§ 4.32 p.m.
§ Report stage resumed.
Lord Mishcon moved Amendment No. 3:
Page 2, line 10, at end insert—
("( ) The Secretary of State shall not give consent pursuant to subsection (2) above unless he has submitted to Parliament the Articles of Association of any equity oil subsidiary to which his consent shall apply.").
§ The noble Lord said: My Lords, I hope that by reason and brevity, and by being non-controversial on this amendment, I shall obtain the approval of your Lordships for it and penetrate what otherwise seems to be the impenetrable harrier of the opposition of the noble Earl the Minister to any amendments which come from this side. In being non-controversial, may I immediately refer your Lordships to the object of this amendment? It is purely and simply to see that some very important memoranda and articles of association are in fact seen by Parliament before there is any question of a consent being given by the Secretary of State to any disposal of an equity subsidiary.
§ It is known of course that the intention is to hive off 51 per cent. of the shares of Britoil, and, for the purpose of this amendment, one has to accept that that is a perfectly proper thing to do. Of course, there is no limit to what can be hived off in Britoil, with all its important powers, as your Lordships may have seen from the draft memorandum and articles of association in regard to Britoil, to which I will refer in a moment. There may be the possibility of disposing of a great deal more of the equity of this company which will be possessed of such vital national assets; and, quite obviously, the great need is to see that in the articles of association of Britoil the country is properly protected when such a transfer takes place.
§ The history of the memorandum and articles of Britoil is not a very good one from a Parliamentary point of view. They were not produced at the Committee stage in another place until the very last stages of the Committee deliberations. The result of it is that, if your Lordships will refer to the Official Report 126 of the Committee stage in another place, you will see that one hour was allowed for the whole of the discussion on this vital question of the articles of association.
§ What is so vital about it? It is that, looking at the draft articles produced at the last moment, the protection of the national interest seems to me to be two-fold. The first protection is in regard to the directors whom the Secretary of State can nominate. Your Lordships will find in the draft articles, as I have seen when I have looked at them, that the Government are entitled to appoint, at the very maximum, three directors; then, if the percentage of shares owned in the name of the Secretary of State drifts to between 35 per cent. and 20 per cent., one director; and then, if it goes below 20 per cent., no directors at all. So director support and director protection for the country in regard to this vital company ceases to exist below 20 per cent.
§ My Lords, if indeed it had the one director, which it would have between 20 per cent. and 35 per cent., in these articles I can find no provision (it may be that I am at fault, and I would be so grateful to the Minister if he would correct me if I am wrong) for an alternate director to be appointed. That means, of course, that, if the one Government nominee happens to he ill or absent on business elsewhere, then there is no Government representation at all at board meetings where the percentage of the Government ownership of shares drifts below 35 per cent. but not below 20 per cent.
§ The only other protection that is given is the holding of a special share. I have looked at the articles to try to see what happens in regard to the holding of this special share. In certain contingencies it has a great deal of power, this special share which will be vested in the Secretary of State, because, when those contingencies occur, the special share will carry voting rights equal to one more than all the other voting rights put together. Your Lordships may think that that is a written-in protection, but is it? Is it a protection in regard, for example, to the shares in this company going in very large measure to non-resident shareholders? If your Lordships will look at—I believe my memory is right—Article 71 of the draft articles, there is there a provision that if the holder of this special share believes he has reasonable grounds for thinking that the control of the board may in fact be sought by some person or persons connected with each other, then he has certain rights, which again invoke this superior voting power which he has under the articles.
§ It was asked in a very brief debate in the other place: what surveillance has the Secretary of State in mind in this connection? Is there some watchdog procedure that can do what people in the City have, it seems, been unable to do? Are they going to be able to stop what are called dawn raids upon the shares? Are they going to be able to run such special inquiry and detective agencies as will enable them to protect the country against, as I say, a holding, and a substantial holding, being acquired which may well, directly or indirectly —I am using the words of the article—seek to control the board'?
§ But, my Lords, that is not the end of the story, because again my recollection of the draft articles 127 that I have seen is that there is a provision in them that the Secretary of State can at any time, if he requires it, get the company, Britoil, to redeem the special share he has got, and to do it at par. This was raised in another place, and thereupon the right honourable gentleman the Minister, obviously realising that this would remove every bit of protection for the nation, gave an undertaking on behalf of the Government that such a step would never be taken without his going to Parliament and getting its approval. If a Minister gives an undertaking on behalf of the Government it is churlish to say anything that casts any doubt upon the sincerity of that exercise, and I certainly do not do that. But a Minister can bind only his own Government; he cannot bind any successive Government. Yet here is this article, to be seen by everybody, namely, that the whole of the protection can go if a Secretary of State happens to be a member of a Government who believe that privatisation ought to be 100 per cent. in regard to the vital assets of this country. Such assets will now be vested in a private company controlled by private interests, while the Government say that they are protecting the interests of the nation by keeping a minority shareholding.
§ What I and my noble friends have asked for in this amendment is purely and simply that, before any consent is given to the transfer of shares by the Secretary of State in these vital subsidiaries—and we are thinking of Britoil—the memorandum and articles of association (and I emphasise the articles much more than the memorandum in the amendment), which deal with the constitution of the company, the protection of shareholders and the protection of the nation, shall at that date have the approval of Parliament. Without this amendment, without this protection, Parliament, in my submission, is not doing its duty, either to itself in regard to the supervision that it ought to undertake, or to the nation, which looks to Parliament, and is now looking to this House, to see that at least this protection is given. I repeat, the amendment is non-controversial in regard to any attack on the policy of the Bill. It accepts the policy of this Bill, but merely seeks proper protection for the nation. I beg to move.
§ The Earl of Mansfield
My Lords, we had an interesting debate on the articles of Britoil at some of the earlier sessions on the Bill. It was a well-informed debate. Noble Lords obviously had looked at the articles, as had the noble Lord, Lord Mishcon. The articles have been available since early March. Therefore, I must say that I was slightly surprised to see this particular amendment put down in the way that it was, in effect to make it a condition of the Secretary of State's consent to a disposal of shares by BNOC that the articles should be submitted to Parliament. I should have said that we had already fulfilled that condition. If it is the submission of the noble Lord, (as I think it is) that when he used the words "submit to Parliament" he means that Parliament should nit-pick over all the articles in the way that the noble Lord, Lord Taylor of Gryfe—who I am sorry to see is not in his place—would deprecate, then I adopt the same view as Lord Taylor.
We have the articles as they stand and any changes 128 which Britoil wish to make to them are likely to be technical. We have set out the objectives that the articles, particularly those concerned with control, are to achieve and we believe that they provide effective safeguards. I do not believe, bearing in mind the complexity and length of the document, that the final version will be substantially different from the one we have already debated. Once the articles are adopted they will be subject to public inspection just like the articles of any other limited company, and, for the reasons I have given, I do not believe it is at all suitable for articles to be submitted to the Parliamentary process, and still less for a second time.
In order to estimate what worth there is in the noble Lord's submission, one must try to look at the dangers that it is sought to provide for. What happens if there are attempts to obtain control of Britoil, although there would be a sharing of 50 per cent. or less? First, there would have to be control of the board or its composition, and that will be fundamental to any attempt to take effective control of the company. A predator, if I may so describe such a person or organisation, if he were seeking to obtain control of the company through a shareholding as I have described, would be caught under Article 71(b) as soon as he made any attempt to control the board or its composition. Article 71(c) adds a further deterrent for anyone who might think he could override the other safeguards by obtaining a majority of the voting shares of the company. Artilce 93 includes unwarranted interference in the management of the company. If, and I do not think it likely, one or more of the existing directors were already under the influence of the party attempting to control the company, they would have to retire with other non-Government directors at the next annual general meeting and the Government would veto their re-appointment.
I do not think, although a certain amount has been said about the City in the debates about the Bill, that we can disregard the City takeover code, although it does not have legal force. We thought it right to assume that the code would be obeyed, but we have not relied on it. The code could usefully reinforce the safeguard provisions. For instance, any shareholder or shareholders acting together who obtain more than 30 per cent. of the voting shares in Britoil would almost certainly be obliged to make an offer for more than 50 per cent., and that would trigger the power at Article 71(c) unless consent was obtained from the City takeover panel not to do so; and that would be a valuable adjunct to the provisions of Article 71(c).
To sum up, we want Britoil to be like any other Companies Act company, without any special statutory provisions or restrictions or encumbrances—and by that I mean we want its articles to be the same as any other companies' articles; but in the particular circumstances we sought to put in safeguards such as those I have described, and the noble Lord, Lord Mishcon, has referred to some of them.
The last point I want to make is this. Supposing that Parliament—and I again use the somewhat inelegant word—nit-picks over these articles in the way in which the noble Lord suggests, it would cease to have any practical effect once the company had been floated off because it would be open to the shareholders at general meetings to amend the articles long after the 129 parliamentary procedure had died away and had been forgotten, although I concede that there would be safeguards attached to the special shares, and any attempt to reduce the effect that they have on the management of the company. For all these reasons, I think that what the noble Lord has suggested is undesirable and perhaps he will withdraw his amendment.
§ Lord Mishcon
My Lords, if I were a person who habitually indulged in dramatic language, I would say that I was broken-hearted and disillusioned by the noble Earl's reply. But, being a man using moderate words, I shall merely say that I am deeply disappointed because the Minister has not answered my points at all. I took the trouble not to indulge in some hypothetical case as to how these articles might be altered in the future. I dealt with their deficiencies at the moment; I said that there was supposed to be director protection. The articles provide where there will not be any directors at all, and in one case, a 20 per cent. to 35 per cent. shareholding, only one director, and no provision for alternate directors, and so on. I then dealt with the power to redeem the special shares, so that the special share does not exist. I asked what protection there could be against successive Governments asking for that share to be redeemed and, therefore all the protection removed.
