HC Deb 27 January 1972 vol 829 cc1635-707

Order for Second Reading read.

4.10 p.m.

The Minister for Industry (Sir John Eden)

I beg to move, That the Bill be now read a Second time.

Since about 1960 the gas industry has been subject to two major changes, first the move away from coal carbonisation in favour of oil refining, and then the change to natural gas. But during that time the statutory position has remained relatively static, with only some enlargement of the functions of the Gas Council brought about by the 1965 Act.

Following the discoveries of natural gas, the reassessment of the industry's future on the basis of assumptions about the amount of gas that would be available, and the taking of the major decisions on the physical development of the industry, legislation to change the industry's structure was planned and even introduced. But the General Election intervened and that Bill, which was related to judgments made fairly early on in the development of North Sea gas, was lost. This has provided an opportunity for further consideration, and the result is the Bill which is now before us.

The structure proposed in the previous Bill, although a substantial move towards putting the main responsibility for the direction of the industry in the hands of the Gas Council, went only part of the way. In some quarters it was indeed seen as a half-way house, with full statutory centralisation to follow later. Whether or not it was so regarded, that structure had undoubted weaknesses. In particular it preserved statutory area boards but made them subject to direction on any matter by the Gas Council and also took away from them any statutory responsibility for their own financial performance; moreover, the central direction of the industry was to be provided by a body which contained a majority of area members.

Our re-consideration has had to take account of the fact that the new structure brought about by any Bill introduced at this time will not become effective before about the end of this year at the earliest. By then conversion to natural gas will be more than half way through; virtual completion of the whole programme is likely in four or rive years from now. It is therefore no longer sensible to think in terms of an interim Measure, and it is desirable in legislating now to provide for the sort of industry we can expect to see as we run up into the 1980s.

Obviously there are some unknowns, and new pressures and developments will influence the organisational pattern of the industry. Therefore, this Bill deliberately does not attempt to provide a precise blueprint which is fixed both in outline and in detail. In particular, the Bill does not attempt to define the distribution of management functions between the centre and the subsidiary branches of the organisation. That would be far too rigid. It is more sensible to proceed gradually, by enabling moves away from the present structure and the present distribution of responsibilities to take place as and to the extent that they become, in management's eyes, necessary for the efficient conduct of the industry.

But the industry must have direction and control, and never more so than at a time of rapid development and change. We have therefore decided to put full statutory responsibility for the industry in the hands of a single body, the British Gas Corporation. The statutory area boards will be abolished, and all the assets of the industry will vest in the corporation.

Under the Bill the British Gas Corporation is not to be an entirely new body; Clause 1 provides for the Gas Council to be re-named as from an appointed day and for its composition to be changed. This method of proceeding has been chosen partly for technical reasons but also to mark the fact that the proposed new structure is not a radical and revolutionary departure from what has been happening hitherto, but a development of it. The appointments of existing members of the Gas Council come to an end immediately before the appointed day, but they may be reappointed. Although I do not have in mind now a full list of potential members of the corporation, I am able to say that it will be the intention of my right hon. Friend the Secretary of State for Trade and Industry, if Parliament passes this Bill in substantially its present form, to appoint the present chairman, deputy chairman and full-time members of the Gas Council to the equivalent positions on the new new corporation. This strong group of five at the head of the present industry is well placed to supervise all necessary planning for the change-over. I can also say that a strong group of part-time members on the corporation will be desirable.

It is not possible to be categoric at this stage about the exact timing of the appointed day. That must depend on a number of factors, including the advice the members-designate of the corporation, when appointed, given me as to the time they need to make their plans, in accordance with the duty laid on them by paragraph 2 of Schedule 1. But 1st January, 1973, is the date we have in mind at present. The Bill provides that the date must not be later than 1st July, 1973; this time limit arises solely for technical reasons concerned with the rating provisions, which are contained in Clause 34, Schedule 5 and parts of Schedule 6.

There has been a tendency in some quarters to describe this decision as one to introduce total centralisation of the gas industry. But this is to mistake the nature of the proposals. As hon. Members who have studied the history of organisational changes within the nationalised industries will know, there are many possible ways in which a single statutory body can organise its own subordinate management structure. It is possible to try to concentrate all power at the centre, or alternatively local organisations can be set up and given a very free rein. The essential point of the reorganisation proposed by the Bill is that it will be for the corporation in the first instance to decide what balance to strike.

This must be right—from several points of view. First, it puts the responsibility for taking decisions on structure in the hands of those directly responsible for the success of the industry. Secondly, it makes possible a more precise distinction than could ever be made in a Statute between those matters which need to be co-ordinated at the centre and those which are best left for local initiative and responsibility. Thirdly, and very importantly, it enables changes to be made in the light of experience or changing circumstances. Under a single statutory body such changes can be made quickly and relatively easily, and can therefore be made, where appropriate, step by step. In this respect they are in complete contrast to changes in structure brought about by Acts of Parliament.

I cannot say what organisation the corporation will adopt, or what matters it will reserve for central decision and what matters it will devolve to area managements. This will be a decision for the Corporation. I have no doubt that on a number of matters closely related to the industry's strategy for the natural gas era and to the financial health of the industry as a whole, a greater degree of central decision-making will be found appropriate. Making this possible is one of the prime objects of the Bill. But equally I have no doubt that the corporation will not make the mistake of trying to run the whole industry from London. Indeed the very nature of the industry, with 13 million customers for whom local service must be provided, would make this impossible. A strong regional organisation, sensitive to the needs of consumers in each area, will certainly be necessary; and it is reasonable to expect that initially it will reproduce the existing area pattern based on the areas of the present 12 area boards.

But while it is right that the corporation, as being responsible for the industry as a whole, should be primarily responsible for determining its internal management structure, it is right also that Parliament should be informed of any substantial changes made by the corporation and of the reasons for them; and right also that the Government should have a reserve power to intervene if they consider that any new organisation introduced or proposed to be introduced by the corporation is seriously defective. Clause 4 therefore provides for the corporation to review its organisation from time to time, with a first review initiated immediately after the corporation is set up, and to report the conclusions of any such review to the Secretary of State, who is to lay the report before Parliament; and it provides also that the Secretary of State may, after considering any such reports, give directions to the corporation about its organisation.

While the corporation will be generally free to organise its affairs as it thinks fit, the Bill does place one restriction upon it, in that Clause 4(5) prevents it from creating area organisations which straddle the boundaries of Scotland and Wales. This means that in any regional organisation which it sets up it must establish a region, or more than one region, to cover Scotland, and similarly for Wales. This would not prevent it from managing some functions, such as research, on a national basis, but it would prevent it from deciding to establish an area to cover, say, the West Midlands and Wales and to manage that area from Birmingham.

Mr. Arthur Palmer (Bristol, Central)

Does not the hon. Gentleman agree that, in spite of what he has said about the limitations on regions, the practical effect of the Bill is that Scotland will lose its autonomous gas boards?

Sir J. Eden

As I said earlier, statutory gas boards will cease to exist, and in their place will be strong regional organisations, which must be preserved in Scotland and Wales.

The abolition of area boards and the creation of a single statutory authority responsible for the industry require changes in the consumer consultative machinery. This is dealt with in Clauses 9 to 13. With ultimate responsibility resting at the centre, it will be necessary for the consumer to have a voice at the centre to enable consultation to take place on major issues which will be decided nationally.

In considering what form these provisions should take, I have taken into account the valuable and timely report of the Select Committee on Nationalised Industries, which was published on 19th October. I have decided that the need for national consultation should be met by a statutory body, with statutory powers, and have rejected as inadequate the alternative of a voluntary body, which was what the previous Government had in mind.

Clause 9 therefore sets up a National Gas Consultative Council, which will include as members the chairmen of regional councils but will also include other members appointed by the Secretary of State, within a limit of 30 members, not counting the national chairman.

Under Clause 10 the national council will have duties similar to those of the existing area gas consultative councils, but on a national scale. It will have the right of notifying its conclusions on any matter to the corporation, and of making representations to the Secretary of State; and the Secretary of State will have the power to give directions to the corporation arising out of its representations.

The creation of a national council will not remove the need for consultation on local matters, and the Bill provides also for local consultative machinery. The existing area councils will become known as regional councils and will continue to be appointed by the Secretary of State. They will continue to be able to consider any matter affecting the interests of gas consumers in their areas, including tariffs, and will be able to notify their conclusions to the corporation, and, if dissatisfied, to make representations to the national council. Where the national council takes up any such complaint, these representations can lead ultimately to the exercise of the Secretary of State's power to give directions to the corporation arising out of consultative council representations.

Since the House last debated the state of the gas industry in July, 1970, further important developments have taken place. These are set out in the Gas Council's booklet "Natural Gas on Target". Although hon. Members will have had the opportunity to study its contents, there are one or two points which I think ought to be picked out for this debate. What three or four years ago may have seemed to some as an over-optimistic assessment of the Gas Council's sales prospects have in the event been fully vindicated.

The programme to absorb the very large quantities of natural gas is, as the title of the booklet indicates, "on target". During 1971 the average daily quantity of natural gas received by the Gas Council was about 1,800 million cubic feet with a maximum daily take of 3,000 million cubic feet towards the end of the year.

Secondly, the conversion of the industry to natural gas continues to progress. All boards are now receiving natural gas, and currently some 90 per cent. of total demand is being met by natural gas, including both natural gas supplied direct and that which is used to make town's gas.

The programme of converting consumers' appliances has also moved on apace since July, 1970, when I told the House that about 15 per cent. of domestice consumers had had their appliances converted. By the end of March, as the table on page 10 of the booklet shows, some 45 per cent. of consumers will have had their conversions completed—three times as many. I know—and, of course, regret—that in the massive conversion operation there have been cases where mistakes have been made and individuals have suffered.

Mr. Thomas Cox (Wandsworth, Central)

A great many.

Sir J. Eden

It varies from area to area. I know also that area boards are doing all they can to guard against their repetition, to learn from the experience they have gained and to minimise the disruption to the householder.

The industry is still very much in the middle of the changeover to natural gas, and heavy expenditure will continue to be necessary for some years yet. For the four years up to March, 1975, the Gas Council estimates that the industry's capital requirements will amount to just over £1,200 million, of which by far the largest items are £531 million on bulk transmission and distribution and £371 million on conversion to natural gas. The industry estimates that a little under half of this will be met from internal resources, leaving about £620 million to be financed by borrowing.

It is likely that most of this external borrowing will be from the National Loans Fund, but Clause 21 continues, as a contingency provision against a possible future change in policy, the power to issue British Gas Stock, and Clause 17(2)(b) and 17(3)(c) continue the power to borrow in foreign currency.

The industry's present borrowing limits are set by the Gas and Electricity Act, 1968, and the Gas (Borrowing Powers) Order, 1970. At the moment they stand under the order at £2,100 million, but a further order could raise them to £2,400 million. To facilitate comparisons I propose that in future all British Gas Stock should be counted against the total limit on borrowing.

Taking into account the industry's outstanding borrowings at 31st March last, its expected requirement for external finance up to March, 1975, and the change of definition which I have just mentioned, we arrive at a borrowing requirement by March, 1975, of £2,480 million as indicated in the table on page 15 of the booklet. The Bill therefore sets, in Clause 19(1), an immediate borrowing ceiling of £2,500 million. Taking account of the change of definition, this is actually a lower ceiling than could now be prescribed by order under the 1968 Act.

Although the industry's self-financing ratio should improve substantially over the next few years, it is by no means certain that it will be fully self-financing in the years after March, 1975. I have therefore provided in the Bill for the industry's borrowing limits to be raised by order, when necessary, to a ceiling of £2,700 million.

A Bill setting up a single statutory body for the gas industry is inevitably a substantial piece of legislation, and we have taken the opportunity to bring together in a single Bill most of the relevant statutory provisions affecting the industry. This has enabled us to propose the repeal of the 1948 Gas Act, the 1960 Gas Act, and references to gas in some other Acts. The relevant provisions, adapted to the situation of a single statutory authority and modernised where appropriate, are reproduced in this Bill.

The only substantial section of existing gas legislation which is not to be dealt with in this way is Part II of the 1965 Gas Act, which is a relatively self-contained code of provisions dealing with underground gas storage. I am sure that this method of proceeding, bringing together in a single Bill the great majority of the provisions relating to the gas industry, will be welcomed both by the House and by the industry.

I have deliberately not gone through the Bill Clause by Clause. If hon. Members are interested in any particular points to which I omit to make reference, I know that my hon. Friend will do his best to deal with them when he comes to wind up this evening. But there are a number of provisions which I think the House will find it helpful to have explained at the beginning of this debate.

Clause 2 sets out the corporation's primary duty, which is to develop and maintain an efficient, co-ordinated and economical system of gas supply for Great Britain, just as the area boards have a corresponding duty at present in respect of their own areas.

Clause 2 goes on, in subsections (2) and (3), to state the corporation's principal powers. Unlike the previous Government's Bill—and I very much welcome the right hon. Member for Manchester, Cheetham (Mr. Harold Lever) as an old protagonist in these matters—these do not include powers to encourage or permit the gas industry to go into the oil business. As we made abundantly clear when that Bill was before the House, this would be totally inappropriate. But I recognise that the corporation may find crude oil in the course of looking for natural gas. If it does so, it will have the power to sell it, after treatment if necessary, or to use it for manufacturing gas, but, apart from this, it will not have the power to refine it.

I am also proposing to clarify, in Clause 2(4), the extent to which the corporation may search for and produce natural gas abroad. Present legislation leaves that question somewhat vague. I am proposing that it should be able to do so, but only with the consent of the Secretary of State. The intention is that consent should be given only where the operation is directed towards fulfilling its primary duty of supplying gas to Great Britain. I do not envisage authorising the corporation to explore for gas abroad with a view to supplying foreign markets. I also envisage that consent will be given only where the proposed method of operation is by way of a joint venture with a private sector company.

Clause 5 deals with—

Mr. Cox

Before the Minister leaves Clause 4, could he clarify one matter? Will he have the right under the Clause to call on the gas boards to change their policy in regard to complaints about gas conversion? I have been told by the Minister and his hon. Friend in reply to previous questions that they have no responsibility on this aspect.

Sir J. Eden

This will be a matter for the British Gas Corporation. It is very much in its interests when it comes into operation, as it is now in the interests of the area boards, to ensure that the whole operation goes forward as smoothly as possible. This is not a matter of direction by the Government.

Mr. Cox rose

Sir J. Eden

I am sorry, but I do not want to trespass on the time of the House more than is necessary. No doubt the hon. Gentleman will have an opportunity to speak later in the debate, and I am sure that my hon. Friend who is to reply will listen carefully to what he says.

Clause 5 deals with the control of capital expenditure. Those hon. Members who took part with me in examining the previous Bill in Standing Committee E will be glad to see that the wording used here embodies the fruits of their careful consideration of this subject. In particular they will note the omission of any reference to "measures of re-organisation and works of development".

Clause 7 contains the normal power for giving general directions in the national interest. It also contains the more specific power, similar to that contained in, for example, Section 27 of the Transport Act, 1962, and Section 7 of the Coal Industry Act, 1971, to direct the corporation to discontinue activities and to dispose of assets. The Government regard this as an appropriate general power to have in reserve in relation to the corporation, in case the corporation, in the exercise of the wide powers conferred on it by Clause 2(2) and 2(3), strays too far from the primary purpose for which it is set up namely, the business of gas supply. As I said in a Written Answer to my hon. Friend the Member for Harrow, East (Mr. Dykes) on 18th January, the taking of this power does not indicate any present intention of making use of it. Steps are being taken, as described in that answer, to create conditions in which a healthy private sector will develop naturally in gas appliance retailing and in gas contracting, but these are not dependent on statutory powers.

