Sitting of 19 March 1981

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PRIVATE BUSINESS
  GREATER LONDON COUNCIL (GENERAL POWERS) BILL (By Order)

    LONDON TRANSPORT BILL (By Order)
    Order for Second Reading read.
    To be read a Second time upon Thursday 2 April.

    BRITISH TRANSPORT DOCKS BILL (By Order)
    Order for Second Reading read.
    To be read a Second time upon Thursday 26 March.

    LLOYD'S BILL (By Order)
    Order for Second Reading read.
    To be read a Second time upon Tuesday 24 March at 7 o'clock.

    COUNTY OF KENT BILL [Lords] (By Order)

      EAST SUSSEX BILL [Lords] (By Order)
      Orders for Second Reading read.
      To be read a Second time upon Thursday 26 March.

Oral Answers to Questions
  AGRICULTURE, FISHERIES AND FOOD

    Common Fisheries Policy
    Mr. Pollockasked the Minister of Agriculture, Fisheries and Food what is the present stage in the negotiations for a common fisheries policy.
    The Minister of State, Ministry of Agriculture, Fisheries and Food (Mr. Alick Buchanan-Smith): I refer my hon. Friend to the statement which my right hon. Friend made to the House on 11 March.
    Mr. Pollock: While understanding the need for reticence on the part of my hon. Friend at this delicate stage in the negotiations, may I nevertheless ask him to confirm, for the avoidance of doubt, that there is no question of reaching a settlement that would allow foreign vessels to fish right up to our beaches, as the French have recently demanded?
    Mr. Buchanan-Smith: I give my hon. Friend that absolute assurance. In any negotiation or in any agreement, we must ensure not only adequate exclusive access for our vessels, but preference beyond that zone of exclusive access.
    Mr. Mason: Is the Minister aware that the present state of the talks is one of deadlock, and that what concerns the House and indeed the industry is not only the point that has just been raised, namely, that pressure is being brought to bear by the French for access to our inshore waters, but that pressure is being brought to bear to get the Canadian cod deal settled with the Germans? Will he give an assurance that at the talks in Maastricht next week the Prime Minister will not trade off any of these matters and that we shall maintain the talks on achieving a common fisheries policy on their merits alone?
    Mr. Buchanan-Smith: I assure the right hon. Gentleman that I am aware of all the pressures. I assure him also that there never has been any question of trading fish against any other issue. Fish is important to the United Kingdom and is a matter that must be dealt with on its merits.
    Mr. Sproat: May I ask my hon. Friend whether the alleged dumping of cheap foreign fish was discussed at the latest talks?
    Mr. Speaker: Order. I think that that matter arises on question 3.

    Less Favoured Areas
    Mr. Mylesasked the Minister of Agriculture, Fisheries and Food what is the level of production from the areas in the United Kingdom which are covered by the less favoured areas directive in each of the past five years.
    The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mr. Jerry Wiggin): The main component of production in less favoured areas is young stock from hill and upland cattle and sheep. Stocking figures for these groups reveal a decline in cow numbers between 1976 and 1980 of nearly 5 per cent., but an increase of 6 per cent. over the same period in the number of ewes.
    Mr. Myles: In view of that reply and the considerable encouragement that the Government have given to this sector of agriculture, will my hon. Friend ensure that short-term economic considerations will not prevent that encouragement from continuing to be given?
    Mr. Wiggin: It is, of course, for economic reasons that these matters are considered in the first place. I think that it would be impossible at this time of the year to anticipate the consideration that my right hon. Friend will give to the matter in the autumn. I think that the fact that he has already given two record payments for hill grants and subsidies indicates the depth of our feeling on this subject.
    Mr. Bill Walker: The Highland farmers of Scotland greatly appreciate the help that has been given by the Government, but does my hon. Friend accept that I should be failing in my duty if I did not ask him to confirm that, whatever happens in the EEC negotiations, Scotland's hill farmers will still be recognised as an essential part of the agricultural community?
    Mr. Wiggin: I do not have the slightest difficulty in giving that assurance. Indeed, the new sheep regime is one of the matters that will considerably help them.

    Common Fisheries Policy
    Mr. Wallasked the Minister of Agriculture, Fisheries and Food if he will make a further statement on developments in the common fisheries policy and on the dumping of foreign fish in the United Kingdom.
    Mr. Buchanan-Smith: On the first part of the question, I refer my hon. Friend to the statement which my right hon. Friend made to the House on 11 March. The team of officials and industry representatives which is investigating the allegations of dumping has made good progress, but has not yet completed its work.
    Mr. Wall: I thank my hon. Friend for standing firm against both the French and the Germans. Is he aware that fish merchants are complaining about a lack of fresh fish and that trawlermen are complaining that the prices are too low? How will he reconcile those two points of view before reaching agreement on a common fisheries policy?
    Mr. Buchanan-Smith: It is precisely because of our concern over the marketing of fish that my right hon. Friend has asked his marketing advisers to look into the whole question of marketing. That they are now doing, and that is in addition to the work of the team of officials who are investigating the dumping of imports. Therefore, work is very much in hand on both those matters.
    Mr. Grimond: Have the Government received any fresh information from the Dutch Government about their inquiry into the possible illegal export of fish from Holland to this country?
    Mr. Buchanan-Smith: We have been in touch with the Dutch Government. As I am sure the right hon. Gentleman will have noticed from press reports, the main problems about fish coming from Holland directly relate to the difference in the currencies between the two countries. That, more than anything else is causing these imports.
    Mr. Sproat: In view of the continuing and severe problems caused to the British fishing industry because of the dumping of cheap foreign fish, when does my hon. Friend hope to come forward with a financial aid package to the industry? Is the industry right in thinking that he is considering providing about £28 million?
    Mr. Buchanan-Smith: I ask my right hon. Friend to have patience. As the industry knows, the Government understand its needs and have already shown by what they did last year that where action is needed they are prepared to take it. I must ask my hon. Friend to wait a little longer.
    Mr. James Lamond: If the use of the word "dumping" in the question suggests that the fish are cheap, will the Minister inform consumers at which retail outlets they can buy that cheap fish?
    Mr. Buchanan-Smith: I refer the hon. Gentleman to that body for which I know he has a great respect, the White Fish Authority, whose survey showed that there had been a reduction in the retail price of fish. I believe that that has been overlooked by those who are seeking to make headlines.
    Mr. Lang: In his negotiations, will my hon. Friend bear in mind the particular problems facing the shellfish industry, which is an important industry in Kirkcudbright in my constituency?
    Mr. Buchanan-Smith: I confirm that the shellfish industry is not only important to Kirkcudbright, but is an
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    important source of foreign earnings. It is an industry with an extremely good export record. I assure my hon. Friend that, in the interests of the United Kingdom as a whole, I shall do all that I can for that section of the industry.
    Mr. Mason: May I take it that the inquiry taking place by the team of officials and industry representatives into the dumping of cheap fish will be carried on separately from the CFP talks, and that it will not be held up until the outcome of those talks? If that is so, when are we likely to know the outcome of the discussions with the industry?
    Mr. Buchanan-Smith: The discussions with the industry about imports are continuing. A meeting was held yesterday at which I understand good progress was made. The two sides hope to meet again in the near future. I cannot anticipate the outcome. As to the broader meetings with the industry about financial aid, we shall come forward with proposals as soon as we are ready to do so.

    Agricultural Production (Marketing)
    Mr. Peter Fraserasked the Minister of Agriculture, Fisheries and Food what measures he is making to improve the marketing of agricultural production.
    The Minister of Agriculture, Fisheries and Food (Mr. Peter Walker): I am discussing with several sectors the potential for improved marketing. I am particularly concerned to see producers, processors and distributors work more closely together. I am following with interest the discussions on a possible new central marketing body.
    Mr. Fraser: Whatever consideration my right hon. Friend may still have to give to the funding proposals contained in the marketing working party report of the BAC, will he publicly give his approval to the four principles on which it says that it is necessary to base a marketing strategy—namely, the establishment of consistent quality standards and continuity of product availability, awareness of the requirement of the final consumer, co-ordination of promotion, and priority to export activity?
    Mr. Walker: Yes.
    Mr. Geraint Howells: Does the Minister agree that if we are to survive we shall have to improve our selling methods within the Community, instead of selling our surpluses to the Russians at give-away prices?
    Mr. Walker: There is terrific scope within the Community for British agriculture and food products. It is interesting to note that in a number of spheres considerable expansion is now taking place.
    Mr. Adley: Is my right hon. Friend aware that the marketing of frozen chickens by United Kingdom chicken processors is being hampered by the different standards of health inspection in this country and in other EEC countries? For example, is he prepared to recommend that one way of overcoming the problem is to have an international interchange of inspectors, so that our inspection standards are imposed on processing factories in other EEC countries?
    Mr. Walker: I am not particularly determined to direct our inspectors to go to foreign parts. However, I am glad to say that the Commission has agreed to come forward in the near future with proposals so that, both in terms of the

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    standard of enforcement and the method of payment for that enforcement, an identical system operates throughout the Community.
    Mr. James A. Dunn: Will the Minister pay particular attention to the need to provide for any regional variation that might be required in any central purchasing organisation, or any central system, that he is helping to create, or perhaps even sponsoring? Will he have special regard to Northern Ireland?
    Mr. Walker: There is a range of specific problems in Northern Ireland affecting both agriculture and horticulture. Primarily, those matters are the responsibility of my right hon. Friend the Secretary of State for Northern Ireland. I know that he is reviewing them with the farming organisations.

    Glasshouse Growers (Energy Costs)
    Mr. Newensasked the Minister of Agriculture, Fisheries and Food if he has yet made any agreement with other members of the European Economic Community to equalise the cost of energy used by glasshouse growers in different member countries; and, if not, if he will give special assistance to British producers.
    Mr. Wiggin: The European Community Commission has repeatedly challenged the Dutch over their gas prices in the glasshouse sector and called on them to cease unfair practices. We are expecting the Dutch reply to the Commission by the end of this month. I cannot anticipate their response.
    Mr. Newens: It is just not good enough to continue to wait. Is the Minister aware of the crippling disadvantage at which British growers have been placed as a result of higher interest charges, the high rate of sterling and the inordinate cost of energy compared with their Dutch counterparts? Would it not be cheaper to pay an £8 million subsidy, as has been proposed by United Kingdom producers, costing £400 per head, than to support people who will become unemployed at a cost of £2,000 per head? Does the Minister want the industry to survive, or is he prepared to see it go down the drain?
    Mr. Wiggin: We are seeking to do all that we can within the legal framework of the Community. The fact that we are expecting an answer on this matter within a fortnight shows that my right hon. Friend has been pushing it continuously at every opportunity, and he will go on doing so.
    Mr. Stephen Ross: What answer did the Secretary of State give to the large number of glasshouse growers and horticulturists, of whom I was one, although I had to leave early, when they demonstrated outside the Ministry on Friday? Things have surely come a long way when these people have to demonstrate against a Government for whom most of them voted.
    Mr. Wiggin: As I have already said, our insistence on an answer within 14 days puts a deadline on this, which no one else wanted to do, and that is right and proper.
    Mr. Colin Shepherd: Is it not permissible within the rules of the Community for temporary assistance to be given, based on the difference in fuel prices since January 1978?
    Mr. Wiggin: The Community rules contain guide lines for providing special assistance. The rules are not necessarily the only drawback.
    Mr. Mark Hughes: Does the Minister not realise that another fortnight will make the problem of our glasshouse growers this season intolerable, and that unless the Government introduce special aid for them there will be an enormous number of bankruptcies, which no one will welcome?
    Mr. Wiggin: Although I was not present, I am told that the growers, who were told that a decision would be forthcoming within weeks, were pleased to hear that a date had been fixed. Their interpretation of the delay was not that expressed by the hon. Gentleman.
    Mr. Adley: Is my hon. Friend aware that many of these people have already gone out of business? Does he accept that knowing that an answer will come in two weeks, without knowing what it is to be, is not much comfort unless there is an absolute assurance that the Government will take the steps recommended if we do not get the answer that we hope for?
    Mr. Wiggin: The Government will respond. We, too, are acutely aware of the difficulties.

    Egg Production
    Mr. Farrasked the Minister of Agriculture, Fisheries and Food what is the United Kingdom level of self-sufficiency in egg production.
    Mr. Buchanan-Smith: United Kingdom self-sufficiency in egg production in 1980 is estimated to have been 99 per cent.
    Mr. Farr: With the continuing fall in United Kingdom chick production and the rise in placings in Holland and France, what level of self-sufficiency does my hon. Friend expect the egg industry to achieve by the end of June? Is it likely to be satisfactory? If not, what does he intend to do?
    Mr. Buchanan-Smith: Such matters depend on the level of demand and so on. On the figures available it appears that we shall be marginal net importers of eggs this year, but I emphasise that any change must be small when we are near 100 per cent. self-sufficiency.

    Poultry Industry
    Mr. Cockeramasked the Minister of Agriculture, Fisheries and Food if he will make a statement on the progress of his Department's efforts to ensure that the United Kingdom's poultry industry does not continue to be at a disadvantage compared with other European Economic Community poultry producers.
    Mr. Peter Walker: The Commission is expected to make proposals very shortly to harmonise inspection standards and methods of charging. It is still considering certain information we sent it on State aids to processors of poultrymeat in France. As regards the recently announced income aids to French farmers, the Commission has now opened proceedings against France under the State aid provisions of the Treaty of Rome.
    Mr. Cockeram: Is my right hon. Friend aware of how disappointing that answer will be to the United Kingdom

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    poultry industry, because it offers no help with interim problems? Is he aware that Midland Poultry Holdings in my constituency, one of the largest United Kingdom producers, has been offered French birds at well below the cost of production in this country? What does he intend to do to help the industry with its interim problems?
    Mr. Walker: My hon. Friend will know that because of the problems only a few weeks ago I provided an additional £2 million of aid to the industry. The poultry industry will be pleased to know that the Commission is making proposals to standardise charges and standards of supervision.
    Miss Maynard: Are poultry producers in other EEC countries receiving subsidies, direct or indirect? If so, why cannot our producers have the same subsidies so that they can compete on equal terms? Do European hygiene standards comply with our import standards? Will the Minister negotiate compensation for redundant poultry workers similar to that for dairy farmers?
    Mr. Walker: The purpose of the so-called compensation for dairy farmers is to enable them to move to activities that are not in surplus in Europe. The Commission has proposals to standardise inspection standards and methods of charging. The Government gave additional aid to the industry before those decisions were taken. On the general question of national aids, one of the most important issues in the Community is the degree to which some countries—and one in particular—are giving substantial national aids, which pervert competition in Europe. That problem must be at the forefront of the Commission's activities in the coming months.
    Mr. Peter Fraser: Will my right hon. Friend take action to ensure greater uniformity in the application of inspection standards by local authorities? Is he aware that some United Kingdom poultry producers are even more disadvantaged than others?
    Mr. Walker: That is one reason for providing aid. Gradually, more conformity is being established in the United Kingdom.
    Mr. Mark Hughes: Does the Minister accept that the arrangements for the poultry industry are disadvantageous to British producers? Unless he takes action urgently, many poultry producers, like glasshouse growers, will be forced out of business.
    Mr. Walker: I did not approve the regulation. That was done by my predecessor. I have come forward with the additional money necessary to see the poultry industry through this phase. Obtaining standardised methods of enforcement and payment will be a big step forward. The previous Administration did not achieve that.

    Sheep Industry
    Mr. Richard Wainwrightasked the Minister of Agriculture, Fisheries and Food if he is satisfied with the present state of the sheep industry; and if he will make a statement.
    Mr. Buchanan-Smith: Yes, Sir. The new sheepmeat regime has brought major benefits.
    Mr. Wainwright: Does the Minister accept that the House will be glad to hear that? Is he aware that reports from the North of England suggest that in this lambing
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    season the destructive worrying of sheep by uncontrolled dogs is worse than ever, which is perhaps not surprising in the present economic climate? In drawing the matter to the attention of the Secretary of State for the Environment, will he warn him of the valuable proposals of the report of the working party on dogs five years ago and ask him to implement them without delay?
    Mr. Buchanan-Smith: One may blame the EEC for many things, but we cannot blame it for dogs worrying sheep. We certainly cannot blame the sheepmeat regime. However, the hon. Gentleman has raised a serious point at a timely moment. I hope that dog owners will pay attention to what has been said.
    Mr. Kimball: Is my hon. Friend aware that sheep production is the most flourishing and successful sector of agriculture? Is he further aware that every prediction of his right hon. Friend last autumn about future prices has been more than met? Will he ensure that nothing is done in the forthcoming negotiations in Europe to destroy the great confidence that is building up in the industry?
    Mr. Buchanan-Smith: I am grateful to my hon. Friend for what he says. The sheepmeat regime has considerably helped our sheep producers. However, some aspects, particularly exports, give us cause to worry. We hope to raise such matters in the price review.
    Mr. Strang: Will the Minister acknowledge that the clawback in the EEC sheepmeat regime has brought to an end the lamb trade with the Continent, when it should be increasing? Will he make it clear that the Government do not accept that and are determined to reverse it in the present price negotiations?
    Mr. Buchanan-Smith: I hope that the hon. Gentleman, in turn, will acknowledge that the clawback has been cancelled for third country exports. The language that he uses is out of place. A change has taken place in the pattern of trade with European countries, but I hope that he will not be disappointed to learn that the level of trade in 1980–81, between November and January, is similar to that of the previous year. It is a distortion to say that trade has been brought to a halt.
    Mr. McQuarrie: Is my hon. Friend aware of the rumour that the French intend to disrupt the entry of sheepmeat to France again this year? If that is correct, when he is in Brussels will he let the French know in no uncertain manner that he will not tolerate it?
    Mr. Buchanan-Smith: If my hon. Friend has evidence of that, I should like to know of it. We have consistently defended the interests of our sheep producers, and we shall continue to do so.

    Price Review
    Mr. Temple-Morrisasked the Minister of Agriculture, Fisheries and Food if he is now in a position to make a statement on the outcome of the European Economic Community price review.
    Mr. Peter Walker: Last week, in the Council of Ministers, the Commission's proposals on farm prices were discussed and views were put by each member country. The main discussions will take place at the beginning of April. I hope that before then we shall have a debate in the House.
    Mr. Temple-Morris: Is my right hon. Friend aware that he has much support in the attempt to restore prices to a realistic level for the British farmer? Will he communicate to his Treasury colleagues the necessity of looking after the countryside, which just about still supports the Conservative Party?
    Mr. Walker: On farm prices and the green pound, the Government are determined to see that the position of British agriculture is protected in the current negotiations. We must also, naturally, have a degree of interest in the impact of the common agricultural policy as a whole and the cost of the budget. assure my hon. Friend that it is the intention of the Government to see that British agriculture continues to prosper.
    Mr. Torney: In his discussions on the price review, will the Minister bear in mind the serious condition of the British poultry industry and its need to achieve some advantage from the review? This industry used to provide a great deal more employment than the glasshouse and fishing industries, which, under the right hon. Gentleman's control, are now in dire straits. There is considerable unemployment in the poultry industry, with a number of bankruptcies looming up. Will the right hon. Gentleman take the opportunity of the price review to remedy the situation?
    Mr. Walker: I welcome the hon. Gentleman's interest in employment in the poultry industry. I wish that a similar interest could be shown by the party of which he is a member, instead of its making constant demands for large green pound revaluations, which would do great damage to British agriculture.
    Mr. Peter Mills: Will my right hon. Friend remain firm in his view that there should be no revaluation of the green pound and that there should be a fair return for British producers? More importantly perhaps, will he try to prise open the mind of the Shadow Minister of Agriculture, Fisheries and Food, so that we know exactly where the Opposition stand? Rumours are circulating that the Opposition want a revaluation of the green pound and no increase in prices to the farmers, which would be disastrous for the producer, the consumer and those who work in the meat plants.
    Mr. Walker: I find it extraordinary that when farm incomes, in real terms, have gone down by 24 per cent. a major political party should advocate that they should be reduced still further. The position of the Opposition will perhaps be revealed in next week's debate.
    Mr. Mason: On the basis of a positive MCA of about 18 per cent., are we not denying our consumers cheaper food and, at the same time, swelling our contribution to the Common Marker budget? Based on a positive MCA of 18 per cent., are we not granting £500 million or £600 million a year to our farmers' incomes? On that basis, is the right hon. Gentleman saying that under no circumstances, in the present review, will he agree to a revaluation of the green pound?
    Mr. Walker: I say clearly to the right hon. Gentleman that in the period when the Labour Government had negative MCAs of between 24 and 45 per cent. food prices in this country went up twice as fast as they have under this Government. Secondly, I am saying that the positive MCAs do not improve farm prices at the farm gate in this
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    country. What the right hon. Gentleman seemingly advocates is that they should be reduced still further. That is a dangerous policy to pursue.
    Mr. Mason: Is the Minister saying that under no circumstances, in the forthcoming agricultural price review, will he agree to any percentage revaluation of the green pound?
    Mr. Walker: I am saying categorically that, on the Commission's proposals for the coming price review and its suggested increases, there will be no revaluation of the green pound.
    Mrs. Kellett-Bowman: Does my right hon. Friend agree that the Agriculture Committee of the European Parliament was right yesterday to emphasise the need to discourage the production of commodities in surplus and to encourage those that are not in surplus? Will he accept that I am delighted to hear him turn down suggestions for a green pound revaluation which would not help British housewives in regard to prices, and which would be damaging to our farmers?
    Mr. Walker: I appreciate what my hon. Friend says. I recognise the immense damage done to British agriculture, food manufacturers and food processors by the appalling policy of the previous Government of having negative MCAs.

    Pig Industry
    Mr. Penhaligonasked the Minister of Agriculture, Fisheries and Food if he is satisfied with the present state of the pig industry; and if he will make a statement.
    Mr. Buchanan-Smith: The three devaluations of the green pound in 1979 removed one of the major problems and there was improvement in producers' returns in 1980.
    Mr. Penhaligon: That is true. Is the Minister not aware, however, of the assistance given to Irish exporters of pig and bacon meat in order to cover their health inspection charges? Will the Government consider giving similar aid to British slaughterers to enable them to compete against these imports on an equal basis?
    Mr. Buchanan-Smith: I agree with the hon. Gentleman that any national aids that lead to unfair competition have to be dealt with carefully. That is a point that we made to the Commission.
    Mr. Colin Shepherd: Is it not the case that during the period of office of the Labour Government the negative MCAs smashed the cooked pigmeat industry in this country? Is it not the case also that the retention of positive MCAs will extend the hope of the United Kingdom pigmeat industry that it will be restored to its proper position?
    Mr. Buchanan-Smith: There is no doubt that if we did not have the positive MCAs conditions would be infinitely worse for the United Kingdom pig industry. It is an important section of our agriculture industry. I believe that in the coming price review we have to look closely at the balance between cereals and livestock. This is one sector of our industry that can suffer if we get that balance wrong.

    Beef
    Mr. Robert Atkinsasked the Minister of Agriculture, Fisheries and Food what proportion of home produced beef was supplied from the dairy herd in the past year within the United Kingdom.
    Mr. Buchanan-Smith: About two-thirds.
    Mr. Atkins: Many of my hon. Friends will be grateful for that answer. Will my hon. Friend consider making a change in the grading standards that will allow more dairy-bred beef to come within the area of premium payments?
    Mr. Buchanan-Smith: One of the hallmarks of British beef is its high quality. It is important to do everything that we can to maintain that high quality. I assure my hon. Friend that we re-examine the standards from time to time. If he has a worry about this, I should be grateful if he would let me know. I must point out that of the animals presented for certification, over 92 per cent. are accepted. I do not believe that that indicates a great problem.
    Mr. Strang: Has the Minister had an opportunity to study the figures released today by the Meat and Livestock Commission, which indicate a record increase in beef and veal exports? Can he say whether these exports have been swollen by a significant increase in the slaughtering of United Kingdom dairy cows? If that is so, is it a matter of concern to the Government?
    Mr. Buchanan-Smith: The Government are, naturally, concerned if there is any effect on our breeding stock. I am concerned generally about beef production. There has been a small decline over the last 12 months. It is a decline that began before then. This is an area which, like the pig industry, requires a great deal of attention in the price review.
    Mr. Myles: Will my hon. Friend consider the effect of the introduction of Holstein blood into the dairy herd on the beef that is produced? Does he consider that, because of the volume of beef coming from Holstein blood, there might have to be a change in the grading standard?
    Mr. Buchanan-Smith: I hesitate to become involved in interbreed rivalry of any sort. I know that in certain areas the Holstein breed has proved successful in its contribution to our dairy industry.

    Dairy Industry
    Mr. Altonasked. the Minister of Agriculture, Fisheries and Food if he satisfied with the present state of the dairy industry; and if he will make a statement.
    Mr. Peter Walker: Yes, Sir. I believe that the United Kingdom dairy industry can continue to improve its structure and efficiency in response to prevailing economic circumstances. In view of a point raised by the Opposition Front Bench, I am pleased to say that slaughterings in January 1981 are 21 per cent. down on the high level of January 1980.
    Mr. Alton: Would it not be beneficial to consumers and producers if the co-responsibility levy were abolished?
    Mr. Walker: As a matter of principle, it is better to have a reduction in price than a co-responsibility levy. The super levy proposed by the Commission, which will prevent and stop increases in production, and therefore decrease surpluses, has considerable merit.
    Mr. Maxwell-Hyslop: Will my right hon. Friend take every opportunity to remind the Opposition Front Bench that if the dairy industry is strangled by the debt carried over from the under-recruitment when the Labour Government were in office it will not be able to play its part in the recovery of the engineering industry in the Midlands, which used to provide such a large market?
    Mr. Walker: One of the important arguments for keeping British agriculture in a position of some prosperity and expansion is that otherwise many jobs in manufacturing, in the agricultural machine industry and in food processing will be at stake.
    Mr. Newens: Will the right hon. Gentleman assure the House that he will in no circumstances agree to any package deal with our partners in the EEC that involves accepting concessions in the dairy trade that are damaging to milk rounds in order to gain advantages in other spheres?
    Mr. Walker: Yes, I can give that absolute assurance. One of the most important features for our dairy industry is the continuation of the doorstep delivery service. I shall not take action that undermines that service.
    Mr. Nicholas Winterton: I recognise the difficult job that my right hon. Friend is seeking to do within the EEC to achieve reform, but is he aware of the dire plight of our dairy and livestock industries? Far from expanding, the dairy herd is being reduced and the incomes of dairy farmers are dropping dramatically. Will my right hon. Friend give some assurance to the industry that it has a future, following the negotiations that are taking place within the EEC?
    Mr. Walker: Three positive green pound devaluations and a substantial increase in the price of liquid milk have helped. I am pleased to tell my hon. Friend that in January slaughterings were 21 per cent. down on the year before and the number of heifers in calf was up on the previous year. The price of a dairy cow is substantially higher now than a year ago. Those factors demonstrate that there is a degree of confidence in the industry.

    Tenant Farmers
    Mr. Allen McKayasked the Minister of Agriculture, Fisheries and Food how many tenant farmers have lost their farms due to the Agricultural Holdings (Notices To Quit) Act 1977 during the last 12 months.
    Mr. Wiggin: The agricultural land tribunals approved 17 notices to quit under the Agricultural Holdings (Notices to Quit) Act 1977 in the 12 months ending 31 December 1980.
    I regret that information about notices to quit that were not contested before an agricultural land tribunal is not available.
    Mr. McKay: Does the hon. Gentleman agree that it is scandalous that tenant farmers can be turned off their land merely for monetary purposes? Will he ask his right hon. Friend to consider the case in my constituency involving James Clegg, who will increase the statistics this year by one because he will be turned off his land as a result of the 1977 Act? Does the hon. Gentleman agree that it is time for the Act to be reconsidered?
    Mr. Wiggin: The Act was put on the statute book when the Labour Government were in office. I do not wish to

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    become involved in an argument about the rights and wrongs of the Act. We are satisfied that the proper procedures were followed in the case that the hon. Gentleman has mentioned. We cannot have a replay in the House of all tribunal decisions.
    Mr. Myles: Does my hon. Friend agree that measures taken by our right hon. and learned Friend the Chancellor of the Exchequer in the Budget will help to increase the availability of farms to rent?
    Mr. Wiggin: Having been responsible for moving amendments to that effect when the Labour Government were in office, I am delighted with my right hon. and learned Friend's proposals. I agree with my hon. Friend that they will help the rented sector considerably.

    Milk Products (Co-responsibility Levy)
    Mr. Allan Stewartasked the Minister of Agriculture, Fisheries and Food what effect the European Economic Community Commission's proposals for a co-responsibility levy will have on United Kingdom milk producers.
    Mr. Peter Walker: The Commission has proposed that the basic co-responsibility levy should remain unchanged, except that it has proposed that a 6 per cent. levy should apply to milk from farms using intensive production methods. I find this proposal totally unacceptable. It would discriminate against producers in the United Kingdom and I will not agree to it.
    Mr. Stewart: I am most grateful to my right hon. Friend for that reply. In looking to the future, will he ensure that any co-responsibility levy will not militate against milk that our producers have to sell for manufacture because of imports of liquid milk from other countries in the EEC?
    Mr. Walker: Yes.

    Fish Imports
    Mr. Beithasked the Minister of Agriculture, Fisheries and Food whether he has completed his inquiries into fish imports.
    Mr. Buchanan-Smith: I refer the hon. Gentleman to the answer I gave earlier to my hon. Friend the Member for Haltemprice (Mr. Wall).
    Mr. Beith: Does the hon. Gentleman realise the anxiety that exists in the industry about imports? Cod, which used to fetch £35 a box two years ago, is appearing on the market for less than half that price. Does he realise that the scale of cod imports is something that the industry has never previously experienced?
    Mr. Buchanan-Smith: The hon. Gentleman might be interested to learn that in January 1981 less cod was imported than in the previous year. I agree with him about the problem of prices. It is precisely for that reason that we have set up an investigation into imports and why we are examining the financial state of the industry. We hope shortly to come to a conclusion following our examination.
    Mr. Kimball: Does my hon. Friend realise that the greatest contribution that he could make to the preservation of fish stocks would be to persuade the
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    Northumberland river authority to abolish the 50 licences that it has issued for drift netting for salmon off the Northumberland coast?
    Mr. Buchanan-Smith: I am sure that the hon. Member for Berwick-upon-Tweed (Mr. Beith) will have noted my hon. Friend's observation.

  PRIME MINISTER

    Engagements
    Mr. Adleyasked, the Prime Minister if she will list her official engagements for 19 March.
    The Prime Minister: This morning I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in this House I shall be having further meetings later today. This evening I shall attend a banquet given by President Shagari of Nigeria.
    Mr. Adley: Is my right hon. Friend aware that some local authorities that are still opposed to the sale of council houses are regarding the Housing Act 1980 as a hurdle to be overcome rather than a law to be obeyed, and that some councillors and officials are harassing, bullying and flying to coerce tenants out of their rights? Will she please today condemn that activity and assure tenants who want to buy that the Government will stand firmly behind them and do everything that they can to help?
    The Prime Minister: Yes, gladly. The law on council tenants' rights must be obeyed. The Government have reserve powers. We are in touch with the 16 authorities in England that are dragging their feet over giving tenants those rights. We have acted with some speed. If need be, we shall not hesitate to use our reserve powers.
    Mr. Jay: Does the right hon. Lady feel that her economic policies have produced the results that she intended?
    The Prime Minister: Perhaps the right hon. Gentleman will wait a little longer.
    Mr. John Browne: Will my right hon. Friend please confirm that to employ people on a discriminatory basis on grounds of race, colour or creed is illegal in Britain? If that is so, will she tell the House for how much longer she intends to allow the existence of employment on the discriminatory basis of whether of not an individual is a member of a trade union? The closed shop is blatantly unjust and blatantly against Britain's interests.
    The Prime Minister: I agree with my hon. Friend that one or two recent cases have aroused the wrath of the British people. I think that the British people are wholly against the sacking of Joanna Harris by a municipal authority. They regard that as a disgrace to that authority. I hope that all those who feel as I do will contact my right hon. Friend the Secretary of State for Employment and make their views clearly known on the consultative document, which envisages the possibility of further legislation.
    Mr. Healey: As it is now clear that the Budget has added massive new burdens to British industry by raising the exchange rate by 4½ per cent. compared with its level at the beginning of the month and by increasing the price of energy for industry, will the right hon. Lady give

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    industry the little psychological boost that she promised on television recently by cutting the minimum lending rate by at least a further 2 per cent. and tabling an amendment to the Finance Bill to cut the price of diesel fuel, which is now a third higher than the price in France and 50 per cent. higher than in Germany?
    The Prime Minister: The answer is "No, Sir". If the level of public expenditure that the right hon. Gentleman had planned was in operation there would have to be even higher taxes and far higher interest rates than those that prevail now.
    Mr. Healey: The Prime Minister cannot continue to attack the Labour Government on the level of public expenditure—
    Mr. Robert Atkins: She can.
    Mr. Healey: She cannot attack that Government for failing to cut public expenditure when she occasionally poses as the Prime Minister.
    The Prime Minister: We have brought public expenditure down to well below the level at which the right hon. Gentleman left it—[Interruption.] It is well below what he had planned. Had we continued on his course—[Interruption.] It is well below what the right hon. Gentleman had planned. Had this Government been on the right hon. Gentleman's course, we should have been on the way to the IMF by now.
    Mr. Allan Stewart: Does my right hon. Friend agree with me in commending the sense of realism that was displayed yesterday by the work force at the Talbot factory at Linwood in rejecting the extremist and irresponsible course of action urged upon it by the Labour and Scottish National Parties, which would have damaged the image of industrial relations in the West of Scotland?
    The Prime Minister: Yes. I join my hon. Friend in welcoming that wise action.
    Mr. William Hamiltonasked the Prime Minister if she will list her official engagements for 19 March.
    The Prime Minister: I refer the hon. Gentleman to the reply which I gave some moments ago.
    Mr. Hamilton: Has the Prime Minister seen the reports in today's newspapers that Shell intends to increase petrol prices by 5p, in addition to the 20p that has already been imposed by the Budget? In view of the right hon. Lady's known concern for the welfare of rural communities, is she determined to retain the 20p increase in the Budget, as well as the 5p that is threatened by Shell and other oil companies?
    The Prime Minister: The hon. Gentleman and many others are only too anxious to increase public expenditure. We have to meet the public expenditure that is already agreed, and even the taxes that the Chancellor has proposed are not sufficient for that purpose and we have to raise a further £10½ billion. We took the view that the top priority for industry was to get down interest rates. They are now down by 5 per cent from their peak.
    Mr. Bill Walker: Has my right hon. Friend had an opportunity during her busy day to look at the comments that are attributed to the right hon. Member for Bristol, South-East (Mr. Benn), which suggest that we in Britain are conducting a battle similar to that in Zimbabwe for
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    independence from the European Economic Community? Will she condemn that and confirm that Government policy is to arrange for matters within the EEC to work for the benefit of this country and all the other members of the EEC?
    The Prime Minister: If those remarks really represent what the right hon. Member for Bristol, South-East (Mr. Benn) thinks, they are not worthy of comment.
    Mr. James Lamond: Does the right hon. Lady believe that her Government have played their proper part at the Madrid conference? If so, can she tell us of any concrete, constructive proposal that has been put forward by the British delegation to assist disarmament in Europe and the building of confidence between the nations that were represented at that conference?
    The Prime Minister: One main element is needed to build confidence, both at the Madrid conference and in other international relationships, and that is the withdrawal of Soviet troops from Afghanistan.
    Mr. Farr: Will my right hon. Friend find time today to look at the worrying situation that has arisen in connection with American textile exports to Britain, particularly synthetic textiles, and the deplorable fact that apparently President Reagan has taken no action about subsidised gas prices in America? Is my right hon. Friend aware that 100,000 jobs were lost in the textile industry last year, and that a similar calamitous decline is possible this year?
    The Prime Minister: We have referred the matter to the European Commission. I am well aware of the problem. However, it should be pointed out that President Reagan has de-regulated oil prices. That was a courageous step, and I hope that it will be followed by further action on gas prices.
    Mr. Grimond: When the Prime Minister meets the President of Nigeria today, will she discuss the difficulties of African students who want to come to universities in this country?
    The Prime Minister: We have already done that. We pointed out that those overseas students who were at university when the increased fees came in could carry on at the former fees. My right hon. Friend the Foreign Secretary has a budget to help overseas students to pay increased fees. It amounts to about £42 million a year, which is equal to 10,000 students. That is not ungenerous.
    Mr. Ward: Has my right hon. Friend had time today to look at The Daily Telegraph report that the level of redundancy payments to miners may well go up to £42,000? Is she not concerned that this and other payments by the nationalised industries compare badly with what private industry can afford because many firms can pay only the minimum statutory level of redundancy payment, which, at its best figure, is £3,900? Is she not concerned that that money can come only from the private sector, which is already hard pressed?
    The Prime Minister: I understand the resentment that is felt about redundancy payments in nationalised industries, particularly that felt by small businesses. Nevertheless, it is to the benefit of the country that we reduce the number of mines that are loss-making so as to reduce the price of coal, which in turn would reduce the price of electricity. The increased redundancy payments

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    are being made so that some of the mines that are producing coal at a very high cost can go out of action. That will be to our benefit. These are not wholly mineworkers' redundancy payments. They are the total payments available under some three Acts.
    Mr. Sheermanasked the Prime Minister if she will list her official engagements for Thursday 19 March.
    The Prime Minister: I refer the hon. Gentleman to the reply which I gave some moments ago.
    Mr. Sheerman: Can the Prime Minister spend some time today considering the announcement that GKN, our biggest engineering company, has lost £1·2 million in the past year, and in view of the fact that ICI, Britain's largest chemical company, has also made a loss this year, what can the Government do to prevent every industry from going bankrupt?
    The Prime Minister: Certainly a number of engineering companies, including GKN, have reported bad results. They would be in a much better position if the 1·5 million cars that were sold in this country last year had included far more British cars. That would have had an effect on the steel and engineering industries. The best way to help other companies is for more people to buy British.
    Mr. Fox: I am sure that my right hon. Friend is aware that, of the two Inland Revenue computer centres to be closed as a result of the Civil Service dispute, one is in my constituency. Is she aware that many of my constituents who work there are opposed to the strike? One of them wrote:
    "We are delighted with the 7 per cent. on offer and trust the Government to see we are paid fairly in the future and in accordance with what our country can afford."
    The Prime Minister: I am grateful for what my hon. Friend says. I believe that the vast majority of people in the Civil Service, knowing that their pay this year is 50 per cent. higher than it was two years ago, and having been offered 7 per cent. on top of that, are of the opinion that this is a fair and honourable deal and are staying at work for that reason.
    Mr. Healey: In view of the fact that the heads of both GKN and ICI attributed their appalling results largely to Government policy, interest rates and the exchange rate, will the Prime Minister take action to bring those down, since in real terms interest rates are still substantially higher than they were a year ago and, as a I said earlier, the exchange rate has risen 4½ per cent. in the past few weeks?
    The Prime Minister: The right hon. Gentleman is not the right person to give advice about exchange rates, bearing in mind that he brought it to an all-time low of $1·56.
    Mr. Stanbrookasked the Prime Minister if she will list her official engagements for Thursday 19 March.
    The Prime Minister: I refer my hon. Friend to the reply which I gave some moments ago.
    Mr. Stanbrook: Will my right hon. Friend find time this afternoon to remind the Opposition and some of her own hon. Friends that if we are to maintain and extend the reduction in the minimum lending rate we must curb Government borrowing, and that that means hard and unpopular measures in the Budget?
    The Prime Minister: That is so. We have to persuade people to lend money to the Government. If we demand too much they will give it only at an unusually high interest rate, and that would spill over on to all those in industry who wish to borrow. It is vital to the future of investment and stockbuilding that the interest rate should be kept down, and that means putting up taxes higher than we should otherwise have wished and trying to keep down future expenditure.
    Mr. Cryerasked the Prime Minister if she will list her official engagements for Thursday 19 March.
    The Prime Minister: I refer the hon. Gentleman to the reply which I gave some moments ago.
    Mr. Cryer: Has the Prime Minister seen the report that the Civil Service unions have discovered the secret payments centres at Edinburgh and Leeds and are, in consequence, stepping up their action? Is she aware that they are doing this to demonstrate that they have a valuable function in the community—contrary to the continuing sneers of the Government and Members of the Conservative Party—and to demonstrate also that they have muscle? Is she aware that, following her settlement with the miners, all trade unionists now understand that the only language to which the Government will listen is that of trade union muscle? Is she aware that that is the language that the Civil Service is being forced to use?
    The Prime Minister: I hardly think so. Before the Government came into office civil servants and others in the public service suffered grievously under the last Government's incomes policies. They did not have a fair deal then but they got a fair deal under this Government.

Fishing Vessel "Celerity"
Mr. David Mylesasked the Secretary of State for Trade if he will make a statement on the Buckie-registered fishing vessel "Celerity" reported missing in the Pentland Firth yesterday.
The Under-Secretary of State for Trade (Mr. Reginald Eyre): The fishing vessel "Celerity" sailed from Kinlochbervie at 2130 on Tuesday 17 March with a crew of six on board, bound for Peterhead.
At 0620 on 18 March the fishing vessel "Crystal Sea" alerted the coastal radio station at Wick that she had lost radar contact with the fishing vessel "Celerity" in suspicious circumstances. The "Crystal Sea" had been steaming approximately five miles astern of the "Celerity" and both vessels were heading eastbound into the Pentland Firth. Weather conditions at the time were severe, with heavy snow squalls.
The coastguard alerted all ships in the area and mounted an air search, which was continued until nightfall. A check of harbours and a coastline search was also carried out by the coastguard. The air search was resumed and widened this morning, using an RAF Nimrod and a Shackleton, and continued until 1500.
I regret to say that no trace of the "Celerity" or its crew has been found and it is my very sad duty to have to inform the House that the vessel must be presumed lost. My Department has ordered a preliminary inquiry into the loss of the vessel.
I am very conscious of the fact that the community of Buckie, which relies so much on the traditional skill and fortitude of its fishermen, has paid a particularly heavy and tragic price in recent times. I am sure that hon. Members would wish to join me in expressing deepest sympathies for the families and relatives of the crew of the "Celerity" and I should be grateful if my hon. Friend would convey this message to the people of Buckie.
Mr. Myles: I thank my hon. Friend for that sad statement. I shall certainly carry the sympathy of the House to the relatives of the unfortunate men from Buckie and Portgordon when I visit them at the weekend.
I greatly deplore the fact that this is the fourth fishing vessel that has been lost from Buckie since I became a Member of Parliament. First we lost the "Corinthia", then the "Ocean Monarch", and then the "Bounteous". Surely that is too many.
The crew consisted of Sandy Bruce, aged 38, of 7 Cathay Terrace, Cullen, who was a very competent skipper. His grandfather pioneered motor fishing vessels out of Buckie. Other crew members were John Innes, of South View, Buckie; Francis Goodall, of 28 McKenzie Road, Buckie; Richard Clark, of 10 Linn Crescent, Buckie; George Reid, of 126 Douglas Crescent, Buckie; and William Grant, a son-in-law of Richard Clark, of 28a Gordon Street, Portgordon.
Will my hon. Friend do everything possible to prevent such a tragic occurrence being repeated? The dangers to which fishermen are exposed far exceed the dangers facing any other sector of the community. Therefore, the Department must recognise its great responsibility. We all have a responsibility to secure the economic viability of the fishing industry.
Mr. Eyre: I note with regret my hon. Friend's comment. My Department realises fully its responsibilities
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to the fishing industry. With the fishing industry safety group, my Department is doing all that it can—and successfully—to raise safety standards in the industry. It is recognised to be a perilous industry.
Several Hon. Members rose
Mr. Speaker: Order. Although this is a private notice question, in view of its substance I shall call the three hon. Members on the Government Benches who have tried to catch my eye and the two right hon. Members and one hon. Member on the Opposition Benches.
Mr. Bruce Millan: May I on behalf of my right hon. and hon. Friends express our sympathy for the relatives and friends of the men who are lost? This is not the first grievous loss in that area. It reminds us that fishing is still a hazardous occupation.
We note that there is to be an inquiry. In view of the recurrence of such losses in recent years, I hope that it will be a wide-ranging inquiry. It is extremely worrying that there have been a number of such tragedies in recent years.
Can the Minister say anything about coastguard surveillance in the area? Suggestions for improvements have been made. That implies that there may be some deficiencies in the present arrangements. I do not say that in a critical spirit, but I should be grateful if the hon. Gentleman could deal with the matter.
Mr. Eyre: I can assure the right hon. Gentleman that the preliminary inquiry will be wide-ranging. I can assure him that the coastguards were fully active, as I made clear in my statement. They did all that they possibly could, in very difficult circumstances.
It has been suggested that the coastguard service at Wick should remain there but that part should be transferred to augment the coastguard service available at Kirkwall. I believe that that move is not yet ready. However, I hope that it will prove of assistance to the fishing industry.
Mr. Albert McQuarrie: It was my unfortunate duty to accompany my hon. Friend the Member for Banff (Mr. Myles) to the memorial services following the loss of the previous vessels to which he referred. As the "Celerity" was sailing to its home port of Peterhead, in my constituency, I share my hon. Friend's sorrow and that of the thousands of fishermen in and around my constituency. It is sad that the poor town of Buckie has had to suffer such a dreadful loss in the last few years.
Mr. J. Grimond: I should like to be associated with the regret that has been expressed, and to express sympathy with the families of the lost men. Does not this once again illustrate the extreme danger of fishing in the seas around Orkney and Shetland, and the cost in lives of bringing fish to this country? Since they have been mentioned, would it not be appropriate to pay a tribute to the work of the coastguards, which is carried out in all weathers and is vital to fishermen in the North of Scotland?
Mr. Eyre: I appreciate the right hon. Member's words of regret. I very much appreciate the tribute that he paid to the coastguards, who play a wonderful part in doing all they can to ensure safety in this area.
Mr. Bill Walker: Everyone in Scotland will be saddened by this additional loss and

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will welcome the interest that the House is showing in this difficult area. Will my hon. Friend and his colleagues in Government look carefully at the facilities that are available for aerial surveillance and sea operations in the now busy waters of the North Sea? The waters are far busier than they have ever been, and the problems are mounting daily. The fishermen who must go out into those waters are facing not only the problems of the elements but the additional problems brought about by oil-related activities.
Mr. Eyre: I appreciate the points raised by my hon. Friend. I assure him that major improvements in the coastguard VHF radio coverage of the North Coast of Scotland have been introduced in the past two years. Search and rescue capability in that area has been strengthened by the establishment of RAF Sea King helicopters at Lossiemouth. Those helicopters were active yesterday in the search in the Pentland Firth.
Mr. Gordon Wilson: I associate myself and my right hon. Friend the Member for Western Isles (Mr. Stewart) with the expression of sympathy that the Minister will make on behalf of the House to the relatives of the deceased. It is on such occasions that those of us who do not have fishing constituencies realise the sacrifice made by those who go to sea in dangerous conditions to bring back the fish that form part of our livelihood.
Mr. Eyre: I am grateful to the hon. Gentleman for his words of sympathy.
Mr. Alex Pollock: I associate myself, on behalf of the neighbouring constituency of Moray and Nairn, with the expressions of sympathy already put forward by the House. The House will understand that the fishing community on the North-East Coast of Scotland is tightly knit, and that the loss to one port is a loss to them all. Will the Minister confirm that in this incident a significant part was played both by RAF Lossiemouth—to which he referred—and RAF Kinloss? They have performed a very great service to the community.
Mr. Eyre: I appreciate my hon. Friend's words and I confirm that the RAF services played a notable part in the search, in the way that I have described.

Business of the House
Mr. Denis Healey: Does the Leader of the House have a statement to make about the business for next week?
The Chancellor of the Duchy of Lancaster, Paymaster General and Leader of the House of Commons (Mr. Francis Pym): Yes, Sir. The business for next week will be as follows:
MONDAY 23 MARCH—Progress on remaining stages of the Local Government (Miscellaneous Provisions) (Scotland) Bill.
Motion relating to the National Health Service (Functions of Health Boards) (Scotland) Order.
TUESDAY 24 MARCH—Supply [13th Allotted Day]: Debate on an Opposition motion on overseas aid.
Remaining stages of the Merchant Shipping Bill [Lords] and on the International Organisations Bill [Lords].
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At Seven o'clock, the Chairman of Ways and Means has named opposed private business for consideration.
WEDNESDAY 25 MARCH—Completion of remaining stages of the Local Government (Miscellaneous Provisions) (Scotland) Bill.
Second Reading of the Ports (Financial Assistance) Bill.
Motion on the Transport Boards (Adjustment of Payments) Order.
THURSDAY 26 MARCH—Debate on European Community documents 5091/81 and addendum l on CAP price proposals 1981–82, and on Documents 5191/81, 12271/80 and on the explanatory memorandum of 17 March 1981 on development of livestock production in Ireland.
Motions on the Enterprise Zones (Northern Ireland) Order and on the Northern Ireland Consolidation Orders on Planning Blight (Compensation) and Public Order.
FRIDAY 27 MARCH—Private Members' motions.
MONDAY 30 MARCH—Supply [14th Allotted Day]: Subject for debate to be announced.

Debate on European Community Documents relating to Agriculture
[The relevant reports of the European Legislation Committee are the Fourteenth and Fifteenth reports of Session 1980–81 (he 32-xiv and 32-xv, 1980–81). These reports are not yet published, but photocopied versions are available in the Vote Office.]
Mr. Healey: As widespread scepticism about the figuring in the public expenditure White Paper published last week has led the Financial Secretary to say that big additional cuts in public spending will be required if the Government are to be able to make cuts in income tax for electoral purposes, will the right hon. Gentleman assure us that we can have a debate on the public expenditure White Paper before we debate the Finance Bill? Will he assure the House that the whole Finance Bill will be taken on the Floor of the House, as it has broken every one of the Government's election promises and is universally agreed to have inflicted great damage on the British economy? Will the right hon. Gentleman tell us when he will be able to arrange the day's debate on race relations, which he promised us last week? In view of the uncertainties still abroad about the precise effect of the Budget on energy prices, will the Secretary of State make a comprehensive statement on Monday about the present position?
Mr. Pym: It is my intention to arrange a day for a debate on the public expenditure White Paper before Easter. I take note of the right hon. Gentleman's request that it should take place before the Second Reading of the Finance Bill. The precise timing is a matter for consideration through the usual channels.
It is our intention to proceed with the Finance Bill as the House has done for many years, with a number of days on the Floor for Committee and part of the Bill taken upstairs, and similarly, on Report, a number of days on the Floor of the House. That will be the right way to proceed.
I did not promise a day for race relations, but I took note of the matter and was aware of the great interest in the House. I expressed the view then—which I adhere to now—that it would be right for the searching inquiry put in hand by the police to be completed before we considered what we should do next.

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I take note of the right hon. Gentleman's request on energy prices. I shall take an opportunity today or tomorrow to discuss that possibility with my right hon. Friend, but I would not like to give an undertaking to the right hon. Gentleman.
Mr. John Stokes: Will my right hon. Friend allow time for a debate on the proposed EEC passport, which is causing disquiet on both sides of the House?
Mr. Pym: It will be some time before any action is taken or any changes are brought about in relation to the passport. However, there will be plenty of time for a debate before that happens. I understand that it may be some years before action is taken.
Mr. Bob Cryer: Will the Leader of the House allow time for a debate on the report of the working party on the establishment of an independent element in the investigation of complaints against the police? The Home Secretary made it clear in a written answer yesterday that he would welcome comments on the report, which many of us think is wholly inadequate. It is a whitewash, and does not even meet the requirements of the terms of reference. Can we have a debate on it reasonably speedily, before it gathers dust and is forgotten?
Mr. Pym: I cannot help the hon. Gentleman in that request. However, it would be appropriate for him, or any other hon. Member, or anyone else, to make any comments that they felt motivated to make. After that we could consider the matter.
Several Hon. Members rose—
Mr. Speaker: Order. I propose to call those hon. Members who have been rising in their places.
Mr. Michael Latham: Did my right hon. Friend hear the strong feelings expressed in questions by several Conservative Members earlier this afternoon about the civil servants' dispute—questions that were effectively replied to by the Prime Minister? Will he ensure that the House is kept fully informed, and that we may be assured that the Government are standing firm?
Mr. Pym: Yes, Sir. Naturally, the Government hope that the dispute can be brought to a reasonably early end. I take note of my hon. Friend's request, which is shared in other parts of the House, for the House to be kept informed of what happens.
Mr. Clement Freud: In view of the ongoing bottomless pit situation, will the House be given a budget on State aid to industry?
Mr. Pym: I think that one Budget this month is enough.
Mr. Sydney Chapman: Is my right hon. Friend aware that the second motion tabled for debate last Friday, standing in my name and entitled "Alternatives to the rating system", was not reached? Will he sympathetically consider finding time for a debate on that general issue? May I suggest that it might be politically prudent to do so before ratepayers receive their next rate demands?
Mr. Pym: I am sorry that there was not time for my hon. Friend's motion to be debated. I shall consider his request sympathetically but without a great deal of hope, because there are other ways in which these matters can be raised. However, I take note of his request.
Mr. David Winnick: Would it not be useful to debate the question whether it is an abuse of the electorate—indeed, of the House itself—for someone clearly elected as a candidate of a certain political party to resign from that party and yet not resign from the House? Is there not a case for changing the law to provide that someone who has resigned from his party would have to resign from the House to fight a by-election under his new colours?
Mr. Pym: That might make an interesting debate, but not in Government time.
Mr. Ivan Lawrence: Is my right hon. Friend aware that a certain amount of heat has arisen in recent exchanges about the Middle East? Will he give an assurance that there will be an early debate on the Middle East, so that more light, rather than more heat, can be shed?
Mr. Pym: I am still hoping to arrange a debate on foreign affairs either just before or just after Easter. My hon. Friend's subject of the Middle East would be appropriate for that debate.
Mr. Derek Foster: When can the House debate Northern region affairs? Is the Leader of the House aware that male unemployment in Bishop Auckland stands at 19 per cent., that it is 24 per cent. in Crook, and that in certain districts of Durham it has reached 30 per cent.? Is he further aware that all that the Government have done is to degrade parts of Durham and cut the amount of money available for regional aid by one-third?
Mr. Pym: I take on board the hon. Gentleman's concern about the Northern region. Everybody is concerned about the economic conditions and the unemployment in that area. I hope that there will be an opportunity for the House to debate that subject. Other regions have had their affairs debated, so it would be appropriate for Northern region affairs to be debated. However, regional debates are usually held in Supply time. As I do not wish to mislead the hon. Gentleman, I cannot give an undertaking that I can find time in the near future. However, I accept the importance of the subject.
Mr. Peter Bottomley: In the discussions in preparation for the debate on public expenditure, would it be possible to prepare for a more useful debate than usual by asking the Opposition and the Government to spell out certain effects on the volume of public services provided within a certain cash limit—especially the effect of the level of pay settlements? Would it be possible to invite the Leader of the Opposition to say, at the start of the debate, what should happen to nominal pay increases during the next two years?
Mr. Pym: I take note of that request. My hon. Friend may be right, but I am not sure whether, in practice, we should make much progress by following his suggestion.

International Computers Ltd.
The Secretary of State for Industry (Sir Keith Joseph): With your permission, Mr. Speaker, I wish to make a statement about International Computers Ltd.
The House will be aware that the Government are users on a substantial scale of ICL computers with equipment to a value of more than £300 million supporting vital operations in some 20 Departments including defence, revenue assessment and collection, agriculture, health and social security. Because of that dependence upon ICL's products we have therefore shared the concern expressed by the company's chairman at the annual general meeting on 3 February about the deterioration in its trading position. In reporting the results for the year to 30 September 1980 he indicated that there had been a sharp drop in profit in the second half of that year, that the company was currently trading at a loss and that adverse trading conditions could continue well into the current year. However, given a revival in markets, the chairman said that ICL expected a significant improvement in the profitability of its operations.
The trading position of the company is, of course, essentially for its management, its shareholders and its bankers, and it is to the banks that ICL looks primarily to maintain its credit facilities on a world-wide basis. However, the Government have a special interest in ICL as a substantial customer for its products. To protect that special interest we have, therefore, given a positive response to a proposal that the Government should provide a limited, temporary measure of support for ICL. That support, in addition to a contribution towards research and development which could be available under existing criteria, should give the company the chance to review its longer term business opportunities. I am glad to be able to say in that context that the company's principal banks are continuing their support for the company in an amount of £70 million.
I therefore intend to seek from the House, at the earliest opportunity, its authority to provide a guarantee for further faciltities to be provided by banks for ICL under section 8 of the Industry Act 1972. The terms I shall be proposing to the House will be for a guarantee of up to £200 million for a period of up to two years. Such a guarantee will not lead to any public expenditure unless it is called. I emphasise that it will be a limited amount and for a limited time.
Mr. John Garrett: Is the Secretary of State aware that we welcome the statement as far as it goes? It is always good to see Government intervention in industry, if only as a result of ad hoc pressures and under duress. Does the right hon. Gentleman agree with the chairman of ICL that the root causes of its difficulties are the high value of the pound on a company that exports half its output, the effect of interest rates on high borrowings, and the decline in domestic demand caused by the capital investment slump—all factors caused or worsened by the Government's economic policies? Does he agree that ICL has received less in State support, especially for research and development, than its competitors in other countries? Will he comment on ICL's request for assistance with research and development?
Does the right hon. Gentleman agree that it is now clear that the sale of ICL shares by the NEB on Government instructions was misguided because ICL is now back in the
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position of being suitable for the NEB to take it over on the Government's criteria for rescues by the NEB? What does he mean by "a limited, temporary measure of support"? Is it true, as reported today, that Sperry Univac is waiting to pounce on ICL and buy it for only £80 million? Does he agree that that would be a disaster for high technology in Britain—an area in which we must have a substantial presence if we are to succeed? How is limited temporary support a substitute for a policy and a plan for information technology such as the French and Japanese have? Why must we lurch from one expedient to another in this as in every other area of industrial policy?
Sir Keith Joseph: ICL, has been subject to the same market and economic conditions as all other companies in Britain. In recent months there has been a sharp downturn in world demand for computers, especially large computers, and ICL has experienced the same downturn as many other computer companies. The record of Government intervention in Britain has not been so happy that the hon. Gentleman should praise it so highly. I do not apologise for the fact that the NEB, under the Government's general policy that it should dispose of its assets, disposed of its shares in ICL at a time when its profits and prospects were, as the market judged, very good. I have no comment to make on the reports in the newspapers to which the hon. Gentleman referred.
Mr. Peter Tapsell: My right hon. Friend said that the Government would usually expect ICI to look to the banks for support. Is he aware that as a consequence of the 15:1 ratio that the banks have to maintain between their capital and their advances, the effect of the £400 million windfall profits tax on the banks has been to reduce by £6 billion the amount of money that the commercial banks have available to lend to the private sectors of industry, business and agriculture? Is it really sensible to drive private enterprise industry deeper and deeper into the ground and then force it to come to the State for aid rather than to the commercial banking sector?
Sir Keith Joseph: The banks have to make a judgment about the amount of money that they will put into any company. In view of the sharp recession in world demand for large computers, they were entitled to make that judgment. I have no reason to believe that the general background to which my hon. Friend refers has anything to do with this case.
Mr. Richard Wainwright: The statement announces a wise move. Will the Secretary of State accept the congratulations from the Liberal Members on discarding rhetoric and coming to terms with business reality, especially in the sense that he has recognised that, while the banks, of their own accord, are supplying £70 million of support, the Government, quite correctly in our view, are offering £200 million of support? That is the proper proportion of support in this case. Does the Secretary of State realise that he has not put this operation into the context of industrial strategy? When will he allow the House to look into the huge pot of gold which the Prime Minister appears to have put at the disposal of his Department?
Sir Keith Joseph: The decision resulted from the dependence of many Government Departments upon the service provided by ICL. It would have been very expensive indeed for the taxpayer had that service come

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under any doubt whatsoever. That is why in this special case the decision has been made. I remind the House and the hon. Gentleman that what the Government are providing is not equivalent to what the banks are providing. The Government are providing a guarantee that is unlikely to be called.
Mr. Tom Arnold: Does my right hon. Friend recognise that his decision will be widely welcomed throughout Manchester? Will he say whether the £200 million will form part of the public sector borrowing requirement immediately?
Sir Keith Joseph: No, the guarantee does not form part of the public sector borrowing until and unless any part of it is called.
Mr. Ian Wrigglesworth: Does the Secretary of State agree that this is further evidence that the Government are at last dropping some of the unnecessary ideological baggage that they brought into office? Is not this a typical example of the damage being done to British industry by successive Governments forcing retraction of public investment in industry and having to return a short time later to put back that public investment? Will he tell the House why the National Enterprise Board, as it was successful in bringing ICL round last time, has not been involved? Will he say what steps will be taken by the Government to ensure that ICL will be put back on the right tracks?
Sir Keith Joseph: I do not apologise in any way for believing that the less the Government and taxpayers are involved in the affairs of private business the better. The job of the Government is to create a framework. As we all know, there are nationalised industries and public agencies and, very occasionally, there are suppliers to the Government which the Government, in the interests of taxpayers, want to allow to continue to provide services that they are providing while that remains a sensible decision. I do not see that as an ideological transformation. We stick to our policy about the National Enterprise Board. The proper behaviour for the NEB is to dispose of its existing assets as practicable and to embark on new ones only in partnership with private enterprise.
Mr. Peter Emery: Does my right hon. Friend accept that many Conservative Members believe that he is correct about the necessity to keep major strategic British industries in being? Will he ensure that if at any time other strategic industries come to him he will use the same method, under section 8 of the Industry Act, of using guarantees rather than grants or Government loans to assist them?
Sir Keith Joseph: My hon. Friend seeks to tempt me upon a path that I do not find particularly inviting because there are many different interpretations of the word "strategic". I repeat that the decision was made on the basis that ICL is an important supplier to the Government. The consequences of anything other than a continued service, while that remains sensible, would be damaging to the taxpayers.
Mr. Robert Sheldon: Is the Secretary of State aware that ICL has recently constructed a major new building in Ashton-under-Lyne? Will he recall the powerful delegation that he saw, together with
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me, some weeks ago which was concerned about the high level of unemployment in the Ashton-under-Lyne area? Will the two-year period be enough for this important company to be able to continue its plans and to introduce new ones for the years ahead?
Sir Keith Joseph: I well remember the delegation that the right hon. Gentleman brought. Yes, we are advised by the management and the banks that the two-year period will suffice.
Mr. David Crouch: Am I right in thinking that my right hon. Friend has acted like a good banker by issuing a guarantee in what is termed in banking circles a comfort letter? I am not against that, but does he realise that other comfort is required by industry, especially by ICL, and that is business and markets? Is he satisfied that the buying that he has referred to by Government Departments and nationalised industries is on a substantial enough scale? Will he consider giving direction to those Departments and nationalised industries to buy British from ICL to a greater degree?
Sir Keith Joseph: We have acted as an enlightened purchaser. It is part of the Government's policy that we should be enlightened purchasers, but I repeat that this is an exceptional case. The House will remember that the Government have placed a number of orders recently with ICL including one which much interested hon. Members. Within the past few days the company has obtained three major orders from leading companies in this country, France and Australia against heavy competition.
Dr. Jeremy Bray: Does the Secretary of State agree that, whatever his doctrinal position, ICL has been a case of successful public intervention and can prove to be so again? Is he aware that the original terms of support for the merger of ICT and English Electric Computers were based on the product design and specification for the 2900 range? It was against a technical and market plan that the original successful support was given. Is the Secretary of State therefore aware of the dangers of waltzing into a position where there are potentially very large investments going well beyond the two years without a national strategy on information technology generally?
Finally, are the £70 million worth of bank loans already available included in the £200 million now covered by the letter of comfort, or are they additional?
Sir Keith Joseph: There might be long debate about the summary and background that the hon. Gentleman has given to the original connection between ICL and the then Government. There is no doubt that ICL contains much talent and great resources. The sum of £70 million is the base on which the guarantee for £200 million is an addition.
Mr. Gwilym Roberts: Does the Secretary of State agree that the narrow point made by the Opposition Front Bench that, however welcome short-term support is, it is no substitution for coherent information technology strategy? Does he agree that most of our industrial competitors are developing such information technology strategy? Will he now follow up the wisdom of the appointment of the Minister for Industry and Information Technology with the development of such a coherent strategy?
Sir Keith Joseph: Inasmuch as the word "strategy" means the identification of obstacles to progress, I accept what the hon. Gentleman says. Inasmuch as "strategy" implies that the Government know better than individual businesses how best to satisfy customers at home and abroad, I hesitate about agreeing with what he said.
Several Hon. Members rose—
Mr. Speaker Order.I have called two hon. Members in succession from the Opposition Benches. I shall do the same in regard to the Government Benches.
Mr. Michael Grylls: Will my right hon. Friend accept that, if he is providing nothing more than a temporary safety net while a private sector rescue is mounted, obviously the taxpayer is not involved? However, may I warn my right hon. Friend in the strongest possible terms against going down the path that Labour took with British Leyland, in taking shares in the company, because that path proved to be totally disastrous?
Sir Keith Joseph: I heed what my hon. Friend says. We are not taking up any equity.
Mr. Richard Page: In view of the possibility of another huge drain on the public purse, may I urge my right hon. Friend to approach the board of ICL and ask its members urgently to undertake talks on possible mergers with other parts of the private sector?
Sir Keith Joseph: This is primarly a matter for the company, but I am sure that what my hon. Friend has said will be noted by it.
Mr. Tom Ellis: Does the right hon. Gentleman agree that, notwithstanding the difficulties referred to by the spokesman of the official Opposition—and they are serious difficulties—it would be extremely difficult for a generalised telemetrics company such as ICL successfully to prosecute its business on the basis of the market of a nineteenth century European State? Will he, therefore, enter into discussions with ICL and with his colleagues in the Community with a view to establishing an integrated telemetrics industry on a Community basis?
Sir Keith Joseph: I hesitate to encourage that ambitious thought. However, the hon. Gentleman surely realises that ICL has established many good markets abroad, which I am sure its management will try to hold.
Several Hon. Members rose—
Mr. Speaker: Order I shall call four hon. Members from the Government Benches—and that, I think, will be a very good run.
Mr. Nigel Forman: Is my right hon. Friend aware that his statements of guarantee today on behalf of the Government will be widely welcomed by all those who are concerned for the long-term industrial future of this country? Will he confirm, now or later, that one of the effects of his very welcome statement will be to make more secure than would otherwise have been the case quite a large number of jobs in the more forward-looking parts of British industry?
Sir Keith Joseph: That depends upon market conditions and the performance of the company.
Mr. Ian Lloyd: While it is obviously essential that a firm which is recognised as the flag carrier in this area in this country should both survive and thrive, may I ask whether my hon. Friend is aware that there is a widely held view among the cognoscenti in this very difficult sphere that a firm of the size of ICL is unlikely ever to thrive if it attempts to compete right across the board, including the very largest mainframe computers, and that unless a major decision on this subject is made and faced by the Government and ICL, it will probably come back to the House again and again?
Sir Keith Joseph: I am sure that the management will be reflecting upon the options open to it and will be aware of what my hon. Friend says.
Mr. Kenneth Carlisle: I recognise that it is important for us to retain our own computer industry in Britain if at all possible, but how can we be certain that the guarantee given will be temporary and limited? History has shown us that once we get embroiled in these matters more and more Government and public funds become committed.
Sir Keith Joseph: I think that all of us on the Conservative Benches are very well aware of the dangers. The guarantee lapses after two years.
Mr. John Browne: My right hon. Friend said that the industry is very competitive. I entirely agree with that. However, I hope that he will agree that it is also a booming industry, particularly in home computers and in software, and that the latter subject is particularly a British strength. Does not the fact that ICL has now had to turn to the Government for a guarantee to enable it to borrow from the banks throw a major question mark over the management of ICL? Will my right hon. Friend please comment upon that, and upon whether he proposes to impose one or two directors on the board of ICL, as was very successfully done before the war in relation to British Petroleum?
Sir Keith Joseph: The Government and the banks will naturally keep a close watch on the company's performance throughout the duration of the guarantee. The size of the ICL operation naturally requires a strong board of management.

