Gas Appliances (Report)

HC Deb 08 July 1981 vol 8 cc405-14

The Minister for Consumer Affairs (Mrs. Sally Oppenheim)

With permission, Mr. Speaker, I should like to make a statement on the action which the Government have decided to take following the report of the Monopolies and Mergers Commission on the supply of certain domestic gas appliances, published last year.

I told the House on 17 June of the public interest findings made by the commission in its report. It considered that the British Gas Corporation's monopoly had acted against the public interest by restricting competition in the retailing of appliances. This had limited the number of independent outlets and suppressed competition and probably had increased prices.

The commission also considered that the manufacturers' over-dependence on the BGC had indirectly led to poor export performance on the part of manufacturers, reduced incentives to improve efficiency and depressed investment and that this was against the public interest.

I told the House on 17 June of the options put forward in the MMC report. The Government have considered these and others with great care, bearing in mind that the Government's objective and first responsibility must be to respond to, and remedy, the adverse findings in the commission's report in a way consistent with the need to give consumers wider choice, better service, safety, availability and convenience and, at the same time, to minimise as far as possible any adverse effects of any change on our own manufacturing industry and the employees of the British Gas Corporation.

I should like to repeat the statement which I made in the House on 17 June that no solution that failed to maintain safety, at least at its present level, that generally inconvenienced consumers or that was seriously damaging to manufacturers would be acceptable to the Government.

Having considered carefully and consulted widely, the Government have concluded that in order to remedy the adverse effects identified by the commission the BGC should withdraw from its current retailing operations but that the timetable of three years in the MMC's first option is too compressed a period.

The Government have decided, therefore, that the corporation should be required to cease retailing domestic gas appliances and to dispose of its showrooms over a five-year period. [HON. MEMBERS: "Oh!"].

Mr. Speaker

Order. Hon. Members must hear the statement before they can ask questions about it.

Mrs. Oppenheim

This would be a carefully structured and phased programme of withdrawal, with the corporation being required to dispose of half its showrooms within two years, a further quarter in the following year and the remaining quarter in the final two years. The Government will, if necessary, introduce legislation to give effect to this decision.

As a counterpart to these steps, the Government are also considering measures under the Fair Trading Act to counteract certain adverse effects of the gas appliance manufacturers' monopolies identified by the commission.

The Government are clearly concerned to minimise the impact of their decision on employment. In this context, I must stress that the Government are not proposing to curtail British Gas's servicing and installation activities. The decision will therefore have a direct bearing only on those who are employed in appliance retailing, mainly in British Gas's showrooms.

The Government would wish British Gas to maintain some consumer contact points, and, since the corporation has stated that 80 per cent. of showroom staff's time is spent on activities other than retailing, the number of jobs which could be affected should be minimised. Nevertheless, the Government recognise that concerns about employment are deeply felt by the corporation's employees, although, in the Government's view, those fears are largely unfounded.

The Government will consult British Gas and the unions closely at all stages about the detailed implementation of these decisions so that the impact on employment prospects can be minimised.

The Government are well aware that a change of the kind that they have decided upon will represent a radical move away from the gas appliance market as we know it today. But the Government would not have reached the decision which they have reached if they did not believe it to be right, justified and necessary and a measure essential to the enhancement of competition in the public interest.

We believe also that as this sector evolves away from its present monopoly-dominated structure there will be positive benefits alike to the consumer and to gas appliance manufacturers, as competition between retailers develops to meet consumer needs and satisfy consumer demand, providing, as enhanced competition always does, wider choice and better service.

Mr. John Smith (Lanarkshire, North)

Is the Minister aware that that is one of the most appalling and spiteful decisions ever announced by the Government? It is further evidence of the spite and animus that exist within the Government towards the British Gas Corporation, one of our most successful industries. Following hard on the heels of the decision to force the corporation to dispose of the Wytch Farm oilfield, the corporation is to be forced to give up a profitable and successful retailing business in order to satisfy the Government's ideological requirements.

