§ Order for Second Reading read.4.34 pm
§ The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. Peter Lilley)
I take this opportunity to express my gratitude to hon. Members on both sides of the House who have expressed their sympathy for, and solidarity with, my constituents after the events of the weekend. I make it clear that this was a success for the police security operation and a failure for the IRA. I am sure that the House will agree that, had it achieved its objectives, that would simply have hardened the determination of my constituents and those of other hon. Members across the House to resist the demands of those who pursue their political objectives by the bomb instead of the ballot box.
I beg to move, That the Bill be now read a Second time.
The Bill fulfils the commitments we made in the citizens charter to strengthen the position of customers of the formerly state-owned utilities. It puts the customer first by extending competition, by strengthening the powers of the regulators where monopoly remains, and by providing for compensation where standards are not met. It will give a better deal to 25 million customers. In future, customers can be confident that all the regulators will have the toughest powers to set standards, customers will have the right to be told what these standards are, customers will be told clearly what recourse they have if standards are not met, and customers will be able to ask regulators to resolve disputes with the utility.
The Bill has been welcomed by almost everybody except the Opposition. It has been welcomed by the regulators, who are pleased by their new powers. It has been welcomed by consumers, who are delighted by their new rights. It has been welcomed by the press, regardless of the party leanings of the papers.
Their headlines were unequivocal. "Customers First" said the Daily Express. "Better Deal for Consumers" said The Independent.Consumer Champions Will Pursue Poor Service Claimssaid The Guardian. "Bill of Rights" said The Observer, and it was echoed by the Evening Standard today. The Financial Times put the general view pretty comprehensively when it said:The Government's aim of making utilities such as gas, water and telecommunications deal better with customers' complaints is commendable. So too are simple systems of redress which offer cash compensation when things go wrong. And independent and binding arbitration when the customer and utility fall out is clearly desirable in the absence of effective competition".
§ Mr. Malcolm Bruce (Gordon)
If that is the case, and I believe that it is, and that the Bill should be welcomed, why were these measures not introduced before privatisation rather than after consumers had suffered several years of exploitation by the private monopolies?
§ Mr. Lilley
That shows a misunderstanding of what has been done. The fact that we have been able to introduce the Bill is one of the successes of privatisation, and I shall explain that.
Despite the general welcome, Labour's opposition to the Bill is no surprise. The Opposition have never been a friend of the customer. They always back the producer interest against the consumer interest. They loathe competition. They were the midwives of monopoly, and they are nostalgic for nationalisation. Nationalisation always has meant, and always will mean, that the politicians, the bureaucrats and the unions come first, while the customer comes a poor fourth.
§ Dr. Kim Howells (Pontypridd)
The Minister described himself as the friend of the customer. In that case, why did the Government privatise, for example, British Gas as a monopoly, and leave it in such a position that it could act as a monopoly despite the fact that it had become a private company?
§ Mr. Lilley
When we privatised British Gas, we took steps to introduce competition. We gave the regulator the duty to extend competition and, through the Bill, we shall extend it further. The Bill is the fruit of privatisation.
§ Mr. Lilley
If the hon. Gentleman wishes to follow up the point made by the hon. Member for Pontypridd (Dr. Howells), I shall give way.
§ Mr. Brown
As for the support of the National Consumer Council, does the right hon. Gentleman agree that the council has described the Bill as narrowly drawn, that it is concerned with certain areas of utility regulation only and that it fails to cover other areas that concern it, such as price regulation, regulatory accountability and consumer representation?
I ask the right hon. Gentleman a direct question that is central to the conduct of the utilities. Does he believe that, in the past year, the profits of British Telecom and those of the gas, water and electricity utilities have been excessive?
§ Mr. Lilley
If the hon. Gentleman had read the comments of the National Consumer Council, he would know that it described this measure as an "elegantly drafted Bill". The Bill, of course, covers some things and not others. That is normal. I shall deal clearly and unequivocally with pricing powers and profitability later in my speech.
§ Mr. Lilley
I have answered the hon. Gentleman's question, and I shall respond to it further in my own time when I come to it.
The Bill is the fruit of privatisation, which has made competition and regulation possible. When the industries were publicly owned, neither competition nor independent regulators existed, so the consumer was given a rotten deal. State ownership led to poor services and high prices. Ten years ago, when British Telecom was still nationalised, 39 more than 250,000 customers were waiting over two months—many for much longer—for a new phone to be installed. Waiting lists are now non-existent. Customers are entitled to compensation if BT is late by even one day.
Before privatisation of BT we could have any type of phone installed as long as it was bakelite, basic and black. Now, the choice is huge. Over 13,000 pieces of equipment have been approved since 1981.
In the five years before privatisation, domestic gas prices increased by 2 per cent. a year in real terms. In the five years since British Gas was privatised, prices have fallen by 2 per cent. a year in real terms.
Electricity disconnections have declined rapidly since privatisation and have fallen by nearly a quarter over the past year. Regional electricity companies are now being required to produce codes of practice protecting consumers against disconnection.
The Labour party wants to return to nationalisation and we intend to build on the successes of privatisation.
§ Mr. Lilley
The hon. Gentleman wants to know who told us what the Labour party intends to do. This document, "Meet the Challenge, Make the Change", sets out the Labour party's commitment to nationalisation, which is one that was reaffirmed and repeated by the leader of the Labour party in September.
§ Mr. John Butterfill (Bournemouth, West)
Is my right hon. Friend not being a little too modest about prices? Is it not true that gas prices have fallen substantially, by 14 per cent., and that they are due to reduce by the retail prices index minus 5 per cent. each year from now on?
§ Mr. Lilley
My hon. Friend is right. There is so much good news that there is not room for it all in my speech.
§ Mr. Lilley
As I told the hon. Gentleman earlier, I shall deal with prices later in my speech.
Part I of the Bill strengthens the powers of the regulators. The Opposition profess concern about the adequacy of those powers, and I shall consider their detailed quibbles later. The stark fact is that under Labour's nationalisation there were no independent regulators. No one was specifically charged to protect the consumer. Still less was any independent body equipped with statutory powers to uphold the consumer's interest. So there was no one to cap prices, to set standards, to ensure compensation and to resolve disputes. Yet Labour wants to return to unregulated state ownership.
It is the sheerest bare-faced cheek for the Labour party to criticise alleged motes in our eye when it still has the beam of nationalisation in its eye. The reason that there were no independent regulators under nationalisation is clear. When a Government are both the owner and the putative regulator, they face an acute conflict of interest. As owners, a Government will be tempted to milk an industry for the Exchequer by allowing unjustified price rises or by deferring investment spending. In practice, a Government's responsibility towards the consumer always plays second fiddle.
§ Mr. Andrew Rowe (Mid-Kent)
I wonder whether my right hon. Friend is being wholly fair. He seems to be slightly exaggerating his case. I am sure that I have received several communications from the National Union of Pulic Employees and other such organizations—perhaps my colleagues have also received them—in which the claim is made quite passionately that they represent the consumer. Is my right hon. Friend being entirely just?
§ Mr. Lilley
That is probably how the Labour Government interpreted consumer interests when the industries concerned were nationalised. They put the unions, rather than the consumer, very much in charge.
§ Mr. Lilley
We shall hear the hon. Gentleman first and then we shall hear something from some of his hon. Friends. We can then see how their remarks compare and contrast.
§ Mr. Brown
I am grateful to the right hon. Gentleman for finally giving way to me to answer the question that I put to him towards the beginning of his speech. The question is central to the conduct of the utilities. Does he agree with many of the regulators, and even with stockbrokers in the City, that the profits of British Telecom, British Gas and those of the water and electricity utilities in the past year have been excessive: yes or no?
§ Mr. Lilley
I have told the hon. Gentleman that I am coming to that matter in my own time and in my own order within my speech.
§ Mr. Lilley
No. I am not giving way. If the hon. Gentleman is not prepared for me to make my speech in my own way, he had better resort to his normal practice of talking to his hon. Friends.
The Fabian Society, which is part of the Labour movement, acknowledged recently in a pamphlet that nationalisation in practice meantself-regulation with the help of Treasury targets.That is why we believe that the roles of owners and regulators should be separated. Ownership should be for the private investor and regulation should be by independent bodies free from political interference. That is why we set up an independent regulator for each of the utilities that we privatised. Each is charged with promoting competition and protecting the consumer where monopoly power remains.
§ Mr. Terry Lewis (Worsley)
Is the Secretary of State satisfied with the progress that has been made so far by the regulators? He tells us that the Bill will extend their powers, but is he satisfied with what has been achieved after six years' regulation of British Telecom?
§ Mr. Lilley
I believe that regulation and regulators have produced a great success story and that the Bill builds on that. The system is infinitely preferable to the regime that it succeeded, when there were no regulators and no protection for the consumer.
As we have set up the regulatory system, each regulator has been given some different powers to reflect the specific circumstances of the industry concerned and experience gained from the regulators established previously. In the citizens charter we therefore promised to 41introduce legislation to bring the formal powers of each regulator in this area up to the levels of the strongest, including making sure that the regulators have adequate powers to require the award of compensation in response to legitimate customer complaints".In most respects the electricity regulator, as the latest to be established, has the best powers. So part I brings the powers of the telecom, gas and water regulators up to the level of that of the electricity regulator. In addition, all the regulators are to be given some new powers to implement our other citizens charter pledges, notably on complaints handling procedures and dispute resolution.
In upgrading and formalising the powers we are building on success. The regulators have all made considerable advances with their existing powers in setting standards, ensuring compensation and resolving disputes. They have all sought to ensure that the quality of service offered by the utilities matches what would be provided in a competitive market. As a result, all the utilities operate consumer service guarantee schemes. Domestic consumers are now entitled to compensation of one month's line rental charge for each day that BT falls short of its targets for the installation and repair of telephones.
§ Mr. Michael Grylls (Surrey, North-West)
My right hon. Friend has referred to the dramatic improvements in British Telecom and many of the other utilities with which the Bill is concerned. Everyone is aware of those improvements. Does he agree that the key to the future is increasing competition for all of the utilities? As competition is increased—probably over a longish period —regulation can be eased off to seek to maximise profitability.
§ Mr. Lilley
My hon. Friend is absolutely right. That is why we have given the regulators a duty to promote and encourage competition. I shall list the areas in which, as a result of that, we are able to increase competition when I deal with part II of the Bill. Our success in that regard will be welcome to everyone in the country except those in the Labour movement.
Ofgas has recently agreed with British Gas a comprehensive new package of key standards which will come into force in April 1992. It includes compensation for individual customers if, for example British Gas fails to keep an appointment. British Gas has halved the number of disconnections since privatisation, and the electricity regulator has made it clear that reducing the number is a priority. As a result, disconnections are at their lowest level for 15 years.
New service standards for the electricity companies came into force on 1 July this year. Failure to comply with those standards will result in compensation of between £10 and £50 for individual customers. In the water industry, a scheme has been agreed setting out customers' rights on appointments, account queries, complaints and interruptions to water supply. It is coupled with a swift, no-nonsense compensation scheme. The regulators have achieved their progress through a combination of their powers under primary legislation, licence conditions and informal arm-twisting.
It is significant that a recent survey on behalf of the National Consumer Council found that consumer satisfaction with telecommunications, gas, electricity and water was notably greater than satisfaction with utilities that were still in the public sector.
§ Mr. William O'Brien (Normanton)
Why will the water regulator not allow consumers to choose between being charged for the water they use and being charged on the basis of rateable values?
§ Mr. Lilley
That is not entirely a matter for the regulator.
Support for our regulatory system has come from across the political spectrum. In another pamphlet, entitled "Telecommunications in the United Kingdom", the Fabian Society described the Government's policies as "bold and radical", adding:Most would agree that the creation of Oftel has been good for the consumer and few would wish to go back to the days when British Telecom operated without an independent regulator.
§ Mr. Tim Smith (Beaconsfield)
The introduction of part I—which, as my right hon. Friend has said, strengthens the powers of regulators, including Oftel—coincides with the Treasury's sale of a large tranche of British Telecom shares. What attitude will the Government take to any amendments that might be tabled whose effect would be a change in the balance between the regulator and the company?
§ Mr. Lilley
That is an important point, with which I dealt in a press release at the time of First Reading. I am happy to reaffirm what I said then.
I have made clear our position in relation to the forthcoming BT sale. It is clearly right for potential investors to be fully informed, and clarification amendments to the Bill cannot be ruled out. The Government do not, however, intend to make any amendments that would have a direct financial impact on BT's profitability. They will also resist any amendments tabled by others that would have that effect.
As a result of the Bill, all the regulators will have statutory powers to take five major steps. They will have powers to set overall performance standards; to set guaranteed service standards for individuals; to establish compensation where service for individuals falls below those standards; to ensure that utilities establish and publicise complaints procedures; and to resolve disputes over standards. In addition, the Government are taking powers to enable the regulators to resolve disputes over bills.
In a plethora of press statements over the past day or so, the hon. Member for Dunfermline, East (Mr. Brown) has suggested the appointment of an ombudsman to deal with complaints and standards. That is a typically misconceived idea: in fact, it would markedly reduce the level of consumer protection.
The regulators already have far greater power than those possessed by any ombudsman. As a result of the Bill, they will have even greater powers. In particular, they can take into account the success or failure of utilities in meeting standards when they fix the price cap. A separate ombudsman could not do that, as, by definition, he would not set prices. He would have less power than the regulators to achieve results.
I am afraid that most of the hon. Gentleman's other suggestions are of a like nature. Either they are ineffective, or they have been looted from our own proposals. At the end of the war, when the Red Army occupied parts of western Europe, some of the soldiers removed almost everything from the houses that they occupied—including the taps—and took them back to the steppes in the hope 43 that, by installing them in their homes, they would ensure a supply of fresh water. Similarly, Labour believes that, by removing some of the fixtures and fittings from our regulators and attaching them to nationalisation, they can protect the consumer. Nothing could be further from the truth.
§ Mr. Peter Hain (Neath)
In his reply to the hon. Member for Beaconsfield (Mr. Smith), the Secretary of State made it clear that he was putting the shareholder first, rather than the consumer, in the sale of the extra tranche of BT shares.
The deferment of shareholders' interim dividend until 28 February will mean that those who have acquired shares through the additional sale will receive a dividend on shares that they did not hold at the time when the dividend should have been paid. Moreover, a City stockbroker has told me that the Government will lose £77 million as a result of the deferment of the dividend. That money could have been used to build a hospital, or invested in schools, housing and a number of projects. Is not the Secretary of State simply giving it away to sweeten the additional privatisation?
§ Mr. Lilley
My right hon. Friend the Chancellor of the Exchequer is handling the sale efficiently and in the best interests of the taxpayer. We have already installed a regime that effectively protects the interests of BT's consumers. Earlier this year we announced a full-scale duopoly review, which led, and will continue to lead, to an extension of competition in the market, and which will give us the most competitive telecommunications market in the world. We have done all that ahead of the sale, and the shareholders are well aware of what we have done. By and large, all in the industry welcome our actions, because competition enlarges the very market in which all participants take part.
Clause 15 empowers Ofgas to set standards of performance for gas suppliers on the promotion of efficient use of gas by consumers. The electricity regulator already has powers relating to energy efficiency. We recognise that improving energy efficiency is the quickest and most cost-effective way of reducing carbon dioxide emissions: that is why we are giving the Director General of Gas Supply stronger powers in that regard.
The Bill gives statutory backing to the code of practice agreed by British Gas and Ofgas on energy efficiency. The code covers, for example, the labelling of appliances in British Gas showrooms, and comprehensive advice for British Gas customers on the efficient use of energy. I know that the House will welcome that.
Our whole approach to regulation is aimed at achieving a balance between two objectives: first, the protection of the customer from the abuse of monopoly power, and, secondly, the minimising of the burden of regulation and the avoidance of political interference in the affairs of the industries involved. We believe that those objectives are best achieved by the focusing of regulatory powers on the end results that matter most to consumers—competitive prices, and standards of service. That is what customers are really concerned about.
Labour wants to extend controls beyond those end results to intermediate objectives such as boardroom pay 44 and profits. We believe that that would be damaging to the utilities and counter-productive for consumers, and that it would politicise the whole regulatory process.
Our system of capping the annual price increase of each utility has been widely acclaimed. In the case of gas and telecommunications, the caps have been set well below the level of inflation. As the Financial Times has said:The UK model of control over prices has been a largely successful spin-off from the privatisation programme. A steady stream of visitors from North America have found much to commend it in comparison with their own bloated bureaucracies.Under our system, the regulators set the cap in the light of productivity gains that they believe the utility should be able to achieve and the need to protect customers against unjustified price increases. Utilities can then increase their profits only by increasing their efficiency even more rapidly than the target set for them. Moreover, the regulators have progressively set more demanding productivity targets each time the cap is renewed. For example, British Gas has been required to cut prices in real terms by 2 per cent. a year. That was a marked improvement on price increases averaging more than 2 per cent. above inflation in the five years before privatisation. As has been said, from April British Gas will be required to do better still and cut its prices by 5 per cent. in real terms each year.
Likewise, British Telecom has seen its price cap tightened successively from 3 per cent. below inflation to 4.5 per cent. below and now 6.25 per cent. less than inflation each year. Given inflation running at under 4 per cent., that means that prices will have to be cut in money terms. I doubt whether the hon. Member for Dunfermline, East can name any other country requiring such large real price cuts by its utilities. However, he is not interested in prices. He is interested only in profits and boardroom pay.
§ Mr. Lilley
No. The right hon. Gentleman's Front Bench colleagues urged me to reach this subject, and I have done so.
§ Mr. Lilley
The hon. Member for Dunfermline, East interrupts when I am making my speech and also when I am answering questions. I suggest that he listens, and he will then learn a lot.
The only alternative approaches to our system of capping prices are to follow the rate-of-return approach adopted in America, which simply encourages over-investment because the more that is invested, the more prices can be raised to provide the guaranteed returns, which by common consent is wasteful; or prices can be set by arbitrary political intervention as they have been in eastern Europe. That seems to be the approach prescribed by the Opposition and it is indefensible in theory and discredited in practice.
It would give me and the House exquisite pleasure to hear from the hon. Member for Dunfermline, East how he could justify moving either to the American's wasteful, bloated and bureaucratic system of rate-of-return control or the east European arbitrary approach to regulating prices in preference to our own. Sadly, we know from experience that the hon. Gentleman never deigns to elaborate on his policies—for reasons that we fully understand.
§ Mr. Gordon Brown
Is the Secretary of State aware that Sir Bryan Carsberg, the regulator for Oftel, has proposed that prices should be cut where profits are too high? He wants to share the benefit of excess profits with the consumer. Will the Secretary of State answer the direct question that I put to him? Does he believe that the profits for BT, gas, water and electricity have been excessive?
§ Mr. Lilley
I am glad that the hon. Gentleman welcomes our regulatory system and the attitudes of the regulators who we have put in place. I join him in paying tribute to them.
So long as we retain our system of capping prices, the proposal of the hon. Member for Dunfermline, East to control directors' salaries makes little sense. Those salaries are a matter for the private shareholders. If they choose to pay over the odds, that will come out of shareholders' funds. The excess cannot be passed on to the customer in higher prices, because prices are firmly capped by the regulator. The Government most certainly do not endorse some of the pay increases that shareholders have agreed to finance: but equally certainly, we do not wish, and nor do the regulators, to get drawn into the business of setting managerial pay.
Suppose the regulators were forced to set a pay rate for the chairmen and directors of each utility and the board of a utility then wished to recruit someone from another company where he already earned more than that level. Is it really the job of the regulator to stand in the board's way? Only a party such as the Labour party, obsessed with envy, malice and greed, could seriously make that a major plank of its policy, let alone the major plank.
Important though regulation is, the best way to improve standards of service is to increase competition.
§ Mr. Peter Rost (Erewash)
Is my right hon. Friend aware that clause 32 will be particularly welcome with respect to increasing competition in gas because it allows the threshold of 25,000 therms to be removed or lowered? Is he aware that half a million industrial and commercial customers have been trapped in that domestic tariff, have not been allowed to shop around for contracts and cannot aggregate their multiple sites? Will he ensure that clause 32 is implemented as soon as possible?
§ Mr. Lilley
My hon. Friend has hit the nail on the head. He is absolutely right. Many small and medium-sized businesses are looking forward to the contents of the Bill eagerly and they will be interested to hear the reactions of the Opposition in respect of clause 32.
Competition is now firmly established in electricity, telecommunications and for large industrial users of gas. Part II of the Bill includes new measures, as my hon. Friend the Member for Erewash (Mr. Rost) said, to increase competition in the supply of gas and of water services. At present, only British Gas has the right to supply householders and small firms who use less than 25,000 therms a year. As my hon. Friend said, clause 32 takes powers to end that monopoly. I challenge the hon. Member for Dunfermline, East to say whether he supports the abolition of that monopoly or whether he wishes to retain it like his union friends and paymasters. The hon. Gentleman is often keen to intervene and I would happily give way to him on this issue. As he does not want to intervene, it seems that he does not know. He has not received his orders yet. No doubt they will be in the post.
§ Mr. Flynn
With regard to hon. Members' paymasters, is the Secretary of State aware that a book entitled "MPs for Hire" proved that less than 14 per cent. of Labour Members received remunerations from trade unions while 85 per cent. of Conservative Members who are eligible to receive money, receive money from consultancies outside this place? The Conservative party is the party with paymasters outside this House.
§ Mr. Lilley
Quite a lot of Opposition Members receive help from their union paymasters direct and I believe that some of those who have spoken today are included. They rarely bother to declare that interest during debates.
§ Mr. Gordon Brown
We will not in principle oppose the clause on gas so the Secretary of State should withdraw his allegation that any decision taken by the Labour party has anything to do with what the trades unions have told us.
Will he explain his allegation that individual Labour Members are receiving cash from trades unions? Is it not the case that hon. Members like me, who are sponsored by a trade union, receive no cash? Is it not also the case that that cannot be said for Conservative Members when 800 directorships and consultancies are shared among Conservative Back Benchers?
§ Mr. Lilley
I am happy to take the hon. Gentleman's assurance about the way in which the money from trade unions is channelled. I have not suggested, would not suggest and have never been known from the Dispatch Box to suggest, any impropriety on the part of any hon. Member. I simply remarked that Labour Members are silent about the relationship between whatever funds that money goes into and their relationship with their trade unions.
§ Mr. Lilley
I do not know what the hon. Member for Dunfermline, East is getting so excited about. I have said that I am not accusing him. Methinks the hon. Gentleman doth protest too much.
§ Mr. Lilley
I was going to give way to the hon. Member for Worsley (Mr. Lewis), but he seems to have given up trying to intervene.
§ Mr. Deputy Speaker (Mr. Harold Walker)
Order. The Secretary of State has indicated that he will not give way. [Interruption.]
§ Mr. Lilley
I did not realise that there was anything sensitive about trade unions giving money to Labour Members.
§ Mr. Gordon Brown
On a point of order, Mr. Deputy Speaker. The right hon. Gentleman made two allegations. First, he said that Labour Members' decisions were dictated by our paymasters. Secondly, he said that we were entirely silent about our relationship with individual trade unions. I have made it absolutely clear that, while I am an individual Member sponsored by the Transport and General Workers Union, like my colleagues I receive no money as an individual from it. Therefore, there is no question of our being silent about a public relationship. The right hon. Gentleman must explain the relationship between his colleagues and individual consultancies and directorships.
§ Mr. Lilley
There we are. I think that I heard the hon. Gentleman, in all his bluster and attempts to disguse and hide it, say that he is actually going to support clause 32, despite the fact that that will get him into some hot water with his trade union friends, and we shall be very interested in that.
§ Mr. Lilley
I shall not give way. I will make a little progress, if the hon. Gentleman will forgive me.
§ Mr. Lilley
If the hon. Gentleman will permit, I shall continue.
I would expect the initial reduction that we shall make when we take the powers to be to a level not less than 2,500 therms, which will take place in the next Parliament. That approach is in line with our phased introduction of competition in electricity, where the 1 MW monopoly threshold is to be reduced to a tenth of that size in 1994. The new threshold will enable many new customers to benefit from competition by allowing them the same right as big firms—that is, to buy gas from anyone, on better terms, and at lower prices. Such a reduction would open up about 7 per cent. of British Gas's market to competition, allowing competitors to develop their systems for supply to smaller customers. After that, the next step will be a review in 1996 to determine the date at which the monoply will end, opening the rest of the market to competition.
§ Mr. Rost
My right hon. Friend referred to smaller firms being given the same opportunities as bigger firms to shop around for contracts. Is he aware that many of the biggest firms are trapped with the 25,000 therms limit? I refer to firms with multiple outlets—large retail organizations—which consume less than 25,000 therms but, on aggregate, are some of the largest gas consumers. Such companies are being penalised. Not only small firms but some of the biggest consumers will be released.
