HC Deb 27 July 2000 vol 354 cc1326-41

Lords amendment: No. 12, in page 6, line 24, at end insert ("or the Utilities Act 2000")

Mrs. Liddell

I beg to move, That this House disagrees with the Lords in the said amendment.

Mr. Deputy Speaker

With this we may consider the following: amendment in lieu thereof, Lords amendments Nos. 13 and 14, 15 and amendment in lieu thereof, and 16, 17, 228, 234, 235 and 241.

Mrs. Liddell

I do not want to delay the House unduly. Amendment No. 12, together with amendments Nos. 14, 15 and 17, clarify what is meant by the functions of the authority and the Secretary of State for the purposes of clauses 9 to 11 and 13 to 15. They also clarify what is meant by activities subject to obligations for the purposes of the finance duty in sub-paragraph (2)(b) of clauses 9 and 13.

Clauses 9 to 11 and 13 to 15 contain obligations that relate to the functions of the authority and Secretary of State. Clauses 9 and 13 set out their principal objective and general duties; clauses 10 and 14 oblige the authority to have regard to social and environmental guidance, and clauses 11 and 15 contain important obligations concerned with health and safety.

Following Royal Assent, the functions of the authority and the Secretary of State will be largely contained in the amended Gas Act 1986 and Electricity Act 1989, but both will also have functions under stand-alone provisions of the Utilities Bill—that is, provisions that do not simply amend the existing Gas and Electricity Acts. For example, clause 4 requires the authority to prepare, consult on and publish a forward work programme, and clause 26 empowers the authority to publish a notice issued by the consumer council setting out its reasons for refusing to supply information.

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The amendments make it clear that references to the functions of the authority or the Secretary of State in clauses 9 to 11 and 13 to 15 relate to their functions under the provisions of the Bill, as well as to their functions under the amended Gas Act 1986 and Electricity Act 1989.

Similarly, the amendments make it clear that, for the purposes of the finance duty in subsection (2)(b) of clauses 9 and 13, the reference to the activities of licence holders that are subject to "obligations" extend to stand-alone obligations under this Bill, as well as to obligations under the amended Gas Act 1986 and Electricity Act 1989.

Amendments Nos. 13 and 16, which were divided on in another place, would place the authority and the Secretary of State under a duty to exercise their functions in the manner that they consider best calculated to secure a diverse and viable long-term energy strategy. The authority and the Secretary of State must, as part of their primary duty, consider the needs of future, as well as existing, consumers. That requirement necessarily imports longer-term thinking about security of supply into their processes.

We accept that many people think that it would be desirable to make this even clearer in the Bill, and the Government are therefore prepared to accept the amendments.

Let me deal briefly with amendments Nos. 228 and 235, to assist the House. Each of those repeal provisions of the Gas Act 1986, which are replaced by equivalent provisions contained in the Bill. Amendment No. 228 repeals the latter half of section 47(7) of the Gas Act, which is the equivalent of paragraph 10 of schedule 1 to the Bill. Amendment No. 235 repeals paragraph 15(2) of schedule 7 of the Gas Act, which is the equivalent of clause 5(9) of the Bill.

Finally, amendments Nos. 234 and 241 repeal spent provisions of the Gas Act and the Electricity Act respectively, which are concerned with the compulsory purchase of land in Scotland.

Mr. Gibb

The Bill started life as the Department of Trade and Industry's great flagship Bill, with 134 clauses and a new regulatory regime for all four utilities—gas, electricity, telecommunications and water. On Second Reading, the Secretary of State introduced the Bill in glowing, almost adulatory terms. He said: The Bill is forward-looking. It sets out a new framework for utilities regulation that is fit and appropriate for the 21st century. The Bill puts utilities regulation on a sure footing for the 21st century, and is good for consumers, good for competition and good for the utilities.—[Official Report, 31 January 2000; Vol. 343, c. 795.] That was on 31 January but, by 2 March, it was clear that, for the telecommunications industry and the water utilities, the Bill was bad for consumers, bad for competition and bad for the utilities. That is why both water and telecommunications were withdrawn from the Bill in a humiliating admission of incompetence by the Government, especially the Secretary of State.

I warned the Minister in Committee that there would be 900 amendments, not 1,000, as she said. In the event, there were more than 600. If I exaggerated, I did so only slightly. The Government made strenuous efforts to reduce the number of amendments by merging some of them to get the number down to 600.

Mrs. Liddell

Perhaps I should be delighted that the hon. Gentleman has joined us, because I understand that he was an accountant in a previous life. If he thinks that the difference between 600 and 900 is slight, I am glad that he never did my tax returns.

Mr. Gibb

It is slight in this context. Huge efforts were made by civil servants to redraft amendments to ensure that they conformed with that figure.

Mr. Stunell

Does the hon. Gentleman agree that, whether the discrepancy in his accounting is large or small, it is not as great as chopping the Bill in half and adding back 600 bits?

Mr. Gibb

The hon. Gentleman makes a good point, especially as those 600-odd amendments were to a Bill of 134 clauses. The Government could almost have started again with more efficiency than just accepting 600 amendments, the vast majority of which dealt with poor drafting and poor policy analysis. I do not wish to be unkind, but it became abundantly clear in Committee that the Ministers were not up to speed with what was going on; they were certainly not driving the policy forward.