Royal Assent
Mr. Speaker: I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified Her Royal Assent to the following Acts:

1. Consolidated Fund Act 1981

2. Redundancy Fund Act 1981

3. Industry Act 1981

4. Gas Levy Act 1981

5. House of Commons Members' Fund and Parliamentary Pensions Act 1981

6. European Assembly Elections Act 1981

BILL PRESENTED
  DISABLED PERSONS (No. 2)
  Mr. Dafydd Wigley, supported by Mr. Jack Ashley, Mr. Lewis Carter-Jones, Mr. Alfred Dubs, Mr. Bob Dunn, Mr. Clement Freud, Mr. John Hannam, Mr. John Heddle, Mr. Alfred Morris, Sir David Price, Mr. D. E. Thomas, and Mr. Gordon Wilson presented Bill to impose on highway authorities and other persons executing or proposing to execute works on highways a duty to have regard to the needs of disabled persons; to increase the penalty for certain offences under the Road Traffic Regulation Act 1967 where those offences are committed by persons who improperly seek to avail themselves of certain parking facilities provided for disabled persons by orders under that Act; to impose a duty on planning authorities to draw the attention of persons to whom they grant planning permission to certain statutory and other provisions relating to access for disabled persons to buildings and other premises used by the public; to make further provision for the display of signs giving information as to such access; to require the Secretary of State to lay before Parliament a report as to proposals for ensuring or facilitating the improvement of means of access to such buildings and premises; and for connected purposes: And the same was read the First' time; and ordered to be read a Second time tomorrow and to be printed [Bill 97].
Orders of the Day

  Iron and Steel Bill
  Order for Second Reading read.
  4.15 pm
  The Secretary of State for Industry (Sir Keith Joseph): I beg to move, That the Bill be now read a Second time.
  The Bill has two main purposes. First, by removing the British Steel Corporation's duty to supply iron and steel products it removes any limitations that may exist to the privatisation of BSC activities. This provision—the removal of the duty to supply iron and steel products—will also enable BSC to withdraw from activities on which a profit cannot be made, if this should prove necessary. Secondly, the Bill recognises the financial consequences of past mistakes and losses by writing £3,500 million off the corporation's capital immediately. This is taxpayers' money which can never be recovered.
  The Bill provides essential backing to the BSC corporate plan. A report on the plan by the corporation was placed in the Library and in the Vote Office on 24 February, on the same day that I made a statement about the steel industry and the Government's response to the corporate plan. The British Steel Corporation's prime aim, as set out in the plan, is to become internationally competitive. It aims to regain its pre-strike domestic market share of 54 per cent. It aims also to increase its exports over the low levels of recent years. By this action it plans to ensure that its remaining manned capacity at 14·4 million tonnes annually is profitably used.
  The substantial reductions in personnel, which have meant that 50,000 jobs were shed in 1980, will have to continue, and it is estimated that a further 20,000 jobs in the corporation will disappear this year. This reduction will be achieved by improving efficiency, but further closures will also be necessary.
  BSC also aims to reduce energy costs, which account for about 20 per cent. of total costs, by improved energy usage. In addition, the arrangements for introducing new flexibility into the pricing arrangements of the electricity supply industry in England and Wales, as announced by my right hon. and learned Friend in his Budget Statement last week, will also help reduce the corporation's energy costs.
  Capital investment will be restricted to the completion of schemes in progress and essential new items. The corporation's interest burden will be reduced, as I shall explain a little later.
  As I said in my statement on 24 February, Mr. MacGregor has described the plan as optimistic. He is right for several reasons, but chiefly because what happens depends to a large degree on factors outside the control of BSC. Effective steel capacity in the EEC has exceeded production by some 40 to 50 million tonnes per year since 1975, and it is unlikely that there will be any sudden or significant improvement in capacity utilisation in Europe as a whole. Excess capacity has kept European steel prices generally at levels below those of 1978–79. BSC has had to respond to this competition, despite inflationary pressures at home. There is no prospect of dramatic improvement in European prices. The strength of sterling,

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  particularly against the deutschemark and the yen, has put the United Kingdom steel industry at a competitive disadvantage.
  Forecasts for 1981–82 are that steel demand in the United Kingdom will fall by 5 per cent., as compared with 1980–81, to 12·5 million tonnes, with a modest degree of recovery thereafter. These adverse trading conditions and the history of massive losses over recent years make it essential for both the corporation and the Government to monitor closely the progress made in achieving the targets set in the plan. Mr. MacGregor will give us his assessment of progress by July. If the plan fails, the corporation may not be able to survive in its present form. Further closures and redundancies may be necessary, perhaps on a large scale. That is why the Bill removes the duty on the corporation to supply iron and steel products, thus enabling it to withdraw—if necessary—from sectors of steel production, and to effect an extensive rundown of its operations.
  The removal of the duty to supply iron and steel products will also facilitate the transfer of the BSC's businesses to the private sector. This will be an important way of optimising the survival of production and jobs in the steel industry in this country, particularly where there is competition between the private and public sectors.
  I welcome the recent announcement by the BSC and Guest Keen and Nettlefolds of an agreement in principle to combine their rod and associated businesses in a new company, Allied Steel and Wire Limited. I hope to receive further agreed proposals for other public sector/private sector joint companies in the other steel making sectors where there is an overlap of operations.
  Because of the need to ensure that the corporation competes fairly with those private sector companies, Mr. MacGregor has agreed to consider placing those corporation businesses that are in competition with the private sector in separate Companies Act companies. This will serve to make the corporation's activities more transparent and will also pave the way for further privatisation, which the Bill permits. In addition, as I announced on 24 February, Mr. MacGregor has undertaken personally to investigate any specific allegations of unfair pricing that are put to him by companies or by hon. Members. My hon. Friend the Under-Secretary is monitoring these complaints and keeping me informed of developments.
  The modification of the BSC's function is effected by clause 1. This clause has three main parts. Subsection (2) repeals section 2 of the Iron and Steel Act 1975, which imposes general duties upon the corporation and on the publicly owned companies. The corporation will, therefore, no longer have the main duty to promote the efficient supply of iron and steel products or to ensure that the reasonable demands of United Kingdom manufacturers are met. A number of its subsidiary duties will also disappear, such as the duty to promote exports and to promote research and development.
  The second substantive part of the clause, subsection (3), modifies section 3 of the 1975 Act, which confers upon the corporation its powers to carry on iron and steel activities, to sell iron and steel products and to carry on certain other activities. This modification will ensure that the corporation retains the legal power to carry on its existing functions, but will also provide that it can carry on its activities through companies in which there is private sector investment. The overall effect of
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  subsections (2) and (3) is threefold. They will facilitate the formation by the corporation of companies to carry on iron and steel activities and non-iron and steel activities, and the holding of shares in companies which carry on such activities. They will enable the corporation to carry on no activities, but merely to procure other companies in which it holds shares to carry them on. Lastly, they will enable the corporation to dispose of its property so as to extinguish public ownership of companies envisaged by the Iron and Steel Act 1975 and to reduce the undertaking of the corporation to minimal proportions.
  The third substantive part of the clause, subsection (4), amends section 4(5) of the 1975 Act so as to enable the Secretary of State by order subject to negative resolution of either House to direct the corporation to discontinue or to restrict any of its activities or to dispose of any of its property. These cover iron and steel activities, whereas they were available formerly only in respect of non-iron and steel activities. They are intended only as reserve powers.
  I turn now to the second purpose of the Bill, which is to effect a reconstruction of the corporation's finances. As I said earlir, this part of the Bill writes off the financial consequences of an over-ambitious investment programme in the early 1970s which was entirely inappropriate—seen in hindsight—to the level of demand later in the decade, and also a consequence of the delay in allowing the corporation to adjust its capacity to the lower level of demand. The corporation was thus left with investments, some of them in modern equipment, that had no potential value in the foreseeable market conditions. This has compounded the losses suffered by the corporation—in common with most European steel makers—in recent years. In addition, the corporation has been forced over the past year rapidly to adjust its capacity to the market realities, instead of being allowed gradually to contract.
  Mr. Frank Hooley: The right hon. Gentleman seems to be trying to argue that the process was somehow inevitable. Is the right hon. Gentleman aware that European countries such as Spain and Italy have substantially increased their capacity and output? No other country has slashed capacity in this way.
  Sir Keith Joseph: Most of Western Europe has experienced large losses. There can be no doubt that the nationalisation and renationalisation of steel was a tragic disaster for the industry.
  The investments written off, the generous payments to redundant steel workers and the loss incurred through inefficient operations in the past can never be recovered. The Bill will immediately recognise the cost to the country by writing off £3,500 million from the BSC's capital.
  The immediate write-off is effected by clauses 2 and 3 of the Bill. Clause 2 writes off the liability of the corporation in respect of the remaining borrowings from national loan fund, amounting to £509 million. This will provide the corporation with an immediate relief from interest in 1981–82 of £59 million. The corporation's long-term interest burden will, therefore, be reduced from £119 million to £60 million in 1981–82. This latter figure will be interest payable on £622 million of foreign borrowing, which will remain on the BSC's balance sheet.
  Clause 3, by virtue of subsections (2) and (3), writes off £3,000 million of the capital invested in the corporation

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  under section 18 of the 1975 Act. When this immediate write-off has taken place there will remain about £1,800 million capital on the BSC's balance sheet. These provisions do not represent the commitment of additional funds, they simply recognise that the large sums invested by the taxpayer in the BSC in the past—or a very large part of those sums—are now worthless.
  The remainder of clause 3 makes provision for a further write-off before the end of 1982 of up to £1,000 million of capital subscribed under section 18, by order subject to affirmative resolution. When viability is in sight it will be possible to assess more accurately the economic size and potential earning power of the corporation, and to make further adjustments to the capital structure, if that seems appropriate. At this juncture it is impossible to say whether any further write-off will be required, and if so what its size—within the £1,000 million limit—should be.
  Clause 4 seeks to reduce the BSC's borrowing limit under section 19 of the 1975 Act to £3,500 million. It will be possible, by order subject to affirmative resolution, to increase this amount to not more than £4,500 million or to adjust it to a figure between £2,500 million and £4,500 million if a further write-off of capital is effected, as permitted under clause 3. The provision relating to the borrowing limit will supersede the borrowing limit of £6,000 million set by the Iron and Steel (Borrowing Powers) Act 1981, which will be repealed by an amendment to be inserted into this Bill. That Act, which was an interim measure to allow the corporation to be financed during the passage of this Bill, would have allowed BSC to acquire £4 billion sterling additional borrowing without reference to Parliament. After the write-off of £3,509 million capital as provided by this Bill, the new £3,500 million limit will allow BSC to acquire £1,500 million further borrowing without further reference to Parliament.
  I have tried to explain the substance of the Bill. By all normal commercial standards the corporation is bankrupt. Under present legislation it cannot be liquidated. This Bill will allow the corporation's activities to be reduced virtually to nil but we have stopped short of introducing a measure to provide for complete liquidation of the corporation. We do not think it appropriate at this stage to take such powers but we do not rule out the possibility of introducing further legislation to wind up the corporation if it becomes necessary. However, we have preferred at this stage to adopt a more positive approach.
  Mr. Michael Grylls: If my right hon. Friend is saying that he actually needs further legislation to bring about the liquidation of the corporation in the sad event that the MacGregor plan does not succeed, why does he not put it in his Bill? It does not have to be used, but it would at least convince people outside that we do mean business and that Mr. MacGregor means business when he says to the corporation "This is your last chance."
  Sir Keith Joseph: I do not think that people outside have much doubt that we mean business. I really do not think that much scepticism could be found about that among those who work for the British Steel Corporation.
  This Bill will enable the British Steel Corporation to run down its activities virtually to nil and to remain involved in the provision of iron and steel inasmuch as it does so through partnerships with the private sector. I am
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  explaining to the House that we thought that went far enough and I am simply emphasising that if the residual British Steel Corporation seemed no longer to have justification we should be ready to seek further legislation to wind up the corporation.
  I repeat that we have preferred at this stage to adopt a more positive approach. Whilst recognising the possibility that the corporation might need to contract further, and I have emphasised that in what I have said, we have demonstrated our support by providing for financial reconstruction which will enable the corporation to pursue its ambitious plan unencumbered by past debt and with a lighter interest burden.
  Mr. Peter Emery: I thank my right hon. Friend for giving way. I thought perhaps he would cover my point and therefore I did not interrupt earlier. Does my right hon. Friend realise that when he presented the corporate plan to the House there was talk of the requirement over the next two years of £730 million extra cash for the British Steel Corporation? That was described as an optimistic figure. My right hon. Friend refused to give me the pessimistic figure that might be necessary. Does he realise that Mr. MacGregor gave to the Select Committee of the House yesterday the figure that might be necessary in the event of a pessimistic factor—namely a financial requirement of £1,192 million, which is nearly 50 per cent. greater than the optimistic figure which was put forward by the Secretary of State? Ought not the Secretary of State, in presenting this Bill, to take that situation into account?
  Sir Keith Joseph: I should like to study what Mr. MacGregor said yesterday. I ask my hon. Friend and the House to accept, that without defending the figures we are using, there can be great confusion. One set of figures may included provision for interest and amortisation but not, for instance, provision for capital expenditure, closure costs and redundancy costs. It may be that the difference can be explained in that way.
  Mr. D. N. Campbell-Savours: Would not the right hon. Gentleman accept that much of this confusion would have been avoided if the Secretary of State had put it to Mr. MacGregor that the corporate plan should be published in its entirety? Much of the confusion that arises stems from the fact that we have not had access to much of the information which was given yesterday, in very curious circumstances, in that Committee. Following Mr. MacGregor's statement yesterday, there is more need than ever before to ensure that the information in the corporate plan is made available to Members. It is possible also that those hon. Members who are on the Committee that reviews this Bill may find that they are speaking in a vacuum because information is only available, as I understand it, to members of the Select Committee who go to the Clerk of the Select Committee on Trade and Industry and ask to look at a document which is not available to other hon. Members of the House of Commons. I must say that I find that situation objectionable.
  Sir Keith Joseph: It would surely be very damaging to nationalised industries, which already have enough problems anyway, to expose their plans to their competitors I think that our overseas competitors would welcome the publication of the full plan, so I do not think that would be very sensible.

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  In the light of the explanation I have given, I commend the Bill to the House.
  4.35 pm
  Mr. Stanley Orme: This is a Bill of major importance and we must be thankful that, as the Secretary of State has said, at least he is taking a positive approach to the steel industry, rather than introducing a Bill that would damage it even further.
  I think that in this debate we must take into account what my hon. Friend the Member for Workington (Mr. Campbell-Savours) has just said about the evidence given to the Select Committee yesterday. I want to come a little later to a point that the hon. Member for Honiton (Mr. Emery) raised with Mr. MacGregor in the Select Committee yesterday, because the meetings of the Select Committee coincide with the passage of the Bill through the House. As the Secretary of State knows, reference to evidence given in private session is not permissible, but reference is permissible when the evidence is given in public session, and I was present to hear the close cross-examination of Mr. MacGregor, certainly yesterday, by the Select Committee.
  We must look at the Bill in the context of what is happening in the steel industry and in the economy as a whole. Whether or not our steel industry will survive and prosper will depend upon the context in which it operates. That context is created to a very large extent, although not exclusively, by the Government. Therefore, the current economic situation and the Budget must be taken into account when we consider the future of the steel industry as a whole.
  Dealing with the reduction in the MLR and the state of the pound, Mr. MacGregor told the Select Committee yesterday that if he could have the pound at $1·50 he could solve the problems of the Steel Corporation. That rate might not be popular with some sections of industry, but that was the context in which Mr. MacGregor made the remark, and the point that he was making was that the burden that he was having to carry because of the high rate of the pound and the exchange rate was crippling British industry, and not least British Steel. That has to be made very clear indeed.
  Whatever sacrifices steel workers make—and they have made many—and however good management may be, unless the Government give them a chance they are lost. It is against that background that we must examine the Bill. In Standing Committee we shall want to go into some of the financial details in greater detail, and later on my hon. Friend the Member for Whitehaven (Dr. Cunningham) will raise some of these matters. No doubt The Minister of State will attempt to reply tonight to some of the questions that I shall put to the Secretary of State but if that is not possible I understand that they can be dealt with in Committee.
  We must do all that we can to support this major British industry, which is at the centre of our manufacturing community. Broadly, we support the financial provisions, although we regret that the proposals were not before us earlier. We oppose the clauses that are based on doctrinal prejudice against nationalised industries. I know that it is futile to attempt to persuade the Secretary of State to look with favour on these industries, so I shall focus on some of the practical implications of his proposals. The Secretary of State, who is doctrinally opposed to the public sector, is forced by the reality of life continually to support
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  the public sector, as he has done with the BSC, BL and ICL. We welcome that. These are crucial industries if we are to survive as a major industrial nation, and we can ill afford to do without them.
  Mr. Hooley: Is my right hon. Friend aware that the Treasury is creating its own poverty trap? The more Treasury policies bite, the more money has to be poured into social security and unemployment payments. The more the policies bite on the industrial side, the more millions of pounds of public money have to be poured into the BSC, BL, ICL and so on. If only the Government would reverse their basic policies they would improve the affairs of the nation and their administration of them.
  Mr. Orme: I accept what my hon. Friend says. He is saying that the Government have no industrial strategy. The Secretary of State is being forced by one disaster after another to take remedial action to assist industry, but he does not have an overall industrial strategy. The tragedy is that the Secretary of State, who puts money into these industries to save them and to prevent unemployment, does too little too late, and against the overall interest of the nation.
  The Secretary of State said that he could not support worthless assets; that these worthless assets in the steel industry must go to the wall. What are these worthless assets? Is the right hon. Gentleman talking about Port Talbot, Llanwern or Redcar? A great deal of public investment has been put into these modern plants, and they produce the goods, yet he is saying that they are worthless assets. I believe that they are priceless assets of the nation. When there is an upturn in industry, there will be a shortfall of capacity and we shall have to depend upon imports rather than producing our own wealth. That aspect has to be taken seriously into account.
  The Bill removes the general duties of the BSC to supply iron and steel products and modifies the powers of the corporation. These are the aspects that cause us grave concern. The Bill is not breaking a monopoly; it is breaking the back of the BSC by taking away its exclusive right in many areas to produce as a publicly owned company.
  I give credit to the Secretary of State. He has not hidden his desire. He said very fairly again today that his desire was to see the industry move away from the public into the private sector. There is a complete division between us on this issue. We want to reaffirm our belief that a publicly owned British Steel Corporation is still essential to the manufacturing base within our society.
  The grounds have been prepared for the denationalisation of the BSC. In October the corporation began to decentralise management authority to semi-independent businesses within the corporation. The purpose is not necessarily to denationalise, but the Government must have seen their opportunity, and the Secretary of State has been very honest with the House this afternoon.
  Mr. Archie Hamilton: Does the right hon. Gentleman not agree that decentralisation improves management?
  Mr. Orme: I take the hon. Gentleman's point, which is a fair one. That is happening with BL. I am not wedded to the Morrisonian concept that in a publicly owned company there must be a national board for the whole

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  industry and that that structure is rigid and must be retained. I am not saying that. We have to look at the structure of publicly owned industry.
  The Secretary of State sees the Bill as a means of hiving off sectors of the BSC. We accept that there may have to be managerial changes. Sir Michael Edwardes is forming four units of production in BL, but he wants the company to remain under the overall control of BL. We want the management structure of the BSC to remain under the overall control of a publicly owned company.
  The Secretary of State made it clear that he sees this change as an opportunity to adopt the policies that he wants to adopt. If an integrated organisation is broken up and the head of each sector is given autonomy, the industry can more easily be sold off bit by bit when the economy improves and when people are in a position to buy it. When an industry becomes profitable and the investment of public money begins to bear fruit it is a tragedy that it should be sold, so that the taxpayer does not get a return on his investment.
  The Minister of State, Department of Industry (Mr. Norman Tebbit): The right hon. Gentleman is misunderstanding the position. The taxpayer does not throw away the money from the sale when he receives it. He invests it in hospitals, roads, schools and so on, which could not be done by any other person in the community.
  Mr. Orme: I am willing to discuss this with the Minister. What the taxpayer gets back is a once-and-for-all payment for the asset, whether or not he invests it. If that asset is owned by the State, and, if year after year it produces a profit, the taxpayer gets a long-term benefit from the investment.
  Mr. Bill Homewood: Much of the Government's expenditure is not on capital projects. At the moment most of it goes on unemployment costs.
  Mr. Orme: I accept what my hon. Friend says. One could develop the argument about how that affects the public sector borrowing requirement and other aspects. It is worth repeating that it is the Government's intention and the Secretary of State's wish to see the British Steel Corporation broken up and sold to the private sector. If that is not successful, and if the industry falters, we shall be dependent upon imports.
  Mr. Martin Flannery: Does my right hon. Friend remember that during Sir Monty Finniston's time, when one of the present senior Ministers was in charge, I did a programme on this on BBC 2? The Brymbo steelworks in North Wales were bought by us for about £43 million. About £8 million was spent on necessary modernisation, and the works were eventually sold back by the Conservatives for about £23 million—less than half of the amount spent on buying them. No matter how much we welcome the money for the BSC, if that is what is to happen under the Bill it should be deplored, because it means that public moneys will go to private enterprise for private use.
  Mr. Orme: I take my hon. Friend's point. He gives a valid illustration of what happened in the past, and of what may happen in the future. We do not know what the value of assets will be if the Secretary of State decides to break up the corporation and sell off the various sections. We
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  know that that is the Government's intention. There is no secret about that. The Prime Minister herself has declared that the idea of making the corporation profitable is to denationalise it at the appropriate time.
  This raises an interesting point, which Conservative Members should bear in mind. It is said that all public money to be allocated to the BSC under the Bill is being given to the corporation, but if those vast sums are being spent with the ultimate objective of selling off parts of the corporation to private interests it will be those private interests and not the British people who will benefit from the taxpayers' money. Conservative Members who support the £6·5 billion input in the writing-off of assets and so on should consider this. The hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) mockingly puts a gun to his head, but he is supporting it. He will not vote against it tonight, and he knows that the Bill will go through. Conservative Members should take that aspect into account.
  I ask the Secretary of State to say to what extent Mr. MacGregor is under pressure from him and from the Government to dispose of good assets from the public to the private sector. Is it true, as was reported in The Times on 10 March, that Mr. MacGregor
  "is considering establishing Companies Act companies to run the Stanton and Staveley pipemaking grouping and British Steel Service Centres".
  We should like an answer to that question. No doubt the Minister of State, who is well versed in these matters, will give us a reply later. I understand that Mr. MacGregor's evidence to the Select Committee indicated that that was the case.
  I twin to the Phoenix arrangements with the private sector and the public sector. There is a problem in this for many workers in the public sector who may be moved as a result of the new privatisation and amalgamation arrangements between the public and the private sector. As the Government know, employees of the BSC have an inflation-proofed pension scheme. Will that be protected if they are transferred to the private sector? I know that the Minister of State will be delighted to answer that question.
  Is the public interest served by the BSC-GKN arrangements? The House has no information. How can we know? The lack of information has been mentioned already. We have not seen the corporate plan, for instance. We do not know the details of Phœnix II and III. The information has not been given to us. We have to wait for press statements from the Department or from the BSC. I do not accept that purely commercial considerations are involved, because Mr. MacGregor told us yesterday that he is having great difficulty negotiating, not least with the private sector, about the proposed amalgamations.
  Mr. Stan Crowther: Having seen the corporate plan, as I am a member of the Select Committee, I assure my right hon. Friend that it would not have told him anything about the matters that he is raising.
  Mr. Orme: If that is so, it is an interesting proposition. The Secretary of State might care to put a copy in the Library tomorrow so that we may judge for ourselves.
  I turn to another important factor. The Secretary of State will appreciate that we are here dealing with the private as well as the public sector in steel making. I wish to make clear the Opposition's standpoint with regard to the private sector. The arguments about the long-term arrangements were put to Mr. MacGregor yesterday in the

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  Select Committee. He was asked whether this was leading to an amalgamation of public and private sector firms which could then be denationalised, or whether the reverse might apply so that this could lead to more public ownership of private firms. I think that that sums up the two points of view put to Mr. MacGregor in the Select Committee.
  The position of the Opposition is very clear indeed. Our main priority at present is to save jobs equally in both the private and public sectors. We are not arguing about what is better or what are the long-term objectives. Our concern is to save jobs. During the past week or two I have been able to look at some of the problems facing the private sector. I visited the Firth Brown company in Sheffield. As my right hon. Friend the Member for Llanelli (Mr. Davies) knows, only this week I met the workers from Duport when they came here to lobby Members. No doubt the Secretary of State and his Ministers are aware of the problems in the South Wales valleys.
  In Sheffield, in South Wales and in other areas there is concern that firms with an international reputation will go to the wall. It is not just a question of unfair competition from the BSC. Not the least important of the issues involved is that of energy costs, to which I shall turn in a moment. The Bill means that assistance can be given to firms in the private sector. I refer the Secretary of State to clause 1(3)(c), which provides that
  "there shall be added the words 'and may, instead of themselves carrying on any iron and steel or other activities, promote the carrying on of any of those activities to such extent as they think fit by other persons none of whom need be a publicly-owned company'".
  Those powers are given in the Bill.
  Certain firms under Phoenix II will be protected. Will the Secretary of State tell us tonight what will be done to assist the firm of Duport in Llanelli? We feel that there is a justifiable case for State support being given to ensure that that company remains in being and that there are not wholesale redundancies in an area of high unemployment, as my right hon. Friend the Member for Llanelli can verify. Having met the workers there, I believe that their plea for assistance is justified, and we support that call.
  The Secretary of State said that he was concerned about energy costs. The Budget also refers to energy costs. When I visit steel plants, I am told that energy costs are of paramount importance. The report of the energy task force implies that 50 per cent. of electricity and 85 per cent. of gas is taken by less than 5 per cent. of industrial consumers. The figures for 1979, which are the latest available, show iron and steel as the largest industrial consumers.
  The concessions in the Budget do only the minimum to sustain the steel industry. They do nothing to reflect the needs of major industries that depend heavily on energy and will not offset the devastation in the economy created by Government policies. That devastation is underlined by heavy energy costs. The BSC or Firth Brown in Sheffield will get little help from the Budget.
  Mr. Grylls: I presume that the right hon. Gentleman is thinking particularly of electricity for the steel industry. France has encouraged the use of nuclear energy for electricity production and now has a great advantage over the remainder of Europe. Is the right hon. Gentleman in favour of speeding up our nuclear policy to give us that advantage?
  Mr. Orme: That is an interesting question. I do not oppose a nuclear element in electricity generation. Irrespective of the source—coal-fired, oil-fired or nuclear generated—the steel industry should have a tariff reduction at source, as we have stated previously. That is of prime importance. The private sector tells me that energy costs are a bigger worry than competition from the BSC.
  Turning to imports and the EEC, the Secretary of State or another Minister will be attending an important meeting later this month. The BSC has achieved about a 52 per cent. share of the domestic market—almost the corporate plan target. That achievement is in jeopardy unless the Government take steps to expand the economy.
  On 24 February the Secretary of State said:
  "We intend to ensure that reductions in capacity are equitably shared among the members of the Community".;[Official Report,24 February 1981; Vol. 999, c. 747.]
  That is of fundamental importance. The matter was discussed at the Council of Ministers on 3 March. The meeting was adjourned to 26 March. The Government must make the point that we have slimmed down our steel industry to a greater extent than has any other member of the ECSC.
  As the Secretary of State said, the BSC lost 50,000 jobs last year. In 1981, under the corporate plan 20,000 more will go. It is not easy to get the figures, but, on an accurate assessment, over 10,000 jobs have been lost in the private sector of the industry, and the Secretary of State has told us that further closures and redundancies may be necessary.
  We are bearing an unfair share of the burden of overcapacity within the Community. Will the Government assure us that they will fight our corner? On every issue in the EEC we play cricket, while our opponents do not. We are disadvantaged in so many areas. Whether or not we support the Common Market, it is time to say that enough is enough. Britain wants her fair share.
  Mr. Tebbit: I am glad to tell the right hon. Gentleman that on 3 March I told the other EEC Ministers most strongly that we were continuing to slim down our industry. We expect other countries that are subsidising their industries to do the same. The right hon. Gentleman need never accuse me of being soft with our opponents.
  Mr. Orme: I welcome that statement. I hope that when the Minister goes to Brussels in the near future he will feel that his argument is strengthened by the views on both sides of the House.
  I noted Mr. MacGregor's words in the Select Committee yesterday:
  "Work for the night cometh."
  They were directed at those who work in the BSC. We all want the BSC to survive and jobs to be maintained. We make no distinction between the private and public sectors. Mr. MacGregor's words meant that if the plan was not workable we should face the consequences. However, he is not taking work people into his confidence. He appears to be running a one-man band. The Steel Board is of no value. I do not know what it does. I doubt whether even members of the Select Committee have seen the corporate plan. The board has not.
  We want to see the corporation survive and prosper, but Mr. MacGregor cannot achieve that by diktat. He must have co-operation. The damage done by the strike has not healed. It will be difficult to heal the damage, when he is making 20,000 more people redundant this year.

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  Mr. MacGregor was asked by the hon. Member for Honition what other proposals he had if things got difficult. He replied that he had personal proposals. When the hon. Member for Honiton said that the Committee was entitled to know those proposals if the targets had not been met, Mr. MacGregor said that at the moment they were locked away in his mind and that he was not prepared to disclose them. That is not the way to get the co-operation of the work people.
  I make an appeal to Mr. MacGregor to adopt a fresh approach to the workers, both the staff unions and the manual workers, to try and achieve an understanding so that they are fully conversant with what is happening. I hope that Mr. MacGregor is prepared to show that he is not simply a one-man band and that he is prepared to work for a situation in which the British Steel Corporation will prosper. I hope that the Secretary of State will also take on board this important point.
  The Opposition will not vote against the Bill. We have been pressing for the financial proposals for some time. We shall, however, continue to oppose those parts of the Bill that undermine the future of the British Steel Corporation. Our objective is to see a thriving British Steel Corporation and a thriving steel industry in the United Kingdom. That is essential. Without that major industrial base we cannot be independent as a major trading nation. We are playing for high stakes. No doubt many of the points that I have raised will be pursued in Committee. I give the assurance that we shall not rest until we see the British steel industry once more viable and, we hope, profitable, in the interests of the British economy and the British people.
  5.12 pm
  Mr. Michael Grylls: A large part of the speech of the right hon. Member for Salford, West (Mr. Orme) touched chords that find a response througout the House in relation to the great concern felt about the future of the steel industry. I agree with my right hon. Friend the Secretary of State, who, in answering questions on his statement today, defined the word "strategic" as representing dangerous and rather boggy ground. Of course, the steel industry is essential to a manufacturing country. I listened, almost with amusement, when the right hon. Member for Salford, West was winding himself up increasingly into a fury about the measures of denationalisation. Clearly, his speech could not be entirely partisan. That would not have worked at all.
  The right hon. Member for Salford, West let a little light into the hearts of Government Back Benchers who otherwise might have been assumed by my right hon. Friend the Secretary of State to be a rather gloomy set of people in view of the figures to which reference has been made. The right hon. Gentleman had to take to task my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark), who was about to shoot himself thinking of the size of the figures involved in the Bill. Part of the approach is partisan and part reflects the different policy that would have been followed by the right hon. Gentleman if he was Secretary of State introducing a Bill in which the figures would probably be roughly of the same size. We can take some comfort from that situation.
  My right hon. Friend the Secretary of State was not as forthcoming as some of us might have liked on the
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  question of ultimate liquidation if the MacGregor plan does not succeed. I accept that the Bill goes a long way to take away the duty from the Government to provide money for the BSC. The fact that Mr. MacGregor himself asked for this power was a clear signal to the BSC, and perhaps to everyone else, including hon. Members that if the plan did not succeed it would be the end of the road. Something would have to happen. Either a receiver would have to go in or there would be liquidation. That would not necessarily mean the end of steel making. If receivership took place, steel making would be divided up. The good bits would be preserved, but the others might have to go. It is a pity that my right hon. Friend has not gone further and taken this ultimate power. He may not be surprised if, in Committee, some of us table an amendment to toughen up those powers.
  The taxpayer will have to accept the Bill today because the House is not to divide. Perhaps that is right. I believe that we should tell the taxpayer that if this proposal does not work we have the best man in the world to run British Steel. We have some wonderful plant. I believe that the right hon. Member for Salford, West was unfair in his remarks about Mr. MacGregor and consultation. My information is that since taking over last June Mr. MacGregor has tried supremely to carry out a great deal of consultation and to ensure that he took the work force with him. I believe that he has largely succeeded.
  Mr. Campbell-Savours: Is the hon. Gentleman aware of the case being heard in the courts brought by the workers of Velindre in South Wales?
  Mr. Grylls: Perhaps for that very reason, I do not wish to commnt on it. I am talking in generalised terms. Those who have visited British Steel and talked to Mr. MacGregor and other executives will accept that he has tried hard and, I believe, succeeded to a great degree. There have been some results. For example, in South Wales productivity levels are improving. This indicates that Mr. MacGregor has succeeded to a large extent in that area. The power to liquidate at the end of the day, if that unhappy event should happen, should exist as a signal to the taxpayer that there would be an end to all this business.
  I wish to refer to the private sector. I considered the remarks of the right hon. Member for Salford, West fair, but I should like to go further. The right hon. Gentleman rightly expressed his concern over the 70,000 people who work in the private sector of the steel industry and their remarkable record of producing profits and preserving good jobs over the last 13 or 14 years. We must ensure that they do not disappear. This is clearly an area in which the House speaks with one voice.
  The Bill does not go far enough in ensuring that as far as possible fair competition takes place. Our objective should be to ensure that over the next few months we do not see more private sector companies disappearing and going into receivership. It is important that the Secretary of State should give a clear direction to the British Steel Corporation about setting up future phoenixes so that what are described as the competition or overlap areas are clearly defined, and so that the corporation acts quickly.
  Mr. MacGregor has gone only as far as suggesting that he will consider setting up further Phoenixes. That is not good enough. While he is considering setting up further Phoenixes and worrying, perhaps rightly, about the asset value of the parts that the BSC might put in, it is possible

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  that parts of the private sector, involving 70,000 people, could get into trouble and disappear like the tragedy of Duport.
  An amendment should be tabled in Committee to provide clear powers of direction to ensure that where the BSC competes with private sector companies it forms Companies Act companies forthwith. Their establishment should not be left to the whim of the BSC or the speed at which it decides to proceed. That will not be good enough. My right hon. Friend the Secretary of State cannot adopt a "hands-off' approach and say "Let British Steel get on with it". He has a duty to ensure that it moves fast.
  Miss Joan Maynard: Firth Brown is a large private steel company in Sheffield. Its largest customer is the BSC. There is no question of competition between the two organisations. Firth Brown wants the BSC to be successful because it is in its interests that it should be successful. I ask the hon. Gentleman to consider the position of GKN, which has lost a vast sum. He should not try to argue that only publicly owned industries are losing money.
  Mr. Grylls: I think that there is no difference between us. In steel making, some nationalised assets, as well as privately owned assets, are losing money. The object of the Phoenix I operation, which was set up on 17 February, was to bring the two together. The assets brought into the new Phoenix I company were roughly equal in terms of assets. It took three weeks to set up that company.
  The areas that the Government should be examining to ensure that Companies Act companies are brought into being quickly are the following: cold rolled strip, commercial quality flats, light sections and low alloy billet and bar. If the plant producing these products can be brought together quickly in Companies Act companies, I believe that we shall be successful in getting the nationalised assets and the privately owned steel assets—I make no differentiation between them—together in Companies Act companies so that they may survive in future. If this process is delayed it will be a great mistake.
  The right hon. Member for Llanelli (Mr. Davies) and I have talked about the Duport works. On one occasion he and I had the opportunity of meeting some members of the Duport work force in his constituency. Their case was tragic. They said "We have done everything that you have asked. We have invested. We have made ourselves more productive. We have reduced our work force. We have a good productivity level, but the company has to close down." It was a tragic and heart-rending story.
  That is an example that causes me to be worried about the future groupings of phoenixes. Developments took place at a slow pace. The BSC and, to some extent, the Department of Industry dragged their feet at various stages of the proceedings. It was the Bank of England that really made things move for Duport. The Bank intervened and speeded up the process. That means that the non-steel making process at Duport—it produces articles such as Slumberland beds—is able to continue and 3,200 jobs in the hard hit Black Country will survive. However, the process was too slow. That is past history, but I am deeply concerned that future developments will proceed at too slow a pace if matters are left to take place at the BSC's speed.
  I hope that the Government will think about taking clear powers to direct the corporation to set up Companies Act
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  companies forthwith. We have not much option but to deal with the financing of the nationalised sector in the way that my right hon. Friend proposes—it is a fait accompli—but we can do something about the delicate state of the private sector, which is outside in the cold, with no taxpayers' money to support it. That is a fact of life against which no one can argue. We must put pressure on the BSC to move as quickly as possible.
  Mr. Hooley: A few years ago the private sector in Sheffield had a brilliant opportunity to obtain public money through the National Enterprise Board but it decided to go for Lonrho instead.
  Mr. Grylls: Given the State of the NEB now, it may be that Lonrho was rather a safer home. However. I do not want to be involved in that argument.
  Mr. Russell Kerr: That is the unacceptable face of capitalism.
  Mr. Grylls: I hope that my right hon. and hon. Friends will consider my arguments about liquidation and strengthen the Bill accordingly. I hope that they will bear in mind my argument about Companies Act companies. The Government should not allow the BSC to sit on its hands. The process should be speeded up and we should be able to see Phoenix II rise quite quickly. The sooner that that happens the sooner we shall achieve the preservation of as many profitable and secure jobs as possible. With that prospect, the House will be happier than it would otherwise have been on rather a gloomy day, a day that is gloomy at least for the taxpayer.
  5.27 pm
  Mr. Denzil Davies: The hon. Member for Surrey, North-West (Mr. Grylls) referred to the tragedy of the Duport works, in my constituency, as did my right hon. Friend the Member for Salford West (Mr. Orme I. I think that it will come as no surprise to the House if I use this opportunity again to advance the cause of the Duport steelworks. The works have almost closed, and almost all the members of the 1,100 work force have gone home. In a few weeks no more steel making will be taking place at Duports at Llanelli. In the language of the book-keeper, which the Secretary of Slate for industry used when introducing the Bill on Second Reading, the asset, which comprises one of the most modern works in Europe, is now worthless. That is the language of the book-keeper and not the language that one would expect from a Secretary of State who is presiding over a basic and vital national industry.
  The House well knows of the efforts that have been made to save the steelworks. Those efforts have involved the Prime Minister. We have had sympathy but no help from the Government. I do not intend to go over that ground again, as I think that it is well known. I wish to make it clear to the Minister of State and to the Government generally that they have not heard the last of the Duport steelworks in Llanelli. The fact that it is now about to close does not mean that the fight will not continue to reopen it and to preserve the asset of the works for the nation.
  The Bill contains a provision that seems to be directed at the phoenix-type arrangement about which we hear so much from the Government. No doubt the Minister will tell us whether that provision is directed to that end. When the Minister replies I hope that he will tell us more about

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  the Government's intentions for the phoenix arrangements. They are important, especially to the Duport steelworks.
  We were told that there were to be two phoenixes, but so far we have seen only one, and a fairly small one at that. It is only recently that the Minister said that there might be three or four phoenixes. It seems that the ashes of British industry will produce a flock of phoenixes. I do not believe it, but I hope that it is true. I hope that the Minister will tell us more about his plans for the phoenix enterprises, and how many of them there will be. I understand that in ancient Egypt the phoenix appeared in public only once every 500 years. I hope that the Government will demonstrate rather more urgency than in the past and will not take the example that I have quoted from the phoenix.
  My first question is: when shall we see the next Phoenix manifestation? When will Phoenix II appear, and who will be involved? Are talks going on? If so, with whom? As we have heard so far in the debate, no one seems to know what is going on either in the British Steel corporate plan or the private sector. Surely that is not how a Government who are concerned about the steel industry should carry on. I hope that we shall be told when we shall see the next stage of the phoenix operations, and which companies the Secretary of State and the Government expect to be involved in that operation.
  The second and perhaps more important question concerns public accountability. If the phoenix arrangements get off the ground, they will do so only with public money. There is no hope of reorganising the private sector without an injection of public money, and that money will come either directly from the Government or indirectly from the British Steel Corporation. Who will decide now that public money is to be spent? What are the criteria for using public money, either directly or indirectly? What criteria will be used to decide which firms are to be helped? Will they be commercial criteria? Will they be on the basis of productivity, the costs of producing steel, or the efficiency of the plant?
  If, when the Minister announces the phoenix operations, I find that they involve many firms that are less efficient than the Duport works in Llanelli, in my constituency, and if Duport is not included, I shall want to know why. I do not have anything against the other firms, but Parliament must know on what basis public money is to be spent and what the criteria are to be, so that we can judge for ourselves whether the criteria are purely commercial or whether politicial factors are involved.
  After all, certain interests are represented in the House. Members of Parliament, mainly Conservative Members, are involved in private steel companies. I do not criticise them for that, and they do not attempt to conceal their interests. I hope, therefore, that we shall be told clearly tonight which criteria will be used in deciding which firms are to be involved in the phoenix operations.
  Thirdly, may we be told to whom we are to put our case? I want to put the case of Duport, in Llanelli, despite the fact that it is now closed. After all, the assets are still there. Do I go to the Department of Industry, the Welsh Office, the Minister of State, or the British Steel Corporation? Who is in charge of the phoenix operations? Is it to be left to Mr. MacGregor, of the British Steel Corporation? I have a duty to my constituents and I want
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  to know whom I approach next to argue the case for Duport. Duport is a very efficient works, and should be included on Phoenix I, II, III, or whichever operation is appropriate. Those questions are all unanswered, and that is not the way to help the steel industry—both the private and public sectors.
  I have been told that it is possible to put steelworks into mothballs. I suppose that that is possible for a short time, but time passes, skills develop, work forces gradually move away, and it is difficult to get them back. Time is short. In the case of Duport, the Government have acted wrongly. They could have done a service to the nation and at the same time to my constituents and the private steel industry by helping one of the most efficient steelworks in Europe. I still hope that it is not too late. We need action, and we need it fast.
  5.34 pm
  Mr. Richard Page: What we have to face tonight is the real and desperate position of the British Steel Corporation, in that, as my right hon. Friend said, it has been declared bankrupt, in commercial terms, and the estimated losses of 1980–81 that were announced yesterday, of about £660 million, bear sad testimoney to that fact.
  However, in the Bill we have a recreation of the corporation—I suppose that one could call it a true phoenix—on a new financial foundation, coupled with a new corporate plan, so that it has another chance of achieving some form of viability, but I must remind the House that, again, it is supported by taxpayers' money.
  I do not believe that anyone in this Chamber or in the British steel industry underestimates the difficulties that lie ahead. Unless there is co-operation on all sides—unions, management, the private sector, and the Opposition and Government Benches—it will not be possible to overcome the difficulties that lie ahead, especially when the projected losses for 1981–82 are about £318 million. I shall come back to some of those difficulties later.
  I also feel that there will be little point in conducting post mortems and compiling lists of past errors and mistakes. The only thing that we should recall before continuing our debate on the corporate plan's chances of success is that it is again the poor taxpayer who has supplied the billions of pounds now being wiped off the slate in this measure.
  I have studied the corporate plan and compared it with past projections, and have found that for the first time there seems to be a mood of realism in British Steel. It is facing the reality of the market place and is starting to bite the bullet of operating in a reduced market, which will mean reducing overheads and, more painfully than anything else, reducing employment possibilities.
  We must also face the fact that, tough as the plan is, it is based on calculations that could be regarded as overoptimistic. First, I must draw attention to the exchange rate that is used in the calculations of the corporate plan. The plan is based on an exchange rate of 2·20 against the dollar and, more important, of 4·20 against the mark. A variant on that exchange rate can mean tens of millions of pounds on the profit and loss account.
  I do not tonight advocate a fixed exchange rate. However, it is only fair to say to my right hon. Friend and to Ministers on the Treasury Bench that this is not the only State industry that has based its future calculations on that

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  limit of exchange rate. That factor must be borne in mind when they are considering the various operations within the money markets.
  Secondly, agreement must be reached quickly with other countries within the EEC to accept more sensible levels of plant production against their capacity. That must be achieved if we are to avoid a continual glut on the market, with consequential uneconomic pricing, as is happening now. If there is no agreement, the huge losses that are occurring in every plant and every country will continue within the EEC.
  I therefore urge my right hon. Friend, when he goes to the Council of Ministers on 26 March, to maintain the tough stance that he has already taken and drive home the fact that unless we have demand and supply in more economic balance there will be economic disaster for every steel plant within the EEC. The Council must appreciate that fact far more than it has done so far in the voluntary pact that is now coming to an end.
  In asking for this form of protection, I do not say that British Steel should stop the continual drive towards efficiency and toward reducing the number of man-hours per tonne of steel produced. I should point out here that some encouraging figures are starting to emerge from British Steel, on which the corporation should be congratulated. I have no doubt that, with the capital reconstruction removing the burden of interest charges and some of the high gearing, together with increased efficiency, we shall see a shift towards reduced losses and, with luck, profitability.
  I turn to the difficulties facing the private sector. There is no doubt that its difficulties have been created by the drop in world demand and a most aggressive sales campaign by our EEC competitors. We must remember the rather artificial price umbrella that the BSC held over the market place for many years—an umbrella that was ripped away in the damaging strike of January last year.
  That strike showed a lack of appreciation of conditions in the real world by the Iron and Steel Trades Confederation, which let in foreign competition and damaged both State and private industry. I would like to think that the ISTC is now being a little more co-operative and appreciative that only together shall we overcome the difficulties. We shall not do it by fighting each other.
  I am told that the overlap on operations between the BSC and the private sector is about 20 per cent. Both groups are being hurt in the aggressive pricing of the market place. If we want the BSC to be aggressive to increase its market share and to reduce its demands on the taxpayer, we cannot ask it to protect and give a price advantage to the private sector.
  Though we should welcome the commitment that any complaints about price cutting will be referred to the Under-Secretary of State for Industry, we must accept the almost impossible position in which he will be placed and the difficulty of obtaining meaningful results from an investigation.
  Probably the most realistic assessment of the position was by Mr. Clancy Scheuppert, the chief executive of Sheerness Steel. When he was asked if the BSC was deliberately cutting prices to put the firm out of business he replied that the corporation had to match Continental prices to stem imports. He said that the BSC had been forced to bring down prices and that, as a consequence, private steel makers were hurt. That is different from
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  saying that the BSC is deliberately driving the private sector out of business, although I am sad to say that the result may be the same.
  The only practical way is to encourage joint partnership with the private sector, in such arrangements as the phoenix operations to which reference had been made, so that there is a united approach to fight off foreign competition. I agree with the remarks of the right hon. Member for Llanelli (Mr. Davies) about financial arrangements being made public so that the private sector, the BSC and we know exactly how funding will he made available.
  Whilst this corporate plan faces the realities, I have to say that many of the actions being taken now would have been far less painful if the people involved four or five years ago had had the guts to take the decisions then. Although we are starting out from a precarious foundation, I wish Mr. MacGregor and his team every success and cooperation in tackling this most difficult of tasks.
  I should now like to draw attention to the activities of the British Steel Corporation (Industry) Ltd., which I describe as the social conscience of the BSC. It is now being run by the previous chairman of the BSC, who is taking a most enthusiastic and conscientious view of his duties. I should like to believe that its activities in providing job opportunities in areas faced with inevitable closures will continue to be actively encouraged.
  To date BSC (Industry) Ltd. has operated in 12 areas of concern. It has established representatives to deal with business men interested in setting up companies and providing job opportunities. The present position is encouraging. Out of about 5,000 applicants, BSC (Industry) Ltd. has decided to support about 500 with management advice and start-up finance. When they are all up and running they should provide about 15,000 job opportunities. That is an area of hope that we should encourage and bear in mind.
  There is not time to deal with each area in detail and to give a progress report. However, one of the most difficult areas that we can envisage is that of Consett. It already has 60 serious offers, with inquiries coming in at a most gratifying rate. It is hoped that by the end of this year 1,000 job opportunities will be offered in Consett. Finance is coming in and is being provided from within the EEC social fund, the European Investment Bank and the European Coal and Steel Community.
  Mr. Donald Coleman: I am interested to hear the hon. Gentleman say that help is being made available through BSC (Industry) Ltd. to Consett, Corby and other places with BSC works. What about Llanelli and the private sector? What will the Government do to help, because it employs steelworkers too?
  Mr. Page: I should like to spend more time talking to the hon. Gentleman about the need to set up small firm investment banks such as operate in the United States to give small firms the opportunity to go into depressed areas and to start real growth opportunities instead of some of the present artificial job schemes, worth while as they are.
  The British Steel Corporation has gone through a difficult phase. We are wiping out a lot of taxpayers' money. I hope that in the reconstruction the parties involved will not fight each other but will co-operate to ensure that taxpayers' money is spent profitably and economically, so that we have a viable steel industry.
  5.48 pm
  Dr. Jeremy Bray: I am sorry that the Secretary of State has not seen fit to sit out the debate, because we all have many points to put to him personally.
  Mr. Tebbit: That is an unnecessary remark. My right hon. Friend has other extremely important and urgent responsibilities, of the type indicated by his statement this afternoon. He will return to the Chamber at the earliest opportunity. In the meantime, I hope that the hon. Member for Motherwell and Wishaw (Dr. Bray) does not find it offensive to put his points to me.
  Dr. Bray: I do not believe that the business of the House can be less important than other matters. The Secretary of State is calling for enormous sums. He is responsible for a major industry. He is a force in the Government, who have set the economic background against which the industry must operate. He ought to take the medicine.
  The prospects of the BSC depend in part on circumstances outside its control. The most important circumstance is Government policy. I should like the Secretary of State to do the sums the other way round. He has set his economic policy and he has seen, painfully drawn out in the public and the private sector, the consequences of that, not only for the BSC but for ICI, GKN and the whole of manufacturing industry. He could have done the sums the other way round. He could have examined the massive investments programme in the BSC, ICI, the chemical and oil industries and the other great capital-intensive industries. He could have asked what sort of economic policy was necessary to validate the technological changes and capital investments that have been made in the past. He would have arrived at a totally different set of conclusions from those with which we are confronted in the House today.
  We should consider what we are doing writing off the £3,500 million that the Minister of State brushes away as a minor matter, which does not deserve the attention of the Secretary of State. It is only the accumulated losses that British Steel has made over recent years which must be considered but the fact that the assets of British Steel—the modern steel plants that have been built—have never been operated in the environment for which they were designed.
  I refer hon. Members to the notes in the BSC annual report last year on the revaluation of assets that took place on 1 April 1979. At that time, the write-down of assets was calculated in relation to
  "(a) Specific plant items for which there is no expected need in the forseeable future. (b) Assets which will go out of use due to works closures which have been announced since 31 March 1979, some of which have already been effected. (c) General over-capacity throughout the Corporation, comparing current installed capacity (after taking account of the two categories above) with an expected annual requirement of 15 million tonnes of liquid steel."
  On 29 July last year British Steel was planning at that level, which has now been confirmed in the corporate plan.
  As the note says, it is wholly proper to write down assets under the provisions of Statement of Standard Accounting Practice No. 12, which requires that
  "Where the unamortised cost of an asset is seen to be irrecoverable in full, it should be written down to the estimated recoverable amount, which should be charged over the remaining useful life."
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  However, that is the accountancy of the doss-house. If one is running an industry that, on its record, one expects to maintain profitable viable operations, far from writing down assets to a recoverable level, under current cost accounting procedures one should write up assets to their replacement value and depreciate on that basis. If the BSC had done that we would be writing off not £3½ billion but much more. That larger figure is the measure of the disastrous policies followed by the Government. It is not £½ billion, but a much larger sum. The Minister of State shakes his head. Perhaps he would like to say why.
  Mr. Tebbit: I shall reply to the hon. Gentleman's speech later, when the Secretary of State is here.
  Dr. Bray: I do not think that the hon. Gentleman understands the argument.
  The fact is that we are facing an industry that has been placed in an environment in which financial discipline cannot operate. Any realistic financial disciplines that could have made sense have been destroyed by the economic policies of the Government. Therefore, in that context it is useless for them to deliver sermons about having to break even in this industry by a certain date. The industry knows that it is totally vulnerable to the economic environment in which it is set.
  Let us be clear about what the Secretary of State said. He said that the Bill wrote off the overestimated investment programme in the early seventies. That is not a physical operation. With a few exceptions, the plants that were built are taking the base load of the corporation, for example, those at Thrybergh, Redcar, Port Talbot, Llanwern and Ravenscraig. Those assets, which were built in the seventies, are operating. We are physically writing off plants that were built many decades before that.
  Mr. Nicholas Lyell: Will the hon. Gentleman explain why this industry is more vulnerable to the economic climate than any other industry?
  Dr. Bray: First, it is highly capital-intensive. Secondly, it is the basic supplier of the capital goods industry. An industry like ICI is capital-intensive, but it supplies across the whole spread of the gross domestic products, and not just investment.
  Therefore, when one hammers GDP and it goes down by 10 per cent,. ICI output goes down by 10 per cent. When GDP goes down by 10 per cent. and investment goes down by 40 per cent. steel demand goes down by 40 per cent. That is why the steel industry is the advance indicator of what will happen to the whole manufacturing industry today. Does the hon. Member agree?
  Mr. Lyell: Yes.
  Dr. Bray: I am grateful to the hon. Gentleman.
  Therefore, I hope that there will be less mindless slanging from the Secretary of State and Conservative Members who are simply concerned with putting their knives into public enterprise and who say that British Steel has been particularly incompetent. By normal technical operating yardsticks, it has not. It has been efficient, it is improving its efficiency, and it is needing to make further improvements. However, hon. Members should realise the particular nature of the industry's markets and the capital intensity of the industry, which have caused the results with which it has been faced.
  The Secretary of State said that the industry was effectively bankrupt and that it could not be liquidated

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  under present legislation, but under the Bill he is making provision virtually to reduce the activities of the Corporation to nil. He is not exactly holding out an encouraging prospect for the reconstruction of the operation of the corporation, nor is he reflecting the point of view put across by Mr. MacGregor and his colleagues on the BSC board, who are having to keep the ship afloat. No chairman could speak as the Secretary of State does and keep his head above water for one day.
  The Secretary of State went on to compound the mischief that he has done to the industry by saying that further legislation would be introduced if liquidation was necessary. The Secretary of State is a business man, because he cannot help being a business man. He is a business man on a massive scale. He is a banker on a tremendous scale. However, he is the most disastrous business man that this country has ever had. Every 10 years or so the Secretary of State has an enlightenment. I have watched him have two enlightenments since I have been in the House. His first enlightenment was on the nature of the social services and his concept of accumulative disability. The second was the enlightenment that led to the disastrous economic policies of the Government.
  Every time, the Secretary of State realises his mistakes afterwards and confesses them in the most engaging manner. Conservative Members face the problem of whether they can afford to wait for his next enlightenment. If the right hon. Gentleman is allowed to run his harum-scarum course through British industry, not only the BSC, ICI and GKN will suffer; the whole of manufacturing industry will be unable to recover without total financial reconstruction of the kind that we are having to carry out today for this part of industry.
  Will Conservative Members consider the political implications of such a Bill not just for the BSC or the public sector but for Unilever, ICI and GKN? Bills such as this will flock in if we have another two years of this sort of economic policy. Conservative Members have had a gutless reaction. They will vote billions away to this disastrous Secretary of State and will not have the courage to vote against him in the Lobby.
  Mr. Michael Ancram: Is the hon. Gentleman saying that he will vote against the Bill tonight, in view of the need to protect steel in Scotland?
  Dr. Bray: Of course I shall not vote against the Bill. I am talking about Conservative Members not voting against the economic policy that has made the Bill necessary. The Bill is an inevitable consequence of the Secretary of State's policy. That is where there is the real measure of the lack of courage on Government Benches. They see the disastrous course of manufacturing industry, but they just sit there like dummies, letting it all flow over their heads.
  Mr. Grylls: Is the hon. Gentleman really saying that the losses have occured only during the past two years? He cannot expect the House to take that seriously. Some losses occured during that time but others occured during the 12 years since nationalisation. They are a result of mismanagement after nationalisation.
  Dr. Bray: The figures for the losses contained in the statement on the corporate plan show that the highest losses occured during the past two years—some £1,200
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  million of the accumulated £2,800 million. They were high because of the intolerable exchange rate and the drastic cut in investment in Britain.
  Mr. Richard Page: I appreciate what the hon. Gentleman is saying, but does he accept that the figures for productivity per man—the tonnes per hour produced—puts Britain at the bottom of the league rather than in the middle, which is where it should be in view of our equipment?
  Dr. Bray: I represent Motherwell, the home of the Ravenscraig works, which has international manning standards. Motherwell also has a special steelworks, and the condition of the investment was that it would not be made until the unions had agreed on full international manning standards. The unions have agreed to the manning standards required by the corporate plan. I constantly discuss manning problems and inter-union problems frankly and freely with both sides of management in the BSC. Further improvements are needed in a number of works. I hope that the hon. Gentleman will not fail to pay tribute to the achievement that has been made, especially in the large flat products works at Port Talbot, Llanwern and Ravenscraig.
  I shall conclude with three specific points about the immediate position. First, there is the impact of the closure of Linwood on the future of the strip mills in general and the cold and hot strip mills in Scotland. Mr. MacGregor is reported as saying that there will be a loss of 15,000 tonnes a year from Gartcosh. That is relatively small in relation to the total output. There is no reason for any immediate threat of closure of the Gartcosh strip mill. I hope that there will be no such suggestion. We must have, and maintain, a complete cold strip and hot strip capacity in Scotland, which means maintaining the Gartcosh works.
  Secondly, various statements in the corporate plan refer to the rundown of research. That is a dangerous development. If the corporation runs down its research not only the long-term work but the current operating efficiency of the works will suffer. Unless the industry maintains the absolute frontier of technological capability across the whole area, from metallurgy to instrumentation, it will inevitably suffer in the operating results and efficiences of the works.
  Thirdly, the corporation has been given licence to compete with import prices. It assists its major customers by matching prices for fabricated goods in export markets where steel is a large proportion of the total export order. Let us take the example of the Esso project at Moss Morran, with its 150 pressure vessels and 200 heat exchangers. A large proportion of the cost of that project relates to steel. If that steel is purchased from the BSC at the home market price the fabricators will be in a difficult position to bid against foreign fabricators who have obtained steel from Japan at a much lower price.
  Once it becomes necessary to trim and match prices to match the prices of imported steel in order to support fabricators in export markets—which represents a large proportion of their steel orders—there is no limit to the amount of support that must be given. The complaints of the private sector are wholly justified. The Government have got themselves into an impossible position in their support for prices. The cure is not to lean on the BSC because of its pricing practices but to get the exchange rate

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  to a level at which British industry generally can compete. Not only the BSC is suffering; we have seen all firms suffer, across the board. In the long run there is no cure for the difficulties of the BSC which is not equally a cure for the economy as a whole.
  This is a sobering Bill. It is a small Bill, and we shall not divide the House on it. It is sobering because it is a condemnation of the whole economic policy of the Government.
  6.6 pm
  Mr. Hal Miller: I hope that I shall not aggravate the apparent annoyance of the hon. Member for Motherwell and Wishaw (Dr. Bray) if I do not follow all his arguments. My remarks are intended to pursue a slightly different line. I hope that he will forgive me, but, having been described by him as a gutless dummy, I feel entitled to make some form of reply.
  When the Labour Party was in office, at a time when there was not a world-wide recession—that is an important point to bear in mind—the BSC's losses for 1975–76 were £255 million; for 1976–77, £95 million; for 1977–78, £443 million; and for 1978–79, £309 million. Where was the hon. Gentleman then? What was the state of world trade? His remarks took no account of the significant decline in the number of customers.
  There has been a world-wide reduction in capacity in the motor vehicle industry, by no means confined to Britain, but experienced by other countries following other economic policies. As I come from the West Midlands I am qualified to say that our workers have experienced a loss in real wages during the past decade compared with most other occupations, regardless of the economic policies followed by the Governments of my right hon. Friend the Member for Sidcup (Mr. Heath), the right hon. Member for Huyton (Sir H. Wilson), the right hon. Member for Cardiff, South-East (Mr. Callaghan) and my right hon. Friend the Prime Minister. I do not feel that the hon. Gentleman has established a case.
  Dr. Bray: The hon. Gentleman asked what I was doing. I was speaking against the economic policies of the Labour Government. In support of my argument I abstained from voting in the Lobby. I hope that the hon. Gentleman will do the same.
  Mr. Miller: I have been supporting the policies of my Government in the Lobby, in the same way as he claims to have done—
  Dr. Bray: I abstained from voting.
  Mr. Miller: I am not giving way to the hon. Gentleman. I do no wish to increase his wrath. As he described me as a gutless dummy, I feel obliged to point out some of the apparent inconsistencies in his argument.
  Dr. Bray: Will the hon. Gentleman give way?
  Mr. Miller:No, I shall not.
  Dr. Bray rose—
  Mr. Deputy Speaker (Mr. Bernard Weatherill): Order. The hon. Member for Bromsgrove and Redditch (Mr. Miller) said that he would not give way.
  Mr. Miller: The line of argument that I want to pursue relates to the argument put forward by the right hon.
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  Member for Llanelli (Mr. Davies) and the right hon. Member for Salford, West (Mr. Orme). I wish to draw the attention of the House to the difficulties of the private sector in the steel industry. To be fair, the hon. Member for Motherwell and Wishaw touched on that point. I wish to ask some questions about the nature of the phoenixes that are to rise. I am not sure how we should domesticate these birds. My hon. Friend the Member for Hertfordshire, South-West (Mr. Page) raised the question, as did the right hon. Member for Llanelli, of how they were to be accountable. Whether we take them with a pinch of salt, put salt on their tails, or however we treat them, I hope that the Minister will enlighten us when he replies.
  The first point that I want to make relates to the private sector of steel making—including the downstream activities. Far too much attention has been concentrated on primary steel making. One of the difficulties that we face is the large range of activities conducted by British Steel inside its overall total of 40·4 million liquid tonnes equivalent of steel and the expansion of its activities downstream from steel making into new areas of competition with the private sector.
  The industry, both public and private, is faced with the need to reduce capacity and to become more competitive, but it is difficult for the private sector to stomach that. Whereas the public sector is enabled to obtain financial assistance from the Government for the necessary adjustments in capacity or for redundancies and, indeed, even for competing with imports, that assistance is not available for the private sector.
  The Opposition have fairly pointed out that heavy losses have been sustained in the private sector regardless of the comparative efficiency of those installations. It is no secret that several firms in the private steel making sector are losing £1 million a month. They naturally find it difficult to understand the Government's policy in supporting the losses of the BSC and the redundancy provisions, which are a great deal more favourable than any offered to workers in the private sector, and subventing competition with imports on a basis that is not available to them. In the end that will inevitably drive them into bankruptcy.
  In the case of Duport that virtually happened, until a last-minute rescue operation was arranged with the assistance of my hon. Friend to whom I pay tribute. The details of that rescue have not been tied up. There are still important points of principle to be resolved, one of which concerns the valuation of the assets of the Llanelli steelworks, which were built in the wrong place as a result of Government policy diverting investment away from the West Midlands, where the works should have been placed to supply downstream activities and to take advantage of the works in the constituency of my hon. Friend the Member for Dudley, West (Mr. Blackburn).
  I welcome the principle of the Bill, as put forward by my right hon. Friend. It removes the duty on the British Steel Corporation to supply iron and steel of all kinds to all sorts of customers. That seems to open the door to dealing with and limiting the range of the corporation's activities. I shall return to that.
  I also welcome the fact that the Bill, as my right hon. Friend says, provides a route to enable the corporation to sell off its assets or to go into partnership with the private sector with part of its assets. I find it difficult to understand how that will be achieved by the phoenix route.

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  We originally heard of Phoenix I in connection with Guest, Keen and Nettlefold. Phoenix II was to deal with Duport, Hadfields and Round Oak. The difficulties with Duport meant that its case had to be considered with rather greater rapidity and separately from the others, but, from the information that I have, it does not seem that the Government are making real progress with Phoenix II. I should be grateful if my hon. Friend would give us some information and say whether he still thinks that that is a viable form of bird or whether there will have to be a more limited regeneration of operations, perhaps involving fewer private companies. My present information is that the BSC will not be in a position to take part in Phoenix II, or even to conclude an agreement on it, until the autumn.
  If private firms continue to lose £1 million a month until the autumn, there will be a great many disgruntled shareholders, quite apart from disgruntled workers, managers, customers and suppliers of the private firms involved. People in the private sector feel that the Government's policy, whether consciously or unconsciously, is resulting in an expansion of the public sector at the expense of the private sector.
  My hon. Friend the Member for Hertfordshire, South-West said that the overlap between the BSC and the private sector was only about 20 per cent. However, that is on the present scale of operations. Once the BSC has acquired the assets of Duport, which it wants to obtain—the bright drawing, the rolling and the stockholding—it will increase its competition in the downstream sector.
  The mention of Phoenix III and IV has led private industry in the downstream sector to conclude that there will be a further strengthening of competition from the BSC or from the phoenix units in the downstream business. That raises the question of the basis on which the phoenix schemes compete. They may be part of a Companies Act company, but that does not mean that the Government, as a major shareholder, will not support them in the way that I have tried to illustrate to my hon. Friend is considered to be unfair by many in the private sector. The private sector is not afforded any aid to compete with imports, to make the improved redundancy payments and to effect the necessary closures.
  There is also the question of energy prices, whether supplies are on an equal footing between the BSC and the private sector, quite apart from the wider issue of energy prices raised by the right hon. Member for Salford, West.
  In the background to the corporate plan dated 23 February supplied to the House it was stated that the BSC still had an estimated energy cost penalty of between £50 million and £70 million a year relative to EEC producers. I do not think that the measures announced in the Budget will have remedied that to the extent that many expected. The Budget measures did not deal at all with foundry coke.
  The competitive situation is very important, in my view. For instance, in the scope of the BSC's operation I cite as an example the Stanton and Staveley foundry. My hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark) has already submitted evidence of extremely unfair competition from that foundry with a private foundry in the West Midlands. Reports have come through to me of other activities by that company which no private company would be able to sustain. That may have been set up as an independent, autonomous unit,
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  perhaps to be converted into a Companies Act company, but I do not think that either the administrative or the legal measure will answer the point that I am trying to make.
  There is a serious doubt in the private sector about the course of policy that the Government are taking and how the phoenixes will evolve. There is already a widespread concern and a deep sense of injustice about the unequal treatment meted out between the public sector and the private sector on the points that I have mentioned—reductions of capacity, redundancies and competition, and possibly also on the energy question. How is the private sector, particularly downstream, to consider its business plans on the basis of the information and the likelihoods presently apparent to it? Will not private companies seek to go further into trading and less into processing and manufacture in Britain? Will they not import more rather than be tied to the BSC as a monopoly supplier? What answers will they give to their work forces, which must, naturally, be concerned about the future of their jobs?
  I come finally to the political point. Private sector companies are saying "How, under a Conservative Government, are we getting into a condition in which even the steel companies denationalised by the Labour Government are now at risk and the only solution proffered to them is that they should be swallowed up once more by the BSC, in whatever guise that may be put forward?" That is the sort of political question that private concerns in the West Midlands are asking me. I should be very grateful for anything that my hon. Friend the Minister can do tonight to help me to give them an effective reply in order to set those real fears and resentments to rest.
  6.21 pm
  Mr. James Tinn: I shall resist the temptation to join my colleagues in the exhilarating sport of chasing after the Secretary of State, not only because he is rather a large target and easy game, but also because, in any case, I have been a lifelong opponent of blood sports. I go even further. I would support a close season on the hunting of the Secretary of State—although even if my colleagues were to go along with that, I am afraid that the right hon. Gentleman himself, by his actions, would ensure that it was a very short close season.
  I want to address myself to two major points. First, I should like to take up strongly the accusation, the smear, that steel workers have in any sense been featherbedded—cushioned by the taxpayer—and have been a burden to the taxpayer, in the way that unfortunately, has been so often suggested and even, occasionally, plainly alleged from the Conservative Benches. I react pretty strongly to that, having worked in the industry.
  Anyone who thinks for a moment that steel workers or blast furnace men have ever been feather-bedded should try a short spell in the industry. He should set off at half-past five on a winter's morning, perhaps climbing up the hill to the works for the first shift, or coming home shortly after six o'clock in the morning after a night shift. He should have a walk around the bottoms of the blast-furnaces, and around the smelting shops, BOS plants, continuous casting plants, and so on. He should then ask himself—he should certainly not dare to ask the workers—whether the workers appear to be featherbedded or cushioned in any sense, and whether they are doing a fair day's work for the money that they are earning.

