HL Deb 24 July 1972 vol 333 cc1152-214

7.34 p.m.


My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.—(Lord Drumalbyn.)

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD CHAMPION in the Chair.]

Clause 1 [The British Gas Corporation]:

LORD DELACOURT-SMITH moved Amendment No. 1: Page 1, line 18, leave out from beginning of line to end of line 22.

The noble Lord said: It may not be necessary for the Committee stage of this Bill to be so long as the consideration in Committee of some other Bills which have appeared before your Lordships in recent months, because this Bill received very thorough examination in another place. Despite that fact, it is a Bill of importance which raises a number of issues of substance which, whether in the event they be contentious or not, require some further explanation from Her Majesty's Government. In moving this Amendment perhaps I may observe that the Amendments to Clause 1, which is an extremely important clause, are in the nature of probing Amendments. However, I propose to move them separately because they raise separate issues which are important and upon which further information is desired. These probing Amendments—and this first one is a good example—are designed to establish more closely the intentions of the Government and of the present Gas Council, in so far as any intentions are at the moment formulated, about the future organisation of the industry and the way in which it should be run.

I have had the good fortune to have a very long association with one nationalised industry—the Post Office—and also to have been for some four years a part-time member of the board of another nationalised industry. The experience of those two industries has fully confirmed my view that the terms of the nationalisation Statutes are important. They require most careful consideration by your Lordships and by another place, because they affect to a material degree the basis of organisation of the industry in question, or, as in this case, the basis of reorganisation of the industry. When we look at industries which are in public ownership we are always confronted with the dilemma of ensuring that they are not subject to too much outside interference, and that those who are charged with responsibility for them have the confidence which derives from knowing that they are able to carry on their work of managing and administering them without undue day-to-day or short-term intervention, while, on the other hand, recognising the necessity of seeing that public accountability is a reality.

Of course, Parliamentary scrutiny is an important part of the exercise of accountability, but there are other elements involved. I am bound to say that it has always seemed to me of great importance that a publicly-owned industry should have the knowledge that there is continuously playing upon it the interest of an informed and reasonably objective specialised public opinion which can offer some constructive and valuable comment upon the conduct of those who have been charged with the responsibility of running it. I make those observations because, if one examines Clause 1 critically against the generality of clauses of similar kinds in other nationalisation Statutes, one is bound to be left with the impression that Parliament is being asked to give a blank cheque to the Secretary of State, and that the Secretary of State will then give a blank cheque to the British Gas Corporation. Under those circumstances, my comments and probing at this stage of our examination of the Bill are necessary.

The Amendment which I am moving at the moment deals with that part of the clause which proposes to abolish the existing 12 Area Boards. This is, of course, a fundamental change in the way in which the gas industry has been organised for more than 20 years. Indeed, it would be fair to say that when the gas industry was taken into public ownership it was almost as much regionalised as nationalised; and the original Statute which established a publicly-owned gas industry placed great emphasis—and it has remained, of course, up until now—upon the position in the industry of the Area Boards, which are now to disappear. As I said on Second Reading, I do not think it is necessary to quarrel greatly with that fundamental proposition, although I can well understand the position of those who have said that the Area Boards should continue a statutory existence, even with a substantial modification of their powers. It can, however, be argued that it is a logical course because of the very important changes in the character of the whole industry, and the fact that the industry will be less concerned with the manufacture of gas and more exclusively concerned with its distribution; and that in these circumstances, with the heavy reliance on North Sea gas, there is a necessity for a much more centralised organisation.

Now I think it is very clear that the fact that the Area Boards are to lose their statutory existence is in no way intended to mean that hereafter the industry will have a purely central organisation of a completely dictatorial kind, with no local organisations or regional organisations at all. The one fundamental difference, of course, is not that these regional organisations will no longer exist, but that instead of being statutory bodies they will be, if I may use the expression, the creatures of the British Gas Corporation. It is in these circumstances, I think, that we are entitled to know from the noble Lord who is to reply for the Government much more about the intentions in this regard than we do at the moment. Reassuring statements have been made to the effect that the local organisation is initially to remain in effect very much the same as it has been; but this, of course, really is only an immediate or an interim situation, and I think we must ask what the intention of the Government is.

What is their expectation of what will be done about the development of regional organisations over a period? What is to be the competitive position of these organisations? Are we to have the situation which has existed in which the price of gas which the consumer pays varies from one part of the country to another; or is it regarded as a logical consequence of this new form of organisation of the industry that there should be a uniform price for gas? This is, of course, a very practical question for consumers in those parts of the country where at present, under the existing form of organisation, the gas price has been lower than that which has applied in most parts of the country. I think, therefore, that we are entitled to know from the noble Lord a good deal more of what is intended by this part of the clause, and what form of organisation below the national level do the Government and the Gas Council expect to see emerging? What, in particular, is likely to be the position so far as the price of gas in different parts of the country is concerned? I beg to move.


The probing Amendment that the noble Lord has moved is, of course, entirely proper in order to try to elicit the intentions not only of the Government but also of the Corporation so far as they are known. In this one has to recognise straight away that, as the Corporation are not yet formed, it is a little difficult to commit them as to what the ultimate form of the organisation in the country will be. The noble Lord will know that Clause 4 makes it clear that the Corporation have to undertake a review of the affairs of the Corporation and their subsidiaries for the purpose of determining how the management of the activities of the Corporation and their subsidiaries can most efficiently be organised ", and has to make a report to the Secretary of State ", which report will be laid before Parliament. Then, after considering the report and consulting the Corporation about it", the Secretary of State may give to the Corporation such directions as he considers appropriate …". The chairman of the Gas Council—and perhaps I could say in parenthesis that in the course of my Second Reading speech I mentioned that he is expected to be the chairman of the Corporation—has made it quite clear that in the initial stages, at any rate, he does not see any reason for changing the present areas; but it is impossible to anticipate what the result of the review will be. The reason for the change, of course, is quite simply that, instead of being a manufacturing-based industry, the gas industry now becomes a transmission and distribution industry, and for that reason it seems more appropriate to have a centralised organisation. But, quite obviously, a substructure is required, and the intention is that it should be flexible so that it can be adapted to the changing needs of the industry and the various parts of the country in the best possible way. I was glad that the noble Lord said that he did not necessarily disapprove this. It seems to us to be the sensible thing to do. But this does not necessarily imply that there should be complete uniformity of price. In fact, I noted rather carefully that the noble Lord did not put down an Amendment to require this, and I am sure he would be much too sensible to do so; for the very good reason, of course, that the costs will vary in different parts of the country. I do not want to prejudice what the Corporation may decide on this, but it would not be surprising—let me put it that way—if costs were reflected in the prices charged in different parts of the country.

As we go through the Bill we shall be able to see more and more how the intention that the chairman has already indicated—his intention to make the organisation as sensitive as possible to the requirements of customers throughout Great Britain—is to be carried out, and we could well defer further consideration of this until we come to the relevant parts of the Bill. Of course, looming very large in this is the organisation for Consumer Councils, the National Council and the Regional Councils, with their own substructure of committees and individuals representing the consumers on the spot, and conveying to the Corporation the reactions of the consumers, their desires and so forth. I am not sure that there is anything else that I can really usefully say at the moment, but if the noble Lord has any particular aspect to raise I should be very glad to go into it. I can certainly confirm that the mere fact of centralisation does not mean that at the centre there will be a purely dictatorial body. Indeed, it would be impossible on such a basis to run an industry which has such close contacts with the consumer throughout the country.

The general pattern of local management must remain to be decided in the light of developments of the industry. I hope that I have said enough to dispel any misgivings that there might he about over-centralisation of the industry. The likelihood is that the officers at the various levels will remain in their positions to start with and that those adjustments of areas or sub-areas—or whatever one may call them—that take place afterwards will depend on ordinary management considerations. On that explanation I hope the noble Lord will be prepared to withdraw his Amendment.


I am grateful to the noble Lord for what he has said. I am bound to say that I do not think he has gone very far to dispel the impression that we are, to a large extent, giving a blank cheque to the Secretary of State—although that point is more relevant to some of my later Amendments—and that thereafter the Secretary of State will be giving a fairly blank cheque to the Gas Corporation. I note what the noble Lord says about the requirements of Clause 4: that the Gas Corporation should at an early stage after vesting day make a report to the Secretary of State upon the organisation of the industry. I did not put down a probing Amendment on that since I was putting some down on the first clause. I think that a great deal will depend on the urgency with which that requirement in Clause 4 is put into operation. In the light of our past experience of this kind of industry, we on this side should not want to suggest a lack of confidence in those who appear likely to be charged, initially at any rate, with its operation under the new Statute. I take note of the noble Lord's reply and although I feel some misgivings as I have indicated, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

7.53 p.m.

LORD DELACOURT-SMITH moved Amendment No. 2: Page 1, line 23, leave out subsection (2).

The noble Lord said: I beg to move Amendment No. 2. The probing nature of this Amendment is indicated clearly by the fact that if one studies Amendments Nos. 3 and 4 it is clear that I have no great hope of this Amendment being adopted. On Amendments 3 and 4 I shall be drawing attention to some specific points in this subsection, but in moving this Amendment I want to ask about what is clearly the main intention and purpose of the subsection, that is to say, the creation of the Gas Corporation itself, the creation of a board of not fewer than 10 and not more than 20 persons, with their chairman. What is really striking about this aspect of the subsection is that, except for the reference to regional knowledge which I shall come to on a later Amendment, it gives no indication at all about the experience, qualifications or competence of the individuals who are to be appointed by the Secretary of State to undertake these extremely important responsibilities and who are to have under the earlier part of the clause this substantial flexibility in the way in which they organise the whole industry.

At one time it was the practice for nationalisation Statutes to specify the broad fields of experience and competence to which the appropriate Minister should look in appointing the members of the board. But the discretion given here is an astonishingly bare one. I am hound to ask whether this is really a wise arrangement and whether it does not leave too little indication, either communicated by the Government Department by Parliament to the Government, about the conception in the minds of Government or Parliament of the board which is to be established. Under the wording of this clause, it would be perfectly possible for the Secretary of State to act in a really quite capricious and irresponsible fashion, and although it might be quite possible to question his judgment if he did so, it would not be possible to say that he had departed from the Statute which had been approved.

This is not a frivolous or meaningless point that I am raising merely for the sake of doing so. I think that we need some much clearer indication of the character of the board which it is intended to establish. Let us take only two aspects. Are we to expect that the Secretary of State and his successors operating the Statute will draw the members of the board exclusively from the gas industry, as they could quite properly do under the clause, or, equally exclusively, from outside the gas industry, as again they properly could do under the clause? Here again, no doubt, Secretaries of State will be reasonable persons and they will probably seek some kind of balance, but there is no guidance given to them of the intentions of Parliament and no guidance given to Parliament—or to the people by the Government—about what they believe is the proper course. The issue of the degree to which individuals should be drawn from within a nationalised industry and the degree to which they should be imported from a nationalised industry to be members of a board, bringing to its work a wider experience, is one of very great practical importance on which it would have been valuable for the Statute to give some indication of guidance and on which we are entitled to some reflections from the Minister in charge of the Bill. Let us take the second aspect, perhaps of even more practical importance.

Are we to expect what seems to be a possibility in the light of the general emphasis put upon continuity that a substantial number of these people, who, after all, cannot exceed 20, will be drawn from the existing 12 Area Boards? This is again a question of great practical importance because this is an industry which has a tradition where the balance of authority and influence are in the areas rather than at the centre, or certainly a very substantial part of the authority being at the area level. Those who know this industry know that there have been some extremely powerful personalities who have derived their positions in the industry from the fact that they were chairmen or members of Area Boards. Therefore it is important when the industry is to embark on a distinctly new stage in its history to know whether the intention is to launch that new stage under a board whose members will inevitably, if they are drawn from the Area Boards, come to their task in the new form of organisation with a background of thinking derived from the old one. These are important questions. That aspect of subsection (2) to which I have referred gives us very little guidance or idea as to what is in the Government's mind. I hope the noble Lord will be able to fill the gap.