Clause 16 enables the Secretary of State to direct the corporation to pay to him any part of its profit from year to year which appears to him to be surplus to the corporation's requirements. Although similar powers exist elsewhere, in, for example, Section 42(8) of the Transport Act, 1968, the circumstances here are a little different. The gas industry is engaged not only in the public utility activity of gas supply but also in the exploration for and production of natural gas. This activity, which is undertaken largely on the basis of fixed interest advances from the National Loans Fund, is a highly speculative business of a type not usually financed by fixed interest loans. We cannot tell how successful the corporation will be in future in the finding of natural gas and perhaps oil, but in this kind of activity there is the possibility that really large finds might give the industry exceptionally high profits. In such circumstances it would not necessarily be right for these profits to accrue wholly to the industry. It might well be appropriate that some payment, over and above the normal receipt of a fixed rate of return, should be made to the Government, which are in effect the 100 per cent. shareholder and lender of last resort.

It is to meet the possibility of this sort of situation of exceptional profitability that Clause 16 has been inserted in the Bill. I would emphasise as strongly as I can that it will not be used to require the corporation to pay over any and every surplus. The industry has heavy financial burdens in the shape of obsolete plant and conversion expenditure, and it has reserves which are tiny in relation to its assets. The Government fully recognise the need to discharge these financial burdens and to build up proper reserves, and the new powers will certainly not be used to prevent this being done.

At this point I think I should say a word or two about any changes in the relationship between the industry and other producers and suppliers of gas.

When considering the whole question of the marketing and disposal of gas throughout the country there are four major interests that have to be taken into account in determining the right statutory framework. First, of course, there is the gas industry itself with its rights and obligations for supplying gas. Secondly, there are the producers, particularly the producers of natural gas from the exceptionally hazardous waters of the North Sea, who rightly need to secure a proper reward for the substantial risks they are taking. Thirdly, there are the consumers, including those in industry to whom gas is of particular importance. Finally, there are the Government with their inevitable responsibility for the development of such an important national asset, their ultimate stewardship for a very sizeable amount of public investment and their responsibilities for national fuel policy.

I have naturally considered very carefully whether the Statutes as they stand provide the right balance between the legitimate interests of these various parties or whether a shift of emphasis one way or another is needed. There are several possible steps which could be taken and hon. Members will no doubt raise some in debate. I have looked in particular to see whether the extent of the nationalised gas industry's market powers in gas supply and distribution should be modified. My examination has covered such questions as the disposal of by-product gas, the use of the gas industry's distribution system by others, the ways in which imported gas can be supplied and the disposal of natural gas from the United Kingdom Continental Shelf. Clearly, I cannot now go into all the possibilities that have been studied and the reasons for rejecting those that have not been included. I shall, however, refer here to one change from the existing statutory provisions and one case where I wish to explain particularly why a change has not been made.

The new provision is in Clause 29(4) which was born out of our discussions on the previous Government's Bill. It provides for appeals to the Secretary of State where a producer of by-product gas is refused permission by the corporation to supply it to a consumer direct. In modern conditions it is unreasonable that the gas industry should have the last word on whether a by-product gas producer can sell his gas privately, since the protection given by Clause 29(5), of being able to require the corporation to buy the gas at a reasonable price, may well be ineffective, because by-product gas will often be incompatible with the natural gas in the gas industry's supply system. Although I have no reason to believe that the corporation would in practice ever adopt a dog-in-the-manger attitude, I think that a by-product gas producer seeking the right to supply direct should have the assurance of being able to take his case to the Secretary of State.

The other provisions to which I wish to draw attention are those governing the disposal of natural gas from the Continental Shelf, as contained in the previous Conservative Government's Continental Shelf Act, 1964. That Act and the system of licensing established under it have served us well. Very large reserves of natural gas have been discovered; and their development and use are proceeding at a speed which has few parallels elsewhere in the world.

The Continental Shelf Act is sometimes spoken of as though it gave the gas industry a complete monopoly of the purchase of natural gas, but this is not altogether the case. The Act does give the industry what amounts to "first refusal" for purchasing natural gas, but the Act also provides for three ways in which the Secretary of State can consent to gas being disposed of to consumers other than through the gas industry: he must give his consent if the gas is to be used for industrial non-fuel purposes such as chemical processing. He may give his consent if the gas is to be used by the producer and its subsidiaries themselves; and, thirdly, he may also give his consent to the producer selling the gas for other industrial uses if it has first been offered to the gas industry at a reasonable price but the gas industry is unwilling to buy it.

These provisions clearly reflect the aim to provide a sensible balance between the interests and responsibilities of Government, consumers, the gas supply industry and the producers, and the powers contained in them are an integral part of the framework of the 1964 Act. I believe that that framework can still serve the country best and the Bill does not, therefore, change the present position with respect to the disposal of natural gas. But I wish to make it clear that the Secretary of State, in view of the importance of encouraging the search for, and production of, natural gas, will be prepared to use his discretionary powers in suitable cases to permit direct supplies to industrial consumers. Any application to the Secretary of State would, of course, have to be considered on its merits. In coming to a decision, he would have to be satisfied that the conditions laid down in the Statute were met, and he would take into account any implications for fuel policy. But, where appropriate, this discretionary power will be brought into use.

Of the remaining provisions of the Bill there are only three to which I must at the outset make brief reference. The first relates to safety. The House will recollect, from the answer I gave to the hon. Member for West Ham, North (Mr. Arthur Lewis) on 25th October last year, that the rectification of weaknesses in the present law is necessary as one of several inter-related measures being taken to increase gas safety. It will complement the voluntary action being taken by gas installers and also the regulations on installation work, to be made under Section 67 of the present Act, on which outside interests are at present being consulted. Clause 31 does this by providing for regulations empowering authorised officials of the corporation to enter premises and inspect, and, as far as necessary, cut off part or all of any gas installation. Except in emergency, these powers will be exercisable only by consent or under a magistrate's warrant, and there will be an appeal procedure against cut-off. These provisions follow closely those in the previous Government's Bill, which, I think, were generally agreed to be right and necessary.

The second is compensation to members of the area boards or the Gas Council, or to employees of the industry or the gas consultative councils, who lose office or whose salaries or pensions rights are diminished as a result of the Bill. It seems unlikely that the reorganisation will lead to any widespread loss of employment or demotion of individuals. It is expected that the corporation will be able to agree a mutually acceptable scale of compensation with the relatively few employees who may be affected, but the Secretary of State would have power under Clause 37 to lay down terms of compensation in regulations if this proved necessary.

Finally, Clause 38 enables contributions to be paid to compensate the industry for incurring expenditure, under the scheme announced by my right hon. Friend the Chancellor of the Exchequer on 23rd November, 1971, to promote employment in the next two years. The gas industry has agreed to bring forward orders for steel pipe and to advance certain work on transmission and distribution mains. The total value of the investment to be brought forward is about £20 million. The Government are grateful for this co-operation, and the intention is that they should be able to recompense the industry for the additional expenditure it incurs as a result of bringing forward these schemes. It is not yet possible to calculate precisely the additional expenditure in relation to the schemes so far agreed, but it is expected to be about £2½ million. The ceiling of £5 million on expenditure by the Government, which this Clause provides, is intended both to cover these schemes and to provide a reasonable margin for covering also any further schemes that may be agreed between the gas industry and the Government.

Mr. Edward Taylor (Glasgow, Cathcart)

Concerning the point about giving extra expenditure to create employment, will my hon. Friend clarify whether the Bill will go towards bringing in a British price for gas, or shall we still have the position that Scottish consumers pay about 25 per cent. more than the average in England and Wales?

Sir J. Eden

That will be a matter for determination by the British Gas Corporation when it comes into existence.

The statutory structure for the gas industry, which this Bill proposes to replace, has lasted with very little change since 1949. But under that structure, which allotted the principal role to autonomous area boards, the industry has had a remarkable record of achievement, both in human and material terms.

Since 1948 it had first the task of welding together more than 1,000 gas supply undertakings of varying size and efficiency into 12 integrated businesses.

Later, in the 1950s, it had the task of breaking free from the stranglehold of a relatively static production technique—coal carbonisation—which, combined with rising raw material costs, seemed likely to spell its extinction. Then came the successful development and rapid introduction on a very large scale of naphtha reforming, which revolutionised the industry's prospects.

Finally, there was the challenge of natural gas, and with it now come further structural and statutory changes which will give to the industry as a whole that flexibility which area boards have always enjoyed, and which has proved so beneficial, to alter and adapt their internal organisation as current and future needs may dictate.

Throughout all this there has been, as the House will recognise, one strong connecting thread, as apparent today as ever it was at any time in the past. There is to be found at all levels of the industry, among area boards and at the Gas Council, a sense of team spirit and pride of achievement which will see it through this necessarily difficult period of transition in which it is now to be engaged. It is that which makes me so confident that the framework provided by this Bill will lead to an increasingly efficient and successful industry. But I know that I speak for all who work in it when I say that they do not see that as an end in itself. Their objective is the relentless pursuit of even better standards of service to their customers. In this they will be greatly helped by the proposals I have outlined. It is the industry's customers, therefore, who will be the real beneficiaries of this Bill, and I commend it to the House.

4.47 p.m.

Mr. Harold Lever (Manchester, Cheetham)

It is a matter for regret that when dealing with the restructuring of this great publicly-owned industry we should unnecessarily turn the occasion into a party political controversy. The responsibility, however, lies on the Minister.

When I had responsibility for this industry before the General Election, we, too, recognised that the structure of the industry required change to take into account the historic changes which were occurring, not only because of the advent of natural gas, which merely accentuated the process of consolidating the national character of the industry which has gone on continuously since the original fragmented, mainly municipally-owned enterprises had been taken over, but because the old methods, which were mainly prevalent when we took over, of making gas from coal had changed to making gas from oil. Later, of course, and increasingly, natural gas came in to play its part.

We introduced a Bill which purported to make these structural changes or to move in the direction of the structural changes which would reflect the changed conditions in the industry. At that time the Minister, who was then leading for the Opposition, welcomed the Bill with one exception. He said that it would get through without any difficulty whatever if we removed from it the power of the Gas Council, as it then was, to process oil which it might discover in the course of its search for natural gas. It was obvious that the hon. Gentleman and his friends thought it would be a great misfortune if the Gas Council struck oil, and it was therefore terribly important that it should strike oil only, as it were, by accident in its search for natural gas.

I have not had the hon. Gentleman's political education of attending Conservative Party conferences year after year. He said that he would have accepted the style of reconstruction which we proposed without any political argument were it not for the fact that we had this minor dispute on this question. I will not go into the merits of that minor dispute. I am not complaining that in the time which has elapsed we have moved further in our thinking about what the industry requires. I have no doubt that as time went on we would have found it necessary to move even further. In a sense, our proposals were an intermediate stage to arrive at what the hon. Gentleman wants to arrive at over the coming years with this Bill.

I would have been able to say, even if he had left out the power, in the form I had it in, to deal with such oil as the gas industry may strike in the course of its search for natural gas, or, rather, even if he had left it in in the form I find it here—which hon. Members who trouble to read the convolutions of the Clause will see is really an expression of Conservative party-political paranoia rather than a serious attempt to limit the commonsense power I proposed to take—that I did not think that there would be any difference in the power I proposed to take and the power that the Minister proposes to take on what he then alleged was a controversial point. I should not have complained if the hon. Gentleman had introduced a measure of statutory political verbiage in the Clause about the search for gas. I would have welcomed the Bill and said that we should put our heads together and do what is so rarely done; that is, think of ways in which these inevitably great natural assets like the gas industry can best be run in the interests of the country, whatever party is in power.

Mr. Frank Tomney (Hammersmith, North)

Perhaps it is a little late at this stage for this suggestion, but this country has not placed any of its newly discovered oilfields to strategic reserve, as has been done in the United States—for obvious reasons. If in its searches for natural gas the Gas Corporation should discover sources of natural oil, why should these not be put to national strategic reserve? If something is discovered by a corporation in the national interest, there is no reason why that should not be done.

Mr. Lever

That automatically follows. When the Gas Council discovers natural gas, it does not propose to use up all of it the next day. It has a very careful plan to deal with these reserves over many years.

Mr. Tomney

I was speaking of oil.

Mr. Lever

The same would apply for oil. This is not an appropriate occasion for me to discuss the way in which strategic oil reserves may be held and whether they are safer in underground tanks in this country or have to be fought for in the middle of a war in the North Sea. This raises problems about which I would not be terribly dogmatic, but I see what my hon. Friend has in mind.

The difficulty about the Bill is that it is not merely the minor adjustment in wording on the search for natural gas and oil, but that the Bill at many points shows that the Conservative Government are driven by political pressures to display a hostility to aspects of publicly-owned industry which is totally irrelevant, very inimical to the status of these industries and bad for the morale of those who work in them, and it quite unnecessarily raises political friction in the discussion of these industries' affairs.

I shall advise my colleagues at the outset to divide against the Second Reading as an act of protest at this Government's unnecessarily introducing matters with which I shall deal later as briefly as I can—although most are for the Committee stage. Wantonly and unnecessarily the Government are seeking to drag our publicly-owned industries into the field of political controversy. I do not mind political controversy if it is relevant, but I do not like irrelevant political controversy.

Curiously enough, because the gas industry has been so successful and is a special industry which, for historical reasons, has always attracted an immense vocational loyalty amongst those engaged in it, and because the Department has grown up over a long time with the people handling the industry and had a remarkable record of tact, understanding and ability in the old Ministry of Fuel and Power in dealing with the gas industry, and because of the nature of this service industry and the enthusiasm and skill of those in it, with their remarkable and special vocational attachment—perhaps an interesting hangover from the Victorian origins of the industry—all this has led to a very successful industry. We shall be spared in the case of this publicly owned industry with its remarkable record of achievement of recent years, thank goodness, what in other industries are the inevitable nostalgic incantations to which we are treated about the mistake of nationalisation and the unwisdom of anything being publicly owned and the incompetence, waste, flabbiness and lethargy which results from this action. Here we are spared that, for there are very few Conservative Members who could say that about this industry in the light of its recent achievements.

If the Minister had kept out of the Bill some of the matters I am about to raise I would have been able to welcome it. So far as it has a tendency to centralisation, there is no principle on centralisation and decentralisation. Some matters are inevitably centralised when we are dealing with a national gas grid. Some things are better decentralised. I agree with the Minister that there is no reason why we should not continue to decentralise what is done better by encouraging local initiative. Here I pay tribute to the members of the area boards. They are men of understanding and ability running a great enterprise in each of the areas. I am sure that in the new set-up decentralisation to men of such ability is required, first to keep attracting that level of ability and, second, to keep the same level of enthusiasm and local skill in the management of our affairs.

One thing troubles me. We must not lose the attention to regional needs which the old system promoted. As the area boards are run by men who are of considerable ability and devotion to their industry but none the less have great local feeling, it is tremendously important that they should be in a position to take into account the special regional needs.

While welcoming for technical reasons this degree of change in the structure in many places, I reserve the right to listen to what my hon. Friends from Scotland and Wales have to say about the particular impact of the Bill on Scotland and Wales. I want to hear the case made. The Government have not made any case for depriving Scotland of a greater degree of autonomy than is provided for in the Bill. For my part, I should like to say that regional needs of a nationalised industry not merely require attention to the special services required according to the location, but require that our national industry be used, in its pricing policy, to stimulate and support a policy of greater attention to bringing up the industrial progress of our less developed areas.

