§ Order for Second Reading read.
§ [Relevant documents: The First Report from the Trade and Industry Committee of Session 1994–95 on The Domestic Gas Market (House of Commons Paper No. 23), the Second Special Report from the Trade and Industry Committee of Session 1994–95, containing the Government's Observations thereon (House of Commons Paper No. 291) and Minutes of Evidence taken before the Environment Committee on 15th and 21st February 1995 (House of Commons Paper No. 229-i and -ii of Session 1994–95).]4.18 pm
§ The President of the Board of Trade and Secretary of State for Trade and Industry (Mr. Michael Heseltine)
I beg to move, That the Bill be now read a Second time.
The assumption that the supply of gas to the public can best be undertaken on a monopoly basis dates from 1847, when a committee of inquiry led to the passing of the first Gasworks Clauses Act. The conclusion that monopoly was the necessary form of organisation was based on the poor economics of laying competing pipelines and the associated disruption in terms of street works that that was found to entail.
The idea of separating the trading functions from the operation of the distribution pipes has emerged progressively over the past few years. We have an active competitive market in the supply of gas to industrial and commercial customers. These customers have already seen savings of 10 per cent. to 15 per cent. or more as a result of that competition.
The Bill provides a sound foundation for the phased introduction of the benefits of competition to the 18 million domestic gas customers in Great Britain. The Bill will empower customers to demand the levels of service that they want. It will provide a powerful incentive to innovation and efficiency, and it will provide a strong downward pressure on average prices. Already since privatisation, we have seen a fall in the price of gas before VAT of more than 20 per cent. in real terms and an even larger fall in the standing charge. Alongside that, British Gas has invested £9 billion in the United Kingdom since 1986, including a £2 billion programme of mains replacement to improve safety.
§ Mr. D. N. Campbell-Savours (Workington)
The President of the Board of Trade used the word "average". Can he illuminate that—[Interruption.] I do not think that the Minister for Energy and Industry needs to tell the right hon. Gentleman the answer. He does not need help in that way. Will the right hon. Gentleman tell us what will happen to low-use consumers of gas? Will their bills go up substantially, as is being argued?
§ Mr. Heseltine
I can try to help the hon. Gentleman. "Average" is a complicated idea. One has to take the lowest prices and the highest prices, put them all together and divide them by the number of consumers. Out of that 577 calculation comes what we customarily called, when I was at school, an average. I hope that the hon. Gentleman has noticed that I did not need to refer to my right hon. Friend the Minister for Energy and Industry for that remarkable piece of memory of my childhood years.
§ Mr.Dafydd Wigley (Caernarfon)
I do not want to challenge the right hon. Gentleman on the definition of "average". He will be aware of the danger that a person walking through a river with an average depth of 4 ft 6 in may drown in the middle. Is he not aware of the danger, within the average charges, to rural areas? If charges are required to reflect the costs of the supply of gas, the charges in rural areas may increase disproportionately, albeit within the average, which will hit some people hard.
As the hon. Gentleman will know, it has been suggested that because of the transportation charge, there may be a differential of between plus and minus 2 per cent., depending on the area. That has to be set against the forecasts of the companies anxious to enter the market. They can see economies of up to 10 per cent. in overall prices. Those matters will be dealt with considerably in the licences that the regulator will issue. The details of the licences will appropriately be explored in Committee, if the Bill receives a Second Reading.
§ Mr.Peter Bottomley (Eltham)
Is not the key point that over the past 20 or 30 years, gas has expanded from covering 7 per cent. of households to about 50 per cent.? Many people in rural areas wish that gas could reach them. If the transportation variation is so small compared with the rest—except when oil prices are very low—most people will be glad that gas has been extended to more people.
That is absolutely right. That is why my hon. Friend will have welcomed the figure that I gave for investment by British Gas in widening and modernising its facilities; that investment amounts to £9 billion since 1986. That money has been obtained without recourse to the public purse because it has been raised in the private market.
§ Mr.Richard Caborn (Sheffield, Central)
Can the right hon. Gentleman enlighten the House on how he believes that the Bill will proceed in terms of the transportation charge? First, there is the geographical point, which he explained to the House. Secondly, there is the variable and the fixed part of the gas charge which, as he probably realises, the Select Committee on Trade and Industry brought to the attention of the House. Can the right hon. Gentleman give the House any assurances that the average price for TransCo was at the lower end? Both the right hon. Gentleman and the regulator accept the figure of £15. Can he give assurances that the cross-subsidy, which is now built into the price, will continue and that it will not be removed in the near future?
§ Mr. Heseltine
The hon. Gentleman puts the case very fairly, in asking about the £15 standard charge that is built into the proposals. That matter is subject in the end to the regulatory regime, but obviously there would be no point in changing the regime shortly after it had been introduced. I am sure that the hon. Gentleman will be reassured by the answer that I have given.
578 In formulating our proposals, we have been careful to ensure that safety will remain a top priority. We asked the Health and Safety Commission for a detailed report on our proposals. That report was published last week and we have accepted it.
It is central to our proposals that every supplier will have an obligation to supply on request any domestic customer covered by its licence. It will charge for gas against publicly available price schedules. There will be a number of measures to discourage cherry picking of the more attractive customers and rules to deal with price discrimination by nationally or locally dominant suppliers. At the same time, market entrants will be allowed to choose pricing structures that meet consumers' needs. If some new suppliers wish to enter the market on the basis of a standing charge set at zero, as one has suggested that it may, we would not wish to stand in its way.
We shall ensure that the requirement for special services to pensioners, the disabled or the blind and to those who have genuine difficulties paying for their gas should continue. That includes important services such as the free gas safety check for pensioners or disabled people who live alone and the provision of a range of special controls and adaptors to help with the use of gas appliances. The current requirements for service in those areas will be maintained and, in some cases, enhanced. All suppliers will have to bear their share of the social obligations to those customers, but there will be arrangements in the licences for a levy to share the costs of those services in certain circumstances if they fall disproportionately on a particular supplier.
§ Mr.Peter Hardy (Wentworth)
The Minister referred to social obligations. Does he feel that the Government have any social obligation to the many Sids and Mrs. Sids who were beguiled by Government legislation, persuaded to buy shares in British Gas and who had not expected that, in the short time to which he referred a moment ago, such a dramatic change in their circumstances would be effected?
§ Mr. Heseltine
The hon. Gentleman has made an important contribution, but is he quite sure that he has the right industry? We are talking about the gas industry this afternoon, not the electricity industry.
I understand that. The complaints of his right hon. Friend the Member for Copeland (Dr. Cunningham) are about the electricity industry, not the gas industry. If I may say so, it is a quite bizarre reversal of fortune for Labour Members to know that there are even things called shareholders, let alone to rise to their feet to defend them.
§ Mr. Heseltine
I thought that the Labour party was interested in customers, consumers and the public. Indeed, the object of this legislation is to reduce prices for the people who buy the gas.
§ Dr. Cunningham
I am talking about this Bill. The Minister mentioned a levy on all providers. That is not in the Bill and the House has not yet had the advantage of seeing the licences, because they have not been published. 579 Is he telling the House, and is he giving a guarantee, that that matter is agreed between himself and the Director General of Gas Supply?
§ Mr. Heseltine
When the right hon. Gentleman gets into the detail of the Bill, he will find that the powers to impose a levy are in the legislation.
§ Mr. Heseltine
From the licences around, the regulator would decide whether that was a necessary development. The power to levy a charge to ensure that those services are protected is in the legislation.
§ Dr. Cunningham
Yes, we understand that, but that was not really the point of question. The power is there, but is the right hon. Gentleman guaranteeing that it will be implemented, and is he guaranteeing that the director general will ensure that that power is used in the way that he suggests?
§ Mr. Heseltine
The right hon. Gentleman can be absolutely sure that the Government's intention is to ensure that the services that we are talking about are protected for the benefit of those who depend on them. The power in the Bill therefore ensures that the opportunity to do that exists. If the regulator could find other ways of doing that through the licensing system, that would achieve the same ends. However, that is not in any way a substitute for our determination that those services should be maintained.
§ Dr. Cunningham
It is the case, then, that it is quite possible that the director general could ensure that those services continue by making their costs fall on the consumers concerned.
Not in a way that would act adversely against the Government's intentions in introducing this legislation. That is the point. The Government are determined to preserve the social implications of the legislation, and the powers to do that are there in the ability to levy in the way that I outlined. I do not in any way criticise the right hon. Member for Copeland for pressing me on the point, because it is important and it is one that the Standing Committee will want to consider when we get to the details. I wholly accept and welcome that as the point is very important.
§ Dr. Keith Hampson (Leeds, North-West)
My right hon. Friend has just said that what we are seeing, or about to see, is a total revolution in the energy industry. Does he believe that one way to stop the scare stories that are being put about by Opposition Members to the effect that those on low income and the disabled will lose out, may be to guarantee to people—particularly during the transitional period—that the present British Gas standards are an absolute minimum and that that will be enshrined in a code of practice, which the regulator will have to follow in the legislation? Would not that shut up Opposition Members?
§ Mr. Heseltine
My hon. Friend makes an interesting point. However, without committing ourselves to a code of practice, the Government's intention is to ensure the outcome that my hon. Friend has drawn to the attention of the House: in other words, the standards of British Gas today are the minimum standards. How we ensure that that happens is an issue that we shall have to resolve in 580 detail. However, it is irresponsible and unforgivable for the Opposition to suggest that somehow or other those minimum standards will not be maintained. They will be maintained.
§ Sir Michael Grylls (Surrey, North-West)
Does my right hon. Friend agree that the scares being raised by the Labour party are very familiar to Conservative Members, because they were raised when we privatised British Telecom? At that time, Labour Members said in the House that all the telephone boxes would be closed after privatisation, but the outcome has been that there are 50 per cent. more telephone boxes and 96 per cent. of them are working.
My hon. Friend reminds us, if we needed reminding, that every piece of competition-enhancing or privatising legislation put through the House by this Government has been subjected to total misrepresentation, deliberately and cynically, by the Opposition parties in order to try to persuade us not to proceed. When we have proceeded, their forecasts have turned out to be misleading and worrying for the particular groups of people on behalf of whom Opposition Members claim to speak.
§ Dr. John Reid (Motherwell, North)
What the Minister is saying about the maintenance of minimum standards and social responsibility is utter balderdash. Can he answer my question without reference to all the President's men beside him? If what he says is the case, why are there 60 fewer home service advisers to visit old people and disabled people, to advise them on the adaption of gas equipment? Without reference to all the President's men, can he tell me why those minimum standards are being reduced day by day?
§ Mr. Heseltine
The hon. Gentleman is complaining about the existing situation. We are trying to introduce competition to improve the existing situation.
I have never been ashamed to turn to my right hon. Friend the Minister for Energy and Industry, to seek his guidance on a matter in respect of which he is a well-known authority. Usually we manage to reach an agreed view, which I then present at the Dispatch Box. That is very different from what we see happening in the Labour party, where leading spokesmen fight each other to get to the Dispatch Box to give the different views of the Labour party's current policy.
We have a bizarre situation in which the Labour party is largely absent from the debate this afternoon because it is now trying to agree its new policy on privatisation. We know perfectly well that when Labour Members have agreed, 53 per cent. will believe that they have won and 47 per cent. will believe that they have lost. If the Labour party ever came to power — which heaven forfend—half its members would sit on the Back Benches opposing the government in which they had been elected to serve. They would then talk to us about divisions in the Conservative party.
§ Dr. Robert Spink (Castle Point)
Can I bring my right hon. Friend back to the question of special interest groups? He will be aware of my special constituency 581 interest in blind people. Can he confirm that blind people will still be provided with Braille controls by all gas suppliers?
§ Mr. Heseltine
I know of my hon. Friend's interest and I am pleased to be able to give him a simple answer, which is yes.
§ Mr. Heseltine
I have given way enough. We must maintain the high standard of the debate and keep to the intellectually coherent case that I wish to deploy without that case being knocked about by the roughnecks on the Opposition Benches.
§ Mr. Heseltine
I know that the hon. Gentleman speaks for those roughnecks, but if he will forgive me, I shall try to make some progress.
I may have the biggest neck, but there are parts of the hon. Gentleman with which I cannot compete.
The Bill retains the duty to promote energy efficiency. It creates a new environmental duty, which would, for example, require the director general to take into account the environmental impact of losses in the gas transmission system. The licences will extend to all domestic supplies the current requirement on British Gas to produce energy efficiency services and advice.
Perhaps most important, we are sweeping away the requirement that gas can only he sold as a fuel. The Bill will allow gas to be sold as part of an energy package, including a more efficient boiler as well as the gas itself. Suppliers will be able to compete in selling warm houses and not simply in selling gas, and they will have every incentive to compete by offering such added-value services as well as competing on price.
§ Mr. Heseltine
The hon. Gentleman's neck is still as rough as it was a moment ago, and I will not give way to him.
I believe that competition will provide a powerful dynamic for energy efficiency. I know that Labour Members have always taken a cynical view about that. They believe that the only way to promote energy efficiency is through public expenditure or levies on other consumers. But they have always scoffed at what a competitive market can achieve. They have always been proved wrong in the event.
The principal concept underlying the Bill is the division of the various components of the gas industry. In particular, the public gas supplier envisaged by the Gas Act 1986 is to become three separate types of entity.
The first is the public gas transporter, who operates the pipelines through which gas is delivered to premises. The Bill recognises that, at the level of local distribution, that 582 remains a monopoly function. Accordingly, British Gas's prices for transportation services will remain closely regulated.
The second entity is the gas supplier, who will contract with the customer for a supply of gas and will be responsible for delivering the services that the customer requires.
The third entity is the gas shipper, who performs the specialised function of arranging with public gas transporters for the right amounts of gas to be put into pipelines—normally at the beach—and conveyed to premises. In effect, that is a wholesaling function. The Bill requires that public gas transporters are separate legal persons from suppliers or shippers. However, the Bill allows the supplier and shipper functions to be handled either by the same entity or separately so that companies can organise themselves to fit their expertise.
A memorandum giving details of the principal terms of the licences—to which Opposition Members have drawn the attention of the House—was placed in the Library last week. The legal drafts of the licences are being prepared and will be published as soon as they are ready. We will of course listen most carefully to the views of hon. Members, the industry and others with an interest as we move towards finalising those standard conditions.
The Bill's detailed provisions largely consist of amendments to the Gas Act 1986 to give effect to the new structure and to provide an appropriate system of licensing. Clauses 1 and 2 adapt the duties of the Secretary of State and the director to the new regulatory framework. Clauses 3 to 8 introduce the new licensing framework for the industry, appropriate to the introduction of full competition. Clauses 3 and 4 and schedule 1 make it a criminal offence, subject to exemptions, to act as a supplier, shipper or transporter without the appropriate licence.
Clause 5 sets out the licensing regime for public gas transporters. Clause 6 sets out the licensing regime for gas supply and gas shipping. Clause 7 provides for the scope of licence conditions and procedures for application. Clause 8 enables the Secretary of State to determine and publish standard licence conditions and provides for their incorporation in licences. The Bill includes a number of other clauses and schedules, which there will be an opportunity to consider in detail at a later stage.
This Bill brings to an end a 150-year period of monopoly in the gas industry. It provides for the change to take place carefully and with fully adequate safeguards, yet it will allow people in the pilot areas to start benefiting from competition from next April. No stronger confirmation could be seen of the popularity of our proposals than the widespread interest that has been shown by people and their elected representatives in participating in the pilot phases. The Bill sets out proposals that have been welcomed by British Gas, by independent suppliers and by the Gas Consumers Council.
Perhaps I can take the House just a little further back in history and deal with the views that the Labour party has expressed on the issue. As we listen to what the right hon. Member for Copeland says this afternoon, we ought to know the judgment, authority and quality of view that lie behind the Labour party's policies.
583 In 1985, the right hon. Member for Salford, East (Mr. Orme), who was then the Opposition spokesman, said:
There is no evidence that the Bill will improve efficiency, provide a better service, produce cheaper gas or, least of all, create greater competition.As the House knows, there have been significant reductions in the price of industrial and commercial gas. There has been a significant increase in competition. There is certainly improved efficiency and a wider service.
The next forecast that we were to hear came from the Liberal spokesman, the hon. Member for Gordon (Mr. Bruce). He told us that
the 16 million British gas consumers can expect only one result—to pay increased gas prices, higher than the rate of inflation, for years to come."—[Official Report, 10 December 1985; Vol. 88, c. 780-93.]The whole House knows that there has been downward pressure on prices. The forecasts are that that will be intensified as a result of the Bill. The average annual gas bill for domestic consumers fell from £392 to £315 including VAT in 1994, in real terms. That is a fall of almost £77 per average domestic consumer.
So what happens? The Opposition forecast inaccurately at every stage. The hon. Member for Clackmannan (Mr. O'Neill) said on 3 October 1994:
The Labour party has no interest or intention in seeking to return British Gas to the public sector.That is not altogether surprising, but it should be contrasted with a statement by the right hon. Member for Salford, East. He told us in 1985:
We shall reacquire the assets, based on the policy of the Labour party conference.The only conclusion is that Opposition Members got their judgments wrong and because their judgments were so wrong, they changed their policy. Now they know that they cannot possibly go back to the electorate with the policies that a few years ago they believed were absolutely essential. That is why the Labour party is in such turmoil on clause IV.
If one thinks that the Labour party's policy is some sort of muddle based on misjudgments about the gas industry, perhaps I may trespass on the House's time a little longer.
When the right hon. Member for Sedgefield (Mr. Blair) led for the Opposition in opposing the Electricity Bill in 1988, he said:
what is proposed today is not something radical, evolutionary and new, but something old-fashioned and failed.Yet now he is flogging around the country trying to persuade his party that the things that we did in 1988 are so central to the economic fabric of society that they cannot be changed.
Just to illustrate the depth of knowledge that he brought to the subject, the right hon. Member for Sedgefield had to say:
the idea that we will have an influx of power stations, all competing on the grid, is nonsense.Yet I was at the Dispatch Box a year or so ago when the Labour party condemned us for the dash for gas, which produced precisely the range of power stations that the Leader of the Opposition forecast would not be produced.
The last forecast stands in line. It is from the right hon. Gentleman in the same debate in December 1988:
In exchange for having no choice, we have the reality of higher prices."—[Official Report, 12 December 1988; Vol. 143, c. 680-84.]584 Yet everyone knows that the downward pressure on prices has continued throughout that time.
I took the liberty of looking once again at the amendment tabled by the right hon. Member for Copeland and his right hon. and hon. Friends. This is what Opposition Members will vote for tonight, if they get the chance. It says that the Bill
is damaging to the interests of many sections of the population, including elderly people, those with low incomes and those living in South West England, Wales and other parts of the United Kingdom distant from beaching points".That is clear. That is their opinion. I took the liberty of asking whether any representations had been made by local authorities to be the first experimental area to have the benefits of the competition that will do so much harm to the elderly, those on low incomes and those living in the south-west. After all, if this is so obvious, so important and so devastating for the people for whom hon. Members on both sides of the House have the utmost sympathy —this is going to be a good one—no authority would want to be an experimental area.
The Tories do not come out of this story as well as I would like, if the standard is the imposition of hardship on all those hard-luck cases. Only two Tory-controlled local authorities applied to be part of the first experiment. The Liberal party did rather better. It did 100 per cent. better than the Tories in trying to impose, in the language of the Labour party, hardship on all the most pressurised classes in society. Four Liberal local authorities wanted to be part of the first experiment.
I warned the right hon. Member for Copeland that there was trouble coming. What did we discover about the people who were going to damage the interests of many sections of the population, including elderly people and people on low incomes scattered all over the place? Who takes the prize for the number of local authorities that came to my Department and asked to help get the experiment in place? The right hon. Member for Copeland should stand up and be counted. Six Labour authorities, as opposed to four Liberal and two Tory authorities, applied to be part of the experiment. So which is the party that really cares? Which party is in the business of damaging the interests of elderly people and people on low incomes? It is the Labour party.
I say to the right hon. Member for Copeland and to you, Mr. Deputy Speaker, for goodness sake, if you can get away from the Chamber, go back to where clause IV is being drafted and check it against the amendment on the Order Paper today. The Labour party will have to do some pretty fast talking if all the forecasts for which it will vote tonight come right. The Labour party has campaigned most arduously.
We might ask a question or two about the Liberals. The Liberal party will undoubtedly vote for the Labour amendment, abstain or something—anything to keep out of the Government Lobby. That will be the Liberals' position, because they want to pretend that they are a distinctive party.
On 13 October 1994, the hon. Member for Gordon, who was the Liberal Treasury spokesman, sent a letter to my right hon. Friend the Minister for Energy and Industry. The hon. Gentleman has moved on. The great thing about being a Liberal spokesman is that one never stays in the job for long. One can abandon the position that the party 585 has adopted one month, hand the job to someone else and disown it the next, in any part of the country. In that letter, he said:
I am concerned to read that the Government may be unable to find sufficient space in the Parliamentary timetable to legislate for competition in the gas industry.It is extremely important that the legislative framework for this is put in place as soon as possible".So that there should be no doubt—even for people like myself who perhaps do not pay as much attention to the Liberals as we should—the letter continued:
`i.e.' the next session in Parliament.Even I could work out on 13 October 1994 when the next Session of Parliament would be. I have good news for the hon. Gentleman—join us in the Lobby tonight, because this is the legislation that he regarded as so critical just a few months ago.
§ Mr. Caborn
On a very important point of order, Mr. Deputy Speaker—the security of Government files. I have just been handed a file on the Second Reading of the Gas Bill—a file that obviously should be in the Minister's hands. All the points that he has mentioned are there—notes on intervention, regional pricing, winners and losers, small customers, cherry picking, direct debit, jobs, safety and the role of the regulator. They are all here in this file and as you will see, Mr. Deputy Speaker, they are marked, "Priority", "Immediate", and "Priority" again. I am sure—
§ Mr. Deputy Speaker (Mr. Michael Morris)
Order. The Chair is not responsible for any sources of reference that hon. Members may have. Clearly, the speech of the President of the Board of Trade has a little way to go yet.
§ Mr. Deputy Speaker
Order. It is no good the hon. Gentleman standing there and waving papers at the Chair. With the greatest of respect, that was not a point of order for me.
§ Mr. Heseltine
It is a huge hoot that the hon. Member for Sheffield, Central (Mr. Caborn) should be able to raise that matter today, but if he ever gets into government, he will discover that everything leaks. All that he has demonstrated is that that was a particularly proficient and professional example of the art. Had I organised it myself, I could not have done it faster, and I could not have chosen a nicer hon. Member to do it to.
Another reason why the Opposition will try to persuade the House to vote for their amendment is that the Billomits any regulatory provision to enable price cuts to consumers where there are unjustified salary and share options awarded to senior employees.
§ Mr. Heseltine
Yes, I will. If the right hon. Gentleman cannot understand that, I shall be happy to read it again. The words are in the Opposition amendment and I thought that Opposition Members could read their amendments. It 586 is clear that the right hon. Gentleman wants an opportunity to discuss recent pay awards and option schemes in British Gas. That is a legitimate thing for him to do and I am not complaining. He did not hear a word of protest from me. I am merely putting that subject on the agenda, so that when he gets up and does so, it will come as no surprise. Indeed, it might even encourage some of my hon. Friends to hang about to hear what the right hon. Gentleman has to say—not that he will not have said it all before.
Nevertheless, I want to deal with that matter seriously. It is suggested that the regulator should be able to impose pressures on gas industry prices to deal with unjustified salary and share options awarded to senior employees. The House will want to know that the turnover for British Gas is £9.698 billion—nearly £10 billion. Total board pay and share options are under £10 million, which works out at 0.09695 per cent. of turnover—less than 1,000th of total turnover. Worked out in terms of the effect on the average domestic customer, it means that if there were no directors, stock options or bonuses, the price to that customer would be reduced by 50p a year. British Gas has succeeded in bringing down prices by 20 per cent., which is £77 for the average domestic customer. So, if one got rid of all the senior directors, bonuses and options and did not replace them, one would save 50p—for a board of directors who have saved customers £77 a year.
I have this question for the right hon. Member for Copeland. Will he not replace that remuneration? Will there be no directors? Where would he recruit them, what would he pay them and how much would that take back from the 50p that he implies would be saved? Does he really think that he could run British Gas and all those other companies with no directors and no cosy soft jobs for pensioned-off trade unionists? He had better not tell them that this side of a general election campaign.
The Opposition are trying desperately to confuse the public about the transformation that they are trying to bring about in Labour party policy on the issue. That policy lacks any credibility because they have had to abandon—or half of them have had to abandon —everything that they have ever believed in on the issue. That is a slight exaggeration, because some Labour Members have certainly not abandoned those beliefs.
I have before me a reference to the hon. and learned Member for Leicester, West (Mr. Janner), who is rather keen on advising people about remuneration. I understand that he is making a killing out of advising directors in the private sector about stock options and remunerative packages—[Interruption.] I am not complaining, but observing that a member of the Labour party is making a killing out of all that. Having done so, in another capacity he is teaching them to present themselves as well as possible, in a friendly and smiling fashion on television, to rationalise and justify to the British people the remuneration packages that he has told them how to get—[Interruption.]
§ Mr. Deputy Speaker
Order. I hope that the Secretary of State warned the hon. and learned Member for Leicester, West (Mr. Janner) that he intended to refer to him. There is a code in the Chamber, which Madam 587 Speaker has re-emphasised, that if hon. Members are to be referred to, they should be done the courtesy of being forewarned.
§ Mr. Heseltine
I respect that judgment, Mr. Deputy Speaker. I shall convey to the hon. and learned Member for Leicester, West the fact that I did not give him warning and that I have referred to that matter. As it has been in national newspapers and as he has set himself up as an authority on the matter, he might have come to the House today to participate in the debate. He is an endangered species—he is hunting with the hounds and with the hares. He jolly nearly got himself outlawed in the House a week ago.
The Opposition amendment reveals that the Labour party has been forced to abandon its opposition to privatisation. It has been forced to recognise that every Government of any significance in the world are moving in the direction that this Government pioneered. Labour Members know that that is in tune with the mood of the people and that is why they have abandoned their long-held views.
Conservative Members have long-held views on the strength of the private competitive world, which offers better services, and is the most effective on quality and prices. We stick to our views and we will stick to this legislation.
§ Dr. John Cunningham (Copeland)
I beg to move,
That this House declines to give the Gas Bill a Second Reading because it believes that the Bill fails to provide effective safeguards for consumers against the deleterious consequences of deregulation of the domestic gas market; is damaging to the interests of many sections of the population, including elderly people, those with low incomes, and those living in South West England, Wales and other parts of the United Kingdom distant from beaching points; fails to provide adequate resources for health and safety monitoring of the implications of deregulation; does not require suppliers to provide the financial surety necessary to guarantee security of supply to consumers; does not address the question of regional electricity companies attempting to enter the gas market; fails effectively to emphasise the need for energy efficiency; and omits any regulatory provision to enable price cuts to consumers where there are unjustified salary and share options awarded to senior employees.We have just listened to a predictable rant by the
President of the Board of Trade, which is now his everyday performance when he comes to the Chamber. On this occasion, as on previous occasions, we give him two out of 10 for content but slightly higher marks for artistic impression, except when he resorted to a squalid attack on my hon. and learned Friend the Member for Leicester, West (Mr. Janner) without doing him the courtesy of notifying him in advance. It is indicative of the depths to which the right hon. Gentleman has descended that he should do that despite the recent admonishment of Madam Speaker about such personal attacks in the Chamber.
