Gas Appliances: MMC Report (Hansard, 8 July 1981)

§ The Parliamentary Under-Secretary of State, Department of Trade (Lord Trefgarne)
My Lords, with your Lordships' permission, I will repeat a Statement being made in the other place by my honourable friend the Minister for Consumer Affairs. The Statement is as follows:
"With permission, Mr. Speaker, I should like to make a Statement on the action which the Government has decided to take following the report of the Monopolies and Mergers Commission on the supply of certain domestic gas appliances, published last year.
"I told the House on 17th June of the public interest findings made by the commission in their report.
"The considered that the British Gas Corporation's monopoly had acted against the public interest by restricting competition in the retailing of appliances.
"This had limited the number of independent outlets, suppressed competition, and possibly had increased prices.
"They also considered that the manufacturers' over-dependence on BGC had indirectly led to poor export performance on the part of the manufacturers, reduced incentives to improve efficiency and depressed investment; and that this was against the public interest.
"I told the House on 17th June of the options put forward in the MMC report.
"The Government have considered these, and others, with great care, bearing in mind that the Government's objective and first responsibility must be to respond to and remedy the adverse findings in the commission's report in a way consistent with the need to give consumers wider choice, better service, safety, availability and convenience, and at the same time to minimise as far as possible any adverse effects of any changes on our own manufacturing industry and the employees of the British Gas Corporation; I should like on this occasion to repeat the statement which I made in the House on 17th June that no solution that failed to maintain safety, at least at its present level, that generally inconvenienced consumers, or that was seriously damaging to manufacturers, would be acceptable to the Government.
"Having considered carefully and consulted widely, the Government have concluded that in 711 order to remedy the adverse effects identified by the commission, the BGC should withdraw from its current retailing operations and that the timetable of three years in the MMC's first option is too compressed a period.
"The Government have decided therefore that the corporation should be required to cease retailing domestic gas appliances and to dispose of their showrooms over a five-year period.
"This would be a carefully structured and phased programme of withdrawal, with the corporation being required to dispose of half their showrooms within two years, a further quarter in the following year, and the remaining quarter in the final two years.
"The Government will, if necessary, introduce legislation to give effect to this decision.
"As a counterpart to these steps, the Government are also considering measures under the Fair Trading Act to counteract certain adverse effects of the gas appliance manufacturers' monopolies identified by the commission.
"The Government are clearly concerned to minimise the impact of their decision on employment.
"In this context I must stress that the Government are not proposing to curtail British Gas's servicing and installation activities.
"The decision will therefore only have a direct bearing on those who are employed in appliance retailing, mainly in British Gas's showrooms.
"The Government would wish British Gas to maintain some customer contact points and since they have stated that 80 per cent. of showroom staff's time is spent on activities other than retailing the number of jobs which could be affected should be minimised.
"Nevertheless, the Government recognise that concerns about employment are deeply felt by Gas Corporation employees, although, in the Government's view, these fears are largely unfounded.
"The Government will consult British Gas and their unions closely at all stages about the detailed implementation of these decisions so that the impact on employment prospects can be minimised.
"The Government are well aware that a change of the kind they have decided upon will represent a radical move away from the gas appliance market as we know it today.
"But the Government would not have reached the decision which they have reached if they did not believe it to be right, justified and necessary, and a measure essential to the enhancement of competition in the public interest.
"We believe also that as this sector evolves away from its present monopoly dominated structure there will be positive benefits alike to the consumer and to gas appliance manufacturers, as competition between retailers develops to meet consumer needs and satisfy consumer demand, providing, as enhanced competition always does, wider choice and better service."

