HC Deb 10 December 1985 vol 88 cc767-853

Order for Second Reading read.

Mr. Speaker

Before I call the Secretary of State, I should tell the House that I have selected the amendment in the name of the right hon. Member for Tweeddale, Ettrick and Lauderdale (Mr. Steel).

3.46 pm
The Secretary of State for Energy (Mr. Peter Walker)

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

The gas industry has had a very long connection with this House, and due to its nature it has always had a connection with Government. Indeed, a committee of 1847 was asked to look into the difficulties of a number of gas companies that were competing down the same streets, with the result that those streets were always in a state of disrepair, but in reality, no benefit was obtained in the longer term because of the manner in which a street was eventually served by a single supplier.

As a result of that committee of inquiry in 1847, and because it was unlikely that there would be several suppliers for each street, subsequent Governments decided that there was a need for some form of price regulation upon the activities of the gas industry. There was a considerable expansion of the gas industry while it was in the private sector before it was nationalised in 1948. A colossal investment went into that industry, and a large section of the public was supplied by it, primarily under local or private enterprise control. Mr. Gaitskell, the then Minister of Fuel and Power, who moved the nationalisation Act in 1948, pointed out that Parliament's first approval of a gasometer was for the one in Great Peter street that supplied the gas lighting for Westminster bridge.

During that period there is no doubt that the enterprise and initiative of the gas industry throughout the country brought considerable benefit. If one reads the 1948 measure, one will see that the reason for nationalisation was to comply with the mood of the then Labour Government, who thought it was sensible and right to bring all these things under public and national control as part of an overall programme of nationalising all our major energy industries.

Looking back on the hopes and aspirations expressed, and the speeches made, in those nationalisation debates, it is sad to reflect that in practice the idealistic hopes of those who nationalised in the 1940s have not been achieved. In reality, we have not seen the ownership of industries by the people, the employees or the customers, but direct ownership primarily in the hands of the politician and the civil servant. For that reason, my view is that, rather than coming under the constant pressure of Whitehall and the current politician in charge, it is far better in the interests of the country to ensure that commercial managers have charge of those industries.

The Department started to consider in July 1983 the feasibility and nature of the privatisation that should take place. In September 1983, I set up a section of the gas division in my Department to make a thorough examination of all the options and to consider the advantages and disadvantages of a private sector gas industry as operated in other countries. That section examined the world gas industry for several months. It considered gas industries in the private sector or under municipal control and all the regulatory authorities, and reached conclusions on the advantages and disadvantages, the mistakes and success stories.

We also considered how the gas industry is organised in Britain and the advantages and disadvantages of dividing it into regional companies, or into companies with different functions, or overall privatisation. The industry was examined thoroughly between September 1983 and April 1985, when I presented a major paper to my Cabinet colleagues giving the options and the arguments in favour of privatisation.

The fundamental advantage offered by the Bill is that it will ensure that people employed in the industry, managers and customers will be able to participate directly in the industry's success. That is a much better system than the present one, which involves politicians and civil servants. The fact of a nationalisation, whether under Labour or Conservative Governments, is that there are three levels of management. There is the board, then there is the sponsoring Department, which crawls over most of what the board wants to do — whether it be pricing policies or investment programmes—and then there is the Treasury which crawls over what the Department has crawled over.

I well remember when, in 1970, I first became a Minister responsible for a nationalised industry, I was asked to approve capital investment by British Rail in a new railway station, I had a 120-page report from my Department which criticised the BR proposal in some detail but which nevertheless concluded that, in view of the delays that had already taken place, the Secretary of State should approve the station. I asked whether anybody in my Department knew how to build a railway station. There was nobody with commercial experience of building such stations. If I had had such people in my Department, it would have been much better if they had been working for BR, building stations. Having completed my examination, however, I had to get Treasury approval for my consent. That example demonstrates the enormous interface between any nationalised industry and its sponsoring Department and between that Department and the Treasury, which serves only to interfere with the speed of decision taking.

Mr. Tony Marlow (Northampton, North)

I am sure that all my right hon. and hon. Friends are convinced by the logic of my right hon. Friend's argument. When does he intend to bring forward a coal Bill to put the coal industry into commercial management? My right hon. Friend said that there were arguments about why the industry should be denationalised in one chunk rather than broken up into regional companies. Will he advance those arguments?

Mr. Walker

Yes. I shall advance those arguments later. We are not discussing the future of the coal industry today. I have given my views and those of the Government from the Dispatch Box several times.

Mr. Eric S. Heffer (Liverpool, Walton)

Does the Secretary of State agree that the conversion to North sea gas, which took place under the gas corporation, was a thorough success? There is no great demand for privatisation from customers because they are well satisfied with the service provided by the board. The gas industry is one of the great successes of nationalisation. Will the right hon. Gentleman admit that the reason for the Government's proposal is sheer dogma and nothing else?

Mr. Walker

The conversion to North sea gas was a substantial success for the corporation and for the mass of private contractors who dealt with it throughout the country. To my knowledge, there was only one failure —when my own house was nearly blown up as a result of a mistake. [HoN. MEMBERS: "Who did it?") Alas, it was the gas corporation. I am not criticising the many successes of the industry. Like all major industries, private or public, it has had its successes and its failures. Free of interference from Conservative or Labour politicians, it will be in an even better position. I welcome the fact that a large number of the managers and employees and, if they wish, the customers will for the first time have the opportunity to participate directly.

It has been argued—incredibly—that consumers will not have the protection that they have enjoyed under nationalistion. The record of the House of Commons shows that for the past 20 years, whenever the Conservatives have been in power, the Labour Opposition have strongly criticised the enormous increases in gas prices, and that, whenever Labour has been in power, the Conservatives have criticised the enormous increases in gas prices. The Alliance has been in the happy position of being able to condemn both Governments for constantly increasing gas prices. It is entirely untrue that nationalisation has protected consumers from major increases in gas prices.

The 1976–77 annual report and accounts of British Gas states: the Corporation increased gas prices under their published tariffs by an average of 12.3 per cent. on 1st October 1976. At that time it was intended that, subject to the Government's management of the economy, no further increase would take place for 12 months. However, on 15th December 1976 the Chancellor of the Exchequer announced in connection with negotiations for the IMF loan that the Government was asking British Gas to raise prices to increase the rate at which the corporation repaid capital to the National Loans Fund to the extent of £100 million". This resulted in a further 9.6 per cent. increase in gas prices. In other words, gas prices increased by 22 per cent. in six months. What protection was provided by nationalisation then? Throughout the present Parliament, the Opposition have criticised the way in which gas prices have been increased. Events under Governments of both parties show that nationalisation is not super for the consumer. Both parties have argued in opposition that nationalisation has been bad for the consumer.

Mr. Tony Baldry (Banbury)

In the debate on the Loyal Address in 1946, Churchill described the Labour Government's proposal to nationalise the gas industry as a fraudulent deception on the housewife. Does my right hon. Friend agree that the whole history of nationalisation has proved that prognosis to be correct? The wonder is not that we are privatising the industry but that it has taken 39 years to get around to it.

Mr. Walker

It is certainly difficult to argue that nationalisation has brought any great benefit to the consumers. Our legislation will provide a form of price control and protection for the consumer. British Gas will continue to be the main supplier of tariff customers throughout the country. We have, therefore, built in powerful safeguards to protect consumers against abuse of that monopoly position. The legislation requires that there must be fair treatment between customers and rules out undue preference for or discrimination against individual customers or classes of customer.

The overall level of price is subject to a maximum set by means of a pricing formula in the licence. Price control will operate by controlling changes in tariff gas prices and by reference to changes in the retail price index and gas costs. However, it will also build in, for the benefit of the consumer, a share in the benefit from the improved efficiency of British Gas. It will give clear protection, therefore, to consumers, as well as the benefit of improved efficiency, while retaining fairness for those who invest in the gas industry.

Mr. Max Madden (Bradford, West)

Does the pricing formula to which the Secretary of State has referred cover all categories of customers? If it does not, what is his justification for excluding certain customers?

Mr. Walker

I shall be dealing in a few moments with the one area that the formula does not cover.

Mr. Robert Sheldon (Ashton-under-Lyne)

When dealing with the price to the consumer and the advantages to shareholders, will the Secretary of State bear in mind the price at which it will be offered to the shareholders? We are dealing with public assets that are equivalent in a normal year to the sale of gilts. When the Government sell gilts they receive very fine prices indeed—to within one eighth of 1 per cent. However, when public assets are sold they can be sold for as cheap as half price. Will the Secretary of State regard the sale of public assets, whatever they are, as of importance to the taxpayer in order to make sure that taxpayers receive the full value that those assets represent?

Mr. Walker

The right hon. Gentleman referred to the full value of the assets. However, he is aware that the full value of an asset cannot be specified without looking at what that asset yields, what it produces, what the future of that asset will be, what its replacement cost will be and a range of complicated factors. These factors will be carefully considered when a decision is taken about the nature and the price of the offer. Therefore the formula which we have provided to protect the tariff market, which affects all domestic users and a number of commercial and industrial users, will be subject to the price discipline which will be in the power of the regulator.

In addition, we have provided in the legislation for both standing and connection charges. Standing charges are included in the overall price control formula. Standing charges are important for small consumers in particular, for whom we have introduced a further level of control. The licence will restrict the increase in standing charges to no more than the rate of inflation. The nondiscrimination provisions 'will also prevent the company from treating any consumer unfairly.

Mr. Alan Williams (Swansea, West)

Will the Secretary of State bear in mind that the protection that he is offering to the consumer is an average increase in price? This is exactly what happened with British Telecom. There has been no protection for the domestic consumer, whose increases have been double or treble those imposed upon the business consumer. That applies also to the standing charge. As the standing charge is a charge against capital that has already been invested, there is no justification whatsoever for allowing an increase that is equal to the rate of inflation.

Mr. Walker

I am grateful to the right hon. Gentleman for making a comparison with British Telecom. Having studied the legislation relating to British Telecom and the licence, the right hon. Gentleman knows that it was made very clear that, because there was an imbalance in the charges to commercial and domestic consumers the formula to be applied in British Telecom's licence for the first period would endeavour to achieve a readjustment. That was made clear in the licence and it was discussed at great length in the heated debates upon that issue. I am delighted to be able to inform the right hon. Gentleman that with British Gas there is no imbalance between commercial and domestic consumers and that this formula will hold good for the domestic consumer.

Mr. Williams

What will the extra safeguard be? There is the same average requirement. The licence will contain nothing that will force the gas company to conform to the advice that the Secretary of State is now giving. It could do whatever it felt was in its commercial interests.

Mr. Walker

If the right hon. Gentleman examines the licence carefully, and the legislation, he will find that the regulator has the power to fix the maximum price. He will have available to him all the information that he needs to fix the maximum price. The fact that there is to be a maximum price and that there will not be an imbalance between commercial and domestic users will protect the position.

It is argued that this is a great monopoly and that there will be no alternatives to it. However, one only has to look at television advertising to see that there is immense competition between gas, electricity, oil and coal in both the domestic and the industrial markets. If British Gas is to succeed, it will need to try not only to retain but to increase its share of the market. The idea that it will do so by increasing its prices is wrong, because it has no monopoly of energy supplied. It operates in an area of very fierce competition.

Mr. Robin Maxwell-Hyslop (Tiverton)

My right hon. Friend could help the House about one point. Competition in tinned tomatoes is a matter of buying one brand rather than another, but if one has a gas central heating system one cannot just switch to electricity; the capital cost is enormous. Therefore, to prohibit the cross-subsidisation of the domestic consumer compared with other classes of consumer is a very real problem. We have corresponded about this matter, and I am grateful to my right hon. Friend. However, I should like the House to know what protection is to be provided, because I am not sure myself, in what is not a competitive situation, like buying different products in a shop. Moreover, if there is no gas connection and the price of obtaining a connection is excessive, there will be no competition with electricity. These are the realities.

Mr. Walker

In reality, if one looks at the commercial nature of British Gas, the electricity supply industry and the oil industry, one has to consider carefully, if one has only one form of heating, the factors involved in moving to a different form of heating. However, each year there is a substantial market of people who are installing central heating for the first time. There is also an expanding market of people who are replacing their existing systems. May I also point out, in Energy Efficiency Year, that if any domestic heating system is more than 10 years old if can almost certainly, due to the newest technology, be replaced by a new one, which will be more than self-financing.

If one is running British Gas, one is desperate to obtain an increasing share of the new market that comes on stream every year. Failure to do so results in damage to the business. All the competitors are desperate to obtain new business and to keep their share of the market. If the price of gas were increased for all those who already have it, the new gas company could not discriminate under the legislation in favour of new customers. We shall prevent discrimination of that nature. In addition, the regulator will have the power to investigate the gas supply accounts —they will have to be kept separately—and decide whether there has been any form of cross-subsidisation. My hon. Friend will therefore find that substantial protection has been provided.

Mr. Maxwell-Hyslop

The regulator will have the power to investigate, but can he stop cross-subsidisation?

Mr. Walker

If my hon. Friend examines clause 9, he will see that considerable power will be given to the regulator to stop it.

Mr. Tony Benn (Chesterfield)

The Secretary of State knows that it is much more complicated than that. For example, the Central Electricity Generating Board would have liked over a long period to convert to gas-fired power stations. They would have been much cheaper than other options. That was prevented, because no Government wanted gas to be used in that way, or gas stocks to be depleted at a rate which is controlled by the Secretary of State. If we are talking about a free market, does it mean that the CEGB will be able to close down its existing power stations and open gas-fired power stations without restraint and that the rate at which our limited gas resources can be depleted will be lifted, which will mean that the new gas company can deplete gas resources at any rate that it chooses?

Mr. Walker

I am delighted to say that, because of the mass of improvements in the cost effectiveness of coal, there would be a competitive position there. No one will rejoice more than the right hon. Gentleman about the improvements in the coal industry.

Connection charges are important. It has been suggested that the imposition of a connection charge could prevent someone from obtaining his rights. We have come up with a formula that will provide protection for customers. The corporation will have to set out the principles that it will apply to those charges.

There will be a substantial improvement in pricing compared with what happened under nationalisation. We have decided to set up a new consumer body. We have carefully examined the operations of former consumer bodies and obtained their advice, knowledge and information. We have spoken in great depth to consumer organisations and, obviously, to British Gas. British Gas is anxious to retain contact with the consumer, because it believes that a good consumer relationship greatly benefits the industry.

The new consumer body will have regional offices and staff to deal with complaints. In cases in which the Director General of Gas Supply has responsibility, the staff will report to him and to the Secretary of State. In other cases, they can, if they wish, report to the Office of Fair Trading. The regional offices will be able to take up all the complaints of gas consumers, including, if they wish, those about appliances and all the activities of British Gas. The corporation wants that to happen and very much values the professionalism of the service that it has maintained. In combination, this provides a basic system for the consumer which is much stronger than anything since nationalisation.

All the present obligations to supply gas, which have existed for a long time, will be carried over to the new company. The legislation provides for other suppliers to be authorised by the Secretary of State to bring gas to areas that have not previously enjoyed those supplies. Those gas suppliers will have the same obligations and be brought under the same regulations as British Gas.

Dr. Michael Clark (Rochford)

Why will the Director General of Gas Supply not be the final arbiter in a dispute concerning industrial gas users? Why will the matter have to go to the Director General of Fair Trading?

Mr. Walker

I shall deal with that point when I come to the industrial market.

All the safety provisions applying to British Gas will be transferred to the new company. For some time, the Health and Safety Commission has been responsible for enforcing safety factors in relation to British Gas. We have reviewed the statutory obligations of the gas industry and have decided to tighten up a number of important areas. The period of 24 hours within which British Gas has to deal with an escape has been reduced to 12 hours. Until now, the statutory requirements have been imposed on the British Gas side of the meter. They will now be extended to the customers' side of the meter.

In discussing the improvements in safety provisions that will occur following this legislation, we have had the full co-operation of British Gas. It has been exceedingly anxious, because there is no other way in which it can succeed as a business, to retain a reputation for high safety standards.

I turn now to the subject of the industrial market which was raised by my hon. Friend the Member for Rochford (Dr. Clark). In supplying the gas industry, British Gas is in a highly competitive market, competing with fuel oil, gas oil, electricity and coal. Gas accounts for only 35 per cent. of the industrial energy market—65 per cent. is in the hands of direct competitors. Apart from one year when a prices and incomes policy was imposed, the Government have never interfered with the contract pricing arrangements of British Gas. The corporation has been left to compete in that market. It would be an absurdity to say, "Now that you are to be privatised, we no longer want you to have the freedom to compete with other energy suppliers. We want to put you under a rigid system in which someone else fixes your prices." In concluding that that would be absurd, we took account of the views of the main industrial users. We met the CBI's energy committee and had detailed discussions with the leading and smaller users of gas in the CBI. We discussed the desirability of keeping the contract market unregulated. Those users concluded that it was in the interests of greater competition and of industry for the market not to be regulated. We met the biggest users of gas—in the chemical industry —which came strongly to the same conclusion and gave us the same advice.

There could be an outside fear that, for some reason, British Gas will decide suddenly to increase its prices, which would swiftly result in it losing its share of the market to the other main competitors. I do not believe that that question will ever arise; but, if it does, we provide in the legislation that it will be as free as it is now arid as free as its main competitors. This involves studying not just gas in isolation, which is the task of the Director General of Gas Supply, but the whole nature of competition in the contract market between gas, electricity, oil and coal, all of which are fiercely competing at present. The Director General of Fair Trading has the ability, knowledge and freedom to note all those fears, not just one. We therefore provide in the legislation that, if the Director General of Fair Trading looks into a complaint and finds that it is justified, he can, among other things, suggest that the whole matter will then be brought into regulation by the Director General of Gas Supply. Obviously, if he did that, the market would be totally regulated.

I can only say to those of my hon. Friends who rightly argue for the advantages of the benefits of competition that, in the view of the CBI, industry or commerce, it was not justifiable to regulate something that had never been regulated during the whole period of nationalisation. The new company, in setting out its policies as required by the licence, will be including two clear assurances for industry. First, for the three years after privatisation, it intends holding contract prices to certainly not above and probably below the inflation rate, subject to there being no substantial and unforeseen changes in the exchange rate which would savagely affect its position. Secondly, the new company will not set prices in such a way as to restrict, distort or prevent competition. That assurance will be pronounced and presented publicly by British Gas. It will give the Office of Fair Trading a further weapon should the office decide that it needs to examine prices.

Mr. Kenneth Carlisle (Lincoln)

My right hon. Friend said that it would be made certain that price increases for industry would not be greater than the rate of inflation. What would happen if, for example, the price of oil on the world market decreased so that energy prices were reduced? Heavy users of gas would prefer lower rather than higher prices.

Mr. Walker

That is why, under nationalisation, British Gas has competed successfully in the market. That is why the CBI and the chemical industry have asked the Government to ensure that regulation is not imposed upon them. I think that one will find that British Gas, would be delighted, in the fierce competition in which it is involved, to take advantage of any downward movement in price and to obtain a better share of the market. The only people who made strong representations to me that this sphere should be regulated are those currently in competition in it.

Mr. Malcolm Bruce (Gordon)

In the light of what the right hon. Gentleman has said, and of the intervention made by the right hon. Member for Swansea, West (Mr. Williams) about British Telecom, will the Secretary of State explain whether what he is saying about the regulation of industrial prices means that the domestic prices will have to rise by more than the RPI formula? He is admitting that there is a differential, similar to that in British Telecom.

Mr. Walker

I cannot acknowledge that. I am saying that, in this sector of contract pricing, British Gas has done well and is doing well and there is not an imbalance of return as there was in the commercial sector of British Telecom. It has a commodity that competes well—it controls 35 per cent. of the market. Its major competitors are the oil companies, the electricity boards and the coal industry. I am glad to say that the latter is becoming an important competitor as a result of the benefit that the Government have given it through the coal conversion scheme, and some of the major users have recently transferred rom other energy to coal. This is a fiercely competitive market place, and it would be absurd to say that in privatisation, our desire is to move the gas corporation from its competitive position, which is helpful to industry and commerce, to a regulated position.

Mr. Madden

The Secretary of State has said that the Office of Fair Trading would, under the powers that he proposes, be able to investigate any complaint from an industrial customer if he felt that his company was being badly treated. As bulk supply contracts have hitherto been commercially confidential, will the Office of Fair Trading have the powers to require from the new, privately owned gas corporation information about the privately negotiated contracts?

Mr. Walker

The Office of Fair Trading has that power in connection with any investigation of any company. Another provision is written into the legislation, which is that for the first time, the Office of Fair Trading can demand that British Gas publishes its maximum prices for contracts. Therefore, one will be able to see to a greater extent than before the method and basis on which the company is doing the pricing.

The Office of Fair Trading will be able to take action through the Monopolies and Mergers Commission under existing trading and fair competition law. Close regulation of the kind proposed for tariff customers would therefore be extended to contract gas sales if necessary, and intermediate stages, falling short of regulation, could be proposed by the MMC. The Office of Fair Trading, rather than of gas, is the right body because it has a wider remit and sees what is happening among the competitors in this important market.

Therefore, in the industrial sphere we can claim that the Bill's provisions, which meet the views on regulations that bodies such as the CBI have given to the Select Committee, comply with what is required, and will assist. There are other ways in which this legislation improves the position of the competition, particularly with regard to competition in common carriage. My predecessor introduced legislation that, for the first time, gave to other gas suppliers the opportunity to use BGC's network. I recognise the importance of giving greater opportunities for competition within gas supply to reinforce the competitive pressures that are already felt from other fuel suppliers.

Therefore, the Bill pushes forward considerably the position under the Oil and Gas Enterprise Act 1982, which first opened up the possibility of private sector supplies to individual consumers. The Bill will carry forward and reinforce these provisions and in addition will complete the process started by my predecessor by removing the unique status of British Gas as the only authorised gas utility. There are no unnecessary obstacles in the way of other companies that wish to become utilities in areas not already served by the British Gas Corporation.

It has been argued that splitting the corporation into area boards serving different parts of the country would achieve greater competition. I carefully examined this possibility, and looked into the advantages and disadvantages that it would bring. Under such an arrangement, each consumer would, as is now the case with electricity, face a single supplier in their area. Breaking up the corporation would also put at risk economies of scale through the integrated transmission and distribution system that has been developed and the advantages of central co-ordination, which allow best practices to be spread rapidly through all parts of the country.

The major structural change would, as in the past, mean far greater regional diversities in prices and would have inevitable disadvantages in disruption to consumers and industry. At the end of the day, the idea is that a therm of gas could be obtained at such and such a price in the north-west as opposed to London or the south-east. In reality, as our examination of the American system showed clearly, there is no effective competition as a result of comparisons with gas prices in one region as opposed to another. In fact, there are always considerable differences in the cost of distribution and other factors that give a reason for variation.

Mr. Gordon Wilson (Dundee, East)

Is the right hon. Gentleman aware that electricity in Scotland comes under the control of the Secretary of State for Scotland and that two electricity boards provide electricity for Scotland at a cheaper rate than that provided by the CEGB? In those circumstances, why does he not consider the prospect of reinstating the old Scottish gas board, which was an autonomous organisation with headquarters in Scotland? That would give rise to much-needed employment, and also, because it has access to its own autonomous indigenous gas supplies, it would be able to compete with the BGC elsewhere.

Mr. Walker

I am sure that the hon. Gentleman will recognise the reason for the advantage in Scottish electricity prices, which is that those boards have gone nuclear to a far greater extent than has anybody else. I am sure that he will support that trend in other parts of the industry. As to gas, significant regional variations would not be to the advantage of either industry or the country, and would not add to the competitive position.

The most significant opportunities for competition in gas are provided by the freedom given by the Oil and Gas Enterprise Act. Under that, sales of gas to individual customers are permitted, and it provides, for the use by third parties of the British Gas Corporation supply system for the delivery of gas to such customers. We are strengthening these proposals. The Bill continues the right, created by the Act, for third parties to use the BGC system and for the price to be set by an independent arbitrator. Unlike a report that appeared in a newspaper today, consistent with our decision on the enforcement of the regulatory system generally, this task will be for the new Director General of Gas Supply.

A new element in the Bill is the possibility of licence conditions concerning the use of the system by others. As was made clear when I published the licence, my intention was to reinforce the present system in two important parts by means of licence conditions. First, it is important that the British Gas Corporation should make clear to all concerned the likely terms on which it would be prepared to enter any such deal. Therefore, I propose to require it to publish such information, including its suggestions of the typical prices that BGC would propose, consistent with the principles set out in the Bill for the determination of charges by Ofgas. We have put a statutory provision into the Bill as to the manner in which the appropriate cost will be considered so that the Director General of Gas Supply has a statutory duty to ensure that the decisions that he takes are based on a realistic assessment of the cost.

Mr. Peter Hardy (Wentworth)

Despite all these complicated rules, it seems that the right hon. Gentleman expects more gas to be consumed, whether by the British Gas Corporation, the successor companies or rival carriers. Given that probable increase in demand, is it proposed to maintain the same limitation on sourcing of that gas on the new privatised company, perhaps by relaxation of his rule on Sleipner, or by what other means will the new company, with the advice of his Department, guarantee that there will be supplies of gas in the latter part of this century?

Mr. Walker

Imports and exports are most complicated in both directions. There is a complication in terms of the potential power of exporters and of importers. The subject is involved in large long-term contracts. Before any flotation takes place, during the passage of the Bill, we shall announce in detail the Government's views and policy on the future of imports and exports. That announcement will not be part of the Bill — it has nothing to do with the legislation. However, we have to make clear our policy, and we shall do so at a later stage.

As was made clear when I published the licence, it is my intention to reinforce the present system in two important areas through licensing conditions. First the BGC must make clear to all concerned the likely terms of any deals. Secondly, a real restraint on supplies by independent companies is their inability to guarantee a continuous supply, whereas the BGC can do that because it has a wide variety of suppliers from different fields. One way of overcoming that problem is for BGC to provide a back-up supply of gas to cover any interruption of supplies from a third party, either planned or in an emergency.

In our discussions with the oil companies, it was shown that one of the weaknesses of the previous legislation was that it did not provide for a back-up supply. Therefore, I propose to require the BGC to state the conditions under which it would be prepared to make available such a backup supply, including the method by which it would calculate charges. The publication of that would enable firms to make decisions about their total supply to a would-be customer, which would substantially improve the position.

A further obstacle to common carriage deals has been the difficulty of matching the output of individual fields with customers' demands, especially the disposal of residual production over and above that which can be taken by a purchaser. I have asked the BGC to make it clear in a public statement that it will not discriminate against offers of residual gas but will consider them in exactly the same context as the other companies' requirements being considered at that time.

The proposals in the Bill—including the statement on principles for setting charges for the director general and the power for him to adjourn cases so that normal negotiations can continue—represent a real advance on the regime introduced in the 1982 Act. They will give new impetus to companies to conclude such deals, and hence reinforce internally the already strong competitive forces that are emerging from other fuels.

One restraint that will be removed from the BGC is its inability—due to pressure from Whitehall under both Labour and Conservative Governments — to take full advantage of its research programmes and the international opportunities that have been presented to it. There is no doubt that had the BGC operated with the same freedom as British Petrolem during the past 10 or 15 years, its contribution to the British economy, both nationally and internationally, would have been very much greater.

Mr. Dick Douglas (Dunfermline, West)

Under the previous legislation, the Secretary of State took the power to remove from BGC something that it could do—and as BP does—its right to drill for oil. Now the right hon. Gentleman is reinstating that facility to suit his views of Tory doctrinaire policy.

Mr. Walker

The hon. Gentleman makes a perfectly reasonable criticism. He is correct to say that the Conservative Government have interfered with the management of the BGC. Can he explain why, during the last five years of the Labour Government, the capital investment programme of BGC was substantially reduced? Was that the result of any Government interference? Was it the result of the Treasury leaning on BGC?

