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Lords Chamber

Volume 376: debated on Monday 25 October 1976

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House Of Lords

Monday, 25th October, 1976.

The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.

Prayers—Read by the Lord Bishop of Salisbury.

The Lord Tollemache—Sat first in Parliament after the death of his father.

Rhodesia: Uk Passport Holders

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government whether it is their policy to remove to Zimbabwe (Rhodesia) holders of United Kingdom passports who flee to the United Kingdom from Zimbabwe with a view to avoiding conscription into the Armed Forces of the illegal reéime.

My Lords, Her Majesty's Government have no fixed practice in circumstances such as these but give careful consideration to each case on its merits.

My Lords, surely this is a matter of principle. Are the Government really saying that there are circumstances in which individuals will be sent back to join the Armed Forces of the illegal régime of Rhodesia and thereby, if the negotiations which we hope will be successful are not successful, prop up the continued existence of that régime which for 10 years we have been trying to put down? Particularly in the case of Mr. Desai last weekend, whether or not evasion of the draft was the principal motive in his coming here, do not the Government think it was grossly unfair to him to send him back to face what may be severe penalties for coming here in the first instance and evading the papers which were served on him?

No, my Lords; I do not think we take the same view as does the noble Lord on the last point in his supplementary question. So far as general practice is concerned, the situation is this. We will look at every case on its merits, but we cannot ignore the potential size of the commitment to admit anyone who applies to come here because he does not wish to serve in the Rhodesian Armed Forces.

My Lords, is it the case that the Government consider every case on its merits? Is it lot the case that they consider it only when it is referred to the Home Office by a Member of the other place or this House? Is the Minister aware that I have recently taken up a case which had been refused entry at Heathrow, but upon consideration the Home Office accepted it? Before a decision is reached at Heathrow, would it not be desirable that cases will be referred to the Home Office?

My Lords, the immigration officers act on the basis of immigration rules. If any approach is made by a Member of either House, then either my right honourable friend the Home Secretary or one of his colleagues will look at the circumstances of the case. So far as this narrow issue is concerned, until May of this year we had received no applications from Rhodesian citizens to enter or remain in this country on the grounds of wishing to avoid military service.

My Lords, is it not a something of a misnomer to describe Rhodesia now as an "illegal régime", when in fact Her Majesty's Government are sponsoring a conference and recognising the existence of Rhodesia?

My Lords, the noble Lord has said that he had received no case of a person who wished to remain here in order to avoid a call-up. If that is so, will he look at the case of Mr. Archie Coleman and Mr. Selwyn Quarrie who originally arrived here in May and who have been on IS96s ever since, reporting regularly to the police every week? Will the Minister consider the possibility of testing the bona fides of people who say they are conscientious objectors by bringing in the United Nations High Commissioner for Refugees, notwithstanding the fact that these people are not de jure refugees?

My Lords, as I have indicated, until May of this year we had received no applications of this kind. I will look at the two cases that the noble Lord has raised and will study the suggestion that he has made or will ensure that my honourable friend the Joint Minister of State will do so. What I have said indicates that we are prepared to look at every case on its merits. We consider that that is the appropriate way of dealing with these matters.

My Lords, is it the policy of Her Majesty's Government not to discourage recruitment to the Forces of a régime in rebellion against the Crown of this country?

My Lords, what I have indicated is that we are not prepared to indicate that we will admit anyone who wants to come here simply because they do not wish to serve in the Rhodesian Armed Forces. Such a commitment would be a very substantial one and I do not think we could lightly enter into it at the present time.

My Lords, appreciating what the Minister has said, that the immigration officers at Heathrow are given rules to act by and that their task is very difficult, may I ask whether it is not clear in cases of this kind—and I have knowledge of the two cases raised by the noble Lord, Lord Avebury—that the immigration officers should consult with the Home Office before they decide to send a person back rather than wait for a Member of Parliament or a Member of your Lordships' House to raise the matter with the Home Office?

My Lords, I think it would be going too far to say that no immigration officer should take a decision on his own account, for this would slow down the administrative processes by which it is decided whether or not to admit a person. I hope that I have indicated that the Government are prepared to look at cases on their merits and that we will do so in the future as we have done in the past.

Summer Time: Eec Synchronisation

2.40 p.m.

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government whether they propose to take steps to synchronise the dates of changes into and out of Summer Time with those proposed for France and the Benelux countries.

My Lords, proposals for the harmonisation of Summer Time dates within the European Economic Community in 1978 and 1979 are under consideration. In the meantime, France and the Benelux countries are understood to be making their own arrangements for a period of Summer Time next year which will be substantially shorter than the period of British Summer Time. We have made it clear to our partners in Europe that any change in our arrangements would have to be acceptable to Parliament.

My Lords, while thanking the noble Lord for that encouraging Answer, may I ask that the Government should take into consideration when negotiating that this is a matter which is of considerable importance within the travel industry and other areas where the present difference of dates causes extreme confusion, and that to concede to our partners would be a concession to European opinion which would be as rare as it would be welcome?

Light Bulb Safety Standards

2.46 p.m.

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government whether it is true, as stated in recent Press Reports, that the Department of Prices and Consumer Protection has more than once had to warn the public to examine new light bulbs for dangerous protruding wires; and if so, whether they do not consider that the safety standards being applied by the light bulb industry require investigation.

My Lords, public warnings about potentially dangerous light bulbs with protruding wires were issued by the Deparment of Prices and Consumer Protection on 1st and 11th October. The British lamp industry has informed the Government that stringent testing and inspection procedures are already used but that further measures are now being taken to ensure that only safe bulbs are released for sale. It is already a contravention of the Electrical Equipment (Safety) Regulations 1975 to sell or possess for sale any light bulbs in this dangerous condition, whether British-made or imported.

My Lords, I am very much obliged. Are the Government satisfied that the sanctions are sufficient to prevent manufacturers and importers from releasing these dangerous bulbs on to the market? Is it not the case that you cannot expect busy wholesalers mid retailers to inspect every single item, nor can the Department be expected to get the message through to every member of the public that they must inspect every single light bulb that they buy?

My Lords, I would not claim that we are satisfied with the situation. We have asked the British Standards Institution to call their committee together to reconsider the matter of standards. Such a meeting is due to take place on 19th November. I can assure the noble Lord that the Department's views about the inadequacy of the present standards will be conveyed to that meeting.

My Lords, is the noble Lord in a position to say how many thousands—if it amounts to that figure—of these light bulbs have been imported from Europe, and whether they are still in this country? Are they going to be sent back, and is the money we spent on them going to be repaid?

My Lords, it is not possible to say how many defective bulbs have been imported. I believe eight million bulbs altogether are imported. This should be seen against the 240 million British made bulbs.

My Lords, is there no general testing of e electrical equipment that comes into this country? Is my noble friend aware that the magazine Which? constantly calls attention to the failure of imported electrical equipment to satisfy regulations? Is it not proper that all imported electrical equipment should be subjected to at least spot testing, even if every single item cannot be tested?

My Lords, since my noble friend refers to imported electrical equipment, perhaps I should make it clear in relation to electric light bulbs that the second release from my Department made it clear that both British and imported bulbs are subject to the defect that has recently been revealed. As to the question of testing, I think some system of spot testing is desirable. I am not fully acquainted with the present position, but I will write to my noble friend.

My Lords, regarding the last part of the noble Lord's answer, is he aware (as I am sure he is) that Czechoslovakia and the COMECON countries are large exporters of these bulbs? Will the noble Lord say what consultations have taken place with the Governments of those countries to encourage them to test the articles at source?

My Lords, the attention of manufacturers in the Eastern European countries concerned has been drawn to the defects found in their bulbs, and they have assured us that the procedures for testing are being reviewed in their countries.

My Lords, regarding checking procedures of imported bulbs, my noble friend may be surprised when I tell him that just last week my good lady purchased a light bulb of English manufacture, and as she put it in the light bracket the bulb came to pieces. I looked at it but I could not give you the name of the bulb manufacturer. Therefore, if there are to be spot checks I hope they will be carried out on British manufactured bulbs as well as imported ones.

My Lords, the hazard to which my noble friend refers is a different one: the exploding bulb. We do not want to get into an argument as between imported or home produced light bulbs; our anxiety is to see that all are subject to safety tests.

My Lords, could the noble Lord tell us how we can tell when a light bulb is "dud"?

My Lords, it is not a case of a light bulb being a "dud"; these bulbs will light but they are dangerous. The question was about the hazard of protruding wires. They can be readily recognised because the wire is easily seen. The wire is in danger of being bent over to touch the cap of the bulb, and that would electrify the whole system. That is the danger. I have an example of such a bulb in my room and I shall be glad to show it to the noble Lord.

Bahamas: Work Permits

2.50 p.m.

My Lords, I beg leave to ask the Question which stands in my name on the Order Paper.

The Question was as follows:

To ask Her Majesty's Government what reciprocal arrangements exist between the United Kingdom and the Bahamas in respect of the issue of work permits to our respective citizens and, in particular, what fees are payable in each case.

My Lords, there are no reciprocal arrangements between the United Kingdom and the Bahamas for the issue of work permits. No fee is charged for a work permit by the United Kingdom. Fees charged by the Bahamas vary according to the category of job and range from 25 to 5,000 Bahamian dollars per annum.

My Lords, I am grateful to the noble Lord for that reply. Would he not agree that, despite the absence of any formal reciprocal arrangements, there really ought to be some form of equality? If he is unwilling to introduce fees for Bahamian citizens applying for work permits in this country, will he use his influence with the Bahamian Government to see that the fees charged there are more equitable?

My Lords, the fees charged by the Bahamian Government are a matter for the Bahamian Government. As regards the question of our charging fees, I would say, first, that very few countries charge fees for work permits; so far as we know, there are only three in the world. Secondly, there were only 11 permits issued in the United Kingdom to Bahamian citizens last year, so that very little would be raised. Thirdly, if we are to have fees for this, I should hope that they would be on a better basis than tit-for-tat.

My Lords, I thank the noble Lord for that further answer. Could he then revert to the second suggestion that I made; namely, the possibility of making representations to the Bahamian Government to reduce the fees there or make them more in line with the benefits granted?

My Lords, we have no evidence that the fees charged by the Bahamian Government cause hardship to any resident of the United Kingdom.

But surely, my Lords, if this were done by us it would be denounced universally as blatantly racist.

The Pound Sterling

My Lords, with the leave of the House, at a convenient moment after 3.30 p.m. my noble friend the Leader of the House will repeat a Statement on Sterling.

Royal County Of Berkshire (Public Entertainment) Provisional Order Confirmation Bill

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 on Recommitment. 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.—( Lord Harris of Greenwich.)

On Question, Motion agreed to.

Education Bill

2.53 p.m.

Report received.

Clause 1 [ The comprehensive principle]:

moved Amendment No. 1:

Page 1, line 19, after ("pupils") insert ("of compulsory school age").

The noble Lord said: My Lords, there is one procedural matter to which your Lordships may like me first to draw your attention, though I believe it is not my proper place so to do. But I understand that the order of the Amendments on the Marshalled List is different from the order in which it is proposed to lake them. The noble Lord, Lord Donaldson, will correct me if I am wrong, but I understand that we are first to have an Amendment No. 1, then Amendment No. 4, then Amendment No. 3 and then Amendment No. 2, because that is the order in which they strike in the Bill. But as your Lordships may have differing interests in different parts of the Bill, I wonder whether the noble Lord would care to confirm or otherwise what I believe to be the case.

(Lord Donaldson of Kingsbridge)

My Lords, this has not been suggested to me. It sounds to me in no way objectionable, and if the noble Lord wants to do it in this order I will be very happy to do so. But the order in the Marshalled List is the order which I was proposing to take, unless otherwise asked.

My Lords, plainly I have been misinformed. I understood that this was the order in which it had been intended to take them. I have no wishes in the matter at all. I shall now proceed as though nothing had happened.

We return, therefore, at the outset of our debate on this Bill to an Amendment which we tabled and discussed in Committee. The original intention of the Amendment was to secure that sixth form colleges could be run as academic institutions suitable for pupils of comprehensive schools who had academic gifts. It is in no way aimed at destroying or curtailing the operation of the comprehensive principle at any point in the career of schoolchildren of compulsory school age. It was framed, in fact, as a means of making it easier to overcome what, to all of us, is seen as being one of the undesirable side effects of the introduction of the comprehensive principle in one of its forms, and I refer to the generation of schools of very considerable size.

I submitted at Committee stare that one widely accepted way of reducing the size of such units was to set up sixth form colleges and the Minister pronounced himself in favour of them. I suggested that they would operate far more effectively if they were permitted to select their entry on grounds that were academic—that is, grounds that were based on ability and aptitude—and I tried to make it clear that the pursuit by school pupils of academic excellence, upon which the whole future of excellence of the administration and industrial performance of this country depend, is made very much easier and more profitable in an atmosphere where that pursuit is recognised as the dominant aim of all those participating. Whatever the social advantages of non-selective education up to the age of 16, the educational advantages of selective education from that time onwards are considerable and have a close bearing upon the future prosperity and cohesion of this country.

However, in his reply, the noble Lord, Lord Donaldson, said at col. 1331:
"The Government are perfectly clear that they want to eliminate selection at all stages of secondary education, and the Government … see no reason to make an exception for sixth form education."
A little further on he went on to say:
"It has always been the Government's view that the sole criterion for admission to a sixth form course should be the pupil's ability to profit from that course."—[Official Report, 6/10/76.]
In accepting that the ability of a pupil was a criterion for admission to a course, he emphasised that it could not, under the Bill, he a criterion for admission to the school in which the course was held.

While I did not in any way accept the wisdom of the noble Lord and his Party in making this decision—and that is a matter of political choice on which we on this side disagree, differ from them fundamentally—it became clear almost immediately afterwards from an intervention by the noble Lord, Lord Alexander of Potterhill, that there were other reasons of an entirely pragmatic and non-political nature that must be taken into account before such a choice can be endorsed by this House, whatever its political complexion may be. If I may summarise, they are briefly as follows. First, there already exist a number of routes by which pupils over compulsory school age can pursue their education beyond the fifth form, and they can do so without remaining at school. Some of these routes are part-time and provide an area for the development of exactly that interrelation between employment and learning that the Prime Minister, in a speech to which I shall have occasion to refer again later, warmly encouraged. Others are full-time and involve institutions of education other than schools.

The second consideration is that the traditional and essential function of the sixth form has hitherto been to provide an extension of education beyond compulsory school age for the specifically academically able up to university entrance level. They are the proper institutions to provide this service and, if they do not provide it, it will not be adequately provided at all in the foreseeable future. If noble Lords opposite want to widen this function and take in an extension of non-academic schools careers, that is an addition to that vital function and not something to replace it. There is scope for such an extension and it will be for them to see that it is not done at the cost of the prime function. Whether or not they can do so is a question that may be open to doubt, but it is not the question to which I am now asking noble Lords to address their attention.

The third consideration is that in present economic circumstances, to quote the Prime Minister again,
"There can be little expectation of further increased resources being made available, at any rate for the time being."
This, I take it, was a euphemistic way of saying that the resources that we are sampling at present already taste very strongly of the bottom of the barrel. If that is so, the 15 sixth form colleges, which the Minister has already told us operate selectively, and any new colleges which may be subsequently opened under the auspices, or perhaps I should say the blight, of this Bill, cannot be expected in any realistic way to deploy any resources beyond the performance of their essential functions; and that is especially the case where such a deployment would merely be in duplication of some of the other resources in other institutions of further education and polytechnics to which I have already referred.

The fourth consideration brings me back to the very valuable intervention of the noble Lord, Lord Alexander of Potterhill, at an earlier stage. It is this: as the noble Lord, Lord Donaldson, said, it has always been the Government's view that the sole criterion for admission to a sixth form course should be the pupil's ability to profit from that course. But the criterion for admission to the college is no more than the sum of the criteria for admission to the courses it offers; and as the noble Lord, Lord Alexander of Potterhill, said, obviously if a child is going to take A-level he must have O-levels in order to pursue the course satisfactorily. That is one measure of ability to which the Minister referred. The Minister was quite clear, and rightly so, that there should be no question of pupils entering upon courses from which, by reason of lack of ability, they could not profit. But if the sixth form college offers only academic courses, it will be forced to admit selectively on academic grounds: that is, on grounds of ability or aptitude.

However, the Bill expressly makes clear in Clause 1, on page 1, lines 17 to 20, that this will disbar the local education authority from placing students in that college. Existing selective colleges will then be faced with the alternatives of closure or of a considerable deployment of scarce resources in needlessly duplicating facilities already available to their potential pupils elsewhere. That is an anomaly in this Bill and it is one quite clearly which, from the tone of the remarks made by the noble Lord at Committee stage, was not foreseen when the Bill was drawn up. In his concluding intervention at Committee stage, in col.1336 of the Official Report, on 6th October 1976, he said:
"Though I do not want to look at the principle involved"—
and he meant the comprehensive principle as applied to post-O-level education—
"I am quite prepared to look at the point the noble Lord—"
and he was referring to the noble Lord, Lord Alexander of Potterhill, to whom I should perhaps apologise for having followed him so closely in this argument—
"has raised, which we can deal with, or otherwise, at a later stage."
That later stage has arrived and as it was our Amendment originally we have tabled it again to provide an opportunity for an explanation of the point; and upon what that explanation is and what evolves from it will rest our decision on what to do at the conclusion of the debate. I beg to move.

My Lords, since I have been referred to so frequently perhaps I should make my position quite clear. When this point was raised in Committee the Minister was kind enough to say that he would look at the point, and he has been kind enough subsequently to write to me, which I very much appreciate. In his letter he gives an assurance that there is no intention of interfering with the operation of sixth form colleges. I hope I have not misinterpreted the letter. Naturally I accept the sincerity of that assurance without any reservation of any kind, but I have to tell the noble Lord the Minister that that assurance can be fulfilled only if this Amendment is accepted by the Government.

The position is as follows. There are three types of operation at sixth form level emerging increasingly. There are tertiary colleges which, as your Lordships know, I personally favour very much, which protect the comprehensive principle and offer the full range of courses. There is no problem there because they operate under further education regulations and are therefore excluded from the provisions of this clause. There are sixth form colleges which have a policy of open admission: that is to say any child of appropriate age can come, and they seek to provide a course which is appropriate to the ability of the child. They do not affect Clause 1. But there are a. number of colleges to which the noble Lord, Lord Elton, has referred which are deliberately designed to provide sixth form courses essentially for A-levels and which therefore necessarily require as a condition of admission appropriate evidence that the course can be pursued satisfactorily.

It is true, of course, that normally young people who do not want to pursue these courses can go to an institution of further education in the area and pursue other courses, so that the full educational opportunity is not barred. These colleges are run under schools regulations. As such, such a college is a school. If therefore any parent, teacher or body of teachers makes a complaint, say, under Section 68, to the Secretary of State against such a college the Secretary of State, in my judgment, would necessarily rule against the authority and the college under this clause. If in his endeavours to fulfil the undertakings the Minister has given he did not so rule, then any parent taking the Secretary of State to court must win because the words of the clause are perfectly clear. This is a school. Its admission policy is on the evidence of academic aptitude, as evidenced by passing certain examinations at the necessary level. I would appeal to the Government, in order to secure that these undertakings are fulfilled, to accept this Amendment. That would resolve the problem and I do not believe it would in any way harm the impact of the Bill.

My Lords, when we discussed this Amendment on the first day of the Committee stage I made the Government's position quite clear. We wish to eliminate selection at all stages of secondary education, and see no reason to make an exception to those aged 16. But both the noble Lord, Lord Belstead, and the noble Lord, Lord Alexander of Potterhill, raised one particular point. In essence they wished to know whether a sixth form college would be in breach of the comprehensive principle if it were not able to provide for pupils of lower ability who wished to pursue certain practical and technical courses normally found within a further education college. On that occasion I said that although I did not want to look again at the principle involved I was quite prepared to look at this specific point. I did in fact correspond with the noble Lord on that point, as he has been kind enough to say. He pointed out on that occasion that where an authority's provision for the 16 to 19 age group is in tertiary colleges students of all abilities and aptitudes would be catered for within one institution.

It has never been envisaged that sixth form colleges should provide the same breadth of courses. To duplicate un-necessarily the courses provided in the local further education college would be a waste of time and money. The Government wish to encourage close co-operation between the schools and colleges providing for 16 to 19 year olds in any area; and for two main reasons. The first is that they want to see the most efficient use of teachers and equipment. Secondly, they want to ensure that between the school and further education sectors a full range of courses is offered for students of all abilities. I can assure noble Lords that there is no question of a sixth form college contravening the comprehensive principle because it could not cater for a pupil wishing to follow a course which it did not provide and which in any case was either already being offered or could be provided more satisfactorily at the local further education college. I hope this will go some way towards satisfying the noble Lord, Lord Alexander, but he shakes his head and so it seems I am unlucky.

I have looked at our latest information. Of the 72 sixth form colleges and two sixth form centres in operation in September 1976, only three still operated selective admission procedures; and of these, two are moving towards becoming open access colleges. By "open access" we do not mean that any student can control for any course. Clearly anyone wishing to study for A-level in a particular subject will need the entrance requirement set by the tutors for those who wish to follow that course. What it does mean is that no general entrance requirement—for example, passes in five O-levels—will be required before a young person can enter the college. Thus there is no entrance requirement to the college but only entrance requirements that are relevant to the course or courses the pupil wishes to take.

Nor does open access mean that a sixth form college must provide every conceivable course which, if I understood the noble Lord aright, is what the noble Lord, Lord Alexander of Potterhill, appeared to be saying. A sixth form college will provide only those courses for which there is a demand, for which it has resources and which are not readily available elsewhere. This clause will bite only on those colleges with a general academic standard for admission, such as five O-levels. It will be perfectly permissible for open access colleges to set standards for admission to particular courses. That is the Government's position and I am afraid I cannot accept the Amendment.

My Lords, I am afraid that this is a very difficult situation. One sees the virtues of the arguments on both sides, but my judgment must come down on the side of the Government. More young people are staying on at school after the compulsory school leaving age and we wish to encourage this trend. I should have thought that taking into account the present very large unemployment problem everybody would wish to encourage this trend as much as possible. It is far better to be learning than to be idle.

When it comes to a choice of what kind of education they are after, there may be very good reasons why young people will want to stay in the school atmosphere rather than move to tertiary colleges, even if academically they are not of a very high standard. Although I say this, I am very much in favour of tertiary colleges; they encourage these young people who feel that they wish to move out of the school atmosphere and go on to tertiary education. Nevertheless, we must take account of the fact that there are young people who wish to stay in the school atmosphere, and parents also who wish them to stay in that atmosphere. I understand that parental choice is still an important feature of Conservative Party policy. Therefore, where there are sixth form colleges I think it is important that young people should be allowed to go to them.

Nor do I see that there is a very great academic difficulty about this unless young people wish to pursue a course which is not offered at a sixth form college. If they do, we have the assurance of the noble Lord, Lord Donaldson of Kingsbridge, that these young people do not in any way lay themselves open to the law. Where, however, they can be accepted, surely this is a situation where, almost more than anywhere else, the comprehensive system and the mixed ability teaching system work. We tend to think of mixed ability teaching, if we approve of it at all, as working only at a fairly low age level, but of course that is absolute nonsense. The older one is, the better the system can work.

One of the great vices of the present debate is that we tend to think of the selective system and the comprehensive system as entirely opposed to each other. They are not. The ideal of the best educationalists in both system is that every child shall be taught individually according to his or her abilities. When you get to sixth form level and to the academic children, plus the children who have voluntarily chosen to stay on, and when you get to the usually higher ratio between staff and pupils, you are most able to take the individual pup I, whether he be very bright or not so bright, and teach him individually: set him or her to do his own job in the school library, with film strips, or what have you. The sixth form colleges and the sixth forms are much more able to take care of mixed ability groups than are certain classes in middle schools, particularly these which are situated in difficult and crowded social situations. Therefore I see no difficulty and I think, on balance, that although there are difficulties the Government are right to resist the Amendment.

My Lords, the noble Lord, Lord Alexander of Potterhill, said that a college is a school. May I ask the noble Lot d whether a sixth form college is to be treated as a school? So many of the following clauses hang on this question that I should be grateful if the noble Lord could clarify the point.

3.15 p.m.

My Lords, I cannot feel satisfied with the answer of the Minister and I support the arguments of the noble Lord, Lord Alexander of Potterhill. If we had infinite resources, then I suppose one could build as many non-selective sixth form colleges as there might be children who wanted to stay on until they were 18, but we have not. We are in for quite a long period wren it will be necessary to make the very best use of the courses which can be provided, using the highly qualified teachers that we have in a restricted number of colleges, which number none of us sees much chance of increasing in the near future. Therefore we ought to look at the sixth form college problem more from a practical point of view, given the organisation of secondary education as envisaged in the Bill.

The fact is that secondary education cannot be organised on the principles of Clauses 1 to 3 without doing educational damage. That is mainly because a limit will have to be put upon the size of all but a very few exceptional comprehensives, not for educational reasons but for reasons of administration and in order to create that sense of community without which a school is not a school and is sometimes a bear-garden.

Public opinion will not for much longer accept the chaos which now characterises some of our large comprehensives. The Soviet Union found that out years ago and limited by decree the general run of schools to a maximum of 800 pupils. Whether or not the limit has been observed I do not know, but at the time Mr. Khrushchev told me that this limitation was necessary because many teachers had no liking or gift for administration. Is the same true here? That is a question which requires very careful investigation and we have put down an Amendment asking for such an investigation to be made. However, we do know now that a great many local education authorities have come round to the view that most comprehensives must be limited to five-or six-form entry if they are to reach the best standards (I think particularly the best standards of discipline) of which their staff is capable.