I shall not elaborate on it today, but I have advanced the view that the Government ought to seek, as far as possible, to create a financial structure in the hard-hit high unemployment regions which would produce for them the kind of advantages that a change in the exchange rate compared with the rest of the country would bring about. As a change in the exchange rate is not practicable, whenever possible I want to use financial means such as trying to provide them with cheaper money than in other parts of the country, whereas our pricing sometimes gives them dearer money. We ought to consider in our pricing policy in the regions the question of supplying the regions of high unemployment with low energy costs by deliberate act intended to stimulate employment in those areas and to encourage them to develop.

Mr. Edward Taylor

Those are very encouraging words. Is the right hon. Gentleman aware that under the previous Government the extra price for gas for Scotland over the average in England and Wales went up from 14 per cent. to the present 25 per cent., and that Scottish consumers today pay 25 per cent. more for gas than the average price in England and Wales? Would it not be enough to have just a British price?

Mr. Lever

That might be one gain. We would gain if we brought down interest rates to the level which applies in England. I favour bringing them down below the English rate. At present, they are above. As the Scottish price is above the British price, I see great virtue in bringing it down to the British price and perhaps even lower.

The hon. Member for Glasgow, Cathcart (Mr. Edward Taylor) said that this was the case under the Labour Government. It is the case under the present Government, but with the difference that unemployment is very much higher than it was under the Labour Government. The energetic efforts made under the Labour Government to keep down unemployment and to develop employment opportunities are being withdrawn and neglected by the present Government. I agree that under the present Government there is an even more urgent case for action of this kind to assist Scotland. If this Government carry on with their present demand management policies, Scotland may need even more drastic help than the modest help for which the hon. Gentleman asks.

Mr. William Molloy (Ealing, North)

Does not my right hon. Friend's argument illustrate the importance of publicly-owned industries where actions of the sort that he is advocating can be taken? Is not this important fact a matter which right hon. and hon. Gentlemen opposite should point out to Tory Party conferences? When we are in grave danger and have I million unemployed, it is only the publicly-owned industries to which we can turn for assistance.

Mr. Lever

I believe that it is the duty of Governments of both parties to make a success of both the privately-owned sector and the publicly-owned sector. I do not assert that the public sector exclusively can assist in these matters. But it has unique opportunities precisely because the industries in the public sector are publicly owned, and when they are appropriate and well-run I concede that my hon. Friend's point is justified.

These publicly-owned industries offer unique opportunities to the Government, and they are reflected in the Bill. The Government cannot go to private industry in the same way and say, "Advance your capital projects, and we will pay the cost." They cannot do that, and they cannot interfere with pricing policy on a regional basis in the way that the hon. Member for Cathcart, suggests.

Mr. John Biffen (Oswestry)

In view of the right hon. Gentleman's answer to the point put to him by his hon. Friend the Member for Ealing, North (Mr. Molloy), does he think that these unique opportunities for energy industries in the public sector to apply differential charges will be affected by our membership of the Treaty of Paris?

Mr. Lever

I take it that the hon. Gentleman means the Treaty of Rome—

Mr. Biffen

I mean the Paris Treaty. The right hon. Gentleman will no doubt bear in mind that on iron and steel—

Mr. Lever

I cannot allow this debate to be turned into an extra day for the Second Reading of a Bill which is to come before the House very shortly. I am sure that the hon. Member for Oswestry (Mr. Biffen) will ask for ample time in which to discuss it and that during the Committee stage of that Bill no one will be unduly impetuous in rushing through the Clauses. We shall have plenty of time in which to discuss them during the days and nights ahead of us, and I feel that today hon. Members should be allowed to discuss the matter which is before us. These bogey-men must be resisted. We are dealing with an innocent Bill, and, even if the hon. Gentleman disagrees with the innocent suggestion to help his hon. Friend the Member for Cathcart, he should not try to score this kind of point in the middle of the debate. It reflects the hon. Gentleman's strange obsessions with the Common Market—

Mr. Biffen rose

Mr. Lever

The hon. Gentleman must contain himself. This is not a vote of confidence on the Conservative Government and the Common Market. It is not even a vote of confidence on the gas industry. It is just a protest which is being raised by right hon. and hon. Members on this side of the House, and I want to explain why it is being made.

On the question of ministerial and departmental control, no doubt we shall have greater and more detailed discussions in Committee. I have no wish to take up time on it now since I know that a number of my hon. Friends are hoping to intervene.

However, I must register here and now our protest about the hiving off provisions in Clause 7. What is the reason for including them? The Minister for Industry seemed to be ashamed of his offspring. He gave a very hasty explanation. He said that if, for some reason, in its enthusiasm the corporation happened to over-extend itself in areas where it was found not to be necessary, it could be divested of it. If his Department has anything like the ordinary co-operative arrangement and relationship with the industry that it had in my day, these matters would be discussed in advance between the Gas Council and the Minister.

The Minister was engaging in what I call statutory oratory to please some of the less enlightened of his supporters. I do not begrudge him that, were it not for the fact that it damages the industry in the sense that it expresses in statutory from that the Minister will take powers to over-ride the commercial discretion of the boards. He has no business to do so, even if he has obsessions on the subject, unless he believes that he will need the statutory power to gratify those obsessions. Even making the empathetic assumption that I have the same obsessions as the hon. Gentleman about this, I would not produce a Clause of this kind unless I had a specific anxiety that such a horrible danger was threatening of some acquisition of this kind.

It is clear from the way that this matter was introduced that the Minister has no ground for apprehension. He has no reason to believe that any of the Gas Council's present acquisitions should be divested. Notwithstanding its offensiveness in terms of a threat to the Gas Council's commercial integrity and power of decision, the Minister has put it in for no better reason than to please the more benighted members of his party. I object to it strongly.

I also object to it because it is a tragedy for this country that when Conservative Governments come to power the impression gets abroad among our great publicly-owned industries that from then on they are in the presence of a Government which wish that they did not exist, which do not sympathise with their objectives and which do not trust or rely upon them to behave with the responsibility that they have amply demonstrated in the past.

The Under-Secretary of State for Trade and Industry (Mr. Nicholas Ridley)

After all that waffle, perhaps the right hon. Gentleman will tell the House why his Government put an identical Clause in the Iron and Steel Acts of 1951 and 1967?

Mr. Lever

The hon. Gentleman refers to identical provisions in different industries and in totally different circumstances from the present. The fact is that this is a novelty introduced into this Bill. It was not in any other Bill affecting this industry, and the Goverment have no business to bring it in now, unless it is to gratify someone's hopes.

Mr. Peter Rost (Derbyshire, South-East)

Very good reasons.

Mr. Lever

I said that the less enlightended members of the Conservative Party would be gratified. The Minister says that they will do nothing. The hon. Member for Derbyshire, South-East (Mr. Rost) notes with glee this useless and offensive Clause which is introduced into the Bill.

Mr. T. H. H. Skeet (Bedford)


Mr. Lever

While I have no doubt that the hon. Member for Bedford (Mr. Skeet) will have an opportunity to intervene in due course, if he wishes to defend himself now I am happy to give him an opportunity to do so.

Mr. Skeet

It should be to the benefit of the taxpayer if the Gas Council, as it is now, were taken out of the Continental Shelf. Money would not have to be provided. All that the council would have to do would be to pay a reasonable price and secure a first option on the gas produced by others. What is the good of having it out there?

Mr. Lever

I am undoing all the good that the Minister is doing with his more benighted followers who do not comprehend his purpose. If the Minister had the smallest intention of withdrawing the Gas Council from the Continental Shelf to gratify hon. Gentlemen there would be some substance in the Clause and in their joy. Hon. Gentlemen will find that their glee has no foundation.

The hon. Member for Derbyshire, South-East this morning took occasion in Committee to express his distaste for any form of public ownership and called for proper management of publicly-owned assets. When this Government, perfectly sensibly, yielded to the request of the Steel Corporation to adjust its balance sheet on a perfectly professional basis I had to defend the Minister from the attacks of the hon. Member who said that it was "cooking the books" and "financial cheating". In accordance with the conventions of ministerial emollience the Minister thanked his hon. Friend for his contribution, although he did not express any particular gratitude for my defence on the charges made against him.

Mr. Rost

I am reluctant to intervene, but I have been provoked to do so. Would the right hon. Gentleman not agree that this Clause could be justified if the gas industry was not prepared to relinquish certain assets which it would be in the national interest for it to relinquish, as well as in the interests of the industry as a whole?

Mr. Lever

There are no assets that require to be hived off in the national interest. The Minister has power without using subsection (2) if it is in the national interest. Subsection (1) gives him the power to do so if it is in the national interest, while subsection (2) gives him the power when it is in the political interests of the Conservative Party. There is a sharp distinction between the two which the Minister rightly emphasises in the drafting of the Bill.

Mr. Gerald Kaufman (Manchester, Ardwick)

It would be interesting if my right hon. Friend could elicit from the hon. Member for Derbyshire, South-East (Mr. Rost) whether he could justify to his electors a Clause for hiving off part of the Rolls-Royce organisation which saved the workers in his constituency.

Mr. Lever

That would be interesting. I am tempted to pursue all these matters but we do not want to stray too far. The tinder-Secretary should know better, seeking to introduce irrelevant and lengthy arguments showing that Bills dealing with the steel industry and transport were somewhat different. We are faced with a silly and offensive Clause, and we could not let the Bill go through without registering our view.

The only claim that could honestly be put up in supporting this is to say that it is not in the interests of efficiency that some subsidiary activities in certain circumstances should be carried out by the gas board; that we must be careful not to make it too diversified by having what may seem marginally irrelevant activities. It is interesting to see the propaganda character of the hiving-off exercise because all we are talking about is probably a half of 1 per cent., or a quarter, or one-tenth of 1 per cent., of the assets of this great industry. We are focusing our attention on what is peanuts in relation to the totality of the industry.

There are lots of vast, private corporations that have subsidiaries whose activities are not strictly and directly necessary for the main purposes of these vast private corporations. It is left to the board to decide whether on balance an advantage accrues. If it is left to the board of a private industry, why should it not be left to the board of this great industry, especially as it has a record which compares favourably with almost any private enterprise that can be cited and since it has a Department in constant touch with it representing the public interest—whichever Government is in power—which is among the most experienced, tactful and intelligent of Departments.

Why should we have the notion that this is bad for the publicly-owned industry yet all right in private industry? Is the Minister trying to convert some of my hon. Friends to the proposition that since it is required for efficiency we ought to go combing through the companies owned by great private enterprises to see whether it is in the national interest that they are hived-off to focus the minds of the directors on the main purposes of the business? In the case of publicly-owned industry it has a special usefulness in helping to keep the directors in constant touch with entrepreneurial activity touching on the central business.

It keeps them more in touch with private business if they are partners in getting natural gas and oil and engaged in other similar activities. It keeps them in close contact with some pretty sharp entrepreneurial operators, and it would be a great stimulus for them to be able to take part in such things. I do not believe the Minister dare or would interfere with any existing activities; there is certainly no reason to do so and he has not pretended that there is. Why on earth this Clause should be in the Bill I do not know?

I object to Clause 16, which takes off the surplus or gives the power to do so. The reason given by the Minister is nonsense. He says that we are engaging in a speculative venture in a natural gas and this should not be financed on fixed interest and so if there is a bumper profit there should be a bumper dividend. This is nonsense. It that were the sole activity of the corporation there might be some case for the argument; but it is not just searching for natural gas. It is supplying the gas services of the country in circumstances in which there is not the slightest doubt that it would service the loan interest.

What matters is not the nature of some of its activities but whether the loan made by the Government is speculative—not whether some of its activities are inevitably speculative. Since the Government have absolute blue chip, guaranteed servicing of the money they have put into the industry they have no business to be talking about bumper profits. If the industry does well with gas discovery, the good fortune in commercial activities should normally be reflected in the improvement of its capacity and capital and, above all, in the prices charged to consumers. There is no such relevant speculative activity, with the Gas Council paying the interest on its loans.

This verbiage conceals an intention to exact a tax from the gas industry by taking into the general exchequer what could have been given to gas consumers through a reduction of prices, better services and equipment. We should protest against this most strongly because there is no justification for it. I cannot believe that the Committee will allow this. We will certainly examine the details of the Bill carefully because of the spirit revealed by the two particularly obnoxious Clauses, one showing such a rapacious desire—subject to the consent of the Treasury forsooth! They shall not take anything out of the industry except with the Treasury's consent. I can think of no Department in which I could have more satisfaction in working than the Treasury but the notion of my old Department resisting the desire to draw from this industry some surplus profit and put it into the general tax fund is one which must, I think, represent a humourous touch. The restriction on a Minister's powers was that he had to persuade the Treasury that he could get hold of the money en route to its despatch to the Treasury. This and Clause 7 are objectionable Clauses. Clause 7 particularly is disrespectful to the great service rendered in the past by the Minister's own Department and by the able and devoted men who have served this industry. To include Clause 7(2) for the sake of some party political enjoyment is wrong.

For these reasons, although I will welcome and support every constructive aspect of the Bill—I am not stick-in-the-mud about the Minister's forward look at changing the structure to meet the needs of the times—I must recommend my hon. Friends to vote against the Bill. But I am anxious to make it clear, especially to those who work in the gas industry, that this is by no means a reflection on them. It is really a reflection on the Government's unnecessarily making a subject of political controversy out of an industry in which we should all be concentrating on encouraging further advance in the brilliant performance that the able men in charge of it have already produced to the advantage of our country.

5.21 p.m.

Sir Henry d'Avigdor-Goldsmid (Walsall, South)

The right hon. Member for Manchester, Cheetham (Mr. Harold Lever) has made, in his characteristic style, one of those orations with which we were more familiar when he sat on the back benches. Then, certainly, the question arose on our side of the House whether he would ever sit down. This, I am afraid, since he was dealing with a Measure with which he is seemingly in full agreement, he indulged in today. The clarion call with which he urged his hon.

Friends to join him in the Lobby to vote against this Bill had all the bravado and awe-inspiring clamour of a china-shop attacking a bull. Frankly, it was not worthy of him or of the high reputation which he holds in our minds. This is to all intents and purposes a non-political Bill, and his desperate efforts to find a political element in it struck me as very lame.

Having sat as Chairman of the Select Committee on Nationalised Industries, which dealt with some aspects of the gas industry, I would rather leave the field to those who know less about it. I should particularly like to call attention to Clauses 9 to 13 and to Schedule 3, which deal with the new system of consultative councils. Consumer relations in the industry were the subject of the Select Committee's last report, Command 514, released on 19th October.

I am surprised that the two opening speeches today have not mentioned the one man who is, in general estimation, responsible for the growth and development of the gas industry. I mean the retiring Chairman, Sir Henry Jones. Anyone who has come into contact with him must realise that his personality has done as much to shape the industry as any governmental committee or body.

Mr. Lever

I endorse every word of that. It seemed to me invidious to name one man, but since the hon. Member has done so I can only agree with every word he said. The only time that Sir Henry disagreed with my Government I agreed with Sir Henry.

Sir H. d'Avigdor-Goldsmid

I count that as a virtue in the right hon. Gentleman.

Although this paper, Command 514, was released on 19th October, it was seen by the officials of the Ministry concerned a good deal earlier. That was due to the intervention of the recess. The object was so that they could take into account the Committee's conclusions in drafting their own legislations. When we agreed to make this paper available, we hoped that some of our recommendations would be accepted, but I am rather disappointed with the results.

The right hon. Member for Cheetham said that this Government had a hostile attitude to the nationalised industries. He is just repeating a piece of cant that came out in the Labour handbook of about 1955 and has probably been repeated since. My complaint is that the nationalised industries are going increasingly out of control—by this Government or anyone else. I shall have something to say about this later, although not in this speech.