I only want to say a few words in support of what my noble friend has just said. One of the very disturbing facts of our time is the alienation of the ordinary public not only from the executive of Government and from Parliament but from the boards of the great national industries. This alienation is really a threat to our whole system of democracy. Although the attendance in the Committee is small at the moment I regard the Amendment as very fundamental to our whole system of democracy. As my noble friend said, there has been no indication whatsoever that the members of this Corporation will represent democratic opinion either within the industry or outside it. There has been no indication at all that they will be representative of the people in the industry.

I have risen only because I regard this as one of the most fundamental issues before us at present—whether our whole Parliamentary procedure, our executive of Government and the boards of our national industries are not elites far removed from the opinion of the people whom they are supposed to represent. If that situation continues, the very fundamentals of our democratic society will be destroyed. I very much hope that as a result of this Amendment the Government will be able to give us an assurance that the members of the Corporation will not only reflect truly the opinions of the people in the industry itself but will also have the confidence of the general public.


Once again the noble Lord has raised some very proper questions, although I am bound to say that I find it difficult to agree with him that this is a very fundamental Amendment in itself, except for the fact that it would remove a very fundamental and necessary power from the Bill. It is a probing Amendment, and while the matter being probed is fundamental I do not think the Amendment itself could be so described. The concern which the noble Lords, Lord Brockway and Lord Delacourt-Smith, have expressed is perfectly proper. We want to make certain that we have a corporation which has the capacity and the imagination—by " imagination " I include what the public will want in future as well as the perspicacity to see what it wants at present—to fulfil in a wholly efficient manner the functions laid down in Clause 2.

It is not quite true that no indication has been given here, quite apart from the indications which were given in another place, of the composition of the Corporation. I had a fairly long paragraph in my Second Reading speech about it. Those who are interested can look it up in column 477 of Hansard. I agree that I did not go into the details of the strong group of part-time members from outside the industry, but at least I made it clear that there would be members from outside as well as from within. Perhaps I could most clearly indicate our intentions by saying once again that the present chairman, deputy chairman and full-time members of the Gas Council will be invited to occupy the corresponding posts in the Corporation.

May I remind your Lordships what these full-time posts are? There is a member for marketing, another for economic planning, one for production and supplies, and one for finance. The general intention is that the Corporation, including this nucleus should consist of some 16 members, of whom perhaps half would be full-time. But as I said, it is intended that there will also be a strong group of part-time members from outsides the in- dustry. Indeed, I do not think one could, on any definition, fail to have such a group because the industry is concerned not only with supplying the domestic consumer but also with the growing degree of industrial supplies. I think it is the intention that by 1975 the latter should be six times what they were ten years previously.

It would be difficult for a member holding a senior regional position to be a full-time member available at the centre. It would not be desirable to have such a guideline in the Bill. Of course this is one of the ways in which the new operational Corporation will differ from the Gas Council, which was originally conceived of as a sort of synod of Area Boards. Now we have a completely different situation and we must cater for it.

The noble Lord did not criticise the size limits of the Corporation. These are very much in line with the sizes of the boards of other nationalised industries. For example, it is much the same as the British Steel Corporation; rather larger than most of the others. But this industry supplies the consumer right from the top to the bottom. I think I should say in passing that there is no precedent in nationalised industry legislation for leaving the Secretary of State without guidance as to size. I think that is accepted. If all the regions were represented at the centre the Corporation would become unduly cumbersome, especially if we were to have this group of members drawn from outside the industry.

I was a little puzzled that the noble Lord did not refer to the proposal, as it appears to be, to take away the power of the Secretary of State to appoint a Chairman. This was a little surprising, as even though under the previous Amendment he criticised the Bill as giving a blank cheque to the Secretary of State, and this allows the Secretary of State to pass on another blank cheque to the Corporation—I am not certain that at one point he did not say the Chairman. It is of course one of the cardinal duties of a Secretary of State in relation to a nationalised industry to choose a chairman whom he can trust and who will have the capacity to weld together a good team for the running of the industry.

The next criticism the noble Lord made was regarding the omission of a list of qualifications. It is true that the 1948 Act had such a list. It required the Secretary of State to appoint members from among persons appearing to him to be qualified as having had experience of, and shown capacity in, gas supply, local government, industrial, commercial or financial matters, applied science, administration, or the organisation of workers. The omission is quite deliberate. The Government have come to the conclusion that such lists really serve no useful purpose. If they are wide, they are no more than a statement of the obvious; if they are narrow, they can unreasonably restrict the Secretary of State's choice. There are precedents for omitting them in the Post Office Act 1969, and again in the Civil Aviation Act 1971. So Governments of both complexions have already concluded that in circumstances of this kind—certainly so far as the Post Office is concerned—where we are dealing with the consumer interest almost direct, the Secretary of State should be given the widest possible choice within the limits of numbers laid down by Parliament. I think the noble Lord will agree that this is wise.

It is clear that the Secretary of State will have to do two things. He will have to make certain that the body contains people with experience of organisation of both industry and, I dare say, of trade unions as well—because this has always been an important aspect. And, as I said before, he must have a team which is sensitive to the needs both of classes of consumers and also of various areas. It is not possible to have all the areas represented, but it is exceedingly important that people should be appointed who have wide experience of the areas: they may not actually be working in the areas at the time, but the wider their experience, the more useful they will be to the Corporation.

The way to ensure that the Corporation is constantly mindful of these special requirements is to have on it someone who is familiar with them and can be relied upon to keep them constantly before the Corporation. Members with regional links will be appointed not solely on that account, but because their experience, competence and personal qualities fit them to contribute to the Corporation's deliberations right across the whole field of policy making. I hope that I have given the picture of a Corporation which will have on it people of the widest possible business experience and, in addition, technical expertise in those areas where technical expertise is required. This is what makes a good mixture for a Corporation of this character. I hope that I have said enough to reassure the noble Lord on this, but if not, I will try again.


I hope that what has been said in the discussion on this clause will have served to reinforce the concern about the way in which Boards are constituted, and not only the individuals who are selected to compose them, but what can often be of great importance, the basis upon which functions are divided among the members of the Corporation here. I am bound to say that I am not altogether convinced by what the noble Lord said about the advisability of moving to this much more spare way of describing the membership of the board of a publicly owned industry, although I take his point that both the Post Office Act and the Civil Aviation Act were framed along the lines of the present Bill. I am inclined to think that this is a matter which ought to continue to be under review.

I hope the noble Lord will take account of the view which is increasingly, and I think justifiably, expressed—and indeed was expressed in your Lordships' House only a few hours ago—that it seems to be an extraordinary thing that, while we are always assured that the members of publicly owned industries are selected solely upon the basis of their suitability for the particular task in hand, it very rarely seems to be the case that the Minister responsible chances to think that a woman may be the most suitable person for a particular appointment. I should have thought that, particularly in the case of the gas industry, where the position of the domestic consumer is such an important element in the success of the Corporation's activities, it would be exceedingly surprising if it did not emerge that at least one member of the Gas Corporation turned out to be a woman. However, having made these observations, and recognising that the noble Lord has shown some consideration of the problem, although I do not know that either my noble friend who spoke in the debate or I can feel entirely satisfied, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

8.18 p.m.

LORD DELACOURT-SMITH moved Amendment No. 3: Page 2, line 2, leave out from beginning of line to end of line 3.

The noble Lord said: In the light of what I said on the earlier Amendments, I can move this Amendment quite briefly. It relates to that phrase which indicates that one or more of the members of the Corporation may be designated by the Secretary of State as deputy chairman or deputy chairmen. It has always been my view that on any board or committee of any size, or any body with a degree of responsibility, the position of deputy chairman (or where there is more than one person, the position of deputy chairmen) is an exceedingly important one, and one that is sometimes underestimated. In the smooth running of a hard-working body of people the possession of an effective and experienced deputy chairman is, I think, invaluable.

I feel that we must ask a little more about this, because here the practice of the nationalised industries has varied widely according to what were felt to be the requirements. There is one large nationalised industry which comes to mind that has one deputy chairman, who is part-time. There is another important nationalised industry which has two, or three, deputy chairmen in a relatively small board, and they are, as I understand it, full-time. These derive from the problems of the industry in question and the way in which it is thought essential to organise the Board controlling the industry. They are by no means fortuitous. These arise from conscious decisions. I would be grateful if the noble Lord could tell us anything at all about the position of deputy chairman in the proposed Gas Corporation. I beg to move.


I had better start from the present position because that will be the position when the new Corporation comes into operation. The position is that the deputy chairman—there is one now—is the chief executive. No doubt it is with the kind of con- siderations that the noble Lord has in mind that the Bill provides that there could be more than one deputy chairman. This is just reasonable foresight, because circumstances might arise which would make it desirable. There is certainly no intention at the moment of appointing an additional deputy chairman. When the review has taken place there might be a recommendation that there should be certain different powers; I cannot tell. At the moment this is to provide for this contingency. I cannot say that it is based on any profound thinking.


Here again I am bound to say that I cannot feel that the noble Lord have gone very far to reassure us about the present state of thinking on this subject or the degree of clarity about the fundamentals of the organisation of the Corporation. He has referred again to the review to be undertaken under Clause 4. In conformity with what I said on an earlier Amendment I must accept that observation. I again beg your Lordships' leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

LORD DELACOURT-SMITH moved Amendment No. 4: Page 2, line 4, leave out from beginning of line to end of line 7.

The noble Lord said: Here, as in the case of Amendment No. 3, the observations which I made on earlier Amendments enable me to be brief. When one looks at this part of the clause it is not possible to feel very proud of the draftsmanship or, if I may say so, of the clarity of thinking behind it. It is nothing more than a pious aspiration. It is a legislative or a statutory sop to regional feeling. If I am not mistaken, it commits the Secretary of State to virtually nothing. What is he committed to? Could he not, with this form of words, ignore altogether in his appointments any regard to regional considerations? Having had regard to them could he not decide that other considerations had greater weight? Or is he to differentiate, as indeed it seems almost certain that he must, between regions? I can imagine that if he neglects the interests of particular regions it will be a situation which will not pass without comment.

Is he to try to ensure that all the regions are represented? If he does this he will certainly be in the difficulty which I foreshadowed at an earlier stage because he would, by trying to ensure the representation of all regions, absorb so high a proportion of the members of the board that he would have almost entirely a board made up of individuals who might believe, rightly or wrongly, that they were there because of their special knowledge of the needs of a particular region. I do not think this is a satisfactory form of words. I do not think that it commits the Secretary of State to anything at all precise. It needs a little justification by the noble Lord in charge of the Bill. I beg to move.


I am bound to say in my turn that the real proof of this provision will be in the eating of the pudding; that is to say, when the members are appointed, noble Lords will be able to have a careful look to see whether this requirement on the Secretary of State to have regard to the desirability of appointing members who are familiar with the special requirements and circumstances of particular regions and areas has been carried out. All I can tell the noble Lord is that it is very much the intention of the Secretary of State to do just this. I would have thought that it is something that noble Lords on all sides would applaud and that it is highly desirable to have people who are familiar with the special requirements and circumstances of the regions.

How one could spell this out in more precise language I do not know. It is an argument which is rather apt to be resented if one says that if the noble Lord is able to see some way of improving on this, it was open to him to do so in his Amendment. All I can say is that we desire to maintain the proper flexibility, while giving satisfaction to the various areas and regions and reassurance that there will be people on the board who are familiar with those requirements. This is the intention. It will be for the noble Lord to judge whether the intention has been properly fulfilled when the board is appointed. I cannot say more than that.