§ Mr. Lilley
My hon. Friend is absolutely right, and I am grateful to him for putting that point clearly on the record. That is why we are in the business of progressively removing the monopoly threshold. As my hon. Friend says, that will be welcomed by all categories of consumer, big and small.
A couple of electricity companies have already expressed interest in competing with British Gas in 48 supplying gas to households. There are a number of other provisions in the Gas Act 1986 subject to the 25,000 therms threshold, including British Gas's obligation to supply to all customers below that level, and British Gas's obligation to offer non-discriminatory tariffs. Those statutory obligations will remain in place to protect all consumers of less than 25,000 therms until competition has developed sufficiently to provide a viable alternative.
The statutory rights of smaller customers to a supply of gas at a fair price will remain as long as competition is limited. We shall not reduce those thresholds until we are satisfied that competition has developed fully. When that has happened, British Gas should be placed on an equal footing with its competitors, in terms of its obligations. I am confident that the reduction in the supply threshold will make a significant contribution towards greater competition in the gas market.
The scope for competition in water is more limited than for other utilities. This is why, when we privatised water, we focused on comparative competition. That relies on comparisons between neighbouring water companies to act as the spur to greater efficiency. But we believe that there is greater scope for actual competition between water companies. Clauses 34 to 41 will therefore let water companies compete more effectively to supply new estates and large users, to buy in water supplies and to offer a better deal.
Water companies have been effectively prevented from competing in each other's areas for new or existing customers within 30 m of the existing company's pipes. Clause 34 abolishes the 30 m restriction on so-called "inset appointments"—appointments to supply water in an area where there is already an existing appointed supplier.
The will to compete in water already exists. There have been approaches to the Office of Water Services for appointments to supply water to new sites in another company's area. The Bill will remove some of the obstacles which are preventing enterprising companies from competing in new areas. Large customers will benefit from greater choice, and all customers will benefit from increased efficiency as a result of competition.
I leave three questions with the hon. Member for Dunfermline, East. First, does he still stand by his party's commitment in "Meet the Challenge, Make the Change", which states:We are clear that the great utilities cannot safely be left as monopolies in private hands. The consumer interest in particular demands that the accountability and social responsibility provided by common ownership must be secured.Perhaps he could give us a yes or no answer to that question. Secondly, if he is deferring his threat to nationalise British Telecom, is he still determined to pursue the far worse threat of taking control by statutory means without any financial compensation?
Thirdly, why are Labour Members persisting in their threats to nationalise water and the national grid at a cost of about £10 billion, when they frankly acknowledge that the cost of renationalising BT might be too expensive? How will they be able to continue to finance the £28 billion investment programme in water if they have already disbursed £10 billion or £9 billion on renationalising the water companies? The House has a right to answers to those questions. If we do not get them today, we will continue to demand them.
49 I have described the excellent progress made to date by the regulators in promoting standards of service and competition. I have made it clear that some of the standards set out in the citizens charter are already being achieved by the utilities, often voluntarily. The new powers that we have introduced reflect good business practice. The Bill will be of significant benefit to consumers. It will deliver the pledges that we made in the citizens charter. It will go a long way towards meeting rising public expectations of the utilities. The Bill ensures that customers of the regulated utilities will get a better deal, have more choice, enjoy higher standards, be better informed, and have proper rights of redress. I commend it to the House.
§ Mr. Gordon Brown (Dunfermline, East)
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 establish independent consumer ombudsmen; fails to strengthen consumer representation; fails to give sufficient priority to energy saving and environmental protection; fails to take action where there are excess profits; and does nothing to prevent privatised boardroom salary excesses.In view of the widespread concern about the standards of consumer service, which is reflected in the large number of complaints, consensus on the need to strengthen consumer representation, a demand that we create ombudsmen, and widespread pressure to take action on excess profits and on privatised boardroom salary excesses, the Bill offers too little, is too limited and is too long delayed. It is not the most that could be done to protect the consumer, but the least that the Government thought that they could get away with. Their failure to take action on the essential measures that we have proposed is a confirmation of the power of the privatised vested interest rather than the promised assault upon them.
There are to be no statutory ombudsmen or ombudswomen to represent the consumer, despite the Government's admission in their document entitled "Citizens Charter Implications for the Regulators of Privatised Utilities":The principal advantage of introducing ombudsmen for each of the utilities is that they are seen by the public to be impartial and independent of all parties.Yet nothing is done. There are to be no improvements in consumer representation, simply because—I quote the same document:It would be more difficult to secure the support of other Departments to a major change … so soon after privatisation".As the consumer associations and others have said, the result is that consumer representation in most of the utilities is completely inadequate. There are to be no changes in the price formula, despite widespread dissatisfaction with the pricing policies of our utilities and representations from many consumer bodies.
There is to be no widespread review of the prices, profits and performance of the utilities, despite the original proposal in the Government's draft document issued before the publication of the citizens charter:The Government will therefore in consultation with the regulators review the performance of the utility companies … the results of the review willl be published".None of that is in the Bill. None of that is promised by the Government.
50 While the Government have to admit that, after pursuit of the policy of privatisation for 12 years, substantial problems have arisen that must be corrected, the best that they can propose is that Ofwat, Ofgas and Oftel should be raised to the standard of OFFER, the Office of Electricity Regulation, as if OFFER were the champion of the consumer against the might of near-monopoly power. I suspect that OFFER is hardly a household name, even in the Prime Minister's household.
The citizens charter was advertised asa revolution in services … one of the central themes of public life in the nineties… a transformation of our services".It was to be the big idea. The best that the Government can do is propose to bring the worst regulator up to the standard of the inadequate, when we need regulation aspiring to the standards of the best.
I have checked on how the public can contact OFFER.
§ Mr. Lilley
An ombudsman would, by definition, have fewer powers than OFFER because he could not determine prices. How can the hon. Gentleman say that OFFER's powers are inadequate when he proposes to set up a less adequate body instead?
§ Mr. Brown
Under our proposals, the powers of the ombudsman would be first, to impose penalty fines; secondly, to determine whether contracts are fair and not merely whether they are fairly interpreted; thirdly, to make recommendations about customer services to the regulator; and fourthly, to insist on consumers' rights to information. I will tell the right hon. Gentleman why he resisted the demand for an ombudsman. I shall read from the document that his Department wrote for him when the case for an ombudsman was examined in detail. It said:There is also an argument that it is desirable ideally to separate the function of economic regulation and investigation of complaints.The Department accepted that there was an argument. It said:Ombudsmen would be seen by the public to be impartial and independent.The problem was that legislation to empower an ombudsman to determine settlements wouldqualify contract law and might therefore be politically controversial.That is why the Government rejected the idea for ombudsmen. It was not because they thought that services to the consumer would be better; they were put off because ombudsmen might have powers that would interfere with the conduct of the privatised utilities.
I will tell the Secretary of State what most reveals the Government's attitude to citizens' and consumers' rights. It is that, as a matter of principle, and as he confirmed earlier, no improvements are to be made to the Bill in Committee or at any point during discussion of the Bill which might significantly strengthen rights and representational services, if they affect the profitability of British Telecom.
§ Mr. Tim Smith
I am sure that the hon. Gentleman understands the legal status of a prospectus and the nature of the commitments that are given to people who are considering buying shares. If not, he is not fit to be Secretary of State or anything else. May I ask him about the record of the past 10 years? Does he accept that a combination of privatisation and liberalisation in 51 telecommunications has resulted in a huge improvement in the quality of service to the customer? The regulator Oftel has done an excellent job for the consumer.
§ Mr. Brown
There were 38,000 complaints to Oftel last year and half a million billing disputes. I will answer the hon. Gentleman directly on BT's prospectus. It was the Government who chose to publish the prospectus and the Bill at the same time. I will tell the hon. Gentleman what the Government decided when consumer rights were set against the dogma of privatisation: privatisation had to come first—then and every time.
§ Mr. Roger Knapman (Stroud)
Does the hon. Gentleman agree with the assertion of his hon. Friend the Member for Dagenham (Mr. Gould) that Labour will return the public utilities to public ownership, where he says they should be? Which utilities and at what cost?
§ Mr. Brown
Our proposals are set out clearly in "Opportunity Britain" which came before the annual conference. The hon. Gentleman can purchase a document if he so wishes. I am surprised that he bothers to continue to ask exactly the same questions as the Secretary of State put to me, and as we are asked in every debate.
Let us deal with the central issue of the Bill. Two Fridays ago the Secretary of State held a press conference to announce the publication of the Bill and what he calleda great advance in consumer rights".Did he tell us that he would listen to the consumer organizations—which, incidentally, he barely consulted during the preparation of the Bill? Did he say that he would be prepared to improve the Bill by accepting proposals that might be made, even by Conservative Members? Did he say that he could be persuaded about the merits of new rights or new services that might enhance the power of the consumer? No. He made it absolutely clear that he would resistany amendments to the Bill during its passage through the House which would have a direct financial impact on BT's profitability. The Government will also resist any amendments tabled by others which would have this effect.For the Government the consumer comes second and privatisation of British Telecom comes first.
The Government may talk about consumer rights and say that consumer redress is fine. They produce charters at taxpayers' expense, but if a measure interferes with British Telecom's profits and the Government's privatisation agenda, it counts for nothing. The guiding principle is the protection not of the British consumer, but of British Telecom's profits. That was stated even at a press conference called by the Secretary of State to advertise the flagship proposals of the citizens charter. That is the basic problem with the Bill.
Even when there is a growing consensus about the need for better consumer representation and for ombudsmen and the need to take further action than that which is proposed in the Bill on energy efficiency and setting environmental standards, even when there is anger about privatised boardroom salaries, excess profits and utility prices in many areas, and even when the Government say that they are taking action to safeguard the consumer, the old agenda of privatisation comes before the new agenda of consumer rights for millions of people. It is privatization 52 irrespective of the consequences for standards, efficiency, speed and reliability of service and, of course, prices for the consumer. The Bill does nothing about excess profits.
§ Mr. Butterfill
The hon. Gentleman seems to be obsessed with British Telecom's profits. Will he reflect on the fact that British Telecom's prices have fallen by about 27 per cent. since it was privatised? Would a future Labour Government, if there ever were one, revert to having a Minister for Prices? I recollect Mrs. Shirley Williams saying that she was proud that, since she had become Minister for Prices, profits in British industry were the lowest that they had ever been. That seemed to reflect a common attitude in the Labour party. Is it still the Labour party's attitude?
§ Mr. Lilley
As that remark is factually wrong, perhaps the hon. Gentleman will withdraw it. Telecommunications prices have fallen by 27 per cent. in real terms since the privatisation of British Telecom.
§ Mr. Brown
I have material from the House of Commons Library which shows price rises for utilities. Since 1979, telephone charges have risen by 148.8 per cent. compared with a rise in the retail prices index of 145.9 per cent.
Although the hon. Member for Bournemouth, West (Mr. Butterfill) says that the consumer is getting a better deal, in its prospectus—
§ Mr. Brown
I am answering the hon. Member for Bournemouth, West. In its prospectus, British Telecom makes it absolutely clear that there will be an increase of 4.9 per cent. in the median residential customer's bill in the coming year.
The Bill does nothing about excess profits, about improvements in the price cap, about additional price cuts, and about the perks and salary abuses that are disfiguring the conduct of our privatised industries. If anything sums up the Government's failure to take on vested interests, it is the inaction over boardroom salary bonanzas, which have been happening year after year and month after month.
Let us be clear about the number of complaints about the utilities. At the last count there have been 38,000 customer complaints to Oftel, 4,500 complaints about water since privatisation, 14,000 about electricity, and 102,000 complaints to the Gas Consumers Council about gas. That is merely the tip of the iceberg, as the Government's citizens charter draft document said that there was a rising level of public concern and disatisfaction.
§ Sir Peter Hordern (Horsham)
It would be helpful to the House if the hon. Gentleman would confirm whether the Labour party, if it were elected to government, would nationalise the water industry. All he has said is that, in the conduct of the utilities, the Labour party would be careful to ensure that no excessive price increases occured and that therefore margins would be reduced. How would he finance the water authorities' capital expenditure 53 programme, which is now £28,000 million? What would be the effect on the public sector borrowing requirement, and what does he think that makes of the Labour party's credibility?
§ Mr. Brown
I will tell the hon. Gentleman why that idea is not laughable, as he has suggested. It is exactly what happens in Scotland, where water is under local authority control.
Let me tell the House what Conservative party supporters have to say about privatisation. A survey in July showed that only 9 per cent. of Conservative supporters—the very people that the Secretary of State should have been able to persuade—believed that gas had improved with privatisation, only 14 per cent. thought that telephones had improved, only 6 per cent. believed that electricity had improved and only 5 per cent. believed that water had improved. That is the answer to the hon. Gentleman's question. Even in its worst days, the Secretary of State for the Environment and the previous Prime Minister could secure greater support for the poll tax than the Secretary of State can secure for improvements to the utilities.
What has happened within the utilities as the complaints have mounted? Do directors take action to deal with the complaints? Do they cut prices and recognise that something should be done? No, having pushed up their salaries last year and the year before, they push their salaries upwards again, ignoring all the complaints about last year's rises. They have given themselves bigger rises this year, the year of recession.
§ Mr. Lewis
Perhaps one of the worst features of the boardroom abuses is the ease with which the right hon. Member for Chingford (Mr. Tebbit) moved from being the Secretary of State who privatised British Telecom to non-executive position on its board, one of whose functions is to set the salaries of board members, including the chairman, whose function is to increase the salaries of non-executive directors. If that is not corruption with a small "c", I do not know what is. When I compare that with Opposition Members who are supported by trade unions, I think that Conservative Members should shut up.
§ Mr. Brown
It is interesting that Conservative Members complain about industries that were run by Ministers before privatisation, but they do not complain about privatised companies run by ex-Ministers—the people who privatised them in the first place.
What has been allowed to happen in the privatised industries? There have been 14,000 complaints about electricity yet a few weeks ago the chairman of PowerGen was awarded an extra £30,000 from 1 April, on top of his rise last year—a 15 per cent. rise to £230,000. What did the Secretary of State for Energy say, or do? Absolutely nothing.
A few weeks ago the chairman of Scottish Power awarded himself a £47,000 rise and his chief executive got 54 a £96,000 rise, on top of rises that took place last year. The Secretary of State for Scotland said and did absolutely nothing.
The chief executive of Scottish Hydro-Electric had an extra £89,000, a 102 per cent. rise, during 1991, and the chairman had a 248 per cent. rise. What did the Secretary of State for Scotland say? Absolutely nothing.
There have been 4,500 complaints about water, a seventyfold rise since privatisation, but what have the chairmen of the water companies done? They have awarded themselves higher rises: Wessex Water, £12,000 or 30 per cent.; Northumbria Water 37 per cent.; North West Water 37 per cent.; South West Water 15 per cent.; and Anglia Water 28.6 per cent.. What does the Secretary of State for Environment say or do? Absolutely nothing. The chairman of Welsh Water awarded himself a 12 per cent. rise, but the Secretary of State for Wales was absolutely silent. The same Ministers are ready to attack the award of a minimum wage of £3.40 an hour to people who are on poverty pay, while they say nothing about people who earn more in a single day than some low-paid workers would earn in a year.
Those are not catch-up increases, justified as one-off boosts for newly privatised bosses. They are taking place year in and year out in year one, two, three, four and five of privatisation. Except perhaps inversely, they are unrelated to standards of service and to levels of consumer satisfaction. What does the Prime Minister do to show, us how that advances the concept of a classless society? Absolutely nothing.
What about British Gas, which is perhaps the most interesting case of all? A fortnight ago Mr. Robert Evans, the chairman, awarded himself another £60,000 rise, on top of his £60,000 rise last year, taking his salary to £340,000 this year, a 21.4 per cent. increase, before his performance-related bonus. On top of that, his share options are now worth a windfall £99,000. Of course, money is not everything—there was also the refurbishment of his rent-free London flat, including the installation of gold taps in the bathroom. A private pipeline a mile long has linked his own home in Bournemouth to the grid. He has £25,000-worth of gas fitments on loan, including a tumble dryer, a gas fire, a gas-powered dishwasher, an oven, a grill, a cooker hob and a gas-fired Aga cooker. Is that to persuade other millionaires in the neighbourhood of the merits of gas, or just in case Joan Collins drops in with a camera crew? He has the equivalent of a gas showroom in his sitting room, his bedroom and his various bathrooms: four showers and five gas lights.
Most lavish of all is the gas supply to the garden, a unique stock of gas-fired garden amenities. He has a gas-fired barbecue and, to illuminate the gas-powered idyll, a collection of Victorian gas lamps costing £8,000, in period standards—at last, amid this sorry tale of affluence and greed, the long-awaited return to Victorian standards, sadly in this instance at the public's expense. What did the Energy Secretary say or do? Absolutely nothing. There is a warning from the Government on every privatisation prospectus for a public utility that shares can go down as well as up. Another warning is needed—a warning from the Opposition that "directors' salaries can only go up under the Government."
Is that what the Prime Minister means by opportunity for all? The real message from Bournemouth and from elsewhere is serious and general—that for 12 years, when we needed a real citizens charter, we have had a directors 55 charter for the privatised boardrooms, unpublished but nevertheless pervasive and wholly effective—a directors charter against which the citizens charter is unfortunately nothing but a feeble gesture and against which the Bill represents no significant redress.
§ Mr. Tim Smith
I was not quite clear about what the hon. Gentleman was saying. Would a Labour Government interfere to fix the salaries of directors of private companies? Is not that a matter for shareholders, especially institutional shareholders? Why does he not encourage trade union pensions funds, which are among the largest shareholders, to take more interest in all this?
§ Mr. Brown
I am impressed by one of the proposals from Sir Bryan Carsberg. There is no question of the Government setting directors' pay, but there is a case for the regulator to be involved in it. If the hon. Gentleman studies Sir Bryan Carsberg's proposal and other proposals that would link performance to pay, which does not happen now, he will see that we would do a lot better. I am grateful to the hon. Gentleman for his intervention, because it has allowed me to clarify the point. He and many of his hon. Friends will agree that something must be done.
There were 38,000 complaints about British Telecom. When the privatisation roadshow reached Edinburgh last week, people who wrote about the way in which the chairman behaved when talking about consumer rights said that he took them on in "an offhand manner". The last published figures showed that, in one year, BT had to deal with half a million billing disputes—2 per cent. of its customers. BT's answer was not to improve the service but to stop publishing the figures, so that we cannot get them.
Nevertheless, a month ago, Mr. Iain Valiance, on top of last year's extraordinary salary rise, awarded himself an additional £64,000—a 16 per cent. rise—to £450,000. What did Ministers say? Absolutely nothing. On top of that came a bonus which could approach £175,000, yet Ministers say absolutely nothing. On top of that, and perhaps even worse, his new deputy was given a salary of £400,000 plus £118,000 of performance-related pay, promised even before he had done his first day's work. Surely that is not so much performance-related pay as appearance money. Between them, five top executives received £2 million in one year alone, yet Ministers do absolutely nothing.
When BT bosses reel off figures, we do not know whether they are talking about telephone numbers or their salaries, because the numbers are roughly the same. In the world of the new citizens charter, it seems that some citizens are far more equal than others. The chairman of BT had the audacity to tell his shareholders at the last annual general meeting that nearly 10 million customers were "unprofitable" for BT. The directors tell us that they cannot afford the customers. The truth is that millions of customers cannot afford the price that they are paying for those directors.
What did Mr. Valiance say when he was pressed about the salaries? We know that the Telecom boss in Germany receives £150,000, in France £120,000 and in Japan £100,000, yet Mr. Valiance receives four or five times as much. When he was asked why he got such a large salary, he said: 56This is compensation for appearing on the front page of the tabloids. This is a high profile job.If Mr. Valiance is to bear the heat of The Sun for being the chairman, what about his deputy chairman? Is he being compensated against the possibility of a small mention on the back pages of the Financial Times? Are the other directors being compensated for the risk of their names appearing in Accountancy Age? Perhaps soon they will receive compensation for having to appear in the telephone book itself.
As everybody knows, those rises are completely unrelated to the standards of service. Last Thursday, the Chancellor of the Exchequer called for reasonable levels of pay settlement. In gas, the percentage rise is more than 30 per cent., in electricity generation alone it is above 50 per cent., in water it is about 20 per cent. and in British Telecom it is even higher than that. What does the Chancellor now say? Why is he silent about these abuses in the boardrooms?
Who has benefited most of all from privatisation? Is it the customer, hundreds of thousands of whom have increased complaints about the services, recording, as even the Government's papers admit, high levels of dissatisfaction? Is it the ordinary employee, thousands of whom have lost their job as a result of rationalisation? Is it the small shareholder, who now owns less than 10 per cent. of the company and who, if he has £100, has dividend payments of less than he has had to pay in the last year in increased phone bills? Or is it the boardroom directors, for whom privatisation has become the nearest approach to a licence to print money since the birth of commercial television?
What does the Prime Minister tell me in his letter?We see no need to take further action.There is no redress on behalf of the citizen, no action on behalf of the consumer where it counts and no price cuts as a result of these high salary awards. The charter is for name tags for civil servants, yes, for action on traffic cones, yes, and of promises for Huntingdon commuters, whose service is no worse than that of many others. Yet when it comes to a charter that holds privatised boardrooms to account, the Secretary of State and the Prime Minister are prepared to take no action. Under pressure, the Prime Minister condemns the boardroom rises; in practice, by his inaction, he condones them.
What should the Government have done? First, when there are legitimate complaints about the conflicting interests of regulators and about responsibilities for public and consumer interests and when there are calls for the mediation of disputes, we need legislation to create independent ombudsmen. Even in the Bill, the case for an arbiter is conceded, but he can be brought in to act only at the discretion of the regulator.
Although there is a clear demand, although in other countries ombudsmen work well, although even in Britain the building societies ombudsman, in an area where there is greater competition than in the utilities, is active and is supported by legislation, the Government are not prepared to act for utilities. We need ombudsmen who can impose penalty fines, determine whether contracts are fair, publicly make recommendations about customer service, and insist on customer rights.
That is not all. The Government's model for the legislation is OFFER—the electricity regulator. Their aim is to raise Oftel, Ofwat and Ofgas to the standard of OFFER. Although national figures have been denied us, I will tell the right hon. Gentleman what OFFER has 57 achieved. Northern Electric gave out only £2,500 in compensation payments in the first quarter of the year, and South Wales Electricity gave out less than £1,500. People will ask whether a scheme that gives out only those sums is adequate to deal with the problems that we face.
The power of settlement has been used on only three occasions. Repairs to the failure of a main fuse are not guaranteed from Friday to Monday. Appointments, although given in a day, are still not timed for the individual consumer. Indeed, I checked up on how the public can contact OFFER—the most basic matter of simply finding it. It is not even in the directory for Liverpool, Newcastle, Portsmouth, Manchester, Coventry and other major cities. OFFER officials may have their name tags on, but if a customer cannot find the name of the organisation in the phone book or locate the office, OFFER is not heralding a revolution in consumer service. Yet that is the standard to which the Government say that they aspire.
When we need new performance standards set; when the compensation levels depend on this, yet when nothing is specifically set down about standards or about the level of compensation in the Bill; when the regulator may recommend but the Secretary of State may at his discretion interfere; when the reality is that the regulator is free to set standards and compensation but we do not know what they will be; when he is free to require information but the penalty for not providing it is only £2,000—the equivalent of two seconds of BT's profits; and when he is to be required to publish information but can get away with reasonable excuses, surely we need tougher requirements set down in the Bill and in regulations.
We need them, first, on compensation. We need a guarantee that it is automatic in every possible case, a commitment that is based on an escalating value year by year—in other words, an incentive for increased efficiency —and a guarantee that it also includes provisions for penalty fines on the utility company when it fails to provide a proper service.
On the disclosure of information, the issue must not just be what the regulator can receive, but what the customer can receive. I am talking not just about prices, but about costs, rates of return, the numbers of inquiries, regional and local information and even league tables about standards and improvements in service. Furthermore, there should be a requirement, which I believe the public will welcome, that utility directors should come before a new Select Committee of this House as part of a freedom of information Act to give full information about the profits, performance and pricing policy of those utilities.
On consumer representation, when it is absolutely clear that changes must be made; when the National Consumer Council, as the Minister must concede, has called for these changes, as have many other organisations; when the Gas Consumers Council has expressed specific fears that its role is not included in the legislation; when the whole purpose of the legislation, as the Prime Minister said, was supposed to be to increase the power of the consumer, but there is nothing specifically saying that the Gas Consumers Council or, indeed, specific consumer councils, such as the NCC, will be consulted; when, most of all, we know that £8 is being spent, for every person who has applied for shares of BT, on advertising the sale, but for each consumer only 15p a year goes to financing the Gas 58 Consumers Council, that is why we need strengthened consumer representation. That is why the Secretary of State should consider amendments now.