The President of the Board of Trade had a lot of say about many matters except the Bill. That is not surprising because, when he talked about the Bill, he demonstrated that he knows little about its implications. Even when the Minister for Energy and Industry whispered the answers in his ear, he confused some of his responses, as I shall demonstrate in a moment.
The right hon. Gentleman talked about 1985 and 1988. We could all remind him where he was in 1988. He was writing a book called "Where There's a Will", which was 588 deeply critical of the Government's policies. It was all about intervention, doing more to support British industry and creating jobs. No one has done a bigger flip-flop than the right hon. Gentleman since coming back to office, except possibly his colleague who has just been appointed a Minister having travelled from the Labour party, through the SDP, to the Conservative Benches.
§ Ms Angela Eagle (Wallasey)
Does my right hon. Friend agree that, as the President of the Board of Trade had nothing to say about executive pay except to justify it, he seemed to be at odds with the Prime Minister?
§ Dr. Cunningham
My hon. Friend is right. I do not know whether the President noticed, but, in the middle of his pathetic rant, even the chief executive of British Gas walked out. So I do not think that he has convinced many people in the Chamber or elsewhere by his performance today.
§ Dr. Cunningham
It is a pity about the President's performance because this legislation is not only complex but important as it covers the safety and security of the supply of gas to many millions of people. The Bill comes at a time of huge public dissatisfaction with the Government's privatisation policies and the conduct of those in charge of privatised industries. It comes at a point when public and political mistrust of the powers, duties and performance of industry regulators is high and widespread.
That the Bill is before the House at all owes more to the humiliating failure of the President of the Board of Trade to convince even his colleagues that the Post Office should be privatised than to any other reason. His isolation on that issue was further confirmed by the report of the Select Committee on Trade and Industry last week.
The Bill's complexity, with 17 clauses, six schedules and some 68 pages of detailed proposals, is predictable enough, but much has been left out of the Bill and will be known and understood only when licences for gas suppliers are published. It is typical of this Government that they invite the House to accept the proposals in the absence of vital information in those licences. A second criticism is that the Bill leaves too much to the interpretation of the regulator. At a time when the regulatory regime has been found wanting, that is completely unacceptable to us.
§ Dr. Hampson
Does the right hon. Gentleman accept that the Trade and Industry Select Committee, which has a Labour chairman and produced a unanimous report, said that British Gas should be deregulated as rapidly as possible for the sake of domestic customers, and that we were leading the world in terms of consumer choice at the meter? Does he also accept that the Committee agreed unanimously that there would be lower prices for customers, wherever they were in the United Kingdom and, in particular, that private competitors to British Gas 589 entering the market have even talked of abolishing standing charges? Does he, as Labour party spokesman, accept each of those points?
§ Dr. Cunningham
No, I do not, and I shall come to the Select Committee's recommendations a little later.
§ Dr. Cunningham
I shall give way to my hon. Friend in a moment.
It is well established that there has been widespread disagreement between British Gas, Ofgas and the Department of Trade and Industry about the Bill. That no doubt accounts for the absence of information on the suppliers' licences today. In many respects, the proposals are simply a leap in the dark. Last December, the Trade and Industry Select Committee concluded —I shall quote rather than paraphrase, as the hon. Member for Leeds, North-West (Dr. Hampson) did, from the report:
We found no correlation between competition in the industrial market and what is envisaged for domestic supply, and could find no parallel examples abroad".The Committee went on to say:
We could find no hard evidence to suggest that competition as currently conceived would deliver substantial reductions in gas purchase prices".Those are two conclusions of the Trade and Industry Select Committee.
Important questions have been raised about fundamental aspects of the Bill by all the leading consumer bodies, the Gas Consumers Council, the National Consumer Council—
§ Dr. Hampson
On a point of order, Mr. Deputy Speaker. May I register the fact that the right hon. Gentleman has misinterpreted a Select Committee of the House by quoting passages entirely out of context—
§ Mr. Deputy Speaker
Order. That has nothing to do with the Chair. Hon. Members' interpretation of other hon. Members' speeches is entirely up to them. There are plenty of opportunities in the House for hon. Members to make corrections.
§ Mr. Spearing
A few moments ago, my right hon. Friend mentioned the Bill's unexpected consequences. Is he aware that, in Bromley by Bow in my constituency, we have a depot containing 20,000 spare units in multiple for gas consumers throughout south-east England? A year ago, the depot was to be expanded under an efficient British Gas; it is now to be closed consequent on the requirement of competition. Does not that show that 590 safety and consumer satisfaction will be reduced in south-east England, with redundancies and the closure of that depot?
§ Mr. Robert Banks (Harrogate)
The right hon. Gentleman has misled the House. May I quote from the conclusions of the Select Committee on Trade and Industry, which clearly say:
There will be benefits to consumers from the increased choice and lower costs flowing from the liberalisation"—
§ Mr. Deputy Speaker
Order. If I heard the hon. Gentleman correctly, he said that the Opposition spokesman had misled the House. I must therefore ask him to withdraw that phrase.
§ Mr. Banks
Perhaps I should have said "misquoted" the Select Committee report. May I point out that the conclusions clearly show that the Trade and Industry Select Committee recognises that there will be advantages to consumers from competition, and lower prices for consumers. It is as clear as a bell.
§ Dr. Cunningham
The retention of the Gas Consumers Council is to be welcomed. It is important that such a body, independent of the regulator, the industry and the Government, should speak out for gas consumers. The council will need to be especially vigilant in the proposed new competitive domestic market. It must be adequately funded.
The Select Committee and unions working in the gas industry, including the GMB, which sponsors me, have raised important questions. These concerns are reflected in the amendment. Briefly, they are matters of consumer protection, consumer safety, energy efficiency, standards in the industry, regulatory weakness, openness and transparency of government and regulator alike.
It is interesting to reflect on what British Gas thinks about these matters. I have a minute of a meeting called by Mr. Peter Sanguinetti—it is an internal memorandum—during December 1994. The minute reads:
There were many comments about the problems caused by the executive and the board making decisions without considering the impact of their actions internally as well as externally. The inevitable conclusion is that we have the potential for a crisis just about every week for the next two months at least.The memo with the minute refers to the withdrawal of services and shops, TransCo having problems with United, which is not paying its bills, the fact that almost 200 members of staff who now have no jobs will be encouraged to leave and TransCo no longer operating leakage survey teams. It appears that TransCo's staff will only go into homes and make the gas supply safe. They will not repair appliances. New debt and disconnection policies are foreshadowed for April. It is possible that disconnections will increase. Meter reading is to be contracted out. That is quite a contrast with what the President of the Board of Trade was saying about the 591 maintenance of current levels of service by British Gas. He is completely wrong about that, as he was about many other things.
§ Mr. Heseltine
It seemed that the right hon. Gentleman was not happy about the contrast between what he said and what the Select Committee reported. Is he aware that the conclusion reads:
We believe that some further safeguards are required, but most of the fears now appear to have been unfounded or exaggerated, especially as regards the transitional period.Why does the right hon. Gentleman— Dr. Cunningham: Read on.
§ Mr. Heseltine
Yes, I shall do so. The conclusion continues:
There will be benefits to consumers from the increased choice and lower costs flowing from the liberalisation of the domestic gas market, but the scale of the benefits and who would benefit is uncertain.The whole—
§ Mr. Heseltine
Of course. The paragraph continues:
Since the Government had already encouraged new suppliers to prepare for entry to the market, we welcome the fact that legislation is to be introduced to comply with the intended timetable, and we emphasise the importance of proceeding in accordance with that timetable".How can the right hon. Gentleman continue producing canards when the Select Committee, which is chaired by the hon. Member for Sheffield, Central (Mr. Caborn), has patently stated that he is peddling "unfounded or exaggerated" half truths?
§ Dr. Cunningham
The right hon. Gentleman had better say that to the National Consumer Council, the Gas Consumers Council and the Consumers Association, all of which have raised the same questions in their briefings, which I assume have been sent to every Member of this place. I am not inventing threats or fears. I am merely expressing the views that are held by all the principal consumer associations—
§ Dr. Cunningham
I shall give way in a moment when I have finished my sentence, if the right hon. Gentleman does not mind.
Of course, there is a welcome for the proposals in principle, but questions have been raised about benefits to consumers and services to consumers, as I have been outlining.
§ Mr. Heseltine
The Second Reading of a Bill is about the principles that lie behind the Bill. As the right hon. Gentleman has now conceded that the Select Committee wants us to go on, as do all the consumer bodies, will he join my right hon. and hon. Friends in the Government Lobby tonight?
§ Dr. Cunningham
The right hon. Gentleman is strangely mistaken if he does not realise, after all his experience in the House, that we have tabled a reasoned amendment. He had a great deal to say about it but apparently he has not taken on board its implications. The 592 jobs of thousands of workers are in question. Many of these people are highly skilled and experienced in safety and maintenance work on behalf of consumers.
Section 10 of the Gas Act 1986 contains an obligation to provide a gas supply. That obligation has been replaced in the Bill by a requirement merely to connect premises to the network. The omission of a statutory obligation to supply any consumer who requests that that be done seriously diminishes consumer protection. That, too, is the view of consumer organisations. People should have the right of supply regardless of who they are, what their income is, where they live or how they pay. The Bill gives no such guarantee. It is said that the obligation to supply will be included in licences, but they will be subject to change without the consent of Parliament. That is unacceptable to my right hon. and hon. Friends because we believe that consumers' interests and protection should be at the heart of the Bill. We know from recent events in the electricity industry that shareholders' interests have been paramount in the view of industry chiefs and of Ministers. That attitude should not be replicated in the gas industry.
Consumers and regions throughout the country must be fully protected from discrimination by suppliers. There is the so-called cherry-picking threat. The problem is not comprehensively eliminated by the proposals that are set out in the Bill. Why is a legislative obligation not placed on suppliers completely to prevent discrimination against elderly people, people with low incomes and areas of the country that are deprived and contain many unemployed people?
Consumer protection should be a primary duty of the Secretary of State and the director general, but as the Bill stands that is not so. It is vital that everyone has access to clear and concise comparable information on tariffs. Prices in terms of supply should be presented in a standard form by all companies so that consumers can make an informed decision, or they may well make the wrong decision. The dangers of misleading information and unfair terms are well documented in consumer affairs.
Clause 2 appears to make public safety subject to section 4(1) of the 1986 Act. That should not be so. The duty to secure effective competition should not override safety for the public. There is worrying evidence about the rising number of accidents involving gas poisoning, which reached record levels in 1994, according to the Health and Safety Executive.
British Gas apparently intends to withdraw from the installation and service market for all domestic appliances other than space and water heating. That contradicts what the President of the Board of Trade said. It intends to cease stocking parts for cookers, fires and other appliances, as my hon. Friend the Member for Newham, South (Mr. Spearing) said in his intervention. These are matters that cause us considerable concern, especially when the Gas Consumers Council, in its 1993 annual report, stated:
Proven incompetence does not yet appear to result in automatic removal of an installer from the Corgi register.Even when companies are shown to be incompetent in matters of maintenance and safety they are allowed to continue providing a service to consumers.
Nor is there any statutory requirement for individual gas operatives to hold a certificate of competence. Of course, that would never be the case at British Gas with its service and maintenance arrangements. The reality, in 593 contradistinction to what the President of the Board of Trade argued, is that the whole culture of gas safety is being revised by the proposed legislation. In future, TransCo will simply make safe or turn off the supply rather than effect comprehensive repairs or replacement. Hitherto, British Gas set and policed the safety standards. That will end with the proposed legislation, if enacted.
The social care obligation is also changed by the proposals. We discussed and exchanged views, during the President's speech, about free safety checks being retained. We shall certainly pursue that matter again in Committee. Labour Members were not convinced by what he said about free safety checks being retained and that an automatic three-year safety check would be retained for elderly and disabled people. Will home service advisers continue to give special help to consumers who are blind, elderly, frail or disabled? The right hon. Gentleman said that no change was envisaged. He seems blithely unaware that the number of home service advisers has already been cut by 60 in advance of the legislation. How can he tell the House that those services will be maintained when the number of home service advisers is being so dramatically reduced? He clearly does not know what he is talking about. Those are vital questions and we have just demonstrated that the right hon. Gentleman does not know the answer to them.
I can go on. British Gas made clear, in a memorandum in December last year, its decision to review the current provision of adaptors for gas appliances and its intention to review the provision of Brailled controls for gas appliances and to withdraw its literature that is currently available in Braille. So much for the right hon. Gentleman's assurances to the House that no detrimental changes were envisaged.
We have seen the problems that the President of the Board of Trade got himself into over the electricity industry, and the hostile bid for Northern Electric. On Monday 20 February, in this Chamber, he misled me and the House over his power to veto in relation to the actions of Office of Electricity Regulation. The right hon. Gentleman was good enough to write to me on 24 February to confirm that he had misled me in the House on that occasion. Since this is a complex matter, I was quite prepared to accept the apology that he gave in his letter. He placed on record in that letter what he should have told me about his duties and responsibilities in that letter. I have it here, but will not detain the House by reading it out.
The right hon. Gentleman appears in the proposed legislation to be giving himself the same powers as the Director General of Gas Supply, who has the power to refer to the Monopolies and Mergers Commission, as he has already done with the Director General of Electricity Supply. Why does he want the power? Why does he believe it necessary? If he envisages using the power, will he announce to the House his reasons for it? We are entitled to some explanation on that issue, too.
§ Mr. Alex Salmond (Banff and Buchan)
The right hon. Member for Copeland is correct. These are vital matters of principle. I know that the right hon. Gentleman has 594 tabled a reasoned amendment, which I shall be happy to support, but given the importance of these matters, will he be voting against the Bill itself?
§ Dr. John Cunningham
No. We shall be voting on our reasoned amendment, for the reasons set out in it and in the context of reservations about the proposed legislation. That is our position.
The Government are apparently so uncertain of the consequences of the proposals on consumer prices, safety and the industry that they have agreed to a trial. That decision is welcome, especially as so many organisations share our concerns about the Bill. It is clear that the Government dare not proceed with their original grandiose plans to introduce the proposals nationwide all in one go. But apparently, according to the proposed legislation and the associated literature, the trials are to be confined to operational efficiency. As the all-party Trade and Industry Select Committee said, in paragraph 60 of its first report:
It would be pointless to have a transitional period unless there is full assessment of its consequences and wide consultation, including parliamentary scrutiny, before further steps are taken.The Labour party strongly shares that view.
Recent experiences of privatisation, competition and regulation have shown that regulation is weak and has been ineffective in protecting consumers. Privatised companies put shareholders first. They do not fully disclose all the details of their financial circumstances to regulators and, as we have seen in electricity supply, consumers have been overcharged for years.
The Director General of Gas Supply will have many gas companies to regulate. We cannot be confident of success, especially as recent experience in the gas industry shows that, from December 1986—since privatisation—to January 1995, the price of gas, as measured by the retail prices index, has fallen by 16 per cent. But the price of gas, based on the producer price index, has fallen by 40 per cent.—more than twice as much. The consumer has not received commensurate benefits from that reduction. The consumer has not had the good deal that the right hon. Gentleman was trying to claim that he has had.
These proposals come at a time when, in Britain, inequality is worse than at any time in the past 50 years. As the Rowntree report showed, in the past 15 years, inequality in the United Kingdom has grown faster than in any other industrialised country, with the exception of New Zealand. One in four people now lives in a household with an income below half the national average. The bottom tenth of the population is 17 per cent. worse off after housing costs than in 1979. The distribution of income is more unequal today than at any time since the war. In addition, as the British Medical Association reported last week, the widening health gap between rich and poor is a direct result of the Government's wrong priorities and unfair policies.
In the monopoly market, the additional costs to British Gas of quasi-social obligations for all those on low incomes, elderly and disabled people, have been spread across the whole consumer base. Will those costs now be recovered from vulnerable consumers or will they continue effectively to be shared? I raised that issue when I intervened during the speech of the President of the Board of Trade. I was not convinced by his answers. 595 As the right hon. Gentleman said, the Bill does nothing to end excessive salary and share option abuses. I wonder whether the right hon. Gentleman agrees with the Prime Minister, who, in answer to my right hon. Friend the Leader of the Opposition, said:
Yes, I do find these payments as distasteful as the right hon. Gentleman—as do, I dare say, many other people as well … I believe that they bring the system into disrepute."—[Official Report, 28 February 1995; Vol. 255, c. 837.]Today the President seemed to be sweeping all that aside in his apparent acceptance of this. Here is the first opportunity for the right hon. Gentleman to act to end those abuses that the Prime Minister finds so distasteful, and he does nothing. There are no such proposals in the Bill. There are no powers for the regulator to cut prices where abuse occurs, to call directors and executives to account. Does the Prime Minister, sorry, the President—I beg his pardon, but we know that he would like to be Prime Minister—approve of Mr. Giordano receiving £450,000 for a two-day week as part-time chairman of British Gas? Does he approve of Mr. Cedric Brown's share options? Does the President realise that, if the recently announced British Gas incentive scheme had been in operation, Mr. Brown would not have qualified for a single share on his or his company's performance over the past three years?
The total productivity of British Gas showed almost no improvement between 1989 and 1994; yet Mr. Brown, Mr. Giordano and their colleagues awarded themselves more than 1 million share options over that period. That was based neither on the company's performance nor on their own performance, and under the new incentive scheme that they have introduced not one of those shares would be available to them on merit. When the share options are set beside the company's performance, they are shown to be completely undeserved; yet the President of the Board of Trade remains silent.
The right hon. Gentleman supported Mr. Brown when the news first broke a few weeks ago. Is that still his position? Would he like to tell us? Is this not all too typical of the present Government?
§ Mr. Heseltine
What I supported—on a Monday morning edition of the "Today" programme, if I remember rightly—was the announcement by the new chairman of British Gas, Dick Giordano, that he did not want a hidden regime in British Gas. He did not 'want executives to receive bonuses and share options that added up, in large measure, to what looked like a salary. He therefore put together a remuneration package for Cedric Brown that enabled him, instead of receiving bonuses on top of his salary, to receive a salary that included those bonuses.
That led to a second stage—the increase in salary, which I believe was £75,000. I am the first to recognise that that is a large sum, but the increase was portrayed as an increase in the basic salary to which the bonuses had been added—an increase of many hundred per cent. I said on "Today" that I thought that the chairman was right to create an open regime, enabling everyone to see what was happening; but I have also said many times, in the House and in public, that the Prime Minister is right to be concerned about such matters. I still believe that, which is why I welcome the establishment of a committee under Sir Richard Greenbury to examine the position.
596 I leave the right hon. Gentleman with a question that he will not want to answer. If he could fix the salaries of all directors of utilities, including British Gas—which he implies that he would like to do—how much difference does he think that that would make to the cost of gas to the customer? I calculate that, if no directors were paid, 50p a year would be saved. How much does the right hon. Gentleman think that he would save?
§ Dr. Cunningham
The public want action, regardless of whether it makes any difference to their gas bills. The right hon. Gentleman does not seem to recognise that the public are fed up with seeing these people—I shall deal with the others for whom he is responsible in a moment—rip them off and make themselves rich in ways that are unconnected with their performance.
The right hon. Gentleman seems not to have heard what I said. British Gas's total productivity showed almost no improvement; how could anyone qualify for a bonus when it had not been earned? How could those people justify giving themselves more than 1 million share options for which they would not qualify under the new regime that they themselves have introduced? How does the right hon. Gentleman defend that?
§ Mr. Heseltine
I shall try to explain to the right hon. Gentleman. A few years ago, British Gas was a cosy monopoly, protected from any competition and with virtually no international ramifications. Today, it faces intense competition in the industrial and commercial markets. It has lost a significant part of its market, because the private sector has come in with lower prices. It has turned itself into a major investor in North sea oil and gas, and has become a world-class company trading in 45 countries. That represents a transformation in Britain's ability to fight in the international market place.
The endless endeavours of the right hon. Gentleman and his party to pretend that British Gas today is what it was five years ago are a manipulation of the reality. British Gas is now a major British international company.
§ Dr. Cunningham
The right hon. Gentleman seems to be saying that pay and share options can be taken regardless of company performance. Incidentally, he is wrong about something else as well: in no circumstances do my right hon. Friends and I want to make such decisions, but we want proper systems. We want remuneration committees that are not stuffed with the cronies of those whose salaries they are raising; and we want duties and obligations to be laid on people to behave with some decency when the stewardship is theirs.
§ Mr. Heseltine
I wonder whether the right hon. Gentleman gave notice to his hon. and learned Friend the Member for Leicester, West of that personal attack on him.
§ Dr. Cunningham
It is all too typical of the Government to refuse—as the President of the Board of Trade has done again today —to deal with abuses perpetrated by those on large incomes, while at the same time introducing legislation to weaken consumer protection and, perhaps, increase charges for pensioners, disabled people and families on low incomes. True to type, the right hon. Gentleman proposes again to risk the widening of inequalities in his legislation.
We know that the Prime Minister is pressing the right hon. Gentleman on these matters, and that the public want action; we also know that the President of the Board of 597 Trade is loth to take such action. We know that because someone sent me a copy of a letter from the right hon. Gentleman's office to the Prime Minister's office—a letter from the right hon. Gentleman's private secretary, Ms Rachel Jenkinson, to Mrs. Mary Francis, the Prime Minister's private secretary at No. 10 Downing street.
The letter says:
On this issue, obtaining information from Stock Exchange sources and direct approaches to the companies would run the risk of becoming a rather public exercise which the President is loth to undertake.I am not surprised that he is loth to undertake it. With the letter is a 20-page memorandum listing the bodies—British Gas, London Electricity, Eastern Electricity, Manweb, Northern Electric, Anglian Water, North West Water and so on—and the millions of share options that have been awarded regardless of performance. The right hon. Gentleman apparently intends to do nothing about that.
The letter says:
The results suggest that there are potentially more causes célèbres to be found. In view of the figures shown in table 2 against the RECs in particular, this suggests that we should expect a good deal of publicity in June and July this year.That shows that self-awarded bonuses and share options, unattached to any performance criteria, are a matter of fact under the present Government. They are part of the system that the President of the Board of Trade and his right hon. and hon. Friends have established, and he intends to do nothing about it. So be it; the public will make their own judgment. The Bill raises that and many other issues of public concern. On this issue the President appears to be paralysed. He is more like Ulysses than Tarzan, sulking in his tent.
The Bill raises a wide range of enormously important issues such as the right to supply, safety, pricing policy and consumer protection. It threatens the employment of thousands of people. The President and the Government have been widely condemned for issuing a false prospectus just a few days ago for the share sale in National Power and PowerGen. By pursuing these issues in Committee we intend to try to prevent them from doing that again. That is why I ask the House to vote for our amendment.
§ Sir Michael Grylls (Surrey, North-West)
The right hon. Member for Copeland (Dr. Cunningham) has given the Labour party's response to the Bill. As his speech rolled on, I felt a bit sorry for him because, apart from picking out one or two important points which I agree should be considered in Committee, he could find nothing to say against the Bill's general principle. Therefore, he spent the greater part of his speech digging around in the same rather unpleasant way as the hon. Member for Dunfermline, East (Mr. Brown) and trying to mislead the public even further about the facts of some of the remuneration for people in the recently privatised industries. For example, he suggested that the share options and other packages are offered to a small number of people. I think that the hon. Member for Dunfermline, East spoke about a handful of directors, but, as is well 598 established throughout British industry, share options are generally given to many people in a business to motivate them.
The right hon. Gentleman is the shadow President of the Board of Trade and, if there were an accident, he could be in office. I do not think that there will be an accident but there could be, and the right hon. Gentleman needs to understand these matters. I hope that I can take him with me on this issue. Does he agree that motivation for people doing any work in industry is important? The right hon. Gentleman nods assent. He and I, like most people, would agree that finding proper ways to motivate people to be successful is important. Therefore, we cannot begrudge the result of that motivation when people are successful. In a sense, that is what the share option argument is about.
Share options are of no value whatever unless the recipients have performed so well that the shares have gone up in price. The right hon. Gentleman and I debated this a few days ago in the House. I hope he realises that profits from share options do not come from the company. They are an economical way to reward people or to motivate them towards success. The profit comes from the remaining shareholders and not from a company's coffers.
§ Dr. John Cunningham
I am grateful to the hon. Gentleman for allowing me to intervene because I spoke for longer than I had intended. Let me be quite clear. I believe in high rewards for high performance. It is right for people to be highly rewarded for outstanding performance. If people create wealth and employment in the British economy and for their organisations they deserve high rewards, but such rewards must be merited and in the cases that I mentioned they cannot be justified. They were not merited by the performance of the individuals or the organisations, and that is especially true of British Gas. Shares were overvalued in the electricity supply industry, not on the basis of performance, but because consumers were being overcharged.
§ Dr. Hampson
My hon. Friend will recall that Mr. Cedric Brown had his salary package changed because, as many of us agree, the existing share option was unsatisfactory. The new share option is performance related, which is what the right hon. Member for Copeland (Dr. Cunningham) was calling for. Ironically, in his speech he somehow condemned that because he said that if it had been in place, Mr. Cedric Brown would not have got his bonus increases. The scheme was changed to a performance-related system and the length of time that his contract had to run was reduced.
§ Sir Michael Grylls
My hon. Friend is right, and he reinforces the remarks of my right hon. Friend the President, who dealt effectively with that matter.
It is rather strange to hear the shadow President of the Board of Trade, in what we are led to believe is the new model Labour party, saying—I carefully wrote it down—that it is wrong for people "to make themselves rich". I thought that the Labour party had changed and wanted to see an improvement in the living standards of our people and to see people in industry doing well, being motivated and getting the rewards of that motivation.
§ Mr. Derek Enright (Hemsworth)
The hon. Gentleman spoke about share options being well spread and giving 599 encouragement to people. How many share options did the manageress of the British Gas shop in Hemsworth receive to encourage her?
§ Sir Michael Grylls
I cannot answer that precisely, but I can respond to the hon. Gentleman as I am about to move to that matter. I am grateful to the hon. Gentleman for reminding me. I shall correct some of the deliberately misleading statements by Labour in recent weeks about some of the share options. For example, some 200 staff and managers have share options in Seeboard, which is one of the smallest regional electricity companies. However, the hon. Member for Dunfermline, East spoke about only six of its directors. He has misled people over that. In Yorkshire Electricity, there were 54 such people, but the hon. Gentleman referred to only five and divided the sum of money between them. That is the sort of sleight of hand that would get an accountant behind bars very quickly. It is extraordinary how a Member of Parliament can get away with that.
§ Sir Michael Grylls
I shall give way in a moment.
In East Midlands Electricity, 37 employees received the benefit of share options rather than the four directors mentioned by the hon. Member for Dunfermline, East in his news release. I could give further examples, but I suspect that I might be told that we are debating British Gas and not other companies.
It is important to have truth and accuracy, and it is certainly important that, where possible, there should be agreement between the two sides. If we agree that people need to be motivated it is quite wrong and intellectually dishonest to attack those who are so motivated. That is my principal point on that issue.
I warmly welcome the Bill. It could have been improved by being called the gas competition Bill, because that is what it is all about. My right hon. Friend the President of the Board of Trade rightly sketched the early history of gas supply. At one time it was generally accepted that it had to be a monopoly, but while Conservative Members realise that we have moved on from those days, apparently Labour Members do not. Nowadays, there can be safe and effective competition and it can operate in the interests of the consumer. That is what the Bill is about: it is not just about price.