The hon. Gentleman quoted an example of my Government interfering with the BGC. I have quoted examples of the Labour Government similarly interfering with the BGC. It is a perfect illustration of how the commercial ability and talents of the BGC have been frustrated by nationalisation.

Mr. Peter Viggers (Gosport)

My right hon. Friend is aware of my interest in this matter. He is also aware of the apprehension felt by the smaller oil companies, many of which have contributed greatly to the North sea. They are concerned that they will be subject to predatory attacks by BGC once it is independent and capable of bidding for them. Can my right hon. Friend give any assurance to those oil companies that they will be protected against such attacks?

Mr. Walker

The powers of non-discrimination against suppliers will be clearly stated because they are important. My hon. Friend says that the oil companies are concerned about take-over bids. He is aware that such attacks could currently be made by BP, Shell or any other major company operating around the world. I do not believe that the creation of another independent major company will make the threat of attack even greater.

Mr. Ted Rowlands (Merthyr Tydfil and Rhymney)

Answer the question.

Mr. Walker

I am answering the question. My hon. Friend the Member for Gosport (Mr. Viggers) knows enough about the oil industry to appreciate that the possibility of a large company taking over a smaller company already exists. Many large companies operate in the North sea with such rights and powers. My hon. Friend is also familiar with the terms of the licensing arrangements that will continue to operate. Whoever may be Secretary of State, he has the power to ensure that the medium and small-sized companies obtain a share of those rights. My hon. Friend knows that that policy has been pursued by successive Governments and will continue to be so. I do not believe that any new fear arises out of this legislation. It will be no different to the current position of major companies operating within certain freedoms.

Part I of the Bill deals with the arrangements for the control of gas supply and the system of licensing. It sets up an effective regulatory body for the whole of domestic and industrial tariff gas. It has an appropriate safeguard for the contract market, but allows industry to benefit from the considerable competition in that market.

Part II provides for the arrangements to transfer BGC to a private company and for the sale of its shares. I hope that the sale will take place soon after Parliament has approved the legislation, and in a way that allows the managers, employees and customers of BGC, as well as other people, to have real participation, for the first time, in that important company.

Part III deals with some of the miscellaneous matters, including protection of commercial information. My hon. Friend the Member for Gosport knows that the protection of information by oil companies—small, medium and large—is an important factor. After careful consultation, we have included provision to deal with the anxiety expressed and the points raised.

This is a carefully considered and well-thought-out piece of legislation. I believe that it will be to the benefit of gas consumers, employees and managers. It will also be of very great benefit to the whole country.

4.36 pm
Mr. Stanley Orme (Salford, East)

Most hon. Members, and people throughout the country, are aware of the reason why the Government have introduced the Bill. It has nothing to do with productivity, efficiency, or competition. It is solely designed to raise revenue so that the Government can implement the only major policy that remains to them—to reduce taxation in an endeavour to buy votes at the next general election.

The Bill will result in the selling off, at cut price, of a major public corporation which has shown superb public enterprise and which is one of the great success stories of the past 20 years.

Twenty years ago, the gas industry was a sad and declining energy supplier, losing its market share and calling out for investment. Today, it is modern, efficient, profitable and responsive. It is one of the 10 largest businesses in the United Kingdom, employing 93,000 people and serving 16 million households and 35 million people.

The BGC's ability to make profits in recent years has never been in doubt. Indeed, the Secretary of State referred to that. Its profit in 1984–85 was £803 million, and more than £504 million was paid to the Government through the gas levy. Its success in productivity is also undeniable. A four-year financial target was set from 1983–84 for an average annual return of 4 per cent. on average net assets. That represents a 12 per cent. reduction in unit net trading costs measured per therm of gas. Not many industries, whether public or private, could match that.

During the past 20 years the industry has been rebuilt to create a national gas transmission system to supply gas safely and securely to 60 million households. It is a technical, commercial and financial success story, which has been achieved by public enterprise and a nationalised industry.

To achieve that success, the Governments of both parties vested in that corporation an enormous set of powers—of first purchase of gas, of sole supply, and of exclusive access to the North sea. By any standards, that is enormous monopoly power. That power was justified for the tasks and objectives that were set, but surely they are not transferable to any private body. Such powers could be justified only if they were made accountable to the Government of the day and to Parliament.

The Secretary of State has described accountability as interference, but it is nothing of the sort. He has exercised his justifiable right in broader national and energy interests to prevent the Sleipner deal, for example. We may quarrel with his decisions, but we do not deny his responsibility to make the corporation, which has enormous power and influence over key national and energy matters, accountable and answerable.

The right hon. Gentleman has told us that the difficult and delicate issue of imports and exports of gas is one which the Government will have to examine further. That is not mentioned in the Bill, nor is it referred to in the licence. The right hon. Gentleman said that he would spell out the issue in Committee and in the Bill's subsequent stages in its passage through Parliament. Why is it not in the Bill now? Why must we rely on a statement by the right hon. Gentleman? It should be recognised that we are talking about a method of interference by the Secretary of State and the Government.

There are other issues that are outside the Bill that we shall have to examine in great detail in Committee and as the Bill passes through the House. Enormous powers are to be transferred from a public monopoly to a private monopoly, and there will be no real public accountability. There is no evidence that the Bill will improve efficiency, provide a better service, produce cheaper gas or, least of all, create competition. I say to Conservative Members, and especially to the hon. Member for Aldridge-Brownhills (Mr. Shepherd), who, like me, was a member of the Committee which considered the British Telecom Bill, as it then was, that the Bill offers no return to the market place or market forces.

The Government's privatisation programme has had a series of curious and contradictory objectives, stretching from Amersham International to British Telecom. The Government's high priest of privatisation, the Financial Secretary to the Treasury, had some interesting comments to make about privatisation in November 1983. He said: The primary objective of the Government's privatisation programme is to reduce the powers of the monopolist and to encourage competition. As the programme moves into the heartlands of the public sector, maximising competition will become of dominant importance. There is nothing in the Bill that meets the remarks of the Financial Secretary to the Treasury. Despite the mutterings of the Secretary of State, that cannot be gainsaid. The right hon. Gentleman was then, as now, a member of the Government.

The Government will have established a private monopoly that will operate in the fuel market both as a buyer and as a seller. It will not be accountable to Parliament, but it will be able to make decisions that could render nonsense the energy and fuel depletion policies that have been determined by the Government. The Secretary of State has recently issued a draft licence to give privatised gas a 25-year monopoly. That can be terminated only if 10 years' notice is given. We note the rather pathetic attempt by the Secretary of State, in the Bill and in the licence to breathe some life into the dead provisions of the Oil and Gas (Enterprise) Act 1982. It is a fact that the Bill will provide no competition, despite what the right hon. Gentleman said.

Mr. John Maples (Lewisham, West)

The right hon. Gentleman is making much of competition. He has told us on previous occasions that a Labour Government would renationalise the gas industry. Will he tell us how much competition there would be with a renationalised gas industry?

Mr. Orme

At a later stage, I shall come to what a Labour Government would do, when I shall answer the hon. Gentleman's question. If there is no competition, there must be public accountability. That is the argument that the Opposition have always advanced when faced with measures to privatise nationalised industries —[Interruption.] The Secretary of State continues to mutter. It would be interesting to hear what he has to say about the gas levy. We are told about the powers of the new Gas Users Council. We believe that it will be able to investigate only those complaints that arise from tariff gas supplies. It will not be able to deal with contract customers' complaints, nor with complaints about installing, contracting, sales and repairs of appliances. It will have no statutory rights to investigate such complaints, yet the corporation controls more than 80 per cent. of appliance sales.

Mr. Peter Walker

There is no specific provision in the Bill of the sort that the right hon. Gentleman appears to want, because the Bill provides gas tariff powers. I can assure the right hon. Gentleman that the new council will have powers to enable it to examine complaints of the sort to which he referred. If a specific reference is required in the licence, that can easily be met. British Gas and the Government have said publicly that they will consider and examine all these matters.

Mr. Orme

The Secretary of State has not answered my question. Clause 32(2)(b) states: any matter (not being an enforcement matter or a matter relating to tariff customers) which relates to the supply of gas through pipes and in respect of which any functions of the Director General of Fair Trading under the Fair Trading Act 1973 or the Competition Act 1980". That provision is directed to supplies. Where is the comparable provision for appliances?

Mr. Peter Walker

I can assure the right hon. Gentleman that all the activities of British Gas will be able to be investigated by the council, including those which relate to appliances. There is no need to set out in the Bill that which the right hon. Gentleman requires. British Gas, the Government and the current chairman of the National Gas Consumers Council have all stated publicly that all these issues will be considered. I am sure the right hon. Gentleman is relieved to know that that consideration will be open to the new council.

Mr. Orme

There is nothing of that sort in the Bill. I hope that the Minister of State will be more explicit when he replies to the debate. I can give the Secretary of State a firm assurance that we shall table amendments in Committee to take up the matter.

My right hon. and hon. Friends supported the powers that were vested in the public corporation, but we believe that they should not be transferred to a privatised company. The powers should not be unaccountable. A privatised BGC will not have fewer powers, and it will not be accountable to the Government or to Parliament. We are being offered the creation of another quango—Ofgas —that will be a pale imitation of Oftel. We are all aware that telephone subscribers are unprotected by Oftel. The recent increases in consumer charges by British Telecom have been met by a wave of protests from consumers, and even some members of Oftel have said that changes should be made in their powers and responsibilities. I wonder whether the Secretary of State and Conservative Members heard the director of Oftel on the radio this morning. He was being interviewed during the "Today" programme on Radio 4. If that is the watchdog that we have in Oftel, I urge the right hon. Gentleman to ensure that a better person is appointed to be in charge of gas. In part I we are being offered cut-price consumer protection. The provisions of the draft licence are no reassurance.

I shall now deal with the rather complicated price formula. We have had only a short time to look at the licence, because we have had it for only a few hours. However, as I see it, the licence contains a complicated price formula with two elements — X and Y. What figure will X be established at? That covers only half the costs. We then have Y, the allowable costs, the North sea costs that can be transferred to the consumer. It is a free-for-all on an increasing proportion of the price of gas. There is not much protection there. Therefore, we are entitled to know what X and Y represent.

Another issue that is unclear is whether the licence allows for differential pricing. Are we to see the introduction of higher regional gas prices? The Secretary of State referred to his opposition to regionalising the gas industry—breaking it up—because of the difficulty as it is a monopoly supplier for consumers. Is there anything in the Bill that prevents the regionalisation of prices? That is an important matter.

Mr. Wilson

Will the right hon. Gentleman support the formation of a Scottish gas company if the Bill goes through, rather than allowing Scotland to be buried in the middle of the British Gas company that may be established?

Mr. Orme

No, because I think that Scotland is well served by the British Gas Corporation at the moment, and there is no need for such a change.

There was speculation that a formula in the licence would ensure that standing charges would rise faster than the rate of inflation. That is not in the licence. Instead, we have the weasel words "best endeavours". What does that mean? What protection is there for the hard-pressed consumer? Why is there not a simple formula of, say, RPI minus Z? I am sure that the House would support such a formula, but there is no statutory provision within the Bill or in the licence; only the words "best endeavours". That does not seem to meet the point in any shape or form.

We understood that codes of practice were to be included in the licence. They are not. There is just an obligation for them to be published three months after the licence is granted. Are there any changes to existing codes of practice? If so, the House should have the opportunity to look at them first.

I remind the House of those who will not be protected by the Bill. The Secretary of State spent some time dealing with industrial consumers. In fact, 38 per cent. of gas consumption is not covered by the Bill. These are the industrial and commercial consumers, many of them small businesses, who buy their gas under contract, amounting to about 6.8 billion therms per year. They will not be protected. In that regard, the Secretary of State's press release is totally misleading. He said: The new system of regulation to be applied to the whole of the domestic market and the industrial tariff market will mean that the price of gas will be regulated in such a way that the consumer will obtain a real and direct benefit from improved efficiency by British Gas".

The right hon. Gentleman said that while conveniently forgetting to tell the press and the public that the industrial tariff consumer represents only 5 per cent. of the industrial market. The remaining 95 per cent. will not be protected by regulations, licence, Ofgas, the Director General of Gas Supply or the Gas Users Council. Over 1.25 million customers who buy appliances from the BGC are not covered by the Bill and are not within the remit of the Gas Users Council. We shall await further information on that from the Secretary of State. All those who need to have their appliances repaired and serviced are not covered by the Bill, and I have already quoted clause 32.

That is linked to the question of gas showrooms. Their future is in jeopardy, and we heard no word from the Secretary of State about that. The Government previously found out, to their astonishment, the rapid reaction of the consumers when they tried to strip and sell off gas showrooms. There are over 800 gas showrooms, which are the local contact point for the consumer for payments, queries, servicing and complaints. They are the point of contact for the consumer to report emergencies.

Any closure must represent a loss, not only in jobs, but in a decline in service. Any reduction in the number of gas fitters employed as a result of closure must mean a less satisfactory emergency service. No statutory provision can make up for the loss of means to provide a proper and safe service. If any showrooms are closed, the customers will suffer and the consumers will be the victims. They will not be the only victims. We have heard nothing about this from the Secretary of State.

In 1984, British Gas invested in British goods to the extent of over £1 billion, giving support to 250,000 British jobs. If privatised gas follows the British Telecom model, we shall see major orders placed overseas, the loss of British jobs and more damage done to the already declining manufacturing industry within the United Kingdom. Those are crucial points.

We noticed recently that the Secretary of State had a difference of opinion with his noble Friend Lord Stockton about the selling of the silver. In fact, I agreed with the Secretary of State when he said that the Government were not selling the silver. It is not the silver that is being sold, but the table, the chairs, and the house itself. That is once and for all. Once that money has been used, it cannot be replaced. A future Government will have to replace it.

Twenty per cent. of the shares of British Telecom were sold overseas on the first day, making a killing of £180 million. That is the size of the problem. We are dealing with a major British industry that is worth about £16 billion, and it is likely to be sold for anything between £6 billion and £8 billion. It is an absolute disgrace that that should be taking place at a time of high unemployment and industrial decline in the United Kingdom.

We have heard a little about greater share ownership from the Secretary of State. Again, I look at the British Telecom figures. The maximum stake of any employee is one millionth of 1 per cent. of the total shareholding. Perhaps the most humiliating aspect is that employees' shares do not entitle them to attend the annual meeting. That is absolutely ridiculous. The vast majority of the 16 million gas consumers in Britain are finding it hard enough to pay their bills. Not many of them will be beneficiaries from such a development.

Labour believes that the British Gas Corporation belongs to the nation. Under Labour, it will be in the public sector. We shall ensure that the new public utility meets the needs of the economy, the consumers and the workers in the industry. That will be achieved in a way that is consistent with our other economic aims and priorities. The industry will be publicly owned and publicly accountable. That is our policy, and it is the policy that we shall implement.

Mr. Bruce

I take it that that is an unequivocal declaration that the Labour Government, if there ever were one, which is unlikely, will take the British gas industry back into public ownership, regardless of the cost. Where will the right hon. Gentleman get the money to do so?

Mr. Orme

I have clearly stated Labour's policy. I give the hon. Gentleman this assurance. He will have a little more time to study our proposals than we have had to study the licence.

Mr. Heifer

My right hon. Friend has made an absolutely first-class speech. Can he take it slightly further and say that we shall consider taking the industry back into public ownership without paying huge sums of compensation because, in the past, it has been the people's money and the people's assets that the Government have got rid of? It is right that the Labour party should take back the people's assets.

Mr. Orme

We shall re-acquire the assets, based on the policy of the Labour party conference and that of the national executive of which my hon. Friend is a member. That policy has been clearly laid down.

Many of the key issues are outside the terms of the Bill and the licence. As well as service, showrooms and the manufacture of gas appliances, there is no mention of research and development, trade union rights or the valuation and sale of the BGC.

I should like to refer to the gas levy. Paragraph 2 of schedule 6 states: No order shall be made under section 2(3) of that Act specifying for the year 1991–92 or an earlier year a rate of levy higher than the rate of the preceding year. Are we to understand from that that the gas levy will be maintained, and will continue until 1992? Will the Government still impose a levy on a privatised gas industry? We were entitled to be told the answer today, but we were not.

The debate should be taking place with the full facts presented to us. The Secretary of State has not answered many points, certainly those that I have raised. For instance, what percentage of shares will be sold overseas? How will the golden share be operated to protect British interests? Will there be any restrictions on the number of shares bought by oil companies, for example? The haste with which the Government have introduced the measure has left many questions unanswered. Those matters are vital to the future of gas, and we are entitled to the answers.

The Secretary of State said that while the industry was fairly successful it could be improved under privatisation. I refer him to the Deloitte, Haskins and Sells report. They are the management consultants whom the Department appointed to look into the BGC. The report states: British Gas management and employees can look back at many excellent achievements, the principal being the conversion from town to natural gas and the substantially increased share of the energy market. These have been combined with a good safety record, a significant improvement in customer service and good industrial relations. Finally, BGC has generated sufficient profit and cash flow to meet financial targets and to self-finance its investment programmes. We consider that the management and employees of any commercial organisation could be proud of such a record, and also that it reflects well on the sponsoring Department of Energy. What better evidence is there than an independent assessment of the British Gas Corporation?

There is only one reason why the Government are proceeding with the Bill. I have mentioned it before. It is to finance tax cuts, while maintaining high unemployment. The Bill is irrelevant to the economic and industrial problems facing Britain. We shall oppose it, and we shall reverse it.

5.6 pm

Mr. John Hannam (Exeter)

I declare my full support for the main principle behind the Bill: privatisation and the transference of the ownership of British Gas to the real public —the employees, the consumers and the investors. I was sorry to hear the right hon. Member for Salford, East (Mr. Orme) clearly state that when— if ever—Labour had the opportunity to renationalise the industry, it would deprive the employees, consumers and investors of any increase that they may have achieved in the value of their shareholdings. That should be well and truly taken on board by those people.

I congratulate my right hon. Friend the Secretary of State on the way in which he has presented the measure and on the methods that he has used to ensure the success of the forthcoming flotation.

Ever since the prospect of privatising the British Gas Corporation began to appear before us, my main concern has been that it would prove impossible to formulate a method that would safeguard the interests of all the various parties concerned —new shareholders, gas consumers and gas producers. Ideally, from my point of view, I should have liked to see a breaking down of the monopoly/ monopsony structure so that effective competition could be introduced at all levels of the industry. But as I looked more deeply at the nature of the industry and the worldwide situation, taking into account the finite nature of the basic resource, the single supplier distribution requirements and the vital safety aspects, it became obvious that splitting the British Gas Corporation into several regional or other sorts of gas companies would leave us not only with monopolies in the regions but with the certainty of loss-making areas, such as my own in the south-west, with large populations spread over wide areas. Therefore, with regret I had to accept, looking across Britain as a whole, that it would be extremely difficult to set up a regional structure of a privatised gas company or companies with equal access to gas supplies at a fair price.

Therefore, reluctantly I accept the continuation of the whole corporation as a single entity and with that the need for a system of regulatory control to protect all consumers and producers —all those who need protection from what will be a powerful private sector monopoly. Incidentally, it will be led by potentially the toughest capitalist monopolist of them all—Sir Denis Rooke. I have the highest regard for his knowledge of the gas industry and his ability to manage it to the best advantage of its employees, but, without any yardstick to judge the gas industry's comparative efficiency over the years, I do not know—and I challenge anyone else to know—how to measure successfully its cost effectiveness. That will be just as difficult under the new regime.

Competition in gas, as my right hon. Friend said, will have to be achieved by other means—by comparisons with other fuels and close examination of costs. Here regional accounting might help, although I appreciate that the gas industry is different from the electricity industry where that is more feasible.

The use of the Oil and Gas (Enterprise) Act by new suppliers could afford an opportunity for some comparisons of efficiency. Although I welcome the improvement for access for industrial suppliers, there probably will not be any great immediate surge of competitive markets here given the power of BGC to resist any such competition in the domestic and industrial markets.

That leaves me still worried about the monopsony situation of the BGC as a buyer and seller of North sea gas. I am convinced that the slow development of gas resources in the United Kingdom sector in the 1970s is directly related to that factor. The low prices offered to gas producers affected the market and it was only when shortages became imminent, especially to the industries sector in the late 1970s, that prospects of higher price imports helped raise the gas offer price to new producers.

That directly resulted in a sharp increase in gas exploration and the subsequent realisation that there was plenty of gas around and that we did not need to buy high cost Norwegian Sleipner gas. Norwegian, Russian and Dutch gas is becoming available throughout Europe, making Europe extremely well provided for Britain should not be completely isolated from the European scene. I strongly urge my right hon. Friend to give full consideration to a freer export and import market in gas.

There are grave fears in the industry that the absence of such competition from the European market will allow the BGC to squeeze United Kingdom gas producers unfairly both on prices for gas and through its own activities as a private sector producer of oil and gas.

So long as we have had a sensible Government policy framework in recent years, the oil companies have generally accepted that the BGC has acted reasonably within that framework, but with privatisation they are increasingly concerned that a new conflict of interest now arises. Here we have a company under obligation to maximise its profit-making potential, but at the same time continuing to have effective control over the development of all United Kingdom gas resources.

Therefore, we should obviously try to ensure that the BGC operates in a way that allows for the most efficient development of United Kingdom natural gas and does not hinder the activity necessary to maintain a stable long-term gas supply from our North sea sector.

As has already been mentioned, one problem area is the discriminatory purchase practices which exist. In all sorts of different ways the BGC could favour those companies with which it is involved in, for example, joint ventures or the disposal of associated gas. We must ensure that there are safeguards against such prejudicial treatment and that competition between producer companies is on an equal footing for gas sales.

Another area of worry is that relating to access to information and all kinds of geological data which are provided by gas producers in the course of contract negotiations. That is always a ticklish area when dealing with the oil industry. Trying to get producers to unite to present a case at any time has always been difficult because of the confidentiality of geological information.

It is easy to see that such information could give British Gas a substantial advantage in applying for future exploration licences and also in the acquisition of other oil and gas interests which are certain to take place. Firm legal safeguards are needed to prevent any flow of such valuable information from the purchasing arm of British Gas to its exploration arm. My right hon. Friend referred to the protection in clause 9, and perhaps the Minister of State will elaborate further on that when he replies. I hope that he will accept the difference between the purchasing and exploration sides of British Gas. They must be kept separate.

The new BGC will be in a unique position for a private company in the oil and gas industry. It will have a captive market in buying and selling and a major say in how, when and where gas and even oilfields are developed.

In addition, BGC will be able to carry on business as an oil and gas exploration and production company in direct competition with others in the industry. That may add up to an attractive proposition for investors, but it also poses obvious dangers to what has been an incredibly successful free enterprise North sea oil industry.

Therefore, it is essential that we establish a clear statutory definition of what BGC can or cannot do. Otherwise, the BGC's obligation to serve its shareholders by the use of every commercial advantage at its disposal could be at the possible expense of effective development of United Kingdom gas reserves. A free export-import gas market would be one way of ensuring a more competitive environment and would guarantee the full development of United Kingdom gas resources, and, incidentally, create a large number of new jobs. In the absence of such a market in gas, other safeguards should be included if we are to secure the best gas developments for Britain.

Nearer to home, I have one or two queries on the regulatory system and on consumer protection. First, there is the problem of small businesses using more than 25,000 therms. What recourse will they have for complaints on unfair pricing? The Gas Users Council does not seem to have been given responsibility for such small and medium sized businesses, so it would be useful to know exactly what avenue of representation is open to them. That applies particularly in my region of the south-west where we have a large geographical spread and a large number of that size of gas consumer.

In the south-west region we have seen the devolving of consumer organisations to about 12 management districts. Will the new consumer users' council structure have the flexibility to deal with the needs of rather diverse regions in Britain?

I have always been particularly worried about the safety of our gas supply system. I welcome the introduction of the stricter safety regime through the Health and Safety Commission. However, as we move into Energy Efficiency Year, I hope that some positive steps will be announced by the commission towards energy-saving audits, equipment standards and general safety matters.

When does the commission expect to announce the action that it proposes to take on some of those fronts, particularly on the safety of imported gas appliances? For years our manufacturers have warned us of the unsafe features of cheap imported gas appliances which do not have to conform, as ours do, to British safety standards. Recent tests have confirmed what we have always been told —that cheaper, often quite attractive, appliances represent real safety threats. Something will have to be done if we are not to see standards drop as our own manufacturers lower their construction standards in order to retain their competitiveness.

The safety of gas supplies, installations and equipment is obviously a vital factor in the public perception of this privatisation measure. I hope that the Health and Safety Commission will soon be able to make some positive pronouncements on those matters. I am pleased that my right hon. Friend has placed such importance upon the safety regime and the role of the Health and Safety Commission.

I welcome the Bill and the transfer of ownership of the gas industry to the real public—the consumer, employee and investor. I welcome the consumer protection structure and ask that it be as flexible as possible to cater for the regional disparities in Britain. Finally, I welcome the release of this great industry from the constraints of Whitehall interference, something which my right hon. Friend stressed. I am sure that the confidence that he is placing in the management and work force of BGC will be well rewarded in future.


Mr. Malcolm Bruce (Gordon)

I beg to move, to leave out from "That" to the end of the Question and to add instead thereof: this House declines to give a Second Reading to a Bill which fails to introduce competition into the operations of British Gas; maintains the British Gas Corporation's monopoly market power without establishing effective regulatory machinery; provides inadequate protection for consumers from unfair pricing; and continues the Government's reckless and irresponsible policy of disposal of national assets to finance current consumption.

The Bill is rather phenomenal—first, because of the scale of the flotation for which it provides and, secondly, because of the implications of this privatisation measure for the British Gas Corporation's consumers and competitors, and for the effect that it will have on Government revenue.

The Bill is interesting because, as far as I can see, it fails to meet any of the known philosophical or ideological justifications that the Government have advanced for any previous privatisation measure.

The BGC is a huge centralised monopoly now. When the Bill is passed it will still be a huge centralised monopoly. Given its size and market power, it is difficult to see how the BGC can be subjected to significant competition other than on the margins. The Bill contains some rather fanciful provisions in respect of "any licensed gas company". We all realise that in practice we are still talking about British Gas plc as the supplier.

It is the difficulty of weakening British Gas's monopoly that makes us critical of the measure. I recommend that hon. Members should read our reasoned amendment, because it spells out in detail why the Bill is wrong on the Government's criteria. Our reasoned amendment takes the Government to task because they have not attempted to introduce competition or to tackle the monopoly.

We do not believe that the Government's proposals provide anything like adequate protection for the consumer. We object to the sale because it is irresponsible and because it has serious long-term implications. It is being introduced, as we are all aware, as a short-term expedient to finance pre-election tax cuts.

The Government are not allowing a free market in North sea gas. The Secretary of State said that he might tell us something about it during the Bill's passage. That was a further sign of how hurried and ill thought out the measure is.

The Government are not taking powers to prevent the BGC from using its monopoly in the way that the hon. Member for Exeter (Mr. Hannam) was worried about—to see off competitors by cross-subsidising or by using predatory defensive pricing to keep people out of the market.

The BGC will be free to move back into the oil business. It could do that merely by gobbling up the independent smaller oil companies which are currently operating at the mercy of the market. They should be protected from being swallowed by a predatory BGC. Why should not Government make the exploration, development and production of the BGC a separate company?

Mr. Michael Portillo (Enfield, Southgate)

For a Liberal, the hon. Gentleman is coming close to enunciating a policy. Is it his policy that the free import and export of gas should be allowed? Will he confirm that?

Mr. Bruce

I was trying to elucidate the Secretary of State's policy. He could not tell us. He said that he might be able to tell us in a few months' time. If the Government are trying to privatise BGC to promote competition, we would expect to see measures to extend competition before we are asked to vote on the Bill. I have made it clear that we do not believe that the Government have justified what they are proposing to do, because they have failed to tell us what they are doing.

