Sitting of 18 July 1985

Preamble
The House met at half-past Two o'clock
PRAYERS
[MR. SPEAKER in the Chair]
PRAYERS
  PRIVATE BUSINESS
    SCARBOROUGH BOROUGH COUNCIL BILL
    Lords amendments agreed to.
    DURHAM CITY COUNCIL BILL [Lords]
    Read the Third time, and passed.
    BERKSHIRE BILL [Lords] (By Order)
    Read a Second time, and committed.

    PETERHEAD HARBOURS (SOUTH BAY DEVELOPMENT) ORDER CONFIRMATION BILL
    Order for Second Reading read.
    To be read a Second time upon Tuesday 23 July.

Oral Answers to Questions
  AGRICULTURE, FISHERIES AND FOOD

    Agricultural Land
    Mr. Nicholas Bakerasked the Minister of Agriculture, Fisheries and Food if he has received representations about the loss of agricultural land in southern England.
    The Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food (Mrs. Peggy Fenner): I have received no such representations.
    Mr. Baker: Is my hon. Friend aware that agricultural land is being lost to development in the south of England at a wholly unacceptable rate? Is she further aware that every acre so lost diminishes our environment and contributes to greater pressure on farmers? Will she add her weight to ensure that that deplorable trend is reversed?
    Mrs. Fenner: The Government have a commitment to the protection of agricultural land, and I attach great importance to the protection of such a finite national resource. I am, however, always ready to examine critically the precise methods of implementing the Government's policy in this area.
    Mr. Meadowcroft: Does the Minister accept that in southern England, as in Leeds, housing policies have a great deal to do with the loss of agricultural land—
    Mr. Speaker: Order. That is what I was hoping would not happen.
    Mr. Meadowcroft: I will rephrase my question, Mr. Speaker. For every three old houses demolished, only one
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    can be built, and that inevitably pushes out development. What talks has the Minister had with the Minister for Housing and Construction—
    Mr. Speaker: Order. The question is about agricultural land.

    Consultancy Fees
    Mr. Stephen Rossasked the Minister of Agriculture, Fisheries and Food whether he has made any studies on the impact of consultancy fees on small farmers.
    Mrs. Fenner: I have recently commissioned an independent survey designed to provide information by farming type and size on the industry's current and future use of advisory and related services.
    Mr. Ross: Does the Minister accept that the work of the Agricultural Development and Advisory Service over the years has been much appreciated by agriculturists in. general? When does she expect to introduce the proposed scale of charges? Will she give us an assurance that the charges will not be unnecessarily high and will not include bureaucratic, fastidious extras?
    Mrs. Fenner: Professor Bell, in his report. made a point about the excellence of ADAS, but recommended that the beneficiaries of the services provided by ADAS should contribute to the cost of those services. Detailed work on the implementaion of Professor Bell's report is in hand, and my right hon. Friend hopes to be able to make a further statement on progress before the summer recess.
    Mr. Andy Stewart: Does my hon. Friend agree that last year alone we spent £53 million on agricultural education and another £8 million on farm training supported by the agricultural training board? Does she agree that it is a misconceived belief held by Opposition Members that all farmers are thick and welcome such unsolicited advice?
    Mrs. Fenner: I am sure that our advice and training services are excellent and of great help to our agriculture industry.

    Food and Drink Federation
    Dr. Twinnasked the Minister of Agriculture. Fisheries and Food how many meetings he or his officials have had with the Food and Drink Federation in the last 12 months.
    Mrs. Fenner: My right hon. Friend or his colleagues have met federation representatives at their invitation five times in the last 12 months. Throughout this period there have been frequent and continuing contacts between my officials and the federation. The most recent meeting at senior level took place on 11 July.
    Dr. Twinn: When my hon. Friend next meets members of the Food and Drink Federation, will she be able to give them good news about the imminent introduction of a national voluntary code of practice for nutritional food labelling? Is she aware of the anxiety of people in the industry that the introduction of retailers' schemes, although welcome as a sign of intent, could cause confusion because there is no common standard?
    Mrs. Fenner: I am aware that too many systems will confuse the consumer. Comments on the Government's

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    grant guidelines are being evaluated. The Government have already said that they will consider laying regulations concerning the format of nutrition labelling.

    Cereal Prices
    Mr. Lathamasked the Minister of Agriculture, Fisheries and Food what is the latest position regarding the negotiations over cereal prices in the Common Market.
    Mr. Heathcoat-Amoryasked the Minister of Agriculture. Fisheries and Food if he is satisfied with efforts to reduce the European Economic Community grain surplus.
    The Minister of Agriculture, Fisheries and Food (Mr. Michael Jopling): The Agriculture Council earlier this week was again unable to reach agreement on cereal prices. The Commission, however, stated that for the coming marketing year it would apply prices for cereals based on an abatement of 1·8 per cent. It also stated that it would be authorising member states to make an end of season payment for common wheat and rye of breadmaking quality and putting proposals to the management committee to reduce the delay in the payment period for cereals bought into intervention and to operate a special intervention measure for breadmaking wheat towards the end of the 1985–86 marketing year.
    The Council will return to the question of cereal prices at future meetings and, in addition, the Commission has said that it intends to bring forward proposals in the autumn for modifying the cereals regime so that decisions on the future of the regime may be taken by the end of 1985.
    Mr. Latham: What sort of Fred Karno outfit is it when the non-elected bureaucrats arbitrarily fix cereal prices because the elected Ministers cannot agree? Surely our farmers and consumers deserve a better arrangement.
    Mr. Jopling: I agree that this is an uncertain area. The Commission claims that the Council's failure to take decisions is contrary to its obligations under the treaty and that the Commission has a duty to fill the gap as far as possible. The Government do not think that it would be profitable to add to the uncertainty. The price reduction of 1·8 per cent. will therefore be applied in the United Kingdom, pending a final decision by the Council.
    Mr. Heathcoat-Amory: As technology and improved techniques will continue to boost cereal production throughout Europe, is it not vital to have an enforceable and realistic policy of controlling surpluses? As the 1·8 per cent. price cut will not do the trick, and as my right hon. Friend must have a realistic policy, can he tell us what it is?
    Mr. Jopling: My hon. Friend has heard me say time and again that discipline by price is the best way in which to control surpluses. The combined result of the Commission's decisions is that the support price for 1 tonne of wheat will fall by an estimated 7 per cent. in real terms in 1985–86. That follows a reduction of more than 9 per cent. in real terms during the previous three seasons.
    Mr. J. Enoch Powell: Is the Minister satisfied about the legality and propriety of the method by which the 1·8 per cent. abatement is being made?
    Mr. Jopling: As the right hon. Gentleman knows, there is a precedent for the Commission moving in, in
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    circumstances such as these, when there is a legal vacuum. The Government do not think that it would be profitable to add to the uncertainty.
    Mr. Torney: Is the Minister aware that this country has a surplus of 4 million tonnes of grain and 3 million tonnes of wheat used mainly for animal feed, which is not required? Is he further aware that putting goods into intervention costs the British taxpayer £40 million a year? What is he going to do about that appalling situation?
    Mr. Jopling: I would have hoped that the hon. Gentleman would applaud the efforts that I have been making to apply even stronger cereal price cuts. I should have thought that he would agree with me that it was a significant step forward over the past three years to have had a reduction of 9 per cent. in real terms. The Commission's decision for this year implies a reduction of a further 7 per cent. in real terms.
    Mr. Deakins: As an important principle is at stake here—whether the Commission has the power to overrule and override the veto of a member Government—will the Minister confer with his colleagues about the possibility of having the matter referred to the European Court of Justice for a ruling?
    Mr. Jopling: It is not the Government's intention at the moment to refer this matter to the court. Under the guarantee threshold arrangement. this year there should have been a reduction of 5 per cent. There is, therefore, a strong argument for saying that there should be a reduction in cereal prices this year, although I wish that the reduction was more than 1·8 per cent.
    Mr. Parris: Does my right hon. Friend agree that the failure to reach a decision, however looked at, is disastrous for the Community? Can he explain what will happen about storage, given that there is already a record amount of grain in intervention store in this country and that a record amount of cereals has been planted and is about to be harvested? What will happen to the new crop?
    Mr. Jopling: My hon. Friend is a brave man to assert that there will be a record harvest. That is not a certainty. I hope that he will reflect on the fact that over the years there has been a major change in the attitude of the Council of Ministers and the Commission, and that although three years ago we were talking about a double digit increase in cereal prices, this year there will be a fall of 7 per cent. in the price of this season's wheat in real terms.
    Mr. John: Does not the fact that Ministers were talking about a two-figure price increase so recently mean that the position is desperate? Will he confirm that the Commission's report reckons that the profit margin on cereals throughout the Community is between 20 and 30 per cent. and that this year's end of season stocks will be 10 million tonnes higher than last year? What hope do we have that in the autumn, or at any other time, the Commission will be less feeble and Ministers less faint-hearted than they have shown themselves to be this summer?
    Mr. Jopling: I hope that the hon. Gentleman will give me credit for having been the most robust Minister in arguing in the Council of Ministers for reduced prices. I was the only member of the Council of Ministers who argued consistently that cereal prices should be reduced by the full 5 per cent. that was implicit in the guarantee threshold. I shall continue to argue in that way.

    Sea Fisheries Committees
    Mr. Patrick Nichollsasked the Minister of Agriculture, Fisheries and Food if he will make a statement on the operation of Sea Fisheries Committees byelaws.
    Mrs. Fenner: Sea fisheries committees, through the application of byelaws, can make a valuable contribution to fisheries conservation at local level. We are satisfied with the operation of those byelaws, but we recognise that the procedures governing their confirmation, set out in a statutory instrument dating from 1938, need to be brought up to date. A revision is now under discussion with the SFCs.
    Mr. Nicholls: Will that revision take into account the circumstances in which scallop fishermen in my constituency can find themselves, namely, that their licences have been revoked by the Southern sea fisheries committee and that the advertisements giving notice of that intention are put into newspapers which the committee knows do not circulate in the area in which those fishermen live? Does that not amount to a substantial injustice? Will the Minister consider using her powers to revoke that byelaw, because an injustice has resulted?
    Mrs. Fenner: I appreciate the difficulty with the present statutory advertising procedures for fishermen outside the district covered by that sea fisheries committee. Those advertisements were placed in seven local newspapers, and the committee met the statutory requirement. However, I do not accept that the restrictions imposed to safeguard scallop fisheries in the southern district were unjust. We are considering whether it would he advantageous to require SFCs to advertise in the trade press, which is widely read in the industry.
    Dr. Godman: To what extent is the north-east England drift net fishery shaped by sea fisheries committee byelaws? The Minister must know that there is a growing demand in Scotland for that fishery to be outlawed. Will she ensure that the interests of those fishermen are not harmed by any changes in the law?
    Mrs. Fenner: We are considering the net fisheries in the north-east area, and future arrangements for it are under review. We hope to announce our conclusions soon. A later question on the Order Paper may also relate to that matter.
    Mr. Beith: Does the Minister recognise that the Northumberland sea fisheries committee is an extremely experienced body in the operation of its byelaws? Will she take good account of its advice on the matter raised by the hon. Member for Greenock and Port Glasgow (Dr. Godman), and on the Scottish Office's proposed regulations on the carrying of monofilament nets by boats? Will she ensure that the advice of the Northumberland sea fisheries committee is taken fully into account?
    Mrs. Fenner: We always listen to the wise advice of the sea fisheries committees.
    Mr. Soames: Does my hon. Friend agree that the sea fisheries committees could take a notable lead by banning the use of monofilament nets, as has already happened in Scotland? Why will the Ministry not do the same for England and Wales?
    Mrs. Fenner: We have no evidence that monofilament nets cause any more damage to fish escaping than do mutlifilament nets. We have no intention of introducing a general ban.
    Mr. Campbell-Savours: Where sea water netsmen for salt water species find that their interests come into direct conflict with those of anglers on rivers, how does the. Minister propose to resolve that dilemma? Is she aware that in west Cumbria it is almost impossible for sea netsmen to lay their fixed engine nets and that the law no longer favours them, although it should favour both sides?
    Mrs. Fenner: The Ministry can review all such fisheries. As I said earlier, we are examining the north-east net fisheries for that very reason.
    Mr. Mark Hughes: Will the Minister think again about monofilament nets? All the evidence shows that they are a disgrace and should be banned throughout our inshore fishing areas. Does she accept that the Opposition would welcome an urgent revision of all sea fisheries committee byelaws and the necessary statutory instrument to bring that about?
    Mrs. Fenner: I assure the hon. Gentleman that the Ministry's directorate of fisheries research keeps the effect of those nets under constant review.

    Food Manufacture (Transport Costs)
    Mr. Thurnhamasked the Minister of Agriculture, Fisheries and Food if he will provide figures for 1984 for the percentage cost of the transport element of food manufacture costs in the United Kingdom and the European Economic Community.
    Mrs. Fenner: On average, transport costs probably represent about 5 per cent. of food manufacturers' costs in the United Kingdom, but there will inevitably be considerable differences between manufacturers. I am not aware of the position being markedly different in the European Community as a whole.
    Mr. Thurnham: I thank my hon. Friend for her answer. Is she aware that the CBI has said that transport costs in Britain are twice as high as those in the rest of the EC? Will she consider those differences further?
    Mrs. Fenner: The evidence that I have described does not show that to be the case, but any evidence that United Kingdom manufacturers are being disadvantaged because of transport costs should be passed to my right hon. Friend the Secretary of State for Transport.
    Mr. John: Does not the huge concentration of food processing plants in the south-east of England involve a double journey of food from the growing areas to the processing plants and back again to be sold? Should we not encourage food processing plants to be dispersed throughout the regions, thus avoiding such extra expense?
    Mrs. Fenner: There has been some reallocation of food processing plants through the regional programme. The Centre for Physical Distribution Management, in a survey of distribution costs in the United Kingdom last year, found that transport costs of food, drink and tobacco manufacturers were on an average 5·77 per cent. of sales. The figure varied tremendously between firms, from 0·35 per cent. to 9·97 per cent.

    Aujeszky's Disease
    Mr. Freudasked the Minister of Agriculture, Fisheries and Food how much has been paid in compensation to pig farmers for losses incurred because of Aujeszky's disease in each of the last three years; what is the aggregate loss to farmers; and whether he will make a statement.
    Mr. Jopling: About £25·3 million has been paid to owners in compensation for slaughter of pigs affected with the disease—£21·5 million was paid in 1983, £3·4 million in 1984 and £350,000 so far this year. In addition, I understand that Pig Disease Eradication Fund Ltd. paid about £3·7 million for disruption costs. It is not possible to give a total figure for farmers' losses in the campaign.
    Mr. Freud: I thank the Minister for that reply. Will he show some sympathy to the industry, which tried to follow his philosophy of helping itself, only to find that the costs were vastly in excess of the estimates? Is it right for the Government to escape completely from the consequences of what the Standing Committee called at least a failure of communications, and at worst maladministration?
    Mr. Jopling: The hon. Gentleman will recall that this scheme was started at the express wish of the industry, and it was on the absolute understanding that it was to be producer-financed. As the hon. Gentleman has been honest enough to acknowledge, the figure of £6 million was an estimate. I remind him that my Department has already contributed more than £3 million in veterinary and administrative resources and in laboratory testing. I remind him as well that the Select Committee, in paragraph 23 of its report, said:
    "it does not appear that MAFF has any contractual obligations to bail out the industry".
    Mr. Maxwell-Hyslop: Is my right hon. Friend aware that although no Standing Committee has reported on this matter, contrary to what the hon. Member for Cambridgeshire, North-East (Mr. Freud) has said, the Select Committee on Agriculture has done so? Does my right hon. Friend accept the obligation which the House knows falls upon him and the recommendations of that Select Committee report? Does he not have a statutory duty to take an effective interest in the prevention of animal disease in this country for the benefit of the nation as a whole, not just of agricultural producers? If my right hon. Friend the Secretary of State for Scotland can get £50 million a year to reduce the rates burden, cannot my right hon. Friend the Minister for Agriculture, Fisheries and Food get a few more million pounds to help to put the eradication fund back into solvency?
    Mr. Jopling: The Select Committee report makes it clear that
    "it does not appear that MAFF has any contractual obligations to bail out the industry".
    Estimates were made, and it was made clear that one could not be precise about how much this disease would cost. I am bound to draw to the attention of my hon. Friend, although he may know it already, that the fund's overdraft of £14 million has been made a good deal higher because of the just short of £4 million of extra costs represented by consequential losses, which were paid out by the fund against my Department's advice. I do not believe that, in spite of the Select Committee's report, there is a duty on my Department to bail out in this case.
    Mr. Haynes: Is the Minister aware that I get the distinct impression that he is standing at the Dispatch Box bragging about how much the Government are paying in compensation? What sort of effort are the Government, especially the Minister, making to stamp out the disease? That is what my farmers want to know. Let us hear about it.
    Mr. Jopling: I am delighted to hear of the hon. Gentleman's great interest in the matter. Since the scheme began in March 1983, 500 herds, including 420,000 pigs, have been slaughtered. Since June 1984, only 17 cases have been confirmed, compared with 92 in May 1983 at the height of the campaign. There are likely to be a few remaining foci of infection, and the efforts of the state veterinary services are geared to identifying those few remaining cases.
    Mr. Key: Does my right hon. Friend agree that pig farmers are not financial experts, that the sum is modest compared with the rest of the agriculture budget, and that he is setting a dangerous precedent if he says that the Government will not be responsible for parts of the agricultural sector, if farmers have agreed otherwise, even if there is a risk of disease? One can, in particular, foresee antibiotic problems in fish farming.
    Mr. Jopling: In this case we had a scheme to deal with a disease, on which the industry placed high priority. The scheme was embarked upon at the specific request of the industry, on the absolute understanding that it was to be producer-financed and that Government money would not be involved. In spite of that, my Department has spent more than £3 million monitoring the programme. That is an extremely generous sum.
    Mr. Mark Hughes: Does the Minister accept that to hide behind the absence of a contractural obligation is unacceptable to the farmers, that animal health is his responsibility, and that ultimately he must pay for the good health of our pig population?
    Mr. Jopling: I do not accept that. The industry said that it wanted to operate the scheme and would finance it. We said that the cost would be at least £6 million, and it has cost more than that. We made it clear that estimating how much it would cost was an unpredictable science. We should not pay any more towards the scheme on top of the £3 million.

    Confectionery Exports
    Mr. Gregoryasked the Minister of Agriculture, Fisheries and Food what value are the United Kingdom's exports of confectionery for the last year for which figures are available.
    Mrs. Fenner: Overseas trade statistics for 1984 provisionally value exports of sugar confectionery, not containing cocoa, and chocolate confectionery at £239,039,000.
    Mr. Gregory: In view of the importance of that key sector of the economy, will my hon. Friend, who represents the sponsoring Ministry, hold discussions with the representatives of overseas states which seek to restrict the import of confectionery? They are fixing artificial barriers to a leading food export product, and the sooner they understand that those artificial barriers are not in the interest of world trade, the better.
    Mrs. Fenner: We are well aware of the industries involved. My hon. Friend discussed the matter with the Cocoa Chocolate and Confectionery Alliance at a meeting on 26 June, and it was the subject of an Adjournment debate on 24 May. We made it clear that we would continue to take every opportunity to dissuade United States authorities from imposing restrictions. Meanwhile, we remain in close touch with the United Kingdom trade and the Commission.
    Mr. Hardy: Does the Minister accept that the British confectionary industry is excellent and should be enjoying a greater share of the export trade? Will the Government ensure that both the United States of America and our Common Market partners are not allowed to erect artificial barriers, so enabling the industry to maintain and achieve the markets that it deserves?
    Mrs. Fenner: I hope I made it clear that we shall argue the case strongly and in every forum that we can. The Government are committed to promoting exports and assisting exporters.
    Mr. Greenway: What is the value of our imports of confectionery? In view of the high standard of our industry, why do we need imports?
    Mrs. Fenner: I cannot find the figure for the value of imports. I can tell my hon. Friend only that the value of our exports is £40 million to the United States alone.
    Mr. Meadowcroft: Is not one of the constraints imposed by other countries the requirement for much more detailed listing of the sugar content of confectionery? Is that not a perfectly proper thing to do, which we would value in this country, so that people may choose what they eat?
    Mrs. Fenner: We are not convinced that that is a perfectly proper thing to do. That is the case that we are making.

    Common Agricultural Policy
    Mr. Marlowasked the Minister of Agriculture, Fisheries and Food if he will estimate the cost of levies and duties to the average family of four due to the common agricultural policy arising from the difference between farmgate prices and cif to the United Kingdom port prices plus port charges, but excluding all European Economic Community tariffs and duties, for major traded agricultural commodities.
    Mrs. Fenner: In 1984 the United Kingdom collected some £387 million of levies and duties on imports of agricultural products from countries outside the European Community, equivalent on average to about 53p per week for a family of four.
    Mr. Marlow: As my hon. Friend knows, agricultural support before we joined the Community was paid through taxation. Now agricultural support is paid through the common agricultural policy and through the infinitely higher price that Community produce sustains compared with world market prices. Effectively, that is a food tax on the consumer. I am sure that my hon. Friend would like eveybody to know what the factors are in the argument. Will she develop that theme so that we may know from week to week and month to month what food tax consumers in this country are paying?
    Mrs. Fenner: Any question that my hon. Friend wants to table about the effects of levies similar to the one that I have just answered will, of course, be answered. However, I know my hon. Friend's views on Europe. Security of supply in Europe is valuable, too, although we are confronted with some surplus now, and there are other very good reasons for our membership of the Community.

    Milk Quotas
    Mr. Colin Shepherdasked the Minister of Agriculture, Fisheries and Food if he will issue advice to dairy farmers with milk quotas who wish to acquire further quota by means of leasing or purchase.
    Mr. Jopling: I am actively pursuing in Brussels changes to the Community regulations to allow quota to be transferred separately from land. There is resistance, however, and I cannot predict the outcome of our negotiations at this stage.
    Mr. Shepherd: I am grateful to my right hon. Friend for that reply. Does he agree that one of the fundamental planks of the solution to the problem is knowing how long the quotas will stay, or whether quotas will be taken off or revised? Will my right hon. Friend press that point so that the industry is given the underlying confidence to enable it to plan?
    Mr. Jopling: As my hon. Friend knows, quotas were introduced for a period of five years, with a review at the end of three years. I was interested to see recently that the National Farmers Union issued a press statement saying that it hopes that quotas will remain. I understand that it would be an important matter if there were a free sale of quotas separately from land, but I do not believe that we shall be able to move towards taking a view one way or the other at least until the review at the end of the third year.
    Mr. Geraint Howells: I am sure that the Minister is well aware that many dairy farmers in Britain are in dire financial trouble because of the Government's policy. He is well aware that he introduced a policy that was unacceptable to the people. Does he accept that many dairy farmers are trying to advise the Government to introduce a scheme to look after the interests of those who were severly hit in 1983–84?
    Mr. Jopling: I congratulate the hon. Member on what appears to be his reappointment as agricultural spokesman for the Liberal party. I note what he said about milk quotas. Travelling around the country as he does, I am sure he has discovered that farmers are becoming increasingly accustomed to working with milk quotas and seem to be attaching some importance to their continuance.
    Mr. Nicholas Winterton: Will my right hon. Friend accept that the acquisition by lease or straightforward purchase of an additional quota by dairy farmers is the only way that some of them will be able to remain in business and avoid having to sell some of their land or perhaps the whole farm? Will he give some guidance on, and inject some urgency into, the problem along the lines of the question asked originally by my hon. Friend the Member for Hereford (Mr. Shepherd)?
    Mr. Jopling: My hon. Friend takes a close interest in these matters. He will know that I have said repeatedly that I should like to move as soon as possible to the leasing and

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    sale of quotas. That will be done when we can get more support from other member states and from the Commission. At the moment, it would mean major changes in both Community and domestic legislation, and the Community and some member states are strongly resisting a sale and purchase scheme. It therefore follows that changes will be difficult to achieve, and I cannot predict the outcome of negotiations. I am pressing as hard as I can to get a leasing of quotas to meet the problem to which my hon. Friend has drawn our attention.
    Mr. Nicholson: Will the Minister give serious consideration to the plight of the young dairy farmer who is in a position neither to purchase nor to lease a quota? Will he consider giving such people a start on the bottom of the ladder so that they may have a future? Without young dairy farmers coming in, the industry will eventually die.
    Mr. Jopling: The hon. Gentleman will have heard me say many times that because of the problems of the young man starting in the dairy industry it is important to get more flexibility into the system. I have said that from the beginning, and I shall continue to do what I can to secure that flexibility.
    Sir Hector Monro: Does my right hon. Friend agree that it would be most helpful if we could get a united front in this country? Does he think that it would be a good idea to bring together the Country Landowners Association and the NFU so that they can reach a common decision? Does he further agree that the Liberal spokesman is probably away discussing the rating of agricultural land?
    Mr. Jopling: Events are moving so fast that I am not sure who is to be the Liberal spokesman on agriculture.
    We are doing what we can to get a united view among all interested parties about how quotas could be made more flexible.
    Mr. John: We cannot be sure who many of the party spokesmen will be in the autumn.
    Does the right hon. Gentleman agree that one of the problems with quotas is that in the Community more milk is being produced than is being consumed? Will he bear in mind that that is an urgent problem which meeds to be faced by the Council of Ministers? If it is not dealt with, we shall have another panic measure in a few years' time.
    Mr. Jopling: The hon. Gentleman has put his finger on a most important point. Many people tend to forget that this year we shall produce about 98 million tonnes of milk and consumption will be about 85 million tonnes. That is why the Commission is currently examining the possibility of another buy-out scheme financed either wholly or partly by the Community, in order to cancel that quota and reduce the 13 million tonnes surplus.

    Beef Industry
    Sir John Farrasked the Minister of Agriculture, Fisheries and Food if he will make a statement on the level of returns in the beef fattening industry.
    Mr. Jopling: In the first half of 1985 producer returns, taken as market price plus variable premium for finished beef cattle, were slightly lower than in the corresponding period of 1984. This reduction was, however, partly offset by lower prices of compound feedingstuffs.
    Sir John Farr: I congratulate my right hon. Friend on his efforts to retain the beef premium scheme, which has made so much difference to the industry, but does he agree that the business of beef fattening and finishing has now become so unprofitable that there is a real risk of the English beef joint disappearing from the Sunday dinner table?
    Mr. Jopling: I am grateful for what my hon. Friend said about the variable premium payments, which are worth between £2 million and £3 million a week to the industry. Intervention has played a greater role since the introduction of the carcase classification grid last year. The United Kingdom intake is now running at about 1,000 tonnes of forequarters per week. The suckler cow subsidy was doubled to £24·74 per cow last year. This year, the hill livestock compensatory allowances have become available in marginal areas for the first time. In addition, private storage aid was made available earlier this year.

  PRIME MINISTER

    Engagements
    Mr. O'Brienasked the Prime Minister if she will list her official engagements for Thursday 18 July.
    The Prime Minister (Mrs. Margaret Thatcher): 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.
    Mr. O'Brien: Is the Prime Minister aware of the hardship and suffering that her Government are causing all people, but patients especially, because of the restricted drug list in the National Health Service? Is she aware also that old people now have to pay between £7 and £10 a week to obtain the drugs that they require, for which there are no alternatives? Will she shake up the Department of Health and Social Security, which admitted in a letter dated 17 June that it had not the resources to reply to the letters of complaint that it was receiving, to make sure that hon. Members can obtain information about what is likely to happen in the future? Will she take steps to make sure that the Department is overhauled and that the restructured list is extended?
    The Prime Minister: I do not accept what the hon. Gentleman said about the prescribed drug list. Every penny that is saved by prescribing generic drugs instead of specific named drugs goes back into patient care and therefore enables more medical services to be supplied. I should have expected the hon. Gentleman to be grateful for that. I shall look into his complaint about the Department's failure to reply to letters.
    Mr. Neil Thorne: Will my right hon. Friend find time today to condemn all racial harassment? Will she condemn especially those who jump to conclusions about these issues in advance of police investigations, especially in the Kassam case in my constituency?
    The Prime Minister: I gladly join my hon. Friend in condemning unreservedly all racial harassment. It should not occur in a country such as ours. If it does, it must be dealt with. I agree with my hon. Friend that the specific case to which he refers is a matter for investigation and that it is not for us to jump to conclusions.
    Mr. Hattersley: Since the Department of Health and Social Security now concedes that it possesses figures for both gainers and losers under the Government's new social security plans, why did the Prime Minister pretend that no such figures existed?
    The Prime Minister: I have made it perfectly clear in the House that illustrative figures will be published at the right time when decisions have been taken on the White Paper and that no effective figures could be published until then.
    Mr. Hattersley: If the figures had only this minimal importance, why was the paper which included them withdrawn from civil servants for destruction, on instructions from the Department, immediately after the Prime Minister made her dubious statement to the House a month ago?
    The Prime Minister: I have made it very clear that the time to publish a range of figures is when decisions have been taken on the structure at the time of the publication of the White Paper. Other figures would be purely speculative. I note that the right hon. Gentleman has nothing more significant to ask.
    Mr. Hattersley: The Prime Minister must know that she is wholly unconvincing when she tells us that the Department of Health and Social Security called in a paper and had it shredded for figures that were wholly speculative. Is it not more likely to be the case that she wanted to suppress the figures because they demonstrate that under her proposals 1·8 million families will lose housing benefit altogether, and 600,000 families will be denied supplementary benefit?
    The Prime Minister: The right hon. Gentleman will recall that, when the Leader of the Opposition was asked about his figures, he said:
    "I am not going to put figures on two or three years hence."
    If we wished to conceal figures, we would hardly have undertaken to give an illustrative range of figures in the White Paper this autumn. We could hardly have wanted to be concealed that which we intend to reveal when the time is appropriate.
    Mr. Michael Brownasked the Prime Minister if she will list her official engagements for Thursday 18 July.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Michael Brown: With over 40 per cent. of tax revenues coming from those on below average income, does my right hon. Friend agree that, if we are to help the low paid, tax cuts must be the priority in her deliberations with her Cabinet colleagues?
    The Prime Minister: Yes, I accept that tax cuts are a priority. As my hon. Friend is aware, we have done a great deal to increase the tax-free allowances. We have put up the tax-free allowances in our time by 20 per cent. in real terms. There is more to be done because, as my hon. Friend is aware, some 40 per cent. of pensioners come into the range of income tax and, as he has already said, many people below average earnings pay far too much income tax.
    Mr. Steel: Will the Prime Minister deny the reports that were circulating last week that, instead of attending the world conference of Finance Ministers with the IMF
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    and the World Bank in October, the Chancellor of the Exchequer will be attending the Conservative party conference at Blackpool? Does she agree that it is time for British leadership on issues such as interest rates, currency stability, the fight against recession, Third world development, and debt, and will she tell her right hon. Friend that he really ought to go to the world conference?
    The Prime Minister: I am surprised that the right hon. Gentleman thinks it surprising that the Chancellor should think it important to be at a party conference. I wonder whether the right hon. Gentleman would not put off certain engagements to be at his own party conference.
    Mr. Parris: With so many more newsworthy issues facing my right hon. Friend, will she not forget the problems that face agriculture as we go into the summer still with no agreement on cereals, and with a regime on dairy products which faces with ruin many small dairy farmers in hill and marginal land?
    The Prime Minister: I am indeed aware that many small farmers have been placed in difficulty. As my hon. Friend is aware, we had to take action on the common agricultural policy, but it does not make sense to pour more and more money into surpluses. Therefore, we are taking action steadily to bring down the surpluses. I think that that is correct.
    Mr. Wareingasked the Prime Minister if she will list her official engagements for Thursday 18 July.
    The Prime Minister: I refer the hon. Gentleman to the reply that I gave some moments ago.
    Mr. Wareing: Would the right hon. Lady care to define to the House and to the 11,000 people who had their homes repossessed last year because they could not pay their mortgages, 40 per cent. of whom went into arrears because of unemployment, the term "property-owning democracy"?
    The Prime Minister: A record number—over 60 per cent.—of all people in houses own their own homes. That is excellent, and is in no way counteracted by the fact that a very small percentage have had their homes repossessed. The number of people having difficulties in meeting their mortgage payments is still well under 1 per cent. of the total.
    Mr. Michael Forsythasked the Prime Minister if she will list her official engagements for Thursday 18 July.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Forsyth: In view of my right hon. Friend's reply to my hon. Friend the Member for Brigg and Cleethorpes (Mr. Brown) recognising the vital importance of tax cuts in generating economic growth and job creation, will she consider introducing an accelerated programme of disposal of state assets in order to support significant cuts in tax rates over a number of years? Will she recognise that that would have the added benefit of restoring much more of the economy to the disciplines of the competitive private sector?
    The Prime Minister: Yes. It is important to go ahead with the privatisation programme for its own sake. It improves the performance of former nationalised industries, it enables many people working in those

    475
    industries to come into share ownership for the first time and it enables managers to manage on a commercial basis. All those are good things in themselves and they help to reduce taxation.
    Mr. Torney: Will the Prime Minister give further consideration during her busy day to her decision to abolish wages councils for workers aged under 21? I represent the Union of Shop, Distributive and Allied Workers, which has a mass of members who come under the wages councils. Will the Prime Minister realise, as those people do, that her Government, having created mass unemployment, are using it to cut the standard of living of thousands of young workers throughout the country, including members of my union who know that their conditions will be worsened by the Government's action? Will the Prime Minister reconsider her decision and not abolish the wages councils?
    The Prime Minister: No. The decision announced by my right hon. Friend the Secretary of State for Employment yesterday will, I believe, improve the employment prospects of young people and will be a further step towards relieving the burden of regulations on small businesses. I remind the hon. Gentleman that 16 wages councils have been abolished since 1969, and 14 were abolished by Labour Governments.
    Mr. Jim Spicerasked the Prime Minister if she will list her official engagements for Thursday 18 July.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Mr. Spicer: My right hon. Friend will be aware that the major problems in famine areas are the provision of transport and lack of infrastructure. Will she take advantage of next week's meeting in Washington of party leaders of the International Democrat Union to press for better co-operation in those areas, if necessary, by the secondment of NATO military personnel to the United Nations?
    The Prime Minister: I am reluctant to try to do that centrally through the United Nations, as I do not think that it would be the best way. There is a United Nations relief co-ordinator in the stricken areas, including Ethiopia. We co-operate through him and he asks for bilateral military aid where it is required. As my hon. Friend knows, we have been giving considerable help in Ethiopia through the
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    Hercules and by other means. I think that that bilateral action, through the United Nations local special coordinator, is the best way to continue.
    Mr. Hume: In the light of the Prime Minister's statement to the American Bar Association earlier this week that no ransom would be paid for kidnapped people in this country, will she tell me why the Government have never taken action against insurance companies in the City of London which conduct a multi-million pound business providing insurance cover against ransoms after kidnaps? Does she agree that the existence of such policies is an encouragement to kidnapping, as is proved by the fact that everybody kidnapped in Britain and Ireland by terrorists over the past number of years held such policies?
    The Prime Minister: I tend to agree with the hon. Gentleman that the existence of such policies is conducive to kidnapping and can encourage the kidnapper in his terrible work.
    Sir Fergus Montgomeryasked the Prime Minister if she will list her official engagements for Thursday 18 July.
    The Prime Minister: I refer my hon. Friend to the reply that I gave some moments ago.
    Sir Fergus Montgomery: Has my right hon. Friend noticed that a CBI report forecasts that 370,000 new jobs will be created in 1985? Does she agree that if that is realised 1 million new jobs will have been created since the last election? Is that not something to give hope to the unemployed?
    The Prime Minister: The CBI report certainly gives hope. I hope that young people will be encouraged by the fact that 640,000 new jobs have been created in the last two years. As the news from Eurostat shows, more new jobs have been created in Britain in the last year than in the whole of the rest of the European Community.
    Mr. Willie W. Hamilton: Now that the House is about to go into recess, will the Prime Minister give a message of comfort to the nation and the House that she will not undertake any official visits during the recess?
    The Prime Minister: Many people who have made important invitations would take considerable discomfort from such a reply.

Business of the House
3.31 pm
Mr. Roy Hattersley: May ask the Leader of the House to state the business for next week?
The Lord Privy Seal and Leader of the House of Commons (Mr. John Biffen): Yes, Sir. The business until the Adjournment will be as follows:

MONDAY 22 JULY—Consideration of Lords amendments to the Social Security Bill, the Interception of Communications Bill and the Sporting Events (Control of Alcohol, Etc.) Bill.

Remaining stages of the Bankruptcy (Scotland) Bill [Lords].

Motion on the House of Commons Disqualification Act 1975.

Motion on European Community Document No. 9427/79 draft directive on the approximation of the laws, regulations and administrative provisions of all member states concerning liability for defective products.

The Chairman of Ways and Means has named opposed private business for consideration at seven o'clock.

TUESDAY 23 JULY—A debate on a Government motion to approve the statement of changes in immigration rules laid on 15 July (House of Commons Paper No. 503).

Motion relating to the statement of changes in immigration rules, Cmnd. 9539.

Remaining stages of the Child Abduction and Custody Bill [Lords]

WEDNESDAY 24 JULY—Motion for the summer Adjournment. It will be proposed that the House should adjourn until Monday 21 October.

Proceedings on the Consolidated Fund (Appropriation) Bill.

THURSDAY 25 JULY—Motions on orders and regulations relating to the uprating of social security benefits and other related matters.

Motion relating to the Housing Benefit (Miscellaneous Amendments) Regulations. Details of relevant documents will appear in the Official Report.

FRIDAY 26 JULY—Debates on the motion for the Adjournment.

European Community documents to be debated;
Monday 22 July
Relevant documents

9427/79

Liability for Defective Products Explanatory Memorandum by the Department of Trade and Industry dated 1 July 1985

Relevant Reports of European Legislation Committee

HC 159-xxii (1979–80) paragraph 1; and

HC 5-xxvi (1984–85) paragraph 1

Thursday 25 July
Relevant documents
Report by the Government Actuary on the draft of the Social Security Benefits Uprating Order 1985, Cmnd. 9567.

Uprating of mobility allowance

Statement prepared pursuant to section 37A(4) of the Social security Act 1975 as amended by Section 3(2) of the Social Security Act 1979

(House of Commons Paper No. 491)
Mr. Hattersley: May I ask the Leader of the House two specific questions? In the light of today's publication of the report by the Select Committee on Defence about the future of the royal dockyards which unanimously condemns the Ministry of Defence's approach to privatisation and the Ministry's failure properly to consult, may we be categorically promised an early debate and chat no action will be taken until the debate is held? Secondly, after the Sporting Events (Control of Alcohol, Etc.) Bill is passed—I hope that it will be and that my hon. Friends will ensure that it is—are we to hear no more about violence and safety at football grounds? Is it a fact that after the Prime Minister made the headlines in Downing street two months ago we are to be left simply with that wholly inadequate measure?
Mr. Biffen: Public order legislation has been promised for the next Session of Parliament and doubtless will feature prominently in our discussions then. We shall consider the right hon. Gentleman's first point through the usual channels.
Sir Anthony Grant: Has my right hon. Friend seen early-day motion 895?
[That this House believes that, in the interest of obtaining better value for money, local authorities should be required by law to submit to competitive tender a wider range of their functions and services.]
It stands in my name and those of no fewer than 191 of my colleagues. It seeks to compel feeble local authorities, in the interest of ratepayers, to submit their contracts to competitive tender. Although I accept that there may not be time to debate this matter before the House rises for the recess, can my right hon. Friend assure us that the Government have not lost their nerve on this issue, even if some local authorities have?
Mr. Biffen: My hon. Friend is a touch pessimistic in the sense that there are a number of opportunities during the week ahead when that matter might be debated. I shall certainly draw the attention of my right hon. Friend the Secretary of State for the Environment to that point.
Mr. A. J. Beith: Will the Secretary of State for Education and Science make a statement next week on the Prime Minister's proposal to reintroduce direct grant schools and student loans, or does the Secretary of State need more notice of these proposals, in which case he might prefer to make the statement after the recess? Why will the debate on Tuesday on the immigration changes be taken on a Government motion rather than on a prayer tabled by my colleagues? Are the Government so desperate to get their word in first?
Mr. Biffen: It is a sign of the seriousness that the Government attach to this matter that the subject will be debated on a Government motion. I am surprised that the hon. Gentleman finds anything extraordinary in that.
Of course I shall draw the attention of my right hon. Friend the Secretary of State for Education and Science to the hon. Gentleman's first point. I am sure that he will not have overlooked the fact that Tuesday is Question Time on education matters.
Sir Kenneth Lewis: Is my right hon. Friend aware that many Conservative Members support what my right hon. Friend the Prime Minister said about direct grant schools? It is extraordinary that the hon.

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Member for Berwick-upon-Tweed (Mr. Beith) had the nerve to raise that matter since it was the president of the SDP, when she was in the Labour party, who did away with those schools. If we cannot bring back direct grant schools, will the Cabinet realistically discuss some means of increasing the number of free places that are available in public schools and make all public schools give some free places to children who do not have the chances that I had as a boy when I went to grammar school?
Mr. Biffen: My hon. Friend has clearly shown that Parliament will have a lively debate on this topic, and dare I suggest that it might start on Tuesday.
Mr. James Molyneaux: Can the Leader of the House confirm that, following consultations through the usual channels, the Nursing Homes and Nursing Agencies (Northern Ireland) Order will not be moved tomorrow so that further discussions can take place?
Mr. Biffen: That is perfectly true. I am grateful for the representations that were made last week which gave rise to that change.
Mr. Ivan Lawrence: Is my right hon. Friend aware that I am grateful that the Water (Fluoridation) Bill was not included in the Government's timetable while I was in Moscow with the Select Committee on Foreign Affairs? This shows that the Government are open to further argument on the matter. Is the reason why that legislation is not included in next week's business the fact that the Government may be having second thoughts because Mrs. McColl has been granted full legal aid to go to the European Court of Human Rights and that the Government wisely consider that it is better to hear the results of the court's findings before jumping too quickly into legislation?
Mr. Biffen: While my hon. and learned Friend was getting a preliminary sense of Siberia, a number of Conservative Members made the most powerful representations to the Government to ensure that the legislation reached the statute book.
Mr. James Hamilton: Is the Leader of the House aware that all Scottish Back Benchers, with one exception, are very much concerned about the corporate plan for steel? Will he give the House a categorical assurance that no decision will be taken on the corporate plan until the House resumes after the summer recess? Will he assure us also that there will be no inspired leaks and that hon. Members will have all the rights in the world to discuss the corporate plan?
Mr. Biffen: I understand the hon. Gentleman's point and the importance of the decisions for Scotland that will be implied in the corporate plan. I shall ensure that his views are conveyed to my right hon. Friend the Secretary of State for Trade and Industry.
Sir Dudley Smith: In view of the anxieties that are being expressed by the Confederation of British Industry and other representative elements of industry about product liability and the directive which will probably be issued from Brussels in the near future, does not my right hon. Friend think that it is time that we had a debate about this matter because of its very wide ramifications?
Mr. Biffen: I wholly sympathise with my hon. Friend if he nodded during the litany that I announced for Monday's business, which includes precisely the debate that he seeks.
Mr. Dave Nellist: Given the generosity of young people, particularly last weekend at Wembley and in Philadelphia, is it not time that the Leader of the House arranged a debate to illuminate the hypocrisy of his Government, and in particular the hypocrisy of the Prime Minister who on Monday and Tuesday attempted to bask in the reflected glory of the actions of young people over the weekend and then on Wednesday turned on those same young people and removed those under the age of 21 from the protection of wages councils, as if lads and lasses in hairdressers earning £33·40 a week were responsible for the 5 million unemployed in this country?
Mr. Biffen: I always enjoy the contributions of the hon. Gentleman. They are a lively reminder that consensus, thank Heaven, will never reign here. The points that he has mentioned could well be raised either on the motion for the summer Adjournment, or on the Consolidated Fund Bill, or on the Adjournment debates. I wish him well in raising that point on any of those occasions.
Mr. Michael Latham: In preparing his speech for the Adjournment debate next Wednesday, will my right hon. Friend be asking the Departments concerned, particularly the Treasury, for all the reasons why between now and Wednesday there should be a further fall in interest rates?
Mr. Biffen: The last time I had to make this speech I took the precaution of not accepting briefs from any Government Department, and nobody noticed the difference.
Mr. Jeff Rooker: Will the Leader of the House seek to add to next Thursday's business on the uprating of social security benefits the latest report of the Public Accounts Committee on the system of paying benefits so that this House can reject early enough, to stop people from worrying, the idea that millions of pensioners should be bribed to stop using post offices to collect their pensions?
Mr. Biffen: It is not within my competence to judge whether it would be in order to make those points in next Thursday's debate, but the hon. Gentleman is probably skilled enough to try—and to try with success.
Mr. Nicholas Soames: While my right hon. Friend is casting around during the summer recess for matters to debate upon our return, will he consider providing Government time for a debate on small businesses and upon the many excellent moves that the Government have made to encourage them?
Mr. Biffen: I shall bear that request very much in mind, but it is not for me to say what will be the disposition of ministerial personnel in the autumn. I have no doubt, however, that in the light of the Queen's Speech there will be plenty of opportunities for my hon. Friend to make exactly the speech that he seeks to make.
Mr. Willie W. Hamilton: Following the question of the hon. Member for Cambridgeshire, South-West (Sir A. Grant) on an early-day motion urging the increased privatisation of local authority services,

481
since the hon. Gentleman is not obliged to declare his own financial interest in these matters, will the Leader of the House give urgent consideration to a debate in Government time on the recent report on the outside financial interests of hon. Members?
Mr. Biffen: Yes; that is a very fair request.
Mr. Eric Forth (Mid-Worcestershire): Will my right hon. Friend give an undertaking that no decisions will be taken or commitments made, particularly those of a constitutional nature, at any inter-governmental conference that may take place between now and the return of the House after the summer recess before the House is given the fullest possible opportunity to debate the proposals?
Mr. Biffen: The best that I can do is to refer my hon. Friend's request, for which I have a lively sympathy, to my right hon. and learned Friend the Foreign Secretary.
Mr. Eddie Loyden: Can the Leader of the House say what provision will be made for the recall of Parliament during the summer recess to deal with the problems facing certain local authorities—for example, Liverpool, Lambeth and Edinburgh? Is it not a fact that Parliament would have to be recalled to make a decision before anything could be done? Can he say what will be his intentions during the long summer recess to deal with this very important question?
Mr. Biffen: At this stage I am trying to get to the point where I can recommend to the House that it adjourns. Unless and until I have got that far I would not want to think about its premature recall.
Mr. Harry Greenway: Will my right hon. Friend say when we might expect to hear the Government's intentions in relation to the House of Lords amendments to the Education (Corporal Punishment) Bill? Will he bear in mind the widespread objection that there would be in the country to making that Bill an abolition Bill?
Mr. Biffen: That is still under consideration, and at this point I have nothing further to add.
Mr. Ron Brown: Bearing in mind that a poll organised by the Edinburgh Evening News—not a Socialist paper—indicated 65 per cent. support for the so-called rebel Labour council, will the Leader of the House arrange another debate next week so that the alliance especially may show its support for the Government? It is clear that locally the alliance supports the Tories. Will the Leader of the House ensure that democracy speaks and that the alliance explains its true position?
Mr. Biffen: Last night's debate on the affairs of Edinburgh was rather enjoyable, and things are never quite as good a second time round.
Mr. Richard Holt: My right hon. Friend will not be surprised if I return to the theme of law and order and say that throughout the country there will be great disappointment that once again there is not to be a full debate on the subject in the House of Commons, particularly in the light of the remarks this week of the Prime Minister and the Police Federation. Will my right hon. Friend accept that, whether he wants to debate it or not, it is probably the second most important subject that the people of Britain want to have debated in the House?
Mr. Biffen: I note what my hon. Friend says. I am sure that he, meanwhile, will be considering how best he can ensure that the matter comes before the House during the Consolidated Fund debate on Wednesday.
Mr. Tom Clarke: In view of the decision of the House of Representatives in the United States on South Africa, and South Africa's invasion of Botswana, can the House look forward to a debate on South Africa before the recess?
Mr. Biffen: Clearly there will be no debate in Government time, as is indicted by the programme of business that I have announced for next week. I accept at once the seriousness of the situation, but I am sure that it is a topic that will await us in the autumn.
Mr. Peter Bruinvels: Although the House is to be very busy next week, will my right hon. Friend give serious consideration to having a debate on the workings of the local DHSS branch offices in Leicester, which in the past week have been working to rule? Some of the civil servants and members of the Society of Civil and Public Servants have refused to handle my constituents' claims on the ground that the union is fighting to have no more overtime and no casuals allowed to help. Is not that a shocking situation? Should not my right hon. Friend provide time to protect my constituents who need to have their claims answered?
Mr. Biffen: My hon. Friend has outlined a thoroughly unsatisfactory situation. He may well find that there will be opportunities in the Adjournment debates, or in the debate on the Consolidated Fund, for the matter to be raised.
Mr. D. N. Campbell-Savours: In the light of the loss of the Unborn Children (Protection) Bill of the right hon. Member for South Down (Mr. Powell), will the Leader of the House, during the course of Cabinet meetings in the recess, impress upon his Cabinet colleagues the need to introduce a Bill based on Warnock, or some related measure, during the next Session of Parliament, and for its inclusion in the Queen's Speech?
Further, may we have a debate on genetic engineering in the first month of the next Session?
Mr. Biffen: I can give no undertaking to provide time for a debate on genetic engineering in Government time. The hon. Gentleman will appreciate that in no sense can I anticipate what might be in the Queen's Speech.
Mr. Edward Leigh: Has my right hon. Friend noticed that, on Tuesday afternoon, I shall be seeking leave to introduce the Local Government (Prevention of Political Corruption) Bill under the ten-minute rule procedure in the light of widespread abuse under sections 137 and 142 of the Local Government Act 1972 by Labour local authorities passing ratepayers' money to their political supporters and advertising pet political causes? If I am fortunate enough to be given leave to introduce my Bill, will my right hon. Friend give it Government time?
Mr. Biffen: It would be the denial of any prudent sense of optimism if I were to encourage my hon. Friend to think that he could do other than get a propaganda coup on Tuesday.
Mr. Tam Dalyell: Will there be a debate or a statement on the policy to withdraw the Hercules from Ethiopia?
Is the Leader of the House happy that there will apparently be no further statement on the Government's role in regard to Johnson Matthey Bankers? Does he think it satisfactory that Sir Patrick Sargeant and others can, on the radio, publicly cast the most serious aspersions by implication on the professional competence of the officials of the Bank of England? Does the right hon. Gentleman agree that some of us do not believe that Mr. Kit McMahon and others in the Bank of England did not at least consult officials before acting in regard to Johnson Matthey Bankers? May we be told when the Prime Minister and the Cabinet Secretary were warned from circles relative to the bullion market and the gold market that there was possible fraud in relation to Johnson Matthey Bankers?
Mr. Biffen: The hon. Gentleman raises issues that go very wide. In respect of Johnson Matthey Bankers, the matter might be ventilated on the Consolidated Fund debates and the Adjournment debates on Friday. As for the use of the Hercules for famine relief in Abyssinia, I shall refer the hon. Gentleman's points to my right hon. Friend the Minister for Overseas Development.
Mrs. Ann Clwyd: Will the Leader of the House ask the Secretary of State for Wales to make a statement next week about rising unemployment in Wales, especially as the National Coal Board has today announced the closure of yet another pit in my constituency? My constituency already has the highest male unemployment in Wales—28 per cent.—and it will now rise to 33 per cent. As Wales is continually being denied investment by the NCB, will the right hon, Gentleman ask the Secretary of State for Wales to say how he intends to increase employment prospects in Wales, especially in my constituency?
Mr. Biffen: Although I do not accept the implications of what the hon. Lady is arguing, I realise that the matter has a real constituency consequence and I shall most certainly pass on her request to my right hon. Friend the Secretary of State for Wales.
Mr. Jeremy Corbyn: Is the Leader of the House aware that, on 29 May, the Home Secretary imposed a visa restriction on all people wishing to leave the Commonwealth country of Sri Lanka to travel to Britain? Is he further aware that it is unprecedented for such an imposition to be made on a Commonwealth country? In answer to successive questions, the Leader of the House has given an undertaking that the matter will be debated before the summer recess and that it will be debated and voted upon at the same time as the immigration rules next Tuesday. May we have an assurance that this issue will come up next Tuesday and that there will be a separate discussion and vote on this aspect of Government attacks on people seeking refuge and asylum in Britain?
Mr. Biffen: The second item of business that I announced for Tuesday was the motion relating to the statement of changes in immigration rules, Cmnd. 9539. I am sure that the hon. Gentleman will be able to make his speech then.
Mr. Robert Parry: Will the Leader of the House ask the Prime Minister to visit
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Liverpool during the long recess to meet councillors, trade union leaders, the unemployed, the sick and pensioners to see what damage the Government's policies have done to the city? Will she do that before she agrees to a commissioner being sent in to Liverpool and the possible gaoling of elected councillors?
Mr. Biffen: As the request has been put to me, I shall of course pass it to my right hon. Friend.
Mr. Greville Janner: In view of the attacks made in the House on the devoted people who work in the understaffed offices of the DHSS in Leicester and elsewhere and who are sick to death of being blamed for their inability to serve the public, which is caused entirely by the Government's reduction in resources, when may we have a debate which will let it be known how deeply we deplore those attacks on such excellent public servants?
Mr. Biffen: I am sorry that the hon. and learned Gentleman, whom I have known all these years, should be so nettled by the advocacy of my hon. Friend the Member for Leicester, East (Mr. Bruinvels). I suggest that the hon. and learned Gentleman, no less than my hon. Friend, should look to the occasion of the Consolidated Fund.
Mr. Max Madden: Will the Leader of the House use his best endeavours to ensure that a statement is made next week on safety at sports grounds? Will he confirm or deny the fact that Mr. Justice Popplewell's interim report into the Bradford fire disaster is with the Home Secretary or will be within a few days? As that report may contain important lessons for football clubs throughout the country, does the right hon. Gentleman agree that it would be intolerable if we were to go into the recess without having an opportunity to put questions to the Government on that important matter?
Mr. Biffen: I recognise that there is a widespread desire that, if Mr. Justice Popplewell's interim report is available, the House should have a chance to hear a statement on it.
Mr. Robert N. Wareing: In view of the United States' continuing threat of aggression against Nicaragua and the participation by Right-wing extremists from this country, including the vice-chairman of the Federation of Conservative Students, who have gone on patrol with the Contra terrorists in that country, is it not about time that we had a full debate on the problems in Central America?
Mr. Biffen: I suspect that the Federation of Conservative Students frightens me much more than it frightens the Sandinistras. The hon. Gentleman's other request will of course be considered.
Dr. Norman A. Godman: Does the Leader of the House agree that Scottish Question Time should appear more frequently in the parliamentary timetable?
Mr. Biffen: However I answer that question I shall be crucified. It is a very ungenerous question to put in the closing days of the Session.

Consolidated Fund Bill and Summer Adjournment
3.57 pm
Mr. Speaker: I have a short statement to make about arrangements for the debate on the motion for the Adjournment which will follow the passing of the Consolidated Fund Bill on Wednesday 24 July.
Members should submit their subjects to my office not later than 9 am on Tuesday 23 July. A list showing the subjects and times will be published later that day. Normally the time allotted will not exceed one and a half hours, but I propose to exercise a discretion to allow one or two debates to continue for rather longer, up to a maximum of three hours.
Where identical or similar subjects have been entered by different Members whose names are drawn in the ballot, only the first name will be shown on the list. As some debates may not last the full time allotted to them, it is the responsibility of Members to keep in touch with developments if they are not to miss their turn.
In addition, I remind hon. Members that, on the motion for the Adjournment of the House on Friday 26 July, up to eight Members may raise, with Ministers, subjects of their own choice. Applications should reach my office by 10 pm on Monday next. A ballot will be held on Tuesday morning and the result made known as soon as possible thereafter.

Estimates Day
[4TH ALLOTTED DAY]—considered
Estimates Day
  ESTIMATES 1985–86
    Department of Trade and Industry

      CLASS IV, VOTE 4
      Motion made, and Question proposed,
      That a further sum not exceeding £39,501,000 be granted to Her Majesty out of the Consolidated fund to defray the charges which will come in course of payment during the year ending on 31st March 1986 for expenditure by the Department of Trade and Industry on export promotion, trade co-operation, regulation of trading practices and consumer protection, and other services including grants in aid and international subscriptions, and other grants.—[Mr. Channon.]
      Mr. Speaker: I remind the House that the debate should relate to United Kingdom trade with China following the approval by the House of the recommendations of the Liaison Committee.
      3.58 pm
      Mr. Kenneth Warren: I wish to speak on the motion on class IV, vote 4, because it is clear from the report which the Select Committee on Trade and Industry had the honour to present to Parliament on Monday of this week that we are worried about the adequacy of the vote and wish it to be examined during today's debate, and further examined by the Governirent in the light of the contributions that I am sure hon. Members on both sides of the House will wish to make.
      As Chairman of that Committee, I express my thanks to the hon. Members who helped in the preparation of the report, who were assiduous in carrying out the investigation and who conducted themselves extremely well during our visit to China to examine the problems and opportunities of trade with that country. I hope that it is not inopportune or out of order for me to say that the clerks and staff of the Committee performed an excellent task. Although they are not often praised in the House, may I also thank the printers, Greenaway Harrison Ltd., who not only last Friday produced a proof of the report, but had it on the desks of the Committee's members at 10 o'clock on Monday morning.
      We visited China as the guests of the financial and economic committee of the National People's Congress of the People's Republic of China, and had the honour of being met by Vice-Premier Li Peng. The embassy of the People's Republic in London and our embassy in Peking rendered tremendous service to us, and we wish to thank Sir Richard Evans and his staff, especially Mr. Charles Haswell, who accompanied the Committee on its tour. We also wish to thank Mr. Christian Adams and Mr. Andrew Seaton of the British Trade Commission in Hong Kong for the assistance that they gave us.
      The House may already have sensed from what I have said that the tone of our report is one of earnest desire, and the belief that it is possible to co-operate with the People's Republic, to the benefit of everyone in Britain, through advancing our trade. Our Committee is solution-oriented. The reports that we have published demonstrate that it is not problem-dominated. All our reports to the House—I

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      cannot promise that this will continue—have been unanimous and have sought to be constructive, but we have not hesitated, as Ministers from the Department of Trade and Industry will know, to confront them when we believed that such confrontation would be constructive.
      China is a buyer's market. It is also the last great untapped market in the world. It is a difficult market, and we praise British exporters for the quality of their products and the success that they have already achieved. However, if I tell the House that, if one travelled through China and saw 1 million people a week, it would take 20 years to see the entire population, hon. Members can gauge the size of the market, the country and, I hope, the opportunity.
      Most people talk about the high technology goods needed in countries such as China, but there are many opportunities for exporting what could be called low-technology goods. We could also export what I could call, without wishing to denigrate the value of the products, second-hand goods, because China is moving up the scale of economic development and needs many of the products and processes that were common in the west 10, 20 or 30 years ago.
      The Chinese market does not only present opportunities to export hardware. The Chinese need advice in accountancy, banking, insurance and international trading practices. They also need product support to meet the priorities that they have designated as the lead tasks of the next five-year plan, which will be launched in January 1986. Those tasks are designed to meet their needs in energy, transportation and communications.
      I must report that the position of our sales to China is less one of accomplishment than one of opportunity. Britain is a long way down the list of OECD countries that export to China. It supplies only about 3 per cent. of all exports to China, which compares badly with Japan and the United States, which together supply about two thirds of China's imported goods and services. We are outranked by Japan, whose exports are worth £4·5 billion a year, the United States at £2 billion a year, West Germany and Canada at £700 million a year each and Australia at £500 million a year. Britain's exports are worth only £300 million a year. The Committee believes—I am sure that this will be endorsed by other hon. Members—that Britain is not exploiting all the available opportunities. Whatever the Government can do to make such exploitation possible will not only benefit employment and profit in Britain, but will give pleasure to the Chinese Government who, after the signing of the Hong Kong agreement, wish to trade with us. I am sure that we could take advantage of that.
      Dr. Norman A. Godman: One of the most important industries in Scotland is the offshore oil and gas construction industry. That industry must be export-minded in its approach to further developments. Does the hon. Gentleman believe that enough is being done in China to persuade the Chinese to purchase such high-technology hardware from the United Kingdom?
      Mr. Warren: We discovered that, although a great deal is being done in all industries, it is not enough. When we met representatives of operators in the South China sea and in the Bohai sea, we discovered that in many cases the Chinese were eager for the most basic help, such as writing
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      specifications to determine the quality of goods that should be demanded of those who supply them. Bristow Helicopters is already there, and British Petroleum is already drilling. The expertise of BP in the Forties field is directly applicable to the opportunities that lie in the deeper waters to the south of China.
      During our visit to Canton, we met representatives and the general managers of the companies which, under the Chinese Government, are responsible for the exploitation of those oil reserves. Although no deal of significant commercial quality has yet been struck, British representatives still believe that they will be successful. I hope that the other members of the Committee will agree with me when I urge those who have that unusual expertise in deep-water oil exploration off the Scottish coast to get together with their Chinese colleagues. As the House knows, in offshore engineering, the ability to supply products and services immediately is paramount. No lead time is available. Companies must be there on the day that oil is struck. I value the hon. Gentleman's intervention and commend it to the House.
      The Select Committee members were not the only people to express the views set out in our report. I hope that the House will be glad to hear about a letter sent to me on 5 July 1985 by my right hon. Friend the Prime Minister, following the visit of the Chinese Premier to Britain. She said:
      "The Chinese Government share our view that the opportunities for expanding our trade and economic links have never been better. I believe the committee have chosen an opportune moment to investigate this important subject."
      As we travelled extensively throughout China, we were given shopping lists of Chinese requirements in every city and plant that we visited. Without doubt, the leadership of China has created eagerness and a dedication to economic growth at all levels of authority, and the wish to succeed is strong in the Chinese people. On a personal note, I should add that it was rare to come across people of such universally high intelligence in whom good sense is a common quality.
      Until recently, Chinese financial reserves were strong, but they have been spending quickly. However, it was evident from our discussions in China and from discussions held with our visitors when the Chinese Premier came to Britain that they are conscious that their rate of spend must be matched to their ability to replenish their resources.
      Recently, they have imposed certain constrictions on the way in which goods are handled for imports, but, on the other hand, they have opened up military facilities to make sure that waiting time does not attract a penalty in delivery for goods that have already been contracted. None of my hon. Friends will accuse me of being a sympathiser with Communism, but I sense that there was an economic pragmatism there in the best interests of the Chinese people in terms of what they were trying to do to develop their country.
      I was also impressed by the way in which young science and business technocrats of the post-cultural revolution generation are the allies of the old guard in economic development and take an active part in policy discussions. These youngsters are causing an interesting ratchet effect. They believe that forward is the only direction of motion after the experience of Maoism and the cultural revolution.
      The Hong Kong agreement is an important step forward. The Select Committee, having had the

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      opportunity to visit China and Hong Kong. knows that the Hong Kong agreement is regarded by the Chinese as a bridge of opportunity between our two countries that is not sensed as clearly on this side of the bridge, in Parliament and the country.
      The period of the next five-year plan starting in January 1986 gives us enormous trade penetration opportunities while it is being drafted over the next several months. In this plan, the Chinese will be accentuating the need for two-way trade, whereas we all tend to regard exports as being the prime opportunity. I hope that we can understand that, to import, the Chinese have to export. If we acknowledge this, we shall have made a gain over other nations that have ignored this. I have to say this rather quietly, lest others take note of what a humble Chairman of a Select Committee says.
      Without any qualification, I can say that the big United Kingdom firms such as British Aerospace, GEC and others in that league are establishing sound credibility that can enhance the opportunities for small firms, and the important factor is not only the totality of the contracts that go to them. From information that we have gleaned from them, probably only about one third of the total value of the contract goes to the prime contractor. Two thirds of the value will go to those down the chain of contract, most of whom will be small firms. Small firms should look at China through the eyes of their large suppliers and not give up the chance of selling in Hong Kong through reputable agents and straight into China the products and processes that they have available. In this connection I was disappointed to find how few manuals of goods and services representing the interests and capabilities of small firms were readily available either in China or Hong Kong.
      I declare an interest as an engineer, although not one connected with China. Looking through such eyes, I saw colossal problems in Chinese engineering firms, some of which were the fault of suppliers, although not British suppliers. The standard and quality of that which this country could provide and the knowledge that, in dealing with this country, the Chinese will get a straight deal that will carry them forward is something that we should put forward in our own determination through diplomatic, commercial and trade channels at every opportunity. We supply quality, and that is what people in China want.
      In getting what they want, the Chinese have to understand what is available. I have referred to those goods and services that can be made known through various normal trade communication channels. However, training and retraining in the United Kingdom of commercial, technical and particularly managing staff, sponsored by partnerships between the Government and state and private companies, is most important. This would be a cost-effective method to promote trade.
      I have already given a long list of favourable comments about trade with China, and, to be constructive, I would be failing in my duty if I did not also make some unfavourable comments. It is obvious that there must be uncertainty about the future of society in China. There have been political upheavals over a number of years, but the present stability seems better than that which existed when I visited the country four years ago. Substantial progress has been made, and I had a welcome shock at the way in which ordinary Chinese people have been able to make progress in their personal lives.
      Market penetration is enormously difficult, slow and expensive. Just about every representative of a major
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      company to whom we talked in Peking told us that it cost them £50,000 a year to keep just one person there, excluding the salary. It is obvious that, as it is a Communist state, purchasing machinery is politically based, and, naturally, there are tensions between state and political authorities over industrial objectives. They arise from the fact that central Government have decided that they will sub-contract responsibility down the chain to the provinces, with the results that one might expect.
      When one exports to China, one is faced—this is no reflection on the Chinese—with the fact that their purchasing skills are poor. A hard deal is not necessarily in the best interest of the buyer any more than it is necessarily in the worst interests of the supplier. It is always important that one should, within the limits of language and definition, have a deal that is happy on both sides. I hope that the Chinese can move forward to promote sensible customer-supplier relationships, to their benefit as well as the benefit of those whom we are supplying.
      I have already, in reply to an intervention by the hon. Member for Greenock and Port Glasgow (Dr. Godman), drawn attention to the fact that a substantial upgrading is required in Chinese systems of specifications and a knowledge of how quality assurance can operate, as opposed to what is called quality control. It is important that they understand the technology of quality assurance, which is practised in the Western world and which they are eager to obtain. That is an opening for British companies that can export such knowledge, and an opportunity for small companies at that.
      The British Executive Service Overseas—BESO—has some retired, or supposedly retired, managers and engineers who rendered an enormous service to the rest of the world and have already proved themselves in China. I have found out from it that in one year the voluntary retired managers and engineers, a part of BESO that is jointly funded by Government and management, has received a request for specialist advice from the Chinese for chemical, steel, vehicle, ceramic, electronic and light manufacturing industries specifically linked by the Chinese to their re-equipment needs.
      BESO has already completed some 12 assignments, which have yielded new contacts with potential British suppliers. It stresses the fact, and I endorse it, that contact and communication, however achieved, are keys to the trading expansion in the China market.
      I must give a personal impression of Hong Kong, which I am sure will not be supported by other members of the Committee. I was surprised at it because I had had the opportunity to visit Hong Kong on a number of previous occasions. When I sat down opposite representatives of the Hong Kong Government, I rather felt as though I were facing not my allies but a foreign Government. With 1997 only 12 years away—I say only 12 years because when one looks back 12 years one realises how short 12 years can be—there was not the coming together of purpose that must develop between the British and Hong Kong Governments as the identity of interest becomes coincidental. The Chinese Government are both a Government of an independent territory and a partner Government in a joint agreement with us. I am aware of the high standards and good practices of those who participate in the Government of Hong Kong, and we were delighted that they were so helpful to us. I hope that my personal comment will be seen to be constructive. The

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      Hong Kong Government may not have recognised their responsibility for the promotion of United Kingdom exports, but I hope that they will as we approach 1997. The Hong Kong agreement, seen from China, and as it should be seen from the United Kingdom, may not appear in the same light from Hong Kong, but I hope that the vision will shortly become the same for all three.
      The Chinese certainly expect our Government to act vigorously as a constant partner in United Kingdom enterprises selling into China. The Chinese leadership is inexperienced in world trade practices. That is not a critical but a constructive comment. They certainly gauge the credibility of a foreign trader by their standards, and they study how the trader's Government help him to promote his products. The Select Committee has said without qualification that the visible and practical partnership rationale, including soft loans, should and must be a facet of growing importance.
      Other hon. Members wish to speak, and they will no doubt enlarge on the 12 recommendations submitted in our report.
      Mr. Bowen Wells: From which budget does my hon. Friend see additional soft loans being made available? Is he thinking of the Overseas Development Administration budget, aid and trade provision assistance or some other source?
      Mr. Warren: It is always nice when an hon. Friend reminds me of what I should say. I was about to come to that point, which is difficult to answer. Rather than decide from which budget the additional loans should come, all available Government resources, whether from the Export Credits Guarantee Department, ATP provision or whatever, should be considered together as total assistance. The various sources should not be presented as an obstacle course to British exporters. At present traders must often look into the ECGD or argue a case for a soft loan. We welcome the Government's recent announcement that soft loans will be granted to Indonesia, and we hope that that is merely the litmus test to prove that they work. One cannot ignore the way in which competitors and their Governments support their exports. There is no point in saying that that cannot be done, because it must be done, and we must get on with it without hesitation.
      I must be daring and criticise my Government because I am a Select Committee Chairman. The Select Committee was dismayed at the statement on 10 July from the Department of Trade and Industry. Paragraph 3, dealing wih soft loans, states:
      "Officials are discussing with the financial community what mechanism might be devised for providing soft loans. It will be some time before these arrangements can be finalised."
      There is no time. That must be done now. I ask my right hon. Friend the Minister for Trade to tackle the problem without hesitation, and to respond to that challenge today.
      Mr. Tam Dalyell: During his interesting visit, did the hon. Gentleman hear about the work of the overseas projects board? Some hon. Members believe that the United Kingdom should give much more help to our overseas projects, considering what other countries are doing.
      Mr. Warren: The hon. Gentleman refers to the point that I was making. The total available resources should be considered together rather than separately.
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      In the report's conclusions we stated the need for a positive commitment by United Kingdom companies, if they are to enjoy a share in the growth of the Chinese market. It is easy to pontificate, and I must declare an interest in that in the past I had a great opportunity, and much misery, in trying to export overseas. A previous Prime Minister said that exporting was fun, but the only fun that I found was when I succeeded, and that was less often than I failed. A long-term commitment towards China is needed. The Chinese like working with people whom they know. I recommend that British companies hang in there. Success will undoubtedly come when the Chinese become used to working with them and know about them.
      It is essential that British companies send appropriate executives. The eager salesman will not do. They must send the sales director to China so that he may be given the appropriate introductions in China. Chinese business can be enhanced through a partnership with British business men. They should tour the various symposia which are organised, especially by the provinces in China. We visited Sichuan province, which has a population twice the size of that of the United Kingdom. I am fond of making the analogy that an increase of only 2 per cent. in the telephone lines in China would be equivalent to the whole of British Telecom. The opportunities are enormous and we should not merely consider the opportunities in the capital, the coastal cities or special economic zones.
      The Government have a stronger duty than they may be seen to perform at present to collect intelligence information, as the Americans do. They have a stronger duty to fight to prevent people from stopping COCOM from exporting products which have no military significance to China. I am extremely worried at the rumours about substantial American computer companies engaging in sales drives in China. We fear that soon they will say that the items can be sold, and they will tell COCOM that they can be sold. By then we shall have been outflanked, and will be without a chance of bidding for the contracts, some of which are said to be worth $800 million.
      COCOM is a voluntary organisation, which has no legality. It operates a sound principle of standing up against the dangers of exporting to Warsaw pact countries, but there can be no rationale for refusing to export commercial standard micro-electronic circuits, which can never be used in military applications, to China.
      We recommend an increase in staffing and in the quality of staff available at our embassy in Peking, our consulate in Shanghai, and our representation in Hong Kong, which covers much of south China. Government support should follow trade opportunities. To look at the size of China through the eyes of the Treasury may be a myopia which cannot be tolerated by British exporters. The Government must recognise the opportunities and the rewards that can come from backing our exporters with the support and services that only they can provide, and that the Chinese expect to be available to our exporters.
      One is amazed at the volume of work that our people in China carry out to support our Government. If the Government, even a non-interventionist Government, choose to play the part of entrepreneur, they must be the entrepreneur and not stint themselves. If ECGD cannot back projects exporting to China, Turkey or anywhere where somebody wants to give a company a contract, I hope that the Government will look at the market, go to

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      the City and encourage merchant bankers who, I understand, are eager to have the opportunity to get in there and support the export credit guarantee business.
      It is my belief that Her Majesty's Government can and must provide accelerators of opportunity. The British Overseas Trade Board is a good organisation which deserves more support. The Export Credits Guarantee Department, which we examined in detail, is also a good organisation that deserves more support. The Overseas Development Administration and all the other agencies are working effectively. One could criticise them in some detail, but we should like them to be seen collectively and to be assured that they have the support of the whole of Her Majesty's Government. I have referred to soft loans. I merely reinforce my request that they should be acted on as an opportunity without which British exporters will lose out in the short term, and riot just the day after tomorrow.
      The United Kingdom is a great commercial nation. We are innovative and constructive. None of us is other than eager to prove our capability in competition and our competitiveness in price, quality and delivery. That we have made known to the Chinese. They would welcome a further demonstration of it not only through the products that they have already contracted but through further bids. They are well aware of our capabilities and eager to work with us.
      I should like to place a challenge before Her Majesty's Government to respond equally, to play the part that they must play to represent our commercial strength without qualification or hesitation but with favour to all those who now take their exporting talents into the new world of opportunity that China offers us, a world where we can gain in employment and mutual profit, and above all where we can gain in peace between two nations that want to live together.
      4.31 pm
      Mr. Stan Crowther: I am happy to follow the hon. Member for Hastings and Rye (Mr. Warren). It may be appropriate for me to take this opportunity, despite our obvious political differences, to pay tribute to his excellent work as Chairman of the Committee.
      It has been obvious for a long time that British manufacturers suffer from a variety of disadvantages compared with competitors in most developed countries. Like other hon. Members, I have drawn attention to them many times in the Chamber. For example, despite certain recent changes, energy costs are still a disadvantage to British manufacturers. Again, despite recent changes in the rate between sterling and the dollar, exchange rates are still creating problems. Many industrialists assure me that the pound sterling is still grossly overvalued against European currencies, and it is in Europe that our main competitors are based. Interest rates are also an intolerable burden on British industry.
      However, even if the British manufacturer can overcome all those obstacles, he is still up against the fact that the British Government do not provide him with the backing in the export market that most other Governments provide for their exporters. That is the essence of the debate.
      I get worried about the extent to which the British Government take the holier-than-thou attitude—that we must never step one inch outside the rules of international trade, whatever others may do. I am not urging the
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      Government to go around the world breaking the rules, but I wish that they were as expert at bending the rules as others. That is all that I ask. If we compare the attitude not only of this Government but of others over the years with that of the French, German, Japanese and American Governments, we find that we are always the righteous ones. The others do not care very much. If they can get away with it, they will break any rule in the book, to the enormous advantage of their industries. That matter should be seriously considered. I make that point not only in relation to China, but in general, although I appreciate that the debate is particularly about trade with China.
      The Government should be very worried about the fact that West Germany is exporting almost three times as much to China as we are. If the Government are not worried about that, they should be. If they are, I hope to hear from the Minister what they propose to do about it.
      During the detailed inquiry carried out by the Select Committee, we learnt about the immense opportunities for increased trade with China. I do not wish to repeat what was said by the hon. Member for Hastings and Rye in his excellent speech, but I agree with almost everything that he said.
      Certain things need to be done. We made a series of recommendations in our report on which I hope action will be taken. I should like to quote just one example of the sort of potential that there is in China. The Committee was stranded for a day in Dalian in north China. It is a huge industrial city with a population of 4·5 million. We were stuck there simply because a bit of mist came down on the airport. It was nothing serious, but it meant that flying was suspended because there are no radar installations in the airport. I do not know whether the General Electric Company, Marconi or other British companies in that business, which are already established in China, have noticed that. If they have, I do riot know whether they have tried to do anything about it. Most important—I do not know this, either—if those companies have tried to do something about it, have they been stopped by the COCOM restrictions? That is the most worrying feature. On the wildest stretch of imagination, no one could pretend that putting radar into Dalian airport could present a military threat to Great Britain. To suggest such a thing would he ludicrous. That is an example of the sort of thing that is now worrying me about our failure so far to take advantage of the opportunities that are there.
      Mr. Dalyell: I should like to reinforce my hon. Friend's important point. My constituents at Hewlett Packard, which supplies precisely such communications equipment, are extremely worried about that, and the chairman of the company, Mr. David Baldwin, has brought the matter to the attention of the Department.
      Mr. Crowther: I am grateful to my hon. Friend for his comment. No doubt he will have noticed our recommendation on that point in the report.
      One area in which China is most anxious to develop is railway transport. There are tremendous opportunities for British industry. After all, Britain used to be the world leader in the manufacture of locomotives and other railway rolling stock. It is not an awful long time since the railway and ring rolled products department of the British Steel Corporation in my constituency had a substantial export market. Regrettably, it has contracted now; but here is a tremendous opportunity for increasing exports in a big way.

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      I should like to know what plans British locomotive manufacturers are making in conjunction with the Government to break into and take a big slice of the Chinese market. If they are not making such plans, they should be. If the Government are not helping them to make such plans, they ought to be. The essence of what I am saying is that there should be partnership between the Government and industry, because on that basis we can succeed. Industry cannot go out on a limb without backing from the Government and expect to succeed, because it is up against the far more effective operations of foreign Governments who look after their industries much better than we look after ours.
      I hope I am wrong, but my impression is that Ministers do not know and do not care very much about this great potential market. I see little evidence so far that they have taken it seriously. Indeed, I see evidence that they are not taking it seriously. An example of that is the reduction in the resources available to the British Overseas Trade Board. That has caused concern to many British manufacturers, not only in relation to trade with China, but in other connections.
      The British Materials Export Group has expressed serious concern about the reductions in BOTB resources. A flat rate has been set for the next three years, but in practice that means a cut over that period. The view of the BMEG is that overseas trade fairs are the most effective means of supporting small and medium-sized firms in new markets. We heard evidence in the Committee that resources for overseas trade fairs have been reduced and, as the BMEG points out, it is small and medium-sized firms which benefit most from this kind of activity; they are supposed to be the firms that the Government are most anxious to support.
      In a written question on 24 June 1985 I queried the action of BOTB in withdrawing from the Interbuild exhibition in Birmingham. That is an important exhibition for people in the building materials industry, and the organisers were hoping for a substantial inward mission of buyers from all over the world, including China. Our overseas posts were led to believe by the BOTB, right up to the end of March, that BOTB resources would be available to help finance this inward mission to the Interbuild exhibition. But at the last minute the board said, "Sorry, we have no money."
      The written answer which I received from the Minister assured me that the decision not to provide British Overseas Trade Board support for the inward mission to Interbuild '85 was based not on eligibility but on the availability of funds. That is precisely the opposite direction to that in which we ought to be going. We should be putting more resources into this kind of promotion. I am afraid that unless there is a substantial change in the Government's attitude towards organisations like the BOTB, all the reports of Select Committees are going to be a waste of time.
      What is going to be done about the size of our embassy staff in Peking? All the members of the Select Committee were alarmed to find that only five people were employed in the commercial section of the embassy. China is the biggest country in the world and it has an enormous potential market. I entirely support the hon. Member for Hastings and Rye in his praise of the staff. They are excellent people, but there are too few of them. As a
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      result, they are not able to get around that huge country to look for opportunities for British business. They sit in Peking, mostly on routine 'work. We made a recommendation about that in the report, and I hope the Government will take it seriously.
      What is the Government going to do to increase the number of Chinese students in British universities? I read in the "British Council News" in June about evidence given by the director-general of the British Council to the Foreign Affairs Select Committee. He was drawing attention to the fact that there are 10,000 overseas students in Japan, and that by the end of the century it is planned to have 100,000, most of them from south-east Asia. I am sure that many of them will also be from China.
      We ought to pay more attention to the long-term benefits of having overseas students in our universities. The Committee drew attention to that in a previous inquiry in connection with the ASEAN countries. There is not the slightest doubt that a student who has had the benefit of attending a British university and who then returns to his own country, which may be China. Indonesia, Malaysia or wherever, is likely, when he attains a decision-making position, to be influenced in favour of the country where he received his advanced education.
      Dr. Godman: I support everything my hon. Friend has said on the need to attract Chinese students to our universities. The obverse side of that coin is: how many British students are studying Chinese in our universities? How many of the members of our embassy in China are Chinese speakers? One of the most formidable barriers to the export of knowledge, which was mentioned by the Chairman of the Committee, the hon. Member for Hastings and Rye (Mr. Warren), is language. How many of our people in China are fluent in Chinese?
      Mr. Crowther: I appreciate my hon. Friend's point. There are many Chinese speakers in the embassy. As to the other part of his question about the extent to which people in Britain are learning Chinese prior to going to seek trade in China, I cannot answer that. However, it is an extremely important question and I hope we can find the answer to it.
      It has been said many times in this House that Britain, once the workshop of the world, is now, for the first time in its history, importing more manufactured goods than it exports. It was made clear to the Committee during a previous inquiry on trade with the EEC that that fact does not worry the Secretary of State, but it certainly worries many people. It worried the Committee and it certainly worries me. It worries people who take a responsible view about the future of this country. I am one of those old-fashioned folk who believe that manufacturing is at the heart of wealth creation. As we have established, there are enormous opportunities for British manufacturers to play a crucial role in the development of the Chinese economy, and that would be to the great benefit of both nations. If the Government fail to give British industry all the support they can in every possible way, the Government will not only have missed a great opportunity, but seriously neglected the national interest.
      4.49 pm
      Sir Peter Emery: The first two speakers in this debate so far and the report illustrate the considerable help that the fairly new structure of Select Committees can

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      be in highlighting certain factors, not only for the House but for the country as a whole. The real benefit is that we were able to investigate with and talk to manufacturers and exporters in Britain. In China we were able to see what is being achieved and how, I am afraid to say, some things are not being achieved. We were then able to analyse why that is so, and investigate what can be done to improve the situation. Therefore, if ever there was proof of the usefulness of Select Committees, this report is it.
      The greatest opportunity for British industry to expand its exports massively lies on the mainland of China, and I am sorry that British industry is not taking up the challenge. It is not often that a nation is given an opportunity such as that now available to Britain. I say that because, before the settlement in Hong Kong, Britain was, if not the least favoured nation, quite a long way down the league table in trade with China. But, since the Hong Kong settlement, the opportunities are greater than ever before. The reason lies not only in what Britain has to provide. Another factor is involved. The Chinese Government, having escaped from the Red revolution and having had many of the tenets of Marxist Communism questioned, are considering the trading aspects of a Socialist economy. The Chinese have seen the problems caused by Russian imports into their industry, and they do not want to see America and Japan taking the place of Russia as a dominant factor in their industry. For that reason, they are more than welcoming to Britain and to British industry. We now have a honeymoon period of perhaps 18 months or two years in which that will remain the position. If we do not grasp the opportunity with both hands, we shall be extremely foolish.
      I reinforce the views expressed both by my hon. Friend the Member for Hastings and Rye (Mr. Warren) and by the hon. Member for Rotherham (Mr. Crowther). There are three factors that British industry has to understand fully if it is to gain Chinese business. The first is the importance of the financial package attached to any business that they propose. The second is the technological input of that business. The third is the training that that business can bring.
      There is no doubt in my mind that Britain has suffered because the Chinese have not thought that the British Government were really keen on doing business with them. Britain is the only major country to have done nothing to provide any soft lending to the Chinese Government. Finland, Denmark and Italy all provide soft funding arrangements to encourage business. Those arrangements are tied to industrial expansion in their countries. Yet the British Government have done nothing. The criticism from the Chinese is understandable. Whether it be with Government funds or whether it is done with some of the International Development Association and International Bank for Reconstruction and Development lending that is available and much of which has not been taken up, the Government could take a lead in trying to ensure that British firms were encouraged to trade overseas.
      The second factor that will benefit any company trying to do business with China is to show that it is willing to share with the Chinese the technology that it is bringing into China. The criticism that I heard again and again was that the Chinese told this to the Japanese and American companies, but that they did nothing. We must show that we are willing to share that technology—I am talking not about the highest-tech defence equipment but about
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      medium and moderate technology which we have had for many years and which the Chinese will get in six or 10 years regardless of whether we help them. Why should not we help them and gain the industrial benefit?
      It is obvious that we could take a lead in this way from some of our competitors, and I urge that it should go hand in hand with training. When we talk about exporting to China, we want to tie into the package the willingness of the exporter to take Chinese people and train them in marketing, in the technologies of the industry and in project management—a subject which they are still coming to understand. We should be offering the Chinese a degree of co-operation that they have not seen from many of the other firms trying to do business with them.
      That ties in with the excellent contribution by the hon. Member for Rotherham about the need to ensure that we encourage Chinese students to come here. Nothing would please our universities more than to be given a little assistance from the Government so that this might be done.
      I believe that the Government should be doing more, and I draw the attention of the Minister for Trade to an amendment proposed in the Committee but unfortunately not carried. It contains a considerable amount of sense because it underlines that aid ought to be tied to the business that we can obtain in China, especially in the next two years. If the Department of Trade and Industry cannot win the battle with the Treasury—it is not the DTI's wish not to get the money; the opposition is from what is frequently described as "the damned Treasury"—it may be that in conjunction with the Foreign and Commonwealth Office, even if the Committee's strong recommendations cannot be accepted, an expansion in aid to China could be made by the Government reallocating existing funds even if, for the next two years, it is done at the expense of the Commonwealth. I know that that will not be a popular suggestion, but we need to increase the aid that we give if we are to see the increase in industrial strength and the creation of wealth which will in turn enable yet more aid to be given. If we have not got that industrial strength, the amount of aid will decline. I have always believed in the advantages of tying aid to business.
      British industry must realise the difficulties in its way. Reference has been made already to the language problem. In addition, the distance is considerable. Account must also be taken of the cost of living and maintenance in China. What is more, doing business in China is not simply a matter of getting hold of a potential customer and agreeing on a deal. One has to realise that central planning ministries have major importance. Further, the deal must be understood and accepted by the Treasury or the Finance Ministry. One has to realise that the deal must be acceptable to the Ministry with responsibility for the industry in question, and then one has to deal with the firm or organisation. That is why there is a time factor, and why many people have gone to China not understanding these problems and have come away disappointed. That is why it is important that we should spell out in the report exactly what has to be done.
      However, I believe that the benefits are considerable. I believe that there is a special encouragement that the Chinese Government will be wanting to give to Britain in the next two years. They will riot give us anything—let us not believe that. It has to be a proper business deal. But I believe that, while in the past we have not been able to obtain the business, in future we will be able to do so.