When one considers that the Post Office, when it became a corporation, passed from the control of the Comptroller and Auditor General simply to the control of the Nationalised Industries Committee, which has two Clerks as against the Comptroller's staff of 500, one begins to see that there is a pretty good smell of liberty in the air for these great bodies. I am not saying that they use it wrongly, but under this Government this opportunity has been increasingly given to them.

The recommendations of my Committee on the subject of consumer relations were not complicated. We took and stressed the point that the public relations of the nationalised industries are their own concern, and that it was not the duty of the consumer councils to step between them and the consumers. But it must remain clear that the consumer councils are the watchdogs of the consumers.

We thought that we could best make that point clear by entirely separating for the future the consumer councils from the industry itself. That meant that the consumer councils should have separate offices, should appoint their own staff and. I believe, should report separately and not via the regional boards.

We further said that their expenses should be paid not by the industry but by the Minister. After all, the expenses of these councils are modest, but they should not depend on going to the gas board or any other authority for their money. They should go straight to the Minister, so that there would be no element of patronage in their relations with the industry in which their duty was to act as watchdogs for the consumer.

I am sorry to say that the Minister has in Schedule 3, among the supplementary provisions, put on the corporation the responsibility for paying the chairman of the National Council and the chairmen of the regional councils. Will the Minister allow the consultative bodies to engage their own experts? That was one of our recommendations.

Paragraph 1(2) says that the corporation may pay various things … to the other members of those Councils, and to the members of committees and to individuals acting as local representatives". Paragraph 3 says: the National Council … may, subject to the approval of the Secretary of State as to numbers, appoint such officers as appear to them to be requisite for the proper discharge of their functions". Would that include an expert adviser, without whose advice much of the work of these councils is likely to be frustrated?

The appointment of a national consultative council was recommended by us, although it was not recommended by Sir Henry Jones in his evidence. He saw no need for it. However, I believe that this appointment is right because, unlike other industries, the local boards have not been in the habit of holding informal meetings with each other.

I am somewhat perturbed over the question of tariffs, to which the right hon. Member for Cheetham referred. Not all regional boards take more than a fraction of their supplies out of North Sea gas. For example, the Welsh Board said that out of 200 million therms it introduced only 15 per cent. of natural gas, whereas 3 per cent. came from the coke ovens of the B.S.C. and the N.C.B.

One would imagine that the industry in Wales would have benefited from the fact that most of its gas is locally produced so that the cost of transportation and so on is less, resulting in gas being attractive to industry in the area. Does the Minister envisage having local tariffs perhaps on the lines suggested by the right hon. Gentleman, though certainly taking advantage of such local benefits as are obtained from local production?

I still wish to stress the importance that my Committee attached to the independence of the local consultative councils. As long as these bodies are mixed up in the public estimation with the officials of these industries they will not make direct appeal to the public. Local consultative councils are not recognised by the public as their watchdogs, mainly because they are regarded as part of the bureaucracy that works these great industries.

It is a waste of time having this elaborate consultative machinery if the public do not know about it and if it is not freely available. Unless something is done to show the independence of these councils, this elaborate provision will mean little and many people who give up an enormous amount of their time free of charge to work on these local consultative councils will find their effort frustrated.

I hope the Minister will reconsider this matter and perhaps on Report say that the expense attaching to the salaries of the national chairman and regional board chairmen might better be defrayed by his Department. I cannot give a precise figure, but, rather than costing £1 million, the overall sum might be in the region of £½ million.

If the Minister is not willing to do this, then I fear that these consultative councils and all the work that these people do for them will be regarded as part of the tentacles of the octupus of this great industry, a feeling which makes the consumer think he has no redress. Hon. Members receive a large number of complaints, but they are nearly always about failings in judgment rather than being of great consequence. However, consumers feel that they have no redress.

If we could get it across that these councils are absolutely independent of the Gas Corporation—are free to make representations to the Minister and public announcements when they feel that that is right; and, of course, if they are able to have specialist advisers to help them—then the Bill will achieve all the more. In any event, I believe that it will do a useful job, and I therefore support it.

5.35 p.m.

Mr. Arthur Palmer (Bristol, Central)

I had intended to deal with the consumer question and follow the remarks of the hon. Member for Walsall, South (Sir H. d'Avigdor-Goldsmid), but in view of the shortness of time for this debate I fear that I shall have to deprive the House of the benefit of those remarks and come straight to what I regard as an extraordinary feature of the Bill, the question of structure.

Hon. Members who have followed the history of nationalisation in the United Kingdom will appreciate that the fashion in organisational forms changes from time to time. This is particularly true in the public utilities of electricity and gas. In the late 'fifties the Conservatives broke down the Labour Government's 1947 settlement for electricity on the grounds that the industry was over-centralised, and they gave virtual autonomy to the area boards and the C.E.G.B.

The justification given by the Conservative Ministers of the time, Mr. Aubrey Jones, was that as the system of regionalisation, rather than nationalisation, had worked well for gas, it should be applied to electricity. All sorts of arguments were adduced at that time by the Conservatives against the over-centralisation of nationalised industries. They said that centralisation was bureaucratic, that it was often London-centred and that there was no competition and effective comparison in financial management between one part of the country and another.

It was clear that the Minister still had the memory of those arguments in mind when he served with me in Committee upstairs prior to the last General Election when we considered the Labour Government's Electricity Bill. He was at that time hostile to the C.E.G.B.—this is an effective comparison in the circumstances—because of its size and remoteness from the consumer. That was his argument, and, as he knows, I thought there was a great deal in it.

Now, however, the hon. Gentleman and his colleagues produce a Measure which can properly be described as a centraliser's dream of bliss. It is a bed of roses for a bureaucrat. There are to be regional organisations—one cannot run a business of this size without some sort of regional organisation—not by right of Statute but simply as a matter of administrative and managerial convenience.

The hon. Gentleman expressed the hope that the British Gas Corporation would not locate its offices in London. Does he think they will be established at Bacton? I doubt it. They will probably be in London.

As I pointed out in an intervention, Scotland is to lose its autonomous gas boards. This is astonishing when one considers the lengths to which the Conservative Government went in the 1950s to break Scottish electricity away from the national system. I said then that they were giving home rule to kilowatt hours. Now they are going to take home rule away from the therms.

I know that it is always difficult to strike a sound balance between centralisation and decentralisation. But the House has a right to know the reason and influences which have brought about the change in Conservative thinking from the former concentration on decentralisation to this new devotion to centralisation. Is it that the Minister, with his obsession about what he regards as the over-commercial activities of nationalised boards in that they are running something on the side at a profit which he thinks should go to private enterprise, has not the time for general creative thinking about the main problems of these great industries? Or is it that he is overborne by the existing Gas Council and those members of it who want to dominate the country's fuel and power scene?

I hope that no one is going to use the argument that because technically the industry uses natural gas which comes in at one or two terminal points on the East coast there must be a centralised administrative organisation throughout the country. In principle it is wrong that the gas industry which is, or should be, a competitive retailer should be able at the same time to monopolise the wholesale supply of a natural fuel. For instance, it is wrong to deny the use of that fuel by price or other mechanisms to the electricity supply industry. Electricity is now being driven because of the obvious reluctance of the Gas Council to let it buy natural gas for industrial purposes—in power stations, for example—to consider North Sea exploration on its own. It will be interesting to see whether the Government allow the C.E.G.B. to go in for North Sea gas exploration.

I have always believed that there should be a State marketing agency for natural gas which would be able to hold the balance fairly between the fuel-using industries. In such circumstances the gas boards, if they had been retained, would have bought it commercially like anyone else. The gas industry is a distributive enterprise and an essential public service; it is more than an industry in the ordinary sense. In this way it would have been kept close to the consumer.

Many other people than myself are shocked by what is proposed in the way of centralisation. For example, Mr. Kelf Cohen, a disillusioned civil servant who is no friend of the Labour Party, wrote last August in the Daily Telegraph, a pillar of Conservatism, an article headed, "The Great Gas Monopoly". Discussing the Government's reorganisation plans he concluded: It was the determination of the Prime Minister which brought an end to restrictive practices which stifled competition and bore heavily on the consumer. It is strange that his Government should now be promoting a Bill which will strengthen a monopoly and make 13 million consumers more helpless than ever. I endorse what my right hon. Friend said about Clause 15. It is a quite wrong Clause. I just could not believe that such a Clause could exist in a piece of legislation presented to this House. It gives the Government the right to claw back to the Treasury any trading surpluses which the industry might earn. This is the kind of thing that backward local authorities used to do in the old days of municipal gas and electricity undertakings. Any surplus had to go back to relieve the rates and was not used therefore for further commercial development. Now the same sort of thing is produced by a Government which proclaim adherence to commercial principles and good commercial management. It is also against the principle of self-financing which the Tory Party upheld at one time. The gas industry may be forced on to the market to borrow expensively, even though, as a result of its own enterprise, it has achieved a surplus. This is an appalling Clause. It should not be in the Bill at all. I cannot believe that the Government will proceed with it in the Committee.

5.46 p.m.

Mr. Geoffrey Finsberg (Hampstead)

I should like to follow the right hon. Member for Manchester, Cheetharn (Mr. Harold Lever), who once again was much excited, although I thought that his thumping of the Dispatch Box was in inverse ratio to the strength of his argument—we might find the strength of the argument in Committee—but I want now to follow the line brought out by my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) and discuss the situation of the consumers. The Bill does not propose a particularly satis factory method but it may be that the Minister has some other points to make on this aspect.

My hon. Friend is taking power to appoint a National Council, which will have such other persons as the Secretary of State may from time to time appoint after consultation with such bodies as he thinks fit. I hope, for example, that he will make it clear that the bodies which will have the right to expect representation will be the T.U.C., the C.B.I. and local government, because without their having a voice on the National Council I do not think it will give us what we want.

I hope, also, that we will have more than what I might call "statutory women". Here is an opportunity for the Government to show their belief in the literature we issued before the General Election and in the principles of the Private Member's Bill to be presented tomorrow. Women are certainly among the largest consumers of gas, and surely they have a right to representation on the National Council.

The second point is the independence of the consultative councils. I am disturbed by the wording of Schedule 3 which says that these councils may occupy … such office accommodation and equipment as the Corporation consider requisite for the proper discharge of their functions". It is not the business of the corporation to decide what premises the National Consultative Council or regional bodies ought to occupy. I hope the Minister will change this position because otherwise he will be perpetuating the feeling that many people have had until fairly recently that the consultative machinery has been no more than a charade.

The Select Committee did great work in highlighting this situation. The old Ministry of Fuel and Power did not put many teeth into the consultative bodies in the gas and electricity industries. I served for 11 years on an area electricity consultative council. We rebelled on one occasion and referred a tariff increase to the Prices and Incomes Board. We did not get very far.

Mr. Ridley

My hon. Friend did not complete his quotation. He will see that it continues: … or as the Secretary of State may direct. So the standard of accommodation provided is not in the hands of the Gas Corporation.

Mr. Finsberg

With great respect, my hon. Friend does not help the case at all. I want the consultative councils to have the right to say what accommodation they want, not to be told by the nationalised body, "You may have this", or to have to go to my right hon. Friend. If that is happening, it is not an independent body. That is why I stress that it must have independent premises.

I hope that the national body will be given finance to carry out proper research. The Post Office Users National Council, on which I still have the honour to serve, today issued a 66-page report on the Post Office tariff proposals. We have not tamely acquiesced in them but have rejected many. I do not know what my right hon. Friend the Minister of Posts and Telecommunications, exercising his final right, will do, but that is evidence of an independently-minded body which has carried out paid research. It does not occupy premises within the Post Office but has premises within the Ministry, and it is organisced to have proper consumer representation from all over the country. It is that sort of body which, if it has proper finance can carry out an independent survey of the needs and wishes of consumers.

It is clear that the Bill will have a Second Reading. We have not yet seen evidence of vast interest among Labour hon. Members, flocking into the Lobby to respond to the right hon. Member for Cheetham. We on this side know that it is a good Measure and shall back it. But, good Measure though it is, it requires improvement. I hope that, particularly on the questions of consultative machinery, my right hon. Friend will have a further look at the Bill and decide to do three things: first, to specify the bodies that they may expect to nominate; secondly, give finance to the National Gas Consultative Council to carry out its own research; thirdly, write out of the Bill the corporation's right to say what premises the council may have.

5.53 p.m.

Mr. Alex Eadie (Midlothian)

Cracks are beginning to appear on the Government benches. The hon. Member for Hampstead (Mr. Geoffrey Finsberg) made some criticism of the Bill and then sought to praise it. If the Minister assumes that the Bill will have an easy passage, he never made a bigger mistake. His Department is full of miscalculations, and if it thinks that the Bill will go through, that is one of its worst. It miscalculated over the miners' strike, and had better keep up its record. We shall examine the Bill closely in Committee.

The Government show a certain insensitivity over some aspects of the Bill, such as the blotting out of the Scottish board. Is the Minister aware of what is happening in his Department and his Government? Last week some of my hon. Friends from the Scottish Parliamentary Group met Ministers and were assured that there would be more decentralisation, more devolution of jobs, and so on. The Bill will not be welcomed in Scotland. The Government fail to understand that Scotland is not a region but a country. When the people of Scotland see the proposition that their gas board should disappear, the Government will have serious political problems in Scotland. The Minister made no case for the disappearance of the Scottish board.

It is a good job that people can read, despite some of the quips of Conservative Members. My right hon. Friend the Member for Manchester, Cheetham (Mr. Harold Lever) and my hon. Friend the Member for Bristol, Central (Mr. Palmer) showed that the Conservative Party always speaks with forked tongues. It is a different party when in Government. Vast political problems will arise unless the Government seriously re-examine the taking away of the Scottish board. The patience of the Scottish people with the Government, when we have 154,000 unemployed, is becoming exhausted. We shall not be able to tolerate much longer the Government's attitude and their prejudices, which mitigate against the Scottish people. The Minister will require to put a far better case.

Mr. W. E. Garrett (Wallsend)

Does my hon. Friend agree that the absence of Scottish Conservative Members shows how indifferent they are to the problems of Scotland caused by the part of the Bill to which he refers?

Mr. Eadie

It is not for me to comment. The hon. Member for Glasgow, Cathcart (Mr. Edward Taylor) was here, and there may be some reason why he had to go. He was not prepared to commit himself very much. He seemed to imply at times that if the price was right we should be prepared to sell our souls. The Scottish people are not prepared to do that.

It is wrong to suggest that the Bill is a nice little Measure. It is ridden with the Government's prejudices, as in the hiving-off Clause, Clause 7. I wish that some Conservative Members would show that they have read not only the Report of the Select Committee on Nationalised Industries but the OFFICIAL REPORT of the proceedings on the Coal Industry Act, when we had a long debate on hiving-off. The Government received a trouncing so bad at times that even some Conservative Members could not support their Government. We see in this Bill that the Government have listened to what the Opposition said. The Government's proposition then was that there should be hiving-off without Parliament and the people having the right to decide. Indeed, no order was to be laid before Parliament. The Government could take a decision on hiving-off, and the people could go to Hell if they were opposed to it. Under this Bill, any hiving-off proposal must come before Parliament, which can debate it and decide whether the Government's proposal is good and just. I am glad that the Government have learnt some sense. Their whole philosophy on hiving-off is one of the most ridiculous things to come before Parliament. If nationalised industries are doing well and showing a profit, they say, "We'll hive off something." If those industries are not doing so well, they even talk sometimes about closing them down. Where is the logic and sense in that?