The loss of growing, small oil companies would be bad news for my area and for Britain. We welcome the fact that those oil companies are diverse in type and offer more contract opportunities and jobs. From the Department of Energy's point of view, the small independent companies have a creative approach to exploration and development and they will maximise our resources and development opportunities.

We know that the BGC wants to get back into oil. It is no wonder that those independents are worried. Why is nothing being done to break up the BGC into its constituent parts? The point has already been made that the Government could have chosen this opportunity to reestablish regional companies. The hon. Member for Dundee, East (Mr. Wilson) has already referred to the possibility of a Scottish gas company. There seems to be no reason why that could not be done and why such companies could not compete in exploration and distribution.

The Government said nothing about retail operations. Having tried to privatise them separately two or three years ago, it is rather surprising that the Government have not referred to them now that they have brought the whole corporation to market.

The Government claim that the sale of the BGC will mean wider share ownership. We welcome wider share ownership. A flotation of this size must secure wider share ownership to raise the money that the Government need. Those shares will have to be offered at a discount, for two reasons. The first is the size of the flotation. The second is the need to ensure that first-time shareholders receive a reasonable bonus and are not put off the whole idea of share-owning from the start. We know from experience that a year or two after privatisation most of those shareholders will have sold the shares to the City institutions and that the real widening of share ownership will not be as great as the Government hope.

We are worried that the BGC will use its size and the power that it has in the market to the detriment of existing or potential competitors. We are even more worried by the Bill's implications for the corporation's 16 million consumers. That represents a great many households as well as an important number of corporations and companies.

It seems that the pricing formula is to be based on the retail price index minus X plus Y, where Y is the allowance for the cost of acquiring new supplies. Hon. Members should strongly question that pricing policy, because there are serious implications behind the licence that the Government will issue.

The licence means, first, that the Government's abuse of the BGC monopoly, when they forced up prices by the RPI plus 10 per cent. for three consecutive years, will he frozen as the base from which all future price increases are calculated. That is an unacceptable starting point. Secondly, the increased cost of new supplies gives BGC an open-ended opportunity to increase prices. The Secretary of State said that measures will be taken to restrict increases for industrial users. That means that the burden will fall more heavily on the 15.5 million domestic consumers. Pensioners and other low income groups will be dismayed by the fact that the Bill permits the continuation of standing charges. Many of them are campaigning to have those charges abolished. We only have the rather lame exhortation, which the right hon. Member for Salford, East (Mr. Orme) mentioned, about BGC using its "best endeavours" to keep standing charges under control.

Those pressures will not make the BGC improve its efficiency or cut costs in such a captive market. The market cannot do that for the reasons that I and other hon. Members have given. The regulatory authority cannot do it because the Government have not given it the power or the authority to do so.

On the Government's instigation, the BGC has squeezed consumers to the point of yielding £2,068.2 million in gas levy since the Government introduced it in 1980, and a further £1,217.1 million in tax to the Treasury during the Government's term of office. That is a total of £3.25 billion to the Treasury.

When I suggested to the Minister of State during last energy Question Time that the Government should introduce a utilities commission modelled on some of the American examples, all the Minister could say was that he noted my liking for bureaucracy. The Secretary of State is offering us the worst of all possible worlds. He is offering us a regulatory body and a director general with powers and functions that spread over 47 of the Bill's 66 clauses but does not give that body the authority or funding to ensure the proper protection of consumers.

Substantial theoretical power is given to the director, the Gas Users Council and the Secretary of State, but with, according to the Bill, a budget of under £2 million and a staff of under 100, it is doubtful whether the director general's sphere of operations will be all that wide. He is also constrained by being one director general rather than a commission. He is appointed by the Secretary of State. He is subject to pressure from and is accountable to the Secretary of State.

For a Right-wing Secretary of State, that may of course be designed to allow the BGC to maximise its profit and ensure that the Government's friends in the City are satisfied. It also allows a Left-wing Secretary of State, such as the right hon. Member for Chesterfield (Mr. Benn), who has no doubt read the Bill carefully, to approach the matter in the opposite way and undermine the BGC's viability to keep down prices. That power is contained in the Bill.

In reality, the director general does not have the power and resources that he needs, either to investigate the pricing policy of the British Gas Corporation and its costing, or to prevent cross-subsidy or the abuse of monopoly power. A much more powerful commission is required. It should be established at arm's length from the Secretary of State, and should have five or seven commissioners with wide-ranging experience, because only then can we be sure that it will operate independently. Obviously, the commission should have regional offices, as the Secretary of State envisages his directorate will have and adequate resources levied on the British Gas Corporation, which is the normal practice in these circumstances.

It should be recognised that a licence to operate a huge monopoly such as the BGC is a privilege, and that that is the basis for issuing the licence. It can and must be used to provide a reasonable return to the operators, but not to maximise profit. The monopoly should not be allowed to pursue unfair pricing, which is being favoured by the Government in their interference with the British Gas Corporation. The commission should have the resources to be able to state exactly how the costs are arrived at, to investigate the abuse of monopoly and cross-subsidy, and to direct the BGC to reduce its prices, if abuse is occurring. That is the strength of authority that we seek, but it is not what we have been offered. The commission should also be allowed to take account of the need to promote conservation before it sanctions further investment and price rises.

Whatever Labour spokesmen may say, it is unrealistic to assume that, once privatised, the BGC could be renationalised. First, the Labour party cannot win the general election outright—there is no chance of that. Therefore, it would not be able to introduce the appropriate measure. Given that it will not have a majority, there is no chance of the House sanctioning nationalisation. Secondly—the Labour party would do well to think about this—a new Government, pledged, as we would be, to deal with appalling unemployment, environmental decay and the need to re-establish a diversified manufacturing base, would have far higher priorities for the billions that it would cost to renationalise the BGC than to waste them on transferring ownership back from one sector of the British economy to another. We would use the money to create new wealth, investment and jobs.

The Government are wrong to believe that the highest price for the flotation—that is presumably what they seek, given that we know why they are introducing the Bill —will be secured by offering minimal regulation. The size of the flotation and the need to attract new shareholders with the prospect of a bonus will do most to depress the share price. The Government's friends in the City would be well advised to note that, if the regulatory powers contained in the Bill prove to be as weak as we believe them to be, and as ineffective as they will be, and if BGC is allowed to make massive windfall profits, a future Government that could include a future Conservative Government if, heaven preserve us, there is one after the general election—may have to introduce tighter regulatory measures. In government, the alliance would not hesitate to introduce a powerful regulatory gas commission, if we felt that the public interest required it. That is the right way to ensure that the BGC is properly brought to account and disciplined in a realistic world.

Mr. Kenneth Hind (Lancashire, West)

Does the hon. Gentleman agree that, if the BGC is free and allowed to make profits, it could do the one thing which at present it cannot do —that is, become another effective multinational company, which will develop at home and overseas, and export the profits back to the British nation for its benefit? Surely we are freeing the corporation from the straitjacket of being involved purely and simply in British business.

Mr. Bruce

The hon. Gentleman has greater enthusiasm for developing more multinational companies than I or other hon. Members have. The BGC is profitable at present in Britain on behalf of the nation. I have already said that there is scope for international operations, but that does not mean that it should not be regulated, nor that it should necessarily be privatised.

The size of the flotation, and its effect on the City and on competition for funds worries me. The City is somewhat bedazzled and starry-eyed at the blue chip monopoly that the Government are offering it. The City would be wise not to think that it is being offered a licence to print money. The billions of pounds that will be raised must come from somewhere. If the private sector invests in the acquisition of shares and the City funds that, it cannot fund other projects. It would be better if the City put more money into creating new wealth, rather than move bits of paper about so that 10 per centers can make a fortune, with no new assets, jobs and installations being created. The Government must recognise that the competition for funds is likely to damage other sectors of our economy. They have failed to recognise that in bringing more and more of our national assets to the market.

The surplus from the BGC is substantial. The Government will use the money from its flotation to finance tax cuts. How will those tax cuts be paid the year after the Government have sold the BGC, and how will the Government continue to fund tax reductions? How will the tax cuts be used? If the money is used to reduce the standard rate of income tax to 25p in the pound, where will the tax cuts go? They will be used by the better-off members of our community to buy imported goods, which will aggravate our underlying economic problems. That will not help our basic problems.

The most depressing aspect of the Bill is that it is being introduced by the so-called Department of Energy. The Government have never had an energy policy, other than not to have one. That has been the stated proud policy of the Government, and is the reason why the Department of Energy has been regarded, presumably by the rest of the of the Cabinet and the Prime Minister, as a suitable repository for dissident wets, which is what the Department of Energy has become.

Mr. Geoffrey Lofthouse (Pontefract and Castleford)

Will the hon. Gentleman give way?

Mr. Bruce

I am sorry, but I shall not give way. I should like to finish my remarks.

The Secretary of State has led his team of wets, presumably to save his skin in Cabinet, given that he was mooted to be for the chop, to offer the BGC up as their sacrificial lamb to redeem the Tories' pledges of pre-election tax cuts. That is the essence of what is being offered. It has nothing to do with sensible planning or use of our energy resources. Indeed, the Government are putting all their eggs in the energy basket. They live off oil revenues, and will live off the sale of the BGC.

If the energy market goes wrong, as today's newspapers suggest, the country will be in a mess because the Government will have failed to pursue an energy policy or to diversify and broaden our manufacturing base. The Government's action amounts to the rape of our energy industry, and is a party political game. There is no ideological justification for it. The Government, including their friends on the Right, know that this is not about competition, markets or efficiency, but about obtaining money to pay for tax cuts.

There will be less, not more, competition as a result of the measure, and the 16 million British gas consumers can expect only one result—to pay increased gas prices, higher than the rate of inflation, for years to come. They can see no alternative when the Bill is passed. Therefore, I urge the House to take account of our reasoned amendment, which demonstrates clearly and categorically that there is no justification for the measure as proposed by the Government and that we should reject it.

5.38 pm
Dr. Michael Clark (Rockford)

I welcome the Bill, unlike the Opposition, who wholeheartedly but honestly reject it, and unlike the hon. Member for Gordon (Mr. Bruce), who spoke on behalf of the Liberal party and referred to his reasoned amendment, which consists of all of five and a half lines. It states that the Liberals would like to privatise the British Gas Corporation, but because there are one or two difficulties involved they do not recommend that it should be done. It is another case of the Liberals saying, "I would if I could, but I can't."

I welcome the Bill because too much of British industry has been in public hands for too long. When the Conservatives came to power in 1979, 40 per cent. of the capital of British industry was in public hands. We have already brought a large amount of that back into private hands, and by 1988, 20 per cent. of that 40 per cent. will have been taken out of the private sector and placed back into private hands. What is happening now, therefore, is just another part of the Government's policy of extending the capital-owning democracy which began so ably with the sale of council houses.

Privatisation also gives us the opportunity to increase the number of people in Britain who own shares. It has already doubled the number who owned shares in 1979, and the privatisation of British Gas is one more move in that direction, and it is to be applauded. When British Telecom went private, a substantial number of its employees bought shares, and 90 per cent. of those who bought have retained them. I am confident that the same will happen with the privatisation of British Gas.

While I congratulate my right hon. Friend on getting the Bill to its present stage so quickly, I must remind him that some of us have had difficulty in digesting all the terms of the licence and the regulatory conditions. Hon. Members who served on the Select Committee have not been helped, because of the speed of the Bill's progress, to get through all the evidence that we wanted to examine before this stage of the Bill.

Gas is a major part, a £7 billion sector, of British industry. It supplies 60 per cent. of the domestic energy market, 40 per cent. of all heat, 36 per cent. of the energy used in the industrial sector and 30 per cent. of that used in the commercial sector. Though it is extremely large in energy terms, the fact that most of those figures are below 50 per cent. —averaging perhaps 40 per cent. —shows that gas has competition. Without competition, the figures would not be so modest. Thus, there is competition in energy, even if there is not competition in gas supply, and that will continue when British Gas is privatised.

Since 1962 the rise in gas prices has been less than half the rise in oil, solid fuel and electricity prices, so that although British Gas has had a monopoly for 20 years or more, it has adopted a responsible attitude towards prices. While in recent years it has been buying from the North sea gas which has been extracted at a reasonable price, British gas has not abused that position; prices to the customer have been kept low and, as I say, it has adopted a responsible attitude towards prices.

Mr. Wilson

Whereas the corporation may not have been raking off huge profits from its customers, the Government gave in to the temptation to do that when they did not exercise the same self-restraint in terms of the gas levy.

Dr. Clark

The gas levy was a responsible act by the Government to ensure that this premium fuel was not depleted too quickly, so ensuring that we would have gas in future for chemical feedstocks, plastics, fertilisers and aviation. It has been necessary to conserve hydrocarbons, and that was the purpose of the gas levy.

Three aspects of competition are disturbing, and we must keep an eye on them. First, let us consider the domestic consumer. It is clear from the terms of the licence published yesterday —naturally, we have had only a limited time to examine it —that there will not be a requirement to disclose the monopoly profits made from selling gas to the domestic consumer.

The argument is that regulation will be by price rather than by profit. If we are to have regulation by price, we must remember that price determines the amount of the commodity that is sold, whereas profit determines competition. If profits are high and generous, others will want to come in and share in them, and hence competition will be generated. That is why I question the wisdom of regulating by price rather than by profit.

I could accept the decision to regulate by price rather than by profit if the profits made from selling monopoly gas to the domestic consumer were revealed for all—hon. Members and the public at large—to scrutinise. But, we are told, the plans are that we shall not see the details of profits made from selling gas to the domestic sector.

The public at large will see in due course the profits made overall by privatised British Gas. They will also see the dividends paid to British Gas shareholders, many of whom will be employees of the company. They will wonder what proportion of that profit came from them, buying gas from a monopoly supplier, and they will not know the answer. I hope that when he replies to the debate, my right hon. Friend will address that point and will reconsider the clause in the licence which says that profits made from supplying the domestic sector will not be revealed. The only way to be sure that the price charged to the domestic customer is fair and reasonable is for us to see the details of the profits made from that business.

Secondly, a clause in the licence refers to domestic prices being set by the complex formula to which the right hon. Member for Salford, East (Mr. Orme) referred. I agree that X and Y appear in the formula, but after studying it for some time, one can see how the figures and control details are derived.

There is a factor in the formula by which, in exchange for making profits from the sale of gas under the monopoly powers that privatised British Gas will have, there is a requirement progressively to reduce non-gas costs. That is fair enough, but the Y factor then allows for all increases in North sea gas supply costs to be passed straight to the customer.

That will weaken the resolve of British Gas to negotiate prices firmly with its suppliers and will weaken its intention to be as efficient as possible in all stages of its business, from supplier to delivery. Perhaps my right hon. Friend will comment on that feature when he replies to the debate. To pass costs straight on without any dilution or modification is a temptation that many companies would not be able to resist.

Thirdly, my right hon. Friend spoke about breaking up British Gas into regions. He said that there was no need to do that because economies of scale would be gained from having one large organisation rather than having competing organisations in the various regions.

If there were regional areas within British Gas—with different supply problems and differing purchasing prices —costs to the consumer would vary in each region. The public would then be able to identify those regions which were operating efficiently. Even allowing for the different circumstances of trading, the public would be able to see which areas were not performing properly and needed to improve. It is a shame that British Gas is not broken down into various regional areas or areas of trade and business, so that there is more competition.

The second aspect of competition is the common carrier —the use of the gas network by those other than British Gas. We on the Select Committee have interviewed a number of oil companies, which say that it is unlikely that they will seek to use the common carrier. As a result, it is likely that British Gas will be the only user of its pipes and network of gas supply.

Why have the oil companies said that they are unlikely to use the common carrier? We all know that the price of gas at its ultimate destination is the purchase price plus the cost of distribution. Oil companies, large and small, can determine through their efficiency and luck of their finds the price of gas taken from the ground or the sea, but the distribution costs will be entirely in the hands of British Gas.

What will British Gas charge anyone else who breaks into the common carrier? If it charged less than it charged itself, that would not be fair on those who purchase straight from British Gas, who would be subsidising those who purchase gas from an oil company. If the oil company was charged exactly the same as British Gas charged itself, there would be no incentive for British Gas to go to all the trouble of allowing the common carrier to be used. The incentive arises only if British Gas charges more for the use of its distribution network than it would obtain by using that network itself. If it charged more, an independent oil company would consider using the common carrier only if its prices at source were considerably lower than British Gas prices at source. Therefore, with a low source price and a high distribution cost, there would still be a benefit to the consumer.

However, if independent oil companies have to get their source price down so low before they can use the common carrier, and if British Gas tempted them with a small margin over and above the price at which the oil companies intended to sell, the gas would simply go back into the British Gas system. One wonders what will happen with the common carrier, and one fears that it will not be used by anyone other than British Gas.

The third area of competition is exploration by the privatised British Gas company. There is no reason why a privatised British Gas should not go back into exploration. Indeed, we have been given reason to think that it will do so—and it might explore for oil, too. The funds for this expensive exploration can come from cross subsidisation, whereby British Gas can charge high prices to the domestic consumer and put the profits to good use by exploring for new gas fields, but what is to stop British Gas favouring the purchase of gas from its own fields rather than buying gas at a low price from independent oil companies? If it does so, there will be no control on price, and price competition will be weakened. That will be a major worry for the independent oil companies, which will be unable to sell gas to the privatised British Gas company unless, perhaps, they are prepared to give up acreage to British Gas in exchange for supplying it with the gas that they have already found. That is another area about which we have reason for concern, and I hope that my right hon. Friend will give an answer when he replies.

The Office of Gas Supply and the Director General of Gas Supply are very unlike the organisation that was set up to control privatised British Telecom. It appears that the director general will not have a specific duty to promote competition. That is sad and surprising, because it should be one of his prime requirements. He will not be the final judge on any industrial complaints, which will go to the Office of Fair Trading. However, my right hon. Friend said that if those complaints were frequent, the regulations could be changed.

The director general can also require British Gas to publish typical prices for conveying gas down the common carrier, and determine a general policy on the use of the common network system by a third party. That does not go far enough. These are statements of policy, not regulations. He cannot require British Gas to accept a third party on the common carrier, but can only require it to make a statement about the terms and conditions under which a third party would be accepted. There should be precise regulations and controls on when, why and under what conditions a third party can use the common carrier.

By the very nature of the gas industry, privatisation, however welcome, will have some imperfections. Despite that, I welcome the Bill because I believe that privatisation of this large industry will be beneficial to customers, to employees of the organisation and to the economy. Strenuous efforts have gone into preparing the regulations and the licence. I hope that my right hon. Friend will keep a careful eye on how the regulations are used and how the licence is applied. If in the future there is need to tighten them up, I hope that he will bring them back to the House so that they can be considered again.

5.57 pm
Mr. Tony Benn (Chesterfield)

One could not have a clearer description of the difference of opinion that divides the two sides of the House. Like a vulture, the Conservative party is already beginning to hover around the British Gas Corporation to see what rich pickings it can make for its own people.

So far there has been no mention of the fact that many people look to gas for security of supply, high levels of maintenance and repair and high levels of safety at a price that they can afford. During this winter, as with every other, many people will be wondering whether they will be able to pay their gas bill when it arrives later in the year. As is well known, people die every winter from hypothermia simply because they cannot afford to pay the price of fuel. Therefore, to look to this industry as a way of making more profit, rather then of meeting a need, shows the real motivation behind the introduction of the Bill.

The Secretary of State was totally unconvincing. His arguments for privatisation were not valid, and he never mentioned the real reason for this measure. In 1969–70 and from 1975 to 1979, I was the sponsoring Minister for the British Gas Corporation. Since the public ownership of gas there has been major investment, higher safety standards and a very good repair and maintenance record. The industry has bought British equipment, which has maintained employment, and there has been a sense of service. Successive Governments have taxed the industry, but one can also tax an industry in private ownership. For example, we tax petrol. Anyone who thinks that once gas is in private ownership it will be free from a predatory Chancellor does not understand how this works. For various reasons, any Chancellor will from time to time look at ways of raising revenue, and private gas could be taxed as easily as public gas. The only difference is that gas is now being taxed for a different reason—to make it more profitable to sell it off.

I happened to be Secretary of State when North sea gas was brought ashore. Because British Gas was a monopoly buyer, it was able to get a good price from the oil companies because the oil companies could not play one customer off against the other. British Gas was able to say, "If you want to sell gas in Britain, you must sell it at the price that we offer." One reason why gas prices have been so low—in some ways too low, to make it easy for electricity and coal—is that British Gas was able to force oil companies to sell gas at a low price.

Massive investment in a new distribution net work was set up and a programme to convert appliances was successfully established. The case for the common ownership of gas is unanswerable. It was not always and only in private ownership before nationalisation. Hon. Members might remember the phrase, "gas and water Socialism." There was a proud municipal record of running town gas before nationalisation.

Gas is a vital national asset. Energy policy under any Government is bound to take account of depletion policy. It would have been possible for British Gas, if it had so chosen and if the Government had allowed it, to deplete at a massive rate and bring the gas ashore so that people converted to gas when it was cheap, only to be caught with equipment that they could not afford to use when more expensive gas came in because ours was starting to run out. Energy pricing as between gas, electricity and coal is a central part of national policy.

I should like to mention one consideration that has not come out so far, unless the Secretary of State dropped a hint. Once gas is taken out of public ownership, British Gas will be under the complete control of the Common Market Commission. I have warned the House about this before, and am speaking from knowledge. When I was Secretary of State, it tried to argue in Brussels that the continental shelf was under the treaty of Rome. We said that it was not and were able to enforce our will because we owned the gas fields there. The Commission wanted the pipelines to take the gas straight to Europe rather than come through our system to the continent. We were able to say, "No, we do not accept that the continental shelf comes under the treaty of Rome." Privatisation will enable the Commission to enforce its will under the competition articles of the treaty. Moreover, the record of buying British equipment will dissolve because the EEC requirement to put orders out to tender will be enforceable with a private gas corporation, whereas it was not when it was public, when we were able to have regard to the long-term security of supply of equipment.

The Bill hands over North sea gas to Common Market control by the act of privatisation. It will lead to higher prices, greater fuel poverty, lower safety, a weakening of regulation, poorer maintenance, loss of control to the EEC and reduced demand for British equipment.

The real motivation for the Bill should be spelt out with absolute clarity, as the Secretary of State did not touch on it. It is to sell assets, which the Government do not own, to their business friends, who will buy the assets at knockdown prices. It is to pay City institutions enormous fees to sell the assets and to use the proceeds for a once-and-for-all tax cut to buy support at the next general election. It is important that, in addition to these technical discussions and dreams about the draft of the Queen's Speech when there is a Liberal Government —my gosh, that was interesting—we make it clear that business firms put up money to pay for Saatchi and Saatchi advertising to get a Tory Cabinet elected, knowing that a Tory Cabinet will put on the market, below their real price, assets the value of which comes from the labour of those who work in the industry concerned and public investment. They will buy them, make a large killing and support the Tory party again. It is corruption. There is no question about it.

I have been here for 35 years and I have never seen a measure which so reeks of corruption as this one. We should consider the figures. British Gas is valued at £16 billion. The Government have already sold £4.7 billion of public assets and lost £1.4 billion by under-pricing. That is statistically established. British Telecom shares, for example, rose 93 per cent. in value before night fell and the Government lost £1.3 billion in a single day —money that would have solved the problem of inner cities, made the Archbishop of Canterbury happy and ended the tragedy in the Broadwater Farm estate or in Brixton or in Liverpool or in Sheffield.

That money could have been used to meet needs, but it was used to pay an electoral debt incurred by the Government, who gained support from business companies. If the House doubts that assertion, the figures are public. The City institutions received £253 million—

Mr. Lofthouse

I thought that it was £300 million.

Mr. Benn

Well, the figures vary. They received getting on for £300 million in fees for selling assets. That is four or five times as much as Band Aid and Live Aid raised in one year of concerts for the starving of Ethiopia. The City of London was rewarded with six times as much as the generosity of the public could provide for the starving of Ethiopia. But here is the rub. Of the City underwriters, 33 of the 55 who got the business contributed to Tory party funds. I have some figures to prove it. Baring Brothers gave £25,000 to the Tory party in 1983 and shared in fees of £5 million to sell off Cable and Wireless. Kleinwort, Benson paid £30,000 to the Tory party and shared in more than £5.5 million for selling British Aerospace, £190 million for selling British Telecom, more than £5 million for selling Cable and Wireless and £9 million for selling Enterprise Oil. That investment of £30,000 in Tory party funds was pretty good. Hill Samuel paid £28,000 to the Tory party and shared in £5.5 million of fees for the sale of Jaguar. Lazards put in £20,000 and shared in £1.75 million for the sale of Wytch Farm. Morgan Grenfell put in £30,000 and got a share of £3 million for the sale of Amersham International and Sealink.

When I think of the district auditor chasing councillors in Lambeth on the ground that they were a bit late fixing a rate and compare that with the massive sums of money given, in effect, in return for political support to City institutions that have contributed nothing to raise the quality of service of British Gas or to provide safety for those who use it, I can only call it corruption. The public should know how it all works.

I am glad that my right hon. Friend the Member for Salford, East (Mr. Orme) said that an incoming Labour Government would deal with this matter. The precedents for legislation set by the Tory party are many. I have gone through the legislation of the 1970–74 Tory Government who took powers under the Counter-Inflation (Temporary Provisions) Act 1972 to control prices, to demand information, to amend statutes, to control profits, to vet investment and to control multinationals. They introduced the Insurance Companies (Amendment) Act 1973 which gave powers to veto directors, to inspect books, to issue directives and to define unfair practices. The fair trading legislation gave powers which included entry and seizure. The classic case was the one-clause Rolls-Royce (Purchase) Act 1971. Through one clause, they brought Rolls-Royce into public ownership. My right hon. Friend need have no fear that he will not be sustained by Tory precedents when dealing with this abuse of public trust, which is a denial of the fiduciary responsibility to taxpayers and the public of whom the judges are so ready to speak when they criticise Labour councillors.

There will need to be changes in the nature of public ownership. Over the years, for my sins, as Postmaster General and as an Energy Minister I have been responsible for many public corporations. There must be real accountability to Parliament. I have never believed it right for the Secretary of State of the day—I had many years experience of this—to have no explicit authority over a chairman such as Sir Denis Rooke, but always to have to twist the chairman's arm and then not be accountable to Parliament. There should be explicit powers of direction, subject to parliamentary approval.

Secondly, we should get away from the crude patronage of appointments of board chairmen. In the United States, an ambassador cannot be appointed without the approval of the Senate in committee. Parliament should have to approve the chairpersons appointed to our public corporations so that people can give evidence about them before they are confirmed.

The third point bears a little on the question of regional boards. I was doubtful about centralisation, but it was thought necessary because of North sea oil. Local authorities should have power over local managers of nationalised industries and be able to seek their removal if they are not sensitive to local needs.

A final precedent from the Tory party is the Trade Union Act 1984. Many Ministers have talked about the need to restore the power of union members over the unions. A minor amendment to the Government's own Act would allow workers in industry to choose by ballot the boards of directors of the companies for which they work. The alteration of one word —from "union" to "company"—would secure a measure of power for those who have invested their lives in the gas industry comparable with the power now supposedly enjoyed by those who have invested their money in it.

The party of which I am honoured to be a member, which still lives under the shadow of and perhaps affection for the Herbert Morrison legislation after the war, must look again at these matters. There must be accountability to Parliament. There has never been proper accountability. Parliament must be able to vet the chairmen of these great corporations. There must be accountability to elected local authorities to see that the big bosses in the public sector do not ride roughshod over local needs. Those who work in the industry must have powers over their own industrial management —based, perhaps, on the legislation introduced by the Conservatives to deal with trade union democracy.

I have long urged those changes. When the history of all this comes to be written, for this privatisation will not last long, it may be that by breaking the Morrison mould the Government will be remembered for having paved the way to a form of common ownership which entrenches service to the public and not the pursuit of profit which is the Government's sole interest in introducing this measure.