A price has to he paid for this limitation on size because in four cases out of five the comprehensives will be too small to develop a strong sixth form. That will happen only in some very favourable neighbourhoods. Then what happens? Limitation of size forces selection, either between a group of comprehensives, or from comprehensives to a sixth form college or to some other such institution. The local education authorities will have to decide which is the less unsatisfactory course: either children dawdling, running or being transported from one comprehensive to another in search of the courses that they want to take and therefore wasting time and probably getting up to mischief, or selecting children at 16 to go on to a sixth form college where the courses that they want are taught by qualified teachers. Noble Lords will notice that either method requires selection.

My noble friend's Amendment is necessary to give the sixth-form colleges as they are now a chance to do the best they can for able children. If they do not select they are not going to attract highly qualified teachers to teach the less well-known subjects, or, indeed, some well-known subjects, like mathematics and the more difficult languages. Therefore, I support this Amendment but with a heavy heart, because sixth-form colleges will decapitate so many comprehensives. The highly qualified teachers will not like teaching in the small comprehensives and many bright children will never arrive at the point where A-levels are within their grasp. Their talents will either be underdeveloped or undiscovered, and the loss of the A-stream all the way from 11 to 17 will deprive the country of leaders in a great many walks of life.

I should like to make two further points. As I have said, in most comprehensives linked to a sixth-form college a strong sixth form can never be developed in the school. At 16, or even before, the bright children will have moved on. This will be a great loss. A sixth form gives a sense of responsibility to the whole school. It is a status to aim at and to work hard for; it encourages staff and pupils to do their best all the way up the school. It helps the head teacher to organise discipline inside the school. Take all that away and substitute a sixth-form college in a different, building with a different staff who will not know any of these young adolescents until they arrive at the age of 16—and then they will be pretty difficult to know—and you have lost something very valuable indeed.

I am astonished that the universities have not seen what is happening and have not demanded changes in this Bill long before it came to your Lordships' House. The consequences of going comprehensive in the manner proposed in the first three clauses of the Bill will damage education for the able children, will be had for industry and will be extremely bad for the universities. If my noble friend presses his Amendment to a Division, I shall be with him.

My Lords, I think some noble Lords are making a mountain out of a molehill over this Amendment, because from what I can see there would be very few pupils affected by this. As we have heard from my noble friend Lord Donaldson of Kingsbridge, most of the sixth-form colleges are what he calls "open colleges", and it seems to me that few pupils would opt to go into a sixth-form college where most of the children had O-levels and were going to take A-levels; but if they do want to do that, then I think they should be encouraged to do so and not prohibited. While this Amendment looks as though it is doing something positive, in fact it is doing something negative, because it is giving the local authorities the power to exclude such pupils from the sixth-form colleges. I agree with the noble Lord, Lord Beaumont of Whitley, when he says that surely they could be catered for.

I agree with the legal interpretation put on this matter by my noble friend Lord Alexander of Potterhill, when he says that if a child were excluded, then the parent would probably (though we never know in view of recent rulings) be able to pray in aid Section 68 of the 1944 Education Act—but we all know where that has led some people lately. That aside, it seems to me that so few pupils will be affected by this provision that those who are affected should be welcomed into the sixth-form colleges and we should not seek to exclude them.

My Lords, by leave of the House, may I say that there are 85 sixth-form colleges, of which 17 would be in breach of this clause. If those 17 have to satisfy the clause they will have to extend the range of their courses and their staff. In fact, they would become virtually tertiary colleges to meet the needs of the whole range of ability, which is a major problem and therefore would necessarily call for considerable resources. As to how they would operate, I may say that I was recently in Solihull, and it is perfectly true, as the noble Lord the Minister said, that they operate very closely indeed with the further education college which is nearby, so that those who do not go to the sixth-form college go to the further education college. It is a fact that last year they won 20 scholarships, so I think it would be a pity if they had to depart from their present purpose.

My Lords, it is important that we should not turn a Report stage into a Committee stage argument but I should just like to say to the noble Lord, by leave of the House, that I do not agree with his figures.

My Lords, may I say that when I heard my noble friend—if I may so call him—Lord Eccles, say that he confronted this question with a heavy heart, I completely agreed with him. I am personally out of sympathy with the intention of the Government to do everything at once and to enforce on the educational system changes which will involve years of reorganisation when a slightly slower pace might have enabled us to reach the wished for goal with much less dislocation. I imagine that I shall be almost alone in this House when I express my deep conviction that the true target in this connection is not the existing organisation but the influences which have paused the existing organisation to come into being.

I am totally out of sympathy with the general policy of the universities South of the Border to inflict upon school education before the age of 18 a sort of imitation of university education as it used to be in my young days. think the Scottish system, which provides for greater versatility and for more superficiality, perhaps, up to the age of 18, is a much superior system, and it is no accident at all that where in the rest of the world the education in this island has been imitated, it is the Scottish system and not the system South of the Border—with one or two notable exceptions—which has been imitated. I have no sympathy at all with the pride in the specialisation w rich is en-enforced in the sixth form colleges, whatever designation they may enjoy. I have no sympathy at all with the system which enforces on my grandchildren at the tender age of 14 or 15 the choice whether they should be scientists or humanists. I think in this Amendment we are completely on the wrong track and, therefore, whatever Division takes place, I personally shall remain glued to my seat.

My Lords, I wish to make only a brief intervention at this point. We have heard about the administration, we have heard about the different types of sixth-form college, we have heard about the large comprehensive schools and the small comprehensive schools: what we have not heard about are the children themselves. Never have children wanted more to have the confidence of those people who are teaching them and have been looking after them from the age of, possibly, eleven onwards, than they do now. With broken homes, with increasing crime figures, the one place where there is a possibility of stability is in the schools where members of the staff have been teaching children—and I am particularly thinking of girls—from an early age. I would beg noble Lords to consider the child through its school years when they are considering the way in which they are going to vote on this Amendment, with which I have very great sympathy.

3.31 p.m.

My Lords, this first Amendment of the Report stage of this Bill demonstrates a problem which, it has struck me throughout the Committee stage, plagues the Bill despite the excellent and thorough arguments and replies which the noble Baroness, Lady Stedman, and the noble Lord, Lord Donaldson of Kingsbridge, have given us in answer to our Amendments. As I see it, the problem is the inflexibility of the provisions of the Bill.

I would assure the Government that this Amendment was not originally put down again on Report with any intention on the part of my noble friend, Lord Elton, or myself that we should press it to a Division as a matter of principle, but because the needs of children differ, as the noble Baroness, Lady Brooke of Ystradfellte, has said so pertinently. We now find, having listened to the debate, that there are very deep considerations to be taken into account as to what should be done with this Amendment, and not least the technical imperfections of the drafting of the Bill which have been shown up by the speech made earlier in this discussion by the noble Lord, Lord Alexander of Potterhill.

The simple effect of this Amendment, if it were to be pressed, would be to allow local authorities to have regard to ability and aptitude in providing sixth-form education. Even the Minister in charge of the Bill could not believe that the choosing of pupils for the sixth form should not pay some regard to their ability to profit from the courses offered; yet that is the really incredible effect of this Bill. Because he was a reasonable man the noble Lord, Lord Donaldson of Kingsbridge, took that view before he read the Bill in any detail. Because he is, as we all know, an honest man, he stood up and said, "To me, 'sixth form' has an academic meaning, whereas it has not in secondary education now, nor should it have".

Let us just look for a moment at his opinion and the really extraordinary reason which he gave in Committee for its correction. I would guess that the noble Lord, Lord Donaldson, being a totally reasonable man, before he read the provisions of this extraordinary Bill took the view that sixth forms should, as far as possible, open their entry to any pupils who had any chance at all of tackling the courses offered. I have no doubt that the noble Lord, Lord Donaldson, would have taken into account that the raising of the school-leaving age was designed to encourage more pupils to to stay on longer at school. I am sure also that the noble Lord was armed with the knowledge that many people want to see a broader sixth-form curriculum—only this afternoon we heard the noble Lord, Lord Robbins, speak again on this particular point on which he has expressed his views trenchantly and forcibly on previous occasions in this House. But to move from all that to the assumption that it should therefore become the law of the land that every single sixth form must admit every single pupil to every single course without any regard at all to either aptitude or ability is really a very large assumption indeed. It will lead to problems of the type which my noble friend Lord Eccles has outlined.

This coercion in the Bill leads the Government into a second problem which plagues the Bill, namely, obscure drafting, a fault which in no way should be laid at the door of the Parliamentary draftsman but which is evidence of the impossibility of translating the intentions of Ministers with regard to this subject into a draft which can take account of the practicalities of life. In the real world, where young people reach the stage when they want to choose courses suitable to their abilities and aptitudes, what are they going to do? They will look around to find where those courses are offered.

The noble Lord, Lord Alexander of Potterhill, has reminded us of the problem as he sees it with regard to the drafting of the Bill on this point. Having listened to the noble Lord speaking, I think it is clear that if a sixth-form college can exclude some pupils because it does not offer certain courses, this is bound to be selection by ability and aptitude. I have listened to what the noble Lord, Lord Donaldson of Kingsbridge, had to say and I would ask the Government this question, and perhaps, as this is Report stage the noble Baroness, Lady Stedman, will be able to reply. If the Government are saying that the noble Lord, Lord Alexander of Potterhill, is wrong, then I hope they will explain the distinction between a college which refuses admission on the grounds that it does not offer the necessary courses and an institution which includes courses of such a standard that some pupils might then be refused admission?

I know perfectly well that the Government will tell me that the second option is completely prohibited by the terms of the Bill. Why is it that the first option cannot be prohibited too? I am driven to the conclusion that the noble Lord, Lord Alexander, is right; that the drafting of Clause 1(1) will lay a duty on authorities to see that their sixth-form colleges can admit any pupil for any course. May I offer the Government a word of warning on this, of an entirely practical kind? I do not know whether the noble Lord has seen the report of the Head-masters' Conference some three weeks or so ago, in which Mr. Dance, Head-master of St. Dunstan's College, Cat ford, and formerly the head of the Luton Sixth-Form College, said that he was concerned whether sixth-form colleges were desirable at all, because at Luton he found that too much—and I quote his words—"remedial work was needed when pupils arrived". He added that it had been a relief to him to return to a school where there was a sense of continuity. That was a very significant statement, because the Luton Sixth-Form College is one of the seventeen selective sixth-form colleges in the country. Presumably the state of affairs on which Mr. Dance was expressing an opinion would have been less marked at the college of which he was then the head than it would have been at colleges which were totally open.

My Lords, I am bound to put it to the Government that they are laying a very formidable burden on local education authorities. Even if the legal advice given to the Government on this Amendment is that this is not so, undoubtedly the Bill is going to continue the practice of spreading sixth-form teaching resources ever more widely, rather than concentrating them, a point on which my noble friend Lord Eccles spoke.

A week ago the right honourable gentleman the Prime Minister made his speech at Oxford, expressing his concern about the results of our education system. He expressed his view in terms of the skills which should be acquired by school-leavers and he was specific. The right honourable gentleman said:
"Is there not a case for a professional review of the mathematics needed by industry at different levels?".
The Government will remember that the right honourable gentleman went on to ask why there were 30,000 vacancies for science and engineering students last year while the humanities courses in higher education were full. These are wholly reasonable words. But what is the Bill doing? It is busy ensuring that the answers to questions which the Prime Minister put are never going to be provided. By removing the discretion of local authorities to provide education as they think best you arc going to be hard put to it to provide, for instance, the sort of maths teaching we want. We shall be discussing this point in more detail when we come to the Amendment of my noble friend Lord Eccles.

My Lords, at col.1342, of Hansard for 6th October last, during the Committee stage of this Bill, the noble Lord, Lord James of Rusholme, put the matter more clearly than I could when he said that if the rare resources for teaching maths up to Advanced level are going to be deployed properly, selection is inescapable. This is precisely what this Bill is aiming to prevent, and that is the point to which this Amendment is directed. The Bill will also work against the expressed desire of the right honourable gentleman the Prime Minister for a swing towards science and engineering, because the total imposition of comprehensive education is absolutely bound to destroy schools which have a science and engineering staff, facilities and traditions.

I remember well the Birmingham proposals in 1973 for reorganisation. There were schools which bear the name of the noble Lord, Lord Kings Norton, and because they do, they have a very strong engineering side to them. I remember how anxious and concerned the noble Lord on the Cross Benches was that those schools were to be turned into mini-comprehensives within a consortium of schools. I remember well the reorganisation proposals for Harrow Secondary School. By common consent, including views given in letters written to the Department at the time by Members of Parliament on the Labour Benches, that school had almost the finest science department of all the maintained schools in the country. It was literally going to be destroyed and dismantled in order to turn the school into an 11 to 16 comprehensive. I am not arguing for a return to the technical schools of the tripartite system, but having listened to my noble friend Lord Eccles I am driven to the conclusion—and I would hope the Government are, too—that if you pull up good sixth form teaching by the roots in this way you cannot hope to achieve the declared objectives of the Prime Minister, when he said that what was needed was a more technological bias in science teaching that would lead towards practical application in industry.

Whether in the light of the Prime Minister's Oxford speech the Government are prepared to write some flexibility into the Bill I suppose we are now going to discover, for a new Secretary of State is saddled with a Bill on which the Government have so far refused to make one concession. Surely this could be an opportunity to recognise that a degree of flexibility for local education authorities is necessary. In addition, I hope the Government will take on board the fact that authorities are genuinely worried that the wording of Clause 1(1) as it appears will lay a duty on them to provide courses at any standard for any pupil who may be admitted. It will be for my noble friend Lord Elton to decide what we ought to do about this Amendment. There is no wish on this side of the House to breach the general principle of the Bill in this respect. As I said when I started, we put down this Amendment for a second time purely to find out what the effect of the wording of the Bill will be in regard to sixth form teaching.

I am bound to say that, in a clash of opinion between the Government and the noble Lord, Lord Alexander, I believe that the noble Lord, with all his experience, is right. The effect of the wording of Clause 1(1) will be to make every sixth form open. There are questions to be answered when the noble Baroness, Lady Stedman, comes to speak. Is the noble Lord, Lord Donaldson, right in saying that you may not refuse admission to an institution because it is an institution but you may refuse admission to an institution because a pupil has not got the correct qualifications for a particular course? Why is it that the wording of this Bill, in distinction to the wording of the 1970 Bill when it was introduced by the last Labour Government, outlaws selection in sixth form colleges but will allow sixth forms in schools to be as highly selective as they wish. We shall hear the answers to these interesting questions in a few moments; then it might be right to have some discussion between the Government, the Opposition and the noble Lord, Lord Alexander, and other noble Lords, and maybe we can return to this matter again on Third Reading.

The Pound Sterling

3.44 p.m.

My Lords, with the leave of the House, I shall repeat a Statement which has just been made in another place by my right honourable friend the Chancellor of the Exchequer. His words were as follows:

"The sterling dollar rate declined sharply when business began this morning. At one point, it was more than 7 cents down on its closing rate in London at the end of last week, a week in which sterling held up well in active trading conditions.

"I understand that the whole of today's pressure has stemmed from the story in yesterday's Sunday Times which suggested that the IMF and the United States Treasury have agreed on a set of conditions, including a lower exchange rate, for the projected United Kingdom drawing from the Fund.

"This story has been denied in the most unequivocal terms both by the International Monetary Fund and by the United States Treasury. The House will have seen that Mr. William Simon, the United States Secretary of the Treasury, has described the story as—I quote his words,

'irresponsible and patently untrue'.

"Mr. William Dale, the Acting Managing Director of the IMF, said that the reports—I quote again,

'have absolutely no basis in fact as to either the Fund's method of procedure or the particular nature and size of the terms. The Fund does not, and cannot, determine its views on detailed measures until after a careful examination of the economic indicators on the spot'.

"These are Mr. Dale's words. In fact, the mission from the IMF staff will not be arriving in London for discussions with Her Majesty's Government until next month.

"It will not form a view on what terms are appropriate until it has been able to assess the prospects for the British economy in the light of Treasury forecasts which will then be available".

My Lords, that concludes the Statement.

My Lords, the House will be grateful to the noble Lord the Leader of the House for having repeated that Statement. I think on this sort of subject we must be very careful what we say. Certainly it is not the wish of anybody in your Lordships' House to say anything which would make a difficult situation more difficult. I would only say—and I think the noble Lord the Leader of the House would agree—that above all what is needed now is confidence here and abroad. If that confidence existed I think we need not fear what other people think. I hope the Government will address themselves to that aspect, and quickly.

My Lords, I should like to endorse what the noble Lord, Lord Carrington, has said. This ought to be a lesson to all of us. If a massive wave of selling of sterling can be sparked off by one newspaper article it shows how fragile our credibility overseas has become, and sterling will presumably be at risk until negotiations have been completed with the IMF. Therefore, I would ask the Government whether it would not be wise to try to hasten these discussions so that the period of risk is shortened.

My Lords, I would say how grateful I am to the noble Lords, Lord Carrington and Lord Byers, for their responsible attitude. I expected that. I remember that my first baptism here on a similar matter led to a debate, but today I believe it is right to exercise a measure of restraint although it is right for noble Lords to ask certain questions. I agree so much with the question of confidence and how important it is. On the question of talks with the International Monetary Fund, they will begin in November but there have already been soundings between officials.

My Lords, speaking from the Cross-Benches, may I say how much I personally agree with the attitude which has been adopted by the Leader of the Opposition and the Leader of the Liberal Party. Speaking as one who in the past has had something to do with the national Press, I was a little shocked at the cocksureness and irresponsibility of the article referred to. On the other hand, may I say to the noble Lord that I hope the reputation which he has been able to convey to the House of the alleged information conveyed in that article will not lead to any complacency on the part of the Government with regard to the measures which need to be taken if we are to be saved from the fate which was perhaps foreshadowed in that article. One has only to travel abroad as I have been doing in the last few weeks to realise with a sense of humiliation the compassion with which our ability to manage our affairs hitherto is commonly regarded by people of good will and of all political persuasions.

My Lords, I naturally thank the noble Lord. May I say that Mr. Simon, the United States Treasury Secretary, said that we have taken some rather courageous measures and I believe that we have to.

Education Bill

3.49 p.m.

Report stage resumed.

My Lords, by leave of the House I should like to make two comments, both factual, on what has been said. The first is that the noble Lord, Lord Belstead, referred to Luton in a sense which suggested that it was selective. It is not selective at the moment. Secondly, the difference between the figures quoted by the noble Lord, Lord Alexander, and mine were so wide that I must repeat my figures, which come from the Department. Of the 72 sixth form colleges and two sixth form centres in operation in September 1976, only three still operated selective admission procedures and, of those, two are moving towards becoming open access colleges. This being a Report stage discussion, I shall not resume the argument.

My Lords, I rose to my feet prior to the Statement of the noble Lord the Leader of the House in regard to the serious situation in which we find ourselves, in order to follow Lord Belstead. I listened to his opening speech and also to the speech he made later on the Amendment. What was noticeable was that he quoted from an ex-Minister of Education, in the person of Lord Eccles, and he also praised Lord Robbins on the Cross-Benches. He played with the noble Lord, Lord Alexander, because of his knowledge of the educational position in this country prior to his coming to this House. But he had not a word to say in reply to the questions that were posed to him by the noble Lord, Lord Beaumont, or my noble friend Lady Bacon. Nor had he anything to say to the noble Baroness, Lady Brooke, in regard to the very important question which she put.

There is another aspect which has never been brought within the ambit of consideration regarding the 17s to 19s, quoted in the course of the debate—these young people who are not prepared to go in for their A-levels after being successful in their O-levels. There is one thing being overlooked, in my submission, and it is this. A lot of these young people who have left the sixth form have left the schools, and have not made application to go into these colleges but have gone into industry, have what is known as day release. They go to technical colleges; this is where you are going to get your technologists from and not so much from the universities. It is to the technical colleges that we look these days to produce those young men and women for the future of this country. I do not know whether Lord Belstead will make any reference at all to what was said by Lord Beaumont and my noble friend Lady Bacon, seeing that both of them are educationists in their own right. I was a member of a county council before I became a Member of Parliament, and I say this in all sincerity and without any sense of arrogance. Lord Alexander did not always receive the praise of local educational authorities up and down this country before coming here. I would say to Lord Belstead that he has played his tactics very well on this occasion, but the time will come when he will try such tactics once too often and he will find that he will be brought down. He will find that what he has to say on important issues like this will not come off in the way it has today.

3.55 p.m.

My Lords, I trust that the House will indulge me in exercising my normal prerogative. It is a difficult task to reply to this debate. It has in part turned out to be a debate about the merits and demerits of the sixth-form colleges as a means of education. To start at the point of greatest difficulty, I must refer to the third intervention of the noble Lord, Lord Donaldson, which was by leave of the House. We are in some difficulty about the figures, because although there is a difference between the figures presented by the noble Lord, Lord Donaldson, this week and those presented by the noble Lord, Lord Alexander of Potterhill, this week, there is also a difference between the figures presented by the noble Lord, Lord Donaldson, this week and the figures presented by him last week. To get a reduction from 14 to three in a matter of seven days is progress of a very high order.

The noble Lord, Lord Belstead, has already advised us to look at this carefully because the question is not as simple as it seems to be thought to be in some parts of this House. First of all, I must emphasise to noble Lords who dislike the idea of an increase in the number of sixth-form colleges that, deplorable as their effects may be in some directions, there are those who feel that they are less deplorable than the effects of gargantuan size which in many cases are the alternative in a straight-through comprehensive school covering the whole of the ability range. This, I think, is a point that should be brought home to the noble Baroness, Lady Bacon. And I am sure that my noble friend Lord Belstead had no intention of being discourteous either to her or to the noble Lord, Lord Beaumont, as the noble Lord, Lord Slater, seemed to think he might have, in not referring to what they had said. He referred in substance to what they had said even if he did not refer to them by name, and perhaps it is the courteous thing to refer to by name only those who have uttered sentiments with which one agrees.

The fact is that come the passage of this Bill, in whatever form, there is going to be an increase of demand for places in sixth form colleges and there is going to be in some cases an excess of demand over availability. We have heard nothing from the Government so far to say on what basis they would allocate the insufficiency of places to the over-sufficiency of pupils applying for them. Is it not going to be on the grounds of aptitude or ability? I shall be very surprised if it is not.

We are in a much more difficult position when we come to examine the noble Lord's reply to the substantive point that I sought to make in my speech in introducing this Amendment. He has said in effect that the admissions criteria for an institution are not the sum of the admissions criteria for the courses which that institution offers. Even if we look at it only in those simple terms, I feel that this is a matter of such importance that it must be decided on an irrefutable authority and one which we have had time to examine. I would have thought that this was something in which the noble and learned Lord on the Woolsack might well interest himself between now and Third Reading, because if we do not have an assurance of the rectitude of Lord Donaldson's interpretation of this Bill, then, like Lord Alexander, we simply cannot accept the assurance of an intention as being superior to the clear duty of the court to rule in a contrary sense if a case is brought. It does seem to me difficult, and indeed odd, to suggest that if a pupil should arrive at a sixth form college and say, "I want to study history. I have got an O-level in history", he can be brought in; but if he arrives and says, "I want to study history but I have no O-level in history", he can be told that he cannot come in to that college.

What happens if he addresses himself to the head of the college and merely says, "I wish to come to your college. I have no O-levels"? He is then not going to be qualified to enter any course, or indeed the college. On a layman's view, it seems to me prima facie to suggest that a sixth form college is selective if it says that. Indeed, my doubts as to what the noble Lord means by an open college and a non-selective college are deepened by the figures he gave in his last intervention just before my reply. He said that the college at Luton was non-selective. I just wonder what non-selective is in that case, and I shall want to study that against the undertakings that the noble Lord has given as to the intentions of the Government.

What has been said by the noble Lord is so set about with uncertainty that it would be irresponsible to move this Amendment at this stage, since we shall be moving on uncertain ground. As I' said at the last stage, it is the duty of the Government to make clear what is the law and it is for the Government to draft their legislation in such a way that it can be understood outside the courts as well as inside the courts. Therefore, if the noble Lord cannot do better than he has now done, I hope your Lordship, will bear with me if I reserve the right to come back with this Amendment at Third Reading. Frankly, we are not satisfied. I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

4.2 p.m.

Page 2, line 11, at end insert—

("( ) Subject to subsection (1) a Jove, local education authorities shall have. I duty to arrange for the admission of pupils with particular needs to the schools most suitable for them.").

The noble Lord said: My Lords, if it is indeed right that I should be sparking to this Amendment at this time—because I too was advised that it would be taken in a different order—I should like to move the Amendment standing in my name. This arises from an argument which we had on Committee stage, I think very largely on a Conservative Amendment. The trouble with that Amendment as the Government saw it, and indeed as I saw it, was that it could have been used to wreck the Bill and to destroy subsection (1). I hope that this Amendment does not have that disadvantage, because it makes subject to subsection (1) what we are trying to put forward. That means that it cannot be used in any way to subvert the comprehensive principle, but it makes a positive virtue of the fact that local education authorities must do their best to arrange the admission of pupils with particular needs to the schools most suitable for them.

We shall be told that education authorities do this already, and I am quite prepared to believe that that is so in the great majority of cases—in fact I am sure that they do. But without joining in the competition as to whether we can be most paranoic about odd Secretaries of State, or rebel authorities, I think we are safe in trying to work on a basis that not every local education authority will be entirely faultless, and that there is always a like-lihood, in the bureaucracies of overworked and undersupplied authorities, that these matters are not always looked at with individual pupils quite as carefully as they might. By imposing this duty, I think that we can give a ground for parents and children to stand on when trying to get admission to a particular school for a particularly good reason.

