Sitting of 17 March 1981

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PRAYERS
  PRIVATE BUSINESS
    CHARTERHOUSE JAPHET BILL
    Bill read the Third time and passed, with amendments.
    CHARTERHOUSE JAPHET BILL
      BARNSLEY BOROUGH COUNCIL BILL
      Further considered; to be read the Third time.
Oral Answers to Questions
  DEFENCE

    Secretary of State (Visit to United States)
    Mr. Kenneth Carlisleasked the Secretary of State for Defence what plans he has to further the prospects of United Kingdom equipment purchases by the United States of America.
    Mr. Parrisasked the Secretary of State for Defence if he will make a statement on his recent visit to the United States of America.
    The Secretary of State for Defence (Mr. John Nott): During my visit to the United States last week, I had useful discussions with the United States Secretary of Defence and also with the Secretary of State. I met a number of senators, and visited the headquarters at Norfolk, Virginia, of the Supreme Allied Commander, Atlantic.
    I found complete identity of view with Mr. Weinberger on the need for the Alliance to remain firm in the face of the military threat we face; and to meet the agreed NATO targets, securing from this expenditure the maximum operational capability. We also agreed that we must not reduce our effort to secure a lower level of armamenton both sides by continuing to try to secure agreement with Warsaw Pact countries on realistic and verifiable measures of arms control.
    On defence equipment, Mr. Weinberger and I agreed that reciprocal trade in equipment between our two countries enhances the economic strength of both the United States and the United Kingdom, and that the United Kingdom had good equipment to offer. Mr. Weinberger confirmed that there were proposals before the United States Congress to fund both the AV8B and the JP233 programmes.
    The briefing I received at SACLANT provided me with a vivid description—[Interruption.]—of the immense capability in the maritime sphere, as in others, that the United States commits to the Alliance. In this, and in all ways, I was heartened—[HoN. MEMBERS: "Too long."]—by the resourcefulness and determination of the United States in its leading role in NATO.
    Mr. Speaker: Order. I did not intervene when hon. Members were interrupting the Secretary of State, but it was a very long reply, although it was a reply to two questions.
    Mr. Carlisle: I thank my right hon. Friend for that reply. Does he agree that the United States should purchase more equipment from the United Kingdom in view of the large sums that we spend on United States equipment and the high quality of many of our products? It is especially important to urge sales now as they would support many jobs in the United Kingdom.
    Mr. Nott: I entirely agree with my hon. Friend. We are doing our utmost to persuade the United States to buy more defence equipment from us. There is a considerable imbalance in their favour at present. As well as discussing with Mr. Weinberger the two items that I have mentioned, we talked about Searchwater, Sting Ray, Wavell, Giant Viper, Hawk and a host of other products. I hope that we shall be successful in selling more British products to the United States in future, which will enhance employment in the United Kingdom.
    Mr. Parris: Was my right hon. Friend able to say that our final decision on Trident might await the final decision of the United States on offset?
    Mr. Nott: We are purchasing from the United States a ballistic missile system. I do not think that offset in the normal sense in which it is referred to is likely or relevant in that circumstance. We shall seek the maximum purchase of our equipment by the United States. The Trident missile system is something rather separate.
    Mr. James Lamond: The Secretary of State always talks about identity of interest and the need to expand expenditure on arms even further. Did he bear in mind the speeches made at the United Nations special session on disarmament by the Prime Minister and the Vice-President of the United States? If so, how does he square the suggestion that we need more and more arms with the speeches made at the United Nations? Must we accept that those speeches meant nothing at all?
    Mr. Nott: We follow what is said in the United Nations, but not all members of that important institution are on our side. I thought that it would save the time of the House if in my admittedly over-long answer to the first question I mentioned what had been discussed initially with Mr. Weinberger. I made a special point of emphasising that we discussed arms control in general. We agreed that it was necessary to secure agreement with Warsaw Pact countries on a lower level of armaments, on both sides, balanced with verifiable measures to control it. We both seek that.
    Mr. Buck: Is my right hon. Friend aware that the House welcomes his statement, especially what he said about the possibility of purchase of arms by the United States? When will he be able to tell us more about what will happen with Sting Ray? Having just returned from America, will he confirm that our relationship with the United States is very close and special and likely to continue so to be?
    Mr. Nott:Our relationship with the United States could not be warmer. I had an excellent series of talks. We were congratulated widely in the United States on our

    183
    substantial contribution to NATO. Sting Ray was mentioned in our talks and we shall be following that up in future months.
    Dr. David Clark: There seems a great deal more discussion than action about equipment purchasing by the United States. Will the Minister confirm or deny that we have had notice of cancellation by the Americans of JP233? If that is correct, shall we continue to develop it on our own? If so, what will the extra cost be?
    Mr. Nott: Under the last United States Administration, Congress was unwilling to vote the funds for the JP233. The present Administration have put the matter back before Congress, and we believe that it is likely to go through this time. Our own decision on JP233 is closely related to the progress which it makes through the United States Congress. It would be much better if we both agreed to have the weapon than if we decided to go it alone.

    Trident Missile
    Mr. Flanneryasked the Secretary of State for Defence what is his latest estimate of the total cost of the Trident programme.
    Mr. Nott: The figure is about £5 billion.
    Mr. Flannery: Even if one accepts the theory of nuclear deterrence, does the Minister not agree that the number of deterrents in the United States and the Soviet Union is now horrendous and massive and would blow mankind sky high if anything went wrong? Does he agree that any shade or nuance of meaning from this country is as nothing compared with those deterrents? The Minister says "£5 billion", so casually and almost monosyllabically. Could not that amount of money, put back into our economy, do a great deal to regenerate British industry and put many thousands of our people back to work? Would not that be better than spending it so uselessly on this so-called deterrent, basically to maintain a friendly relationship between us and the United States?
    Mr. Nott: I doubt whether the shipyard workers in Barrow, who will be receiving a large proportion of that money in extra shipbuilding orders, would share the hon. Gentleman's view. Of the £5 billion, 70 per cent. will be spent with British industry; it will help to increase jobs and will go back into the British economy. As for the deterrent aspect, although, I agree, the scale of growth of nuclear strategic weapons is horrendous, our independent deterrent will make a significant contribution to the deterring of any aggressor because it involves a second area of decision-making. The hon. Gentleman must know all the arguments for that: I outlined them at some length in the recent debate on Trident.
    Mr. Farr: Is my right hon. Friend aware that it is very encouraging that 70 per cent. of the total cost of Trident will be spent in United Kingdom firms? Can he confirm that over 80 per cent. of the electronics of Trident will be backed by United Kingdom businesses?
    Mr. Nott: Yes, I can confirm that 70 per cent, will be spent in this country. Without reference, I cannot tell my hon. Friend the precise percentage that will be spent on electronics in the United Kingdom but I will check that and write to him.
    Mr. John: The Secretary of State's talk of extra jobs is a little disingenuous. If the report in The Guardian this
    184
    morning is right, and the Government have refused to reopen Cammell Laird, does that mean that the Barrow shipyards will build Trident submarines at the cost of the interruption of the long programme of the hunter-killer submarine? Does he agree that that is an opportunity-cost interruption to the defence effort of this country which makes nonsense of spending £5 billion on a marginal addition to the so-called deterrent at the expense of interrupting our other defence commitments?
    Mr. Nott: The future shipbuilding programme for SSNs—the non-ballistic nuclear submarines—over the 10-year period that we are talking about has not yet been decided, so the hon. Gentleman is in no position to make that judgment. As for expenditure, every Labour Government since the war have considered it desirable, if not essential, that we should have an independent strategic nuclear deterrent. If the Labour Party has changed its mind at this juncture, one must ask why, when the threat is increasing year by year.

    Naval Shipbuilding Orders
    Mr. Stephen Rossasked the Secretary of State for Defence if he will publish his programme of naval shipbuilding orders for the next financial year.
    The Under-Secretary of State for Defence for the Royal Navy (Mr. Keith Speed): It is not the practice to publish future warship ordering plans. At present, the Department holds a number of tenders from interested shipyards for a variety of vessels including a nuclear-powered fleet submarine, type 22 frigates and minesweeping trawlers.
    Mr. Ross: If it is not the custom to publish figures it is surely important that the naval shipbuilding yards should know what the future building programme is likely to be. Will the Minister tell us whether it is true that the "Invincible" class of aircraft carriers or through-deck cruisers is likely to be delayed further? Can he give us any information on the type 23 frigate that we have been reading about in the newspapers?
    Mr. Speed: The type 23 frigate procurement process is being accelerated as quickly as possible. The "Invincible" class anti-submarine carriers are not through-deck cruisers. They are not being delayed in any way. "Ark Royal" will be launched by Her Majesty the Queen Mother in June.
    Mr. Viggers: In view of the importance of the new class of diesel-electric submarine, will the Minister say something about the building programme? When can we expect to see it in service?
    Mr. Speed: Not yet. Development is going ahead. These vessels are not being delayed. The 2400 class of the new SSK forms an important part of our submarine capability. I hope that within a few months I shall be able to give more details. We are still at the development stage.
    Mr. George Robertson: Since the Minister is saying that he will not declare in advance the shipbuilding programme for the Navy—although two national newspapers this morning have well-documented accounts of the future ordering programme for the Royal Navy—will he say whether there will be a future fleet submarine ordering programme? Will it be SSN or conventional? Where will the submarines be built?
    Mr. Speed: There will be SSNs and conventional submarines but I am not responsible for what appears in a speculative form in the national press.
    Mr. Trotter: Will the Minister explain why it is not our practice to publish details of our future warship building programme, since most of our NATO allies do? Would there not be advantages to the industry and a boost to export orders if future plans were known?
    Mr. Speed: My hon. Friend has referred in the past to the five-year rolling programme, particularly in respect of the United States Navy. There is something in what he says. Procurement and ordering are presently being looked at by my noble Friend Lord Trenchard. I do not say that I can follow my hon. Friend down that path, but we shall look at it once we have got the procurement process right. I do not think that any of us is happy with the time which the procurement process takes at present, which militates against doing what my hon. Friend wishes us to do.

    Air Defence
    Mr. Robert Atkinsasked the Secretary of State for Defence if he is satisfied with the current state of United Kingdom air defence.
    Mr. Speed: No. Sir. Although we are undertaking a substantial programme of improvements which will greatly enhance our air defence capability, there can be no room for complacency about this, or any other aspect of our defences.
    Mr. Atkins: I am grateful for my hon. Friend's comments. Does he not think that an early decision on AV8B, and some urgency in the decision that needs to be taken on the European combat aircraft, would go a long way towards giving peace of mind both to hon. Members and to other people in the country?
    Mr. Speed: The AV8B is one of the options for the RAF. As my hon. Friend will have heard, my right hon. Friend had encouraging discussions with the United States last week. The attitude of the United States to the AV8B is extremely important. This is an option on which I hope we can reach a decision as soon as possible, but many important industrial and operational considerations are involved for the RAF.
    Mr. Maclennan: Although one recognises the need for training in low flying, does the Minister accept that over-concentration of these exercises in small areas, such as Caithness, which are densely populated, leads to considerable indignation? Will he ask his hon. Friend the Under-Secretary of State for the RAF, with whom I have been in correspondence about this, to end the practice of low flying by the RAF over the village of Watten, particularly over the local school?
    Mr. Speed: I note what the hon. Gentleman says, and I shall draw my hon. Friend's attention to it. We try to vary the paths as much as possible, but, as the hon. Gentleman will know, it is important, for both operational and safety considerations, that our pilots get this practice.
    Mr. Churchill: Bearing in mind that there are now more than 3,000 Fencer, Fitter and Flogger aircraft in the infantry of Soviet frontal aviation, all with the capability of striking these shores, and that there is therefore a serious possibility that up to a third could be tasked on the United
    186
    Kingdom, which has barely 70 aircraft for its entire air defence, is it not a matter of urgency for the Government to take a decision on the replacement programme for the Harrier and the Jaguar?
    Mr. Speed: I have already spoken about the importance of AV8B. The other matters are under consideration by my hon. Friend the Under-Secretary of State for the Royal Air Force and my right hon. Friend, but I cannot give an answer this afternoon.
    Mr. Snape: I congratulate the Minister on his additional portfolio. Will the air defence of this country be increased or retarded by the gap between the phasing out of Shackleton and the introduction of Nimrod? Is that not yet another example of the realities of Government taking over from the bluster of Opposition?
    Mr. Speed: As has been said, it takes one to recognise one. My hon. Friend the Under-Secretary of State for the Royal Air Force referred to airborne early warning on 17 February. At present, he is on his way, with the head of defence sales, to represent the British aircraft industry at an important and major sales exhibition in Delhi. I am sure that the whole House will wish both him and British industry success in selling our equipment in that important market.

    Shoeburyness
    Mr. Teddy Taylorasked the Secretary of State for Defence if he will make a statement on the future of the Ministry of Defence establishment at Shoeburyness.
    The Under-Secretary of State for Defence for the Army (Mr. Philip Goodhart): There is a long-terrn requirement for the proof and experimental establishment at Shoeburyness to continue with its present defence functions.
    Mr. Taylor: Does the Minister agree that the Shoeburyness ranges are a unique facility in the United Kingdom? Is it the Government's intention that Shoeburyness should have an important and continuing role in the United Kingdom's defence provision?
    Mr. Goodhart: That is most certainly so. Our present plans are to spend £¾ million on new facilities in 1981–82.

    Rapid Deployment Force
    Mr. Stokesasked the Secretary of State for Defence what progress has been made in improving the United Kingdom intervention capability outside the NATO area.
    Mr. Biggs-Davisonasked the Secretary of State for Defence what United Kingdom contribution will be made to any Western rapid deployment force established by the West; and whether he will make a statement.
    Mr. Roy Hughesasked the Secretary of State for Defence if he is to hold any discussions with the Gulf States about new proposals for a possible intervention force for use in that area.
    Mr. Aitkenasked the Secretary of State for Defence what representations he has received concerning the proposals for establishing a rapid deployment force for operations in the Middle East.
    Mr. Beaumont-Dark askedthe Secretary of State for Defence whether, in reviewing British defence

    187
    commitments in the context of the Alliance, he will have due regard to the threat to British interests outside the NATO area.
    Mr. Nott: British defence activity outside the NATO area aims to help maintain stability primarily by the provision of training and assistance, participation in joint exercises and the supply of defence equipment. In addition, British Armed Forces are already available to take military action in an emergency by rapid deployment overseas.
    In concert with other allies, principally the United States, we are ready, where our assistance is sought, to make a modest use of force to protect the interests of friendly local States and of the West in strategic regions. In my discussions last week with the United States Secretary of Defence about the United States plans for a rapid deployment force, I made it clear that we will give full support to the United States.
    We are also ready to undertake national tasks such as the reinforcement of British dependent territories or the protection of British citizens overseas.
    Several Hon. Members rose—
    Mr. Speaker: Order. I propose to call first the five hon. Members whose questions are being answered together.
    Mr. Stokes: I thank my right hon. Friend for that reply. Will he give some idea of the sort of forces which could be deployed in a rapid deployment force?
    Mr. Nott: On our side, we already have a spearhead battalion, on 72 hours' notice. At present, it is the 1st Battalion the Cheshire Regiment, and in two weeks' time it will be the 1st Batallion the Royal Regiment of Wales. We have enough VC1Os and Hercules aircraft to lift the battalion quickly to any necessary part of the world. We also have further units on which we can draw from the 8th Field Force, which is stationed here, which includes a fully trained parachute battalion. We also have other forces, earmarked for NATO's ACE mobile force, some of them at present deployed in the United Kingdom, on which we can draw.
    Mr. Biggs-Davison: Would not belief in my right hon. Friend's welcome substantive reply be undermined if anything were done to reduce the strength and effectiveness of the Royal Marine Commando Force?
    Mr. Nott: I know of my hon. Friend's great concern about the proposal to merge one of the Commandos with others. As I think I have told him, there is no present intention to reduce the numbers of Royal Marine Commandos, and recruiting is still increasing their numbers. However, we envisage there being one fewer Commando.
    Mr. Roy Hughes: Has the Secretary of State considered the objections to these plans from Arab States in the area? Does he appreciate that, wisely and understandably, they do not wish to be involved in this cold war strategy? Would not it be better for the Government to forget these imperialist delusions and concentrate on getting Britain back to work?
    Mr. Nott: I am not aware of the objections to which the hon. Gentleman has referred. I shall be going to Saudi Arabia, Oman, the United Arab Emirates, Qatar and Bahrein next week. No doubt I shall hear directly how they
    188
    think we can act together in our common interests to preserve parts of the world from potential threats to countries in those areas and to the West as a whole.
    Mr. Aitken: During my right hon. Friend's forthcoming visit to the Middle East, will he undertake to carry out detailed consultations with friendly Governments before coming to final decisions on our contribution to a RDF? In particular, is he aware that, although any extension of the existing maritime forces in the Gulf could be useful in a time of crisis, any attempt to build large military bases on foreign soil could prove both counterproductive and provocative?
    Mr. Nott: The security and stability of the Gulf are in the first place matters of concern for those States themselves. We do not envisage action in the Gulf, for instance, without the full support and request of those States. It would be a common venture for the defence of countries threatened by aggression, so it would have to be by agreement and after consultation. I should have mentioned the Royal Navy's contribution, which could be significant, and in certain cases substantial, for a rapid deployment force.
    The United States is at present having talks about bases with a number of countries in the area. They would almost certainly be bases for equipment and not for people, but these are matters that we are reviewing with the countries concerned.
    Mr. Beaumont-Dark: Bearing in mind the vast wealth of the Gulf States, is it not best to offer them our military expertise and equipment and leave them to do best for themselves what in the end each country has to do?
    Mr. Nott: Of course—that is precisely the position at present: we are providing considerable assistance to the Gulf States. They have extensive arrangements for their own defence, but if at any time they seek our assistance, I think that we should be ready to provide it.
    Mr. Frank Allaun: Does the Secretary of State remember the long and successful struggle in the House to wind up our military activities east of Suez? Are the Government now proposing to return there?
    Mr. Nott: I certainly remember the hon. Gentleman's struggle. Whether it was successful is a matter of judgment. We withdrew from permanent bases east of Suez, if that is what the hon. Gentleman means, and there is no intention to return to permanent bases there, in the Gulf or anywhere else. That is not, and was never said to be, the purpose of the rapid deployment force.
    Mr. Trippier: Will my right hon. Friend seriously consider the suggestion by my hon. Friend the Member for Epping Forest (Mr. Biggs-Davison) about the Royal Marines? If money is to be found for a rapid deployment force, could that not be a means of giving a new lease of life to 41 Commando?
    Mr. Nott: I understand my hon. Friend's concern about 41 Commando. The Royal Marines generally need no new lease of life, as I am sure my hon. Friend will agree. On the Naval task force side, we envisage the possibility that HMS "Hermes", with a Marine Commando and with support forces, would be available for an RDF-type task. In circumstances of that kind, or in others, the marines would perform a vital role.
    Mr. Wellbeloved: Does not the Secretary of State's statement that he is prepared to reassign NATO-assigned mobile forces to the RDF strike a fundamental blow at the coherence of the NATO alliance, since our first priority is to the central front of NATO?
    Mr. Nott: That is not what I said at all.
    Mr. Wellbeloved: Yes, it is.
    Mr. Nott: No, it is not. I said that we had a spearhead battalion available in this country at 72 hours' notice. I referred to the 8th Field Force, based in the United Kingdom, which is not dedicated to SACEUR. I then said that NATO itself—SACEUR—has a mobile force which, if NATO and SACEUR so decided, might itself provide some additional forces. That is quite different from the way in which the hon. Gentleman put it.
    Mr. Johnson-Smith: As there are real problems with the composition and methods of control of rapid defence deployment forces outside the NATO area, when will my right hon. Friend be able to give us some idea of the Government's thinking on these complex and necessary matters?
    Mr. Nott: I think that in the past five minutes I have given my hon. Friend a fairly clear idea of our thinking, but I should be happy to elaborate on it on some other occasion. A number of details have still to be settled. This depends to some extent on the Americans further developing their own ideas—for instance, on the command and control structure and on the exact composition of their forces—before we can finally tie up the details of our own contribution.
    Mr. John: In an interview in NOW! magazine on 6 March, the Secretary of State denied that the boundaries of NATO would be extended at all. What he has now said about SACEUR seems to imply that there is a desire for extension. Does he deny that? Secondly, does he realise that the great fault in the announcement of the rapid deployment force is that the consultation took place in Washington and not in the Gulf States, where it should have been, before the force was announced? Will he kindly ask his right hon. Friend the Prime Minister to think first and speak afterwards rather than the reverse?
    Mr. Nott: There is a continuing dialogue with the Gulf States by the United States and by this country. The command and control arrangements would be national forces, not under NATO command. I must clarify once again what I said. I said that some mobile forces already exist which, if NATO so desired, might provide some forces as a mobile force. The United States, for instance, does not envisage that the RDF should be drawn from any troops on the central front. Nor do I envisage that any contribution that we might make would come from the central front. As I have said, it would come from the spearhead battalion. If more was needed, it might come from the 8th Field Force, which is in the United Kingdom.

    Armed Forces (Northern Ireland)
    Mr. Ron Brownasked the Secretary of State for Defence what is the current total strength of British Armed Forces in Northern Ireland.
    Mr. Goodhart: In Northern Ireland, there are currently 10 major units of the Regular Army deployed in the
    190
    infantry role, together with supporting arms and services, 11 battalions of the Ulster Defence Regiment, and small Royal Navy and Royal Air Force elements.
    Mr. Brown: I thank the Minister for his reply. Does he agree that Ireland's problems are mainly political and not religious? Does he accept that Irish Protestants and Catholics can be united, as Larkin and Connolly clearly proved? Does he accept that one of the first steps towards a political solution is to withdraw British troops? Is it not important to consider that as it is most urgent to achieve some solution in that troubled island?
    Mr. Goodhart: The Opposition's principal spokesman on defence, the hon. Member for Pontypridd (Mr. John), knows Northern Ireland and the role of the Army there very well. I am sure that he can give the hon. Gentleman a lesson on both subjects.
    Mr. Biggs-Davison: Is not one right hon. Gentleman who does not understand the role of the Army in Northern Ireland the right hon. Member for Bristol, South-East (Mr. Benn)? In an attempt to remove the right hon. Gentleman's paranoia, will my hon. Friend consider taking him by the hand, and showing him what our soldiers are doing to defend human life in the United Kingdom?
    Mr. Goodhart: I think that it is generally agreed that the right hon. Gentleman's speech at the weekend was most unfortunate.
    Mr. Molyneaux: Is the Minister aware that there is a general support throughout the community for the policy that is resulting in the Royal Ulster Constabulary assuming responsibility for law enforcement throughout the Province, with the Army fulfilling its rightful role in defending the frontier of the United Kingdom?
    Mr. Goodhart: As a Minister in Northern Ireland for 20 months, I know personally that that is true.
    Mr. Arthur Davidson: Will the Minister confirm that his long-term policy is for policing eventually to revert to the police, together with the maintenance of law and order? Meanwhile, does he agree that the unilateral withdrawal of British troops would serve no purpose whatever and is not the policy of the Labour Party?
    Mr. Goodhart: I absolutely and completely agree with the hon. and learned Gentleman.

    Cruise Missiles
    Mr. Nicholas Winterton: asked the Secretary of State for Defence when he now expects cruise missiles to be delivered and deployed on British soil.
    Mr. Goodhart: Late in 1983.
    Mr. Winterton: Will my hon. Friend confirm yet again that cruise missiles form a vital part of our overall defence strategy? Will he further confirm that when cruise: missies are deployed on training exercises they will not carry live warheads?
    Mr. Goodhart: That is most certainly true. On exercises, cruise missiles will deploy only to Ministry of Defence training areas, and they will carry neither warheads nor fuel.
    Mr. Stephen Ross: Although Liberal Members support the idea of updating our NATO nuclear weapons,

    191
    Will the Minister confirm that, if meaningful progress can be made with the Russians and the Warsaw Pact countries over the withdrawal of the SS20s and other weapons, Her Majesty's Government intend not to proceed with the introduction of cruise missiles in the United Kingdom?
    Mr. Goodhart: I am happy to say that the Russians have been more forthcoming on talks since the deployment of these weapons was announced. There will be a further meeting of the NATO steering group, which deals with questions of arms negotiations, in the very near future.
    Mr. Wilkinson: Will my hon. Friend confirm that the theatre nuclear role assigned to the Tomahawk cruise missiles to be deployed in the United Kingdom is not the only purpose for which cruise missiles were designed, and that there will shortly be a real requirement for air-launched cruise missiles or effective stand-off weaponry to improve the penetrating capability of British air power?
    Mr. Goodhart: That is under active consideration at this moment.
    Mr. John: But will the Minister confirm that NATO agreement to the deployment of cruise missiles was given on condition that the disarmament talks would take place with the Russians? Will the Minister therefore accept that hon. Members in all parts of the House expect an energetic pursuit of those talks with the Russians before cruise is ever deployed?
    Mr. Goodhart: As I said, there is to be a meeting of the steering group. The discussions are scheduled to be held in the very near future.

    British Army of the Rhine
    Mr. Gwilym Robertsasked the Secretary of State for Defence if he will give the latest figures for the costs associated with maintaining British troops in Germany; and if he will make a statement.
    Mr. Goodhart: I refer the hon. Member to the answer I gave the hon. MeAlber for Newham, North-East (Mr. Leighton) on 27 January 1981.
    Mr. Roberts: Will the Minister accept that, in terms of Army support, it is intolerable that a relatively poor country such as Britain should be effectively subsidising Germany, which is a very rich country? Irrespective of any mistakes in this direction which may have been made by the Labour Government, will the Minister now accept that it is time to reopen the negotiations to see whether we can receive a satisfactory payment from Germany towards this cost?
    Mr. Goodhart: When the Labour Government concluded the final offset agreement in 1977, it was part of that agreement that there would be no continuing negotiations on this subject. Since then, the German trade balance has gone into deficit and ours has gone into surplus.

    Light Anti-Armour Weapon
    Mr. Colvinasked the Secretary of State for Defence if he will make a statement on the development of the light anti-armour weapon.
    Mr. Goodhart: A man portable lightweight anti-armour weapon known as LAW 80 is under development for introduction into the British Army during the early 1980s.
    LAW 80 is an all-British design and the first manned firing took place recently. It is designed to knock out of action the most modern Russian main battle tanks and will be issued to the Services in large numbers.
    Mr. Colvin: Will my hon. Friend agree that the light anti-armour weapon could make a most cost-effective contribution to the task of stopping mass attacks of Warsaw Pact armour in a central European theatre? What other NATO countries have agreed to adopt this weapon?
    Mr. Goodhart: It is still in the development stage, but we hope and believe that there will be a large sale to our friends and allies.

    Foreign Troops (Training)
    Mr. Newensasked the Secretary of State for Defence what criteria are laid down before foreign troops are accepted for training with members of Her Majesty's Armed Forces in this country or elsewhere.
    Mr. Goodhart: I refer the hon. Member to the answer I gave him on 2 March and to the answer given by my right hon. Friend the present Leader of the House to a similar question from the hon. Gentleman on 12 February last year.
    Mr. Newens: Will the Minister accept that training in horrific interrogation techniques is sometimes given to the troops of Governments who oppose human rights and who may be hostile to the interests of this country? Does he justify this? Will he comment on the fact that Iranian troops and Argentinian troops are at present, as I understand from his reply to my question, in training in this country?
    Mr. Goodhart: We do not train any overseas students in interrogation techniques. Although there were about 1,000 Iranians being trained in this country, there are now about 20, and one Argentinian is being trained.

    PRIME MINISTER

      Nerve Gas Weapons
      Ql. Mr. Hooleyasked the Prime Minister whether her conversations with President Reagan included discussions on the stockpiling or deployment of binary nerve gas weapons on British soil.
      The Prime Minister (Mrs. Margaret Thatcher): No, Sir.
      Mr. Hooley: Is the Prime Minister aware that the United Kingdom has hitherto had a good record in promoting discussions on a convention to abolish all chemical weapons and prohibit their use? In the light of the horrific nature of such weapons, will this continue to be the policy of Her Majesty's Government?
      The Prime Minister: Yes, indeed. We are anxious to secure a comprehensive ban on chemical weapons. what is holding up such a bands the attitude of the Soviet Union, which has shown itself unwilling to countenance the verification arrangements that we need.
      Mr. Cyril D. Townsend: Does my right hon. Friend appreciate that many of us on the Government Benches welcome the Government's decision not to develop an offensive chemical warfare capability but to concentrate on producing better defensive mechanisms against chemical warfare?
      The Prime Minister: I am grateful to my hon. Friend. It would be better still if we had a comprehensive ban on the possession of chemical weapons but so far there is no prospect of getting one. Moreover, it would be better if those who have been accused of possibly using chemical weapons in Afghanistan would submit to United Nations investigation, which so far they have refused to do.
      Mr. James A. Dunn: Will the Prime Minister include in her discussions reference to El Salvador and any military or civil assistance that might be requested?
      Mr. Speaker: Order. That is a very different question from the one that is before the House.
      Mr. Churchill: Is it not a matter of extreme concern that the Soviet Union should have made such heavy investments in recent years in offensive chemical capability, both land-based and air-launched? Is it not a fact that every division of the Soviet Army has an integral chemical battalion? In those circumstances, unless some agreement can be obtained with the Soviet Union, is my right hon. Friend prepared to reconsider whether British troops should face these weapons without any means of defending themselves?
      The Prime Minister: I agree with my hon. Friend that it is a terrible fact that the Soviet Union has a considerable offensive chemical weapons capability. Criticism should be concentrated on persuading the Soviet Union first to reduce that capability and then totally to disband it. So long as the Soviet Union retains it, naturally other countries are concerned that they have nothing with which to deter the Soviet Union from using it. We must first concentrate on giving our own troops a defensive capability and proper protection.

    Engagements
    Mr. Colin Shepherdasked the Prime Minister if she will list her official engagements for Tuesday 17 March.
    The Prime Minister: This morning I had meetings with ministerial colleagues and others, including one with the Commonwealth Secretary-General. I was also present when Her Majesty the Queen welcomed President Shagari of Nigeria. In addition to my duties in this House I shall be having further meetings later today, and this evening I shall attend a State banquet given by the Queen in honour of President Shagari.
    Mr. Shepherd: Has my right hon. Friend had time today to read the press reports of the tremendous success being enjoyed by British Leyland's Mini Metro, which is currently top of the sales league? Is not the message for British industry that if the work forces and managements of companies work together as teams they will enjoy greater success, with better results for employment? Will my right hon. Friend take time today to congratulate the whole of British Leyland's management and work force team?
    The Prime Minister: The news about the Mini Metro was very good. I gladly respond to my hon. Friend's invitation to congratulate both the management and the work force. I hope that the Mini Metro will sell well and that the number of sales will continue to increase. However, many must be sold before the break-even point is reached. I should very much like British Leyland to sell enough to make a profit.
    Mr. Foot: In what circumstances has the right hon. Lady set up an inquiry into an alleged Budget leak?
    The Prime Minister: I personally do not set up inquiries into matters that are within the province of the Treasury. The inquiry has been set up in the normal way by the Treasury. The Treasury is taking action through the usual Civil Service departments.
    Mr. Foot: Must I take it that this is a normal inquiry into the usual leakage? May I press the right hon. Lady further? Does she not think that perhaps the most serious of last week's leakages occurred last Friday when it was suggested that she or those closely associated with her had said that it would not be possible to hold pre-Budget Cabinet meetings to discuss the contents of the Budget because of the danger of leakage and because what was discussed in the morning might be out by tea-time? Who are these tea-time traitors? Can the right hon. Lady enlighten us a little more about that and about whether the leakage came from her office?
    The Prime Minister: In all the time that I have been in Cabinet I cannot remember a Budget that was discussed in Cabinet before it had been prepared.
    Mr. Foot: It is a most extraordinary development if the Cabinet does not discuss the Budget beforehand. That was not the practice of previous Cabinets. [HON. MEMBERS: "Oh".] I can assure the House that there were discussions, as the right hon. and learned Member for Hexham (Mr. Rippon) said yesterday. However, I am asking the right hon. Lady about her statements, or about the statements that have been attributed to her, which were released on Friday. They imply that she would have difficulty in instituting any discussions on such matters in this Cabinet. Did that leakage come from her office, or from thin air?
    The Prime Minister: Budget Statements are never discussed in Cabinet. The right hon. Gentleman seems to be saying that things were different in his time. I wonder why we frequently saw news items to the effect that on the day before the Budget or on the morning of the Budget the Cabinet had been called together to be told its precise contents.
    Mr. Robert Atkins: Will my right hon. Friend take time today to consider the enormous rates increase that has occurred in the borough of Preston since the Labour Party took control? Before that take-over Preston had the lowest rates in the United Kingdom. Under Labour control, the borough has announced a rate rise of 160 per cent.
    The Prime Minister: I hope that the electorate will draw the lesson from my hon. Friend's question. Labour Governments and authorities are adept at spending other people's money.
    Mr. David Steel: A week after the Budget Statement, is it still the Prime Minister's view that we must go on

    195
    taking the medicine? If so, will she bear it in mind that the side of every medicine bottle bears the words "Caution—do not exceed the stated dose"?
    The Prime Minister: The stated dose has not yet been exceeded.
    Mr. Hardyasked the Prime Minister if she will list her official engagements for Tuesday 17 March.
    The Prime Minister: I refer the hon. Member to the reply which I gave some moments ago.
    Mr. Hardy: Does the Financial Secretary's recent speech, which seemed to give enormously high priority to cuts in direct taxation despite the fact that they will mean substantial increases in unemployment, have the right hon. Lady's approval?
    The Prime Minister: I think that the hon. Gentleman must be referring to a television interview in which my right hon. Friend repeated that it was our objective to reduce the standard rate of income tax. That was and remains our objective, and it is a very good one. The Labour Party would have increased income tax.
    Mr. Dover: Will the Prime Minister assure the House that civil servants who take part in the current dispute will lose their pay for the days that they are on strike?
    he Prime Minister:people in the Civil Service are not paid for the days that they are on strike.
    Mr. Alexander W. Lyon: Since the Prime Minister came into office nearly two years ago, millions of people have suffered as a result of her policies. In what way have she or her family suffered in that time?
    The Prime Minister: I do not think that I answer for anything personal at this Dispatch Box.
    Mr. Pawseyasked the Prime Minister if she will list her official engagements for 17 March.
    The Prime Minister: I refer my hon. Friend to the reply which I gave some moments ago.
    Mr. Pawsey: Will my right hon. Friend try to find time during her busy day to urge the nation to buy more British manufactured goods? At the same time, will she underline the point that buying British will save British jobs?
    The Prime Minister: Many people could help by buying a larger proportion of British-made goods. I said as much in a speech about a fortnight ago. We cannot always buy British-made goods because jobs are also involved in exports. As my hon. Friend said, it would undoubtedly provide more jobs if more people were to use their pay packets to buy goods made in this country.
    Mr. Robert Hughes: During the right hon. Lady's discussions with President Shagari of Nigeria, will she give him an undertaking that when the subject of Namibia next comes before the Security Council the British Government will support mandatory economic sanctions against South Africa?
    The Prime Minister: I can give no such undertaking. The British Government will continue to work in the usual way in which we have been working with our partners in order to achieve a settlement in Namibia. In that way Namibia can reach true independence through a proper election and a free ballot.
    Mr. Adley: Following the question raised by my hon. Friend the Member for Chorley (Mr. Dover), is my right
    196
    hon. Friend aware that many of my constituents feel that civil servants are neither underpaid nor lacking in job security? In the light of the current dispute, will she redouble her efforts to review the manpower levels in every Department of central Government?
    The Prime Minister: It is true that the pay of civil servants and of those working in local authorities is, in money terms, about 50 per cent. above the level of two years ago. That shows that the Government have tried to give those who work in the public service a fair and true deal. We have announced that we wish to reduce the Civil Service to its lowest post-war level of 630,000. We shall pursue that objective vigorously.
    Mr. Dubs: Will the right hon. Lady spend time today considering the secrecy that surrounds the way in which Governments traditionally approach their Budget plans? In future, could not the options that underlie the Budget be made public before the Statement, so that debate in the House and in the country may be better informed?
    The Prime Minister: No, Sir.
    Mr. Langasked the Prime Minister if she will list her official engagements for Tuesday 17 March.
    The Prime Minister: I refer my hon. Friend to the reply which I gave some moments ago.
    Mr. Lang: Will my right hon. Friend find time today to consider the recent decision of the Scottish Labour Party conference in favour of setting up a Scottish Assembly with tax-raising powers? Does she not agree that another layer of bureaucracy and of taxation is the last thing that Scotland needs?
    The Prime Minister: I agree with both the opinions so ably expressed by my hon. Friend.
    Mr. Stoddart: Has the right hon. Lady had time to consider last night's vote on the increased petrol tax? The increase was universally condemned by her right hon. and hon. Friends—[Interruption.] Indeed, the increase resulted in at least one defection from the right hon. Lady's party. May I take it that between now and Committee stage—which I hope will be taken on the Floor of the House—the Government will review their policy and remove that tax increase?
    The Prime Minister: No, Sir. As for the majority, I seem to recall that the Labour Party nationalised British Aerospace and British Shipbuilders on a majority of one. Ours was 1,400 per cent. better than that.
    Mr. Neubert: In view of the continuing disruption by civil servants, has my right hon. Friend reached any conclusions about the statement made by the strike coordinator 10 days ago that the intention is to damage economic strategy and to reduce the country's defence capability? Does not that go beyond a pay dispute and threaten democratic Government itself? Does it not argue for a renegotiation of conditions of employment of key workers to prevent such sabotage of national security?
    The Prime Minister: We would regard these matters very seriously indeed. Sometimes, indeed, I have suggested myself that we have no-strike agreements. We believe that in key matters of this kind it should be almost a matter of honour that there should be no strike without negotiating a special agreement about it.
    Mr. Foot: Since the right hon. Lady seems to be happy about the result of the vote in the House on the petrol tax, and since the increase seems to be causing such great
    198
    disturbance in the country at large, would she not care to think it over and perhaps make the matter the subject of a free vote in the House?
    The Prime Minister: No, Sir.

Questions to Ministers
Mr. Bob Cryer: On a point of order, Mr. Speaker. You may recall that in reply to question No. 1, to the Secretary of State for Defence, the Secretary of State made an extremely long answer, which seemed to cause you concern. When a Minister uses that sort of opportunity to make what is, in effect, a statement, that reduces Question Time and also reduces the further opportunities for questioning Ministers through avoiding the need to make a statement. I wonder, Mr. Speaker, whether you could indicate your concern that whenever Ministers have an important statement to make they should do so by way of a statement and not use the means of a planted question for oral answer in order to avoid that responsibility.
Mr. Speaker: A question that comes out No. 1 in the ballot can hardly be a planted question in the sense that the House understands it. It is true that I discourage major statements being made in answer to questions when that takes a long time. We spent seven minutes on question No. 1 which reduced the time that could be spent on other questions.
Sir Frederick Burden: Further to that point of order, Mr. Speaker. Did you notice that the hon. Member who raised this point of order was asking questions from a sedentary position throughout the whole of Question Time, as he does on every conceivable occasion?
Mr. Speaker: I am much obliged to the hon. Gentleman. This gives me an opportunity to remind the House that shouting from a sedentary position is quite unparliamentary, and that while the House is accustomed—[Interruption.] I do not know which hon. Member made that remark, but it was very ill-mannered. The House is accustomed to displays of emotion. None the less, we destroy our own democracy if Members have to fight constantly to have a chance to be heard within the Chamber.

Belize
The Minister of State, Foreign and Commonwealth Office (Mr. Nicholas Ridley): With your permission, Mr. Speaker, I should like to make a statement on Belize.
Following the recent ministerial talks in London between Her Majesty's Government and the Government of Guatemala, at which the Premier of Belize and two of his Cabinet colleagues were present, heads of agreement were signed on 11 March on the basis of which a full settlement is to be negotiated between the United Kingdom and Guatemala. This settlement will end the controversy that has existed between the two countries for well over 100 years over the territory of Belize.
The heads of agreement, which were published last night, represent a significant advance. They provide a framework for a solution to this long-standing problem that all concerned can regard as just and honourable. Settlement of the controversy will bring great benefits to Belize, the safeguarding of whose interests has been our concern throughout the negotiations. Under the terms of the treaties, which we shall now negotiate, the Guatemalan territorial claim will be ended and Belize's future security will therefore be assured. Guatemala will recognise the independent State of Belize within its existing frontiers on the day of independence.
Guatemala will also benefit. It will be assured permanent and unimpeded access to the Caribbean; the use and enjoyment of the Ranguana and Sapodilla cays, the two southernmost groups of very small islands on the Belizean barrier reef; and rights in areas of the sea adjacent to the cays, as may be agreed. Other provisions will be mutually beneficial. They include free port facilities for Guatemala in Belize and for Belize in Guatemala, completion of roads, facilities for oil pipelines, agreements on pollution control, navigation and fishing, joint exploration and exploitation of minerals in areas of the sea bed and continental shelf to be agreed, and development projects and security co-operation. A copy of the full text will be circulated in the Official Report.
The heads of agreement represent a commitment on all sides to negotiate in good faith the legal instruments that will provide for a full, honourable and permanent settlement. I pay tribute to the imagination and flexibility shown by the Belizean delegation as well as the Guatemalan Government in the talks, which have enabled us to take this major step forward. I am confident that, with continuing good will and understanding, a final settlement can be negotiated successfully over the coming months.
Mr. Giles Radice: Is the Minister aware that the Opposition welcome the heads of agreement in the hope that this will end the long-running dispute between Britain and Guatemala over Belize and enable Belize at last to take its place as an independent nation? At this crucial stage, before the joint commission has met to work out the fine print of the heads of agreement, it would be wrong to make any detailed comment, but I should like to ask the Minister some questions about the outline settlement.
First, does the freedom of transit given to Guatemala on the two roads through Belize to the Guatemalan frontier apply to military transport? Secondly, how many British troops, if any, will be stationed in Belize when that country becomes independent? Lastly, does the Minister

201
accept that in any final settlement between this very small parliamentary democracy and the much larger military regime of Guatemala—a settlement in which both sides, Belize quite as much as Guatemala, will have to make concessions—the proof of the pudding will very much lie in the eating?
Mr. Ridley: I am grateful to the hon. Gentleman for what he says. I am also grateful to the Opposition for consistently supporting our efforts to achieve this agreement over a long period, with, I think, an all-party approach to the problem. The freedom of transit across the two roads to which the hon. Member drew attention is for commercial traffic only. There is no concession for military traffic along those roads. In relation to post-independence arrangements for security, I think the House will agree that it is a little premature to decide these matters. They will be discussed at the constitutional conference that is shortly to come. We shall certainly do whatever is necessary. The point that I should like to make is that what will be necessary if there is a settlement with Guatemala will be vastly different from what will be necessary if there is not a settlement. On the last point, about which the hon. Gentleman will perhaps remind me—
Mr. Radice: The proof of the pudding lies in the eating.
Mr. Ridley: I agree with the hon. Gentleman. These are only a heads of agreement. Difficulties may still arise in negotiating the final settlement.
Mr. Robin Maxwell-Hyslop: In view of the fact that, at any rate up to the time of Her Majesty's visit to Mexico, the Mexican Government expressed a continuing interest in the locus standi of Guatemala and Belize—indeed, at one stage, there was a Mexican claim to northern Belize—may we take it that this arrangement has been discussed informally with the Mexican Government so that it receives their good will, that being an important ingredient in any settlement in that region?
Mr. Ridley: We have kept in close touch with the Mexican Government throughout the negotiations, and I can assure my hon. Friend that the Mexican Government are extremely happy with the heads of agreement. There is no question of Mexico's pressing any claim against Belize.
Mr. Edward Rowlands: As one who has been involved in the protracted negotiations, may I add my congratulations on the settlement that is about to happen? In particular, may I offer my best wishes to Premier Price and the people of Belize, who have fought a long campaign on behalf of their aspirations to become an independent State, against considerable Guatemalan intransigence?
I wish to put two points to the Minister. First, I think that it would be a good idea for the troops to withdraw slowly, to ensure that the settlement will stick, and so that the volatile Guatemalan political scene will not affect the result. The second point relates to the cays and the negotiations that are to take place. Will my hon. Friend be able to give the same assurances that he has just given about transit to the Belize on ports, and can he confirm that there will be no question of a Guatemalan military presence on the cays in any subequent negotiations?
Mr. Ridley: I thank the hon. Gentleman for what he said, and I pay tribute to the sterling efforts that he has made in this dispute over many years. I believe that he helped to lay the foundation of the agreement that has now been reached. I join him in congratulating Premier Price on what I believe has been a good settlement, but one that was hard-fought, particularly on his side, and I wish the Government of Belize all success in the future.
I hesitate to answer the hon. Gentleman's first question, for the reason that I gave the hon. Member for Chester-le-Street (Mr. Radice)—it is still too soon to say what the effects will be. We shall need to discuss the matter with Belize before making precise predictions about troop strengths.
Secondly, the types of use of the cays that are to be agreed between Belize and Guatemala have not yet been settled. That is one of the items that still have to be finalised in the negotiations leading up to the treaty.
Mr. Robert Atkins: I wish to press my hon. Friend on two matters that concern security. First, it was clear to a number of hon. Members of both parties who recently visited Belize under the leadership of the right hon. Member for Mansfield (Mr. Concannon) that most of the people of Belize wished to retain British troops there, if for no other reason than that the money has to be spent in some way, and that is an excellent way for the troops to get jungle training, while enhancing the security of Belize. I accept that my hon. Friend will not he able to give me any details now, but will he consider the matter?
Secondly, what help ought to be given to the Belize defence forces, which at present have one or two British permanent instructors? 'What equipment or further assistance can we give them after independence?
Mr. Ridley: The views that were expressed about British troops on my hon. Friend's visit to Belize were expressed before settlement was reached. If settlement is finally achieved, I hope that it will allay the fears of the people to Belize to a large extent. I can confirm that whatever happens we shall help the Belize defence force to improve its capability, with training and equipment, so that it can become a credible force in the defence of Belize.
Mr. Russell Johnston: Is the Minister aware that, in view of the fact that he is often criticised in other parts of Latin America, he deserves our congratulations on achieving this agreement? Is he prepared to guarantee the agreement in security terms?
Mr. Ridley: I am not quite sure what the hon. Gentleman meant in the first part of his question. In answer to the second part, we shall do whatever is necessary in the circumstances. Clearly, I cannot go as far as to guarantee anything in a country that is soon to become independent. We shall keep in close touch with the Government of Belize and help them with any problems that may arise.
Dr. M. S. Miller: I congratulate the Minister on the settlement, which certainly seems better than what we had been led to believe previously, but are not congratulations somewhat premature, considering that we are dealing with a dictator whose country is aimed to the teeth? The situation in Belize has remained calm because of the presence of British troops there, to whom congratulations and credit are due. In such a situation, where there is to be a big constitutional change, surely the

203
people of Belize should be consulted. Would it not be a good idea to hold a referendum, with impartial supervision, to ascertain the views of the people?
Mr. Ridley: It is only 13 months since the Government of Belize were re-elected, extremely convincingly, on a full mandate to proceed to independence, come what may. If a settlement is reached, that mandate will be reinforced. I accept that we are still not at the end of the road, and that things may go wrong, but surely the hon. Gentleman will agree that if an agreement is reached with Guatemala, it will be by far the best way to bring about a good relationship between Guatemala and Belize. It must, by definition, be infinitely better than having independence without such an agreement.
I join the hon. Gentleman in congratulating the troops on the magnificent job that they have done in Belize. They deserve the admiration of all hon. Members.
Mr. Speaker: Order. I propose to call those hon. Gentlemen who have been rising from the beginning of supplementary questions on the statement.
Mr. William Shelton: Will my hon. Friend accept my congratulations for having moved the affair thus far? May I also pay tribute to the good sense of the Guatemalan Government and the representatives of Belize? Will my hon. Friend tell us what is the present cost of her Majesty's forces stationed in Belize, and whether that cost will be reduced or will increase in the next year or two?
Mr. Ridley: I am extremely grateful for what my hon. Friend said. I echo the tribute that he paid to the other parties in this round of negotiations. It is difficult to give accurate figures for the cost of troops, because it depends on whether one takes the absolute cost of the troops, plus their equipment, or includes the extra cost of having them in Belize rather than in the United Kingdom. I believe that the former figure is between £25 million and £30 million a year, and the latter figure is about £3½ million a year. I am sure that my right hon. Friend the Secretary of State for Defence will confirm those figures.
Mr. Eric Ogden: Will the Minister accept my congratulations on the patient but—I gather—determined fight that he played in the negotiations? Will he confirm that agreement was reached at 8·30 last Wednesday morning? If it proves nothing else, it proves that the Minister has more control over leaks in his Department than is the case in other Departments. What part, if any, will the British Government play in the further negotiations on the clarification of the heads of agreement with Belize and Guatemala? Will they be between Belize and Guatemala, or shall we have some part to play in the negotiations?
Mr. Ridley: I am grateful to the hon. Gentleman. I must disclaim having sat all night on Tuesday. We concluded our discussions at 7 pm on Tuesday and merely returned to sign at 8·30 am on Wednesday. I confirm that we shall play a part in the further rounds of negotiations with representatives from the Belize and Guatemalan Governments. There will be further tripartite negotiations.
Mr. Peter Bottomley: I hope that my hon. Friend will find this experience useful when dealing with other settlements and disputes in the
204
neighbourhood. Is the draft agreement in line with United Nations resolutions on the subject? What is the attitude of the Opposition party in Belize to the draft agreement?
Mr. Ridley: The heads of agreement comply entirely with the United Nations resolution of last autumn. There is no derogation of sovereignty and no impairment of Belize's traditional frontiers.
To my knowledge, the Opposition in Belize have not commented since they heard the details of the settlement. As it was announced only last night, no comment has so far reached me. Any comments made before they knew the terms of the settlement might need to be revised. I am waiting to hear what the Opposition in Belize have to say.
Mr. Robert C. Brown: Does the Minister agree that Belize is probably the best example of a truly multi-racial democracy? We all wish to congratulate the Minister on the progress so far. Is he aware that we are all determined that Belize should be able to maintain its independence? Does he agree that it is no part of the job of a former colonial Power to guarantee independence by military means? Since there is such unanimity in the United Nations on the question of independence for Belize, will the Minister seek the United Nations guarantees for the independence of Belize in future?
Mr. Ridley: I am grateful to the hon. Gentleman. I confirm that Belize is a multi-racial democracy of an exemplary rectitude, despite its small size. We want it to remain so. I do not believe that that can be achieved by a United Nations guarantee. There is no precedent for that. The biggest contribution that can be made to security is to have a treaty of settlement with Guatemala. After that it is difficult to see who the enemy could be. That is the best guarantee for the future.
Mr. Christopher Murphy: In view of the increasing Cuban threat to democracy in Central America, does my hon. Friend agree that to assure Belize's independence some form of military guarantee may have to be made by Britain?
Mr. Ridley: The mere fact that Belize goes independent and becomes a member of the United Nations and, we hope, the Organisation of American States, will in itself be a major guarantee of its security. Her Majesty's Government will take whatever steps seem necessary to reinforce that independence and that security in the light of events at the time when Belize achieves independence.
Mr. Stanley Newens: Since, in the past, the United States has had a policy that has not always coincided with that of Britain, can the Minister assure the House that the present American Administration will give full backing to the settlement and will in no circumstances back any future Guatemalan Administration who seek to revive Guatemala's claim?
Mr. Ridley: I am happy to pay tribute to both the present and the past American Administrations. The last Administration supported the United Nations resolution. President Reagan's Administration have already sent messages to the Guatemalan and Belizean Governments congratulating them on a just and honourable agreement.
Mr. John Sever: Is the Minister aware that the statement will be welcomed, particularly by hon. Members who recently visited Belize?

205
I am grateful to the Minister for having placed on record the thanks of the Government for the work that British troops have been doing in Belize, in what must be one of the most unacceptable and difficult postings abroad. When the Minister considers the negotiations further, will he bear in mind that the situation within Belize is difficult in relation to some local administration and infrastructure? Will he bear in mind the difficulties that might be occasioned to a newly independent State and make provision for and give assistance in terms of the infrastructure and similar matters at independence?
Mr. Ridley: I agree with what the hon. Gentleman says. I repeat my tribute to the troops and to the RAF personnel who have served in Belize. The development of the infrastructure is important, and we shall play our part. My hon. Friend the Minister for Overseas Development hopes to discuss that later this afternoon. The fact that there has been a settlement will bring help from many other countries—including the United States of America—which are pleased that this has happened. We are conscious of the need.
Mr. Edward Lyons: I congratulate the Minister on the progress that he has made towards the independence of Britain's last colony in the Western hemisphere. Will he bear in mind that the reason why Guatemala has been so obdurate is that it enshrined the claim to Belize in its 1946 constitution? In the negotiations, has there been any promise to remove the assertion of sovereignty over Belize from the Guatemalan constitution? If there has not been such a move, there could be trouble in the future.
Mr. Ridley: I am sorry to have tell the hon. and learned Gentleman that Britain still has 13 dependencies in the Western hemisphere, including Belize. The Guatemalan constitution is a matter for the Guatemalan Government. However, by signing the heads of agreement they have implied that they wish to recognise an independent Belize and to drop their claim against us for that territory. How they regularise that internally is a matter for them.
Following is the text:
Heads of Agreement
The United Kingdom and Guatemala, in order to settle the controversy between them over the territory of Belize, have reached agreement on the following points.
1. The United Kingdom and Guatemala shall recognise the independent State of Belize as an integral part of Central America, and respect its sovereignty and territorial integrity in accordance with its existing and traditional frontiers subject, in the case of Guatemala, to the completion of the treaty or treaties necessary to give effect to these Heads of Agreement.
2. Guatemala shall be accorded such territorial seas as shall ensure permanent and unimpeded access to the high seas, together with rights over the seabed there-under.
3. Guatemala shall have the use and enjoyment of the Ranguana and Sapodilla cays, and rights in those areas of the sea adjacent to the cays, as may be agreed.
4. Guatemala shall be entitled to free port facilities in Belize City and Punta Gorda.,
5. The road from Belize City to the Guatemalan frontier shall be improved; a road from Punta Gorda to the Guatemalan frontier shall be completed. Guatemala shall have freedom of transit on these roads.
6. Belize shall facilitate the construction of oil pipelines between Guatemala and Belize City, Dangriga and Punta Gorda.
7. In areas to be agreed an agreement shall be concluded between Belize and Guatemala for purposes concerned with the control of pollution, navigation and fishing.
8. There shall be areas of the seabed and the continental shelf to be agreed for the joint exploration and exploitation of minerals and hydrocarbons.
9. Belize and Guatemala shall agree upon certain developmental projects of mutual benefit.
10. Belize shall be entitled to any free port facilities in Guatemala to match similar facilities provided to Guatemala in Belize.
11. Belize and Guatemala shall sign a treaty of co-operation in matters of security of mutual concern, and neither shall permit its territory to be used to support subversion against the other.
12. Except as foreseen in these Heads of Agreement, nothing in these provisions shall prejudice any rights or interests of Belize or of the Belizean people.
13. The United Kingdom and Guatemala shall enter into agreements designed to re-establish full and normal relations between them.
14. The United Kingdom and Guatemala shall take the necessary action to sponsor the membership of Belize in the United Nations, the Organisation of American States, Central American organisations and other international organisations.
15. A Joint Commission shall be established between Belize, Guatemala and the United Kingdom to work out details to give effect to the above provisions. It will prepare a treaty or treaties for signature by the Signatories to these Heads of Agreement.
16. The controversy between the United Kingdom and Guatemala over the territory of Belize shall therefore be honourably and finally terminated.
Signed at London, the 11th day of March 1981, in the English and the Spanish language, both texts being equally authentic.