I have indicated that these are probing Amendments to show some of the features which need serious thought in considering the composition of the board, bearing in mind the implication which the composition of the board of a nationalised industry almost certainly has for the way in which it conducts its operations. I am afraid again on this Amendment that I find the reply of the noble Lord not very convincing. I am surprised that he did not apply to the question of the regional knowledge—knowledge of affairs outside and perhaps distant from London—the same arguments that he applied when on an earlier Amendment I was pointing to the simple and stark way in which the composition of the board had been set out and the fact that there was nothing more than the minimum and maximum numbers with no indication of the experience, competence and fields from which individuals should be drawn. He has not convinced me that the form of words covered in my Amendment is any more than a sop to regional feeling to which it is difficult for the Secretary of State or anybody else to attach a precise meaning. I would not be disposed to press the Amendment and I beg your Lordships' leave to withdraw it.

Amendment, by leave, withdrawn.

Clause 1 agreed to.

Clause 2 [Principal duties and powers of Corporation]:


With the agreement of noble Lords, I will speak to Amendment No. 5 and Amendment No. 6 together. I do not think I need spend much time on them. Quite clearly, No. 5 is an improvement and clarification of the wording, and I hope that the noble Lord opposite will agree that the provision will now read even better than it did before. I beg to move.

Amendment moved— Page 3, line 9, leave out (" and ") and insert (" including ").—(Lord Drumalbyn.)


I wholeheartedly support the noble Lord. This is a great improvement.

On Question, Amendment agreed to.


I beg to move Amendment No. 6.

Amendment moved— Page 3, line 10, after (" provision") insert (" power ").—(Lord Drumalbyn.)

On Question, Amendment agreed to.

8.31 p.m.

LORD DELACOURT-SMITH moved Amendment No. 7: Page 3, line 15, leave out from (" paragraph ") to (" to ") in line 16.

The noble Lord said: I beg to move Amendment No. 7. Its purpose is clear, and can be briefly and simply stated. The brevity and simplicity with which one can state it does not, however, detract in any way from the importance of the issue which the Amendment is intended to raise. The purpose of the Amendment is to remove a limitation upon the power of the Corporation. The limitation which appears affects the position if the Corporation in the course of its work of searching for natural gas in fact finds oil. The limitation which is imposed upon it is that it may do no more than treat that oil for the purpose of rendering it saleable in the form of crude oil. It is debarred from any further processing of this product. It is debarred from refining it. It is clear and beyond dispute—and I trust that the noble Lord will confirm that this is so—that this limitation is imposed against the views of the Gas Council. In view of the proper, justified tributes which have been paid to the sagacity and competence of the Gas Council, the fact that this limitation has been imposed, as I understand it—I ask the noble Lord's views—against the wishes of the Gas Council, makes it to me doubly surprising.

Of course, it is not a question of whether oil will be found in the course of the search for gas; it is, as I think the noble Lord will again confirm, the fact that oil has been found in the course of the search for gas. It is hard to see why this limit should be imposed not only upon the Gas Corporation, but (and again I hope the noble Lord will confirm this), as I presume is the case, also upon any partners which the Gas Corporation may have in the prospecting work which it does. I should have thought that any limitation of this kind upon the commercial freedom of an organisation that was engaged in the prospecting work, searching and boring work—work which it is quite proper that the Corporation should undertake—was bound to be commercially disadvantageous. The mere limitation placed upon the freedom of action of the Gas Corporation is surely bound to put it in a less advantageous position than it would be in if it were free to process the oil which the Corporation, either itself or in association with partners, finds and which it wishes to treat in some other way because tha is commercially more desirable. I hope that the noble Lord will be able to clear up the position and to explain in a convincing fashion why this limitation should be placed upon the Corporation. I beg to move.


The noble Lord asked me whether this had been imposed against the wishes of the Gas Council. I can tell him that the Council has accepted the Government's view that it needs powers only to treat oil for the purpose of rendering it saleable in a crude state; that is to say, to remove water or unstable gases from it and to supply or sell that oil, or to use it to manufacture gas. It may be that the Gas Council, or at any rate some members of it, would welcome the opportunity of going into the oil industry in a big way, or of at least refining such oil as it found, and would consider the limitation commercially disadvantageous in the sense that it might make more profits and have a higher surplus if it did so.


Would the noble Lord clear up this point. He used the form of words that the Gas Council had accepted the Government's view that it should not have this power. Are we to understand from that that the Gas Council has not any such wish to have the power which my Amendment would give to it?


The vital point here is that it has accepted the Government's view on this matter. That being so, it is somewhat immaterial what its own particular wishes in the matter were. The Government's duty is to make certain that it makes a success of its main functions, and we think that it should concentrate on its main functions in this regard. There is no need for the Corporation to become involved in the refinery business. We consider that the requirements of public accountability make it appropriate for each public Corporation to stick reasonably close to its task and the various Statutes all recognise this. For example, the National Coal Board (Additional Powers) Act 1966 provided powers closely similar to those in Clause 2(2)(b): power to engage … in the treatment of … gas or petroleum "— I am quoting the relevant words— for the purpose of rendering it saleable in petroleum "— That was the National Coal Board. So there is a firm precedent on this. We consider that there is sufficient competition among the refiners to ensure a fair price. If the power to refine had been a genuine necessity, it would surely also have been included in the National Coal Board (Additional Powers) Act 1966.

At an earlier stage the previous Government argued in favour of including these refining powers—and I would think it perfectly reasonable that the Gas Council would have accepted the inclusion of the refining powers, just as it has accepted exclusion; it is not for me to say whether it would have done so with more or less reluctance. The previous Government's view was that if the Gas Council found oil it should not be hampered in the exploitation of any such asset any more than any private citizen would be hampered. But this would have surprising consequences if it were carried to its logical conclusion and applied to other assets—for example, to surplus land, with which a private citizen might decide to do a variety of things. There are limitations on the use of land. The gas industry itself from time to time has surplus land available. Should it have unrestricted power to turn it to best account?

The point of this argument is quite simply that one has to consider what are the essential functions of the Gas Council and make certain that nothing is done that will detract from those essential functions. Nobody could possibly say that it is an essential function of the new Corporation to refine any oil that it might find. It is obviously possible for others to refine it, and perhaps I might explain this. If one of the partnerships in which it engages—with Amoco, for example, or Mobil—find oil then I understand that the produce is divided in relation to the shareholdings under the agreement. I cannot say precisely, but it is divided in proportions under the agreement and the Corporation has no difficulty at all in selling that oil on and having it refined by one of its partners, which I think would be a logical thing for it to do, especially as I understand that its partners probably treat the oil anyway in order to make it saleable in a crude state, let alone refining it.

There is of course a substantial point of difference between us here and one has to make up one's mind where the national interest lies. Our judgment is that it lies in ensuring that the Gas Council concentrates its energies on the main functions that are allotted to it. There is nothing in any of the partnership arrangements or otherwise that in any way makes us feel that that judgment is wrong.


Is there not also a practical point here, that the oil-refining industry is by its nature a large-scale industry? I should have thought it extremely unlikely that the Gas Council would ever have at its disposal sufficient quantities of crude oil to make it economical for it to operate refineries. In this case I do not altogether agree with what the noble Lord, Lord Drumalbyn, has said about land. I do not see why the Gas Council could not exploit this land, but in the case of oil refineries I should have thought that there was strong objection to allowing the Gas Council to refine the relatively small amount of oil involved.


I am much obliged to the noble Viscount. The argument was that the Corporation cannot do exactly as it likes with its land, any more than it can with the crude oil. But I am obliged to the noble Viscount for the additional argument he has put forward, with which I entirely agree.

8.42 p.m.


If I may say so, I think the noble Lord, Lord Drumalbyn, by the reply he has given us, has raised more questions than he has answered. In the first place, I think he has almost presented a case that there could be no danger if this Amendment were adopted, and if this additional power were given to the Gas Corporation, because, as sensible, commercially minded men—the competent men whom we are assured the Secretary of State will find, and I have no doubt will find, under Clause 1—they could hardly want to use the power, even if they had it. So there can be no great danger in giving the Corporation this power. I really think I must press the noble Lord on some of the things he has said and some of the things he has implied.

I am frankly puzzled by his references to land. He says that the Gas Corporation or any other publicly owned corporation cannot do what it likes with its land. Is the noble Lord really saying that the Gas Corporation or any other publicly owned corporation, if it has land which is surplus to its requirements, is precluded from disposing of that land or using that land in the way that the commercial judgment of the board suggests is the best in the interests of the Corporation, and therefore in the national interest? Is he really saying that the Corporation is precluded from that? If he is saying that, I hope he will develop the point a little more and will explain the reason for it. The noble Lord said earlier in his observations that there was competition among refiners of oil. Perhaps he can amplify that a little. Is he saying that there is perfect competition among refiners of oil, and that any person who has crude oil available is able quite freely to bargain and is in an advantageous position in bargaining with the refiners if he is precluded from refining that oil himself?

Also, what is the effect in partnerships? The noble Lord has told us, as I understand it, that the Gas Corporation in a partnership could dispose of the crude oil to its partner if the partner was a refiner—or indeed, I suppose, even if the partner was not, so long as he had some capacity or ability or legal power to refine—if the partner so desires. But why should not the partnership undertake refining? Why should not the Gas Corporation, if that is to its commercial interest, and therefore to the national advantage, not propose that the partnership should be the refining agency? If I understand aright, the Corporation is precluded from so doing. Indeed I am not quite sure—and perhaps the noble Lord will detail specifically with this point—whether a partnership which includes the Gas Corporation can refine or not. Is the partnership precluded from refining? I take it that it is.

What really are the effects upon the commercial position of the Gas Council? Is the noble Lord really assuring the Committee that this provision as it stands in the Bill at the moment imposes no commercial disadvantage of any kind upon the Gas Corporation in any of its dealings so far as oil is concerned, and that it does not in any way make the Gas Corporation a less attractive partner for other concerns with whom it might want to work jointly than would be some concern which was not subject to this statutory limitation?

Lastly, may I ask the noble Lord what he would say if anybody proposed that private concerns should be limited in this way, on what seemed to be his assumption and his implication, that the Gas Corporation would be made up of people who would not discharge their primary functions efficiently if they were allowed to undertake something which to many people must seem quite a reasonable incidental activity arising in the course of one of their major activities. What would he say if anybody proposed to apply that to a large private firm? If it were said, for example, that a firm whose main interest was in the entertainment industry ought not in any circumstances to be allowed to interest itself in office equipment, photocopying machines, and so on, I wonder what he would say. Or suppose there was an imposition placed upon some large chemical concern which laid down precisely how far it might involve itself in the refining of oil or in the manufacture of plastics or in some other extension of its frontiers which in its commercial judgment it might think quite reasonable. He would not for a moment accept, still less would he defend, such a limitation being imposed upon a private concern. If he would not accept such a limitation upon a private concern, is he reflecting upon the potential future management of a publicly owned concern in the belief that it is less capable than a privately owned concern of judging how it can best manage its affairs, and precisely where it should itself draw the line in these activities which arise quite incidentally to the main activities in which it is concerned?

Nobody is arguing that the Gas Corporation should not have complete freedom to go into any field quite unrelated to and in no way originating from, or associated with, its private activities. So there is no need for the noble Lord to put up that Aunt Sally for the pleasure of knocking it down. We are not arguing that. We are arguing that here is a field in which the Gas Corporation inevitably becomes involved—indeed has already inevitably become involved—in the performance of its primary work, and we are asking why the Gas Corporation should not be allowed, as a private firm would be, to exercise its commercial judgment about where it draws the line.

8.50 p.m.


The primary answer to the noble Lord must be that a nationalised industry is set up with a particular purpose in mind. It is financed in order to secure that purpose. It relies on the Government for finance and, in any case, the Government would be able to decide in the last resort whether the industry would be able to go into various kinds of development, by-products and so on. In this case the Government would be bound to have regard to the economic factors, and I imagine that investment in refineries involves a considerable amount of money. There are several other companies in this country which have this expertise and there is no need for the Corporation to go into the refining of oil. There being no need, one has to consider whether it would be commercially advantageous. This is a matter of fine judgment in any particular case and it is bound to relate to the expenditure involved, to competition for the produce once it is produced and to a great many varying factors.