This flagship Bill, which was part and parcel of the Government's so-called modernisation programme, has become a huge embarrassment to them, and the House even considered referring it back to Committee. It started as one of those eye-catching initiatives with which the Prime Minister likes to be personally associated, but it has finished up as an example of how not to legislate. Even the Secretary of State, who is absent today, is trying to avoid being associated with it.

The essence of the Bill is to change the role of the regulator from that of an economic regulator to one of regulating for the sake of it. The gas and electricity regulators were put in place when the industries were privatised in 1986 and 1989 to deal with the fact that they were effectively monopolies and to ensure that those monopolies did not exploit their position. They were also charged with promoting competition—a role that they have carried out in an exemplary fashion during the past 11 or 14 years. The retail prices index minus X formula applied by the regulators has given the industries huge incentives to cut costs, increase efficiency and become more customer focused. Electricity and gas prices have fallen by 30 per cent, in real terms since privatisation and huge competition exists in the gas and electricity industries.

In 1988, when the Prime Minister led for the Opposition in opposing the privatisation of electricity industry, he said: outside of the Conservative party…it is barely in issue that prices will rise because of privatisation. The truth is that they have fallen. On competition, he said: I would have thought that it was…virtually impossible that anyone would build a power station and invest hundreds of millions of pounds, unless they received a guarantee covering the capital cost, the fuel cost and, probably … the operating costs, too … the idea that we will have an influx of power stations, all competing on the grid, is nonsense.—[Official Report, 12 December 1988; Vol. 143, c. 681–84.] The truth is that there has been an influx of new power stations, all of which are in competition. There are 27 new power stations, and 50 new independent power producers have entered the generation market since privatisation with a total market share of 21 per cent.

Under the Bill, the Government are changing the role and obligations of the regulators. That role would also be amended under the Lords amendments. It is important to understand the philosophy behind the Bill. It is set out in a pamphlet, entitled "Regulating in the Public Interest", written by Dan Corry in 1994. Some hon. Members might not be aware that Dan Corry is one of the Government's huge army of special advisers. He said that his pamphlet tries…to take us back to the reasons that we have regulation in order to see whether this leads us towards a different vision for the way forward. Interestingly, he continued: Once we accept that regulation is here to stay, we are into the world of how we should use it. This is a classic issue of interventionism in the workings of the economy.

Sir Michael Spicer (West Worcestershire)

I declare an interest as president of the Association of Electricity Producers. Does my hon. Friend agree that the situation is even worse than he suggests because the concept of social regulation will replace that of economic regulation and because the system that will replace the existing markets system is largely contract based and anticompetitive in many respects?

Mr. Gibb

My hon. Friend makes a good point, and I shall deal with some of the comments in the newspapers and on Second Reading.

That pamphlet is, in essence, a blueprint for the Bill. The key point is that the Government believe that, because the regulators exist for those industries, they should be used to deliver some of the Government's social and political programmes. If the Government had their way, we would also have a regulator for the supermarkets, for car retailers and for a number of other things.

The interventionist instincts of the Labour party and of those who share its philosophy are alive and kicking and prevalent in the Bill. The amendments are the key to that philosophy. That is why the order of the objectives for the regulator has been changed. That is why the Bill gives the Secretary of State the power to direct the authority to take into account directives from the Secretary of State on social matters when regulating the utilities.

That is the fundamental difference that the Bill brings to the role of the regulator. It begs the question: what happens when the market, the industry or a sector of the industry becomes fully competitive? If we believe that the regulator's role is to mimic competition, once a sector becomes competitive, the regulator's role is effectively redundant and should disappear. The Health and Safety Executive can deal with safety issues; the Competition Commission can deal with any anti-competitive forces or alliances; but the specific role for a regulator of that particular sector of that industry should go. The electricity supply industry is one such example. It is highly competitive, so now is the time to remove the regulator from that sector altogether.

If one believes, as the Government seem to, that the regulator has a wider role even in a fully competitive market—even when competition has fully arrived—there can be no rolling back of the regulator's role. That point was put to the Secretary of State during the Second Reading debate. He was asked whether he believed that there is still a role for the regulator when the utility sector involved … is fully exposed to fierce competition. His answer was: As a general rule, my personal view is that regulators are not appropriate in those circumstances, and I should much rather have the discipline of an effective market.—[Official Report, 31 January 2000; Vol. 343, c. 793.] That is his personal view, which contradicts the basis of the Bill that he has proposed. He tries to justify it by saying that, in many areas, the market is not perfect and thus a role for the regulator remains, but no market is absolutely perfect. However, most markets do not—apart from the utilities and financial services sectors—have a regulator. Provided that there is fierce competition, there is no need for a regulator to mimic competition. If, in those circumstances, the regulator remains, its role has become something else: a regulator for the sake of regulation, for the sake of intervening for policy purposes. Therefore, it is in essence a return to increased state control.