It is not my intention to weary the House with a number of instances. I shall merely take one. In the library at Swiss Cottage of Camden Borough there was over the last month—and may be still for all I know—a remarkable exhibition of photographs by two girls aged 8 and 13, the daughters of a professional photographer, who were obviously guided, but not overtly helped, by their parents. The photographs of both of them were extremely good; in fact the photographs of the younger one were perhaps the more outstanding.

When it comes to choosing a school for a child like that, obviously it would be right that, if there was a school with good darkrooms and with an art teacher who specialised in photography, the child should go to that school. Although we on the Front Benches here are agreed on the comprehensive principle, I hope that we are also agreed upon the principle of excellence, and that where we find excellence we ought to cultivate it. Here is a situation where a sensible education authority, when appealed to to make this choice in this particular allocation, would do so.

But not all education authorities are perfect, although most of them are very good for most of the time. I am sure that noble Lords can think of many other cases, it merely happens that the one I mentioned has come into my experience in the course of the last few months. When we come across a case like that it is right that we should lay an especial duty on the local education authority to make that kind of choice. I cannot see that this Amendment can do any harm to the general principle of the Bill at all. It seems to me that it strikes one of the very small blows which are available for the freedom of choice of parents and children that we should all like to see increased. Therefore, I beg to move.

4.7 p.m.

My Lords, we discussed a rather similar Amendment at Committee stage, which was moved by the noble Lord, Lord Belstead, but warmly welcomed by the noble Lord, Lord Beaumont. On that occasion I explained that the Conservative Amendment would enable local authorities legally to retain their selective systems, and it was then withdrawn. This Amendment, although, similar, has one important difference. Local authorities would have a duty to arrange suitable education for pupils with particular needs, but subject to the comprehensive principle. This Amendment does not share the defects of the former one; in principle it is reasonable but, as I hope to convince the noble Lord, totally unnecessary.

In earlier debates we established the fact that, whether or not the first fourteen lines had been added to Clause 1, local authorities are to have regard to the comprehensive principle,
"in the exercise and performance of their powers and duties relating to secondary education …"
In other words, the duty to have regard to the comprehensive principle in no way absolves authorities from their duties under Section 8 of the 1944 Act to offer such variety of instruction and training as is necessary in view of pupils' different ages, abilities and aptitudes. Authorities are already under a duty to provide children with a suitable education, and when the Bill is enacted, they will still be under a duty to continue to do this while having regard to the comprehensive principle—that is, within a school that admits children without reference to ability or aptitude.

As I said during the debate on the previous similar Amendment, the principle in Clause 1 is really quite narrowly drawn: all that it does not allow is the making of special arrangements for the admission of pupils on the basis of their academic ability. It would be permissible for a pupil to be admitted to a school in order to benefit from special facilities if his admission was not governed by his general academic ability and it would remain a duty of the local authority to ensure that each child was provided with an education suitable to his or her needs. It is because this ideal is more readily attainable within a comprehensive system that we support comprehensive rather than selective schools. I hope that in the light of what I have said the noble Lord will feel able to withdraw the Amendment; if not, I must ask the House to reject it as being unnecessary.

My Lords, the noble Baroness, Lady Stedman, has assured us that the Amendment is unnecessary because Section 8 of the Education Act 1944 remains in force and that that lays a duty on authorities to provide schools which are suitable to the age, ability and aptitude of pupils. I accept from the noble Baroness that she means exactly what she says, but I confess that she could have fooled me, considering the reception which our first Amendment had in Committee when we tried to write in Sections 8 and 76 of the 1944 Act and for which it seemed the Government were not particularly enthusiastic. That aside, I have a more positive concern about this issue and it lies within the new draft Manual of Guidance which the Department of Education and Science issued in the summer and to which I referred in Committee.

The reply which the noble Baroness just gave does not seem to be quite in tune with new draft Manual of Guidance, a document which has raised considerable anxieties. As I pointed out in Committee, there is no mention in the new draft of the part which would b played by religion in deciding admissions to voluntary schools. In addition, there is no mention in it of many of the other reasons why parents want their children to go to a particular school; because it is large or small, because it uses new or traditional methods, because it is mixed or single sex or—and this is, I think particularly worrying the noble Lord, Lord Beaumont of Whitley—because it has especially good teaching in a particular subject. The noble Baroness kindly wrote to me on 20th October on this general point and in her letter she said:
"You also referred to the draft circular about the admission of children to schools of their parents' choice. Reference to religious factors was omitted quite deliberately, together with reference to other factors of a general kind (e. g. preference for single sex education) because such factors are mainly relevant to the general arrangements made by authorities for allocating places, whereas the draft circular was intended, unlike the old Manual of Guidance, to be concerned with particular cases which might be referred to the Secretary of State."
I am grateful to the noble Baroness for writing to me, but I find that passage worrying. Surely it is precisely on the grounds referred to in her letter that particular cases of parental choice get referred to the Secretary of State. It is because parents want a single-sex or denominational school or a small or traditional school that they sometimes come in conflict with their local education authority and eventually the case goes to the Secretary of State under Section 68 of the 1944 Act.

Am I to assume that because there are legitimate reasons for parents wanting choice of school and because they are accepted as being legitimate reasons by the Department of Education and Science, they do not need to be referred to in the new draft Manual of Guidance? I should like to think that I have t tat right, but my hopes were dashed when I read on in the draft manual and, on coming to paragraph 8—which I have quoted before but will repeat—I read:
"Questions of a school's suitability to the ability and aptitude of a child are not expected to remain of practical significance for much longer as they should not normally arise in the case of admission to a comprehensive school."
With their obsession for academic selection, I could have understood it if the Government were saying in their draft circular that questions of the ability of a child should not be allowed to arise in the case of admission to a comprehensive school. I would not applaud it, but I could understand it.

As noble Lords have pointed out incessantly in these debates, the aptitude of a pupil may require choice of one school and not of another. I am therefore particularly glad that the Amendment refers to the needs of children. In Committee I gave an example of a dyslexic child I knew who was not making any progress at school and was moved to another school where his need for specialised teaching would be met. Could anybody doubt that that boy had been admitted to his second school on grounds of need, the need in that case of his particular disability? My noble friend Lady Faithfull spoke in previous debates on this subject of children who were not categorised as handicapped but who were in need of special care and education, often in boarding schools, because they had symptoms of maladjustment and were probably backward. Those pupils are placed on grounds of their needs, the needs of their aptitudes and sometimes of their abilities, also.

The point to which I did not receive a reply in Committee was the question of what one does if one has a very gifted child who will obviously make progress in one school rather than in another. Presumably the Bill will prohibit admission to one school rather than the other because the admission of that pupil would be decided on the grounds of his or her need, in this case the need of ability, which can strike at the very root of the life of a very gifted child.

I was particularly glad that Lord Beaumont pointed out that this is not a wrecking Amendment but is subject to subsection (1). It says that there should be the discretion of local authorities to be allowed to take those pupils of whom I have tried to give illustrations into one comprehensive school, if the Government like, and not into another. The Bill, so far as can be seen, will prohibit the placing of a child in one school rather than in another, even if they are comprehensive schools. If I am right on that, then that is the reverse to progress in education and the Amendment would help to rectify the damage which I still believe Clause 1 will do in this respect.

4.17 p.m.

My Lords, I am sorry that, because of its drafting, I cannot support the Amendment. To place a duty on local education authorities to arrange for pupils to go to particular schools because of their particular needs is not in my opinion a practical proposition; that is, unless one accepts the entire principle of selection over all schools in the area. I should have no objection whatever if it was so drafted that it was not a breach of Clause 1 for a local authority to arrange for the admission of pupils with particular needs to schools most suitable for them. Then one would rest on parental choice.

This is a very real problem. The banding system will not work in practice, in my view, because of the difficulties of transport and the complaints of parents. It would be a very difficult operation. Inevitably, therefore, comprehensive schools will vary a great deal in their nature; they will vary in the range of ability in the schools according to the districts or areas in which they are. I am thinking of the last city in which I administered; the comprehensive school in Fulwood would be very nearly a grammar school while the comprehensive school in the Attercliffe Valley would be a very different comprehensive school indeed.

Obviously if one accepts what is now the amended Clause 1, the provision of Section 76 applies and parents would have the right to say to an authority, "I would prefer my child to go to this rather than that comprehensive school because he has particular needs, "whatever these might he, "and I should be happy if the authority will say we accept that and we agree." He is not required to go to the neighbourhood school, so to speak, if a case can be made. Obviously it would depend on the availability of places in the particular schools. However, to place a duty on the authority to arrange to do that is very different. I do not think it is a practical proposition in terms of administration.

My Lords, by leave of the House I accept what the noble Lord, Lord Belstead, has said that this is not a wrecking Amendment. On the other hand, we think it is quite unnecessary and, perhaps I may refresh the memory of the House as to what Section 8(1) of the 1944 Act states. It is that:

It shall be the duty of every local education authority to secure that there shall be available for their area sufficient schools—(a) for providing primary education … and (b) for providing secondary education … and the schools available for an area shall not be deemed to be sufficient unless they are sufficient in number, character, and equipment to afford for all pupils opportunities for education offering such variety of instruction and training as may be desirable in view of their different ages, abilities, and aptitudes, and of the different periods for which they may be expected to remain at school, including practical instruction and training appropriate to their respective needs."
That part of the 1944 Act still goes side by side with this Bill when it is enacted and we are still subject to it.

So far as the comments which I made in my letter to the noble Lord are concerned, if he had read on it would have said:
"There is no intention of implying that denominational preferences should no longer play a part in school allocations but as explained in the debate at column 1624 we are going to have another look at the arrangement for allocations for school places and the Secretary of State will, among other things, be reviewing the draft circular to which he referred."
I am quite sure that this Amendment is unnecessary. I agree with the noble Lord, Lord Alexander of Potterhill, that it would be unwise to place a duty on authorities, and I hope the noble Lord might withdraw it.

If I might intervene briefly, my Lords, to take up a point which the noble Baroness made. She quoted to us in extenso the part of Section 8(1) of the 1944 Act which sets out the duty of a local authority to provide places,

"… sufficient in number, character, and equipment to afford for all pupils opportunities for education offering such variety of instruction and training as may be desirable …"
Of course, the whole Bill is concerned about whether children who have the needs meet up with the places that offer the resources they require. Therefore, I do not think that what the noble Lord, Lord Beaumont of Whitley, seeks to do is in any way superflous at all. That was the substance of our Second Reading and a good deal of our Committee stage debate, and I am surprised that it seems to be slipping away from us. The ethos of the comprehensive idea, the respectable content of the comprehensive idea, is that you remove from a child the agonising and odious choice between schools with different academic and, therefore, different social connotations and you present the same choice to the child within a school where the choice is no longer odious because it is not publicly discerned.

That is a condensed but recognisable description of the situation. That is what the noble Baroness and her friends seek to do. What we are saying is, "A 1 right"—and I specifically said this at the last stage on this Bill—"if that is what you are seeking to do and if you can do it, well and good." What we want is for children to be well-educated, educated as well as is possible with the resources at our command. But we said that we are not confident that it is physically possible to produce all these different choices in the one school. It becomes very big if you do and we have just had a debate about the sixth-form colleges which arose simply because of the need to make these schools less big.

Another solution is to split them up in some other way. But if you split them vertically instead of horizontally, and split them according to some criterion other than age, then some of the resources you want will be in one school and not in another; the choice will no longer be within the school, and thus the covert choice—to extend the paraphrase I have used—will be an open choice between two schools. Now, obviously, if the comprehensive principle is to survive, it must not be a choice resting upon academic aptitude and ability of the mass of the children, because that brings you back into the bipartite system.

What you have to do is to say that the schools are generally selected without reference to ability and aptitude, but in particular cases—and the noble Lord has wisely used the word "particular" as we did in our first draft—wherethere is a brilliant teacher of music in one school and you have a musically gifted child in another, regardless of any other considerations that particular nerd and we have avoided the use of aptitude and ability) shall be taken into consideration and the child shall be transferred. You cannot say that is not a choice by reference to aptitude and ability and that destroys the principle of the Bill in reference to that school. Here is a child who is admitted to that school in regard to its particular ability for music. I am sorry I chose music, because there is an Amendment covering music already. Let us say it is sculpture or Greek—it does not matter what it is so long as it is a breach of the principle.

The noble Lord has a point and the noble Baroness has not answered it. I did not anticipate that she would because it will be very difficult to do. If the draft which the noble Lord is submitting to the House has the effect that I think it has, as the noble Lord, Lord Alexander of Potterhill—who is exercising a considerable effect on our debates this afternoon—thinks, then if he is right in this interpretation, and he would seem to be, you could say that every child is a particular child and every child has particular needs. Therefore, we are back to where we tried not to be before; though it might give a certain glow to our political hearts it would be in direct contradiction to the principle of the Bill. That, I know, is not what the noble Lord, Lord Beaumont of Whitley, wishes to do, and far be it from me to egg him on to do things which are contrary to his principles. But he has a point and I feel that the noble Baroness has not answered it. It must be answered if unfairness is not to result, and I hope that we resolve this question before the Bill leaves this House.

My Lords, one thing is quite clear, and that is that the noble Baroness, Lady Stedman, and the noble Lord, Lord Alexander of Potterhill, cannot both be right. It cannot be both unnecessary and impractical. So I should like to take the two arguments separately. I take very seriously the point which the noble Lord, Lord Alexander of Potterhill, has made, but I would say to him that if we cannot find a way in this Bill whereby we can make it more flexible for individual children without breaching the whole principle, we certainly will have failed in this House. I believe we can find such a way. I believe that my Amendment is two-thirds of the way there, if not further. It is my intention to ask the House to divide on this issue and I would say to the noble Lord, Lord Alexander of Potterhill, that perhaps he and I could get together in order to bring an Amendment to the Bill, as it will be amended, on Third Reading and to put in an extra qualification if one is needed. It seems to me that what is needed is a qualification about what is practicable for local education authorities. We can pass this Amendment now and then put in an extra qualification if necessary at Third Reading. I believe that would be a very straightforward way of dealing with the matter and would waste less time in your Lordships' House.

To the noble Baroness, Lady Stedman, I would merely emphasise what the noble Lord, Lord Elton, said. Section 8 of the 1944 Act does not lay a duty on local education authorities actually to help put children into the right schools. What it does is to say that they must provide the requisite number of places in order to deal with them, of particular types over a whole local education authority, which is a very different point altogether. The noble Baroness says that this Amendment is unnecessary, but I think that it ought to be put in because everyone knows—the Government Front Bench knows—that there is considerable worry in this country that what the Government are trying to do is to impose a rigid grey comprehensive system over the whole country. Whatever noises the Conservative Front Bench may be making at this particular moment, the Government Front Bench and myself know that this is untrue; but it is very important in my mind that we should make it quite clear to people that it is untrue and that we should make the system in such a way that it cannot be made true. It was for that reason, and with the assurance to the noble Lord, Lord Alexander of Potterhill, and anyone else who feels the same way he does, that we will examine the possibility and desirability of putting down a further qualifying Amendment at a later stage that I ask the House to divide.

4.30 p.m.

On Question, Whether the said Amendment (No. 2) shall be agreed to?

Their Lordships divided: Contents, 102; Not-Contents, 53.


Airedale, L.Emmet of Amberley, B.Nugent of Guildford, L.
Amory, V.Erskine of Rerrick, L.O'Hagan, L.
Ampthill, L.Faithfull, B.O'Neill of the Maine, L.
Amulree, L.Ferrers, E.Onslow, E.
Arran, E.Fraser of Kilmorack, L.Platt, L.
Ashbourne, L.Glasgow, E.Rankeillour, L.
Auckland, L.Glenkinglas, L.Redesdale, L.
Banks, L.Gray, L.Reigate, L.
Beaumont of Whitley, L.Grey, E.Rochdale, V.
Belstead, L.Gridley, L.Ruthven of Freeland, Ly.
Berkeley, B.Grimston of Westbury, L.Sackville, L.
Brooke of Cumnor, L.Hailsham of Saint Marylebone, L.St. Aldwyn, E.
Brooke of Ystradfellte, B.St. Davids, V.
Byers, L.Hampton, L. [Teller.]Sandys, L.
Campbell of Croy, L.Hanworlh, V.Savile, L.
Carr of Hadley, L.Harmar-Nicholls, L.Sharples, B.
Carrington, L.Harvey of Prestbury, L.Simon, V. [Teller.]
Cathcart, E.Hylton-Foster, B.Spens, L.
Clancarty, E.Inglewood, L.Stamp, L.
Clifford of Chudleigh, L.Kimberley, E.Strathclyde, L.
Clitheroe, L.Kinnaird, L.Strathcona and Mount Royal, L.
Clwyd, L.Lauderdale, E.Sudeley, L.
Cullen of Ashbourne, L.Long, V.Tenby, V.
Darcy (de Knayth), B.Lyell, L.Teviot, L.
Daventry, V.Macleod of Borve, B,Thomas, L.
De Freyne, L.Marley, L.Trefgarne, L.
Denham, L.Merrivale, L.Vickers, B.
Derwent, L.Mersey, V.Vivian, L.
Devonshire, D.Monck, V.Wakefield of Kendal, L.
Drumalbyn, L.Morris, L.Ward of North Tyneside, B.
Ebbisham, L.Mowbray and Stourton, L.Ward of Witley, V.
Eccles, V.Munster, E.Wigoder, L.
Elles, B.Newall, L.Wolverton, L.
Elliot of Harwood, B.Northchurch, B.Young, B.
Elton, L.


Aylestone, L.Harris of Greenwich, L.Phillips, B.
Bacon, B.Henderson, L.Popplewell, L.
Birk, B.Houghton of Sowerby, L.Sainsbury, L.
Blyton, L.Jacques, L. [Teller.]Shepherd, L.
Brimelow, L.Janner, L.Shinwell, L.
Brockway, L.Kirkhill, L.Slater, L.
Buckinghamshire, E.Leatherland, L.Stedman, B.
Burntwood, L.Lee of Newton, L.Stone, L.
Burton of Coventry, B.Llewelyn-Davies of Hastoe, B.Strabolgi, L. [Teller.]
Champion, L.Lloyd of Hampstead, L.Summerskill, B.
Collison, L.Lovell-Davis, L.Taylor of Mansfield, L.
Cooper of Stockton Heath, L.Maelor, L.Wallace of Coslany, L.
Crowther-Hunt, L.Maybray-King, L.Wells-Pestell, L.
Cudlipp, L.Melchett, L.Wigg, L.
Darling of Hillsborough, L.Northfield, L.Winterbottom, L.
Donaldson of Kingsbridge, L.Oram, L.Wise, L.
Gordon, Walker, L.Pannell, L.Wynne-Jones, L.
Hale, L.Peart, L. (L. Privy Seal.)

Resolved in the affirmative, and Amendment agreed to accordingly.

4.38 p.m.

Page 2, line 11, at end insert ("or

(c) the provision of education in any school where the arrangements for the admission of pupils are based partly on selection to ensure the most effective use of qualified teachers of mathematics.").

The noble Viscount said: My Lords, this Amendment does not open the door to all kinds of exceptions to the general principle in Clause 1. I should not want it to do that. It creates one new exception—mathematics—to be added to music and dancing. When I put down the Amendment, I did not know that, in a matter of days, the Prime Minister would declare himself a strong supporter for the reasons which have prompted my new subsection. In his speech at Ruskin College, the right honourable gentleman made my case for me. The part of his speech which dealt with the decline of standards in mathematics received very wide and favourable publicity and so, with such backing from such an important quarter, it would be grotesque if the Government did not accept the Amendment. It replaces the one which I withdrew at the Committee stage; and, as your Lordships will remember, on that occasion all noble Lords who spoke recognised that the standards of teaching mathematics varied very much from school to school, and in many schools adequate teaching was almost non-existent. It was agreed by all of us that action was required. The Amendment which I then moved sought to divide that action into two parts. It called for the attainment of minimum skills in mathematics to become a statutory aim in all schools—something which the Prime Minister warmly endorsed in his speech—and it provided for the selection of pupils to attend schools where the subject was taught by highly qualified teachers.

The Amendment which I am now moving is reduced in scope. It proposes the first essential step towards making an all-round improvement in the teaching of mathematics, and that cannot be done unless the very best possible advantage is taken of all the qualified teachers in this subject that we have at the present time. It needs to be said again and again that the lowering of standards in mathematics has not occurred in the grammar schools but in the primary schools and the non-selective secondary schools. At the Committee stage, the noble Lord, Lord Davies of Leek, with his customary vigour, described the abandonment of elementary mathematics in many primary schools. It was there, he said, in the primary schools, that the rot had set in. That is indeed part of the story, but if the teaching it unsatisfactory in the primary schools that cannot be put right until more boys and girls secure reasonable passes in O-and A-level mathematics and until a fair proportion of them go on to become teachers. I wonder whether your Lord-ships realise that last year 38 per cent. of all students entering colleges of training as teachers did not have a pass at O-level in mathematics. That is the root of the trouble, and we must deal with it as best we can in this Bill.

What has been the result of this long neglect? Thousands of children are leaving primary schools hardly able to do the simplest sums. That was the point made by the noble Lord, Lord Davies of Leek, and no one can deny the truth of his statement. When these unfortunate children reach seconday schools, unless they receive remedial teaching in mathematics they abandon the subject as soon as they can. This is bound to happen on a considerable scale because, as your Lordships know, in many non-selective schools there are not enough qualified mathematics teachers to cope with the children who arrive having been well taught in primary schools, let alone the children who arrive knowing next to no mathematics, not even their tables. It would be very interesting to know how many are these deprived innumerate children; and we have to say that we do not know because the authorities do not tell us. If they did, they would have a prodigious row with the parents. But it would not be far out to suggest a figure between 30 and 40 per cent. of the total intake of the non-selective secondary schools.

I want to add one or two further points for your Lordships' consideration. The child who leaves school without having mastered the basic skills in mathematics is unlikely to acquire them later in life. Once out in the world, boys and girls may be inclined to educate themselves by reading, by watching TV, by taking up some hobby; but how often do they buckle to and learn elementary mathematics? This job has to be done in the schools if it is to be done anywhere. Yet—and this is my second point—if British industry is to keep up with the rest of the world, young entrants should have received a good grounding in mathematics. The Prime Minister made much of that in his speech last Monday, and, of course, he was right. Numbers are the language of technology. I could not, but industry, at a pinch, can do without music and dancing: industry cannot do without mathematics.

Therefore, my Amendment is designed to make it possible to maintain and enlarge the pool of potential mathematicians. I am not driving a coach and horses through the general principle of Clause 1, but in this House we ought to add to music and dancing any further specific exception if we are quite sure that such an exception is in the national interest and that the result could not be attained by any other methods. Of that, my Lords, I think there can be no doubt at all. Selection for mathematics is a very high national priority, at least as high, your Lordships may think, as music and dancing, and it ought to be written into the Bill. Whatever comes out of the Secretary of State's review of mathematics teaching—and we all hope that she will undertake that review with thoroughness and expedition—she will need to have this power in the Bill. Without it, she cannot get very far, and that is why we must put it in now.

It may be that the Government will object to my Amendment on two grounds. They may say that, where a comprehensive school does not have sufficient qualified teachers, the pupils wishing to take O-and A-level mathematics can at the age of, I suppose, 14 or 15 be selected and sent to another comprehensive where appropriate teachers are in post. My Lords, do not fall for that argument. The boy or girl with a bent for mathematics shows it early, as the noble Lords, Lord Snow and Lord James of Rusholme, told us on the Committee stage. They need good teaching long before they reach the sixth form. It is not only the children who will suffer from non-selection. Many good mathematicians—I know three or four—are attracted to teaching only when they can teach children all the way to A-level. They are unhappy teaching in the un-selected schools where classes of mixed ability can be the rule up to the age of 14. Noble Lords opposite may be inclined to say, "But how disgraceful! Every graduate teacher ought to be prepared to teach children of every level of ability and aptitude". Perhaps they ought, my Lords, but the facts of life are different.

At the Committee stage, the noble Lord, Lord Donaldson, dismayed some of us when he said that the Government intended all secondary schools to be neighbourhood comprehensive schools. He knows that this means that the good schools will get better and the poor schools will get worse. The reluctance to teach in the poor areas of the qualified mathematics teachers, who can pick and choose where they go because there are so few of them, will become more pronounced, and the result will be that thousands of children in the poor areas will never have a chance to discover their talent in mathematics. This Bill diminishes t le chances of the able children in the working-class areas, and the social consequences are bound to be deplorable. Professional people will not want to live in areas where the neighbourhood comprehensive school is unsatisfactory. Therefore this Amendment is a test case. Do the Government want to see teaching improved and more young people with the basic skill; in mathematics entering industry; or do they prefer to discourage the qualified teachers we have today from staying in the profession and, as a result, to diminish the output of mathematicians for the future? This is a test case by which we shall know whether the Prime Minister's encouraging speech last Monday means business. It is not possible to make any serious impression on the present unsatisfactory state of mathematics teaching unless we can select the able pupils to be taught by the totally insufficient number of qualified mathematicians. I beg to move.

My Lords, I should like to support the noble Viscount in the excellent case that he has put for this Amendment. Nobody knows more than he or has more experience and nobody could put the case better. I support it because I have had experience of mathematics in my own family. True, the boy in question did not go to a comprehensive school. If he had gone to a comprehensive school he would have had to fight very hard to get anywhere where he would have received the sort of teaching in mathematics that he obtained in the private sector. Nevertheless, once taught and once reaching a very high stage, he will then be in a position to help to train others if he so wishes. But some effort must be made to bring in this particular skill. My experience as chairman of an education committee for many years was that there were certain schools and certain teachers who were extremely good at mathematics and one was able to see that the children who wanted mathematics teaching got to those schools or to those classes in the schools. But one had to make a selection; there was no other way of doing it. And mathematics teachers wanted to get pupils who would benefit from the kind of skills that they were able to teach.