Price, of course, is affected by competition. All our experience of shopping in the high street leads us to believe that competition encourages prices to be kept down and, if possible, reduced, but competition also leads to improved service. This is what I find strange about the Opposition. They talk as if the introduction of competition will lead to the disappearance of services for the disabled, the blind and others who particularly need looking after. Experience shows the opposite.
Most hon. Members will remember that, some years ago, when British Gas was a sleepy old state-owned company, a great deal of our constituency mail consisted of letters from desperate people who could not get the gas board to come round and put their appliances right, and so on. I can only speak for myself, although I suspect that most hon. Members share my experience: since privatisation, the complaints have all but disappeared. To be sure, mistakes still happen in any industry, but they have been greatly reduced in this one. I cannot remember 600 when I last had a letter from a constituent complaining about the service that he had received from a gas supplier. I accept, however, that the service can be improved—hence the argument behind this extension of competition, which is about improving the standard of service.
In conversations with some of the gas suppliers, I have been told that they see improved standards as part of their role. I have, for instance, a circular from United Gas, one of the new private companies. The company says on the first page:
Gas is fundamental to quality of life and is not merely a commodity. Service to the customer is not only essential but is also one of the principal ways, along with price, that companies will gain market share.In other words, the company views it as important to its business to be able to say to the consumer, "Come to us for your supply, because we will offer you a better service than will any other supplier." That is competition, and it is just the same as a high street shop offering people a better service than the shop next door. Gas is no different.
United Gas goes on to say:
We see opportunities to improve standards in areas such as (1) no disconnection in winter months for elderly customers with debt problems, (2) more frequent meter reading to avoid debt and disconnection problems, and (3) maintenance of an industry-wide Gas Care Register".Those ideas have been advanced by one of the new competing gas companies. They show that such companies want to enter the marketplace. Thanks to the Bill, they will be allowed to do so, so as to offer better services and, one hopes, lower prices.
We saw the same thing when British Telecom was privatised. Waiting lists for telephones have evaporated. There used to be 250,000 people waiting for telephones, but there are no waiting lists now and people can get telephones installed quickly.
When British Airways was the sole airline flying the London-Glasgow route—I remember this well, as I used to go to Glasgow quite often—the company used to tell passengers that the flight was so short that it did not have time to serve them breakfast. That was unfortunate, since I rather like breakfast early in the morning—as, I suspect, do many other people. Wonder of wonders: once British Midland was allowed on the route, it said, "Of course we can supply breakfast while flying between London and Glasgow", and it did. Business men benefited, and—lo and behold—British Airways found a way of supplying breakfast, too. That is what competition does. Strangely, the new model Labour party seems to have forgotten what competition is all about.
Monopoly can do a great deal of damage to the public. It may be the dream of many business men; most business men would love to misbehave by rigging the market to create a monopoly. That is why we need competition authorities—to ensure that it does not happen and to protect the consumer. I believe that it is the duty of every Government to end monopolies wherever they find them—in the utilities or in the ordinary marketplace that we encounter every day.
As for the opportunities offered by competition, there is always—understandably—a great deal of emphasis on the reduction in unemployment that follows the modernisation and privatisation of those industries, because they have to be run efficiently. British Gas had about three people for every two jobs. Clearly, that could not go on in a competitive marketplace. Quite reasonably, 601 the Opposition called the loss of jobs a bad thing. So it is when people lose their jobs in the first instance, but let us look at the positive side. New jobs are created in other companies entering the marketplace. That is exactly what happened in the telecommunications industry, and I believe that it will happen in the gas industry, too.
For the employee, competition can also be beneficial. As long as there is only a monopoly, the employee is in a dicey position. If he falls out with his manager or director, he has nowhere else to go. There is only one gas company and if he leaves it, he has nowhere to work. If, however, there are a dozen competing companies and the employee does not like one of them, he goes to another. That is what happened with BT; there are now about 120 competing firms in the telecommunications market, where there used to be only one, and we know what good results that has had for the public.
When the election comes, the electors will have an interesting choice. They can choose the new model Labour party which is apparently going to renationalise some of the utilities. We do not yet know which ones, but no doubt Labour will tell the country. It will make them into monopolies again and close independent gas companies, for instance. The outcome will be lower services at higher prices. Alternatively, the electors can chose to stick with the Conservative party which has brought about competition, with lower utilities prices, to the benefit of the consumer.
That is a clear choice. I believe that people will chose the Government and the party who really believe in competition and in the free market; and in giving other companies a chance of coming into the market. What is proposed here for the gas industry is a massive step forward, for which the Government should be warmly applauded.
§ Mr. Stephen Byers (Wallsend)
I begin by declaring the fact that I am sponsored as a Member of Parliament by Unison, the trade union which represents many of the workers in the gas industry. I might explain for the record that that means that I receive no money personally, but my constituency party receives about £600 a year towards its running costs and, at the last election, received £2,200 towards election expenses.
Reference was made earlier to a bundle of documents that had been mislaid. I have now had the benefit of reading the Minister of State's wind-up speech, which we shall not hear officially until later this evening. As usual, it is an excellent speech—written, I believe, on 8 March, when the Minister predicted the nature of the contributions that would be heard from Opposition Members:
What I have found particularly fascinating is the muddle, contradiction and hypocrisy emanating from the Benches opposite.602 What marvellous foresight that shows on the part of the Minister of State. Perhaps he could also predict the winner of the gold cup at Cheltenham on Thursday—that would be of real benefit to hon. Members on both sides of the Chamber.
§ The Minister for Energy and Industry (Mr. Tim Eggar)
The hon. Gentleman obviously did not get to the fourth paragraph of my speech.
§ Mr. Byers
The second paragraph was more than enough.
In his Second Reading speech, the President of the Board of Trade referred at some length to the licensing regime and rightly stressed the importance of the licensing procedures. It was interesting and a matter of some concern that the documents contained a briefing note to the Minister stating clearly that the Minister should not
refer to licences being available at the beginning of the committee stage",which his civil servants say is unlikely. The note goes on to say that the Minister should always refer to licences being available in Committee but without specifying exactly when that important information will be made available. I urge the Minister to ensure that the licences are available at the beginning of the Committee stage.
§ Mr. Eggar
As the old adage states, civil servants are there to advise, and Ministers are there to decide. Having received the advice that the hon. Gentleman has clearly read, I have given an undertaking to Opposition Front-Bench spokesmen that I shall do my utmost to make the suppliers licence available on the first morning of the Committee. I cannot give the assurance that I had hoped to give that the transportation and shippers licences will be available on the first morning of the Committee, but I am extremely hopeful that, if they are not available on that morning, they will be available later. I have always said that I will make the suppliers licence available as early as possible, and that it would available on the first day of the Committee.
It is right that licences should be available to the House and to the Committee as early as possible. I have always been critical of situations in which hon. Members have been deprived of information that is essential if a Committee is properly to consider a proposal.
§ Mr. Byers
I welcome the Minister's comments. Clearly, the licensing regime and the details contained in the licences will be of crucial importance for a proper consideration of the Bill. I welcome the assurance that he has given.
Superficially, it is attractive to open up the domestic gas market for competition. I have always taken the view that competition is necessary if we are to have a strong, dynamic and vibrant private sector. That is good for the economy as a whole, with our industries competing, as they must, in the world market. Competition will often bring real benefits to the consumer in terms of wider choice, better quality and lower costs. It is important that Labour Members recognise the important role that competition can play in the private sector.
I therefore start from a presumption in favour of competition in industry. Overriding reasons must exist as to why, in the public interest and for the common good, competition should not be imposed on the domestic gas market. On balance, I take the view that, for practical 603 reasons, the Bill's provisions do not benefit all our people. Therefore, the Bill is not in the public interest. Nevertheless, my party's Front-Bench team and I recognise the importance of competition. We have therefore tabled a reasoned amendment which seeks to deal with some of the genuine concerns of many hon. Members and of the public about the provisions of the Bill.
The Monopolies and Mergers Commission recommended that British Gas's domestic monopoly should not be removed until some three to five years after the company had divested itself of its trading arms, but that recommendation has in effect been ignored by the Government. Unfortunately, they have allowed political dogma to triumph over reason in imposing competition on the domestic market at a rapid rate.
In the relatively brief time available, I wish to deal with two issues to which the reasoned amendment refers: the pricing that is to be put into place, and hon. Members' real concerns about the Bill's safety provisions. Some 18 million domestic gas consumers use less than 2,500 therms per year. The President of the Board of Trade and my right hon. Friend the Member for Copeland (Dr. Cunningham) dealt earlier with cross-subsidy. Such a subsidy in the domestic gas market is highly significant. I think that all hon. Members recognise that the cross-subsidy is considerable and that domestic consumers who use a relatively high volume of gas—I think that the figure is more than 635 therms a year—are in effect subsidising the costs of consumers who use smaller amounts of gas.
The effect of that is that people in larger properties, who will be consuming greater amounts of gas and who will often be among the wealthier members of the community, are subsidising pensioners, people on low incomes, and people with a disability, who will often be living in accommodation where a relatively low amount of gas is used each year. The bills of the low-volume users are being subsidised by the wealthy high-volume users. That has been described to me as socialism in action.
§ Mr. Alan Duncan (Rutland and Melton)
Will the hon. Gentleman enlighten the House as to why the industrial user should be obliged to continue to subsidise the household user?
§ Mr. Byers
The Bill deals specifically with the domestic gas consumer. The point that I am trying to make is that the high-volume domestic consumer is subsidising the low-volume domestic consumer through the cross-subsidy. Conservative Members have advanced the argument to me that competition will drive down costs for everyone. That is an important point that I feel obliged to deal with later.
I was surprised at the extent of cross-subsidy. The House of Commons Library considered the effect of the subsidy in a purely statistical way. It showed that some 5 million gas domestic consumers who use 350 therms a year or less will pay 12.5 per cent. more for their gas if the cross-subsidy is removed while the cost for consumers using more than 2,000 therms will be cut by 10 per cent. if the subsidy is removed. An argument could be made that competition even protects people using low amounts of gas.
§ Mr. Eggar
The hon. Gentleman obviously did not get to the part of my briefing which referred to that calculation. Had he read that far, he would have realised that the whole basis of that calculation—assuming the accuracy of the leak of his speech that I read in The Guardian this morning—is false. That calculation appears to be based on a British Gas figure given in August 1992 which was subsequently withdrawn in the evidence given by British Gas to the Select Committee on Trade and Industry in 1994. There is the old adage, "Garbage in, garbage out." The hon. Gentleman should not try to make that kind of capital.
§ Mr. Eggar
It is the view of independent competitors of British Gas that there should be no losers. In a free market, it is impossible to predict with certainty the effect on the individual consumer. As I am not sure that this assumption was in the hon. Gentleman's calculation either, I remind him that the regulator's decision to fix the transportation standing charge at £15 per individual consumer means that the interests of low-volume consumers will be more than protected.
§ Mr. Byers
If the Minister could guarantee that the charge will remain at £15, I would welcome that enormously—as would low-volume users—but he knows that he will not take responsibility for maintaining the charge at £15. If he would, we should all breathe a sigh of relief. The Government have washed their hands of that responsibility and are prepared to leave the matter to the regulator. The Minister cannot guarantee that the £15 standing charge will remain.
§ Mr. Nigel Griffiths (Edinburgh, South)
It is difficult for Opposition Members to accept that figures are independent. Giving evidence to the Monopolies and Mergers Commission on one occasion, British Gas implied that the majority of its domestic consumers were contributing not profits but losses, but when giving evidence to the Select Committee on Trade and Industry British Gas changed its position. It has the facts at its fingertips, but if it cannot interpret its own facts, it is difficult for the public and the House to do so. I commend my hon. Friend for endeavouring to enlighten the public and to express our fears—
§ Madam Deputy Speaker (Dame Janet Fookes)
Order. That sounds remarkably like a speech, rather than an intervention.
§ Mr. Byers
My hon. Friend made the point that there is clear evidence of the political view currently held within the Department of Trade and Industry. The DTI paper "The Prospects for Coal", published in 1993, is a clear example of Government thinking on energy:
The aim of Government policy is to ensure that service is provided to customers in a commercial environment in which customers pay the full cost of the energy resources they consume.605 If that happens in the way that the Department proposed in 1993, the Minister must accept that a large number of consumers will be losers under the Bill.
The argument is made that competition will drive prices down for all consumers, but in practice that will not be the case because new independent suppliers will be looking for the most profitable consumers. The suppliers will cherry pick. When profit is the motive, one can expect nothing else.
§ Mr. Nigel Evans (Ribble Valley)
The hon. Gentleman suggests that low-volume users will incur extra costs or higher prices as a consequence of the lack of cross-subsidisation. The same fears were expressed about British Telecom. but low users now enjoy a rebate rather than the opposite. How does the hon. Gentleman argue against that?
§ Mr. Byers
If the Bill required such a rebate, I would accept the hon. Gentleman's point. Government advisers have warned about the implications of the Bill Mr. Dieter Helm of New college, Oxford is not just an academic—I would not rely on his words if he were—but a member of the Government's energy panel and an adviser to the Minister. He said:
There are almost certainly going to be winners and losers. Some people are paying too much for their gas at the moment and some people are paying too little. The new competitors coming into the market will want to pick the cherries … The losers are going to be those people who haven't really been paying the true cost of their gas supply in the past. Those are people who take relatively low amounts of gas, they're people who are, to put it bluntly, very difficult customers for British Gas or anyone else to service.That Government adviser was telling the public what can be expected from the Bill. Even more significant is the view of the independent suppliers who will move into the market. The managing director of Alliance Gas, Mr. Kristoffer Maroe, said one month ago that
it's impossible to stop cherry picking: that's what competition is all about.The Government's own energy advisers make the point that there will be losers under the Bill.
Only clause 6(6) makes an effort to protect vulnerable groups in our communities. It states that the director shall not licence where it is proposed artificially to exclude
an undue proportion of premises likely to be owned or occupied by persons who are disabled or of pensionable age, or who are likely to default in the payment of charges.Such wording will bring a smile to the lips of every lawyer in the country, because it will be a nightmare to define. Cash registers will he ringing in courts throughout the land. That matter should not be left to the judicial process. In the supply of an essential commodity such as gas, the Government have a responsibility to provide a safety net to ensure that there will be no losers.
The public generally would consider it wrong to exclude a poor area of a city such as Newcastle, but clause 6(6) would not stop an independent supplier applying for a licence to supply the whole of a desirable area such as East Anglia—as opposed to north-east England, where a larger proportion of the population will be of pensionable age, on low incomes or unemployed. Writing in The Times recently, Melvyn Marckus commented:
Eventually the penny will drop. Competition will herald cost-reflective prices, which in turn will mean winners and losers.606 The other element in the reasoned amendment on which I wish to speak is safety, which must be paramount. The Minister has said that increased competition will not compromise safety, but I have bad news for him: it already has. He need only look at the way in which research and technology budgets, which are often devoted to improving safety, have been cut over the past few months because British Gas is cutting corners to prepare for competition.
I have a real constituency interest in this as the energy research station at Killingworth in my constituency is threatened with closure and the loss of almost 500 jobs. It would be inappropriate in this narrow debate to talk about the devastating impact on the north-east of England of the loss of highly skilled and well-paid jobs, but there will certainly be an impact on the ability of the gas industry to meet safety needs.
The gas business has been divided into five trading arms which last year spent £31.4 million on research and technology. This year the figure is down to £19.9 million and by 1999 it will be down to £14.2 million. Those budget reductions will have serious repercussions for the safety of the system. I am not talking about esoteric or academic research but about practical research which has real safety implications.
To be more competitive, British Gas is not just cutting the amount it spends on research and technology; even more dangerously, there are reductions in safety margins elsewhere. Pipelines are having to take higher pressure to increase profits. The programme to replace the old iron gas mains has been slowed down. The research station at Killingworth has three areas of responsibility connected with safety.
First, the Killingworth station contains the unit which monitors and identifies the risks involved in the non-renewal and maintenance of the old iron gas mains, some of which are now 100 years old. The real problem is the amount of disturbance to which those old mains are now subject. Cabling and the London docklands extension of the Jubilee line are creating great difficulties and problems for the old mains. All the work being done on that and on the safety risks is currently carried out at Killingworth.
Secondly, the work being conducted on the safety and security of supply in high-pressure transmission lines bringing gas from the landing points to the pressure reduction stations, to try to ensure that there is no serious escape, is mainly carried out by a team based at Killingworth. Thirdly, Killingworth is the base of the incidents team, who go out to investigate any pipe explosion to identify the error and to try to ensure that such mistakes do not happen again.
All that vital safety work is currently conducted at Killingworth, and it is being put at risk by the Government's proposals. The dedicated and highly motivated work force at Killingworth are to he the innocent victims of the Government's policies for the gas industry. The Bill is a triumph of political dogma over reason. It puts safety at risk and it will create many losers among gas consumers. For those reasons, the reasoned amendment is worthy of support today.
§ Mr. Robert Banks (Earrogate)
The hon. Member for Wallsend (Mr. Byers) referred to the speech to be made 607 later tonight by my right hon. Friend the Minister for Energy and Industry. I have no doubt that it was entirely right that my right hon. Friend should have composed his speech somewhat ahead of the debate. The speech by the hon. Member for Wallsend was entirely predictable. It was full of doom and gloom, and everything that he could dredge up was thrown against the Bill. If ever there was a Bill that deserved to command a consensus, to be approached from an intelligent point of view and to be discussed in Committee, this Bill is it.
I suspect that few Opposition Members, including the right hon. Member for Copeland (Dr. Cunningham), actually read the report by the Select Committee on Trade and Industry. If they had read the evidence, they would have been convinced, as we on the Committee were, that it was right and proper for the Government to press ahead now with the deregulation of the gas industry. The evidence was overwhelming and the conclusion that we reached was that the Government should go ahead with the Bill. I am, therefore, delighted that we are debating the Bill today. I assure the House that I shall vote enthusiastically for the Bill, not for reasons of political dogma—I happen to believe in privatisation—but because of the evidence presented to the Select Committee, which pointed overwhelmingly to the Bill being necessary in the interests of the consumer.
It will be interesting tonight to see where the Liberal Democrats stand on the issue. What are they going to do? Will they support the Labour party and go along with the old dogma of resisting and voting against any form of privatisation, irrespective of the proof of the pudding that has been eaten by the consumer, who has benefited so enormously from lower prices as a result of privatisation? The Liberal Democrats, just as much as the Labour party, are frightened of change. I suspect that if they do not vote with Labour, they will abstain as a means of keeping out of the decision-making process. It is all the more a pity for Parliament as a whole that we cannot join together and work in consensus, based on the hard evidence presented to the Select Committee.
Some 18 million consumers out there will benefit from lower prices. Some great words have been said about standing charges, a point that concerned the Committee. There is no doubt that standing charges will be reduced; Competition will have a major part to play because, as the licences are taken up, companies will be hungry to expand their territory for the provision of gas and to bring on board the smaller users. They will do so in a way that will encourage people to go for gas and to use gas. The companies will reduce standing charges as part of that promotion.
While the Select Committee took evidence, the subject of cherry-picking was exhaustively discussed. I am especially pleased that the Bill will ensure that suppliers are obliged to supply any customer in their licensed area. Surely that covers the point about some parts of the area not having large consumers and, therefore, being excluded. There is, however, a point about the geography of the licensed areas that will have to be addressed in Committee. The licensed areas must be comprehensive as opposed to just covering the areas where the better customers are and excluding those on the periphery.
§ Mr. Banks
I am delighted to see my right hon. Friend nodding his head in agreement.
608 Safety is a very important factor. I have no doubt that it is sensible that safety throughout the United Kingdom should be in the hands of British Gas TransCo. It would be wrong to expect individual suppliers to set up their own teams and to make them available to rush out to deal with any emergency. There must be a comprehensive system to ensure that if a person suspects a leak in his gas supply, he can call a service which will be available immediately, irrespective of which supplier covers the territory. That has been agreed and accepted.
It is important, however, that we deal with electricity emergencies and water emergencies in the same way. We should have a single telephone number so that a consumer may ring 888, for example, and be able to get through to gas, electricity or water emergency services. I see no reason why we should not arrange such a service. It would be a simple process and invaluable if time were of the essence—as it often is with gas leaks—and one needed to get hold of the person at the other end of the line so that a team could quickly check the possible out-flow of gas. There is no reason why we should not be able to set up such an arrangement. The Select Committee on Trade and Industry certainly recommends the provision of one telephone number and it would be convenient to use that same number for calling out emergency services to deal with electricity and water as well.
Another matter is pipe installation work. Inevitably, certain pipes will have to be replaced and serviced from time to time and there may be a programme for replacement of gas pipelines in certain parts of the United Kingdom. I am concerned about whether the costs of pipeline work in specific areas will fall on the licence holder for that area, which could affect the prices charged for gas, or whether those costs would be subsumed in the whole programme of servicing pipes in the United Kingdom. It would be fair to assure consumers on that matter at this stage, rather than to leave them to discover subsequently that they happen to be in an area where much replacement pipe work is needed, which would increase the licence fee and mean that their gas prices would not equate with those of somebody in a neighbouring town. I hope that that question may be answered.
My right hon. Friend the President of the Board of Trade has referred to the cost of licences and I know that that matter will be addressed later in Committee. Some costs, however, as is explained in the memorandum, will be incurred by shippers of gas in meeting the obligations of their licences as well as in paying licence fees. The memorandum states:
It has not yet been possible to determine these costs as the precise terms of the licences and the commercial background to the obligations are not settled. However, the Government will be publishing the draft shipper's licence shortly and will consider the views of business before finalising the proposals.I welcome very much the consultation between my right hon. Friend and representatives of the various companies which are potential suppliers. Indeed, British Fuels in my constituency has consulted members of my right hon. Friend's Department and I am grateful for the arrangements that have been made.
However, I am somewhat concerned that the small supplier may often be left out and that the draft proposals in the Bill, which were sent out to a number of gas producers, were not sent out to some of the smaller potential suppliers. It is important that we consult as 609 widely as possible so that we do not at any point exclude the small supplier from the chance of entering the market and from securing a fair deal on power along with the large suppliers.
The network code under consideration is relevant because it is feared in some sectors of the industry that British Gas, which will, after all, be in control of pipelining, will hold things up to the detriment of some of the smaller users. We have been assured that, by October 1995, British Gas will be in a position to deliver the systems required for the whole system to function. I should like to be further reassured that British Gas will be able to deal with pricing and with all the various balances that have to be facilitated to make the system work effectively, and that it will not militate against the smaller supplier wishing to enter the market.
Rates of daily input, for instance, will be part of the system which will have to be put in place. Billing for gas is another factor to consider, especially its time scale, which could have quite an effect on the smaller supplier which relies on 28 days or less—perhaps more if it can get it—to balance its books. We must ensure that the smaller supplier is not at a disadvantage in comparison to the very large supplier which can carry the weight of being billed for the necessary gas on a day-to-day basis. There needs to be a check so that the finances of the small supplier will not over-balance.
It is reasonable to assume that competition in the gas supply market will inevitably encourage—indeed, we want to encourage—people to consume more gas, but that militates against energy efficiency. That matter was raised in the Select Committee and one of the statements that emerged from the evidence given touched on a pertinent point and has always rested in my mind. I shall quote two sentences of the evidence given by the representative of Amerada Hess, Mr. Laidlaw. In reply to a question on energy efficiency, he said:
What we are actually trying to do is secure the maximum number of customers. The way we can do that is actually to offer energy efficiency packages and we have already had, even though our plans are obviously just shaping up, a number of energy efficiency companies contact us with a view to preparing and offering a full energy efficiency package to the residential market.That is a positive point and it is one of the exciting factors. The argument that energy efficiency will be sacrificed in the rush of people for cheaper gas has been overtaken by the fact that more people will be offered incentives to conserve their gas and to use more efficient appliances.
It is important that the published prices and tariffs are fully available from all the suppliers. In all fairness, the system must be transparent, so that people who have a grudge against it because they see the large users getting lower prices can see also the price tariffs that are open to everyone within the scope of the suppliers.
Having listened to the hon. Member for Wallsend, I wonder whether I am in the right country. The way in which he referred to the elderly and the disabled as being priced out and receiving rough treatment made me wonder what kind of people we are in this country. It is almost as though we have lost our ordinary basic common sense by believing that the world out there is a nation of people who want to do down the disadvantaged.
610 We do not have ruthless, heartless and unscrupulous business people in our nation. There are people out there who care about the disabled, the blind and the pensioners. They do not need to be told, or regulated, to care. They are perfectly capable of being perfectly reasonable in looking after those sectors of our society and our communities. It is an extraordinary fact of political life today that everyone believes that everything must be regulated because, if it is not, society will do down the weaker people. It is extraordinary that we cannot rely more on people's good nature and common sense to deal with those issues.
§ Mr. Martin O'Neill (Clackmannan)
Is not the hon. Gentleman aware that, last week, share prices in the regional electricity companies collapsed because the regulator discovered that he had not been told that one of the electricity companies had something like £500 million tucked away in its books, which it could use as a defence mechanism, not to protect consumers, but to protect the directors of the board of the company concerned? That is going on all the time.
The regulator did not know the information because he had not been told. When he discovered it by chance, he took the opportunity to do something about it. Those are the kind of people who are making money out of the energy business. That is why so many of us are so suspicious of the people who want to get into the industry and why we believe that those people must be regulated far more severely than they are regulated at the moment.
§ Mr. Banks
We have one of the greatest energy businesses in the world. Our offshore exploration and drilling is second to none. British Gas has expanded abroad since privatisation and become one of the nation's great industries. I am sick and tired of hearing people trying to do down the managements which have gone out there and done something for this country. If we had not put the prospectors into the North sea, we would not be deriving the oil revenues that we enjoy and that help us to improve our standard of living. That has been achieved only by hiring the very best people and paying proper salaries so that they can get on and do the job effectively.
Having dealt with that point, I want to consider the question of consumers being able to link up to gas. I understand that there is an obligation in the legislation governing the fact that if a consumer wants to become part of the gas supply network, provided that gas can be made available, it will be possible for that consumer to do that. British Gas TransCo will be responsible for linking people into the system. In a sense, that provision seems to be unnecessary because it is in everyone's interest, obviously not least that of the gas companies, to get more users into the network.
§ Mr. Salmond
The hon. Gentleman says that it is in everyone's interest. The village of Rosehearty in my constituency is less than 10 miles from the St. Fergus gas terminal, one of the largest gas terminals in Europe. The people of Rosehearty are being offered a connection to the British Gas pipeline service at the cost of £1,000 per household. Under those terms, is that not a rather theoretical right? Is the hon. Gentleman aware that one of the reasons why connection costs have risen so much is that British Gas argues that it now cannot use the previous 611 connection formula because someone else could take over those connections after they have been connected at a high cost?
§ Mr. Banks
I am not aware of the specific circumstances to which the hon. Gentleman refers. However, he may be referring to the development of a housing estate where it is necessary to bring gas from quite a distance to service not just one consumer, but a clutch of consumers. I suspect that the £1,000 that the hon. Gentleman quoted may well relate to supplying a small or even medium-sized housing estate. That sum of money, spread among the different consumers, would be a perfectly reasonable price. Competition will certainly bring the price down.
§ Mr. Salmond
I was talking about a price per household. A few years ago, when British Gas could look over a much longer period in terms of connection prices, St. Fergus, a village similar to Rosehearty, was offered connections at £40 per household. Why, in the competitive world about which the hon. Gentleman is so enthusiastic, has the price risen from £40 to £1,000 per household?