It is that to which my hon. Friend the Member for West Worcestershire (Sir M. Spicer) referred when he wrote in The Daily Telegraph that the Utilities Bill and the Financial Services and Markets Bill will establish an entirely new form of government, the like of which this country has not experienced before: rule by regulator. Neil Bennett in The Sunday Telegraph called it the near renationalisation of the gas and power industries. It is why, during the Second Reading debate, my hon. Friend said: regulators are being given social and political objectives, which are antithetical to competition. We are witnessing a parallel system of government emerging. He went on to say: That is socialism by regulation; it is socialism on the sly and it is nationalisation by the back door. I hope that one of our first objectives when we return to government will be to dismantle all the regulatory apparatus, except for that which focuses on competition because competition is the true friend of the consumer.—[Official Report, 31 January 2000; Vol. 343, c. 828.] I tell him here and now categorically that, when we return to power, we will significantly reduce the role of the utility regulators and confine their role to that of mimicking a competitive market and to promoting competition.

I have tried to establish that the Bill creates a whole new type of industry regulator, with wide new objectives, obligations and powers. It is those extra duties that the Government have imposed on it that will involve Ofgem—or GEMA as it should now be called—in higher cost, all of which will be passed on to the industry and thence on to the consumer.

In fact, industry will suffer three forms of increased costs as a result of the Bill. The first is higher licence payments to cover the increased costs faced by the regulator himself. The second relates to the higher cost incurred directly by industry as it implements the social and other obligations required of it. The third is the higher cost of capital that results from greater regulatory risk. That is why the Bill has been so poorly received by industry, despite all the alleged consultation. Indeed, Ian Byatt, the erstwhile water regulator, said of the Bill when it included water: The Bill's enlargement of the scope for discretionary intervention by regulators, politicians and advocates is likely to extract a high price from utility industries, and all consumers will pay it. Clauses 9 and 13 are two of the most important clauses in the Bill. They set out the objectives of both the Secretary of State and the regulator, and thus constitute the lodestone on which the whole direction of regulation of the utilities is based. Those "objective" clauses not only change the regulator's role, but change the order and priority of other objectives.

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The Gas Act 1986 and the Electricity Act 1989, which privatised the industries concerned, are similarly worded, setting out the regulators' objectives as established at the time of privatisation. Three key objectives were specified. The first was to secure that all reasonable demands for electricity were satisfied. The second was to secure that licence holders were able to finance the carrying on of the activities involved. The third was to promote competition. There were three equal duties, relating to security of supply, financial viability and the promotion of competition.

That is the current regulatory regime. Under the Bill, however, the primary objective is to promote consumers' interests. Issues such as security of supply and financial viability have been downgraded to second place.

The great achievement of the current regulatory regime is this. The RPI minus X formula gave industry incentives to reduce costs while maintaining financial viability, at the same time as delivering lower prices to the consumer. Everyone knows—even Labour pretends to accept—that the private sector is more efficient than the state sector. The RPI minus X formula was established to ensure that a proportion of that saving was passed on to the consumer.

Of course, once a fully competitive market has been established there is no need for a formula, because the market itself will deliver the price reduction. The RPI minus X formula is only a mechanism enabling the benefits derived from efficiency savings to be shared; it does not, in itself, deliver efficiencies. It is the effect of being in the private sector that delivers the forces leading to greater efficiency.

The regulator needs to be aware—this is the point of the amendment—that he cannot simply pluck the "X" figure from the air, and expect efficiencies to be delivered. There comes a point at which diminishing returns start to kick in. After a number of years in the private sector, the huge efficiency savings resulting from release from the lethargy of the state sector will no longer be kept up. Efficiency will continue to increase, but not at the same dramatic rate. That is why, under the existing system, there was always a prime duty to maintain the financial viability of the companies. Demoting that objective means that the regulator is almost forced to put such concerns very low on his list of considerations—which leads to the real danger of over-prescriptive and draconian regimes.

There is another real danger, of which we are beginning to see signs in the utilities even before the implementation of the Bill. In Yorkshire, for example, Kelda, which owns Yorkshire Water, has sought to transfer all the assets of its business to a mutual trading company. Ofwat has said no to that, but the proposal is significant.

Because of what is now widely regarded as an excessively draconian regime, the returns—the income—that Ofwat is allowing the water companies to make are so low that the market value of shares in the companies is below the book value of the assets that they own. If they simply sold all their assets, such as buildings and pipelines, and deposited the money in a building society, they could generate a significantly higher income than they are making from the provision of water services.

Yorkshire Water wanted to sell its assets, and to sell them to a mutual trading company. The assets would have been sold in exchange for debt, so the mutual trading company would have been 100 per cent, debt financed. There is no doubt that interest on debts must be paid, although there is an element of choice governing whether a company pays a dividend. In this case, the regulator would not be able to force the funders of the asset to take a lower return.

The regime has therefore become so unattractive that equity capital—entrepreneurial, innovative, private-sector business—does not want to run the business. It wishes to withdraw and to leave the supply of water to a mutual trading company. The danger of large mutual companies is that they have reduced incentive to innovate and to provide improved services. Philosophically, they are in many ways akin to the state sector. As the Financial Times said yesterday in an editorial: mutual ownership…leaves big questions as to how the new managers could be kept sharp in pursuit of efficiency.

The point that the Minister has to take into account is that, although Ofwat has refused to allow the restructuring, in the long run there is nothing that any regulator can do to stop equity owners from withdrawing their capital from businesses that are impossible to run at a profit because the regulatory regime is too harsh.

Mutualisation is effectively the renationalisation of those industries by over-regulation. If the Bill results in over-burdensome regulation in electricity and gas, as there is in water, we could see—I am not sure, but we may already be seeing it in gas distribution—similar trends in those industries. The replacement of equity funding with debt is the first step in that process.

