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Stock Transfer Bill

Volume 432: debated on Wednesday 30 June 1982

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3.13 p.m.

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

Moved, That the House do now resolve itself into Committee.—( Lord Glenarthur.)

On Question, Motion agreed to.

House in Committee accordingly.

[The Earl of LISTOWEL in the Chair.]

Clauses 1 and 2 agreed to.

Clause 3 [ Regulations and amendments relating to the computerised system and exempt transfers]:

Page 3, line 41, at end insert—

("() No regulations shall be made under subsection (1) above unless a draft of the instrument containing the regulations has been laid before Parliament and has been approved by resolution of each House of Parliament.").

The noble Lord said: Your Lordships will recall that this Bill itself is a completely non-controversial Bill; in fact, it received but perfunctory attention in another place. We have already debated it on Second Reading, when there were a number of most interesting contributions, particularly from those noble Lords who have considerable experience in the City of London.

All this amendment seeks to do is to ensure that any regulations made under Clause 3 of the Bill are subject in your Lordships' House to the affirmative rather than the negative procedure. It is thus not a party matter at all. If the Government would today give me an assurance that they will accept the amendment, then I must immediately say, after having consulted with my side of the usual channels, that we are prepared to allow the Bill to go through on Report and all remaining stages today if necessary.

I gather that, for reasons which are not quite clear, the Government are not prepared to accept the amendment, that they regard the negative procedure as being quite adequate for this purpose. That being so, I have to support my amendment by some argument, which I hope will commend itself to your Lordships on whichever side of the House your Lordships sit.

This Bill provides uniquely that specific securities can be transferred without written instrument of transfer through a computer based system. This is the essence of the matter. I would not wish to go through the whole of the arguments that I brought up at Second Reading, but I did, I think with some justification, point out that this was a unique event. There have in the past been a number of ways in which property has been transferred, in which title to goods and other things has changed, and by virtue of which transactions are concluded, either verbally or under seal or under hand, whichever it may be. There has been a recent modification where the transfer of shares could be accomplished on the basis of the signature of the transferee only.

But now we are dealing with the question, if I may put it this way, of transfer by silicon chip. This is really what it is all about. This is not a most momentous thing so far as most of our citizens are concerned; they have no interest in the transfer of securities. But it is rather a novel form, and the question is whether, in view of the fact that this is an enabling Bill, admittedly an enabling Bill, it is proper that the regulations made under Clause 3 of the Bill should be by affirmative instrument. This is the sole issue before us.

The affirmative procedure is so designed that it lays an obligation on the Government to bring the order before the House itself for affirmation. Normally speaking, if the original Bill is non-controversial and the regulation is merely a technical, though important, one, it goes through this House in well under ten minutes and nobody is inconvenienced thereby.

The disadvantage of the negative procedure so far as this House is concerned is twofold. First, it means that the House itself has to depart from its own traditions. A tradition in this House, I believe, though I am subject to correction by those more experienced than I am, is that it is unusual to pray against orders. The other inconvenience is this. A negative order tends to be lost among the plethora of negative orders which appear before the House from time to time. If the noble Lord looks at the list of statutory instruments—No. 13—dated 26th June, he will find that there are already no fewer than 74 orders waiting the due passage of time and that can be prayed against under the negative procedure. In Part II there are certain schemes and ordinances which may be prayed against and these number some 12. In Part III there are some 15 orders which are going to be subject to the affirmative procedure in this House.

All one is trying to do is to say that, in a Bill of this uniqueness, however non-controversial it may be, it is quite proper that any regulation made in respect of Clause 1—and the noble Lord will, I am sure, agree that I have deliberately omitted Clause 4—should be subject to the affirmative resolution. It is necessary for all Governments of all political persuasions to conduct their administration through a series of orders and regulations. All Governments do it. Most departments, if they can get away with it, like to have the negative procedure because they know that there is very little likelihood among some 70-odd regulations outstanding at any one time, of anybody picking upon theirs. The affirmative resolution ensures that it comes before the House.

However, is it really important? Are the principles involved important? I must cite in this respect the view of the noble Lord, Lord O'Brien of Lothbury, who has very considerable experience and standing in the City, when he said on Second Reading:

" I agree very much with the noble Lord, Lord Bruce of Donington, that a Bill of this character, although a highly tech- nical Bill which interests relatively few people, is of immense importance. Everybody who engages in the transfer of securities can be affected by it. I think it is important that his point should be dealt with carefully and that in your Lordships' House we should examine the Bill very closely indeed".—[Official Report, 25/5/82; col. 1079.]

That is precisely what we are doing.