§ Mr. Banks
I am always suspicious of figures like that. When we look into them, we find that they are not quite as they have been set out. The Bill introduces competition and it has been proved that competition forces prices down. The hon. Gentleman's case is the very case that we are making. We want to get prices down. The hon. Gentleman should vote for the Bill and ensure that there is a better deal for consumers and the new suppliers.
With regard to shippers, it is important that gas suppliers have equal treatment in respect of bringing gas into the system. I urge my right hon. Friend the Minister for Energy and Industry to press for United Kingdom suppliers to have access to European markets for gas supplies. That will be the start of a process which will develop in the countries of our European partners, for example, in France and Germany, and it is important for us, as a supplying nation, to have access and to put our gas into those systems.
Recommendation 12 of the Trade and Industry Select Committee states that:
The UK Government should continue to press for unimpeded rights for UK gas suppliers in foreign (especially EU) energy markets.It is in Britain's interests to promote that.
I am grateful for the opportunity to make a speech in this debate. I most heartily welcome the measures incorporated in the Bill. I hope that it passes through Standing Committee quickly and that we get on with the job, and with the test that will take place.
§ Mr. Nick Harvey (North Devon)
Any attempt to transform a monopolistic gas market into a competitive one, in which customers can choose for themselves from whom they wish to buy their gas, is a step in the right direction. For that reason, the Bill receives the broad support of the Liberal Democrats.
The Bill is based on the sound principle that competition gives consumers greater choice and, as such, should bring them benefits that a monopoly market will not deliver. However, what is less certain is whether the legislation is capable of transforming that sound principle 612 into sound practice. To that end, we must consider two broad areas of concern to see whether there is adequate provision in the Bill to bring real, tangible benefits to consumers. The acid tests in that context are: will customers receive better service and will they be required to pay less? I shall look briefly at each of those matters.
First, will people receive a better service? Since privatisation, British Gas has had a fairly good record in customer services relative to other utilities. Recently, however, we have seen some worrying developments, such as leaked internal memos threatening to charge extra for services for the blind and the elderly, a sharp increase in the number of customer complaints and the beginning of preferential treatment not for prompt payers, but for prompt payers by direct debit. Some have suggested that the reason for those developments is the desire within British Gas to lower its costs to protect its interests in the run-up to competition.
Those are examples of the sort of problem which could arise within a more competitive market if suppliers were given the freedom to lower standards and to cherry-pick customers. Against that backdrop, the introductory list of duties for the Secretary of State on the one hand and the Director General on the other should include the protection of the interests of consumers as a primary duty, rather than—as is currently the case in the Bill—a subsidiary duty. Consumer benefit should not be seen as a fortunate consequence of competition, but rather the driving force behind it. Competition itself is the means, not the end.
As regards the specific service standards which will be required of all suppliers, we welcome very much the proposals put forward by one of the proposing suppliers to improve and enforce the current 39 standard requirements to which British Gas works. Polling has shown that standards of service are of great importance to customers, and those must be safeguarded against becoming victims of any frantic price war.
Service standards can be divided into two groups; those which are vital and others which are desirable. Vital services, such as safety provisions and services for the disabled and the elderly should be protected in law and applied fairly to all suppliers. Services which are desirable, but not in any sense life-threatening—answering the telephone promptly, for example—need not be enforced by law, but should be monitored by consumer groups whose findings should be published so that customers can have the information they need to make an informed choice of who they will get their gas supply from.
Balanced against the need for high levels of customer service is the need not to erect barriers to entry into the market which would inevitably lessen the scope of competition. So it is reasonable that only those requirements which are essential are backed up in legislation. However, there are some areas in which the Government's approach to liberalising the market—some of the more important provisos which are intended to be only in the licence rather than in the Bill—must be questioned. For some of the more central pillars of the market, legislation would be more appropriate than regulation. The duty to supply on request—as was mentioned by the right hon. Member for Copeland (Dr. Cunningham)—is an obligation in the Gas Act 1986 which is not to be found in the Bill. 613 Under the proposals, only the regulator will be able to ensure that disabled customers enjoy exactly the same protection as they have had in the past. By putting the provisions in the licence, the already pivotal role of the regulator is extended.
If people are to benefit properly from competition, good service must go hand in hand with lower prices. It has been suggested that since the savings promised by the independent suppliers are to be made at the customer end of the supply chain, it would be impossible for prices to fall if standards are to be maintained or improved. That is, by and large, a false thesis. Customer services need not in many instances be expensive, and there is no reason why service standards cannot be improved at the same time as prices are lowered. It must be said, however, that some of the claims being made about the degree of savings to be achieved are probably fanciful at the higher end.
As with service standards, the largest potential barrier to delivering financial benefits to customers is cherry-picking which, in this context, could take place on two levels—choice of area and choice of customers within an area. There must be safeguards against the possibility of competition flourishing only in areas near to gas sources, and also against competition reaching only the more cost-efficient customers within those areas.
Licences will need to cover large enough areas to he comprehensive, but—as the hon. Member for Harrogate (Mr. Banks) said—those areas must not be so large as unreasonably to restrict access for suppliers into the market. As with service agreements, if safeguards against price discrimination are only written into licences, an important check against unfair charging is open to modification in the future without parliamentary scrutiny.
On both counts—the quality of service and the level of pricing—it could be seen that customers who are the least cost-efficient from the suppliers' point of view risk missing the benefits of competition unless they are protected by the Bill as well as by the licences. If a pensioner in the west country has a significantly more restricted choice of supplier than an affluent family on the east coast, we could rightly say that the Bill had failed to establish the necessary structures to protect all consumers. Due to variations in transportation charges, benefits will vary from place to place, but we must ensure that all customers—no matter where they are from—get a gain of some sort.
§ Mr. Sebastian Coe (Falmouth and Camborne)
The hon. Gentleman will, I presume, give unreserved support to the announcement last week that the south-west is to be the first of the pilot schemes, which will guarantee liberalisation and cost savings to that west country pensioner about whom he talks.
§ Mr. Harvey
The hon. Gentleman anticipates my next point. For the very reasons which he has outlined, the choice of the south-west for the pilot scheme is a good one. There will not just be an opportunity to see whether the computer systems work, but to see whether customers really will be better off under the new system. Once the Bill has undergone parliamentary scrutiny, it will be 614 interesting to see whether the people of Devon, Cornwall and Somerset will enjoy the benefits for which everybody hopes.
§ Mr. Duncan
I have not been able to discern from what the hon. Gentleman has said whether he and his party will support the Government and vote for Second Reading of the Bill. Will he confirm that that is his intention?
§ Mr. Harvey
I assure the hon. Gentleman that I will not sit down and leave him disappointed. I shall come to that point presently.
I shall finish the point that I was making about the experiment in the south-west. If the Government are as confident as they appear to be about the proposals, will they consider offering a guarantee to consumers in the south-west who are to be used as guinea pigs in the trial? The south-west has suffered disproportionately from utility costs during the past few years, and the Government should offer a guarantee that—should the system not work as they hope—they will offer compensation.
§ Mr. Harvey
I understand the Minister's point. For that reason, it must be seen that it is unlikely in most circumstances that anyone will lose in absolute terms. The acid test will be whether some consumers lose out in relative terms either within a region or, more probably, between different regions of the country.
The Standing Committee will have an opportunity to look at the issues—including many of the points which the Opposition have made in their amendment—in great detail. But the principle of the Bill of extending competition is right and, for that reason, we will support its Second Reading.
§ Mr. Piers Merchant (Beckenham)
I was brought up in a world in which the basic household services—electricity, gas, telephones and water—were all provided by public service utilities. I was born after electricity and gas were originally nationalised so I knew nothing else.
§ Mr. Merchant
I can assure my hon. Friend that I was also born after the original gas monopoly was set up, surprising though it may seem to him.
While I have always been a believer in private enterprise and competition, I was not instinctively led in the direction of applying such an approach to the services. Certainly, any suggestion at the time that the Labour party might in some way support such an idea would have been stupendous. I suspect that some of the old Labour stalwarts of the era must be spinning rather swiftly in their graves at the idea that the Labour party should, as it appears to be doing, smile on the idea of competition in the provision of such services—in this case, gas.
I listened carefully to the hon. Member for Wallsend (Mr. Byers). He told the House that competition was necessary and that there was always a presumption in favour of competition. They are welcome words indeed, 615 but not ones that would have chimed well with the old approach of the Labour party. It is good to welcome members of the Labour party into the real world and see them accept in the House the importance of competition and, indeed, the vital role that it plays in modern society.
The hon. Member for Wallsend somewhat spoilt his speech by going on to advance a thesis that appeared to say that everything had to be regulated. I wonder exactly how competition can operate if regulation is so severe and all-encompassing that those who are in competition can hardly move or vary from a set pattern. The hon. Gentleman also said that, on balance, he had doubts about the Bill for practical reasons. He seemed to say that he went along with most of it but that there were practical problems in it and, for that reason, he would support the reasoned amendment. He finished by saying that he opposed the Bill because it was dogmatic in its base; yet he had accepted its basic principle. I found a considerable amount of contradiction in what he said.
The other point that I picked up from the remarks of the hon. Member for Wallsend was his reference to cross-subsidy, which he described as socialism in action. That struck me as strange because cross-subsidy is an essential part of a competitive system. Anyone who goes to supermarkets—hardly part of the state sector—will see cross-subsidy in operation in the pricing structures of the goods within that market. It is an essential part of the system.
The hon. Member for Wallsend advanced a thesis based on scare stories. That was sad because he had already conceded the importance of competition. I was sorry that he could not take himself a further step and accept the benefits of the Bill, even if he had doubts about one or two sections that could have been dealt with in Committee.
I also listened with interest to the right hon. Member for Copeland (Dr. Cunningham), to whom I always listen with great pleasure. He is an eloquent espouser of his cause, but I felt that on this occasion he was more eloquent in making a case where in fact there was none. He seemed to have lost his basic fire. I suspect that he was caught in a position in which he had no principled base on which to oppose the Bill. So he scratched around trying to find justification for opposing it.
The right hon. Gentleman conceded early in his speech any basic principle of objection. He constructed a case based purely on the weaknesses that he thought existed in parts of the structure, rather than the underlying concepts of the Bill, or on scare stories similar to those that we heard, as my hon. Friend the Member for Surrey, North-West (Sir M. Grylls) pointed out, about other privatisation measures that have come before the House in recent years.
I said at the beginning of my speech that I had been brought up in a world in which there was only state provision of basic services. I had always supported denationalisation. It seemed sensible to denationalise the manufacturing industries such as steel, and services such as buses and road freight. Indeed, I witnessed when I was fairly young the creation of private broadcasting companies. I have to admit that in the early days I shared the doubts that are now being expressed by the Labour party about privatisation of some of the services. For me it was a journey into unknown territory. I was influenced by popular theories that were around at the time about a mixed economy and the prevalent economic theories that 616 natural monopolies had to be run by the state so that consumers were protected, which could not be provided by competition or the private sector.
Indeed, I had some misgivings when British Telecom was first privatised. I wondered whether it would work. I wondered whether it was a suitable service to be privatised. I felt that, if it were privatised, it should at least be broken up. I reasoned that surely a private monopoly was even worse than a public one because it had no accountability. However, with hindsight I realised that the doubts that I had at the time were not justified. For that reason, I am utterly confident in the Bill. I base that view not on any dogmatic approach but on my belief that it represents practical reality—the same practical reality as made privatisation of BT and subsequent privatisations work.
Privatisation has turned out, perhaps to the surprise of many people, to be one of the most brilliant, radical and successful developments in public policy in this half-century. British Telecom was the forerunner, but it is entirely right that gas should follow in its footsteps. As a service, British Telecom showed the way in the complex change of ownership and organisation of a whole industry. That process had to be taken in steps.
My second original reservation about the privatisation of British Telecom was about the need to break it up. It was not broken up. I now realise that that would have been a mistake. It was correct to take the privatisation in stages because the operation was complex and it represented such a fundamental change.
§ Mr. Salmond
I am interested in the hon. Gentleman's personal experiences. Has he spoken to any British Gas shareholders recently? If he has, will he estimate for the House whether they are enamoured with the activities of the company?
§ Mr. Merchant
I expect that I have spoken to many British Gas shareholders because so many exist. As it happens, I have not discussed the matter to which I think the hon. Gentleman refers, of British Gas and its activities, but the hon. Gentleman is an intelligent enough person to realise that anyone who owns shares will change his views from one moment to the next about the efficiency and effectiveness with which the management of a company operates. I am sure that that is true of British Gas, as it is of any other company. That is an entirely good thing because it puts the company and its management under continual pressure. They have to be answerable to their shareholders. If the shareholders are unhappy with one particular aspect of the management's reign, the shareholders will take action.
The three stages of this type of privatisation process are as follows. The first step is transforming a state-owned company to a private monopoly, which of course is regulated to ensure that it operates generally in the interests of its consumers. The second step is to introduce some competition. Both those stages have taken place with British Gas. The third step is to transfer as far as possible the operations into that of a fully competitive market. That is what the Bill is about. That is why I welcome it and support it in its entirety. I have no doubt that that is the right approach. It is the logical conclusion of what has already been done with the gas industry. Its timing is right. The timing set within its clauses for the move towards full competition is also right. It is a step at 617 a time, not a "leap in the dark", as the right hon. Member for Copeland called it earlier. It is a measured step at a time which will achieve its objective.
If we think back to the old days of the state-run gas industry, we remember the gross inefficiency as well as the total lack of real accountability to the consumer and the "gas man cometh" stories. We remember the jokes about the gas board and its failure to respond to consumer inquiries and complaints. Indeed, speaking some weeks ago in a debate on the citizens charter, I alluded to my experience many years ago as a journalist, when the paper that I worked for had a department called Action Desk, which was designed to help members of the public with consumer problems. Within a few weeks of opening, Action Desk was completely flooded out by complaints about British Gas, to the exclusion of any other complaints.
Such stories are well known in the public domain. Everyone remembers the poor standards and everyone can see the huge improvement in efficiency that has taken place since. Of course, the system is not perfect and there are still complaints and problems. What area of activity in the retail or service trades does not occasionally have problems?
A simple look at the available statistics will demonstrate how dramatic the change has been. For example, supply restored has increased by leaps and bounds and is now up to 99.5 per cent. within 24 hours. There are special arrangements, such as Gas Care, which did not exist before, and arrangements for the elderly. People can now pay their bills at about 19,000 post offices, instead of only at the rather limited number of gas show rooms. Since privatisation in 1986, there has been a drop of about 20 per cent. in the real price. The drop has been about 35 per cent. for industry.
Equally crucially, investment increased around threefold in that period. It varies between £1.3 billion and £2.2 billion a year, which is a huge amount and benefits not merely consumers, but the economy of the country as a whole. British Gas has been enabled to become a truly international player in energy, with activities in 45 different countries, exploration in 25 countries and supply in countries as wide apart as Argentina and India. That is a remarkable achievement and it shows the sort of business that can be built up, once the shackles of state control are lifted and the company is allowed to compete and to invest.
§ Mr. Tim Smith (Beaconsfield)
My hon. Friend has obviously been watching those rather strange television advertisements about the international achievements of British Gas. Is not the key point that, whereas it is sometimes suggested that there is a conflict between the interests of shareholders and customers, British Gas has been so successful in driving down its costs and increasing productivity in a relatively short time that both customers and shareholders have benefited from privatisation?
§ Mr. Merchant
Absolutely. My hon. Friend is entirely correct. People who oppose the enterprise system or privatisation try to drive wedges between what they see as various competing interest groups in the industrial structure; but those groups are not competing. It is in all their interests to go in the same direction, just as discounts 618 for people who pay their bills by direct debit, which the hon. Member for North Devon (Mr. Harvey) mentioned, are in the interests of both sides. People ask why discounts are not extended to people who pay by cash and do not have bank accounts and British Gas has said that it will also extend them to those people, for a simple reason—it is in the interests of both sides for that to happen. It is in the interests of British Gas to encourage swift payment and a discount is in the interests of the payer. That is the beauty of the system; it works in the interests of all.
I was discussing the benefits that have already flowed. Further benefits will flow if the argument is continued. If competition is brought fully into the provision of domestic gas, all of the price, quality and investment benefits that I have outlined will also improve and the customers will have choice—that essential weapon that enables them to change from one supplier to another if they are discontented, or to choose one supplier in preference to another if they feel that what they are offered is better. That also operates in the interests of both sides; the consumer gets a better deal, better quality and better prices and the supplier has continually to improve and review its operations to maintain its market share when in competition.
It is also important to maintain some regulation, which is essentially what the Bill is about. The licences are about ensuring that the triple operations of supply, shipping and transport are carried out in a way that will ensure the success of the whole operation. I am glad about the split, which is a natural one. It too will ensure that the consumer is protected.
Sufficient protections are built into the Bill to prevent cherry picking and to ensure safety and the provision of special services, such as those to the elderly. The detail must come in the licence, as it would not be appropriate for a Bill to include all the detail that must necessarily appear in a licence. The Bill rightly sets up the framework in which the licence is produced. The licence will contain the conditions, but the Bill clearly steers the structure of the licence in the right direction.
Someone commented on tariffs—I think it was the right hon. Member for Copeland—but they will also be sorted out by the market, as long as sufficient regulation is present. I favour light regulation, but I clearly favour regulation and do not want a complete free for all, as we would then lose some safeguards, especially as competition develops. It is unnecessary to go into the detail of tariffs in a licence, let alone in a Bill, because that will be worked out with competition. That is also true of services, such as the repair of appliances, for which there is already a healthy private market.
The principle of the Bill is excellent and the practice is thorough and realistic. It is thoughtfully worked through and takes care of the detail, yet maintains a tough regulatory environment. It introduces full competition in three phases, which is sensible timing. There is not a mad rush that might result in things becoming unhinged early on, but it is not put off to such an extent that all consumers will have to wait for an eternity to benefit.
For all those reasons, the 18 million gas consumers will benefit considerably from the Bill. I support it strongly for that practical reason. I am very eager that my constituents should receive the benefits as soon as possible, so I wish it a hasty passage through the House.
§ Ms Ann Coffey (Stockport)
The Gas Act 1986 created a private monopoly in the domestic sector, whose abuses were to be checked by a gas regulator. It has been a highly successful company, but the Bill is an admission by the regulator and the Government that it has not worked for customers. The new Bill is relying on competition to do what the 1986 Act failed to do, but the big question is, will it do it?
There have been problems with the regulator and one of the disappointing aspects of the Bill is that it does not take the opportunity to rectify those problems. The Bill, as well as the 1986 Act, gives the regulator a duty to protect the interests of gas consumers, but that is subject to other duties, including that of securing effective competition. I suppose that one might ask which gas consumers she is there to protect. To assume that gas consumers are an entity is to misunderstand what people out there are about.
The Bill gives no clearer definition of the regulator's duties, which is a serious problem. When the actions of the first regulator are compared with those of the second, one is hard pushed to accept that they have the same job description. Therein lies the problem, because part of the definition of their duties is a self-definition. The phrase, "public interest", is, in an independent, non-political arena, totally meaningless. Such a wide definition of duties inevitably means that the regulator is seen to operate within a political arena. How can she not, given that gas is a political issue and every action that she takes has political consequences? Lack of accountability—the gas regulator is accountable to no one—does not necessarily equal independence.
§ Mr. Tim Smith
The hon. Lady said that the gas regulator is accountable to no one. The Gas Act 1986 provides that the Director General of Gas Supply is accountable directly to Parliament.
§ Ms Coffey
I am grateful to the hon. Gentleman for his intervention, but I have yet to see how that takes place. The regulator comes to the Select Committee, as the hon. Gentleman says, but is not accountable to it. The Select Committee cannot direct the regulator what to do. In a previous debate on the regional electricity companies, the Minister took great pains to point out that the regulator was independent and had independent duties.
The relationship between the Secretary of State and the regulator is also murky. The regulator advises the Secretary of State, and the Secretary of State may take that advice or not. The Bill gives the Secretary of State a veto concerning referral to the Monopolies and Mergers Commission. I presume that the Government's view is that they may as well give the Secretary of State that power because it will save them rejecting the MMC's findings once it has reported. However, it does not help the idea of a credible, independent regulator and it is a great pity that the Bill did not take the opportunity to begin the process of looking again at the duties and accountability of the regulator, who is very powerful and has great responsibilities and duties to perform.
The gas, electricity and water regulators sometimes act inconsistently. Perhaps that is supposed to demonstrate some independence, but, like the MMC, which also shows such a tendency, it can lead to much confusion. Unless there is a stricter remit, we shall be faced with a myriad 620 of gas companies and a great deal of confusion. Last week, the electricity regulator, for example, suddenly discovered unknown cash reserves in regional electricity companies. Coincidentally, Norweb directors made £1 million by selling their share options a few days before the electricity regulator announced his decision to review prices. Perhaps they felt able to take their reward as they had performed so brilliantly in hiding from the regulator the extent of Norweb's cash reserves; or perhaps the matter throws a new light on performance-related pay or a corporate response to selling share options.
If the Minister is seriously trying to set up a level playing field, why does he not set up TransCo as a legally separate company? If TransCo remains within British Gas, it will create difficulties in terms of transparency and ensuring that extra costs are not passed on to competing gas companies through standing charges. It will also be difficult to ensure that chief executives' high salaries are not passed on to competing gas companies. In essence, making the standing charge cost-reflective will depend on the regulator. As the regulator seems to have had some difficulty in lowering British Gas prices and ensuring better management in the company, there is not much cause for optimism.
Another disappointing aspect of the Bill is its scant regard for energy conservation. At this point, I should say that I am co-chair of the British parliamentary lighting group. As the Minister is probably aware, the group is anxious to install low-energy light bulbs for obvious reasons, but those involve a capital cost. Although the Bill places a new duty on the Secretary of State and the regulator to take account of the effect on the physical environment, and licences will require all gas suppliers to provide energy efficiency advice to their domestic customers, it is not clear where the money will come from for energy conservation measures such as insulation, which is important because it allows people on low incomes to heat their houses for less money. It would have been helpful if the Bill had been clearer about how that would be managed.
Low-income customers are the most expensive to supply in relation to their demand, particularly customers on pre-payment meters. I approve of pre-payment meters as an alternative to disconnection, but those who use them currently pay 12 per cent.—I hesitate to mention the figure—more than those on direct debit. So those who can afford to pay least for their gas pay more. How will competition help them? Much of what we have heard is simply speculation, as no one knows whether the standing charge will come down. What is not speculation is the fact that cross-subsidy by British Gas helps low-income customers to some extent. In the short term, therefore, cost-reflective pricing will raise the cost of gas to those customers.
Not all customers are the same, nor are their interests, and British Gas has ably demonstrated that with its discount to direct debit customers. That discrimination can continue because it is a saving offered on an administrative cost, but pre-payment customers will not benefit from such a saving. British Gas made a pre-emptive strike at "cherry picking" because direct debit customers are attractive. Moreover, they are likely to be offered further administrative savings, so competition will without doubt benefit them. The bottom line is that they will get their gas more cheaply than those on pre-payment meters. 621 Irrespective of what the independent gas suppliers say, I do not believe that low-income pre-payment customers are an attractive proposition. They are likely to continue to pay higher prices while better-off customers benefit. The gas companies cannot refuse to supply them, but I doubt whether that group of customers will leaf through the "Yellow Pages" to find another gas supplier. People in that group probably have no telephone as they cannot afford the connection charge or have had their telephone disconnected. The independent companies probably know that those people will not ask them to supply them, and that they can afford to target better-off customers. So who will ensure that pre-payment customers benefit? The regulator obviously has some remit in the matter, but the interpretation of her duties is wide. The DTI said in its response to the report of the Select Committee on Trade and Industry:
We accept that by the very nature of competition there must be some uncertainty as to the scale and distribution of benefits".That is true. It is at present a matter of speculation.
It is worth remembering that the supply of energy to the poor and needy is a social responsibility. It is ultimately a Government responsibility. It is not the responsibility of the market and delivery cannot be made by the market. In those terms, the Bill will not deliver. If the Bill will not deliver, what will? I have not heard what or who will deliver. Have we reached a state where gas has become just another commodity, a situation in which if someone has the money he will be supplied with gas, and if he has not, he will not? If that is the state to which we have come, it is not good enough.
§ Mr. Sebastian Coe (Falmouth and Camborne)
I approach the debate with a feeling of deja vu, and I am interested in the division of attitude that has already been established across the Chamber towards the Bill. I am interested also in the revisionist historians who are packing the Opposition Benches. I accept that I must be careful because the Liberal Democrat spokesman this evening has shown some enlightened approaches to the Bill.
As Opposition Members are busily rewriting the history of privatised industry in the 1980s, it is worth reminding the House that in 1979 publicly owned companies were costing the taxpayer about £50 million a week. The newly privatised companies, which were lauded as public sector operations by Opposition Members, are now contributing about £50 million a week in taxes. I suggest to Opposition Members that we should not be manning the barricades over the new-found profits of recently turned private companies. Instead, we should be saying that these companies are not contributing enough and that it is necessary to push for more. We should be seeking higher levels of profit, with which will go a considerable tax take. Last year, British Gas made a tax contribution of about £500 million. When the Government came to power, British Leyland and other clapped-out public sector industries were not making massive contributions to the welfare state through the tax take.
I sense that Opposition Members are merely going through the motions. They. no longer believe in the nostrums that they were brought up to espouse. It is 622 interesting that weekend after weekend we witness one policy U-turn after another. A few weeks ago there was the acceptance of education league tables. Apparently the Labour party suddenly came to the conclusion that opted-out schools were not a disaster for the British people, or even for key members of the party. I read with great interest today that we are about to be confronted by a Labour U-turn on private health.
I rather fancy that before the next general election, when the Labour party has sorted out the words that it hopes will get it through on clause IV, privatisation will be well and truly enshrined in its policy.
I welcome the Bill for all the reasons that have been identified by my right hon. and hon. Friends. They go beyond the mechanistic reasons that centre on the opening up of the market, the sensible opening of North sea supplies and the availability of pipelines to companies other than British Gas. We know that as a result clear benefits will accrue to about 18 million consumers.
The Bill is to be welcomed because it represents an extension of the Conservative party's belief that at the centre of policy must lie consumer choice and sovereignty. If we ever walk away from that as a concept or philosophy—I am sure that it is one in which Opposition Members believe, although they would implement it differently from us—we shall be selling consumers short. The Bill offers the freeing of a market. It continues the downward pressure on utility costs.
The consumer does not regard price as the only touchstone of a service. He or she will have regard to a range of other factors. I am pleased that enshrined in the Bill are sensible provisions for disabled people. My right hon. Friend the President of the Board of Trade has given a commitment to take account of the interests of blind people. The Bill contains provisions for the elderly, for those about whom the hon. Member for North Devon (Mr. Harvey) talked. We know that there are pensioners who might find life difficult. The provisions to which I am referring are sensible, central and integral to the proposed legislation, as are those that relate to safety. Perhaps it is a liberty to speak on behalf of Opposition Members, but I think that there is broad agreement that such provisions are key tenets of the Bill.
I have spoken in the House on many occasions about the importance of inward investment into Great Britain plc and into our peripheral regions. Inward investment is the lifeline of the economics of peripherality. If it is important as a general concept, it is a supply of oxygen in an area such a Cornwall.
For some in my constituency, life is a hard-pressed existence. Average incomes are significantly lower in Cornwall than in other parts of the country for a myriad of reasons, including structural changes within the economy. If inward investment is to mean anything tangible in my constituency, we must have regard to the decision-making processes in boardrooms the length and breadth of the country, in Europe and even wider afield. Areas will be selected where there is seen to be a sensible business return.