The noble Earl the Minister did not reply and has to admit therefore that this is what a successor Government could do. This is only operative when the transfer of shares takes place and the Secretary of State consents. It is an insult, if I may say so, without using dramatic language, to Parliament to say that Members of this House or of another place would indulge in a nit-picking exercise in order to say that consent should not be given because Article 5 ought to be altered by the deletion of the word "the" and the insertion of the word "a". Obviously, this House is too serious for that, and I make no comment on another place because my noble friend's friends are in power there and I would therefore wish to compliment them by saying that they would see that such a situation of nit-picking was not allowed to take place.
Unless the noble Earl can say that he has second thoughts about this or will look at it before the Third Reading stage—he knows perfectly well that I have no alternative but to withdraw this amendment because I do not want to take the time of the House by voting upon it—then I ask the noble Earl, with the leave of the House, to address us once more very shortly and say he will at least consider the points that I endeavoured humbly to make, none of which has been answered.
As before, the noble Earl is silent. He was silent before even though he spoke words. In the circumstances, I have no alternative but to withdraw the amendment and to consider what steps ought to be taken at a later stage of the Bill.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 4 not moved.]
§ Clause 2 [Provisions supplementary to Section 1]:
§ 4.52 p.m.
The Earl of Mansfield moved Amendments Nos. 5 to 8:
Page 2, line 38, at end insert (" to secure increases in the capital of subsidiaries ").
Page 3, line 5, leave out (" specified ") and insert (" prescribed ").
Page 3, line 5, leave out second (" or ").
Page 3, line 7, leave out (" specified ") and insert (" prescribed ").
§ The noble Earl said: My Lords, we now come to Amendments Nos. 5 to 12 inclusive which are all Government amendments. I could speak to them altogether but I do not think I will do so. Although it might save time, I do not think that it would add to the clarity of our debate. What I intend to do is move Amendments Nos. 5 to 8 en bloc because they are drafting amendments. If any noble Lord would like me to go into them of course I should be—I do not say happy—resigned to doing just that.
§ I intend to take Amendments Nos. 9 and 10, and finally Amendments Nos. 11 and 12. On the basis that Amendments Nos. 5 to 8 are drafting improvements, I beg to move them.
Lord Bruce of Donington
My Lords, this particular clause as a whole deals with the ability to manoeuvre and transfer assets and liabilities from one subsidiary to another as a part or as a whole of some projected disposal. It is a kind of juggling clause. I should like to know why it has been found necessary at this stage to insert Amendment No. 5. I should like to know why it has been necessary at line 38 to insert the words:to secure increases in the capital of subsidiaries ".I should like to know the circumstances in which it is envisaged that the capital of a subsidiary ought to be increased prior to a disposal.
§ The Earl of Mansfield
My Lords, Amendment No. 5 ensures that the corporation has for the purpose of facilitating a disposal the power to increase the capital of subsidiaries in addition to the power it already has to establish subsidiaries. This will enable BNOC, which has already established Britoil as a £100 company to increase Britoil's share capital prior to its transfer to the Secretary of State.
§ On Question, amendments agreed to.
The Earl of Mansfield moved Amendment No. 9:
Page 3, leave out lines 9 to 32 and insert—
§ The noble Earl said: My Lords, Amendment No. 9 largely repeats the present subsection (3) and paragraph (a) of subsection (4). There is, however, a change to the present subsection 3(b) which I think will be welcome as well as being important.131
The amendment introduces the words:
for the purpose of dealing with matters arising out of or related to the transfer ".
This is specifically to ensure that the participation agreement between BNOC and Britoil can be put in place as part of the scheme.
§ This meets, I hope, a major concern expressed by noble Lords opposite in moving Amendment No. 1 that we discussed earlier. This was that the sale of Britoil shares should not go ahead unless the participation agreement giving BNOC access to Britoil's oil had been settled first. This concern was also expressed in another place, and we have considered carefully the points made there ever since and during the passage of the Bill through your Lordships' House.
§ The Government originally envisaged that the participation agreement would not form part of the scheme, although the scheme would be helpful in securing for BNOC certain participation rights. The amendment is designed to make clear that the participation agreement—a matter arising out of or related to the transfer—can be put in place as part of the scheme.
§ The widening of the vires in this way would ensure that BNOC's participation agreement with Britoil can be dealt with under the scheme at the time when the oil-producing assets are transferred, rather than being handled separately. This will ensure well before flotation that there is no doubt about BNOC's and Britoil's participation commitments. It underlines the importance we attach to these arrangements and the contribution participation oil makes generally to helping secure the nation's oil supplies. I hope, therefore, that it will be welcome to the House and not least to noble Lords opposite. A summary of the agreement, in accordance with the Participation Agreements Act 1978, will be laid in the Libraries of both Houses in the normal way.
§ Turning to Amendment No. 10, the new paragraph (a) of subsection (4) introduces the concept of consideration into the scheme-making powers. As presently drafted, the Bill envisages the transfer to BNOC's oil-producing assets to Britoil with the corporation receiving no consideration in return. Equally, Britoil would issue shares to BNOC without any consideration being attached to the issue of such shares. I am sure noble Lords will appreciate that such transaction would create certain problems and technical difficulties in constructing balance sheets for Britoil and BNOC after the transfer of assets. We have examined in detail the various problems that would arise, not least those relating to taxation.
§ By making the transfer of assets for consideration the transaction is simplified and becomes a two-way affair. In return for the oil-producing assets, Britoil would issue to BNOC securities prescribed under the scheme. "Securities" is defined in a later amendment (I think, No. 57) to Clause 35 as including shares, debentures or bonds which could take the form of loan stock. We have therefore taken account of a point which was raised in another place about the possibility of transferring any commencing debt under Clause 4 to Britoil. No decision on this has been taken but we are making sure that the flexibility is there.132
§ Paragraph (b), together with the remaining paragraphs of subsection (4), provides for continuity in the treatment of assets and liabilities as between BNOC's and Britoil's accounts. These paragraphs arc designed to reduce the accounting problems inherent in the transfer of any business from one owner to another and to simplify the technical complexities of establishing Britoil's opening balance sheet. They also provide flexibility within the scheme to determine the best capital structure for Britoil prior to flotation.
§ Paragraph (b), therefore, provides that the value of assets and the amount of liabilities appearing in Britoil's opening accounts immediately after the transfer would be the same as if they had remained with BNOC. it specifies, therefore, that the book values at which the assets are to be transferred are to be the values that would have been appropriate if BNOC had prepared statutory accounts just before the transfer. This continuity ensures that the book values assigned to the assets and liabilities in BNOC's accounts are reflected in Britoil's accounts.
§ Without this provision, different values and amounts may have to be entered into Britoil's accounts, which in turn could affect the level of reserves in the company's balance sheet. The meaning of statutory accounts is given in Amendment No. 12 and follows the definition in Section 10 of the Petroleum and Submarine Pipelines Act 1975.
§ Paragraph (c) creates a distinction between distributable and non-distributable reserves, to reflect the orthodox capital structure of a normal company. It enables the scheme to establish a reserve, not exceeding the accumulated realised profits of BNOC at the transfer date, which would be available for distribution to shareholders.
§ Paragraph (d) sets out a formula for accommodating any share premium account arising as a result of the issue of shares in consideration of the transfer. It provides that the amount of distributable reserves created under paragraph (c) should be deducted from the share premium account created under paragraph (b). This is, therefore in the nature of a balancing item in Britoil's books. Thus the nominal value of the shares issued in consideration, together with the distributable non-distributable reserves and any debt would equal the net book value of the assets transferred to Britoil.
§ Lastly, paragraph (e) repeats the sense of the present subsection (4)(b) by allowing the accounts to be drawn up as if anything done by BNOC had been done by Britoil in respect of the assets and liabilities transferred. This again reflects the need for continuity, particularly for the purpose of establishing taxable gains or losses on the subsequent disposition of an asset acquired through the scheme.
§ I must apologise for speaking at length on these two amendments but they are complex and they are important. For the moment, I beg leave to move Amendment No. 9.
Lord Bruce of Donington
My Lords, the noble Earl has been kind enough to range fairly widely over Amendments 9 and 10. I note in particular his reference to paragraph (b) of Amendment No. 9 which has been inserted, he informs me, among other things, to ensure that the participating rights of the nation can 133 in fact be protected within the provisions of that clause. Of course, the clause merely enables it to be done, so that the things we requested to be done in Amendment No. 1 can be carried out. Unhappily, they do not constitute any kind of confirmation that they will in fact be done. That is why it was necessary for us to move the first amendment.
I am afraid that in connection with that aspect we shall have to return once again to this matter on Third Reading, and it may well be that if this particular clause is inserted into the Bill at this stage we may have to come back to subsection (3)(b), as it will then be, in order to see whether some further amendment could be inserted there, making it obligatory for the participating rights to which I have referred to be taken into account. Nevertheless we are grateful for progress. The Government will he enabled to do what they say they will do. That is a very considerable step and my noble friends and I are deeply grateful for it.
When we come to the remainder of the amendments, and particularly No. 10, I must confess I shall have to study these proposed subsections in conjunction with the Bill and with the speech the noble Earl has been kind enough to make in this connection, before recommending to my noble friends that we come to any firm decision upon it. Naturally, we are always very grateful when matters of account come to be cleared up, because normally the House does not very much like dealing with those matters. Equally, the fact that some endeavour has been made here makes it all the more necessary that one should exmaine it very closely.
Am I to understand from the noble Earl that the sole purpose of this is to enable, as is done in current takeover positions and particularly after the passing of the 1980 and 1981 Companies Acts, the profits that would have been distributable by the transferor company to be distributed by the transferee company —in other words, they would avoid capitalisation and would not be available for dividends? If I have interpreted correctly what the noble Earl said, that would appear to be the intention.