Does the Minister realise that there is no provision in her statement to counter the legitimate fears about safety which have been expressed ever since this matter was first raised? Is she aware that recent statistics show that private sector gas installers have 15 times more accidents than the British Gas Corporation in the installation of appliances?

Is the Minister aware that the decision to remove the profitable retailing arm from the British Gas Corporation and to leave it with responsibility for safety, service and installation is disgraceful? The corporation will not make the profits from retailing to provide proper service and installation cover, and after the private firms have made a quick profit British Gas, for years afterwards, will have the responsibility for service, maintenance and safety.

Is the Minister aware that thousands of jobs, not only in the British Gas Corporation but in the gas appliance manufacturing industry, will be thrown away needlessly by this decision? Does she realise that 1,000 school leavers are taken on each year by the British Gas Corporation in the servicing and installation departments? Does she agree that such jobs cannot be guaranteed? Carelessly to throw thousands of good employees out of a job to satisfy the Government's ideological whim demonstrates the nadir which the Government have reached.

Is the Minister aware that as a result of the decision British gas appliance manufacturers will be displaced in the market place by a flood of foreign imports brought in by private sector retailers?

Who is in favour of the decision, apart from the Government and private sector interests which will benefit from it? Is it surprising that both the gas consumers' councils and the National Consumer Council have come out violently against the decision which the Minister has announced? Does she agree that the decision is a remarkable humiliation for the Secretary of State for Energy, particularly in view of the Minister from whom the humiliation is delivered?

Is the right hon. Lady aware that the decision will be met with united and determined opposition from the whole Labour movement? Does she realise that in an industry where industrial relations are a model it is likely that industrial action will be taken by employees affected by the decision? Is she further aware that the Labour Party will seek to reverse the decision as soon as it has the power to do so? Finally, will not this appalling decision lead to lower safety standards, worse service, higher prices and poorer choice for consumers?

Mrs. Oppenheim

I shall attempt to answer the right hon. Gentleman in a shorter time than he took to put his questions.

First, this is not a party political matter. The reference was made to the Monopolies and Mergers Commission by the Labour Government. The commission is an independent body. Is the right hon. Gentleman saying that a Labour Government, on receipt of a report containing such adverse criticism, would do nothing on behalf of the consumer?

On the question of safety, I consulted Dr. Philip King, senior lecturer in chemical engineering at the University of Manchester, who is responsible for two major reports on gas safety to both Labour and Conservative Governments. Dr. King said that, in his view, with adequate safeguards there should be no safety problems inherent in the sanction of private gas installation. I have already explained the safeguards.

The right hon. Gentleman is wrong not only in his facts but in his assumptions. The Government do not believe that the employment consequences of the decision will be anything like those which have been advanced. If the same number of gas appliances are used and installed, substantially the same number of engineers will be employed. A number of hon. Members will wish to ask more about that. The Government will not accept a standard which is lower than the present standard. There is no reason why the consequences for employment should be anything like those put forward, and inflamed, by the right hon. Gentleman today.

Mr. Anthony Grant (Harrow, Central)

Is my right hon. Friend aware that her decision will be welcomed by all those who put the interests of the consumer before the interests of nationalised monopolies, unless they have swallowed the outrageous propaganda campaign of the British Gas Corporation? Will she reassure the public about safety by explaining the principal cause of gas accidents? Is it installation or something else? Is it not a fact that the services of people who are doing useful and necessary jobs now will be required by the private sector?

Mrs. Oppenheim

I can reassure my hon. Friend on both matters. The Government will, of course, want to ensure that safety is achieved by the observance of codes of practice, either voluntary or statutory if necessary, and by higher standards for appliances, if that proves necessary. Dr. King has confirmed that the connection of gas appliances, except in the case of central heating appliances, 92 per cent. of which are installed by the private sector, does not present a safety problem.