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      I refer now to something which has not been mentioned so far in the debate, the aspect of joint ventures in China, which I believe the Chinese Government are very keen to stimulate involving the development of British industry' in China. I am not saying that we will be there for ever. I believe that, like most countries, in time the Chinese will want to take control of the totality of that joint venture, but if that joint venture is for a 10-year period or an 8-year period it ought to be a considerable benefit to Britain and, if properly structured, a considerable benefit to the firms that enter into it.
      With regard to the great advantages and benefits that we have, we have Hong Kong business, which is already structured within Red China. I was amazed to find that some members of the National People's Congress of Red China had a visiting card giving the full title of a member of the People's Congress and another card which was the business card of a Hong Kong business man. Indeed, they were only too delighted to encourage one to come and see them and use their facilities for trying to do business in China. We have great friends in Hong Kong who are crying out to assist British business in parallel with their own expansion. But there is so much more that British business can do. Let us please realise the benefits that Hong Kong could provide as a permanent feature, enabling business to be carried on. That would help overcome some of the financial difficulties that people resident in the region experience in keeping full-time staff.
      I believe that there is one factor that is an innovation. It is an innovation I welcome, and which should be trumpeted fairly hard. The Select Committee has decided to produce a guide, a small pamphlet. It will set out not the whole of the report but, as guidance for any person who wishes to consider doing business in China, the pitfalls, the advantages and many of the points which have been, and I know will continue to be, made in speeches in the debate.
      I end as I began. The report is an illustration of what the Select Committees can do. We are innovating by producing direct assistance, as a Select Committee in the name of the House, enabling British business to achieve more exports. China is an area of great possibilities for expansion.
      5.3 pm
      Mr. James Wallace: As the first Member to speak in the debate who is not a member of the Select Committee, I wish, I am sure on behalf of other Members not on the Committee to thank the Chairman and the members for this valuable report and to welcome the opportunity to debate it.
      It has already been said that considerable importance must be attached to future trade with China, particularly because of its large market. I share the view of the hon. Member for Rotherham (Mr. Crowther) that it is a matter for concern, not complacency, that we are dipping into deficit on the balance of trade of manufactured goods. Because of the size of the population of China, there are clearly considerable opportunities.
      I was a member of the all-party group which visited Japan in February this year. It was clear to us that Japan has recognised the potential of the Chinese market and is making every endeavour to take advantage of all the opportunities it offers.
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      We now have further opportunities because of China's open-door policy. We have reached an agreement with the Chinese Government on Hong Kong. As the hon. Member for Honiton (Sir P. Emery) said, our relationship with Hong Kong gives us particular advantages in being there on the doorstep, and we should take advantage of the settlement on Hong Kong.
      There are particular opportunities for exports in high technology. China is in the process of modernisation. It is seeking to expand its telecommunications network. As has already been mentioned, it is developing its energy resources. The hon. Member for Greenock and Port Glasgow (Dr. Godman) referred to our potential, as a country that has already developed offshore oil resources, to export some of our offshore technology to China. When one considers the advantages Norway has taken from developing its offshore techniques. I sometimes regret that British industry has not latched on in the same way. None the less, there are still opportunities at home and, given the development of these technologies, for export to a very important market in China.
      While there are obvious advantages and opportunities, there are also problems, some of which have already been mentioned. There is the basic problem of distance. There is also the question of culture—an oriental culture and a culture of a system based on centralised planning. The effort and time taken in achieving export orders in China will be much greater, for example, than is the case in trading relationships with our partners in the European Community. Nevertheless, I believe time and effort will be well spent. There is a tradition in the Chinese culture that, if a relationship of trust and good faith is built up and established, and a market developed over the years, they will be loyal to the products, if we give them high quality products.
      The problem of language has been referred to. That is probably even more of a problem as one gets into the provinces of China and away from the main city centres. Japan clearly has certain advantages over us because of its proximity, and because it does not have quite the same language difficulties. The United States has certain advantages because it has within it second generation Chinese who perhaps fled from China but who are now going back with a knowledge of the culture and of the language. We can perhaps overcome some of our disadvantages by encouraging Chinese students to come and study in our universities. I think that that is one of the most effective ways in which we can promote trade in the longer term, as well as encouraging some of our students to learn Mandarin and Cantonese.
      I do not want to overestimate the problem of language, but I discovered on my visit to Japan, and it may well be the same in China, that while in our embassy in Tokyo we have people who are very skilled linguists—and it is appreciated by the Japanese that those people have taken the time and effort to learn the language—they do not always have great commercial expertise. A lot more can be done to ensure that in the embassies, in particular in Beijing, our representatives not only are skilled in languages but also have a certain commercial nous.
      The Select Committee report mentions the problems of exporting high technology, with particular reference to COCOM. There is no legal basis for COCOM and no treaty has been ratified by the House. Indeed, I do not think that COCOM's functions have ever been debated in the House. I have no doubt that there is merit in keeping

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      from our potential enemies in the Eastern bloc information that is important to our security. However, the worth of an organisation such as COCOM must be called into question if it is abused by other countries. As the hon. Member for Rotherham said, we always stick to the letter of the law, but other countries manage to bend it. Sir Peter Matthews told the Select Committee:
      "The goalposts get moved from time to time and they are usually moved by the Americans at strategic moments when they are just about to score a goal in the new position."
      The first four annual reports of the export administration division of the United States commerce department showed that licences issued for computers and semi-conductor manufacturing equipment and electric test equipment between 1981 and 1983 resulted in substantial exports from the Unted States to China, totalling $98 million in 1980, $117 million in 1981 and rising to $143 million in 1983.
      We should investigate whether the United States has been trying to get round the COCOM rules to establish a market in China at a time when pressure was being put on British-based companies, such as ICL, not to export. The American figures do not show the multi-million dollar deals done by American companies on the very day in 1983 when the Reagan Administration announced a significant relaxation in what they were prepared to allow to be exported to China. That included one deal of $800 million.
      My hon. Friend the Member for Yeovil (Mr. Ashdown), who has looked into the matter in detail, has established that the Foreign Office was not advised of that relaxation and did not know about it until April 1984. The House is entitled to ask why the Foreign Office did not know and what liaison exists with the Americans, with whom we are supposed to enjoy a special relationship, and between the Department of Trade and Industry and the Foreign Office. Our exporters have been blocked, whilst last year IBM took four floors in the biggest hotel in Beijing for two months to offer a full range of IBM machines to the Chinese Government and officials. That is scarcely fair competition.
      The House will be interested to hear from the Minister for Trade how the Government view the COCOM arrangements. Will he explain what has been happening in trade with China over the past three or four years? Why does the United States always get away with it, at the expense of our industries? Can the Minister confirm that the COCOM agreement is to be extended to cover software, in which we have particular expertise, and thereby further hinder the development of our export opportunities?
      I welcome the Select Committee's recommendation that there should be a liberalisation of COCOM rules for trade with China. It is important that the Government ease trade relations with China, particularly for trade in high technology, but they must take other action, including the provision of soft loans and assistance to enable our industry to seize the opportunities that are open to us.
      Even a Government committed to the free market must realise that in trying to build up trade relations with China we are not dealing with a free market. The aid and assistance given by our Government must be commensurate with the size of the opportunities open to our exporters.
      5.14 pm
      Mr. Richard Page: A much more illustrious public speaker than I—which includes most public speakers—said that if one wanted to get a message over, one had to be like a hit record and keep repeating the theme time and again.
      I am more than willing to follow up the theme that I developed in an Adjournment debate in the early hours of 1 April when I stressed that there had to be greater support for British exporters if we were to stay in the world of the manufacturer and provide jobs for our people.
      I welcome the opportunity to re-emphasise some of the points made in that debate, and I endorse the thanks given to the Select Committee for its report, which will be a valuable talking point and shows the direction that we should follow.
      In the world of exporting, we take about 8 per cent. of the market, but we take only 1 per cent. of the Chinese market. As my hon. Friend the Member for Honiton (Sir P. Emery) said, we are not taking advantage of the tremendous opportunities that are open to us. We have recently gone into surplus with our trade with China, but the opportunities still stretch ahead of us and could provide us with almost an El Dorado if we make the necessary efforts.
      We must be careful and clever in going into the Chinese market. My hon. Friend the Member for Hastings and Rye (Mr. Warren) said that the Chinese had poor purchasing skills. They have already spent up to the hilt in their 1985 budgets and they will have problems providing any more orders for the rest of the year. We know that there is a five-year plan in China. Only the companies that get in early in the game will get the contracts. Those that hang around or come in late and those whose Governments do not support them early enough will lose out.
      I welcome the provision of the £39 million in the Estimates, but I doubt whether it will be adequate to tackle the whole Chinese market. Over the past few years, the Japanese have put £3 billion into that market The Japanese are good at exporting. They have taught us one or two lessons and we should be wise to take the hint from them.
      We do not realise the problems and the competition confronting us. Recipient countries are demanding that a support mechanism, such as soft loans, should be put up front when the tender is submitted. I understand that the Indonesians have passed a decree that no company can pre-qualify for tendering without agreeing to 25-year loan terms, grace periods and certain interest rates. I understand that China is making demands for similar terms. I have some evidence that the Japanese are offering 30-year loan terms, seven-year grace periods and 2·7 per cent. interest rates. We must stop trying to match those offers and initiate offers ourselves if we are to get the contracts.
      Efforts have been made in the City to produce a private financial package. I welcome those efforts with all my heart, but whatever financial mechanisms are developed for soft loans, I doubt whether private sector arrangements will be enough.
      If we are to make a worthwhile impact in China, it will cost us about £50 million annually. The Select Committee has recommended that funds should be increased so that resources for China are not diverted from other markets.

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      We have to retain a world presence as well as taking the opportunities in China. That implies that we cannot eat into the aid and trade provision of £66 million.
      I emphasise what I said in my Adjournment debate. We must increase the flexibility of the aid and trade provision. It must roll on from year to year. and we must end the rigid divisions between sectors. We must not lose contracts because of various quirks of timing.
      The Select Committee pointed out the value of establishing a presence in the Chinese market. It said:
      "there can be longer term advantages of establishing UK exporters in a growing Chinese market, where the repeat orders can make the loss leading worthwhile."
      The value of additionality is not always fully taken into account when the Treasury does its tight and careful calculations.
      The role of the British Overseas Trade Board in world markets has been mentioned. A striking fact is that the bulk of our overseas trade is in the hands of major corporations, but 80 per cent. of the users of the BOTB services are firms with fewer than 200 employees. The majority of contacts by the BOTB in 1984 were with small firms, which took advantage of the springboard offer to bring them into the export market.
      We must make small profitable firms producing quality goods aware of the export opportunities and the services available. Too often when Ministers attend business functions they are told by small firm owners that they know nothing about the BOTB or about moving into the export market. In the next few years we must plan a modest increase in the BOTB's budget of £27 million a year to ensure that small companies are aware that they can almost piggy-back into the export market.
      Earlier this month my hon. Friend the Under-Secretary of State for Trade and Industry said that 1 per cent. of our world trade creates 250,000 jobs. If we lose that world trade, the jobs will be lost. The converse also applies. For every 1 per cent. increase in our world trade, we shall gain 250,000 jobs.
      The opportunity exists to do business with China. My hon. Friend the Member for Honiton made that point forcibly and ably. I welcome the extra support, but I hope for flexibility within the Treasury and the Department of Trade and Industry so that we can react quickly to opportunites to seize contracts.
      5.22 pm
      Mr. Tam Dalyell: I agree with the hon. Member for Hertfordshire, South-West (Mr. Page) that quick reactions and flexibility are of vital importance.
      I echo what the hon. Member for Orkney and Shetland (Mr. Wallace) said about paying tribute, where warranted, to the work of our parliamentary colleagues on both sides of the House who are Members of the Select Committee. I willingly pay that tribute because the report that we are discussing is of high quality. It is clear that hon. Members from both sides worked hard on the report and when they were in China. Such trips are not joyrides but hard work. I thank our parliamentary colleagues.
      I strongly agree with the Chairman about the need for old friends. I understand that one can get nowhere with the Chinese unless they are old friends. I organised and went with the Scottish Council for Trade and Industry delegation to China 15 years ago. It was the first
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      delegation to go there. I might be asked why the Scots went. It was partly because some of us tried hard with Mr. Pei, the charge d'affaires. I shall believe until my dying day that there was some confusion about the Scots being like the Albanians—a small and oppressed group which should be encouraged. I do not kid the House when I say that we were taken to the Sino-Albanian friendship commune. It was a good delegation, which included Louis Portman of Leyland and a small mink farmer from Midlothian who is still in business. Since then I have counted myself as an old friend of China, albeit with ups and downs. That is my reason for taking part in the debate.
      I could not agree more strongly with my hon. Friend the Member for Rotherham (Mr. Crowther) who eloquently expressed his feeling about the holier-than-thou attitude about which many of us have been worried for a long time. As my hon. Friend said, others seem to be more adept at bending the rules and cutting the corners than we are and we lose out time and again. That hits work and employment in Britain.
      I wish to raise a specific point. Bluntly, I have a constituency axe to grind. Hewlett Packard has been in South Queensferry for two decades. Mr. David Baldwin and Mr. Denis Tompkins and their colleagues have pleaded with those who represent constituencies in which Hewlett Packard factories are based, and with the hon. Member for Wokingham (Sir W. van Straubenzee) who represents the area in which the firm has its headquarters, to do someting about the COCOM regulations. The subject was debated yesterday, and the Minister said:
      "Exports to China were mentioned by the hon. Member for Dagenham (Mr. Gould) and many of my hon. Friends. We are playing a leading part in talks in COCOM … My hon. Friend the Member for Orpington (Mr. Stanbrook) referred to Professor Ashworth's letter, to which I shall of course reply."—[Official Report, Fifth Standing Committee on Statutory Instruments, &c., 17 July 1985; c. 25.]
      I tabled a written question yesterday to ask
      "the Secretary of State for Trade and Industry, what conveniently available figures he has for the average time it takes a British exporter of high-technology equipment to receive a decision or a COCOM application, compared with the practice by Governments in Germany and Italy."
      The answer was:
      "I regret that this information is not available."
      I make no complaint about that reply because, as I said on Friday, I am against asking questions which lead to statistics which are expensive to find. If I am told that it is too expensive to find an answer to a question, in most circumstances I accept that.
      Reputable people at Hewlett Packard say that their German and French colleagues receive much quicker answers than we can expect here. They say that the reason might be shortage of staff in the Department, but, whatever the reason, we must react more quickly. This is an all-party occasion, and I agree with the hon. Member for Honiton (Sir P. Emery) and others that flexibility and quick reaction are of great importance.
      I hope that the House will forgive me if I quote three of Professor Ashworth's arguments. He said:
      "The British Government should urge COCOM to lift restrictions on trade in goods other than those which genuinely meet military applications."
      The word "genuinely" should be emphasised. He went on:
      "The fact is that almost any civilian product or process technology could with time and determination be re-engineered to military use. But that is an argument for no trade and is being used to restrict market opportunities for British firms. If lines are

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      to be drawn let the restrictions apply to technologies which realise military applications rather than ones which could inter alia enable such applications."
      Surely there can be no objection to that.
      Professor Ashworth continued:
      "Apart from trimming the lists to the minimum, the interpretations of whatever restrictions are agreed in the issuing of export licences should be liberal. The presumption should be that the trade should proceed unless a sound argument is advanced for prohibition."
      Are we sure that we do not tag on to the Americans from time to time? Professor Ashworth went on to say:
      "The industry fears that the possible deliberate or inadvertent confusion and/or combination of COCOA restrictions with the US 'extra-territoriality' laws will operate to the detriment of UK industry interests."
      What is the Government's attitude? I realise, of course, that the Minister may be giving a thought-out reply in a letter to one of my colleagues. I should have thought that the right hon. Gentleman could have made some reference to this matter in his reply. It was obvious that it would come up in debate. I am aware also of the answer given in the other place to Lord Hatch.
      I declare an interest in that I am a National Union of Railwaymen-sponsored Member of Parliament. I should like to follow what my hon. Friend the Member for Rotherham said about railway equipment. The Yugoslavs have signed a series of trade agreements with Argentina. Among the areas for planned trade and co-operation is electrification equipment for the Argentine railways. As these railways were originally built almost entirely with British capital and technology, there is a certain poignancy in this, although the decline of Britain's role in South America began long before 1982. I am not making too many assumptions about the conflict in the south Atlantic, although it had some effect on that decline.
      The same goes for China. Many of the railways which we saw 15 years ago were British-made. Although the Chinese are developing a considerable railway industry, do we not have a part to play? To what extent were British Railways workshops consulted by the Government, as the Swindon works was, before its closure was announced, and other works would have been had there been any other Government? That is what the French and Germans do so differently.
      Recently, the Siemens offshoot, KWU, agreed to build the second stage of the Atucha nuclear energy plant in Argentina with West German finance. That was not necessarily a project in which the United Kingdom could have been involved, but it showed how other countries are developing their trade with Latin America and China. We have heard that German participation in China is three times greater than British participation. How did that come about? It is heart-rending in view of the efforts that were made to establish a British presence in China when it opened up again in the late 1960s
      Britain is now very much behind the rest of its European partners. The reason why Britain is very much behind has a great deal to do not only with soft loans but with the Overseas Projects Board. Following the comments of Mr. Roy Withers about Britain's willingness to give loans compared with that of our competitors, I asked the Minister in a written and an oral question about the Overseas Projects Board. What is the right hon. Gentleman's attitude towards that board? Are the implicit criticisms by Mr. Roy Withers justified? Is this a matter that we should examine? What is the board's role in relation to the Chinese?
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      One of the great universities of Europe, the university of Edinburgh, has a distinguished school of Chinese studies under Dr. Chinnery. As with many other departments, there is a danger that that department will be cut back and back. I know that the Minister for Trade is not an Education Minister, but I must ask him, given the special circumstances, the need to understand China and the need for certain British people to speak Chinese, what is the input of the Department of Trade and Industry into the question of university cuts? If we do not take this whole matter in the round and have an overall policy, Britain's trade with China, where our competitors are formidable and keen, will not get very far.
      5.34 pm
      Mr. Martin Stevens: My right hon. Friend the Minister for Trade has not invited me to help him to draft his speech in reply to the debate, but there is no reason why I should wait to be asked. My right hon. Friend will tell the hon. Member for Rotherham (Mr. Crowther) that our increased diplomatic staff in China has the best record of Chinese speakers of any mission in Beijing. He will refer to the reintroduction of the consulate in Shanghai. He will mention that, as a result of our mission, the Chinese Deputy Premier authorised his statisticians to sit down with our mission staff to reconcile the argument whether our trade was in balance with China or whether, as the Chinese claimed, there was a trading balance in our favour of £300 million. My right hon. Friend will tell us that money is invested in a new and improved transmission system in Hong Kong for the BBC. The quality of reception of Chinese language broadcasts was one of the deficiencies that was most frequently drawn to our attention. Nothing could less expensively increase our influence in the People's Republic of China.
      My right hon. Friend will speak of the intention to increase the number of Chinese students in Britain and will point to the scholarships offered by Lloyd's of London. He will point to the significant increase—from a low base, it is said—in trade with China so far during 1985. I had better not go on or my right hon. Friend will sit in silence at the end of the debate, with nothing left to say. I have made those points because it is not right for us to act and speak as though the Government have done nothing and do not care about China. That is not so.
      I should like a slightly different approach to be taken. I should like greater flexibility, as other hon. Members have said, in the Government's attitude to any overseas market. We shall be said to be besotted with trade with China because the Select Committee has just returned. People who visit another country always return home thinking that our relationships with that country are the most important items on the international horizon. Our commercial relationships with China is one of the most significant factors on the commercial horizon. I should like the Government to adopt a market-oriented approach to China and other countries, rather than what might be called, in a business, a product-oriented approach.
      If one is going into the business of selling, the old adage—the customer is always right—is correct. We must tackle the Chinese market on the basis of meeting and matching their desires and not simply saying, "We have a lieutenant-colonel as military attaché in Paris. It would be embarrassing to have an officer of higher rank in

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      Beijing." That stereotyped bureaucratic approach is the reverse of the approach that business people should adopt towards countries in which they want to sell their goods.
      I should like the Government to consider new initiatives. One of the most important ways to enter the Chinese market is to offer to carry out a feasibility study. The United States will get the contract to build the new airport in the special economic zone adjacent to Hong Kong because it has spent $750,000 on a feasibility study. This is not a huge sum in political terms. Nevertheless, it is not a sum to be tossed lightly into the pot. Why are the Government not much more ready to provide the money for feasibility studies? Why do they not say, "If you get the contract, my dear fellow, we shall want our money back"? That does not seem to me to be a wasteful approach. Because of the way that they do business in China, not because of the way that we do business, it would help to bring in contracts that we should otherwise lose.
      The hon. Member for Orkney and Shetland (Mr. Wallace)—I hope that I am not putting words into his mouth—said that the Chinese have the happy quality of not forgetting their friends. That is true. The only way for the British Government and British industry to approach the Chinese market is on the basis of a continuing relationship. My hon. Friend the Member for Honiton (Sir P. Emery) spoke of an eight or 10-year period. One ought not to look at this as quite such a brief flash in the pan. When we met him the deputy Premier referred to trade with China in the middle of the next century.
      Sir Peter Emery: Indeed.
      Mr. Stevens: What?
      Sir Peter Emery: Indeed.
      Mr. Stevens: I am so unused to the unstinted endorsement of my hon. Friend that I felt that I must have committed some blunder or social offence. I thank him for his endorsement. What was I saying?
      Sir Peter Emery: Perhaps I may help my hon. Friend along the route of his argument. Reference was made to joint ventures. I suggested that even if joint ventures were for as short a period as eight or 10 years they were worth doing, but I endorse entirely my hon. Friend's point that they could continue for 30, 40 or 50 years. Trade with China will be very considerable. That was his line of argument when I so rudely interrupted him.
      Mr. Stevens: Having tipped me off the rails, my hon. Friend has gracefully replaced me on the tracks. We asked the deputy Premier whether by the year 2050 the Chinese, having sucked in all the technological transfer that they so ardently desire from the West, would use their very low labour costs to "do a Japan" on us and flood western markets with their own products at a fraction of the price. He, like all the Chinese leaders that we met, was clearly aware of these anxieties and told us that, with a population of 1 billion, the overwhelming bulk of the goods that China produces in the next half century will be needed for the consumer requirements of the Chinese people. As a nation, China has a wretchedly low standard of living. Indeed, some of our Opposition colleagues were busily photographing their dwelling houses for use in their next general election addresses over the caption, "Thatcher's
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      Britain". Much progress needs to be made before the living standards of the Chinese people begin to match those which we in the west take for granted. Their leaders know this perfectly well. Ours was not a political mission. It was no part of our job to talk about the political future of China. However, one may speculate about whether the present political institutions will remain unchanged at the end of 50 or 70 years of free enterprise economics.
      The Chinese are making enormous efforts to welcome people to China from all over the world. In 1984 there were 12 million tourists, of whom 11 million were people of Chinese origin who were returning to China to visit relatives and perhaps to provide help. The building of new hotels was proceeding apace. It was almost a question of hotels being erected the day before we arrived to provide appropriate accommodation for us. As a team, the Select Committee is austere. For its members a bowl of lentils is a feast. Toss in a turnip and it becomes a banquet. However, some of the hotels in which we stayed in Communist China offered a degree of luxury, service, elegance and cuisine that I have never experienced anywhere else in the world. That may also be an attraction for some of our fellow countrymen for whom the fleshpots hold out a greater inducement than they do for parliamentarians.
      The Chinese were very explicit about the list of goods that they hope to sell in Britain and the list of goods that they hope to buy from us. They want to sell electrical machinery, motors, generators, hand tools, labour-intensive goods that we on the whole are gradually ceasing to produce, cotton piece goods, tea, bristles, rosin, textiles, tungsten, minerals, such as antimony, rice and canned vegetables. They are already buying coal mining equipment and know-how, aircraft and offshore oil expertise, but they want to buy 300 Mw and 600 Mw power stations, rubber goods—I cannot supply the details—and telecommunications goods. There is no reason why our Government cannot make sure, as no doubt they have already made sure, that the people in this country who deal in such goods know that these items are desired by China. However, several major British firms that are involved in the activities in which the Chinese are interested do not appear to have visited China, and their absence was sorrowfully commented upon to us by British business men who are already in China.
      I said earlier that I should like the Government to be imaginative and flexible when responding to the special needs of the Chinese market, and I mentioned the funding of feasibility studies. One might also mention the emulation throughout the Pacific basin of the Japanese trading house system, which has been so successful and which has brought into those markets many firms that are too small to enter them on their own. The Chinese do not expect British business men to outsell their rivals on every point. We must be price competitive. They told us that the French are the most expensive but that we run them a very close second. We must offer soon to China some form of soft financial provision. We must also offer to transfer know-how and technology. We are very good at that. We are much more liberal than some of our competitors in those matters. From that it follows that the firms that are most likely to build up and sustain long-term relationships with our Chinese friends are those that are developing new technologies every year. There is nothing new in that as a system but it is new for the Chinese. They accept that we shall sell them last year's know-how while we are

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      ourselves perfecting next year's. There is a great deal of scope and long-term opportunity for those who grasp that point.
      I should like to add a few words about the Chinese as people. They certainly think of us as people. They have not, over the centuries, been any too keen on foreigners, but now that circumstances compel them to open their doors to foreign business people they are beginning to compare us with the others who are entering their markets. We shall be comparing them with others in whose markets we are trying to sell.
      The Chinese are extraordinarily tough in bargaining but extraordinarily agreeable as human beings. Their sense of humour is comparable to ours. Even in Beijing, which is the most Communist city, where the little blue suits, caps and macs are most frequently seen as the uniform of all men and women, the children are beautifully dressed and cared for. If sentiment were to be our only guide, there would be even more reasons for seeking to do business in China than those to which reference has been made in the debate.
      The Select Committee, as has been kindly said by colleagues who were not members of it, worked very hard. I endorse everything that was said in the magisterial opening statement of our Chairman, my hon. Friend the Member for Hastings and Rye (Mr. Warren). I hope that the debate today will be heard and echoed among those who it is most important should respond actively and positively to what we are saying in the House this afternoon.
      Several Hon. Members rose—
      Mr. Deputy Speaker (Sir Paul Dean): Order. The wind-up speeches are expected to begin at 6.20 pm. There are four hon. Members hoping to speak. I hope that they will co-operate so that they can all be called.
      5.53 pm
      Mr. Barry Porter: If I cannot be brief, Mr. Deputy Speaker, I will be as rapid as possible. It is always a great pleasure, if not a challenge, to follow my hon. Friend the Member for Fulham (Mr. Stevens) whose erudition and depth of detail in research are an example to every hon. Member.
      While I concede that there was an element of work in our trip to China, I rather enjoyed it, and the bowl of lentils and the odd turnip were not obvious to me by their presence. There were many 13-course banquets. If my hon. Friend casts his mind back to Canton, Shanghai and other delightful places, he might just recall the odd sea slug and other things that we enjoyed at that time.
      On the general question of public expenditure, which is what the debate is supposed to be about, I might be regarded as a hawk rather than as a dove and as a dry rather than as a wet. I fully recognise the need, in the context of the Government's financial strategy, for restraint and for resistance to special pleading, except where there is a medium-term or long-term benefit to the economy from that public expenditure.
      In the past we have all seen mountains of public money thrown at various industries here or abroad that were either dying on their feet or had gross over-capacity, and could not possibly ever again achieve a competitive position. Often that expenditure has been justified on social grounds, but in my judgment the reasoning has been
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      essentially short-term, without any hard thinking about the longer future. Surely it must be much more sensible to invest public money where there is a likelihood of success than to use money that we can ill-afford in trying desperately to stave off failure. I make those general points in relation to my own attitude only to indicate that I have taken considerable persuasion to reach the conclusion that the Government are spending too little in developing our trade with China.
      In so far as anything is certain in this uncertain world, first, it seems to be true beyond peradventure that there is a huge market in China of which at present we have far too small a share. Secondly, that market is growing rapidly as the present Chinese Administration expands the economy. Thirdly, other countries have realised the potential and have decided to put their money where their mouths are and, as a result, are obtaining footholds in that market. It will be very difficult to supplant them once they are established.
      Whether the companies involved are admitting any profit in the ventures undertaken up to now is a matter for conjecture, but certainly the companies and the Governments concerned have made a judgment that returns in one way or another will be there in the future. That is especially true of the Japanese but equally Of various European countries, even Denmark.
      If we stand back—here I agree with the hon. Member for Rotherham (Mr. Crowther)—and take a lillywhite attitude to providing soft loans, cheap credit or whatever is the description, my judgment is that in 10 or 20 years—and I gather that the hon. Gentleman agrees with me—we shall bitterly regret it.
      If in some other way British industry and trade could establish itself in China without Government assistance, I should be delighted, but, to coin a phrase, there is no alternative. If we take the long view, a partnership between British industry and the Government in China can and must be the only way. I think that the Government have come to recognise that. Their recent decision, on similar arguments in relation to Indonesia, as the Chairman of the Select Committee pointed out, underlines the point that the pragmatic approach to rapidly expanding markets is already Government policy.
      Obviously, the detail of a soft loan policy is a matter for discussion. I hope that it would not take the form of general cheap credit. I hope that it would be on the basis of stringent examination of individual ventures, which should pass the test of ultimate profitability.
      There are, of course, risks and difficulties, not merely economic but political as well. If I may take issue with my hon. Friend the Member for Fulham, I think that it is the responsibility not only of the Committee but of the House to try to make some judgment about the political future. The open-door policy has been of relatively short duration, certainly in the Chinese scale of thinking. When we inquired about China's population control policy, we were told that it had been decided to bring down the population from 1·8 billion to between 600 million and 700 million in the year 20400. We said, "Surely you mean 2040," and they said, "No, we mean 20400." That is the scale of thinking; that is the time scale in which they see the future of their country. Ten years of an open-door policy and of an expanding economy is like a flash of light.
      I shall not enter the game of Chinese euphoria, but the open-door policy and the policy of general economic expansion have already run into some trouble, and there

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      is no point in British industry and the British Government not being aware of it. The scope and the pace of the reforms are already being re-examined.
      Imports of refrigerators, cars, television sets and motor cycles are apparently, according to recent reports, clogging the seaports. Railways are so seriously congested that there are grave coal and steel shortages. One factory in four throughout China is idle because of electricity cuts. It seems clear that there will not be an easy progression of 7 per cent. a year of economic growth. Even an old horse like me is willing to urge the Government to spend more money supporting British industry and trade because the Chinese leaders accept that there are difficulties. In a conversation with Trinidad's Prime Minister, Deng Xiaoping said that, although there were difficulties,
      "I believe that our policy will succeed. If one method proves ineffective, another will be used."
      I was sceptical about whether Chinese political society will be such in the next 10 years that people can expect a return on capital. Having met people in China, I believe that there is such a prospect, in spite of the difficulties. It would be entirely wrong not to expect difficulties—there could be difficulties for a considerable time. We must bear it in mind that a society that has already turned 180 deg in the past 10 years could quite possibly turn another 180 deg in the next 10 years.
      Even the special economic zones are not terribly successful at the moment. We went to Shenzhen, which is now described as an experiment, although it was not so described previously. Only one third of production is being exported, and investment has been terribly disappointing. Moreover, the area is notorious for its currency black market and smugglers. It sounds just like the West, doesn't it? Whatever the difficulties, however, there is enormous potential. We should not think that British industry and trade will be transformed overnight, because it will not be. However, given the circumstances that I and others have outlined, the Government have a duty and a responsibility to do something quickly.
      When I look at the Estimates, which are supposed to be the basis of this debate, I see that we are not spending much, not merely on China, but on anything. The sums involved seem, even to a wicked old monetarist like me, rather like back pocket money. I can think of ridiculous things on which we spend money, yet cases such as this deserve money but do not get it. If I am asked to pick a figure out of the air, I would say double it for starters and see how we get on.
      6.2 pm
      Dr. Norman A. Godman: I am not a member of the Select Committee and I should like to offer my compliments to the Chairman and his colleagues on producing a useful report with sensible recommendations. I hope that the Government will examine it most carefully.
      I should like there to be a growth in our trade and friendship with China but I cannot foresee the day when lots of Chinese fishermen fish for salmon on the Tay. Of course I should like more Scotch whisky to be exported to China. I should like other indigenous products such as salmon and knitwear to be exported there, but I shall confine myself to the offshore oil and construction
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      industry. I should like to hear what the Minister has to say about the prospects for that industry in the growing Chinese market.
      The offshore oil and gas industry is a significant element in the Scottish economy, and hence in the United Kingdom economy. The industry will have to continue to change rapidly if it is to remain the wealth earner and employment generator that it is at the moment. Scores of thousands of people in Scotland are employed in the industry and the emphasis will have to switch to export-led demand.
      Our yards are now among the best in Europe. I include in that Scott Lithgow, which is in my constituency, UIE, which is on the Clyde, and Methil, which is in the east of Scotland. We now have the experience and knowledge to seek exports to China, and we need as much help as we can get from the Government. I appreciate the work being done by the Minister of State, Department of Energy, the right hon. Member for Kincardine and Deeside (Mr. Buchanan-Smith), who has made at least one journey to China in an attempt to increase exports.
      Because of developments in our offshore industry, we must develop our exports. Scott Lithgow and Ferguson's in my constituency are actively involved. Ferguson's has just won a remarkable export order for two offshore supply vessels for Canada to work in the Beaufort field. The management and work force of Scott Lithgow are at one in their endeavour further to develop work in the design and construction of semi-submersible rigs. What are the prospects for such structures in the Chinese offshore industry?
      As Scott Lithgow is a front runner in that technically advanced field, it is essential that it is given all possible aid to sell its products in China and elsewhere. The managing director, Mr. Fudge, who is perhaps the most inappropriately named manager that I have met—there is nothing soft-centred about this laddie—and Mr. Duncan McNeil, the convenor of the shop stewards, are working in the closest co-operation further to develop the reputation of the company.
      What are the Government doing to encourage the export of such structures, not the intellectual property which goes with the design and construction of them? It is an important industry to Scotland and hence to the United Kingdom. It is essential that that export market is developed in the next 20 years.
      6.8 pm
      Mr. Michael Morris: I too am not a member of the Select Committee and would like to compliment the Committee on its report, not least because it is succinct and makes clear recommendations. I shall not repeat what I said on 5 July.
      Since I have been a Member of Parliament, we have had major export drives to the Soviet Union, when Lord Wilson of Rievaulx was Prime Minister, to Iran and to Nigeria. All three of those have gone wrong, but for different reasons.
      My plea to my right hon. Friend, therefore, is that we treat trade with China as a topic on its own. We should give it its own budget. We should analyse the work that is put into that trade and what we get out of it. Nigeria went foul on us and every other export market suffered. If something goes wrong with the China trade other export markets will suffer. If we get our act together—the report helped to pave the way—I hope that whichever

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      Prime Minister and Government are in power in five years' time will see the success that follows from a concentration of resources and good marketing and agree to make resources available for other world markets.
      I know Singapore reasonably well. We have worked closely and successfully with the Chinese there. The same applies to Hong Kong. No one has as good an entreé to Hong Kong as we have. We should be able to do something there.
      Paragraphs 58 and 59 of the report say a great deal about soft loans. It is not surprising that we have difficulty competing with Japan, Belgium, the Netherlands, Denmark, Germany, Austria, France, Sweden and Italy. They all give soft loans and we do not. I am a member of the Public Accounts Committee. Problems of overexpenditure and funding come before that Committee. I should like to see a report from the Comptroller and Auditor General illustrating the competition that we face as a result of other countries offering soft loans. We must have a significant soft loan budget for China. That budget must be allowed to be rolled over. The Public Accounts Committee recommended that the defence budget be rolled over. I recommend that a soft loan budget be rolled over.
      We must be able to make decisions reasonably quickly. I am not asking for decisions within one, four or eight weeks—they should not take more than eight weeks—but at the moment we go on, month in month out, waiting for decisions. My right hon. Friend will not want me to mention a certain dam.
      The Minister for Trade (Mr. Paul Channon): My hon. Friend will be pleased to know that good news is on the way.
      Mr. Morris: That is even better. Soft loans are the key to improved trade.
      The Export Credits Guarantee Department is important. The Public Accounts Committee received written evidence from Northern Engineering Industries plc. I shall quote one sentence:
      "The crucial requirement for success is that the supplier should be internationally competitive in cost terms to exactly the same extent"
      as his competitors. Northern Engineering Industries plc said that it would not have obtained £500 million of business if it had not had support from ECGD. That was good hard evidence. It is rubbish when Mr. Byatt and his colleagues say in their report that there is no evidence of a follow-on employment benefit.
      I am sorry to have to mention the Bosporus, but I have a letter from a friend in Bedford who says that as a result of failing to secure the second Bosporus bridge and the Saudi airport terminal contracts, 50 redundancies are being made at Redpath Dorman Long. The key point is that that company is to be wound up and the staff and expertise in that hitherto British-dominated specialty in world terms disbanded. We cannot afford such things.
      My hon. Friend the Under-Secretary of State for Trade and Industry told me in an Adjournment debate that each 1 per cent. trade gain or loss represented 250,000 jobs. That is a sign of how important our export trade is. One GEC major contracting subsidiary had 7,000 suppliers. The majority of those suppliers are in the black country, the north-west and the north-east. That is why capital goods companies are vital to this country's future prosperity.
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      My right hon. Friend must respond to the report within 60 days. The recess is ahead of us. I am sorry to make him work ever harder than he normally does during the recess, but I should like to see the response in a form different from that which is normally made to a Select Committee report. I should like to see a marketing plan for exporting to China as the response to this imaginative document.
      6.14 pm
      Mr. Mike Woodcock: As the Committee's final contributor this afternoon. I realise that, having only five minutes in which to speak. I must be brief.
      China is committed to fast economic growth and peace. It is presently undergoing a controlled revolution which will be more far-reaching in its effects than the cultural revolution. Whilst China remains a Socialist country—if Socialism means the state ownership of the means of production, distribution arid exchange—it is also a country where collectivism, central control and doctrinal Communism are being rapidly replaced by individual responsibility, the profit motive and reward for effort.
      Capitalist principles are being applied and the economy is taking off. People are becoming more prosperous, and that heralds tremendous opportunities for British exporters. We have already heard about many of those opportunities—raw material development, transport, commercial services, tourism and consumer goods. They all provide opportunities for British exporters.
      Whilst I was in China, I kept an eye open for export opportunities for people in my constituency. They were many and varied. Companies in my constituency have a great deal of expertise to offer on oil exploration. We can offer refining equipment—even second-hand refining equipment. We have a redundant refinery which could easily be sold to the Chinese. We can assist with lead additives. The Chinese Government have not been as foolish as our Government in seeking to take lead out of petrol. The Associated Octel Company has already made plans to attend the trade fair in Peking. It hopes to do substantial business there.
      Nuclear enrichment offers opportunities. China has a booming nuclear industry and nuclear power generation requires enrichment. We have an enrichment facility. We have already signed contracts with the Soviet Union, and I am sure that similar contracts could be signed with China.
      There are opportunities for chemicals and fertilisers. Chinese agriculture is booming. There is an enormous need for chemicals and fertilisers and for the plant to manufacture them.
      We have a great deal of coal expertise to offer. China has a great deal of coal to get out of the ground.
      Even in an industry as outdated as water transport, we have something to offer. The Chinese need to develop water transport to move raw materials to the industrial centres.
      Those are some of the opportunities available to firms in my constituency. Those opportunities are repeated hundreds of times across the country. If we could ensure that everyone who goes to China returns to preach the message of the opportunities available, British industry would see that they are tremendous.
      We have heard a great deal about the barriers to trade in China—the distance, the difficulty of the market, the need for long-term commitment. the high cost of offices

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      and hotels, the poor telecommunications, the Government's unwillingness to provide soft loans—although I note what my right hon. Friend has said—the difficulties faced by commercial staff in our industries and the COCOM restrictions. Despite all that, business could do a great deal to capitalise on the available opportunities.
      Some large companies are doing well. Members of the 48 club are doing well. All companies that wish to export to China must recognise that country's different cultures and values. Those companies must be prepared to go there and negotiate locally over a long time scale and to maintain a local presence. They must be prepared to take advantage of the unique joint venture arrangements in China and of the special economic zones. If they do that, they will soon reaise that China can be an excellent base for exports to all the countries in the far east.
      Only three hours ago I talked to Gerry Boxhall, the chief executive of Vickers Defence Systems—a company that has concluded many successful deals in China—and he is flying to Peking on Saturday to talk about a possible joint venture. I asked him what advice he would give to British exporters, and he said that four things are essential. First, take time to ensure that one deals with the right man. It is easy to choose the wrong man and to spend a long time going down the wrong tunnel. Secondly, find out what the Chinese want. A company should not enter China with its perspective of what the Chinese want; it should listen to them. Thirdly, as has already been said, send the top man. The Chinese will not do business with anyone other than the top man. Fourthly, beware of "Mr. Fixits"—the many agents who purport to be a good link between Britain and China.
      What can the Government do to help? We have already heard a plea for increased staff in the commercial section of our embassy. It is absurd to have only between five and seven commercial staff in Peking to service a country' that has 25 per cent. of the world's population. It is also absurd to have only three British members of staff in Shanghai to service an area that is bigger than the EEC. The Government should also press to liberalise COCOM rules. I say no more about that, because it has already been mentioned several times. The Government must provide soft loans to China. In that respect, we welcome what the Minister said. Perhaps through our embassy, the Government could do something to provide collective office facilities in Peking from which small business men can work without having to pay the high costs of offices there.
      I end with a warning. China needs technology, and we need profitable exports. We have the basis of trade to our mutual advantage. But some—perhaps the cynics—may say that the Chinese want cheap, or even free, technology transfer, capital goods at uneconomic prices and soft loans on extended terms, which almost mean payment out of profits. It could be argued that, if we are not careful, we shall export technology on terms that destroy jobs in the United Kingdom for little commercial gain. United Kingdom firms may be lured into uneconomic business, believing that a foot in the door will lead to profits later. However, that door may be closed when the transfer of technology is completed.
      My visit to a Shanghai factory, where workers were earning less than £30 a month producing shirts with Van Heusen labels, gave me a vivid insight into the possible
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      effects of technology transfer on British jobs. I offer those thoughts not as a deterrent, but as a warning to companies to ensure that the business they do in China is profitable and advantageous to them and to United Kingdom interests.
      In the long term, Britain can compete with China only if it is ahead in technology and if it has better management and marketing skills. Let us look to China with optimism, but with realism.
      6.23 pm
      Mr. Bryan Gould: I, too, congratulate the hon. Member for Hastings and Rye (Mr. Warren) on his report and on the speech with which he opened the debate. It has been universally agreed in the debate that the report is valuable and has been an extremely useful spur to a greater and proper recognition of the immense opportunities offered by the Chinese market. Many contributors to the debate bore witness to the immensity of that market, to the prospects for growth and to the political changes, which mean that there is a new readiness to open trade doors.
      In 1978, I had the good fortune to visit China at an interesting moment in its history. The cultural revolution had just ended, and Deng Xiaoping had not yet properly asserted himself, but there were extremely high hopes about the prospects for trade with China. It must be said that, almost immediately, those hopes were dashed. For about three years after 1979, trade with China suffered severely. The Select Committee report makes clear that Britain now enjoys only 1 per cent. of the Chinese market for imports.
      That is worrying, because Britain of all countries should have the inside lane. We have a long involvement with Hong Kong which, in turn, gives us a privileged commercial entree. In the wake of the political agreement to settle the future of Hong Kong, we bask in the warmth of a new glow of friendship and approval from Peking. It is entirely appropriate that we should now try to reverse what is, in all conscience, a disappointing trade performance so far. I am sorry to disturb the welcome, all-party consensus that has dominated the debate, but it must be said that that disappointing performance is of a piece with our general trade performance. My hon. Friend the Member for Rotherham (Mr. Crowther) and others have said that. from 1983 onwards, we have had a deficit in our trade in manufactured goods that is growing rapidly and disastrously.
      The report makes clear that British industry could do much for itself. I am sure that industry' will read the report with interest, and will look forward to receiving the handbook which, interestingly and innovatively, the Select Committee intends to produce.
      However, the debate is primarily about the Government's responsibility for promoting exports to and trade with China. I am in a slight difficulty here, because whenever I tax the Minister with the fact that our trade in manufactured goods has declined, he usually replies, "What are you worried about? We are balancing our trade. We could not continue to produce goods and rack up great surpluses. In any case, the Government can do nothing about the loss of trade in manufactured goods."
      The Government are being inconsistent. On the one hand, they argue that the decline in our trade has been the inevitable consequence of North sea oil and other factors. On the other hand, the Minister and others rightly lay

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      considerable emphasis on the need to improve competitiveness and productivity. What is the point of doing that if no improvement in our trading performance is possible? However, if it is possible, by improving competitiveness and productivity, to improve our trading performance, those are matters for which the Government must take some responsibility.
      On export support and promotion, the Government's position is sometimes similarly confused. On the one hand, understandably, and with the support of most hon. Members, the Government express outrage at an episode such as the loss of the Bosporus bridge contract. On the other hand, the Government, wedded strongly to their free market ideology and their dislike of subsidy and public spending, are tempted by the thought that they should stand aloof from efforts to support our exporters in those difficult markets. From time to time, there is a worrying element of what one could call unilateral disarmament in the Government's position.
      The Select Committee has served a useful purpose in drawing attention to the undeniable fact that such a policy will get us nowhere in our trade with China. For the Chinese, soft loans and extended credit terms are essential. They are an intrinsic part of the deal, on the basis of which the Chinese will decide whether to give business to us or to our competitors. With the Select Committee, I welcome the belated step the Government have announced that soft loans will be extended to China. However, we must remember that that step will be taken within the present limits of the aid and trade provision. Therefore, it is a diversion of resources rather than an increase. Aid will be provided on existing terms, which in many cases will not match those offered by our competitors. As the hon. Member for Hastings and Rye said, there seems to be a lack of urgency in introducing the new regime. I urge the Minister to make clear that he sees the urgency of what is required and that he will move rapidly to make sure that our exporters are not at a disadvantage in this important matter.
      The problem for the Government is that some years ago they commissioned the Byatt report, which was produced from within Whitehall. Although the report was published, it was never debated. It purported to show that there were serious lapses in the reasoning to support export promotion. Its conclusion was to the effect that such promotion was undesirable and probably unnecessary and impracticable.
      Understandably, that report created anxiety and led to some uproar among the business community. That must have been increased by the signs that the Byatt report philosophy had taken root to some extent. For example, the Chief Secretary to the Treasury, in a speech made over a year ago to the association of engineering employers in the west midlands, referred to the report in approving terms.
      However, what seems acceptable to civil servants and Ministers does not necessarily commend itself to firms engaged in the actual business of trying to obtain such orders. Not surprisingly, industry has reacted strongly, sharply and critically to the Byatt report. The Government's own Overseas Projects Board published its fourth report in April this year. It said that the Byatt report was "seriously flawed". It continued:
      "recently we have become very concerned at the Government's apparent ambivalence as reflected in delays in handling ATP cases, some curtailment of the ECGD's facilities and pressure on
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      ECGD to adopt a more cautious attitude to 'country risk' than that taken by many of the UK's competitors. These developments leave a feeling that the Government may not fully understand industry's needs and serve to undermine confidence".
      That body was set up by the Government and consists of leading industrialists and financiers, so it is not normally critical of the Government. Therefore, I trust that the Government will take some notice of what it had to say.
      Mr. Wells: What does the hon. Gentleman understand by an increase in soft loans and the place in the budget from which it comes? I understand that the Labour party believes that the ODA's budget should be expanded and that the ATP should not take an increased share of that budget. I understand that his proposal, and what he is approving, is an expansion of the ATP, but without expanding the ODA budget. In that case, we shall be in serious difficulty in other sectors of export support, as 70 per cent. of the ODA's bilateral budget goes to the acquisition of British goods and products.
      Mr. Gould: The hon. Gentleman is right to draw a distinction between the ODA and the ATP, but I assure him that, while we would wish to see, and have argued persistently and strongly for, an expansion of the ODA budget, we are entirely in support of industry and many of the bodies that I am about to cite when we say that an increase in the ATP is also required. I hope that there will be no misunderstanding on that.
      After the Overseas Projects Board report, the next blow was struck by the National Economic Development Office report, which was a response to the Chancellor's challenge to produce some evidence of follow on. That report is a full and detailed rebuttal of the reasoning underlined by the Byatt report. It gives in more than adequate detail, chapter and verse, example after example, of follow on business being obtained. For example, Balfour Beatty in Indonesia, with the aid of £15 million worth of provision, has secured over the past 12 years £317 million worth of business That point is reinforced by the Select Committee when it emphasises the need for British firms not just to fly in and out of the market but to stay in it and expect to develop business over a long time.
      The next response from industry was the formation into a group of 13 major British contractors employing 394,000 people, and underpinning thousands of sub-contracting firms and all the jobs that depend on that. The group has been brought into being to make the case for this form of export support on the ground that it is the essential element in obtaining an important part of the business on which they depend.
      What is now needed—here I am happy to echo points already made—is for the Overseas Projects Board, the major British exporters and everybody else who has looked at the subject to agree on a substantial increase in ATP. We have to get away from the idea that we are talking about subsidy when we are talking about an essential Government effort to match what other Governments are doing to support their industry. The Japanese have an ATP budget of 40 times ours. Even the French have a provision that is 10 times as great as ours. In 1984–85, it is estimated that ATP of £59 million produced orders of £222 million. That is good value for money in anybody's terms.
      As the hon. Member for Northampton, South (Mr. Morris) said, it is nonsense that accounting rules prevent us from spending money that is available under this

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      provision. We need a roll-over provision because I understand that, over recent years, £16 million worth of this provision has not been spent, and that is nonsense.
      There is also the point, made by Conservative Members, that we need to initiate the provision of help. Too often, we send our exporters into battle inadequately armed. They go in and get some interest in a contract, but then they have to come back to ask whether they can match the terms offered by foreign competitors. That gives a bad impression to start with, and inevitably leads to delay and catching up because we are lagging behind.
      Something has to be done about procedural delays, as is universally agreed. There are too many bodies in Whitehall tossing ideas backwards and forwards. We had the disastrous experience of the Bosporus bridge contract.
      We looked to be in danger of repeating that experience with the Samanala Wewa hydro-electric dam in Sri Lanka. I know that the Sri Lankans are keen that British firms get that contract, but there is a danger that we shall lose it. I was delighted to hear the Minister's cryptic intervention. I hope that he has some good news for us and that that good news has not come too late. It is running things rather tight to have left that project to simmer away in Whitehall for so long. It would be useful if the Minister could tell us what is happening to the shake up of the export promotion effort, which was written up in one of the Sunday papers about four weeks ago and on which we were promised results by the end of the month, although these have yet to come. Is there more good news in the pipeline?
      The ECGD has faced difficult trading conditions, and unnecessary political uncertainty engendered by the process of the Mathews report and the internal departmental report, and so on. Industry is clear about the fact that we need more resources for the ECGD, particularly for its ability to cover things such as tender for contract cover.
      As the Select Committee points out forcefully, there is the problem of the reduction in real terms of the British Overseas Trade Board's budget. That is a strong example of penny wise, pound foolish and it calls into question the Government's seriousness of purpose when they are willing to cut the budget of the major body designed to encourage British exports.
      As a former second secretary, commercial, in our embassy in Brussels, I have considerable sympathy with the Select Committee's strictures about the staffing of our embassy in Peking. Five to seven commercial staff is simply not good enough. Three full-time staff in Shanghai is ridiculous for an area as great as the EEC, as hon. Members tonight and the Select Committee have pointed out
      There are other matters. One could go on with a long list, starting with the BBC external services and Chinese students coming to Britain—all important projects through which we could engender the relationship with China that would make the task of our exporters so much easier. Unfortunately, yet again the Government are cutting back the budgets for those projects, and doing so quite unrealistically.
      I have only a minute to deal with the important and vexed question of COCOM. We had an excellent debate in Committee yesterday on this subject. The Minister for Trade was kind enough to say that he recognised the force of the argument that the rules of the COCOM arrangement
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      should be substantially relaxed in the case of China, something for which my hon. Friend the Member for Linlithgow (Mr. Dalyell) argued forcefully. I am glad that he is aware of that point, and is negotiating even now to secure that relaxation. The problem of trade with China consists of all those matters, and the underlying lack of competitiveness of British industry. As the Select Committee said, the Chinese will buy from us only if we are competitive.
      I shall conclude on a tendentious but accurate point. Despite ministerial rhetoric, we have lost competitiveness. Every index of competitiveness shows that we have lost ground during the past five years. Day by day the problem is exacerbated by the Treasury-dominated Government, who are using high interest rates to force up the value of the pound. This is destroying our competitive position against our most dangerous rivals. Until the Minister and his colleagues get to grips with the Treasury and persuade it that trade matters are of immense importance to our economic future, we cannot take seriously the Government's intentions for the trading opportunities with China.
      If the Select Committee has done even a little to remind the Government of the immense importance and opportunities of what beckons us in China, it will have done a good job.
      6.40 pm
      The Minister for Trade (Mr. Paul Channon): I intend to base my remarks wholly on the draft given me by my hon. Friend the Member for Fulham (Mr. Stevens). In future I shall use him exclusively as my speech writer. I agree with all hon. Members who have said what a splendid report the Select Committee has produced. The Government congratulate my hon. Friend the Member for Hastings and Rye (Mr. Warren) and his colleagues on their impressive report.
      The hon. Member for Dagenham (Mr. Gould) introduced general points, and I am tempted to spend time replying to him, but that would be unfair because I want to deal with China. Nevertheless, first I shall reply to some of those generalities. My hon. Friend the Member for Northampton, South (Mr. Morris) has been the most fervent advocate of the Samanala Wewa project. The Government are delighted to offer ATP—aid and trade provision—for that project and I hope that it will be a success. We are delighted to initiate ATP in suitable cases, and there is no inhibition about that. We shall certainly try to reduce any delays that may exist, and we are constantly taking steps to improve the workings of ATP. Indeed, as the hon. Member for Dagenham rightly pointed out. ATP has been underspent in recent years. It will not be underspent significantly this year, and we have taken steps to ensure that it will not be underspent significantly in future.
      I return to the specific points about China. We have had the report only since Monday, and I hoped to reply to it all this afternoon, which would be a record. However, I am slightly put off by my hon. Friend the Member for Northampton, South, who suggested that I should reply to it in a different form later this summer. Nevertheless, I can say something about some of the recommendations this afternoon. We shall consider the report carefully and reply in the normal way when we have the time to consider it more fully. If I do not have time to answer all the points raised this afternoon, I shall write to hon. Members.

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      The debate and the report are well timed. Large numbers of hon. Members are well aware of the opportunity for expanding our trade with China, which is a view widely shared outside the House. Why has China become such an important topic in terms of trade recently? First, we have entered a new phase in our political relations. The United Kingdom-China joint declaration on Hong Kong was signed during the visit of my right hon. Friend the Prime Minister to Peking in December, ratified on 27 May, and followed by the welcome visit to Britain last month by the Chinese premier, His Excellency Mr. Zhao Ziyang. It has been announced that Her Majesty the Queen will make a state visit to China next year. During Premier Zhao's visit, both Governments reaffirmed their wish to see United Kingdom-China co-operation develop even faster in the years ahead.
      The second main reason for renewed interest in trade with China is that the development of China's economy during the next two decades offers real opportunities for many British companies, as the Select Committee pointed out. Perhaps the greatest opportunities are in China's economic priority sectors of energy, transport, telecommunications and industrial modernisation, in which we have great expertise. There are also opportunities for co-operation in areas such as agriculture, health care, electronics, information technology, defence sales and transport. British aircraft companies have had considerable success recently. China recently signed contracts for the delivery of 10 BAe146 aircraft worth some $150 million, and eight Short Brothers SD360 aircraft.
      In energy, our coal mining industry has a long history of co-operation with China. Premier Zhao visited Anderson Strathclyde, one of our major suppliers of coal mining equipment. I hope that the hon. Member for Greenock and Port Glasgow (Dr. Godman) feels that Scotland got a look in on that visit. Negotiations on the Guangdong nuclear project are now at an advanced stage. I hope that GEC will shortly receive the turbine generator contract when outstanding issues have been resolved.
      In telecommunications, Cable and Wireless has entered into joint ventures to develop the telecommunications system in south China, and is holding discussions about co-operation in other parts of China. Other major projects are under negotiation—for example, in steel and nonferrous metals.
      There are also good prospects for growth in invisibles, which were not mentioned during the debate. The British Invisible Exports Council held an extremely good seminar in Peking, and the chairman of Lloyd's recently led a successful mission to China with the aim of further developing Britain's large reinsurance business with China.
      In recommendation 5 the Select Committee suggests that we should ensure that information about tenders is disseminated effectively, and we shall certainly do our best to ensure that. Incidentally, I have received no complaints about that. For the world aid section, which is an important part of the World Bank's programme of lending to China, we shall continue to ensure that details are available as early as possible. Although the present position is not wholly satisfactory, as hon. Members pointed out, there are good prospects for the future.
      There have been good exchange visits at Government level. The visit of my noble Friend Lord Young, Minister without Portfolio, who led a high level business mission earlier this year, opened up an enormous number of
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      valuable opportunities. Later this year my right hon. Friend the Minister of Agriculture, Fisheries and Food will also visit China. We have had visits from the Chinese Ministers of Agriculture and of the Environment. A great deal has been going on and the momentum must be kept up.
      As the Committee stressed, China is not an easy market. It remains a state trading country where doing business can be expensive, difficult and slow. The language and cultural barriers need to be overcome. Reliable market information is hard to obtain, and it is not always easy to identify potential Chinese customers. The present pace of change has added to the difficulties.
      It is essential for business men, especially newcomers to the market, to understand the potential problems and to seek advice on how to overcome them. They will need patience and perseverance, and to be competitive. As my hon. Friend the Member for Honiton (Sir P. Emery) and others pointed out, business with China can take a variety of forms and the transfer of technology is extremely important. We have a much better record than the Japanese and nearly every other country on that. Wherever I go—I have just returned from the far east—it is pointed out that the United Kingdom is much better at transferring technology than Japan. When hon. Members go abroad, I hope that they will point that out, because it is the truth.
      Joint venture agreements are a further promising area. Some companies selling to China, especially medium-sized and smaller ones, would do well to form links with one of the large international trading companies with offices in China, or to work with a Hong Kong partner experienced in trade with China.
      The official export services are one important source of advice and help. I think that the Committee saw our publication entitled "Selling to China". We shall await with great interest the Committee's own publication.
      In recommendation 7, the Committee made a plea for greater resources to be devoted generally to promoting exports. There are already the export services of the BOTB, the ECGD, the ATP and the trade promotion work of British diplomatic posts abroad. Up to 75 per cent. of the users of BOTB services—the figure may be even a little higher—are small firms with fewer than 200 employees. Helping large companies to win orders benefits many smaller companies through sub-contracts and equipment orders.
      I understand the Committee's desire to see an increase in the funds available to the BOTB. I note that that seems to be the view of the House. The funds have been held constant in cash terms. The House will know that the resources available to the Department of Trade and Industry are, unfortunately, finite, but my right hon. Friend the Secretary of State will examine the Committee's recommendation carefully when considering other conflicting claims on his budget.
      When we have debates on other issues such as research and development, compelling demands are made, sometimes by the same hon. Members, for an increase in that budget. Others say that Government expenditure should be held steady or reduced. However, that is a very important matter, and my right hon. Friend will pay the closest attention to the views of the House.
      The hon. Member for Rotherham (Mr. Crowther) was, uncharacteristically, a little unfair when he said that the Government were not interested in China, or words to that effect. In fact, BOTB spending last year in support of

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      exports to China was over £1 million, more per pound of exports than was spent on any other market in the world. Expenditure this year will, again, be at a high level. BOTB expects to support British groups at 12 international exhibitions. I shall not read out the whole list, but I can give it to those hon. Members who are interested.
      The board also expects to support 11 outward and inward missions. It will pay a grant in aid to the Sino-British Trade Council. We are pleased that Sir Eric Sharp has become the new president. I am sure that everyone will wish to thank Sir Peter Matthews for his work as president of the council for a very long time.
      Increased resources for the BOTB in China were mentioned, but we must look at the priorities elsewhere. The Committee was keen on western Europe and the countries of the Association of the South Eastern Asian Nations. We must consider whether it would be better to spend more money in western Europe, the United States, China or elsewhere. There are good cases for all of them.
      Diplomatic posts are mainly a matter for my right hon. and learned Friend the Foreign Secretary. When I was in China not long ago, we did not have a consulate general in Shanghai, but we do now. That is a major step forward at a time when other posts are having to be closed. The Committee was informed in evidence given by the permanent under-secretary to the Foreign and Commonwealth Office that the staff in Peking has been increased by adding a new first secretary responsible for energy matters.
      The commercial staffing in China numbers 10. That is larger than that of any of our European rivals. Only Japan and France have more. Therefore, our number is higher than that of the United States of America, West Germany, Sweden and Italy and is not out of line with that of many others. However, again, that is a matter of priorities. Many requests come to the Foreign Office for posts in places such as Miami. There is a strong case for reopening there, for the important market in South America referred to by some hon. Members. We are asked to put more resources there or in other places. My right hon. and learned Friend the Foreign Secretary will study the points made in the debate about staffing.
      Credit terms have been mentioned on many occasions. China is eligible for the full range of credit facilities from the ECGD. There is no shortage of cover. I do not think that firms should be deterred on that account. Until recently China has not been eligible for support under the ATP. However, the Government have decided that in future ATP support will be available for China. That is a considerable step forward. At present that is only on the usual ATP terms of a mixture of grants with export credits, and the funds available are limited.
      Therefore, it is right that we should discuss with the financial community the mechanisms that might be devised for providing soft loans. That will be equally true in Indonesia as well as China, as was announced a little while ago. My hon. Friends the Members for Hertford and Stortford (Mr. Wells) and for Hastings and Rye dealt with that matter. We shall proceed speedily with those talks. I cannot say what the conclusions will be today. The announcement was made only on 9 July, but when the House returns in the autumn I hope that my hon. Friend
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      the Member for Hastings and Rye will table a question on the first day. I know that if he does not receive a satisfactory answer he will create havoc.
      Resources will still be limited and most of our exports to China will continue to be paid for either in cash or on normal credit terms. Reference was made to increasing the ATP budget. I note the views of the House about that. They will be considered carefully by my right hon. Friends in the public expenditure round.
      Technical co-operation has also been mentioned. Among other things, the ODA contributes to the cost of consultancies. The hon. Member for Linlithgow (Mr. Dalyell) talked about British consultants. We hope that that contribution will lead to commercial benefit for Britain. The ODA also contributes to the costs of Chinese students coming to Britain for further education. The number has trebled from a low base, as my hon. Friend the Member for Fulham said. The Committee recommended that ODA funding should be increased, and that recommendation will be considered carefully. Many companies make arrangements to bring Chinese people to Britain for training, and I hope that other companies will follow their example.
      The COCOM countries have already agreed to apply controls to China more flexibly than to the Soviet bloc countries. On a British initiative, they have agreed to speed up the processing of applications for China. The possibility of further relaxations is under consideration. Britain is playing a leading role in the discussions. We have made clear to our COCOM partners the British view, which I think is widely shared, that there are several areas of high technology in which the West can contribute to China's modernisation without damage to our other interests. There will be further discussions in September, and the views of the House will be useful to us.
      No applications have been made in regard to Dalian airport. I cannot see any reason why civil radar should be any problem under the COCOM rules.
      The hon. Member for Greenock and Port Glasgow referred to offshore oil and gas. The prospects, which are considerable, depend to some extent on how soon oil is found in commercial amounts. British Petroleum is playing a major part in the search. Last year the Government supported a major oil seminar in Peking, Shanghai and Canton, arranged by the Sino-British Trade Council. My right hon. Friend the Secretary of State for Energy went there. He takes a keen interest in the subject.
      Railways have been mentioned by several hon. Members. One company—Strachan and Henshaw—recently won a substantial order for coal unloading equipment. We are in touch with the companies connected with the industry and railway electrification. There may be opportunities in the not-too-distant-future in underground railways or metros.
      The hon. Members for Greenock and Port Glasgow and for Orkney and Shetland (Mr. Wallace) will be interested to remember that it was owing to British persuasion that the China National Offshore Oil Corporation set up its European office in Britain despite strong competition from other parts of Europe.
      The Overseas Projects Board is a valuable source of advice to me and my colleagues. We agree on the need to use the ATP flexibly and efficiently. The recent measures that have been taken will, I hope, help greatly in that respect.

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      The hon. Member for Dagenham (Mr. Gould) referred to the Byatt report. It provided an interesting input to thinking on this important topic. It has not met with unanimous support. It never represented Government policy. That is shown by the fact that we are already taking steps to improve the ATP. With regard to soft loans for China, we are the only country that does not have them.
      There is a host of ways in which we can increase our trade with China, which I know is the wish of the whole House. Our exports to China are at a low level, but they have increased considerably in the past few years. A few years ago they were worth about £110 million. I remember going to Cyprus when we exported more there than we did to China. The hon. Member for Dagenham may criticise us for many things, but when he is talking about trade with China he is on a weak wicket. Trade with China has gone up considerably. Even taking the freakish figures for last year, which included some erratic exports, it has more than doubled. Prospects for expansion of trade are good.
      The Committee has done a useful job and we shall be answering its report fully in the usual way. We are aware of the importance of exports to China and we shall do our best to expand trade. I know that the House will be vigilant to ensure that the Government take the necessary steps towards that end. But, above all, it will be for business to seize the initiative. I am sure that industry will be grateful that we have had this debate today.
      It being Seven o'clock, the Question was deferred, pursuant to Standing Order No. 19 (Consideration of Estimates) and to order [4 July].

Orders of the Day
  Insolvency Bill [Lords]
  As amended (in the Standing Committee), considered.
  Insolvency Bill [Lords]
    New Clause 5

      AUTHORISATION OF MEMBERS OF RECOGNISED PROFESSIONAL BODIES
      '(1) A member of a recognised professional body is authorised to act as an insolvency practitioner if he is permitted so to act by or under the rules of that body.
      (2) The Secretary of State may by order declare a body which appears to him to fall within subsection (3) below to be a recognised professional body for purposes of this section; and any such order may be revoked by a further order if it appears to the Secretary of State that the body no longer falls within that subsection.
      (3) This subsection applies to any body which regulates the practice of a profession and maintains and enforces rules for securing that such of its members as are permitted by or under the rules to act as insolvency practitioners—

      (a) are fit and proper persons so to act; and

      (b) meet acceptable requirements as to education and practical training and experience.

      (4) Any order under subsection (2) above shall have effect from such date as is specified in the order: and any such order revoking a previous order may make provision whereby members of the body in question continue to he treated as authorised to act as insolvency practitioners for a specified period after the revocation takes effect.
      (5) In this section references to members of a recognised professional body are references to persons who, whether members of that body or not, are subject to its rules in the practice of the profession in question.'.[Mr. Fletcher]
      Brought up, and read the First time.
      The Parliamentary Under-Secretary of State for Trade and Industry (Mr. Alex Fletcher): I beg to move, That the clause be read a Second time.
      Mr. Deputy Speaker (Mr. Ernest Armstrong): With this it will be convenient to take new clause 6—Applications for authorisation.
      Government new clause 7—Grant, refusal and withdrawal of authorisation.
      Government amendments Nos. 5 to 7, 233 and 239.
      Mr. Fletcher: This clause replaces the existing delegation clause 5 in the Bill, and provides that a member of a recognised professional body is authorised to act as an insolvency practitioner if he is permitted to act by the rules of that body. We expect such members to comprise the largest proportion of qualified insolvency practitioners in future. On application by a body for recognition, the Secretary of State will have regard to whether it regulates the practice of a profession and will seek assurances that it will be able to maintain and enforce rules for securing that those of its members authorised to act as insolvency practitioners are fit and proper persons, and meet acceptable requirements as to education, practical training and experience.
      Our consultations with the main accounting and legal bodies will ensure that those requirements are suitably balanced between the member of a recognised professional body and the person authorised to act by the Secretary of State or other relevant authority.
      The purpose of new clause 6 is to lay down the manner, content and form of an individual's application to the

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      relevant authority. It also gives the latter various powers in relation to applications. Amendment No. 7 deletes clause 3 dealing with applications for certificates. The relevant authority will also have to consider whether the applicant meets the prescribed requirements with respect to education, practical training and experience. This differs from existing provisions in the Bill, in that we have added education and have stipulated that training should be practical.
      The effect of these changes is to ensure that those applying to relevant authorities—and we expect that they will mainly be individuals who do not belong to professional bodies recognised for insolvency purposes—will have to meet requirements equally demanding as those faced by members of professional bodies.
      Mr. Gerald Bermingham: Will the Minister tell us whether he sees the Department's role as supervisory? Each of the professional bodies has its own rules and regulations about training and, of course, there ought to be some uniformity between them. In future, does the Department see itself telling the Law Society, the Bar Council, the Institute of Chartered Accountants and the Institute of Insolvency Practitioners exactly what remit they must follow to secure adequacy of training?
      Mr. Fletcher: I would not use the term supervisory body, but, as the hon. Gentleman suggests, it is important there should be a balance of expectation between the relevant authority and the qualifications, education, training and experience looked for by the professional body. This will be done. At the moment, we are discussing with the professional bodies precisely what standards and what rules there should be for establishing this new arrangement, because there must be similarity in the way that various bodies and the Secretary of State exercise their powers. That is what the hon. Gentleman has referred to, and I hope that clarifies the point he made. It is not just a matter of making sure that the new arrangements continue to be managed properly by the professional bodies; it is a matter of saying that they get off to a good start and that rules are laid down that can be referred to if any doubt or any questions arise in future.
      Mr. Bermingham: The Minister has pinpointed the matter that worries me. Is the Department of Trade going to say to the Institute of Chartered Accountants or the Institute of Certified Accountants, "These are the criteria which we will demand in the training courses so that a person may become an insolvency practitioner"? If that is the case, it seems that the Department of Trade is seeking to interfere in the standards and codes of conduct of those professional bodies.
      Mr. Fletcher: We are making sure that we get off to a good start. It is not a matter of laying down rules, but a matter of agreeing with the professional bodies. I take the implication of the hon. Gentleman's point, that these bodies are well used to regulating the professional standards of their members. However, we must try to achieve the maximum amount of equivalence of treatment between the individual bodies—there will be several of them—and the way the authorisation is carried out by the Department. For that reason, we are having consultations with the professional bodies and wish to lay down guidelines for their benefit as well as for our own.
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      I was saying that we expect that those who are authorised by the relevant authority will be mainly individuals who do not belong to professional bodies recognised for insolvency purposes. I added that they will have to meet requirements equally demanding as those faced by members of the professional bodies. That is the obverse of the point made by the hon. Gentleman. For obvious reasons there cannot be the same requirements for those applying to the Secretary of State, because they will have a different background from that of members of professional bodies. We will seek to balance them as near as we can, and our consultations with the main professional bodies are continuing on that basis. One other change is that subsection (3) will allow more flexibility in fixing the length of time that an authorisation can continue in force.
      Amendment No. 5 is necessary, because, whereas clause 2 refers to certification of practitioners by the Secretary of State, the provisions introduced by new clauses 5, 6 and 7 refer to authorisation by membership of a recognised body or by a relevant authority. Accordingly, amendments to clause 2 are necessary to accommodate these changes. The amendment to clause 2, which is amendment No. 6, adds references to the mental health legislation and is as a result of an amendment moved in Committee by my hon. Friend the Member for Tynemouth (Mr. Trotter). It is intended that any person who is subject to either of the specified mental health enactments will be disqualified from acting as an insolvency practitioner. Should an order under the mental health legislation be lifted, it will be possible for a person to apply for authorisation in the normal way. The hon. Gentleman will remember that we considered this matter in Committee.
      Turning to amendment No. 233, schedule 9 contains the transitional provisions relating to insolvency practitioners, but makes reference only to clause 2(2). The additions to that clause expand subsection (2) into two subsections, Nos. 2 and 3. Therefore, an appropriate amendment to schedule 9 is required. The amendment to schedule 10 is amendment No. 239. Section 302(1) of the Companies Act 1985 provides that an undischarged bankrupt who is formally appointed or assumes the role of a director or liquidator of a company commits an offence unless he first obtains leave of the court to so act. The words, "or liquidator" have been rendered redundant by existing clause 238 and amended clause 248 which disqualifies an undischarged bankrupt from acting as an insolvency practitioner, which term includes a liquidator, in any circumstances. I commend the amendments to the House.
      Mr. Bryan Gould: My calculation is that simply to read out the vast number and volume of Government amendments and new clauses, let alone explain them and debate them, would take some hours. Therefore, in commenting on many of the amendments we are constrained to be extremely brief, and I shall be brief.
      When we considered the provisions in Committee we had before us a relatively simple, comprehensible structure. Either someone obtained the necessary authorisation by being a member of a recognised professional body or, if he could not achieve that, he applied for individual certification and, no doubt, obtained it from the Secretary of State.
      I imagine that the Minister was telling the House that this new and much more complex structure was the

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      consequence of consultations with the professional bodies. I am rather taken aback to discover that what should have been a relatively simple change has required several new clauses and further amendments. So we are left with a more complicated position.
      What we now face leaves open a number of questions. As my hon. Friend the Member for St. Helens, South (Mr. Bermingham) asked, what will be the role of the Secretary of State in this? Surely he will take some sort of co-ordinating responsibility to ensure some uniformity of practice and standards, even if his role is not supervisory.
      What will be the attitude of the Secretary of State and the relevant authorities to the questions which engaged members of the Committee when we discussed these matters? For example, what will be the attitude towards members of professional bodies—let us say, the Law Society or the Institute of Accountants—who have not passed specialised papers in insolvency? What rule, principle or practice will he applied?
      Given that one of the major objectives of the new provisions is to make it possible for those who have never passed and are never likely to pass examinations or to gain admission to a professional body nevertheless to qualify as insolvency practitioners, what do we know about the criteria which the Minister or the relevant authorities will apply to experience? It is exactly from that area that some of the major problems have arisen in the past and where some of those who have most disgraced the profession have come. I argue that experience, while necessary as a qualifying condition simply because it is needed for transitional purposes, should be limited to that transitional period and that we should be aiming to move towards a profession where either membership of a recognised professional body or the passing of some recognised examination should be the essential precondition for entry into the profession. Will the Minister explain how the new structure will reflect upon and influence those matters?
      Mr. Jeremy Hanley: Will the Minister say what form of consultation he will be holding with the professional bodies during the summer recess? If that consultation is to be meaningful, no doubt coupled with our experience so far—it is unique in my experience to have 1,000 Government amendments made to a Bill of 200 clauses originating in the other place—surely there are bound to be more amendments recommended during the recess. What is the procedure for bringing what might be wise and sensible amendments before the House when right hon. and hon. Members return after the recess?
      7.15 pm
      Mr. Bruce Millan: I must first declare an interest as a member of the Institute of Chartered Accountants of Scotland, which hopes to be one of the recognised professional bodies and has been engaged in discussions with the Government. I am also parliamentary adviser to the institute.
      I take the point made by the hon. Member for Richmond and Barnes (Mr. Hanley). We are in difficulty in dealing with this vast number of amendments to a Bill that has already been through the other place and in any case has been under discussion for a number of years, what with the Cork report, the White Paper and so on. It is an unsatisfactory way of dealing with important legislation.
      In the new clauses we have a complete rewriting of part I. It so happens that I welcome that, so I am not
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      complaining about the merits of what the Government are doing. However, it is not a satisfactory way of dealing with legislation, and it is extremely difficult, with not only this group of amendments but with a number of others that we shall be discussing later, to know exactly how the Bill will stand when the amendments have been made. There will be wholesale changes in the Bill if the various Government amendments are carried. I regret that we are dealing with important matters in his way.
      I ask the Minister a couple of questions for clarification, and one of them follows on from what my hon. Friend the Member for St. Helens, South (Mr. Bermingham) said. I am not clear what the relevant authority will be, as distinct from the Secretary of State. As I understand it, the definitions of "relevant authorities" are exclusive of the professional bodies. Will the Minister confirm that a number of the other new clauses which refer to relevant authorities do not refer to the procedures under the recognised professional bodies?
      If a member of a professional body is not granted authority under new clause 5 by the recognised professional body, I assume that he does not have an appeal from there to the tribunal. If he is turned down by his own professional body, it appears that there is nothing to stop him applying to the Secretary of State or the relevant authority and then subsequently to the tribunal. Will the Minister confirm that all the provisions about tribunals, appeals and so on are nothing to do with new clause 5, which deals with recognised professional bodies?
      I come, then, to the matter raised by my hon. Friend the Member for St. Helens, South and by my hon. Friend the Member for Dagenham (Mr. Gould) about the rules. By amendment No. 10, the Government will be providing for rules by way of regulation, and these rules will include
      "provision as to the matters to be taken into account in determining whether a person is a fit and proper person to act as an insolvency practitioner."
      As I read it, the amendment will apply to professional bodies as well as to the relevant authorities.
      Mr. Alex Fletcher indicated assent.
      Mr. Millan: If that is correct, there will be a supervisory function by the Secretary of State. He will lay down the rules by way of regulation which will apply to applications to professional bodies as well as to applications to the relevant authorities. So there will be an element of standardisation. I do not complain about that, but it is unsatisfactory. We are dealing with it at a late stage in our consideration of the Bill, and we have no idea so far what is likely to be provided for in these regulations and we have no idea how far they will impose obligations on professional bodies and how far the professional bodies will have to change their internal rules and procedures to meet the regulations.
      As I see it, by a subsequent amendment there will be supervision, but at the moment we have no idea what that supervision may entail.
      Mr. Tim Smith: I am a member of the Institute of Chartered Accountants in England and Wales, and its parliamentary adviser. Obviously the institute would hope to become a recognised professional body for the purposes of the new clauses.
      I have a lot of sympathy with what has been said in the debate. Part of the answer to the hon. Member for Dagenham (Mr. Gould), who asked how we would

      531
      achieve a degree of consistency in the new arrangements, is that there is a precedent. It is not unprecedented for the Department to recognise bodies in this way because four are already recognised for the purposes of auditing under the Companies Acts. The Department does not recognise a body and leave it at that: it has a role in constantly supervising and ensuring that the body concerned maintains the highest standards. Nevertheless, a lot of detailed matters need to be dealt with.
      I wish to ask two questions of my hon. Friend. First, as I did not have the good fortune to be a member of the Committee, I am not clear about the position of those insolvency practitioners who will be qualified by virtue of their experience. When the provisions in relation to auditors were enacted in 1948, only those qualified by experience up to the time that the Act came into force were recognised. That would seem to be the right parallel.
      Secondly, I imagine that the changes to the Bill will be considered in another place, I hope in October rather than next week. If it is in October, those who have an interest in these matters will have had an opportunity to consider them. I understand that the new clauses under consideration today were tabled last Thursday, so that effectively there has been a good deal less than a working week in which to consider them. I hope that my hon. Friend will confirm that he is prepared to consider further representations if the interested parties have views to offer on them.
      Mr. Bermingham: Consideration of the Bill is beginning to sound like the well-known musical which speaks of 1,001 nights. This is a Bill of 1,001 amendments, or small cuts. With respect to the Minister, we still seem not to have it right. I wish to draw his attention to several minor points.
      As my right hon. Friend the Member for Glasgow, Govan (Mr. Millan) said, amendment No. 10 refers to laying down the prescribed rules. Who will advise the Secretary of State what should be in the prescribed rules? We are now getting into a cyclic argument. I sincerely hope that the persons who advise the Secretary of State will be from among insolvency practitioners. I would shudder if I thought that civil servants would do this. The Minister knows well why I say that, after one or two comments which I made in Committee about advice received by Ministers on occasion.
      With regard to new clause 5, I draw the attention of the Minister to the word "acceptable", which I suggest is the wrong word to use. It would be far better to use "prescribed". Indeed, new clause 12 contains a definition of "prescribed". This would perhaps get us out of the problem.
      I should have declared an interest at the beginning of my speech, which I know is well known to hon. Members. I am a practising barrister and have acted as a solicitor in insolvency in the past and no doubt will do so again in future, so let the record show that the Bill is of some considerable interest to me.
      I do not necessarily wish to see the Bill go on to the statute book. I shall have some comments to make on certain other clauses which are gobbledegook and will lead to litigation. Needless litigation benefits nobody. This is our last opportunity to attempt to get it right, bearing in
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      mind that it has taken over 100 years since the last Bill on these matters was brought in by Joseph Chamberlain in 1882, if my memory serves me correctly.
      Mr. Fletcher: I remember him.
      Mr. Bermingham: The Minister says that he remembers him. I say no more than that.
      New clause 7 refers to the relevant authority which grants the application. The authority is to have regard to
      "the information furnished by the applicant"
      and
      "such other information, if any, as it may have".
      It is not clear whether the applicant will have any right of access to such information. All professional bodies at some stage receive the almost malicious complaint from a disgruntled or dissatisfied customer. Surely the applicant should have access to that sort of information, if nothing else, in order to rebut the allegation. It may well be that those other sources of information contain defamatory material which, if disseminated, would cause considerable professional damage.
      Mr. Gould: I am sure that my hon. Friend will agree that the rules of natural justice suggest that the provision as drafted is curiously defective, unless the Minister were to argue—and I am not sure that this would be sufficient answer—that the right of appeal would cure any such difficulties.
      Mr. Bermingham: I entirely accept what my hon. Friend says.
      New clause 9 seems merely to give the applicant a right to make written representations to the authority. I suggest that that is not sufficient, and that the Minister should reconsider new clause 7 if the rules of natural justice are to be complied with.
      Mr. Fletcher: If I may declare my interest, I am a member of the Institute of Chartered Accountants of Scotland, members of which, I observe, are just in the majority this evening, although I do not know what that proves.
      The hon. Member for Dagenham (Mr. Gould) commented on the number of amendments. I apologise that so many amendments have been tabled on Report, and I know that it makes heavy reading for Members participating in the debate. The hon. Gentleman will appreciate that a number of them flow from undertakings which I gave in Committee. A number of groupings encompass technical amendments or are minor matters. The group of 28 amendments, starting with Government amendment No. 20, is concerned only with the definition of security throughout the Bill. Starting with Government amendment No. 25, there are 19 drafting amendments. I take the point that this is an unusually large number of amendments on Report, although I hasten to add that I think that it is not quite 1,000.
      My hon. Friend the Member for Richmond and Barnes (Mr. Hanley) mentioned the question of consultation during the recess. My hon. Friend the Member for Beaconsfield (Mr. Smith) asked whether the Bill will be going to another place in the spillover of the Session. The answer is yes. There is, therefore, further time for certain matters. However, it should be remembered that the Bill started in the Lords so that the ability of the other place to make amendments is restricted in the usual way.
      The hon. Member for Dagenham asked about professional members who have no special training or

      533
      experience. They will not be authorised. Part of the transitional arrangements is that, if a person is acting as a liquidator when the Bill is enacted, he will continue to act as a liquidator in a liquidation. Thereafter, members of professional bodies will have to show that they have the requisite amount of training and experience before being authorised by the professional body to act as liquidator. Non-professional persons will have to satisfy requirements of training and experience and show that they are fit and proper persons in respect of professional bodies, that is, their own assessment of the fitness of the member, plus the guidelines laid down in the rules which will decide whether they will be authorised by the professional body.
      The right hon. Member for Glasgow, Govan (Mr. Millan) referred to the tribunal. One reason for the large number of amendments is that the professional bodies were unhappy about having a tribunal second-guessing their authorisations. That is understandable. A professional body can choose whether to seek recognition or to be regarded as a relevant body. If it seeks recognition, the tribunal will not apply to the professional body.
      7.30 pm
      Mr. Millan: What about someone who is not recognised by his professional body and applies to the relevant authority? There is nothing to stop that happening. That must be unsatisfactory, because if a person cannot get his professional body to recognise him as a fit and proper person it is a little odd that he should be able to go to the relevant authority.
      Mr. Fletcher: The right hon. Gentleman is correct. Nothing in the Bill will prevent a person who is turned down by his professional body from making an application to the relevant authority. However, in considering the application, the relevant body will take into account the reasons why the applicant was turned down by his professional body.
      Having applied to the relevant body, an applicant would have the right to appeal to the tribunal, which would take the final decision.
      Mr. Gould: The Minister's confirmation of that point surely reveals that unfortunately, but perhaps typically, in his anxiety to escape the second-guessing of the professional body, he is introducing a system that allows not only a second guess, but a third guess.
      Mr. Millan: Will there not be, in effect, an appeal to the tribunal against the decision of a professional body?
      Mr. Fletcher: I do not think that the tribunal will take that view. We cannot write into the Bill a provision to prevent an individual from making an application.
      Mr. Millan: Why not?
      Mr. Fletcher: We cannot prevent people from applying for anything. If a person wishes to make an application to the relevant authority, he will be free to do so. However, I am sure that the relevant authority and, more important, the tribunal will want to know why that person had been turned down by his professional body.
      Mr. Hanley: If an individual is turned down by his professional body and is successful on an appeal to the tribunal, will the Secretary of State license him to practise in insolvency or will the professional body be ordered to
      534
      register that person? It is important for the integrity of professional organisations that they should not be forced to take on a person whom they had previously rejected.
      Mr. Fletcher: The Secretary of State will have no power to direct a professional body to authorise one of its members to be an insolvency practitioner.
      I understand the point that is being made, but it would be rare for a person to be turned down by his professional body and be authorised on appeal to the tribunal after applying to the relevant authority. If it happened, that person would be authorised by the Secretary of State and not by his professional body. It is a valid debating point. but the situation is unlikely to arise.
      Mr. Tim Smith: My hon. Friend says that the situation is unlikely to arise and that he finds it difficult to envisage a person being turned down by his professional body and subsequently being accepted under the alternative mechanism. Why not put into the Bill a provision to ensure that that cannot happen? Why is that objectionable?
      Mr. Fletcher: I am not sure that we can prevent people from making applications.
      Mr. Gould: We can.
      Mr. Fletcher: A person who wishes to make an application is entitled to be heard.
      Mr. Millan: Surely there is a difference between making an application to the relevant authority in the first instance and following the appropriate procedures—it is fair enough if a member of a professional body wants to do that—and the system in the Bill, which allows someone who is rejected by his professional body, which decides that one of its members is not fit to be an insolvency practitioner—because of his lack of experience or training or for other reasons—to circumvent that decision by going through the relevant authority. Ultimately, the appeal to the tribunal is effectively an appeal against the decision of the professional body, a process which other provisions in the Bill are meant to exclude.
      Given the difficulty in making further amendments in another place, I am not sure that we can alter the Bill now, but the Government have not got it right.
      Mr. Fletcher: The right hon. Gentleman overlooks what I said earlier about the equivalence of treatment and standards which will be in in the rules. If a person is turned down by his professional body and applies to the relevant authority, the authority will make its assessment on the same basis and under the same rules as the professional body made its decision. The right hon. Gentleman said that an applicant might lack sufficient training or experience. I find it hard to believe that the relevant authority or, on appeal, the tribunal would take a different view from the professional organisation.
      Question put and agreed to.
      Clause read a Second time, and added to the Bill.