§ Lord Ponsonby of Shulbrede
My Lords, may I first of all thank the noble Lord for repeating the Statement made in the other place detailing the Government's reaction to the MMC report—that is, the Monopolies and Mergers Commission report—published almost a year ago today and based on evidence taken in 1976. This is an appalling Statement. It flies right in the face of the expressed wishes of the National Consumer Council, the manufacturers the gas industry and the Gas Consumer Council. The only part of the industry which I understand is in favour of this Statement is the retailers.
This Statement and the intentions embodied in it will create a potentially serious industrial situation within the British gas industry where none has existed before. Your Lordships will know that the record of industrial relations in the gas industry has been almost perfect. These proposals will destroy that record. At a stroke, the Government are proposing—and I give these figures on the basis of the estimates made by the unions involved—to create between 20,000 and 30,000 job losses in the gas industry.
If British Gas is forced to sell off its showrooms, it will not be able to maintain the same level of service to its customers. Inevitably, the public will have to call more and more on the services of private gas installers—those who work for the Council of Registered Gas Installers (CORGI). The safety record of those involved in gas installation shows that a gas installation made by a member of CORGI is fifteen times more likely to result in an accident than one which is made by a Gas Board employee. That is because the employees of CORGI firms are not necessarily trained fitters. There must be a very great deal of public concern about this safety aspect.
The Minister said that the Government would start consultation with British Gas about the implementation of this Statement, and I understand that consultations started at 3 o'clock this afternoon between the Minister and the chairman of British Gas, and that there has been, bar one general discussion between British Gas and the Government, no consultation about the proposals in this Statement before.
The noble Lord indicated in the Statement that legislation could be needed before, in fact, British Gas takes the action proposed in the Statement. We believe that it will be necessary for the Government to bring forward legislation. We shall oppose that legislation, and shall seek to have it reversed in the next Parliament. I would ask the noble Lord to say what compensation the Government propose should be given to British Gas for the disposal of a successful business.
Briefly, what this Statement envisages is poorer safety in the gas industry, higher prices, and worse services for the consumer.

Lord Winstanley
My Lords, on behalf of my noble friends on these Benches, I should like to join with the noble Lord, Lord Ponsonby, in thanking the noble Lord for repeating the Statement made in another place. The noble Lord will understand that this is a very complex Statement, with very important and serious implications for those who work in this industry and for those who depend upon it for goods and services, and indeed for consumers in general. The noble 713 Lord will understand that we shall wish to consider this Statement carefully before reaching any final conclusions. First, does he agree that this present tendency of the Government to privatise, to sell off or otherwise to eliminate highly profitable sections of nationalised industries, does not hold out a helpful example to people working in those industries? Secondly, is the noble Lord aware that the gas showrooms provide a whole series of services, apart from selling goods? From my own knowledge I can ask, is he aware that they give advice on safety, on energy conservation and on the economic use of fuel? Also they frequently give advice to elderly people on heating costs and heating allowances and help with matters of that kind. Finally, in the event that the gas showrooms are phased out and this void is left which will certainly not be filled by the commercial operators, have the Government any plans for replacing the important services at present being provided by the gas showrooms?

§ Lord Trefgarne
My Lords, may I first take the point made by the noble Lord, Lord Winstanley. As I said in the Statement—and I appreciate that the noble Lord may not have had a chance to study it—it is the Government's intention that British Gas should maintain an adequate number of contact points for the public so that the advice to which the noble Lord referred and some of the other services and activities which are presently carried out in gas showrooms, as, for example, the payment of gas bills, should continue to be possible on a local basis. It is the retailing activities on which we have made the decisions which are contained in the main thrust of the Statement.
As for the points raised by the noble Lord, Lord Ponsonby, he started with what I must tell him is a wholly misinformed, inaccurate and quite wrong condemnation of the activities of the private installers. The CORGI installers are just as good in terms of safety as the British Gas Corporation. There are no statistics which show that they are less efficient than British Gas. What is the case is that there are a few "cowboy" installers who are not covered by the CORGI scheme. It was to the CORGI scheme that the noble Lord, Lord Ponsonby, specifically referred. It is the "cowboy" installers who perhaps in some cases are not up to the required standards; and we shall want to ensure than any disadvantages of that nature are not continued in the proposals we shall be bringing forward. The insinuation—and I can call it no less—made by the noble Lord, Lord Ponsonby in that respect is, as I say, quite wrong and I hope that the noble Lord will not persist with it.
As for employment, a point which the noble Lord also raised, as I said in the Statement, 20 per cent., or even fewer, of British Gas employees in the showrooms are presently engaged on retailing activities so that it is a small percentage that will be directly concerned in the phasing out of the retailing activities. But I am sure that it is not beyond the wit of British Gas to ensure that redundancies on any significant scale do not occur.

§ Lord Mottistone
My Lords, is my noble friend aware—

§ Lord Mottistone
My Lords, I think we speak from alternative sides of the Chamber, do we not?

§ Lord Denham
My Lords, the generally accepted point of view is that we do go from one side to the other. I think that is right. I think that my noble friend got up before the noble Baroness did, but certainly the noble Baroness got up soon after. I think it was my noble friend who rose first.

§ Lord Mottistone
My Lords, perhaps I might continue with my question to my noble friend.

§ Lord Kennet
My Lords, will the House allow me to speak as Chief Whip of the SDP, to remind the noble Lord the Government Chief Whip that what he has just said is not entirely in accordance with the private agreement reached, and to ask the forbearance of the House when I say that we shall raise the matter again in private?