One comes back in the long run to the fact that even if the industry had the power to enter this development it would need money to do so and would look to the Government for that money. The judgment of the Government is, as I said, that it is much better that it should concentrate on its main functions and that the resources of the Corporation should be devoted to those functions. This is the purpose for which the money has been advanced; the Government have financed the gas industry for the supply of gas, so far as it is economical to do so, so as to meet all reasonable demands for gas in Great Britain. This is their main function. We believe that they should stick to that, although subsection (2) allows the Corporation . power to carry on all such activities as it may appear to them to be requisite, advantageous or convenient for them to carry on for or in connection with the discharge of their duty under subsection (1) … Plainly, this is not for or in connection with that duty and we do not think that this is an extension of their functions that should be added to the Bill.


I am sorry that I must press the Minister further. I said that the noble Lord had raised more questions than he had answered. I am sorry to say that I raised more questions than he answered because he did not answer any of mine, so perhaps I had better briefly recall them. Is the noble Lord really saying that there is such a degree of competition among refiners that anyone who is subject to this limitation on his power, not only in his own regard but in respect of any partnership in which he may be involved, is at no commercial disadvantage compared with the position in which he would be if he had this power?

Will the noble Lord say a little about the effect on partnerships and whether this makes the Gas Corporation a less attractive partner in joint enterprises than it would be if it could enter a partnership which would be enabled, if it so wishes in its commercial judgment, to undertake refining? Is he prepared to assure us that this is no detriment to the financial prospects of the Corporation? What would he say if this sort of limitation were imposed on a private company? Is the noble Lord less prepared to trust the commercial judgment of the Gas Corporation which the Secretary of State is to establish than he is prepared to trust the commercial judgment of a private company? He has, of course, assisted in making the case by his emphasis on the control which in any case the Government have over the investment programmes of the Gas Corporation as over the investment programmes of other publicly-owned industries, and I hope that the noble Lord will feel able to comment on at least some of these points.


Until someone engages in an activity it is difficult to say whether there is commercial advantage or disadvantage in his engaging in it. As the noble Lord said, this is a question of judgment and our judgment is that it is better that the gas industry should not directly engage in the refining of oil. The noble Lord then asked whether the exclusion of the refining of oil made the industry a less attractive partner. The answer is, " Not at all ". The people with whom it associates as partners are themselves those who refine oil or, if they are not, they are those who deal in oil and there is no indication whatever that the Gas Council suffers from this. Its expertise lies in looking for gas—noble Lords should not forget that it is looking for gas, though it may find oil—and it is contributing in this sphere in this way. Its partners, who may prefer to find oil because they deal in oil, have their main expertise in the oil side.

The noble Lord asked if there was no detriment to the commercial advantage of the Corporation. I do not see any distinction between this and his first ques

9.6 p.m.

LORD DELACOURT-SMITH moved Amendment No. 8: Page 3, line 39, leave out from beginning of line to end of line 5 on page 4.

The noble Lord said: Here we are concerned again with a limitation upon the

tion. He went on to ask what I would say if a similar limitation were placed on a private company. Limitations are, of course, placed on the activities of private companies in their memoranda of association, though they can he altered at a general meeting. On the other hand, so can this limitation be altered by an Act of Parliament, but in this measure we think it is better not to include refining.


I am bound to say that the noble Lord has not convinced me and, I am sure, will not have convinced my noble friends. In these circumstances I cannot withdraw the Amendment. I must, therefore, invite my noble friends to divide the Committee.

8.58 p.m.

On Question, Whether the said Amendment (No. 7) shall be agreed to?

Their Lordships divided: Contents, 18; Not-Contents, 39.

Bacon, Bs. Champion, L. Nunburnholme, L.
Beswick, L. Delacourt-Smith, L. Rusholme, L.
Birk, Bs. Garnsworthy, L. [Teller] St. Davids, V.
Blyton, L. Heycock, L. Serota, Bs.
Brockway, L. Hoy, L. Shackleton, L.
Chalfont, L. Milner of Leeds, L. [Teller] Taylor of Mansfield, L.
Aberdare, L. Denham, L. [Teller] Milverton, L.
Ailwyn, L. Drumalbyn, L. Mowbray and Stourton, L. [Teller]
Alexander of Tunis, E. Ferrers, E.
Amory, V. Fortescue, E. Northchurch, Bs.
Balfour, E. Gainford, L. Rankeillour, L.
Belhaven and Stenton, L. Gowrie, E. Redesdale, L.
Belstead, L. Grenfell, L. Sandford, L.
Berkeley, Bs. Hailes, L. Selkirk, E.
Brabazon of Tara, L. Hanworth, V. Tweedsmuir, L.
Brooke of Cumnor, L. Jellicoe, E. (L. Privy Seal) Tweedsmuir of Belhelvie, Bs.
Brooke of Ystradfellte, Bs. Limerick, E. Vivian, L.
Brougham and Vaux, L. Lothian, M. Wakefield of Kendal, L.
Cork and Orrery, E. Macleod of Borve, Bs. Young, Bs.
Cowley, E.

Resolved in the negative, and Amendment disagreed to accordingly.

power of the Corporation. The existence of this limitation is one which does need some explanation by the Government. We are not here dealing with a complete limitation on their power such as we were in the previous Amendment; we are dealing with two limitations on their power from which they may be released by the Secretary of State.

It is appropriate to ask for an explanation of the limitation and the kind of circumstances—and this I think is important—in which the Secretary of State might be expected to extend his consent to this limitation being removed. The limitation in the first case relates to any operations for prospecting and getting natural gas carried on outside Great Britain and the territorial waters of the United Kingdom as set out. Secondly, there is the limitation upon the export of gas. Both these limitations seem to me to require some justification, in the light of the increasingly international character of the search for and use of energy. I think it is within the knowledge of all of us that there is international prospecting for sources of energy, and there is certainly in the case of electricity between this country and France some arrangements which I suppose would be regarded as involving export.

As I understand it, in the limitation upon export the Gas Corporation would be precluded by this provision, even after this country has entered the European Economic Community, from any kind of export of gas or any kind of gas sharing system with countries of the Community. I do think this whole provision in this subsection, which seems to run so counter to the international character of the provision of energy, does require some explanation, and that there should be some further explanation of the sort of circumstances in which it might be expected that the Secretary of State would give his consent to operations of this sort. I beg to move.


The noble Lord is, of course, quite right that this is not the same kind of absolute prohibition in subsection (3) as we had on the last Amendment. It merely says that the Corporation is not except with the consent of the Secretary of State and in accordance with any conditions he may attach to his consent either to carry out operations for the searching or boring for natural gas or getting natural gas otherwise than within Great Britain, or export gas. I was not quite sure if the noble Lord realised that the export of gas also would be possible with the Secretary of State's consent. There is no complete ban on that either.

Here again the main thing is that the Corporation's business is to supply gas to consumers in Great Britain, and it would be really incompatible with that power to have an unfettered power to get gas abroad, a power which they might use to enable them to undertake supply to foreign markets, certainly without the consent of the Secretary of State. Although the Gas Council's powers to get gas under Section 1(2)(a) of the 1965 Act are geographically unlimited, they were never justified on the grounds that the gas industry needed a world-wide power to get gas. Because of Continental Shelf developments they needed power to get gas outside Great Britain, and they also needed a power to acquire gas world wide—for example, from Algeria in liquefied form. The present form of power arises from the coupling together of the getting and the acquiring.

The reason for the requirement for the Secretary of State's consent is that in effect to do otherwise would be to interfere with the use of a natural resource which has been brought under the control of the Government. The producers on the United Kingdom Continental Shelf are also required by the terms of their licences to bring the gas ashore for use in the United Kingdom unless they have the Secretary of States consent to the contrary. If we are to put the Corporation in their capacity as buyers on a reasonably fair footing with the producers, it is necessary to provide that the Corporation also should require the Secretary of State's consent to export gas. One can imagine circumstances in which it would be reasonable for the Corporation to export gas, and these can be covered by the granting of consents.

Unlike the previous Amendment, the previous Bill also included a similar provision to this, and perhaps I could remind the noble Lord of Mr. Alan Williams' defence of this on behalf of the then Government in Standing Committee E on February 24, 1970. He said: It would be utterly wrong for a Minister merely to say to an operator, ' We refuse you permission to export your surpluses ' while on the other hand he allows the Gas Council to export. That is not our intention. In my opinion, it would be an abuse of the power under the Continental Shelf Act, and that is not what we are aiming to achieve in this clause."—[OFFICIAL REPORT (Commons), 24/2/70, col. 465.] That is a good argument. If I may revert for a moment to the question of boring for gas—or rather getting gas; that is the right phrase—in some circumstances it may be necessary or desirable for this purpose that the Corporation should take part in operations beyond the United Kingdom Continental Shelf. The most obvious example of this is perhaps where a field straddles the Median line and the Corporation may wish to operate from the far side of the line—either as the result of a unitisation agreement or because they have been able to obtain a licence from a foreign government to operate on the far side of the line. This will be getting gas for use in the United Kingdom. It is also the case that not all of the United Kingdom Continental Shelf has yet been designated; and the boundaries of the Shelf have still to be agreed, for example, between the United Kingdom and France, Eire, Denmark and the Faroes.

If the Corporation wish to undertake survey work in areas of the Continental Shelf around the United Kingdom which have not been designated we should need to consent, and that, of course, would be readily given. I hope I have said enough to show there will be no reluctance to give consent in appropriate circumstances, but I think the main point has to be stressed that the object of getting the gas is to bring it to Great Britain, and if the export of gas were required then there again the Secretary of State would have to look at this from the point of view of the general use of resources, from the point of view of conservation of resources, and also to make certain that a sufficient supply was available in this country.


I am grateful to the noble Lord for the explanation he has given. Should I be representing him fairly by saying that the essence of his argument is that it would not be appropriate in the Government's judgment to place the Gas Corporation in a more favourable position than other concessionaires or licences? May we take it that it is not the Government's intention that, in the matters covered by this clause, the Corporation should be in a not less favourable position?


We are talking here about the getting of gas. So far as the searching or boring for natural gas is concerned, or for that matter in the export of gas, the answer is, " Yes ", I agree.


My Lords, I am not quite sure that I fully understand the noble Lord. This Amendment deals with two aspects—the getting of gas and the export of gas. I fully understand his argument that it would not be appropriate to put the Gas Corporation at an advantage compared with others engaged in enterprises in this field, but I am putting the question whether we may take it that it is the Government's intention, or the policy of the Secretary of State, in considering whether he should withhold or give his consent, that the Gas Corporation shall not be at a disadvantage with others operating in this field.


As I have said, the licences require that the gas is brought to this country. That applies to every concessionaire.


Yes; but as I understand it they could be released from that requirement with the consent of the Secretary of State.


That is so.


Are we to understand that it is not the intention that in general the Gas Corporation should be treated less advantageously, in respect of any cases in which the Secretary of State's consent was required, than a private concessionaire?


I can give the noble Lord, Lord Delacourt-Smith that assurance.


My Lords, I am grateful to the noble Lord, and I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

9.19 p.m.

LORD DRUMALBYN moved Amendment No. 9: Page 4, line 4, after (" gas ") insert (" or ").

The noble Lord said: It would be convenient to take this Amendment together with Amendment No. 10, in fact it would be meaningless if we did otherwise. Clause 2(2)(h) gives the Corporation express power to manufacture gas fittings in connection with their primary duty under Clause 2(1). Clause 2(3)(b) modifies this power so far as it relates to the manufacture of gas fittings for export. I do not know whether the noble Lord, Lord Delacourt-Smith, would wish to take his Amendment together with this one or not. Perhaps it would be a little difficult to discuss them separately.