The noble Lord, Lord Glenarthur, may say, "Well, what is the real objection to the negative procedure at any rate? It makes very little difference". If it makes very little difference why cannot the affirmative procedure be agreed to anyway? Why can we not have the affirmative procedure if there is not very much difference between the two? The principles remain exactly as I have stated. All these matters are, of course, relative and without wishing in any way to say that any of the orders to which I shall refer do not merit the affirmative procedure—because I do not wish, in common with most other constitutionalists, to reduce the number of statutory instruments that are subject to the affirmative procedure—may I refer him to the following statutory instruments which are subject to the affirmative procedure. First, there is the Town and Country Planning (Minerals) Regulations 1982—a very small order with practically negligible effect upon a citation of certain extremely unimportant regulations in the Town and Country Planning (Minerals) Regulations 1954, 1957 and 1971; an order that, in the ordinary way if one applied the criteria of the Treasury, ought to be not merely a statutory instrument subject to negative procedure, but possibly not subject to any procedure at all because it is a very small one. Then we have the Draft Pool Competitions Act 1971 Continuance Order 1982 for which there is no explanatory note save to point out:

"This order continues in force the Pool Competition Act 1971 until and including 26th July, 1983".

That is a world-shattering regulation to put up for affirmative procedure.

Alternatively, let us take the Pilotage Commission (Additional Function) Order 1982. This is another one which, if the noble Lord examines it, he will find that there is nothing earth-shattering about it either and that there is no real reason why it should not go into the negative procedure even though I am quite sure, along with the noble Lord, Lord Renton, that we would not wish to restrict the numbers going for affirmative resolution.

However, perhaps the best example of all is one that occurred last week where we had—and the noble Lord may recall it—the Sheep Variable Premium (Protection of Payments) (Amendment) Order 1982 which was brought before us under the affirmative procedure. The debate upon it took exactly eight minutes and consisted in the main of the insertion of the words:

"from any place outside the United Kingdom".

The noble Earl, Lord Ferrers, in explaining it said:

" The main, and I think by any standing not monumental, consequence of these changes, is that animals which come into Great Britain from Northern Ireland must be marked".— [Official Report, 24/6/82; col. 1179.].

That does not seem be be a world-shattering event that, in the ordinary way, would demand the affirmative procedure.

One can, of course, take the reductio ad absurdum argument too far and I do not wish to embarrass the

Government or any of their predecessors by citing these matters. But occasionally there does come a time, particularly here in your Lordships' House where we have a special function within the constitution, where we have to take a stand. I repeat that it would be no inconvenience to the Treasury—however irritated they may be that somebody wants to amend their precious Bill—to have the affirmative procedure, and I invite all those who regard the function of the House to safeguard Parliament as against the executive and to preserve the liberties of the subject—all constitutionalists on whichever side of the House they may sit—to support the amendment that I venture to lay before your Lordships. I beg to move.

I think that the noble Lord, Lord Bruce of Donington, is right to be vigilant about this matter. There is a great deal of nonsense in our subordinate legislation and I think that he was fully entitled to draw attention to one or two cases which are at present subject to affirmative resolution and to point out that really those cases are not justified. However, I am afraid that if we accept his amendment we shall be adding to the nonsense to which he has drawn attention. Of course, the important matter of whether there shall be an affirmative or a negative resolution—and it is an important matter and I do not take the view that the noble Lord was suggesting that it matters very little in some cases—is a matter of judgment, of our judgment as parliamentarians, and not only judgment in this House but judgment in the other House.

It so happens that in another place the suggestion which the noble Lord has made here was not made at all. That is not conclusive. We are entitled to improve upon the work of the other place. Indeed, in my humble opinion, that is largely the reason why we exist. But I do not think that we would be improving upon that work by making the particular regulations referred to in Clause 3(1) and, by reference, the other parts of the Bill under which regulations can be made, subject to affirmative resolution. I say that because, clearly, the affirmative resolution is right for use when substantial changes of the law may be made by affirmative resolution, when a very important power is being exercised in an enabling Bill; and I agree that this is an enabling Bill. But surely the affirmative procedure is not right for use when the regulations are to deal with detailed technical matters, and, indeed, are regulations containing administrative procedure and guidance. I should have thought that to use it in those circumstances was a misuse of the affirmative procedure.

As I understand it, the regulations are not likely to have to deal with matters of privacy, because in the matters which the regulations cover, or in the procedures which follow from those regulations, there is no question of privacy being divulged. So although one must be vigilant—always vigilant—about the interests of the subject, I do not think that the subject's right of privacy, to the limited extent that it is a right under our law, would be infringed if regulations were made. As I say, this is a matter of judgment. If, by some unlikely possibility—some mischance—there were ever to be another Labour Government, I do not think that the Chief Whip in another place of that Government, looking back to our debate today if this amendment were to be carried, would praise the blessed name of the noble Lord, Lord Bruce of Donington. I think he would say, "We have enough of these affirmative resolutions with which to contend. We have to make time specially for them. It is far better to leave it to Parliament to demand time for discussion under the negative procedure if there is any real uneasiness". Therefore, for those reasons, I hope that my noble friend Lord Glenarthur, whom we are so glad and proud to see handling his first Committee stage, will consider rejecting this amendment.