One thing for which we are grateful to the Government is that during their term of office nationalised industries have become respectable. The Government are staggering from the disaster to disaster. Unemployment is running away with them, and they do not know what to do. They appeal to private enterprise to help them with the 1 million unemployed, but private enterprise puts its fingers to its nose at them. The Government say, "What can we do? We will go to the nationalised industries, the industries under public ownership, over which we have some control." So the Government go to the nationalised industries and offer them all the money they want so that they can provide more jobs. This is their only solution. Yet here they are, putting a proposition before the House about hiving-off.

My right hon. Friend the Member for Cheetham demolished Clause 16. For the Government to say that if the industry is doing well they will tax it is "conning" the consumer. We were told that the advent of North Sea gas would mean a bonanza for the consumer and that costs would go down. The Government are saying in the Bill that if the industry does well they will tax it and to hell with any advantages for the consumer.

This is a thoroughly bad Bill. The people of Scotland and of Wales will object to it, and when the people of England see the dogma and the prejudice within it their wrath will descend upon the Government.

6.1 p.m.

Mr. John Biffen (Oswestry)

There is a certain attractiveness about Her Majesty's Opposition. The hon. Member for Midlothian (Mr. Eadie) provides the passion and the right hon. Member for Manchester, Cheetham (Mr. Harold Lever) provides the padding, making an effective balance. Nevertheless, as the hon. Member for Midlothian acknowledged, when the Coal Industry Bill was going through Committee it was the persuasive arguments of the liberally-minded Members on the Government back bench which were decisive in securing parliamentary sanction for hiving-off operations. That is a reminder that the most effective opposition does not necessarily derive from passion or padding.

The debate has been characterised by most helpful contributions from the hon. Member for Bristol, Central (Mr. Palmer) and my hon. Friends the Member for Walsall, South (Sir H. d'AvigdorGoldsmid) and Hampstead (Mr. Geoffrey Finsberg). I should like to dwell upon both the points which they mentioned; namely, structural organisation and the rôle of the consumer.

The hon. Member for Bristol, Central was perfectly right in saying that we move through certain fashions in organisational size. Inasmuch as Parliament is required to legislate upon certain industries, we have hit a point in time when the unitary structure has obtained favour. The hon. Gentleman was a little less than fair. There have been substantial changes in manufacturing technique which must have considerable consequences for the organisational structure of the gas industry.

I am anxious to ensure, and to receive a comment from my right hon. Friend upon his expectation and hope, that the Bill will not lead to excessive centralisation. Above all, there is real danger in a monopoly purchaser of the size of an industry whose borrowing powers have been referred to as between £25,000 million and £27,000 million.

At the time when we received the first intimation of the Bill, the right hon. Member for Southwark (Mr. Gunter), who was then in office, said that the Bill would give to the Gas Council: … responsibility for the main policy decisions of the industry, including its investment decisions."—[OFFICIAL. REPORT, 22nd May, 1968; Vol. 765, c. 549.] That places tremendous purchasing power in the hands of a sole commercial organisation reinforced by the unitary structure to be implemented by the Bill and adds validity to the concern which many hon. Members on both sides of the House feel about the need for a competition policy.

The area boards fostered a degree of commercial competitive spirit. Although it is true that alterations in techniques of manufacture and distribution have mitigated that consideration, we should do well to acknowledge in any organisation the importance of marketing, and therefore to hope that initiatives in marketing would still be left at as decentralised a level as possible.

This has caused some concern among those who are interested in consumer representation. I will quote from the Gas World of 4th December, 1971, the anxieties that have been expressed by the West Midlands Gas Consultative Council: Until now West Midlands Gas Board consumers have been sitting pretty. Those are the words of the Gas World, not mine: They enjoy the benefits of a highly successful Gas Board which sells the cheapest gas in the country. However, should the British Gas Corporation seek to standardise gas prices … This may interest the hon. Member for Midlothian: … they would be in for a shock—a possible increase in prices of about 15 per cent. … Mr. John Plant, of Stoke on Trent, asserted: If this Council never does anything else, the most important thing it can do for the customers is to ensure that they don't suffer and lose the benefits of the hard work which all associated with the gas industry in the West Midlands have put in over the past 20 years.' I hope that my hon. Friend in winding up will allay these anxieties, and I look forward to hearing his comments.

Mr. Eadie

The hon. Gentleman realises, of course, that there are consultative councils in the coal industry.

Mr. Biffen

It is kind of the hon. Gentleman to remind me of something which he says I know, and I take notice of his generosity.

My second point is on consumer representation, on which most anxiety has been shown. I say, in all friendliness to the hon. Member for Midlothian, that this is an area in which we may get a success in the Committee stage. We achieved success before on hiving-off in the coal industry, and I think we may look for success here on consumer representation.

There is anxiety that the recommendations of the Select Committee on Nationalised Industries shall be given more direct legislative form than appears from the Bill as drafted. The danger is that consumer consultative councils should be thought to be riding in the hip pocket of the industries they serve. As my hon. Friend the Member for Hampstead said, this can be graphically illusrtated by the offices which they occupy. Schedule 3 raises all the doubts that were expressed by those who had the privilege to serve on the Select Committee under the chairmanship of my hon. Friend the Member for Walsall, South.

There is one other point I should like to mention on the question of fair competition within the industry. My hon. Friend the Member for Harrow, East (Mr. Dykes) was the recipient of a statement widely welcomed on these benches, that in retailing and contracting the gas corporation would be required to present its accounts in such a way as to make apparent the true costs of these activities. It was hoped that this would be the preliminary to a wider participation of the private sector in this particular practice.

I acknowledge the anxiety of the gas industry that it may be confronted with some unfair competition from the oil industry. There is a belief—I do not know how well founded—that many oil companies do cut-rate installations and then recover these essentially uneconomic installation costs by having fuel supply agreements that tie the person to buy over a certain period of time. This could be the kind of situation which might—I do not say it should—be referred to the Monopolies Commission to ensure there is parity of competition between these two providers of energy.

I will conclude on the question of the controversial Clause 16. A number of comments have been made on this provision and reflect a good deal of concern. I am quite certain that my right hon. Friend will interpret and execute this Clause in a most prudent fashion, and therefore my anxieties are nothing like those which have been expressed from the Opposition benches.

Anybody who is concerned about the degree of intimacy between Government and public corporation can only conclude that energy pricing policy has been considerably influenced by administrative decisions, and attempts have been made to try to persuade the British consuming public to express their preferences in ways which have been politically oriented rather than market oriented. My anxiety is lest the gas industry in its activities creates considerable commercial advantages which result in a large profit which it would then like to use to cut the price of gas and to increase its share of the supply of the United Kingdom energy market. I should like to feel that, if this were its policy, it would not find itself harassed and inhibited by the Government under the provisions of Clause 16 from pursuing what it believed to be a good commercial policy. No doubt these are points which my hon. Friend will argue are Committee rather than Second Reading matters.

Finally, I want to associate myself wholeheartedly with those who have paid tribute to those engaged in this industry, whose success story is one in which we can all share. Since I was a member of the Select Committee on Nationalised Industries, I should like to pay a personal tribute to Sir Henry Jones, whose reputation will long endure in the gas industry.

6.14 p.m.

Mr. W. E. Garrett (Wallsend)

I intend to be brief in my remarks and I intend to resist making any jibes about the thinking of the two terrible twins, the junior Ministers in the Department, and their philosophy which somehow has percolated through into the Bill.

I speak with concern about certain Clauses in the Bill since they involve the welfare and livelihood of a considerable number of my constituents. The House should know that within my constituency I have the main offices of the Northern Gas Board, the headquarters of the Gas Research Council and also a craft training school for the industry. All employ a considerable number of people, ranging from highly qualified scientists and engineers to administrative workers and craftsmen. This is why, with certain reservations, I welcome the provisions in the Bill for the welfare, health and safety of all these employees.

Subsections (2) and (3) of Clause 3 make it clear that the proposed corporation must maintain the high standards imposed by the present boards on matters relating to training and education and also to matters of research, on which the Northern Gas Board and the Gas Research Council have a magnificent record which is not equalled by any other region in the country. Therefore, either today or in Committee I should like some assurance from the Minister that there will be no impeding of the research which is suitably important to the future of that industry.

On the negative side of Clause 3, I see no statement of intent on whether the labour force in the three establishments I have mentioned will be maintained at its present level. I hope that we shall have some assurance that it will be maintained. I would have preferred to have inserted in this Clause a clear assurance that there will be no redundancies arising from the proposed reorganisation. In fact, if the Minister could give an assurance that more jobs would be created, this would be a tonic not only to the gas industry but to the North-East in general, which is reeling from the effects of high unemployment and daily announcements of further redundancies in other industries.

I am certain that there will have to be a close scrutiny of the principles embodied in Clause 35. Here it is stated that the Gas Corporation must commence consultation with trade unions or staff associations to establish new agreements for settling terms and conditions of employment. Why is such a Clause necessary when there is already in existence a number of good industrial agreements reached through negotiating machinery which has been built up over many years? Will the proposed new constitution mean that all those agreements will be scrapped, kept the same, or improved? If they are to be scrapped, this will mean the end of a very long period of harmonious relations which have existed between the trade unions and the negotiating committees associated with the industry.

Clause 35 undoubtedly has been inserted because of pressure by the same Minister who introduced the infamous Industrial Relations Bill—I have no doubt about that. I have equally no doubt that, behind it all, there is some aspect of these provisions which will further restrict, and possibly impede altogether, trade union activity in this industry. We shall probably be able to ferret this out in Committee. A lot of explanations will have to be given by the Minister if all connected with collective bargaining are to be satisfied that this Clause will not disturb industrial relations, which at the moment are excellent.

Clause 16 clearly states that all excesses of revenue that the corporation may acquire must in turn be paid over to the Secretary of State. Several hon. Members have referred to this matter and have given their own interpretations. We may well ask why this is the case. Is it because the Minister will have no faith in the members appointed to run the new corporation to manage the business? Does he want to deny them the right to use the excess of revenue that will accrue to the best possible advantage for the industry? What is his purpose in forbidding them to use the expertise which they should have if they are given the job? The whole basis of the Clause must cut across the basic philosophy of hon. Members opposite who have repeatedly urged the need for public industries to manage their own affairs without departmental influence.

Again, the reversal of this view must require a rational explanation. Or is it that the dead hand of the Treasury has won another battle over the Ministers in the Department, possibly lacking the will to fight those anonymous characters who seem to frighten all departmental chiefs?

In general, I am in favour of some parts of the Bill, but critical of others. My main objection is that I see no need for it to be forced on this already overworked parliamentary machine. I regret the abolition of the area boards. In my opinion, it will prove to be an abysmal failure to substitute other machinery for them. I state this because of my study of the efficiency of the area boards. I suggest that the Bill will wreck a good system of operation which has been established in the industry. The Government are getting rid of it and replacing it with a new structure which, in print, looks like developing into another example of the Tories' inefficiency when they start meddling in the operation of any public industry.

It is an untidy Bill. I and, I am certain, many of my hon. Friends will show sound judgment when we vote against it tonight.

6.22 p.m.

Mr. Hugh Dykes (Harrow, East)

I welcome this opportunity to intervene briefly in the debate. I am aware that other hon. Members on both sides of the House still wish to speak and time is short.

The debate this afternoon has been characterised by an absence of passion, with the notable exception of the hon. Member for Midlothian (Mr. Eadie), who is not in his place at the moment. It has also been characterised by an absence of political dialogue on one side or the other, with some exceptions. That is right in the sense that the Bill is substantially mechanistic, technical, functional and operational in character. It has many aspects of the prospective Bill which the previous Administration wished to introduce but which was interrupted by, for them, the unhappy event of June, 1970. One or two anxieties have been voiced this afternoon which will be elaborated and clarified in Committee after the Bill is given its Second Reading. Those anxieties have primarily reflected the consumer aspect. It is on that aspect that I hope to hear one or two comments from my hon. Friend the Under-Secretary when he replies to the debate.

Those anxieties rightly reflect two aspects. The first is that in all the conversions to natural gas there has so far been a mixture of notable success and smoothness in varying degrees in different areas, but also extremely acute difficulty for many consumers. There have been more than a few individual cases. There have been enough to cause Members of Parliament on both sides acute anxiety when they hear of particular cases. And who is to say how many unheard-of cases there are or have been vis-à-vis Members of this House?

The second aspect is that, even including conversion to natural gas and despite the success of the area boards in many places—I do not wish to criticise them too much—there have been far too many occurrences of problems with the installation of appliances. This concerns all appliances—often expensive appliances—which the many showrooms in all areas have been advertising and promoting. I have not time to go into the details of individual cases which have been brought to my attention. I hope that the operation, structural improvements and the reinforcement of the Consultative Council which will come from the Bill will lead to a diminution of these problems in future.

I welcome the provisions primarily of Clause 7 and certain aspects in other Clauses. I welcome those matters which devolve upon the activities in the commercial sector of the future British Gas Corporation and its regional structure: namely, the promotion and selling of appliances and the contracting activities of the industry. This point was tied up with what my hon. Friend the Minister for Industry said when he referred to my Written Question on Tuesday, 18th January at col. 136. I think it will be widely welcomed not only in the House but throughout the country, that the industry will be obliged, as my hon. Friend the Member for Oswestry (Mr. Biffen) said, to separate out its accounts in terms of its commercial contracting and appliance retailing activities from those of its central gas generating, receiving and distributing activities. I wholeheartedly welcome this new development, and I imagine that many hon. Members on both sides will also welcome it.

We should like to see in what precise practical ways the Gas Corporation can become commercial in its accounting. There is no need for us to say "commercial in its activities", because the industry is a great success story. We want clarification of some particular aspects of what that separating of accounts and of activities will mean. What will be a proper commercial rate of return? What will fair competition with the private sector mean? I know that many representatives of the private sector in the country at large will welcome these developments and proposals, even if they are long-term and do not come about immediately. What will it mean if there is any question of disposal later of those activities which are not essential to the industry's primary activity? I realise that that is only a reserve power in the Bill. Answers to these questions will clarify and elucidate some of the Clauses of this largely welcome Bill.

6.27 p.m.

Mr. Thomas Cox (Wandsworth, Central)

The Minister for Industry made reference to the future development of the gas industry and the part that natural gas conversion will play in it. When all the technical and financial aspects of this have been discussed, the success of it, in the eyes of the general public, will be determined by the consideration which they received from the area gas boards.

I hope that, if not this evening, in Committee, we shall have some indication from the Minister that the problems which consumers have been experiencing as the result of conversion to natural gas will cease and that he will tell us that he has far more powers than he has so far told the House he possesses to overcome many of the difficulties which face consumers.

The Minister referred to the progress which is taking place on gas conversion and stated that within about five years it will have taken place throughout the country. I can only hope that many people, as gas conversion takes place in their areas, will be spared the kind of problems which constituents of mine have had to face since gas conversion started in Tooting.

I hope that Clause 4 will clear up what I believe are the present inadequate powers of the Minister to force gas boards to change their policies when they are detrimental to the consumer. The Clause gives power to the Minister to direct changes in the activities of the corporation.

The Under-Secretary of State for Trade and Industry, in reply to a Question I asked on 17th January, stated: If the hon. Gentleman has specific complaints, I suggest that he gets in touch with his gas hoard, which is responsible for administering these arrangements. I have no responsibility to tell gas boards how to proceed."—[OFFICIAL REPORT, 17th January, 1972; Vol. 829, c. 19–20.] I hope we shall be successful in introducing the kind of Amendments we want. I hope also that the Minister will be able to say that he will have the power to take action, because unfortunately at present certain actions of gas boards can only be described as downright dishonest to the consumer. In my area the gas boards are now distributing extremely attractive leaflets. When consumers read them I suppose they think that it is something we should welcome.