Cornwall has been successful in attracting inward investment. I can think of two or three notable examples over the past year or so. At Redruth, Contico plastics, an American-owned multinational company, decided to set up its European manufacturing base. It had trawled Europe before coming to that decision. It was not a happy accident. The company decided to establish its base at 623 Redruth because of a flexible, well-educated, committed and loyal work force. It did so also because of our belief that businesses should not be saddled with overly burdensome regulations.
Central to any future investment decisions are the costs that are likely to be faced through utility charges. That is why I welcome unreservedly, as I did last week, the decision to use the south-west of England for the first pilot scheme. It will produce dramatic downward pressure on the cost of gas supplies to consumers. That is nothing new in commerce. There were reductions of between 10 and 15 per cent. in the cost of gas supplies to businesses. I am pleased that there are potential advantages for household consumers of anything between 10 and 15 per cent. I hope that the assessments are right. I would settle for even less than those percentages. It must be a move in the right direction. For the heart, the vibrancy and the economic base of Cornwall and the rest of the south-west of England it is vital that we maintain downward pressure on utility costs and charges, which, in my constituency, take up an inordinate amount of disposable income.
The proposed legislation is sensible. I am sure that it will be treated sensibly in Committee. I have great pleasure in supporting it this evening and I will support it on Third Reading. I commend it to my constituents, whom I know will be looking to many of the pieces of the Bill tonight to produce real advantages for them in their businesses and their domestic households.
§ Ms Judith Church (Dagenham)
I am grateful for the opportunity to speak in this important debate. I addressed many of our prime concerns about the proposed legislation in November when I spoke during a debate on the Gracious Speech. Since then, few people in the country can be unaware of the bad smell surrounding British Gas: the stench of corporate greed with orbiting fat cat salaries for those at the top; share options showering like Smarties; and bonuses that beggar belief. The Government might like to pretend that it is nothing to do with them—the "It's not me, guv" simpleton expression that they assume when their chickens come home to roost. But the people of this country are not stupid. They know who was responsible for privatising British Gas. They know that their money is paying for these outrages. They know that the Bill will not lead to lower prices for most of them, just reductions for those who are most able to afford to pay and relatively more expensive gas for the least well off. It is called "cherry picking". It happened in health—[Interruption.] Conservative Members should listen, because they might learn something tonight. It happened in health, where general practitioners do not want the most expensive patients on their fundholding lists. It happened in education, where schools are selecting pupils who will be the least troublesome, and it has happened in gas supply already, where British Gas now has an extra 1 million customers paying by direct debit since it announced that there would be a 5 per cent. discount for "good" payers last November. 624 The Bill is seriously flawed—
§ Mr. Eggar
I am grateful to the hon. Lady. Will she tell us whether she opposes her constituents who are paying less for their gas, because they have voluntarily opted to pay by direct debit, thereby saving money, or is she in favour of them paying 5 per cent. more for their gas than they do at present.
§ Ms Church
I very much welcome the fact that a number of my constituents in Dagenham are now able to pay by direct debit and get a saving on their gas [Interruption.] I must tell the Minister that, in my constituency, far fewer people than in his constituency or those of other Conservative Members are able on economic grounds to take advantage of paying by direct debit. It is our constituents who are suffering from the changes in the pricing structure of British Gas. It is our constituents who will suffer as a result of the Gas Bill. I welcome the Minister's intervention, because I welcome the opportunity to tell the people of this country just what the Bill will mean for them.
The Bill is seriously flawed—[Interruption.] The Minister may laugh, but he will find out what the flaws are soon enough. That does not worry Conservative Members, a good many of whom—one can see it already in their faces—will not be here after the next general election, when these measures come into full force in 1998, when the so-called competition takes off. Others among them who may be here after 1998—I doubt whether there will be so many of them—know that they will be sitting on the Opposition side of the House. Labour Members know that we will be sitting over there, picking up the pieces if this flawed Bill becomes law. We know how difficult it will be to address the inequities that the Bill will introduce.
The Financial Times leader of 3 March summarised the situation perfectly when it said that the
Bill leaves too much of importance to the suppliers' licence, and so to the interpretation of the Regulator. It has placed an extra burden on the utilities' regulatory regime, at a point when its achievements and powers are already under question … In particular, the implications for pricing remain obscure.It would be churlish not to welcome the Government's climbdown from their much-heralded free market dogma, when clause 6(6), to which my hon. Friend the Member for Wallsend (Mr. Byers) has already referred, states:
The area of the licence may not artificially exclude an undue proportion of premises likely to be owned or occupied by elderly persons or persons who are disabled or who are likely to default on the payment of charges.The key question, however, is what will be considered as artificial? Will it be considered as artificial if firms choose to supply only to the wealthier cities or boroughs, or if they choose to ignore regions of high unemployment or choose only the areas that give the highest returns? The fact is that the two objectives—protecting the poor and promoting competition—are absolutely irreconcilable. In a competitive environment, profits can be made only by attracting the custom of the wealthy while opting out of the more costly accounts of the less well-off. Wait and see. It is already happening.
§ Mr. Nigel Evans
I am enjoying the hon. Lady's rant, but what would she say to the people who have heard all 625 this before? The Labour party came up with the same fears about British Telecom, saying that the poor who use public telephone boxes would not be able to use them because they would not be working, that no more would be installed and that the costs would go through the roof. The opposite has happened.
§ Ms Church
I thank my hon. Friend for his assistance.
For the Government to deny that simple market truth is either plain incompetence or, at worst, a calculated deception. Because the specific terms have been left to the suppliers' licences rather than being included in primary legislation, the role of the regulator is critical to the market. Yet I was shocked last week to hear the Director General of Gas Supply maintain that it was her premise that she should not be mixed up in politics. Unfortunately for Mrs. Spottiswoode, she is mixed up in politics—all consumers are not equal, but they all need gas. She should shut herself away with Orwell's "Animal Farm". Perhaps after that she might realise that some gas consumers are more equal than others—but not many of them in Dagenham, I fear.
The regulator cannot escape the fact that her decisions, her actions or her failure to act will affect the lives of people throughout the country. A regulator is not some hidden hand in a virtual world of licences, technical jargon and "undue proportions". A regulator is affecting the real world, the real lives and the real hardship of the British people.
Cross-subsidy is not some evil, unmentionable disease. It is about gas supply and fair gas pricing.
§ Mr. Tim Smith
Has the hon. Lady noticed that, since the regulator was established some seven years ago, the effect of the regulator's activities on the people whom she has been describing has been to reduce gas prices by 20 per cent. in real terms? Is that not a benefit to consumers?
§ Ms Church
Much of any gain that has been made has, of course, been made by the better off at the expense of the worse off. Relatively, the price of gas has fallen more for the better off than for poorer people. [HON. MEMBERS: "No."] Hon. Members must believe that. It is due to the price structure that British Gas has introduced, which the Bill will perpetuate. [Interruption.] I shall explain—very simply, because the hon. Member for Croydon, South (Mr. Ottaway) clearly still does not understand. If people are able to pay their bills by direct debit, because they are wealthy and have a lot of money in their bank accounts, they will pay less per therm than my constituents in Dagenham, who cannot pay by direct debit because they 626 have no money in their bank accounts. I am sorry that Conservative Members do not understand that, but it is a fact.
§ Mr. Nigel Evans
As the hon. Lady knows, British Gas has already said that a discount will be available as soon as possible to those who pay in cash and on time.
§ Ms Church
Many of my constituents in Dagenham cannot pay their bills on time, because they are trying to pay for school meals, electricity and food from the local supermarket. They are living on income support—living at subsistence level—and they cannot afford to pay their bills on time. Many, indeed, have prepayment meters and find it very difficult to make the payments. So what do they do? They turn their heating off. [Interruption.] I will continue, if the hon. Member for Ribble Valley (Mr. Evans) will let me. These are important points, and I am grateful to Conservative Members for giving me a chance to spell out the position because they do not understand.
Cross-subsidy and the obligations that we owe our fellow citizens do not bring tears to the eyes of Conservative Members. We should not be surprised at that, because they have spent 16 years widening the gap between rich and poor—committing increasing numbers of our children to living in poverty, and in cold and damp houses where their young lives are blighted by illness. I know that, because I see them in my surgeries every week. Conservative Members do not understand that mutual obligation, and do not recognise the society in which I want my children to grow up.
Undoubtedly, all this strikes Conservative Members as being a long way from the technicalities of the Gas Bill. That only demonstrates how little they understand or care about the consequences of their policies. Last week, the Director General of Gas Supply said of British Gas's gas care register, the free safety checks and British Gas's safety record:
Some of it is right and we don't want to put that at risk".But what will be put at risk by the Bill? I should like to look at the gas care register of elderly and disabled people. As British Gas puts it, there will be
extra help for those who need it".British Gas now has 160 home service advisers, one for each 150,000 customers. Their job includes making home visits to provide—free—adapter devices, advice on gas use and advice on cooking for some of the most vulnerable people in society. I gained first-hand experience of the value of such support services last Friday when I accompanied Erika Aldridge, a home service adviser, on a visit to an elderly disabled customer in Dagenham. She was offered a contour tap to enable her to ignite the sole means of heating in her small bungalow; for years she had not been able to turn it on properly, and lately she had not been able to click the switch into the ignition position.
The tap was not simply handed to that woman with the words "Grandma, get on with it." Erika Alridge kindly helped and encouraged her to use it, and after three or four attempts she was able not only to turn on the gas for her fire but to click on the ignition. As she did that, on her own, her face lit up with joy: she would no longer have to depend on a 70-year-old neighbour to come in every morning and help her light the fire. On that 627 occasion, I also found out about "bumpons" and "knobbles". The Minister looks puzzled; I give way to him.
§ Ms Church
The Minister is making my point for me. If those obligations are so important to elderly and disabled British Gas customers—which they are—why is the provision not in the Bill? Why has it been stuck in the licence, with the result that adherence to the licence conditions will depend on the regulator?
§ Mr. Eggar
I am sorry to keep interrupting the hon. Lady. The reason is simple: the obligations currently imposed on British Gas by the Gas Act 1986 are also imposed in the licence. We are simply following precedent.
§ Ms Church
For decades, British Gas has carefully built up a professional service, but we know that the independent suppliers will not do that, because it would cost a lot of money. The idea of social responsibility in the provision of an essential service such as gas, the notion that there is a large social benefit to be gained from ensuring that our needy citizens are well looked after and the basic principle that we are one nation with mutual obligations and responsibilities are entirely alien to Conservative Members.
The Minister needs to know that professionals like Erika do not come cheap. British Gas employs only people with degrees in home economics, and gives them substantial training. Not everyone has the right combination of personal qualities and technical competence to do such work. Given the cost—and there will be a huge on-cost—does anyone seriously think that the same standard of service will be provided by the independents? Where will be the incentive, in a competitive environment, to provide such service for the most costly and least sought-after customers? The Government have dramatically increased the number of elderly people living in the so-called "care in the community" system; they must understand that such policies elicit certain obligations.
The flaws in the Bill are too numerous to mention, but some questions need answers from the President of the Board of Trade. [Interruption.] The energy consultants Gas Strategies reported last week—the hon. Member for Falmouth and Camborne (Mr. Coe) obviously has not read the report yet—that
Significant imbalances between supply and demand are likely to lead to price instability.What safeguards will there be for the consumer? The consultants also stated:
It is inevitable that some of the thirty or so companies will pull out or be forced out of the gas business as it evolves.What proof of the financial strength will the regulator require before granting a licence? Will the regulator act promptly to deal with suppliers who take a chance in an unstable market and end up with no gas to supply? Will the regulator ensure that the price is directly related to the cost of supply for all new entrants? At what point will 628 there be considered to be enough competition for the imposition of a levy to cross-subsidise and protect the more expensive customers?
Why cannot the fundamental duty to supply be laid down in the Bill itself rather than in the licences? As my hon. Friend the Member for Stockport (Ms Coffey) pointed out, how can the regulator be considered to have adequate powers and independence when the Secretary of State can veto a reference to the Monopolies and Mergers Commission?
The Bill is another measure that is entirely consistent with the Government's record: it will fatten up the rich at the expense of the poor. We all know, however, that it will be another nail in the coffin of this Tory Government—a coffin that is now well nailed down. The President of the Board of Trade thinks that he can get the Bill past the British people without a murmur of protest by promising lower gas prices, but he is wrong—and, at the next general election, he and his Government will find out just how wrong.
§ Mr. Alan Duncan (Rutland and Melton)
The hon. Member for Dagenham (Ms Church) has given a lively and spirited performance which will earn rave reviews, at least from Conservative Members. We could not but perceive from her endearing little chuckles in the middle of her speech that part of it was a bit of an act. One does not have to go to a west end theatre for such an excellent performance but I fear that the theme of her speech and those of her hon. Friends cast them all as prophets of doom and gloom. Opposition Members were nit-picking rather than cherry-picking.
§ Mr. Duncan
The hon. Lady says that I have no sense of humour but I assure her that I enjoyed every moment of her speech and I congratulate her on it. I shall enjoy reading it.
In debating the Bill, the hon. Member for Dagenham and her colleagues have not been able to tell the wood from the trees. There are great advantages in the continuing advance of competition, and challenging the whole principle will deny to her and to my constituents the benefits offered by the gas and other industries.
The House will be aware of my interest in oil. Two years ago, that interest spread to an interest in gas. The Minister will remember the small private Member's Bill that I piloted, aimed at deregulating the supply of gas to caravans. The regulations so liked by the hon. Member for Dagenham were stopping the sensible supply through pipes of butane and propane gas. Thanks to the co-operation of the Minister and the procedures in the House that apply on Fridays, caravan owners can now benefit from the supply of gas piped from tanks. We are moving from basically the same principles to a larger operation.
§ Mr. Peter Hain (Neath)
The hon. Gentleman mentioned an interest in gas. Do he or any of his hon. Friends—perhaps I should more accurately say how many 629 of them—have an interest in the competitor companies that will be invited into the market on such favourable terms as those in the Bill?
§ Mr. Duncan
I am not aware of any such details. I am here to debate the principles of the legislation, not to listen to the usual complaints by the hon. Gentleman.
Some 30 years ago, Britain was principally fuelled by coal and oil and only partly by gas. It is now fuelled by oil, gas and coal, and the increase in production of North sea oil, much of which I say to the hon. Member for Banff and Buchan (Mr. Salmond) was not Scottish, coincided with the rise of Britain as a gas-producing country. In 1965, offshore gas had a mere 7 per cent. share of the market for energy. It is now 50 per cent.
The discovery, production and supply of gas has been a great success story and as the industry expanded, the nationalised company of the time could not cope with it. The Gas Act 1986 started the process of denationalisation. Inevitably, when transferring a massive nationalised concern with millions of household consumers to ownership by shareholders, there is a period of transition during which the nature and identity of the business is essentially a half-way house between nationalisation and full privatisation. It was right that in managing that transition, the Government ensured a proper regulatory regime. That was primarily to protect the consumer, within certain bounds and that is exactly what has successfully been done.
British Gas faced competition from the moment that the 1986 Act was enacted, initially for the supply from others to consumers of more than 25,000 therms a year and thereafter to consumers of more than 2,500 therms. For those who do not appreciate such volumes, that is equal to the annual consumption of about four households. The regulator has successfully imposed a price regime corresponding to the retail prices index minus 4 per cent.
British Gas is not a monopoly. Since the 1986 Act broke up what was at that time a monopoly, about 60 per cent. of gas comes from other suppliers. There are 25 other companies supplying wholesale gas and among them are Alliance, Amerada Hess, Calor, Enron, South Wales Gas, Southern Gas, Sterling Gas and United Gas. All 25 companies are already competing with British Gas at a time when British Gas faces regulation and competition.
§ Mr. Michael Clapham (Barnsley, West and Penistone)
The hon. Gentleman speaks about the introduction of competition to the domestic market and about the demand from companies which use gas to generate power. Is he aware that the supply-demand ratio may become insecure? The Bill contains no reference to who will be the supplier of last resort, and that could jeopardise the future.
§ Mr. Duncan
The hon. Gentleman has a point and it will be addressed in Committee. However, I shall deal with it now by saying that it is already addressed by the geographical pattern of licences. Anyone who applies for a licence for a geographical area will have no way in which to distinguish in supplying gas through the existing pipelines whether he is supplying a house containing a disabled person or in which the main earner has a low income. The distinctions which the hon. Gentleman and 630 his colleagues have been trying to draw are entirely contrived and artificial. The guarantees for which he asks will be properly addressed in the detail of the licences in the same way as the licence held by British Gas properly addresses those matters. The hon. Gentleman should bear in mind that the benefits of privatisation are already massive.
§ Mr. Duncan
I shall come to that in a moment. Let us look first at the basic price. The price of gas to the domestic household has gone down by 20 per cent. not just in money terms but in real terms since privatisation in 1986. We have the lowest industrial gas prices in Europe. The network supplying gas used to consist of cast iron pipes, but that has been upgraded. Verges are being dug up for the laying of yellow polyethylene pipes. Between £1.3 billion and £2.2 billion a year is being invested in the pipeline network. That would have been unimaginable under the nationalised system.
Much of the profit in British Gas is invested, much goes to shareholders and much goes to the Inland Revenue. Last year, £504 million was paid in tax and that pays for hospitals and schools and for other projects for which the hon. Member for Barnsley, West and Penistone (Mr. Clapham) often asks for more money. British Gas has an expanding and significant global presence which would have been unthinkable under the financial constraints of nationalisation.
Despite all those benefits, which are evident even during the transitional phase, it is right to move on. That is what the Bill does. Having gone through the transition of the company being subject to regulation and competition, we should enhance the climate of competition so that the benefits to wholesale consumers can be transferred in equal measure to household consumers. The pessimism of the hon. Member for Dagenham and her hon. Friends is ill placed. Within a few years she will have to eat her words.
§ Mr. Duncan
The hon. Lady advances the typical socialist argument—just because some benefits cannot be spread to all they should be spread to none. It appears that she would deny to those of her constituents who benefit from competition and the direct debit system the benefits that they are already enjoying. The price of her recommendation is that she would confiscate from her constituents and from mine the benefits that they enjoy, just because those same benefits have not yet been extended, as they surely will be, to the rest of her constituents.
Even now, cards are coming through our letter boxes asking domestic consumers to put their names on a register expressing an interest in receiving an alternative 631 supply of gas for their cookers and heaters. Even now, companies are preparing for the benefits of competition that will derive from the Bill, which I trust will be given a Second Reading tonight.
I was pleased that the hon. Member for North Devon (Mr. Harvey), in what I thought was an initially ambivalent speech, came down in favour of voting for the Bill. I welcome that because this primary legislation is right. It provides for an equitable regime of duty and obligation on the part of licence holders. There will be a licensing system which will properly supply all parts of this country. The benefits of competition will spread, and—who knows?—some companies might even compete for business by deciding to abolish the standing charge. That is not unthinkable; it is perfectly possible. I look forward to the day when it becomes part of the marketing objectives of the companies that are going to queue up for licences to supply.
There is not just competition within the gas industry; there is competition between gas and other sources of energy. That is the global picture which the hon. Member for Dagenham signally failed to assess.
I should like to pick up a point about what should be in law and what should be in a licence. I can understand some people feeling that all the guarantees and standards that they wish to preserve should be enshrined in the letter of the law—but there is a problem with that. This is a rapidly developing market, taking on new technology, new structures and new competitive methods. If we put all the details in law, we should forever have to come back to the House to amend, update and change the law. It is right to put the parameters in law, and then to leave it to the Secretary of State and the licensing system to ensure that the guarantees which the hon. Lady rightly seeks are given legal effect.
If a company wants to supply gas but does not meet the stipulations in the licence, it is a far more rapid remedy if the Secretary of State removes that licence than if the company goes through the courts for a number of years, supposedly for having failed to observe the terms of the law. So guarantees to the consumer are much better for being in licence form than if we included them in the more cumbersome structure of the Bill.
Another important point concerns the question: why should a supplier of gas feel any less inclined to supply gas to someone who is disabled, just because that someone is disabled? We have heard the cry from the Opposition that the Bill will stop gas going to the disabled. I find that suggestion incomprehensible, and I call on the Opposition Front-Bench spokesman to explain what is meant by it—if he cares to repeat the allegation.
I do not accept what has been said about safety either. There are fewer problems with safety, largely as a by-product of more modern equipment for the supply and use of gas. Because the lack of investment hanging over from nationalisation has been so rapidly solved, there are now fewer safety problems and risks associated with the supply of gas.
As for complaints, I heard the hon. Member for Barnsley, West and Penistone mention VAT. Certainly, there were problems when it was announced that VAT would be charged on domestic fuel. A lot of people phoned up, not necessarily to complain but to inquire about how to pay their bills. As the measurement system does not distinguish between an inquiry and a complaint, the apparent number of complaints is a fallacious statistic. 632 All that happened was that a great many people—understandably, given that VAT was to go on their bills—phoned up to find out how it was going to work.
§ Mr. Clapham
Is the hon. Gentleman suggesting that the great British public did not complain about VAT and just accepted that it should be added to fuel bills?
§ Mr. Duncan
That is not the point that I am making, which is that the total number of complaints which the Labour Front-Bench spokesmen and their colleagues measured and then claimed were related to the performance of British Gas have nothing whatever to do with its performance. They were the fall-out from a political decision made in the Budget—nothing to do with safety, customer satisfaction or the performance of British Gas.
§ Mr. O'Neill
The hon. Gentleman will probably be aware of, but has probably not yet read, the research paper produced by the Library which gives a breakdown of complaints and inquiries received by Ofgas. It shows that, in 1993, Ofgas received 1,658 complaints; in 1994 it received 2,203. In the same period, the number of inquiries fell from 184 to 115—so it would appear that the imposition of VAT does not support the hon. Gentleman's argument.
§ Mr. Duncan
I suggest that the hon. Gentleman is being disingenuous. The figures put to us were not from Ofgas: they were from the Gas Consumers Council, based on a 20,000 sample—[Interruption.] I can wave my copy of the research document as easily as the hon. Gentleman can—I have seen the figures in it. The hon. Gentleman will appreciate that the numbers are very small indeed—250 out of 20 million customers ain't bad. I commend British Gas on its standards.
There has been a great deal of complaint to the effect that those who work. for British Gas are dramatically overpaid. I do not agree. Had the hon. Member for Clackmannan (Mr. O'Neill) been present at the meeting of the Employment Select Committee last week, he would have seen the hon. Member for Wallasey (Ms Eagle) squirming at the answers that she got from Cedric Brown, chief executive of British Gas, and from Richard Giordano, chairman of British Gas to her accusation about how the share option scheme worked. It was shown to be completely wrong. The whole point of the share option scheme is that British Gas has to work steadily up the FTSE 100, not just in competition with its own past performance but in competition with all other FTSE 100 companies, before the company so much as earns a penny. Had those executives been paid according to what they have saved consumers since the privatisation of British Gas, they would now be worth billions, not millions.
The consumer is protected by a regulatory regime which has meant prices falling. The shadow Chancellor implies that if the chief executive and his boardroom colleagues gave back their share options, customers would be much better off, but the director general of Ofgas, Clare Spottiswoode, has said:
British Gas could pay their directors 10 times the amount they currently are, and the consumer would not pay an additional penny.She said that on the "Today" programme on 9 March this year. 633 The implication put about by the hon. Member for Dunfermline, East (Mr. Brown)—that high salaries cost the consumer—is no more than a political point about something which, on the most generous calculation, would be worth 6p a month.
§ Dame Elaine Kellett-Bowman (Lancaster)
I understood our right hon. Friend the Secretary of State to say that if the executives were not paid a bean, it would save gas consumers a penny a week.
§ Mr. Duncan
My hon. Friend is right. However many fingers we have, we know that only pennies are involved, whether it be one penny, fourpence or sixpence. The amount is small. The policy of criticising boardroom salaries in the pretence that they somehow cost the consumer money is a distasteful exercise in trying to buy votes. The hon. Member for Dunfermline, East has bought a sixpenny vote on the issue of Cedric Brown's income, yet, if he were ever to get into office, he would slap sixpence on income tax to grab the money off everyone else.
The so-called reasoned amendment picks up on themes that are unfounded. It says that the Bill is
damaging to the interests of many sections of the population, including elderly people".It says that the Bill
fails to provide adequate resources for health and safetybut that is not so.
The amendment talks about guarantees that will be in the licence, even though they were not in the Bill because circumstances will change. It once again talks about regulatory provision to enable price cuts to consumers where there are unjustified salaries and share options. If the Labour party fails to support the competition that will arise from the Bill, the real benefit of its promise is an enormously generous penny, twopence, threepence and fourpence a week—bully for that. If that is the price of its principles, I can understand why the hon. Gentleman has put such a low price tag on them.
The Bill is the final step to privatisation. It is clear that the Labour party will attack it all the way, but will it reverse it? We do not know. It will not say whether the answer is yes or no. Even on the day that I am speaking, it appears that clause IV will be replaced by clause four and a half and that the rearrangement of the dinosaurs in the Labour party's constitutional museum will merely mean that the promise to nationalise will be replaced by a promise to own industries in public—a mere semantic change, but the same principle remains. It will not even tell us the words of the clause IV replacement.
I predict that it will not be long before the Labour party has to eat its words in the amendment. All that the debate will have revealed is that the Labour party remains an anti-business party. It cares about votes. It does not care about consumers. It will stir up grievance and milk it for all it is worth. It will deploy every method of negative politics that it can. It will deny to its constituents what we will not: the inestimable advantage to consumers, to shareholders and to the economic improvement of the country that will arise from the passage of the Bill.
§ Mr. Alex Salmond (Banff and Buchan)
I assure the hon. Member for Rutland and Melton (Mr. Duncan) that his speech, in its own way, was every bit as amusing as that which preceded it. When the hon. Member for Dagenham (Ms Church) was making her vigorous denunciation of the Bill and all its works, one of his hon. Friends shouted out, "Who wrote this stuff?" I assume that Tim Bell wrote the hon. Gentleman's speech as I have never heard such an extravagant defence of the extravagances of British Gas.
Not all the oil and gas in the North sea would be in Scottish waters if Scotland were independent—just 90 per cent. or so—but I make no territorial demands nor have I any designs on Rutland, so perhaps the hon. Gentleman would abandon his territorial demands on Scottish resources.
I declare an interest as a shareholder in British Gas, albeit a modest one. Perhaps more appropriately, I hold 2,000 shareholders' proxies, so I shall go to the annual general meeting of British Gas on 31 May with the intention of tackling some of the excesses that the hon. Gentleman finds so congenial. I assure him, however, that the vast majority of private shareholders in the company are in open revolt.
I have heard it said that if the Select Committee on Trade and Industry says something, a consensus should exist in the House on the Select Committee's views. I even detected a nod from the Minister when one of his hon. Friends said that. I do not know whether some sort of contract has been offered or whether, from now on, any Select Committee recommendation will be immediately accepted by hon. Members on both sides of the House. It would be an interesting venture if the Government went down that road. However, they are unlikely to do so.
I did not sit on that Select Committee, but I was a member of the Select Committee on Energy which preceded it. I remember that some of us were unenthusiastic, to say the least, about the process of privatisation in the electricity industry. Nevertheless, as privatisation was being proposed we agreed to try to make sensible recommendations in that context. It would have been unfair for people to say that that implied support for privatisation. It is legitimate for a Select Committee to make recommendation within a context set by the Government without conceding the point of principle.