In this connection it has not been the policy of BNOC to make any distributions by way of dividends. It has been building up its reserves and has discharged its taxation. I should like an assurance from the noble Earl, particularly in view of Amendment No. 11, that the profits which have been built up by BNOC, either in itself or in its subsidiaries, and which have been earned up to the date on which disposal will take place will be retained for further development pruposes and will not become available for dividend—otherwise, of course, an asset-stripping position would arise. Here is BNOC, having built up its own position and its subsidiaries, having refrained from making any dividend distributions and building up its reserves, being told by the Government to flog parts of it off as a private enterprise so that it finds itself in possession of distributable reserves and proceed to make dividends on them. Maybe that is the purpose of the exercise. On the other hand, it may well be that I have got it wrong, but the noble Earl must agree with me that the amendments are somewhat complex. They have not been debated in any great detail in Committee and we have had no documentation upon them.
134 The noble Earl has, however, referred to the taxation aspects of the matter and I should like some explanation from him. As he knows, when assets are disposed of under the arrangements that are so far contemplated, all that BNOC gets back—and exactly the same considerations apply to British Gas—is the cost of the disposal. The sale of the assets does not get back into the pockets of the corporation the actual money which passes on their transfer. In other words. BNOC loses an asset and an asset completely disappears from its balance sheet. I have already spoken to that in Committee.
On the assumption that that is so and that the Government do not accept Amendment No. 25, which deals with this aspect of the matter, will the noble Earl give an assurance that, in the event of such an arrangement coming within the functions of Clause 2, the loss that is incurred by BNOC or by any one of its subsidiaries as a result of what amounts to Government confiscation will be available for carry-forward as a loss for corporation tax purposes against any future profits that might conceivably be made by the truncated BNOC, and the subsidiaries that remain, and that such a loss will be available for group loss relief under the provisions of the Act on corporation tax? These are matters which ought to be cleared up.
I do not ask the noble Earl to answer those questions now, because they are somewhat complex and he may wish to take advice upon them. But they are matters that arise whenever there is a massive redistribution of function, of assets and of liabilities, as well as the various other manoeuvres that are covered in these clauses. As I said, I am not prepared to resist these amendments at this stage, but we should like to have a further opportunity of looking at them when we have seen a report of the Minister's speech, and have had the opportunity of studying it further.
§ Lord Lloyd of Kilgerran
My Lords, while I thank the noble Earl, the Minister, for his careful explanation of the scope of Amendments Nos. 9 and 10, may I say that, like the noble Lord, Lord Bruce of Donington, I should like to reserve my position as to whether paragraph (b) in Amendment No. 9 covers adequately the position which was raised on Amendment No. 1—namely, does it preserve the position in regard to participation oil rights given to the corporation under licences granted in the fifth and sixth rounds? As to Amendment No. 10, I, also, have not had an opportunity of making a fully study of it and therefore, like the noble Lord, Lord Bruce, I reserve my position on that.
But I should like to raise a point in regard to the scope of the words "rights" and "liabilities" in both amendments. I do that for two reasons. First, Clause 2 states in subsection (1) that it is for the purpose of facilitating the eventual disposal under Section 1(1) that the rest of Clause 2 is to follow. It seems to me on glancing through these amendments that certain difficulties arise in the field of intellectual property—patents, trade marks and know-how agreements.
The second reason why I raise this point at this stage—and let me say at once that I make no complaint at all on the matter—is that I raised the question of intellectual property rights on 11th April at the Committee stage. At column 157 in the Official Report, 135 the Minister said that he would write to me about this matter, but I have so far not had that letter. Also, if I may support my plea for further information, on 18th May at the Committee stage, the noble and learned Lord, Lord Mackay of Clashfern, also said at column 638, on a different matter, but one involving intellectual property rights, that he would be adding a postscript to the letter from his colleague the noble Earl, the Minister.
I make no complaint, but I should therefore like to ask one broad question. I could, of course, have put up to the Government certain examples of difficulties that might arise in the intellectual property field. I could have put forward scenarios, but I do not want to take up the time of this House in that way. I am going to ask a comprehensive question and, of course, I do not want to have an answer tonight. Can the Government give an assurance that the scope of these clauses has been considered in the context of any intellectual property rights and liabilities, which could quite easily arise in dealing with these transfers?
§ The Earl of Mansfield
My Lords, if I may deal first with the noble Lord, Lord Lloyd of Hampstead, I am very surprised that—
§ Lord Lloyd of Kilgerran
My Lords, the noble Earl is having difficulty about my name. May I announce publicly in this House that my name is the Lord Lloyd of Kilgerran? It is a little Welsh village, not far from Cardigan town.
§ The Earl of Mansfield
My Lords, all I can say to the noble Lord is that jolly good Peers have come out of Hampstead before now. So I was not intending in any way to insult him. It was only my confusion, because I remember approving—
§ Lord Lloyd of Kilgerran
My Lords, I hesitate to interrupt the noble Earl again. But I did not feel insulted in any way, as a Welshman, by being called the wrong name. I was merely trying to assist the noble Earl, the Minister, in getting the matter right at this stage.
§ The Earl of Mansfield
Yes, my Lords. I do not think we need worry about the nomenclature of Peers any longer. I was confused, because I approved a letter, and my noble and learned friend confirmed that he had a hand in it from his eyrie where he dispenses legal advice. The letter went to the noble Lord addressed to the House of Lords and I, for one, do not know why he has not got it. That is why I was covered with confusion and I am very sorry.
I welcome the guarded way in which these amendments have been greeted. I think it is probably better for us all to read the Official Report and then take stock of the position. I will certainly write to noble Lords as soon as maybe and, hopefully, we shall not have to come back to this at Third Reading, because I anticipate that it will be one of those days when the House will be rather anxious to get away.
§ On Question, amendment agreed to.
The Earl of Mansfield moved Amendment No.10:
Page 3, line 36, at end insert—
(" ( ) A scheme under subsection (2) above may also provide that—
§ On Question, amendment agreed to.
§ 5.19 p.m.
The Earl of Mansfield moved Amendment No.11:
Page 4, line 7, at end insert ("notwithstanding any rule of law and the provisions of any enactment ").
§ The noble Earl said: My Lords, with the leave of the House, I can speak to Amendments Nos. 11 and 12 together. Amendment No. 11, which, generally speaking, looks to be of greater significance than perhaps it is, is consistent with the principle established by the earlier amendments of maintaining continuity between the two sets of accounts. It is to enable the assets to be transferred at book value, without the application of the normal company law principle that, where shares are issued in consideration of the acquisition of an asset, the true value of the asset determines the value of the shares issued. Amendment No. 12 gives the definitions of "statutory accounts" and "prescribed", which are two of the new terms introduced into Clause 2. I have already mentioned that the other new term—the word securities "—is defined in a later amendment to Clause 35. I can elaborate on Amendment No. 11, if necessary. In the meantime, I beg to move.
Lord Bruce of Donington
My Lords, I am grateful to the noble Earl. who has given a very modest explanation of Amendment No. 11. When I see at the end of any clause or subsection of proposed legislation the phrase,notwithstanding any rule of law and the provisions of any enactment ",immediately I become a little alert. It seems to me that in putting down the amendment the noble Earl must have had it in mind that there is a possibility that the particular parts of Clause 2 to which he referred were in conflict with some enactment, or were in conflict at some point with the law, whether it be case law, statute law, or whatever else.
137 This will not do. If the noble Earl feels that the provisions of the particular subsections of Clause 2 are likely to be in conflict with the law or with any enactment, he should research it out and find out exactly where there is this conflict, or where there is likely to be this conflict. Then the matter can be dealt with specifically in the Bill by the words "notwithstanding the provisions of such-and-such an Act" or, alternatively, by the words "the provisions of so-and-so shall be amended in accordance with this, that or the other".
But, no. The noble Earl is worried about it, otherwise he would not have put in this phrase. The words: "notwithstanding any rule of law and the provisions of any enactment", are not frivolous. So the fear is real. If the fear is real—I speak as a non-lawyer and in the presence of my noble and learned friend who was on the Woolsack for a long time, so I am subject to his correction—I feel that this is not the correct way to deal with the matter. But I may be naive. If the noble Earl can give me something a little more specific which stands up to the battery of legal talent that I still have available behind me, then I shall be very happy to accept his explanation. At the moment, however, I remain profoundly sceptical.
§ Lord Elwyn-Jones
My Lords, on the face of it, the words of the amendment look very startling, do they not? They shut out the courts. The noble Earl is a distinguished lawyer and I should have thought that he would have resiled against that. It is a lazy way, is it not, of getting around the difficulty in the previous provisions of the clause? One hopes that one can get through the schemes without difficulty. However, to safeguard the position one puts in these remarkable words, "notwithstanding any rule of law and the provisions of any enactment ". It is not a good way to legislate. It is a fall-back position of a somewhat barbarous character, so perhaps the noble Earl will think about it again.
§ The Earl of Mansfield
My Lords, my better judgment told me that I should not have tried to shorten our labours. My less good judgment told me that in his practice the noble Lord, Lord Bruce of Donington, would know what I was talking about and that I would not have to do it. But now I am going to have to do so.
Let me take the first limb first—that is, the reference to "any rule of law ". There is a well-known principle, which the noble and learned Lord will know, which was established in the case of Head v. Ropner Holdings Ltd., and recently confirmed in the case of Shearer v. Bercain Ltd., that wherever shares are issued in acquisition of an asset (I see that the noble Lord, Lord Bruce of Donington, is nodding, but it is too late) the true value of the asset determines the value of the shares issued, and consequently the full amount of that true value must be brought into the books of the company issuing the shares—in the present case, Britoil—whether by way of nominal value or share premium account. So if, for the reasons I have already given, Britoil issues shares or other securities to BNOC in consideration of the transfer of the upstream business of BNOC, and there is nothing else bearing on the point, what 138 happens? Britoil will have to have that business valued as at the date of transfer and carry the difference between that value and the nominal value of the shares or securities issued as consideration to a share premium account.
Given that it is possible that certain of the transferred assets may well have a true or market value exceeding their written-down value in the books of BNOC at the transfer date, application of this principle could lead to Britoil having a type of reserve—the share premium account does not form part of the distributable reserves—which might not facilitate the sale of its shares to the public. So the Government have included paragraph (e) in Clause 2(4) of the Bill. Its purpose is to enable Britoil to take over the transferred assets at book value.