It seems to me that to be so hidebound about the way you deal with these special and important subjects means that you are shutting your eyes to what it is possible to do. I think it is necessary to have a clause of this kind in the Bill. After all, we have it for two other subjects, music and dancing. As my noble friend Lord Eccles has said, this is of vital importance in the development of our industrial life. Unless there is something of this kind in the Bill then, as my noble friend has said, the whole standard will continue to go down. It is going down now and we must stop it from going down. Unless this Amendment is accepted we shall be simply aiding what we are all desperately anxious to stop at the present time. I support the Amendment strongly.

My Lords, the noble Viscount, in 75 per cent. of what he was saying, was talking about a serious reality which the Government would not for a moment wish to deny, which is the importance of putting right the present shortage of, particularly, graduate teachers of mathematics. Where we differ is in the view that this Bill is the place to do it. The Amendment would enable an authority virtually to retain its selection procedure on the grounds that it was an effective use of mathematics teachers. The word "partly" does little to mitigate this defect, and in a previous debate I pointed out that in a selective system pupils were only partly selected on academic ability—geographical area, age and sex all played a part in this selection. It is reasonable, however, to use this Amendment to discuss mathematics education in the light of the comprehensive principle, which is something of the greatest importance in our opinion; but if the Amendment is pressed to a vote it must be clearly seen as potentially wrecking. Hence, we shall have to ask the House to reject it.

My Lords, there can be no dispute that mathematics is a vital part of the school curriculum. My right honourable friend the Prime Minister, as the noble Viscount has said, in his speech at Ruskin College on 18th October voiced the concern of all of us that the standards of numeracy of school-leavers shall be such that they have the option to pursue careers in science and technology and to meet the requirements of employers at different levels. But we need facts here. We need to know whether the achievements of the schools genuinely fail to match the needs of industry. There is a letter in The Times today, which most noble Lords will have seen, questioning this. We want to discover whether this is a serious failure to match or a matter of misunderstanding or of minor discontinuities which can be put right relatively easily.

At present there is no objective statistical evidence about national standards in numeracy. Such evidence as there is does not support the conclusion that there has been a substantial fall in standards. The Department of Education and Science has now given its Assessment of Performance Unit the task of developing methods of assessing and monitoring the achievements of children at school. The unit is treating mathematics as a priority area and is building on work already carried out for the Department by the National Foundation for Educational Research—and the noble Viscount will note that this is not a Departmental examination—in preparation for a monitoring system to cover mathematical skills. It is hoped that a start can be made on monitoring performance in mathematics in 1978. The National Survey of Secondary Schools by Her Majesty's Inspectorate is concerned among other things with the development of numeracy in the last two years at secondary schools, as I told your Lordships in Committee. This Survey, based on a 10 per cent. sample of all maintained secondary schools, will go on for 2½ years. These investigations together with information from national monitoring of performance of pupils in mathematics will give us much more evidence of the true situation in our schools.

To turn to the question of the numbers of teachers, the persistent shortage of teachers of mathematics is, of course, a serious problem. I recognise, as I think the noble Viscount does, that there is a vicious circle here. If the schools produce too few entrants to higher education in the shortage subjects, a consequence must be a shortage of teachers of quality in those subjects. This shortage itself is one of the factors which leads to too few pupils studying them to a higher level. In these circumstances there can be no quick or easy remedy. But let me say again what I said in Committee. The number of A-level mathematic passes rose from 37,000 in 1964 to 47,000 in 1974. Over 25 per cent. in 10 years. This does not suggest that the rapid increase in the comprehensive education is having an adverse effect.

Let me explain the extent and nature of the shortage of mathematics teachers. The Department of Education and Science carries out an annual survey of teachers of shortage in secondary schools, based on an inquiry to heads of a 10 per cent. sample of secondary schools. On this basis, the net shortage of mathmeatics teachers was estimated to have declined from 1,140 in 1974 to 720 in 1975. This net improvement reflects the fact that heads report a net surplus of certificated teachers of mathematics. But the heads state their main need as being for graduate teachers of mathematics, and here the picture is more gloomy; the shortage of graduate mathematics teachers increased somewhat, from 1,450 in 1974 to 1,580 in 1975. This is clearly a situation which gives cause for concern.

For a number of years the Department has, on the basis of the results of its surveys, asked teacher training colleges to give priority to the admission of students who want to train to teach mathematics, or other subjects shown in the surveys to be difficult to staff in the secondary schools. The Department also keeps university departments of education in touch with its thinking on these matters. The available figures indicate that entrants to specialist courses in mathematics have not increased as a proportion of total entrants, although mathematics has on the whole been holding its own as a subject. The colleges have also been made aware of the importance of providing adequately for mathematics as part of the training offered to intending teachers of young children. The need to continue adequate provision for the subject has again been emphasised in guidance given to the colleges earlier this year for their forward plans for course provision over the next few years, as the total size of the teacher training system declines and with it the risk that those subjects to which recruitment is difficult will no longer he adequately provided for. These forward plans, co-ordinated on a regional basis, are now being carefully examined by the Department so that further guidance can be given to the colleges if necessary.

One of the main results of the reorganisation of the teacher training system now in progress will be to strengthen the part played in teacher training of institutions with strong mathematics and science Departments. At the same time the establishment of the bachelor of education degree and the diploma of higher education in place of the old teacher's certificate should enable more students with scientific and mathematical backgrounds to opt for teacher training after a period in which they can carry forward these subjects beyond school level. These developments should help to strengthen the place of mathematics in the training system.

There is a further specific point to make on initial training. Noble Lords will know that, when compulsory professional training for graduates wishing to teach in secondary schools was introduced in 1973, it was agreed that new mathematics and science graduates should be exempted from the requirement because of the severe shortage of teachers of these subjects. The Advisory Committee on the Supply and Training of Teachers recommended at their meeting in June last that these exemptions from the training requirement should now be abolished. My right honourable friend the Secretary of State recognises the arguments in principle for professional training; but in the light of the continuing severe shortages in these subjects, and the contribution which untrained graduates are making to the schools, she has now decided or balance that the time is not yet ripe for removing the training exemption. We must encourage as many mathematics and science graduates as possible to teach in our schools.

In several of our previous debates I have been at pains to point out that we are legislating against selection for admission to secondary schools, not against selection for courses followed within those schools. A school whose admission arrangements are in accordance with the comprehensive principle may specialise in certain areas of the curriculum. We should consider this type of specialisation likely to be of overriding importance only at sixth form level; and, of course it may apply to other subjects besides mathematics. One school may develop its mathematics provision; another its provision for languages, music or engineering. And where it is the most convenient way to arrange such matters children from other schools would attend courses at the school with the specialist teaching facilities. This kind of co-operation between schools—and indeed with the further education sector—is to be encouraged.

Authorities must consider carefully their 16–19 provision. We want to make the most effective use of all teachers, not only mathematics teachers. There are several subjects for which teachers are difficult to recruit: mathematics is not unique in this respect. It is clear that certain reorganisation structures lend themselves more readily to the efficient use of specialist teachers. Sixth form colleges and tertiary colleges, catering for 16 to 19-year-olds, and upper schools, catering for 13 to 18 and 14 to 18-year-olds, can bring together pupils and teachers in efficient working ratios for the more advanced levels of work. Nothing in this Bill will prevent reasonable arrangements from making the most effective use of all teachers.

I have spoken at considerable length, which indicates the importance that the Government give to the general point which the noble Viscount has raised. In relation to this Bill, this Amendment is unnecessary and, I fear, potentially wrecking. I hope that the noble Viscount will withdraw it; if not, I must advise the House to vote against it.

5.7 p.m.

My Lords, I do not know what the noble Viscount, Lord Eccles, will feel regarding taking this Amendment to a Division. If he does so, I will certainly support him. We have been told in this debate and in previous debates that there is a great shortage of mathematics teachers. If there is such a shortage, this branch of the profession will have to be built up and that will take time. In the meantime, I see no other alternative but to have some form of selection. This deficiency must be put right, as the Prime Minister said at Ruskin College last Monday. I fully support the noble Viscount, Lord Eccles, in his admirable speech.

My Lords, there is another problem which this Amendment would not solve—not that I am out of sympathy with its purposes. I believe the great problem in possible falling standards in mathematics is not in the secondary schools but in the primary schools. The reason for this, despite repeated attempts which some of us have made in the National Advisory Committee on the Training and Supply of Teachers, is that we have never faced the issue of making O-level mathematics a requirement for all those who wish to enter a college of education. We do so for English. It must be 15 years since I suggested we did so in mathematics but the representatives of the colleges would not accept it because the great majority of teachers going into primary schools are women and they argued that we would lose a great many good women teachers if they were required to take O-level mathematics. I reject that proposition. It is a fact that, whereas our ladies would be ashamed to suggest that they were illiterate, they can smile beautifully and say: "Figures? I haven't a clue". In other words, there is an acceptance among women that not to be numerate is in no way a disgrace—

and it may apply to some men also. My Lords, I suggest that this is where the attack should be made. In general, graduate teachers of mathematics do not teach in primary schools—that would be quite exceptional. The need, therefore, is an attack in the primary schools which will not cause children at that stage to have an adverse reaction. A teacher who is not interested in mathematics, and not very skilled in the teaching of arithmetic, will transmit a dislike of the subject to the children. That, in turn, will cause them not to pursue the subject subsequently. I venture to suggest that the Department might look carefully at whether the stage has been reached where requirements in mathematics, as well as the requirements in English, for all students entering colleges of education should be imposed.

My Lords, I should like to align myself firmly behind the noble Viscount, Lord Eccles, for his admirable proposal embodied in this Amendment. In this day and age mathematics is not merely a building block but a foundation stone for education of all kinds. It teaches honesty and produces a mental discipline which is good, and although it may not have the visual or oral glamour of music or dancing, it is essentially an emotional subject. Mathematics can be extremely attractive and sentimental, if properly taught and appreciated. As I say, I should like to align myself whole-heartedly behind the noble Viscount.

5.11 p.m.

My Lords, I must apologise to the noble Viscount, Lord Eccles, for having unfortunately missed a small part of his opening remarks. I agreed with 90 per cent. of what he said, and perhaps the 10 per cent. I did not agree with occurred because of my absence during those few minutes. I think the importance of this point has been underlined by every speaker, and not least by the noble Lord, Lord Donaldson, when he told us about the Government's decision not to remove training exemptions. That is an extremely important decision, which must have been taken under very considerable pressure from the trade unions the other way, and which shows the importance attached by the Government to this problem.

Nevertheless, I do not think this Amendment is in fact the right way to deal with the situation. I am against our putting specific exemptions like this into the Bill. It is very difficult to know when to stop and where to start. In spite of the fact that music and dancing add to the Bill, as a correspondent whom I quoted at an earlier stage said, an almost frivolous air, they have a defence in that there are already specialist schools dealing with those subjects. I think we are going quite a long way towards dealing with the problem in the progress we have already made in this Bill. At an earlier stage your Lordships were good enough to approve the last three lines of sub-section (2)(b) of Clause 1 which gave power to the Secretary of State to make categories of exemptions in the future. That is perhaps a better way of dealing with this problem, rather than taking what are rather technical decisions in this House. At the same time your Lordships have just been good enough to pass my Amendment No. 2, enabling local education authorities to match particular children with need for mathematical teaching with the best mathematical teachers in that area. If your Lordships should pass Amendment No. 13, concerning the Committee of Inquiry which would have the duty of looking into the facts of the situation, then with those three Amendments I have referred to—provided that your Lordships are firm in keeping them in the Bill, whatever happens—we shall have gone a long way towards meeting the point put by the noble Viscount, and we may be doing it in a rather better way.

5.14 p.m.

My Lords, I should like from these Benches to welcome with great enthusiasm the Amendment of my noble friend Lord Eccles. I think it is 'fortunate that the Amendment should have been moved by somebody with his distinguished experience, stature and eloquence. I must say that it was not matched in content by the reply gained, although there was a great deal of interest in that. It was noticeable that at Ruskin College last week the Prime Minister said in terms:

"I am concerned on my journeys to find complaints from industry that new recruits from the schools sometimes do not have the basic tools to do the job that is required."
He went on to say that there was concern about the standards of numeracy in school-leavers. It seems to me tint this is a matter of some urgency, when one looks at the economic and industrial scene around us. It also seems that this Bill is designed to accelerate the decline which we detect, and which the noble Lord does not detect, in the standard of mathematics in this country at the present time.

The argument is simple. I can do little more than recapitulate what the noble Viscount has said, but it may be that my approach will be somewhat different. Our resources for the teaching of mathematics are limited and inadequate. The need to make use of them is general and urgent. Surely, as a first step, regardless of any doctrinaire position adopted by any Party, we should at least ensure that wherever possible the children best able to make use of those resources are brought into contact with them. The device of the noble Lord, Lord Donaldson, for doing that was a sort of shuttlecock between schools with mathematically able children and schools with mathematically able teachers. The noble Lord said that they would be seconded to or could attend courses at other schools. There seems to be a certain absurdity about enrolling children in one school, with the deliberate intention of then ferrying them to another school for a great deal of their school career. Everybody in this Chamber must be aware, as I am, that at an early age one is aware of whether or not one is mathematically able. I was aware of the fact, to my great regret, at the age of 11 or 12. Computers did not exist then to make the analogy, but a lot of my friends had minds like silent and swift abacuses, whereas my own was like a rather jumbled cupboard. Whether it is a matter of heredity or the elective principle I do not know, but I think that among your Lordships the distribution is about the same as it is in constitutional terms. The fact is that by the age of 11 or 12 there are some of us on whom it is not worth wasting the highest mathematical teaching talents; and I am one of them.

The noble Lord, Lord Donaldson, and his Party are, it seems, completely "sold" on the comprehensive idea. When one used to ask them why that was, it used to be pretty clear that it was for the purposes of what one may loosely call "social engineering". They looked to it to produce homogeneity in our society. My own view has always been that in the long term it will produce a polarisation far less satisfactory, as a result of neighbourhood schools. But I do not want to tempt the noble Lord, Lord Donaldson, to charge me again with making a Second Reading point, so I shall move on. But I would say that in one of the more revelatory passages in our Committee stage the noble Lord disavowed the idea that the motives for comprehensive education were in any way social. Time did not allow for it to be made clear what other motives there could he for this extraordinarily expensive and disruptive reorganisation of our schools. I hope the omission may soon be made good, but even if such an explanation is not forth-coming, which it certainly ought to be, we have to look no further than our Prime Minister for an endorsement of what some of us have been proclaiming for a very long time. He said at Oxford last week:
"There is no virtue in producing socially well-adjusted members of society who are unemployed because they do not have the skills."
It may be that this illumination has not yet spread beyond the Prime Minister and the more reasonable occupants of the Benches opposite. It may be that some of them still think that you have to mix pupils up in batches as if they were cement in order to produce a society that is either cohesive or just.

I would refer them first to the pronouncement of their Leader, which I have just quoted and, secondly, to my two certainties about the division between the mathematically gifted and the mathematical dunces. I think that even if they do hold these views it will be seen that they ought not to resist the Amendment of my noble friend. My certainty is that the division between the mathematically gifted and the mathematical dunces follows absolutely no discernible line of social demarcation. It is as clearly in evidence in the most patrician public schools as it is in the most disadvantaged and educationally deprived areas. Therefore selection on grounds of ability or aptitude in this subject will have no effect on the impact of the comprehensive system. The choice will be mathematically determinate but socially random, if T may so express it.

Therefore it is really necessary for the noble Lord to say what he expects of the comprehensive system, other than social advantage for our society, which causes him to reject this principle, which would not upset the social impact of comprehensive reorganisation in any way. If the motive is social egalitarianism that is a recognisable motive, although we do not welcome it. I can only say that to pursue it to the extent of rejecting the advantages which selection in this area would bring to the children on the one hand and to the nation on the other seems to me to be an example of exactly that which I said our Party were set against at the beginning of the debate on this Bill at Second Reading; and that was the universal, blind and undiscriminating application of the comprehensive principle. I believe that my noble friend Lord Eccles summed it up very nicely when he said that the Government's attitude to this Amendment was a test case of the good intentions of their Prime Minister, because he has said that he deplores what appears to be our shortcomings in the mathematical and industrial fields. My noble friend has gone further and said that here is one way in which we can help them.

The noble Lord, Lord Donaldson, has come forward with a number of interesting aspirations and intentions, but they will not mature until after the Bill has been effective for some time. I note, in passing, that it is not until 1978 that we are to have the statistics from the assessment of performance unit, which he said are the statistics that we lack before we can determine whether or not there is a decline. If he is to say that we should not take this step until we have these statistics, then he is in the position of the captain of a sinking ship with the water washing around our knees, saying: "Stand away from the pumps. You cannot use them, until I have sounded the water in the bilges", because subjectively it is clear, however objectively it may be obscure, that things are not as they should be.

There is also an absurdity in the position of a Government who reject an Amendment, which is as eminently constructive and sensible and as much in the public interest as this, and which is clearly not in breach of the general principles of the Bill, on the grounds that it is in breach of the principles, when they already have music and dancing. It seems to me that they are prepared to educate infant Neros to fiddle, while we destroy ourselves and leave the embryo Einsteins untaught in schools without adequate supervision. I think that their position is regrettable. I think it displays a far greater commitment to ideology than it does to political reality.

I would refer the noble Lord, Lord Donaldson, to the article by J. B. Priestley in the Sunday Telegraph only yesterday, which said that common sense dictated that when you found a good school you left it to get on with its job and ideology dictated that you removed it and replaced it with something else. I fear that that is the position that we are in—and he is a veteran Socialist. I think that the Government are here committing themselves far beyond the brief which they originally had. They are now legislating to satisfy their ideologues, who are pushing them on from behind, and they have got out of touch with reality. So I hope that my noble friend is successful in pressing this Amendment.

5.22 p.m.

My Lords, a really astonishing remark fell from the Minister's lips. I think I have got it right. He said, "Nothing in the Bill will make it impossible to make the best use of all our highly qualified teachers of mathematics". Let me give him just one example to show that that is not so. I know—and lie would know if I told him which I it was—an admirable grammar school in South London which had about 650 girls, a sixth form of 200 and far above the average number of scholarships to universities. Its arms have been twisted, because it has no money to go independent, and it has been compelled to come into the comprehensive system and the sixth form may be reduced to about 60. How does the noble Lord think that that kind of thing can take place, without a number of very highly qualified teachers saying: "I am sorry. I have spent more than half my life teaching sixth forms. I am not the kind of person who can teach children over the whole range of ability. I have had plenty of other offers from the computer industry, or wherever it is, for my mathematical ability, and I am off". That is happening. That is one reason why, at any rate, during the period when there are not the resources to make the new comprehensives really able to cope with the full range of ability, we shall have fewer qualified teachers than we have today.

The second reason—I am sorry, but I said it before and perhaps I did not make myself plain—is that for the production of mathematicians who will become graduates thereafter, and, we hope, return to teaching, it is no good selecting them at the age of 16 and sending them to a sixth form college, where there may be an admirable set of mathematics masters or m: stresses. Unless they learn their mathematics all the way up towards the A-level, they will not be fit and they will probably give up the struggle ever to take A-level at all. That is why selection is still needed now, because if you deny selection you will deny to a very large number of children the opportunity to be taught t y well-qualified teachers before they reach the age of 15 or 16, and in many cases that will be too late. I wish that the noble Lord, Lord James of Rusholme, was here. He understands that far better than I do, and he would put it to your Lordships most convincingly.

I now come to what the noble Lord, Lord Alexander of Potterhill, said. He made the case for this Amendment as no one has ever done. He said, like the noble Lord, Lord Davies of Leek, at the Committee stage, that the rot is in the primary schools. Very well then, he said, the remedy for that is to make O-level in mathematics a condition of a student going to a college of education to train to be a teacher. But how are all these girls to get O-level in mathematics, unless we make the very best use of the highly qualified teachers we have? Any teacher who is going to do any good taking a class for O-level in mathematics, must himself, or herself, have learned mathematics to A-level, or they will not teach O-level at all well. Where are they to come from?

We know that there is a tremendous gap. We could not have had the speech from the Prime Minister, which my noble friend Lord Elton quoted, unless that gap was very widely recognised, and recognised as very serious in the national interest at this time. To carry out the wish of the noble Lord, Lord Alexander, it would be admirable that every student presenting himself, or herself, at a college of education should have an O-level in mathematics. But there will have been


Amory, V.Faithfull, B.Lyell, L.
Belstead, L.Ferrers, E.Macleod of Borve, B.
Berkeley, B.Fraser of Kilmorack, L.Mancroft, L.
Brooke of Cumnor, L.Gainford, L.Marley, L.
Brooke of Ystradfellte, B.Glendevon, L.Mersey, V.
Caccia, L.Glenkinglas, L.Monck, V.
Campbell of Croy, L.Gore-Booth, L.Monson, L.
Carr of Hadley, L.Gray, L.Morris, L.
Carrington, L.Gridley, L.Mottistone, L.
Cathcart, E.Grimston of Westbury, L.Mowbray and Stourton, L. [Teller.]
Clifford of Chudleigh, L.Hailsham of Saint Marylebone, L.
Clitheroe, L.Newall, L.
Crawford, and Balcarres, E.Hankey, L.Northchurch, B.
Cullen of Ashbourne, L.Hanworth, V.Nugent of Guildford, L.
Darcy (de Knayth), B.Harmar-Nicholls, L.O'Hagan, L.
Daventry, V.Harvey of Prestbury, L.O'Neill of the Maine, L.
Denham, L. [Teller.]Hawke, L.Onslow, E.
Derwent, L.Home of the Hirsel, L.Orr-Ewing, L.
Drumalbyn, L.Hylton-Foster, B.Pender, L.
Ebbisham, L.Ilchester, E.Rankeillour, L.
Eccles, V.Kimberley, E.Redesdale, L.
Ellenborough, L.Kings Norton, L.Reigate, L.
Elles, B.Kinloss, Ly.Rochdale, V.
Elliot of Harwood, B.Kinnaird, L.Ruthven of Freeland, Ly.
Elton, L.Lauderdale, E.St. Aidwyn, E.
Emmet of Amberley, B.Long, V.St. Davids, V.

the greatest difficulty in bringing those students together, with the inadequate quantity of higher mathematics teachers which we have today. So that to say that this Bill does not damage the situation is something which I do not think anyone in the education world, who is not absolutely prejudiced beyond belief on the political principle, can possibly do.

It is equally sad that the need for a massive effort to teach mathematics better should not lead the Government to see that, however many inquiries the Department may make, however many groups are sent here and there and whatever the statistics they find out, that will not do any good unless the able pupils are matched with the inadequate supply of able teachers. We shall simply go on having one report after another and we shall lose a significant number—I do not know how many—of the middle-aged mathematics teachers whom we have in our sixth forms today. Therefore we should put this Amendment in the Bill and let them have an argument in another place, where, if it goes to a vote, the Prime Minister is bound to be in our Lobby.

5.30 p.m.

On Question, Whether the said Amendment (No. 3) shall be agreed to?

Their Lordships divided: Contents, 96; Not-Contents, 63.

Sandys, L.Strathclyde, L.Vivian, L.
Savile, L.Strathcona and Mount Royal, L.Wakefield of Kendal, L.
Selkirk, E.Sudeley, L.Ward of North Tyneside, B
Sharples, B.Tenby, V.Ward of Witley, V.
Snow, L.Thomas, L.Wolverton, L.
Spens, L.Trefgarne, L.Young, B.
Stamp, L.Vickers, B.


Airedale, L.Elwyn-Jones, L. (L. Chancellor.)Maybray-King, L.
Allen of Abbeydale, L.Evans of Hungershall, L.Melchett, L.
Ampthill, L.Fulton, L.Oram, L. [Teller.]
Amulree, L.Gladwyn, L.Pannell, L.
Avebury, L.Gordon-Walker, L.Peart, L. (L. Privy Seal.)
Aylestone, L.Grey, E.Phillips, B.
Bacon, B.Hale, L.Platt, L.
Beaumont of Whitley, L.Hampton, L.Popplewell, L.
Beswick, L.Harris of Greenwich, L.Sainsbury, L.
Birk, B.Henderson, L.Shepherd, L.
Blyton, L.Houghton of Sowerby, L.Shinwell, L.
Brimelow, L.Jacques, L. [Teller.]Simon, V.
Brockway, L.Janner, L.Slater, L.
Buckinghamshire, E.Kirkhill, L.Stedman, B.
Burton of Coventry, B.Leatherland, L.Stone, L.
Byers, L.Lee of Newton, L.Strabolgi, L.
Champion, L.Llewelyn-Davies of Hastoe, B.Taylor of Mansfield, L.
Collison, L.Lloyd of Hampstead, L.Wells-Pestell, L.
Cooper of Stockton Heath, L.Lovell-Davis, L.Wigoder, L.
Cudlipp, L.McCluskey, L.Winterbottom, L.
Donaldson of Kingsbridge, L.Maelor, L.Wise, L.

Resolved in the affirmative, and Amendment agreed to accordingly.

5.38 p.m.

Page 2, line 11, at end insert ("; or

(c) the provision of education at any non-maintained school which can afford opportunities for education to a particular pupil which cannot be afforded at a maintained school in that area").