STATUTORY INSTRUMENTS, &c.
Mr. Speaker: To save the time of the House I propose to put together the Questions on the two motions on statutory instruments.
Ordered,
That the Rating of Industry (Scotland) Order 1981 be referred to a Standing Committee on Statutory Instruments, &c.
That the draft British Nuclear Fuels Limited (Financial Limit) Order 1981 be referred to a Standing Committee on Statutory Instruments, &c. —[Mr. Boscawen]

WELSH AFFAIRS
Ordered,
That the matter of the Consequences of the Budget and the Government's Economic Policies in Wales, being a matter relating exclusively to Wales, be referred to the Welsh Grand Committee for their consideration. —[Mr. Boscawen.]

BUSINESS OF THE HOUSE
Ordered,
That, notwithstanding the practice of the House relating to the interval between stages of Bills of aids and supplies, more than one stage of the Consolidated Fund (No. 2) Bill may be proceeded with at this day's sitting. —[Mr. Boscawen.]

European Communities (Amendment)
3.58 pm
Mr. Tony Marlow: I beg to move,
That leave be given to bring in a Bill to amend certain provisions of the European Communities Act 1972.
As you are well aware, Mr. Speaker, the position of the United Kingdom within the European Community is once again a live political issue. There are the pressures of the CAP, pressures of the budget, pressures on our farmers, pressures on food prices and, above all at this instant, pressure on jobs. Different parties are distilling their different positions. The Labour Party, many members of which have an undisguised and thus quite proper purpose, wish to get out of Europe and to smash any international institution that could prevent their realisation of that happy dawn—a Socialist Britain. I believe that they are wrong. We are not a smashing nation. We like instead to build.

207
Then there is that uncertain and amorphous flock—the unprincipled yet gay and gentle central souls whose approach to Europe is marked by the grace, subtlety and posture of Veronique, the young French model destined for stardom on the small Italian screen.
For ourselves, the Conservatives in the Conservative Party, we believe that Britain is best, but that in a large and sometimes brutal world some things are nicer done together. We are in the EEC, and we shall probably stay in. But if we do, by the lakes and mountains of the CAP it had better get a whole lot better. We seek, and we shall have, reforms.
Next after determinating the first essential to the achievement of reform is information. Many of us over the months have attempted with stuttering success to draw knowledge from the Government and from the great pandjandrums of the Berleymont. In the Chamber I have on several occasions asked my right hon. Friend the Minister of Agriculture, Fisheries and Food to explain to me and to those curious within the nation the consumer costs of the MCAs. It is sad that one so fit and so talented should suffer from partial hearing. Had he heard, I am sure that I would have had my answer.
Other questions must be asked and must be answered. How much does the French farmer cost the British housewife over and above the burden of the Brussels budget? How many jobs have we lost to the cheaper currencies of Continental Europe? Why do the statisticians in the Department of Trade concentrate on trade including oil, rather than on the mega-dole queues caused by our massive deficit in manufactures? Those questions have been asked, yet, strangely, go unanswered.
Therefore, I feel that the sensible and proper thing must be to amend the European Communities Act 1972 through new clauses in such a way as to make the provision of objective and relevant information automatic—without chance, without interpretation and without, if I may say it, deafness.
I have time for one example. During the past three years each British pound fed into the Brussels financial washing machine has come back shrunk. Our return—our dividend—has been a mere 49p. What has happened to the remainder? Claret, perhaps, or comforts and interpreters for buxom Strasbourg—no doubt the worthy and well-loved Continental farmer—all have had their share and none—perhaps some—would grudge them.
At this moment we must take care because we are entering that season of projects larded with returning British money disgorged from the brimming Brussels coffers. There are those, alas, who would, through guile darkened by base and selfish motives, call such money European. MEPs, whistle-stopping on their way from Bogota to Sierra Leone, whose every waking hour must justify the glory of their own lame institutions may, just, be tempted. Throughout the country offices and pressure groups, some funded from the Brussels interest—again with our money—may mount a massive campaign of media manipulation to praise the greater glory of the EEC, going on about jobs saved and magnificent munificence.
In those circumstances, we who form the people's elected Chamber must be on our guard. We are the people's watchdogs. In the Bill it would be made necessary for each re-routed tranche of Brussels British
208
money to bear a prominent notification, clear to all, in the style of, in the manner of, almost like a Government health warning. It would read thus:
"This money, returned to us from Europe paid for by the British taxpayer, represents £1 alone of each £2 so far committed."
We must trust the people, but first we must make sure that they know the facts. There will be a temptation among many of the more insistent aficionados of Brussels to try to portray every penny from Europe as European money. But the people must not be misled. They must be made aware that that money started in our pockets—
Mr. Speaker: Order. I know that the hon. Gentleman wants to tell us what would be in his Bill if he were given leave to introduce it. I am still waiting to hear the detail of it.
Mr. Marlow: With respect, Mr. Speaker, I have just said that any money coining from Brussels, or the information with that money, should carry a warning so that the people are fully aware that it is British money returned from Brussels and that it is a dividend merely of £1 for every £2 that we have so far expended.
4.5 pm
Mr. Russell Johnston rose—
Mr. Speaker: The hon. Gentleman indicated to me that he wished to oppose the Bill.
Mr. Johnston: I hoped that the hon. Member for Northampton, North (Mr. Marlow) would spend rather more of his limited time telling us precisely what he intended to do rather than simply disparaging what various people, perhaps for reasons that he disagrees with, have been trying to do for the best for Britain in European institutions. The House must remember that what the hon. Gentleman proposes—an amendment of the 1972 Act—quite simply is not practical. It is political nonsense to suggest it.
The Opposition Front Bench, whose members are notably absent, proposed that the 1972 Act should be repealed. That at least is a perfectly practical proposition. I profoundly disagree with it, but it is possible and practical. Equally, it is practical to say that the Treaty of Rome could be amended by agreement. But the hon. Gentleman is suggesting some sort of unilateral amendment to the Treaty of Rome that is impractical and impossible. I hope that no Opposition Members, holding the views that they do—with which I disagree, but which are perfectly straightforward—will support such a proposition.
What the hon. Gentleman proposes is dishonest.
Mr. Marlow: Oh, no.
Mr. Johnston: Oh, yes. The hon. Gentleman knows the commitment of his party to the Community: he has been told so many times in the House, in my presence, by the Lord Privy Seal. He knows that many members of his party, like myself, are dissatisfied about certain of the workings of the EEC. But he knows that to pretend that some amending legislation would solve that problem is not true. Since he came to the House he has tried to build up, with some success, a reputation as a direct and forthright—not entirely concise, but forthright—Member of Parliament. He would gain more respect in the House if he came clean and said that he wanted out of the

209
Community rather than fluffing around and pretending that he could produce amending legislation. That is genuinely not true—
Mr. John Carlisle: On a point of order, Mr. Speaker.
Mr. Speaker: I shall take the point of order later. We usually hear one hon. Member in favour of and one hon. Member against the motion without interruption.
Mr. Johnston: The hon. Member for Northampton, North bemoans the lack of control that the House has over Community legislation. He specifically mentioned that. What is he doing about it? As he is a member of the governing party and presumably, therefore, has some influence in these matters, he should direct his attention to the fact that in terms of scrutiny of European legislation it is an unpalatable but recognised fact that the most impressive scrutiny comes not from this elected Chamber but from the Scrutiny Committee in another place. That is something that the House should consider.
The hon. Gentleman treated us to some references to the trade figures for the remainder of the Community. He has gone over those matters several times. I readily accept his point that oil distorts the position. But he failed to face up to two simple fundamental points. First, despite our poor economic performance—for which he cannot blame the Community—the volume of our manufacturing exports to the Community, especially in the new industries, has continued to increase. Secondly, if he doubts our ability to negotiate a fair deal with friendly countries which, according to him—I heard him say it'—need us more than we need them, how on earth does he expect to conclude a better deal with other countries? That is a quite incredible idea.
We get a bad deal from the CAP; I accept that, and do not argue about it. But if we build our alternative, as the hon. Member for Southend, East (Mr. Taylor) did recently, on the assumption of a world surplus in food—which is a pretty ropey assumption, which I do not accept, and a narrow plank to tread—a crop failure this summer in the USSR would put all those calculations at naught. It is worth remembering that the capacity of the Community to give Poland food in the present situation has added greatly to the stability of the situation in Europe.
I shall not repeat the complete impracticability of the amendment proposed by the hon. Gentleman. You rightly drew attention, Mr. Speaker, to the fact that the hon. Member said little about what was in his Bill. He attempted the same exercise in July last year. We have still to see what the Bill might contain. It would have been helpful to explain what it contains.
I ask the House to reject what the hon. Gentleman said. Britain's problems are political, not national. Hon. Members may laugh. As an individual citizen, I would be considerably happier if my lot in the Community were determined by a President called Helmut Schmidt rather than in this country by a Prime Minister who was the right hon. Member for Bristol, South-East (Mr. Benn). The future of Britain lies not in political unilateralism but in co-operation.
Mr. Speaker: I shall take the point of order before I put the Question.
Mr. John Carlisle: With respect, Mr. Speaker, you stopped my hon. Friend the Member for Northampton,
210
North (Mr. Marlow) because he was not keeping to the subject of his Bill. The hon. Member for Inverness (Mr. Johnston) then made a vicious attack on my hon. Friend's character. Surely he should have been stopped for the same reason.
Mr. Speaker: The hon. Member has referred to a vicious attack having been made on the character of the hon. Member for Northampton, North (Mr. Marlow). No one in the House would dream of doing such a thing. If he did, the hon. Member for Northampton, North would deal with him, or I would intervene. If one hon. Member wanders, unfortunately it tempts the hon. Member who is opposing him to do the same, although the two hon. Members wander along different paths.
Mr. John Farr: Further to that point of order, Mr. Speaker. I did not think that it was a vicious attack on my hon. Friend. It verged almost on the sadistic.
Mr. Speaker: Clearly the hon. Member does not live in Wales if he thinks that what the hon. Member for Inverness (Mr. Johnston) said was sadistic.
Question put, pursuant to Standing Order No. 13 (Motions for leave to bring in Bills and nomination of Select Committees at commencement of public business:
The House divided: Ayes 128, Noes 178.

Division No. 108]

[4.12 pm

AYES

Alexander, Richard

Garrett, John (Norwich S)

Allaun, Frank

Garrett, W. E. (Wallsend)

Ashley, Rt Hon Jack

Graham, Ted

Bennett, Andrew(St' Kp'tN)

Grant, George(Morpeth)

Bevan, David Gilroy

Griffiths, Peter Portsm' thN)

Bidwell, Sydney

Hamilton, James(Bothwell)

Blackburn, John

Hardy, Peter

Body, Richard

Harrison, Rt Hon Walter

Booth, Rt Hon Albert

Hawksley, Warren

Brotherton, Michael

Haynes, Frank

Brown, Michael(Brigg &Sc'n)

Heffer, Eric S.

Brown, R. C. (N'castle W)

Homewood, William

Callaghan, Jim (Midd't'n&P)

Hooley, Frank

Canavan, Dennis

Huckfield, Les

Cant, R. B.

Hughes, Mark(Durham)

Carlisle, John (Luton West)

Hughes, Robert(Aberdeen N)

Carmichael,Neil

Hughes, Roy (Newport)

Clark, Hon A. (Plym'th, S'n)

Janner, HonGreville

Clark, Dr David (S Shields)

Jay, Rt Hon Douglas

Cocks, Rt Hon M. (B'stol S)

John, Brynmor

Cohen, Stanley

Johnson, James (Hull West)

Cook, Robin F.

Jones, Barry (East Flint)

Cowans, Harry

Jones, Dan(Burnley)

Crowther,J.S.

Kerr,Russell

Cryer, Bob

Lamond,James

Cunliffe,Lawrence

Lewis, Ron (Carlisle)

Cunningham, Dr J.[(W'h'n)

Lloyd, Peter(Fareham)

Davidson, Arthur

Lofthouse, Geoffrey

Davis, T. (B'ham, Stechf'd)

McCartney, Hugh

Deakins, Eric

McDonald, DrOonagh

Dean, Joseph (Leeds West)

McKay, Allen(Penistone)

Dempsey, James

McNamara, Kevin

Dixon, Donald

Mc Taggart, Robert

Dormand, Jack

Marks, Kenneth

Dover, Denshore

Marlow, Tony

Dubs, Alfred

Marshall, D(G'gowS'ton)

Dunlop, John

Marshall, Dr Edmund (Goole)

Dunwoody, Hon Mrs G.

Maynard, Miss Joan

Eadie, Alex

Mikardo, Ian

Eastham, Ken

Miller, Dr M.S.(E Kilbride)

Edwards, R. (W'hampt'n S E)

Moate, Roger

Ellis, R. (NE D'bysh're)

Molyneaux, James

Fletcher, Ted(Darlington)

Morris, Rt Hon A. (W' shawe)

Forrester, John

Moyle, Rt Hon Roland

Foster, Derek

Mudd, David

Fraser, Rt Hon Sir Hugh

Newens, Stanley

211

O' Neill, Martin

Stott, Roger

Orme, Rt Hon Stanley

Taylor, Mrs Ann (Bolton W)

Pawsey, James

Taylor, Teddy (S'end E)

Pendry, Tom

Thomas, Dafydd(Merioneth)

Powell, Rt Hon J.E. (S Down)

Thorne, Stan (Preston South)

Powell, Raymond(Ogmore)

Torney, Tom

Race, Reg

Urwin, Rt Hon Tom

Richardson, Jo

Varley, Rt Hon Eric G.

Roberts, Gwilym(Cannock)

Walker, B. (Perth)

Rooker, J. W.

Watkins, David

Ross, Ernest (Dundee West)

Weetch, Ken

Ross, Wm. (Londonderry)

Whitlock, William

Sheerman, Barry

Wigley, Dafydd

Shepherd, Richard

Wilson, Gordon (Dundee E)

Short, Mrs Renée

Winnick, David

Skinner, Dennis

Young, David (Bolton E)

Soley, Clive

Spearing, Nigel

Tellers for the Ayes:

Spriggs, Leslie

Mr. K. Harvey Proctor and Mr. John Farr

Stoddart, David

NOES

Adley, Robert

Eden, Rt Hon Sir John

Alison, Michael

Emery, Peter

Alton, David

English, Michael

Ancram, Michael

Eyre, Reginald

Atkins, Rt Hon H. (S'thorne)

Fairbairn, Nicholas

Atkins, Robert(PrestonN)

Fairgrieve, Russell

Baker, Nicholas (N Dorset)

Faith, Mrs Sheila

Banks, Robert

Finsberg, Geoffrey

Beaumont-Dark, Anthony

Fisher, Sir Nigel

Beith, A.J.

Fletcher, A. (Ed'nb'gh N)

Benyon, W. (Buckingham)

Forman, Nigel

Berry, Hon Anthony

Fowler, Rt Hon Norman

Best, Keith

Freud, Clement

Biggs-Davison, John

Gardiner, George(Reigate)

Boscawen, Hon Robert

Garel-Jones, Tristan

Boyson, Dr Rhodes

Glyn, Dr Alan

Braine, Sir Bernard

Goodhart, Philip

Brittan, Leon

Goodlad, Alastair

Buck, Antony

Gorst John

Campbell-Savours, Dale

Gower, Sir Raymond

Carlisle, Rt Hon M. (R'c'n)

Gray, Hamish

Cartwright, John

Grieve, Percy

Chalker, Mrs.Lynda

Grist, Ian

Channon, Rt. Hon. Paul

Gummer John Selwyn

Chapman, Sydney

Hamilton, Hon A.

Churchill, W.S.

Havers, Rt Hon Sir Michael

Clark, SirW. (Croydon S)

Hawkins, Paul

Clarke, Kenneth (Rushcliffe)

Hayhoe, Barney

Clegg, Sir Walter

Heddle john

Cope john

Higgins, Rt Hon Terence L.

Corrie, John

Hill, James

Cranborne, Viscount

Hogg, Hon Douglas(Gr'th'm)

Dorrell, Stephen

Holland, Philip(Carlton)

Douglas-Hamilton, LordJ.

HomeRobertson, John

Durant, Tony

Hooson, Tom

Howe, Rt Hon Sir Geoffrey

Rathbone, Tim

Howell, Rt Hon D. (G'ldf'd)

Rees, Peter (Dover and Deal)

Hunt, David(Wirral)

Rees-Davies, W. R.

Hunt, John(Ravensbourne)

Rhodes James, Robert

Hund, Hon Douglas

RhysWilliams, SirBrandon

Jenkin, Rt Hon Patrick

Ridley, Hon Nicholas

Johnston, Russell(lnverness)

Ridsdale, SirJulian

Jopling, Rt Hon Michael

Rifkind, Malcolm

Kershaw, Anthony

Roberts, M.(Cardiff NW)

Kimball, Marcus

Roberts, Wyn (Conway)

King, Rt Hon Tom

Roper, John

Knox, David

Ross, Stephen (Isle of Wight)

Lamont, Norman

Sainsbury, Hon Timothy

Lang, Ian

Shaw, Giles (Pudsey)

Lawrence Ivan

Shelton, William(Streatham)

Lawson, Rt Hon Nigel

Shepherd, Colin(Hereford)

LeMarchant, Spencer

Shersby, Michael

Lewis, Kenneth(Rutland)

Silvester, Fred

Lloyd, Ian (Havant & W' loo)

Sims, Roger

Luce, Richard

Skeet, T. H. H.

Lyons, Edward (Bradf'd W)

Speed, Keith

McCrindle, Robert

Spence, John

MacGregor, John

Spicer, Michael (S Worcs)

MacKay, John (Argyll)

Squire, Robin

Macmillan, Rt Hon M.

Stanbrook,Ivor

McNair-Wilson, M. (N'bury)

Steel, Rt Hon David

Major, John

Stevens, Martin

Mates, Michael

Stewart, Ian (Hitchin)

Mather, Carol

Stradling Thomas, J.

Mawhinney, Dr Brian

Tebbit, Norman

Mayhew, Patrick

Thomas, Rt Hon Peter

Meyer, Sir Anthony

Thompson, Donald

Mills, Iain (Meriden)

Thornton, Malcolm

Mills, Peter (West Devon)

Townsend, Cyril D, (B'heath)

Mitchell, David (Basingstoke)

Trippier, David

Moore, John

Trotter, Neville

Morris, M. (N'hampton S)

Vaughan, Dr Gerard

Morrison, Hon C. (Devizes)

Viggers, Peter

Morrison, Hon P. (Chester)

Waddington, David

Myles, David

Wainwright, R. (Colne V)

Needham, Richard

Wakeham, John

Nelson, Anthony

Walker, Rt Hon P. (W'cester)

Newton, Tony

Wall, Patrick

Normanton, Tom

Walters, Dennis

Nott, Rt Hon John

Watson, John

Owen, Rt Hon Dr David

Wells, Bowen

Page, Rt Hon Sir G. (Crosby)

Wheeler, John

Patten, John(Oxford)

Whitehead, Phillip

Penhaligon, David

Whitelaw, Rt Hon William

Percival, Sir Ian

Whitney, Raymond

Porter, Barry

Wilkinson, John

Price, Sir David(Eastleligh)

Young, Sir George (Acton)

Prior, Rt Hon James

Pym, Rt Hon Francis

Tellers for the Noes:

Radice, Giles

Mr. Robert Maclennan and Mr. Cranley Onslow.

Raison, Timothy

Question accordingly negatived.

Orders of the Day

  Consolidated Fund Bill
  Order for Second Reading read.
  Motion made, and Question proposed, That the Bill be now read a Second time.
  Mr. Speaker: Before I call the hon. Member for East Kilbride (Dr. Miller), I am sorry to have to remind him that the scope for discussion is narrow. He will be able to discuss only the reasons for the increases outlined in the Vote.

  Belize
  4.23 pm
  Dr. M. S. Miller: I am grateful to you, Mr. Speaker, for the clear indication of the limit of my remit. I was hoping that your successor would be in the Chair by now and that he would not know quite as much about the limit of the discussion.
  I see that you, Mr. Deputy-Speaker, are now in the Chair. I shall apply myself as best I can to the task before me. It is the first time that I have spoken in the House since you were appointed to that illustrious seat. It is, therefore, appropriate for me to offer you my sincere congratulations.
  This subject is the only one in the so-called series of debates. It is appropriate to raise it shortly after a statement has been made on Belize. My purpose in raising the subject is to try to ensure that that little country does not get a raw deal in the months and years to come.
  Aid to Belize has been given by the British Government for a long time. In 1975 the net transfer of aid was about £2¼ million. By 1979, the last year for which I have figures, the amount had increased to over £7 million. The £7,454,000 gross comprises almost £7 million of financial aid and £½ million of technical co-operation. Included in the financial aid is £6,771,000 of project aid—aid to establish new or expand existing production and infrastructure facilities—leaving only £95,000 of non-project aid, all of which is used for disaster relief.
  I am informed that disaster relief is one matter to which I may refer this afternoon, but let me first point out how important money for that purpose is to a country such as Belize. Belize suffers many natural disasters. It is frequently hit by hurricanes, often of great intensity. In 1961 hurricane "Hattie" devastated large areas, including Belize city, which I visited three years later, in 1964. The disaster caused over 300 deaths, and that in a country with fewer than 100,000 inhabitants at the time.
  The Supplementary Estimates allow for small increases in the proposed aid for Belize. They come under three sub-headings:
  "Assistance after disasters", development grants and "Service overseas and Regional Technical Co-operation Programmes".
  The reference to "Assistance after disasters" appears in the Supplementary Estimates (Classes II-XVII: Civil) at page 17. Belize is grouped with Algeria, Bangladesh, Cameroon, Cayman Islands, Dominica, Fiji, Haiti, Honduras, Jamaica, Mozambique, Nepal, St. Lucia and
  214
  St. Vincent. The sum allocated for all those countries is very tiny. What proportion of the allocated increase will go to Belize?
  As far as I can make out, the development grants for Belize appear at page 45, under the heading "British dependent territories", either under the sub-heading "Loan" or "Grant", or perhaps both. The overall sum is substantial, but, again, what will be the apportionment to Belize?
  I am not sure where I can find the third group. It is supposed to be concerned with service overseas and regional technical co-operation. Will the Minister tell me where I can find the previous apportionment and the increase, if any, earmarked for Belize in the Estimates that we are discussing. In 1979, £587,000 was spent on regional technical co-operation and service overseas; £114,000 was spent on student training, £460,000 on personnel overseas and £13,000 on other services. May I have more information from the hon. Gentleman on that matter?
  The Minister is the first to recognise the importance of overseas aid. I am sure that the whole House greatly appreciates both his present interest in these matters and the interest that he has shown over many years. We derive satisfaction when we know that aid is put to good use. There has been a great deal of criticism, some of which is not particularly justified, about overseas aid that finds its way into the coffers of people for whom it is not intended. Belize is a democratic, multi-racial country, which has a parliamentary system similar to ours. It is intensely pro-British and intensely preoccupied with maintaining British links. I am sure that any aid that is accorded to it from the British Treasury is appreciated and put to good use.
  I am sure that the Minister will agree with me that this small country of about 150,000 inhabitants, with few natural resources apart from the willingness of its people to work, deserves our thanks for its long-standing accord with Britain and the British people and our assurance that we shall not forget it when it proceeds to independence.
  When a director of a firm leaves after long and good service the custom is to give him a golden handshake. I ask the Minister to accord a similar golden handshake to Belize, so that she will not be disadvantaged in the new world in which she will find herself when she becomes independent. The people of Belize are worried about their future. There are certain matters over which the British Government have no control and about which they cannot concern themselves, but the Government have considerable control over overseas aid. I ask the Minister to accept the necessity of retaining the good will of this small country and of helping its people in every way that we can as a nation.
  4.35 pm
  Mr. Edward Lyons: I am sorry to learn that the Minister for Overseas Development is to leave the House at the end of this Parliament. Although I do not agree with his views on the Common Market, he has been a brilliantly resourceful anti-Market gladiator for many years. He is a master of the art of parliamentary questions in Opposition. My only regret, now that he is a Minister, instead of a Back Bencher, is that he had so much more liberty to entertain us on the Back Benches than the discipline of Government allows him now. He will be sadly missed by both sides of the House.

  215
  I congratulate my hon. Friend the Member for East Kilbride (Dr. Miller) on introducing this topic and being successful in obtaining the debate. One of the more endearing characteristics of the House of Commons is that it can spare time from issues involving millions of people to consider issues involving small numbers of people—in this case the country of Belize with a population of about 140,000 and one of the smallest capital cities in the world, Belmopan, with a population of only 4,500.
  I understand from figures that I have seen that the cost of maintaining a British Army presence in Belize to defend the country is about £25 million annually, whereas the total gross revenue of the country is about £36 million. So we are dealing with a small country with a small population, I understand, although I have never been there, few streets are paved, there is no television—some people might think that a blessing—and a great deal needs to be done to develop the infrastructure to help the people to get on their feet. As I understand that 63 per cent. of all money for capital development projects comes from Britain, the continued assistance of Britain in that area is crucial.
  Earlier this afternoon the Minister of State, Foreign and Commonwealth Office spoke of the heads of agreement that had been reached, one of which involved exploration for minerals. Reference was also made to oil and the possibility of joint efforts between Guatemala and Belize in this respect. I hope that British aid will be available for facilitating the search for and the discovery and development of these resources, which will be of great value to those countries and to the world at large.
  The Brandt report bears generally on the problems of countries such as Belize. The West has a duty and a responsibility to ensure that such countries are enabled to develop and to build up their standard of living. There is a bonus in that policy for the West. An increased standard of living in Belize will mean that Britain can hope for a share of the orders for goods which a higher standard of living will enable the Belizeans to buy.
  I hope that Britain will continue to discharge its responsibilities in that part of the world and will continue to support the Belizeans, not only in relation to their security but in relation to their development, not only as a moral duty but from self-interest, for the sake of the stability of that part of the world and because Britain has been there an awfully long time. There was a considerable period when we did nothing to assist the improvement of the standard of living and the conditions of life in that country. Our record in recent years has been considerably better, and I hope that independence will not prevent the continuance of those efforts to improve the situation in that small and rather impoverished country.
  4.41 pm
  The Minister for Overseas Delevopment (Mr. Neil Marten): I first thank the hon. and learned Member for Bradford, West (Mr. Lyons) for his kind remarks about my decision not to stand at the next election. It was most courteous of him. When I came into the House 21½ years ago I remember going into the Tea Room and being surrounded by some over-70s who offered me "very sound advice, my boy". I shook my head and decided that I was not going to be here when I was 70. If I were to stand at
  216
  the next election that would be the case, so I decided that I had better hand in my notice to my constituency in good time.
  I am sure that the people of Belize will welcome this debate, initiated by the hon. Member for East Kilbride (Dr. Miller). I think that much of his interest came about through four visits, I believe it was, on behalf of the Commonwealth Parliamentary Association. That illustrates the great value of the CPA, which I hope will go from strength to strength.
  Dr. M. S. Miller: I thank the hon. Gentleman. I also visited Belize with the Select Committee on Defence, and therefore saw another aspect of the country and its problems.
  Mr. Marten: I hope that Select Committees, too, will go from strength to strength.
  I am sure that the people of Belize will welcome what has been said in the debate. We shall certainly take great notice of what has been said by people who know Belize.
  There is just one point that I should like to pick up from what the hon. Gentleman said—that the benefits of aid sometimes do not go to the people for whom it is intended. That may have been so many years ago—we have all heard many stories about that sort of thing—but I assure him that now we very carefully appraise any aid project and monitor it, cost it and watch the costs very carefully, so I hope that that sort of thing does not happen now. Of course we cannot control everything all over the world when we are giving aid to over 130 different countries, but we do our best to monitor it and see that nothing goes astray.
  First, I propose to explain the reason for the Spring Supplementary Estimate provision required for Belize in the Overseas Aid Vote. The sums in question are not large. There is an item of £792, which was provided under the disaster sub-head C7 to which the hon. Gentleman referred, and covered the use of a Ministry of Defence helicopter for flood relief operations. I pay a tribute to those who take part in these operations, because we have a very high standing in the world in providing aid following disasters.
  Secondly, the provision for development aid under subhead C2 of the Overseas Aid Vote requires increasing by £164,000, to £4 million. This is to provide fully for expenditure arising from existing commitments, including hurricane rehabilitation aid agreed in 1979–80 but not all spent in that year.
  Thirdly, there is an increase for technical co-operation under sub-head D1 from £700,000 to £925,000, mainly to permit the engagement of consultants to help plan a new Belize city hospital.
  In calling for a debate on Belize the hon. Member for East Kilbride has provided an opportunity to discuss the question of aid following independence. Figures have not yet been decided, but I assure the House that aid will continue for a number of years and that we are considering a suitable aid package, or what is sometimes called a golden handshake, on independence. This will need to be discussed with the Belize Government when the date for independence is fixed. That is the usual way of going about it.
  An important factor to be taken into account is the signing of the heads of agreement for a settlement of our dispute with Guatemala over Belize, which heads of

  217
  agreement were published yesterday and announced by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) this afternoon. I stress that the full implications of the settlement will not, however, be known until the detailed arrangements have been negotiated over the coming months.
  Dr. Alan Glyn: I have been to Belize recently. We are all grateful for the incredible ability of my hon. Friend the Minister of State—the hon. Member for Cirencester and Tewkesbury (Mr. Ridley)—in achieving what he has. My hon. Friend has just said that aid will be limited, and I think there are two things that really matter. The first is that aid will be given over a reasonably long period, because it will take a long time for the people of Belize to get on their feet. Their economy is by no means strong. Secondly, the assurance that British troops will be there for a long period will provide some form of stability. If that is combined with a long-term aid programme it will enable Mr. Price, or whoever succeeds him, to establish a much stronger base for the Government.
  Mr. Marten: I am grateful for that intervention because it enables me to reaffirm that our aid programme will be a fairly long-term one, and one in which the people of Belize can have confidence. On the question of troops, my hon. Friend will have heard my hon. Friend the Minister of State. We cannot give any commitment at this stage.
  Our existing aid to Belize is given in the context of a healthy and expanding economy. There was strong economic growth in the 1960s and 1970s, and with a per capita gross national product of US$ 870 in 1978 Belize is one of the richer developing countries in the Commonwealth Caribbean. It has tremendous potential for development, and with under-population in rural areas there is considerable scope for agricultural expansion on land not yet cultivated.
  The major crop at present is sugar, which accounts for over 20 per cent. of the gross domestic product and 60 per cent. of domestic exports, but there are also prospects for increasing exports of citrus fruits, bananas and livestock. The economic and social infrastructures are adequate, but there remains a real need for continuing aid in this area.
  We are already helping with roads, the Caribbean Development Bank has assisted with a deep water port, and the Canadians and we have both helped with projects to provide mains water to the major towns. The Belize Government have plans for a new hospital in Belize city, for which finance may come from the European Development Fund, which is the fourth major donor of aid to Belize.
  218
  Our project aid in 1978–79 and 1979–80 was £3·6 million and £5·7 million respectively, although these figures include about £3 million rehabilitation aid following hurricane "Greta", in addition to the normal aid programme. Technical co-operation expenditure in the same two years was £516,000 and £642,000.
  All this aid is administered by the British Development Division in Bridgetown, Barbados, and Belize also benefits, as I have already indicated, from British aid provided through the Caribbean Development Bank and the European Development Fund.
  Most of the project aid in the last few years has been spent on a major road project, hurricane rehabilitation and a rural development project in Toledo, the southern part of Belize. Other projects include town water supplies, smaller road projects, a police training school, the Belize river ferry and radio equipment.
  The technical co-operation includes training in the United Kingdom and the Caribbean region, and financial assistance, with nearly 40 British expatriate staff.
  Mrs. Gwyneth Dunwoody: Will the staff that are sent from Belize to Britain in future have any cover under the National Health Service? Will the hon. Gentleman's Department be prepared to take up health insurance? What will happen to these people?
  Mr. Marten: That one has bowled me middle stump. I shall write to the hon. Lady when I have researched the issue.
  I return to aid following independence. I repeat the assurance that I gave earlier, that arrangements will be made for development aid and technical co-operation to continue for a number of years yet. We hope and expect that aid to Belize from other sources will increase as a result of full independence. I do not envisage that that will affect British aid expenditure.
  The hon. Member for East Kilbride has done a service to the House in raising this issue in the debate on the Consolidated Fund Bill. It has enabled me to explain what aid we are currently giving to Belize and to state clearly that there is some way to go yet before we finalise any aid settlement on independence.
  Question put and agreed to.
  Bill accordingly read a Second time and committed to a Committee of the whole House; immediately considered in Committee.
  Clauses 1 to 3 agreed to.
  Bill reported, without amendment.
  Motion made, and Question, That the Bill be now read the Third time, put forthwith pursuant to Standing Order No. 93 (Consolidated Fund Bills) and agreed to.
  Bill accordingly read the Third time and passed.

London Hospital Medical Schools
Motion made, and Question proposed, That this House do now adjourn. —[Mr. Newton.]
4.52 pm
Mr. John Wheeler: I am glad of this early opportunity to raise the issue of the future of St. Mary's hospital medical school, in my constituency. The Government are no doubt aware that as a result of their policy on overseas students' fees the University of London has had its resource allocation reduced this year by £6·3 million, of which £3·8 million has fallen on postgraduate medical schools. It is now being suggested that the St. Mary's hospital medical school will have to close.
I was especially concerned and surprised to hear that the university senate was considering this course of action, not least because it goes against a number of recent expert recommendations on the organisation of the university's faculty of medicine.
For example, in February 1980 the Flowers committee reported on medical education in London. Having spent much time and effort in obtaining evidence from all points of view, the committee strongly supported the future development of St. Mary's as a school and as a hospital to serve the local population. Furthermore, the committee's recommendations are compatible with the recommendations of the Department of Health and Social Security, the London Health Planning Consortium and the regional health authority.
St. Mary's hospital medical school has a fine tradition of solid achievement. It can boast two Nobel Prize winners—Sir Alexander Fleming, who discovered penicillin, and Professor Rodney Porter, who won the prize for his work on how the body protects itself against infection—work that is of great benefit to all countries of the world.
In the early 1970s, with an academic staff of under 100, the school had no fewer than four fellows of the Royal Society on its staff. The school's academic record is good. Its output of research publications per member of staff is higher than that other medical school in London and its examination record is well above average. In addition to these factors, the school costs comparatively little to run. About 28 per cent. of its income comes from money that is independent of the University Grants Committee. That income is used for research projects. It is won in open competition and constitutes a higher proportion of funding than that for any of the other London medical schools. The closing of the school would not only be sad and wasteful; it would have a disastrous effect on St. Mary's hospital itself.
The medical school provides the hospital with numerous support services—for example, a pathology department to diagnose illnesses. It also enables the hospital to attract the highest-quality staff. The best junior doctors are recruited, because they want to work under the prestigious professors in the medical school. The best technical staff are recruited, because they want to be trained with the latest sophisticated equipment, which is provided by the medical school. Nurses benefit from the lively social environment of the teaching hospital.
Perhaps the people to benefit most from the medical school are the patients, who can be treated with technology that is 10 to 15 years ahead of that which would be found in a non-teaching environment. The main hospital is about
220
to be rebuilt and the medical school would be an integral part of it. To all intents and purposes the hospital and the school are inseparable. Without the school the hospital would deteriorate beyond recognition. In effect, it would be crippled.
This is a matter of the deepest concern to me and my constituents. St. Mary's hospital is a general hospital, which provides excellent bread and butter routine services for the community. For example, it deals with hernia repairs and appendicitis conditions that could not be treated adequately by the other specialist hospitals in the area. About 75 per cent. of its patients come from within three miles of the hospital.
The demands on the hospital made by my constituents are heavy. Social deprivation in Paddington is considerable and 20 per cent. of all families with dependent children are headed by lone parents. About 25 per cent. of births in the area are illegitimate, compared with a national average of 9 per cent. Severe house crowding results in real health care problems. Psychiatric cases and drug abuse cases are of a level well above the national average. All these facts, which can be verified by statistics issued by the Department of Health and Social Security, combine to put an enormous burden on the local hospital. St. Mary's hospital has therefore become essential to the health care of my constituents.
The Government have said that decisions on the closing of London medical schools are for the university senate. I understand that the senate is to meet on Wednesday 25 March, when it will most probably make a decision about the future of the London medical schools. The vice-chancellor of London university is to address the academic board and school council of St. Mary's hospital on Monday 23 March, when I know that important decisions will be reached.
Unfortunately, it is not as simple as that. The closure of St. Mary's hospital medical school would have repercussions far outside the academic world. It would cripple the hospital and destroy the health care that is essential to my constituents. To some it would be literally a matter of life or death. I urge the Government not to wash their hands of this matter but to face the real problem and to accept part of the responsibility for resolving it.
4.59 pm
Mrs. Gwyneth Dunwoody: We should be grateful to the hon. Member for Paddington (Mr. Wheeler) for raising this subject because it is obvious that with the enormous pressure being put on medical care in the inner cities the closure of St. Mary's hospital medical school will be of enormous importance not only to the people who normally receive training in that school but to those who live in the area.
I declare a mild interest, because a member of my family works in the hospital. I hasten to add that my views are not coloured by hers.
What concern me deeply are the far-reaching suggestions for the amalgamation of medical schools. When I was a very young doctor's wife I remember that a decision was taken to cut down the number of medical students being trained. Consequently, in a short time there were not enough doctors to fill the relevant posts. At present, we have a difficulty because many Commonwealth doctors are, almost by accident, treated as second-class citizens. They fulfil house jobs and senior house jobs in the Health Service. One of the Government's

221
avowed objects has always seemed to be to produce sufficient home-grown doctors to fill all those posts. It is totally contradictory on the one hand to say that we are concerned about the number of doctors produced and their quality and on the other hand to talk about taking piecemeal decisions on medical school training.
There are many questions for the Government to answer. The subject should be dealt with in a very much broader way than by shutting down some units, irrespective of the overall plan for medical education in the inner city. It is not simply a matter of training doctors. St. Mary's hospital contains many acute beds and provides positive health care for those living in the area. There is a suggestion that the ambulance, rehabilitation and rheumatology units will be closed. In fact, the rehabilitation and rheumatology units have already been closed. It was always understood that the changes would come about when other hospitals in the area had developed alternative services.
I make it clear that I am not in favour of maintaining any old hospital irrespective of the standard of care. It is depressing that in 1981 there are so many new office blocks, many of them standing empty, and so many inferior hospitals. The same energy should have been put into building new hospital units that has been put into developing property for the profit of a small section of the community. I am not saying that irrespective of the quality of the health care we must keep hospitals open and working. However, before the Government go ahead with the closure of a unit that is providing a generally needed service they must plainly demonstrate that alternative facilities are available. I understand that the ambulance station is modern. It is not housed in inferior buildings.
We have recently had clear evidence that the health care provided for those in the inner city is in many instances inferior. Too many general practitioners work from lockup shops. Too many people have difficulties in finding a doctor. There are instances where deputising services are routinely used. All those factors mean that a general unit in the area inevitably takes a large amount of the emergency work. If there are not sufficient primary health care units, inevitably the local population relies on the casualty department for basic services. That will be materially affected if parts of St. Mary's are closed.
In considering the provision of health care and the further training of doctors we must bear in mind that lumping together medical training facilities does not automatically produce a higher quality of care. The Government are free with their statements about how they want to support the National Health Service. The Ministers have a little monologue that goes: "Look, we are giving the same amount of financial aid to the National Health Service that our predecessors gave". They carefully skate over the fact that over the past five years there has been a 50 per cent. cut in capital costs. They do not spell out the point that by increasingly seeking to use the facilities of the National Health Service to cross-subsidise medical facilities in the private sector they are merely helping the cash flow of the private units.
If there is excess money from National Health funds to pay for facilities in the private health sector, that money should be spent on upgrading hospitals such as St. Mary's. It should be used to improve the facilities for the citizens of Paddington. It should not be used to support private hospitals to enable them to make a profit.
222
In a nutshell, the problem of the inner city is that of old hospitals, inferior facilities and, too often, management decisions which are dictated far too much by a sort of book-keeping exercise. Because of the staff cuts, we know that there will be problems in providing services. In an area such as Paddington, the local social services committee finds it virtually impossible to replace the facilities that once were provided by hospitals. The personal social services are now so badly overloaded that local authorities are faced with an intolerable choice. Do they cut down their services, their home helps and social service workers to such an extent that they cannot provide cover, or do they put such a burden on the rates that the ratepayers, many of them pensioners living in substandard housing, cannot afford to pay them? That is the practical effect of the Government's policies.
The Government's attitude to inner city care leaves a great deal to be desired. There is another problem with hospitals such as St. George's. The Secretary of State is anxious to draw a great deal of money back into the National Health Service. Why, then, have we heard so little about what is happening to the NHS site at St. George's hospital? A planning application has been made to Westminster city council for that site when it is not wholly owned by those who have applied for planning permission. There is clear evidence that, far from getting the best price for the hospital, because of considerable difficulties in negotiations, the Department is allowing Grosvenor Estates to benefit at the expense of the taxpayer.
I realise that it is difficult for the Minister to answer questions off the cuff, but I want him to take time in the forthcoming weeks to tell us exactly what is happening about St. George's hospital. How much is being paid for the site? How much will the Health Service benefit from the sale? Where will that money go? Why should it not be spent on inner city care and on an expansion of the facilities at a hospital such as St. Mary's?
I return to what to me is the relevant point. Why are the Government now prepared—apparently in advance of the decision to be taken on the Flowers report—to close down one unit? I know that we shall return to the old argument "It is not us but them". The truth is that the Government determine the size of the grant, they lay down the priorities, they decide what will happen in terms of staffing and they have a responsibility to tell us what they will do about St. Mary's. They have a responsibility to tell us what they intend to do about medical training. They certainly have a responsibility to tell us how they will provide other facilities for people in the area.
It is all very well to say that a couple of miles down the road alternative facilities will be available. The Minister is a sympathetic man, which is one reason why he so frequently appears at the Dispatch Box to defend the indefensible. He knows that in that area many old people and one-parent families with young children will find it a burden. They do not have ready access to motor cars, and must rely in times of emergency on getting themselves to the nearest casualty unit as quickly as possible, especially if the level of GP cover is not of a high standard
In his reply, I hope that the Minister will tell us "Ah, but we can immediately demonstrate that we are replacing these facilities. We are not simply doing what you might think, being hard-hearted and, in effect, saying that this has nothing to do with us and that decisions on the overall financing are for the people concerned". I hope that he will

223
say that it is his intention to demonstrate, through a large injection of capital into the Paddington area, that he cares about facilities and is prepared to replace the existing substandard hospitals in the area. If he cannot do that immediately I hope that he will not go blindly ahead with a closure programme which will affect not only the medical school but the number of acute beds and casualty facilities for the local population.
If the Minister cannot do so, he will be demonstrating only too clearly the Government's strategy for the NHS, which is that they will not seek to demolish the NHS by a head-on attack but will use a much more subtle approach. They will dig away at the foundations of the Health Service, cut down on facilities and make it more difficult for people to use the service.
Having done that, like the Prime Minister, they will then say "Well, of course, we expect people to use the money in their pockets to provide for their own health care." If that is the best that the Minister can do, he would have been better served by staying in his elegant Ministry.
5.12 pm
The Under-Secretary of State for Health and Social Security (Sir George Young): Anyone who calls my Ministry elegant is quite misinformed. It is one of the humbler Government buildings on the South Bank which, in theory, is injecting new life into the Elephant and Castle.
I congratulate my hon. Friend for raising the question of the future of St. Mary's hospital medical school. I endorse what he said about the school and its staff and I commend the way in which he so eloquently defended the interests of his constituents. As he said, the debate is aptly timed, because the decision on the St. Mary's medical school is imminent.
I begin by dealing with some of the points raised by the hon. Member for Crewe (Mrs. Dunwoody). I would not dissent from much of her analysis of the health problems in London. She was quite perceptive in identifying some of the shortcomings. It is difficult to reply in detail to the position relating to St. George's. That is a complex problem, because the site is in multiple ownership and there are a number of restrictive covenants. I shall write to the hon. Lady outlining where we have got to in our discussions on the future of that site and shall try to put her as fully in the picture as I can.
The hon. Lady would have more credibility when speaking on health matters had 229 of her hon. Friends not voted last night against the increase in tobacco duty on cigarettes, for which there was the most compelling health reasons. I think that it was with some embarrassment that some of her colleagues found themselves voting against the Government.
Mrs. Dunwoody: The Minister tempts me, and I am grateful to him for giving way. Many hon. Members abstained from that vote. Had he been able to carry the same urgency into his discussions with his fellow Ministers, the tax on cigarettes would not have been as low as it was. Therefore, it ill-becomes the hon. Gentleman to attack the Opposition.
Sir George Young: I shall not twist the knife any deeper into the wound. It is quite clear that the Labour Party is as divided on health policy as it is on a number of other issues.
In a moment I shall say something about the amount of money that we shall be investing in Paddington as an earnest of our intent to improve health facilities there. The hon. Lady said that we were maintaining spending at the planned levels that we inherited. It is difficult to reconcile that part of her speech with what she said towards the end, when we were accused of undermining the very foundations of the National Health Service. We are also trying to complement Health Service resources by encouraging private provision and by tapping the resources of the voluntary sector.
We have no intention of reducing the number of students trained in London—roughly 1,200 out of 3,800 in Great Britain as a whole. The university is considering mergers in order to provide training more economically. On primary care, we are awaiting an expert report from a study group under Professor Donald Acheson, which has been set up to advise on what needs to be done in this area.
I now turn to the main subject of the debate, which is the future of St. Mary's medical school. Perhaps I could begin by clarifying where responsibility lies, because, as both hon. Members implied, responsibility is split between two Government Departments. My right hon. and learned Friend the Secretary of State for Education and Science has responsibility for funding undergraduate medical education and for determining the overall level of intake of medical students. But, within agreed levels of intake and standards laid down by the General Medical Council, it is for London university to determine how to provide undergraduate teaching. That university is a self-governing chartered institution, which is solely responsible for its own internal organisation.
Although the various medical schools have their own identities and their own governing bodies, they are a part of the university and receive their funds from it. It is the senate and the court which must decide their future. But we do not for one moment pretend that what happens to medical education can be divorced from the Health Service. The two are so closely interlocked as to be in some instances inseparable. That was one of the themes that my hon. Friend developed. It is for that reason that the two bodies that have been looking closely at Health Service problems in London—the London Health Planning Consortium and the London Advisory Group—have included representatives of London university. Those representatives have played an important part in formulating the proposals that both bodies have put forward.
My right hon. Friend the Secretary of State for Social Services has a direct statutory responsibility to make available facilities that are needed to support clinical teaching. This responsibility is discharged on his behalf by the health authorities, particularly those that manage the great teaching hospitals. Not only do they allow students to see patients on their wards; much of the clinical teaching that students receive is given by consultants employed by the Health Service. For that part of the undergraduate course, teaching is very much shared between the Health Service and the medical schools. Staff of the medical schools provide clinical services to patients,

225
and in many cases support services—such as pathology—are provided entirely by the medical school, although on a repayment basis.
The broad position is that while the university must make its own decisions—we cannot take those decisions for it—we would expect it to give due weight to the impact of its actions on the Health Service. The university and the Health Service have been involved in the various committees and bodies that have been set up to plan the future of health services in London.
What is it that London university proposes to do? Here there is still some uncertainty. That the university needs to make changes in the organisation of its medical school seems clear. The university faces three main problems. First, it faces financial pressures. For some years the university has been conscious that medicine was accounting for an increasing proportion of its total expenditure. The more recent impact of the phasing out of subsidies for overseas students which my hon. Friend mentioned, and the general curtailment of university expenditure, have added to the pressure to rationalise provision in medicine.
Secondly, the university had made plans that would, if carried through, have led to its increasing its total intake of medical students above the nationally agreed target levels. Some medical schools in London made a temporary increase in their intakes in the early 1970s, which will need to be reduced when the expansion of St. George's hospital medical school is complete.
Thirdly, the medical schools were concerned about the prospective reduction in the Health Service facilities to be available to support their clinical undergraduate teaching.
I am sure that hon. Members who represent London constituencies, and perhaps others, will have seen the recent report by the London Advisory Group on the provision of acute hospital services in London. That report concluded that a major reduction in the number of acute hospital beds in London was required because of the continuing reduction in the population and because patients now need to stay in hospital for shorter periods. But the advisory group also felt that if used to the full the remaining acute facilities would be sufficient for London university's needs. That is not to say that there is no need for the university to change. There may still be implications for the distribution of students in different parts of London. I shall say more about that in a moment.
Faced with these problems and these pressures the university, on the advice of its medical schools, concluded that a complete re-examination of the organisation of medical education in London was called for and that it might be necessary to consider the closure of one or more schools.
Accordingly, a working party was set up under Lord Flowers' chairmanship, which reported in February last year. Its report proposed the amalgamation of the 34 existing medical institutions within the university into six large schools. Two undergraduate schools—the pre-clinical schools at King's college, London and the Westminster medical school—were to be closed. The report was hotly disputed, and the subject of its contents was raised many times in the House. I see my hon. Friend the Member for City of London and Westminster South (Mr. Brooke) in his place. He fought a formidable campaign within and outside the House for the future of the Westminster hospital school.
226
After a long period of consultation, the medical faculty of the university, through the joint medical advisory committee proposed a revised package which changed some elements of the Flowers' recommendations but supported many of its conclusions. This package was endorsed by the university's joint planning committee and put to the senate last October. While endorsing the general approach of the proposals and encouraging schools to pursue them where agreement existed, the senate was unwilling to accept some of the conclusions without further evidence.
A further working party was therefore set up, under Professor Leslie Le Quesne, of the faculty of medicine, to examine the costs of a range of different options. That working party's report, which was circulated last month, does not make recommendations but provides further factual evidence on which the university can now consider how to proceed. The report has been considered by the joint medical advisory committee but at this moment we do not know what proposition the senate and the court will be asked to consider when they meet on 25 March arid 1 April respectively.
One proposal being considered—and this is what has come to my hon. Friend's attention—is that, as a result of the further evidence, St. Mary's hospital medical school may be included in a joint school with University college and the Middlesex hospital medical school. Such a joint school would not, I understand, simply involve the physical concentration of all the facilities on a single site but might involve a reduction in the number of centres used by the schools concerned. For St. Mary's, the main issue seems to be whether pre-clinical teaching should continue at the Praed Street site.
What form the proposal will finally take remains to be seen. What is beyond doubt, however, as my hon. Friend made clear, is the quality of the St. Mary's hospital medical school and the important contribution that it has made over many years to the development of medicine and to the provision of services to patients. One of the great dilemmas of the London scene, and one that makes any proposal for radical change unwelcome, is that so many of London's medical schools can point to a noble history and a valuable present contribution. What is most important is that in making changes that may well be unavoidable the university should look to the future and make changes that will leave a settled pattern of medical education that can rely on continued support from the Health Service.
There can be no doubt that St. Mary's hospital, Paddington will continue to be a major centre for the provision of acute hospital services. Like my hon. Friend, we remain fully committed to the current plans for developing the hospital. Whatever decisions are made by the University of London about the rationalisation of medical education institutions in London, there is a pressing need for improved hospital services in the Paddington area and these must go ahead.
This is a major redevelopment involving expenditure of more than £21 million from the North-West Thames regional health authority's capital funds, as well as central contributions from the University Grants Committee and my own Department. As I shall try to explain, it is a key feature in a number of important strategies for the delivery of health care in London. It may help to allay my hon.

227
Friend's fears if I outline briefly some of the reasons why we regard the hospital development at St. Mary's as being so important.
My hon. Friend will know that over the past few years there has been a considerable amount of debate in London on how to achieve a better balance of health care provision. The problem, which is generally recognised and accepted, may be stated in short in this way: how can London's acute hospital services be developed in such a way as to maintain acute services for local populations, to sustain medical education and at the same time to release resources to enable services for the priority care groups—particularly the elderly, the mentally ill and the mentally handicapped—to be developed from their current inadequate levels of provision?
A number of people have looked at this, and the problems are indeed complicated. That is why we set up the London Advisory Group—a high-level body, including the chairmen of the four Thames regional health authorities, representatives of the TUC, the GLC, the London Boroughs Association and the health professions—to advise on the development of London's health services.
One of the group's first tasks was to look at the crucial question of how acute services should develop in the light of the overriding need to switch resources to other care groups. As I have already mentioned, the group reported in February this year that there was scope to make significant reductions in the capital's acute bed stock in the light of population movements and increasing efficiency in hospitals. It also outlined a strategy for achieving these changes, recommending that acute services should be concentrated on the major hospitals in London and that the savings on acute services should be found in the other smaller hospitals. The report identified St. Mary's, Paddington as one of the major centres for concentrating acute services.
The Government have accepted that as a broad strategy. In welcoming the report, my hon. Friend the Minister for Health said:
"London has seen huge investment in major hospitals, including the major teaching hospitals. We must use these hospitals fully to cover the health needs of the people who live in inner London and maintain the greatness in London's health care".
St. Mary's, Paddington is an integral part of that strategy and its future is assured.
As my hon. Friend graphically pointed out, however, the current condition of the facilities at St. Mary's is inadequate, and it has become increasingly difficult over recent years for the hospital to meet the requirements of a district general hospital and also of a teaching hospital in its existing buildings. Part of the building is over 100 years old, the layout has become almost unworkable, space is inadequate, and communications are very poor. Despite these difficult conditions, the standard of service provided has remained consistently high. As my hon. Friend pointed out, the hospital provides an important local service to the community of Paddington as well as a number of more specialised services. I will not dwell on the reasons why successive redevelopment schemes for the W2 site have failed to get off the ground since the war, but the condition of the fabric of the hospital and its vital future as a provider of acute services to that part of London make it imperative that the scheme goes ahead this time.
228
I have laid great stress on the importance of St. Mary's and its redevelopment within the general strategy for London's health services, but there are a number of other reasons why this scheme is needed at this time.
The redevelopment forms an important part of the North-West Thames regional health authority's strategy for redistributing resources within the region. The regional health authority anticipates that the redevelopment, together with the consequent rationalisation of acute services within the district, would produce an annual revenue saving of some £1·9 million. These funds are essential not only for the development of priority services within London, but, as an integral part of the region's overall financial strategy, to allow it to fund acute hospital developments in the county areas of the region£Hertfordshire and Bedfordshire£where there is a shortage of acute services and where a number of important schemes are now coming on stream and are planned for the next eight to 10 years.
Looking at the problem more locally, the redevelopment also plays a key role in the strategy for the North-West district of Kensington and Chelsea and Westminster. That district serves a resident population of 157,700, expected to decline to 139,000 by 1986. The strategy is a twofold one—to improve the acute services, taking into account the reducing population and changing patterns of demand and clinical practice; and to remedy outstanding deficiencies in local health care provision, notably in services for the elderly and the mentally ill, and in community health services.
Phase 1 of the rebuilding of St. Mary's, Praed Street, which should be completed by 1986, will provide a children's department with 60 beds and a child development centre; a psychiatric hospital of 60 beds and 80 day places; 240 acute beds, mainly surgical; eight operating theatres; an intensive care unit; an accident and emergency department, and various other clinical support and ancillary departments. These developments will enable St. Mary's, Harrow Road, to be closed, although some facilities may continue to be provided on part of the Harrow Road site. A joint working party of the community health council and the district management team explored a number of possibilities, and the area health authority has recently agreed a proposal that an experimental community hospital project should be set up for two years if the funds can be found. That will be in keeping with the main strategy, under which the district will have two acute general hospitals—St. Mary's, Praed Street and St. Charles'.
There is a second major capital development, which is fundamental to the strategy at St. Charles' hospital. This long-term strategy is accepted locally. However, the area health authority now wishes to bring forward the closure of about 127 acute beds at Harrow Road, representing about one-third of the hospital's total bed complement, and a consultation document was issued in January last year.
In September last year, the North-West district community health council notified the authority of its opposition to the closure and submitted an alternative strategy. As both the area and the region have reaffirmed their support for the proposal, it is now with my Department.
The health authority wants to bring the reduction of beds forward, for a number of reasons. The district has too many acute beds, and reductions now at W9 are consistent

229
both with current work loads and with the London Advisory Group strategy, which involved the concentration of acute services for this part of London at W2 and at St. Charles'. This would achieve a better balance of services within the district. Secondly, the district has recurrent over-expenditure to reduce, and it has to take steps to bring down its rate of expenditure in order not to leave its successor district with a deficit.
I know that my hon. Friend is concerned that the proposal should be agreed as quickly as possible, so that the district plans can proceed. My hon. Friend the Minister for Health will come to a decision on this as soon as possible.
I have attempted over the last few minutes to explain why, for a variety of reasons, we see a redeveloped St. Mary's hospital as having a vital role in the future of London's health services, in terms of the wider strategy for the capital's services, of the North-West Thames financial and planning strategy, and of the important place that the hospital has within its own district's plans.
I assure my hon. Friend that whatever the decisions of the University of London about the organisation of the medical schools we are fully committed to this redevelopment. My hon. Friend was right to stress the close interrelationship between academic and service accommodation at St. Mary's, and the redevelopment is designed to further this integration.
My Department has made it quite clear to the university that substantial costs would be involved in any major replanning and that this would be undesirable at such a late stage. But there are two further points that I should like to make. First, we would not allow NHS services to be adversely affected by any withdrawal of vital support services. Secondly, it seems to me inconceivable—I hope that this provides reassurance to my hon. Friend—that the university will not continue to use St. Mary's hospital as a major centre for clinical teaching, wherever the siting of the schools may be. To do so would be a foolish waste of what will be excellent facilities, well sited for patients and students. The benefits of the teaching environment, which my hon. Friend mentioned in his speech, should be retained.
I shall make absolutely certain that before any decision is arrived at my hon. Friend's speech is made available to those who have a decision to take, so that they can be well aware of the high feeling and the strong arguments that my hon. Friend has made in support of the medical schools.
Mr. Ronald W. Brown: Am I to understand, therefore, that if any hon. Members have a similar Adjournment debate, all our remarks will be taken into account by London university?
Sir George Young: I have never noticed any reluctance on the part of hon. Members generally to have Adjournment debates on hospitals. Where important decisions are about to be taken I have made a point of making sure that the speeches of hon. Members are sent to the regional health authority and the area health authority before any decision is made.