About 95 per cent. of appliances are sold for central heating, which represents the potentially dangerous sector of the market, and are already installed by the private sector. If the decision results in the Government's achieving a more comprehensive safety record among the few cowboys in the private sector—not the Council of Registered Gas Installers approved installation engineers to whom the British Gas Corporation subcontracts—the decision will be in consumers' interests.

I refute the figures relating to unemployment. The British Gas Corporation will be bound to keep a substantial proportion of people employed to deal with inspections, emergencies, maintenance and warranty claims and for service contracts on sales that have taken place in the last five years. There is no reason why the BGC, although no longer retailing appliances, should not stay in the service and installation market.

Several Hon. Members

rose—

Mr. Speaker

Order. I remind the House that two Supply day debates on regional policy and higher education, in which there is considerable interest, are to take place later. In addition, we have an opposed Ten-Minute Bill. If there is a Division on that, that matter could take over half an hour. I propose to allow questions on the statement to continue until 4.5 pm, and then we must move on.

Mr. Arthur Palmer (Bristol, North-East)

Does not the right hon. Lady know that the best practice throughout the world is to keep an integrated process of collection, distribution and utilisation? Will not the practical result of the Government's policy be to push up prices and costs all round? Why do the Government, and particularly the Minister, have such hatred of publicly owned industries. to the despair of those who work so hard within them?

Mrs. Oppenheim

As far as I know, in no other country in the free world does the supplier of gas also have a retailing monopoly. There is no justification for it. But that is not what determined the Government's decision. It was determined by the adverse effect of this monopoly on the consumer and, in particular, on consumer choice and price. There is no case of which I know where active competition does not enhance service, widen choice and raise standards.

Mr. Nigel Forman (Carshalton)

Is my right hon. Friend aware that it is welcome to see the Government acting in response to the recommendations of the Monopolies and Mergers Commission and in the consumer interest? Will she assure the House that she will look carefully at the need to make the codes of practice on safety statutory rather than voluntary? That would go a long way to reassuring people. Will she reassure the House that she will not be deflected from this sensible decision by any hysterical union pressure?

Mrs. Oppenheim

I can reassure my hon. Friend. The Government are adamant that safety standards should not fall. It is important, however, that anyone connecting gas appliances should follow the codes of practice and exercise care, particularly in initiation procedures. The Government are considering whether the codes should remain voluntary or become statutory and whether higher standards for both performance and safety of appliances might be introduced.

Mr. David Penhaligon (Truro)

Is the Minister aware that the decision is final proof that she has lost all grasp of what is happening in Britain today? Will she explain how the instruction to the BGC to sell its showrooms will help the 3 million unemployed and stop the daily riots? How can the Minister possibly enforce the safety regulations to which she referred in her statement?

Mrs. Oppenheim

First, the hon. Gentleman is wrong, as are a number of other people, in his assumptions about the consequences for employment. If consumer demand remains at its present level —demand for gas appliances such as cookers has remained level and I would expect it to rise—private sector retailers will meet the demand, and that will benefit those employed in the manufacturing industry. We are talking about a transition of employment from the public sector to the private sector, not about unemployment.

I pay tribute to those who work for the corporation. Those who are planning and taking initiatives to expand in the private sector—they include some co-ops—are to be congratulated on their initiative. It is to them that we shall look to create the secure jobs of the future.

Mr. Terry Davis (Birmingham, Stechford)

If it is the Minister's intention to stop the British Gas Corporation selling appliances and the showroom staff spend 80 per cent. of their time on other activities, why is she insisting that the corporation must close its showrooms?

Mrs. Oppenheim

The hon. Gentleman must have misheard me, which is understandable in the circum-stances. It is 80 per cent. of the time that is spent on other activities. Much of this time is spent on emergency work, on safety and installation, and on dealing with suspected leaks. That is carried out not in the showrooms but by the British Gas Corporation separately. Those services will still be maintained and will have to be maintained. Many of the corporation's liabilities, both under the Sale of Goods Act 1979 and under the warranty and service contracts on which it has already embarked, will continue for a number of years.