I have listened with great care to what the noble Lord, Lord Bruce, had to say about his amendment. I do not think that there would be any point in my going over the background to the Bill, which has been discussed before. Nor can I comment usefully upon the many orders which he cited as examples of, perhaps, time-wasting discussion which has to be held on them in the future, because I have no special knowledge of them. But I do have one personal piece of knowledge about a Bill in which we rejected a piece of legislation in this way, and that was in the Deer Bill, which the noble Lord may remember took a certain amount of time earlier this year.

It might be useful if I were to describe the sort of regulations which are envisaged under the Bill. As the noble Lord said, the principal regulations which will be made, following enactment of this Bill, are those under Clause 3, which establishes the technical framework for computerised transactions—that is, the nuts and bolts of the scheme. The remaining regulations will parallel existing regulations in respect of transfers by instrument in writing and cover such matters as the certification of stock holdings and the protection of the office running the computer installation against notices of trust, et cetera.

The regulations under the Bill will not deal with such matters as privacy and safeguard against fraud, rather in the way that my noble friend Lord Renton described just now. These matters will be the subject of separate arrangements and will principally be those adopted by the people establishing and running the scheme in their own interests. The expected users of the scheme are, naturally, conscious of the need to ensure that the system is proof against fraudulent use or accidental misuse. They are also strongly aware of the need to preserve confidentiality. There is, of course, the possibility of legislation on privacy in respect of computer records coming before both Houses in due course, and the operators of the system have already given an assurance that if such legislation is enacted, they will ensure that the system complies with any such legal requirements.

This Bill simply clears the way for the Bank of England and the Stock Exchange to do more efficiently by new technology what they at present do by hand—namely, process large numbers of stock transfers. To make the regulations which I have described subject to affirmative resolution would, in the Government's view, be unnecessary. The regulations will be of a specialist nature and ideal candidates for the negative procedure, as the Bill envisages and as my noble friend Lord Renton said just now, particularly when one considers that any alterations to the regulations which would be made in due course would also be subject to the affirmative procedure, which, of course, is a thoroughly time-consuming process. Furthermore, as my noble friend Lord Renton also said, if the case of the noble Lord; Lord Bruce, is as strong as he feels it is, I am a little surprised to find no clamour for the affirmative procedure in the Second Reading and Committee debates in another place. I hope that the noble Lord will accept the assurances which I have given about the scope of the regulations which the Bill envisages and will agree that his amendment is not needed.

I am most indebted to the noble Lord for having provided some further information which was not given on Second Reading as to the form and the approximate parameters of the regulations that it is proposed to issue in connection with subsection (1). While I am about it, I should like to felicitate the noble Lord on his first appearance at the Box and sincerely hope that we shall have many other opportunities possibly of crossing swords or of forging plough shares, as the case may be.

I do not find the arguments that have been adduced against this amendment very satisfactory. The noble Lord, Lord Renton, laid down what seemed to be an astonishing doctrine, that if a regulation were replete with technical matters, that seemed automatically to disqualify it from the affirmative procedure. I was always taught—and indeed I aver—that experts should be on tap, never on top, and that if a regulation contains an undue amount of technical matter, that is all the more reason for drawing it to the attention of the House, so that the appropriate expertise may be obtained, by way of advice, in helping to elucidate any matters that appear obscure.

The noble Lord said that he thought that perhaps a Labour Government might reproach me for having insisted on the affirmative resolution in this particular case. Quite frankly, I do not mind in the slightest. If the noble Lord will look at my record in another place he will find that I had plenty of arguments with them there on these exact principles to which I hold. No, it is quite clear that the Government do not intend to give way on this matter, for reasons that to me still remain obscure. Therefore, all I can say is that I shall obviously have to review the matter again to see whether on Report I can produce something that may go some way to allay their fears—because they obviously have fears—in the hope that then, on Report, they may be able to quieten my suspicions. It is not fitting that I should seek to divide the Committee on an issue of this kind. I rather hoped to carry your Lordships' agreement to the arguments on a purely constitutional basis. Therefore, I shall be content to have the amendment negatived.

On Question, amendment negatived.

( Amendment No. 2 not moved.)

Clause 3 agreed to.

Remaining clauses and the schedules agreed to.

House resumed: Bill reported without amendment.