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  I used to climb a hill to the steelworks. It used to stand overlooking the river Derwent, across the border into Northumberland. It looked almost like a Vesuvius with the slag cascading down the sides of the tips, with beautiful country surrounding it, moorland, rivers, and so on. It was the heart and life blood of the town. But now, if one is on the moorland roads looking eastwards towards Consett at night, one will not see in the works so much as a 40-watt bulb glowing. The furnaces are cold. They are already being dismantled. One will see plenty of men out walking their dogs, as men did in the thirties, because that is all they have to do. Those men were never feather-bedded in their working lives. They are certainly not feather-bedded now, although the full and savage impact of that murder of a town is still fully to be felt because they are still benefiting from the redundancy payments—not wasting them—which at present are to some extent anaesthetising the surgery, the butchery, that has been done on the town.
  There is no doubt that the steel industry has had massive amounts of money over recent years. Everyone is entitled to ask "Where have those amounts gone, and how have they been used?" I have looked over the figures today. Rounding them off slightly it is interesting to find that two-thirds of the money has gone on public investment. I readily acknowledge that a very substantial part of that has gone in my constituency at the Redcar complex—in investment, though, for the future, as my hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) has pointed out. This investment is not wasted money. It is not feather-bedding the workers. It has established steelworks of a technological level to match the best in the world, and with manning levels comparable and competitive with the best in Japan, or elsewhere.
  Those investments cost money. Sadly, a very considerable amount of money was spent on building those plants at times when none of us on either side of the House, in Grosvenor Place or elsewhere, could guess or appreciate the catastrophic impact that the world recession would have on the steel industry. Many of the plants that have been closed, including that at Consett, have been closed partly as a price that is being paid for the massive investment that the corporation undertook, and which, in the long run, will be shown to have been rightly undertaken, although in ignorance of the immediate future that lay ahead.
  Two-thirds of the money has gone on investment in new plant. That is a good bet by any standards—unless we are prepared to write off any British steel industry altogether. A quarter of the rest of the money has gone on interest payments. I welcome the easement that the Bill provides in that regard. It is absolutely essential. I should have liked to see it sooner, but nevertheless I give a very warm welcome to it now.
  The rest of the money, about 10 per cent., is taken up in redundancy payments. They are a necessary charge on the conscience and the pocket-book of the industry for men who have devoted their lives to it. It is ironic that the industry should have to bear that burden, because the men would far sooner earn their livings in the industry in which they grew up and developed their skills. Despite the bad conditions and the risks involved, they have a feeling for the industry. There is a close family relationship in terms of commitment. The feeling is, perhaps, akin to that felt
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  by the miners for their industry. The men would far sooner work than draw redundancy payments. Less than 1 per cent of the money has gone on job creation.
  I do not want to dwell on the negative aspects of the issue for too long. We must consider how the industry's future should be determined. I am happy to report that the workers on Teesside are equipped with modern plant that is comparable to that of the Japanese. Indeed, the blast furnace was designed by the Japanese. In Redcar, steel workers have been given the tools. I am glad to say that they are breaking records. The Pellet plant attached to the blast furnace is breaking records. The blast furnace itself has a capacity of 10,000 tonnes a day. It has fully recovered from the setbacks of the industrial dispute. It is achieving, not only record output ahead of target, but record figures for low fuel consumption. The oxygen steel making plant at Lackenby and the continous casting plant are also doing well.
  I have tried to inject a more positive tone into the debate. Given the period that we have gone through, it is inevitable that many of our debates have been negative and critical of one party or the other. Hon. Members have tried to attribute responsibility for this and that. They have tried to fix the blame where they think it lies. On Teesside, at Ravenscraig and at modern plants in Wales the same situation applies.
  Even in the depths of its greatest recession, the industry is demonstrating that if the workers are given the tools and the equipment to produce steel, they will out-produce the best in the world.
  6.32 pm
  Mr. Gerry Neale: Through my hon. Friend the Minister, I apologise to the Secretary of State, as I was unable to be in the Chamber when he addressed the House. Many hon. Members come from or have constituencies with steelworks in them. There are no steelworks or steel workers in my constituency and I have no knowledge or experience of them. I have no hesitation in saying that, with one exception, the constituency of Cornwall, North has little sympathy with, or concern for, the plight of the steel industry. However, like the vast majority of constituents, they pay for the steel industry's losses.
  Mr. David Lambie: What about farming?
  Mr. Neale: It is important that the views of so many people should be borne in mind. I accept that those who have steelworks in their constituencies are faced with considerable problems. Many of their constituents are faced with the loss of their jobs, short-time working, and so on. My constituency is third in the league of constituencies with the greatest number of small businesses. The constituents of Cornwall, North do not need to be told about the problems of unemployment. They know about unemployment. It is one of the worst areas for unemployment.
  The hon. Member for Redcar (Mr. Tinn) spoke with great sincerity about the problems of working in a steelworks. He spoke about the difficulties of turning out early in the morning, and so on, as though those difficulties were unique to the steel industry. I do not wish to belittle the hardships involved in working in the steel industry, but people in my constituency work through the

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  night lambing on Bodmin moor. Others spend the night fishing. In emergencies, men go out in lifeboats. Such people feel that their jobs are just as difficult and as vital as those of the steel workers.
  Mr. Tinn: I do not quarrel for one moment with the hon. Gentleman. I should not join with anyone who suggested that such hard-working people were featherbedded. I was defending steel workers against the accusation that their jobs are feather-bedded.
  Mr. Neale: Cornwall's industry has suffered the most drastic structural changes during the past two centuries. There have been considerable alterations in the basic structure of local industry. Unashamedly, I shall direct my remarks to those areas that interest my constituents, and many of those in rural areas.
  All small business men realise the economic realities. They know that they have to provide a good service to their customers. They know that they must provide the services or the goods when they are required, and at a price that the customer can afford. If they do not do so they will go out of business. Many small business men will argue that they have to live with a simple truth, namely, that the Department of Industry will not bail them out if they run into problems.
  Whether Opposition Members like it or not—if they do not, there may be a presentational problem that needs solving—there is a strong belief in constituencies such as mine that the steel industry and its workers should live with that very truth. [HON. MEMBERS: "Farming."] There are other examples of the same thing. Two, three or four wrongs do not make a right.
  At present, there is a considerable amount of frustration. I have great respect for my hon. Friend the Minister. I know that he is determined to bring a greater sense of reality into the public sector, and particularly into the steel industry. In addition, I have great respect for the BSC's new chairman.
  I welcome the Bill in many respects. I think that the way that it allows the steel industry to be run down to a trimmer and fitter size, bearing in mind the world recession, makes sense. It makes sense also that it will be possible to sell off various parts of the corporation in due time. But I come back to what I sincerely believe to be the reaction of many people in this country to what we are doing in the Bill. We are, among other things, proposing to write off £509 million, the remaining debt to the national loan fund. I suppose that that makes sense. Then we read that another £3,000 million of the BSC' s capital is to be written off. I have to confess that when constituents put this to me I am somewhat bemused by these figures. Then we read that yet another £1,000 million can be written off on top of that. Worse still, there seem to be powers to invest another £1,000 million as a result of amending the 1975 Act, and more powers to invest yet another £2,000 million.
  I have to tell the House that the fury of the people in my constituency is mounting and has reached a stage at which it has become almost unchallengeable. In fact, one constituent approached me quite recently and said "You look an honest sort of chap." I do not know, Mr. Deputy Speaker, how you cope with that sort of remark, but I find it very difficult to argue with it, particularly when it is said a second time, as it was by my constituent. Then he paused and it was in that pause that I realised that either he had
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  no idea whether or not I was an honest sort of chap or he was pretty sure that as a breed politicians are not, but that he wanted an honest answer on this occasion.
  He said "If you had £5,000 or £10,000, would you invest it in British Steel?" I had to admit that I would not. He said "You are a solicitor and presumably a trustee on occasions. As a trustee of a fund, would you invest money for the trust fund in British Steel?" I had to admit that. I would not, and he said "You would probably go to prison, would you not, if you put that money into British Steel?" Then, of course, the inevitable question followed. He asked why I had put taxpayers' hard-earned money into British Steel.
  Mr. Campbell-Savours: The hon. Gentleman may well guide his constituents when they read the reports of his speech tomorrow in the papers in his constituency, to which he will no doubt circulate it, but he might indicate to them that tens of thousands of steel workers descend on the national park in his constituency annually and spend their money propping up the economies of Devon and Cornwall. His area exists on the money earned by industrial workers in the Midlands, the Northern region, and Scotland, and he would do well to draw his constituents' attention to that before he starts knocking hard-working steel workers.
  Mr. Neale: My constituents in North Cornwall would, of course, be very quick to remind me that they have already partly paid for the money that they are getting back in payment for holidays. They would see that as at least some return on the so-called investment that they have made in British Steel.
  We really have to encourage the view that the taxpayer must be borne in mind in the negotiations and decisions that are made along with these vast injections of cash and when we come, as successive Governments have, to a position like this, in which it has recently been announced that this vast sum of about £1,121 million is to be put into British Steel this year. A constituent pointed out to me last weekend that the sum that was to go into British Steel was pretty closely equated to the sum that we were proposing to raise through the Finance Bill by petrol and diesel duty.
  To show the frustration that exists—I repeat that I do this only because I feel that hon. Members from the steel industry constituencies must appreciate what the feeling is—that constituent said to me "If it had been necessary for the Secretary of State to go before the House when asking for this money and ask at the same time for the money to be raised on a particular item, what chance would there have been of this money going into British Steel? If, first, he had asked that the money should go into British Steel but had then said that it was to be raised by a 20p tax on petrol and diesel fuel, would it have gone through?" I leave that thought with hon. Members.
  It may also be said by my hon. Friend that if we did not aid steel at the cost of, say, 20p on petrol, it would cost 25p just to let the steel industry find its own level in these very difficult times. But the argument that is then presented to me is that, presumably, five years ago the figures would have been 5p and 7½p; two years ago it would probably have cost us 10p on petrol duty and 15p if we had allowed it to find its own level. I think that the problem that we now face is that on the track record of the losses that have been referred to—and there was some

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  discussion of these across the Floor—we could well find, in another year or two's time, that the figures were even greater.
  I have to say, in the absence of the hon. Member for Motherwell and Wishaw (Dr. Bray), that he made a point about the last two years' losses, but, looking at the figures for 1977–78, I can assure the House that it would be a great comfort to my constituents to know that while losses are running at £2 million a day at the moment they were at that time only £1·5 million a day.
  On that point, therefore, it seems to me that there is a built-in incentive to guarantee that the problem gets larger and larger each year, on the basis that the likelihood gets less and less that any Government of any persuasion will have the courage really to tackle it. The position seems to me to be that, as my right hon. Friend the Prime Minister said in an answer at Question Time regarding redundancy payments to coal miners, however justified may be the solution to the problem that exists in these industries—and I concede not only to my hon. Friends but to hon. Gentlemen on the Opposition Benches that the problem is considerable—there is major frustration, exasperation and even anger among many ordinary people—people who are totally unrelated to the steel industry—about the sheer size of the sums going into it.
  Therefore, while I welcome what my hon. Friend is seeking to do and wish him and my right hon. Friend the Secretary of State every success in their efforts to bring a far greater sense of realism to the industry at an early date, and while personally, as a Member for a rural constituency, I take great heart from the general optimism that seems to be expressed that this is now achievable, I cannot see that it would be serving the best interests of my constituents or of the country to go on for much longer funding these vast losses by inflicting on people like them the petrol and diesel duties and taxes of the high order that we are now seeing.
  6.50 pm
  Mr. Stan Crowther: I shall try later to reply to the important point raised by the hon. Member for Cornwall, North (Mr. Neale). I was amused earlier to hear the hon. Member for Surrey North-West (Mr. Grylls) expressing profound confidence in Mr. MacGregor's enthusiasm for trade union negotiations. Unfortunately, the hon. Member is out of the Chamber. I was about to suggest to him that he should read the report of last week's meeting of the Select Committee on Industry and Trade. On that occasion I put it to Mr. MacGregor that Mr. Sirs of the ISTC had said "How can I be expected to support a plan I have never seen?" When I suggested to Mr. MacGregor that a little more consultation with the trade unions might have been desirable, he said "I did consult, but unfortunately Mr. Sirs was out of town that day." The significant words are "that day". Apparently, he thought that one afternoon's meeting with the TUC steel committee was adequate consultation. It is hardly what I would regard as adequate consultation on a matter that profoundly affects a major industry and will put 22,000 people out of work.
  I am unhappy with the first part of the Bill. I cannot agree with the hon. Member for Bromsgrove and Redditch (Mr. Miller) that the scheme is designed to extend public ownership. On the contrary, it is a form of back-door
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  denationalisation. I am reluctant to accuse the Secretary of State of misleading either me or the House, but what is now being proposed is in total contradiction to earlier assurances given by the right hon. Gentleman.
  The Under-Secretary of State for Industry, the hon. Member for Arundel (Mr. Marshall). assured my hon. Friend the Member for Penistone (Mr. McKay) in July 1979 that the Secretary of State did not intend to hive off the profitable parts of the British Steel Corporation Sheffield division to the private sector.
  A little later I asked the Secretary of State for a firm assurance that the Government would not be denationalising Rotherham works. I said that I asked that question because of anxiety expressed by my constituents. The Secretary of State said in reply:
  "We certainly do not intend any attempt at wholesale denationalisation in the steel industry."—[Official Report, 23 July 1979; Vol. 971, c. 3.]
  I pointed out later that I had not raised the question of wholesale denationalisation, but in his opening speech today the Secretary of State was getting on to the point of wholesale denationalisation. He made it quite clear that the proposals in clause 1 could well result in the BSC owning no steelworks; so he is now in favour of wholesale denationalisation.
  When I wrote to the Secretary of State and pointed out that I had not raised the question of wholesale denationalisation but asked only about Rotherham, he replied to the effect that the assurance given by the Under-Secretary of State to my hon. Friend the Member for Penistone certainly applied to Rotherham works. He added:
  "I hope this will enable you to allay any anxiety and uncertainty among steelworkers in your constituency."
  I shall not go through the whole catalogue of questions and answers and letters. The position has gradually changed. We have had to squeeze information out of the Government on how they have been shifting their position. They have not said in the Chamber that they have completely changed their views and are now in favour of wholesale denationalisation. Not until the arrival of the Bill has that been admitted.
  On 16 December at a meeting in the Secretary of State's office in the House he admitted that he was "encouraging" the setting up of joint companies, in which the private sector would have a majority interest, to take over BSC assets. He also made it clear that the reason for this complete change of position between July 1979 and December 1980 was to save the private sector. He made no bones about it. He was anxious to prevent private sector companies being extinguished.
  That is what the Bill is about. It is about taking valuable, potentially profitable assets of BSC, especially in the special steel sector, and handing them over to companies in which, if the Secretary of State gets his way, private interests will have the majority shareholding. He also said on 16 December that, as far as he could, he would insist on the new joint companies being 51 per cent. private sector and 49 per cent. BSC. That would take their borrowing out of the public sector borrowing requirement. On the first company that has emerged, Allied Steel and Wire, there is a 50/50 split. How Mr. MacGregor has managed to prevent the Secretary of State enforcing his views on that one I am not sure.
  Sir Keith Joseph: It is still private sector, not public sector, because BSC has asserted that it is not seeking to control Allied Steel and Wire. Thus, its activities fall outside the PSBR.
  Mr. Crowther: Yes, I know that because I raised the question with Mr. MacGregor in the Select Committee. It has been taken outside the PSBR without the need for BSC to accept less than half of the interest in it. Perhaps that will apply to cases that arise under the Bill—I do not know.
  I am very unhappy about what I regard as the denationalisation by stealth which has been going on until now. The Secretary of State's assurances to my hon. Friends in 1979 have proved to be entirely worthless. That part of the Bill causes me no joy, although I welcome the principles underlying the financial restructuring. However, there are some matters on which I have considerable reservations.
  For example, I am sorry that the Government are not taking over responsibility for the outstanding foreign loans, which will continue to impose a hefty interest burden on the corporation, although the size of it is apparently in dispute. What the Secretary of State said that afternoon does not accord with what Mr. MacGregor told the Select Committee about the size of the remaining interest burden after the restructuring. Mr. MacGregor was clear that it would be £100 million per annum. The Secretary of State said that it would be £69 million. There is a substantial difference.
  If Mr. MacGregor is right, the interest burden per tonne of steel will be reduced from almost £14 to about £7, which will put it roughly in line with the position in West Germany but still much worse than that in the United States. Nevertheless, the general idea of restructuring is right. It is a pity that the Secretary of State has been so tardy in recognising the need for a realistic attitude towards Government support for major industries such as the British Steel Corporaion. If in December 1979 he had adopted the attitude that he is now adopting, there would never have been a strike. That must be clearly understood.
  Under the proposal now before us, Government money will be available to the BSC for operating costs as well as for capital investment and redundancy and closure costs. Had that been the case in December 1979, a very damaging strike would not have taken place. However, I realise that there is more joy in Heaven over one sinner who repents than over 99 just men. I should not, therefore, be churlish about the Secretary of State's late conversion.
  Unfortunately, however, the Secretary of State will now have to take his conversion a little further. This will be difficult, because it will involve breaking away from his ideological view that the Government are not responsible for ensuring that British industry is able to meet competition on equal terms. That is the point at which the Government seem to differ from everyone else—if not from Conservative Back Benchers, certainly from the Opposition. They are at odds with the TUC, the CBI and nearly all the employers' organisations on the fundamental point of whether they have a responsibility to ensure that British industry is able to operate in fair, competitive conditions. They say that they have not. I am afraid that the Secretary of State will have to change his mind on that as well, because capital restructuring of the
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  BSC will be a waste of time and money if the factors which make the British steel industry and steel-using industries uncompetitive are not dealt with quickly and effectively.
  I was glad that my right hon. Friend the Member for Salford, West (Mr. Orme) referred to these matters at some length as they are extremely important. I shall not go over them in detail. The exchange rate cannot be mentioned too often. It is the most important matter of all. When the CBI came to the Select Committee on Industry and Trade a year ago today, on 19 March 1980, I asked how much of the loss of competitiveness of British industry over the past five years or so was due to changes in the exchange rate. The CBI said that about half was due to that. That is a significant answer, but that was a year ago.
  The position has become worse in the last 12 months. I cite just one instance. In the six months to January this year the change in the position of the pound sterling in relation to the German mark and the French franc resulted in a loss of competitiveness for a typical product of BSC 's special steels of £50 per tonne. That is more than the total labour cost in producing that tonne of steel. Mere changes in the relationship between sterling and other currencies have caused a competitive loss amounting to more than the total labour cost. That is the measure of the problem that we face.
  Mr. John G. Blackburn: The hon. Gentleman is developing an important argument relating to the value of sterling in world markets, which I believe has increased by about 24 per cent. Under the Labour Government, the price of the pound in relation to the dollar was $1·56. It is now $2·20. What would the hon. Gentleman regard as the value of the pound which would help the steel industry?
  Mr. Crowther: I think that a reduction which would take us roughly half way back to the appallingly low figure that the hon. Gentleman quoted would probably be realistic. But I am not an economist. I am concerned with the effects of the changes that have taken place. I realise that there are disputes between members of the Government, and certainly between individual Conservative Back Benchers, as to whether the Government can do anything about the exchange rate.
  Many hon. Members are satisfied that if the Government set their mind to it they could do something important in that direction. I do not pretend to be able to pick out a certain value of the pound which would be ideal for the British Steel' corporation. There must be an ideal value at which the BSC would gain the most benefit from a reduction in its export prices as well as in its import costs for raw materials. No doubt somebody could give the answer to that.
  I emphasise that these factors bear not only on the British Steel Corporation but on its customers and on the whole of manufacturing industry. The output of manufacturing industry suffered an appalling drop of about 14 per cent. in 1980. That was the worst drop in this history and lies at the heart of steel manufacturers' problems. The BSC does not sell its goods in Woolworths, but to other manufacturers. When manufacturing industry goes into the doldrums, the primary producers suffer.
  I shall not go into the details of the many other factors which give all kinds of competitive advantages to foreign steel makers in the EEC and elsewhere. These were

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  brought out in detail in the sector working party report and in the British Iron and Steel Consumers Council report, which I strongly recommend to any hon. Member who has not read them. They make it clear that competitors in other countries receive assistance with financing research and development, rail freight subsidies, low interest loans and coking coal subsidies, which have been mantioned many times in the House, as well as many other forms of assistance.
  The net effect for the BSC has been a smaller share of a smaller market. This is where the difficulty lies. It is not merely that the BSC's share of the market is smaller. The market itself is smaller, because the BSC's manufacturing customers are themselves going out of business. This is where we must tackle the problem. It is no good putting more and more money into the BSC unless conditions are created in which it can operate effectively. I hope that one day we shall have a full debate on the report on imports and exports produced by the Select Committee on Industry and Trade. We made 29 recommendations, all of which stem from the same basic message. We are not asking for a policy of protectionism. We are saying that British industry should be allowed to compete on equal terms, which is manifestly not the case at present.
  Anyone could be forgiven for believing that the Government's policies were deliberately designed to give the maximum advantage to overseas competitors. Some time ago the Prime Minister did a remarkable turnabout on the question of coal industry closures. That problem arose simply because there were 37 million tonnes of coal on the ground and the Government automatically assumed that the NCB was producing too much coal. It was not. The customers were not buying enough coal because of the general decline of industry.
  The steel industry is one of the biggest customers of the coal industry. When the steel industry declines it does not buy as much coal because its own customers are not buying enough steel. The problem can be remedied only by a different approach to the management of the economy. It is the economic climate in which all of those industries operate which is causing the problem.
  The Government's present industrial policy can only be described as economic lunacy. They persist in running away from their responsibility to ensure fair trading conditions for British industry. They then have to dig deeply into the public purse to pay the price of their own negligence by way of the massive cost of unemployment and periodic rescue operations for individual industries or companies. Another one was announced only this afternoon. Those operations would be either unnecessary or, at least, far less expensive had the Government not neglected their duty in the first place. That is what the hon. Member for Cornwall, North should tell his constituents who complain about being required to contribute to these industries out of their own pockets.
  If the economic climate were changed so that industries could operate profitably there would be no need for this to happen. No one in the BSC wants to drag more money out of the public purse. If the BSC was given a chance to operate competitively and effectively in a sound economy, there would be no need for it.
  Mr. Neale: Is that something which is peculiar to the last two years? How does the hon. Gentleman explain away the fact that constituents such as mine have had to contribute even when the Labour Party was in power?
  Mr. Crowther: The hon. Gentleman referred to the considerable difference in amounts. The other major difference is that in the earlier period that money went almost entirely into investment, as my hon. Friend the Member for Redcar (Mr. Tinn) pointed out.
  Mr. Peter Hardy: Perhaps my hon. Friend will remind the hon. Gentleman that the works in his constituency, as well as mine and some other South Yorkshire constituencies, had never been unprofitable until the present disaster. We and our constituents are saddened at the fact that the State must pay enormously to support people who are not allowed to work full time in modern plant which had previously broken world records with unfailing regularity.
  Mr. Crowther: My hon. Friend is absolutely right. Rotherham and other works within the special steels groups were, and potentially still are, profitable plants, but they must be given the chance to operate in the proper economic circumstances.
  I do not know how the Secretary of State can imagine that the British steel industry, both public and private—however much it is restructured and rationalised—will ever return to real prosperity and profitability while all the dice are loaded against it as a result of the Government's policies.
  I am sometimes accused of being over-optimistic about the potential prospects for the steel industry. That may well be due to the fact that I am well aware that in Rotherham and the other plants production records have been achieved many times. We know that they can be achieved if those plants are given the chance. I firmly believe that the publicly owned steel industry is capable of again becoming a competitive and profitable industry and that it can achieve a level of production substantially higher than that proposed in the MacGregor plan.
  That depends on what the Government are prepared to do in order to create the right competitive conditions. The Secretary of State has a duty which goes far beyond the mere financial measures proposed in the Bill. I hope that he will soon begin to appreciate that simple point.
  Several Hon. Members rose—
  Mr. Deputy Speaker: Order. Before I call the next hon. Member, I remind the House that six hon. Members still wish to speak before the wind-up speeches begin. Long speeches will make it difficult to accommodate all of them.
  7.13 pm
  Mr. Archie Hamilton: I should like to say something about the Keynesian views of the hon. Member for Rotherham (Mr. Crowther). Clearly, if we were to stimulate demand for products steel stocks would be used up, steelworks would to some extent come back into production and no doubt existing coal stocks would be reduced. It is unfortunate that the hon. Gentleman has not learnt a lesson from the experience of the right hon. Member for Leeds, East (Mr. Healey), who, when Chancellor of the Exchequer, accepted that there was a direct relationship between stimulating demand and creating inflation. I have no doubt that if we created the

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  sort of inlation about which most Labour Members are talking we would in the medium term destroy far more jobs than we ever thought of in the past and create far greater economic problems than we have yet seen.
  The Bill, which asks for extra funds for the BSC, is yet another chapter in the sorry tale which has now lasted for some years. British Steel has had to come back to the House to ask for more funds to keep going. These problems can be traced back to the nationalisation and renationalisation of the BSC, which basically changed a number of relatively small companies into a gigantic and unmanageable organisation, which in turn has resulted in its being unresponsive to changes in the market place, indifferent to customer demands and held to ransom by the monopoly unions which, inevitably, control such large organisations.
  As a result, the labour force has refused to implement new plant and processes. The industry has also been beset by overmanning. The productivity of the BSC, relative to our competitors, has been bad, and remains bad today. The latest figures for man hours per tonne of steel show that in the United Kingdom it is 11·7, in France, 7·2 and in Germany 6·5, which does not reflect well on the United Kingdom.
  The problems of the past were compounded by the actions of Sir Monty Finniston during his time as chairman of the BSC. He introduced an expansion programme which increased the capacity of the BSC to a staggering degree at a time when, in practice, foreign competition was increasing and the steel market was shrinking.
  The BSC has been one of the worst examples of nationalisation. It is remarkable that the national executive of the Labour Party is today calling for more nationalisation, especially when we look at the examples that we have which in anyone's mind are disastrous. I do not see how an increased programme of nationalisation would in any way result in increased benefit to the nation.
  As always happens, nationalised industries are basically controlled to a large degree by politicians. Therefore, there are political pressures in constituencies not to announce redundancies when elections are looming. For some time there has been a need to run the industry down, and it is a great sadness and tragedy for the people involved that that was not done slowly and gradually over a, period of years.
  When my right hon. Friend the Secretary of State inherited this industry, it was in need of major surgery. Last year there were massive redundancies, totalling about 50,000. There are more to come in 1981. It is expected that there will be about 20,000 redundancies this year. The problems were compounded by the 13-week strike, which cost the industry about £200 million. That strike had all the hallmarks of a kamikaze pilot, because it was inconceivable that people should strike for higher wages when their industry was basically bankrupt. It would have been impossible for that to happen in the private sector, because there would have been no way in which the workers could be paid. As a result, these redundancies are now taking place at a time of rising unemployment, which merely increases the human tragedy of the people involved.
  As my hon. Friend the Member for Cornwall, North (Mr. Neale) said, the taxpayer has to fund all these activities. During the five years of Labour Government, £2,750 million was put into the corporation. Under this Government, £2,000 million was put in up to the end of
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  last year. There is now need of another £100 million to carry the corporation through until April 1981, and £730 million to see it through until April 1982. Up to the end of December last year, the corporation was losing £800 million a year—a rate of £30 a second.
  If we take £500 million as representing 1p on the standard rate of income tax, without steel losses it would have been possible for the standard rate to have been 1p lower during each year of the Labour Government. During the period of this Government, it would have been possible for the standard rate to have been 2p lower. The resulting reduction in demand may have saved what are basically non-jobs in the BSC, but it has destroyed proper jobs in other manufacturing industries. When it comes to it, I doubt whether it will have saved any marginal seats either.
  We cannot always dwell on the past. We must look forward with optimism, and hope that the future holds more than the past, although the picture is not very exciting, with the over-capacity in most European steel corporations, as mentioned by my right hon. Friend. I welcome his statement that the corporation's progress will be closely monitored. We cannot let this one step by. We must from now on watch carefully how the group performs. I am glad that my right hon. Friend has grasped the nettle.
  If the group does not perform better, the business will have to be run down. I do not see that as the end of the road, as many Opposition Members do. Out of the liquidation of the BSC a number of ventures in the private sector may rise and have a good future. I am encouraged by the prospect of having separate Companies Act companies in competition with the private sector. I hope that I can count on my right hon. Friend to maintain separate accounting, so that it will be possible to compare the performance of those companies with the private sector. My right hon. Friend's realisation that the corporation may have to be wound up is courageous.
  We must give all possible encouragement to Mr. MacGregor. His policy to decentralise is sensible. Almost everyone in the industry recognises that building vast groups with centralised management has not worked Diversifying and decentralising the management organisation can improve management control. It will also improve labour relations in the separate parts, together with marketing and customer relations.
  The phoenix projects are exciting and offer enormous possibilities. If they are a form of back-door denationalisation, I support them fully. The future of our steel making lies in the private sector. The taxpayer has already been asked to contribute far too much. He cannot be expected to continue contributing endlessly. Private sector steel making will be much more competitive and productive and offer a far more secure future for people in the industry.
  The right hon. Member for Salford, East (Mr. Orme) is worried that the taxpayer will not get a return on his investment if the companies are sold to the pivate sector. To date the BSC has cost the taxpayer almost £6,000 million, so he may well be prepared to forgo his return if he does not have to produce more money.
  7.23 pm
  Mr. D. N. Campbell-Savours: I spoke for 50 minutes in the previous steel debate and made out the case for Distington in detail, so I shall be brief.

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  It is my party's policy to support the measure, but I am inclined to object. Unless the Government are willing to set up machinery to monitor the BSC's decisions, the public interest is not being served. The Government were prepared to allocate £1,120 million for the trading losses of the BSC last year and are now introducing capital restructuring of the corporation and writing off further moneys. The taxpayer should be able to feel that the BSC's decisions are sensible and that his interests are being protected.
  I do not seek to undermine Mr. MacGregor's ability as a manager. I was one of the few hon. Members on the Opposition Benches to support his appointment. However, until he comes to terms with the fact that managers not capable of taking reasonable decisions still hold office in the regions, strategy will not succeed. While such people exist in the BSC, the Secretary of State should intervene to protect the public interests.
  The Government have already made U-turns on Leyland and, to a certain extent, on ICL today, when they announced that they were giving further support to the company, having sold it at a high price last year. Many people who bought shares must be shaking with anger. Having allocated vast sums, however, the Government have not yet made a U-turn to intervene in the decision's of the BSC.
  The Secretary of State and Ministers at the Dispatch Box and on television repeatedly state that they will protect the public interest when money is expended by the State and that they are determined to ensure that the money is seen to be well spent, yet the Secretary of State remains wedded to the principle of keeping out of decisions made by mammoth companies like the BSC. Mr. MacGregor may be a good manager, and some of the decisions may be acceptable to the whole House, but Workington is a prime example of a decision made by a tier of management of the BSC that does not stand up to realistic commercial assessment.
  Even before I spoke in the previous debate the right hon. Member for Taunton (Mr. du Cann) asked the Government to look more closely at the BSC's decisions. Presumably as a result of representations made, the Secretary of State appointed a conciliator, whose function appears to be simply to arbitrate in price disputes between the private sector and the BSC. His role seems to be limited to establishing in minds of private sector producers the fact that the base import price of iron and steel products is fair and that if the BSC is willing to meet the target prices the private sector should do the same. The conciliator should also act in disputes between trade unions and action committees—as at Distington—and the BSC.
  In the event that Mr. MacGregor, in his remarks yesterday to the Select Committee, and the right hon. Gentleman the Secretary of State, at the Dispatch Box, are correct, and that there may be a further retrenchment of British Steel Corporation operations over the months to come, there will increasingly be more disputes. It seems that unless the Secretary of State is willing to intervene to ensure that people who dispute the judgments and decisions of the corporation have their cases heard, there will be only further difficulties in the future.
  It is not only at my own plant where these disputes have taken place. An argument has now broken out in the courts
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  over an attempt to put aside the decision to close the Velindre plant on the basis that the unions were not consulted under the 1975 Act. I am told that the referral to the courts might not have taken place had the Secretary of State set up machinery to ensure that people had a right to seek an outside arbitrator in their disputes with the British Steel Corporation.
  There is a crying need, especially during this period of retrenchment, for the Secretary of State to provide an arbitration service to ensure that people feel that justice is being done in their areas. I can appreciate the sense of grievance over the position at Velindre. I was born in Swansea. The feelings among people who work at that plant can only be further aggravated by the fact that they are directly affected not only by the Velindre announcement but by the situation at the Llanelli plant of Duport, which also provides work for people from the Swansea area. This shows the great need for the Secretary of State to provide the machinery to intervene where disputes occur.
  The right hon. Member for Taunton, supported by some of his hon. Friends, said that the best way to rejig the economy and to reflate to a certain extent would be to set up a programme of public construction. I believe that the right hon. Gentleman mentioned the possibility of the Channel tunnel, or the rebuilding of the construction industry. Those proposals would be highly beneficial to the British Steel Corporation. The true potential of productivity of the British Steel Corporation cannot be established by quoting figures from a European assessment, or an assessment by certain bodies in the United Kingdom when demand has been deflated. The potential of the BSC can be evaluated only in conditions of a reflated economy. The best way to bring about that situation is to enter upon the programme of public construction put by the right hon. Member for Taunton, increasingly supported by his hon. Friends.
  Instead of pressing the British Steel Corporation to close plants, a better approach might be for the Government to urge it to retain that capacity, to mothball plants and to give special relief from local authorities where rate liability exists. Where it is clear that plant closures will take place, there is a feeling that the Government should intervene to ensure mothballing, if only to make certain that capacity is retained within the corporation for the time when an upturn occurs.
  7.33 pm
  Mr. John G. Blackburn: This is one of those occasions in the House of Commons when there is little happiness on either side of the Chamber. It would be wrong to say that we are holding an inquest on the British steel industry. It is, however, the case that we find ourselves in a very sad situation. I am sure that the Secretary of State finds no happiness in the fact that his name is attached to the Second Reading of the Iron and Steel Bill, but I believe that he displays a remarkable sense of courage in taking these steps on behalf of the industry.
  I should like to deal with the effect of the Bill on my constituency, its impact on the people and its future effects on the steel industry corporately. I am humbled at being the Member for a constituency that is dominated by a steelworks. The steelworks was founded in 1867 by the Earl of Dudley and now stands alone in the West Midlands as a major steel producer. The company was acquired in 1953 by Tube Investments Ltd. to provide a secure source

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  for the high grade carbon and alloy steels required for the seamless tube-making companies. Its history is interesting.
  With the nationalisation of the industry in 1967, the newly formed British Steel Corporation took a half share, along with the Round Oak company itslf. The expression "half share" that is to be produced under the phoenix scheme is familiar to hon. Members. This period of joint ownership has been successful. The owners have encouraged the local management team to enter into a widespread and costly modernisation scheme. As I gaze across the Opposition Benches, I see that there are some who are familiar with that scheme of modernisation and who played a greater part in it than I have done.
  A total of £24 million has been invested in this company. That is the background. It has been nationalised. It has been denationalised. It has been renationalised. The investment programme that was produced by the Labour Party when in Government was over-ambitious. Time and again during this sad debate we have had brought to our attention the tragedy of the steel strike in 1980. This was a strike for a pay increase that was not justified because, as has so often been said, the company should have been placed in the hands of the receiver.
  Nine months later I was in the Indian Sub-continent. I visited India, Bangladesh and Malaysia. As an engineer, I visited engineering works to see the construction that was taking place. I asked where the steel had been purchased. I was told that until the strike the steel had come from Britain, but that orders had now been placed with German producers. I found no comfort in hearing those words. We had given this valuable export market of one of our basic industries on a silver salver to the competition. There followed a partial shedding of jobs in the steel industry.
  I do not apologise for speaking about my constituents and my people. We have been ravaged by unemployment in the steel industry. At the north end of the constituency there was the closure of the Bilston steelworks. At the southern end of the constituency there was the closure of the Cookley steelworks during the administration of the Labour Government. By good management, sound common sense and a wonderful relationship between union and management, which is a credit to the company, the Round Oak steelworks is still in situ. Without that works my constituency would be savaged right across the centre.
  Steelworks in both the public and private sectors have shed labour quickly, especially over the past 12 to 18 months. I think that it took courage to do that. Some of them have reduced the total work force by nearly one-third. They will not increase the work force significantly to higher levels for plant utilisation. The gains in the private sector are about £20 a tonne.
  I had the opportunity to speak to the newly appointed chairman of the BSC, Mr. MacGregor, prior to the announcement of 19 December. I applaud any man who says that he will sell the BSC's product. That is the voice of a business man who is anxious to develop the corporation that has been placed at his disposal. However, that is not enough. He must declare the market in which he will sell his steel, against whom he will have to compete and the products that he will sell. For example, is Mr. MacGregor moving into tube manufactures or engineering steels?
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  It is critical for the private sector to know more about Phoenix I and II. I find it unacceptable to be told that we shall have a statement in the autumn. I speak with some feeling, as the steelworks in my constituency is losing more and more money day by day and is paying interest upon interest. It is critical that the decision is made with great urgency so that the private sector knows the exact position and can plan for it.
  I do not accept that the private sector is asking for special treatment. Historically, it has never done so. However, it wants parity in finance, financial security, the cost of energy and investment. We have had an opportunity to think about the investment programmes that have been accomplished by the BSC. Investment programmes in the private sector have come from private sources, and the sector is looking for parity.
  Can we salvage anything from the Bill that will give us encouragement when we return to our steel making constituencies this weekend? I am pleased to read the phrase "Financial reconstruction of Corporation". I am not entirely happy but the Bill becomes acceptable when I read in clause 3 of £3,000 million. We do not solve the problem by throwing money at it as that will not remove the root cause of the problem.
  My remarks are saturated with sincerity. By means of the Bill the House will make £3,000 million available to the industry. The nation is entitled to proper monitoring. It is the nation that is picking up the bill and investing in the corporation. We are entitled to say that we expect this to be a once-and-for-all occasion for a Bill of this nature to be brought before the House. I have a great deal of faith in the steel workers in my constituency and throughout Britain. I pray that they will accept the challenge and the opportunity that will be presented to them tonight when the Bill is given its Second Reading.
  7.48 pm
  Mr. Bill Homewood: I am pleased to be able to take up the remarks of the hon. Member for Dudley, West (Mr. Blackburn). I am not too sympathetic towards some of his arguments but I sympathise with him in the situation in which he finds himself. For a good many years I was a full-time trade union officer at the Round Oak works. It is true that if those works were to close the hon. Gentleman would find himself in exactly the same situation as that with which I am faced in Corby and that faces my right hon. Friend the Member for Llanelli (Mr. Davies) at the Duport steelworks.
  I am at odds with some Conservative Members about the steel strike. There can be little doubt that the industry was damaged by the strike. However, we must be careful in apportioning the blame. If any body of workers at that time had been faced with an insulting offer of a 2 per cent. increase in earnings a strike would have been inevitable, whatever the industry or the employment position within it.
  Sir Keith Joseph: The hon. Gentleman knows as well as I do that the offer, which was the management's affair, was a 2 per cent. increase plus 10 per cent. to be earned by increased productivity, making 12 per cent. in all.
  Mr. Homewood: The Secretary of State and I could carry on a debate about what constituted the productivity side of that offer from now until midnight, and I am sure that we would still not agree about what the BSC meant.

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  Ultimately, the productivity element that came out of the final deal, as the Secretary of State knows, was much less than 10 per cent.
  I want to talk about the industry in general, and the difficulties that we are facing. Labour Members welcome the Bill. We shall not vote against it, because from the point of view of my trade union, anyway, it substantially meets what we have been asking for for a long time.
  We are discussing an industry that has shed about 262,000 employees in 13 years—that is 58 per cent. of its work force. Moreover, it is now envisaged that a further 22,000 jobs will go in the public sector, under the so-called MacGregor corporate plan.
  As the Secretary of State said in opening, 50,000 jobs were lost in 1980. When I hear some Conservative Members talking about subsidies for rural constituencies I feel somewhat cynical, bearing in mind the vast subsidies that have been given to farmers since time immemorial.
  The loss of jobs in the steel industry is concentrated in small areas. Last year in South Wales about 12,500 jobs were lost. In Shotton the figure was 7,250; in my constituency, Corby lost 5,500; in Consett, 3,700 jobs were lost; in Scunthorpe 2,300 were lost; and there were sundry others, making up the figure of 50,000.
  In the decade 1970–1980, crude steel production in this country fell from 28·3 million tonnes to 11·3 million tonnes—a drop of about 60 per cent. Even if the 1980 figures were influenced by the strike, if we ignore those figures and use the corporate plan figure of 14·4 million tonnes, we find that the drop in output in the 10 years was 49 per cent.
  In the same decade—the strike had little effect here, because it was a gradual change in position over the whole period—imports rose from 3·73 million tonnes to 6·36 million tonnes—in percentage terms an increase from 15·53 per cent. to 39·88 per cent. Imports from the EEC rose from 25·5 per cent. of our total imports in 1970 to 66 per cent. of our imports last year.
  During that time, while the British steel worker was thrown out of work and denied wage increases because of over-capacity, what was happening to his counterpart in the Common Market? In the decade 1970–1980, Belgium crude steel production fell by a mere 2·4 per cent.; French CSP by a mere 2·5 per cent.; and West German CSP by a mere 2·7 per cent.; and the Italian CSP rose by 51 per cent.—a matter to which my hon. Friend drew attention earlier today.
  The Secretary of State believes that all these difficulties stem from the fact that the industry is nationalised. I do not know how that squares with the contention that we now hear from the Government Benches whenever we have a debate on steel—the contention that the private sector is now complaining that the BSC is being unfairly competitive. I am not sure how far the taxpayers' money subsidy may be used as an argument in favour of private steel production.
  Let us consider how the money has been spent over the past 30 years. About £5·6 billion was poured into the BSC in that time, of which £3·6 billion has been invested, £1·3 billion paid in interest, £5·2 million spent on redundancy and £40 million spent by BSC (Industry) Ltd. on job creation. Not a penny has gone on the day-to-day running of the industry, or on its workers' wages.
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  When my hon. Friend asked whether the phoenix propositions were an extension of nationalisation or whether they were back-door nationalistion, the question was easily answered; it depends on whether they become profitable. If they are unprofitable the public will bear the cost. If they are profitable they will, of course, be sold or given away to private enterprise.
  That brings me to my main point. The present catastrophic situation of our steel industry—this was confirmed by what the Secretary of State said in opening—is due to the mammoth investment errors that have been made over the past decade. I am not talking just about incorrect demand forecasting, because that happens in almost every industrialised country. I mean it more in terms of big being beautiful, the Japanese model, and work and productivity arguments, no matter what the cost of the capital equipment.
  I am sorry that the hon. Member for Dudley, West (Mr. Blackburn) is not here, because I believe that the company that he mentioned invested too much money and created exactly the same sort of situation. I believe that capital equipment has replaced labour on the basis of diminishing returns in the steel industry, even if one discounts the unemployment costs at a level of 20 per cent. in Corby, 20 per cent. in Llanelli, 18 per cent in Shotton and wherever steelworks have been closed.
  I think that a long look should be taken at our European competitors. My hon. Friend the Member for Workington (Mr. Campbell-Savours) said that the comparisons that are now drawn concerning cost and productivity are difficult on the basis of different levels of activity in the various countries. We have poured about £3 billion into the steel industry over the past decade. To employ a steel worker in this country now costs only half as much as it does in West Germany or Belgium, 50 per cent. less than in France, 25 per cent. less than in Italy or Spain—of all countries—and a little over one-third of the cost in America.
  With the massive investment that our industry has received and its enormous labour costs, it is impossible to argue that the import difficulties are based on fair competition. The subsidies on fuel, coking coal and transport in other countries play a substantial part in our difficulties.
  It is obvious from the figures that we need only a marginal upturn in economic activity to put our steel industry in an impossible position in relation to helping the balance of trade. The industry has difficulty in producing the crude tonnage allowed under the EEC quota. I find it difficult to listen to Government Members. They are extremely defence conscious and yet they talk as though they would not mind if no bulk steel making were left in Britain. I hope that the Secretary of State will apply his mind to that and see whether he can find better answers.
  8.2 pm
  Mr. Tom Ellis: I apologise in that I shall not be able to be present when the Minister replies to the debate. My absence will be unavoidable.
  This has been a sad debate. I felt that we were experiencing the funeral rites of the British Steel Corporation. We do not have a corpse, but we have a patient on a life support system. There is a sombre air about the House. The conventional stimulii have not provoked the usual Pavlovian response. When reference

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  is made to nationalised industry or free enterprise everybody accepts that we are in extremis. The Bill is accepted as a last resort.
  The steel industry has failed the country. I do not blame anybody. The job of all politicians it to be realistic. The failure should not be measured by comparisons with European Community countries in the last few years. The citizens of Britain should ask how it was that in the early 1950s we produced 28 millions tons of steel and Japan produced 2 million tons whereas now we produce about 1 million tonnes and Japan produces 90 million tonnes. That is a good question which cannot easily be answered. Any answer will be complex, especially since Japan is an island with no coal or iron ore.
  Mr. Hooley: I can give three answers. The first is the low value of the yen which has been deliberately maintained for years. The second answer is the massive and continual high investment in steel making capacity in Japan, which we did not have in Britain. The third is Japan's rigorous policy of keeping out foreign imports that it did not want. Those are the three classic ways in which the Japanese developed their industry.
  Mr. Ellis: I regret that the hon. Member did not give us the benefit of his experience earlier, so that we could be producing 90 million tonnes this year. The hon. Member over-simplifies the problem. Japanese workers receive wages worth about 50 per cent. more in real terms than British workers. We tend glibly to put many issues on one side. We have to accept the Bill. There is little else that we can do. The only good that will come out of it will be a few lessons about industrial problems generally.
  Management must bear its responsibility. In normal commercial enterprises, management is responsible. If a firm goes bust, management is to blame. However, the issue is more complex in the steel industry. However good or bad management is, it does not have the same responsibility as it has in private industry. Politicians tend to intervene. If there is a lesson to be learnt from the last 30 years it is that if responsibility lies other than with management it lies with this House.
  Tonight hon. Members asked to see the corporate plan as if they were to run the steel industry. Only two or three years ago a parliamentary Sub-Committee demanded that the then chairman of the BSC should explain why he had miscalculated the losses that the corporation was due to make. I said at the time that the Serjeant at Arms should have marched him at sword point down Whitehall so that the whole world could see how we go about the business of running the steel industry. For two hours parliamentarians scrutinised the affairs of the British Steel Corporaion. After two hours with the chairman, politicians thought that they could put everything right. That is a travesty of the truth. The capriciousness of intervention demonstrates that many lessons have still to be learnt.
  My hon. Friend the Member for Motherwell and Wishaw (Dr. Bray) talked about accountancy technicalities and asked whether the assets to be written off had been valued correctly. In the light of what has happened for 30 years and of the enormous influence that we have had, I could not help but feel that his arguments were a little specious. Indeed, his main argument was about the economic situation. Much is wrong and much blame must be attached to the Government, but we are dealing with
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  the steel industry. Even if the economy improves overnight, the organisaion and well-being of the steel industry is a separate matter.
  I shall give an illustration. The Secretary of State said that we were talking with the benefit of hindsight about the market. However, in 1973, some voices pointed out that a figure of 35 million tonnes was not on. Some hon. Members even talked about 45 million tonnes. I do not wish to be immodest, but I remember that when a lobby came from Shotton steelworks in 1974 all hon. Members made the same speech. They said "Good lads. Backs to the wall. Man the barricades." One could almost see the machine guns being set up around Shotton. At the time 1,700 of my constituents worked at Shotton. I told them that they would not sell even 23 million tonnes let alone 35 million tonnes.
  President Nixon had suspended dollar convertibility in 1971. The situation was obvious and yet politicans were arguing for a 35 million tonnes share of the market. The sheer irresponsibility of that stuck in my throat. I told my constituents "Look, you would be better off to accept." Today I believe firmly that they would have been better off if they had rejected the advice of all the politicians and accepted the advice of just one. I do not pretend to be an expert, but it was blindingly obvious. I could not understand how politicians could say that we should aim for 35 million tonnes or 45 million tonnes. They plucked figures from the air. That is not shouldering the responsibility of one's job in the House. Therefore, all sorts of lessons are to be learnt.
  The hon. Member for Sheffield, Hillsborough (Mr. Flannery) talked about the Brymbo steelworks. He spoke about it on television—on BBC 2, if you please. So he really knew about it. I played a modest personal role. The facts were contrary to what the hon. Member said. For a long time, British Steel valued the works according to a valuation by its financial department. GKN had the works valued by a merchant banker and the discrepancy was enormous. GKN said that a figure produced by any merchant banker anyone cared to name should be settled on. It said that it would accept whatever figures resulted. In the event, the deal went through after the death of the former chairman of British Steel. The works have just finished investing £49 million in the steel industry.
  At that time, I was severely criticised by my constituents because I was trying to obtain something for free enterprise. The argument about free enterprise versus the nationalised industries is a sterile one. Some industries should be nationalised and some should be privately owned. All sorts of complex questions are involved. However, simply to rear up on one's hind legs and say that one industry should be nationalised and another should be private misses the point.
  At that time, my duty was to try to safeguard the future of those who were employed at Brymbo. Brymbo did well but now, because of the economic crisis, it is in difficulties. The firm has sacked 600 people out of a total labour force of about 2,400 during the last few months.
  Brymbo steelworks has electric arc furnaces and is a major consumer of electricity. In April, there will be a 16 per cent. rise in electricity charges. The chairman of the works says that that is crucial. He is a good chap and I believe what he says. He says that, as a result, the works could finish. He desperately pleaded with me to use whatever influence I could with the Government to see

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  whether something could be done about the electricity charges. The same applies to many industries. I hope that the Minister will be able to do something about it.
  The issue is not wholly concerned with economics, as the hon. Member for Motherwell and Wishaw said, although that matter is relevant. Nor is it concerned with technical accountancy arrangements, although, again, those are important. It is as if a patient were on a life support system and one either raises or lowers the purity of the oxygen content. An important decision has to be made, but the patient is still on a life support system. The real issues are much more profound. Essentially, they concern the political structure of the country. No one should make any mistake about that. The political governing system of nationalised industries is in the balance tonight. That is an illustration of what has gone wrong. That system is completely outmoded. If we learn that lesson from the Bill, we might go into the next decade with more confidence than we have had over the last 20 or 30 years.
  8.14 pm
  Mr. Anthony Beaumont-Dark: I apologise for missing the last hour of the debate—I was on other parliamentary duties—but I have heard much about what has taken place this afternoon. I am pleased that I heard the hon. Member for Wrexham (Mr. Ellis), who spoke much common sense.
  I do not believe that all money given to State industry is a sort of evil. There are times, when one is talking about great and structural changes that must take place, when one cannot say that if the industry cannot make a profit nothing should be done, or that it should not be run. For example, there is a good logic that railways and the railway system are of great and abiding importance to a country such as ours.
  The same applies to the steel industry. I do not look upon all money that we spend on the steel industry as if it were a wicked waste. It is true that every time one puts a subsidy into an industry, someone somewhere has to be making a profit for that money to be spent. However, I thought that the hon. Member for Wrexham was right when he said that very often, with the best intentions in the world, politicians tend to spoil industry. The good intentions for the steel industry and the people who work for it have paved the way for the thousands of millions of pounds that the people in this country have had to put into steel.
  Since the corporation was set up more money has gone into it than it took to fight and pay for the whole First World War. That must be an incredible proposition. Perhaps more incredible is the fact that we have ended up with a steel industry in a greater crisis today than when steel nationalisation took place, with all the optimism that existed at the time. One of the greatest problems that faces the industry—this is one of my great worries—is that which arises from the fact that we were concentrating on the problems of the nationalised steel industry and some of us felt at the time that it was to the exclusion of the real and even more telling problems of the private steel manufacturers. Other hon. Members share that worry.
  I should like to place on record my personal thanks to the Secretary of State and the Minister of State for the tremendous amount of time and effort that they have put
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  into talks about the problems that face the private steel makers. The outcome of Phoenix I—although I think that GKN will not look upon it as a great victory—avoided a situation that was not of its making. The new system has the making of a genuine and proper wire, rod and bar industry, which can and will prosper.
  Those who are against public money say that they do not care what good comes out of that money and that they have put enough in. They consider that if the industry cannot prosper immediately it should be bankrupted. One cannot talk about great enterprises and hundreds and thousands of jobs in that cavalier fashion. We must consider each matter on a more long-term basis.
  I have no political or other objection to spending the people's money on building a better, more viable and prosperous industry, as I hope it will be in the end. That does not apply only to steel, but it is steel that we are discussing tonight. Mr. MacGregor must come up with the goods, in view of what we are paying. If he can ultimately produce a genuinely viable steel industry—and I believe that he can—in which the private sector can play its vital and profitable part and the great steel-producing BSC can also play its part, the thousands of millions of pounds that have been invested will have been worthwhile. I am positive that, ultimately, no country can afford to place itself hostage to Europe, Japan or Korea. We need a steel industry. The pains that we are suffering now are reducing the steel industry to a sensible and viable whole.
  Phoenix II will probably cause more troubles. I hope that the same good sense will apply to those talks as applied to the talks on Phoenix I. It will be a tragedy if the Llanelli works have to be closed, but it would have been an even greater tragedy if Duport, as a private company, had had alone to bear the burden of all the loss involved. Once again, I pay tribute to the Minister for his work in that area.
  The problem faced by the private steel makers—although they produce only 20 per cent. of the total steel capacity in Britain—is the sense of mistrust and distrust built up over the years that almost naturally exists between private manufacturers and the State. That is not unusual. A private manufacturer faces the bank manager every Friday, wondering whether he will meet his bills. State industries face the bank manager when the Minister says that they must, but at the same time they know that he will pick up the bills. There is a natural feeling that the one can do so much better than the other.
  I applaud the imaginative concept now being put forward that we will pluck out and set up, almost as separate identifiable entities, those State companies that compete with the private sector. That is the right thing to do. I have received correspondence after correspondence from intelligent and hard-working business men continually saying that the BSC' s Stanton and Staveley plant, or some other plant, has been competing unfairly. If that could be proved not to be so—if it could be proved that the one is competing fairly with the other—it would be good and proper.
  The optimistic plan is that British Steel will cost another £730 million. The pessimistic plan is that it will cost an additional £432 million on top of that. I wish British steel well, meaning not only the BSC but the whole identifiable mass of the steel industry—both private and State. We need it because we need the jobs, the prosperity and the exports that it brings. Knowing the Minister as I do, I am sure that he will be bold and blunt in his talks with the EEC

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  on the manifest crisis. Never has anything been better named. There is a manifest crisis in the steel industry not only in Britain but world-wide.
  Steel was built on the idea that, somehow, the Western world would grow and grow and grow. It will not now do that. It cannot do so, because of the price of oil. The Arab countries do not need our money. They can afford to keep their oil. Every time that we, as the Western world, appear to become more prosperous and need more oil, the Arab States raise the price of oil and cut back our prosperity and growth. We must live with what we need. If we can achieve a steel industry that produces 10 million, 11 million or 12 million tonnes instead of the 28 million tonnes that it produced in 1950, if it can do that well, and if the industry is run properly it will result in good steel jobs, and a good investment for Britain.
  The money that we lose now does not matter so much. What matters is that we grasp the reality of the position, namely, that we in the House cannot produce steel. With the best of intentions, we cannot produce steel at Merthyr Tydfil simply because tens of thousands of people have nothing else to do. We must produce a good and viable industry. If we do that, other industries and jobs will grow around it.
  Change is not painless. The trouble is that we have told people that it can be. If the debate about the new crisis facing the British steel industry has shown us anything, it is that somehow or other the House—we, as politicians—must make people face the truth. I believe that they can do it, provided that we can do it.
  8.25 pm
  Mr. Frank Hooley: I do not necessarily regard this as a tragic occasion or as some sort of funeral or wake. The reconstruction of the capital of the British Steel Corporation is very important. It is overdue. We are considering a great public corporation, with a capacity to produce real wealth to the value of £3,000 million. That is the value of the turnover of the BSC. If people talk airily about liquidating, they must explain where that wealth will come from, or what we shall export to buy the equivalent amount of steel from abroad if we intend to run down this huge operation, with all its magnificent assets and its highly skilled work force.
  The British Steel Corporation has superb assets. We have a highly skilled work force and a very good management. I object to the sneering and jeering about British Steel's management, because there are many dedicated and highly skilled men in the BSC who have worked extremely hard at building up their sections of the enterprise, and have done it with great success under considerable difficulty.
  There has been much talk about profitability. Until the present Government came into office, the special steels division at Sheffield made a profit year after year, so there is no question of its not being profitable. The present economic climate and the economic policy pursued by the Government have created two-thirds of the difficulties.
  The first message that we have to get across is that in no circumstances must the capacity of 15 million tonnes be cut further. This business of cutting back and back must stop. The capacity must be preserved. The closing of steelworks such as Shotton, Corby, Duport and the others must be halted.
  The Government have tried to argue that there is an inexorable decline in the British steel industry. Perhaps
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  they can explain why Germany has not slashed its steelmaking capacity by 50 per cent. and why France, Japan or the United States have not massacred their steel-making capacities. In Italy and Spain, far from cutting capacity and production, those were increased in 1980. In spite of the so-called world depression and the economic forces that we cannot resist, we find that other countries have adopted policies that have made their steel industries flourishing and viable. Of course we know that they are working below their full capacity, but they have not destroyed capacity on the scale that we have, and for good reason. Steel is a basic industry fundamental to the economy of any advanced industrial country.
  Therefore, the message must go out, and to Mr. McGregor above all—I believe that he is anxious to hold to the capacity that he has—that there must be no further cutbacks and that we are determined to maintain the capacity of 15 million tonnes and build on that a steel industry that can expand in the future.
  I should be interested to know how the Government are approaching the European negotiations, which I understand will take place in May or June, about future quotas and allocations. I do not know whether I am correct, but I have been told that the Germans do not wish to participate further. They want to go their own way and do their own thing. I want to know whether the British Government will tamely accept some diktat from Brussels that we should cut back because we have too much capacity and that the capacity must be lowered to 11 million tonnes, 10 million tonnes, 9 million tonnes or whatever is decided by Brussels. That would be unacceptable. I am sure that it would be unacceptable to Mr. McGregor, and it is unacceptable to the House.
  We are entitled to be told on what basis the British Government are going into those negotiations. No doubt they will say that the detail is a matter for private discussion, but are we prepared to say that we are willing to shed another 4 million tonnes or 5 million tonnes? As I understand it, the agreement runs out at the end of May or June.
  We are constantly being told that world demand for steel has slumped. I do not believe that that is true. I think that there has been a slight decline in the past couple of years in world steel usage and world production—possibly about 10 million or 15 million tonnes from a total of about 790 million tonnes—but it is simply not true that there has been a massive slump in world demand for steel, and that is not the explanation for the present situation in Britain.
  Why is it that the British steel industry has run intro these difficulties in recent years? We know that in other countries coking coal has been subsidised. We know that freightage and the railways in Western Europe receive public subventions on a far greater scale than anything that we give in Britain. We have had reference to energy prices and costs. We know that these are serious problems in steel making and that they have been aggravated by deliberate Government policy. There are some signs that, under massive pressure from the CBI and industry, and from the NEDC and other bodies, the Government are modifying their attitude on the question of energy prices. However, we ought to be assured firmly tonight that this will be a real change that will be of help to the steel industry, and that we shall see some move in that direction.
  Another problem is interest rates. The Prime Minister boasts that she has brought these down by four or five points. That is certainly welcome. It was long overdue.