Several Hon. Members


Mr. Speaker

Order. Fifteen hon. Members are seeking to catch my eye. Some of the speeches have been rather long. The right hon. Member for Chesterfield (Mr. Benn) has set an admirable example, but I ask hon. Members once again to be relatively brief.

6.12 pm
Mr. John Maples (Lewisham, West)

The right hon. Member for Chesterfield (Mr. Benn) manages to construct an incredible conspiracy around almost anything of which he does not approve. He should reflect on the fact that the vast majority of shares in denationalised public corporations will end up in the ownership of pension and life assurance funds, and that profits from them will inure to the benefit of the 11 million occupational pensioners in this country.

I wish to deal briefly with two aspects of the Bill—the principle of denationalisation and the need for competition. Although they are interlinked, I do not believe that they are mutually dependent. There is a respectable and persuasive case for denationalising public corporations regardless of the consequences for competition, although competition is clearly important.

Denationalisation results in genuine public ownership, rather than ownership by the Government of the day. It enables management to manage the business free from political interference. Investment programmes are not constrained by the annual imperatives of the public sector borrowing requirement target. The record of denationalised industry is most encouraging. Profits have almost always increased substantially, which results in a substantial increase in corporation tax, which inures to the benefit of us all.

It is time that we nailed the lie that the sale of public corporations is intended to finance tax cuts, because it is not. The purpose is to reduce gilt sales and to help fund the Government's capital investment programme. It is not like selling the silver to pay the butcher—an analogy commonly used by the Labour Front Bench—but more like selling an old picture that has been sitting in the attic for a long time, so as to avoid increasing one's overdraft.

Much of the criticism of the Bill in the financial press relates to competition, but the arguments are not so strong as they at first appear. The Labour party has no standing in the argument, as it wishes to renationalise the gas industry and to reinstate a state monopoly without any competition at all. The alliance seems to want to have things both ways. The hon. Member for Gordon (Mr. Bruce) put his name to the amendment criticising the Bill for not promoting enough competition, but said in his own speech and in a Liberal party press release that it was virtually impossible to have competition in the gas industry. Similar statements have been made by members of the SDP.

Consideration of three areas of the corporation's business shows that the arguments about competition are not so persuasive. The Government are being urged to allow the free export of gas. Presumably this must also mean freedom for British Gas to import it. The people asking for that are the oil companies, and it would almost certainly result in an increase in price. In this area, there is a great national interest at stake —the rate of depletion of North sea gas and oil reserves—and it is reasonable for any Government to have some influence on that. I do not believe that it would be right to free the market internationally for North sea gas, but there is a serious danger of the British Gas Corporation exercising its monopsony purchasing power to the detriment of producers. I am sure that the Government will keep a careful eye on that. If there is any evidence of such behaviour, the Government will be able to hold over the corporation the threat of allowing producers to export, so as to ensure that the British Gas Corporation does not exercise its monopoly against the public interest.

Secondly, there is not a legally constructed monopoly in the Bill in relation to industrial and commercial supplies. Anyone will be able to supply industrial and large commercial customers and will have the right to use the corporation's pipes. The normal legal and free market rules will thus apply, and if the corporation abuses its effective monopoly by trying to charge unrealistic prices it will almost certainly find that it has competition. Moreover, the Director General of Fair Trading, backed by the Monopolies and Mergers Commission, will have considerable power to intervene in any abuse of the corporation's considerable commercial powers.

It is also worth remembering that gas is not the only fuel available. People can use oil, coal or electricity. It may not be easy for industry to switch from one fuel to another overnight, but in general it is easy to make such a switch in the medium term because there are always industries coming on stream, introducing new plant or renewing old plant and thus able to make the choice. It is also open to the North sea gas producers to become suppliers to industry. There is thus no need to worry about the Bill not promoting greater competition in supply to industrial and commercial users.

In the domestic market, the criticism seems a little more valid, but one must ask whether there could possibly be competition in the supply of gas to domestic users. If there were two gas mains running down the street, some hon. Members would no doubt say that the two of them would conspire to raise prices, so more than two would be necessary. How many gas mains are there to be on each street? It is clear that we cannot have competing suppliers for domestic customers. We must bite the bullet and accept that. As my right hon. Friend the Secretary of State said, however, there will be competition from oil, coal and electricity. That competition is real and genuine. If the British Gas Corporation abuses its monopoly, the use of other forms of energy will increase substantially and its own share of the market will be greatly eroded. It seems to me, on reflection, that a privately regulated monopoly, with the kind of price formula that the Bill envisages, gives consumers a far better deal than a public, politically controlled monopoly.

If one reflects upon the Bill, one is driven to the inescapable conclusion that, in general, denationalisation is good for efficiency —management, shareholders, employees, consumers and the taxpayer. The Bill, which denationalises the gas industry, allows and promotes competition, where it is practicable, and protects consumers where competition is not practicable. I am sure that it will prove a success, and I hope that it will soon be followed by the denationalisation of the electricity industry.

6.20 pm
Mr. Robert C. Brown (Newcastle upon Tyne, North)

Alongside my name in the Register of Members' Interests are the words Sponsored by the General, Municipal, Boilermakers and Allied Trades Union. That union organises most of the workers in the gas industry, and I declare that interest. But in today's Second Reading debate I am speaking on behalf of the 72,000 electors at the poll in my constituency—or the vast majority of them, because very few of my constituents support this retrograde measure.

The Government intend to privatise the British Gas Corporation. With their gross majority they will hardly need to play the loyalty card to get Conservative Members, who ought to know better, to go into the Lobby and support this measure which—make no mistake about it —will rob the British people. The gas industry belongs, in the truest sense, to the British people. The investment in the gas industry was derived from the taxpayer and the raw material—gas—belongs to the British nation, not to any section of it. Governments, acting through the British Gas Corporation, hold it in trust. That trust is to be betrayed tonight by the Conservative majority in this House.

The Conservative Government and party say that they believe in the sanctity of property, but time after time they have trampled upon property rights, even if those rights were held collectively rather than individually. Something does not cease to be owned simply because not a single name is attached to it. The Government have fought this out the hard way—through the courts after the Trustee Savings Bank flotation. However, because the nation did not believe that it could be so blatantly robbed of assets such as gas, it did not think to bolt down those assets. Unfortunately, the option to bolt down the assets is no longer available to the British people.

If we consider the effects of privatising the British Gas Corporation, the first issue in people's minds must be gas safety. I worked for 30 years in the private gas industry. Then I worked in the publicly owned gas industry. Therefore, I am well aware of how important gas safety is to the industry's employees. A privatised British Gas Corporation will eventually be less safe than it is now. No amount of flummery will disprove that fact. The Secretary of State for Energy airily dismisses our worries about gas safety by suggesting that it would be commercial suicide for a private gas company to neglect gas safety. I agree entirely, but he has not taken on board the implications of his measure for gas safety right across the board. I want to deal with them.

The British Gas Corporation plc, or whatever it will call itself in future, will be forced into devising a tariff formula which, broadly, is about a reduction in non-gas costs. They include pipeline maintenance. Although the British Gas Corporation has been quite successful in reducing its non-gas costs, there comes a point when they cannot be further reduced without endangering the services that are provided.

In real terms, during the last 10 years the BGC has reduced its non-gas costs by more than 20 per cent. Pressure to reduce them further, to fit an artificial formula, could lead to the kind of risk assessment that defers a mains renewal until another financial year, or for two financial years. No fig leaf of commercial concern could hide the risk that that course of action would entail. We have seen such commercial concern lead to aircraft disasters. I do not believe that any hon. Member would be bold enough to say that there is not serious concern, to put it at its mildest, about some of the air disasters that have occurred both in this country and elsewhere, involving both the British Aircraft Corporation and foreign corporations.

Mr. Maples

Does the hon. Gentleman think that in that respect there is a difference in the safety record between airlines which are owned by their Governments and airlines which are privately owned? I suggest there is not.

Mr. Brown

I am prepared to accept that point, but at least the customer can choose his method of travel: whether by train, road, ship or air. The average domestic gas consumer has no choice.

A further element in non-gas costs are wages and salaries. As a percentage of all non-gas costs, they have fallen from 27 pr cent. to just under 19 per cent. When the pressure to reduce non-gas costs is applied, what better way is there to save money than to economise on staff costs? That point will not escape any corporation. Just by moving to a contractor-based industry, thereby getting rid of the obligation to provide pensions for its employees, the British Gas Corporation would save 17 per cent. of its costs. Although contractors will try to operate safely, their record in the domestic installation market is worse than that of the BGC's directly employed work force.

No one should kid himself that the Consortium of Registered Gas Installers was a cure-all for the cowboys in the industry. It was not. However, when a cowboy bodges a job, the skilled work force of the BGC can be called on at present to put things right for the customer. We cannot rely on the Government's bland assumption that privatisation will make no difference to safety. Of course it will. I am not suggesting that the difference will be immediately apparent and that the day after the Act is on the statute book everything will fall apart, but in the medium and in the longer term there will be vast differences in safety standards.

It is also the height of insult, as the BGC is now constituted, for the Secretary of State to trumpet that a new statutory requirement will be imposed upon the BGC to answer calls about gas escapes within 12 hours instead of within 24 hours. It is insulting to make out that there will be new protection. Does the right hon. Gentleman not know that British Gas already has an internal code that its work men get to a gas escape within two hours? The board for which I worked before I became a Member could proudly say that it attended a reported escape within minutes rather than hours. There will be no extra safety, and it is hypocrisy to suggest otherwise. Costs and circumstances could lead the privatised company to take advantage of the 12-hour limit in a way that the public company would never dream of taking advantage of the present 24-hour limit.

Gas is an inherently unsafe substance but, thanks to the corporation's care, dedication and investment, the industry has the best safety record in the world. However, after privatisation, we shall have only the protection of commercial suicide rather than the ethic of public service. I know which I prefer. I know which one the public needs and deserves.

The Bill provides for the establishment of a Gas Users Council which will be able to maintain prices and make representations to Ofgas. Its powers will be more limited than present powers because they will be restricted solely to the price of gas. In effect, important chunks of the corporation's service will be excluded for ever —notably, appliance retailing and the code of practice on disconnection.

The staff of the gas consumers councils are all to be made redundant. A letter from the consumer affairs branch of the Department of Trade and Industry, Millbank tower, confirms that, stating: This means that existing contracts of employment will come to an end when the new provisions come into force and all staff can therefore expect to receive redundancy notices in due course. Those agencies have existed to protect the consumer. This overkill will result in a lack of continuity of expertise and knowledge. Behind all this is the Government's view that regulation and consumer protection will depress share prices. Regulation may affect share prices, but I submit that the City would not consider consumer protection important compared with direct regulation. Consumer protection will not affect share prices.

It is scandalous that, in those areas where the Government have the least political support — the regions with the highest unemployment levels, especially the northern region—the gas consumers councils have consistently handled twice the national average number of complaints per thousand customers, not counting inquiries, requests for guidance and advice. In the past two years in the northern region the gas consumers council retrieved £55,000 for consumers on disputed gas and service bills.

There can be no doubt that the ability of the Gas Users Council to maintain the operation of a rather complicated price formula—for both beachhead and non-beachhead costs—will be limited. That means that the price of the raw material will not be subject to any constraint, save the ability to pay. We can see the deals that will come forward. With gas costs being 46 per cent. of all costs, the scope for moving from average pricing to long-run marginal pricing is great. It has been calculated that gas prices in the medium to long term could cost a family of four an extra £1 a week. That sum is large enough to do away with the great bonanza of the tax handouts that the sell-off is intended to create.

Another matter of concern, which is probably of no interest to the Government, is jobs. I have already touched on the pressures to make greater use of contractors and to close showrooms. Up to half of the corporation's work force could face the sack. Although the new go-getting company may expand its business, it is unlikely that those jobs will ever be replaced. We are likely to see a takeover market boom rather than an expansion of the gas market.

We have had no assurance about the future, as my right hon. Friend the Member for Salford, East (Mr. Orme) said, of the "Buy British" policy with British Gas. If this legislation is anything like the British Telecom legislation, there will be a sad future for many British jobs. If the denationalised body buys extensively overseas, it will put at risk up to 250,000 manufacturing jobs. What an achievement! It is in line with the Conservative party's achievement during its six years in office of massively increasing unemployment.

Privatisation is morally wrong. In this case, it is also logically wrong. The gas industry works well. We should keep it public.

6.36 pm
Mr. Michael Portillo (Enfield, Southgate)

I listened with great interest to the hon. Member for Newcastle upon Tyne, North (Mr. Brown). I would not for a moment doubt his sincerity, but a number of his points were extraordinary. I do not believe that any of his points—that British Gas will lose half its employees, that 250,000 jobs in the gas industry are at stake or that safety will be called into question — are credible or will carry any credibility outside the House. If that is the basis of the Labour party's attack on the Bill, I warn the party that it will not carry that attack far. It bordered on the insulting for an hon. Member who spoke proudly of representing the workers to imply that, just because industry moved from the public to the private sector, the same people in control would completely disregard the safety of the public. That was an extraordinary claim and did no credit to those workers.

Mr. Robert C. Brown

I was not suggesting that for one moment. The hon. Gentleman is grossly misrepresenting me. I said that if the industry were fully privatised and we did not have in gas distribution the number of employees that we have today, there would be a great danger of safety being disregarded.

Mr. Portillo

Whether or not I grossly misrepresented the hon. Gentleman, he will understand that I did not intend to do so. The Official Report will show whether I made a fair assessment of what he said.

I am a strong supporter of privatisation. It has provided a considerable stimulus to companies that have moved from the public to the private sector. On the whole, those companies have become more responsive to their customers, more efficient and more profitable. The fact that they are more efficient and more profitable means that they perform better in the economy. It adds to the economy's performance and is likely to be productive, not destructive, of jobs. Competition is generally improved, which means a better choice and better service for the customer.

Another aspect of privatisation is the creation of millions of new shareholders—people who have never invested before. I think here of the right hon. Member for Chesterfield (Mr. Benn), who spoke about common ownership. The people have no sensation of owning in common the British Gas Corporation, the NCB or any of the other nationalised industries. The first occasion on which these people felt that they might own some of these great British industrial giants was when the Government gave them a chance to buy shares, and in the case of British Telecom, 2 million people bought shares.

Mr. Lofthouse

What evidence has the hon. Gentleman of inefficiency, which has been referred to by him and other Tory Members, in the gas industry when that industry is compared to those in the private sector?

Mr. Portillo

I prefer to deal with the historical example and let the hon. Gentleman know what he knows perfectly well already, that in the case of British Telecom customers are extremely satisfied because they are getting a better service. If the hon. Gentleman is telling me that he has never had a letter from one of his constituents complaining about the gas industry, and if he is saying that there is no room for improvement, I should have to doubt that. I see every reason to believe that with the BGC, as there has been with British Telecom, there will be an improvement in the service to the customer after privatisation.

Privatising a monopoly presents difficulties for a Government. It is not as easy as privatising a company with direct competition in its product. Whatever one does when one privatises a monopoly, some natural monopoly sectors will remain, and the problem is how one deals with this problem, addresses it and improves the situation. However, the fact that a natural monopoly will remain is not a good reason for leaving this in the hands of the Government. I see no reason to believe that Ministers and civil servants are any good at running companies, and here I agree strongly with my right hon. Friend the Secretary of State. There is no evidence that Government control has been good for customers, and it is demonstrable that Government control has been bad for the running of business and therefore for the whole economy.

With both British Telecom and the British gas industry, I should have preferred the new arrangement to be one of divided companies. That would allow for greater competition, transparency and comparison between one part of the industry and another. I am perhaps an idealist, but I know that I share those views with a number of my hon. Friends.

If I am asked whether I should like to see a company privatised, even without the opportunity of its being regionalised in the first place, the answer would be yes. The great change in employee attitudes, the freedom that management gains when freed from Government control over its investment policy, and the pressure that is established on management both from bankers and shareholders, all combine to make it a better company in all respects, including its services to its customers.

None the less, it is important that the Government leave the door ajar for the entry of new competition. They must be prepared to defend competitors from the anticompetitive practices of the monopolies, and they must press the monopolies to pass on to the customer any gains in efficiency in the form of lower prices.

The Government did quite a good job on all of those matters in the privatisation of BT. The Director General of Oftel was specifically charged with promoting effective competition within the industry. The fact that he has taken that duty seriously has recently been proved by his decision on inter-connection. This is important, because, however good one makes regulations in industry, the true friend of the customer is competition. Several important groups have agreed on that point when being interviewed by the Select Committee—the National Gas Consumers Council and National Consumer Council both agreed that that is so.

If anything, the British gas industry should face tighter regulation than does British Telecom. The BGC faces competition from other fuels, such as electricity, gasoil, and so on, but much of that competition is weak. On the other hand, with the privatisation of BT, we were dealing with a rapidly developing market where technological developments were coming along fast and establishing new markets in which the monopolies had no long-established monopoly. That is not the case with the British gas industry. The gas market will not change in its ways and a monopoly will continue to hold its monopoly. For that reason, the regulatory regime should be tighter in this case than in the case of British Telecom.

One thing missing from the Bill is the duty, present in the British Telecom Act, on the director general to promote effective competition. I was surprised by that. There used to be a cartoon character who stuck his head over a brick wall and said, "Wot, no Watneys?" When I stuck my nose into the Bill I said, "Wot, no duties to promote effective competition in the industry?"

I am also concerned about how the industrial customer, who gets no protection, will fare under the Bill. The reason advanced for that being the appropriate mechanism is that the British gas industry faces tough competition in the industrial market. That was not the case in all industrial markets. For example, in some markets gas competes with gas oil, which is about 50 per cent. more expensive than gas.

I have heard it said that the CBI has made no objection to the fact that there will be no reserve powers for the regulator. I venture to suggest that the CBI does not speak for all British industry. I am not the secretary of the CBI's fan club. I wonder whether all British industry has understood that there is no reserve power in the Bill for the regulator. It may be fair to argue that British Gas should be able to price up to what the market can take. But from the political point of view, some customers will have a problem if gas price rises to what the market can take, and their squeals could be rather loud.

I am concerned about two other points about pricing. The first is the obligation on the new British Gas company to "use its best endeavours" to keep down standing charges which is rather a weak phrase. The other provision is that it should publish the principles that underly the connection charges. As far as I can understand, there is no control over connection charges. That is important. The BGC has an obligation to supply customers with up to 25,000 therms if they live within 25 yards of a gas main, but if there is no control over what the new company can charge for connection, there will be a way round the statutory obligation, and some safeguard would be appropriate.

I should like to see further improvements in the competition for the supply of gas. The Oil and Gas (Enterprise) Act 1982 opened the way for private suppliers to supply gas direct to customers, and the Government have rightly recognised in the Bill that one of the important failings of the previous legislation was that there was no provision for back-up supplies. I am pleased that the Government have suggested something in the Bill, but the important point is the price at which back-up supplies will be provided. Again, as far as I can tell, the Bill and the draft licence leave the decision on what is a reasonable price in back-up supplies entirely to the new gas company, and that is not desirable.

I am aware that the new British Gas company will be able by predatory pricing policies, if it should choose to operate them, to pick on any competitors that may appear one by one. It can offer a good deal to industrial customers based on the fact that it has much cheap gas coming to it from old contracts. It can make an average price with which it can easily undercut any new product on the market, as the price of that must be based on up-to-date costs of new supplies from the North sea. Again, I should have thought that a specific prohibition on predatory pricing would be appropriate.

I am a little surprised that the Bill does not seem to extend to the sale of appliances. In some of the appliance markets, up to 80 per cent. of the market is controlled by the British Gas Corporation, and that is important. This contrasts with the British Telecommunications Act, because in that measure there is a provision that it shall be the duty of the director general to enable producers of telecommunications equipment to compete effectively. An equivalent clause in this Bill would be appropriate.

I am also concerned that in the offshore sector the BGC should not be allowed to use its special position in an anti-competitive way. These days we talk much about Chinese walls, and one needs something like a Chinese wall between the two positions of the British Gas Corporation —as the most important, virtually monopoly buyer of gas from the North sea, and as an important producer. If it is both of those things, it can find itself competing for new licences with other oil companies and also being the only possible buyer of gas from those oil companies. It could put pressure on its competitors to discourage them from competing for licences. It is possible that such a practice might already be illegal under the Competition Act 1980. Perhaps my right hon. Friend can confirm that.

My hon. Friends have raised another important point —the desirability of a distinct prohibition of preference being shown towards one supplier. The most obvious example would be the BGC showing preference to itself as a supplier, but there could be other examples. That brings us to the complicated question of what is the correct regime for imports and exports. In the past, the BGC has shown a preference for foreign supplies. This is not simply an academic point, because in the 1970s the BGC contracted for Frigg supplies, the result of which was a tremendous slump in exploration and development on the United Kingdom continental shelf. This was serious both for our balance of payments and for employment, which is why we take such a serious view of the matter.

My right hon. Friend said that he intended to make a statement on imports and exports, and I look forward to that. I remind him of the conclusions of the Select Committee report on gas depletion—that imports of gas were likely to be necessary at some future time, perhaps in the 1990s, so it was desirable to move towards a regime in which both imports and exports would be allowed.

Privatisation of a monopoly has three important benefits —commercial freedom for the company, regulation to protect the customer, and competition. I believe the greatest benefit to be competition. I am not sure whether the Bill recognises competition as the most important aspect. I hope that the Government will carefully consider whether the balance is right, or whether there should be certain additions to the Bill to bring competition to the fore.

6.52 pm
Mr. Peter Hardy (Wentworth)

I hope that the hon. Member for Enfield, Southgate (Mr. Portillo) will serve on the Standing Committee. However, he has outlined differences between his views and those of the Government that may lead to the Government not to look kindly upon any application from him.

Some of us have sympathy with a little of what the hon. Gentleman said—although only a little. His attachment to competition is genuine and sincere. I hope that he understands that some of us represent constituencies where the Government's lust to achieve competition has resulted in 200 or 300 people chasing one job. That has not generated any great achievement.

My hon. Friend the Member for Newcastle upon Tyne, North (Mr. Brown) asked what we should call the new organisation. Perhaps it should be called, "Privatised Integrated Gas plc" —"PIG" for short. That is not an inappropriate title given the direction in which so many Conservative snouts have been pointing during the debate. However, at least we know where we stand with the majority of Conservative Members.

The alliance amendment would give us the worst of all worlds. At least the Secretary of State has managed to resist pressures to disintegrate the industry, to split it into many pieces. If the amendment was accepted, that would happen. We should be grateful that we have been spared that.

The Secretary of State's speech was condescending, especially when he implied that the BGC had not been successful. Had it performed as badly as the private sector companies that have given money to the Conservative party during the past five years, there might be a case for the Bill. Had it been only half as successful as it has been, however, that surely should have protected it from the Government's clutches. The BGC has out-performed every company that supports the Conservative party.

Our country is too short of success and achievement for the sort of success achieved by the BGC to be put at risk. For it to be put at risk for corrupt motives is deplorable, and for that corruption to be disguised is equally deplorable. The Bill is about raising money, but the Secretary of State did not once offer even the slightest glimpse of the Government's estimate of what they expect to gain. The Government are to spend £30 million promoting the sale of BGC. We know that the City of London will receive at least £300 million for arranging that sale—yet we do not know how much the Government hope to gain. We must be given that information. If we are not, the Committee stage may not proceed as quickly as the Government might wish.

We are concerned about priorities within the Department's expenditure. As I said, the Government will spend £30 million promoting the sale of the BGC. However, recently the Secretary of State and his colleagues expressed a burning commitment to the cause of energy conservation—indeed, 1986 is to be Energy Efficiency Year. When the Minister replies, will he confirm that the Government intend to spend £30 million promoting the sale of BGC, but only £5 million to £6 million supporting the promotion of Energy Efficiency Year? It appears that the interests of the Conservative party have been valued at five times higher than the interests of the nation.

The Secretary of State should have referred in more detail, and with a little less condescension, to the achievements of the BGC. In the foreword to the BGC accounts, Sir Denis Rooke painted an entirely different picture to the one painted by the Secretary of State. He referred to the BGC doing well to achieve a record level of gas sales, to the steady customer growth and to continuing healthy profits.

The BGC's profits during the lifetime of this Administration and that of the previous Administration elected in 1979 have provided receipts to the Treasury that will probably exceed the amount that will be obtained from its sale. The BGC has been forced to make those payments, but it will contribute no longer when it has been sold, and then the taxpayer will bear an even heavier burden.

One point that appears to have escaped Conservative Members is Sir Denis Rooke's reference to the willingness of all employees, at all levels, to adapt to change and to co-operate. The BGC's achievement has been that operating costs, in real terms, fell by 19 per cent. in five years. Few private companies have reached that level of efficiency —reached with the full co-operation of its employees.

The hon. Member for Southgate said how great it was for workers to have shares in their companies, because it would help them to identify with their enterprise. The hon. Gentleman would have to go far and wide before he could find any significant enterprise in which the employees identified with the success of that company in the way that employees of the BGC, at all levels, identify with their company's success. Is the hon. Gentleman saying that their efforts, their co-operation and their significant achievements will not be set at naught by the greedy snouts of those who form the current Administration?

Mr. Portillo

Is the hon. Gentleman seriously doubting that National Freight Corporation Limited has moved from loss to profit and success because many of those who are employed by it have had their attitudes affected by their ownership of shares in the company?

Mr. Hardy

It was about four or five years ago that I took part in a debate on the sale to the public of Amersham International. Conservative Member after Conservative Member said that the only real resources of Amersham International lay in the hands and brains of those who worked for the organisation. They went on to ask why ownership should continue to rest with the state. I suggested that the Government and Conservative Members should allow Amersham International to be owned by a co-operative. There were ribald remarks as Conservative Members sniffed the profits that they were going to make. That disposed of that argument.

If the hon. Member for Southgate tables an amendment in Committee that is designed to make British Gas a cooperative owned by the employees at all levels, from Sir Denis Rooke down to the apprentice gas fitters, I might vote for it. I do not think that such an amendment would be supported by his right hon. and hon. Friends. That is not what they are about. They realise how badly they have served Britain and how badly they have performed generally. They realise that the only way in which they can win power at the next election is by bribing the electorate.

I do not regard the Conservatives' bribery as an inevitably successful venture. The common sense of the British people has caused them to recognise that the country cannot afford the sort of Government that we have had here over the past five or six years. The Government's bribery will be a vain effort and the course on which the Secretary of State and his right hon. and hon. Friends are embarked will cause them to be regarded with greater distaste by the electorate than would otherwise be so.

That distaste will be emphasised and intensified by the complacent condescension of the Secretary of State, who disregarded the efforts made by those employed in the gas industry. He chose to minimise the achievements that they have secured. He forgot about the enormous income which the Government have derived from British Gas and which they plan to enjoy on privatisation. That is scarcely a responsible approach—it is certainly not a generous one —on the part of the Secretary of State. At the very least he could have paid proper tribute to those who work in the gas industry instead of insinuating failure throughout his speech—although British Gas may be rather relieved that there is to be an integrated organisation rather than the dismembered one which some Conservative Members have advocated.

Lastly, I shall refer to part of the document which was laid before the House last night. I trust that the Minister will be able to explain it fully, either this evening or in Committee. We have heard a great deal of jargon and gobbledegook in the House. It can be found in almost every published utterance. It is often ornate and sometimes it is a confusing and irritating use of language.

It seems that we have moved now to a form of numerate language which is completely bewildering. I do not regard myself as an idiot, but I find it extremely difficult to understand the formula which has been presented to the House. The Minister assured us that there would be clear price protection, but I wonder how many gas consumers in my constituency, the Minister's constituency or the constituency of anyone else here can be reassured by the formula of price protection:

That is followed by some further embellishments that do not contribute to clarity.

I know that the Conservative party has frequently fought elections with the claim that the people are entitled to know. Surely they are entitled to know, even if they do not have a first-class honours degree in mathematics or statistical science. If the Minister thinks that the formula to which I have referred is a satisfactory piece of clarification, that will neither give reassurance to the 35 million who depend upon gas, nor make the 93,000 employees of British Gas confident of the sanity of those who have made the decision to put their jobs under threat. He is sadly mistaken. We are entitled to a better explanation than that.