The noble Lord's Amendment would remove the limitation. The Government Amendments would permit the manufacture of gas fittings for export if the Corporation consider this to be requisite, advantageous or convenient in connection with their primary duty, but only with the consent of the Secretary of State and subject to such conditions as he may attach to the consent. The noble Lord will be aware that gas fittings are defined in Clause 48 as meaning gas pipes, fittings, meters, apparatus, and appliances designed for use by consumers of gas for lighting, heating, motive power, and other purposes for which gas can be used. The prohibition in the Bill follows Sections 1(2)(e) and 2(3)(b) of the Gas Act 1948, but under the previous Government's Bill the prohibition on the manufacture of gas fittings for export by the Gas Council would have been removed. The fact is that only the most limited use has been made of the existing power to manufacture fittings—for example, the manufacture of individual conversion parts for " difficult " consumer appliances.

We do not think it would be right to go as far as the noble Lord has suggested. The Joint Parliamentary Under-Secretary of State for Industry said (col. 1897 of the OFFICIAL REPORT of another place for June 30, 1972) on an Amendment moved there: to have the Gas Corporation manufacturing for its own customers may in certain circumstances be reasonable and sensible, but manufacturing specifically for export surely goes much too far. … The prohibition which is present and proposed reflects the general policy that powers of manufacturing are intended only as a reserve power against unreasonable action by the manufacturers ". I think that this reflects also the attitude at the time the 1948 Act was passed.

We have looked at this matter again, and we concede that there are circumstances in which gas fittings manufactured by the Corporation could reasonably be exported, and that one cannot be sure in advance that manufacture for export would be undesirable in all circumstances. Of course, export of gas fittings manufactured by the Corporation is possible in some circumstances as the Bill stands. For example, the Corporation might manufacture a batch of goods solely for the home market, and have a surplus which could not be sold at home but which could be sold abroad. This would appear to be permissible under the Bill as it stands if the goods had not been manufactured for export. Then again, the Corporation might set up a manufacturing line solely to supply the home market, and subsequently find that home demand fell off but that a market could be found abroad which would keep the manufacturing capacity fully occupied. It could be regarded as rather too rigid to insist that this spare capacity was not used, but it is by no means clear that the Bill as it stands would permit this capacity to be used in these circumstances.

Because it is not possible to determine in advance, and to define, all the circumstances in which " manufacture for export " might be proper, it is better that the question should be left for decision according to the circumstances of the time. The Government have therefore brought forward their Amendments, which follow the approach adopted in Clause 2(3)(a) in relation to the exploration for and production of natural gas abroad, and to exporting gas; that is to say, they require that the manufacture of gas fittings for export shall not be undertaken except with the consent of the Secretary of State and in accordance with such conditions as he may attach to the consent. Since the phrase " manufacture for export " would not appear to cover the case where fittings originally manufactured by the Corporation solely for the home market were being exported, the Secretary of State's consent would not be necessary. So that the consent would not be necessary in all cases, but only where the manufacture was deliberately planned with a view to export. I hope that perhaps the noble Lord will accept what is proposed as meeting him halfway in this matter. It is in that spirit that I move this Amendment. I beg to move.


I appreciate the spirit in which the noble Lord has moved this Amendment. It certainly represents an improvement upon the position in the Bill as it came to us from another place. The noble Lord has made a valuable statement and has made it clear, as I understand it, that there will be no difficulty about the Secretary of State giving his consent automatically, as it were, in cases where a line of gas fittings which were primarily designed for the home market were being exported because there was a surplus available. Only in the case of a manufacture deliberately undertaken for export would the Secretary of State's consent be required. Can the noble Lord clarify the position?


If I may clarify the position, the noble Lord has gone a little far in what he has said. Obviously, there are three cases. First, there is the case where the Corporation sets out deliberately to manufacture for export rather than for the home market; it might be for a totally different market. Secondly, there is the case where the Corporation is manufacturing for the home market and there is a surplus available for export. Thirdly, there is the case where the Corporation provides more than is necessary for the home market, and in that case it would also be manufacturing in part for export and would need permission.


I am grateful to the noble Lord for that explanation. I am still not quite sure why there should be any limitation at all, because one would have expected that even any manufacture which was undertaken deliberately for export would be undertaken only if it was to the financial advantage of the Gas Corporation, and if exports were achieved that would clearly be beneficial to the national balance of payments. But in the light of what the noble Lord has said, I think we are willing to accept the Amendment.

On Question, Amendment agreed to.


I beg to move Amendment No. 10.

Amendment moved— Page 4, line 5, leave out from beginning of line to (" manufacture ") in line 6 and insert (" (iii) ")—(Lord Drumalbyn.)

On Question, Amendment agreed to.

Clause 2, as amended, agreed to.

Clause 3 agreed to.

Clause 4 [Duties of Corporation as respects management of affairs]:

9.30 p.m.

LORD DELACOURT-SMITH moved Amendment No. 12: Page 5, line 1, leave out subsection (4).

The noble Lord said: In moving this Amendment I should merely like to gain some clarification from the noble Lord. The subsection in question deals with the position of subsidiaries, and indicates that: The Corporation shall exercise their control … so as to secure that the subsidiary does not, either alone or in association with any other person, engage in any activity which the Corporation are not empowered to carry on …".

I find it a little surprising that it is necessary to insert this phrase, " in association with any other person ". I do not trace this in respect of the activities of the Gas Corporation themselves. Of course, we have already touched upon the question of the position of the Corporation in partnership activities, and it has been made clear that the Corporation are precluded, even in a partnership activity, from undertaking activities which they are themselves precluded from undertaking. In the case of subsidiaries this is made clear, but I am bound to say that I do not quite see where it is made clear in respect of the Corporation themselves. If the noble Lord would like to take note of this point and consider it at a later stage, I should be quite happy. I hope I have made my point clear to the noble Lord. I beg to move.


What I think the noble Lord was saying when making his last point is that, while the Corporation have to exercise their control over any subsidiary of theirs to make certain that the subsidiary, whether it is working with some other party or on its own, does not go beyond the powers specified in Clause 2(2), the Corporation could themselves join with some other body and do just that. But surely the Corporation would not be exercising control over themselves in that respect under this clause, but would be exercising control over themselves so far as Clause 2 is concerned. If the noble Lord is asking whether the Corporation can themselves combine with others, the answer is that they do so already; but under the Bill they can only combine with others to do the things which they have power to do themselves. I think that the noble Lord does not dispute that the fact that subsidiaries should not be allowed, either, is only logical, and that it would make a nonsense of the thing if the subsidiaries were allowed to do things which the Corporation are not allowed to do. I think the noble Lord recognises this. I hope I have answered the point he has made, but if I am wrong in any particular I shall gladly write to him.


Perhaps the noble Lord could consider whether, in those circumstances, this specific reference to " in association with any other person " is required in this subsection.


Yes, it is; because where a subsidiary entered into arrangements of any kind—formed a joint company, or something of that sort—it is right, surely, that its activities, whether acting alone or jointly, should also be subject to the same rule. It might help the noble Lord if I were to indicate here the principles involved. A wholly-owned subsidiary, though a legal entity distinct from the Corporation, may in reality be no more than the incorporation of a department of the Corporation with some particular objects. It is therefore appropriate that wholly-owned subsidiaries should normally be subject to the full range of financial and Ministerial controls applicable to the Corporation. But the second principle is that it is desired not to discourage co-operation between the Corporation and private interests through the medium of partly-owned subsidiaries of the Corporation, and to avoid deterring private interests, therefore, controls involving Ministerial discretion are not extended to partly-owned subsidiaries wherever the outside parties might fear that their financial interests could be substantially prejudiced by the exercise of such controls.

The result of this is that there are certain clauses in the Bill which apply to wholly owned subsidiaries, and to them alone. For example, there is Clause 5, on capital investment; Clause 6(3) on guarantees; Clause 7(2) on hiving-off; Clause 15 on reserves and Clauses 17 to 19 on borrowing. On the other hand, Clauses 4(3), on organisation, Clause 7(4), on information, and Clause 23, on accounts, where the financial interests of outside parties are not so directly involved, apply to all subsidiaries. I hope that this will give the noble Lord a stronger impression of our thinking in this matter.


In the light of the noble Lord's explanation, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 4 agreed to.

Clauses 5 and 6 agreed to.

Clause 7 [General powers of Secretary of State to give directions to Corporation and obtain information]:

9.36 p.m.

LORD DELACOURT-SMITH moved Amendment No. 14: Page 7, line 1, leave out subsection (2).

The noble Lord said: The general character of this subsection has already been made familiar to your Lordships by our discussion at an earlier date upon the legislation for the coal industry. It is a little surprising, and I think, a little unnecessary, to find these proposals embodied in the present piece of legislation. I draw attention to them for the purpose of asking what are the current intentions of the Government in respect of the scope for private industry in manufacturing, servicing, installing and contracting in the gas industry, compared with the scope which there has existed for private industry in these fields in gas in the past; and also for the purpose of seeking an assurance that it is not the intention of the Government to seek artificially to limit the activities of the publicly owned gas industry by the use of this clause.

I do not know why the purpose set out in such a subsection as this could not be equally adequately met by a small extension of Clause 7(1), if the Secretary of State were accorded power to give to the Corporations directions of a special as well as of a general character. As I understand it, he would then be able to achieve all that he can achieve under subsection (2). This would have the additional advantage that it would be necessary for any action taken by the Secretary of State in this direction to be related to the national interest. Under subsection (2) there are no requirements to show that the national interest is involved in any action which the Secretary of State proposes. Perhaps the noble Lord will comment on these points.


The noble Lord has asked in particular how this subsection relates to retailing and contracting in the gas field. During the Second Reading debate I said that this power is similar to existing powers in relation to most of the other nationalised industries and is being taken as a general reserve power. There are at present no plans to use it. Of course that goes for the organisation of the industry's retailing and contracting activities. We are dealing with this from the point of view of seeing that there is properly separated management and that they have proper accounting for these activities, so that if they are unprofitable that fact may be known. Of course any extra advantages which might accrue to the industry as a whole from having these facilities must also be borne in mind. I hope that will reassure the noble Lord.

So far as I can see, this does not extend the concept of the national interest, which would be a little more difficult to apply in this case. The opening words of subsection 2 are: Without prejudice to the generality of subsection (1)", which includes the national interest. This is a well recognised power to be exercised for the good management of industry as a whole, and I do not see why it should not exist as a reserve power in this Bill as it appears in so many other Acts. However, we see no particular likelihood of its being used at the present time.


The noble Lord, Lord Drumalbyn, surprised me a little when he referred to this provision being in so many other Acts. It was my impression that it was only in the Act dealing with the coal industry. Am I to take it from what the noble Lord said that it would be necessary for the Secretary of State to justify any direction given under Clause 7(2) by reference to the national interest?


So far as I can see, he would not have to do that, but of course he would have to consult the Corporation before giving any such direction.


It would be misleading if I pretended that my noble friends and I are enthusiastic about this subsection. However, we have heard the noble Lord's views on it and we welcome his statement that the Government do not see any likelihood of its being used. We shall wish to consider precisely what the noble Lord said, particularly in relation to national interest. Perhaps he too would consider the matter.

I should have thought it was desirable for the Secretary of State, in any action concerning a publicly-owned industry, to be required to justify his action by reference to the national interest. Perhaps either the noble Lord or we on this side will wish to raise the point again at a later stave.


I apologise to the noble Lord. I meant to comment on his taking me up on my reference to " so many other Acts." In fact there are four: The Iron and Steel Act 1949; the Transport Act 1962; the Coal Industry Act 1971 and the Civil Aviation Act 1971.


I was about to say, in reference to my remarks about the national interest and the point that we might wish to consider this further, that in the light of the discussion, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 7 agreed to.

Clause 8 agreed to.

Clause 9 [The National Gas Consumers' Council and the Regional Gas Consumers' Council]:

9.46 p.m.

LORD DELACOURT-SMITH moved Amendment No. 15: Page 8, line 10, leave out from (" of ") to (" not ") in line 11.