But Britoil would then be in a dilemma. On the one hand, there would be the provision in the scheme, pursuant to paragraph (e)—and I am advised that there will be such a provision—enabling it to use the BNOC book values, and that provision is in accordance with paragraph (b) of Clause 2(6), to have effect as a matter of law. On the other hand, there is the principle which I have described, which is a rule of law and which would require them to do something quite different. So the amendment resolves the dilemma in a manner consistent with the principles underlying all these amendments by providing that what is said in the scheme shall have effect, notwithstanding any rule of law.
I turn now to the second limb of the amendment—to the reference to "the provisions of any enactment ". The obvious example here is Section 56 of the Companies Act 1948 which requires that where a company issues shares at a premium, whether for cash or otherwise, a sum equal to the amount or value of the premium is to be transferred to a share premium account. There are substantial restrictions on what may be done with the moneys in a share premium account. In particular, they may not be utilised for the payment of dividends. I have already indicated why the Government do not wish the common law rules to apply to the valuation of the assets transferred to Britoil.
I should now explain that even when those assets are transferred at book value there will still be a substantial difference between that value and the nominal value of the shares or securities issued to BNOC. That difference, in the language of Section 56, is a premium, and Section 56 would require the whole of it to be transferred to a share premium account. But it is necessary, in establishing Britoil for flotation, to give it a fairly conventional capital structure, including both distributable and undistributable reserves.
Paragraphs (c) and (d) of Clause 2(4) enable the scheme to make provision to this effect, consistent with good accounting and financial practice. But again, unless there is something further in the Bill, there is a conflict between what the scheme requires to be done and what Section 56 requires. The amendment removes the conflict by providing that the provisions of the scheme shall have effect, notwithstanding the provisions of any enactment. I am afraid that this has been an exhaustive explanation but I hope that it will reassure both the noble Lord and the noble and learned Lord.
§ Lord Lloyd of Kilgerran
My Lords, while thanking the noble Lord for that very comprehensive statement concerning the reasons for Amendment No. 11, may I ask him whether his advisers have considered the position as to rules of law or enactments arising from our membership of the EEC and the effect of the provisions of the Treaty of Rome? There are problems in industry relating to the competition laws. I have the privilege of having been made a member of a working party of the EEC sub-committee which has been asked to consider the scope of obstacles to trade arising from Articles 85 and 86 of the Treaty of Rome. Obviously I am not asking for an answer tonight, hut so far the noble Earl has made no reference to enactments which arise under Rome Treaty provisions; I am sure he has that in mind and may be able to say to me that his comprehensive statement includes any enactment or any provision of law arising under the Rome Treaty.
§ 5.30 p.m.
§ Lord Beswick
My Lords, I am beginning to wonder whether in the past I have not been wasting a good deal of my time in these legislative assemblies. I thought that when we had gone through Committee stage and Report stage, carefully considering the provisions of a Bill clause by clause and line by line, when we had finally got it settled, and had carefully chiselled out the terminology to leave no doubt what was intended, then that was that. But now I find that it is possible to come alone later with another Bill and say that, notwithstanding any enactment or any rule of law, the Secretary of State can override it. I must say that I find this a very funny way of building up our law-making cathedral. This morning, at the other end of the Palace, I heard the noble and learned Lord the Lord Chancellor say that the rule of law was a protection against tyrants. I was greatly moved by the words of the noble and learned Lord. The law may protect us against tyrants, but apparently not against the Secretary of State. I really do feel that there is something wrong; something "lazy", as my noble and learned friend Lord Elwyn-Jones said, about trying to conduct our affairs with this sort of phraseology. The noble and learned Lord may tell me that we can trust the Secretary of State not to use his powers, except in exceptional cases. If we are going to depend upon the common sense and the good faith of Ministers, again I must ask, why do we bother going through all this procedure of carving out legislation?
The other thing that disappoints me is that, when I turn round to see on the Cross-Benches the number of noble and learned Lords to whom we turn in these cases, there are not an awful lot of them here. I would have thought they would he interested in this development in our legal system.
§ Lord Molloy
My Lords, as my noble friend Lord Beswick has just said, many of us have read the previous Bill to which he referred and, although we know what is the fundamental aim behind this Bill, I find it very disturbing, not to say distressing, because from my long experience, both in another place and in this House, I have never seen wording of the kind which appears in the amendment proposed by the noble Earl. As my noble friend also said, this morning we 140 heard a warm eulogy from the noble and learned Lord the Lord Chancellor, who was talking about law and order, democracy, and the fact that the rule of law must prevail. All of us would agree with those words, and yet we return to this Chamber and find ourselves confronting wording which appears to be a professional lawbreaker's charter:notwithstanding any rule of law and the provisions of any enactment ".In these particular circumstances, it may well be an official thieving—in this case, it seems so to many of us—of something that is publicly owned. When one reads the words,notwithstanding any rule of law and the provisions of any enactment ",this could come from any burglar, any thief, or anyone who is going to steal anything from anybody. Here we have that same excuse being taken by this Government to steal publicly-owned property. I believe that the best thing the Government can do now, before this gets round and is really understood, is to drop this Bill when I sit down, and then take it back and start again with a more civilised approach, so that these words will not be quoted in any court. I can imagine some very astute lawyer saying that, when it comes to the Government, they just slip in some words about "notwithstanding any rule of law ". He might appeal to a noble and learned Lord who sits in this House, on the basis that if it is good enough for your Lordships, it is good enough for his client. We have to look very closely at the words proposed, and if they cannot be changed then I believe the Government ought to drop them altogether.
Lord Bruce of Donington
My Lords, I am most grateful to the noble Earl for having gone into some detail in explaining the whole purpose of Amendment No. 11. As he said, its application is limited to the operation of subsection (2) of Clause 2 and in particular to the new subsections (3) and (4). I would have thought that this would prevent any wild excesses that might have been apprehended by the inclusion of words of this kind.
§ Lord Skelmersdale
My Lords, if I may interrupt the noble Lord for one moment, he appears to forget that we are now in the process of Report stage. I think I am correct in saying that the noble Lord has spoken before to this amendment, and so if he can phrase his remarks as questions, I am sure that the House will he extremely grateful.
Lord Bruce of Donington
My Lords, I am most grateful to the noble Lord, Lord Skelmersdale. I was endeavouring to assist his noble friend Lord Mansfield by indicating that we on this side of the House appreciate the explanation he has given. We were congratulating him in part on the fact that the effect of the amendment was not quite as wide as one initially apprehended. However, we on this side of the House would like to have an opportunity of studying in the Official Report what the noble Earl has said. He will appreciate that it is a matter of a little more technical significance than Shearer v. Bercain Limited. We would like to take a look at it again, because we are still not very satisfied. We do not like the inclusion of words of this kind in any Act of Parliament.
§ The Earl of Mansfield
My Lords, I believe that I have the right to speak again because it is my Motion. So far as the noble Lord, Lord Lloyd of Kilgerran, is concerned, I can save myself writing a letter; the drafting has been carried out with the European Community in mind and we have not identified any problems so far as the drafting of this provision of the Bill is concerned.
Now I come to the noble Lord, Lord Beswick. When I first saw this amendment I thought the same as he did, but I must tell the noble Lord—and this may also come as some comfort to the noble Lord, Lord Molloy—that the amendment does not strike at our civil rights or liberties. It is not an aid to tyrants. It is not a concealed way of repealing Magna Carta. The noble Lord, Lord Beswick, has exaggerated the significance of the words. The use of the scheme-making power in Clause 2 is not a normal occurrence in company law and it is not surprising, therefore, that it gives rise to problems which are not normally encountered. Therefore, these words are a technical provision to deal with the special circumstances surrounding Britoil's balance sheet.
The reason why Amendment No. 11 is drafted in general terms—I want to allay the fears that have been expressed—is that it has to support the different propositions in various paragraphs in Clause 2(4). Each of these propositions addresses a specific subject and I have indicated how Amendment No. 11 resolves any conflict between these propositions as expressed in the scheme and other provisions of law.
The amendment has to be written in general language to give it the ability to support each of the propositions in Clause 2(4). The only alternative would have been to write suitable overriding provisions into each of the paragraphs of Clause 2(4). That would have been a cumbrous way of proceeding, and instead we have put in this short provision, which looks very sweeping at first blush but is in fact very specific, because it is tied to the specific provisions in subsection (4) of Clause 2. That, I think, perhaps puts the matter more into perspective.
§ Lord Elwyn-Jones
My Lords, before the noble Lord sits down, I wonder whether he would be willing to refer this matter to the draftsmen again. We feel very unhappy about this. We feel it can be remedied in the concrete way which the noble Earl has mentioned. If he would be willing to refer it again for consideration, that would affect the view that we take of the amendment.
§ The Earl of Mansfield
My Lords, of course when the noble and learned Lord asks me to look at this I will undertake to do so, but he will appreciate that I do so without any firm commitment.
§ On Question, amendment agreed to.
The Earl of Mansfield moved Amendment No.12:
Page 4, line 10, at end insert—
(" (8) In this section "statutory accounts" means—
§ The noble Earl said: My Lords, I have explained Amendment No. 12. It is a definitions amendment. I beg to move.
§ On Question, amendment agreed to.
§ [Amendments Nos. 13 and 14 not moved.]
§ Clause 9 [Gas Corporation's powers of disposal]:
§ 5.42 p.m.
The Earl of Mansfield moved Amendment No.l5:
Page 9, leave out lines 42 to 44.
§ The noble Earl said: My Lords, this amendment seeks to delete from Clause 9(1) the words "Provided that such disposal shall not result in the impairment of essential services nor imperil supplies to or safety of consumers". These words, noble Lords will recollect, were inserted in the Bill in Committee against the advice of the Government. The Government remain opposed to them for the following reasons. In the first place, the words appear to be in the wrong place. This I said, I hope trenchantly, on the last occasion. Clause 9 confers powers on the British Gas Corporation, and it is hardly likely that the corporation would of its own volition exercise its powers so as to have any of the consequences postulated in lines 42 to 44. The corporation will act in accordance with its statutory duties. What appears to give rise to some concern is the possibility of the Secretary of State directing the British Gas Corporation to exercise its powers in a certain way, but Clause 9 is not the place for such con-cerns to he addressed. It is Clause 11 which deals with the Secretary of State's powers of direction.