Preventive Medicine
5 33 pm
Mr. Robert Rhodes James: May I say at the outset how much I welcome the presence here tonight
230
of the hon. Member for Crewe (Mrs. Dunwoody) as a result of her new responsibilities? Because we have had other responsibilities, on which we were opposed to each other, I am delighted to see her in her new post. I am also delighted to be introducing a very brief debate on a subject which I know to be very close to the hon. Lady's heart—that of preventive medicine, with particular relevance to the problems of developing countries.
My interest in this subject began intellectually—I hope that my hon. Friends will not be too disturbed about this—when I read the accounts of Engels of the situation in Leeds in the 1840s and the cholera outbreaks there. In my own lifetime—in which I have seen the death of a younger brother and the crippling of a sister through poliomyelitis— there has been a revolution as a result of the use of antibiotics, which would have saved my brother's life. But, more important than that, I have seen a revolution in preventive medicine, and the understanding of preventive medicine.
In talking of the problem of cholera in Leeds in the 1840s we are not talking simply about a medical problem. We are talking about a whole constellation of problems in which housing, hygiene and understanding of living were as important as purely medical responses.
Particularly in this, the International Year of Disabled People, I should like to draw the attention of the House for a few minutes to a simple point. When we talk about disabled people we tend to talk about people who are already disabled, or, indeed, to believe that we are talking about people who are disabled for their entire lives. Most people become disabled for one reason or another, and in many cases that disablement could have been prevented.
In dealing with this subject, one should not speak locally, or even nationally, because the problems are much wider than that. The most glittering achievement of the United Nations was the elimination of smallpox. That elimination, achieved in seven years at a very small cost, could have taken place only because the countries of the world had the political will to destroy that bestial disease.
I suggest to the House that what has been done with smallpox can and should be done with other diseases. Bilharzia, diphtheria, malaria, measles and poliomyelitis are among the great killers. They are all preventable if the political will exists among the Governments of the world.
Poliomyelitis was a terrible killer in this country until the 1950s. It is still a killer elsewhere in the world. It is important to recognise what could be achieved in positive terms in development and in health prevention for literally millions of children if this immunisation programme could succeed. Instead of giving grants to disabled people, perhaps it would make better sense to try to prevent certain kinds of disablement occuring in the first place. Therefore, although these diseases are national problems, and although they afflict our children or our grandchildren—or can do—they are also international and can be properly dealt with only by an international response.
It is said in this country that we do not have to worry any more about poliomyelitis—three doses of vaccine on a sugar lump and a child will be protected for life. That is absolutely true. The trouble is that, through complacency, people are forgetting to make use of this basic and readily available protection for their children. But for millions of families in developing countries poliomyelitis is a dreaded disease that strikes at everyone, but principally at children and young people. For those who survive an acute attack, their disabilities usually mean

231
that they are unable to work or to be independent in any way, and that they require specialised treatment and facilities. In many countries those are simply not available.
I declare an interest—but not a financial one—as the vice-chairman of the Save the Children Fund "Stop Polio" campaign, in which a very distinguished colleague of mine is the wife of my hon. Friend the Minister for Overseas Development—the Member for Banbury (Mr. Marten). We work very hard to produce vaccine and to deliver It to certain countries in the world on an experimental basis, in order to meet this scourge.
It is not generally recognised that poliomyelitis is a huge and international problem. At least half a million cases occur each year among children. I emphasise the words "at least". Those are the ones that we know about. Alas, the number of cases is increasing. Paradoxically, an increase in the number of cases occurs as living standards improve and as children do not achieve the immunity that they had previously gained through exposure to polio viruses early in their lives. That is a curious and tragic paradox.
It is vital that as living standards improve—even marginally—we should tackle the problem. The Save the Children Fund "Stop Polio" campaign has launched itself in Malawi, Swaziland and Lesotho and is co-operating not only with the Governments concerned but with the World Health Organisation. The purpose of the campaign is to ensure that all children are immunised against this terrible disease.
I am sure that the House is aware that it takes seven months to create the vaccine. It has to be refrigerated from the moment that it is created until the moment that it is put into a child's mouth. The maintenance of the cold chain from the laboratory to the child represents an acute problem, particularly in Africa. In addition, we hope to expand our operations into Asia. However, these problems are being met and resolved.
It is remarkable that a small and not very rich British charity should lead the world in this operation. I have stressed this point because in the International Year of Disabled People I hope that we shall begin to think more about the prevention of disablement—poliomyelitis is only one example of a disabling disease—rather than about the cure. Indeed, this is also the year of the Mexico summit on the Brandt commission.
When I worked for the United Nations for four years and saw this country from abroad I was struck by the fact that the British people and British Governments underestimate the extraordinary qualities that they possess. Britain has a unique knowledge of and expertise in diseases, particularly tropical diseases. That expertise is recognised all over the world, yet British people are often unaware of it. Therefore, in the International Year of Disabled People I hope that the Government—with the support of both sides of the House—will recognise that preventive medicine, both in Britain and abroad, should be one of our dominant themes. I hope that my particular concern—poliomyelitis— will be one of the main items for consideration.
I am comforted by the fact that my hon. Friend the Under-Secretary is to reply, because last time I raised an Adjournment debate with my hon. Friend I was concerned about the maternity hospital in Mill Road, Cambridge. I
232
urged the building of a new hospital. My hon. Friend gave me a most courteous but not very positive reply. However, many things stemmed from that debate. Last week building work began on the new maternity hospital. I hope that that is a good omen and that my hon. Friend will respond positively to the appeal made not only by me, but by many others. I recognise the limitations that are imposed on him, but in this year of all years we should consider the role of preventive medicine with considerable vigour and interest.
5.43 pm
Mr. Peter Bottomley: I congratulate my hon. Friend the Member for Cambridge (Mr. Rhodes James) on bringing this subject to the attention of the House. He has dealt both nationally and internationally with the importance of preventive health measures, which promote health and well-being and prevent ill-health and handicap.
In addition, I welcome my hon. Friend's reference to the Mill Road maternity hospital. For a long time my aunt was a distinguished gynaecologist and obstetrician at that hospital. I always think that I should have represented my hon. Friend's constituency, because my family has brought most of his electors into the world. However, I have managed to recruit one of my aunt's babies—perhaps she is one of my hon. Friend's ex-constituents—as my agent. She is now going into the maternity business herself, and I wish her luck.
I shall concentrate on the importance, both in this country and overseas, of making people aware of the measures that they can take to promote health and wellbeing. My hon. Friend the Minister has distinguished himself by leading campaigns, both inside and outside Government, on smoking. The hon. Member for Crewe (Mrs. Dunwoody) has often joined that campaign and dealt with me when I have strayed from the straight and narrow.
We must not only occasionally demand action from the Government; we must use the Floor of the House to remind members of the public—whether they are professionals in health care, involved in voluntary organisations, such as my hon. Friend the Member for Cambridge, or ordinary families—that they will find that information is available about the action that they should take in their own best interests. As some hon. Members may know, I am associated with a new body called "Family Forum". It is designed to bring people together to consider not only health measures but the other measures that people can take. I refer not only to the suggestions that can be made to Government but to an awareness that the primary determinant of health and wellbeing in a family is the family's own actions.
The Court report on child health services and the parts of the Black report that did not involve the spending of large sums of money show that a family's actions often make a great difference to handicapping accidents, whether in the home or outside. I am sure that hon. Members will remember the campaigns on perinatal mortality and on avoidable handicap at birth and in the early years of life. The French programme is perhaps the most sophisticated project on avoiding birth handicaps. It reached its target levels of achievement within about 18 months and not—as was expected—after seven years of Government programmes. The discussions on ways of avoiding handicaps and on the targets that could be achieved dramatically raised public awareness and

233
consciousness. The people of France have benefited. Obviously, adjustments in Government policy can also make a difference. However, the most significant difference can be achieved by increasing public awareness.
I remind the House and the public that there are two simple ways of avoiding the distress that afflicts so many. We should deal with smoking and with the wearing of seat belts. There is a great deal of public concern about issues such as nuclear power. If people realised that only one-tenth, one-hundredth or one-thousandth of the casualties that arise from smoking or from accidents in which seat belts are not worn might arise as a result of nuclear power, they might accept that we should concentrate more on certain risks.
We do not consider risks realistically. The avoidable risks that we run in our every-day behaviour are far greater than the risk attached to events that have never occurred in Britain. I hope that this debate will make people aware of what can be achieved both overseas and in Britain.
5.48 pm
Mr. Bob Cryer: I congratulate the hon. Member for Cambridge (Mr. Rhodes James) on securing another Adjournment debate. There has been a slightly surprising turn of events and, as a result, we have time for this debate. I support the hon. Gentleman's concern for preventive medicine in developing countries. In addition, I echo the comments made by the hon. Member for Woolwich, West (Mr. Bottomley) about preventive medicine in Britain. However, I shall concentrate on the problems of developing countries rather than on those that we face, which are—at least in part—the problems of an affluent society. The problems in the developing world are clearly much greater. I believe that this is behind the motivation of the hon. Member for Cambridge in seeking to raise this issue.
I should like to quote from the Brandt report. an important document that has twice been debated in the House by concerned hon. Members on both sides. Somehow or other that concern has to be translated into action. We shall see a continuing gap between the affluent nations of Western Europe and the American continent on the one hand and the developing countries on the other, unless we can translate into action some of the ideas in the Brandt report.
I should like to quote from page 14, where the report says:
"The prospects which might open up if only part of the unproductive arms spending were turned to productive expenditure on development are only slowly dawning on people. The annual military bill is now approaching 450 billion US dollars, while official development aid accounts for less than 5 per cent of this figure."
The report goes on to give four examples, one of which is connected with the subject raised by the hon. Member for Cambridge. The report states:
"The military expenditure of only half a day would suffice to finance the whole malaria eradication programme of the World Health Organisation, and less would be needed to conquer river-blindness, which is still the scourge of millions".
That is the military expenditure for half a day. As the third in its list of examples, the report states:
"For the price of one jet fighter (20 million dollars) one could set up about 40,000 village pharmacies"
We are currently buying about 380 Tornado jet fighters at roughly the price quoted in the Brandt Commission's
234
report, that is, at around £10 million each. We have to look at our own priorities. The fourth example quoted in the Brandt report is:
"One-half of one per cent. of one year's world military expenditure would pay for all the farm equipment needed to increase food production and approach self-sufficiency in food-deficit low-income countries by 1990".
That alone would help to curb disease. People who are not well fed are open to attack from disease because they do not build up a natural resistance. Disease can attack them much more easily and rapidly—and it does.
I want to emphasise that we have to tackle this issue ourselves. I wish to make the point that the Government have cut back overseas aid by 21 per cent. That is entirely mistaken. Among that 21 per cent. I am sure that there must be an element of assistance for the provision of facilities to prevent disease and to prevent the onset of deprivation of one sort or another.
Putting aside the moral dubiety of cutting overseas aid to the very poorest developing countries, such a policy is not to our commercial advantage. As countries develop they will look to us to provide them with further technical assistance facilities, and the provision of those facilities will help us, commercially and industrially.
I believe that foreign students coming to our universities help to gain knowledge from our facilities and take that knowledge back to their own countries. That is another important aspect of our sharing in the attack against the onset of disease in developing countries. Whether it is straightforward knowledge of better medical facilities, indirect assistance, such as improved agricultural facilities, or simply some sort of engineering knowledge, it is of advantage, both from a moral and commercial view, if the Government are prepared to tackle this issue on the basis of setting an example.
I wish to touch briefly on a suggestion in the Brandt report–
Mr. Rhodes James: I do not wish to become involved with the hon. Gentleman in a debate about overseas aid policy, although it is fair to point out that the present overseas aid budget is considerably higher under this Government than under the previous Government. Not nearly enough of it, however, is devoted to preventive medicine. That is true of the budgets of other Governments. That is the point that I was trying to make. It is implicit in the Brandt report. I regret only that it was not given sufficient emphasis.
Mr. Cryer: The hon. Gentleman makes a fair point about the allocation of the overseas aid budget. That is a matter that the Government must take into consideration.
I wish to conclude my remarks by referring to a suggestion in the Brandt report for a tax on military expenditure. On page 122 the report states:
"The treaty under which Latin America was declared a zone free of nuclear arms could be an interesting model for consideration by other regions. Measures to curb the global arms race have made only limited progress. They may have prevented some programmes from expanding and certainly the major powers have come closer together in appreciating the dangers and the costs of the escalation of arms production. Bur real disarmament, actual reduction of weapons and expenditure levels, remains elusive."
On page 123 the report adds:
"Nonetheless, military expenditures and arms exports might be one element entering into a new principle of assessment for international taxation, and efforts to generate appropriate information for this purpose deserve encouragement."

235
That is absolutely right. The developing nations must get together in order to stem the arms flow to the developing countries which are poor, and, in some cases getting poorer, but still find financial facilities available for the purchase of arms. On this planet we are now in a position in which if we fail to live together we shall die together.
There is a great moral imperative. It is difficult to defend a decision, for example, to spend over £25 million—an enormous sum for these poorer countries—on the installation of cruise missiles or £5 billion on the installation of Trident submarines. When we talk about the development of preventive medicine in developing countries—an important subject, on which hon. Members on both sides of the House feel deeply—the fact is that the developing countries say "A large proportion of your expenditure goes on means of extermination which, hopefully, will never be used". They also say "You are not setting a very useful or good example in priorities". I would much prefer to see the release of that expenditure in aid to the developing countries of the world—to set, if one likes, a moral example in non-proliferation of nuclear weapons.
Whatever view one takes of nuclear weapons, the fact is that we live in a dangerous age. It is not getting easier. Expenditure on nuclear weapons and conventional weapons becomes greater with each year that passes. Some initiative must be taken to break through the momentum that the arms race is gaining of its own accord. I believe that the Government could and should set an example to the rest of the world by saying that they are not prepared to spend £5 billion on Trident and that they intend to restore the 21 per cent. cut in overseas aid.
The hon. Member for Cambridge said that it was more than the Labour Government would have spent, whatever the cuts. I should like to think that a Labour Government would still preserve that level of progressive expenditure for overseas aid whatever difficult circumstances existed at home, because we like to think of ourselves as international Socialists, who feel concern for people all over the world. I also hope, even at this late stage, that the Government can be pushed away from their militaristic posture and be persuaded against the expenditure of this enormous amount, which will probably be doubled by the time that the missiles are actually stored in the submarines, if that dreadful day ever comes.
This is an important moral imperative that should bring strength. The point of view is universally held, not necessarily by the Labour Party but by people of all political views or of no political views, and by the Churches, that it is a scandal that so much money is spent by the West on nuclear weapons while two-thirds of the world's people are short of food, clothing and shelter. It means, of course, that preventive medicine is all the more important, because basic deprivations leave people more open to the ravages of disease.
The Brandt report, which I know is supported enthusiastically by some Conservative Members but also receives its fair share of sneers from the Conservative Benches, contains some ideas which are worthy of our support. It indicates paths that Governments can follow. I realise that the Minister may not be able easily to answer the argument, having been propelled into an Adjournment debate at very short notice, but I must tell him that the
236
Government are not setting a good example to the rest of the world in the priorities that they are pursuing. It would be welcomed by developing countries if they shifted their priorities so that some of the money that they have allocated to be spent on the means of extermination could go into a programme for survival, including the preventive medicine that was mentioned by the hon. Member for Cambridge.
We have had a short but useful debate. The topic that it concerns will not go away. I cannot marshal all the arguments at this short notice, but they relate to the most important question of all—whether we live together or die together. With the proliferation of nuclear weapons and the greater expenditure by this Government we are set on a course that is beset by grave dangers. Let us pull back and support a programme of survival for humanity. In so doing, I am sure that our influence in the world will be immeasurably enhanced.
I do not believe that people who are deprived of food, clothing, shelter and medical facilities are much impressed by a Trident missile programme. If we were to embark on a programme of hospitals, irrigation facilities and village pharmacists we should be able to win friends and influence people, if that is what the Government's foreign policies seek to do. So if we are to win friends and influence people in the developing nations of the world we need to help them. They will be impressed by help, and not by some of the expenditure that this Government, alas, are carrying out.
6.5 pm
Mr. John Farr: I want to get back to the purpose of the debate. The hon. Member for Keighley (Mr. Cryer) spent 10 minutes or so telling us what a short debate we are having and then concentrated almost entirely on the sins of the British Government in deciding to defend ourselves in a proper way against nuclear attack. I believe that most of us, certainly those on the Conservative Benches, believe that if we are under threat, as we are, from the East, we must be properly defended against any form of conventional or nuclear attack.
I come back to the subject of the debate. I congratulate my hon. Friend the Member for Cambridge (Mr. Rhodes James) on his initiative and alertness in securing this important debate on the use of medicines in the developing world. I join him in welcoming the hon. Member for Crewe (Mrs. Dunwoody) to her new position. We look forward to seeing her there for a number of years. I am sure that the whole House recognises that she has a fund of knowledge of these matters, and we look forward to hearing her contributions.
I intervene in the debate to say something about the use of preventive medicine in developing countries, and in particular in India and Bangladesh. My hon. Friend the Member for Cambridge, as chairman of the appropriate committee, is an expert on the subject. I was in India a week or two ago, and I discovered that some of the preventive medicines that are used there against malaria are no longer effective because the malaria mosquito is continually developing a different strain. It is therefore essential that there should be continuous and permanent research into the type of preventive medicine that is used—the injection—in combating malaria in India and Bangladesh and some of the other diseases to which my hon. Friend referred.

237
While preventive medicine has performed remarkable achievements in India and Bangladesh, at the same time it is helping to swell a growing and obvious menace on the horizon, namely, the growing population of those countries, with their continuously growing demand for more food and more money to be spent on them. The more effective that preventive medicine is in developing countries such as Bangladesh and India, the more infant mortality rates drop, as is happening in India, and the more maternal mortality rates drop, and the longer people live.
Perhaps my hon. Friend the Minister can assure the House that he recognises that, hand in hand with the progress of preventive medicine in developing countries, there is a proper programme of family planning. The Family Planning Association in India is an example to the rest of the world. It is run almost entirely by volunteers, headed by its president, Mrs. Wadia. It has worked for about 37 years in Bombay and has had remarkable success in reducing the population growth in India. But, despite that success, and despite the work of countless thousands of volunteers throughout the country, it is likely that the population of India will approach 1,000 million by the turn of the century.
The Family Planning Association in India, and to some extent in Bangladesh, almost entirely through volunteers encourages mothers and wives to learn the benefits of a limited family. "Two will do" is a phrase that is gaining publicity. Mothers join clubs to perform plays and sketches showing the benefit of having only two children, compared with five or six, and the relatively poorer conditions in which larger families live.
We visited some of the villages in the countryside around Bangalore and saw some of their projects. Whole villages are taken over by a team of skilfully led volunteers. All the married couples in some of the villages are volunteers in limiting family numbers. Guided by the Family Planning Association, some villages have for a number of years been reproducing at only replacement rate. It is essential to have a full and effective family planning link with any schemes to improve medicines in developing countries.
We saw almost the same situation in Bangladesh, although the history of family planning in Bangladesh is not as old as it is in India. We took a car trip to a town called Mymemsingh. After a long and dusty journey we were welcomed by a large number of ladies who were wearing lapel badges proclaiming that they were members of Mymemsingh Childless Ladies Club. They were all part of the family planning scheme in Bangladesh.
I was encouraged to discover that the family planning scheme, particularly in Bombay, is not designed only to bring population numbers down. A counselling service to childless couples operates in Bombay and in other towns. The Family Planning Association has made it clear that it wishes all families to have two children. The counselling service is a great help to many childless couples. Some of the counsellors who offer family planning advice to childless couples have remarkable records of success. Unless the Governments of the world co-operate and recognise and assist family planning in a proper way, it is likely, as the hon. Member for Keighley said, that some of the dangers of excessively large populations, of which we were warned in the Brandt report, will arise.
I was lucky to attend the world food conference in Rome, where a number of Ministers from developing and developed countries spoke on this subject. After listening
238
for only a day or two one could detect the general pattern of opinion. Unless the number of extra mouths represented by the number of children born every day is reduced the agriculturists will not be able to cope by growing increased amounts of food.
The key to the problem is not disarmament, as the hon. Member for Keighley claims. The key to helping the Third world is education. With a better education the people of the Third world could understand and apply the techniques of modern food production and help themselves to grow more food. If we could improve the appalling literacy rate in India—it is only 27 per cent.;we would have a chance of getting over the benefits of family planning and bringing home to people how a smaller family would help towards a better family life. Education, which is the key, cannot be had without money. I believe that the Government must provide that money to the limit of their ability.
6.15 pm
Mrs. Gwyneth Dunwoody: The hon. Member for Cambridge (Mr. Rhodes James) is well known for his genuine commitment to the interests of the Third world. He introduced our first debate on the Brandt report. He feels strongly that we do not do enough in Britain. I agree with him. I find it dispiriting that the Government take the attitude that they do, not only to the provision of overseas aid but in particular to the provision of services.
The hon. Member for Cambridge said that we could be doing many other things to assist the prevention of disease in the Third world. He was reminding us that we have money, expertise and ability. Even if it were necessary to cut the amount of money available to the Third world—and I do not think that Britain has ever achieved the targets that a civilised nation should achieve—we should look hard at the effect of some internal policies on other countries.
Only last week students from the London School of Hygiene and Tropical Medicine lobbied hon. Members. They are worried about the effect of Government policy on fees for overseas students. They fear that their remarkable unit, which is known throughout the world for its suberb level of provision, will have to close or so curtail its activities that it might find it difficult to continue. That is shameful.
If a nation with the standard of health care enjoyed by Britain does not offer assistance in training doctors from overseas, does not provide information about new techniques and the development of new drugs and vaccines, it is behaving dis
astrously. We are not even behaving in a normal, civilised Christian manner.
As the hon. Member for Harbrough (Mr. Farr) said, both education and services are essential. There are many reasons why we should examine our consciences. Some multinational companies have argued strongly with the Government about the health warning on cigarette packets. They have sought to avoid doing anything to restrict advertising that noxious product, tobacco. They do not apply stringent standards when selling tobacco in the Third world.
There is clear evidence that the multinationals, which are responding to pressure in the so-called civilised Western countries, are using techniques to sell tobacco in Third world countries when it has been proved to be capable of causing hundreds of thousands of deaths a year. Television in Britain has been prepared to put forward

239
arguments that the House has not had time to develop. Recently there was a moving and frightening programme about the sale of tobacco products by multinationals in South America. It proved conclusively that there is astonishingly little evidence that Western countries, who make the largest profit from the sale of those products, are prepared to consider the interests of those to whom they are selling.
Mr. Cryer: Will my hon. Friend remind the House that multinationals are going along exactly that same path in the sale of baby milk products? They are usurping the natural breast-feeding process to improve sales of their products. That is having a retrogressive effect because it produces more disease due to the lack of washing facilities for babies' bottles, and so on.
Mrs. Dunwoody: My hon. Friend, as is his wont, has stolen one of my best points. I was about to come to the whole question of the sale of powdered milk in Third world countries. We sell not only tobacco elsewhere in the world, but many other products. I do not necessarily agree that multinationals are deliberately seeking to dissuade mothers from breast-feeding. The difficulty is simple. An undernourished mother, extremely tired, doing a hard physical job in high temperatures, inevitably finds it difficult to feed her baby. She will therefore look for means to supplement the food. Anyone who has dealt with even a well-fed British baby will know that mothers have a habit of looking for means to keep the baby quiet from time to time.
There is also the simple problem of hygiene education. I want to see ritain actively training many more village pharmacists. A simple amount of training could produce a fantastic result. In Africa we can see the work being done by individuals able to control a number of straightforward drugs, do simple first aid and teach people in the langauages and attitudes of the area in which they work to look after themselves in a better way. It is time that we imposed a code on the sale of products such as powdered milk from Western countries to Third world countries.
Inevitably, the education level of many of the communities is such that they do not always take care to use only absolutely clean water. The damage that can result from that is quite frightening. A few years ago the European Community found itself facing an intolerable problem. As part of its food aid it was handing large sums of money and large amounts of powdered milk to African, Caribbean and Pacific countries—only to find that because there was not sufficient tuition in the way that the powdered milk should be served it was doing positive harm. The Community took fairly active stops to ensure that the recipients of powdered milk understood how the products had to be used, and also that it could never be a substitute for human milk but should be used to boost the intake of food for babies.
Mr. Rhodes James: The villain of the piece is not the multinational companies, or the powdered milk; it is polluted water. That takes us back to one of the most fundamental problems of all. With great respect to the hon. Member for Keighley (Mr. Cryer) and the hon. Lady, it is easy to attack companies for manufacturing a product. The real issue lies in the basic poverty, pollution and
240
corruption of the environment in which people live, of which polluted and corrupted water is the most serious problem of all.
Mrs. Dunwoody: I do not think that we are in disagreement. I was not suggesting that the multinational companies deliberately set out to poison those buying their products. Obviously, that is nonsense. Nevertheless, they have a responsibility to ensure that simple education is provided, and that simple and straightforward instructions are supplied with their goods. With the example of tobacco, I am not sure that I want to be as generous to the multinationals as is the hon. Member for Cambridge. It is a different question. In the case of the supply of milk products, the expenditure of quite a small amount by the multinationals—a tiny percentage of their budget for advertising—should be used to ensure that those who buy and use their products are aware of the dangers. It would be a simple thing to do. It would not cost a great deal of money but it would save a great many lives.
There are good arguments for extending preventive medicine to the supply of vaccines and medicines. Britain has always endeavoured to export the very best standards of the National Health Service. There is a department dealing specifically with the provision of high quality information and services to Third world countries, to encourage them to ask for the right facilities, but it cannot provide sufficient health care if it does not have the money to do so. It is part of our problem, and certainly part of our responsibility, not only to lecture people on the health care that they should be providing, but to enable them to have access to bank loans and other money to give that help to those who most desperately need it. That is where the Government are falling down on the job in a specific way.
When the Government think about their expenditure on overseas students, when they examine the rates that they are now charging for education in Britain—which includes medical education, one of the most expensive courses—will they consider whether they cannot now admit that they were wrong, admit that they should not have put such a high cost on the provision of education, but should have been prepared to accept that it was one way to help the Third world constructively? When the Government look at the workings of the multinationals, especially those based in Britain, will they ask for the same safeguards for the marketing of their products in Third world countries as they are trying to achieve for Britain?
Above all, when, as a country, we offer help and advice to Third world countries, can we be sure that we do only those things, and provide only those services, for which we are asked? I find it sad that the Governments in Africa, Asia and many other countries are always happy to come to Britain to discuss the sale of arms and the provision of equipment for causing death. Can we not offer the same encouragement to those Governments to come here to seek to benefit from our expertise and to take back with them a very much better life for their people? That is the message that should go out from the House today. The families that we are happy to acknowledge as friends and dependants of Britain should be healthy as well as happy.
6.29 pm
The Under-Secretary of State for Health and Social Security (Sir George Young): I join other hon. Members in paying a tribute to my hon. Friend the Member for Cambridge (Mr. Rhodes James) for his moving and

241
knowledgeable speech when he introduced the debate. He is an expert on the Third world, and he displayed that expertise very well during his opening remarks. He was kind enough to say that the last time he had an Adjournment debate on the provision of a new hospital in his constituency, within 12 months a new hospital was being built. Building new hospitals in England is difficult, but possible. The extermination of preventable disease in the Third world could take me a little longer.
My hon. Friend asked what initiatives had been planned for the International Year of Disabled People. On the specific subject to which he referred, we have plans for an international initiative this autumn on the prevention of disability. I think that my hon. Friend will wholeheartedly endorse that initiative. I shall return in a moment to some of the specific subjects that he mentioned in his speech.
My hon. Friend the Member for Woolwich, West (Mr. Bottomley) made some kind remarks about my attitude to smoking. He is right to emphasise the role of the individual in making sensible decisions about life-style. It is no good bullying and lecturing people into doing things that they do not want to do. Such decisions do not stick. We should give people the information on which they voluntarily come to sensible decisions about life-style. Decisions of that sort will stick.
My hon. Friend mentioned seat belts. I have always voted for the compulsory wearing of seat belts, and shall do so whenever the opportunity arises. However, we must be selective about the freedom that we seek to defend. The freedom to kill oneself in a motor car is not one that I should spend much energy defending.
My hon. Friend also talked about relative risks. I never cease to be amazed by the way in which the public become hysterical about threats to life that are so slight as to be almost fanciful, yet regularly ignore the real killers. Nuclear power is an example. In a typical year in Britain, the chances of dying from radiation are about 1:16 million. Of the actual risks from radiation, over 98 per cent. arise from natural causes or medical X-rays, while less than 2 per cent. arise from all other causes, including nuclear power stations. All over the world campaigns are mounted against the generation of nuclear power, but where are the mass demonstrations against smoking?
When I saw the hon. Member for Keighley rising to his feet I wondered how he would introduce cruise missiles in a debate on preventive medicine in the Third world. I should never have doubted his ingenuity, because, quite rightly, he found a clause in the Brandt report which linked the two subjects. Most of the hon. Member's speech was not directed at my Department, but was about defence spending. Last November the Government, when making some difficult decisions about public expenditure, cut defence expenditure and left health expenditure alone. Therefore, I am not sure that the hon. Member is right to grumble about the Government's priorities.
Having suggested that we should cut defence expenditure, the hon. Gentleman recommended a measure that would increase that expenditure by adding a tax to what we already spend on it. If one were to maintain the volume of defence spending, that would increase the amount of resources devoted to it. However, the hon. Member was right to say that we have a moral, economic and political interest in tackling the problems of the Third world.
I shall draw the hon. Member's remarks to the attention of my hon. Friend the Minister for Overseas Development
242
and my right hon. Friend the Secretary of State for Defence to see whether there is any new gem of information in the hon. Member's speech that might cause them to rethink or to write to the hon. Member in response to his arguments.
My hon. Friend the Member for Harborough (Mr. Farr) had an interesting trip in India and Bangladesh. I endorse what he said about the need for more research into malaria. The School of Hygiene and Tropical Medicine is playing a large part in monitoring the spread of chloroquine-resistant malarial parasites and is offering advice on the use of drugs that have been developed to combat the resistant parasites that he mentioned. Discussions are taking place about the impact of policy on overseas students. This year and last year a special fund was made available to provide transitional relief. Discussions are now taking place on what should follow.
My hon. Friend the Member for Harborough was right to say that there were implications for the population if we were successful in introducing preventive medicine, extending longevity and reducing infant mortality. If the rate of infant mortality fell, family size would also fall because parents would not need to produce so many children to ensure that a given number survived into adulthood. I am happy to say that I shall shortly meet the all-party group for population and development which is concerned with those problems. I shall speak to it, and I shall then listen to the remarks of its members to see in what further way the Government can help the initiatives that are taking place in India. I shall write to my hon. Friend at greater length about the Government's help in this matter.
The hon. Member for Crewe (Mrs. Dunwoody) urged us to take initiatives in areas which I believe are the responsibility of other Health Ministers. It is difficult enough to keep the show on the road in this country. If we were to assume the responsibility for health in other countries, as the hon. Lady implied we should, by, for example, insisting on various health warnings for cigarettes sold in South America or other countries, that would be an abuse of our power. However, we can make available to health departments and Ministers overseas the sort of information that we have here. We can explain the measures that we are implementing to tackle smoking, for example, and encourage them to adopt them in their own countries. As we do not have the power, we cannot insist that those who package or prepare their export products here do so in a way that we think is right. That is the responsibility of the receiving country. I see problems in adopting a slightly higher profile on the lines suggested by the hon. Lady.
With regard to baby milk, about three weeks ago I made an perceptive speech on the Adjournment in response to a debate initiated by the right hon. Member for Stoke-on-Trent, South (Mr. Ashley). The hon. Lady will be pleased to know that we are supporting a code of conduct that will be discussed at the forthcoming meeting of the WHO. If other countries support us in recommending that code of conduct, the abuses to which she referred will be curtailed. This country has played an important role in drawing up that code of conduct. The abuses that undoubtedly exist are not the responsibility of manufacturers based in this country. There is a role for us to play in the forum of the WHO, in encouraging that code of conduct to be adopted to avoid the senseless deaths caused by the indiscriminate and often illiterate use of baby milk powder.

243
The quality of life today owes much not to acute medicine but to preventive medicine. It is easy to forget that during the last century only six out of every 10 children grew to adulthood. If they survived childbirth, which was a hazard for mother and child, they then had to face diseases such as scarlet fever, measles, whooping cough and diphtheria. Other diseases struck at any age—diseases such as typhoid, cholera, tuberculosis and smallpox. Water supplies were frequently tainted with sewage and uncontrolled industrial waste. Our cities were dark with soot and smoke. Overcrowding and poor nutrition contributed more misery.
Public health achievements have contributed many improvements since that time. We took action to protect the public against the hazards of their environment. The sanitary reform movement ensured reasonably pure water supplies and the efficient removal of sewage by the late 1880s, and the virtual disappearance of enteric fever. There were Acts to control air and water pollution in the 1860s and 1870s.
Preventive measures such as vaccination and immunisation reduced the toll previously exacted by common infectious diseases such as TB, polio and diphtheria. About 99 per cent. of those diseases have now been eliminated. More recently there was the widespread acceptance of family planning, and there were improvements in antenatal care. Those initiatives have done more to improve the quality of life than does the more dramatic and expensive acute medicine that often hits the headlines.
We must pass on that basic information to the Third world. We must not forget that many of those measures were not achieved without controversy. For example, in the nineteenth century The Times was concerned at measures that were being taken to prevent further outbreak of cholera. It said:
"We prefer to take our chance of cholera and the rest than be bullied into health. There is nothing a man hates so much as being cleaned against his will or having his floors swept, his walls whitewashed, his foul dung heaps cleared away".
There were battles to be fought even in those days on the familiar grounds of personal freedom and State intervention. The quality of life today owes much to measures designed to preserve public health.
In his opening remarks my hon. Friend the Member for Cambridge referred to polio. Many hon. Members will recall the 1940s and 1950s, when poliomyelitis was common in this country. There were over 3,000 paralysis cases in 1957. Immunisation was first introduced in 1956, and the disease was brought under control. In 1979—the last year for which figures are available—there were only six paralysis cases in England and Wales. Of those cases, four acquired their infection abroad.
The uptake of vaccination against poliomyelitis is high. About 79 per cent. of children born in 1977 had been vaccinated by the end of 1979. There is no doubt that it is the high vaccination rate that is protecting our children from the disease. It is true that there is a certain, slight danger from vaccination to unimmunised parents when their child is vaccinated. That is why the Department advises unimmunised parents to be vaccinated at the same time as their children. However, very few cases of polio now occur in this country.
I believe that my hon. Friend has a particular interest in the activities of the Save the Children Fund in the fight against polio abroad. I should like to take the opportunity
244
to make particular mention of the work that the fund is doing and to congratulate it both on its original campaign and on its expansion to a wider immunisation programme covering measles, diphtheria and other killer diseases. We are well aware of the valuable work being done by the Save the Children Fund in assisting Governments in certain Southern African countries to established programmes of immunisation.
In addition, the World Health Organisation has set the ambitious goal of
"Health for all by the year 2000",
now endorsed by the United National General Assembly. The organisation has identified immunisation against the major infectious diseases as one of the keys to the attainment of that goal. To that end the WHO has an expanded programme on immunisation. Its objectives are to provide immunisation for every child by 1990 against certain selected diseases—initially, polio, together with diphtheria, whooping cough, tetanus, measles and tuberculosis—and to promote national self-reliance in the delivery of immunisation services and regional self-reliance in vaccine production and quality control. I believe that it was through the officers working with the expanded programme that the Save the Children Fund was able to identify as in prime need of assistance the countries in which it is now working in Southern Africa.
On the technical side, the WHO's work includes developing effective vaccines and the "cold-chain" for the transport of refrigerated vaccines from manufacture to the field and their storage there, particularly in extreme tropical conditions. Our expertise has been very prominent in the whole of this work. For example, the WHO cold-chain support unit, which is about 65 per cent. funded by the ODA, has been remarkable in its success, from the development of cheap, locally manufactured, hand-carried cold boxes to the commissioning of an icemaker that can be used on dung or wood fires in the bush. There is also an organisational side since, as with other health measures, the basic work must be in the hands of local people. The intention of the expanded programme to promote national and regional self-reliance is an expression of that.
Finally, the WHO is making considerable efforts to mobilise resources in cash and kind outside its own budgetary financing on a United Nations-type basis. Thus, in addition to the £1·7 million that it has devoted to the expanded programme from its own resources, it has raised to date the equivalent of a further £1·7 million as voluntary contributions, with a further £2·2 million firmly pledged, but not yet fed into the programme. I believe that we all recognise that this is where bodies like the Save the Children Fund come in. We have received numerous indications from the WHO and from contacts abroad of the way in which its campaign has been so well received.
I hope that the organisations will continue to work closely with the United Kingdom departmental elements—which include officers of both the DHSS and the ODA—involved with the WHO in the expanded programme of immunisation, which is now being given such high priority. The WHO has demonstrated by its successful campaign to eradicate smallpox that it has the skills necessary to organise and manage a global campaign, although I recognise that the expanded programme of immunisation is a much more complicated business, which the WHO seems to be putting together fairly well now. I assure the House that Ministers and

245
officials in my Department play a full part at international conferences in doing all that they can to spread the gospel about preventive medicine overseas.
In congratulating those who have worked so tirelessly to achieve success, I must emphasise that prevention remains the responsibility of us all—Governments, health authorities, health workers throughout the world, voluntary bodies and, last, but not least, ourselves as individuals. The Government are pledged to play their part.
Mr. Rhodes James: I thank the Minister and all who took part in the debate for their contributions.

Colleges of Education (Scotland)
6.44 pm
Mr. John Maxton: As this is the first time that I have spoken since your elevation to the Chair, may I congratulate you, Mr. Deputy Speaker, on being there? Having spent a long night on the Criminal Justice (Scotland) Bill with you in the Chair, I am sure that you will carry out your new task with considerable distinction.
I am not sure whether I welcome the fact that, with so many important matters before it, the House tonight has nothing on which to vote or on which to make decisions, but I welcome the opportunity to raise an important issue in Scotland concerning colleges of education. There may be no obvious connection between the debate on the Third world and this debate, which some of our English colleagues may consider parochial, but there is a connection between the educational assistance that we can give the Third world and our education system throughout the United Kingdom. The more that we run it down, the less able we shall be to provide the services for education, health and so that the Third world desperately needs.
The debate must be placed within the general context of education in Scotland and the Government's expenditure cuts across the board. We are facing a cut of £65 million in an education budget that has already been severely cut. Either 6,000 teachers will be threatened with redundancy, or 6,000 who may like to have taken up teaching posts will no longer be able to do so. Our universities will not be able to provide certain courses. Staff will be declared redundant. We are at risk of losing one university altogether—Stirling. It is linked to one of the colleges that the Government are proposing to close—Callendar Park college of education. The closure will have a disastrous effect on the economy and education programme in the Central region of Scotland.
In August last year, the Government proposed that Hamilton and Callendar Park colleges of education should be closed. They also proposed that Craiglockhart should be merged with another college. I am pleased to see that the Under-Secretary of State is to reply. The college is situated in his constituency of Edinburgh, Pentlands. When the proposal was made, the college with which it was to be merged was not identified. Craiglockhart trains Roman Catholic teachers. The Government undertook that it should continue to do so.
Opposition to the proposals has continued since that time. It is on three major grounds—the way in which the process was undertaken and has since been handled, the
246
educational deprivation that will result and the fact that the Government wrongly claim that financial savings will result.
In 1976, when my right hon. Friend the Member for Glasgow, Craigton (Mr. Milian) was Secretary of State, the Labour Government suggested in a consultative document—and I emphasise the word "consultative"—that two colleges should be closed and a further two merged. Opposition came from Labour and Conservative Members. They asked for a debate in the Scottish Grand Committee and spoke in an Adjournment debate on the subject. They organised meetings outside the House. At that time I happened to be chairman of the Association of Lecturers in Colleges of Education in Scotland. and the association was one of the leaders in mounting the campaign. I attended the Scottish conference of the Conservative Party where a fringe meeting was organised. I chaired a meeting at the conference and flanking me on the platform were the present hon. Member for Southend, East (Mr. Taylor), who then represented my constituency, and the Under-Secretaries of State for Scotlan—the hon. Member for Edinburgh, Pentlands (Mr. Rifkind)—and the hon. Member for Edinburgh, North (Mr. Fletcher}—
The Under-Secretary of State for Scotland (Mr. Malcolm Rifkind): The hon. Gentleman should refresh his memory. I assure him that I have never had the pleasure of being present at a meeting chaired by him.
Mr. Maxton: If the hon. Gentleman was not present, I shall withdraw his name, but certainly the other hon. Members were present, as were the Under-Secretary of State for the Environment—the hon. Member for Dumfries (Mr. Monro)—and one of the Lord Commissioners of the Treasury, the hon. Member for Edinburgh, West (Lord James Douglas-Hamilton). They were all there on the platform speaking with me against the proposals put forward in a consultative document.
On another occasion I stood on the picket line outside New St. Andrew's House to lobby my right hon. Friend the Member for Craigton about these proposals. Standing on that picket line beside me was the present Secretary of State for Scotland. Time after time we had speeches from Tory Members and we heard all about their objections. Nothing has changed. I could make my whole speech using quotations from speeches made at that time by the right hon. and hon. Members to whom I have referred. I shall use only one quotation:
"I am not arguing that for the time being we have to cut down the number of teachers—I know we have. Cut down the number of the new teachers in training. We accept for the time being that has to be done, but the argument is about how do you go about it. The scheme that looks best on paper because it is tidy and neat is not always the best one in practice. It takes a long time to build up the reputation of a college—it can be destroyed easily. Again, where those colleges are doing a very good job, let us keep them in being. I think sometimes it is better not to merge or destroy colleges, but to say 'All right, we will keep them all going, because the more widely they are distributed, the more chance people who live near them have to go and train in them and still live at home.' So it makes better human sense the way we are going about it than I believe the Government scheme does."
That is not very clearly expressed, it is a little woolly, but the person expressing those sentiments is the present Prime Minister when speaking against the previous Government's proposals for colleges of education in a party political broadcast in Scotland on behalf of the Conservative Party on 4 May 1977. What she said then was absolutely right. If we close down educational

247
establishments that are doing a good job we cannot expect them to take off again later. If she was right then, and if the Secretary of State for Scotland and all the other Conservative Members who spoke so vociferously with me in support of the 10-college system in Scotland were right then, what has changed so dramatically? I cannot see that anything has changed dramatically.
We still have declining primary school rolls. That was known in 1977 when Conservative Members welcomed the decision made by my right hon. Friend the then Secretary of State for Scotland not to close the colleges. They said then that my right hon. Friend was right. It was agreed that school rolls were falling and forecasts could be made through to the end of the decade in terms of secondary schools. That sort of judgment could be made in 1977.
If there has been a change in the demographic arguments, it is to the reverse effect. In 1977, although the Government were predicting that there would be a rise in the birth rate in Scotland, that had not started to happen. By 1980–81 it had started to happen. In Scotland there is an increasing child population at the infant stage. So the demographic argument which my right hon. Friend accepted when he was in office and when he kept the colleges open has, if anything, more weight now.
The need which my right hon. Friend identified and accepted for 10 colleges, was accepted by the then Opposition. The arguments have not changed since then, so why are the Government making these proposals? I know of no convincing argument why they should. Those 10 colleges are desperately needed in the educational system. Everyone will accept that if there are fewer children in the schools, fewer teachers are needed, but it is not necessarily true that a strict ratio reduction in the number of teachers is required. We should take this opportunity to improve the quality of education by reducing the pupil-teacher ratios in our schools. That is a perfectly reasonable aim. The Government may say that they do not want to spend any more money, but by spending the same amount of money they could get vast improvements. We should use this opportunity not to train more teachers than we require but to train a few more so that we can improve the quality of education across the whole country, particularly in areas of urban deprivation where the educational needs are so great.
If we have reducing school rolls we cannot cut the number of teachers in a strict ratio. For example, if there are 20 children who wish to take 0-level maths in one class and, over three or four years, that number falls to 15, it does not follow that one maths teacher can be dismissed. That makes no sense. It takes more teachers than the Government are prepared to concede to take care of the reduction in school rolls. We need 10 colleges just to make sure that we have enough teachers to improve and maintain the education service during a period of falling school rolls.
The Government are saying that the function of colleges of education is to provide a pre-training service for teachers. But colleges of education are concerned with other matters as well. They are concerned with providing in-service courses for existing teachers. Most people would accept that at a time of rapidly changing technology and a changing society generally the need for teachers to maintain their levels of knowledge, to change their areas
248
of knowledge, to be able to adapt to a changing society is imperative if we are to maintain an education service. That requires colleges of education to provide the in-service training that is necessary. This is only possible on an area and regional basis with the existing colleges. It cannot be done as easily and it certainly cannot be done as cheaply if we start to close down certain colleges. So we need the colleges of education to maintain in-service training just to keep the teachers aware of what is going on.
In Scotland we have had some five or six major educational reports over the past five or six years. We have had the Munn and Dunning report, dealing with the curricula in secondary schools in the third and fourth years and the examination system in Scotland, and proposing radical changes in the way in which assessments of our schoolchildren should be made. We have had the Pack report, which dealt with the question of truancy and indiscipline in Scottish schools and suggested various means by which the system could be improved. We have had the Warnock report, which covered the whole of the United Kingdom but which had to be taken into account in Scotland, dealing with the needs of children who have educational problems or who are educationally subnormal. Every one of those reports, and others, has suggested that there is a need for in-service training of teachers at present in service if the reports are to be properly implemented. In other words, they say that teachers need training in order to implement those reports.
But what are the Government proposing to do? In two major population areas of Scotland, in terms of Callendar Park in the Central region, and Hamilton college in Lanarkshire, they are proposing to close down the two colleges that could provide that sort of in-service training. I am delighted to see my hon. Friend the Member for Hamilton (Mr. Robertson) present. I hope that he will make a speech on the effects of this on his constituency and on the general area of Lanarkshire. I should like to make a few remarks as well.
The fact is that over the past 15 years Callendar Park—to take the Central region first—has built up a reputation for providing primary school teachers and doing in-service work in that area. It is worth pointing out that the Central region, unlike other parts of Scotland, is not one of declining population; the population is increasing because of the petrochemical complexes in that area. If Callendar Park closes, teachers who wish to do in-service work and students who wish to go to a college of education to train as teachers will have to travel very considerable distances. That is, of course, if they are doing direct in-service work in the colleges. They will have to travel either to Glasgow or to Edinburgh to do that. There will be problems in terms of both expense, either to themselves or to the local authority, and of time. Teachers might go to Callendar Park, four or five miles down the road, if they can go at 4 o'clock or half-past 4 and, since it only takes five or 10 minutes, be home by 6 o'clock. But if they have to travel 20, 30 or 40 miles to do it they are less likely to go. The result will be that the general level of in-service training will drop.
My second point concerns the development of what is called school-based in-service training—which was part of my right hon. Friend's proposals. In other words, lecturers go out to the schools and help teachers to develop their courses. If Hamilton college and Callendar Park are closed, those lecturers will have to travel greater distances and the result will be either greater cost or a considerably

249
poorer service than those two areas, Lanarkshire and the Central region, have grown to expect over the past few years.
There is, therefore, an expense factor in this, and there will be enormous educational deprivation in areas which already lack the educational services which other parts of the country have. This is particularly true in the Lanarkshire area, which was for a long time one of the most educationally deprived areas in Scotland. Yet now it is to lose the college that has helped to bring that educational service up to an acceptable level. It has provided more teachers, not just in the primary school area, but in terms of mathematics and physics. It will lose that, and the result could be a decline in educational standards in an area of very high population.
I think that I have probably said enough. I see that there are some of my hon. Friends present who will also wish to say something. What I would like to say is that the Government have mishandled this matter from the very beginning. They did not issue a consultative document and they never have, despite promises to do so. They said there would be consultation on the question of the means and the timing, yet the Minister in charge of education in Scotland told us, though not very clearly, in the Scottish Grand Committee that the colleges were to close at the end of June. There was no consultation at all about timing. More clearly, he told students from Hamilton college of education at an informal meeting that the college would be closing in June and that they should forget about all their protests because he was going to close it anyway. So where was the consultation about the closure? The Government mishandled this. They said that they would give us costings. They did so, after four months of pressure. The costings were examined by the Scottish Select Committee. I do not wish to give any facts before the report of the Select Committee, but I think that the evidence produced was inadequate—in fact, the Government did not produce any evidence for Callendar Park; that had to come later. They made various errors in their costings, which Hamilton college has proved to be wrong. Some statistics were so incorrect that it is surprising they were given in the first place. The Government have been defeated on every educational and social argument about these closures.
I therefore hope that, even at this late stage, the Minister who will reply tonight, even though he is not the Minister in charge of education in Scotland, will tell the House and the people of Scotland—who feel very strongly about this issue—that at long last the Government have changed their minds and will not proceed with the closure of these two colleges.
7.9 pm
Mr. George Robertson: This debate is a bonus, I suppose, inasmuch as that at last we are having a debate on the Floor of the House on the Government's intention to close two colleges of education in Scotland and to merge another with some unknown institution. I should like to say at once that this is not a substitute for the sort of debate that the Government should have accorded to this important subject.
This is not the first debate on the subject that has taken place in the House, although it is the first in this Chamber, because in December of last year this matter was debated in the Scottish Grand Committee on a motion tabled by the
250
Opposition, and not by the Government, to debate in Opposition time a matter that is crucial to large numbers of people throughout Scotland.
The culmination of the debate in the Scottish Grand Committee was not a triumph for the Government, with their paper majority in the House covering the discrepancy in numbers in Scottish constituencies. We saw on that occasion the humiliation of the Government, with every Government Back Bencher and Front Bencher failing to vote for the Government's tawdry policy. it was a mute, silent group that was defeated by 40 votes to nil in the Scottish Grand Committee, it having debated an issue crucial to the Scottish people.
We should debate the colleges of education, not on the initiative of my hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton), but in Government time, on a Government motion. The rules of the House provide that at the end of this debate we shall not be able to have a vote. We need to know how many supporters the Government have on this issue. It would be easy to quote speech after speech by Conservative Members in 1977 against almost precisely the same proposals that are now being made by the Government. That would prove nothing other than the double standards practised by Conservative supporters. The Government were humiliatingly defeated in the Scottish Grand Committee and they were obliged morally, if not by the rules of order, to introduce a motion to be debated on the Floor of the House to enable us to flush out the Government's supporters.
The Government have precious few supporters in Scotland. Until this evening only the hon. Member for Argyll (Mr. MacKay) had come out pubicly in support of the Government's policies. the Conservative parties in East Kilbride and Hamilton have expressed their disagreement with the Government's policy towards the Hamilton college of education. Conservative councillors in the districts surrounding the college and Conservative councillors in the Strathclyde regional council have all expressed their disagreement with the Government on this issue.
I am led to believe that even this week Conservative trade unionists in Lanarkshire have asked the Government to reconsider their view on the fate of the college. Throughout the community councillors, Churches, youth organisations and community organisations have been unanimous in their condemnation of the Government's proposals. They are calling upon the Government to change their mind.
The Government have no friends. Conservative Members do not keep counsel even with themselves. That is perhaps why they remained silent in December when there was a Division in the Scottish Grand Committee. Friendless and isolated Ministers continue with a policy that seems destined to cause education damage even at the expense of increased public expenditure, which it seems will be the net result of the exercise.
I am glad that the hon. Member for Renfrewshire, East (Mr. Stewart) has entered the Chamber. He has been courageous in taking a critical stand on the Government's policy. Such courage should be the subject of congratulation, especially during this week. The hon. Gentleman and I have argued passionately, yet moderately, in the cause of Hamilton college of education. Until this evening I have managed, despite the anger that is felt throughout my constituency, to retain that degree of moderation in the faint and almost vain hope that the