The Government have lengthened the period put forward in one of the commission's recommendations to allow a period for adaption and transition to the more active and competitive private sector retailing markets. I see no reason why a substantial number of those currently employed by the corporation in retailing, installation and maintenance should not be employed in the private sector, while a considerable hard core will have to be maintained in employment by the corporation.

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

Will my right hon. Friend confirm that the State corporation, Gaz de France, does not sell appliances, nor the subsidiaries of ENI, the Italian State corporation? Will she also give an assurance that CORGI will be maintained and will remaining independent? Will she also tell the House whether she wishes to pursue this course by means of a statutory instrument or by a Bill?

Mrs. Oppenheim

Yes, CORGI will be maintained. It is true that the retailing of gas appliances in France is carried out entirely by the private sector. According to information that I was given recently, in one private sector showroom in France 100 different gas cooker models were available. In this country, within a square mile of an average small city there are 35 different electric cooker models available, and over 200 are available for delivery within a week. That is what the private sector does and that is the sort of choice of gas appliances that I hope will be available to the consumer.

Mr. Arthur Lewis (Newham, North-West)

In her statement the Minister said that she had consulted everyone concerned. Is she aware that we all know from the now almost daily press handouts and leaks that that includes the trade unions? Is she further aware that in this industry the unions concerned are known as moderate unions but that they have stated that if this decision is implemented they will all call an official strike throughout the industry? Has the Minister considered that aspect?

Mrs. Oppenheim

First, let me reassure the hon. Gentleman. I have had long meetings with the trade unions concerned, meetings which I found valuable and useful. I agree with what the hon. Gentleman said about the unions. They are moderate and responsible; they have a reputation for moderation, responsibility and concern for the public interest, which I respect and of which I had evidence when I met them. Of course I sympathise with their concern. However, I cannot believe that they would embark on action—although obviously one cannot rule it out—that would be detrimental to the interests of the individual and their own colleagues in industry, as well as to the economy as a whole, on the basis of suggestions and beliefs which have yet to be shown to have any foundation.

Mr. Tom Ellis (Wrexham)

Why will not the Minister allow the corporation to remain in the gas appliance business in competition with the private sector?

Mrs. Oppenheim

The corporation will be in competition with the private sector over the next five years. Only at the end of the five-year period will these activities be phased out. As I have already told the House, in no other country in the free world of which I am aware is there a retail presence by a provider of the main utility.

The main reason for the Government's decision is that the Monopolies and Mergers Commission reached adverse public interest conclusions about the way in which the British Gas Corporation retail monopoly operated against the public and consumer interest. The Government had to take steps that they considered most appropriate to remedy that.

Mr. John Wilkinson (Ruislip-Northwood)

I declare an interest as a consultant to the Society of British Gas Industries, the trade associaion for the private sector of the gas industry. Is my right hon. Friend aware that many of us feel that these tactics of salami—slicing the public sector are the wrong way of tackling the serious problems of monopoly that characterise the public sector? Is she further aware that we would prefer the possibility of the British Gas Corporation being enabled to raise private equity capital on the market? Will my right hon. Friend acknowledge that there has been considerable investment by manufacturers of cookers, that the efficiency of gas appliance manufacturers has dramatically improved in recent years, and that there is a danger of serious import penetration, which should be recognised?

Mrs. Oppenheim

My hon. Friend underestimates the manufacturing industry, for which he is speaking today. I have confidence that the industry will be capable of exploiting the new market that is open to it and of meeting consumer demand and consumer need more effectively than it has in the past. I believe that in the end the industry will welcome this change. It will be to its advantage and to the advantage of the economy as a whole.

I agree with my hon. Friend that there has been a noticeable improvement, particularly since the Monopolies and Mergers Commission report. What it is important for the Government to consider is how to maintain and sustain that improvement.

Mr. Robert C. Brown (Newcastle upon Tyne, West)

Following the hon. Member for Ruislip-Northwood (Mr. Wilkinson), I had better declare my interest as secretary of the General and Municipal Workers Union parliamentary group. That union represents 50 per cent. of the workers in the gas industry.