§ My second point is that the words in lines 42 to 44 are as they stand vague in their drafting. Where should one draw the dividing line between essential and other services? Such uncertainties are unwelcome to this or any other Government, since they cast a shadow over any exercise of the powers, even in areas which on a common-sense basis could be seen not to threaten any of the consequences mentioned. I suggest that such uncertainties should be unwelcome to the House also, because if they passed into law they would leave all concerned in doubt as to where they stood, with consequent delay and distraction not only for the Government but for the corporation, too.
§ The Government have given very serious consideration to all that was said in Committee and particularly to representations from my noble friend Lady Macleod. From the speeches which were made in Committee, of course the Government recognise that there was a genuine concern about safety which was apparent in all sections of your Lordships' House. I can assure your Lordships that the Government take the question of safety very seriously indeed, and are particularly concerned that there should be proper standards for gas appliances and for installation and servicing. The Government's objective is to ensure that gas safety standards will be of an acceptable level regardless of whether the public or private sector are concerned.143
§ Under the Energy Conservation Act 1981, orders will be introduced requiring gas appliances sold in the United Kingdom, whether of United Kingdom or foreign origin, whether sold by public or private sector, to meet approved safety standards. In order to ensure that safety standards do not fall as the private sector's share of the installation and servicing market increases, the Government intend to introduce a rigorous system for the licensing of gas installers which will ensure that private sector installers are on equal footing with the British Gas Corporation's.
§ Glancing on, if I may, to Clause 11—and I do not want to anticipate debate, but nevertheless it hangs together—my noble friend Lady Macleod has tabled an amendment to meet the concern she feels. This amendment, I can tell your Lordships, commends itself to the Government, because it would specifically enjoin the Secretary of State to have particular regard to safety before any directions to the British Gas Corporation under Clause 11. In doing so it would meet the fundamental concern felt by the Committee during the discussion on lines 42 to 44, and do so in a way which has the advantage over lines 42 to 44 in terms both of certainty and, I must emphasise, correct positioning in the Bill in the drafting sense.
§ If the House will agree to my amendment—in other words, to delete lines 42 to 44—the Government will be content to accept my noble friend's amendment to Clause 11, which I think achieves everything that she wants and does it in the right place in the right way. If the words that I seek to delete were to remain in the Bill it would cause problems both for the Government and for the corporation. I would advise the House, if I might use that word, that my noble friend's amendment seems to be an excellent means of avoiding the problems while giving proper recognition to the concern expressed in Committee. So it is in this spirit of compromise, I hope, that I move this amendment, and hope it will be accepted by the House.
§ Baroness Fisher of Rednal
My Lords, I want to thank the noble Earl for his explanation. I must say at the beginning that I am not going along with his point of view. I say this quite candidly to the noble Earl. When we moved the amendment in Committee, and all shades of opinion supported it, the Minister, after the result was declared, said that perhaps we would be able to explain what this amendment meant and what its effect would be in the totality of the Bill. I was listening with great interest to see whether he had worked out with his advisers what we thought it meant. We were quite clear what we had put down in our amendment, and it was the noble Earl who quite clearly asked my noble friend the Chief Whip what it meant.
I want to remind the House that our drafting of the amendment might perhaps not have been as imprecise as people thought; perhaps it was sweeping, but it was perfectly clear, and I think the Committee understood this when we voted for the amendment. We wanted to make quite sure that the disposal of any assets could not be carried out unless we were completely satisfied that standards of safety and service to consumers would be maintained. I think the Committee was quite clear that their concern was that individual consumers could have complete faith in the deliberation.
144 I want to draw the attention of the noble Earl to correspondence which has been sent to me by the Consumers' Association. They say quite clearly in their letter to me:However, we felt that the Minister gave a misleading impression of the consumers' organisations' opinions on the proposal to close gas showrooms ".They go on to specify that what they were clearly trying to bring out was the safety element that arose from the gas showrooms and they were a little disturbed that the Minister misintepreted their deliberations. When we went into this matter in great detail in Committee the noble Earl said that a great need for competition would arise and there would be safety in that regard. However, that does not appear to be the findings of the National Gas Consumers' Council, who, again in a letter to me, said:We are concerned "——
§ The Earl of Mansfield
My Lords, I hesitate to pry into the correspondence of the noble Baroness, but I wonder whether we are looking at the same letter?
§ Baroness Fisher of Rednal
My Lords, I would not know about the noble Earl's letter. If he tells me what his letter is, I shall tell him what my letter is. It is as simple as that.
§ Baroness Fisher of Rednal
My Lords, mine happens to be dated 7th June, so we do not have the same letter.
§ Baroness Fisher of Rednal
If the noble Earl wants the date of the National Gas Consumers' Council letter it is 25th May. I do not know whether that coincides with his correspondence. The letter says:We are concerned that an incomplete impression was given of the views expressed by consumer organisations on the future of gas showrooms ".I want to point out to the House tonight that we were not trying to mislead the House. The findings that we had about the service and safety aspects of gas showrooms were, to our mind, of great importance to the majority of gas consumers in this country. So many people have mentioned today the comments made by the President of the United States when he was addressing both Houses. He spoke about liberty and freedom especially in regard to ordinary people. Perhaps what we are talking about here is the protection that is so necessary to what we call the ordinary people. What we are asking for in our amendment concerns the complete safety angle.
The noble Earl mentioned as regards the Amendment to Clause 11 that at a later time we shall come back to the question of safety. In the Amendment to Clause 11 we have exactly the same wording as appears in Clause 14 of the Bill dealing with safety regulations. The only difference is that in the amendment to Clause 11 we have "shall", but as regards safety regulations we have "may". Otherwise the words are exactly the same. No doubt the noble Minister would feel that perhaps even that was in the wrong place as well.
145 However, I want to draw the attention of the House to the fact that we have had observations and that the safety aspect is most important. What we are concerned about is that with the removal of the gas showrooms the safety aspect as regards the individual is concentrated more on finding information from some other source. This causes us a great deal of concern. I wish that there were present in the Chamber this evening those who have a main interest in the handicapped because, through the National Gas Consumers' Council working alongside British Gas, a tremendous amount of work has been done to help the handicapped and the aged. Consumers over 65 living alone and registered handicapped people have a free service to check any problems that they might have regarding the safety of the appliances in their own homes. Adaptors are made for people who are blind. Braille symbols are placed on gas cookers. Special adaptations are made for the handicapped, Are we going to say that if we get rid of the retail sales in the gas showrooms the needs of the handicapped the elderly and these special places will be taken over by the discount warehouses? Will they be as concerned about the safety aspect of gas appliances, as the Gas Board itself has been, working alongside the National Gas Consumer's Council?
It is for those reasons that we are not satisfied that the safety element is recognised by the Government. We have heard observations on safety made by the noble Earl. He has not said that he will press for BSI standards. We understand that all the appliances—I think that this point was made by one of the noble Lords who spoke in the debate last time—sold in gas showrooms have to have the BSI standard. Although the noble Earl in reply said then that as soon as it was possible the Government intend to make regulations under the Act on energy conservation, he has not said tonight that he will specify BSI standards. What my noble friends and I are concerned about is that even if at a later stage we discuss the amendment to Clause 11, we feel that our amendment which we moved on the last occasion is a very wide safeguard for all gas consumers in this country. We feel quite concerned that the Government have completely disregarded that aspect of our case—namely, that gas consumers should have the right to use British Gas retail service outlets for their special needs regarding safety, installation and the purchase of articles.
§ Lord Underhill
My Lords, I should like to support my noble friend. So far the remarks that have been made have emphasised the safety aspect. In fact, the noble Earl's comments were mainly on the safety aspect. Therefore, perhaps for a moment I can keep to that. However, there are two other points to which I want to return. We added at the Committee stage the words:disposal shall not result in the impairment of essential services nor imperil supplies to or safety of consumers ".The "safety of consumers" was only one of the three points dealt with in the words which were inserted at the Committee stage.
In Committee, when we were debating the previous amendment, I stressed that the Government had not been told by the Monopolies and Mergers Commission 146 that they should dispose of the gas showrooms and discontinue the retailing of appliances. There were three alternatives given by the commission, and the commission said, "Please look at only two". The two they were asked to look at were the ending of all retailing by British Gas and that they should overhaul and monitor their finances so that they would be able to keep the financing of the retail appliances completely separate from the services and installations.
It was the Government who decided to take the first course, and this was a point which I made in Committee. I have looked very carefully at the noble Earl's remarks, which seemed to imply, although he may not have intended them to, that the two bodies to which my noble friend has referred made no comments. My noble friend has referred to correspondence from the two bodies. I should like to quote one or two lines from the response of the National Gas Consumers' Council to the actual report of the Monopolies and Mergers Commission. They say:The Council consider that the first option "—that is, the one of discontinuing retailing—would lead to disruption in the retailing market and would operate against consumer interests ".They are not just talking about safety, but are talking about consumer interests. That is one of the points dealt with in the words which we inserted last time.
In a communication to which my noble friend has referred, the Consumers' Association says:The Consumers Association in its comments to the Monopolies Commission report on domestic gas appliances is clearly opposed to the proposal to close gas showrooms. The Consumers Association made clear that it supported instead the close monitoring of the gas corporation's retailing activities ".So both those important bodies criticised the final decision which the Government took, which was only one of the alternatives given by the Monopolies Commission.
Incidentally, I echoed the points which the National Gas Consumers' Council made when I drew attention in Committee to the vast spare parts organisation of the gas corporation, which cannot be equalled in any other way. It would mean that we have to ask the gas corporation to retain a huge spare parts department for the vast number of appliances which are out of production, for which there have to be safety provisions and maintenance.