§ Mr. Lilley
Can the hon. Gentleman explain why none of his proposals—on close inspection, most of them do not go as far as measures that we already have in place—were introduced when the industries were nationalised: the state to which he wishes to return them?
§ Mr. Brown
We are dealing with the issue of regulating the industries that have been brought into the private sector by the Government. Let us consider what should be done to provide proper regulation.
The Gas Consumers Council and other similar organisations are angry about the terms of the Bill, because it contains no provision for them to be consulted. However, their existence and their role was recognised in previous legislation. If the Secretary of State said that he would agree to amendments to recognise the role of such organisations, that would be welcome to many of them.
My hon. Friend the Member for Dewsbury (Mrs. Taylor) will talk about energy efficiency and environmental standards later. Certainly the Government's record is lamentable and the proposals in the Bill are inadequate. The job of the water companies is supposed to be to ensure that we have the best and cheapest water available. Now they have become an adventure playground for dabbling in hotel and leisure complexes, television companies, employment agencies, direct mail companies and even gift shops. What guarantees do we have that the directors and managers of those companies are devoting their energy to their principal duty—the provision of the cheapest and best water available to the ordinary consumer?
The Bill depends on whether the Government are serious about acting against the vested interests of the utilities. Let us be clear about the profits involved. Last year, British Telecom made £3 billion, British Gas made £1.6 billion, the electricity companies made more than £1 billion, National Power and PowerGen made £700 million, and the water authorities made £1.3 billion. In total, last year, the utility companies made £8 billion, the equivalent of £350 for every household.
The Secretary of State is not prepared to answer the central question that I put to him earlier—does he believe that those profits were excessive? He refuses to tell us. Whatever measure one takes to calculate the profits made by British Gas or British Telecom, most people would accept that they are excessive.
When one considers what the regulators have said, and even what stockbrokers have said, one understands that in the past few years the Government have stood by and done absolutely nothing while excessive profits have been earned by the privatised utilities. The consumer wants the Government to take action on that, but the Government refuse to do so.
The profits from British Telecom are even ahead of those generated by the Baby Bell companies of the United States. They are ahead in terms of the operating margin, the operating return net profit, the operating return on new profit and the cash surplus per line. British Telecom is making excess profits on every indicator that can be produced, but the Government will do absolutely nothing about it.
§ Mr. Brown
No, I have already given way on a number of occasions.
The gas regulator has revealed that British Gas is making more profits per household than British Telecom, but the Secretary of State for Energy will do nothing about that.
What about the electricity companies? That industry sums up the whole sorry problem. On 22 October, the regulator wrote to the regional electricity companies in England and said that they were overcharging their franchise customers. He named the price charge by every regulated company, and added that he believed that it would be appropriate for them to act now. Although the director general will not publish the reply, his office has confirmed that not one of those electricity companies is proposing a price cut. That is why we need action from the Government to deal with excess profits and the need for further price cuts.
Although British Telecom profits have been excessive, local telephone call charges are still the highest in western Europe. In 1974, the connection charge for a telephone was £40, in 1979 it was £45 and now it is £139. The price has gone up almost every year under the Government, but they tolerate a system that means that that charge will rise even further in the years to come.
Gas prices among large industrial users are the second highest in Europe, after those of Germany. The price of water has risen faster than anywhere except Italy. Domestic electricity prices have risen faster than anywhere except Italy and Greece. Surely that makes the case for a price review, for action on profits and for a new price formula to be introduced immediately.
Nothing has happened, even though the regulators have admitted that profits are excessive. Nothing has happened, even though the stockbrokers have said that such profits are excessive. Nothing has happened, even though some of the regulators have produced proposals to change the regulatory system. What have the Government done? Absolutely nothing. The Secretary of State will not admit to himself what the regulators, the stockbrokers and many others have stated—that the profits are excessive. If he will not admit that, there is no likelihood that the Government will do anything about it.
The Government will, of course, tell us that they are acting to protect consumer rights. They tell us that they will enact legislation to provide such protection. However, the moment that the Bill comes into conflict with their central theme of more privatisation, the Government will back away. The Secretary of State's speech proved that. They will not act against excess profits and they will not enforce a system of price cuts even though the case has been made for them. The Government will not take action on directors' pay. The consumer deserves a far better deal than that.
When the telecommunications, gas, water and electricity industries were privatised, extravagant claims were made. In 1984, the then Minister for Trade said:We offer millions of BT customers a newly enshrined set of rights and benefits.People cannot see those benefits today. In 1985, the Government said of gas privatisation:We have built in powerful safeguards to protect consumers against abuse of the monopoly position.That is not so.
We were told that there was adequate provision in the Telecommunications Bill 60for the general protection of consumers' interests.The fact that the Government have now introduced this Bill means that that claim did not turn out to be true. In 1988, the Minister responsible for water privatisation said:Privatisation…will contribute towards the reduction of prices.However, prices have gone up and up again.
In 1990, when it came to the electricity privatisation, we were told:There will be no significant real terms increases in prices for domestic customers…except in exceptional circumstances.It has turned out that exceptional circumstances have ruled in every year since then.
We now have the citizens charter and the Bill, the very existence of which is an admission of failure. It is an admission that everything that Ministers said when privatisation was forced through about the consumers being protected and safeguarded and about their interests being advanced by the mere fact of privatisation have not been realised.
The Bill is the first embodiment of the principles enshrined in the citizens charter. The Prime Minister has declared that that charter will transform public services and utilities. The Prime Minister believes that some of the problem lies with identifying the civil servant, and he has sought to overcome that by introducing more name tags. The real redress will not be found by blaming the civil servant for what goes wrong while ignoring the need for a strengthened commitment from Government to invest in our public services.
Increasingly, the citizens charter is offering a right to complain about a public service—a right which, in many cases, one does not have—and the right to complain about the service provided by a utility which one simply cannot afford. The real answer is to recognise that standards in public services are the central theme. They should come above all considerations, including the ideology of privatisation. Instead of providing an alibi to be called in aid during the further decline in those services, the Government should take action essential to protect the consumer interest.
The basic conclusion must be that, even when there is a consensus on the need for major changes to protect the consumer through representation and via ombudsmen; even when there is anger about salary excesses and excess profits; even when the Government say that they are taking action to safeguard the consumer through the citizens charter, privatisation comes first. The Government are not prepared to cross the line between putting privatisation first and their public responsibility to take action on those abuses.
The Prime Minister said that he wants to be remembered for the citizens charter. The citizens charter will be remembered for promoting name tags, moving traffic cones and missing the point. Despite all the expensive advertising and public relations, the Bill is half-hearted and superficial and puts the failed 1980s agenda before the real agenda, which puts consumer interests first. According to the Prime Minister, the citizens charter's role is to punish incompetent administration, ensure a high quality of service and give recourse for negligence. Nowhere has there been greater maladministration and lower quality of service than from a Government who have imposed the poll tax and failed to deal with the other abuses with which the Bill should deal.
61 The Prime Minister rightly says that the citizen needs the right of redress. He should give us the right of redress now—an election to get rid of the Government.
§ 6.1 pm
§ Mr. Tim Smith (Beaconsfield)
Not for a long time have I heard a speech so lacking in substance and consisting totally of demagoguery based on malice and jealousy—characteristics that we naturally associate with the Labour Front Bench. I am worried further by the apparent failure of the hon. Member for Dunfermline, East (Mr. Brown) to understand the legal nature of a prospectus. If clear undertakings are given in a prospectus, the arrangements cannot be changed.
The terms of the Bill are well known. They change the arrangements, and to make further changes would not be right in legal terms. I am sorry that the hon. Gentleman does not appear to appreciate that. Nor does he appear to be capable of doing simple arithmetic. If the prices of British Telecom's services have fallen by 27 per cent. in real terms since 1984 when it was privatised, and if its prices have risen faster than the RPI in the 12 years since 1979, it follows that its prices rose substantially in real terms before it was privatised. There were always excessive price rises in nationalised industries—[Interruption.]
I wonder whether the hon. Member for Holborn and St. Pancras (Mr. Dobson), who is having difficulty in containing himself, can say whether the nationalised industry cut its prices in real terms by 27 per cent. in seven years.
§ Mr. Frank Dobson (Holborn and St. Pancras)
Is the hon. Gentleman aware that those circumstances apply to British Coal? In the past five years, the price of coal has stayed the same while, curiously, the price of electricity has risen by 30 per cent.
§ Mr. Smith
The point that I was making was that prices in British Telecom and other nationalised industries rose faster than inflation, because there was no incentive for them to become more efficient. Fortunately, there was an incentive for British Coal to become more efficient, even though it remains in the public sector.
If the hon. Member for Dunfermline, East is so concerned about excessive profits and pay for company directors, he should have said a little more about Labour's policies to deal with them. If one tries to regulate profits and not prices, there is no incentive for the industry concerned to be more efficient. The Americans have learnt that lesson, and, as other countries privatise their industries, they now look to the British model, which controls prices and allows profits to rise if a company becomes more efficient.
If the hon. Gentleman is so concerned about the excessive salaries of directors, the solution lies in the hands of institutional shareholders. There are many institutional shareholders in those privatised companies. Many are trade unions or county councils controlled by the Labour party. Why do they not take an interest in that? Rather than all the rhetoric from the Dispatch Box, a more constructive approach would be for some of the institutional shareholders to take a greater interest.
I understand that the hon. Member for Dunfermline, East did not say that a Labour Government would intervene directly to control directors' salaries, and I was glad to hear that. However, even to allow regulators to 62 become involved in the directors' salaries would create a dangerous precedent. I entirely agree that the salaries should be performance-related. We have learnt from the profits of British Telecom, which are deemed to be excessive, that, although strict price controls have been placed on British Telecom—it is now required to increase its prices by RPI minus 6£25 per cent., which, as my right hon. Friend said, will mean price reductions in cash terms —it has still made substantial profits. That shows the extent to which it was previously inefficient, and the scope that still exists for efficiency.
§ Mr. Malcolm Bruce
Will the hon. Gentleman confirm that competition in telecommunications does not work? Although Mercury charges less for a local call than British Telecom, that has not depressed the price of British Telecom's local calls, because the vast majority of consumers cannot gain access to the Mercury system. Therefore, the competition and the price mechanism are not working.
§ Mr. Smith
I agree that the most effective control over prices is competition. We heard very little about that from the hon. Member for Dunfermline, East. Much the best way to tackle the problem is to introduce increased competition into the market, which is how we shall serve consumers best. We have seen increased competition in telecommunications with the arrival of Mercury for industrial customers, but we must find ways to introduce competition throughout the market.
The hon. Member for Gordon (Mr. Bruce) will probably agree that it was right to have managed competition in the telecommunications market, because if we had allowed all sorts of companies to compete, none of them would have become established. We were right to allow Mercury to become established in the market, and it is now right to open up competition to more companies. Naturally, the objective should be to have perfect competition in the telecommunications market, but that is difficult to achieve and we are probably still some way from achieving it. All the changes in technology may mean that it will happen faster than we think. I agree with the hon. Gentleman about the paramount importance of competition.
There is a clear relationship between the quality of customer service and the degree of competition in a given market. The telecommunications market is an obvious example when it comes to the supply of telecommunications equipment. The market was opened up by the 1981 Act, the supply of equipment has been liberalised and the consumer has benefited. Mercury has become established in that market. There is considerable competition in electricity generation, and industrial customers are already benefiting. As for the Post Office, there is competition between Parcel Post and private operators, which works well because Parcel Post must compete in an open market.
According to my constituents, the worst examples of lack of competition are British Rail and the Post Office letter monopoly. Those are both monopoly industries, and the customer has no choice. As a result, they are grossly inefficient, with an appalling quality of service. We need to think about ways of tackling that and introducing competition into those markets.
§ Mr. Smith
I had the misfortune to be drafted on to the Standing Committee that considered the Telecommunications Bill in 1982–83. I say "the misfortune" because one of the Committee members was a nice man called John Golding, who spoke for 11½ hours on one amendment. His speech is now in the Guiness Book of Records. It was no coincidence that he was sponsored by the Post Office Engineering Union.
An argument in that Committee was that the telephone service's rural customers would suffer. Special arrangements therefore had to be made to protect rural customers. The same would have to be done for letter services. We need to think of ways of achieving greater competition while at the same time protecting customers' interests, to which the hon. Member for Dunfermline, East drew attention.
Where there is the fullest competition, it is important to have an effective regulator. When we were considering the Bill in 1982–83, it was difficult to anticipate exactly how the independent regulation of a newly privatised monopoly would work in practice, because there had been no such creature before. We knew that British Telecom was then performing badly. One sometimes had to wait months to have a line installed, and the number of public call boxes out of order was legion—about half of them did not work at any one time. We knew that improvements to the quality of service to customers had to be made and we thought that the best way to do so would be to set up an independent regulator. Oftel was the first to be established, under its director Sir Bryan Carsberg. I believe that the office proved an effective regulator in practice.
It is obviously important to have the right system of regulation. I should be interested to hear from the hon. Member for Dunfermline, East whether he thinks that we should regulate profits or whether it would make more sense to regulate prices and thus encourage improved efficiency. We want substantial profits in some of the industries, because two thirds of the profits are reinvested in new capital and fixed assets.
§ Mr. Smith
I am told that, after tax, 100 per cent. is reinvested. It is not widely recognised that easily the most important source of new investment in the United Kingdom is companies' retained profits, which is why high profitability is so important. It is essential to have high but not excessive profits. That is particularly important in the water industry, where there is a need for substantial new investment. Everyone knows that, if we are to achieve higher environmental standards, we must have higher investment in the water industry. One of the great advantages of privatising the water industry was that, instead of queuing up for capital at the door of the Treasury, water authorities would queue up at the door of the Stock Exchange to borrow money or issue shares.
It is impossible to secure effective regulation in the public sector. That is why it was not done before. It is easy to say now that we should have regulated the monopolies when they were in the public sector, but I do not believe 64 that it would have been possible in practice. There would have been a fundamental conflict between the regulator's objectives and the needs of other Government Departments, particularly the Treasury. That is why I believe that there is an urgent need to privatise the remaining public sector industries, particularly British Rail and the Post Office letters service.
It is important to have a sensible balance between the regulator and shareholders. Excessive regulation would make it impossible to persuade people to invest in the company the new capital needed to improve services. However, by and large, we have achieved a sensible balance between the regulator and shareholders during the past seven years.
It is interesting to compare the performances of the different regulators. I have examined the annual reports of the different offices mentioned in the debate. Different approaches are taken by the various offices. Oftel is the most experienced regulator of the four. I am glad that the National Audit Office has decided to carry out a review of Oftel's operations and to report to the Public Accounts Committee, because I believe that it is right that, after a period, a Committee of the House should examine how the regulator is performing. I understand that that review is about to begin, and I believe that it will be followed by reviews of the other regulators.
Much emphasis has been placed on the importance of comparative competition in water regulation—the comparison of the performances of different monopoly suppliers in various parts of the country—because there is no real competition in the water industry. If comparative competition is important, as I believe it is, it is equally important not to allow too many mergers between water companies, because we must maintain substantial numbers of firms so that we can compare their performances. I am glad that the Bill will, for the first time, introduce competition between water suppliers. Even if that competition is only at the margin, it will help water customers. Those people sited close to the boundaries between water suppliers will benefit from the proposal.
The annual report of Ofgas shows that it has had a tremendous struggle with British Gas to obtain the necessary information to regulate properly. It is important that the Committee considering the Bill should consider whether Ofgas has adequate powers because, unfortunately, British Gas still has an effective monopoly of the market.
There is an urgent need for increased competition in the industrial gas market and the proposal in clause 32—to get rid of the monopoly eventually and, meanwhile, to reduce to 2,500 therms the category of customer to which the monopoly applies—is welcome and will make a significant difference in practice. My right hon. Friend said that some of those customers were not small—for example, county councils, as education authorities, are large gas users, but they found that British Gas assessed each school separately for the purposes of regulation. The proposal means that they will be able to take advantage of the introduction of competition, as will many other organisations in the public sector, as well as businesses in the private sector.
The office of electricity regulation is in its early days, but there is plenty of competition in that market. It is important to encourage competition in electricity generation, so that customers, especially industrial ones, 65 have the maximum choice. The electricity regulator already has substantial powers, and it is right that the Bill should bring the other regulators up to that level.
It is important to have satisfactory complaints procedures. The hon. Member for Dunfermline, East said that he wanted ombudsmen; the Government should consider that proposal and their response to it. There should be codes of practice, so that customers know exactly how their complaint will be handled and how the system works.
It is important that, when we ring one of the monopoly suppliers, we know to whom we are talking. The person should be required to give a name so that, if the complainant calls back, he or she can ask to speak to the same person and is not given the run-around, as often happens in large organisations where a caller is passed from one office to another, which is extremely irritating.
Initially, the complaint will be dealt with internally, whatever external system we agree on. It is important that those inside the organisation who handle the complaints should be independent of the organisation about which the complaint is being made. There is no point in someone complaining to the organisation that has cut off his telephone; those to whom we complain should be independent of the suppliers.
§ Mr. Rowe
I wish to make a point that, although small, is of great importance to consumer satisfaction. It would be extraordinarily good if companies taught their staff to give not only their first but their second names. The constant reference to "Tracy" or "Andy" is extremely unhelpful when, some days later, one attempts to get back into the system.
§ Mr. Smith
I am sure that my hon. Friend is right: those receiving complaints should give their full name when customers ring up, so that they know who to ask for in future. That is especially true of people called Smith or Brown.
Where customers are not satisfied with the system for dealing with complaints, it is important that there should be a proper procedure for resolving disputes between the customer and the business. The hon. Member for Dunfermline, East rightly said that Oftel still receives thousands of complaints about British Telecom. However, before British Telecom was privatised, there was no independent organisation to which one could complain, only British Telecom itself.
Before water was privatised, a constituent complained to me about the charge that Thames Water proposed to make to lay new pipes to a house that my constituent was building. The only person to whom one could complain was the chairman of Thames Water. That was an unsatisfactory arrangement within a monopoly supplier. Now we can complain to an independent office, which is a major step forward.
There should be independent investigation of these matters. For instance, we all know that the meters monitoring our telephone calls are unfortunately not in our homes. The meter is the telephone exchange, so we cannot check our bills against the meter. Many people feel that they have been overcharged, often because while they were out someone else in the family made a call without telling them. On other occasions, complaints are legitimate, which is why it is important to maximise itemised billing so that people can check the numbers that 66 they are alleged to have called. That has started to happen in a big way. I can now show my wife how often she has called her mother over the past three months—a great step forward. We can see who has been making phone calls and what the charges have been, and that might encourage people to phone in the evening when the rates are lower.
If people are still dissatisfied with an itemised bill, they should be able to complain, and the regulator should be able to check the complaint independently. He should be able to send in consultants or whoever is necessary to look at the systems of a business; he should not have to rely on undertakings given him by BT—so systems evaluation is important.
I am disappointed that British Rail is not included in this Bill, because I wish that some of its provisions applied to BR. The citizens charter has a few things to say about BR, and I was glad about that, but earlier today I tried to discover what had happened to the charter's provisions on British Rail. According to the citizens charter, there are to be both a passengers charter and new conditions of carriage. The citizens charter states that the passengers charter will be published in the autumn, and the new conditions of carriage will be published in November.
Hon. Members will not be surprised to learn that the train is late, as I learned in a phone call today. Neither document will be published this year: they will be published early next year. That is a considerable disappointment to me, but it is entirely in line with British Rail's timekeeping.
On Friday, there was a debate in the House about the service on the Southend railway line, which, by common consent, is the most notorious in the country. Replying to my hon. Friends who raised the subject, the Minister said:The process of total route modernisation has already begun. The Chiltern line once suffered by far the worst service on Network SouthEast"—the Chiltern line serves my constituents—although I am reluctant to say that, having heard my hon. Friend's complaints about their line. I understand that the Chiltern line was worse even than theirs.
§ "Mr. McLoughlin
I said that I was reluctant to say that.
The Networker turbo diesel trains are now being delivered and will run to new, faster timetables in the new year."— [Official Report. 15 November 1991; Vol. 198, c. 1407–8.] So they will. At the moment, the service is still no better than it was when I became a Member of Parliament, and as usual I received two letters today complaining about its quality.
How shall we deal with this problem? British Rail's serious management problem is that it is still not sufficiently customer-oriented. There is an urgent need to break British Rail down into manageable units and to privatise it. There is an urgent need for independent regulators to do what this Bill provides they should do. There should be guaranteed standards and compensation for British Rail customers. There should be overall standards for British Rail. There should be information on performance against those standards, and it should be published.
British Rail should have procedures for handling complaints. In my experience, when there are complaints to British Rail, I have to organise meetings between the management of the line and the customers complaining about the service. That is the best way to get things done now, but it is not satisfactory. There should he proper procedures for handling complaints about British Rail, 67 and we need disputes resolution procedures, too. In short, the excellent provisions of this Bill should be extended as a matter of urgency to British Rail. With that proviso, I am happy to give the Bill a warm welcome.
§ Mr. Alan Williams (Swansea, West)
It is always a pleasure to speak in the same debate as the hon. Member for Beaconsfield (Mr. Smith). Although one may not agree with it, what he has to say is always considered and well argued. I was particularly encouraged by his response to the idea of an ombudsman—it was in sharp contrast to that of the Secretary of State. The hon. Gentleman conceded that it was an idea worth considering, whereas the Secretary of State mocked it from the outset. The hon. Gentleman's contribution stood better in the traditional approach of the House in the past two decades to issues relating to consumer affairs. There has been an attempt to find a consensus. That is not to say that there has been universal agreement, but there has been an attempt to discover what is best for the consumer.
I recall leading for the Opposition in the early 1970s on the Fair Trading Act 1973. We opposed various stages of the Bill, regretting the fact that it did not cover consumer safety; but, on Third Reading, I committed our party at the Dispatch Box—this was just before an election—to honouring the existence of the Office of Fair Trading and the appointment of John Methven as director general. That was how, for many years, the parties approached these matters and it is why I greatly regretted the style adopted by the Secretary of State. I am sorry that he has gone, since I do not like criticising him in his absence.
It was not so much the right hon. Gentleman's arrogance to which I objected—we are accustomed to that. What I regretted most was his ignorance. He made great play of the Opposition never, as he put it, having supported the consumer. That only shows how little parliamentary experience he has. Perhaps he has been promoted a little too rapidly and a little too high.
I remind the Secretary of State and his Ministers that the National Consumer Council, which he quoted several times, was set up by Shirley Williams and me when the Department of Prices and Consumer Protection was still in existence. We set up an independent Ministry of consumer protection: this Government closed it down. We set up a national network of consumer advice centres: the Government closed them down. We gave more funding to the citizens advice bureaux: the Government even tried to axe the NACAB grant, but had to back down.
It was particularly offensive to hear the Secretary of State talking about price increases in the gas industry before privatisation, as though he were not a member of a party and Government who decreed that gas prices had to rise arbitrarily, unilaterally and unnecessarily by 10 per cent. above general price increases for three years in succession. When compounded, that amounted to an increase of more than 30 per cent. utterly unnecessarily imposed so as to fatten up the privatisation turkey—and the Government have the cheek to tell us how much better things are now.
I consider myself highly privileged to have been the first Minister for consumer protection in a completely independent consumer protection Department. The 68 consensus that I have described is still enshrined in legislation. Before the 1974 election, the Consumer Credit Bill was going through the House. It fell at the election. I picked it up after the election and modified it in the light of the amendments that we had tabled when we were in opposition. With the co-operation of Conservative Members, we enacted it. My greatest contribution to human happiness was either the decision to abolish the cartel on cross-channel ferries or, less delicately, the decision to abolish monopoly price fixing for condoms.
In the 1970s it was recognised that for decades there had been a growing imbalance between the consumer and the supplier or manufacturer. Changes in marketing methods, such as mass marketing on top of mass production, kept the customer further and further away from the suppliers of goods. The complexity, technology and chemical make-up of goods made it more difficult for people to understand what they were buying and to make a judgment at the time of purchase. More important, the cost of legal action to seek redress had become so prohibitive that the consumer had little chance of taking legal action against suppliers. That is significant in terms of the ombudsman proposal.
We tried to switch the balance, and there was a move on both sides to do that. There was an attempt to push the balance back in favour of the consumer, but privatisation has achieved the opposite because it has resulted in a major shift of power away from the consumer to the producer. The House is debating a complex Bill presented by a Government who for 12 years have said that legislation is not needed on consumer protection issues. They have said that there is too much legislation and that voluntary codes are required. The Government are not saying that now. We are hearing a different song.