The Secretary of State told us that the officials of the Department of the Environment had crawled all over British Gas and other energy industries. I do not know whether that is a fair description. If the result of that crawling is to inflict numeracy upon Britain of the sort that is exemplified by the formula to which I have referred, perhaps the Department of Energy and its Ministers should be privatised and not the successful BGC.

7.6 pm

Mr. Peter Rost (Erewash)

It was predictable that the Opposition would spend their time today in another sterile argument about the marvels of nationalisation. It is regrettable but rather comforting that they have reaffirmed their commitment to grab back the millions of shares that will be taken by small savers, and especially workers in British Gas, following the enactment of the Bill. They have told us that they will do so if they get the chance to implement that policy. I have no doubt that one half of the Labour Opposition—again, this is comforting to know —intend to grab back the shares without paying compensation, while the other half will do so while paying some sort of compensation. We should welcome their decisive declaration to the voters for it means that the Labour party is even less likely than before to have the opportunity to form a Government and to carry out its policy.

I welcome the Bill. I want to see the spur of greater efficiency and the profit motive spread throughout British industry. I do not see why employees in British Gas should be denied the advantages and privileges that are already on offer and have proved to be beneficial to the employees of British Aerospace, Jaguar, National Freight Corporation Ltd, British Telecom and all the other industries and organisations that have been privatised. I wish to see the extension of privatisation.

However good a performance British Gas has put up —I am not one of its critics—I am modest enough to accept that under privatisation it might do even better. It might serve the economy better as well as the consumer. That in itself is a justifiable objective.

Mr. Kevin Barron (Rother Valley)

The hon. Gentleman has referred to the employees of British Aerospace and their shares. Does he realise that only 3.6 per cent. of British Aerospace's employees now own shares in the company?

Mr. Rost

That is 3.6 per cent. more than before. I have no doubt that many of those—[Interruption.] The hon. Gentleman may have the opportunity to make his own contribution if he will allow me to continue. I have no doubt that those who no longer own shares in British Aerospace will regret having disposed of them when they reflect on the performance of the company as a result of the motivation that has been provided by privatisation. I am sure that that applies to all the truck drivers who took their trade union leaders' advice and failed to take shares when the National Freight Corporation was privatised. I have no doubt that they are regretting that decision.

I welcome the Bill, but I, too, have doubts. I feel that some of the provisions can be improved. I support the arguments that have been advanced by my hon. Friends the Members for Enfield, Southgate (Mr. Portillo), for Rochford (Dr. Clark), for Exeter (Mr. Hannam) and for Lewisham, West (Mr. Maples). We must be careful not to fall into the trap of privatising a monopoly without creating the opportunity for genuine open competition of providing a system of firm regulation. Naturally, most of us would prefer to adopt the first option. If a major industry is privatised, we should try to provide within the transfer the opportunity for real competition. If that is not possible—I think that most of us understand that it is not practical—we must take the second best. It is a poor, but important, second best. Whether we like it or not, we must provide a sensible system of regulation. I am not entirely persuaded that we have followed either of those courses effectively enough to protect consumers and the national interest.

My colleagues on the Select Committee on Energy's inquiry into the regulatory process have made points that I can only confirm. Those points have come out during the inquiry in evidence from oil companies, the BGC and consumer organisations, and much of it has already been published. A pattern is emerging. We appear to be in danger of privatising a monopoly without providing a competitive framework or an adequate framework of protection through regulation.

I shall give an example of one area that has not been mentioned so far—consumer representation. I am not certain whether the loss of the regional structure of the National Gas Consumers Council will weaken consumer representation. I should like a firm assurance. I am not certain whether the Gas Users Council should have the right to take up consumer issues directly with the company instead of indirectly through the regulatory agency.

In view of the details that the Government have given on the licence and the legislation, I wonder whether we have done enough to protect ourselves against the risks. I do not want to accuse the company, because I am sure that it will act responsibly when it becomes a member of the great club of free enterprises. Nevertheless, I wonder whether we should have provided stronger safeguards against the cross-subsidisation that might prevent genuine competition in the tariff structure that we are entitled to expect. Perhaps the Director General of Gas Supply should have been given an overriding duty to encourage competition as a general guideline. My hon. Friends have already made that point. I want to know how the director general will ensure that costs are properly allocated and charges fairly based on those costs.

I want the further assurance that the director general will have those powers and that the company will have an obligation for its accountancy procedures to be more clearly laid out and defined than at present. They must be transparent, as they are in other areas of the private sector, for shareholders and the market. If the accounts are to be separated into only two categories—one covering gas supply and the other covering all the rest of the operations of the company—I can see the possibility of obscuring cross-subsidisation. That might work against whatever competition could be available and against the consumer.

I believe that in the licence there should be an obligation to safeguard the consumer and the national interest. I am not sure whether that is in the licence. For example, standing charges are of great concern to smaller consumers. It seems to show sloppy drafting of the legislation —I put it no stronger than that —that the successor company will have no obligation to keep standing charge increases below the rate of inflation, but will be obliged to use its "best endeavours". I am sure that the Minister of State is listening, and I hope that he will interpret that as sloppy drafting rather than a deliberate plan. There should be an obligation on the company to publish not just the maximum but the minimum prices. That is tremendously important, so that the smaller industrial consumers can see whether they are being asked to pay a higher price than the large industrial consumers. Therefore, we want to see not just the maximum prices of industrial tariffs —that is already provided —but the minimum ones, too.

It is assumed that commercial and industrial customers can protect themselves against the privatised BGC. I hope so. It is right that the regulatory powers should be primarily concerned with the domestic consumer, but I believe that the larger industrial and commercial consumers can protect themselves only if there is genuine competition or if, for example, the common carrier provisions can be operated fairly. As my hon. Friends have said, there are serious doubts about the common carrier provisions. We know that they have not worked so far, because the BGC has not encouraged or wanted them. There is no evidence that it will encourage them in future. After all, the new company will have tremendous power in the market place. If anybody wants to transport gas direct from the North sea to industrial customers, it will have the power to offer the customer the average price, whereas the competitor, wanting to use the common carrier facilities, will have to offer the customer the marginal price.

We are still not clear whether the method for calculating the tariff for the use of the common carrier will be fairly judged. There must be genuine monitoring, even if there is good will from British Gas, and we hope that there will be. The Secretary of State has a responsibility to look again at that subject, to see whether the common carrier provision is a genuine attempt to provide some competition or just a bit of window dressing, which I am sure it is not.

Many points have been covered and I do not wish to hold up the House unduly. I shall summarise by suggesting that if we want to privatise British Gas, we should do so. However, it is a monopoly and we must provide particular safeguards—even more so than with British Telecom. I am not sure whether we have provided those safeguards, particularly upstream on production and competition. British Gas will now be encouraged and will want to go back into the exploration and production of gas. We must consider what effect that may have on the market place. I am not sure that we have provided competition where it could be provided, nor am I entirely satisfied that the regulator will have enough teeth.

We seem to be resting our case on the Monopolies and Mergers Commission. The commission and the Director of Fair Trading already exist and have a statutory duty. But is it satisfactory that we should leave the regulatory body relatively weak and then expect the Monopolies and Mergers Commission to crawl all over the new company on a monitoring basis? The director general should be given a little more power to prevent the commission being asked to come in the whole time.

The same applies to the Secretary of State. It seems that he is reserving his powers. He has ultimate power, through Parliament. We have ultimate power to renationalise, if necessary, and to change all the rules. If a great deal of the regulation and the assurance of competition and fair play is left to some extent to the discretion of the Secretary of State, using his reserve powers, particularly in upstream areas, one wonders whether that will be an undesirable form of political intervention, rather than getting away from that, which is the purpose of privatisation in the first place.

We want to make sure that we shall not continue, in a privatised form, the cosy relationship that appears to have been built up between a major oil sector and the larger companies in that sector, and the BGC. We also want to make sure that the prospectus looks attractive, so that the Revenue can get its money. We may be failing to accept that a tough form of regulation will not necessarily put investors off, nor will it mean getting a lower price for the shares. That is a misguided point of view. Investors might be more encouraged if there were a tougher regime and fairer regulation of the monopoly, in interests of the consumer and the nation. I think that investors would prefer that, and it would look better in the prospectus. It would be better than the continuing fear that the rules might have to be changed and the uncertainty that investors would have as to whether there would be a continuing public and political argument on whether we had done enough to regulate the monopoly. Such fear and uncertainty would be damaging to investors' confidence, and would affect the prospects of the prospectus more than if we built in from the beginning a slightly tougher regime.

I hope that the doubts that I have expressed have not given the impression that I am in any way unhappy about the Bill. On the contrary. Many of them may be too pessimistic points of view. I have great confidence in the management of BGC, which should have been privatised long ago. It would have shown some of the private sector Confederation of British Industry members a thing or two if the managers had been allowed to get going before. I believe that privatisation will be in the long-term national interest, and the short-term benefits to the Treasury are only secondary to that.

However, we must not forget that the credibility of the Government's privatisation programme is now on the line. It could be at risk if we do not get it right. Therefore, it is important that we scrutinise the legislation closely. I hope that my right hon. Friend the Secretary of State will examine the Select Committee's report when we have considered what we shall say ourselves, and that, if necessary, we shall still be flexible enough to make adjustments to make sure that we get it right.

7.33 pm
Mr. Kevin Barron (Rother Valley)

I think that all hon. Members will accept that the strength or weakness of any monopoly, certainly in the gas industry, lies in its exemption from the price discipline. Once the state disposes of its ownership of the British Gas Corporation, inevitably there will be a conflict between the owners, suppliers and customers unless suppliers and customers have a practicable and reasonable option. There is no option for the suppliers. The Secretary of State tried to say that there was, but he was not convincing. I do not think that he himself was convinced that there was an option. At the same time, there is an option for customers, but it costs a lot of money. The option is to install an oil-fired oil burner or a coal-fired coal burner in place of a gas one, in a domestic central heating system. In most households that option is not practicable, as it could cost anything up to £1,000.

We should consider the reaction of our constituents to privatisation, and the questions that they will ask. We shall be able to answer the questions that they are likely to ask only when we have had a chance to study the draft licence, which was published only 25 hours ago. It was not fair to publish the draft licence less than 25 hours before the beginning of the debate. The National Gas Consumers Council and consumer councils in the regions have been the eyes and ears on many occasions of right hon. and hon. Members on both sides of the House, because they can scrutinise proposals in detail and on occasion they write to us to say exactly how they feel we should treat legislation. They have not had the opportunity to do so through the trick of printing the draft licence less than 25 hours before the debate. That is a great pity. There is representation for consumers in the Bill. I am sure that everyone involved with the present consumer councils will not like the idea of their being missed out because the draft licence was published such a short time ago.

This morning I received a letter from the North Eastern Gas consumers council about regional representation if the Bill is passed. It believes that there should be not just regional offices but people in the offices who know about the needs of the regions and can represent people there. I hope that the Minister and members of the Standing Committee will take that into account.

Prices are a major matter on people's minds. The formula that my hon. Friend the Member for Wentworth (Mr. Hardy) read out was a bit confusing, to say the least. I understand that the draft licence says that the percentage of increase will be below the rate of inflation. However, there is also a percentage for the rising cost of materials. It is vague on exactly how the new licensing authority, or regulatory body, will control prices. I should like the Minister to explain in more detail than in the draft licence what we can expect. Is it true that the price rises will be below the rate of inflation, or will they be above the rate of inflation, for other reasons?

Standing charges are another matter on people's minds. The words "best endeavours" are used in condition 4 of the draft licence. It would be difficult to make a valid judgment on the level of standing charges in the next 12 months or the next three or four years.

The Bill talks about different suppliers. Condition 11(3) in the draft licence says: Where an escape of gas reported to the Supplier relates to gas supplied by any other gas supplier authorised under the Act, the Supplier shall take all reasonable steps to notify that other gas supplier of the escape as soon as practicable after the escape is reported to the Supplier. If a supplier is told of a gas leak, is it the case that that might not be acted upon straight away? If so, more clarification on the emergency services is needed than appears in condition 11(3).

I was fortunate enough to see a new service centre that opened in Rotherham during the summer recess. That centre can respond quickly to telephone calls from anybody who suspects that there is a gas leak on domestic premises or anywhere else. Will that no longer be the case? If so, that is a backward step for the community.

Condition 12(1)(b) of the draft licence talks about a Code of Practice concerning the payment of gas bills including guidance to domestic consumers if they have difficulty in paying". I am sure that hon. Members will have had dealings with the BGC when people on low incomes or state benefits have been unable to pay their gas bills. However, they have been able to continue to use gas to keep warm and so on while overcoming the problems of immediate payments. How will that situation differ now? I am sure that the Minister will recognise that, because of Government in action, fuel poverty in Britain will not go away. It is a real problem, despite our great energy supplies.

Why are we discussing the privatisation of the BGC now? Nothing in the Bill will give much protection to consumers in my constituency. Little protection is being given to people who work in the industry. Indeed, if past privatisation programmes are anything to go by, the improved efficiency that some Conservative Members have talked about will be followed by massive redundancies. It falls on the Exchequer to pay for that in unemployment benefits and so on. The Government are taking this step for reasons which do not necessarily benefit the people who work within the British gas industry or use British gas.

This summer, British Telecom announced annual profits of £945 million after tax —the first profits since privatisation. Because of the sell-off of British Telecom, the British people lost half of that—£472 million. The same has happened in other sell-offs under the Government. British Aerospace shares were sold for 150p in 1981. Two weeks ago those shares fetched 481p, an increase of 331p a share.

Mr. Rost

Does the hon. Gentleman accept that a large proportion of the rise in value of British Aerospace shares since 1981 could be due to the success of privatisation?

Mr. Barron

I doubt that that could be substantiated when one considers other privatisations where the price of shares have sometimes doubled, or increased even more, within weeks of privatisation. It is more likely that the City is making a big killing than that the public interest is being looked after. British Aerospace shares have shown an increase of 331p, or £95 million.

Cable and Wireless shares were sold for 168p in 1981. Two weeks ago they fetched 635p a share, a gain of 467p or £534 million. The shares of Amersham International increased within a few weeks of being sold. In 1982 they were 142p and now they fetch 290p or £67 million. The same applies to Associated British Ports and Jaguar.

British Telecom shares were sold for 130p. Two weeks ago they were fetching 206p a share, a gain of 76p or £2,289 million. Those are the gains that are being made in this casino of privatisation deals that the Government have been putting through.

There is not necessarily any more real investment or jobs in those industries. In many cases, the opposite is true. Privatisation does not necessarily mean a greater or better use of new technology or lower prices. It does not mean that more people are making more things. It just means that a few people are making money.

The Government say that the sell-off has nothing to do with the base and tawdry business of helping the rich to get richer. When the subject rears its head in the Chamber we are told that their policy is all about creating truly public enterprise and a wider share ownership whereby workers have a stake in the companies in which they work. That is a con trick. The facts and figures of privatisation measures since the Government have been in power show that.

For example, when British Aerospace was privatised in 1981, there were 158,000 shareholders, 125,000 of whom had holdings of less than 500 shares. Last year that figure had dropped to 43,000 shareholders, with 35,200 of them holding fewer than 500 shares. I can tell the hon. Member for Erewash (Mr. Rost) that the employees' shareholding in British Aerospace is 3.6 per cent. —hardly the great stake in the employees' industry that was spoken about before privatisation. One half of 1 per cent. of shareholders—just 500 people or institutions—own 76 per cent. of the British Aerospace shares that have been sold off. That is a higher concentration of ownership than in Marks and Spencer or the Midland bank.

The number of shareholders in Cable and Wireless dropped from 151,000 to 50,000. Those with over 1 million shares rose from four to 54. Employees' holdings in Cable and Wireless are now 1.4 per cent. Where is the wider share-owning democracy that we have heard about so often from the Conservative Benches? Where do we find the people in the workplace getting the benefits of their labour, other than as salaries or wages?

In British Telecom, 500,000 shareholders with 400 shares or less sold their shares within six months of privatisation. At present less than 2 per cent. of employees hold shares in the company. Again I ask, where is the wider share-owning democracy that is talked about and the golden light that is held up to show the way forward for the British economy? Over 65 per cent. of the shares of privatised companies are owned by the top 0.5 per cent. of shareholders. So much for people's capitalism and for the spreading of share ownership.

The Government are now about to privatise the BGC. They say that they will raise over £5 billion. For what —to raise tax thresholds and cut income tax rates? Privatisation will do nothing for the 7 million people in this country who are living on state benefits. The Government hope that it will help them keep power in the House of Commons in 1987 or 1988. People should not ask me for an opinion; they should go to the City. They will be told that the BGC is now and will in years to come be worth more than £5 billion.

The measures contained in the Bill are not for the small investor; they are for the big money. The Bill is not for the 16 million gas consumers. It would be nice if we had had the opportunity to debate in greater detail whether there will be higher standing charges and how prices will be regulated. The Bill does not provide for competition in supply. If it did, it would keep down share prices. I am sure that those people who are sitting around like vultures waiting to buy into the BGC do not want that to happen. The Bill does not safeguard the consumer. Safeguards for the consumer would make the BGC less profitable for those waiting to buy.

The industry was nationalised in 1949. It had been a private shambles. There was under-investment, primitive technology and danger, as in the coal industry which was nationalised a few years earlier. The industry was rescued by public ownership and was made fit for modern needs by economic planning.

The BGC is now a high-employment, high-investment, high-technology and high-efficiency industry. It is responsive to national and industrial needs. It is sensitive to consumer and community interests. It is a public service in every sense. It is a profit-making public service. It provides income of £1 billion a year for the taxpayer. Will the Minister tell us how taxpayers will obtain the income that will disappear with the privatisation of the BGC? Will it be brought in through a further gas levy? Will the income go to those people who are sitting on the fence waiting to buy into the industry?

The gas industry that the Tories want to sell is a national asset. They will turn a public monopoly that has public duties and is publicly accountable into a private monopoly —a machine for making big money for big money. There will be no price or service advantage for the people.

The most ironic factor in this privatisation measure is the Morecambe bay project. It was rejected by private enterprise which did not feel that it was necessary. Private enterprise did not believe it necessary to develop or produce gas in Morecambe bay. The BGC decided to go into Morecambe bay. It ensured that in January this year Morecambe bay came on to cope with the winter gas demands. The Government will be asked over and over again why they are handing the BGC back to people whom gas consumers would regard as irresponsible.

7.44 pm
Mr. Richard Shepherd (Aldridge-Brownhills)

A case for the privatisation of public holdings can be made much more easily than we sometimes think. As we are all aware, difficulties arise when we talk about public monopolies. In this case, the public monopoly is also a utility. Market theory argues that there need be no regulation if there is a competitive environment. However, where there is no competitive environment, but there is regulation, it is often difficult to determine the nature of the regulatory authority. Like a moving target, our appreciation of what we are looking at changes from time to time.

We saw that with British Telecom. The reservations that we had about Oftel when we discussed British Telecom's licence are now being expressed by the Director General of Oftel. We are sometimes slow to take on board where the force of an argument lies.

I find that there is something distinctly disappointing and worrying about the Bill. The arguments that we adduce for privatisation revolve, essentially, round efficiency. We say that greater efficiency accrues to the industry and to the national interest from competition. In this instance there is an absence of competition, whichever way one considers the Bill.

We are considering the structure of the industry. If we privatise the BCG in its present form and move it out of the public into the private sector, we beg the question why that, of itself, is beneficial. One argues and accepts the argument that it is beneficial to withdraw the industry from the claw of public sector interference, Treasury views and strictures, and the Department second guessing the professionals within. That is the one argument that I can appreciate and wholeheartedly support. What inducements have we tried to construct in the Bill that will enable us to be assured that the industry will seek out efficiency and manage its affairs efficiently in the public interest?

I found it disappointing to hear my right hon. Friend the Secretary of State say that he had considered the various forms in which the BCG could be privatised and had rejected the regional operating company argument. I considered that proposal carefully because it has some of the features—not all of them, by any means—which at least help one to assess whether an industry is more likely to work to the consumer's general benefit. That is my primary interest in the privatisation process.

With a regional operating company, we have the first thing that we are looking for—a benchmark by which to judge whether one area is operating reasonably as against another. There is another benefit. We reduce the possibility of monopolistic tendencies through cross-subsidisation. My right hon. Friend said that one lost the economies of scale with the regional operating company. I am surprised at that observation. I have not seen enough of his background papers or work to give me sufficient confidence to accept his point. The argument in favour of breaking up the BGC's present structure into regional operating companies is that they would be handling the same distribution pattern as at present. There is no difference in scale. We are talking about 12 companies where there is one at present, all operating within the area of their natural monopoly. Where is the loss of economy of scale?

We shall probably have price differentials. I am not sure that the Bill, or the regulatory machinery that it envisages, will eliminate subsequent changes in pricing policy. We have national unitary pricing. I believe that that is counter-productive and against the national interests. It does not mean pricing at marginal costs. A social judgment is being taken that prices should be the same in one area as they are in another. That is a fair point to make, but it is not in the interests of efficiency or the good running of companies.

There is a benefit in terms of regional pride. I have seen a tremendous managerial drift to the centre over the years. I was born in Aberdeen, and I am sympathetic to the Scottish point of view. In the west midlands, I have again seen this drain towards the centre. To have 12 large regional operating companies with their headquarters in regional towns dealing direct with their local market and employees would give a flavour of entrepreneurial drive to these regions. There is merit in considering that. The national transmission system would be a 13th element, separate from them. There is no reason why it should not be a separate company, together with the 12 regional operating companies. I am looking for a benchmark and a test of efficiency. In that way we could ask why it is that region A manages its affairs more tightly than region B. Our interest in that would reflect the customers' interest. We do not want customers to be ill served.

In talking about the present corporation we are talking about a massive company. It is difficult to have windows into its activities without a regulatory regime that is pervasive and demanding in information. I know that that is not the British way. In the past I have watched our response to regulatory authorities. We are light regulators. Indeed, we have difficulty in regulating the City. In this vast business we are dealing with technologies, details of men management, and a huge tranche of information, and it is difficult to identify practices with which we may be unfamiliar.

I fear monopolies because of the rationale behind them and the incentive to maximise profits, not necessarily with the exertion of effort, but with the acceptance of the monopolicy position in the market. That is why I am sorry that my right hon. Friend the Secretary of State did not say more about the reasons which made him discount introducing a different structure for the privatisation of the BGC.

Mr. Rowlands

I have been following the hon. Gentleman's argument closely. At present, there is regional identification. Certainly Wales Gas has a certain pride. It would be wholly unfair to compare one region with another. The Welsh economy will determine the success or failure of the sale of gas in Wales. It would be wholly unfair to compare a Welsh regional gas corporation with one in the south-east. During the past five years, in particular, Welsh gas would have come out badly because of the collapse of the industrial market. The hon. Gentleman's argument for regional comparisons would lead to unfairness.

Mr. Shepherd

I understand the hon. Gentleman's point. He may be over-anxious about the ability of people to judge efficiency in areas between one set of circumstances and another. Obviously every circumstance is not identical, but in that way we could see the management of a national scarce resource on a comparative basis. The hon. Gentleman has put forward an argument to show why for a period, Wales may not seem to have performed as efficiently for example as Midland gas or South-East gas. Nevertheless, through comparison one gets closer to identification, and so to adding an incentive to efficiency, which I should like. Obviously, we differ on this.

My right hon. Friend the Minister will probably have read the report on fiscal studies by Hammond, Helm and Thompsons, and I certainly commend it to the House. The report concludes: We find it difficult to see any significant benefits from the Government's proposals to privatise BGC in its present structure. The consequences may even be adverse. And privatisation on this basis is likely to make the task of introducing competitive incentives in the future more, rather than less, difficult to put into practice. I am inclined to agree with that. I am disturbed by the closure of options by this form of privatisation.

I urge upon my right hon. and hon. Friends the need to reconsider their route to privatising BGC, with all its implications of a massive significant market force. There will be no market discipline. Such a huge combine will mean that stockbrokers and the finance industry will not be able to exercise the detailed determination of its arrangements, which should provide one of the benefits of privatisation. That would work much better with smaller regional companies. If there is an opportunity to do so, I should be grateful if the Government would reconsider that point.

7.54 pm
Mr. Gordon Wilson (Dundee, East)

It is a happy coincidence that I follow the hon. Member for Aldridge-Brownhills (Mr. Shepherd) after his thoughtful remarks. He put trenchant criticisms of the Bill to the Government, and I should like to follow his example, but perhaps less delicately.

The Gas Bill is completely misguided. It is both daft and dangerous. It is daft because it is not necessary to privatise the gas industry in the first place, and dangerous because it creates a large powerful private monopoly. We must consider one matter which did not necessarily follow previous privatisation legislation —the British Gas Corporation is a monster company, and straddles a huge market. If all monopolies are insensitive to public needs, and if it is difficult enough to control our public monopolies, as the Government have found in times past in dealing with Sir Denis Rooke as chairman of the BGC, what will happen when the BGC becomes a private monopoly and Sir Denis is freed from the fetters of having to pay some attention to the Government's views?

The BGC has a total monopoly of gas collection, distribution and sales. It is a monopoly buyer of methane, has a monopoly of trunk pipelines, and a monopoly of sales to domestic, industrial and commercial suppliers. In practical terms, even if it were possible for other companies to catch up, it would take decades for any company to match the BGC in the open market. It would be virtually impossible for the Shells and Essos of this world to shoulder the BGC from its customer base. There is nothing in the license arrangements announced by the Government precipitately before the debate which allows for adequate competition, and care of consumers.

One can consider the legislation in a broader light. At present we are in the middle of a merger mania where large companies either come together voluntarily or are forced into shotgun marriages. The Government are introducing legislation to spread the powers and functions of building societies, yet the building societies, huge as they are, continue to merge. We see more and more financial power coming into the hands of fewer people.

Yesterday we debated the Channel tunnel. Again, with a Government directive, without adequate consultation, a huge investment could be made without considering the impact which it might have in other areas. The Government seem to be following a dictatorial path. During the past year I have detected a whiff of the corporate state coming from the Government. One of the problems of the development of mega-corporations in the financial and industrial world is that eventually they may be able to challenge the Government, and dare the Government to do things which the Government could have resisted if the corporations had been more and smaller.

Privatisation of the BGC does not make sense. The BGC is over the golden years. The hon. Member for Rother Valley (Mr. Barron) dished out great dollops of praise to the BGC, but he neglected to mention that latterly the BGC came into a huge windfall through the discovery of natural gas in the North sea.

On that basis, it has managed to expand what was previously a declining market and to build up its organisation. Speaking as a consumer, at various stages in its development I have considered it to be one of the most inefficient of the public corporations because it never seemed to get its workmen out to put right some of the equipment that it had sold to suppliers such as myself. That is why I do not entirely accept the view that everything British Gas has done over the years is perfect.

The Government should read into the whole question of the supply of gas a considerable warning, as should future investors in the company. The gas supply forecasts covering the period 1985 to the year 2000, issued by British Gas in November 1984, stated: The amount of gas produced from fields now under contract will fall steeply in the late 1980s and early 1990s.…But United Kingdom supplies will not be enough. This leaves a gap between the supplies from the UK fields which British Gas can rely on for the 1990s and the demand it predicts from its customers. This gap will have to be filled by imports continuing at about their present levels. British Gas intended that it should be able to fill that supply and demand situation by entering into an arrangement with the Norwegians for the development of the Sleipner field, but the Government turned that down and at present everything depends on which sector forecasts one believes. Either way, by the mid-1990s we could be running out of gas. It is certain that, should we move into such a restricted supply situation, the price of gas would climb steeply for the consumer, yet there would still be a profit element levied for British Gas plc.