The noble Lord said: I think it might be convenient if we take together Amendments Nos. 15, 16, 17 and 18. Amend ment No. 15 by itself would not be a very significant or useful Amendment, but it is intended as part of this series of Amendments in which we are raising the question of whether it is possible to provide that in appointing the chairmen both of the National and of the Regional Consumers' Councils the Secretary of State shall have consultation with the members of those Councils respectively. Some noble Lords expressed the view on Second Reading that the provisions for the Consumers' Councils—although I think I said at the time that in many ways they are helpful, useful and to be welcomed—gave the impression that a large part in the appointment of these Councils was played by the Secretary of State. Along the lines that we have so far had them in respect of publicly-owned industries, this is, I think, at any rate with Consumers' Councils, unavoidable. But the provision exists for the Secretary of State in making appointments of members of the Councils to have various consultations with local authorities and with other bodies as set out in the Bill. Those provisions I am not in any way seeking to vary. But I am raising the question of whether those consultations having taken place on the appointment of members, it would be practicable and desirable for the Secretary of State to consult the members so selected in the appointment of their chairmen.

It may well be argued that this would have the advantage of ensuring that there could not exist a situation in which the members of the Councils felt in the chairman who was presiding over their deliberations a small degree of confidence than was desirable, and would, I think, provide some degree of opportunity for the members of the Councils to have some influence upon the appointment of chairmen. I am not of course suggesting, and the Amendments do not propose, that the chairmen should be selected by the members of the Councils, but I am raising the possibility of the members being given the opportunity of consultation by the Secretary of State in these appointments. I beg to move.


At first sight, this seems to be an eminently sensible proposal, and I must say that at first sight I was attracted to it. However, when one comes to look at it, it would perhaps turn out to be rather difficult to operate. One starts off with the position that these Councils, by and large, are already in existence with chairmen. Where any future reorganisation is concerned, there will be a different set of circumstances. Supposing, for example, that a new Regional Council is being set up because of a reorganisation, the normal course is to start by appointing the chairman and consulting the chairman about the members and not vice versa. Where, on the other hand, the time comes to replace a chairman the Secretary of State gives the most careful consideration to the matter. Most of the recent appointments have been from outside the Council; I am told that the last four were all appointed from outside the Council. The practical question is this. What happens if the Secretary of State finds a person who in his opinion is just the man, and the Council have somebody in mind from among themselves whom they should like to appoint? This position could well arise. The Secretary of State is responsible for these appointments and it is a responsibility which he takes seriously. When we discussed this matter informally the noble Lord told me he realised that it would be a transitional problem in any case where, for example, a new council was being set up, or even in the present transitional stage.

We see considerable difficulties about consulting the Council in the kind of circumstances we have in mind. As I said, the Secretary of State takes enormous trouble to find whom he thinks will be the right person. If he wanted to appoint someone from outside, it might not be someone who was known to a sufficient number of the members of the Council for them to judge fairly between the Secretary of State's candidate, as it were, and their own candidate. We think that there would be considerable difficulties in this. The practice has always been for the sponsoring Minister to appoint the chairman. This system applies generally to Government-appointed bodies. It was not questioned by the Select Committee on Nationalised Industries in their Report on relations with the public. After careful consideration of the noble Lord's proposal in the time available, which has been very short, we think it would be better, on balance, to stick to the present system in the case of consumer councils.


As one who is interested in consumer representation, I think that on balance the Minister is right. From time to time it could be that one would wish to introduce new blood by having an outside chairman, and it could be that this would be better done without formal consultation. Undoubtedly there will always be a measure of consultation, but it would be far better to leave matters as they are.


I was going to make the same point as the noble Lord has just made. I was attracted at first sight by the suggestion of the noble Lord, Lord Delacourt-Smith, but, as my noble friend said, one can visualise a weak, ineffective Council which would need putting together, and it would be unlikely that a Council of that kind would suggest the type of chairman who would be needed. It would be embarrassing if the Minister in that case had to go through the process of consultation. In other cases where the Council was a good, effective body it would be easy for the Secretary of State to consult them informally before making an appointment. I see the point of the proposal but I feel that my noble friend's argument probably should predominate.


I am grateful to the noble Lord and to other noble Lords who have commented on this Amendment. I appreciate, of course, that it is a question of weighing the advantages and the disadvantages of the course proposed in my Amendment. I myself am inclined to think, notwithstanding the arguments noble Lords have put forward, that the balance of advantage would lie on the side I have proposed. I appreciate that this is not a matter which the Government have had an opportunity of considering for long. I have listened with interest to what has been said in comment upon it, and in all the circumstances I would not be disposed to press this Amendment.

My noble friends and I may, however, want to reopen this matter, not necessarily in respect of this industry, at some future time. I think we are all concerned to ensure that consumer representation is as good as we can make it. We recognise that there are difficult problems of the kind which noble Lords have mentioned, but I am not sure that we have necessarily yet come to the end of our search to find, within the general framework which we have devised for publicly-owned industries, the best balance. Nevertheless, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 9 agreed to.

Clause 10 [Functions of National and Regional Councils]:

9.57 p.m.

LORD DELACOURT-SMITH moved Amendment No. 19: Page 10, line 32, at end insert—

" (e) taking steps to set on foot or to cause to be set on foot an annual survey indicating how far domestic consumers of gas in their area are satisfied or otherwise with the service and facilities provided in their area by the Corporation and for what reasons and considering the results of such survey and reporting their conclusions thereon to the Corporation ").

The noble Lord said: I think it would be convenient to take with Amendment No. 19, which I now move, Amendment No. 20, which is clearly consequential upon No. 19. Here again, we are putting forward, once more perhaps in a somewhat tentative way, a proposal designed to improve the machinery of consumer Consultation. It may well be argued by the noble Lord—I am not sure; I am told by some that this could well be a legitimate argument—that the power to do what is proposed in this Amendment can already be deduced from the other powers which the Bill conferred upon Consumer Councils. However, that may be, we are in fact in this Amendment not proposing an optional power but proposing to lay a duty upon Regional Consumer Councils, to whom this is initially appropriate, to promote, in whatever way seems to them to be suitable, an annual survey showing the degree to which domestic consumers are satisfied or dissatisfied with the services and the facilities provided in their areas.

Although we have, on both sides of the House, in the course of the discussions of this Bill paid tributes to the activities of the Gas Council and the performance of the gas industry, equally none of us would deny that there has been a substantial degree of criticism, at any rate in some parts of the country, of the service which is sometimes provided. In such circumstances, and since we are now passing so clearly, as the noble Lord has said, from an industry which is based upon manufacture to an industry which is primarily there to transmit and distribute gas, it is particularly important that there should be satisfaction to the consumers with the service they receive. In this Amendment we are proposing that it should be one of the duties of the Regional Consumer Councils to make an annual survey by some appropriate method of the degree to which domestic consumers are satisfied with the service they are getting. No doubt, of course, proper methods of sampling would be used, but there are plenty of techniques available to measure the degree of satisfaction which domestic consumers feel.

I hope that this suggestion, or at any rate the general principle of it, will commend itself to the noble Lord and that he will be able to receive it sympathetically. It might be that he would wish to say that, if this were accepted, there would perhaps need to be a power, possibly for the Secretary of State, where he was satisfied that it was reasonable, to relieve the Consumer Council of this obligation in a particular region in a particular year. That might arise if it were felt that an annual survey was too frequent. I hope the noble Lord will he able to comment upon this proposal in a practical way. I beg to move.

10.0 p.m.


I will certainly comment in a favourable way on the general idea that the consumer bodies should make it their duty to know the attitude of the consumers in their area towards the services and facilities that they are receiving, but I am not so certain whether it is necessary to include an annual survey as a specific provision in the legislation. Our feeling is that it would be unwise, and even wrong, to impose such a duty on each of the Regional Councils. It would be much better to leave the Regional Councils free to decide on the form and the content of any investigations and surveys that they consider are necessary in relation to the Corporation's services and facilities.

There is quite a danger that if we impose a duty to have an annual survey of this sort it will become very much a matter of routine and might not be effec tive. I may say that the Post Office Users' National Council survey of postal delivery times is an example of what can be done—even though there is no statutory requirement to carry out surveys of any kind. I agree that that is not a particularly close parallel to what the noble Lord is proposing. Even as things are at present, the Councils and their staffs keep in fairly close touch with the consumers' general difficulties, and as a barometer of satisfaction or otherwise they have the usual barometer of the number of complaints and queries that are received. I believe that in the year ended March 31, 1972, the Councils dealt with over 25,000 consumers' representations. Undoubtedly this is one way at any rate in which they can keep in touch with the views of consumers.

The techniques of surveys of this kind, trying to find a degree of satisfaction, are not quite as straightforward as one would imagine. If one knocks on a door and says, " Are you satisfied with so-and-so? ", the first answer one obtains is generally " Yes ". Then if one asks various other questions and comes down the list, one finds that customers are not as satisfied as perhaps they seemed to be at first sight. I have a feeling that if we made this an obligation it might become just an annual routine of the first kind. Something more sophisticated, more special and more appropriate to particular needs at any one time is, in my view, desirable. So while I am in full sympathy with the noble Lord's idea I would rather not accept his Amendment.


The noble Lord has shown a degree of sympathy, but if I may say so it is somewhat qualified sympathy. I welcome his remarks so far as they have gone. Do I understand from him that there is no doubt that it would be quite within the powers of a Regional Council to take the initiative in canvassing, by some proper selective techniques, the degree of satisfaction of consumers, and that they are not limited to waiting to receive complaints or representations from consumers? If the noble Lord can assure me that it is within the power of the Regional Councils to undertake this survey he will not only make me a happier man but will enable me immediately to withdraw the Amendment.


I should like to give further thought to the matter before giving a definite assurance, but I should have thought—I may be criticised for saying this—that that would be well within their powers. The question is whether the Secretary of State determines that they have the finance to do so. It is therefore a question which must be agreed in their budget. The Corporation have to pay in the long run, but they may wish to have this information. Again, however, I doubt whether the Corporation would like this to be just an annual, routine matter.


In the light of the discussion, I beg leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Clause 10 agreed to.

Clauses 11 to 15 agreed to.

Clause 16 [Payment of excess revenue to Secretary of State]:

On Question, Whether Clause 16 shall stand part of the Bill?

10.7 p.m.


This is a clause which we on this side of the Committee do not like at all. It envisages a situation in which the Gas Corporation do well financially because of their good management and good fortune in the exploitation of natural gas, and possibly even as a result of the sales of crude oil which they find in the course of their gas operations. In such a case the Secretary of State may, after consultation with the Corporation, confiscate a part of the money which the Corporation have earned in this way where, first, it is attributable to the activities I have mentioned and, second, is surplus to the Corporation's requirements.

There is a further provision that no direction shall be given in certain circumstances, though when one reads the closing words of the clause one has the impression that the Secretary of State has a good deal of power in defining the basis in which the calculation is made in deciding whether or not that provision should be any bar to his confiscatory activities. I hope that the noble Lord will give some explanation of these unpalatable proposals. Will he say, in particular, what is meant by the excess being " surplus to the Corporation's requirements "?

In the light of any answer he may give on those points, I may want to make some further observations. Perhaps he could give an explanation on those two points: first, what is meant by " surplus to the Corporation's requirements "; and, second, what is the meaning of the final paragraph of the clause?


I realise that to noble Lords opposite this clause is perhaps not so palatable as some of the other clauses in the Bill, and I would not pretend that there is any exact precedent for it. But on the other hand there is not any exact precedent for the circumstances either. Here we have an industry which is given the right to search for its own raw material. In the course of that searching, it might find another raw material as well and the two of them together—particularly the other raw material—might give it a period of quite unparalleled prosperity. It might not last for very long but nevertheless it will give them a period of prosperity. What the clause seeks to do is to recognise the fact that the Exchequer, as virtually the 100 per cent. shareholder and guarantor of the industry, is entitled to a share in that prosperity, which would not necessarily all go to the gas consumer.