    New Clause 6

      APPLICATIONS FOR AUTHORISATION
      `(1) An application for authorisation under section (Grant, refusal and withdrawal of authorisation) below—

      (a) shall be made in such mariner as the relevant authority may direct;

      535

      (b) shall contain or be accompanied by such information as that authority may reasonably require for the purpose of determining the application; and

      (c) shall be accompanied by the prescribed fee;
      and the relevant authority may direct that notice of the making of the application shall be published in such manner as may be specified in the direction.

      (2) At any time after receiving the application and before determining it the relevant authority may require the applicant to furnish additional information.
      (3) Directions and requirements given or imposed under subsection (1) or (2) above may differ as between different applications.
      (4) Any information to be furnished to the relevant authority under this section shall, if it so requires, be in such form or verified in such manner as it may specify.
      (5) An application for authorisation under section (Grant, refusal and withdrawal of authorisation) below may be withdrawn before it is granted or refused.
      (6) Any sums received under this section by a relevant authority other than the Secretary of State may be retained by that authority; and any sums received under this section by the Secretary of State shall be paid into the Consolidated Fund.'.—[Mr. Fletcher.]
      Brought up, read the First and Second time, and added to the Bill.

    New Clause 7

      GRANT, REFUSAL AND WITHDRAWAL OF AUTHORISATION
      `(1) The relevant authority may, on an application duly made in accordance with section (Applications for authorisation) above and after being furnished with all such information as it may require under that section, grant or refuse the application.
      (2) The relevant authority shall grant the application if it appears to it from the information furnished by the applicant and having regard to such other information, if any, as it may have—

      (a) that the applicant is a fit and proper person to act as an insolvency practitioner; and

      (b) that the applicant meets the prescribed requirements with respect to education and practical training and experience.

      (3) An authorisation shall, unless previously withdrawn, continue in force for such period not exceeding the prescribed maximum as may be specified in the authorisation.
      (4) An authorisation granted under this section may be withdrawn by the relevant authority if it appears to it—
      (a) that the holder of the authorisation is no longer a fit and proper person to act as an insolvency practitioner; or

    New Clause 10—Reference to Tribunal—
    `(1) A person on whom a notice is served under section [Notices] above may within twenty-eight days after the date of service give written notice to the relevant authority requiring the case to be referred to the Tribunal referred to in subsection (6) below.
    (2) Where a requirement is made in accordance with subsection (1) above, then unless the relevant authority within the period there mentioned—

    (a) decides to grant the application or, as the case may be, decides not to withdraw the authorisation; and

    (b) gives written notice of that fact to the person by whom the requirement was made, it shall refer the case to the Tribunal.

    (3) On a reference under this section the Tribunal shall—

    (a) investigate the case; and

    (b) make a report to the relevant authority stating what would in their opinion be the appropriate decision in the matter and the reasons for that opinion; and it shall be the duty of the relevant authority to decide the matter accordingly.

    (4) The Tribunal shall send a copy of the report to the applicant or, as the case may be, the holder of the authorisation; and the relevant authority shall serve him with a written notice of the decision made by it in accordance with the report.
    (5) The relevant authority may, if it thinks fit, publish the report of the Tribunal.
    (6) For the purposes of this section there shall be a tribunal—

    (a) which shall be known as the Insolvency Practitioners Tribunal (in this Part referred to as "the Tribunal"); and

    (b)in relation to which the provisions of Schedule 1 to this Act shall apply.'.

    (b) without prejudice to paragraph (a) above, that the holder of the authorisation has failed to comply with any provision of this Part or of any regulations made under it or. in purported compliance with any such provision, has furnished the relevant authority with false, inaccurate or misleading information.
    (5) An authorisation granted under this section may be withdrawn by the relevant authority at the request or with the consent of the holder of the authorisation.'.—[Mr. Fletcher.]
    Brought up, read the First and Second time, and added to the Bill.

    New Clause 8

      NOTICES
      '(1) Where the relevant authority grants an authorisation, it shall give written notice of that fact to the applicant, specifying the date on which the authorisation takes effect.
      (2) Where the relevant authority proposes to refuse an application or to withdraw an authorisation under section [Grant, refusal and withdrawal of authorisation] (4) above, it shall give the applicant or holder of the authorisation written notice of its intention to do so, setting out particulars of the grounds on which it proposes to act.
      (3) In the case of a proposed withdrawal the notice under subsection (2) above shall state the date on which it is proposed that the withrawal should take effect.
      (4) A notice under subsection (2) above shall give particulars of the rights exercisable under sections [Right to make representations] and [Reference to Tribunal] below by a person on whom the notice is served.'.—[Mr. Fletcher.]
      Brought up, and read the First time.
      Mr. Fletcher: I beg to move, That the clause be read a Second time.
      Mr. Deputy Speaker: With this, we may take the following: New clause 9—Right to make representations—
      '(1) A person on whom a notice is served under section [Notices] above may within fourteen days after the date of service make written representations to the relevant authority.
      (2) The relevant authority shall have regard to any representations made in accordance with this section in determining whether to refuse the application or withdraw the authorisation, as the case may be.'.
      Amendment (a), in line 1, after 'under', insert 'subsection (2) of'.
      Amendment (a), in line 1, after 'under', insert `subsection (2) of'.
      Amendment (b), in line 2, after 'service', insert
      'or in a case where he has made representations under subsection (1) of section (Right to make representations) above within twenty-eight days after the relevant authority has given him notice that having considered his representations it has determined to refuse his application or withdraw his authorisation as the case may be'.
      Government new clause 11 and Government amendments Nos. 8 and 182.
      Mr. Fletcher: New clause 8 does not differ from clause 4(3)(a) in that it requires the relevant authority to give written notice when it grants or proposes to refuse or withdraw an authorisation. However, the new clause goes further by requiring the relevant authority to give more information to the applicant or holder of an authorisation about the date when authorisation takes place or withdrawal takes effect.
      New clause 9 gives the person on whom a notice of a proposed refusal or withdrawal of authorisation is served the right to make written representations to the relevant authority within 14 days.
      I am grateful to the right hon. Member for Glasgow, Govan (Mr. Millan) for tabling amendment (a) to new clause 9. It clarifies which subsection in the notices clause is being referred to and we are happy to accept it.
      New clause 10 differs in several ways from the existing provisions in the Bill. First, it gives a person 28 days instead of 14 days in which to require his case to be referred to the insolvency practitioners tribunal. Secondly, it requires the tribunal to send a copy of its report not only to the relevant authority, but to the person concerned. The relevant authority will have to serve the person with a written notice of its decision made in accordance with the tribunal's report and may also publish the report if it thinks fit.

    New Clause 9

      RIGHT TO MAKE REPRESENTATIONS
      `(1) A person on whom a notice is served under section [Notices] above may within fourteen days after the date of service make written representations to the relevant authority.
      (2) The relevant authority shall have regard to any representations made in accordance with this section in determining whether to refuse the application or withdraw the authorisation, as the case may be.',—[Mr. Fletcher.]
      Brought up, and read the First time.
      Amendment made: (a) in line 1, after 'under', insert 'subsection (2) of'.—[Mr. Millan.]
      Clause, as amended, read a Second time, and added to the Bill.

    New Clause 10

      REFERENCE TO TRIBUNAL
      To move the following clause:
      `(1) A person on whom a notice is served under section [Notices] above may within twenty-eight days after the date of service give written notice to the relevant authority requiring the case to be referred to the Tribunal referred to in subsection (6) below.
      (2) Where a requirement is made in accordance with subsection (1) above, then unless the relevant authority within the period there mentioned—

      (a) decides to grant the application or, as the case may be, decides not to withdraw the authorisation; and

      (b) gives written notice of that fact to the person by whom the requirement was made, it shall refer the case to the Tribunal.

      (3) On a reference under this section the Tribunal shall—

      (a) investigate the case; and

      (b) make a report to the relevant authority stating what would in their opinion be the appropriate decision in the matter and the reasons for that opinion;
      and it shall be the duty of the relevant authority to decide the matter accordingly.

      I am, again, grateful to the right hon. Member for Govan for tabling amendments (a) and (b) to new clause 10. I am happy to accept amendment (a), because it clarifies which subsection is being referred to, and amendment (b) is accepted in principle, because a person who makes representations may not consider requiring his case to be referred to the tribunal until he is aware of the result of his representations. The amendment will ensure that he has 28 days to act from when he is given notice of the decision. However, there are drafting difficulties with the amendment. I ask the right hon. Gentleman to withdraw that amendment, because we intend to deal with the matter in an amendment to be moved in the House of Lords.
      New clause 10 allows a person 28 days in which to require that his case be referred to the tribunal. However, if he does not make that requirement, and assuming that the relevant authority has not been swayed by any written representations lodged within the first 14 days, new clause, 11 requires that the authority must await the expiration of the 28 days appeal period before giving written notice of the refusal or withdrawal.
      Amendment No. 182, which amends the Tribunals and Inquiries Act 1981, is necessary to place the insolvency practitioners tribunal under the supervision of the Council on Tribunals. I commend the new clauses and amendments to the House.
      Mr. Millan: I do not have to make a speech because the Government agree that my amendments are necessary. I accept that amendment (b) to new clause 10 is inelegant, but I thought there was a deficiency in new clauses 9 and 10. I am glad that that is recognised and that the Minister intends the matter to be put right in another place.
      Question put and agreed to.
      Clause read a Second time, and added to the Bill.
      (4) The Tribunal shall send a copy of the report to the applicant or, as the case may be, the holder of the authorisation; and the relevant authority shall serve him with a written notice of the decision made by it in accordance with the report.
      (5) The relevant authority may, if it thinks fit, publish the report of the Tribunal.
      (6) For the purposes of this section there shall be a tribunal—

      (a) which shall be known as the Insolvency Practitioners Tribunal (in this Part referred to as "the Tribunal"); and

      (b) in relation to which the provisions of Schedule 1 to this Act shall apply.'.—[Mr. Fletcher.]

      Brought up, and read the First time.
      Amendment made: (a) in line 1, after 'under', insert `subsection (2) of—[Mr. Millan.]
      Clause, as amended, read a Second time, and added to the Bill.

    New Clause 11

      REFUSAL OR WITHDRAWAL WITHOUT REFERENCE TO TRIBUNAL
      'Where no requirement is made under section [Reference to Tribunal] (1) above in respect of a proposed refusal or withdrawal, the relevant authority may, at the expiration of the period within which such a requirement can be made, give written notice of the refusal or withdrawal to the person concerned in accordance with the proposal in the notice given by it under section [Notices] (2) above.'.—[Mr. Fletcher.]
      Brought up, read the First and Second time, and added to the Bill.

    New Clause 12

      INTERPRETATION OF PART I
      'In this Part—
      "prescribed" means prescribed by regulations made by the Secretary of State;

    New Clause 18

      RESTRICTION ON USE OF COMPANY NAMES
      '(1) This section applies to a person where a company ("the relevant company") has gone into insolvent liquidation and he was a director or shadow director of the company at any time in the period of twelve months ending with the day before it went into liquidation; and for the purposes of this section a name is a prohibited name in relation to such a person if—

      (a) it is a name by which the relevant company was known at any time in the said period; or

      (b) it is a name which is so similar to a name falling within paragraph (a) above as to suggest an association with the relevant company.

      (2) Except with the leave of the court, a person to whom this section applies shall not at any time in the period of five years beginning with the day on which the relevant company went into liquidation—

      (a) be a director of any other company that is known by a prohibited name; or

      (b) in any way, whether directly or indirectly, be concerned or take part in the promotion, formation or management of any such company; or

      (c) in any way, whether directly or indirectly, be concerned or take part in the carrying on of a business carried on (otherwise than by a company) under a prohibited name.

      (3) If a person acts in contravention of this section, he shall in respect of each offence, be liable—

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

      (b) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or to both.

      (4) In subsection (2) above "the court" means any court having jurisdiction to wind up companies; and on an application for leave under that subsection, the Secretary of State or the official receiver may appear and call the attention of the court to any matters which seem to him to be relevant.
      (5) References in this section, in relation to any time, to a name by which a company is known are references to the name of the company at that time or to any name under which the company carries on business at that time.
      (6) For the purposes of this section a company goes into insolvent liquidation if it goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up.
      "the relevant authority" means—

      (a) in relation to a case of any description specified in directions given by the Secretary of State, the body or person so specified in relation to cases of that description; and

      (b) in relation to a case not falling within paragraph (a) above, the Secretary of State;
      "the Tribunal" means the Insolvency Practitioners Tribunal.'.—[Mr. Fletcher.]

      Brought up, and read the First time.
      Mr. Fletcher: I beg to move, That the clause be read a Second time.
      Mr. Deputy Speaker: With this it will be convenient to discuss Government amendments Nos. 9 and 10.
      Mr. Fletcher: The purpose of new clause 12 is to interpret part I of the Bill. and amendment 9 deletes clause 5 from the Bill.
      Amendment No. 10 to clause 6 is to give power to make regulations concerning the criteria for assessing whether a person is "fit and proper"; to prohibit acting in conflict of interest and to provide for the supervision of authorised practitioners, and other necessary matters.
      Question put and agreed to.
      Clause read a Second time, and added to the Bill.
      (7) In this section "company" includes a company which may he wound up under Part XXI of the 1985 Act—[Mr. Fletcher.]
      Brought up, and read the First time.
      7.45 pm
      Mr. Fletcher: I beg to move, That the clause be read a Second time.
      Mr. Deputy Speaker: With this it will be convenient to take the following amendments: (a), in line 36, at end add—
      '(8) In this section "director" excludes any director who together with connected persons does not hold more than 5 per cent. of the equity shares of the company.'.
      Government amendments Nos. 15 to 17 and 103 and 234.
      Mr. Fletcher: As the House is aware, the problems of the so-called phoenix syndrome, as a result of which innocent members of the public or suppliers are often misled by unscrupulous company directors, leading them to sustain often considerable financial loss, have become increasingly apparent during recent times. Many of the provisions of the Bill are directed at preventing such abuse in the future.
      We indicated, however, in Committee that the restriction on the subsequent use of a company's name as presently provided by clause 86 of the Bill was perhaps not the best way to approach the problem of abuse relating to the use of names of companies in liquidation, which is one of the manifestations of the phoenix syndrome. The company name itself is often a valuable asset which the liquidator can dispose of to the benefit of the creditors of the insolvent company.
      The proposed new clause, rather than preventing the continuing use of a company name, shifts the emphasis to those who have been directors, or shadow directors, of the company in insolvent liquidation in the 12 months before the liquidation. Such directors must not, unless they have the leave of the court, for a period of five years from the commencement of the liquidation, be involved in any other company which uses the same, or a very similar, name, including any trading style used by the liquidated company. Contravention of such provisions will be an offence and may also lead to personal liability for the new company's debts.
      Genuine cases of former directors wishing to buy out the business of a company in liquidation will, we feel, be sufficiently rare to justify their having to apply to the court for leave to use the same or a similar name in carrying on the new business. Liquidation will not come about immediately without any warning. There will always be a petition for winding up or a meeting called to pass an appropriate resolution if a company is to be wound up voluntarily, and the persons concerned will have time to apply to the court for leave to continue to be involved in companies with similar names to that of the company in liquidation, for instance, where a group of companies is involved.
      Amendment (a), tabled by my hon. Friends the Members for Richmond and Barnes (Mr. Hanley) and for. Tynemouth (Mr. Trotter), seeks to exempt certain directors from the provisions of new clause 18. We feel that such an exemption would lead to unnecessary complications, particularly as there is, within the new clause, provision whereby such persons can apply to the
      542
      court for leave to continue to act as a director of a relevant company. It might also provide scope for abuse through the use of nominees or the manipulation of shareholdings at a late stage prior to liquidation. An application to the court in genuine circumstances would prove no more onerous than an application for some form of clearance certificate from the Secretary' of State suggested by my hon. Friend the Member for Richmond and Barnes in Committee in relation to clause 86 which this new clause replaces. I therefore ask my hon. Friends to withdraw their amendment.
      Mr. Gould: This is a welcome fulfilment of a promise which the Minister gave in Committee. It is a better and more accurate solution to an obvious problem than is clause 86. The hon. Member for Richmond and Barnes (Mr. Hanley) might be able to persuade me otherwise, but I am inclined to accept the Minister's reasoning.
      Mr. Hanley: I tabled the amendment late one night earlier this week in response to yet more new clauses. Considerable research has been done on ministerial statements promising amendments. I counted 27 such occasions and nine new clauses are now suggested
      Many of the amendments are in response to the professions. Those practising in insolvency are grateful for the way in which the Minister has responded to their advice. The problem is that the Minister might continue to respond until a Bill to amend this Bill is introduced next Session.
      Although new clause 18 is better than it was before, no hon. Member in his right mind would defend anyone who tried to set up another organisation using a name that was like another to defraud innocent people. As I said in Committee, often the name of the organisation is the most valuable asset that a liquidator has. There is another asset—the organisation's managers. Companies that have failed—perhaps through inexperience or, even worse, the deceit of certain directors—might be able to flourish with new capital and new management. It would be a disaster if certain people such as production, design and marketing directors, who are called "directors" but who are really senior managers, were allowed, without having to go to court, to be transferred with the name to another organisation.
      I fully accept that the new clause provides that one should go to court. We are trying not only to protect the innocent but to save the businesses that can be saved We are not trying to take the weakest companies to the wall if they can succeed with the help of an intravenous financial drip—for example, new management initiatives. If a valuable commodity such as the name of the business and its senior employees cannot be transferred without too many restrictions—especially, the severe restriction of having to go to court—the Bill may not be doing the job that we had hoped.
      I shall not press amendment (a). I have had an opportunity to express my concern and that of many insolvency professionals that the new clause will restrict the power of a liquidator to sell the name of a company with senior management who were innocent of any wrongdoing before the liquidation. Senior managers, who

      543
      are sometimes called production or design directors, should be able to transfer freely as long as the liquidator feels that they are bona fide.
      I am inexperienced in this matter, so I must explain that I did not declare my interest as a certified accountant earlier in this debate, because I had done so at the beginning of the Committee stage.
      Question put and agreed to.
      Clause read a Second time, and added to the Bill.

    New Clause 21

      AGENCY AND LIABILITY OF RECEIVER FOR CONTRACTS
      `(1) Section 473 of the 1985 Act (agency and liability of receiver for contracts) shall be amended as follows.
      (2) In subsection (2) after the words "provides" there shall be inserted the words ", and on any contract of employment adopted by him in the carrying out of those functions".
      (3) After subsection (4) there shall be inserted the following subsections—
      "(4A) For the purposes of subsection (2), a receiver is not to be taken to have adopted a contract of employment by reason of anything done or omitted to be done within 14 days after his appointment.
      (4B) This section does not limit any right to indemnity which the receiver would have apart from it, nor limit his liability on contracts entered or adopted without authority, nor confer any right to indemnity in respect of that liability —[Mr. Fletcher.]
      Brought up, and read the First time.
      Mr. Fletcher: I beg to move, That the clause be read a Second time.
      Mr. Deputy Speaker: With this it will be convenient to take amendment (a), line 7, leave out
      `or omitted to be done',
      Government new clause 20—Disposal of interest in property—
      Government amendments 60, 61, 264, 265, 64 to 77, 79, 80, 114, 174, 202 and 208 to 210.
      Mr. Fletcher: New clauses 20 and 21 and the 26 amendments to the Scottish receivership provisions in chapter V of part II are principally designed to bring them into line with changes made to those provisions relating to England and Wales, which were made in Committee. They accord with amendments to the England and Wales provisions which the House will be invited to make later.
      Mr. Hanley: Amendment (a) stands in my name and that of my hon. Friend the Member for Tynemouth (Mr. Trotter). This is an important point, as new clause 21 introduces a principle that I find difficult to countenance.New subsection (4A) states:
      "For the purposes of subsection (2), a receiver is not to be taken to have adopted a contract of employment by reason of anything done or omitted to he done within 14 days after his employment."
      This introduces a fairly new principle into this type of law—by doing nothing, the receiver is in effect allowing something to be ratified. If a receiver does not step in and say within 14 days to an employee, "This contract of employment is invalid", three, four or five months later he may be in difficulty. He may be confronted by a person who says, "I have an agreement with this company. I am the employee of a subcontractor to the company. I have been working with the company." The receiver may not have known of the conditions of employment that would have enabled that employee to be rejected within 14 days.
      544
      Does this mean that a receiver has to accept the contract of employment of anyone who comes to his attention after the 14-day period?
      In a business that has a worldwide payroll there may be people who do not come to the administrative receiver's attention within that 14-day period. This would bind the receiver and later in the Bill the administrative receiver to contracts of employment about which they were totally ignorant. I am concerned that the receiver will be bound by inaction. The 14-day period is far too short for large worldwide receiverships and liquidations. This could be extremely dangerous for the receiver, especially with respect to personal liability.
      Mr. Fletcher: I am afraid that the amendment proposed by my hon. Friend the Member for Richmond and Barnes (Mr. Hanley) is not acceptable. When I move amendment No. 29 I shall explain in more detail our proposals in relation to the liabilities of receivers generally in England, Wales and Scotland.
      I hope that I can allay my hon. Friend's concern. He is afraid that the court will consider a receiver to have adopted a contract of employment where he fails to inform an employee that he is not adopting his contract after 14 days have elapsed—perhaps where the receiver is in ignorance of the contract or simply omits, by accident, to give notice of non-adoption because the employee has contributed no service to the company during the 14 days' grace provided for by new subsection (4A) of section 473 of the 1985 Act. That is not the intention. New subsection (4A) is designed to catch the case where a receiver knowingly allows an employee to contribute his services and says nothing to him for more than 14 days about payment for those services.
      Current law appears to allow the receiver to say to the employee that his contract is with the company, that the company is insolvent and that he has no intention of paying him. This would clearly be wrong, as my hon. Friend the Member for Richmond and Barnes pointed out. We allow the receiver a period of grace in which to decide whether to adopt contracts of employment. New subsection (4A) does that, and the grace period is a fortnight.
      If the receiver knowingly allows an employee to contribute his services and says nothing to him for more than 14 days about his contract of employment, he should not be allowed to refuse to make payment for those services. Given the current state of the law, I am afraid that that would be the effect of my hon. Friend's amendment. I hope that he will withdraw it in the light of my remarks. If I have not entirely reassured him, perhaps he would be kind enough to allow me to move amendment No. 29 before pressing me further on this point.
      Mr. Hanley: Will this principle of adoption by not doing anything be extended to other contracts outside employment? If so, it will have remarkable consequences.
      Mr. Fletcher: No. We are dealing with a particular situation in current law.
      Question put and agreed to.
      Clause read a Second time, and added to the Bill.

    New Clause 20

      DISPOSAL OF INTEREST IN PROPERTY
      ' —(1) Section 477 of the 1985 Act (disposal of interest in property) shall be amended as follows—
      (2) In subsection (2)—

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      (a) at the beginning there shall be inserted the words "Subject to subsection (2A) below,"; and

      (b) the words from "But that authorisation" to the end of the subsection shall be omitted.

      (3) After subsection (2) there shall be inserted the following subsections—
      "(2A) In the case of an application where a fixed security over the property or interest in question which ranks prior to the floating charge has not been met or provided for in full, the court shall not authorise the sale or disposal of the property or interest in question unless it is satisfied that the sale or disposal would be likely to provide a more advantageous realisation of the company's assets than would otherwise be effected.
      (2B) It shall be a condition of an authorisation to which subsection (2A) above applies that—

      (a) the net proceeds of the disposal: and

      (b) where those proceeds are less than such amount as may be determined by the court to be the net amount which would he realised on a sale of the property in the open market by a willing seller, such sums as may be required to make good the deficiency,
      shall be applied towards discharging the sums secured by the fixed security.

      (2C) Where a condition imposed in pursuance of subsection (2B) above relates to two or more such fixed securities that condition shall require the net proceeds of the disposal and, where paragraph (h)of that subsection applies, the sums mentioned in that paragraph to be applied towards discharging the sums secured by those fixed securities in the order of their priorities.
      (2D) A copy of an authorisation under subsection (2) above certified by the clerk of court shall, within 14 days of the granting of the authorisation, be sent by the receiver to the registrar of companies.
      (2E) If the receiver without reasonable excuse fails to comply with subsection (2D) above, he is liable to a fine and, for continued contravention, to a daily default fine.".'.—[Mr. Fletcher.]
      Brought up, read the First and Second time, and added to the Bill.

    New Clause 13

      RIGHTS OF OCCUPATION ETC. OF BANKRUPT'S SPOUSE
      '(1) Where a spouse's rights of occupation under the Matrimonial Homes Act 1983 are a charge on the estate or interest of the other spouse or of trustees for the other spouse and the other spouse is adjudged bankrupt—

      (a) the charge shall continue to subsist notwithstanding the bankruptcy and, subject to the provisions of that Act, shall bind the trustee of the bankrupt's estate and persons deriving title under that trustee: and

      (b) any application by that trustee for an order under section 1 of that Act shall be made to the court having jurisdiction in relation to the bankruptcy.

      (2) Where a person and his spouse or former spouse are trustees for sale of a dwelling house and that person is adjudged bankrupt, any application by the trustee of the bankrupt's estate for an order under section 30 of the Law of Property Act 1925 (powers of court where trustees for sale refuse to exercise powers) shall be made to the court having jurisdiction in relation to the bankruptcy.
      (3) On such an application as is mentioned in subsection (1) or (2) above the court shall make such order under the said section 1 or the said section 30 as it thinks just and reasonable having regard to the interests of the bankrupt's creditors, to the conduct of the spouse or former spouse so far as contributing to the bankruptcy, to the needs and financial resources of the spouse or former spouse, to the needs of any children and to all the circumstances of the case.
      (4) Where such an application is made after the end of the period of one year beginning with the first vesting, under Chapter V of this Part, of the bankrupt's estate in a trustee, the court shall assume, unless the circumstances of the case are exceptional, that the interests of the bankrupt's creditors outweigh all other considerations '—[Mr. Fletcher.]
      Brought up, and read the First time.
      8 pm
      Mr. Fletcher: I beg to move, That the clause be read a Second time.
      Mr. Deputy Speaker: With this it will be convenient to discuss Government new clause 14—Rights of occupatiom of bankrupt—Government new clause 15—Payments in respect of premises occupied by bankrupt—and Government amendments Nos. 137, 138, 149, 161 and 247.
      Mr. Fletcher: This group of amendments is the Government's response to representations made both in another place and in Committee in relation to the recommendations of the review committee on the treatment of residential property occupied by a bankrupt's family. The review committee drew attention in particular to the position of a bankrupt's spouse who had no legal interest in the home. The review committee recommended that greater regard be had to the interests of the bankrupt's family, who were often innocent victims of the bankruptcy. The committee also recommended that a trustee in bankruptcy should not be able to dispose of a bankrupt's interest in a relevant property without an order of the court.
      The amendments that were tabled in another place on this subject were unacceptable to the Government, because, in giving too much weight to the interests of the family, they tilted the balance too far away from those of the bankrupt's creditors. We remain convinced that the interests of creditors must remain a high priority.
      As the House is aware, we have consulted on the subject but, as I indicated in Committee, the consultation produced no consensus of opinion as to the path to be followed, although several useful comments were received, which we have taken into account in framing our proposals. It may assist the House if I explain briefly the effect of the principal amendments. First, however, I should like to stress a point made by the review committee in paragraph 1119 of its report. It is a point not dealt with specifically in the amendments, because it is a question not of legalities but of good practice. The review committee said:
      "Trustees have usually acted with humanity both in the manner and in the timing of any sale of the family home … arrangements can often be made for the likely value to the creditors to be provided without a sale".
      In very many cases the matter is settled by negotiation without disturbing the family and without involving the court, and there is absolutely no reason why that should not continue to be the case.
      Turning to the amendments, new clause 13 sets out the principal proposals. Section 1 of the Matrimonial Homes Act 1983 confers on a spouse without any beneficial estate or interest in a matrimonial home rights of occupation as against the other spouse. At present where the spouse with a beneficial estate becomes bankrupt the spouse without any such interest loses his or her rights of occupation as against the trustee in bankruptcy. Subsection (1) of the new clause reverses that position and the spouse who has no beneficial interest in the property is therefore placed in a similar position to a spouse with a beneficial interest. The position in the case of a spouse with such an interest is dealt with in subsection (2) of the clause and remains basically the same as now. That is to say, that the trustee

      547
      needs to obtain an order of the court under section 30 of the Law of Property Act 1925 before being able to sell the property concerned.
      Subsection (3) of the clause allows the court to make whatever order it considers just and reasonable on an application by the trustee under either subsection (1) or subsection (2). The criteria to which the court is to have regard are based on those contained in section 1(3) of the Matrimonial Homes Act 1983. The matters mentioned in subsection (3) of the clause strike, we think, the balance sought by the review committee and have the advantage of being based on existing matrimonial legislation, with the necessary addition of the interests of the bankrupt's creditors.
      Subsection (4) of the clause provides that, unless there are exceptional circumstances, on any application by the trustee once the period of one year from the date of the vesting of the bankrupt's property has expired, the interests of the bankrupt's creditors are to be paramount. The combined effect of subsections (3) and (4) is that the court is to regard the period of one year as the maximum breathing space to be allowed to the members of the family under normal circumstances, to enable them to adjust to their changed circumstances and either to seek alternative accommodation or arrange the buying out of the bankrupt's interest. The court may, of course, allow only a shorter period, or no period at all, if circumstances warrant it. However, we expect the combined effect of the amendments and the practice of negotiation normally adopted by trustees to result in most cases in a period of grace for the bankrupt's family of the type sought by the review committee.
      New clause 14 applies to a limited extent the principles of new clause 13 in the case of a bankrupt who has actual custody of children. This is to cover the situation where the bankrupt has no spouse with occupational rights or, because of a divorce, no spouse at all, but nevertheless has children to bring up. In such a case the needs of the bankrupt's children will be taken into account by the court but not the needs of the bankrupt.
      New clause 15 preserves the present position where a bankrupt is able, for whatever reason, to continue to occupy premises comprised in his estate and makes mortgage payments or pays other outgoings in relation to the property. If such payments give rise to the post-bankruptcy acquisition by the bankrupt of an interest in the property, such interest vests automatically in his trustee as after-acquired property under section 38 of the Bankruptcy Act 1914.
      This package of amendments goes a long way towards meeting the objectives of the review committee in respect of what is termed the family home. At the same time it achieves an equitable balance between the rights and interests of the creditors and those of the bankrupt's family.
      Mr. Gould: A measure of the difficulties that we face is the fact that we are now confronted with new clauses which, to do justice to them, merit some hours of debate. The importance and difficulty of the subject is so great that we ought not to allow these provisions to be passed without substantive debate.
      We are also in the difficulty that the consultation process, through which the Government quite rightly
      548
      went, ended so recently that hon. Members are little the wiser. The Government may have been privy to the representations and to the consequences of the consultations, but we were not. It would have been useful if we could have seen the representations in published form. We have seen a list of those who made representations, but we have very little idea of what they said or of the balance of opinion on many of the issues. We are therefore compelled to exercise our judgment on the basis of very little information.
      It has been apparent from the outset that the obvious interests of the bankrupt's family, who will often be completely innocent parties, remaining in the family home have to be reconciled with the equally compelling interests of a different nature of the creditors who, if they cannot lay their hands on the primary asset, might find themselves in difficulties.
      The effect of these provisions means that the whole question has been handed over to the courts. I am sure that the Under-Secretary of State recognises that this is very much the pattern that has been adopted over matrimonial property disputes, where the maximum amount of discretion has been given to the courts. In that sense, the Under-Secretary of State is right to have pursued that course. It reflects fairly accurately the recommendations of the review committee. On that ground, too. it is more acceptable.
      It is clear that the structure of the arrangement allows discretion to the court, but that after a period of grace of one year there is a presumption that the creditors' interests will then prevail. I am not sure that that is necessarily as liberal as one would have liked. I enter that caveat without wishing to press it further.
      Secondly, the review committee referred not just to children but to ailing, elderly and dependent relatives, yet the provisions make no reference to that point.
      There is probably an obvious answer to a drafting point which puzzles me. New clause 14(3)(c) refers to a person who
      "married the bankrupt immediately before the commencement of the bankruptcy".
      I am not quite sure about the significance of the word "immediately."
      Question put and agreed to.
      Clause read a Second time, and added to the Bill.

    New Clause 14

      RIGHTS OF OCCUPATION OF BANKRUPT
      `(1) This section applies where a person—

      (a)who is entitled to occupy a dwelling house by virtue of a beneficial estate or interest: and

      (b) with whom any children have their home,
      is adjudged bankrupt.

      (2) Whether or not the bankrupt's spouse (if any) has rights of occupation under the Matrimonial Homes Act 1983—

      (a) the bankrupt shall have as against the trustee of his estate and persons deriving title under that trustee the same rights of occupation under that Act as a person who fell within subsection (3) below would have; and

      (b) subject to the provisions of this section, that Act shall apply accordingly.

      (3) This subsection applies to a person if—

      (a) that person is the spouse of the bankrupt;

      (b) that person is not entitled to occupy the dwelling house by virtue of a beneficial estate or interest:

      (c) that person married the bankrupt immediately before the commencement of the bankruptcy; and

      (d) the dwelling house is a matrimonial home of the bankrupt and that person.

      (4) Any application by the trustee of the bankrupt's estate for an order under section 1 of the said Act of 1983 shall be made to the court having jurisdiction in relation to the bankruptcy.
      (5) On such an application as is mentioned in subsection (4) above the court shall make such order under the said section 1 as it thinks just and reasonable having regard to the interests of the creditors, to the bankrupt's financial resources, to the needs of the children and to all the circumstances of the case other than the needs of the bankrupt.
      (6) Where such an application is made after the end of the period of one year beginning with the first vesting, under Chapter V of this Part, of the bankrupt's estate in a trustee, the court shall assume, unless the circumstances of the case are exceptional, that the interests of the bankrupt's creditors outweigh all other considerations.—[Mr. Fletcher.]
      Brought up, read the First and Second time, and added to the Bill.

    New Clause 15

      PAYMENTS IN RESPECT OF PREMISES OCCUPIED BY BANKRUPT
      'Where any premises comprised in a bankrupt's estate are occupied by him (whether by virtue of section [Rights of occupation of bankrupt] above or otherwise) on condition that he makes payments towards satisfying any liability arising under a mortgage of the premises or otherwise towards the outgoings of the premises, the bankrupt shall not, by virtue of those payments, acquire any interest in the premises.'.—[Mr. Fletcher.]
      Brought up, read the First and Second time, and added to the Bill.

    New Clause 16

      DISABILITIES ON REVOCATION OF ADMINISTRATION ORDER AGAINST INDIVIDUAL
      `(1) Where a person fails to make any payment which he is required to make by virtue of an administration order under Part VI of the County Courts Act 1984, the court which is administering the estate of that person under that order may. if it thinks lit, revoke the administration order and make an order directing that this section shall apply to that person for such period, not exceeding two years, as may be specified in the order.
      (2) A person to whom this section applies by virtue of an order under subsection (1) above shall not, except with the leave of the court which made that order, act as director or liquidator of, or directly or indirectly take part or be concerned in the promotion, formation or management of, a company (within the meaning of section 1 above).
      (3) A person to whom this section so applies shall not—

      (a) either alone or jointly with another person, obtain credit to the extent of the amount prescribed for the purposes of section 179(1)(a) above or more; or

      (b) enter into any transaction in the course of or for the purposes of any business in which he is directly or indirectly engaged,
      without disclosing the fact that this section applies to him to the person from whom he obtains the credit or, as the case may be, with whom the transaction is entered into.

      (4) The reference in subsection (3) above to a person obtaining credit includes a reference to—

      (a) a case where goods are bailed or hired to him under a hire-purchase agreement or agreed to be sold to him under a conditional sale agreement; and

      (b) a case where he is paid in advance (whether in money or otherwise) for the supply of goods or services.

      (5) A person who contravenes this section shall be guilty of an offence and liable—

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

      (b) on conviction on indictment, to imprisonment for a term not exceeding two years or to a fine or to both. '.—[Mr. Fletcher.]

      Brought up, and read the First time.
      Mr. Fletcher: I beg to move That the clause be read a Second time.
      Mr. Deputy Speaker: With this we may take Government amendment No. 176.
      Mr. Fletcher: The Insolvency Bill has repealed most sections of the Insolvency Act 1976, including section 11. which enables the court to make a receiving order where a debtor has failed to make the payments due under a county court administration order. For a number of practical reasons, that section has never been brought into force.
      A large number of administration orders are revoked each year. If the section were used to its fullest extent, the Official Receiver would have to deal with numerous extra small cases, which probably did not warrant the investigation. I appreciate that the courts should be able to apply some form of sanction where a debtor is subject to a county court administration order and then does not comply with its terms. Such a debtor has similar privileges to those of a bankrupt, in that the order prevents creditors from pursuing remedies in respect of debts covered by the order.
      While preserving the right of creditors, or the debtor himself, to apply for formal bankruptcy, the new clause will allow the court to impose some of the restrictions of bankruptcy without necessitating full bankruptcy proceedings. Of course, the restrictions may be revoked only when the person fails to make the payments under the order. As in the majority of cases the person will have no assets of value and only minimal debts, that does seem to be an appropriate way of dealing with persons who are subject to the administration order procedure.
      The imposition of such restrictions will not preclude creditors from taking normal recovery steps, including bankruptcy proceedings, but they will no doubt have regard to the practicalities of recovering anything from a person who has few or no assets.
      Question put and agreed to.
      Clause read a Second time, and added to the Bill.

    New Clause 17

      CO-OPERATION BETWEEN COURTS EXERCISING JURISDICTION IN RELATION TO INSOLVENCY LAW
      '(1) An order made by a court in any part of the United Kingdom in the exercise of jurisdiction in relation to insolvency law shall be enforced in any other part of the United Kingdom as if it were made by a court exercising the corresponding jurisdiction in that other part.
      (2) Without prejudice to subsections (3) and (4) below, nothing in subsection (1) above shall require a court in any part of the United Kingdom to enforce, in relation to property situated in that part, any order made by a court in any other part of the United Kingdom.
      (3) The courts having jurisdiction in relation to insolvency law in any part of the United Kingdom shall assist the courts having the corresponding jurisdiction in any other part of the United Kingdom or any relevant country or territory.
      (4) For the purposes of subsection (3) above a request made to a court in any part of the United Kingdom by a court it any other part of the United Kingdom. or in a relevant country or territory shall be authority for the court to which the request is made to apply, in relation to any matters specified in the request, the insolvency law which is applicable by either court in relation to comparable matters falling within its jurisdiction: and in exercising its discretion under this subsection, a court shall have regard in particular to the rules of private international law.
      (5) Section 38 of the Criminal Law Act 1977 (execution of warrant of arrest throughout the United Kingdom) shall apply to

      551
      a warrant which, in exercise of any jurisdiction in relation to insolvency law, is issued in any part of the United Kingdom for the arrest of a person as it applies to a warrant issued in that part of the United Kingdom for the arrest of a person charged with an offence.
      (6) In this section "insolvency law" means—

      (a) in relation to England and Wales, provision extending to England and Wales and made by or under this Act or Parts XIX to XXI of the 1985 Act;

      (b) n relation to Scotland, provision extending to Scotland and made by or under this Act, Parts XVIII to XXI of the 1985 Act or the Bankruptcy (Scotland) Act 1985;

      (c)in relation to Northern Ireland, provision made by or under the Bankruptcy Acts (Northern Ireland) 1857 to 1980, Part V, VI or IX of the Companies Act (Northern Ireland) 1960 or Part IV of the Companies (Northern Ireland) Order 1978;

      (d) in relation to any relevant country or territory, so much of the law of that country or territory as corresponds to provisions falling within any of the foregoing paragraphs.

      (7) In this section "relevant country or territory" means—

      (a) any of the Channel Islands or the Isle of Man; or

      (b) any country or territory designated for the purposes of this section by the Secretary of State by order made by statutory instrument.'.—[Mr. Fletcher.]

      Brought up, and read the First time.
      Mr. Fletcher: I beg to move, That the clause be read a Second time.
      Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 160, 168, 175, 177, 179, 180, 230A, 245 and 250 to 253.
      Mr. Fletcher: In Committee, my hon. Friend the Parliamentary Under-Secretary of State gave notice that clause 194 was to be replaced by a new inter-jurisdictional clause which gave effect to the recommendations of the review committee in chapter 49 of its report. The amendments are consequential on the new clause.
      As was explained on that occasion, by virtue of the new clause, courts within the United Kingdom will be able to enforce orders made by the courts of other United Kingdom jurisdictions in the exercise of jurisdiction in relation to insolvency law. The clause creates a complete intra-United Kingdom system of reciprocal enforcement in respect of bankruptcy, winding-up, receivership and the new administration order procedure.
      Question put and agreed to.
      Clause read a Second time, and added to the Bill.

    New Clause 19

      RECOGNISED BANKS ETC.
      `(1) The Secretary of State may, by order made with the concurrence of the Treasury and after consultation with the Bank of England, provide that such provisions of Part II of this Act and Parts XVIII to XXI of the 1985 Act as may be specified in the order shall apply in relation to—

      (a) recognised banks and licensed institutions within the meaning of the Banking Act 1979; and

      (b) institutions to which sections 16 and 18 of that Act apply as if they were licensed institutions,
      with such modifications as may be so specified.

      (2) An order under this section may make different provision for different cases and may contain such incidental, supplemental and transitional provisions as may appear to the Secretary of State necessary or expedient.
      (3) An order under this section shall be made by statutory instrument subject to annulment in pursuance of a resolution of either House of Parliament.'.—[Mr. Fletcher.]
      Brought up, and read the First time.
      Mr. Fletcher: I beg to move. That the clause be read a Second time.
      Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 18, 19 and 228.
      Mr. Fletcher: New clause 19 will empower the Secretary of State, with the concurrence of the Treasury and after consultation with the Bank of England, to introduce by order a modified version of the administrative procedure to apply to recognised banks, licensed and other institutions covered by the Banking Act 1979. Pending the making of that order, amendments Nos. 18, 19 and 228 disapply the provisions of part II, chapter III, from recognised banks and licensed institutions.
      The evolution of the new procedure, following consultations with practitioners on the detailed provisions, has meant that it has not been possible to devise appropriate modifications to make it suitable for application to Banking Act institutions in time for their inclusion in the Bill. Clearly, such modification is necessary in recognition of the Bank of England's statutory status in relation to the supervision of recognised banks and licensed institutions.
      The provisions of the winding-up code already recognise this statutory status. It is intended that an order will be made under new clause 19, which will modify part II, chapter III, in a way which recognises the Bank of England's supervisory responsibilities. The provisions of the winding-up code will be the principal guide in devising the modified procedure, but detailed consultations with relevant Departments will take place.
      8.15 pm
      Mr. Gould: I congratulate the Minister on speaking for several minutes about the Bank of England's supervisory functions, about recognised banks and about banks failing, and for getting right to the heart of the very area which has been occupied by Johnson Matthey Bankers. Can he assure us that the provisions were not tabled in response to that situation?
      Mr. Fletcher: I am not surprised at the hon. Gentleman's remarks, but I can give him the assurance that he seeks.
      Question put and agreed to.
      Clause read a Second time, and added to the Bill.

    New Clause 22

      AMENDMENTS OF RESTRICTIVE TRADE PRACTICES ACT 1976
      '(1) No restriction in respect of any of the matters specified in subsection (2) below shall, after the coming into force of this section, be regarded as a restriction by virtue of which the Restrictive Trade Practices Act 1976 applies to any agreement (whenever made).
      (2) The said matters are—

      (a) the charges to be made, quoted or paid for insolvency services supplied, offered or obtained;

      (b) the terms or conditions on or subject to which insolvency services are to be supplied or obtained;

      (c) the extent (if any) to which, or the scale (if any) on which, insolvency services are to be made available, supplied or obtained;

      (d) the form or manner in which insolvency services are to be made available, supplied or obtained;

      (e) the persons or classes of persons for whom or from whom, or the areas or places in or from which, insolvency services are to be made available or supplied or are to be obtained.

      (3) In this section "insolvency services" means the services of persons acting as insolvency practitioners or carrying out under the law of Northern Ireland functions corresponding to those mentioned in section 1(2) or (3) above, in their capacity as such; and expressions which are also used in the said Act of 1976 have the same meanings as in that Act.
      (4) In Schedule 1 to the said Act of 1976 (services excluded from designated services), after paragraph 9 there shall be inserted the following paragraph—
      "9A. Insolvency services within the meaning of section (Amendment of Restrictive Trade Practices Act 1976) of the Insolvency Act 1985.".'.—[Mr. Fletcher.]
      Brought up, and read the First time.
      Mr. Fletcher: I beg to move, That the clause be read a Second time.
      Mr. Deputy Speaker: With this it will be convenient to take Government amendment No. 267.
      Mr. Fletcher: The purpose of the new clause is to exempt the provision of insolvency services from the application of the Restrictive Trade Practices Act 1976 and to extend that exemption to Northern Ireland.
      Mr. Gould: I cannot resist making a brief comment. I am sure that the Minister will recognise that this is one element in a by now very confusing pattern established by the Government in their attitude towards professional bodies. On the one hand, we have deregulation for opticians, solicitors and many other professions; on the other hand, we have the retrenchment of restrictive practices for the stock exchange and in this case for insolvency practitioners. One of these days, will the Minister turn his mind to a coherent competition policy?
      Mr. Fletcher: One hit at a time, please.
      Question put and agreed to.
      Clause read a Second time, and added to the Bill.

    New Clause 4

      DATA AND ESTIMATES
      '()—(1) The directors of every public company shall secure and collate not less than once in each accounting reference period such data about the company's affairs and transactions and those of its subsidiaries and prepare such estimates of the future course of the business as are necessary to enable a reasonable assessment to be made of the future ability of the company to carry on business as a going concern and to pay its debts as they fall due.
      (2) The data and estimates prepared in pursuance of subsection (1) above shall be provided as soon as reasonably practicable to all the directors of the company, to the company secretary and to the auditors.
      (3) In the auditors' report the auditors shall state if it is their opinion (having due regard to the nature of the company's undertakings) that the requirements of subsection (1) of this section have not been complied with.
      (4) "accounting reference period" has the meaning given in section 2 of the Companies Act 1976; and
      "auditor's report" has the meaning defined in section 14 of the Companies Act 1967.'.—[Sir B. Rhys Williams.]
      Brought up, and read the First time.
      Sir Brandon Rhys Williams: I beg to move, That the clause be read a Second time.
      The clause stands in my name and in the names of right hon. and hon. Members on each side of the House.
      The Bill is entitled "Insolvency" but it also deals with important aspects of company management, and in particular the way in which problem companies are managed by the directors, and their fitness to continue in that capacity in the light of their performance when their
      554
      companies are in difficulties. It also introduces a new type of manager, as I read it, in the form of the administrator, who appears in clause 21. Clause 21 says that
      "an administration order shall not be made in relation to a company … after the company has gone into liquidation".
      The Bill therefore is dealing with the procedure which is open to parties concerned with the management before it has reached the point of no return. It seems to be producing a new type of company Siegfried who has to tackle the problem of the companies in difficulties at the stages where they might still be saved by the introduction of some new supervisory element, that is to say, before they have reached the stage at which they can no longer carry on business as a going concern and pay their debts as they fall due.
      We must ask ourselves whether that is the best system that we can think of, bearing in mind the number of companies that seem to slide unexpectedly into acute financial difficulties. Many companies seem to reach the brink of disaster before anybody has tried to get something done. All too often, the creditors, the shareholders and even the directors do not know how deeply they are in trouble before reaching the point of no return.
      The Bill, especially in clauses 7 to 9, refers to the punishment of directors who fail to carry out their functions in difficult circumstances. Anxieties about those parts of the Bill have been expressed in another place and in Committee. When difficulties arise, it is commonplace for people to ask why nobody knew the company was approaching insolvency, why there was no warning and, in particular, what the auditors were doing.
      The long-standing problem of British company law is the weakness of the elements that are expected to act in a supervisory capacity on behalf of the shareholders. It is not sufficient to blame the directors in the present set-up as the only parties who should carry the blame. In the 19th century, Germany evolved the practice of appointing a supervisory board. In Britain, however, we adopted the practice of appointing auditors with specific but limited responsibilites relating to the accounts for former years.
      The work of the auditors has extended into other areas related to the financial affairs of companies and, in some ways, their status has become more important. In one way, however, the position of the auditors has been weakened. I may be one of the few hon. Members here who is not a qualifed auditor and I might therefore be speaking out of turn, but I believe that what I have to say is quite widely agreed in the profession. Auditors have become more dependent on the board and oriented towards the service of management. Their duty to provide a service for shareholders in a supervisory role has correspondingly become more difficult to perform.
      When things go wrong we blame the auditors—we have all read recently of a company which has been mentioned here in the past half hour—but we are possibly asking too much of them because we do not give them the status that they ought to have in helping to prevent companies from sliding into insolvency. When dealing with problem companies auditors do not have a simple duty in company law to issue a warning note to the shareholders. It is difficult, unhelpful or even improper for them to qualify the accounts with an adverse comment—if the balance sheet and profit and loss account are a correct record of how things were when the accounts were made up. The auditors do not have a clear statutory

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      responsibility to issue a warning to shareholders and to make known their doubts about the course the business may take in the future.
      Some elements of the profession would not wish that situation to be changed; they feel that they would then be taken into an area of prophesy and out of the strictly arithmetical and professional background which they are trained to deal with. The difficulties in many of our public companies that have come to light recently show a deficiency in our company law which in effect is creating insolvency, because the parties that ought to be acting to prevent it are not doing so in time.
      Mr. Hanley: Auditors have the power to qualify an audit report if the auditor believes that the company is not a going concern. There is a requirement on directors to state in their report the likely developments in the business of the company and its subsidiaries and, under recent company law, the auditor must consider whether that information is fair. There are therefore some provisions by which an auditor has to consider the future in a modern audit.
      Sir Brandon Rhys Williams: I agree with my hon. Friend, but there is a great deal of doubt in the profession about how those functions must be carried out. When a company goes to the market for fresh funds and has to issue a prospectus, the auditors have a well defined responsibility. When a company fails to analyse its own data, nobody is confident about what is happening. Auditors cannot act in a clairvoyant manner because the data on which they might base professional and responsible advice to shareholders has not been prepared or, if it has, it might not be reliable because, in different branches of the business, managers approach the making of estimates or the collecting of data concerning performance, costing. profits and so on, quite differently. They sometimes do that in a way which suits their comparative performance.
      When the data is unreliable or the estimates of the costs of the business are based on inadequate knowledge of markets and technical factors, there is an acute difficulty for the auditors. If they sense that the company is coming under the scrutiny of shareholders or institutional investors who are anxious about the way it is going and then come out brazenly with criticisms that are made public, they simply serve to compound the difficulties of a company which might be basically sound and add to the problems which could be corrected if management knew what to do.
      All too often, management does not have the necessary professional guidance from people who know what happens in other businesses. It should be noted that 90 per cent.—perhaps a higher proportion—of our public companies are already doing what I am asking. The proportion might even be 99 per cent; but some companies are not doing what I suggest. The managements of those companies might be ignorant of the fact that they are not handling the preparation of data and estimates in a way which many other businesses would regard as commonplace.
      I have proposed the provisions of new clause 4 many times before and the text bears the signs of my having received very well-informed professional advice when I first drew it up. I have chosen to refer only to public companies, partly because I do not want to make new
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      burdens for private concerns and partly because small businesses are naturally able to make their own estimates of where they are going in a way which is quite different from the practice of large companies. In regard to the preparation of data and estimates, small businesses should follow practices similar to those which I recommend for public companies, but it is not necessary to carry that idea into company law.
      The great majority of public companies, and all well-managed concerns, collate their records of company performance and make projections of the future course of the business as an elementary precaution and as an automatic aspect of good management. They regard it as a matter of course and an essential element in the control of the business. Because some companies do not do that, however, we have shock insolvencies. We should not be prepared to allow that situation to continue when it can so easily be remedied with existing management and professional resources.
      Companies may prepare their forecasts punctually and competently or they may rely upon the hunches of senior management. That can sometimes be a good way to run a business, but it can sometimes be a disastrous way to run a business. I am sure that anyone who has experience of industry or commerce could think of examples of companies that come under those categories.
      8.30 pm
      We sometimes find that a company is dominated by one powerful individual. A company created by an entrepreneur which has grown to the point where it finds it necessary to go public and which is then managed by the founder with a circle of relatively powerless or ill-informed directors and non-executive directors who do not have the knowledge necessary successfully to challenge the founder's decisions is a strong candidate for sudden insolvency. That is a well-known type of company in the City. They are sometimes profitable but sometimes disastrous.
      With that in mind I have stipulated in new clause 4 that the data and estimates required under the clause should be circulated to all the directors, the company secretary and the auditors. I can think of many examples, as I am sure hon. Members can, where there is a clique of directors or members of top management who are fairly well in the know; and there is also an outer circle of people who are supposed to bear the responsibility for management but who are not kept fully informed of what is going on. That is another type of company that is a candidate for sudden insolvency.
      If we are to have the doctrine of directors' collective responsibility, we must ensure that all directors are kept fully in the picture about the company's ability to pay its debts and carry on as a going concern. There will be some company secrets. I do not insist that a matter which is so private that if it were disclosed outside the firm it would damage the business should be circulated outside the company. I do not suggest that the data and estimates should be made known to the shareholders or to the public but only to those in the company who have to bear the responsibility for running it and to the auditors. All companies must gain if the directors know what is happening.
      Who can decide what the company should be doing about the preparation of estimates and forecasts? Clearly, the professional accountants retained by the shareholders

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      to supervise the way in which the company tackles its financial responsibility should do that. How can we give the auditors the power and the duty to perform that function discreetly but effectively without damaging the business? I have given that matter considerable thought, as hon. Members may be aware. What I suggest in new clause 4 is the best proposal that I can bring forward for my hon. Friend's consideration. I have been making the same suggestion for a number of years, and I should be pleased now to hear what the Department thinks of it. If it does not like my suggestion, we may hear what it recommends to fill that gap.
      I suggest that the auditors must warn the shareholders where it is clear that the company's performance is inadequate having regard to the nature of the business. No two businesses are alike. Forecasts that should be made in one class of business may be superflous in another. The collection of records may be unnecessary in one type of business whereas they ought to be kept as a matter of routine in another.
      If the new clause is introduced into company law, as I hope that it will be, we shall not see a rash of qualifications of accounts containing negative warnings to the shareholders. The auditors would be able to say to top management, "Unless you improve the way in which you handle your estimates and make your forecasts, we shall be obliged to warn the shareholders." At that stage, every prudent business will say to the auditors, "Drawing on your experience of what other businesses do, what should we be doing? Will you help us to do it?" That is the best cure that can be recommended for the company that is in financial difficulties.
      Auditors must have this extra status. They would have additional status if the clause conferred on them not just the right but the duty to warn the shareholders when the estimates and forecasts are not being competently prepared. The auditors would advise the management that it was approaching the point where the shareholders would have to receive the statutory warning. That would be a far more effective corrective in the majority of cases than the appointment of an administrator with uncertain responsibilities and powers.
      Mr. Fletcher: I am grateful to my hon. Friend the Member for Kensington (Sir B. Rhys Williams) for tabling this new clause. I am aware of the serious interest that he has taken in the matter for a number of years. I hope that he will accept that the Bill's purposes go some way towards meeting his objectives. I am sure we can agree on what we should like to achieve, although our approach may be rather different. Important as the legislation is, what my hon. Friend suggests might be more appropriate in a companies Bill. I know that that is what he has tried to achieve over the years.
      New clause 4(1) requires some form of management accounts. That is intended not just to assist shareholders but to help to protect creditors from suffering unnecessary loss because of directors' mismanagement. My hon. Friend mentioned the doctrine of directors' collective responsibility. I do not believe that there is any such thing in company law; the director is a director is a director. He may suggest that he was on holiday when something went wrong but, nevertheless, he must find his own reasons for not shouldering the responsibility that might apply to him in the course of his duties.
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      The clause requires auditors to state that the requirements of the subsection have been complied with—that the data have been collated to enable a "reasonable assessment" to be made of the company's prospects. I believe that my hon. Friend recognises that that creates a difficulty. How can the auditor determine what information is needed to enable the directors, individually, to form a reasonable assessment of what might happen in the future? The clause does not require that information to be made public, correctly because, as my hon. Friend said, it might contain information about the company's affairs which would almost certainly be damaging if it were made known generally and reached a competitor's hands. Directors of all companies, not just public companies, should monitor their company's finances regularly, not just once a year, as would be the case under the clause.
      We also believe that it should be up to each director to decide, in the light of his expertise, how best to do that monitoring to protect himself and to carry out his responsibility as a director by safeguarding the shareholders' funds. The view of the Institute of Chartered Accountants in England and Wales about management accounts was given in a memorandum issued by its parliamentary and law committee. That view was:
      "that the question of definition of such accounts is one which would be open to endless debate as is the question of whether the accounts revealed with sufficient accuracy the state of its trading operation and financial position."
      That is our view of statutory management accounts, although naturally we recognise their value in assisting directors to manage their companies' affairs.
      I suspect that, in most public companies, such information is already provided to the directors to enable them to prepare their report to the shareholders. Indeed, my hon. Friend said that as many as 99 per cent. of public companies already do this. Schedule 7(6) of the Companies Act 1985 requires the directors' report to contain particulars of important events affecting the company, or any of its subsidiaries, which have occurred since the end of the financial year, and an explanation of likely future developments in that company's business or its subsidiaries. That point was made by my hon. Friend the Member for Richmond and Barnes (Mr. Hanley), who also said that auditors have a duty to qualify the accounts of companies whose affairs they suspect are not in order.
      The Bill will create new dimensions to directors' responsibilities. It seeks to achieve the objective that my hon. Friend mentioned at the beginning of his remarks: that directors should act at the earliest possible moment if they believe that their company is getting into difficulties. I should tell my hon. Friend that the Bill will achieve that without going down the path that his new clause recommends.
      Sir Brandon Rhys Williams: I do not agree with what my hon. Friend said, but I recognise that the new clause forms part of a body of reforms that is needed in company law. It would have been appropriate to have included it in the Bill, and the Bill suffers because my hon. Friend will not be sufficiently specific about the way in which problem companies should be tackled. At present the Bill would go for the directors after their problems have overcome them: it does not give them the help that they deserve at the time when they most need it. However, in

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      view of my hon. Friend's comments, which I shall want to study, I do not wish to press the matter further now. I beg to ask leave to withdraw the motion.
      Motion and clause, by leave, withdrawn.

    New Clause 23

      RESPONSIBILITY FOR COMPANY'S WRONGFUL TRADING
      '(1) Subject to subsection (3) below, if, in the course of the winding up of a company which has gone into insolvent liquidation, it appears that subsection (2) below applies to a director, the court, on the application of the liquidator or the official receiver, may declare that that director is to be liable to make such contribution (if any) as the court thinks proper to the company's assets for distribution pari passu to such of the company's unsecured creditors as do not fall within the provisions of paragraphs 1 to 3 of Schedule 4 to this Act.
      (2) This subsection applies to a director who—

      (a) was a director of the company at a time when it was unable to satisfy its debts and other liabilities as they fell due; and

      (b) during that time knew or ought to have concluded that there was no reasonable prospect that the company would be able to satisfy all its debts and other liabilities in full; and

      (c) during that time knew or ought to have known that the company was continuing to carry on its business to the detriment of any of its creditors.

      (3) The court shall not make a declaration under subsection (1) in respect of any person if it is satisfied that he took every step reasonably available to him in the circumstances with a view to minimising any potential detriment to the company's creditors.
      (4) For the purposes of subsection (2) and (3) above, the facts which a director of a company ought to know or ascertain, the conclusions he ought to reach, the diligence he ought to display and the steps which he ought to take are those which would be known, ascertained, reached, displayed or taken, by a reasonably diligent person having both—

      (a) the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company; and

      (b) the general knowledge, skill and experience that that director has.

      (5) The reference in subsection (4) above to the functions carried out in relation to a company by a director includes a reference to any functions which he does not carry out, or has not carried out but which have been entrusted to him.
      (6) Subsections (3) to (6) of section 630 of the 1985 Act (responsibility for company's fraudulent trading) shall have effect in relation to a declaration under subsection (1) above as they have effect in relation to a declaration under subsection (2) of that section, and this section is without prejudice to that section.
      (7) For the purposes of this section a company goes into insolvent liquidation if it goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up.'.—[Mr. Gould.]
      Brought up, and read the First time.
      Mr. Gould: I beg to move, That the clause be read a Second time.
      Mr. Deputy Speaker (Mr. Harold Walker): With this, it will be convenient to discuss the following:
      New clause 25—Wrongful trading—
      '(1) Subject to subsection (3) below, if, in the course of the winding up of a company which has gone into insolvent liquidation, it appears that subsection (2) below applies to a director, the court, on the application of the liquidator, or the official receiver, may declare that that director is to be liable to make such contribution (if any) as the court thinks proper, to the
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      company's assets for distribution pari passu to such of the company's unsecured creditors as do not fall within the provisions of paragraphs 1 to 3 of Schedule 3 to this Act.
      (2) This subsection applies to a director who:—

      (a) was a director of the company at a time when it was unable to satisfy its debts and other liabilities as they fell due: and

      (b) during that time knew or ought to have concluded that there was no reasonable prospect that the company would be able to satisfy all its debts and other liabilities in full; and

      (c) during that time, negligently permitted the carrying on by the company of its business to the further detriment of creditors; or

      (d) during that time knew or ought to have known that the company was continuing to carry on its business to the detriment of any of its creditors.

      (3) The court shall not make a declaration under subsection (1) in respect of any person if it is satisfied that he took every step reasonably available to him in the circumstances with a view to minimising any potential detriment to the company's creditors.
      (4) For the purposes of subsections (2) and (3) above, the facts which a director of a company ought to know or ascertain, the conclusions he ought to reach, the diligence he ought to display and the steps which he ought to take are those which would be known, ascertained, reached, displayed or taken, by a reasonably diligent person having both—

      (a) the general knowledge, skill and experience that may reasonably be expected of a person carrying out the same functions as are carried out by that director in relation to the company; and

      (b) the general knowledge, skill and experience that that director has.

      (5) The reference in subsection (4) above to the functions carried out in relation to a company by a director includes a reference to any functions which he does not carry out, or has not carried out, but which have been entrusted to him.
      (6) Subsections (3) to (6) of section 630 of the 1985 Act (responsibility for company's fraudulent trading) shall have effect in relation to a declaration under subsection (1) above as they have effect in relation to a declaration under subsection (2) of that section, and this section is without prejudice to that section.
      (7) For the purposes of this section of a company goes into insolvent liquidation if it goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up.'.
      Amendment No. 287, in clause 10, page 8, line 24, leave out 'every step' and insert 'such steps'.
      Mr. Gould: This new clause brings us to one of the most important and widely contested issues in the Bill, and certainly one on which the Committee spent much time. The present clause 10 introduces an extremely valuable concept, and there is widespread support for the Government's attempt to establish the new notion of wrongful trading. However, the new clause is an alternative way to achieve the objective which the Government have set. It is supported by the CBI, the National Consumer Council, the Institute of Directors—although it makes a few minor amendments to the clause, which are expressed in new clause 25—the suppliers of venture capital and by many hon. Members on both sides of the House. A new clause with such unusual unanimity of support cannot be all bad.
      From what is known of the Minister's position, and from correspondence between the Secretary of State and some of the bodies that support this measure, it seems clear that the Government share the objectives of the new clause. There is little difference in principle among the parties that have reached a conclusion on the issue. Where we depart from each other, and where most of us depart from the Government, is on the means by which they have chosen to achieve their objective—the drafting of clause

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      10. It is curious, to say the least, and it is less than clear. In effect, it would bring every director of every company that goes into insolvent liquidation into a big net. However, in most cases, it does so too late, given that we are trying to strike at a course of conduct over a period of time. Subsection (2) brings everyone into the net at the last possible moment.
      8.45 pm
      Subsection (3) provides the means by which people can escape the net. The method offered to them is also extremely curious and uncertain. It is almost certain that most people will escape the net. I am not sure whether that is the Government's intention, but the CBI and the Institute of Directors are worried that, although people might get out in the end, they will not be sure as to what they must do and show to escape liability. We have the worst of all possible worlds. Everyone will be caught, but too late; the means are provided by which almost everyone will escape, but in conditions of maximum confusion and uncertainty. That is a fairly dreadful list of achievements for a clause, which I accept is well-intentioned. We all agree on what we wish to achieve.
      The problem is that the clause departs from the straightforward, easily comprehensible, recommendations of the review committee, which identified wrongful trading and said that we must do something about it. The Committee identified wrongful trading in a way that should commend itself to any reasonably intelligent observer approaching this matter for the first time. He would say, "Let us try to identify the elements of this new course of conduct called wrongful trading." The first thing that one must do in order to be caught by the provision is to trade—to carry on business. To be more precise, the review committee stated that trading meant taking on new liabilities and undertaking new indebtedness to a new group of people. But not everyone who trades will fall within the provisions of what should be clause 10. We are aiming only at those who trade wrongfully—in circumstances where they know, or should have known when they took on those new liabilities, that they had no reasonable prospect of meeting them.
      I despair sometimes, because we have put this point repeatedly, and hon. Members who served on the Committee will know that, straightforward though it may seem, we have still not managed to persuade the Minister that this is the obvious and rational way to approach the problem.
      My hon. Friends and I do not wish to support the addition of a third element—the defence of escaping liability, even if one falls within the definitions of having traded and having done so wrongfully, if one has taken every reasonable step to reduce the disadvantage to one's creditors. However, for the sake of consensus, I and my hon. Friends will support that defence, although it is otiose. We adhere strongly to the basic definition that wrongful trading means trading in the knowledge that one cannot meet one's liabilities.
      Unless the Minister will accept a clause drafted along those lines, he will fail in his objective of striking at wrongful trading, and he will cause the maximum confusion and anxiety in the business community, to very little purpose.
      Mr. Steve Norris: I should declare an interest, not as an accountant, but as a business man who was told that the way to find a good accountant was to ask
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      all the accountants that one knows how many two and two make, and to hire the one who said, "How many do you have in mind?" I represent the thousands of small businessmen who are worried about the effect of the Bill's operation. They are especially worried by what was clause 9 and is now clause 10.
      Like the hon. Member for Dagenham (Mr. Gould) and, as he rightly said, every other member of the Commee, I welcome the admirable purpose of the clause, which is to define the concept of wrongful trading and establish it as a rationale for the withdrawal of limited liability. Nobody disputes that, but the danger has always been that we will throw the baby out with the bath water. In an effort to ensure that those who should not be allowed the protection of limited liability are not, we may, on occasions, find ourselves reacting to innocent directors. Such directors may have no more than made mistakes, or have been in a market that collapsed or have had a major supplier or customer who defaulted, or got into trouble in some way with the result that his business has been put into liquidation and he has been caught by the wrongful trading provisions.
      With that in mind, clause 10 is too harsh. It is too difficult for the clause as it stands to distinguish between the legitimate directors and those whom we would all want to see banned. Every director, as the hon. Member for Dagenham pointed out, is caught by subsection (2)(a), (b), and (c). I cannot conceive of any circumstances in which any company goes under where the directors could not be said at some point to have been caught by this subsection. That is wrong because it cannot be the purpose of the clause, which is trying to distinguish culpability from non-culpability.
      It follows from that that I take a different view from that of the hon. Member for Dagenham on whether subsection (3) provides an escape route through which most directors will be able to travel. The existence of the words "every step" provides a barrier that a liquidator could ensure was equally insurmountable to every director because "every step" is unfortunately a phrase that, in retrospect particularly, is capable of almost any definition. What is meant by "every step"? How can every director, however culpable or innocent, be sure that every step will have been taken?
      Four principal bodies have come together on this. The CBI and the Institute of Directors represent the interests of business and individual directors. The British Venture Capital Association represents those who are seeking to use their skill, often in risk situations, to make companies work more efficiently. The fourth body is the National Consumer Council, whose objective is primarily to ensure that the interests of consumers are protected. That alliance is startling in its impact and shows the extent to which there are problems with this clause.
      The British Venture Capital Association has said:
      "If the Bill's wrongful trading clause is implemented as drafted, no sensible professional manager will run the additional risks of personal liability proposed, despite the attractions of share options (which are there to compensate for the loss of job security/pension rights, perks and automatic salary increases which large employers provide).
      The same disincentive will apply to company doctors or professional turnaround experts being prepared to go into existing businesses in trouble (which can be rescued, provided the honest/competent manager is not threatened, as at present, by clause 10)."
      The effect of this will be that fewer small companies will be started by professional managers spinning off from

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      larger companies. Of those that start, fewer will be able to survive the natural cliffhangers that automatically affect any business. This will happen because their boards will decide on premature voluntary liquidation to ensure that they are not caught by the provisions of clause 10. What is more, where a small business is in temporary difficulties but has a real future if it can get the right sort of company doctor in, the business will simply not survive if the company doctor has to take account of the fact that if he fails—there must always be a high risk of that—he will be caught by clause 10.
      The British Venture Capital Association says that clause 10
      "will seriously damage the health of the UK's small business sector, at a time when a fragile new dawn is appearing for all those committed to an entrepreneurial Britain".
      It follows from that that we must look again at the way that clause 10 is drafted.
      I am obliged to differ from the solution arrived at by the hon. Member for Dagenham. I do so because the constructive knowledge test that is the essence of new clause 23 is, of itself, capable of creating the same difficulty of retrospective constructive interpretation, as is implicit in the existing form of words. We have to go on a stage further to the ascertainment of conduct showing a connivance at or continuation of a business when it is clear to the directors that they should be taking another course.
      New clause 25 appears not in the form that I have set out for the clerk. It should not include subsection (2)(d) (ii). I am afraid that the original drafting of both options appear, and it is not my intention that they should do so. My intention was to insert (2)(c)(i) which has the concept within it of
      "negligently permitted the carrying on by the company of its business to the further detriment of creditors".
      That is what we all want to achieve.
      We want to get at the man who was not only a director at the material time but whose company went insolvent and who knew that there was no hope for it. That provision would capture everybody without exception. More particularly, it covers the director who then went on and consciously made the position worse. He is the man who, either through neglect or malfeasance, has forfeited the right to limited liability, and probably the right to be the director of a company in future.
      With that in mind, I hope that my hon. Friend the Minister will not regard consideration of clause 10 as closed but will take account of the unanimity of concern expressed not only on both sides of the House but by the organisations that have raised objections to the clause. I hope that he will take whatever opportunity is open to him to have another look at the matter.
      Mr. Bermingham: If the Minister wants a section of the Bill to achieve our aim, that is to catch the crook and negligent director and to make them personally responsible for the loss suffered by others, he should begin to listen to those who will operate the legislation—the Institute of Directors, the Confederation of British Industry, the National Consumer Council and lawyers. They are saying precisely what we have said in Committee. Clause 10, or clause 9 as it was, is badly drawn and achieves nothing. It presents a deterrent without teeth. It has had its teeth pulled.
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      We are now dealing with new clauses 23 and 25, and I concede that the concept contained in new clause 25 is valuable. The section needs to catch negligent directors. All hon. Members have heard of companies which go steadily downhill, and whose directors know that that is happening, and either through sheer incompetence and laziness or sheer negligence allow both the position to deteriorate as each day goes by and the creditors to suffer increasingly.
      9 pm
      Why should people who put others in a position of loss hide behind a screen which denies them personal liability when that loss is entirely their fault? If I drive my car negligently and run over an hon. Member, I am sued because it is my fault. I cannot possibly say, "It was the car that ran him over, not me", and the same is true for negligent directors. They control the business and its direction. If they know that the business is in trouble, they are under a moral duty—we all agreed about that in Committee—to do something about it. Their duty may be to cease trading, to seek help or a further injection of capital, or to restructure the business, but they are not entitled to allow the matter to drift away to the detriment of others.
      If the Minister agrees with the philosophy that lies behind the arguments put forward in Committee, in the business world at large and every other section of the community, he must explain why every variation on clause 9, now clause 10, has been peremptorily rejected. Why will he reject the new clauses and use the weight of the Government's majority, or the payroll vote, as it is a Thursday, to force through this piece of nonsense? If, as the Minister said time and time again in Committee, he wants the clause to work, will he explain why he has rejected every one of the numerous ways of achieving that end suggested by people who understand these matters?
      Mr. Allen McKay: The new clause gives me the opportunity to refer to a constituency matter that has been exercising me and many others for the past seven months. The clause fits the bill. The last person to be considered in insolvency cases usually appears to be the consumer.
      The case relates to a desirable building site in Hoyland Swaine in my constituency, on which the builder is erecting some good houses, in most cases successfully. However, it appears that times became difficult for Manston Builders. It would have been better if the firm had decided that it was in trouble and had been honest, but it was not. It carried on building and selling homes or signing people up for homes before those homes were completed. It did that, although it obviously knew that it was in financial difficulties. Local people knew that it was running into financial difficulties when the suppliers of building materials moved in and retrieved their materials. But even then, the firm allowed people to sign up for homes and to pay deposits of up to £3,000.
      I should like to quote an example. Mrs Janet Barber and her husband are extremely hard-working and genuine people. They signed for a bungalow, which is in a beautiful area in my constituency. When the house was seven eighths built, and the builder had informed them that they would be able to move in in a few weeks, they found that the builder had had to move out and had left them with an uncompleted dwelling. The Barbers had gone into debt in buying soft furnishings, carpets and furniture, which

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      they had had to put into store. They had been promised that in a few weeks they would be able to move in, so they sold their home and moved into lodgings with their parents. When the crunch came, therefore, that couple had sold their home, bought the furnishings and paid the deposit in good faith. Seven months later, they are still in lodgings with their parents.
      When the matter was put into the hands of the liquidators the problems started again. Irrespective of the representations that I and the agencies acting on the couple's behalf made to the liquidators, despite the promises continually made to me that it would be only a few weeks until the house was finished, and although not only the Barbers but other people offered the liquidators the price of the completed dwelling in cash, the liquidators did not accept any of those representations or proposals. They were using those half-finished homes as a carrot to attract someone to take the whole site. Under the present law, there is nothing wrong with that because the liquidators are acting for the creditors. However, what is to happen to the poor old consumer? What protection will he have in future? He does not have it now.
      Three weeks ago when I rang the liquidators again, they said that a firm was now taking over the site, and the Barbers could not have their home, although on three occasions they had offered the price of the house minus the cost needed to complete it. The liquidators were happy with the price, and I know that because they told me. However, as soon as somebody came along and said that he would buy the whole site, the poor old consumer went to the bottom of the bin and did not matter.
      There is need for legislation to deal with that matter. I accept that the creditors need to be looked after, but so does the consumer. That should never happen again. As late as today, I received a final letter from the liquidators saying yet again that a person was taking over the whole site, and that it would take a few weeks to complete. In the meantime, the Barbers and other families have decided that enough is enough. Despite a loss running at £3,000 to £4,000, they have decided that the time has come for them to take up another option. Who will compensate those people for the £4,000 that they have already spent, and can ill afford? The builder knew what was happening when they signed the agreement, but they did not. It was obvious at the time that the company was going towards bankruptcy. That should not have happened. I hope that the Minister will ensure that it does not happen again.
      Mr. Fletcher: I sympathise with the case that the hon. Gentleman has made. I cannot ensure that it will not happen again, but the measures we are taking in the Bill provide an opportunity to pursue more vigorously and to more effect directors who act in the way the hon. Gentleman has described.
      Clause 10 would allow the court, in the event of an application by the liquidator, to attach personal liability to directors who trade wrongfully. That, of course, would affect their pockets, because they would lose the protection of limited liability, and that is the purpose of the clause. The hon. Gentleman has chosen the correct clause in which to make the point about his constituent.
      A number of hon. Members raised other points about the clause. The hon. Member for Dagenham (Mr. Gould) said that we had spent some time discussing this clause in Committee, and that is true. The hon. Member for St. Helens, South (Mr. Bermingham) said that we had
      566
      dismissed in a peremptory manner all the recommendations and advice given to us by various bodies. I am bound to say to him that that does not apply to any of the recommendations made to us.
      At least three hon. Members referred to a letter from the CBI and the IOD and the NCC. In relation to that, senior officials had a long discussion with all the parties together, but I am afraid that no agreement was reached.
      My hon. Friend the Member for Oxford, East (Mr. 'Norris) said there was unanimity of concern. In relation to those three bodies that is the case, but there was no unanimity about how the problem should be tackled. Indeed, on the amendments before the House, there is not complete agreement between my hon. Friend and Opposition Members on what might replace the clause we are discussing.
      Mr. Gould: Is the Minister implying that he will accept amendments to the clause on which we could establish unanimity? If he is saying that, it would take us a long way.
      Mr. Fletcher: I can safely say that is the case, because I doubt whether unanimity could be achieved among all the parties protesting rather vigorously about this matter.
      The hon. Member for Dagenham said that everyone is agreed on the overall policy. I am sure that is so. Everyone is concerned about the abuse of limited liability and the fact that directors of companies which have. shall we say, traded wrongfully appear to be able to walk away from the resulting mess they have created in relation to other people's money and have no liability attached to them. The difficulty, of course, is how best to achieve the objective of making directors personally liable for wrongful trading.
      It is suggested that one of the new clauses should be accepted in order to make the Bill more understandable to the layman, not least the director, so that his mind w ill be concentrated at an early stage on the financial problems of the company. There is no doubt that that would be helpful, because the more easily the clauses are understood by the layman the better for him. But our principal purpose must be to ensure that, when tested in the courts, there will be certainty of interpretation leading to effective application and the fulfilment of Government policy. The clause, as drafted, will properly fulfil that need and enable the counts to penalise those who abuse the privileges of limited liability.
      Mr. Bermingham: Does the Minister agree that the real argument is whether the clause, as drafted, is effective? The Minister has legal opinion which says it is, and everybody else has legal opinion which says it is not. As a compromise, would the Minister accept a third independent legal opinion between now and the next stage in the Lords? If it proves that the Minister's advisers or his parliamentary draftsmen are wrong, will he bow gracefully to the advice of any independent leading counsel he may choose? It is as simple as that.
      Mr. Fletcher: It is the duty of the House to decide whether a Bill should be accepted and how it should be passed into legislation. There have been opportunities in the other place to consider this matter. In the other place there are many eminent legal minds, and there the clause was not amended. Nor was it amended in Committee. Therefore, I cannot recommend the amendments now before the House.

      567
      9.15 pm
      Subsection (1) of both new clauses would exclude creditors with preferential claims from sharing in the proceeds of a successful wrongful trading application. We have already gone a long way to meet demands to reduce Government preferences. But to accept the subsection would mean that there could be no wrongful trading application where only preferential debts were outstanding. The significance of that is that there are rogue directors, to whom many references have been made, and the paying off of non-preferentials to keep suppliers reasonably happy so that they can start up their businesses again next day—what is referred to as the phoenix syndrome—is one of the tricks of rogue directors, and they could apply it on the basis of the suggested subsection (6). In any event, we argued in Committee that the proceeds of wrongful trading should be for the generality of creditors, and the Government still hold to that view.
      Paragraphs (a) and (b) of subsection (2) of both clauses are the same and are in fact cumulative provisions. The starting point for the period of wrongful trading—subsection (2)(a)—requires first that default in payment of one or more due debts must occur. It would not therefore apply whilst the company maintained payments on due debts and avoided a cash flow problem by, for instance, taking deposits and prepayments from customers but failed to supply the goods. It would also enable a director to escape liability if he resigned his directorship immediately before the first cheque bounced and in anticipation of the company first encountering cash flow difficulties, even though the conditions of subsection (2)(b) applied at the time he knew that there was no reasonable prospect that the company would be able to satisfy all its debts and other liabilities in full. I acknowledge that the proposals made by my hon. Friend the Member for Oxford, East and by the hon. Member for Dagenham have some element of certainty, but at the cost of an unacceptable curtailment of liability where there has been conduct which has been wrong and damaging. It does not meet our policy needs, and I cannot accept it.
      We believe that it is necessary to deal not only with the case when a company has actually found itself unable to meet its debts, but where the director knew that there was no reasonable prospect of the company avoiding insolvent liquidation; the company may or may not be technically insolvent at that time. In addition, our formula provides more flexibility for directors in that they can go on trading while technically insolvent if there is a reasonable prospect in their opinion that they can trade out of their difficulties or that an arrangement with creditors will solve the financial difficulties.
      I wish to stress that under our proposals directors are allowed a reasonable opportunity to consider what steps are available to them to remedy their financial problems. They will not, as some people have claimed, risk having a wrongful trading declaration made against them if they fail to put the company into liquidation immediately a cheque bounces.
      The proposition in subsection (2)(c) of new clause 23 and subsection (2)(d) of new clause 25 in our view appears to impose an unnecessary obligation on the liquidator to show that the director not only knew that the situation was hopeless but that it was getting worse because the company was continuing to trade.
      Subsection (2)(c) of new clause 25 requires the liquidator to show, as an alternative, not only that the
      568
      director had permitted the company to carry on its business to the further detriment of creditors but had negligently done so. I submit that, in trying to make the clause clearer, my hon. Friend has made it more complex.
      The obverse of negligence is diligence. That test is clearly set out in subsection (4). I am surprised that the hon. Member for Dagenham did not refer to subsection (4). He pointed to subsections (2) and (3), and I was waiting for him to bring in the very important subsection (4). Subsection (4) of the new clause is, apart from some additional words, an exact copy of subsection (4) of existing clause 10.
      Mr. Gould: The Minister is, of course, right that subsection (4) establishes a test which is indistinguishable from that applied by the common law, but the test has to be applied to a course of conduct. The course of conduct is then defined in subsection (3), and it is that definition which is so difficult.
      Mr. Fletcher: But the test is applied. My hon. Friend the Member for Oxford, East was arguing for a negligence test, but I believe that clause 4 meets the point that he was making. The additional words in brackets in the new clause in my view add nothing to the meaning of the subsection.
      The new clauses in subsection (3) add to existing subsection (3), after the words "every step" the words
      "reasonably available to him in the circumstances".
      In my view, those additional words are unnecessary. A director could not reasonably be expected to take steps which were not reasonably available to him.
      Amendment No. 287, tabled by my hon. Friend the Member for Oxford, East, seeks to substitute the words "such steps" for the words "every step" in subsection (3). When the matter was raised in Committee, I said that subsection (4) of clause 10 explained fully that what was meant by "every step" was the steps which a reasonably diligent person would have taken in the circumstances, and that no useful purpose would be served by replacing "every step" with "such steps." If I remember my hon. Friend's new clause correctly, he may well have accepted that point.
      Concern was also expressed in Committee about the danger of the courts applying a negligence test and making unreasonable requirements of directors who had had to make difficult decisions on uncertain questions as a matter of business judgment, and in particular doing so with the benefit of hindsight. I am sure that the hon. Member for Dagenham is aware that the courts are accustomed to putting themselves in the shoes of decision makers at the time, faced with all the difficulties, the need for quick decisions and decisions which have to be made in the heat of the moment, whether the defendant is a company director, a surgeon or a drug company. In particular, all the authorities recognise that the company director has a proper role in the exercise of commercial judgment into which the court will not inquire. I believe that this is an important and helpful point which may need to be given more emphasis.
      I cannot recommend the new clauses.
      Mr. Norris: Will my hon. Friend tell the House whether in his view, accepting that the new clause makes it easier for us to get at the rogue director, it makes it no less attractive for honest directors, company doctors and valuable people operating with companies whose futures

      569
      are by no means certain but which have immense potential if they can be established, put right and made to grow? Is he satisfied that those directors will not be more wary in the light of the clause than they ought reasonably to be, given that the purpose of the clause is to strike at the fraudster, not at the honest man?
      Mr. Fletcher: I do not believe that the new clause would make it easier to catch the rogue director. I think that the clause as drafted should not hold any fear for company doctors and people whose purpose in the company is quite clearly to try to assist it. That is the usual condition on which the company doctor is employed and the court, if somebody were to suggest to the contrary, is used to recognising that that purpose is indeed a profession.
      I hope that clause 10 will make the generality of directors, particularly those who carry a number of directorships, more wary. They will have to consider whether they are capable of applying all care and diligence to every directorship in future. If that results in some individuals reducing the number of directorships that they hold, that will not be a bad thing.
      Question put, That the clause be read a Second time:—
      The House divided: Ayes 43, Noes 140.