In gas showrooms a leaflet is handed out containing questions and answers on gas conversion. One of the questions asked in the leaflet is: How much is conversion going to cost me? The answer is: There is no charge to consumers for conversion. SEGAS is carrying the full cost. The leaflet goes on to say: Can all gas appliances, however old, be converted? The answer: With very few exceptions the answer is 'Yes'. All gas appliances now on sale are fitted with universal burners which makes conversion a comparatively simple matter. A majority of older appliances can also be converted but some may need special attention. Anyone reading that would believe that they will have no problems with gas appliances that they have in their homes when they come to be converted. But another leaflet is being handed out by the South Eastern Gas Board which puts an entirely different picture on the kind of problems that consumers can face and, certainly in my constituency, are facing. One of the comments made in this leaflet is: Spare parts for old appliances are often not available from the manufacturers and because of this they are very difficult to convert. Yet in the leaflet given out by gas showrooms it is stated, after the questions and answers, that this should not take place. This causes a great many problems. Many hon. Members on both sides of the House have faced this kind of problem. One hon. Gentleman opposite had an Adjournment debate on 17th January about the problems he faced in his area.

It is downright dishonest of gas boards to tell consumers, many of whom are elderly and do not understand the technical jargon of salesmen, and are very often frightened of the dangers of gas, on the one hand that they will not be forced to any expense and then, on the other hand, to say to them, "We are sorry, but your gas appliance cannot be converted and it will cost you perhaps £20 or £30." I hope that the Minister will say in no uncertain terms that he will have the power to direct gas boards to see that consumers are not forced to expend money as a result of gas conversion.

Many of my constituents are suffering great injustice because of gas conversion. Many are without any heating. Elderly people especially are finding this very difficult to face. They were offered from £2 to £5 compensation for gas appliances that were not converted. Any hon. Member knows that with that kind of compensation elderly persons cannot get adequate alternative heating in their homes.

That is the kind of system I want to see changed. It gives me no pleasure to make these criticisms against a very great nationalised industry. Along with the electricity boards, the industry has made great advances to the benefit of the country. The introduction of natural gas will be extremely beneficial to Britain, certainly financially. But I do not want that financial advantage to occur at the expense of my constituents or those of other hon. Members. I hope to hear from the Minister during the passage of the Bill that he has additional powers to compel area gas boards to see that consumers do not suffer in any way from gas conversion, especially financially, as they are at present suffering. It is the duty of hon. Members to voice such criticisms in the hope that we shall hear from the Minister a clear statement that he and his Department will seek to put a stop to this as soon as possible.

6.35 p.m.

Mr. T. H. H. Skeet (Bedford)

I apologise to the hon. Member for Wandsworth, Central (Mr. Thomas Cox) for not following up his argument. I want to take up one or two points mentioned by the right hon. Member for Manchester, Cheetham (Mr. Harold Lever).

The argument was in reference to Clause 7. I have indicated that in my view—because I cannot tie the Minister on this matter—what could be hived off are the assets of the existing Gas Council on the Continental Shelf. I adduce as my reasons that it has first option on any gas found, it has only to pay a reasonable price and it would be saving the immense capital expenditure involved.

Since 1964, 349 development wells have been drilled at a total cost of 560 million dollars. There have been a lot of dry holes and there has been immense expenditure, which has never been isolated for the benefit of the public. This could all be saved and all the gas which is required by the existing Gas Council would be available in the United Kingdom at absolutely no cost to the taxpayer. Therefore, I should have thought that that view would have commended itself to many hon. Members.

By sheer coincidence, I have a certain amount of support from my hon. Friend the Minister for Industry. On 11th December, 1969, he said: The Council's job is to supply gas, and very well it is doing that, and it should stick to that job. It should not be required by the Government to get involved in the oil business. My argument is very clear here. It is that we want to save the taxpayer money; we want to keep the gas industry to its primary job as a supplier. This could be done without prejudicing its interests. I agree with one or two of the comments made from the Opposition benches on the question of centralisation. The Bill is the epitome of centralisation. I realise that there are marked dangers in it.

In the same debate in 1969 my hon. Friend the Minister also said: I will only add at this stage that no matter how much one may regret this trend"— that is, centralisation— it is an inevitable consequence of nationalisation. This is being experienced now by, for example, the steel industry. If one creates a monopoly in the public sector, then real power is increasingly drawn into the centre. My argument would be that if we are to be faced with undue centralisation, would it not be better to induce what I will term private participation in the supply industry in the United Kingdom? One has only to look to the Continent to see several examples. The Government could have favoured the policy of Gasunie in the Netherlands, where there is participation by Dutch private interests which has worked remarkably well since its inception: or Ruhrgas and Thyssengas in West Germany, or Distrigas in Belgium. Unfortunately, however, the Government have not accepted the options open to them. They have taken in some measure the example which has been established in Italy by E.N.I. and Gaz de France. Here we have extremely large State structures which cannot be referred to the Monopolies Commission. They can set their prices, for which no criteria have been settled. They bring in substantial profits if they can. I hope that they will be able to do that.

My hon. Friend the Under-Secretary brought out one argument with which I fully agree. In 1969, after he had deprecated the passing of the area boards, he said—and this is a danger to which we should be alive: This has been admitted by the C.E.G.B.; there are few people qualified to criticise technically who are not within it. There is this danger from size itself, in that we shall cease to have the ability for open debate about the the future and about failings."—[OFFICIAL REPORT, 11th December 1969; Vol. 793, c. 729, 725, 761–2.] This is an argument that we must face. I agree that with the evolution of the industry we must move ahead and we have to appreciate the problems that the gas industry faces.

The next question might be, what does the monopoly cover? It covers all pipeline gas throughout England, Scotland and Wales, including natural gas, gas derived from petroleum fractions, gas from what is left of the old carbonisation process, chemical gases, and later perhaps synthetic natural gas from coal. When we set up a monumental institution like the proposed British Gas Corporation, some attempt should be made to define what is gas. In Clause 48 of the Bill natural gas is defined but no attempt is made to define gas.

It is entirely wrong that the chemical industry, which may be moving oxygen, ethlyene and the rest, should have to go to the Gas Council under Section 52 of the 1948 Act—it comes in another form in Clause 29 of the Bill—for consent to move it. I should much prefer to see the emphasis changed entirely in a way that ensured that if it wished to do these things, the consent of the British Gas Corporation would not be required.

The other part outside the monopoly—gas moved other than by pipeline, namely liquid petroleum gas and liquid natural gas—is a growing and expanding business. I have no doubt that as this enormous organisation gets going, it will move into that business.

The Minister's statement today about by-product gas from coke ovens and tail gases from refineries was an easement of the situation. In the case of Conoco and La Porte Industries, they have entered into an agreement whereby the former is transmitting to the latter for prime energy use 500 million therms over a 10-year period. This is sent through a four-and-a-half-mile pipeline. The way it would be conducted under the Bill is that the consent of the British Gas Corporation would have to be secured first. The Minister says that he will have certain flexibility and will grant it. But I think that it should be the other way round: that up to a certain quantity of gas there should be direct sales by the owners of it to industry—namely, of tail gases and coke oven gas. Beyond that, consent would be required. Nor do I see any requirement for consent which may be automatic in the case of chemicals under Clause 29 of the Bill or Section 9 of the Continental Shelf Act, 1964.

I am also glad to find that crude oil and gas condensate are outside the Bill. I cannot understand the argument of the Opposition for wishing to bring them in. Have not they heard that British Petroleum is part Government-owned? Do they want to set up a competitor to their own partly-owned enterprise?

Mr. Palmer

Why not?

Mr. Skeet

Because it is better to have real competitors in private industry. If the hon. Gentleman wants to challenge that, I am prepared to give way to him. Right hon. and hon. Gentlemen opposite do not like competition. That was why initially they set up the Gas Council, where there is no competition at all.

Mr. Palmer

My party has no objection to competition—that is, competition between publicly-owned enterprises.

Mr. Skeet

That is anathema. Once a publicly-owned enterprise is established, it becomes comprehensive and it covers the lot. There is no competition.

Mr. Kaufman

Not necessarily.

Mr. Skeet

If one looks at the gas industry—

Mr. Kaufman rose

Mr. Skeet

No, I shall not give way. If the hon. Gentleman succeeds in catching Mr. Speaker's eye, he can make his own speech. I am glad to see that the Minister has excluded that section.

I do not follow the argument that while the corporation is entitled to search for natural gas, it is not entitled to search for petroleum. Petroleum is very much involved. The Gas Council and Amoco have an interesting discovery at Block 22 18. Do they bring it forward as crude oil and sell it on the open market? I am sure that it will be a useful result in this limited form.

I want now to refer briefly to one or two figures relating to the position in the United Kingdom as I see it. They lead me to the conclusion that there is little chance of the British Gas Corporation running out of supplies, and that there should be a margin available at a later date for exports, if private enterprise becomes entitled to do this, which at present it is denied.

There are something like 0.9 trillion cubic metres of gas in the English basin in the form of reserves. There are 1.5 trillion cubic metres available to Holland and that is made available to Common Market countries. Local supplies are only made available to the United Kingdom. Deliverable supplies in the United Kingdom will be of the order of 4,000 or 4,500 million cu. ft. per day, but the availability by 1975 should be up to 6,000 million cu. ft. a day. Most of the reserves are well inside the median line of the United Kingdom. They should be extremely valuable and profitable.

I make only one quotation. It is from W. W. Dunn, the Vice-President of Phillips Petroleum Co. Europe-Africa. He said: Recoverable reserves of non-associated gas of about 40 trillion cubic feet have been established in two producing reservoirs, and two-thirds of the present reserves are in United Kingdom quarters. However, there are significant reserves of associated gas in Norway which will be produced with oil and there are also indications of deeper gas reservoirs. It is possible to foresee gas reserves approaching 50–55 trillion cubic feet That is most encouraging news and it underlines the fact that there is no question of our running out of supplies in the future. The Government can afford to be charitable to private concerns. There is no need for a cast-iron monopoly keeping out competitors.

The British Gas Corporation will be the sole buyer and virtually the sole supplier at a price determined by Section 9 of the Continental Shelf Act, 1964. I believe that certain modifications or amendments should be made to it to assist private operators.

I suggest also that as the Bill empowers the British Gas Corporation, with the Minister's consent, to export gas, there is no reason why private enterprise should not enter the market as well, especially if this will be of interest to our balance of payments position. This is rather important as the United States is running short of gas and there may be a buoyant market in that quarter, partly fed by North Sea reserves.

Though the National Gas Board is entitled to explore for natural gas on the Continental Shelf it does not need to do so, while the C.E.G.B. which wants to, is not entitled to explore. It was the C.E.G.B. which wanted to get Viking gas from the Continental Oil Company. This it failed to get. It was prepared to import it in the form of liquid natural gas, but this it could not do. It could not burn it in its power stations without the assent of the Minister, which I am sure he was not prepared to give. It is ridiculous that one nationalised industry should be tied by restrictions imposed by another.

Private enterprise would welcome the opportunity of participating in the monopoly. It is denied it because of the Statutes which have been passed by successive Governments. The British Gas Corporation on the other hand, can buy from private enterprise what assets it likes, with ministerial consent. If there were a change of Government, right hon. and hon. Members opposite would not hesitate to utilise the power.

I wish to make a special plea for the manufacturers of plant and equipment in the United Kingdom. They will be faced with exactly the same crisis as occurred with the C.E.G.B. There is one buyer and in the end prices are forced down and manufacturers are forced out of existence. I wonder whether the Minister has considered this point.

There are one or two short points I wish to make. I notice that the Bill will enable the corporation to buy its land under the Acquisition of Land (Authorisation Procedure) Act, 1946, as though it was a local authority. This is regrettable. A local authority is elected, the British Gas Corporation is not. All of its members are appointed by the Minister. It should therefore not have those powers, although I agree that there are respectable precedents. This can be argued in another place.

Finally I come to the claw-back provision in Clause 16, which, of course, I support. Should we not have laid down criteria under which it is to operate, and could we not have some word tonight about the effect of the value-added tax on the industry? I assume that when gas is sold at the beach-head value-added tax will be charged, and I assume that when the gas is sold to the customer it will also come in. Could the Minister be a little more specific on these points which are of interest to all hon. Members?

6.53 p.m.

Mr. Gwynoro Jones (Carmarthen)

As one who used to work in the gas industry before coming to this House, I had prepared lengthy notes for this debate. However, I can set everyone's mind at rest by saying that I will not pursue many matters tonight but will save them for a later stage.

I am surprised that the Under-Secretary has even bothered to come along tonight when I see what he had to say in the debate on the Second Reading of the Gas Bill in 1969. He said then: There will be an end to the area boards as we have known them, and this is a great pity. But I hope that more work will be done on finding ways of devolving responsibility down from the centre, or otherwise the heart and soul will go out of those people who are trying to contribute by working their way un through an industry such as this."—[OFFICIAL REPORT, 11th December, 1969; Vol. 793, c. 761.] It was not just left to the hon. Gentleman, because the present Minister for Industry expressed great fears about the abandonment of the functions of the area boards. In Standing Committee he said: On Second Reading I expressed fears lest this Measure would go so far as virtually to abolish for all intents and purposes the area boards. … My fear is that the powers which are now being taken on behalf of the Gas Council will in due course completely erode the authority of the area board chairmen and their senior management staff."—[OFFICIAL REPORT, Standing Committee E, 20th January, 1970; c. 5–6.] There was this great passionate plea made by the " terrible twins " defending area boards. They pleaded—they even took it to a vote in Committee—that we on this side should not take away the functions of the area boards. It was anathema to them. Here we are now—not only taking away the functions—but abolishing the area boards. I look forward to hearing the remarks of the hon. Gentleman on his change of heart.

Have there been consultations with the area board chairman in preparation for the Bill? I recall that on the occasion of the last Gas Bill there was a great deal of consultation and controversy, in particular from one area board chairman. If there is to be reorganisation and reconstruction of the industry I am sure that it is coming at the wrong time. We are in the middle of a great upheaval caused by conversion. The reorganisation will cause chaos and great concern. There was concern on the last occasion. The Under-Secretary said on Second Reading: Would it not therefore be wiser to leave well alone and have the same arrangements for the next slice as we have had for the last?".—[OFFICIAL REPORT. 11th December, 1969; Vol 793, c. 769.] How right he is; but why come along today and propose such a mammoth piece of centralisation?

I was asked my reasons for proposing that the area boards should be kept in existence, maybe not as area bodies but as some other organisation in the area. The Minister for Industry implied that Wales and the West Midlands should be put together with a centre in Birmingham. The Government are not highly thought of in Wales at the moment. If they want to keep the people happy there the last thing they should suggest is that Birmingham, should run Wales.

Mr. Ridley

I though that the hon. Gentleman missed the negative in my hon. Friend's speech. My hon. Friend said that that would not be possible. I saw the hon. Member jump when he said it.

Mr. Jones

I am glad to hear that. There is no doubt that the industry has made tremendous changes. The Gas Council has changed since it was set up. Its first task was to advise the Minister, to act as an advisory and co-ordinating body. There has been a considerable change. The council played a major part in the implementation of policy for the industry. It has moved from decentralised production to centralised supply. from localised production to a national grid system, from diversified costs of production to a common supply price. The industry has changed, and the Gas Council's rôle has become more important.