The Government should be honest enough to recognise that their actions have prejudiced the consumer. The Bill is a confession because in it the Government say, "We have done wrong by you, consumer." The firms listed in the Bill are not minority suppliers, because everyone in the United Kingdom is a consumer of at least one and probably several of the services covered by it. Every consumer has been disadvantaged by the privatisation of those industries, and the Bill is the Government's attempt to make amends.
We all know that the privatised monopolies have become virtually unaccountable and are an embarrassment to Ministers, who try to put a bold front on enormous salary increases. They do not disagree with them instinctively, but they are politically embarrassed. The Government wish that such increases were not happening, but realise that they can do nothing about them.
Wales is not the most prosperous part of the United Kingdom and there is great bitterness there over the antics of Welsh Water. Three years ago the chairman of that company had a salary of £46,000. He increased it to £76,000 in the first year, which was a modest 65 per cent. increase, and he doubled that increased salary in the following year. His salary is now £143,000, which means that it has more than trebled in just a couple of years. The only productivity gain that he can show for it is in the courts. Welsh Water has dragged many old-age pensioners and under-privileged people through the courts of Wales because they have fallen down on the odd instalment on their water charges. While those people are being credit 69 blacklisted because of the actions of Welsh Water, the chairman of the company plays computerised monopoly in his Cardiff headquarters.
I am willing to wager that the Government will not present proposals before the election about the salary of top civil servants. That is because comparators are involved, and what is happening in the private sector will have repercussions in the public sector. We shall be given all manner of reasons why there should not be a top salary review, or whatever it is called since the former Prime Minister tore up the negotiating arrangements for the civil service. Conservatives will be embarrassed and will find it difficult to defend increases in civil service salaries. However, they will have to accept those increases because of what they have allowed to happen to salaries in the comparator industries.
The privatised boards have given themselves an inbuilt incentive to exploit their monopoly position. When they were privatised I was on the Opposition Front Bench and did the job so well that I am no longer there. I was there when British Telecom was privatised and I warned of the grave dangers in turning public monopolies into private monopolies. The new board is able to award itself performance bonuses based on monopoly profit and to take share options on share values which reflect that monopoly profit.
The members of those boards would be saints if they did not seek to take advantage of the position in which the Government have placed them. That is exactly what is happening. They are making hay while they can. Their snouts are in the trough. A coat of arms for the Government would consist of a silver trough with Tory snouts rampant and in the corner there would be a cardboard box, symbolising the situation in which far too many of our people find themselves.
§ Mr. Williams
That is correct, and the privatised noses are in among the privatised silver, getting the benefit. I suspect that the hon. Gentleman makes an amusing debating point and is not advancing it as part of a serious political argument.
Many of the ideas before the House are well worth examining. For example, the proposal for an ombudsman is sensible. The difference between the overall strategic regulatory power of the directors and that to deal with the often small complaint from the consumer is important. I am delighted that Professor Carsberg is here listening to the debate. However, he cannot be doing his job properly in his supervisory and regulatory role if, at the same time, he is bogged down in a morass of consumer complaints. My hon. Friend the Member for Dunfermline, East (Mr. Brown) mentioned a number of consumer problems with these industries. The Government would be well advised to look constructively and positively at the suggestion that there should be an ombudsman.
§ Mr. Tim Smith
I am interested in what the right hon. Gentleman is saying, but I am not sure that there will be a conflict, in principle, if the regulator regulates both economic matters and complaints. I should have thought that it was a good idea so that he could see, from time to time, individual complaints about the businesses that he has the responsibility for regulating.
§ Mr. Williams
I shall draw a comparison with the Act that I mentioned earlier, whose survival for so long is a sign of its success—that establishing the Office of Fair Trading. The Director General of Fair Trading has an overall strategic role in making proposals for regulating the market and protecting the consumer, but he does not deal with individual cases. Information on individual cases is referred to him in so far as it might help him to frame proposals for orders and changes in the law. There is a distinction. For example, the West Glamorgan consumer protection department deals with the problems of the local small shopkeepers and the Office of Fair Trading collates information from it and from all the other consumer departments so that it can identify whether there is a general abuse that needs remedial action.
I hope that the hon. Member for Beaconsfield will serve on the Committee that will examine the Bill, although I am not trying to condemn him to that if he does not wish to be there, because I think that we might be able to find some common ground. That there is some common ground is shown by the welcome that the hon. Gentleman gave to the concept of the Public Accounts Committee looking at the regulators and to our slightly wider suggestion that there should be a Select Committee to deal with the matter. There is something new here which, with good will, both sides of the House could pick up and use.
I have two personal proposals to make—to my party, as I know that they will not be welcomed by Conservative Members. I am not saying that unpleasantly: I am just recognising that there is a philosophical divide between us. First, I hope that my hon. Friends will commit themselves to referring every one of these privatised monopolies to the Monopolies and Mergers Commission during our first period of Government. British Telecom and the water authorities should be the first to be so referred.
My second recommendation is that both parties think in terms of a return to an independent consumer protection Department. It was too narrow in its previous incarnation. Too many Whitehall battles were fought because, for example, tourism had to stay with trade, with the result that a whole series of issues that should have been in the consumer department were not.
I make that suggestion for this reason. Someone has to appoint the director and the ombudsman, if we have one. They have to report to someone at parliamentary level when they have completed their analyses. It is imperative that that voice, at the Government end, should stand equal in Cabinet with the voice speaking on behalf of the commercial and industrial interests and that that voice should be independent. Therefore, I hope that the prospect will appeal to hon. Members on both sides of the House.
§ Mr. Roger Knapman (Stroud)
Thank you for calling me, Madam Deputy Speaker. Looking around the sparsely attended Chamber, I had a feeling that I might catch your eye sooner or later. I am glad to be able to contribute briefly to the debate on the Bill, although I can see that there will not be a meeting of the minds. In any socialist society, competition is absent and, because it is absent, services are usually non-existent.
I congratulate my right hon. Friend the Secretary of State for Trade and Industry on his excellent speech. I am sure that all my colleagues are as delighted as I am to support this excellent Bill, not least because it builds on the 71 firm foundation organised during the passage of our privatisation measures. The attitude taken to privatisation is one of the key differences between the two parties. We as Conservatives believe in privatisation, as do the Russians, the Poles, the Czechs and the Slovaks. Very shortly, the Albanians will also approve of it. However, tonight we have heard that the Labour party will never approve of it.
The Labour party's amendment shows that it is still wedded to clause 4 and to renationalisation, despite the fact that the leader of the Labour party said recently:We must learn to run capitalism better than the Conservatives.If he meant that, the Labour party would not have tabled the amendment.
The more astute Labour Members recognise that, with £35 billion-worth of promises under their belts, renationalisation in the event of a Labour Government would be most unlikely. Therefore, their secret agenda is how best to strangle the utilities with as much bureaucracy and red tape as possible.
The hon. Member for Dunfermline, East (Mr. Brown) criticised the £8 billion of profits from the various companies which would yield about £2 billion or £2.5 billion of taxation to the Exchequer. He is prepared to forgo that. If he were here, it would be interesting to know how that deficit would be reflected in Labour party policy. What would it cut as a result? To promise £35 billion-worth of extra expenditure without the benefit of privatisation revenues is absurd. To promise £35 billion-worth of extras and then to renationalise these concerns—as has been said, it might cost as much as £10 billion—is not just absurd but highly irresponsible.
My right hon. Friend the Secretary of State and my hon. Friend the Minister have achieved in the Bill a delicate balance between encouragement of the private utilities so that they remain profitable and strengthening consumer interests, without excessive bureaucracy. As a result, I have never been less tempted to support an Opposition motion, although I assure my hon. Friend who is the Whip on duty that I am never tempted in that direction.
The amendment is opposition for the sake of opposing, but of course the Labour party has opposed every privatising Bill. I wonder whether, if Labour Members present were Members not of this but of a similar Parliament in an eastern European country or in Russia, they would be taking this attitude. I am disappointed with the amendment principally because it says that the Billfails to establish independent consumer ombudsmen".This is bad, Surely they mean "ombudsperson".
I wonder whether Opposition Members have looked at the excellent background paper produced by the Library research division, entitled "The Regulation of Privatized Utility Companies", which was published on 1 July and is available in the Library. The paper goes to the core of the argument and the answer to it is to be found in paragraph 1(a) at page 1. I should think that Opposition Members normally get that far into a document. The passage states:Reference is often made to the regulators by name. Thus it is said that a particular decision was taken by Sir Bryan Carsberg rather than by Oftel. This approach is not adopted in order to personalise the issues but to reflect the legal position. The Acts of Parliament which carried out the privatisations and established the powers of the regulatory 72 agencies lay the various duties upon the Directors of the various industries and not upon the regulatory agencies as corporate bodies. Each agency is there to assist the director and not legally to share in the decision-making process. One cannot say, for example, that `Oftel decided something by a narrow vote' or that personnel changes in an individual agency will change the approach.We arrive now at the crux of the matter, and it is described as follows:The actual decisions are made by the Directors of each agency separately.As I have said, I have quoted from the first page of the background paper, which is available from the Library.
When the Opposition call for an independent consumer ombudsman, I suggest that that is exactly what they have under the present arrangements. I believe, however, that the regulators have much stronger powers than those for which the Opposition are calling.
The issue does not stop there, because the Opposition's amendment suggests that the Billfails to strengthen consumer representation; fails to give sufficient priority to energy saving and environmental protection".The protection of customers has been successfully achieved since privatisation and my right hon. Friend the Secretary of State produced several examples. British Telecom's prices—the undertaking has been the subject of some criticism in the press—have decreased by 20 per cent. in real terms since 1984. Surely that is good. We have heard that the price of gas will be 5 per cent. less than the retail prices index next year. That may mean that there will be no increase in gas prices during the forthcoming year. That will be excellent and will be a far cry from the situation that we faced during 1974–79 under the Labour Government, when prices tended to rise by 2 per cent. every month, not every year.
§ Mr. Knapman
Opposition Members probably look forward to occasions when they can dig out figures of the past. It should be remembered, however, that the prices charged by all the privatised concerns are controlled by the various regulators and that the price increases are less than the rate of inflation. That should be good enough for hon. Members on either side of the House.
The new regulator following the privatisation of the electricity industry has guaranteed 10 standards of performance. At long last consumers have redress—and in some instances compensation—if service is unsatisfactory. Surely that lies behind the excellent initiative of my right hon. Friend the Prime Minister which led to the citizens charter.
We should be interested in hearing rather more about the Opposition's sudden interest in consumer protection. I have no doubt that it would result in countless quangos that would be dominated by their trade union friends, who always represent the vested interests of the Labour party, which include the producer and the single parrot cry, "More money."
Consumer protection is easily achieved if two golden rules are observed. First, there must be competition. Secondly, there must be regulation where necessary. The two rules must always be applied in that order. If there is competition and then regulation, the consumer is usually 73 protected. We can prove that reasonably satisfactorily by having regard to the position of the electricity supply industry now compared with what it was about 10 years ago.
How was the price of electricity arrived at about 10 years ago? There was the price of coal and no one is sure how that was determined. We had rather dominant trade unions that decided that wages must be at certain levels, the cost of which was incorporated on a cost-plus basis. The monopoly Central Electricity Generating Board examined the figures and said, in effect, that they amounted to 80 per cent. of the total cost of power generation and that it had to add its own costs. It would then make an assessment of likely capital needs for building new power stations. The costs that were reached at that stage were sent off to the distribution companies, which had to add their costs. At the end of that process, the poor consumer was lumbered with the most expensive energy in Europe. That is about the truth of what happened under the Labour Government.
Against that background, it is clear that the consumer is protected by OFFER. It is for the distribution companies to purchase as cheaply as they can, through their joint ownership of the national grid, from the competing generating companies. The generating companies have a diversity of supply from several suppliers, including the coal industry. That has had the desired effect.
Miners have broken previous production records, and they are much more efficient now than 10 years ago. That must be a credit to them. I hope it will not be much longer before their industry is in a position to be privatised as a reward for their endeavours. In short, the industry is now consumer-driven, whereas 10 years ago it was producer-driven. That is because the Labour Government always pandered to vested interests.
§ Mr. Knapman
I note that the hon. Member for Gordon (Mr. Bruce) disagrees with me. His party has voted against every privatisation measure. Perhaps he will tell us whether he believes that Mr. Arthur Scargill, who played a vital part in determining the price of coal, had the interests of consumers at heart.
The Labour party claims also to be interested in environmental protection. We know, however, that my right hon. Friend the Secretary of State clashes with National Union of Mineworkers-dominated delegates in the House. It is rather pitiful that some Labour Members are mere delegates when the rest of us have the privilege of being representatives. An Opposition Front-Bench spokesman complained recently that he was under undue pressure from the National Union of Mineworkers.
Another example has been provided by what was the Killingholme Generating Stations (Ancillary Powers) Bill. I had the privilege of taking the measure through the House last year in the teeth of opposition mounted by the NUM. The Bill merely sought to take in water inlet pipes together with water outlet pipes to permit a combined cycle gas turbine station to be constructed. The Labour party opposed the Bill at all stages. I wonder whether it argues that combined cycle gas turbine stations are less or more harmful to the environment than—
§ Dr. Kim Howells
I appreciate the point that the hon. Gentleman is trying to make. Does he agree that some of 74 us are worried about combined cycle operations, not for the reasons that he has given, but because we are going to be very slow in burning a premium fuel simply because accountants have not allowed gas-fired power stations? They are much cheaper to build and one gets a return on one's money much quicker than from building a coal-fired or nuclear power station. It is not an environmental consideration; it is an accountancy one.
§ Mr. Knapman
I think that both considerations may apply. Most people suggest that coal is a less satisfactory fuel for the environment than others. The Opposition's amendment suggests that the Government have failed to givesufficient priority to energy saving and environmental protectionSurely the CCGT stations are more suitable for protecting the environment than coal-fired stations. I am not saying that that is the end of the argument, but in the terms of the Opposition's amendment it is quite clear that what I am saying is correct.
The question of profits has greatly exercised the minds of Opposition Members. In 1990–91, British Telecom made £3.1 billion before tax; that yielded roughly £1 billion to the Exchequer. On what has the £1 billion been spent? Has it been spent on hospitals, roads or schools? Can any hon. Member tell me what will happen if the profit disappears and what will be cut from Labour's programme if the money is no longer available? What incentive will there be for efficiency if profits are reduced? That is the central issue.
Surely a 20 per cent. reduction in prices since 1984, along with increased profits and taxation liabilities, constitutes a virtuous cycle. The old nationalised telephone network was grotesquely inefficient; it was hugely overmanned, for instance. Although it has been slimmed down, British Telecom is still considerably overmanned in comparison with most similar countries on the continent. Ten years ago, in many areas it was hardly worth bothering to cross the street to use a telephone box, because it would be certain to have been vandalised. Now, 98 per cent. of telephone boxes are working at any one time.
Those using directory inquiries used to experience an exceptionally long wait: on Sundays, they would be lucky to obtain an answer at all. Now, there is a rapid response to such calls—and, usually, a charming Irish accent to accompany it. There was an even longer wait for telephones themselves. The "black, bakelite and basic" telephones described by my right hon. Friend the Secretary of State were so basic that most people did not even possess one. A business subscriber would crawl right to the bottom of someone's priority list, but for the ordinary residential subscriber the chances of obtaining a telephone in a reasonable time were nil. That is another example of a consumer-driven industry replacing a producer-driven one.
I had the privilege of serving on the Standing Committee that debated the Water Bill in 1989—a Bill that was taken through its stages very competently by my right hon. and learned Friend the present Secretary of State for Employment. The Bill's prime objective was the separation of the provider of services from the regulator of standards. Labour, of course, opposed it; the hon. Member for Dewsbury (Mrs. Taylor) opposed it fluently and at great length.
75 Having opposed privatisation on every possible occasion, Labour cannot now seriously claim to be interested in the plight of consumers. It was a great step forward to separate the poachers from the gamekeepers. The Opposition merely propose the establishment of a quango to oversee some nationalised industry; that would not work here, any more than it would work in Russia. The poachers and the gamekeepers are working independently and working very well. This Bill will strengthen that process, in the light of experience since the privatisations.
My right hon. Friend and my hon. Friend the Minister for Corporate Affairs have achieved an excellent balance between the respective and varied interests involved. The Bill is very much in the interests of the consumer and the purchasing public, and we should give it our enthusiastic support.
§ 7.3 pm
§ Mr. Terry Lewis (Worsley)
I am grateful for my second opportunity in a week to contribute to a Second Reading debate. I shall confine my remarks to clauses 1 to 10 of the Bill, which deal with telecommunications. I see this as an opportunity to amend the Telecommunications Act 1984 in the interests of consumers, and I hope that whichever Minister takes the Bill through its Committee stage will adopt some of the amendments to that Act that I have been suggesting for some time.
I intervened on the Secretary of State's speech to ask whether he was satisfied with the conduct of Oftel, and, in particular, with that of its director general, Sir Bryan Carsberg. In my dealings with him, Sir Bryan has taken effective action, subject to the limitations imposed by the House. I suspect, however, that he would have liked to do more. Judging by his correspondence, and by conversations that we have had, I believe that—had it been the wish of successive Secretaries of State—he would have wished to deal with some of the worst abuses of the telecommunications industry. Monopolistic abuse has never been more apparent in any of the other privatised utilities.
In his recent statement on the citizens charter—the precursor of the Bill—the Prime Minister said:In the parliamentary session ahead, I want the public to watch who it is who really supports the consumer.In the six years since the privatisation of British Telecom, the dogmatism that presides over all privatisations has never been more acute than in that industry. It will come as no surprise to my hon. Friends that I refer especially to the advent of premium-rate services.
Premium-rate services began almost on the day of privatisation. The so-called services fell into six main categories—chatlines, recorded messages, one-to-one services, live services including sports commentaries, competitions and similar interactive games, and information services. That last service presents the most serious problem, as it used to be possible to dial a number free of charge to obtain information about sport or the weather.
§ The Minister for Corporate Affairs (Mr. John Redwood)
Normal charges applied to such services.
§ Mr. Lewis
I accept the Minister's correction. It was possible, for the normal charge, to hear the test match score, a weather report or a road report. Now, subscribers must pay the going rate of about 35p
People have now realised that there is money to be made through the development of sleazy services—and of respectable ones. I have often spoken in the House about the abuse of the chatline service, which joins up to a dozen people in conversation; I shall say more about that later. There are recordings of filthy stories—and also of stories conning people into believing that, for 30p or 40p, they will receive something that, in fact, they will not receive. No real control over such services exists, although various attempts have been made to impose it.
The one-to-one services exploit women in our big cities in a Dickensian fashion. Women in economic straits—one-parent families, for instance—are given so-called jobs; for about £2 an hour, they are expected, during "convenient hours", to talk dirty to pornographers and other people who telephone at night to engage in crude conversations.
People can dial into a football commentary on a Saturday afternoon. Does the Minister know anyone who would use his own money to listen in to a football commentary for two hours at 30-odd pence a minute? I am also certain that many of the competitions on telephone lines contravene the law. Money and holidays are offered as prizes, but I have no clue whether anyone has been successful in those competitions or whether the prizes were delivered. Oftel cannot do a damn thing about that. It cannot control what is happening because so many people are involved in the supply of those services and there are so many services that it is impossible, under present conditions, for them to be controlled.
Such services are provided by someone who goes along to British Telecom, rents a line and agrees a price—perhaps a 50 per cent. cut for the sake of tonight's argument—and someone with no bona fides or track record and whose circumstances have not been investigated, can set up one of those services. That person might be sleazy or respectable or anything between the two.
Over the past six years I have raised in this House many problems relating to those services. Let us consider their cost. Many thousands of people are still saddled with extraordinary debts because of the costs of the services that I have described. Chatlines are particular promoters of that problem. There are examples of 13 and 14-year-olds running up telephone bills of £7,000. Bills of £3,000 to £7,000 a quarter were normal. Whenever I argued for chatlines to be controlled, Ministers took no notice.
I believe that Sir Bryan Carsberg wanted to do something about that problem. However, as always, the Government did not care two hoots because the money was pouring in. The embarrassment which that might have caused the privatisation process was swept under the carpet.
I am surprised that Conservative Members have not intervened to say, "Why let a 13-year-old have access to a telephone to run up that kind of a bill?" That is the easy way out and that is the way out taken by British Telecom and by Conservative Members on several occasions. Many youngsters were caught in a trap. The parents were unaware of those huge bills until they dropped on their doormats.
77 Three years ago, there were three attempted suicides —one in Scotland, one in the north-east and one in the north-west involving youngsters who had run up such enormous bills. The Government did not show much interest in that. There was certainly no interest shown by those on the Treasury Bench. However, those are the problems that have occurred as a result of privatisation and what flowed from it.
The worst kind of pornography has been and still is being peddled on such telephone services. I have no doubt that such telephone services provide a way into prostitution. British Telecom and the other network providers take a share of the money generated through those services.
We must also consider the new crimes that are being committed. A newspaper article on 25 October reported that an ingenious telephone tapper had tapped into people's telephones and had run up a £13,000 sex line bill. He also ran up a £10,000 bill at his place of work. After the matter had been through the courts and the man had been dealt with for stealing electricity, British Telecom said that the householder who had been fleeced of £13,000 would have his bill settled. However, his employer's £10,000 bill would not be settled. Surprise, surprise, that man was sacked, but he is just one of many who have keyed into that new crime.
Another example of that crime occurred not very long ago in the Wirral. A poor old chap went on holiday to visit his relatives for a few months. While he was away his flat was broken into. A chatline operator in the area, in league with the man who broke into his flat, helped to run up a bill of tens of thousands of pounds. After lengthy arguments, the case was settled, but there are many such cases affecting consumers about whom the Government say they now care enough to do something about them in the citizens charter.
The campaign against such services has lasted for the best part of six years. I have had a considerable amount of correspondence with successive Ministers. I have tabled innumerable early-day motions and obtained Adjournment debates about those services. I have used every device open to me in the House to raise the matter, but I have been unable to amend the Telecommunications Act 1984. When the Minister replies tonight, I hope that he will confirm that he will accept some of the amendments that I will table if I am drafted on to the Standing Committee, as I hope to be.
The Minister, the Prime Minister and the Prime Minister's predecessor cannot claim that all this is new to them. It is well known to the point of tedium. Far be it from me to bore the House, but I believe that these issues must be pressed home.
All along, the reaction of Ministers has been, "Leave it to the regulator." However, in such circumstances, the regulator does not have enough power. The Government have rejected the idea of amending the 1984 Act and I hope that that will be corrected tonight. The thing that makes me laugh is that the House authorities have recognised that there is a problem. During the summer recess, 0898 numbers were barred from House of Commons telephones —[Interruption.] My hon. Friend the Member for Dewsbury (Mrs. Taylor) may say, "Shame"—
§ Mr. Lewis
I am sorry, she did not say that and I hope that she has not been using those numbers. I must stress that I am not guilty of the accusation that I have carried out my research on 0898 numbers by using House of Commons telephones.
If we leave it to the regulators, what powers do they have? The problems have become worse. In the early days, some four years ago, Sir Bryan Carsberg issued an instruction to British Telecom on some aspects of the premium-rate services, but BT rejected the solution. All that Sir Bryan could do then was to refer the matter to the Monopolies and Mergers Commission. The Monopolies and Mergers Commission reported that it was a whitewash. That was doubly unfortunate, because, within a week of the inquiry closing, one or two of the worst cases of abuse came to light. One of them involved a suicide attempt. Had that occurred before the inquiry closed, there might have been a different outcome. The Monopolies and Mergers Commission's suggestions did not match what was needed to control premium-rate services.
However, in 1986, the Independent Committee for the Supervision of Telephone Information Services was set up —a puny organisation. Its creation was doubtful in the first place because, in a sense, it was created by British Telecom—granted, it was at the behest of Oftel, but its funding was through British Telecom. If that is not a gamekeeper-poacher syndrome, I do not know what is. Funding is now also provided by Mercury and by one of the aircall networkers. None the less, that organisation, which was set up to monitor and regulate, is being funded by the people who are making the most money out of it. That cannot be right.
When I have argued for a statutory committee I have been told, "Oftel has sufficient powers. ICSTIS is doing a wonderful job." ICSTIS is not doing a wonderful job, partly because it is under-resourced for the job that it is expected to do. It has approximately £1 million in funding. We are talking about a multi-million pound market for premium-rate services, thousands of lives, hundreds of operators, and large amounts of money ranged against that so-called supervisory committee. That is not good enough if we are serious about consumer interests.
Since 1986, ICSTIS has produced four draft codes of practice. Each code of practice has been more expensively produced than the last, and each one has been like King Canute trying to turn back the tide of abuses in premium-rate services. That organisation cannot succeed in the circumstances that I have described. It has talked about the control of advertisements. Even Ministers cannot have escaped seeing in the newspapers busty young ladies advertising lusty services on the telephone.