I see the future market as being sticky. Any investor who takes shares in British Gas based on the company's previous success should be wary. In that connection, the Government should explain what will be the position of the gas levy. So far, British Gas has increased its prices in response to demand by central Government and the surplus has been whisked off by the gas levy.

If the price of gas begins to rise and the increase must be borne by the consumer, will the Government surrender part of the gas levy so that the price rise will be braked? It is clear from the criticisms of the licence that insufficient information will be provided about the profit levels of the new public limited company. Despite that, we still have a public tax—the gas levy—involved in the matter. The Government should come clean on that.

I have argued so far that the privatisation we are considering is bad in United Kingdom terms. I am even more worried about the position in Scotland, which has not done all that well out of the gas industry. By a circumstance of history, gas was first discovered in the southern basin of the North sea and it was six or seven years before the gas pipelines began marching northwards. In the meantime, much of Scottish industry was deprived of supplies of gas at a time when the price of gas was extremely cheap. Indeed, to this day Scottish industry consumes a smaller proportion of gas than elsewhere in the United Kingdom.

It is interesting to record that, as soon as gas was discovered in Scottish waters, in the early 1970s, the then Conservative Government intervened and abolished the then autonomous Scottish gas board. That cannot be regarded as entirely coincidental, in the same way as, all of a sudden, in 1975–76, the then Labour Government decided that mineral resources which had previously been attached to the Scottish region should come under a different regime. They transferred all the offshore oil resources from the Scottish account into a new offshore account. Government financial trickery of that kind is prevalent.

When I asked the Secretary of State whether he thought that a new Scottish company should be set up, I got an unconvincing reply. We cannot assume, either, that the existing company in Scotland—I will call it the regional company —Scottish Gas, will remain even with the autonomy that it now has.

Mr. D. E. Thomas (Meirionnydd Nant Conwy)

Is the hon. Gentleman aware that it was recently made clear that under the Bill the boundaries of Wales Gas —presumably the same applies to the company in Scotland —were not protected? Does he agree that it is time the Minister came clean on that issue?

Mr. Wilson

That is true, and I am grateful to the hon. Gentleman for raising it. Information leaked from Scottish Gas suggests that the British Gas Corporation, in preparation for its changing role, intends to change the identity of Scottish Gas. Quietly, without a fanfare of trumpets, the term "Scottish Gas" is likely to be dropped and "British Gas (Scotland)" put in its place. Scottish Gas will decrease in importance in the new structure. It would not surprise me if, once British Gas got going, the Scottish area management—the same may be true of Wales and of local managements in other parts of Britain —disappeared. In other words, there is a danger of further centralisation.

I read in the Petroleum Economist for November that the Bow Group, with the members of which I am not always in agreement, had made clear its preferred solution, which was that British Gas should be split up like the Bell Telephone Company in the United States and sold off separately.

Although I am completely against the privatisation of British Gas, I believe that if it came to the bit, it would be more effective in United Kingdom and Scottish terms for there to be an independent Scottish company. Let us remember that such an organisation would not be small. At present, Scottish Gas has 6,700 employees and 1 million customers. It has sales of £403 million a year and it is one of the top 10 Scottish companies, judged on sales. Last year, Scottish Gas invested £20 million and paid £57 million in wages.

It is also more than self-sufficient in supplies of gas, because, although Scotland consumes 6.2 per cent. of British Gas Corporation sales, 20 per cent. of the gas produced comes from gas fields off the Scottish coast, excluding Norwegian gas from the Frigg and Statfjord fields.

I call on the Government to review their policy in that respect. According to leading articles that I have read, the investment market in Scotland would be interested in having the opportunity to invest in a company of that sort, so that we could keep the management and policy firmly in my country.

I was flabbergasted to hear that Labour party policy was completely against any regional control of Scottish Gas, yet it is supposed to be the party of devolution, the party that claims it wants a Scottish assembly, that believes that industrial development should go to a Scottish assembly and that such a policy should be binding even on north of England Labour Members —or so I am informed by Scottish Labour Members. Being a naive soul, I am willing sometimes to believe that.

When I heard, however, that the right hon. Member for Salford East (Mr. Orme) had firmly committed the Labour party against any form of Scottish involvement, and when he said that the official Opposition were in favour of this big private monopoly operating from a London base, I felt that the Labour party's devolution policy did not amount to much. I shall make some effort to let people in Scotland know that the Labour party is still the party of centralisation and believes in London control.

The Government should beware of making some of the same mistakes that they made in relation to the Trustee Savings bank, when they assumed that they could float off a company with assets that did not even belong to the state. Apart from the legal action, the House of Lords excluded Scotland from that Bill. One can never tell what the House of Lords will do, but we know what the House of Commons will do because of the Government's huge majority. In this case, I would like to encourage their Lordships to dismember this Bill and to ensure that if it goes through, adequate care is taken to retain as much financial and managerial power as possible within the areas in which British Gas operates.

Even with their present free market philosophy, I cannot understand why the Government should go out of their way to create such a huge private monopoly which, given what has happened with British Telecom, will undoubtedly lead to massive increases in gas prices for the consumer. If they do privatise this company, I serve notice that any Scottish Government will have to take steps to return this important industry to Scotland.

8.11 pm
Mr. Tom Sackville (Bolton, West)

I welcome the Bill because there is every reason for returning the gas industry to private ownership. The conditions that existed in 1948, which first led to nationalisation, no longer apply. Then there was a general recognition that a major reorganisation was needed. The industry had grown up piecemeal over 100 years and was extremely diverse and unco-ordinated. Thanks to the differing qualities and specifications of its products, as well as the varying efficiency and stability of producer companies, there was considerable doubt whether consumers or industry were being served as well as they could be.

It was not clear that the necessary reorganisation could even be achieved under private ownership. There was also a reforming Socialist Government for whom it was an article of faith that production could be better harnessed under state ownership for the greater benefit of consumer and employee alike.

Given the lack of any real example up to then of a major nationalised manufacturing concern by which the likely success of failure of the new enterprise could be judged, it was relatively easy to sell the idea of nationalisation to people of all political persuasions. But the conditions are now very different. Nationalisation has not brought the great economic and social benefits assumed by Socialists of the day. Indeed, it is alarming how little their successors on the Opposition Benches have learnt from the intervening years. They still have a touching faith in the principle of state ownership that is not given substance by industrial experience either here or anywhere else. That faith is not shared by many people outside the immediate world of politics, and I suspect that it is not shared by even a majority of those who normally vote Labour at the polls —or used to.

The situation today is also quite different from 1948 in that the co-ordination and modernisation of the industry is now complete. The task for which the Government were brought in has now been fulfilled.

Many long-term benefits will stem from this Bill. One of the most significant is the opportunity it gives to encourage enterprising private sector management into a large and vital British commercial concern. That is in no way a criticism of the present management of British Gas, and I pay tribute to the entire work force of North-West Gas, 500 of whom work in my constituency in Bolton.

It would be profoundly unhealthy to perpetuate the current situtation in British industry of two distinct sectors —the private and the nationalised. In practice, the result is that nearly all the go, go modern image concerts are in the private sector, whereas large and important corporations, such as British Gas, do not have complete access to all the managerial talent that is at present available. That is particularly true at senior management level, because many of the most able and creative managers in British industry are simply not prepared to put up with the arbitrary interference of politicians in investment, pricing and other routine management decisions.

The effect of this failure to maximise managerial efficiency in the gas industry is potentially very serious. It threatens the interests of employment in the industry through lack of competitiveness with other sources of energy, with a consequent fall in market share. It also threatens consumers, and, thanks to the role of gas as one of the major elements in industry's source of energy, it threatens to raise costs. We are all aware that for years large sections of British industry have suffered as a result of high energy costs compared with overseas competition. That fact has undoubtedly contributed to the decline of many sectors of our industry. The Bill will ensure that those dangers are minimised.

The Opposition have given no good reasons for keeping British Gas in state ownership. They have said nothing to dissuade me from the ideal that if politicians were any good at running major energy or other commercial concerns, they would have gone into industry. The running of British Gas is to be returned to those best qualified to do the job. For that and many other reasons, I unreservedly welcome the Bill.

8.17 pm
Mr. Geoffrey Lofthouse (Pontefract and Castleford)

A few moments ago I glanced at the Bill and noticed that it was entitled "Gas Bill". It should have really been called the Representation of the People (Purchase of Seats) Bill, because that is what it is.

In my view, the Bill and the licence have been brought to the House with indecent haste. There has been no real chance to digest the contents of the licence, and only this morning that problem was encountered by the Select Committee. Although the hon. Member for Erewash (Mr. Rost) tried to show some enthusiasm for the Bill, he found it exceedingly difficult.

The management and employees of British Gas will be surprised to learn how inefficient Conservative Members feel the British Gas Corporation has been over the past 20 years. My right hon. Friend the Member for Salford, East (Mr. Orme) said that it had been 20 years of success, and I support that view.

Why do the Government want to privatise BGC without any evidence of inefficiency and with no evidence at all of non-profit making sectors within the corporation? Many Labour Members and, I guess, many Conservative Members and people in the country know why the Government are pushing the Bill forward with indecent haste. It will provide them with income for tax cuts for their friends. That is no secret. The whole country is aware of it. They are selling the family silver, as has been said often since a speech in another place, and they are selling the bricks and mortar, as my right hon. Friend the Member for Salford, East said today.

I understand that British Gas is valued at anything from £6 billion to £10 billion. If it is worth £8 billion, it represents a 7p cut in income tax, but that same £8 billion could keep another 100,000 people on the dole and still provide tax cuts. The Bill represents the biggest present to the Government's friends and relations in the City of London. The British gas industry is to be handed to them on a gilded plate. It is a good deal for City financiers who will be on a nice little earner with commission for handling the sale. Moreover, the City will be able to buy the industry at half price and pocket the profits which currently pay for community services. The Bill represents profit for the people who can afford to buy and for the Government's friends, but it is rotten for consumers. As has been said time and again today, there will be no competition. There will be a private monopoly keen to push up its prices to increase profits still further.

The right of British Gas to force entry into a consumer's home is also to be transferred. That is deeply worrying. I appreciate that that right must be retained for safety reasons, but it is dangerous to give that right to a private company that is not answerable to Parliament. It endangers civil liberties.

What arrangements will be made for pensioners and others with little money? Private companies exist to make money. I do not believe that any hon. Member disagrees with that. I do not believe that a private company will concern itself with keeping the old, the disabled and the low-paid warm. The area that I represent is now feeling the full force of the Government's policies through the Department of Energy. They have created mass unemployment and poverty in the coal industry. My constituents will have great difficulty in meeting their gas bills, and they do not expect the new company to be as sympathetic towards them as British Gas.

Who will be the regulator? The Secretary of State, a politician, a politician's hack? Will the regulator be independent and part of the Office of Fair Trading? Listening to the Secretary of State, I got the impression that he wants to conceal the Bill's purpose, because he gave little information about what it will do. For example, will the regulator act as an arbitrator on price fixing? Will he fix prices? Can there be a fully competitive market with the regulator fixing prices? Such questions must be answered.

I do not know whether the Secretary of State and his Department have considered such matters in their indecent haste to produce the Bill. How much political interference will there be from Government? Will it be the same as with British Gas? Will the regulator have control? Nobody knows. I suggest that the Secretary of State does not know. I hope that the Minister will give the matter some thought before giving an answer later.

Will the privatised gas company be free to import, or will it be controlled by the Government? What will happen to the gas levy? Will the Government continue to control price increases, which has enabled them to put money into the Treasury's coffers? What will happen when the Government receive the first flood of money after the sale of British Gas, which they will need to fulfil their electoral commitment to cut taxes? What will they use after that money is gone? What will they use to replace the income from the profits of British Gas? Such questions need to be answered. We believe that we know the answers.

If the Government were to be re-elected, they would have to increase taxes to fill the revenue vacuum. What information is to be available to the regulator? Will he get the same information as that to which the public are entitled, or will he get more? Could British Gas run its accounts together? Could there be cross-subsidy? Could domestic and industrial tariffs be joined? Nobody will know where the profits and losses come from.

I understand that the Bill lays down no obligation to keep increases in standing charges down to the rate of inflation. this business of "best endeavour" has been put into the Bill. Somebody has thought it up. It has not been put there because it looks nice. Why has it been included if the Government genuinely intend that standing charges shall not increase above the rate of inflation? I suggest that it is a get-out, so that, if "best endeavours" prove not to be good enough, it can be argued that standing charges must increase above the rate of inflation.

The Secretary of State referred to other nationalised industries. As he mentioned them, we are entitled to more information. He said that the Government would consider all nationalised industries with a view to privatisation. Was he referring to the coal mining industry? Did he have an eye to the future, when massive sums of taxpayers' money have been used to buy men's jobs through redundancy payments? When all that money has been used, will the Government hive off the profitable parts of the mining industry to their friends? Is that what he meant when he said that other industries will be considered?

This is a continuation of the Government's policy of denationalising and selling off to their friends anything and everything that is profitable. No case whatever has been made for hiving off British Gas to the private sector. There is no evidence that British Gas has been inefficient. The Bill arises purely out of Government dogma. I hope that Conservative Members, who know in their hearts that the Bill cannot be good for the nation, will join us in opposing it today and in Committee.

8.30 pm
Mr. Peter Bruinvels (Leicester, East)

I am sorry that the hon. Member for Pontefract and Castleford (Mr. Lofthouse) is so worried about the Bill, because employees in the industry support it. Like many other people throughout the country, they look forward to legislation which will not merely privatise a major industry but will allow all those prepared to come forward the opportunity to share in a highly successful industry. What is wrong with reducing state influence and introducing free private enterprise?

I welcome the Bill and I pay tribute to the people in the gas industry, especially in East Midlands Gas —the board, the engineers, the technicians, the salesmen and women, accountants, clerks, telephonists and all the other people who have made the industry in Leicestershire and throughout the country the great success that it has become.

In 1984–85 the industry's turnover was £6,913 million, and it is to be congratulated on the way in which it conducts its business, its undoubted professionalism and its good service. If the time has come for it to go into the private sector, what is wrong with that? Its success is not a vindication of the principle of state ownership. It is due to the high standards of technical expertise, good management and perceptive planning. I suggest to the hon. Member for Pontefract and Castleford that we should wait and see—I hope that I shall be proved right and that he will be proved wrong.

In 1950, after the first year of state ownership, 213.5 million therms of gas were distributed in the east midlands region. Last year, the figure was 1,746 million therms —an increase of more than 800 per cent. and evidence that the customer is getting what he wants and needs. In 1950, the region had 1,055,000 customers. It now has 1,700,000. That represents a vote of confidence by the people of the east midlands in the industry and in the service that it provides so efficiently and well. In the same period, the output of therms per employee has increased tenfold —a measure of productivity of which any industry could be proud. East Midlands gas is run like a small public company in which customers and consumers are treated like shareholders, favourably and with care.

I am pleased to welcome the assurances given by my right hon. Friend the Secretary of State that he intends to encourage all employees to take up shares in the industry, as I know that my constituents who work in the industry are keen to take up that important concession. Since its inception in the early 1820s, the gas industry has been a family industry, with intense loyalty not just to the company but to the consumers on whom the industry has always depended, and the Conservative party has never forgotten the consumer. I am sure that that loyalty will be confirmed by the willingness of employees to take up a stake in their industry, as I pointed out to my right hon. Friend the Secretary of State following his statement earlier this year.

I want an end to high costs and prices once and for all, I want a reliable and universal service no matter where one lives, and I want a much better return on capital. I believe that that will be the result of the Bill.

Mr. Hardy

The hon. Gentleman has paid a well-deserved tribute to the staff of East Midlands gas, which serves my constituency. I confirm his assessment, but does he accept that that splendid record has been achieved by people who believe that they are providing a service and who are sustained in their efforts by consultative committees, the members of which ensure that that high standard is met and recognise the contribution of the workers? If the hon. Gentleman is on the Standing Committee, will he vote with us to ensure that the qualities that have made that success possible are maintained?

Mr. Bruinvels

The hon. Gentleman makes an important point. The employees of East Midlands Gas are a credit to their industry. Indeed, I believe that we are better served than are many other parts of the country, but I do not believe that there is any need to revert to the old system of area and regional councils, because I do not believe that it is principally they who have made East Midlands Gas so successful, although they have certainly contributed to it. In any case, those people are keen for the Bill to go forward.

Mr. Hardy

No, they are not.

Mr. Bruinvels

For a long time I was national accounts manager for an excellent energy cost analysis company specialising in tariff analysis. We worked out the best possible deals for gas consumers throughout the country. I agree with my hon. Friend the hon. Member for Erewash (Mr. Rost) that maximum tariffs and costs for particular firms must be published under clause 36, but 1 want the minimum tariffs available to be published as well. In fact, I want far more information to be given. I hope that, in replying to the debate my right hon. Friend the Minister will refer to the tariff structure. There is no reason for tariffs to be kept as private property by any gas board so that companies such as the one to which I have referred require enormous amounts of money to be put up to achieve savings. All companies are keen to make savings on heat and energy. This country is now a cost and energy efficiency organisation, and the whole tariff structure needs to be re-examined.

I believe entirely in fair competition, and I believe that the effects will be good. I do not share the Opposition's view about a monoploy, and so on, because it is not a closed market. There will still be electricity, and oil will be available on the open market. I want at least and at last an efficient service at a price to suit the customer. The customer must come first. Local negotiations with local companies should continue, but agreements reached in one part of the country should be published for the benefit of others elsewhere. In other words, the tariff structure must be published. Controversially, I have never accepted the need for standing charges. I believe that the charge should be included in the price per therm supplied to each customer.

Everyone is concerned about allegations that safety will suffer because so many people will be involved in putting in new equipment, but I do not accept that claim. I believe that even greater efficiency will make for even greater safety. Clearly public confidence must be retained at all times, and it is important that a free emergency service will be available at all times, but we must also demand standard equipment and standard repairs throughout the entire network and watch that aspect carefully. There is no justification for spreading fears, because safety will be better. The Health and Safety Commission will be observing developments, there will be close liaison with local engineers and any sub-contracted work will have to be approved.

I realise that this is a sad day for the Labour party, which has long been committed to further nationalisation and has already pledged its commitment to the renationalisation of this great industry. I am sorry that the Opposition wish to take away power from the people, to disregard their views and to bring back more state control and the resultant faceless bureaucrat. I think that the people of this country want local people to look after local industry. Do the Opposition not realise that people want a stake in their future? They do not want to be denied that stake. Hundreds of thousands of people wanted a stake in British Telecom. They got it, and they have done very well out of it. The Opposition should not be worried about this measure. It will give more say to the people of this country. Democracy will be seen to work in this industry.

It has been alleged that the employees are worried about their future. The gas industry's employees have nothing to fear. They have the expertise and a role to perform. They will be called upon regularly to perform that role. The industry will always, of course, look after its consumers, but it needs the confidence of its employees. It will get that confidence.

Finally, I pay tribute to the safety standards of the industry in the east midlands. I deprecate the suggestion by trade union spokesmen that when the Bill becomes law the industry's employees are likely to compromise the safety standards. I know that this is untrue. As usual, the trade union representatives are wrong.

The proposed sale of the British Gas Corporation will result in many benefits. Privatisation will work slowly, but it will work. It will make the industry much more accountable to the consumer and to the shareholder. Many thousands of people will have a real voice and a real stake in the gas industry. They will have a say in how it is to be run successfully. This is a partnership agreement from which both consumer and employee alike will benefit, and I have no hesitation in supporting the Bill.

8.41 pm
Mr. Peter Pike (Burnley)

When the hon. Member for Leicester, East (Mr. Bruinvels) began, it sounded as though he was making a case for the industry remaining in the public sector. He referred to the industry's glowing record. However, he then said that he would loyally troop through the Government Lobby tonight and vote for the privatisation of the industry. His reasons for voting for the Bill, however, were weak. They did not take the matter any further than the Secretary of State for Energy's statement this afternoon.

The hon. Member for Bolton, West (Mr. Sackville) referred to the conditions in 1948 when the industry was taken into public ownership. He said that they were very different from the conditions that appertain now. He used the phrase, "there will be a return to private ownership", but forgot to mention that large sectors of the gas industry were already in the public sector before it was nationalised in 1949. They had been developed by the foresight of local government over a long period, so it is not just a question of the industry being returned to the private sector; it did not belong completely to the private sector in the first place.

When the Bill was debated in Parliament in 1948, in preparation for nationalisation in 1949, many people said that the industry was not worth nationalising because it was dead and finished, and that the demand for gas would fall. During the war, very little money had been spent upon the industry. It was in an appalling state. The Labour Government of that time did the right thing. Ever since then, the gas industry has repaid the confidence that was placed in it by the growth that was so well illustrated by the hon. Member for Leicester, East and by its development since it was taken into public ownership.

The Secretary of State made no case for taking this industry out of the public sector and putting it into the private sector. One has to assume that there are three reasons why the Government are privatising the industry. The first is political dogma; anything that is successful and is under public control must be returned to the private sector, whether by means of privatisation Bills or by means of the creeping privatisation of local government. I refer to hospitals, the Health Service and similar services. The Government are so opposed to anything being under public control that if it is successful they must take it away and put it into the hands of private owners.

Secondly, the Government are adamant that, if money is to be made out of any industry, it should go into the pockets of their allies and wealthy supporters. Conservative Members have said on several occasions this afternoon that the Gas Bill will widen share ownership, but this is nonsense and a fallacy. The percentage of shares that will be offered to the public will be very small. My hon. Friend the Member for Rother Valley (Mr. Barron) illustrated just how rapidly the widespread shareholding in British Aerospace and in other industries has diminished.

The third reason for the Government's pursuit of privatisation is their need for cash—to pay for tax cuts, whether by reducing the rates of tax or by a change in the tax threshold, and to meet the cost of public expenditure. However, the Government have failed to say what they will do when they have no more assets to sell. Once they have sold all the country's assets, they cannot be sold again.

The profits of nationalised industries are very important to the economy. I refer to a gas industry profit of well over £1 billion. That excludes the £500 million special gas levy. British Telecom made a similar profit of well over £1 billion. As soon as that money is in the hands of the private sector, the Government will have to raise it from other sources if they wish to maintain their programme. They ought to tell the people of this country where that money will come from and what they will do when there are no more industries to sell off.

This is a very important debate. My hon. Friend the Member for Wentworth (Mr. Hardy) referred to the British Gas Corporation's annual report. Any company would be proud to produce a report of that kind. It shows an increase in markets, profits and productivity. The industry has a turnover of £6.913 billion. It has over 93,000 employees and over 16.5 million customers. It has a tremendous record, of which the industry can rightly be proud. Last year its profit was £1.6485 billion. That included the £504 million gas levy. The industry's report makes a good case for this industry not being put into the hands of the private sector.

Is there any good reason why a successful industry that is in public ownership should not be used to support an industry that can be run only as a service and that will never make a profit? There is no good reason why that should not be so. If the gas industry can make a profit which enables the Government to meet the costs of other necessary services that cannot be run at a profit, it is right and justifiable for the money to be used for that purpose. If one looks at the gas industry's improvement in productivity and takes as its base year 1978–79 with a factor of 100, the productivity of the gas industry has improved to 112, that of the electricity supply industry has improved to 111.5 and that of all other United Kingdom industries has improved to 108.7. This shows that the gas industry's record is very good.

During the last 15 years a tremendous amount of work has been undertaken towards integrating the previous 12 area boards and developing the national grid. This has resulted in scale economies, national research and development programmes, centrally controlled product management, integrated purchasing and the planning of supplies. By achieving these objectives efficiently and effectively, the British Gas Corporation has become an even more highly effective national energy supplier. This progress and success will he better maintained under public control rather than under private enterprise. Gas is such a major source of national energy that it is vital, in the interests of the nation, for it to remain under public control.

Major decisions are needed in the near future in the electricity and gas industries to ensure that our energy supplies are adequately safeguarded. Although there are various forecasts on the reserves of natural gas in the North sea and Morecambe bay gas fields, the one certain fact is that they are both finite. At the same time, gas demand continues to grow. In the national energy interest, decisions must be taken speedily to develop a means of producing substitute natural gas from coal. Even if the need for this coincides with the most optimistic forecasts of natural gas reserves and the ability to meet demand from existing sources, I am firmly convinced that it would be in Britain's best interests to embark upon such a programme of substitution. Natural gas on a phased basis should be introduced sooner rather than later.

Page 15 of the BGC's annual report refers to the developments that the BGC has made and the £21 million it has spent in the past year on research and development of substitute natural gas. British Gas can be proud of this programme in which it leads the world. If the Government and a publicly owned industry were to go full ahead with that programme, we could seize the export market and fulfil our tremendous potential. If the BGC is put into the private sector, one must accept that issues such as supplies from the Norwegian Sleipner field are of such strategic and national importance that they should be determined by the Government and not a publicly owned industry.

I am extremely worried about the possible closure of gas showrooms. There are two showrooms in my constituency—in Padiham and in Burnley. The one at Padiham is open part time, and I am sure that, once the BGC is privatised, it will not be considered economically viable. It is a matter of not only sales but the point of contact for customers. If that showroom closes, many customers will face difficulties in going to the main centre in Burnley, especially when the bus services end because of the transport legislation —the Transport Act that the Government have forced through.

The Bill poses a threat not only to people in the industry but to the 250,000 people employed by British suppliers who supply the goods that British Gas needs. This is a vital matter. The Royal ordnance factory legislation was debated two years ago, but staff issues have still not been resolved. There are still disputes about pensions for the employees. As I said repeatedly in Committee and in the House, if the Transport Bill was passed, employees' conditions would deteriorate. We are already seeing signs of that, with bus operators withdrawing from the National Joint Omnibus Council. In rural areas London Transport is asking drivers to take a massive wage cut. That is a sign of the times which is likely to be seen again from that the the Transport Act has been passed.

The National Gas Consumers Council is extremely worried about some aspects of the Bill. Because one of my colleagues wishes to speak, I shall refer only to the TUC submission to the Select Committee on Energy entitled, "The real cost of privatisation." The two small squares at the bottom of the front page state, "Public, it's yours" and "Private, it's theirs". This summarises the effect of the legislation. It is vital that the Bill should be defeated.

Advertising for British Telecom shares stated, "Buy a share in British Telecom". Millions of pounds were spent on trying to convince people to do so, but the people already owned British Telecom.

The TUC's submission states: The TUC can see no evidence that privatisation as such will make British Gas more efficient, more competitive, or more publicly accountable; nor that its service to customers or its support for UK manufacturers will improve. The TUC does not believe that its sale will benefit the British Exchequer in the long run and it fears a marked worsening of employees' job prospects and terms and conditions. Perhaps most important of all, the TUC judges that the sale will seriously weaken national energy policy at a time when most countries recognise its importance to future economic recovery. Those are good reasons to reject the Bill, which is not in the nation's interest.

8.55 pm
Mr. Dick Douglas (Dunfermline, West)

have a confession to make —none of my constituents own Canalettos, to the best of my knowledge, but they have a distinct interest in the public sector, especially energy. I know that the Minister of State is conscious of public interference in the energy sector. He presides over the Offshore Supplies Office which proudly tells us the percentage that British contractors receive from our offshore activities. That is public interference. It is not allowing the market to hold sway.

Why do the Government dislike the British Gas Corporation? Is it because it has been technologically inefficient? This nation took an industry that was technologically backward —in terms of converting gas from coal and antiquated appliances —and brought it into the last decades of the 20th century. The BGC pioneered the shipment of natural gas for Britain and the world. Ships were converted. The British Princess and British Pioneer were pioneers in the importation and exportation of natural gas. In converting the whole nation to the use of natural gas, a public corporation has been and continues to be a technological innovator.

The BGC went into partnership with international oil companies to develop North sea oil. Some are well known to the Minister of State. Is there any evidence that the BGC was backward in terms of technological development in the North sea and elsewhere? In the so-called Oil and Gas (Enterprise) Act 1982 —what a misnomer —the Government took away the possibility of continuing to drill for oil in the North sea. They imperilled the innovator centres for geology and drilling that the BGC had set up.