§ Lord Denham
My Lords, we have had discussions, of course, on various points outside the House, but I think it has been generally agreed that at the specific moment the noble Lord and his friends who find themselves sitting on that particular Bench do not get any particular preference in forms of statements.

§ Lord Mottistone
My Lords, is my noble friend aware that his remarks will be welcomed as bearing out what the Monopolies and Mergers Commission recommended and that it will be unquestionably in the interests of consumers? But is it not a very long time to phase out the retailing operation over the whole of five years? Is there any possibility that when experience has been gained after, say, two years this process could be expedited and that the three years that the Monopolies and Mergers Commission recommended could be adhered to?

§ Lord Trefgarne
My Lords, the five-year period to which I referred in the Statement was arrived at after a lot of careful consideration. I think that there are dangers in seeking to expedite this process too rapidly. That was why we took the decision, as we did, that the three-year period recommended by the Monopolies and Mergers Commission was unduly hasty. There are risks of putting too much property on to the market at the same time, although I should say in parenthesis that not all the gas showrooms are held on a freehold basis. But, having regard to all considerations of that kind, we came to the conclusion that five years was the right time.

§ Baroness Burton of Coventry
My Lords, I was under the impression that as we, the Social Democrats, had been given a copy of the Statement, after the official Opposition and Liberal speakers had asked questions we would come next. I apologise to the noble Lord the Chief Whip, but I believed that to be so. We on these Benches do not agree with what the Government propose to do. I should like to ask three questions. First, we feel that the presence of the showrooms in the high streets and the service provided from them are both of real benefit to the consumer. I should like to ask the Government whether they believe that the 715 same level of service will be provided by a fragmented network of private sector retailing outlets? That is something we cannot accept.
If I might move on to the monopolies point in the noble Lord's Statement, we must accept that there is a technical monopoly in gas appliances. I even think that service to consumers would be improved if steps were taken to reduce this monopoly. Certainly I think that the corporation should become more competitive in its retailing. I believe that monopolies do not create competition or the best choice of reasonably priced new products. Arising out of that, I want to ask the Minister—and I hope that he will agree with me—in view of that, can the Government not consider even now at this late stage the proposition that retailing and maintenance become separate sections as distinct and accountable parts of British Gas? Can he look at that? We are interested in what the noble Lord said about steps to be taken under the Fair Trading Act. We all hope to hear more of those.
But I find—and this is my third question—that the answers that the noble Lord, Lord Trefgarne, has given to previous questions were rather confusing. He says in the Statement that the Government have decided that the corporation should be required to cease retailing domestic gas appliances in their showrooms over a five-year period. Then he says that, in this context, the Government are not proposing to curtail British Gas servicing and their installation activities. Finally he went on to say that the Government would wish British Gas to maintain some customer contact points. I suggest that these statements are all contradictory. As we understand it, over a period of time the Government are proposing to sweep away all the retailing shops of British Gas. If they are not proposing to do that, may we be told what that means?

§ Lord Trefgarne
My Lords, I do not think there is any contradiction in what I have said. British Gas will be remaining in the servicing and installation businesses. However, those businesses are not necessarily conducted from the gas showrooms, which are concerned with retailing gas appliances, on which less than 20 per cent. of the staff time is employed. At the gas showrooms there are also certain other activities, for example, the collecting of accounts. Those activities will continue at the contact points to which I referred.

§ Baroness Gaitskell
My Lords, may I ask the Minister very briefly this question: How many consumers—housewives—did the Government consult about this act of vandalism? We have had it before; we have been here before, and none of the women I talked to about this—and, after all, one knows about these shops closing—has been in favour of it at all. I think that it is an absolute scandal.

§ Lord Trefgarne
My Lords, this decision is, of course, in accordance with the main thrust of Conservative policy which was put to the electorate in May 1979, and the decision that they took then was a clear one.

§ Lord Noel-Baker
My Lords, looking back to the 716 early years of nationalisation when, as Minister of Fuel and Power, I was very closely concerned with the matter, would the Minister agree that gas suppliers are a national monopoly and that the nationalised board, by suppressing small gas stations of very low efficiency and introducing a grid, have made enormous profits and there have been enormous advantages for the consumer over all the years since then? Would he agree that the supression of the showrooms must inevitably reduce contact with gas consumers, and that the corporation will literally be unable to give the same kind of service, about which the noble Baroness has spoken, to consumers of all kinds that it gives today? May I express the hope that before too long a Labour Government may be able to reverse this decision?