It was suggested that the price of such calls had to be clearly printed upon advertisements. Some prices can hardly be seen with the naked eye. That organisation cannot have the time, staff or energy to make sure that its own codes are adhered to. It also called for caution in respect of under-18s who are likely to phone chatlines and so on. How in heaven's name can one seriously expect a monitor to judge whether a person on the telephone might be 16, 15 or 14? Publicans have enough difficulty when they confront people. How in heaven's name can someone be expected to make such a judgment on the telephone?
The other significant move was the introduction of a compensation scheme. The service providers—those who get the rake-off—must now pay a deposit which goes into 79 a pot that is supervised by an independent arbitrator. It is a tortuous process, to say the least. Significantly, if such a service must be regulated in that way before it is even delivered to the consumer, there must be something wrong with it. It is addressed to the wrong people, it is delivered in the wrong way, and much of what is being delivered is unworthy of the House.
What has been BT's reaction? BT originally told me that it was technically impossible to call-bar an exchange. In May last year, after a long argument, it decided that it could call-bar an exchange, provided that it was a digital exchange. At that time, only 50 per cent. of customers were on a digital exchange. I regarded call-barring as a step forward and gave it a cautious welcome in the House. At that time, we were told that BT, in the next round of bills, would insert a "billstuffer"—a leaflet giving information about how one could obtain call-barring at the exchange. That circular has still not gone out. Is it because BT wants to be as dilatory as it can because it is still raking in the money? Also, why has it not instructed most of its regional managers in how to operate the service?
People still say to me, "I have been in touch with BT. I have a dispute with my bill. How can I pay £3,000?" My first question is, "Have you been told about call barring? That is the first step, and then we will go through the rest of the process to try to right the wrong." Invariably, they have not been told about call-barring. I do not expect the regulator to be able to work with that kind of minutiae.
The latest innovation is the separation of numbers. Again, I give that a qualified welcome—only a qualified welcome. The separation of numbers means that entertainment numbers will be separated from serious information numbers. That innovation was requested six years ago. I think that it was an initiative of Sir Bryan Carsberg. It has now been taken on board. What worries me is that, if a service needs to be split into two separate types of numbers, what clientele and what services are being separated? The answer must be that we are separating dirt from serious information. I question whether dirt has any place on the national telephone network. It is tantamount to making sleaze respectable.
The chairman of ICSTIS says that we must not moralise about the services that people buy on the telephone. We must do so. We must take a stand on the matter. Anybody can pick up a newspaper and see reams of advertisements for sleazy services. Anyone can misdial. Sons or daughters—we should be especially worried about daughters—can misdial and hear some of the most appalling, vile rubbish that one could imagine. There is no room for that on our national telephone network.
I have no doubt that the Minister will flash back at me later and say, "What about section 43, which bans the commission of illegal acts, bad language and so on?" By splitting up the numbers the Minister is saying, "To blazes with section 43. It does not matter." I accept that he cannot do that but it would be tantamount to doing so. The House must say that we shall not have sleaze services on the telephone. If I am accused of moralising, I admit it.
So far, I have tested the Prime Minister's new-found commitment to defending the citizen against tyranny. One such tyranny is premium-rate services. Another problem is phantom calls. One Conservative Member spoke about his delight at being able to obtain itemised calls. Of course, 80 that is a major step forward. We look forward to that facility being available to all telephone subscribers. But itemised bills have shown up a large number of phantom calls.
Consumers are setting up organisations throughout the land to challenge the appearance of phantom calls on their telephone bills. Phantom calls are being made on their telephones. I have had cases of old couples who live alone and know that no one has ever had access to their phone. Once in dispute, they have received an itemised bill which showed whole strings of calls on 0898 numbers. Oftel has loads of records of such cases which the Minister could examine at his leisure.
Phantom calls are made in various ways. They may be made by employees of British Telecom. At one time British Telecom denied that that could happen but now it accepts that it does. There are also the characters who go into the woods with bits of wire and tap into other people's telephones.
Phantom calls cause social problems. Let us imagine a middle-aged couple who challenge their bill and find that many of the calls were made on 0898 numbers. Perhaps the wife will ring the numbers to see what they are. She may find the most appalling pornographic services on that number. The first thing that she thinks is, "Is my husband going round the bend? Is something going wrong with my marriage?" By and large, unregulated premium-rate services have caused all sorts of social problems which we cannot continue to ignore.
I have already mentioned unauthorised use of telephones but it is worth labouring the point. We have talked about unauthorised use in the home and the people who tap into phones and about British Telecom employees tapping into other people's lines. But another worry is what happens in the workplace. I invite Conservative Members to think about that. They claim to be the friend of the small business man. I have given innumerable examples to successive Ministers of business men who have been ripped off by unsupervised employees or, more often, those who work for security firms which have been engaged by the company. Business men find that employees of the security firm spend three quarters of their time on the telephone on 0898 numbers.
Employees may run up enormous bills for those small businesses. Small businesses in my constituency cannot stand such costs. Of course, it is against the law and if people are found out they will be sacked, but British Telecom is not prepared to write off those debts. I can understand that because they must run into many hundreds of thousands, if not millions, of pounds. I spoke earlier about football commentaries. Who would spend 30-odd pence a minute on such a service? It works out at about £20 an hour plus VAT. Only someone who is using someone else's telephone would do so.
One can imagine a security man on the two to 10 shift on a Saturday afternoon. His favourite team is playing and he cannot go to watch it. He has a phone there and he will spend someone else's £20-odd to listen to the match. I cannot believe that that is right, that we cannot regulate it or that we should ignore it.
It is simple to do something about the problem, if there is the will to do so. I do not know the figures because they are a secret. I do not know whether Oftel has the figures. British Telecom will always hide behind commercial confidentiality. Now that we do not have a Postmaster General whom we can bring to the Dispatch Box at 81 Question Time we cannot find out what is going on in the industry. We do not know what is going on in the privatised industries, especially British Telecom.
I want to know whether the Prime Minister, through his Minister, will back the citizen against the obscene profits made from premium-rate services and against the abuses of which I have spoken. Many people are making money out of premium-rate services. They include advertisers in newspapers. I have here one of this morning's newspapers which has a whole page of advertisements for such services.
British Telecom, the system provider, also makes money from premium-rate services. So do television companies which advertise the services at night. Inordinate amounts of money are made. I argue that we should put the citizen and the consumer first, before those who make the profits. I have argued that strenuously for a long time. I hope that we shall have the opportunity to put the consumer first.
How can we sort out the problem of premium-rate services? I make two suggestions and I defy anyone to say that they cannot operate well. The first is a system of contracting in. I want the Minister to listen carefully to what I am about to say. I am a Labour Member of Parliament and I suggest that we should give the consumer choice. I want the consumer to be able to choose whether the telephone in his or her house is geared to receive 0898 numbers, or whatever number is agreed when the regulations come in. I am arguing for choice.
The authorities in the House have made a choice on our behalf not to allow the telephones to receive 0898 numbers. I want that facility to be replicated outside. As a free citizen and a subscriber to the telephone service—I spend a considerable amount of money on my telephone —I want to be able to say to British Telecom, "Thank you, Sir Ian Vallance,"—or is it Mr. Vallance? I do not know whether we have knighted him yet—"I do not want to receive 0898 services on my telephone." I want to sign a piece of paper just as I have to do if I want to move a line. I recently had a new extension put in my home. British Telecom did not put that extension in before I signed a piece of paper. I want the same thing to happen with premium-rate services. I am talking about choice.
I should also like direct billing to be introduced. British Telecom will thank me for that. If a service provider sells a service, whether bawdy, serious or whatever, the provider should be responsible for its own billing, collection and debt collection.
The Minister frowns—I ought to go slowly. At present the system provider takes a cut in the sum total covered by the bill. British Telecom pays the system provider by cheque monthly, according to the amount on the meter, which means that it has paid out before it has submitted its quarterly bill to the consumer. If the consumer receives a bill for £3,000 and is on income support there is no chance that it will be paid. British Telecom pays the characters who operate such services before it has collected the money and has to go debt collecting if it does not get the money.
If the services that such people are providing are wholesome and if the consumer wants them, the system providers should be responsible for collecting their own cash, like any other commercial enterprise. Therefore direct billing is the second prerequisite. I am certain that newspapers such as the one that I have here would be carrying fewer adverts which cause enormous offence to ordinary people—adverts such as "Horny", "Talkback", 82 "Dial a mistress", "Mistresses in all areas, home phone numbers given"—that is supposed to be against the rules —"Hard adult line", and "Straight dirty sex talk." Those services are available on the British Telecom telephone network. It is an absolute disgrace in a civilised society.
I have a full page of similiar advertisements here. I might have read some of them out if one of our male colleagues had been in the Chair, Madam Deputy Speaker, but I shall spare your embarrassment out of respect for you.
Such advertisements cause enormous offence to ordinary people. Tabloid newspapers do not carry as many as this rag, which I shall not give advertising space by naming tonight. Respectable people are outraged that such things are still taking place. The House has been listening to similar arguments for six long years.
I have made two serious propositions, which will cure many of the problems. My final suggestion is that the Bill be forgotten and replaced by a statutory supervisory committee. For the sake of getting the message into Ministers' skulls I repeat my first two propositions: a contracting in system to give the consumer real choice; and a direct billing system to regulate the problem in a commercial way.
The Government cannot be proud of the situation, they should not be proud of it and they ought to join Opposition Members in Committee to do something serious about it at last.
§ Mr. David Nicholson (Taunton)
I must apologise as I shall not be here for the wind-up speeches. I shall refer to the speech by the hon. Member for Worsley (Mr. Lewis) later as it was rather more constructive than the speech of the hon. Member for Dunfermline, East (Mr. Brown), who opened the debate for the Opposition. His speech was singularly sterile and he spent a large part of it making fairly obvious points. They were obvious coming from the Opposition, but there was a certain amount of assent from Conservative Members about some of the salary increases for chairmen and chief executives of the newly privatised companies.
The hon. Member for Dunfermline, East was singularly unfair when he said repeatedly that there was no ministerial response to those increases and my hon. Friend the Under-Secretary of State heard him. I recall my right hon. Friend the Prime Minister and my right hon. Friend the Secretary of State for Energy commenting that some of those increases were beyond the pale.
However, I shall dwell not on those matters but on a general issue which is valid. As industries pass from the nationalised to the private sector, previous distortions and holding down salaries will become apparent and a rectification of salary levels will have to take place to enable the companies to compete with the private sector in this country and with similar organisations abroad.
I regret that so many of the utilities hoiked up the salaries of the chairmen and chief executives without considering those of senior and middle management, or of the professional, scientific and technical grades which they need to attract to do their jobs competently. In both my constituency and the House I have been critical of the way in which the utilities have handled that matter.
The hon. Member for Dunfermline, East was scathing about what he described as the excessive profits of the 83 utilities. The Labour party cannot have it both ways—it has criticised the Government in the past 10 years for the low level of investment in the water industry, while ignoring the fact that the last Labour Government slashed investment in that industry.
Where will investment come from if not from profit? Are not the bulk of those profits being ploughed back into investments in the industries to enable, them, as in the case of British Telecom, to compete in a competitive and technically advanced world? It is vital to carry out the vast work in the water industry that the last Labour Government and this Government in their early years neglected. The fact that there will be £28 billion of investment in the water industry in the next 10 years, the bulk of it from profits, is an achievement. That is one of the most important arguments in support of privatisation.
I welcome the Bill and the debate on Second Reading which will enable me to mention various aspects of some utilities. The debate also enables us to review the progress of privatisation and the success thereof. To start with, we must judge by constituents' letters and queries. In the past year and in this Parliament I have received a number of complaints about British Telecom—not a large number, but perhaps a score every nine months.
I must inform the hon. Member for Worsley that a number of those complaints refer to the chatline scandal that he mentioned. I shall not develop that argument as he has stated his case, but I pay tribute to his pioneering work on the subject. Of course, such calls can be traced. When a wife finds that a massive bill has built up as a result of calls to such numbers—as happened in a case in my constituency—every other member of the family goes to considerable lengths, such as visiting a priest, to deny that they made the calls. What does that do to relationships within the family? The hon. Member for Worsley made his point and I endorse it.
As for British Gas, I must confess that, with one exception, I have received no complaints. That may be because I live in a semi-rural constituency. Although most of Taunton and Wellington are on the gas main, the rural areas are not. I shall mention the availability of electricity to some of my more rural constituents in a moment. It is a great tribute to British Gas that I encountered no complaints.
I hope that the Bill will help in this further regard. At a recent meeting with my branch of the National Farmers Union, some fruit growers told me how gas prices affect them. The case is always made that competition, particularly from Holland, is more heavily subsidised. There is an article in Under Glass about it. In the 1970s many growers were happily converting to gas on interrupted supply contracts. When British Gas was privatised, that arrangement came to an end, so the debate on energy costs has been reopened.
A case is given of a grower, not in my constituency, who has 2.25 acres of tomatoes. He burns about 120,000 therms a year. Until 18 months ago he praised the use of gas. In 1988–89 he was paying about 27p a therm. During the season the price for him has been raised to 32.3p a therm and he is told that for the following season his price will go up to 35.84 a therm. He says that those price levels make it very difficult to make a living and he fears that the size of his undertaking makes him a prey. His neighbours, 84 whose undertakings are twice the size of his, still pay 27p a therm—5p less than he does. He reckons that that makes a difference of £12,000 to his income.
British Gas softened its position slightly when it announced a tiering of prices, depending on quantity used, but that applies only to growers using up to 25,000 therms. As I have said, the Dutch price is below that. In May, any Dutch user of 10,000 therms upwards was paying 21.5 a therm. The matter was drawn to my attention by Mr. Newton-Scanlon of Nailsborne nurseries in my constituency. Most hon. Members with semi-rural constituencies will know of people who face similar competition from the Dutch and similar problems with British Gas. It is pointed out that Ofgas has behaved well and pursued the matter vigorously. I hope that we may be able to pursue the matter in Committee.
I had little controversy from my constituents about the privatisation of electricity. A small but significant number who knew quite a lot about the industry wrote to me two years ago about the chosen method. I must pay tribute to my right hon. Friend the Secretary of State for Energy for the way in which he has overcome what might have become considerable difficulties in the privatisation process. I think that we have a satisfactory arrangement now.
In a rural constituency, people expect to be off the gas main—they do not expect to have gas. However, these days they expect to have access to electricity. I am sorry to say that there are still small groups, perhaps only a dozen, such as those in a particular valley near Winsford on the edge of Exmoor, who are not yet connected to the grid. They have pursued the matter and tried as a group to explore what the cost would be to be linked to the grid. These are small-scale farmers who face the sort of difficulties that many farmers face at present. They have been told that it would cost about £10,000 per family, which is beyond their means. Therefore, they must generate their electricity and their own generator is costly and not always reliable. Again, I hope that we may explore that in Committee.
About two years ago, when the matter was first raised with me, I tabled a written question asking what estimates the Minister or the electricity industry had of the number of people in England who were not connected to the grid. I obtained the reply that that information was not available. It is in the public interest that that information should be available. We should know how many of our fellow citizens—it is only a tiny minority—are unfortunate enough not to be connected to the electricity grid in England and, I imagine, in Scotland and Wales.
I have been slightly critical of the electricity industry, but I pay tribute to the way in which, in the past few days, South Western Electricity has responded to my representations by some constituents assisted by me. It was proposing to shut down the supply one Saturday to do urgent maintenance work at the Wellington sewage plant. That would have meant considerable difficulty for one or two firms and shops.
This morning, I received a letter dated 14 November saying that the SWE engineer had advised my constituents that it was not feasible to change the shut-down date, but had offered technical assistance so that a small generator could be used as an alternative supply for the duration of the shut-down. That was accepted; my constituents arranged to hire a generator and, as far as everyone is aware, those businesses could function throughout the 85 shut-down period last Saturday. I welcome that. It shows a utility responding to reasonable representations—in this case, from small industrial customers. I hope that it is a harbinger of the way in which matters will progress.
British Telecom was the first major utility to be privatised. We have heard legitimate criticisms from the hon. Member for Worsley and a fair amount of flak from the hon. Member for Dunfermline, East, so it is important to place it on record that BT's prices have fallen by more than 20 per cent. in real terms since 1984 and will fall by a third by the end of the present price cap in July 1993.
The price formula governing BT prices has been strengthened three times since privatisation. It now stands at RPI minus 6.25 per cent. That means that the cost of a range of calls will fall in cash terms next year. As a result, a three-minute cheap-rate call now costs less in absolute terms than it did in 1981. There is a reduction of 50 per cent. in real terms. BT's new low user scheme means that 2 million people will pay half the normal rental and get 30 free call units per quarter.
In my first year as the Member for Taunton, I had several complaints, particularly from villages and small towns in rural areas, about telephone boxes. Many hon. Members will have had similar complaints about the inadequacy of call boxes. Tremendous tribute should be paid to BT—I am not saying that this removes my criticisms of the salary increases of the chairman or chief executive—that since 1984 the number of call boxes has increased from 77,000 to 98,000 and that 96 per cent. of those boxes work at any one time. That is an increase from only 75 per cent. in 1987. It is a considerable achievement, and we should see similar performance achievements in the other utilities.
I welcome the fact that the Bill will provide Oftel with powers to set guaranteed standards of service for residential and small business customers and that, if a designated operator fails to meet guaranteed standards, he can be required to pay compensation to the customer. I also welcome the fact that, if a customer and a designated operator disagree on whether standards have been met or compensation is due, either may ask the director to settle the dispute. The director's decision will be final. I welcome the measures taken, and I hope that we can explore them in detail in Committee.
I referred earlier to problems with the gas industry, but, as a general rule, British Gas has performed extraordinarily well since privatisation. Gas prices for domestic users have fallen by 14 per cent. in real terms, and those prices are among the lowest in Europe. The prices charged to some European businesses may be lower, but, on average, European households using gas for central heating pay 40 per cent. more than British ones.
An important fact was revealed last week when a number of my hon. Friends and I met the south-west and west midlands branches of the Gas Consumers Council. We were told that disconnections for debt are at their lowest level since records began. I welcome that.
I also welcome the proposals in the Bill which mean that a further 7 per cent. of the supply market will be taken out of the monopoly. That will enable new customers to benefit from competition as they will be allowed to buy gas from anyone on better terms and at a lower price. Such customers may include the market gardeners whom I discussed earlier as well as small and medium-sized manufacturers who use gas to operate their furnaces and larger retailers who use gas for heating.
86 My hon. Friend the Member for Beaconsfield (Mr. Smith) said that certain provisions in the Bill will mean that schools which use gas for heating can group together and thus achieve economies of scale in the cost of their gas. I hope that those measures will be successful.
Certain basic superstitions were expressed about the privatisation of part of the water industry. Responsibility for sewage remains under public control, which is correct. The privatisation was controversial because of the widely held belief that water was some sort of natural, God-given commodity that we enjoyed without the interference of nasty industrial money-making processes. Anyone who knows anything about how water, of varying quality, reaches our taps, must realise that that process relies on major investment and infrastructure.
Such investment is also important to attain the environmental requirements that we all desire for our rivers, beaches and the disposal of sewage. People have come to recognise the necessity for the privatisation and the way in which it was undertaken. They also welcome the great investment that is now being made in the water industry.
There are complaints about water charges, and I receive my fair share of them. Earlier, an hon. Member referred to the way in which water charges are assessed. That issue is probably not relevant to the Bill, but we may be able to squeeze in a debate about it in Committee. For the majority of people, water charges are assessed on rateable values and that produces a number of inequalities. I hope that the water companies will make rapid progress in the introduction of meters and charges that are more closely related to the amount of water used. Such progress is important given that, in many cases, rateable values are 15 years old.
A number of building companies in my constituency have long complained to me about the infrastructure charges on new houses. I shall not develop that argument now, but I understand that the director general of Ofwat has expressed reservations about whether infrastructure charges are the most suitable way in which to recover the costs of extending water and sewerage systems. As part of his public consultation on his paper "Paying for Water", the director general has said that further thought needs to be given to those charges.
In a letter to me on 30 September, the secretary of Ofwat wrote that the director generalwill be examining the position of infrastructure charges within the overall charges for each company in considering responses to his consultation paper on 'Paying for Water'.I welcome that, because we need to pay attention to the way in which infrastructure charges for new housing operate. We must consider whether they are fair to the businesses involved and whether they serve the interests of reviving the building industry, which is in considerable difficulty.
I share the regret expressed by my hon. Friend the Member for Beaconsfield that British Rail does not come within the purview of the Bill. I use the InterCity link between Taunton and Paddington, and I do not encounter the ghastly problems faced by my hon. Friends who represent Essex and other southern regions. However, we are all irritated when there is a delay or rolling stock breaks down for no apparent reason. It is also irritating, although it may seem a trivial point, when a train running 87 on a Sunday—I accept that it may happen at any time —which is scheduled to have a buffet car does not have one.
I welcome the proposal to encourage British Rail to pay compensation to travellers when particularly bad service has been provided. That will mean that the consumer feels that he has got something back for the dreadful service he encountered and it is the means by which to tot up the number of occasions on which a particular service has had to offer such compensation. One would then get an idea which services are badly managed.
In the debate on the Queen's Speech, I said that I did not wholly endorse the privatisation pressures on British Rail. That argument must be examined carefully, although I accept that there is scope for improvement in the management of British Rail. A sensible process of privatisation may enhance that management. Although British Rail does not fall within the purview of the Bill —who knows?—we may have the occasional debate on it in Committee.
It is important to remind the House of what underlies the Opposition's response to the Bill as well as their carping about the process of privatisation. The Opposition make such criticism despite the fact that the privatisation of the telecommunications and gas industries is widely accepted as successful. There is also a growing recognition that the electricity and water privatisations undertaken in this Parliament will also be successful. I accept that time is needed to prove that.
Despite the fair and effective words of the hon. Member for Dunfermline, East, deep down the mentality governing the Opposition is a desire to nationalise, renationalise and control. I remind the House of remarks made by the Leader of the Opposition. He is now cleansed and purged, but in December 1974 in Labour Monthly—I accept that he was a young man at the time—he said:There is no need to be apologetic about the extension of public ownership or the establishment of workers' control. They are now prerequisites of the economic survival of Britain.We should gently remind people of those words.
Ten years later, in October 1984, he said in Marxism Today:The process of renationalisation … is basic to my view to democratic socialism.He may wish us to forget those words. The record of Labour's pledges to renationalise show that the hankering is still there. The two targets for Labour's first round of renationalisation are the water companies, for which the market capitalisation is £8.2 billion, and the National Grid Company, which would cost an estimated £1.7 billion. In addition to all their other spending commitments, that is a cool £10 billion for the first round of their renationalisation proposals.
In case anyone doubts my reference to those commitments, the Labour energy spokesman, the hon. Member for Holborn and St. Pancras (Mr. Dobson), said:We have said all along that we will bring the National Grid Company back into public ownership. It will be a high priority, I assure hon. Members".—[Official Report, 2 July 1991; Vol. 194, c. 234.]We must remember that.
§ Mr. Nicholson
I hope that my hon. Friend will develop that interesting linguistic point in his own speech.
Labour Members have given so many priorities and made so many commitments to health, social security, industry and overseas aid that the poor shadow Chancellor must be desperate. "Opportunity Britain", which the hon. Member for Dunfermline, East said was a moderate document, said:The provision of water is so fundamental that it is a priority"—not a high priority—for return to the public sector".In an interview last September in Director, the Leader of the Opposition reaffirmed Labour'spledge to return the water companies to public ownership.Labour does not stop with those utilities and companies that have been privatised in this Parliament. The hon. Member for Kingston upon Hull, East (Mr. Prescott) has made it clear that other industries remain on the shopping list. For example, he said in Business of May 1990 that BAA plc—formerly the British Airports Authority—was one of theareas which we are going to turn into public utility companies. We are not going to leave them as private sector companies".I am not sure how an area can be nationalised, but I leave that to my hon. Friend the Member for Mid-Kent (Mr. Rowe), who may wish to pursue the linguistics of the matter.
When the hon. Member for Kingston upon Hull, East was pressed in that article about whether Labour's plans would involve nationalisation, he half backtracked and said:I have already told you more than I should".That suggests that the Labour party have a secret agenda. The only renationalisations on the record are electricity and water, but there may be a little list, as in the run-up to previous elections, when they had programmes for sections of industry all over the place. Perhaps their plans are being kept under wraps and we shall have more leaks from the more honest or indiscreet Labour spokesmen in the coming months.
I always enjoy quoting the hon. Member for Dagenham (Mr. Gould) on local government finance. He was Labour's trade and industry spokesman some time ago. In The Sunday Times of 6 November 1988, when he was part of a process of reforming, modernising and purging the Labour party, he said:Our purpose in looking at more flexible forms of common ownership is to enable us to represent more faithfully the objectives of clause 4, to which I remain personally committed".That is what the Labour party really wants. I thought that the hon. Member for Dagenham was the face of the new 1990s Labour party, but he is personally committed to clause 4.