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  High interest rates have caused massive problems for the steel industry over the past two years. Unless the process of reducing interest rates is continued, matters are not likely to improve in that direction.
  The exchange rate has also been mentioned. I have seen figures produced in Sheffield on this matter. They show the appalling effect of the rate of sterling on the cost per tonne of certain special forms of alloy steel. This is an impossible burden for the steel industry to carry if it is to compete abroad against other producers. Therefore, the Government owe us some explanation of those matters. Is there to be a genuine effort to reduce energy costs? Will interest rates come down further, and quickly? Is a serious effort to be made to bring the exchange rate down to a more reasonable level?
  Then there is the question of the reorganisation with the private sector. Obviously this is a matter of considerable concern in Sheffield, because there are certain major private sector steel making firms that are in desperate trouble and would like to know what is going on in these phoenix operations.
  I inquired the other day about the extent to which the trade unions that would be involved in these matters would be consulted. The Secretary of State brushed off the suggestion that the trade unions had any right to be consulted. That was an astonishing attitude from my point of view. Shareholders, the banks, the institutions, investors and managers have had a say in what is going on, but the people whose livelihood is involved are to be shut out; they are to have no say. Apparently they cannot be trusted with being told what the arrangements are to be. These are the people who will be most directly and severely affected by reorganisation plans as between the public corporation and the private sector.
  I have no special objection to a reorganisation involving public capital and private industry. I think that what is now happening is that the Government are using the BSC as a substitute for the National Enterprise Board to strengthen or shore up certain private steel companies. I should have no objection if that would save jobs and make viable those private companies that would otherwise collapse. Rationalisation between the public and private sectors is probably overdue. I see nothing fundamentally objectionable in that, provided that if public and private assets are merged in some way there is fair and proper public control of them. After all, the taxpayer has paid for them.
  I was interested when the Secretary of State said that, although the BSC held a 50 per cent. share in the Phoenix I reshuffle, it would have no control. The Secretary of State or the Minister should explain why the public sector has no control when there is a 50 per cent. public stake in a reorganised company. Who represents the taxpayer? In what way are taxpayers' interests protected? I would understand if the public had a minority stake of 20 or 25 per cent. The position might then be different. However, I understood the Secretary of State to say that there was a 50–50 share. That suggests that control has passed out of the hands of the BSC. The Government should explain how public investment is being protected and controlled, and what responsibility the Secretary of State has.
  The House should also be told what progress has been made on the so-called Phoenix II discussions. We know that private firms are queueing up to knock at the Secretary of State's door for help. They want to know how they can
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  be saved from toppling over the brink in such an economic climate. The problem is particularly acute in areas such as Sheffield, where many companies are running into serious trouble. If it is possible to rescue those companies and to keep them afloat through some form of reorganisation between the BSC and the private sector, action should be taken. However, the House is entitled to know on what basis such action would be taken.
  If there is any reorganisation, how will the public interest be safeguarded? Who will exercise control on behalf of the taxpayer and the public? The Government's overall economic policy is responsible for two-thirds of the steel industry's problems. Deflation, the cut in demand and the monetarist policies that the Government have pursued over the past two years have had a disastrous effect on powerful, enormous corporations such as GKN and ICI.
  Thousands of smaller companies that are not so famous cannot survive the blizzard. Therefore, we need a change in the economic strategy.
  It is important to know whether the BSC's capacity to produce at least 15 million tonnes of steel a year will be protected, and if necessary enhanced. In addition, we want to know about the reorganisation plans in so far as they affect the private sector.
  8.38 pm
  Mr. Roger Moate: I apologise for coming into the Chamber at this late stage. Indeed, I have been able to attend only because the Standing Committee on the Transport Bill finished earlier than had been expected. Therefore, I apologise if I repeat arguments that have already been made, or make points that have already been answered.
  I was privileged—if that is the right word—to hear the speech made by the hon. Member for Sheffield, Heeley (Mr. Hooley). With respect, he is living in a fool's paradise. He argued for massive subventions to the public sector on a European scale. He referred to transport and to the steel industry. Where does he think the money for the Bill will come from if it does not come from individual taxpayers or from the wealth created by private industry.
  My main desire in speaking today is to emphasise to my hon. Friend something that he has already heard very often from the Government Benches—the strength of feeling that exists generally throughout the country that there is a limit to how much support we can continue to give over and over again to the public sector. At a time when private companies are going bankrupt, the hon. Member for Heeley should understand the strength of their feeling when they see what the State-owned companies can achieve. They can simply go along to the Secretary of State and be bailed out to the tune of the sort of figures we have got in this Bill today.
  It makes no difference to the employees whether they are employed by a nationalised industry or a private sector company if they are declared redundant or their employer is going bust. If they are going to lose their jobs they, too, deeply resent the fact that others are being bailed out while they are going under. It is one of the welcome signs from many Opposition Members and, I hope, from hon. Members on this side of the House that during the recent debates on the steel industry there have been fewer arguments about the public sector versus the private sector; there has been a general desire to protect the steel industry and to try to ensure that a steel industry, both

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  public and private—though personally I would prefer it to be mostly private—will emerge from this present crisis. I hope in a few moments to turn to the future, because that is really what the Bill should be about.
  Mr. Hooley: Where does the money come from? Does it make more sense to pay £7,000 million to keep 2½ million people doing nothing or to put £7,000 million into productive industry in order to create jobs?
  Mr. Moate: I was just going to agree with the hon. Gentleman, but now he has taken me back to a point of fundamental disagreement. It is no good having people producing steel that nobody is buying. It is the hon. Gentleman's quite clear contention that the crisis today is a British crisis, generated by the policies of this Government. Has he missed the point that this manifest crisis—that is not a British phrase, although the words are English—affects the whole European situation; that it is the whole of European industry that is in a state of manifest crisis, with a few exceptions? It is on a European dimension. I will not go into all the other economic facts of life that are grimly staring in the face Belgium or Ireland, or other nations that have very different sorts of economic policies.
  We are in a recession. It is certainly a European recession, and I would say that it is a world-wide recession. The hon. Member for Heeley tries to pretend that it is somehow created by current policies here, but he knows full well that he is indulging in a little dogmatic party mud-slinging, and that really does not help us at all.
  The hon. Member was right in saying that he did not feel that this was in any sense a funeral, or a wake. Indeed, if every capital reconstruction of a State industry were a funeral these corpses would be being buried over and over again, because this is by no means the first time that we have engaged in a capital reconstruction of this kind. It is a realistic thing to do. I have said before that it is utter folly, year after year, to leave many of our State-owned corporations paying interest charges on totally unrealistic capital debts. We have to do this; we have to face it, and what we are now doing, in the words of the Secretary of State, is dealing with the mistakes of the past. The great point is that when the State makes a mistake it makes it on a mighty scale. Here we are writing off £3,500 million of taxpayers' money that has been lost.
  I do not want to be ideological or dogmatic about private or public ownership, but I would say to right hon. and hon. Gentlemen that had the steel industry never been nationalised the taxpayer today would not be involved in writing off debts of this kind. It is possible that the steel industry would not have expanded to the point that it did. I concede that. But nearly everybody now concedes that the plans of the time were totally unrealistic. To talk about 35 million, 40 million or 45 million tonnes capacity was to live in the dream world of politicians, and not the real world.
  Mr. Crowther: Does the hon. Gentleman recall the Benson report, which preceded nationalisation and which clearly showed that the investment plans of the then private steel companies were totally inadequate to meet the level of investment needed? But for nationalisation, that investment would not have taken place and the British steel industry today would be largely dead.
  Mr. Moate: I recall the many years of being lectured about the inadequacy of investment levels, but in the end
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  the test of adequacy is whether people are prepared to put up the cash to produce a viable industry. The very fact that the taxpayer had to step in to carry out the theories of the report demonstrates the strength of my argument.
  Surely we are all agreed that we must have a viable steel industry. It will be smaller. Even the hon. Gentleman said that we would have to stick at 15 mililion tonnes. The difference between that figure and the 14·2 million or 14·4 million tonnes is not of fundamental long-term significance, the latter figure, I understand, being that adopted by Mr. MacGregor and the BSC. We are talking of a viable steel industry, be it publicly or privately owned. That means that there must be a reasonable rate of return on the capital invested, whether by the taxpayer or the private sector.
  We do not want any more long-term public involvement that will repeat the mistakes that were made in the past. Today we are footing the bill for yesterday's mistakes. The hon. Member for Wrexham (Mr. Ellis) spoke of the failure of the steel industry. The steel industry has not failed Britain, it is the politicians who have failed the steel industry by nationalising it in the first place.
  I will try not to be too ideological. Ownership is about financial control and making sensible investment decisions that will produce a viable industry giving a healthy return. We have only to see what has happened in the private sector in the past five or six years. It has produced profits of £700 million at a time when BSC produced about one and a half times as much as that in losses. It can he done. Had the industry been in private hands the taxpayer would not be having to pay this bill today.
  I want to take up with my hon. Friend the Minister of State a few key points. I want him to explain the extent to which the BSC will separate off those parts of its business that are seen to be viable and can be free-standing companies competing without subsidy. I do not know whether we have been given that information or whether it is part of the corporate plan that is still rather elusive. I regard it as part of the key to the future.
  We are in a terrible situation and we want to see the way out. It is not a funeral. We are recreating a viable and profitable BSC for the future, I hope, having in two or three years' time no public money in annual subsidy. Let us hope that we can talk less of the desperation of today and more of the prospects of tomorrow. Let us think more optimistically about the MacGregor plan and the private sector.
  I would like to hear my hon. Friend tell us that a substantial slice of BSC will be separated off and ultimately privatised or denationalised. Admittedly that will leave parts of BSC that might need support for longer, but in the end those parts, too, should be privatised and the disciplines of private capital and the private sector applied. Will my hon. Friend tell us more about those proposals?
  I was very impressed to learn from the recent statement on the coal industry that the Government were to deal with the question of coal imports. We were told in an earlier debate about BSC that its pricing policy was based upon the price levels of imported steels.
  As we have pretty well entirely destroyed the free market for steel, a similar argument could be applied to steel imports as to coal imports. If my hon. Friend has time, I hope that he will deal with this question. If the EEC can work out a quota system on production, as it did—a system that may well be renewed—I do not see why it

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  cannot work out a quota system, within the Community rules, for steel imports. That might give the breathing space that the private and the public sector need at present. I should be grateful for my hon. Friend's comments on that, too.
  On pricing policy, Mr. MacGregor undertook personally to investigate any accusations of unfair price cutting or undercutting of the private sector through taxpayer subsidies. I expressed scepticism about that at the time, and I do so again. According to today's papers the BSC is losing £2 million per day. If the Corporation is losing that much money as a generality, I cannot see how it is possible to identify the way in which the taxpayers' money is being used. I am therefore sceptical about Mr. MacGregor's abilty to prove that the money is not being used to undercut private sector products. I believe that the House is entitled to seek a more specific way of dealing with those complaints.
  I must ask my hon. Friend once again about energy prices. The steel company in my constituency asserts that it is paying about £9 million per year for electricity while its Continental competitors are paying about £6 million on a comparable basis. That is an additional burden of £3 million being carried by that company. The Chancellor of the Exchequer has made announcements about ways of relieving the burden of electricity costs on intensive energy users. I have given a classic example. I should like to know more clearly how the new system will work and how it will help the whole steel industry, but particularly the type of example to which I have referred.
  Many of us have criticised the Government for the way in which they seem to have been supporting the public sector at the expense of the private sector. In doing so, we have perhaps been unfair, in that the Government really had no choice. They had their backs to the wall. No one could really argue that they could have done anything but give the BSC the support that they gave, although many of us said that they must then meet the consequences of those policies. In other words, if they distort the market to that extent, they must offer help to those who suffer the consequences.
  It is nevertheless only fair to congratulate the Government upon the courage with which they have faced some of the roughest, toughest and worst decisions that any Government could have to take. Bearing in mind the views of my hon. Friend the Minister of State and my right hon. Friend the Secretary of State, I believe that the praise should be even greater. If we sometimes vent our criticism forcefully, it is because we feel strongly about the need for survival of the private sector, which in the end will be the long-term guarantee of jobs for much of our hot steel industry.
  In asking my hon. Friend to keep up the pressure on the Government to find solutions to the problems of the private sector and the public sector, I end on a note of optimism. We are at the depths of a recession. Both sectors have encountered fearsome difficulties. Let us hope that the Bill before us is not, as the hon. Member for Heeley suggested, a funeral or a wake but the basis of a new beginning, and that in a year or two, when we are out of the recession and growth has started, we shall have a profitable, viable and substantial steel industry, which will produce the steel that we need and provide security and jobs for the many people employed in both sectors.
  8.54 pm
  Dr. M. S. Miller: On a number of occasions the hon. Member for Faversham (Mr. Moate) repeated his faith in the private sector of the steel industry. He also said that we are in a deep recession. It seems to some of us that when things are going well the private sector in most industries does well, but when the going gets rough it tends to run away.
  As my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) pointed out, one of the reasons for nationalising steel was due to the necessity to pump more into the industry to produce more steel. The hon. Member for Faversham said that we were in a recession. I believe that we are in a depression. He merely stated the truth. However, when we see that recession, or depression, emasculating one industry after another, do we sit back complacently and preside over the total annihilation of other industries or do we make a comprehensive effort to save them?
  I realise that I am not speaking for one of the great steel towns, but I appreciate the tragedy of those towns. It is a tragedy for people in towns such as Corby, Shotton, and to some extent, Sheffield and Motherwell, which is near my own constituency. I make no apology for intervening in this debate, because many of my constituents work in the steel mills of Motherwell. In any case, all of us who represent industrial constituencies are involved in what happens to steel.
  We indulge in platitudes when we constantly talk about the rundown of British industry. The hon. Member for Faversham said that we should try to make up for the many mistakes of the past. At one time, we were the only country that produced the goods that nearly everyone now produces, and we must accommodate ourselves to that fact.
  The Secretary of State for Industry indicated today that this was pretty well the last chance for the BSC. So be it. But it indicates the necessity on his part to keep this industry going. Although there is an over-capacity in most of the industrial countries of the world, we must accommodate ourselves to the share of the goods that we can produce. We must not allow ourselves to be browbeaten, inveigled or hammered into giving up and letting others produce what we should produce ourselves. That goes for steel, just as it applies to many of the other industries that are currently under threat.
  Steel used to be, and still is, an index of a country's industrial power. Some of the developing countries have taken that dictum to heart. They are also trying to produce steel. If it is an index of our industrial power, it ill-behoves us to give up the part that our industry can play without a fight.
  It is a tough world, which is getting tougher all the time. The developing countries, as well as the other industrial countries, are now able to produce goods of which we had the monopoly at one time.
  I do not object to having a certain element of private sector involvement, if the private sector wishes to play a part in revitalising the steel industry. But the industry requires the injection of large sums of money. We are asked where the money will come from. We could better spend the money used to keep a large number of people unemployed on aiding production. We must look beyond the next year or two in revitalising many industries. The steel industry will play an important part, as the Secretary

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  of State indicated, so we must hold on to it. Through the public sector we have the authority, power and industrial muscle to help industry to re-enter the race for markets all over the world. We must hold on to what we have. Many people would be willing to grab what we relinquish.
  9.1 pm
  Dr. John Cunningham: In this debate we have discussed not only the proposals in the Bill but what we know of the corporate plan, Mr. MacGregor, the new chairman of the BSC, the industrial recession raging around us, the influence on the industry's prospects of the Bill and the plan, prospects for investment in other public and private sector industries, and the situation in the EEC generally. We have also discussed the proposals in the Community for a European restructuring of steel. The debate has been important and wide ranging.
  We welcome the proposals for financial restructuring of the corporation, so we do not propose to divide the House. To fit in with their philosophy, the Government have cleverly included other provisions hi the Bill such as that to terminate the statutory duty of the corporation to fulfil the market. The Bill also includes proposals on disposals. The Secretary of State is taking power to instruct the corporation to dispose of assets. The great non-interventionist is taking yet another power to intervene, despite his protests to the contrary. As my right hon. Friend the Member for Salford, West (Mr. Orme) made clear, we oppose the latter proposals and in Committee we shall be moving amendments.
  Turning to the Secretary of State's attitude to public industries, as my hon. Friend the Member for Sheffield, Heeley (Mr. Hooley) said, it does not make sense to mount a massive financial reconstruction of an industry and almost in the same breath to speak in terms and tones damaging to the morale of the people in the industry. That does not make any sense to the Secretary of State or to anyone else. If he intends the corporation, however slimmed down or changed, to succeed, he ought to be speaking in terms that at least help morale in the industry. I am talking about the management. The man the Secretary of State appointed, Mr. MacGregor, has made this point. Other appointees of the Secretary of State in public sector industries make the same point. It is in the Secretary of State's interests, as well as the interests of the industry, that an attempt should be made to improve morale. Nowhere is that more true than in the British Steel Corporation.
  I hope that the Secretary of State will in future resist the temptation to indulge his tendency to denigrate public enterprise. Whether he likes it or not, within his tenure of office—I do not speculate about how long or short that may be—he has to go on dealing with significant public sector industries. It is not in the country's interests, nor his, that morale should continue to be damaged and eroded whether from the Government Dispatch Box or by comments from his right hon. and hon. Friends on the Back Benches. That is an important point.
  Mr. Richard Page: I take on board what the hon. Gentleman says. I hope that he will express a view that the ISTC, particularly in its publication "The ISTC Banner", should be publicising support and encouragement for the plan so that a confident work force can help to make the plan succeed instead of the virulent attacks that are at present being published.
  Dr. Cunningham: I listened to the hon. Gentleman's speech. I had taken note of the point that he made, which was similar to the point he has just expressed. I assure him that I shall come to that matter. I recognise that there is some importance in what he says about the attitude of the unions towards the future of the industry.
  I should like to say, in regard to the speech of the Secretary of State and the speeches of some, although not all, of his hon. Friends, that the steel communities and the workers in the industry need no lessons from any quarter of this House about facing the realities of the industrial situation in Britain. The steel communities and the unions representing people in the industries know the reality. More than anyone, they have felt the damage that has been done and sustained by themselves, their families and their communities. It ill behoves hon. Members, especially the hon. Member for Cornwall, North (Mr. Neale), to make the kind of speech that the House heard about the steelworkers and the communities in which they live.
  It is a simple and long-established fact that productivity in any industry is primarily determined by output. The steel workers want to be as productive as any of their competitor companies, whether in the private sector in this country or elsewhere in the EEC. It is extremely difficult, if not impossible, with the best investment and with the best plant running so far below capacity, as is the case in some of our plants, to make meaningful comparisons about productivity with our competitors abroad or in private sector industries. A lot of nonsense has been talked in criticism of the workers in the industry.
  The Secretary of State made a curious speech. He began by talking about privatisation. I suppose that he wanted to maximise his political position. He talked about the disposal of assets and the withdrawal of the corporation from certain operations. I assume that he was referring in part to the powers that he will take to direct the corporation on what it must do. That is a curious position for the right hon. Gentleman of all people to be taking. He has appointed Mr. MacGregor, who has an aggressive business record, to take control of the corporation. There is a tremendous conflict when the right hon. Gentleman appears to be taking power for himself. I assume that he will use it as he has done with the NEB and in other circumstances. That is a conflict. I shall return to that theme in referring to certain provisions in the 1975 Act.
  The right hon. Gentleman talked about the capital reconstruction of the industry which, as my right hon. Friend the Member for Salford, West said, we greatly welcome. It is long overdue. It has not made sense for the industry to continue carrying unrealistic burdens. We all knew that sooner or later there had to be a capital reconstruction if we were to make any sense of the corporation's industrial position, so the proposal is welcome.
  The industry lost 50,000 jobs in 1980. The MacGregor proposals envisaged at least a further 20,000. That is one of the reasons why we are sceptical about the proposals contained in the corporate plan in conjunction with the Bill. We are not convinced that continual rundown will save the industry. The right hon. Gentleman and Mr. MacGregor have said from time to time that the industry will be run down to such a point that it becomes profitable. There is little profit for anyone in taking that view. One would not have to be a genius to reduce the corporation to a size when it could be said "This plant will be viable". It could be done with significant sections of the industry

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  in Sheffield or Rotherham. However, that would not be in the taxpayers' interest. It would be against their interest and against the national interest.
  Demand for steel is likely to fall again in the next 12 months. That will make the achievement of the MacGregor proposals difficult. Although we say that we shall oppose further closures, we recognise that we must advance arguments to sustain existing capacity. A number of my hon. Friends have done that. My hon. Friends, the Members for Rotherham (Mr. Crowther) and for Heeley, for example, have argued cogently for maintaining existing capacity in the industry. I shall not rehearse their arguments.
  The right hon. Gentleman appeared to have left his interventionist hat on the peg of his earlier ICL statement when he began to talk about non-intervention, the disadvantages of public enterprise and other similar phrases. He cannot have it both ways. I understand his trouble with Conservative Back Benchers. In some ways the Opposition have done him a favour by not dividing the House. If there had been a Division, he may have found himself on the wrong side if some of his hon. Friends had had the opportunity to vote. Of course, it is right that he should be intervening. There is no reason for him to apologise for so doing.
  The right hon. Gentleman mentioned the public interest, as I have done. What is the public interest in these matters? The right hon. Gentleman asserts that it is not to have public enterprise. We contest that. He asserts—I think I understand him correctly—that the present size of the corporation is unlikely to be maintained. He knows, and his hon. Friend the Member for Faversham (Mr. Moate) reminded him, that imports of steel into this country are significant. The corporation and the private sector are not meeting the demand for steel in the British economy, even at present. The concomitant of further reduction in capacity for the BSC is more imports into the British economy, and that is not in the national interest.
  We are debating a strategic industry. The Secretary of State said today that it was important in the national interest to sustain ICL; and, similar, if not identical, arguments can be used about the British Steel Corporation. We need a construction industry—that requires steel. We need an engineering industry—that requires steel. We need defence—that requires steel. We need a shipbuilding capability and a capability to produce goods for the exploitation of the British sector of the North Sea—that requires steel. We have a coal industry that requires steel. We have an electricity industry that requires steel, and a nuclear power industry which requires steel. Our railways, too, require steel.
  Let us not pretend that liquidation of the steel industry—that, in effect, was what was being suggested by a number of Conservative Members—would be in the interests of the taxpayer. Liquidation would be an expensive exercise. As my hon. Friend the Member for Heeley reminded us, we are discussing significant national assets, an organisation with a turnover in excess of £3 billion. It would be no soft option for the taxpayer or anyone else to liquidate the BSC.
  In 1969–70, the corporation had a 70 per cent. share of the market. The hon. Member for Bromsgrove and Redditch (Mr. Miller) expressed concern about the corporation's share of the market. It is less now than it was
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  a decade ago. It fell to below 50 per cent. last year. Now it is coming up again, as Mr. MacGregor said in evidence to the Select Committee last week. In fact, one of the reasons why the Secretary of State appointed Mr. MacGregor was to make the corporation aggressive again so that it would have a larger share of the market than it has now.
  Mr. Hal Miller: Does the hon. Gentleman accept that there are real fears that this aggressive competition by the BSC, supported by public funds, is extending downstream from steel making into secondary activities? That is one of the main causes of concern.
  Dr. Cunningham: The corporation has been involved in what the hon. Gentleman describes as downstream or secondary activities for a long time. Some Conservative Members, including the right hon. Member for Taunton (Mr. du Cann), argued to much the same effect in the last debate that we had on steel. Labour Members do not accept that the corporation should be pushed back into being simply a bulk steel producer. There is no good commercial, economic or political argument for that. We recognise the problems of the private sector, and those problems are caused, in the main, by imports from countries such as the Federal Republic of Germany.
  Ministers have been fair to their Back Benchers in the stand that they have taken. They have said that they are willing to investigate any evidence which suggests that the British Steel Corporation, as a policy, is unfairly trying to undermine the private sector. Hon. Members cannot ask for anything fairer than that. It will be interesting to see whether any of the claims can be proved.
  The problem is that the Government's wider policies and lack of industrial strategy will make it difficult for the proposals to come to fruition and for the corporate plan to meet success. The construction, chemical and engineering industries are facing grave difficulties. We have just heard of GKN's position. The chemical industry, traditionally, is one of our most successful industries. Figures produced by the Chemical Industries Association predict a 16 per cent. fall in real terms in investment this financial year. That is very damaging, not only for our industrial prospects but for the construction industry and, hence, for the steel industry.
  We have been told that shipbuilding has had its worst year for many decades. The railways face unrealistic cash limits. Even the CBI is calling for public capital investment. All those factors are damaging to the prospects of the corporation and the private sector.
  It must be a long time since a leading article in The Times—which cannot be described as the village voice of the Labour Party—drew attention to the need for industrial strategy, as it did on Friday 20 February. It described the present position as a "lacuna at the centre" of Government policy. It went on to say something even less kind about the Secretary of State of which I shall not bother to remind him. My purpose in referring to the article is to show that there is a widespread recognition that the ad hoc approach, the one-off interventionist approach of the Secretary of State, who intervenes here and intervenes there with no overall strategy, is not in our national interest.
  I cannot understand why he has not reached the conclusion that it is not only in the national interest to have a national strategy but in his interest. We certainly urge

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  a strategy on him. That is the best chance of success for the major financial proposals—for the public sector, the taxpayer and the British industry as a whole.
  I turn to the manifest crisis in the Community. I understand that discussions on the restriction proposals, State aid, the social fund and existing quotas are ongoing but that little progress is being made. Perhaps the Minister of State will explain. I understand that he is to resume discussions on 26 March.
  Are the British Government one of the Governments responsible for the failure to reach agreement on the social fund provisions because of their attitude to the legality of that which is proposed? The Minister of State shakes his head. That was so until recently. I am pleased that is no longer the case.
  Mr. Tebbit: That was never the case We think that the method proposed is the wrong method. We have considerable doubts about it. We have not blocked an agreement. We are searching for an agreement. When other countries come forward with firm proposals we shall not let anything stand in the way.
  Dr. Cunningham: I listened carefully to what the Minister said. He said that the Government had not blocked an agreement. If he means that in so many words, I accept what he says. I hope that he was not denying that the British Government was one of the Governments which was questioning the legality of the proposed transfer of funds between budgets. That is a matter of record. It was one of the the things which prevented an agreement. I do not wish to become involved in wrangling about that matter.
  Will the Minister tell us a little more about the monitoring of EEC quotas? Have any problems developed? What does he think will happen to the existing mandatory quota system when its six months period expires? That is important for the future prospects of both the public and the private British steel industry.
  The Secretary of State was right to ignore some of the more doctrinaire calls from Conservative Members to liquidate the corporation. I hope that, far from doing that, he and the Minister of State will re-emphasise their support for Mr. MacGregor in his efforts to sustain the corporation, although we do not agree with all of them in detail. The Government are responsible for that. They went to a great deal of trouble to get Mr. MacGregor and at no little expense. Therefore, they can hardly justify not supporting him to the hilt, having appointed him.
  The major capital reconstruction will not be one of the contentious issues which we discuss in Committee. It must be supported. We must try to ensure that the new start for the industry succeeds. That relates to the point made by the hon. Member for Hertfordshire, South-West (Mr. Page)—I nearly said "Workington". We used to be constituency neighbours for a little while. I did not regret the termination of that arrangement. Nevertheless, for a time the hon. Member was involved with the BSC plant there. He and others have emphasised that the trade unions should now support the MacGregor proposals. I should like the trade unions to be able to support a future for the industry. All Opposition Members would like that.
  In that connection, I refer now, as I have done before, and as have a number of my right hon. and hon. Friends, to provisions in the 1975 Act, which place a statutory
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  requirement upon the corporation. The Act states that before reaching conclusions in consequence of a review undertaken in pursuance of subsection (1)
  "the Corporation shall seek consultation with organisations appearing to them to represent substantial proportions of the persons employed by the Corporation or the publicly-owned companies or of any class of such persons."
  That is an Act of Parliament. It places upon Mr. MacGregor, the House and the Secretary of State a duty to ensure that the unions are taken into all confidences and are party to discussions about major changes in the industry. If Mr. MacGregor steadfastly refuses to do that he can hardly complain if they refuse to accept what he is saying. The same is true of the position of the Secretary of State. If the Secretary of State steadfastly refuses to see that that provision of the 1975 Act is implemented—it is not repealed by the Bill, so it will persist—how can the unions be critised? The reality is that they want to see success for their industry. They would rather be part of an industry that is making a profit and—to coin a phrase used by several Conservative Members—is off the backs of the taxpayers. They would welcome that. They should be given the chance to discuss the detailed proposals for the industry, not only because the Opposition say so, but because the law says so. That is the law, and I call upon the Secretary of State to ensure that it is carried out. That section is germane to the question raised by several hon. Members about the discussions taking place on Phoenix I—about which we know a little—and on Phoenix II. Section 5(1) states:
  "It shall be the duty of the Corporation, so often as occasion seems to them to require it or as the Secretary of State may require it, to undertake a review of their affairs for the purpose of determining whether the carrying on of the activities that have fallen to be carried on under their ultimate control is organised, so far as regards the direction thereof, in the most efficient manner, and to report their conclusions to the Secretary of State."
  I see that the Minister is indicating that I am running over my time. I apologise, but it is an important point. Mr. MacGregor should report the details of the discussions about the reorganisation of the steel industry. My hon. Friends the Members for Rotherham and Kettering (Mr. Homewood) and others referred to section 5(7). It states:
  "The Secretary of State shall lay before each House of Parliament a copy of every report made under subsection (1) …above".
  My right hon. Friend the Member for Llanelli (Mr. Davies) raised that point in connection with Duport. To quote one of his famous forebears,
  "Why look in the crystal ball when you can read the book?"
  The Act says that these matters should be reported to the Secretary of State and to Parliament. We want the Act to be implemented in respect of Phoenix I and II—not because we are not necessarily opposed to them, we are not, but because we are entitled to know—as is the taxpayer—exactly what is happening.
  I shall be brief. I apologise to the Minister for exceeding my time limit. There are two views about what is happening in industry. One is that the Government will, once and for all, make us face reality, that industry will be dealt with, that a climate for enterprise is being created, that competiveness and productivity will improve, and thereby the Government will lay the basis for our future prosperity. That sums up the Government's view. The Opposition do not share that view. That view is not shared by the CBI, nor by many economic commentators. That view is not borne out by events since the Government took office. The excessive reliance on monetarism, on the size

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  of the public sector borrowing requirement, the control of the money supply, the protection of an over-valued sterling and high interest rates are causing a holocaust for British manufacturing industry, in which the British Steel Corporation is being caught up.
  9.34 pm
  The Minister of State, Department of Industry (Mr. Norman Tebbit): I shall do my best in the time that is left—I am not criticising the hon. Member for Whitehaven (Dr. Cunningham)—to answer as many points as I can. That will present some technical difficulties at this stage in our proceedings.
  The hon. Member for Whitehaven criticised my right hon. Friend for, in effect, giving a warning with the money. It would have been more correct to criticise my right hon. Friend had he not given a warning at the time that the money was made available. It would have been extremely damaging for the morale of all those involved if the money had been given without some pretty straight talking. There must be some pretty straight talking when one is writing off £3,500 million of taxpayers' money.
  As the hon. Gentleman and the House know, many trade unions are dedicated to having the extension of public ownership as a political objective written into the rule books. I recollect the words of the right hon. Member for Manchester, Ardwick (Mr. Kaufman) during passage of the Aircraft and Shipbuilding Industries Bill. He excused what he was doing on the ground that it was for the advance of Socialism. In the face of dogmatism of that kind the hon. Gentleman must not be surprised if, from time to time, Conservative Members take a slightly different view.
  The right hon. Member for Salford, West (Mr. Orme) said that the clauses to which he took exception were based on a doctrinaire dislike of nationalised industries. Those feelings are not doctrinaire. They are entirely empirical.
  Cash-hungry, profitless, wealth-consuming industries are objectionable, whether they are in public or private ownership. In private hands the agony is normally short-lived and the cost to the taxpayer is minimal. In public hands a loss-making industry has an agony that is protracted and intense, and the taxpayer pays. Whether the humane killer or the life support system is used, it is a very expensive operation. The task that my right hon. Friends and I have is to decide whether it shall be the humane killer or the life support system. We hope, by whatever means we choose, to restore the industry to viability.
  The right hon. Gentleman is not alone. People in the private sector who think of themselves as entrepreneurs have the same problem. The right hon. Gentleman has not yet learnt to tell the difference between an asset and a liability. An item is not an asset because one has paid a lot of money for it. It is an asset only if it is earning its keep, and if, potentially, it can be sold to somebody else. If it cannot, it is a liability. The sooner that is understood, both in the public and the private sector, the better. I have had to tell people in the private sector "Gentlemen, what you tell me are your assets are, in fact, your liabilities. You cannot tell the difference."
  I was glad of one thing in the right hon. Gentleman's speech. He said that he was no defender of Morrisonian nationalisation. God be praised. That is another U-turn, and we must be grateful for them when we see them. I say
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  that it is a U-turn because it was only about four years ago that the right hon. Gentleman voted to trap the aerospace and shipbuilding industries precisely into the Morrisonian glue-pot of nationalisation in exactly the same form as had been used in 1945. He did that in 1977–32 years later.
  I am glad that the right hon. Gentleman has had a revelation in the past couple of years. I welcome his support in getting rid of Morrisonian nationalisation wherever it is found. I hope that he will promise never to go in for it again if he finds himself in the position of being able to do so.
  Mr. Orme: I am enjoying the hon. Gentleman's rhetoric, but what I said was that the Morrisonian mould that has been used for the public sector should be broken. There should be other forms of public ownership and control. That is my point. That can be brought about with industrial democracy and other measures.
  Mr. Tebbit: Yes, it is always going to be a great new idea tomorrow, is it not? What a pity it is that the right hon. Gentleman did not use the great knowledge that he now has to reform some of the nationalised industries when he was in office. He was not interested in doing it then. He has only just invented it. What is the matter? Is he afraid of the Social Democrats? Is that why he has invented this? He does not have to be afraid of them. We shall help him. He should stand up to them and be a man. As the right hon. Gentleman knows, they too are being infiltrated from the Left these days.
  One of the most important things on which I should spend a few moments, because it is at the heart of many of our problems, is the question of the actions that we should take in Europe in order to help solve the problems of the steel industry. There are three things that must be done. The first is to come to the point at which, in the short run, we can get the price of steel in the market back to one at which efficient steel makers can be profitable—not the inefficient steel makers, not those that have to have subsidies, but the efficient ones. That is the first and most immediate task, because unless we achieve that we shall have calls for protection and subsidy from the steel makers that are at present unprotected and are relatively—I emphasise "relatively"—unsubsidised, and that way lies disaster.
  Secondly, we have to move towards a longer-term solution. I am convinced that that longer-term solution lies in our phasing out public subsidies of steel making across Europe. If we achieve that, the question of capacity will adjust itself automatically in the longer term. That is the second task, and that will be another very difficul one.
  Mr. Hooley rose—
  Mr. Tebbit: I would rather not give way. Many questions have been asked, and I want to answer as many as I can. I have already lost a few minutes.
  The other part of this argument is that we must work for a package of what, in the Community, are now usually called social measures in order to lessen the impact on those people who will lose their jobs during restructuring. I assure the House, first, that most of the other Ministers in Europe take views similar to those that I have expressed.
  Mr. Campbell-Savours: They cannot make it work.
  Mr. Tebbit: The hon. Gentleman keeps prattling "They cannot make it work." We certainly cannot make the present system work, and we had better find a better

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  one pretty quickly. If the hon. Gentleman is to start on the basis that there is no salvation through the present method he will have to come to the conclusion that there is no salvation through any method.
  As I said, the other element is that we must have a package of social measures. I believe that that is generally accepted among the Ministers. It will be particularly difficult to sell this package in countries that are still expanding production and dumping steel at great public expense. It will present a very difficult political problem for them to deal with that policy. I assure the House that I have pointed out to other Ministers that the British steel industry has declined dramatically in size. I think that much of that is due to our own shortcomings. I have given them good reason to understand that when the public sector of the steel industry has just lost 50,000 jobs and it is proposed that another 20,000 jobs will be lost this year, it would be objectionable if they were to ask British industry to bear a further heavy burden of closures. In particular, it would be objectionable if they were to ask us to do that when others who have been producing subsidised capacity on the European market did not do their share of carrying the can for their misdeeds of subsidising and producing excess capacity. I shall go to Europe in order to achieve that end. I do not know how much I shall achieve next week. Events will be coloured by what happens during this week's talks between the steel producers of Europe. Indeed, I think that those talks will commence tomorrow.
  Mr. Robin Maxwell-Hyslop rose—
  Mr. Tebbit: I am sure that my hon. Friend will forgive me if I do not give way, because I have little time left in which to deal with the points that have been raised. Hon. Members raised the important subject of progress with the phoenix companies and the Companies Act companies within the BSC.
  That problem was raised by the right hon. Member for Salford, West, by my hon. Friend the Member for Surrey, North-West (Mr. Grylls), by my hon. Friend the Member for Bromsgrove and Redditch (Mr. Miller), by my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark), by my hon. Friend the Member for Dudley, West (Mr. Blackburn) and by the right hon. Member for Llanelli (Mr. Davies). In response to the right hon. Member for Salford, West, I should point out that those employees of the BSC who will become employees of Allied Steel and Wire will have to discuss the question whether they will continue to enjoy inflation-proofed pensions—[Interruption.] The hon. Member for Liverpool, Walton (Mr. Heffer) does not have to be silly when we are talking about serious matters.
  Mr. Eric S. Heifer: I remember when the hon. Gentleman was in Opposition.
  Mr. Tebbit: I remember that the hon. Gentleman is now in Opposition and I am now in Government. I advise him to remember that and not to interrupt in a debate that he has not attended.
  Pensions are to be negotiated between the employees and management of Allied Steel and Wire Limited. It is not for me to say what the arrangements should be. They will be made between the parties directly concerned.
  We are making progress in forming the Phoenix II consortium. Beyond that, there is the possibility of
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  Phoenix III. My hon. Friend the Member for Surrey, North-West asked me to make the BSC move quickly. He asked me to take powers to force it into the phoenix arrangements. Uncharacteristically, he has not thought the problem through. If I took such powers, the Government would inevitably set up the consortium, would pick the partners and the plants. I and my advisers in the Department are not the best equipped for that job. We shall not have to carry the can as the management will. If I am to adopt powers to direct the BSC about plants, terms and prices, perhaps I should have the powers to direct the private sector too. It would do me no good to have only half the powers required. Therefore, it is better not to take that point further.
  Mr. Denzil Davies: Which companies are being considered for inclusion in the consortium for Phoenix II? Who will decide which companies are to be included?
  Mr. Tebbit: The participants must make the decision. When the BSC acquired the assets from Duport, it had in mind that they would be used in Phoenix II. There have been discussions between GKN and Tube Investments Ltd., and possibly other companies, too. I think that it would be best if I did not, in advance, perhaps, of the shareholders of the companies being told, go through a list of the companies that are negotiating. They are not my companies.
  Mr. Denzil Davies: Who decides?
  Mr. Tebbit: Clearly, it is decided by agreement with the parties concerned. I do rot decree who goes in or who stays out. It is a commercial judgment.
  Mr. Denzil Davies: The parties concerned presumably include the British Steel Corporation. It decides in the end which assets it wants and which it does not.
  Mr. Tebbit: It is not a question of which assets British Steel wants and which it does not want. Curiously enough, it takes two to make a bargain. That answers also, I think, the question raised by the hon. Member for Sheffield, Heeley (Mr. Hooley). He asked why the British Steel Corporation is in a 50-50 owned company and does not have control; it has got 50 per cent. of the shares. I do not know whether it has occurred to the hon. Gentleman that somebody else has got 50 per cent. of the shares and has not got control either. It is a straightforward mathematical matter and I do not see why it is causing him such a problem.
  Mr. Grylls: The point surely is that in the overlap areas it is the British Steel Corporation's businesses that are in danger of competing by using Government subsidies. The hope was that my hon. Friend could put some pressure behind them, because they are the ones that could potentially do the damage, and in some cases already have done the damage, to the private sector companies.
  Mr. Tebbit: My hon. Friend is right, of course, but both British Steel and the private sector are bleeding at the moment. Both sides acknowledge that there are areas in which there is excessive capacity, both sides have an interest in seeing a more efficient set-up, and both sides want to come to agreements. That is why we got an agreement on Phoenix I and that is why we shall reach agreements on Phoenix II and III. We just have to say that it must be left primarily to the parties concerned. I will do my part in encouraging the corporation to enter this type

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  of company, and I shall also do my part, as my hon. Friends the Members for Bromsgrove and Redditch and Faversham (Mr. Moate) particularly wanted, on the question of the Companies Act companies within the corporation.
  My right hon. Friend the Secretary of State said on 24 February that Mr. MacGregor would be putting some businesses in Companies Act companies, and I can confirm that the corporation has already put in hand arrangements to place the Stanton and Staveley business and the BSC stockholders' operation-British Steel Service Centres—into separate Companies Act companies and that that reorganisation will take place shortly. So I think that there is real progress in these areas.
  In the last few minutes available to me I should deal also with some of the other points that were made. I should like particularly to comment on the speech of my hon. Friend the Member for Hertfordshire, South-West (Mr. Page), because he mentioned something that I think almost nobody else did, namely, the role of BSC (Industry) Ltd. in helping former steel workers into new jobs. This is an important and worthwhile task and I hope that it will continue to go well—indeed, better than it has in the past.
  It may be particularly appropriate this evening to refer to the news, in the papers this morning, of the remarkable success of five former steel workers in Wrexham in obtaining the franchise for a commercial broadcasting station. I am sure that the whole House, whatever hon. Members' views on commercial broadcasting, will want to wish them well and say how glad we are that that sort of thing is happening. I had considered saying something about the speech of the hon. Member for Motherwell and Wishaw (Dr. Bray), but on reflection I think that I should not do so. It was dealt with extremely well by the hon. Member for Wrexham (Mr. Ellis), and if I added anything to that it might tend to spoil it. What the hon. Member for Motherwell and Wishaw said about my right hon. Friend was unworthy, ill-considered, intemperate, dogmatic, ill-informed and thoroughly discourteous. The discourtesy was further marked by the fact that, having delivered his attack upon my right hon. Friend for not being present to listen to him, the hon. Member walked out of the Chamber and has not been seen since.
  Anyone who is interested and who wishes to follow up the point that the hon. Gentleman made when he tried to amaze the House with erudite remarks about inflation cost accounting should turn to the BSC accounts for 1979–80, from which it will be seen, on page 45, that the hon. Member for Motherwell made a fool of himself.
  My hon. Friend the Member for Bromsgrove and Redditch said that it was unfair that we should support only the public sector. He thought that we should help people with losses in the private sector. When times were good and Hadfields was making profits we did not expropriate Lonrho's profits. When times are good in the steel industry we hope that it will make profits, which will accrue through the BSC to the taxpayer until we denationalise it. Equally, when it makes losses, we as taxpayers have to carry the can.
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  Competition between public sector and private sector can never be entirely fair. I have heard both public and private sector chairmen shout "Foul" about it. There is a great deal to be said on both sides. That is the purpose of forming the phoenix companies. They are private sector unsubsidised companies that will stand on their own, but with a share from both public and private sector.
  The hon. Member for Redcar (Mr. Tinn) must know we are all aware of the physically hard life of steelworkers. However, for too long the industry has produced far too little steel per man, not just in bad times but in good times. Of course, it is up to international standards, but oh, how late it is, and how much better it would have been if it had happened five or 10 years ago.
  I understand the feelings expressed by my hon. Friend the Member for Cornwall, North (Mr. Neale) when he spoke for the taxpayers. We have to accept that this year's cash requirements for the BSC are roughly equal to the 20p tax on petrol. There is consistency on the part of those who agree with both or disagree with both, but we cannot regard as credible politicians those who call for one without the other. The hon. Member for Wrexham said that in the past the industry had suffered far too much from politicians. We have all intervened, with- the best of motives, some eagerly, some reluctantly, but few of us successfully.
  I want to end the debate on a positive note, as the hon. Member for Redcar asked. Let us try to cease recrimination and look forward to the future. There are things to be done by all of us. The workers in the industry must make steel, shape steel and sell it more efficiently at lower cost than ever before. When I say "workers", I do not distinguish between Mr. MacGregor and the other workers in the BSC. They are all workers wherever they are. Mr. MacGregor is not a one-man band; the reverse is true. One of his principal tasks is to develop the new management talents that have been needed for a long time. I have the greatest confidence in him, and I believe that he has the support of all those who are prepared to put their backs into making the industry a success. If they produce steel right across the board at German prices they have a good chance of success in Europe, after the politicians have done their bit in the discussions next week.
  I commend the Bill to the House.
  Question put and agreed to.
  Bill accordingly read a Second time
  Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

  IRON AND STEEL [MONEY]
  Queen's Recommendation having been signified—
  Resolved,
  That, for the purposes of any Act of this Session to modify the functions of the British Steel Corporation and to make further provision with respect to the finances of the Corporation and the publicly-owned companies, it is expedient to authorise the extinguishment of the Corporation's liability in respect of long-term loans made to the Corporation by the Secretary of State.— [Lord James Douglas-Hamilton.]

  Merseyside Development Corporation
  10 pm
  The Minister for Local Government and Environmental Services (Mr. Tom King): I beg to move,
  That the Merseyside Development Corporation (Area and Constitution) Order 1980, a copy of which was laid before this House on 27 November, be approved.
  Following the passing of the Local Government, Planning and Land Act 1980, approval was given by Parliament in principle to the concept of UDCs. Tonight marks the laying of the first order for one of the UDCs. We made clear in Committee and on Report our intention that there should be only two—one for Merseyside and one for London Docklands. This first order marks the first stage in the establishment of the Merseyside UDC.
  The proposal that I put before the House involves the setting up of the corporation to achieve the regeneration of some 865 acres of the redundant dock areas of Merseyside. It involves the district council areas of Liverpool, Sefton and the Wirral. Hon. Members will have had the opportunity to study the maps which set out clearly the areas envisaged.
  The Government made clear in the discussions on the Local Government, Planning and Land Act their belief that the approach of an urban development corporation, involving a single-minded agency tackling problems of exceptional dereliction with sufficient resources and powers, was an appropriate way to find a solution to very long-standing problems.
  It may help the House if I recall the progress that has taken place since the passing of the Act. It was necessary for the orders to be laid, and the judgment was reached in another place that both orders, for Merseyside and for London Docklands, were hybrid. This involved the opportunity for petitions to be laid against both orders. One petition was laid against the Merseyside order, but this was subsequently withdrawn. It is therefore now possible, without interruption, to proceed to the discussion and, we hope, the approval of the order by the House.
  I shall deal briefly with the corporation, its powers and the area involved. I must say at once that this is a novel procedure. I understand that there may well be queries and uncertainties that hon. Members wish to raise. With the leave of the House, Mr. Deputy Speaker, I shall seek to reply to the debate and clear up any misunderstandings before hon. Members are asked to reach a decision on the matter.
  As hon. Members will be aware, the board already exists in "shadow" form in terms of its senior members. Its shadow chairman is Mr. Leslie Young; its deputy chairman is Sir Kenneth Thompson; and its chief executive is Mr. Basil Bean. I think that hon. Members are familiar with the precedent which exists for setting up a shadow corporation in this form. In an enterprise of this kind, it is clearly important that there should be the minimum hiatus. With the shadow corporation, it has therefore been possible for a considerable amount of preparatory work to be undertaken in advance of the establishment of the corporation proper.
  If the order is approved tonight the Secretary of State proposes to confirm the appointments of Mr. Leslie
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  Young, Sir Kenneth Thompson and Mr. Bean to the board. Other appointments will be made shortly and will include those, in the words of the Act,
  "having special knowledge of the locality".
  As hon. Members will see from the order, the Secretary of State can appoint 11 members plus the chairman and deputy chairman. It is our intention that the corporation should operate with a small staff. It will work very much in conjunction with local expertise. In other words, it will not seek to be a master of all trades but will "buy in" local skills, use local firms and work with and use the services of the local authorities in the areas in which it will operate.
  Part XVI of the Act provides for a wide range of specific and general powers to be exercised by the corporation in carrying out its tasks. In that connection, hon. Members will have noticed that the subsequent provisions relate to the arrangements which may be made for excluding any of those powers if that is thought appropriate. The order makes no proposals for any exclusions. In other words, the Merseyside Development Corporation will have full powers as set out in the Act.
  However, I enter one caveat. We have no current intentions to bring forward subsequent orders to enable the corporation to exercise either building control functions or the powers of a housing authority. None the less, the corporation will still be able to provide housing under its general powers, although it will not assume the full responsibilities of a housing authority.
  Mr. James A. Dunn: The right hon. Gentleman said that the order does not exclude building powers. Does it contain planning authority proposals?
  Mr. King: The hon. Gentleman is extremely alert, because that is the next paragraph in my speech.
  It is the Government's intention that the corporation should have the full range of planning authority powers which the Act permits. My right hon. Friend accordingly intends to lay a further order, which will be subject to negative resolution, to cover planning aspects, as well as orders which will cover the vesting of certain publicly owned land.
  Mr. Allan Roberts: The part of the Merseyside Development Corporation in my constituency, as proposed on the present boundaries, includes the only existing housing anywhere in the boundaries. The Minister said that the urban development corporation will not assume the full role of a housing authority but will have certain housing powers. How will the UDC's jurisdiction be exercised over existing houses within the boundaries that are to be designated?
  Mr. King: The existing housing authority in the hon. Gentleman's constituency is Sefton. I am aware of the housing estate to which he refers. The situation will remain exactly as it is. It will remain the responsibility of the Sefton council. I understand the hon. Gentleman's concern, because it was a concern well before the concept of an urban development corporation. If the hon. Gentleman succeeds in catching the eye of the Chair, I shall be able to respond to him at greater length on this point. I am aware of his concern, and I hope that what I have said will be taken as an interim reply.
  I turn to the financial arrangements. As last week's estimates showed, we have made a level of grant provision for the corporation of £16.5 million in the coming year.

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  That sum is additional to the £17 million that has been allocated to the Liverpool partnership for the coming year, and the Wirral can expect to receive about £2 million as an inner city programme authority.
  Mr. Anthony Steen: Is my right hon. Friend saying that of the £88 million allocated to development corporations in Liverpool and London, London will get £72 million and Liverpool only £16 million?
  Mr. King: The figure is £82 million, and the division is then correct. My hon. Friend has also been quick on his feet. The next sentence states that it is possible that further sums will be allocated to the new development corporation in 1981–82. We may have more to say about that in the course of the year.
  In the first year of operation, inevitably, much of the expenditure will be for land acquisition and initial reclamation work, but provision is made in the strategy—which we expect to be published by the UDC shortly—for expenditure on environmental schemes, infrastructure and industrial support.
  I deal now with the reasons for choosing the areas for the UDC. Inevitably, difficulties occur in selecting an area—which must be limited—for the provision of the UDC. The first was to identify the areas that we believed suffered from the worst dereliction and were, therefore, most in need of the regenerative capability that a UDC can contribute. Secondly, in seeking the areas of worst dereliction we were anxious not to prejudice the existing operating capability of the port of Liverpool. The third criterion was to see in what ways, by establishing areas that might be most suitable for port-related activities, we might be able to support and encourage the parts of the port that are successful. The fourth criterion was not to cut across local authorities' existing efforts where they have been anxious to support and stimulate industrial and economic revival.
  As a result, as hon. Members will see from the order and the simple map attached, three parcels of land are involved. Most of the land is in public ownership. Almost three-quarters of it is owned by the Mersey Docks and Harbour Board. Much of the balance is owned by British Rail.
  Mr. James A. Dunn: The right hon. Gentleman has made a statement of great significance. There is no Mersey Docks and Harbour Board. It is the Mersey Docks and Harbour Company, which is a private company. The land is therefore in private ownership.
  Mr. King: It is difficult, because we are discussing the MDHC and the MDC, which will replace it. The hon. Gentleman is correct. I should have said the Mersey Docks and Harbour Company. I shall come to the point about the land. The hon. Gentleman will be aware of the public support involved in the company.
  Much of the land proposed for designation as an urban development area on Merseyside is in pretty bad shape. The majority is derelict docks. At the same time, some of it has an economic life, a sort of second life of its own. A number of warehouses have been taken over by small firms which have found them useful and valuable. Those firms are undoubtedly taking advantage of the low rents
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  that exist but in many cases they operate in pretty poor conditions. A number have no real security of tenure under the present situation.
  The South Docks ceased effective operation in the early 1970s. They are full of polluted silt. There are problems to be faced. At the same time, many of the sheds house small companies. There is a big job to be done to attract private investment. We believe that with encouragement there could be a valuable and profitable base for the economic development of the area. The Riverside area, which has been partly cleared, involved petrol storage. We believe that it is capable, with suitable landscaping, of being used for housing provision. The Bootle docks and its back-up land is also an area where the support and port-related activities could be helpful.
  Across the river there are further derelict docks in Birkenhead and in Wallasey. I note the presense of my hon. Friend the Under-Secretary of State for Health and Social Security, the hon. Member for Wallasey (Mrs. Chalker), and appreciate her interest in this matter. Here again, a problem exists of derelict dock areas, which are being used by some small firms. There exists the opportunity, which the stimulus of an urban development corporation can provide, for far more effective utilisation.
  These areas together make up a challenge to which we believe the Merseyside Development Corporation is an effective response. This response, we believe, can be achieved by the development corporation only if it is done with the full co-operation of the existing tenants, the local authorities and the Mersey Docks and Harbour Company. A shadow team is already at work. It has had close consultation with bodies already existing in the area. This must clearly continue. If the urban development corporation is to succeed and if this initiative, backed by a significant sum of public money, is to be successful, there must be the closest co-operation and consultation with the bodies in the area, not merely with the statutory undertakers and the local authorities but with other existing landlords.
  This is a major challenge to an area that has faced dereliction and decline for far too long. It is a major public initiative that I am inviting the House to approve. I would be the first to recognise that public initiative on its own will not succeed. The test for the development corporation, if the House chooses to approve it tonight, will be whether it can provide the climate, the opportunity and the pump-priming initiative that will encourage outside private investment to play its part.
  I believe that the corporation has the framework and has the beginnings of the team that can achieve this task. If it does, it will make a major contribution to the regeneration of one of the most significant but, sadly, most significantly declining parts of the United Kingdom. I commend the order to the House.
  10.18 pm
  Mr. Gordon Oakes: The House is grateful to the Minister for the full way in which he introduced the order, which is of great importance to the whole of Merseyside and the North-West of England. I can assure him that the Opposition have no intention of voting against the order. We would never vote against anything that brought desperately needed money to the Merseyside area. There are, however, aspects of the order and the whole

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  concept of the urban development corporation and its creation about which many Opposition Members are exceedingly sceptical.
  Like the hon. Member for Liverpool, Wavertree (Mr. Steen), I am disappointed with the moneys that will be made available. Almost exactly one-fifth of the £82 million—it is not £88 million—will go to Merseyside, while four-fifths will go to London. We are dealing with over 800 acres. In the first year almost all of the £16 million will be devoted to acquisition costs. Not much will be spent except on acquisition costs. This is urban land that is owned, as my hon. Friend the Member for Liverpool, Kirkdale (Mr. Dunn) correctly said, by the Mersey Docks and Harbour Company.
  The Government are appointing a chairman, a deputy chairman and 11 other members, including the chief executive, to do a job which effectively could have been done well by the democratically elected local authorities. The local authorities lacked only the money. The money is being provided to the body that will be appointed by the Secretary of State. I was delighted when the Minister said that he hoped that the body created would work in close co-operation with the local authorities. Disaster will result to Merseyside and Liverpool if the two entities become in high conflict with each other. They must work together for the ultimate benefit of Merseyside.
  When we were discussing this matter in Committee the Minister often said that the urban development corporation would enshrine that same sort of structure as a new town but within an urban context. I accept that view. However, I cannot envisage any new town corporation operating in the geographical manner in which the order has been designed. There are four separate pieces of land, two of them together in Birkenhead, one in Bootle and one in Liverpool, which are divided by an estuarial river. This is a different concept from a new town where one deals with virgin territory and assemblies of land all in one unit. There are not only three separate local authorities and a council to deal with, but these are dockland areas only. I admit that there are some marshalling yards at Sefton, but basically the corporation will be taking over docklands.
  Is it not a misnomer to describe this undertaking as the urban development corporation for Merseyside? It is really a dockland development corporation. This could create problems for the rest of the area and for the local authorities in what they are trying to do.
  Those of my hon. Friends who represent Liverpool constituencies, including my hon. Friend the Member for Bootle (Mr. Roberts), could each argue constructively that the whole of his constituency is in difficulty. There are vast areas of derelict land. There are vast areas that need to be developed within Bootle and within different parts of Liverpool. The scheme involves 800 acres of dockland only. The urban development corporation will have to think carefully when it co-ordinates its activities with what the local authoritites have done and are doing in developing the whole of Merseyside area. I foresee difficulties unless great care is exercised by the corporation.
  The chairman, the chief executive and the deputy chairman have been named, but we are disappointed that we do not know who the other members will be. No doubt the Secretary of State knows who the other 10 people will be. It should be possible for him to name tonight those who are to be members of the development corporation. It is a matter of great concern in Merseyside. We hope that they
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  will be people from Merseyside, or at least from the North-West of England. We do not want appointees from London or some other area. We want people who have an indigenous interest in the area. I am only sorry that the Minister has not been able to give us the names in this debate.
  I mentioned the difficulties that the corporation will have in connection with the existing local authorities—the four separate parts divided by an estuary. I remind the Minister that within 20 miles of the area there are no fewer than four new town corporations, some of which are being wound down. They are Skelmersdale, Central Lancashire new town, Runcorn and Warrington. All are within 20 miles and are competing for resources and industry, as are the special development areas. So it will be difficult for the development corporation to attract investment to the area.
  That leads me to the next matter—the type of development that the Secretary of State envisages. He mentioned some housing functions. I am not sure whether he was talking about houses that the development corporation would take over because they are in a designated area, or new building and new housing within the designated area.
  Mr. King: Both.
  Mr. Oakes: The Minister says that he meant both. He is not asking for housing authority powers, and no order is coming before the House in that respect, so presumably the existing district housing authority will be the housing authority. I am glad to see that the Minister agrees.
  The Minister mentioned commercial developments in the area and dock-related development. What sort of development does he have in mind? Is it private sector or public sector development? There was a scheme for Government offices, and it was a highly attractive proposition, because it would have brought Government offices to Merseyside. Will the Government assist their own development corporation—their own appointees—by building Government offices, and thus provide much-needed office jobs in our area? That would be a great attraction.
  My fear is—I hope that I am wrong—that nothing will happen. We have seen many schemes for Merseyside, including paper schemes to develop the docklands, which have all come to naught. Some were produced by the local authority, and others by the county council. Now we have this new authority, in which we are putting much hope, as I am sure the hon. Member for Wallasey (Mrs. Chalker) will understand. Nevertheless, we are somewhat sceptical, unless there is more positive Government assistance than £16 million, about whether it will actually bring work and jobs to Merseyside.
  Mr. Steen: The right hon. Gentleman is quite right when he says that the local authority has encouraged many schemes over the years, but he must accept that his side, too, introduced many schemes. I shall not bore the House by giving the full list, but it includes comprehensive community programmes and partnerships, which came to naught. This is a real attempt to shift the balance away from socially motivated projects to economically motivated projects in an attempt to bring back real wealth to Liverpool, and not just community enterprises.
  Mr. Oakes: The hon. Gentleman is saying that Conservative and Labour Governments have failed

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  Liverpool and I agree with him. The order is regarded as a desperate last fling. If it fails there will be utter despondency in the Merseyside area. If nothing results there will be bleak despair in the area.
  The Minister hopes that a small staff will be involved and that the corporation will buy in from local industry and local authorities. How many staff does he envisage will work for the corporation? How much work will be put out to Liverpool Merseyside, Sefton and other authorities?
  My hon. Friend the Member for Kirkdale made an acute intervention about the Mersey Docks and Harbours Company. The Government have run into some difficulties with the London order because of its hybridity. Some discussions have been necessary in another place. Hybridity is involved in the order that we are discussing. Let us suppose that a compulsory purchase order is made, not under this order but under the planning order, by the development corporation. That could be subject to the doctrine of hybridity and have to go to the House of Lords. I do not state that that is so but I ask whether it is so. If it is, I can envisage endless delays and problems. The derelict docklands will remain derelict until it is sorted out.
  Many of my hon. Friends from Liverpool constituencies wish to speak. We shall not vote against the order. We look at it quizzically but we welcome any money that will flow to Merseyside, which so desperately needs national financing.
  10.33 pm
  Mr. James A. Dunn: I welcome the general intent of the order. I have some reservations, and I wish to ask a number of questions. I am sure that the Minister will not be able to answer them all immediately. I shall be happy to receive a written reply, which I shall circulate to my colleagues and other interested persons.
  I have believed for some time that Merseyside needs a development agency of some type. I do not join the hon. Member for Liverpool, Wavertree (Mr. Steen) in his condemnation of precious attempts. The inner city partnership is producing some results. They have taken time to work through. There were difficulties about coordination and co-operation but they have been resolved. The benefits are beginning to accrue.
  I share the apprehension of my right hon. Friend the Member for Widnes (Mr. Oakes) about the competing organisations in the 20-mile radius and the setting up of an enterprise zone. They compete for the finances. There is even more apprehension since the Budget.
  I wish to ask several questions. I shall try to be as much to the point as possible.
  I was grateful to the Minister for allowing me to intervene in his speech. It appears from what he said that under section 134 the Secretary of State has assumed that in land designation the development corporation will be able to take land that he considers to be already in public ownership. No doubt that was based on the fact that the Mersey Docks and Harbour Company owns about 75 per cent. of the land designated on the maps. It owns land on both sides of the river, and going from north to south on the Liverpool and Sefton side of the Mersey. The land goes away from the docklands in the south to what was once oil tanks and an oil jetty at Dingle. It then goes to Otterspool promenade, to land that was once used for open recreation
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  and is now parkland. Therefore, a number of side issues are associated with what the development is attempting to do.
  Although the Government are a major shareholder in the Mersey Docks and Harbour Company they have no more rights than any other stockholder or shareholder. To that degree-I am not being hypocritical or over-critical on this matter—the assumption is based on less than fact. I hope that the Minister will give the matter proper and due consideration.
  If the land designation is not generally in public ownership, how will it be brought to the ownership of the new corporation? Will powers be vested in its four compulsory purchase orders? Will the local authorities be asked to act as agents in order to acquire the necessary land? What would be the consequences if that were so? I am considering only the land that belongs to the Mersey Docks and Harbour Company. By an Act, a moratorium and agreements across the Floor of the House there is a designation for what should happen to any moneys realised on the sale of land. We resisted that at the time. That would immediately go to the stockholders. Nothing would accrue to the Mersey Docks and Harbour Company. It could not use that money for extra capital development or for the extension of some of the facilities in the other portion of the docks. It could not even contribute to the investment for anything that might be created as a facility within the land that originally belonged to it. That needs careful thought. I am sure that the Secretary of State will wish to consider that matter more carefully, because it is based on a false assumption.
  At first glance, the sale might please the stockholders. Some of them might jump for joy at the thought that all the south docklands will be sold and will think that large sums of money will accrue to them. But how is the valuation of that land to be judged? What are the criteria for the valuation of derelict dockland? This dockland is different from any other.
  In the south docklands, the silt from Canning to Herculaneum dock is high in intensity, and is heavily contaminated and polluted. From Queen's dock to Toxteth dock it is a hazard to health. How will the silt be cleared away to stop the hazard to health and the danger to those who work in the area?
  If we followed some of the suggestions made by the brilliance of those who turn their minds to it we should leave water there, but with the silt underneath. That would not remove the hazard; it would only increase it. As time goes on it would become worse. That contamination must be dealt with. There will be major difficulty dredging the dock and putting the silt on land, or dumping it at sea. It will take a major operation to do so. I assure the right hon. Gentleman that it will cost much more than £16 million. I speak with some knowlege of dredging and the port.
  Even if that difficulty were to be overcome with the resources that were made available, there remains the problem of re-establishing the dock walls and the infill. That will take time and major resources. My estimate, off the top of my head, is that the infill would cost over £250 million. If that is doubted, one has only to take the measurement of what has already happened in Herculaneum dock, with the infill of rubble, and what is happening in the rest of the dock.
  A large water mass must be dealt with. When silt and water are taken away the pinion, the toe and the heel of the dock walls become suspect for collapse. Many

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  problems have yet to be resolved in the designation of the land. I could speak about that point for two or three hours by delving into the technical details. I shall resist that temptation. I shall write to the Minister about some of the other important points.
  Having dealt with the allocation of resources and the method by which the redevelopment will take place, I should like to know who will control, organise and finance it. Will it he a partnership between commerce, industry and the corporation? I cannot envisage that. There will be no investment in the land until it is ready for development, which means after the infill has taken place and after having dealt with all the dock buildings that are rapidly deteriorating throughout the dock systems.
  I could talk about the Wallasey dock. I could refer to the other side of the Alfred dock, which is in exactly the same position as the Wallasey dock. There are about three or four feet of silt and a larger water mass. It is not contaminated, but is still creates problems. There is little difficulty about the Dingle area, except in terms of knowing what can be done with the sunken tanks that used to contain oil. There is a multiplicity of complexities that must be faced in the designation of that land. Again, I shall write to the Minister about the details.
  I turn to the method of appointing members to the board. I join with my right hon. Friend the Member for Widnes in saying that it should be composed of people who come from Merseyside and understand the area. I ask the Minister to think again.
  Unlike my right hon. Friend, I am glad that he did not name the 11 members. If he had, he would not be able to agree to my request. I ask him to reconsider the composition of the board. There should be a more equal balance of those nominated from the local authorities—Wirral, Sefton, the Merseyside county council and the Liverpool city council. I ask for six of the 11 places. That would leave him five plus the chairman, the deputy chairman and—I hesitate to say it—the chief executive officer. Most unusually, the chief executive officer has been appointed by the Secretary of State. He hired him. Who is the one that will fire him if he cannot do his job, or if he fails to meet the challenge?
  Having dealt with the composition of the board, how can we resolve the problem of the planning authority's relationship with neighbouring authorities that possess the planning power? We already have one authority in Liverpool, and there is the Merseyside county council, of which I have personal knowledge. There are four if Sefton, and Wirral and Wallasey are included. They cannot agree now. If absolute power is given to a corporation that has no need other than to consider the commercial development of the land there will always be conflict.
  There have been recommendations about high-rise developments on the River Thames. God knows what will happen on the Mersey after the infill has been carried out and the land is ready for development. I once more ask the Minister to reconsider the composition of the board to give a further balance to the nominations from the local authorities to deal with the conflict of identity and operation between one planning authority and another.
  How will the new corporation, under the terms of its constitution, prepare a code of practice? How will it cooperate with the subscribing geographical local authorities? What will be the sharing of the power at the end of the day? How will the powers be exercised? Will the Mersey Docks and Harbour Company be considered
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  a relevant local authority? Any development that takes place inside the docks, especially the South docks, can affect the flow of the river, with consequential difficulties of shifting masses of sand and sandbank. The navigation of the river is put in jeopardy. The Mersey Docks and Harbour Company will have to consider those matters.
  I believe that much more thought has yet to be given to the order. In the short time that has been available I am sorry that we have not been able to go into all the aspects of the order. I am grateful for the opportunity that the Minister has given us. I share with my right hon. Friend appreciation for the detail that the Minister gave. But I know from the heart, with my knowledge and experience, that it will not be that easy. At the end of the day we want to see this succeed and work. If it does not work our. constituents will suffer badly.
  There is a crisis of unemployment on Merseyside. We need help. We need something tangible tomorrow, if we can have it. I do not want to see delay but equally I do not want to see such a mess that we shall not be able to raise ourselves out of it. I ask the Minister to think again, for God's sake.
  10.45 pm
  Mr. Anthony Steen: One is always impressed when one hears the hon. Member for Liverpool, Kirkdale (Mr. Dunn) speak with such local knowledge and skill, but the problems that he has outlined merely make one realise that "hope springs eternal". Liverpool has been the victim of more action research, community development, urban deprivation experiments, neighbourhood projects, quality of life studies. comprehensive community programmes and partnerships, with more public money spent, than any other city in Europe. One must realise that the time has come to halt the drift of those social, educational and community experiments and develop a new thrust and a new approach.
  The urban development corporation comes at the end of a long line of distinguished and, I regret to say, unsuccessful projects designed to turn about the ailing fortunes of the city. The urban development corporation, we are told, is something different. On the face of it, it may well be. Along with the enterprise zone, it is designed to bring economic recovery to the city. The spotlight has turned from eliminating pockets of deprivation and reorganising local authority expenditure to economic recovery—and so it should be.
  The House must welcome the urban development corporation, even though some hon. Members are, correctly, cautiously optimistic and others are cynically optimistic. There have been problems about the exact location and understandable difficulties with the docks and harbour company over the land. But the idea that something should be done about the acres of derelict and vacant land on the waterfront must be correct.
  The key to the success will not be the amount of Government money that the Minister can offer. We know that Government intervention has done a lot of harm on Merseyside. It has driven out private enterprise rather effectively. Special development area status accorded to the region has let firms build new businesses on industrial parks not in the inner area but on green field sites on the edges. In fact, that has shifted 100,000 jobs from the inner to the outer area.
  The massive demolition programmes of the public authorities demolished 21,500 dwellings between 1966

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  and 1976 and nearly 500 small firms have been displaced in the past six years. Thus, more public intervention and more public money will not solve the problems of Liverpool. On the contrary, they may make matters worse.
  The key to the success of the urban development corporation and the regeneration of Liverpool is the extent and level of private enterprise and private investment that will be attracted. If public funds are to be used merely for the infrastructure development for the land bank, that is a good start, but it is not enough. What incentive will there be to bring firms to the urban development corporation? Will the corporation be simply an inner city industrial park? Does the Minister hope that it will halt the continued development outwards on green field sites? It is a pity that the enterprise zone does not cover the same area as the urban development corporation, for that would provide a double incentive. It would provide land prepared, and ready for development, but there would also be an incentive for private enterprise and new businesses to settle there.
  I am sorry, Mr. Deputy Speaker, but there is a tremendous amount of noise in the gallery behind, I wonder whether it could be reduced.
  Mr. Deputy Speaker (Mr. Bernard Weatherill): I have been listening very carefully to what the hon. Gentleman has been saying, and I have not heard any noise.
  Mr. Steen: I am grateful to you Mr. Deputy Speaker. It was becoming a Tower of Babel, but it probably did not catch your ear from behind.
  As I was saying, what we have got is the urban development corporation preparing public land so that it is suitable for development but not offering incentives for those who come there. In another part of the city we have an enterprise zone, which has been declared in the very area in which manufacturing enterprises have failed and where derelict and moribund factories stand as a monument to industrial failure. So the urban development corporation has advantages, in that the infrastructure will be provided from public funds but no tax inducement will be given to the businesses that settle there, whereas the enterprise zone will have no infrastructure grants but will have tax inducements for those that decide to settle and get business done there.
  But from where will the work force for the urban development corporation area come? The enterprise zone is outside the inner city and many people live around that enterprise zone on the vast public council estates which were built there after the war. But what about the urban development corporation area in the centre of the city on the waterfront? Twenty-two per cent. of the inner city population left Liverpool between 1966 and 1976. With the present cost of petrol, transport and parking in the inner area, which is now so enormous, will there be an incentive for the work force who live in the outer areas to come back to the inner areas? They will certainly not be able to live there, because most of the homes have been demolished. Whereas in the enterprise zones employers can offer higher wages because they have no rates to pay, in the urban development corporation area the employers will still have to pay the full level of rates. Already businesses
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  in the inner city have left because of the high level of rates. Why should they return to operate in the area of the urban development corporation?
  Surely it is a better idea for our big clearing banks, instead of having their windfall profits taxed, to be encouraged to express some measure of social responsibility in this country by spending some of their profits on this urban revitalisation. The banks have increasingly become the enemies of our cities. The four clearing banks have an antipathy to investing in the older industrial areas. Surely they have made enough money in areas such as Liverpool, and surely some of that money should be reinvested in the area in which they have made the money. The American banks have recognised that it is not charitable but good commercial sense to invest in the older ailing areas.
  Without new money and new investments, the urban development corporation will just not realise its full potential. If the Minister is concerned about the level of private enterprise in the urban development corporation, I take it that he will ensure that the 50 or so small, private one-man firms, already clustered in the man-made caves in the South docks are not displaced. They do not want to be moved to advance factories, with all the commercial trappings. They simply want cheap accommodation where they can start an embryo business and pay £5 or £10 a week rent and rates. Will the urban development corporation provide accommodation for that kind of business, and at a price that it can afford? Will the urban development corporation have the money not just to develop land but to help to build on it?
  Success in Liverpool has always been amongst the small entrepreneurs. The danger of the urban development corporation is that it will stifle the small business men and drive them further away from the city. Will the urban development corporation of today be the enterprise zone of tomorrow, with abandoned factories cluttering the land, witnessing an era when public money tempted big business to come North, only to abandon the sites when the economic recession hit it?
  We do not want the urban development corporation to be another in the very long line of urban initiatives. We hope that it will be something different, but whether it will work and to what extent will depend on the value for money offered to private business, the level of rates the local authority charges, and the attitude of the financial institutions, banks and insurance companies towards lending money and taking real risks.
  The present Government partnership is a contradiction in terms, because the partners are all in the public sector. The urban development corporation must be a genuine partnership. That means joint enterprise, joint resources and joint responsibilities. The Government must finally show that they are prepared to trust and work with the private sector as equals fighting the same battle.
  Let us give the urban development corporation a chance and let us hope that it succeeds.
  10.55 pm
  Mr. Allan Roberts: When the concept of an urban development corporation was proposed in the Local Government, Land and Planning Bill, it was generally welcomed by those who represent or live in constituencies in Merseyside, whereas the proposals for an urban development corporation in London's Docklands have been greeted with hostility.