The right hon. Lady's statement was probably as bogus a statement as the House has ever heard. The right hon. Lady expresses concern about employment. I do not believe that she has any concern about employment. [HON. MEMBERS: "Reading."] I am not reading. I do not have to, because, unlike the right hon. Lady, I know the industry.

Can the Government implement the decisions announced in the statement without introducing legisla-tion? The statement refers to consulting the unions in the industry about the implementation of the proposals. Does not the right hon. Lady realise that that is tantamount to saying that having decided to castrate the industry financially she will consult it as to whether a bread knife or a meat cleaver will do the job?

Mrs. Oppenheim

I shall not accept any lectures from the hon. Gentleman about who feels concern about employment, as the section of the Labour Party led by the right hon. Member for Ebbw Vale (Mr. Foot) put forward last weekend policies that would create the highest unemployment that we have ever had.

Of course one is concerned, but it is not the Government's view that our decision will lead to greatly increased levels of unemployment, or even substantial levels of unemployment. The question is how swiftly the transition can take place and how much co-operation will be shown by Sir Denis Rooke and the corporation in ensuring that the transition is smooth. I cannot believe that Sir Denis and the corporation, taking account of the safety assurances, employment assurances and availability assurances that I have given, would want to do other than to assist in the smoothest possible transition and—we hope—to obviate the need for legislation.

Mr. Tim Eggar (Enfield, North)

Will my right hon. Friend accept the congratulations of the vast majority of Conservative Members on her extremely courageous statement? Will she go on to confirm that she will make it clear to Sir Denis Rooke and the senior management of British Gas that they are expected to comply with and agree with the statement that she made today, in exactly the same way as all hon. Members would expect a private sector company's senior management to comply if the Monopolies and Mergers Commission reported against a private sector monopoly?

Mrs. Oppenheim

Negotiations with the chairman of the British Gas Corporation are a matter for my right hon. Friend the Secretary of State for Energy, but I trust that my right hon. Friend will not have to make those points in such a forceful way. It would be unusual, and I should be surprised, for the chairman of a great public undertaking to seek in any way to frustrate the decision of a democratically elected Government. I believe that the safeguards that the Government have implied, and negotiations and consultations with both the corporation's management and the unions at every stage, should ensure that the transition is as smooth as it should be, in the public interest.

Mr. loan Evans (Aberdare)

Does the right hon. Lady realise that what she has announced today is Right-wing reactionary Tory dogma? If she reads the report of the Monopolies and Mergers Commission, she will see that options were suggested. Will she cease calling herself "Minister for Consumer Protection", because she is denying the consumer protection? She is doing that by destroying the choice of gas facilities now available in the gas showrooms, a choice which will no longer be available in many rural areas and cities if her plan goes through. Will the right hon. Lady, even at this stage, reconsider her policy, which is detrimental to consumers?

Mrs. Oppenheim

I have read the report thoroughly. I agree that the commission put forward a number of options, but, as I made clear in my statement today arid in the House on 17 June, it is the Government's responsibility to take a decision in the public interest, on the basis of the report of an independent body. The Government have taken this decision to protect the consumer's interest, which, according to the report, was being undermined by the dominant and overbearing position of the British Gas Corporation in the retailing of gas appliances. That was probably putting up prices and definitely reducing choice—as one can see if one compares it with the choice of electrical appliances. The commission operates in the public interest, and mainly in the interests of the consumer.

Mr. John Smith

Why is the consumer to be deprived of the choice of British Gas appliances? Will the right hon. Lady answer the question that has been put several times in these exchanges: is legislation required, and, if so, when will it be introduced?

Mrs. Oppenheim

The answer to the right hon. Gentleman's first question is that the consumer will not be deprived of the opportunity to buy British Gas appliances. Indeed, the opportunity to do so will be increased instead of being curtailed. If the status quo is allowed to continue, those in the private sector who cannot always obtain what they want from manufacturers, because of the corporation's monopoly, will increasingly turn to imports.