We all know what the Leader of the Opposition would like to do. If he ever obtained the power, I am sure that he would not require much pressure from the right hon. Member for Chesterfield (Mr. Benn) to drive him that way. The right hon. Member for Chesterfield said that the Labour party may have to keep quiet about certain plans if it is to win, but that when it had won it could scrap nuclear weapons, nationalise a few industries and possibly —who knows?—start to take Britain out of the European Community. There, Mr. Deputy Speaker, I stray into a debate that we shall begin on Wednesday.
89 I welcome the Bill and the measures of reform and guarantee that it gives to customers. I believe that it is welcomed by the utilities, the regulators and most of the press who have commented on it. Indeed, it is welcomed by most people except the Labour party. Although we may regret that, we should not be surprised.
§ 8. 15 pm
§ Mr. Malcolm Bruce (Gordon)
The Bill is certainly necessary, although it is rather late and its fundamental objectives are rather weak. The Secretary of State made more extravagant claims for the Bill than its content would justify. To some extent, it increases regulation on the margin, which is welcome and necessary, and proposes some competition on the margin. However, it does not deal with the fundamental problems in a radical way. Indeed, as several hon. Members have already said, it is a confession by the Government of how they have mismanaged the entire privatisation programme.
During his opening speech, I asked the Secretary of State a question to which he did not give a full or satisfactory answer—why had not the Government sought to introduce those measures before they privatised monopolies, rather than wait until the customers had suffered the consequences of several years of high prices and not necessarily improved services?
The Monopolies and Mergers Commission has already been mentioned and it has been suggested that it will have to be involved again. One of the problems is that the Government's momentum to privatise was determined for ideological reasons and on a tight time scale. As a consequence, it was not possible to privatise in a way that put customers' and consumers' interests first because the overriding interest was the Conservative Government and ensuring maximum take up. The potential shareholders' interests were far more important than those of the consumers. Indeed, it was necessary for the Government to carry the management of those companies with them so that any radical measures to expose the industries to serious restructuring or competition were not on the agenda.
It was well known that Sir Dennis Rooke made it clear to the right hon. Member for Worcester (Mr. Walker) that the privatisation of gas should be on his terms, and those were the terms on which gas was privatised. On the first major privatisation—that of British Telecom—the right hon. Member for Hertsmere (Mr. Parkinson) gave the game away when he said:I have decided against breaking up BT before offering it to the public. To do so would require a delay of many years in order to put British Telecom's accounts into a form that would make piecemeal disposals possible".The idea was considered but rejected because it did not meet the Government's timetable. The right hon. Member for Hertsmere made extravagant claims at that time for the purposes of privatisation which, had they been fulfilled, would have made today's Bill unnecessary. He said:In the past, it seems, we have never been concerned enough to regulate our monopolies. Customers have had little redress against BT, or the Post Office before that. It has been impossible to judge whether increases in telephone charges could be justified. After all, when people point to the profits, a monopoly can turn in large profits year after year, whether it is efficient or not."—[Official Report, 18 July 1983; Vol. 46, c. 30–34.]That is the crucial point about the argument about British Telecom's current profits.
§ Mr. Redwood
How do the duopoly policy in telecommunications and the restructuring of the electricity industry fit that picture? Did the electricity industry management welcome it?
§ Mr. Bruce
The point about the duopoly policy in telecommunications has already been made by the statistics. The proportion of the telecommunications industry that is outside British Telecom control does not constitute a duopoly. It is a monopoly with a little managed competition on the fringes. That managed competition may increase in time but it is stretching credibility a long way to suggest that a company that accounts for more than 96 per cent. of the market does not have a monopoly. In that respect, the Minister's intervention is not valid, but he may have a point in relation to electricity.
The right hon. Member for Hertsmere blew the whistle on his colleagues when he disarmingly said that, when he privatised electricity, he would not make the same cock-up as they had done with British Telecom and British Gas. He did not, but he made a different one. He created two competing monopolies which are causing considerable unrest within the industry.
Only this weekend, industrial users in the electricity industry have been looking to break up power generators and introduce competition, and there is a suggestion that the Director General of Electricity Supply might yet refer the electricity industry to the Monopolies and Mergers Commission on the issue of industrial prices, as happened with British Gas.
The interesting factor in all those arguments is that my hon. Friends who sat on the respective Committees or spoke on the Second Reading of Bills associated with privatisation said at the time that the Government were privatising monopoly, not introducing effective competition and regulation, and the matter would have to be examined again. We were rubbished then, but we have been vindicated, and the matter will not rest when the Bill has been passed. Anyone who believes that the Bill goes far enough or is radical enough to satisfy customers' interests is living in cloud cuckoo land. Several more pieces of legislation will have to be enacted before there is effective competition or regulation within the privatised industries.
Despite the much-vaunted claims of Conservative and Labour Members about their faith in competition, it is interesting that a truly radical step to introduce competition into the privatised utilities has yet to come. Last week, the Liberal Democrats published proposals for breaking up British Telecom into a number of components to provide effective and proper competition, and create regional corporate headquarters of benefit to our regions, which find that massive monopolies concentrate their headquarters elsewhere in the country—by definition, in one place.
If effective competition is to be introduced, whether in gas supply, telecommunications, water or electricity, there will have to be a division of the market into effective competitors. That has not taken place. At present, we are the only party prepared to grasp the nettle and to recognise that consumers' interests require both effective competition in the marketplace—the Government have a long way to go before they create that—and effective regulation where the market cannot produce a solution. The Bill 91 provides a little extra competition and regulation on the margin, but it does not fundamentally transform the regime.
The Bill was brought forward in response to the outcry from consumers and the industry about the way that, over the years, they have been ripped off by the privatised utilities and the fact that, while the regulators have made a contribution—no one would deny that—they have not done anything like enough and do not have the necessary power or resources to advance consumer interests and issues.
I want to make it absolutely clear so that the Minister and the House are in no doubt that, despite my criticisms, the Liberal Democrats will support the Bill, as any such measure is preferable to no measure at all. The Labour amendment is strange and perhaps a little revealing. It suggests that the Labour party has no interest in trying to explore the use of competition. I agree with comments made by some Conservative Members that there is still a desire within the Labour party—as there has been in their approach to every privatisation—to maintain the huge corporate structures in the hope that they can renationalise them or, through the back door, do it on the cheap. If the Labour party cannot afford to buy back the structures, it wants to create such a stranglehold on the regulator that it can manage and run the industry without owning or controlling it. If the amendment is put to the House, we shall vote against it.
The question still remains as to why privatisation has so far failed and what could be done to try to ensure that we pick up the pieces in the interests of the customers and consumers. I find it difficult to believe that, in a company the size and scale of British Gas, no matter how ingenious and committed the regulator is—I have received considerable help and support from Mr. James McKinnon, the director of Ofgas, who has been able to use his resources—a work force of 28 will be anything like enough to shadow it. The other regulators have similar staffing levels.
I think that the hon. Member for Beaconsfield (Mr. Smith) mentioned one of the regulator's disadvantages. His ability to question, challenge, direct or intervene in the marketplace is dependent on the fundamental information that he can obtain about the costs involved. It is difficult to see how the regulators can effectively achieve their goal with the resources currently available. The Government must give the regulators more resources, thus giving them more power and the ability to follow up that power effectively and in detail.
One reason why we are in the present difficulties is that the Government were driven by their short-term considerations, the need to secure revenue and to ensure successful flotations. They are still haunted by that problem. The electricity industry is looking for a reference to the Monopolies and Mergers Commission, which may yet happen. In addition, the second flotation of British Telecom is imminent and creating some controversy.
I was interested to read in yesterday's edition of The Independent on Sunday that the flotation is being regarded with much cynicism, even by people in the City. It says that the flotation and premium willplainly not be of the same magnitude as in the water and electricity privatisations, but the Government has injected enough 'greed factor' into the issue to underpin it.92 That illustrates the standard practice of offering a premium on the flotation that has to be underwritten by the taxpayer. In this case, the Government have provided a sum from taxpayers' resources to ensure that there will be no hiccup after the flotation.
The article in The Independent on Sunday mentions the "novelty of over-allocation" and states:This allows the Government to spend up to £400 million 'stabilising' the BT share price in the immediate aftermath of the issue. If the price shows signs of slipping by more than the market as a whole, Warburgs will step in and prop it up. Warburgs call it 'market management'. A ruder description might be 'market manipulation'. 'Isn't this what the Guiness chaps went to jail for?' asked one fund manager last week. Well, not exactly, but we all know what he means.That is an apposite comment about how £400 million of taxpayers' money is being used to protect the Conservative party from possible embarrassment. It is quite a tidy sum to put in an election fund.
The article concludes with a demonstration that the Bill does not hold many fears for the City and does not seriously change the regime. It states:For most investors, privatisation has nearly always been money for old rope. Despite the present negative background noise, there's no reason yet to suppose the BT issue won't be the same.So much for the Government's sabre rattling, and their claims that they are getting to grips with effective regulation and it will all be different. We have it on good authority that those in the City consider it a minor change on the margin and believe that there is still much money to be ripped off from the consumers so that they do not need to worry too much about the Government causing them further serious embarrassment.
While I support the Bill, I do not do so because I believe that the Government are anywhere near solving the problem. They are merely taking small, halting, cosmetic steps towards it, with a few useful changes on the margin. We welcome the fact that the Government will allow water to be supplied across boundaries and will be interested to see what effect that potential competitive pressure will have. But I do not think that anybody believes that there will be a massive development of water pipes shooting across boundaries all over England to take advantage of that clause.
The Minister seems to be nodding, but if this is so, why do not the Government pursue similar legislation in the context of gas, electricity and telecommunications? The Liberal Democrats have proposed a policy of breaking up telecommunications into regional companies, which would have the benefit of bringing down the cost of local calls, which are the highest in the industrial world due to the ineffectiveness of competition from the duopoly of which the Minister seems so proud. The fact Mercury offers cheaper local calls has little impact on the market because most people do not have access to Mercury.
It is interesting that the Government are anxious to explore electricity and water but are not prepared to grasp the nettle of the other utilities. We need to create real competition. We must fundamentally restructure these industries. If the Government were serious about the ideological claim that they make for these measures, as opposed to their evident short-term political opportunism, they would be prepared to consider breaking up the utilities, thereby opening them up to genuine competition. That would have the added advantage of stimulating the regions in the process.
93 I concede that the Labour amendment refers to the need for regulators to be accountable to Parliament and public. I do not think that an ombudsman is necessarily the right answer. One possible route, favoured by the Labour party, may make sense—that there should be a Select Committee charged with being the body through which directors of utilities and regulators would be accountable to this House.
We should also consider combining the regulators into one organisation instead of their remaining independent in each industry. They all have the same approach but they must have a learning curve and they could benefit from exchanging experiences. I hope that the regulators meet and discuss these matters informally already, but it would be helpful if they operated from the same office using the same staff, thereby securing economies of scale, and exchanged experiences that make them more effective regulators.
When the history of this period is written, the success of the privatisation programme will not go down as the greatest achievement of the Conservative regime. I am not a fan of that regime but I admit that there have been some achievements. Ultimately, the democratic reform of the trade unions will probably go down as the greatest achievement of the Conservative regime in the 1980s. Conservative Members have said that all types of regimes all over the world, regardless of political persuasion, are carrying out privatisation and that it might even have had to be contemplated by a Labour Government. But the Government have been found wanting in many areas of the execution of this policy; they have failed to consider the consumers' interests paramount and they have squandered taxpayers' money to secure good flotations. They have privatised monopolies which have been out of control, and then, late in the day, they have had to introduce weak and ineffective means of controlling those monopolies.
The Government have not followed the logic of their own professed ideology—of introducing effective competition. It remains our conclusion that consumers' interests can be served only if we promote competition at the core of services and effective regulation when competition cannot deliver. The Government are moving too slowly in both directions. They have a great deal to be ashamed of in respect of competition, and their rhetoric falls far short of its practical application.
§ Mr. Andrew Rowe (Mid-Kent)
I do not think that this Bill will impinge in any noticeable way on my private interests, but it would be better to be safe than sorry, so I declare that for many years I have held a consultancy with Chevron United Kingdom. In so far as it has an interest in the provision of gas, it might have a tangential interest in this Bill.
It is unfortunate that we have so far heard little about the massive achievements of some of the great utilities. British telecommunications have advanced tremendously in the past decade, and we have every reason to feel proud of that industry. In that advance, British Telecom has played a major role. It would perhaps have sat more happily with Conservative philosophy if it had proved possible to create a more substantial competitor for British 94 Telecom in the early years. It would have been an improvement if a series of competitors, as suggested by the hon. Member for Gordon (Mr. Bruce), had been built up.
But the Government had to start where they were: with a sluggish and backward-looking monopoly, heavily overmanned and with many out-of-date technologies. It was quite ready to be destroyed by international competiton. Now, British Telecom is consulted by companies from all over the world for its expertise; we should be proud of that, and the Government should take some credit for it.
The same is true of British Gas, which has also achieved some remarkable advances, especially in the ways in which it looks after consumers. It takes great care, for instance, to advise those whose gas supply may be affected by works done on mains outside the house or on feeder lines, and that is a model to other services of how to keep consumers informed. British Gas, like other modern industries, manages to lay mains nowadays with a minimum of disruption and considerable speed. We should not over-indulge in the British disease of looking only at what is wrong and not giving credit to what is going well.
I do not know how many hon. Members share my perception that complaints from the public about these great utilities have fallen off in recent months, but that is certainly true, to judge from my postbag. The possible exception is water, which was given a massive amount of bad publicity, mainly by paranoid Opposition Members. In the short term, that led to a marked increase in the numbers complaining about water.
It has been entirely beneficial, however, that the public have come to understand that water is not a commodity that costs nothing provided it rains. Neither is its quality maintained without effort. The British public, who are becoming increasingly sophisticated by the day, as our mailbags show, have suddenly realised that a great deal of work goes into providing water. In my part of Kent, we do not blame the water companies: we blame God. It does not rain in Kent any more, and we face severe shortages. Still, the public debate about water has been wholly beneficial. It has done the water companies a great deal of good and will lead to substantial improvements.
Before it is too late, the Minister should take a last look to make sure that he is as convinced as his Department sometimes tells me it is that the terms of competition between companies that were already private and the newly privatised ones are as level as is maintained. The old private companies are being asked to seek a return on their assets and are receiving little assistance, whereas the newly privatised companies will find such a return much easier to make. That is not good for competition or for the companies.
The most important development in the water industry has been the major drive to eliminate wastage. The vast majority of leaks in the system are now on private property and a move to metering is certain. Although I value the separateness of the great utilities and the possibility in some cases of competition between them, there are areas in which co-operation is essential. One is the reading of meters. It would be absurd and enormously expensive to have gas, electricity and water meters read separately. It is not yet possible to read meters by remote control. That will come much sooner than any of the companies believe, but until it does there must be sensible co-operation, which I am glad to see is beginning to develop.
95 One of the consequences of leaving big utilities in the public sector is that maintenance does not feature high enough on the investment priority ladder. The same applies to education. Kent is notorious for the way in which its schools are not properly maintained, and when companies get into difficulties it is always the maintenance programme that is cut. One of the encouraging features of the privatised water companies is the way in which they have invested massively, not only in the development of new sources of supply, but in upgrading what was in many cases a Victorian legacy.
I commend the proposal by David Bellamy in his charter of 10 points, some of which seem more attractive than others, that industrial companies should have to take water from rivers at a point below their outfall. That is an admirable proposal and should be taken seriously, because it would certainly sharpen up many company acts.
It has been suggested that the big utilities pay little heed to the consumer, but that is not my experience. It is noticeable, for example, that disconnections of gas and electricity are at their lowest level for 15 years. That is a remarkable achievement in view of the hard times through which many people are passing, and I hope that the companies will improve on it. As the companies have established, many disconnections are out of all proportion to the offence of not being able to pay the bill.
I welcome the news that Oftel will be able to examine the scale of deposits for the installation of new telephones. I am still not satisfied with British Telecom's policy of demanding direct debits from certain types of customer. It is bizarre for British Telecom to insist on direct debit for service personnel. If there is one group of people in the country who cannot lightly baulk at paying their bills, it is service personnel, who are accountable to the armed forces and cannot easily moonlight.
I share the view expressed by many of my hon. Friends that it is a shame that the Government cannot include British Rail in their legislative framework. My views on British Rail are not wholly unknown to hon. Members. I agree with Sir Bob Reid's good analogy that, when your ball is in a bunker, you do not ask how it got there, you fight to get it out. The time has come for me to pass on beyond the many complaints that I have had about British Rail and its workings in an attempt to dig ourselves out of the hole.
It is plain that British Rail has an impossible position to maintain. In many respects, it is expected to make a return on investments and is bound to act commercially. But it is also regarded as the only source of advice to Government on railway matters. Those two things can come into conflict.
I have had personal experience of that during the evaluation of the alternative routes to the Channel tunnel. I have good reason to believe that the analysis of those routes was skewed by British Rail with the clear intention of retaining, if it could, a commercial edge. I do not blame it for trying to do that, but it is indicative of the mess in which Governments find themselves when companies which should be in the private sector and competing are confused and have to play the role of adviser. I look forward to seeing British Rail joining the other utilities in the private sector, and I welcome the hints about how that will be achieved.
96 I must respond to the diatribe on salaries by the hon. Member for Dunfermline, East (Mr. Brown). When Labour seeks to distract from the meat of an argument, it always turns to executive salaries. I absolutely reject the proposition that private sector salaries should be limited by politicians or civil servants. However, they are of central concern to shareholders, who are often quite cavalier about that element of expenditure in their companies.
They should be performance-related, as has been clearly postulated in the document "Competing for Quality" which was launched today. That relationship to performance should operate from to the top to the bottom and there should be no exceptions. It would be a valuable exercise for institutional investors—including, for example, the trade union pension fund holders about which we have heard—to create some kind of pro forma in which, for example, the number of consumer complaints was one of the yardsticks against which to measure performance.
§ Mr. Malcolm Bruce
Might not the shareholders be extremely pleased with the chief executive who both protects the monopoly position that has been passed on to the utility and exploits it to the shareholders' advantage, to the detriment of the consumer? The hon. Gentleman's suggestion does not solve the problem.
§ Mr. Rowe
In those circumstances it does not. There are difficulties within the relationship between companies and the shareholders which entitle the latter to ask questions about whether salaries should be doubled. It is hard to imagine a performance that warrants a doubling of salary. A fairly narrow comparison across a small range of carefully chosen companies to arrive at a figure that is satisfactory for the individual concerned is the wrong way to go about things. The creation of expensive escape packages before someone has even joined the company requires closer analysis. I should like a larger performance-related element in the pay of senior executives of these companies, as there is in every other company.
We have heard the obvious arguments about prices. There is clearly disagreement across the Floor of the House, but my understanding is that the performance of these public utilities has improved markedly since privatisation. The fall in British Telecom's prices, which is set to be 33 per cent. in real terms by July 1993, is impressive. I hope that we can all applaud that.
I am sorry that the hon. Member for Worsely (Mr. Lewis), who spoke so eloquently about the 0898 numbers, is not here. He did us a service by reminding us that lines are being used for purposes that none of us could approve of or applaud. If we can take steps to control those numbers, so much the better. It occurred to me that perhaps he should try to bring a prosecution against BT for living off immoral earnings.
The difficulty of control is enormous. Many of the things that the hon. Gentleman said were wrong. For example, it is both impractical and wrong to expect the Government or the law to regulate the use of the telephone. There are now inexpensive mechanisms on the market that allow people to keep an eye on their bills, to itemise their bills or to lock up their telephones. To expect business managers not to notice for months on end that their security guard is misusing the telephone suggests an unacceptable dereliction of management.
97 It is nonsense to say that we should not have made the changes we did. The position of the consumer in nationalised industries is infinitely worse than that of the consumer in the privatised utilities. One has only to look at the unfortunate passenger on British Rail, who gets no explanation of why his train is cancelled or there is no one to buy a ticket from, to realise that.
When Conservatives are seeking a distraction from the main argument, we like to talk about the Labour party and nationalisation. I do not propose to do that at great length, particularly as my hon. Friend the Member for Stroud (Mr. Knapman) did so to considerable effect. However, it is important to remind the public that clause 4 remains in the Labour party's constitution. It genuinely believes in nationalisation, and even if Labour Members dress it up and say that they are proposing to bring these private utilities back into public hands through local authority control, that is not likely to set the steeples ringing cheerfully with public enthusiasm in Lambeth, Tower Hamlets, Southwark, Liverpool or Maidstone.
We all have quite enough experience of how local authorities run public organisations. The Labour party should not hide its commitment to nationalisation behind devolution to local authorities. We do not like local authority mangement of businesses either.
§ Mr. Deputy Speaker
Three hon. Members are rising and there are 26 minutes left before the Front Bench speeches will begin. The arithmetic is obvious.
§ Mr. Bill Michie (Sheffield, Heeley)
I am aware of the time, having sat here for three hours. I realise that other hon. Members wish to speak, so I shall be as brief as possible. I have already thrown away four pages of notes, and I shall stick to five points and try to get through them as quickly as I can.
Many aspects of the Bill will have to be scrutinised in great detail in Committee, and I hope that I shall be allowed to be a member of that Committee. For example, one of the most important considerations for the water industry is how the domestic consumer will be charged. I hope that, during the passage of the Bill, we shall he able to table amendments to introduce a system that will allow consumers the opportunity to decide on the system that they use.
We do not need to wait for the completion of the water industry's metering trials to find out what is acceptable about meter charging. Since the advent of the poll tax in 1990, there has obviously been no rateable value on new houses, so all but a handful of water companies insisted on putting water meters into new homes and charging on a volume basis.
This has caused considerable anxiety, as I can report from experience in Sheffield. There was a tremendous outcry because people's water bills shot up not by two but by three or four times overnight. Many of the consumers on social security or low incomes were beside themselves with anxiety, especially those with large families, who naturally use more water. It is deplorable that parents have to teach their children not to wash their hands after using the toilet. This should not be allowed in modern society. It is going back to the bad old days, and it will mean a deterioration in our hygiene standards.
98 Fortunately, Sheffield city council was able to form a partnership agreement with Yorkshire Water. A system has been devised to help some people, although it is limited to those in council houses. The housing department makes arrangements for the payment of water charges through the rent system. The scheme started in October this year, and of the 700 council tenants invited to participate, 440 have chosen to be charged by the council and to pay for their water services, in the rent, on the basis of a notional rateable value, as an alternative to meter charging.
I have many examples, but I shall give the House only three. A consumer who would pay £7.40 a week on the metered charge would pay £4.10 through the notional rateable system. Another consumer who would pay £8.15 on the metered charge would pay £4.12 on the basis of the notional rateable system. Someone who would pay £3.30 on the metered charge would pay £3.57 under the other system. In my final example, the consumer chose to pay a little more to be in the partnership scheme, perhaps so he or she could use as much water as would be needed.
Those who have been forced on to metered systems in Sheffield and Yorkshire, for example, seem drastically to have reduced their consumption of water. The Yorkshire authority did not believe that consumption would be reduced so much in some instances, and inspectors were given instructions to make inquiries. Considerably reduced consumption poses a serious risk to personal and public health.
Under some schemes, even reduced charges will seem excessive to some consumers. Far too many families have to live on income support, and the benefit that is calculated for water charges is currently £2.08 a week. If someone's water charges exceed that amount, he or she will have to decide what essentials to forgo in order to afford, perhaps, the "luxury" of a bath once a week.
My personal view on disconnections is not necessarily shared by my right hon. and hon. Friends. I feel strongly, however, that the most important feature of a standard of service is the obligation to supply. That obligation ceases to apply if a consumer is in debt to the utility. Sadly, many consumers have low incomes, and for those people debts arising from the supply of water, electricity and gas are unavoidable.
This deplorable state of affairs leads to disconnections. The annual disconnections for water, electricity and gas are 7,560, 60,920 and 18,009 respectively. The barbarous practice of disconnection for debt is unnecessary and inhuman. I hope that there will be an opportunity for my right hon. and hon. Friends and me to stop it.
Age Concern welcomes the policy of gas and electricity suppliers that have decided not to disconnect older people during winter months. It believesthat disconnection is largely a redundant policy … we would like to see the power to disconnect customers removed from all utilities.I could not agree more with that sentiment.
Disconnection for debt has been shown to be unnecessary by NORWEB, the North Western electricity board. It has virtually stopped disconnections. Typically, gas and electricity companies disconnect several hundred consumers a quarter because they have not paid their bills. In the past two quarters, NORWEB disconnected only six consumers for debt. Instead, it provides consumers with pre-payment meters instead of disconnecting them, and thereby neatly substitutes a pay-as-you-go arrangement for the credit billing that leads to the problem of debt.