§ Lord Ponsonby of Shulbrede
My Lords—

§ Lord Trefgarne
My Lords, be that as it may, the fact is that in our view the consumer is much better served by having a wider range of suppliers from whom he can purchase his equipment than he is by having to go almost exclusively to the showrooms of the British Gas Corporation, which is the situation at present. As the report from the MMC showed, the results of this monopolistic situation which has existed for a long time now have been that the prices have been kept high and competitive choice available to the consumer has been much less. Those are the evils that we seek to correct.

§ Baroness Macleod of Borve
My Lords, I am sorry but I cannot agree with the statement that my noble friend has made today. I was the first chairman of the National Gas Consumer Council. I was chairman for five years. In that time I was able to assess what British Gas does for the consumers. It is only on the subject of safety that I am worried this afternoon, primarily because to my certain knowledge the people who give after-sales help to those who buy gas appliances, from British Gas or any other outside outlets and those who service these appliances, have to be highly trained. One cannot take somebody off the street—a plumber or anyone like that—and say: "Go and service this piece of equipment". I hope that the Minister will agree with me that safety for the consumer is paramount, and that wherever the gas appliance is sold there must be back-up sales staff who are highly qualified.
Reference has been made to CORGI. That is an excellent organisation. They have people who can give back-up sales advice. But, as I understand it—and I have not had the pleasure of a copy of the Statement—other private people will now be able to sell gas appliances without, presumably, the back-up sales staff. Is my noble friend aware whether British Gas and their staff will agree to service appliances that they have not sold? They have never done so in the past. I should be very interested to know whether the Minister has come to any conclusions with the British Gas Corporation on this subject.

§ Lord Trefgarne
My Lords, as I said in the Statement, the installation and servicing activities of the British Gas Corporation are unaffected by the announcement that we have made today. However, it will continue 717 to be possible—as it is now, for that matter—for independent gas installers to do the work when the customer so chooses. We continue to think that it is the customer who is entitled to have the last word in this matter. I absolutely agree with my noble friend when she says that safety is of paramount importance. We shall certainly ensure that arrangements are made to secure the necessary safety levels in this matter, and we shall, if necessary, consider what "policing" arrangements can be brought into force.

§ Lord Ponsonby of Shulbrede
My Lords, I was seeking to intervene a few moments ago when the noble Lord, Lord Trefgarne, was replying to my noble friend Lord Noel-Baker, when he referred to the monopoly situation revealed in the MMC report. What I wanted to draw to his attention was that this report was based on the retailing position in the industry in 1976—five years ago—and since that time there have been considerable additional outlets for gas appliances outside the showrooms of the board. The other point which the noble Lord took me up on regarding safety and its being 15 times more likely for there to be an accident if an installation is made by a non-employee of the Gas Board, I would agree with the noble Lord that I should have referred to a non-Gas Board employee as opposed specifically to somebody working for a CORGI firm.
The final point—which several noble Lords have touched upon—is the role of gas showrooms in helping consumers generally. The point here is that although only 20 per cent. of the time of staff in gas showrooms is spent in retailing, it is the fact that the retailing which takes place enables the other 80 per cent. of the work to be done.

§ Lord Taylor of Gryfe
My Lords, may I ask the Minister two questions? Is it still the standing instruction of the Government to the nationalised industries that they should in fact behave commercially? If that is the standing instruction, is this decision justified on commercial terms? The retail trade is not particularly lively at present. Due to the high rates that exist in the country at the moment, property values tend to be depressed. May I ask whether anyone acting commercially at the board would regard this as an appropriate time for disposal of these assets? May I also ask whether the realisations of these disposals will affect in any way the external finance limits and the investment ceilings of the board? Will they be credited with realisations of the assets for further investment purposes?

§ Lord Trefgarne
My Lords, I am afraid that I cannot answer the last point without some consideration. I shall write to the noble Lord. On the wider point of the need for the nationalised industries to operate on a commercial basis, we certainly continue to think that that is the right way to proceed. In this case that is not what was happening. The Gas Corporation were in an almost wholly monopolisitic situation. Although, as the noble Lord, Lord Ponsonby, said, in the past two or three years there have been a few additional outlets, the fact still remains that the British Gas Corporation had far and away the largest retailing operation in terms of gas appliances.

§ Lord Soames
My Lords, I know that there are a number of noble Lords who would like to ask more supplementary questions; but this debate has been going on for the best part of half an hour. We have a lot of business before us, and if I get right the feeling of the House, it is that we should return to the main business of the House today.