      Division No. 284]

      [9.24 pm

      AYES

      Atkinson, N. (Tottenham)

      Lewis, Terence (Worsley)

      Banks, Tony (Newham NW)

      Lloyd, Tony (Stretford)

      Bermingham, Gerald

      McWilliam, John

      Boothroyd, Miss Betty

      Madden, Max

      Buchan, Norman

      Millan, Rt Hon Bruce

      Campbell-Savours, Dale

      Nellist, David

      Clarke, Thomas

      O'Neill, Martin

      Clwyd, Mrs Ann

      Park, George

      Cocks, Rt Hon M. (Bristol S.)

      Pike, Peter

      Cook, Robin F. (Livingston)

      Prescott, John

      Davis, Terry (B'ham, H'ge H'l)

      Redmond, M.

      Deakins, Eric

      Rooker, J. W.

      Dormand, Jack

      Short, Ms Clare (Ladywood)

      Dubs, Alfred

      Short, Mrs R.(W'hampt'n NE)

      Dunwoody, Hon Mrs G.

      Skinner, Dennis

      Faulds, Andrew

      Spearing, Nigel

      Foot, Rt Hon Michael

      Stott, Roger

      George, Bruce

      Strang, Gavin

      Godman, Dr Norman

      Thomas, Dr R. (Carmarthen)

      Gould, Bryan

      Hattersley, Rt Hon Roy

      Tellers for the Ayes:

      Haynes, Frank

      Mr. Allen McKay and Mr. Ray Powell.

      Hogg, N. (C'nauld & Kilsyth)

      Kaufman, Rt Hon Gerald

      NOES

      Alison, Rt Hon Michael

      Durant, Tony

      Amess, David

      Eyre, Sir Reginald

      Ashby, David

      Fenner, Mrs Peggy

      Atkinson, David (B'm'th E)

      Finsberg, Sir Geoffrey

      Bellingham, Henry

      Fletcher, Alexander

      Blackburn, John

      Fookes, Miss Janet

      Bowden, Gerald (Dulwich)

      Forth, Eric

      Brandon-Bravo, Martin

      Fox, Marcus

      Brown, M. (Brigg & Cl'thpes)

      Franks, Cecil

      Bruinvels, Peter

      Fraser, Peter (Angus East)

      Butler, Hon Adam

      Gale, Roger

      Carlile, Alexander (Montg'y)

      Galley, Roy

      Carlisle, Kenneth (Lincoln)

      Garel-Jones, Tristan

      Cash, William

      Gow, Ian

      Chope, Christopher

      Ground, Patrick

      Clark, Dr Michael (Rochford)

      Hamilton, Neil (Tatton)

      Clarke, Rt Hon K. (Rushcliffe)

      Hargreaves, Kenneth

      Cope, John

      Harris, David

      Crouch, David

      Harvey, Robert

      Dorrell, Stephen

      Hawkins, Sir Paul (SW N'folk)

      Dover, Den

      Hawksley, Warren

      570

      Hayes, J.

      Raffan, Keith

      Hayhoe, Rt Hon Barney

      Rathbone, Tim

      Hayward, Robert

      Rhodes James, Robert

      Heathcoat-Amory, David

      Rhys Williams, Sir Brandon

      Hickmet, Richard

      Ridsdale, Sir Julian

      Hind, Kenneth

      Robinson, Mark (N'port W)

      Howarth, Alan (Stratf'd-on-A)

      Roe, Mrs Marion

      Howells, Geraint

      Rowe, Andrew

      Hubbard-Miles, Peter

      Sainsbury, Hon Timothy

      Hunt, David (Wirral)

      Sayeed, Jonathan

      Hunter, Andrew

      Shelton, William (Streatham)

      Jessel, Toby

      Shepherd, Colin (Hereford)

      Jones, Gwilym (Cardiff N)

      Sims, Roger

      Jones, Robert (W Herts)

      Smith, Tim (Beaconsfield)

      Key, Robert

      Soames, Hon Nicholas

      King, Roger (B'ham N'field)

      Speed, Keith

      Knight, Greg (Derby N)

      Spencer, Derek

      Lawson, Rt Hon Nigel

      Spicer, Jim (W Dorset)

      Leigh, Edward (Gainsbor'gh)

      Stanbrook, Ivor

      Lennox-Boyd, Hon Mark

      Stanley, John

      Lester, Jim

      Steel, Rt Hon David

      Lightbown, David

      Steen, Anthony

      Lilley, Peter

      Stern, Michael

      Lloyd, Peter, (Fareham)

      Stevens, Lewis (Nuneaton)

      Luce, Richard

      Stevens, Martin (Fulham)

      Lyell, Nicholas

      Stewart, Allan (Eastwood)

      McCrindle, Robert

      Stradling Thomas, J.

      MacKay, Andrew (Berkshire)

      Taylor, Teddy (S'end E)

      Marland, Paul

      Thatcher, Rt Hon Mrs M.

      Marlow, Antony

      Thompson, Donald (Calder V)

      Maxwell-Hyslop, Robin

      Thompson, Patrick (N'ich N)

      Mayhew, Sir Patrick

      Thorne, Neil (Ilford S)

      Mellor, David

      Tracey, Richard

      Merchant, Piers

      Twinn, Dr Ian

      Meyer, Sir Anthony

      Waddington, David

      Mills, Iain (Meriden)

      Wallace, James

      Mitchell, David (NW Hants)

      Waller, Gary

      Morrison, Hon C. (Devizes)

      Wardle, C. (Bexhill)

      Murphy, Christopher

      Warren, Kenneth

      Neubert, Michael

      Wells, Bowen (Hertford)

      Newton, Tony

      Wells, Sir John (Maidstone)

      Nicholls, Patrick

      Whitney, Raymond

      Onslow, Cranley

      Wiggin, Jerry

      Oppenheim, Phillip

      Wilkinson, John

      Osborn, Sir John

      Wolfson, Mark

      Ottaway, Richard

      Wood, Timothy

      Pawsey, James

      Yeo, Tim

      Percival, Rt Hon Sir Ian

      Pollock, Alexander

      Tellers for the Noes:

      Portillo, Michael

      Mr. Archie Hamilton and

      Proctor, K. Harvey

      Mr. John Major.

      Question accordingly negatived

    New Clause 24

      SET-OFF OF DEBTS DUE TO AND BY THE CROWN
      (1) Where this section applies compensation shall not be available between debts due to or by the Crown under the provisions of any statute and debts due to or by the Crown in respect of contractual obligations
      (2) This section applies:—

      (a)where a company is being wound up by the court or voluntarily; or

      (b)in the case of a company to which a receiver or manager or administrative receiver has been appointed and is in office; or

      (c)where a bankruptcy order has been made against an individual; or

      (d) where a composition or scheme has been approved by a meeting summoned under section 95 of this Act and has taken effect.'.—[Mr. Gould.]

      Brought up, and read the First time.
      Mr. Gould: I beg to move, That the clause be read a Second time.
      The new clause is a slight variation on an amendment that we debated in Committee. It is designed, as that

      571
      earlier amendment was, to reduce the present gross advantage enjoyed by the Crown, in addition to all the other advantages that it enjoys as a creditor, in relation to the set-offs of amounts due to and by an insolvent individual or company.
      The Crown enjoys two unfair advantages over other unsecured creditors. First, it may, to its advantage, set off debts due to it for taxes against debts due by it for commercial transactions. Such a set-off is not allowed where the Government might lose out. The arrangement is completely one-sided, and that is where the unfairness lies. Secondly, transactions with the Government are all-pervasive. A right of set-off which may be totally fair in the context of individual creditors becomes an unfair preference when used by each of the many arms of Government to extract their separate and different pounds of flesh. Both of these unfair preferences appear to be contrary to the policy of the Crown Proceedings Act 1947. Both are contrary to the views expressed in the review committee.
      The new clause would reduce the effect of these advantages by providing that set-off would be permissible only between obligations of a like nature—between statutory obligations on the one hand and contractual obligations on the other. It is therefore a relatively modest attack on Crown privilege and advantage in this respect, as it leaves many other rights of set-off untouched. It at least makes the distinction between the Crown's role as a revenue raiser and its role as a commercial agent. In that respect, the measure is fair. I hope that it will commend itself to the House that the Crown should be forced to deal with its debtors in separate ways.
      Mr. Hanley: The Committee discussed this matter at some length, and this new clause encapsulates most of the arguments of those of us who believe that the Crown has many unfair advantages over ordinary creditors. The Bill aims to protect the ordinary creditor from the ravages of the unscrupulous director and, as we discussed in Committee in relation to preferential creditors, certain unfair powers of the state.
      It is ironic that my hon. Friend the Under-Secretary of State who declared his interest as a member of the Institute of Chartered Accountants of Scotland should find himself hoist with his own petard, as this measure was suggested by his institute. The speech of the hon. Member for Dagenham (Mr. Gould) followed the institute's advice. The hon. Gentleman has taken a close interest in its advice, and I hope that my hon. Friend the Under-Secretary of State will take an equally close interest in the well-chosen words of the institute of which he has been a successful and famous member for many years. I hope that my hon. Friend will remain a member of the institute for many years, although, by moving against the amendments of his institute, he risks almost certain censure.
      The right of set-off is an equitable right in English law. Any equitable right is a right that may be exercised by the courts only if it is fair. With respect to the Crown, that right is established in statute in certain areas. It would be completely unfair if the Crown were to be allowed a right that is not allowed to others. If a holding company has two wholly-owned subsidiaries, one of which owes money to a company that subsequently becomes insolvent while the other subsidiary is owed money by the company that has
      572
      become insolvent, subsidiary A may not offset the debt against subsidiary B. The two subsidiaries are wholly owned by the same holding company, but in law the right of set-off is exerciseable only by one individual legal person.
      In the locus of a holding company, however, the state might have two subsidiaries, one being value added tax and the other the Inland Revenue, or another branch that deals with pay-as-you-earn or national insurance contributions. If PAYE is owed money by an insolvent company but the VAT authorities owe money to the insolvent company, an automatic right of set-off is provided for in the Bill. In other words, what is available to the state is not available in exactly the same set of circumstances to companies. That is unfair and, as I said in Committee, this right of set-off should not exist in a Bill that is trying to protect ordinary creditors.
      Mr. Millan: I support the arguments in favour of the new clause. The mischief arises from the fact that the Government are treated as a single entity. As a single entity, the Government are far more pervasive than any other single entity, even the grandest holding company. Apart from the mischief that that causes in equity, which the hon. Member for Richmond and Barnes (Mr. Hanley) has graphically explained, there is also the practical question, which many who are experienced in insolvency practice have explained to me, that it is very difficult to get money out of a Government Department that may owe money to a debtor in a liquidation or a bankruptcy. It searches around all the other Government Departments to make sure that nothing is owed on the other side to which they could apply the set-off provisions. Apart, therefore, from equity, it means that in certain circumstances there is difficulty in winding up a particular bankruptcy or liquidation.
      For all those reasons, I hope that the Government will be able to accept the new clause. It is a more modest form of the new clause that was moved in Committee. It does not altogether eliminate set-off, but it confines set-off either to statutory obligations on the one hand or to contractual obligations on the other. At the moment the set-off that is available to the Government can apply to all statutory and contractual obligations. A debt in one area can be set off against an obligation in another.
      Mr. Andrew Rowe (Mid-Kent): The Government have recently made a welcome change to the VAT regulations. It allows small firms not to be penalised in quite the same way as they were before. This is a welcome move towards recognising the fact that the damage done to a small firm when the Government insist upon taking priority over all other creditors far outweighs the merit of the amount of money that the state receives. The Government should take every opportunity to ensure that innocent sufferers from an insolvency are not put in some cases at a fatal disadvantage when the state insists upon taking its share.
      9.45 pm
      Mr. Fletcher: With regard to Crown preference, the Government have gone a long way to making sure that there is a better distribution of the assets in a liquidation.
      The right hon. Member for Glasgow, Govan (Mr. Millan) said that the Crown is indivisible, and that is indeed the case. With all due respect to this important piece of legislation, I do not think that that is exactly the way that such a truth may be challenged.

      573
      The proposed new clause curtails the Crown's right to set-off in a way that the Government consider to be undesirable—indeed, to be absurdly unfair. The new clause would have the effect of placing the Crown in a significantly worse position than that of other creditors. Other creditors would be able to continue to set off contractual debts against statutory debts. To quote an example given in another place by the Lord Advocate, if a local authority as an education authority owes a bankrupt builder £5,000 for work done by him on a school, and the builder owes the local authority as a rating authority £5,000 in rates, the local authority can set off the debt owed by it against the rates owed to it. That, as the House will know, is something that can also be done by commercial businesses. I cannot see why the Crown should be placed in a worse position than other creditors in this respect. Therefore, I cannot commend the clause to the House.
      Mr. Gould: I fear that the Minister was no more persuasive on this occasion than when he addressed himself to the same problem in Committee. In particular, it is a little difficult for him to claim credit on behalf of the Government for having reduced the ambit of Crown preference when that was forced upon him by the fact that there was a majority vote against his view. Unfortunately, as I cannot be sure that we have such a majority of votes available to us this evening, I fear that I must beg to ask leave to withdraw the motion.
      Motion and clause, by leave, withdrawn.

    New Clause 26

      PREPAYMENT CREDITORS
      `(1) This section applies where an individual pays to a company a deposit of money or a pre-payment in relation to a contract for the supply of goods or services by the company for use or consumption other than in the course of business.
      (2) Where this section applies the beneficial interest in the deposit or pre-payment shall remain with the individual until the later of—

      (a) the performance of the contract of supply by the company;

      (b) three months after the relevant date, as defined in relation to companies in Part II of Schedule 4 of this Act.'.—[Mr. Norris.]

      Brought up, and read the First time.
      Mr. Norris: I beg to move, That the clause be read a Second time.
      Mr. Speaker: With this it will be convenient to take amendment No. 284, in page 61, line 11, clause 81, at beginning insert
      `In a winding up any deposit of money or pre-payment made before the relevant date (as defined in Schedule 4) in relation to the purchase, leasing, hire or rental of goods from the company or the provision of services by the company for use or consumption other than in the course of business shall, where the goods or service have not been provided to the person who has paid the deposit or made the pre-payment, be returned to that person as his property and shall not be available for the payment of any other debts of the company.'.
      Mr. Norris: Earlier we heard about the problem that the constituents of an hon. Member were having with their house. He spoke of the distinction between creditors and consumers, which seems to epitomise the problem that the new clause is designed to cure. That may no doubt be a lay distinction worthy of being drawn, but in practice it is not a distinction that the Bill has ever drawn.
      574
      Creditors are very neatly separated into two types, particularly when dealing with the new clause. There are those who have extended credit for an account which they have submitted for payment for services rendered as a commercial undertaking. Presumably there is an element of profit in the transaction for the creditor, and the creditor has had the usual trade opportunities to decide whether he wants to extend the credit to the company. Indeed, if a person does not like what he sees, he will decide not to extend credit to the company.
      In that context I remember the stories of some of the small men in the engineering industry who did not lose money when Rolls-Royce went under. It was largely because, in the years prior to the eventual demise of Rolls-Royce, they had simply found that however hard they tried they did not get paid, and they applied a common sense rule of business. If a firm is not going to get paid, there is no point in its supplying goods or services.
      That is a process which a commercial creditor can go through, but I am concerned in the new clause with people who are not in that category. They are people who send money in response to an advertisement which solicits money for goods which they subsequently never receive because, with their money safely lodged in the company's hands, the company goes bankrupt and they are left with absolutely nothing. I have called such people deposit creditors, and it is to them that we should address our minds for a moment, if only because their concern, in terms of the volume of complaint and criticism that we hear of, is probably greater titan any of the other concerns that we have been speaking of this evening.
      I was reminded of that when, only two days ago. I read that a man behind a shower blind firm which is going into liquidation just three years after another company controlled by him failed is already back in business. The Daily Telegraph reported how a company called Rollaway Shower Blinds had an estimated deficiency to creditors of £426,949, about £63,000 of which was owed to 1,400 people who had answered advertisements in Sunday colour supplements. Some who had paid by credit card had been charged twice, which was no doubt very convenient for the company, but Mr. Alan Ward, managing director, said that the mistakes were caused by overstrained office administration.
      We then discover that the crash followed a 1982 failure of a company called Matador Shower Sytems, of which the said Mr. Ward also happened to be a director. On that occasion, creditors lost £252,000 in the liquidation. The creditors meeting was told that Mr. Ward is now trading with a company called Rollway (UK) which, in the light of our previous discussion, is not to be confused with Rollaway, from The Green, Letchmore Heath, Hefts, where Rollaway conveniently and coincidentally also happened to have been based.
      It is widely recognised that such practice is intolerable. Through clause 7, concerning the disqualification of directors, and clause 10, on the reduction of limited liability, my hon. Friend the Minister has made provision to deal with that practice. I hope that, as a result of the Bill, it will be reduced. It is for the 1,400 people who have paid money for which they have received absolutely nothing that I am anxious. I understand that there is a business principle which, for convenience, is referred to as the Romalpa clause. It says that a company may add a rider to its invoices which says that the company retains title and goods until they have been paid for.

      575
      I have heard what I am trying to do described as a reverse Romalpa clause. We are saying that until a depositor who has sent a cheque to a company gets his goods, he should be treated as though he has retained title in that deposit. He should therefore be able to apply to a liquidator or a receiver and say, "I sent my money. I never had anything in return for it. The company has become insolvent and I should like my deposit back. I retain my claim to it because I have received nothing."
      I appreciate that, in those circumstances, trade creditors who would otherwise have ranked pari passu with deposit creditors will be disadvantaged. I regret that, because I am more likely to be a trade creditor than a deposit creditor, but deposit creditors are qualitatively different from those whose invoices have been issued in the nature of trade. Moreover, the vast majority of people believe that they are entitled to be treated differently.
      Amendment No. 284 tries to achieve the same end by slightly different means. Without the advantage of detailed advice, I am not able to say which of the two forms of words is to be preferred, but anybody who listens to the consumer programmes that are popular on televison and radio, anybody who reads the newspapers and anybody who has any concern for natural justice, for little people who cannot be expected to have batteries of accountants with a Dun and Bradstreet address facility to establish the status of companies, must want this small protection to be afforded.
      I believe that this measure, together with the provisions contained in clauses 7 and 10, will ensure that the Bill achieves its main aim—a greater degree of equity as between those who stand to lose money in a liquidation and those who should be held to blame, if any, in such liquidations.
      I commend the new clause to my hon. Friend the Minister. I hope that he will take on board seriously the strength of feeling that there is about this issue.
      The other day, the producer of a consumer affairs programme on Channel 4 gave me a large file of correspondence from people who had responded to his invitation and had written on the subject. The diversity of complaints about different industries is frightening. I am aware that the travel and some other industries have indemnity schemes. No doubt such a scheme could be extended. We must have similar protection for all businesses to ensure that what I have described cannot happen in the future.
      Mr. Gould: As the hon. Member for Oxford, East (Mr. Norris) explained, new clause 26 is designed to achieve the same objective as amendment No. 284. Like him, I cannot distinguish between the efficacy of either of them. I am happy to endorse all that he said. We share an anxiety which is widely felt for—to use his felicitous description—the deposit creditor.
      I am sure that the Minister will accept that there is no doubt about the range and scale of the problem. In Committee, the Minister accepted that it was a problem which should be dealt with. We are again faced with the familiar problem of how best to deal with it and whether it can be dealt with in the Bill.
      The trade creditor is different. He offers credit in the normal course of business. He knows the risks. He has a clear understanding of what he is doing. He knows the
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      benefits that he seeks to achieve. He has various means available to protect himself. He can make all the usual professional checks on the creditworthiness of the person to whom he is extending credit. He can, if he wishes, avail himself of the Romalpa clause, which is used increasingly as trading conditions become more difficult.
      The deposit creditor has no such protection. He would be amazed to be told that in making the deposit for some goods or service he was contributing to the working capital of the firm which was meant to be supplying him. He has no means of checking creditworthiness. He does not understand that he is extending credit. He has never heard of the Romalpa clause. He needs protection. Various suggestions have been made as to how that can be achieved. The earliest one, which commanded some support, was the notion that the deposit creditor should be made a preferred creditor, and should be granted a statutory preference. I found that principle a little difficult to accept, because one of the Bill's objectives is to reduce the scope and number of preferred creditors.
      The second suggestion was that a type of tracing principle, relying on the law of trust, should be applied. There is a hint of that in new clause 26 where it mentions
      "the beneficial interest in the deposit".
      The third suggestion emerged in Committee. It is becoming known as a reverse Romalpa clause. The idea is that the deposit creditor should be given—without having to do anything—the type of protection that a trade creditor might insist upon in similar circumstances by inserting a Romalpa clause in the contracts through which he supplies goods or extends credit. The new clause and my amendment seek to do that. I believe that they provide a neat and elegant solution in principle. I admit that one could question whether that is properly achieved in either the new clause or the amendment, but I hope that the Minister will accept that we must deal with this matter, and that the Bill is the right place to do it. The solution that we offer must be at least acceptable, even if it is not the best solution.
      Therefore, despite any drafting deficiencies, which the Minister's expert advisers can remedy, I hope that he will accept the principle of what the hon. Member for Oxford, East (Mr. Norris) and the Opposition suggest.
      Mr. Millan: I wish to make only two points in support of what has already been said. First, many of the people in this unfortunate position have been misled, because advertisements in reputable newspapers—
      It being Ten o'clock, the debate stood adjourned.
      It being Ten o'clock, MR. SPEAKER proceeded to put forthwith the deferred Question necessary to dispose of the proceedings on Estimates 1985–86 (Class IV, Vote 4).

    Class IV, Vote 4
    Resolved,
    That a further sum not exceeding £39,501,000 be granted to Her Majesty out of the Consolidated Fund to defray the charges which will come in course of payment during the year ending on 31st March 1986 for expenditure by the Department of Trade and Industry on export promotion, trade co-operation, regulation of trading practices and consumer protection, and other services including grants in aid and international subscriptions, and other grants.
    MR. SPEAKER proceeded to put forthwith the Question which he was directed to put, pursuant to paragraph (7) of Standing Order No. 19 (Consideration of Estimates).

    Class IV, Vote 4

      ESTIMATES 1985–86
      Resolved,
      That a further sum not exceeding £48,588,165,000 be granted to Her Majesty out of the Consolidated Fund to complete or defray the charges for the service of the year ending on 31st March 1986, as set out in House of Commons Papers Nos. 239, 240, 241, 426 and 427.
      Bill ordered to be brought in upon the foregoing Resolutions, and upon the Resolutions [11 July] relating to Estimates 1985–86 by the Chairman of Ways and Means, the Chancellor of the Exchequer, Mr. Peter Rees, Mr. John Moore, Mr. Barney Hayhoe and Mr. Ian Stewart.

    CONSOLIDATED FUND (APPROPRIATION) BILL
    Mr. John Moore accordingly presented a Bill to apply a sum out of the Consolidated Fund to the service of the year ending on 31 March 1986, to appropriate the supplies granted in this Session of Parliament, and to repeal certain Consolidated Fund and Appropriation Acts: And the same was read the First time; and ordered to be read a Second time tomorrow and to be printed. [Bill 160.]

    BUSINESS OF THE HOUSE
    Ordered,
    That, at this day's sitting, the Insolvency Bill [Lords] may be proceeded with, though opposed, until any hour.—[Mr.
    Neubert.]

  Insolvency Bill [Lords]
  As amended, again considered.
  Question again proposed, That the clause be read a Second time.
  Mr. Millan: Many deposit creditors are caught out because they have responded to advertisements in reputable newspapers or journals, and are under the mistaken impression that anything advertised in a reputable newspaper is bound to be genuine and that there is no risk. Unfortunately, that is not always true. many companies involved in this business which have a record of going bankrupt and starting again advertise in reputable newspapers.
  Secondly, if we had such protection, some trade creditors would be much more careful about extending credit to the companies with which we are trying to deal. They would recognise the additional danger that those companies were trading on depositors' money which, in the event of the company going bankrupt, would not be available to them. Another advantage in such a provision is that it would impose an additional disability on some of the companies which operate in that way now. The new clause will benefit everyone, including trade creditors arid deposit creditors.
  Mr. Fletcher: In Committee, I said that I would give serious thought to the problem of consumer creditors arid pre-payments; and this I have done. We found Committee that the well-intentioned proposals by hon. Members on the creation of preferential and even pre-preferential status for such creditors and the imposition of special regulations on traders were impracticable. My hon. Friend the Member for Oxford, East (Mr. Norris) referred to the Channel 4 file, which I saw the other day. It was not any larger than some of the files on this matter that we have seen in the Department I make it clear that we are aware of the size of the problem. The difficulty, as with many aspects of this subject, is how to deal with it.
  My hon. Friend said something about a small measure of protection, but the measures of protection that I have considered are by no means small. They seem to be rather complex and require some kind of trust fund, or a system such as that suggested by the hon. Member for Dagenham (Mr. Gould) in his new clause. However, it would appear that neither system would be foolproof. The very persons and types of business men and companies that we are most anxious to catch in this respect are the ones most likely to escape from any of the suggestions that I have heard before and that I have heard again today.
  I say that with regret because I should very much like to find a system that would be effective in curtailing this problem. Obviously, as my hon. Friend the Member for Oxford, East said, the measures already in the Bill will be helpful. Hon. Members will know that the Insolvency Law Review Committee considered the problems, and in particular the proposal that statutory arrangements should be made to require companies that hold consumers' prepayments and trust accounts. The review committee concluded that such creditors should not receive preferential treatment and that the trust account proposal is impracticable. That is the view that the Government still hold.
  The House may know that pre-payment was the subject of a discussion paper published by the Director General of Fair Trading in October 1984. Although he disagreed with

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  both the Cork Committee and the Government about the giving of some preferential status to pre-payment creditors, he concluded that the best prospects for the protection of consumers without involving a complicated and far from foolproof system, lies with voluntary schemes designed to cover particular problem areas. I and, I am sure, other hon. Members will be interested in the outcome of the Office of Fair Trading's discussions on this subject. However, I am afraid that I cannot accept the new clauses, partly because I do not believe that they would have the effect for which they hope.
  Mr. Hanley: In paragraph 1075 of the report on Insolvency Law and Practice, the review committee says:
  "Accordingly, we do not propose any amendment in principle of the existing law in this field, but we consider that the new Insolvency Act should contain general provisions, applicable to companies and individuals alike".
  Mr. Fletcher: That comment does not differ from my view. The Bill will allow opportunities for consumer creditors to be better placed in a liquidation than at present as well as providing for trade creditors. I have not seen any proposals for preferential or pre-preferential treatment that I consider workable.
  Mr. Norris: Earlier, the hon. Member for Dagenham (Mr. Gould) rejected the idea of a preference arrangement for deposit creditors because that muddied the waters more than it cleared them, which is a fair thing to say. In Committee, I was encouraged by the undertaking given by my hon. Friend the Minister to look again at this matter. I am sure that he appreciates that this is of great concern to a great many people. We should try to address ourselves to these issues. I readily admit that the wording suggested to me by those who have been kind enough to advise me may be less than perfect, and that the amendment standing in the name of the hon. Member for Dagenham may be equally imperfect. However, I am saddened that my hon. Friend should reject the notion that anything can be done by a detailed critique of my amendment.
  Mr. Gould: Does the hon. Gentleman share my disappointment that the Minister appears to recognise that there is a problem which needs a solution, does not find that our suggestions meet the bill, but produces no suggestions of his own?
  Mr. Norris: It is possibly more appropriate that that comment comes from the hon. Gentleman than from me. I shall have to live beyond this night with the consequences of telling my hon. Friend the Minister how disappointed I am with his efforts. He told me that the large fat file which I shall shortly send him will accompany many large fat files which he already has. My hon. Friend will continue to receive such files and to have to respond on television, the radio and elsewhere to the outrage expressed by ordinary people who recognise this genuine problem, and who ask why, if he accepts that a problem exists and something can be done about it, he does not do something about it.
  Even at this late stage, I hope that my hon. Friend will bear in mind the significance of this small provision in the 200-clause Bill to many people. However, I recognise the potential imperfection in my new clause, and I beg to seek leave to withdraw the motion.
  Motion and clause, by leave, withdrawn.

  Insolvency Bill [Lords]
    Clause 1

      UNQUALIFIED PERSONS NOT TO ACT AS INSOLVENCY PRACTITIONERS
      Mr. Fletcher: I beg to move amendment No. 1, in page 1, line 17 at end insert
      'or as supervisor of a composition or scheme approved by it under Chapter II or Part II of this Act'.
      Mr. Speaker: With this it will be convenient to take Government amendments Nos. 2 to 4.
      Mr. Fletcher: These are technical amendments aimed at providing both consistency with existing provisions and clarity of wording generally.
      Amendment agreed to.
      Amendments made:
      No. 2, in page 2, line 4 leave out 'in Scotland'.
      No. 3, in page 2, line 6 after 'under', insert 'a deed which is'.
      No. 4, in page 2, line 15 leave out from beginning to `to' in line 17 and insert 'References in this section to an individual include, except in so far as the context otherwise requires, references to a partnership and'—[Mr. Fletcher.]

    Clause 2

      QUALIFICATION OF INSOLVENCY PRACTITIONERS
      Amendments made:
      No. 5, in page 2, line 32 leave out from beginning to end of line 5 on page 3 and insert—
      '(2) A person is not qualified to act as an insolvency practitioner at any time unless, at that time—

      (a) he is authorised to act as an insolvency practitioner by virtue of section [Authorisation of members of recognised professional bodies] below; or

      (b) he holds an authorisation granted under section [Grant, refusal and withdrawal of authorisation] below.

      (3) A person is not qualified to act as an insolvency practitioner in relation to another person at any time unless—

      (a) there is in force at that time security or, in Scotland, caution for the proper performance of his functions; and

      (b) that security or caution meets the prescribed requirements with respect to his so acting in relation to that other person.

      (4) A person is not qualified to act as an insolvency practitioner at any time if, at that time—

      (a) he has been adjudged bankrupt or sequestration of his estate has been awarded and (in either case) he has not been discharged;'.

      No. 6, in page 3, line 8 at end insert
      'or
      (c) he is a patient within the meaning of Part VII of the Mental Health Act 1983 or section 125(1) of the Mental Health (Scotland) Act 1984.'.
      No. 7, in page 3, line 9, leave out Clause 3.
      No. 8, in page 3, line 19, leave out Clause 4.
      No. 9. in page 4, line 17, leave out Clause 5.—[Mr. Fletcher.]

    Clause 6

      RULES AND REGULATIONS
      Amendment made:
      No. 10, in page 4, line 25, leave out from 'for' to 'shall' in line 29 and insert
      'the purpose of giving effect to this Part.
      (1A) Without prejudice to the generality of subsection (1) above or to any provision of this Part by virtue of which regulations may he made with respect to any matter, regulations under this section may contain—

      (a) provision as to the matters to be taken into account in determining whether a person is a fit and proper person to act as an insolvency practitioner;

      (b) provision prohibiting a person from acting as an insolvency practitioner in prescribed cases, being cases in which a conflict of interest will or may arise;

      (c) provision imposing requirements with respect to—

      (i) the preparation and keeping by a person who acts as an insolvency practitioner of prescrivbed books, accounts and other records; and

      (ii) the production of those books, accounts and records to prescribed persons;

      (d) provision conferring power on prescribed persons—

      (i) to require any person who acts or has acted as an insolvency practitioner to answer any inquiry in relation to a case in which he is so acting or has so acted; and

      (ii) to apply to a court to examine such a person or any other person on oath concerning such a case;

      (e) provision making non-compliance with any of the regulations a criminal offence; and

      (f) such incidental, supplemental and transitional provisions as may appear to the Secretary of State necessary or expedient.

      (2) Any power conferred by this Part to make regulations, rules or orders'.—[Mr. Fletcher.]

    Clause 7

      DUTY OF COURT TO DISQUALIFY UNFIT DIRECTORS OF INSOLVENT COMPANIES
      Mr. Fletcher: I beg to move amendment No. 11, in page 5, line 20, leave out subsection (3).
      Mr. Speaker: With this it will be convenient to take Government amendment No. 12, amendment No. 259, in page 5, leave out from line 33 to line 12 on page 6 and insert—
      '(5) It shall be the duty—

      (a) of the liquidator in the case of a company which is being wound up voluntarily; or

      (b) of the official receiver in the case of a company which
      is being wound up in the court in England and Wales, to provide a written report to the Secretary of State to indicate whether or not it appears that the conduct of each person who was a director of that company at any time during the two years before liquidation has made him unlit to be concerned in management of a company.',

      and Government amendments Nos. 13, 14, 183, 184, 261, 262 and 199.
      Mr. Fletcher: These amendments fulfil undertakings that I gave in Committee. Amendment No. 12 answers the concern expressed on behalf of directors, that they should not have the threat of being made subject to a disqualification order hanging over their heads indefinitely by preventing an application for a disqualification order being made more than two years after the company has become insoolvent—as defined by subsection (7)—unless the court gives leave for an application to be made out of time.
      Amendment No. 199 to schedule 5 will enable rules to be prescribed regarding the reports required to be made about directors' conduct to the Secretary of State by the official receiver, the voluntary liquidator, the administrator or the administrative receiver. The rules will prescribe when he has to report, on which directors he has to report, and the form in which the report must be made.
      582
      I hope that having explained the purpose of amendment No. 199 the hon. Member for Dagenham (Mr. Gould) will not need to move amendment No. 259, which duplicates in part what amendment No. 199 will achieve.
      I know the particular point that the hon. Gentleman will have in mind. It is that there should be an obligation on the liquidator and others to make the report. We are doing that in the rules because of the other considerations that are attached.
      10.15 pm
      In Committee concern was expressed by practitioners and those speaking on behalf of creditors, particularly prepayment creditors, that the court should be required to have regard to the extent of a person's involvement in other insolvencies and also whether he was in any way responsible for the company's failure to meet its obligations to customers who had paid in advance for goods or services. That point was stressed by my hon. Friend the Member for Oxford, East (Mr. Norris). We have therefore added two items to the schedule of matters that the court must take into consideration when determining whether a person's conduct makes him unfit to be a director of a company.
      Amendment No. 185, which introduces paragraph 5A to schedule 2, will require the court to take into consideration the extent of a person's responsibility for the cause of any company of which he was a director becoming insolvent. Paragraph 5B of schedule 2 will require the court to take into consideration the extent of the director's responsibility for any failure on the part of the company to supply any goods or services which had been paid for in advance.
      Finally, amendments Nos. 184, 261 and 262 are necessary to allow the schedule of matters that the court has to take into consideration when determining the unfitness of directors to be divided into those matters which are applicable in all cases where an application is made under clause 7 or clause 8 of the Bill and, in part II, those matters which, because of their nature, are applicable only when the company has become insolvent. An opportunity has been taken at the same time to divide further paragraph (b) of part II of the schedule to highlight a director's responsibility to ensure that not only he but his fellow directors comply with the requirements of clause 77 in respect of meetings of creditors in a voluntary winding up.
      Mr. Gould: The Minister will recall that in the Committee discussion, which was substantial, great importance was attached by many hon. Members to the obligation being placed on the liquidator or the official receiver to make a report in each case on the conduct of the directors. The Minister will recall also that he was persuaded by that argument. I listened carefully to what he said. For the sake of my peace of mind and that of my hon. Friend the Member for St. Helens, South (Mr. Bermingham), who perhaps did not hear him, I ask him to give an assurance and make it perfectly clear that by virtue of amendment No. 199 and therefore the addition of that provision to the schedule, rules will be made to provide for the obligation resting on the liquidator and the official receiver.
      Mr. Fletcher: I cannot give that assurance, but I shall explain the matter a little more. It was my desire to make

      583
      the amendment on the face of the Bill rather than in the rules. As recently as yesterday afternoon, I spent a considerable amount of time on the matter.
      Clause 7(5) requires the liquidator to report forthwith. When the liquidator has a positive report to make, we do not wish him to delay. We are not saying when he should do so, but we want it to be forthwith. When we consider two other aspects of timing and the fact that the liquidator has a duty to report in every case, it is better with regard to the form of the report and the timing to put that into the rules.
      Let me explain briefly. There is a two-year limit on the amount of time that the liquidator has to make his report to the Secretary of State, so that the director of a company that has become insolvent will know that after two years, except by leave of the court, there is no likelihood of a disqualification order being made against him. At the same time, to minimise the number of times when the Secretary of State would be required to seek leave of the court, in the rules we are asking liquidators to give us their report in each case within 12 months. Those two timings, the laying down of the form in which we wish the reports to be made to the Secretary of State, and the provisions on the face of the Bill, with the need to report forthwith where there is a case for disqualification, require the amendment to make it clear that the provisions will be in the rules and not on the face of the Bill.
      Mr. Norris: I am sure the Minister will be able to satisfy my concern in relation to this new apparent undertaking, just as he was able to satisfy the concern of the hon. Member for Dagenham (Mr. Gould). I took the matter of automatic reporting seriously. Without restating all the arguments made on Report, it is clear that automatic reporting does a lot more than merely fill up a lot of files at a Department of Trade and Industry. If that were its only purpose I would be the last to support it, but there is a significant purpose. Even a collection of mill reports in relation to one person might individually be of no substance, but collectively would be valuable information in relation to the other sections of the Bill. I regard automatic reporting as one of the key undertakings given by my right hon. Friend at Committee stage, and in going through these amendments I looked for it in vain. I am told by my hon. Friend that the form in which it appears in Government amendment No. 199 is as an addition to schedule 5. Schedule 5(21A) would then say,
      "(including, in particular, requirements with respect to the making of periodic returns).".
      I understand that the expression "including in particular" by definition implies that other returns may be made. But this is an important return and is certainly not a periodic return, but one made specifically in the circumstances outlined in the amendment proposed not only by Opposition Members but by my hon. Friend the Member for Richmond and Barnes (Mr. Hanley) and by me. We want to make it quite clear in the Bill that a liquidator or an official receiver has
      "to provide a written report to the Secretary of State to indicate whether or not it appears that the conduct of each person.".
      and so on. That is a specific and important requirement and I am less than happy that it is deemed to be implicit in a section of an amendment to schedule 5 dealing with the making of periodic returns. If my hon. Friend can assure me that the point has been accepted in its entirety, I am
      584
      sure that hon. Members on both sides will not wish to detain the House longer. I would be grateful if my hon. Friend would make that entirely clear, that this has nothing to do or cannot be confused with any other periodic returns that an liquidator or official receiver may be required to make.
      Mr. Gould: As the author of the original amendment and of the subsequent laying down of this amendment, the point which worries me is that when I looked at Government amendment No. 199 I had not realised it referred back to section 7(5). What worries me is the use of the word periodic in Government amendment No. 199. Under the rules the cut back is from two years to one year. Is the Minister saying that within one year there must be a report from the liquidator? He shakes his head: therefore it must be that within two years that there must be a report from the liquidator. That does not solve the problem about which we sought and received an absolute undertaking in Committee. It now becomes a matter of honour. We had an undertaking and the system works on undertakings. The Minister spoke to me privately and I accepted what he said.
      Mr. Fletcher: I am aware of the commitment made in Committee, and I agree entirely with what my hon. Friend said about the importance of this return. I have already confessed to the House that I am rather disappointed we are dealing with the matter in the rules, and I took some satisfying that we had to deal with it in that way and not on the face of the Bill. Government amendment No. 199 enables the Secretary of State to make detailed provisions about how insolvency practitioners should carry out their functions when reporting under clause 7(5). In particular we propose to set up a system for returns. At determined intervals practitioners will be required to submit a report on what they have done and what evidence of unfitness has been discovered about the directors of the company concerned during the period reported on. The Secretary of State will thus receive reports on all directors who have been involved in insolvency proceedings. The reports will form part of the data base which will gradually be built on all directors who have been involved in insolvency proceedings. That was one of the key matters that we considered in committee.
      Mr. Bermingham: I am grateful for the Minister's intervention. As he said, in Committee it became a matter that was fundamental to the Committee, in the collective view of the Committee. It was the general consensus that a rogue or bad director needed to be located and identified as soon as possible so that the various other sanctions against rogue directors could be brought speedily to bear.
      At the same time, it is equally right that directors who have no faults—who through adverse trading conditions, the collapse of the market or the collapse of a supplier—can find themselves directors of an insolvent company and should know as soon as possible that their explanation of why the company crashed has been accepted and that their names are clear. In humanitarian terms that is equally important—hence the insistence of hon. Members that brought the matter home in the amendment and in the undertaking.
      If I understand the Minister correctly, amendment No. 199 now means that there will be periodic returns throughout the course of the liquidation, and in the questionnaires which the insolvency practitioners have to

      585
      complete, whether they have been liquidators or receivers, there will be this definitive question about the directors and in each of the returns submitted during the course of the liquidation within the two-year period the same question will be repeated. It must be remembered that it is sometimes not at the beginning of the liquidation that the fault on the part of a director is found. It may come towards the termination of the liquidation, and the evidence suddenly begins to emerge. If the Minister will reassure the House that these questions which will form the data base of the information available to the Department will be repeated in each return throughout the course of the liquidation, I am sure that many—
      Mr. Norris: I share the hon. Gentleman's concern. But was it ever in his mind when he moved amendment No. 22 in Committee that we should be talking about periodic returns? Where does this business of periodic returns come in? We are saying that in the course of a liquidation a liquidator sends a report to the Department of Trade and Industry saying, "I have looked at this chap and he is OK," or "he is not." It was said in Committee—and column 68 of the Official Report confirms this—that we were thinking in the vast majority of cases of no more than a nil return. That was the expression used. There is no mention there of a necessity for periodic returns. That is the cause of the concern which the hon. Member for St. Helens, South (Mr. Bermingham) is expressing and which is shared by a number of Government supporters.
      Mr. Bermingham: I am grateful for that intervention. The use of the word "periodic" has prompted a certain question in my mind. If these returns are coming in at various times, what happens if in the first return it is said, "Clear," in the second it is said, "Clear," and in the third it is said, "There is less than clarity in the behaviour of the directors"? Where does that put the directors?
      10.30 pm
      Mr. Fletcher: The use of the word "periodic" has not helped the debate. We are talking about any period up to two years, but I mentioned earlier the time factors in our minds. The word "forthwith" provides immediacy in the Bill and when liquidators are filling in general returns and not making a charge of unfitness, they will be advised by the rules to let us have a report "as soon as possible".
      The reason why I mentioned a period of 12 months is that if any action is to be taken on a report there will be a two-year limit on when the Secretary of State can make an application without leave of the court. Therefore, the 12-month and two-year periods should both be prescribed in the rules. However, there should be only one report on the directors in each liquidation, and not a series of reports.
      Mr. Bermingham: I suggest that the removal of the word "periodic" might clarify the situation. The rules could show that at a specific date the liquidator has to return a form covering this matter. All of us will then know that what we sought in Committee has been achieved. The word "periodic" is confusing, and if it stays in the Bill all sorts of things will happen and we shall not get the clarity that we seek in ensuring that there will be a return about the conduct of a director in every case.
      Mr. Gould: The debate has added to my anxieties. Amendment No. 199 specifies rules that could be made in respect of two types of return—a return under clause
      586
      7(5), which is clearly not the sort of return that we are talking about, because it relates to specific circumstances, and a periodic return, which is open to all the objections that hon. Members have spelt out. It is not clear to me what a periodic return is and why we should not simply talk about a return specific to each insolvency.
      In any case, I am far from convinced that the Minister was right to be satisfied that there was no better way of handling the issue. I cannot see why it was not possible to provide that, having specified in clause 7(5) certain circumstances in which the liquidator must make a report forthwith, words such as "and in each other case shall make a report within two years on whether the directors involved conducted themselves properly" could not have been added. That would have included in the Bill the principle that we all regard as important and that should be given as much prominence as possible.
      Mr. Hanley: Does the hon. Gentleman remember the contribution in Committee of my hon. Friend the Member for Tynemouth (Mr. Trotter) whose experience in insolvency matters was unrivalled? At our second sitting, my hon. Friend said that this issue was one of the rnost important practical matters to have been brought before the Committee up to that stage. My hon. Friend said that. although 95 to 98 per cent. of reports might have nothing to add, that was the basis of information that, after a repetition of "nothing to add" forms, might provide evidence of a suspicion of wrong behaviour. I am sure that if my hon. Friend the Member for Tynemouth were present today he would make as passionate a speech as he made in Committee. Unfortunately, he is absent on parliamentary business.
      Mr. Gould: The hon. Gentleman is right. We all saw the importance of a mechanism by which a pattern of conduct could be identified and isolated.
      The Minister would help the House if he expressed his understanding of our anxieties. I hope that the Minister will consider whether it is possible to put the provision in the Bill. I am confident that it is possible.
      Mr. Fletcher: We agree that the liquidator shall report "forthwith". A report by the liquidator will be made in respect of every liquidation about the fitness of the directors. Part of our scheme is to keep on the database a record of those liquidators who make no returns. That is just a little help, but it might enable the Department over a period to say to a professional body that it is odd that Mr. X has been involved in 29 liquidations in the past 10 years but that no returns have been made. I know that the matter is not as simple as that, but since we plan a database that seems worthwhile.
      I explain so that the House may understand that our intentions are more than honourable; they are practical. I spent some time considering whether it was possible to put this in the Bill, but for various reasons we decided to deal with the matter through the rules.
      Mr. Norris: I am reassured by the spirited way in which my hon. Friend said that he intended to do what he said he would do, but I am concerned about the way in which he professes to have achieved that. I located amendment No. 259 in a long list, but I did not appreciate the true significance of amendment No. 199.
      Mr. Deputy Speaker (Mr. Ernest Armstrong): Order. The hon. Gentleman must not make another speech.
      Mr. Norris: I stand corrected, but I want to ask the Minister a specific question. Clause 7(5) states that if the conditions are satisfied, the liquidator shall make a report. The point about clause 7 is that the liquidator shall have to take a qualitative decision. The Committee took exception to that and surely it must be corrected. Amendment No. 199 does not do that.
      Mr. Fletcher: I am not sure that I understand my hon. Friend. Clause 7(5) makes it clear that the liquidator shall forthwith report when he believes that a disqualification application shall be made. That is clear. The amendment requires the liquidator to make a report in all cases.
      Mr. Gould: If a liquidator refuses to make a report, how will the Minister persuade him that he has a statutory obligation to make a report? Perhaps that is what the word "periodic" means. If so, it is an ill-chosen word.
      None of us has any objection to making additional provision in the rules about keeping a data record of liquidators' actions. That does not preclude the Minister from putting the basic principle in clause 7.
      Mr. Millan: The use of the expression "periodic returns" is causing difficulty, especially as clause 7 refers to individual reports and not "periodic" returns. There is a limit to what we can do at this late stage of the legislation. It might help us if the Under-Secretary of State said that it would be possible to amend amendment No. 199 in the other place to take care of some of these matters. It would be helpful if he said "I shall look again at amendment No. 199. Perhaps we have not got it right. It is misleading or confusing". As I did not have the benefit of hearing the Committee's discussions, I think that that would help to clear matters up, to some extent at least.
      Mr. Bermingham: Will my right hon. Friend give way?
      Mr. Deputy Speaker: Order. As I understand it, the right hon. Member for Glasgow, Govan (Mr. Millan) was intervening during the speech of the Under-Secretary of State. An hon. Member cannot intervene on an intervention. I thought that the Under-Secretary of State had not finished speaking.
      Mr. Millan: The Under-Secretary of State has been up and down several times. I had not been on my feet until 30 seconds ago. I am not intervening.
      Mr. Deputy Speaker: Order. As I understand it, the Under-Secretary of State was making his speech and had not finished, and the right hon. Member for Govan was intervening.
      Mr. Millan: That was not my understanding, Mr. Deputy Speaker, and I do not think that it was the understanding of the Under-Secretary of State either. If my hon. Friend the Member for St. Helens, South (Mr. Bermingham) will simply put his case to me, I shall resume my seat in a few seconds.
      Mr. Bermingham: Does my right hon. Friend the Member for Glasgow, Govan (Mr. Millan) agree that the simplest solution would be to take out the words "periodic return" and insert the word "report"?
      Mr. Millan: It would be. I suggested that the Under-Secretary of State might consider whether amendment No. 199 could be amended in the other place so that the wording is made clearer. If the hon. Gentleman does so, that might resolve some of our difficulties.
      Mr. Fletcher: I do not think that there is anything wrong with amendment No. 199, but I shall certainly look at it again. If it needs to be amended, we shall do so in the other place, having described what we want to achieve.
      On the more substantial point made by my hon. Friend the Member for Oxford, East (Mr. Norris) via the hon. Member for Dagenham (Mr. Gould), concern has been expressed about the power of the Secretary of State to ensure that the liquidator carries out this duty. That is provided for in clause 7(6).
      Amendment agreed to.
      Amendment made: No. 12, in page 5, line 32, at end insert—
      `(4A) Except with the leave of the court, an application for the making under this section of a disqualification order against any person shall not be made after the end of the period of two years beginning with the day on which the company of which that person is or has been a director became insolvent.'.—[Mr. Fletcher.]

  Insolvency Bill [Lords]
    Clause 9

      MATTERS FOR DETERMINING UNFITNESS OF DIRECTORS
      Amendments made: No. 13, in page 7, line 31, leave out
      'to the matters mentioned in Schedule 2 to this Act' and insert—

      `(a) to the matters mentioned in Part I of Schedule 2 to this Act; and

      (b) where the company has become insolvent, to the matters mentioned in Part II of that Schedule;'.

      No. 14, in page 7, line 35, after first 'section' insert 'and Schedule 2 to this Act'.—[Mr. Fletcher.]

    Clause 12

      PERSONAL LIABILITY OF PERSONS ACTING WHILE DISQUALIFIED
      Amendments made: No. 15, in page 9, line 18, after `order', insert
      'of section [Restriction on use of company names] above'.
      No. 16, in page 9, line 26, after 'order', insert
      ', to be in contravention in relation to that company of section [Restriction on use of company names] above'.
      No. 17, in page 10, line 9, after 'order', insert
      ', to be in contravention in relation to that company of section [Restriction on use of company names] above'.—[Mr. Fletcher.]

    Clause 21

      POWER TO MAKE ORDER
      Amendments made: No. 18, in page 16, line 33, leave out 'or'.
      No. 19, in page 16, line 35, at end insert
      'or
      (c) where the company is a recognised bank or licensed institution within the meaning of the Banking Act 1979 or an institution to which sections 16 and 18 of that Act apply as if it were a licensed institution'.—[Mr. Fletcher.]
      Mr. Gould: I beg to move amendment No. 271, in page 17, line 6, at end insert—
      '(e) to secure greater protection for the jobs of those employed by the company than would be effected on a winding up.'.
      Mr. Deputy Speaker: With this, we shall take the following:
      Amendment 272: in clause 34, page 25, line 41, after 'creditors', insert
      'and trade union and other representatives of the company's employees'.
      Amendment 273, in page 26, line 2, after 'creditors', insert
      'and trade union and other representatives of the company's employees'.
      Amendment 274, in clause 35, page 26, line 15, leave out 'of creditors'.
      Amendment 275, in clause 36, page 27, line 9, after 'creditors', insert
      `and trade union and other representatives of the company's employees'.
      Amendment 276, in page 27, line 13, after 'creditors', insert
      'and trade union and other representatives of the company's employees'.
      Amendment 277, in page 27, line 24, leave out 'of creditors'.
      Amendment 278, in clause 37, in page 27, line 35, leave out 'of creditors'.
      Amendment 279, in clause 38, page 28, line 4, after 'creditors', insert 'or employee'.
      Amendment 280, in page 28, line 9, after 'creditors', insert 'or employees'.
      Amendment 281, in page 28, line 10, after 'creditors', insert 'or employees'.
      Amendment 282, in page 28, line 36, after 'creditors', insert 'or employees'.
      Mr. Gould: We considered this group of amendments in Committee, and the Under-Secretary of State expressed some warmth about them. He undertook to consider them in a general sense. Predictably, he has not been able to accept the amendments, which were designed to impose upon the adminstrator the duty to pay some attention to the employment prospects of the work force in the company for which he was acting as liquidator. It imposed on hire the duty to consult the work force at a number of stages during the carrying out of his functions as administrator.
      The fact that the Under-Secretary of State has not been able to accept the thrust of the amendments that we are left in the familiar position where the potential failure of a company is seen almost exclusively—in my view, wrongly—as a balance to be struck between the interests of the directors and the creditors. The employees, whose livelihood are most likely to be directly at stake, are regarded as a side issue and not a central matter to be taken into account by those responsible for the company's future. Their jobs are regarded as of very little value compared with the debts owed to creditors and the future of the company. The paradox is that the administration procedure is designed to maximise the chances of survival of the company. In that undertaking there can be no more important body of people than the work force. Its cooperation is essential. It needs to be taken into the confidence of the administrator at the earliest possible moment and to be kept in his confidence throughout.
      The Opposition regret that, although he expressed general sympathy, the Under-Secretary of State found it impossible to express it directly in the Bill. I do not intend to press this amendment to a Division, but many people outside the House will take this failure to recognise the importance of the work force as another indication that in the end the Government do not concern themselves to much with the jobs of ordinary people and that they are quite content to leave this area of the law as a battleground between the directors of companies and those who in many cases are trade creditors, sight being lost of the interests of the work force.
      10.45 pm
      Mr. Fletcher: I sympathise with the spirit of the amendments. I made that clear in Committee,. I cart envisage obvious political attractions in flagging up the requirement that the administrator should consult the work force. However, having considered this matter in the cold light of the Department as distinct from the warmth of the Committee it does not appear to be very helpful. Amendment No. 271 could be harmful. It could introduce a potential conflict between the purposes for which adminstrators are to be appointed.
      There are two fundamental issues. First, the new administration procedure is intended to promote the

      591
      survival of companies as going concerns. Secondly, it is intended to secure the preservation of jobs. The purpose of amendment No. 271 is therefore implicit in all of the existing purposes for which administrators may be appointed. As for the remaining 11 amendments, the hon. Member for Dagenham (Mr. Gould) knows that my view is that no administration will be successful unless the administrator enjoys the support of the employees. To achieve this support he must consult them and keep them informed. There may be cases where the employees of a company will be creditors; they will then have the rights of creditors in terms of formal consultations with the administrator.
      The central point that I wish to underline is that the success of the procedure is the best safeguard for employees' jobs and that, attractive though the amendments of the hon. Member for Dagenham are, they would not improve that safeguard. I cannot therefore agree to the inclusion of something which, although it might appear to be attractive politically, would not serve a real purpose or have any real effect.
      Mr. Bermingham: Once again the Parliamentary Under-Secretary of State has proved that we were right. He warned us in Committee that we should not be too nice to him because it would harm his political career. Every time that we did our best to educate him he went back to his Department, of which we were highly critical. It poured cold water on this education and destroyed everything. The only thing to do is to move the Under-Secretary of State and to ignore the Department.
      We are saying in the amendment that if there is any chance of saving a business the people we need to help us most are the employees; so why not put it on the face of the Bill? In Committee the Under-Secretary of State said that in theory it was a good and attractive idea and that he liked it. But what do we find when he returns to the Floor of the House? We find that the gremlins in the Department have got at him again. There seems to be an overwhelming objection on its part to anything sensible, humane and decent being put on the face of the Bill.
      I said earlier that it is over 100 years since we had a Bill on insolvency. Joseph Chamberlain introduced the last one. It will be another 100 years before we have the next one. I fear that the gremlins in the Department in 100 years' time will again wreck the face of the Bill. We should be showing that it is the purpose of the insolvency law to save employment where we can, and that we think that the work force is important. That is not too much to ask.
      The Minister says that it would be cosmetic and pretty. I say that it would be positive and attractive to the work force. It would show that this House believes that the people who work in industry are important, that their rights matter, that they will be protected, and that they will be given the courtesy of consultation. To achieve that, the Minister has only to bow gracefully to us—because he is at present some distance from the gremlins—in the warmth of this Chamber and accept the amendment. Then we can all go home thinking that he has done a fine job and finally overcome his own gremlins.
      Mr. Gould: In the conviction that the arguments, if not the votes or the gremlins, are on our side, I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.

    Clause 22

      APPLICATION FOR ORDER
      Mr. Fletcher: I beg to move amendment No. 20, in page 17, line 28, leave out 'charge or'.
      Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 23, 24, 26, 30, 32, 33, 35, 263, 37, 39 to 41, 50 to 56, 78, 102, 109, 115 to 117, 162, 163 and 167.
      Mr. Fletcher: The 29 amendments in the group are drafting amendments which are designed to establish a single definition of what is meant by the term "security" in the Bill.
      Amendment agreed to.
      Mr. Fletcher: I beg to move amendment No. 21, in page 17, line 31, leave out 'or'.
      Mr. Deputy Speaker: With this it will be convenient to take Government amendments Nos. 22, 27, 28, 31, 34, 38, 42 to 44, 46, 47, 111 and 112.
      Mr. Fletcher: The purpose of this group of 14 amendments is to adapt the provisions of the Bill relating to the administrative procedure so that wherever possible they are capable of operating in relation to Scotland without separate and distinct provisions having to be made.
      Amendment agreed to.
      Amendment made: No. 22, in page 17, line 32, after 'below', insert—
      'or would be challengeable under section 615A or 615B of the 1985 Act or under any rule of law in Scotland.'.—[Mr.Fletcher.]

    Clause 23

      EFFECT OF APPLICATION
      Amendments made: No. 23, in page 18, line 6, leave out 'charge on or'.
      No. 24, in page 18, line 37, leave out 'shall be construed as references to diligence' and insert
      'being commenced or continued shall include references to diligence being carried out or having effect and references to distress being levied shall be construed as references to poinding being carried out.'.—[Mr. Fletcher.]

    Clause 24

      NOTIFICATION OF ORDER
      Amendments made: No. 25, in page 19, line 10, after 'no', insert 'other'.
      No. 26, in page 19, line 10, leave out 'charge on or'.
      No. 27, in page 19, line 31, leave out 'a charge on' and insert
      'charged on and paid out of'.
      No. 28, in page 19, line 32, leave out and shall have priority over any charges or' and insert
      'in priority to any'.
      No. 29, in page 19, line 33, leave out 'to which section 28(1) below then applies' and insert
      'held by the person by or on whose behalf he was appointed'.—[Mr. Fletcher.]

    Clause 28

      POWER TO DEAL WITH CHARGED PROPERTY ETC.
      Amendments made: No. 30, in page 21, line 3, leave 'charge or'.
      No. 31, in page 21. leave out lines 5 to 8 and insert 'security'.
      No. 32, in page 21, line 12, leave out 'charge or'.
      No. 33, in page 21, line 19, leave out 'charge or'.
      No. 34, in page 21, line 23, leave out
      'charge or security held by a person who'
      and insert
      `security held by a person who (whether by virtue of the security or otherwise) appointed or'.
      No. 35, in page 21, line 26, leave out
      'charge or security to which a charge or'
      and insert 'security to which a'.
      No. 263, in page 21, line 28, leave out 'charge or security on' and insert
      'security which, as created, was a security over'.
      No. 37, in page 21. line 29, leave out 'charge or'.
      No. 38, in page 21, line 30, at end insert—
      `(3A) Where any property is disposed of under subsection (1) above, the security shall have effect in relation to any property of the company which represents the property disposed of as if—

      (a) the security had been created by the company as a floating charge over the property; and

      (b) any condition precedent to the exercise of the right to appoint a receiver of the property by virtue of the security were satisfied.'.

      No. 39, in page 21, line 40, leave out 'charge or'.
      No. 40, in page 21, line 43, leave out 'charges or'.
      No. 41, in page 22, line 2, leave out 'charges or'.
      No. 42, in page 22, line 10, at end insert—
      '(7A) Where any property is disposed of under this section in its application to Scotland, the administrator shall grant to the disponee an appropriate document of transfer or conveyance of the property, and—

      (a) that document; or

      (b) where any recording, intimation or registration of that document is a legal requirement for completion of title to the property, that recording, intimation or registration,
      has the effect of disencumbering the property of or, as the case may be, freeing the property from the security.'—[Mr. Fletcher.]

    Clause 31

      VACATION OF OFFICE AND RELEASE
      Amendments made: No. 43, in page 23, line 26, leave out 'a charge on' and insert
      `charged on and paid out of'.
      No. 44, in page 23, line 28, leave out
      `and shall have priority over any charge or'
      and insert 'in priority to any'.
      No. 45, in page 23, line 31, leave out from 'incurred' to `functions' in line 32 and insert
      'while he was administrator under contracts entered into or contracts of employment adopted by him or a predecessor of his in the carrying out of his or the predecessor's'.
      No. 46, in page 23, line 33, leave out 'a charge on' and insert
      'charged on and paid out of.
      No. 47, in page 23, line 34, leave out
      'and shall have priority over'
      and insert 'in priority to'.
      No. 48, in page 23, line 35, at end insert
      '; and for the purposes of paragraph (b) above the administrator is not to be taken to have adopted a contract of employment by reason of anything done or omitted to be done within fourteen days after his appointment.'.—[Mr. Fletcher.]

    Clause 39

      PRELIMINARY
      Amendment made: No. 49, in page 29, line 18, leave out from first 'a' to 'or' in line 19 and insert
      'charge which, as created, was a floating charge, or by such a charge and one or more other securities'.—[Mr. Fletcher.]

    Clause 43

      POWER TO DISPOSE OF CHARGED PROPERTY ETC.
      Amendments made: No. 50, in page 30, line 28, leave out 'charge or'.
      No. 51, in page 30, line 33, leave out 'charge or'.
      No. 52, in page 30, line 35, leave out 'charge or'.
      No. 53, in page 30, line 37, leave out
      `charge or security to which a charge or'
      and insert 'security to which a'.
      No. 54, in page 31, line 4, leave out 'charge or'.
      No. 55, in page 31, line 6, leave out 'charges or'.
      No. 56, in page 31. line 10, leave out 'charges or'.—[Mr. Fletcher]

    Clause 44

      AGENCY AND LIABILITY FOR CONTRACTS
      Amendments made: No. 57, in page 31, line 28, leave out from beginning to
      'and' in line 30 and insert 'by him in the carrying out of his functions (except in so far as the contract otherwise provides) and on any contract of employment adopted by him in the carrying out of those functions;'.
      No. 58, in page 31, line 32, at end insert
      '; and for the purposes of paragraph (b)above the administrative receiver is not to be taken to have adopted a contract of employment by reason of anything done or omitted to be done within fourteen days after his appointment.'.
      No. 59, in page 31, line 33, leave out subsections (2) and (3) and insert—
      `(2) This section does not limit any right to indemnity which the administrative receiver would have apart from it, nor limit his liability on contracts entered or adopted without authority., nor confer any right to indemnity in respect of that liability.'.—[Mr. Fletcher.]

    Clause 45

      VACATION OF OFFICE
      Amendments made: No. 60, in page 32, line 13, leave out 'a charge on' and insert 'charged on and paid out of'.
      No. 61, in page 32, line 14, leave out 'and shall have priority over any charge or' and insert 'in priority to any'.
      No. 62, in page 32, line 15, leave out
      'to which section 43(2) above then applies
      and insert
      `held by the person by or on whose behalf he was appointed'.—[Mr. Fletcher.]

    Clause 51

      POWERS OF RECEIVER
      Amendments made: No. 264, in page 36, line 32, at end insert—
      '(aa)in paragraph (c)of subsection (1), after the word "to" there shall be inserted the words "raise or".'
      No. 265, in page 36, line 33, leave out 'subsection (1)' and insert 'that subsection'.
      No. 64, in page 37, line 18, at end insert—

      595
      `(ee)after paragraph (r)there shall be inserted the following paragraph—
      "(rr) power to change the situation of the company's registered office; ";'.—[Mr. Fletcher.]

    Clause 52

      VACATION OF APPOINTMENT BY RECEIVER
      Amendments made:
      No. 65, in page 37, line 24, leave out from beginning to 'for' in line 25 and insert—
      '52(1) Section 478 of the 1985 Act (vacation of appointment by receiver) shall be amended as follows.
      (2)'.
      No. 66, in page 37, line 34, at end insert—
      '(3) For subsection (4) there shall be substituted the following subsection—
      "(4) Where at any time a receiver vacates office—

      (a) his remuneration and any expenses properly incurred by him; and

      (b) indemnity to which he is entitled out of the property of the company, shall be paid out of the property of the company which is subject to the floating charge and shall have priority as provided for in section 476(1).".

      (4) In subsection (5) for the words "7 days" there shall be substituted the words "14 days".'. [Mr. Fletcher]

    Clause 53

      POWERS OF COURT
      Amendment made: No. 67, in page 38, line 3, after 'invalid', insert
      '(whether by virtue of the invalidity of the instrument or otherwise)'.—[Mr. Fletcher.]

    CLause 54

      INFORMATION TO BE GIVEN BY AND TO RECEIVER
      Amendments made: No. 68, in page 38, line 12, leave out '14' and insert '28'.
      No. 69, in page 38, leave out lines 16 to 23.
      No. 70, in page 38, line 24, leave out 'does' and insert 'and section 482 do'.
      No. 71, in page 38, line 28, leave out 'it applies' and insert 'they apply'.
      No. 72, in page 38, line 29, leave out 'it has' and insert 'they have'.
      No. 73, in page 38, line 30, after 'section', insert 'and section 482'.—[Mr. Fletcher.]

    Clause 55

      COMPANY'S STATEMENT OF AFFAIRS
      Amendment made: No. 74, in page 39, line 3, leave out from beginning to end of line 4 on page 40 and insert—
      '482.—(1) Where a receiver of a company is appointed, the receiver shall forthwith require some or all of the persons mentioned in subsection (3) below to make out and submit to him a statement in the prescribed form as to the affairs of the company.
      (2) A statement submitted under this section shall be verified by affidavit by the persons required to submit it and shall show—

      (a) particulars of the company's assets, debts and liabilities;

      (b) the names and addresses of its creditors;

      (c) the securities held by them respectively;

      596

      (d) the dates when the securities were respectively given; and

      (e) such further or other information as may be prescribed.

      (3) The persons referred to in subsection (1) above are—

      (a) those who are or have been officers of the company;

      (b) those who have taken part in the company's formation at any time within one year before the date of the appointment of the receiver;

      (c) those who are in the company's employment, or have been in its employment within that year, and are in the receiver's opinion capable of giving the information required;

      (d) those who are or have been within that year officers of or in the employment of a company which is, or within that year was, an officer of the company;
      and in this subsection "employment" includes employment under a contract for services.

      (4) Where any persons are required under this section to submit a statement of affairs to the receiver they shall do so (subject to subsection (5) below) before the end of the period of 21 days beginning with the day after that on which the prescribed notice of the requirement is given to them by the receiver.
      (5) The receiver, if he thinks fit, may—

      (a) at any time release a person from an obligation imposed on him under subsection (1) or (2) above; or

      (b) either when giving the notice mentioned in subsection (4) above or subsequently extend the period so mentioned,
      and where the receiver has refused to exercise a power conferred by this subsection, the court, if it thinks fit, may exercise it.

      (6) If a person without reasonable excuse fails to comply with any obligation imposed under this section, he shall be liable to a fine and, for continued contravention, to a daily default fine.'.—[Mr. Fletcher.]

    Clause 56

      REPORT BY RECEIVER
      Amendments made: No. 75, in page 40, line 16, at end insert
      `so far as he is aware of them'.
      No 76, in page 41, line 24, leave out '481' and insert '482'.
      No. 77, in page 41, line 25, at end insert—
      '(5A) Nothing in this section shall be taken as requiring any such report to include any information the disclosure of which would seriously prejudice the carrying out by the receiver of his functions'.
      No. 78, in page 41, line 31, leave out 'whose debt is secured on assets' and insert
      'who holds in respect of his debt a security over property'.—[Mr. Fletcher.]

    Clause 57

      COMMITTEE OF CREDITORS
      Amendments made: No. 79, in page 41, line 41, leave out 'at any time' and insert
      'on giving not less than 7 days notice'.
      No. 80, in page 41, line 42, after first 'it', insert
      'at any reasonable time'.—[Mr. Fletcher.]

    Clause 62
      FUNCTIONS OF OFFICIAL RECEIVER IN RELATION TO OFFICE OF LIQUIDATOR
      Amendment made: No. 81, in page 46, line 2, leave out 'one-half' and insert 'one-quarter'.—[Mr. Fletcher.]
    Clause 63

      APPOINTMENT OF LIQUIDATOR IN SCOTLAND.
      Amendment made: No. 82, in page 47, line 2, after
      `person', insert
      `(who may be the person who is the interim liquidator)'.— [Mr. Fletcher.]

    Clause 66

      COMMITTEE OF CREDITORS ETC. IN ENGLAND AND WALES
      Amendment made: No. 83, in page 48, line 12, at end insert
      '; and the liquidator of a company who is not the official receiver shall summon such a meeting if he is requested, in accordance with the rules, to do so by one-tenth, in value, of the company's creditors. '. '—[Mr. Fletcher.]

    Clause 69

      EARLY DISSOLUTION OF COMPANY IN SCOTLAND
      Amendments made:No. 84, in page 51, line 9, leave out from 'dissolved' to end of line 10 and insert
      'in accordance with this section.'
      No. 85, in page 51, line 13, leave out from 'shall' to end and insert
      'forthwith register it and, at the end of the period of three months beginning with the day of its registration, the company shall be dissolved.'.
      No. 86, in page 51, line 13, at end insert—
      `(3A) The court may, on an application by any person who appears to the court to have an interest, order that the date at which the dissolution of the company is to take effect shall be deferred for such period as the court thinks fit.
      (3B) It is the duty of the person on whose application an order is made under subsection (3A) above, within seven days after the making of the order, to deliver to the registrar of companies such a copy of the order as is prescribed.'.
      No. 87, in page 51, line 18, at end insert—
      '(5) If a person without reasonable excuse fails to deliver a copy as required by subsection (3B) above, he shall be liable on summary conviction to a fine not exceeding one-fifth of the statutory maximum, and for continued contravention, to a daily default fine not exceeding one-fiftieth of the statutory maximum.'.—[Mr. Fletcher.]

    Clause 71

      REMOVAL OF LIQUIDATOR AND VACATION OF OFFICE.
      Amendments made: No. 88, in page 52, line 16, leave out 'one-half and insert 'one-quarter'.
      No. 89, in page 52, line 28, leave out 'forthwith vacate office' and insert
      `vacate office when the dissolution of the company takes effect in accordance with that section'.—[Mr. Fletcher.]

    Clause 72

      RELEASE OF LIQUIDATOR
      Amendment made: No. 90, in page 54, line 2, at end insert—
      '(7) In the application of this section to a case where the order for winding up has been made by the court in Scotland, the references to a determination by the Secretary of State as to the time from which a person who has ceased to be liquidator shall have his release shall be construed as references to such a determination by the Accountant of Court.'.—[Mr. Fletcher.]

    Clause 73

      DISSOLUTION OF COMPANY
      Amendments made: No. 91, in page 54, line 7, leave out 'subsection (2)' and insert 'subsections (2) and (3A)'.
      No. 92, in page 54, line 17, at end insert—
      '(3A) Subsection (2) above shall not apply in a case where the winding-up order was made by the court in Scotland, but in such a case the court may, on an application by any person appearing to the court to have an interest, order that the date at which the dissolution of the company is to take effect shall be deferred for such period as the court thinks fit.'.
      No. 93, in page 54, line 19, leave out 'or'.
      No. 94, in page 54, line 21, after 'determined', insert
      'or on whose application an order is made under subsection (3A) above'
      No. 95, in page 54, line 22, leave out 'or'.
      No. '96, in page 54, line 22, after 'appeal', insert
      'or the making of the order'.
      No. 97, in page 54, line 23, leave out 'or determination' and insert 'determination or order'.—[Mr. Fletcher.]

    Clause 75

      EFFECT OF INSOLVENCY ON MEMBERS' VOLUNTARY WINDING UP
      Amendments made: No. 98, in page 56, line 12, leave out from 'the' to 'and' in line 13 and insert
      'directors' declaration under section 577 of that Act had not been made'.
      No. 99, in page 56, line 18, after 'accordingly,' insert
      'the winding up shall become a creditors' voluntary winding up and'.—[Mr. Fletcher.]

    Clause 77

      MEETING OF CREDITORS IN CREDITORS' VOLUNTARY WINDING UP
      Amendment made: No. 100, in page 58, line 3, after 'practitioner' insert
      `in relation to the company'—[Mr. Fletcher.]

    Clause 79

      RELEASE OF LIQUIDATOR IN VOLUNTARY WINDING UP
      Amendment made: No. 101, in page 60, line 42, at end insert—
      '(2A) In the application of subsection (2) above to the winding up of a company registered in Scotland, the references to a determination by the Secretary of State as to the time from which a person who has ceased to be liquidator shall have his release shall be construed as references to such a determination by the Accountant of Court' —[Mr. Fletcher.]

    Clause 81
      PREFERENTIAL DEBTS
      Amendment made: No. 102, in page 61, line 23, leave out 'under (and, in Scotland' and insert 'secured by, or'.—[Mr. Fletcher.]
    Clause 86
      NAME CHANGES
      Amendment made: No. 103, in page 66, line 1, leave out clause 86.—[Mr. Fletcher.]
    Clause 88

      PRELIMINARY
      Amendment made: No. 104, in page 67, line 32, at end insert—
      '(3) Section 90 below shall apply where a composition or scheme approved by meetings summoned under section 16 above has taken effect as it applies where a company goes into liquidation as if references in that section to the officer holder were references to the supervisor of the composition or scheme —[Mr. Fletcher.]

    Clause 90

      SUPPLIES BY UTILITIES
      Amendments made: No. 105, in page 69, line 2, leave out 'and'.
      No. 106, in page 69, line 4, at end insert
      'and
      (e) the date on which the composition or scheme was approved by the meetings summoned under section 16 above.'.—[Mr. Fletcher.]

    Clause 94

      TRANSACTIONS AT AN UNDERVALUE AND PREFERENCES (ENGLAND AND WALES)
      Amendments made: No. 107, in page 73, leave out lines 13 to 25 and insert—
      '(8) Subject to subsection (8A) below, the time at which a company enters into a transaction at an undervalue or gives a preference is a relevant time for the purposes of this section if the transaction is entered into or the preference is given—

      (a) in the case of a transaction at an undervalue or of a preference which is given to a person who is connected with the company, at a time in the period of two years ending with the commencement date; or

      (b) in the case of a preference which is not such a transaction and is not so given, at a time in the period of six months ending with that date; or

      (c) in either case, at a time between the presentation of a petition for the making of an administration order in relation to the company and the making of such an order on that petition.

      (8A) Where a company enters into a transaction at an undervalue or gives a preference at a time mentioned in subsection 8(a) or (b) above,that time shall not be a relevant time for the purposes of this section unless the company—

      (a) is unable to pay its debts within the meaning of section 518 of the 1985 Act at that time; or

      (b)becomes unable to pay its debts within the meaning of that section in consequence of the transaction or preference;
      but the requirements of this subsection shall be presumed to be satisfied, unless the contrary is shown, in relation to any transaction at an undervalue which is entered into by a company with a person who is connected with the company.'

      No. 108, in page 73, line 37, leave out from beginning to end of line 3 on page 74.—[Mr. Fletcher.]

    Clause 95
      ORDERS UNDER S. 94
      Amendment made: No. 109, in page 74, line 15, leave out 'charge or'.—[Mr. Fletcher.]
    Clause 97

      AVOIDANCE OF CERTAIN FLOATING CHARGES
      Amendments made: No. 110, in page 76, line 38. leave out from beginning to end of line 16 on page 77 and insert—
      '(2) Subject to subsection (3) below, the time at which a floating charge is created by a company is a relevant time for the purposes of this section if the charge is created—

      (a) in the case of a charge which is created in favour of a person who is connected with the company, at a time in the period of two years ending with the commencement date;

      (b) in the case of a charge which is created in favour of any other person, at a time in the period of twelve months ending with that date; or

      (c) in either case, at a time between the presentation of a petition for the making of an adminstration order in relation to the company and the making of such an order on that petition.

      (3) Where a company creates a floating charge at a time mentioned in subsection (2)(b) above and the person in favour of whom the charge is created is not connected with the company, that time shall not be a relevant time for the purposes of this section unless the company—

      (a) is unable to pay its debts within the meaning of section 518 of the 1985 Act at that time; or

      (b) becomes unable to pay its debts within the meaning of that section in consequence of the transaction under which the charge is created.

      (3A) For the purposes of subsection (2) above the commencement date is—

      (a) in a case where this section applies by reason of the making of an administration order, the date of the presentation of the petition on which the order was made; and

      (b) in a case where this section applies by reason of a company's going into liquidation the date of the commencment of the winding up.'.

      No. 111, in page 77, line 24, leave out subsection (5).—[Mr. Fletcher.]

    Clause 101

      CONSTRUCTION OF PART II
      Amendments made: No. 266, in page 79, line 15, leave out 'preceding'.
      No. 112, in page 79, line 42, at end insert—
      'in a case where the whole (or substantially the whole) of the company's property is attached by the floating charge'.
      No. 113, in page 80, line 6, at end insert—
      '"floating charge" means a charge which, as created, was a floating charge
      No. 114, in page 80, line 10, at end insert—
      '"office copy" in relation to Scotland, means a copy certified by the clerk of court; '.
      No. 115, in page 80, line 28, leave out
      'whose debt is charged or secured on assets'
      and insert
      'who holds in respect of his debt a security over property'.
      No. 116, in page 80, line 30, at end insert—
      security" means—

      (a)in relation to England and Wales. any mortgage, charge, lien or other security;

      601

      (b) in relation to Scotland, any security (whether heritable or moveable), any floating charge and any right of lien, retention or preference;'.

      No. 117, in page 80, line 31. leave out subsection (4).

    Clause 113

      CREDITOR'S PETITION
      Amendment proposed: No. 118, in page 91, line 15, leave out 'them' and insert 'the debts'.—[Mr. Fletcher.]
      Mr. Deputy Speaker: With this we shall consider Government amendments Nos. 119 to 121.
      Mr. Bermingham: Amendment No. 121 would appear to make it impossible to present a bankruptcy petition as long as there is an outstanding application to set aside the statutory demand.
      Should there not simply be a power to restrain the presentation of a petition when such an application is considered by the court to be genuine?
      Mr. Fletcher: These amendments provide an extra condition before a creditor may present his petition against the debtor so that as well as having to exceed the bankruptcy level the petition may be presented only when the debt or debts are a liquidated sum, the debtor has no reasonable prospect of being able to pay the debt or debts and the court is not dealing with an application to set aside the demand. The last condition will ensure that when a debtor has applied to have a demand set aside—perhaps because the amount of the debt outstanding is being disputed—the creditor may not present a bankruptcy petition.
      Amendment agreed to.
      Amendments made: No. 119, in page 91, line 18, leave out second 'and '.
      No. 120, in page 91, line 19, leave out 'them' and insert 'the debts'.
      No. 121, in page 91. line 21, at end insert
      'and (d) there is no outstanding application to set aside a demand served for the purposes of subsection (3)(a) or (4) below in respect of the debt or any of the debts.'.—[Mr. Fletcher.]

    Clause 116

      PROCEEDINGS ON DEBTOR'S PETITION
      Amendments made: No. 122, in page 94, line 10, leave out 'and'.
      No. 123, in page 94, line 15, at end insert
      `and (d) that it would be appropriate to appoint a person to prepare a report under subsection (3) below'.
      No. 124, in page 94, line 17, leave out `(c)' and insert
      `(d)'.
      No. 125, in page 94, line 18, leave out 'may' and insert `shall'.—[Mr. Fletcher.]

    Clause 121

      POWER TO APPOINT INTERIM RECEIVER
      Amendments made: No. 126, in page 98, line 3, leave out from `not' to end of line 7 and insert
      'release a bankrupt from any liability in respect of a fine or other penalty imposed for an offence or from any liability under a recognisance except, in the case of a penalty imposed for an offence under any enactment relating to the public revenue or of a recognisance, with the consent of the Treasury.'.
      No. 127, in page 98, line 16, at end insert—
      602
      '(5A) Discharge from bankruptcy shall not release a bankrupt from such other bankruptcy depts., not being debts provable in his bankruptcy, as are prescribed.'.—[Mr. Fletcher.]

    Clause 123

      DEFINITION OF BANKRUPT'S ESTATE
      11 pm
      Mr. Gould: I beg to move amendment No. 283, in page 100, line 3, at end insert—
      `(c) The bankrupt's only or main residence which is:

      (i) a protected tenancy or restricted contract as defined in the Rent Act 1977;

      (ii) a protected occupancy as defined in the Rent (Agriculture) Act 1976; or

      (iii) a secure tenancy as defined in the Housing Act 1980 unless it is a tenancy to which Part II of the Landlord and Tenant Act 1954 applies."

      Mr. Deputy Speaker: With this it will be convenient to discuss Government amendments Nos. 140 to 147.
      Mr. Gould: In Committee I mentioned the problem of the family home when the bankrupt—to take the most obvious example—was a council tenant. Under the existing law, the tenancy would vest in the trustee, but for no purpose. The only consequence of that would be that in many cases the bankrupt's family would lose its family home without a corresponding gain to the creditors.
      The Minister kindly said that he understood my anxiety and undertook to try to do something about it, and he has tabled amendments Nos. 140 to 147, which are welcome so far as they go. I believe that the Minister has fulfilled his undertaking to try to find a solution to the problem. However, I wonder whether he could be prevailed upon to go a little further. The problem is that in each case the tenancies will still vest in the trustee, although in most cases the tenancy will be of no value.
      The trustee or the official receiver may then disclaim the tenancy under clause 154. That will improve the tenant's position, but many tenants will not understand what is going on unless they receive clear notice of the disclaimer. In many cases they will not have proper advice. They may not be able or ready to act within the 14 days that they are given. There is a grave danger that, merely because many of the people about whom we are worried will not have access to proper advice and will be completely confused by being caught up in the proceedings, they will lose their homes for no good reason.
      I ask the Minister whether he considered, and, if so, what was the outcome of his consideration, if it were possible to prevent the vesting of the tenancy in some defined circumstances. That would be a neater and more foolproof solution to the problem. That is what amendment No. 283 is designed to achieve.
      I am advised that there may be a serious technical problem with the amendment, but if the Minister does not take that seriously I wonder whether he would accept in principle that it may be a better approach and may meet the point that we both want to achieve.
      Mr. Fletcher: The difficulty is that if a blanket exemption were provided for all tenancies there would have to be a reserve power to enable trustees to claim tenancies which were of value to the estate.
      As a third party—the landlord—would be involved, the claiming would have to be done through the court. That

      603
      could involve considerable trouble for the trustee and expense to the estate. We do not have evidence that a substantial number of people suffer hardship under the present system sufficient to justify a radical change such as the hon. Member for Dagenham (Mr. Gould) suggests. We must also remember that he said that people involved in this matter may not always have the benefit of proper advice. Bearing that in mind, we cannot avoid the fact that the tenancy may be of value to the estate and that there is a third party involved.
      Mr. Gould: I am a little worried about the Minister's point that not many people are involved. We do not know how many people may be involved, but if a technically satisfactory solution could be arrived at, surely it would be worth helping a handful of people. I am not convinced that the numbers are material. The Minister should consider whether it is possible to find a satisfactory solution which would avoid hardship for the families of some bankrupts.
      Mr. Fletcher: I agree that there may be some hardship, but there is no evidence available and I do not believe that the fact that there were many such cases was brought out elsewhere. I do not think that there is sufficient evidence to justify the blanket exemption that the hon. Member suggests.
      Mr. Gould: The Housing Aid Trust which has advised me on this matter believes that it is serious. I imagine that it would be happy to provide the Minister with the evidence. I wonder whether the Minister would reconsider the matter in the light of any evidence that that organisation provided. On that understanding, I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.
      Amendments made: No. 128, in page 100, line 20 leave out 'is so exercisable'.
      No. 129, in page 100, line 21 after `(a)', insert 'is so exercisable'.
      No. 130, in page 100, line 25 leave out
      'exclusively for the benefit of a person other than' and insert 'cannot be so exercised for the benefit of'
      No. 131, in page 100, line 29 leave out from `time' to
      `(whether' in line 30 and insert 'of the transaction or event by virtue of which it is exercisable by that person'.—[Mr.
      Fletcher.]

    Clause 134
      POWER OF CREDITORS TO REQUIRE MEETING TO BE SUMMONED
      Amendment made: No. 132, in page 108. line 25 leave out 'one-half' and insert 'one-quarter'.—[Mr. Fletcher.]
    Clause 136
      APPOINTMENT OF TRUSTEE BY SECRETARY OF STATE
      Amendment made: No. 133, in page 109, line 33 leave out `that section' and insert `this Part'.—[Mr. Fletcher.]
    Clause 137
      SPECIAL CASES
      Amendment made: No. 134, in page 110, line 26 leave out `that section and insert 'this Part'.—[Mr. Fletcher.]
    Clause 138
      REMOVAL OF TRUSTEE AND VACATION OF OFFICE
      Amendment made: No. 135, in page 111, line 3 leave out 'one-half and insert `one-quarter'.—[Mr. Fletcher.]
    Clause 150

      ACQUISITION BY TRUSTEE OF CONTROL
      Amendment made: No. 136, in page 119, line 14 at end insert
      `; but notice of the deemed assignment shall not be required to be given except in so far as it is necessary, in a case where the deemed assignment is from the bankrupt himself, for protecting the priority of the trustee.'.—[Mr. Fletcher.]

    Clause 152

      CHARGE ON PRINCIPAL RESIDENCE
      Amendments made: No. 137, in page 120, line 10 leave out
      'the principal residence of the bankrupt or of'
      and insert
      a dwelling house which is occupied by the bankrupt or by'.
      No. 138, in page 120, line 12 after 'unable' insert 'for the time being'.—[Mr. Fletcher.]

    Clause 153

      GENERAL POWERS OF TRUSTEE
      Amendment made: No. 139, in page 122, line 23 after `and', insert
      in respect of the bankrupt's estate, on'.—[Mr. Fletcher.]