99 The fact that NORWEB has chosen this procedure through commercial self-interest shows that requiring other companies to follow suit will hardly damage their profitability. A service standard requiring that suitable payment arrangements be made available to all consumers, including those with low incomes, will end the problem of disconnections. I hope that such a standard will be incorporated in the Bill.
As pre-payment metering for water is unavailable—in any case, I believe that it is unsuitable—the ending of disconnection of domestic water supply for debt has to take a different route. Water is essential for every family. Without it, life in our society would be an impossibility. I want to see the power to disconnect for debt withdrawn, and, as for other goods, action for debt in the county court established as the ultimate sanction for non-payment for water services.
Withdrawing the disconnection sanction would occasion some difficulty and cost for companies. It has to be recognised however, that water companies, as monopoly suppliers of essential services, hold an extremely valuable franchise. On that basis, they must be prepared to shoulder public service obligations. Moreover, some companies have shown that they can go a long way towards recovering debt without using the sanction of disconnection. The companies' disconnection rates are very different, which shows that companies could be flexible in their approach if they chose to take that course.
Thames water authority, for example, disconnected only seven domestic consumers for debt last year, whereas the Yorkshire authority, which operates in my constituency, disconnected 1,492. I do not believe that the difference in the figures can be explained by socio-economics.
It is my personal view that, when it comes to telephones the difference in philosophy—
§ Mr. Terry Patchett (Barnsley, East)
How does my hon. Friend interpret the figures of the water authority in the area that he represents relative to those of other water authorities?
§ Mr. Michie
I can only assume that Yorkshire Water has not been as co-operative as we think it should be when helping consumers who are in debt. All companies should adopt the best example provided by others.
Telephones should be provided for everyone, but that is not going to happen now. I agree with Age Concern that single old-age-pensioners and single parents are the most vulnerable members of society. They should have access to telephones, and it should not be beyond the wit or the finance of British Telecom to provide services that it and the consumer can afford.
At present, there seems to be no overall national standard. Regrettably, for a sizeable proportion of consumers, paying the gas bill, or obtaining and paying for a much-needed telephone, is a real struggle. I want to be sure that services to meet those consumers' particular needs are quite as good as services for consumers in general. The poorer section of society should not be classed as a nuisance; they have every right to enjoy access to these utilities, and every need for them, and finance 100 should not be a bar. I hope that amendments can be tabled to empower regulators to set standards with special relevance to such people.
There is much concern about accountability in consumer representation. Age Concern points out that there are different systems for different utilities. Electricity and water have regional consumer committees, which are not independent; they are subordinate to the regulatory bodies. Gas consumers have recourse to a national body, but it does not seem to be accountable to the regions. I hope that the Committee stage will produce a guarantee of accountability.
I hope that, if I am chosen to serve on the Standing Committee, what I say will be taken seriously. It is vital to all consumers that something is done: after all, the utilities are monopolies, and consumers cannot go elsewhere.
§ 9.7 pm
§ Mr. Peter Hain (Neath)
The Bill is an exercise in retrospective pragmatism. It undoes all the disastrous consequences of the Government's dogmatic drive to privatise without real regard to consumer rights or the protection of the public interest. Their intention is clear from the British Telecom experience. Competition is limited, and it is not free; it is rigged. There is discrimination against BT and in favour of rival operators. The Government have loaded the dice of market forces in their favour.
When left to its own devices, competition does not necessarily protect the citizen. An example is BT's necessary obligation to its shareholders to maximise its rate of return. Because competition is greatest in the business sector, tariffs have been rebalanced to favour business at the expense of the residential customer. Where is the Government's commitment to consumer rights there?
Elevating competition to the status of a cure-all loses sight of the major policy and strategy questions that epitomise the Government's cavalier disregard of the real interests of the British economy and British industry. Its operation is extremely contradictory. Let us take the asymmetry rule. BT's access to markets is unfairly restricted; that is important, given its inability to offer entertainment services, for instance.
Local cable television operators, which are largely owned by American-controlled companies, can provide both voice telephony and entertainment services. That stops British Telecom upgrading the local loop with fibre optic cabling, which would revolutionise communications in this country, and that means that the residential market will lag behind. The ordinary citizen will not be able to obtain broad band or cable television on a massive scale, because only British Telecom could provide that.
Competition is also one-sided because of the way in which reciprocity operates. In America, BT cannot own more than 25 per cent. of a designated carrier using the air waves—such as the major telephone companies, or the regional Bells, as they are known. It also cannot provide cable television. However, American and other foreign companies can walk into British markets and do precisely that. We are virtually inviting foreign companies to colonise our telecommunications market if we do not have the same access to their markets. The Government have failed abysmally in that respect. All that prevents BT being 101 a major international player as the international telecommunications market congregates into five or six major operators.
Another problem that has existed for the past seven years and which is present in the Bill is the inability of the regulator to be made accountable to Parliament. For example, the Director General of the Office of Telecommunications is more powerful than the average junior Minister; I say that with respect to the Minister for Corporate Affairs, who is in the Chamber at the moment.
The director general is not answerable to the electorate or to Parliament. I have examined the records, and I discovered that only once in seven years has Sir Bryan Carsberg been questioned by the Select Committee on Trade and Industry. On 19 July 1989, he was questioned for an hour. I do not impugn his integrity or professionalism. I am simply saying that he is not accountable to Parliament, and that issue must be addressed. A quasi-judicial power is invested in his quango. He does not have to give evidence or reasons for his decisions. That is a major constitutional shortcoming.
The alternative policy that we must address is not just to leave the question of the regulation of British Telecom to one-sided regulation or to the whims of the market. Instead, we should set a new agenda covering BT's vital strategic role in providing the best possible infrastructure for British industry and residential customers. It is very worrying that BT's capital investment has fallen alarmingly over the past few years.
We must give the British telecommunications industry a platform from which it can compete with the rest of the world, and exploit its technological lead and expertise. We must ensure that BT is a major player in the global telecommunications market and therefore protect Britain's interests.
We must also ensure that it continues to play a vital role in the microelectronics sector, because the rest of British industry depends crucially on that. We must also ensure that BT provides proper quality of service to the customer. The price-capping mechanism is inadequate to achieve that.
We must ensure that BT has good employment practices and that a key priority is given to its social responsibility—particularly to low-income customers and extended services over advice and information provision. Its protection of low-income customers, particularly old-age pensioners, is not adequate at the moment, and that point must be addressed. We must also recognise that BT's market penetration in Britain is proportionately nothing like it should be in comparison to the United States or our European competitors.
Those issues must be addressed by a new Labour agenda for regulation and protection of the consumer. None of them are addressed by the Bill. Our argument is that BT is too important a provider of a key telecommunications service simply to have the maximisation of its shareholders' dividends as its overriding priority. For Labour, the priority is to serve the consumer, not the shareholder.
§ Dr. Kim Howells (Pontypridd)
In the years since the state-owned monopoly gas industry was privatised, it would have been churlish to argue that the regulatory body, Ofgas, has not tried hard to carry out its duties in the 102 most effective fashion. Its director, Mr. James McKinnon, and his staff of 28 have recently been accused of worrying British Gas to death. It is difficult to see how they could do it, but they have been accused of it.
If there is one matter in which Mr. McKinnon has not done too well it is in breaking up the monopolistic powers of British Gas and providing competition to that company. The central problem is that British Gas had all the assets which its competitors needed to compete. It was allocated the North sea supply agreements, it had control of the gas grid, and it had the customers. In other words, even if British Gas was prepared to pipe a competitor's gas down its own lines to one of its former customers, that could not happen, of course, if the competitor did not have any gas in the first place.
Between them, Mr. McKinnon, the Office of Fair Trading and the Monopolies and Mergers Commission sensibly concluded that competition in the industrial market could not begin until the competitors had some gas, and they forced British Gas to agree, in February 1990, not to buy more than 90 per cent. of North sea gas —which I suppose is some progress at least. However, it is not enough to meet the demands which the 1990s have imposed upon the Government—to fulfil their commitment to reduce carbon dioxide output from power stations.
The accountant-led regional electricity companies decided that the best means of doing that was to install efficient combined-cycle gas power stations. As I have said, I have grave reservations about that. Bolting together those stations is not the complete answer to reducing carbon dioxide emissions. It raises serious questions about the way in which we manage our natural resources.
Competition in the generation of electricity has suffered similarly from the creation of a huge duopoly, National Power and PowerGen. They have been hardly more helpful than British Gas in letting others into their market. The Secretary of State, the right hon. Member for St. Albans (Mr. Lilley), pledged at his party's conference this year that he would respond to that unfairness by threatening to "smash" the British Gas economy by separating out the network, by making it pay for the use of its own lines, and generally by sticking the boot into what he portrayed as a monopolistic fat cat. He resisted the temptation to mention, of course, that his own party had created the unfairness in the first place, five years ago.
The Bill will provide the House with an opportunity to examine the central contradictions inherent in some of the most important utility privatisations. I have tried to show how the privatisation of British Gas as a monolith—albeit a regulated one—has worked against the promotion of real competition in gas supply, which is a crucial factor, given the new role of gas as a fuel selected for base-load burn for electricity generation.
I am no admirer of monoliths, state-owned or otherwise; I have too much experience of the bone-headed, moribund policies and managerial style of British Coal for that. Nor am I in favour of regulators who try to second-guess decisions which properly should be made by the managers and staff of our utilities. The strictures of command economies have been seen to be wanting or to be complete failures, and in no circumstances should regulators be seen as a substitute for top-heavy bureaucracies, whether they are located in Whitehall, Moscow or anywhere else.
103 There are potential roles for regulators, however, which are absolutely essential if the rhetoric of encouraging competition and caring for the environment is to mean anything. The electricity privatisation White Paper of 1988 suggested that regulation would "wither away". Well, attitudes change, and, as the Bill makes clear, it appears —to the contrary—that, as more and more players enter the market, so it becomes more and more likely that a diversity of disputes will regularly appear—disputes which Professor Littlechild of OFFER will be called upon to solve.
In addition, he will have to address the duties laid down in condition 5 of the public electricity supply licence, which imposes a duty on him and OFFER to acquire electricity at the most reasonable price for a wide portfolio of sources —fossil, non-fossil and renewable. That is intended to ensure that they build a diversified power supply in terms of source and contract length.
I am sorry that there is little in the Bill to encourage either the proliferation or the growth of the independents or a diversity of fuel supply. If condition 5 does not bear fruit, it is difficult to see how the private monopolies and duopolies and the rigged markets can be challenged with any degree of effectiveness.
I hope that the Bill will be subject to amendments in Committee which will highlight its deficiencies and ultimately provide the regulators with the wherewithal to introduce real competition and real respect for our natural resources and our environment.
§ Mrs. Ann Taylor (Dewsbury)
The Secretary of State presented the Bill as proof that the Government were the new friend of the consumer. That claim might have carried more weight if Conservative Members had not spent so much time last year defeating the Consumer Guarantee Bill introduced by my hon. Friend the Member for Clwyd, South-West (Mr. Jones). It ill becomes the Government to make that claim today.
There is one area of agreement in the Bill: that there is a need to provide greater consumer protection. There is no doubt that the creation of private monopolies has generated a new level of anxiety about the potential to exploit consumers as never before.
Indeed, in the water industry, that fear, coupled with the moral outrage that something as fundamental as water should be made the subject of the profit motive, led to the public perception of its privatisation as one of the most outrageous acts of the Government. Public experience of the privatised water companies has done nothing to allay public fears. Unfortunately, our worst fears at the time of privatisation have been confirmed.
I shall deal with the water industry in some detail in a few moments, but first I say a few words about the Bill as a whole and about some of the points already made in the debate this evening. The Bill is, at best, a wasted opportunity. It is a collection of measures that do not add up to the scale or depth of protection that is required for customers today. The Bill does nothing about some of the most critical areas of concern, such as profits. It was significant that the Secretary of State refused to answer my 104 hon. Friend the Member for Dunfermline, East (Mr. Brown) when he asked whether profits were excessive in the industries under consideration.
§ Mrs. Taylor
I shall come to that, especially with regard to the water industry. The public have been staggered at the water companies' priorities. Having put up prices by so much, the water companies spend a great deal of time on diversification. They buy hotels and franchises in television companies. Indeed, one chairman said that he spends more than half his time on diversification. That shows that he does not attach the importance required to the essential problems that he should tackle as chairman of a water company.
Conservative Members were not anxious to talk about salary increases such as the increase given to the chairmen of British Telecom and Yorkshire Electricity. The hon. Member for Mid-Kent (Mr. Rowe) made a half-hearted attempt to deal with salary increases, but then said that they should be performance-related, which ruled out any justification for the increases that we have seen this year.
Among other things, the Secretary of State claimed that the Bill would improve competition. I shall deal with that, and especially with competition in the water industry. Ever since privatisation was proposed, Ministers have suggested that privatisation and competition went hand in hand. In the water industry, that is patent nonsense. I was glad that the Secretary of State acknowledged today that the scope for competition in the water industry was extremely limited.
It is a clear fact that consumers, have no alternative. As consumers, we cannot say that company A is cheaper than company B so we will switch to that company, or that company C has water which meets European standards so we will switch to that one. Everyone knows that that is impossible. The only choice, and people are exercising it, is to buy bottled water. One of the most staggering features of the past few years is the sales of water, which increased from 1,000 bottles a week five years ago to 1 million litres a day. Many consumers have totally lost confidence in the water companies: those sales are their verdict on privatisation.
As regards competition, no one could suggest that more than a few people would have any real choice even if the inset provisions were used, or if new suppliers came on the scene. There will never be a time when competition in the water industry will offer real choice of supply to consumers.
What has happened in the electricity industry, where there is more scope for competition, since privatisation? There was a scurry of activity immediately after privatisation. The 12 newly privatised regional companies rushed to compete to supply established sizeable users of electricity and to compete for some new projects. Now, even before the first anniversary of privatisation, only three of the electricity companies are chasing work outside their areas, and that number may diminish further.
The so-called great benefits of competition have not materialised. Like the water companies, electricity supply companies are content, for the most part, to operate as regional monopolies in the private sector. The customer is clearly extremely vulnerable with a private monopoly and requires further consumer protection.
105 For many consumers, prices are the first area of concern and that is not surprising. Price increases in the water industry present a sorry picture. Each year since privatisation was proposed, there have been massive increases in water charges way ahead of inflation. I remind the House that a few years ago water bills were a relatively minor item. In 1979–80, the average domestic water bill in England and Wales was £41.98. This year, the average is £154.51—a 368 per cent. increase, at a time when the retail prices index has risen by 146 per cent., and there are prospects of more to come.
The Government fixed the original K factor which led to the present price increases. Although the Secretary of State did the original price fixing, now that the industry is privatised, further levels of K will be determined by the regulator.
In the summer, the Director General of Water Services thought that he had a case for issuing interim adjustment notices to the water companies which would have limited their scope for price increases and the amount by which prices could increase this year. Because the water companies heard about the director general's considerations, they came to an agreement with him behind closed doors which resulted in some of the companies not pushing their price increases to the maximum—or not quite.
Such an arrangement may appear to be in the interests of the consumer—no one wants prices to rise more than is absolutely essential, but we should ask why that agreement was reached. It was because the water companies had windfall profits about which the director general knew. Our problem is that no one in the House has the information to decide whether the agreement reached by the regulator and the water companies was fair and just. The information on which that agreement was reached has not been published. Therefore, we do not know whether we are talking about high or marginal excess profits.
The nature of that agreement is contrary to all that the Director General of Water Services has said on previous occasions about the importance of public participation in these debates and, indeed, of openness and transparency. He said that there should be transparency in decision making. In this case, transparency was replaced by a heavy cloud.
Secrecy is no friend of the consumer. What has happened in the water industry reinforces the point made earlier that regulators cannot be the consumers' friends when they are reaching secret deals with the industries that they are regulating.
It is not just the level of prices that is causing problems. There is also the difficulty of the structure of price increases. Many of my colleagues who represent Yorkshire constituencies will share my concern that Yorkshire Water has loaded a great deal of its price increase on to the standing charge. Welsh Water has likewise tried to move towards a flat rate charge and, indeed, is implementing a flat rate water charge of more than £200 a year for all new consumers. That means that companies are hitting hardest those who can least afford to meet their bills. When we see the level of price increases, it is not surprising that the number of households getting into difficulty with paying their water bill has increased dramatically.
During the passage of the Water Bill, the Government gave way at a late stage and accepted that no one should 106 have their water disconnected without a court order. Some companies—unfortunately, not all—have regarded that as a restraint.
§ Mrs. Alice Mahon (Halifax)
Is my hon. Friend aware that last week Yorkshire Water sent out nearly 1,000 threatening letters to people all over Yorkshire, including three pensioners in my constituency, because two mailbags had gone missing and their cheques had not been received by the company? Yorkshire Water should have known that they were regular paying customers. Instead of treating them as such, the company sent out threatening letters, causing great alarm. It knew on 15 November that two mailbags had gone missing, but it kept silent about it. The local media could have been used, yet the company chose not to do so, causing great alarm and distress to my constituents.
§ Mrs. Taylor
My hon. Friend is right. It is significant that many people who have never been in debt in their lives are receiving threatening letters or even summonses as a result of the trigger-happy approach of some water companies which should know better.
I suggest to hon. Members who serve on the Committee discussing this Bill that they look carefully at the moves under way in the water companies to remove the need for a court order before a disconnection. I trust that members of the Committee will resist any move to allow disconnections without a court order.
There are other problems with the price structure. My hon. Friend the Member for Sheffield, Heeley (Mr. Michie) touched on the problems associated with water metering. Small business men are being forced to accept compulsory water metering with almost no discussion with the water company. Compulsory metering can lead to a doubling of their bills. I know of one publican in my constituency who is facing compulsory metering; it may send his water bill into four figures—more than doubling what he pays now—yet neighbouring pubs are being left untouched. So much for fair competition.
My hon. Friend the Member for Heeley also drew attention to the owners or tenants of new properties that do not have a rateable value. My hon. Friend and other colleagues have fought Yorkshire Water on this and because of their efforts a new scheme has been introduced in Sheffield. The city council has implemented a landlord agreement with Yorkshire Water to provide an option for charging and collecting on a national rateable value basis.
Today the Secretary of State said that the choice between metering or payment on a rateable value basis was not a matter for the regulator. It is true that the Water Act allows the water companies to determine their method of charging. Today the Secretary of State revealed that, if water companies choose to introduce compulsory water metering, the Government will sit back and do nothing about it. Owners or tenants of new properties should enjoy the same rights as the owners or tenants of existing properties. They should not be subject to compulsory water metering, which is aimed solely at increasing the revenue of the water supply companies.
Another issue of vital interest to customers which has not been addressed in the Bill is the quality of water supply and environmental considerations. They represent a vital part of consumer protection. In Britain, 11 million people receive drinking water that does not meet European Community standards—standards that were established in 107 an EC directive of 1980 and which should have been implemented by 1985. Now, in 1991, we still have a major problem with drinking water quality.
Public confidence is not helped by the Government's attempt to introduce domestic derogations. A letter has been sent by the European Commission about 4,536 infringements of the EC directive on drinking water. I have a practical suggestion that would help all our consumers. Everyone is entitled to know whether their drinking water supply meets the EC standard, so information on water quality should be stated on the bottom of every bill. Then all consumers would know where they stand. I hope that my hon. Friends who serve on the Committee will table amendments to that effect.
Environmental considerations affect other industries. At the time of the electricity privatisation, the Government made their priority clear when they got Her Majesty's inspectorate of pollution to issue a letter for inclusion in the prospectus to the effect that the electricity industry would not be forced to push ahead with flue gas desulphurisation as quickly as it should. That letter was designed to take the pressure off the industry to ensure a sucessful flotation. It meant that the industry could waive the potential costs of the clean-up. In other words, the Government put privatisation before environmental considerations and before cleaning up the industry.
In May, I wrote to the Secretary of State for the Environment asking for assurances that National Power and PowerGen would not have the information relating to their pollution authorisations omitted from the public register. The Secretary of State has not replied, so we must fear the worst. It is a sad fact that not one of our power stations will have been cleaned up by the time that the Government leave office.
During the passage of the Electricity Bill, my hon. Friends tried time and again to introduce amendments to compel energy providers to give due attention to energy conservation measures and energy efficiency—to make more than token gestures. Time and again the Government voted them down, even though energy conservation measures could do so much, not only to advance environmental protection but to improve the quality of life for many of the poorest people in this country.
Last week, Dr. Brenda Boardman, probably Britain's leading expert on the subject, produced a report showing that 7.5 million householders in Britain are suffering from fuel poverty. Many of them are pensioners or people with young children. It is a sad indictment of this Government that, had the programmes of the Callaghan Government been in force for the past 12 years, an extra 5 million households would have had the benefit of home insulation.
Ministers have had ample opportunity to show their priorities. On every occasion the Government choose to put ideology before consumers, taxpayers, the environment and common sense. Today, the Secretary of State said that there will be no changes to the Bill that could affect BT's share prices. Back Benchers said that that was necessary for legal reasons due to the timing of the flotation, but who chose the timing? That shows the Government's priority.
The Government put the electricity privatisation before the environment. The Government spent £3.3 billion of 108 taxpayers' money to give away the water industry, not for the benefit of taxpayers or consumers, but for the benefit of shareholders and, above all, top management, whose salary increases and outrageous perks add insult to injury. If the Government were serious about looking after consumers' interests, they would not be content with the measures in the Bill. It must be obvious to anyone who has listened to today's debate that only the Labour party puts the interests of consumers and the environment before the interests of shareholders and top management.
§ The Minister for Corporate Affairs (Mr. John Redwood)
What an extraordinary performance the hon. Member for Dewsbury (Mrs. Taylor) gave. She asked us to go back to the golden age of Callaghan. All that one can say is that he was better than the current Labour party leader. I do not want to return to a world in which the lights go out, there is no money in the country, we have to turn to the International Monetary Fund, and investment in the leading industries has to be cut back. That is the state to which the Labour party would return us.
It was because the Callaghan Government ran out of money to spend on the water industry and the big utilities that they encountered such problems. The hon. Lady did not seem to realise that the diversification policy of those industries cannot be cross-financed from the core businesses—[Interruption.] I wish that the hon. Lady would listen, because she might learn something and avoid mistakes in future. Under the rules of the water industry, the diversifications cannot be financed from the core businesses, but are clearly segregated by the regulator.
The hon. Lady complained about what she called secret deals to cut price increases. I welcomed moves to cut price increases and did not find that they were being done in secret—I read about them in the newspapers and elsewhere. The hon. Lady was also worried about methods of debt recovery, but admitted that legislation states that a court order is needed. As a result, the number of such procedures is well down on previous years because the process is much better. I hope that she will welcome that.
§ Mrs. Ann Taylor
Will the Minister resist any attempts to change the position in the water industry and any attempts to remove the need for a court order for disconnection?
§ Mr. Redwood
The Government have announced no change of policy. The Government's policy, of which we are proud, remains the same.
The hon. Lady also said that she was worried about people buying more bottled water. Perhaps she does not realise that that is a characteristic of people becoming more prosperous. Perhaps she does not realise that they are buying private water which is in competition with other private water.
Hon. Members make strange predictions when we try to introduce measures to improve such industries and their performance. When the measures to privatise British Telecom were being debated in the House, Opposition Members said that the public telephone box was threatened with extinction. We have heard in this debate that, far from being extinguished by these policies, it is flourishing. Many more call boxes are working, and there are many more of them.
109 Hon. Members told us that rural services, emergency services, call boxes and provision for the blind and disabled would all have an uncertain future under privatisation, yet in each case the future has been better, thanks to the privatised industry and the regulatory world that we have created. The leading Opposition spokesman, on Second Reading of the BT legislation, said that privatisation would be a "devastating blow". Perhaps he had in mind profits collapsing or the inability of the industry to finance its capital programme. Tonight, however, the Opposition come to complain that the industry is too successful and making too much money, even under the tight price controls that the Government and the regulator have imposed.
I am happy that BT is profitable. I want it to have the money for the investment that it needs to build the phone service that we require for the 1990s. I am also confident that BT is not achieving that by exploiting customers because of the tight price controls which Labour could never offer, since in its day the company was nationalised and did not work nearly as well.
We have had a good if somewhat sparsely attended debate. My hon. Friend the Member for Beaconsfield (Mr. Smith) made some extremely good points about prospectuses, competition and the regulatory task. Opposition Members should study them before going into the Committee.
The right hon. Member for Swansea, West (Mr. Williams) made a miscued attack on my right hon. Friend the Secretary of State. He did not understand my right hon. Friend's point about how the Government have stood up for consumers by introducing competition and the right kind of legislation. He should reflect on the Secretary of State's opening remarks, which were clear and helpful to customers, as this Bill will be.