Now, we see a conversion. What is bad for a public corporation when it is used for development is good in a private sector company when the doctrinaire Tories so determine. There is nothing to show any backwardness in the BGC. Is it the Government's view that the BGC has failed to make profits and serve the nation? My hon. Friend the Member for Burnley (Mr. Pike) showed how profitable the BGC is, and this fact should go echoing from the Chamber. The profits that accrue to the nation will not be lost for one year. They are lost from 1986 for as long as Tory Government remain in power.

The Government are not selling Canalettos. It is a falsehood to say that the industry will be transferred to the people. Few people in High Valleyfield, Dunfermline, Kincardine and Oakley in my constituency will have shares in the new company, but they know that this industry has served them well. The Government are using a doctrinaire approach that shows their profligacy. The Minister knows that we are producing 2.7 million barrels of oil a day from the North sea. I warned time and again that the retaliation of the OPEC countries would come, and so it has, because the Government have used the nation's assets to furnish bribery.

If there is any indictment of corruption, it should be levelled at the Government, not for selling Canalettos but for misusing the vital assets that the nation has built up under Governments of both parties. In the past we had the middle way, but now we see profligacy and a wasting of the nation's assets. The foolish virgins did not put oil in their lamps. This Government are so foolish that they are wasting the oil and gas assets of the nation. When the next election comes, I am sure that they will get their comeuppance.

9.1 pm

Mr. Ted Rowlands (Merthyr Tydfil and Rhymney)

My right hon. Friend the Member for Salford, East (Mr. Orme) reminded the House of the remarkable achievements of the BGC in the past 20 years. First, there was the technical achievement of laying and developing a national gas transmission system that has turned out to be not only one of the safest but one of the most extensive, in terms of size of country and population, in the western world. It has turned a sad, downtrodden and declining industry into one of the great success stories of the past 20 years. This success story and these achievements were carried out by a public enterprise, by people with a sense of service rather than of profit, who believed in the industry and invested their lives and skills in it. In return, the industry invested in Britain. As many of my hon. and right hon. Friends have said many times, the BGC has invested in British manufacturing, and has contributed to the creation of up to 250,000 jobs as a result of its "Buy British" policy.

The Labour party sees no need to have to justify the continuation of the BGC as it stands. We are committed supporters of the concept of public enterprise, of which we see the BGC as an excellent illustration. When the Government, who wanted to find things desperately wrong with the corporation, sent in their people to check the corporation, there was a problem. Deloitte Haskins and Sells went into the BGC, went through it and came up with this conclusion: We consider that the management and employees of any commercial organisation could be proud of such a record, and also that it reflects well on the sponsoring Department of Energy". The Secretary of State should take note of that second point. The company endorsed our belief not only in the success of public enterprise but in the relationships between the Department, Ministers and civil servants and that between the Government and the corporation. We do not have to justify the continuation of the BGC, because of what it has achieved and could still achieve for our national energy requirement.

My right hon. Friend the Member for Salford, East also reminded us of another important point. Those achievements have been obtained by bestowing on that corporation massive powers, and with it huge resources. No one could deny that they are extraordinary powers. Successive Governments have given the BGC, and then endorsed such a policy, the power of first purchase of all gas, of sole supplier of gas, and exclusive access to the North sea gas. Thereby, as my right hon. Friend the Member for Chesterfield (Mr. Benn) reminded us, they enabled the BGC to drive a good bargain on behalf of consumers with the multinational oil companies developing gas in the North sea.

Those powers were, and are, justified to achieve national energy objectives and to provide consumers with safe supplies of gas at a reasonable price. We are unashamed supporters of public enterprise, and especially the success of the BGC. When Governments gave the BGC such powers, they rightly believed that the corporation would be directly accountable to the Secretary of State. Therefore, I cannot understand the right hon. Gentleman's argument in that respect. The 1972 Act endorsed and supported the role and the relationship between the Secretary of State and the BGC. The right hon. Gentleman was certainly part and parcel of the Department and the industry when that Act passed through Parliament.

We must be squeamish and conscientious when handing over such powers to a corporation. Therefore, in the past we have imposed upon the corporation a degree of parliamentary, public and governmental accountability. Such control is well justified. Without it, Parliament should not bestow such powers on a public enterprise.

In selling the assets of the BGC, we shall also be transferring its powers to the new independent company. We must discover the Secretary of State's policy on that. Enormous powers now reside in a public enterprise and will be transferred to a private sector gas monopoly. Wherever one stands on privatisation, whatever the ideological, philosophical or economic divide, the concept that we should invest in a private company the powers that we invested in a public enterprise, without any safeguards, is a major concern that should divide not only the two main parties in the House, but Conservative Members in their attitude to the Government's proposals.

The Secretary of State's defence of the Bill is that it will remove ministerial and Whitehall interference in the BGC. In their place, he wants competition and regulation. We must ask whether there will be that competition and whether the regulations will be adequate. It is interesting to note that coded messages —some rather less coded than others —have been sent from Conservative Members to the Secretary of State during the debate. For example, the hon. Members for Erewash (Mr. Rost) for Enfield, Southgate (Mr. Portillo) and for Aldridge-Brownhills (Mr. Shepherd), after a few comments in support of the Government, quite rightly then turned on the Government and said, "We do not believe that there will be competition or that there will be proper and effective regulation."

If those Conservative Members do not believe that, and we certainly do not believe that, it is obvious that those two alternatives to proper public accountability will fall. Unless the Government can prove that there will be competition and effective regulation, their case cannot be accepted, because it is too weak. There is no justification for the sale of the BGC's assets or the transfer of its powers to the private sector.

The Secretary of State's case is that there will he more competition and effective regulation. We cannot know whether there will be more competition, because the right hon. Gentleman has not told us about the vital decisions that must be made.

The right hon. Gentleman came to the Dispatch Box to justify the Bill and the Government's policy, and it was astonishing that he made no statement on whether he would allow exports of gas. Indeed, he said nothing about gas imports. I understand the battles that he might be fighting on that score, but if he is not so engaged, we hope that the Minister of State will announce that the Government will not allow gas exports and that they will retain power to deal with Sleipner-type cases. If the Secretary of State decides to allow gas exports —many Conservative Back Benchers want that to happen, as do many outside, who are demanding that that should happen on behalf of the private sector —he will make nonsense of the case that he and his Department have advanced on the Sleipner contract.

The case that was put before the Select Committee on Energy, and before the House generally, on the Sleipner contract was that there would be a sufficient amount of gas from the United Kingdom's part of the North sea. It was said that that could be guaranteed because we could control North sea resources. It was explained that the resources would be brought to our shores to provide gas for British consumers, be they industrial, commercial or domestic. It was said that we did not need a Sleipner import contract because we had sufficient gas in the North sea, that we had control of it and that it would he brought home to British consumers.

The issue was fundamental to our depletion policy and the provision of gas in the 1990s. Against that background, we ask the Minister of State to tell us where the Government stand on exports of gas. If it is an area in which there will be competition, we must be told of the consequences. It is an area of competition of which we still have no understanding or appreciation.

The Secretary of State says, "There will be competition. I shall breathe some new life into the powers and effects of the Oil and Gas (Enterprise) Act 1982. I have done it in the Bill and in the licence." Let us remind ourselves of the common carrier provisions in the 1982 Act. There are two or three Members in the Chamber, apart from myself, who are veterans of that measure, in that we considered it with our colleagues in Committee. We remember the arguments. We remember the then Secretary of State for Energy, the present Chancellor of the Exchequer, claiming that the gasless folk of Blaby would be supplied with gas by means of private contracts and private common carrier provisions. He told us that British Gas had never reached his constituency and that a private supply would reach out to consumers who had been thwarted and disappointed by public enterprise.

What has been the result of the 1982 Act? Its previsions allow applications for and approval of common carrier provisions, but there has not been one approval, nor has there been an application since 1982. That has been the result of one of the famous privatisation Acts. That is the consequence of the Chancellor of the Exchequer's policy when he was Secretary of State for Energy. The pipe dreams of alternative supplies are not being converted into reality.

The Secretary of State's response to that charge turns on the provisions in clause 19. I have read the clause, and I ask the Minister of State to tell us where we can find any meaningful or significant improvement in the so-called common carrier provisions. The bulk of clause 19 has been taken from section 17 of the 1982 Act. There are a couple of different subsections, and they appear to be modest concessions that reflect what British Gas wanted us to do in 1982. There is not much in the clause that brings anything new to the common carrier provisions currently on the statute book.

We were told by the Secretary of State this afternoon that there are new common carrier provisions in the licence. He explained that these are to be found in the 10th condition, which deals with the supply of back-up gas. It appears that the BGC will provide some general information on policy and that it will have to stand ready to supply back-up gas. At best, that can be described as a marginal improvement on the common carrier provisions. We were expecting a further condition in the licence which—

Mr. Robert C. Brown

On a point of order, Mr. Speaker. I am trying hard to follow the arguments of my hon. Friend the Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) but it is difficult to do so while two Scottish sub-committee meetings are taking place simultaneously behind me as well as a Chesterfield and Merseyside committee meeting.

Mr. Rowlands

We Welsh have survived the Scots for long enough.

Where is the condition in the licence that British Gas will have to buy the residual gas from privately contracted oilfields? Where in the licence is the solemn and binding declaration of intent by British Gas? It is not in the conditions of the licence where we would expect to see it. Where is the famous new leap forward in the private common carriership of gas? The truth is that there will be no competition. The very day on which the Secretary of State talks about that he produces a draft licence for a 25-year public gas monopoly.

The extra conditions will not create a common carrier provision. Anyone who has been sitting at the back of the room during the Select Committee on Energy's considerations will have heard oil company after oil company, having been presented with the propositions, saying that they will not make any difference at all and that it is scarcely worth the bother. That has been the sum total of the advice given to the Select Committee by the oil companies, and hon. Members on the Committee know that to be true.

As there is no proper accountability or control over a monopoly of that sort with such enormous powers, the question of competition falls. There may not be much competition. There has not been any so far, and there is little likelihood of it.

The Secretary of State also referred to regulation. How effective will the regulation be in protecting the industrial and commercial consumer, with a privatised monopoly power of the type that will be created under the Bill? There is a great deal of scepticism about that argument. Many hon. Members —the Secretary of State did not listen to many of them —such as the hon. Members for Erewash, for Enfield, Southgate and for Rochford (Dr. Clark), have said that the regulatory powers and the provisions in the draft licence are scarcely effective in defending or providing sufficient safeguards to industrial, commercial and domestic consumers.

When one starts to look at the regulations, it is little wonder that there is scepticism and disbelief at the effectiveness of the regulatory system that is being introduced. We were told of the great advance in controlling prices. There will be control over one part of the gas cost, the non-gas cost—the RPI minus X. We do not know what X will be, and we ask the Minister to tell us what the Government's thinking is in that respect.

There will be another wide ingredient in the gas cost, called "allowable cost". That is the cost of gas from the North sea. The Secretary of State did not tell the House or remind everybody that that portion of the total price is a growing proportion. The non-gas cost used to be a larger proportion, but it is now a little over 50 per cent. By the time the new company gets going, the major portion of any price of gas could be totally allowable and uncontrolled by any formula.

Mr. Rost

Does the hon. Gentleman agree that if British Gas is allowed automatically to pass on all the extra costs of higher prices from the North sea, there will not be an adequate incentive for it to shop around for the most economic gas price? Should not the shareholder, rather than the consumer, carry the can for any mistakes?

Mr. Rowlands

The hon. Gentleman should put that point to the Minister of State, because it is reasonable. I am saying that the Secretary of State promised some sort of price formula that would control the price of gas for the domestic consumer. Up to half, if not more, of that gas price will be wide, which is just allowable gas costs. Therefore, it is not an adequate protection.

That is not the only area where the consumer is not protected under the arrangement. We have all the weasel words about standing charges. Why is it just "best endeavours"? Why is it not RPI minus Z? Why should there be a case for just making the best endeavours to hold standing charges at about the rate of inflation?

The Secretary of State derided the role that the House plays in influencing, controlling, supervising and making British Gas accountable. It is as a result of pressure from both sides of the House that we have a rebate system on standing charges. It was not volunteered by the gas industry, but extracted from it as a result of that pressure. Now we shall have the regulatory power, under which the new company will have to do nothing more than use its best endeavours to hold down the standing charges.

There is a list of other conditions in the licence about publishing tariffs, and publishing maximum prices. The hon. Member for Erewash said that there was not much point in that. How does publishing maximum prices protect the consumer? It is not a form of consumer protection. The Director General of Gas Supply will not be able to control the tariffs. British Gas will just publish its maximum prices, which is not consumer protection. As my hon. Friend the Member for Salford, East said, it is cut-price consumer protection.

Mr. Peter Walker

What control has there been over contract gas during nationalisation?

Mr. Rowlands

I listened with interest to the right hon. Gentleman when he was talking about that in his speech. He was not Secretary of State when, for the best part of 12 months, there was a growing and justifiable chorus in the House against the imposition of unnecessary price increases for industrial and commercial consumers.

Mr. Peter Walker

Who did it?

Mr. Rowlands

The right hon. Gentleman did it. There was a change as a result of pressure from both sides of the House.

Ninety five per cent. of industrial consumers will be excluded from the regulations. Only 5 per cent. buy gas on a tariff basis, so the rest will have to take their chances. We were told that ICI and the chemical companies had gone to the Secretary of State and said that they did not want any regulation. We understand that ICI can take care of itself. The big boys in the chemical industry can take care of themselves. A large number of industrial consumers who will need protection will want to be covered by the regulations. They will have no protection, as they are denied that right under the Bill and the licence.

Mr. Peter Walker

Why does the hon. Gentleman think that the main competitors of British Gas want regulation?

Mr. Rowlands

They feel that British Gas will use its monopolistic power in the private sector to scoop up additional markets. What will the Secretary of State say to them about that? The licence and the Bill will not do anything effective on behalf of the consumer, whether industrial, commercial or domestic.

Genuine questions have been raised by supporters of public enterprise and people outside, who have said that, as a result of the weak and loose form of regulation, there will be no effective regulation of what will be a large privatised monopoly. A Conservative Member asked what control there would be over the right of British Gas to go out and acquire significant oil companies. Unless some tax dividend is taken out of the corporation we shall be left with a minimum of £3 billion to acquire an oil company or two. Sir Denis Rooke, the chairman of the British Gas Corporation, has never concealed his intention in that regard. Therefore, understandably, there are worries and complaints that there will be the break-up of some independent British oil operations.

We do not believe that there is any effective consumer protection. We do not believe that there will be an effective form of regulation or competition. Yet the Bill will transfer these enormous powers to a private monopoly. Why will there not be any effective form of regulation? It is because the City and those who advise on the sale of the shares say that an effective and tough form of regulation will depress the price of the shares and make it more difficult for people to take them up. It will not help the so-called sale of the century.

We know who will be the beneficiaries of the sale. First, it will be those who advise the Government —the bankers, the stockbrokers, the consultants. Who is the chief adviser on the sale? It is none other than Rothschilds. This will be its second privatisation exercise. Hon. Members will remember the first one —Amersham International. It managed to get it wrong by only a third on that occasion. It managed to sell a marvellous company at a knockdown price. That was the first major scandal to be created by the sale of assets at discount or knock-down prices. The very organisation that was in charge of the sale of Amersham International —one of the great disgraces —will now be in charge of a larger sale of public assets.

If the Bill and the draft licence are anything to go by, consumers will not be protected. The Bill has nothing to do with a better service, a cheaper form of gas for consumers or the rights of industrial or commercial consumers. It has everything to do with the financial greed of the Government and the way in which they are trying to plan a victory at the next election. They are using public assets, nationally developed, to pay for tax cuts. That is what is behind the proposals. That is why we shall oppose the Bill and why a future Labour Government will restore not only the assets but the powers to the nation, where they belong.

9.27 pm
The Minister of State, Department of Energy (Mr. Alick Buchanan-Smith)

As long as the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) was dealing with the Bill, he had difficulty in making his case. That changed only when he came to the end of his speech and endeavoured to raise his pure political prejudices in describing what the Labour party would do if Britain were ever unlucky enough to see that party re-elected to power.

It was interesting that in those closing moments the hon. Gentleman did not say on what terms a Labour Government would renationalise if that eventually ever arose. The right hon. Member for Salford, East (Mr. Orme) says that I should wait and see. An interesting altercation took place on the Opposition Benches earlier when it was suggested that perhaps re-nationalisation should take place without compensation—

Mr. Heffer

I hope that the right hon. Gentleman will read what I said. I did not say "without compensation". I said that I trusted that we would renationalise without massive compensation. I have checked my speech. The point is that these are the assets of the nation, paid for by the ordinary people through their taxes, and those assets are being handed over to rich people to make rich pickings.

Mr. Buchanan-Smith

I am grateful to the hon. Gentleman for giving us the view of one member of the Labour party. I recall that the phrase used earlier was "at the price that had been paid for it".

Mr. Hannam

That is right.

Mr. Buchanan-Smith

I noticed that the Front Bench was careful not to follow up that point, and not to say what it would do. I agreed with the hon. Member for Gordon (Mr. Bruce) only when he said that that eventuality would not arise. Even if it did, it would be interesting to see what view a Labour Government took of an industry whose ownership was spread widely not just among its employees but through the rest of the economy.

The Government's privatisation proposals have given people throughout the country a greater opportunity to share in British industry. The Labour party is completely wrong and out of touch when it wants to deny people the opportunity to share the assets of British industry and to have a direct stake in the country's future prosperity.

Mr. Ron Leighton (Newham, North-East)

The Government are taking away something that belongs to all the people to pay for tax cuts for a few of the people.

Mr. Buchanan-Smith

I should be interested to know what the hon. Gentleman feels he owns in the BGC at the moment. As my right hon. Friend the Secretary of State explained, ownership of the BGC is vested in the Government. The corporation is administered by Ministers and civil servants. The British people do not own it.

Mr. Douglas

The other day, there was an article in The Times by the Attorney-General. He said clearly that the National Health Service belonged to the nation and that he was proud of it. There is a valid analogy with the BGC. People are proud of the public sector, and the Tories cannot stomach that pride.

Mr. Buchanan-Smith

One is interested in one's health in relation to the National Health Service. One's interest in this proposal is in the benefits that it can bring and the opportunity it gives to share in a prosperous, expanding and healthy gas industry. It will bring back benefits to the country and to those individuals who will have a stake in the industry after the Bill's passage. I am delighted that the Government are giving that opportunity to the public.

We heard some prejudices at the end of the debate. There were one or two interesting interventions. One of the most interesting came from the right hon. Member for Chesterfield (Mr. Benn). He said that he had been a Member of the House for 35 years. When I listened to him, I began to wonder what he had learnt during those 35 years, not in the sense of experience, because I know that he has a great deal of experience of these matters, but about the real world of energy and the gas industry, and what the position was when he was responsible for those matters.

The right hon. Gentleman made the extraordinary statement that if we were to privatise the BGC it would, in some strange way, give the European Community control over the resources of the United Kingdom continental shelf. Does he not realise that the vast majority of those resources belong to the nation? They are national resources which the Government are committed to ensuring are shared more widely throughout the nation. Does the right hon. Gentleman not realise that the exploration and production of those resources is already almost entirely in the hands of companies that are not in the public sector? If one removes one company —that is a small part —in the gas sector, or even if one removes a small proportion of reserves which are not at present being exploited, it will make absolutely no difference in terms of the European Community. The right hon. Gentleman is talking nonsense.

Secondly, the right hon. Gentleman said that in some strange way by privatising BGC we would reduce the demand for British equipment. I would be the first to pay tribute, as one who has responsibilities for the policies of procurement, to the good record of British Gas in using British contractors and suppliers —the hon. Member for Newcastle upon Tyne, North (Mr. Brown) made that point —but so do other companies. All companies are treated equally, whether they are British, American, French or Italian. They are all treated the same. There is no difference regarding procurement. I have little doubt that the management of BGC will continue the same policies in compliance with the Government's requirements and buy British where it is the right and proper thing to do.

Mr. Benn


Mr. Buchanan-Smith

I shall give way in a moment. The way in which the right hon. Members for Salford, East and for Chesterfield say that the commercial policies followed by BGC will change as a result of privatisation shows an extraordinary lack of confidence in its present management. We are privatising British Gas with the same management in control, and I have little doubt that the same sensible policies will continue in support of British industry.

Mr. Benn

Could I advise the Minister to look at the records of his Department, because he will find two things? First, the Commissioner for competition made representations when the Labour party was in government that it was contrary to the Treaty of Rome to insist that the gas be landed in Britain. Secondly, when we continued a scheme introduced by the Conservative Government to encourage the purchase of British equipment by American companies, we were taken to the European Court, and the present Government abandoned the matter in the summer of 1979 because the court case was launched on polling day 1979. If the right hon. Gentleman looks at the records, he will find that he is wholly misleading the House by implying that there is no connection between this matter and Common Market controls.

Mr. Buchanan-Smith

I am delighted that I gave way to the right hon. Gentleman, who demonstrates everything that I have said about his being completely out of touch. I ask him to look at the most recent publication of the Department, the Brown Book, which shows that more than 70 per cent. of the procurement regarding the United Kingdom continental shelf is from British companies. I also invite him to look at the 1985 Brown Book. He will undoubtedly not look forward to its publication. Although there are still two weeks before the end of this year, I happily predict that we shall see an even better record on British procurement. It will certainly be better than when the right hon. Gentleman was in charge.

The right hon. Gentleman's fantasies reached their peak when he asked for more accountability to Parliament, and spoke of the lack of control of Ministers under current legislation over nationalised industries. Is he not aware that under the nationalised industries legislation the Secretary of State in the responsible Department has the power to give directions to that industry?

Mr. Benn

They are general.

Mr. Buchanan-Smith

They are not so general. I know that the right hon. Gentleman did not like it, when the Government gave directions to BGC, for example, regarding Wytch Farm. That could scarcely be more specific. Yet again, the right hon. Gentleman is simply talking through his hat. It is not a good account of his stewardship if it is only now, many years later, that he tries to regret not using powers which were available for him to use, if only he had chosen to do so.

Mr. Robert C. Brown

We were discussing procurement. Is the Minister aware that if the denationalised British Gas adopts the same attitude as British Telecom since its denationalization, countless thousands of jobs of British workers will be put at risk?

Mr. Buchanan-Smith

No, their jobs will not be put at risk, because British Gas will be subject after privatisation, as it has been all along, to the same policies as is every oil and gas company. It must agree to the memorandum of understanding when applying for licences and to the full and fair opportunity concept.

I assure the hon. Gentleman that a privatised British Gas will be treated in exactly the same way by my offshore supplies office after privatisation as it is treated now. I have confidence in the management of British Gas and I have confidence —unlike Opposition Members; it is clear from the points that they have made that they do not have the same confidence —in the way British Gas will act, and I am sure that it will continue its record.

After the hon. Member for Gordon moved the alliance amendment, I was left, as were many hon. Members —that was clear from the comments that were made subsequently —confused about what he and his hon. friends wanted. He spoke in general terms about competition, said that the Government were being irresponsible and at one point urged the break-up of British Gas into separate parts, saying that he would separate the production from the other functions of the company.

What does the hon. Gentleman think all that would do for the morale and strength of British Gas as a British company, remembering that the corporation —throughout the period of nationalisation and not just since the development of our offshore gas resources —has had a stake in the manufacture of the product which it supplies and sells? The hon. Gentleman seeks to turn back British Gas not just to pre-North sea oil days but to the time of pre-nationalisation.

The hon. Gentleman was most confused when he dealt with the kind of regulator he wanted. I am delighted that more hon. Members are now in their places because they will be interested to learn that the alliance parties recommend not one regulator but six or seven regulators.

At Question Time recently the hon. Member for Gordon chipped me by saying that all I wanted was extra bureaucracy. From his own mouth tonight he told us that he was seeking precisely that. It is clear that that is what the alliance wishes to achieve. As I say, one is left confused.

The hon. Gentleman was against privatisation as we are proposing it, and when answering an intervention from the right hon. Member for Salford, East, he said that he was against renationalisation. One was left wondering where he was. My hon. Friend the Member for Rochford (Dr. Clark) summed it up by saying that the hon. Member for Gordon was really saying, "I would if I could but I can't because I don't know what I want to do." On that basis, I ask the House to reject the alliance amendment, especially as, if by chance it were agreed to, we should have no idea of the direction in which we were going.

The hon. Member for Dundee, East (Mr. Wilson) and several hon. Members mentioned the possibility of breaking up British Gas into regions. That would not make sense. Nor would it make sense for Scottish consumers. After all, consumers would still be facing a single monopoly supplier. We should simply be putting at risk the economies of scale from which Scottish consumers, like all consumers, will benefit as the result of having a highly integrated industry with an integrated transmission and distribution system and all the advantages that coordination allows countrywide.

The hon. Member for Dundee, East must remember that gas has been built up as an integrated industry, particularly since nationalisation in 1948. He may argue the case from the point of view of narrow nationalism, but I am interested in looking after the Scottish consumers to ensure that they get the best deal, pay the cheapest price for gas, and enjoy the benefits of efficiency. I assure the hon. Gentleman that if we followed his course and that of his party, the Scottish consumers would suffer. I certainly cannot recommend that.

Mr. Wilson

I am grateful to the Minister, although not for that exposition, with which I totally disagree. If he wishes to help the consumer, he should perhaps leave the privatisation scheme alone in its entirety. He is arguing that on the benefits of scale it is far better to have one United Kingdom company rather than a company in Scotland. Would not Scotland's economic health be improved if we had as many autonomous companies as possible operating in our country, because every time power is taken away, Scotland loses out. Scottish Gas now intends to change its name to British Gas (Scotland), and that shows just how the Scottish element will diminish once we have a United Kingdom private company.

Mr. Buchanan-Smith

I am not aware of any such intention. Secondly, on no occasion have I, on behalf of a constituent, had to go beyond the Scottish area manager of Scottish Gas in order to get matters resolved. The way in which Scottish Gas and British Gas have devolved their administration means that the Scottish consumer is getting the benefits of scale as well as a recognition of a well-devolved administration from British Gas. I hope that they will continue to enjoy those benefits.

My hon. Friends the Members for Erewash (Mr. Rost), for Enfield, Southgate (Mr. Portillo) and for Rochford spoke of competition and the powers of the regulator. I agree that there is a balance, and that where there is a risk of monopoly power we want the regulator to be strong. But equally, where there is scope for competition it would be foolish and wrong to extend the power of the regulator into those areas where adequate competition already exists. That certainly applies to the contract market.

As my right hon. Friend said earlier, gas has only a 35 per cent. share of that market and there is already considerable competition from other fields. That market is unregulated at present, and to regulate it now would turn the clock back instead of forward. That is something which a Conservative party and Government should not do.

The regulator has real powers under the Bill. A number of points were raised about the area within which the regulator would be working, and concern was expressed about discrimination between consumers —particularly the small industrial consumer —in the tariff market or discrimination between the industrial market, the contract market which is not regulated, and the domestic market.

Under clause 9, suppliers will continue to be obliged not to discriminate in supply to tariff customers, and tariffs must be framed to avoid such discrimination. That is enshrined in the legislation. Equally, under condition 2 of the licence, there must be separate accounting. That will make clear the profits in the gas supply and will pre vent hidden subsidy of other activities such as the appliance retailing and exploration sectors.

We must remember that the regulator has considerable power. In the event of a supplier not complying with the conditions of the licence, he can make a direction to the supplier and, if the supplier does not comply with that, the Bill empowers him to obtain damages and the rest. If there is abuse in the industrial contract market, which is under the control of the Office of Fair Trading and the Monopolies and Mergers Commission, there is always a possibility of the regulator's powers being extended if that is recommended to the Secretary of State.