The danger here is not only that of remoteness. What will be the functions of the organisations in Wales and Scotland and the regions? One of the tragedies is that this is not in the Bill. Civil servants would always want to keep power in Whitehall but the regions naturally want more devolution of power. In this era of political devolution it is extraordinary for the Government to press this massive centralisation upon us. What does the Minister see as being the rôle of the organisation in the areas in such things as customer service, marketing and sales? There must be effective decisions here. The marketing policy of the West Midlands could not be pursued in Wales, because conditions differ, income per head varies, and so on. Local conditions vary. Marketing, sales and customer service conditions differ in different areas. It would not be good enough for the new corporation to be running those services for the whole of the country without the decision being made in Wales on the matters to which I have referred.

There are problems at present with customer service, but we must not be too critical of the gas boards over conversion difficulties. It is a major task. But customer relations are not what they should be. Remoteness is already a factor creeping in in the present system. Showrooms have been closed and are replaced by mobile showrooms, but often these mobile units come round infrequently. The local authority in Kidwelly has been told that its mobile showroom will come around only once a quarter.

This sense of remoteness under the present system will obviously increase under the new system, with no guarantee that the regions will have their own organisations by which they can perform their duties effectively. The people of Wales will not allow such a massive piece of centralisation. It is a retrograde step and a bad policy decision on commercial and political grounds. At the same time we are talking of political devolution, we are removing effective area board control. This will not do for Wales or Scotland, and I am sure that the regions of England—the West Midlands, particularly—will find problems in view of their present gas prices.

7.3 p.m.

Mr. Peter Rost (Derbyshire, South-East)

The House will be relieved to hear that my speech today will be even briefer than my speeches usually are. I have been fortunate enough to speak after my hon. Friend the Member for Bedford (Mr. Skeet), who said a number of the things that I wanted to raise.

I welcome the Bill, but I, too, have some serious reservations which can probably be discussed in more detail later. I particularly welcome Clause 7 and the hiving-off powers. I must reply to the quite unwarranted attack upon me by the right hon. Member for Manchester, Cheetham (Mr. Harold Lever). I support this Clause not for any doctrinaire reasons but simply because it will give the industry the opportunity it needs, as one of our most rapidly expanding areas, to maximise its growth and efficiency. It will give it the opportunity, which the previous Government were not prepared to give, to sell off any surplus land or property that it is not using or does not require, perhaps to cut down on some of the plushy showrooms and extravagant headquarter offices, money for which could be put to better use to meet the industry's hungry need for capital investment. For these reasons, the Clause is admirable and I hope that it will be put to use fairly quickly.

I welcome the opportunity which the industry will now have to introduce competition into retailing, contracting and servicing. This is most important for the consumer. I wonder whether the Bill will go far enough and whether competition which may at the moment be unfair will not only develop but become fair.

I also support Clause 2, which prevents the corporation from developing oil search and expanding in oil refining and the chemical field. I support this not because I do not believe that the gas industry would be capable of developing here but because it is important for national efficiency and competition that there should be at least one fuel industry owned completely by private enterprise. This will provide competition against the other, nationalised, industries, even if that competition is heavily weighted against the oil industry because it is lumbered with heavy taxation.

I have some anxieties about the clawing back of profits under Clause 16. I cannot see why, under the modern corporate structure, it is necessary to have such a provision. One hopes that the gas industry will be profitable and that the profits will be absorbed in fresh capital investment. Why have a clawing back when one has one's palm open all the time for an open-ended source of money for fresh capital investment? Surely the two should be integrated, so that cash flow can be coordinated and can be seen to go into sensible capital investment, which will produce the expansion that the industry needs.

I naturally welcome the new accounting process, because this is the most important move forward in our thinking towards the nationalised sector. It will prevent cross-subsidisation of one sector of a corporation with another and ensure genuine competition, while stopping unfair competition. I hope that the same will be done with the other nationalised industries, where applicable, particularly electricity, so that one can know the cost of reading the meters, servicing and providing sales facilities, as opposed to the cost of generation and distribution.

Reverting to what I said about the financial structure of the industry, I have some reservations about Clauses 17 to 22, which relate to borrowing powers, and these provisions require further thought. It appears that these borrowing powers are virtually unlimited. I am particularly anxious that we discuss whether or not some restriction will be placed on them by the industry having to operate through the market. If so, the market disciplines will ensure that a commercial return is produced on the capital investment, rather than allowing there to be an open-ended borrowing facility, with money available as and when required up to almost any amount.

I feel rather unhappy about Clause 29, which imposes a restriction on the sale of gas to the customer. This could be too restrictive, and I hope that we shall have an opportunity to discuss the extent to which the industrial user will be restricted, particularly in relation to long-term contracts.

I have particularly in mind one of the most rapidly expanding processes in the consumption of gas, which is the on-site generation of electricity through total energy. This has had an explosive growth in Holland since natural gas was discovered there, and it is clear that the process will be coming here.

We want an assurance that long-term contracts will be made available in a competitive way, without restriction, so that this sphere of activity can expand. I also query how we are to define "reasonable price" when it comes to giving the industry first option on the purchase of gas.

With these reservations, which are important—there are others to which I would have referred had not my hon. Friend the Member for Bedford mentioned them—I believe that the Bill represents an important reform of the industry. I hope that it will provide the scope it needs to develop further and thereby prove the important rôle it will undoubtedly play in the future of British industry as a whole.

7.13 p.m.

Mr. Eric G. Varley (Chesterfield)

The House will not regard it as a discourtesy if I and, I believe, the Under-Secretary who intends to reply to the debate do not cover all the points that have been raised by hon. Members, because I sense that the House is anxious to come to a decision in the matter.

Allowing for the strong points that have been made by, among others, my hon. Friend the Member for Midlothian (Mr. Eadie), my hon. Friend the Member for Carmarthen (Mr. Gwynoro Jones) and my hon. Friend the Member for Bristol, Central (Mr. Palmer) about the regional aspects of the Bill and particularly about the way in which it will affect Scotland and Wales, we could have given it a speedy Second Reading followed probably by a speedy Committee stage. However, I am not so sure now that we can be that speedy in our deliberations in view of some of the more contentious aspects of the Measure.

We certainly could not allow the Bill to go by without reminding the Minister for Industry and the Under-Secretary of some of the things they said about the gas industry on 11th December, 1969. On that occasion we were debating a modest proposal of ours, yet they said that it was far too centralised and bureaucratic. When we read this Bill, however, we note how much further they have gone. We recall the long Committee stage that took place on that occasion.

However, hon. Gentlemen opposite have inserted into today's Bill some of the prejudices which they, and particularly the Minister for Industry, showed. There can be no doubt about that. For example, there was a prolonged filibuster in Committee on that occasion about the gas industry's profitability and the question of stopping the industry from exploiting any of the oil it found in its offshore search for gas.

The Minister for Industry has resuscitated his prejudices in the form of Clause 2(3)(b) and, under this Measure, the Gas Corporation will not be allowed to refine its oil. It will have to market its crude oil in a restricted market and take whatever price it can get for it. To some extent, therefore, I salute the Minister's triumph, but I warn him that in Committee we shall want to put that proposal back in its resting place.

We start with something old and later in the Bill we find something new. But we certainly have something borrowed. It has been borrowed from last year's Coal Industry Bill, as my hon. Friend the Member for Midlothian pointed out. We have the ritual hiving-off Clause which we seem to get nowadays in everything introduced by the Minister for Industry. On this occasion it came to the notice of the House through the well-known device of the "planted" Question. The Minister for Industry said a week ago last Tuesday: The Gas Bill provides for a general power for the Government to direct the corporation to discontinue activities and dispose of assets which are not essential to its primary business. This is a reserve power and its inclusion in the Bill does not indicate any present intention of making use of it."—[OFFICIAT, REPORT, 18th January, 1972; Vol. 829, c. 137.] I said that we could have a relatively short or long Committee stage but in relation to Clause 7 we can do a deal only if the Minister is prepared to say that it is not necessary.

Another important provision is Clause 16, which provides for the creaming-off of what is blandly described as excess profits. The Under-Secretary may say that the same provision appears in Section 24(8) of the Transport Act, 1968, but he will not get away with that if that is the excuse he uses in this instance. It was included in that legislation primarily as a quid pro quo in exchange for extinguishing part of the capital debt of the British Railways Board.

Thus, from the point of view of this Measure the creaming-off exercise in Clause 16 is new. I have the support of the Financial Times in this. A number of questions have been asked about the intentions of the Government in this respect and we still want to know, for example, to what use the creamed-off profits will be put and how they will be creamed off. I had intended to go into some of the questions that were asked about this matter by the hon. Member for Derbyshire, South-East (Mr. Rost) and the hon. Member for Bedford (Mr. Skeet). I hope that in Committee we will join forces and succeed in knocking that Clause out of the Bill.

I have been asked by my hon. Friend the Member for Newcastle-under-Lyme (Mr. Golding)—who cannot take part in this debate because he is engaged in Committee upstairs on the Sound Broadcasting Bill—to mention representations that he has made to the Government on the subject of liability for damage caused by explosions and accidents to, in particular, Post Office engineers. The number of such occurrences increased from 12 in 1963 to 68 in 1970. I do not expect the Under-Secretary to reply to this point tonight. I hope, however, that he will look into the matter, note the representations that my hon. Friend has made and give a considered answer.

I come to the strange case of the gas showrooms. In August, 1970, the Prices and Incomes Board produced a report about the gas showrooms and made critical remarks about the smaller showrooms, recommending that those which could not be made profitable should be closed down. But it did not suggest that there should be a duplication of private gas showrooms. This matter has been dealt with at some length. I know that the Gas Council is looking at the board's recommendations. I cannot understand what the hon. Gentleman was driving at in his answer to a recent Written Question when he said that it was the Government's wish … to encourage a flourishing private sector throughout the whole range of appliance retailing and contracting activities carried on by the industry … He added that a first essential was … the creation of such conditions as to ensure that gas revenues are not used to subsidise the gas industry's operations in the fields of retailing and contracting."—[OFFICIAL REPORT, 18th January, 1972; Vol. 829, c. 136.] As I have said, the Gas Council is already acting on the recommendations of the Prices and Incomes Board, so I hope that we are not going to have all the paraphernalia of duplication arising again. Of course the private competitors are to be encouraged, but I hope that if the Government are really serious about this they would take account of the ancillary functions which place such a financial burden on the Gas Council in maintaining gas showrooms. I hope that this is not a question of gas showrooms being set up just to get the lucrative business of the gas industry. What the Minister is doing, or what he might be doing, is typing the hands of the gas industry.

Then there is the question of Clause 38, which one of my hon. Friends has described as the panic Clause. This is a panic provision in response to the Chancellor of the Exchequer's request to bring forward public expenditure programmes within the nationalised industries. In the Bill the sum is £5 million and in the Electricity Bill, to be produced next week, the figure will be £25 million. The Government are asking the nationalised industries to scratch around and see what expenditure they can bring forward. I remind the Government again of what they were saying only a few months ago. They said that the answer to the unemployment problem was virtually untrammelled and unfettered private enterprise. They certainly said so before the General Election. Now, because of the Government's appalling policies, we have over 1 million unemployed and we are seeing another Government conversion. Ministers are now saying that the only answer to the problem is to ask public corporations to bring forward their investment programmes.

But the Government should follow this to its logical conclusion. We accept that public enterprise has a big part to play in maintaining employment and a long-term strategy for employment. Let us have more of it. But let it be well thought out and strategic. Just because the Government's other policies have failed so miserably, do not let us have panic measures. Do not let them go running to the gas and electricity industries saying, "We are in a mess. Here is some money. See what you can do to get us out of it."

The Gas Bill which the last Government introduced in autumn, 1969, had 25 Clauses and it was described by the then Opposition as a terribly bureaucratic, centralising Bill. We had a Committee stage of three months with very many long sittings. This is a 50-Clause Bill. On the lines of opposition to our Gas Bill in 1969–70, this should mean a six months' Committee stage.

Mr. William Ross (Kilmarnock)

I will join.

Mr. Varley

We are prepared to help to facilitate this Bill, which is important. My hon. Friends the Members for Midlothian and Carmarthen have demonstrated how it will affect Scotland and Wales. If the Government say that they intend to abandon Clauses 7 and 16 and to have a total strategy for employment prospects within the gas industry, we will help the Bill through Committee. If the Government cannot say that, we shall start by voting against the Bill tonight and promising that we will scrutinise it in Committee to the utmost.

7.25 p.m.

The Under-Secretary of State for Trade and Industry (Mr. Nicholas Ridley)

If I am as brief as possible, it is not because many interesting points have not been raised which I would like to reply to but because I know that the House wishes to move on to other business and also because there will be ample opportunity in Committee to discuss the points raised.

I welcome the right hon. Member for Manchester, Cheetham (Mr. Harold Lever) as Shadow Minister of Power, as I suppose he is now. We greatly miss his predecessor, who was a sort of oratorical blastfurnace. But I am sure that we shall be charmed by the natural gas of the right hon. Gentleman in his new position. His grounds for inviting the Opposition to vote against the Bill were very thin.

First, I deal with the point raised by the hon. Member for Wandsworth, Central (Mr. Thomas Cox). The powers in the Bill to compel the Gas Corporation are no greater than those contained in previous legislation and it will still be the Government's intention that responsibility for natural gas conversion should remain with the boards.

My hon. Friend the Member for Bedford (Mr. Skeet) talked of the problem of defining gas. Although it is a difficult legal problem, it does not now seem to be so important or pressing. Perhaps we can pursue this point in Committee, I hope to his satisfaction.

To the hon. Member for Wallsend (Mr. Garrett), I point out that the industrial relations Clauses in the Bill are almost identical to those in the 1948 Act. Far from its being my right hon. Friend the Secretary of State for Employment who carries the responsibility for the insertion of these Clauses, it was the late Lord Morrison of Lambeth who designed them. Equally, existing agreements with the trade unions can continue or be built upon or changed as the corporation may in time desire.

The two grounds on which the Opposition appear to have doubts about the Bill—and I repeat they are very thin grounds—are Clause 7 and Clause 16.

Mr. Gwynoro Jones

And centralisation.

Mr. Ridley

I accept the correction. But the first two grounds appears to be Clauses 7 and 16.

There are good precedents for Clause 7—the Iron and Steel Act, 1949, the Iron and Steel Act, 1967, the Transport Act, 1962, the Coal Act, 1971, and the Civil Aviation Act, 1971. I could almost agree with the hon. Member for Chesterfield (Mr. Varley) that this is a ritual Clause. No Government can foresee the course of industrial logic in the future. It is always possible to be wrong. There are powers in nationalisation Statutes to enlarge the areas of the boards; so why not have powers to reduce them if necessary? I see no particular doctrinaire objection to the owners of the industry—the taxpayers—taking power to affect the shape and size of the industry as they so wish.

But I make it clear that there is no present intention of using these powers either in relation to the retailing and contracting activities or in relation to Gas Council (Exploration) Limited which my hon. Friend the Member for Bedford would like to see them directed against.

In defending Clause 16, I do not see why the taxpayers, who in the last resort are providers of the capital and the financers of the industry, and who are called upon often to make up deficits, should not have the power to bring in excess revenue if that should happen. There are equally many precedents for this—both the Iron and Steel Acts, the Civil Aviation Act, the Air Corporations Act and the Coal Industry Act, 1965. I accept, however, that these are in a slightly different category, because they all arose out of capital reconstructions. But I believe that there should be a standard Clause in nationalised industry legislation, so that the Government have powers to set right the finances of a nationalised industry either way.

The debate centred more on gas, but it is on the cards that the corporation might discover large quantities of oil or gas. The possibility of the taxpayers paying themselves a dividend is something the House would be unwise to regard with so much hostility.