The purpose of our amendment in lieu is to put financial viability higher up the regulator's consciousness. It is important that the regimes are carefully balanced. The Bank of England has a similar imperative. Anyone can cure inflation by raising interest rates to 100 per cent, and killing the economy totally. The truth is that, to get interest rate policy right, we have to keep inflation down and growth steady. That is the trick of economic policy. That is also why the Governor of the Bank of England has to write to the Chancellor explaining why inflation has fallen to below 1.5 per cent. Similar constraints have to be imposed on the utility regulator, to ensure that the regulator does not drive out equity capital in the provision of investment funds to electricity and gas. Our amendment would help to achieve that.

Our amendment in lieu is important and could do much to save the gas and electricity industries from the problems being faced in water. Without it, we run the risks associated with mutualisation and the effective renationalisation of those industries. I hope that the Government will accept it at this late hour. However, I suspect that the words of the Prime Minister back in 1988, may prevail. He said: We are proud that we took the— electricity— industry into public ownership. When we come to power it will be reinstated as a public service for the people of this country, and will not be run for private profit.—[Official Report, 12 December 1988; Vol. 143, c. 681–84.]

I trust that that is no longer the Government's policy, and that they will demonstrate their commitment to the private sector by accepting our amendment. However, if they are not prepared to accept the amendment, I hope very much that the House will vote to accept it.

Mr. David Wilshire (Spelthorne)

It might benefit the House if I were to point out that—although it is not, strictly speaking, a declarable interest—many of my constituents earn their living by working for the successors to British Gas. I approach the debate from that direction.

I also understand from listening to the speeches of other hon. Members that there is a general wish not to prolong matters too much. I shall attempt not to do that.

The Minister rightly said that Lords amendments Nos. 12, 14, 15 and 17 were seeking simply to expand the statement that "so and so shall arise out of this part" to "so and so shall arise out of this part or the Act itself." I am not a lawyer or a parliamentary draftsman. However, I am puzzled about why, if the legislation provides that something shall arise out of the Act, it should also state that something shall arise out of one part of the Act. It seems to be an excessively belt-and-braces approach to say that something will arise from both the Act and a part of the Act. Surely to goodness we know that "this part" is a part of the Act itself. Why is the Minister so keen, at a very late stage in our consideration of the Bill, to urge us to support including repetition in the Bill? I should be grateful for some clarity on that point.

I am also concerned about Lords amendments Nos. 16 and 17. If I heard the Minister correctly, the Government have made a concession. They initially preferred to have no reference in this part of the Bill to the long-term supply of energy. In a debate in the other place, they tried to prevent Parliament from saying that the long-term provision of energy matters sufficiently to be mentioned in the Bill. I suppose we should be grateful for the concession, but it is worth making the point that they tried to exclude any such reference.

My hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb) made it clear that, if we were the Government, we would not be starting from here, but the Government are starting from here and have decided to overturn the existing arrangements for the regulator and introduce new requirements. If they are determined to do that, they have the majority, and no doubt they will use it. It is extraordinary in those circumstances to resist any reference to the long-term supply of energy for the British people.

In the absence of a realistic justification, that seems to reveal the Government's hidden agenda and to show that their real focus is not on the consumer's interests, as they claim. It suggests that, if they are not interested in the long-term supply, they are really only interested in control and regulation. That reveals their prejudice.

The Government see that we have successful businesses, following the Conservative Government's privatisation of the industry. We are being asked to approve legislation that is aimed, as is always the case with the Labour party, at wrecking a successful business. The Government cannot tolerate financial success or bring themselves to understand that through such success comes prosperity and the underpinning of long-term viability for all sorts of enterprises.

The Government are now conceding the point, presumably because they want to get away by 7 o'clock, and thereby conceding that they ought to consider other factors rather than wrecking successful businesses out of spite and prejudice. I would be grateful if the Minister could explain how I am wrong.

Mr. Stunell

The debate seems to be rather wide-ranging, but the amendments in this group and the clauses to which they relate go to the heart of some of the Bill's aims. I want to respond to some of the points made by the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) in support of the amendments in lieu. Neither the Lords amendments nor the amendments in lieu make any significant difference to the impact of the Bill, but it is legitimate to discuss them.

I agree with many of the hon. Gentleman's points about the construction and history of the Bill and the disappointing way in which it has proceeded. It was cut in half and had 600 amendments added in Committee, we now have the Lords amendments, and we can see further difficulties lying ahead. There are also some missed opportunities. Some of them are the result of an absence rather than an excess of regulation. In Committee and elsewhere, the Liberal Democrats tabled amendments to try to give the regulating authorities greater power and influence, particularly in the area of environmental control.

I want to tackle the central argument that the hon. Gentleman deployed. The energy supply industry in the United Kingdom has never been completely deregulated and left to the mercies of unregulated rampant market forces. The Conservative Government never thought that that was an option and it is certainly not one for the future. The hon. Gentleman said that it would be absolutely bonkers to lift all regulation except that relating to competition. It would be particularly bonkers for hon. Members representing rural constituencies. If one simply left competition to run unhindered, rural consumers would pay higher prices than urban consumers because the cost of supplying them would be greater.