The Bill helps to improve safety. I pay tribute to the role that the hon. Member for Newcastle upon Tyne, North (Mr. Brown) has played in the gas industry. I understand that he was an apprentice in the Newcastle gas company some years ago. The Bill provides the independent oversight of the Health and Safety Commission. I agree that the industry handles substances that can be dangerous in certain circumstances, but it is in the industry's interests to ensure that safety is a top priority. It has done that for many years. Its record of safety is second to none in the world. It will remain in its interests, if it is to be commercially successful, to ensure that that safety record continues.

There is to be a reduction in the response time when an emergency arises and an extension of emergency provision to the consumer side of the gas meter. That is another advantage for the consumer. We also have new arrangements which my hon. Friend the Under-Secretary of State for Employment is working out with the Confederation for the Registration of Gas Installers to promote better self-regulation and safety. A new code of practice is being drawn up and I believe that standards will rise.

The right hon. Member for Salford, East mentioned the safety of appliances. Those standards are the responsibility of the British Standards Institution, but most important is the supervision of the Department of Trade and Industry, which is considering a Bill to cover the safety of goods —especially imported goods —about which I get the most complaints. There will be better safety as a result of the Bill and it is scaremongering to suggest that privatisation will lower safety standards. Safety is the prime responsibility of the nationalised industry and it will remain the prime responsibility of the new private industry. In several respects, safety matters are being tightened up.

Concern has properly been expressed in relation to the Gas Users Council. The right hon. Member for Salford, East and other Opposition Members assume that its power will extend only to the regulated area —that is, the tariff market area —but clause 32(2) gives much broader powers, allowing it to cover any area covered by the Office of Fair Trading, including industrial contracts as well as appliances. At present, the National Gas Consumers Council can take up consumer problems with suppliers such as Comet. The Gas Users Council will have the same ability.

I am anxious that there should be no doubt about the powers and I shall be happy to return to the subject in Committee if the Opposition wish. The Government intend the Gas Users Council to operate widely in the best interests of all consumers. Here again, however, the powers will be greater. At present, the National Gas Consumers Council can make reports. The Gas Users Council will be able to do the same. The Gas Users Council will be able to go to the new privatised company just as the National Gas Consumers Council can now go to the corporation, but the Bill gives extra power especially in the area of the tariff market, allowing the Gas Users Council to go directly to the regulator —the director general of Ofgas —and ask for action to be taken. The powers will thus be greater and more specific than at present.

I hope that my hon. Friend the Member for Erewash was not trying to mislead the House—I may have got it wrong —when he expressed concern about the structure of consumer councils. It is perfectly possible for the new Gas Users Council to set up a regional structure to deal with consumer questions in all parts of the country. It will be able to set up whatever structure is appropriate in the regions and in Scotland. It will also be able to set up an advice structure in any area in relation to the various industrial and consumer interests or to ensure that widely scattered consumers are properly represented.

We have had a good and useful debate, but I have been surprised at the lack of enthusiasm from the Opposition. When the measure was announced in May they said that they would fight it the whole way. Yet when the right hon. Member for Salford, East was speaking, I counted only 15 Members on the Labour Back Benches. If that is the strength of their defence against privatisation, any other nationalised industry had better look to the Conservative party for support in ensuring an exciting commercial future.

The Bill gives a privatised British gas industry the opportunity to be more efficient and to act commercially. That opportunity will benefit consumers, as they will realise, through better service, better prices and better safety. There is also the important opportunity —at which the real opposition from the Labour party is directed —for wider share ownership and a greater opportunity for the people of Britain to own a stake in one of our greatest industries. The Government are prepared to give the people of Britain that stake. The Labour party wishes to deny it to them.

Question put, That the amendment be made: —

The House divided: Ayes 23, Noes 302.

Division No. 20] [10 pm
Alton, David Owen, Rt Hon Dr David
Beith, A. J. Penhaligon, David
Bruce, Malcolm Ross, Stephen (Isle of Wight)
Carlile, Alexander (Montg'y) Steel, Rt Hon David
Freud, Clement Stewart, Rt Hon D. (W Isles)
Hancock, Mr. Michael Thomas, Dafydd (Merioneth)
Howells, Geraint Wainwright, R.
Hughes, Simon (Southwark) Wilson, Gordon
Jenkins, Rt Hon Roy (Hillh'd) Wrigglesworth, Ian
Kennedy, Charles
Kirkwood, Archy Tellers for the Ayes:
Livsey, Richard Mr. John Cartwright and
Maclennan, Robert Mr. James Wallace.
Meadowcroft, Michael
Adley, Robert Cash, William
Aitken, Jonathan Chalker, Mrs Lynda
Alexander, Richard Chapman, Sydney
Alison, Rt Hon Michael Chope, Christopher
Amery, Rt Hon Julian Churchill, W. S.
Amess, David Clark, Hon A. (Plym'th S'n)
Ancram, Michael Clark, Dr Michael (Rochford)
Arnold, Tom Clark, Sir W. (Croydon S)
Atkins, Rt Hon Sir H. Clarke, Rt Hon K. (Rushcliffe)
Atkins, Robert (South Ribble) Clegg, Sir Walter
Atkinson, David (B'm'th E) Colvin, Michael
Baker, Nicholas (Dorset N) Conway, Derek
Baldry, Tony Coombs, Simon
Beaumont-Dark, Anthony Cope, John
Bellingham, Henry Cormack, Patrick
Benyon, William Corrie, John
Best, Keith Cranborne, Viscount
Bevan, David Gilroy Critchley, Julian
Biffen, Rt Hon John Crouch, David
Biggs-Davison, Sir John Currie, Mrs Edwina
Blackburn, John Dickens, Geoffrey
Blaker, Rt Hon Sir Peter Dicks, Terry
Body, Richard Dorrell, Stephen
Bonsor, Sir Nicholas Douglas-Hamilton, Lord J.
Boscawen, Hon Robert Dover, Den
Bottomley, Peter du Cann, Rt Hon Sir Edward
Bottomley, Mrs Virginia Dunn, Robert
Bowden, A. (Brighton K'to'n) Durant, Tony
Bowden, Gerald (Dulwich) Dykes, Hugh
Braine, Rt Hon Sir Bernard Edwards, Rt Hon N. (P'broke)
Brandon-Bravo, Martin Emery, Sir Peter
Bright, Graham Evennett, David
Brinton, Tim Eyre, Sir Reginald
Brooke, Hon Peter Fallon, Michael
Brown, M. (Brigg & Cl'thpes) Farr, Sir John
Bruinvels, Peter Favell, Anthony
Bryan, Sir Paul Fenner, Mrs Peggy
Buchanan-Smith, Rt Hon A. Fletcher, Alexander
Budgen, Nick Fookes, Miss Janet
Bulmer, Esmond Forman, Nigel
Butler, Rt Hon Adam Forsyth, Michael (Stirling)
Butterfill, John Forth, Eric
Carlisle, Kenneth (Lincoln) Fowler, Rt Hon Norman
Carlisle, Rt Hon M. (W'ton S) Fox, Marcus
Carttiss, Michael Franks, Cecil
Fraser, Peter (Angus East) Lilley, Peter
Fry, Peter Lloyd, Ian (Havant)
Gardner, Sir Edward (Fylde) Lord, Michael
Garel-Jones, Tristan Luce, Richard
Gilmour, Rt Hon Sir Ian McCrindle, Robert
Glyn, Dr Alan McCurley, Mrs Anna
Goodhart, Sir Philip MacGregor, Rt Hon John
Goodlad, Alastair MacKay, Andrew (Berkshire)
Gow, Ian MacKay, John (Argyll & Bute)
Gower, Sir Raymond Maclean, David John
Grant, Sir Anthony McNair-Wilson, M. (N'bury)
Greenway, Harry McNair-Wilson, P. (New F'st)
Gregory, Conal McQuarrie, Albert
Griffiths, Sir Eldon Madel, David
Griffiths, Peter (Portsm'th N) Major, John
Grist, Ian Malins, Humfrey
Ground, Patrick Malone, Gerald
Grylls, Michael Maples, John
Gummer, Rt Hon John S Marland, Paul
Hamilton, Hon A. (Epsom) Marlow, Antony
Hamilton, Neil (Tatton) Marshall, Michael (Arundel)
Hampson, Dr Keith Mather, Carol
Hanley, Jeremy Maude, Hon Francis
Hannam, John Mawhinney, Dr Brian
Harris, David Maxwell-Hyslop, Robin
Harvey, Robert Mellor, David
Haselhurst, Alan Merchant, Piers
Hawkins, C. (High Peak) Meyer, Sir Anthony
Hawkins, Sir Paul (N'folk SW) Miller, Hal (B'grove)
Hawksley, Warren Mills, lain (Meriden)
Hayes, J. Miscampbell, Norman
Hayhoe, Rt Hon Barney Mitchell, David (Hants NW)
Hayward, Robert Moate, Roger
Heath, Rt Hon Edward Monro, Sir Hector
Heathcoat-Amory, David Montgomery, Sir Fergus
Heddle, John Moore, John
Henderson, Barry Morris, M. (N'hampton, S)
Heseltine, Rt Hon Michael Morrison, Hon C. (Devizes)
Hickmet, Richard Morrison, Hon P. (Chester)
Hicks, Robert Moynihan, Hon C.
Higgins, Rt Hon Terence L. Mudd, David
Hind, Kenneth Murphy, Christopher
Hirst, Michael Neale, Gerrard
Hogg, Hon Douglas (Gr'th'm) Newton, Tony
Holland, Sir Philip (Gedling) Nicholls, Patrick
Holt, Richard Norris, Steven
Hordern, Sir Peter Onslow, Cranley
Howard, Michael Oppenheim, Phillip
Howarth, Gerald (Cannock) Oppenheim, Rt Hon Mrs S.
Howell, Rt Hon D. (G'ldford) Osborn, Sir John
Howell, Ralph (Norfolk, N) Ottaway, Richard
Hubbard-Miles, Peter Page, Sir John (Harrow W)
Hunt, David (Wirral) Page, Richard (Herts SW)
Hunt, John (Ravensbourne) Parkinson, Rt Hon Cecil
Hunter, Andrew Parris, Matthew
Irving, Charles Patten, Christopher (Bath)
Jackson, Robert Patten, J. (Oxf W & Abdgn)
Jessel, Toby Pawsey, James
Johnson Smith, Sir Geoffrey Percival, Rt Hon Sir Ian
Jones, Gwilym (Cardiff N) Pollock, Alexander
Jones, Robert (Herts W) Portillo, Michael
Joseph, Rt Hon Sir Keith Powell, William (Corby)
Kellett-Bowman, Mrs Elaine Powley, John
Kershaw, Sir Anthony Prentice, Rt Hon Reg
King, Roger (B'ham N'field) Price, Sir David
Knight, Greg (Derby N) Proctor, K. Harvey
Knight, Dame Jill (Edgbaston) Pym, Rt Hon Francis
Knowles, Michael Raffan, Keith
Knox, David Raison, Rt Hon Timothy
Lamont, Norman Rathbone, Tim
Lang, Ian Rees, Rt Hon Peter (Dover)
Latham, Michael Rhodes James, Robert
Lawler, Geoffrey Rhys Williams, Sir Brandon
Lawrence, Ivan Ridley, Rt Hon Nicholas
Lee, John (Pendle) Ridsdale, Sir Julian
Leigh, Edward (Gainsbor'gh) Rifkind, Malcolm
Lennox-Boyd, Hon Mark Roe, Mrs Marion
Lester, Jim Rossi, Sir Hugh
Lewis, Sir Kenneth (Stamf'd) Rost, Peter
Lightbown, David Rumbold, Mrs Angela
Ryder, Richard Tracey, Richard
Sackville, Hon Thomas Trippier, David
Sainsbury, Hon Timothy Twinn, Dr Ian
Shaw, Giles (Pudsey) Viggers, Peter
Shepherd, Colin (Hereford) Wakeham, Rt Hon John
Shersby, Michael Waldegrave, Hon William
Silvester, Fred Walker, Bill (T'side N)
Skeet, T. H. H. Walker, Rt Hon P. (W'cester)
Smith, Tim (Beaconsfield) Wall, Sir Patrick
Speed, Keith Waller, Gary
Spence, John Wardle, C. (Bexhill)
Spencer, Derek Warren, Kenneth
Spicer, Michael (S Worcs) Watson, John
Stern, Michael Watts, John
Stevens, Lewis (Nuneaton) Wells, Bowen (Hertford)
Stevens, Martin (Fulham) Wells, Sir John (Maidstone)
Stewart, Andrew (Sherwood) Whitfield, John
Stradling Thomas, Sir John Wiggin, Jerry
Sumberg, David Wilkinson, John
Taylor, John (Solihull) Winterton, Mrs Ann
Thatcher, Rt Hon Mrs M. Wood, Timothy
Thomas, Rt Hon Peter Woodcock, Michael
Thompson, Donald (Calder V) Yeo, Tim
Thompson, Patrick (N'ich N) Younger, Rt Hon George
Thorne, Neil (llford S)
Thornton, Malcolm Tellers for the Noes:
Thurnham, Peter Mr. Michael Neubert and
Townsend, Cyril D. (B'heath) Mr. Peter Lloyd.

Question accordingly negatived.

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

The House divided: Ayes 300, Noes 213.

Divison No. 21] [10.15 pm
Adley, Robert Carttiss, Michael
Aitken, Jonathan Cash, William
Alexander, Richard Channon, Rt Hon Paul
Alison, Rt Hon Michael Chapman, Sydney
Amery, Rt Hon Julian Churchill, W. S.
Amess, David Clark, Hon A. (Plym'th S'n)
Ancram, Michael Clark, Dr Michael (Rochford)
Arnold, Tom Clark, Sir W. (Croydon S)
Atkins, Rt Hon Sir H. Clarke, Rt Hon K. (Rushcliffe)
Atkins, Robert (South Ribble) Clegg, Sir Walter
Atkinson, David (B'm'th E) Colvin, Michael
Baker, Nicholas (Dorset N) Conway, Derek
Baldry, Tony Coombs, Simon
Beaumont-Dark, Anthony Cope, John
Bellingham, Henry Cormack, Patrick
Benyon, William Corrie, John
Best, Keith Cranborne, Viscount
Bevan, David Gilroy Critchley, Julian
Biffen, Rt Hon John Crouch, David
Biggs-Davison, Sir John Currie, Mrs Edwina
Blackburn, John Dickens, Geoffrey
Blaker, Rt Hon Sir Peter Dicks, Terry
Body, Richard Dorrell, Stephen
Boscawen, Hon Robert Douglas-Hamilton, Lord J.
Bottomley, Peter "Dover, Den
Bottomley, Mrs Virginia du Cann, Rt Hon Sir Edward
Bowden, A. (Brighton K'to'n) Dunn, Robert
Bowden, Gerald (Dulwich) Durant, Tony
Braine, Rt Hon Sir Bernard Dykes, Hugh
Brandon-Bravo, Martin Edwards, Rt Hon N. (P'broke)
Bright, Graham Emery, Sir Peter
Brinton, Tim Evennett, David
Brooke, Hon Peter Eyre, Sir Reginald
Brown, M. (Brigg & Cl'thpes) Fallon, Michael
Bruinvels, Peter Farr, Sir John
Bryan, Sir Paul Favell, Anthony
Buchanan-Smith, Rt Hon A. Fenner, Mrs Peggy
Budgen, Nick Fletcher, Alexander
Bulmer, Esmond Fookes, Miss Janet
Butler, Rt Hon Adam Forman, Nigel
Butterfill, John Forsyth, Michael (Stirling)
Carlisle, Kenneth (Lincoln) Forth, Eric
Carlisle, Rt Hon M. (W'ton S) Fowler, Rt Hon Norman
Fox, Marcus Lewis, Sir Kenneth (Stamf'd)
Franks, Cecil Lightbown, David
Fraser, Peter (Angus East) Lilley, Peter
Fry, Peter Lloyd, Ian (Havant)
Gardner, Sir Edward (Fylde) Lloyd, Peter, (Fareham)
Garel-Jones, Tristan Lord, Michael
Gilmour, Rt Hon Sir Ian Luce, Richard
Glyn, Dr Alan McCrindle, Robert
Goodhart, Sir Philip McCurley, Mrs Anna
Goodlad, Alastair MacGregor, Rt Hon John
Gow, Ian MacKay, Andrew (Berkshire)
Gower, Sir Raymond MacKay, John (Argyll & Bute)
Grant, Sir Anthony Maclean, David John
Greenway, Harry McNair-Wilson, M. (N'bury)
Gregory, Conal McNair-Wilson, P. (New F'st)
Griffiths, Sir Eldon McQuarrie, Albert
Griffiths, Peter (Portsm'th N) Madel, David
Grist, Ian Major, John
Ground, Patrick Malins, Humfrey
Grylls, Michael Malone, Gerald
Gummer, Rt Hon John S Maples, John
Hamilton, Hon A. (Epsom) Marland, Paul
Hamilton, Neil (Tatton) Marlow, Antony
Hampson, Dr Keith Marshall, Michael (Arundel)
Hanley, Jeremy Mather, Carol
Hannam, John Mawhinney, Dr Brian
Harris, David Maxwell-Hyslop, Robin
Harvey, Robert Mellor, David
Haselhurst, Alan Merchant, Piers
Hawkins, C. (High Peak) Meyer, Sir Anthony
Hawkins, Sir Paul (N'folk SW) Miller, Hal (B'grove)
Hawksley, Warren Mills, lain (Meriden)
Hayes, J. Miscampbell, Norman
Hayhoe, Rt Hon Barney Mitchell, David (Hants NW)
Hayward, Robert Moate, Roger
Heath, Rt Hon Edward Monro, Sir Hector
Heathcoat-Amory, David Montgomery, Sir Fergus
Heddle, John Moore, John
Henderson, Barry Morris, M. (N'hampton, S)
Heseltine, Rt Hon Michael Morrison, Hon C. (Devizes)
Hickmet, Richard Morrison, Hon P. (Chester)
Hicks, Robert Moynihan, Hon C.
Higgins, Rt Hon Terence L. Mudd, David
Hind, Kenneth Murphy, Christopher
Hirst, Michael Neale, Gerrard
Hogg, Hon Douglas (Gr'th'm) Neubert, Michael
Holland, Sir Philip (Gedling) Newton, Tony
Holt, Richard Nicholls, Patrick
Hordern, Sir Peter Norris, Steven
Howard, Michael Onslow, Cranley
Howarth, Gerald (Cannock) Oppenheim, Phillip
Howell, Rt Hon D. (G'ldford) Oppenheim, Rt Hon Mrs S.
Howell, Ralph (Norfolk, N) Osborn, Sir John
Hubbard-Miles, Peter Ottaway, Richard
Hunt, David (Wirral) Page, Sir John (Harrow W)
Hunt, John (Ravensbourne) Page, Richard (Herts SW)
Hunter, Andrew Parkinson, Rt Hon Cecil
Irving, Charles Parris, Matthew
Jackson, Robert Patten, Christopher (Bath)
Jessel, Toby Patten, J. (Oxf W & Abdgn)
Johnson Smith, Sir Geoffrey Pawsey, James
Jones, Gwilym (Cardiff N) Percival, Rt Hon Sir Ian
Jones, Robert (Herts W) Pollock, Alexander
Joseph, Rt Hon Sir Keith Portillo, Michael
Kellett-Bowman, Mrs Elaine Powell, William (Corby)
Kershaw, Sir Anthony Powley, John
King, Roger (B'ham N'field) Prentice, Rt Hon Reg
Knight, Greg (Derby N) Price, Sir David
Knight, Dame Jill (Edgbaston) Proctor, K. Harvey
Knowles, Michael Pym, Rt Hon Francis
Knox, David Raffan, Keith
Lamont, Norman Raison, Rt Hon Timothy
Lang, Ian Rathbone, Tim
Latham, Michael Rees, Rt Hon Peter (Dover)
Lawler, Geoffrey Rhys Williams, Sir Brandon
Lawrence, Ivan Ridley, Rt Hon Nicholas
Lee, John (Pendle) Ridsdale, Sir Julian
Leigh, Edward (Gainsbor'gh) Rifkind, Malcolm
Lennox-Boyd, Hon Mark Roe, Mrs Marion
Lester, Jim Rossi, Sir Hugh
Rost, Peter Tracey, Richard
Rumbold, Mrs Angela Trippier, David
Ryder, Richard Twinn, Dr Ian
Sackville, Hon Thomas Viggers, Peter
Shaw, Giles (Pudsey) Wakeham, Rt Hon John
Shepherd, Colin (Hereford) Waldegrave, Hon William
Shersby, Michael Walker, Bill (T'side N)
Silvester, Fred Walker, Rt Hon P. (W'cester)
Skeet, T. H. H. Wall, Sir Patrick
Smith, Tim (Beaconsfield) Waller, Gary
Speed, Keith Wardle, C. (Bexhill)
Spence, John Warren, Kenneth
Spencer, Derek Watson, John
Spicer, Michael (S Worcs) Watts, John
Stern, Michael Wells, Bowen (Hertford)
Stevens, Lewis (Nuneaton) Wells, Sir John (Maidstone)
Stevens, Martin (Fulham) Whitfield, John
Stewart, Andrew (Sherwood) Wiggin, Jerry
Stradling Thomas, Sir John Wilkinson, John
Sumberg, David Winterton, Mrs Ann
Taylor, John (Solihull) Wood, Timothy
Thatcher, Rt Hon Mrs M. Woodcock, Michael
Thomas, Rt Hon Peter Yeo, Tim
Thompson, Donald (Calder V) Younger, Rt Hon George
Thompson, Patrick (N'ich N)
Thorne, Neil (llford S) Tellers for the Ayes:
Thornton, Malcolm Mr. Tim Sainsbury and
Thurnham, Peter Mr. Francis Maude
Townsend, Cyril D. (B'heath)
Adams, Allen (Paisley N) Cunningham, Dr John
Alton, David Dalyell, Tarn
Anderson, Donald Davies, Rt Hon Denzil (L'lli)
Archer, Rt Hon Peter Davis, Terry (B'ham, H'ge H'l)
Ashley, Rt Hon Jack Deakins, Eric
Ashton, Joe Dewar, Donald
Atkinson, N. (Tottenham) Dixon, Donald
Banks, Tony (Newham NW) Dobson, Frank
Barnett, Guy Dormand, Jack
Barron, Kevin Douglas, Dick
Beckett, Mrs Margaret Dubs, Alfred
Beith, A. J. Duffy, A. E. P.
Bell, Stuart Dunwoody, Hon Mrs G.
Benn, Rt Hon Tony Eadie, Alex
Bennett, A. (Dent'n & Red'sh) Eastham, Ken
Bermingham, Gerald Edwards, Bob (W'h'mpt'n SE)
Bidwell, Sydney Evans, John (St. Helens N)
Blair, Anthony Ewing, Harry
Boothroyd, Miss Betty Fatchett, Derek
Boyes, Roland Field, Frank (Birkenhead)
Bray, Dr Jeremy Fields, T. (L'pool Broad Gn)
Brown, Gordon (D'f'mline E) Fisher, Mark
Brown, Hugh D. (Provan) Flannery, Martin
Brown, R. (N'c'tle-u-Tyne N) Foot, Rt Hon Michael
Brown, Ron (E'burgh, Leith) Forrester, John
Bruce, Malcolm Foster, Derek
Caborn, Richard Foulkes, George
Callaghan, Jim (Heyw'd & M) Fraser, J. (Norwood)
Campbell, Ian Freeson, Rt Hon Reginald
Campbell-Savours, Dale Freud, Clement
Canavan, Dennis Garrett, W. E.
Carlile, Alexander (Montg'y) George, Bruce
Carter-Jones, Lewis Gilbert, Rt Hon Dr John
Cartwright, John Godman, Dr Norman
Clark, Dr David (S Shields) Golding, John
Clarke, Thomas Gould, Bryan
Clay, Robert Gourlay, Harry
Clelland, David Hamilton, James (M'well N)
Clwyd, Mrs Ann Hancock, Mr. Michael
Cocks, Rt Hon M. (Bristol S.) Hardy, Peter
Cohen, Harry Harman, Ms Harriet
Coleman, Donald Harrison, Rt Hon Walter
Conlan, Bernard Hart, Rt Hon Dame Judith
Cook, Robin F. (Livingston) Hattersley, Rt Hon Roy
Corbett, Robin Healey, Rt Hon Denis
Corbyn, Jeremy Heffer, Eric S.
Cox, Thomas (Tooting) Hogg, N. (C'nauld & Kilsyth)
Crowther, Stan Holland, Stuart (Vauxhall)
Cunliffe, Lawrence Home Robertson, John
Howell, Rt Hon D. (S'heath) Penhaligon, David
Howells, Geraint Pike, Peter
Hoyle, Douglas Powell, Raymond (Ogmore)
Hughes, Robert (Aberdeen N) Prescott, John
Hughes, Sean (Knowsley S) Radice, Giles
Hughes, Simon (Southwark) Randall, Stuart
Janner, Hon Greville Redmond, M.
Jenkins, Rt Hon Roy (Hillh'd) Rees, Rt Hon M. (Leeds S)
John, Brynmor Richardson, Ms Jo
Jones, Barry (Alyn & Deeside) Roberts, Ernest (Hackney N)
Kaufman, Rt Hon Gerald Robertson, George
Kennedy, Charles Robinson, G. (Coventry NW)
Kilroy-Silk, Robert Rogers, Allan
Kinnock, Rt Hon Neil Rooker, J. W.
Kirkwood, Archy Ross, Ernest (Dundee W)
Lambie, David Ross, Stephen (Isle of Wight)
Lamond, James Rowlands, Ted
Leighton, Ronald Ryman, John
Lewis, Ron (Carlisle) Sedgemore, Brian
Lewis, Terence (Worsley) Sheerman, Barry
Litherland, Robert Sheldon, Rt Hon R.
Livsey, Richard Shore, Rt Hon Peter
Lloyd, Tony (Stretford) Short, Ms Clare (Ladywood)
Lofthouse, Geoffrey Short, Mrs R.(W'hampt'n NE)
McCartney, Hugh Silkin, Rt Hon J.
McDonald, Dr Oonagh Skinner, Dennis
McGuire, Michael Smith, C.(Isl'fon S & F'bury)
McKay, Allen (Penistone) Smith, Rt Hon J. (M'kl'ds E)
McKelvey, William Snape, Peter
MacKenzie, Rt Hon Gregor Soley, Clive
Maclennan, Robert Spearing, Nigel
McNamara, Kevin Steel, Rt Hon David
McTaggart, Robert Stewart, Rt Hon D. (W Isles)
McWilliam, John Stott, Roger
Madden, Max Strang, Gavin
Marek, Dr John Straw, Jack
Marshall, David (Shettleston) Thomas, Dafydd (Merioneth)
Martin, Michael Thomas, Dr R. (Carmarthen)
Mason, Rt Hon Roy Thompson, J. (Wansbeck)
Maxton, John Thorne, Stan (Preston)
Maynard, Miss Joan Tinn, James
Meacher, Michael Torney, Tom
Meadowcroft, Michael Wainwright, R.
Michie, William Wallace, James
Mikardo, Ian Wardell, Gareth (Gower)
Millan, Rt Hon Bruce Wareing, Robert
Miller, Dr M S. (E Kilbride) Weetch, Ken
Mitchell, Austin (G't Grimsby) Welsh, Michael
Morris, Rt Hon A. (W'shawe) White, James
Morris, Rt Hon J. (Aberavon) Williams, Rt Hon A.
Nellist, David Wilson, Gordon
Oakes, Rt Hon Gordon Winnick, David
O'Brien, William Woodall, Alec
O'Neill, Martin Wrigglesworth, Ian
Orme, Rt Hon Stanley Young, David (Bolton SE)
Owen, Rt Hon Dr David
Park, George Tellers for the Noes:
Patchett, Terry Mr. Frank Haynes and
Pavitt, Laurie Mr. Ron Davies.

Question accordingly agreed to.

Bill read a Second time and committed to a Standing Committee pursuant to Standing Order No. 42 (Committal of Bills).