    Clause 154

      POWER TO DISCLAIM ONEROUS PROPERTY
      Amendment made: No. 140, in page 124, line 14 at end insert—
      '(7A) Without prejudice to subsection (6) above, the disclaimer of any property in a dwelling house shall not take effect unless a copy of the disclaimer has been served (so far as the trustee is aware of their addresses) on every person in occupation of or claiming a right to occupy the dwelling house and either—

      605

      (a) no application under section 155 below is made with respect to that property before the end of the period of fourteen days beginning with the day on which the last notice served under this subsection was served; or

      (b)where such an application has been made, the court directs that the disclaimer shall take effect.'.—[Mr. Fletcher.]

    Clause 155

      POWERS OF COURT IN RESPECT OF DISCLAIMED PROPERTY
      Amendments made: No. 141, in page 124, line 35 leave out 'or'.
      No. 142, in page 124, line 38 at end insert
      `or
      (c) where the disclaimed property is property in a dwelling house, any person in occupation of or claiming a right to occupy the dwelling house.'.
      No. 143, in page 124, line 44 leave out 'or'
      No. 144, in page 125, line 2 at end insert
      `or
      (c) where the disclaimed property is property in a dwelling house, any person in occupation of or entitled to occupy the dwelling house.'.
      No. 145, in page 125, line 8 leave out
      `claiming under the bankrupt as underlessee or mortgagee'.
      No. 146, in page 125, line 21 leave out
      'claiming under the bankrupt as underlessee or mortgagee'.
      No. 147, in page 125, line 32 leave out from 'person' to 'declines' in line 33.—[Mr. Fletcher.]

    Clause 157

      MUTUAL CREDIT AND SET OFF
      Mr. Fletcher: I beg to move amendment No. 148, in page 126, line 26 at end insert—
      '(2A) Sums clue from the bankrupt to another party shall not be included in the account taken under subsection (2) above if that other party had notice at the time they became due that a bankruptcy petition relating to the bankrupt was pending.'.
      This amendment creates an exception to clause 157(2) of the Bill and re-enacts, in terms appropriately modified to take account of the abolition of acts of bankruptcy by the Bill, the exception currently contained in section 31 of the Bankruptcy Act 1914. It has been represented to us that abuse against the concept of equality of treatment of creditors could occur if the relevant part of section 31 of the 1914 Act is not re-enacted. We agree with this.
      Mr. Bermingham: Although I welcome this amendment as a step in the right direction it seems that the gremlins have begun on the right road. Unfortunately, they did not follow the tram tracks to the end of the tunnel. This is exactly the same case with regard to preference. If one knows that someone is going bankrupt, there are ways to gain preference. This good amendment seeks to guard against that happening, but the same thing can happen in company liquidations, deeds of assessment, voluntary arrangements and receiverships. I merely ask the Minister to take on board what I, and practitioners who have advised me, say: having got onto the right tracks, perhaps he would push the train a little further down so as to remove the preference in all other liquidations and receiverships.
      Amendment agreed to

    Clause 161

      FINAL MEETING
      Amendment made: No.149, in page 129, line 1, leave out
      'the principal residence of the bankrupt or of'
      and insert
      ' a dwelling house which is occupied by the bankrupt or by;—[Mr. Fletcher.]

    Clause 164

      TRANSACTIONS AT AN UNDERVALUE AND PREFERENCES
      Amendments made: No. 150, in page 133, line 25, leave out subsection (7) and insert—
      '(7) Subject to subsections (7A) and (9) below, the time at which an individual enters into a transaction at an undervalue or gives a preference is a relevant time for the purposes of this section if the transaction is entered into or the preference is given—

      (a)in the case of a transaction at an undervalue, at a time in the period of five years ending with the day of the presentation of the bankruptcy petition on which that individual is adjudged bankrupt;

      (b)in the case of a preference which is not a transaction at an undervalue and is given to a person who is an associate of that individual, at a time in the period of two years ending with that day; and

      (c)in any other case of a preference which is not a transaction at an undervalue, at a time in the period of six months ending with that day; and

      (7A) Where an individual enters into a transaction at an undervalue or gives a preference at a time mentioned in paragraph (a) or (b) of subsection (7) above, not being, in the case of a transaction at an undervalue, a time less than two years before the end of the period mentioned in the said paragraph (a), that time shall not be a relevant time for the purposes of this section unless the individual—

      (a)is insolvent at that time; or

      (b)becomes insolvent in consequence of the transaction or preference;
      but the requirements of this subsection shall be presumed to be satisfied, unless the contrary is shown, in relation to any transaction at an undervalue which is entered into by an individual with a person who is an associate of his.'.

      No. 151, in page 133, line 43 leave out from 'if' to end of line 12 on page 134, and insert—

      (a) he is unable to pay his debts as they fall due; or

      (b)the value of his assets is less than the amount of his liabilities, taking into account his contingent and prospective liabilities.

      (9) A transaction entered into or preference given by a person who is subsequently adjudged bankrupt on a petition under section 112(1)(d) above shall be treated as having been entered into or given at a relevant time for the purposes of this section if it was entered into or given at any time on or after the date specified for the purposes of this subsection in the criminal bankruptcy order on which the petition was based.'.—[Mr. Fletcher.]

    Clause 169

      EFFECT OF BANKRUPTCY ON ENFORCEMENT PROCEDURES
      Amendments made: No. 152, in page 138, line 7 leave out 'served on' and insert 'given to'.
      No. 153, in page 139, line 19 leave out subsection (8) and insert—
      '(8) Neither subsection (2) nor subsection (3) above shall apply in relation to any execution against property which has been acquired by or has devolved upon the bankrupt since the commencement of the bankruptcy unless, at the time the execution is issued or before it is completed—

      (a) the property has been or is claimed for the bankrupt's estate under section 147 above; and

      607

      (b) a copy of the notice given under that section has been or is served on the sheriff or other officer charged with the execution.'.—[Mr. Fletcher.]

    Clause 177
      FRAUDULENT DISPOSAL ETC. OF PROPERTY
      Amendment made: No. 154, in page 145, line 10 after 'causes', insert `to be made'.—[Mr. Fletcher.]
    Clause 181

      GAMBLING
      Amendments made: No. 155, in page 147, line 38 leave out from beginning to 'in' in line 43 and insert
      'The bankrupt shall be guilty of an offence if he has—
      (a)
      No. 156, in page 148, line 1 leave out from `speculations' to 'between' in line 3 and insert 'or
      (b)
      No. 157, in page 148, line 5 leave out 'such gambling or' and insert
      'gambling or by rash and hazardous'.—[Mr. Fletcher.]

    Clause 182
      PENALTIES
      Amendment made: No. 158, in page 148, line 19 after `179(1)' insert 'or (3)'.—[Mr. Fletcher.]
    Clause 193
      APPEALS ETC. FROM COURTS EXERCISING INSOLVENCY JURISDICTION
      Amendment made: No. 159, in page 156, line 21 leave out from second 'Appeal' to end of line 25
    Clause 194
      ASSISTANCE FOR OTHER COURTS IN INSOLVENCY MATTERS
      No. 160, in page 156, line 31, leave out clause 194.
    Clause 202

      INTERPRETATION OF PART III
      Amendments made: No. 161, in page 160, line 27 at end insert—
      '"dwelling house" includes any building or part of a building which is occupied as a dwelling and any yard, garden, garage or outhouse belonging to the dwelling house and occupied with it;'.
      No. 162, in page 161, line 15 leave out
      'as security for the debt a mortgage, charge or lien on'
      and insert
      'any security for the debt (whether a mortgage, charge, lien or other security) over'.
      No. 163, in page 161, line 23 leave out 'lien' and insert `security'.—[Mr. Fletcher.]

    Clause 203

      TRANSACTIONS DEFRAUDING CREDITORS
      Mr. Fletcher: I beg to move amendment No. 164, in page 162, line 4 leave out
      'that is being wound up'
      and insert
      'which is being wound up or in relation to which an administration order is in force'.
      Mr. Deputy Speaker: With this, it will be convenient to discuss Government amendments Nos. 165 and 166.
      Mr. Fletcher: In moving these amendments. I am indebted to the hon. Member for Dagenham (Mr. Gould) and my hon. Friend the Member for Tynemouth (Mr. Trotter), who moved similar amendments in respect of voluntary arrangements in Committee. This action confirmed the views that had been expressed to us by representatives of the main accounting bodies that a supervisor of a voluntary arrangement, whether individual or corporate, and an administrator should enjoy similar powers to those enjoyed by a trustee or liquidator in attacking transactions which have reduced the value of assets available for creditors and others. The amendments will achieve that aim, and I commend them to the House.
      Amendment agreed to.
      Amendments made: No. 165, in page 162. line 6, after `liquidator', insert 'or administrator'.
      No. 166, in page 162, line 8, leave out from `transaction' to end of line 13 and insert—
      '(b) in a case where a person who is, or is capable of being, prejudiced by the transaction is bound by a composition or scheme approved under Chapter II of Part II or Chapter I of Part III of this Act, by the supervisor of the composition or scheme or by any person who (whether or not so bound) is, or is capable of being, so prejudiced; or
      (c)in any other case, by a person who is, or in capable of being, so prejudiced;
      and an application made under any of the preceding paragraphs in relation to a transaction shall be treated as made on behalf of every person who is, or is capable of being, prejudiced by the transaction.'.
      No. 260, in page 163, line 9, leave out 'individual in question' and insert 'relevant person'.
      No. 167, in page 163, line 30, at end insert—
      '"security" means any mortgage, charge, lien or other security.'
      No. 168, in page 163, line 31, leave out subsection (8).—[Mr. Fletcher.]

    Clause 207
      AMENDMENTS OF EMPLOYMENT PROTECTION (CONSOLIDATION) ACT 1978
      Amendment made: No. 169, in page 167, line 22, after 'under', insert 'Chapter II of Part II or'.—[Mr. Fletcher.]
    Clause 208

      AMENDMENTS OF BANKING ACT 1979
      Amendments made: No. 170. in page 167, line 24, leave out 'In section 18(1)' and insert
      'For subsections (1) and (2) of section 18'.
      No. 171, in page 167, line 26, leave out from 'England)' to first 'of in line 36 and insert
      'there shall be substituted the following subsections—
      "(1) On a petition presented by the bank by virtue of this section, the court having jurisdiction under the Companies Act 1985 may wind up a recognised bank or licensed institution under that Act if—

      (a) the institution is unable to pay its debts within the meaning of section 518 of that Act; or

      (b) the court is of the opinion that it is just and equitable that the institution should be wound up;

      609
      and for the purposes of such a petition an institution which defaults in an obligation to pay any sum due and payable to a depositor shall be deemed to be unable to pay its debts as mentioned in paragraph (a) above.

      (2) If a petition is presented by the Bank by virtue of this section for the winding up of a recognised bank or licensed institution which is a partnership (whether limited or not), the court has jurisdiction, and the Companies Act 1985 has effect, as if the institution concerned were an unregistered company within the meaning of Part XXI of that Act."
      (1A) For subsection (4) of that section there shall be substituted the following subsection—
      "(4) In its application to Northern Ireland, this section shall have effect—

      (a) with the substitution of a reference to the Companies Act (Northern Ireland) 1960 for any reference to the Companies Act 1985;

      (b) with the substitution of a reference to section 211 of the said Act of 1960 for the reference to section 518 of the said Act of 1985;

      (c) with the substitution of a reference to Part IX of the said Act of 1960 for the reference to Part XXI of the said Act of 1985; and

      (d) with the insertion in subsection (2) after the words `(whether limited or not)' of the words 'then, notwithstanding section 348(d) of the Companies Act (Northern Ireland) 1960 (exclusion of partnerships etc. having less than eight members)'."

      (2) In subsection (2) of section 19'.
      No. 172, in page 167, line 40 leave out from second `any' to end of line 42 and insert
      '"provision of Part XVIII to XXI of the Companies Act 1985 or any provision (other than section 93) of Part II of the Insolvency Act 1985: or".
      (3) In subsection (8) of that section, for paragraph (a) there shall be substituted the following paragraphs—
      "
      (a) for the reference in subsection (2) to Parts XVIII to XXI of the Companies Act 1985 there shall be substituted a reference to Parts V, VI and IX of the Companies Act (Northern Ireland) 1960;
      (aa) for any reference in subsection (5) to section 432 or 442 of the said Act of 1985 there shall be substituted respectively a reference to section 159 or 165A of the said Act of 1960:".'—[Mr. Fletcher.]

    Clause 221

      CROWN APPLICATION
      Amendments made: No 257, in page 175, line 8 after `under', insert
      'Chapter II of Part II or.—[Mr. Fletcher.]

    Clause 222
      CONSEQUENTIAL AMENDMENTS, TRANSITIONAL PROVISIONS, SAVINGS AND REPEALS
      Amendment made: No 173, in page 175, line 30 after `III', insert `or IV'.—[Mr. Fletcher.]
    Clause 223

      SHORT TITLE COMMENCEMENT AND EXTENT
      Amendments made: No 174, in page 176, line 2 at end insert—"() section 43,'.
      No. 175, in page 176, line 6 leave out 'except subsection (8)'.
      No 176, in page 176, line 8 leave out `(f) sections 209' and insert—

      '(ea) section 209;

      (eb) section (Disabilities on revocation of administration order against individual) (2) to (5);

      (f) sections 210'

      No 177, in page 176 leave out line 14 and insert—
      `(a) section [Co-operation between courts exercising jurisdiction in relation to insolvency law]; '
      No 267. in page 176, line 15 at end insert—
      610
      `(ba) section (Amendment of Restrictive Trade Practices Act 1976);'
      No 178, in page 176, line 15 at end insert—
      `(bb) section 208;'.
      No 179, in page 176, line 18 after 'and' insert 'Part IV of'.
      No 180, in page 176, line 20 leave out `and the Bankruptcy Act 1883' and insert
      `the Bankruptcy Act 1883, the Bankruptcy Act 1914, the Criminal Law Act 1977 and the Civil Jurisdiction and Judgments Act 1982'.—[Mr. Fletcher.]

    Schedule 1
      TRIBUNAL ESTABLISHED UNDER SECTION 4
      Amendment made: No 182, in page 178, line 30 at end insert—
      TRIBUNAL ESTABLISHED UNDER SECTION 4

        'Supervision by Council of Tribunals
        5.—(1) The Tribunals and Inquiries Act 1971 shall be amended as follows.
        (2) In section 8(2) (concurrence required for removal of members of certain tribunals), after "6A" there shall be inserted "10A".
        (3) In section 13(1) (appeals from certain tribunals), after "10" there shall be inserted "10.A".
        (4) In Schedule 1 (tribunals under general supervision of Council), after paragraph 10 there shall be inserted the following paragraph—

        Insolvency Practitioners
        10A. The Insolvency Practitioners Tribunal established under section (Reference to Tribunal) of the Insolvency Act 1985."

        Parliamentary disqualification
        6.—(1) In Part III of Schedule 1 to the House of Commons Disqualification Act 1975 (disqualifying offices), there shall be inserted at the appropriate place the following entry—
        "Any member of the Insolvency Practitioners Tribunal in receipt of remuneration."
        (2) A corresponding amendment shall be made in Part III of Schedule 1 to the Northern Ireland Assembly Disqualification Act 1975.'.—[Mr. Fletcher.]

    Schedule 2
      MATTERS FOR DETERMINING UNFITNESS OF DIRECTORS
      Amendments made: No. 183, in page 178, line 32, at end insert—
      MATTERS FOR DETERMINING UNFITNESS OF DIRECTORS

        'PART I MATTERS APPLICABLE IN ALL CASES'.
        No. 184, in page 178, line 39, leave out from second `transaction' to end of line 41 and insert
        `liable to be set aside under section 203 of this Act'.
        No. 261, in page 179, line 13, leave out
        `or section 77 of this Act'.
        No. 262, in page 179, line 14, at end insert—

        `PART II MATTERS APPLICABLE WHERE COMPANY HAS BECOME INSOLVENT
        5A. The extent of the director's responsibility for the causes of the company becoming insolvent.
        5B. The extent of the director's responsibility for any failure by the company to supply any goods or services which have been paid for (in whole or in part).
        5C. The extent of the director's responsibility for the company entering into any transaction or giving any preference, being a transaction or preference liable to be set aside under section 94 of this Act or section 522 of the 1985 Act or challengeable under section 615A or 615B of that Act or under any rule of law in Scotland.
        5D. The extent of the director's responsibility for any failure by the directors of the company to comply with section 77 of this Act.'.—[Mr. Fletcher.]

    Schedule 4

      PREFERENTIAL DEBTS
      Mr. Gould: I beg to move, amendment No. 268, in page 181, line 1, leave out 'twelve' and insert 'six'.
      Mr. Deputy Speaker: With this it will be convenient to take amendment No. 269, in page 181, line 17, leave out 'twelve' and insert 'six'.
      No. 285, in page 181, line 27, leave out 'twelve' and insert 'six'.
      No. 270, in page 181, line 32, leave out 'twelve' and insert 'six'.
      Government amendment No. 190, in page 183, line 17, leave out 'twelve' and insert 'six'.
      Mr. Gould: Only an hour ago, although it seems much longer, the Minister was claiming credit for reducing the ambit of Government preference. These amendments give him the opportunity to claim yet more credit, and I hope that he will seize it with alacrity.
      More importantly, the amendments seek to achieve what is universally accepted as being a sensible uniformity of provision in this type of taxation. Having reduced the period of VAT preference to six months, a Minister in the other place went on record as saying that the rule should be the same for VAT as for PAYE and national insurance contributions. The Minister will be familiar with the arguments, which we rehearsed at some length in Committee. These amendments offer him another opportunity to carry out that simple principle. Once we have a six-month period for VAT, it is nonsense to have a different period for the other collector taxes.
      Mr. Hanley: I remind the hon. Gentleman that this gives my hon. Friend the Minister another chance to agree with the Institue of Chartered Accountants in Scotland.
      Mr. Gould: I am not sure that that point has all the force that the hon. Gentleman feels that it should have, given the experience that we all suffered on an earlier amendment, when he used a similar argument, which was brusquely rejected by the Minister. The arguments are familiar, and the Minister's reply may be familiar, but we at least live in hope.
      Mr. Millan: I strongly support this series of amendments. It is nonsense that the Government, having conceded the six-montheperiod on VAT, are unwilling to concede it on PAYE. The Minister, as my hon. Friend the Member for Dagenham (Mr. Gould) has reminded us, has said that the Government have been generous to make all these concessions, but every concession has been squeezed out of them. They were reluctant to make any concessions on Government preference, but because of the pressure when the Bill was in the other place and in Committee, certain concessions have been made. Similar arguments have been made about the Bankruptcy (Scotland) Bill, which has been going through simultaneously. We welcome the Government concessions on VAT in Committee.
      However, the Government's intention was to have VAT and PAYE treated on the same basis—that was how the Bill was drafted, and there is logic in that. There is now no reason why, having conceded the six-month period for VAT, the Government should not make a similar concession on PAYE.
      612
      It is not appropriate at this time of night to go over the arguments in detail, or even in principle. There must be a genuine concern among all those who are concerned in these matters, whether professionally or as Members of Parliament, about the position of small creditors in particular. There is a desire to reduce the preference of Crown creditors, in the interests of ordinary creditors who, in many a typical case, will be small firms for which the bankruptcy or liquidation of a debtor can be extremely serious. Even with the six-month period, the Crown will have a considerable preference that is not available to ordinary creditors. It would be logical and in the interests of small creditors if the Government would concede the six-month period for PAYE in the way that they have accepted it for VAT.
      Mr. Fletcher: The right hon. Member for Glasgow, Govan (Mr. Millan) and the hon. Member for Dagenham (Mr. Gould) think that the Government have been reluctant in these matters. I confess that we did not table such amendments ourselves. Indeed, that is not likely ever to happen from these Benches on such matters. Nevertheless, I listened to the arguments objectively and constructively, and it was decided that the Government could give way. We have given way to a large extent on Crown preference. The following amendment confirms the extent to which the Government have given way on VAT.
      Throughout our proceedings there has been a misunderstanding on pay-as-you-earn. It appeared in the Cork report, in the debates in the other place, and even in Committee and again this evening. The misunderstanding relates to the idea that PAYE is of a term similar to VAT. There is no question that PAYE has a 12-month accounting cycle, and that payments made during the year are paid to account, but the balancing of the book is done at the end of the year.
      The hon. Member for Dagenham said that his arguments were familiar and that he expected to hear familiar ones from me. At least in that respect he has not been disappointed.
      Mr. Gould: I beg to ask leave to withdraw the amendment.
      Amendment, by leave, withdrawn.
      Mr. Deputy Speaker: Order. As all the remaining amendments that are selected are Government amendments, unless any hon. Member wishes to raise any matters, with the leave of the House I shall put them together.

    Schedule 4

      PREFERENTIAL DEBTS
      Amendments made: No. 186, in page 181, line 12, leave out from beginning to 'the' in line 13 and insert 'is referable to'.
      No. 187, in page 181, leave out lines 14 and 15 and insert 'the relevant date'.
      No. 188, in page 182, line 24, at end insert—
      6. So much of any amount which—

      (a) is ordered, whether before or after the relevant date, to be paid by the debtor under the Reserve Forces (Safeguard of Employment) Act 1985; and

      (b)is so ordered in respect of a default made by the debtor before that date in the discharge of his obligations under that Act.
      as does not exceed such amount as may be prescribed by order made by the Secretary of State'.

      No. 189, in page 183, line 15, leave out
      'in respect of which any value added tax is due'
      and insert
      'to which any value added tax is attributable'.
      No, 190, in page 183, line 17, leave out 'twelve' and insert 'six'.
      No. 191, in page 183, line 24, at end insert—
      'and in this paragraph "prescribed" means prescribed by regulations under the Value Added Tax Act 1983'.
      No. 192, in page 184, line 26, leave out
      '(5) An order under paragraph 5'
      and insert
      '4.—(1) An order under paragraph 5 or 6'.
      No. 193, in page 184, line 29, after '5', insert 'or 6'.—[Mr. Fletcher.]

    Schedule 5

      PROVISIONS CAPABLE OF INCLUSION IN COMPANY INSOLVENCY RULES
      Amendments made:—
      No. 194, in page 185, line 8, at end insert—

      PROVISIONS CAPABLE OF INCLUSION IN COMPANY INSOLVENCY RULES

        'Registration of voluntary arrangements
        5A. Provision for the registration of compositions or schemes approved under Chapter II of Part II of this Act, including provision for the keeping and inspection of a register.'.
        No. 195, in page 186, line 37, leave out 'are held in' and insert 'have been paid into'.
        No. 196, in page 186, line 40, at end insert—
        '16A. Provision as to the fees, costs, charges and other expenses that may be treated as properly incurred by the administrator or administrative receiver of a company.
        16B. Provision as to the fees, costs, charges and other expenses that may be incurred for any of the purposes of Chapter II of Part II of this Act or in the administration of any composition or scheme approved under that Chapter.'
        No. 197, in page 187, line 14, after 'company', insert
        'or by the supervisor of a composition or scheme approved under Chapter II of Part II of this Act'.
        No. 198, in page 187, line 19, after 'company', insert
        'or by the supervisor of such a composition or scheme'.
        No. 199, in page 187, line 27, at end insert—
        '21A. Provision imposing requirements in connection with the carrying out of functions under section 7(5) of this Act (including, in particular, requirements with respect to the making of periodic returns).'.—[Mr. Fletcher.]

    Schedule 6

      AMENDMENTS OF 1985 ACT
      Amendments made:
      No. 200, in page 188, line 28. at end insert '7 or'

      "(477(2E) Failing to send to registrar of companies a certified copy of authorisation to dispose of certain property.

      Summary

      One-fifth of the statutory maximum

      One-fiftieth of the statutory maximum.".'.

      No. 210, in page 191, leave out lines 5 and 6 and insert—

      (3) For the entry relating to section 482(5) there shall be substituted the following entry—

      "482(6) Failure to comply with obligation to submit statement of affairs to receiver.

      1. On indictment

      A fine.

      2. Summary

      The statutory maximum.

      One-tenth of the statutory maximum.".'.

      No. 211, in page 191, line 24, leave out from beginning to 'after' in line 25 and insert—
      '(1) Section 518 (definition of inability to pay debts) shall be amended as follows.
      No. 201, in page 189, line 25, at end insert—
      '10A. In section 426(6) (liability of officer or liquidator of company for default in connection with the circulation of information as to a compromise), after the word "liquidator" there shall be inserted the words "or administrator"'.
      No. 202, in page 189, line 25, at end insert—
      '10B In section 478(6) [receiver to be appointed within one month of cessation of appointment of earlier receiver] at the end there shall be inserted the words—
      "and for the purposes of calculating the period of one month under this subsection no account shall be taken of any period during which an administration order under Part II of the Insolvency Act 1985 is in force".'.
      No. 203, in page 189, line 32, at end insert—
      '(1A) in subsection(1), after the words "secured by' there shall be inserted the words
      "a charge which, as created, was".'
      No. 204, in page 190, line 6, leave out 'For subsection (1) of and insert '(1)'.
      No. 205, in page 190, line 7, after 'court)', insert '
      'shall be amended as follows.
      (2) For subsection (1)'.
      No. 206, in page 190, line 14, at end insert—
      '(3) In subsection (3), after the word "provides)" there shall be inserted the words "and on any contract of employment adopted by him in the performance of those functions".
      (4)After that subsection there shall be inserted the following subsections—
      "(4) For the purposes of subsection (3)(a) the receiver or manager is not to be taken to have adopted a contract of employment by reason of anything done or omitted to be done within fourteen days after his appointment.
      (5)Where at any time a receiver or manager so appointed vacates office—

      (a) his remuneration and any expenses properly incurred by him;

      (b) any indemnity to which he is entitled out of the assets of the company,
      shall be charged on and paid out of any property of the company which is in his custody or under his control at that time in priority to any charge or other securit) held by the person by or on whose behalf he was appointed." '

      No. 207, in page 190, line 31, after 'substituted', insert' the words'.
      No. 208, in page 190, line 47, at end insert'—
      ' 17A.—(1) Section 476(1) of the 1985 Act (distribution of monies) shall be amended as follows.
      (2) After the words "categories of persons" there shall be inserted the words "(which rights shall, except to the extent otherwise provided in any instrument, have the following order of priority)".
      (3) In paragraph (d), after the word "remuneration" there shall be inserted the words "and any indemnity to which the receiver is entitled out of the property of the company.".'.
      No. 209, in page 191, line 2, at end insert—
      '(1A) After the entry relating to section 470(3) there shall be inserted the following entry—
      (2) in subsection(1)(a);.
      No. 212, in page 191, line 26, at end insert—
      '(3) In subsection (1) (d) for the words from "(and, in determining" onwards there shall be substituted the words "as they fall due".
      (4) After subsection (1) there shall be inserted the following subsection—
      "(1A) A company is also deemed unable to pay its debts if it is proved to the satisfaction of the court that the value of the company's assets is less than the amount of us liabilities, taking into account its cotingent and prospective liabilities.".
      No. 213, in page 192, line 12, leave out 'the Insolvency Act 1985' and insert 'that Act'.
      No. 214, in page 193, line 30, at end insert—
      `37A. After subsection (1) of section 625 (transactions in fraud of creditors) there shall be inserted the following subsection—
      "(1A) A person shall not be guilty of an offence under this section—

      (a) by reason of conduct constituting an offence under subsection (1)(a) above which occurred more than five years before the commencement of the winding-up; or

      (b) if he proves that, at the time of the conduct constituting the offence, he had no intent to defraud the creditors of the company."

      37B. In section 626(1)(d) (failure to inform liquidator that false debt has been proved), for the words "for the period of a month to inform the liquidator of it" there shall be substituted the words "to inform the liquidator as soon as practicable".'.
      No. 215, in page 194, line 14, at end insert 'the words'.
      No. 216, in page 194, line 36, at end insert—
      `46.—(1) In section 669 (inability of unregistered company to pay debts), at the end of paragraph (d) there shall be inserted the words "as they fall due".
      (2) That section, as amended by sub-paragraph (1) above, shall be re-numbered as subsection (1) of that section and after that provision as so renumbered there shall be inserted the following subsection—
      "(2) An unregistered company is also deemed unable to pay its debts if it is proved to the satisfaction of the court that the value of the company's assets is less than the amount of its liabilities, taking into account its contingent and prespective liabilities.".'.—[Mr. Fletcher.]

    Schedule 8

      CONSEQUENTIAL AMENDMENTS
      Amendments made:—
      No. 217, in page 198, line 9, at end insert—

      CONSEQUENTIAL AMENDMENTS

        'The Bills of Sale Act (1878) Amendment Act 1882
        1. In section 11 of the Bills of Sale Act (1878) Amendment Act 1882 (local registration of bills of sale), for the words "the London bankruptcy district as defined by the Bankruptcy Act 1869" and the words "the said London bankruptcy district" there shall be substituted, in each case, the words "the London insolvency district".'.
        No. 218, in page 198, leave out lines 10 to 22.
        No. 219, in page 199, line 19, at end insert—
        `(10) In section 30(1) (interpretation), for the words "the Bankruptcy Act 1914" there shall be substituted the words "the Insolvency Act 1985".'.
        No. 220, in page 200, line 44, at end insert
        'and at the end there shall be inserted the words "or of a composition or scheme proposed for the purposes of Chapter II of Part II of the Insolvency Act 1985 being approved under that Chapter" '
        No. 221, in page 201, line 28, after 'under,' insert `Chapter II of Pan II or'
        No. 222, in page 202, line 5, leave out from `adjudged"' to end of line 7.
        No. 223, in page 203, line 47, at end insert—

        'The Conveyancing and Feudal Reform (Scotland) Act 1970
        17A. In Schedule 3 to the Conveyancing and Feudal Reform (Scotland) Act 1970 (the standard conditions of a security). in standard condition 9(2)(b), for the words from "or an order" to "1925" there shall be substituted the words "or his estate falls to be administered in accordance with an order under section 216 of the Insolvency Act 1985".'
        No. 288, in page 206, line 8, at end insert—
        '(3A) In paragraph 2(2), for the words "in a case where the relevant event took place on or after the day of the passing of the Social Security Act 1985" there shall he substituted the words "in any other case".'
        No. 224, in page 206, line 43, leave out from second `or"' to end of line 45.
        No. 225, in page 207. line 15, at end insert
        'and at the end there shall be inserted the words "or a composition or scheme proposed for the purposes of Chapter II of Pan II of the Insolvency Act 1985 is approved under that Chapter".'.
        No. 226, in page 207, line 27. after 'under', insert 'Chapter II of Part II or'.
        No. 227, in page 207, line 46. at end insert
        'and at the end there shall be inserted the words "or a composition or scheme proposed for the purposes of Chapter II of Part II of the Insolvency Act 1985 is approved under that Chapter".'.
        No. 228, in page 208, leave out lines 4 to 6.
        No. 258, in page 208, line 12, leave out from `corporate), to end of line 15 and insert
        'after paragraph (b) there shall be inserted the words "or
        (c) on the holding of a creditors' meeting summoned under section 75 of the Insolvency Act 1985 (effect of insolvency on members' voluntary winding up);".'.
        No. 230, in page 209, leave out lines 11 to 17.
        No. 230A, in page 209, line 29, at end insert—

        The Civil Jurisdiction and Judgments Act 1982
        35A. After paragraph (b) of section 18(3) of the Civil Jursidiction and Judgments Act 1982 (judgments to which provisions relating to the enforcement of judgments within the United Kingdom do not apply), there shall be inserted the following paragraph—
        ("ba) a judgment given in the exercise of jurisdiction in relation to insolvency law within the meaning of section (Co-operation between courts exercising jurisdiction in relation to insolvency law) of the Insolvency Act 1985;".'.
        No. 231, in page 210, line 24. at end insert—

        The Housing Act 1985
        38.—(1) The Housing Act 1985 shall be amended as follows.
        (2) In paragraph 3(4) of Schedule 19 (suspension of condition as to residence), for the words "is administered in bankruptcy under section 130 of the Bankruptcy Act 1914" there shall be substituted the words "falls to be administered in accordance with an order under section 216 of the Insolvency Act 1985".
        (3) In paragraph 5(3) of that Schedule (conditions affecting house purchased by means of advance), for the words "being administered in bankruptcy under section 130 of the Bankruptcy Act 1914" there shall be substituted the words "falling to be administered in accordance with an order under section 216 of the Insolvency Act 1985".'.
        No. 232, in page 210, line 24, at end insert—

        'The Administration of Justice Act 1985
        39. In section 16(1)(g) of the Administration of Justice Act 1985 (conditional licences), for the words "and having obtained his discharge" there shall be substituted the words "and discharged".'.—[Mr. Fletcher.]
    Schedule 9

      TRANSITIONAL PROVISIONS AND SAVINGS
      Amendments made:
      No. 233, in page 210. line 31, after `(2)', insert 'or (3)'.
      No. 234, in page 211, line 8, at end insert—
      `4A. Section (Restriction on use of company names) of this Act shall not apply where the relevant company (within the meaning of that section) went into liquidation before the coming into force of that section. '
      No. 235, in page 212, line 7, leave out '20' and insert `19'.
      No. 236, in page 212, line 7, leave out '45' and insert '46'.
      No. 237, in page 213, line 10, leave out 'in the 1985 Act to a winding-up order' and insert `to a winding up'
      No. 238, in page 217, line 42, at end insert—
      '(2) References in sub-paragraph (1) above to setting aside a transaction include references to the making of any order which varies or reverses any effect of a transaction.'.—[Mr. Fletcher.]

    Schedule 10

      REPEALS
      Amendments made:
      No. 239, in page 218, line 5, column 3, at beginning insert—

      "In Section 302(1), the words "or liquidator". '

      No. 240, in page 218, line 16, at end insert—

      '37&38 Vict. C. 42.

      The Building Societies Act 1874.

      In section 32, the words "under the supervision of the court".

      6&7 Eliz. 2 c. 45

      The Prevention of Fraud (Investments) Act 1958.

      In section 4, in subsections (2)(b) and (4)(a), the words "or under the supervision of".

      1975 c.75.

      The Policyholders Protection Act 1975.

      In section 5(2), the words "or subject to the supervision of'.'.

      No. 241, in page 218, line 16, at end insert—

      '1982 c.50.

      The Insurance Companies Act 1982.

      In section 57(1), the words "or under the supervision of'.'.

      No. 242, in page 219, line 40, column 3, leave out `Sections 611 to 618' and insert—

      'Sections 611 to 615. Sections 616 to 618.'

      No. 243, in page 219, line 44, column 3, at end insert—
      'In section 625(1), the words "with intent to defraud creditors of the company" and the words "with that intent.".'.
      No. 244, in page 220, line 21, column 3, leave out 'and "or 609"' and insert
      'the words "or 609" and the words from "or appointing" onwards'.
      No. 245, in page 221, line 2, column 3, at end insert—
      'except sections 121 to 123'.
      No. 246, in page 222, line 12, column 3, at end insert—

      'Section 13A(2)(b).'

      No. 247, in page 222, line 35, at end insert—

      '1983 c.19.

      The Matrimonial Homes Act 1983.

      Section 2(7).'

      No. 248, in page 222, line 39, at end insert—

      '1985 c.00.

      The Housing Act 1985.

      Section 121 to 123.'

      No. 249, in page 222, line 39, at end insert—

      '1985 c.00.

      The Administration of Justice Act 1985.

      In section 16(1)(f), the words "or while a receiving order is in force against him".

      Section 17(2)(b).'.

      No. 250, in page 223, line 3, at end insert—

      '4&5 Geo.c.59.

      The Bankruptcy Act 1914.

      Sections 121 to 123.'

      No. 251, in page 223, line 25, at end insert—
      618

      '1977 c. 45.

      The Criminal Law Act 1977.

      Section 38(5).'.

      No. 252, in page 223, line 38 at end insert—

      '1982 c. 27

      The Civil Jurisdiction and Judgements Act 1982

      In section 18(3)(c), sub-paragraphs (i) and(ii).'.

      No. 253, in page 223, line 44, column 3 at beginning insert—

      'Section 570.'.

      No. 254, in page 223, line 47, column 3 at end insert—

      'Section 666(7)".

      No. 255, in page 223, line 52, column 3 leave out 'and'.
      No. 256, in page 223, line 54, column 3 at end insert
      'and to sections 18 and 19(8) (a) of the Banking Act 1979'.—[Mr. Fletcher.]
      Order for Third Reading read.—[Queen' s Consent, on behalf of the Crown, and Prince of Wales's Consent, signified.]
      11.15 pm
      Mr. Fletcher: I beg to move, That the Bill be now read the Third time.
      We have made a contribution to the many problems raised during the debates in this House and the other place. I am satisfied that the Committee in particular contributed substantially to the quality of the legislation. As I do not wish to embarrass Labour Members, may I say quietly that I am grateful for their constructive approach. I hope that that augurs well for the legislation on financial services, which the Government hope to introduce next Session. I am also extremely grateful to my hon. Friends who were equally objective and constructive in proceeding with the legislation.
      The Government set out with many objectives, which have been debated. However, I am happy to say that we still have licensed insolvency practitioners. We have fresh powers to disqualify unfit directors, powers to reduce limited liability through wrongful trading, and a new, helpful and constructive administration procedure. I hope that insolvency practitioners and the commercial world generally will find the Bill greatly advantageous to them. I hope that the poor bankrupts who find themselves in trouble over a relatively small sum will find the new simplified procedures helpful.
      11.19 pm
      Mr. Gould: The Minister's generous remarks are typical of the good humour with which both the Committee and the House have dealt with the Bill. Just as he thanked his hon. Friends, I should like to thank mine, particularly my hon. Friend the Member for St. Helens, South (Mr. Bermingham) for the great support and work that he has done in Committee and throughout the Bill's passage.
      None of those agreeable aspects of the Bill's proceedings will deter me from making one final point that I am sure the Minister would expect me to make. We have had to deal with the Bill in the most difficult of circumstances. Some of his hon. Friends totalled up the number of amendments made throughout the proceedings., and came to the grand total of 1,000. I confess that I did. not do that sum, but it is true that we had over 400 Government amendments in Committee and another 200 on Report. That is virtually unprecedented, and even more

      619
      remarkable when one considers that we are dealing with a Bill on a subject that has been under consideration since 1977. One cannot help but think that something went wrong somewhere and that the consultation procedures were inadequate for presenting a Bill of this complexity. The consequence was that the parliamentary procedures for scrutinising this important and complex measure were stretched virtually to breaking point. At times some of us felt almost overwhelmed by the volume of amendments and new clauses. I am sure that even the Minister found it difficult at times to keep pace with what was happening.
      The consequence of that is that, while the Minister is right in saying that the Committee can take credit for having improved the Bill, the Bill is still not—and I am sure that my hon. Friends agree with me in this respect—in as good shape as it should have been. We have done what we can in the time available and with the resources available to us, but in the end the Bill still needs considerable amendment. It is unfortunate that we may yet again have to rely on another place to achieve that further refinement of the Bill. If that is so, I fear that the Government have no one but themselves to blame. On the other hand, the Minister is both generous and correct when he says that the Committee has done a good job. I hope that in that respect at any rate we have made it a better Bill than it was when it came to us.
      11.22 pm
      Mr. Hanley: I must crave the indulgence of the House while I make a few remarks on Third Reading.
      I do not apologise for doing so, because I believe that there should be on the record certain matters that have not been discussed tonight. My hon. Friend the Minister has listened hard, often and widely. I know that we are all grateful for that. We are grateful for the careful consideration that he has given to our pleas and the careful consultation that he has gone into, particularly with his officials. If only that consultation had happened before report or even Third Reading, perhaps 1,000 Government amendments would not have been necessary. Maybe there would have been 1,000 paragraphs in a working party report. On this Bill, the case for a draft Bill on a technical matter has been proved.
      I am grateful to my hon. Friend for the progress that we have made on preferential creditors. He is right in saying that the Government should be congratulated on trying to help small unsecured creditors. It was the Government's initiative that helped in removing corporation tax, and particularly the pernicious charge of local authority rates. Indeed, tonight the Government could have reversed the progress that we had all made on VAT being brought down from 12 to six months. The Government deserve some credit for accepting the Committee's view. In doing so, the Government will greatly help small firms that are creditors of those who go into liquidation.
      Therefore, we should be grateful for many small mercies in the Bill. However, on the record should be certain matters on which my hon. Friend the Minister and the Parliamentary Under-Secretary of State, my hon. Friend the Member for Rossendale and Darwen (Mr. Trippier), agreed to come back to the Committee, having considered them. If the Bill is going to another place, we should put those matters to it.
      620
      First, on clause 7 the Minister undertook to consider whether provision with regard to the frequency of misconduct should be incorporated in a practice direction or in the rules. If the Government have dealt with any of those matters, I am sure that they will understand that it is difficult to find them in the vast volume of amendments.
      Secondly, my hon. Friend the Minister said that he would consider provisions to enable a disqualified director who had been rehabilitated to apply to have the disqualification terminated. That is in clause 13. In clause 34 the Minister said he would consider making it a requirement for information to be given to the workforce. That has been mentioned tonight. but there was no progress. In clause 68, the Parliamentary Under-Secretary of State for Trade and Industry, my hon. Friend the Member for Rossendale and Darwen (Mr. Trippier), agreed to reconsider whether early dissolution should occur where an administrative procedure is in place. In clause 70 the Parliamentary Under-Secretary of State—my hon. Friend the Member for Edinburgh, Central (Mr. Fletcher)—said that he would investigate the concern of the hon. Member for Dagenham (Mr. Gould) about there being no provision to deal with the possible lack of a quorum at the final meeting.
      In clause 81, the hon. Member said that he would consider the suggestion by the hon. Member for St. Helens, South (Mr. Bermingham) that deposit payments should have preferential status. That was discussed tonight, but it is still a matter of major concern. In clause 97, my hon. Friend the Minister agreed to consider from my hon. Friend the Member for Tynemouth (Mr. Trotter) that the appointment of an administrative receiver should be recognised with regard to floating charges. In clause 105, he agreed to consider the suggestion by the hon. Member for St. Helens, South that the court should have power to give a direction about dealings with assets during the period of an interim order.
      You will be pleased to hear, Mr. Deputy Speaker, that there are not many more, but I want them on the record. In clause 108 the Minister agreed to think about the suggestion by the hon. Member for Tynemouth that courts should have power to make a bankruptcy order immediately if attempts to have a voluntary agreement fall with regard to the decision of creditors meetings.
      Mr. Fletcher: Where we were able to table an amendment in accordance with commitments, we did so. Where we could not, we wrote. I certainly wrote to hon. Members explaining why we could not follow up commitments that I had given in Committee.
      Mr. Hanley: Many of these matters raised in Committee were of interest to more than the hon. Member who raised them. Having heard that assurance from the Minister, I should be very grateful if I could have sight of some of the letters, and I will undertake to the Minister to write to the hon. Gentleman concerned and ask for such information. I am merely trying to put these on the record so that the other place may consider them. I am about two thirds of the way through my list, and if their lordships are sitting on the edges of their red lined benches dying to know the other items, I will in turn write to them and give them the other seven items about which I have had no response.
      Mr. Bermingham: For the last time in this Bill, I will come to the aid of the Minister and reassure the House that

      621
      I received a letter in respect of each and every one of the matters I raised, and the letters were both helpful and explanatory. I am sure that my hon. Friend the Member for Dagenham (Mr. Gould) will join with me when I say how grateful I am to the Minister for the way he replied in these matters.
      We leave this Bill as we began it. It has taken 100-plus years to get this far in improving insolvency law, but perhaps we have laid a few markers on the road. I hope it will not be another 100 years before we begin to develop the ideas in the Bill, many of which were canvassed in Committee. Parliamentary draftsmen often say, "It cannot be done," but where there is a will there is a way. The markers are on the road and many of us who took part in the debate on the Committee stage of this Bill know well where we want those markers to take us.
      We say gently to this Government and to successive Governments that once this Bill goes into operation and flaws are found, those of us who are interested in the subject will bring those flaws back for correction. We all want to have a civilised insolvency law to remove the cruelty of the Riley case. We want to be able to catch and stop the war referred to tonight. or stone the gnome as I kept referring to it in Committee. If we are going to do that, we have to accept that insolvency law must develop with changing times, with the changing concepts in industry, and with changing methods in the service industry. It cannot be allowed to stay the same from 1880 until 1980 or from 1914 until 1985. We have to update the law, and we have to take on board the new ideas, commercial and otherwise, that exist.
      For all those who served on the Standing Committee, the Bill has been an interesting exercise. I hope that for those who have had to listen to us it has not been too boring an exercise. To those who helped members of the Committee from without this place and in the various professional bodies we all owe a deep debt of thanks. Much of what we portrayed in the Committee came from their advice and guidance, and it is right that we should place on the record our gratitude for the great help that we get, which is voluntarily and freely given to us.
      Perhaps the House of Lords can push the Bill just a little further down the tram tracks, and perhaps the gremlins will not get in the way too much.
      Question put and agreed to
      Bill read the Third time and passed, with amendments

    STATUTORY INSTRUMENTS, &C.
    Motion made, and Question put forthwith pursuant to Standing Order No. 79(5) (Standing Committees on Statutory Instruments, &c.),
    STATUTORY INSTRUMENTS, &C.
      CONSUMER PROTECTION
      That the draft Food Imitations (Safety) (Amendment) Regulations 1985, which were laid before this House on 21st June, be approved.

      MERCHANT SHIPPING
      That the draft Merchant Shipping (Fire Protection', (Ships Built Before 25th May 1980) Regulations 1985, which were laid before this House on 5th July, be approved.
      That the draft Merchant Shipping (Fire Appliances) (Amendment) Regulations 1985, which were laid before this House on 5th July, be approved.
      That the draft Merchant Shipping (Fire Protect:Ay1) (Amendment) Regulations 1985, which were laid before this House on 5th July, be approved.
      That the draft Merchant Shipping (Grain) Regulations 1985, which were laid before this House on 18th June, be approved.
      That the draft Merchant Shipping (Radio Installations) (Amendment) Regulations 1985, which were laid before ibis House on 18th June, be approved.

      AGRICULTURE
      That the draft Agriculture Improvement Regulations 1985, which were laid before this House on 8th July, be approved.
      That the Agriculture Improvement Scheme 1985 (S.I.. 1985, No. 1029), dated 5th July 1985, a copy of which was laid before this House on 8th July, be approved.—[Mr. Boscawen.]
      Question agreed to.

    DISCHARGES OF DANGEROUS SUBSTANCES
    Motion made, and Question put forthwith pursuant to Standing Order No. 80(5) (Standing Committees on European Community documents),
    That this House takes note of European Community Document No. 4519/85, a proposal for a Council directive on the discharge of certain dangerous substances into water, and affirms the need for a Directive to deal with pollution by substances meeting the List I criteria set out in Council Directive 76/464/EEC, and which requires monitoring for the levels of those substances in the aquatic environment, irrespective of source.—[Mr. Boscawen.]
    Question agreed to.

  Mr. Michael Starrs (Mobility Allowance)
  Motion made, and Question proposed, That this House do now adjourn.—[Mr. Boscawen]
  11.32 pm
  Mr. Tom Clarke: I am particularly grateful for this opportunity to debate the case of Michael Starrs, and I welcome the interest which the Minister's Department has shown and look forward to the hon. Gentleman's response.
  Michael Starrs is a father, aged 47. Clearly he is very severely disabled and an extremely ill man. Until his first serious illness struck in 1965, the year when a fateful operation for a duodenal ulcer was performed, Michael was extremely fit and far from work shy. As a national service man, he served in the 15/19 King's Royal Hussars in Northern Ireland in the late 1950's. Apart from that period, and until his illness, he worked as an apprentice and then as a welder in Tollcross foundry.
  Prior to his illness, Michael's average weight was 10 stone 7 pound. Now it is just 8 stone. He has twice applied for mobility allowance and had been refused on both occasions.
  Tonight I have to ask the Minister why and, grateful though I am that the hon. Gentleman is present to reply to the date, I have to tell him that I shall listen very carefully, as will my constituents, to his reply, because it is a case which has baffled many people and continues to baffle me.
  I have to ask the Minister why there should be a refusal in the case of a man who is qualified for and has been given a wheelchair by the National Health Service, presented by Belvedere hospital. Why should there be a refusal in the case of a man who was informed by letter on 8 March 1983 by the Ministry of Transport that the restricted condition of his legs meant that his driving licence would cover hand controls only? Why should a man who is fed intravenously or who is otherwise dependent on baby food or a liquid diet be judged so harshly? Why, when a man suffers from such obvious fatigue that his walking is considerably impaired and when it would be cruel in the extreme to make demands beyond his present limited capacity, is this not taken into account?
  Those questions are also being asked by my constituents, 3,500 of whom have petitioned me to insist on a full inquiry into the whole of Michael Starrs' case, including his medical history, and some of those people themselves receive mobility allowance. Some of them are the same constituents who got together in a local social club and presented Michael with a hand-controlled car, which gives him the little comfort that he has when he can afford to run it.
  Last year the local newspaper in my constituency, the Airdrie and Coatbridge Advertiser, published a prominent article headed
  "Michael's 19 years of hell."
  It reflected, quite properly, the views of those in my community and strong views generally that those involved in social security have not yet found a satisfactory conclusion.
  In March 1965, at the age of 26 years, Michael was admitted to Hairmyres hospital, East Kilbride. He underwent an operation for a duodenal ulcer. From that date until now he has never had a normal meal because his
  624
  digestive system cannot cope with one. As it was not in his nature to be voluntarily without work, he applied for and was given a light job in the Gartcosh strip mill from 1965 to 1970. However, even that became too much for him and his consultant wrote to British Steel and told them so. After a lengthy period as an out-patient and sometimes as a in-patient, yet another operation, the third in all, took place in 1970 to deal with the complications which had arisen from the earlier operation in 1965. It is a matter of medical history that a piece of silk, which lingered from Michael's first encounter with surgery, had to be removed. Michael tried to resume work but found that his condition had deteriorated so badly that he experienced a burning sensation every time that he attempted to swallow, a condition which persists to this day.
  Michael finally accepted early redundancy and left his employment with £800 for his 20 years' service. With that he was left to face the future. Michael has existed on invalidity benefit since then. It is not surprising that his faith in social services has been somewhat shattered. Astonishing though it may seem, in 1976 he was called before a medical tribunal and his invalidity benefit was discontinued. He appealed to the health commissioner, who restored it. That establishes that tribunals are not always right, and certainly have not been so in Michael's case.
  The first tribunal that heard Michael's application for mobility allowance sat on 13 October 1980. It concluded:
  "We have considered the evidence and observed the claimant walking out of doors. He walks slowly with a hesitant gait and with the aid of a stick hut without apparent pain or severe discomfort."
  The best person to make a judgment on his ability to walk and his discomfort is Michael. On that evidence, which is supported by all who know him, there is and has been considerable discomfort. I find it incredible that the tribunal could have reached such a conclusion.
  I gave evidence at the second tribunal hearing in January. It had before it a great deal of information, including the opinion of Dr. Ian Bone, a consultant neurologist, who said:
  "'He walks in an extraordinary manner, bent forward as though walking on a treadmill. The walking is symmetrically abnormal but becomes more bizarre when the stick is held in the left hand. On general examination, he is a small emaciated man."
  Having heard the evidence and made my contribution to the tribunal. I believe that my constituent suffered in the conclusions reached because of aconflict of medical evidence about his condition. There were several diagnoses from various doctors. Doctor No. 1 said that Michael suffered from multiple sclerosis, doctor No. 2 said that it was
  "post-gastric surgery debility: ataxia"
  and a third doctor concluded that Michael's condition was caused by a psychosomatic illness.
  The doctor who knows most about the case is Mr. Starrs' own medical practitioner, Dr. Edward McCabe, a man who does not use words lightly and thinks carefully before he reaches a conclusion and offers it for consideration. He said:
  "Mr. Starrs suffers from a difficulty in locomotion which I feel qualifies him for a mobility allowance."
  That is the unreserved view of a doctor who knows Michael and has seen the condition develop and Michael's health deteriorate.
  Unfortunately, the tribunal did not share that opinion. It concluded:

  625
  "We have observed the claimant walking a distance in excess of 100 yards outside. The claimant can walk such a distance, as was confirmed by Mr. Clarke, slowly and gingerly with frequent short pauses for no apparent reason and without any evidence of distress."
  I found that conclusion astonishing and I regret to have to say that it was a distortion of the evidence that I gave. I made it clear that on a very cold winter's morning I walked 100 yards with Michael Starrs and I had to stop with him on five or six occasions. He was unable to continue and was caused considerable distress. I was cold and Michael, in his condition, must have felt much colder. How the tribunal could have reached that conclusion is a mystery which still invites an explanation.
  I have discussed all the papers in the case and the facts known to me with my right hon. Friend the Member for Manchester, Wythenshawe (Mr. Morris), who introduced the legislation that provided the mobility allowance. He would have spoken in the debate. but unfortunately he has to be out of the country on parliamentary business. However, he has encouraged me to say that he finds it astonishing that Michael Starrs has not been given a mobility allowance. He would have supported my case, and I find that support a great comfort.
  On the basis of the evidence in this case, there must be a suspicion that applicants for the allowance, at least in Scotland, if not elsewhere, are being subjected to more stringent tests than many people would feel are desirable. I know of the independence of adjudication authorities, yet there is a clear injustice in the case of Michael Starrs and it worries me that similar injustices might be occurring in other cases.
  If the Minister tells the House that he cannot intervene in the case, there will be considerable disquiet amounting, yes, to disgust in Coatbridge and throughout my constituency.
  I invite the Minister to share my contempt for the procedures which have condemned Michael Starrs to immobility and dependence whereas with the allowance which the thousands of people who know him think he should have he could be mobile and independent.
  I cannot believe that a man and his family who are experiencing such stress and pressure will not be compelled later to make even greater demands upon the National Health Service. No saving is made by not granting the allowance.
  I say to the Minister and to the adjudicating authorities that I cannot accept their view. I cannot accept that Michael Starrs should be treated in this way. The fight will continue beyond this debate.
  I sought the opportunity to ensure that we had an Adjournment debate on the issue because I profoundly believe that the case speaks for itself and invites correction. I should be delighted if the Minister responded positively, not just in the interest of Michael Starrs and his family, important though that is, but in the interests of humanity.
  11.45 pm
  The Parliamentary Under-Secretary of State for Health and Social Security (Mr. Ray Whitney): I am grateful to the hon. Member for Monklands, West (Mr. Clarke) for raising the case tonight. I congratulate him on the eloquence and sincerity with which he put the case. He has pursued Mr. Starrs' claim for mobility allowance with great assiduity for some time.
  626
  It will be no surprise to the hon. Gentleman to learn that great as my sympathy is for Mr. Starrs and his difficulties, I cannot make any decision on his claim. I hope that the hon. Gentleman will understand.
  The reason is that mobility allowance claims, in common with claims for other social security benefits, are decided by independent adjudicating authorities. An adjudication officer examines a case in the light of a medical report prepared by a doctor, in the first instance. If the claimant appeals, a medical board reconsiders the case. There is a further right of appeal to a medical appeal tribunal whose decision is final on the medical questions.
  I accept that mistakes can be made at any stage in that process and changes in decisions can be made. However, over many years under all Governments the independent nature of the adjudicating authorities has been preserved. Ministers cannot intervene. I recognise the hon. Gentleman's argument about the view of a particular doctor, but I hope that he will accept that the views which we collect through the medical appeal tribunal system offer a wide range of experience and knowledge which must be accepted as being valid.
  A decision by a medical appeal tribunal can be challenged only by way of an appeal on a question of law to the Social Security Commissioner. Neither Ministers nor officials of the Department can decide claims, nor cart they alter or try to affect decisions given by those authorities.
  Before I deal with the specific case of Mr. Starrs it might be helpful if I explain briefly the medical qualifying conditions for the allowance.
  Mr. Clarke: At the second tribunal the chairman was Queen's Counsel. If Michael Starrs appeals, can he be represented by a Queen's Counsel and have legal aid?
  Mr. Whitney: I would need to write to the hon. Gentleman on that precise point. Mr. Starrs has the right of appeal, but I would not want to mislead the House on the detail.
  The medical qualifying conditions were set out in 1976. The hon. Member for Monklands, West referred to his colleague the right hon. Member for Manchester, Wythenshawe (Mr. Morris), who was intimately connected with the introduction of the benefit in 1976. Careful consideration was given to the conditions in the light of the resources available and the need to provide a cash allowance which would be a worthwhile contribution towards the additional expenses which disabled people incur in getting about. It was decided that the allowance should be available to those severely disabled people who are unable, or virtually unable, to walk due to physical disablement.
  Virtual inability to walk is not defined in the legislation, but regulations lay down the kind of factors that are to be taken into account in assessing a claimant's walking ability. These include the distance a claimant can walk and the speed, length of time and manner in which he can make progress without severe discomfort.
  I must emphasise that the adjudicating authorities are responsible for the interpretation of these conditions and for their application in individual cases. They can, for instance, decide that a mental handicap has a physical cause or that its effect is to produce a physical disablement but the test for the allowance remains one of walking ability.

  627
  The first claim by Mr. Starrs was received on 13 October 1980. The decisions, in turn, of the insurance officer, medical board and the medical appeal tribunal were that he was not unable or virtually unable to walk and thus not entitled to the allowance. He was refused leave to appeal against the decision of the medical appeal tribunal on a question of law by both the medical appeal tribunal and the social security commissioner.
  Mr. Starrs subsequently made a fresh claim for the allowance which was received on 1 June 1983. Again, an insurance officer, medical board and medical appeal tribunal, in turn, decided that he was not unable or virtually unable to walk. He has now sought leave to appeal to the social security commissioner on a question of law and we currently await the decision of the medical appeal tribunal chairman on this application. If such leave is refused, Mr. Starrs will still have the opportunity of seeking leave direct from the commissioner.
  The hon. Gentleman will thus see that a final decision has not, as yet, been given on the claim made by Mr. Starrs and I cannot, of course, anticipate the likely outcome.
  The question whether the qualifying conditions are satisfied are considered as at the date on which the claim is received by the Department. If Mr. Starrs considers that his walking ability has become worse since he made his
  628
  last claim, it is open to him to make a fresh claim which will be considered in the light of his walking ability at the time that it is received.
  I recognise that Mr. Starrs' case had taken a long time to resolve. It is inevitable that such cases should be protracted because of the importance both for the claimant and the Department of gathering all the facts, of obtaining medical reports and of considering all the evidence carefully. However, we have been concerned about the length of time cases like Mr. Starrs' take and we have been considering what we can do to speed up the process of adjudicating on claims. I am glad that we have made some progress, although there is more to do.
  Mr. Starrs' claim has not beeen finally decided. He has applied for leave to appeal to the social security commissioner against refusal of mobility allowance. In any case, if the decision goes against him and Mr. Starrs believes that he now satisfies the criteria, he can apply again.
  I have carefully noted the points made by the hon. Member for Monklands, West and shall write to him on the specific point he raised. He has argued Mr. Starrs' claim cogently and effectively. I shall note his continuing interest and keep closely in touch with him about this case. The lessons that may be learnt about the handling of this case will be taken to heart by the Department.
  Question put and agreed to.
  Adjourned accordingly at six minutes to Twelve o' clock.

TRADE AND INDUSTRY
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  W. B. Gurney and Sons (Exhibition)
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  Manufactures (British Exports)
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  Departmental Legislation
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  Exchange Risk Guarantee Scheme
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NORTHERN IRELAND
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  Meat Consumption
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  Import Levies
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  Departmental Legislation
  Departmental Legislation

Preamble
The House met at three of the clock: The LORD CHANCELLOR 011 the Woolsack.
Prayers—Read by the Lord Bishop of Lincoln.

Diplomatic Cars: Parking Spaces
Lord Boyd-Carpenter: My Lords, I beg leave to ask the Question standing in my name on the Order
Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will remind local authorities in London that the provision of parking spaces where use is restricted to diplomatic cars only should be limited to spaces adjoining premises actually at the time occupied by diplomatic missions.
The Minister of State, Foreign and Commonwealth Office (Baroness Young): My Lords, the provision of specially marked parking spaces for diplomatic missions, and their removal when they are no longer required, is a matter for the local authorities. They are well aware of the position.
Lord Boyd-Carpenter: My Lords, I thank my noble friend for that Answer. Can she indicate whether her department has recently given local authorities any particular advice, or whether the apparent policy of the City of Westminster to duplicate the allocation of these spaces where one has sufficed before is based on its own initiative?
Baroness Young: My Lords, the position is that the formula which has been agreed between the Foreign and Commonwealth Office and local authorities, subject to local traffic conditions, is that for each mission up to three parking spaces outside its office buildings, plus one for the head of mission's residence, is allowed.
Lord Cledwyn of Penrhos: My Lords, can the noble Baroness say whether the objectives of the White Paper, which was published last April, are being achieved? She and the House will recall that the number of parking offences committed by diplomats had increased to 4.3 per cent. of the total, from about 2.8 per cent. two years previously. Can she say whether these figures have come down as a result of the efforts made by her department?
Baroness Young: My Lords, we believe that the White Paper, which has of course been drawn to the attention of all diplomatic missions in London, has been helpful in the present situation. I shall have to write to the noble Lord on the specific point that he raised about the number of car-parking offences committed since its publication.

Wave Energy Power Generation
3.8 p.m.
Viscount Hanworth: My Lords, I beg leave to ask the Question standing in my name on the Order
Paper.
The Question was as follows:
To ask Her Majesty's Government whether, in view of the likely developments in the economic viability particularly of small-size wave generators and the lead Britain had in this field, they will allocate more funds for research and development.
The Minister of State, Scottish Office (Lord Gray of Contin): My Lords, it is unlikely that wave energy generators, except possibly on a very small scale, such as navigation buoys for example, will be cost-effective in the United Kingdom, and it is appropriate to round off our research in this field, although of course we shall be receptive to any realistic new ideas which could lead to major cost reductions.
Viscount Hanworth: My Lords, I thank the Minister for that reply, which has been much more encouraging than I imagined it would be. May I ask him whether he is aware that there is a wave generator which is being constructed in Norway on, I gather, the lines of our own research and that the Japanese are following on? Does he not think that perhaps it is a pity that our thinking about wave generation has always been in too ambitious terms, and that there is a great advantage in keeping in being a small research team which can quickly take advantage of any breakthrough that may come? Finally, does the noble Lord agree that we can never quite tell what will be useful because we do not know what will be the price of competitive energy in the years to come?
Lord Gray of Contin: Yes, my Lords, I am grateful to the noble Viscount for drawing my attention to that. I was in fact aware of the Norwegian project to which he referred; but I am bound to say that we are rather sceptical of the figures produced by the Norwegians with regard to that. We think that they are rather over-optimistic. However, I can assure the noble Viscount that we would certainly not set aside any new ideas if they were seen to be genuinely cost-effective.
The Earl of Lauderdale: My Lords, can my noble friend say whether the researches so far conducted in Norway and elsewhere have reconciled the problems of something light enough to operate in summer water and waves, and strong enough to stand up to winter water and waves, to say nothing of the problem of storage?
Lord Gray of Contin: No, my Lords. I am afraid that I cannot give my noble friend an exact answer to that. What I can tell him, as I said a little earlier, is that we are not satisfied that the figures at present being projected by the Norwegians are realistic.
Viscount Montgomery of Alamein: My Lords, can my noble friend say something about wind power? There is almost an equal and perhaps a greater field for endeavour in power generation from wind sources. Is this receiving equal attention?
Lord Gray of Contin: Yes, my Lords. I can confirm to my noble friend that we are very interested in a number of projects concerning wind energy. Indeed, my figures tell me that we can expect, post the year 2000, that for large production turbines there will be a cost per kilowatt hour of something between 2.5p and 3.2p, which is a competitive price.
Lord John-Mackie: My Lords, the noble Lord suggested that he would be receptive to new ideas. Does not current research cover new ideas as well?
Lord Gray of Contin: My Lords, I am not aware that the research about which we are talking today is under particular threat. But of course research, and what transpires from research, must always ensure that the funds available are directed to where they are likely to produce the best results. That is why we are discontinuing our major research in the area about which the Question was asked.
Lord Ezra: My Lords, in view of the fact that it is necessary for this country, as a primary producer and user, to be permanently looking at new sources of energy, is the noble Lord satisfied that we are allocating sufficient resources to those ends?
Lord Gray of Contin: My Lords, yes. Over the past five years the Government have invested in excess of £68 million on alternative sources of energy, and of course about £12 million of that investment was on wave power. That investment was not wasted because we learned a great deal from it; but the conclusion is that the money can now be better spent developing other alternative sources.
The Earl of Lauderdale: My Lords, will my noble friend not agree that common to both wind and wave generation is the problem of storage when the wind dies down or when the waves calm?
Lord Gray of Contin: My Lords, my noble friend is correct. That principle would also apply of course to solar heat generation.
Lord Rea: My Lords, does the noble Lord consider that the Atomic Energy Authority establishment at Harwell is the best agent through which to channel research funding and the evaluation of renewable energy projects? Would not the Science and Engineering Research Council be a more appropriate body, considering the possible competing nature of renewable energy and atomic energy? I am sure that the noble Lord has read the report which comes from the energy technology support unit of the Department of Energy—
Noble Lords: Question!
Lord Rea: My Lords, has the noble Lord read this report which comes from the Atomic Energy Authority?
Lord Gray of Contin: My Lords, if I judge the mood of the House correctly, I think that the noble Lord is perhaps straying a little from the Question. If I may return to wave power, I would advise him that the
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wave energy decisions have been taken by us as a result of the information that we have had and the guidance we have received from the energy technology support unit. I do not think that I should allow myself to be diverted on this point.
Lord Stoddart of Swindon: My Lords, is the noble Lord aware that in spite of his doubts about the Norwegian figures, they claim to be producing energy from wave power at less than 5p per unit? Is it not conceivable and is it not possible that in Orkney, Shetland and the West of Ireland we could be producing energy from wave power at less than 5p a unit? Will the noble Lord look at this?
Lord Gray of Contin: My Lords, perhaps I may reiterate that we have been doing so. While we can certainly produce energy from wind power at the figure that the noble Lord suggests, we are extremely sceptical as to the future of wave power. But as I indicated earlier, we certainly would not cast aside any new ideas which showed a reasonable prospect of being cost-effective.

Diplomatic Immunity: Claims for Losses
3.16 p.m.
Viscount St. Davids: My Lords, I beg leave to ask the Question standing in my name on the Order
Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will study as a method of compensating individuals for any losses they may incur which they are unable to recover through legal action in cases where the defendants have diplomatic immunity, the method used in the United States of America of requiring embassies to carry insurance policies for this purpose.
Baroness Young: No, my Lords. I understand that the United States Foreign Missions Amendment Act 1983, which the noble Viscount must have in mind, covers only vehicle insurance. In the United Kingdom the position is as described in the Answer I gave to the noble Viscount on 24th June. We would normally request the transfer of any diplomat found to be driving without third-party insurance.
Viscount St. Davids: My Lords, I agree with the noble Baroness that if we did start on this road we ought to start very gently and in a narrow field, as the Americans are, with their very limited Act. Nevertheless, they now have some years of experience. Should we now not be asking them how well they have done in the course of these years of experience, particularly at this moment when we have so many very eminent American lawyers present with us?
Baroness Young: My Lords, I have given the Government's view of the value of this piece of American legislation in British circumstances, but the noble Viscount must understand that should a diplomat be found not to have carried third-party insurance and to be involved in an accident, we would

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normally request the transfer of such a diplomat. If there were damage and the mission or the diplomat refused to pay, I understand that the victim could expect compensation from the Motor Insurers' Bureau.
Lord Denning: My Lords, is the noble Baroness aware that the head of a mission can always waive the benefit of diplomatic immunity on behalf of the agents of the mission? In these circumstances, would it not be reasonable to ask the head of a mission to waive diplomatic immunity in respect of any claims that can be covered by insurance, not only motor vehicle claims but property claims and the like? Would it not be wise in advance to ask the head of a mission to give such an assurance?
Baroness Young: Yes, my Lords, I think I can assure the noble and learned Lord, Lord Denning, that it would frequently be the case that, if there was a matter in which a diplomat had committed a criminal offence and the police would have preferred charges had the person not been a diplomat, there would be an opportunity for the police to report the matter to the Home Office, which in turn would report to the Foreign and Commonwealth Office which would raise it with the head of the mission. It is then possible for the Government sending the diplomat to give a waiver of diplomatic immunity, and the matter can then be brought before the court.
Lord Denning: My Lords, I am sorry to press this matter further but I was not referring to criminal cases. I was referring to civil claims for damages in our civil courts.
Baroness Young: Yes, my Lords, this too is perfectly possible. Diplomatic immunity can be waived by the Government of the country sending the diplomat to this country.
Lord Cledwyn of Penrhos: My Lords, can the noble Baroness say whether the embassies have co-operated in this matter of waiving diplomatic immunity? Have any countries said that they will be prepared to waive diplomatic immunity in the case of parking offences, to which the earlier Question referred? If I may return to the subject of the White Paper, is the noble Baroness aware that it refers to the need for a stricter code of practice under the Vienna Convention? Can the Minister say whether such a code is being produced by the department?
Baroness Young: My Lords, there are many cases where diplomatic immunity is waived. Indeed, it may in effect be waived by the diplomat himself, who may go before the court and not indicate that he is a diplomat with immunity to waive. It is perfectly possible that such might be done.
In answer to the noble Lord's second point, we are following up the White Paper, which we believe has been helpful in clarifying the position over parking offences and other matters which concern diplomats.
Lord Kennet: My Lords, does the Minister of State's first Answer imply that the United States does not like expelling diplomats and so diplomats there need an
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insurance scheme, whereas we do not mind expelling diplomats and so they do not need an insurance scheme?
Baroness Young: My Lords, I could not possibly comment on what the United States might or might not like in these circumstances. I simply stated what the law is. So far as the United Kingdom is concerned, nobody can like such a circumstance as asking a diplomat to leave. It is a question of whether or not it is the right thing to do.
Lord Elwyn-Jones: My Lords, do we make arrangements for reciprocity concerning the granting of diplomatic immunity in respect of our own diplomats? Having asked that first question, is it not the case that our record is pretty good in that field?
Baroness Young: My Lords, as the noble and learned Lord has rightly said, the Vienna Convention applies to diplomats all over the world. Whatever ruling we may wish to apply here, we must recognise that it may be applied also to our diplomats in whatever country they are serving. So far as motor vehicle insurance is concerned, we of course insist on third-party cover.
Lord Airedale: My Lords, supposing that in a civil case diplomatic immunity is not waived, could not consideration be given to compensating the person concerned out of public funds, provided he can satisfy the appropriate tribunal that but for the diplomatic immunity he would have a valid claim?
Baroness Young: My Lords, that point was raised earlier in the Question of the noble Viscount, Lord St. Davids. The position is as I have given in my original Answer to that Question. We believe that it would be impossible for officials or a special tribunal to determine the facts of any case without compulsory powers to obtain documentary or written evidence.
Where the facts are clear there is no difficulty in applying political pressure, such as the threat of withdrawal of a diplomat who is found to have committed an offence. The difficult cases are those where the facts or law are in dispute. We could not award compensation simply on the basis of the claimant's version of the case. Furthermore, the existence of the right to compensation could encourage diplomats to flout their obligations, and claimants to inflate or invent claims against diplomats.
Viscount St. Davids: My Lords, can the noble Baroness give the House any indication of who should be expelled or what should be done in the matter of a cargo of American strategic oil bought commercially abroad and shipped on a normal merchant vessel which is subject to a salvage claim at this moment, and where the American Government is apparently claiming diplomatic immunity?
Baroness Young: Not without notice, my Lords.

Breast Cancer: Screening Policy
3.24 p.m.
Baroness Ewart-Biggs: My Lords, I beg leave to ask the Question standing in my name on the Order
Paper.
The Question was as follows:
To ask Her Majesty's Government whether they have any plans to introduce a national breast cancer screening service.
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Baroness Trumpington): My Lords, my right honourable friend the Minister for Health announced in another place on 2nd July that the Government were establishing an expert working group to consider the information now available on breast cancer screening by mammography and advise on policy options. He has asked the chairman to report as soon as possible. Any change in policy on screening must await that report.
Baroness Ewart-Biggs: My Lords, I thank the Minister for that very encouraging Answer. Nevertheless, does the Minister not agree that there is a need for urgent action to deal with this situation, where out of the 24,000 women who develop breast cancer annually, 14,000 die? Many of those women would not die were the disease detected in time.
Will the Minister give the House some indication of when she anticipates that the report from the working group will be published? Also, can she say how many hospital units to deal with the diagnosis and treatment of breast cancer have been closed? Will the Minister give an assurance that no further hospital units dealing with breast cancer will be closed while this very serious situation continues?
Baroness Trumpington: My Lords, I agree with the statements made by the noble Baroness. The working party was set up in order that a decision could be reached as soon as possible. The question of any closures is a matter for local health authorities.
Lord Molloy: My Lords, can the noble Baroness tell the House whether there is any truth in the apprehensions expressed by some specialists working on breast cancer, who believe that they are within an ace of curing this horrid disease without removal of the breast, and that there will be no inhibitions on the finance they require to complete their research?
Baroness Trumpington: My Lords, with regard to funding, each option for a screening service has implications, as the noble Lord will know, for National Health Service manpower and financing. We cannot decide what resources health authorities will need until the implications have been assessed.
Lord Ennals: My Lords, while warmly welcoming the establishment of the working party to which the noble Baroness has referred, may I, in support of my noble friend Lady Ewart-Biggs, ask the Minister whether she has seen the recent statement made by the director of the Cancer Research Campaign that a substantial number of the 14,000 women who die each year could be saved by a breast cancer screening
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service; and that regular screening of women over the age of 50 by mammography has, under trial, reduced the number of deaths by at least one-third? We are dealing with some staggering figures here.
Baroness Trumpington: My Lords, in answer to the noble Lord, the information I have—and let us not split hairs—is that 13,277 women died from breast cancer in England and Wales in 1984. I agree that a significant number of those deaths might have been avoided if cancer had been diagnosed sufficiently early.
Baroness Masham of Ilton: My Lords, should there be a non-profit making breast cancer screening service, might not some women who could pay contribute towards it?
Baroness Trumpington: My Lords, no doubt that is one of the matters which might be discussed by the working party.
Lord Rea: My Lords, is the noble Baroness aware that there has been a considerable improvement in treatment for breast cancer recently? I can give evidence of patients who are surviving very well using anti-oestrogen treatment. Will the noble Baroness see to it that her right honourable friend makes sure he anticipates that the committee will recommend more funding, and be prepared for that as part of the inevitable increase in health service expenditure which is necessary as new technology is developed?
Baroness Trumpington: My Lords, I will see to it that my right honourable friend reads the noble Lord's remarks.
Baroness Ewart-Biggs: My Lords, will the noble Baroness assure the House that the research already done in the United States, Sweden and Holland, where it has been proved that mammography screening is most effective, will be taken into account by our own working groups, and that the cost will not deter the Government from taking that method seriously into account?
Baroness Trumpington: My Lords, the previous studies in the United States produced conflicting evidence on the effectiveness of mammographic screening, but the recent Swedish study, which I know the noble Baroness is aware of, has removed many of the doubts previously attached to the value of mammographic screening. However, it is right to ask leading United Kingdom experts to confirm its scientific validity, and that screening would be similarly effective in the United Kingdom.

Business
3.30 p.m.
Lord Denham: My Lords, it may be for the convenience of the House if I announce that the Committee stage of the Transport Bill will be adjourned at approximately 7 p.m. for a short period. During this adjournment the Town and Country

863
Planning (Fees for Applications and Deemed Applications) (Amendment) Regulations 1985 and the Town and Country Planning (Fees for Applications and Deemed Applications) (Scotland) Amendment Regulations 1985 will be taken.

Summer Recess
Lord Denham: My Lords, it may also be for the convenience of your Lordships if I announce that, subject to the progress of business, it is proposed that the House should rise for the Summer Recess on Wednesday 31st July and return on Monday 14th October. The House will sit at 11 a.m. on Wednesday 31st July.
Cambridge City Council Bill
Bill read a second time, and committed to an Unopposed Bill Committee.

Business of the House
The Lord President of the Council (Viscount Whitelaw): My Lords, I beg to move the first Motion standing in my name on the Order
Paper.
Moved, That Standing Order 38 (Arrangement of the Order Paper) be dispensed with to enable the Motion standing in the name of the Lord Soames to be taken before the Second Reading of the Oil and Pipelines Bill on Monday the 22nd of July.—(Viscount Whitelaw.)
On Question, Motion agreed to.

Business of the House
Viscount Whitelaw: My Lords, I beg to move the second Motion standing in my name on the Order
Paper.
Moved, That Standing Order 44 (No two stages of a bill to be taken on one day) be dispensed with to enable the Finance Bill to be taken through all its stages on Tuesday the 23rd of July.—(Viscount Whitelaw.)
On Question, Motion agreed to.

Housing Bill [H.L.]
3.32 p.m.
The Lord Chancellor (Lord Hailsham of Saint Marylebone): My Lords, I beg to move that this Bill be now read
a third time.
Moved, That the Bill be now read a third time.—(The Lord Chancellor.)
Lord Simon of Glaisdale: My Lords, I was allowed by your Lordships to intervene at Second Reading as one of those concerned with the acceleration of this consolidation to express our gratitude to, and to congratulate, my noble and learned friend on the Woolsack, the Law Commission and their
864
draughtsmen, on the formidable work that they had done so rapidly.
The Bills have now returned from the Consolidation Committee and are about to leave your Lordships' House. I think that your Lordships would not wish them to go without recognition of what the Consolidation Committee has accomplished. Of the three methods of consolidation the ones concerned with these Bills—consolidation with Law Commission amendments—is by far the most onerous. In this case there were 37 Law Commission recommendations, which I think is unexampled, and many of them were multiple. In those circumstances a quite exceptional burden fell on the Consolidation Committee. Your Lordships will wish to recognise the way that, under their brilliant chairman, they accomplished this consideration and report of the four Bills in three meetings, and to express to them your gratitude and admiration, too.
Lord Airedale: My Lords, may I add that the brilliant chairman who piloted the committee through this formidable piece of consolidation was, of course, the noble and learned Lord, Lord Brightman.
Lord Elwyn-Jones: My Lords, I rise merely to associate this side of the House with the complimentary and highly deserved remarks in regard to the progress on the work of consolidation, including the contribution of the noble and learned Lord the Lord Chancellor himself in being a spur in this matter, and to express our gratitude for the progress that is taking place.
The Lord Chancellor: My Lords, I am most grateful to the noble and learned Lords and the noble Lord who have given this encomium on the work of consolidation and for the special mention by the noble Lord on the Liberal Benches of the work of the noble and learned Lord, Lord Brightman, as chairman.
On Question, Bill read a third time, and passed, and sent to the Commons.

Housing Associations Bill [H.L.]
Read a third time, and passed, and sent to the Commons.
Landlord and Tenant Bill [H.L.]
Read a third time, and passed, and sent to the Commons.
Housing (Consequential Provisions) Bill [H.L.]
Read a third time, and passed, and sent to the Commons.

Weights and Measures Bill [H.L.]
3.36 p.m.
The Lord Chancellor: My Lords, I understand that no amendments have been set down to this Bill and that no noble Lord has indicated a wish to move a manuscript amendment or to speak in Committee. Therefore, unless any noble Lord objects, I beg to move that the order of recommitment be discharged.
Moved, That the order of recommitment be discharged.—(The Lord Chancellor.)
On Question, Motion agreed to.

Town and Country Planning (Amendment) Bill
Read a third time, and passed.