251
Government will begin to accept the sense of the arguments that have been advanced by Conservative Back Benchers, by their own supporters throughout the country and by every organisation that has submitted evidence.
There are times when such a bipartisan and moderate approach is no longer relevant. At such times we have to bell the Government's cat and tell the people of Scotland precisely what damage the Government are causing. The Government seem blind to the state of public opinion in Central Scotland. The effect of the closure of Hamilton college of education will be considerable. Many of the views expressed by Conservative Members in 1977 when they were in Opposition apply equally today.
The education service in Lanarkshire suffers from considerable deprivation. I accept that the concept of deprivation is one that is not easily grasped by everyone. Sometimes "deprivation" is used by sociologists and social scientists to describe a host of conditions, many of which do not apply in Lanarkshire. I do not consider Lanarkshire to be a slum area, an area that is down at heel, or an area without prospects. However, if we consider the education prospects of the children of Lanarkshire, it is clear that classical features of deprivation exist.
Lanarkshire has the worst pupil-teacher ratio in Scotland, and the worst staffing ratios of any of the regions in Scotland and of most parts of the United Kingdom. Some of the major schools in Lanarkshire—some of them with considerable education qualities—still have not achieved the minimum Red Book standards laid down by the Scottish Education Department.
There are still problems in science, mathematics and technical subjects. I am sure that the Under-Secretary of State agrees that such subjects are crucial to Britain's economic recovery, especially in areas of high unemployment such as Lanarkshire. There are still critical and chronic shortages of teachers in those subjects. The lesson of the past 20 years is that only when Hamilton college of education appeared on the scene, and teachers were trained locally and stayed locally, was anything done to improve the chronic teacher shortage. The years of improvement since 1966 are apparently to be swept away in some dogmatic move by the Government to rid the countryside of a number of education establishments.
I should have argued that the closure is being carried out in the dogmatic pursuit of the Government's monetarist policies, had it not been proved conclusively by the lecturers of Hamilton college of education that it will cost the Exchequer at lot of money to close the college. It is a perversion of the Government's economic policies that the college is to be sacrificed to meet the ambitions of the Under-Secretary of State for Scotland who has responsibilities for education and industry. The hon. Gentleman seems to think that if he reduces the number of education opportunities and education institutions he will adhere to the Government's overall objective of reducing public sector expenditure.
In Lanarkshire the effect of the closure will be considerable, and all the years of improvement will be swept away by the elimination of a valuable and vital education resource that has made a major contribution to increasing education standards in the area. When the college was established, local people went to it to be trained. For the first time a significant number stayed in the area after being trained. The Minister has produced no
252
evidence to suggest that once the role of the college is taken over by a college of education in the West End of Glasgow, which is about 10 or 12 miles from Hamilton, Lanarkshire will have the supply of teachers that it so desperately needs.
The Government have not remained totally intransigent on Hamilton college of education during the debate since August. I am not so churlish as to say that the Minister has stood steadfast against all the arguments advanced against the Government's policy, but with each concession that the Minister or the Secretary of State has made to the argument put forward by the Lanarkshire people the argument for the abolition of the college has grown weaker. We now have a catalogue of agreement by the Minister that a considerable number of the functions of Hamilton college of education are to remain in the province of educational establishment in the area.
One of the remarkable things about today's debate, taking place in the March following the unilateral decision last August, is that in that time the Government have established the fact that so many of the functions of the college will continue to be carried out by a college of education in the area. In the name of public savings the Government will sweep away an institution that has done good, and in its place will remain all of the functions that Hamilton college carries out today, but without that vital local link which was so essential in the past, and which has made a contribution to improving Lanarkshire's teaching standards.
On a rare occasion of some note the Secretary of State for Scotland himself answered a question on 18 January from that sole supporter of the Government, the hon. Member for Argyll. Perhaps the hon. Member for Argyll was being rewarded for his unique loyalty to the Government's policy by that answer from the Secretary of State for Scotland. In his incredible answer the right hon. Gentleman outlined to the hon. Member for Argyll—who required reminding—the commitments that had been given to maintain the in-service training capabilities of Hamilton college.
The right hon. Gentleman said that at both Callendar Park and Hamilton colleges there would continue to be outstations of the parent college—whatever the parent college might be after the Government's closure decision had been carried out. Accommodation for the outstations could, and, the answer implied, would, be in the existing buildings of the colleges and—the eternal Catch 22 situation—that the details would have to be worked out and consultation would take place to enable the colleges to decide what form of execution was best suited to the circumstances.
The Minister has given a commitment to retain the technical education features of the work of Hamilton college. There is a commitment to maintain in-service training, which already accounts for a sizeable proportion of the work. At the same time, despite the commitment that will be carried out by another college 12 miles on the other side of Glasgow, the Government intend to abolish the institution that made all the demands necessary, and which was itself capable of delivering them to the area of Lanarkshire served by the college.
It makes no sense, politically, economically or educationally, to axe Hamilton college of education and, at the same time, move the bulk of its work to a college on the other side of Glasgow, with all the added cost

253
involved, as well as the psychlogical disadvantages to the recruitment of teachers from Lanarkshire and for Lanarkshire.
I remain confused about why the Government are so recklessly pursuing a policy that does not stand up to examination. The policy has received no support from the education experts that the Government are obliged, and often willing, to consult, and whose advice they usually seek in cases where educational problems are to be dealt with. The General Teaching Council for Scotland, which is statutorily charged with the responsibility of advising the Secretary of State on education matters, has made its view clear on the vital nature of the role of Hamilton College in the future of Lanarkshire's education, yet the Government have chosen to ignore that advice.
The Government do not seem to have any friends or supporters or back-up for the view that they have taken. Why are we still being told at this late stage that there is no alternative to closing this college, which is demonstrably needed by the people of an area of such clear and measured educational deprivation? The Under-Secretary told us the last time that we debated this subject that the Government have supporters, but they are all silent. All those who keep sitting on their hands are supporters of the Government. Some of those who keep their hands above the table support the Government in this exercise of educational vandalism. That is the sort of thesis that is difficult to prove. Anyone who believes that has not benefited from the Scottish education system. If during the coming months the Government can find any authority or organisation, or any person of standing, that supports the view that they are correct and should be supported, the case that we have put forward will be weakened. To date they have not found such support. No one has said that he is in favour of the Government's decision.
Two weeks ago the Select Committee on Scottish Affairs considered the economic consequences of the closure of Hamilton college of education and Callendar Park. The Committee did so following a letter that I wrote pointing out the enormous discrepancies between the figures supplied by the Minister responsible for education and industry and the figures worked out in detail by Hamilton college lecturing staff. It is not proper for us to debate the deliberations of the Select Committee. As I am not a member of the Select Committee I do not wish to encroach on them, but the evidence was public before the Select Committee considered the issue. To any objective outsider there was no doubt that the Minister's inadequate and delayed documentation did not stand up to scrutiny. The figures that he produced contained nothing like the detail of those worked out by the lecturing staff of Hamilton college.
The Minister's view has been made clear since the deliberations of the Committee. The Minister with responsibility for education said that it was immaterial whether the college's figures were correct. It did not matter whether it would cost money now to close the college, or whether it would cost money for ever to close the college. What mattered, apparently, in the Government's judgment were the crude figures of the numbers of teachers required. That was the dominant aspect that would determine the Government's view on the need for additional colleges of education.
I shall not make a meal, as I could, of the contradictions between the present approach and the approach by the Secretary of State for Scotland in the defence of Craigie
254
college in 1977. The record stands quite clear. The Secretary of State for Scotland's speech in 1977 is on the record. The speech of the Secretary of State for Scotland in the Scottish Grand Committee in December last year is also on the record. The contradictions are there for history to judge precisely on which side of the fence he has come down and which viewpoint should be accepted as his real opinion, as distinct from the opinion which at the time it was convenient for him to put forward.
It is a perversion of basic economics to say that it is legitimate to close colleges irrespective of their cost or their educational impact on an area, simply to satisfy crude estimates—which so often in the past have proved to be inaccurate—of the number of teachers who will be required in any specific subject. That is all the more so when the bulk of the work done by Hamilton college of education relates to post-teacher and in-service training, which will be crucial, irrespective of the number of pupils in schools today.
Economics of the sort that seem to be paraded by the Scottish Office team is almost like an economics and education policy "Muppet Show", with the Minister playing Miss Piggy to the Secretary of State's Kermit the Frog. That would be a joke if the consequences for the children of Lanarkshire were not so dire. I seriously wonder whether Ministers have considered the impact of their policies on the people who at the end of the day represent the crucial aspect of an education system.
Education systems were not established in order to employ lecturers, teachers or school janitors. Education exists for our children and for future generations of children. It is they who will suffer as a direct result of the Government's policy to close down the Scottish colleges of education without properly taking into account the effect that that will have on the Scottish education system or the way in which children will be educated in future.
The Government seem hell-bent on closing down the college of education in my constituency irrespective of the cost to the Exchequer, irrespective of the cost to the children of Lanarkshire in education terms and irrespective of the cost to the community as a whole. There is still time for the Government to change their mind. There is still time for Ministers to look at the facts, to listen to opinions and to listen to the voices of their own supporters. Even at this late stage they should recognise that those facts and views are against them. There is still time for the Government to make a U-turn, which would be welcomed throughout Lanarkshire as well as by a large section of the Scottish population.
We have a different Minister at the Dispatch Box this evening—one who previously rejoiced in his liberal reputation. He defended a college in 1977. I therefore hope that we shall at last have a fresh mind on the subject, so that for the first time we can see the possibility of a change in policy. I hope that it will be a policy that can receive the general acclaimation of the Scottish people, otherwise the Government will face near certain condemnation if they continue with the policy with which they have stuck up to now.
7.33 pm
Mr. Bruce Milan: I intervene only briefly. I congratulate my hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) on initiating this

255
debate and on his speech. I also congratulate my hon. Friend the Member for Hamilton (Mr. Robertson) on his speech.
I do not intend to go over more than a small part of the ground because I do not wish the Government to say, on a future occasion, that this debate, unsatisfactory as it is bound to be, is sufficient to deal adequately with the problem of the closure of the colleges and that they must therefore maintain the view that they will not provide time for the matter to be properly discussed.
The matter has been raised at short notice. The Minister responsible for Scottish education is not present. He has been engaged in other matters. Another Minister is to answer the debate. I do not complain about that. He has simply been given the job, and he could not do it any worse than his hon. Friend has done it Upstairs and in other places. As he is not the Minister responsible for Scottich education we do not expect him to know all the details.
This has not been a real debate, because there have been no contributions from the Conservative Benches. That is slightly surprising, because the hon. Member for Edinburgh, South (Mr. Ancram) has been present during the whole of the debate. He has not opened his mouth, even though we know that on an earlier occasion he expressed great concern about what the Government were doing and did not feel that they had put up an adequate case for their closure proposals. In particular, he was worried about the financial consequences.
There has been some development in that regard since the Scottish Grand Committee debate, which was a complete fiasco, in that the Government did not vote for their proposals. The Minister has attempted to produce a number of costings to demonstrate that the closure of colleges would save money. Without going into detail, I may say that I found most of the figures that he produced completely unconvincing.
Of course, the lecturers and others in the colleges concerned have produced their own costings, which demonstrate that far from achieving savings the closure of colleges would cost the Government additional money. The way in which the Government have handled this matter and the various compromises they have reached about keeping the locations going, and so on, suggest that the lecturers may well have the right answer and that any savings are likely to be minimal. In fact, they may be completely non-existent. Among other things, we may be faced with additional expenditure.
I hope that the Select Committee will produce a report on that matter. However, I mention the costings for one reason alone, which is the extraordinary statements that have been made by the Minister who is in charge of Scottish education. He has implied that costings do not matter, and that even if they prove that it would cost more money, the Government are determined to go ahead with the closures.
In the first instance, one of the few plausible arguments for the closures was the need to save Government money because of the rundown in the number of pupils and, therefore, the need for fewer teachers than we have had in the past. Now the Government's view is that it does not really matter. They do not care what anybody says. They do not care whether it will cost more money. They do not care about the disorganisation. They do not care about Scottish public opinion. They will close the colleges
256
anyway, regardless of what anybody says or does. I cannot imagine a more discredited way of handling this situation. It should be added to the discredited way in which the Government handled the original "non-consultations", the lack of a consultation document, the way in which they did not announce the closure proposals to the House of Commons, and the way in which they dealt with the debate in the Scottish Grand Committee.
There is now utter confusion about what will happen over the next few months, even if the Government continue with their proposals. For example, Craiglockhart is in the Minister's constituency. The original proposition was that everything was to be moved from Craiglockhart and the college was to be merged with one of the east coast colleges. That was taken to be Moray House. Perhaps the Minister will confirm that, because it has been impossible to get firm information.
The latest situation seems to be that Craiglockhart will stay where it is—in other words, it will not be moved from its present location—and the East of Scotland college with which it was to be merged turns out to be Notre Dame, which is in the West of Scotland. We are completely in the dark about the basis on which such a merger is to take place, who is to do what and where, what the board of governor will be, what the arrangements for courses will be, and all the rest.
If the Minister thinks that all the staff at Notre Dame are happy about the prospect of a merger he could not be more wrong. Within the last few days I received a letter complaining about the complete lack of information to staff. It also complained about certain arrangements which, in the view of many staff members at Notre Dame, would not be in the interests either of Notre Dame or Craiglockhart. More important, those arrangements did not seem to be in the interests of Roman Catholic education in Scotland or the supply of an adequate number of teachers to deal with Roman Catholic education in Scotland.
The point is that what started out as one proposition has gone rapidly through various stages to become an entirely different proposition. At the end of the day, if there is to be a presence at Craiglockhart and some kind of arrangement with Notre Dame, it is difficult to see why the existing arrangement should be disturbed at all. It would be far simpler and more satisfactory if Craiglockhart simply stayed as it was.
Exactly the same arguments apply to Hamilton and Callendar Park. My hon. Friends have spoken particularly about Hamilton and have shown that as the argument has gone on the Government have conceded that more and more is to continue to be located in Hamilton in the way of in-service training, the staff to deal with it, and a whole variety of other things. Nevertheless, there is to be some kind of merger. Indeed, it is not even a merger. The college is to be closed, but in the case of Hamilton there are to be some arrangements that are to take place with Jordanhill.
Again, there is utter confusion on this, just as there is with Callendar Park. We do not know the dates for the closures, or how they are to be carried out—if, indeed, they are carried out. We do not know what is to happen to the staff. In each case the college governors have refused to co-operate with the Government's proposals, while the Government have been tying themselves in knots

257
with different versions of so-called concessions to try to prove that even if the colleges are closed they will carry on doing the same work as they are doing at present.
The whole situation has become farcical. It has happened because the Government made certain decisions without consultation and, indeed, in breach of specific promises to consult the interests concerned. The proposals have been greeted with utter hostility by the whole of educational opinion in Scotland. The Government have not put up a credible case for the proposals. The proposals were defeated in the Scottish Grand Committee. From the day that they announced the proposals until now the Government have not succeeded in persuading one person in Scotland who was hostile to the proposals that they have done anything more than make a complete mess of something that could well have been left alone, with the reduction in numbers that everyone agrees must inevitably take place as a result of the reduction in the school population spread over the whole of the 10-college system.
The matter had been decided three years previously, after considerable public discussion, consultation and debate, but the Government were determined not to leave well alone. Despite what happened on earlier occasions and despite the protestations and speeches made by the Secretary of State himself and by most of his hon. Friends on those earlier occasions, the Government made the announcement. They have been in confusion ever since. This has done the Government's standing and their reputation for honesty and integrity no good, and it has done Scottish education no good. It has caused a great deal of unnecessary worry and loss of morale when there is already a tremendous loss of morale in Scottish education.
The situation is not helped, incidentally, by the appalling figures published in the public expenditure White Paper last week about the reductions proposed by the Government in the numbers of teachers in the schools over the next few years. To all those difficulties and problems, the Government added a completely unnecessary irritation and annoyance to the whole education sector in Scotland. They have not yet extricated themselves from their self-inflicted difficulties, and they have done tremendous damage to Scottish education.
Even at this late stage I hope that the hon. Gentleman will convey to his right hon. Friend that the most satisfactory solution to the whole problem and the most satisfactory way in which the Government can extricate themselves from the imbroglio in which they have involved themselves is to withdraw the proposals. They should allow the 10-college system to continue at the reduced level that everyone agrees must happen over the next few years because of the reduction of population, and allow the colleges to get back to the job that they ought to be doing with some vestige of morale, namely, training teachers to teach our children adequately in our schools. So far, the Government have merely caused immense damage. The damage is not completely irreversible if they will now adopt the common-sense solution, which is to withdraw the proposals and allow the 10-college system to continue.
7.46 pm
The Under-Secretary of State for Scotland (Mr. Malcolm Rifkind): I begin by congratulating the hon. Member for Glasgow, Cathcart (Mr. Maxton) on using this opportunity to debate this subject. He began his contribution by referring to the reductions in expenditure
258
on education in Scotland and implied that they were having a disastrous effect on the Scottish educational framework. If the hon. Gentleman wished to make a balanced contribution to the debate he might have pointed out that, notwithstanding the reduction in resources, as a result of the reduction in pupil numbers, the pupil-teacher ratio in Scotland has not merely been maintained but is better than it has ever been, and that will continue during the year to come.
Mr. Millan: What the hon. Gentleman said is untrue. The public expenditure White Paper published last week shows a substantial deterioration in the pupil-teacher ratio over the next few years.
Mr. Rifkind: The hon. Gentleman had better await consideration of the White Paper, but nothing that he said in any way alters the basic fact that at the present time and in the year to come the resources made available to the education service will maintain and indeed improve the pupil-teacher ratio in Scotland. It is right that that should be pointed out.
Mr. Maxton rose—
Mr. Rifkind: No, I shall not give way. The hon. Member for Hamilton (Mr. Robertson) referred to the debate which took place in the Scottish Grand Committee. He made considerable play of the fact that the Scottish Conservative Party is a minority party. After his recent experience at the Scottish Labour Party conference in Perth, at which he turned out to be a small minority in the Scottish Labour Party, and where his point of view was not shared by his colleagues, I should have thought that he would be the last person to make a play of the position of minorities.
The important point, as the hon. Gentleman is perfectly well aware, is that the decision in the Scottish Grand Committee was not a vote on the merits of the Government's policy. The Opposition are perfectly well aware that the Scottish Grand Committee does not vote on the merits of policies. The vote that the Opposition chose to promote was on the technical question,
"That the Chairman do now report to the House that the Committtee have considered the matter of the colleges of education in Scotland."
Merely because the Opposition sought to use a technical procedure in order to express their view that does not mean that Government supporters are obliged to continue in the same way. [Interruption.] Perhaps the right hon. Member for Rutherglen (Mr. MacKenzie) will allow me to finish this point. He should not deplore the fact that the Government have not provided time for a debate on this subject on the Floor of the House. It is within the Opposition's power to have a debate on any subject that they wish and to vote on it. If they have not done so, it would seem that the right hon. Gentleman's colleagues do not give the matter the priority that he would wish it to have.
Mr. Gregor MacKenzie: First, as these are the Government's proposals, some of us might just think it right and proper for the Government to bring them to the House so that we may discuss them adequately. On the matter of voting in the Scottish Grand Committee, for the benefit of those who are, perhaps, less interested, in procedural tactics, will he tell us why, some years ago, even the right hon. Member for Brighton, Pavilion (Mr.

259
Amery) and people of that kind were brought to the Scottish Grand Committee? Was that just a little technical exercise, or did it really mean something when all those people were brought in from all over the place to vote against us on that occasion?
Mr. Rifkind: My right hon. Friend the Member for Brighton, Pavilion (Mr. Amery) is the best person to explain why he attended the Committee on that occasion. The Government of the day—of which the right hon. Member for Rutherglen was a distinguished member—emphasised at the time that any vote in the Scottish Grand Committee was of a merely technical nature. They were quite right to emphasise that, and it is rather strange that today Labour Members seem to give such a vote a much greater importance.
The right hon. Member for Glasgow, Craigton (Mr. Millan) raised the subject of Craiglockhart college, a college in my own constituency, and he made various comments about the question of a merger between Craiglockhart college and another college. I remind the right hon. Gentleman that the statement originally made on the question of Craiglockhart said only that the Government believed that it was appropriate to have a merger of Craiglockhart college with another college, while retaining a Catholic teacher training presence in the East of Scotland. When I hear the right hon. Gentleman maintaining his total hostility to the Government's proposals, I cannot but remember his own remark during the debate in the Scottish Grand Committee in 1977, when he said:
"it is utterly absurd"—
not just absurd but utterly absurd—
"to pretend that the entire supply of Roman Catholic teachers in the East of Scotland depends on the continuation of Craiglockhart as a separate college."—[Official Report, Scottish Grand Committee; 15 February 1977, c. 58.]
If that was the right hon. Gentleman's view in 1977, I presume that it is still his view in 1980. He did not draw that comment to the attention of the House when he spoke in this debate.
Mr. Millan: Will the Minister say something more about Craiglockhart?
Mr. Rifkind: I understand that there are constructive discussions going on at the moment. It is right and proper that we should not at this stage wish to prejudice the outcome of those discussions. I believe that Craiglockhart college has responded in a very constructive way and has entered into detailed discussions with my right hon. Friend and with the Scottish Education Department. I hope that they will lead to a result that will be acceptable to the college as well as to the Government.
Mr. Millan: With respect, that is telling us nothing. Is Craiglockhart to be maintained at a separate location? Is it to be merged with Notre Dame? This has been going on for about nine months now. There is no point in the Minister's saying that there are discussions going on. What is happening? He ought to know as he is the constituency Member. Why does he not tell us?
Mr. Rifkind: The right hon. Gentleman will be aware that when in the past he had ministerial responsibility and was engaged in what are inevitably delicate and sensitive
260
discussions, he did not usually announce to the House the details of those discussions and negotiations while they were continuing.
The Government's original statement remains entirely valid, namely, that what they are proposing and intend to see established is the merger of Craiglockhart college with another college, while retaining a Catholic teacher training presence in the East of Scotland. That was the Government's statement at the beginning of these matters and nothing that has happened has changed that position.
Mr. Maxton: If there is to be a merger with Notre Dame and there is to be a Roman Catholic presence maintained in the East of Scotland—which means, presumably, the present Craiglockhart college—the only saving that will be made in that process is that one governing board will disappear, and a few pence each month will be saved by not having to buy tea and buns for the governors of the college of education in Craiglockhart.
Mr. Rifkind: I advise the hon. Member for Cathcart to await the outcome of the negotiations. Obviously, when they have been concluded my right hon. Friend will, of course, ensure that all the details of what is proposed are made known. That might be a more appropriate time for the hon. Gentleman to give us the benefit of his comments.
The whole basis of the argument that was put forward by the hon. Member for Cathcart and by the right hon. Member for Craigton was, in essence, that nothing has changed since 1977. If, therefore, it was then considered inappropriate to change the system and structure of colleges of education what has changed since in order to make it acceptable today? That is a perfectly fair question and there is a perfectly satisfactory answer to it. It has been given in the past but I must use this opportunity to emphasise it.
At the time in 1977 when the right hon. Member for Craigton proposed closures of colleges of education there was capacity in Scotland for 14,450 places. The previous Labour Government—in which the right hon. Gentleman was the Secretary of State for Scotland—issued a consultative paper in which they said that the appropriate capacity for the colleges of education in Scotland would be a figure of approximately 11,900. That was the figure which they believed could maintain the viability of the existing college structure in Scotland—a total student intake of 11,900.
The right hon. Gentleman and the hon Member for Cathcart know perfectly well that at the present time the college student population in Scotland is approximately 7,300. The figure has fallen dramatically, even over the last three to four years, since these matters were considered by the previous Labour Government. Therefore, even compared with the figure proposed by the right hon. Gentleman, we have now some 4,000 places surplus to requirement. The basis on which the right hon. Gentleman put forward a consultative document on the colleges and their appropriate capacity is no longer relevant, given the substantial decline as the result of the fall in student numbers.
Mr. Millan: I do not want to go into details. I simply say to the Minister that what he is saying is nonsense, and it is not believed by one person involved in education in Scotland. There is nothing that has happened over the last few years with regard to pupil numbers in the schools that is any different; in fact, the position is almost exactly what

261
we said it would be in the original consultative paper in 1977. Of course, there has been a very considerable falling off, but it is all in line with the projection that we made at that time. Nothing has changed in that respect. Nothing that the Minister has said about numbers is any different from what was said in the original consultative paper in 1977. All that has changed is that the Government have decided, for purposes which are still completely obscure, to close a number of colleges. The birth rate is actually going up at the present time.
Mr. Rifkind: The right hon. Gentleman's intervention has added nothing to the debate, I regret to say, because he has not been able to dispute the fact—it is an obvious fact, not capable of disputation—that the student population in the colleges at present is 4,000 less than the level that the right hon. Gentleman said would be appropriate for the existing structure of colleges in Scotland. [Interruption.] I accept that hon. Members will not themselves feel able to agree with that fact.
Mr. Millan: It is not a fact.
Mr. Rifkind: The fact remains that there is substantial surplus capacity in the colleges at present.
Mr. Millan: The Minister is confusing overall capacity with the numbers of students in the college at any particular time. I simply repeat that the figures as they have emerged over the last few years are exactly as projected in the papers that we produced at the time. There has been no change and there has been no dispute about that. The Minister cannot get out of the present position by confusing the numbers at any particular time with the overall capacity of the colleges. That is a long-term matter; it is not a matter of dealing with the student population in any particular year. It was always recognised that the figures would go down well beyond even the reduced capacity, but they will, of course, go up again in future years. What the Government are now doing is to remove capacity altogether.
Mr. Rifkind: The right hon. Gentleman makes regular interventions in these matters, but he still cannot divorce us from the simple fact that there are far more places in the existing college structure than there are students. The Government have to take cognisance of that. Indeed, I remind the right hon. Gentleman of what he said in 1977:
"if we do not contract the system to deal with the new situation in terms of pupil population and the rest, we shall be doing considerable damage to the students and to the teachers themselves" —[Official Report, Scottish Grand Committee; 15 February 1977, c. 8.]
That is the position that the Government face at the moment. My hon. Friend the Under-Secretary of State has not said that questions of cost are irrelevant, as the hon. Member for Hamilton indicated. What he has said is that the primary consideration is that the teacher training college structure should be related to the number of students and the need for teachers to be trained. That is the primary consideration.
Although questions of cost are relevant and are quite properly matters for debate, to suggest that somehow it has been indicated by my hon. Friend that he is not remotely interested in questions of cost, or whether it would be a gain or a loss in terms of the Government's financial position, is to put the facts quite beyond recognition.
Mr. George Robertson: First, when did the Under-Secretary say that? Secondly, can the Minister contradict
262
what I heard as an observer in the Scottish Grand Committee when the Minister was asked whether the outcome of the costings exercise would make any difference? He replied "No". If the Select Committee concludes that the closure of the colleges will result in a financial loss, will the Government change their mind? That would be the only proof of the Minister's remarks.
Mr. Rifkind: At every opportunity my hon. Friend the Minister has made it clear that the Government's prime consideration is that the structure of teacher training in Scotland has a far greater capacity than is required. That is the primary reason why the contraction is appropriate.
I have nothing to add to the remarks made on 13 January about in-service training by my right hon. Friend the Secretary of State in reply to my hon. Friend the Member for Argyll (Mr. MacKay).
On the important question of the various differences of detail between the position suggested by the Scottish Education Department and that suggested by Hamilton and—
Mr. Robertson: I should like to ask the Minister a question before he leaves the subject of in-service training. Indeed, the Minister has glossed over that subject with a few words. The Minister certainly gives us brisker speeches and blathers less than do some of his other hon. Friends. However, his response does not do justice to the importance of the in-service component. I pointed out that since the Government had committed themselves to such a large degree of coverage for in-service training there could be little sense in closing down a college that acts not only as a base for in-service training but as its kernel. The in-service training that represents at least 40 per cent. of the college's work will have to be carried out at a considerable distance from Lanarkshire.
Mr. Rifkind: The hon. Gentleman should express his satisfaction that the Government's response will ensure that the in-service requirements of the area that he represents will be fully met even after Hamilton has ceased to be a separate college. The hon. Gentleman cannot have it both ways. He has implied that the Government's response to in-service training is so similar to the existing provision in Hamilton college that the college should riot be closed. If the hon. Gentleman believes that my right hon. Friend's reply of 13 January amounts to a satisfactory response to the needs of in-service training, he should welcome it and not condemn it.
A basic point was raised about the differences of detail—some of which are important—in the views of the Scottish Office on financial and other relevant issues and those expressed by Callendar Park college and Hamilton college. I am sure that hon. Members will agree that it would be in the interests of all concerned if the colleges were prepared to enter into formal discussions with the Scottish Office in order to discuss those matters.
Obviously, if there are differences of view on important points of detail, such as the teaching staff and the financial aspects involved, those subjects can best be dealt with by holding meetings with all those concerned. So far, the colleges have not been prepared to enter into such discussions, but I hope that they will consider doing so in the interests of their staff and their pupils. I shall pass on the points raised by the right hon. Member for Craigton

263
to my hon. Friend the Under-Secretary and to my right hon. Friend the Secretary of State, who has specific responsibility for such matters.
8.3 pm
Mr. Dennis Canavan: I am sorry that I was not here earlier. However, it was not entirely my fault. I am a member of the Committee on the Education (Scotland) (No. 2) Bill and I was detained in the Committee Room upstairs. Despite repeated requests from Labour Members to adjourn the Committee so that we could participate in this most important debate, which concerns Scottish education, Scottish students, teachers and school children, the Minister refused to adjourn the Committee. Indeed, I have given up my dinner to attend this debate.
In a sense, I was not surprised that the UnderSecretary—the hon. Member for Edinburgh, North (Mr. Fletcher)—who is supposed to be in charge of Scottish education, should refuse to adjourn the Committee and reply to this debate. He should be thoroughly ashamed of himself. On this issue—as on many other Scottish issues affecting education, industry and unemployment—his record is disgraceful. The Under-Secretary of State—the hon. Member for Edinburgh, Pentlands (Mr. Rifkind)—has been brought from the substitutes' bench to the Front Bench. He is standing in for his hon. Friend.
The issue at stake is dear to the heart of Scottish education and to the hearts of all who are concerned with preserving and improving it. In addition the credibility of this shabby Government and of those Ministers who have been involved in this decision is at stake.
It is more than a year since I and my hon. Friends the Members for Stirling, Falkirk and Grangemouth (Mr. Ewing) and for Clackmannan and East Stirlingshire (Mr. O'Neill) met the Minister. Indeed, he is now hiding somewhere in the building and is ashamed to show his face in the Chamber. The hon. Gentleman realises that he cannot defend the indefensible. In February 1980 my hon. Friends and I and the representatives of students and staff at Callendar Park college met the Under-Secretary at New St. Andrew's House, in Edinburgh. He gave us a verbal assurance that no college would be closed down and that no decision would be taken on restructuring the college system until a consultative document had been published. That was a firm assurance. Indeed, the hon. Member repeated it in writing in a letter to Mr. Tom Rae, the principal of Callendar Park college. The Under-Secretary wrote:
"I repeat the assurance that, at this point in time, we have no proposals before us for the closure of colleges. If, in the light of the information to be examined, we conclude that there is a case for some re-structuring, our findings will be incorporated in a consultative document and we shall consult all concerned before any final decisions are reached."
The letter was signed by the Under-Secretary—the hon. Member for Edinburgh, North. At the time some of my hon. Friends and I thought that the Under-Secretary may have made a slip of the tongue when he gave that cast-iron verbal assurance about the publication of a consultative document. However, it could not have been a slip of the tongue, because the Under-Secretary later repeated the assurance in writing. Indeed, he also signed his name at the bottom of the letter.
264
It is almost incredible that the Government should stoop so low that Ministers can put their signatures to written documents giving firm promises and send them to Members of Parliament and to important people such as principals of colleges of education and can then, only months later, break those firm promises.
What is at stake is not simply the interests of Scottish education, which obviously must be top priority. What is at stake is the credibility of the Government, and especially the Under-Secretary of State—the hon. Member for Edinburgh, North—who, if he were an honourable person, would have resigned. Whether or not he was forced into it by constraints from the Treasury, how on earth can we ever believe anything that he says, by word of mouth or in writing? Anything that he says in meetings with hon. Members, anywhere, we cannot believe, because he is not a man of his word. He is a man who broke his word. He broke his word to hon. Members. He broke his word to the principal of Callendar Park college—
Mr. Deputy Speaker (Mr. Bernard Weatherill): Order. It is not parliamentary practice for the hon. Member to impugn the honour of the Minister by saying that he had broken his word.
Mr. Canavan: He told untruths, if that is a parliamentary expression. He certainly put in writing things that amounted to a clear-cut promise—a promise that he did not deliver and a promise that he clearly broke a few months after putting his name at the bottom of that letter. I leave it for hon. Members and people outside to judge whether or not the Minister is a man of integrity. I know what most people in Scotland think about him.
No consultative document was published, for the simple reason that no adequate consultations took place. The Minister claims tht he had to come to a decision quickly and that it was better to come to a decision quickly rather than have long-drawn-out consultations. We are talking about the livelihood of people who have devoted many years to Scottish education. We are talking about the livelihood of the staff in the colleges of education, particularly Hamilton and Callendar Park. We are talking about the livelihood of all the ancillary staff employed in Hamilton and Callendar Park, in particular. We are also talking about future job opportunities for young teachers.
Most important of all, we are talking about the educational opportunities that should be made available and should be improved for this and future generations of Scottish school children. That was part of the reason why the Minister seemed so reluctant—indeed, afraid—to enter into meaningful consultative procedure. He knew that the decision that he wanted to reach—indeed, the decision that may even have been taken at that time—was unjustifiable.
There is no educational justification, no moral justification, no econimic justification and no demographic justification for closing down these colleges. As to the absence of any moral justification, I refer to my previous remarks about the credibility of the hon. Member for Edinburgh, North and the fact that he has the brass neck to continue as a Minister of the Crown having signed the document that he sent to the principal of Callendar Park. I do not know what confidence anyone outside can now have in a Minister of the Crown who behaves in that manner.
There is no moral justification for going ahead with these closures in view of the commitment given to Mr.

265
Tom Rae and the principals of the other colleges concerned. There is no educational justification. The Government ask what is the sense in training teachers for unemployment. I do not want to train teachers for unemployment. The Government say that local education authorities in Scotland employ too many teachers. They seem to be bringing pressure to bear on local education authorities to sack about 6,500 teachers. I hope that local education authorities resist that with all their might. I hope that the teaching unions resist it with all their might. It is one of the biggest myths that the Government have produced that there are no jobs for young people coming out of Hamilton, Callendar park, Craiglockhart, or any of the other colleges. There should be jobs.
The Government may boast that the teacher/pupil ratio in Scotland is the best since that statistic was invented. Much of the credit must rest with the Labour Government, who, despite tremendous economic difficulties, managed to bring about an improvement in the ratio. But the ratio is a global statistic that tends to hide deficiencies in staffing in some schools and in some areas—subject areas and deprived areas. There is still plenty of room for improvement in the staffing standards in many of our schools.
Hon. Members were earlier debating upstairs, in the Education (Scotland) (No. 2) Bill, the Warnock Committee's report. If the report is ever to be implemented, it is not good enough for the Government merely to lay down a legislative framework. They have to back up that legislative framework with adequate resources. The most valuable educational resource is a teacher. If we are positively to discriminate in favour of handicapped children, some physically handicapped, some mentally handicapped, and some perhaps both physically and mentally handicapped, this is very much related to teacher training—the training of teachers in general subjects and the training of specialist teachers who are devoted to the education of those children.
Instead of trying to encourage the colleges to train more teachers, whether specialist teachers or general teachers, the only response of this Government seems to be to axe two of the colleges of education in Scotland and try to pressurise Craiglockhart into merging with another college. There is an absense not only of educational justification but of any financial or economic justification. The Government have failed to produce credible figures showing the saving of public money. Even if there was a saving, which I doubt, how on earth can the Government afford to give out £3½ million to private fee-paying schools—an amount that could go towards more useful aspects of education, such as teacher training to help the education of those children to whom I have referred?
There is also a lack of justification on demographic grounds. Both the Hamilton college of education and Callandar Park college of education are situated in growth areas. It is no use the Secretary of State and his junior Ministers informing the House that the school children population of Scotland is likely to fall, that there will be fewerpupils in our schools, teachers and fewer students teachers, and that that these colleges should therefore be closed.
I take as an example the catchment area of Callendar Park, which includes my constituency. According to the Government's projections, the growth of population in that area will be 15·3 per cent. between 1978 and 1996 and the population of children under 4 years of age between 1978
266
and 1991 is expected to increase by over 37 per cent. Yet the Government propose to go ahead and close down a college of education in that growth area. By doing so they are proposing to cut the educational opportunities for today's children and the children who will be born in the next 10 years.
Not long ago I received an appeal from the staff and students of Callendar Park college addressed to all Members of Parliament. It mentioned some of the matters that I have referred to in my speech, including the broken promise of the Scottish Minister for Education., the disadvantaged children in Scotland, the areas of multiple deprivation and said that in Scotland the ratio of population to institutions offering teacher training was at present one per 480,000. The corresponding figure for England and Wales is one per 400.000. That statistic is disturbing, because Scotland has a greater proportion of rural areas and less densely-populated areas than England and Wales. Scotland should, therefore, have more colleges of education per head of population. If the closures take place, the proportion in Scotland will be one institution per 660,000 population.
The information that I received from the Callendar Park college contained further information about international comparative studies, pointing out that Scotland has the lowest provision of nursery education in the EEC, and the lowest rate of post-16 schooling in the United Kingdom, and the second lowest in the EEC, and so on.
When I read all the information that was sent to me my first impulse was to forward it to the Secretary of State for Scotland and appeal to him. However, many Labour Members are fed up with bringing matters to his attention and to the attention of his minions in the Scottish Office. All that we get is a kind of stereotyped Civil Service reply, with the Minister's autograph at the bottom. Many of my constituents are utterly disgusted when they see replies that come from the Scottish Office.
In this case, I was so disgusted that the Minister had broken his promise on the previous occasion that I thought that I should go to the very top. I reported the Minister to his boss, the Prime Minister. I wrote to her on 16 February, enclosing the petition from the students and staff of Callendar Park college. I did so for two reasons—first, because she is the useless head of this useless Government and, therefore, the boss of the Ministers at the Scottish Office, and surely the boss should know what subordinates are up to in failing to deliver their promises. I also wrote to her because her credibility is at stake in this whole sorry saga.
Not long ago, the Prime Minister—she was then Leader of the Opposition—came to Scotland and made a party political broadcast. I believe that my hon. Friend he Member for Glasgow, Cathcart (Mr. Maxton) mentioned this in his speech. Unfortunately, I did not hear my hon. Friend's speech because I was upstairs in Committee considering the Education (Scotland) No. 2 Bill. I managed to get a transcript from the BBC, which I shall read to the House, because I should not like to misquote the Prime Minister. The interviewer was a man called George Birrell—he must be Scotland's answer to Robin Day. He said:
"'Our conversation covered a wide range of topics affecting Scotland. Towards the end I asked Mrs. Thatcher specifically about the threat to axe up to four of Scotland's teacher training colleges.'
The Prime Minister replied:

267
'I'm not arguing that for the time being we have to cut down the number of teachers—I know we have. Cut down the number of new teachers in training. We accept that for the time being that has to be done, but the argument is about how do you go about it. The scheme that looks best on paper because it's tidy and neat, isn't always the best one in practice. It takes a long time to build up the reputation of a college—it can be destroyed easily. Again where those colleges are doing a very good job', let's keep them in being. I think sometimes it's better not to merge or to destroy colleges, but to say all right we'll keep them all going, because the more widely they are distributed, the more chance people who live near them have to go and train at them and still live at home. So it makes better human sense the way we're going about it than I believe the government scheme does.'"
That was in 1977. I reminded the Prime Minister of her fine words at that time in the letter that I sent her last month. I also told her about the Under-Secretary of State for Scotland—the hon. Member for Edinburgh, North and the promise that he failed to keep. Indeed, the credibility of the Secretary of State for Scotland is also at stake here, because he stood on a picket line along with my hon. Friend the Member for Cathcart in 1977 to fight the proposals that were then put forward to close certain colleges of education.
I told the Prime Minister all that, but I am afraid that her reply was bitterly disappointing. She tried to justify her statement by saying:
"Circumstances have changed considerably in the four years since I commented on the last Government's proposals to close colleges in Scotland. At that time the forecast was that the student population of teacher training colleges would fall to its lowest level of about 8,000 in 1979–80 and rise to about 12,000 by the end of the decade. The current forecast is that the number will continue to fall to less than 7,000 by 1983, and will not rise above 8,000 before the end of the 1980s. This is a very different situation, and I really do not consider it justifiable to retain as many as 10 separate colleges of educaton in Scotland, with all the disadvantages that involves in the spread of staffing and other resources. I am entirely in agreement with the Secretary of State's proposals and I am in no doubt that there will be ample capacity in the contracted system for the students who will need places."
Hon. Members can judge for themselves. I have quoted what the Prime Minister said four years ago and what she said last week. I am beginning to wonder whether anyone in this Government has any credibility. When the Prime Minister, the Secretary of State for Scotland and the Minister responsible for education in Scotland behave in that way what will people outside this Chamber think? No wonder some of them think that Members of Parliament
268
in particular, and politicians in general, are people whose promises should never be believed, because they fail to keep their promises. The Government are feeding the growth of hostility among the population, particularly as a result of their lack of credibility in connection with the college of education system.
The Prime Minister fails to say in her letter that the drop in the forecasts of the numbers of students in the colleges of education is the direct result of the impositions which the Government have placed on the colleges. The Government dictate the number of students which colleges are allowed to take. Many colleges would like to take more students and they may even have the necessary staff and accommodation. The Government are using the excuse of a recession which is made worse by last week's Budget, the public expenditure cuts and further cuts which will be on their way unless we get rid of the Government as soon as possible.
The Government are putting the whole of Scottish education in a financial straitjacket. They are destroying the opportunities, not only of the staffs and the students, but of Scottish children who will be born to future generations.
The Government seem hell-bent on one of the biggest acts of educational vandalism in the history of Scottish education. They have failed to have adequate consultation with the people most involved. I appeal to the Minister, even at this late date. One of the colleges—Craiglockhart—is in his constituency. I have no doubt that he has conversed with the people involved.
Even if Craiglockhart is saved and a solution is found which is acceptable to the Catholic hierarchy and the Catholic population, the Minister must also look again at Callendar Park and Hamilton colleges. Let us come to a sensible and reasonable solution. The best way to preserve what is good in our teacher training system is to continue with the 10-college system.
I hope that the Minister will report back to the Secretary of State and the Prime Minister and remind them that if they go ahead later this year and close the colleges they will be seen to be destroying a valuable part of Scottish education. They will also be destroying any vestige of credibility which this incredible and discredited Government may still have.
Question put and agreed to.
Adjourned accordingly at twenty-eight minutes to Nine o' clock.

TRADE
  Scotch Whisky (Greek Trade and Tariff Measures)
  Scotch Whisky (Greek Trade and Tariff Measures)
  European Community (Non-tariff Barriers)
  European Community (Non-tariff Barriers)
  Merchant Vessels (Registration)
  Merchant Vessels (Registration)
NATIONAL. FINANCE
  Petroleum and Oil Products
  Petroleum and Oil Products
  Budget (Cigarettes and Retail Price Index)
  Budget (Cigarettes and Retail Price Index)
  Surgical Appliances
  Surgical Appliances
  Family Income
  Family Income
  Gross Domestic Product
  Gross Domestic Product
  Civil Service Pay Dispute
  Civil Service Pay Dispute
  Tax and Price Index
  Tax and Price Index
  Financial Statement and Budget Report
  Financial Statement and Budget Report
  Value Added Tax
  Value Added Tax
PRIME MINISTER
  Engagements
  Engagements
  Factory Closures
  Factory Closures
  Departmental Co-ordination
  Departmental Co-ordination
  Enhanced Radiation Weapon
  Enhanced Radiation Weapon
  Child Benefit
  Child Benefit
  Republic of Ireland (Prime Minister)
  Republic of Ireland (Prime Minister)
  Rapid Deployment Force
  Rapid Deployment Force
  Official Information (Leakages)
  Official Information (Leakages)
  Closed Shop
  Closed Shop
  Council of Europe (Consultative Assembly)
  Council of Europe (Consultative Assembly)
ENERGY
  Gas and Electricity Disconnections
  Gas and Electricity Disconnections
  Coal (Strategic Stockpiling)
  Coal (Strategic Stockpiling)
  Coal Supplies (Electricity Generation)
  Coal Supplies (Electricity Generation)
  Coal Demand
  Coal Demand
  Pit Closures
  Pit Closures
  Coal-fired Power Stations
  Coal-fired Power Stations
  Energy Prices
  Energy Prices
  Electricity Generation (Cost)
  Electricity Generation (Cost)
  Electricity Prices
  Electricity Prices
  Gas Supply Contracts
  Gas Supply Contracts
  Fuel Oil Duty
  Fuel Oil Duty
HOME DEPARTMENT
  Borstal Training
  Borstal Training
  Bullwood Hall Borstal
  Bullwood Hall Borstal
  Chief Constables (Names and Addresses)
  Chief Constables (Names and Addresses)
  London Metropolitan Police
  London Metropolitan Police
NORTHERN IRELAND
  Press Conference (Cost)
  Press Conference (Cost)
  Prime Minister's Visit (Cost)
  Prime Minister's Visit (Cost)
  56,Carlisle Park, Ballynahinch
  56,Carlisle Park, Ballynahinch
WALES
  Trunk Roads (South-West Wales)
  Trunk Roads (South-West Wales)
  Non-Welsh Speaking Children
  Non-Welsh Speaking Children
  Higher Education (Lecturers)
  Higher Education (Lecturers)
  Teacher Training
  Teacher Training
  Hospital Admissions
  Hospital Admissions
  Home Ownership Schemes
  Home Ownership Schemes
  Ceredigion (Advance factories)
  Ceredigion (Advance factories)
  Employed Population
  Employed Population
  Nissan Project
  Nissan Project
DEFENCE
  Defence Expenditure
  Defence Expenditure
  Saudi Arabia and Emirates
  Saudi Arabia and Emirates
  Rapid Deployment Force
  Rapid Deployment Force
  Cash Limits
  Cash Limits
  Gazelle Observation Aid
  Gazelle Observation Aid
  Cruise Missiles
  Cruise Missiles
  Enhanced Radiation Weapon
  Enhanced Radiation Weapon
  Flying Experience
  Flying Experience
  AV8B Aircraft
  AV8B Aircraft
  Trident Missile
  Trident Missile
  Military Co-operation
  Military Co-operation
  Secretary of State (Visit)
  Secretary of State (Visit)
EMPLOYMENT
  School Leavers
  School Leavers
  Community Industry
  Community Industry
  Job Release Scheme
  Job Release Scheme
  European Community (Unemployed Persons)
  European Community (Unemployed Persons)
  Redundancies (non-notification)
  Redundancies (non-notification)
  Protective Awards
  Protective Awards
  Health and Safety
  Health and Safety
  Holiday Entitlement and Unemployment
  Holiday Entitlement and Unemployment
AGRICULTURE, FISHERIES AND FOOD
  Weedkillers (Ester Formulations)
  Weedkillers (Ester Formulations)
  Food Prices
  Food Prices
  Sugar Beet (Factory Closures)
  Sugar Beet (Factory Closures)
  Council of Agriculture Ministers
  Council of Agriculture Ministers
CIVIL SERVICE
  Metropolitan Area (Non-industrial Staff)
  Metropolitan Area (Non-industrial Staff)
SOCIAL SERVICES
  Benefit Payments
  Benefit Payments
  Fuel Debts
  Fuel Debts
  Self-employed Persons (Reciprocal Health Benefits)
  Self-employed Persons (Reciprocal Health Benefits)
  Earnings Rule
  Earnings Rule
  Deferment of Retirement (Single Men)
  Deferment of Retirement (Single Men)
  Medical Practitioners (New Commonwealth and Near East)
  Medical Practitioners (New Commonwealth and Near East)
  Tubal Ligation
  Tubal Ligation
  Essential Drug List
  Essential Drug List
  London Undergraduate Medical Schools (Reorganisation)
  London Undergraduate Medical Schools (Reorganisation)
  Hospitals (Appointments)
  Hospitals (Appointments)
  Fund Raising
  Fund Raising
  Radiological Work
  Radiological Work
  Fluoridation
  Fluoridation
  Acute Geriatric Medicine
  Acute Geriatric Medicine
  Hospital Admissions
  Hospital Admissions
  Supplementary Benefit
  Supplementary Benefit
  Adult Training Centres
  Adult Training Centres
  Smoking (Deaths and Diseases)
  Smoking (Deaths and Diseases)
  Alcohol (Deaths and Diseases)
  Alcohol (Deaths and Diseases)
  Child Benefit (Children in Care)
  Child Benefit (Children in Care)
  Heating and Fuel Benefits
  Heating and Fuel Benefits
  Poverty Trap
  Poverty Trap
  Christmas Bonus
  Christmas Bonus
  Postgraduate Hospitals
  Postgraduate Hospitals
  Invalidity Benefit
  Invalidity Benefit
ENVIRONMENT
  Tobacco Industry (Sports Sponsorship)
  Tobacco Industry (Sports Sponsorship)
  Housing Associations (Revenue Deficit Grant)
  Housing Associations (Revenue Deficit Grant)
  Glazing and Glass Fixing
  Glazing and Glass Fixing
  Council House Sales (Departmental Circular)
  Council House Sales (Departmental Circular)
  Housing Benefits
  Housing Benefits
  Housing Revenue Account
  Housing Revenue Account
SCOTLAND
  Rate Poundage
  Rate Poundage
  Housing
  Housing
  Construction Industry
  Construction Industry
  Barlinnie Special Unit (Correspondence)
  Barlinnie Special Unit (Correspondence)
  Main Line Electrification
  Main Line Electrification
  Hospital Admissions
  Hospital Admissions
  Contract Cleaning
  Contract Cleaning
  Craiglockhart College
  Craiglockhart College
DEFENCE
  Rapid Deployment Force
  Rapid Deployment Force
  North Atlantic Treaty Organisation
  North Atlantic Treaty Organisation
  Equipment Purchases
  Equipment Purchases
  Neutron Bomb
  Neutron Bomb
  Royal Dockyards
  Royal Dockyards
  Service Pay
  Service Pay
  Defence Industries (Jobs)
  Defence Industries (Jobs)
  Naval Operations (Fuel)
  Naval Operations (Fuel)
  Arms Sales (South Africa)
  Arms Sales (South Africa)
  Defence Equipment (Sales)
  Defence Equipment (Sales)
  Defence Equipment (European Policies)
  Defence Equipment (European Policies)
  Defence Equipment (Purchases)
  Defence Equipment (Purchases)
  Type 22 Frigates
  Type 22 Frigates
  Military Installations
  Military Installations
  Royal Air Force Houses (Dishforth)
  Royal Air Force Houses (Dishforth)
  Diego Garcia
  Diego Garcia
  South Korea (United Nations Force)
  South Korea (United Nations Force)
  Official Cars
  Official Cars
  Territorial Army
  Territorial Army
  Service Houses
  Service Houses
  Medals (Monetary Benefits)
  Medals (Monetary Benefits)
  Mine Hunters
  Mine Hunters
  Royal Ordnance Factories
  Royal Ordnance Factories
  Brussels Treaty
  Brussels Treaty
  Senior Civil Servant (Security Risk)
  Senior Civil Servant (Security Risk)
FOREIGN AND COMMONWEALTH AFFAIRS
  Hong Kong
  Hong Kong
  Negative Security Assurance
  Negative Security Assurance
  Cyprus
  Cyprus
  Indian Ocean (Zone of Peace)
  Indian Ocean (Zone of Peace)
  Brussels Treaty
  Brussels Treaty
EDUCATION AND SCIENCE
  Animal Breeding Research Organisation Farm, Corwen
  Animal Breeding Research Organisation Farm, Corwen
  School Inspectors
  School Inspectors
  Nursery Education
  Nursery Education

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

Building Societies: Depositors' Protection
Lord Redesdale: 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 progress has been made in the discussions between the Building Societies Association and the Chief Registrar of Friendly Societies about the establishment of a comprehensive deposit protection scheme under Section 43 of the Building Societies Act 1962.
The Minister of State, Treasury (Lord Cockfield): My Lords, in the course of lengthy discussions it became apparent that societies were unlikely to be able to introduce a scheme on a basis which would be acceptable to all of them. Accordingly, the introduction of a statutory scheme has been noted as a matter to be considered when the opportunity next arises for building society legislation. While the Building Societies Association has never formally committed itself to guaranteeing that no investor in a building society would ever suffer loss, the association is confident that, in the event of difficulties arising in a particular society, there would be a similar constructive response from other societies in the future, as there has been in the past.
Lord Redesdale: My Lords, I thank my noble friend for his most full and clear explanation. Would he be good enough to state whether he would consider deferring the depositors' protection scheme under the Banking Act until a scheme is worked out that is satisfactory to the building societies?
Lord Cockfield: My Lords, with respect to my noble friend, that is quite a different question. The Banking Act 1979, which was discussed at length in your Lordships' House, provides for the setting up of a statutory scheme for the protection of banking deposits. It is generally agreed that there should be a scheme in respect of building society deposits. We very much hoped that it would be possible to secure voluntary agreement to this. It has not been possible, and therefore we have noted the position for statutory action in due course. Meantime, the Building Societies Association has adopted a resolution for the protection of depositors, the general effect of which I summarised in the latter part of my reply to my noble friend's original Question.
The Earl of Kinnoull: My Lords, will my noble friend advise the House whether any investor has lost any savings in any of the recent defections of building societies?
Lord Cockfield: My Lords, I am very happy to assure my noble friend that in recent years no member of the public depositing money with a building society has in fact suffered any loss as a result.
Lord Davies of Leek: My Lords, is the noble Lord aware that many laymen in not too affluent circumstances regard the building societies, by whatever name they may be called, as a fairly safe place for their savings, small or large? Would that be true?—because there have not been many defaults.
Lord Cockfield: My Lords, I entirely agree with the noble Lord, In fact, the record of the building society movement in this particular field has been admirable, and when difficulties have arisen the movement as a whole has been able to deal with them on a very satisfactory basis. The resolution that it has passed indicates that that position will continue.
Lord Redesdale: My Lords, will my noble friend also agree that the record of the banking industry is equally good and that only on one occasion since the Banking Act was passed has a depositor lost money through a bank?—and this came up in the discussions on the Banking Bill. Will he not agree that if the principle should be on a statutory basis for banks, it should also be statutory for building societies?
Lord Cockfield: My Lords, I do not think that any of us disagrees with the general drift of my noble friend's supplementary question. It is very important that depositors, whether with banks or building societies, should be adequately protected. In the case of banks, appropriate provisions were included in the Banking Act 1979, and in view of present developments we have noted the position in relation to building societies in order to deal with it when building society legislation is next introduced.

Energy Prices and Industry
2.43 p.m.
Lord Irving of Dartford: 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, now that they have received the report of the Task Force on Energy, they will make a statement.
Lord Skelmersdale: My Lords, the Government have announced in another place measures on gas and electricity prices which will cost some £120 million in the coming financial year. These measures, which are additional to steps already taken, will provide considerable benefit particularly to large energy-intensive users. The NEDC Task Force report was taken fully into account in reaching these decisions.
Lord Irving of Dartford: My Lords, is the Minister aware that that is a very disappointing Answer? The Budget itself was a bitter blow to industry. Having got the task force to confirm that the price of energy to large users in British industry was much higher than

653
to their foreign competitors in Europe and the United States, the Chancellor, in the very limited reliefs that he gave, then offset these reliefs in a very complete way by adding 20p to the derv tax. Is the noble Lord aware that that, with the tax on the road fund licence, will add £4 million to the cost of industries, such as the paper industry, which will inevitably lead to further mill closures and further loss of jobs?
Lord Skelmersdale: My Lords, what my right honourable friend the Chancellor of the Exchequer does in his Budget is a matter for him and not, I think, for either me or this House. However, on the earlier part of the noble Lord's supplementary, the NEDC Task Force report discovered that for a small but important group of energy-intensive consumers forming part of the remaining 5 per cent.—that is the 5 per cent. over and above the 95 per cent. of individual industrial customers who remain broadly in line with those on the Continent—the United Kingdom prices had moved significantly ahead of those being charged to some major competitors on the Continent by the end of 1980. Therefore, to that extent I would agree with the noble Lord.
The Earl of Lauderdale: My Lords, would my noble friend agree that the task force report was by no means unambiguous in confirming the complaints of British industry, and that the figures cited from European Commission sources rather support the Government as distinct from the industries' view?
Lord Skelmersdale: Yes, my Lords; I would agree with that.