As for the claimed success of British Gas since privatisation, I remind the House that the company has been referred to the Monopolies and Mergers Commission twice since privatisation and to the Office of Fair Trading once. It was in constant battle with the previous regulator, Sir James McKinnon. At last year's general meeting of British Gas, which I also attended as a small shareholder in the company, I remember the valedictory series of insults that were levelled at Sir James by the company's board. One of the small shareholders got up and said that James McKinnon could not be too bad a lad as the person who appointed him was a member of the company board and sitting on the platform. He was referring, of course, to Lord Walker. Given the company's track record of constant battles due to the anti-competitive behaviour that Sir James detected, to claim that the privatised company has been an unqualified success is a remarkable argument.
§ Mr. Tim Smith
I was surprised to hear what the hon. Gentleman said about the relationship between the 635 company and the regulator. Surely, by definition there is bound to be a certain degree, to put it mildly, of creative tension. It would be far worse if some kind of cosy relationship existed between the regulator and the company.
§ Mr. Salmond
These things are a matter of degree. I suggest that two referrals to the Monopolies and Mergers Commission and one to the Office of Fair Trading tend to suggest that the Gas Act 1986 had certain flaws. Moreover, the fact that we are debating another Gas Bill to change the ground rules is an implicit admission that the Gas Act 1986 was a failure in terms of introducing proper and effective competition into the gas markets.
I have tried to detect positions of principle in today's debate. With the greatest respect to hon. Members on both sides of the House, however, little of what I have heard today has been about the principle of the Bill. I have a fundamental disagreement in principle. It involves clause 5, which states that TransCo, the transportation company, should continue to be owned by British Gas, although its activities should separated. I object in principle to that arrangement and to clause 5.
I will try to deal with both points of view and to explain to Labour and Conservative Members why they, too, should disagree with that policy in principle. I am attracted to the formulation that the previous Select Committee on Energy advanced for the electricity industry. It took the view that a strong argument existed for the distribution system to remain under public control and under common ownership. It said that that would ensure fair play in the overall market place. If it is no longer fashionable to have common ownership of the means of production and exchange, the Labour party may care to consider whether it might still be possible at least to support common ownership of the means of distribution. Serious ambiguities are left in the system. The company should have a social duty to provide gas supply to areas where it will be extremely costly to provide that supply. That is best catered for within a public sector arrangement.
If the company's safety obligations are placed in the private sector and in a fully competitive environment, that will cause great difficulty. The Labour party might like to consider particularly whether the transportation system would not best be handled within some form of common ownership or public control. I suggest to the Conservatives, too, that the idea that that matter can be left in the hands of British Gas is a fundamental mistake in the privatised structure. One cannot have a truly competitive market in which just one player is left in control—albeit at arm's length—of the distribution system. To illustrate the substantial doubts of other players, I shall quote from an internal memorandum from a private oil company which hopes to move into UK gas supply in a big way. I shall not identify the company as I received the memorandum for other reasons.
On the subject of introducing competition into the gas market, the company refers to the problems that it foresees in its internal planning:
British Gas TransCo, through its inability to deliver a competent service to shippers and hence our customers, is severely damaging the perception of gas competition among final consumers. Service standards have worsened since last autumn and British Gas TransCo seem to have taken no effective action to improve the situation. We have asked Ofgas to impose financial penalties for failures to meet set standards. However, penalties are not enough in themselves; 636 entering the domestic market with such poor standards of TransCo service would be highly damaging to customers and the reputation of independent suppliers in dealing with the general public.That is evidence of substantial doubts among companies wanting to move into the freed-up competitive gas market about the effectiveness of TransCo at present and the wisdom of TransCo being part of the overall British Gas network.
British Gas must be one of two things—a company with a larger responsibility as a utility, or just another oil and gas company competing in the market. The ambiguity and personality split are already evident: Mr. Giordano clearly believes that salary levels should be set on the international oil and gas market, while many British Gas customers, staff and shareholders believe that the company has a special and particular obligation as the gas utility of final resort. Until the Government resolve that matter and identify the future for British Gas, the principles in the Bill will remain fundamentally flawed.
As to the internal machinations of British Gas, I am indebted to Mr. Giordano, writing in tonight's Evening Standard, for crystallising some of my complaints about the company. Referring to the transformation of British Gas under his chairmanship, Giordano states—ironically, I believe—
British Gas? Isn't that the company which has all those over-stocked, rather unfriendly showrooms in Britain's high streets?The reality is that British Gas has become an unfriendly company with hardly any showrooms because so many have been closed under Mr. Giordano's chairmanship. He also comments on the difficulties that British Gas has encountered with public resentment and shareholder outrage at pay settlements in the company. He writes of Mr. Cedric Brown:
Alas, the issue of his pay, which has been so unfairly dealt with, has consumed an inordinate amount of energy during the past few months. There has been a fog of confusion and misinformation.Indeed there has. That fog of confusion and misinformation was created by the board of directors, who refused to reveal to shareholders at the last annual general meeting the pay deals that had been made.
§ Mr. Duncan
Showrooms are a hoary old chestnut. Does the hon. Gentleman believe that British Gas should be obliged to subsidise retail outlets when one can buy gas appliances from a wide range of retailers and pay one's gas bill free of charge at 19,000 or more post offices?
§ Mr. Salmond
Scottish Power, a privatised utility, is expanding its showroom network throughout Scotland and moving south of the border. It is surprising that British Gas is retreating from Britain's high streets at precisely the time that other privatised utilities are expanding their showroom network and seem to regard that as a particular advantage in the competitive marketplace.
As to salary levels in British Gas, I will quote from supporting comments for one of the resolutions that I sincerely hope will upset the apple cart at the company's annual general meeting and restore some sanity to its top leadership. The resolution was submitted not by me but by Pensions and Investment Research Consultants, and it details what has happened in terms of the pay deals negotiated behind the scenes. It states:
Companies have been asked by PIRC and by others to provide full disclosure on the issue of pay. PIRC welcomes British Gas commitment to the principle in future. PIRC notes that the review 637 of the remuneration for executives was not announced at the April 28 1994 AGM, yet the salary rises were backdated to that point and for the chief executive backdated to before the AGM, to January 1994. The Chairman"—Mr. Giordano—
was appointed an annual salary (for a two-day week) of £450,000 at the AGM, yet the terms were not disclosed at the AGM or indeed in any of the quarterly statements.That situation was defended by the hon. Member for Rutland and Melton. Details of salary settlements were kept not just from the general public but from shareholders at the AGM. If any Conservative Member, arguing for a competitive market, can defend senior executives who do not have the guts to go before their own shareholders to explain and to defend huge salary increases that the public find offensive, I shall be interested to hear that defence. Events in British Gas have provoked outrage among the public. It is interesting that Conservative Members do not realise that there is a shareholders' army set to march on the AGM to right the wrongs in the company.
The House should examine not just what Mr. Giordano and Mr. Brown have done wrong but the structure that Parliament established in 1986, which allowed a company that the public once held in high esteem to become widely despised by the public and wholly hated by its shareholders.
I explained earlier how moving to an open market can provoke problems as well as create opportunities. I gave the example of the people of Rosehearty and Sandhaven in my constituency. In Banff and Buchan terms, they are substantial villages of several hundred people. They live within a few miles of St. Fergus gas terminal, which is one of the largest in Europe. The flames from St. Fergus light up the evening sky. Those villages have wanted a gas supply for many years. One might criticise the structure of the nationalised British Gas which rationed gas supplies to consumers throughout the country, but my villagers' hopes were raised when they received a commitment from British Gas after privatisation that supply would be extended to their villages.
At that time, British Gas in Scotland had the ability to operate a formula whereby the cost of connecting rural communities could be approached imaginatively. It assumed a number of connections over the years, which allowed the high initial cost to be offset on the assumption that more customers would be attracted in the longer term. By that means, villagers in St. Fergus, St. Combs, Inverallochy and Cairnbulg were connected to a gas supply at a cost of £40 per household in the early 1990s. Villagers in Sandhaven and Rosehearty are now being offered connection at more than £1,000.
The explanation is that changes in British Gas have totally eliminated management autonomy in Scotland, so the previous formula has been vetoed by the London headquarters. Also—this is interesting in the context of competition—British Gas argues that it cannot afford the substantial outlay of connecting small villages if it cannot be protected from another company supplying those households in the future after British Gas has met the high initial cost. The move to competition is not helping people to obtain a gas supply but actively hindering the extension of the network. A once reasonable connection charge has 638 become highly inflated. The House must deal with that real situation, which is confronting rural households the length and breadth of the country.
There are objections in principle to the Bill. The question of competition has not been fully thought through and cannot be dealt with while TransCo remains in the hands of British Gas. I see no reason why the Opposition should not vote against the Bill in principle, because it does not offer that protection, as well as making some factual points through the reasoned amendment. For that reason, if no one else divides the House on Second Reading, my party and Plaid Cymru will certainly do so.
§ Mr. Tim Smith (Beaconsfield)
The hon. Member for Banff and Buchan (Mr. Salmond) is very concerned about clause 5. I understand that, but I do not see it as a reason for him to vote against the Bill, which has considerable merit. In 1982–83, I served on the Standing Committee which considered the Telecommunications Bill, which led to the privatisation of British Telecom. Apart from a speech made by Mr. John Golding, who was sponsored by the Post Office Engineering Union, which now appears in the "Guinness Book of Records", I remember that Labour Members indulged in various scare stories about what would happen when British Telecom was privatised. They said that prices would rise, that the service would deteriorate and that the number of call boxes would be decimated. The exact opposite happened. In real terms, prices dropped dramatically. The service improved tremendously because BT started to employ salesmen rather than order takers and a telephone line could be connected within 24 hours. The number of call boxes that work is now much higher than it was when the business was nationalised.
We have seen the same pattern with every privatisation measure brought before the House since 1982. We saw the same pattern with the Gas Bill in 1986. The same claims were made about what would happen when British Gas was privatised as a monopoly. Labour Members said—this is on the record—that prices would rise and that the service would deteriorate. In fact, as we have heard during the debate, the price of gas in real terms has fallen by 20 per cent. since the business was privatised. Every consumer of gas has benefited. Shareholders, including the hon. Member for Banff and Buchan, have also benefited because profits and dividends have risen. As I said in an intervention, it is possible in such circumstances that customers and shareholders can benefit.
The hon. Member for Banff and Buchan suggested that the fact that we introduced the Bill meant that we had got the legislation wrong in 1986. He seemed to think that once one had legislated on something, it was never possible to amend the legislation in any way, or alternatively, that if one did amend it, it was an admission of guilt or fault. Clearly, we have moved on from 1986. An element of competition was built into the Gas Act 1986 so that, as we have heard during the debate, industrial customers have benefited significantly. My hon. Friend the Member for Rutland and Melton (Mr. Duncan) told the House that there are now 25 independent gas companies supplying industrial consumers and that the price to those consumers has fallen dramatically. I suggest 639 that it is sensible to move on from there to see whether it is possible to bring an element of competition into the supply of gas to domestic consumers.
People sometimes suggest that the Government have run out of radical ideas. I suggest that the Bill is an extremely radical measure. There is no major capitalist country in which there is genuine competition in the supply of gas to domestic consumers. The idea that one can retain the pipes in one company and then generate competition by supplying gas from different suppliers down those pipes is relatively recent. The Bill represents a substantial step forward.
It is not surprising that it is difficult to envisage precisely how the new system will work. That is why it is right that legislation should be relatively flexible and not too prescriptive. It is right that many of the terms and conditions under which the competitors of British Gas will operate should apply under licences granted by the Director General of Gas Supply because it will be easier for her to alter the terms than it will be for the House to amend primary legislation.
Over the past few weeks, there has been a lot of debate about the role of the regulators. It is true that the regulators have considerable power; it is right that they should have considerable independence. The hon. Member for Stockport (Ms Coffey), or the hon. Member for Dagenham (Ms Church)—I cannot recall which—suggested that there was not sufficient accountability. Accountability does not mean that Select Committees should give directions to the regulator. It is right that the regulators should be accountable. It is reasonable that they are confined to a clear and relatively narrow objective, which is to ensure that the system operates in the interests of consumers.
What concerns me about the way in which the Labour party is moving is that it wants to try to go back to the bad old days of the nationalised industries. The difficulty was that although the 1948 White Paper said that the nationalised industries would operate at arm's length and that Ministers would not interfere in their day-to-day affairs, the history of what happened over the next 30 years showed that no Minister of any political party could resist the temptation to interfere in their affairs.
§ Mr. O'Neill
The hon. Gentleman is being rather narrow in his interpretation of the Bill's remit as regards the regulator. The Bill says that the regulator shall have a duty
to secure that, so far as it is economical to meet them, all reasonable demands in Great Britain…are met".The Bill says that the regulator shall have a duty
to secure that licence holders are able to finance the carrying on of the activities which they are authorised…to carry onand a duty
to secure effective competition".There are three major and substantial responsibilities for the regulator which are embodied in clause 1. It seems likely that the hon. Gentleman has not read the Bill if he did not get as far as clause 1.
§ Mr. Smith
I understand that point. However, all those objectives are included in the Bill because they are clearly in the interests of the consumer. That is exactly as it should be.
The difficulty when these businesses were publicly owned, nationalised industries was that Ministers interfered in their day-to-day management for a raft of 640 different reasons. I remember when their prices were held down artificially to meet an objective of the income or prices policy of the Government of the day. That meant that those industries made losses and that the taxpayer had to subsidise them. No Governments were able to resist the temptation—
§ Mr. Smith
The Heath Government. I said that no Governments of whatever complexion were able to resist the temptation to interfere in the day-to-day affairs of those industries.
It is not possible to establish a regime under which those companies remain in the public sector, but under which the Government set up a regulator who regulates their affairs. That is not an option. The only solution is to move those businesses into the private sector and then to establish a degree of independent regulation. The far better option is, as far as possible, to introduce competition into the affairs of a particular industry. That is what the Bill would do and for that reason, I very much welcome it.
I do not believe that the powers of the regulator should go further than those set out in the Bill. What concerns me about what Labour Front-Bench Members are now saying about the system of regulation is that we would return effectively to the bad old days. They would give new powers to the regulators. They would give to the regulators, for example, the power to start interfering in the day-to-day affairs of the business. We already know that Labour plans to give the regulator power to fix the level of remuneration of board members. That is just for starters. I suspect that Labour will be unable to resist the temptation to suggest that the regulator should also be concerned about employment levels in the business. That was always a major consideration when these businesses were nationalised industries; they were effectively employment creation agencies. In other words, employment was held at artificially high levels to ensure that unemployment did not rise. I do not believe that that was a legitimate use of nationalised industries, yet that is precisely what happened.
§ Mr. Salmond
I am not sure where the hon. Gentleman's argument is leading. Is he saying that the previous ideological battle between members of the two Front Benches about the ownership of any industry will be replaced by a debate about the extent of the powers of the regulator? If that is the sum total of the debate, I suggest that they all sit on the same Bench.
§ Mr. Smith
The hon. Gentleman underestimates the importance of the issue which I am discussing. I am not suggesting that it is trivial, as he apparently believes. The power of the regulator is absolutely fundamental. It is terribly tempting to give the regulator this power or that power because we do not like this abuse or that abuse. None of us has liked what has been going on in the privatised utilities. Nobody looks on it with favour, but the answer to the problem is not to add to the powers of the regulator.
There is no doubt that when these businesses were nationalised industries, employment was a very important factor. That is why even the Treasury underestimated the ability of businesses to reduce their costs and the speed at which they could do it once they were privatised. That is certainly what happened with the regional electricity 641 companies. They drove their costs down far more quickly than anybody anticipated. They did that, of course, by increasing productivity and reducing staffing levels. That has happened throughout the industries which have been transferred to the private sector. They are far more efficient and more cost-effective than they were.
It would not be sensible to revert to the kind of system that we had before and that is why the Labour party's policies worry me. The proposals in the Bill are the best way forward. They will introduce a substantial element of competition in the supply of gas to the domestic customer and that is extremely welcome.
§ Mr. Peter Hain (Neath)
I challenge the whole philosophy behind the Bill because the proposition that competition can be left to its own devices and, thereby, automatically establish ideal equilibrium in the gas market is entirely without foundation. We are not dealing with a traditional, conventional area of supply and demand that can be rationed by price. We are not dealing with high-speed consumer gadgetry for which competition is ideal. We are dealing with a key, strategic and essential service. The Bill, in line with the Government's whole policy and their free market mania, is at the expense of public interests and in favour of private interests.
The Bill will have three immediate consequences. It will increase cherry picking as the competition focuses and concentrates on the areas where most money can be made at the expense of the rest, which will result in social dumping. Secondly, it will undermine the strategic interests of the British economy by forcing our only national champion—British Gas—to concentrate on pygmy competition in its own back yard, instead of international competition that can advance the strategic interests of the British economy. The third major defect of the Bill is that it will operate under an inadequate system of regulation, which is not accountable to Parliament and is not seriously democratically accountable. The gas regulator and other regulators are virtually tin gods; a law unto themselves. They are pursuing competition blindly.
One of the immediate consequences of such an approach is the lack of a sensible energy policy. In fact, we do not have one at all because each regulator and each competitive market is pursuing its narrow interests in a compartmentalised fashion and they cannot be aggregated to pursue an energy policy in the public interest.
As a result of that free market mania, we are seeing the compartmentalisation of gas into shipping, transportation and supply, which means that the benefits of an integrated service, such as for repairs, are prevented. If one has a problem with one's gas system, wherever it may be situated, somebody from British Gas turns up at one's front door in a van. That van contains all sorts of things. It could contain a thermo-couple for a boiler, a small item for a cooker, something to do with the meter or some other part of the system that has gone wrong. With that one service man or woman and the equipment stored in the van, it is possible to rectify that problem. In future, if there is an emergency of some kind, TransCo will send 642 out an operative to deal with the problem and effect a repair. He or she will effect that repair if there is a problem with the meter. Beyond that—
§ Mr. Hain
I am sorry that I cannot take interventions, much as I would like to, but many hon. Members want to speak.
Beyond problems with the meter, other people will have to be called in. The list of various operatives in the Council for the Registration of Gas Installers will have to called on and those people will be invited to—perhaps—repair a cooker. That will result in an extra call-out charge being imposed on the householder, whereas at the moment there is simply one call-out charge and one person deals with the whole job.
The ethos of an integrated service is being destroyed in front of our eyes. That may be of no interest to Conservative Members, but it certainly interests Labour Members, who have the interests of the people at heart, as opposed to those who wish to make profits out of the system. For example, as a matter of courtesy and good will, the gas man or woman may take a cooker out and replace it with a more modern model, and rather than throw the old cooker on the scrap heap, may install it free of charge in the home of—perhaps—an old woman whose cooker has broken down. That may not be competitive or go along with cost-related charging and all the jargon of the free market, but it reflects an integrated service.
Indeed, it has even been the practice among British Gas workers to look at old, abandoned cookers, strip them down, put some of the parts in their vans and supply them to pensioners when they are in need of such equipment. Again, that service may be provided free of charge and may not conform to the dictates of the market, but it supplies a public service for people in need.
Cross-subsidy will be impossible under the cost-related system of charging, which will be one of the guiding principles of the Bill when it becomes law. A uniform price, which has been one of the cardinal principles of the supply of gas in this country over many generations, will be impossible. We shall no longer have a uniform price. Safety will also be impaired and threatened by this regime. All those are consequences of the compartmentalisation of the industry; the destruction of an integrated service.
I now refer to cherry picking and social dumping. Inevitably, the focus of competition will be in areas where the money can be made. Hon. Members need not accept that proposition from a left-wing Labour Member; they can accept it from the Monopolies and Mergers Commission, which predicted that social dumping and cherry picking would take place when such a regime, or something like it, was advocated.
The competitors will not be interested in going up a remote Welsh mountainside to supply gas. They will not be interested in supplying gas at the top of a south Wales valley such as the Dulais valley in my constituency. Gas is supplied only half way up that valley. The competitors will be interested only in making money and in competing where the money can be made—among large users and rich households. Inevitably, there will be differential pricing. Indeed, the Government have conceded that. Rich customers and large users will pay relatively less; poor customers and low users will pay relatively more. That is a form of social dumping and it is already happening. 643 A dress rehearsal for that regime is already occurring in respect of the change introduced by British Gas whereby direct debit customers pay 5 per cent. less. That is a form of social dumping and it particularly hurts people on low incomes who cannot afford to have direct debits. I very much resent the arrogance of many Conservative Members who seem oblivious to the fact that many pensioners in my constituency, and I am sure in constituencies across the country, are frightened about direct debits. They are terrified at the prospect of a bank raiding their accounts, month by month, whether or not they have the money to pay those debits. Why should those people pay 5 per cent. more on their gas bills when they cannot afford those bills anyway? That is a form of direct social dumping.
Other consequences of the Bill worry me a great deal. The obligation to supply is defined in statutory form in section 10(1) of the Gas Act 1986. However, that obligation has been weakened. It has been removed from the new Bill. TransCo simply has an obligation to connect a premises to the network. It no longer has an obligation to supply. It has been said—and I have no doubt about this—that the obligation to supply is in the licence. However, that weakens the obligation. The obligation should be in the legislation where it can be democratically accountable. It should not be in a licence or left to the regulator to police.
Similarly, the obligation to publish prices has been weakened. That provision was contained in section 14(1) of the Gas Act 1986. The Bill deletes that requirement. Why does it do that? That obligation is weakened and it is transferred into the licence. I do not believe that that is an adequate safeguard.
The obligation not to show undue preference or discrimination when setting prices has been weakened. That obligation was also contained in section 14 of the 1986 Act and it is another derogation to the licence and to the regulator. That undermines democratic accountability. Those are warning signals that social dumping will be institutionalised as part of the new competitive regime.
Wales, in particular, will lose out. As it is far away from the points where gas is beached on the east coast, according to British Gas, charges could rise by up to 8 per cent. above those on the east coast. In addition, because Wales has many more low-income households than in the rest of the United Kingdom, social dumping will hit the people of Wales much harder.
Proportionately, half the number of people in Wales are on direct debit in comparison with elsewhere in the United Kingdom. Many more cannot be on direct debit because Wales is the lowest income area of Britain. As a result of the 5 per cent. extra through not benefiting from direct debit; the 8 per cent. extra to pay for gas to be transported from the east coast; and differential pricing, which could be as high as 12 per cent., and which will open up between low users and rich users, people in Wales could pay 25 per cent. more than people elsewhere in Britain. Why should the people of Wales suffer simply because of their geography?
I want to finish—[HON. MEMBERS: "Hear, hear."] I am grateful for the encouragement from the Opposition Front Bench. My major strategic criticism of the Bill is that it does not create a level playing field for competition. There is no reciprocity. British Gas has to compete with many foreign-owned suppliers and companies, when it cannot compete in Europe, where there is no reciprocal 644 opportunity to enter European markets. It is having to compete with European companies such as Shell, Elf, Total, Statoil and Norsk Hydro, which have access to our markets while there is no reciprocity for us to have access to their markets.
British Gas is planning to invest up to £2 billion internationally over the next five or six years. It is in a very important market as one of the big international global players. If it is forced continually to fight off competition in its own back yard, it will be prevented from being a big player, and Britain will lose out strategically and economically to companies in Europe, America and elsewhere, which are coming in on much more favourable terms. For all those reasons, I believe that the Bill is the last spasm of a failed Thatcherism and I am totally opposed to it.
§ 9.3 pm
§ Mr. Nigel Evans (Ribble Valley)
I have enjoyed many of the speeches this evening, but I did not enjoy the speech by the hon. Member for Neath (Mr. Hain). The hon. Gentleman—a former leader of the Young Liberals—has changed his politics once by moving leftwards, and no doubt he can change them again. I enjoyed the speech of the hon. Member for Dagenham (Ms Church), but not as much as she appeared to enjoy it herself. The hon. Lady was extremely witty, but if she cannot take her speech seriously, I do not see how she can expect the rest of the House to do so.
The message that we are getting loud and clear from the Labour party is that it is in favour of competition, but not the Government's sort of competition. As the Labour party experiences the death of clause IV and grieves over the sad departure of a loved one, it is finding that the vacuum created is rather difficult to fill. The Labour party cannot quite embrace privatisation and full competition because it has been weaned on state control, which is ingrained in its soul.
There is no doubt that if Labour forms the next Government, there will be far more state control than there is at present. The golden share will be held on behalf of the Government and in the interests of the unions, and certainly not in the interests of the consumers. We are seeing the sequel to clause IV, but—as with many sequels—it does not stand up to what went before. The Labour party's message is that it has principles, but if one does not like them, it has other principles.
The only thing worse than a monopoly is a state monopoly. The Government want to introduce competition because it is good for the consumer. The scheme has started with 500,000 consumers and will be extended to 2 million before all 18 million consumers benefit from the extension of competition in the delivery of gas to all consumers. Competition benefits many people in industry, and gas is currently being supplied to 60 per cent. of businesses by companies other than British Gas.
As I said during an intervention on the hon. Member for Dagenham, we have heard the Labour party's fears on privatisation and competition before, and British Telecom was the prime example. BT now has competitors such as Mercury and many other cable operators. In my area in the north-west, Nynex is investing more than £1.8 billion to provide cable entertainment and telephony in direct competition with British Telecom. 645 Since privatisation, BT has invested some £22 billion in the telecommunications market, and that has come in the face of competition with cable operators, which are now putting 50,000 people a month on to their systems. That is the sort of competition we want. Thanks to that competition in the telecommunications market, prices have fallen and far more people are benefiting from that. The hon. Member for Dagenham talked about constituents who could not afford to get on to the telephone system.
§ Mr. Evans
I am not laughing. There have always been people who have not been on the telephone system for one reason or another, but—thanks to privatisation and competition within the telephone market—there are far more public telephone boxes that those people can use than was ever the case before, and far more of those telephones are working than ever before.
We have also heard the argument that many people who are low users of telephones might find that their charges will go up. However, quite the opposite has occurred and low users are now getting rebates. That is not a result of Government legislation, but because it is in the interests of BT to do that.
With regard to the payment of gas bills, I live in a rural area and there are many post offices in villages there. I am delighted that people will now have the opportunity to go to those post offices to pay their gas bills at no charge to them. That will be a shot in the arm for post offices across the country, including those in the constituency of the hon. Member for Banff and Buchan (Mr. Salmond).
There has been tremendous downward pressure on prices within British Gas. Analysts have predicted that there will be a further fall of about 10 per cent. in addition to the 20 per cent. that we have already seen. Prices to industrial users have fallen by between 10 and 15 per cent. since competition was introduced. So I look forward to further falls in gas prices for my consumers.
We have heard the old chestnut about a 5 per cent. discount being given to people who can afford to pay by direct debit. Opposition Members say how terrible that is because it is done at the expense of everyone else. Yet British Gas plans to introduce discounts for people who pay promptly in cash or by cheque. That has to be welcomed. Some people try to delay paying their gas bill, electricity bill or any other bill until the last possible moment. I believe that people who take the time and trouble to pay promptly ought to be given every incentive to do so and should benefit from doing so. I see nothing wrong with that whatever.
We have heard a catalogue of scare stories from Opposition Members on various things including safety standards and essential safeguards. Yet those matters are covered in the Bill. We have heard again about cherry picking, but we know that the licence conditions will be sufficient to ensure that cherry picking does not take place. As someone who represents a rural area, I welcome that. I want to ensure that everyone benefits from competition. We shall see that in the pilot in the south-west.