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The hon. Gentleman may contradict me, but I do not believe for a moment that he has brought to the House a new Conservative policy on energy supply which is that rural consumers should pay the full price for the product and therefore pay more. Nor do I believe that he is in favour of dismantling the regulatory framework relating to the security or safety of supply. In some respects, it is absolutely transparent that the quick soundbite of getting rid of all regulation except that relating to competition is bonkers.

Mr. Gibb

The hon. Gentleman deliberately misunderstands my point. The regulator was put in place at the time of privatisation. There were rules about security of supply and so on before the regulator was appointed. I am talking about restoring the role of the regulator to that of an economic regulator in order to mimic competition. When competition is fully established, that role would be withdrawn from the regulator. However, all the other rules and regulations about safety and security of supply that existed before privatisation would continue.

Mr. Stunell

What we have established from that intervention is that I am correct: the hon. Gentleman does not seek the dismantling of the regulatory regime. When an industry is privatised, the constraints provided by state ownership are withdrawn and if one does not substitute a regulatory framework rural consumers will pay more, safety corners will be cut, long-term investment will go out of the window and security of supply will become a redundant issue. Quite clearly, the Conservatives do not mean what the soundbite suggests.

Let me take the argument a little further because the Utilities Bill addresses some of the issues of social welfare. I give the Minister credit for those provisions, but the Bill is still slack on environmental control. The Minister has missed some opportunities and this group of Lords amendments does not restore the regulatory framework to the extent that I would like. I do not know whether the Conservatives will press the matter to a vote, but the view of the Liberal Democrats is not that we should have excessive regulation, but that we should have regulation which benefits and protects the consumer. That is why we need regulations on safety and supply and the social provision of energy, and that is why we believe that there should be additional regulation relating to the environment.

Mr. Gibb

I am grateful to the hon. Gentleman for giving way a second time. If those issues are so important, will he tell the House why his party has not tabled amendments enabling the House to discuss them?

Mr. Stunell

We have tabled a string of amendments on which I shall raise some of those issues.

Finally, the hon. Member for Bognor Regis and Littlehampton alleged that somehow the Bill was leading inexorably to a secret renationalisation of the energy companies in the United Kingdom. That is quite amusing given that the profit made from the electricity lighting the lamps in the Chamber is going to a state company—but it happens to be the French state electricity company. That is the outcome of the privatisation process of which the hon. Gentleman is so proud.

Dr. Howells

I agree with the hon. Gentleman. If the previous Government had been a bit more rigorous and shown more guts in taking on other member states to break up the monopoly markets that still exist in some parts of the European Union, we might not have been in this situation.

Mr. Stunell

I warn the Minister that the lights might go off if we have any more remarks like that.

The much-vaunted privatisation of this country's power companies has resulted in state enterprises elsewhere moving in on our territory. A completely unregulated market in this country would mean that that would happen more often. I will be delighted to vote against the amendment if it is pressed.

Mr. Forth

I want to register my mild protest at amendment No. 13, which strikes me as the epitome of guff. It looks innocuous enough, and who would argue with the intention to secure a diverse and long-term energy supply? However, propositions that arouse no argument are usually vacuous and meaningless. I suspect that this one is too.

The amendment appears to encourage the development of solar energy, and wind and wave-generated energy. It may also aim to encourage the development of coal as a source of gas, in competition with or to complement natural gas. That is all very well, but is not that at odds with some of the environmental aims espoused by the same people who produced this nonsensical amendment?

The amendment does not make clear whether the achievement of a diverse and viable long-term energy supply would be in conflict with environmental aims, and so it does not take us much further forward. I believe that Bills should not contain meaningless terms. The amendment is therefore to be resisted.

Mrs. Liddell

I agree whole-heartedly with the right hon. Gentleman. The amendment was introduced by the Opposition in the Lords. The point made by the right hon. Gentleman was made by my noble Friend Lord McIntosh but, in the spirit of co-operation that we have shown throughout deliberations on the Bill, the Government are willing to accept the amendment. However, I am sure that the right hon. Gentleman's words will be heard by his noble Friends in another place.

Mr. Forth

I am advised that Liberal Democrat peers in another place tabled the amendment. They are not part of the official Opposition: in fact, they usually do not oppose the Government at all.

Even so, I am not impressed with what the Minister just said. It is astonishing that she should have told the House that the spirit of compromise—with which I rarely agree anyway—has led her to agree to the inclusion in the Bill of meaningless verbiage. That will hasten the Bill's progress to the statute book, but it is astonishing and disgraceful for her to admit that she is willing to accept words that she has said that she opposes. It reinforces my determination to vote against the amendment, if the opportunity so to do arises.

Sir Michael Spicer

I shall not repeat my Second Reading speech, which my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb) was kind enough to quote at length. However, I want to put it firmly on record that I believe that the regulatory system amounts to socialism on the sly. It has nothing to do with benefits for the industry, and everything to do with income distribution and the Government's political objectives.

If that were not so, the Government would have established a totally different trading system, which did not depend on the big companies being able to sew up the contract market. Different arrangements would not have created so much worry among smaller market players, and no referrals to the Competition Commission would have been made. The whole matter would have been dealt with in a totally different way. That needs to be put on the record.

This is not an isolated case—it is part of a process that goes right across the regulatory board. Every regulatory regime that the Government are tampering with is putting economic and competition considerations below the wider political considerations. The Government are proactive in this respect, and have that objective in mind. There is no disguise. It is apparent in all the bodies—the Financial Services Authority now has social banking, and integrated transport systems are an objective.