Palace of Westminster Restoration
2.44 p.m.
Lord Lee of Newton: 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 progress has been made in cleaning and restoring the exterior of the Palace of Westminster.
The Earl of Avon: My Lords, we have removed potentially dangerous coping stones and string courses and brushed off all the spalling stone surfaces. Work to make the stonework sound above doorways and to replace stone copings will be completed this year. My right honourable friend the Secretary of State for the Environment hopes to make a statement shortly about further repair and cleaning of the stonework.
Lord Lee of Newton: My Lords, I thank the noble Earl for that reply, which I am sure is as disappointing to him as it is to me. Would he agree that according to the Fourth Report of the Select Committee in the House of Commons we are now confining our activities to making sure that loose stones do not fall on people's heads? Will he agree that this noble building, which millions of people from all over the world come to
654
see, is now getting into an utterly dangerous state? Why is it, when, since the cleaning took place, we see the beauties of the Abbey in a way we have not seen them for many years, that we have to make this place look like a black beetle in comparison?
The Earl of Avon: My Lords, while appreciating the value of this building, about which we all wholeheartedly agree with the noble Lord, I must resist his later statement as being altogether too provocative. If he will await the statement of my right honourable friend I hope he will find something to his liking.
Baroness Llewelyn-Davies of Hastoe: My Lords, is the noble Earl aware that if the further statement of his right honourable friend is not more satisfactory than his own Answer, he will still have the description of a black beetle thrown at him? Does not the noble Earl agree that the beautiful, clean Abbey shows up this building, of which we are all so proud and about which even this Government ought not to be stingy?
The Earl of Avon: My Lords, may I remind the House that it was in 1973 that the first report was made, and so far we have been unable to find the monies to do it. Therefore it is not altogether this Government's responsibility. I am glad that the noble Baroness reminded me of a black beetle. Having just been through the Wildlife and Countryside Bill, I am sure the black beetle needs to be preserved.
Lord Mowbray and Stourton: My Lords, we have seen the admirable result of what has happened on the Lord Chancellor's wing, which has received the admiration of people everywhere, and is there not a danger in waiting for the Secretary of State's announcement and for something big to take place at some time in the future? Is not a little going on all the time better than something big one day in the future?
The Earl of Avon: My Lords, as I am sure my noble friend is aware, a little is going on all the time. The point of my right honourable friend's statement will be the major action to go on in the next year or so.
Lord Simon of Glaisdale: My Lords, is the noble Earl aware that occupants on the upper floors of the West Front can feel the whole fabric shaking when heavy lorries go by? Would not some further measure of traffic control be advantageous?
The Earl of Avon: My Lords, I take note of the noble and learned Lord's remark. I am not sure that traffic control would help in this case, but I will certainly make sure that his remarks are noted.
Lord Lee of Newton: My Lords, would the noble Earl agree that whereas the first report of the House of Commons Committee showed an expenditure of some £3 million, we have now trebled that, and if we wait much longer the cost will be quite prohibitive and the building beyond repair?
The Earl of Avon: My Lords, as I think the noble Lord is well aware, a major stone-cleaning and repair programme would cost more than £5 million, but at

655
the moment there are other strong competing claims on limited funds, notably for the repairs to your Lordships' ceilings.

Racial Violence: Inquiry
2.48 p.m.
Lord Avebury: 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 who is conducting the inquiry into racist violence promised by the Secretary of State for Home Affairs, and in what manner they propose to obtain evidence from ethnic minorities of attacks on their members.
The Parliamentary Under-Secretary of State, Home Office (Lord Belstead): My Lords, Home Office officials are currently arranging a survey of the incidence of alleged attacks by members of one racial group on another in a number of police areas. They will also be visiting those areas to obtain, at first hand, the views of the ethnic minority communities, as well as those of the police and local authorities.
Lord Avebury: My Lords, while there was a very general welcome for the assurance given by the Secretary of State when he met the Joint Committee against Racialism on 4th February that an immediate study would begin of racist organisations in Britain, and the monitoring of attacks which might have racist motives, may I ask whether the Minister is aware that the credibility of this study will be undermined if it is conducted entirely within the closed walls of the Home Office? Is it not absolutely essential that members of the ethnic minorities should be seen to participate in the inquiry that the Secretary of State is undertaking? Can the Minister give us any idea of how the ethnic minorities will be able to take an active part in the Home Secretary's investigation, apart from just giving evidence to the Home Office officials when they pay visits to the constituencies?
Lord Belstead: My Lords, the way in which the Home Secretary has announced how the inquiry will enable the views of all concerned to be gathered effectively and, as I said in my main Answer, it is intended to hold discussions—and they will be two-way discussions—with a wide range of community relations organisations and ethnic minority groups, as well as local authorities and the police. I think that is the most effectively way of proceeding with this inquiry.
Lord Brockway: My Lords, while deeply welcoming this investigation, may I ask the Minister whether he is aware that many of us are very disturbed by the increasing exhibitions of towards ethnic minorities by other residents in this country? In view of that situation, will the Minister suggest to the Secretary of State that very great care should be taken about the nature of this investigation so that it may have the confidence of the ethnic minorities and not lead to further criticism?
Lord Belstead: My Lords, this inquiry is being conducted into the incidence of racist attacks and of course it follows a visit paid to the Home Secretary by the Joint Committee Against Racial Discrimination. As I said, I think this is an effective and sensible way to proceed and I would assure the noble Lord, Lord Brockway, that my right honourable friend condemns racist activity anywhere.
Lord Avebury: My Lords, will the Minister consider suggesting to his right honourable friend that even if black people are not allowed to participate directly in the inquiry—which, as he said, is to be conducted entirely by Home Office officials—at least the views of organisations like the Standing Conference of West Indian Organisations, the Standing Conference of Pakistani Organisations and the Indian Workers' Association, which represent substantial bodies of persons in the ethnic minorities, should be sought during the course of the inquiry?
Lord Belstead: Perhaps I might correct what the noble Lord said at the beginning of that, my Lords. People who are concerned with this will all be involved in it. The discussions will be two-way and they will be conducted at local level. All who are concerned and who feel they are concerned will be welcome to have their say. The answer to the last part of the noble Lord's supplementary is that it is open to any person or organisation to send us their views in writing.
Lord Chitnis: My Lords, may I ask the Minister to say whether, among the Home Office officials who will be conducting this inquiry, there will be some members of the ethnic minorities themselves?
Lord Belstead: My Lords, I have no idea what the answer to that question is. The point is that this is a sensible way of proceeding. I must confess to the noble Lord that it had not occurred to me that I should count the heads of those who actually will be conducting the inquiry.

DINNER
Viscount Long: My Lords, it may be for the convenience of your Lordships if I announce that dinner will be available this evening at the usual time. It is proposed that the Committee stage of the Companies (No. 2) Bill should be adjourned at approximately 7 o'clock for a short period.

Belize: Agreement with Guatemala
2.53 p.m.
The Secretary of State for Foreign and Commonwealth Affairs (Lord Carrington): My Lords, with your Lordships' permission, I shall make a Statement on Belize.
Following the recent ministerial talks in London between Her Majesty's Government and the Government of Guatemala, at which the Premier of Belize and two of his Cabinet colleagues were present, Heads

657
of Agreement were signed on 11th March on the basis of which a full settlement is to be negotiated between the United Kingdom and Guatemala.
This settlement will end the controversy that has existed between the two countries for well over 100 years over the territory of Belize.
The Heads of Agreement, which were published last night, represent a significant advance. They provide the framework for a solution to this longstanding problem which all concerned can regard as just and honourable. Settlement of the controversy will bring great benefits to Belize, the safeguarding of whose interests has been our concern throughout the negotiations.
Under the terms of the treaties which we shall now negotiate, the Guatemalan territorial claim will be ended and Belize's future security will therefore be assured.
Guatemala will recognise the independent State of Belize within its existing frontiers on the day of Independence.
Guatemala will also benefit. It will be assured permanent and unimpeded access to the Caribbean; the use and enjoyment of the Ranguana and Sapodilla cays, the two southern-most groups of very small islands on the Belizean barrier reef; and rights in areas of the sea adjacent to the cays, as may be agreed.
Other provisions will be mutually beneficial. They include free port facilities for Guatemala in Belize and for Belize in Guatemala; completion of roads; facilities for oil pipelines; agreements on pollution control, navigation and fishing, joint exploration and exploitation of minerals in areas of sea bed and continental shelf to be agreed; development projects and security co-operation.
A copy of the full text will be circulated in the Official Report.
The Heads of Agreement represent a commitment on all sides to negotiate in good faith the legal instruments which will provide for a full, honourable and permanent settlement. I pay tribute to the imagination and flexibility shown by the Belizean delegation as well as the Guatemalan Government in the talks which have enabled us to take this major step forward. I am confident that with continuing goodwill and understanding a final settlement can be negotiated successfully over the coming months.
Following is the text referred to in the Statement:

HEADS OF AGREEMENT
The United Kingdom and Guatemala, in order to settle the controversy between them over the territory of Belize, have reached agreement on the following points.
1. The United Kingdom and Guatemala shall recognise the independent State of Belize as an integral part of Central America, and respect its sovereignty and territorial integrity in accordance with its existing and traditional frontiers subject, in the case of Guatemala, to the completion of the treaty or treaties necessary to give effect to these Heads of Agreement.
2. Guatemala shall be accorded such territorial seas as shall ensure permanent and unimpeded access to the high seas, together with rights over the seabed thereunder.
3. Guatemala shall have the use and enjoyment of the Ranguana and Sapodilla cays, and rights in those areas of the sea adjacent to the cays, as may be agreed.
4. Guatemala shall be entitled to free port facilities in Belize City and Punta Gorda.
5. The road from Belize City to the Guatemalan frontier shall be improved; a road from Punta Gorda to the Guatemalan frontier shall be completed. Guatemala shall have freedom of transit on these roads.
6. Belize shall facilitate the construction of oil pipelines between Guatemala and Belize City, Dangriga and Punta Gorda.
7. In areas to be agreed an agreement shall be concluded between Belize and Guatemala for purposes concerned with the control of pollution, navigation and fishing.
8. There shall be areas of the seabed and the continental shelf to be agreed for the joint exploration and exploitation of minerals and hydrocarbons.
9. Belize and Guatemala shall agree upon certain developmental projects of mutual benefit.
10. Belize shall be entitled to any free port facilities in Guatemala to match similar facilities provided to Guatemala in Belize.
11. Belize and Guatemala shall sign a treaty of co-operation in matters of security of mutual concern, and neither shall permit its territory to be used to support subversion against the other.
12. Except as foreseen in these Heads of Agreement, nothing in these provisions shall prejudice any rights or interests of Belize or of the Belizean people.
13. The United Kingdom and Guatemala shall enter into agreements designed to re-establish full and normal relations between them.
14. The United Kingdom and Guatemala shall take the necessary action to sponsor the membership of Belize in the United Nations, the Organisation of American States, Central American organisations and other international organisations.
15. A Joint Commission shall be established between Belize, Guatemala and the United Kingdom to work out details to give effect to the above provisions. It will prepare a treaty or treaties for signature by the Signatories to these Heads of Agreement.
16. The controversy between the United Kingdom and Guatemala over the territory of Belize shall therefore be honourably and finally terminated.
Signed at London, the 11th day of March 1981, in the English and the Spanish language, both texts being equally authentic.
Lord Goronwy-Roberts: My Lords, we are all grateful to the noble Lord, the Foreign Secretary, for that Statement. It is an encouraging one and I am glad to congratulate him on a very substantial achievement. For more than a century, relations between us and Guatemala have been unduly difficult because of certain claims they have sustained against Belize, which was under our protection. What we have of course is a number of heads of agreement and there may be some tough argument as to their implementation. But it is particularly pleasing that the Governments of both Belize and Guatemala have accepted the heads of agreement and, judging from the Foreign Secretary's Statement today, are well on the way to agreeing on the details, which are, as he said, mutually beneficial to the two countries. It is certainly in their best interests to agree as soon as possible, because a settlement will help to maintain the peace and stability of that crucial area, especially in the face of Cuban adventurism. It is in the interests of Central America as a whole that there should be this new evidence of stability in that area.
The concessions to Guatemala are substantial and valuable, but they do not, so far as I can see, endanger the territorial integrity of Belize. That is most acceptable and reflects the statesmanship of the Guatemalan Government in their approach to this problem in the last few months. Nevertheless, Belize will no doubt wish to have guarantees for the future. One of them, judging from the comments made by Mr. George Price, their Premier, yesterday or this morning, might be the continuance of the British sophisticated military presence in that country. We on this side of the House would hope that any such presence might not be

659
unduly prolonged; it involves 1,600 troops and a high level of technical support costing some £26 million. Even more important in the medium and longer term is that Her Majesty's Government should be as generous as possible in the aid that will be extended to the new independent country of Belize.
It is not only a United Kingdom interest that there should be peace and stability in this vital area. It is of primary importance to the countries of central America themselves, and to the rest of the peace-loving world. I am disposed to suggest that, if the agreement needs to be underwritten in a physical sense, that should be done by an international body, possibly the United Nations, or even the Commonwealth. It should not be entirely the obligation of the United Kingdom to continue to maintain stability in this area.
Finally, may we take it that in all the negotiations the Government have kept in touch with the Government of Mexico? Mexico is a country of increasing economic significance and international stature, whose interest in the future of Belize is very real, and, over the past few years at least, has conducted itself in this area with constructive and helpful restraint.
Lord Gladwyn: My Lords, we, too, should like to congratulate the Foreign Secretary and Mr. Nicholas Ridley very warmly on the success of the negotiations up until now. I think that I am expressing the view of the whole House when I say that there has been great success. I have only one question to raise. So far as we can see, the heads of agreement seem to cover all, or nearly all, the questions that have been at issue between the two countries in the last few years. If that is not the case, perhaps the Foreign Secretary can tell us what are the outstanding issues. Judging from the Statement, is there perhaps remaining only the question of the rights in the areas of the sea adjacent to the cays, as may be agreed, or are there other substantial outstanding issues? In any case, may we assume that there is now every reason to suppose that the negotiations will be finally terminated quite shortly and that the treaties will be signed?
It only remains for me to go along with the noble Lord, Lord Goronwy-Roberts, in saying that I imagine that, since on the face of it the security of Belize is now ensured, the troops will be shortly withdrawn, even if the Belize Government would in general like them to stay.
Lord Carrington: My Lords, I am grateful to the two noble Lords for what they have said and for the congratulations that they have offered the Government. Perhaps I should make it clear that my honourable friend Mr. Ridley, and those in the Foreign Office who have been working with him, have been engaged on this matter for 18 months or so. It is to them, as well as to the Guatemalan Government and the Government of Belize, that the credit should go.
What I have mentioned are heads of agreement—there are no outstanding differences—and the details have to be clarified. The noble Lord, Lord Goronwy-Roberts, is right in saying that some negotiation will be necessary in order to achieve that; but otherwise there is nothing outstanding. As the noble Lord said,
660
the territorial integrity of Belize is maintained and preserved by the heads of agreement.
The security of Belize has of course been one of our primary concerns during the negotiations. I think it too early to say what will be the solution. The matter will of course be discussed at the constitutional conference, but I believe that the nature of the agreement will perhaps make the need rather different from what it would have been had there not been an agreement.
With regard to Mexico, I saw the Foreign Minister of Mexico here last week. The Mexicans have always been on record as accepting the rights of the Belizeans to their own self-determination. Indeed, at the United Nations they have always voted in favour of the independence of Belize, and I know that they will approve of this agreement.
The Earl of Selkirk: My Lords, can my noble friend say whether Belize will become a member of the Commonwealth, or possibly become an associate state in the interim?
Lord Carrington: No, my Lords; after independence it will be for the Belizeans to decide whether they wish to become members of the Commonwealth, and for the Commonwealth to decide whether they will have them. But 1 would not anticipate too much difficulty.
Baroness Jeger: My Lords, was the noble Lord made aware—as I was when I was in Belize—of the very real fear of these poor and virtually unarmed people arising from the arming and training of Guatemalan forces by the United States, which they felt was a real menace to them? In view of the appalling record of Guatemala regarding human rights, has the noble Minister been able to consult the United States Government on this aspect of the problem, and perhaps ask them to associate themselves with the guarantees of the integrity of Belize? I ask that question because it seems to me that there will be a very contradictory situation if the United States continues to arm and train forces in Guatemala at the same time as we are trying to give some confidence to the people of Belize regarding their peaceful future.
Lord Carrington: My Lords, if there is an agreement, as I hope there will be—and there are heads of agreement—there will be no territorial claim by the Guatemalans on Belize, so there would be nothing for the Belizeans to fear. I have been in close touch with the United States Government, who have been extremely helpful over the negotiations, and I think that all parties ought to be satisfied.
Lord Reigate: My Lords, may I ask my noble friend whether we shall now have full diplomatic representation in Guatemala, and vice versa?
Lord Carrington: Yes, my Lords, after the agreement.
Lord Brockway: My Lords, may I very sincerely congratulate the noble Lord, Lord Carrington, upon reaching this agreement? He has referred to 100 years of confrontation. He has not been involved throughout that period, nor even have I. But 40 years ago the struggle for the independence of Belize began. I congratulate my old friend George Price, the Prime

661
Minister, and I congratulate also the others who took part in reaching the agreement.
May I say how pleased we are that there is no territorial concession to Guatemala in the agreement? I think that the concessions regarding fishing and seabed rights are acceptable, in view of the tremendous importance of Belize gaining independence. However, may I ask the noble Lord whether there are any proposals for economic aid to Guatemala? As the noble Lord is aware, it is a dictatorial state, crushing human rights, and I very much hope there is no suggestion that, as a result of the agreement, we should give economic or other aid to the Government of Guatemala.
Lord Carrington: My Lords, there is no suggeston of that. There is of course the suggestion, or rather the practice on our part, when a colony becomes independent, of giving aid to that colony, and during the constitutional conference we shall be negotiating aid to Belize.
Baroness Vickers: My Lords, may I thank the noble Lord for his Statement and congratulate him most sincerely? As he knows, I have for many years been interested in this territory. May I ask him about two points? First, members of Her Majesty's Forces are doing a very valuable job there; it is the only place where tropical training can be carried out. In view of the fact that on the radio this morning Mr. Price was reported as saying that he would like the forces to stay, is there any point in asking whether Belize can contribute towards the cost of keeping Servicemen there? Secondly, for many months I have been trying to arrange for some of the "boat people" to go there, and as my noble friend knows, Mr. Price has asked for 1,000 of them. Is there now any chance of getting these people there? They would be very beneficial to the small population.
Lord Carrington: My Lords, I am grateful to my noble friend for what she has said. As I have said, I think it is too early to decide the future of the security forces in Belize. I wonder whether my noble friend is quite accurate in what she says. Perhaps I am out of date, but from my days at the Ministry of Defence I seem to recollect that we also had service training in Malaysia, but perhaps that has now finished—
A noble Lord: Sarawak.
Lord Carrington: Sarawak. Well, maybe I am out of date, though it appears that I am not, and I am very glad about that. With regard to my noble friend's second question, I think that that is a matter for the Government of Belize, but I shall certainly draw Mr. Price's attention to what my noble friend has said.
Lord Leonard: My Lords, may I congratulate the Minister on his wonderful success in this matter. Might it be possible on this day when the Irish pay homage to their patron saint for the noble Lord to take over the cudgels in that direction with equal success?

Greater London Council (General Powers) (No. 2) Bill
Read 2a, and committed to an Unopposed Bill Committee.

British Railways Bill
The Chairman of Committees (Lord Aberdare): My Lords, I beg to move that this Bill be now read a second time.
Moved, That the Bill be now read 2a—(Lord Aberdare.)
Lord Mottistone: My Lords, in Part IV-A of the British Railways Bill there is reference to Fishbourne, in the Isle of Wight. There is concern in the Isle of Wight about some of the proposals that British Rail have, and I understand that there may indeed be a petition in this area. I trust that if, in that case, this Bill is referred to a Select Committee, they will take exceptional care to see that a reasonable and fair solution is reached in relation to Part IV-A of this Bill.
Lord Aberdare: My Lords, as the noble Lord says, there is indeed in the Bill reference to works in the Isle of Wight, and specifically in the Borough of Medina. The Borough of Medina have petitioned against this particular provision, and unless that petition is withdrawn it will, as usual, go to a Select Committee.
On Question, Bill read 2a, and committed to a Select Committee.

House of Commons Members' Fund and Parliamentary Pensions Bill
Bill read 3a, and passed.

Companies (No. 2) Bill [H.L.]
3.12 p.m.
Lord LyellMy Lords, on behalf of my noble friend I beg to move that the House do now resolve itself into Committee on this Bill.
Moved, That the House do now resolve itself into Committee.—(Lord Lyell.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD ABERDARE in the Chair.]
Clause 1 [General provisions with respect to the form and content of accounts]:
On Question, Whether Clause 1 shall stand part of the Bill?
Lord Bruce of Donington: I must apologise to the Committee for not having been able to attend your Lordships' House on the occasion of the Second

663
Reading of this Bill due to a long-standing engagement in the United States. Nevertheless, I have followed all that was said in the Second Reading debate, and before we part with Clause 1 I should like to offer one or two observations on it that were possibly not appropriate to Second Reading. It is appropriate, as is my custom, to declare a personal interest in this part of the Bill. I am a practising chartered accountant belonging to the firm of Halpern and Woolf, who may be deemed to have a direct or indirect interest in the Bill.
Clause 1 of the Bill marks a radical departure in regard to the whole question of company accounts in the United Kingdom. The provisions in the 1948 Act relating to the particulars to be disclosed in company accounts did not in any way seek to lay down the form in which those accounts were to be presented. Consequently, over the years the manner in which company accounts and, indeed, the accounts of other enterprises—partnerships and individuals—have been presented, in which they have been filed and in which they have been used for commercial and even for taxation purposes, has largely been the result of the work of the professional bodies, whose business it has been to develop and enhance the way in which the accounts of enterprises are presented.
This particular clause, which lays down that the format of company accounts shall be in accordance with Schedule 1 to the Bill, which is to become the new Schedule 8 to the Companies Act 1948, marks a radical departure from that tradition. The exact formats, or series of alternative formats, are laid down within a comparatively rigid framework. Whereas the old Companies Act 1948, together with that of 1967 and again of 1976, as well as (dare I say it?) of 1980, have been content to make general provisions in regard to accounts and have defined the law only in instances where the business and accounting communities have deemed it necessary that specific rights and specific duties should be defined in law, on this occasion the whole realm of company accounts has been brought under what are termed rules.
The Bill is here with its formats laid out, but I am bound to express on behalf of the accountancy profession—in this respect I speak on behalf of the accountancy profession—their strong misgiving that the rules governing the whole format and content of company accounts should be put into statutory form and should have a degree of rigidity which, in their view, will on application over the years show considerable disadvantages. The accountancy profession, comprising the six component bodies, have for a number of years been developing a series of accounting standards. These have become generally applicable throughout industry; and, indeed, they have shown a considerable flexibility and have worked well. The accountancy profession would much have preferred to have continued on what may be termed the voluntary but nevertheless professionally-guided way of proceeding.
Speaking in purely political terms I must say that I myself am a little surprised, because the party opposite have very frequently avoided specific legislation on the basis that so many things are best left to voluntary agreement. I am a little surprised that in the case of this Bill—which, as your Lordships will know, is
664
extremely complicated in parts—they should have departed from that principle. Your Lordships will note that at later stages there will be endeavours made to eliminate certain parts of Schedule I which are considered to be unduly inflexible and which may impede the satisfactory operation of the Bill when it becomes an Act, and may, indeed, impede the smooth flow of information. That is not a matter for Clause 1; but it should be marked—and I hope that the Government have marked—that it indicates a radical departure from what has been done before and a departure from the whole attitude that the Government have hitherto adopted towards accountancy. It is not for us to obstruct the wishes of Government in this matter, but I should be doing less than my duty if I were not to draw your Lordships' attention to the significance of the step it is desired to take particularly in Part I of this Bill.
Lord Lloyd of Kilgerran: At second Reading I presumed to stress to your Lordships how the Government, by introducing another Bill on Company Law, was further smudging and fudging the position as to company law in this country, making it appallingly difficult for the average practitioner, whether accountant, solicitor or member of the Bar, to see his way through the jungle of present company law. Professional people have difficulty in dealing with company law, let alone the employees of companies who are concerned with advising their boards of directors and shareholders as to the position. I endorse many of the things the noble Lord, Lord Bruce, has said. There is in Clause 1 a radical departure on the presentation of accounts. Hitherto, the way in which accounts have been presented was developed by professionals rather than by rules in a Bill. Nevertheless, the Government have decided that this is the way in which they should proceed in the future. May I suggest that their enthusiasm for harmonisation of British law with the so-called law of the European countries and the EEC has rather carried them away.
May I make a plea in regard to what your Lordships may think is a very elementaty point concerning the opening words of Clause 1. There are now hundreds and hundreds of practitioners concerned with company law who will know what is Section 149 of the 1948 Act. They will know of its scope. This is now to be renumbered as Section 149A. The new clause which the Government are to introduce in this Bill is to have the old number, No. 149. This procedure occurs in Clause 2 and many other parts of the Bill. This is not a matter of semantics; there must be some fundamental reason why one should change the reference to a well-known clause and call it something else. Is this not just causing confusion for the many practitioners? I am sure that the noble Lord, Lord Lyell, will have an answer to this point, but I cannot see why it is necessary to change the reference of an old Act by introducing a new clause with the same number. I am not going to take up your Lordships' time in an analysis of the difference between Section 149 of the 1948 Act and the proposed Section 149. They are to have the same numbers, but their contents are different. This is adding confusion to the despair of the average practitioner.
The Government have laid great stress on the

665
desirability of assisting small companies. Flow can this help the small companies? It adds to their confusion. If Members of this House complain hereafter of the high fees charged by their accountants and lawyers, may I put it at the door of the Conservative Government that at least in this aspect of company law they are adding confusion to the situation.
Lord Strathclyde: I do not wish to make a speech at the moment, but, as a chartered accountant, to express my entire approval with what has been said by most noble Lords who have spoken on this matter.
Lord Boyd-Carpenter: Some noble Lords may recall that on Second Reading I suggested that those who are responsible for the management of companies at this time are being given something of an additional burden as a result of the introduction of this Bill. It follows so closely on that of last year and must involve a good deal of additional effort, not so much for the professional advisers, whose views have already been reported to the House, but to the people ultimately responsible, the chairmen and directors of public companies. Still, at this stage, I remain unconvinced that there is such an urgent necessity for change that it is worth while imposing this additional burden on the management of companies.
This particular clause certainly underlines that point for the reasons so succinctly put by the noble Lord on the Liberal Benches. If one is to amend the law, to amend it by first altering the number of a section which has been part of the law of the land for over 30 years and then allotting that number to this clause which is then put in as a section of the Act, is an extraordinary cumbrous way of doing things. Thinking of it in practical terms, people keep manuals, copies of the Act in their offices; and scissors and paste will have to be used to put all sorts of loose bits into copies of the 1948 Act. And when that is reprinted it will not be immediately apparent to those reading it whether this clause has always been Section 149 of the 1948 Act or when it was introduced. It seems an extraordinarily sloppy way of legislating. If they feel it necessary to proceed at all, I am sorry that my noble friend the Minister and the Department of Trade should feel that they must proceed in this way.
I would comment on a point well put by the noble Lord, Lord Bruce, from the Opposition Front Bench. I, too, feel it is a pity, and a little surprising for a Government of this colour, that we should be departing from the well-established practice of a very distinguished and able profession in order to spell it out in legislation. I suppose one reason may be that this is thought necessary in order to harmonise with the EEC and to comply with our obligations under the laws of the Community. That, I suppose, would be a justification, but I should be interested to hear from my noble friend whether that is so. I hope that he will accept that a decision to change a perfectly satisfactory practice imposes an onus of proof on those who are advocating the change. It may be that he can discharge that onus if he can satisfy the Committee that this is absolutely necessary to comply with our obligations under the EEC; but 1 shall listen with interest because it certainly appears in other matters
666
that our colleagues in the EEC are not always 100 per cent. punctilious in complying with their obligations to the Community.
Lord Hale: No doubt the noble Lord has seen the document which I have in my hand and which I have received from the Law Society. But other noble Lords have not seen it. It contains their well-considered view on the general tenor of the Bill. Inevitably, one must be thinking of later clauses in this Bill where one is referring to the matter of accounts, because accounts are set out in Schedule 8. I have not been a lawyer for a good many years. I relied on my daughter's advice (although she, too, has ceased to be a lawyer) in the reading of what is written under the headings "Clause 1" and "Clause 2".
A note says that the memorandum has the approval of the Law Reform Committee of the Senate, of the Inns of Court and the Bar. They say that under the new schedule a company will be entitled to prepare its statutory accounts on the basis either of historical cost or current cost. The results produced by adopting one such basis might be very different from those which would be produced by adopting the other. It says that there will be an overriding requirement that the accounts shall give a true and fair view. If it be true that there can be at least two—and some would say several—views of the same set of circumstances, each of which is true and fair, it would seem to follow that the requirement to give a true and fair view should be to give a true and fair view on the basis which has been adopted for the preparation of the particular accounts. The committee anticipated that auditors' reports would contain some such qualification.
I also had the privilege of being a member of the legal sub-committee of this House's EEC Committee and the privilege of being a virtually constantly silent spectator of the noble and learned Lord, Lord Diplock, covering with great learning very many aspects of the problems which were arising and must arise and which would be involved in the effort to obtain some uniformity over a very long period. It would be interesting if the Committee were rather more clearly informed how far this Bill is in conformity with the recommendations of the EEC directive and how far it is felt that it would be in danger of being reconsidered in Brussels if it did not fully comply.
3.33 p.m.
The Lord Advocate (Lord Mackay of Clashfern): As has already been anticipated, the purpose of Clause 1 of the Bill and the relative first schedule is to implement the fourth directive on company law of the EEC. That directive was negotiated on behalf of the United Kingdom by the last Administration. This Bill, so far as Clause 1 and the relevant schedule are concerned, is intended to implement the obligations on the United Kingdom resulting from that agreement. My understanding is that work on the implementation of the fourth directive is presently proceeding in all member states and that most are expected to legislate upon it during the current year. In approaching this directive, the attitude that the present Government have taken is to make maximum use—speaking generally—of the exemptions in order to make as flexible as possible the régime which is being introduced here. This has

667
certainly not been approached in a sloppy manner. I am sorry that my noble friend felt that that was the proper way to describe the drafting of part of Clause 1.
Lord Boyd-Carpenter: Would my noble and learned friend allow me to intervene? I think that he has misunderstood my argument. The term "sloppy" was used not in the context of the substance which he is seeking to enact but in the use of this extraordinary method of putting one clause into the 1948 Act and altering the numerology of that Act. My criticism was of the method, not the substance.
Lord Mackay of Clashfern: I understood that perfectly. My noble friend is much clearer than I am in expressing himself. I understood exactly what he was saying. The Government, in approaching this matter in principle and in substance, did it with great care and considerable thought for the companies to which it will apply—this is where I was going to deal more directly with the matter that my noble friend raised—and in the execution of it they endeavoured to be careful, too.
May I explain that the reason that this particular form was adopted was to try to make it easier for practitioners. The reason is this: the old Section 149 was well known to practitioners. Perhaps the noble Lord, Lord Bruce of Donington, would agree with that. From the time that this directive comes into force here and we apply it, the principal provision will be the new Section 149. The old one has much less effect. It is relevant for past years and for certain limited groups of companies; but for the generality it will be the new Section 149. We therefore felt—and obviously there is room for a difference of opinion, but I certainly cannot accept that it was done without deliberation or carelessly—that it was better to retain from now on the structure of the old system for the generality of the companies. Of course, from the point of view of the law and consolidations it would mean that the provision which has operated for the generality would be the provision which has always had the number that the generality have operated. That is the explanation.
The old provision requires to be retained. We cannot dispose of it altogether, for the reasons that I have explained. It continues to have some effect; but its effect will be subsidiary in amount to that of the main provision. I would press this upon your Lordships as being a useful way of going about it: we thought that the main provision should have the old number which has been so familiar for a number of years.
So far as the rigidity which is imposed on a company's accounts by the fourth directive is concerned, these provisions were negotiated earlier. We have done our best within the structure of the directive to permit the maximum flexibility. There may be some question between us later on the details of that and I shall be happy, with my noble friend Lord Lyell, to try to deal with these matters. In principle, the Government have approached this subject with care and in order to take as much advantage as possible of the exemptions which the directive allows and the flexibility which is permitted under it. I hope that, with my explanation, the Committee will feel that Clause 1 should stand part of the Bill.
Lord Hawke: May I ask my noble friend to deal with one point, because I do not think he has really dealt with the question of whether it is to be historic or current cost accounting. 1 presume the directors of a company can choose which they like at the moment and say that it is a fair view, but the results may be markedly different. Which in practice is the fair view?
Lord Mackay of Clashfern: Perhaps I may say that the question of whether one uses historic cost, current cost accounting or a mixture of the two is in our view primarily a matter for the professional judgment of the auditor and accountant; but we will deal with that in more detail later because there is an amendment down which raises that point expressly. Therefore perhaps I may be excused from dealing with it in more detail at this juncture.
Lord Lloyd of Kilgerran: May I thank the noble and learned Lord for his explanation on the point that I raised? I should like to put forward another suggestion. Throughout this Bill where there is reference to a section from a previous Act there is in parenthesis a very helpful phrase or sentence giving an indication as to what that section in the 1948 Act refers to. I wonder whether in this case it would be felt helpful for the Government to insert in Clauses 1 and 2, in parenthesis, something that would give us a summary of what the old sections were dealing with in the way they have done with so many sections in this Bill.
Lord Mackay of Clashfern: Certainly we will consider that. It is a matter of discretion, because one does not want to make the Bill too long by explaining all that was in earlier Bills on every occasion. We had thought, possibly wrongly, that Section 149 would be pretty plain to almost anyone who had to deal with these matters. Section 149, I think, rings a bell with most people who have any idea of company accounts, but we shall certainly consider the point. I am obliged to the noble Lord.
Lord Bruce of Donington: May I thank the noble and learned Lord for the explanation he has given? We are not anxious to obstruct the passing of this particular clause. As he says, there will be contentious matters arising on Schedule 1 when we come to consider it.
Clause 1 agreed to.
Clause 2 agreed to.
Schedule 1 [Accounts]:
3.43 p.m.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 1:
Page 60, line 39, leave out ("income or expenditure, asset or liability") and insert ("asset or liability, income or expenditure").
The noble Lord said: I beg to move this amendment, which is purely a drafting amendment, because, if your Lordships will refer to paragraph 3(2), you will see that it refers to in that order the contents of a company's balance sheet or profit and loss account. It would therefore seem appropriate that the reference to items should be:
"asset or liability, income or expenditure".

669
That order seems to be a more logical way of putting it, and I beg to move.
Lord Lyell: First, following the introduction of the noble Lord, Lord Bruce, perhaps I too should declare that I am a member of a different institute from that of the noble Lord but connected with the same profession. It is more than flattering that the noble Lord, Lord Lloyd of Kilgerran, should have addressed me not once but twice as "learned". Unfortunately, I am not learned in the sense in which the word is used in your Lordships' House, but there is always time. We started off this afternoon's proceedings on this particular stage of the Bill, which I regret did not endear itself entirely to your Lordships' House at an earlier stage, nor indeed to many of my noble friends this afternoon, but the noble Lord, Lord Bruce, has moved his Amendment No. 1 and I am happy to say that the Government are pleased to accept the amendment because it does clarify the Bill. I hope that the noble Lord will be happy with that.
On Question, amendment agreed to.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 2:
Page 61, line 29, after ("withdrawn") insert ("or proposed to be withdrawn").
The noble Lord said: This is another more or less drafting amendment which is designed to make the purport of the clause a little clearer than it appears at the moment. Paragraph 3(7) on page 61 reads as follows:—
"(7) Every profit and loss account of a company shall show separately as additional items—
(a) any amount set aside or proposed to be set aside to, or withdrawn from, reserves;".
We think it should be made clear that the requirement itself includes amounts proposed to be withdrawn from reserves so that, on amendment, the paragraph would read as follows:
"any amount set aside or proposed to be set aside to, or withdrawn (from or proposed to be withdrawn) from reserves;".
It is purely a drafting amendment, designed to assist the noble Lord and it is not contentious. I beg to move.
Lord Lyell: Lightning, in the form of the noble Lord, Lord Bruce, has struck twice! The Government are happy to accept his amendment.
On Question, amendment agreed to.
Lord Lyell Lord Lyell moved Amendments Nos. 3 and 4:
Page 64, line 29, leave out ("fund").
Page 66, line 7, leave out ("fund").
The noble Lord said: I hope it may be for the convenience of the Committee if I move Amendments Nos. 3 and 4 together. They are both minor drafting amendments and we believe that they will make the Bill clearer. I beg to move.
Lord Bruce of Donington: I am happy, in a spirit of reciprocity, to accept completely the noble Lord's explanation, and I entirely support him.
On Question, amendments agreed to.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 5:
Page 69, line 15, at end insert—
(". Profit or loss on ordinary activities before taxation").
The noble Lord said: Perhaps it will be for the convenience of the Committee if Amendments Nos. 5, 6, 7 and 8 are taken together, because they all embody the same point. There is a requirement in Schedule 1, Part I, Section A, paragraph 3(6), page 61, line 23, that—
"Every profit and loss account of a company shall show the amount of the company's profit or loss on ordinary activities before taxation".
This, of course, will now have to be reflected in the format of the profit and loss accounts that are set out under various heads on pages 69, 70, 71 and 72, which your Lordships will see are the four alternative formats of profit and loss account with which companies will have to comply.
If paragraph 3(6) is to apply, the requirement must be carried forward into the format itself. That is why, after Item 12 in Format No. 1 we seek the insertion of the words:
"profit or loss on ordinary activities before taxation".
We ask also that those words should be inserted after Item 14 in Format No. 2, after Item 5 in Format No. 3 and after Item 7 in Format No. 4. This is purely to assist Her Majesty's Government. If these items which we have put forward as amendments were not incorporated in the format, the formats would not comply with the law that is being laid down by the Government in paragraph 3(6). So once again I hope that this will be entirely non-controversial. The amendments are offered in a spirit of complete cooperation with the Government in order to achieve their stated objectives. I beg to move.
Lord Lyell: I hope that the noble Lord, Lord Bruce of Donington, and the Committee will accept that I may speak to Amendments Nos. 5 to 8 together. The noble Lord, Lord Bruce of Donington, mentioned paragraph 3(6) of Schedule 1, which we find on page 61 of the Bill. As your Lordships will see, paragraph 3(6) of Schedule 1 already contains a requirement that every profit and loss account of a company shall show the amounts of that company's profit or loss on ordinary activities before taxation. This requirement was included at the suggestion of the Consultative Committee of Accountancy Bodies. The Government agree that it is a very important item which ought to appear in every company's profit and loss account. But the effect of the amendments which the noble Lord, Lord Bruce of Donington, has proposed extend a little beyond mere duplication of the requirement contained in paragraph 3(6). If the item is inserted as an additional line into the profit and loss account formats, which are Formats 1, 2, 3 and 4 on pages 69, 70, 71 and 72, the Government believe that there would be uncertainty as to whether or not the item was covered by the power given to companies by paragraph 3(4), which also is on page 61. This allows companies to combine together items in the profit and loss account and to show the breakdown only in a note to the accounts.
We believe that the profit and loss on ordinary activities before tax is one of the most important figures in the profit and loss account and that it should

671
always appear in the account proper and not be capable of being relegated to a note to the accounts. This confirmation of our belief is achieved by the requirement in sub-paragraph (6) to paragraph 3. But we believe that this achievement would be in danger of being undone by the amendments which have been proposed by the noble Lord, Lord Bruce of Donington. I am sure that both he and the Committee will be happy to know that last week we discussed this point with representatives of the CCAB and managed to persuade them to agree with the views which I have expressed this afternoon. Therefore, I hope that the noble Lord will agree with the explanation which I have given.
3.54 p.m.
Lord Bruce of Donington: I am most grateful to the noble Lord for his explanation. I understand from him that he agrees that the existing form will, to put it in quotes, "do" so far as the Consultative Committee of Accountancy Bodies is concerned. I have had no opportunity to consult it on this point but I should be less than frank with the Committee if I did not tell it that the noble Lord's explanation does not satisfy me. Saving any amendments which may be passed through your Lordships' House and what happens to the Bill in another place, it appears likely that this Bill will become an Act. Therefore, I repeat that it is stated in paragraph 3(6) of Section A in Schedule 1 that
"Every profit and loss account of a company shall show the amount of the company's profit or loss on ordinary activities before taxation".
The word is "every". It is completely inclusive, unless the word "every" has lost its meaning.
When we come to profit and loss accounts on Formats 1, 2, 3 and 4, they are the profit and loss accounts to which companies, according to whichever one they select, are required to conform. The profit and loss accounts set out in Formats 1, 2, 3 and 4 are, may I reiterate, profit and loss accounts and are therefore included in the term "every". In other words, the provisions of paragraph 3(6) are as applicable to any one of the formats as they are to any particular profit and loss accounts which a company might wish to prepare for itself or might wish to provide for Her Majesty's inspector of taxes. Yet when we come to the published form we find that there is no requirement to disclose the profit before taxation.
No matter what the noble Lord may say about the desire to have flexibility, there is no flexibility in the term "every"—none at all. "Every" means precisely what it says: that it includes Formats 1, 2, 3 and 4. I should therefore have thought that the insertion of the words which I have incorporated in the amendments, which were designed purely to assist Her Majesty's Government in carrying out the provisions of their own schedule, would have been immediately acceptable to the noble Lord. I trust therefore that on reflection the noble Lord will conclude that I have on my side not only logic but the precise thrust of the clause which he has put into the Bill and which he desires us to accept. I am at a loss to understand why these very constructive amendments should not have been immediately accepted. I remain completely mystified.
Lord Lyell: The noble Lord has made a considerable point of the main thrust of his argument. We take the point that in sub-paragraph (6) the words "Every profit and loss account" appear. But nowhere in the remarks which I made on these four amendments did I say anything about flexibility. I hope that the noble Lord did not mishear me. However, we can check this tomorrow in Hansard. I mentioned nothing about flexibility when I replied to the noble Lord's amendments. I hope he will accept the main thrust of my reply: that the Government put their points fairly forcefully to the representatives of the CCAB and that they were entirely happy that the formats set out on pages 69 to 71 of the Bill certainly met the wishes of the accountancy profession and were adequately clear.
If the noble Lord, Lord Bruce—and indeed the Committee—would care to glance at any of the formats that the noble Lord mentioned so far as his amendments 5, 6, 7 and 8 were concerned, I think, looking at Format 1 on page 69, the noble Lord will find that the figure he particularly wishes to see is immediately visible from the combination of items 13 and 14. If the noble Lord, or indeed any student of the accounts, would wish to derive the profit or loss on ordinary activities before tax, it would seem to me to be immediately deducible. I would not go beyond my original remarks, apart from saying that the accountancy profession was entirely happy with the points that I made.
Lord Bruce of Donington: I must now therefore give the Committee the information that is derived from the consultative committee to which the noble Lord has referred. It is evident that the consultative committee may have had some degree of flexibility which the Government have not, because I have before me their document which sets out their views on this particular subject, and I quote from paragraph 36:
"We support the requirement in paragraph 3(6) that every profit and loss account shall show the amount of the company's profit or loss on ordinary activities before taxation. We believe, however, that the requirement should be expressed as a separate line in each of the profit and loss formats given in Section B of the schedule".
That is precisely what I have done. The amendments put forward are therefore in full conformity with the consultancy committee of accountancy bodies. It may be that during the past week the noble Lord has so used his eloquence to persuade them that they may have decided to be far more flexible than he; but I am not so flexible as the consultative committee may seem to have been and I should much prefer the amendments to be put into operation.
It may well be that the noble Lord will wish to have time to reflect on this matter and I shall have to have consultations with my colleagues to find out their present attitude. It may therefore be necessary for me to return to the matter on the Report stage, and if the noble Lord is not prepared to accept the amendment now then in order to facilitate business I am happy to withdraw it.
Lord Hawke: Before the noble Lord withdraws the amendment, may I ask my noble friend to look at it again, because as an ordinary investor I should very much like to see these things in the company accounts.
Lord Lyell: I will certainly consider what the noble Lord, Lord Bruce, has said, but we cannot accept the amendments as they stand this afternoon. The noble Lord suggested that I—and he might have added "or the department"—may have persuaded the consultative council. In two words: we did.
So far as my noble friend Lord Hawke is concerned, I will study what he has said and if necessary I will write to him. I, too, am an investor, and if my noble friend will glance at the company accounts and look at the format, as I mentioned in my earlier remarks, if he checks lines 13 and 14 in most of the formats he will find that by the simple process of addition he will be able to obtain the figure for profit or loss on ordinary activities before taxation. But I undertake to see what my noble friend has said.
Lord Lloyd of Kilgerran: If the noble Lord the Minister is writing to any member of this Committee about matters on which I may not have intervened, will he send a copy to me as well? In order to expedite business on this Bill I shall not intervene on many occasions; therefore I should like to know what is going on.
Lord Lyell: I will certainly give the noble Lord, Lord Lloyd of Kilgerran, copies of any letters he requests, but I have undertaken to write to my noble friend Lord Hawke only if there was anything in his remarks. That was the hypothesis. I do not think there is a great deal in his remarks but I will check and ascertain.
Lord Hawke: I quite appreciate that, but will my noble friend remember that we investors are rather inclined to be lazy-minded and we do not like having to do arithmetic in order to discover the facts that we want to learn.
Amendment, by leave, withdrawn.
[Amendments Nos. 6, 7 and 8 not moved.]
4.8 p.m.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 9:
Page 74, line 17, leave out ("realised") and insert ("made").
The noble Lord said: This amendment refers to some accounting principles with which companies are required to comply, set out at Part II, Section A of Schedule No. 1, and in paragraph 12 it is stated:
"The amount of any item shall be determined on a prudent basis, and in particular—
(a) only profits realised at the balance sheet date shall be included in the profit and loss account;"
The amendment that is put forward seeks to substitute for the word "realised" the word "made" because that is more in conformity with the fourth directive itself, as Article 31(1)(c) of the directive (which is reproduced, incidentally, as an appendix to Cmnd. 7654) provides at paragraph 2(c). Only profits made at the balance sheet date may be included. In the present Bill the term "realised" has been used. The problem really 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.
In this connection I should like to refer your Lordships to the decision in Re Oxford Building Society, 35 Ch. D., 502:
"the word 'realised' must have its ordinary meaning which, if not equivalent to 'reduced to actual cash in hand', must at least be 'rendered tangible for the purpose of division'… The meaning of the word is the direct converse of 'estimated'.".
Your Lordships will appreciate that there is a difference between profits made and profits realised, and it is this principle that we desire to highlight in suggesting that it would be far safer, bearing in mind the other uses to which the term "realised" is put, if we put "made" instead of "realised" at paragraph 12(a). I beg to move.
Lord Hawke: I spotted this, too, though not from the technical angle that the noble Lord, Lord Bruce of Donington, has done. One realises, of course, that it is only proper that profits realised by, for instance, hire purchase people should come into their profit and loss when only they have actually got the cash in hand. But what about a bank that lends money? If a bank lends money, I presume at the moment it brings into its profit and loss account the interest on that money, quite regardless of whether or not the loan has been paid back. If I am right, I think the noble Lord, Lord Bruce, must be correct in suggesting that "realised" is not quite the right word for this paragraph.
Lord Mackay of Clashfern: I am obliged to the noble Lord for the very constructive way in which he moved this amendment, and I should like to make it clear that we appreciate the help that is given in trying to get the right formulation for these rules, which we hope will last for a considerable time. But, in this particular instance, if I might answer the question of my noble friend Lord Hawke first of all, whether it was "realised" or "made" that was the word used bank interest which had been paid by the customer would be properly covered in either case. Whether the loan itself had been repaid or not, the interest, which in that case would be presumably a measure of the profit, would already have been realised if it had been paid.
Lord Hawke: It might well be that the interest had not been paid; the loan is still outstanding, and perhaps the interest is only paid after the date of the balance sheet.
Lord Mackay of Clashfern: In that case, I would think if the debt is a good one at that date it would be reasonable to take it into the account as something which is sufficiently definite in amount to be regarded as realised. The provision we have used here is intended to reflect the meaning of the directive as we understand it. I agree that the word actually used in the directive at this place is the word "made", but we have looked at this against the background of accountancy practice, and the provision that we have adopted is intended as an expression of the well-understood prudence concept in the Statement of Standard Accounting Practice No. 2 under which profits are not anticipated but only recognised when there is sufficient certainty to make such recognition reasonable. In this context, "realised", does not

675
mean realised only in the form of actual cash but is used in the wider sense adopted in accounting terminology of realised either in cash or other assets the ultimate realisability of which can be assessed with reasonable certainty. It is difficult to see that use of the term, "made", would make any difference in the application of the principle. In other words, at least at the moment I am unable to grasp with certainty the area that would be different if the word "made" was used, as against the word, "realised", in the sense in which we have endeavoured to use it, which I think is in accordance with the authority the noble Lord has referred to, which does not restrict "realised" to strictly realised in the form of actual cash.
There is another point that I should mention to your Lordships. It would, it seems to us, create confusion and imply that different principles were intended to be applied in Part III of the 1980 Act in connection with distributable profits and this paragraph, paragraph 34 of Schedule 1, where "realised" is used in connection with the transfer of revaluation surpluses to the profit and loss account. In other words, we would see value in trying to keep these two in line and not create the sort of difference to which the noble Lord has referred. All profits, I think, can be said to be either realised or unrealised. These two classes are exhaustive between them of the whole class of profits, and it is clear from paragraph 34 of Schedule 1 that unrealised profits must be carried to a revaluation reserve and may only be carried to profit and loss account if they are realised. If "made" is intended to mean more than "realised" in the sense in which I have explained it, then it will include unrealised profits, which may not, in accordance with that paragraph, be carried to profit and loss account. It is, therefore, inconsistent with the policy embodied in that paragraph. The point is not a particularly easy one, and it is one to which we have given attention in view of the word used at this place in the directive; but I hope the noble Lord will feel that this is an adequate explanation for the stance we have taken.
Lord Bruce of Donington: I am sorry to be unable to follow the noble Lord all the way in his argument. The noble Lord referred to the professional position on this matter, and I am authorised to say that the views I have put forward in connection with this matter are indeed the views of the profession. They think that the term "realised" would lead to undue confusion. Moreover, the noble Lord, in citing to me the rules relating to revaluation—I believe he referred to paragraph 34—should not really pray that in aid as a basic accounting principle, because that is within the rules covering current cost accounting, so far as I can recall. We shall have to refer to this matter again when we come to consider the whole question of current cost accounting, which is raised by the next amendment.
The noble Lord asked for an illustration as to the point at issue. The noble Lord will be aware that the profits of a company are determined after taking into account its stock position, its physical position and everything else. It does not require that all the stocks in its possession should be realised for them to be taken into account for the purpose of assessing profit
676
ability. There is a perfect example. When stocks are taken into account for the purposes of profit and loss it is not necessary that they are in fact realised, and hence the differentiation, and the term "made" in the EEC directive. It must not be thought because of this—I shudder at it—that because I am quoting the EEC directive I am necessarily 100 per cent. for everything contained in EEC Directive No. 4, but the Government are supposed to be following it. I would have thought that the same word which is used by the EEC Directive No. 4—the term,"made"—is far more appropriate; it does ally the Government's version more closely to the directive if they use the identical term. And, in view of the fact that the profession considers that it is likely to give rise to some ambiguity, I would have thought the noble Lord would have been better advised to accept the professional view of this matter.
Once again I am anxious to be most co-operative with the noble and learned Lord. I have no desire to hold up the Bill on what may be a small point of construction. I should like the noble and learned Lord to take further advice on this matter and indeed have further consultation with my colleagues in the profession before finally making up his mind. A change of word, after all, would not strike to the root of the Bill but it might affect the susceptibilities of parliamentary counsel who are notoriously inflexible in matters of this kind once they have put something into a Bill However, I have no doubt that the noble and learned Lord, with all his charm, would be able to get over that in his usual way. In the meantime, and on the understanding that we may have to refer to this matter once again at Report stage, I—
Lord Hale: Is the noble Lord about to withdraw the amendment?
Lord Bruce of Donington: Yes, I was about to ask the leave of the Committee to withdraw it.
Lord Hale: Before the noble Lord does so I should like to make a few additional comments, purely to be helpful. The memorandum to which I previously referred expresses specific doubt about the use of the word "realised" because it has two separate meanings, and doubt as to whether a judicial interpretation would produce something new in this matter. It takes the view that the use of the word "realised" in paragraph 12 on page 74 creates a very serious problem. It says that the existing criteria applied by the courts go far to give some definitions which must be considered in the light of the interpretation of this clause. Some decisions on company law recently have shown such a vast diversity of opinion, with such immense length and cost of argument, as to emphasise the fact that we ought to go very carefully about using decisive words without being absolutely sure of their interpretation.
Lord Mackay of Clashfern: Before the noble Lord, Lord Bruce, asks leave to withdraw the amendment, I should like to say that we will certainly consider the matter further and perhaps—pursuing the noble Lord's illustration—it would be easier to consider it in another situation, other than just here. We will certainly look at what the Law Society said. We have considered it, but we shall be happy to consider it further.
Lord Bruce of Donington: I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
4.23 p.m.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 9A:
Page 74, line 41, leave out ("Subject to section C of this Part of this Schedule").
The noble Lord said: I beg to move Amendment No. 9A. It might be for the Committee's convenience if Amendment No. 12A were discussed simultaneously with this amendment, because, as your Lordships will see, the purport of the two amendments taken together is to eliminate completely from Part II of the Schedule, Section C.
This matter raises the whole question of current cost accounting. Section B of Schedule 1 sets out the rules to govern the preparation of accounts prepared on the basis of historical cost accounting. But your Lordships will note that at paragraph 16 the whole process of preparing historic cost accounts is to be subject to section C which, as your Lordships will note, deals with alternative accounting rules. By the operation of these two sections the option is given for any company that so wishes to prepare its accounts on one of two bases: either on the basis of historic cost accounts alone or on the basis of a combination of historic cost accounting and current cost accounting.
I must apologise if I am addressing some noble Lords who are already familiar with the whole principles of current cost accounting, but there may be some of your Lordships who are not perhaps entirely familiar with it. In short, the reasons for the emergence of current cost accounting lie in the sharply accelerating rates of inflation that have taken place, in particular over the last 10 or 15 years. So at the end of a particular year, with accounts prepared on the basis of historic cost—which has been the basis of the preparation of accounts almost since time immemorial—it was thought that although any profit disclosed after the preparation of historic cost accounts (and it should be remembered that a balance sheet is in effect a photograph of a business at the date to which the accounts are taken) was a perfectly accurate one, in the sense that the profit had been made in money terms and emerged quite logically and correctly through the inexorable process of accounting treatment from the original primary documentation, it was nevertheless not really worth the profit which had in fact been made.
It was feared, perhaps, that if a company, on the basis of the profit revealed by historic cost accounts, made rather hefty sums of profit, then perhaps the boards of the companies might be importuned by shareholders who would say, "You made so much profit last year; therefore you can pay us much more dividend than evidently you propose to do". Alternatively, it might be thought by some boards that if trade unions that were in negotiation with the management for adjustments to wages and for the betterment of conditions fastened on the profit that was produced on the basis of historic cost accounts, they might be faced with artificially inflated claims. In times of inflation the management could say, for example, and with every justification," We have been depreciating our assets and have made allowance for them in our profit and loss account on the basis of the
678
historic cost of those assets. But when we come to replace these assets in one, two or three years' time, owing to inflation we are going to have to pay very much more for the assets that replace them. Therefore a correct depreciation charge would be far greater than that which has been incorporated in the historic cost accounts, and if the true depreciation, based on the expectation of replacement at a higher price, had been inserted, then the profit in the accounts has been overstated".
Exactly similar observations apply to the question of stocks. There have been refinements of rules in recent years, but in broad and general terms the stocks in trade and work in progress of a business have normally been valued at the lower end of cost and market value. But with inflation running at high levels—and I am talking now of inflation in double figures, about which we have an elusive promise that it will be brought down to single figures some time in the future—the management can say, quite truthfully, "It is all very well having those stocks in at the lower end of cost or market value, but we shall have to replace them in order to continue trading, and on the basis of current inflation we shall therefore have to pay more for them". Therefore, they say that the profit produced from the profit and loss account prepared on an historic cost basis really reflects a misleading view of the situation as they see it now, as distinct from the photograph that was made as at the year end itself. This is the reason for the whole emergence of current cost accounting.
I shall not weary your Lordships by giving further examples. Exactly the same considerations apply in regard to debtors, which are in the accounts at one figure but, as money will be worth less by the time they are paid, some adjustment is due to be made for that. As to the validity of those arguments there can be no dispute at all. I would say immediately that any management or any board of directors that failed to take into account for management account purposes the various complications that would arise because of inflation would indeed be failing in their duty
But there are two different aspects. Inevitably, the adoption of the principles of current cost accounting bring into the realms of accountancy an element of speculation which many of us in my profession find undesirable. For many years there has been a widespread reliance on accounts properly certified by qualified accountants on an historic cost basis. Once one introduces current cost accounting into the position, inevitably accountants cease to perform the function that I have always understood that they were there to perform—that is to say, the ascertainment, marshalling and presentation of fact—and they begin to enter the field of industrial astrology, however skilled and however necessary it may be.
Over the years the profession of accountants have given considerable study to this whole question of inflation accounting. After a long period of time in which practically every business interest of significance was consulted, they brought out a booklet entitled Accounting Standards in respect of current cost accounting. In effect, this became binding on all members of the accounting profession belonging to the six bodies that compose the consultative committee. They say—and I quote from Statements of Standard Accounting Practice, 16 at page 246 of the 1980 edition of Account

679
ing Standards:
"This requirement to include current cost accounts in Addition to historical cost accounts or historical cost information can be complied with by"—
and then they decided on three alternatives—

"(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; or

(c) presenting current cost accounts as the only accounts accompanied by adequate historical cost information".