Transport Bill
3.38 p.m.
The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead): 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 Belstead.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD ABERDARE in the Chair.]
Clause 47 [Transfer of operations of the Bus Company to the private sector]:
[Amendments Nos. 170 to 172 not moved.]
Clause 47 agreed to.
Lord Grimond Lord Grimond moved Amendment No. 172A:
After Clause 47, insert the following new clause:
("Application of s. 60 of Companies Act.
.—(1) Where it is proposed in connection with the disposal of shares in or other securities of a subsidiary or an associated company pursuant to sections 47 or 69 respectively to offer any shares or other securities of a qualified company to an exempt person for the purpose of raising money in connection with the acquisition by the qualified company of such shares or securities the Secretary of State may at the request of the qualified company order, upon such conditions as he shall think fit, that the offer shall be treated as falling within section 60(1) of the Companies Act 1985.
(2) For the purposes of this section a qualified company is a company which—

(a) is incorporated with limited liability; and

(b) the Secretary of State is satisfied that it is intended to be an employee controlled company as defined for the purposes of paragraph 10C of Schedule 1 Finance Act 1974, and

an exempted person is a person of the kind described in section 60(4) and (8) of the Companies Act 1985.")
The noble Lord said: This amendment may require some redrafting. I am well aware that if the Archangel Gabriel came down in the guise of a Lord of Appeal in Ordinary and drafted amendments to any Bill, they would certainly be found out of order, and probably rightly so. There are two points to which I should like to draw the attention of the Committee before I reach
866
the substance of the amendment. First, I have taken some trouble to obtain legal advice on the matter, and I am informed that the amendment may require further words after subsection "(2)(b)" to make clear that it applies to employee controlled companies. Secondly, some Members of the Committee who have looked up the details of this amendment may be rather surprised by the reference to,
"paragraph 10C of Schedule 1 Finance Act 1974".
At first sight that particular schedule to that Finance Act seems to bear no relation whatever to the matter in hand; but I am assured by my legal advisers that that is the correct way to refer to the definition of an employee-controlled company. Actually, it was made in a later Finance Bill but referred back to that Finance Bill.
Having dealt with some of the drafting points, I wish to turn to the purpose of the amendment, which is extremely simple. It is to facilitate the buying-out by their workers of companies which are to be privatised as a result of this Bill. I am not asking the Committee to approve or disapprove of the main proposals of the Bill. All I am saying is that if, as a result of this Bill, certain bus undertakings change hands, then the workers should be given an opportunity to take them over; and I have put down a later amendment in more general terms to ensure that if this Bill is passed then the workers would have what one might call a first refusal when the companies come to be offered.
I would have thought that I should carry your Lordships with me when I say that it would be a very good opportunity to take advantage of this Bill in order to spread worker ownership. I myself believe that wider worker ownership and a wider spread of wealth are absolutely essential to the wellbeing of the country. I believe that if this Bill is passed it will offer an opportunity for encouraging that movement. Unless this amendment is passed, it seems to me that it will be very difficult for the workers in a bus undertaking to complete a worker buy-out.
Your Lordships will remember that the National Freight Corporation was taken over by its management and workers and that it has proved extremely successful. How was that done? It was done because Mr. Thompson (as he then was) and his associates formed a company and issued a prospectus asking the workers in the National Freight Corporation and certain financial institutions to take shares in the company. The company then made a bid for the National Freight Corporation and procured it. I am told that it required 25 drafts of the prospectus before it was finally agreed. I am also told that the formation of the company issuing the prospectus was extremely expensive. I believe that to issue a prospectus for the smallest company which might seek to be listed on their listed market would be of the order of between £100,000 and £150,000. If this point is insisted upon, it would make it quite impossible for the workers in small bus companies to take over the operation. They would simply never find that kind of money. It would be far beyond their resources. No doubt your Lordships noticed the costs of the British Telecom issue. They actually ran into millions, though admittedly that sum takes account of various other matters.
3.45 p.m.
Therefore, unless the Government are able to assure me that there is something in the Bill which makes it unnecessary, I suggest that this amendment is essential if we are going to see any bus undertakings taken over by their workers. I should also say that the workers would almost certainly need to associate themselves with financial institutions. That was done in the case of National Freight, and it would seem to me to be highly desirable, both so that they can obtain the expertise that is available in the institutions and so that they can raise capital, because they will probably be unable to raise the whole of the capital themselves.
What I am asking is that the company laws which insist upon these elaborate prospectuses should be waived to some extent in regard to this Bill, and what I hope are the consequent proposals by the workers to take over some of the bus undertakings. I emphasise that such a relaxation is already allowed and I refer to that in my amendment.
I also draw the attention of your Lordships to the fact that the Secretary of State for Industry in another place, when speaking in the debate on the financial services, indicated that the Government would indeed relax the full requirements of the prospectuses in regard to smaller businesses. Your Lordships will be aware that under the present law the full prospectus is extremely elaborate, and to my mind to a great extent is poor and somewhat ineffective. It is a goldmine for lawyers and punters. It deals very largely with the past, and it gives not very much guidance as to the future prospects of the undertaking. Your Lordships may well think that the people who will know about the prospects of the undertaking are those who already work in the buses, and they will be in a fairly good position to judge whether it will be profitable or not. Therefore I do not see that this is a case in which a great mass of shareholders, widows and small people who know nothing about the undertaking, must be safeguarded to the hilt. In any case, I rather doubt whether the present Companies Acts do in fact safeguard them.
Here we have what I hope will be a proposal limited to workers in a bus undertaking and possibly to one or more financial institutions. I should have thought that in those circumstances it would be perfectly proper to extend the relaxations which are already made in certain cases. If, as I hope, your Lordships wish to encourage worker ownership, then I think that this amendment should commend itself to your good wishes; and unless the Government can show that it is unnecessary, it should be passed. I beg to move.
Lord McIntosh of Haringey: I appreciate that the noble Lord, Lord Grimond, has moved this as a probing amendment and that he himself has expressed some doubts about the wording of it. But even in those circumstances I should like to give a welcome from these Benches to the thinking behind the amendment and to express our view that, although of course we are in favour of public ownership of undertakings of this kind, which in our view and as expressed in this Bill do not readily lend themselves to the kind of privatisation proposed, there should be some opportunity for the workers involved in the industry to participate in it. I
868
think there is a limit to that from the participants' own point of view.
After all, we have expressed the view on a number of occasions that jobs will be at risk with privatisation and deregulation coming at the same time. The possibility of financial loss, if any of those undertakings go to the wall, added to the loss of jobs, could be very serious for a family. I am sure that the noble Lord, Lord Grimond, is aware of that problem and would wish there to be some limit on participation. With that minor disagreement, I think that we would support the noble Lord in his amendment.
Lord Sandford: I had intended to speak to the second of the two amendments on this subject tabled by the noble Lord, Lord Grimond, Amendment No. 172E, and I shall still do so if he is going to move it. But if he has now said all that he is going to say on both amendments, I shall speak now. I wonder whether he can guide me.
Lord Grimond: Subject to your Lordships' opinion, I had proposed to move the second amendment very briefly, but I am open to argument. I am a new boy in this House. It was my intention up to now to speak briefly on the second amendment and to move it.
Lord Sandford: Perhaps I may say what I wanted to say now, but by way of preliminary to make it clear that what I am saying is not to do with the National Bus Company, whose part of the Bill we are in, but the municipal bus companies. The Committee will have heard me say on many previous occasions that the municipal bus companies have a number of objections not so much to this policy but to the way that it is being implemented—to the fact that we have departed from our manifesto commitment. We are tackling this in one great swipe rather than by stages, and it is being undertaken, in our view, with insufficient consultation, research, study, testing, and so on.
The matter is already beyond question. We have reached the stage on this Bill in the two Houses of Parliament when buses will no longer be part of a public service but part of private enterprise, and we are all going into full-blooded competition with each other. Therefore I and the municipal bus companies very much welcome the noble Lord's introduction of this topic and the chance to debate it.
If there is to be full-blooded competition, the sooner the municipal bus companies start to consider full-blown privatisation, and employee participation in addition to that, the sooner they are likely to get themselves into a strong position to face the competition that is undoubtedly awaiting them. That means that discussion of employee participation as a part of the process of privatisation is very welcome at this stage.
I hope that the Government will be able to respond to the noble Lord, Lord Grimond, by indicating that they too are in favour of this process, particularly in the light of the good experience of the National Freight Consortium, and will agree with me that the sooner the existing municipal companies can consider and start to move into privatisation the sooner they will be

869
able to escape from the coils of legislation that will surround them if they stay within this Bill.
I very much welcome the introduction of this topic and look forward to hearing what my noble friend on the Front Bench has to say about it, not only in relation to the National Bus Company but in relation to the municipal companies.
The Parliamentary Under-Secretary of State for the Armed Forces (Lord Trefgarne): If I may first address myself to the first amendment of the noble Lord, Lord Grimond, I want to say that the Government have considerable sympathy with his aim of encouraging employee ownership of public transport companies. Indeed. Clause 48(4) of the Bill requires the National Bus Company to give employees a reasonable chance to acquire a controlling interest in the part of NBC's operation for which they work. Employee share ownership is thus something the Government wish to encourage. The amendment would enable an employee controlled company to raise capital for acquiring a subsidiary or associated company by offering shares to employees or financial institutions without being subject to the obligation to publish a prospectus.
As some of your Lordships will no doubt know, in January the Government published a White Paper on financial services in the United Kingdom. This contained proposals for a new framework for investor protection. Legislation is planned to be introduced as soon as possible. The White Paper included a chapter on public issues in which it was proposed that derogations from the requirement to publish a full prospectus should be allowed for offers of securities to professional investors and offers by a company of its securities to its employees. The details of the proposals have yet to be finalised. But the White Paper recognised that the cost of preparing a full prospectus could act as a disincentive to employee share ownership and accepted that the standard prospectus may not be the best way of communicating the necessary information.
I believe that it would be undesirable to pre-empt the financial services legislation by including in the present Bill a prospectus provision limited to the public transport sphere. Prospectus law is a complex subject and details of the Government's proposals are still evolving—for example, on the balance between the burden on companies of issuing a prospectus to employees and protecting the employees' position as investors by ensuring they have sufficient information.
In addition there is a potential defect in the amendment to which the noble Lord referred when he spoke earlier, but I should like to make it clear that I am not opposing the amendment solely on technical grounds.
Thus I am able to confirm that the amendment is broadly in line with our thinking and that we are, in preparing the forthcoming financial services legislation, giving sympathetic consideration to the encouragement of employee share ownership. I hope that the noble Lord will agree that it would be sensible to consider the subject in that context instead of proceeding on a piecemeal basis, and that accordingly
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he will not wish to press his amendment. If he remains dissatisfied with our more general proposals, he will have an opportunity to take another bite at the cherry when the financial services legislation is introduced in due course.
Lord Tordoff: For the benefit of some of us, may we have a timetable? Will the legislation be in time for the employees of the NBC?
Lord Trefgarne: As the noble Lord will be well aware, I am not in a position to anticipate what this or any other Queen's Speech may contain, and so I cannot give him the categoric assurance for which he is asking; but we certainly wish to proceed with this matter as soon as we can.
Lord Grimond: I am most grateful to noble Lords who have supported me—the noble Lords, Lord McIntosh and Lord Sandford—and to the Minister for showing sympathy at least to the thinking behind the amendment. I realised that it would be desirable to legislate in general and not piecemeal. As I mentioned in moving the amendment, I am aware of the proposals in the White Paper which were endorsed by the Secretary of State for Industry. But, as has been mentioned, the trouble is that the financial services legislation will, I imagine, almost certainly come into operation considerably after this Bill. It may be that the provisions will still be useful, but I think that your Lordships will agree that it would have been highly desirable that the provisions which the Government themselves say that they at any rate contemplate introducing in the financial services legislation should be available when this Bill is passed into legislation, if it is.
Therefore I ask the Government to look at this matter again, as they have expressed sympathy with it, to see whether the provisions which they outline in their White Paper and their desire to see greater employee ownership in this Bill cannot somehow be brought together. But in view of the Government's general—
Lord Sandford: Before the noble Lord withdraws the amendment, if that is what he is about to do, may I put this to him? I am very disappointed at the lack of urgency registered by my noble friend on the Front Bench. I have in front of me the transition timetable for the formation of those companies and for the tendering that they have to be capable of. On top of that we are now contemplating privatisation of those companies when they are newly formed; and on top of that we are contemplating offering their employees share ownership.
They will need a lot more help than my noble friend has offered so far to be anywhere near being capable of carrying that through within the timetable set by the Bill. Either there has to be a lot more give and take on the final date for deregulation or a warmer response for what the noble Lord, Lord Grimond, has just been saying.
Lord Grimond: I am grateful to the noble Lord, Lord Sandford. What he says is absolutely true. As he divined, I intend, with the approval of the Committee,

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to withdraw the amendment. However, I certainly should like to return to it at a later stage of the Bill because I feel it is highly unsatisfactory, if Members of the Committee and the Government want this, that some way cannot be found for it to be made more realistic than appears possible at present. Subject to a determination to return to the matter, with the agreement of the Committee I wish to withdraw the
amendment.
Amendment, by leave, withdrawn.
4 p.m.
Clause 48 [General duties of the Bus Company]:
Lord Gridley Lord Gridley moved Amendment No. 172B:
Page 45, line 26, after ("shall") insert—
("(a) take such steps as may be necessary fully to secure the payment of the benefits that, but for the operation of this Part, would have been payable under any pension scheme or in accordance with customary practice in respect of the employment, before the coming into operation of this section, of persons employed or formerly employed by the Bus Company or in any undertaking or part of an undertaking which is to be the subject of a disposal under the programme, and so to secure the due performance of the employer's obligations in respect of those benefits; and (b)").
The noble Lord said: In moving my amendments to this Bill, at Clause 48, I have no political objective in view. I am speaking from conscience. I should like to speak also to Amendments Nos. 172C and 172D.
Amendment No. 172C: Page 45, line 27, leave out from ("any") to ("are") in line 29 and insert ("such undertaking or part");
Amendment No. 172D: Page 45, line 37, after ("(4)") insert ("(a) or (b)");
I have some experience of pensions issues. For over 15 years it has been my duty to serve as a Government-nominated member of the Far East (Prisoner of War) and Internee Fund, and I have given longer service on the executive committee of the Overseas Service Pensioners' Association. I have to say also that I do not move this amendment with a light heart, and only after persuasion.
It is a matter of hours since I became aware that an amendment identical to the amendment I am now moving was moved in another place and defeated by the Government by 241 votes to 178. I have to say that in the time available to me I have carefully considered the Government's arguments in Hansard in attaining their defeat of this amendment and I respectfully submit that I am not persuaded. The reference is Hansard, Report stage, House of Commons, col. 1031, on 22nd May.
It appears that at this stage I should briefly outline to the Committee the issues about pensions as I see them. The existing pension funds of the National Bus Company are well funded and soundly based. It is a condition of employment that employees on entry were, and still are, contributing to those funds. Indeed, the funds which have been entrusted for some years have been drawn up to give varying pensionable entitlements to the employees who are subscribers to these funds. The National Bus Company had every reason and the subscribers had every reason to believe when the time comes for them to enjoy pensionable status that they, the subscribers would enjoy a pensionable entitlement laid down in the pensionable schemes of the company, schemes which they joined
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in good faith. In justice, in that situation I do not think we can ignore it.
The pension funds are administered by trustees under the legal provisions applicable to such funds to honour pensionable entitlement to employees which they have earned by subscribing, but under privatisation and fragmentation of the company the contingent liabilities which fall on accrued pensions to be paid cannot be foreseen with any precise exactitude by the trustees. I shall come to that in a short time.
It is apparently the Government's case that while this amendment is admirable in its way, and the Government accept that the existing pension entitlement of the employees of the National Bus Company are extremely important, they nevertheless consider the amendment in another place (similar to the one I am moving here) hampers the present NBC-Government negotiations. I am not aware of the full details of the Government negotiations with the National Bus Company, and if I was it would be improper of me to refer to them.
But in Hansard of another place there is admission by Government, when an amendment similar to the one I am moving now was considered, that the pension entitlements of the employees of the National Bus Company are extremely important. If they are extremely important, and considered so by Government, it is difficult not to believe that there have been discussions about these pension requirements already.
There are other problems, for under this Bill the National Bus Company will be dissolved, resulting in the fragmentation of its business and the privatisation of its fragmented parts. But the liability to honour pension entitlements for the NBC now and in full remains. The National Bus Company has covenanted with the trustees of the National Bus Company pension schemes to pay the balance of the cost of the schemes but this Bill will remove that covenant which effectively guarantees payment of pension entitlements earned today by 50,000 employees and 16,000 pensioners over varying years of service.
To be fair to the Government, they have indicated that they will top up any liabilities that exist at the time of privatisation of its fragmented parts and the dissolution of the company, but it is not known what this liability is meant to cover and perhaps the Minister when he replies will let me know.
At present the NBC pension funds are soundly based and financially well balanced. I believe that view is held in Government. The NBC also ensures, by three-year actuarial valuation, that these will be topped up if this actuarial valuation discloses any deficiency. Thus the NBC guarantees the solvency of its funds, and so there would appear to be no problem here.
The National Bus Company's concern is that the Bill gives no protection for accrued pension rights in respect of service before privatisation and after the company is dissolved, and when the company as it now is has been fragmented into smaller companies; that is to say, pension rights already earned at present by monthly or weekly deductions from wages and salaries, and when the contingent liabilities in the future on pension funds are unknown.
I happen to believe that the bus industry might achieve greater prosperity in due course when privatised, but I cannot believe in justice that the Government should dissolve the bus company and proceed with the fragmention proposal before present and prospective pensioners have been fully assured that they will enjoy all the scales and emoluments of the present NBC pension funds that they would have enjoyed had there been no policy to dissolve the National Bus Company.
The difficuty for the company and the pension trustees—who, after all, have to abide by the laws which govern the management of these pension funds—is that it is impossible for them to calculate with any accuracy the precise liabilities of those funds after the company has been dissolved; that is to say, the amount of pension funds which will enable them to honour pensioners' entitlements to payment.
It has been suggested with regard to this contingent liability that recourse might be made to the insurance industry in order to take out insurance to cover accrued benefits. I have to say in regard to this that I am advised by the National Bus Company that after it pursued this question with two of the most prominent insurance companies in this country, the advised answer it received was that no insurance was possible unless there was a dilution of the pensionable payments paid to pensioners. This the National Bus Company and the trustees of the pension funds regarding dilution of payments to pensioners cannot accept; nor in fact could they, if they are to honour pension entitlement to employees which at present exists.
A considerable number are involved: 50,000 present employees; 9,000 pensioners and 6,000 deferred pensioners—a total of 65,000 people; to which must he added other dependent beneficiaries, making a total number well in excess of 100,000. That includes widows and orphans.
My final submission is this. There are millions of people in Britain who enjoy pensionable status because they believe in the security of a pension. In the present context 100,000 employees of the National Bus Company can be included in this belief. If ever the belief in the security of a pension was broken and not honoured, quite apart from the hardship to pensioners, the repercussions throughout the pension industry and elsewhere would be immense. The amendment that I have moved and those to which I am speaking were drafted by parliamentary lawyers and included under Clause 48 of the Bill. They make clear the legal obligations that lie on the National Bus Company and the trustees of its pension funds to obtain full security to all accrued pension entitlement.
The amendment does not exclude any of the options that might be suggested by the Government regarding the contingent liability to be met. And the solution thereafter in no way precludes the solution to the present problem which I have indicated, provided that all pensionable entitlements are met. I hope that the Minister and the Government will be able to accept the amendments or to give full consideration to them.
Lord Barnett: I should like to say at once that I am delighted to support the noble Lord, Lord Gridley, in
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an amendment that is clearly not of a party political nature. I am also delighted to support the noble Lord because I know that he is held in the greatest respect in the House not least because of his knowledge of the pension industry. The amendment would be necessary regardless of the conclusions arrived at in any discussions to which neither of us is party between the Government and the NBC. There is no other way, as the noble Lord, Lord Gridley, has indicated, of ensuring that the pension rights are adequately and fully protected.
When I say that this is not a party political matter, I mean that there is, in fact, virtually no dispute between the noble Lord, myself and the Government, as I understand it, with regard to the objective of the amendment. In that sense I should like to refer to what the Secretary of State said at the Report stage in another place on 22nd May. He said at col. 1042:
"I accept that the obligation about which my honourable friend talked relates to the first two categories—existing pensioners, and rights earned up to the dissolution of the NBC. The difficulty is not whether we should achieve that objective—I agree that it is vitally important—but how we achieve it".
So there is no dispute between us as to whether it should be done. The only dispute is how we should do it.
It seems to me that if there is no difficulty with the objective of protecting pension rights up to the point of privatisation, there is no reason why the Government should not give the appropriate guarantee. The Secretary of State certainly has absolute and total reserve powers as to how this should be achieved. Indeed, there is no other way, as I believe the noble Lord has indicated, and as I hope to show, in which the Secretary of State's own objective can be achieved. Unfortunately, the Secretary of State went on to say:
"The best that any company can do",
in the pension field
"is to ensure that the money invested in the fund, as a free-standing entity with its own assets and liabilities, is adequate to provide benefits earned to date".
I am afraid that he is wrong. That is not the situation. I am glad to see the noble Lord, Lord Gridley, nodding. It is not true, because the NBC and very many companies in both the public and private sectors have an obligation to provide additional funds if problems arise. In the case of the NBC the trust deeds and rules require it to pay the balance of the costs under schemes after allowing for the assets. It may well be the case that this would not be necessary because, as the noble Lord rightly said, the pension fund is a very soundly based one. In normal circumstances unless inflation once again went through the roof, or something else happened, those pension funds would be adequate. But, of course, at this stage we do not know. It is not possible to give an adequate assurance to those pensioners who are now pensioners and to those who have accrued rights up to the date of privatisation.
4.15 p.m.
The Secretary of State went on to say that,
"it is wrong in principle for the Government to give an open-ended guarantee to a private sector fund".
But the guarantee we are talking about—that kind of guarantee—has been given to the trustees of the

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Industrial Training Board pension schemes. The ITB close schemes are covered by trust deeds and rules that are no different from any private sector close fund except that they have a Government guarantee. That is all that would be necessary here to meet the Government's own objective.
It so happens that the Secretary of State went on to say that,
"there is no such legal guarantee at present",
by the NBC.
"I should tell my honourable friend the Member for Portsmouth, North (Mr. Griffiths) that the NBC does not legally guarantee its pension fund. Neither the Government nor the NBC guarantee for all time the present NBC pension fund".
In fact, under the trust deeds and rules of its pension funds the NBC presently effectively guarantees any potential deficit in that fund. The NBC can break this guarantee only by giving notice of discontinuing the fund, in which event it avoids liability only for new deficits that may arise after the expiry of that notice. The Transport Bill will break this guarantee by dissolving the NBC. The question of whether one agrees with the objectives of the Bill is irrelevant. What we are concerned with here—the Government have indicated that they are concerned with it as well—is to ensure that pensioners and those who have earned rights up to the date of privatisation are protected.
It seems to me that a guarantee is required in respect of pension entitlements relating to service up to privatisation. If this is not granted, it will mean that the legislation has retrospective effect. There can be little doubt about that. If it turns out—much as we may all like to believe that the pension fund is adequate—that it is inadequate, pensioners who would have expected and who would have been entitled to expect, under the pension fund and under the arrangements which oblige them to join it, that they would have a certain pension, may, in the event, not be able to have that pension. Surely that cannot be right. I hope that the Committee will agree—unless the Government have some other way of meeting the objectives which they have indicated they want to meet—that there is no other way but that suggested by the amendment.
The Secretary of State also said in the debate that he felt that the NBC pension fund would be put in a privileged position if this amendment was carried. That is simply not true. It would only be put in exactly the same position that it was in up to the date of privatisation. It would be no better or no worse, but just in the same position. The Secretary of State has indicated that he will see that the funds are at an adequate level. But that simply is not possible, as the noble Lord, Lord Gridley, indicated. Neither the Secretary of State, nor I, nor anyone else, can say what will happen to inflation or earnings over the next 50 years. It is quite impossible. I do not dispute the good intentions and the good will of the Secretary of State. But no one can give an adequate assurance as things stand. The only way is something like the amendment moved so well by the noble Lord. As he indicated, you can give as much money as you like to an insurance company from the funds, but no insurance company will give cover for any possible rates of inflation or earnings over the years. It is impossible to get that kind of insurance cover.
So there is no other way of meeting what the Secretary of State wants to do—to ensure that the pension funds are adequately protected. In those circumstances I hope that the amendment will have the support of your Lordships as being the only way to avoid a gross unfairness to employees and effectively introduce retrospective legislation on rights which people were very much intended to enjoy whether or not they ceased employment at the date of privatisation. I beg to support the amendment.
Lord Banks: I should like to support the purpose of Amendment No. 172B, moved by the noble Lord, Lord Gridley, and, with the leave of the Committee, to speak to Amendment No. 173 standing in my name and the names of a number of other noble Lords.
Amendment No. 173: Clause 52, page 48, line 3, at end insert—
("( ) The Secretary of State shall guarantee that in respect of service with the National Bus Company or one of its subsidiary Companies participants shall receive at normal retirement date pensions no less than those which they were entitled to receive at normal retirement date on the day the National Bus Company and its subsidiary Companies ceased to operate.")
Both these amendments have the same objective.
We already know that the National Bus Company is to be dissolved and broken up into parts. These amendments are concerned with the employees of the National Bus Company; they are concerned with their pension rights, and in particular with the accrued pension rights for service up to the time when they cease to be employed by the National Bus Company. As has already been said, there are about 65,000 people in that category.
The noble Lord, Lord Gridley, pointed out that the National Bus Company has formally covenanted the trustees of its own pension schemes to pay the balance of the cost of the schemes. The National Bus Company can only break that guarantee by giving notice of its intention to dissolve the funds. However, as the noble Lord, Lord Barnett, said, the Government are ending that guarantee by dissolving the National Bus Company.
As we have heard, the Bill provides that the pension funds should be adequate at the time of transfer, but of course the test of adequacy will be an actuary's opinion that the assets of the funds at that time will be sufficient in the future to meet the liability to provide the accrued benefits to which the employees are entitled at the time of transfer—that is, the benefits that they are entitled to receive at normal retirement date. As the situation is at that point, the National Bus Company will make up any deficiency so that the assets are those that the actuary says are required.
However, as we have heard, the actuary has to make certain assumptions with regard to inflation, to the rate of interest that may be anticipated and to mortality experience. These assumptions can be proved wrong through no fault of the actuary. That is why pension schemes are revalued every three years: to monitor progress and to correct any deviation between assumption and experience. Such deviation may well require higher contributions being paid after such a review.
If, in relation to the accrued rights at transfer, the assumptions prove wrong, it could be that further contributions are necessary to the funds. If that should

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be the case, who would pick up the bill? There is no guarantee that the successor bodies will do it; there is no guarantee that the successor bodies will even be there. As the Government are abolishing the body which had guaranteed to find the money if necessary, surely the Government should replace that guarantee.
There is no precedent for the disintegration of a nationally-owned organisation prior to the privatisation of the residual parts. With all previous privatisations protection has been provided either by a financially equivalent successor—for example, British Telecom—or, where the successor body was not financially equivalent, the Government, or a Government-owned body. For example, in the case of the royal ordnance factories it was the Government, and in the case of Sealink it was British Rail. The only precedent for dissolution has been that of the industrial training boards, to which the noble Lord, Lord Barnett, referred, where the Government gave a guarantee to the trustees of the industrial training board pension schemes in respect of accrued benefits of members and pensions as at 31st March 1982.
It is important to stress that these two amendments, as I understand that of the noble Lord, Lord Gridley, and certainly as regards the one in my name and the names of others, are not asking for statutory protection for prospective pension rights for future service; they are asking for statutory protection to ensure payment of pension relating to service prior to the dissolution of the National Bus Company. The Government have decided to carry out that dissolution. They have a moral obligation to replace the guarantee which the National Bus Company gave. The National Bus Company are themselves asking that this should be done, and I hope that the Government will respond favourably.
Lord Belstead: If noble Lords would allow me, I wonder whether it would be of some help if I intervene briefly on behalf of the Government at this stage and then listen to the rest of the debate before making some brief remarks in reply at the end. I do so on the understanding—which I think I have right—that my noble friend Lord Gridley has moved Amendment No. 172B, with which go Amendments Nos. 172C and 172D, and the noble Lord, Lord Banks, has now spoken to Amendment No. 173, to which three other noble Lords' names are added. That means that we are having a debate about the National Bus Company, accrued pensions and we are not touching at all on the local authority pension scene, which will be the subject of more than one debate a little later on this afternoon.
Briefly, we are talking here about pension benefits which were accrued in the NBC pension funds before privatisation, and I take the point which has been made by all three noble Lords who have spoken that this is a very serious issue for Parliament and, of course, most especially, for those who are affected: the pensioners and employees of the National Bus Company.
Amendment No. 173, to which the noble Lord, Lord Banks, spoke, presses for a Government guarantee for these benefits. It is of course a case that has been put in another place as well as outside your Lordships' House, and the Government recognise that
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the proposed privatisation of the National Bus Company will be unusual in that the company is to be split up at the time of privatisation so that there will be no single continuing employer. It is this that has lead to the proposal for a Government guarantee, which is called for in Amendment No. 173, and to the reference to the due performance of the employer's obligation, which is contained in Amendment No. 172B, which is being moved at the present time.
I ask your Lordships to bear in mind that even today, with its status as a single employer, the NBC does not actually guarantee the pension funds in the complete open-ended way that, in essence, is being requested in both of these amendments. As the noble Lord, Lord Barnett, said, it is true that the fund rules require the NBC to make employer's contributions to maintain the benefits. But it is also true that the rules of both the funds—because, as we know, there are two funds—provide for the termination, suspension or reduction of employer's liability, and a provision of that kind really cannot be equated with a complete guarantee in the full sense of the word.
I say that not as a debating point, because it is not a very attractive debating point, but in order to direct your Lordships' attention to the funds themselves rather than to the employer behind them. I really think that many of the fears which have been expressed in another place, outside your Lordships' House, and indeed at the beginning of this debate today, would not have been raised if the NBC had stood to be privatised as a single unit. Had that been the case, the NBC could not responsibly guarantee the funds, as indeed it does not now, simply because such a guarantee would depend upon the trading environment of the company, and that is a guarantee that no company can give. Indeed, that is why pension schemes have funds: so that they possess their own independent assets, independent of the fortunes of the parent company. Indeed the NBC funds already have their own independent assets, which are worth about £0.5 billion, which have been responsibly built up over the years in order to meet their obligations. I think it is worth stressing that nothing in this Bill diminishes those assets. They are in the funds to provide pensioners' benefits and we are not reducing or removing a penny of them.
4.30 p.m.
I hope that what I have been saying indicates just how remarkable a step it would be for the Government to give a complete guarantee of the funds. Not only would it be to maintain a link with a privatised organisation, which I have to say is contrary to the whole principle of privatisation, but it would above all be to put the funds in a privileged position. It would guarantee the past service element of the fund against any economic event in the future, no matter how widespread its effects on the rest of the citizens of this country. It would be to pledge taxpayers' money to put a private sector fund in such a special position.
The noble Lord, Lord Barnett, said to me, "Well, that is all very well, but what about the industrial training boards?" Of course, in the case of the industrial training boards the Government were in the position of the employer, having been responsible for the running costs of the boards, and making the

879
employer's pension contributions. That really is not the case so far as NBC is concerned.
May I repeat the undertaking given by my right honourable friend in another place. My right honourable friend has undertaken that at the time of privatisation the Government will make sure that the assets of the funds are sufficient to meet their liabilities. That will be done following a fresh actuarial valuation on a prudent and reasonable basis, and the Government will ensure that, if necessary, extra assets are put into the funds from NBC resources. In so far as that eventually would mean a reduced revenue to the Government from the sale of NBC, then that is something that we would accept.
My noble friend Lord Gridley asks, exactly what does that mean? It means that the words I have just spoken would cover everyone who is in the pension schemes whether they are already on a pension or are the newest qualifying member of the schemes. This undertaking reflects our view that it is the assets of the funds which represent the best and most appropriate security for the fund members, and it is also our view that we must ensure, with the trustees, that those funds are adequate for their obligations.
I realise that the noble Lord, Lord Barnett, the noble Lord, Lord Banks, and my noble friend Lord Gridley each in their different ways have great experience of matters of this kind and have each drawn the attention of the Committee to the fact that, in so far as the accrued rights are concerned in the future, the trustees of the funds would probably very well feel that, in the circumstances I have outlined, they would need further security.
I realise it, too. I realise that if the funds were closed on privatisation then the advantage of cash flow from contributions as a means of easing the purely short-term peaks and troughs would not be available, just to give one example. In that case there would be the possibility for the trustees to seek backing for the fund's assets from a private insurance company on a reasonable basis.
Although this is something which has not commended itself to the three noble Lords who have spoken, the Government hope that the trustees will look carefully at that option. Certainly the Government for their part are doing all they can to help the trustees. Already insurance companies have been approached and negotiations are under way. But your Lordships will understand that this is a negotiating situation and that more than one insurance company is involved. I am sure that your Lordships will agree that it would be wrong for me at this time to say anything which might prejudice the interests of the pensioners in those negotiations.
My noble friend Lord Gridley made some remark about his understanding of the way in which the negotiations were going. I hope that my noble friend will forgive me if I say that I think that his understanding, so far as that is concerned, is out of date now. I am hopeful on behalf of the Government that a solution acceptable to all parties could be arrived at before the Report stage in the autumn, but of course that depends on whether your Lordships will allow the Government to go that far with this matter.
I am saying that instead of agreeing to the first of these amendments, which is what the noble Lord, Lord Barnett, has already said in his speech the Committee ought to do, it would be wiser to allow the negotiations to continue so that on behalf of the Government I can report further to the House at the next stage of the Bill, in the expectation that a solution satisfactory to all parties can be made available to the trustees.
Lord Barnett: Would the noble Lord give way? It is important, if we are to accept the noble Lord's advice and leave it to Report stage, to know whether he is telling your Lordships that the insurance company negotiations could conclude with giving the kind of assurances that other noble Lords and I have sought in the debate this afternoon.
Lord Belstead: I was not wishing to go into detail because I was waiting to see what other noble Lords were going to say. Perhaps I ought to say that there are, in a most important position, the existing pensioners under the schemes, and no doubt something will be said about them. As I understand it, the existing pensioners under the two schemes have their pensions kept in line with prices. As my right honourable friend has said on more than one occasion in another place, it would be our intention to try to see that they were in no worse, but at the same time in no better, position than they would otherwise be because of privatisation.
I realise that the accrued benefits of the preserved pensions have to be carefully thought of. Here I can respond to the noble Lord, Lord Barnett, by saying that I know that one option which is being looked at is the possibility of preserved pensions being treated in line with prices with a percentage being put on the top of that. But this is all subject to negotiation. As the noble Lord, Lord Barnett, will be the first to realise, there is no way that I can possibly go further than try to give an indication, as I have in reply to the noble Lord, in I hope a reasonable way, to what was a reasonable request.
Lord Irving of Dartford: Before we resume the main theme of the debate so far, I hope that the Committee will allow me to raise a more limited point. I appreciate that it may be more appropriate for another amendment, but the noble Lord will tell me if that is the case. In 1974 London Transport improved the benefits of the London Transport 1970 superannuation fund, but the London Country Bus Services, by that time an independent company as a result of the London Transport Act 1970, indicated that it could not afford the additional cost falling on the management.
In the result, the London Country Bus Services staff were given an option to transfer to the national bus pension fund, the fund of their old parent company. The majority of the staff accepted the transfer terms, but of those who did not there remain a number, including 150 pensioners. These staff and pensioners are in a separate section of the London Transport fund.
The Government have undertaken to ensure adequate funds on an actuarial basis at the dissolution

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of the NBC to pay the NBC pensions. Mr. Nicholas Ridley said in another place on 22nd May at col. 1043:
"We must make sure—absolutely sure—that the assets are adequate to discharge the funds' responsibilities".
I should like to know from the noble Lord whether these LCBS people, whether present employees or pensioners, will be covered in that assurance.
Lord Nugent of Guildford: I should like to thank my noble friend for his helpful reply, which at any rate goes some way to meet this major anxiety which is shared by noble Lords on all sides. It was rightly said by my noble friend Lord Gridley, and I think by the noble Lord, Lord Barnett, that this is an unprecedented situation, where we have a nationalised industry which is being privatised, not as one unit but split up into a number of units. Indeed, it is the essence of the Government's plans that they should be a number of relatively small units. The commercial structure is going to be completely different from what it was.
The point has already been made in answer to the precedent which the noble Lord, Lord Barnett, thought he had of the industrial training boards, that that was not a true precedent because the Government were the employer, and continued to employ the same people afterwards and to guarantee their pensions. We have here an unprecedented situation; one which gives anxiety to everybody. There is a major conflict of principle. On the one hand, there are the existing employees and pensioners of the National Bus Company, with their right to expect the pension scheme to maintain its value and the value of their pensions after privatisation, but on the other hand, it is the Government's duty to protect the taxpayers from the burden of underwriting the value of pensions in private industry. Nobody would be more aware of this principle than the noble Lord, Lord Barnett, with his distinguished ministerial career on the financial side in another place. I am certain that noble Lords in all parts of the Committee will recognise that this is something the Government must do.
The Government have argued that the trustees can best provide for the interests both of existing pensioners and the employees, and the employees who already have a claim against the pension fund, by making a deal with an insurance company that they will, on dissolution of the National Bus Company, see that the funds are topped up on a generous scale following the advice of the consultant actuary. That goes a long way, but much depends on just how far it does go. My noble friend has told us that he hopes to be able to tell us more about that when the negotiations have been concluded, when he can see what the situation looks like.
I follow the point made by the noble Lord, Lord Barnett. I do not believe that any insurance company, whatever the fund, will give an undertaking to underwrite index-linked pensions for the future, because they are underwriting something which is unforeseeable. Here is a basic difficulty in the situation. I am familiar, as are other noble Lords, with the process in nationalised industries that usually every three years there is an actuarial valuation and the consultant actuary advises the trust, and through
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the trustees the employers, what the employers' contribution should be for the next three years to maintain the solvency of the fund at the required level of pension which will be needed for the numbers expected in the future. That is combined with the foreseeable investment income which will be coming in from investment funds managed in a prudent and skilful manner.
That process goes on every three years and employees have that security which they can look to. They know that this is happening every three years and it is unlikely that their contributions will be significantly increased, but the employers' share undoubtedly will be increased as necessary. If inflation is bad in any particular period the employers' contribution will have to be increased accordingly. The employers then have to take that burden on board, the extra cost goes into the income and expenditure account, and that is paid for either by reduced profits in the undertaking or by increased charges that the undertaking has to pass to consumers and the public.
All that will change when we have a number of small individual bus companies. There is no way in the world I can see of reproducing that position. I have thought about this because I feel, just like my noble friend Lord Ridley, that the Government have a major obligation to meet and to try to find the right balance between their obligations to the employees and pensioners in the National Bus Company on the one hand and the taxpayers on the other.
I read with care what my right honourable friend said in another place and the fairly sharp exchanges that took place on the subject. But here, in this calmer atmosphere, all of us want to try to find a satisfactory answer. I think it might be possible—I am not sure whether my noble friend can accommodate such a thought—to differentiate between the past and the future. I am clear in my mind that the Government cannot rightly underwrite the pensions for the employees of the new range of private bus companies which will come into being. That would be wrong in principle and every Government would resist it. But I think it would be terribly hard on the existing pensioners if they received something less good than they have already because that, so far as they knew, was a solid pension scheme, as good as the credit of this country.
I wonder whether my noble friend might consider, maybe he will give a complete answer, the negotiations which the National Bus Company will carry out with the insurance companies, with the generous provision which my right honourable friend in another place has undertaken to see is provided in topping up the fund. That may be good enough. But I admit that I feel that out of it should come an absolute guarantee that the existing pensioners' position, their existing pensions with their index-linked nature, should be maintained for the future, either by that means or by the alternative that inevitably they would be transferred to the public purse for the Treasury to take on.
I do not think that suggestion breaches the general principle that the Government should not in any circumstances underwrite pension schemes in private business. It does not. This is an unusual situation,

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whereby we have a nationalised industry in the course of transition from one kind of body into another. I hope my noble friend will be able to consider that thought. It could be fulfilled by the method he has suggested, and I hope it will be; but if it is not, I seriously urge that he and his right honourable friend should consider the alternative that this is not an improper burden for the public fund to shoulder.
4.45 p.m.
Lord Shepherd: I am happy to follow the noble Lord, Lord Nugent, because with the latter part of his speech I found myself in more than broad agreement. The noble Lord said it would be quite wrong for the Government to guarantee the pension of any employee of the National Bus Company as and when he moved into the private sector. That is not the purpose of this amendment. That has never been the case that has been made to the Government by the trustees of the pension fund. The limited objective is that at privatisation no employee or pensioner should be worse off in his pension entitlements, earned and paid for by members. That limited objective falls closely to the final words of the noble Lord, Lord Nugent. I am so glad that we have agreement on that.
I am deeply distressed that this matter has had to come before your Lordships because there has been immense anxiety within the National Bus Company ever since the introduction of this Bill in another place. I have to say frankly to the Government that whereas the National Bus Company management took a very positive attitude on the proposals in the White Paper and in this Bill, the sense of injustice that has arisen as a consequence of debates in another place has been a most destructive element in the morale of those in management and the work force on whom much of the future of the Bill which is now before us will so greatly depend.
The noble Lord, Lord Belstead, raised the question of whether there is a legal guarantee by the board. My noble friend Lord Barnett referred to the deed of trustees and the rules of the pension funds. A board, of which I was not a member, firmly undertook in an agreement on the setting up of the pension funds that there would be the provision of moneys to ensure that the assets could meet the liabilities of the pension funds.
Through all my six years as chairman, when we looked at the pension funds situation to ascertain that all was properly in balance, that undertaking, that guarantee, to the trustees was never questioned at any stage. It has always had the firm support of the board; and, if I may say so, Secretaries of State of successive Governments have never raised this issue with the board.
It is perfectly true, as the noble Lord, Lord Belstead, has said, that in the agreement (if that is the right expression) by the company over the trust funds there is provision that in the event of the company being unable to make contributions to the fund, it can give notice. If my memory is right, in giving notice, its liability would remain exactly the liability on the date of giving notice. The ability of the National Bus Company to pay its contributions to the fund—and the funds have been recognised in all quarters as being
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properly managed—has been acknowledged within the recent actuarial review to be broadly in line with the liabilities. The point that I am trying to make is that the liabilities of the fund have been fully covered by the assets. The board, without any question, has seen itself able to fulfil its commitment; and the resources of the National Bus Company would always encourage it to that view.
I wish to remind your Lordships' Committee that the National Bus Company has been a good profit earner for the state and the taxpayer. Apart from the £20 million a year which it pays on its capital and its interest, it has repaid since the end of 1983 and should have repaid by October of this year some £63 million of its capital and its borrowings. So on a commercial track record the board would have no difficulty in saying they can guarantee the fund. But that has never been in question.
The noble Lord is quite right. The problem arises not through the privatisation of the National Bus Company, but through the possible fragmentation of the group as a consequence of this Bill. The noble Lord, Lord Belstead, in the earlier part of his speech departed very little from the speeches that were made in another place, except that perhaps they were delivered in a more agreeable form; but then that is the characteristic of the noble Lord, Lord Belstead. But he advanced very little. Then, right at the end, he put your Lordships' Committee into what I would say was almost an impossible position. What he was saying was this: "If you insist upon this amendment, you will prejudice us (the Government) in finding a solution to this problem". I would have had more confidence in this respect if the noble Lord, Lord Belstead, had made known his position a little earlier. I then might have had time to think and to take advice, as no doubt the noble Lord, Lord Gridley, would have so wished.
We are now being asked to accept a particular assurance—and I accept that sincerity of the noble Lord, Lord Belstead—which places us, I would suggest, in a difficult situation. If the Committee wishes this amendment to be withdrawn, I think that it should be withdrawn on condition that this particular clause of the Bill should be recommitted at Report stage so that this matter could be freely and frankly discussed in a Committee situation and not in the more formal restraints of the Report stage. I think that the Government ought to give that undertaking if they wish to press the noble Lord, Lord Gridley, and my noble friend Lord Barnett, not to proceed with this amendment. I may be more persuaded if the noble Lord can give me an answer to the following question—
Lord Tordoff: Is not the undertaking that the Committee needs an undertaking that if negotiations were to fail, the Government would come back with a similar provision to the one in this amendment?
Lord Shepherd: That certainly would be the case. But I should like to put this question because I think it is very central to the issue and much depends on how the noble Lord replies to it. The noble Lord has said that there were discussions with various insurance companies. The insurance companies have made their position clear, and I suspect (as the noble Lord, Lord

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Barnett, has said) that the question arises of how to guarantee these funds for 30, 40 or 50 years hence on the present assets of the company. Clearly, there would have to be some topping up.
This is the question to which I referred. If an insurance company were prepared to take over the assets and to guarantee the benefits at a price (which would include a profit element) to be determined by its own actuaries, does topping up—that is a phrase that the Secretary of State in another place has used—mean that the Government would pay whatever is required by the most competitive insurance company which is prepared to take on the risk without dilution of the benefits?
If the Minister will say that in the Governments's view the topping up meets that point, I certainly would have greater ease in not pressing this amendment today. But the noble Lord, I am sure, will understand that he has placed some of us who have great responsibility in this matter and great commitments of past service, in a difficult situation because of the manner in which he has made this statement this afternoon. I do not say that in any way it was a political ploy; but it has placed some of us in an intolerable position as to the best decision on behalf of the 50,000 employees and the 16,000 pensioners. I think that is enough for the moment, but I hope that the Minister can give me a direct answer to that question.
Lord Chelwood: It is only because my name is on the amendment that I might be allowed a few minutes briefly to address the Committee. I should like to say to my noble friend that so far as I am concerned, as a late signatory to the amendment, I thought that the undertaking he gave was helpful and forthcoming—and in some contrast, may I say, with a rather more dismissive attitude taken to this amendment when it was moved in the same words in another place.
So far as I am concerned therefore I think it would be quite wrong to press my noble friend's amendment to a Division at this stage. I want to be brief and I want to try very hard not to repeat what has already been said. I added my name to this amendment because it seemed to me to raise a question of important principle which did not depart in any way from the object of the Bill.
Also, for some 10 or 12 years, I was a director of a bus company before it was nationalised and I was a consultant to another; therefore I know quite a number of former employees of the National Bus Company who are now enjoying their pensions. We have just been reminded that there are some 16,000 involved. I have tried, therefore, to put myself into their shoes and, speaking as if in their shoes, I feel that the Government are under an inescapable obligation to ensure somehow that the promised benefits are secured. As I see it, we are debating not whether it should be done but how it can be done.
5 p.m.
How then can the rights of NBC pensioners and employees with pension rights be most effectively and
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inexpensively underwritten? I think that is the right phrase to use. My noble friend Lord Gridley and other noble Lords have talked about what contribution might be made by an insurance company by covering all risks and covering all contingencies—and, incidentally, making a goodly profit at the same time. It goes without saying that this would surely be very expensive indeed, and I cannot for the life of me see how any insurance company can think half a century ahead in trying to cover contingencies and risks which might arise.
We have discussed the option of a Government guarantee—although my noble friend Lord Belstead does not like the word, and perhaps he will have to find a better one—that all pension rights can be fully secured at the moment of privatisation. That would certainly be cheaper and simpler. There is the precedent—and I regard it as a precedent—of the industrial training board; and my noble friend made a sharp distinction, which did not seem to me a distinction with a real difference.
But there is a third option, or part-option, which nobody has yet mentioned—that is, that the companies tendering for the NBC routes, however many of them there may be, will be making offers for assets and liabilities. The existing pension rights of those now employed and of those who have retired are one of the liabilities. Why not apportion existing pension obligations between the successful bidders? Of course that might be much too complicated; it might be impossible. But that option has not yet been mentioned and I certainly think that it ought to be most carefully considered. Perhaps it would be possible even to dovetail all three options.
As I see it, therefore, it is for the Government to recommend how this problem should be solved, and it is for Parliament to approve it. In that connection we look forward very much to the Report stage. This is the Government's Bill and it is their problem. As I see it, we want a firm assurance that somehow a way will be found to underwrite the trustees' present covenant under seal, which, although my noble friend Lord Belstead does not like the word "guarantee", does amount—at any rate to a layman like me—virtually to a guarantee. The mechanics, given that assurance, can follow later. The Bill at present retrospectively expunges the NBC guarantee, and that cannot be right.
Viscount Massereene and Ferrard: I should like very much to support what my noble friend has just said. I was going to say much the same, though of course not so expertly. I am absolutely definite that the pension rights of the NBC employees must be secured. To do otherwise would be quite dishonourable.
I hope that the fragmentation of the NBC into companies will not be too great. I understand that is entirely in the hands of the Secretary of State. He is enabled to sell these assets to people who send in their tenders. However, I think there would be some safeguard if the only people to be accepted to run the buses were big companies, and those with a very good background, because fragmentation into dozens, if not hundreds, of small private companies could be highly dangerous. It is probable that one or two of them might go into liquidation, and one wonders what would happen then to pension rights.

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I am quite definite that the Government must find a solution—even though not necessarily by way of a guarantee—which so far as human ingenuity can ensure it, should be foolproof. I hope that will be possible. Of course I favour a Government guarantee, and I do not think the taxpayer would object to that: certainly I myself, as a taxpayer, would not object. When one considers how some of our taxes are squandered on the most useless endeavours, I would far rather see them being spent to ensure a guarantee for the pension rights of the employees of the NBC.
Lord Mottistone: I added my name to the amendment of the noble Lord, Lord Banks, because my views on this matter are similar to those put forward by the noble Lord and by my noble friend Lord Gridley, and indeed by practically every noble Lord who has spoken. I have no wish to repeat all the statements that have been made already.
The important points I should like to comment upon are, first, that I do not think my noble friend the Minister is right in talking about underwriting pensions of companies in private industry. We are not talking about that: we are talking about underwriting pensions of companies before they were in private industry, which is a very different matter.
My second point concerns training boards, which have been mentioned by several noble Lords. My noble friend dismissed them because the Government was the employer. I was an employee of a training board, although when I went to another company I transferred my pension and so I am not in that pension scheme. But at the time I was with my training board all the training boards were independent, and the result is not quite the same as saying that the Government have always been the employers. I make the point because, as other noble Lords have said, this is a special case, and therefore it requires special treatment. I think the Government can afford not to be swayed by people who might say, "You must not set up a precedent", because it will be difficult to envisage another precedent quite like this.
I thought that my noble friend Lord Nugent in his closing remarks really put his finger on the point: what we must have is some sort of undertaking from the Government which satisfies us as meeting the basic requirement of giving the pensioners what they would have got if nothing new had happened. That is what we must have. I think my noble friend has said that is what he is aiming for and that is what is in negotiation. I understand the point made by the noble Lord, Lord Shepherd, that it is infuriating not to know in advance what the outcome of that negotiation will be, but I would suggest to your Lordships that we are extremely fortunate that this Bill has hit us at this particular time so that there is a gap of two and a half months between Committee and Report. That really does give time for these negotiations to reach the right conclusion.
In that connection I agree with the suggestion made by the noble Lord, Lord Shepherd, that we should, if necessary—I would qualify it in that way—have a recommitment of this clause, as was done in the Insolvency Bill with Clause 7, and for somewhat similar reasons. There is a precedent there. Perhaps that course could be adopted when we resume in October. However, I say that should be done only if it
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appears to be necessary, because I hope that my noble friend the Minister will put down an appropriate amendment of his own which will give us the reassurances that we need. Indeed, perhaps he might write to us to say that he has completed his negotiations satisfactorily.
What I think would be unwise at this stage is to take either of these two amendments to a Division. I personally, if I have to choose between them, think that the much more simple one, (that is No. 173), which clearly puts the weight on the Secretary of State, is the better of the two. I am just about to sit down; but I should not like to go into the Division Lobby at this stage of the game in support of Amendment No. 172B, and I hope that the noble Lord, Lord Banks, will not push his Amendment No. 173, either.
Lord Chelwood: Before my noble friend sits down, may I ask very briefly whether he is aware that Amendment No. 173 does not deal with existing pensioners—or has he not noticed that? He has put his name to it.
Lord Mottistone: So far as I am concerned, it does.
Lord Peyton of Yeovil: I lay no claim to any specialised knowledge of the pensions industry. I concede, of course, to my noble friend Lord Gridley, who moved the amendment, and to the noble Lord, Lord Barnett, opposite, that they have such a specialised knowledge. Therefore, most of my remarks will be in the interrogative, seeking from my noble friend on the Front Bench an understanding of the position. There can be no challenge anywhere in your Lordships' Chamber of the need to show care to safeguard the accrued rights of pensioners. Like others of your Lordships, I have received many letters on this subject. An official of the Transport and General Workers' Union kindly came to see me the other day to express the anxieties of his members and I told him that I was very ready to consider those and to repeat them here.
But I think—and I am not referring to anything which has been said today in your Lordships' Committee—that it is also incumbent upon others who oppose the Bill not to stir up unnecessary and irresponsible anxieties on this very delicate matter. We are, I think, united that employees ought not to lose, but I want to be clear myself as to the likelihood, as things are at present, of their actually doing so. My first question is: how absolute is the so-called guarantee which pensioners, either present or prospective, enjoy? As I understand it, the rules of these funds provide for the reduction, suspension or termination of employers' liability, which at least gives me the impression that the guarantee is not quite as absolute as has been suggested.
The Government are now asked to give a guarantee which is not qualified in the way that the present National Bus Company's guarantee is qualified. I am concerned to know whether pensioners are at present protected—and I hope that my noble friend will be able to give me a clear answer to this—against, for instance, a storm of inflation. The noble Lord, Lord Barnett, opposite, in the course of his very temperate remarks, suggested that one of the dangers was a recrudescence of inflation which would immensely

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damage the rights of pensioners. What I am inquiring about is whether, in fact, today pensioners are fully protected against such a return of inflation.
I come to my second question. If it were the intention of the Government that the National Bus Company should be sold as a whole would it, or could it, have replaced its present limited guarantee with one such as is now suggested; in other words, something very much wider? My last question is: does any private employer give any such guarantee now, and if he did how could he be sure of being able to honour it? The Government have stated very clearly—and I think this has been generally welcomed—that if, following a prudent actuarial valuation, any deficiency in the fund should appear, then that could be topped up from National Bus Company funds. The possibility of some insurance arrangement has been aired, and I share with others of your Lordships a considerable interest in learning what progress has been made.
I think the suggestion that the noble Lord, Lord Shepherd, made towards the end of his speech, that this was putting your Lordships in very great difficulty was, if I may say so, slightly unfair, for it seems to me that my noble friend has done, and is continuing to do, his best to resolve what is generally admitted to be an exceedingly difficult problem and one without precedent.
I hope that my noble friend will give me answers to those questions, because I have a feeling that some of the things that have been said on this subject have given the impression that present pensioners enjoy a very much wider guarantee and a wider degree of certainty than in fact they do. I may be wrong, but I should like to be reassured about that.
The last point that I want to make is this. Some of the arguments that have been adduced during the passage of this Bill have led me to believe that some of your Lordships, and some of my noble friends even, would really stop at nothing in their attempts to wreck this Bill—
Noble Lords: Oh!
5.15 p.m.
Lord Peyton of Yeovil: I am so sorry, but I am entitled to my opinion. I do not interrupt other noble Lords. We have had a very great number of amendments which seem to me to be designed to undermine the working of the Bill. If all of your Lordships do not agree, that is my misfortune, but it is my view. What I fear is that this very sensitive aspect of the Bill might well be used by others, not in your Lordships' House, in an irresponsible manner, and that the very delicate subject of pensions will be treated as yet one weapon in the arsenal of those who wish to destroy this Bill.
Lord Shepherd: The noble Lord, Lord Peyton, has really cast a massive slur upon the noble Lords, Lord Gridley, Lord Barnett and Lord Chelwood. They put their own names to this amendment. Certainly, I had no involvement in their names being put to it. What the noble Lord is saying is that, because some of us have spoken on the general nature of the Bill, we are
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using what is a sensitive and very serious matter, like the noble Lord, Lord Nugent, has said, for narrow reasons to cause difficulties for the Government and for the Bill. I hope that the noble Lord will withdraw that statement.
Lord Peyton of Yeovil: I was very careful to say in the course of my remarks that nothing of what has been said in your Lordships' Committee this afternoon was anything other than completely responsible. I am sorry if the noble Lord, Lord Shepherd, misunderstood me, but he certainly did.
Lord Barnett: Will the noble Lord allow me to intervene, as he was so kind as to exclude me! Probably, he meant his criticism to say: present company excluded. But may I say to him that not only does the amendment not seek to wreck the Bill; it effectively assumes that the Bill will become law.
Lord Peyton of Yeovil: I do not wish to detain your Lordships for too long, but the whole point of what I had to say was to refer to amendments which were, in my view, designed to undermine the Bill. I was not referring to the one which your Lordships are at present discussing and which was moved very responsibly by my noble friend Lord Gridley and supported by the noble Lord, Lord Barnett.
Viscount Hood: The National Bus Company has two very good pension schemes, and I think it is common ground in the Committee that the members should enjoy those schemes. The problem with which the Government have to deal is that they are both fully related to the retail price index. This inevitably leads to the uncertainties, to which the noble Lord. Lord Barnett, referred in achieving some completely insured scheme for the future. The companies are undertaking to fund these schemes, in one case up to 1995 and in the other case to 1998, but these schemes can clearly fall under the terms of the Bill before your Lordships' Committee.
The scheme of a good and well-run private company is fully funded and it is backed by the company, though probably not by any written undertakings. But the company and the pension plan are run under the authority of the same board of directors. It is an essential element in the judgments of the directors to see that their employees are happy, and a pension plan is an important element there. Clearly, the Government will have to make up the full funding of both these schemes. This can be on certain assumptions arrived at with a given figure, but the problem is how to be sure, that having been achieved, that the funding will remain intact for the forty or fifty years ahead of these schemes. I do not think that this is an insoluble problem.
It is also fair to say that the unwritten guarantees of any company are only as good as the company. The guarantee of the Government is necessarily better than that of any company, including the National Bus Company. This is the Government's problem. I think that the amendments go too far with a complete guarantee of Her Majesty's Government, and that the Government should be given time to work out some scheme which is acceptable to your Lordships and to the members of the scheme.
Lord Belstead: Perhaps I may reply briefly to what your Lordships have said. That is not an entirely easy thing to do as practically every noble Lord who has spoken has a first-hand knowledge of pensions or a very close knowledge of the bus industry or of the National Bus Company, or has a knowledge of both areas. Nonetheless, I shall do my best.
Briefly, and without more ado, perhaps I may pick up a point which was put to me by my noble friend Lord Peyton. My noble friend asked about the rules of the two funds which are the pension funds for the National Bus Company. My reading of the rules, which I have with me, is clear. They provide for the termination, the suspension or the reduction of the employer's liability. I feel on behalf of the Government that no company could guarantee its trading position and therefore the fortune of its pension scheme without any peradventure at all.
I should like immediately to make the point that I am not saying that as a defensive screen for an argument that the Government are attempting to put before your Lordships, but as the reason we believe that we need to ensure that the funds of these pension schemes are adequate. That is why my right honourable friend in another place has given an undertaking that, following a fresh actuarial valuation on a prudent and a reasonable basis, the Government will ensure that, if necessary, extra asets will be put into the funds from the sale of NBC assets. It could mean a reduced revenue to the Government from the sale of NBC, but we accept that in order to fulfil our undertaking to all who are in the pension schemes, whether they are already drawing a pension or are the newest qualifying members of the schemes.
It is, though, the further security to protect the funds in the future against any unforeseen eventualities which is at issue now, the point spoken to by so many of your Lordships, in particular by my noble friend Lord Gridley in opening this debate, by the noble Lord, Lord Barnett, and by the noble Lord, Lord Banks. I have said on behalf of the Government again today that the Government cannot pledge taxpayers' money to give an open-ended guarantee, but it is here that there is the possibility for the funds to be backed for the future by private insurance. The difficulty in which I find myself with regard to this afternoon's debate is that, although all noble Lords who have spoken have been at one in expressing their concern for the future position of NBC pensioners, either those who are pensioners now or when they take the pension, there has been some difference of emphasis coming out of this last hour and a quarter's discussion.
We have two different sets of amendments—one would place a duty on the National Bus Company itself to give a form of guarantee; the other would place a duty on the Government, although the nature of the exact guarantee that would fall upon the Government does not seem to be entirely agreed between all your Lordships. My noble friend Lord Nugent, although by no means being uncritical of the position in which we find ourselves at the moment, put his finger on the position of the existing pensioners as being more special almost than anything else. My noble friend Lord Mottistone and my noble friend Lord Chelwood were both generous in saying that they felt that, on behalf of the Government, I had endeavoured to come
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forward with a helpful and forthcoming statement earlier on. But both my noble friends went on to examine very carefully what they believe the options might be for the future. Indeed, I must be fair about this: they expressed doubt and at any rate hesitation about what insurance could do when one was looking many years ahead.
On that point, may I pick up the view that was expressed by my noble friend Lord Hood in the intervention that he made at the very end of this debate. My noble friend said that he felt that this was not an insoluble problem. As a layman in this matter I have been reflecting for many days now. Surely, it is the case that although no insurance company or any other body can predict precisely what will be the rates of inflation and rates of interest for periods for many years ahead, nonetheless, it is not the business of many insurance companies, not least the life insurance companies in this country, to try to do just that, although very often it is more difficult to underwrite one form of cover than it may be for another?
In reply to the emphasis on the different views which have been put forward, and indeed in reply to the two different sets of amendments which have been put forward, the Government are saying that in addition to the absolutely cast-iron guarantee that we give for the topping-up of the funds at the time of privatisation, we are now negotiating with insurance companies for further security for the funds. Negotiations so far have shown a good basis for fruitful further progress if the trustees decide that they want to pursue the insurance option. My noble friend Lord Nugent drew particular attention to the position of existing pensioners. Here I would say to my noble friend that any insurance option which we can secure would of course be for the members as a whole, most certainly in order to cover existing pensioners.
So far as preserved pensioners are concerned, as I said to the noble Lord, Lord Barnett, he asked me to respond about the detail, we are looking at an option, which would be connected with prices. The noble Lord accepted that I could not go further than what I said about three-quarters of an hour ago. If I may say so to the noble Lord, Lord Shepherd, we are most certainly not talking about dilution. However, we may have to talk about the same package of benefits in a different shape in return for insurance cover and certainly—not worse benefits but different benefits, but equivalent. Here again, this is subject to negotiation.
I will end by answering three questions put to me by noble Lords. The first came from the noble Lord, Lord Irving of Dartford, who referred to the London country bus service. I am hopeful that this particular situation will not be an obstacle to any satisfactory settlement. We recognise the point which the noble Lord made in his speech and we are certainly taking account of it.
5.30 p.m.
Secondly, in reply to my noble friend Lord Peyton I should like to say that we are seeking to ensure that employees do not lose out. I have to say that the present rules of the funds are indeed, as my noble friend suggested, not absolute. Negotiations with insurance companies have shown, as I have said, that there is a basis for fruitful further negotiation. I do not

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see how the National Bus Company, if privatised as a unit, could have given a complete guarantee. However, that is ground I have already gone over.
Thirdly, the noble Lord, Lord Shepherd, asked me an absolutely direct question: would the Government be prepared to pay whatever an insurance company demanded in order to guarantee the existing benefits? At least, I thought that was the question which the noble Lord put to me.
Lord Shepherd: I meant a guarantee that was competitive, whereas the noble Lord suggested that I referred to a guarantee at any price. My question assumed a competitive situation. Clearly I am not suggesting that the Government should pay whatever price any insurance company demanded. Obviously one is talking about a competitive situation.
Lord Belstead: I am grateful to the noble Lord, and he was quite right to intervene. My answer is that the Government will be prepared to pay what is necessary to achieve adequate insurance cover, as we would be to top up the funds adequately in the way that we have given an assurance that we would do.
I am asking as a result of this debate that the Committee will agree that the negotiations to which I have referred should continue, so that the Government can report again to the House at the next stage of this Bill. I make that request not in order to try to evade responsibility. As sure as night follows day, and whatever may happen to anybody in this life, your Lordships' House will meet again for the next stage of this Bill a little later this year. And, again, as sure as night follows day, it will be in the hands of your Lordships as to what your Lordships consider should be done with this particular part of the Bill and with this particular issue.
I earnestly ask your Lordships, after what has been a valuable exchange of views which has taken us a little further today, to allow the Government to try to pursue the option which the Government are genuinely trying to pursue, and then allow me to report back to your Lordships' House, if that is the way events turn out at the next stage of this Bill.
The Earl of Selkirk: Can my noble friend the Minister say whether or not there was a covenant between the National Bus Company and their pensioner! If so, does he have any idea of what were the terms of that covenant?
Lord Belstead: A covenant has been referred to in today's debate. I certainly accept anything that has been said about it and about an undertaking by the National Bus Company about the payment of contributions. But that is part of the rules. The rules are, as I understand them—and I have the rules with me—subject to the overriding stipulation that they can be terminated, suspended or reduced by the National Bus Company if it wishes to do so, by way of the employer's liability, if that is necessary. That is an overriding stipulation.
The Earl of Perth: Before the Minister concludes, will he give an answer to a proposal which I found to
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be of the greatest interest? It was made by the noble Lord, Lord Shepherd, who suggested that at Report stage we should recommit this matter, as if it were. We would then all feel very much happier about letting the Government go forward with their negotiations. We could be the judge of whether recommitment was necessary. The noble Lord, Lord Mottistone, used, I believe, the words "if necessary". I say that we should have it as an assurance. After all this debate we could then wait and see.
Lord Shepherd: Before the Minister replies to the noble Earl, perhaps I may make a point in a similar vein. Of course this matter depends very much on what your Lordships wish to do. Clearly this is an on-going situation. I believe we are due to return to this Bill at Report stage on 14th October. We will not therefore have the usual facilities for discussion and information.
In the pursuit for a settlement will the noble Lord the Minister undertake that he will be willing to see those who have expressed an interest in this question, so that they may be brought up to date on the situation before we meet on 14th October for the next stage of this Bill? We would then be in a position to take a view as to how far the negotiations have progressed, how successful they have been, and how closely the genuine anxieties expressed have been met. Such a meeting could be the basis of that information.
Lord Gridley: the noble Earl, Lord Selkirk, spoke about a covenant. As I understand it, the position is that at present the National Bus Company has covenanted with the trustees of the National Bus Company's funds that if there is any shortage in those funds to pay the entitlement of pensioners, the company will see to it that those funds are met. That agreement covers 50,000 pensioners. I believe that is the covenant to which the noble Earl was referring.
Lord Belstead: Perhaps I may reply specifically to the noble Earl, Lord Perth, and to the noble Lord, Lord Shepherd. I give without hesitation the undertaking for which the noble Lord, Lord Shepherd, has asked. The Government give an absolute undertaking that in the week before we reach the Report stage of this Bill there will be a meeting with any noble Lord who has spoken on this particular amendment this afternoon. I shall make sure that we are in touch with noble Lords to that effect. I will go further. When that meeting takes place, if it is to take place in good faith, there clearly must be an understanding that if the Government's report is not to the liking of your Lordships, the Government will agree to recommittal of this particular clause. I give that undertaking.
Lord Barnett: The noble Lord the Minister has, as usual, been very courteous. I am most grateful to him for the way in which he has responded, particularly in his concluding remarks. In those circumstances I am sure that your Lordships will feel that the House should have an opportunity to consider the matter again. Because it will be a couple of months before we reach that stage I believe one or two points of clarification still need to be placed on the record.

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I know the noble Lord too well, even in the short space of time I have been in this House, to believe that he would wish in any way to mislead the Committee. However, I noted in particular what he said about the Government's undertaking in reply to my noble friend Lord Shepherd. I shall return to that point in a moment.
I shall now take up the point made by the noble Lord, Lord Peyton, concerning the present rules. In the case of the rules of any pension fund, it would be absurd if there were not a clause allowing them to be discontinued. It is not surprising that such a clause exists in this case, but in respect of the NBC all that would happen is that the NBC could break the guarantee only by giving notice of discontinuation, and it would cease as from that time. However, this would not affect the position before that time.
What we are talking about in these amendments and what I thought almost every noble Lord who has spoken in the debate—the noble Lord, Lord Peyton, included—wanted to ensure was not that there should be some open-ended guarantee for new pensioners but that it should be for existing pensioners and the existing pension rights of employees at the date of dissolution. I thought that that, however much they disagreed or agreed with the amendment, was what everybody was in favour of doing.
We are not, therefore, talking about a link with a private company. We are talking about a link for employees of a publicly-owned company up to the date before it becomes a private company. So there is no dispute about that. Nor is there dispute, I should have thought, about the case for the industrial training boards. Frankly, and I hope that on reflection the Minister will agree, one is a state-owned board and another a state-owned company, and to argue whether one is right to give a guarantee and one not is no more than a quibble.
I now turn to the point to which we shall return at a later stage. I said that I would not wish to accuse the noble Lord of misleading the Committee. I noted very carefully what he said about the Government's proposals in these negotiations. He told us that the undertaking would be to top up the funds on a reasonable actuarial assumption. Those are the words he used. That makes it quite clear. In reply to my noble friend Lord Shepherd a moment ago he gave an undertaking that the Government would ensure that there would be adequate funds; but they cannot, by the very nature of things, be adequate to ensure the guarantee. They cannot be; that just cannot happen.
I do not know what actuarial assumptions will be given to the actuary but I must tell noble Lords that when I was Chief Secretary to the Treasury I gave a few assumptions to the actuary and he had no choice but to take them. I have to say that they did not always come true, as many assumptions do not; yet here we are talking about assumptions that will have to last for some 50 years. The Minister tells us that in those circumstances he will ensure that the funds will be adequate but, frankly, we all know that no insurance company would accept whatever money anyone is prepared to give it in order to provide a 50-year undertaking that was previously given to workers in a pension fund at the date of dissolution.
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However, I hope I am wrong. As I said, I know the Minister did not wish in any way to mislead the Committee. Therefore, when he comes back to this issue he will be able to tell us the extent to which the insurance companies are unable to give the sort of guarantee that most noble Lords want and that there will be a further topping up by the Government to ensure that the guarantee is met.
Lord Banks: I have just one point to make. It seems to me that the central issue at stake is whether the successor bodies will be as good a guarantee for providing any extra funds which may be necessary to secure the accrued benefits as is the National Bus Company. Can the noble Lord, Lord Belstead, say whether he thinks that the successor bodies will be as good a security from the point of view of making up any deficit in the funds in the future, relating only to the accrued benefits at the time of transfer? If he does not think so, obviously the employees must be in a worse position.
I listened with very great interest to what the Minister said about the negotiations with the insurance companies. I am not very hopeful about that, but it may turn out better than I expect. However, in view of what the Minister said I would not want to move Amendment No. 173 when we reach it.
Lord Belstead: Perhaps I may just say to the noble Lord, Lord Banks, who is an expert in this field, that the question of accrued benefits for those who are moving off to the subsidiaries is of course all part of the calculations and negotiations one must go into when considering the position of those people for the future. This is a matter to which we must return on Report.
5.45 p.m.
Lord Gridley: I have heard with interest the reply given by my noble friend the Minister to this rather long debate on pensions. I feel that my amendment has drawn the attention of your Lordships to all the provisions regarding pensions with which the National Bus Company has to comply in honouring pension schemes to its employees.
Constructive speeches have been made, but I am in a little doubt in withdrawing my amendment because I cannot see why it should in any way fetter the Government's future negotiations. It clearly lays down what are the existing legal requirements in obtaining satisfaction for pensioner entitlements. My noble friend said that he is prepared to meet the requirements in a way which can be dealt with on Report. If it is the feeling of the Committee that it would be right to consider an amendment on those lines at Report, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. I 72C and 172D not moved.]
Clause 48 agreed to.
Clauses 49 and 50 agreed to.
Lord Grimond Lord Grimond moved Amendment No. 172E:
After Clause 50, insert the following new clause:
("Employee acquisition of business.
. Before granting or withholding his consent to any scheme of disposal submitted to him for approval by either the National Bus Company or a controlled authority, the Secretary of State

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must first be satisfied that the employees concerned have had an opportunity to acquire the business for themselves.").
The noble Lord said: In the debate on an earlier amendment I said that I wanted to move this amendment but intended to be brief in doing so. I hope that the amendment speaks for itself. It lays upon the Secretary of State an obligation to see that employees are given an opportunity to acquire the successor businesses, whether they come from the National Bus Company or a controlled authority. In the debate on the earlier amendment I explained that I am much in favour of employee-owned and controlled companies, co-operatives, and so on.
This is a general amendment calling attention to the possibilities existing under this Bill for promoting ownership by employees, in all its forms. I also said earlier that my amendments are relevant to the question of whether or not your Lordships consider this is a good or a bad Bill, but my personal feelings are that it at least gives a chance for the setting up of small businesses and the promotion of competition. In that respect at any rate it is in my view much preferable to some of the earlier privatisation measures which merely turned public monopolies into private monopolies. It seems to me that the Secretary of State could well be given the power indicated in this amendment.
But whether the Committee decides that he should be or not, what I think is quite certain is that if the Government are to tell us that they are in favour of spreading ownership, in my view they must go very much further than some of the rather cosmetic allocations of small numbers of shares which have been a feature of earlier Bills, and they must also be in favour of encouraging small businesses. As the Bill stands I am afraid that, without some amendment and without the positive good will expressed not only in words but in actions by the Secretary of State, the excellent intentions which the Government express will never come to fruition. Therefore I think the amendment is perfectly clear and with those few words I beg to move.
Lord Sandford: Again, I should like to thank the noble Lord for introducing this subject and particularly this amendment, the purpose of which is, if anything, a little clearer than the earlier one which was linked with it, certainly to a layman like myself. I should like to stress that at any rate as regards the municipal bus operating authorities it will, so far as I can see, be very greatly in their interest, once they have formed the company required by this Bill, immediately and at the same time to consider not only privatising that company but also embarking on the possibility of employee acquisition. We want a lot of help from the Government in that area because it is a major undertaking to step from being a public service within a local authority to being an employee-owned private enterprise, and I should like further assurances from my noble friend on the Front Bench not only about the timing but also about the assistance and encouragement that we can expect from central Government in this field.
Lord Belstead: There is really nothing between the Government and the noble Lord, Lord Grimond, on the objective. As the noble Lord recorded in his remarks, the Government have made it clear that they believe in employee acquisition. In the White Paper of last July we made it clear that we would welcome bids from employees for the units in which they work. This is now reflected in Clause 48(4) of the Bill which places on the company a duty in carrying out their disposal programme to take such steps as may be practicable to secure that employees are afforded a reasonable opportunity for acquiring a controlling interest in the part of NBC in which they work.
But as regards putting this on the face of the Bill, perhaps I may first of all make clear to my noble friend Lord Sandford that in the case of the public transport companies to be created from the PTEs and the municipal bus undertakings, it is not our policy at this juncture to secure their privatisation. I felt from an earlier discussion that my noble friend felt that it was. We should not wish to stand in the way of that happening, particularly if the employees were disposed to make a bid, which of course they would be quite free to do.
Clause 71 contains the necessary powers to facilitate disposals, and that clause indeed requires my right honourable friend's consent. This provision was included to stop the possible misuse of the power of disposal rather than to secure that particular parties should be the beneficiaries of such a sale. I say that because the noble Lord, Lord Grimond, will readily appreciate that there is a difference in the relationships between my right honourable friend and the National Bus Company, on the one hand, because the Government are a 100 per cent. shareholder, and the public transport companies which are to be formed on the other, in which of course my right honourable friend will have no equity interest at all.
Really, in the last analysis the controlling authorities have to be free to exercise their control as shareholders over the affairs of the public transport companies in the same way as shareholders are in any other company. Although I hear my noble friend Lord Sandford saying that help from the Government is needed, I should have thought that this really would come very close to Government interference.
As for the public transport companies, the amendment would place the Secretary of State in the position of deciding how assets for which he has no responsibility ought to be sold, and this is a task which the Government consider should be more properly placed on the controlling authorities. It is not that I do not agree with the noble Lord, Lord Grimond, in the objective which he is trying to achieve, but I do not think that it can be done by Government interference—and I think it would be seen as interference.
Lord Oram: I should like just briefly to support the noble Lord, Lord Grimond, the more so since, when some years ago I was chairman of the Co-operative Development Agency, he was very helpful with the work of that agency on a number of occasions. I rise merely to point out to your Lordships that cooperative ownership of transport undertakings is a perfectly feasible and viable proposition. Perhaps I

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may give two examples. The first is that the buses in Israel are run by the workers in that undertaking. The second is that the gondoliers in Venice are run by a co-operative. So I feel very sure that with such variety of example it ought to be possible in this context for the workers to run co-operative undertakings in the transport industry.
Lord Sandford: May I at once say that of course I was not inviting central Government to interfere in the affairs of local authorities. My constant song is that they should do less of that. What I was saying was that they are in a position to encourage us, not the least by removing various impediments. What happens if we saddle the new municipal bus operating companies with unacceptable pension liabilities in respect of their pensioners? This is one of the ways in which the Government can help—and we shall come to that in a moment. When we get to the subsection of this Bill concerning municipal bus operators, I shall explain to the Committee how the various structures at present on offer in the Bill are all entirely unsatisfactory and that therefore the best option for the municipal bus companies is to privatise themselves. Another impediment in our way, which I alluded to at an earlier stage, was the impossibly tight timetable that we have set. It is impossibly tight as it is now, but if the municipal bus operating companies decide that their best option is to become fully privatised and at the same time they enable their employees to take up shares in the ownership of the company, then we need time to give effect to all these measures. It is that kind of encouragement for which I was asking.
Lord Grimond: I am obliged to the Minister for his response to my argument and also to the noble Lords, Lord Sandford and Lord Oram. Indeed, I remember well the noble Lord, Lord Oram's, distinguished chairmanship of the Co-operative Development Agency, and I rather look forward to visiting Venice with him, where no doubt we shall be well received by the gondoliers. But I was rather surprised at one remark made by the noble Lord the Minister, which was that it was not the Government's intention to interfere in transport. I understood that the whole of this Bill was an interference in transport. If it is not an interference in transport, it appears to me that we are wasting our time. But I suppose that the noble Lord the Minister meant that he did not want the Secretary of State to do any more than is his duty in regard to the National Bus Company.
As to what the noble Lord, Lord Sandford, said, it is not so much a question of the Minister taking only positive action, but of removing impediments to worker ownership. Indeed, I believe—and here again I think I have the support of the noble Lords, Lord Sandford and Lord Oram—that unless the Government remove the impediments to ownership and take a more positive line about this—I know full well that they are nominally in favour of worker ownership and that there are parts of this Bill which actually advocate it—it will not take place. Therefore if the Government are sincere about this matter, I beg them to look not necessarily at the proposals in this particular amendment, but at the general tenor of the Bill, and at least to remove some of the obstacles and
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persuade the Secretary of State to take up a very positive attitude where groups of employees are willing to take over a bus company.
I end by reiterating what has already been said by the noble Lord, Lord Oram. This is the kind of small business which is very suitable to the co-operative system. If the Government are sincere about spreading that type of ownership, this is a great opportunity for them. Nevertheless, in view of what the Government have said, I would, by leave, withdraw the
amendment.
Amendment, by leave, withdrawn.
Clause 51 agreed to.
[Amendment No. 173 not moved.]
Clause 52 agreed to.
6. p.m.
The Deputy Chairman of Committees (Lord Murton of Lindisfarne): Unless your Lordships wish to speak on any of these clauses, may I put the Question that Clauses 53 to 56 stand part of the
Bill?
Clauses 53 to 56 agreed to.
Clause 57 [Passenger Transport Areas, Authorities and Executives]:
Lord Teviot Lord Teviot moved Amendment No. 174:
Page 51, line 9, leave out ("consists") and insert ("is a body corporate with perpetual succession and a common seal consisting")
The noble Lord said: This is a small technical amendment. Clause 57(1) substitutes new subsections for subsections 9(1) to 9(4) of the Transport Act 1968. While most of the essential provisions have been reenacted in Clause 57, the Bill does not re-enact the provision in Section 9(1)(b) of the 1968 Act that the executive shall be a body corporate with perpetual succession and a common seal. That provision is obviously essential to enable the executive to carry out the functions provided for in the Bill together with its normal day-do-day business. I beg to move.
Lord Brabazon of Tara: I hope that I can answer my noble friend very briefly and to his satisfaction. I can assure your Lordships that those words in Section 9(1)(b) of the 1968 Act have already operated in the case of each PTE. That means that each executive is already a body corporate with perpetual succession and a common seal and will remain as such. The provision in the original version of the 1968 Act therefore has now no further function to perform. Its replacement will not alter the position of the existing PTEs. I hope that with those remarks my noble friend will be satisfied.
Lord Teviot: My noble friend sounds very reassuring. I shall read exactly what he says and be advised accordingly. I thank him very much indeed, and beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 174Z:
Page 51, line 34, at end insert—
(" (bb) in subsection (5), as it applies to Scotland, for the word "designated" there shall be substituted the words "passenger transport";")
The noble Lord said: With the leave of the Committee, I should also like to speak to Amendments Nos. 174Y and 174X.
Amendment No. 174Y: Page 51, line 36, leave out ("subsections") and insert ("subsection")
Amendment No. 174X: Page 52, line 16, leave out from beginning to ("and") in line 17.
These are technical amendments. They reinstate Section 9(5) of the Transport Act 1968 for Scotland. The provision which allows district councils to assist a PTE and vice versa was proposed to be repealed because district councils in Scotland no longer have transport functions. However, we have received representations from the Strathclyde PTE that under this power it enters into agreements with district councils for such matters as the cleaning and maintenance of bus shelters. We propose therefore to reinstate the provision but subject to a minor drafting change to alter the description of the area from "designated" to "passenger transport" as the Bill does elsewhere in the 1968 Act. I beg to move.
On Question, amendment agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 174Y:
[Printed above.]
On Question, amendment agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 174X:
[Printed above.]
On Question, amendment agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 174W:
Page 53, line 19, leave out second ("section") and insert ("sections").
The noble Lord said: With the leave of the Committee, I should like also to speak to Amendments Nos. 178D: 208CA and 211ZCA.
Amendment No. 178D: Page 54, line 31, at end insert—
("Consultation and publicity with respect to policies as to services.
.—(1) When considering from time to time the formulation of policies for the purposes of section 9A(3) of this Act, the Authority for a passenger transport area shall consult—

(a) with every Passenger Transport Authority, county council or regional council whose area may be affected by those policies; and

(b) either with persons operating public passenger transport services within their area or with organisations appearing to the council to be representative of such persons.

(2) As soon as practicable after any occasion when they formulate new or altered policies for those purposes, the Authority concerned shall publish a statement of all policies so formulated by them on that or any previous occasion which for the time being apply in relation to the performance by the Executive for their area of their duty to secure services under section 9A(1).
(3) When the Authority publish such a statement, they shall send a copy of the statement—

(a) to each Authority or council whom they were required to consult under subsection (1)(a) above; and

(b) to each of the persons or (as the case may be) organizations whom they consulted under subsection (1)(b) above; in relation to the formulation of their policies on the occasion in question.

(4) The Authority shall also—

(a) cause a copy of the statement last published by them under subsection (2) above to be made available for inspection (at all reasonable hours) at such places as they think fit; and

902

(b) give notice, by such means as they think expedient for bringing it to the attention of the public, as to the places at which a copy of that statement may be inspected." ").

Amendment No. 208CA: Clause 61, page 60, line 1, leave out subsection (4).
Amendment No. 211ZCA: After Clause 61, insert the following new clause:
("Consultation and publicity with respect to policies as to services.
.—(1) When considering from time to time the formulation of policies for the purposes of section 61(1)(b) or (2)(b) of this Act, any council to whom either of those provisions applies shall consult—

(a) with every Passenger Transport Authority, county council or regional or islands council whose area may be affected by those policies; and

(b) either with persons operating public passenger transport services within their area or with organisations appearing to the council to be representative of such persons;

and where the council's area is in England and Wales the council shall also consult with the councils of districts comprised in their area.
(2) As soon as practicable after any occasion when they formulate new or altered policies for those purposes, any such council shall publish a statement of all policies so formulated by them on that or any previous occasion which they propose for the time being to follow in the performance of their duty to secure services under section 61(1)(a) or (as the case may be) under section 61(2)(a).
(3) When any such council publish such a statement, they shall send a copy of the statement—

(a) to each Authority or council whom they were required to consult under subsection (1)(a) above; and

(b) to each of the persons or (as the case may be) organizations whom they consulted under subsection (1)(b) above;

in relation to the formulation of their policies on the occasion in question.
(4) The council shall also—

(a) cause a copy of the statement last published by them under subsection (2) above to be made available for inspection (at all reasonable hours) at such places as they think fit; and

(b) give notice, by such means as they think expedient for bringing it to the attention of the public, as to the places at which a copy of that statement may be inspected.")