The noble Lord said: My Lords, this Amendment is the lineal successor to an Amendment that I moved at Committee stage as Amendment No. 9, which specifically reserved the right of a local authority to provide boarding education in selective non-maintained schools, and part of the group of Amendments Nos.11 to 13 to which my noble friend Lord Belstead spoke at the same stage. It would have been possible to draft the Amendment now before your Lordships more technically by again naming specifically the existing legislation to be reserved from the effects of Clause 1 of the Bill, but our advice has been that it is more effective and simpler to state instead the functions for which those powers can be employed. This method has also the considerable and somewhat unusual advantage that the resultant passage in the Bill as printed, and hopefully the Act as passed, will appear to mean what it intends to mean.

The effect of the Amendment is to enable local authorities, notwithstanding the contents of Clause 1, to provide education at a non-maintained school where that non-maintained school can afford opportunities for education to a particular child which cannot be afforded at a maintained school in that area. The existing powers to which I refer, and which were referred to earlier by my noble friend and myself, are Sections 9 and 81 of the Education Act 1944 and Section 6 of the Education Act 1955. Together they permit the Secretary of State t D arrange and pay for the education pf pupils from their area in non-maintained schools when they are not able adequately to do so in their own maintained schools.

The noble Lord, Lord Donaldson of Kingsbridge, accepted at Committee stage (col.1420 of the Official Report) that certain authorities are at the moment dependent upon the use of places at non-maintained schools to fulfil their statutory duty to provide suitable education to those children for whose education they are responsible. He later assured us that:

"There is no intention on the Government's part to lessen the freedom which the authorities have to give assistance, provided that such assistance is not inconsistent with the comprehensive principle."—[Official Report 6/10/76; col.1421.]

That proviso is exactly at the heart of the matter because it is generally recognised

that the majority of non-maintained schools are selective. I think the House has taken the point that the Bill has the effect of preventing local education authorities laying out their funds to secure education in selective schools. That prohibition clearly holds good whatever the grounds for which the LEA selects the particular children to go to a non-maintained school because the qualification relates to the school and not to the child.

Therefore, I was interested to receive from the noble Baroness, Lady Stedman, the letter which she promised to send me—for which I thank her—about the provisions for boarding. She said:

"We do not intend to probe into the admission arrangements of non-maintained schools. This would be both impracticable and unnecessary".

It may be impracticable, but I cannot see that under the terms of the Bill it would be unnecessary in the light of the prohibition in Clause 1. The noble Baroness went on to say in her letter:

"The important thing is that authorities' decisions to support education, boarding or day, and non-maintained schools should not be based on considerations of ability. If this condition is met authorities will not be in breach of the duties imposed on them by Clause 1."

Taken on its own, that statement seems to me to be a fundamental misreading of the Bill.

What the Bill expressly discourages is not the use of any particular selective criteria by the authority but the use by the authority of places in a school which selects upon the criteria of ability and aptitude. Those, as it happens, are precisely the criteria upon which most—though not all—non-maintained schools base their selection. However, I implied that this statement by the noble Baroness might bear a different interpretation if it was not taken on its own. By that I did not mean that it took on a different colour viewed in conjunction with what was said by the noble Lord, Lord Donaldson of Kingsbridge, at Committee stage. Your Lordships will recall that he said authorities were free to give assistance to non-maintained places only if that was not inconsistent with the comprehensive principle. The noble Baroness has now narrowed that principle quite without any basis in law, that I can detect, to apply only to the authority and not to the school. The context in which that passage of her explanatory letter to me should be set is the context of an earlier paragraph.

I may be in a difficulty here owing to an accident that I had with my notes earlier. She stated that there were 11,500 boarding school pupils at non-maintained schools who were being assisted by local education authorities in schools. The force of her argument seems to be that local authorities are only bound to have regard to the general comprehensive principle and may have regard also to a number of other considerations. It imputes to the Secretary of State the power to accept or reject exceptions from the general principle. I apologise to the noble Baroness for not quoting her in extenso—she will probably do so in any case in her reply—but this was the gravamen of what she said; that is, there were a number of general principles to which the local authority could have regard and it was up to the Secretary of State to decide which of these was admissible.

In the first instance I would say this: it is perfectly clear to anyone who has followed the debates in either House of Parliament that it is the undisguised intention of the Party opposite to use this Bill to secure as wide an application of the comprehensive principle as possible and that no Secretary of State of their Party is likely to extend such an act of clemency or indulgence, even where it is within her power, except under something approaching duress. Secondly, I must ask the noble Baroness to point out to me exactly where in the Bill she finds the power of the Secretary of State to accept or reject any of the exceptions to the general principle. She inclines to her judicial role in the matter and we should like to be told whence it derives.

Thirdly, I have to remind your Lord-ships that the phrase "have regard to" is one fraught with much legal nicety and peril. Your Lordships may see fit to repose confidence in the judgments given in Watt v Kesteven County Council in 1955 and Wood v the London Borough of Ealing in 1966 and assume that the generous intention of the noble Baroness that the local education authorities are left free to have regard to other considerations is soundly based, but I would not counsel your Lordships so to do. I am confident that where they are required

to have regard to one general principle by statute and impelled to have regard to another by common sense then the courts probably, and the present Government certainly, will give precedence to the general principle enthroned by the Act over the general principle enthroned by reason.

What is more, I think that to rest our expectations of sensible conduct upon the interpretation of the phrase by the noble Baroness at least invites what I would call speculative litigation from those who feel that their authority has had too much regard to one general principle and too little to another which they prefer. This Amendment takes this matter out of the realm of speculation. It removes from the authority the expedient of throwing up their hands in despair when faced with a pupil with specific needs which they are unable to meet. It ought not to be open to them to say, "We recognise that you ought to be in a boarding school because of the circumstances of your family"—or "at a school at a certain altitude because of the circumstances of your health", or "a school of a certain size because of the conditions of your nerves but, alas and alack! we have no such school so here is a bus ticket to the local comprehensive. Good luck."

This Amendment leaves it clearly and unequivocally open for them to say that in those and analogous circumstances, "What we cannot provide out of our own resources we can procure for you elsewhere", and the child will be accepted into a non-maintained school at the authority's own expense, to his own advantage and the advantage of the non-maintained sector which the noble Lord has been at pains to say it is no part of the intentions of this Bill to curtail. The intentions behind this Amendment, therefore, are to enable local authorities to take up places in non-maintained schools when those non-maintained schools are selective.

It is upon that that the argument hinges; I have read very carefully what was said at Committee stage and I am not in any way convinced that the Bill does not prevent the placing by the local authority of its children in non-maintained schools when it cannot otherwise provide for them. I think it ought to be able to do so; I think it would be reasonable and I think your Lordships would agree with me that it would be unreasonable to deny them the opportunity of doing so. This is not intended as a means o enabling them to place all their children in non-maintained schools and I do not think really on a reading of the Amendment anybody could claim that it was or that it could be so used because that recourse would be held to be unreasonable. This is a reasonable Amendment, it is not politically based, it is intended to help the children and indeed to make, sense of the Government's legislation. I beg to move.

My Lords, in rising to support the Amendment which has just been extremely ably moved by my noble friend Lord Elton, I should like to bring before your Lordships' imagination for one moment a case of which I happen to know the facts. Two small girls living in a country area, whose mother had to be moved into a mental home, whose father abandoned them, had to be sent to a non-maintained boarding school in order that they might have a certain sense of security and care in being looked after. These children were of an age that had they been boarded out and sent to the local day comprehensive school I regret to say that owing to influences that were around them there would have been nothing but potential criminal tendencies developed. It is on those grounds—human grounds of the individual child or children—that I feel so strongly this particular Amendment could be accepted. I am certain that they are not in large numb m. s. But there will be cases up and down the country which, through domestic, parental, or some problem of that nature, 'will need special care and special cherishing, which one can deal with only by moving them into a non-maintained boarding school.

My Lords, may I support the noble Baroness, Lady Brooke of Ystradfellte, on this. I have dealt with a number of children who can only be sustained in a small school for, say, 30, where there were particular problems with the family and with the child itself. I should very much like to sup port this Amendment.

My Lords, if I may deal with the remarks of the two noble Baronesses first, there is nothing in the example given by the noble Baroness, Lady Brooke of Ystradfellte, which is contrary to the practice which the Bill would authorise without this Amendment. I think there is a total misunderstanding here.

My Lords, may I ask the noble Lord the Minister a question before he goes on. What if the children to whom the noble Baroness, Lady Brooke of Ystradfellte, was referring were placed at a boarding school, and the entry to that school did require a level of academic standard—in other words, they were selective?

My Lords, in the absence of other alternatives, in my understanding this would be possible for the local authority to use, just as we have said from the word "go" that boarding is a priority. The local education authority has a duty to provide boarding, if possible, within the comprehensive system, but it may not be possible. This has been the position from the beginning, as I understand it. If this Amendment were to be approved, it would be open to any local education authority to take up any number of places at non-maintained schools, without having regard to the comprehensive principle, whenever they thought that a non-maintained school could offer an "educational opportunity" not available in the maintained sector. This would be a very wide freedom indeed. Of course, the Government are not opposed to widening the range of educational opportunities available as much as possible: that is, indeed, precisely our objective in promoting the current Bill. We do firmly believe, however, that the comprehensive principle should be observed as far as possible in the provision of education—the words "as far as possible" are the governing words here.

It. is for this reason that Clause I exists and it was for the same reason that Clause 5—restoring to the Secretary of State her powers to control the extent to which authorities may make use of the non-maintained sector—was originally included in the Bill. It is our intention to ask our colleagues in another place to restore the powers contained in the original Clause 5 of the Bill, and if this happens we have declared our intention of administering these powers flexibly, giving sympathetic and careful consideration to a range of circumstances in which authorities, for good reason, may wish to make use of the non-maintained sector.

We are firmly opposed, however, to the selection of pupils to attend non-maintained schools on grounds solely of academic ability. If this Amendment were to be accepted, it would be open to any authority to do this simply by declaring that any particular pupil could only receive a particular educational opportunity (in itself an ill-defined and totally subjective concept) at a non-maintained school. This could, moreover, be done on a sufficient scale to undermine the provision of a fully comprehensive system. It is, therefore, not out of any desire to deny opportunities to particular pupils, but only through our wish to see a general improvement in opportunities for all pupils through the observance of the comprehensive principle that I would now ask the noble Lords to withdraw this Amendment. My right honourable friend has indicated her intention to use her powers of control over the use of the non-maintained sector sympathetically; the effect of the Amendment would be to render those powers useless, and to affect adversely the purpose of the Bill. I hope the noble Lord will not feel it necessary to press the Amendment.

My Lords, before the noble Lord opposite indicates his wishes in the matter—and I do not wish to throw any spanner in the works—I wonder whether the Minister could tell me what is the situation of the religious schools, the denominational schools, with which I am concerned. I listened to the case referred to by the noble Baroness opposite, and it occurred to me that there might be just such a case where the only school available of a certain denomination was a non-maintained school.

My Lords, it is exactly the same as a boarding school. If it is the only available place, it would be up to the local education authority to make use of it, as I understand it.

My Lords, it is perhaps not unusual that I shall find myself speaking in support of both sides of this House from time to time. This Amendment cannot be sustained without destroying the Bill. There are probably three reasons why local authorities use places in non-maintained schools. The first, and much the largest, is the need for boarding education, and we do not have the facilities for boarding education in maintained schools. As I understand it, an assurance that that would continue to be effective has already been given during an earlier discussion. There are a substantial number of these, of the order of about 10,000. The second reason is where there is a special need not necessarily requiring boarding education, but where there is a genuine lack of the necessary facilities in the area of the authority. As I under-stood it, on that again, there was an assurance that that would be acceptable, although I believe it was indicated that it was presumed it would be temporary rather than permanent.

The third reason is that of authorities wanting to select pupils on the grounds of academic ability, and to send them to schools where they feel they will have a greater opportunity than in the schools of their own area. We know authorities where this happens. This Amendment would enable the third principle to operate. On these grounds, it seems to me that the Government must necessarily reject it, but I hope we can have a repeated assurance that the first two grounds would be acceptable, even if Clause 4 were restored to the Bill.

My Lords, with the leave of the House, I am very glad to give that assurance.

My Lords, the noble Lord, Lord Donaldson of Kingsbridge, said that the objective was to put into effect the comprehensive principle as far as possible. If that were so, I think it would be a bad thing. Luckily, I do not think that it is so in fact. I think that what we are agreed on is that the comprehensive principle ought to be put into practice all over the country, and that we should have a comprehensive system of education in this country. But it appears as a pattern from this Report stage and also from the Committee stage that within that system, we should be making the greatest flexibility for individual children, as much as we possibly can.

What this really boils down to—and the noble Lord, Lord Alexander of Potterhill, put his finger on it, although I dc not agree with him—is whether we are going to be more paranoic about a Secretary of State than we are about local education authorities. I think that in this case we are right to be. It is very much more likely that whatever the present Secretary of State says, there may be another Secretary of State who says something completely different. This is much more likely than that local authorities are going to use money which they now have not got, and which they are unlikely to have. for the next 20 years, as far as I can see, to breach the comprehesive system in a massive manner by sending lots and lots of children to maintained schools because of their academic ability. This seems a nightmare, and one which has no remote likely-hood of happening.

On the other hand, I think the vision of a future Secretary of State not using the powers against local education authorities which he or she is given under this Bill is a very real one. That is why, if very sadly the Government decide they will put back the old Clause 5 in another place, I hope your Lordships will not agree with it. I hope your Lordships will, complete the good work by passing this Amendment today.

6 p.m.

My Lords, am not entirely happy with the assurance, given in good faith I know, by the noble Lord, Lord Donaldson, to the noble, Lord, Lord Alexander, that where there is a question of boarding need or a genuine lack of the necessary facilities in the area of an authority the Secretary of State will use her powers under the Bill (if the old Clause 5 is put back) to see that authorities can go on taking up places. I am not happy about this for two reasons: first, because the Government have defended their intention to revoke arrangements to take up places at independent schools on the grounds that by the use of these powers local education authorities might seek to avoid complying with the comprehensive principle of the Bill. The noble Lord, Lord Donaldson, repeated this view today and it was also effectively dealt with just now by the noble Lord, Lord Beaumont of Whitley.

That is a fundamental misconception of the way in which local education authorities go about their duty to provide education. If possible, authorities will always want to provide their own schools, not least their own sixth forms; but for different reasons, often financial, authorities choose to take up places at independent schools which pupils in the locality have often attended for a great many years. In passing, may I say that surely it is fundamental to the autonomy of authorities that they should be free to decide how to place their pupils at the most suitable schools. In recent years authorities have built up considerable expertise with staff consisting of educational advisers, psychologists, doctors and very often their own inspectors. What is the use of building up a structure like that if an authority is forbidden to use its discretion as to where to place its pupils?

My second reason for being unhappy about the undertaking which the noble Lord has given is connected with the question of boarding need. No one knows more about this than the noble Lord, Lord Alexander, who three years after the Martin Report chaired a committee on the question of boarding education. This evening he has put his finger on what was always held to be the fourth criterion for boarding education, where the special aptitude of the child requires a special training which can only be given by means of boarding education. One is talking about a report which was produced 16 years ago and it is interesting that the Public Schools Commission of 1968 not only accepted the Martin Report categories but elaborated on them and added two more which are particularly relevant to this Amendment. The Public Schools Commission—which, after all, is not notable for its particularly Right-Wing views—held that pupils should be considered for boarding education, and I quote—
"If the child's aptitude or intended course of study requires some special educational provision not available in accessible day school or college of further education …"
and the Public Schools Commission added a final criterion to which they said they attached great importance, namely—
"where there are any other exceptional circumstances which severely impede a child's educational progress".
When the noble Baroness, Lady Stedman, was replying in Committee to the Amendment on boarding education, the noble Baroness disregarded the fourth criterion of the Martin Report and the recommendation of the Public Schools Commission, and it is for this reason that I am worried also about the undertaking which has been given concerning boarding need. We should get plainly into our minds that it is a limited undertaking.

In addition there are a variety of other reasons, with which I will not weary the House and with which we are all familiar, as to why parents sometimes want their child to go to a non-maintained school. My noble friend Lady Brooke of Ystradfellte and my noble friend Lady Faithfull have mentioned some of them in passing. My noble friend Lady Faithfull made the point on previous debates that you may get children who are in need of boarding education because they arc bordering on being maladjusted, and my noble friend Lady Brooke made the same point. When he was proposing this Amendment my noble friend Lord Elton said that the difficulty here is what happens if unfortunate children of that sort are placed—as is likely—in a non-maintained boarding school which is selective in its intake.

If the Government are going to refuse this Amendment I would suggest that they will be meddling with arrangements which have continued for many years and where schools have often committed themselves to substantial expenditure in order to enlarge or convert, perhaps from single sex to mixed, or simply to improve their premises for the good of children in the area. I happen to live only I z miles away from a very ancient foundation, Woodbridge School, which spent a huge sum of money out of its own pocket in order to provide—and I know the Government will be pleased to be reminded of this—for a totally open sixth form for all pupils of the area. But they cannot be absolutely sure that under old Clause 5 of the Bill the Secretary of State will allow this arrangement to continue. Further, when one considers that 20 per cent. of all sixth form pupils in the country are still at independent schools and that some 35 per cent. of all independent school-leavers go to university one must conclude that sixth form facilities in the independent sector ought to be made available as widely as possible, not as narrowly as possible.

If the Government refuse the Amendment they will be rejecting closer links between the maintained and the independent sectors and will be affirming that what they really believe in is educational monopoly. I think this Amendment is very modest in its effect. In essence it is no more than an extension of Section 8 of the 1944 Education Act which we have written into the Bill, saying that as part of the opportunities of education for pupils authorities should be able to use independent education. This has been the law since 1944. Local authorities have had full discretion in this respect since 1959. I hope we may have persuaded the Government to look with a little more favour on this Amendment than they have suggested during the debate. If not, I very much hope that my noble friend will press the Amendment.

6.8 p.m.

My Lords, may I inquire whether the Government Front Bench intend to reply to what my noble friend has said before I reply to the debate?

My Lords, at Report stage I think it would be quite inappropriate.

My Lords, it would be inappropriate for the same voice to speak twice, but there is more than one voice to cut off anything which the noble Lord wished to say. I wished to say two things myself: first, I notice that whenever there is an Amendment to which the noble Lord and the noble Baroness opposite take particular exception they instantly say that it is a wrecking Amendment. I presume this is because they wish to label it with something which will produce a shout of rage when it goes down the corridor. If they look at the wording—even with respect to the noble Lord, Lord Alexander of Potterhill—it provides for "opportunities for education to a particular pupil". Flow you could expect to use that reasonably to send all your best pupils out of the local authority to non-maintained schools at considerable expense to the rates and in the face of popular hostility among the local electors I do not know. It is not a wrecking Amendment.

The noble Lord laid great stress on the words "as far as possible" being a limitation of the duties of the 13111, but if those words are to have effect or the problem that we are discussing then they would have to occur at line 17 of page 1 of the Bill, because they would have to qualify,
"the general principle that such education is to be provided only in schools where the arrangements for the admission of pupils arc not based wholly on selection by reference to ability or aptitude."
They do not there occur. Thirdly, what the noble Lord says is very welcome in the form of an undertaking, but it is not what the Bill says, and, as I said before, it is to the Bill and not to Hansard that he courts will address themselves when any case is brought before them. Therefore I feel that the noble Lord and the noble Baroness have not answered the case we made. We made it before, we took it away to consider after listening to their arguments and they still have not satisfied us. Therefore I beg to press the Amendment.

6.10 p.m.

On Question, Whether the said Amendment (No. 4) shall be agreed to?

Their Lordships divided: Contents, 104; Not-Contents, 54.


Airedale, L.Emmet of Amberley, B.Mowbray and Stourton, L.
Amory, V.Faithfull, B.Newall, L.
Amulree, L.Ferrers, E.Northchurch, B.
Ashdown, L.Fraser of Kilmorack, L.Nugent of Guildford, L.
Avebury, L.Gainford, L.O'Hagan, L.
Balfour of Inchrye, L.Gladwyn, L.O'Neill of the Maine, L.
Barrington, V.Glendevon, L.Onslow, E.
Beaumont of Whitley, L.Glenkinglas, L.Pender, L.
Belstead, L.Gray, L.Platt, L.
Berkeley, B.Greenway, L.Rankeillour, L.
Birdwood, L.Grey, E.Reigate, L.
Brooke of Cumnor, L.Gridley, L.Rochdale, V.
Brooke of Ystradfellte, B.Hailsham of Saint Marylebone, L.Ruthven of Freeland, Ly.
Brougham and Vaux, L.Hampton, L.St. Aldwyn, E. [Teller.]
Byers, L.Hankey, L.St. Davids, V.
Caccia, L.Hanworth, V.Sandys, L.
Campbell of Croy, L.Harmar-Nicholls, L.Savile, L.
Carr of Hadley, L.Hawke, L.Selkirk, E.
Cathcart, E.Hylton-Foster, B.Sharpies, B.
Chelmer, L.Ilchester, E.Simon, V.
Clifford of Chudleigh, L.Kemsley, V.Spens, L.
Clitheroe, L.Kimberley, E.Stamp, L.
Cullen of Ashbourne, L.Kings Norton, L.Strathclyde, L.
Darcy (de Knayth), B.Kinnaird, L.Strathcona and Mount Royal, L.
Daventry, V.Lauderdale, E.Sudeley, L.
de Clifford, L.Long, V.Trefgarne, L.
Denham, L. [Teller,]Macleod of Borve, B.Vickers, B.
Derwent, L.Mancroft, L.Vivian, L.
Drumalbyn, L.Marley, L.Wakefield of Kendal, L.
Dudley, E.Merrivale, L.Ward of North Tyneside, B.
Eccles, V.Mersey, V.Ward of Witley, V.
Ellenborough, L.Monck, V.Wigoder, L.
Elles, B.Monson, L.Wolverton, L.
Elliot of Harwood, B.Morris, L.Young, B.
Elton, L.Mottistone, L.


Alexander of Potterhill, L.Gordon-Walker, L.Pannell, L.
Allen of Abbeydale, L.Greenwood of Rossendale, L.Peart, L. (L. Privy Seal)
Ampthill, L.Henderson, L.Peddie, L.
Aylestone, L.Houghton of Sowerby, L.Phillips, B.
Bacon, B.Jacques, L.Popplewell, L.
Beswick, L.Janner, L.Sainsbury, L.
Birk, B.Kinloss, Ly.Shepherd, L.
Blyton, L.Kirkhill, L.Shinwell, L.
Brockway, L.Leatherland, L.Slater, L.
Buckinghamshire, E.Lee of Newton, L.Stedman, B.
Burton of Coventry, B.Llewelyn-Davies of Hastoe, B.Stone, L.
Champion, L.Lovell-Davis, L.Strabolgi, L. [Teller.]
Collison, L.McCluskey, L.Taylor of Mansfield, L.
Cooper of Stockton Heath, L.Maelor, L.Wallace of Coslany, L.
Donaldson of Kingsbridge, L.Melchett, L.Wells-Pestell, L. [Teller.]
Elwyn-Jones, L. (L. Chancellor.)Noel-Buxton, L.Winterbottom, L.
Evans of Hungershall, L.Oram, L.Wise, L.
Fulton, L.Paget of Northampton, L.Wynne-Jones, L.

Resolved in the affirmative, and Amendment agreed to accordingly.

Clause 1, as amended, agreed to.

My Lords, I beg to move that further consideration of the Bill on Report be adjourned.

Moved, That further consideration of the Bill on Report be adjourned.—( Baroness Stedman.)

On Question, Motion agreed to.

Industrial Common Ownership Bill

Read 3a , and passed.

Supplementary Benefit (Amendment) Bill

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 Commitment be discharged.

Moved, That the Order of Commitment be discharged.—( Lord Wells-Pestell.)

On Question, Motion agreed to.

Aircraft And Shipbuilding Industries Bill

6.20 p.m.

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, that the House do again resolve itself into Committee.—( Lord Melchett.)

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD DERWENT in the Chair.]

Clause 35 [ Compensation for vesting of securities):

Page 49, line 12, at end insert ("or—

(c) the amount which would have been payable under subsection (3) above, if the special declaration had not been made, less the amount of the payment or assistance which is the subject of the special declaration.").

The noble Earl said: This Amendment refers to the same subject as the last Amendment which we dealt with before the Committee adjourned last Thursday. It refers to this curious phrase "the reduced amount", which is the compensation payable when the Secretary of State makes a special declaration. This Committee will remember that a special declaration can be made when a company has received funds from the Government after 6th November, 1965, when these provisions were announced, and before the vesting date. If the Secretary of State considers that the company would have been unable to pay its debt without those funds, or that the state of the company's affairs—and this is quite remarkable—is such that in the foreseeable future in the Secretary of State's view it is probable that the company would be unable to pay its debts without those funds, then the Secretary of State can male a special declaration. It was at this point that on the previous Amendment we suggested that these were very wide rowers and the Secretary of State should have the advice of an independent accountant, but the Government did not see fit to accept that Amendment.

This Amendment is on a different point, because when the special declaration is made then the compensation is the reduced amount. The reduced amount is, as it says in Clause 35(6) either 5 per cent. of the notional value of the shares at 1974 prices, or what would be: he current break-up price of the company had it not received the Government funds. I gave an example of this last time, and I would trouble your Lordships by repeating it so as to remind you of the provisions. Let. us assume that in 1974 there was a company worth £5 million, and it may be that it was in financial difficulties—it may be that it was not—and that since 1974, and indeed between 1974 and 1976, an order had come to the company which it felt that it could carry out. It may be that it would have required to borrow some money, but because it was going to be nationalised the normal places where one would borrow money, such as the banks, would of course not be available. Therefore, the only place to which that company could go to borrow the money to retool, or to buy some new equipment in order to fulfil the order, would be the Government.