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  Hon. Members representing Merseyside constituencies and others welcomed the proposals because, unlike our London counterparts, we felt that the local authorities involved might not be able to deal with the job adequately. My right hon. Friend the Member for Widnes (Mr. Oakes) paid tribute to the efforts made by local government to revitalise docklands and to deal with the problems involved. However, the situations in Merseyside and London are different. For example, all the local authorities in Merseyside are either Conservative- or Liberal-Conservative-controlled. Over the years, the local authorities do not seem to have shown the drive, initiative and energy of the London local authorities in the revitalisations of docklands.
  Together with my hon. Friend the Member for Liverpool, Kirkdale (Mr. Dunn), I am worried that when the board of the Merseyside development corporation is constituted no one will represent the areas that are being designated. Each local authority is nominating a member. The Liverpool, Sefton and Wirral local authorities and the county council will nominate a member. With the exception of Liverpool, which may choose a Liberal, the authorities will choose Conservative representatives. In the end, there will not be any Labour local authority representatives on the Merseyside development corporation. But all the areas concerned and the surrounding areas elect Labour representatives to Parliament and to the local authorities. I hope that the Minister will give that matter serious consideration and rectify the mistake.
  The local authorities have often dealt with the problems in an incompetent manner. They have certainly been Scrooge-like in their attitude to providing public services and money for the infrastructure needed to attract industry to the area. I speak with some knowledge, particularly of Sefton council. It is one of the lowest-rated metropolitan districts in the country. It has done very little to meet the needs of the area. Indeed, it admits as much in some of its reports.
  The boundaries of the urban development corporation area in the constituency of Bootle cover what is know as the "maritime area" in the plans and proposals of Sefton council. Only last year, in its report on employment in industry, the metropolitan borough of Sefton stated that the development of the maritime area had not been as extensive as had been envisaged. It said that it still contained a mixture of uses and the largest resource of potential industrial land in the plan area that was still unused. That area was going to be developed for uses subsidiary to those of the Mersey Docks and Harbour Company, but that has not happened.
  Having welcomed the concept of the Merseyside development corporation, one of the things which leads myself and others now to be a little sceptical is the way in which the Minister has gone about setting it up and the very slender resources that are actually to be allocated for the corporation.
  If we compare the £16 million which is being allocated for areas throughout Merseyside with the £19 million which has been knocked off Sefton council's rate support grant alone, we see how little this is, and it seems that this is just a palliative—that a lot of window-dressing is taking place and that no real action will follow.
  In an intervention in the Minister's speech I referred to the problems of the Rimrose housing estate, in my constituency, within the area that is being designated. That estate is surrounded by industrial land and other industry.
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  It is across on the port side of a busy main road. It has no facilities and has been neglected for a considerable number of years. It seems that between them the local authority, the county council and the shadow urban development corporation that has been in existence for some months now have been practising a major exercise in closed government, not telling the residents of the area what their thinking is about the future of that estate.
  There are proposals that have been in existence for some time in the Sefton planning department for the demolition of that estate and the rehousing of the people elsewhere because it has always been considered to be in a bad situation and in an area that should be concerned with industrial uses.
  Now, with £16 million for the whole of the Merseyside development corporation, I believe—although I am not certain of the figure—that about £6 million will have to be spent on the purchase of land from the Mersey Docks and Harbour Company. In fact, in the Mersey Docks and Harbour Company's document "The Profitability Study, 1980", which the Government required the company to produce, the statement is made under section 353:
  "This section has been omitted as it deals with specific areas of the company's properties which are the subject of current negotiations with the urban development corporation."
  So it is still not very clear exactly what is happening, but rumour has it that £6 million at least of the £16 million is to be spent on purchasing land from the Mersey Docks and Harbour Company. As my hon. Friend the Member for Kirkdale said, that will be distributed to stockholders or shareholders and cannot be spent on capital investment in the docks to create more employment. So that is not going to be any help whatsoever.
  That leaves at the most £10 million, and it would take almost that to deal with the Rimrose estate problem itself. So the urban development corporation sees no future for that estate and we would like some kind of intervention from the Minister to make sure that at least the residents of the estate know what their future is. The worst thing for the residents is not knowing whether the estate is to be demolished and they are to be rehoused, or whether it is to remain. Certainly if it is to remain we want to know what kind of life it is to have so that some money can be spent on it, it can be improved, and life can be made tolerable and bearable for those who remain there.
  I hope that the Minister will address himself to that question and explain to me and my constituents, who are very concerned about this matter, exactly what powers he has given in this order to the urban development corporation as far as housing is concerned, and whether he has any knowledge of the discussions that are going on between the UDC and Sefton council. In its own report the Sefton metropolitan district council, referring to the Rimrose estate, said:
  "This matter is currently under consideration by the Department of the Environment and the committee"—
  that is, the policy committee or the housing committee of the Sefton council—
  "will be kept informed of any development."
  That report was dated 4 November 1980, so I hope that if it is accurate it will allow the Minister to tell us exactly what the Department of the Environment has been discussing about that estate, so that the people of the area will know at last exactly what is going to happen to them in the future.
  One of the problems with the Merseyside development corporation has been highlighted by the hon. Member for

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  Liverpool, Wavertree (Mr. Steen)—that the enterprise zone is being set up in a green field site. That enterprise zone, I assure the Minister, will not create any more new jobs in Merseyside. During the summer recess, I went round a number of firms, bonded warehouses and other warehousing factories, and all the owners told me that when the enterprise zone was set up they would move from dockland to the zone. Our major expense is rates. We shall not be able to compete with any bonded warehouses set up in the enterprise zone, so we shall move there so that we can compete. Jobs will therefore actually move from the inner city docklands area. Warehousing and bonded warehousing will move to the enterprise zone. That will not assist the development corporation's activities at all.
  In addition, particularly in the maritime area designated in my constituency, the jobs envisaged for the future are related to the activities of the port. Most of the jobs that have been created in the past and are developing in that area relate to the activities of the port. The port is in decline. The Government refuse to assist the Mersey Docks and Harbour Company with investment. They will assist it only to buy off jobs and reduce the amount of activity in the docks by paying £16,000 to every docker who leaves. Unless the Government do something to revitalise the docks and to assist the Mersey Docks and Harbour Company far more than is at present proposed the development corporation will have its hands tied and will be unable to develop in the way that the Minister envisaged in his statement.
  A further recent development will affect these areas considerably. The Secretary of State for Industry and his ministerial colleagues have altered the way in which grants are given to firms in a development area. A well-known firm of dock chandlers, which has now developed its activities into making equipment for containerisation, has told me that it can no longer obtain grants to expand its activities in Merseyside because the Department of Industry will give grants only for the establishment of new industries and not for the expansion of existing industries. Unless something is done about that there will not be much room for development by the corporation.
  I disagree completely with the hon. Member for Wavertree, who asserted that the development corporation will succeed through a partnership with private enterprise and incentives to private enterprise. History has proved that that is the way in which Merseyside has been let down. From 1964 onwards, from the time when the Wilson Government came to power and subsequently through the period of the Heath Government, billions of pounds of public money were poured into Merseyside, not into public enterprise but to encourage private enterprise and private capital to invest in Merseyside. That has not worked.
  Indeed, we are now witnessing a reversal of the situation, in which private capital is leaving Merseyside. Private firms are closing down and there is less and less private sector investment. One has only to consider the list of firms that have closed down—Tate and Lyle, Courtaulds, Bowaters, and small companies as well. Companies that had Government assistance to establish themselves in Merseyside are now getting out. So the idea that private enterprise will solve our problems is hardly a convincing one.
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  We hoped that the development corporation would bring a big injection of public money, public expenditure and public activities in the docklands to set Merseyside on the right course. We hoped that it would be able to create jobs and activity, to save the docks, to create a new environment, to create new jobs and to create wealth by public enterprise. With £16 million and further cuts in public expenditure promised by the Treasury, I do not believe that the future is as rosy as all that. Nevertheless, I hope that the Merseyside development corporation will work, because it is a concept that I welcomed in the beginning and still welcome as a concept.
  Mr. Deputy Speaker: Order. I understand that the Minister would like to begin to answer the debate at about 11.20 pm. I should like to be able to call the three hon. Members who have risen in their places.
  11.9 pm
  Mr. Eric S. Heller: I shall be about three minutes, Mr. Deputy Speaker. When the Labour Government discussed urban development I suggested that there should be an urban development corporation in Liverpool. I therefore naturally welcomed this development. I believed then that we ought to have a body that could cut through red tape and speedily get down to tackling the problems, particularly those of the South docks.
  I worked on the South docks for many years, as did my hon. Friend the Member for Liverpool, Kirkdale (Mr. Dunn). Anyone who knows those docks knows that the area is not quite the same as the rest of Merseyside. It is a special area, which needs special treatment.
  If I have any criticisms, it is that the money being made available to the corporation is insufficient. It would be wrong if once the corporation has got off the ground and begins to deal with the problems—as I think it will—it finds that it has run out of money because private investment is not forthcoming.
  While public money is to be used as a catalyst for private investment, the danger is that we shall not get that investment. Therefore, it would be wrong if the corporation were starved of the necessary money.
  The corporation's first statement talked about revitalising the heart of Liverpool. That is essential. I hope that there will be new housing in the area, as part of all the other work. It must be mixed housing. Do not let us have any more ghettos of one kind or the other. We must not miss this opportunity. I should like to see a Liverpool "Pimlico", where rich and poor live cheek by jowl. I want to see that sort of development. I want to see many other developments in that area.
  There is a problem about small existing companies. However, had the hon. Member for Liverpool, Wavertree (Mr. Steen) read the document issued by the corporation he would know that it proposes to cater precisely for those companies. It does not intend to do what happened in the Islington area of Liverpool, where the small businesses were wiped out.
  I welcome this corporation. I know that many local councillors got uptight about it. Sir. Kenneth Thompson is an old friend of mine. He is also an antagonist, in the sense that we fought each other at the hustings. Luckily, I won. He was very much against this idea. Many councillors have changed their minds. Some were for it

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  originally and are now against it. Others were against it but are now in favour of it. Sir Kenneth was against it until he was made deputy chairman, and then he was for it.
  I welcome the corporation. It is essential. There has been far too much negative talk this evening. I do not like that. The corporation is something that Merseyside should welcome. Whatever we may feel about the composition of the board and whether it should have more elected representatives— I believe that it should— we should acknowledge that this is a welcome development. However, I ask the Government to make more money available in order to make it a success.
  11.14 pm
  Mr. Richard Crawshaw: The largest of the three designated areas covers the waterfront of my constituency. Twenty-five years ago it was a hive of industry. Some of my hon. Friends worked in the area. Now I doubt whether more than two or three dozen people are employed along the whole length of those docks.
  I was heartened by what the hon. Member for Liverpool, Walton (Mr. Heffer) said. It brought a note of realism into the debate. We should not be pessimistic about what can happen in Liverpool. I like to believe that the Government intend to make a go of this. The only thing that can stop it getting oft the ground is too many people looking to their own empires. A development corporation is the only body that can concentrate sufficiently on the problems of a small area to make the plans work. I hope that the Liverpool corporation and other authorities involved will work towards that end.
  The hon. Member for Wavertree asks where the workers will come from. My constituency, within a stone's throw of the development in the South docks, can provide 5,000 or 10,000 people who are out of work.
  I am sad about the amount of money allocated, although we hear that there may be more. I take that in good faith. I hope that the Government will not let down the people of Merseyside. They have been let down often after their hopes have been raised. Past promises have been made in good faith, but have not helped the people of Merseyside. I hope that the Government will make every effort to make the development corporation work.
  I have had a bee in my bonnet ever since the development of the docks was first mentioned. In the centre of Liverpool we have wonderful docks, with probably one of the best landing stages in the country. Two miles further up the river is Otterspool, with a wonderful frontage and green lawns. In between, we have devastation. The development between the two areas will settle the fate of Liverpool for the next 100 or 150 years. It will be a crime if we do not make the whole stretch as attractive as it is at Otterspool. We can have a mixture of housing and industry, but I should like the front at Liverpool joined up with Otterspool, with a promenade on which the people of Liverpool and Toxteth can take daily walks.
  I welcome the proposal, and wish it every success.
  11.17 pm
  Mr. Eric Ogden: Like the speeches of the hon. Member for Liverpool, Toxteth (Mr. Crawshaw) and my hon. Friend the Member for Liverpool, Walton (Mr. Heffer), my speech will be a truncated version of what was intended to be a brilliant and
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  devastating resume of the development corporation and all that it may or may not be. The Minister will be able to speak well before 11.20 pm.
  My approach to the development corporation is rather like the approach of the man from Missouri—prove it; show me. It is partly that of the optimistic pessimism of the hon. Member for Liverpool, Wavertree (Mr. Steen)—although I deplore his attacks on the banks. It is not my role, from the Labour Benches, to defend the banking system, but from my personal knowledge of the regional directors of more than one bank on Merseyside I can say that the banks are pouring a great deal of money from their coffers into Merseyside. The case for not having a levy on banks is made on Merseyside. They are not calling in overdrafts, and are supporting small companies.
  The development corporation approach is not what we asked the Labour Government for; we wanted a Merseyside development agency. We do not all trust every local corporation or city council. The officers are different. The debt owed to the city of Liverpool's senior officers and chief executives should be placed on record, but now is not the time. We do not particularly trust city councillors as representatives. I would not put some in charge of a fish and chip shop, let alone give them seats on the board of the development corporation.
  Nevertheless, the task of the development corporation should have the support of every hon. Member representing Merseyside and every outside representative. It has a good chairman-designate, who has considerable contacts outside Merseyside—the old fox whom my hon. Friend the Member for Walton once defeated but who has never held a grudge—Sir Kenneth Thompson. He has political contacts and a great deal of expertise. He has a good potential team. I wish that we had had more advertising for staff locally, but that is a small point. Will the corporation need 52 members of staff? Will it try to recruit them locally? Merseyside and its need have a special quality, which would take an incomer time to understand.
  If £16 ½ million is to be provided and if most of the land is in the control of the Mersey Docks and Harbour Company, there is at this stage no incentive for the company to dispose permanently of any land. None of the revenue from the sale of the land would come to the company in the form of everyday working capital; it would go to the bondholders. The right hon. Gentleman should be talking to the Secretary of State for Transport to see whether arrangements can be made to deal with the settlement imposed by the previous Conservative Administration, who permitted a policy of non-intervention, so enabling the company to dispose of some land profitably.
  Will the Minister encourage the development corporation to look at commercial and service industries? That is the hope of Merseyside. Will he wish the corporation well in its efforts? Is he trying to tell hon. Members that if we make sufficient fuss we shall get more money? If that is offered tonight, it will save a great deal of time.
  11.21 pm
  Mr. King: With the leave of the House, I should like to reply to a number of points that have been raised. I should like to express my gratitude for what I thought was the much more positive response in the latter part of the

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  debate to the proposal that I have put before the House. I should like to deal with a number of detailed points. On those that I do not cover, I shall write to hon. Members.
  The right hon. Member for Widnes (Mr. Oakes) raised the question of a relative share of resources. If one takes the acreage involved in the Docklands UDC and that involved in the Merseyside UDC, one sees that Merseyside gets a rather larger share of the provision proposed at present. That is not, however, a particularly valid observation and I shall say more about resources at the end of my remarks. The right hon. Gentleman argued that the proposal was not like a proposal for a new town, and drew attention to the fact that odd pieces are selected. This is the nature of the problem. It is a different exercise. It seeks to take the new town approach into an old town. One does not get the perfect green field development. There is the problem of dealing with different bits that have decayed more rapidly than others.
  A number of hon. Members raised the question of membership of the UDC. I hope that we shall be able to take account of local representation. It would be a pointless exercise to seek to appoint people from miles away who commanded no local confidence. The hon. Member for Liverpool, West Derby (Mr. Ogden) was kind enough to pay tribute to our choice of chairman, while the hon. Member for Liverpool, Walton (Mr. Heffer) referred in affectionate, if conquering, terms to the deputy chairman. We believe that this is a sensible approach.
  Mr. Heffer: I said that I was lucky.
  Mr. King: I accept that. We shall seek to ensure that the board is strong and respected. In regard to staff, it is important to get the skills and experience needed for certain specialist jobs. Otherwise, so far as possible, local staff will be appointed.
  The right hon. Member for Widnes asked me one of those worrying technical questions, which for a moment caused me apprehension until I thought about it, relating to CPOs and whether any individual CPO would be hybrid. In my judgment, the answer is "No". I am fortified in making that response by advice from the official box that suggests that I am correct. That makes two against one, which may be a winning combination.
  The hon. Member for Walton, referred to the need for what he called a "Liverpool Pimlico"—an evocative phrase. I am sure that the approach to mixed housing is right. The need to avoid a concentration of one form of development is important. The hon. Member for Liverpool, Kirkdale (Mr. Dunn) referred to the position of the Mersey Docks and Harbour Company. It is a statutory company, but for the purpose of vesting it is in the public sector. The hon. Member for West Derby suggested that we should talk to the Secretary of State for Transport. Talks with my right hon. Friend have already taken place. The talks are proceeding well with the company. It has responsibilities to its stockholders.
  Mr. Ogden rose—
  Mr. King: I shall not give way. I ask the hon. Gentleman to write me. There are a number of questions to which I must respond before the debate is closed.
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  We are optimistic that it will be possible to make satisfactory arrangements with the company, which is co-operating well in the initial discussions with the shadow members of the corporation. The members of the MDHC recognise that it is crucial that adequate land be obtained if the development corporation is to proceed.
  There are problems with valuation. The relevant provisions are set out in the Act and the issue will be dealt with under the compensation code in the Act. That is the responsibility of the district valuer.
  My hon. Friend the Member for Liverpool, Wavertree (Mr. Steen) suggested that we should have enterprise zones coterminous with the UDC. The point of the exercise is to try two different approaches. My hon. Friend rightly contrasted the difference between one and the other. I am pleased to be able to say that both approaches will be tried in the area.
  With respect to my hon. Friend, I am much more in sympathy with the hon. Member for Liverpool, Toxteth (Mr. Crawshaw) on the issue of finding the work force. The least of the problems in Liverpool at present is the location of the work force. I feel that it will be readily available. We shall seek to give every encouragement to the tenants in the sites that now exist.
  I cannot add to what I have already said to the hon. Member for Bootle (Mr. Roberts) about the estate in respect of which he expressed concern. The development corporation is conscious of the problem and we shall do what we can. The corporation will be anxious to ensure that the estate is not disadvantaged. It has been a problem for the Sefton council and I am aware of the difficulties to which the hon. Gentleman referred. These are problems that will have to be considered.
  I do not share the hon. Gentleman's pessimism about the enterprise zones. He claims that there will be no new jobs, but merely immediate transfers. I had to face that criticism when I piloted the Bill through the House. There is some risk that there will be a transfer of jobs, but I contend that the enterprise zones will stimulate new jobs. I was pleased last week to issue the official invitation to Sir Trevor Jones, the leader of the Liverpool city council, for the enterprise zone scheme to be set up.
  A number of hon. Members referred to £16 million as if it were a lump sum contribution. In fact, it is only the sum for this year. A further contribution will follow in subsequent years.
  Mr. Ogden: If it is used.
  Mr. King: During my contribution and other contributions I was aware of certain elements of the volcano about the hon. Member for Walton. I was encouraged by his remarks. It is easy to indulge in too much negative talk. Of course, there are problems. I offer the House no guarantee that the corporation will work. A long series of initiatives, including regional policies and industrial incentives, have failed for different reasons. The hon. Gentleman is not alone in suggesting that we need the single-minded approach of a development corporation to tackle some of the most intractable problems that we face.
  My hon. Friend the Member for Wavertree has been staunch in his support for the private sector. We believe, as the hon. Member for Toxteth said, that Liverpool and Merseyside can rise again.
  Question put and agreed to.
  Resolved,

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  That the Merseyside Development Corporation (Area and Constitution) Order 1980 a copy of which was laid before this House on 27 November be approved.

  WELSH GRAND COMMITTEE
  Ordered,
  That during the proceedings on the matter of the Consequences of the Budget and the Government's Economic Policies in Wales, the Welsh Grand Committee have leave to sit twice on the first day on which they shall meet; and that, notwithstanding the provisions of Standing Order No. 64 (Meetings of Standing Committees), the second such sitting shall not commence before Four o'clock nor continue after the Committee have considered the matter for two hours at that sitting.—[Mr. Newton.]

  Vale of White Horse District Council
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Newton.]
  11.30 pm
  Mr. Tom Benyon: I am fortunate in having in my constituency two districts councils—both Conservative-controlled, disciplined and responsive. They are both dedicated to keeping down rates and costs in their area and to maintaining services to their ratepayers. The first is the South Oxfordshire district council, which is responsible for the southern part of my constituency, and the second is the Vale of the White Horse district council, based in Abingdon.
  Neither of those councils is an over-spender. Both have shown a determination to run their areas responsibly and in the best traditions of local government. Both have set examples of financial continence and prudence that I hope will be noted by the voters at the next local government elections in May. The councillors in both districts have been tolerant of the problems that appear, as far as they can see, to have emanated from Government in recent months. Both councils have, to my certain knowledge, attempted to understand the new block grant system. Neither met the change in local government financing 'with closed minds.
  Senior councillors in the Vale of the White Horse district council were grateful for the opportunity to meet a Minister at the Department earlier this year who explained to them the intricacies of the block grant. However, I have to tell my hon. Friend the Under-Secretary that these councillors were not entirely satisfied with the answers given. Nor did they fully understand the block grant. This is one of the reasons why I have raised this debate.
  I fully appreciate, as do my constituency councillors, that the Government have the highest aspirations in making the change from the old system to the present block grant. I believe that the Government's intentions were to achieve the following commendable aims. First, they sought to increase incentives where few existed previously by tapering off Government support for local government spending once a certain limit was passed. Secondly, they sought to provide greater scope for local decision-making by allowing almost total freedom, on the capital side, in any event, in reaching decisions on how to spend the more tightly constrained total of funds. Since council current spending covers the provision of services that are a statutory obligation, the scope for freedom is necessarily limited.
  The third aim of the Government was to achieve simplicity. I am sure that one of their aims was to have a system that was understandable. The Secretary of State has often said—I agree with him—that the old system was incomprehensible and that a simpler system was needed—one that could be achieved by measuring local needs on a declared basis and publishing the sums so provided. At least when one understands the principles one can argue the quantum, presumably on a rational basis.
  In a perfect world this system should work. The old system was obscure, expensive and inefficient. However, I have yet to be convinced—this applies to my constituency councillors and many others; not only those

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  who always see problems for every solution produced by the Government but genuine Government supporters—that the new system will be an improvement on the old one.
  Thoughtful observers of the new system fear that it is every bit as obscure, inefficient and possibly as expensive as the old system. It will give me genuine pleasure and relief to be persuaded to the contrary by the Under-Secretary. I hope that the proof of the pudding will be seen to be in the eating, when, in a year's time, my hon. Friend will be able to announce what saving has been made as a result of the implementation of the new block grant system.
  However, it is possible that the old system is being dumped before the new system has been entirely thought through. To date my constituents are not convinced that the rough justice that has been meted out is not unnecessarily rough. They feel that there is not enough justice in the system for them. They believe that the new block grant system may have the opposite effect to what was intended. Far from being clear, the new system appears to be rather arbitrary in its application. With the measurement of needs being applied through some form of algebra, the result is somewhat obscure.
  The Vale of White Horse district council has attempted to work out the variations between what has happened to it and to local authorities bordering it, both Oxford city and the South Oxford district council. I shall not weary the Minister with the detailed workings of the calculation. Suffice it to say that the grant appears to allow £18·64 more per head of ratepayer in the area of Oxford city and £1·24 more in the area of South Oxford district council than ratepayers in the Vale of White Horse district council will receive, and I have to say to the Minister that no one can quite see why these things should be.
  Secondly, and partly to allow for known imperfections, individual grants are not fixed but are still partly related to expenditure, and yet the total of all grants is fixed by cash limits. This might be an open provocation to over-budgeting, since authorities expect to get only a proportion of their entitlement. That, I think is human nature. I see, with a degree of alarm, that I asked my right hon. Friend the Secretary of State how many local authorities had budgeted for expenditure in the current year in excess of the targets laid down by his Department. I received the reply yesterday that, on the basis of local authority 1980–81 revised budgets, 249 authorities in England had budgeted for current expenditure in excess of their volume targets for 1980–81 by a total of £317 million at November 1979 prices. I regard that answer as rather alarming in the circumstances. It appears to justify the doubts that I have about the inflationary element in the way that the block grant is calculated.
  I have to say to my hon. Friend that my council is keen to help in the battle against rising public expenditure. Today it is facing a reduction of over £¾ million in its rate support grant, which is equivalent to an increase of 4·4p in the pound. This is coupled with the extra costs involved in the full cost of rate collection, which will be added to the district rate next year. Faced with the prospect of an increase of over 7p in the rate for district purposes, the future for the electors in my constituency appears to be bleak. As, I repeat, the council has a record of sound budgetary control that Whitehall should envy, it is having
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  great difficulty in finding where to cut. The savings that are contemplated will cut into the bone because there is no fat left.
  The senior councillors know the trap of just cutting capital expenditure. It is so much easier to do that in a democracy. It is the revenue expenditure that always hurts the most. The councillors know that cutting capital expenditure leads to problems if the administration is merely allowed to march on—a lesson that Whitehall might take to heart as well.
  The councillors are reluctant to cut services, because they take considerable pride in running them, as they have for many years, most efficiently. However, the council has been forced to cut recreational facilities at the old gaol in Abingdon, to the great distress of my constituents and, indeed, the council.
  I must tell my hon. Friend that 12 people have recently been made redundant. The councillors and senior officers are also looking at other areas of the administration to make savings. They know that no-redundancy policies are Socialist luxuries, which the corporate ratepayers and ordinary ratepayers cannot contemplate or afford. They have been making savings and taking proper steps so that the rates will not have to rise unduly, although there will be a considerable hoist in the rates this year.
  Most of the problems are faced by other councils in the country. We cannot claim a monopoly of problems as a result of the rate support grant. However, a specific problem is faced by the Vale of White Horse district council, which believes that it has been penalised over the rate support grant calculation for selling its housing stock to tenants.
  The problem arises when calculating the authority's assessment for grant based on how much it should spend. The arithmetic dealing with profits and deficits and housing revenue account assumes that future interest and mortgage payments resulting from council house sales will put the district council into substantial profit. That income counts as a contribution to the rate fund, depresses the Government's grant-related expenditure assessment for the council, and leaves it with a smaller grant entitlement than it would have received if it had not sold any council houses.
  There is a further problem involved in council house rents. The calculation assumes that councils will charge the average rent for the region. Councils charging below the regional average have a lower assessment and lower grant. They will have to make up the difference by increasing rents or rates and cutting services even further.
  My constituent councillors are concerned that they are being penalised by having to charge higher rents to ensure that expenditure assessment and grant entitlement is higher in 1982–83. If that is the national tendency it could be inflationary. Councils with high rents and high levels of expenditure do not appear to be penalised in the same way under the formula.
  I cite Lambeth—and who does not cite Lambeth when talking about incontinent councils? Lambeth makes a speciality of spending money, ignores Government requests for rent rises, and does not make haste in selling council houses—quite the reverse—and does well. In this aspect of grant allocation my council is being penalised because of low expenditure and low rents.
  I do not wish to sound negative. My Conservative councillors and I are at one in wishing the Government success in their attempts to introduce controls and to save

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  on public authority expenditure, but we remain unconvinced that the present system is working in the interests of my constituents or, indeed, of the country at large.
  I hope that the Minister can give my authority some comfort. Surely we cannot sit idly by and see our facilities reduced and our rents and rates rise whilst other authorities who ignore calls for cutting costs benefit at the expense of the public purse.
  I respectfully seek from the Minister the replacing of about £286,000, which has been lopped off our housing revenue account in the erroneous belief that on sales of council houses the Vale of White Horse district council is cash in. Mortgages are supplied by the council and it is not in receipt of substantial sums. It has merely transferred cash from one ledger to another. It is wrong to believe that the council has benefited substantially in the short term. We freely concede that what has been done has been done. We hope that it will be reviewed in years to come. We also hope that the Minister will review the grant after the first year.
  My constituent councillors know that there is an element of rough justice. They are not seeking Utopia, or grumbling irresponsibly about cuts. They intend to serve, but they do not believe that Westminster has got it right at the start. They believe, with some justice, that the problems of local government are not always understood at Westminster. Sometimes councillors feel patronised by Departments that do not appear fully to understand the problems of councillors or the efficient way in which they run their local authorities. That could be reflected in the way in which Westminster Departments are run.
  I cordially invite the Minister to Abingdon to see for himself the unique contribution that my council has made to planning, and how ancient Abingdon lives happily with modern housing, which blends with discreetly placed industrial estates for medium and small business. The whole is a pleasure to the eye and a tribute and compliment to the authorities that have grappled with many problems of late, not least with the closure of MG in Abingdon, which now entails a new beginning for an industrial estate to be developed by Standard Life, which we hope will replace the jobs lost last year. All those problems have been faced manfully by my district council.
  I end on a high note. If the Minister comes to my constituency—as I hope he will—he might take time to pay tribute to the Edwards twins, who have served the local authority well for the past 30 years and who will honourably retire in May this year. I am sure that he will want to wish them well.
  On behalf of my council, I shall listen to the Minister's reply with great interest. He will know that although we are critical we offer constructive criticism and hope that the Minister can offer us what we want and what has been expected by my council—an open and constructive mind.
  11.47 pm
  The Under-Secretary of State for the Environment (Mr. Giles Shaw): I congratulate my hon. Friend the Member for Abingdon (Mr. Benyon) on the way in which he put over his case about his council and on the way in which he marshalled his arguments, which suggest that under the present new system of determining the rate support grant his council has been to some extent unfairly treated.
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  I wish to be associated with the good wishes to the Edwards twins after their extremely long record of public service. I also wish to be associated with congratulating the council of Vale of White Horse on the efforts that it has made to establish the industrial estate to take over from the recently closed Abingdon works. I am delighted to know that there is now a significant prospect of a development there.
  The burden of my hon. Friend's remarks understandably related to the block grant. He graphically illustrated many of the exceedingly difficult elements in that system. Those elements illustrate the dilemmas which face any Government when they distribute the rate support grant each year. The task is to share out about £11 billion between over 400 local authorities. That is half the total yield of income tax. Every authority is different. I venture to suggest that my hon. Friend would expect many of our hon. Friends to argue that their authorities deserve special consideration in terms of the way in which the amount should be shared. Each one has its own competing claims on a greater share of grant. The vast majority can point to a long and creditable tradition of responsible decision making and responsible financial control. The Vale of White Horse is one of those authorities.
  My right hon. Friend the Member for Bridgwater (Mr. King) was pleased to meet the leaders of that authority last January, together with my hon. Friend. Although they enjoyed their meeting and found it useful, perhaps they did not entirely understand the problem, but at least they had an opportunity for a full and frank discussion about it. One of the major steps forward is that we can have such a discussion at all. That could not have happened under the old arrangements. Therefore, if I commiserate with my hon. Friend's councillors over the fact that they were not totally satisfied, at least the door is open for discussion on those matters.
  No longer are the calculations hidden from view. On the contrary, we have opened up both the figures and the thinking behind them to a greater extent than ever before.
  I can fully understand my hon. Friend's concern about the not inconsiderable grant changes that the council is experiencing, despite its good record of economy and observance of Government spending guidelines. But that does not mean that the block grant system is failing to achieve its objectives. Nor, indeed, would it be true to say that we are muddying waters which have remained undisturbed for years. Only two years ago, in 1979–80, the then Secretary of State decided to reallocate to shire district councils part of the needs element of the rate support grant, which had previously been paid only to county councils in shire areas. The effect of that was to give district authorities, in one fell swoop, more than £300 million in grant, enabling many of them to achieve very low rate increases that year, or even to cut their rates, because of this windfall. The Vale of White Horse obtained almost £1 million in this way, and cut its local rate by one-third in that year.
  How was that money shared out among the shire districts? It was shared out not by using any proper assessment or consistent measure of spending need for districts across the county but by means of a rough and ready arrangement under which three-quarters was based on population and one-quarter was related to their average expenditure over the previous three years. Not only 'was that extraordinarily cumbersome and indefensible as a means of compensating for spending needs; a significant

  537
  part of the grant distribution was dependent upon what authorities actually spent. Even the right hon. Member for Stepney and Poplar (Mr. Shore) recognised that that approach could not last and had to be replaced by a better basis for the longer term. We were faced with dismantling those arrangements and bringing district councils fully into the rate support grant on a sound basis. Of course, correcting the anomalies created by the ad hoc arrangements inevitably means some extra difficulty for some authorities this year. But changes now for districts like the Vale of White Horse must be seen in the context of its sudden windfall grant gain of only two years ago.
  I turn to the assessment of spending needs—the grant-related expenditures. Of course, for shire districts housing is a key component of their spending and is represented in the GREs by indicator E7. My hon. Friend criticised the way in which we have put this factor together. I accept that the technicalities are difficult to follow and I hope that he will accept, for his part, that the underlying reasoning takes account of the position in which authorities now find themselves.
  The indicator is built up on the assumption that each authority is able to charge the regional average rent, so that in some cases—as for the Vale of White Horse—they are assumed to make a contribution to, rather than from, their rate fund. It is the case that Vale of White Horse rent levels are relatively low, and beneath the regional average.
  Different reasons may apply in different areas to explain why rents have been kept low. The position can be affected by the age of the stock and the costs which the authority has to bear as a result. Local expenditure on upkeep may be relevant. So too, of course, is the effectiveness or otherwise of local management. But I note what my hon. Friend said about the Vale of White Horse. I would not wish to dispute that its management of its housing stock has been economical and that that has contributed to low rents. I note also what my hon. Friend said about the sale of council houses and the assumptions made that that would allow the authority to retain significant sums. The question of the mortgage payment is involved. There is an arrangement about mortgages which is relevant to this point. The mortgage payment is 100 per cent., and is spread over a considerable time. It is not deductible at once from the amount available for housing. Local authorities now have an enlarged discretion on rent, as is implicitly recognised in basing our housing GRE calculation on the assumption of each authority charging, and being able to charge, rent at the regional average level.
  The housing component of the GRE notwithstanding, I gather that the Vale of White Horse is planning to restrain its overall spending in 1981–82 to below the level of its total GRE. That appears to be a matter for congratulation. I am in no doubt that authorities that are able to do that will be in a much better position when we come to next year's settlement. We shall be able to smile on responsible authorities and to frown on irresponsible ones, such as Lambeth.
  Naturally, I can give no guarantees about how the rate support grant for the following year, 1982–83, will come out. There are a number of aspects of this year's block
  538
  grant which we shall want to examine further with the local authority associations in the Consultative Council on Local Government Finance during the course of this year. It is appropriate, therefore, to tell my hon. Friend quite clearly that the sort of points that he raised tonight in relation to the apparent feeling of unfairness and discrimination in the operation of the system will be matters reflected not only by my right hon. Friend in respect of his district council but by other hon. Members on both sides of the House in respect to many other councils. Therefore, we intend further to investigate the scheme with the local authority associations. No doubt many of the matters connected with factor E7 and housing matters will be concerned. We shall enormously value the comments that my hon. Friend and other hon. Members make on these matters.
  There is an important point. The new-found ability of hon. Members to contribute to the wide-ranging debate about the development of the rate support grant is important. It allows us to try to evolve a system to eliminate some of the problems which must have occurred as we applied the system initially this year.
  I assure my hon. Friend that while these matters may not in one year either all be explicable or all be put in hand without difficulty, the prospect for the future is that we shall be able to review the operation of the new system and, we hope, make changes in the light of experience.
  As my right hon. Friend the Minister told my hon. Friend and his colleagues in January, and as he has made clear in this House on more than one occasion, we are under no illusion that this year's RSG settlement is anything but a tough one. We know that it is a tough one. We are asking a good deal from local authorities—particularly Conservative councils like the Vale of White Horse, which has always readily responded in the past to Government calls for economy. It is essential that every entity charged with responsibility for spending public money at this time should examine its plans afresh to see whether they can be afforded. One corollary of this is less money for local government as a whole out of the Exchequer's resources. But I am confident that we have taken a considerable step forward towards greater fairness in the distribution of those limited funds.
  I note what my hon. Friend says about the comparisons between the Vale of White Horse and its adjacent authority, Oxford city. I should like to examine that and write to my hon. Friend on it, offering comments upon it. But overall the system that we have implemented this year is based upon an essential fairness, which was absent from a system which largely depended upon previous rates of expenditure. I urge councillors in my hon. Friend's area and elsewhere to stick to the task of ensuring efficiency and economy. Those are the authorities which will reap the benefits of the greater fairness of the new grant distribution system in years to come.
  I am confident that the councillors of the Vale of White Horse and my hon. Friend's authority will be those to whom we shall look for leadership in this matter, because I feel certain that they will be able to operate as efficiently in the future as they have in the past.
  Question put and agreed to.
  Adjourned accordingly at two minutes to Twelve o' clock.

DUCHY OF LANCASTER
  Sir Peter Hayman
  Sir Peter Hayman
  Members of Parliament (Salaries)
  Members of Parliament (Salaries)
ATTORNEY-GENERAL
  Sir Peter Hayman
  Sir Peter Hayman
  Personal Injury Cases (Damages)
  Personal Injury Cases (Damages)
  Barristers (Dress)
  Barristers (Dress)
SOLICITOR-GENERAL FOR SCOTLAND
  Personal Injuries (Damages)
  Personal Injuries (Damages)
SCOTLAND
  Solvents (Abuse)
  Solvents (Abuse)
  Sheltered Housing Project (Maryhill)
  Sheltered Housing Project (Maryhill)
TRADE
  Bradford Exchange Limited
  Bradford Exchange Limited
  Insurance Companies (Repudiation of Liability)
  Insurance Companies (Repudiation of Liability)
  Caravans (Code of Practice)
  Caravans (Code of Practice)
  Aircraft Accident (Tenerife)
  Aircraft Accident (Tenerife)
  Tamworth Industrial Fabrics Ltd. (Correspondence)
  Tamworth Industrial Fabrics Ltd. (Correspondence)
  Royal Bank of Scotland and Lloyds and Scottish Finance Group (Mergers)
  Royal Bank of Scotland and Lloyds and Scottish Finance Group (Mergers)
  Trust House Forte Ltd.—Savoy Group
  Trust House Forte Ltd.—Savoy Group
  Full-line Forcing and Tie-in Sales (Report)
  Full-line Forcing and Tie-in Sales (Report)
  Export and Import Markets
  Export and Import Markets
PRIME MINISTER
  Engagements
  Engagements
  Central Policy Review Staff
  Central Policy Review Staff
  Caernarfon
  Caernarfon
  Pensioners' Lobby
  Pensioners' Lobby
  Interception of Communications (Diplock Report)
  Interception of Communications (Diplock Report)
  Mintlaw
  Mintlaw
  Factory Closures
  Factory Closures
  Dunlop Ltd.
  Dunlop Ltd.
AGRICULTURE, FISHERIES AND FOOD
  Green Pound
  Green Pound
  Tate and Lyle Refinery, Liverpool
  Tate and Lyle Refinery, Liverpool
  Common Agricultural Policy
  Common Agricultural Policy
  Pre-packaged Foods (Cost)
  Pre-packaged Foods (Cost)
  Agriculture Industry (Employment)
  Agriculture Industry (Employment)
  Agricultural Training Board
  Agricultural Training Board
  Milk
  Milk
  Fish Stocks
  Fish Stocks
  Agricultural Wages
  Agricultural Wages
  Milk Marketing Board
  Milk Marketing Board
  Agricultural Land
  Agricultural Land
  Potatoes
  Potatoes
  Intervention Stocks
  Intervention Stocks
  Beef
  Beef
  European Community (Exports to Russia)
  European Community (Exports to Russia)
  Beef Cows
  Beef Cows
  Farm Incomes
  Farm Incomes
  Fish and Fish Products
  Fish and Fish Products
  Poultry Industry
  Poultry Industry
  Cream (Container Regulations)
  Cream (Container Regulations)
  Glasshouse Production
  Glasshouse Production
  Barley
  Barley
  Farm Subsidies
  Farm Subsidies
  Farm Prices
  Farm Prices
  Wool Marketing Board
  Wool Marketing Board
  Swine Vesicular Disease
  Swine Vesicular Disease
  Fishing Industry
  Fishing Industry
  Brucellosis
  Brucellosis
  Price Review
  Price Review
  Marginal Land Farmers
  Marginal Land Farmers
  European Community (Price Proposals)
  European Community (Price Proposals)
  Agriculture Industry
  Agriculture Industry
  European Community (Subsidised Exports)
  European Community (Subsidised Exports)
  Subsidised Butter (Charities)
  Subsidised Butter (Charities)
EDUCATION AND SCIENCE
  Local Authorities (Manpower Requirements)
  Local Authorities (Manpower Requirements)
  Further and Higher Education (Teacher Redundancies)
  Further and Higher Education (Teacher Redundancies)
  Higher Education (Expenditure)
  Higher Education (Expenditure)
  Universities (Closure or Amalgamation Proposals)
  Universities (Closure or Amalgamation Proposals)
  Universities (Expenditure)
  Universities (Expenditure)
CIVIL SERVICE
  Contract Cleaning
  Contract Cleaning
FOREIGN AND COMMONWEALTH AFFAIRS
  Poland (Food Assistance)
  Poland (Food Assistance)
HOME DEPARTMENT
  Prisoners (Statistics)
  Prisoners (Statistics)
  Smoke Detectors
  Smoke Detectors
  Remand Statistics
  Remand Statistics
  Fines (Outstanding Payment)
  Fines (Outstanding Payment)
  Tyne and Wear (Parliamentary Constituencies)
  Tyne and Wear (Parliamentary Constituencies)
  Easter Act 1928
  Easter Act 1928
  Persons on Remand
  Persons on Remand
  Police Custody (Deaths)
  Police Custody (Deaths)
  Personal Information (Protection)
  Personal Information (Protection)
INDUSTRY
  Grants
  Grants
  Walsall
  Walsall
  National Giro Bank
  National Giro Bank
  Clothing Industry Resources Productivity Agency
  Clothing Industry Resources Productivity Agency
  British Steel Corporation
  British Steel Corporation
NORTHERN IRELAND
  Agriculture Industry
  Agriculture Industry
  Medical and Social Services (Expenditure)
  Medical and Social Services (Expenditure)
  Fuel Allowance
  Fuel Allowance
  Training Schools (Black Report)
  Training Schools (Black Report)
  Ormeau Park Recreation Centre
  Ormeau Park Recreation Centre
  Health and Social Services (Administrative Costs)
  Health and Social Services (Administrative Costs)
  Leisure Centres (North and West Belfast)
  Leisure Centres (North and West Belfast)
  Constitutional Reform
  Constitutional Reform
  De Lorean Car Co.
  De Lorean Car Co.
WALES
  Services for the Elderly/
  Services for the Elderly/
  School Leavers (Dyfed)
  School Leavers (Dyfed)
  School Closures
  School Closures
  Doctors' Salaries
  Doctors' Salaries
ENVIRONMENT
  Local Authorities (Expenditure)
  Local Authorities (Expenditure)
  Housing Investment Programmes
  Housing Investment Programmes
  Smoke Detectors
  Smoke Detectors
  Leasehold Valuation Tribunals
  Leasehold Valuation Tribunals
  Town and Country Planning Regulations
  Town and Country Planning Regulations
  Housing Investment Expenditure
  Housing Investment Expenditure
  Grant-related Expenditure
  Grant-related Expenditure
  Dioxin Dumping (North Derbyshire)
  Dioxin Dumping (North Derbyshire)
  Transport Policies (Cycling)
  Transport Policies (Cycling)
NATIONAL FINANCE
  Public Sector Borrowing Requirement
  Public Sector Borrowing Requirement
  Personal Taxation
  Personal Taxation
  Value Added Tax
  Value Added Tax
  Sick Pay Schemes (Taxation)
  Sick Pay Schemes (Taxation)
  Tax and Price Index
  Tax and Price Index
  Income Tax Payers
  Income Tax Payers
  Dutiable Items (Revenue)
  Dutiable Items (Revenue)
  Betting Tax
  Betting Tax
  Women Pensioners (Taxation)
  Women Pensioners (Taxation)
  Vehicle Excise Duty (Heavy Goods Vehicles)
  Vehicle Excise Duty (Heavy Goods Vehicles)
  European Community (Finance Council)
  European Community (Finance Council)
  Power Stations (Duty-free Oil)
  Power Stations (Duty-free Oil)
  Personal Tax Allowances
  Personal Tax Allowances
  Family Income
  Family Income
TRANSPORT
  Cycling
  Cycling
  Motorways (Sevenoaks)
  Motorways (Sevenoaks)
  Motor Cycle Riders (Test)
  Motor Cycle Riders (Test)
  Petrol (Lead Additives)
  Petrol (Lead Additives)
SOCIAL SERVICES
  National Health Service (Employees)
  National Health Service (Employees)
  Drugs (Tests)
  Drugs (Tests)
  Audiological Services
  Audiological Services
  Child Care (Cost)
  Child Care (Cost)
  Bio-Medical Research
  Bio-Medical Research
  One-Parent Families
  One-Parent Families
  Mentally Handicapped Children
  Mentally Handicapped Children
  Supplementary Benefit (Blindness Addition)
  Supplementary Benefit (Blindness Addition)
  Family Income Supplement
  Family Income Supplement
  Pensions
  Pensions
  Invalidity Benefit
  Invalidity Benefit
  Abortion
  Abortion
  Census (Computing)
  Census (Computing)
EMPLOYMENT
  Secretary of State (Engagements)
  Secretary of State (Engagements)
  Employed Persons
  Employed Persons
  Job Search and Employment Transfer Schemes
  Job Search and Employment Transfer Schemes
DEFENCE
  Universities and Polytechnics (Grants and Contracts)
  Universities and Polytechnics (Grants and Contracts)
  Job Vacancies (West Midlands)
  Job Vacancies (West Midlands)
  Northern Ireland (Service Fines)
  Northern Ireland (Service Fines)
  Canberra Aircraft (Refurbishing Contract)
  Canberra Aircraft (Refurbishing Contract)
  Excess Baggage (Charge)
  Excess Baggage (Charge)
  Glasshouse Industry (Energy Costs)
  Glasshouse Industry (Energy Costs)
  Northumberland (Shell Fishing)
  Northumberland (Shell Fishing)
AGRICULTURE, FISHERIES AND FOOD
  European Community (Foodstuff Purchases)
  European Community (Foodstuff Purchases)
  Green Pound
  Green Pound

Preamble
The House met at three of the clock (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Exeter):
The LORD CHANCELLOR on the Woolsack.

Water Charges
Lord Boyd-Carpenter: 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 requests they have made to water authorities to reduce proposed increases in their charges; and what responses they have received.
The Parliamentary Under-Secretary of State, Department of the Environment (Lord Bellwin): My Lords, following the consultants' review of water authority budgets in February, the authorities were asked to look at possible ways of moderating the increase in charges proposed for 1981–82. As a result, the total of water rates to be collected in England and Wales in 1981–82 will be some £91 million lower than had been planned.
Lord Boyd-Carpenter: My Lords, while congratulating my noble friend on succeeding in making water cheaper—as a slight offset, perhaps, to making whisky dearer—may I ask him whether the need for this kind of action by the Government is not a rather vivid illustration of the lack of machinery for consumer representation in the water industry?
Lord Bellwin: That may be an interesting point to consider, my Lords, but we should have to look at the procedure that exists at present in the water industry, at what it was the Government did to try, if you like, to persuade the industry themselves—because it was they who called in the outside people—and the effect that that had.
Lord Harmar-Nicholls: My Lords, will the £91 million that is being saved be spread over the whole country or will some sections get a lot and the others get none?
Lord Bellwin: My Lords, it will be spread over the whole of the country. It will of course vary according to each separate authority.

Consumers and the Nationalised Industries
3.3 p.m.
Baroness Burton of Coventry: 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 when they expect to complete their review of the position of consumers and the nationalised industries; and whether this review will be published as a Green Paper for circulation among interested organisations or as a White Paper for discussion in Parliament, or both.
The Parliamentary Under-Secretary of State, Department of Trade (Lord Trefgarne): My Lords, there will be consultations before the review is completed, and we are currently considering what form of consultation would be most appropriate.
Baroness Burton of Coventry: My Lords, does the noble Lord recall, or does he have a note of it in his brief, that his noble friend Lord Trenchard told me on 22nd October that the Minister expected the report by the end of the year? His noble friend said then that it had taken rather a long time. Could the noble Lord say how much longer we shall have to add to that long time?
Lord Trefgarne: I am afraid I cannot be precise, my Lords, but I can tell the noble Baroness that it will not be very long.
Baroness Burton of Coventry: My Lords, I was not clear from the Answer whether the paper will be published and whether we shall then have an opportunity to discuss it in Parliament as well as outside. If not, what is the procedure to be?
Lord Trefgarne: My Lords, the Government have not decided what form this document should take and how it should be published, but whatever we decide I have no doubt the noble Baroness will find a way of raising it in your Lordships' House.
Baroness Macleod of Borve: My Lords, is my noble friend aware that the consumer councils attached to the nationalised industries are of vital importance? Having been a member of one, I know that the main way in which consumers of nationalised industry products can make their position felt is through those consumer councils. Is my noble friend aware, therefore, how vital it is that these councils should be kept in being, and will he take note of this point?
Lord Trefgarne: My Lords, I certainly agree with my noble friend that it is vital that nationalised industries should be made aware in the most effective way possible of the views of their consumers. It was with a view to improving arrangements for this that this inquiry was originally set in train.

Drug Addiction Units and Patients
3.5 p.m.
Baroness Trumpington: 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 how many drug addiction units there are, and what has been the increase in patients in them over the past 10 years.
Lord Sandys: My Lords, there are 56 units or other special facilities for the treatment of narcotic drug addiction within the National Health Service in the United Kingdom, including four units for in-patient treatment only. Other National Health Service hospitals may sometimes use beds for the treatment of drug misuse, but information on this is not available centrally. Information on the number of patients over the last 10 years is not available for all parts of the United Kingdom. However, the number of patients in England and Wales rose from an annual average of 1,104 in 1971 to 1,713 in 1980, an increase of 55 per cent.
Baroness Trumpington: My Lords, while thanking the Minister for that reply, may I ask him whether the number of deaths due to drug addiction is on the increase, and would he agree that the closure of any facilities for the rehabilitation of those with drug dependence must be a cause for national concern, in view of the limited number of facilities available for this group of people?
Lord Sandys: Indeed it is a cause for national concern, my Lords. The figures of deaths from drug addiction, I must stress, are available only up to 1979. The available figures show that there were 38 deaths from drug dependency in 1971 and 111 in 1979, the last year for which figures are available. Those include deaths where the cause or underlying cause of death is recorded as drug dependency—that is, from any drug, not only opiates or barbiturates but also analgesics and tranquilisers, including overdose cases.
Lord Soper: My Lords, are the Government fully aware of the change in the nature of this dependency in the last few years, away from personal characteristics which would render particular people liable to become addicts, to the general stress and sense of loss of useful occupation, which has meant in many of the places where they have been cared for a need for greater attention to be paid to rehabilitation after the preliminary drying out has been secured?
Lord Sandys: My Lords, the Government are aware of that, and in the debate on an Unstarred Question in this House on 30th October 1979 that fact was made very clear by noble Lords who took part.
Baroness Faithfull: My Lords, has the success rate of the clinics been monitored?
Lord Sandys: My Lords, the success figures are monitored to the extent that one could say that a success rate of 30 per cent. could be thought to be a maximum in present circumstances, but it is an extremely difficult figure to calculate.
Lord Wallace of Coslany: My Lords, how many units in the National Health Service are scheduled to be closed as an economy measure?
Lord Sandys: My Lords, so far as I am aware no unit is at present under immediate threat of closure. The noble Lord may be referring to the Ashdown ward of Bexley Hospital. That is under consideration now and I am glad to say that the regional health authority and the area health authority are trying to find ways by which it may remain open.
Lord Wells-Pestell: My Lords, the noble Lord was good enough to give the House figures of drug addicts who attend as in-patients in hospitals. Can he say, so far as the second figure is concerned, how many of them are patients who have already been in hospital, have been discharged and have had to return? I understand the difficulty one is in when talking about success, but may I ask the Minister to say, when he says it is estimated that the success rate is about 30 per cent., what aftercare and supervision there is, so enabling one to form some sort of judgment as to the yardstick which is being used?
Lord Sandys: My Lords, I think that the yardstick is an extremely difficult one. This is no more than a "guesstimate". With regard to the aftercare situation, I fear that I am not able to give the noble Lord an answer to the first part of his supplementary question.
Lord Gridley: My Lords, bearing in mind the great extent of the incidence of drug smuggling in the last few years, has the noble Lord any information regarding the apprehension of offenders in this light? Is this not one system that should be tightened up and brought under stricter control?
Lord Sandys: Yes, most definitely, my Lords; but that is beyond the ambit of this Question.
Baroness Trumpington: My Lords, would not the Minister agree that all the figures that he has produced are really "guesstimates", bearing in mind the vast number of people who are not registered drug addicts and who are not known to the medical profession or to ordinary members of the public as being drug addicts?
Lord Sandys: My Lords, perhaps I may refer to what my noble friend Lord Belstead said, as reported at column 363 of the Official Report of 30th October 1979, which is most relevant:
"Perhaps the most scientific indication that we have had of the possible size of this unknown grey area of narcotic addiction is contained in studies which were carried out by Dr. Hamid Ghodse into the drug problems dealt with by 62 London hospital casualty departments".
Baroness Macleod of Borve: My Lords, can my noble friend give the House any reassuring figures? It is within my knowledge that the amount of drugs coming into this country has escalated enormously, possibly since the figures referred to were given. Does my noble friend agree that it is vitally important, through both the DHSS and voluntary organisations, to encourage the setting up of as many drug assessment centres and rehabilitation centres as possible? Does my noble friend also agree that some young people take to drugs more than they take to smoking or to drink, and this is harmful to their future? Will he

859
please encourage voluntary organisations, as well as the DHSS, to set up as many drug centres as possible?
Lord Sandys: My Lords, with regard to the number of addicts, the number notified to the Home Office rose to 2,815 on 31st December 1979. Provisional statistics for 1980 show a continuation of the upward trend of the past few years. Of particular concern is the rise in the number of newly-notified addicts from outside London and the Home Counties. Provisional figures for 1980 suggest that such notifications are 41 per cent. up on the 1979 figures. With regard to the point about the clinics, I do not think I can add to what I have already said; but the Government are very well aware of the increasing trend of the figures.
Lord Leatherland: My Lords, will the noble Lord agree that if the tax on alcoholic beverages were not so high, more people might be inclined to be satisfied with the mild stimulation of those beverages without being driven to buy drugs?

Land Registers in the London Area
3.14 p.m.
Lord Gainford: My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will increase the number of local authorities required to publish land registers of vacant and under-used land in their ownership, so as to include all Inner London boroughs and metropolitan district councils.
Lord Bellwin: My Lords, Her Majesty's Government do not propose at this stage to increase the number of 33 districts and London boroughs which are currently designated for registers, but it is expected that the scheme will be extended later in the light of experience.
Lord Gainford: My Lords, I thank my noble friend the Minister for that Answer. In the light of the proposals of Her Majesty's Government for the use of vacant and under-used land, and bearing in mind the importance of the land registry offices concerned, is there any likelihood of difficulties arising from the fact that land registration is so specialised a profession that it is almost an esoteric mystery to the outsider? Will any obstacles to administration arise from the fact that, where land has changed hands a number of times, some of the land registry offices are in danger of becoming mausoleums of parchment?
Lord Bellwin: My Lords, I should have thought that one of the objects of the legislation is to ensure that the mausoleums to which my noble friend refers are opened up and air is allowed in, so that one can see exactly what is available. With regard to the first part of his supplementary question, the scheme is in its relatively early days. Indeed, the registers are not to be published until April, and so we want to see what experience is gained after the scheme comes into operation.

Business
Lord Denham: My Lords, with the leave of the House, at a convenient moment after 3.30 p.m. my noble friend Lord Gowrie will repeat a Statement that is to be made in another place on International Computers Limited.
It may also be for your Lordships' convenience 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 be adjourned at approximately 7 o'clock for approximately one hour. The Committee stage of the Water Bill will be taken during the adjournment.

Business of the House
The Minister of State, Ministry of Agriculture, Fisheries and Food (Earl Ferrers): My Lords, on behalf of my noble friend the Leader of the House I beg to move the Motion standing in his name on the Order Paper.
Moved, That Standing Order No. 43 (No two stages of a Bill to be taken on one day) be dispensed with for the purpose of taking the Consolidated Fund (No. 2) Bill through its remaining stages this day.—(Earl Ferrers.)
On Question, Motion agreed to.

Consolidated Fund (No. 2) Bill
Earl Ferrers: My Lords, on behalf of my noble friend Lord Cockfield I beg to move that this Bill be now read a second time.
Moved, That the Bill be now read 2a.—(Earl Ferrers.)
On Question, Bill read 2a: Committee negatived.
Then, Standing Order No. 43 having been dispensed with, pursuant to Resolution, Bill read 3a, and passed.

English Industrial Estates Corporation Bill [H.L.]
The Lord Chancellor (Lord Hailsham of Saint Marylebone): My Lords, I understand that no amendment has been put down either to this Bill or to the next three Consolidation Bills in my name on the Order Paper, and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee on any of these Bills. Unless, therefore, any noble Lord objects, I propose to move that the Order of Re-commitment in respect of each of these four Bills be discharged.
I beg to move that the Order of Re-commitment in respect of the English Industrial Estates Corporation Bill be discharged.
Moved, That the Order of Re-commitment be discharged.—(The Lord Chancellor.)
On Question, Motion agreed to.

Public Passenger Vehicles Bill [H.L.]
The Lord Chancellor: My Lords, I beg to move, for the same reasons as were given in regard to the previous Bill, that the Order of Re-commitment in respect of the Public Passenger Vehicles Bill be discharged.
Moved, That the Order of Re-commitment be discharged.—(The Lord Chancellor.)
On Question, Motion agreed to.

National Film Finance Corporation Bill [H.L.]
The Lord Chancellor: My Lords, for the same reasons beg to move that the Order of Re-commitment for the National Film Finance Corporation Bill be discharged.
Moved, That the Order of Re-commitment be discharged.—(The Lord Chancellor.)
On Question, Motion agreed to.

Film Levy Finance Bill [H.L.]
The Lord Chancellor: My Lords, for the same reasons I beg to move that the Order of Re-commitment for the Film Levy Finance Bill be discharged.
Moved, That the Order of Re-commitment be discharged.—(The Lord Chancellor.)
On Question, Motion agreed to.

Royal Assent
The Lord Chancellor: My Lords, I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified her Royal Assent to the following Acts:

Gas Levy Act,

Consolidated Fund Act,

Redundancy Fund Act,

Industry Act,

House of Commons Members' Fund and Parliamentary Pensions Act,

European Assembly Elections Act.

Companies (No. 2) Bill [H.L.]
3.23 p.m.
Lord Trefgarne: My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved, that the House do now again resolve itself into Committee.—(Lord Trefgarne.)
On Question, Motion agreed to.
House in Committee accordingly.
[THE LORD ABERDARE in the Chair.]
Lord Mishcon Lord Mishcon had given notice to move Amendment No. 60:
After Clause 22, insert the following new clause:
("Preparatory steps before registration of
.—(1) Application shall not be made for registration of a company under the 1948 Act or for re-registration under that Act or the 1980 Act until 21 days after notice of intention to apply has been published in the Gazette, stating the proposed name of the company.
(2) Any person, being a body the name of which is entered on the index of names kept by the registrar in pursuance of section 23 of this Act, may make to the Secretary of State an objection in writing within 21 days after the publication in the Gazette of notice of intention to apply for registration or re-registration, but such objection shall be limited to an objection on the grounds that the proposed name of the company is so similar to the name of the person making the objection that confusion is likely to be caused.
(3) The Secretary of State shall take account of any objection under subsection (2) above before deciding whether to permit the registration or re-registration of a company by a name to which objection has been made.").
The noble Lord said: Those Members of the Committee who were in attendance at a very late hour on Tuesday night heard from all sides of the Committee an expression of view that to rob the Registrar of Companies of the power to disallow a similar name was wrong, and the amendment now before the Committee is a long-stop to that amendment. In view of the attendance of the Committee at that time and the number of organisations which supported the amendment, quite apart from its looking as though it were an all-party amendment from the speeches then made, the amendment was then withdrawn so as to be dealt with at the Report stage. I think it would be an inconvenience to your Lordships' Committee, therefore, if I were to make a speech or to move an amendment which deals with this long-stop position. That is the reason why I shall not be moving this amendment this afternoon.
Clause 23 [Index of names]:
[Amendment No. 61 not moved.]
Lord Lloyd of Kilgerran Lord Lloyd of Kilgerran moved Amendment No. 62:
Page 30, line 35, at end insert—
("; and
(f) business names within the meaning of the Registration of Business Names Act 1916.").
The noble Lord said: I have the privilege to submit this very important amendment, which appears, from the names that are appended to it in the Marshalled List, also to be on an all-party basis. It is an amendment to Clause 23 of the Bill, which gives instructions to the Registrar of Companies to keep an index of the names of various bodies; and the object of this amendment is to restore the Registration of Business Names Act 1916 into this Bill so that the Registrar of Companies has to maintain a business names register. This register of business names, in spite of certain deficiencies, is and has been for over half a century an important source of information about business activities of firms. As those of your Lordships who are concerned with international business will well know, piracy in the field of business names and trade marks is a very profitable international growth business in this Elizabethan age. This piracy is more subtle, no doubt, than the piracy occurring in the first

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Elizabethan age, but it is just as extensive and is very profitable internationally.
The operation of the Registration of Business Names Act 1916 and of the registry certainly helps to prevent the fraud and malpractices now so rampant in the course of trade in the United Kingdom, in the export trade and, of course, in the business activities of many foreign companies. So far the Government seem to have remained obdurate in their proposals to repeal the Registration of Business Names Act in the face of many representations from outside bodies concerned with trade internationally. I say at once that the Government have endeavoured to put in alternative steps to deal with this matter, but the suggestions put into this Bill by the Government are totally inadequate to deal with the position and certainly offer little protection to business creditors in this age.
In your Lordships' House at Second Reading many of your Lordships made strong representations to the Government in favour of retaining and strengthening the present business names system. At Second Reading, the noble Lord, Lord Lyell, dealt with this important matter in his winding-up speech quite shortly and with his usual charm and persuasiveness.
Several noble Lords: Hear, hear!
Lord Lloyd of Kilgerran: I am much obliged to have that support. He indeed suggested that noble Lords who were opposing the Government's proposals were (to use his words) overlooking,
"perhaps naturally, the deficiences of the existing system".—[Official Report, 26/2/81; col. 1202.]
His use of the phrase "perhaps naturally" as an aside in all these circumstances would, if I had the time and real incentive, tempt me to indulge in a careful analysis of its likely significance. "Perhaps naturally" does not apply to me, because I am well aware of the deficiencies and the advantages of the register in the course of my experience in international trade mark matters. The noble Lord went on to say, however, that
"the Government recognise the reality of confusion in the current situation".
That certainly seemed to me to be a step forward. It may therefore be—and I am always an optimist—that the phrase which he used, "perhaps naturally", indicated that the Government may be willing to think again, perhaps quite naturally in the face of the furore aroused from and on behalf of industry in regard to their proposals to repeal this Act.
Confusion of trade names is of great commercial significance. This confusion can arise accidentally; and remarkable coincidences arise in the course of trade where a new company adopts the trade name of another one which has been in business for some time. I have personally been concerned with a large number of these cases; but the confusion is often caused deliberately and fraudulently. I think I can say positively that there is an international industry today where people set out to trade under names deliberately chosen to be like the trade name and trade marks of some well-known businesses. They deliberately set out to deceive and cause confusion so as to mislead potential customers into the belief that their goods are connected with the business of another person or firm.
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This is known as trading on the goodwill of another company, and is a well-known fraudulent business operation.
The business names register affords a source of information as one means of helping to limit confusion in the course of trade, as well as fraud and malpractices. I hope your Lordships will allow me on this important matter to go into some detail about the Registration of Business Names Act. Your Lordships may not, all of you, be familiar with it. I apologise if I take up a certain amount of time, but I have here in my hand—and I must confess an interest here—the 38th volume of Halsbury's Laws of England, edited by a Lord High Chancellor of Great Britain, the late Lord Simonds. It is dated 1962 and I am very familiar with it.
Your Lordships will allow me to say that I am the author of the several hundred pages in Volume 38 dealing with trademarks, trade names and design section. May I say at once that the book cannot be an authority because, under the legal jargon, a legal textbook can only be an authority if the author of it is dead. Now that I have confessed that I have in my hand a book largely written by myself, I am quite sure from the smile and the look of happiness on the face of the noble and learned Lord, the Lord Advocate, remembering his distinguished career at the Bar, that he is happy to find that he has another opponent who has written a book. We all at the Bar are delighted if we come on to a case where the opposing counsel is the author of a book. May I turn to page 627? I shall be brief about this.
Several noble Lords: Hear, hear!
Lord Lloyd of Kilgerran: This is a very important matter. If your Lordships' applause means that you are unanimously in my support then I shall sit down immediately; but I am not so sure that the applause was as great from the Front Benches of the Government; and it is to them and not to other Members of the House that I am directing my attention.
Under this Act, every firm having a place of business in the United Kingdom and carrying on a business under a business name which does not consist of the true surname of all partners who are individuals and the corporate names of all partners who are corporations, without any addition, must register with the Registrar of Companies. There is a similar duty to register imposed on every person having a place of business in the United Kingdom. The duty to register is also imposed on every company carrying on business under a name which does not consist of its corporate name without any addition—and so it goes on. There is a procedure for registration. It is very simple. The remarkable thing in this age is that the fees for registration and the fees associated with the registration are minute by present-day standards: £1 for registration; 25 pence for certain other formalities. It is about time that realism in some monetary sense was introduced into the finances of registration.
There are set out penalties for default of registration; and I say at once that there have been deficiencies in the system because there have been many defaults, hundreds who have not registered; and these have not been pursued. There is a penalty for false statements, for the disability of defaulters; and then it goes on to say how appeals can be made from the decision of the

865
registrar—not to the High Court, the expensive High Court, but to what is known in the section as the "Board of Trade" but which is now the Department of Industry. Then there can be the removal of the name from the register by the registrar. It is a simple procedure and it should be self-financing. In my view, it would be simple to make it self-financing.
May I give another example which has not yet been raised where the absence of a business register of this kind can affect United Kingdom trade? It is desirable for a trader before selecting a business name or a trade mark to make a proper search through all the available sources of information to see whether he is free to proceed. Business names, therefore, are potential obstacles to proposed new trademarks, and clearance searches would be less effective if the functions of the business names register were to disappear. It would definitely increase expense and may increase delay and produce frustrations which could damage the export potential. Again, the absence of a business names registry would mean that large companies would have to maintain a watching service for new names—which is expensive and time consuming. The proposals put by the Government as to how they can deal with this problem are, in my view, quite futile. This would not help industry to keep down prices.
Several commissions or inquiries during the past 20 years have reported to the Government on this matter. There is the well-known Jenkins Committee on Company Law in 1962, which recommended the reorganisation of the business names registry by increasing the fees. Then there was the Mathys Committee in 1973 investigating trade names and trademarks, which emphasised that the services in the registry were of considerable help to industry. The gentleman who chaired this committee was a distinguished chartered patent agent and deputy chairman of Courtaulds. To conclude: to abolish the business names register will leave companies with virtually no protection against a new business using a name confusingly similar to their own, whether this name has been adopted accidentally or deliberately. Overwhelming commercial arguments for retaining this registry have been presented to the Government. I urge the Government in the strongest possible terms to reconsider their proposals. I beg to move.
Lord Ponsonby of Shulbrede: I should like to support the noble Lord, Lord Lloyd of Kilgerran, in moving this amendment. It is a paving amendment for the deletion of Clauses 28 and 29 and the substitution of Clause 29 by Amendment No. 102 and also for Amendment No. 158, which deletes the reference to the repeal of the Business Names Act. The noble Lord, Lord Lloyd of Kilgerran, has given a lawyer's point of view of the effect of the abolition of the registry. I think it can be said clearly that if the registrar is abolished there will be no central register of unincorporated businesses. This means there will be no access to information about a business other than from the business itself. The point has been made already that there is no reason why the registry should not become self-financing, and there have been many indications from businesses themselves that there would be no objection to a considerable increase in the size of the registration fee and a considerable increase
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in the amount of search fee which at present is only five pence and could easily be substantially increased.
One may well ask why the Registry of Business Names is so important. One comes to look at the sort of problems which the consumers face. For example, one can take the case of somebody who has paid a deposit of £100 for the re-covering of a three-piece suite. This is an actual case reported by the Consumers' Association. When the customer returned to the shop the shopkeeper said that the business had changed hands, that he had no record of the deposit and would not accept the previous owner's receipt. The shopkeeper demanded full payment for the work before he would return the suite. The customer appealed to the local consumer advice centre who consulted the Register of Business Names. This enabled the customer to prove that the business was still owned by the same person. The customer was then able to take action to get her suite back in return for payment for the work, less a deposit. This is the sort of case which is well documented, where there is very real use for, and protection for the consumer provided by, the existence of the Registry of Business Names.
Great concern has also been expressed in many other quarters that people register a name, such as the name of a whisky, and then use it as a trade name. This can cause great confusion and many problems. We know that in the past there has been a low level of compliance with existing requirements of the registrar, but this has been considerably improved over the past few years now that banks demand that registration certificates be produced by those opening accounts. I understand that the level of compliance is up from some 50 per cent. to 80 per cent. I do not wish to take too long in speaking in support of the noble Lord, Lord Lloyd of Kilgerran, but I am sure that the proposal to retain the registry is something worthy of the support of this House.
Baroness Elliot of Harwood: The noble Lord, Lord Lloyd of Kilgerran, has said that this is an all-party amendment. Certainly I am speaking from these Benches with great conviction and experience in this subject, having been a chairman of the Consumer Council. I can also speak for the noble Viscount, Lord Hanworth, who unfortunately could not be here. He and I were together on the original Consumer Council and I do not think that he would disagree with anything I have to say. In this amendment, and on this occasion, we have a group of all-party people. How many people on this side of the Committee are going to support me I cannot tell until the vote, but I am speaking with absolute conviction when I say that I do believe that what has been said by the noble Lords, Lord Lloyd of Kilgerran and Lord Ponsonby of Shulbrede, is absolutely correct.
Since the Second Reading, when I spoke on behalf of the Consumer Council, I have received a mass of correspondence and information from a variety of societies; from the consumer groups, of course, because they were the ones I was speaking for—but also from the Law Society, complaining about the abolition of the Register of Business Names. I have also received documents from the Consultative Committee of Accounting Bodies, from the CBI, from a company named Dun and Bradstreet which is a firm dealing