The noble Earl referred to the amendment to Clause 11. When we come to that we shall debate it. I readily appreciate that the noble Baroness, Lady Macleod, is very concerned with the safety aspects—she has made that quite clear. But when we come to that we shall have to point out that the amendment to Clause 11 in no way deals with the three points which were included in the amendment carried by this House in Committee. It deals only with the safety aspect; it does not deal with any imperilling of supplies; it does not deal with any imperilling of services. We are talking about disposal of the whole or part of any subsidiary; we are not just talking about disposal of any part which could affect safety provisions.
Although the Government say that there is no intention now, the noble Earl the Minister agreed that there is no limitation on the powers and that a future Secretary of State—if not this one—could decide to dispose of any part of the transmission and distribution 147 system of gas in any area. That brings up the whole question of the integrity of supplies. The Bill brings up the question of integrity of supplies because there will be competition for gas supplies between the gas corporation and the private suppliers. Therefore, the question as to whether or not the gas corporation can keep to its statutory responsibilities is also brought up. So we are not just dealing with safety; we are dealing with the question of the possible imperilling of the services, the possible imperilling of safety and the possible imperilling of supplies.
They were the three points dealt with in the last amendment. Therefore, we should not just deal with the points raised on safety; we should deal with all three. The amendment to Clause 11 in no way deals with all three, and we shall deal with that when we come to it. For that reason I hope that the House will not agree to the amendment put forward by the noble Earl on behalf of the Government.
§ Lord Lloyd of Kilgerran
My Lords, if I might briefly address your Lordships, 1 must confess at once that I am in something of a dilemma for three reasons. First, I spoke strongly in favour of inserting the words into the Bill which the Government now want to strike out. Secondly, I agree almost completely with the content of the speeches made by the noble Baroness, Lady Fisher, and by the noble Lord, Lord Underhill. Thirdly, I have some correspondence from the National Gas Consumers' Council; in fact, I have a letter dated 4th June from the gas council. I do not know whether it is the same letter as the letter of 4th June which the noble Earl the Minister has in his hands. That letter refers to an earlier letter.
I think that my dilemma could be resolved if the Minister would be good enough to amplify one of the reasons that he put forward for advising the House to reject these lines. He said that the presence of these three lines inserted by the House in Committee would embarrass or cause trouble to the corporation. Would he be good enough to resolve my dilemma by explaining a little more fully how the presence of these three lines will embarrass or give trouble to the corporation?
§ Baroness Macleod of Borve
My Lords, at this stage, having listened to everything that has been said, I am slightly surprised that so many noble Lords seem to have encompassed in one speech many of the amendments which we are debating this evening. The noble Baroness, Lady Fisher, very ably moved Amendment No. 18A in Committee and on that occasion the House agreed with her. She very ably put forward the primary problem which we were all facing about consumers and safety. Very soon after this amendment was carried the parliamentary draftsman told me—and perhaps he told the noble Baroness—that this amendment was in the wrong place.
This is the only thing that we are querying tonight. Perhaps the noble Baroness is a lawyer, but I am not, so I have to accept what I am told.
§ Lord Beswick
My Lords, would the noble Baroness allow me to intervene for one moment? This is quite an important matter of parliamentary procedure. Is the noble Baroness saying that the parliamentary draftsman approached her spontaneously?
§ Baroness Macleod of Borve
My Lords, I was about to say that I have seen the Secretary of State and it was he who told me that this amendment was in the wrong place. Apparently he must have been told this by the parliamentary draftsman, which is perfectly in order and perfectly correct. No, I do not have knowledge of who these people are. But apparently noble Lords and noble Baronesses on all sides of the House were trying to put the provision in the wrong place. I accepted that—I think, quite rightly—because I am no lawyer. This is why the same words as have already been put forward this evening are to be included in an amendment which I shall move to Clause 11.
The noble Lord, Lord Underhill. has drawn our attention to the fact that in his opinion the amendment to Clause 11 only concerns safety. It concerns the safety of everybody who uses gas because it mentions specifically all gas that goes through any pipe of any sort: that is, any pipe connecting any appliance. It does not quite specifically mention services and supplies, which were mentioned during the Committee stage. I believe that it is correct not to mention them,because my noble friend has already said that the vague concept that this proposes to incorporate in the Bill would serve to promote uncertainty rather than to give any useful protection. In fact, the Bill itself contains in Clause 17(2) a specific safeguard for the conveyance of supplies of gas which the Gas Corporation requires, to perform—its statutory duties and contractual obligations".The Secretary of State not only told me himself but wrote to me saying,and it is accepted all round this Chamber, that safety is of the utmost importance. "Paramount" is a word that has been hackneyed around the place, and I do not think it really means very much now, but safety is of the utmost importance and the Government recognise that. But to make it absolutely doubly sure we ought to put it in the Bill in the right place. There does not not seem to be any point in having it in the Bill in the wrong place. Therefore, I would certainly thank my noble friends for all that they have done to help all sides of the House to put this in the right place. If we delete these few lines, and if we, as I hope, accept the amendment under Clause 11, then we shall have done what we originally set out to do.
I hope that the House will accept what my noble friend is proposing.
§ 6.12 p.m.
§ Baroness Hornsby-Smith
My Lords, before my noble friend replies, could he clarify one point? We have rather been led this afternoon to believe that all the safety provisions and the unrest regarding gas appliances rest on the showroom. It is my experience that it you want to buy a geyser you can buy 12 or 20 different varieties through the gas showroom, but they are made by different manufacturers. If anything goes wrong and you take them back you are referred to the manufacturer. The gas hoard does not take responsibility for the making of that appliance. They do take responsibility for their supply, their connections, the gas pipes and the like; but where appliances are concerned, that is, in exactly the same way as with electrical appliances, the responsibility of the manufacturer.
149 I feel that there are times when the Consumers' Association is rather like a dog biting its own tail. It rejoices in the competition in the electricty industry which supplies handicapped people, which supplies homes, and council after council building new estates insist on having all electric homes. Why should it be that an entirely different system can apply to the electricity industry, and is quite impossible of application for the gas industry?
I would agree on the need for safety, and I would heartily support my noble friend Lady Macleod that the safety issue should be enshrined in the Bill, but in the right position in relation to the appliances which, in their main manufacture, are not the responsibility of the gas board at all.
§ Lord Jacques
My Lords, I think that we could save some time if the Minister would give straight answers to two questions. First, is he accepting Amendment No. 24? Secondly, is he accepting Amendment No. 24A?
§ The Earl of Mansfield
My Lords, with due regard to the noble Lord, I think I shall make my speech and answer his points in that way because it probably will be shorter in the end. The Government have been accused of being totally obdurate so far as this Bill is concerned and unwilling to compromise in any way, shape or form, but it is obvious that there has been a genuine and sustained attempt at compromise, and that there is a successful measure of compromise put together not least through the efforts of my noble friend Lady Macleod. Before condemning those efforts noble Lords opposite might have given them a little consideration. However, that is not to be.
I want to answer these points because it seems to me that it is still maintained, on the part of some noble Lords opposite at any rate, that we have paid no attention to safety and have had no regard in effect for the public and their worries which have been brought out in some of the debates on this Bill, and are evidenced by some of the letters which I have seen, at any rate on behalf of consumer organisations. May I deal first with the proposals for showroom disposal. The disposal provisions in the Bill, together with the revised Gas Act power to give directions to the corporation to cease activities, would permit the Government to take action, following criticisms in the Monopolies and Mergers' Commission Report to encourage competition in the domestic gas appliance market and to break the gas corporation's dominance of that market.
I have made it clear before that we consider it essential that any such action should be accompanied by measures to maintain existing standards of safety, and I start from that base. This will require legislative measures, which means that there must be a delay before the Government can proceed with measures to meet the Monopolies and Mergers Commission criticism. But of course that delay allows us time for further considerstion about how to proceed. I assure the House that the Government will examine seriously and carefully any constructive proposals that may be offered, provided that they will meet the objective of breaking the Gas Council's monopoly in this area and ensuring effective competition.
150 Then we have had talk about the showrooms and how useful they are to the public, and for one, would not attempt to deny that in the past they have been so. It is in the showrooms that the gas corporation conducts its retailing of appliances. But of course noble Lords, particularly in Committee, pointed out that other activities occur there. It is in recognition of this that we are encouraging the Gas Corporation to maintain consumer contact points where consumers can go to get advice, where they can pay their bills, and inquire about servicing and that sort of thing. I suggest to the House that it would be difficult to justify on economic grounds the retention of the larger sites needed to display appliances simply for those purposes.
Then the point was properly taken about servicing and installation. It is no part of the Government's decision that the gas corporation should cease customer services such as the installation and servicing of appliances. The report of the Monopolies and Mergers Commission, which looked into the corporation's activities in retailing appliances and made criticisms which have to be met, did not criticise installation and servicing activities. The ending of the Gas Corporation's dominance in appliance retailing will bring about a reduction in their share of the appliance servicing market. Consumers will have a greater degree of choice as to whether to deal with the gas corporation or with private installers. It is important to recognise that the safety record of the reputable private sector is on a par now with the gas corporation. In order to ensure satisfactory safety standards where work may be undertaken by the less reputable private sector, the Government are looking urgently into what legislative action on safety may be required.
Then the point has been made about spare parts. We are well aware of the gas corporation's outstandingly good service on spare parts. There is no reason why private sector installers should not be able to obtain and fit spare parts for their customers, provided that manufacturers will supply them. One result of the report of the Monopolies and Mergers Commission is that manufacturers have been caused to broaden their horizons in terms of home markets, and I have no reason to doubt that they are as keen to sell accessories and so on to the private sector as to the British Gas Corporation.
The noble Lord, Lord Underhill, referred to the difference in wording between the two amendments and he made reference to essential services and supplies. Having considered the matter carefully, we found that the references to services and supplies were undesirable. Looking first at the word "services", I have mentioned that the phrase, "essential services" raises difficult questions of what is and what is not essential. It may be that what was in mind were services essential to safety, although I rather doubt that. However, to that extent, the specific mention of safety which my noble friend's amendment makes appears to meet the point.