Once the company took the money off the Government, or accepted the money from the Government, it had, as it were, the kiss of death, because then the Secretary of State could come along and say, "You have borrowed the money and therefore I will pay you in compensation only the reduced amount" The reduced amount would be either 5 per cent. of the 1974 prices which, in the example I gave of a company worth £5 million would be only a quarter of a million pounds, or alternatively the current break-up price of that company had it not borrowed the money. That is, of course, a figure which would be open to question, and in any event would be an inaccurate figure because it would only be a guess. I believe that it is not fair that a company worth that sum of money in 1974 might only be paid a quarter of a million pounds now simply because it had borrowed some money.

The object of this Amendment is to say that the correct and fair compensation would be the figure that it would have received in 1974 less the amount of money which, as a loan or as grant or in any other form, it had received from the Government. That would appear to us to be a fair form of compensation. I hope that the noble Lord, Lord Winter-bottom, in his usual magnanimous way, will agree that it is a fair suggestion and will accept the Amendment. I beg to move.

It is a fair suggestion, but at this moment in time I cannot undertake to accept it. We are having a serious discussion, and therefore all suggestions are fair. However, I should like to try to persuade the noble Earl that the Government's view is not quite as rigid as he seemed to make out. I seem to remember that at about midnight one day last week we were talking about events arriving out of a blue sky. But what we are really talking about is a situation where a company is in difficulties—and companies can get into difficulties through no fault of their own—and has to decide whether to go it alone and, with the help of its bankers, fight its way through its difficulties, or turn to the Government and get a loan which in fact affects the degree of compensation that it is likely to receive.

The situation which the noble Earl described is perhaps possible, but I do not think that it actually will be so. Banks, taken by and large, are very loyal to their clients. If a client came to them and described the situation which the noble Earl has foreseen, I think they would support him, but if they did not, then we have this particular situation which we have to consider. May I just give the Government's argument as clearly as I can?

As I see it, and as the Government see it, Amendment No. 160 seeks to offer a further choice of valuation—and we have to deal with other choices of valuation in a later discussion—for a company facing bankruptcy; namely, the full valuation less the aid given. The amount of aid given does not have any bearing on the question of whether or not a company is solvent without it. It is either solvent, and thus to be compensated for in full, or else insolvent and thus virtually worthless. The clause already provides two options for compensation, either 5 per cent. of the full compensation or the amount which the shareholders would have received had their bankruptcy taken place. In the vast majority of cases, and this is an unfortunate fact, shareholders receive nothing out of a compulsory winding up, and for this reason I believe that to offer 5 per cent. in these special circumstances is by no means unfair. But to offer any more, except in the remote possibility where shareholders would have received more had the winding-up proceeded, would perhaps be considered unjustified largesse on the part of the Government. It is for this particular reason that I feel I must reject this particular Amendment.

I was surprised that the noble Lord did not accept the Amendment and I was greatly surprised at his reasons for not accepting it because the whole point of the compensation through-out the Bill is that it is based on spurious data; that is, the notional value at 1974. In the example I gave it is possible that in 1974 the company in question was viable and would not go into liquidation. If in 1976 one is buying out a company at 1974 prices, I suggest that it is not fair to say that because subsequent to 1974 the company got into difficulties we should therefore use a different figure from that on which the whole of the compensation is based, which is the 1974 figure. If in 1974 that company was viable, why should it not be paid out in compensation at 1974 prices?

I find the argument adduced by the noble Lord strange because it may be that a company will go into liquidation and, if it does, there is very little left for the share-holders. But in the example I gave the company was not, in 1974, in liquidation and was not likely to go into liquidation and I do not see why the noble Lord says that the Government would be paying out largesse if he accepted the Amendment. It would not be largesse. It would be just and fair to pay the 1974 value less any sums which the Government had paid. Would the noble Lord care to explain—I am willing to be told if I am wrong—whether, if a company was solvent in 1974, under these provisions it would not be paid out at 1974 prices?

The argument is that in the period between 1974 and 1976 a hypothetical situation may have arisen in which a company is in such difficulty that it is at risk of becoming insolvent and being forced to wind up its operations. It is obviously the Government's wish that such companies should continue trading and one would hope that if such a situation arose the company would turn to the Secretary of State, get a grant and continue doing what it was doing at the time of the original situation in 1974 when it was brought within the ambit of the Bill.

I remind the House that we are talking about hypothetical situations, not real ones. If such a situation were to arise, then either the shareholders would get 5 per cent. of the full compensation—and it is open to them to decide—or the amount which they would have received had the bankruptcy taken place. I think we can assume that at this moment all companies which are concerned with the progress of the Bill would choose to take what assistance the Secretary of State can give them rather than go into liquidation and throw their work forces on to the labour market. Admittedly, this is not a usual situation about which we are talking—it is a hypothetical one—and I believe that the terms proposed by the Government are fair; either 5 per cent. of the full compensation or the amount which the share-holders would have received had the bankruptcy taken place.

I regret that the noble Lord, Lord Winterbottom, has opposed the Amendment so strongly. Do the Government understand that the problem is one of blight? We all know that if one is living in the shadow of a projected motorway or similar development the value of one's property can decrease sharply. Similarly, a company threatened with nationalistaion can find itself in a similar position. The noble Lord will recall that the Bill did not appear in the first Session of Parliament, over which the present Government had some control, although it was expected to arrive. There was a period of' uncertainty before the Bill was introduced in another place and that exacerbated the situation to which my noble friend has drawn attention. The Government are being unreasonable over this and I hope that my noble friend will press the matter to a Division.

I am grateful to my noble friend Lord Trefgarne and I, too, find the Minister's argument extraordinary, especially when he described this as a hypothetical case.

Can any noble Lord tell me of a factual case of any company suffering from blight? Perhaps the noble Lord, Lord Trefgarne, will tell me of one?

It is all very fine to ask that sort of question and I think I see the noble Lord, Lord Winterbottom, smiling. I would remind him that we have not yet had the vesting date and much can happen before then. What he is seeking to defend is putting something in the Bill which I suggest is unfair. My noble friend, Lord Trefgarne, referred to blight and what I think he had in mind was the situation where a company might have been viable in 1974 but could not find the funds to re-tool or buy new equipment, or carry out this new order which it has got since 1974, aid because it might have been in difficulty it must go to the Government. Once it f as gone to the Government, the Secretary of State is obliged to pay out in compensation what is frankly a derisory amount. Had that company in 1974 been in difficulties and had it in 1974 got a grant from the Government because of those difficulties, things might have been different. But it is possible that in 1974 the company was totally viable, and it is the mere operation of obtaining funds from the Government later to develop its exercise that the Government put in this provision which, frankly, will result in a thoroughly unfair amount of compensation. The obvious and reasonable thing, I suggest with humility, would have been to pay out what was agreed to he the proper price in 1974 less any funds the Government paid into the company. Even then the Government would be getting the company at a value probably much lower than is current value simply because it would have borrowed the money to develop its work.

I find the noble Lord's argument thoroughly unconvincing. I suppose that at this juncture he will not accept the Amendment and I see him, I think sadly, shaking his head in dissent. I am sorry about that. With respect, he is being most unreasonable. I hope there will be a little give somewhere from the Government, otherwise it makes the exercise in which we are involved rather tedious, particularly when we are trying to provide constructive Amendments, of which this is one. However, if the noble Lord sees fit not to accept it, then I shall be obliged to withdraw it and reconsider the matter.

Before the noble Earl seeks leave to withdraw the Amendment, may I ask the Minister, as one who has had to deal with this question only in relation to Communist Governments who have tried to take over companies without paying any compensation at all, how the figure of 5 per cent. was conjured up? It seems remarkably low. One does not know what proportion the compensation bears to the value of the company. It could be virtually taking it over without any compensation. If the noble Lord would explain the clause a little more we might be able to have a better view of the Amendment.

I am not the most skilled person on the procedures of your Lordships' House, but I thought that the noble Earl, Lord Ferrers, had withdrawn the Amendment—

Several noble Lords: No!

and, if he had withdrawn it, that is the end of the discussion on the Amendment.

I was careful in the words I chose. I think I said that I would be obliged to withdraw it and then sat down. I did not actually seek leave to withdraw it.

I said as I rose, "Before the noble Earl seeks leave to withdraw the Amendment". I would be grateful if the Minister would explain the provision further; I am sure he understands it better than I do.

May I put it in words of one and a half syllables? The Opposition is making too much of the "investment blight". No noble Lord opposite or on the Cross-Benches has told me of a company which is blighted. We have given assurances to companies to ensure that normal, on-going business is not blighted by the Bill and we believe that companies are operating quite normally against the background of this Bill. If any noble Lord can tell me of a case of blight I should like to know of it.

Is the noble Lord really saying that because we cannot mention a particular case, we must now write this grotesque provision into the Bill?

Am I right in saying that the noble Lord said he had had enough talking? Am I not allowed to talk if I want to? I cannot hear what the noble Lord says.

I apologise. I said that I was bad on procedure. I thought that the noble Earl had withdrawn his Amendment, but I find that he has not.

I am very grateful to the noble Lord. I was wondering why he said that this was a hypothetical case and asked for evidence. When we are dealing with a Bill, we cannot, until we know what the conditions are and until all the firms that are to be nationalised have been gone into, give any evidence. One cannot say that one cannot have a clause in a Bill which is hypothetical unless one gives the cases. That seems to me to be quite ridiculous and I cannot understand it at all. We want clauses that are fair to the people so that, when we come to deal with the compensation, we can then provide the facts; but we cannot do so on a hypothetical case because at the moment we have no hypothetical cases. So what I want to know is why the noble Lord used the word "hypothetical".

I am afraid that hypothetical is hypothetical. I merely asked for an example of a blighted company. None has been given. Therefore, it is very difficult to say whether we are being fair or not. So far, no unfairness has appeared.

I am going to throw a small pebble into the pool by asking the noble Lord whether, if he is satisfied that no case will arise, it is necessary to have the clause in the Bill at all.

Oddly enough, that was almost the question that I was going to ask the noble Lord and, as we are asking each other questions, perhaps I may ask him this. Does he know of any company that was reasonably solvent in 1974 which has subsequently received a Government grant which will result in that company being paid out only either 5 per cent. of its 1974 prices or the current break-up value?

While we are asking each other questions, maybe I can join in and ask the noble Earl a question. We have been asked a lot of questions and I believe that I am entitled to ask one in return. Noble Lords opposite passed Amendment No. 156 when we were nearing the end of the previous Committee stage: am I right in thinking, as I think I am—for it is the Amendment of noble Lords opposite and not mine—that, under that Amendment, somebody who was not satisfied with the particular item of compensation with which we are dealing at this stage could go to the tribunal and say that, having regard to all the circumstances, the compensation was not fair and could ask the tribunal to alter the compensation? If that is the case, I am not quite sure what we are arguing about.

I can tell the noble Lord exactly what we are arguing about: we are trying to make the provisions of the Bill reasonable. I do not think it much of a statement to say that because somewhere in the Bill there is the right of a company to go to arbitration, therefore all the other provisions of the Bill can be absolutely haywire for, if they are not right, the company can go to arbitration. Clearly, we must try to get things right, but the noble Lord, Lord Winterbottom, asked me specifically whether I knew of any company that was going to be blighted. I shall find out, for I cannot tell him on the spur of the moment. But that does not alter the reason for trying to make the provisions fair. What I should like to know is whether the noble Lord knows of any company which has received funds from the Government and which, as a result of receiving those funds, will have the reduced amount payable.

I think that we are getting down to details. I shall inform the noble Earl at Report stage.

I am very grateful to the noble Lord. We are getting down to details, and I believe that they are rather important details, but I will withdraw the Amendment and shall come back to it at Report stage. I now, formally, and at the noble Lord's pleasure, beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

6.47 p.m.

moved Amendment No. 162:

Page 49, line 14, leave out ("either").

The noble Lord said: With this Amendment, which I am moving on behalf of my noble friends, I should like to speak to Amendment No. 163. Here, we are still addressing ourselves to this question of the special declaration and we are on a narrower point still. Since we have got into this rather unfortunate word "hypothetical", which looks like being our touchstone instead of our usual one—"flexibility"—I would just point out that, though I know that "hypothetical" is a dirty word in this House, the whole of this clause is to a very large extent hypothetical. That became very evident when the noble Lord was challenged by my noble friend Lord Ferrers to cite an example. Many of the provisions in the Bill are trying to deal with hypothetical situations that may arise. I think that we must accept that. So I do not believe that it will quite do to fling out the word "hypothetical" and say that that is an answer. I do not believe that it is.

What we are dealing with here is a rather technical point which, again, deals with accounting and also involves the onus of proof. Although these are comparatively narrow points, they are of some importance and I believe that they are made more important when this sinister phrase, "in the opinion of the Secretary of State" creeps in. That keeps on happening in this Bill. The subsections to which we are now referring were not in the original draft of the Bill. This is a point that was made in the discussion in another place and it was one of the Members from our side who pointed out that we were not here asking for special help but trying to redress an adverse balance against the companies. Indeed, one wonders why these subsections have been introduced. The apparent intention—and this has already been said—is to reduce the compensation which would otherwise be payable in the case of companies which receive Government assistance where, in the opinion of the Secretary of State, that assistance saves the company from liquidation or receivership.

Subsection (4) makes clear what is intended and, again, we are referring back to the date of 6th November 1975 and speaking of the reduced amount. I believe that we have discussed the broader issues involved here and the issue that we are addressing ourselves to in these Amendments is the fact that the accountants regard the phraseology as extremely unsatisfactory. We have these two provisions that the accountant has to declare that the company would be unable to pay its debts as they fall due without the payment or assistance in question. That, I understand, is technically possible, but, where the purely practical accountant says that he runs into grave difficulties is in the provision that the state of the company's affairs is such that, in all the circumstances, it is probable—one might almost have said "hypothetical"—that, in the foreseeable future, it would become unable so to pay the debts without that payment or assistance.

The accountants advise that this is not the kind of statement that they can be expected to make, and the industries feel that this is an unreasonable paragraph to have in here at all. We come back to the "heads I win and tails you lose" type of situation. I do not want to pre-empt the more general debate on compensation which will probably take place on the Question, That the clause stand part, but we are talking about a situation where one does not get a penny more if one has done better since November, but one gets substantially less if one has done worse. Again, in this particular instance, we are talking about a potential collapse.

May I finally remind the noble Lord that it was in discussing this point in another place that the remark which showed an appalling lack of understanding of the whole principle of compensation was made by Mr. Carmichael when he said:

"We are not in a take-over situation, we are acquiring by Act of Parliament."

If that is the attitude as exemplified in that discussion, then this is perhaps a slightly more important Amendment than at first might appear. I beg to move.

We have been discussing a group of Amendments which relate to the reduction of compensation for companies saved from collapse by Government financial assistance in the period, shall we say, from 1974 to whatever date it is when the Bill becomes an Act. May I briefly outline the basic philosophy behind the compensation terms before dealing with the Amendments which we are discussing now, Nos.162 and 163.

Compensation is fixed on the basis of a past reference period, the six months up to the end of February 1974. At that time, all the companies named in the Bill were viable concerns at the end of the reference period and the basic assumption still is that they will remain in that state up to the vesting day. Just to make the point clear, no company as of now has come to ask for aid under the clause, so we are—I know it is a longish word—in a position where the whole situation we are discussing is "hypothetical". I agree that it is the duty of this House and another place to discuss hypothetical situations, but hypothetical situations are less important than real situations, and as of now no company has come forward for help. The noble Lord opposite has said that clearly the prospects of individual companies may have changed since the reference period. But that in itself does not affect the basis of compensation. By basing compensation on a past period, the compensation payable is fixed, and generally speaking the shareholders are assured as to the basis on which the compensation they will receive will be assessed. We are talking about something that is not hypothetical but is factual.

However, all of this is built on the premise that the companies continue as going concerns up to the vesting date, and I think we can agree on that. If a company should collapse before the vesting date, then clearly the whole basis of compensation is destroyed. That is recognised by the provisions of Clauses 27 and 29 which have already been discussed. But for a number of reasons the Government may not be prepared to see a company collapse before vesting day, and again, noble Lords who arc fair-minded men would not wish that to happen. In those circumstances, the Government may decide to support the company in the intervening period with some form of financial aid. If a company is saved from collapse solely by the Government digging into their pockets—ot should I say more carefully as noble Lords will correct me—digging into the pockets of the public, it is clearly wrong that the shareholders should nevertheless receive full compensation as if the company had remained viable by its own efforts.

I believe that it would not be right for the House to accept these Amendments. When a company is running into financial difficulties, its directors will seek to avert the final collapse by early action and not wait until the receiver is at the door: that is to say, provided their accounting procedures are adequate. As soon as the danger signs appear, the company will seek whatever financial assistance it can to stave off collapse. The noble Lord opposite said that the bank might not support it. That again is a hypothetical situation, because I believe that banks tend to support their old and trusted clients.

It may be that the company has no option but to turn to the Government, if the size of the problem is too great for any other sources to deal with it. While the ultimate collapse without assistance might be inevitable and clearly foreseen, it might nevertheless not occur at once—shall we say that while the organisation was working at full blast, the order book was shrinking and the future looked some-what bleak. If the Government give aid in these circumstances it is just as much to stave off bankruptcy as if the bankruptcy would have occurred the next day. As I understand it, sub-paragraph (b) of sub-section (6) which the noble Lord, Lord Strathcona and Mount Royal, is trying to delete in Amendments Nos.162 and 163, is to recognise this fact. If that sub-paragraph were to be deleted, then a company could receive aid a mere week before its bankruptcy and this maintain its right to full compensation. It is for those reasons that I must resist these two Amendments.

Before my noble friend replies on this Amendment, and since the noble Lord, Lord Winter-bottom, said that he wished: o give his view on these Amendments in the context of an explanation about the Government's philosophy on compensation, may I ask him one question? If I understood him aright, he was saying that if between the date in 1974 when we have a fixed point—which is a fact, not a hypothetical position—and the vesting date, a company's activity level and profit level drops so badly that it collapses, then, of course, the whole basis of compensation collapses also? But if that argument applies to a company whose level of activity and profitability changes dramatically in the downward direction, what about the position of a company whose level of activity and profitability changes dramatically in an upward direction? Does not the whole basis of compensation logically collapse, just as much in the case of a company whose level of activity and profitability changed dramatically upwards since 1974? Is that different in principle from one which changes dramatically downwards?

We are talking about collapse. If a company's profitability rises, then I suppose there are hypothetical situations when that could bring about the collapse of the company; but it is highly hypothetical and unusual.

I thought that the noble Lord was trying to tell us an important thing—which we grateful for him trying to tell us—namely, something more about the underlying philosophy of the Government in setting these principles for compensation, which we shall debate more generally in a few moments, and that is why the statement is important and needs to be clarified. As I understood it, he said that it was part of the philosophy that if the situation changed dramatically since 1974, then the basis of compensation would also be undermined. He took the case of a change which was dramatic alas! in the bad direction; but logically the argument applies just as much if the dramatic change were to take place in an upward or hopeful direction. Both cases in logic, I suggest, would completely upset the basis of compensation.

The distinction which the noble Lord has not made and which we would make is that a company's activity and profitability after the date in 1974 can go up or down, and the basis of compensation is not affected; it would still be the base period of 1974. What we are pointing out is the distinction if the company ceases altogether. If the activity drops so low that the company goes bankrupt, then at that point the distinction should be made; but we are not making any distinctions if the profitability or activity goes up or down, except for this one case which, I think the noble Lord would accept, is of a different degree from an increase or decrease in activity or profitability.

I think I now understand the Government's position. What the Government are in fact saying is that if, following 1974, a company (to put it crudely) sits on its behind and does nothing, then its compensation is fixed. If, on the other hand, in the national interests as well as its own, it really forges ahead and greatly increases its level of activity to the national benefit, then it does not get any benefit from it. Is that really very fair or very encouraging to the sort of effort we want over what is a period of two or three years?

I do not think there have been cases, unless the noble Lord can bring them to our attention, where companies have sat on their backsides, and I hope the noble Lord was not suggesting that that was the case.

But if they have not, as I believe is the case, and they have greatly improved their business, on what conceivable basis of fairness is it right to give them only what the Government say they were worth in 1974, when since then they have been forging ahead to the national benefit and not just their own?

There is one question I should like to ask arising out of this small debate, and that is this. The noble Lord, Lord Winterbottom, said that no company had approached the Government for rescue aid. Is there any prospect of any companies approaching the Government for rescue aid? It is very easy, perhaps, obviously telling the complete and utter truth and looking backwards, to say that no company has, but is there any prospect, looking forward, of anybody approaching the Government for rescue aid?

As I understand it, the answer to that is "No", but obviously the Government cannot answer for the companies. It must be the companies who would know whether or not they are going to come to us; but as far as we know the answer which my noble friend gave was the correct one.

One of the difficulties that I see with the subsection which the Government seek to retain is the word foreseeable". We have heard no indication of how long "foreseeable" might be. The Government's arguments might hold a little water if "foreseeable" was just a few months, but there is nothing in the Bill to say that. It might be six months, it might be one year, it might be two years, it might be ten years. Is the noble Lord able to give any indication of how far ahead a company would have to be able to ensure its viability to avoid the penal effects of this clause?

"Foreseeable" depends upon the accuracy of the firm's accounting and the wisdom of its executives. How far can one peer into the future?

I really cannot allow the noble Lord to get away with that. The words in this clause are quite clear:

"… a declaration by the Secretary of State that in his opinion … it is probable that in the foreseeable future …"
According to this clause, it is for the Secretary of State to decide when the foreseeable future shall end. Can the noble Lord tell me how far ahead the Secretary of State can see?

Perhaps on the same point, if I remember rightly my noble friend Lord Ferrers said among other things with regard to this paragraph (b) that no reasonable and competent accountant would find it easy to make a statement which backs up the situation which is described here. It is too difficult for even the most expert of common men to deal with this particular paragraph in real life. The noble Lord, Lord Winter-bottom, did not in fact reply to that in his first statement, and it would seem to me that it would be helpful if the Government could tell us why they think this is a paragraph which is in practical terms able to be realised by somebody who is really competent and trying to meet its terms.

I am very grateful to the last two of my noble friends who spoke from behind me, Lord Trefgarne and Lord Mottistone, because they in fact returned us to the Amendment. On this occasion the Government widened the debate quite beyond what T had originally envisaged when we embarked upon it. I do not think we are any the worse for that, because we probably dealt with issues which we should otherwise have dealt with in a few minutes' time. But I was a little suspicious that possibly the noble Lord was distracting our attention from the particular point that I was trying to deal with and to which we now have to return. The noble Lord nods his head, which I take to mean that he is going to deal with the issue and that he was not trying to distract our attention.

We wandered off into this whole question of hypotheses, and I should like to remind the noble Lord of one thing. The whole basis of compensation, as we shall be saying in a moment, is throughout designed on a hypothetical Stock Exchange valuation; and once you start on that—and the Government have started on that; we have not—you can hardly blame us if we follow with a whole series of other hypotheses. In this particular instance we have a very hypothetical situation, as the Government themselves have admitted, since the noble Lord, Lord Melchett, said that he did not know of anybody who was likely to go "bust"—which I am very glad to hear, incidentally.

May I answer one or two of the other, more general, points which the noble Lord made? The issue of blight spreads right across the industry. Once you announce that it is going to be nationalised, it is very difficult indeed for any company, under that kind of threat, to borrow money. That is surely self-evident, and there are many noble Lords here tonight who will, I hope, reiterate this much more authoritatively than ever I can.

But the noble Lord asked us one or two questions, trying to envisage the kind of circumstances. If one thinks back to the position of property companies during the period of the recent fall in property values, one recalls that many large property companies were: technically "bust". The City thought it would be undesirable to allow them to go through the hoop, which is perfectly proper, and they have a lifeboat committee, or some such committee I think it is cal ed, which exists to avoid this happening to such companies. I do not think anybody suggests that because they are technically "bust" you should therefore say that all their assets are worthless, which I think is what follows from the kind of argument here.

Furthermore—and this brings us right back—is it seriously supposed that any accountant could possibly do any of the three or four things required of him here? No accountant could do them. It talks about the foreseeable future and "it is probable". Accountants try to make their trade into as exact a science as possible, and they like to stick to facts. We are all trying to stick to facts. That is our complaint here. On the narrow point, leaving aside the more geneeral one about hypothetical values, lifeboat operations, Burmah, the Bank of England, nationalised boards, et cetera, we are trying to stick to the practical point and we are saying that we are assured by those whose business it is that they would be extremely unhappy if they were asked to perform the particular service which is liable to be asked of them under this Bill as it stands at the present time.

I rather doubt if the noble Lord wants to say anything further about this matter at this stage. If he does, I will gladly give way to him. If not, I should be happy to allow us to proceed to the Question, Whether the clause shall stand part of the Bill?, and the debate on it which will ensue. But I must warn the noble Lord that it is quite possible that we may have to address ourselves purely to the narrow, technical point at a later stage of the Bill. I beg leave to withdraw this Amendment.

Amendment, by leave, withdrawn.

7.9 p.m.

On Question, Whether Clause 35, as amended, shall stand part of the Bill?

The reason I am entering the fray at this late stage is because my noble friend Lord Selsdon has asked me to move some Amendments which he put down. I have accordingly been studying the Bill and Hansard assiduously over the weekend, but I know quite well I can be tripped up on detail. However, I propose to deal with the general point, which I think is important and which was referred to by my noble friend Lord Orr-Ewing and expanded upon during the debate on Amendment No. 156 by my noble friend Lord Carr.