I made it clear in my statement that if legislation proved necessary the Government would introduce it. As for the precise date, the right hon. Gentleman will not expect me to anticipate the next Queen's Speech, but I can say that consultations between my right hon. Friend the Secretary of State for Energy and the chairman of the corporation have already begun. The consultations may obviate the need for legislation. I hope that they will, but the Government are not counting on that, and, if necessary, and when appropriate, they will be prepared to introduce legislation.

Several Hon. Members

rose—

Mr. Speaker

Application under Standing Order No. 9—

Mr. Peter Hardy (Rother Valley)

On a point of order, Mr. Speaker. I think that you would agree that you would not be straying beyond the bounds of impartiality if you agreed that the right hon. Lady took an inordinately long time to answer most of the questions. You will also agree that many Opposition Members still wish to ask questions on this serious, indeed outrageous, matter. In view of the Minister's long answers, are you prepared to extend the time available for questions for another five or 10 minutes?

Mr. Speaker

The difficulty is to be fair to those who wish to speak later in the debates on regional policy and higher education. Many right hon. and hon. Members wish to take part in those debates. That is why I put on the time limit. I think that we had better stick to it, because we cannot debate this matter today.

Mr. D. N. Campbell-Savours (Workington)

On a point of order, Mr. Speaker. Is it in order for the right hon. Lady to make a statement with clear employment implications and yet not state how many thousands of jobs will be lost?

Mr. Speaker

Order. The hon. Gentleman is making the point that he would have made if I called him to ask a question.

Several Hon. Members

rose—

Mr. Speaker

If hon. Members have genuine points of order, I shall listen to them, but it will be very unfair to the House if hon. Members waste time on points of order that are not genuine.

Mr. Douglas Jay (Battersea, North)

On a point of order, Mr. Speaker. Is it not entirely inappropriate and unsatisfactory for the right hon. Lady to announce a policy and then be unable to tell the House whether it requires legislation?

Mr. Speaker

The right hon. Gentleman is extending the question period. That is not a point of order on which I can rule, as well he knows.

Mr. Arthur Lewis

On a point of order, Mr. Speaker. This is a point of order that is within your jurisdiction. We all know that, technically, any hon. Member who wishes to raise any matter in the House has to obtain your permission. We all know that, technically, Ministers have to do likewise. We know that Ministers invariably obtain your permission.

During your remarks at the start of the business, Mr. Speaker, and also subsequently, you rightly mentioned the difficulty of the Chair when a statement is made that is known to be controversial and will take up Members' time. You have to protect the interests of Back Benchers. Surely the Government should be advised—if not from the Chair, through the usual channels—that if they spend two or three weeks leaking the statement, as is the case in this instance and in others, they should not choose an Opposition Supply day on which to make the statement. They should be fair and reasonable to the Chair. They should say that they wish to make a statement which they know to be controversial and ask you, Mr. Speaker, to suggest a day that will not be too inconvenient and will not take up Opposition time.

Mr. Speaker

As I have reminded the House many times, the hon. Gentleman and I became Members on the same day. He is an experienced Member. I am grateful to him for what he has said, except that I do not want the responsibility of deciding on which days statements should be made.

Mr. Andrew Faulds (Warley, East)

Further to that point of order, Mr. Speaker. You know my warm regard for you, Sir, and that I always approach you with due temerity. May I suggest that there is a somewhat arbitrary element in your deciding a term for questions, which is now an increasing custom of yours, when you cannot know the pressure of the demand from the Floor of the House to ask questions on a specific subject. Is it not a questionable procedure that you have adopted, Sir? I ask that with due regard.

Mr. Speaker

May I say with equal temerity that I was well able to gauge the pressure because it was after I had seen how many Members stood that I estimated how many Members I could call. The points of order have already prevented one Member who wishes to speak in the debate on regional policy from doing so.