We have also heard that the disabled and the blind will lose out under the Bill, even though they have been told that that will not be the case. It was suggested that there 646 should be one number—perhaps 888—for people who have gas leaks or fears about electricity. It would be a good idea if they could dial one number from a telephone. I hope that that will be examined more carefully.
The Labour party talked about cherry picking this evening. The cherry picking in which Labour Members have been involved is picking on Cedric Brown, share options and directors' pay. It is the worst case of the politics of envy that I have seen in a long time. Irrespective of the conclusions of the Greenbury committee, if a Labour Government were elected, they would no doubt act on share options and directors' pay. That can be seen clearly as a diversion from the other cherry picking that they would do. Not only the people at the top of the premier league, but people in division one, division two, division three and all the lower divisions would suffer. A Labour Government would pick on anyone and everyone because they would try to implement a massive programme and would need extra money to pay for it.
We need profits in our companies in Britain because we need the investment that will be made with those profits. If the Labour party sees itself forming a future Labour Government and hitting companies that make profits, it must also accept that it will hit essential investments necessary for those companies to grow, flourish, go into the world market and compete.
The Bill will benefit British companies. It will certainly benefit gas suppliers that wish to compete with British Gas. I fundamentally believe that it will benefit the consumers. We are here this evening to protect the consumers and promote their interests. I believe that the Bill will do exactly that.
§ Mr. Andrew F. Bennett (Denton and Reddish)
I have been surprised by the debate. I was disappointed by Conservative Members, who spent more time in a debate on the Gas Bill speaking about telephones and what had happened in the telecommunications industry than they did on comparing what had happened in the gas industry before privatisation and since. Much of the success of British Gas since privatisation has been built on the skills that people learnt while the industry was still nationalised. The emphasis that the nationalised British Gas placed on training and skills for the work force has benefited the company a great deal.
My main disappointment with the debate is that no reference has been made by Conservative Members and very little, I am afraid, by Opposition Members to the environmental consequences of the Bill. The Order Paper tags up the fact that the reports on energy conservation by the Select Committee on the Environment are relevant to this debate, and I had hoped that the Minister might mention that subject in his reply, but the leaked version that was circulating earlier did not seem to contain much concern for energy conservation.
The Environment Select Committee, of which I was then a member, under the chairmanship of the hon. Member for Hertfordshire, West (Mr. Jones), carried out a very useful survey and report for the House. We followed it up with further inquiries into energy conservation. It is essential that the Government meet their Rio commitments, but, for all our constituents, it also makes good sense to save energy in the home, in industry and in offices. 647 The idea that the only thing that matters at the moment is the price of gas is a major failure. The issue has to be considered in a much wider context. It is much more important for the country and for many people that we consider the price of gas over a period of time. The dash for gas by the electricity generators has not been in the country's long-term interests. It may mean that electricity prices have come down, but it has done a great deal of damage to the coal industry and to people who make mining engineering equipment.
If one brings the price down further and further, one certainly makes it harder to encourage alternative forms of energy production—certainly the renewable forms that might be far better for the long-term interests of the country. It also affects exploration.
We should not forget the fundamental fact that natural gas is a finite resource. If we use it irresponsibly now, future generations will not be able to use it. I know all the arguments. For the past 20 years, it has been said that the supply will eventually run out, but as fast as people have been saying that, new discoveries have been made. Because it is a finite resource, it will run out in the end. The hope is that, by the time that it starts to run out, alternatives will have been found, but as there is no total logic that says that the two will coincide, it would merely be prudent for us to try to reduce the amount of energy that we waste. It would certainly be good for the environment if we were to do so.
I remind the House that one of the most severe jolts to British industry occurred with the sudden hike in oil prices in the early 1970s. Although I cannot imagine circumstances in which there would be a sudden hike of the same dimensions in the price of natural gas, it is irresponsible to go on consuming natural gas so wastefully. It is important that we deal with the problem and, sadly, the Bill is not an attempt to do that.
Rio required a major reduction in carbon dioxide emissions. Originally, the Government estimated that the Energy Saving Trust should reduce carbon dioxide emissions by 2.5 million tonnes. Last week, the Secretary of State for the Environment revised that figure downwards on the basis that, because of the way in which energy is being generated, it is not necessary to make quite such a big saving. He is still looking for a reduction in the region of 1.3 million tonnes by the year 2000, however, and if that is to be achieved, there must be some money for energy conservation. So far, the Government have not come up with a mechanism for paying for that. Originally, it was hoped that some of the money would come from the gas industry, but the new regulator stepped in and virtually vetoed that.
The Government are now committed to competition. Whereas electricity consumers will pay about £6 a year towards energy conservation measures, gas consumers will pay virtually nothing. The Government should certainly have taken the opportunity provided by the Bill to propose some mechanism for making the Energy Saving Trust work.
If the regulator must simply obey the law and the law is tightly defined, that is a useful role for a regulator but not very important. The Government say that they want to give the regulator a political role and it is clear that, over the past few years, the regulator has made political decisions. I simply argue that, if it is a political role, it should be exercised by a Minister accountable to this House, not by someone at second hand from the House.
648 Earlier in the debate, the President of the Board of Trade said that if we dealt with the benefits that were going to the top executives in British Gas, gas bills would be reduced by only 50p per consumer. If many of my constituents could have the 50p per consumer being squandered by those at the top of the gas industry—the same applies to the other privatised industries—it would make a considerable difference to their expenditure.
Finally, I regret that the Bill makes no reference to the gas industry's environmental responsibilities. The only reference that it makes is to pipes. I gather that that puts the industry on the same footing as the electricity industry, which is responsible for pylons. The gas industry should have a far wider environmental responsibility and should certainly be responsible for conserving supplies of natural gas, which will ultimately run out.
§ Mr. Martin O'Neill (Clackmannan)
The reasoned amendment in my name and that of my right hon. Friends is based on the assumption that we oppose a private monopoly. We are willing to have competition because the record of British Gas is not sound enough to merit our continued support.
When this issue came before the Monopolies and Mergers Commission for consideration some time ago, we argued that British Gas should be allowed to operate in its present form because it was a world-class company, and that it was entitled to have in the United Kingdom a base of a size that enabled it to work extensively abroad. We still hold that view and, therefore, do not oppose clause 5, which the hon. Member for Banff and Buchan (Mr. Salmond) used as an excuse for opposing the Bill in principle. British Gas is a natural monopoly, but it is currently subject to close regulatory processes, Chinese walls and the threat of being split up if it does not operate as a single body.
§ Mr. Salmond
I do not necessarily expect the hon. Gentleman to share my principles. He seems to have none of his own and seems to be about to recommend to his hon. Friends that they first vote to decline to give the Bill a Second Reading and then abstain on a subsequent vote when the question of Second Reading is put to the test.
§ Mr. O'Neill
The hon. Gentleman clearly does not take too much time paying attention to the procedures of the House, as he spends most of his time outside the Chamber. The whole point of tabling a reasoned amendment is that we do not oppose the principle of the Bill. If the hon. Gentleman does not understand that fundamental procedural point, he has some learning still to do. We believe that British Gas's role in the domestic market should be opened up to a degree of competition.
I have already referred to the MMC's 1993 report, in which it said:
We recognise that, while introduction of competition may well result in a reduction in the overall level of prices, some groups may be worse off'.Our amendment seeks to minimise that deleterious effect.
Several groups are vulnerable. This has been an effective and wide-ranging debate. While we may not have agreed with everything said by Conservative Members, a number of their speeches were uncharacteristically thoughtful. On cherry picking and social dumping, my hon. Friend the Member for Neath 649 (Mr. Hain) said that, as the Institute for Fiscal Studies pointed out in its report of January last year, the average weekly wage in Wales is some £223, whereas in the south of England it is some £290. Even if we have uniform pricing, some areas will experience considerable disadvantage. We shall have to wait to see whether competition can bring down prices in areas such as south Wales to make the new entrants into the business that much more attractive to existing consumers. That is hard to envisage because of distances and consumption.
Some of the evidence given by representatives of British Gas to the MMC has been undermined by the introduction of the direct debit discount. British Gas was able to introduce its own form of cherry-picking in advance of competition taking place. That was a crass public relations error.
The discount was a gross insult to the poorer consumers, many of whom do not have bank accounts. Many of them do not have direct debit facilities. Over the past few months a sizeable television campaign has been waged by the banks and others in support of the direct debit system because many people are still sufficiently unsure of their relationships with banks not to enter into direct debit agreements. British Gas's opportunism undermines its claims about cherry-picking.
§ Mr. Duncan
Does the hon. Gentleman accept that if a company such as British Gas improves the credit performance of its customers and attracts as many people who can give security of payment as possible, the ensuing benefits will bear on all consumers through the greater efficiency that will have been achieved?
§ Mr. O'Neill
British Gas could similarly have benefited small consumers who pay regularly and on time. In fact, British Gas has been able to pull a stroke that may be difficult for its competitors to follow in securing access to 19,000 post offices. It remains to be seen whether there will be that number of post offices when the Bill is enacted and begins to be implemented. We shall worry about that when the time comes. If British Gas had really wanted to be of assistance, it would have introduced the discount at the earliest opportunity. That would have prevented yet another PR boob.
Our concerns are not limited to payment. The starting point must be safety. Of all energy sources, gas is potentially the most dangerous. My hon. Friend the Member for Wallsend (Mr. Byers) talked about the work that is done at Killingworth and throughout the country by trained BG staff. Many of those who are now responsible for installation, maintenance and safety work are Corgi employees. They are not employed by British Gas. Under the Corgi scheme, contractors are registered. There is no requirement on the contractors to secure properly qualified staff.
Many gas fitters who are unemployed as a result of redundancies are available to be recruited. It is to be hoped that the men will get jobs elsewhere. It must be understood, however, that many of the installation and maintenance contracts for gas consumers are being undertaken by Corgi contractors who do not adhere to proper safety standards. They are not capable of doing so because they do not have properly trained staff in the relevant disciplines.
650 As far as we are concerned, that is an anxiety, but we recognise that the Government have taken it into account in their requirement that the Health and Safety Executive makes proper provision for it. The only problem is that the Government have not provided the HSE with the resources to do so. Members of the HSE—the Trades Union Congress and the GMB—who are the people responsible for picking up the pieces when something goes wrong with the safety arrangements for British Gas, have expressed great disquiet about the funding and resourcing of the work for which the HSE will now be responsible, and I would hope—
§ Mr. O'Neill
No, I am sorry. The hon. Gentleman took up a considerable amount of the House's time—longer than I shall be able to speak this evening.
Perhaps when he replies, the Minister will be able to tell us about the financial provisions that the Government will make available to the HSE to carry out its work, because one of the areas about which there is considerable disquiet is in the Bill's consideration of financial matters generally. It is not enough to say that provisions should be made to take out a financial bond or make other arrangements to the director general's satisfaction to cover the financial costs of suppliers—basically, having to cover the cost when a supplier goes bust. It is our view that leaving it to the discretion of the director general is not ideal, and we shall table amendments to secure that companies that wish to enter are required to take out bonds.
We know that there is a certain shyness, or diffidence, on the part of the director general to require people to put down money. She does not like the idea of handling other people's money, as we found in the debate on the E-factor levy, but we believe that the provision of a commodity as substantial and potentially dangerous as gas should be undertaken only by people with the appropriate financial resources, sufficient concern for safety and a degree of security in their financial activities, which will enable some form of guarantee to be part and parcel of the package. Something along the lines of the air tour operator's licence, which is required by people involved in the travel business, would be of assistance.
We want greater protection for the consumer. It was widely predicted that the director general wanted to remove the Gas Consumers Council. I am pleased that she was not successful. We believe that the role of the GCC as a separate body, apart from both the Government and the regulator, is important. We want it to continue in its present role. We want the statutory responsibility for consumer protection, which is contained in the Gas Act 1986, continued in the proposed legislation. We do not think that discretionary licence control is the best way of doing that, because at the moment, as I understand from the memorandum that has been made available by the Minister—we are grateful for it at this stage and look forward to receiving the licences at his earliest convenience—the discretionary provisions that are left in the hands of the director general are insufficient. The GCC has echoed that and says that the provisions that are made in the 1986 Act, as amended by the Competition and Service (Utilities) Act 1992, provide an obligation to supply, to publish prices, and not to show undue preference or discrimination between customers. Those principles should be enshrined in the proposed legislation. 651 Reference has been repeatedly made this evening to the standard of service, particularly to the old and disabled, and few people will forget the contribution of my hon. Friend the Member for Dagenham (Ms Church), who went out and saw the work of the properly qualified home service advisers. We can joke about the passion with which she made her point, but it was a vital point. She said that elderly people who were infirm and dependent on specialist advice and equipment were entitled to receive those services in perpetuity.
As has been pointed out, British Gas—which some defend, describing it as the only provider of good services—has already sacked some 61 home service advisers this year. They were graduates with proper technical qualifications, capable of arguing their case with their superiors. Such services for the old and disabled must be central.
Some organisations, including the Consumers Association, have expressed a degree of cynicism about United Gas's claim that the standard of service would be enhanced—"the thirty-nine steps", as United Gas described the process. It is suspected that United Gas said that in the certain knowledge that the consumers who would supposedly benefit from such protection would be discouraged from doing business with it, thus imposing an additional burden on British Gas. I do not know whether that will happen, but we shall examine the issue carefully in Committee.
My hon. Friend the Member for Denton and Reddish (Mr. Bennett), who is a member of the Select Committee on the Environment, mentioned the absence of proper attention to the environment in the Bill. We want more than a token gesture in regard to pipelines; we want to consider the whole question of energy efficiency. It seems that what was crystal clear in the days of James McKinnon has become a grey area; certainly it is well known, and has been recorded in the minutes of several Select Committees, that Mrs. Spottiswoode is not enthusiastic about the E-factor. She does not want a levy to provide for effective energy-efficiency advice.
Mrs. Spottiswoode has seen fit to approve only a handful of schemes suggested by the Energy Saving Trust, the body through which such advice would be channelled. However, Lord Moore—a former Secretary of State for Energy, now chair of the Energy Saving Trust—has said that the aims of the Rio summit should be incorporated in legislation, and that there should be a statutory requirement to provide for energy efficiency. We shall return to that in Committee.
Investment in energy efficiency, however, is of secondary importance to investment in research and development. British Gas has invested in R and D for many years. One reason for our claim that we want British Gas to be a major player not only in the United Kingdom but throughout the world is that it would sustain its investment in the UK as well as abroad.
Representations by British Gas to the Select Committee on Trade and Industry suggested that the company should not be subject to special restrictions on commercial freedom to restructure if that would not be in the interests of the shareholders. We believe that such restrictions should apply if they will require British Gas to invest in the most modern and efficient methods of gas provision—if for no other reason, because, as no one has disputed, British Gas will remain the major gas supplier for some time. As for the other suppliers, there are the regional 652 electricity companies, whose records leave something to be desired in some areas. Seven are linked to Utilicorp alone, and another group is linked to other major oil and gas companies. We should certainly like greater attention to be paid to the activities of those companies. There should be greater provision for the regulator or the legislation should enshrine provisions to ensure that the executive salaries of directors are given proper attention.
§ Mr. O'Neill
I do not have time to give way. The hon. Gentleman has not been here for much of the debate.
Last week Mr. Giordano told the Select Committee on Employment that he was happy to have full transparency either through a change in stock exchange rules or by the introduction of a new law. This is an opportunity for the House to introduce such legislation. Mr. Giordano is not against it, we want it, and we cannot understand why Conservative Members should turn their backs on it. If it is good enough for the chairman of British Gas it should be good enough for the Government. Such payments are certainly distasteful to the Prime Minister, but we are not sure about the attitude of the President of the Board of Trade.
Before long pilot areas will be in operation. We are concerned that the trials will not just be about operational and technical efficiency but will be used to monitor the practices and policies and the advertising techniques of the companies that want to challenge British Gas. As the Select Committee said, during the transitional period we should be able to look at all aspects of the legislation. We welcome that period and hope that before long we shall be able to review what has taken place.
The Bill marks a change in the British consumers' opportunity to buy gas. British Gas should not have a monopoly because that is not necessary. However, if that monopoly is broken due protection should be provided and it should be enshrined in the legislation and not in the licences. Protection should clearly be provided for the elderly and the infirm, it should relate to the duty to supply and it should require all the companies to publish their tariffs so as to make clear what is happening.
We appreciate that the legislation could place a tremendous burden on the regulatory process, which has much to answer for. In the past 10 days we have seen its inadequacy when applied to electricity, and in the past few months there have been inconsistencies in application between one regulator and another in the same area. The Bill should correct many of the shortcomings. There will be opportunities to debate these matters in Committee, where our amendment will provide an opportunity to improve legislation that leaves a lot to be desired. We are not prepared to support it in its present form and shall look to see what we can achieve in Committee and on Third Reading.
§ The Minister for Energy and Industry (Mr. Tim Eggar)
This has been an interesting debate on what is essentially a technical Bill. Hon. Members who have been here for the debate will realise that it had a detail which is normally associated with Committee discussions. Many of the issues that have been raised can be debated in Committee. 653 I listened to the hon. Member for Clackmannan (Mr. O'Neill) with considerable interest because on 27 February I received a letter from Clydebank district council. It was in response to my letter asking local authorities whether they wanted their districts to be included in the pilot areas for competition. Clydebank council said:
(a) Clydebank should be included in the first or at worst second batch of premises relating to the extension of competition.In other words, Clydebank wanted the benefits of competition that flow from this Bill—a clear and, one would have thought, unequivocal contribution. But it goes on:
(b) Your Department be reminded of the policy of this district council in being against the privatisation of the gas industry.In other words, the council wanted the benefits of competition but not the implications of that competition—
§ Mr. Eggar
I heard something behind me, Madam Speaker. My hon. Friend said that Clydebank council sounded like a Liberal council. He was obviously not here to witness a great event: the hon. Member for North Devon (Mr. Harvey) came down on our side. The Liberals are going to join us in the Division to support the Bill. It was the hon. Member for Clackmannan who sat on the fence. He was in favour of this and against that. I have watched with considerable interest his struggle over this Bill inside the Labour party over the past few months. It has been a battle between neanderthal man, ably represented in this debate by the hon. Member for Dagenham (Ms Church), the old believer in clause IV, supported at one stage by the hon. Member for Neath (Mr. Hain), and modern Labour party man, as represented by the hon. Member for Clackmannan.
In October the hon. Gentleman made a courageous speech asking the Government to legislate as quickly as possible to introduce competition to the gas market. It was an important and thoughtful speech, a brave attempt to get the Labour party to seize the high ground in favour of competition. It was especially brave because he knew perfectly well that his hon. Friend the Member for Livingston (Mr. Cook) was in the 654 neanderthal camp—against competition and the privatisation of British Gas. He represented the other view of Clydebank council.
Of course this was before the hon. Member for Livingston sold his conscience for the shadow Foreign Secretaryship. Greater love hath no man than that he give up 75 years of Labour party history for promotion, which is what the hon. Gentleman did when he turned turtle and opposed his old position on the retention of clause IV.
§ Dr. Reid
Yes, I have the guts to make a decision. Let us see what the Minister's guts are like tonight. Will he make a courageous decision? Does he support the faction, led by the Prime Minister, in the Cabinet that finds excessive pay and share options distasteful and needing regulation; or the faction led by his immediate boss at the Board of Trade, who is loth even to investigate these obscene pay increases and who regards any such investigation as unwarranted interference in the market?
§ Mr. Eggar
That intervention will not help the hon. Gentleman with his brothers in the Transport and General Workers Union one bit. He will have to fight that battle in his constituency. I should like to deal with the reasoned amendment that has been tabled by the Opposition. It also refers to top people's pay in the gas industry. I shall pick up the hon. Gentleman's points at that stage.
The reasoned amendment states that the Bill
fails to provide effective safeguards for consumers".
§ Mr. Eggar
Opposition Members, including the hon. Gentleman, should listen to what the Consumers Association says about the Bill. It states:
The Bill should lead to all consumers benefiting from lower prices, improved service standards and a wider variety of service packages within the gas market from which to choose.The Director General of the Gas Consumers Council, which is preserved in the Bill, said:
The Council welcomes the Gas Bill as an imaginative solution to the difficulties of fast but orderly transition from a monopoly to a competitive market.So the representatives of the consumer organisations support the Bill. We have dealt with every one of their concerns in the memorandum. If not, we will do so in the licence.
The reasoned amendment goes on to state that the Bill is damaging to many sections of the population and that it singles out the elderly and people living in the south-west. It appears that Opposition spokesmen are not aware of those people's views. The hon. Member for North Devon, my hon. Friend the Member for Falmouth and Camborne (Mr. Coe) and GCC South-West have made clear that they welcome the fact that the south-west is the pilot area for the introduction. 655 So why does the reasoned amendment say that the Bill will harm the people of the south-west? That is not their view.
The amendment draws attention to the position of pensioners, the disabled and the blind. The fact is that all those groups will have their present standards of service preserved, maintained and, if appropriate, improved. I say to the hon. Member for Dagenham that an obligation will be placed on alternative gas suppliers to provide fitments for gas appliances and cookers, and other such services to customers.
§ Madam Speaker
Order. If the hon. Member for Edinburgh, South (Mr. Griffiths) has something to say, he should stand up and try to make an intervention. If not, it would be better if he kept quiet until he is allowed to intervene.
§ Mr. Eggar
That was typical of the hon. Gentleman. He does not bother to check his facts. He mutters into his beer belly—[Interruption.] I am sorry. I have obviously maligned him. It was just the angle of the light. He has not got the guts to come to the Dispatch Box and to repeat his assertions because he knows that he has not done his research. [Interruption.] That would add to his beer belly.
The hon. Gentleman for Clackmannan referred to health and safety. I would like to welcome the Health and Safety Commission's work. The hon. Gentleman, who sat with me on the Committee that considered the Coal Industry Act, knows that I regard safety matters as paramount. The commission has identified the need for additional resources to underpin the new regime. The hon. Gentleman asked me, not unreasonably, about funding. I am discussing that matter with my Government colleagues, but there is no need at present for specific provision in the Bill for additional funding. I assure the hon. Gentleman that adequate resources will be made available.
§ Mr. Eggar
If the hon. Gentleman will forgive me, he slightly overran his time.
The hon. Member for Clackmannan asked also about financial surety. We are determined to give consumers the assurance that they require, that the supply of gas to their homes will be maintained. Suppliers will have to satisfy the director general that they are financially sound. We intend also that suppliers will take out a bond—in effect, an insurance arrangement—to help maintain gas supply to consumers. In addition, the director general will have the ability to nominate a supplier to step in, as a last resort if another supplier fails and the market does not deal with the situation.
§ Mr. Peter Thurnham (Bolton, North-East)
Will my hon. Friend bear in mind the concerns of small traders—such as my constituent, Mr. Eaton, whose 656 business suffered from street works outside his shop? He was able to obtain compensation from North West Water but not, surprisingly, from British Gas.
§ Mr. Eggar
My hon. Friend has seen me about that complex case. I am studying and considering the various conflicting rights and obligations, and I assure my hon. Friend that I will give him another opportunity to discuss that matter with me.
As to regional electricity companies, having listened to the right hon. Member for Copeland (Dr. Cunningham) and to the hon. Member for Clackmannan, I remain unsure of the Opposition's concern. If it is lack of competition between suppliers of electricity and of gas, that can be dealt with through the Monopolies and Mergers Commission and normal competition policy. Other aspects can no doubt be covered in Committee.
The hon. Member for Denton and Reddish (Mr. Bennett) and my hon. Friend the Member for Harrogate (Mr. Banks) spoke of the need for energy efficiency. The Bill will increase the incentives for gas supply companies to offer consumers modern, energy-efficient gas installations—so in total, less gas will be consumed. I agree with my hon. Friend the Member for Harrogate that is likely to be an attractive selling point to many companies.
The Opposition believe that the regulator should in some way set senior employees' salaries.
§ Mr. Eggar
No. I am sorry.
My right hon. Friend the Prime Minister said that legislation will be considered in the light of the Greenbury committee. The suggestion that consumer price cuts should depend on the regulator operating, in effect, a top peoples' pay policy, shows a naive misunderstanding of the regulatory system and of basic mathematics.
If one takes the figures of the hon. Member for Dunfermline, East (Mr. Brown), even if the regulator returned to consumers all of Mr. Cedric Brown's 28 per cent. increase, that would amount to less than half of 1p per customer per year. The regulatory system sets prices—it does not attempt to control costs, which is for British Gas. If it can reduce its costs below those anticipated, it can increase profits and its competitiveness.