I would first refer your Lordships to subsection (3) of this clause, which reads:
"… the amount of compensation due to any person in respect of any securities of a company which are held by him immediately before the date of transfer of that company shall be an amount equal to the base value of those securities",
and so on. I draw attention to the significant words, "any person". These words occur again in subsections (4) and (5). As I understand it, these words are only applicable in the case of one out of the 43 companies intended to be nationalised. In the other 42 cases, the compensation is to be paid not to any person but to the parent company concerned.

Let us for the moment forget the one quoted company and consider the other 42. The Government have repeatedly made clear that they wish to be fair. I should like to know what is meant by the word "fair". I trust that this means fairness not only to the taxpayer but also to the parent companies and to the underlying shareholders. If the Government are going to be fair to the parent companies they will automatically be fair to the shareholders; but the shareholders are, so to speak, once removed and will receive no compensation at all from the Government. They will, if they so wish, continue to hold shares in the parent company and will be concerned that the value of the compensation stock will be sufficient to replace lost assets with others of equivalent earning power. If that is not so, the Government will definitely not have been fair to the shareholders—something which the noble Lord, Lord Melchett, has frequently told us it is the avowed aim of the Government to be. I realise that it is very late in the day to raise the point and I do not have the experience to know how the Bill should be amended, but I would suggest that the words "any person" should be changed to "any parent company or person". If the Committee agree with this then perhaps we could return to it on Report.

It seems to me that the Government, perhaps owing to the immense amount of legislation to which they were committed by their Manifesto, have used previous nationalisation Bills as a blue-print for this Bill. They have tried to use the previous system of using Stock Exchange prices by inventing the extraordinary idea of notional prices. For this, I suspect, they may have drawn some inspiration from Lewis Carroll. While speaking to Amendment No. 156, my noble friend Lord Wardington explained very clearly the inadequacy of using actual Stock Exchange prices as a means of valuing a company. It must be well known to the Government that during the relevant period Stock Exchange valuations were well below asset values. Therefore, if the parent companies had sold their assets on the basis of Stock Exchange valuations they would have been unable to replace them. Similarly, if the Government nationalise one of their subsidiaries and compensate on a Stock Exchange or quasi-Stock Exchange basis, the parent company will be unable to establish itself—to quote the words of the Under-Secretary of State—
"at the same level of activity as existed before its subsidiaries were vested".
If the Government would admit that, although they want to be fair they arc using a method of compensation that is unfair, we could get together and work out some improvements to the Bill to make it at least more fair, but the intransigent attitude adopted by the Government that they are being fair when it is obvious they are not, seems somewhat tedious and time-wasting.

7.14 p.m.

May I crave your Lordships' indulgence from the Cross-Benches to indulge in a few general reflections on the implications of this clause? I have not spoken, save on one occasion, on the rest of the Bill and I do not wish on this occasion to indulge in any observations at all on the nationalisation of the two industries concerned. I address myself solely to the question of fairness on which I personally am prepared to accept the assurances which have been given by noble Lords on the Government Front Bench that they are united with the rest of the world in seeking. I am afraid that the impression left upon what I imagine to be an impartial observer in this particular context must be to the contrary. It is on that matter and on that matter alone that I should like to expatiate for a few moments.

It is very clear (is it not?), that the draftsmen of this Bill started from the simple notion that if some person or group of persons is compensated on the basis of the Stock Exchange value at a said date, then the criterion of fairness is satisfied. Unfortunately or fortunately, it so happens that the companies enumerated in the Schedule for the most part lack a Stock Exchenge quotation on the named date. It is therefore considered to be necessary, and certainly it is necessary if compensation is to be devised at all, that some tribunal of arbitration should be set up to ascertain what would have been the Stock Exchange value at a certain date of these companies had they enjoyed the benefit of quotation—a task which must be associated with all sorts of perplexities and necessarily involves a vast number of judgments which in the nature of things are subjective.

It may be that if the fundamental Amendment moved last time by the noble Lord, Lord Selsdon, survives in another place, the terms of reference of the arbitration committee may be interpreted in such a wide sense as in the event to vitiate the many fears which have been expressed in this House (and, I think, are expressed in the knowledgeable world at large) with regard to the procedure of this tribunal which I think it is not unfair to say is implicit in much which has been said from the Government Benches, much indeed which has been said from the Government Benches, in the last half hour.

Let us then proceed to examine a little the fairness involved in what I, at any rate, believe to be implicit in the general philosophy of compensation as alluded to by the noble Lord, Lord Winterbottom, 10 minutes ago. Let me start from the position of an individual shareholder, if such an individual shareholder exists; but I hope Lord Winterbottom will not think I am indulging in too much in a hypothetical exercise if I use the words actually used in the Bill, "a person". The person involved may have observed that since the date mentioned in the Bill there has been a not inconsiderable degree of inflation. Any pecuniary compensation, therefore, which is paid to him now, or two or three years hence, is likely to have a very substantially lower real purchasing power than it would I have had at that date.

You may dismiss that and I can under-stand your dismissing it, although I deplore the fact that Governments in general usually dismiss such arguments. I must say—perhaps this may be thought by noble friends on the other side a vindication of my speaking from the Cross-Benches—that I think most Parties have been almost criminally indifferent to the effects of inflation on investors, especially on investors who have been coaxed by the very often honest and upright agents of the Government to invest their money in Government securities. However, this is the fate of many unfortunate people, and those who receive lower recompense in real terms for what is taken over in respect of aerospace and shipbuilding are suffering in common with a great many of their fellow countrymen who have not had the common sense to "twig" the inherent dishonesty of Government policy in general in regard to inflation. I will not dwell upon that grievance any longer.

On the other hand, I think that the individual might have some, complaint about the date. If I were in such a position—I am not aware I am—I should certainly feel that the choice of date and the perspective it involves is open to criticism on more than one count. Retrospectively, surely, the date occurs at a time when many values have been upset by every kind of unforeseen contingency: the rise in the price of oil; the gradual realisation of the catastrophic nature of the inflation to which we have been committed by an earlier Government, the attitude of certain bodies of producers and so on. If I were the individual person concerned, I should feel that some compensation assessed on a wider view of past profitability of what was to be taken from me would be appropriate.

Leaving that on one side, accepting for the moment the cynical vindication which might be made: "Well, you might just as well choose some date, and we have chosen that, and that is that", I cannot regard as so unimportant the point made just before we embarked on this part of the debate by the noble Lord, Lord Carr of Hadley. Supposing that some of the companies concerned—I use the word, "some" advisedly—had shown some elements of enterprise, had reinvested profits in the industry, some of the entrepreneurs concerned had shown themselves not to be the imbeciles they are sometimes represented to be, if I, the person, were to be compensated on some notional value of what my shares would have been worth on the Stock Exchange in 1974, I might feel some sense of grievance. Similarly, if there were some companies which answered to the description sometimes delicately referred to by the noble Lord, Lord Melchett, as not having been absolutely 100 per cent. in every possible respect, it may well be that if I were the person concerned with those companies, I might he rather lucky in comparison to the other persons, to whom I have alluded, who had foresight to invest their money in more go-ahead concerns.

I cannot regard this point as insignificant. I found it extraordinary that so fair-minded a debater as the noble Lord, Lord Winterbottom, can brush it aside as being merely hypothetical. It surely must be the case that there are some people who will lose relatively because of the adoption of this criterion. However, all this pales into insignificance beside a further conceptual mistake which seems to have been made by the framers of this Bill. For the purposes of argument, let me accept that compensation according to notional Stock Exchange value in the year 1974 seems to be fair. I am perfectly prepared to admit if you were thinking simply of inflicting an extraordinary fine on some reprehensible person by depriving him of his opportunity to possess shares in a certain branch of industry, and then you were persuaded that, after all, he needed compensation, it might seem fair if you could—and if your arbitration tribunal could do the job properly for you—compensate him at the notional Stock Exchange valuation. He could then buy another security of equivalent value.

But now we come to what may be said is the grand structural defect of this set of provisions. It may appear to be fair when you are considering individual persons, and regarding the rest of the world as staying put, but it loses all appearance of fairness when you are thinking of compensation to holding companies and to parent companies, whose subsidiaries are to be compensated in the same way. I will not dwell further on the anomalies very well pointed out by the noble Lord, Lord Wardington, in the debate on Thursday night which may arise as a result of the use of notional Stock Exchange values compensating equal holdings in different companies. The noble Lord, Lord Wardington, gave striking examples of the anomalies of that kind. The point I wish to make—I do not wish to detain your Lordships much longer—is this: taking over the assets of an entire company is taking over something which usually if the company has any prospects of prosperity is considerably lower than the Stock Exchange value. This has certainly proved to he the case again and again in the City where a perfectly fair take-over bid is made for the assets of a particular company.

Did the noble Lord say "lower than"? Surely he meant "considerably higher than"? When you take over a company you usually pay much higher than the—

Did I not say "higher"? I beg your Lordships' pardon. I certainly meant to say "higher". The point is so obvious that I do not think I need elaborate it further. It is true that the individual shareholder, other things being equal, does not realise, either annually or when he sells his securities, his share of the total value of the going concern. But when the going concern is taken over as a whole, then a notional valuation based upon Stock Exchange values at a certain date will certainly not, even if inflation is taken out of the system, enable the company concerned to replace the value of its assets and control. That, I believe, is the fundamental defect inherent in this part of the Bill. In my judgment, fair compensation involves an assessment of re-placement value, and even to say that is over-simplifying.

The point to which I have been leading up is an extremely simple one. I have yet to indulge in any conversation or to read any article in which it is controverted. Yet unless the Amendment moved by the noble Lord, Lord Selsdon, so enlarges the opportunities for the arbitration tribunal, the simple principle of fairness will be flagrantly violated by this clause. That, I think, is a pity because people are cynical enough already about the degree of fairness they may expect from Government in this country. I think it is a pity, because it violates principles of abstract justice, because it will certainly be a further discouragement to prudent investment and, finally—and I do not drag this in now, since it has been at the back of my mind ever since I became conscious of this element in the Bill—it is a pity because of the impression that it will create abroad.

I wonder whether members of this Government, if some British company operating abroad were to be nationalised by some other reprehensible Government on the principles of this clause, would feel that full compensation was being paid by an export credits department or some other department if it were to act on this principle. Certainly we should be under no misapprehension at all in this respect. Noble Lords who were present earlier this afternoon will have witnessed that I have borne testimony on my feet in this chamber today to the unwisdom and the irresponsibility of certain remarks in the newspapers yesterday and to the effect that has had on the pound. But anyone who goes abroad deceives himself if he thinks that this kind of thing has not contributed materially to the inability of the pound to stand up to the sort of vicissitudes it has suffered recently. I cannot believe that the sober and moderate men on the Government Benches really intend that result.

Noble Lords have had a great deal to say about whether the compensation terms will be fair. The noble Lord, Lord Robbins, was among them. There haw been some very persuasive speeches from the Opposition Front Bench, and among others from the noble Lord, Lord Selsdon, and the noble Lord, Lord Orr-Ewing, from the Back-Benches. I am prepared to go along with those noble Lord; including the noble Lord, Lord Harmar-Nicholls, and the noble Lord, Lord Robbins, who paid tribute to noble Lords c opposite for being fairminded; and of course I would add that they obviously wish to be seen to be fair. Whether or not these terms are fair, it is perfectly clear that the only possible two reasons for unfairness would be either that the compensation "Cake" was too small or that the slices were cut unfairly. These are the two strands which the noble Lord, Lord Kirkhill, defined during the Second Reading of this Bill as being the Government's approach to compensation.

The Bill intends that the general principles, which the noble Lord set out as being necessary, should be devised for common application to all the companies to be taken over and that the Secretary of State would have regard to these principles in the case of the quoted company and the Secretary of State and the arbitration tribunal in the case of the unquoted company. As has been said by the noble Lord, Lord Robbins, and others, in this they will be guided by notional Stock Exchange values. Therefore all the effects which will flow from the compensation principle, such as fairness or unfairness, the added burden on the National Debt or restitution to the shareholders who have lost capital and income, depend upon the suitability of the Stock Exchange mechanism as a method of determining whether these effects can be achieved in the best possible way.

I should like to ask noble Lords Opposite which of these effects they are seeking to achieve in respect of the compensation terms. They have said that they wish to be fair, and, of course, it would be very satisfactory, egalitarian and equitable if shareholders could be compensated fairly; but I see some difficulty for noble Lords in the proposition that we should, at the same time as we attack nationalisation on the basis that the country cannot afford the cost, be suggesting that the price should be upped. What we ought to want, and what Ministers more than anyone else ought to want, is the most efficient and effective deployment of the nation's resources, which in terms of investment means that funds should find their way not, as so often happens, to the least resourceful companies, but to the most resourceful companies. I do not believe it is possible to sustain the momentum of a mixed economy unless the energies and resources of the public and private sectors are most delicately sustained, balanced and co-ordinated.

Noble Lords opposite accuse us of confrontation, but have they tried to sit down with the CBI and discuss with them, and with leaders of the other Parties, the implications and possible consequences of this Bill? And how can the private sector, which is soon to be deprived of these vast and, in many cases, profitable assets, plan to redeploy the proceeds of compensation stock in the most gainful way, in the way to achieve the greatest benefit to the domestic product, if they are to be kept in the dark about what they can expect to receive and what demands are to be made by some irrelevant and inappropriate formula?

If Ministers think that average Stock Exchange values of three years ago are the best way of valuing the current worth of a business, then they greatly misunderstand and overrate the mechanism of the Stock Exchange and the movement of share prices as a means of computing the resources and resourcefulness of a group or company in the private sector at any time. In my view nothing can be done to undo the damage to the economy by transferring companies to the State sector—some vigorous and flourishing, and removed from the control of well-tried and flourishing managements; others in decline being propped up at public expense for a period. But compensation will, at least, provide an injection of funds into the private sector to help carry the State sector whose enlargement, as Professor Friedman said yesterday, has brought us to the cliff top of collapse.

Many noble Lords opposite will, because of their views, reject what I say. But I ask them to consider whether the highest standard of living, and the greatest satisfaction, is obtained in that country which has the most vigorous and largest private sector, or in that country where all the resources, all the means of production, distribution and exchanges, are owned by the State. I have no doubt in which direction the Labour Party will take us, unless we dig our heels in all the way. That is why there is this talk of confrontation, and I suggest to noble Lords opposite that if they want to cool the temperature, to bring the heat down and to try to produce a situation where we shall have some kind of meaningful relationship between the Parties, they should try to introduce a measure of flexibility into this Bill, which does not at the moment exist; that they should try, between now and Report stage, at least to modify the compensation clauses so that they can be seen to bring benefit to the nation.

7.45 p.m.

I hope that the noble Earl, Lord Dudley, was wrong in one respect. I hope he was wrong when he said that he anticipated that noble Lords on the Government Benches would reject the advice which he had been giving them, because that would mean that they underestimate the dangers that lie in front of us. One advantage of a debate on "clause stand part" is that one can talk in a general way. We have examined line by line, and word by word, what is in the Bill and we can now give a little genuine advice to the Government in the hope that they will accept it. I do not expect for one moment that noble Lords opposite can accept the arguments which will be put, but I hope that they will impress upon the Department how essential it is that, by the time this Bill becomes an Act—if ever it does—the compensation clause carries with it a message very different from what is in it now, even as amended.

The first question which I should like to ask noble Lords is whether they will use their influence to see that the Amendments which have been carried in this House remain in the Bill, and that it will not just come back to us from the other place in the most unfair state in which it existed before we first looked at it. Will they take into account what the noble Lord, Lord Robbins, said to them that this clause carries with it something much more important than that which is in the Bill? This will, I believe, affect the general world view of our future possibilities and potentialities.

If one values the pound now on a purely technical basis, taking into account the inflation in Germany, France, Switzerland and elsewhere, one can quite safely say that it should stand at around 1·90 to 1·95 to the dollar. The reason why it is at its present frighteningly low figure is that the world has no confidence in our forward projections, and people think that our potential will be misused. That has a bigger impact than anything else on forming a view. Everybody knows that what we need in this country is a bigger output per man hour to bring us to the level of some of our competitors. Alongside that, we need a more vigorous and risky investment programme, both from Government and from private individuals. Unless we can get those two things we shall be over the cliff, and we shall be unable to get back.

This clause relates very fundamentally to the second point. If the Government give the impression that when they nationalise they will be unfair in giving compensation, they will undermine world confidence at a time when they ought to be rebuilding it. They will drive the private investor away from using any savings or other money in a constructive way. They will encourage the feeling, which is rife throughout the country today, that the best thing to do is spend your money and not invest it; to get something on the shelf, in the safe or in the cupboard which will maintain its value. This kind of feeling, which comes from being unfair in matters such as this, will send us so quickly down the road to ultimate ruin that the present forecasts will seem almost rosy when we look at them in retrospect.

If I might have the attention of the noble Lord, Lord Melchett, who is the Under-Secretary as distinct from being a conveyor of messages, I should like to emphasise that apart from maintaining, with all their influence, the Amendments which have been written into the clause the Government should go further and recognise the force of the argument of the noble Lord, Lord Robbins: that unless replacement value is taken into account nobody will be compensated. People are not being asked to sell at a time of their own choosing; they are having to sell at a time dictated to them by the Government. The least that the Government can do is to insist upon a compensation clause which will ensure that people are able to retain the replacement it value of the assets that they have built up in the past.

There is much more to this clause than merely being fair to the people, who are involved. The clause will send out a message regarding our future approach which will decide whether or not we shall have any home investment. In. hat spirit, not merely in the technical spirit, I hope that the clause will be looked at by the Government before it comes back to us at Report stage and before we are asked to give it a Third Reading. If the clause goes back to the other place in anything like this form I hope that they will not feel that they have an ideological duty to send it back to us in a form which can bring only disaster to this country.

The noble Earl, Lord Dudley, mentioned the question of the mixed economy. Per taps the attitude of Her Majesty's present advisers to the mixed economy is that of drunken American who likes his dry Martinis mixed with less and less Martini. By this I mean that the Martini is the private section of the economy while the gin is the public sector. Also I have a feeling that noble Lords opposite are trying to buy the gin at duty free prices.

This leads me to my next point: that if the Government buy at a notional share value and find, leaving aside the part we were discussing the other day relating to the ship repairers and the plastic coating manufacturers, that they have something that they want to sell in that shipbuilding, ship repairing or aircraft manufacturing company which is totally the bounds of the Bill, they will be indulging in what they have accused the "flyer" members of the City of; namely, of asset stripping. Earlier in our proceedings when I raised the point of surplus office blocks and said that I hoped the Government would not have to buy new office blocks to house these vast Corporations, the noble Lord, Lord Melchett, gave me an assurance that they would try not to do this. If the Government are buying large numbers of ship repairing and shipbuilding companies and are putting them into British Shipbuilders and if they are also buying the two main airframe and engine manufacturing companies and calling them British Aerospace, they must find that they will have spare stuff to sell. Consequently they will be selling, either for their benefit or for the benefit of the Corporation, certain assets that they have and they will be buying at this notional share value. If the notional share value were freely negotiated or if it were a freely negotiated takeover perhaps this would be fair, but as it is not a freely negotiated takeover the people who are suffering are not the bloated City plutocrats who seem to loom so large in the imagination of noble Lords opposite but the vast majority of the institutions which to a large extent provide life insurance and pension funds for ordinary working men and women.

When they have to justify the Bill to our lords and masters, the citizens of the United Kingdom, I hope that the Government will explain to them that what they have done has been to depreciate those pension and life insurance companies which have tried to keep up the value through appallingly inflationary times, and economic mismanagement of Olympian standards; that it is their fault and that they are very sorry, but they had to do it for doctrinaire reasons, and that their pension and life insurance funds, when they come to maturity, will be less than they would have been had they not interfered by buying these shares in that way.

7.55 p.m.

The clause that we are discussing is of extreme importance and the reason why it is important is, as has already been said, that any form of compensation must be fair. I do not think that there ought to be anything between those of us who sit anywhere in the House and the Government. If you are going to nationalise, then it stands to reason that the price paid must be fair. This means that the price has to be fair to the person receiving the compensation for which his assets are being removed. It must mean also that the price has to be fair to the Government and to the taxpayer in order to indicate that they should not pay out more than that which the assets are worth. It is fundamental to the discussion of Clause 35 that the compensation should be fair. The noble Lord, Lord Kirkhill, referred to this in his Second Reading speech when he said:

"My own view is that the compensation approach in the Bill is the fairest that can be devised"—
Those are very important words. Referring to the principle of compensation which the Government are using, the noble Lord went on to say:
"Your Lordships' House will have understood that the approach has two basic strands. The one is to devise general principles of common application to all the companies to be acquired"—
that is understandable—
"the other is to apply those principles in the fairest way possible".—[Official Report, 28/9/76; col.181.]
So if the expression of view of the noble Lord, Lord Kirkhill, is correct, there is nothing between anybody on the principle that compensation should be fair. If one does not agree with that, one is saying that expropriation or unfair compensation is acceptable and I do not believe that that is contemplated by the Government; at least, I like to think that it is not.

My worry is that even if the Government intend the compensation to be fair the very methods that they are using ensure that it cannot be fair because they are founded upon spurious data. The noble Lord, Lord Kirkhill, said that we have to find a common system of compensation. The whole basis of compensation is notional values of Stock Exchange prices, and of all the 43 companies which are to be taken over, only one is quoted on the Stock Exchange. Therefore one starts off by saying that the other 42 companies will be valued on an unreal basis; they will be valued on the basis of what the figure would have been had they been quoted, which they are not.

When I say to the noble Lord, Lord Winterbottom, that this is spurious data this is because one is trying to compensate people for a level of shares which does not exist. This means that then you have to devise a system to find our what is right. If one begins with what the share figure should be, one of the first things one realises is that the value of shares goes up and down depending on all kinds of circumstances: on the economic circumstances, on the viability of the company as a whole; and on the timing of the reports. And not only that: the share value of companies depends to a large extent on what is known about the company by the public at the time and it does not depend upon what the public knew about the company in retrospect. This is the situation in which the Government will be involved in trying to find out in 1976 not what actually happened in 1974 but what the view of people in 1974 would have been for the future of those companies, which at that time was not known. That is the type of consideration which has to be given.

And, of course, the value of shares depends upon what the public know about the company at that time, which is not the same as what the company knows about the company at that time. The company obviously may know very much more of its inner workings than the public knows, yet it is what the public knows that determines the value of the shares. Even then the value of the shares represents only the very small number of shares that change hands, and, as the noble Lord, Lord Robbins, said, absolutely correctly, if you are going to acquire a controlling interest then the value of those shares is enormously higher. It is reckoned that to have a controlling interest in a firm means that normally the share value will be 50 per cent. higher than that parcel of shares which is quoted on the Stock Exchange. Indeed, only the other day (dare we refer to it?) the Felixstowe Dock and Harbour Board were given a value for the full control of the company, and those shares were valued at 60 per cent. higher than those quoted on the Stock Exchange.

I suggest that in this respect these figures cannot be fair, because they are based, to start with, on shares that are not known and on the value at which they would have been quoted on the Stock Exchange floor, and they are not valued on the basis of an acquiring and controlling interest. So the whole basis of what the notional value of the shares would have been in hindsight I suggest is spurious and academic. It is certainly open to question and to argument on all sides and by many people. Of course, the value of these shares practically never reflects the value or the cost or the earning power of the individual assets which underpin the shares, because the individual investor is in no position to realise his share of those assets. The individual investor receives only the dividend income that that company chooses to pay, and that of course, as a matter of practice, is invariably much less than the total earnings of the company. Yet again that is the kind of value—what the shares earn—that determines the level of the shares on the Stock Exchange.

But if one accepts the fact that for control of a company it must be expected that the shares would increase in value by 50 per cent., and I think that is generally agreed upon by all people, then the value of the compensation which the Government are offering these companies is only two-thirds of the value of what it should be for a controlling interest. The curious part is that the shareholders are being paid, some time between 1976 and 1980, for securities which are transferred in 1976 and the compensation for which is based on 1973/74 values. So there is a huge time-lag and, as has already been stated, during that time inflation has gone up. So what in fact are the companies to do with the money which they acquire for the shares which have been taken over? The answer is that presumably they will either buy other companies or put that money into new plant and new equipment. They will have to buy new plant and new equipment at 1978 prices with cash paid for their assets at 1973–74 prices.

I do not believe that that can be said to be fair, and perhaps I may just interject this thought with regard to Amendment No. 159, which I think was the last Amendment with which we dealt on Thursday. It was asked whether the Government accountancy service was consulted over the drawing up of the compensation aspects of this Bill, and the noble Lord, Lord Melchett, said, quite reasonably, that that was not something which arose on that particular Amendment. He said that he did not know what the answer was but that he would be kind enough to let us know the answer if we referred to it on the Question, 'Whether Clause 35 shall stand part of tie Bill? So I shall be grateful if the noble Lord, Lord Winterbottom, if he is to reply to this Amendment, will say whether in fact the Government accountancy service was consulted over the drawing up of the compensation clauses.

I am bound to say that I find myself in a little difficulty over this matter because I believe that between us all we agree that the system should be fair. I do not think it is fair, and, what is more, the point that I find infinitely worrying is that when the Government were asked about compensation during the Committee stage of this Bill in another place the Minister of State, Mr. Kaufman, made it perfectly clear. He said, in effect, "We are not taking over these companies on the basis on which a willing buyer would get them from a willing seller. That is not what we are doing. We are nationalising them. We are taking them over by Act of Parliament. Therefore the terms on which a willing buyer buys them from a willing seller are not the terms on which we are offering compensation". It is as simple as that. That is what Mr. Kaufman said, in effect. The difficulty I find is that it is terribly hard to believe that the Government intend to be fair when the Minister of State says that that is the basis on which we are compensating companies. I genuinely hope—and I suppose it is an almost impossible thing to ask the Government—they they will reconsider this matter. If they want to be fair, then they must be seen to be fair, and at the moment I do not believe that they are being seen to be fair, nor do I believe that they are being fair.