In every regulatory regime, the political objectives are more important that the economic objectives. I am very glad to hear from my hon. Friend the Member for Bognor Regis and Littlehampton that when we come into office, we will strip all this bare again and start off with a proper regime that puts competition, the marketplace and genuine economic objectives at the forefront. It will not do what politicians may seek to do, albeit through different means. Income distribution should not be made through a regulatory process that pretends to be of economic benefit to the country.

Mrs. Liddell

Well, the splits have been exposed tonight all right. We have seen splits between the official Opposition in this place and the official Opposition in another place. The right hon. Member for Bromley and Chislehurst (Mr. Forth) claimed that amendment No. 13 was defective and that he would oppose it, yet his colleagues in another place supported it. The reason that the Government are accepting it is quite simple: it adds very little to the Bill, but it is better that people get the benefits of the Utilities Bill sooner rather than later.

We also saw a split between those on the Front and Back Benches. The hon. Member for West Worcestershire (Sir M. Spicer) complained about new electricity trading arrangements, yet only a couple of weeks ago Baroness Buscombe said: we welcome the merging of the electricity and gas regulators…—[Official Report, House of Lords, 4 May 2000; Vol. 612, c.1143.] She also said that they supported the new electricity trading arrangements. The hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) made exactly the same point. It is always a pleasure when the hon. Gentleman comes to the Dispatch Box; it is like listening to the speech of an old friend, because we hear it so often.

We will make sure that we take careful note of what Conservative Members have said tonight—it will be very useful in the forthcoming election. Conservative Members put in place the system of privatisation that was deliberately opposed to the interests of the consumer. We will bear that in mind.

The hon. Member for Bognor Regis and Littlehampton complained about telecommunications and water being taken out of the Bill. When he reads his speeches, he should read all of his speeches. I draw to his attention his remarks that the Government would have the support of the Opposition if telecommunications were to be removed from the Bill, when he said: That removal could be carried out in as swift and easy a manner as the Minister wished.—[Official Report, Standing Committee A, 29 February 2000; c. 184.]

Despite the fact that this debate has sounded like a Third Reading debate, it was not—it was actually a debate on the Opposition's amendments (a) to Lords amendments Nos. 12 and 15. The Opposition's amendments are technically deficient. Under existing legislation, the regulator and the Secretary of State are under a primary duty to secure that licence holders are able to finance certain of their activities. That is why we are concerned that this and other aspects of existing legislation has led to the interests of consumers being subordinated to those of shareholders. That is why the Bill puts the consumer first. However, it remains important that licence holders are able to finance their activities. That is why the Bill replaces the existing finance duty as an aspect of the primary consumer duty. A balance must be struck between the consumer and the shareholder. That is why the finance duty has been incorporated as an aspect of the interests of consumers.

The amendments proposed by the hon. Member for Bognor Regis and Littlehampton would add nothing to the present wording of clauses 9 and 13. They simply introduce a reference to securing finance and to capital investment required. However, it is already clear that the duty in the provisions extends to the securing of finance. The licence holder's provision could not be included could it not secure that finance. I believe that the hon. Gentleman has used this as an opportunity to rehearse the arguments that he has used in the past.

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The hon. Member for Spelthorne (Mr. Wilshire) asks why we are using expressions like arising out of this part". We are referring to the wording of the Gas Act 1986 and the Electricity Act 1989.

I urge the House to support the amendments tabled by the Government which make sensible improvements to the Bill and take into account the concerns of all involved.

The House divided: Ayes 281, Noes 116.