867
with business information services. There are a great many organisations deeply concerned about this.
The Consumer Association runs a service based on giving help and advice to people with consumer problems, and at least half the inquiries which come before it have involved tracking down the company through the Register of Business Names. Another point is that a great deal of direct selling goes on involving goods bought by the consumer direct from a small company or trader, and, without the Register of Business Names, certain transactions could not take place. If the trader is dishonest the only way that the consumer has of tracking down the company is through the Register of Business Names. I believe one of the most important things of all is that anybody who wishes to start or run a small business and who wants to open a bank account has first to obtain a registered number. All these things are absolutely necessary.
I think it is quite unnecessary for this service to cost the Government any money at all. The noble Lord, Lord Ponsonby of Shulbrede, has pointed out that only a ridiculously small sum of money is asked for at the present time. I would say that this register is so important that an assessment should be made of what it really costs, and any company that wishes to be registered and wants to open a bank account would be able to do so if it pays the fee. If we all had to pay, as we do now, £70 to licence a motor car, I am perfectly certain that most people would pay for a licence for their business without any difficulty at all.
I should like to quote from two letters, the first from the National Federation of Consumer Groups:
"We represent voluntary consumer groups in towns throughout the country, whose members are well aware that it can be extremely difficult but absolutely crucial for an individual consumer to find out who is the responsible person in a firm with which he or she is in dispute. It must be made as easy as possible for consumers and for those who act on their behalf to enforce the rights which have been given to them in both civil and criminal laws. While this register is by no means perfect, abolishing it would not improve the situation. We would very much like to see it centralised using modern technology, made self-financing and enforced".
Another letter I have received makes the point:
"If it were not for this register, there would be no central register of unincorporated businesses. There would be no access to information about a business other than that available from the business themselves, yet objective information is vital to trade creditors in protecting themselves from the risk of dealing on open credit terms with a business they know nothing about".
I do not think that this need cost the Government anything if they will look at it in a perfectly straightforward manner and charge people what it is going to cost. Certainly I think that anything which makes it impossible for honest people to deal with dishonest traders is something we should not allow. If we do insist on this and improve it—and of course there is room for improvement—it will provide a vital service to both consumers and traders, and to the whole business conception in this country. I hope very much that all will support this amendment and that we shall not do away with what is a vital matter.
3.47 p.m.
Lord Davies of Leek: I shall take only two minutes. It must be realised that this on no account imposes a burden on small businesses. If that argument is being
868
put forward, it does not hold water. Somebody who knows a little about the commodity market and the modern use of telex will know that that can—as it does in the case of commodity prices—increase the word of a man; his word in a telex, and on the telephone internationally, is his bond. It makes it much easier to maintain the integrity of companies when the register is there and available as it has been up to now. Anyone who has listened to BBC radio on Monday morning will have heard the Checkpoint programme, which looks into fraudulent cases all over the country in which cowboy firms, without setting up business names and everything else, diddle people and destroy their happiness, sometimes even leading to suicide; these are people of small means who have been involved with bogus companies. I hope to heaven that the noble Lords opposite do not see this as a piece of "clean legislation" which will improve business. Here they can help by insisting that the register is kept. I said that I would take only two minutes and I have!
Lord Trefgarne: May I first deal with the amendment which the noble Lord, Lord Lloyd of Kilgerran, has moved and then come to the more general point of the register itself, which really hes at the heart of the noble Lord's amendment. The amendment itself would involve an enormous extension of the controls on names which have been applied in the past under the Companies Acts and the Registration of Business Names Act. It has never been unlawful, nor indeed has it ever been considered undesirable, to allow a company to be registered by the name of an unincorporated business. The index which the registrar maintains at present, and against which the names of new companies are checked, includes about 860,000 entries covering the names of those bodies which it is proposed in future to cover in the statutory index. This index has never included business names registered under the Registration of Business Names Act, of which there are now some 2,600,000.
A business name is no more than a trading convenience. Throughout the country there must be countless instances in which different businesses are trading under the same name. For example, the Castle Tea Shoppe or Phoenix Garage. The Registrar of Business Names has power to refuse to register an "undesirable" business name, but has never held that a name of this sort is undesirable simply because it is already in use. The broad purpose of the Registration of Business Names Act 1916 was to enable the public to identify the true owners of a particular business, whatever the name it used. It was not, and has never been, the effect of that Act to preclude two businesses from using the same name.
In the same way, there has been no legal obstacle to the registration of a company by a name on the Register of Business Names. There is no cross-check between the two indices. The name of a company, on the other hand, identifies its corporate personality. As such, it is important in legal processes and the registrar has always sought to secure that no two companies are registered by the same name, and under the Government's proposals this will be prohibited by the combined effect of Clauses 22 and 23.
I am afraid that the noble Lord's proposal would be quite impracticable without considerable investment

869
and extra staff. To start with, it would involve a combination of the existing indices of companies and of business names, to produce a massive index of upwards of 3½ million entries. Thereafter, the noble Lord is proposing that on a continuing basis the user of any business name should be required to send it to the registrar. How could such an obligation be enforced in the absence of a registration requirement? Even under the present system, we know that the Register of Business Names is largely defective. The outcome would be a vast and unreliable index. It would severely restrict the area within which companies are free to select their names and it would not serve the purpose of either of the registers which are at present maintained.
The noble Lord, Lord Lloyd of Kilgerran, made it clear that the amendment relates only to the names of businesses within the meaning of the Registration of Business Names Act; it does not require that that register be maintained. The present Registry of Business Names does not seek to avoid confusion. Many names are duplicated, as I have already said, solely to identify who owns which business. It must not be confused with the Companies Registry or the Trade Marks Registry. Putting all these names on the companies register would merely confound the position.
May I turn now to some of the more general points in relation to the Register of Business Names? The reason for closing the registry is that since its operation cannot be made wholly effective under legislation, the Government, in assessing their priorities, have decided that it is preferable to admit this fact and, by the closure, save 65 staff and put public spending in line with Government policy to reduce their demand on national resources.
Clause 28 defines the circumstances in which persons will be considered to be carrying on a business under a business name, and specifies the conditions under which certain business names cannot be used without the approval of the Secretary of State. The Government, while believing that a central registry can no longer be maintained, recognise the need for details of the ownership of a business, particularly for the purpose of legal proceedings, to be available to the public. A consultative document published by the Department of Trade in April 1980, accordingly proposed that a new legal requirement should be introduced; namely, that the names and addresses of the proprietors of businesses carried on under a name other than that of the owners should be displayed at the place or places of business and on business communications. In addition, customers should be given a legal right to require such information in writing in cases where they would not normally have access to the firm's place of business; for example, in the case of doorstep sales.
My noble friend Lady Elliot made a number of points, particularly on the financial implications of these proposals. Other noble Lords (I think the noble Lord, Lord Ponsonby) referred to the possibility of putting up the cost of the present registration arrangements. That matter was also referred to at Second Reading. Several noble Lords have suggested that if the charge were raised to, say, £6 or a higher figure, that would cover the present costs. So it might; but the fact is that the scale of operation which is presently
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relied upon is wholly inadequate. I have referred to the number of staff who are presently employed on this business. The fact of the matter is that if the system is to be made effective, we should have to increase the number of staff very substantially. Thus the figure of £6 or so, to which noble Lords referred, would be wholly inadequate to cover what we believe would be necessary if the scheme, as noble Lords envisage it, were to be made to operate on the present basis.
It is the case that 40 per cent. or so of the entries in the present Register of Business Names are thought to be defective for one reason or another. If we were to eliminate all those defects, that means something upwards of 1 million of the present entries would need to be investigated, their errors rectified and, if necessary, the perpetrators of those errors taken to court. Is it really thought that the cost of all that operation should be placed upon the shoulders of the small businesses involved? Remember, we are dealing only with the owners of small businesses who are trading under names other than their own. It is the case that the Register of Business Names has never sought to be a comprehensive register of unincorporated businesses, it is only a register of unincorporated businesses trading under a name other than that of the proprietor himself. The suggestion that we are doing away with what is a comprehensive register is not one that can be sustained. I believe that these difficulties and drawbacks are sufficient to justify the Government's policy in this matter, and I hope that your Lordships will reject this amendment.
3.57 p.m.
Lord Ponsonby of Shulbrede: May I pick up a point raised by the noble Lord? On the basis of 65 staff it would appear that the average staff costs would be, approximately, under £500,000. In 1980 there were 144,504 new registrations. On that basis, a fee of £3·50p would cover the staff costs, and that is not taking into account any additional income from inspection charges which could raise a considerable additional amount.
Lord Trefgarne: The noble Lord is no doubt quite right. The present level of staff could be covered in terms of cost by increasing the fee to £4 or £5, whatever the figure may be. What I have endeavoured to explain is that the present level of staff is wholly inadequate for the purpose which we see as being contained in the thoughts of the Opposition in this matter. They seek to maintain this register as it is—as an effective register. I have sought to suggest that the present register is not effective. At least 40 per cent. of the present entries are believed to be in error in one way or another.
The noble Lord, Lord Ponsonby, referred to the case of somebody who had paid a deposit on the repair of a piece of furniture. When he took his receipt back to the shop, the shop had changed hands and it was not possible to locate the old owner because the new owner disclaimed reponsibility for what happened to the deposit. Under our proposals, the receipt which the householder had received for his deposit would bear the names of the previous shop owner. Thus it would be unnecessary to institute a search at the Register of Business Names. If our proposals had been in force at the time the affair, which the noble Lord related,

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occurred, then that customer would have been much better protected than he was.
Lord Lloyd of Kilgerran: I do not propose to keep the Committee much longer in view of the important business to follow, particularly as, when moving the amendment, I addressed the Committee at length. The reply from the noble Lord the Minister once again emphasised that the Government do not fully appreciate the value of the registry's function which I outlined. We have talked about fees and administration. The administration, as was so ably pointed out by the noble Baroness, Lady Elliot of Harwood, can easily be done under modern technology, which would save an awful lot of time, trouble and staff. I could not understand the Minister's reference to certain figures but, if I may detain the Committee for a few moments more, I understand that a number of new registrations in the Registry of Business Names dealt with so ably by the registry in 1980 was of the order of 144,000. That was an increment of about 7.5 per cent. over the previous year. The number of changes that arose as a result of the operations of the registrar were just over 5,000. The number of cessations was 4,000—
Lord Trefgarne: I wonder whether the noble Lord would allow me to intervene? He referred to, I think, 5,000 changes of particulars recorded last year. I referred only to the fact that there were 2,600,000 entries. Is the noble Lord really suggesting that only 5,000 of those had changes to report to the registrar?
Lord Lloyd of Kilgerran: I am not sure whether I can answer the noble Lord the Minister on that. All I know is that they made in that year 5,000 changes. The registrar must have considered, and indeed certainly did consider, the large number of names that were on the register at that time: he must have done in order to make those changes in relation to the new registrations. Again, he issued 50,000 copies of certificates; there was an inspection of 34,000. Therefore the total activities in regard to copies of certificates and inspections were of the order of 100,000. This is quite a large matter and therefore the operation of this business registry cannot be so difficult to administer as the noble Lord has suggested. I do not propose to delay your Lordships any further, and I beg to press the amendment.
4.2 p.m.
On Question, Whether the said amendment (No. 62) shall be agreed to?
Their Lordships divided: Contents, 96; Not-Contents, 90.

CONTENTS

Adeane, L.

Blease, L.

Airedale, L.

Bowden, L.

Amherst, E.

Briginshaw, L.

Ampthill, L.

Brockway, L.

Amulree, L.

Brooks of Tremorfa, L.

Ardwick, L.

Bruce of Donington, L.

Avebury, L.

Caradon, L.

Balogh, L.

Collison, L.

Banks, L.

Cooper of Stockton Heath, L.

Belhaven and Stenton, L.

Cudlipp, L.

Beswick, L.

Darling of Hillsborough, L.

872

David, B. [Teller.]

Mishcon, L.

Davies of Leek, L.

Monson, L.

Denington, B.

Nathan, L.

Diamond, L.

Oram, L.

Donaldson of Kingsbridge, L.

Paget of Northampton, L.

Elliot of Harwood, B.

Peart, L.

Elwyn-Jones, L.

Phillips, B.

Gaitskell, B.

Polwarth, L.

Galpern, L.

Ponsonby of Shulbrede, L.

Gladwyn, L.

Rathcreedan, L.

Goronwy-Roberts, L.

Richardson, L.

Gosford, E.

Ritchie-Calder, L.

Greenwood of Rossendale, L.

Robbins, L.

Grey, E.

Rochester, L.

Hale, L.

Sainsbury, L.

Hampton, L.

Seear, B.

Henderson, L.

Seebohm, L.

Hooson, L.

Segal, L.

Houghton of Sowerby, L.

Somers, L.

Jacobson, L.

Stamp, L.

Janner, L.

Stedman, B.

Jeger, B.

Stewart of Alvechurch, B.

Kaldor, L.

Stewart of Fulham, L.

Killearn, L.

Stone, L.

Kilmarnock, L.

Strabolgi, L.

Kirkhill, L.

Underhill, L.

Leatherland, L.

Wallace of Coslany, L.

Listowel, E.

Wedderburn of Charlton, L.

Llewelyn-Davies of Hastoe, B.

Wells-Pestell, L.

Lloyd of Hampstead, L.

Whaddon, L.

Lloyd of Kilgerran, L. [Teller.]

White, B.

Wigoder, L.

Lovell-Davis, L.

Wilson of Langside, L.

McGregor of Durris, L.

Winterbottom, L.

Mackie of Benshie, L.

Woolley, L.

McNair, L,

Wynne-Jones, L.

Milford, L.

Young of Dartington, L.

Milne, L.

NOT-CONTENTS

Alexander of Tunis, E.

Gowrie, E.

Alport, L.

Gridley, L.

Armstrong, L.

Hailsham of Saint Marylebone, L.

Auckland, L.

Avon, E.

Hawke, L.

Balfour of Inchrye, L.

Henley, L.

Barnby, L.

Hornsby-Smith, B.

Bellwin, L.

Hylton-Foster, B.

Belstead, L.

Ilchester, E.

Bessborough, E.

Ironside, L.

Boyd-Carpenter, L.

Kinnaird, L.

Brentford, V.

Long, V.

Burton, L.

Luke, L.

Caccia, L.

Lyell, L.

Campbell of Croy, L.

McAlpine of Moffat, L.

Carrington, L.

Mackay of Clashfern, L.

Chelwood, L.

Macleod of Borve, B.

Clancarty, E.

Mancroft, L.

Clitheroe, L.

Mansfield, E.

Clwyd, L.

Marshall of Leeds, L.

Cockfield, L.

Mersey, V.

Colville of Culross, V.

Milverton, L.

Cottesloe, L.

Montgomery of Alamein, V.

Craigton, L.

Newall, L.

Daventry, V.

Noel-Buxton, L.

Davidson, V.

Nugent of Guildford, L.

Denham, L. [Teller.]

Renton, L.

Derwent, L.

Rugby, L.

Drumalbyn, L.

St. Davids, V.

Ebbisham, L.

St. Just, L.

Eccles, V.

Saint Oswald, L.

Effingham, E.

Sandys, L. [Teller.]

Ellenborough, L.

Savile, L.

Elles, B.

Selkirk, E.

Falkland, V.

Skelmersdale, L.

Ferrers, E.

Slim, V.

Ferrier, L.

Spens, L.

Fraser of Kilmorack, L.

Strathcarron, L.

Geoffrey-Lloyd, L.

Strathclyde, L.

Glasgow, E.

Strathspey, L.

Glenkinglas, L.

Sudeley, L.

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Swinfen, L.

Trumpington, B.

Terrington, L.

Vaux of Harrowden, L.

Teviot, L.

Vivian, L.

Trefgarne, L.

Wise, L.

Trenchard, V.

Resolved in the affirmative, and amendment agreed to accordingly.
Lord Trefgarne: I beg to move that the House do now resume.
Moved accordingly and, on Question, Motion agreed to.
House resumed.

International Computers Ltd.
4.10 p.m.
The Minister of State, Department of Employment (The Earl of Gowrie): My Lords, with the leave of the House, I should like to repeat a Statement being made in another place by my right honourable friend the Secretary of State for Industry, on International Computers Ltd. My right honourable friend's Statement reads as follows:
"With your permission, Mr. Speaker, I wish to make a statement about International Computers Ltd.
"The House will be aware that the Government is a user on a substantial scale of ICL computers with equipment to a value of more than £300 million supporting vital operations in some 20 departments including defence, revenue assessment and collection, agriculture, health and social security. Because of this dependence upon ICL's products we have therefore shared the concern expressed by the company's chairman at the annual general meeting on 3rd February about the deterioration in its tradign position. In reporting the results for the year ta 30th September 1980 he indicated that there had beeo a sharp drop in profit in the second half of that yern, that the company was currently trading at a loss and that adverse trading conditions could continue well into the current year. However, given a revival in markets, the chairman said that ICL expected a significant improvement in the profitability of its operations.
"The trading position of the company is of course essentially for its management, its shareholders and its bankers and it is to the banks that ICL looks primarily to maintain its credit facilities on a world wide basis. However, the Government have a special interest in ICL as a substantial customer for its products. To protect this special interest we have, therefore, given a positive response to a proposal that the Government should provide a limited, temporary measure of support for ICL. This support for ICL, in addition to a contribution towards R and D which could be available under existing criteria, should give the company the chance to review its longer-term business opportunities. I am glad to be able to say in this context that the company's principal banks are continuing their support for the company in an amount of £70 million.
"I therefore intend to seek from the House at the earliest opportunity its authority to provide a guarantee for further facilities to be provided
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by banks for ICL under Section 8 of the Industry Act 1972. The terms I will be proposing to the House will be for a guarantee of up to £200 million for a period of up to two years. Such a guarantee will not lead to any public expenditure unless it is called. I emphasise that it will be a limited amount and for a limited time".
My Lords, that ends my right honourable friend's Statement.
Lord Beswick: My Lords, I thank the noble Earl for the Statement and, given the facts as set out in it, the Government would seem to be taking the right decision. I am sure that the House will be especially interested in this decision as another case when the non-interventionist dogma just does not fit in with the realities of the modern world. May I ask the noble Earl to refresh our memories of the date on which the National Enterprise Board were instructed to sell their interest in ICL; and, with hindsight, may I ask him—I am sure he will think it is a fair question—would it not have been better for this support to have been provided by the NEB? Is that not what the board was for?
May I also ask the noble Earl whether, in making this not inconsiderable sum available, the Government have satisfied themselves about the future strategy of the company? Is there, for example, any question of collaborating with any other companies, perhaps in Europe? Finally, arising out of that last question, if this Statement is to be taken as a proof, and a welcome proof, of a determination to maintain a United Kingdom position in this modern, high technology growth business can we take it now that there is no question of allowing American companies to take a dominating interest in ICL?
Lord Avebury: My Lords, while we also welcome this Statement, and the continuing support that it affords for what we consider to be an essential national enterprise, should it not have been accompanied by some admission on the part of the Government that the number and the scale of the commitments which they are now making to rescue industry from the consequences of the Government's own policies are incompatible with past declarations that they have made, such as that of the right honourable lady the Prime Minister on 21st April last, when she said:
"Loss makers must be free to do what is needed to get rid of their losses"?
Does the Minister also recall the Prime Minister saying that it was assumed that no large enterprise could be managed successfully without the help of the State?
Is it not true that as a result of the Government's policies and, particularly, their maniac adherence to high interest rates and the unrealistically strong pound, most of the key industries of this country are, in fact, bleeding to death and requiring the kind of help which the Government are now forced to announce? Where they have not plummeted into the red since monetary extremism began to rule, have not many companies been forced to reduce their research and development staff and to close laboratories in a desperate attempt to cope with their cash flow problems, so that when the recession comes to an

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end it will be that much more difficult for them to recover against the competition which they face from the United States and Japan?
When are the Government going to start listening to the cries of agony that are arising from the industrial heartland of this country, and recognise that unless there is a prompt and substantial reduction in interest rates, accompanied by a lowering in the value of the pound, there will have to be many further rescue operations of this kind, with the result that the public sector borrowing requirement will not be under control, but will be incalculable because of the scale of commitments, such as the present one, which they will have to enter into?
Is it not highly damaging to a company such as ICL to persist with a policy of indiscriminate cuts in public spending, which means that, while it is being made impossible, because of the strong pound, for the company to compete overseas with the Americans and the Japanese, the orders which were the vital basis of their prosperity in the home market have dried up? So should not Government departments be given authority during the present recession to increase their orders for computers, so that, first, companies such as ICL which are in the business of information technology—which is, after all, an essential business of the 21st century—are in a position to compete once we emerge from the recession; and, secondly, the public administration would benefit from the use of computers which ICL could provide? I have in mind my noble friend's Registry of Business Names, which is a perfect example of where computers can help.
What is the contribution towards research and development which is mentioned here? Is this an industry Act provision? Has ICL submitted proposals for assistance under that Act and, if so, how much has it asked for, on what date and when do the Government expect to reply? The guarantee is for £200 million compared with the borrowing of the company, at the moment, of £70 million. Is it, therefore, anticipated that the cash flow of the company will deteriorate to the extent of £130 million during the current year? Finally, may I ask the Minister whether the company is now in a position, as the chairman hoped at the annual meeting, to sustain as far as possible levels of investment in key areas of business, so that they can remain competitive and be in a position to respond when demand returns?
4.19 p.m.
The Earl of Gowrie: My Lords, perhaps the noble Lord, Lord Beswick, will forgive me if I take the questions in reverse order, as it were, as the noble Lord, Lord Avebury, asked me so very many. I cannot tell the noble Lord, Lord Avebury, about the applications by the company for research and development assistance outside this contingency rescue fund. If I may, I will write to him about that, or if he cares to put down a Question for Written Answer and the House is interested I will, of course, answer that.
On the general issue, I think that both noble Lords are, perhaps, overstating the position a little. The bankers of this company, which has been affected strongly by the world recession and the fact that, inevitably, expensive investment in hardware suffers
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during a recession, are prepared to continue funding the company to the degree of £70 million. But this was not sufficient. The Government's contingency reserve for this purpose will cover the needs of the company during this limited period.
I cannot accept the arguments about monetary extremism because they are so circular. The noble Lord, Lord Avebury, wishes us to bring down interest rates and thereby, by proxy, the pound; but simultaneously he wishes us to borrow more money. Those two things are not compatible. The more money which the Government borrow, the higher interest rates are liable to be and the higher the pound is liable to be. Obviously the company has been hit, as other companies have been hit, by high levels of sterling, though it is the lower demand for orders which has probably hit them most. I do not know whether the noble Lord, Lord Avebury, has suggestions to make to us as to how sterling should artificially be brought down, but it would involve Government expenditure on a quite massive scale. I do not see how one could equate that with aid to companies or lower interest rates.
The noble Lord, Lord Beswick, asked me whether it would have been better to keep this company in the hands of the National Enterprise Board. I do not accept that. We are not yet clear whether this contingency fund will be called on, or to what extent. I am glad to be able to say that the company has placed major orders internationally in the last few days. It may be that it will be able to pull itself up by its own bootstraps, so to speak. We should all wish to see that.
Both noble Lords were interested in our continued commitment to high technology industries. Of course I am happy to say that we have made such a commitment. This is clearly the way that industry in this country must go. It is because we are so heavily involved in this particular industry as a purchaser that we have made the facility available. I would say to the noble Lord, Lord Avebury, that the Government are, as the Statement suggests, still placing major orders with ICL, and that can only help its position.
Finally, the noble Lord, Lord Beswick, asked me about any foreign involvement in the country. No one to my knowledge has expressed an intention to make an offer for the company. If there were to be any approach, our attitude as the Government would depend upon the particular circumstances, the nature of the approach and, of course, upon where any such approach came from. I shall have to rest on that.
Lord Beswick: My Lords, I asked the noble Lord a specific question as to the date upon which the NEB was instructed to sell its interest in this company. Looking back, is it not inconceivable that the Government did not know of the difficulties which would arise in a business of this kind where investment is so high and where lead times are so great? In the circumstances, would it not have been advisable to have left it with the NEB? Does not the noble Earl recognise that in an industry of this kind one has to have Government involvement?
The Earl of Gowrie: My Lords, the date which the noble Lord is seeking is December 1979. At that time the company looked very healthy. However, as the

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noble Lord is well aware, the recession has deepened since that time and the position has deteriorated since then.
Lord Beswick: My Lords, may I press the noble Earl? There is a case on major national grounds for getting some European industry into this computer business. If there is to be any collaboration, is the noble Earl telling me that there is to be no endeavour to find a suitable European partner?
The Earl of Gowrie: My Lords, the future is all before this company. The noble Lord is going too fast for the Statement. The Statement refers to the provision by the Government of a limited amount of funds for a limited period of time to ease the company over a severe cash flow problem. The Government are doing that for this particular company because of two things: first, as I said to the noble Lord, Lord Avebury, because of our commitment to high technology industries, and secondly because we are substantially involved in this company as a major purchaser and placer of orders in a number of sensitive areas, including the revenue and defence areas. That is the reason why we have made available this contingency liability. What happens now that the acute cash flow difficulties of the company have been eased is a matter for the company, though of course the Government will take a very close interest in any suggestions which are made to them.
Lord Kaldor: My Lords, is the noble Earl aware that the traditional method for regulating exchange rates throughout the 19th century and, indeed, this century has been through variations in interest rates? If the Government really wish to bring down the exchange rate, the normal method is to bring down very substantially the interest rate, which makes the country a less good place to lend in and a better place to borrow from. Is the noble Earl also aware that there is nothing whatever in the Government's argument that a higher public sector borrowing requirement requires higher interest rates, because that is offset by higher private sector lending requirements, which bring down interest rates. All the historical evidence tends to suggest that the times when the nation's borrowing requirements were highest—as, for example, during the Second World War—were the times when interest rates were particularly low and when medium and long-term borrowing took place at very low rates.
The Earl of Gowrie: My Lords, during the Second World War, as the noble Lord with all his experience is well aware, the world was not awash with "hot" money looking for favourable rates of return. If the Government increased their borrowing at the present moment in time and in present market conditions, they would have to compete in the money markets of the world for that money. At the moment the prime rate in America is, I think, 18 per cent. That would be very uncomfortable competition in which to have to engage.
Lord Boyd-Carpenter: My Lords, are the Government supporting this company also by using their very considerable influence throughout the public sector by securing that bodies in the public sector place their
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purchases with a British computer manufacturer and not overseas?
The Earl of Gowrie: My Lords, the Government not only are doing this but have been doing it for some considerable time. It is because the Government are so involved in this company as a purchaser or placer of orders, as I said, that they have made available this tide-over provision.
Lord Polwarth: My Lords, would the Government bear in mind, in applying their policy, that however desirable it may be to maintain a strong British-based company in this industry, there are a number of overseas-owned companies with substantial manufacturing operations in this country which give considerable employment, notably in a number of the regions?
The Earl of Gowrie: Yes, my Lords, I am well aware of that.
Lord Polwarth: My Lords, I thank the noble Earl.

Companies (No. 2) Bill [H.L.]
4.28 p.m.
Committee stage resumed on Clause 23.
Lord Lloyd of Kilgerran Lord Lloyd of Kilgerran moved Amendment No. 62A:
Page 30, line 36, at end insert ("; and
(f) Societies registered under the Industrial and Provident Societies Act 1965.").
The noble Lord said: The noble Lord the Chairman of Committees, Lord Aberdare, has received a letter from the noble Lord, Lord Mottistone, explaining that he is unable to be present and asking whether I might substitute for him, with the leave of the Committee. This is another amendment to Clause 23 which concerns the kind of indexes which the Registrar of Companies should maintain. Amendment No. 62A seeks to add to that list that there should be an index in relation to societies registered under the Industrial and Provident Societies Act 1965. When I accepted the invitation of the noble Lord, Lord Mottistone, to move this amendment I did not realise that I may have an interest in the Industrial Provident Societies Act because I am chairman of a charitable society which is registered under that Act (or its previous Acts); namely, a charitable society which is responsible for the activities of Bembridge School in the Isle of Wight and of Brantwood, the house and estate of John Ruskin on the shores of Lake Coniston, which is maintained open to the public for seven months of the year.
The effects of this amendment would be to require the Registrar of Companies to include on the index of names the names of societies registered under the Industrial Provident Societies Act. The purpose of the amendment is to ensure that companies cannot be registered in a name identical to that of a body corporate taking the form of a society. Like companies, societies have limited liability and there is usually nothing in the name indicating that they are not limited companies. I beg to move.
The Lord Advocate (Lord Mackay of Clashfern): We can see the merit of this amendment which the noble Lord has proposed and we should like to consider it further.
Lord Lloyd of Kilgerran: I am very much obliged to the noble and learned Lord the Lord Advocate for agreeing to consider this amendment, and, in those circumstances, I beg leave to withdraw it.
Amendment, by leave, withdrawn.
Lord Lyell Lord Lyell moved Amendment No. 63:
Page 30, leave out line 40 and insert ("do not appear to the registrar not to have a place of business in Great Britain.").
The noble Lord said: I beg to move the amendment standing in the name of my noble friend Lord Trefgarne. In so doing I should like to explain its purpose, which is to improve the effectiveness of a particular definition which relates to what we call overseas companies, whose names have to be included upon the statutory index. The Bill which is before us this afternoon states in Clause 23(2) that the registrar would be placed under a very strict obligation to do one particular thing; namely, to act on some information which he might well not be able to find out and that information would be that the particular overseas company was actually carrying on business in Great Britain at that time.
Section 407 of the 1948 Act requires oversea companies which establish a place of business in Great Britain to register with the Registrar of Companies certain particulars and to deliver to him certain statutory documents. These documents may imply that business is being carried on, but there is no certainty in this and the only firm criterion is where a place of business of an oversea company is established.
The reason for the double negative in the Bill is that in certain cases the registrar may not readily be able to ascertain when the company ceases to have a place of business. This amendment proposes that, in such doubtful cases, the company's name shall be retained on the index and if there was certain and firm evidence that this company no longer had a place of business then the name could be removed. It is with that in mind that I beg to move the amendment.
Lord Bruce of Donington: I should like to question the noble Lord a little on this amendment. If this amendment is carried in the form in which it is now set down and the entire line 39 is eliminated—because that is what the amendment says, "leave out line 39".
Lord Lyell: No, line 40.
Lord Bruce of Donington: I am sorry, but I have line 39 on my Marshalled List. I refer to page 2 of the second Marshalled List of amendments, where it says, under Amendment No. 63,
"page 30, leave out line 39 and insert ('do not appear to the registrar not to have a place of business in Great Britain')".
If those words as printed are inserted in the text of the Bill, with the greatest possible respect, the subsection makes no sense at all, aside from the question of the double negative which has already been referred to.
Lord Lloyd of Kilgerran: I may be able to help, because in the first Marshalled List it was line 40 and not line 39. There is quite clearly a printing error of some kind.
Lord Lyell: I apologise to your Lordships for the slight pause. I hope that the main substance of my amendment made some sense but we are grateful for the detailed scrutiny given by the noble Lord, Lord Bruce, and indeed the eagle eye of the noble Lord, Lord Lloyd of Kilgerran. I understand that it might be in order if I ask leave of the Committee to amend the Marshalled List, because I understand that it is a misprint and that if the amendment were amended to read "page 30, leave out line 40", as I have on the amendment, then I hope what I mentioned to the Committee would make some sense.
Noble Lords: Withdraw Amendment No. 63!
Lord Lyell: In view of doubt about the line number, I beg leave to withdraw Amendment No. 63.
Amendment, by leave, withdrawn.
Lord Lyell: I beg to move as a manuscript amendment that Amendment 63 on the Marshalled List should read "page 30, leave out line 40 and insert"—the words as printed. I beg to move.
On Question, manuscript amendment agreed to.
On Question, Whether Clause 23, as amended, shall stand part of the Bill?
Lord Mishcon: I hope I am not detaining the Committee, but I rise only because I am looking at line 40 and I am trying awfully hard to delete line 40 and make sense of this amendment. I find myself confused beyond confusion. I am perfectly sure that the noble Lord, after further reflection, will wish to withdraw the amendment that he has now moved after having withdrawn the amendment that he previously moved.
Lord Lyell: I am afraid we are too late at this particular stage, but if the noble Lord, Lord Mishcon, were to examine the amendment that I moved and were to insert the words which are in the Marshalled List at the end—to delete what is now in line 40 and to insert the words in the manuscript amendment—I think then the particular paragraph would make some sense because the paragraph would read,
"and which do not appear to the registrar not to have a place of business in Great Britain".
That is the double negative and that is very much the gist of the main amendment that I moved.
Lord Boyd-Carpenter: Would my noble friend help me by reading out the words which it is proposed to delete because in my copy of the Bill the figures "40" are opposite a blank space neatly equidistant between subsections (2) and (3). I am genuinely at a loss to know whether my noble friend is conducting the sleight of hand of leaving out a blank space or whether he is leaving out some words, and if so, what are the words?
Lord Lyell: Is my noble friend referring to the Bill or the amendment?
Lord Boyd-Carpenter: To the Bill.
Lord Lyell: I think there are different prints of the Bill. The Bill I have been working from tallies with what I have moved this afternoon.
Lord Boyd-Carpenter: Would the noble Lord read out the words he wants to leave out?
Lord Lyell: Yes, certainly. The words I want to leave out are:
"for the time being carry on business in Great Britain".
Perhaps it would help if I read subsection (2):
"In subsection (1) above 'oversea companies' means companies which have complied with Section 407 of the 1948 Act (delivery to the registrar of statutes of company, etc.) and which for the time being carry on business in Great Britain".
The amendment I proposed was to leave out the words,
"for the time being carry on business in Great Britain".
and to substitute,
"do not appear to the registrar not to have a place of business in Great Britain".
I hope my noble friend was here when I explained that double negative and explained that the registrar might well not be able to ascertain whether an overseas company had ceased to have its place of business in the United Kingdom.
Lord Bruce of Donington: Would the noble Lord for final clarification refer to Amendment No. 63 as it is in the second Marshalled List? He will find that there are brackets round,
"do not appear to the registrar not to have a place of business in Great Britain".
Will he confirm that in the amended form the brackets will no longer appear as they appeared in the original Amendment No. 63? Will he note that there has evidently been some confusion about this?
Lord Lyell: I think it is the arrangement with every amendment we move that we do put brackets round the quotation which we seek to insert. I am sorry if I did not read out in my amended amendment that the brackets should be there, but I hope it is taken that they should.
Lord Wells-Pestell: My attention has been called to the situation which seems to create the difficulty. I do not know whether the Committee knows that all the numbers on page 30 have slipped; 5 should be 6, 10 should be 11. They have slipped down, and I think this is the cause of the difficulty.
Clause 23, as amended, agreed to.
Clause 24 [Change of name]:
[Amendments Nos. 64, 65 and 66 not moved.]
4.43 p.m.
Lord Lloyd of Kilgerran Lord Lloyd of Kilgerran moved Amendment No. 67:
Page 31, line 14, leave out ("twelve") and insert ("four").
The noble Lord said: I beg to move this amendment to Clause 24. Under Clause 24 the Secretary of State has powers to deal with this situation. There may have
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been, inadvertently or otherwise, an application for registration or re-registration of two companies with the same name. It may have been through inadvertence; it may have been as a result of malpractice. But there are two names which are the same. The Secretary of State, according to the Bill in its present form, may within 12 months of having made this discovery direct the company to change its name.
As was pointed out by the noble Lord, Lord Mishcon, at Second Reading, it does seem a long time to give somebody who has got a name on the register which is the same as that of another company; he is given up to 12 months in which to put the matter right. It does seem to be a long time for that to happen and for action to be enforced, particularly where the person introducing the same name has not done it inadvertently but is doing it as part of a deliberate fraud. My amendment is simply to say that 12 months is too long. Is not four months a better period in which to allow the Secretary of State to act? That is all it is. I beg to move.
Lord Mackay of Clashfern: The particular power that we are discussing at the moment is the power of the Secretary of State to give a direction. We are not dealing with the time within which the direction must be complied with. That, unfortunately, was misprinted. We intend to leave that as it is, and a later amendment will correct that, as six weeks instead of six months. That was a misprint. But the power we are considering just now was deliberately altered from the present period to 12 months for the purpose of giving added protection to companies on the register. The reason for that is that, if the company has been put on the register the circumstance will normally be brought to the attention of the Secretary of State by the company that has been disadvantaged by the second registration. It may be some time before they get round to noticing that a registration has been entered. It may be a registration that has not been greatly publicised, or the company is a small one in a different part of the country. The company may not notice that its name has been copied by another, and it is in order to give more time for that that this period has been extended. Practical experience has been that very often these applications from disadvantaged companies come in after the present period has expired. It seems a beneficial change, therefore, in the sense for which the noble Lord was arguing, that this period should be somewhat extended.
Lord Lloyd of Kilgerran: It does not seem that there is any support for my amendment. In view of what the noble and learned Lord has said, may I reconsider the situation and look at it again at Report stage? I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Lloyd of Kilgerran Lord Lloyd of Kilgerran had given notice of his intention to move Amendment No. 68:
Page 31, line 15, leave out ("six") and insert ("two").
The noble Lord said: The noble and learned Lord has explained that there is a misprint in lines 15 and 16 of this clause. My amendment was to say that, instead of directing a company to change its name within six months, which I thought was a rather long time to

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give the company, six months should be left out and two months inserted. Now, I understand that the Government are being even more generous and are limiting the period not to two months, as I suggested, but to six weeks. In those circumstances, I shall not move this amendment.
Lord Lyell Lord Lyell moved Amendment No. 69:
Page 31, line 16, leave out ("months") and insert ("weeks").
The noble Lord said: I beg to move Amendment No. 69, which is in the name of my noble friend the Minister and my noble friend Lord Mottistone. The purpose of this particular amendment is to rectify a small error in the print of the Bill. I stand corrected in the last amendment that I moved. If we correct this small printing error this will retain the present time limit of six weeks during which a company must comply with a direction from the Secretary of State to change its name. The experience of the Registrar of Companies has been that this is a reasonable period, and it is right that, if an improper registration is brought to light, this situation should be corrected as quickly as possible. I am pleased to see that the noble Lord, Lord Bruce, might agree on this occasion. I beg to move.
Lord Mishcon: I hope that I shall not be accused by the Committee and certainly not by the Front Bench opposite, of making cheap debating points. This is not meant to be that type of point at all. However, I want to point out to the Committee again the really clumsy thinking—and I must be forgiven for using the phrase—as regards the way in which the extremely important provisions in Part II have been dealt with.
I raised the question of the six months period during the Second Reading debate on this Bill. I said that I thought that it was unconscionable that six months should be allowed, or, as stated in the Bill, such longer period as the Secretary of State might specify. There was a speech in reply by the Government. In the circumstances, whether or not the Minister had even read the Bill, I am doubtful if there was an actual misprint because no explanation was given in the winding-up speech that it was in fact a misprint and that therefore the point that I had rather labouredly made was an empty point since we were merely dealing with a misprinted clause. It is regrettable, and I am only pointing out to the Committee that we must be extremely careful about these provisions on business names and companies because not a great deal of thought has been given to them—that is obvious.
Lord Boyd-Carpenter: I hope that I shall not be accused either of pedantry if I say how unhappy, it seems to me, is the way in which this Bill has been presented. My noble friend will recall that I made this point on Second Reading. We were presented with a number of misprints and erratum slips. Now we have reached the Committee stage and find that a really quite important provision has been misprinted and has reached this late stage before being spotted.
I do not want to take an unkind point either, but it has really been noticeable that, in particular in documents emanating from the Department of Trade, the errors are becoming very frequent indeed. We had a statutory instrument last December to which I
884
invited attention—namely, the Companies' Charges Order—where a vital point was misprinted as to the day it was presented to Parliament. I would ask my noble friend, who now I am very glad to say has responsibility in that department, whether he will indicate that it is not treating Parliament properly to produce legislation riddled with misprints so that when we try to study these measures in advance and try to consult outside interests we are doing so on an inaccurate basis. It is very unhelpful.
I am the last man to urge that the department should increase its already very large staff, but is it not possible to recruit just one man who can read and write and who will scrutinise Bills before they are presented to this House? I know that they are printed by the House authorities, but they are presented to us on the responsibility of the department and of the departmental Minister. No one expects a busy Minister to spend his time reading through these Bills for misprints, but he has plenty of officials and perhaps just one of them could look at these Bills occasionally and see that they are right before, and not after, they are presented.
Viscount Montgomery of Alamein: Unlike my noble friend Lord Boyd-Carpenter and the noble Lord, Lord Mishcon, I was not able to be present during the Second Reading debate. However, I have some sympathy with what they have both said. I ask my noble friends in the Government whether we are not making too much of an issue of the whole business of business names at this particular stage of the Committee proceedings? It may be that this came out earlier and that my noble friend will be able to say that the Register of Companies and the Register of Business Names are two distinct issues. Are we not allowing ourselves to get bogged down on an issue which is really less important than the objectives of the Bill?
Lord Lyell: I should like briefly to reply to my noble friend Lord Montgomery of Alamein. He has made a major point which probably would be best dealt with by my noble friend the Minister. As far as the printing is concerned, I accepted responsibility as a Lord in Waiting for your Lordships' House. The department informed me that the printing took place here although my noble friend was quite correct in saying that probably the department and indeed we ourselves should check it. I also accepted responsibility at Second Reading for the misprints. I remember my noble friend pulling my leg by saying that at least there might be one honest man who could both read and write in the department. He may have been referring to me—I do not know—in which case I was more than flattered!
However, I hope that my noble friend and the Committee will bear with me, in that, as regards the amendment which I have moved—Amendment No. 69—I take the point made by the noble Lord, Lord Mishcon. I am sure that the department and my noble friend the Minister will bear this very closely in mind. As regards the previous amendment, over which I was in considerable difficulty, I point out that I have the first Marshalled List of amendments—(72—II)—and that refers to "page 30, line 40". In the Bill that I have before me it is page 30, line 40.

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I apologise to your Lordships if my Bill—which I am sure has come from the same source as all of your Lordships' Bills—tallied with what I was mentioning, but other noble Lords found themselves in some confusion. I hope that that does not go down to the responsibility of the department.
Lord Boyd-Carpenter: I do not want to be a bore but I think that my noble friend slightly misunderstood me, in which case I am sure that it was my fault. I accepted what he said on Second Reading—namely that the printing is undertaken by the House authorities. But I hope that he will accept and confirm two matters: first, that responsibility for what we are asked to put into the law of the land is the responsibility of Her Majesty's Ministers and in particular the Ministers in the department concerned and not the responsibility of the House authorities who are responsible for printing. Secondly, I hope that he will confirm that, in the light of the experiences, particularly as regards measures from the Department of Trade, something is being done in that department to ensure that this does not happen again, at least on this scale.
Lord Trefgarne: I know that my noble friend was expecting that I should respond to this point and as he has specifically mentioned the department in which I serve, perhaps I should do so. I am informed that the proof-reading of Bills is not, in fact, the responsibility of the department and is not conducted by them. Indeed, they are given no opportunity to do so. On the other hand, in fairness to the printer who thus comes under my noble friend's lash, I think that it is correct to say that on this occasion, in respect of this particular measure, the draft that was presented to him for printing did contain a number of manuscript amendments to the typescript which may have caused him some difficulty. I understand also that there is considerable pressure on the Government printer at present, for one reason or another, which has no doubt added to his difficulties. Any failing of the department is, of course, the responsibility of that department's Ministers. If there is any failing in this case, then, of course, I accept the appropriate responsibility.
On Question, amendment agreed to.
4.58 p.m.
Lord Ponsonby of Shulbrede Lord Ponsonby of Shulbrede moved Amendment No. 70:
Page 31, line 20, at end insert ("section").
The noble Lord said: I beg to move Amendment No. 70. I do not know whether this is another misprint or a drafting error, but it would certainly seem that this particular subsection would read better if the word "section" were added as the last word of the subsection. I beg to move.
LoId Mackay of Clashfern: We are happy to agree with the noble Lord's suggestion.
On Question, amendment agreed to.
Clause 24, as amended, agreed to.
Clause 25 [Companies exempt from requirement to use word 'limited', etc.]:
Lord Lyell Lord Lyell moved Amendment No. 71:
Page 31, line 38, after ("company") insert ("(a)").
The noble Lord said: I beg to move Amendment No. 71 and I hope that it will be for the convenience of the Committee if I speak to Amendments Nos. 72 to 80 as well. I hope that your Lordships will find that those amendments comprise the entire list of amendments to Clause 25 on the Marshalled List.
The Government's proposals to allow certain companies which meet strict conditions to enjoy the privilege of omitting the word "limited" from their names has been welcomed by all the organisations which replied to our consultative document. However, it was pointed out that although the overwhelming majority of the companies to which this privilege is currently granted by a licence under Section 19 of the 1948 Act are indeed limited by guarantee, there is a very small number which is limited by share.
The Committee might be interested to note that Amendments Nos. 71 and 72 will remedy this particular deficiency. As a consequence of these two amendments, any company which at present holds a licence to omit the word "limited", and which meets the conditions of this particular clause, will be able to continue that privilege. But we consider that it would not be entirely appropriate to extend it to any further companies limited by share, which nowadays is a status which is normally adopted for commercial rather than charitable purposes.
The other amendments to this clause are, we hope, designed to improve its effectiveness. The inclusion of the words "any profession" among the qualifying objects will enable, for example, a local law society formed as a company limited by guarantee to omit the word "limited" from its name, while the provision in Amendment No. 77 will, we hope, provide a little more flexibility in the distribution of any remaining assets if that company is wound up, while retaining the control in that regard which has been fundamental to the operation of the system which we have at the moment.
Finally, I would draw the Committee's attention to Amendment No. 80, which provides that a company which meets the conditions of the clause and which wishes to assume this special privilege may do so in the simplest way possible—by resolution of the directors rather than by requiring the consent of the company in general meeting.
These are fairly detailed amendments. I hope that I have adequately explained them. I beg to move Amendment No. 71.
On Question, amendment agreed to.
The Deputy Chairman of Committees (The Earl of Listowel): Does the noble Lord wish to move the remaining amendments en bloc?
Lord Lyell: Yes.
Lord Lyell Lord Lyell moved Amendments Nos. 72 to 80:
Page 31, line 40, after ("guarantee") insert ("or

(b) which immediately before the appointed day is a private company limited by shares the name of which does not,

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by virtue of a licence granted under section 19 of the 1948 Act, include the word "limited";

and which complies with the requirements of subsection (1A) below.
(1A) The requirements referred to in subsection (1) above are—

(a) that the objects of the company are or, in the case of a company about to be registered, are to be the promotion").

leave out line 41.
line 42, leave out ("or charity") and insert ("charity or any profession").
Page 32, line 1, at beginning insert ("that")
Page 32, line 1 leave out ("which") and insert ("the company").
Page 32, line 8, leave out from ("up") to end of line and insert ("either to another body with objects similar to its own or to another body the objects of which are the promotion of charity and anything incidental or conducive thereto.").
Page 32, line 9, at beginning insert ("Subject to subsection (6) below,")
Page 33, line 1, after ("name") insert ("by resolution of the directors")
Page 33, line 2, at end insert—
("Section 143 of the 1948 Act (certain resolutions to be registered) shall apply to any resolution passed by the directors of any company in compliance with a direction under this subsection.").
The noble Lord said: I am sure that it would be for the convenience of the Committee if I were to move Amendments Nos. 72 to 80 en bloc. Unless any member of the Committee seeks enlightenment on any particular amendment, I beg to move.
Lord Mishcon: I am sure that the Committee is indebted for a very clear explanation of the group of amendments, and we have been saved several speeches. We are obliged to the Minister for that. My speech will also be very short. It is limited to the point which is made in Amendment No. 74—namely, the inclusion of the words "or any profession". I am much obliged to the Minister for indicating as an example the splendid profession of the Law Society and that of solicitors connected with that profession. I am sure that solicitors and other well-known professions are grateful to the noble Lord.
However, I think I am right in saying that there is no definition of "profession" in this Bill. I have the unhappy task of seeing the notepaper of bookmakers, hairdressers and goodness knows what referring to their "profession". I am just wondering, if we leave it like this without any definition, what it will lead to in a clause which gives a very valuable exemption indeed—a very treasured exemption; that of leaving the word "limited" out of a name even though it be a company limited by guarantee or whatever.
That is my sole point and I therefore ask whether I am right in thinking that there is no definition of "profession". If I am right in thinking that, between now and the Report stage will the Government look at this matter?—because, as I said, we used to know what was a profession; we no longer do in current language.
Baroness Phillips: I should like to follow up what my noble friend has said, in that, as the noble Lord, Lord Lyell, will be aware, a charity carries certain privileges, including a zero rating for VAT. Will this also have to be extended to professions? It seems to me to be a slightly dangerous precedent to establish.
Lord Lyell: Perhaps, first, I may try to reply to the noble Baroness, Lady Phillips. I think that the matter of value added tax is a little beyond my responsibility. Perhaps I may refer her comments to my noble friend Lord Cockfield, who I am sure will read carefully what she has said. We are very grateful for the comments of the noble Lord, Lord Mishcon. I understand that the particular company to which he refers is the Liverpool Law Society and, indeed, we take the noble Lord's comments very much to heart.
I understand that there is no definition of the word "profession" in this Bill. We shall read carefully what the noble Lord has said today, at an earlier stage today and, indeed, late on Tuesday night. Perhaps I may reply to him informally later.
Lord Mackay of Clashfern: Just before we leave this point perhaps I may mention that the word "profession" is, I think, used in the 1916 Act without any further definition. At least for purposes up till now it has not proved too difficult to deal with that aspect of the 1916 Act, although, as your Lordships know, it raises many other difficulties.
Lord Mishcon: The noble and learned Lord, Lord Mackay, will know—as will other members of the Committee—that the word "client" was understood in 1916 and until fairly recently. Now everyone, including grocers, candlestick-makers and so on, has clients; they no longer have customers. In exactly the same way, I am afraid that the word "profession" has been somewhat minimised in our vocabulary, and there are many who seek to come within that category who should never be in it. I think that in 1981 we must ensure that we know that for which we are legislating.
On Question, amendments agreed to.
Clause 25, as amended, agreed to.
Clause 26 agreed to.
Clause 27 [Names of oversea companies]:
Lord Lyell Lord Lyell moved Amendment No. 81:
Page 34, line 15, leave out ("(3)") and insert ("(2)").
The noble Lord said: We are happy to see, coupled with the name of my noble friend the Minister, the name of the noble Lord, Lord Bruce of Donington, who temporarily is not in his place to receive this encomium, and, indeed, that of the noble Lord, Lord Ponsonby of Shulbrede. I hasten to inform your Lordships' Committee that this amendment seeks to correct a misprint. I beg to move.
On Question, amendment agreed to.
Lord Ponsonby of Shulbrede Lord Ponsonby of Shulbrede moved Amendment No. 82:
Page 34, line 28, leave out ("two months") and insert ("of that notice").
The noble Lord said: This amendment is not actually a misprint; this is a drafting point. This clause would, in fact, read better if the new words "of that notice" were inserted in the subsection instead of the words "two months". I beg to move.
Lord Lyell: We are grateful to the noble Lord for his brief explanation, but I am afraid that my reply is

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somewhat lengthy and a little convoluted. I shall attempt to do my best to be clear, but I understand that the requirement in Section 31 of the 1976 Act is that if a company registered overseas proposes to carry on business in Great Britain, it may be given notice requiring it not to continue to do so under its corporate name if that name is considered to be undesirable. In other words, it allows the same considerations as are applied to the names of companies registered in the United Kingdom to be applied to foreign registered companies. The subsection of the Bill seeks to provide that if a notice is issued in such circumstances, the time allowed for compliance may be extended a little beyond the two months specified in the Act of 1976. This extension would allow some flexibility for overseas companies who may not otherwise be able to meet what is, after all, a fairly tight time limit for that, or who may have to approach a designated body elsewhere should they, the oversea company, require evidence of non-objection to the use of a prescribed word in their particular name.
We believe that the amendment seeks to ensure that the time allowed for compliance shall run from the date of service of the notice. But I suggest that the wording of the clause is sufficiently clear on this point, which is that:
"An oversea company on which a notice is served … shall not at any time after the expiration of two months or such longer period as may be specified in the notice "—
and that is relevant—
"carry on business in Great Britain under its corporate name"
We do not think that the insertion of the words "from the service of that notice" after "two months" is necessary. The full amended sub-paragraph seems not to be capable of any other particular construction. That is somewhat convoluted. I hope it may go some way to satisfy the noble Lord, Lord Ponsonby.
Lord Ponsonby of Shulbrede: I do not feel so strongly about this amendment that I wish to press it. I take the noble Lord's explanation, which I shall read with interest, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 27, as amended, agreed to.
Clause 28 [Control of business names]:
On Question, Whether Clause 28 shall stand part of the Bill?
5.12 p.m.
Lord Ponsonby of Shulbrede: This Motion to leave out Clause 28 is consequential upon the decision of the Committee earlier today, and I understand that the Government accept the consequences of the vote we took then. Therefore, I beg to move that Clause 28 be left out. For the convenience of the Committee—and I am not quite certain what the correct procedure is—I would also (although it is out of numerical order) beg to move Amendment No. 102, which is to leave out Clause 29 and insert the words as printed. This is also consequential. It seems to me that otherwise we should be dealing with a number of amendments to Clause 29 which, as a consequence of the earlier vote, would not now be in the Bill. I understand that
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the Government have reserved their position to come back to this matter at Report stage.
Lord Trefgarne: Indeed we have. Furthermore, I think it is improper—I do not wish to use that in any pejorative sense—to move amendments out of order. It would not be right for the noble Lord to move Amendment No. 102 now. As for the question of whether or not they are consequential, perhaps my noble and learned friend Lord Mackay can deal with that particular point in a moment, as he will wish to address your Lordships on this particular Motion.
Lord Hawke: Supposing Ian Smith, Charles Robinson and Ian Stewart band together in a partnership, can they register themselves as ICI?
Lord Mackay of Clashfern: I think it might depend a little on the circumstances in which they proposed to carry on business. So far as the present law and the Register of Business Names is concerned, they would be able to get it on that register. Whether they would be able to carry on business under that name for any length of time would depend a great deal on the nature of their business. I am pretty certain that if it was anything remotely to do with business which ICI conducted they would speedily be invited to discontinue, with possibly one or two threats added about what would happen if they did not. So far as Clause 28 is concerned, it is not, strictly speaking, consequential on the amendment already dealt with. It would certainly be useful from our point of view to know the view of the Committee on this clause as it stands.
The Deputy Chairman of Committees (The Earl of Listowel): The Question is, That Clause 28 stand part of the Bill. As many as are of that opinion will say "Content". To the contrary "Not-Content". I think the "Contents" have it. Clear the Bar.
Tellers for the "Contents" have not been appointed pursuant to Standing Order No. 50. A Division, therefore, cannot take place, and I declare that the "Not-Contents" have it.
Lord Ponsonby of Shulbrede: I think the correct procedure would be for me not to move all of the amendments standing in my name between No. 83 and No. 101.
Clause 29 [Disclosure of names of persons using business names]:
[Amendment No. 83 not moved.]
5.21 p.m.
Lord Noel-Buxton Lord Noel-Buxton moved Amendment No. 84:
Page 36, line 28, after ("letters") insert (", order forms, written material used for the purposes of creating, effecting, maintaining or increasing sales of goods or services (not being material offered or to be offered for sale)").
The noble Lord said: In view of what has happened and the remarks of the noble Lord, Lord Ponsonby, I do not know what purpose will be served by my moving this amendment, which has the same intention as Amendment No. 83. On Second Reading I took issue on the proposed requirements of Clause 29 ex

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tending only to business letters and written demands for the payment of debts and said I should like to see the requirements extended so far as practicable to all promotional material. The noble Lord, Lord Mishcon, also drew attention to the omission of order forms. My amendment seeks to extend the scope of the requirements in the way I said on Second Reading I thought was desirable, and I trust it is essentially self-explanatory. The phrase
"written material used for the purposes of creating, effecting, maintaining or increasing sales of goods or services (not being material offered or to be offered for sale)"
is my attempt at a definition of "promotional material". I am not sure in the circumstances whether it is appropriate to commend the amendment to the House, but I beg to move it.
Lord Mackay of Clashfern: The Government have considered this matter again, particularly in view of what my noble friend said on Second Reading, and we have tried to see whether we could strike a better balance than we already have. It is obvious that if the full details are to be included the total amount of literature which would go out, would become a tremendous burden on such businesses. If one looks at some suggestions for this sort of provision, one can see that the proposal would go as wide as any promotional material. Our view at present is that the balance which has been struck in the Bill is reasonable and that so long as these provisions are complied with, that would be sufficient for the purposes of securing that reasonable information about the matter is giving to people who have an interest to know.
Lord Mishcon: On Second Reading I made the point that an order form was of particular importance because the person to whom the order was directed was keen to know who was in charge of the business that was trying to order something from him, so that he could decide whether credit should be given and whether it was sensible to supply that business. Do the Government agree that in the Bill as drafted an order form is a document on which the particulars of the principals, and so on, do not have to appear? If so, whatever be the ultimate wording of an amendment, either on Report or hereafter, do the Government agree that order forms should be among the documents on which it should be mandatory that the particulars appear?
Lord Mackay of Clashfern: As matters stand there might be some doubt whether order forms are covered in the Bill as drafted, and in view of what has been said we will consider the matter further between now and Report.
Lord Noel-Buxton: With that assurance, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 85 to 89 not moved.]
Lord Lloyd of Kilgerran Lord Lloyd of Kilgerran had given notice of his intention to move Amendment No. 90:
Page 36, line 42, at end insert (";and
(c) cause the business name to be recorded in the index kept by the registrar of companies.").
The noble Lord said: This was spoken to in connection with Amendment No. 62. In the circumstances, however, I do not propose to move it.
[Amendment No. 90 not moved.]
The Deputy Chairman of Committees: Before I call the next amendment I should point out to your Lordships that if it is agreed to, I shall not be able to call Amendments Nos. 92 to 95.
[Amendments Nos. 91 and 92 not moved.]
The Deputy Chairman of Committees: Before I call Amendment No. 93, I should point out that it pre-empts Nos. 94 and 95.
[Amendments Nos. 93, 94, 95 and 97 not moved.]
The Deputy Chairman of Committees: The next amendment pre-empts No. 96.
[Amendments Nos. 96, 98, 99, 100 and 101 not moved.]
Lord Ponsonby of Shulbrede Lord Ponsonby of Shulbrede moved Amendment No. 102:
Leave out Clause 29 and insert:
("Certificate of registration
.—(1) Any person to whom the Registration of Business Names Act 1916 applies shall—

(a) state in legible characters on all business documents—

(i) in the case of a partnership, the name of each partner;

(ii) in the case of an individual, his name;

(iii) an address at which service of any document relating in any way to the business will be accepted by or on behalf of each person so named;

(b) in any premises where the business is carried on and to which the customers of the business have access, display in a prominent position a copy of the certificate of registration issued in accordance with the requirements of the Registration of Business Names Act 1916.