My hon. Friend the Member for Oswestry (Mr. Biffen) raised a point about the competition in installing central heating fixtures that the corporation will experience from the oil industry. It would be impossible for the corporation to subsidise the installation of central heating equipment and then to charge the tied customers who own the houses concerned a greater sum that it would normally charge. I think that it would be prevented from doing that under the Bill. We are watching very carefully the oil industry's practice in this respect. Now that it is the Government's intention that the gas retailing and contracting activities should be carried out on a purely economic basis, I hope that the oil industry will compete fairly. We are keeping a close watch on such arrangements, and I do not rule out the possibility of a reference to the Monopolies Commission.

One of the main themes of the debate was the great importance of the relationship between the consumer and the corporation. Here I pay a warm tribute to the Report of the Select Committee so well chaired by my hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid). The Government will give their comments later, but I should like to say something about the provisions of the Bill in this regard.

There is one respect, and one respect only, in which the Government have taken a decision different from that recommended by the Select Committee. I had hoped that my hon. Friend would give us a little more credit for embodying so much of his Report in the Bill. For instance, the Chairman of the National Gas Consultative Council is not to be a member of the board, which is a change in practice recommended by my hon. Friend. The council will be able to publish separate reports. There will be a national body for the industry. There will be payment for the chairman and provision for payment of pensions and expenses. We shall make provision for payment for expert assistance, and there will, of course, be payment for staff and accommodation.

The respect in which we have differed slightly from the Select Committee is that we have said that the cost of those services should fall on gas consumers and not on the taxpayers. It would be wrong to charge the general body of taxpayers with what is purely a matter for gas consumers. Some taxpayers do not burn gas. But the determination of the amount of those sums in either case would have to lie with my right hon. Friend. Therefore, there is no question of the corporation's being able to dictate to, lay down terms to, or patronise the council. There will be complete independence and a right of direct access to the Minister for the council if it feels that its independence is in any way threatened. We can explore this question further in Committee, and if the wording can be changed in any way to make the Government's intentions clearer and more straightforward, we shall certainly consider doing that, but I do not believe there is a great departure from the recommendations of the Select Committee.

Now a word about prices. No control is laid down in the Bill. Clause 25 deals with prices. It will be for the corporation to work out its own pricing structure and set its own policy, subject to the constraints in that Clause. It has always been the case that nationalised industries are free to determine their own pricing policy. I was surprised that the righ hon. Member for Cheetham found that either extraordinary or regrettable. I cannot help quoting what he said in the Standing Committee on the last Bill: In the last analysis, the whole scheme of this Bill is that the Gas Council should fix the tariffs throughout the country as well as the bulk supply charges."—[OFFICIAL REPORT, Standing Committee E, 24th March, 1970; c. 840.] The right hon. Gentleman is now suggesting that we should take power to ask the corporation to reduce prices in the regions at the expense of the more favoured areas. That is a matter for the corporation. There will be economies from central supplies of North Sea gas, which will have their effect in the more expensive regions such as Scotland, about which my hon. Friend the Member for Glasgow, Cathcart (Mr. Edward Taylor) is always con cerned. But the local costs in gas supply, the costs of the distributive network, are very high. That factor may well militate against such regions. What I think the corporation must do is to put forward in due course the principles of its new pricing policy so that they can be seen to be fair and acceptable to all. There is a difficult problem here.

I should like to say just a few words about centralisation, because hon. Members have given their opinions. Two or three years ago the Opposition were dubious about this move, but the logic of the situation has changed. It is that change, which becomes obvious after a certain period, that has necessitated the change in the legislation. No one saw the need for change in 1945, because no one saw the likelihood of natural gas coming. We should make a mistake in our legislation on nationalised industries if we tied any of the corporations to too inflexible a system. The possibility that we might have to legislate again to change the structure is surely something that would appeal to the right hon. Gentleman as logical. The corporation may well make little difference to the administrative arrangements, but it is free to make those differences that it thinks to be sensible. That does not mean that the area boards will necessarily disappear. They will cease to be statutory, but their future is in the hands of the industry for them to evolve. That is managerially very important, and something to which I have always subscribed and will continue to subscribe to.

Mr. Edward Taylor rose

Mr. Ridley

I shall not give way because I am about to finish.

Mr. Eadie

Give way. The hon. Gentleman is an ex-Minister.

Mr. Ridley

I should like to quote something said by the Chairman-designate of the corporation, Mr. Hetherington, who has written to us about his intention in this respect. He said: Although the new organisation must mean an increase in central authority, the Corporation will clearly take care to see that the regional organisations remain strong and sensitive to the needs of their customers in each area. Local knowledge will still be vital and indeed I think it unlikely that the Corporation would want to start with anything different from the 12 existing Board areas. I hope the Corporation will concern itself with major issues such as the industry's investment programme, leaving the regions freedom to operate within the terms of a broad policy set out by the Corporation. I believe that the hon. Members for Carmarthen (Mr. Gwynoro Jones) and Midlothian (Mr. Eadie) can feel from that that the genuine interest of Wales, Scotland and other parts of the country are fully reflected in the attitude of the Chairman-designate, though I understand the feelings they expressed today. The people of Wales and Scotland would not like a rigid organisational structure to stand in the way of the greatest possible

efficiency and the lowest possible gas prices. So I hope the House will think twice before voting against this very good Bill, which will start a new era for the gas industry, one which I hope will continue the success it has had in the past, which is in no small measure due to the retiring Chairman, Sir Henry Jones.

I commend the Bill to the House.

Question put, That the Bill be now read a Second time:—

The House divided: Ayes 172, Noes 147.

Division No. 46.] AYES [7.40 p.m.
Alison, Michael (Barkston Ash) Gilmour, Sir John (Fife, E.) Onslow, Cranley
Allason, James (Hemel Hempstead) Goodhart, Philip Oppenheim, Mrs. Sally
Amery, Rt. Hn. Julian Goodhew, Victor Page, Graham (Crosby)
Archer, Jeffrey (Louth) Grant, Anthony (Harrow, C.) Parkinson, Cecil
Atkins, Humphrey Gray, Hamish Peel, John
Awdry, Daniel Green, Alan Percival, Ian
Balniel, Rt. Hn. Lord Grieve, Percy Powell, Rt. Hn. J. Enoch
Beamish, Col. Sir Tufton Griffiths, Eldon (Bury St. Edmunds) Price, David (Eastleigh)
Bell, Ronald Gummer, J. Selwyn Pym, Rt. Hn. Francis
Benyon, W. Gurden, Harold Quennell, Miss J. M.
Biffen, John Hall, Miss Joan (Keighley) Rawlinson, Rt. Hn. Sir Peter
Biggs-Davison, John Hall, John (Wycombe) Rhys Williams, Sir Brandon
Blaker, Peter Hannam, John (Exeter) Ridley, Hn. Nicholas
Boardman, Tom (Leicester, S.W.) Haselhurst, Alan Ridsdale, Julian
Boscawen, Robert Hastings, Stephen Roberts, Michael (Cardiff, N.)
Bossom, Sir Clive Havers, Michael Rossi, Hugh (Hornsey)
Bowden, Andrew Hawkins, Paul Rost, Peter
Boyd-Carpenter, Rt. Hn. John Hayhoe, Barney Russell, Sir Ronald
Bray, Ronald Heseltine, Michael St. John-Stevas, Norman
Brinton, Sir Tatton Higgins, Terence L. Scott, Nicholas
Brocklebank-Fowler, Christopher Hill, John E. B. (Norfolk, S.) Sharples, Richard
Brown, Sir Edward (Bath) Hill, James (Southampton, Test) Shaw, Michael (Sc'b'gh & Whitby)
Bruce-Gardyne, J. Holland, Philip Shelton, William (Clapham)
Bullus, Sir Eric Hornsby-Smith, Rt. Hn. Dame Patricia Smith, Dudley (W'wick & L'mington)
Butler, Adam (Bosworth) Howell, David (Guildford) Soref, Harold
Campbell, Rt. Hn. G.(Moray & Nairn) Howell, Ralph (Norfolk, N.) Speed, Keith
Carlisle, Mark Irvine, Bryant Godman (Rye) Spence, John
Channon, Paul Jones, Arthur (Northants, S.) Sproat, Iain
Chapman, Sydney Kellett-Bowman, Mrs. Elaine Stanbrook, Ivor
Clark, William (Surrey, E.) King, Evelyn (Dorset, S.) Stewart-Smith, Geoffrey (Belper)
Clarke, Kenneth (Rushcliffe) Kinsey, J. R. Stodart, Anthony (Edinburgh, W.)
Clegg, Walter Kirk, Peter Stuttaford, Dr. Tom
Cockeram, Eric Knox, David Sutcliffe, John
Cooke, Robert Legge-Bourke, Sir Harry Tapsell, Peter
Cooper, A. E. Le Marchant, Spencer Taylor, Edward M.(G'gow, Cathcart)
Corfield, Rt. Hn. Frederick Lewis, Kenneth (Rutland) Taylor, Frank (Moss Side)
Cormack, Patrick Lloyd, Ian (P'tsm'th, Iangstone) Tebbit, Norman
Critchley, Julian Longden, Sir Gilbert Thatcher, Rt. Hn. Mrs. Margaret
Crouch, David Loveridge, John Trew, Peter
Curran, Charles McAdden, Sir Stephen Tugendhat, Christopher
d'Avigdor-Goldsmid, Sir Henry McCrindle, R. A. Vaughan, Dr. Gerard
d'Avigdor-Goldsmid, Maj. -Gen. James Maclean, Sir Fitzroy Vickers, Dame Joan
Digby, Simon Wingfield McMaster, Stanley Walder, David (Clitheroe)
Dixon, Piers McNair-Wilson, Michael Walker-Smith, Rt. Hn. Sir Derek
du Cann, Rt. Hn. Edward Maddan, Martin Ward, Dame Irene
Eden, Sir John Marten, Neil Warren, Kenneth
Edwards, Nicholas (Pembroke) Mather, Carol Weatherill, Bernard
Elliot, Capt. Walter (Carshalton) Maude, Angus Wells, John (Maidstone)
Eyre, Reginald Maxwell-Hyslop, R. J. White, Roger (Gravesend)
Farr, John Meyer, Sir Anthony Whitelaw, Rt. Hn. William
Finsberg, Geoffrey (Hampstead) Mills, Peter (Torrington) Wiggin, Jerry
Fletcher-Cooke, Charles Miscampbell, Norman Wilkinson, John
Fookes, Miss Janet Moate, Roger Woodhouse, Hn. Christopher
Fortescue, Tim Money, Ernie Wylie, Rt. Hn. N. R.
Foster, Sir John Monks, Mrs. Connie
Fowler, Norman Montgomery, Fergus TELLERS FOR THE AYES:
Fox, Marcus Murton, Oscar Mr. Michael Jopling and
Fry, Peter Neave, Airey Mr. John Stradling Thomas
Gibson-Watt, David Normanton, Tom
Allen, Scholefield Harper, Joseph Pannell, Rt. Hn. Charles
Archer, Peter (Rowley Regis) Harrison, Walter (Wakefield) Parker, John (Dagenham)
Armstrong, Ernest Hattersley, Roy Parry, Robert (Liverpool, Exchange)
Atkinson, Norman Healey, Rt. Hn. Denis Pavitt, Laurie
Barnett, Guy (Greenwich) Heffer, Eric S. Peart, Rt. Hn. Fred
Bennett, James (Glasgow, Bridgeton) Horam, John Perry, Ernest G.
Bidwell, Sydney Houghton, Rt. Hn. Douglas Prentice, Rt. Hn. Reg.
Bishop, E. S. Howell, Denis (Small Heath) Prescott, John
Blenkinsop, Arthur Huckfield, Leslie Price, William (Rugby)
Booth, Albert Hughes, Mark (Durham) Rankin, John
Bradley, Tom Hughes, Robert (Aberdeen, N.) Reed, D. (Sedgefield)
Buchan, Norman Jeger, Mrs. Lena Rees, Merlyn (Leeds, S.)
Carmichael, Neil Jenkins, Hugh (Putney) Richard, Ivor
Castle, Rt. Hn. Barbara Johnson, Carol (Lewisham, S.) Rodgers, William (Stockton-on-Tees)
Cocks, Michael Bristol, S.) Johnson, James (K'ston-on-Hull, W.) Roper, John
Cox, Thomas (Wandsworth, C.) Johnson, Walter (Derby, S.) Rose, Paul B.
Cronin, John Jones, Rt. Hn. Sir Elwyn (W.Ham, S.) Ross, Rt. Hn. William (Kilmarnock)
Crosland, Rt. Hn. Anthony Jones, Gwynoro (Carmarthen) Sheldon, Robert (Ashton-under-Lyne)
Cunningham, Dr. J. A (Whitehaven) Judd, Frank Shore, Rt. Hn. Peter (Stepney)
Dalyell, Tam Kaufman, Gerald Silkin, Hn. S. C. (Dulwich)
Darling, Rt. Hn. George Kelley, Richard Skinner, Dennis
Davidson, Arthur Lamond, James Small, William
Davis, Clinton (Hackney, C.) Latham, Arthur Smith, John (Lanarkshire, N.)
Davis, Terry (Bromsgrove) Lawson, George Spearing, Nigel
Deakins, Eric Lever, Rt. Hn. Harold Stallard, A. W.
Delargy, H. J. Mabon, Dr. J. Dickson Steel, David
Dell, Rt. Hn. Edmund McBride, Neil Stewart, Rt. Hn. Michael (Fulham)
Doig, Peter Mackie, John Stoddart, David (Swindon)
Douglas, Dick (Stirlingshire, E.) Marquand, David Stonehouse, Rt. Hn. John
Douglas-Mann, Bruce Marsden, F. Summerskill, Hn. Dr. Shirley
Driberg, Tom Meacher, Michael Tinn, James
Dunn, James A. Mellish, Rt. Hn. Robert Tomney, Frank
Dunnett, Jack Mendelson, John Torney, Tom
Eadie, Alex Mikardo, Ian Urwin, T. W.
Edelman, Maurice Harper, Joseph Varley, Eric G.
Edwards, Robert (Bilston) Molloy, William Wallace, George
Ewing, Harry Morgan, Elystan (Cardiganshire) Watkins, David
Fisher, Mrs. Doris (B'ham, Ladywood) Morris, Alfred (Wythenshawe) Weitzman, David
Morris, Rt. Hn. John (Aberavon) Wellbeloved, James
Fitch, Alan (Wigan) Moyle, Roland Whitlock, William
Fletcher, Raymond (Ilkeston) Mulley, Rt. Hn. Frederick Willey, Rt. Hn. Frederick
Foot, Michael Oakes, Gordon Williams, Alan (Swansea, W.)
Fraser, John (Norwood) Ogden, Eric Williams, W. T. (Warrington)
Galpern, Sir Myer O'Halloran, Michael Wilson, Alexander (Hamilton)
Garrett, W. E. O'Malley, Brian Wilson, William (Coventry, S.)
Gilbert, Dr. John Oram, Bert Woof, Robert
Golding, John Orme, Stanley
Grant, John D. (Islington, E.) Oswald, Thomas TELLERS FOR THE NOES:
Griffiths, Eddie (Brightside) Padley, Walter Mr. T. D. Concannon and
Grimond, Rt. Hn. J. Paget, R. T. Mr. Tom Pendry.
Hamilton, William (Fife, W.) Palmer, Arthur

Bill accordingly read a Second time.

Bill committed to a Standing Committee pursuant to Standing Order No. 40 (Committal of Bills).

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