In short, by their amendment Opposition Members are proposing a pay policy through the regulator—not because that policy makes sense but because Labour, as ever, revels in the politics of envy. That assertion is all the more real because of what the right hon. Member for Copeland said in response to an intervention—
§ Question put, That the amendment be made:—
§ The House divided: Ayes 244, Noes 318.660
|Division No. 99]||[9.59 pm|
|Abbott, Ms Diane||Anderson, Ms Janet (Ros'dale)|
|Adams, Mrs Irene||Armstrong, Hilary|
|Anger, Nick||Ashton, Joe|
|Allen, Graham||Austin-Walker, John|
|Anderson, Donald (Swansea E)||Banks, Tony (Newham NW)|
|Barnes, Harry||George, Bruce|
|Barron, Kevin||Gerrard, Neil|
|Battle, John||Godman, Dr Norman A|
|Bayley, Hugh||Godsiff, Roger|
|Beckett, Rt Hon Margaret||Golding, Mrs Llin|
|Bell, Stuart||Gordon, Mildred|
|Benn, Rt Hon Tony||Graham, Thomas|
|Bennett, Andrew F||Grant, Bernie (Tottenham)|
|Bermingham, Gerald||Griffiths, Nigel (Edinburgh S)|
|Betts, Clive||Griffiths, Win (Bridgend)|
|Blunkett, David||Grocott, Bruce|
|Boateng, Paul||Gunnell, John|
|Bradley, Keith||Hain, Peter|
|Brown, Gordon (Dunfermline E)||Hall, Mike|
|Brown, N (N'c'tle upon Tyne E)||Hanson, David|
|Burden, Richard||Hardy, Peter|
|Byers, Stephen||Harman, Ms Harriet|
|Caborn, Richard||Hattersley, Rt Hon Roy|
|Callaghan, Jim||Henderson, Doug|
|Campbell, Mrs Anne (C'bridge)||Heppell, John|
|Campbell, Ronnie (Blyth V)||Hill, Keith (Streatham)|
|Campbell-Savours, D N||Hinchliffe, David|
|Canavan, Dennis||Hodge, Margaret|
|Cann, Jamie||Hoey, Kate|
|Chisholm, Malcolm||Home Robertson, John|
|Church, Judith||Hoon, Geoffrey|
|Clapham, Michael||Howarth, George (Knowsley North)|
|Clark, Dr David (South Shields)||Hoyle, Doug|
|Clarke, Eric (Midlothian)||Hughes, Kevin (Doncaster N)|
|Clarke, Tom (Monklands W)||Hughes, Robert (Aberdeen N)|
|Clelland, David||Hutton, John|
|Clwyd, Mrs Ann||Illsley, Eric|
|Coffey, Ann||Ingram, Adam|
|Cohen, Harry||Jackson, Glenda (H'stead)|
|Connarty, Michael||Jackson, Helen (Shef'ld, H)|
|Cook, Frank (Stockton N)||Jamieson, David|
|Cook, Robin (Livingston)||Janner, Greville|
|Corbett, Robin||Jones, Barry (Alyn and D'side)|
|Corbyn, Jeremy||Jones, Ieuan Wyn (Ynys Mon)|
|Corston, Jean||Jones, Martyn (Clwyd, SW)|
|Cox, Tom||Jowell, Tessa|
|Cummings, John||Kaufman, Rt Hon Gerald|
|Cunliffe, Lawrence||Keen, Alan|
|Cunningham, Jim (Covy SE)||Kennedy, Jane (Lpool Brdgn)|
|Cunningham, Rt Hon Dr John||Khabra, Piara S|
|Dafis, Cynog||Kilfoyle, Peter|
|Darling, Alistair||Lestor, Joan (Eccles)|
|Davidson, Ian||Lewis, Terry|
|Davies, Bryan (Oldham C'tral)||Liddell, Mrs Helen|
|Davies, Rt Hon Denzil (Llanelli)||Litherland, Robert|
|Davies, Ron (Caerphilly)||Livingstone, Ken|
|Davis, Terry (B'ham, H'dge H'I)||Lloyd, Tony (Stretford)|
|Denham, John||Llwyd, Elfyn|
|Dewar, Donald||McAllion, John|
|Dixon, Don||McAvoy, Thomas|
|Dobson, Frank||McCartney, Ian|
|Donohoe, Brian H||McCrea, The Reverend William|
|Dowd, Jim||Macdonald, Calum|
|Dunnachie, Jimmy||McFall, John|
|Dunwoody, Mrs Gwyneth||McKelvey, William|
|Eagle, Ms Angela||McLeish, Henry|
|Eastham, Ken||McMaster, Gordon|
|Enright, Derek||McNamara, Kevin|
|Evans, John (St Helens N)||MacShane, Denis|
|Ewing, Mrs Margaret||McWilliam, John|
|Fatchett, Derek||Madden, Max|
|Field, Frank (Birkenhead)||Mahon, Alice|
|Fisher, Mark||Mendelson, Peter|
|Flynn, Paul||Marshall, David (Shettleston)|
|Foster, Rt Hon Derek||Martin, Michael J (Springburn)|
|Foulkes, George||Martlew, Eric|
|Fraser, John||Maxton, John|
|Fyfe, Maria||Meacher, Michael|
|Galloway, George||Meale, Alan|
|Gapes, Mike||Michael, Alun|
|Garrett, John||Michie, Bill (Sheffield Heeley)|
|Milburn, Alan||Salmond, Alex|
|Miller, Andrew||Sedgemore, Brian|
|Mitchell, Austin (Gt Grimsby)||Sheerman, Barry|
|Moonie, Dr Lewis||Shore, Rt Hon Peter|
|Morgan, Rhodri||Short, Clare|
|Morley, Elliot||Skinner, Dennis|
|Morris, Rt Hon Alfred (Wy'nshawe)||Smith, Andrew (Oxford E)|
|Morris, Estelle (B'ham Yardley)||Smith, Chris (Isl'ton S & F'sbury)|
|Morris, Rt Hon John (Aberavon)||Smith, Llew (Blaenau Gwent)|
|Mudie, George||Snape, Peter|
|Mullin, Chris||Soley, Clive|
|Murphy, Paul||Spearing, Nigel|
|Oakes, Rt Hon Gordon||Spellar, John|
|O'Brien, Mike (N W'kshire)||Squire, Rachel (Dunfermline W)|
|O'Brien, William (Normanton)||Steinberg, Gerry|
|O'Hara, Edward||Stevenson, George|
|Olner, Bill||Stott, Roger|
|O'Neill, Martin||Strang, Dr. Gavin|
|Orme, Rt Hon Stanley||Straw, Jack|
|Patchett, Terry||Sutcliffe, Gerry|
|Pearson, Ian||Taylor, Mrs Ann (Dewsbury)|
|Pendry, Tom||Thompson, Jack (Wansbeck)|
|Pickthall, Colin||Timms, Stephen|
|Pike, Peter L||Tipping, Paddy|
|Pope, Greg||Touhig, Don|
|Powell, Ray (Ogmore)||Turner, Dennis|
|Prentice, Gordon (Pendle)||Walker, Rt Hon Sir Harold|
|Prescott, Rt Hon John||Wardell, Gareth (Gower)|
|Primarolo, Dawn||Wareing, Robert N|
|Purchase, Ken||Watson, Mike|
|Quin, Ms Joyce||Wicks, Malcolm|
|Radice, Giles||Wigley, Dafydd|
|Randall, Stuart||Williams, Rt Hon Alan (Sw'n W)|
|Raynsford, Nick||Wilson, Brian|
|Reid, Dr John||Wise, Audrey|
|Robertson, George (Hamilton)||Worthington, Tony|
|Robinson, Geoffrey (Co'try NW)||Wray, Jimmy|
|Roche, Mrs Barbara||Wright, Dr Tony|
|Rogers, Allan||Young, David (Bolton SE)|
|Rooney, Terry||Tellers for the Ayes:|
|Rowlands, Ted||Mr. Jon Owen Jones and|
|Ruddock, Joan||Mr. Joe Benton.|
|Ainsworth, Peter (East Surrey)||Bottomley, Peter (Eltham)|
|Aitken, Rt Hon Jonathan||Bowden, Sir Andrew|
|Alexander, Richard||Bowis, John|
|Alison, Rt Hon Michael (Selby)||Boyson, Rt Hon Sir Rhodes|
|Allason, Rupert (Torbay)||Brandreth, Gyles|
|Alton, David||Brazier, Julian|
|Amess, David||Bright, Sir Graham|
|Ancram, Michael||Brooke, Rt Hon Peter|
|Arbuthnot, James||Brown, M (Brigg & Cl'thorpes)|
|Arnold, Jacques (Gravesham)||Browning, Mrs Angela|
|Arnold, Sir Thomas (Hazel Grv)||Bruce, Ian (Dorset)|
|Ashby, David||Budgen, Nicholas|
|Ashdown, Rt Hon Paddy||Burns, Simon|
|Atkins, Robert||Burt, Alistair|
|Atkinson, David (Bour'mouth E)||Butcher, John|
|Atkinson, Peter (Hexham)||Butler, Peter|
|Baker, Rt Hon Kenneth (Mole V)||Butterfill, John|
|Baker, Nicholas (North Dorset)||Campbell, Menzies (Fife NE)|
|Baldry, Tony||Carlile, Alexander (Montgomery)|
|Banks, Matthew (Southport)||Carlisle, John (Luton North)|
|Banks, Robert (Harrogate)||Carlisle, Sir Kenneth (Lincoln)|
|Bates, Michael||Carrington, Matthew|
|Beith, Rt Hon A J||Carttiss, Michael|
|Bellingham, Henry||Cash, William|
|Bendall, Vivian||Channon, Rt Hon Paul|
|Beresford, Sir Paul||Chidgey, David|
|Biffen, Rt Hon John||Clappison, James|
|Body, Sir Richard||Clark, Dr Michael (Rochford)|
|Bonsor, Sir Nicholas||Clarke, Rt Hon Kenneth (Ru'clif)|
|Booth, Hartley||Clifton-Brown, Geoffrey|
|Boswell, Tim||Coe, Sebastian|
|Colvin, Michael||Heseltine, Rt Hon Michael|
|Congdon, David||Hicks, Robert|
|Conway, Derek||Higgins, Rt Hon Sir Terence|
|Coombs, Anthony (Wyre For'st)||Hill, James (Southampton Test)|
|Coombs, Simon (Swindon)||Hogg, Rt Hon Douglas (G'tham)|
|Cope, Rt Hon Sir John||Horam, John|
|Cormack, Sir Patrick||Hordern, Rt Hon Sir Peter|
|Couchman, James||Howard, Rt Hon Michael|
|Cran, James||Howarth, Alan (Strat'rd-on-A)|
|Currie, Mrs Edwina (S D'by'ire)||Howell, Rt Hon David (G'dford)|
|Curry, David (Skipton & Ripon)||Howell, Sir Ralph (N Norfolk)|
|Davies, Quentin (Stamford)||Hughes, Robert G (Harrow W)|
|Davis, David (Boothferry)||Hughes, Simon (Southwark)|
|Day, Stephen||Hunt, Rt Hon David (Wirral W)|
|Deva, Nirj Joseph||Hunt, Sir John (Ravensbourne)|
|Devlin, Tim||Hunter, Andrew|
|Dorrell, Rt Hon Stephen||Jack, Michael|
|Douglas-Hamilton, Lord James||Jackson, Robert (Wantage)|
|Dover, Den||Jenkin, Bernard|
|Duncan, Alan||Jessel, Toby|
|Dunn, Bob||Johnson Smith, Sir Geoffrey|
|Durant, Sir Anthony||Johnston, Sir Russell|
|Eggar, Rt Hon Tim||Jones, Gwilym (Cardiff N)|
|Elletson, Harold||Jones, Nigel (Cheltenham)|
|Emery, Rt Hon Sir Peter||Jones, Robert B (W Hertfdshr)|
|Evans, David (Welwyn Hatfield)||Jopling, Rt Hon Michael|
|Evans, Jonathan (Brecon)||Kellett-Bowman, Dame Elaine|
|Evans, Nigel (Ribble Valley)||Kennedy, Charles (Ross,C&S)|
|Evans, Roger (Monmouth)||Key, Robert|
|Evennett, David||Kilfedder, Sir James|
|Faber, David||King, Rt Hon Tom|
|Fenner, Dame Peggy||Kirkhope, Timothy|
|Field, Barry (Isle of Wight)||Knapman, Roger|
|Fishburn, Dudley||Knight, Mrs Angela (Erewash)|
|Forman, Nigel||Knight, Greg (Derby N)|
|Forsyth, Rt Hon Michael (Stirling)||Knight, Dame Jill (Bir'm E'st'n)|
|Forth, Eric||Knox, Sir David|
|Foster, Don (Bath)||Kynoch, George (Kincardine)|
|Fowler, Rt Hon Sir Norman||Lait, Mrs Jacqui|
|Fox, Dr Liam (Woodspring)||Lang, Rt Hon Ian|
|Fox, Sir Marcus (Shipley)||Lawerence, Sir Ivan|
|Freeman, Rt Hon Roger||Legg, Barry|
|French, Douglas||Leigh, Edward|
|Fry, Sir Peter||Lennox-Boyd, Sir Mark|
|Gale, Roger||Lester, Jim (Broxtowe)|
|Gallie, Phil||Lidington, David|
|Gardiner, Sir George||Lilley, Rt Hon Peter|
|Garel-Jones, Rt Hon Tristan||Lloyd, Rt Hon Sir Peter (Fareham)|
|Garnier, Edward||Lord, Michael|
|Gill, Christopher||Lyell, Rt Hon Sir Nicholas|
|Gillan, Cheryl||Lynne, Ms Liz|
|Goodson-Wickes, Dr Charles||MacGregor, Rt Hon John|
|Gorman, Mrs Teresa||Mackay, Andrew|
|Gorst, Sir John||Maclean, David|
|Grant, Sir A (SW Cambs)||Maclennan, Robert|
|Greenway, Harry (Ealing N)||McLoughlin, Patrick|
|Greenway, John (Ryedale)||McNair-Wilson, Sir Patrick|
|Griffiths, Peter (Portsmouth, N)||Madel, Sir David|
|Grylls, Sir Michael||Maitland, Lady Olga|
|Gummer, Rt Hon John Selwyn||Malone, Gerald|
|Hague, William||Mans, Keith|
|Hamilton, Neil (Tatton)||Marshall, Sir Michael (Arundel)|
|Hampson, Dr Keith||Martin, David (Portsmouth S)|
|Hanley, Rt Hon Jeremy||Mates, Michael|
|Hannam, Sir John||Mayhew, Rt Hon Sir Patrick|
|Hargreaves, Andrew||Merchant, Piers|
|Harris, David||Mills, Iain|
|Harvey, Nick||Mitchell, Andrew (Gedling)|
|Haselhurst, Alan||Mitchell, Sir David (NW Hants)|
|Hawkins, Nick||Moate, Sir Roger|
|Hawksley, Warren||Monro, Sir Hector|
|Hayes, Jerry||Montgomery, Sir Fergus|
|Heald, Oliver||Moss, Malcolm|
|Heath, Rt Hon Sir Edward||Nelson, Anthony|
|Heathcoat-Amory, David||Neubert, Sir Michael|
|Hendry, Charles||Newton, Rt Hon Tony|
|Nicholls, Patrick||Steen, Anthony|
|Nicholson, David (Taunton)||Stephen, Michael|
|Nicholson, Emma (Devon West)||Stem, Michael|
|Norris, Steve||Stewart, Allan|
|Onslow, Rt Hon Sir Cranley||Streeter, Gary|
|Oppenheim, Phillip||Sumberg, David|
|Ottaway, Richard||Sweeney, Walter|
|Page, Richard||Tapsell, Sir Peter|
|paice, James||Taylor, Ian (Esher)|
|Patnick, Sir Irvine||Taylor, John M (Solihull)|
|Patten, Rt Hon John||Taylor, Matthew (Truro)|
|Pattie, Rt Hon Sir Geoffrey||Taylor, Sir Teddy (Southend, E)|
|Pawsey, James||Temple-Morris, Peter|
|Peacock, Mrs Elizabeth||Thompson, Roy|
|Pickles, Eric||Thompson, Sir Donald (C'er V)|
|Porter, Barry (Wirral S)||Thompson, Patrick (Norwich N)|
|Porter, David (Waveney)||Thornton, Sir Malcolm|
|Portillo, Rt Hon Michael||Thurnham, Peter|
|Rathbone, Tim||Townend, John (Bridlington)|
|Redwood, Rt Hon John||Townsend, Cyril D (Bexl'yh'th)|
|Rendel, David||Tracey, Richard|
|Renton, Rt Hon Tim||Tredinnick, David|
|Richards, Rod||Trend, Michael|
|Riddick, Graham||Trotter, Neville|
|Rifkind, Rt Hon Malcolm||Twinn, Dr Ian|
|Robathan, Andrew||Tyler, Paul|
|Roberts, Rt Hon Sir Wyn||Vaughan, Sir Gerard|
|Robertson, Raymond (Ab'd'n S)||Viggers, Peter|
|Robinson, Mark (Somerton)||Waldegrave, Rt Hon William|
|Roe, Mrs Marion (Broxbourne)||Walden, George|
|Rowe, Andrew (Mid Kent)||Walker, Bill (North Tayside)|
|Rumbold, Rt Hon Dame Angela||Wallace, James|
|Ryder, Rt Hon Richard||Waller, Gary|
|Sackville, Tom||Wardle, Charles (Bexhill)|
|Scott, Rt Hon Sir Nicholas||Waterson, Nigel|
|Shaw, David (Dover)||Watts, John|
|Shephard, Rt Hon Gillian||Wells, Bowen|
|Shepherd, Colin (Hereford)||Wheeler, Rt Hon Sir John|
|Shepherd, Richard (Aldridge)||Whitney, Ray|
|Shersby, Michael||Whittingdale, John|
|Sims, Roger||Widdecombe, Ann|
|Smith, Sir Dudley (Warwick)||Wiggin, Sir Jerry|
|Smith, Tim (Beaconsfield)||Willets, David|
|Soames, Nicholas||Wilshire, David|
|Speed, Sir Keith||Winterton, Mrs Ann (Congleton)|
|Spencer, Sir Derek||Winterton, Nicholas (Macc'fld)|
|Spicer, Sir James (W Dorset)||Wolfson, Mark|
|Spicer, Michael (S Worcs)||Wood, Timothy|
|Spink, Dr Robert||Yeo, Tim|
|Spring, Richard||Young, Rt Hon Sir George|
|Squire, Robin (Hornchurch)||Teller for the Noes:|
|Stanley, Rt Hon Sir John||Mr. David Lightbown and|
|Steel, Rt Hon Sir David||Mr. Sydney Chapman.|
§ Question accordingly negatived.
§ Main Question Put forthwith, Pursuant to Standing Order No. 60 (Amendment on Second or Third Reading):—
§ The House divided: Ayes 312, Noes 22.663
|Division No.100]||[10.16 Pm|
|Ainsworth, Peter (East Surrey)||Arnold, Jacques (Gravesham)|
|Aitken, Rt Hon Jonathan||Arnold, Sir Thomas (Hazel Grv)|
|Alexander, Richard||Ashby, David|
|Alison, Rt Hon Michael (Selby)||Ashdown, Rt Hon Paddy|
|Allason, Rupert (Torbay)||Atkins, Robert|
|Alton, David||Atkinson, David (Bour'mouth E)|
|Amess, David||Atkinson, Peter (Hexham)|
|Ancram, Michael||Baker, Rt Hon Kenneth (Mole V)|
|Arbuthnot, James||Baker, Nicholas (North Dorset)|
|Baldry, Tony||Forman, Nigel|
|Banks, Matthew (Southport)||Forsyth, Rt Hon Michael (Stirling)|
|Banks, Robert (Harrogate)||Forth, Eric|
|Bates, Michael||Foster, Don (Bath)|
|Beith, Rt Hon A J||Fowler, Rt Hon Sir Norman|
|Bellingham, Henry||Fox, Dr Liam (Woodspring)|
|Bendall, Vivian||Freeman, Rt Hon Roger|
|Beresford, Sir Paul||French, Douglas|
|Biffen, Rt Hon John||Fry, Sir Peter|
|Bonsor, Sir Nicholas||Gale, Roger|
|Booth, Hartley||Gallie, Phil|
|Boswell, Tim||Gardiner, Sir George|
|Bottomley, Peter (Eltham)||Garel-Jones, Rt Hon Tristan|
|Bowden, Sir Andrew||Garnier, Edward|
|Bowis, John||Gill, Christopher|
|Boyson, Rt Hon Sir Rhodes||Gillan, Cheryl|
|Brandreth, Gyles||Goodson-Wickes, Dr Charles|
|Brazier, Julian||Gorman, Mrs Teresa|
|Bright Sir Graham||Gorst, Sir John|
|Brooke, Rt Hon Peter||Grant, Sir A (SW Cambs)|
|Brown, M (Brigg & Cl'thorpes)||Greenway, Harry (Ealing N)|
|Browning, Mrs Angela||Greenway, John (Ryedale)|
|Bruce, Ian (Dorset)||Griffiths, Peter (Portsmouth, N)|
|Budgen, Nicholas||Grylls, Sir Michael|
|Burns, Simon||Gummer, Rt Hon John Selwyn|
|Burt, Alistair||Hague, William|
|Butcher, John||Hamilton, Neil (Tatton)|
|Butler, Peter||Hampson, Dr Keith|
|Butterfill, John||Hanley, Rt Hon Jeremy|
|Campbell, Menzies (Fife NE)||Hannam, Sir John|
|Carlile, Alexander (Montgomery)||Hargreaves, Andrew|
|Carlisle, John (Luton North)||Harris, David|
|Carlisle, Sir Kenneth (Lincoln)||Harvey, Nick|
|Carrington, Matthew||Haselhurst, Alan|
|Carttiss, Michael||Hawkins, Nick|
|Cash, William||Hawksley, Warren|
|Channon, Rt Hon Paul||Hayes, Jerry|
|Chidgey, David||Heald, Oliver|
|Clappison, James||Heath, Rt Hon Sir Edward|
|Clark, Dr Michael (Rochford)||Heathcoat-Amory, David|
|Clarke, Rt Hon Kenneth (Ru'clif)||Hendry, Charles|
|Clifton-Brown, Geoffrey||Heseltine, Rt Hon Michael|
|Coe, Sebastian||Hicks, Robert|
|Colvin, Michael||Higgins, Rt Hon Sir Terence|
|Congdon, David||Hill, James (Southampton Test)|
|Conway, Derek||Hogg, Rt Hon Douglas (G'tham)|
|Coombs, Anthony (Wyre For'st)||Horam, John|
|Coombs, Simon (Swindon)||Hordern, Rt Hon Sir Peter|
|Cope, Rt Hon Sir John||Howard, Rt Hon Michael|
|Couchman, James||Howarth, Alan (Strat'rd-on-A)|
|Cran, James||Howell, Rt Hon David (G'dford)|
|Currie, Mrs Edwina (S D'by'ire)||Howell, Sir Ralph (N Norfolk)|
|Curry, David (Skipton & Ripon)||Hughes, Robert G.(Harrow W)|
|Davies, Quentin (Stamford)||Hughes, Simon (Southwark)|
|Davis, David (Boothferry)||Hunt, Rt Hon David (Wirral W)|
|Day, Stephen||Hunt, Sir John (Ravensbourne)|
|Deva, Nirj Joseph||Hunter, Andrew|
|Devlin, Tim||Jack, Michael|
|Dorrell, Rt Hon Stephen||Jackson, Robert (Wantage)|
|Douglas-Hamilton, Lord James||Jenkin, Bernard|
|Dover, Den||Jessel, Toby|
|Duncan, Alan||Johnson Smith, Sir Geoffrey|
|Dunn, Bob||Johnston, Sir Russell|
|Durant, Sir Anthony||Jones, Gwilym (Cardiff N)|
|Eggar, Rt Hon Tim||Jones, Nigel (Cheltenham)|
|Elletson, Harold||Jones, Robert B (W Hertfdshr)|
|Emery, Rt Hon Sir Peter||Jopling, Rt Hon Michael|
|Evans, David (Welwyn Hatfield)||Kellett-Bowman, Dame Elaine|
|Evans, Jonathan (Brecon)||Kennedy, Charles (Ross,C&S)|
|Evans, Nigel (Ribble Valley)||Key, Robert|
|Evans, Roger (Monmouth)||Kilfedder, Sir James|
|Evennett, David||King, Rt Hon Tom|
|Faber, David||Knapman, Roger|
|Fenner, Dame Peggy||Knight, Mrs Angela (Erewash)|
|Field, Barry (Isle of Wight)||Knight, Greg (Derby N)|
|Fishburn, Dudley||Knight, Dame Jill (Bir'm E'st'n)|
|Knox, Sir David||scott, Rt Hon Sir Nicholas|
|Kynoch, George (Kincardine)||Shaw, David (Dover)|
|Lait, Mrs Jacqui||Shephard, Rt Hon Gillian|
|Lang, Rt Hon Ian||Shepherd, Colin (Hereford)|
|Lawrence, Sir Ivan||Shepherd, Richard (Aldridge)|
|Legg, Barry||Shersby, Michael|
|Leigh, Edward||Sims, Roger|
|Lennox-Boyd, Sir Mark||Smith, Sir Dudley (Warwick)|
|Lester, Jim (Broxtowe)||Smith, Tim (Beaconsfield)|
|Lidington, David||Soames, Nicholas|
|Lightbown, David||Speed, Sir Keith|
|Lilley, Rt Hon Peter||Spencer, Sir Derek|
|Lloyd, Rt Hon Sir Peter (Fareham)||Spicer, Michael (S Worcs)|
|Lord, Michael||Spink, Dr Robert|
|Lyell, Rt Hon Sir Nicholas||Spring, Richard|
|Lynne, Ms Liz||Sproat, Iain|
|MacGregor, Rt Hon John||Squire, Robin (Hornchurch)|
|Mackay, Andrew||Stanley, Rt Hon Sir John|
|Maclean, David||Steel, Rt Hon Sir David|
|McLoughlin, Patrick||Steen, Anthony|
|McNair-Wilson, Sir Patrick||Stephen, Michael|
|Madel, Sir David||Stem, Michael|
|Maitland, Lady Olga||Stewart, Allan|
|Malone, Gerald||Streeter, Gary|
|Mans, Keith||Sumberg, David|
|Marshall, Sir Michael (Arundel)||Sweeney, Walter|
|Martin, David (Portsmouth S)||Tapsell, Sir Peter|
|Mates, Michael||Taylor, Ian (Esher)|
|Mayhew, Rt Hon Sir Patrick||Taylor, John M (Solihull)|
|Merchant, Piers||Taylor, Matthew (Truro)|
|Mills, Iain||Taylor, Sir Teddy (Southend, E)|
|Mitchell, Andrew (Gedling)||Temple-Morris, Peter|
|Mitchell, Sir David (NW Hants)||Thomason, Roy|
|Moate, Sir Roger||Thompson, Sir Donald (C'er V)|
|Monro, sir Hector||Thompson, Patrick (Norwich N)|
|Montgomery, Sir Fergus||Thornton, Sir Malcolm|
|Moss, Malcolm||Thurnham, Peter|
|Nelson, Anthony||Townend, John(Bridlington)|
|Neubert, Sir Michael||Townsend, Cyril D (Bexl'yh'th)|
|Newton, Rt Hon Tony||Tracey, Richard|
|Nicholls, Patrick||Tredinnick, David|
|Nicholson, David (Taunton)||Trend, Michael|
|Nicholson, Emma (Devon West)||Trotter, Nevile|
|Norris, Steve||Twinn, Dr Ian|
|Oppenheim, Phillip||Tyler, Paul|
|Ottaway, Richard||Vaughan, Sir Gerard|
|Page, Richard||Viggers, Peter|
|Paice, James||Waldegrave, Rt Hon William|
|Patnick, Sir Irvine||Walden, George|
|Patten, Rt Hon John||Walker, Bill (N Tayside)|
|Pattie, Rt Hon Sir Geoffrey||Wallence, James|
|Pawsey, James||Waller, Gary|
|Peacock, Mrs Elizabeth||Wardle, Charles (Bexhill)|
|Pickles, Eric||Waterson, Nigel|
|Porter, Barry (Wirral S)||Watts, John|
|Porter, David (Waveney)||Wells, Bowen|
|Portillo, Rt Hon Michael||Wheeler, Rt Hon Sir John|
|Rathbone, Tim||Whitney, Ray|
|Redwood, Rt Hon John||Whittingdale, John|
|Rendel, David||Widdecombe, Ann|
|Renton, Rt Hon Tim||Wiggin, Sir Jerry|
|Richards, Rod||Willetts, David|
|Riddick, Graham||Wilshire, David|
|Rifkind, Rt Hon Malcolm||Winterton, Mrs Ann (Congleton)|
|Robathan, Andrew||Winterton, Nicholas (Macc'fld)|
|Roberts, Rt Hon Sir Wyn||Wolfson, Mark|
|Robertson, Raymond (Ab'd'n S)||Wood, Timothy|
|Robinson, Mark (Somerton)||Yeo, Tim|
|Roe, Mrs Marion (Broxbourne)||Young, Rt Hon Sir George|
|Rowe, Andrew (Mid Kent)|
|Rumbold, Rt Hon Dame Angela||Teller for the Ayes:|
|Ryder, Rt Hon Richard||Mr. Sydney Chapman and|
|Sackville, Tom||Mr. Timothy Kirkhope|
|Austin-Walker, John||Llwyd, Ellyn|
|Barnes, Harry||Madden, Max|
|Benn, Rt Hon Tony||Mahon, Alice|
|Campbell, Ronnie (Blyrh V)||Michie, Bill (Sheffield Heeley)|
|Campbell-Savours, D N||Patchett, Terry|
|Canavan, Dennis||Rooney, Terry|
|Cohen, Herry||Skinner, Dennis|
|Corbyn, Jeremy||Wigley, Dafydd|
|Ewing, Mrs Margaret||Wise, Audrey|
|Godman, Dr Norman A||Wray, Jimmy|
|Gordon, Mildred||Tellers for the Noes:|
|Jones, leuan Wyn (Ynys Mon)||Mr. Alex Salmond and|
|Lewis, Terry||Mr. Cynog Dafis.|
§ Question accordingly agreed to.
§ Bill read a Second time, and committed to a Standing committee, pursuant to Standing Order No.61
§ (Committal of Bills).
§ Madam Speaker
With the leave of the House, I will put the money and the Ways and Means resolutions together.