The noble Lord asked what is meant by, " surplus to the Corporation's requirements ". Proper payments to reserves would, of course, be one of those requirements. It is certainly not the intention to exercise these powers so as to prevent the industry from discharging its financial burdens and, where this was economically justified, from reducing prices to the consumers. But since gas prices should take into account, among other things, the industry's long-run marginal costs, it would not necessarily be right for profits from extracting oil or natural gas from the Continental Shelf, to be used to subsidise gas prices at a lower level. Although the provision relates to a surplus in any financial year, this does not mean that the Secretary of State is obliged to look, as though blinkered, at a single year. He will not require surpluses to be paid over simply because a run of poor years is succeeded by a very profitable year. The " 10 per cent. of assets " criterion will to some extent ensure this. He is free to look at the situation of the Corporation as a whole in assessing how much of the profits are surplus to their requirements. As the noble Lord pointed out, the Corporation will be fully consulted before the proposed power is exercised.

The noble Lord asked what was the meaning of the last paragraph which states: Provided that no such direction shall be given as respects any financial year unless the total of the sums standing to the credit of the Corporation's reserves at the beginning of that year exceeds 10 per cent. of the value at the beginning of that year of their net assets as for the time being defined for the purposes of this section by the Secretary of State. The net assets would no doubt be the net assets as shown in the balance sheet, and it is a valuable safeguard that this cannot be forward-looking in any way. It would have to reflect the results over the previous year and at the same time take into account the general financial position of the Corporation. In particular, it is well worth pointing out that the last paragraph does not mean that, just because the total of the sum standing to the credit of the Corporation did exceed 10 per cent. of the value of the net assets at the beginning of the year, there would be a direction from the Secretary of State. That is the minimum at which the provision could operate and it would fully take into account the financial position, the financial needs, the investment needs and all the rest of it, of the Corporation. I might add perhaps that there has been no such windfall as yet and it is not envisaged that this power is going to be used in the near future.


I am grateful to the noble Lord for what he has said, and particularly for his saying, as I understood him, that generally speaking he would expect that the net assets as for the time being defined for the purpose by the Secretary of State would be the net assets as they appear in the balance sheet. I still think that this clause is open to considerable objection. First, it is hard to see why any sums earned in this way should not go in a straightforward fashion for the reduction of debt, or alternatively that they should not go for the reduction of charges. We know, of course—the noble Lord emphasised this in his Second Reading speech, and it is brought out in the Bill itself—that the Gas Corporation are likely to be involved in the future in a fairly heavy programme of capital investment. In so far as that capital investment has to be incurred before any substantial returns which might be caught by this clause are likely to be available, I would expect that a part, at an rate, of that capital investment will have to be found by the consumers of gas.

It has been the general practice of the Government—and I am not at the moment debating the rights and wrongs of it as a general proposition—as it has been with successive Governments, for publicly owned industries to be required to meet or to seek to meet a financial target, and this financial target has in most cases, and certainly in the case of industries with heavy capital investment programmes, included a requirement that a substantial proportion of new investment should be generated from within the industry. The only way in which it can be generated is, broadly speaking, by the charges which the consumers of the service pay. It is therefore reasonable to expect that the heavy programme of investment will at any rate have some influence upon the prices which consumers of gas are required to pay. That being the case, it would seem reasonable that the return which, at any rate in some degree, will be attributable to the capital investment should benefit the consumers of gas. After all, any substantial profits that are earned in this way are not going to go into the pockets of the Gas Corporation; they are not going to be consumed in riotous living by the members of the Corporation and by their area and regional staffs; they are not going to be distributed either to private shareholders. In those circumstances it would appear that since these are the profits, surpluses, of a publicly owned industry, it ought to be very carefully borne in mind that the consumers who have contributed, by their charges, at any rate to a degree, to the capital investment which has made the profits, they possibly should expect to benefit, and I should have thought that what was available and was not required for further investment could properly be used for reduction of existing debt. As I understand it, this would not to any material extent necessarily be the case; although these sums would go to the Treasury they would not of themselves affect the indebtedness of the Gas Corporation to the Treasury.

I appreciate again the spirit in which the noble Lord has replied upon this clause. As he always does, he has made it sound an extremely reasonable proposal. But I hope that he will be able to comment a little further on the points I have made and strengthen still more some of the assurances he has given about the degree to which these other elements will be taken into account in any operation under this clause.

Perhaps I may raise one last point. As I understand it, this will be purely an operation between the Secretary of State, the Treasury and the Corporation. I should like the noble Lord to consider whether it would not be appropriate if any action is to be taken under this clause for it to require the consent of Parliament before it is made effective.


May I ask my noble friend whether if profits of this nature arise, they will be available to help meet normal debt repayments and also to meet that part of fresh capital expenditure which it was considered a requirement to be paid from the funds of the Corporation? Profits of this kind will be available, I take it, for both those purposes so far as they were acceptable to requirements.

10.21 p.m.


I think I can give the noble Lord the assurance that he is seeking. It is certainly not the intention to use these powers in any way capriciously—I think that was the word he himself used. The general concept is that as the Exchequer has put up the money, if the surpluses that arose were so much more than would normally be required for internal investment and repayment of debt and other services, it seems only reasonable that sonic part of what appears to be the profits—the equity profits in this case—should go hack to the Exchequer. I do not think there is any more to it than that. The noble Lord suggests that the consent of Parliament should be obtained, but the normal running of finances is a matter for the Secretary of State. The Corporation report to the Secretary of State and Parliament receives that report. Parliament can comment on what has been done. I would not myself have thought it was necessary to insert into the Bill that the consent of Parliament should be obtained, but I am willing to look at the point.

I can repeat the assurance given by the Minister for Industry, which was, first of all, that the power will not be used to require the Corporation to pay over any and every surplus. Secondly, the Government recognise the need to discharge current financial burdens of obsolete plant and the conversion expenditure. Thirdly, the Government recognise that proper reserves need to be built up. Fourthly, the new power will not be used to prevent either the discharge of financial burdens; and finally that regard will be had to the financial performance in the succeeding years. It is a fact, as the noble Lord has said, that we are in a period of conversion, and that means high capital expenditure. But once that is complete it should be pretty well all clear again. When that moment comes, one would have to have regard, of course, to what seemed just and equitable and sensible in the circumstances at the time, as to how much should go as a reduction of price to consumers and how much should be the object of a direction under this clause, after all the other obligations had been fulfilled.


Again I am afraid that the noble Lord, although he has made some valuable observations, will not have convinced my noble friends or myself about the satisfactoriness of these provisions. He has given a number of assurances, or has repeated a number of assurances, and amplified them. This we welcome. But I should have thought that those assurances would have been of all the greater value if in fact there were a requirement that, at the end of the day, an operation of this sort would require some order placed before Parliament. I would not pretend that my noble friends or I are happy about this matter as it now stands, and we may well wish to return to it. Were the hour not quite so late my noble friends and I would be disposed to divide the Committee upon this issue. In view of the hour, we will not do so.

Clause 16 agreed to.

Clauses 17 to 38 agreed to.

Clause 39 [Application of Pipe-lines Act 1962]:

10.26 p.m.

LORD DRUMALBYN moved Amendment No. 21: Page 33, line 35, after (" above ") insert (" but subject to subsection (3) below ").

The noble Lord said: I beg to move Amendment No. 21, which is a paving Amendment for Amendment No. 22. This is an Amendment of some interest to those concerned. Clause 39(2) applies to gas industry pipelines certain provi sions of the Pipe-lines Act which are designed to protect pipelines laid under that Act from damage that could arise through the erection of buildings or deposit of materials too close to the pipeline. This Amendment recognises the fact that in certain circumstances this could create difficulties for the developer. For example, there might be some lapse in conveyancing procedure, or for some other reason the owner or local authority might not know, or could not be expected to know, the exact whereabouts of the pipeline, or even of its existence.

The Amendment seeks to help those concerned to find out whether a gas pipeline crosses any particular piece of land by encouraging the deposit of maps with local authorities. It does this by providing that the protection of the provisions applied by Clause 39(2) will be available to the Corporation only where maps showing the route in question have been deposited by the Corporation (or before the appointed day by the Gas Council or an Area Board) with the local authorities concerned. Local authorities will hold the maps and make them available for inspection free of charge. The lines of the Amendment have been the subject of consultation with local authority associations and have been agreed with them.


We welcome the appearance of this Amendment. We take note of the fact that it arises from consultation with the local authorities and that its terms are, if I may use a term which the noble Lord used earlier, " acceptable ".


As somebody who was on the Turner Commission for Mining Subsidence—and I will not delay the Committee—may I ask for confirmation that on this question of the relaying of important gas lines the Coal Board will be informed of this information. In some areas, as the noble Lord knows, local authorities have been spending thousands a year for the protection of the public from mining subsidence. Consequently, as well as local authorities in the key mining areas (and we thought of this during the Turner Commission), I should like the noble Lord to confirm to the Committee that the same care will be taken to see that the mining authorities are aware of the information, too.


I am grateful to the noble Lord for bringing this point to my attention, and I shall have a look at it tonight.

On Question Amendment agreed to.


I beg to move Amendment No. 22.

Amendment moved— Page 33, line 44, at end insert— (" (3) The application by virtue of subsection (2) above of the said section 27(1) and the said section 31(1) to a particular part of any pipeline shall be dependent upon there having been previously deposited with every local authority in whose area the part lies, either by the Corporation or, before the appointed day, by the Gas Council or an Area Board, a map, on a scale not less than 1 in 10,560, showing the route taken by the part. A local authority holding a map relating to a pipe-line vested in the Corporation shall keep the map at their offices, and shall secure that it is open to inspection by any person at all reasonable times free of charge. In this subsection " local authority " means—

  1. (a) in England and Wales, the council of a county, county borough or county district, the Greater London Council, the council of a London borough, and the Common Council of the City of London, and
  2. (b) in Scotland, a town or county council.")—(Lord Drumalbyn.)

On Question, Amendment agreed to.

Clause 39, as amended, agreed to.

Clause 40 [Meaning of " operational land " in Planning Acts]:

LORD DRUMALBYN moved Amendment No. 23: Page 34, line 2, leave out from (" section ") to (" (which ") in line 3 and insert (" 212 of the Town and Country Planning (Scotland) Act 1972 ")

The noble Lord said: This Amendment reflects the passage through Parliament of a Bill consolidating Scottish town and country planning legislation, which is intended to be passed before the Gas Bill and to come into force well before the appointed day under it. I beg to move.


I do not want to delay the Committee, but the noble Lord mentioned Scotland and did it so perfunctorily that perhaps he will explain a little further what effect this Amendment will have in Scotland. He knows, as I do, that the Scots are very touchy about legislation of this kind and they will always want to know the effect of an Amendment such as this. I am certain that the noble Lord will be delighted to give us a further explanation.


If the noble Lord will look at the Bill, he will see that this is only a change of reference to the new consolidating Act.

On Question, Amendment agreed to.

Clause 40, as amended, agreed to.

Remaining clauses agreed to.

Schedules 1 and 2 agreed to.

Schedule 3 [The consumers' bodies: supplementary provisions]:

10.33 p.m.

LORD DRUMALBYN moved Amendment No. 24. Page 49, Line 27, leave out from beginning to (" and ") in line 29 and insert (" There shall be paid such pensions, or arrangements shall be made for the payment of such pensions, to or in respect of persons who are or have been in receipt of remuneration under sub-paragraph (1) above as the Secreteary of State may with the consent of the Minister for the Civil Service determine; and if a person in receipt of remuneration under that sub-paragraph ceases to hold the office by virtue of which he receives it ")

The noble Lord said: Amendment No. 25 goes with this Amendment. The Amendments make it possible for the chairmen of the National and Regional Gas Consumers' Councils, if paid, to receive a pension in accordance with the determination of the Secretary of State made with the consent of the Minister for the Civil Service. Without committing the Government in any way, these Amendments provide the necessary powers to enable pensions to be paid in appropriate cases if, as a result of some future change in policy, it were desired to do so. They are identical in substance with the provisions concerning pensions of members of the Corporation in Clause 1(3) of the Bill. I beg to move.