(2) Subsection (1)(a) shall not apply in relation to any business document sent out by a partnership of more than twenty persons if the document states the names of the partners may be obtained on request from the stated address.").
The noble Lord said: This is consequential on the earlier vote. I beg to move.
On Question, amendment agreed to.
5.29 p.m.
Lord Noel-Buxton Lord Noel-Buxton moved Amendment No. 103:
After Clause 29, insert the following new clause:
("Telephone numbers
30.—(1) This section applies to any person not being a company who carries on business in Great Britain.
(2) A person to whom this section applies shall state in legible characters an extant British telephone number in such manner and location as to give reasonable notice thereof on all business letters, order forms and written material used for the purposes of creating, effecting, maintaining or increasing sales of goods or services (not being material offered or to be offered for sale), issued in the course of the business and on all written demands for payment of debts arising in the course of the business.
(3) Any proceedings or other document intended to be served on any person to whom this section applies shall be duly served on him if it is served upon the person and at the address recorded by the Post Office as the subscriber to the telephone the number of which is stated as required by subsection (2) above.
(4) Any person who contravenes subsection (2) above shall be guilty of an offence and liable on summary conviction to a

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fine not exceeding one-fifth of the statutory maximum or on conviction after continued contravention to a default fine not exceeding one-fiftieth of the statutory maximum.").
The noble Lord said: I think this amendment is untainted by what has been happening this afternoon. Following Second Reading, I have received a number of representations, and the thread running through all of them has been concerned with the ability—or, rather, the inability—of any aggrieved party to pursue a rogue unincorporated business, and I should like to think that that concern is shared by the House and the Government. I do not take issue with the Government on the abolition of the Register of Business Names, though others clearly have. I do not think that in general the Register of Business Names has proved much help, or that it could be made to be of much help.
I have given thought as to how best to legislate in order to assist aggrieved parties in their pursuit of rogue businessmen operating even under their own name, but not through a company. It occurred to me that in the absence of a registration number, which is often the key to a registered person or entity sought to be pursued, an effective key might prove to be a telephone number. Surely few businessmen nowadays can carry on business without a telephone. The particulars of a person with a telephone are by necessity recorded by the Post Office, if it is not now British Telecom—
Lord Lyell: It is.
Lord Noel-Buxton: I am obliged to my noble friend. I understand that it is easy for British Telecom to find the particulars of a subscriber merely from a telephone number. That is how British Telecom works when it goes about billing the use of a telephone. The vast majority of businessmen put their telephone number on their written business material in any case. An obligation so to do should place no extra burden, or only a minimal extra burden, on businesses. Having required unincorporated businesses to publish their telephone number, there automatically arises an easy means of identifying the businessman. So far so good.
But a link in the chain is the divulgence by British Telecom to an inquirer of the particulars of the subscriber. I understand that British Telecom is currently not required to give the name and address of a subscriber upon an inquirer quoting only a telephone number. However, surely British Telecom could easily be so required. Once it is established that businessmen must publish a telephone number, and that the particulars of the subscriber to the telephone are easily available, it remains only to provide that service of proceedings on the person whose name and address are supplied by British Telecom is due service on the businessman who publishes the telephone number. I beg to move.
Lord Lyell: We are very grateful for the clear way in which my noble friend has explained his amendment. Indeed, we all but come to expect such clarity of lawyers and solicitors, especially of my noble friend Lord Noel-Buxton. I am sure that the Committee understand and very much appreciate the intention behind my noble friend's amendment, as indeed I do, too. A number of hats descend upon me and some of my noble
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colleagues in your Lordships' House, and so from time to time I speak on matters relating to the Post Office or, as my noble friend so accurately said, British Telecom, as we must now call it.
The very brief answer to my noble friend's amendment is that at the moment his proposition is not feasible. The amendment would require British Telecom to disclose information about the subscriber who was listed against a particular telephone number. At the moment that does not apply. I understand that there are certain exceptions to that rule. They relate to instances of dire emergency, such as extreme illness of relatives and other such personal matters, but I do not envisage the need to pursue a rogue businessman or others as coming under matters of dire emergency.
Furthermore, it appears to us that even if it were possible from one particular telephone number to obtain the information sought, the consequence of such an arrangement would be that every company or every person carrying on a business in Great Britain, except limited companies—we spoke earlier about 2frac12; million registered names—would be required to have a telephone. It is possible that there would have to be a separate telephone for each separate business name if effective service of writs or documents were to be achieved with certainty; and that is a very important point so far as the law is concerned. We believe that to require each single business to have a separate identifiable telephone line would be an unjustifiable imposition, and I am sure that such a requirement would not be at all welcome in general, given the long waiting list of British Telecom for telephone lines.
We regard the intention of my noble friend's amendment as laudable, but we consider that it goes far beyond the scope of the Bill that is before us today, which, as your Lordships' Committee will appreciate, is concerned here with businesses carried on under names other than the names of the owners. While my noble friend was speaking a thought crossed my mind, somewhat evilly, in relation to my noble friend or any other person wishing to find out a registered name against a telephone number. We might embark upon the Chinese Box puzzle if opposite every telephone number one could find a business name. We would then return to the problems that we spoke about earlier this afternoon. That is a further point, which possibly goes too far into the realms of hypothesis. I must tell my noble friend and the Committee that while the amendment and the intention behind it are laudable, the current law as it appertains to British Telecom would not permit such a proposal to be carried out.
Lord Noel-Buxton: I am very much obliged to my noble friend for that explanation, and in the circumstances I am happy to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 30 agreed to.
Clause 31 [Words and expressions requiring approval of Minister]:
5.38 p.m.
Lord Lyell Lord Lyell moved Amendment No. 104:
Page 38, line 15, leave out ("subsection (2)") and insert ("subsections (2) and (3) ").
The noble Lord said: I should like to commend this amendment to the Committee. Clause 31(1) provides for regulations to be made by the Secretary of State, who would specify not only certain words or expressions that could not be used in company and business names without his approval, but also a Government department or other body whose opinion would have to be sought by the applicant. Subsection (3) describes the procedure to be followed by an unincorporated business in such a situation and requires an approach to be made to the relevant body. It would follow from that that Clause 31(1)(b) should have referred also to subsection (3), and I hope that the Committee will support us in making this necessary correction. I beg to move.
On Question, amendment agreed to.
Clause 31, as amended, agreed to.
Clauses 32 to 34 agreed to.
Lord Seebohm Lord Seebohm moved Amendment No. 105:
After Clause 34, insert the following new clause:
("Preliminary

PART (JOB OWNERSHIP COMPANIES)
This part of this Act has application to companies qualified hereunder as "Job Ownership Companies".").
The noble Lord said: This is perhaps a slightly unusual form of amendment and needs a little explanation. A job ownership company is a form of cooperative. Unfortunately, the word "co-operative" is now used to cover a very large diversity of organisations, some of which are nothing more than a small partnership and others of which have thousands of members. Their history has, to put it mildly, been very erratic. Mr. Robert Oakeshott, who I expect many of your Lordships have heard of, and who has made a study of the worker co-operative movement from both a theoretical and a practical point of view over many years, has just published a book (which I have not brought with me but which I strongly recommend everybody to read) which he called The Case for Worker Co-operatives. He could actually have called it, I think, The Case Against Worker Co-operatives, because it is a completely objective account from very early days of the co-operative movement with examples of those which have succeeded and those which have failed.
As I say, it is an entirely objective study and really a most important contribution, I believe, to our knowledge. It is as a result of the work that he and his colleagues have done, and particularly of the study they have made of the remarkably successful enterprise in Spain known worldwide as Mondragon, that this addition to the Companies Bill is being put forward. I think I should explain a little about Mondragon, which perhaps some noble Lords do not know. A film of it was shown some time ago and had another showing yesterday, which some noble Lords came to see, and I think they were very impressed by what they saw.
Mondragon is a town or city in the Basque country. It was a very poor little village in 1955, when the first co-operative was started. It employed about 1,500 people. Today, 25 years later, it employs 18,000 people; its sales are something in the order of
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£350 million, or its equivalent; and they have had no unemployment since it started. The only strike they had was one in the biggest of the co-operative members, which has about 3,000 people, when 17 revolutionaries organised a strike and the rest of the workers quickly threw them out of the works and they went on normally. In fact, there are 62 manufacturing worker units in this organisation. There are other co-operatives of various types, including agricultural ones. The main principle is that the workers are the owners of all the shares in the company and in the organisation, and it is on the basis of this concept that this amendment is put forward.
It is rather interesting that the whole origin of Mondragon in fact came from this country. It was a local priest who had studied the thoughts and works of Robert Owen and the Rochdale pioneers who started the Mondragon scheme. It is also interesting that he pointed out at the time why Robert Owen's pioneers and their factory failed. They started the same way, with the workers owning all the shares in the business. They began to expand fast, and they started to take in outside capital, with outside shareholders. Very soon these outside shareholders took control and put in their own management, and in due course the business failed. The original concept was, I think, a very good one, and it worked for quite a long time until they over-expanded.
A job ownership company which is now proposed is something quite different, as I have said, from the usual concept of a workers' co-operative, and has the following purposes. First, to establish a class of companies owned by those who work in them and, in effect, only by those who work in them; secondly, to enable such companies to purchase their own shares, as without this facility the first requirement is not practicable. That I shall come back to later because there is an amendment set down by the Government which very considerably facilitates the operation of the organisation which is proposed.
The aim of the clauses is to make available a simple form of business organisation which can be owned and directed by those who work in it and which has special advantages as follows. First, to escape from the traditional confrontation between capital and labour. We all know that change must come in the structure of industry if there is to be harmony and increasing productivity. We must get away from management by confrontation. Sooner or later this will happen. Secondly, to assist in the spread of wealth in a tangible and realisable form, and at a valuation that does not depend on the whims of portfolio investors. Mondragon employees who entered some years ago, in its early days, have now been retiring, and they find that they have something in the order of £20,000 of realisable assets on which to retire. Thirdly, which I think is important, to avoid the dangers of absentee ownership, which can result in mergers and takeovers which are not in the interests of the company or those who work in it, and which in fact ruined Robert Owen's theories.
This type of company would be particularly useful and appropriate in those cases, which are not uncommon, where there is a succession problem and the proprietor wishes to hand over or sell his interests to those who have worked with him over many years in

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the business. It seems particularly relevant to me in view of the rapid growth of management takeovers at the present time, and perhaps I may give your Lordships a concrete example of what has been happening in the last few years in this field. Before about three years ago it was very difficult to get over Section 54, which I believe we are going to discuss later, in order to organise these management takeovers, in view of the fact that the company could not lend money to any of its employees or to anybody else to buy its own shares, and was to be taken to be a reduction in capital. But we found a way round this. I think it was fairly close to the wind, but we found a legal way round it some three years ago, and in my last year as chairman of ICFC we in fact did about 38 management buy-outs. Since then—and I see that Lord Caldecote is here; he can confirm my figures—we in fact did about 49 in the year which ended the 31st March last year, very nearly one a week, and this year it is running at about 70 in the financial year, which is getting near to 1½ a week.
We are not the only people in the field, and in fact it has become very infectious. This is a growing form of change in the business and industrial structure of this country. It is, I think increasing the number of small and medium-sized businesses, which is highly satisfactory; and I believe that what we are putting forward today is in fact something which would be very welcome to quite a number of these private proprietors who are wishing to hand over their businesses, not only to their senior management, perhaps, but to all the employees in the firm.
There are other advantages which I hope subsequent speakers will mention, but there is one important point which I wish to make and which convinces me that this legislation is necessary. I am sure the point will be made that there is adequate provision, or there shortly will be, for such a structure to be set up without further legislation. I personally doubt whether this is true, and I should like to see a memorandum and articles of association drawn up to prove the case. But even if it were true, I find the case for consolidation and simplification very strong. After all, it is necessary to dip into the Industrial and Provident Societies Acts, the Industrial Common Ownership Act and no doubt others.
The reason why I want to make so much of this point is that in the many years that I have been providing finance and, at times, advice for small and medium-sized companies I have found that smaller firms of accountants and solicitors, although having high professional skills, cannot have the specialist partners, and certainly not specialist departments, who have the capability for the elaborate adaptation of provisions not designed especially for the purpose. The critical argument, therefore, for a new class of company embodying these principles in statutory form is precisely that it would be widely available to the many professional advisers to whom company law is familiar but to whom co-operative law is a closed book.
Much was said at the Second Reading of this Bill about the help needed for small businesses. It is my opinion that there is as great a need for comprehensible procedures as there is for finance. I have recently seen a draft of a report prepared by a very large
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company about small businesses and their problems over eight of the major countries in OECD, and right at the beginning they point out that the main problem they have discovered is not necessarily finance; it is simplification and decentralisation. If small businesses are to grow I feel quite certain we have got to go for this simplification.
I believe that the clauses we have put in our suggested amendments to the Bill would in fact remove a great cloud of fog which, to many, has the density of a pea-souper. I also believe that these proposed changes fit very well into this Bill, and help to achieve one of the main objectives; that is, to facilitate the formation and growth of small and medium industrial enterprises. The clauses have been carefully worded to meet the needs of the directive; and, really, a lot of them are mainly a form of consolidation. I very much hope that we can come to some agreement on this Bill, particularly in view of the new proposals put forward by the Government on companies buying their own shares, which I am sure will need further discussion and which in fact does not quite meet the full requirements that we have put forward in the proposals for job ownership companies. I beg to move.
5.50 p.m.
Lord Oram: I should like to support, with certain reservations, the new clause moved by the noble Lord, Lord Seebohm. If in what I say I seem to stress the reservations rather than the support, this is because the noble Lord himself, it seems to me, has made out admirably the general case for the setting up of job-ownership companies; and, as he has explained, they are a different kind of company. They would incorporate some features of conventional companies and some features of workers' co-operatives; but they would be neither one nor the other. When I put forward my reservations and suggestions, it is in the hope that they may help the noble Lord improve on the scheme which he has put forward in Committee. Perhaps I should explain that I approach the whole question of enterprises owned by those who work in them from the point of view of a lifelong co-operator; and maybe I should indicate an interest in that I am the chairman of the Co-operative Development Agency, which your Lordships may know as a body set up by Parliament for the encouragement of co-operatives and which, in its first two years, has concentrated particularly on the encouragement of industrial cooperatives.
Co-operatives of all kinds, including industrial cooperatives, need to conform to a number of well-known principles of which two are of particular importance; and I stress them. The first is that the membership should be open to all who can directly benefit from the operations of the society—in the case of industrial co-operatives this means the workers in the enterprise—and the members should exercise full control over the enterprise on the principle of one member, one vote.
That is provided for in the new clause that the noble Lord has moved. It means that the member, as a person, together with his fellow-members, exercises control irrespective of the size of his own shareholding. It is on the basis of one member, one vote, This distinguishes a co-operative sharply from a conventional

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business and ensures that there shall be democracy in the exercise of control. The second essential cooperative principle that I would wish to stress is that profits at the end of a trading period are divided among the members in accordance with their transactions with the society. In the case of worker co-operatives this means that profits are distributed in proportion to the input of work or of skills to the operations of the enterprise. It is what they put in that is the basis for the calculation of the division of profits.
It is in the light of these two principles that I should like briefly to examine the noble Lord's new clause, because I find in respect of both of these principles that his new clause is somewhat defective, although not seriously so. The definition that the noble Lord put forward is that members are required to be employees, workers, in the enterprise. But I can find no provision—perhaps this was an oversight—that all employees should have the right to become members. In other words, there is no indication that the first co-operative principle is to be operative—that is, that there should be open membership in the sense that have defined it earlier. It seems to me that unless the noble Lord incorporates such a requirement in his proposition, it is possible that a small number of the employees could get control of the company and establish themeslves as an élite from which other workers would be excluded.
Lord Seebohm: I apologise for intervening; but in our plans every worker must be a member and must have a stake in the company.
Lord Oram: I am glad to hear that but I suggest that it is not contained in the new clause. I suggest, therefore, that it would be an improvement if at a later stage that could be made clear. It is perfectly clear that all members must be workers; but it is not clear that all workers should have the right to be members; and that should be included.
Equally, I believe that additional thought needs to be given by the noble Lord to the question of how profits are to be divided. I can find nothing in this new clause on that point. Looked at from the point of view of a co-operative organisation, I think that that is an important thing to be taken care of. The noble Lord might say that it is not his intention that profits should be divided according to the co-operative principle which I have described. In that case, no doubt we could agree to differ as to our objectives in that respect, but I would point out to him that when the Chancellor of the Exchequer introduced his Budget only last week he brought forward a most welcome concession to industrial co-operatives. I will not detail it now, but it was an important concession; and I have no doubt that that concession will be administered according to clear precepts as to what an industrial co-operative is. I have no doubt, also, that the Inland Revenue will wish to see that the profit sharing is on a proper co-operative basis if an industrial cooperative is to benefit from the concession that he makes. Therefore, I suggest that unless the noble Lord takes care of this point, the company which he envisages might well not qualify for the concession which, in a welcome way, the Chancellor of the
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Exchequer brought forward last week.
I welcomed what the noble Lord said by way of description of the highly successful co-operative nexus at Mondragon, in the Basque country. But there are many other examples—in France, Italy, Denmark and elsewhere—of equal success. It is Mondragon that has caught the public eye, but there are many other examples throughout the world of the successful application to industry, to manufacturing, and the provision of services of the principles which I have described. In the Mondragon enterprises they apply the principle of admitting to membership all the workers in the enterprise and they divide the profits among the workers in proportion to their input of work and skills within the enterprise. In other words, in my judgment they are bona-fide co-operative societies. I believe it true to say that if what the noble Lord has in mind is the growth in this country of comparable enterprises it is possible (as I think the noble Lord, Lord Lyell, said at the Second Reading of this Bill) for them to be set up under the existing state of the law. But we have listened to what the noble Lord has said and it may be that a change of this kind could facilitate it. As I see it at the moment, there are the defects—which I hope that I put forward in a friendly and constructive way—and if they could be taken care of I think it would make the proposition that the noble Lord puts forward stronger than it is already.
6 p.m.
Lord Lloyd of Kilgerran: I am pleased to have the opportunity to follow the noble Lord, Lord Oram, as my name is associated with this amendment. Your Lordships are probably aware that the Liberal Party has been closely concerned with a number of job ownership schemes, and indeed a former leader of the Liberal Party who is still a Member of the other place, Mr. Jo Grimmond, is, I believe, chairman of certain job ownership schemes. It seems to me that at the present time this kind of scheme, if it can be called a scheme, so lucidly and clearly explained by the noble Lord, Lord Seebohm, is extremely appropriate today. It provides a convenient vehicle, similar to a partnership but with limited liability, to deal with an increasing number of men and women in this country who have been made redundant in their thirties and who wish to combine together in order to work in this form. There is a lot of redundancy money in areas such as South Wales. The first reaction of many of the men and women who are made redundant and receive a large amount of redundancy pay is to have a little leisure, but they get tired of a trip to Miami or wherever it is they go, and they group together wanting to work and make things which they can market in the local area.
I am presently concerned with finding commercial outlets for men and women who have made simple inventions which they can manufacture with the minimum of tools and apparatus, and there is a demand for these simple inventions which the normal firm—large or small—would not necessarily take up. These skilled men and women know their markets, and if they can have an opportunity to get places where the rent is cheap, or where the premises are given to them without any rent being charged, then that is an opportunity for them to make a living. The question then

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arises, how should they form themselves? It seems to me that it is in a system of this kind that they would find the greatest opportunity.
I was very glad to hear the helpful observations made by a person so experienced as the noble Lord, Lord Oram, and I am personally grateful for the observations he made to improve this amendment. With regard to one point he raised about all employers having the right to be members of the scheme, it seems to be inherent in the amendment as it stands, as the noble Lord, Lord Seebohm, has explained, that all employees shall have the right to be members of the scheme. I should like to support this amendment very strongly, and my remarks are directed not only to Amendment No. 105 but also to Amendments Nos. 106 and 107.
Lord Boyd-Carpenter: It would be wrong for any noble Lord to feel that enthusiasm for schemes of this sort was confined to one side of the Committee. I believe many of us feel that in these days a variety of developments for dealing with what may be called the "we-they syndrome" in industry are required and should be encouraged. I myself thought that the noble Lord, Lord Seebohm—and I nearly said, for personal reasons, "my noble friend" because in everything except the purely technical, procedural sense I like to think he is—made a very important speech and one having a good deal of significance, perhaps, in the longer term. I do not think he would claim that in this amendment and those which follow it he has evolved a perfect scheme. I believe there was some force in the moderate criticisms which the noble Lord, Lord Oram, made, based on his own great experience. However, I think that the general proposition made by the noble Lord, Lord Seebohm, that some form of structure a little different from that of a normal Companies Act company would facilitate the growth of these worker co-operatives is very soundly based indeed.
For the reasons which the noble Lord gave—and I will not weary the Committee by repeating them—there are practical difficulties in complying with our somewhat complex company law (which we are at the moment busily engaged in making even more complex) when one is setting up an organisation of this sort and perhaps starting on a modest scale without being able to afford or obtain high-grade professional advice. The noble Lord's initiative is a very valuable one indeed. I am sure he would not contend, and if he did so contend I would not agree, that it is the only method of dealing with this problem. I happen myself to be the chairman of a company having a normal company structure which has encouraged employee shareholding to the extent that today over 90 per cent. of our employees in the United Kingdom hold shares in the company. We have been assisted in this by Finance Act legislation of successive Governments, although the tax limitations on the development of such schemes are still, in my view, unduly severe. We have certainly found, in a normal Companies Act structure, that the wide development of employee shareholding such as we have is very valuable; and, based, on strong practical experience, I would commend it strongly to the Committee.
I accept that we want varieties and that the ordinary Companies Act structure, for the reason that I mentioned
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earlier, is not necessarily the sole or only answer to this problem. I should be extremely interested to hear what my noble friends on the Front Bench have to say. If 1 may say this without impertinence, I hope they will not confine themselves to seeking to point out defects in Lord Seebohm's clauses, because I have not the slightest doubt that with their great abilities and with their staffs behind them they would be able to do so. With respect, I do not believe that at this stage that is what the Committee is particularly interested in. What I hope they will say is that they would like to see encouragement given to the development of activities of this kind.
They may argue, and the noble Lord, Lord Lyell, did so on the Second Reading, that there really are no difficulties under present company law. I do not think the weight of evidence would support them, and even if there was a certain amount to that argument, as there may be, I hope they will not underrate the presentational and moral advantages of putting into our law a new provision deliberately tailored to job ownership, co-operation, or whatever one likes to call it and one likely to have an encouraging effect on people who are hesitating as to whether to go forward with these proposals. It would be something more than a gesture; it would be an indication of Government sympathy and understanding and indeed of Government encouragement. I, for one, should very much like to see this. I think it is wholly in the spirit in which this Government were elected that we should seek to encourage developments of this sort, and I hope that when one of my noble friends replies from the Front Bench he will, whatever his comments on the details of the amendments may be, indicate a broad sympathy with them—and, more than that, indicate a desire on the part of Her Majesty's Government to help forward movements of this kind.
Viscount Caldecote: I would support most strongly the noble Lords, Lord Seebohm and Lord Boyd-Carpenter, and in particular the words used by Lord Boyd-Carpenter when he said in the latter part of his speech that this would encourage people to set up this kind of company. As the noble Lord, Lord Seebohm, has already pointed out, there has been a very great success rate with what has been called management buyouts, and this amendment would provide for employee buy-outs on a larger scale. I therefore support it strongly. I agree that there are all the advantages which the noble Lord, Lord Seebohm, put forward, and I support them strongly too.
Whilst the co-operative principle which the noble Lord, Lord Oram, put forward, is no doubt important, I believe I am right in thinking that the job ownership company involves the ownership of shares in the company by the employees. All employees have the right to participate but not necessarily all employees would be shareholders. There might be some who would not but they would have the right if they so wished. So if there were certain tax advantages of becoming closer to co-operatives, as the noble Lord suggested, then no doubt these companies could take advantage of them.
I should like to make a plea that there may well be detailed problems connected with this proposed new

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clause. I very much hope that we take the advice of the noble Lord, Lord Boyd-Carpenter, and look for ways of implementing it and not look for difficulties. Let the best not be the enemy of the good. This is a real opportunity—as I said on Second Reading—of moving from a property-owning democracy to a company-owning democracy. I should like to give this new clause my very strong support.
6.12 p.m.
Lord Diamond: There is very little left for me to say except to make it clear that support for this kind of approach comes from every possible quarter of the Committee. I have been interested in this problem for very many years. I took part in drawing up a plan which the Labour Party considered. However, the plan has not yet reached manifesto status. I hope that it might do so at some time or other. It is a problem to which we all want to address our minds.
I subscribe to what has been said about the practising accountant and, I dare say, the practising solicitor, finding it a great and difficult problem to show the way to a group of people who want to get together and form a job ownership scheme of this kind. This is a new clause and what we are doing is giving a Second Reading to a new proposal, although in technical terms we are in Committee. This proposal would provide a fillip of the kind which is more than necessary. It would also be a clarification. It will be a great encouragement and I am sure a great success.
My anxiety is that and number of the tiny businesses that we are so anxiously pushing inexperienced workers into trying to run, might fail to a surprisingly and unpleasantly large extent. If an organisation of the kind was suggested there would be a much greater chance of such activities being successful. I do not see this merely in terms of small businesses. When in Spain one is bound to notice the fact that practically every refrigerator one sees is made by the factory within the Mondragon village. They are very successful in terms of both domestic production and sales and overseas exports. There is no reason why business should not be carried on in an increasing and extensive scale within this kind of system.
I am sure that the noble Lord, Lord Seebohm, will not object if a dot or comma is excluded. What we are anxious to do is urge the Government—and encourage people outside the Committee—to take this step forward to enable people to take in this venture. It is an excellent way of overcoming all sorts of problems. It is entirely within the development of the philosophy of the Companies Acts which we are now considering, especially in terms of buying one's own share capital, and I hope that the Government will give the idea the encouragement which our economy needs.
Lord Rochester: I had not intended to say a word. I am not sure that I should do so now as I have little of substance to add to what has been said. However, like the noble Lord, Lord Diamond, I have been enormously impressed by the degree of support that has come for this amendment from all parts of the Committee and, if I may say so, by the calibre of those
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who have lent it support. Like the noble Lord, Lord Diamond, I should like in these few words to add my personal support and express the hope that the Government will take these factors into account. Whatever are the defects of detail in this amendment, I hope that the Government will find it possible to speed the underlying principle of it on its way.
Lord Kilmarnock: I am sure that the noble Lord, Lord Seebohm, is anxious to hear what reception the Government will give to this proposal. My only reason for intervening at all is that I have visited Mondragon, as no doubt have other noble Lords. I was there about 18 months ago. The note I made in October 1979, when I returned, was:
"If the two sides of industry could be more widely dissolved on Mondragon lines and if Mondragon type agreements on rewards were to replace the clumsy ritual of free collective bargaining, that would be a great step forward in the direction of a fairer and less divisive society".
That was simply a personal note that I made on return from a three-day trip to the Mondragon complex of co-operatives.
The atmosphere there is extraordinarily impressive. There is tremendous sense of participation and dedication. It is important to point out that there is nothing wild or woolly about this scheme. The Mondragon complex is extremely professional. Before a co-operative is set up at least three years of studies go into the preparation. Once it has been accepted into the major group, it is monitored for a further two or three years. There is a very stringent rolling accounting procedure. There is absolutely nothing which could be vague or merely idealistic about this. There is obviously a basis of idealism to it but it is also profoundly and very stringently practical.
Something that attracted me about it is the ratio of rewards. The noble Lord, Lord Seebohm, mentioned that there is a general 1:3 ratio. In other words, the newest apprentice begins by getting one and the managing director does not get more than three. This differential is even narrower in practice. The apprentice speedily jumps to 1:2 in the ratio: many of the top management do not get more than 2:6 or 2:7 of the ratio, though I understand that technological requirements these days produce some variants and some outside advisers are being paid a higher wage or get a higher participation.
In terms of motivation for collaboration in industry, there is no doubt that this is a most impressive experiment. It is true, as the noble Lord, Lord Oram, has said, that there are other examples of this around Europe and Mondragon has slightly scooped the headlines. Simply on those grounds I do not think that we should turn ourselves away from the experience it can offer us.
I am not qualified to comment on the technicalities of Lord Seebohm's clause. Many members of the Committee seem to feel that in general principle it is correct, although there could be some improvement at a further stage. I hope that the Committee will give it a fair wind.
Lord Davies of Leek: I have just come into the Committee because I was interested in this matter and I apologise for speaking. I have taken an interest in this experiment and it is rather remiss of me to indulge

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on the good temper of the Committee by making a long speech, having, by accident, absented myself. Nevertheless, may I record, without going into the arguments which I have read and the history of the Spanish experiment and others, that this development may be very worthwhile. Without going into it in detail, having missed the full debate, I should like to put it on record that I support this amendment and if we go into the Lobbies I shall go into the Lobbies in favour of it.
The Earl of Halsbury: If I may come to the help of the noble Lord who has just spoken, I, too, sincerely apologise to the Committee because I missed the beginning of this debate; it was called a little earlier than I had budgeted for, and I arrived late. Like the noble Lord, I do not wish to take up the time of the Committee by doing more than recording my support for this amendment. I think that one or two bits of sandpaper could perhaps be used before Report stage, but I should like my noble friend to be assured of my support.
6.21 p.m.
Lord Mackay of Clashfern: A great deal of support in principle for these interesting proposals has been manifested on all sides of the Committee. So far as Her Majesty's Government are concerned, they are interested to promote enterprises of this kind and to make it reasonably easy for them to promote themselves and to be continued. It is in that spirit that I approach the amendments which have been proposed by the noble Lord, Lord Seebohm. The principles he has explained and the desires he seeks to achieve are ones which we would certainly seek to facilitate.
As I think has already been acknowledged, a company which is broadly on the lines of the company proposed in these amendments can presently be set up under the Companies Acts, subject to two major matters. The more important of them is the difficulty about the purchase of its own shares by a company, and it is in order to facilitate that in proper circumstances that the Government have proposed in later amendments new clauses to provide more generally for the purchase by a company of its own shares, subject to certain safeguards. There are also questions with regard to the restrictions imposed by Section 54 of the 1948 Act to which the noble Lord, Lord Seebohm, referred and we have proposed in this Bill a certain relief in this respect.
If these later amendments to which I have referred are passed, the result would be that, subject to safeguards of detail which I would not propose to go into fully now, in the spirit of my noble friend Lord Boyd-Carpenter, the sort of company that is here proposed could be set up. However, it is important not to lose sight of the point made by a number of your Lordships: this is not the only vehicle by which the sorts of objective we are here seeking to promote can be achieved and therefore it may not be wise, or indeed in the best interests of the ultimate success of this development, that it should be singled out for very special treatment in the Companies Acts. Surely it is better to look at the obstacles to the development which have been experienced and see to what extent those obstacles can be removed, under proper safeguards. That has been Her Majesty's Government's
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approach and, as I say, the most important obstacle to the formation of these companies was undoubtedly the difficulty over a company purchasing its own shares. That we have sought, by the proposal of the later clauses, to remove.
I appreciate, as the noble Lord, Lord Seebohm, pointed out—and it was a point also taken up by other speakers—that the Companies Acts are apt to be a little complicated. I am not certain that I would go along with the view that we are now engaged in making the provisions more complicated: in some ways we are giving considerable help and alleviation to small and medium-sized companies in connection with the rules with which they must comply. Nevertheless, the Companies Acts are somewhat complicated and I appreciate that people to whom small enterprises might go—solicitors, accountants and possibly even members of the Bar—might not be familiar with the details of the model that the particular amendment incorporates. We would suggest that the way to overcome that is not to put this particular model, in its present stage of development, into statute but to engage in publicising it so that even the humblest practitioner will come to be aware of it. Indeed, it may be wise to circulate it in other sorts of literature apart from professional literature.
We feel that we have, by the general provisions I have referred to, sought to overcome the principal obstacles to the development of this type of company and we would suggest that the right way forward is for such companies to develop, making use of these general relaxations. We would also suggest to the Committee that it may not be in the best interests of this development, as I have mentioned, to "freeze" it at this stage into an Act of Parliament. Once it is in an Act of Parliament, as your Lordships know, it is not particularly easy to have it altered; and experience might show that in some details it could be improved in practice. Therefore, we would suggest that the objectives of these amendments can be achieved without the necessity of particular provisions of this kind. I shall not go into details of the provisions now—
Lord Diamond: I am most grateful to the noble and learned Lord for giving way. He was referring to the fact that the Government proposes to publicise methods whereby this can be achieved within the framework of the Companies Acts. Did he have in mind, for example, that there would be a new model Table A and that anyone could take the whole of that table and the articles of association and say, "This is a model of the way in which you could operate, for example, this job-ownership scheme"?
Lord Mackay of Clashfern: I did not mean to imply that the publicity would necessarily be undertaken by the Government, although no doubt the Government might be able to assist in one way or another in such publicity. To frame an alternative to Table A on the lines of these proposals might have the kind of difficulty I have mentioned. It would tend to put the company, in its present stage of development or in the formulation of its memorandum and articles in its present state of development, into the statute, and thus inhibit further development. Therefore, while I can see that doing so would achieve a fair measure of

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publicity for the form, it would have the sorts of disadvantage to which I have drawn attention and, certainly for my part, I would suggest that publicity of a more general character might be more appropriate.
I was saying a moment ago that I did not propose to go into the details of the clauses that have been proposed by the noble Lord at the present stage, because our principal view is as I have expressed it. However, as the noble Lord, Lord Oram, has mentioned it, I would say that my understanding of the clauses as they are at present is that they restrict membership of the company to the employees, but not conversely. In other words, not every employee would have a right, in terms of this memorandum and articles to be a member; but of course—
Lord Seebohm: I would just intervene once more to say that it is the full intention of our scheme that every employee should be a shareholder.
Lord Mackay of Clashfern: I can well understand that; and I was just about to say that I can well understand that that sort of arrangement would be over and above the provisions of the memorandum and articles: in other words, it might well be a condition of part of the employee's contract on taking up the employment that he should be entitled to become a member of the company. Perhaps it would be more appropriate to have a contractual arrangement of that sort rather than to incorporate it into the memorandum and articles; and of course it does mean that this sort of proposal we are talking about would have flexibility to be used, for example, in a case where for some good reason the general co-operative arrangement to which the noble Lord, Lord Oram, referred might not be appropriate. Apart altogether from the question of development forward of this project, we would also say that in the interests of flexibility, in the interests of trying to fit this kind of scheme into a number of different situations, it is unwise to legislate about it in too much detail.
In the light of that explanation, I hope the noble Lord will feel that, while we support very much the objectives which he is seeking to achieve here, the way in which we have put it is perhaps preferable. I should be happy if the noble Lord felt that, between now and Report stage, we could look at it, possibly with him, to see whether there were any points about our general proposals which he felt required to be altered in any way to accommodate his proposal.
Lord Wilson of Langside: Before the noble and learned Lord spoke, it had never occurred to me to address your Lordships on this amendment, because I cannot match the knowledge and experience of the several of your Lordships who have spoken to it. I found the response of the Government, as expressed by the noble and learned Lord on the Front Bench, to these imaginative and potentially exciting innovations in the industrial scene more than somewhat disappointing. Indeed, I thought, in spite of the note on which the noble and learned Lord concluded, that the Government's approach to these matters tended just a little—I hope that this is not an unkind thing to say—to express the spirit of a man who has a problem for every solution.
Lord Mackay of Clashfern: Perhaps I might be allowed to say that I greatly regret that the noble and learned Lord should feel that. That is certainly not the spirit in which we have approached this matter—quite the reverse. I would say, particularly, that the fairly elaborate amendments which we have brought forward to provide for the purchase by a company of its own shares are a very positive response to trying to push forward the kind of proposal which the noble Lord, Lord Seebohm, has made. Far from trying to put obstacles in his way, we have sought to deal with these obstacles to some extent. I should perhaps correct one thing that I said earlier about Section 54. We have certainly made proposals in relation to Section 56. We are considering what could be done in relation to Section 54.
Lord Wilson of Langside: I certainly apologise to the noble and learned Lord if I misinterpreted the spirit in which he replied to the amendment. I readily apologise for that, but, certainly, that was the impression I gathered. But, of course, I may have been wrong.
Lord Mishcon: I wonder whether, upon that note which the noble and learned Lord sounded of Government encouragement to what is a brave initiative in this field and to an amendment for which the Committee is deeply grateful—because it has been a most interesting debate—I may say this. The noble and learned Lord caught the spirit of the Committee in wanting to further the principle behind the amendment, and very correctly referred to the general policy in certain clauses of this Bill, which would make what I think will inevitably be called JOCs something better known and something practised.
But I also wonder whether, bearing in mind that the noble Lord is speaking for the Departments of Trade and Industry in connection with this Bill, he could make the Committee a little happier—and I am not criticising him for not having made the Committee happy up till now—by saying that it is the Government's intention, so welcome is this proposal, to conduct in very near months from now discussions with the Confederation of British Industry, discussions with commerce and discussions with the trade unions, and perhaps the co-operative movement, on the furtherance of this idea, so that the publicity of which he spoke, and for which, understandably, he did not want to take responsibility on behalf of the Government at this stage, is something that is likely to be fairly imminent.
Many of us know of the good intentions of the noble and learned Lord. What we are scared of is that, having had this useful debate, with all the trouble taken by the noble Lord who moved the amendment, the proposal will be lost in the labyrinths of our Official Report and not come forward once we have excluded it from the Bill. If the noble and learned Lord could help with some pronouncement of intention to further the scheme, most members of the Committee, who have spoken in favour of this amendment, would be happier.
Lord Mackay of Clashfern: I am inclined to the view that actions speak loudly in this context and I would have said that in this field the Government have shown,

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by action, their encouragement, by bringing forward their amendments in order to enable companies, subject to certain qualifications, to purchase their own shares. That is an active response to this matter.
Lord Mishcon: I must persist but only for one moment, because I do not want to bore the Committee. This is an important matter, and we do not want this debate to resolve itself into mere print upon pages, with all of us praising ourselves tonight for the speeches we have made and the matter resting there. The noble and learned Lord is a very frank person, and I do not think that he would put forward to the Committee that the reasons for looking at Section 56, and, ultimately, for looking at Section 54 and at the whole idea of a company's ability to purchase shares, were specifically in relation to our debate on these amendments. There were many other reasons why the Government had, quite properly, to look at those provisions and to bring in those reforms.
The noble and learned Lord will be the first to admit that, if we merely pass these sections in regard to a company's ability to purchase shares, and to finance the purchase of shares, and they become enacted, that will not forward the scheme in any way. What we are anxious about is that the scheme itself should go forward, not just the enabling powers. I therefore press the noble and learned Lord again. Is he prepared, on behalf of the Departments of Trade and Industry, to say that discussions to further this kind of scheme will be initiated by his departments?
Lord Seebohm: I so much agree with what the noble Lord, Lord Mishcon, has said. I had hoped that we should get more encouragement than we have had from the Front Bench. It is perfectly easy for legislation to do what I have put forward. But unless there is some positive encouragement from the Government, by way of stating the case—by no means do I say that this evening has been wasted—the Government will not have done what I wanted. I do not believe that a single person has spoken against my amendment.
Lord Lloyd of Kilgerran: May I attempt to clarify a few points by asking the noble and learned Lord the Lord Advocate two questions? I, too, was a little disappointed at his approach, but I may have misunderstood him in this matter. In the early part of his speech, he referred to the fact that he was not going to deal with these amendments in detail. He was talking about the whole scheme, subject to certain details, but he did not want to bore the House, he said—or words to that effect—and did not give us the details which he had in mind in relation to these amendments. As the noble and learned Lord will appreciate, one of the amendments associated with what the noble Lord, Lord Seebohm, spoke about was the new clause for amendment of the Companies Act 1980, to enable a limited company to acquire its own fully paid shares.
Secondly, when the noble and learned Lord so courteously and in a friendly way suggested that there should be talks, I was not clear about the nature of those talks. Would they be talks relating to the structure of these amendments and taking place before Report? Or did the noble and learned Lord have in mind other kinds of talks? As I have my name down
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to this amendment, I think it would be very helpful if the noble and learned Lord could assure us that the talks which he has suggested will relate to the clauses which we have put into the Marshalled List.
6.40 p.m.
Lord Mackay of Clashfern: I did not examine the clauses in tremendous detail because I sensed that the Committee had accepted the suggestion put forward by my noble friend Lord Boyd-Carpenter. I certainly am in a position to give to the Committee views about the clauses in considerable detail, if that is thought to be wise. However, I concluded, rightly or wrongly, that perhaps it was unnecessary at this stage to go into that kind of detail. When I spoke earlier, the kind of further discussions which I had in mind were discussions about whether we had, to the extent necessary to allow the scheme to proceed in the general clauses, met the points which the noble Lord, Lord Seebohm, considers to be essential. That is the sort of discussion which I had in mind, for the reasons which I have explained. I hope I have made it clear that it seems to us not to be right to go ahead along the lines of these particular clauses, for the reasons which I have mentioned. I submit that the correct and wise approach is to remove, so far as possible, the obstacles as general obstacles and to permit therefore development of this sort of idea without these obstacles.
Lord Lloyd of Kilgerran: May I thank the noble and learned Lord the Lord Advocate for his explanation of why he did not go into the matter in detail? However, another aspect of the speech which he has just made reminds me that he seemed to suggest that possibly these amendments are not suitable for a Companies Bill. I thought he indicated to the Committee, with his great skill in these matters, that these clauses should not be in a Companies Bill. I feel, however, that these clauses ought to be contained in a Companies Bill, subject to the discussions to which the noble and learned Lord referred regarding certain improvements to their drafting.
Lord Mackay of Clashfern: In that case, I have not made my main proposition very clear. The view which we take is that the sort of company which is proposed in these amendments is of a very specialised form and subject to the matters which I have mentioned, could be created under the Companies Acts as they presently stand. If therefore they are a good thing—and your Lordships have plenty of evidence that for some circumstances they are an extremely good thing—then it is right that they should proceed. But in order for that to happen there is no need to put them into the Companies Acts as a special model. To select one possible model and to give it pre-eminence in the Companies Acts would be a mistake and possibly would inhibit the very development which your Lordships are anxious to promote.
There are other models which are possible. If one were to have the Companies Acts full of all possible models for doing everything that is good, the Companies Acts would be infinitely more complicated than they are. Accordingly, it is our view that the thing to do in the Companies Acts is, so far as it is right, to remove obstacles to desirable developments. That leaves the

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developments to take place at the initiative of those who want them, helped, so far as it is desirable, by Her Majesty's Government. In that connection, which may help the noble Lord, Lord Mishcon, may I say that, as the noble Lord, Lord Oram, has already pointed out, my right honourable friend the Chancellor of the Exchequer gave in his Budget very practical help in the direction of enterprises such as this.
Lord Mishcon: The noble and learned Lord has helped me, but only by a minuscule amount. I was asking him, as he very well knows, for something further. The Committee in my judgment, and I shall be corrected if I am wrong, regards the debate we have just had as very valuable. As has been pointed out, not one speaker—and we have heard speakers of great experience—has spoken against the proposals. The noble and learned Lord has given very good reasons, in my judgment, as to why it is not appropriate to legislate within this Companies Act for a specific type of company. I do not want to argue with him about that; he has given very good reasons why we should not have another Table A. I think that point is debatable, but I do not want to argue about it. However, the noble and learned Lord, I am sure not intentionally, has evaded the one question which I put to him.
This Committee, I feel, wants action upon this point—not just action which enables, from a legislative point of view, but action to encourage companies of this kind to be set up. Therefore I ask the noble and learned Lord, in straightforward, simple English, are the Government, through the Departments of Trade and Industry, prepared in the near future, having heard what this debate has told the Government and which the Government themselves have been good enough to say they have looked upon with favour, to initiate discussions with these organisations which are concerned with these matters to try to progress companies of this kind? Without that, we are in a position of de mortuis nil nisi bonum—concerning the dead say nothing but good. And this clause will be dead, and these amendments will be dead, and we shall have done nothing but express good about them.
Lord Oram: As I understood the Minister, he wanted to confine his talks with the noble Lord, Lord Seebohm, to the practicalities of the Government's amendments which are on the Marshalled List. I wonder whether I may press the noble and learned Lord to go somewhat wider than that and to offer to enter into discussions with the noble nord, Lord Seebohm, with a view to looking at the position which we may reach at the Report stage in order to find out whether or not some other form of amendment might be moved. I believe that talks of that wider kind might help the Committee out of the present difficulty in which it is placed.
I have considerable sympathy with the Minister's position in not wanting to give approval to a particular pattern of progress in this respect. I did not make this point in my earlier remarks, but I am very conscious that there is a completely different area of law under the Industrial and Provident Societies Acts which were specifically enacted for the setting up of co-operative
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societies. I believe this to be very relevant to the discussions which we are having this evening. If the Minister could go somewhat wider than he has about the possibility of this matter being further discussed, perhaps informally outside the Chamber, it might help.
Lord Boyd-Carpenter: Before my noble and learned friend replies, may I say that I am a little surprised that my noble and learned friend's, I thought, very helpful response has not been, apparently, as fully appreciated by one or two noble Lords as, frankly, I should have expected. Certainly they do not seem to regard it in the same favourable terms as I do.
However, can we not leave the matter like this? My noble and learned friend on the Front Bench has said that he would like to have discussions with the noble Lord, Lord Seebohm. The noble Lord, Lord Seebohm, is a great enthusiast who has done a great deal of work on the subject. Both he and my noble and learned friend are reasonable men. I should have thought the sensible thing to do would be to allow them both to have a discussion such as has been promised and to await the outcome of that discussion. If unhappily they are unable to agree, then anybody will be free—the noble Lord, Lord Seebohm, or any other noble Lord—to raise the subject at Report. However, to attempt to pin down my noble and learned friend in advance of the discussion with the noble Lord, Lord Seebohm, seems to me to be rather counter-productive. I hope the Committee will feel that the stage we have reached is a good one. There has been a successful debate with, as everybody has pointed out, general agreement with the spirit of the proposals made by the noble Lord, Lord Seebohm. There is a suggestion of a discussion between the two (if I may so describe them) protagonists at this moment; would it not be sensible to await the outcome of those discussions?
Lord Lloyd of Kilgerran: I should like to express my thanks to the noble Lord, Lord Boyd-Carpenter, for his helpful suggestion. I heard the noble and learned Lord the Lord Advocate refer to discussions and in my further speeches I tried to evaluate what those discussions would comprise. As my name is associated with this amendment as well as that of the noble Lord, Lord Seebohm, I would welcome such discussions if the noble Lord, Lord Seebohm, agrees. I would welcome such discussions with the Government as soon as possible in the context of the amendments as now in the Marshalled List, in order to see whether we can go any further without detaining this Committee any longer.
Lord Seebohm: I agree with that and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 106, 107 and 108 not moved.]
Clause 35 agreed to.
Clauses 36 to 39 agreed to.
Clause 40 [Provisions supplementary to Sections 36 to 39]:
Lord Ponsonby of Shulbrede Lord Ponsonby of Shulbrede moved Amendment No. 109:
Page 45, line 24, at end insert—
("(11) References in sections 37, 38 and 39 of this Act to the issue of shares at a premium include references to the issue of shares where the value of the consideration given for the shares exceeds the nominal value of the shares issued whether or not the excess is or would but for those sections be recorded in the share premium account.").
The noble Lord said: Clause 39(1) provides retrospective relief from Section 56 of the 1948 Act where the issuing companies issued shares at a premium, and it would seem to be helpful if it were made clear that "issued at a premium" includes issues made at a premium, whether expressly or by implication. The intention of this amendment is to clarify the situation. I beg to move.
Lord Mackay of Clashfern: The question of whether or not a share premium has arisen is a question of law to be determined in the light of the facts, and I should have thought that the amendment was unnecessary. The Bill as it stands achieves its purpose and I would suggest that in the light of the ordinary principle of economy this amendment should not be agreed to.
Lord Ponsonby of Shulbrede: I thank the noble and learned Lord for his reply, which I will study in detail. The intention of the amendment was to clarify the situation and I will see whether in fact his remarks meet that situation. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Trefgarne: I understand that it has been agreed through the usual channels that we should now adjourn consideration of this Bill in Committee, proceed with the other business, and then continue with this Bill again at eight o'clock. Accordingly, I beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Water Bill
6.56 p.m.
Lord Bellwin: My Lords, 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 Bellwin).
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD ALPORT in the Chair.]
Clause 1 [Increased borrowing powers of British Waterways Board]:
Lord Burton Lord Burton moved Amendment No. 1:
Page 1, line 8, leave out from ("million") to end of line 10.
The noble Lord said: I rise to move this amendment with not a little trepidation because it deals with figures rather above those which I am accustomed to handling. Furthermore, any suggestion of cuts in public expenditure is never popular and this is certain to be unpopular with the Minister of the Environment, who is hoping to dispense the money. However, my noble friend Lord Bellwin on Second Reading referred to this Bill as being uncontroversial. No doubt he hoped that it would be, but since he made those remarks we have had a tough Budget and clearly figures of £15 million should not be allowed to pass unscrutinised and some consideration should be given to the sort of return which may be expected from such an investment. The Bill authorises borrowing up to £35 million; but to quote from the British Waterways Board's report for 1979, the board were paying over £1 million in interest. However, the board's total net income was only £6 million and the country was having to top up this income with an annual subsidy of £21 million.
The Minister and the speakers from both Opposition parties agreed that this money is mainly for recreational purposes, and I ask your Lordships whether we should go on running up a debt of this nature in the current financial atmosphere to provide recreation for a comparatively small section of the community. Not only that, but as the Caledonian Canal runs past my house I have a golden opportunity of seeing how some of this money is spent, and I do not like what I see. I am not going into details just now, but the British Waterways Board seem to be totally unwilling to accept that there can be anything wrong with their management.
I do not expect an answer just now, but presumably some of this borrowing of £35 million is to be applied to a highly speculative marina planned by the board for Dochgarroch on the Caledonian Canal and perhaps the Minister can let me know before the Report stage how much public money it is intended to devote to this venture and what sort of return is expected from the investment.
I have another suggestion which may appeal to the Minister, though I appreciate that perhaps it has implications beyond the British Waterways Board; indeed, it arose on the forestry debate we had recently when a question was put as to what would happen to receipts for the sale of forestry ground. So far as the British Waterways Board are concerned, they have got surplus property which could well be sold, but the proceeds of this would be paid to the Exchequer and would be lost to the British Waterways Board. At the moment, any revenue received from these properties, such as rents, accrues to the board, so that if they were sold the board would lose net income. This seems illogical. Would it not be possible for any sales to be used to offset borrowing, thereby reducing the board's liability for interest?
Finally, I think it must be agreed that anyone who can afford a boating holiday cannot be among the poorest section of the community. One wonders, therefore, whether it is right to subsidise this comparatively small proportion of the population to the extent of £21 million a year. Perhaps I may just draw one parallel. The petrol duty at an extra 20p per gallon is, I gather, to bring in £910 million; if the British Waterways Board had no annual subsidy (and I agree

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that is not really feasible) this would mean ½p off the petrol tax, which I suggest would be a very much better way of spending recreational money. I beg to move.
Lord Underhill: At the Second Reading of this Bill I expressed concern as to the indebtedness of the board and also the amount of interest charges that have to be paid by the board. The figures that I have (and I think they are correct) from their 1979 accounts was an indebtedness of £14 million. That may seem very small but in relation to the net income from the board's own activities of only £6 million, it is a substantial amount.
At this stage I must express my warm thanks to the noble Lord, Lord Skelmersdale, who sent me a detailed letter on quite a number of the points which I raised at Second Reading. He will be disappointed, of course, to note that some of the amendments are necessarily still on the Marshalled List. The important thing is that the borrowing, as was made quite clear by the Minister on Second Reading, relates to capital expenditure for buildings, equipment and new developments, and the last thing that we on this side of the Committee would wish to do would be to stop any new developments. Moreover, some of the equipment may be required for maintenance work, even if not actually coining under the heading of maintenance. We should not wish to restrict the board in any possible developments. I would disagree with what the noble Lord, Lord Burton, said, that this is merely for recreation; there is a commercial aspect to it to which we wish to pay a certain amount of attention. Therefore, we should not be in favour of supporting the amendment, even though there are some cautionary words which I have given and would like to add.
The noble Lord, Lord Burton, mentioned the question of the grant, and those noble Lords who were here at Second Reading will recall that there was discussion about the actual level of the grant. I will not argue that tonight, except that it is agreed that there is a decrease in the amount of the annual grant. I believe the Government take the view that it is only a small amount and the board can easily cope with this issue. It may be remembered that I enquired of the Government Front Bench how much of the maintenance arrears, as revealed by the Fraenkel Report, has been cleared, and the noble Lord, Lord Skelmersdale, said 10 per cent. and that if I was patient it could all be cleared within a period of years. Since Second Reading there have been press reports about the backlog. I hope the Committee will bear with me while I raise this matter, because this is the only opportunity we have to raise the question of the British Waterways Board and its financial affairs.
It is stated in that report that the board's officials are now negotiating with the Department of the Environment and the Treasury for up to £100 million to clear the backlog, and another £25 million to do essential work on some of the 90 reservoirs for which the Board is responsible, and for other installations. The report went on to say that because of their poor state of repair six of the reservoirs are being kept only a quarter full as a safety precaution. Therefore, we are talking about money not just for leisure and recreation but for safety, as well as the actual commercial use of the
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waterways and the water from the reservoirs. It was mentioned in this report that the water level in these reservoirs, with urban development below them, is being kept well down because of this danger. Sir Frank Price, the board's chairman, has stated that as a result the board is short of millions of gallons of water, and should there be a very dry summer, he is reported to have said, there could be a danger of the reservoirs drying out altogether, and even some of the canals in the system which are supplied by reservoirs also drying out and their sides cracking. Therefore, we are talking about serious matters.
Sir Frank has stated that to bring the reservoirs up to standard would cost £9 million, and maintenance of the bridges another £16 million—I understand the board is responsible for something like 1,600 bridges which come under its jurisdiction. He is reported to have said that the cost of the backlog of maintenance is today no less than £100 million at current prices.
At Second Reading I said that whatever case there may be for cuts in public expenditure, there are times when to put off public expenditure only stores up trouble for the future. If what the chairman of the board has said is correct, there is a danger not only in regard to meeting the interest charges from revenue, not only as to whether or not they can proceed with developments, but also, because of the urgency of some of the things Sir Frank Price has mentioned, whether or not they can cope with the backlog of maintenance work. I know it is not competent for this Committee to move anything, but this does bring into question the whole issue of the annual grant. I wonder whether in reply to the amendment moved the Government can say something about the grant in the light of this report about the statements by the chairman of the board.
Lord Skelmersdale: I am grateful to my noble friend, Lord Burton, for moving this amendment and also for the support which it will be seen to have received—if that is the correct English—from the Front Bench opposite. We have really had two points of view about the effectiveness of the operations of the British Waterways Board. I think we can agree that our inland waterways are a national asset which deserve to be preserved and enjoyed for their recreational value, and also, and here I particularly agree with the noble Lord, Lord Underhill, for their transport function. This is the Government's firm intention and we propose to continue to assist the board to maintain the waterways in a useful condition consistent with their status to the extent that national economic circumstances allow.
I appreciate the point that the board's operations are heavily dependent on Government grant to meet the inevitable deficit between the costs of operating and maintaining the waterways and the money that can be generated from their various activities, the income from Government licences, tolls and dues from their freight services, sales of water and so on. I can also understand the point of view that suggests that the board's finances should be kept under close parliamentary scrutiny because of their dependence on Government grant, and that is exactly what Clause 1 of this particular Bill seeks to do. I can assure your

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Lordships that officials of the department are in close touch with officials of the board, and while they do not seek to interfere with the board's day-to-day management functions—nor do they, of course, with any nationalised industry—they do consider with them in detail the board's financial requirements.
I should perhaps again distinguish, as I did at Second Reading, between the board's revenue requirements and their capital requirements which are the subject of this clause. Their maintenance and operating costs are met from revenue, from income they receive plus grant. Their capital needs are relatively small, and they raise loans to buy new equipment such as dredgers and so on, or for actual waterway improvement, such as the Sheffield and South Yorkshire Navigation. They do not spend money on investments such as marinas, which they prefer to leave to private investors. My noble friend Lord Burton said that one of the intentions behind his amendment was to bring the affairs of the board more closely under the scrutiny of Parliament. I would submit that the clause already provides for the opportunity for debate in another place before any extension of borrowing powers beyond £25 million can be approved, because of the requirement for the Affirmative Resolution procedure.
The noble Lord suggested that if the board disposed of their houses and other assets, probably land and other buildings, they would not need to raise their borrowing limit to the extent proposed in this Bill. The board's annual report for 1979, the most recently published one, shows that they hold freehold land and dwellings put at £14 million. Of this sum, property worth £7½ million was used for their various operations, freight services and so on, £6½, million was the value of their estate strictly surplus to operational needs, which yielded gross revenue of nearly £2 million. After deducting all overheads, including interest, administrative and essential charges, there was a surplus of £670,000, which of course was used to help finance the maintenance of waterways. Without this surplus the board would be forced to look to the department for an equivalent increase in annual grant. If such an increase were not forthcoming, the waterways would, to that extent, be less well maintained, which is to nobody's advantage.
Nevertheless it remains Government policy to encourage nationalised industries to dispose of surplus assets where it makes commercial sense to do so. To that end the board are preparing a list of their assets for purposes of discussion with the Department, and of course will register those properties which fall within the property registration requirements of the Local Government (Land and Planning) Act 1980. Should it prove possible for the board to realise to any appreciable extent its surplus assets, then it could be for consideration by the board, the Department and the Treasury how the borrowing requirement for a particular year would be affected.
With regard to the point raised by the noble Lord, Lord Underhill, on the backlog, the chairman of the British Waterways Board has put the costs for arrears of maintenance at £100 million, plus £25 million for repeairs to major structures. Those are his prices, but we do not challenge them, or the indication of the size of the problem. We know that there is a problem here, and as soon as there is money available to deal
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with it, over and above the strict safety requirements which the noble Lord mentioned, we will do exactly that and put money into the British Waterways Board. We are currently in discussion with the board about how to tackle these particular problems. I hope that that goes some way at least towards answering the various points that have been raised in the debate.
Lord Underhill: The noble Lord said that as soon as money is available the Government would naturally do what they could to look at the points raised by the chairman of the board. Do I have his assurance that the urgently needed safety measures will be able to be tackled by the present annual grant—that is the important point—without any deterioration of the position?
Lord Skelmersdale: Yes, my Lords, that was what I thought I said, but obviously I did not make myself clear.
Lord Burton: I should like to thank my noble friend for that very lengthy and useful answer to the amendment. First, I should like to say to the noble Lord, Lord Underhill, that I appreciate that of course, there is a commercial use for the canals. In fact, the income, as he probably knows, was £4,335,000 from commercial uses, whereas leisure produced only £1,651,000. I am wondering whether the leisure side is paying as much as it should, because these waterways cost a great deal of money to maintain. Furthermore, the reason why I made remarks about leisure uses as opposed to commercial uses was that the noble Lord, Lord Winstanley, said that my noble friend Lord Bellwin indicated that the main purpose of the inland waterways network was, frankly, recreational.
However, I propose to leave that point. I shall just say that the feeling about the amount of subsidy which has to go to lame duck nationalised industries is really very strong throughout the country at the moment, particularly when industry and private commerce are suffering so severely and having to subsidise those industries out of their taxation. The Government must look at every possible method of restricting the amount of public money that goes to those industries.
Finally, I should like to know when the board's full estate was last valued. Clearly I do not want an answer now. My noble friend gave us figures regarding the value of the houses and the commercial property. Clearly valuing property is quite an expensive business and I would not like to ask the board to incur a great deal of expense by doing that. However, I wonder on what date the valuations were last made.
There is undoubtedly in some cases a surplus of houses on these canals. They have been modernised and the locks can now be operated with far fewer personnel. Of course, the question of where the money is to go is a much wider subject. I do not want to press my noble friend Lord Skelmersdale at this stage because this is the first time that he has spoken from the Front Bench in Committee—and I should like to congratulate him on the way in which he has answered the points which have been raised. However, I think that the Government should look at the question of what happens to the capital assets of nationalised

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industries that are sold. With those few remarks I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 1 agreed to.
Clause 2 [Exemption from charges for water for fire fighting]:
7.13 p.m.
Lord Underhill Lord Underhill moved Amendment No. 2:
Page 2, line 19, after ("purposes") insert ("providing that such criteria impose no additional charges upon domestic users").
The noble Lord said: I beg to move Amendment No. 2. It may be for the convenience of the Committee if I speak also to Amendments Nos. 3 and 4. Clause 2 with which we are now dealing provides for the exemptions from charges of private water supplies for fire-fighting purposes, to serve, for instance, a sprinkler system that may be installed. As was made clear on Second Reading, only a limited number of the water authorities levy such charges and the Minister explained that it is only one, the North-West Water Authority, which has any charges of any significant size. In the last year the total of those charges was £600,000. I think that it is generally agreed that if those charges are no longer to be levied, then that amount of money must obviously be made up from somewhere.
On Second Reading I was very surprised to hear the noble Lord—and the noble Lord, Lord Skelmersdale, has confirmed what he told me in his kind letter—when replying for the Government, state that, based on views which were expressed by the North-West Water Authority, the Government originally took the view that the exemption would be recovered from metered industrial and commercial consumers and that domestic consumers would not be affected. The noble Lord added that, at its meeting on 23rd February the North-West Water Authority changed its plans and proposed to spread the cost of the exemption among all consumers, and therefore domestic consumers would be affected.
I have been studying very carefully the stages in the other place, because they seem to reflect that the Government's attitude was either put badly in the other place or, frankly, was based on a view which the Government sincerely held and which may justify the reason for my first amendment. On 20th January Mr. Giles Shaw, the Under-Secretary of State for the Environment, stated, in column 231:
"It is not correct … that the burden of the withdrawal of those charges will fall on the domestic ratepayer. It will fall on the same category of consumer as that on which charges are currently levied, namely, the industrial and commercial user".
That was quite a definite statement. When the Opposition spokesman challenged the statement, the Minister commented:
"The right hon. Gentleman is wrong about that, as he was wrong about many other matters".
It was not just a view expressed by a particular water authority. In Standing Committee the matter was reopened and there were quite a number of amendments tabled to propose various exemptions when the charges are reallocated. The Minister, Mr. Shaw, said, at
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column 108:
"The consequence of the clause will not be to shift a higher burden on to the smaller and more vulnerable consumers and domestic consumers".
Again, at column 110, he said:
"Water undertakers will need to distribute"—
note that he said "water undertakers"; he used the plural, he did not refer just to the North-West Water Authority—
"the loss of income involved in these connection charges among consumers but, as I indicated on Second Reading, I envisage this as falling on the measured consumers—in other words, on the metered sector".
Finally, at column 111, the Minister said:
"If the Bill is passed unamended, as we intend, the redistributed charges will fall on the same category of consumers who currently pay the charges".
The important point is that, in view of those assurances, a number of amendments, including the one which I am now proposing to the Committee, were withdrawn. I would again emphasise that these extracts seem to make absolutely clear that it was the Government's interpretation of the proposed clause and the Government's intention that it would apply to all water undertakings and not just to the North-West Water Authority.
The first of the amendments which I am moving is to exempt from any reallocation of charges the domestic consumers. The second is to exempt the small family businesses, and the third is to provide that these charges should not fall at all upon the commercial or industrial consumers employing less than 50 persons, with the proviso
"where there is not installed equipment for extinguishing fires".
I should like to make a few comments on the consumers' amendment. This amendment will restore to the clause the meaning that the Government, by the Ministers' various statements in the other place, intended. Therefore, we are really asking the Committee to put into the Bill what the Minister in the other place made quite clear should be the position. If he was wrong in making that statement then no doubt we shall be told. It seemed to be based on something more than a statement of the North-West Water Authority.
As regards the two other amendments, can it possibly be justified that a large concern with, say, a sprinkler system, shall be exempt from charges and that small family businesses—to which this Committee always gives considerable attention—should be called upon to help to meet the loss of revenue in consequence of that exemption? The third exemption deals with the firms that may employ fewer than 50 persons. I make it clear that the amendment says:
"…where there is not installed equipment for extinguishing fires";
that is, equipment such as a sprinkler system. Those last words are important. Can we justify making a small concern employing fewer than 50 persons that has no sprinkler system bear charges in order to afford exemption to the large concerns which, as I made quite clear on Second Reading, already—because they have a sprinkler system—are in a favourable position regarding the small concern, in that they receive a considerable reduction in their insurance premiums? I am concerned that we cannot justify the two points dealt with in Amendments Nos. 3 and 4. Amendment

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No. 2 seeks to restore the Bill to the position about which the Government in another place gave assurances. I beg to move.
Lord Burton: I should like to make two short points. I am rather at a loss to understand how the North-West Water Authority managed to expend, I think £600,000—not £300,000 as is stated in Hansard—or at any rate a large sum of money, which cannot have been entirely just for the use of water to fight tires. If one installs a sprinkler system, it is presumably largely for the safety of the workers working on that premises; and presumably as the workers live within a reasonable distance, the chances are that they will be the very people who may be charged some of the cost. It will be only a very small proportion when it is distributed among the various domestic houses, but it does not seem to be inequitable that they should be charged a little for their own safety.
Lord Skelmersdale: I, too, with the permission of the Committee, should like to take these three amendments together. The noble Lord, Lord Underhill, has made very clear his view that the cost of exempting charges for water for fire-fighting should not fall on certain categories of consumer, and his amendments are designed to achieve this. None the less, the Government must ask your Lordships to reject them. If accepted, they would impose unnecessary and troublesome constraints on water undertakers in the way in which they structure their charges. Imagine the additional administrative work involved in identifying these categories in each water authority area. The cost of this could well outweigh the relatively small revenue lost by these exemptions and, of course, it would be quite open to the water authority to pass on these administrative costs to all consumers—and I stress "all''.
We have acknowledged that water undertakers will need to re-distribute the loss of income among consumers. But I think that there is danger of making too much of a meal of this. It must be borne in mind that at present no water undertaker actually charges for water taken for fire-fighting and only one levies significant charges for making water available for this purpose. Yet these services have costs which must be recovered. So the vast majority of the water undertakers already absorb the costs of these services in their general charges as, indeed, they absorb the costs of supplying water to public hydrants for fire-fighting purposes. This may mean adding a small extra cost to every consumer's bill, or it may be that some water undertakers choose to recover the cost from certain classes of consumer. But it is certain that the extra costs involved are small.
To be simplistic is perhaps to use the wrong word and eventually the right word will come to me, but I am sure that your Lordships would not be surprised if I were to say that I was not expecting a certain amount of flak as a result of the Committee and subsequent stages on this Bill in another place. But, to be fair, I am sure that the noble Lord, Lord Underhill, will agree that the Government can speak only on the facts as they know them at the particular moment in time that they are speaking. That is exactly what my honourable friend Mr. Shaw did. I, equally, have
922
tried to be as fair as I could with the Committee and with the noble Lord. When I discovered that the facts had changed, I, of course, let him know; and I hope he will agree that that was the right and proper thing to do.
Reverting to what I was saying about the extra costs involved being small, I would point out that if we take as an example the North-West Water Authority—at the moment the only one to levy significant charges for making fire-fighting water available—they have estimated that when they can no longer levy these charges, they will have to levy an extra charge on the community as a whole; that is, on both measured and unmeasured consumers. So far as unmeasured consumers are concerned—the class to which the three categories of consumer in these amendments would normally belong—the authority reckons that the exemption will add, on average, only 11.5 pence per year to every water bill. I would stress that this is the authority's own figure, but I think it serves to make the point. What I must ask your Lordships is whether this is too high a price to expect people to pay for the extra public safety that Clause 2 is intended to secure, and whether amending the Bill to protect certain categories of consumer is worth the extra administrative cost to which I have referred. The Government firmly believe that the answer to both these questions is "No"; but I would add that the community at large, as my noble friend Lord Burton stressed stands to benefit from these proposals which will help protect shops, factories, offices and other buildings which the public frequently use. There is also the point that where no fire occurs anywhere in a local authority area, there is a saving to all the ratepayers in that particular local authority area. Therefore, for these reasons, I hope that the noble Lord will agree to withdraw his amendment.
Lord Underhill: I have already expressed my thanks to the noble Lord, for the letter that he sent me, and on this issue he gave me the full facts concerning the North-West Water Authority. However, the point I was endeavouring to make is that the Government in the other place were so adamant that it seemed to us that it was not just the North-West Water Authority about which they were worried, but the general principle; so much so that the debate went on for many hours and took up many columns.
The only other point I would make is that the noble Lord said that this would be creating an immense amount of administrative work for small sums involved. I shall not be tabling any amendments on the other subsections of this clause, but there is much administrative work involved. I know that the Government say that they will try to keep it down but, because of these exemptions, where there is one common supplier to supply both fire-fighting equipment and general purposes, much administrative work is involved. I should have thought that with the modern computer system, the allocation of charges, whatever they might be, would be very slight. I think that I have made my point quite clear. Therefore, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 3 and 4 not moved.]
Clause 2 agreed to.
Clause 3 agreed to.
[Amendment No. 5 not moved.]
Clause 4 [Separation of common water service pipes]:
On Question, Whether Clause 4 shall stand part of the Bill?
Lord Burton: I should like to raise one point on Clause 4. It is a question of individual water pipes. I believe that this question arose through urban development, particularly where council houses were being sold. Will the Government please look at the rural situation where, when a pipe is renewed, if the public supply is not close enough to the individual dwelling three or four lengths of pipe may have to be used where only one has existed before. I can think of one particular instance of two cottages and a farm building. If these cottages were separated away, it would involve quite a long piece of pipe to reach the individual properties, whereas probably it would be better for the mains to be moved nearer to them. I do not know whether I have made that clear.
Lord Skelmersdale: On that point, Clause 4 says that the statutory water undertaker:
"shall not require the provision of separate service pipes for those houses until either—"
one of four conditions has been met. But it does not mean that if one of these four conditions is met, this will necessarily happen on every occasion. I hope that that will satisfy my noble friend.
Clause 4 agreed to.
Clause 5 agreed to.
7.30 p.m.
Lord Skelmersdale Lord Skelmersdale moved Amendment No. 6:
After Clause 5, insert the following new clause:
("Civil liability of statutory water undertakers for escapes of water
.—(1) Where an escape of water, however caused, from a communication pipe or main of statutory water undertakers causes loss or damage, the undertakers shall be liable, except as otherwise provided in this section, for the loss or damage.
(2) Statutory water undertakers shall not incur any liability under subsection (1) above if the escape was due wholly to the fault of the person who suffered the loss or damage or of any servant, agent or contractor of his.
(3) Statutory water undertakers shall not incur any liability under subsection (1) above in respect of any loss or damage suffered by any excepted undertakers for which they would not be liable apart from that subsection.
(4) The Law Reform (Contributory Negligence) Act 1945, the Fatal Accidents Act 1976 and the Limitation Act 1980 shall apply in relation to any loss or damage for which statutory water undertakers are liable under this section, but which is not due to their fault, as if it were due to their fault.
(5) Nothing in subsection (1) above affects any entitlement which statutory water undertakers may have to recover contribution under the Civil Liability (Contribution) Act 1978; and for the purposes of that Act, any loss for which statutory water undertakers are liable under that subsection shall be treated as if it were damage.
(6) Where statutory water undertakers are liable, under any enactment or agreement passed or made before the coming into force of this section, to make a payment in respect of any loss or damage, they shall not incur liability under subsection (1) above in respect of the same loss or damage.
(7) In this section—

(a) "communication pipe" and "main" have the meanings assigned to them by section 1(1) of Schedule 3 to the Water Act 1945;

(b) "damage" includes the death of, or injury to, any person (including any disease and any impairment of physical or mental condition);

(c) "excepted undertakers" means—

(i) statutory undertakers within the meaning of section 290(1) of the Town and Country Planning Act 1971;

(ii) any highway authority within the meaning of the Highways Act 1980;

(iii) any bridge authority, bridge managers, street authority or street managers within the meaning of section 39(1) of the Public Utilities Street Works Act 1950; and

(iv) any person on whom a right to compensation under section 26 of the said Act of 1950 is conferred;

(d) "fault" has the same meaning as in the Law Reform (Contributory Negligence) Act 1945; and

(e) "statutory water undertakers" has the meaning assigned to it by section 11(6) of the Water Act 1973.

(8) This section shall come into force on such day as the Secretary of State may by order made by statutory instrument appoint.").
The noble Lord said: I must apologise in advance for the length of what I am about to say, but it is an extremely complicated issue. This amendment results from a Government promise in another place that we would bring forward our own proposals to provide for compensation to those suffering damage as a result of burst water mains. If it is for the convenience of the Committee, and particularly the noble Lord, Lord Underhill, I should like, in speaking to this amendment, to deal with his amendment as well.
The present position in law is of long standing and is as follows. As the result of the case Green v. Chelsea Water Works Company, decided by the Court of Appeal in 1894, statutory water undertakers have been under no liability to pay compensation for damage caused by escapes of water from burst water mains, except where it is possible for a plaintiff to prove they have been negligent. Statutory water undertakers have been able to defend themselves on the grounds that, though there are inherent dangers in conveying water through pipes under pressure, nevertheless because they have been authorised by Act of Parliament to lay their mains, and because they have a statutory duty to maintain a continuous supply of water, not for their own purposes but for the purposes of the public, they should not be made liable for any damage if the water escapes.
It is true that they can be held liable if they are shown to be negligent. But this is a very difficult thing to prove. For instance, how old should a pipe be before it is reasonable to expect things to go wrong with it? The courts have had to make decisions on just such a matter. If a pipe is less than the required age, and if there are no other grounds for assuming negligence, it is virtually impossible to prove. Or again, how many degrees of frost should water mains be designed to withstand? If a burst occurs as a result of a cold spell, was it a normal cold spell (in which case negligence might be proved) or something worse than that?
It is unreasonable, in our view, that such questions should have to be considered. If there is an escape of water from a water main, however it may have been caused, the assumption should be that the public, for

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whose benefit the pipe has been laid, should pay. This can be achieved by making the water undertakers liable, and that is the purpose of this clause.
It may be asked—and has been in some quarters—why confine this amendment to water mains and communication pipes? Communication pipes, incidentally, are the pipes leading off the mains to the boundary of the individual's property and are, like mains, the undertakers' responsibility. Why confine the clause in this way to water pipes? My honourable friend the Parliamentary Under-Secretary of State has already explained the reasons for this in another place. A particular problem for property owners stems from the present law about the laying of water mains. Statutory water undertakers have wide powers to lay mains across private land. These are wider than the powers enjoyed by most other statutory undertakers (for example, the British Gas Corporation).
Water undertakers do not require the owner's consent, and in consequence they do not need to obtain any easement or deed of agreement which (typically) would provide that in the event of escapes of water from the main the owner would be entitled to compensation. So they do not get this. In rural areas, where mains cross individual owners' land for considerable distances, it is impossible for the owners to insure themselves against the risk of damage from escapes of water at anything less than a prohibitive cost. It is equally impossible for the water undertakers to insure themselves since—because of the Green v Chelsea judgment—they have no liability to pay anything. The result is that, when a burst occurs, possibly damaging a farmer's crops, then the farmer has no redress against the water undertakers for the damage caused. This is a real source of grievance. In towns, where it is possible to obtain insurance, the water undertakers in recognition of the present illogical state of the law have agreed to make ex gratia payments to uninsured householders who suffer damage in this way. We understand however that the compensation payable under this arrangement is often only a partial recompense for the damage. We do not in any case feel that it is right to depend on a regular system of ex gratia payments of this kind. There is an inherent oddity in this concept. The principle in our view is—and I repeat it—that the public should pay the private individual who suffers damage in these circumstances.
It seems from his amendment that the noble Lord, Lord Underhill, would extend this principle—the principle of strict liability—to cover escapes of substances from sewers. As my honourable friend said in another place, sewers present a more complicated problem than water mains. The water authorities have no control over the volume of effluent carried by particular sewers. Anyone can connect a drain into a public sewer. That fact, combined with the age of the sewerage system, has led to substantial problems of overloading of sewers, and of decrepit sewers in certain parts of the country. We need to consider whether this should affect the principle of liability, and it if does not, whether liability should be imposed in respect of damage caused directly by collapses, or by leaks of sewage, or in any other circumstances. Many housing and industrial estates are served by private sewers. The noble Lord's amendment would benefit only those whose properties were drained by
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a public sewer. Is this an appropriate limitation?
When this matter was considered in another place my honourable friend said that he could not easily exclude that the principle of strict liability should be established for the sewerage system, but he did not think it feasible to table an amendment on this subject during the passage of this Bill. I did also try to underline that in my winding-up speech on Second Reading, when I pointed out to the House that this was a Water Supply Bill. However, my honourable friend did agree to a proposal of the Opposition that he should meet an all-Party delegation—later the suggestion was widened to include outside interests such as the National Farmers' Union, the Association of Metropolitan Authorities and others—to discuss the matter further. In our view that is a reasonable position to have reached, and we do not think that we should contemplate extending the principle of strict liability to sewers until more thought has been given to the subject.
I should briefly explain the limits we have imposed on the extent of this clause because I know that there has been a certain concern in various quarters. These limits are not many. We have provided that where it is wholly the fault of the person suffering the damage, or his servant, agent or contractor, that he has suffered this damage, then no liability should rest on the water undertakers (subsection (2)). Where it is partly his fault, subsection (4) provides that the undertakers' liability should be diminished accordingly. Subsection (3) provides that no other statutory undertakers, highway authorities or allied body should benefit under this provision. That is because the relationships between these bodies are governed generally by the Public Utility Street Works Act 1950, and we do not wish to disturb those provisions. It would be unreasonable to put a higher degree of burden onto statutory water undertakers vis-à-vis other undertakers than is already imposed on those other undertakers. Subsection (6) prevents the duplication of payments of compensation.
I hope that with the benefit of these explanations your Lordships will be able to agree that what we propose represents an important measure to help those who at present, through no fault of their own, have to sustain losses and damage which properly should be borne by the public at large. I commend this clause to your Lordships, and I would ask the noble Lord, Lord Underhill—although he has not yet moved it—to consider withdrawing his own amendment for the reasons which I hope I have fully explained and the fact that it goes too wide for the present Bill. I beg to move.
7.38 p.m.
Lord Underhill Lord Underhill had given notice of his intention to move as an amendment to Amendment No. 6, Amendment No. 7:
Line 2, after ("main") insert ("or escape of any substance from a sewer").
The noble Lord said: I can assure the noble Lord that I shall not move this amendment but speak on his own amendment, for the reason that I shall explain. I am grateful to the noble Lord for the helpful outline and explanation he has given of the Government's amendment. We welcome in general the amendment moved by the noble Lord on behalf of the Government.