Division No. 296] [6 pm
AYES
Abbott, Ms Diane Brown, Rt Hon Nick (Newcastle E)
Allan, Richard Buck, Ms Karen
Allen, Graham Burden, Richard
Anderson, Donald (Swansea E) Byers, Rt Hon Stephen
Anderson, Janet (Rossendale) Cable, Dr Vincent
Ashton, Joe Cabom, Rt Hon Richard
Atkins, Charlotte Campbell, Rt Hon Menzies
Austin, John (NE File)
Banks, Tony Campbell-Savours, Dale
Barnes, Harry Cann, Jamie
Barren, Kevin Caplin, Ivor
Beard, Nigel Casale, Roger
Beckett, Rt Hon Mrs Margaret Caton, Martin
Bell, Stuart (Middlesbrough) Cawsey, Ian
Benn, Hilary (Leeds C) Chapman, Ben (Wirral S)
Benn, Rt Hon Tony (Chesterfield) Clapham, Michael
Bennett, Andrew F Clark, Rt Hon Dr David (S Shields)
Benton, Joe Clark, Dr Lynda
Best, Harold (Edinburgh Pentlands)
Blears, Ms Hazel Clark, Paul (Gillingham)
Blizzard, Bob Clarke, Rt Hon Tom (Coatbridge)
Bradley, Keith (Withington) Clarke, Tony (Northampton S)
Bradley, Peter (The Wrekin) Clelland, David
Bradshaw, Ben Clwyd, Ann
Brinton, Mrs Helen Coaker, Vemon
Coffey, Ms Ann Hughes, Kevin (Doncaster N)
Cohen, Harry Hurst, Alan
Coleman, lain Hutton, John
Colman, Tony Iddon, Dr Brian
Connarty, Michael Illsley, Eric
Cook, Frank (Stockton N) Jackson, Ms Glenda (Hampstead)
Cooper, Yvette Jackson, Helen (Hillsborough)
Corbett, Robin Jamieson, David
Corbyn, Jeremy Jenkins, Brian
Corston, Jean Johnson, Alan (Hull W & Hessle)
Cousins, Jim Johnson, Miss Melanie
Cox, Tom (Welwyn Hatfield)
Cranston, Ross Jones, Ms Jenny
Cryer, John (Hornchurch) (Wolverh'ton SW)
Cummings, John Jones, Jon Owen (Cardiff C)
Cunningham, Jim (Cov'try S) Jones, Dr Lynne (Selly Oak)
Curtis-Thomas, Mrs Claire Jones, Martyn (Clwyd S)
Darvill, Keith Jowell, Rt Hon Ms Tessa
Davey, Edward (Kingston) Keen, Alan (Feltham & Heston)
Davey, Valerie (Bristol W) Keen, Ann (Brentford & Isleworth)
Davies, Rt Hon Denzil (Llanelli) Kelly, Ms Ruth
Davies, Geraint (Croydon C) Kennedy, Rt Hon Charles
Dawson, Hilton (Ross Skye & Inverness W)
Dismore, Andrew Kennedy, Jane (Wavertree)
Dobbin, Jim Khabra, Piara S
Doran, Frank Kidney, David
Dowd, Jim King, Andy (Rugby & Kenilworth)
Drown, Ms Julia Kumar, Dr Ashok
Dunwoody, Mrs Gwyneth Ladyman, Dr Stephen
Eagle, Angela (Wallasey) Laxton, Bob
Eagle, Maria (L'pool Garston) Leslie, Christopher
Edwards, Huw Lewis, Ivan (Bury S)
Ellman, Mrs Louise Lewis, Terry (Worsley)
Ennis, Jeff Liddell, Rt Hon Mrs Helen
Field, Rt Hon Frank Linton, Martin
Fisher, Mark Livsey, Richard
Fitzpatrick, Jim Lloyd, Tony (Manchester C)
Fitzsimons, Mrs Lorna McAvoy, Thomas
Flint, Caroline McCabe, Steve
Follett, Barbara McCafferty, Ms Chris
Foster, Rt Hon Derek McCartney, Rt Hon Ian
Foster, Don (Bath) (Makerfield)
Foster, Michael Jabez (Hastings) McDonagh, Siobhain
Foster, Michael J (Worcester) McDonnell, John
Fyfe, Maria McGuire, Mrs Anne
George, Andrew (St Ives) McIsaac, Shona
George, Bruce (Walsall s) McKenna, Mrs Rosemary
Gerrard, Neil Mackinlay, Andrew
Gibson, Dr Ian McNamara, Kevin
Godman, Dr Norman A McNulty, Tony
Godsiff, Roger McWalter, Tony
Goggins, Paul Mahon, Mrs Alice
Gordon, Mrs Eileen Mallaber, Judy
Griffiths, Jane (Reading E) Marsden, Gordon (Blackpool S)
Griffiths, Win (Bridgend) Marshall, David (Shettleston)
Grocott, Bruce Marshall, Jim (Leicester S)
Grogan, John Martlew, Eric
Gunnell, John Meacher, Rt Hon Michael
Hall, Mike (Weaver Vale) Meale, Alan
Hall, Patrick (Bedford) Merron, Gillian
Hamilton, Fabian (Leeds NE) Michael, Rt Hon Alun
Heal, Mrs Sylvia Michie, Bill (Shef'ld Heeley)
Healey, John Miller, Andrew
Hepburn, Stephen Moffatt, Laura
Heppell, John Moore, Michael
Hesford, Stephen Moran, Ms Margaret
Hewitt, Ms Patricia Morgan, Alasdair (Galloway)
Hill, Keith Morgan, Ms Julie (Cardiff N)
Hinchliffe, David Moriey, Elliot
Hodge, Ms Margaret Morris, Rt Hon Ms Estelle
Hoon, Rt Hon Geoffrey (B'ham Yardley)
Hopkins, Kelvin Mountford, Kali
Howarth, Alan (Newport E) Mullin, Chris
Howarth, George (Knowsley N) Naysmith, Dr Doug
Howells, Dr Kim O'Brien, Bill (Normanton)
Hughes, Ms Beveriey (Stretford) O'Brien, Mike (N Warks)
Olner, Bill Starkey, Dr Phyllis
Öpik, Lembit Steinberg, Gerry