On Question, Amendment agreed to.


I beg to move Amendment No. 25.

Amendment moved— Page 50, line 11, leave out (" the said paragraph 2 ") and insert (" those paragraphs ").—(Lord Drumalbyn.)

On Question, Amendment agreed to.

Schedule 3, as amended, agreed to.

Schedule 4 [Gas supply code]:

LORD DRUMALBYN moved Amendment No. 26: Page 51, line 18, at end insert— (" (2) The powers of the Corporation under sub-paragraph (1) above shall include power to erect in any street one or more structures for housing pressure governors, but only with the consent, which shall not be unreasonably withheld, of the highway authority or other person having the control or management of the street. Any question whether or not consent to the erection of such a structure is unreasonably withheld shall be determined by arbitration; and for the purposes of this sub-paragraph, the withholding of consent shall, to the extent that it is based on the ground that the structure ought to be erected elsewhere than in a street, be treated as unreasonable if the Corporation show either that there is no reasonably practicable alternative to erecting it in a street, or that all such alternatives would, on the balance of probabilities, involve greater danger to life or property.")

The noble Lord said: I apologise for this being a starred Amendment. It has been down for some time, but it is starred because one or two drafting Amendments have been made to meet the points of the County Councils Association and the Greater London Council since the Amendment was tabled. The Amendment implements an undertaking given in Standing Committee in the other place, when an Opposition Amendment had been moved to permit the Corporation to erect in streets structures for housing pressure governors, otherwise known as governor kiosks. Pressure governors, I should explain, are apparatus for regulating the flow and reducing the pressure of gas, in particular, to the low pressures appropriate for final distribution or supply to the consumer. A considerable number of these structures have already been installed by the gas industry, and a number of them have been erected on roadside verges, and so on; but some doubt has arisen as to the gas industry's powers to erect these structures in streets, and clarification is desirable. I hope that your Lordships will agree to this Amendment. It represents a sort of compromise between the interests concerned; it seems reasonably sensible, and has reasonable safeguards attached to it. I beg to move.

On Question, Amendment agreed to.

Schedule 4, as amended, agreed to.

Schedule 5 [Rating of Corporation in England and Wales]:

10.36 p.m.

VISCOUNT SIMON moved Amendment No. 27: Page 66, line 19, leave out (" nine-tenths ") and insert (" nine-twentieths ").

The noble Viscount said: I beg to move Amendment No. 27, and I suggest to the Committee that with it we discuss the following two Amendments in my name, Nos. 28 and 29. This part of the Schedule deals with the apportionment of the total rateable liability of the Gas Corporation between the various rating areas in England and Wales, and your Lordships will see that there are three elements in the calculation. One is the number of therms estimated and certified to be sold to consumers in each area as compared with the total number in England and Wales; one is the number of therms manufactured in each area as against the total; and the other is the number of therms produced by the application of a process mentioned in Section 33(3)(c) of the General Rate Act 1967. If your Lordships want to see that, your Lordships should look back to page 63 where you will find the new Section 33(3)(c). It is gas which is produced, by the application to gas purchased by them of any process not consisting only of purification, or of blending with other gases, or of both purification and such blending ".

When we come to the calculation, we see that the first element is taken at its face value; for the second element, which is the number of therms manufactured, nine-tenths are taken into the calculation; and for the therms which are produced by such a process as is here described, again nine-tenths is taken. Then, if we look on to sub-paragraph (3) we see this extraordinary statement that: For the purposes of sub-paragraph (2) … the number of therms produced by such an application of such a process as aforesaid shall be taken to be half the actual number thereof ". This seems to be a sub-paragraph written in Alice's Wonderland. The number of therms is what we say it is; it is half what it really is. It seems very much simpler to produce the same result by taking nine-twentieths instead of nine-tenths in sub-paragraphs (a) and (b). I must confess that I made a mistake when putting the Amendment down which I discovered only when it was too late to amend it, because I have in fact applied the nine-twentieths in this Amendment both to the manufactured therms as well as to the therms produced by the process. Therefore, the Amendment is defective; but I have ventured to move it because I am hoping that, in reply, the noble Lord might be able to say that between now and Report stage he will think of an Amendment which will correctly produce the same result and which will eliminate this (if I may say so) ridiculous sub-paragraph (3), which I really think brings Parliament into ridicule.

I have only one other point to make, and that is this. It undoubtedly takes a certain modicum of intelligence to understand an Act of Parliament, but most people today (it may not have been so a hundred years ago) who have that modicum of intelligence would understand an algebraic formula more easily than they would understand the sort of wording that is used to spell out calculations of this kind. I do not know of any precedent for putting algebraic formulae into an Act of Parliament, but I seem to remember having seen one in an Act not long ago. I would not suggest it in this particular context, but I wonder whether the noble Lord and those responsible for the Parliamentary draftsmen might consider whether in a case of this kind, it would not be simpler for everybody to put the formula in a mathematical form rather than to spell it out in the cumbrous way in which it is presented in the Bill.

Before withdrawing the Amendment, I move it in the hope that the noble Lord might be able to give me some comfort on the first of my suggestions if not on the second.


I take note of the noble Viscount's suggestion. If I remember aright, the formula he saw was in the Housing Finance Bill. It was in algebraic terms and the terms were defined; but this formula, I gather, is in effect the existing formula but on an England and Wales basis instead of on a basis of individual Area Boards. Neat as it would appear to be to make the change the noble Viscount proposes, if he works it out—and I shall be glad to pass to him an hypothetical example of this—he will find, surprisingly enough that it does not arrive at exactly the same result. This is one of those formulae which I gather was arrived at by a committee after a great deal of study. It has been appropriately adapted since. I do not think I should be very successful if I tried to devise another appropriate formula before the next stage of the Bill. I am sorry, but I am afraid the noble Viscount must put up with this one, which I think will be understood by those who operate it.


I am very shocked that the Treasury allowed such a new-fangled idea as algebra to get into the Finance Bill.


It was the Housing Finance Bill.


Still, the Treasury have an interest in that. In my day at the Treasury we had the measure of arithmetic but had not got as far as algebra.


I am obliged for what the noble Lord has said. Perhaps between now and the next stage we may be able to have a word together on this.


For clarification, since I understood the noble Lord to say that this formula was for application to England and Wales, can he tell us what is the provision in respect of Scotland? He is giving concern to some of my noble friends.


The provision in respect of Scotland is somewhat simpler. Although it is not set out fully in the Bill itself, it is dealt with in Clause 34(3).


I do not want to delay the Committee but I can hardly believe that that is a very good answer. Here is a Bill which says—and I am sorry that the noble Viscount, Lord Simon, said that he was about to withdraw the Amendment before he had actually moved it that we are going to take a specific number and that the number … produced by such an application of such a process … shall be taken to half the actual number thereof. It is surely rather curious to lay down a certain figure in a Bill and then to stipulate that you take half of it. The noble Lord, Lord Drumalbyn, says that this applies only to England and Wales. I shall be interested to hear whether we are to say in Scotland, too, that nine-tenths will become nine-twentieths. We in Scotland are more precise in our mathematics. Indeed if we talk about nine-twentieths that is what we mean. The noble Lord, Lord Drumalbyn, said that if we went back a certain distance in the Bill we should find the answer. If there is an answer the noble Lord should tell us what it is.


I am afraid I am not equipped to reply to that question, but I shall be happy to write to the noble Lord and give him the information—I see that it is coming along now, so I am equipped to reply. I am afraid that, after all, the formula is similar. It involves the Acts of 1956, 1962, 1963 and 1966, all of which are amended by Schedule 6 to this Bill. The General Rate Act applies to England and Wales only.

Amendment, by leave, withdrawn.

Schedule 5 agreed to.

Schedule 6 agreed to.

Schedule 7 [Savings and transitional provisions]:

LORD DRUMALBYN moved Amendment No. 30: Page 80, line 9, at end insert—

(" Compulsory purchase

Anything done before the appointed day for the purposes of, or otherwise in connection with, the compulsory purchase of land, or rights over land, by the Gas Council or an Area Board under section 11 of the Gas Act 1948 shall have effect as from that day as if done for the purposes of, or otherwise in connection with, the compulsory purchase of the land or rights in question by the Corporation under Schedule 2 to this Act.")

The noble Lord said: This Amendment is a transitional provision in order to ensure continuity of procedures for compulsory purchase of land and rights which are somewhat complicated.

On Question, Amendment agreed to.

LORD DRUMALBYN moved Amendment No. 31: Page 84, line 13, at end insert—

(" Pension rights

The repeal by this Act of section 58 of the Gas Act 1948 shall not affect the operation of subsection (3) of that section in relation to regulations made before the appointed day, and, notwithstanding that repeal, subsection (5) of that section shall, with the necessary modifications, continue to have effect in relation to any such question as is therein mentioned.")

The noble Lord said: This is a saving provision. Its first object is to protect any person who thinks that his position as to pension rights has been worsened by regulations made under Section 58 of the 1948 Act. These regulations are continued in force after the appointed day by Clause 36(3). The Amendment ensures that, notwithstanding the repeal of the 1948 Act, any such person retains the right to have the question whether his rights have been worsened determined by an industrial tribunal. The second object of the Amendment is to preserve the right of reference to an industrial tribunal for anyone who claims entitlement to a pension given as a " customary obligation " rather than as a legal right. The Amendment also ensures that the position is rectified, if the tribunal's decision in either of these two cases is in the claimant's favour.

On Question, Amendment agreed to.

10.48 p.m.

LORD DRUMALBYN moved Amendment No. 32: Page 84, line 24, at end add—

(" British Gas Stock issued under Gas Act 1948 by way of compensation

Notwithstanding the repeal by this Act of the Gas Act 1948

  1. (a) composite companies within the meaning of that Act shall continue to have the rights and powers conferred on them in connection with British Gas Stock by section 30(7) of that Act, and
  2. (b) paragraph 5 of Part I of Schedule 2 to that Act, including that paragraph as applied by paragraph 6 of Part II of that Schedule, shall continue to apply to British Gas Stock issued pursuant to that Schedule.")

The noble Lord said: The 1948 Act contained provisions concerning the powers of composite companies; that is to say, companies supplying both gas and water under statutory powers to hold British Gas Stock issued as compensation for the nationalisation of gas undertakings. Schedule 2 contains provisions whereby holders of securities converted into British Gas Stock on nationalisation were to hold stock on the same trusts and subject to the same powers as applied to the original securities. It is undesirable that the repeal of the 1948 Act should affect those provisions. This Amendment ensures that it does not.

On Question, Amendment agreed to.

Schedule 7, as amended, agreed to.

Schedule 8 [Repeals]:

LORD DRUMALBYN moved Amendment No. 33: Page 85, line 11, at end insert—

(" 14 Geo. 6. c. 39. The Public Utilities Street Works Act 1950. In Schedule 5, the entries relating to the Gas Act 1948.")

The noble Lord said: It may be convenient to take Amendments Nos. 33, 34, 35 and 36 together. They are all tidying-up Amendments. I beg to move Amendment No. 33.

On Question, Amendment agreed to.


I beg to move Amendment No. 34.

Amendment moved— Page 85, line 32, at end insert—

(" 6 & 7 Eliz. 2. c. 55. The Local Government Act 1958. In section 66(1), the definition of ' Gas Board '.")

On Question, Amendment agreed to.


I beg to move Amendment No. 35.

Amendment moved— Page 85, line 38, at end insert—

(" 1963 c. 33. The London Government Act 1963. In section 93(3), the words ' or gas' and the words ' or the Gas Act 1948 ', and in Schedule 2, paragraph 31(e).").

On Question, Amendment agreed to.


I beg to move Amendment No. 36.

Amendment moved— Page 86, line 20, at end insert—

(" 1968 c. 13 The National Loans Act 1968. In Schedule 1, the entry relating to the Gas Act 1948.").

On Question, Amendment agreed to.

Remaining Schedule, as amended, agreed to.

House resumed: Bill reported, with the Amendments.