Those three alternatives were given. By the combination of paragraph (b) and paragraph (c), the Government themselves, in effect, have chosen to give us an alternative to the presentation of current cost accounts accompanied by adequate historical cost accounts information. I think that this is bound to be misleading and, indeed, is undesirable.
The Committee will recall a speech made by the noble Lord, Lord Weinstock, on 27th November last year in which he referred to the mumbo-jumbo that had been created by the accounting profession. He referred somewhat nostalgically to the old days, when it was quite possible for him to read his accounts on an historic cost basis and gain all the information that he wanted from them; he seemed to think—and I am bound to say on that occasion that I was constrained to agree with him—that it would have been far easier to have the situation as it was.
If the existing options which are given to companies are to remain in the form in which they now are it will not be possible within the same industry to compare the performance of companies like with like. Some companies in the industry will prepare their accounts on an historic cost basis; others will prepare them on a current cost accounting basis. Although, of course, by sheer mathematical calculation and much study it will ultimately be possible to reconcile them, it will not be possible readily to compare them. Moreover, in so far as the Inland Revenue are concerned, they will invariably require the presentation of historic cost accounts for corporation tax purposes. The Government may have legislation in contemplation to bring in current cost accounting for the purpose of determining corporation tax liability for companies. I do not know whether or not that is so; but certainly it is not so at the moment.
I would therefore urge on the Government that they should accept this amendment. They would not suffer in the slightest thereby if they eliminated current cost accounting from the current Bill, because notwithstanding the fact that the historic cost accounting rules set out in Section B of Schedule 1 would be the only ones within the new statute, the provisions of SSAP 16 would still continue to apply. All professional accountants preparing the accounts or auditing the accounts of companies would still be bound to comply with SSAP 16. Therefore, in practical terms the Government would be in no worse position at all.
I am hopeful, at least—I sincerely trust the Government are hopeful—that ultimately the policies of one party or another, or some future parties, will, together with the conduct of the British people, whether they are employed in management, provide the money, are operatives or whatever they may be, ensure that our
680
joint conduct, as people operating in this country, will ultimately result in the bringing down of inflation. This is the avowed aim of the Government, however painful the efforts so far most certainly have been.
Therefore, is it wise to enshrine in a statute provisions relating to current cost accounting which themselves arise from inflation, apparently on the assumption that inflation at the rates that prompted the introduction of current cost accounting is going to continue? I should have thought that it would be most unwise to incorporate those provisions in a statute. It is as though the Government were now writing on blocks of stone that they see continuing indefinitely into the future the inflationary trend which brought the CCA rules into existence.
I ask the Government to have more faith in themselves or, if they have no faith in themselves to bring down the rate of inflation to acceptable levels, then faith in their successors. Surely it is unwise to incorporate these rules as they are now into a statute. Moreover, as I have shown—or at least I hope I have shown—they are concepts which give rise to a degree of speculation, doubt and estimate which are unacceptable as a firm base for the financial accounts of a company, which ought to rest where they have rested—I was going to say almost over the centuries—on the basis of facts that are easily ascertainable, rather than estimates and speculations of the future.
This is not to say—and I venture with your Lordships' leave to repeat it—that companies should not, if they wish, publish current cost account information alongside historic cost. This is not to say that it does not have its uses for management purposes. But once we get into the position where the whole basis of accounting in the United Kingdom departs from the historic cost basis and begins to enter into the more misty areas of inflation rates and of estimates as to the value of assets that have to be replaced in the future, then it is going to strike a blow at the confidence which, by and large, the people of this country have reposed in accounts that are properly produced and properly certified.
I repeat that there is no objection to current cost accounting as an aid to management. There is no objection to providing the information or anything else as an additional note to shareholders and to the public; but I urge the Committee that we should not lightly abandon the whole principles that have been sustained by my profession over the years. I invite the Committee to support the amendment.
4.46 p.m.
Lord Mackay of Clashfern: When the noble Lord, Lord Bruce of Donington, opened his observations in this debate earlier in relation to Clause 1, he told us that he was all for flexibility and that the Government were all for rigidity. I think that at this stage of the debate it looks as though the tables have suddenly somewhat turned, because what the Government have sought to do in this Bill is to take advantage of a flexibility which the fourth directive gives to enable a company, if it thinks that is the best and the correct thing for it, to use the current cost accounting method.
It does not oblige a company to do that. All it

681
does is to confer on the company an option to do so. I must say that we should have thought it extremely retrograde, having regard to the tremendous developments that there have been in the accountancy profession on this matter, to force company auditors to use the historic cost method in every case, which is the effect of the amendments to which the noble Lord has spoken.
The noble Lord talks about fact, and suggests that the historic cost accounts are all based on precise facts and that current cost accounting is in the nature, I think he called it, of industrial astrology. I am not an accountant, but I had always understood that it was possible in historic cost accounts occasionally to find things that were referred to as "valued at cost" or "market value". That seems to me to involve an element of judgment; and far from current cost accounting involving speculation in the way that is suggested, in my submission it involves a question of developing judgment. It is not an easy matter, I quite agree, and that is why—
Lord Kaldor: May I interrupt the noble Lord? The concession to value stocks at market value when it is below cost does not really ultimately involve any arbitrary judgment. It allows a trader to anticipate losses without compelling him to anticipate gains. That is to say, if the market value fell below the cost, he could substitute market value. But when he finally disposes of the stock, then all this is brought back into the accounts and the element of judgment disappears. However, once you enter this inflation cost accounting business you are in entirely different territory.
Lord Mackay of Clashfern: I am obliged to the noble Lord for his helpful intervention. I agree that the amount of judgment required may vary, but I still maintain that if you have to arrive at the market value of something which has not actually been sold, that involves an element of judgment—perhaps not a big element, if a lot of these things are sold, but at any rate some element of judgment. The current cost accounting methods, which have been developed by the profession over the years with a great deal of hard work, are to be encouraged.
The noble Lord says this suggests the Government have no confidence in the future and in their ability to bring down inflation. The position is, in fact, nothing of the kind. It is surely right to recognise a state of affairs which has existed, and at least for the moment does exist, and to recognise the methods by which the accountancy profession have themselves sought to deal with the matter, in a way that gives a true and fair view of the company's position. I do not think I need remind the Committee that the accountancy profession's desire to deal with this issue has been supported by Governments of both parties, and I quote a Parliamentary Answer given by the then Secretary of State for Trade, Mr. Edmund Dell, in December 1976 when he said, talking of the Government of which he was then a member:
"The Government reaffirm their support for the system of current cost accounting and their desire that this should become the basis for the preparation of accounts as soon as practicable".
Indeed, Article 33 of the directive, which permits alternative accounting methods, was obtained as a
682
modification of the original text of the directive by the Government of the United Kingdom which were then a Labour Administration. Accordingly, I strongly submit that Governments of both parties have supported the view that this is a problem which must be grappled with by the accountancy profession and that it is right that when they do grapple with it, and that when the company and those concerned with the accounts of a particular company consider that the current cost accounting method is the correct method to use in the circumstances of that company, in accordance with good accountancy practice as they see it at the time, the Bill should allow them the flexibility to do so.
There are two further points I should mention. First, if the noble Lord's proposals were accepted, companies would lose their existing power to make selective revaluations of amounts in the accounts, and that would be a most retrograde step. Secondly, although companies may, under Section C, value items included in the accounts in accordance with the alternative accounting rules, certain historical cost information will always be required to be shown—that is a requirement of the directive—and of course if the alternative method is used, that must be stated. Thus, the historical cost information that is relevant will be available and the fact that the accounts have been prepared in accordance with the current cost accounting standard would be stated.
Lord Bruce of Donington: Could the noble Lord say whether, under the arrangements he now proposes under Section C, included in the notes and information will be a statement showing what the net profit would have been had historic cost accounting been adopted, and will that figure be set against the figure that emerges from the various adjustments that are set out in Section C to produce the net profit on the CCA basis? In other words, can he assure me that on any published accounts the two figures will be there; net profit on an historic cost accounting basis and net profit on a current cost account basis? There is a difference between saying, "You can get that figure by doing a series of additions and subtractions" and the answer to the question I am asking: whether the figure as such will be stated against the corresponding figure for current cost accounting.
Lord Mackay of Clashfern: I will have this checked, but my understanding is that it would not be necessary to state (if one is using the current cost accounting convention to arrive at the profit) the final result of an historic cost accounting calculation. But certain historic cost accounting information is required by the directive to be stated as a basic minimum. There is a point about this I should stress; I was just coming to it, so the noble Lord's intervention was particularly timely. This Bill makes it the supreme test of accounts that they should show a true and fair view of the state of the company, and that provision, which takes precedence over all other requirements, is in that position because of the efforts of the United Kingdom negotiators on the directive.
It therefore follows that if the current cost accounting convention is used and the auditor proceeds on that basis, he will be satisfied that that is the way, in the circumstances of that company, to give a true and fair

683
view of the company's position. It seems to follow therefore that to proceed on some different convention, such as the historic cost convention alone, would not do so, and thus to put forward the sort of figure the noble Lord is asking for, except in some fairly dismissive way, would be to direct attention to something that has capacity, in the circumstances of the particular company, to mislead.
Accordingly, I invite the Committee to agree that companies should continue to have the flexibility they have now when the Bill becomes law and should continue to have the option to use the current cost accounting convention or any other development of that which the accountancy profession develops and which is consistent with the rule as a way in which they can state their accounts if it seems right that they should do so.
Lord Hawke: I again approach the matter as an ordinary investor, and in that capacity I am rather disappointed with my noble and learned friend's reply. From the investor's point of view, if some companies adopt historic and some current cost accounting, it will be most muddling and it will be impossible to compare the results. Suppose a person is thinking of making an investment in, say, the engineering section and he finds that half the companies are doing historic cost and half current cost; he will not know where he stands without doing a tremendous amount of arithmetic. Whereas if, as the noble Lord, Lord Bruce of Donington, says, they were bound to show the historic cost figures and could then show the others if their accountants thought them more relevant, at least he would know where he stands in comparing the results of one company with another.
Lord Mackay of Clashfern: 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 would therefore answer my noble friend by saying that if he finds that two companies are having their accounts presented under the accounting standard on these two different bases, he should look further to ascertain what are the differences between the companies—because they must be very relevant from an investor's point of view—which leads the companies and the auditors to take the view that they should be distinguished in that way. It suggests that merely to look at companies' accounts presented on the same basis does not necessarily tell one the whole story; there is something a good deal deeper that one should look into if one is contemplating investing in two such companies and one is trying to compare them.
Lord Hawke: I suggest to my noble and learned friend that the answer to that one is that it depends on which firm of accountants is doing the accounts; one firm will favour historic and another may favour current.
Lord Mackay of Clashfern: That is the whole purpose
684
of developing the accounting standard—so it will not depend on the whim of the particular accountant, but that in deciding which method to use the accountant will have the guidance of rules of general practice which are accepted by the generality of those who practice in the profession, just like many other conventions that accountants over the years have used, as the noble Lord, Lord Bruce, pointed out.
Lord Bruce of Donington: The noble and learned Lord is of course aware that under the provisions of the Bill an option is given; there is no compulsion on a company or its auditors to adopt current cost accounting The term "may" is used, and when that term becomes effective the words
"Subject to section C of this Part of this Schedule"
come into operation so far as historic cost accounting is concerned. Perhaps I ought to explain that in the views that I am putting forward to your Lordships' Committee this afternoon I do not speak with the authority of the six accounting bodies which produced the consultative document, negotiated with the Minister, and indeed were responsible for producing these excellent accounting standards. I wish to make that quite clear.
Nor for one moment do I dispute the fact that the previous Administration adopted an attitude very similar to that being displayed here this afternoon by the noble and learned Lord. But the previous Administration did not have the benefit of my advice on this particular subject, and I have no doubt that, had I been available at the time so to advise them, Her Majesty's previous Administration would not have taken up the position that they evidently did.
The noble and learned Lord has spoken of the question of a true and fair view, and I concede immediately that the incorporation of the term "true and fair view" into the EEC Directive No. 4 itself represents a considerable victory, upon which I congratulate the previous Administration and Her Majesty's present Administration. It must have been a very considerable achievement, in view of the attitude of our French colleagues, and in particular our Italian colleagues, who apparently are not conversant with the term.
But it now emerges that there can be at least two true and fair views. There can be a true and fair view of the situation of a company whose accounts have been prepared on the basis of the historic cost convention. Any accountant can prepare a company's accounts on that basis and can certify them as showing, in accordance with the historic cost convention, a true and fair view. This point was very well made by the noble Lord opposite, whose name escapes me at the moment. At the same time, another accountant working on the accounts of the same company—imagine this hypothetical situation—but operating on the current cost accounting convention could certify a totally different profit, and in times of inflation probably a reduced profit, as being a true and fair view of the company's affairs. That is where there arises the confusion to which the noble Lord, in my view quite correctly, referred.
The Bill legislates for two or more true and fair views of a company's affairs at a given date, or at the date of the preparation of the accounts, or whatever the date might be. In my view that is confusing. It is

685
confusing not only to shareholders, but also to trade unions. In fact those with suspicious minds might have taken a certain view—I am not saying that they did—in the light of the considerable profits produced on the historic cost basis, showing much higher profits than would be shown by the current cost accounting method. There might have been a fear that the trade union movement would take undue advantage of the situation. There might have been the suspicion that the whole purpose of having current cost accounting within the convoluted formulae, in regard to which we might seek elucidation in later amendments, is to confuse the public in general and perhaps the trade union movement as to the true extent of the profitability of a company.
I can only repeat the point: if the amendment is carried, it will not make the position much different from what it is today. The abolition of Section C would still leave the professions free to operate as they have operated in the past, and there would be no noticeable difference. But I take a firm stand, and I invite my colleagues to do likewise, regarding the inclusion in a statute of measures relating to current cost accounting, the total effect of which may be to mislead, rather than to reveal to the public and to those interested the true state of affairs of the various companies concerned.
5.6 p.m.
On Question, Whether the said amendment (No. 9A) shall be agreed to?
Their Lordships divided: Contents, 60; Not-Contents, 116.

CONTENTS

Ardwick, L.

Lovell-Davis, L.

Baker, L.

McCarthy, L.

Birk, B.

McGregor of Durris, L.

Blease, L.

Maelor, L.

Blyton, L.

Mishcon, L.

Boston of Faversham, L.

Oram, L.

Briginshaw, L.

Peart, L.

Brockway, L.

Phillips, B.

Brooks of Tremorfa, L.

Ponsonby of Shulbrede, L.

Bruce of Donington, L.

Ritchie-Calder, L.

Cooper of Stockton Heath, L.

Rugby, L.

Crowther-Hunt, L.

Sefton of Garston, L.

Davies of Leek, L.

Segal, L.

Davies of Penrhys, L.

Shinwell, L.

Donnet of Balgay, L.

Spens, L.

Elwyn-Jones, L.

Stedman, B.

Gaitskell, B.

Stewart of Alvechurch, B.

Hale, L.

Stewart of Fulham, L.

Hayter, L.

Stone, L.

Houghton of Sowerby, L.

Strabolgi, L.

Howie of Troon, L.

Strauss, L.

Jacques, L.

Taylor of Mansfield, L.

Janner, L.

Underhill, L.

Jeger, B.

Wallace of Coslany, L. (Teller.)

Kaldor, L.

Killearn, L.

Wells-Pestell, L.

Leatherland, L.

Whaddon, L.

Lee of Newton, L.

White, B.

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

Willis, L.

Wilson of Radcliffe, L.

Longford, E.

Wootton of Abinger, B.

NOT-CONTENTS

Ailesbury, M.

Alport, L.

Airey of Abingdon, B.

Ampthill, L.

Allen of Abbeydale, L.

Amulree, L.

Allerton, L.

Auckland, L.

686

Avon, E.

Kimberley, E.

Balerno, L.

Kinloss, Ly.

Banks, L.

Kinnaird, L.

Belhaven and Stenton, L.

Lloyd of Kilgerran, L.

Bellwin, L.

Long, V.

Belstead, L.

Loudoun, C.

Bessborough, E.

Lucas of Chilworth, L.

Boyd-Carpenter, L.

Lyell, L.

Bradford, E.

McFadzean, L.

Braye, L.

Mackay of Clashfern, L.

Caccia, L.

McNair, L.

Carrington, L.

Mancroft, L.

Chelwood, L.

Mersey, V.

Chitnis, L.

Milverton, L.

Clifford of Chudleigh, L.

Minto, E.

Cockfield, L.

Montagu of Beaulieu, L.

Cottesloe, L.

Montgomery of Alamein, V.

Craigavon, V.

Mottistone, L.

Craigmyle, L.

Murton of Lindisfarne, L.

Craigton, L.

Noel-Buxton, L.

Cranbrook, E.

Northchurch, B.

Dacre of Glanton, L.

Nugent of Guildford, L.

Daventry, V.

O'Neill of the Maine, L.

Denham, L. (Teller.)

Orkney, E.

Donegall, M.

Pender, L.

Drumalbyn, L.

Penrhyn, L.

Eccles, V.

Redmayne, L.

Ellenborough, L.

Rochester, L.

Elliot of Harwood, B.

St. Just, L.

Elton, L.

Saint Oswald, L.

Erroll, E.

Sandford, L.

Ferrers, E.

Sandys, L. (Teller.)

Forester, L.

Seear, B.

Fraser of Kilmorack, L.

Seebohm, L.

Gladwyn, L.

Selkirk, E.

Glasgow, E.

Skelmersdale, L.

Glenarthur, L.

Strathcarron, L.

Glendevon, L.

Strathclyde, L.

Gormanston, V.

Strathspey, L.

Gridley, L.

Swinfen, L.

Hailsham of Saint Marylebone, L.

Swinton, E.

Terrington, L.

Halsbury, E.

Teviot, L.

Hampton, L.

Tranmire, L.

Hanworth, V.

Trenchard, V.

Harmar-Nicholls, L.

Trumpington, B.

Harris of Greenwich, L.

Vaux of Harrowden, L.

Harvington, L.

Vickers, B.

Henley, L.

Vivian, L.

Hillingdon, L.

Waldegrave, E.

Holderness, L.

Westbury, L.

Hornsby-Smith, B.

Wigoder, L.

Hunt, L.

Winstanley, L.

Hylton-Foster, B.

Young of Darlington, L.

Ironside, L.

Resolved in the negative, and amendment disagreed to accordingly.
5.15 p.m.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 10:
Page 75, line 18, at end insert—
(". In the case of debts due or accruing due to the company purchase price shall be taken to mean the value of the consideration given in transaction giving rise to the debt").
The noble Lord said: Paragraph 17 of Schedule 1 provides that
"the amount to be included in respect of any fixed asset shall be its purchase price or production cost".
This does not seem appropriate in the case of debts, and it is suggested that in relation to both this particular paragraph and paragraph 22, which deals with the amounts to be included in respect of any current asset, this provision should be inserted. If it is agreed in relation to this particular paragraph then perhaps

687
a similar provision could be inserted in relation to paragraph 22.
Exactly the same principle arises on Amendment No. 11, which it will probably be convenient to consider in conjunction with this one. That suggests that we carry the same wording through on page 76, at line 31:
"In the case of debts due or accruing due to the company purchase price shall be taken to mean the value of the consideration given in the transaction giving rise to the debt".
This is purely technical and is designed to assist the Government. I beg to move.
Lord Mackay of Clashfern: We appreciate the assistance offered here, but the point is a slightly difficult one. The phrase "purchase price or production cost" is a phrase which is not easily applicable to a number of different types of asset, but we believe that accountancy practice can deal with these matters and that the phrase "purchase price or production cost" is sufficiently general to enable an accountant to make the proper application of it to a variety of different assets. We feel that to provide a specific definition of this kind in the case of debts without doing it for all other assets where there might be difficulty might not be particularly helpful, and it is for that reason that so far we have not been persuaded that this suggestion, which I quite accept is made in the most helpful way, would in fact be an improvement.
Lord Bruce of Donington: I am grateful to the noble and learned Lord. I shall not seek to persuade him further. The amendment is put forward to be helpful. If the noble and learned Lord does not want to be helped, that is entirely up to him. With the permission of the Committee, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 11 not moved.]
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 12:
Page 77, line 43, leave out from ("any") to the end of line 45 and insert ("generally accepted accounting method provided that the method is one of those mentioned in sub-paragraph (2) below and is applied to all such assets of the same class ").
The noble Lord said: By this amendment we propose, in page 77, line 43, to leave out the words,
"of the methods mentioned in sub-paragraph (2) below in relation to any such assets of the same class",
and to substitute the words which appear on the Marshalled List. It is considered to be important that accounting standards should be allowed to continue to operate without apparent conflict with statutory provisions. Indeed, I referred to that earlier this afternoon in the opening part of my remarks on Clause 1. The risks of such conflict are heightened where detailed specifications of accounting rules, including valuation rules, are incorporated in statute law. My view is that accounting requirements in the legislation should be kept in as general terms as is possible.
A present example of the difficulties is to be found in the provisions of paragraph 27 of Schedule 1, which specify methods of valuation of stock which are not wholly consistent with the present Standard of Accounting Practice No. 9 on stocks and work in progress,
688
to which, with your Lordships' permission, I should like to refer. Page 185 deals with the method of costing. It reads:
"The method of arriving at cost by applying the latest purchase price to the total number of units in stock is unacceptable in principle because it is not necessarily the same as actual cost and, in times of rising prices, will result in the taking of a profit which has not been realised.
"One method of arriving at cost, in the absence of a satisfactory costing system, is the use of selling price less an estimated profit margin. This is acceptable only if it can be demonstrated that the method gives a reasonable approximation of the actual cost".
Then it says:
"Furthermore, where standard costs are used they need to be reviewed frequently to ensure that they bear a reasonable relationship to actual costs obtained during the period. A method such as base stock and LIFO—last in first out—do not usually bear such a relationship".
Yet, within paragraph 27, particularly at sub-paragraph (2), one of the methods listed at sub-paragraph (2)(b) is that known as "last in first out". There is the conflict; because LIFO is not considered by the profession to be satisfactory in all circumstances. We consider that these difficulties could be avoided by a simple amendment which would have the effect of setting the method of valuation prescribed in paragraph 27(2) within the context generally accepted by accounting methods. This is the whole purpose of the amendment which would clarify the position in paragraph 27 and would bring it more into conformity with standard practice as adopted by the accountancy profession at this time. In order to reassure the noble Lord, I may say that this amendment is put forward with the object of assisting. I would not dream of pressing it any further. If the Government do not wish to take advantage of it, I have the melancholy satisfaction of putting it forward with the best possible motive in order to assist.
Lord Mackay of Clashfern: It is perhaps not great gratitude to leave the noble Lord melancholy; but I will have to do that. The purpose of this particular set of provisions is to lay out the possibilities and LIFO (last in, first out) is one of the possibilities. The noble Lord read from Accounting Standards. What that says about this particular matter is:
"It is not usually appropriate".
That suggests that there may be circumstances in which it might be appropriate. We have sought to make it available where it is appropriate. The difference between us is whether it is necessary to bring in at this particular place expressly "generally accepted accounting method". To enshrine that phrase in this place would be to inhibit the progress and process of development of accounting methods. If only what is generally acceptable is to be used, that will be a very great clog on appropriate innovation.
It reminds me of a story about a certain solicitor in Glasgow who never instructed counsel except of established reputation and was left wondering how counsel ever came to have established reputation. It seems to me to be that sort of problem. We have to allow the accountancy profession to regulate these matters. This is another instance of the Government seeking to be as flexible as possible within the framework of the directive, leaving the accountancy profession

689
to develop its own approach within that minimum legal framework. I should have thought that as a lawyer I could commend that approach to an accountant.
Lord Bruce of Donington: I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 12 not moved.]
[Amendment No. 12A not moved.]
The Deputy Chairman of Committees: Amendment No. 12A pre-empts Amendments Nos. 13, 14 and 15. I cannot call these amendments. Amendment 16, Lord Trefgarne.
Lord Bruce of Donington: Amendment 12A, as I understand it, resulted in the "Not-Contents" exceeding numerically the "Contents" and therefore Section C still remains in the Bill. I submit with respect that that does not now inhibit the calling of Amendments Nos. 13, 14 and 15; but I defer to the Chair.
The Deputy Chairman of Committees: If the noble Lord wishes to move Amendment No. 13, I think that is in order.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 13:
Page 79, line 30, at end insert—
("(5) Current asset investments may be included at their current cost").
The noble Lord said: I beg to move Amendment No. 13. It will be noted that although I recommended to the Committee that Section C should be eliminated from the Schedule, Section C having been retained in the Bill by the will of the Committee, I will now seek constructively to effect amendments to Section C itself in the hope that my endeavour to be constructive on this matter will not be construed as my giving any support to Section C itself. It is purely the acknowledgment by me of the fait accompli. The accountants' co-ordinating committee believe that it would be desirable to provide specifically for current cost valuation in respect of current asset investments under the alternative accounting rules. I have no further comment to offer than that and I commend the amendment to the Committee.
Lord Lyell: The purpose of the amendment is to attempt to provide some scope for the future development in current cost accounting, about which the noble Lord was speaking to us a short while ago. It will not surprise the noble Lord to find that the Government are sympathetic to that objective. What may surprise him is that we accept his amendment in principle. There is one small caveat: the Government want to consider the drafting of the amendment to see whether it is appropriate for the particular purpose that he has in mind. We undertake to draft an amendment of our own and bring it forward at a later stage. I hope that the noble Lord might see fit to cheer this small mercy.
Lord Bruce of Donington: Yes. With the leave of the Committee, I shall withdraw the amendment.
Amendment, by leave, withdrawn.
5.32 p.m.
Lord Bruce of Donington Lord Bruce of Donington moved amendment No. 14:
Page 81, line 28, leave out ("a").
The noble Lord said: This is a small drafting amendment. I commend to the Committee the elimination of the little word "a". If the position is left as it is concerning the revaluation reserve, it appears to have the possible effect of restricting transfers from the revaluation reserve to reversals of amounts relating to the same item previously credited to a revaluation reserve. If one eliminates the word "a" so that the paragraph reads:
"… it represents realised profit".
we think that that more accurately reflects the real wishes of the Government in the matter. I beg to move.
Lord Lyell: My Lords, this is a small amendment. Nevertheless, it is a point of interest, a point of detail and a point of some importance. The noble Lord, Lord Bruce, has moved it; I detect a trace of hope on his face and it is realised: we accept it.
On Question, amendment agreed to.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 15:
Page 81, line 29, leave out ("treatment for taxation purposes of") and insert ("accounting treatment of taxation related to").
The noble Lord said: This amendment again refers to the wording of paragraph 34(5). It seeks to leave out the words "treatment for taxation purposes of", substituting "accounting treatment of taxation related to". That is a more accurate way of what it is believed are the Government's real intentions. Paragraph 34(5) provides that the treatment for taxation purposes of amounts credited or debited to the revaluation reserve shall be disclosed in a note to the accounts. The whole purpose of the amendment is to make it clear that the treatment for taxation purposes relate to the accounting treatment of taxation related to amounts credited or debited to revaluation reserve rather than the treatment of such amounts in the returns made by the company to the Inland Revenue. We think that this amendment achieves that purpose and is fully consistent with the whole purpose of paragraph 34. From the standpoint of the professionals, it clarifies the position. I beg to move.
Lord Mackay of Clashfern: The intention of this provision is to deal with the way in which the amount is treated for tax purposes. 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. The point—so far as the directive appears to bring it out—relates to the actual sums that go into the reserve rather than the treatment of the taxation. It may be that there is some difficulty between us on the way in which this is phrased. I should be glad if the noble Lord would accept an assurance that we shall look at this. At the moment it seems to us that we have it correct, and that the provision as drafted is in accordance with the directive and does not have the detrimental effect to which the noble Lord referred.
Lord Bruce of Donington: I am happy to accept the assurance of the noble and learned Lord that he will take another look at the amendment. Although this is a comparatively small matter, it is one which the consultative committee would once again like to impress upon the Minister. They are clear in their minds. The point may be abstruse but most points relating to the treatment of taxation tend to be a little abstruse. I think that the noble Lord's offer to look at the matter again ought to be acceptable to the Committee. With the leave of the Committee, I wish to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Mackay of Clashfern Lord Mackay of Clashfern moved Amendment No. 16:
Page 82, line 14, leave out ("preference").
The noble and learned Lord said: On behalf of my noble friend Lord Trefgarne I move this amendment and speak also to Amendment No. 20. The reason for this amendment is that we have tabled amendments designed to enable a company to purchase their own shares. In the past, redeemable preference shares were subject to the possibility of being redeemed. This possibility is being opened out now and therefore is is no longer appropriate to restrict the shares in question to redeemable preference shares, but redeemable shares as such are appropriate. I beg to move.
Lord Bruce of Donington: I am not prepared to advise the Committee to do anything other than support the amendment at this stage. It is something that anticipates events which we understand are to take place later. On the supposition that the Government are likely to obtain their will in regard to the later clause that has been tabled, I do not see any reason why we should not support this particular amendment.
On Question, amendment agreed to.
The Deputy Chairman (Lord Jacques): I have to advise your Lordships that, if Amendment No. 17 is agreed to, I shall not be able to call Amendment No. 18.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 17:
Page 84, line 20, leave out paragraph 45.
The noble Lord said: I beg to move this amendment. In view of the overall disclosure requirements of the Fourth Directive, the requirements to distinguish "listed" from other investments and to differentiate "investments listed on a recognised stock exchange" from other listed investments would appear to be unnecessary. So, with the object of minimising legislation —a course to which we are quite sure the Government are committed—we offer to assist them in this matter by not resisting any endeavours to minimise legislation by eliminating the paragraph.
Lord Lyell: The noble Lord, Lord Bruce of Donington, has proposed this amendment. It seems quite drastic to leave out the whole of paragraph 45, because we believe that this requirement in paragraph 45 of Schedule 1 does not stem from the Fourth Directive. It is, as we see it, a modification of several of the
692
existing requirements of Schedule 8, specifically in paragraph 8(1)(a), 8(3), and paragraph 11(8). These small and detailed requirements in the existing Schedule 8 have not been the subject of any criticism so far and the Government take the view that disclosure of the amount of any company's investments which are listed and the market value of these investments does provide very useful and desirable information. I hope the noble Lord, Lord Bruce of Donington, will accept, for this reason, that we cannot accept deletion of the entire paragraph and I would hope the noble Lord might see our views in that light.
Lord Hawke: Could my noble friend explain the difference between a "listed investment" and a "listed investment on a recognised stock exchange"? That is what is rather defeating me at the moment.
Lord Lyell: I understand that there are recognised and unrecognised stock exchanges and that the London Stock Exchange, together with the provincial branches, is a recognised stock exchange. I believe there are differing rules as to what is a listed and an unlisted security on a recognised stock exchange, but perhaps I might write to my noble friend with a particular definition of this.
Lord Hawke: I do not want the noble Lord to waste pen and ink in writing to me: I want him just to look at the Bill and see whether it is necessary in some way to redefine them, because I still do not understand why some are "listed" and some are "listed on a stock exchange".
Lord Lyell: I am sorry: I did not quite hear the last words of the noble Lord.
Lord Hawke: May I repeat that I still do not understand the difference between a listed investment and one which is listed on a recognised stock exchange. The ones that are just "listed"—what are they listed on?
Lord Lyell: As I hoped I had suggested earlier, the noble Lord has stumped me. Could I inquire and could I let him know?
Lord Hawke: No, I merely want the Bill to be put right, if it is wrong.
Lord Lyell: If my noble friend believes that the Bill should be put right, perhaps he could put down an amendment. We believe that the Bill before us is presented in reasonable form, but perhaps we might study what has been said and we could perhaps write to him.
Lord Mishcon: I wonder whether I might intervene for a moment and keep talking while a certain note reaches the noble Lord, as a result of which he may be able to enlighten the Committee and we can move on.
Lord Lyell: Once again the solicitors' profession, in the person of the noble Lord, Lord Mishcon, has

693
come to the aid of the accountant! I am advised—and I hope that my noble friend and the Committee might accept this—that there is no need for a definition of "a recognised stock exchange" because that definition is already contained in Section 455(1) of the 1948 Act. I have that beside me but it is temporarily out of reach. Investments which are listed on other than on a recognised stock exchange are those which are listed on other stock exchanges. I hope that might help my noble friend.
Lord Hawke: I really would suggest to my noble friend then that he should insert in the Bill some phrase such as—
"listed on non-recognised stock exchanges".
Lord Bruce of Donington: Perhaps I can assist the noble Lord, Lord Lyell, a little. If he will turn to the balance sheet formats, Format 1 (page 63) he will find under B III, "INVESTMENTS", the following classifications:

"1. Shares in group companies

2. Loans to group companies

3. Shares in related companies

4. Loans to related companies

5. Other investments other than loans

6. Other loans

7. Own shares".

Under C III "INVESTMENTS" he will find listed shares in group companies, own shares and other investments. In Format 2, "ASSETS", he will find under B III "INVESTMENTS":

"1. Shares in group companies

2. Loans to group companies

3. Shares in related companies

4. Loans to related companies

5. Other investments other than loans

6. Other loans

7. Own shares.".

This is all that is required on the pro formal. All one is really asking is why, in view of the requirements on the formats of the balance sheet, which go into considerable detail as to which is required, do we want this extra paragraph 45, since all the requirements have already been set out in the formats? I am only trying to be helpful to the noble Lord. I would have thought he would have found it much simpler to eliminate this paragraph which, on the basis of the EEC directive and indeed of his own Formats 1 and 2 for balance sheets, appear to be redundant anyway. I do not understand why he will not co-operate with himself.
Lord Lyell: I find the invitation of the noble Lord, Lord Bruce, most interesting, but perhaps we need legal advice as to how I can co-operate with myself. I have nothing further to add to what I said originally. Basically, we believe the effect of what the noble Lord would have us do—and it is quite drastic to remove the whole paragraph—would be harsh. It would remove the disclosure of any amounts related to listed investments. For the benefit of my noble friend Lord Hawke, I have Section 455 of the Companies Act 1948 in front of me, but I do not immediately find in front of me the definition schedule to the 1948 Act. However, I would assure my noble friend that the definitions of "listed stock exchange" and "recognised stock exchanges" are within this particular section.
Lord Hawke: My Lords, I apologise to my noble friend because I was the secretary of the Conservative Committee in this House which considered the 1948 Act, but I am afraid I have forgotten the contents of Section 455.
Lord Lyell: May I then put my noble friend's mind at rest? In the 1948 Act, Section 455, says that a recognised stock exchange
"means any body of persons which is for the time being a recognised stock exchange for the purposes of the Prevention of Fraud (Investments) Act, 1939;".
This is possibly going back even further than when my noble friend was doing all the preparatory work on the 1948 Act. I am very grateful to him for pointing out his problem and for his helpfulness.
Lord Tryon: I do not want to prolong this debate but I find that sub-paragraph (2)(b) of paragraph 45 is somewhat confusing. Could the noble Lord, Lord Lyell, explain to me how the market value and the stock exchange value can in any way be different? I have been involved with these things all my working life, and the terms "stock exchange value" and "market value" have always meant the same thing to me.
Lord Lyell: Could I defer just briefly my reply to the noble Lord, Lord Tryon. I have received a note regarding the point made by my noble friend, Lord Hawke, about the distinction between listed and non-listed investments. It seems to be an important one for the sake of giving what we regard as useful information about the character and value of a company's investments. If we draw that distinction, whether "recognised stock exchange" or not, I hope my noble friend will see that the listing of investments is meant to be helpful. I hope that the words "recognised stock exchange" will give to my noble friend some indication of where the listing of the investments takes place.
The noble Lord, Lord Tryon, asked me about the terms "market value" and "stock exchange value" which appear in the first line of paragraph 45(2)(b). His point is germane to the one I raised earlier when answering my noble friend Lord Hawke about "recognised stock exchange" and otherwise. I am advised that the market value and the stock exchange value may differ according to the size of the investment and (something which will be familiar to the noble Lord, Lord Tryon), its marketability. To take one example, the controlling stake would be worth more than a mere minority of the shares in a company. I hope that this will be especially relevant to the noble Lord, Lord Tryon, who has interests in this particular area.
Lord Hawke: If my noble friend would consider replacing the word "listed" in line 24 by the word "corporate", it might make things a little clearer.
Lord Lyell: I will certainly consider my noble friend's suggestion.
Lord Bruce of Donington: I have listened very carefully to the noble Lord and to the exchanges which have taken place between him and his noble friend. I

695
wonder whether he would now give me some guidance as to exactly how companies which use Format 1 are going to enter items under C.III investments and exactly how they are going to deal with the same investments under C.III of Format 2. Those formats appear on pages 63 and 65 respectively. Are companies going to be required to elaborate further the specific items which have been set out in this format? If all that is required—and this is implied by the formats themselves—is the bare figure against each item on the format, then the relevance of paragraph 45 disappears. If on the other hand paragraph 45 is to remain, will the noble Lord show exactly how the entries are going to be made, and the respective entries?
Lord Lyell: The noble Lord has done exactly what I should have done. If he will look at the top of page 82 he will find in heavy type:
"Information supplementing the balance sheet"
and that it is Schedule 1, Part III, paragraph 37 onwards which we are discussing. I understand that paragraph 45 relates to the notes, which is information supplementing the balance sheet. Therefore, the requirements of paragraph 45 will not necessarily be in the format. I have much sympathy with the noble Lord. I hope I have explained it.
Lord Bruce of Donington: I am obliged to the noble Lord. He has indeed clarified the position.
Lord Hale: I had a letter in January which I put on one side in the hope that I might understand it. I am anxious to know whether it is supposed to be favourable or unfavourable to me. It came from a well-known insurance company with a name which promises resurgence. Apparently they are the trustees for shareholders in a company. They say this:
"As you are aware"—
that is me; I was not—
"the Stock is an unsecured obligation of Brittains Limited, and several subsidiaries of Brittains Limited ('Guaranteeing Subsidiaries') guaranteed its due repayment. Those guarantees are also unsecured. In addition to Brittains Limited, twelve of the Guaranteeing Subsidiaries are in receivership. Messrs. M. A. Jordan and R. A. Stone of Messrs. Cork Gully are the receivers of Brittains Limited and nine of the Guaranteeing Subsidiaries, while Messrs. A. R. Houghton and C. Morris of Messrs. Touche Ross & Co. are the receivers in the case of the three other Guaranteeing Subsidiaries in receivership".
How the accounts of guaranteeing companies and non-guaranteeing companies and the more or less quiescent and non-active companies arc mingled in some common account somewhere, I do not know. And they say that they are not going to tell me. They say that they can tell me but that on the whole there is a lot of work to be done yet to clear it all up and that it must be nicely tidied up. But there will not be any assets.
I am sorry to intervene. Indeed, I should not have intervened at all if I had reached the stage of comprehension of what was being discussed, but not being able to comprehend what was being discussed I thought this was an opportunity to suggest that if the noble Lord could let me know whether or not that is Favourable, and what it means, I should be grateful
Lord Mackay of Clashfern: I think the noble Lord will agree that we shall need time to consider that question.
Lord Tryon: To return to sub-paragraph (2)(b) of paragraph 45, although I thank the noble Lord, Lord Lyell, for his answer and see what he is getting at, if (2)(b) is to stay in the Bill he will cause confusion if the terms "market value" and "stock exchange value" remain there together. Why not say "realisable value"?
Lord Lyell: I should like to thank the noble Lord, Lord Tryon, for his suggestion but I fear that both he and I may get into particularly boggy ground if we go on with this. We have already had a lengthy discussion this afternoon on "realisable". It is perfectly clear to me what "market value" and "stock exchange value" mean. I hope that I gave a partial explanation to the noble Lord. May we consider what he has said? If we find that there is anything of intrinsic merit in it, we will write to him. I am sure the noble Lord will accept my word that we shall consider everything that he has said.
Amendment, by leave, withdrawn.
6 p.m.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 18:
Page 87, line 24, leave out ("each of the amounts") and insert ("the amounts relating to each item").
The noble Lord said: This is a drafting amendment. Paragraph 53 requires a separate statement in the profit and loss account of certain items of income and expenditure. Paragraph 53(1) requires "each of the amounts mentioned" to be disclosed. This does not seem to be clear in relation to paragraph 53(2). It is not clear what the effect of the use of those words in paragraph 53(1) is on those in paragraph 53(2). If it is intended, under sub-paragraph (a) which is at line 28 on page 87, to require interest on bank loans to be shown separately as regards both heads (i) and (ii) of that sub-paragraph, I think the words in the amendment will be more appropriate—namely, "the amounts relating to each item" rather than the words that are in the Bill as at present drafted. It is purely a matter of clarification and I do not press it. I beg to move.
Lord Lyell: The noble Lord, Lord Bruce, has proposed this amendment, and indeed we have also considered whether there seems to be any lack of clarity as to exactly what type of information is demanded by paragraph 53. It has been put to us that it might be better to have separate information which would be required in respect of the items which are described under the two particular elements (i) and (ii) in sub-paragraph (a). If there is a problem, which the noble Lord seems to have spelled out for us, certainly it is not a new problem, since this particular provision has existed in this form since 1948 in Schedule A. At the same time we believe that there could not be much doubt as to what information is specially required.
If your Lordships will consult sub-paragraph (1) you will see that each of the amounts "mentioned below"—that is, in sub-paragraph (2)—"shall be

697
stated". Sub-paragraph 2 refers to only two amounts: the amounts described under (2)(a) and (2)(b) are the two differing amounts. Thus we do not think that any separate information needs to be given in respect of the several elements described in sub-paragraph (a), but the proposed amendment might call for further information and therefore would increase the amount of disclosure that would be required. We do not think it is necessary that such detailed disclosure should be in the Bill. I hope the noble Lord will accept that we would rather leave the particular provision in paragraph 53 as it is.
Lord Bruce of Donington: I am grateful to the noble Lord for that information. Now his intention is quite clear I entirely agree that it would be wrong to require the expenditure relating to each particular item, which would of course include items under heads (i) and (ii). If he says he does not want that, I am happy that he should not get it, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
6.3 p.m.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 19:
Page 87, line 41, leave out ("provided") and insert ("set aside").
The noble Lord said: This amendment seeks to leave out the word "provided". It is a drafting amendment but it is an important one, and I am suggesting that there should be put, instead of "provided", the words "set aside". At page 96, paragraph 87, the use of the term "provision" is quite clearly explained, and I think it would be wrong to confuse the term "provision", which to the accounting profession carries a particular connotation, which is confirmed in paragraph 87 at page 96, if this were used at paragraph 53(3). I think the accountancy profession—and indeed the noble Lord—would agree that the term "provided" is in fact inappropriate and that the insertion of the term "set aside" is the correct accounting term to use in that context. I beg to move.
Lord Lyell: The noble Lord, Lord Bruce, has pointed out that the use of the word "provided" in paragraph 53(3) would make for some uncertainty and he has doubts about it. It also seems that he has doubts as to whether or not the amounts in paragraph 53 would be within the definition of "provision". The Government agree that the applicability of the definition of "provision" for liability and charges to these particular items, and indeed the implication for a proper balance sheet treatment, requires a little further consideration. The Government will give the undertaking that we will give further consideration to the points raised by the noble Lord and we will bring forward an amendment at a later stage if we think it appropriate. I hope the noble Lord will accept that. We do not want to clutter up the Bill and to waste your Lordships' time with completely unnecessary amendments, but we will take on board everything that the noble Lord has said, and if we deem it necessary we will bring an amendment forward to meet his point.
Lord Bruce of Donington: I hope that the noble Lord,
698
Lord Lyell, will give this point serious consideration, because it is a matter on which the accounting profession is quite firm and has been so for many years. May I respectfully suggest to the noble Lord that the desire of parliamentary counsel to keep precisely to the text and nothing but the test should not be allowed to impede the undoubted progress of his own intellectual judgment in these matters, which we trust will prevail. On his undertaking that he will bring the matter again before the House at Report stage, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Schedule 1, as amended, shall be the first schedule to the Bill?
Lord Bruce of Donington: Before we part with this schedule, which has taken a lot of your Lordships' time, there are still one or two matters to which I should like to refer. These are matters on which it has not been possible or even thought desirable to bring forward amendments, but we should like the Government to consider them before the Report stage.
The first matter relates to paragraph 29 of Schedule 1 which contains a definition of "depreciation". It defines depreciation rules and, in paragraph 32, their application. I wonder whether it would be possible for the noble Lord to take another look at these provisions to see whether they could be put in rather simpler words. If we take paragraph 32, we find that it says:
"Where the value of any asset of a company is determined on any basis mentioned in paragraph 31 above, that value shall be or (as the case may require) be the starting point for determining the amount to be included in respect of that asset in the company's accounts, instead of its purchase price or production cost or any value previously so determined for that asset; and the depreciation rules shall apply accordingly in relation to any such asset with the substitution for any reference to its purchase price or production cost of a reference to the value most recently determined for that asset on any basis mentioned in paragraph 31."
With the best will in the world, I do not think that paragraph is one of the finest examples of the draftsman's art. These drafting questions are very difficult. Parliamentary counsel has to take into account every contingency, and one understands in relation to legislation that there has to be what appears to be convoluted language in order that the precise legal effect may be expressed. This one fully understands, and I am not trying to make a snide point about it. All I am saying is that I should be extremely surprised if any of your Lordships could readily understand paragraph 32 and rise forthwith and explain the precise point in very great detail. I think the Government might have a look at it to see if it is possible to produce some simpler form of words.
There is another point in relation to Schedule 1, namely, paragraph 43(b). It provides that where assets have been valued during the year, the names of the valuers or their qualifications and the bases used shall be given. On the assumption that revaluation of fixed assets under the indexation method in accounts prepared under the current cost convention constitutes a valuation under paragraph 31, then the requirement could be unduly onerous. In major groups a considerable number of valuers might be involved, resulting in a statement of excessive length. I think this ought to be looked at to see whether there is any way of

699
simplifying it. The reason I have mentioned these points on the Question that the schedule be agreed to is that quite purposely we did not submit amendments. The reason I raise them here is so that the Government are under notice that they really ought to do something about them before Report stage, at which stage we shall of course return to both these questions.
Lord Mackay of Clashfern: We will certainly look at what the noble Lord has said. Of course, the definition in paragraph 32 was not primarily designed for oral recitation and therefore it may not be particularly adapted for that purpose. Nevertheless, I think it is reasonably plain so far. But we will certainly look at what the noble Lord says, to see whether we can improve it even further.
Schedule 1, as amended, agreed to.
Clause 17 agreed to.
Schedule 2 [Preparation of accounts under Schedule 8A to 1948 Act]:
Lord Mackay of Clashfern Lord Mackay of Clashfern moved Amendment No. 20:
Page 98, line 42, at end insert—
("(aa) in paragraph 2(a), the word "preference" shall cease to have effect;").
The noble and learned Lord said: I have already explained this amendment. I beg to move.
Lord Bruce of Donington: We are happy to facilitate the amendment.
On Question, amendment agreed to.
Lord Lyell Lord Lyell moved Amendment No. 21:
Page 100, line 11, at end insert—
("(1A) Section 41(11) shall continue to have effect for the purposes of any Schedule 8A accounts.").
The noble Lord said: On behalf of my noble friend Lord Trefgarne, I beg to move Amendment No. 21. It might be for the convenience of the Committee if I were to speak also to Amendments Nos. 42, 43 and 44, as well as Amendments Nos. 167 and 169, which I think are the last amendments on today's Marshalled List. All these amendments deal with a fairly minor technical point and I hope your Lordships will find it helpful if, in dealing with the amendments, I point out that they take care of that one point.
Paragraph 41(11) of the 1980 Companies Act requires that any investment companies which determine their profits and losses under that particular paragraph shall treat assets which are neither fixed nor current assets as fixed assets; in other words, where there is any doubt as to whether an asset is a current asset it shall be a fixed asset. The fourth directive requires that all assets must be classified either as fixed or as current; it does not permit the prevision of paragraph 41(11) to be continued. The provision can be retained for those investment companies which continue to comply with the existing accounting requirements—that is, the Schedule 8A requirements—for the financial years before the directive becomes mandatory. The amendments to Clause 16, which
700
are Nos. 42, 43, and 44, repeal paragraph 41(11), and the amendment to Schedule 2 which I am moving now saves it as appropriate. The other amendments are consequential drafting amendments in line with the two amendments I have already spoken to. I beg to move.
On Question, amendment agreed to.
Lord Mackay of Clashfern Lord Mackay of Clashfern moved Amendment No. 22:
Page 100, line 17, after ("respectively") insert (" (and the consequential repeal of section 43(2) made in Schedule 4 to this Act) ").
The noble and learned Lord said: This amendment is consequential on the same point. I beg to move.
On Question, amendment agreed to.
Schedule 2, as amended, agreed to.
Clauses 3 and 4 agreed to.
Clause 5 [Companies entitled to the benefit of the exemptions for individual accounts, etc.]
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 23:
Page 8, line 44, leave out ("or").
The noble Lord said: I beg to move Amendment No. 23, which is purely a drafting amendment, leaving out the word "or". It would seem to me entirely noncontroversial.
Lord Mackay of Clashfern: Unless I have misunderstood, this "or" is left out for the purpose of the following amendment. It is uncontroversial only if the following amendment is accepted.
Lord Bruce of Donington: I will speak to Amendment No. 24, page 9, line 5 insert "or (d) an overseas bank". Clause 5(5) defines an ineligible group for the purpose of subsection (3) in relation to the exemptions for individual accounts described in Clause 6 of the Bill. As indicated in the enclosure of the consultative committee's letter to the Department on 31st December 1980, it would seem logical that an ineligible group should be defined as including a group any of whose members is an overseas bank. The point is a comparatively small one, but I beg to move.
Lord Mackay of Clashfern: As has been pointed out Amendment No. 23 is really a paving amendment for Amendment No. 24 which is the amendment of substance, and the purpose of this amendment is to render ineligible a group which contains an overseas bank. The policy of this part of the provisions is to render ineligible groups, or indeed companies, which carry on banking business in this country. That is the purpose of this provision. Perhaps there may be some misunderstanding about this. The reference to "an overseas bank" would not of course have the effect of making the company ineligible unless it carries on business in this country, and overseas banks which carry on business here but having their principal offices elsewhere will, of course, require an authorisation under the Banking Act 1979, and therefore be ineligible. Therefore, this amendment would seek to extend that

701
to deal with banking business overseas and that seems to be outside the purpose of this provision. Accordingly, in the light of that explanation, I would invite the noble Lord to withdraw this amendment and perhaps not move the following one.
Lord Bruce of Donington: I am grateful to the noble and learned Lord for his explanation, which has clarified the position so far as I am concerned. My Lords, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 24 not moved.]
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 25:
Page 9, line 17, leave out from ("above") to ("shall") in line 20.
The noble Lord said: The purpose of Amendment No. 25 which, by the leave of the House I will discuss together with Amendment No. 26, is to clarify the position in regard to the making of regulations. We desire that the regulations under subsection (7) shall not be made unless a draft containing the regulations be laid before Parliament and approved by resolution of both Houses. We do not believe that should be done merely when the regulations seek to reduce the class of companies. We want it to be generally applicable. Exactly the same purpose inspires us to eliminate the subsection 9. I beg to move.
Lord Lyell: The noble Lord has moved these two amendments together and it seems that they are addressed to the particular parliamentary procedure which is applicable to the power provided by subsection (7). Clause 5(7) gives power to the Secretary of State to modify the accounting exemption provisions by statutory instrument. These provisions are defined in sub-paragraph (6) as the provisions of Clauses 5 to 10. As we understand it, the amendment which has just been moved by the noble Lord, Lord Bruce, would require any regulation to amend the provisions of Clauses 5 to 10 to be subject to Affirmative Resolution.
Nobody could deny that Clauses 5 to 10 contain a wealth of detailed and technical references but it would be very surprising if over the light of the years to come and, above all, in the light of experience and also because of developments in accounting opinion and changes in circumstances in these matters and others, all these provisions in Clauses 5 to 10 were to remain absolutely inviolate, as they are now.
May I refer the Committee to one possibility? The fourth directive permits us to allow medium-sized companies to omit certain details of amounts which are payable after more than five years hence. The fourth directive permits such amounts, if need be, to be omitted from the notes to the accounts. We have not yet taken advantage of this provision but possibly in the future we might want to take a different view of the particular provisions—as indeed might any Government—and for this reason the Government does not consider that it would be right to require the positive procedure for the approval of regulations making amendments of that particular and rather detailed character. The approach that we have adopted in this particular clause is exactly that which is already enshrined in the Act. One example is provided in Section 454 of the 1948 Act, and we find provisions
702
there to alter or indeed to add to the requirements of all of the Acts as to matters to be stated in a company's accounts.
If the regulations to make the provisions are even more onerous than the Affirmative Resolution procedure is required; it is required at the moment. But otherwise the negative resolution procedure is normally used in both Houses. So far we do not have any concrete evidence that these provisions of Negative or Affirmative Resolutions have given rise to problems, or indeed to outraged comment, in the 33 years since 1948. I hope that my explanation might convince the noble Lord, Lord Bruce.
Lord Bruce of Donington: What the noble Lord, Lord Lyell, has just said fills me with despair. It looks very much as though having embarked, on an unprecedented scale, of legislating in the accounting field, it seems likely that we are now going to have a spate of regulations amending the existing provisions of the Bill, which are themselves quite complicated enough.
One of the banes in the lives of professional men is to keep an eye on an apparently unending stream of regulations which emanate from various Government departments. It is bad enough in the case of the Companies Bill, which has almost littered the country over the past two or three years, with an acceleration in company Bill legislation which will take a very considerable time to digest. Now to feel that we are going to be inundated with regulations every time that the EEC blinks an eye or every time a Commissioner gets some new idea about standardisation, or some new quirk about what information is required by the Commission, fills one with some dismay.
The reason why this amendment has been put down is to make it more difficult for the Government to start making regulations under this particular head, in the knowledge that if it does want to make regulations then at least it will have to go to the trouble of having the Affirmative Resolution in both Houses. Many Ministers have been known to be deterred from making too many regulations if the affirmative procedure is laid down. Indeed, that is the reason for which it is being done.
If the noble Lord, or if his right honourable friend, has any further thoughts in mind, buoyed up by the passing of this Bill through here and another place, and he wants to make yet further alterations, let him wait for a new Bill in which to do it. Let him give the professions and the commercial world generally time to digest this Bill rather than make any regulations. However, if he does want to make regulations, let him be compelled to go through the Affirmative Resolution way of doing it, which we hope will deter him from being too voluble in the legislative field. I beg to move.
6.31 p.m.
On Question, Whether the said amendment (No. 25) shall be agreed to?
Their Lordships divided: Contents, 57: Not-Contents, 72.

CONTENTS

Airedale, L.

Blease, L.

Amulree, L.

Blyton, L.

Ardwick, L.

Boston of Faversham, L.

703

Broadbridge, L.

Lovell-Davis, L.

Brockway, L.

McCarthy, L.

Brooks of Tremorfa, L.

Maelor, L.

Bruce of Donington, L.

Melchett, L.

Chorley, L.

Milner of Leeds, L.

Collison, L.

Mishcon, L.

Davies of Leek, L.

O'Brien of Lothbury, L.

Davies of Penrhys, L.

Ogmore, L.

Elwyn-Jones, L.

Oram, L.

Erroll, E.