I hope that there may be time for one more speech from the Cross-Benches. I share the views which have been expressed that this really is not a very fair arrangement. The relevant days cover six months, during which period we had a coal strike, the engineers' strike, the three-day working week and numerous other troubles, and I cannot conceive that a worse period could have been chosen for fixing the base value.

I do not want to repeat all the things which have been said, but I did not get an answer to a question which I put to the Government as to how they thought up the figure of 5 per cent. for the "reduced amount". It seems to me an extremely low figure. My experience in cases of company compensations has been gained when dealing with Communist Governments. They never want to pay compensation, and they pay it at the lowest imaginable figure. The figure of 5 per cent. strikes me as an ominous similarity and puts fear into my bones. I do not like it. If it strikes me like that, it will strike foreign investors like that and we want foreign capital in this country. I have always hoped that we would have a Government which would give real help to our shipbuilding industry—knock down a bit of town around the shipbuilding yards, and extend the yards to build ships in a new way, as do the Swedes and the Germans. I had hoped that the Government would encourage investment in shipbuilding, but instead they have cast a blight on the whole thing.

Someone on the Government Front Bench—I think it was the noble Lord, Lord Winterbottom—said he did not know of any case where any company had asked for Government help. But with a text like this around where you get only 5 per cent. if you have asked for Government help regardless of how much their help was needed, how do you expect to find anyone asking for it? The shipyards are starved of capital and the industries have had a blight cast upon them. This is a most unfortunate moment to bring forward such a Bill.

What ought to happen is that in view of our economic situation, the Government should have the good sense to scrap the Bill. It does not matter that it is part of the Social Contract. If the Social Contract requires something manifestly idiotic and unfair, it should not be carried out. These are strong words, but I have very good reasons for thinking this in this case.

Finally, we have the interesting case that the compensation will be paid in the form of Government stock. At a time when the inflation rate is running at 14 per cent. and likely to rise again because the Government borrowing continues, can you think of a quicker way to lose everything than to put it into Government stock? This is so much so that the Government have had to raise the rate of interest to 15 per cent., and probably it will go higher. If you pay 15 per cent. for assets which you take over, the assumption is that you are able to make more than 15 per cent. out of them, otherwise you will lose your money. Do the Government seriously think that, by taking over the shipbuilding companies, which have been badly treated, they will make 15 per cent. profit out of them? Or is this not otherwise throwing money down the drain? This is bad economics, bad commerce, bad finance, bad in every way. These compensation proposals are very open indeed to criticism.

8.13 p.m.

It is perfectly obvious from the debate that compensation is badly regarded from all sides of your Lordships' Committee, and quite rightly so. I want only to raise one particular point, a rather different one from most people. I wish to ask why this system was introduced by this Government? Several of my colleagues have said that the system itself was a very bad one and that the Government ought to have been able to find a better system. I happen to have represented Wallsend-on-Tyne from 1931 to 1945. Wallsend-on-Tyne is a very big shipbuilding and ship repairing area. For all those years, even having lost my seat in 1945, and afterwards being returned for Tynemouth in 1950, I have still retained a very great interest in the shipbuilding area on Tyneside. I like to think that I know, at any rate, something about it.

When I lost my seat in 1945 and the Labour Government were returned with, if I remember rightly, Mr. Attlee as Prime Minister, the first decision was taken to nationalise the coal mines. That was the first nationalisation programme. So the coal mines were nationalised, and the question of compensation arose. It is very difficult to remember so long ago; but I think my brain is quite clear that the decision was then made that an independent body should advise on the compensation to be paid to the private coal owners.

Of course, the problem of compensation in shipbuilding depends, at any rate to some extent, on the different assets of the different companies. Some companies have tremendous assets, some shipyards are losing money and some shipyards have ship-repairing yards attached. One cannot find a general compensation scheme which would fit every shipyard. In the same way, in 1945 you could not find a scheme of general compensation because of the different coal fields.

At that time I had some connection with Bolsover, one of the most progressive coal mines, which always had plenty of money, which had deep seams and was a grand company. In my area of Northumberland and Durham we had a lot of mines which were losing money. Again, as today in shipbuilding, there were many differences in the compensation which had to be paid to the private mine owners, as there is in paying adequate compensation to the different shipyards.

Although I had lost my seat in 1945, I still had a fairly wide connection with colliery undertakings. An independent body was set up to assess what would be fair compensation. My recollection is that the compensation terms game out, they were considered by the private colliery owners as fair and there was not the controversy over the compensation to the private colliery owners as there has been over the compensation to ship-builders and ship repairing yards. So it seems to me that the system used then was a very much better one than tie system being used today. I should like to know from the Government whether they have considered using the same system as was used in 1945. I suppose it ran until 1948, because there would be some t me while the investigations were put into operation.

My recollection is that the private colliery owners were very well satisfied with the scheme that had been put into operation. I should like to know from the noble Lord why the Government have not used that system today in the compensation of shipbuilders and those connected with shipbuilding. Had that been done, it would have been very much more helpful. I am always looking at these things with great interest, with regard both to shipbuilding and coal-mining. I have always wondered why the old system of compensation paid to the private colliery owners was not used, and I should be grateful to hear why not, because it was regarded as fair. Nothing like the controversy arose then as is arising over the present system which this Government now want to introduce. I am very sorry that I failed to hear the speech made by the noble Lord, Lord Robens, because, after all, he fought in the next constituency to me in Blyth very many years ago when he was a great supporter of nationalisation.

With the deepest respect to the noble Baroness, she is confusing me with a much more eminent Peer of the name of Robens. I rejoice in the humble name of Robbins, and I have never entered into political conflict with the noble Baroness, and I should fear to do so.

I do apologise. Unfortunately, when I came in I heard one or two noble Lords talking about Lord Robens, so they also used my noble friend's name incorrectly. Nevertheless, had he been here I should have liked to hear what the real Lord Robens thought. In those days, he was a great believer in nationalisation. He does not seem to be now, and he has gone into other and wider fields. He accepted the compensation for the coal mines—whether or not he had shares of course I do not know. It seems to me that that scheme under Mr. Attlee was a much fairer one. Though I did not agree with his policies, Mr. Attlee for many years Prime Minister of a Socialist Government, was widely respected and had a very wide approach to the problems of industry. I wonder whether he would have been pleased with the terms in regard to ship-building and ship repairing which have been put forward by noble Lords opposite.

The scheme for compensation for the coal mines, carried out by an independent body and accepted by the private colliery owners, was apparently a good one. Of course, they regretted nationalisation, they did not enjoy losing their private collieries, but at the same time they considered that they had been fairly treated. When I heard many noble Lords say what a bad system this Government are producing, I wondered whether they had looked at that scheme—but perhaps they are all too young and it is only I who am old enough to remember what happened in 1945. When the noble Lord replies, I should be glad to know why this particular system, which has caused so much controversy, has been introduced, and why the other form of compensation has not been adopted on this occasion.

I should like briefly to support the general view expressed by many noble Lords that the Government's formula for compensation, based on a notional Stock Exchange value, is not realistic and not fair. I should like to raise one aspect in which in my submission the formula is not realistic or fair—that is, in its application to the successful company, particularly the successful company whose success is based on the technology and the good will and the know-how that it has built up and also to the assets it has built up which are generally known as industrial and intellectual property.

When I spoke on Second Reading, I declared an interest in that I was a small shareholder in Vosper Thorneycroft. It seems to me that the Government's formula omits to take such assets into account. If I may mention a personal aspect, I have spent many hours of my life endeavouring to assess the value of good will, of know-how and the value of assets of industrial and intellectual property. In a successful company, the value of these assets often has no relation to the Stock Exchange value. Therefore, even at this late stage, I should like to invite the Government to indicate what their policy is in relation to that aspect of compensation.

I cannot speak with the graciousness or fairness of the noble Lord, Lord Robbins, but without going back to the debate of last Wednesday and the various points which I then considered to be unfair, I should like to consider whether a notional price is appropriate. The Stock Exchange price represents the whole of the business. But many companies which are the subject of the Bill have a variety of interests and divisions. Not all divisions necessarily produce the same earnings or have the same assets or asset value for people who might wish to take over a part. Following on the remarks of the noble Baroness, Lady Ward of Tyneside, previous Bills have related to industries where there were a substantial number of companies quoted which, therefore, provided a reasonable base to start with, though exceptions had to be made. Previous Bills gave an option because the assets represented a different value to different people. Whether it is fair or appropriate I leave for the moment, though I do not retract what I said the other day. It is going to be difficult to arrive at a notional price.

A Stock Exchange price takes the future into account, but that is something we are explicitly excluding from 1974 onwards. That is unfair and inappropriate. We are specifically excluding any increase in dividend and, as I said the other day, we are including a period of quite exceptional circumstances and taking a very short period of time. Disregard the question of whether this is a good time to bring in the Bill or whether it is a suitable industry to be nationalised. Six months is not a good period, and I believe that one of the reasons why we have these anomalies in the Bill is that political expediency meant that the Bill had to be drawn up quickly and therefore previous nationalisation Bills were not blue-prints for these wholly exceptional circumstances. I should like to say one or two further things as we progress through Clauses 37 and 38 because they are all related together. But I beg your Lordships opposite to pay particular attention to what Lord Robbins said, because it is very pertinent.

8.30 p.m.

Noble Lords on the Front Bench opposite are beginning to look a little weary and perhaps even bored.

I am glad that is not so; obviously my rising to my feet makes a difference. But in general I think it would he fair to say that there has been a look of some weariness, or a sort of Lenten look of fasting and misery, about noble Lords on the Front Bench opposite, because this is a tedious exercise. Constructive Amendments have been put forward and they have been simply blocked outright. We have been taking part in a dialogue of the deaf. It is necessary to go on repeating points made over and over again in the hope that noble Lords opposite may eventually tumble to the point. It is always said that if you make a speech to simple people you should say what you are going to say, say it, and then tell them what you have said. I am not going to say that noble Lords opposite are as simple as that, but there are moments when one wonders whether their refusal to answer questions derives from the principle, "Never explain, because your friends understand you and your enemies will not believe you", or whether their philosophy is, "Better a bad excuse than none at all."

What has been so extraordinary about debates on this Bill so far is the emptiness and silence of the Benches opposite. Your Lordships' House has been enriched in the last few years by the ennoblement of a number of persons of very considerable business, industrial and City experience. Indeed, some of them, when they have come here on a rare occasion, particularly the Opening of Parliament, have come in the Rolls-Royce we heard about over the weekend, which I must say are absent from noble Lords on this side of the House. But where are they? When the Front Bench cannot give intelligible explanations and rely simply on reading out briefs, which are not very well constructed to start with, all right, that is their bad luck; but one would have thought that at least their own supporters with knowledge and experience of industry and the City would come to their rescue and explain what they are up to. The fact is that they have been deserted by their own side, and it can only be that the good and intelligent and wise and experienced men who exist in the Party opposite do not really have much faith in; he policy behind this Bill in general and behind this set of clauses in particular.

The Government may be getting rather tired of hearing about fairmindedness. When I was at school we were always told about "house spirit" until I could have screamed. Of course "house spirit" meant that we all did what the housemaster wanted. It may well be that noble Lords opposite will say that when the rest of the House talks about fairmindedness, it means fair in our view and not in theirs. But the fact is that this issue of fairness is critical in the eyes of the world. It has been said half a dozen times tonight, but it is worth saying another twenty times, if only noble Lords would take it on board in their heart of hearts, that we are not asking them to declare a great charismatic conversion tonight but we are asking that they will look at the problem of fairmindedness in the light of this country's reputation, in the light of today's news about sterling, in the light of the lack of investment and lack of foreign confidence in this country, and by Report stage come back and at any rate, as the phrase is, be a little more flexible.

This word "fairness" is really, in the jargon of Statutes and of Bills brought before Parliament, a fairly new concept." Fairness cannot be defined; fairness is something we know about, something we recognise and understand, but it is jolly hard to define it. It is a fairly new concept, but it is creeping into other aspects of our public life. For example, only a fortnight ago—the text reached me today—the Department of Energy sent round a letter to companies applying for licences in the fifth round of licensing; they were invited to say whether they would enter into discussions about the participation of the British National Oil Company on the basis not of the market price for crude oil but a fair price. Hitherto it has been the market price. This is a matter I shall refer to on another occasion. The point is that the concept of "fairness" is being used by the Government to introduce quite a new slant where there is a negotiation between the Government on the one side and "little brother" on the other. So this question of the way the Government treat fairness is a touchstone, and is going to he seen abroad as a touch-stone, of the Government's good faith.

The words of Mr. Kaufman in the Standing Committee have been quoted, but they need to be quoted over and over again, because unless noble Lords opposite understand the inwardness, as we say in Scotland, the real meaning of what Mr. Kaufman said, they will never grasp what we are getting at. What Mr. Kaufman said was this:
"We are not taking over these companies on the basis on which a willing buyer would get them from a willing seller. The Government are not going out on the market to buy control. We are taking control by Act of Parliament. While doing so we are offering fair compensation for the assets".
If that is not the classic Communist case of, as you might say, double-think and double-speak with regard to expropriation, then it is very difficult to imagine what is. This phrase is going to be stuck in the Government's mouth for a long time to come.

May I say in parenthesis, talking about fairness, that we on these Benches, and I believe throughout the House, have no fear whatsoever of the sort of blackmail nonsense that has been spoken over the weekend in certain speeches by Members of another place. Where it comes to fairness and we are seen to be standing for fairness the public will be behind us. It might be well worth while noble Lords opposite understanding that, instead of allowing some of their friends down the corridor to rant about Rolls-Royces and a lot of other things that are quite irrelevant. The concept of fairness is critical to this country's good name in the world, and this is the point that is at issue on this clause.

It may well be said that I am only repeating what has been said already, but I have explained why it is worth while repeating these things. There are the distortions, of which the worst is the wholly hypothetical nature of the calculation; it is one hypothesis built upon another. There is a notional value which can be twisted and turned to mean absolutely anything; it certainly cannot be checked objectively. There is the question of the Stock Exchange quotation—what it would have been. How on earth can serious people, be they lawyers or economists, say what would have been in a hypothetical situation, one hypothesis on top of another? Then there is the assessment, which is either what the stockholders can negotiate with "Big Brother" in an atmosphere of so-called fairness, negotiate under the threat of the bullet, negotiate when some people are more equal than others, or it is what the arbitration tribunal may fix; and in view of the Government's philosophy about fairness as we have had it hitherto, who is going to have much confidence in a tribunal?

Then much has been said, and it is worth while repeating, about this nonsense of the Stock Exchange quote. An example was given so well and so convincingly and so plausibly, and I thought so simply, by the noble Lord, Lord Selsdon, who, alas, cannot be with us today. I think he is in America, or Geneva, or abroad somewhere. He said it is like trying to measure the value of Boot's by the value of the high street chemist. Stock Exchange prices, anyway, do not refer to assets; they refer to the market for a small block of shares on any particular day. One knows that, and it is worth saying again, because noble Lords do not seem to be able to understand quite simple matters in this regard.

They say they are taking control. All right, taking control normally means paying between 25 per cent. and 50 per cent. above the market level of the shares at the present time. Let us take a very good example. There has been an uproar over the weekend because this House threw out the Felixstowe Docks Bill on Friday. Under that Bill we were invited to approve a situation in which British Transport Docks Board has been offering 150p per share for shares that stood at 90p when the offer was made. This is an offer that the Government approved. If they accept the principle that when you buy control you have to offer very much more than the market price, surely they could recognise it now.

The fact is that the Government consider that it is fair to confiscate the control value of a company, and we shall listen with interest to what they have to say now. But I am reminded of the adage of one politician—and I think he was in fact from the Party opposite but he might well have come from my side—when he said something very shrewd on political argument. He said,
"The more one seeks to speak the truth, the more difficult it becomes to he precise".

8.42 p.m.

Before I reply to this somewhat diffuse discussion on clause stand part, may I, through the noble Lord, Lord Cullen, thank the noble Lord, Lord Selsdon, for his courteous note in which he told me that he was not going to be present here tonight. As I understand it, the noble Lord, Lord Cullen, has a watching brief on this subject, and I am certain that he will exercise his watching brief with precision. So far as I understand it the noble Lord, Lord Cullen, raised the question of the meaning of the word "person", which I believe under the Interpretation Act 1889 includes a body corporate as well as an individual; that is, a body corporate which is a parent company as well as an individual. This should not stand as a hazard in our discussions.

On Wednesday night noble Lords opposite passed Amendment No. 156 moved by the noble Lord, Lord Selsdon, which introduced in statutory form the word, "fair" into the Bill. We believe that this Amendment would have dealt with the problems raised by noble Lords on all sides of the Committee. However, we on this side of the Committee resisted the Amendment on the basic, that the terms in the Bill as present to the House were fair. I shall, therefore, make my remarks at this point on the basis of the Government's view of what is fair. May I say to the noble Earl, Lord Ferrers, that I think he was fair when le pointed out to the Committee that fairness is a two-way state: the Government have to be fair to the individual or to the company, and the Government at the same time have to be fair to the taxpayer, because at the end of the day it is the taxpayers' money that is being shifted to compensate the individual or the company.

The noble Lord, Lord Robbins, took perhaps a realistic but at the same time rather hard view that none of the Parties, no Government, is ever truly fair; that fairness is a word that they find very difficult to understand. It is not quite true because I think we all try to be fair, but what exactly we mean by fairness is not the easiest thing to define. Noble Lords opposite have put "fair'' into the Bill, and we shall perhaps in clue course know what the statutory in: aping of "fair" is. The best we could do as a Government was to take a measure that was not hypothetical but factual, and which was the average of a series of share values over a six-monthly period.

I am willing to accept that that method of measurement is imperfect. In point of fact anything that we did was bound to be imperfect. But I suggest that certain aspects of the fairness or unfairness of this decision might be discussed at a later stage in our discussions with greater precision. On this Motion on clause stand part noble Lords seen-to have fired at me with a blunderbuss, some bits going back and some going forward, and we are going to have an opportunity as we go on with our discussions to discuss the base value of listed securities, the base value of other securities, the function of the stockholders' representatives, and of course the arbitration tribunal. I should have thought that there were particular clauses in the Bill where certain of the points raised in this discussion might more profitably have been raised. After all, we are coming to them, and I hope noble Lords will be prepared to argue with us with greater precision these specific points which have been raised rather loosely at this stage of our discussions on Part II.

I hope that the noble Lord will acquit us of any endeavours to hold up proceedings. This section of the Bill is headed "Compensation", and it seemed to a number of us that by far the simplest way of despatching the business and, for that matter, helping the Government to get on with the Bill, was by making these general comments on the clause stand part. I speak for myself, but I think that was the idea. I hope we are not going to have a long clause stand part on each clause, otherwise we are going to get very thirsty indeed.

I think that the noble Earl mentioned the "Lenten look" on this Bench. May I say that so far as I am concerned it must be very early in Lent because I have not yet got a lean and hungry look. But I hope that the noble Earl will in fact practise asceticism at the later stages of our discussion, and having had a full meal now will in fact fast thereafter.

May I go back to the point that I was making. The most factual way that we could find of valuing shares as a starting point of negotiations was the Stock Exchange valuation of those shares, or the shares of parent companies, at a series of dates prior to the Government's announcement to nationalise these two groups of companies. Might I say to the noble Lord, Lord Robbins, that the reference period which ended in February 1974 was chosen as the last reasonable period during which share prices were unaffected by the prospect of nationalisation. To have chosen a later period would have opened the Government to the charge that they were rigging the terms of their offer. The problem we are discussing I think divides both sides of the Committee, but we believe that we chose the only factual and fair way of valuing the shares for the purposes of compensation.

Stock Exchange prices, so far as I know, are a fact. When I buy a share or sell a share the price is a fact, and that is the best and nearest I can get to a factual state.

The noble Lord will observe, of course, that the majority of the companies do not have Stock Exchange prices.

This is a very interesting point. I am not dodging it. I cannot dodge it because it is coming towards me. We should be able to deal with this with precision, even brutality, when we come to Clause 38. I see that the noble Earl, Lord Lauderdale, is about to leave the Chamber. Presumably he has lost his appetite for these proceedings, though it is of course for him to decide to have a meal whenever he likes.

I enjoy listening to the noble Lord, Lord Winterbottom, but I thought he had left the points that interested me and that I might have a thin Lenten supper.

After that pleasant exchange perhaps I might answer the noble Earl, Lord Dudley, who will of course correct me if I failed to grasp exactly what he said. He asked what, at the end of a transaction, when Government stock had been exchanged for shares and so on, the individual company was to do with its Government stock. He argued that it was essential that the money—not the money of course; the Government stock—that had been issued for this purpose should in due course find its way into productive investment for industry. This point is of great importance which is recognised by the Government, and I am grateful to him for bringing it to the notice of the House.

In cases where the compensation stock is issued to a single shareholder, which is the holding company concerned, that company may wish to realise its stock in order to restructure its company, and I am certain that will happen; it has happened in the past and I feel sure that it will happen now. The Government are anxious to encourage reinvestment in productive industry and they have therefore provided an incentive in the Finance Act 1976—I believe in Section 54—by which a company owning the shares of a vesting subsidiary which sells its compensation stock within one year of receiving it is exempt from any capital gains tax on the stock, provided that it reinvests the proceeds in what the Inland Revenue calls qualifying assets; for land, building, fixed plant and so on. This amounts to reinvestment in productive industry, whether or not it takes place inside or outside the aircraft or ship-building industries, which is what the noble Earl wants and what the Government also want.

I hope the Minister can relieve my extreme puzzlement. I gather that in the course of a friendly exchange of view concerning the issue of Government stock, the noble Lord, Lord Melchett, argued with great force and a considerable degree of voracity that this issue was simply a transfer and did nothing necessarily to augment the flow of aggregate expenditure.

That was the situation at the moment of the transaction, but time passes and various other factors come into effect and this is one of them. I do not believe that some of these great companies which receive a substantial holding of Government stock as compensation will just sit there and hold it; they will do something with it, but this is not on the day of the transfer, of the transaction.

Am I to understand, then, that the noble Lord thinks that eventually the issue of this stock will augment the flow of aggregate expenditure? This has deep implications as regards macro-economics.

I shrink from arguing with the noble Lord, whose expertise is far greater than mine, but I think he will agree that nothing in life is static. There may be an exchange of equal value between the Government and the individual on vesting day, but that does not mean to say that that freezes the situation for ever. I would hope that the situation today is not one that is frozen for ever.

I am grateful to the Minister for answering my point. However, nothing he has said so far invalidates my proposition that provided the stock is sold and the funds reinvested, a generous rate of compensation would be in the national interest.

Arising out of what the noble Lord, Lord Winterbottom, has been saying and the fact that he visualises these companies selling their Government stock, may I ask him to agree, that the only people who will buy it are the very people who would otherwise buy Government stock direct from the Government? As the Government have at present enlisted every buyer they can to raise the wind, they are mortgaging their own future in this way. I am not sure that he was correct in his remarks about capital gains tax; I always understood there was no capital gains tax on Government stock, anyway.

That is going a little beyond what we are discussing. At any rate, what I am discussing is Clause 35 standing part of the Bill. Much of what has bun said is valuable, but it is not quite what we set out to discuss at this stage of the evening.

It is the Minister who has inadvertently or other-wise strayed into another important field. Unless the Government tell Parliament and the country that there will be some time bar on the recipients of this stock in selling it, liquidating t, he does not begin to answer the point nude by the noble Lord, Lord Robbins; namely, the effect on the aggregate purchasing power released into the economy. Unless he says that the Government will put some time bar on the sale of this stock, he is admitting what we all—we on these Benches and the Liberal arid Cross-Benches as well as people o outside the Committee—have been saying from the beginning; namely, that this act of nationalisation adds significant, to the Government financial demand and the Government financial deficit.

8.57 p.m.

What the noble Lord has said is extremely interesting but there must be a point, which probably we have passed, when such points should be discussed. I think it is valid on Second Reading to discuss the whole impact of these proposals on the money stock, but what I am trying to do, and what I thought it only courteous to do, is to pick up the point made by the noble Earl and express the Government's view on the problem he raised. I cannot do more than that and noble Lords would not wish me to do more than I can do. I shall, therefore, stick firmly to the provisions of Clause 35 and not wander into the charming areas of macro-economics and Stock Exchange valuations and so on which have been dragged across my path. The points raised by the noble Earl, Lord Ferrers, will have to be raised again on later Amendments and I am sure he will keep up his strength to deal with those issues properly at a later stage of our night's discussion.

I come firmly back to Clause 35, which deals with two points only; it prescribes that compensation will be in the form of Government stock and that the amount of Government stock to be issued will equal the value of compensation and it provides that where a company is saved from collapse by Government financial assistance, a reduced amount of compensation will be paid. This is a splendid hook on which to hang much of our discussion, but I am sure that the Committee will excuse me if I do not go into the question of the saving of a company from collapse by Government financial assistance because we have had a good discussion of that already. I want simply to come back to the point that Clause 35 prescribes that compensation will be in the form of Government stock and that the amount of Government stock to be issued will equal the value of compensation. This will provide former shareholders with a steady income and with the opportunity of gaining whatever capital appreciation there may be on the gilt edge market.

The stock can be traded in in exactly the same way as equity shares. The clause provides that the amount of compensation due will be the base value of the vesting securities and we go to Clauses 37 and 38 to decide what is appropriate in the case of base values. Clause 35—the clause that we have been discussing—does not bear on the valuation of securities themselves. I know that noble Lords will sharpen their intellect to deal with the method of valuation on later clauses. It is on this very simple premise that I ask the House to accept the clause.

9.1 p.m.