Palmer, Dr Nick Stewart, Ian (Eccles)
Pearson, Ian Stinchcombe, Paul
Perham, Ms Linda Stoate, Dr Howard
Pickthall, Colin Strang, Rt Hon Dr Gavin
Pike, Peter L Stuart, Ms Gisela
Plaskitt, James Stunell, Andrew
Pollard, Kerry Sutcliffe, Gerry
Pond, Chris Taylor, Rt Hon Mrs Ann
Pope, Greg (Dewsbury)
Pound, Stephen Taylor, Ms Dari (Stockton S)
Powell, Sir Raymond Temple-Morris, Peter
Prentice, Ms Bridget (Lewisham E) Thomas, Gareth R (Harrow W)
Prentice, Gordon (Pendle) Thomas, Simon (Ceredigion)
Prosser, Gwyn Tipping, Paddy
Quin, Rt Hon Ms Joyce Tonge, Dr Jenny
Quinn, Lawrie Touhig, Don
Radice, Rt Hon Giles Turner, Dennis (Wolverh'ton SE)
Rammell, Bill Turner, Dr George (NW Norfolk)
Rapson, Syd Turner, Neil (Wigan)
Reed, Andrew (Loughborough) Twigg, Derek (Halton)
Robinson, Geoffrey (Cov'try NW) Twigg, Stephen (Enfield)
Rogers, Allan Tyler, Paul
Rooker, Rt Hon Jeff Vis, Dr Rudi
Rooney, Terry Walley, Ms Joan
Ross, Ernie (Dundee W) Ward, Ms Claire
Ruddock, Joan Wareing, Robert N
Salmond, Alex Watts, David
Salter, Martin Whitehead, Dr Alan
Sarwar, Mohammad Wicks, Malcolm
Savidge, Malcolm Williams, Rt Hon Alan
Sawford, Phil (Swansea W)
Sedgemore, Brian Williams, Mrs Betty (Conwy)
Shaw, Jonathan Wills, Michael
Sheerman, Barry Winnick, David
Shipley, Ms Debra Winterton, Ms Rosie (Doncaster C)
Simpson, Alan (Nottingham S) Wood, Mike
Skinner, Dennis Woodward, Shaun
Smith, Rt Hon Chris (Islington S) Woolas, Phil
Smith, Jacqui (Redditch) Wright, Anthony D (Gt Yarmouth)
Smith, Llew (Blaenau Gwent) Wyatt, Derek
Snape, Peter
Soley, Clive Tellers for the Ayes:
Southworth, Ms Helen Mr. Clive Betts and
Spellar, John Mr. Robert Ainsworth.
NOES
Ainsworth, Peter (E Surrey) Fabricant, Michael
Amess, David Fallon, Michael
Arbuthnot, Rt Hon James Flight, Howard
Atkinson, Peter (Hexham) Forth, Rt Hon Eric
Baldry, Tony Fowler, Rt Hon Sir Norman
Bercow, John Fraser, Christopher
Beresford, Sir Paul Gale, Roger
Blunt, Crispin Gamier, Edward
Body, Sir Richard Gibb, Nick
Boswell, Tim Gill, Christopher
Bottomley, Peter (Worthing W) Gillan, Mrs Cheryl
Brady, Graham Gorman, Mrs Teresa
Brazier, Julian Gray, James
Brooke, Rt Hon Peter Green, Damian
Browning, Mrs Angela Greenway, John
Butterfill, John Grieve, Dominic
Cash, William Gummer, Rt Hon John
Chapman, Sir Sydney Hague, Rt Hon William
(Chipping Bamet) Hamilton, Rt Hon Sir Archie
Clappison, James Hammond, Philip
Clarke, Rt Hon Kenneth Hawkins, Nick
(Rushcliffe) Heald, Oliver
Collins, Tim Heathcoat-Amory, Rt Hon David
Cormack, Sir Patrick Hogg, Rt Hon Douglas
Cran, James Horam, John
Curry, Rt Hon David Howard, Rt Hon Michael
Davis, Rt Hon David (Haltemprice) Jack, Rt Hon Michael
Day, Stephen Jenkin, Bernard
Johnson Smith, Pickles, Eric
Rt Hon Sir Geoffrey Prior, David
Key, Robert Redwood, Rt Hon John
King, Rt Hon Tom (Bridgwater) Robathan, Andrew
Kirkbride, Miss Julie Rowe, Andrew (Faversham)
Laing, Mrs Eleanor St Aubyn, Nick
Lait, Mrs Jacqui Shepherd, Richard
Lansley, Andrew Simpson, Keith (Mid-Norfolk)
Leigh, Edward Spicer, Sir Michael
Letwin, Oliver Spring, Richard
Lidington, David Stanley, Rt Hon Sir John
Lloyd, Rt Hon Sir Peter (Fareham) Streeter, Gary
Loughton, Tim Swayne, Desmond
Luff, Peter Syms, Robert
Lyell, Rt Hon Sir Nicholas Tapsell, Sir Peter
MacGregor, Rt Hon John Taylor, Ian (Esher & Walton)
McIntosh, Miss Anne Taylor, John M (Solihull)
MacKay, Rt Hon Andrew Tredinnick, David
Maclean, Rt Hon David Trend, Michael
McLoughlin, Patrick Tyrie, Andrew
Madel, Sir David Viggers, Peter
Major, Rt Hon JohnWaterson, Nigel
Malins, Humfrey Whitney, Sir Raymond
Whittingdale, John
Maples, John Widdecombe, Rt Hon Miss Ann
Maude, Rt Hon Francis Wilkinson, John
May, Mrs Theresa Willetts, David
Moss, Malcolm Wilshire, David
Nicholls, Patrick Yeo, Tim
Norman, Archie Young, Rt Hon Sir George
O'Brien, Stephen (Eddisbury)
Ottaway, Richard Tellers for the Noes:
Paice, James Mr. John Randall and
Paterson, Owen Mr. Geoffrey Clifton-Brown.

Question accordingly agreed to.

Lords amendment agreed to.

Lords amendments Nos. 13 to 54 agreed to.

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