I shall not detain your Lordships too long with these amendments. They are important and useful amendments which arise from undertakings given in another place, and I hope that they will find favour in your Lordships' Committee.
First, they requires PTAs, county councils, regional councils and in the case of Clause 61, islands councils before formulating their general policies for securing public passenger transport services to consult each other where those policies may affect each other's area. Clearly authorities' policies for subsidising services will have an important effect on neighbouring authorities, particularly in areas close to the boundaries of authorities, and I believe this new requirement will be welcomed by authorities and passengers alike.
Secondly, they require the authorities to publish a statement of their general policies for securing services. It was impressed upon my right honourable friend in another place that such a requirement would usefully improve accountability to the electorate. My right honourable friend agrees, although his natural concern was to avoid placing an unnecessary extra burden on local authorities. These amendments are not intended to require authorities to produce an annual report. The intention is that members of the public should always be able to see a statement of the authority's policies. I believe these amendments will increase accountability, which we all welcome, while keeping the burden on authorities to a minimum. I beg to move.
On Question, amendment agreed to.
[Amendment No. 174A not moved.]
Earl De La Warr Earl De La Warr moved Amendment No. 175:
Page 52, line 32, after first ("to") insert ("(a)").
The noble Earl said: In moving Amendment No. 175, I should like to speak also to Amendments Nos. 176 to 178, 180 to 183, 188 to 206, 212 to 217, 219C and 219D, 220 to 225, 230 to 238, 241 and 243 to 245.
Amendment No. 176: Page 52, line 34, after ("subsection;") insert ("and
(b) the manner in which the powers of the Executive under subsection (4) below are to be exercised in securing such services").
Amendment No. 177: Page 52, line 36, leave out ("duty under that subsection") and insert ("functions under those subsections").
Amendment No. 178: Page 52, line 43, leave out ("; but their power to do so is subject to") and insert—
("(4A) The functions of the Authority and the Executive in securing the provision of passenger transport services by agreements providing for service subsidies shall be exercised in accordance with").
Amendment No. 180: Schedule 3, page 130, leave out lines 2 to 8 and insert ("subsections (1)(a), (2) and (3) shall be omitted").
Amendment No. 181: Page 130, leave out line 10.
Amendment No. 182: Page 130, line 11, leave out ("(b)").
Amendment No. 183: Page 130, leave out lines 13 and 14.
Amendment No. 188: Clause 58, page 56, line 18, leave out subsection (8).
Amendment No. 189: Page 56, line 24, at end insert ("but subject as provided in section 71(2) of this Act").
Amendment No. 190: Page 56, line 27, leave out ("otherwise than in accordance with subsection (8) above").
Amendment No. 191: Clause 59, page 57, line 7, leave out subsections (5) and (6).
Amendment No. 192: Page 57, line 24, leave out ("; and").
Amendment No. 193: Page 57, leave out line 25.
Amendment No. 194: Page 57, line 29, leave out ("or have the powers under section 10(1)(i) and (viii)").
Amendment No. 195: Clause 60, page 57, line 38, leave out from ("the") to ("place") in line 40 and insert ("initial company has been formed by the Executive,").
Amendment No. 196: Page 57, line 41, leave out ("Authority") and insert ("Executive").
Amendment No. 197: Page 57, line 42, leave out ("Authority") and insert ("Executive").
Amendment No. 198: Page 58, line 15, leave out ("Authority") and insert ("Executive shall consult the Passenger Transport Authority for their area and").
Amendment No. 199: Page 58, line 24, after ("the") insert ("Executive and the").
Amendment No. 200: Page 58, line 28, after ("the") insert ("Executive and the").
Amendment No. 201: Page 58, line 32, leave out ("Authority") and insert ("Executive").
Amendment No. 202: Page 58, line 43, leave out ("Authority") and insert ("Executive").
Amendment No. 203: Page 58, line 44, leave out ("Authority") and insert ("Executive").
Amendment No. 204: Page 59, line 11, leave out ("Authority") and insert ("Executive").
Amendment No. 205: Page 59, line 16, leave out ("Authority") and insert ("Executive").
Amendment No. 206: Page 59, line 18, leave out ("Authority") and insert ("Executive").
Amendment No. 212: Clause 68, page 69, line 26, leave out from ("Executive") to end of line 27.
Amendment No. 213: Page 69, line 29, leave out ("Authority") and insert ("Executive").
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Amendment No. 214: Page 69, line 31, leave out ("Authority") and insert ("Executive").
Amendment No. 215: Page 70, line 5, leave out from ("Executive") to ("of") in line 6.
Amendment No. 216: Page 70, line 17, leave out paragraph (a).
Amendment No. 217: Page 70, line 21, leave out from ("Executive") to ("are") in line 22.
As amendments to Amendment No. 219B:
Amendment No. 219C: Clause 69, in line 2 of paragraph (a), leave out ("Authority") and insert ("Executive").
Amendment No. 219D: In line 4 of paragraph (a), leave out from ("within") to the end of the paragraph and insert ("their powers for that area").
Amendment No. 220: Page 71, line 26, leave out ("Passenger Transport Authority or").
Amendment No. 221: Clause 71, page 73, line 39, leave out ("a Passenger Transport Authority").
Amendment No. 222: Page 74, line 7, leave out ("Authority") and insert ("Executive").
Amendment No. 223: Page 74, line 10, leave out ("Authority") and insert ("Executive").
Amendment No. 224: Page 74, line 13, leave out ("Authority") and insert ("Executive").
Amendment No. 225: Page 74, line 23, leave out ("Authority") and insert ("Executive").
Amendment No. 230: Clause 74, page 76, line 31, at end insert—
("(3) In exercising or performing their functions under this Act, a Passenger Transport Authority shall have regard to any administrative, professional or technical services which may be provided for them by the Passenger Transport Executive for that area.").
Amendment No. 231: Clause 75, page 76, line 32, leave out ("Authority") and insert ("Executive").
Amendment No. 232: Page 77, line 3, leave out ("Authority") and insert ("Executive").
Amendment No. 233: Page 77, line 17, leave out ("Authority") and insert ("Executive").
Amendment No. 234: Page 77, line 20, leave out ("Authority") and insert ("Executive").
Amendment No. 235: Page 77, line 33, leave out ("Authority") and insert ("Executive").
Amendment No. 236: Page 77, line 42, leave out ("Authority") and insert ("Executive").
Amendment No. 237: Page 78, line 1, leave out ("Authority") and insert ("Executive").
Amendment No. 238: Clause 76, page 78, line 12, leave out ("Authority") and insert ("Executive").
Amendment No. 241: Clause 78, page 79, line 13, leave out ("Authority") and insert ("Executive").
Amendment No. 243: Clause 82, page 83, line 33, after ("Executives") insert ("or Passenger Transport Authorities in accordance with subsection (8) below").
Amendment No. 244: Page 83, line 36, at beginning insert ("subject to subsection (8)").
Amendment No. 245: Page 83, line 36, at end insert—
("(8) In any passenger transport area the Passenger Transport Authority shall be responsible for determining which (if any) tenders for agreements providing for service subsidies are accepted and, subject to any direction which may be given to the Executive by the Authority, the Passenger Transport Executive shall be responsible for issuing invitations to tender, advising the Authority on tenders submitted and the publication of statements and shall be party to all such agreements.").
My arithmetic may be wrong but I think that it is around 50! That may encourage some of your Lordships during the tedious hours that lie ahead of us.
I should like to make it quite clear at the start that this big series of amendments fully accepts the principles and the practice of the Government's policy of deregulation and everything that goes with it. There is absolutely no intention at all to question the main thrust of the Government's intentions either directly or indirectly.
The amendments deal with the ownership and operation of buses in the metropolitan counties alone. This is a subject of which many noble Lords will not have a great deal of knowledge, and so I must do a certain amount of preparatory explanation. First of all, let me say this. The amendments have two simple objects. They aim to leave control of bus operations with the professionals—that is, the transport executive—in each metropolitan county—and to give responsibility for subsidised services and making the decisions about them to the transport authority—that is, the political arm.
Let me enlarge on what the situation is now, and then go on to deal with what is proposed. The existing set-up in a metropolitan county is this. The transport authority is the metropolitan county council. It will shortly become the joint transport board and it will continue to be called the transport authority. The present function of the authority is to appoint the director-general and the members of the executive, to give general directions on policy, to approve the executive budget and to control to a large extent its fare structure.
The transport executive is a statutory body. It is staffed by professionals and its present function is, first of all and primarily, to own and operate the buses. That means that in each metropolitan county in some cases the executive is operating many thousands of buses—a very large operation indeed. In addition to owning the buses it may in some cases own ferry services and in one case underground services. That is the first function. The second function is operating agreements with other operators and with British Railways. Thirdly, they are required generally to oversee public transport. However, I repeat that their main object, their raison ďêtre, is to run the buses. Thus, if I may sum up, on the one hand one has the authority, a political body drawn from democratic elections, and, on the other hand, business people who are professional in their job of running buses but are a statutory body. That is the present set-up.
Under the new Bill, some remarkable and curious changes are to be made. First, the bus assets are to be formed into a Companies Act company. That is quite straightforward and no problem. As soon as that has been done by the executive, they are to transfer the shares in those assets to the authority—that is, to the political arm. It is the authority who will then run the buses because it owns them and because the Bill specifically forbids the executive so to do. The authority will in addition to that allocate funds to the executive to do the job which it has to do.
So the executive will be left with no buses, although they are staffed by professional busmen, and it will be asked to administer the tendering process for the subsidised services, the services that are to be subsidised following competitive tender and, in order that it can do this, to make the decisions that have to be made as to what services are socially necessary and therefore fit to receive subsidies. That seems to me to be an odd task to give to the officers of the executive. Social judgments are to be made about the services that are to be available to people, with the taxpayers' money and the ratepayers' money, whereas surely that
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is something that is more properly done by an elected authority.
6.15 p.m.
I simply do not understand the reasons for what I call this "looking glass" situation. As somebody who has been involved with buses for quite a long time but in the service industries for the whole of my business life, I have to say that it appears to me to be an arrangement which makes no business sense at all. Why remove the buses, the ownership and their operation from the profession? Why deny to the elected body, the authority, the right and the duty to spend the money that they receive from Government and from the ratepayers, and to decide how it shall be spent? I would suggest that that is what elected authorities are all about.
Is it surprising that in these amendments we have sought to reverse this situation? We have sought to leave the buses where they are and where they should be, in the hands of the executive, the professional, and to give the authority the job of operating the tendering process and to decide what services shall receive subsidies.
We have gone along one route with the Secretary of State. He wants to keep the staff of the authorities small, and he may be right on that. If the staff of the authority is small and there will be no one else to do the job, therefore we have suggested that it is for the executive to do the administrative work on behalf of the authority; but the authority must decide where its money is to be spent.
Many may think that this subject is obscure, and indeed esoteric. I assure them that this is not the case. We are talking about thousands of buses; we are talking about millions of passengers. I repeat that we are seeking no interference with the main thrust of the Bill. We are seeking only greater operational efficiency, and that means the best service to the travelling public. I very much hope that my noble friend, even though it may be difficult, will be able to give me some encouragement, even if only to the extent that he will say that these matters can be discussed in the light of this debate.
I shall make the assertion, but I will not enlarge on it, that there are a number of apparently false premises behind the method that the Secretary of State has chosen to go about this matter. With the help of professional advice, we badly want to feel that, as a result of what I am saying and what we are going to discuss now, further talks will follow. As I have said, I am well aware that this is a new subject. It is unfamiliar to many members of the Committee. I hope that your Lordships will feel, as a result of what I have said, that there is a need for further consultation between now and the time when we deal with this Bill at a later stage. I beg to move.
Lord Belstead: My noble friend has presented what I think can be described as an alternative configuration for the ownership of bus companies and the administration of tendering in the passenger transport areas in a selection of some 50 amendments to which he has spoken. My noble friend's plan would involve the passenger transport executives who are, as my noble friend said, the transport professionals, retaining

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control of the bus operations, although in company form and broken down into smaller units, and the diivision of the tendering function between the executives and the passenger transport authorities which, in England, will be joint boards made up of district councillors nominated by the councils to which they are elected.
My noble friend argues that the bus company is to be operating in a free commercial market and therefore requires professional control motivated to succeed in its business. The Government could not agree more. But the Government's proposals do not mean that the company will be deprived of such expertise. A considerable number of skilled managers with considerable experience of bus operations will transfer to the companies when they are formed.
The Bill provides for there to be at least a required minimum number of full-time employee directors on each company's board. The board will also have a number of directors who are not drawn from the company's management staff. Some of these may well be councillors nominated by the joint board to supervise the ratepayers' interest in the company. Those interests are considerable. These bus undertakings have been built up on the basis of local rate income over many years. The Government are convinced that it is the ratepayers, though their elected representatives, who should benefit directly from any profits generated by the companies and from the proceeds of any disposals.
My noble friend suggests that the joint boards may set objectives for their companies which are of a political nature rather than the companies needing to face the commercial reality of competition. But if the joint boards are minded to follow uncommercial policies, there are going to be important limits placed on them. The company must remain solvent as there is no automatic right to subsidy to make good any losses. Any rescue plan is subject to the agreement of my right honourable friend, who would not, as I am sure your Lordships will realise, agree to continuing commercial folly.
To remain solvent, the company has to be competitive. It must control its costs, organise its services to win passengers and bid effectively when invitations to tender for service subsidy are issued. I tend to think that controlling the company may bring a much greater sense of reality to the PTA than might prevail under my noble friend's alternative. I am sure that the company will have the expertise to succeed and that its success will quickly become an objective of the joint board.
My noble friend also spoke of the role of the PTE in connection with the whole tendering process. The PTEs are, as my noble friend stressed, the transport professionals. As such, they are well able to evaluate tenders from operators and to determine the most cost-effective way of meeting the objectives set for them by the joint board. Let us be clear that this is the split of responsibilities. The PTA, at least initially, has no expertise in these matters. It is a point of agreement between my noble friend and the Government that it would be undesirable for the joint board to develop its own bureaucracy with the sole aim of second-guessing the PTE's evaluations. It is surely better for the PTE to
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carry out the whole tendering process within the general policy framework which the PTA has set.
Within the framework provided for in the Bill the PTEs functions in relation to tendering will complement their other functions of negotiating subsidies for local rail services under Section 20 of the 1968 Act and taking measures to secure the coordination of commercial and subsidised services and the convenience of passengers. All these functions are to be formed within the general polices of the joint board, the PTE having clear duty to follow those policies.
What I have been trying to say on this very complicated string of amendments is that the Government, for their part, are convinced that the bus companies, formed from the restructuring of both PTE and municipal bus undertakings, should be controlled ultimately by the ratepayers' representatives. There is really no inconsistency of approach here between our proposals for the passenger transport areas and for other authorities. The function in relation to tendering, however, is one which, in our view, can best be performed by the PTEs and is consistent with their wider co-ordination role. The PTE must act in accordance with the PTA's general policies throughout. The joint boards themselves would not be equipped to decide upon tenders independent of PTE advice. There is nothing to be gained, we feel, by placing such a role upon them.
I hope that my noble friend will forgive me if I add one last thing. My noble friend really asked two questions: first, whether this had been considered, and, secondly, would it be possible to discuss it further? My noble friend, as he has taken great trouble to do before and throughout the Bill, warned me that his string of amendments would be put down. I was most grateful to my noble friend for mentioning the matters and for explaining the broad thrust of them. And, indeed, I consulted my right honourable friend.
I am sorry. Although this is an interesting string of amendments, we disagree with them fundamentally. They would change totally the functions of the PTAs and the PTEs under Part IV of the Bill. I hope therefore that my noble friend will not think that I am being unhelpful when I say that, for once, there is not anything to sit down and talk about in relation to these amendments. It is always a pleasure to meet my noble friend, but not on this string of amendments.
Lord Carmichael of Kelvingrove: The Minister has explained very reasonably his objections to the amendments and has tried to give an explanation of how he sees the Bill operating. The noble Lord was absolutely correct in saying that this is a complicated string of amendments. I believe, however, that the amendments are an attempt to examine a very complicated method of operating a bus service. I am in complete agreement on one issue at least with the noble Earl, Lord De La Warr There is nothing political in this. It is a business arrangement connected with running the transport service in an area.
Having had some connection with the setting up of the PTEs, I thought that they were a reasonable way of organising things. I cannot, for the life of me, understand why the same method has not been used

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and could not be used even now. The Minister said that he was concerned that at present the PTEs are in control of the buses although they are ultimately owned by the PTAs. The PTAs themselves will be broken up and become joint boards when the Local Government Bill goes through. The joint boards will then own the buses. The more that one gets into PTEs and PTAs the more confused one becomes. If the noble Lord the Minister spent as much time as I did last night looking over this stuff, he was probably rather punch-drunk himself at the end of it.
The position, so far as I can understand it, is that the buses owned by the authority, by the PTA, even though once removed (there are separate companies but the buses will actually be owned by the authority) will be competing with private operators for the ordinary, commercial services and for the uneconomic services, although, on the uneconomic services, the subsidy will be paid by the authority to the buses that it owns. To me this seems to be real grounds for confusion.
It will be the PTAs which will be paying any balance from their rate support or from the transport support funds to their own companies once removed for running services that are uneconomic as well as, on some occasions, doing it with private companies. To me this is a recipe for considerable confusion and there is a good possibility of political influence, depending on which particular group ran the local authority at the time or which group had the strongest representation on the joint boards.
6.30 p.m.
I am almost convinced that between now and the Report stage, or at some stage, another memorandum will come from some other section of the Department of Transport saying, "Perhaps we have it wrong and should look at it again". I can assure noble Lords that I have looked at the matter with a number of people who are experts on this particular subject and we do not always reach the same conclusion when we talk it over for any length of time. I believe that there is a strong possibility that that will happen when the Minister takes the matter away over the Summer Recess. I am sorry that he was quite so positive about it. I certainly accept that he will not agree to any of the amendments now, but I hope that over the recess period better counsel will prevail.
For the sake of simplification of the system, I do not see why he cannot return to the system that operated before, with the PTA being the authority that decides the wide political aims—and when I say "political", I mean the social desirability of a network in an area—and with the PTE, including the joint board company, finding the operators to operate this network. Then the PTE would need to return to the PTA and tell them that the cost would be so many million pounds. The PTA would perhaps say, "We are sorry, but we cannot meet that sort of cost, so you will need to trim it in certain places". I believe that that is a much better way to organise it than the way which the Minister has suggested. I hope that he will look at what has been said, particularly by his noble friend Lord De La Warr, who has great experience of the running of the bus industry.
Lord McIntosh of Haringey: I know that it is unusual for two speakers to rise to this Dispatch Box one after another, but I am emboldened to intervene by having been in this position; I do not know whether any other noble Lords have. I was a member of the Transport Committee of the Greater London Council at a time when London Transport had the relationship which the noble Earl, Lord De La Warr, described. I am perfectly familiar with the powers of an elected authority—in this case it would be a joint board—over London Transport and of the limitations of those powers. Perhaps I may give an example of the limitations of those powers. In those days the Greater London Council had the power to issue directives to London Transport, and indeed it had the duty to do so every year when it came to consider London Transport's budget proposals; it had to consider them in the light of its own transport policies and programmes, and to consider what financing from the ratepayers was required in order to meet the objectives agreed with Government for an integrated transport policy and, therefore, to agree a transport budget for public transport with London Transport.
The power of direction existed for other purposes, but in my experience the only occasion when the Greater London Council ever came close to issuing a direction to London Transport was when London Transport insisted on the name "Heathrow Central" for the new station which they were just about to open, and the GLC was convinced that that was the wrong name and that is should simply be called "Heathrow". Needless to say—I should not say this, should I?—it now turns out that London Transport was right and the GLC was wrong, because there has to be a separate station for Terminal 4.
The other use of the GLC's powers over London Transport was to nominate members to the executive, and when I was involved it was done with care and discretion, and there was never any conflict between the GLC and London Transport. It is only in the last couple of years that the GLC has sought to dominate the London Transport Executive by the appointment of part-time members. If I remember correctly, this policy was widely execrated by the Government in this House and in another place.
The thought that the Bill is now proposing a situation where the joint board is composed of politicians—these very local politicians who are so despised by the Government and whose powers have been taken away to such an extent by the newly passed Local Government Act—who will have 100 per cent. of the shares of the operating companies, which means that the only restriction on them is that they cannot order the directors to do anything illegal (they can do everything else), seems to me to be absolutely extraordinary.
I believe that the Government have turned the whole matter on its head. Surely the joint board should have what is proposed by the noble Earl; it should have responsibility for the disbursement of public funds, the financing of socially necessary services, and the allocation of public resources. Then it should have a general oversight of the PTEs and of the appointment of members, as has been the case in London and as will be the case in the shire counties. On the other hand, the PTEs comprise the bus men who ought to be

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owning the bus undertakings and they ought to be giving professional advice to the elected authorities about the tendering process and about the way in which the concessionary fares policy determined by the elected members is actually operated.
I have listened very carefully to the noble Lord, Lord Belstead, and he has not convinced me in any way that the Government have not stood this completely on its head: the politicans are left to run the buses and the bus men are left to take the political decisions. It says in the Bill that the PTEs have responsibility for the assessment of public transport requirements of the area. That is a political decision, not a decision for a bus company.
Lord Tordoff: If the noble Lord will give way, he is absolutely right, but that is not the way the Government see it. The noble Lord takes the same view as I take and as the noble Earl takes. But the view that the Government take is that the running of buses is not a political matter. They maintain that it is not a social matter, but that it is a managerial matter and is simply a matter of business. If you take the Government's view, of course you stand the matter on its head because they are standing on their head.
Lord McIntosh of Haringey: I am sorry to disagree with the noble Lord, but that is not the case. The noble Lord is suggesting that the Government are taking a business view of the matter, whereas in point of fact they are failing completely to take a business view and are failing to meet their own objectives. If they were wise, they would listen to the words of the noble Earl, because it is the noble Earl who has the experience and who, as the noble Lord, Lord Tordoff, properly says, is making the right distinction, between business and politics.
The amendment accepts—I do not—that the running of buses is to be primarily a commercial undertaking, separate from Government. That is included in the amendment. The amendment says that where public money is to be involved—and inevitably public money will be involved because there is a whole series of processes for the involvement of public money—it is the elected members who shall have the responsibility for ensuring that public money is properly allocated. The Bill does the exact reverse of that.
Earl De La Warr: I am extremely grateful to the noble Lord, Lord McIntosh, for the way in which he puts a punch into the points I made. I think he probably put the arguments a great deal clearer than I did. At least, I hope that noble Lords are clearer about these esoteric problems than they were when we started some 25 minutes ago.
I want to say two things. First, I want to comment on something that my noble friend Lord Belstead said. In practical terms, this is a crucial point. My noble friend said that we can assume that a lot of people will come over from the transport executive and run the buses for the authority. I think that the Government are depending a great deal too much upon that happening. If it does not happen they are going to find themselves in the cart. I have to tell them that I think it might well not happen.
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The members of the transport executive are not civil servants, they are members of a statutory body. They will not wish to see their pensions interfered with even to go on running buses, because they would then have to become municipal servants. For that reason alone, while I cannot aver that the assumption the Government have made is false, it is extremely risky, and there is a danger that instead of the highly-professional management you get now there may be a second-rate management as a result of this, and that would be a shame. This is the only new point that I should like to raise which arises out of what my noble friend said.
If I may comment in general terms, I am deeply disappointed in the answer that my noble friend gave. I did not find his arguments persuasive, and in part I did not find them persuasive because I thought they were so short as to verge on the border of being dismissive. Nevertheless, despite that, partly because I am an optimist and partly because I am extremely determined in this matter, we shall carry on with this affair until we get it put to rights.
It will be argued inside the Chamber and outside the Chamber; it will be argued in the regions and in Marsham Street. My noble friend may be certain that we shall be extremely busy between now and the autumn, because for sure we shall return to this at Report. With the permission of the Committee, I beg leave to withdraw this amendment, and we have got through 50.
Amendment, by leave, withdrawn.
[Amendments Nos. 176 to 178 not moved.]
6.45 p.m.
Lord Belstead Lord Belstead moved Amendment No. 178ZA:
Page 53, line 13, after ("public") insert ("including persons who are elderly or disabled)").
The noble Lord said: I beg to move Amendment No. 178ZA. With your Lordships' permission, I shall speak also to Amendments Nos. 178C, 210ZA and 211ZBA.
Amendment No. 178C: Page 53, line 30, at end insert—
("(6A) It shall be the duty both of the Authority and of the Executive for any passenger transport area, in exercising or performing any of their functions under the preceding provisions of this section, to have regard to the transport needs of members of the public who are elderly or disabled.").
Amendment No. 210ZA: Clause 61, page 60, line 36, after ("public") insert (" (including persons who are elderly or disabled) ").
Amendment No. 211ZBA: Page 61, line 15, after ("Act") insert (", other than services provided wholly or mainly to meet the needs of the members of the public who are elderly or disabled.").
Several of your Lordships emphasised in the debate we had last week on elderly and disabled travellers how important it is that the powers of local authorities should extend beyond subsidised services to commercial or, as they have sometimes been called, mainstream services. The Government recognise the need for this and the first two amendments, 178C and 178ZA, impose a duty on both the PTA and the PTE to have regard to the transport needs of members of the public who are elderly or disabled in securing both subsidised services and exercising their wider coordinating powers for subsidised and commercial services.
The first of our amendments also reminds authorities that the public, whose convenience is to be promoted under subsection (5)(b), includes members who are elderly or disabled. I would ask your Lordships to accept that these amendments impose quite a comprehensive obligation on authorities in the metropolitan areas.
As to Clause 61, our amendments apply to the power of non-metropolitan district councils to secure the provision of subsidised services under Clause 61(6), or again to the power of the non-metropolitan county councils and Scottish councils to co-ordinate the provision of all services, commercial as well as subsidised, under subsection (7). Our amendments cover all these duties and powers and would also secure, as in metropolitan areas, that attention is specifically drawn to the presence of elderly and disabled people among the public whose convenience authorities should be promoting.
I accept that when we come to the amendment in the name of my noble friend Lord Ingleby and other noble Lords, 211ZA, that amendment covers all the powers and duties which Clause 61 confers on the different authorities. I shall have to say, when we come to that amendment, that I am concerned about the specific requirement which the amendment would impose on operators to co-operate with authorities in the performance of their duties.
It is my hope that co-operation will exist, but we have before been through the difficulties that there are if one lays a duty on operators so far as concerns excluding some operators who would be exceedingly good at their job but perhaps unable to offer the facilities required in a particular amendment. I say no more about that because it is for the noble Viscount, Lord Ingleby, to decide whether he would wish to speak on the amendment I move now, in regard to his amendment.
The final Government amendment, 211ZBA, relates to services provided under permit under Clause 19 of the Bill, which is a point which has not yet been brought out in our debates. The Government appreciate that it is precisely mini-buses of the kind that would be provided under Clause 19 that would be used in many, if not most, cases to operate the Dial-a-Ride and other voluntary services now making such a welcome contribution to the mobility of elderly and disabled people.
This amendment recognises this by providing that the exclusion of these mini-bus services from the definition of public passenger transport services shall not apply in those cases where services are provided wholly or mainly to meet the needs of members of the public who are elderly or disabled. This means that it would be possible, if the amendment is agreed to, for authorities to provide support for these services through subsidies in a way that would not be possible unless the amendment were to be made. Those are the Government's amendments which flow from the first of the amendments I am moving which is Amendment No. 178ZA. I beg to move.
Viscount Ingleby: I should like to thank the Minister for the Government amendments to which he has just
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spoken. I am delighted to hear that this duty will apply to unsubsidised services as well as to the subsidised services. But I should like to make a few further remarks when we reach Amendment No. 211ZA.
Amendment No. 211ZA: Clause 61, page 60, line 43, at end insert—
("(8C) It shall be the duty of the authority in exercising its duties and powers under this section to have regard to the public transport requirements of the elderly and disabled in respect of—

(a) the services to be provided;

(b) the types of vehicles to be used; and

(c) the facilities to be provided at stops and terminals.

(8D) It shall be the duty of each operator of registered local services in the area to co-operate with the authority in performing its duty under subsection (8C) above.").
Lord Ennals: May I from these Benches say how much, in the light of the debate that took place on 10th July on this issue, we welcome the fact that the Minister has taken on board many of the concerns that were expressed from both sides of your Lordships' House. I welcome all of the amendments that he has proposed, especially the reference to services such as Dial-a-Ride which is described in Amendment No. 211ZBA, and also the fact that this relates to unsubsidised services as well as to subsidised services. This was one of our principal fears when we were debating this matter on 10th July.
I find it surprising, though it is not for the Minister to decide, why we are not discussing Amendment No. 211ZA at the same time. I know that we will reach it and then no doubt we shall want to argue the case strongly that there should not only be a duty upon PTAs and PTEs, the licensing authorities, but that there should be a duty upon operators as well. That amendment is not in this group so we shall have to wait until it comes. In the meantime, I warmly welcome the fact that the Minister has taken several steps forward both from the time when it was debated in another place and from the Bill as we saw it when we debated it on 10th July.
Lord Henderson of Brompton: I add my thanks to the noble Lord, Lord Belstead, both for the substance of the amendments and for bringing them forward at the Committee stage with great effort on his behalf and on behalf of the department. It has been extremely helpful that these are to be put into the Bill at this stage so that we can look at the Bill on Report as it has been amended now, to see whether any improvements need to be made.
Will the Minister confirm my understanding of what he said and what was obviously the understanding of the noble Viscount, Lord Ingleby, that the amendments that he is proposing apply both to subsidised and non-subsidised undertakings or operators?
Secondly, I think he referred obliquely to Amendment No. 211ZA—I gather that we are to have a separate debate on that—when he said that Amendment No. 211ZA was unacceptable if only because it specified the requirements, which is perhaps not the best thing to do. If one specifies requirements one might inadverently leave out other requirements which have not been specifically mentioned. At this stage I think that paragraphs (a), (b) and (c) of Amendment No. 211ZA were put in only in response to the noble Lord, Lord Belstead, who said in reply to a previous amendment that it was hard to see what the

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amendment was getting at because it was not specifically specific. One cannot win! However, that is mere detail and when we came to debate Amendment No. 211ZA perhaps we can address ourselves particuarly to the duty of the operators, which some of us believe ought to be mentioned in the Bill together with one or two other matters.
At this stage I should merely like to thank the noble Lord, Lord Belstead, for the extremely constructive start to the provisions for the elderly and the disabled.
Earl Attlee: On behalf of these Benches, we too thank the Minister for these amendments. Many people will be relieved especially concerning the point that this will cover subsidised and normal services.
Baroness Fisher of Rednal: While one welcomes the points that the Minister has made, one must read the amendment:
"it shall be the duty of any council".
Obviously, the duty of any council will be governed by the amount of finance that they will be able to put into the scheme to subsidise the needs of the elderly and the disabled. While I welcome what the Minister has said, and though it sounds nice, I am a little worried lest it will not go all the way to cater for all the needs of the elderly and the disabled that one might expect.
Lord Belstead: I think we should be dealing with local government finance with the question raised by the noble Baroness, Lady Fisher. However, I should reply to the noble Lord, Lord Henderson. Yes, the Government amendments apply both to subsidised and to commercially-provided services, but they apply in different ways in the sense that they impose a duty with regard to the needs of the elderly and disabled people when authorities are carrying out their duties in exercising their powers to secure the provision of subsidised services and their power to co-ordinate all services, both commercial and subsidised. There is a duty. However, although the power to co-ordinate covers all services, both commercial or subsidised, this leaves us in the position which I endeavoured to explain a week ago, which is that local authorities, be they PTEs or non-metropolitan county councils, only have power under these amendments to stipulate that an operator shall provide certain facilities on subsidised services. The power to stipulate that an operator shall provide certain facilities does not, under the amendments to which I have spoken, extend to commercial services.
Lord Ennals: It seems to me, from his last sentence, that the Minister almost used the words of Amendment No. 211ZA, subsection (8D) which reads:
"It shall be the duty of each operator of registered local services in the area to co-operate with the authority in performing its duty under subsection (8C) above."
I know that the Minister has doubts about "(8C) above" and those matters we shall deal with, but did he not say that the operator shall have the responsibility of co-operating with the licensing authority, PTA or PTE, in terms of making provision as required by the licensing authority? In that case, is he not accepting the principle that lies behind an amendment shortly to be debated?
Lord Belstead: I think the answer is, no, because we still have to debate Amendment No. 211ZA tabled by the noble Viscount, Lord Ingleby. But this lays a duty on the local authority to have regard to various things connected with elderly and disabled people in providing services, and then lays a duty on each operator of local services in the area to co-operate, be those services subsidised or commercial. Therein lies the difference.
On Question, amendment agreed to.
The Earl of Caithness: I think this is an opportune moment to move that the House do now resume. In moving that Motion I confirm that we shall not come back to consider this matter
further until 8 o'clock.
Moved accordingly, and, on Question, Motion ageeed to.
House resumed.

Town and Country Planning (Fees for Applications and Deemed Applications) (Amendment) Regulations 1985
7. p.m.
Lord Skelmersdale Lord Skelmersdale rose to move, That the draft regulations laid before the House on 25th June be approved. [27th Report from the Joint Committee.]
The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. I understand that it will be convenient to the House to discuss the Scottish Motion at the same time.
These two sets of amending regulations which were laid before the House on 25th June are laid under powers contained in Section 87 of the Local Government, Planning and Land Act 1980. They basically provide for a general increase in the level of fees prescribed in the Town and Country Planning (Fees for Applications and Deemed Applications) Regulations 1983, and the corresponding Scottish regulations. These latter regulations, which came into operation on 1st December 1983, consolidated with revisions the original regulations of April 1981, as amended in June 1982. We have again taken the opportunity to make a small number of (mostly minor) changes to the fees scheme itself, in the light of our further experience of its operation.
It may be for the convenience of the House if, before I go on to explain the proposed changes, I give a brief outline of the way the fees scheme works. Whenever it is necessary for a specific application to be made to the local planning authority for planning permission to carry out development—usually either for the construction of buildings, or the making of a material change in the use of the land—the applicant is required to pay a fee to the authority (normally the district council) when submitting his planning application. The fee must be as prescribed by the regulations, and it cannot be waived or (except in defined circumstances) refunded, though provision is made for certain concessions in circumstances where a requirement to pay the full normal fee, or any fee at all, would be unreasonable.
Subject to this, applications are charged according to the nature of the development proposed, and its size where that is relevant. The fees scheme is designed so that, first, there is a fair balance in the charge made between the specified categories of development in the regulations; secondly, that the fees charged should reflect in broad terms similar proportions of the local planning authority's likely handling costs; thirdly, that fees should not be so high as to discourage sensible planning applications; and, fourthly, that the scheme should be easily understood and, so far as is practicable, be free of areas of dispute.
When the fees scheme was originally set up in 1981 it was thought that the scale of fees prescribed would lead to an overall recovery of about 60 per cent. of local planning authorities' development control costs. In the event, however, the actual level of recovery has come out at only around 40 per cent. We have kept this matter under review in the light of the wider need to control public expenditure, and we have now come to the view that a fair balance would best be obtained if we were to aim for a 50 per cent. recovery. However, in order to avoid what would otherwise be a substantial "once-and-for-all" increase at this time, we propose to proceed by annual stages. On this present occasion therefore we propose an increase of approximately 12½ per cent. to apply across the whole range of the presently prescribed scale of fees. In so far as this increase will more than cover the effects of inflation since the present scales came into operation on 1st December 1983 there will be a contribution—probably of the order of 2½ per cent.—towards the projected higher level of costs recovery. On the question of what further element of costs recovery should be included in the next uprating of the scale of fees, we will put proposals before the House in 1986.
My Lords, I turn now to the other changes proposed in the regulations. The House will recall that the extensive changes made at the time of the 1983 regulations reflected the outcome of a thorough review of the working of the fees scheme up to that time. As a result, the regulations reached a level of refinement and sophistication that generally points to the need for a long clear run, with further changes being kept down to a minimum.
Consequently, we propose that there should be only one change of substance to the fees scheme itself at the present time. This change concerns the fee payable for an application to continue an existing use, or to retain an existing building, without complying with a condition attached to an earlier permission (including one which requires cessation of the use, or the removal of the building, at the end of a specified period). At the present time such applications are charged a fee of £47—which would rise to £53 on the basis of the general increase now proposed. We have, however, received a number of representations that this requirement can operate harshly. Most of the concern has been directed at those cases where applications need to be made for the renewal of planning permissions granted for short periods. Examples might be the continued stationing of a caravan on land, or the retention of a garage constructed in temporary materials.
We are satisfied that the fee requirement as it stands can result in genuine cases of hardship, and we have therefore decided that such applications should in future attract a fee of only half the normal rate: which under the new arrangements, will be £27.
We remain of the view that, even after taking into account the increases proposed in the amending regulations before the House, and the longer-term aim of moving towards a 50 per cent. development-control costs-recovery objective, fees for planning applications remain modest—in some instances virtually negligible—in relation to the overall costs of the development that is the subject of the application.
Finally, my Lords, I need to say a word about Scotland. The basic Scottish fees regulations are in most respects the same as those for England and Wales, although they incorporate some very minor differences to reflect different circumstances north of the Border. The relevant amending regulations before the House provide for a similar general 12½ per cent. increase in fees for Scotland, and also include the concession for conditional permissions to which I have referred in the English and Welsh amending regulations. I commend the amending regulations to your Lordships.
Moved, That the draft regulations laid before the House on 25th June be approved. [27th Report from the Joint Committee.]—(Lord Skelmersdale.)
Lord Graham of Edmonton: My Lords, the House is grateful to the Minister, both for the brevity of his speech and also for its clarity. In effect, this exercise is about cutting public expenditure and any other words that the Minister or his colleagues might care to use would be a sham because, as the Minister points out, at the moment the balance of moneys received by councils for planning applications, which it was hoped by the Government would be 60 per cent. of the costs of the planning control departments, has resulted in about 40 per cent. of those costs; and now they want to increase that to 50 per cent.
My comments will be in the form of a series of questions, but if in fact there is to be an increase of the costs gained from the public of 10 per cent. (that is, from 40 per cent. to 50 per cent.) would the Minister care to tell the House what consequence or effect this has on the level of the rate support grant? I appreciate that how a council manages its affairs is to some extent up to the council itself, but the extent to which the Government take "into account" various things needs to be commented on.
The Minister told us about 60 per cent. and about 40 per cent. and about the £47 and the £53. Would the Minister care to tell us the global sum which it is estimated or known is actually to be clawed back from the public under these particular schemes?—so that, in effect, by comparison with 1980, that will be the additional sum which the public are paying. The Minister is aware that on this side of the House—and this applies to both Houses; I served on the 1980 Bill and the Minister and I have talked about these matters before—we are not in favour of the principle of charging; but this is neither the time, place nor opportunity to make that particular argument. Nevertheless, we need to make sure that what the Minister is proposing is reasonable.

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The Minister talks in terms of a fair balance. The Minister says that the fair balance that the Government are looking for is to reduce public expenditure as much as possible by one means or another. I wonder whether the noble Lord would care to tell us, in view of the announcements that were made earlier this week by the noble Lord, Lord Young, in introducing Lifting the Burden, when great play was made about the easements in planning controls, whether any assessment has been made about the impact of those particular regulations on the planning control system. It must have a bearing. The planning department will need to have either more or less staff to look after a greater or less volume of work that will go through the department arising from Lifting the Burden.
On the other hand, if the cost of the department is the raison d;être and it needs to be reduced, does it mean that if in fact there is less work for the planning officers to do because the burdens have been lifted and there is no planning control, the cost to those who need planning applications will be increased? In other words, are the Government in the business, regardless of the number of planning applications, of trying to reduce the cost of the department?
Is the Minister able to tell the House what has happened to the size of the planning departments since 1980? The "Manpower Watch" exercise of the Government is well understood, and so is the pressure on the different departments of all councils to reduce the size of manpower. Can the Minister tell us the extent to which there have been reductions in the size of the personnel in planning departments who look after the kind of work which is covered by these regulations? If the Minister is able to tell us there has been no reduction, then the Government have failed in their exercise. On the other hand, if there has been reduction, then I think we ought to know.
Also, could the Minister tell us this evening what has been the effect of the Government's plans in respect of approved inspectors? The Minister is well aware of the exchanges that took place two or three years ago in this Chamber over the Housing and Building Control Regulations, where in effect there was to be a reduction in the number of building inspectors employed by councils under privatisation in the building inspector sector.
I realise that planning applications still need to be made and fees still need to be paid, but I should like to take this opportunity to ask the Minister whether he can tell us if the "approved inspector" syndrome is now working—and, of course, it should be working, as it concerns legislation which is now more than a year old. Could the Minister tell us what impact that has had upon the quality and quantity of the work going through?
The Minister talked in terms of 12½ per cent. (which is a broad uplift) being more than required to meet the rate of inflation. If one looks at the last increase, which was about 14 months ago, one does not require 12½ per cent. The Minister then tells us significantly that he will be coming back again next year. Can he say why he was not satisfied with 10 per cent. this year, leaving a greater sum until later? I know that everybody who makes a planning application, if it is a choice of getting
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it or not, will pay for it; and so I am not talking about paying in order to get a planning application. However, the Minister must realise that all these marginal additional costs—for planning, for approval, for building, for labour and for materials—all add to the cost of housing. I think that perhaps it would be helpful to the House if the Minister could answer some of the questions I have put to him.
So far as the official Opposition is concerned, we shall of course do nothing to oppose the passage of these regulations except to say that this is a highly unsatisfactory way of encouraging the public to use a proper planning system of control which has stood the test of time over many years. This is simply another gimmick used by the Government to reduce the cost of ensuring that the environment, and the built environment particularly, is dealt with in a proper manner. After all, it is the public itself which insists upon these regulations, quite properly, and the public as a whole ought to pay.
7.15 p.m.
The Earl of Kinnoull: My Lords, I must apologise to my noble friend because I was not in the Chamber when he moved these regulations. However, I was glad to hear that he moved them briefly and very distinctly, and I would congratulate him on that. I was going to agree with much of what the noble Lord, Lord Graham, said until almost his very last sentence, when I believe he said that the public were suffering, as I understood it, and I believe that his party is committed to abolishing the fees. Perhaps the noble Lord will correct me if I am wrong.
Lord Graham of Edmonton: No, my Lords. Unless I am advised otherwise, I do not think we are on record as saying that we shall abolish them. I stand to be corrected, of course. We opposed the introduction of them, but, as with most oppositions, there are certain things one makes commitments about which are matters of great principle. This is important, but it is not in that category; and what my party does after gaining power—which, of course, we shall do after the next election—remains to be seen.
The Earl of Kinnoull: My Lords, I am glad to be corrected. I thought that the noble Lord was criticising the whole principle of charges and was therefore implying that his party might take a different view should they form a Government. I do not know how far my noble friend's brief goes, but I should like to ask a few questions because this is an opportunity to discuss an important side of planning and, indeed, the whole ambit of town and country planning. I should like to ask my noble friend, in regard to these regulations, whether his department has received a large postbag of complaints on the level of charges. Also, has there been any case made out that the charges are set too high? I have never met that myself, quite frankly, and I welcome the realism of these regulations in the reductions they make, because clearly they have arisen from the experience of having introduced the charges; and that is obviously very helpful.
I should like also to ask my noble friend what are the latest figures he has on the numbers of applications made over the last three years. It would be very

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interesting to see what those figures are. May I also ask him what currently are the systems of delay in the whole system of planning? That is a very important aspect. I hope that he can reply to these points. I have not given him any warning, and basically it is of course unfair to ask him about these things; but if he is able to give some figures I am sure the House would be very grateful to him.
Lord Skelmersdale: My Lords, I am most grateful to both the noble Lord, Lord Graham, and my noble friend Lord Kinnoull for expressing approval of these regulations. Because they are specifically about paying for a service, I regret that I shall be unable to answer some of the questions that have been raised by them this evening, but I undertake to write to them on the wider points that they have raised.
I do not really want to go back to the arguments of the 1980 Act, which of course is the parent of these regulations, because we went through that stage some four years ago. But I think it would be appropriate to wish the noble Lord, Lord Graham, many happy returns of the day—the day being 10th November 1983 when on last year's regulations he made his maiden speech from the Front Bench opposite and I was able to respond to him on that occasion.
The subject of these regulations—namely, the paying of fees for planning applications—is of course part of the Government's drive to make costs be borne by those people who use particular services, and we do not see any reason why the general ratepayer, or indeed the taxpayer, should necessarily pay development costs of this kind. It is therefore perfectly reasonable that the applicant for planning permission should be asked to pay a proportion—
Lord Graham of Edmonton: My Lords, that is a fair point, if one looks at the purpose of the planning application as being to give the applicant a benefit. But we take the view that the whole community is the beneficiary of a planning system. In other words, it is the public who get the benefit of ensuring that development is controlled.
Lord Skelmersdale: My Lords, we obviously differ. If the Government were seeking to get 100 per cent. of the costs from the applicant, then it would be clearly wrong. But since we are seeking to have a proportion from both the applicant and general public expenditure, we have to decide what that proportion should be. My right honourable friend has come to the conclusion that what we should aim at is the 50 to 60 per cent. range, and we have not yet reached that. As I said in my opening speech, we are at 40 per cent.
The noble Lord, Lord Graham, asked what the fee income to be recovered is expected to be in the next year, to which the answer is £32 million. This will be from planning applications of, I expect, the order of 430,000. The figures for which my noble friend Lord Kinnoull asked earlier are: at 1980, 527,000; at 1981, 450,000; at 1982, 399,000; at 1983, 429,000, and at 1984, 426,000. So in the last couple of years they have been broadly static. I made the point earlier that the real increase in these fees was about 2½ per cent. The fees were last raised 19 months ago and the increase in inflation over the 19 months is of the order of 10 per
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cent. Therefore, if any progress towards a 50 per cent. cost recovery is to be achieved, one must go slightly over that and I should have thought that 24 per cent. was reasonable.
The noble Lord, Lord Graham, asked about the possible effects on the rate support grant. As the noble Lord will know, the overall amount of rate support grant is a finite sum. For all authorities, RSG is calculated using criteria applicable to classes of authorities and these criteria include a weighting for planning. But with this very small extra amount of money I would rather doubt, certainly in this year, that there would be any effect at all on the rate support grant. If I am wrong, I shall of course write to the noble Lord.
As regards the subject of planning delays, if I remember rightly these are published roughly quarterly. I shall willingly send the latest statistics to my noble friend. But the determinations are fairly speedy and have improved over the last couple of years, I am glad to say.
Lord Graham of Edmonton: My Lords, I wonder whether the Minister is in a position to relate whether the planning application fee system has anything to do with the speeding-up of the backlog. For instance, I can well imagine that if people are paying for something they will be just a little more impatient and perhaps a little more aggressive. I can also see that a planning department, which before had simply processed applications as fast as it could, is now under pressure from people who can say, "I have paid you £53" or "I have paid you £120". Is the Minister in a position to say whether the fee system has a bearing on the speed with which the planning applications are processed?
Lord Skelmersdale: No, my Lords. I am afraid that the department has done no research into that, nor, to the best of my knowledge, has it asked local authorities for their opinion on the situation. But one reason for the speeding-up of the time taken to determine planning cases is that more and more people, since they have to pay a fee, are first going along to the planning officer and getting an off-the-cuff opinion as to whether something is likely to succeed in a particular form or whether it is desirable to change it at the outset.
My noble friend Lord Kinnoull asked whether the department had received a large post-bag of complaints since the introduction of planning fees. The answer to that is a straight, no. Nor have we had any complaints about either this order or the order to which the noble Lord, Lord Graham, and I spoke on 10th November 1983.
The noble Lord, Lord Graham, asked about deregulation as it applies to the White Paper Lifting the Burden. So far as these regulations are concerned, I do not see that there will be much effect on the planning system. But, again, for the more detailed questions perhaps I may write to the noble Lord, and I shall include in that letter the whole subject of approved inspectors, about which he also asked. I feel that I have answered most of the questions to which I am able to reply and which pertain directly to these regulations.
On Question, Motion agreed to.

Town and Country Planning (Fees for Applications and Deemed Applications) (Scotland) Amendment Regulations 1985
Lord Skelmersdale: My Lords, I beg to move.
Moved, That the draft regulations laid before the House on 25th June be approved. [27th Report from the Joint Committee.]—(Lord Skelmersdale.)
On Question, Motion agreed to.
Baroness Cox: My Lords, I beg to move that the House do now adjourn during pleasure until 8 o'clock.
Moved accordingly, and, on Question, Motion agreed to.
[The Sitting was suspended from 7.27 to 8 p.m.]

Transport Bill
House again in Committee on Clause 57.
Lord Tordoff Lord Tordoff moved Amendment No. 178A:
Page 53, line 28, at beginning insert (" (i) ").
The noble Lord said: It may be for the convenience of the Committee if we also discuss Amendments Nos. 178B, 208Z, 208AA and 242.
Amendment No. 178B: Page 53, line 30, at end insert—("; and
(ii) to consult persons representing the users of passenger transport services within their area.").
Amendment No. 208Z: Clause 61, page 59, line 31, at end insert—("; and
(c) to consult persons representing the users of passenger transport services within their area.").
Amendment No. 208AA: Page 59, line 41, at end insert—("; and
(c) to consult persons representing the users of passenger transport services within their area.").
Amendment No. 242:
After Clause 80 insert the following new clause
("Public Transport Consultative Committees.
.—(1) It shall be the duty of each Passenger Transport Authority, county council, regional and islands council to establish, not later than six months after the vesting date, a committee to be known as the public transport consultative committee (hereafter "the committee").
(2) The Passenger Transport Authority (or as the case may be) the county council, regional or islands council shall provide that—

(a) members of the committee appointed by the Passenger Transport Authority (or as the case may be) county council, regional or islands council shall not exceed one-sixth of the membership of the committee; and

(b) members of the committee appointed by district councils shall be equal in number to members appointed by voluntary organisations.

(3) It shall be the duty of the Passenger Transport Authority (or as the case may be) county council, regional or islands council to provide such staff, office and other accommodation and expenses as they consider necessary to enable the committee to perform its functions.
(4) It shall be the duty of the Passenger Transport Authority (or as the case may be) county council, regional or islands council to provide the committee with such information as the committee may reasonably require in order to carry out its duties.
(5) It shall be the duty of the committee to consider—

(i) any matter affecting the supply and use of road passenger transport services, ferry services and rail services (other than those provided by British Rail) and to make recommendations to the Secretary of State or the Traffic Commissioners or the Passenger Transport Authority or (as the case may be) county council, regional or islands council; and

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(ii) any matter that has been the subject of representations (other than representations appearing to the committee to be frivolous) made to the committee by or on behalf of users of any services or facilities provided within their area; and

(iii) any matter referred to the committee by the Secretary of State or the Traffic Commissioners or by the Passenger Transport Authority or (as the case may be) county council, regional or islands council; and

(iv) any matter which otherwise appears to the committee to be a matter to which the consideration ought to be given.

(6) Copies of the minutes, conclusions and recommendations of the committee with respect to any matter shall be sent:

(a) in the case of any matter referred to the committee by the Secretary of State, to the Secretary of State;

(b) in the case of any other matter to the Passenger Transport Authority or the county council or the regional or islands council; and

(c) otherwise as the committee may deem appropriate.

(7) Where the Secretary of State or the Traffic Commissioners or the Passenger Transport Authority or (as the case may be) the county council or regional or islands council receives a recommendation under subsection (6) above he or they may give such directions as he or they think fit with respect to matters dealt with in the recommendation; but before giving any such direction he or they shall consult with such authorities as he or they think fit.
(8) On reaching a decision with respect to matters dealt with under subsection (6) above the Secretary of State or the Traffic Commissioners or the Passenger Transport Authority or (as the case may be) the county council or regional or islands council shall give notice in writing of that decision to the committee.
(9) The committee shall elect its Chairman and Vice Chairman from amongst the members.
(10) The committee may co-opt persons deemed by the committee to be knowledgeable in transport affairs within its area.
(11) The committee may appoint sub-committees to exercise, subject to such restrictions and conditions as the commitee thinks fit, some, but not all, of the committee's functions and such subcommittees may consist wholly or partly of persons who are members of the committee.
(12) Meetings of the committee, which shall be open to the public and the press, shall take place at least once 3in every three months, the time and place of meetings to be publicly notified.
(13) The committee shall make an annual report which shall be published.").
These amendments are not consequential upon each other, but they all touch on the question of consumer consultation. Therefore, although Amendment No. 242 is not directly related to the other four amendments, I thought that it might be for the convenience of the Committee if we discussed this whole area together. I should like to say a few words about Amendment No. 242, because it is the major amendment, and then come back to the others in a minute or two. These amendments, in particular Amendment No. 242, have the support of the National Consumer Council, the National Federation of Bus Users, the National Association of Local Councils, the National Federation of Women's Institutes, the National Association of Passenger Transport Users, Transport 2000 and Friends of the Earth. I am sure that the Government will see that as being an irresistible combination of consumers.
One important omission from the Bill is any provision for bus users to express their views through statutory consultative bodies; that is to say, ones that can officially represent their views to both the transport authorities and the providers of the services. Where consumer consultative committees have been set up on a pro tem basis they have worked well. East Sussex is one of the few shire counties to have them. We believe that bus users have benefited from that. The metropolitan counties have 10 years of experience of transport advisory committees working quite successfully with PTAs and PTEs. Drawing on this

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experience, the new clause in Amendment No. 242 meets this need for statutory consumer representation.
The clause requires the responsible transport authority to establish a public transport consultative committee. This committee would have the power to make recommendations to the Secretary of State, the transport authority or other appropriate bodies. Members would be appointed by the transport authority, district councils, local consumer groups and other organisations with an interest in transport matters. Such committees would enable public transport users to register complaints about all aspects of service provision, to suggest improvements, and to help influence local transport policies. There has been criticism from the Government Back-Benches during the earlier stages of the Bill that many of the speeches and many of the amendments were too producer oriented. I am glad to redress that balance with this series of amendments because quite clearly the passenger—who in this case is the consumer—is the most important factor in the whole equation of improving bus services, if that is what we are succeeding in doing; we are certainly trying to do it, but whether we succeed is a different matter.
The Government have so far implied in another place that user representation of this kind will be unnecessary in a deregulated environment. They argue that market forces will ensure that the users' needs are met. That seems to me to be a too simplistic view of the situation in what is not a perfect market. It represents a negative attitude to consumer representation which I believe is unacceptable in principle.
But there are also important practical arguments for these proposals. Public transport consultative committees are necessary because the Bill envisages enormous changes in public transport service provisions. Changes of this magnitude to existing public services, particularly those with a 50-year old history, need systematic and authoritative monitoring both before and after the event. Public transport is not like general merchandise on the supermarket shelf. This comparison is misleading. It is not possible for consumer preferences to be signalled directly through the market mechanism. Some attitudes will of course be directed through the market mechanism, particularly in those areas where the bus services are profitable. In the centres of cities choice will much more easily establish the demands of the customers, but in remote areas this is far from being true.
The existing transport users consultative committees deal with rail transport only, except in London where the bus users are included, but provincial bus users deserve no less support. The National Consumer Congress, which brings together delegates from more than 100 consumer groups, passed a resolution on bus services in March of this year. They reiterated their belief in the need for a statutory system of consumer representation covering all sectors of public transport. If the aim of the Bill is to benefit passengers, which is what the Government claim, I believe that consultative committees of this kind working alongside each passenger authority would help everybody to know quickly, accurately and systematically—"systematically" is the word to underline—how well the new system is working.
There is a danger in allowing merely the market mechanism to determine what is going to happen. One gets into a position of anecdotal evidence only when really rather more professional and scientific evidence is required by the passenger undertakings in order for them to determine how well they are meeting the needs. Therefore we certainly urge the Government to adopt a more positive approach to this issue.
Perhaps I may back track now to the shorter amendments, Amendments Nos. 178A, 178B, 208Z and 208AA. These amendments are so worded as to leave open the matter of which representatives we are talking about. In other words, it will be for the authorities and the executives concerned to decide what would be appropriate representatives. There are a number of precedents in legislation and draft legislation for employing this formula or variations of it. The Consumer Safety Act 1978, the Weights and Measures Act 1973 and the Trade Descriptions Act 1968 are worded in a similar way.
If Amendment No. 242, which provides for the establishment of consultative committees, were to be agreed to by the Government, it would be much more straightforward. But as I say, these amendments are complementary. In some ways they may be mutually exclusive, but, nevertheless, they touch on this whole area of consumer consultation which we believe needs to be regularised in a way which is not at present provided for in the Bill.
I do not intend to press this amendment to a Division, as your Lordships will understand, but it would be interesting to know the Government's most recent thoughts on this matter to see whether they can go some way towards meeting the requirements of a wide number of organisations in the country which are extremely worried about formal consultation procedures, and who are not happy about relying merely on market forces to enable the producers—in this case, the bus companies—to make sure that their needs are met.
On an individual or anecdotal basis, as I have said before, the needs of users may be met; but on a network or wider basis of knowing what the market really needs from a consumer's point of view, I believe that a structure such as that proposed is necessary and that it would be wise of the Government to go some way down that road. I beg to move.
Lord Mottistone: I understand precisely what the noble Lord has been saying, but what worries me are the words:
"persons representing the users".
The whole object of the Bill is to encourage more people to use the buses because usage has sunk to a very low level.
We really want to make sure that people who might use the buses are consulted, rather than those who will never use the buses. The point of the exercise is to find out where the demand lies in order to expand the bus services. I am very serious about this. It could be done by having a proper inquiry—one of those silly things where they ask people how they are going to vote. The information has to be found out in that kind of way. But one has to consult the people who are not using the buses just as much as the people who are. I am not sure

927
that having a formal body of people representing the users will give the right answers or that the proposed addition to the Bill will help. We want to get at the non-users rather than at the users.
Lord McIntosh of Haringey: I forgive the noble Lord, Lord Mottistone, his insult to the survey and research trade, in which I have earned a living for many years. In fact, his contribution was constructive. I support the noble Lord, Lord Tordoff. He makes a very valid point. Whether or not we approve of the detailed provisions of this Bill, all thinking is to persuade more people to use public transport—as has been achieved in London by better marketing and better services without privatisation. I say that as an aside.
I realise that the Government are in some difficulty about nationalised industry consumer councils. There have been attempts in your Lordships' House to press the Government to come to a conclusion in respect of their policy about such councils. Those attempts have always failed because the Government are instinctively, or so it seems to me, antagonistic towards such bodies. The Government call them quangos and other rude names.
The only other point I would add to the arguments of the noble Lord, Lord Tordoff, is that the changes proposed for the bus industry will actually increase the need for the views of consumers and potential consumers to be felt. It is proposed that there shall be an element of competition in the bus industry as a whole, but for 95 per cent. to 99 per cent. of actual bus users, perhaps after an initial period of cut throat competition, there will only be one operator supplying the need that the consumer has. Under those circumstances, there will be as much of a monopoly as if it had been a National Bus Company, London Transport or municipal public transport undertaking.
In those circumstances, the fact that the service was formerly private will not make any difference to the ordinary consumer, who will have the same needs for adequate information in the form of timetables and so on, and for adequate opportunities to complain about failure to perform, as he or she has when dealing with the water, electricity or gas industry. The noble Lord, Lord Tordoff, put a modest and fair point rather than the strong point that he might have made about the increased need for consumer protection in the industry as envisaged.
8.15 p.m.
Lord Teviot: I should like to follow the very interesting few words of the noble Lord, Lord McIntosh, but I think I had better pick up on the words of my noble friend Lord Mottistone, when he said that one should consult the non-users rather than the users. The users are in the competitive marketplace and they like to get a whole lot of other people interested. If there are all these people ready to use the buses, they should consult the users. The users are the people who know the true situation. They have been around for a long time. The users publicise their views on local radio, in the free press and everywhere else. They are surely the people in the know. The nonusers are simply uninterested.
Lord Mottistone: Not true.
Earl Attlee: I fully support my noble friend Lord Tordoff. My name would have been put to this amendment and to other amendments, but unfortunately last week I lost my voice and I did not see any point in putting my name to amendments to which I could not speak.
When I worked for British Rail, one of the worst duties we had was to to attend meetings with the consultative committees. However, they were useful in that they allowed us to talk to the actual people who caught the 6.58 p.m. from Tooting Bec to Sevenoaks. They know what they want. I feel that the noble Lord, Lord Mottistone, was splitting hairs. He said that there should be consultations with the non-users. The nonuser is someone who does not—
Lord Mottistone: If the noble Lord will allow me to intervene, I was talking about potential users. Those are the people we want to get at.
Earl Attlee: I was just coming to that point. I agree with the noble Lord that is not the captive audience one wants to attract but the people who may not go by bus and who could go by bus. There are some people who will never travel by bus. We would be wasting our time on them. One is thinking of instead of the people one could attract onto the buses. If one has been on a bus once in a lifetime, I presume one could say that one is a bus user. I am certain that almost everyone in your Lordships' Chamber has been on a bus at one time or another and could therefore say that they are bus users.
In the case of British Rail, we did not like meeting the consultative committees because quite honestly, they tended to ask awkward questions—questions which maybe we would rather they did not ask. They would ask why we did such a thing and did not do another, and then we would have to think up very good reasons or we would have to do something about it. That was a good thing. The market force is great.
As my noble friend Lord Tordoff said, whether or not one likes this Bill, the bus industry must be a success. It will only be a success if more and more people use the buses. They will only use the buses if they provide the kind of service, at the kind of intervals and serving the places, which the users want.
Lord Brabazon of Tara: These amendments suppose a bus industry very different from the one that will emerge after deregulation. If we were proposing that bus services should be protected monopolies, planned and co-ordinated by local authorities, then the elaborate consultative machinery proposed might well provide a useful means of finding out what services passengers want and how well they operate in responding to passengers' wishes. Even then, the machinery would be a very imperfect one. We are proposing something which we consider to be infinitely better; that is, that operators should be allowed to compete to provide the services people want. The incentive of competition will make the bus industry more sensitive to the demands of customers.
Both the noble Lord, Lord Tordoff, and the noble Lord, Lord McIntosh, mentioned the existing statutory transport consumer bodies—the CTCC, the area transport users' consultative committees and the

929
London regional passenger committees. These were established by Parliament to represent the interests of users of British Rail and London Regional Transport services. They fulfil an important function, as do other nationalised industries' consultative committees, in representing the interests of customers where the industry is providing many of its services in a monopoly or near monopoly situation. I hope that the noble Lord, Lord McIntosh, hears my words because I do not in any way wish to deprecate these bodies.
It is right that there should be formal procedures for representing the views of the passengers of BR and LRT, but where a deregulated bus industry operates in a highly competitive market, where innovative and unconventional services likely to meet passengers' needs are encouraged, there is absolutely no need for the network of committees envisaged in this amendment and the elaborate bureaucracy which would be involved.
Turning now to the situation where market forces do not prevail and where subsidies are necessary, the Government fully recognise that in reaching decisions about subsidising uneconomic services the local authorities will need to be aware of the wishes of passengers and the potential passengers, to which my noble friend referred, on particular routes. Again, no network of statutory committees seems to the Government to be necessary. Indeed, it seems unjustifiable to seek to impose a statutory committee of the kind proposed between passengers and ratepayers and the councillors whose job it is to represent their interests.
Following discussion on just this issue in the Committee stage in another place my right honourable friend the Secretary of State agreed to consult the local authority associations whose members would be affected about whether they would welcome such a duty. It was clear from the response that they would not. They place considerable importance on consultation but do not see what is to be gained from a specific duty to consult persons representing, or claiming to represent, passengers.
Lord McIntosh of Haringey: The noble Lord said that there had been consultation with local authorities as to whether they would welcome such a duty. Immediately before that he referred to the alternative strategy of having local authorities taking the strain, so to speak, of representing the passengers. Does the noble Lord mean that the local authority associations said that they do not wish to represent the passengers or that they do not wish to see statutory consultative committees? That was not clear from what the noble Lord said.
Lord Brabazon of Tara: I apologise. I said that we consulted them about whether they wished to see such consultative committees established. The authorities felt that they could represent the interests of their own electors, to put it more simply, and I must say that I agree. We would encourage authorities and councillors to consult widely on their policies and nothing in the Bill prevents them from doing that. Consultation, not just of specified groups, is part and parcel of normal democratic procedures. Therefore, I think that not
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only is the amendment of the noble Lord, Lord Tordoff, unnecessary but that consultation through the locally elected councillors is the better way.
Lord Tordoff: I am grateful to all noble Lords who have joined in this short debate. May I say to the noble Lord, Lord Mottistone, that it seems to me that to have some kind of structure to the consultation process is more likely to involve the potential users than simple market forces. It is much more difficult in an ad hoc situation to know what potential users really want. It is easier to know what the actual users want and more difficult to know, just by studying the returns, what potential users want. By having a properly structured consultation process it is much easier to test the potential market.
To come to what the Minister said, it is quite clear that the Government are resistant to any kind of structured consultative process. I think they are making a grave mistake. I believe we are moving into a totally different situation. I suspect that, in this case, because the local authorities actually have a stake in running buses they probably do not welcome an open-ended consumer consultative system in the way in which my noble friend Lord Attlee said that British Rail did not exactly welcome it. It was uncomfortable for them. I do not expect the National Bus Company necessarily to welcome a consumer council of this kind. However, I expect that the passengers would because they would be better informed through their ability to call on the scientific, legal, or whatever support these kind of consultative committees can provide which the passengers do not have as individuals
Even if one accepts that argument in relation to Amendment No. 242—which I do not for one moment accept—nevertheless the earlier amendments talk about consulting suitable bodies, whatever they are. There is a duty, for example, to consult the Women's Institute in rural areas. That does not seem to be a particularly wild suggestion to make. The WI represents people who know what bus users want, and a number of the other bodies which I have already mentioned who support these amendments involve people who know more about the overall position than do individual passengers, particularly individual potential passengers.
It was with those ideas in mind that I spoke to these amendments together because there are a number of dimensions to this series of amendments. It is sad that the Government are not prepared to give any ground or even to suggest that they might think about it again. However, time is getting on, I certainly will not drop this subject and I hope that while we are discussing all these matters, on the beaches or wherever, we can make some kind of progress before we come back on Report in October. Meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 178B not moved.]
Lord Belstead Lord Belstead moved Amendment No. 178C:
[Printed earlier.]
The noble Lord said: I spoke to this amendment with Amendment No. 174A. I beg to move.
On Question, amendment agreed to.
Following is the text of the amendment (No. 178C):
Page 53, line 30, at end insert—
("(6A) It shall be the duty both of the Authority and of the Executive for any passenger transport area, in exercising or performing any of their functions under the preceding provisions of this section, to have regard to the transport needs of members of the public who are elderly or disabled.").
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 178D:
[Printed earlier.]
The noble Lord said: I spoke to this amendment with Amendment No. 174W. I beg to move.
On Question, amendment agreed to.
Following is the text of the amendment (No. 178D):
Page 54, line 31, at end insert—
(" Consultation and publicity with respect to policies as to services.
.—(1) When considering from time to time the formulation of policies for the purposes of section 9A(3) of this Act, the Authority for a passenger transport area shall consult—

(a) with every Passenger Transport Authority, county council or regional council whose area may be affected by those policies; and

(b) either with persons operating public passenger transport services within their area or with organisations appearing to the council to be representative of such persons.

(2) As soon as practicable after any occasion when they formulate new or altered policies for those purposes, the Authority concerned shall publish a statement of all policies so formulated by them on that or any previous occasion which for the time being apply in relation to the performance by the Executive for their area of their duty to secure services under section 9A(1).
(3) When the Authority publish such a statement, they shall send a copy of the statement—

(a) to each Authority or council whom they were required to consult under subsection (1)(a) above; and

(b) to each of the persons or (as the case may be) organisations whom they consulted under subsection (1)(b) above;

in relation to the formulation of their policies on the occasion in question.
(4) The Authority shall also—

(a) cause a copy of the statement last published by them under subsection (2) above to be made available for inspection (at all reasonable hours) at such places as they think fit; and

(b) give notice, by such means as they think expedient for bringing it to the attention of the public, as to the places at which a copy of that statement may be inspected." ").

Clause 57, as amended, agreed to.
Schedule 3 [Amendments consequential on section 57]:
Lord Teviot Lord Teviot moved Amendment No. 179:
Page 129, line 7, at end insert—
("( ) in paragraph (i) (power to carry passengers by road), after the word "from" there shall be inserted the words "or in the vicinity of;").
The noble Lord said: With this amendment I shall speak also to Amendment No. 184:
Amendment No. 184: Clause 58, page 55, line 21, after ("from") insert ("or in the vicinity of").
The object of this amendment is to make clear that it is legal for the operating companies formed by the passenger transport executives to operate services which are wholly outside the passenger transport areas. At present the executives run services entirely outside the present area for two reasons. First, the areas concerned were in these passenger transport
932
areas between 1969 and 1974 but fell outside them as a result of local government reorganisation. However, the executives continue to hold the licences to operate those services, and they do so now. Secondly, the services were in the operating areas of undertakings acquired by executives because most of their operation was inside the passenger transport area concerned.
The most important example which comes to mind concerns the Greater Manchester PTE which operates a number of services of this nature: in the Glossop area of the High Peak of Derbyshire; in the Wilmslow area of Cheshire; in the Warrington area of Cheshire, and in Merseyside.
8.30 p.m.
However, Greater Manchester is not the only executive affected. If the Bill is not amended it will not be possible for the companies who take over from the executives' operations to run these services. The amendment therefore changes Clause 58(1)(a) by adding the words "or in the vicinity of" to the present wording. This will not therefore give these companies the right to operate anywhere in the country, although there is no reason in principle why they should not, but merely seeks to ensure the continued operation of existing services after deregulation.
In discussions with the PTE group, the Department of Transport have argued that the situation is covered by the Bill as presently drafted. I am sure that my noble friend will explain that. If, however, it is the intention not to restrict the area of operation of PTE companies, the words "within to and from the Executive's area" in the clause are superfluous and should therefore be deleted. Indeed, it can be argued with some such justification that this would place the passenger transport executive companies on an equal footing with all other bus operators who will be able to operate without geographical restriction and would therefore foster fair competition. However, the PTE group has not pressed this point with the department and merely seeks to clarify the position beyond any doubt by inserting the words, "or in the vicinity of" in the clause, which will permit operation immediately outside a passenger transport area. What the amendment will do is to correct an omission from the Local Government Act 1972 which should have recognised the position by amending the Transport Act 1968 which has been used as the basis of the Bill, and a consequential amendment to the 1968 Act is therefore proposed. I beg to move.
The Earl of Caithness: I am grateful to my noble friend for raising these amendments, which in fact arise from a misunderstanding of Clause 58(1). If he has discussed the matter with the department, which he says he has, he will of course know the answer, but for the benefit of the rest of the Committee may I just reiterate that this is an error and indeed the department has had to cross through a sentence from the Notes on Clauses circulated to your Lordships which made the same mistake.
Clause 58(1) is not a limit on the powers which the initial company may be given in its objects clause. It describes the minimum powers which the initial company will require. In complying with this clause the PTE must form a company with at least the powers to carry on the purposes specified.

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While the company remains in the public sector its controlling authority is required to ensure that it does not extend the scale of any road passenger transport activities beyond those which are currently being undertaken by the controlling authority or the PTE itself. Clause 69(3)(a) requires this, but it does not prevent the transfer to the company of any operations currently entirely outside the area, or the continuing and lawful provision of those services by the company.
I hope that my noble friend will accept my assurance that no amendments to this Bill are necessary to allow the continuation of any existing bus services. He mentioned in particular the one at Glossop and this is four square within the Bill. It will not be affected. On that basis I hope that my noble friend will withdraw his amendment.
Lord Teviot: I am delighted to withdraw this amendment. In doing so I should like to say that if I had had that answer before, I would have taken this amendment off the Marshalled List. However, I am grateful to my noble friend for what he has said. I repeat, to be absolutely clear on this, that any services which now exist which are outside the area will continue to be allowed to do so. That has been agreed to and in those circumstances I beg leave to withdraw the
amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 180 to 183 not moved.]
Lord Henley Lord Henley moved Amendment No. 183A:
Page 132, line 37, leave out ("(b)").
The noble Lord said: With this amendment I should like at the same time to speak to Amendment No. 183B, which is consequential upon Amendment No. 183A.
Amendment No. 183B: Page 132, line 38, leave out from ("services") to end of line 41 and insert—
("(a) for paragraph (b) there shall be substituted the following:
"(b) any operator of a public passenger transport service within the meaning of the Transport Act 1985;"
(b) in paragraph (f) after the words "in paragraph (a)" insert:
"or (c)"; and after the words "(whether wholly owned or not)" insert "of a body falling within paragraph (b) above or".").
May I start by apologising for putting these amendments down rather late, which was due to circumstances beyond my control. These amendments concern paragraph 22 of Schedule 3 which is about the Post Office Act of 1969. As the Committee know, two of the principal aims of this Bill are to make provision for the transfer of the NBC to the private sector and to provide for the reorganisation of passenger transport in the public sector, the latter including enabling provisions for the entry into the private sector of PTEs and local authority bus undertakings.
So far as the Post Office is concerned these provisions pose a serious threat to its counter business, given that when the provisions have been brought into effect it will cease to have statutory power, under Section 7 of the Post Office Act 1969 as amended by the British Telecommunications Act 1981, to perform services for the bodies concerned by way of the sale of tickets, travel passes, etc., and in turn will lose a significant amount of valuable business not only in
934
respect of its Crown office but also its network of sub-post offices, of which at the moment at least 20 per cent. are involved in this type of work. This potential loss of business will therefore strike a serious blow to Post Office efforts to maintain the size of the present network through the retention of existing business and the development of new, long-term business.
My amendments seek to overcome this by making provision in Section 7(1A) of the Post Office Act 1969—that section having been added to the 1969 Act by the 1981 British Telecommunications Act—to empower the Post Office, subject to the consent of the Secretary of State, to continue to perform services at its counters for the particular bodies I have mentioned once they have entered the private sector. I beg to move.
Lord Brabazon of Tara: I am entirely in agreement with my noble friend that it would be a pity if the Post Office were no longer to be able to continue to offer the services which it gives at the present time with regard to selling bus tickets and passes and so on, and particularly so in the case of sub-post offices, which I think we would all wish to see have the opportunity of doing as much business as they can. I therefore find my noble friend's arguments very persuasive. I should just like to enter one reservation, which is that when we look at this amendment in detail we might find it more complex than it appears to be. My noble friend has said that his amendment was only put down at very short notice and I am afraid that I have not had the chance to discuss it with my department nor with Parliamentary Counsel. However, I am entirely in sympathy with his arguments and I shall give him an assurance that we shall look at this very seriously and I shall be in touch with my noble friend. I hope that on that undertaking he will be willing to withdraw the amendment for the time being.
Lord Henley: I thank my noble friend for that reply. I apologise again for putting this amendment down so late. I see his point that the Parliamentary draftsmen have not had time to look at it. I was about to say that I am not a lawyer—I am, but I have forgotten all the law that I knew. I have looked at the amendment and I suspect there may be one or two things wrong with it; but I am sure we shall be able to sort them out. On that assurance from my noble friend, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 183B not moved.]
Schedule 3 agreed to.
Clause 58 [Transfer of bus undertakings of Executives to companies owned by Authorities]:
[Amendments Nos. 184 and 185 not moved.]
The Earl of Caithness The Earl of Caithness moved Amendment No. 185A:
Page 55, line 33, leave out from ("theirs") to end of line 35 and insert ("which it appears to the Executive to be appropriate to transfer to that company").
The noble Earl said: With the leave of the Committee, I shall speak also to Amendments Nos. 188A, 188B, 197A, 197B, 197C, 198A, 203A, 206A and 264B.

935
Amendment No. 188A: Page 56, line 22, leave out ("held by them").
Amendment No. 188B: Page 56, line 23, at end insert—
("(8A) Where—

(a) the property, rights and liabilities transferred under subsection (7) above include the whole of the undertaking of any wholly-owned subsidiary of the Executive; and

(b) it appears to the Executive that no further action is required on the part of that subsidiary to perfect any transfer under that subsection;

the Executive shall secure that that subsidiary is wound up.").
Amendment No. 197A: Clause 60, page 57, line 45, at end insert—
("(1A) Where the initial company has any wholly-owned subsidiaries, the proposals may, instead of or (as the case may be) in addition to providing for the transfer to any one or more of those companies of the shares in or other securities of any such subsidiary comprised in the initial company's undertaking, provide for—

(a) the division among those companies; or

(b) the transfer to any one of them;

of the whole or any part of the undertaking, or of any property, rights or liabilities of, that subsidiary.").
Amendment No. 197B: Page 58, line 10, leave out ("is to be divided among the transferee companies") and insert (", and the whole or any part of the undertaking of any wholly-owned subsidiary of the initial company to which the proposals relate, is to be divided among the transferee companies or (as the case may be) transferred in accordance with the proposals to any one of those companies;").
Amendment No. 197C: Page 58, line 12, leave out from ("company") to end of line 14 and insert (", and of any wholly-owned subsidiary of the initial company the whole of whose undertaking is to be transferred in accordance with the proposals to any one or more of the transferee companies, on completion of the transfer of that company's or (as the case may be) of that subsidiary's undertaking ")
Amendment No. 198A: Page 58, line 20, after ("company") insert ("and of any wholly-owned subsidiary of the initial company").
Amendment No. 203A: Page 59, line 2, leave out ("comprised in the part of the initial company's undertaking") and insert (", and of any wholly-owned subsidiary of the initial company, which are").
Amendment No. 206A: Page 59, line 21, at end insert—
("(12) Subsection (11) above shall apply in relation to any subsidiary of the initial company the whole of whose undertaking is transferred under the scheme to one or more of the transferee companies as it applies in relation to the initial company.")
Amendment No. 264B: Clause 113, page 111, line 15, leave out ("a") and insert ("the whole or any").
These amendments have been brought forward because the PTEs have at present powers to create subsidiary companies under Section 10(19) of the 1969 Act. The amendments are technical ones giving the necessary flexibility for the transfer schemes under this Bill. I beg to move.
On Question, amendment agreed to.
Lord Teviot Lord Teviot moved Amendment No. 186:
Page 55, line 35, at end insert—
("(3A) A scheme under subsection (3) above shall identify any liabilities retained by the Executive or any wholly-owned subsidiary of theirs on the transfer of their property, rights or liabilities to the company under the scheme, being liabilities in respect of the following matters:—

(a) compensation payable under section 78 or otherwise in respect of persons who suffer loss of employment or loss or diminution of emoluments by reason or in consequence of the transfer,

(b) the provision of funds to secure the payment of benefits and pensions of employees;

(c) loss arising in respect of assets held and not transferred under the scheme.").

The noble Lord said: I shall speak also to Amendment No. 187.
Amendment No. 187: Page 56, line 17, at end insert—
("and the Secretary of State shall make grants to the Executive of such amounts as appear to him to be requisite for indemnifying the Executive in respect of the retained liabilities identified in the scheme.").
The need for these amendments arises because Clause 58 of the Bill provides for the transfer of the PTE bus operations to a newly created initial company which will have to act commercially. At the present time the PTEs combine both commercial and noncommercial bus operations. In future the initial company will be interested only in commercial operations and those contracts it may win under the tendering process. Even if authorities could afford to put every non-commercial service out to tender the company is unlikely to win them all. They cannot make up for this, as other operators like NBC can, by tendering for operations outside their areas, as permitted by Clause 58(1)(a).
The initial company will therefore be smaller than existing PTE operations and this gives rise to the problems my amendments seek to deal with. The company will have surplus buses, premises and staff, the disposal of which will cost substantial sums of money. These are one-off costs incurred in establishing the initial company. Amendment No. 186 provides that in the scheme for transfer of the executive's property, rights and liabilities to the initial company, these costs will be identified.
There are three possible ways of paying for these costs. First, they could become obligations on the initial company. In this case the company will be far less competitive than it should be and it will not be able to compete fairly. In the end, the passengers will pay through higher fares or less service.
Secondly, they could become obligations on the executive. In this case they will have to be funded by the authority. That is a perfectly reasonable solution perhaps, but there is a serious problem. Under the Local Government Act the expenditure of the authority during the first three years—a critical period—will be limited by the Secretary of State. Any payments of these initial costs must mean that there is less money for supporting non-commercial services, financing concessionary fares or supporting local train services, etc.
Additionally, the Department of Transport has indicated that for this period from next April the PTAs' expenditure levels will be between 5 per cent. and 15 per cent. less than this years. Thus this second option is not an option at all unless bus service levels are unacceptably reduced.
The third option is for the Secretary of State to make grants to the executives to cover these costs, and this is provided for in Amendment No. 187. This will ensure that the Government's objectives in reorganising conurbation transport will be achieved without detrimental effect on the passengers.
If my noble friend disagrees with this amendment, the Government are saying very clearly that they want the passengers and ratepayers to pay for the changes proposed in the Bill. I beg to move.
8.45 p.m.
Lord Trefgarne: With respect to my noble friend, I have to say that I think that his amendments paint a rather pessimistic picture. I urge your Lordships instead to consider that this Bill will rejuvenate the market for bus services and provide a better chance than the existing policies do that the industry will flourish. After all, I do not think that the PTEs could feel particularly happy with their position at the moment. All of them would doubtless say that they provide valuable services, and no doubt many of us would agree with that. But I am sure that many PTEs will admit that recent trends in the industry represent an unhealthy state of affairs and that greater efficiency and enterprise would provide them with better value for money.
The new companies will have every chance to share in the benefits of the change which this Bill will bring about. Management will for the first time be established in a commercial structure, able to provide all the services which it believes in its commercial judgment to be attractive. I think that it would be wrong for us to think in terms of sizeable residual liabilities falling on the PTE. Let us recall instead the benefits the company structure will bring to the PTE and the ratepayers. It is in that spirit that I ask my noble friend to reconsider Amendment No. 186.
In regard to Amendment No. 187, my noble friend is, I think, worried about liabilities which may remain with the PTE and should perhaps properly fall upon the Secretary of State. As I have said, I would ask him to consider that in the context of the Bill as a whole and the benefits that it will bring. The Government have made clear, I know, that they believe some PTE bus undertakings to have subsidy bills which are much too high. But the amendments paint the picture of an embattled Left with losses here, liabilities there, and only the Secretary of State to look to for comfort. The ratepayers will in fact derive great benefits from the Bill. They will see their bus services provided by a company with a renewed stimulus to provide what the public wants in the most efficient way.
In the light of those considerations, I invite my noble friend to withdraw his amendment.
Lord Teviot: This was a quiet amendment. My noble friend has posed all sorts of arguments which almost make me want to start a long discussion, going on for about 20 minutes. My noble friend Lord De La Warr seems to want to ask me a question, and he is perfectly able to do so before I sit down; or if he thinks that my arguments are inadequate, he can come in. If my noble friend's amendment on Clause 1 introduced a trial period for one year, or even extended it to two or three years, I should say that there was quite a lot to say for that. But this Bill is largely untried.
My noble friend's seated interjections put me straight back down to the very pleasant city of Hereford. It has a population of 48,000, with the rural area outside. This amendment deals entirely with PTEs, and their areas usually cover millions of people. Some are larger than others. That is quite a different thing. At the moment those systems carry lots of passengers. They may have a problem which could have been dealt with in the 1963 legislation, but we shall not discuss that; perhaps they take too much
938
subsidy. But, by and large, they operate a very good service for the public. It is a very much better service than I am afraid there will be in the future. There are these areas of dense population, with the splendid routes about which we have all heard, and there are the evils of cross-subsidy. I must not go on, although I am tempted to do so.
I shall make this point. The areas that will be affected are the so-called residential areas where there are a lot of Tory voters. Those systems will either be subsidised, will not run at all or will run only on a limited service. I really must stop, but I am extremely disappointed with what my noble friend the Minister said. We have gone right back to the root of the philosophy. I have risen like a fish, but I shall not go further, unless noble Lords—no, I am withdrawing the amendment, so no one else can come in. I am very disappointed at the reply. I shall certainly come back with a much more robust amendment, probably on Report. In these circumstances, I beg leave to withdraw the
amendment.
Amendment, by leave, withdrawn.
Lord Banks Lord Banks moved Amendment No. 186A:
Page 55, line 42, at end insert—
("and any such scheme shall include provision to secure the payment of benefits and pensions in accordance with the accrued rights of existing employees of the Executive or any wholly-owned subsidiary of theirs under the Local Government Superannuation Act 1972 or any customary practice in respect of the grant of gratuities.").
The noble Lord said: I beg to move Amendment No. 186A and at the same time speak to Amendment Nos. 211AB and 240F.
Amendment No. 211AB: Clause 64, page 64, line 27, at end insert—
("and any such scheme shall include provision to secure the payment of benefits and pensions in accordance with the accrued rights of existing employees of the council or councils concerned under the Local Government Superannuation Act 1972 or any customary practice in respect of the grant of gratuities.").
Amendment No. 240F: After Clause 77 insert the following new clause:
("Transfer pensions
. Provision shall be made in any scheme for the transfer of property, rights or liabilities under section 58 or 64 of this Act to secure the payment of benefits and pensions of persons employed in any undertaking or part of an undertaking which the subject of such a transfer in respect of their employment in the undertaking or part thereof both before and after the transfer.")
As the Committee is aware, Clause 58 transfers the operation of passenger transport executive bus fleets from the PTE to a Companies Act company, which is eventually to be divided into smaller companies under Clause 60. The shares will be held by passenger transport authorities with power to dispose of them later. Similarly, Clause 62 prevents non-metropolitan councils in England and Wales and regional councils in Scotland from operating bus servies—though some of them have been doing so for over 100 years. Clause 63 requires them to form a company to run bus undertakings.
Those employed by passenger transport executives and by municipal undertakings who will be transferred to the new companies are presently members of the local government superannuation scheme. It would seem that two main problems arise. First, the funding of Pensions (Increase) Act payments for former

939
employees will impose a major burden on the new companies or on the funds of the passenger transport authorities who will have to fund as well the non-commercial services. All bus workers employed by a passenger transport executive or a municipal passenger transport undertaking from manual worker to management have been required to invest a proportion of their earnings in the local government superannuation scheme from 1972 and a high proportion of this number have been required to invest prior to 1972 as a result of a decision of their employing authority.
The amount of the employee contributions has been between 5 per cent. and 6 per cent. of their regular earnings with a small number paying up to 15 per cent., the statutory maximum, of their remuneration into the scheme. The employing authority has also to finance certain additional charges levied by the administering authority (normally the county council). These amount in general terms to, firstly, an amount levied by a quinquennial actuarial review to ensure the fund is financially stable; secondly, the general amount of the annual pensions increase; and, thirdly, a direct charge in respect of early retirement caused by ill-health, redundancy, or terminations of employment in the interests of the efficiency of the employing organisation.
This additional amount funded by the employer is infinitely variable between the various administering bodies. The cost appears to vary between 4 per cent. and 10 per cent. of the total gross paybill. If such costs are transferred to the new company by the authority as a liability included in the transfer order in accord with Clauses 58 and 65 of the Bill, then such a liability will materially affect the ability of the company to compete within the new deregulated situation. Conversely, the local authority or passenger transport executive, having lost its passenger transport revenue, if it retained that liability would only be able to discharge it by the use of some of its rate-funded income.
The second problem which arises is that should the companies be privatised, under Clause 71 their employees will no longer be eligible for membership of the local government superannuation scheme and their pension rights may be affected.
Amendment No. 186A lays an obligation on the Government to make provision to secure for former employees of passenger transport executives payment of pension in accordance with their accrued rights under a local government superannuation scheme at the time of transfer. It makes sure that they are no worse off. Amendment No. 211AB does the same for former employees of municipal undertakings. Amendment No. 240F obliges the Government in each case to make provision for pensions in respect of service, both before and after transfer, whether eventually privatised or not. I beg to move.
Lord Trefgarne: I am glad to have this opportunity of explaining the position of pensions for staff transferred to public transport companies. I know that pensions are a difficult issue, of concern to staff, and I hope that what I have to say will be of reassurance to those employees who may be affected by the establishment of public transport companies.
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I turn first to the amendments to Clauses 58 and 64. These concern safeguards for accrued pension entitlements—that is to say, pension entitlements which have been built up because of service before transfer to the bus undertaking. As the amendment implies, these entitlements have been built up in the local government superannuation scheme.
Whatever pension arrangements are made by public transport companies for the future, the staff concerned will be free if they wish to leave their past entitlement in the local government scheme where they have accrued it, even if they do not stay in that scheme for the future. Provided they have the minimum qualifying service, the entitlement will be preserved in the local government scheme until they eventually reach retirement age; it will then be paid to them as a pension. And the preserved benefit will be increased in line with prices, both before and after the person reaches the relevant retirement age.
I hope it will be clear from this that accrued entitlements can have exactly the same security in the future as they do now. They can be kept in the local government superannuation scheme where they are now, with all the security that that implies. I would therefore suggest that the amendments to Clauses 58 and 64, whilst I understand and sympathise with them, are simply not necessary.
May I turn now to the new clause to appear after Clause 77. This speaks of security for pensions in respect of future services, after the transfer to the public transport company, as well as before. For future service we envisage the public transport company, with its parent local authority or PTE, being free to make its own decisions. After all, it is a key part of our policy that management decisions such as this should be left to the management of the bus undertaking, although of course they will want to negotiate with the staff representatives.
But the Government want to do all they can to leave options open to the parent authorities and companies in consultation with their staff, and one such option would be the continued membership of the local government superannuation scheme, where they are now. To facilitate that option, the Government have undertaken to amend the regulations for the local government scheme: that amendment will allow the parent district council or PTE, if it chooses with the company, to deem that the transferred staff remain their employees for pensions purposes. The effect could be that the staff would stay in the local government scheme, with exactly the same security as they have now, since—for this purpose only—their nominal employer would still be the parent authority. I hope that the noble Lord feels that making this option available does demonstrate the Government's wish to be helpful. In the light of these considerations, I invite him not to press these amendments.
Lord Banks: I should like just to ask the noble Lord one question arising out of that reply. What is to happen should any of these companies be privatised? May they then still remain within the local government superannuation scheme?
Lord Trefgarne: My understanding of the position is that they may. However, perhaps I may check that and, if I am wrong, I shall write to the noble Lord.
Lord Banks: I think the statement which the noble Lord has given to the Committee this evening is very reassuring. I should like to consider carefully exactly what he said. However, it seems that some of the fears which have been expressed are groundless and that steps are being taken to see that people will get their accrued entitlement within the local government superannuation scheme preserved within that scheme and that employers in the new companies will be able to continue membership in the local government superannuation scheme, which will probably be the most desirable outcome.
Subject to what the noble Lord has to say eventually on the other point, it would seem to be a satisfactory situation. However, as I say, I should like to consider it further and, in the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 187 and 188 not moved.]
The Earl of Caithness The Earl of Caithness moved Amendments Nos. 188A and 188B:
[Printed earlier: col. 935.]
The noble Earl said: I beg to move Amendments Nos. 188A and 188B together.
On Question, amendments agreed to.
Following is the text of the amendments (Nos. 188A and 188B):
Page 56, line 22, leave out ("held by them").
Page 56, line 23, at end insert—
("(8A) Where—

(a) the property, rights and liabilities transferred under subsection (7) above include the whole of the undertaking of any wholly-owned subsidiary of the Executive; and

(b) it appears to the Executive that no further action is required on the part of that subsidiary to perfect any transfer under that subsection;

the Executive shall secure that that subsidiary is wound up.").
[Amendments Nos. 189 and 190 not moved.]
Clause 58, as amended, agreed to.
[Amendments Nos. 191, 192, 193 and 194 not moved.]
Clause 59 agreed to.
Clause 60 [Division of undertakings of companies formed under section 58]:
[Amendments Nos. 195 to 197 not moved.]
9 p.m.
The Earl of Caithness The Earl of Caithness moved Amendments Nos. 197A, 197B and 197C:
[Printed earlier: col. 935.]
The noble Earl said: I beg to move these amendments en bloc. I have spoken to them already.
On Question, amendments agreed to.
Following is the text of the amendments (Nos. 197A, 197B and 197C):
Page 57, line 45, at end insert—
("(1A) Where the initial company has any wholly-owned subsidiaries, the proposals may, instead of or (as the case may be) in addition to providing for the transfer to any one or more of
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those companies of the shares in or other securities of any such subsidiary comprised in the initial company's undertaking, provide for—

(a) the division among those companies; or

(b) the transfer to any one of them;

of the whole or any part of the undertaking, or of any property, rights or liabilities of, that subsidiary.").
Page 58, line 10, leave out ("is to be divided among the transferee companies") and insert (", and the whole or any part of the undertaking of any wholly-owned subsidiary of the intial company to which the proposals relate, is to be divided among the transferee companies or (as the case may be) transferred in accordance with the proposals to any one of those companies;").
Page 58, line 12, leave out from ("company") to end of line 14 and insert (", and of any wholly-owned subsidiary of the initial company the whole of whose undertaking is to be transferred in accordance with the proposals to any one or more of the transferee companies, on completion of the transfer of that company's or (as the case may be) of that subsidiary's undertaking.").
[Amendment No. 198 not moved.]
The Earl of Caithness The Earl of Caithness moved Amendment No. 198A:
[Printed earlier: col. 935.]
On Question amendment agreed to.
Following is the text of the amendment (No. 198A):
Page 58, line 20, after ("company") insert ("and of any wholly-owned subsidiary of the initial company").
[Amendments Nos. 199 to 203 not moved.]
The Earl of Caithness The Earl of Caithness moved Amendment No. 203A:
[Printed earlier: col. 935.]
On Question, amendment agreed to.
Following is the text of the amendment (No. 203A):
Page 59, line 2, leave out ("comprised in the part of the initial company's undertaking") and insert (", and of any wholly-owned subsidiary of the initial company, which are").
[Amendments Nos. 204 to 206 not moved.]
The Earl of Caithness The Earl of Caithness moved Amendment No. 206A:
[Printed earlier: col. 935.]
On Question, amendment agreed to.
Following is the text of the amendment (No. 206A):
Page 59, line 21, at end insert—
("(12) Subsection (11) above shall apply in relation to any subsidiary of the initial company the whole of whose undertaking is transferred under the scheme to one or more of the transferee companies as it applies in relation to the initial company.").
Clause 60, as amended, agreed to.
Lord Teviot Lord Teviot moved Amendment No. 207:
After Clause 60, insert the following new clause:
("Protection of employees benefits.
. Any scheme prepared by the Executive under section 58(3) of this Act or any proposals prepared by the Passenger Transport Authority under section 60(1) of this Act may, with the approval of the Secretary of State, include provision—

(a) for the maintenance of any concession, benefit or privilege enjoyed by persons who are or have been employed by the Executive or Company which is the subject of transfer, or

(b) for the making of any payment or the provision of any other concession, benefit or privilege in compensation for the loss of that concession, benefit or privilege.")