I repeat that it is no part of our plans, in response to the Monopolies and Mergers Commission, that the gas corporation should cease providing its present servicing, installation and services, and I have already said how we shall encourage contact points as part of the disposal of showrooms to encourage the gas corporation to maintain its advisory service and provide 151 facilities for the public to pay their bills and obtain any advice they may want.
The question of supplies is to a large extent a matter arising more in the context of Clause 12. We have made clear our belief that the BGC will be able to obtain the supplies it needs by bidding at the right price in the market, and Clause 17(2) contains a specific protection for gas which the BGC requires to convey to perform its statutory duties and contractual obligations. However, to the extent that Clauses 9 to 11 are relevant, the Government have already given an assurance, and I gladly repeat, that before issuing any direction under Clause 11, the Secretary of State will satisfy himself that that will not prevent the gas corporation from carrying out its obligation to supply gas to consumers within 25 yards of a BGC main whose requirements do not exceed 25,000 therms a year. The Government have also made it plain that they have no present intention of privatising the gas corporation's transmission system, distribution system or customer services, and therefore I hope it will be agreed that the mention of supplies is unnecessary.
To answer the noble Lord, Lord Lloyd, while I do not think I used the word "embarrass", I take his point. He will have observed that Clause 9 gives power to the gas corporation for it to exercise, not only on the direction of the Secretary of State but also on the corporation's own initiative; and therefore lines 42 to 44—that is, the subject of the amendment—which at first blush appear reasonable, in fact put at risk all sorts of disposals of which the BGC might be taking upon itself to dispose and which could not have the consequences feared, so it could be constrained in carrying out its powers not at the Secretary of State's direction but under its own initiative.
I said at the beginning, and I repeat, that I do not believe there is very much, if anything, between the two sides of the House or between the Government and other noble Lords; we are all concerned with safety. However, the Government must be concerned that the amendment makes sense and appears in the right clause of the Bill.
The noble Baroness, Lady Fisher, took against a jocular answer which I gave to what I took to be a jocular question posed by her noble friend the Chief Whip, who had not previously taken part in our debates on the Bill. I assure her that although my reply was perhaps jocular, it was meant to be friendly under the circumstances of the heat of the Division. However, that does not detract from the seriousness of the matter; that is, the safety of consumers, which I agree is paramount. We all want them to make the very best possible arrangements they can, but I submit to the House that the agreement. if I may so call it, to which we have come so far as my noble friend's amendments are concerned, is the best that can be devised in the circumstances, and it is in that spirit that I have moved the amendment; and it is in that spirit, when the Question comes to be put, that I ask the House to accept it.
§ Lord Bishopston
My Lords, the House will agree that, taking into account the discussion that we had in Committee on 11th May, we have had a good debate on this subject. Some would say that on 11th 152 May the Government were defeated on this matter by 15 votes. We are not concerned with defeats.
We are concerned with safety, and the House is still concerned with that, and tribute is due to the noble Baroness, Lady Macleod, for the further consideration she has given to the matter since the debate on that occassion.
I remind your Lordships that in Committee on 11th May we were told that we were not discussing another nationalised industry. Indeed, the noble Lord, Lord Miles, came in, I think, especially, to say that, while he was not necessarily a great exponent of nationalisation,British Gas, in its nationalised form, has already shown all the marks of individual enterprise and market efficiency; the very foundation stones upon which wide areas of Government policy rest ".He added:It cannot, surely, be made more successful than it has been ".Shortly after that, the noble Baroness, Lady Macleod, having reminded us with rightful pride that she had been the first ever Gas Consumer Council chairman in 1971, said:I agree with every single word that has been said from the other side of the Committee this afternoon ".—[Official Report, 11/5/82; col. 129.]That is the sort of all-party concern which was expressed on that occasion, and in the Lobby—I am talking not about defeat but about concern—noble Lords on both sides expressed that concern.
While the Minister says there is not a great deal between, us, it was clear on that occasion that noble Lords in all parts of the Committee voted for an amendment which the Government now recommend we delete, and we should be clear what that amendment was about. Clause 9 was amended; that clause refers to the Gas Corporation's powers of disposal. Whether or not we agree that the assets should be disposed of is not the point. The Government, the House, have taken a decision on that and now we have a common concern about safety, about the interests of the consumer. The amendment which was inserted in Committee:Provided that such disposal shall not result in the impairment of essential services nor imperil supplies to or safety of consumers ".The Committee on that occasion voted, in effect, to say, "If you are going to sell the enterprise (and we are not concerned with the merits) the consumer and the public will need these safeguards", and noble Lords voted freely to insert that amendment. It was not revolutionary. Millions of people throughout the country have come to appreciate what the BGC has done, not as a nationalised body but as a British institution, and those millions of people would say that those words should be in the Bill. The Minister says, "Ah! but they are not in the right place". His noble friend the noble Baroness, Lady Macleod, helps him out, quite rightly, of course, and says, "I will put down an amendment to Clause 11, where the change should be".
If your Lordships will turn from Clause 9, which has been amended, to Clause 11, you will see that in subsection (3) the words in paragraphs (a"),(b) and (c) are very similar, if not identical, to the words in paragraphs (a), (b) and (c) of Clause 9(1). The words do 153 not mean exactly the same reference so far as the clause is concerned, but I am sure that the clause could be amended so that the lines which the Minister says he would like taken out of Clause 9 could be inserted into Clause 11, in order to do the same thing. What is the objection to that?
Why have a special amendment such as the noble Baroness has tabled in Amendment No. 24 in order to insert a new subsection? As my noble friend Lady Fisher of Rednal has already pointed out, the words in the amendment of the noble Baroness are already in the Bill, in Clause 14(1), which states:The Secretary of State may make such regulations as he thinks fit ",and so forth. That is the same as the wording of the noble Baroness's amendment, and so the Minister might well have said today that there was no need for his noble friend's amendment, since what it proposes is already in the Bill. The noble Baroness goes a little farther—and I think that the Government have given way a little—in that Clause 14 states that:The Secretary of State may make ",whereas the amendment states that he "shall have regard" to the factors. So there is an advance there. However it does not really do the job that your Lordships wanted the Government to do in the amendment of 11th May.
Without any further discussion I would say that the question is whether we are going home tonight to say of our day's work that, on the matter of the gas corporation's powers of disposal, the House of Lords voted that the words,Provided that such disposal shall not result in the impairment of essential services nor imperil supplies to or safety of consumers ",should be taken out of Clause 9—that we did not need them. Do we want "Today in Parliament" to be stating tonight or tomorrow that your Lordships' House did not want any assurances about how a disposal shall be made so that there shall not be any resulting impairment of essential services? Are we going to hear that we did not want any assurance about there being no impairment of supplies, or that in the clause we were not concerned about the safety of consumers? I ask that question because it is the one that we are going to vote on. I can see no reason at all why words which only a week or two ago were voted for on an all-party basis should tonight be the subject of a debate and a vote in circumstances in which at the end of the day some noble Lords will have to admit that they voted that they did not want the assurances.
Since the earlier occasion, your Lordships have debated the question of safety, and we still have some amendments on it. When in another place last year the Minister made her pronouncement about the sale of gas showrooms and so on, I think she promised that some legislative action would be taken by the Government at a later stage to deal with safety. I believe that the House is right in saying that, if we are now to deal with the disposal of assets, we also want to ensure that private pipe-lines, as well as public pipe-lines, will be safe, and that there will be compatibility of gas and so on. In other words, we want to make sure that after the vote there remains the meaning of the words, 154Provided that such disposal shall not result in the impairment of essential services nor imperil supplies to or safety of consumers ".One cannot say that too often, especially in a Bill where, to be fair to the Ministers, one would say that they have done their best to try to explain decisions which have not yet really been made by the Government.
The House would be well advised to leave the decision made a couple of weeks ago. If the Government are anxious about getting the matter right and about the clause in which the words should be included, should they want to give us an assurance, there is no reason why the sentiments of Amendment No. 18A, which was debated last time and passed by your Lordships, should not be included with equal merit in Clause 11. Until we get that assurance, I recommend that Members of all parties here tonight do the same thing as we did last time, and so assure not only the Government but also the country that we are concerned about the consumer interest and public safety in terms of the words as they are at present in the Bill.
§ 6.35 p.m.
§ On Question, Whether the said amendment (No. 15) shall be agreed to?