Phillips, B.

Foot, L.

Ponsonby of Shulbrede, L. [Teller.]

Goronwy-Roberts, L.

Gosford, E.

Ritchie-Calder, L.

Hale, L.

Rochester, L.

Hampton, L.

Seear, B.

Hanworth, V.

Stewart of Alvechurch, B.

Houghton of Sowerby, L.

Stewart of Fulham, L.

Howie of Troon, L.

Stone, L.

Jacques, L.

Strabolgi, L.

Janner, L.

Taylor of Mansfield, L.

Kaldor, L.

Underhill, L.

Kilmarnock, L.

Wallace of Coslany, L.

Lee of Newton, L.

Wells-Pestell, L.

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

White, B.

Wilson of Radcliffe, L.

Lloyd of Kilgerran, L.

Young of Dartington, L.

Lockwood, B.

NOT-CONTENTS

Alport, L.

Kinloss, Ly.

Auckland, L.

Long, V. [Teller.]

Avon, E.

Loudoun, C.

Baker, L.

Lucas of Chilworth, L.

Belstead, L.

Lyell, L.

Bessborough, E.

McFadzean, L.

Boardman, L.

Mackay of Clashfern, L.

Bradford, E.

Mancroft, L.

Brougham and Vaux, L.

Mansfield, E.

Campbell of Croy, L.

Mills, V.

Chelwood, L.

Minto, E.

Clifford of Chudleigh, L.

Montgomery of Alamein, V.

Craigavon, V.

Mottistone, L.

Craigmyle, L.

Murton of Lindisfarne, L.

Dacre of Glanton, L.

Noel-Buxton, L.

Daventry, V.

Northchurch, B.

De L'Isle, V.

Nugent of Guildford, L.

Denham, L.

O'Neill of the Maine, L.

Donegall, M.

Orkney, E.

Eccles, V.

Pender, L.

Faithfull, B.

Penrhyn, L.

Ferrers, E.

Polwarth, L.

Ferrier, L.

Renton, L.

Forester, L.

St. Just, L.

Gainford, L.

Saint Oswald, L.

Glasgow, E.

Sandys, L. [Teller.]

Glenarthur, L.

Selkirk, E.

Gridley, L.

Skelmersdale, L.

Hailsham of Saint Marylebone, L.

Spens, L.

Strathclyde, L.

Halsbury, E.

Swinfen, L.

Harvington, L.

Tranmire, L.

Hertford, M.

Trenchard, V.

Holderness, L.

Tryon, L.

Hornsby-Smith, B.

Vaux of Harrowden, L.

Hylton-Foster, B.

Waldegrave, E.

Killearn, L.

Resolved in the negative, and amendment disagreed to accordingly.
[Amendment No. 26 not moved.]
Clause 5 agreed to.
Clause 6 [The exemptions for individual accounts]:
6.39 p.m.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 26A:
704
Page 10, line 7, leave out from ("by") to ("section") in line 8.
The noble Lord said: I beg to move Amendment No. 26A. The general purport of this clause is to exempt the directors of a company entitled to the benefit of exemption from the provision necessitating the disclosure of the aggregate amounts of directors' salaries. The deletion of Section 196 of the 1948 Act, which relates to the aggregate amounts of directors' salaries, would leave that responsibility still there, and we want it left there. We want the aggregate amount of directors' remuneration still be be disclosed in companies' accounts, although we concede that in certain instances the more detailed provisions of Sections 6, 7 and 8 of the 1967 Act possibly need not be provided. We simply seek to maintain the disclosure which would then still be required by Section 196 of the 1948 Act. I beg to move.
Lord Mackay of Clashfern: As the noble Lord has explained, his intention is to disallow the exemption on companies covered by this clause whereby they need not disclose in the information that they file with the registrar the aggregate amount of the directors' emoluments. That does not mean that they are not obliged to disclose it; it just means that they are not obliged to disclose it in the accounts filed with the registrar. They continue to have the obligation to disclose it to their shareholders, but in our view companies covered by this provision are sufficiently small and sufficiently personal in character to be entitled to this exemption so far as the other people are concerned.
Indeed, the amount one has to pay the directors of a small company of this sort may be of very real competitive interest. The directive allows this exemption, and we have taken advantage of it. The directive allows the accounts going to shareholders also to have the advantate of this exemption; but we have not availed ourselves of that. We believe that this is a very reasonable situation. Those who have an interest in knowing—the shareholders—will still know, in spite of the directive; the public at large, entitled by the directive not to have this information, will not have it because of the particular circumstances of these small companies. I would ask your Lordships not to agree with this amendment. In our view this is a valuable relief for very small companies from an obligation which could be onerous, without being of any real benefit to the public.
Lord Bruce of Donington: We take the view that creditors are also entitled to some information, information that they have hitherto been able to obtain. Creditors as well as shareholders are interested in limited liability companies and ought to be able to obtain information of this kind. It should be freely available. Shareholders and creditors are, of course, also more likely to be interested in the profit that emerges before directors' emoluments have in fact been charged. There is no reason at all why this particular exemption should now be granted.
I should like to draw your Lordships' attention to the problems that are very often created in cases where accounting firms are investigating instances of alleged fraud. Very often the only information that can be obtained by investigating accountants is by a system

705
atic search of company files, and with the existing obligation that is well-known for disclosure of directors' interests in other companies, other than the particular one that one is searching, one can obtain a vast amount of information as to the interests of particular directors in particular firms—all of them probably being small companies within the definition prescribed even in this Bill—and one is able to build up a comprehensive picture to suggest how the directors have failed in the various enterprises with which they are concerned.
Therefore, this kind of information is a very valuable tool in the hands of those who, on behalf of creditors of companies which have got into difficulties or which perhaps may get into difficulties, are making inquiries on their own behalf. One begins to hazard the view—and it is not in relation only to this particular piece of legislation, but it emerges as current thinking in the Government's reply to the interim report produced by the committee under the chairmanship of Sir Kenneth Cork—that there seems to be a gradual development of disinterestedness by the Government in the fate of creditors who have certain rights in relation to limited companies. I regret to say that this is another melancholy example of the way in which Government thinking is moving. I would sincerely hope that the disclosure requirement is not onerous. It has never proved onerous in the past. There does not seem to be any reason why it should not still remain. I must insist on the amendment.
Baroness Phillips: I do not often take issue with my noble friend—in fact, I very rarely do—but as the unfortunate company secretary of a very small trading concern which is limited, I am bound to say that I find that each Government—not necessarily this one—have heaped on small companies so much work that we now have the ridiculous situation that, out of a staff of six, one is there simply to deal with all the various matters that are required by law. Where you have directors who are not receiving any remuneration, you still have to make all the returns of their directorships of other companies.
I would plead that we want less work. Of course, we know that in seeking to obtain all the information, my noble friend has in mind very large companies, companies of a multi-national character. But I can assure him that many small trading concerns suffer the many requirements that Governments put upon them, and the situation is now quite out of balance. In fact, one often feels that the staff whom one employs are much occupied in returning information, which detracts from the opportunity to earn money for the company. I think that we are getting totally out of balance in company law, and I was horrified to see that there is to be yet another Act of Parliament to deal with these unfortunate small companies.
Lord Lloyd of Kilgerran: I am delighted to follow the noble Baroness, Lady Phillips, on this theme. I am also delighted to see that there is a division in the Labour Party on this important matter relating to small companies. I am impressed by what the noble and learned Lord, Lord Mackay of Clashfern, says—that this is an exemption of value to small companies. On the other hand, I have a little sympathy with the sub-
706
missions of the noble Lord, Lord Bruce, in this matter. I am not as distressed as he is, but the position of creditors should, I agree, be considered as a general matter.
Would it not be helpful of me to suggest that, as regards this part of the clause, the Government should limit this exemption to small companies. Small companies are now defined in the Bill. I am very glad that the noble Baroness, Lady Phillips, is present, for I am sure that I shall have at least one supporter for the rather drastic amendment that I shall shortly move. Would it not be a solution to the problem between the Government Front Bench and the Opposition Front Bench on this matter that the exemption should be limited to small companies, as defined in Clause 8 of the Bill?
Lord Mottistone: I should very much like to support what the noble Baroness, Lady Phillips, has said. If the noble Lord, Lord Lloyd of Kilgerran, would turn to line 35 on page 9, he would find that the whole of Clause 6(2) relates to small companies. The point he makes is covered. I should like to suggest that because it is small companies perhaps the noble Lord, Lord Bruce of Donington, would like to think again, because surely the creditors, whose interests must be supported, will obtain more than enough information from other sources without having this particular piece of information which the Bill seeks to cut out.
I should have thought that he was making a bit of a mountain out of this molehill, when one bears in mind that we are talking only about small companies, on whom the burdens are onerous. Anybody who has had anything to do with small companies—I am sure that the noble Lord has—will know that increasingly, just as the noble Baroness, Lady Phillips, said, they are having to provide more and more information from all sorts of sources for all sorts of Government departments. If we can cut down on that—and I should have thought that this was a reasonable area where we could—the directive, as we are told by my noble and learned friend the Minister, allows us to do it. Therefore, it is being given special thought within Europe as a whole, and I should have thought that it was not something we wanted to make a great issue about.
Lord Bruce of Donington: I am most reluctant to impose any extra burdens on small companies—even small companies as defined within this Bill. But the idea that the insertion in the accounts of the total of directors' emoluments imposes enormous burdens on company secretaries, staff, bookkeepers and everybody else is taking things a little too far. All that happens is that the accountants who prepare the report just specially segregate this item. There is no inconvenience to the company whatsoever. To say that it is an extra burden on a company is stretching imagination a little too far.
I still stand on the proposition that the directors' emoluments in the small company are a matter of legitimate interest both to shareholders and to creditors, and therefore should be known. However, in view of the sentiments expressed in the Committee on the matter I have no intention of pressing the amendment. I shall return to a similar theme at a later stage affecting

707
a rather larger area. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
6.54 p.m.
Lord Lloyd of Kilgerran Lord Lloyd of Kilgerran moved Amendment No. 27:
Page 11, line 13, at end insert—
("(6A) Notwithstanding anything in the Companies Acts a small company within the meaning of section 8 of this Act having a turnover not exceeding £50,000 and a balance sheet total not exceeding £25,000 shall be exempt from filing and publishing its annual accounts.
(6B) Any creditor of such small company as defined in subsection (6A) above shall have the right to inspect and receive a copy of the annual accounts as certified by the qualified secretary of that small company and that right shall be enforceable by the Registrar.").
The noble Lord said: The object of Amendment No. 27 is to endeavour to reduce the expense, both in time and money, to small companies as I have defined them in this amendment. When I spoke on the previous amendment I had in mind my definition of small companies as in this amendment. Perhaps I was not quite clear in my submission on that previous amendment. I am unashamedly a strong supporter of the Prime Minister in her oral and published announcements that it is necessary, in the economic interest of this country, to encourage new companies and small companies. We have heard this from time to time.
Here, with this amendment, I am giving an opportunity to the Front Bench of the Conservative Party to put into practice, perhaps for the first time, a real, basic encouragement to small companies. I was happy to see the noble Lord the Chairman of the Conservative Party present earlier, and I had hoped that pressures of other business would not have taken hint away from his place, so that he could hear my submission in regard to Amendment No. 27. Definitions of what is a small company are difficult. I am sure that the noble Lord, Lord Mottistone, would agree with me. My definition of a small company for the purpose of this amendment is that it should have a turnover not exceeding £50,000; nor should it have a balance sheet total exceeding £25,000.
There is no magic in those figures. Other figures, preferably smaller, would probably be helpful to a large number of small companies. What I say in this amendment is that notwithstanding anything in the Companies Acts a small company, as I have defined it,
"shall be exempt from filing and publishing its annual accounts."
According to the practice in Germany, it is only companies over a certain size which, by regulation or by law, have to publish their accounts. I am advised that that is the position there.
The second part of my amendment relates to the position of a creditor. Obviously, as the noble Lord, Lord Bruce of Donington, indicated earlier, the position of a creditor must to some extent be safeguarded. Therefore, while the first part of my amendment sets out that the company shall be exempt from filing and publishing its annual accounts, there is one circumstance where it has to produce further information: if there is a creditor of a small company, as I have defined it, he shall have the right to inspect and receive a copy of the annual accounts of that small company. Those annual accounts shall be certified by the qualified
708
secretary of that company. If there is any dispute arising between a creditor and the small company, as I have defined it, then that right shall be enforceable by the registrar of companies.
It seems to me that this amendment would be helpful to the small company of a turnover of under £50,000. The noble Baroness, Lady Phillips, has indicated the pressure on small companies. This does not need any elaboration by me. I feel that here is the opportunity for the Government to make a step forward in relation to assistance to small companies. I beg to move.
Lord Mackay of Clashfern: I would certainly support the sentiments that the noble Lord, Lord Lloyd of Kilgerran, has expressed in relation to relieving the burden on small companies as much as possible. That is a fair part of the object of what we are doing here, and it is unfortunate, in a way, that Acts of Parliament are required in order to do that. One cannot achieve that in this area without an Act of Parliament. I also should like to express my appreciation of what the noble Baroness, Lady Phillips, said on that subject. It is an unfortunate corollary that one has to do it in this particular way.
Unfortunately we cannot take our enthusiasm so far as Lord Lloyd of Kilgerran's amendment, for the reason that this particular exemption is not allowed by the directive. If it be the position in Germany, as he explained to us, that this sort of exemption is available at the moment, then when the directive is implemented by West Germany it will no longer be the case as we understand it. We have endeavoured in this area to take as full advantage of the exemptions contained in the directive as we could. Accordingly, we feel that this particular amendment would put us in breach of the directive, and therefore we could not advise the Committee to support it.
Lord Lloyd of Kilgerran: I am grateful to the noble and learned Lord for that explanation, but I am a little surprised that we are being so closely governed by directives of the EEC on a matter of such consequence to the small companies of this country. When I explained to the Committee the position of a creditor and how the creditor's position was safeguarded, I should have added that I am advised that that is the position in Switzerland. I fully realise that Switzerland is not a member of the EEC. In view of the statement made by the noble and learned Lord, I will endeavour to check whether that is the precise position and whether any amendment of the directive would be feasible, if not now then later, and in those circumstances I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Viscount Long: I beg to move that the Committee do now adjourn during pleasure until 7.45 p.m.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 7.1 until 7.45 p.m.]
Committee stage resumed on Clause 6.
House again in Committee on Clause 6.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 27A:

709
Page 11, line 22, leave out from ("Act") to end of line 25.
The noble Lord said: With this amendment I should like to take Amendment No. 27B, since in each amendment the point is almost exactly the same, and I feel that both amendments can be dealt with together, if your Lordships' Committee agrees. I do not see why medium-sized companies should be exempt from the responsibility to provide particulars of their turnovers. The medium-sized company, at any rate as defined in the present Bill, is really of quite substantial size. Its results are quite significant, and its performance figures are a matter of interest not only to the company itself and its shareholders, but to the public as well. There are quite a large number of medium-sized companies, even within the current definition of such companies, and the aggregate results of their activities are of public interest. There does not seem to be any reason why they should be exempt from providing particulars of their turnovers, though I willingly concede that a case could easily be made out for a small company which is already exempt from filing a profit and loss account.
Let us consider the modified profit and loss account that is referred to in subsection (8). In my view the various "addings together" that can be accomplished in the actual formats that are put forward can result in a situation where quite insufficient particulars are revealed. I do not see any particular reason why a medium-sized company should not be required to provide particulars. Format 1 refers to turnover, cost of sales, gross profit, and other operating income. That may be a convenient form of shorthand for the company, but I should have thought that there was a public interest, and even a creditor interest for that matter, in obtaining the particulars that are set out in the format, whether it is Format 1, Format 2, Format 3 or Format 4. No good reasons have been adduced as to why there should be exemption in these particular cases. Such reasons need to be advanced. I think that there is an overwhelming case for adhering to the requirement to state turnover and particulars of gross profit, as set out in the formats. I do not see any reason why a medium-sized company should be exempt from that requirement. I beg to move.
7.50 p.m.
Lord Mackay of Clashfern: As has been explained by the noble Lord, the amendment would remove the exemption given whereby a medium-sized company need not file with the Registrar particulars of its turnover, as required to be given by paragraph 55 of Schedule 1, in its accounts drawn up for shareholders. I should have thought that this amendment displays a somewhat grudging attitude to the medium-sized company.
When the Government undertook consultations on the implementation of the fourth directive it was very strongly impressed upon us that information relating to turnover is particularly sensitive for medium-sized companies. If such information was required to be placed on the public file—and this would be the effect of accepting the amendment—the provisions would have the effect that the various classes of turnover would require to be separated out. For example, if different markets were supplied the turnover attributable to each market would have to be separated out from
710
the rest. Although there is a provision that this information need not be disclosed if it is seriously prejudicial to the interests of the company I would suggest that, in the case of a medium-sized company, even if it is not split up in that way it would be possible to infer a great deal from the accounts that one could not infer in the case of a larger company, where the figures would be subsumed in larger aggregates in their accounts.
The other point I should like to mention is the risk that if we were not to take advantage of an exemption given by the directive our medium-sized companies would be at a disadvantage in relation to their competitors in Europe, who could come along and make an analysis of this material in their accounts. On the consultation the Government considered very carefully where the correct balance lay and concluded that we should take advantage of the exemption to the extent of relieving medium-sized companies from the obligation to file this information with the registrar. The directive would also entitle us to exemption from giving this information in the accounts for shareholders, but the Government concluded that it would not be wise to go that far. Accordingly, I would suggest that this particular exemption is well given to medium-sized companies.
If one goes on to look at the next amendment that the noble Lord has mentioned—and I am content to do that—it is a little difficult to see what exemptions he proposes to give medium-sized companies at all. It would seem to us that medium-sized companies are an important group and that some exemptions—and the ones we have suggested for them we think are the right exemptions—should be given to them. I would hope that your Lordships would not support this amendment.
Lord Bruce of Donington: Before the noble and learned Lord sits down, could he refer the Committee to that portion of the EEC directive, which I have in front of me—and, indeed, it would assist me—where these exemptions are given to medium-sized companies? So far as I am aware—I may he wrong—in the EEC directive there are only two kinds of company, the small company and the rest. Perhaps I am wrong in this, but it would certainly be to my assistance if the noble and learned Lord could refer me to it. I have Article 11 in front of me, in which it is said that member states may permit companies which, on their balance sheet dates, do not exceed certain criteria, to draw up abridged balance sheets.
Lord Mackay of Clashfern: The articles are Article 27 and 47(3) of the directive, on page 80. The criteria, of course, have to be translated into sterling from the European units of account.
Lord Bruce of Donington: I am greatly obliged.
Lord Lloyd of Kilgerran: As the noble and learned Lord is assisting the noble Lord, Lord Bruce of Donington, to find things in the directive, I wonder whether it would save time if at some stage convenient to the Government they could let me know where is the objection in the directive to my Amendment

711
No. 27. It is probably out of order for me to ask that, but the noble and learned Lord did say that he had sympathy with the theme of my amendment to help small companies but he was precluded from doing anything to help them because of the fourth directive.
Lord Mackay of Clashfern: It is perhaps not in order, out if I can be out of order only very briefly the answer is that the obligations cast on small companies may be relieved to a certain extent, and the extent that the noble Lord was asking for in his Amendment No. 27 goes beyond what the directive allows. Article 47(1), I think, is the relevant one.
Lord Lloyd of Kilgerran: With the leave of the Committee, I fully gathered that that was the position, but I wondered whether it was possible to guide me to the exact passages in the directive on this matter.
Lord Mackay of Clashfern: Article 47(1) is perhaps the best reference I can give. Perhaps I can guide the noble Lord more fully outside the Chamber, if necessary.
Lord Bruce of Donington: I am grateful to the noble Lord for having directed my attention to those parts of the directive. In so far as our affairs in this country are concerned, I am still not convinced that we should of necessity keep meticulously to those items in the directive itself. We still have a very wide discretion in these matters; and I would have thought that the more information one can get about the performance of significant sections of the economy, the better. I am talking now of the practice of the art or science of econometrics, where it is desirable to obtain national statistics in regard to the performance of various industries, both as regards sales and even the division of sales, where this can be done without adverse effect upon the companies concerned. I would have thought that the more we were able to measure these various factors on a macro-scale, taking into account the various component factors, the better it is, because there is already an exemption if any harm is going to be done to the firm concerned.
Nor would the disclosure of these particulars impose any particularly onerous obligation on the company. The company, if it is going to conduct its affairs satisfactorily and is going to manage them satisfactorily, will have all the figures readily available anyway. All that needs to be done is for them to be assembled by the accountants and ultimately approved by the auditors, which, as I say, is not an onerous obligation imposed upon the company's staff. I would have thought that it would have been in the public interest that this quite significant section of the economy should reveal its essential business factors where, as I say, competition is not particularly involved and where the individual interests of the firm are not adversely affected thereby, rather than allow them to remain within the confines of the company itself.
Of course, we can quite understand those whose firm philosophy it is that the ultimate aggregation of the figures in terms of their measurement is really of very little significance to the country or anybody anyway; that these are essentially private affairs, that in due course competition takes care of everything,
712
and there really is not any necessity for economists to know very much what is happening in the private sector of the economy anyway. This is a tenable proposition, but it is not one that I hold. I would have thought that, on balance, the advantage lay, particularly in the case of the medium-sized companies—I can see the point with regard to the small ones, but particularly with regard to the medium ones—in these particulars being disclosed.
On Question, amendment negatived.
On Question, Whether Clause 6 shall stand part of the Bill?
8 p.m.
Lord Bruce of Donington: There is one further point in connection with Clause 6 which I should like the noble Lord to consider with a view to an amendment possibly being introduced by the Government at the Report stage or, at any rate, to consideration being given to it. At the present time when we are discussing the exemptions for individual companies, the exemption in the case of small companies means that, if the provisions of this Bill apply, they will only have to file a modified balance sheet. That balance sheet, if the format is adhered to, will not have to state what profit is made in the year. If the noble Lord looks at the format for any of the balance sheets he will find that all that is required to be stated on the balance sheet is the balance on the profit and loss account. Consequently, a small company will not have to give any indication on its filed document as to whether during the year it made a profit or not; because all that will appear on the abridged balance sheet is the one item, the profit and loss account.
I cannot believe the Government intend a position to obtain where any creditor inspecting the file of the small company is not to be informed whether or not during the last financial period, or the financial period before, it had made a loss or a profit. I cannot believe that that is the intention of the Government. After all, the public have, I agree, a residual interest, but certainly an interest, in what happens to small companies. Otherwise there is no point in their filing anything at all.
Perhaps some provision can be made by way of addition to the notes required whereby the item of profit and loss account in any one of the formats selected by the small company as being the one under which it files can be extended into an appropriation account showing at least the balance on the profit and loss account at the commencement of the year under review, and then the addition to or subtraction from any profit or loss made during the year immediately prior to the date of the balance sheet submitted. This, I think, is absolutely minimal. If a small company, by virtue of being small, is to give no indication of what its last year's results were, whether it was trading at a loss or a profit, then I do not see any point in its filing even a modified balance sheet.
I think, once again, that on Clause 6 there is still an overwhelming case for the directors' emoluments in the small company to be stated; otherwise no one can know what the profit before directors' remuneration was, and this is the figure in which there is a fundamental interest. Is the noble Lord prepared to contemplate a situation where a small company

713
makes a profit of, say, £70,000 before charging directors' emoluments and directors' emoluments can be charged at £75,000, producing a loss of £5,000? Is the noble Lord prepared for an incident of that kind? I am only picking a figure out of the air. Does he think it right that that position should remain undisclosed on the company file when, in fact, the very extent of the remuneration itself may have imperilled the company's continued existence and may be therefore of quite legitimate interest to the creditors?
No creditors are popular, particularly one's own. When one is a creditor oneself then the position becomes a little more acute. I would draw the attention of the Committee to the fact that when we are talking about the creditors of small companies, we are often talking of other small companies with whom those small companies trade. There is in this a commonality of interest. I think these matters should receive the noble Lord's consideration and I hope that he may feel able to respond. These are matters to which I think it right to return at the Report stage, and we hope he will be prepared to meet us on that occasion.
Lord Mackay of Clashfern: I share that hope. Our belief is that we have reached the balance due in the light of the consultation; and the interests of small companies as creditors in the affairs of others will be present in the minds of those representing small companies in the consultation. We feel that the results in this clause are reasonably balanced, taking into account the exemptions and giving effect, as far as possible, to the reliefs that small companies are entitled to under the directive. Accordingly, we hope that in due course the clause will stand part of the Bill. We shall consider later any amendments that the noble Lord might suggest.
Lord Lloyd of Kilgerran: The noble and learned Lord has emphasised that he has to have certain strict rules arising out of the exemptions which are set out in the directive. The noble Lord, Lord Bruce, indicated that even though it would appear that any amendment put to the Committee could not be accepted by the Government because of the terms of the directive, there was some discretion in the matter by the Government. Would it be convenient for the noble and learned Lord to indicate the kind of discretion that the Government can give in regard to certain exemptions such as the one I indicated about small companies recently?
Lord Mackay of Clashfern: Taking the exemptions we are talking about in these amendments, the directive entitles one to go up to a certain limit and the Government had to consider whether to go to the full extent of the limit or something less in the definition of those companies which would benefit as small and medium-sized companies. That is the nature of the discretion which arises under the kind of exemptions that we talk of in Clause 6.
Clause 6 agreed to.
Clause 7 [Provisions supplementary to section 6]:
Lord Lloyd of Kilgerran Lord Lloyd of Kilgerran moved Amendment No. 28:
Page 13, line 12, at end insert—
("( ) In respect of all accounts of small companies requested
714
in accordance with section 6(6B) the certification of such accounts by the Secretary of the company shall be accepted in lieu of an auditors report unless such report is ordered by the Registrar of Companies.").
The noble Lord said: This is another attempt to assist the small companies, to save them time and money in regard to their official requirements under the law. The amendment is directed to small companies having—
Lord Mottistone: Does the noble Lord not believe, in view of the fact that he withdrew Amendment No. 27 and there is now no Section 6(6)(b), that therefore this amendment has no point to it?
Lord Lloyd of Kilgerran: I expected somebody from the other side to point out to me that technicality. I was coming to the point. The real reason why I mentioned Section 6(6)(b) in my amendment was to define the nature of the small company to which I was referring. Therefore, I would have submitted that I was in order in moving this amendment because my reference to Section 6(6)(b) is a reference to the previous amendment (which was not accepted) in order to define the kind of small company I am dealing with. I await any decision on this matter. If the noble and learned Lord is going to take that very technical point, I shall have to reconsider the position at Report stage.
I am also asked to remind the Committee that there is an error in the Marshalled List. Amendment No. 28 should refer to page 13, line 8. When this amendment was put down through the usual channels it was not indicated in the copy of the Bill as printed that the first four lines on page 13 had been deleted.
If I may continue with my submission in regard to what I say is a helpful amendment to small companies whose turnovers do not exceed £50,000 and having a balance sheet total not exceeding £25,000, the certification of any accounts should be made by the secretary of the Company. This certification should be accepted in lieu of an auditors' report unless such a report is required by the Registrar of Companies. In effect, the amendment is intended to save expense to the small company, as I have defined it, from having to go to the expense of a full auditors' report.
When I raised this matter on Second Reading, the noble Lord, Lord Lyell, replied that so far as the cost element was concerned, the little information which was available to the Government—and indeed the general public—about the cost of the audit of small companies did not suggest that it was excessive in relation to the benefits to shareholders, creditors and indeed to the small companies and small businesses themselves. The noble Lord was good enough to say that the Government had only a little information. I have made inquiries of small firms of accountants which are dealing with small businesses which have a turnover of under £50,000. I am given figures of this order. To produce a balance sheet would cost some £300 or £400. To produce an audit it would cost the company something of the order of £800 to £1,000. The expense is not inconsiderable to the smaller company. I should be very much obliged if the Government could see their way to relieve this kind of company of having that kind of audit and enable it to rely upon accounts as certified by the secretary.
Most companies employ fully qualified men as their

715
secretaries. The secretary of the company has very wide powers. He represents the company to the outside world. He is a person responsible for complying with the law and seeing that the company complies with the law. His responsibilities are very great indeed. I should have thought that it would be a great help to a small company, instead of having to go to the expense of an audit, that creditors and other persons requiring to see the accounts would accept them as certified by the secretary of the company, always giving the creditor who is not satisfied with the accounts the opportunity to apply to the registrar of companies who would order an audit in those circumstances. I beg to move.
Lord Mottistone: May I suggest that the calling and the speaking to this amendment is out of order in view of the fact that Amendment No. 27 was withdrawn? There is therefore no Clause 6(6B). This clause is meaningless and speaking to an amendment can only have the ultimate object of the amendment being incorporated in the Bill. But if the amendment were to be incorporated in the Bill, it would be a nonsense because it would be referring to something which had already been rejected by the Committee. I should have thought that it is out of order to speak to it and indeed to progress further with this amendment.
Lord Lloyd of Kilgerran: I am very much obliged for the helpful submission made by the noble Lord, Lord Mottistone. I tried to explain that there was a technical difficulty in that the whole object of referring to Section 6(6B) was to refer to the previous amendment in order to define the scope. I see the noble Lord, Lord Mottistone, wishes to intervene. I have given way to him on several occasions, and so may I conclude? The object of having this reference to Clause 6(6B) is merely to define the kind of small company which I have in mind.
Lord Mottistone: May I suggest to the noble Lord that the way he could have done that, as he was talking to an imaginary and non-existent subsection, would have been to talk on the Question whether Clause 7 should stand part of the Bill, and not take up the time of the Committee in dealing with an amendment which is meaningless.
Lord Lloyd of Kilgerran: I apologise if I am taking up the time of the Committee, but I think I have made my point clear. If the noble and learned Lord the Minister cares to take that technical point, I shall be happy to withdraw the amendment.
Lord Mackay of Clashfern: The noble Lord sees difficulties in his amendment as it stands. The Government considered this question of the auditing of the accounts of small companies. In the light of replies that we received on consultation we conclude that the interests of shareholders and creditors—and these have been referred to—required that we should ask that the small companies should continue to require to be audited. I hope that is sufficient on the substance of the matter to enable the noble Lord to withdraw
716
the amendment.
Lord Lloyd of Kilgerran: I am very much obliged to the noble and learned Lord. I fully appreciated that he probably would not take a technical point of the order raised by the noble Lord, Lord Mottistone. In the circumstances, I propose to withdraw this amendment and raise the matter again on Report.
Amendment, by leave, withdrawn.
Clause 7 agreed to.
Clause 8 [Small and medium-sized companies]:
8.17 p.m.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 29:
Page 14, line 6, leave out ("£1,400,000") and insert ("£500,000").
The noble Lord said: With the permission of the Committee and in order to save time, I propose to discuss with this amendment Amendments Nos. 29, 30, 32, 33, 34 and 36. The same principle is involved in each case. The amendments that we seek to make concern companies that qualify for treatment as small companies. Roughly speaking, their turnovers are less than half the figures which are stipulated in Clause 8(2). The amendments stipulate that the balance sheet should be £250,000 instead of the £700,000 in the Bill, and the average number of persons employed would be 30 instead of 50. In so far as medium-sized companies are concerned, we set the limits of the turnover rather lower. In the Bill, the amount of turnover is stipulated to be £5,750,000 and we prefer £3 million. We prefer balance sheet totals of £1,500,000 as against £2,800,000 in the Bill. We prefer 100 as the average number of employees, instead of 250.
These are what we consider to be reasonable figures, bearing in mind the extent of the exemptions that are given to small companies. To give the exemptions which we have already discussed in our debates today and to define as "small" a company whose turnover does not exceed £1,400,000 with balance sheet totals of £700,000 and which employs 50 persons is setting the limits of "small" higher than we would wish. Similar reasons have impelled us to scale down the various financial levels which determine whether a company can come into the medium-sized category. This, we think, is a matter of common prudence.
It may well be, as no doubt the noble and learned Lord will point out, that these to some extent conflict with the limits set out in the fourth directive, but once again, as the noble and learned Lord is well aware, we are not bound in every meticulous detail of the directive. We have a very wide discretion and we should adapt it to British conditions. I repeat that the size is of some significance when one comes to consider the various exemptions and privileges given to the various grades of companies. On the assumption that the various exemptions remain substantially unchanged from what they are in the Bill, we would commend to the Committee our proposed new limits, and I beg to move.
Lord Mottistone: I see the point of what the noble Lord, Lord Bruce of Donington, has to say. It is very difficult to strike the right figure for this purpose, but in this country the best assessment of the size of a

717
small company was that contained in the Bolton Report, about 1967 or 1968, in which Bolton, for manufacturing, hit on the figure of 200 for small companies and on a very much lesser figure—more like 20—for retail companies. There is a great difference between the two. I rather forget the retail one, but I certainly remember the manufacturing one.
If you look at these figures, which I am sure my noble and learned friend the Lord Advocate will tell us are based on the directive, you will find that the small company, in manufacturing terms, at any rate, in a sense, as defined in subsection (2) is on the small side. So, too, in those terms is the medium-sized company, because if the small manufacturing company is 200, the medium must be a good deal more than that, and 250 would seem to be pressing it down; so all I am saying to noble Lords opposite is that one sees the problem—and it creates all sorts of other problems, this business of hitting upon a figure for definitions, and I shall say more about that when I come to deal with my own amendments in this area. But so far as Britain is concerned, which was the point made by the noble Lord, Lord Bruce, our only really authoritative document on the general subject of how to measure what a small company is, on the whole goes higher, rather than lower, than these two clauses. Therefore, I should have thought that if one were trying to "muck about" with this—if indeed one can, because I suspect that there is not room for derogation in this area, though no doubt my noble and learned friend will tell us whether that is so—one wants to turn to Bolton rather than to the figures which the noble Lord and his friends have tabled in their amendments.
Lord Mackay of Clashfern: As has been explained, these amendments seek to lower the thresholds in subsections (2) and (3) of Clause 8 under which companies may qualify on the basis of turnover, balance-sheet total and the number of employees, as small or medium sized. They would reduce significantly the number of companies able to take advantage of the accounting exemptions applicable to such companies as listed in Clause 6. As I believe the Government have demonstrated—and the noble Lord, Lord Lloyd of Kilgerran, referred to the statements of my right honourable friend the Prime Minister earlier—the Government wish to assist the small and medium-sized company sector of our business community wherever it is possible and where it is reasonable to do so. We regard small companies as vital to our future economic prosperity. We have therefore set the threshold at virtually the maximum permitted by the fourth directive for the classification of small and medium-sized companies in order that the maximum number of companies may take advantage of the exemptions.
We consider that this is the right thing to do in the light of the consultation that we held on implementing the directive. We cannot go further up because the directive itself puts ceilings on it, but clearly it would be open to us to come down; and what noble Lords opposite are asking us to do is to come down. We could do that, but in our view it would not be right to do so. In seeking to reduce the threshold by the extent proposed, noble Lords opposite appear to take a somewhat grudging attitude towards exemp
718
tions for small and medium-sized companies. They are not opposing the principle of the exemptions but are trying, in effect, to make them of minimal impact.
Our approach has been, and is, quite different. What we have done is to weigh up in the light of the views expressed, as I said, in very extensive consultations on this matter, the various interests and concerns of companies themselves, of their shareholders, their creditors and other users of accounts. The accountancy provisions in this Bill amount to a carefully considered balance of these interests. Shareholders will continue to get full information—that I regard as very important—and accounts will still have to be audited. That of course is what we were discussing a moment ago. The information, therefore, will be there and in a proper form; but if medium and small-sized companies wish—and the choice will be theirs they will be able to file modified accounts. With that balanced and rational approach, in the Government's view we are fully justified in enabling as many companies as we can, under the terms of the fourth directive, to take advantage of the exemptions.
I mentioned earlier a further point: it is an important one and I think it is right to mention it again in this context. The thresholds proposed by the noble Lord, Lord Bruce, would almost certainly put our companies at a competitive disadvantage with some of their European counterparts which are very likely to adopt the maximum thresholds allowed by the directive. It is therefore very important that we should set the levels as high as possible, as has been done in the Bill: otherwise this information would be open to European companies, competing at the same level with our companies, whereas the corresponding information about them would not be available to our companies. We would regard that as a very important point and I hope that in the light of all these considerations your Lordships will not feel able to support these amendments.
Lord Bruce of Donington: I have listened to the noble and learned Lord very carefully. There seems to be a complete misapprehension in his mind as to what constitutes a relief to small and medium-sized businesses. No matter what form of accounts are submitted to the Registrar of Companies and what accounts are filed, whether they are in a full or an abridged form, the fact is that having certain concessions as to filing and making public certain parts of their accounts does not mean that the company itself or its accountants will be relieved of the burden of preparing the accounts as usual. The accounts of the company, in whatever form they may be filed with the registrar, have to be prepared anyway and there may be many cases in which the submission of abridged accounts, in addition to those already prepared on behalf of a small company by its accountants, may represent an additional cost. It does not seem to be appreciated that these so-called reliefs are more cosmetic reliefs than actual reliefs in any cost. The exemptions merely mean that not quite so much information is available as was formerly available to creditors.
There has been much discussion as to what constitutes "small", and the noble and learned Lord opposite was kind enough to refer to this aspect of the matter. I am one of those who believe that small is

719
beautiful, at any rate in the manufacturing sense of the term. Within the context of what, in managerial circles, we would call a social unit of production, where people can identify with one another and be part of a general production team, then 200 or 300 is probably about right. But there, within the social and organic context, we are talking about a small firm as a productive unit.
I am not using the terms "small", "medium" and "large" within that connotation at all. The only use that "small" and "medium" has here is to entitle companies which fall within the definition to certain exemptions from accounting and disclosure provisions. This is the reason for the terms "small" and "medium". There is no comparison with what the noble and learned Lord would understand as "small", from the managerial point of view or even from the point of view of an economist. Smallness, in that sense, is not connected with any smallness that we have here. Smallness here is concerned purely with ensuring that certain information is not made freely available.
It is not only a question of the shareholders and creditors being entitled to information. No matter how small a firm is, the ordinary person who works there has more than a passing interest in the fortunes of the company. The ordinary salaried employee, who spends his life in a small-or medium-size company, is also a producer of wealth. Is he not entitled to know? Perhaps, if he cannot get the information from the firm in which he works, he can go along to the company's file and see what the results were. That seems to be reasonable.
No; the figures here have been set too high with the object of not making information available to interested parties outside the firm, but parties who have social connections with the firm, since all firms are part of society as a whole, with the object of keeping as much information to itself as possible. We on this side do not think that this meets the public interest and we shall press the amendments to a Division.
Lord Mottistone: Before the noble Lord sits down, would he not perhaps agree that the one thing he has missed out, the important point which my noble and learned friend made—and the noble Lord has done this consistently over the last few amendments that he has been speaking to is the competitive aspect? In fact, at one stage he said he did not think that competition was a very good thing, or words to that effect. I think the noble Lord was exaggerating when he talked about the work force, because we are talking about small firms, by any standards, and people in such firms can know what is going on in a way that cannot happen in a bigger one. One does not have to think too deeply about that.
But the most important point that my noble and learned friend made is that competitors will get vital information. As he also said, in a large firm the information is buried within other information and is difficult to extract. But the smaller the unit, the easier it is to learn from what you see in the accounts, if they are made public. It is in this area where the noble Lord is exaggerating the disadvantages to the other kinds of people, such as the creditors, and is not giving enough attention to the competitors. I would
720
ask the noble Lord to think again before he presses this amendment any further, because I should have thought he might think he was overdoing it and might like to think about it and bring it back at another stage.
Lord Bruce of Donington: I am most grateful to the noble Lord for his courtesy in giving me time to reconsider. I should like to assure the noble Lord that I, too, have considered the competitive factor. I have asked myself the question in regard to competitors overseas, particularly in the EEC on the other side of the Channel: what real, competitive information would be conveyed to them by, for example, particulars of a company's turnover and factors of that kind? In other words, what competitive edge is given to overseas competitors by the inspection of statistics relating to turnover, gross profit ratio and matters of that kind. I have come to the conclusion that the risk is a comparatively small one; in fact, a very small one indeed. I can understand overseas competitors wanting to find out details of secret processes. I can understand them wanting to find out know-how and so on. But I do not feel that the revealing of particulars of this kind could be regarded as exposing our companies to all that overseas competition. If that be the case, then successive Governments back over many years stand very considerably indicted by the amount of statistical particulars, relating to companies' performance, that already resides on companies' files and has done for the past 40 or 50 years.
Lord Mottistone: if a competitor is not going to gain from this information, who else is going to benefit? How can a creditor learn anything worth while from these apparently worthless statistics?
Lord Bruce of Donington: Simply because, normally speaking, the creditor himself has a financial relationship with the company. The creditor is not in competition with the company as such. He is very often a supplier to the company and is not trying to beat the company at its own trade. The relationships of creditor and company and competitor and competitor are—as I think even the noble Lord must admit—slightly different.
8.38 p.m.
On Question, Whether the said amendment (No. 29) shall be agreed to?
Their Lordships divided: Contents, 25; Not-Contents, 53.

CONTENTS

Blease, L.

Northfield, L.

Boston of Faversham, L.

Pitt of Hampstead, L.

Bruce of Donington, L.

Ponsonby of Shulbrede, L. [Teller.]

Collison, L.

David, B.

Ritchie-Calder, L.

Goronwy-Roberts, L.

Stewart of Alvechurch, B.

Hale, L.

Stewart of Fulham, L.

Houghton of Sowerby, L.

Stone, L.

Irving of Darftord, L.

Strabolgi, L.

Jeger, B.

Underhill, L.

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

Wedderburn of Charlton, L.

White, B.

Lockwood, B.

Young of Dartington, L.

Mishcon, L.

721

NOT-CONTENTS

Airedale, L.

Hornsby-Smith, B.

Alport, L.

Killearn, L.

Auckland, L.

Lloyd of Kilgerran, L.

Avon, E. [Teller.]

London, Bp.

Bellwin, L.

Long, V. [Teller.]

Belstead, L.

Lyell, L.

Boardman, L.

McFadzean, L.

Bradford, E.

Mackay of Clashfern, L.

Brougham and Vaux, L.

Masham of Ilton, B.

Caldecote, V.

Montgomery of Alamein, V.

Chelwood, L.

Mottistone, L.

Chorley, L.

Murton of Lindisfarne, L.

Cockfield, L.

Noel-Buxton, L.

Craigavon, V.

Seear, B.

Drumalbyn, L.

Selkirk, E.

Dulverton, L.

Skelmersdale, L.

Elton, L.

Strathclyde, L.

Evans of Claughton, L.

Sudeley, L.

Ferrers, E.

Swansea, L.

Ferrier, L.

Swinfen, L.

Forester, L.

Tranmire, L.

Gainford, L.

Trenchard, V.

Glasgow, E.

Trumpington, B.

Glenarthur, L.

Waldegrave, E.

Gridley, L.

Wilson of Langside, L.

Hampton, L.

Winstanley, L.

Harvington, L.

Resolved in the negative, and amendment disagreed to accordingly.
[Amendment No. 30 not moved.]
8.45 p.m.
Lord Mottistone Lord Mottistone moved Amendment No. 31:
Page 14, line 8, after ("employed") insert ("on a full time basis").
The noble Lord said: In moving Amendment No 31, with the leave of the Committee I should like to take Amendment No. 35. This is a technical point. I hope that my noble friends on the Front Bench will not have to say, "You can't do this because the directive didn't do it". Their purpose is to point out that in a company it is very difficult to take an average number without being more precise in your definition. I have sought to widen this, because it is easier to define, by taking the average number of full-time employees. The principle of full-time employment is fairly well defined in labour law and therefore is easy to identify and specify.
If my noble friends resist these amendments, the danger will be that if people are employing near the top limit averages for the year of 50 and 250 they will say to themselves, "We like the benefit which we get from this definition, because of all the relaxations, so we will continue in this way". Even if the noble Lord, Lord Bruce of Donington, thinks that they are cosmetic advantages it may be that in real life people will find that they are not and that they will come to like them and will want to have them. They may say to themselves, "I won't take on the extra part-timers I would normally employ in the late summer or just before Christmas". There is a great deal of seasonal employment in manufacturing, in retailing and also in the hotel trade. A great range of part-timers are employed. But people might hesitate to employ them if they feel that this will push them above the limit specified in the Bill.
This would be a pity from all sorts of points of view, particularly in these days of large-scale unemploy
722
ment. It would also be a pity so far as straightforward efficiency is concerned. If people have the flexibility to be able to employ part-timers at the time they normally employ them, this is to be encouraged. Speaking from a certain amount of experience in personnel work, I believe that from a practical point of view "full-time" is easily definable and is a better way of describing it. A subsidiary point is that it encourages people to employ part-timers without feeling that they will suffer any penalty thereby because of the Bill. I beg to move.
Lord Lyell: We are grateful to my noble friend Lord Mottistone for speaking to his two amendments, Nos. 31 and 35. We believe that they seek to provide something which is fairly simple: that the number of employees which determines the size classification of a company relates to full-time employees only. Subsection (10) of Clause 8 already provides one means of determining the number of persons who are to be employed for the purposes of (2)(c) and (3)(c), which are the relevant paragraphs pertaining to my noble friend's amendments. The formula which is embodied in Clause 8(10), which is the one we would seek to use, is the same formula as that which determines the number of employees to be stated in the notes to the accounts, which we find in paragraph 56 of Schedule 1.
This is a fourth directive requirement, so I am afraid that I may have to disappoint my noble friend slightly, but I hope he will bear with me. The directive itself does not provide a definition of "employees" but my noble friend—and indeed the Committee—will find the definition included in Section 18 of the 1967 Act. Indeed, earlier this evening the noble Lord, Lord Bruce, was looking at what he referred to as "gobbledegook". With all the good will in the world and with the great skill of the parliamentary draftsmen, I think that the relevant paragraph 3 in Section 18 of the 1967 Act is difficult to understand, but I think it is not impossible to understand.
Section 18 of the 1967 Act has been considerably simplified, and I think that my noble friend Lord Mottistone will find its basic characteristics maintained in paragraph 56 of Schedule 1 to the Bill which is now before us. In using the formula which we have adopted in the Bill, the figure for determining the number of employees under Clause 8 will be readily available to any company, and indeed the method of deriving that formula should be familiar to each and every company. We believe that it will be inconsistent and indeed confusing to determine the number of employees (for size purposes) on the basis of full-time employees only, whereas on the other hand for the purpose of giving information in the notes to the accounts part-time employees would be included.
The amendment seems not to be consistent with subsection 10 of Clause 8 and also with paragraph 56 of Schedule 1. We find it a little difficult to understand, but further, as indeed my noble friend has pointed out, some companies have part-time employees as a very large proportion of their workforce and if these employees were not included in the calculation of course the Committee would see that it would discriminate against companies of similar size whose workforce was comprised of full time employees only. The directive does not say that the number of em-

723
ployees is to be taken as being full-time employees and we believe that to accept these amendments would be damaging to the fourth directive and would be confusing in the Bill.
Lord Mottistone: I am humbled by my noble friend that I overlooked subsection (10). I had great difficulty in finding paragraph 56 of the 1948 Act, because it is not in that Act, but now I find myself helped through Schedule 1 to this Bill. I think it is a pity in fact that my noble friends have gone to the trouble of paragraph 56 of Schedule 1—to be known as Schedule 8—in fact I think they would do better to be simple on this point. I have a fair amount of experience on it, but at this time I will not delay the Committee any further. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 32 to 36 not moved.]
Lord Mottistone Lord Mottistone moved Amendment No. 37:
Page 15, line 45, at end insert—
("(13) The Secretary of State may by order as circumstances require amend the figures in subsections (2)(a) and (b) and (3)(a) and (b) of this section. A statutory instrument containing such an order shall he subject to annulment in pursuance of a resolution of either House of Parliament.").
The noble Lord said: This amendment is really brought about by the fact that when one looked at the figures, to be precise at this moment, one said "What about inflation?" We felt that it was going to be terribly burdensome and I know that the figures themselves come out of the directive and therefore we should have to wait for the directive to be amended, but it seemed that it would cause quite a lot of trouble to have to amend these figures upwards, as we shall have to do as inflation goes by. Sadly, however well my noble friends do in controlling inflation, they will not sweep it away just like that, and one would have thought that certainly in five years' time for reasonable purposes one would wish to adjust the figures, relatively easily, in the earlier part of this clause. Therefore, I propose that it should be made easy for the Government of the day to do so by having enabling powers to amend them by regulation. I beg to move.
Lord Lyell: Once again we are grateful to my noble friend for moving his amendment clearly and succinctly. It is an amendment of some substance, but I hope my noble friend will accept that the power that he seeks in his amendment, I understand, already exists in Clause 5(7) of the Bill which we were discussing a little earlier this evening. My noble friend will find it at page 9 of the Bill at lines 11 to 16. This subsection already empowers the Secretary of State to modify the accounting exemption provision by statutory instrument and by virtue of subsection (6) of Clause 5, which is just above the original paragraph on page 9 —the accounting exemption provisions means all the provisions in Clauses 6 to 10 and this naturally extends to amending the criteria in Clause 8.
I hope that will settle the query in my noble friend's mind, but I would add that we have gone to the maximum levels permitted by the directive in all these criteria, and therefore we should not be able to raise the threshold until the figures in the directive itself
724
are raised. I hope that will go some way towards clarifying the issue in my noble friend's mind.
Lord Mottistone: I am again humbled by the fact that my noble friend is much more widely read in this Bill than I am and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Lloyd of Kilgerran Lord Lloyd of Kilgerran moved Amendment No. 38:
Page 15, line 45, at end insert—
("(13) The disqualifications for appointment as auditor specified in section 161(1) of the 1948 Act shall not apply in the case of a company which qualifies to be treated as a small or medium-sized company within the meaning of this section.").
The noble Lord said: The purpose of this amendment is to attempt to reduce the disqualification for the appointment of auditors as set out in Section 161 of the 1948 Companies Act. Your Lordships will recall that the purpose of Section 161 is to define the eligibility for appointment as auditor of a company incorporated under the Companies Act. It is neither an assessment of competency nor a barrier to the provision of accountancy services to the public, but it is within the hands of the Government to decide which bodies shall be capable of acting as auditors of a limited company. Parliament has given to the Departments of Trade and Industry the right to recognise certain bodies of accountants. In fact no further body of accountants has been recognised since the Companies Act of 1948 was enacted. No new boy has been allowed in this rather closed field.
I will take the opportunity of saying that so far as small and medium companies are concerned this disqualification should not be pursued so strictly as it has been in the past. The Government have recognised for the first time—I warmly support this step—that there are such things as small companies and medium-sized companies as defined under that section of the Act. Therefore it seems to me that it would be appropriate at this stage, so far as certain bodies are concerned, to act less sternly in the appointment of bodies that can act as auditors.
May I now briefly take up the point that was put to your Lordships by the noble Lord, Lord Energlyn, at Second Reading. He brought to your notice the case of the Association of International Accountants. They are not recognised by the Secretary of State. This is one of the bodies that I submitted to your Lordships, when considering the Companies Act of 1980, that should be recognised by the Secretary of State. I understand, however, that certain investigations have been made by the Government, or on behalf of the Government, into the standards of examinations of this body. The Association of International Accountants were founded about 40 or 50 years ago, and I understand that they operate all over the world; therefore it is a little surprising that they are not recognised by the Secretary of State. The noble Lord, Lord Energlyn, made some study of the kind of examinations and criteria for membership of this body. I beg to move that the disqualification in Section 161 of the 1948 Act should not be pursued so diligently as it has been in the past.
Lord Lyell: It is apposite once again that I should