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But the Committee will understand that I only saw this amendment yesterday, and therefore its full implications and the various law points mentioned must be given some study, but in general we welcome it at this stage.
The reason why we wished to add the amendment I had put on the Marshalled List is because everyone would understand that there are as many cases of serious loss and damage arising from leakage from sewers as there are from water. In fact some are so bad that I am certain your Lordships will be aware of the situation. That is why we felt the sewers ought to be covered as well. I thought there would be no danger in putting forward such an amendment because, after all, this is a Water Bill. The Water Act places sewerage and the responsibility for sewers upon water authorities. Therefore, I am certain that it would have been a competent amendment to have moved but for the explanation given by the noble Lord.
The Minister in another place had a good deal of sympathy for including sewers and at one stage promised to look at the matter with a view to introducing a suitable amendment on Report. I readily understand, because of the legal points which the noble Lord explained, that it was impossible for him to do that. However, would it be possible for the consultations which I am pleased are to take place to consider the question of escapes from sewers—in other words, the Government are saying that consideration should be given to the matter and that they wish to look at all the problems—to take place before the Bill leaves your Lordships' House? That is important, otherwise we may find that we have compensation provisions for leakage from water mains but not from sewers, and there may be little chance of including that in legislation for a considerable time.
Have any views on the new clause been received from the National Water Council, which is, I understand, concerned with certain aspects? I am not saying that I support the points about which the council is concerned, but it would be helpful to know if its views have been received. Although the new clause would place some burdens on water authorities, in effect it means placing a burden on the whole of society, because we all pay water rates. However, I welcome the Government proposal, subject to what I said about studying it carefully, and I hope the other consultations will take place before we part with the Bill.
Lord Nugent of Guildford: I thank my noble friend for his lucid exposition of the new clause, an important provision which introduces an important new principle. I can meet the inquiry of the noble Lord, Lord Underhill, about the views of the National Water Council, because I heard their views today. They, like the noble Lord, have found the time all too short because they saw the amendment only yesterday and had not been brought into consultation on its form. They, and the water industry generally, are perfectly willing to accept any liability which Parliament wishes to put on them, and in practice they have been makirg ex gratia payments where anybody has suffered from burst mains; although, following the principle of Green v. Chelsea Water Works Company to which my noble friend referred, they have no legal liability unless negligence has been proved.
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Having said that they are in principle willing to shoulder whatever burden Parliament wishes to put on them, I should express their serious anxiety about the form of my noble friend's new clause. It places an almost unlimited liability on the water industry and they feel some doubt as to whether that is sensible. As the noble Lord, Lord Underhill, said, whatever additional costs fall on the water industry have to be paid for by the whole community in increased water charges. Be that as it may, I would call attention to a few aspects of the new clause.
My noble friend explained that subsection (2) reduces the liability on water authorities and water companies where negligence by the claimant has been proved. That is fair enough and it is a useful little concession. But the rest of the liability is enormous—it is virtually unlimited—and such anomalies would occur as where a water main is running in the same trench as a gas main (which is frequently the case, especially in urban areas) and then, if the gas main bursts and bursts the water main, the water industry has to pay, and that is absurd. The other public utilities have no liability in the matter at all; nor, similarly, have the electricity industry, the Post Office or British Railways.
I suggest that this liability, which is probably justified in terms of public policy, needs looking at in the context of the liabilities of the other national utilities which have many similar features. Incidentally, they would also be liable for the act of a third party or an act of God. Maybe Parliament wishes to make them subject to all those liabilities, but they are very great liabilities indeed and the National Water Council, speaking for the water industry, has not yet had a chance of expressing its views on the new clause because, like the rest of us, it has only just seen it. I therefore hope my noble friend will feel that in the points I have made there is sufficient substance to justify another look to see whether the liability has been set just right. My guess is that the right solution would be to make the water industry's liability a responsibility without the claimant's obligation to prove negligence by the water industry. That would of course limit it considerably compared with the new clause.
I was glad to hear my noble friend resisting the blandishments of the noble Lord, Lord Underhill, to extend the liability to sewer mains as well; the liability involved there is a good deal more serious because the water industry has no control over what is put into sewers. It would therefore be unreasonable to make them liable for bursts which occur there. Incidentally, the nature of bursts from sewers is different, in that they are not under pressure. Such an occurrence is much more in the nature of a collapse, especially in urban areas where the original sewer was badly built, the whole structure has worn away and leaked, so that eventually a huge chasm appears under the road and suddenly the whole road falls in, and probably a bus goes down with it. It is a very different liability and I was glad to hear my noble friend resist any extension of that liability.
I hope my noble friend will be willing to take the new clause back for further consultation, perhaps with myself and the leaders of the water industry, to see whether the extension of public liability in this sphere, which I am sure is right in principle, has perhaps gone a little too far in the new clause as drafted.
Lord Burton: I join my noble friend Lord Nugent in welcoming the new clause, on which I have three points to make. The first is that it says the provision shall come into force on a day to be appointed by the Secretary of State. Can my noble friend give any indication as to when it is likely to come into force? Secondly, can he give any indication at all of the extra cost which is likely to Call on water authorities? That may go part of the way to answer what Lord Nugent was saying.
Thirdly, I welcome in some respects what the noble Lord, Lord Underhill, said about sewers. If it is not possible to include sewers in this legislation—and it seems the Government are against doing so—would it be possible to go part of the way by giving water undertakings a directive to the effect that whereas at present they give compensation on an ex gratia basis for water bursts, they might consider giving ex gratia payments to someone who has suffered severely from something going wrong with the sewers? That is just a thought on the matter; a directive might go part of the way towards dealing with the situation.
It seems that no Government when in power devote to the question of sewerage the same amount of energy or finance as they devote to water. I do not know why this should be. Perhaps it is because water, as it goes into a house, is more appreciated. Certainly sewerage does not receive the same priority as water, but I feel that the two are equally important. Perhaps I may be a little personal here. In my own area the sewerage of the whole of Inverness borough still goes crude into the firth, which is really disgraceful. Perhaps that is another matter, but we are, I believe, giving £50 million to Egypt for new drains in Cairo, and yet we cannot spend £7 million on laying new drains in Inverness.
Lord Skelmersdale: It is difficult to know where to start in replying to the points made. With the permission of the noble Lord, Lord Underhill, I should like to refer first to my noble friend, whose experience and expertise in these matters we welcome to our deliberations. Of course, I know about the letter of his successor, Sir Robert Marshall, to my honourable friend Mr. Shaw. In fact, I have a copy of it before me. Perhaps I can tie in this point with something that the noble Lord, Lord Underhill, said. The letter is dated 12th March, and it is now the 19th March. We have already decided to widen the consultations that are to take place, and I do not consider that we are being exactly laggard in how we are dealing with the matter.
My noble friend Lord Nugent has commented on the very wide nature of this provision and on the point that it is possibly an open-ended liability. As he said, the water industry in England and Wales has accepted for some time that the rule in the Green v. Chelsea Waterworks Company case should be reversed. That is to say, it has accepted that it should no longer be necessary to prove negligence where bursts have occurred. This is a very significant element in the new liability that the Bill is imposing. In our view, for practical purposes the clause is not going so very much wider than that. We are not allowing the water undertakers to plead non-liability for bursts caused by an act of God or by a third party. If the industry's
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wish were observed, both those defences would be open to them. However, we do not accept that an act of God is a common enough occurrence to be concerned about. How many times, for example, has a water main been struck by, say, a bolt of lightning, causing damage? As for the action of a third party, one water authority has estimated that a quarter of its bursts are caused by others; for instance, other statutory undertakers, developers, contractors, and so on.
All the clause provides is that where such an accident occurs the water undertakers should be liable to anyone who suffers damage from the escaping water. We are not reducing the water undertaker's powers to proceed against any third party which may be responsible for the damage, and subsection (5) is intended to make that clear. I hope that my noble friend will be able to take that point.
My noble friend Lord Burton suggested that we should direct water authorities to make ex gratia payments. I regret to have to tell him that there is no way in English law in which that can be done. The noble Lord, Lord Underhill, while generally welcoming the clause, said that he wanted more time to study it, and he asked me about the consultations that had taken place regarding sewers which I mentioned in moving the amendment. The position is that we must get the Bill back to another place in order for it to agree or disagree with any amendments that we may make, and we must bear in mind the question of the Bill receiving the Royal Assent by about the middle of April. I am advised that that would not allow enough time for consultations to be concluded. Of course consultations will begin in the period—I willingly give that promise from this Dispatch Box—but there is really not enough time for them to be concluded.
My noble friend Lord Burton asked about the coining into effect of this clause. Since water authorities have now prepared their budgets for 1981–82, and bearing in mind that these obviously do not take account of the new liability that this provision imposes upon them, we feel that it is therefore totally impossible to bring the provision into force before the 1st April 1982. Our provisional view is that the day appointed should be 1st April 1982, though that will be subject to further consultation with the water industry. I should also stress to my noble friend Lord Nugent that these consultations will continue. I hope that in the light of those answers the Committee will feel able to approve this new Government clause.
Lord Nugent of Guildford: I thank my noble friend for his answer, but I must say that it does not convince me in the least. I consider that the liability being put on the water industry by this proposal is absolutely out of proportion in comparison with those imposed on all other public utilities and is entirely unfair in the instance that my noble friend proposes. The point that my noble friend has made gives water undertakers a course of action, but that is all; there is no question of putting them on the same basis as other public utilities. I am not satisfied with my noble friend's answer. I feel that the consultations have been inadequate. Any liability in this context should be placed equally on all public utilities, and then we could put the matter in the correct perspective. I must advise my noble friends that I shall put down an

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amendment for the Report stage to accomplish that end.
Lord Burton: I thank my noble friend for his answer to the question about the starting date. If the actual starting date cannot be fixed, can consideration be given to advancing the date of liability, even if payment is to come at a later date? I should like my noble friend to think about that; I do not want an answer at this stage. I gather that we are pressed for time and so I shall raise now a point which I had intended to raise on a later amendment. The Scottish local authorities have apparently been refusing to pay compensation unless the aggrieved person can prove that the authority concerned was negligent. Clearly that is a very hard thing to do. Can the Minister tell me whether or not the Scottish authorities are right in withholding compensation in such cases? If the authorities have a right to withhold compensation unless negligence is proved, can the Government give an assurance that Scotland will be brought into line with England on this matter?
The Minister of State, Scottish Office (The Earl of Mansfield): Perhaps it will be for the convenience of the Committee if at this stage I intervene in regard to the Scottish interest in this matter. I fear that I have to tell my noble friend that it is not for me to say whether or not Section 10 of the Scottish Act imposes a strict liability on a Scottish water authority. That would be a question for a court to decide, and so far no court has been asked to test the matter. What I can tell my noble friend—and I hope that it may be of some comfort to him—is that, naturally enough, the Government are taking account of this particular amendment which is being inserted in the Bill at the behest of the Department of the Environment, and we shall have to take stock of our own particular Scottish conditions to see whether legislation will be necessary in the future. I say that, bearing in mind that our water authorities are local authorities and their customs are different from those of English water authorities. Similarly, they operate under pressures and constraints which are different from those affecting the English authorities.
We shall have to consider the effects of the amendment of the law on the subject, and then consult the Convention of Scottish local authorities to see what it has to say. I tell my noble friend that because there will not be any question of our coming forward on Report with any kind of amendment in this regard. There simply is not time for the consultation and cogitation that would be necessary. My noble friend spoke about public expenditure and expressed the very laudable desire to contain it. I should tell him that an amendment on these lines which extended to Scotland would, in terms of public expenditure, have the effect of placing new burdens on Scottish local authorities.
Lest, however, my noble friend were to come to the conclusion that the Government are in effect putting off some evil day, what I can say to him is that I give no undertaking but if the Government decide that legislation on these grounds is needed in the future, then I think certain legislative vehicles will present themselves, either perhaps later in this Session or certainly next Session, to bring into the law any
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desirable reform which the Government may wish to introduce.
Lord Burton: I thank my noble friend for giving a little, perhaps, on this, and for his helpful reply. I only hope that Scottish local authorities are not as unhelpful as my noble friend Lord Nugent seems to have been on the English part.
On Question, amendment agreed to.
[Amendment No. 7 not moved.]
Lord Denham: I think this might be a convenient time to adjourn this Committee stage. I do not know how long the noble Lord, Lord Underhill, thinks the remaining amendments will take but I understand there are points of substance here. I think it might be better to go back to the Companies Bill, unless he violently disagrees with that.
Lord Trefgarne: I beg to move that the House be now resumed.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.

Companies (No. 2) Bill [H.L.]
8.2 p.m.
House again in Committee.
Clause 40 agreed to.
Clause 41 agreed to.
Lord Mackay of Clashfern Lord Mackay of Clashfern moved Amendment No. 110:
After Clause 41, insert the following new clause:
("Power of company to issue redeemable shares
.—(1) Subject to the following provisions of this Part of this Act, a company limited by shares or limited by guarantee and having a share capital may, if authorised to do so by its articles, issue shares which are, or at the option of the company are to be liable, to be redeemed.
(2) No redeemable shares may be issued at any time when there are no issued shares of the company which are not redeemable.
(3) Redeemable shares may not be redeemed unless they are fully paid.
(4) The terms of redemption must provide for payment on redemption.
(5) Subject to section (Power of private companies to redeem or purchase own shares out of capital) of this Act—

(a) redeemable shares may only be redeemed out of distributable profits of the company or out of the proceeds of a fresh issue of shares made for the purposes of the redemption; and

(b) any premium payable on redemption must be paid out of distributable profits of the company.

(6) Subject to the provisions of this Part of this Act, the redemption of shares under this section may be effected on such terms and in such manner as may be provided by the articles of the company.
(7) Shares redeemed under this section shall be treated as cancelled on redemption, and the amount of the company's issued share capital shall be diminished by the nominal value of those shares accordingly; but the redemption of shares under this section by a company shall not be taken as reducing the amount of the company's authorised share capital.
(8) Without prejudice to subsection (7) above, where a company is about to redeem any shares under this section it

933
shall have power to issue shares up to the nominal amount of the shares to be redeemed as if those shares had never been issued.
(9) For the purposes of section 47 of the Finance Act 1973 the issue of shares by a company in place of shares redeemed under this section shall constitute a chargeable transaction if, and only if, the actual value of the shares so issued exceeds the value of the shares redeemed at the date of their redemption; and where the issue of the shares does constitute a chargeable transaction for the purposes of that section, the amount on which stamp duty on the relevant document relating to that transaction is chargeable under subsection (5) of that section shall be the difference between—

(a) the amount on which that duty would be so chargeable if the shares had not been issued in place of shares redeemed under this section; and

(b) the value of the shares redeemed at the date of their redemption.

(10) Subject to subsection (11) below, for the purposes of subsection (9) above shares issued by a company—

(a) up to the nominal amount of any shares which the company has redeemed under this section; or

(b) in pursuance of subsection (8) above before the redemption of shares which the company is about to redeem under this section;

shall be regarded as issued in place of the shares redeemed or (as the case may be) about to be redeemed under this section.
(11) Shares issued in pursuance or subsection (8) above shall not be regarded for the purposes of subsection (9) above as issued in place of the shares about to be redeemed unless those shares are redeemed within one month after the issue of the new shares.").
The noble and learned Lord said: It might be helpful if I were to take this opportunity to describe the objectives of Amendments Nos. 110 to 122 taken together. The general legal prohibition in this country of a company buying its own shares is very nearly 100 years old, as it was established by a case in 1887. In this particular aspect of company law we have been somewhat out of step with the position in the United States and in Europe, where the purchase of own shares is generally permitted.
When the Jenkins Committee considered this matter in 1962 it reported that it would be possible to devise effective safeguards to protect both creditors and shareholders if it were considered appropriate to permit the purchase of own shares. But, they said, they had received no evidence that British companies needed the power, and most witnesses were against it. They therefore recommended that the general prohibition should remain.
Since then, opinion has developed remarkably on this subject. A growing number of representations have been made in recent years that this was a facility that should be available to companies in the United Kingdom, as to their counterparts in the European Community. The Government indicated during the passage of the Companies Act 1980 that they believed that the present prohibition should be relaxed. A Green Paper was published in June 1980 discussing the main issues involved. Much of this Green Paper comprised a paper by the department's research adviser on company law, Professor Gower, and I should like to take this opportunity to express the Government's appreciation of the contribution that he has made on this and other company law matters in the period since his appointment, which has (I do not need to remind noble Lords) been a particularly active period for company law.
The Government made their position in principle clear on this matter last year, and the Green Paper
934
was launched on a very fair wind. But the Government were delighted and impressed by the scale and warmth of the response which it evoked. Whatever the position in 1962, it is certainly the case in 1981 that there is a widely-felt demand among companies for this facility and a keen interest in the Government's proposals, particularly, but not exclusively, among small companies.
In the light of this response, the Government are confident that your Lordships will welcome these amendments to the Bill. I know that your Lordships' welcome would have been even warmer had we been able to incorporate the clauses in the Bill on introduction. But I think it is apparent from the scope and content of these clauses that in providing this facility to companies we have had to take considerable care to ensure that the legitimate interests of companies themselves, of shareholders and of creditors are not prejudiced. In other words, we felt it better to table clauses that have been thought over, rather than inadequate clauses earlier. But I understand that noble Lords will wish to have time to reflect on these provisions, and may well wish to return to them in greater detail.
With the leave of the Committee, I shall briefly describe each of the clauses at this stage, and for convenience I shall refer to them by their amendment number. Amendment 110 enables companies to issue redeemable shares. This will replace Section 58 of the 1948 Act, under which companies could issue only redeemable preference shares. Your Lordships will remember that earlier in this Committee stage I moved amendments to delete the word "preference" now and again. That was in consequence of this change, where the phrase "redeemable preference" had previously been used. Subject to Amendment 116, which I shall refer to shortly, shares must be redeemed out of distributable profits or the proceeds of a fresh issue. Shares redeemed are to be treated as cancelled on redemption.
Amendment No. 111 has the virtue not only of brevity but of providing the key new power for companies to purchase their own shares. Similar conditions apply as to redeemable shares. I should draw the attention of noble Lords to the fact that this facility will be available to both public companies, including investment trust companies, and to private companies.
Amendment No. 112 contains the requirements for the authorisation of purchases of own shares off a market. It should be considered in conjunction with Amendment No. 113, which deals with the procedures for the authorisation of purchases of shares on a market. The Government's approach here has been to devise arrangements for the authorisation of purchases which are practicable in the circumstances of a share purchase, which nevertheless provide due opportunity for the approval of shareholders to be given to purchases, and which meet the requirements of the European Community Second Directive, which lays down a régime for public companies. The effect of the clauses is to provide one procedure for purchases of shares listed on a recognised stock exchange or dealt in on a market such as the unlisted securities market, where it is not practicable to require authorisation of particular purchases, and a different procedure for other purchases.
Amendment No. 114 provides for the disclosure

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of purchases and contracts to purchase as part of the safeguards I referred to earlier. Amendment No. 115 provides for the creation of a capital redemption reserve to ensure that, subject again to Amendment 116, capital is maintained in the event of a redemption or repurchase. This is clearly one of the most important safeguards for creditors.
Amendments Nos. 116 to 119, however, provide for the situation in which a private company wishes to effect a redemption or a repurchase, but has insufficient distributable profits or is unable to raise the amount required by way of a fresh issue. As proposed in the Green Paper, we are in these clauses providing a procedure for capital reduction which avoids the need for the company to apply to the court under the appropriate provisions of the 1948 Act. Of course, we have had to build in adequate safeguards for shareholders and for creditors, including requirements as to special resolutions, publicity, declarations and the right for them ultimately to take the matter to the court. But we would expect the new arrangements to have considerable advantages for private companies in terms of time and expense.
Amendments Nos. 120 and 121 deal with circumstances which we all hope will be rare but which we must provide for, where the provisions in the clauses which I have briefly described earlier are not fulfilled because the company goes into liquidation at an early date or because an agreement to redeem or purchase is not carried through. Amendment No. 122 contains miscellaneous and supplemental provisions of the type normally associated with provisions of this sort.
I apologise for taking up so much of your Lordships' time on these amendments, but I hope noble Lords will have found this indication of the background and our objectives helpful. I would accordingly move Amendment No. 110, which I have briefly described.
Lord Ponsonby of Shulbrede: May I thank the noble and learned Lord for explaining the purposes of Amendments Nos. 110 to 122? He rightly anticipated the views of the Committee in moving the amendments in saying that the Committee would have been much happier if these amendments had been included in the Bill when published. As it is, tonight we are virtually engaged in a Second Reading debate on these 12 clauses, because they are very substantial in their effect. We have no particular objection to the purpose of these clauses but shall want to examine each of them carefully and possibly come back with amendments of detail at Report stage.
Lord Mishcon: I entirely echo the words of my noble friend Lord Ponsonby, but I want to ask two questions which could help in considering the two clauses. Although the Committee could not be consulted before now on these clauses because they have only just been put in as amendments, can the noble and learned Lord inform us whether the Stock Exchange, the Institute of Chartered Accountants, the Law Society and the Bar Council have had the opportunity of making representations on the clauses? I think that the answer to that may facilitate our own consideration of the situation before reaching Report stage. I confess to the noble and learned Lord that my second question might result
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from my foolishness and, if it is so, I would ask him to be merciful. In Amendment No. 110, there is a requirement in subsection (2):
"No redeemable shares may be issued at any time when there are no issued shares of the company which are not redeemable".
We seem to have gone in draftsmanship from double negative to triple negative. I see what it means. It means, I assume, that unless you have got a share issued which is not a redeemable share, you cannot issue any more redeemable shares. I should like the noble and learned Lord to explain the purpose of this and whether, whatever the purpose may be, it has any practical effect when presumably all that you need to do is to issue an ordinary share which is not redeemable—one insignificant share to some insignificant shareholder—and the whole subsection is completely worthless from the point of view of saving or preventing anything that this subsection is supposed to prevent. It may be that there is something very simple which will explain all this. I should be grateful if the noble and learned Lord could clarify the matter.
Lord Mackay of Clashfern: So far as the first point is concerned, there has been extensive consultation with all the bodies mentioned in connection with the formulation of these clauses. I am not saying that they have seen the precise detail of the clauses, but there has been extensive consultation with them about what was proposed. The object of subsection (2) is to ensure that there is always some non-redeemable equity issued in the form of ordinary shares before this redeemable share is possible. It is true that the equity can be small but it is still necessary to have that as a starting point for the company; otherwise the position would be that a company would be able to redeem its whole capital and wipe itself out. Even a small, rather insignificant share of the type the noble Lord referred to would have that effect, although the resulting company would be a modest one.
Lord Lloyd of Kilgerran: May I apologise for the fact that I was not in my place when the noble and learned Lord the Lord Advocate recommenced the proceedings. I should like to say, to save time, that so far as these Benches are concerned, we agree in principle with all the amendments in the 16 to 17 pages of amendments which are now put in by the Government regarding the purchase of shares? Also, may I apologise, in view of another commitment that I have 200 miles away tomorrow morning, for the fact that I shall not be staying for as long as I ought on this occasion? I am obliged to your Lordships for allowing me to say those few words.
Lord Mackay of Clashfern: My Lords, I should like to thank the noble Lord for his remarks. I sympathise with him in his journey. I am in somewhat the same position myself; but, for me, the journey will be first thing tomorrow morning.
The Deputy Chairman of Committees (Lord Alport): I understand that the noble and learned Lord the Lord Advocate spoke to Amendments Nos. 110 to 122. Is it the desire of the Committee that I put these amendments to the Committee en bloc?
Lord Wedderburn of Charlton: No.
On Question, Amendment agreed to.
8.15 p.m.
Lord Mackay of Clashfern Lord Mackay of Clashfern moved Amendment No. 111:
After Clause 41, insert the following new clause—
("Power to purchase own shares
Purchase by a company of its own shares
.—(1) Subject to the following provisions of this Part of this Act, a company limited by shares or limited by guarantee and having a share capital may, if authorised to do so by its articles, purchase its own shares (including any redeemable shares).
(2) Section (Power of company to issue redeemable shares) of this Act shall apply in relation to the purchase by a company under this section of any of its own shares as it applies in relation to the redemption of redeemable shares by a company unde that section, save that the terms and manner of purchase need not be determined by the articles as required by subsection (6) of that section.
(3) A company may not purchase any of its shares under this section if as a result of the purchase of the shares in question there would no longer be any member of the company holding shares other than redeemable shares.").
Lord Wedderburn of Charlton: If the noble and learned Lord the Lord Advocate is of the opinion that he has moved this amendment which I understand is the position in this Committee, I did not speak to the last amendment for the reason that that amendment did not change company law in a fundamental way; it extended the ability to have redeemable shares—which already exists—to some degree. This amendment, I would submit, is the very centre of the new structure which, as the noble and learned Lord has suggested, will be entirely novel, albeit we have for centuries been out of step with many European legal systems and with the United States jurisdiction in certain respects as well. Nevertheless, since the noble and learned Lord, I am sure, has relied a great deal upon the most interesting report by Professor Gower, The Purchase by a Company of its own Shares, it is right to judge the proposals which the Government have brought forward perhaps by some other words of Professor Gower ill his Textbook of Modern Company Law—words which, since I am now associated with it, I hasten to assure the noble and learned Lord were there in the edition long before the assistant editors had anything to do with it. Professor Gower described in Trevor v. Whitworth of 1887, to which the noble and learned Lord referred, the rule that a company may not purchase its own shares, in the following way:
"Such acquisitions are dangerous, not only because they might result in the reduction of the capital yardstick to the detriment of creditors, but also because, if the company paid more than the true worth of the shares, it would dilute the value of the remainder, while, if it paid too little, it would increase the value of the remainder and might be used by the directors to enhance the value of their own holdings. Moreover, such purchases might be used by the directors to maintain themselves in control".
That, I suggest, is a reasonable summary of some of the problems to which the Green Paper (to which Professor Gower so admirably contributed) addressed its mind. But the subsequent pages of the book, pages 226 and 227, relate to that issue the other parts of our company law especially in the statute of 1948. The noble and learned Lord will know that I am referring in particular to Section 27 of the 1948 Act,
938
which bears a very close proximity in purpose with the long-established rule which it is now proposed to change—namely, that the subsidiary cannot be a member of its holding company.
Also I refer to Section 54 of the same Act which, although somewhat amended in the 1980 Act, is still substantially and correctly described, I think, as the section which prohibits financial assistance for the purchase or subscription of a company's shares. The most recent judicial decision has put the most strict interpretation on that section. It is, therefore, highly odd that the Government come forward with clauses which they could not put into the Bill on first publication because they had not then made up their mind exactly how they should be framed; odd to produce clauses relating to a company purchasing its own shares as against the previous clause in relation to redeemable shares, which is a minor useful enhancement of company law, and yet not have any conclusions about clauses of that kind. I apprehend that I have not given the noble and learned Lord a full list; he can make one for himself, or, if he is off early in the morning, perhaps one of his advisers will do it for him. But there is a large hinterland of company law which I submit is not dealt with at all in these amendments, some of which must be dealt with.
Indeed, in approaching these amendments, for all the warmth with which the noble and learned Lord said companies have displayed towards their publication—and I think that is not, as it were, an unblemished canvas—there are some who have evinced fears; those who know far more than I do about open-ended funds have not had un-mixed feelings, as I am sure the noble and learned Lord will tell us. But when the noble and learned Lord speaks to this clause as opposed to the last one, which allowed him to give us a wider panorama, I hope he will tell us just what the position will be in his understanding in regard to such funds.
It is very strange to come forward and say we are going to change company law and that a company can buy its own shares, and then not add whether or not a company can provide financial assistance for the purchase of its own shares. I am aware that the noble and learned Lord will tell me that in the last paragraph of Professor Gower's report on the purchase of own shares, where he makes proposals to which I should like to come in a moment, Professor Gower says that the view is held that to retain Section 54 while giving companies the right to purchase their own shares appears to be anomalous. Then, at the end of paragraph 66, Professor Gower says, and I quote:
"This, however, is not the view taken by the second directive (sec Article 23) and it is thought that that view is correct. The abuses which can flow from the latter practice, as many inspectors' reports have shown, both prevalent and likely, are more dangerous than an open purchase by the Company itself. This is not to suggest that the section is not indeed a clarification and amendment".
I think that is a fair quotation. It seems to me that what Professor Gower is saying is that the view to do nothing in Section 54, but to pass these amendments, is indeed to introduce an anomaly, but it will not be a very big or dangerous one because while breaches of Section 54 are very serious and dangerous the open purchase of shares by the company itself is not as dangerous as that.

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It seems to me that the Government must tell us a little more about its ultimate intentions. I cannot believe that the noble and learned Lord is going to tell us that these clauses are in their final form. To take five matters almost at random: first, which of the purposes in paragraph 11 of the Green Paper are being pursued by these amendments? I immediately add that of course it is not headings J to K; that is to say, in effect allowing companies to rig the market or to traffic in their shares—but it is interesting that Professor Gower had to take account of that. if it is not market rigging and it is not trafficking in shares, which of the other purposes—all of them arguable but very different—are being pursued? And are the ones which are being pursued for private companies exactly reflected in these clauses or not?
That leads me to a second question. Where there is to be permission to purchase own shares, are the Government fully satisfied that in regard to both public and private companies the three problems mentioned especially in the report are dealt with? The first is that of disclosure. There is a lot about disclosure in the subsequent clauses, but when we come to them later there may perhaps be cause for looking at them a little more carefully. More importantly, and much more worrying, is the question of the executory contract; the problem which is sometimes illustrated by the right to buy shares in instalments, which is dealt with to some extent in Clause 119—the noble and learned Lord will tell me if that is wrong—but not, I think, in regard to all matters.
Lastly under this heading, there is the requirement that members' approval must be obtained. Why is it that sometimes it is by a special resolution but in other cases—and particularly in one case we are coming to—it is by an ordinary resolution? What is the logic behind the structure of the approval mechanism? Thirdly, there is the problem of the protection of the minority which is discussed in paragraphs 40 and 44 of the Green Paper. There, one suggestion is that one should stop those who are interested in having an improper effect on the voting on those resolutions, which is somewhat reflected in the clauses that follow. The other proposal (one which Professor Gower rather prefers) is to allow the dissident minority to petition the court. I appreciate that there is that right in one clause—unless I misunderstood it, the clause dealing with the permissible capital reduction—in regard to private companies, but have the Government considered the proposals rather more widely than that, if not to apply to both private and public companies then at any rate to apply to private companies outside the ambit of the clause wherever it appears.
Lastly, and this is something I hope we shall come back to on Report stage, because I do not quite understand the clauses as I have been able to read them, what is the relationship to the structure that the Government is putting before us and the problem of insider dealing? Because of course all the protections which are being built in are fine so far as they go, but is it not the case that to allow a company which in effect means the directors, to purchase its own shares, is to open up a new front in the battle on insider dealings? It may be that it has escaped me in the clauses, but I have not found in the clauses themselves any great bulwark
940
against the practice, which now, as a legislature, we condemn; we made it criminal under the 1980 Act (Part V) and surely it must be right that something should be done to apply Part V to the rather wide area which has now opened up.
I immediately hasten to say that I am not suggesting that the companies which will make use of these provisions are all chaired and run by rogues who wish to take part in insider dealing, but insider dealing does exist and that is why we made it a crime. However much it exists, here is a new opportunity to engage in it. What is the Government's response? Is it not right that they should take these clauses away and relate them to insider dealing, to match their own statutes which they passed last year and which appear to be reflected not at all in these clauses? I have taken the opportunity in regard to this clause, because this is the central clause, to open up some questions for the Government to answer.
Lord Robertson of Oakridge: May I follow the noble Lord, Lord Wedderburn of Charlton, on his last point dealing with possible insider dealing. Section 68(6) of the 1980 Companies Act provides that persons in possession of non-published price-sensitive information are unable not only to deal themselves but also to counsel and procure another person to deal in the securities concerned. I should be grateful if the noble and learned Lord could say whether it is the Government's opinion that that section covers directors acting collectively as a board, and if he would give an assurance that this particular point will be the subject of further discussions which will take place with the relevant bodies.
8.30 p.m.
Lord Mackay of Clashfern: Noble Lords have opened up a wide range of matters. May I answer by identifying what the Government feel are the advantages that will result from the new clauses, first of all so far as private companies are concerned. It can often be very difficult to transfer shares at present, with the result that shareholders can become "locked in"; that is, unable to sell their shares and recover their investment in a company. It is considered that the availability of a power of the company itself to use its funds to purchase its own shares will in many cases afford companies the means of releasing such investments. This will increase the attraction of investment in private companies from the point of view of the investor, who will have greater assurance that he will be able to recover his investment. Also the power to purchase own shares should make entrepreneurs and family companies less reluctant to accept participation of outside capital as equity capital, as they will have the assurance that there need be no long-term dilution of control.
The power may also contribute to improved management of small companies as such companies will be able to use their funds to purchase by agreement the shares of persons not closely involved with the conduct of their affairs or the shares of dissenting shareholders. Small family companies will find it easier to maintain family control, as they will be able to use the funds of the company to purchase shares of

941
deceased or retiring family members. The power should also make it easier for capital transfer tax liabilities arising on the transfer of shares between members of such companies to be met.
If I may bring this to a particular example, the job ownership companies—if I can use their full title—referred to in the amendments proposed by the noble Lord, Lord Seebohm, are a good example of the particular way in which companies of this type would benefit from having this power.
The advantages which have been identified for public companies, in the case of which shares may well be found more readily transferable, are somewhat less clear cut. However, some large companies and financial institutions have asserted that a power to purchase own shares could provide a means for such companies to return surplus funds to shareholders, thus allowing financial resources to be deployed more usefully within the economy. The evidence of experience in other countries, most nobably the USA, is that large companies find advantage in a power to purchase their own shares as affording flexibility in ordering their capital structure and matching that structure to their needs at a particular stage in the development of a company. It has been suggested that the power will facilitate what has come to be called "demergers", and, in the special case of investment trust companies, that a reduction of issued share capital achieved by a purchase of own shares will enable market prices of shares to be more properly related to asset value. There is no doubt that the risk of abuse of a power to purchase own shares is greater in the case of public companies with shares actively traded on a market, but the Government consider that adequate safeguards can be provided against abuse. While acknowledging that the arguments for a power are less compelling in the case of public companies, the Government do not consider that the possible objections to provision of the new power for such companies are sufficiently strong to justify denying it under the safeguards which have been proposed.
May I turn now to the question which has been asked specifically on insider dealings? The insider dealings of the 1980 Act will apply to market purchasers of own shares as defined in the proposed clauses, and to transactions effected through licensed dealers. The Government take the view that no amendments are needed to these provisions. It is unnecessary to provide a remedy against insider dealing in transactions effected directly between a company and a shareholder such as will normally be the case in private companies. All such transactions will be undertaken only with the consent of the seller under the terms of the Government Amendment No. 121A, who will be well aware of the advantage that the company has in this respect.
If, on the other hand, the seller seeks to use some confidential information which he has at the expense of the company, he will be in breach of his duty to the company and a remedy will lie accordingly. In those cases, we believe that it can be left to the prudence of the company, on the one hand, and the seller, on the other, to make necessary inquiries of one another whenever a purchase is suggested and to take such steps as the circumstances indicate would be justified
942
to ensure that they comply with the general law.
In answer to the question raised about instalment contracts by the noble Lord, Lord Wedderburn, that I would refer him to subsection (4) of the new clause provided by Amendment No. 110, which provides for payment on redemption and this also applies to purchase. Amendment No. 121 deals with the possible questions of breach of executive contracts to redeem on their own shares. These are the main provisions which deal with the problems of the instalment contract. I hope that, in the light of these explanations, the Committee will agree to Amendment No. 111.
On Question, amendment agreed to.
Lord Mackay of Clashfern Lord Mackay of Clashfern moved Amendments Nos. 112 to 120:
After Clause 41 insert the following new clause:
("Authority for off-market purchase.
.—(1) This section applies to an off-market purchase by a company of any of its own shares.
(2) A purchase by a company of any of its own shares is an off-market purchase for the purposes of this section if either—

(a) the shares are purchased otherwise than on a recognised stock exchange; or

(b) the shares are purchased on a recognised stock exchange but are not subject to a marketing arrangement on that stock exchange.

(3) For the purposes of this section shares of a company are subject to a marketing arrangement on a recognised stock exchange if either—

(a) they are listed on that stock exchange; or

(b) the company has been accorded facilities for dealings in those shares to take place on that stock exchange without prior permission for individual transactions from the authority governing that stock exchange and without limit as to the time during which those facilities are to be available.

(4) A company shall not make an off-market purchase of its own shares unless the purchase of those shares and the terms of the contract of purchase have first been authorised by a special resolution of the company.
(5) The authority conferred by any such resolution may be varied or revoked by special resolution of the company.
(6) In the case of a public company an authority for an off-market purchase of any of its own shares must specify a date on which the authority is to expire; but, subject to the preceding requirement, any such authority may be renewed from time to time by special resolution of the company.
(7) The date specified in accordance with subsection (6) above in any special resolution of a public company to confer or renew authority for an off-market purchase shall not be later than eighteen months after the date on which the resolution is passed.
(8) A special resolution of a company to confer, vary, revoke or renew authority for an off-market purchase of any of its own shares shall not be effective for the purposes of this section if any member of the company holding shares to which the resolution relates votes on the resolution, otherwise than—

(a) on a poll; and

(b) in respect only of shares other than shares to which the resolution relates;

and the resolution would not have been passed if he had not done so; and, notwithstanding anything in a company's articles, any member of the company may demand a poll on the question whether any such resolution shall be passed.
(9) Any such resolution shall not be effective for the purposes of this section unless (if the proposed contract of purchase is in writing) a copy of that contract or (if it is not in writing) a written memorandum of its terms is available for inspection by members of the company both—

(a) at the registered office of the company for not less than the period of fifteen days ending with the date of the meeting at which the resolution is passed; and

943

(b) at the meeting itself.

(10) A public company may make a purchase of its own shares in accordance with this section after the expiry of any time limit imposed by virtue of subsection (6) above in any case where the contract of purchase was concluded before the authority expired and the terms of the authority permitted the contract to be executed wholly or partly after the authority expired provided that it was concluded before it.
(11) Where a company proposes to agree to a variation of an existing contract for the purchase of any of its own shares the references in subsection (9) above to the proposed contract of purchase shall be read as referring to the orginal contract together with the proposed variation (and any variations previously made).
(12) For the purposes of this section a vote and a demand for a poll by a person as proxy for a member shall be the same respectively as a vote and a demand by the member.")
After Clause 41 insert the following new clause:
("Authority for market purchase.
.—(1) This section applies to a market purchase by a company of any of its own shares.
(2) A purchase by a company of any of its own shares is a market purchase for the purposes of this section if it is a purchase made on a recognised stock exchange, other than a purchase which is an off-market purchase for the purposes of section (Authority for off-market purchase) of this Act by virtue of subsection (2)(b) of that section.
(3) A company shall not make a market purchase of its own shares unless the purchase has first been authorised by the company in general meeting.
(4) A resolution authorising market purchases of a company's own shares in accordance with this section may confer general authority for that purpose or authority limited to the purchase of shares of any particular class or description, and the authority conferred may be unconditional or subject to conditions.
(5) Any such authority must—

(a) specify the maximum number of shares authorised to be acquired;

(b) determine both the maximum and the minimum prices which may be paid for those shares; and

(c) specify a date on which the authority is to expire.

(6) Subject to subsections (5) above, any such authority may be varied, revoked or from time to time renewed by the company in general meeting.
(7) The date specified in accordance with subsection (5)(c) above in any resolution of a company to confer or renew authority for market purchases shall not be later than eighteen months after the date on which the resolution is passed.
(8) A company may make a purchase of its own shares in accordance with this section after the expiry of any time limit imposed by virtue of subsection (5)(c) above in any case where the contract of purchase was concluded before the authority expired and the terms of the authority permitted the company to make a contract of purchase which would or might be executed wholly or partly after the authority expired.
(9) A resolution of a company to confer or vary authority for market purchases of its own shares may determine either or both of the prices mentioned in subsection (5)(b) above by—

(a) specifying a particular sum; or

(b) providing a basis or formula for calculating the amount of the price in question without reference to any person's discretion or opinion.

(10) Section 143 of the 1948 Act (registration of copies of certain resolutions and agreements) shall apply to any resolution of a company conferring, varying, revoking or renewing any such authority.")
After Clause 41 insert the following new clause:
("Disclosure of particulars of purchases and contracts of purchase.
.—(1) Within the period of twenty-eight days beginning with the date on which any shares purchased by a company under section (Power to purchase own shares) of this Act are transferred to the company the company shall deliver to the registrar of companies for registration a return in the prescribed form stating with respect to shares of each class purchased the number and nominal value of those shares and the date on which they were transferred to the company.
(2) In the case of a public company the return required by this section shall also state—

(a) the aggregate amount paid by the company for the shares; and

(b) the maximum and minimum prices paid in respect of shares of each class purchased.

(3) Particulars of shares transferred on different dates and under different contracts of purchase may be included in a single return under this section; and in any such case the amount required to be stated by subsection (2)(a) above shall be the aggregate amount paid by the company for all the shares to which the return relates.
(4) Where by virtue of section (Power to purchase own shares) of this Act a company enters into a contract to purchase any of its own shares the company shall keep at its registered office—

(a) if the contract is in writing, a copy of that contract; or

(b) if it is not in writing, a memorandum of its terms;

from the conclusion of the contract until the end of the period of ten years beginning with the date on which the transfer of shares under the contract is completed.
(5) Every copy and memorandum required to be kept by subsection (4) above shall, during business hours (subject to such reasonable restrictions as the company may in general meeting impose, provided that not less than two hours in each day are allowed for inspection) be open to the inspection—

(a) of any member of the company without charge; and

(b) if the company is a public company, of any other person on payment of such reasonable fee for each inspection as the company may prescribe.

(6) If default is made in delivering to the registrar of companies any return required by this section, every officer of the company who is in default shall be liable—

(a) on conviction on indictment to a fine;

(b) on summary conviction to a fine not exceeding the statutory maximum or, on conviction after continued contravention, to a default fine not exceeding one-tenth of the statutory maximum.

(7) If default is made in complying with subsection (4) above or if an inspection required under subsection (5) above is refused, the company and every officer of the company who is in default shall be liable on summary conviction to a fine not exceeding one-fifth of the statutory maximum or, on conviction after continued contravention, to a default fine not exceeding one-fiftieth of the statutory maximum.
(8) In the case of a refusal of an inspection required under subsection (5) above of a copy or memorandum, the court may by order compel an immediate inspection of the copy or memorandum.
(9) In relation to any contract for the purchase by a company of any of its own shares, the obligation under subsection (4) above to keep a copy of the contract or (as the case may be) a memorandum of its terms until the end of the period there mentioned shall apply to any variation of the contract as it applies to the contract.")
After Clause 41, insert the following new clause:
("The capital redemption reserve Maintenance of capital on redemption or purchase of own shares otherwise than out of capital
.—(1) Where in pursuance of section (Power of company to issue redeemable shares) or (Power to purchase own shares) of this Act any shares of a company are redeemed or purchased wholly out of the profits of the company the amount by which the company's issued share capital is diminished in accordance with subsection (7) of section (Power of company to issue redeemable shares) of this Act on cancellation of the shares redeemed or purchased shall be transferred to a reserve, to be called "the capital redemption reserve".
(2) Subject to subsection (6)(b) of section (Power of private companies to redeem or purchase own shares out of capital) of this Act, where in pursuance of either of those sections any shares of a company are redeemed or purchased wholly or partly out of the proceeds of a fresh issue and the aggregate amount of those proceeds is less than the aggregate nominal value of the shares redeemed or purchased, the amount of the difference shall be transferred to the capital redemption reserve.
(3) The provisions of the 1948 Act relating to the reduction of the share capital of a company shall apply as if the capital redemption reserve were paid up share capital of the company,

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except that the reserve may be applied by the company in paying up unissued shares of the company to be allotted to members of the company as fully paid bonus shares.").
After Clause 41, insert the following new clause:
("Power of private companies to redeem or purchase own shares out of capital
Redemption or purchase of own shares out of capital
.—(1) Subject to the following provisions of this Part of this Act, a private company limited by shares or limited by guarantee and having a share capital may, if authorised to do so by its articles, make a payment out of capital in respect of the redemption or purchase under section (Power of company to issue redeemable shares) or (as the case may be) under section (Power to purchase own shares) of this Act of any of its own shares.
(2) The payment which may (if authorised in accordance with the following provisions of this Part of this Act) be made by any company out of capital in respect of the redemption or purchase of any of its own shares shall be such an amount as, taken together with—

(a) any available profits of the company; and

(b) the proceeds of any fresh issue of shares made for the purposes of the redemption or purchase;

is equal to the cost of redemption or purchase (including any premium payable on redemption or purchase).
(3) The payment permissible in accordance with subsection (2) above in respect of the redemption or purchase by a company of any of its own shares is referred to below in this Part of this Act as the permissible capital payment for the shares.
(4) Subject to subsection (6) below, if the permissible capital payment for any shares redeemed or purchased by a company is less than their nominal amount, the amount of the difference shall be transferred to the capital redemption reserve.
(5) Subject to subsection (6) below, if the permissible capital payment for any shares redeemed or purchased by a company is greater than their nominal amount, the amount of any capital redemption reserve, share premium account or fully paid share capital of the company may be reduced by a sum not exceeding (or by sums not in the aggregate exceeding) the amount by which the permissible capital payment exceeds the nominal amount of those shares.
(6) In any case where the proceeds of a fresh issue are applied by a company in making any redemption or purchase of its own shares in addition to a payment out of capital under this section—

(a) the references in subsections (4) and (5) above to the permissible capital payment shall be read as references to the aggregate of that payment and those proceeds; and

(b) subsection (2) of section (The capital redemption reserve) of this Act shall not apply.

(7) Subject to subsection (8) below, the reference in subsection (2)(a) above to available profits of the company is a reference to the company's distributable profits, determined in accordance with Part III of the 1980 Act as if for the purpose of determining whether a distribution within the period of three months ending with the date on which the resolution approving the payment out of capital in accordance with section (Requirements for redemption or purchase out of capital; special resolution approving payment) of this Act is passed would contravene section 39 of that Act.
(8) The relevant accounts for the purpose of determining in accordance with section 43 of that Act whether the company has any available profits and the amount of any such profits shall be such accounts, prepared as at any date within the period mentioned in subsection (7) above, as are necessary to enable a proper judgment to be made as to the amounts of any of the relevant items (within the meaning of that section), and subsection (2) of that section shall not apply.").
After Clause 41 insert the following new clause:
("Requirements for redemption or purchase out of capital: special resolution approving payment.
.—(1) Subject to any order made by the court under section (Objections by members or creditors) of this Act a payment out of capital by any company for the redemption or purchase of any of its own shares shall not be lawful by virtue
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of section (Power of private companies to redeem or purchase own shares out of capital) of this Act unless the requirements of this section and section (Publicity for proposed payment out of capital) of this Act are satisfied.
(2) The payment out of capital must be approved by a special resolution of the company (referred to below in this section and in section (Publicity for proposed payment out of capital) of this Act as the resolution for payment out of capital.)
(3) The directors of the company must make a statutory declaration specifying the amount of the permissible capital payment for the shares in question and stating that, having made full inquiry into the affairs and prospects of the company, they have formed the opinion—

(a) that there will be no ground on which the company could be found to be unable to pay its debts immediately after the date on which the payment out of capital is proposed to be made; and

(b) that, having regard to their intentions with respect to the management of the company's business during the year immediately following that date and to the amount and character of the financial resources which will in their view be available to the company during that year, the company will be able to continue to carry on business as a going concern throughout that year; and

(c) that accordingly the company will be able to pay its debts as they fall due throughout that year.

(4) In forming their opinion for the purposes of subsection (3)(a) above the directors shall take into account any liabilities of the company which the court would be required by section 223(d) of the 1948 Act to take into account in determining for the purposes of section 222(e) of that Act (circumstances in which a company may be wound up by the court) whether the company was unable to pay its debts.
(5) The statutory declaration made by the directors must have annexed to it a report addressed to the directors by the auditors of the company stating that—

(a) they have inquired into the company's state of affairs; and

(b) the amount specified in that declaration as the permissible capital payment for the shares in question is in their view properly determined in accordance with section (Power of private companies to redeem or purchase own shares out of capital) of this Act; and

(c) they are not aware of anything to indicate that the opinion expressed by the directors in that declaration as to any of the matters mentioned in subsection (3)(a) to (c) above is unreasonable in all the circumstances.

(6) The resolution for payment out of capital must be passed within the week immediately following the date on which the directors make the statutory declaration required by subsection (3) above, and the payment out of capital must be made not earlier than five nor more than seven weeks after the date of the resolution.
(7) A special resolution of a company to approve a payment out of capital for the redemption or purchase of any of its own shares shall not be effective for the purposes of this section if any member of the company holding shares to which the resolution relates votes on the resolution, otherwise than—

(a) on a poll; and

(b) in respect only of shares other than shares to which the resolution relates;

and the resolution would not have been passed if he had not done so; and, notwithstanding anything in a company's articles, any member of the company may demand a poll on the question whether any such resolution shall be passed.
(8) Any director of a company who makes a declaration under this section knowing it to be false or misleading or without reasonable cause to believe in its truth shall be liable—

(a) on conviction on indictment to imprisonment for a term not exceeding two years or a fine or both; and

(b) on summary conviction, to imprisonment for a term not exceeding six months or a fine not exceeding the statutory maximum, or both.

(9) For the purposes of this section a vote and a demand for a poll by a person as proxy for a member shall be the same respectively as a vote and a demand by the member.")
After Clause 41, insert the following new clause:
("Publicity for proposed payment out of capital
.—(1) Within the week immediately following the date of the resolution for payment out of capital the company must cause to be published in the Gazette a notice—

(a) stating that the company has approved a payment out of capital for the purpose of acquiring its own shares by redemption or purchase or both (as the case may require);

(b) specifying the amount of the permissible capital payment for the shares in question and the date of the resolution for payment out of capital;

(c) stating that the statutory declaration of the directors and the auditors' report required by section (Requirements for redemption or purchase out of capital: special resolution approving payment) of this Act are available for inspection at the company's registered office; and

(d) stating that any creditor of the company may at any time within the five weeks immediately following the date of the resolution for payment out of capital apply to the court under section (Objections by members or creditors) of this Act for an order prohibiting the payment.

(2) Within the week immediately following the date of that resolution the company must also either cause a notice to the same effect as that required by subsection (1) above to be published in an appropriate national newspaper or give notice in writing to that effect to each of its creditors.
In this subsection "an appropriate national newspaper" means a newspaper circulating throughout England and Wales in the case of a company registered in England and Wales and a newspaper circulating throughout Scotland in the case of a company registered in Scotland.
(3) References below in this section to the first notice date are references to the day on which the company first publishes the notice required by subsection (1) or first publishes or gives the notice required by subsection (2) above (whichever is the earlier).
(4) Not later than the first notice date the company must deliver a copy of the statutory declaration of the directors and the auditors' report required by section (Requirements for redemption or purchase out of capital: special resolution approving payment) of this Act to the registrar of companies.
(5) The statutory declaration and auditors' report shall, during business hours on any day during the period beginning with the first notice date and ending five weeks after the date of the resolution for payment out of capital, be open to the inspection of any creditor of the company without charge.
(6) If an inspection required under subsection (5) above is refused, the company and every officer of the company who is in default shall be liable on summary conviction to a fine not exceeding one-fifth of the statutory maximum or, on conviction after continued contravention, to a default fine not exceeding one-fiftieth of the statutory maximum.
(7) In the case of a refusal of an inspection required under subsection (5) above of a declaration or report, the court may by order compel an immediate inspection of that declaration or report.").
After Clause 41 insert the following new clause:
("Objections by members or creditors.
.—(1) Where a private company passes a special resolution approving for the purposes of this Part of this Act any payment out of capital for the redemption or purchase of any of its shares—

(a) any member of the company other than one who consented to or voted in favour of the resolution; and

(b) any creditor of the company;

may within five weeks of the date on which the resolution was passed apply to the court for the cancellation of the resolution.
(2) An application under this section may be made on behalf of the persons entitled to make the application by such one or more of their number as they may appoint in writing for the purpose.
(3) If an application is made under this section, the company shall—

(a) forthwith give notice in the prescribed form of that fact to the registrar of companies; and

(b) within fifteen days from the making of any order of the court on the hearing of the application, or such longer
948
period as the court may by order direct, deliver an office copy of the order to the registrar.

(4) On the hearing of an application under this section the court may, if it thinks fit, adjourn the proceedings in order that an arrangement may be made to the satisfaction of the court for the purchase of the interests of dissentient members or for the protection of dissentient creditors, as the case may be, and the court may give such directions and make such orders as it thinks expedient for facilitating or carrying into effect any such arrangement.
(5) Without prejudice to its powers under subsection (4) above, on the hearing of an application under subsection (1) above, the court shall make an order on such terms and conditions as it thinks fit either confirming or cancelling the resolution; and, where the court confirms the resolution, it may in particular by order alter or extend any date or period of time specified in the resolution or in any provision of this Part of this Act which applies to the redemption or purchase of shares to which the resolution refers.
(6) Subsections (7) to (9) of section 11 of the 1980 Act (provision in orders of the court for purchase of shares and alterations in memorandum and articles) shall apply in relation to orders under this section as they apply in relation to orders under section 11.
(7) A company which fails to comply with subsection (3) above and any officer of the company who is in default shall be liable on summary conviction to a fine not exceeding one-fifth of the statutory maximum or, on conviction after continued contravention, a default fine not exceeding one-fiftieth of the statutory maximum.")
After Clause 41, insert the following new clause:
("Liability of past shareholders and directors
.—(1) This section applies where a company has made a payment out of capital in respect of the redemption or purchase of any of its own shares otherwise than out of the proceeds of a fresh issue of shares, referred to below as the "relevant payment".
(2) Where the company is being wound up and the aggregate of the amount of its assets and the amounts paid by way of contribution to its assets (apart from this section) and by its debtors is not sufficient for payment of its debts and liabilities and the costs, charges and expenses of the winding up, then, if the winding up commenced within one year of the date on which the relevant payment was made—

(a) the persons from whom the shares were redeemed or purchased; and

(b) the directors of the company who signed the statutory declaration made in accordance with section (Requirements for redemption or purchase out of capital: special resolution approving payment) (3) of this Act for the purposes of the redemption or purchase, except a director who shows that he had reasonable grounds for forming the opinion set out in the declaration;

shall, so as to enable that insufficiency to be met, be liable to contribute to the assets of the company to the extent specified in subsection (3) below.
(3) A person from whom any of the shares were redeemed or purchased shall be liable to contribute to the assets of the company an amount not exceeding the amount of so much of the relevant payment as was made by the company in respect of his shares and the directors of the company shall be jointly and severally liable with that person to contribute that amount to the assets of the company.
(4) Any person who has contributed an amount to the assets of a company in pursuance of this section may apply to the court for an order directing any other person jointly and severally liable in respect of that amount to pay to him such amount as the court thinks just and equitable.
(5) Section 212 of the 1948 Act (liability of contributories) shall not apply in relation to any liability accruing by virtue of this section.
(6) Any reference in the articles of any company to a contributory shall not unless the context requires include a reference to any person who is a contributory only by virtue of this section.
(7) A person who is liable by virtue of this section to contribute to the assets of any company in the event of its being wound up may by petition apply to the court for the winding up

949
of the company on either of the grounds set out in paragraphs (e) and (f) of section 222 of the 1948 Act (inability of company to pay its debts and the "just and equitable" ground) and paragraph (a) of the proviso to section 224(1) of that Act (restrictions on right of contributory to present petition) shall not apply in relation to a petition made by any such person; but unless he is a contributory otherwise than by virtue of this section he may not in his character as contributory present such a petition on any other ground.").
On Question, amendments agreed to.
8.35 p.m.
Lord Mackay of Clashfern Lord Mackay of Clashfern moved Amendment No. 121:
After Clause 41 insert the following new clause:
("Effect of company's failure to redeem or purchase own shares, Miscellaneous and supplemental
.—(1) This section shall apply where a company—

(a) has issued shares on terms that they are to be redeemed; or

(b) has agreed to purchase any of its own shares.

(2) Any failure on the part of the company to redeem any shares in accordance with the terms on which they were issued shall be treated (if it would not otherwise be) as a breach of contract by the company, actionable by the shareholder accordingly.
(3) Where at the commencement of the winding up of any company, any shares in the company which were to have been redeemed or purchased by the company before that time have not been transferred to the company, those shares shall on the commencement of the winding up be cancelled; but the holder of the shares at the time of their cancellation may (notwithstanding their cancellation) claim in the winding up in respect of any loss resulting from the fact that the shares have not been redeemed or purchased by the company, as the case may be.
(4) Where at the commencement of the winding up of any company, the company is obliged (contingently or otherwise) to redeem or purchase any shares in the company at a date subsequent to the winding up, those shares shall not thereafter be transferred to the company; and, subject to any provision to the contrary contained in the terms of redemption or purchase, the company shall thereupon be taken to be in breach of its obligations to the shareholder to purchase or redeem his shares.
(5) There shall be paid in priority to any amount which the company is liable to pay (whether by virtue of this section or otherwise) in respect of any failure on its part to fulfil any of its obligations to redeem or purchase any of its shares all other debts and liabilities of the company; and the provisions of Part V of the 1948 Act (winding up) shall have effect accordingly.
(6) For the purposes of section 212(1)(g) of the 1948 Act (postponement of debts, etc. due to members) any amount due from a company to a member the payment of which is postponed by this section shall be taken to be a sum due to him otherwise than in his character of a member.
(7) Where by virtue of section 66 of the Bankruptcy Act 1914 (payment of interest on debts) as applied by section 317 of the 1948 Act (application of bankruptcy rules to insolvent companies) a creditor of a company is entitled to payment of any interest only after payment of all other debts of the company, the company's debts and liabilities shall for the purposes of subsection (5) above include the liability to pay that interest.
(8) Subsections (3) to (7) above shall not apply in relation to any winding up which commenced before the appointed day.")
Lord Wedderburn of Charlton: I think that it is necessary to put on record the fact that at twenty-five minutes to nine o'clock this evening your Lordships have just passed over amendments in Committee—true we can come back to them on Report which no doubt is the assumption in everybody's mind. As has been said by my noble friend on this side of the Committee from the Front Bench, these are very important clauses.
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Some of us have not looked at them for very long. As my noble friend Lord Mishcon said, they have not been with us very long. I now cannot advert to the matters that I wished to discuss with those Members of the Committee who are present, and the noble and learned Lord who was going to speak to them on Amendment Nos. 112 to 119. There are a very large number of at least drafting points in these clauses. This is supposed to be a revising House. The Government treat it as though it was a conduit pipe through which one could throw clauses after dinner at as rapid a rate as they can be consumed.
May I address myself to Amendment No. 121? I failed to get up in time for Amendment No. 120. Let me ask a small question of the Government on this matter. In subsection (2) it is said, in dealing with the question of a company's failure to redeem or purchase its own shares, that failure on the part of the company to redeem them in accordance with the terms on which they were issued is treated as a breach of contract by the company if it would not otherwise be—which in many cases I would have thought it would. But were it not so, then the subsection makes it clear. But then it continues:
"actionable by the shareholder accordingly".
I want to know what the Government understand by that last phrase. Is it meant to indicate that all the remedies that flow from a breach of contract, at any rate in the English jurisdiction, will flow from it; and whatever the Scots' jurisdiction remedies may be, that they flow? If it is, it is quite an important little subsection stuck away in the back. It is normally understood that the shareholder cannot claim damages from his company whether for misrepresentation, fraud or breach of contract—according to the cases still extant on the matter—while he remains a shareholder.
In regard to this matter, the particular shares involved are being redeemed or purchased and it will not be in respect of them that he can be alleged to be a shareholder. But he may of course have other shares; he may even have shares of the same class; it depends how the company have arranged their purchase and redemption.
Is this a part of a remedy? It may well be that it is the correct remedy. It may well be this is the right thing to introduce into English company law. But if it is right, then the Government must have thought very carefully about the very large number of judicial interpretations and other arguments as to why we have this principle that a shareholder is not allowed to claim damages from his company and remain a shareholder—even, it appears, in the face of fraud, subject to statutory remedy. But this is not a statutory remedy; this is statute saying, "You are deemed to have the ordinary contractual remedy at common law."
So is this in effect saying to the courts that those decisions must now be put aside? If that is what the clause is saying—and it may be what the clause ought to say—then I suggest that the Government should take it away and tell us in so many words that that is the case for the clarity and certainty of the law, which I know the noble and learned Lord and I have very much at heart. They should not leave it to the vicissitudes of the courts—I am sure the Court of Session is safe, but at any rate of the English courts—but should say

951
not merely what the remedies are but also, if damages are to be available, what the measure of damages is to be. It may be that it is obvious in the average case, but there could be difficulties, and if we are coming back to this on Report I would invite the noble and learned Lord to tell us that this matter and perhaps a few previous matters we have passed over will be examined rather more carefully.
Lord Mackay of Clashfern: So far as this matter is concerned, the intention is to provide that the failure on the part of a company to redeem shares, that is to let the shareholder out, in accordance with the terms on which they were issued is to be treated as a breach of contract. In other words, the shareholder and the company will be treated as if they had a contract in these terms and the ordinary remedies will apply. If I am not mistaken—and if I am I shall be corrected—the situation is that a shareholder under the present law may have an action in respect of breach of contract where that contract is with the company and is not simply a matter of the arrangements that are contained in the memorandum and articles. Therefore I do not at the moment see that the problems that the noble Lord has suggested will flow from this will actually do so. However, I shall be happy to consider the matter further though that is the view I have formed in listening to him now.
Lord Wedderburn of Charlton: It would be unfair of me not to substantiate a slightly wider area of difficulty than the noble and learned Lord has suggested. Of course he is right in saying in the situation he has suggested that, where there is a clear breach of contract and no other problem emerges, then if you apply this clause to that situation, yes, that is as far as you get. But there is another area of difficulty. If you take cases such as Houldsworth v. The City of Glasgow Bank in 1880 and more particularly the case of re Addlestone Linoleum Limited in the 1880s in the Court of Appeal, which dealt with the question of breach of contract in regard to prospectus, subscription and so on, one there has a general principle where the courts lean against damages. If the Government wish damages to be available, then, because of those cases and not the situation to which the noble and learned Lord adverted, I think it would be wise to say so and in doing so to spell out some of the things he has just mentioned.
Lord Mishcon: I do not want to detain the Committee and I shall not do so for more than a second or so; but what the noble Lord, Lord Wedderburn, has said conveys the feeling of a number of Members, that it is awfully difficult to carry out our duties properly in the circumstances, which I do not intend to repeat or to complain about again. May I make this respectful suggestion? Normally when you have got a complicated Bill of this kind you have notes on the clauses. I am wondering whether, between now and Report stage, your Lordships would not be greatly convenienced by having some notes on clauses produced, purely and simply covering the provisions we have had to deal with so hurriedly tonight, and which do in fact re-make and indeed create new law. If a document, however roughly prepared, could be issued to the Members of the Committee, and especially those who are interested
952
in this, I think it would make our task easier for the Report stage. I do hope, that, having placed the Committee in the difficulty which the noble Lord, Lord Wedderburn, so correctly talked about, the noble and learned Lord can at least help us in this respect.
Lord Mackay of Clashfern: I shall certainly consider what we may be able to do in that particular respect, and I am happy to consider further the suggestions made by the noble Lord, Lord Wedderburn.
On Question, amendment agreed to.
Lord Mackay of Clashfern Lord Mackay of Clashfern moved Amendment No. 121A:
After Clause 14, insert the following new clause:
("Restriction on company's powers to require members to sell back shares
.—(1) Subject to subsection (2) below, a company which has power to alter its memorandum or articles of association to require any person in any circumstances to transfer to the company or to any other person any share in the company shall not without the written consent of the Secretary of State exercise that power in relation to any share which has been allotted before the alteration takes effect.
(2) Subsection (1) above shall not prevent any company from altering its memorandum or articles of association (without the Secretary of State's consent) to require a member who is proposing to transfer any of his shares in the company to any person other than the company or another member, to offer the shares first to the company or another member, either on the same terms as or on terms more favourable to him than the terms on which that transfer is proposed to be made.
(3) Where a company alters its memorandum or articles of association for the purpose mentioned in subsection (1) above by resolution made with the written consent of the Secretary of State, it shall send with the copy of that resolution forwarded to the registrar in compliance with section 143 of the 1948 Act a copy of that consent; and subsection (5) of section 143 (criminal penalties) shall apply in relation to a failure to comply with the requirements of this subsection as it applies in relation to a failure to comply with the requirements of section 143(1).").
On Question, amendment agreed to.
Lord Mackay of Clashfern Lord Mackay of Clashfern moved Amendment No. 122:
After Clause 41, insert the following new clause:
("Interpretation, repeal of section 58 of the 1948 Act and savings
.—(1) In this Part of this Act—
"distributable profits", in relation to any company, means those profits of the company which are available for distribution (within the meaning of Part III of the 1980 Act); and
"permissible capital payment" has the meaning given by section (Power of private companies to redeem or purchase own shares out of capital) (3) of this Act.
(2) Section 58 of the 1948 Act (which is superseded by sections (Power of company to issue redeemable shares) and (The capital redemption reserve) of this Act) shall cease to have effect; but any preference shares issued by a company before the appointed day which could but for the repeal of section 58 have been redeemed under that section shall be subject to redemption in accordance with the provisions of this Part of this Act.
(3) In any case to which section (Power of company to issue redeemable shares) applies by virtue of this section—

(a) any premium payable on redemption may, notwithstanding the repeal by this Act of the words in section 56(2) of the 1948 Act which enabled such premiums to be paid out of the share premium account, be paid out of that account instead of out of profits or partly out of that account and partly out of profits (but subject to the provisions of this Part of this Act so far as the payment is out of profits); and

953

(b) to the extent that the premium is paid out of the company's share premium account it shall not be a distribution for the purposes of Part III of the 1980 Act (restrictions on distributions of profits and assets).

(4) Until 22nd June 1982 (that is to say, until the expiry of the period which is the transitional period for the purposes of Part I of the 1980 Act) any reference in this Part of this Act to a public company shall include a reference to an old public company within the meaning of section 8(1) of the 1980 Act and any reference to this Part to a private company shall be construed accordingly.
(5) Any capital redemption reserve fund established before the appointed day by any company for the purposes of section 58 of the 1948 Act shall be known as the company's capital redemption reserve and be treated as if it had been established for the purposes of section (The capital redemption reserve) of this Act; and, accordingly, any reference in any enactment or in the articles of any company or in any other instrument to a company's capital redemption reserve fund shall be construed as a reference to the company's capital redemption reserve.").
On Question, amendment agreed to.
Lord Lyell: I understand it has been agreed through the usual channels that this would be a convenient adjournment point for this evening. I beg to move that the House be now resumed.
Moved accordingly and, on Question, Motion agreed to.
House resumed.

Allied Irish Banks Bill
Examiners Certificate that no further Standing Order is applicable: Ordered to lie on the Table.
  ARSON: NUMBER OF CASES
  ARSON: NUMBER OF CASES
  ARSON: PENALTIES
  ARSON: PENALTIES
  NORTHERN IRELAND: CORPORATION TAX CONCESSION
  NORTHERN IRELAND: CORPORATION TAX CONCESSION
  DIVIDEND CAPITAL FOR NATIONALISED INDUSTRIES
  DIVIDEND CAPITAL FOR NATIONALISED INDUSTRIES
  TANZANIA: UN ASSISTANCE
  TANZANIA: UN ASSISTANCE