The right hon. Gentleman asked why we were introducing a Bill on this subject. The answer is that our policies are evolving. What we have achieved so far has been extremely good, so we want more of it. We recognise the need—the Government always have recognised it—for regulation, when there are elements of monopoly. We also believe that competition is superior to regulation, so whenever possible we promote competition so that the need for regulation is not as great.
My hon. Friend the Member for Stroud (Mr. Knapman) understood all these points and put them clearly to the Opposition. At the same time, he made a good contribution on the difficulty in which Labour will find itself, if it is ever in government, with its massive plans for overspending. Indeed, Opposition Members did nothing to clear up the uncertainties about the huge expenditure on which they would have to embark to renationalise these industries before messing them up again as they did in the 1970s when they were under national control.
My hon. Friend the Member for Stroud pointed out that a regulator is much better than an ombudsman. If the person sorting out complaints for consumers is also the person regulating the industry and setting the prices, he is in a much stronger position. That gives the regulator much more clout. How could the ombudsman improve on that?
The hon. Member for Worsley (Mr. Lewis) made a sincere if overlong speech on premium-rate services. I read in the guide to Members of the House that he is the embodiment of the success of Government policies. He sports a fax number, a pager, a messenger service number 110 and several telephone numbers, as listed in that excellent publication. I am glad that the hon. Gentleman is proud to join in the consumers' society that has been created by our policies.
§ Mr. Redwood
I thought that phrase went out with the 1980s. We shall have to think of a new one, but I am grateful to my hon. Friend.
§ Mr. Redwood
I shall be happy to receive them in any form in which the hon. Gentleman cares to send them—but they should probably go to the independent regulator, as he well knows. Like him, I do not like sleazy and unpleasant chatlines or dirty recorded messages. That is why powers were taken in the legislation to stop just that sort of abuse. That is why licence powers are being used to control it and why this Bill, soon to go to Committee, will give the director general still more powers, should he want to use them. I am sure that he will hear from the hon. Member for Worsley if he does not want to use them.
I do not think it right to ban all these services. I do not want to stop people listening to football commentaries or cricket scores. These services are subject to gradation and it is difficult to distinguish between them sometimes. Of course we want to ban the disgusting material, and the powers exist to do so. I want to give people a choice, and the system that we have set up through ICSTIS and the regulator will do just that. The hon. Gentleman defeated his own argument by saying that 0898 numbers are barred in the House in order to stop hon. Members exploiting them.
§ Mr. Lewis
The Minister misses the whole point. Large organisations such as this can impose such a bar, but domestic customers cannot, nor should they be expected to do so. The small business man with two men and a dog working for him cannot afford the call-bar facilities that are in the House. I am trying to get the Minister to remove his blinkers and do something in favour of the small person.
§ Mr. Redwood
Call barring is available to all those using digital exchanges, which now cover large chunks of the country and will shortly cover the whole country. I am happy to add my voice to that of the hon. Gentleman to ensure that the facility is understood all over the country.
My hon. Friend the Member for Taunton (Mr. Nicholson) welcomed the Bill. He and my hon. Friend the Member for Beaconsfield posed the best question of the debate when they asked whether it could apply to rail. I do not know whether I have the best answer to that, but I remind them that the Bill relates only to those utilities that have been privatised and to which a policy of independent regulators applies. The task would be more complex and would require other policy issues to be considered in relation to industries that are still nationalised.
I am grateful to the hon. Member for Gordon (Mr. Bruce) for giving one or perhaps two cheers for the Bill and for saying that his party would support it. He took a rather wrong-headed view of the history of the development of competition in these industries, although he will not be surprised to learn that I agree with his criticisms of the 111 Labour amendment. He seemed to be unaware that there had been a further post-duopoly review and that competition within the telecommunications industry is being opened up generally. I hope that on reflection he will agree that that is good.
My hon. Friend the Member for Mid-Kent (Mr. Rowe) justifiably praised British Gas and British Telecom for elements of their services which are now very good. He asked whether competition between the old private companies and the newly privatised ones is fair. Wearing my competition hat, I shall be happy to examine any evidence which suggests that competition is not fair. If my hon. Friend can make a case, we shall have to think about the issue. I entirely agree that salaries should be performance-related and subject to shareholder control.
The hon. Member for Sheffield, Heeley (Mr. Michie) did not mention BT's low-user scheme, which is a major advance and solves some of the low-income consumer problems that the hon. Gentleman described. He did not mention the point missed by the hon. Member for Dewsbury, that disconnections are now at a low level.
The hon. Member for Neath (Mr. Hain) easily won the prize for the longest words in the debate, but that does not mean that his speech had the best content. For example, he thought that BT should be allowed to offer entertainment services but seemed to be unaware that it could and had applied for cable franchises. He also seemed unaware of the great progress in laying fibre optic cable around the country, mainly between cities. That has come about because of our liberalisation policy and as a result of the investment moneys that British Telecom and others have available.
I agreed with the thoughtful contribution by the hon. Member for Pontypridd (Dr. Howells) about the problem of a shortage of gas. However, I did not agree with some of the hon. Gentleman's other points, especially about his hatred of combined cycle gas. That is the technology that the new electricity industry wishes to build because it is environmentally better and cheaper. Those are two good reasons for pursuing such schemes. The hon. Gentleman seemed to be unaware of the great progress being made in building an independent and renewable sector in electricity.
In the long tirade by the hon. Member for Dunfermline, East (Mr. Brown), there were about 10 debating points and if time permits I shall try to answer them. I shall begin by correcting an error in the hon. Gentleman's speech. He said that there had recently been 102,000 complaints against British Gas. I am told by British Gas that that is untrue, and that the hon. Gentleman has taken the number of inquiries and complaints made to the Gas Consumers Council. That includes people ringing up to ask where they can pay their bills, which is hardly a complaint. I hope that the hon. Gentleman will accept the correction that, far from there being 102,000 complaints, British Gas received 23,000.
The hon. Gentleman's first request was for a widespread review of the prices, policies and performance of these industries. Where was he during the past year's review of the telecoms industry? Is he aware that the duopoly policy was re-examined on the stated date and competition was introduced generally? Is he aware that, in the case of telecoms, the price control formula started at 112 retail prices index minus 3 and went on to RPI minus 4.5 and only recently has been increased to RPI minus 6.25? Where else in the world can one get a pledge of a 6.25 per cent. real cut in telephone prices year after year? If the hon. Gentleman goes to France—a country he seems to admire more than ours—he will find that it has introduced a price formula that is far less tough than ours on BT because it knows that its nationalised industry would find it difficult to match the performance of BT.
If the hon. Gentleman would listen rather than talk, he would learn that the price formula for gas has also been revised: where it was minus 2 on the controllable costs it is now going to minus 5—another tough target. I hope that, the hon. Gentleman will welcome these tough targets and recognise that they mean that when the time is right, these matters are reviewed and the customer gets a better deal because we make sure that he does and that the regulators do their job excellently.
I was surprised by the hon. Gentleman's attack on the standards of the work of some of the regulators. I should have thought that hon. Members would have got behind the work of the regulators, who are standing up for the interests of the customer. He asked where OFFER's telephone number was. It is on the back of the bill. [Interruption.] I suggest that the hon. Gentleman looks in the right telephone directory.
My hon. Friends have already dealt with the Labour party's idea for ombudsmen, and I have also mentioned it in my reply to them. The regulators have stronger powers than ombudsmen could have, not only with the new powers in the Bill but with their existing powers.
The trouble with the hon. Gentleman is that he believes his own propaganda. Halfway through our policy discussions in preparation for the citizens charter and the Bill, he obtained a leaked document containing the views of some officials. He claimed in the press that it set out Government policy, but it was a million miles away from our policy. He is now upset that it is not our policy and keeps saying that the views in it must be the views of Ministers. They are not—it was a working document from officials; Ministers' views were set out in the citizens charter as they are set out in the Bill. They are different from the views that he is saying are ours, and I wish that he would retract that.
The hon. Gentleman said that there was not enough consumer representation. Perhaps he should read the Bill, in which there are several references to the Gas Consumers Council. The regulators will consult widely with consumer groups and customers before setting out standards, in conjunction with the industries.
The hon. Member has been trying to make out that the Government have been putting profits, the success of BT and the shareholder interest before our policy. How can the Labour party say that in the year when we opened up the whole of industry to competition, in the year when we tightened the price control and made it clear that the customer is high on our list of priorities? His claim is absurd and he should withdraw it immediately. We have set out the policies for customers, and that was what motivated the main changes this year in our telecoms policy.
Much of the speech by the hon. Member for Dunfermline, East, which lacked content, was taken up by a series of jealous tirades against the pay of people in the private sector who have satisfied shareholders, directors and other representatives of their need for a pay rise. He 113 claimed that complaints were up but nobody ever thought of complaining when the Labour party was in power because there was not a proper procedure, and in many cases the service was so bad that people did not bother. The hon. Gentleman then said that he was thinking of municipalising water. Heaven help us! I know that the House will reject that idea.
I know that the House will vote overwhelmingly for the Bill, which I wholeheartedly recommend.
§ Question put, That the amendment be made:—
§ The House divided: Ayes 191, Noes 278.116
|Division No. 11]||[9.59 pm|
|Adams, Mrs Irene (Paisley, N.)||Fisher, Mark|
|Allen, Graham||Flannery, Martin|
|Anderson, Donald||Flynn, Paul|
|Archer, Rt Hon Peter||Foster, Derek|
|Armstrong, Hilary||Fraser, John|
|Ashley, Rt Hon Jack||Fyfe, Maria|
|Ashton, Joe||Galloway, George|
|Banks, Tony (Newham NW)||Garrett, John (Norwich South)|
|Barnes, Harry (Derbyshire NE)||Garrett, Ted (Wallsend)|
|Barron, Kevin||Gilbert, Rt Hon Dr John|
|Battle, John||Godman, Dr Norman A,|
|Beckett, Margaret||Golding, Mrs Llin|
|Benn, Rt Hon Tony||Gordon, Mildred|
|Bennett, A. F. (D'nt'n & R'dish)||Gould, Bryan|
|Benton, Joseph||Graham, Thomas|
|Bermingham, Gerald||Grant, Bernie (Tottenham)|
|Bidwell, Sydney||Griffiths, Nigel (Edinburgh S)|
|Blair, Tony||Griffiths, Win (Bridgend)|
|Blunkett, David||Grocott, Bruce|
|Boateng, Paul||Hain, Peter|
|Boyes, Roland||Harman, Ms Harriet|
|Bradley, Keith||Heal, Mrs Sylvia|
|Bray, Dr Jeremy||Healey, Rt Hon Denis|
|Brown, Gordon (D'mline E)||Henderson, Doug|
|Brown, Nicholas (Newcastle E)||Hinchliffe, David|
|Brown, Ron (Edinburgh Leith)||Hoey, Kate (Vauxhall)|
|Caborn, Richard||Hogg, N. (C'nauld & Kilsyth)|
|Callaghan, Jim||Howarth, George (Knowsley N)|
|Campbell, Ron (Blyth Valley)||Howell, Rt Hon D. (S'heath)|
|Campbell-Savours, D. N.||Howells, Dr. Kim (Pontypridd)|
|Canavan, Dennis||Hoyle, Doug|
|Clark, Dr David (S Shields)||Hughes, John (Coventry NE)|
|Clelland, David||Hughes, Robert (Aberdeen N)|
|Clwyd, Mrs Ann||Illsley, Eric|
|Cohen, Harry||Ingram, Adam|
|Cook, Frank (Stockton N)||Janner, Greville|
|Cook, Robin (Livingston)||Jones, Barry (Alyn & Deeside)|
|Corbett, Robin||Jones, Martyn (Clwyd S W)|
|Cox, Tom||Kilfoyle, Peter|
|Crowther, Stan||Kumar, Dr. Ashok|
|Cryer, Bob||Lambie, David|
|Cummings, John||Leadbitter, Ted|
|Cunliffe, Lawrence||Leighton, Ron|
|Cunningham, Dr John||Lestor, Joan (Eccles)|
|Darling, Alistair||Lewis, Terry|
|Davies, Rt Hon Denzil (Llanelli)||Litherland, Robert|
|Davies, Ron (Caerphilly)||Livingstone, Ken|
|Davis, Terry (B'ham Hodge H'l)||Lloyd, Tony (Stretford)|
|Dixon, Don||Lofthouse, Geoffrey|
|Dobson, Frank||McAllion, John|
|Doran, Frank||McAvoy, Thomas|
|Duffy, Sir A. E. P.||McCartney, Ian|
|Dunnachie, Jimmy||Macdonald, Calum A.|
|Dunwoody, Hon Mrs Gwyneth||McKay, Allen (Barnsley West)|
|Eadie, Alexander||McKelvey, William|
|Edwards, Huw||McLeish, Henry|
|Enright, Mr Derek||McMaster, Gordon|
|Evans, John (St Helens N)||McNamara, Kevin|
|Ewing, Harry (Falkirk E)||Madden, Max|
|Fatchett, Derek||Mahon, Mrs Alice|
|Faulds, Andrew||Marek, Dr John|
|Field, Frank (Birkenhead)||Marshall, David (Shettleston)|
|Fields, Terry (L'pool B G'n)||Marshall, Jim (Leicester S)|
|Martin, Michael J. (Springburn)||Rooney, Terence|
|Martlew, Eric||Ross, Ernie (Dundee W)|
|Maxton, John||Rowlands, Ted|
|Meale, Alan||Ruddock, Joan|
|Michael, Alun||Sedgemore, Brian|
|Michie, Bill (Sheffield Heeley)||Sheerman, Barry|
|Mitchell. Austin (G't Grimsby)||Sheldon, Rt Hon Robert|
|Moonie, Dr Lewis||Short, Clare|
|Morgan, Rhodri||Skinner, Dennis|
|Morley, Elliot||Smith, Andrew (Oxford E)|
|Morris, Rt Hon J. (Aberavon)||Smith, C. (Isl'ton & F'bury)|
|Mowlam, Marjorie||Smith, Rt Hon J. (Monk'ds E)|
|Mullin, Chris||Smith, J. P. (Vale of Glam)|
|Murphy, Paul||Soley, Clive|
|Oakes, Rt Hon Gordon||Steinberg, Gerry|
|O'Brien, William||Strang, Gavin|
|O'Hara, Edward||Taylor, Mrs Ann (Dewsbury)|
|Orme, Rt Hon Stanley||Thompson, Jack (Wansbeck)|
|Parry, Robert||Turner, Dennis|
|Patchett, Terry||Wardell, Gareth (Gower)|
|Pendry, Tom||Wareing, Robert N.|
|Pike, Peter L.||Watson, Mike (Glasgow, C)|
|Powell, Ray (Ogmore)||Welsh, Michael (Doncaster N)|
|Prescott, John||Wigley, Dafydd|
|Primarolo, Dawn||Williams, Rt Hon Alan|
|Quin, Ms Joyce||Williams, Alan W. (Carm'then)|
|Randall, Stuart||Wilson, Brian|
|Redmond, Martin||Winnick, David|
|Rees, Rt Hon Merlyn||Worthington, Tony|
|Reid, Dr John||Young, David (Bolton SE)|
|Robertson, George||Tellers for the Ayes:|
|Robinson, Geoffrey||Mr. Frank Haynes and Mr. Ken Eastham.|
|Adley, Robert||Brown, Michael (Brigg & Cl't's)|
|Aitken, Jonathan||Browne, John (Winchester)|
|Alexander, Richard||Bruce, Ian (Dorset South)|
|Alison, Rt Hon Michael||Bruce, Malcolm (Gordon)|
|Allason, Rupert||Buck, Sir Antony|
|Alton, David||Budgen, Nicholas|
|Amess, David||Burns, Simon|
|Amos, Alan||Burt, Alistair|
|Arbuthnot, James||Butler, Chris|
|Arnold, Jacques (Gravesham)||Butterfill, John|
|Ashby, David||Carlisle, Kenneth (Lincoln)|
|Ashdown, Rt Hon Paddy||Carr, Michael|
|Aspinwall, Jack||Carrington, Matthew|
|Atkinson, David||Carttiss, Michael|
|Baker, Rt Hon K. (Mole Valley)||Cash, William|
|Baker, Nicholas (Dorset N)||Chalker, Rt Hon Mrs Lynda|
|Baldry, Tony||Channon, Rt Hon Paul|
|Banks, Robert (Harrogate)||Chapman, Sydney|
|Barnes, Mrs Rosie (Greenwich)||Chope, Christopher|
|Batiste, Spencer||Clark, Dr Michael (Rochford)|
|Beaumont-Dark, Anthony||Clark, Rt Hon Sir William|
|Beith, A. J.||Clarke, Rt Hon K. (Rushcliffe)|
|Bellingham, Henry||Colvin, Michael|
|Bellotti, David||Conway, Derek|
|Bendall, Vivian||Coombs, Anthony (Wyre F'rest)|
|Bennett, Nicholas (Pembroke)||Coombs, Simon (Swindon)|
|Benyon, W.||Cope, Rt Hon Sir John|
|Bevan, David Gilroy||Cormack, Patrick|
|Biffen, Rt Hon John||Couchman, James|
|Blackburn, Dr John G.||Cran, James|
|Blaker, Rt Hon Sir Peter||Currie, Mrs Edwina|
|Bonsor, Sir Nicholas||Davies, Q. (Stamf'd & Spald'g)|
|Boscawen, Hon Robert||Davis, David (Boothferry)|
|Bottomley, Peter||Day, Stephen|
|Bottomley, Mrs Virginia||Devlin, Tim|
|Bowden, A. (Brighton K'pto'n)||Dickens, Geoffrey|
|Bowden, Gerald (Dulwich)||Dicks, Terry|
|Bowis, John||Dorrell, Stephen|
|Boyson, Rt Hon Dr Sir Rhodes||Douglas-Hamilton, Lord James|
|Braine, Rt Hon Sir Bernard||Dover, Den|
|Brandon-Bravo, Martin||Dunn, Bob|
|Brazier, Julian||Durant, Sir Anthony|
|Bright, Graham||Eggar, Tim|
|Emery, Sir Peter||Johnson Smith, Sir Geoffrey|
|Evans, David (Welwyn Hatf'd)||Jones, Gwilym (Cardiff N)|
|Evennett, David||Jones, Robert B (Herts W)|
|Fallon, Michael||Kellett-Bowman, Dame Elaine|
|Farr, Sir John||Kennedy, Charles|
|Favell, Tony||Key, Robert|
|Fearn, Ronald||Kilfedder, James|
|Fenner, Dame Peggy||King, Roger (B'ham N'thfield)|
|Finsberg, Sir Geoffrey||Kirkhope, Timothy|
|Fishburn, John Dudley||Kirkwood, Archy|
|Fookes, Dame Janet||Knapman, Roger|
|Forman, Nigel||Knight, Dame Jill (Edgbaston)|
|Forsyth, Michael (Stirling)||Knox, David|
|Forsythe, Clifford (Antrim S)||Latham, Michael|
|Fowler, Rt Hon Sir Norman||Lawrence, Ivan|
|Fox, Sir Marcus||Lee, John (Pendle)|
|Franks, Cecil||Lester, Jim (Broxtowe)|
|Freeman, Roger||Lightbown, David|
|French, Douglas||Lilley, Rt Hon Peter|
|Fry, Peter||Lloyd, Sir Ian (Havant)|
|Gale, Roger||Lloyd, Peter (Fareham)|
|Garel-Jones, Tristan||Lord, Michael|
|Gill, Christopher||Luce, Rt Hon Sir Richard|
|Glyn, Dr Sir Alan||Lyell, Rt Hon Sir Nicholas|
|Goodhart, Sir Philip||MacGregor, Rt Hon John|
|Goodlad, Alastair||MacKay, Andrew (E Berkshire)|
|Goodson-Wickes, Dr Charles||Maclean, David|
|Grant, Sir Anthony (CambsSW)||McNair-Wilson, Sir Patrick|
|Greenway, John (Ryedale)||Malins, Humfrey|
|Gregory, Conal||Mans, Keith|
|Griffiths, Sir Eldon (Bury St E')||Maples, John|
|Griffiths, Peter (Portsmouth N)||Marland, Paul|
|Grist, Ian||Marshall, Sir Michael (Arundel)|
|Grylls, Michael||Martin, David (Portsmouth S)|
|Hague, William||Maude, Hon Francis|
|Hamilton, Neil (Tatton)||Maxwell-Hyslop, Robin|
|Hampson, Dr Keith||Mayhew, Rt Hon Sir Patrick|
|Hannam, John||Michie, Mrs Ray (Arg'l & Bute)|
|Hargreaves, A. (B'ham H'll Gr')||Miscampbell, Norman|
|Hargreaves, Ken (Hyndburn)||Mitchell, Andrew (Gedling)|
|Harris, David||Moate, Roger|
|Hawkins, Christopher||Montgomery, Sir Fergus|
|Hayes, Jerry||Morris, M (N'hampton S)|
|Hayhoe, Rt Hon Sir Barney||Morrison, Sir Charles|
|Heathcoat-Amory, David||Moynihan, Hon Colin|
|Heseltine, Rt Hon Michael||Neale, Sir Gerrard|
|Hicks, Mrs Maureen (Wolv' NE)||Neubert, Sir Michael|
|Higgins, Rt Hon Terence L.||Nicholls, Patrick|
|Hill, James||Nicholson, Emma (Devon West)|
|Hordern, Sir Peter||Norris, Steve|
|Howard, Rt Hon Michael||Onslow, Rt Hon Cranley|
|Howarth, Alan (Strat'd-on-A)||Page, Richard|
|Howell, Rt Hon David (G'dford)||Paice, James|
|Howell, Ralph (North Norfolk)||Patnick, Irvine|
|Howells, Geraint||Patten, Rt Hon John|
|Hughes, Robert G. (Harrow W)||Pattie, Rt Hon Sir Geoffrey|
|Hughes, Simon (Southwark)||Pawsey, James|
|Hunt, Rt Hon David||Price, Sir David|
|Hunt, Sir John (Ravensbourne)||Redwood, John|
|Hunter, Andrew||Ridsdale, Sir Julian|
|Hurd, Rt Hon Douglas||Rifkind, Rt Hon Malcolm|
|Irvine, Michael||Roberts, Rt Hon Sir Wyn|
|Jack, Michael||Roe, Mrs Marion|
|Jackson, Robert||Rost, Peter|
|Janman, Tim||Rowe, Andrew|
|Jessel, Toby||Rumbold, Rt Hon Mrs Angela|
|Ryder, Rt Hon Richard||Taylor, John M (Solihull)|
|Sackville, Hon Tom||Taylor, Sir Teddy|
|Scott, Rt Hon Nicholas||Thompson, D. (Calder Valley)|
|Shaw, David (Dover)||Thompson, Patrick (Norwich N)|
|Shaw, Sir Giles (Pudsey)||Thorne, Neil|
|Shaw, Sir Michael (Scarb')||Thornton, Malcolm|
|Shelton, Sir William||Tracey, Richard|
|Shephard, Mrs G. (Norfolk SW)||Tredinnick, David|
|Shepherd, Colin (Hereford)||Trippier, David|
|Shepherd, Richard (Aldridge)||Twinn, Dr Ian|
|Shersby, Michael||Vaughan, Sir Gerard|
|Skeet, Sir Trevor||Waldegrave, Rt Hon William|
|Smith, Tim (Beaconsfield)||Walden, George|
|Soames, Hon Nicholas||Waller, Gary|
|Speed, Keith||Walters, Sir Dennis|
|Speller, Tony||Ward, John|
|Spicer, Sir Jim (Dorset W)||Wardle, Charles (Bexhill)|
|Squire, Robin||Watts, John|
|Stanbrook, Ivor||Wells, Bowen|
|Stanley, Rt Hon Sir John||Wheeler, Sir John|
|Steel, Rt Hon Sir David||Whitney, Ray|
|Steen, Anthony||Widdecombe, Ann|
|Stephen, Nicol||Wilkinson, John|
|Stern, Michael||Winterton, Mrs Ann|
|Stevens, Lewis||Wolfson, Mark|
|Stewart, Allan (Eastwood)||Wood, Timothy|
|Stewart, Andy (Sherwood)||Yeo, Tim|
|Stewart, Rt Hon Sir Ian||Young, Sir George (Acton)|
|Stokes, Sir John|
|Sumberg, David||Tellers for the Noes:|
|Summerson, Hugo||Mr. Greg Knight and Mr. Tim Boswell.|
|Taylor, Ian (Esher)|
§ Question accordingly negatived.
§ Main Question put and agreed to.
§ Bill accordingly read a Second time and committed to a Standing Committee pursuant to Standing Order No. 61 (Committal of Bills).