The noble Lord said: The reason for this is to afford similar protection to employees of passenger transport executives as that given to employees of the National

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Bus Company and National Bus Company subsidiary companies under Clause 53(6). A specific right is given here for these employees to have their concessions, benefits or privileges protected by the company. It is not obligatory but the disposal scheme may make provision for this with the consent of the Secretary of State. A similar power needs to be given in respect of passenger transport executive employees as they are in a similar position, working for a statutory corporation that is a creature of statute. It is believed that the Department of Transport feels that PTE employees were adequately protected under the local government legislation. But the executive is not a local authority and only has the powers and duties given to it under the Transport Act 1968. I beg to move.
The Earl of Caithness: I wonder whether I detect a welcome shift of policy by my noble friend. Here we have a constuctive amendment. I accept the principle. Unfortunately, it is technically defective in a number of ways. If I give the undertaking that we shall come back to it on Report, I hope that my noble friend will withdraw it.
Lord Teviot: Splendid! I beg leave to withdraw the
amendment.
Amendment, by leave, withdrawn.
Clause 61 [Functions of local councils with respect to passenger transport in areas other than passenger transport areas]:
Lord Teviot Lord Teviot moved Amendment No. 207A:
Page 59, line 23, leave out subsections (1) and (2) and insert—
("(1) It shall be the duty of a non-metropolitan county council in England and Wales, or in Scotland, a regional or islands council, in relation to any part of their area which is not a passenger transport area, to take any measures that appear to them to be appropriate for the purpose of or in connection with promoting—

(a) the availability of public passenger transport services other than subsidised services and the operation of such services, in conjunction with each other and with any available subsidised services, so as to meet any public transport requirements the council consider it appropriate to meet;

(b) the securing of the provision of such public passenger transport services as the council consider appropriate to meet any public transport requirements in their area which would not otherwise be available; and

(c) the convenience of the public in using all available passenger transport services (whether subsidised or not).

(2) In pursuance of subsection (1) a council shall formulate and publish from time to time general policies as to the measures to be undertaken in exercising their duties under this section and the descriptions of service to be secured in pursuance of subsection (1) (b).").
The noble Lord said: Together with this, I would like to take Amendments Nos. 208B, 208F, 209B, 210A and 211ZB.
Amendment No. 208B: Page 59, line 42, leave out subsection (3).
Amendment No. 208F: Page 60, line 4, leave out from ("above") to end of line.
Amendment No. 209B: Page 60, line 25, leave out subsection (7).
Amendment No. 210A: Page 60, line 39, leave out subsection (8).
Amendment No. 211ZB: Page 61, line 1, leave out ("(7)") and insert ("1").
The purpose of these amendments is not to make any dramatic change to the Bill, but merely to re-order Clause 61 so that it is in a more workable frame. I must say here that I dislike the phrase "shire county
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councils" because, in history, all counties were known as shires apart from Norfolk and Suffolk, but, nevertheless, shire counties is now the present term. The present duty on shire county councils under the 1978 Transport Act is to promote a co-ordinated and efficient system of public passenger transport to meet the needs of the county. Clause 61 of the Bill is a replacement of that. What it does is to give a duty to county councils which is confined to services that would not otherwise be available; that means subsidised services. The notes on clauses say that the purpose of the clause is to replace existing duties and powers with ones consistent with the principle of the Transport Bill that local authorities should supplement services provided by the market and, if they wish, promote the use of public transport rather than seeking to control it.
This amendment is not intended to give county councils control over the market. Far from it. But it is intended to acknowledge that the market exists. Recently, a local government observer commented that what this does is virtually to relegate everything other than giving financial support to a local bus service by means of subsidy into a hotch-potch under subsection (7) which is clearly detached and secondary and, as the notes on clauses make clear, totally discretionary.
This produces a total imbalance. On the Marshalled List today we have from the Government a new clause to follow Clause 61. I think that your Lordships have had little time to study it. But it does appear to add a clear responsibility on county councils to evolve policies and to consult on them with operators and district councils and then to make public what they do. All this is confined to subsidised services.
If, as I have quoted, it is the Government's intention to see commercial services as the backbone to the future of public transport, that is surely where a county council's duties should begin. County councils should have a clear idea of the total role they consider appropriate for public transport in the county in order to assess the strength of the commercial services. Only then should they look at where they need to place additional resources. This re-ordering of Clause 61 aims to achieve that emphasis. It also has several other benefits. Not only would it enable county councils to engage in a more realistic debate on policies with both operators and other authorities, but it would also be of benefit in particular to operators who would clearly see that the county council can talk positively about measures which are needed to assist all types of operation, including those which are commercial. There is a whole host of things, from the publication of comprehensive timetables, facilities on the highways such as priorities for buses and, as the third part of the amendment makes clear, facilities for passengers. It might even be part of a county council's policy that these should be provided by the operators contributing towards them. That would be a matter for local decision.
Nothing onerous is being placed on county councils by this amendment. There are, as the Committee will see from the wording, ample qualifications for local discretion as they make judgments as to what may be appropriate in their particular circumstances.
This amendment endeavours to avoid a distinct message of discouragement, which I do not believe Ministers intended, with regard to many of the useful things which shire county councils have been doing to help promote public passenger transport. The reordering of this clause also has other vital benefits. Elsewhere in the Bill there is a distinct requirement for county councils to take into account school transport services, and I notice that this is picked up at the very end of the amendment which was published today by the Government on the new arrangements that they are suggesting for Schedule 5.
In the Standing Committee in another place the Parliamentary Under-Secretary of State for Scotland, Michael Ancram, said that:
"nothing in the Bill at present prevents them—that is county councils—from formulating an overall policy for public transport".
However, he rejected any suggestion that policies should precede action on the grounds that county councils will not be able to tell operators what to do. This amendment does not attempt to do that. However, it does attempt to create a tidy context in which operators and the public alike can have confidence in the actions of their county council. In this way I hope that county councils will continue to do many of the good things, and indeed will do more if at all possible, and in particular will aid the disabled. I beg to move.
Lord McIntosh of Haringey: I should like to express general support for the amendment moved by the noble Lord, Lord Teviot, and in so doing say that I believe he is exactly right in pointing out the other responsibilities of county councils in addition to the operation of commercial bus services, which must be linked with them if a sensible transport policy is to be evolved and publicised.
Lord Teviot: If the noble Lord will give way, the Bill says that county councils will only be concerned with the subsidised services, not even with commercial services.
Lord McIntosh of Haringey: That is of course true, but, as I understood it—and perhaps I have misunderstood the noble Lord—the point of this amendment and certainly the point of Amendment No. 211ZCA, which is the new clause, is that the county councils are required to have and to publish some form of transport policy. I understood the noble Lord, Lord Teviot, to say that this ought to cover all the transport services provided in and for their area. I do not wish to add any more, except to say that we seem to be in the middle of a Bill which is being rewritten as the Committee proceeds. It is extraordinarily difficult for us to relate the arguments which we planned some time before to a stream of Government amendments which come through at the very last minute and which require much more attention than it is possible for those of us who have to earn our living elsewhere to give them in the way of making effective judgments as to what they mean.
Lord Belstead: My noble friend Lord Teviot presented this amendment to your Lordships as being
946
a modest alteration to the Bill, but it is really quite a fundamental one. The duty which the Government propose for councils in the Bill is narrowly drawn to supplement services in order to meet public transport requirements which are not met commercially and which the council considers it appropriate to meet.
The powers proposed by the Bill go wider than that, and in particular Clause 61(7) confers wide powers to promote the use of public passenger transport generally. This power, which is subject to an important proviso that it should not be used in such a way as to inhibit competition between operators, will enable councils to take a wider general interest in public transport if they choose.
However, in effect, my noble friend's amendments propose that this valuable power should become a duty, and I also notice that the important restriction on its use to inhibit competition would fall. Under the terms of these amendments councils would be required to promote the availability of all services and the convenience of the public in using all services. I do not think that that would be helpful. The task of local authorities in this Bill is to supplement the market. We may disagree on that, but the Government's argument is that if authorities concentrate on the areas of real need, they will perform their task the more effectively. That is, as I say, one of the principles of the Bill, and these amendments would undermine that principle. It is for that reason that I am afraid I must resist this amendment.
Lord Teviot: Obviously there is a fundamental difference here, which perhaps we shall never get over. It is not the same sort of answer as my noble friend Lord Trefgarne's own amendment, and my noble friend's answer to this amendment does not incite me to reply in quite the same terms. I shall withdraw the amendment shortly, but I am not happy about this.
The county councils have looked after these services for all these years, and if they are to control just the subsidised services all these other things will be outwith their responsibilities, and I do not think that just to let the market forces deal with them is satisfactory. However, at this time of night I am not going to press this amendment. I beg leave to withdraw the
amendment.
Amendment, by leave, withdrawn.
9.15 p.m.
Lord Mottistone Lord Mottistone moved Amendment No. 208:
Page 59, line 27, leave out ("within") and insert ("serving").
The noble Lord said: This amendment is a probing one, and it relates strictly to island councils both in England and in Scotland. So far as England is concerned, it has particular reference to the Isle of Wight. Clause 61(1) says:
"it shall be the duty of the county council—
(a) to secure the provision of such public passenger transport services as [are] within the county".
That is seen by the Isle of Wight County Council as possibly overriding their present statutory position with regard to the ferry services which run from the islands to the mainland.
They would be keen not to lose that position. It has frequently been of importance that they should be able

947
to have a statutory position to guide and give advice to the ferry services which are subject to a wide variety of local interests which often conflict one with the other. I think that this has been a balanced position for the whole of this century, and it would be a great pity if other considerations overthrew it inadvertently.
Therefore I propose this small amendment to widen the effect of subsection (1) of Clause 61. It is a probing amendment, and it may not be the right way of doing it. I am sure that my noble friend will have a better way of doing it. I should particulary like reassurance that this overriding of the present statutory position is not a possibility as a result of this Bill. I beg to move.
Lord Monk Bretton: I should like to say a word in support of my noble friend's amendment. I think that he has reason for it. I can understand the problems in connection with the Isle of Wight. The amendment would also be of considerable benefit to other county councils dealing with ordinary commercial bus services running across a land boundary. I mention that point in passing.
Lord Brabazon of Tara: I believe a misunderstanding has given rise to this amendment. Clause 61 requires councils to secure services they consider appropriate to meet any public transport requirements within their areas. What we are proposing is that councils should be required to secure services as they think appropriate to meet requirements which arise within their area.
The services which meet those requirements will not necessarily be linked to those running wholly within the county borders. To take an example, there may be a village on the border of Hampshire which requires a service to take its inhabitants to their nearest shopping centre over the border in Dorset. The requirement for a service arises within Hampshire, and it is for Hampshire rather than Dorset to consider if it would be right to meet the requirement. The service which will meet that requirement will indeed cross the boundary. The wording of Clauses 61(1) and (2) in no way excludes such a service, and Clause 61 provides the necessary powers for councils to secure the service. Clause 61(5) gives non-metropolitan county, and regional and islands, councils power to secure services "for their area".
Of course the situation of the Isle of Wight, in which the noble Lord, Lord Mottistone, has a special interest—and I must declare my own interest in the Isle of Wight, of which I am a resident—is unusual because it is an island. But exactly the same principle applies. This duty is concerned with services which meet the requirements arising within the county. Clearly in the case of the Isle of Wight those requirements may be for services which cross the Solent. The terms of the duty in Clause 61(1) can apply to ferry services as much as to cross-boundary bus services. I hope I have given my noble friends Lord Mottistone and Lord Monk Bretton the reassurances that they require.
Lord Mottistone: I am indeed grateful to my noble friend and thank him for his reassurances, which seem to me to be absolutely splendid. I shall consult the Isle of Wight County Council, and if they see some snag I
948
may come back; but at this stage I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 208Z, 208AA, 208A and 208B not moved.]
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 208C:
Page 59, line 43, at end insert ("(except insofar as provided in subsection (7) below).").
The noble Lord said: It may be convenient to speak also to Amendment No. 210A.
[Printed earlier: col. 943.]
The first amendment is in recognition of the fact that although under the Bill there will be two groups of services, those provided by the free market and those secured by local authorities, those services must necessarily overlap. Subsection (3) restricts the policy-making duties of local authorities to those services which would not otherwise be available and the securing of such services. However, subsection (7) significantly provides powers to take measures to promote:
"the availability of public passenger transport services other than subsidised services and the operation of such services, in conjunction with each other and with any available subsidised services",
and
"the convenience of the public in using all available public … transport services (whether subsidised or not)".
By amendment to subsection (3) the duties under subsections (1) and (2) and the power under subsection (7) are drawn more sensibly together. In particular, authorities would be able to take a view on the requirements of the area as a whole on formulating their policies and so, where appropriate, develop measures to promote co-ordination of services, joint publicity and marketing for services in a particular area, and so on.
Examples of where such powers might be used could involve the extension of bus services to railway stations and the co-ordination of bus and train timetables, or in rural areas the provision of subsidised feeder bus services to commercial trunk routes, perhaps with a through ticketing facility to promote interchange and through travel.
The second amendment deals with the deletion of subsection (8). This is necessary because that subsection effectively nullifies much of the potential benefit of subsection (7). If we consider an example, it might be this: if a county council decides to ask a bus operator to co-ordinate his services with a railway service to provide a link from a village to a large town or city, negotiations will take place between county officers, the bus company and British Rail. Let us suppose that the bus service is operating without subsidy and that all parties agree that the necessary changes can be introduced without cost to the council. The council therefore appears to have succeeded in properly using its powers to promote the convenience of the public and secure the operation of services in conjunction with each other.
However, another operator might complain that he already operates, or is considering operating, a direct route between the village and the large town or city

949
without using the rail link service. In this case the county council appears, in terms of its duty under subsection (8), to have inhibited competition as it has promoted the operation of services in conjunction that threaten the success of the second operator's service or proposed service. Many authorities will therefore decide that their powers under subsection (7) are very restricted and the intended effect will not be realised. I hope the Minister will consider this carefully and give an explanation if he is not willing to agree. I beg to move.
Lord Belstead: The restriction on the scope of the duties imposed by Clause 61(3) does not in any case apply to the powers contained in subsection (7) and, for that reason, the first of the noble Lord's amendments really is not necessary. If Lord Carmichael's concern is that councils should formulate policies about the use of the power in subsection (3), then I can assure him that nothing in the Bill prevents them from doing so. Since subsection (7) is a discretionary power, it would not be appropriate to require authorities to formulate policies about its use. The sum total of that rather convoluted reply of mine is that this amendment, so far as the first of the noble Lord's amendments is concerned, really is not necessary because the duties imposed by subsection (3) do not apply to subsection (7).
The noble Lord went on and put the case that Clause 61(8) operates unfairly upon subsection (7). I think that all I can say at this stage is that I would like to look carefully at the example which the noble Lord gave. As the noble Lord will know from the Notes on Clauses, the purpose of subsections (7) and (8) of Clause 61 is to give local authorities broad powers to promote public transport provided that they do not favour one operator at the expense of another. I could think of many examples (and I am sure that other noble Lords could do so) of what would happen to jeopardise the main objectives of this Bill if we did not have subsections (7) and (8) put together.
The noble Lord gave an example of the way that he felt it would work unfairly. If the noble Lord will allow me to do so, I should like to look at the specific example that he gave, but as it stands at the moment I think that subsection (8) is necessary in conjunction with the power in subsection (7).
Lord Carmichael of Kelvingrove: I thank the Minister for that helpful answer. It appears to me from the example that there is a certain unfairness because of a lack of evenhandedness. Perhaps the Minister will look at it and come back. May I ask that, when he is looking at it, he will appreciate that this amendment and the others relating to the powers and duties of elected local authorities have been specifically related to non-metropolitan authorities pending the final passage of the Local Government Bill, and that it will be necessary for us to review at Report the corresponding provisions for the metropolitan authorities. I would let him know that this was specifically aimed at the non-metropolitan authorities at this stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Deputy Chairman of Committees (Lord Ampthill): Before calling Amendment No. 208CA, I would remind the Committee that, if it is agreed to, I cannot call Nos. 208D, 208E or 208F.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 208CA:
[Printed earlier: col. 902.]
The noble Lord said: I spoke to this with Amendment No. 174W. I beg to move.
On Question, amendment agreed to.
The Deputy Chairman of Committees: I cannot call Amendments Nos. 208D, 208E or 208F.
Following is the text of the amendment (No. 208CA):
Page 60, line 1, leave out subsection (4).
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 208G:
Page 60, line 22, after ("provision") insert ("for their area").
The noble Lord said: This is a technical amendment. The power of PTEs and councils other than district councils to subsidise services is limited to services provided "for their area". This technical amendment places a similar limitation on district councils' powers. I can assure noble Lords who have the district councils' interests at heart, that this amendment does not limit their powers in an unfair way. No responsible council would subsidise services which were not "for their area". The amendment simply ensures consistency for all councils. I beg to move.
On Question, amendment agreed to.
[Amendments Nos. 209, 209A, and 209B not moved.]
9.30 p.m.
Lord Sandford Lord Sandford moved Amendment No. 210:
Page 60, line 25, after ("council") insert ("or a non-metropolitan district council").
The noble Lord said: On behalf of the noble Baroness, Lady Vickers, I beg to move Amendment No. 210 and at the same time to speak to Amendment No. 211.
Amendment No. 211: Page 60, line 40, after ("be)") insert ("of a district council or").
I am glad to be able to tell the Committee that not only do I have the noble Baroness' amendments but I also have the reasons behind them, and as I was successful in getting one amendment accepted without having to explain the reasons, I now have very high hopes of getting the rest.
The Bill at Clause 61(6) quite properly gives concurrent powers to the district to subsidise services in the same way that the counties can. For instance, in Devon (which is where the noble Baroness has very strong interests, as I have myself) this is a power which is used at the moment because the districts do the subsidising in cities like Exeter, Plymouth and Torbay and the shires cover the rest of the county. That is successfully provided for in Clause 61(6), but if the district is to get good value for its money when placing its subsidy, it will be necessary for it to have the

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complementary concurrent powers which are provided for the counties in Clause 61(7), governed by Clause 61(8). The powers of Clause 61(7) are complementary to the concurrent subsidising power, and therefore it is logical for the districts, if they have the subsidising power, to have the complementary supporting power. It just seeks to ensure an even application of the Bill in shire counties where shire districts of the character of Plymouth, Exeter and Torbay, will be active in service subsidies. This is a probing amendment, and I beg to move.
Lord Belstead: I recognise, and indeed the Bill recognises, that district councils in England and Wales, notably the fifty or so with their own bus undertakings, have a special role in public transport matters. The Bill gives district councils in England and Wales the power to subsidise services, and I trust that my noble friend will note that attempts in another place to amend the Bill to bring the exercise of that power under the control of county councils has in fact been resisted by the Government. We think it right that district councils which have experience of public transport in their areas should be able to subsidise services and should not have to seek the county's permission before doing so; but I have to say that the present amendments which my noble friend Lord Sandford is dealing with go a good deal further. Indeed, they go against the established allocation of functions in public transport which was brought into existence under the Local Government Act 1972—an Act which I seem to remember passed into law at a time when my noble friend was working as Parliamentary Under-Secretary in the Department of the Environment in the Government of that day.
Since 1974 the county councils have had the primary responsibility for public transport in their areas. Accordingly, the Bill places a duty on county councils to secure services to meet public transport requirements within their area and, in addition to the subsidy power it gives, which is contained in Clause 61(5), it gives them the wide-ranging power in subsection (7) to promote the availability of services and the convenience of the public. Many district councils would doubtless welcome the power, but I think that perhaps fewer of them would welcome the duty.
We are continuing a long-established division of responsibilities in this Bill and giving the counties the powers they will need to carry out their duties. The power and the duty go together and, if my noble friend will forgive me for saying so, I do not believe it would be right to extend this wide-ranging power to district councils. My noble friend is probing and I must say, for the reason I have given, I hope that he will not press the amendment further.
Lord Sandford: I shall not take up time on it but, if I may say so, I think that my noble friend on the Front Bench has completely missed the point. The duties of the county councils are set out at Clause 61(1). The power—that is to say, something which they can exercise if they want—is properly given, and this is an innovation which is welcomed, at Clause 61(6), to the district councils in areas such as Exeter, Torbay and Plymouth and whether they run buses themselves is
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neither here nor there. It is any authority of that kind of substance and category which should have the power and which has been given the power in the Bill.
All these amendments are asking for is that the supplementary power contained in Clause 61(7) should be added, because just having the power to subsidise without having the additional power which the counties need to supplement it in various ways is not sensible. I shall not spend any more time on this now, but I would ask my noble friend to have a look at it between now and Report stage. Meanwhile, I beg leave to withdraw the
amendment.
Amendment, by leave, withdrawn.
Lord Belstead Lord Belstead moved Amendment No. 210ZA:
[Printed earlier: col. 912.]
The noble Lord said: This amendment is consequential on Amendment No. 174A. I beg to move.
On Question, amendment agreed to.
Following is the text of the amendment (No. 210ZA):
Page 60, line 36, after ("public") insert ("(including persons who are elderly or disabled)")
[Amendments Nos. 210A and 211 not moved.]
Lord Belstead Lord Belstead moved Amendment No. 211YA:
Page 60, line 43, at end insert—
"(8A) It shall be the duty of any council, in exercising or performing any of their functions under the preceding provisions of this section, to have regard to the transport needs of members of the public who are elderly or disabled.")
The noble Lord said: I have already spoken to this amendment on Amendment No. 174A. I beg to move.
On Question, amendment agreed to.
Viscount Ingleby Viscount Ingleby moved Amendment No. 211ZA:
Page 60, line 43, at end insert—
("(8C) It shall be the duty of the authority in exercising its duties and powers under this section to have regard to the public transport requirements of the elderly and disabled in respect of—

(a) the services to be provided;

(b) the types of vehicles to be used; and

(c) the facilities to be provided at stops and terminals.

(8D) It shall be the duty of each operator of registered local services in the area to co-operate with the authority in performing its duty under subsection (8C) above.")
The noble Viscount said: In moving this amendment which stands in the names of myself, the noble Baroness, Lady Elliot, the noble Lord, Lord Henderson of Brompton, and the noble Baroness, Lady Stedman, may I first apologise on behalf of the noble Baroness, Lady Elliot, who has just had to leave the Chamber in order to catch a train. This amendment spells out in a little more detail the purposes which we welcomed so much in the earlier amendment from the Government. It spells out the needs of the elderly and disabled in a little more detail, because these are very important. Perhaps at the end of the third line of the amendment, the word "including" would be better than "in respect of".
The second half of the amendment would put a duty on each bus operator to co-operate with the local

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authority in performing its duties towards the elderly and disabled under this clause. This would be just a gentle prod, to make sure that the needs of the elderly and disabled are not overlooked by the bus operator. It would start a dialogue between the operator and the local authority, without which the duties of the local authority, which the Government have already conceded, could be to some extent frustrated by the bus operator. Nothing at all specific is mentioned in this amendment, because what, if anything, is necessary will vary greatly from place to place and in different parts of the country.
The concept of putting a duty to co-operate on someone is not unknown to the Government. I believe that it found its way into the Local Government Act which has recently passed through your Lordships' House. So I hope that the Government will consider carefully the need to put some kind of obligation on the bus operator, just so as to give him a gentle prod and to start a dialogue, and to make sure that the needs of the elderly and disabled are not overlooked by him. I beg to move.
Lord Henderson of Brompton: Perhaps I may briefly support this amendment. I do not think that it is necessary to talk to the first part of the amendment, subsection (8C), because that has already been amply filled by the admirable amendments moved by the Minister, for which we are very grateful indeed. However, there is a point in subsection (8D) to which I hope the Minister will address himself. This is the concept of a duty on the operators to co-operate. This is very much less than we have been asking for. I wonder whether the model in the Local Government Act might be followed. I know that nothing is precisely the same, but a Government amendment imposed on the local authorities a duty to co-operate in the abolition period. I wonder whether something could be adapted from that Bill; otherwise there will not be any kind of imperative on the operators to co-operate with the local authorities.
Incidentally, Amendment No. 240B, which I suppose will be moved later on, also concerns co-operation.
Amendment No. 240B: After Clause 76, insert the following new clause:
("Duty of public passenger transport operators to co-operate with local authorities.
.—(1) It shall be the duty of public passenger transport operators to supply to the authority responsible for passenger transport services in an area in accordance with the provisions of section 57 or section 61 of this Act (as may be appropriate) such information as the authority may reasonably require for the purpose of carrying out its duties.
(2) Information with respect to any particular service or business which is given to an authority in accordance with subsection (1) above shall not be disclosed except:—

(a) with the consent of the person for the time being carrying it on; or

(b) for the purpose of the discharge by any person of his functions under any enactment which also applies to the person or body which supplied the information; or

(c) with a view to the institution of, or otherwise for the purposes of, any legal proceedings pursuant to or arising out of any enactment (including proceedings before the Transport Tribunal),

and any person who discloses any information in contravention of this subsection shall be liable on summary conviction to a fine not exceeding level 4 on the standard scale.
(3) For the purposes of this section "authority" means—

(a) in a metropolitan county in England or the Strathclyde Passenger Transport area in Scotland, the Passenger Transport Authority and the Passenger Transport Executive for the area;

(b) in a non-metropolitan county in England or Wales, the County Council;

(c) in Scotland, otherwise than in the Strathclyde Passenger Transport Area, a Regional or Islands council.").

I wonder whether the noble Lord the Minister will kindly consider Amendment No. 240B in conjunction with the second part of this amendment, which naturally enough we do not intend to press at this stage.
I should like to bring in one matter by a side wind. It is all a package on the elderly and disabled. I know that the Minister has very kindly said that a code of practice will be issued in due course. Here again I wonder whether at the next stage of the Bill the noble Lord, Lord Belstead, will consider whether or not it is possible to make the code of practice statutory, as indeed it was made in the Food and Environment Protection Bill with which we have recently been dealing. I think that was in Clause 16. I do not think that I have had a very pleasant look from the Minister following that request, but nevertheless I shall be delighted if he will consider it.
Perhaps I may ask the Minister two questions about the operation of the amendments which he has just moved to Clause 61 and Clause 57. They are two quite simple questions. If the noble Lord finds it is too late at night to answer them now, perhaps he will be able to do so at another stage or in writing. I am slightly puzzled how the new duty imposed on the local authorities under subsection (8A), which has been inserted into the Bill under Amendment No. 211YA, can be reconciled with the existing duty of local authorities under subsection (8),
"so to conduct themselves as not to inhibit competition".
What will happen if there is a conflict between that duty,
"so to conduct themselves as not to inhibit competition",
and the new duty in relation to the elderly and the disabled? Which would prevail in the event of conflict? I see that Clause 101 applies the Restrictive Trade Practices Act to road passenger transport operators. That is fine, but I assume that work of the Office of Fair Trading is not and cannot be applied to local authorities.
My second question is of the same order. The new subsection (8A) applies to previous subsections. I am not sure what would happen in the case of subsection (7). There, the new duty is imposed as it is under subsection (8A) and it applies to the preceding subsection also. Subsection (7), which is one of the preceding subsections, is permissive. It says that the county councils "shall have power" and not a duty. Subsequently, under subsection (8), the county council is given "the duty".
What happens where one has a permissive power and a duty is added? Presumably if one does not choose to exercise the permissive power then the duty does not apply. It is a puzzle to me and I am positing one possible explanation which may or may not be right. I shall be grateful if at some time, sooner or later, the Minister will kindly consider that point and give me a reply.
9.45 p.m.
Lord Belstead: The Government fully sympathise with the feeling which has been put forward by the noble Viscount, Lord Ingleby, in this amendment; that the powers of authorities to co-ordinate the provision of all services, commercial and subsidised—which, as I explained earlier this evening, is now established by the Government amendments—should be backed up by a duty for all operators to co-operate with the authorities in the use of those powers.
I believe we must ask ourselves what is the best way of achieving that objective. We have a choice. Either we make a statutory requirement, as this amendment proposes, or we can ask local authorities to secure co-operation on a voluntary basis through active promotional work and close contact with individual operators and their staff.
There are two reasons why I believe the second approach is to be preferred. The first is the very real fear, which the Government have expressed on several occasions previously, that the statutory requirement may in some cases serve to diminish the pool of resources on which public transport ought to be able to draw under deregulation. The fact is that the nature of the requirements which are being proposed in this amendment would be broad, and indeed so broad and general, as to create very real anxieties for the prospective operator—particularly the very small operator who potentially has a very important role to play in the development of services, especially in rural areas.
The search for the best in all circumstances —particularly when thinking about the needs of elderly and disabled people—could in this case indeed prove to be the enemy of the potentially good operator who feels that he simply cannot get on in the market because too much is being demanded of him so far as facilities are concerned.
Secondly, and I think more importantly, I suggest to the Committee that co-operation is likely to be more effective when it is granted on the basis of free will and mutual agreement. Operators will be very well aware of the large proportion of their potential passengers who are likely to experience difficulty in travelling by public transport. They will have every incentive to co-operate in measures designed to help such people. It has been said on more than one occasion in our debates that a considerable percentage of the travelling public are elderly or disabled.
I may add that it is not the Government's intention that authorities should be left to pursue those functions entirely alone and without any guidance. On the contrary, I have already indicated that the Government accept the need for a statutory advisory body which will have wide coverage in all fields of public transport. That was the concept discussed at the meeting which the noble Viscount, Lord Ingleby, arranged with my right honourable friend the Secretary of State, and it was the subject of the amendment which my noble friend Lady Lane-Fox succeeded in putting to the Committee at its sitting earlier this week.
We then have the undertaking of my right honourable friend that he will seek changes in the construction and use regulations, and in the driver's regulations.
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There is then the question of the code of practice to try to see that operators with older buses who will not be caught by the construction and use regulations will have good guidance on what they can do—particularly in an easier way in some cases—in order to make their vehicles suitable for elderly or disabled people. The reason that I frowned when the noble Lord, Lord Henderson, made his suggestion that the code of practice should become statutory (as the one in the Food and Environment Protection Bill has become) was that I suddenly felt that there was very little which escapes the eagle eye of the noble Lord. It was for that reason only, and it is certainly a point I shall be glad to look at before the next stage of the Bill.
These add up to quite a lot of movement on the part of my right honourable friend the Secretary of State. He has tried to respond to points put to him ever since the Bill started in another place in order to endeavour to include provisions which will facilitate travel for elderly and disabled people. On top of that there are the amendments which the Government moved into the Bill earlier this evening which your Lordships have been most generous in accepting.
The noble Lord, Lord Henderson, asked two specific questions about those amendments. He first asked: how is it possible to have a duty with regard to the elderly and disabled without jeopardising the freedom for competition which is written into subsection (8)? My answer to that is that we have gone out of our way to write it into the Bill so far as the elderly and disabled are concerned. It will, of course, apply only to subsidised services and it will mean that, where a local authority is receiving tenders for a subsidised service, operators will be able to tender but in certain cases—for instance, where a service is running close to a housing estate on which there are many elderly people—all operators will have to meet certain stipulations when tendering. This will operate in the same way as if any noble Lord were to put out to tender the construction of a building and wanted the walls to be a certain colour. The invitation to tender would go to a whole raft of different builders but that stipulation would be included in all the tender documents.
The noble Lord, Lord Henderson, also asked about the relationship between subsections (7) and (8). This is ground which the noble Lord, Lord Carmichael and I trod a short while ago. I do not think that there is any difficulty in subsections (7) and (8) standing together in the Bill. The purpose of subsection (7), taken with subsection (8), is to give local authorities broad powers to promote public transport, provided they do not favour one operator at the expense of another. If I may look at what the noble Lord, Lord Henderson, said and write to him if I feel that I ought to add to that rather brief answer, perhaps he will be content for this evening.
I am saying to your Lordships' Committee that for the Government's part we believe that all the factors we have tried to promise to write into the Bill, or have promised that we will set in hand, should help authorities in carrying out their functions. We are worried about the present amendment, which calls for co-operation between operators and their authorities, for the reasons I have already given. I believe it is possible that the amendment which the noble

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Viscount, Lord Ingleby, has moved could be the pursuit of the best, yet finding out that, in the end, it is the enemy of us all; that it keeps operators out of public transport when what we want is to encourage operators into it.
I give the noble Viscount an undertaking because I would not wish him to feel that I am trying to brush past an important amendment. If the noble Viscount together with other noble Lords, wish to discuss this matter between the Committee and the Report stage, of course I shall be very ready to conduct further discussions. But so that I do not mislead him I must explain that this evening we have put into the Bill Government amendments which make it clear that the Government believe that they can go so far as giving authorities the right to stipulate certain provisions when they are letting their subsidised services, but they do not give authorities the right to go further than that when they are dealing with the commercial services.
That is as far as we feel that we can go at the present time. If the noble Viscount wishes to discuss the matter with me to see whether he can persuade me to go any further, I should be very ready to do so, but I warn him that I feel that we have gone just about as far as we can down this particular road.
Earl De La Warr: Before my noble friend says his final piece, perhaps I may say that it was clear to me that the Government felt really nervous about this subsection (8D). They seemed really to feel that it would inhibit small operators from coming in. I took the view that this was really taking their new doctrine to an extreme which was almost ridiculous. We know that the provision of the kind of vehicle into which at least the ambulatory disabled can enter exists to some extent, but it will be a long time before vehicles with underfloor engines and therefore high floors and three steps up will disappear. In due course we shall probably influence the manufacturers to act on this and so the time will come when the lot of the majority of the disabled is very much better. But when they say that the clause goes too far because it might interfere with this precious policy of deregulation, it seems to me that the Government are almost making fools of themselves in their obsessive regard for sticking so tightly to their Bill that they refuse even a clause such as this.
However, I am very glad that my noble friend has said that he will discuss it and I urge my noble friend Lord Ingleby to do his very best to persuade the Government out of this tight little concept to which they are wedded, because we really must try to make some gentle progress in this matter.
Viscount Ingleby: I should very much like to thank those noble Lords who have supported this amendment; namely, the noble Lord, Lord Henderson and the noble Earl, Lord De La Warr. I should also like to thank the Minister for the sympathetic way in which he has responded to this amendment. I should like to consider most carefully what he has said and almost certainly I shall take up his offer to discuss this matter further.
Perhaps I may ask just one question. The noble Lord mentioned the code of practice which obviously
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will be a very important factor. Can the noble Lord the Minister say whether this will be in operation by the time the Act comes into force? Having said that, I should like to withdraw this amendment, to consider carefully what has been said and possibly to come back to it at a later stage.
Lord Belstead: May I just say to the noble Viscount, Lord Ingleby that I do not think the code of practice can possibly be in operation before the beginning of the new year, which of course is when the transitional period begins—when the plans of the local authorities require to be made by my right honourable friend. As to whether the code of practice could be in effect by the beginning of October, which is the moment of deregulation, I should be more hopeful about that. But I should perhaps like to have a word about that with the noble Viscount a little later on.
Viscount Ingleby: I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 21IZB not moved.]
10 p.m.
Lord Belstead Lord Belstead moved Amendment No. 211ZBA:
[Printed earlier: col. 912.]
The noble Lord said: I spoke to this with Amendment No. 174A. I beg to move.
On Question, amendment agreed to.
Following is the text of the amendment (No. 211ZBA):
Page 61, line 15, after ("Act") insert (", other than services provided wholly or mainly to meet the needs of members of the public who are elderly or disabled.").
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 211ZC:
Page 61, line 20, leave out from ("agreements") to end of line 23 and insert ("under which any person undertakes to provide a public passenger transport service of any description on terms which include provision for the making of payments to that person by that Executive or council").
The noble Lord said: This is purely a drafting amendment. Clause 94 allows the provision of travel concessions to be financed through service subsidy agreements, where there is no other travel concession scheme for the eligible group in question. That clause makes it possible to include provisions for reduced or concessionary fares to be paid for within a service subsidy agreement. The amendment we are considering here changes the definition of service subsidies so that agreements providing for such payments are governed by the provisions on tendering in Clauses 83 to 86.
This amendment is necessary to avoid any confusion arising, as otherwise Clauses 83 to 86 might apply only to that part of the agreement which secured the running of the service but not that to secure reduced or waived fares for concessionary fares, though these parts need not be separately identified. I beg to move.
On Question, amendment agreed to.
Clause 61, as amended, agreed to.
Lord Belstead Lord Belstead moved Amendment No. 211ZCA:
[Printed earlier: col. 902.]
The noble Lord said: This is consequential on Amendment No. 174W. I beg to move.
On Question, amendment agreed to.
Following is the text of the amendment (No. 211ZCA):
After Clause 61, insert the following new clause:
("Consultation and publicity with respect to policies as to services.
.—(1) When considering from time to time the formulation of policies for the purposes of section 61(1)(b) or (2)(b) of this Act, any council to whom either of those provisions applies shall consult—

(a) with every Passenger Transport Authority, county council or regional or islands council whose area may be affected by those policies; and

(b) either with persons operating public passenger transport services within their area or with organisations appearing to the council to be representative of such persons;

and where the council's area is in England and Wales the council shall also consult the councils of districts comprised in their area.
(2) As soon as practicable after any occasion when they formulate new or altered policies for those purposes, any such council shall publish a statement of all policies so formulated by them on that or any previous occasion which they propose for the time being to follow in the performance of their duty to secure services under section 61(1)(a) or (as the case may be) under section 61(2)(a).
(3) When any such council publish such a statement, they shall send a copy of the statement—

(a) to each Authority or council whom they were required to consult under subsection (1)(a) above; and

(b) to each of the persons or (as the case may be) organisations whom they consulted under subsection (1)(b) above;

in relation to the formulation of their policies on the occasion in question.
(4) The council shall also—

(a) cause a copy of the statement last published by them under subsection (2) above to be made available for inspection (at all reasonable hours) at such places as they think fit; and

(b) give notice, by such means as they think expedient for bringing it to the attention of the public, as to the places at which a copy of that statement may be inspected.")

Lord Tordoff Lord Tordoff moved Amendment No. 211ZD:
After Clause 61, insert the following new clause:
("Designated areas.
.—(1) Where a county council, regional council or islands council (as the case may be) in exercising its duties and powers under section 61 of this Act is satisfied that the availability of public transport services will thereby be enhanced or the expenditure on the provision of such services reduced, the council may resolve to designate the whole or any part of its area as being subject to a comprehensive service scheme (being hereinafter known as "a designated area".").
(2) Within a designated area a county council, regional or islands council shall draw up a scheme to secure the overall provision of public passenger transport services by competitive tender, and enter into such agreements under section 83 of this Act as are necessary for their comprehensive provision.
(3) A scheme made under subsection (2) above shall come into effect on such date (being not less than nine months and not more than 12 months after the date of the resolution) as shall be specified in the resolution, being either the day after the end of the transitional period or a day not earlier than 12 months after the end of the transitional period as defined in paragraph 1(1) of Schedule 5 to this Act.
(4) Where a resolution has been made in accordance with subsection (1) above—

(a) the authority shall within 7 days of the relevant resolution notify the traffic commissioner,

(b) the authority shall invite tenders under section 83 of this Act for such routes or combinations of routes within the designated area as the authority considers appropriate for the purposes of the scheme;

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(c) section 61(3) shall not apply within the designated area;

(d) the making of a scheme by a resolution under this section shall not be taken for the purposes of this Act to be conduct on the part of the council that will inhibit competition.

(5) In drawing up a scheme the council shall take into account—

(a) measures to encourage innovation;

(b) fares, through ticketing and marketing of services; and

(c) the provision of services to and from the designated area and adjacent areas.

(6) Where a scheme is in force in accordance with subsection (2) above—

(a) an application for registration of a service under section 6 of this Act shall be accepted by the traffic commissioner only if within 21 days of his notifying the authority of the making of the application the authority gives its written consent thereto;

(b) where a person wishes to register a service within the designated area and the authority do not give their consent to such application in accordance with paragraph (a) above the traffic commissioner shall require the authority to make representations within two months showing why they consider that the operation of the service proposed to be registered would have an adverse effect on the availability or the cost to the authority of some or all of the services provided within the designated area wholly or partly out of the expenditure of the authority and if he is not satisfied that the grounds of objection are valid he shall direct the authority to give their consent to the registration and shall thereupon register the service.

(7) The Secretary of State may make an order containing such supplementary, incidental and consequential provisions as he thinks necessary or expedient for the purposes of the application of this section and in particular (but without prejudice to the generality of that) may include provision—

(a) modifying Schedule 5 to this Act in relation to schemes brought into effect under this section; and

(b) for the lapsing of the registration of a service made under section 6 of this Act before the scheme has effect.

(8) Regulations may be made under this section as to—

(a) such additional procedures as may be necessary in determining any area to be designated; and

(b) any procedures to be followed with regard to the implementation of a scheme.").

The noble Lord said: This amendment which stands in the names of my noble friend Lady Stedman and myself could call for a Second Reading speech, which I am sure would not be welcomed by the Chief Whip, who is looking at me in a slightly quizzical way at the moment, and I do not intend to make a Second Reading speech. But questions have been asked from the Government Back-Benches about what other options there are for people opposing the Bill and what other ideas they have. This amendment offers an alternative which can be used as an option, particularly in shire counties, for situations where the Government proposals may not fit the situation.
I do not need to rehearse the problems that we have in many ways with the Government's Bill. Many of us do not accept that market forces are necessarily the total answer to everything, and the Government's reliance on them may be taking an unnecessary risk in some areas. The Government have set their face against cross-subsidy and assume improved efficiency if cross-subsidy is got rid of. That could be wrong or it could be over-ambitous in certain areas. Nobody has been able to determine how market forces will work in meeting customers' needs. We dealt with that earlier in terms of consumer protection. It is possible that some of the cost savings offered in the Government's scenario could be offset by a fragmented approach and little bits of services which would cost a lot to provide could be left over to tender.
I emphasise that this amendment is an option. It was an option which was referred to by the Committee in another place looking at the Bill. It was an option which was put forward by one of the honourable friends of the noble Lord the Minister in another place, although I think in a slightly modified form. Perhaps I may direct the Committee's attention to the first two subsections of the amendment. If I may paraphrase it, what it tries to say is that where a county council or other similar council is satisfied that the availability of public transport will be enhanced or expenditure reduced, it may as a result designate the whole or part of its area as being subject to a comprehensive service scheme known as a designated area. Within that designated area a county council or a similar council shall draw up a scheme for the overall provision of passenger transport by competitive tender.
It is a way of ensuring competition, of which we on these Benches are not afraid, but competition through a tendering process rather than competition on the road. As we have heard so often in the earlier part of this debate, one of the problems of competition on the road is the kind of race to the bus stop that has been seen in some of the experiments that have already taken place.
The Government have put up a certain amount of attack on this comprehensive competitive tendering, as it has come to be known. It has also been attacked by those people who believe that the status quo has to be maintained under any circumstances. However, it is clear that the status quo cannot continue and there is no doubt that the threat of competition has stimulated a certain amount of cost cutting and innovation. However, the Government's paper on comprehensive competitive tendering is, I believe, disingenuous and many of the criticisms that have been ascribed to this system apply to a significant extent to the Government's own proposals for limited competitive tendering for loss-making services.
For instance, the Government say that franchises offer protection to the incumbent since it is in the local authorities' interests to maintain continuity of contract. They say that franchises are an abuse of monopoly power; that performance specifications in the contract cannot accurately reflect the customer's wishes; that invitations to tender are likely to be biased towards the incumbent; that the criterion for finally awarding the contract will be artificial and that franchises will tend to use imprecision in the contract as room for manoeuvre and/or to press for renegotiation, and so on. I hope that the Government are communicating these doubts to the DHSS because, in so far as these arguments apply at all they apply to the franchising of hospital cleaning.
However, in the case of buses the pros and cons of comprehensive competitive tendering must be balanced quantitatively against those of the present system and those of the Government's proposals. If one does that, CCT comes out as a clear winner. It ensures the benefits of competition but it minimises the dangers inherent in the Government's proposals. Furthermore, many of the problems attributed to CCT can be overcome if the contracts are not homogeneous. Thus a mosaic of short and long
962
contracts covering large and small networks of services could be effective.
I could go on at some considerable length but I dare say that the amount of attention that I am likely to receive from the Committee at this stage of the night is not likely to be great. However, I felt that it was right to introduce this matter at this stage because I think it is a serious alternative in certain areas. I stress that it is a matter that is of interest in only certain areas and particularly in shire counties.
The Association of County Councils has now come round to the view that this is worth supporting. I was interested to receive a letter from Lancashire County Council the other day, who have taken a very fundamentalist approach to this whole problem until recently but who now feel that comprehensive competitive tendering may be the answer to their problems, where they have had an integrated network, which I have seen and I greatly admire—although I do not greatly admire some of the things that Lancashire County Council have done in the past in trying to oppose the buses Bill and in spending public money in the run up to the county councils. Nevertheless, they have now come round to the view that this is something that is worthy of consideration in preserving the integrated services which they have had across the county.
Kent County Council, as the Minister will doubtless know, has been very strongly in favour of this for some considerable time, as has Cambridgeshire. Many of my friends in Cheshire have also been pressing me to support this concept. It is a concept. It needs refining. It is however a concept that we should consider perhaps in more detail. It is an idea that is beginning to be seen as having more merit than the Government gave it credit for in the early stages. I believe that between now and Report stage it is something that we should all think about. My hope is not that this will destroy the Government's Bill. This is certainly not a wrecking amendment. It is however an option that I believe the Government should consider particularly in shire counties, but only giving the option to those shire counties that wish to adopt it. I beg to move.
Lord McIntosh of Haringey: As the noble Lord, Lord Tordoff, says, it is unfortunate that an amendment of this significance has to be debated at this time of night on the fourth day of the Committee. Perhaps it is the fault of those of us who have been putting down amendments to the Bill as it has proceeded. I hope that noble Lords will allow me to finish the sentence. It has a rather different end to that which some noble Lords on the Government Front Bench might expect. We have done the Government the credit of assuming that they took their principles seriously and that they had thought out seriously the implications of the combined deregulation and privatisation that is the theme of the Bill. We have taken those intentions at face value. In many amendments to many clauses and many subsections, we have sought to provide safeguards for the travelling public or to find out how seriously the Government had actually thought about the problems that they were getting into by this series of untested adventures into privatisation and deregulation.

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I have to say that experience so far is not encouraging. Experience is that the Government have not thought about the implications of doing all these things together. They are not prepared to undertake adequate experimentation or trials. They are not prepared to do anything other than to assert that the benefits of integrated transport services are to be achieved. Indeed, this is not even as much as an assertion. It is what Bernard Shaw called mere asseveration. There is not even an attempt to put any evidence behind it other than the pathetic and usually irrelevant experiments in Hereford, Norfolk and Devon. It is for that reason—having been extremely sceptical about comprehensive competitive tendering at the outset—that I believe the noble Lord, Lord Tordoff, may be right. It may be that, not now, but at Report stage, a concerted attack may have to be mounted by those who are worried about the whole progress of the Bill and lack of adequate answers to serious questions about the Government's proposals.
The amendment, as proposed, is extremely cautious. It talks about designated areas. It leaves it to the local authorities concerned to decide whether they want to designate all or part of their areas. It is basically confined to the shire counties. It provides even for the option of comprehensive competitive tendering at the outset or of delaying it for a year, if I understand the amendment correctly. So there is not even the risk of authorities rushing into a scheme without adequate consideration. But, as the noble Lord, Lord Tordoff, has said, this is a way which might have to be the right way for some parts of the country to achieve the objectives of competition and yet maintain the benefits of integration, the benefits not of outside planning but of the use of an integrated network of transport services, not just the buses, the commercial services or the subsidised services, but all of the ways in which people seek to move about our country.
I believe that the noble Lord is right not to take the matter any further at this stage, and clearly a great deal of further thought will be required if we on these Benches are to put our names to any comparable amendment at the Report stage. However, the noble Lord is right to raise the matter now and it is right that the Government should take it seriously.
10.15 p.m.
Earl De La Warr: For all the reasons which the noble Lord, Lord McIntosh, has put forward so well, I too am extremely grateful to the noble Lord, Lord Tordoff, for putting this on the record. It is right that it should be there and we may well return to it.
Lord Monk Bretton: I also have some sympathy with this amendment. I do not know whether it is the right approach and I do not know what my noble friend the Minister will say about it in reply; but I do not think that it will be too favourable. However, it is further evidence that the Bill creates a problem for rural areas, and particularly for semi-rural areas —those rural areas that are near pretty large conurbations. Because there has been a higher degree of cross-subsidy, there are doubts whether economies in operation can fill the gap, partly because in some of those areas very substantial economies have already been made.
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Therefore, the results of the Bill as it affects these rural areas are—and I am sure that I am not alone in thinking this—evidently likely to be patchy. So I trust that my noble friend the Minister will forgive my pose as a doubting Thomas because I am concerned about these rural areas. I believe that by being a doubting Thomas I am reflecting the view of the rural public about this, and I am quite sure that the more I can urge my noble friend the Minister to do by way of tackling this problem or by dispelling the doubts, the better.
We have tried various amendments on what I call the pragmatic theme. The amendments involving the pragmatic theme are those which retain a certain amount of cross-subsidy somewhere: on-route cross-subsidy or off-route cross-subsidy. This one involves some off-route cross-subsidy. We have done that because it is an approach that is cheaper from the point of view of the public purse. So far none of these proposals has found favour, but we are anxious about what my noble friend the Minister and the Government intend to do about this problem. There are the gravest doubts about the proposal to solve it: whether an extra sum of £50 million over four years is likely to be enough. Therefore, I hope that my noble friend the Minister will be able to say something on these matters when he replies to this amendment.
Lord Belstead: I understand why the noble Lord, Lord Tordoff, has moved this amendment, and I do not object at all that we should have a debate on the concept of comprehensive competitive tendering. In some respects it would be an advantage over the present arrangements under which local authorities often make bilateral arrangements with one public sector operator, often resulting in a pattern of services which makes neither commercial sense nor reflects the social needs of the area, and that sometimes happens.
However, in many respects I think that franchising would be a step back from the present system. It would put into the hands of local authorities responsibility for decisions about which services the customers should have and which they should not. It really would virtually remove the possibility of operators starting services on their own initiative in the areas which would be designated under the amendment.
My noble friend Lord Monk Bretton has been saying—and I understand his concern; he has talked to me about it so far as the rural areas are concerned—how are the Government going to overcome what my noble friend called the problem of deregulation? First, experience in just about every sector of our economy tells us that when decisions are taken by many different people in response to market pressures the customer usually does far better than when decisions are concentrated in the hands of a few people who do not have direct experience of providing the services themselves.
The sheer complexity of this concept of franchising would be enormous. Most, if not all, the franchises in a given area would have to be let simultaneously so that operators in bidding would know how the various services would relate one to another. The more comprehensive and complex it became, the more difficult it would be for planners to tailor the network to what the customer wanted.

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Enlightened authorities will no doubt seek to encourage new operators into the field and encourage innovation and efficiency in the provision of services, but I do not think anyone could reasonably claim that they could do these things as effectively as the market will when operators have the freedom and incentive to seek out customers and do their utmost to serve them.
One of the main aims of this concept of franchising would be to preserve non-commercial cross-subsidy. If your Lordships will forgive my saying so (and for the record I do), it is a system which has been part and parcel of the steady downward slide of the use of public transport, of buses, in this country on local services, together with the steady increase—indeed, dramatic increase—in public subsidy, not to mention the dramatic increase in fares. I think it is fair to say that cross-subsidy is something which appears to damage the best parts of the market, and in an arbitrary way to affect passengers on different services.
I have to ask now what it is about direct competition which led my noble friend to ask me the question he did, and your Lordships to cast about for an alternative. It has been argued that competition will mean wasteful duplication of resources on the profitable services. But if there is room for more than one operator, why deny the customer that extra choice and extra service? It has been argued that competition will bring instability and unreliability in the way that services are provided. I think those with experience of existing bus services might be forgiven for asking whether that is not more likely to happen when operators have a monopoly than when they are under some competitve pressure.
In any event, the Bill contains tough sanctions to deal with operators who may run unreliable services or behave foolishly on the road. There are also measures, as we know, to sort out problems arising from severe traffic congestion. It has been suggested that competition on the road is unlikely to be fair competition, and that in a free market big operators will soon drive the little ones out of busness. While that may be a problem when competition is limited to a few trial areas, it will not be so when the major operators have a monopoly than when they are under some competitive pressure.
Many people, and your Lordships again this evening, have gone through these arguments and have turned to this concept in this amendment as being an ideal compromise. In reality, I suggest it would be a very unwieldy, centralised system which would perpetuate cross-subsidy and would discourage new thinking. I believe it would deprive the travelling public of the benefits of a free market—benefits which we already enjoy in most other sectors of the economy—and it would do all this in order to avoid competition on the road.
Yet, as I have explained, the Bill contains all the necessary safeguards to deal with any problems which might arise when operators are free to compete with one another. Those who support this amendment believe that the interests of the community will best be served by planning the provision of services and the charge to be made for them in conditions of monopoly. All that is part and parcel of this
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amendment. But the essence of the Bill is the belief that the community will gain most from competition in the market between operators striving to meet the needs of the passengers, subject to the proper safeguards on safety and arrangements to meet social needs. It is not surprising that, having deployed these arguments, I say on behalf of the Government that I do not like the amendment.
Lord Tordoff: Nobody is offering this as the ideal compromise. It is an option. It is an option that might be suitable in certain places. The thought that somehow the county councils of Kent, Cambridge and Cheshire are some wild militant Marxist group which is seeking to subvert the needs of the travelling public by some Marxist concept is beyond comprehension.
The problem that we are worrying about is not in the areas where competition will reduce prices and give better service. It may be that the Government's proposals will do that. It is the devil-take-the-hindmost part of this equation which is worrying. Those areas which are not in the profitable areas are the greatest worry. The idea that somehow we are on a diabolical slide into even more and more expensive subsidisation of services does not stand up in relation to this amendment. There is an element of noncommercial cross-subsidy left, but it is much more transparent under this amendment than it is at the moment. It is that transparency of cross-subsidy which I believe is the control.
It is interesting that as the debate extends on this subject of the CCT more and more people are beginning to see merit in it, not as a panacea or a total alternative to the Government's proposals, but as an option which could be useful particularly in shire counties. I hope that that learning curve will continue and that it might even take in the Government at some stage over the summer period. I have my doubts, but we can all live in hope.
It is getting late, and I do not intend to press this tonight. We shall be back at Report stage, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 62 [Exclusion of powers of certain councils to run bus undertakings]:
The Earl of Caithness The Earl of Caithness moved Amendment No. 211ZE:
Page 62, line 30, leave out ("to") and insert ("(according to the context) to—
(i)").
The noble Earl said: With the leave of the Committee I shall speak to Amendments Nos. 211ZF, 211AZA, 211AZB, 211AZC, 211CB, 211CC, 211CD, 2110E, 211CF, 211CG, 211CH, 211CJ, 211CK, 211CL, 211CM and 242A:
Amendment No. 211ZF: Page 62, line 35, at end insert ("; or
(ii) all property of the council used or appropriated for use and all rights and liabilities of the council subsisting for the purposes of any such activities.").
Amendment No. 211AZA: Clause 63, page 63, line 15, leave out subsection (3) and insert—
("(3) Subject to subsections (3A) and (3B) below, a council's bus undertaking shall be regarded for the purposes of this Part of this Act as forming part of a joint undertaking if the services for the carriage of passengers by road provided in the course of the

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activities of the council's bus undertaking are wholly or mainly provided under any agreement for—

(a) the provision or operation of those services by a body acting on the joint behalf of that council and one or more other councils; or

(b) the operation of those services by any company operating those services in conjunction with services for the carriage of passengers by road provided by that company.

(3A) Subsection (3)(a) above only applies where the agreement provides for the distribution among the parties on its termination of—

(a) all assets, or the proceeds of all assets, used or appropriated for use for the purpose of providing services for the carriage of passengers by road under the agreement; or

(b) all such assets or proceeds excluding only land or the proceeds of disposal of land.

(3B) Subsection (3)(b) above only applies where—

(a) the agreement includes provision for securing that the parties on termination of the agreement hold shares of equal value in assets required to be brought into account on termination of the agreement; and

(b) those assets include all assets so used or appropriated for use.").

Amendment No. 211AZB: Page 63, line 35, leave out ("or arrangements").
Amendment No. 211AZC: Clause 64, page 64, line 7, leave out ("or arrangements as are") and insert ("as is").
Amendment No. 211CB: Clause 65, page 65, line 16, leave out from beginning to end of line 17 and insert ("In any case within section 63(3)(a) of this Act both or all the councils participating in the joint undertaking may").
Amendment No. 211CC: Page 65, line 29, leave out ("or arrangements").
Amendment No, 211CD: Page 66, line 11, leave out from ("case") to second ("the") in line 13 an insert ("within section 63(3)(b) of this Act").
Amendment No. 211CE: Page 66, line 14, leave out ("that party") and insert ("the company carrying on the joint undertaking").
Amendment No. 211CF: Page 66, line 16, at end insert ("by the council concerned").
Amendment No. 211CG: Page 66, line 24, after first ("of') insert—
("(i) all property, rights and liabilities of the body carrying on that undertaking; and
(ii) ").
Amendment No. 211CH: Page 66, line 43, leave out from ("and") to ("share") in line 1 on page 67 and insert (", in any case within section 63(3)(b) of this Act, for the transfer to the company carrying on the joint undertaking of any property, rights and liabilities of the council concerned which are comprised in that company's").
Amendment No. 211CJ: Page 67, line 5, leave out ("any joint body established for the purposes of') and insert ("the body carrying on").
Amendment No. 211CK: Page 67, line 20, at beginning insert ("in any case within section 63(3)(a) of this Act,").
Amendment No. 211CL: Page 67, line 20, leave out ("any joint body established for the purposes of') and insert ("the body carrying on").
Amendment No. 211CM: Page 67, leave out lines 22 to 27.
Amendment No. 242A: Clause 81, page 82, line 7, leave out ("(3) and ").
I am glad to say that this group of amendments is rather less formidable than it may seem. It has a very simple purpose: to clarify the meaning of "joint undertaking" in Part IV of the Bill, which I am sure can only be welcome. I beg to move.
On Question, amendment agreed to.
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 211ZF:
[Printed earlier: col. 966.]
On Question, amendment agreed to.
Following is the text of the amendment (No. 211ZF):
Page 62, line 35, at end insert ("; or
(ii) all property of the council used or appropriated for use and all rights and liabilities of the council subsisting for the purposes of any such activities.")
10.30 p.m.
On Question, Whether Clause 62, as amended, shall stand part of the Bill?
Lord Sandford: We now come for the first time to that part of the Bill which contains the special features for the 50 bus companies run by the municipalities. I had understood earlier from the Chief Whip that he did not want to go particularly late tonight, but if it is the decision to continue I am happy to do so; although I am anxious that all of these six or seven groups of amendments should be tackled fairly thoroughly, and I hope that the Committee will understand if I take a certain amount of time about these topics as we are now reaching them for the first time.
I am moving, as a probing amendment of course since I have no intention of pressing it, the deletion of this clause and speaking at the same time to Amendment No. 211A.
Amendment No. 211A:Clause 63, page 62, line 36, leave out from beginning to ("form") in line 39, and insert—
("Without prejudice to the power of a non-metropolitan district council in England and Wales to provide a service for the carriage of passengers by road which requires a PSV operator's licence, any council who, at the time this section comes into force, are providing any such service (referred to below in this Part of this Act as a council operating a bus undertaking) may at any time apply for and the Secretary of State may make an order empowering the council or (as the case may be) each of the councils to whom the order applies, before the end of the period applicable to that council under the order, to".)
This is because I want to draw my noble friend on the Front Bench to say a bit more about the Government's intentions over the structure of municipal bus companies.
If I can take the Committee back to the White Paper, it stated at 5.10:
"The Government have therefore decided that there should be changes to the structure of public sector operation at the earliest opportunity to ensure fair competition between public sector operators and with the private sector".
Then, a little further on, it says:
"The Government will consult those affected by these proposals about the detailed implications".
Well, no sooner had the consultations begun than, as I explained at Second Reading, they were broken off. Of the three or four options that they had for making the changes which they decided were necessary, the Government have chosen easily the worst. They have proposed that any bus undertaking by a district council should be incorporated into a company owned by the district council.
The purpose of suggesting that Clause 2 should be omitted and Clause 63 should be amended with Amendment No. 211A is to give the district councils the option of retaining the powers that they use at the moment to run bus undertakings and the option to apply to the Secretary of State for an order to form a separate company if that seems the best way of dealing with the situation which is being created by deregulation. I am now asking my noble friend on the Front Bench to comment on the need to take

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municipal undertakings out of direct control of district councils at all and to form them into these separate companies.
The Transport Committee of the House of Commons in their Second Report of 4th March 1985, in paragraph 281 said:
"The formation of the companies does little to promote fair competition and the financial separation of the undertakings from their councils could be achieved without removing the undertakings from direct local control".
I am not seeking on behalf of the Association of District Councils any favourable treatment for municipal operators. They are already subject to the spur of competition and we remain unconvinced by the arguments for the obligatory setting up of municipal operators as companies. But if in the circumstances of a particular area, the council should see advantage in such a course, then enabling powers should be available and that is what is sought in Amendment No. 211A.
But the decisions as to whether to go that way or another way should be taken locally in the light of the differing local circumstances. It should not, I submit, be imposed as a mandatory requirement. The Association of District Councils supports the Monopolies and Mergers Commission Report on the need for municipal managers to have the freedom to use their own professional expertise to ensure that their undertakings are managed efficiently and without excessive political interference.
Yet it has to be recognised that municipal bus services are operated to meet the needs of local communities and, more than any other type of operator, they are directly accountable under the democratic process. Local democracy is a matter of principle which cannot be subordinated to bureaucratic central government directives, as this clause would do at the moment. The style of control and the management of municipal bus services, I submit to the Committee, should remain subject to the elective local processes and control, even though a new financial framework may be necessary.
As I have said, the House of Commons Transport Committee urged that there should be an option in this matter and that it should not be mandatory; but the Government spokesman in the other place at Committee stage said:
"We need the companies because of deregulation. There is no other way to identify the cost benefits given to municipal undertakings as a part of a local authority."
That is just not the case. My noble friend referred just now to the days when I was in the Department of the Environment. At that time the Department of Transport was in with us, and they would not have made the mistake of overlooking the existence of the direct labour organisation regime.
That is a regime specially established in order that organisations operating directly under district councils should be able to compete fairly with other organsiations in the private sector. It operates particularly in respect of direct labour building organisations, of work done on highways, of work done on sewers, water mains and so on. In all those cases, by the operation of the direct labour organisation regime the agencies working under the district councils are able to
970
compete on a fair basis with agencies, building firms, plumbers and so on, in the private sector.
That is an organisation which has been established for four years and we have long working experience of it. There is absolutely no reason why the running of bus operations should not be controlled in the same way. This is a regime which requires a building agency working under the district council to keep separate accounts, to pay for the legal and financial advice and any other advice and assistance it gets from its parent body, and in that way to ensure that it competes on a fair basis. That whole regime of controlling direct labour organisations is in the process of being extended by the DoE into other fields such as catering, and it would be perfectly simple to extend it into transport and bus operations as well.
If that sensible alternative had been adopted for the setting up of a separate company, it would promote competition quite effectively, ensure financial separation and avoid the complex and formidable problems of company formation, such as the transfer of assets and liabilities, employee transfer, pension rights (which we discussed extensively earlier today) and expenditure and borrowing controls. All those constitute formidable problems, when one asks district councils such as those of which I am speaking to set up separate companies. That is the reason I am moving the deletion of Clause 62 and at the same time speaking to Amendment No. 211A. I should be grateful for my noble friend's comments on those points as a start.
Lord Belstead: The purpose of the clause which my noble friend is proposing should not stand part of the Bill is to ensure that district councils and, in Scotland, regional councils will not in future have powers to provide bus services directly. The clause preserves the powers of councils who are now running such undertakings until a date specified by my right honourable friend, giving them a period in which to transfer their undertaking to companies; but once that transfer has been completed the powers to provide services directly—in other words, by operating public service vehicles themselves—would be removed under this clause on a date specified by order. We propose that date should be 28th September 1986, when, as your Lordships will know, we propose that deregulation should come into force.
My noble friend has asked me one main question, which is: why form separate companies? What is the need to do so in the local authority sphere? It is a concept in Part IV which goes to the very heart of the proposals in the Bill because we believe that it is vital that bus undertakings should be placed at arm's length from their local authorities. This will enable the undertakings in future to operate entirely commercially, serving in competition with other operators the routes which they consider commercially viable and tendering, again in competition with other operators, for the service subsidies made available by their controlling authority.
I submit to my noble friend that that would not be possible without this clause. As your Lordships will know, we believe that competition is a critical step in reversing the relentless decline, which we all want to

971
stop, in bus services. How, I would ask the Committee, could the system of tendering for subsidy, which is proposed later in this Bill, work effectively if councils retain their bus undertakings in their present form? It is a question which, if my noble friend will forgive my saying so, he did not address in his speech. If that happened, other operators would feel that they simply could not get a look in if they were trying to compete with a municipal operator who was in that sort of position.
I can see from the Marshalled List that we will be discussing the arguments for permitting companies to run bus services when we come to the next clause; and, indeed, my noble friend has moved onto Amendment No. 211A. But I hope that the answer that I have given to the main question which he has asked and which applies to the Question, That Clause 62, as amended, shall stand part of the Bill, and to his Amendment No. 211A, will suffice for the moment.
Lord Stoddart of Swindon: I must say that until I heard the Minister speaking I had absolutely no intention of saying anything at all on this clause or on any amendment. But the fact is that, having at one time been the chairman of a municipal passenger transport undertaking in Reading, I know that what the noble Lord has said is simply not true, and it is not true for this reason.
The Reading Corporation transport undertaking is under a duty from the council itself to pay all proper central charges and is, therefore, in no way—and I believe that this is true of bus undertakings up and down the country—subsidised by the ratepayers, except in the case of concessionary fares. In my experience, the municipal bus undertakings are run in that way. They receive no subsidy from the ratepayers and they pay the full central charges which are due from local authority services, like the town clerk's department and so on. It is also true of other services as well.
I certainly had the opportunity, when I was the leader of the borough council, of setting up a direct labour department and, again, it was run on commercial lines and paid the full central charges. That did not prevent the building undertaking from competing on the open market with other builders in the area. It had no concession whatsoever and it was run as a commercial organisation very successfully indeed. So successful was it that the Tory Party in Reading was unable to get rid of the department, as it would no doubt have wished to do on dogmatic political principles. I do not want to insult the Minister in any way; I do not want to be unkind to him; but he really is talking nonsense, absolute nonsense.
Lord Denham: Order!
Lord Stoddart of Swindon: If I have offended the Minister I will of course apologise. But let me say that I know from experience that what he is saying does not really apply. The district council authorities which run bus undertakings are perfectly able with their present organisation and without being hived off into separate bodies to do the job that is required of them in this Bill. As the noble Lord, Lord Sandford, has asked, I hope that the Minister and the Government will look at this problem once again. It is a serious matter. I believe that the Government are wrong. There is time for
972
them to think about it, and if they do so I feel quite sure that they will come to the conclusion that there is no need to impose this severe re-organisation on the district councils.
10.45 p.m.
Lord Belstead: Just for once the noble Lord has not quite hit the target. I was not suggesting in my speech that there will not continue to be some financial relationship between the new companies and their authorities. This is a matter to which we shall be coming at a subsequent sitting of the Committee and in subsequent clauses when we deal with the financing of the new companies.
I was suggesting that it is essential for the concept of the Bill that the arm's length companies should be set up, because if one does not set up such companies it is simply impossible for the company—whatever one may call it; I am calling it "the company"—to tender for the local authority subsidised services in fair competition with other companies. One simply could not do it. If Parliament decided to continue to tie the bus undertaking of a local authority to the undertaking and not form an arm's length company in the future, with the best will in the world it would be impossible for that undertaking to tender fairly with other competitors for the subsidised services.
There are other reasons for the formation of the companies but, with respect to the noble Lord, it was on that ground that I was saying it was essential, and indeed vital to the concept of the Bill, for the companies to be set up. I was content to confine myself to that ground because the hour is late and I know that this is only the opening shot in a series of amendments that my noble friend Lord Sandford is going to move.
If the noble Lord will forgive me saying so, for the reason that I have just repeated, this is an important amendment as far as the concept of the Bill is concerned. I hope the noble Lord will not think that I am being deliberately obstructive when I say that there is no give in the Government's position on this point.
Lord Sandford: I see that, and I have not yet said anything about what it is that makes these hybrid arm's length companies so impossible to operate. That will come when I reach Clauses 69 and 72. My noble friend has not really answered the point that I was making about the regime that governs direct labour organisations. I am not aware that building firms, carpenters, plumbers and other people, tendering and competing with district council direct labour organisations in Reading or anywhere else, feel that they are up against impossible competition, because that is what the regime was designed to secure and to safeguard. My noble friend has not said anything to explain why a system which works well in that area has not been at least provided for as an option in this area. However, we have other matters to discuss and I do not wish to stand in the way of Clause 62 any
longer.
Clause 62, as amended, agreed to.
Clause 63 [Formation of companies to run council bus undertakings]:
[Amendment No. 211A not moved.]
The Earl of Caithness The Earl of Caithness moved Amendments Nos. 211AZA and 211AZB:
[Printed earlier: col. 966.]
The noble Earl said: I beg to move Amendments Nos. 211AZA and 211AZB together.
On Question, amendments agreed to.
Following is the text of the amendments (Nos. 211AZA and 211AZB):
Page 63, line 15, leave out subsection (3) and insert—
("(3) Subject to subsections (3A) and (3B) below, a council's bus undertaking shall be regarded for the purposes of this Part of this Act as forming part of a joint undertaking if the services for the carriage of passengers by road provided in the course of the activities of the council's bus undertaking are wholly or mainly provided under any agreement for—

(a) the provision or operation of those services by a body acting on the joint behalf of that council and one or more other councils; or

(b) the operation of those services by any company operating those services in conjunction with services for the carriage of passengers by road provided by that company.

(3A) Subsection (3)(a) above only applies where the agreement provides for the distribution among the parties on its termination of—

(a) all assets, or the proceeds of all assets, used or appropriated for use for the purpose of providing services for the carriage of passengers by road under the agreement; or

(b) all such assets or proceeds excluding only land or the proceeds of disposal of land.

(3B) Subsection (3)(b) above only applies where—

(a) the agreement includes provision for securing that the parties on termination of the agreement hold shares of equal value in assets required to be brought into account on termination of the agreement; and

(b) those assets include all assets so used or appropriated for use.").

Page 63, line 35, leave out ("or arrangements").
Clause 63, as amended, agreed to.
Clause 64 [Schemes for transfer of individual council bus undertakings to companies formed under section 63]:
The Earl of Caithness The Earl of Caithness moved Amendment No. 211AZC:
[Printed earlier: col. 966.]
The noble Earl said: This amendment is consequential. I beg to move.
On Question, amendment agreed to.
Following is the text of the amendment (No. 211AZC):
Page 64, line 7, leave out ("or arrangements as are") and insert ("as is").
Lord Sandford Lord Sandford moved Amendment No. 211AA:
Page 64, line 19, at end insert—
("(3A) A scheme under subsection (1) above shall identify any liabilities retained by the council or councils concerned on the transfer of their property, rights and liabilities to the company or companies under the scheme, being liabilities in respect of the following matters:—

(a) compensation payable under Section 78 or otherwise in respect of persons who suffer loss of employment or loss or diminution of emoluments by reason or in consequence of the transfer;

(b) the provision of funds to secure the payments of benefits and pensions of employees.").

The noble Lord said: I beg to move Amendment No. 211AA, and I shall speak also to Amendment No. 211CA.
Amendment No. 211CA: Page 64, line 45, at end insert—
("and the Secretary of State shall make grants to the council or councils concerned of such amounts as appear to him to be requisite
974
for indemnifying the council or councils concerned in respect of the retained liabilities identified in the scheme").
We come now to pensions again. We spent some time earlier today debating pensions in the case of the National Bus Company, and when we reached Clause 58 we spent some time discussing pensions as they affected the PTEs. We now deal with pensions as they affect the municipal bus companies. All three cases are different.
The point they have in common, as can be seen clearly by the Committee, is that there is no doubt that one of the areas of greatest anxiety and concern relates to the future of the superannuation liabilities for staff who are transferred—either from the nationalised National Bus Company to the privatised fragments of the National Bus Company, or from the PTEs in the public sector to the private sector, or from the district councils to the new bus operating companies in whatever form they take.
In every case, staff are being transferred from public service, with the assurance of the pensions they carry, to the risks and uncertainties of private employment in private enterprise. There is a substantial difference, and the way in which the matter has to be handled is different in every case.
The Government's proposals so far—at least until today—are not to be found on the face of the Bill. It appears that their first thoughts were that when municipal employees were transferred, they would no longer be members of a local government scheme but would just join whatever arrangements the new companies were able to set up. They will not be able to do anything very elaborate in the time that has been allowed for that process. Therefore, those arrangements will certainly be a good deal inferior to those which the employees are enjoying at the moment.
I am glad to be able to report to the Committee that the discussions going on between officials in the ADC and the DTP seem to indicate that the Government are now prepared to accept that it would be desirable as a matter of policy to enable municipal employees to retain their pension rights, and a proposal to this end will be made.
However, the problem is that this entails severe costs either for the new transport companies or for the present parent local authorities. These arise in three different ways. First, there is the annual pensions increase to update the benefits of the current pensioners—not the current employees, the current pensioners—and that, presumably, will continue to fall on district councils whatever is done for employees who are transferred. I have to point out to the Committee that this amounts to as much as £800,000 for a large municipal bus undertaking.
Secondly, the cost of future pensions increases in respect of transferred employees will fall, in whole or in part, on the new companies on top of the cost of around 10 per cent. of pay constituting the employers' contributions for those employees who are transferred. Thirdly, the liability to meet pensions costs and redundancy compensation during that transitional reorganisation, or if the company should fail, would rest with either the district council or the superannuation administering authority which, as your Lordships know, would be the county council.
If the Government accept the desirability of enabling transferred employees to retain their superannuation rights in the local government scheme and accept the need to minimise the burden on the new companies which possibly are to be privatised and will need to be in a position to find capital for themselves—and this is what flows from this policy—and if the Government accept that district councils' expenditure ought not to continue on these items after the revenues are lost, the Government should meet centrally the increased pensions costs and accept liability for debts which may be outstanding if the companies fail, as well as the once-off transitional costs.
There are precedents for this request, notably in the establishment of the National Freight Corporation—now a consortium. All this is essential if the new companies are to compete fairly with independent operators and, if they are privatised, to get access to their own capital. The Government have argued that the financial benefits of their policies will match these costs and no net increase will arise. That remains to be demonstrated. We certainly cannot let the legislation through on that assumption. At the very least there needs to be recognition in the grant-related expenditure assessments of those costs which will fall on the districts.
I have to say that originally the Department of Transport appeared to want to wash its hands of the consequences of this part of the legislation but it is clear from the earlier debates today that that is not the case. However, the way in which it proposes to deal with the pension rights in the case of the municipal bus undertakings needs to be made clear and this is the moment to do it. The danger is that the Government will claim that they have made provision for employees to remain within the schemes while the actual cost will fall locally; and I do not think that that can be accepted. We have discussed similar problems in the National Bus Company and the PTEs, but of course they are not the same as those which arise in the case of municipals.
I hope that with that explanation of the special situation my noble friend will be able to respond with the same thoroughness as he responded earlier in the day in the case of the National Bus Company and the PTEs. I beg to move.
Lord Trefgarne: I have listened very carefully to the arguments deployed by my noble friend in support of these amendments. We have of course debated a similar set of amendments to Clause 58 dealing with the PTEs and the companies that they will be forming, and while of course I appreciate that we are dealing here with rather different bodies—district councils and their undertakings—I suggest that the same principles hold good for both.
May I remind your Lordships very briefly of the main points? I hope that in the earlier debate my noble friend was reassured about the terms and conditions of the employees as they transferred to these companies. The Transfer of Undertakings (Protection of Employment) Regulations 1981 will ensure that the contracts of employees who transfer will continue to apply, with the same terms as though they had originally been made with the new company rather
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than the PTE or district council. If, after transfer has been effected, the company wanted to make changes in the contracts of employment, it would of course be open to it to renegotiate with the staff, but existing terms and the rights to compensation which they imply would have to be the starting point.
11 p.m.
Clause 78 of the Bill provides for the Secretary of State to make regulations providing for the payment of compensation to employees who have suffered loss or diminution as a result of the transfer, but the Government regard this very much as a reserve power for use in particular circumstances in which staff may suffer loss. We do not envisage regulations under Clause 78 requiring payments of compensation to staff generally.
These amendments suggest that my noble friend believes' that the employees of municipal bus companies will be worse off once they have been transferred to the new public transport companies, and that there will be residual liabilities remaining with the district councils which should fall on the Government. However, we believe very strongly that the Bill will rejuvenate the market for bus services and provide a better chance for the industry to flourish than existing policies do. As with the PTE's new companies, the district council companies will have every chance to share in the benefits of the change that this Bill will bring about. For the first time management will be established in a commercial structure able to provide all the services which it believes in its commercial judgment to be attractive. I suggest that it would be wrong of us to think in terms of a sizeable residual liability falling on them. Instead I ask my noble friend to recall that, as with the PTEs, the company structure will bring many benefits to the councils and their ratepayers.
My noble friend has referred specifically to the extra cost of pensions, a matter which we have of course already debated at some length. However, I would reiterate that the bus undertakings undoubtedly will already be covering their own pensions costs and that may well continue to be the case in the future, and in so far as any extra costs fall on the authorities, I do not think it would be right for them to be passed on to the Government.
Finally, let me say once again that the policy in the Bill as a whole will be to the financial benefit of local ratepayers since they will all have the advantages of efficiency and competition, with the reductions of wasteful subsidy that the Bill will bring. I suggest again to your Lordships that in these circumstances it is not right to require the taxpayer to meet any liabilities which may be left to the councils, and it would be quite inappropriate to expect that central Government should meet those transitional costs which arose from the move towards greater efficiency and cost effectiveness in the provision of services.
Lord Teviot: I had absolutely no intention of intervening at this time of night, but I must say that we are now back on to the old philosophical tack: that with the lid off the pot this Bill will be the most roaring success. However, when it comes to pensions we are discussing important areas of people's lives. I shall not say very much at all and I shall leave your Lordships

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to my noble friend Lord Sandford who will reply, but the Opposition might wish to come in and say one or two things. We are just back into that same old tack. This debate is sounding like a very boring old gramophone record, and it is entirely speculative.
Lord Sandford: I must say that I regard that response from the Minister as very unsatisfactory. I asked my noble friend a number of specific questions which arise in the case of the municipal undertakings and which have not arisen before in regard to either the National Bus Company or the PTEs. If I may say so, he ignored the whole lot. I know that it is late at night, but that is not my fault. We have only just arrived at the matters which concern the district councils, and I really must have them discussed properly. I am prepared to go on for as long as the Chief Whip wants me to go on, but I expect to have better answers than that. I shall not press the amendment any more tonight, but I shall certainly press it a good deal harder at Report stage. I beg leave to
withdraw it.
Amendment, by leave, withdrawn.
[Amendments Nos. 211AB, 211B, 211C and 211CA not moved.]
Clause 64, as amended, agreed to.
Clause 65 [Orders for transfer of joint undertakings to companies formed under section 63]:
The Earl of Caithness The Earl of Caithness moved Amendments Nos. 211CB to 211CM.
[Printed earlier: col. 966.]
The noble Earl said: With the leave of the Committee, I should like to move Amendments Nos 211CB to 211CM en bloc. I spoke to these with Amendment No. 211ZE. I beg to move.
On Question, amendments agreed to.
Following is the text of the amendments (Nos. 211CB to 211CM):
Clause 65, page 65, line 16, leave out from beginning to end of line 17 and insert ("In any case within section 63(3)(a) of this Act both or all the councils participating in the joint undertaking may")
Page 65, line 29, leave out ("or arrangements")
Page 66, line 11, leave out from ("case") to second ("the") in line 13 and insert ("within section 63(3)(b) of this Act")
Page 66, line 14, leave out ("that party") and insert ("the company carrying on the joint undertaking")
Page 66, line 16, at end insert ("by the council concerned")
Page 66, line 24, after first ("of") insert—
("(i) all property, rights and liabilities of the body carrying on that undertaking; and
(ii)")
Page 66, line 43, leave out from ("and") to ("share") in line 1 on page 67 and insert (", in any case within section 63(3)(b) of this Act, for the transfer to the company carrying on the joint undertaking of any property, rights and liabilities of the council concerned which are comprised in that company's")
Page 67, line 5, leave out ("any joint body established for the purposes of") and insert ("the body carrying on")
Page 67, line 20, at beginning insert ("in any case within section 63(3)(a) of this Act,")
Page 67, line 20, leave out ("any joint body established for the purposes of") and insert ("the body carrying on")
Page 67, leave out lines 22 to 27.
Clause 65, as amended, agreed to.
Clause 66 [Supplementary provisions with respect to orders under section 65]:
The Earl of Caithness The Earl of Caithness moved Amendment No. 211CN:
[Printed earlier.]
The noble Earl said: I should like to speak also to Amendments Nos. 211CP, 217A, 217B, 221A, 231A, 234A, 239A, 241ZA, 241B, 241C, 264A and 264C to 264G.
Amendment No. 211CP: Page 68, line 28, at end insert ("; and (e) with respect to the consideration to be provided by any such person for any transfer under the order.").
Amendment No. 217A: Clause 69, page 70, leave out lines 33 to 35 and insert—
("(2) Following the transfer to a public transport company of its initial undertaking,").
Amendment No. 217B: Page 70, line 41, at end insert—
("The reference above in this subsection to the transfer to a public transport company of its initial undertaking is a reference, in relation to any such company, to the transfer or (if more than one) the first transfer of property, rights and liabilities to that company under section 58(7), 60(10), 64(7) or 66(2) of this Act.").
Amendment No. 221A: Clause 71, page 74, line 3, leave out from ("company") to ("any") in line 4 and insert ("so formed by way of consideration for").
Amendment No. 231A: Clause 75, page 76, line 42, leave out from ("in") to ("requires") in line 1 on page 77 and insert ("pursuance of any provision made by any scheme or order under this Part of this Act in connection with any transfer of property, rights and liabilities to the company in question for which that scheme or order provides").
Amendment No. 234A: Page 77, line 26, leave out ("and") and insert ("or").
Amendment No. 239A: Clause 76, page 78, line 25, leave out ("and") and insert ("or").
Amendment No. 241ZA: Clause 78, page 79, line 17, leave out ("or") and insert ("and").
Amendment No. 241B: Clause 79, page 80, line 44, leave out ("subsection (6) below") and insert ("the following provisions of this section").
Amendment No. 241C: Page 81, line 10, at end insert—
("(6A) Any order under this section may make modifications in Schedule 4 for the purposes of its application to a transfer effected by that order.").
Amendment No. 264A: Clause 113, page 111, line 12, leave out ("and") and insert ("or").
Amendment No. 264C: Page 111, line 17, at beginning insert (" (or partly in one way and partly in the other)").
Amendment No. 264D: Page 111, line 19, at end insert ("(including in particular, but without prejudice to the generality of that, provision with respect to the consideration to be provided by the transferee for any transfer under the scheme) ").
Amendment No. 264E: Page 111, line 20, leave out ("subsection (4) below") and insert ("the following provisions of this section").
Amendment No. 264F: Page 111, line 34, at end insert—
("(5) The Secretary of State may by order make modifications in Schedule 4 for the purposes of its application to tranfer under section 50(4), 58(7), 60(10) or 64(7) of this Act.").
Amendment No. 264G: Clause 120, page 117, line 12, at end insert—
(" "securities", in relation to a body corporate, means any shares, stock, debentures, debenture stock, and any other security of a similar nature, of the body corporate;").
This is a group of technical amendments to the provisions in the Bill relating to transfer schemes. They are needed to ensure that the scheme-making provisions will work properly. I beg to move.
On Question, amendment agreed to.
Following is the text of the amendment (No. 211CN):
Clause 66, page 68, line 22, leave out ("and").
The Earl of Caithness The Earl of Caithness moved Amendment No. 211CP:
[Printed above.]
On Question, amendment agreed to.
Clause 66, as amended, agreed to.
Lord Denham: I am of course in the hands of your Lordships' Committee, but I feel that my noble friend Lord Sandford does not want to be hurried on these next two amendments. I think the Committee has gone beyond the time that your Lordships' House normally sits.
Lord Sandford: I should much rather stop now. Through being pushed, harassed and, I think, not really treated properly, I have missed an amendment altogether. I think it is rather unfair, after sitting here all day, that when the issues with which I am concerned come up, we are not handling them properly.
Lord Denham: I am very sorry that my noble friend feels that we are not handling things properly. We have spent quite a lot of time on his amendments as well as on those of other noble Lords. If he does not wish to move his amendment now, perhaps it is time we resumed the House. I therefore beg to move that the House do now resume.
Moved accordingly, and, on Question, Motion agreed to.
House resumed.
House adjourned at ten minutes past eleven o'clock.

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