725
declare an interest, in that I am a member of one of the bodies mentioned in Section 161, but I hope they will not hold against me anything that I have to say now or at a later stage. The noble Lord, Lord Lloyd, mentioned various comments that had been made by the noble Lord, Lord Energlyn, at Second Reading. If the noble Lord would read on in that column, particularly my reply to the noble Lord, Lord Energlyn, he will find that the one thing that causes panic and trouble in the world of commerce is disputes—I think I used the word "war" at Second Reading—between various accountancy bodies. Even the noble Lord, Lord Bruce, would be a brave man to stand between various bodies of accountants or professional auditors who might wish to obtain their position in Section 161 of the 1948 Act. I think I said in reply to Lord Energlyn at Second Reading that there were already adequate powers for the Secretary of State to add any professional bodies to those bodies named in Section 161, should he wish.
If I may direct the attention of the Committee to the amendment which has been moved by the noble Lord, Lord Lloyd, I hope he will think it relevant if I also address my remarks to Amendment No. 147 in his name, which is right at the end of the Bill.
Lord Lloyd of Kilgerran: I am much obliged to the noble Lord. I omitted to ask the leave of the Committee to refer to No. 147. I have it in my notes, but I forgot to mention it.
Lord Lyell: I hesitate to move other noble Lords' amendments for them. I hope it is for the convenience of the Committee if I speak to that amendment. The amendment the noble Lord has moved is, in our opinion, something of a retrograde one, because we believe that the standards of training and of expertise required of an auditor of a company—a company is a fairly specialised incorporated body with great privileges, and we believe that an auditor of a limited company is someone who must employ the highest standards—are the same as far as the auditor is concerned, regardless of the size of the company whose accounts he is to audit. I do not think anybody in the Committee would suggest that a solicitor—and I look carefully at the noble Lord, Lord Mishcon, and indeed my noble friend Lord Noel-Buxton—who advises only private clients, of whatever means or power, would need a lower standard of qualification than one who advises large organisations or corporations. I do not think anybody would hold that view. I hope the same view would be held in regard to anybody auditing a limited company.
We believe that still less would anyone suggest that the person auditing—or indeed the solicitor giving advice—should have no qualifications at all. The Companies Act 1948 recognised that the position of the auditor was a skilled one which carried a great degree of responsibility, and this was sufficient to require formal and defined qualifications. Both Governments and the profession itself have since been very alive to the need for the maintenance and improvement of high standards in auditing. The Companies Act 1976 made it an offence for an unqualified person to act as an auditor.
726
The statutory duties of an auditor are the same, whatever the size of the company. In brief, his duties are to report whether the accounts give a true and a fair view and also whether those accounts comply with the Acts. That is not to say that the auditor of a very small business, like a corner newsagent or even a chain of newsagents, will adopt the same approach and procedures as the auditor of a vast corporation, BP or Imperial Chemical Industries. Of course the auditor would adopt different procedures for different clients of different sizes. This is recognised by the accountancy profession in their auditing standards which they published in 1980; they recognised the differences in treatment which may be dictated by a company's size.
The eighth directive of the European Communities, which deals with company law, is especially relevant. The aim of this directive is to set minimum standards of qualification for auditors. It does not, at least in its present form, permit differentiated standards according to the size of the company. By definition, it also goes on to forbid unqualified persons to act as auditor in any circumstances. Even if we in this country thought there was some degree of differentiation which might be desirable or even permissible, we think it would be very wrong to change the law with the prospect of having to restore the position as it is now in a few years when the eighth directive is implemented.
With the greatest respect to the noble Lord, Lord Lloyd, even if it were acceptable to turn the clock back in auditing terms more than 33 years and permit the accounts of a limited company to be audited by a person who was not qualified to act as auditor under the present law, we wonder whether an audit carried out by such a person in such conditions would have any real value.
Lord Lloyd of Kilgerran: I have listened with care, great care, to the brief which the noble Lord, Lord Lyell, has read out, and most of it seems on first hearing to be totally irrelevant to the matter with which I am concerned. I am not concerned about unqualified auditors, a subject which this Committee has referred to so frequently; I am talking about auditors who are members of a highly respectable institution which has been in being since 1928. They have a thousand members and they are well-known internationally. Also, I must again express surprise that no new institution has been allowed to enter this closed area of institutions which was set up in 1948 under the Act, and that is in itself surprising, having regard to the competency of the members of the institution referred to by the noble Lord, Lord Energlyn.
However, I am advised that the Department now has in its possession reports for the 1977 and 1978 examinations for this association, that consideration is being given to recognition of the association under Sections 161, and that this is pending. I am concerned only to suggest that in the general rule there should be a modification of the strict rules of qualification for these two new classes of companies—the small company and the medium-sized company. Having regard to what the noble Lord has just said, I will look very carefully at Hansard and will come back to the matter if I am so advised at a later stage.
Amendment, by leave, withdrawn.
Clause 8 agreed to.
Clauses 9 to 12 agreed to.
Clause 13 [General nature of directors' report]:
9.10 p.m.
Lord Mottistone Lord Mottistone moved Amendment No. 39:
Page 23, line 10, leave out subsection (1).
The noble Lord said: This is by way of being a probing amendment. Reading it carefully, I believe that the change which is effected by Clause 13(1) to the 1948 Act is of no substance whatsoever in practice. Modern companies of all sorts, in reporting on the state of their affairs, automatically make a fair review of the development of their companies' business and so on. Any who wish to hide what they are doing in a way that might be considered to be against the interests of people in employ or creditors, or even the public, are going to do that, whether there is a more elaborate set of wording as indicated in this subsection, or whether there is the old wording. Therefore, one would have thought that subsection (1) is really an unnecessary addition to the Bill. I beg to move.
Lord Mackay of Clashfern: I believe it is true, as my noble friend, Lord Mottistone, has said, that the best practices do this already. The directive requires us to do it, however, and that is why it is in this Bill.
Lord Mottistone: If it is as simple as that, then I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Mottistone Lord Mottistone moved Amendment No. 40:
Page 23, leave out lines 26 to 29.
The noble Lord said: This is the most important amendment I have moved so far. Whether the directive requires what is provided in the subsection or not, I hope that the Government will resist it, even to the extent of informing the Commission that they will not embody this part of the directive. The point of the amendment is to omit head (iii) of subsection 13(3). Quite enough is said by any company under head (ii)"—an indication of likely future developments". But when that is stretched further to go into the area of research and development, in a very large number of companies you are striking at the bedrock of information which is vital for their competiveness.
That does not apply to every company and to some of them it does not matter, in which case probably they are not doing any significant research and development; but there are companies which do, and this particular Bill embodies all companies and makes no exceptions. There are companies for whom research and development is vital, and it would make a very great difference indeed if their competitors were to have an indication of their activities. That is enough in itself for alert businessmen, watching their rivals in the market place. I believe a great deal of damage could be done to companies of a certain sort. They could be the very companies which the Government are trying to foster
728
and encourage; companies dealing with new technology. Those are the ones which will suffer from this little but dangerous subsection.
It could be said, as I said as regards the earlier amendment, that people can hide. However, this is rather specific because it says:
"an indication of the activities".
If it means anything at all, it means saying enough to give the rival a clue at a particular point in time—research and development time—that you particularly do not want him to have if you are to prosper and he is not. One needs to think of this in the context of the total EEC market and to see it against the world as a whole. This sort of information will not be restricted to the people who pay attention to the directives of the European Community: it will be available to the Japanese, the South Koreans, indeed anyone one cares to think of. Therefore, I trust that my noble friends will fall over backwards to ensure that this particular provision is omitted from the Bill. I beg to move.
Lord Mackay of Clashfern: I well understand the fears that my noble friend has expressed in this connection. I must say, however, that paragraph (iii) implements Article 46(2)(c) of the directive. I have looked into the matter a little and so far as I have been able to discover there were no representations against this particular provision when the directive was being negotiated. I think that the explanation may well be that the phrase:
"an indication of the activities (if any)"
is intended to be a pretty vague phrase and not a sufficiently definite obligation to oblige directors to disclose matters which would be of real value to competitors. It is only an indication of the activities in the field of research and development that is required. I hope that, with that explanation, my noble friend will feel able to withdraw the amendment. I quite understand his concern, but as I say, I think that the paragraph must have been accepted on a basis such as I have described.
The Earl of Selkirk: Would this include research by contract? Many companies do research by contract. On the face of it, it would not do so, but it might be much more important than research carried out by the company itself.
Lord Mackay of Clashfern: I think that if what the company does by contract can properly be described as its activities—and I should think that in most cases it could—then it would be covered, but I would not expect this clause to require a company to specify the method by which it was carrying on its research and development. It would only be "an indication of the activities", which is a vague enough phrase to enable sufficient compliance without giving very much away.
Lord Mottistone: Before I deal with this matter, I should like to ask my noble and learned friend a question. He mentioned that there were no objections to this when the directive was being negotiated. Can he give me a rough idea of the date on which the directive was being negotiated?
Lord Mackay of Clashfern: I think that it was 1977–78—it was that kind of time.
Lord Mottistone: The heyday of the noble Lords opposite of course—just what one would have expected.
Several noble Lords: Oh!
Lord Mottistone: Oh, yes, 1977 was their worst period. It was absolutely terrible. They should be ashamed of it.
I shall have to study the directive very carefully and see if I cannot somehow construe some further amendment to tone down this little clause even more when we come to the next stage of the Bill. With that in mind, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
On Question, Whether Clause 13 shall stand part of the Bill?
Lord Bruce of Donington: Before parting with Clause 13 which deals with the directors' report, I should like to have some indication from the Government as to what additional information they would propose ought properly to be disclosed to the shareholders and, indeed, to the public in so far as the directors' report may be made public even within the restricted circulation that is implicit in the classification of the grades of companies. I have in mind that when the future of companies' reports was being discussed in 1977 under the previous Administration—and I have before me Command 6888—it was quite clearly in mind that much more extensive particulars should be provided either by way of the directors' report or by way of annexed notes and statements than appear to be envisaged in the current Bill. In saying that I take account not only of the provisions of Clause 13 of the Bill, but also of the provisions of Part III of Schedule 1.
Has any thought yet been given to the consultative document, The Future of Companies' Reports, Cmnd. 6888, and in particular to paragraph 4 thereof which emphasises the importance of a statement being annexed to the accounts or incorporated in the report or notes, of the value added as defined in paragraphs 13, 14, 15 and 16 of the particular document to which I refer? One recalls that even a statement of turnover—which is still required by the larger companies falling outside the categories which are exempt in certain particulars—in respect of large enterprises may be quite meaningless in terms of the value added by the efforts of those employed in that particular company.
In our view, a value-added statement would be a useful piece of information, not only to the shareholders but also to the outside world and indeed to the creditors, because, as Cmnd. 6888 states at paragraph 13:
"A company's turnover is in part the result of other people's work—namely, the raw materials, products and services which the company has purchased from outside—and in part the result of the efforts of the company's workforce and the use of its physical and financial assets. This latter part is the value added by the company and can therefore be expressed as turnover less goods and services provided from outside".
A statement of that kind would be of enormous assistance to the shareholders of large companies, the companies that are not to benefit—if benefit is the term
730
to use—from the exemptions that have been given to them by earlier clauses in this Bill. I should have thought that some consideration ought to be given to that.
At this stage I should also like to ask the noble and learned Lord, Lord Mackay, whether it is proposed to annex to the directors' report a statement showing the source and application of funds. In most companies now, even though it is not required by law, a statement of source and application of funds has been found to be enormously useful, both to companies and to outside bodies, in order to see where the flow of funds has actually taken place. In addition to the information which is required at Part III of Schedule 1, is there any intention in the directors' report in future to make any reference to the employment of disabled people? Are any particulars available about that?
In general, we should like the directors' report, as supplemented by the provisions of Part III of Schedule 1, to give information more in keeping with the modern outlook towards management-employee co-operation. Very often in this country we pay tribute to the productivity of German and Japanese industry. What we sometimes do not always remember is that that is achieved by collaboration between the employees and management, encouraged by freely available information to all parties, whether they be employees, staff, shareholders or whatever. We had rather hoped that there would be more progress towards that in this Bill than there appears to have been up to the present time. It is something to which we may return on Report, unless we get some indication that the Government are prepared to give a little in this respect.
Lord Mishcon: I intervene briefly, because, as usual, the noble Lord, Lord Mottistone, brought a bit of lightness and fun to our proceedings late at night. Would the noble and learned Lord the Lord Advocate when replying to this debate indicate whether it is not a fact—because I personally have a great deal of sympathy with the point that he raised, only to be answered by the fact that the directive had this and there we are, and these things have to be included in the report—that a directive in its draft form was available not only to Her Majesty's Opposition but to the great Confederation of British Industry? Would he indicate to the Committee whether any representations were made by either of those worthy bodies; namely, Her Majsety's Opposition at that time or the Confederation of British Industry, who are supposed to be very observant of these matters, criticising these provisions in the directive, so that Her Majesty's Government were asked to make representations?
Lord Mackay of Clashfern: May I first take the point raised by the noble Lord, Lord Bruce. The noble Lord asked whether we have considered requiring further information of the kinds that he has described. There are of course provisions under which certain other information can be asked for; for example, the employment protection law entitles the employees to ask for certain information. But when it came to considering whether further burdens of information should be put upon companies in this Bill, in the light of the consultation which has been held we came to the view that it would not be appropriate in this

731
Bill to add to the burdens being imposed upon companies by the provisions of the directive itself. Accordingly, we have considered it unwise to add to these burdens at this juncture. As noble Lords on all sides of the Committee have said, the burden of these matters on companies is considerable and we feel that it would be unwise to add to them.
So far as the point raised by the noble Lord, Lord Mishcon, is concerned, the point I was seeking to make earlier was that in relation to the matter we were then discussing, so far as I know there were no representations from any United Kingdom interests against the inclusion in the directive of the provisions we were then considering, and I think that would include such an important body as Her Majesty's then Opposition and the Confederation of British Industry.
Clause 13 agreed to.
Clause 14 agreed to.
Clause 15 [Auditors to verify information given in directors' report]:
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 41:
Page 25, line 12, leave out second ("the") and insert ("such").
The noble Lord said: I need not detain your Lordships for very long with this amendment, which is purely technical, and it is at page 25, line 12, when we come to Clause 15, which itself reproduces a new Clause 23A, which is divided into two subsections, (1) and (2). We would suggest that in place of "the" in line 12 it would be a little more consistent, and probably more helpful to the correct construction of the new clause, if the word "such" were put in instead. At the same time, since I understand that it is not in order to put amendments down to indents, may I point out to the noble and learned Lord that in the indent "Auditors to verify" it is possibly a good thing, in the light of the new contents of the clause, if it were "Auditors to consider information given in directors' report", and not required to verify. Possibly the indent can be made in conformity with the contents of the clause itself. As for the substitution of the word "the" by "such", I propose this in a desire to be helpful. I beg to move.
Lord Mackay of Clashfern: We have considered this and for the moment we think that what is already in the Bill is preferable to inserting the word "such". The word "the" in subsection (2) refers back to the word "the" in subsection (1) and I have not been able to find any qualifying content for the word "such", so for the moment at least we prefer to leave the provision as it is. As for the indent, I agree that the noble Lord has made a point that is worthy of consideration and we may be able to do something about that.
Lord Bruce of Donington: May I press the noble and learned Lord to go a little further? Difficulty arises in that one must relate Clause 2 to the financial year in question. If the word "the" is left as it is, it may relate not particularly to the financial year, and I think the insertion of "such" would more neatly relate to the financial year in question.
Lord Mackay of Clashfern: So far we have not found it necessary to make the change, but we will look at it in the light of what the noble Lord has said.
Lord Bruce of Donington: I am obliged. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
9.32 p.m.
On Question, Whether Clause 15 shall stand part of the Bill?
Lord Mottistone: It has been suggested that it is doubtful whether this clause is necessary. At present it is the responsibility of directors to ensure that their directors' report contains all the information necessary for their shareholders; it is very much their important responsibility. It could be considered an infringement of their responsibilities and duties—almost, one might say, an encouragement to them not to take their responsibilities as seriously as they do—for auditors to have to verify that the information given in their report is consistent with the company's accounts. It is the sort of thing that any competent board of directors, aided by a reasonable company secretary, would do as a matter of course. To have their hand held by statute seems almost an insult. I suggest therefore that the whole clause could well be omitted.
Lord Mackay of Clashfern: It is of course true that the directors have a responsibility for the directors' report. But the directors have a responsibility for the accounts as well, and that does not in any way dispose of the need to have them audited. The idea of this provision is simply to enforce what is presently good practice, namely, for the auditor to make sure that the information given in the directors' report is consistent with what the accounts say. Further, this is an obligation under Article 51 of the Fourth Directive.
Clause 15 agreed to.
Clause 16 [Certain provisions of 1948 and 1967 Acts to cease to have effect]:
Lord Lyell Lord Lyell moved Amendment No. 42:
Page 25, line 27, leave out ("and 5(3) and (5) ") and insert (" 5(3) and (5) and 6(1A) ").
The noble Lord said: I spoke to Amendments Nos. 42, 43 and 44 when I moved No. 21. They are in the nature of drafting and clarification amendments and I do not think I need speak further to them.
On Question, amendment agreed to.
Lord Lyell Lord Lyell moved Amendment No. 43:
Page 25, line 38, leave out ("and").
On Question, amendment agreed to.
Lord Lyell Lord Lyell moved Amendment No. 44:
Page 26, line 4, at end insert ("and
(e) section 41(11) of the 1980 Act (treatment of assets of investment companies which are neither fixed nor current).").
The noble Lord said: I have already spoken to this amendment. I beg to move.
On Question, amendment agreed to.
Clause 16, as amended, agreed to.
Clause 18 [Alteration of Companies Acts' requirements relating to accounts, etc.]:
Lord Mottistone Lord Mottistone moved Amendment No. 45:
Page 26, leave out lines 23 to 36 and insert (" modify the requirements of the Companies Acts 1948 to 1981 as to the matters to be stated—

(i) in the documents required to be comprised in the accounts of any company in respect of any accounting period for the purposes of section 1(6) of the Companies Act 1976; or

(ii) in any document to be delivered to the Registrar of Companies under section 1(7) of that Act;").

The noble Lord said: In moving this amendment, with the leave of the Committee I should like to speak also to Amendments Nos. 46 and 48. The purpose of these amendments is to remove the new power which would be conferred upon the Secretary of State in adding, by statutory instruments, to the classes of documents to be prepared and filed by companies. Section 454(l) of the 1948 Act already empowers the Secretary of State, by regulations made by statutory instrument, to alter, or to add to, the content of documents filed with the registrar but does not add thereby to the classes of documents themselves. It is suggested that the question of the imposition of such a requirement on companies merits a much fuller debate in both Houses of Parliament than would be permitted by the procedure on statutory instruments; hence the amendments. I beg to move.
Lord Mackay of Clashfern: The amendment that the noble Lord has moved, and the other amendments, would have the effect of depriving the Secretary of State of the power to take account of changes that may occur. It has been recognised for at least 30 years that in this area accountancy is an inexact and developing science, or perhaps I should say, art. It is essential that it should be possible to alter the requirements of the Acts to take account of developments in practice and changes in economic circumstances without always having recourse to primary legislation. The much more prescriptive approach to the requirements which we have been obliged to adopt by the directive is bound to make this need greater in future. The Secretary of State's existing powers under Section 454, as amended, already take account of that need by enabling him to alter, add to, or reduce the disclosure required in the balance sheet, profit and loss account, group accounts, and directors' report.
That has enabled the Secretary of State in recent years, for example, to raise financial thresholds for disclosure, and in response to strong representations in another place last year to require an entirely new statement on employment policy for the disabled to be incorporated in the directors' report. The clause before the Committee is really an application of that principle to the circumstances of the present case, and I would suggest that no harm has resulted from the existence of a somewhat similar power since 1948. In the light of those factors I invite the noble Lord to
734
consider whether he needs to restrict the power in the way that he proposes.
Lord Mottistone: I shall read with care what my noble and learned friend has said and consider whether to return to the charge at a later stage in the Bill. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 46 not moved.]
Lord Mottistone Lord Mottistone moved Amendment No. 47:
Page 27, line 19, at end insert—
("(d) reduce the amount of information required from any company falling to be treated as a small or medium-sized company within the meaning of section 8 of this Act with respect to the drawing up of the accounts of such a company;
(e) exempt any company which qualifies to be treated as a small company within the meaning of section 8 of this Act from the requirement to have its accounts audited annually.").
The noble Lord said: This amendment seeks to encourage the Government—this has been tried earlier in regard to other parts of the Bill—to take full advantage of all the concessions for the small and medium-sized firms that are permitted by the EEC fourth directive. It is intended to secure for the Secretary of State the power to make regulations by statutory instrument, reducing the amount of information to be required from small and medium-sized companies in the drawing up of their accounts, and relieving small companies from audit requirement to a greater extent than the Bill already does. I beg to move.
Lord Lloyd of Kilgerran: If I may, I should like to support very briefly what the noble Lord, Lord Mottistone, has had to say in moving this amendment.
Lord Mackay of Clashfern: So far as the first paragraph of this amendment is concerned, it is already covered by the new subsections (1) and (2A). So far as the second paragraph is concerned, we are on to the auditing question, which we discussed earlier, and the Government's view at present, at least, is that it would not be wise to relax these obligations. That is the present situation with regard to these two paragraphs, and I hope that in the light of that explanation my noble friend will feel able to withdraw his amendment.
Lord Mottistone: Before proceeding further, could my noble and learned friend tell me whether, in the terms of the Bill, the Government will have the power effectively to introduce my proposed paragraph (e) by regulation at a later stage if they decide, after experience, that this particular derogation can be taken up later on?
Lord Mackay of Clashfern: As I read the Bill, this power is not given because the Government consider the obligation to have the accounts audited to be an important one, and the decision has been taken, as I explained earlier, that we should leave this obligation. Therefore, there is no power in the Bill as at present drafted to enable this to be done by regulation. Our view is that primary legislation is more appropriate for this purpose.
Lord Mottistone: Once again, I shall give thought to this. I should like to thank the noble Lord, Lord Lloyd of Kilgerran, after having jousted with him somewhat fiercely earlier in the evening, for supporting me in this amendment. Having taken note that my proposed paragraph (d) is already covered, it could be that we shall return to the charge on paragraph (e) at a later stage. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 48 not moved.]
Clause 18 agreed to.
9.43 p.m.
The Earl of Selkirk The Earl of Selkirk moved Amendment No. 49:
After Clause 18, insert the following new clause:
("Interest in transactions
. In section 54(4) of the Act of 1980 at end insert—
";and
(c) an interest shall not necessarily be treated as material on account of the size or nature of the interest (that is to say having regard as to whether the interest is a sole or partial or actual or contingent interest or the like) if the transaction or arrangement in which such interest consists is not material.".").
The noble Earl said: I am moving this amendment, or these two amendments, at the request of the Law Society of Scotland. They refer to the 1980 Act. This Government are trying, I think, to relieve companies of unnecessary burdens—burdens which add to the difficulty of what they have to do. These amendments both have this in common, that they suggest that some of the disclosures demanded by the 1980 Act are excessive; indeed, not only are excessive but are not easy to interpret. It is suggested here that there should be clearer guidance as to what should in fact be disclosed.
Amendment No. 49 deals with directors, and in this case the directors are governed by Section 54(4) of the 1980 Act, which provides that any transaction or arrangement must be settled
"in the opinion of the majority of the directors (other than that director) of the company …".
That leaves it perfectly open as to what they should do. Some of them—the more conscientious ones—have said, "What is the law? Ought we to disclose this, or ought we not?" I think this is too vague. It is an unnecessary burden.
This is restricted to aggregate amounts of over £5,000. There is, therefore, necessarily, an idea behind this that the size of the arrangement is the dominant factor in deciding what they have to disclose and what they do not. This is not so. I do not think it is intended to be so, and this amendment seeks to make it quite clear that it is the material nature of the arrangement, not its size, which is the dominant factor in deciding what should be disclosed. It is easy, I think, to think of various things like insurance, which might be more than that, perfectly properly, or, should I say, retirement pensions of this character. This could help directors to be quite clear what it is they should disclose and what they should not. The lawyers whom they consult do not find it easy to give a clear definition of what is proper and what is right, and I think this would clear the issue. I beg to move.
Lord Lyell: Did my noble friend wish to take both amendments together?
The Earl of Selkirk: I was not intending to do that. The second amendment deals with officials and the first with directors. I could do so if my noble friend wishes.
Lord Lyell: It would suit the Committee well to take the directors first. We are grateful to my noble friend for moving this amendment which deals with a subject which has arisen in this House on earlier Bills and is still a point at issue. This subject has been raised by the Law Society for Scotland. The Committee will see that Section 54 of the Companies Act 1980 requires the disclosure in the accounts of any transaction or arrangement (other than any loans which are dealt with elsewhere in the Act) between any limited company and its director in which the director had any material interest whether direct or indirect. Taking one example of the provisions for disclosure, we can see the contracts with the company for the employment of someone's services or, another example, property transactions between any one person and a company. Disclosure of either of these points should reduce the risk of any misuse of company resources.
But the amendment which my noble friend has moved appears to be designed to give exemptions from any disclosure if the relevant transaction or arrangements are not material which, I, not being a lawyer, would interpret as being of no great significance. I hope that my noble friend and I myself are on parallel lines so far. One thing about which we are not clear is whether the words "not material" are intended to apply to the company or to the director, or to both company and director.
We have misgivings about this particular amendment because we think it would enable the director not to put an arrangement in which he had a clear material interest to his fellow directors simply because he himself was able to judge the substance of the arrangement not to be material or, possibly, not to be of any great significance. The proposed amendment by my noble friend does not seem to provide any test of what is or is not material. This would give rise to certain instances where the company might have or might appear to have substantial assets or, indeed, if a director had considerable personal assets or, again, could suggest that he had considerable personal assets. Again, in this case no disclosure would be required although, in the real world, the company's net assets were very slim indeed and the director could appear to be a man of straw.
We hope that the Committee might recognise that the disclosure provisions of the 1980 Act, and especially Part IV of that Act, were designed to be comprehensive; and we hope they are. They were also designed to prevent the sort of avoidance which had occurred under the previous disclosure provisions especially set out in Section 197 of the Companies Act 1948. Those of your Lordships who discussed the 1980 Companies Act and dealt with that will recall the lengthy discussion we had upon directors' disclosures. Secondly, I would not wish to remind the Committee of the many inspectors' reports which called attention especially to the transactions of the kind which now have to be

737
disclosed. I hope that my noble friend will accept that his amendment could easily be used to encourage avoidance by unscrupulous presons and, especially, unscrupulous directors. I hope that my noble friend will accept what has been a rather lengthy and complicated explanation. However, he knows that the subject is complicated and I hope that he will accept the explanation bearing that in mind.
The Earl of Selkirk: I hope that the noble Lord will look at that answer again. It does not bear much relation to the amendment that I moved. In the 1980 Act it says:
"… an interest in such a transaction or arrangement is not material if in the opinion of the majority of the directors".
I have said that it is not material simply from size. I have never said for one moment that it was not material. If it was material, it obviously was of consequence.
I ask the noble Lord to tell whoever devised that answer for him that he has not begun to understand the simple point that I make; it may be some arrangement which is a substantial size but then it is still not material because it deals with an insurance company or some other matter. I ask the noble Lord to look at this again carefully. My intention is to make it simpler for the directors to come to a decision. I shall not press the matter and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Earl of Selkirk The Earl of Selkirk moved Amendment No. 50:
After Clause 18, insert the following new clause:
("Aggregate amounts outstanding
. After section 56(3) there is inserted—
"Subsection (2) above shall not apply in relation to any accounts in which the aggregate amounts which, apart from this subsection would require to be disclosed by virtue of subsection (2), do not exceed £5,000.".").
The noble Earl said: This is a similar amendment but it deals with officials. In the case of officials, there is no limitation to which disclosure should take place. There is no £5,000 and therefore any indebtedness at the end of the year by an official has to be disclosed. This might amount to a pair of shoes if it was a shoemaking company. It might amount to credit cards used to purchase petrol or anything like that. That is absurd; it does not amount to anything. It is something which does not need to be disclosed in the way it is in the Bill. As a very broad point, I suggest that the same limitation should be made; nothing under £5,000 a year need be disclosed. It is obviously a trivial matter which adds to the burden of what has to be done. It does not reveal anything of consequence and adds to the work of the company.
That is a simple method of doing it. It may be in many cases the sum will be much bigger than that; but that is neither here nor there. This sum is a reasonable amount to exclude small matters which are not worth recording but merely put an added burden and add nothing to the public interest and increase work. I would ask noble Lords to consider this very carefully. It is a simple way of getting out of an unnecessary
738
burden which the Act of 1980 imposed possibly without adequate thought. I beg to move.
Lord Lyell: I once again thank my noble friend for moving what he says is a very simple amendment. I live in hope that this explanation may be a little briefer but more favourably received by him. We accept that the purposes of Section 56 of the 1980 Act are to require disclosure in matters of contracts which concern officers of the company. I am sure that my noble friend will accept that there are no de minimis and very small exemptions. We believe the reasons for the lack of exemptions are twofold: first of all, the disclosure which is required in relation to officers is far less comprehensive than that which is required for transactions which concern directors.
One example would be that there is no requirement for "material interest" transactions with officers which have to be disclosed. That was the main thrust of my noble friend's amendment.
Secondly, only any amounts which are outstanding at the end of the year are required to be disclosed, so that any loan or any other transaction needs to be disclosed in the accounts only if it is outstanding under this arrangement at the end of the company's financial year, and then only with other similar amounts outstanding to other officers in one amount. We do not think this imposes a very serious burden on major companies, and certainly we would expect the directors to wish to compile figures of this kind for their own purposes and indeed for the efficient running of the company's financial resources.
I am equally sure that my noble friend appreciates that any amounts which are advanced to an officer of a company for the purpose of meeting company expenses are not disclosed under these provisions, which are concerned purely with the disclosure of loans, credit cards and other forms of remuneration which are granted by the company as what is called "a perk" and repayable by the officer to the company. We hope that the conflict of interests for officers should be less than for directors. Equally, we believe it is important that shareholders once a year should be told how much is owed to the company by the staff—that is very relevant at the year-end—in order to judge the scale of the perks and remuneration and also the nature of the company's debtors. I hope that explanation will go some way towards mollifying my noble friend—perhaps "mollifying" is the wrong word, but at least I hope it is slightly more acceptable than the last explanation I tried to give to him.
The Earl of Selkirk: I appreciate what the noble Lord has said. I think it is a pity to add to the work which has to be done. This is really putting down sundry creditors, I suppose, in one form or another and it is probably fair enough in itself. But it seems to me that this should be shown separately, or that every single account which has not been dealt with should be added up at this time may seem excessive. However, I shall not press this matter. I will only ask the noble Lord to look at it and see if there are ways in which burdens which are not necessary can be relieved. I beg leave to withdraw the amendment.
Amendment, by leave. withdrawn.
Clause 19 [Accounts of oversea companies]:
9.57 p.m.
Lord Mottistone Lord Mottistone moved Amendment No. 51:
Page 28, line 6, leave out from ("accounts") to end of line 17.
The noble Lord said: This amendment seeks to delete all of paragraph (b), and I regret to say that it should not end with line 17 but it ought to have ended with line 25. I apologise to the Committee for that. If your Lordships read this carefully it would seem that the Government, in writing the whole of Clause 19, said: "We had better do something about bringing the accounting of overseas companies into line." They did that in the earlier subsections and then apparently they said: "We are never sure about overseas companies: let us give ourselves complete freedom by regulation to introduce practically any restraint on overseas countries that we can think of." If we look at the proposed new subsection (3B) it says:
"An order made under subsection (3A) above may make different provision in relation to different cases or different classes of case and may contain such incidental and supplementary provisions…".
That is a save-all for everything! I know that overseas companies are sometimes unpopular. They are suspect because their head offices are somewhere else, but they do bring employment to this country. There is no doubt about it at all; and even if we cannot provide a company which will employ motor workers, some of these Japanese motor manufacturers can, and are going to do so. I would have thought that in the first instance it is not entirely appropriate to give the Secretary of State quite such immense powers to legislate by regulation.
If at this time the Government wish to give powers for restraining overseas companies in some way or another, they should spell it out within the primary legislation and put something else in place of paragraph (d)—1 suppose it ought to be that, although mine is labelled "(b)" which starts in line 7. Something else should be put in there which says what they now think needs to be done to restrain overseas companies. Then everybody will know where they stand. Otherwise, someone in an overseas company reading this will think "My God! I wonder whether I should go there, because the Secretary of State can, by regulation, make me do all sorts of things, particularly in relation to accounting, which may not suit me." So may I suggest to the Government that they accept my amendment now, and at a later stage of the Bill introduce an alternative and more specific, primary legislative clause to replace it. I beg to move.
Lord Mackay of Clashfern: The intention of Clause 19 is to apply all the new accounting requirements to overseas companies within the structure provided for. The purpose of the paragraph, to which my noble friend objects, is to parallel a similar order-making power given to the Secretary of State in relation to the generality of companies. So if one looks at the Bill as a whole, there is no kind of discrimination against overseas companies. What there is is an application to overseas companies of the general rules that apply to others. In relation to the others, the Secretary of
740
State has power to make alterations for reasons which we have described, and this is a similar power in relation to overseas companies. It is, of course, possible that this power could be misused, but the safeguards which apply to the other provisions also apply here, and we would say that they are sufficient to prevent any misuse of this power. I think that the experience of the past in regard to similar powers has been reasonably good, and I invite my noble friend to withdraw the amendment.
Lord Mottistone: Somewhat reluctantly, I accept what my noble and learned friend has said, but I will not promise not to come back at a later stage. At this stage, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 19 agreed to.
Clause 20 agreed to.
Clause 21 [Interpretation of accounting and disclosure provisions]:
Lord Lyell Lord Lyell moved Amendment No. 52:
Page 29, line 9, leave out ("(10)") and insert ("(9)").
The noble Lord said: This is in the nature of a small drafting amendment. If your Lordships care to glance at the top of page 12, it can easily be seen that the definition is not relevant to subsection (10), but is relevant to subsection (9) at the foot of page 11. For that reason, I beg to move.
On Question, amendment agreed to.
Clause 21, as amended, agreed to.
Clause 22 [Prohibition on registration of certain names]:
The Deputy Chairman of Committees (Lord Ampthill): I should point out that if Amendment No. 53 is agreed to, I cannot call No. 55 or 56.
Lord Mishcon Lord Mishcon moved Amendment No. 53:
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: A weary, attenuated but, if I may say so, still highly intelligent Committee has now reached an important Part of the Bill. I do not want, in any way, to minimise the importance of Part I, but, as I ventured to say in the Second Reading debate, while it is perfectly correct that that Part of the Bill which deals with the fourth directive has been ably dealt with in this Bill—one can quarrel with details and we have discussed them—and while it is perfectly true that matters dealing with investigation by inspectors have been very usefully dealt with in this Bill, when the Government came to consider the question of limiting the powers and duties of the Registrar of Companies and abolishing the Registry of Business Names, they became confused, muddle-headed and, if I may say so with the deepest possible respect and then use words

741
which are highly disrespectful, they behaved with an incompetence in putting provisions before this House which has seldom been equalled.
I would not say that lightly, but when we came to discuss on Second Reading the question of the abolition of the Registry of Business Names and putting self-regulatory procedure before this House, I decided to take one clause—Clause 29(2). I could not believe that I could be correct. But then I delivered on behalf of the Opposition a barrage of attack upon the sheer intelligibility of this self-regulatory clause which had no time limit attached to it regarding a direction to supply particulars and which dealt with the exemptions that people could claim before they gave those particulars if, indeed, the applicant had visited the premises. I did not know, and I invited somebody to tell me, what visiting the premises in fact constituted.
There were other defects in that clause which I ventured to point out. The House was kind enough, with the exception of the Front Bench opposite, to greet what I had said with sallies of laughter. I, too, could not believe that all my criticisms were right. I notice, only so that your Lordships pay special attention to this particular amendment, that the Government have now, at this Committee stage, put down revisions to that clause which I attacked, taking into account every point of criticism which I levelled at Second Reading. I would have hoped possibly for a gracious note from the Minister concerned, in place of the angry look which he gave me at the time, saying that the Opposition had been rather useful in pointing out the terrible weaknesses of the draftsmanship of that clause. But I know that the Minister must have been very much too busy to drop me that line. I appreciate that it was only as a result of his manifold activities that the Opposition did not receive it. And I did not receive it as the spokesman oil that occasion.
I mention this only because of the duty imposed upon us to look at what is being done in regard, for example, to the Registry of Business Names. The fact that under the old law the Registrar could say that he would not admit a name because it was objectionable —and part of the nature of the objectionable quality of a name was the fact that it was similar to another name has now been omitted from the Bill. The only objection that the Registrar can take regarding a name as such—I am not talking about whether the objection is represented to be on behalf of a Government department or a local authority—is that it is the same name: not a similar name but the same name. I venture to describe that as a licence to confidence tricksters to imitate the names of well-known concerns and to give the impression to the public at large that they are in fact part and parcel of the same concern.
Under the Bill as it is now before us, even with the same name the Secretary of State has got the following powers: that on it being pointed out to him (and he has 12 months within which to act) that the name is the same, he can then require the person who has registered the same name as somebody else on the index to put it right within six months thereafter, or within such extended time as the Secretary of State may decide. What a lovely length of time to allow to somebody who has possibly deliberately created this confusion in the public mind: in the minds of consumers, suppliers
742
and other people. So this amendment seeks to do one thing and one thing alone. It seeks to give the power to refuse a name if it is similar to a name which is already registered, with the result, obviously, that confusion could be caused.
I wonder whether I may turn quite briefly to an amendment which succeeds the one which stands in my name and that of my noble friend Lord Wallace of Coslany. It is Amendment No. 54 and it might help if I merely pointed out, with great respect to those whose names are associated with that amendment, that of course paragraph (c) is the one which I am now dealing with and is in my amendment; paragraphs (e) and (f ) are in the Bill anyway and so far as paragraph (d) is concerned—
"which is a false or misleading indication of the objects of the company and the intended business"—
I venture to suggest that anybody who knows anything about a memorandum of association knows that a company usually puts in every object under the sun in order to give it the vires, the powers, to carry on such a trade which may be mentioned in those all-pervading, all-inclusive objects. Therefore, for the registrar or the Secretary of State to have to adjudge whether that company in future is going to carry out an object mentioned in the memorandum I should have thought was not a practical thing to do.
I merely mention that in the hope that one day, when this is put to a vote in this Committee—unless the Government with their usual graciousness are prepared to accept this amendment—I may enlist their support. I hope that I have put sufficient argument at this late hour for the Government at the very least to say that with so many bodies behind the principle of this amendment: my own Law Society, chambers of commerce, finance houses associations, all sorts of people who are in favour of this—the CBI I mention with terrific respect—
Noble Lords: Oh!
Lord Mishcon: I am delighted that the CBI should take this view and I mean that in all seriousness. Because of the weight of opinion behind this principle and the weight of argument and logic, and because, as I have said, nobody wants to give a licence to confidence tricksters, I hope that the Government at the very least will say that they are prepared to consider this matter between now and the Report stage, in which case I, with equal graciousness, will ask leave to withdraw the amendment and see what comes up at the Report stage. I hope that will be the answer that I shall be given. I beg to move.
Lord Boardman: The noble Lord, Lord Mishcon, has prayed in aid for his amendment bodies with which I, too, have a close association—the Law Society and chambers of commerce. I think my noble friend will be aware of their very serious reservations about this clause and indeed the clauses which follow it. I certainly would not associate myself with the noble Lord in the reason that he gave. I believe that my noble friend will say that part of this provision is to reduce public expenditure, and I believe there are other

743
ways in which the gap between what it costs and what industries provide to supply the service can be met. But I hope that my noble friend will give full weight, as I am sure he will, to the very real and sincere reservations in criticisms which have been made by bodies who are daily concerned with the registration of companies and business names.
Lord Mackay of Clashfern: The problem in connection with this matter is that if one is to decide whether a company which is seeking to register a name is seeking a name which is so similar to a registered name as to be likely to cause confusion, it involves a very considerable judgment on the circumstances. It is reasonably easy to devise an administrative procedure for identifying identical names, subject to the minor additions to these which are permitted under the Bill. That is something that an administrative office can do efficiently and one can be reasonably confident that the result sought has been achieved. But when it comes to a matter of this sort which is suggested by the noble Lord, Lord Mishcon, one is in a very different field. There are many cases in the books dealing with this problem, or a problem very similar to this, in the field of passing-off, and it is obvious that one has to make a pretty extensive consideration of all the circumstances before one decides whether or not the similarity is sufficiently close to cause confusion.
The Government point of view is that if central Government are going to do a task, then the principle should be that they must be able to do it properly and that the citizen can have reasonable confidence that the result aimed at has been achieved. It has not been found possible to devise administrative techniques which are adequate to discharge the task put upon the registrar under the present law. The phrase "too like", for example, is one of the phrases in this area of the present law.
I would suggest to your Lordships that the noble Lord, Lord Mishcon, realised clearly, as one would expect, the deficiencies of a purely administrative procedure for this purpose when he put down Amendment No. 60, providing for notification. In other words, when someone asks to put a new name on the companies register people interested will have a chance of looking at it and coming forward with their claim, "Here, I claim that a new name is too like mine". Then you are in a situation where there is a dispute between the person seeking registration and the other. I think certainly the noble Lord, Lord Mishcon, and perhaps I, would agree that that kind of question is best settled by a judicial rather than an administrative approach. It is true also that this work, presently shouldered by the registrar, does involve staff time and that kind of thing, and it is wise for central Government to restrict their operations to necessary operations that they can do well.
On looking at this matter carefully in the light of all the evidence that was received, the Government's view was that the best solution here was to restrict the task to the task that the Bill has taken up and leave the rest to be settled otherwise if it arises. Accordingly, while I am certainly prepared to consider further what the noble Lord has said, I want to say that the Government
744
have not reached their present position without very serious consideration of the arguments that have been put forward. Therefore I am not to be taken as indicating any likelihood of a change from our point of view in acceding to the suggestion that it would be wise to have this matter reconsidered.
Lord Lloyd of Kilgerran: May I express my surprise at some of the observations made by the noble and learned Lord, in so far as I understood them. The main objection he appears to have raised to this amendment is that the Government find it very difficult to set up an administrative arrangement to decide whether one name is confusingly similar to another. The Government have such an administrative organisation, the Registrar of Trademarks, as part of his work is constantly considering, with another procedure, whether or not one word or trademark is confusingly similar to another. I should have thought that in view of the serious attitude adopted by industry in relation to this matter the Government could quite easily set up a simple procedure whereby, by charging a fee, they could arrange, as they can do under the present law, to have this matter referred to either the Board of Trade or the Registrar of Trademarks. It merely involves some simple administrative arrangement.
The office of the Registrar of Trademarks does a good deal for British industry and I would have thought that this was an administrative matter which would satisfy the fears and anxieties of industry. Since the last war I have spent most of my life at the patent and trademarks Bar, where we have constantly found that entrepreneurs deliberately set out to get a name for their companies or trademarks which are just as near as possible to well-known names or trademarks.
In business activities the attempts to ride on the goodwill of companies which have been in business some time is very well known, and I think it is a great mistake for the Government to dismiss this matter and say that one should go to the courts to deal with these difficulties. There should be a simple administrative arrangement, involving if necessary the Registrar of Trademarks, to deal with this serious problem.
Lord Mackay of Clashfern: I am reasonably well aware of the functions of the Registrar of Trademarks and Patents, but I regard the Registrar of Trademarks as discharging a judicial function when deciding between competing claimants about the question of whether the mark which it is sought to register is confusingly similar to another.
There is another point. The Registrar of Trademarks is dealing with a trademark in relation to a particular subject matter. With all respect, that is difficult enough and the Registrar sometimes finds it difficult to come to a decision. That is a much more difficult thing than dealing with a company name in relation to the breadth of subject matter which is nowadays to be found in the objects clauses of a company's memorandum of association. It is very difficult to guess exactly what the shape of a company's business will be at the outset and, indeed, how it will develop.
In the light of the information we have had, I just feel that the task which is put upon the Registrar, or the Secretary of State at the moment, is too difficult.

745
It is well to recognise that fact and to take action accordingly. As the noble Lord, Lord Lloyd, has said he has had a lot of personal experience of this at the trademarks and patents Bar, the reason for that must be that the present administrative procedures in relation to companies are not adequate to prevent the mischief of which he complains.
Lord Boardman: As I understand it, the present law is working fairly satisfactorily. I wonder if the noble Lord could just say, if indeed he envisages difficulties in making changes, why make any changes at all to this particular aspect of the law?
Lord Mackay of Clashfern: There are two particular factors involved. The amount of work which is presently put to the Registrar of Companies has increased a great deal in recent years, and therefore the existing staff has had to cope with much more work than it had before. Secondly, and with great respect, I do not agree that the existing law has worked well in the sense that has been suggested because, as the noble Lord, Lord Lloyd of Kilgerran, has said, with all his experience at the trademark and patents Bar and notwithstanding the present situation, people try to go as near as they can to the names of existing companies.
Certainly quite a number of cases occur in which the company's name is the source of the confusion, notwithstanding the present law. The present law does not have as its result that a company cannot register a name which may be confusingly similar to that of another company, having regard to all the circumstances of the business which it carries on. Certainly as at present we feel there is a very strong case for making the improvement which we have suggested.
Lord Mishcon: I am most grateful to the noble Lord, Lord Boardman, and to the noble Lord, Lord Lloyd of Kilgerran, for the support that they have given to this amendment. I am somewhat downcast—although not entirely surprised—by the reply given by the noble and learned Lord the Lord Advocate. I say that for the following reason. The point made just now by the noble Lord, Lord Boardman, was absolutely correct. The view which I am about to express is shared by the Law Society and by the Bar Council, and I beg of the noble and learned Lord the Lord Advocate, in spite of the fact that he has graced the Scottish Bar and not the English Bar with his very powerful professional experience, to listen with the deference that I am sure that he would to the views of the Bar Council and the Law Society of England. The experience of those of us who are in practice and who deal with company matters is that our only complaint is that we might have had to wait rather a long time before we heard from the registrar that a name was approved. However, I can assure the noble and learned Lord that our experience of the Registrar of Companies' department is that very few cases of confusion have crept through.
There is no complaint at all about the administrative work. If the noble and learned Lord wants to say quite frankly that the Government are determined at all cost to save expense and to cut down the personnel of the registrar's department, then I understand the
746
point; but I do not accept it because I think that the protection of the public and the protection of decent commercial firms who value their good name and goodwill are of sufficient value in this country to our economy as to be set against the very poor and almost meagre saving that there would be in personnel in the Registrar of Companies' department.
It was not because I saw a weakness in the administrative department that I put down Amendment No. 60 which deals with a procedure of advertising in the Gazette and gives the opportunity of objection: it was because in the same way in which I understand the wicket keeper of the West Indies team in Barbados has decided after the hurricane bowling that he has seen, that he needs a longstop, that I felt, in exactly the same way, that I needed a longstop. If I found that I was overcome by the fast bowling of the noble and learned Lord and that therefore the ball passed this amendment, I felt that I needed a longstop to say: If you have convinced this Committee that, because of expense or whatever it may be, the valued assistance given by the Registrar of Companies must now cease and the practice that we have enjoyed for so long shall no longer be the practice in regard to the safeguards that I have mentioned, then I want an amendment by way of a longstop—which, of course, has not yet been moved—in which I could say, "All right, still try and safeguard the consuming public and industry and commerce at large by having a procedure outside the registrar's jurisdiction, to look at the names and let people say 'This is a name so similar to mine that I ask for consideration to be given to that other name not being allowed'".
The noble and learned Lord the Lord Advocate referred to a judicial process. I am sure that he knows much better than I do what a passing-off action means to the very small firms that he with such eloquence was defending on behalf of the Government and very rightfully looking after in the provisions of this Bill with the full support in principle of the Opposition. It is the small firms, we were told, upon whom the future of this country to a large extent depends. We want to help them. We want to protect them. Does the noble and learned Lord think that he is protecting and helping small firms by telling them, "Somebody has pinched your name. They have been awfully clever and they have just altered a syllable. Phonetically it is the same, but the spelling is different so now you had better go along to a lawyer and bring a passing-off action"?
The noble and learned Lord knows as well as I do the five elements in a passing-off action which were decided, if I remember correctly, only last year in one of the leading cases which followed a 1979 case. There are five ingredients which are so very difficult. The noble and learned Lord knows perfectly well that a passing-off action means, as a rule, quite a long action, an expensive one—and as a rule it is not a matter that is decided by injunction; it is very often a matter that has to go to a full hearing and, therefore, time elapses and as a result people have advantages which they should not get if they have wrongly been using a name. That cannot be the answer of the noble and learned Lord, especially to small businesses. Is that the Government's answer? If so, I am surprised. I did feel that, although the noble and learned Lord

747
was not going to concede the point tonight, he would at least give an open-minded reconsideration to this matter, in spite of the fact that there are noble Lords behind him who feel as I do. The noble Lord, Lord Lloyd of Kilgerran, enhancing the Liberal Benches, feels precisely the same as my friends and I. In spite of that, the noble and learned Lord will not yield. I respect him for his obduracy, although I do not welcome it.
However, at this late hour in regard to the duty of this attenuated Committee—and I say this with the utmost deference—with so many organisations, professional and otherwise, looking to us to put right this clause in this Bill, I think that it is absolutely wrong to test the view of the Committee tonight by a Division. Therefore, for that reason—and that reason alone—and so that, quite frankly, I can table this amendment (or someone else can, and the more support I get the better) at the Report stage, that I ask the Committee's leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Deputy Chairman of Committees: I should point out to the Committee that, if Amendment No. 54 is agreed to, I cannot call Amendments Nos. 55, 56 or 57.
[Amendment No. 54 not moved.]
Lord Lloyd of Kilgerran Lord Lloyd of Kilgerran had given notice of his intention to move Amendment No. 55:
Page 29, line 30, after ("as") insert ("or confusingly similar to")
The noble Lord said: This amendment raises somewhat similar points that we have already discussed at length. It may be helpful to the Committee if I indicate now that I do not propose to move Amendments Nos. 55, 64, 65 or 159 at this stage. However, I reserve the position as far as the Report stage is concerned.
[Amendment No. 55 not moved.]
Lord Lyell Lord Lyell moved Amendment No. 56:
Page 29, line 30, leave out second ("the") and insert ("a")
The noble Lord said: I regret that this is in the nature of being a small and minor drafting amendment. Line 30 on page 29 of the Bill contains a self-evident error. It should read
"which is the same as a name appearing on the Index".
I ask for your Lordships' support for this amendment.
On Question, amendment agreed to.
10.34 p.m.
Lord Mottistone Lord Mottistone moved Amendment No. 57:
Page 29, line 37, at end insert ("or undesirable").
The noble Lord said: Section 17 of the 1948 Act provides that no company shall be registered by a name which, in the opinion of the Board of Trade—but I understand that the modern interpretation is the Secretary of State—is undesirable. As I understand it, over the years the main criterion by which a name has been judged undesirable is that it is misleading, and in particular by being confusingly similar to the name of an existing company. I do not wish to pursue all the arguments of the noble Lord, Lord Mishcon, or my noble friend Lord Boardman, with
748
both of whom I agree, and indeed the noble Lord, Lord Lloyd of Kilgerran. I trust that my noble friend on the Front Bench will take note that we are all deeply concerned about this. But I noted that my noble and learned friend said that he was concerned to take note of what we had said, or words to that effect. I hope he takes very serious note.
The point of this amendment is to make sure that what is in Section 17 of the 1948 Act is read within the context of the legislation in this part of this Bill. I hope that this would appeal to the Government rather more firmly than perhaps the other arguments, because it is really only repeating what earlier Governments have said and done. I should like to take my Amendment No. 66 with the general point that I have been talking to because that too is reiterating the same point again, that we must have legislation to deal with "too like", "similar", and other phrases.
I have been advised on these amendments by the CBI, which has not been always the case with some of the earlier amendments. I think that everybody has a certain degree of respect for the CBI's understanding about the needs of companies of all sizes. I hope that my noble friends take to heart what has been said from all sides of the Committee; that is, that they must do something about this risk of similar and identical, or near identical, names to a greater extent than the Bill now does at this stage. I beg to move.
Lord Lyell: The proposals of the Government to reform the legislation governing company names whether on first registration or at a subsequent change are contained in Clauses 22, 23, and 24 of this Bill. All these recognise the difficulties which have been experienced over so many years, and have been expressed all round the Committee tonight. These have been experienced, certainly since the 1947 Act, in seeking to apply the discretionary powers which are enshrined in Section 17 of the 1948 Act. I am sure that my noble friend will appreciate that there are 800,000 names now on the register. This number is increasing by something in the region of 60,000 new names every year.
It would be, with such vast figures, quite impossible to ensure that there is no possible confusion between any of the names. It is important to put the whole of this matter into perspective. I mentioned that the annual rate of new first registrations is in the region of 60,000 new names every year. But the number of objections—and one may be too many—which 1 would ask the Committee to consider out of 60,000, or indeed out of the 800,000 names altogether on the register (it is increasing every year) received by the Registrar during the last 12 months was in the region of 300. This was despite some relaxation in the last two years of the criteria within the present very wide discretion against which new names are compared with those already registered. It is against this background—
Lord Mishcon: Is the noble Lord the Minister coming to a new point? If the noble Lord wishes to complete a thought or a sentence, I would not be rude enough to interrupt him at this stage.
Lord Lyell: The noble Lord was not rude, but he has interrupted.
Lord Mishcon: I am not sure that I interpret that as a welcome to my intervention or not. I would ask the Minister to help me on this. I am not sure—other Members of the Committee may be—what he means by objections received by the Registrar. Does he mean objections received by people who thought that the names that were being registered were rather similar to their own? I am not sure what he is referring to as objections. Possibly the noble Lord could tell the Committee.
Lord Lyell: 1 thought I had made the position clear; they are objections received by the Registrar. That is clear, is it not?
Lord Mishcon: Objections against what?
Lord Lyell: Objections received on any grounds; objections received by the Registrar out of 60,000 new names every year.
Lord Mishcon: I know the noble Lord is anxious to help the Committee; that is why I am pursuing the point. I gather he is bringing forward that figure as showing how ably the Registrar manages to deal with 800,000 names—because there are only 300 objections on any ground from other people to the effect that he has done the job badly—in which case I welcome the point and I am sure all those who are in favour of my amendment will welcome it as strengthening our case.
Lord Lyell: I understand the objections are those received after a name has been registered. I am told that the objections usually come from companies which are already on the register, and I hope that puts the figure I gave, of 300 objections by companies already on the register, about their name or trademark being stolen, removed or somehow threatened by a new interloper, as to speak—
Lord Mishcon: I am sorry to interrupt the noble Lord, but is he saying that that shows that the Registrar has done an extremely good job in sifting these things out beforehand?
Lord Lyell: Among other things, yes, but it is not just the Registrar; it shows that the scale of objections, and thus the scale of the problem, is 300 out of well over 800,000. That is the main thrust of my argument, and I am sure there are others which the noble Lord, Lord Mishcon, with his facility, would be able to adduce, but I am advancing my argument on a fairly broad front and I hope the Committee will bear with me while I attempt to complete my answer to my noble friend.
The provisions of Section 18 of the 1948 Act, under which companies are permitted to change their names voluntarily or may be directed to do so in certain circumstances by the Registrar, are reflected in Clause 24 of the Bill, although the powers of the Secretary of State to direct a change of name are related, of necessity, to the criterion set out in Clause 22 by reference to which a name may or may not be allowed. To do otherwise would mean, in effect, changing the rules half way through the game, which clearly would not be equitable to any companies, either companies wishing
750
to join the register or companies already on the register.
Section 19 of the 1948 Act allows companies which meet certain strict criteria to be licensed to omit the word "limited" from their names; for example, charities constitute the majority of companies which have taken advantage of this provision. Although the Government virtually suggested that this privilege should be withdrawn—as being no longer relevant in a situation where, under the European Communities Act 1972, all limited companies are required to reveal that status on their notepaper—we have taken account of representations we have received. Clause 25 of the Bill now provides for that particular privilege to be retained by companies which meet the criteria which are set out in the clause, and that retains the effect of the existing Section 19 without the requirement for specific licensing. I am afraid that of necessity my explanation has been very lengthy, but I hope that it might be of some assistance to my noble friend.
10.45 p.m.
Lord Mottistone: I am afraid that the explanation is of no assistance, because my noble friend did not answer my point about the word "undesirable"; nor did he deal with the fact that I was trying to ensure that what is contained in Section 17 of the 1948 Act is included in the Bill. I shall not pursue the matter. I noted that my noble and learned friend the Lord Advocate said that he would look closely at this point. As I said earlier, I hope indeed that he will, since there is no doubt that we are all very disturbed about it. I very much take the point that the noble Lord, Lord Mishcon, made; namely, if there are 800,000 names and only 300 complaints, it cannot be—as my noble and learned friend has said—that there is a problem of being unable to cope with the large number of names. That does not add up; it is not logic. Having said that, at this stage I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Lyell Lord Lyell moved Amendment No. 58:
Page 30, line 16, after ("expressions") insert ("where they appear at the end of the name").
The noble Lord said: This amendment, and the following amendment, are Government amendments which we hope will clarify the clause somewhat. I wish briefly to try to explain the reasons for putting forward this clarification. It seems that the invention of Clause 22(3) is to ensure that only what might be described as the distinctive elements in a company's name are taken into account for purposes of comparison against other names. Let us take the example of "J. Smith & Company Ltd". For this purpose that would be regarded as the same as "J. Smith Company Ltd.". The Government recognise that although the words and expressions are usually found at the end of a company's name, there may be occasions on which they form part of the "distinctive" element; for example, "Company Searches Ltd", or "Associated Company Registrars Ltd". In such cases as those it would be most appropriate to take account of the word "company" when considering subsequent applications.
At the same time the Government wish to add two

751
further expressions to those specified in the Bill; namely, "company limited", and "and company limited". That is in order to avoid any doubt which might otherwise exist in your Lordships' Committee, or elsewhere, to the effect that the words in question are to be ignored for comparison purposes, even when they are associated with one another. My noble friend Lord Noel-Buxton raised this matter on Second Reading, and it is to meet his point, as well as other points that were raised, that I move the amendment. I beg to move.
The Earl of Selkirk: May I ask whether the three categories of company that we are creating—large, medium and small—are to appear anywhere, so that people will know with what type of business they are dealing? Is the category of company to be indicated in the name of the company, or in some other convenient form which people could discover? This point is not wholly without concern to people who might be carrying out trading activities with the companies.
Lord Lyell: I wish that I could help my noble friend further, but I do not think that there is much that I can say, other than to suggest to him that the type or statutory size of a particular limited company could not be adduced from its name or from any letters that might follow the name. The purpose of the company's name is to set it apart from other registered companies. We have already gone into the question of likeness and similarity quite enough for this evening. I fear that I do not think there is any method whereby my noble friend or anyone else could adduce the size of any relevant concern. The category of the company certainly would not appear in the name. I fear that any such requirement as is suggested by my noble friend would be rather onerous. But the category would definitely appear in the accounts, and that might be of considerable assistance to my noble friend or anybody else who might wish to discover what type of concern or what size of concern they were considering dealing with. I hope that explanation might be of some help to my noble friend.
The Earl of Selkirk: I am grateful for that answer. Of course, what is important is that they are governed by slightly different regulations, and that should be known. My noble friend has said that this will appear in the accounts. I did not notice that in the Bill—that means nothing, of course; I have not read the whole Bill—but possibly he is correct.
On Question, amendment agreed to.
Lord Lyell Lord Lyell moved Amendment No. 59:
Page 30, line 17, after ("company"") insert (""company limited", "and company limited",").
The noble Lord said: I have spoken to this amendment already. I beg to move.
On Question, amendment agreed to.
Clause 22, as amended, agreed to.
Viscount Long: I beg to move that the House be now resumed.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

CHARTERHOUSE JAPHET BILL
Brought from the Commons; read 1a, and referred to the Examiners.
LLOYDS BANK BILL
Examiners Certificate that no further Standing Order is applicable: Ordered to lie on the Table.
  LONDON-SCOTLAND TRAVEL STATISTICS
  LONDON-SCOTLAND TRAVEL STATISTICS
  SERVICE MEDALS: ABOLITION OF BENEFITS
  SERVICE MEDALS: ABOLITION OF BENEFITS