§ Their Lordships divided: Contents, 87; Not-Contents, 65.155
|Abinger, L.||Macleod of Borve, B.|
|Airey of Abingdon, B.||Mansfield, E.|
|Avon, E.||Mar, C.|
|Bellwin, L.||Massereene and Ferrard, V.|
|Beloff, L.||Merrivale, L.|
|Belstead, L.||Mersey, V.|
|Blake, L.||Mills, V.|
|Boardman, L.||Monckton of Brenchley,V|
|Brougham and Vaux, L.||Monk Bretton, L.|
|Cockfield, L.||Mottistone, L.|
|Coleraine, L.||Norfolk, D.|
|Cork and Orrery, E.||O'Brien of Lothbury, L.|
|Cromartie, E.||O'Hagan, L.|
|Cullen of Ashbourne, L.||Orkney, E.|
|Daventry, V.||Penrhyn, L.|
|Davidson, V.||Rankeillour, L.|
|De La Warr, E.||Renton, L.|
|Denham, L. [Teller.]||Rochdale, V.|
|Donegall, M.||Romney, E.|
|Eccles, V.||St. Davids, V.|
|Eilenborough, L.||Sandford, L.|
|Elphinstone, L.||Sandys, L.|
|Ferrers, E.||Sharpies, B.|
|Fortescue, E.||Shrewsbury, E.|
|Fraser of Kilmorack, L.||Skelmersdale, L.|
|Glenarthur, L.||Spens, L.|
|Gormanston, V.||Strathspey, L.|
|Grimston of Westbury, L.||Swansea, L.|
|Henley, L.||Swinfen, L.|
|Hornsby-Smith, B.||Swinton, E.|
|Hylton-Foster, B.||Terrington, L.|
|Inglewood, L.||Teviot, L.|
|Killearn, L.||Tranmire, L.|
|Kimberley E.||Trefgame, L.|
|Kitchener, E.||Trenchard, V.|
|Lane-Fox, B.||Trumpington, B.|
|Lauderdale, E.||Tweedsmuir, L.|
|Lawrence L.||Vaux of Harrowden, L.|
|Lindsey and Abingdon, E.||Vivian, L.|
|Long, V. [Teller.]||Windlesham, L.|
|Lucas of Chilworth, L.||Wise, L.|
|Lyell, L.||Wynford, L.|
|McAlpine of Moffat, L.||Young, B.|
|Mackay of Clashfern, L.|
|Bacon, B.||Loveil-Davis, L.|
|Barrington, V.||McGregor of Durris, L.|
|Beswick, L.||MacLeod of Fuinary, L.|
|Birk, B.||McNair, L.|
|Bishopslon, L.||Milner of Leeds, L.|
|Blyton, L.||Ogmore, L.|
|Boothby, L.||Oram, L.|
|Boston of Faversham, L.||Phillips, B.|
|Bovvden, L.||Ponsonby of Shulbrede, L. [Teller.]|
|Bruce of Donington, L.||Rochester, L.|
|Cledwyn of Penrhos, L.||Segal, L.|
|Collison, L.||Shackleton, L.|
|David, B.||Shinwell, L.|
|Daviesof Leek, L.||Simon, V.|
|Davies of Penrhys, L.||Stewart of Alvechurch, B.|
|Elwyn-Jones, L.||Stewart of Fulham, L.|
|Ewart-Biggs, B.||Stone, L.|
|Fisher of Rednal, B.||Strabolgi, L.|
|Foot, L.||Tanlaw, L.|
|Gaitskell, B.||Taylor of Mansfield, L.|
|Hampton, L.||Underhill, L.|
|Harris of Greenwich, L.||Wade, L.|
|Hatch of Lusby, L.||Wallace of Coslany, L.|
|Howie of Troon, L.||Wells-Pestell, L,|
|Irving of Dartford, L.||Whaddon, L.|
|Jacques, L.||White, B.|
|John-Mackie, L.||Wigoder, L.|
|Leatherland, L.||Wilson of Langside, L.|
|Llewelyn-Davies of Hastoe, B. [Teller.]||Winstanley, L.|
|Lloyd of Kilgerran, L.||Young of Dartington, L.|
§ Resolved in the affirmative, and amendment agreed to accordingly.
§ 6.43 p.m.
§ Clause 10 [Provisions supplementary to section 9]:
§ The Earl of Mansfield moved Amendments Nos. 16 to 21:
§ Page 10, line 33, at end insert ("to secure increases in the capital of subsidiaries ").
§ Page 10, line 41, leave out ("specified") and insert ("prescribed ").
§ Page 10, line 41, leave out second (" or ").
§ Page 10, line 43, leave out (" specified") and insert (" prescribed ").
§ Page 11, leave out lines 2 to 25 and insert—
- (" (a) provide that any prescribed rights or liabilities of the transferor shall be enforceable either by or against either party or by or against both;
- (b) for the purpose of dealing with matters arising out of or related to the transfer, confer or impose on either party rights or liabilities which are to be enforceable against or by the other;
- (c) provide that for the purposes of section 19 of the 1972 Act (borrowing limit) the aggregate there mentioned shall be determined as if any money borrowed by the transferor the liability to repay which is transferred were money borrowed by the transferee; ").
§ Page 11, line 29, at end insert—
§ (" ( ) A scheme under subsection (2) above may also provide that—
- (a) prescribed securities of the transferee shall be issued to the transferor in consideration of the transfer and shall be credited as fully paid up;
- (b) for the purposes of section 56 of the Companies Act 1948 (share premium account) and of any statutory accounts of the transferee, the value of any asset and the amount of any liability transferred shall be taken to be the value or (as the case may be) the amount which would have been assigned to that asset or liability for the purposes of the statutory accounts prepared by the transferor in respect of its last
156 accounting period ending before the transfer date if that period had ended immediately before that date;
- (c) a prescribed amount not exceeding the accumulated realised profits of the transferor at the transfer date shall be treated by the transferee as a reserve which represents its, profits available for distribution (within the meaning of Part III of the Companies Act 1980);
- (d) in ascertaining for the purposes of the said section 56 what amount (if any) falls to be treated as a premium received on the issue of any shares in pursuance of any provision made by virtue of paragraph (a) above, the amount of the net assets transferred shall be taken to be reduced by an amount corresponding to the amount of any reserve for which provision is made by virtue of paragraph (c) above;
- (e) subject to any provision made by virtue of the preceding provisions of this subsection, for the purposes of any statutory accounts of the transferee the amount to be included in respect of any item shall be determined as if any relevant thing done by the transferor (whether by way of acquiring, revaluing or disposing of any asset or incurring revaluing or discharging any liability, or by carrying any amount to any provision or reserve, or otherwise) had been done by the transferee.").
§ The noble Earl said: My Lords, we now have a range of amendments, Nos. 16 to 23, which seek to put into this part of the Bill exactly the same considerations as were put in by Amendments Nos. 5 to 12 inclusive, and which have been quite exhaustively discussed. I hope it will not be considered impertinent if I beg to move them en bloc. Of course, if any noble Lord objects to that course then we will not do it; but for now I beg to move, first of all, Amendments Nos. 16 to 21
§ On Question, amendments agreed to.
The Earl of Mansfield moved Amendment No.22:
Page 11, line 43, at end insert (" notwithstanding any rule of law and the provisions of any enactment ").
§ The noble Earl said: My Lords, this was part of the block, too, so I beg to move Amendment No. 22.
§ Lord Bishopston
My Lords, I believe it will be for the convenience of the House merely to say on this occasion that on a previous amendment, Amendment No. 11, to Clause 2—I think it concerns enactments and so on—my noble friends made their misgivings clear and the Minister gave some assurance about looking at the matter again. I anticipate that, as these amendments are much the same as those on the previous clause, the same assurance might apply and the matter may be looked at, so that we can return to reconsider the matter of Amendment No. 22 at a later stage.
§ On Question, amendment agreed to.
§ The Earl of Mansfield moved Amendment No.23:
Page 11, line 46, at end insert—
(" (8) In this section statutory accounts "means—
§ On Question, amendment agreed to.157
§ Clause 11 [Powers of Secretary of State as respects disposals by Gas Corporation]
§ Baroness Macleod of Borve moved Amendment No. 24:
Page 12, line 6, at end insert—
(" (1A) The matters to which the Secretary of State shall have regard in exercising his powers under subsection (1) above shall include, in particular, the need to secure that the public is so far as practicable protected from any personal injury, fire, explosion or other dangers arising from the transmission or distribution of gas through pipes, or from the use of gas supplied through pipes.").
§ The noble Baroness said: My Lords, as my noble friend said earlier, this amendment arises from consideration in Committee of the amendment which inserted the words appearing at lines 42 to 44 on page 9. Underlying that amendment was a concern, which we all felt, about the possible impact on gas consumers of disposals which the Secretary of State might direct the BGC to carry out. My own concern, and I believe that of a number of other noble Lords on all sides of the Committee, centred particularly on the apparent danger that the BGC might be directed to carry out a disposal which jeopardised the corporation's ability to ensure proper standards of safety for the gas consumer and also for the public at large. In this amendment—and this is the purpose of it—I seek to meet that concern, and indeed to meet it more fully than would have been achieved if we had left lines 42 to 44 in the Bill as it was, while at the same time avoiding some of the difficulties of drafting which my noble friend identified in the words which appeared in those lines.
§ The amendment bears directly on the Secretary of State's power to give directions to the BGC under Clause 11. This in itself is an improvement. Also, I submit, the word "shall" instead of "may" makes this amendment much tougher than the previous one. Clause 11 is, I believe, the better location for the amendment, because there is no need for concern at the giving of power to the corporation. The concern is rather that at some time in the future the corporation's own decisions might he overridden by a Secretary of State who, if only by inadvertance, might require the corporation to carry out a disposal of a sort which hazarded safety.
§ I believe this amendment improves on the words at lines 42 to 44 on page 9, in that it refers to the safety, not only of gas consumers but of the general public. That is important, because we must be concerned, not only with the gas consumer but also with those living or working nearby, and those who may be passing in the street. Gas is an explosive substance, as we all know, and all may be at risk if standards of safety are not maintained.
§ The Government have made a number of helpful statements which assist considerably in meeting the concerns which might otherwise have arisen; for example, that the Government's response to the Monopolies and Mergers Commission report on gas appliance retailing does not involve the BGC ceasing its present servicing and installation work. After much advice and consultation at many levels, I have come to the view that the best way forward to services and supplies is not to endeavour to mention them in Clauses 9 to 11 but to ensure that the Gas Consumers' Council will continue to be in a position to safeguard consumers' 158 interests in these areas. Therefore, when we come to Schedule 3 (which will be on another day) I shall be moving an amendment to delete paragraphs Nos. 11 to 13 which would empower the Secretary of State to restrict the role of the consumer councils in future. I suggest that by guaranteeing the future role of the consumer councils in this way your Lordships would achieve a more effective safeguard for supplies and services than would be achieved by mention of these matters in Clauses 9 to 11. I commend this amendment to the House. It is in the proper place and I hope that all noble Lords will agree to it. I beg to move.
§ 6.52 p.m.
Baroness Fisher of Rednal moved, as an amendment to Amendment No. 24, Amendment No. 24A:
At end insert (", and that satisfactory standards of service and supply to consumers are maintained.").
§ The noble Baroness said: My Lords, may I ask the noble Baroness, Lady Macleod, if she is going to accept Amendment No. 24A?
§ Baroness Macleod of Borve
My Lords, I have heard Amendment No. 24A mentioned. I have a copy of the Marshalled List which I picked up earlier this afternoon and there is no mention of Amendment No. 24A. if the noble Baroness can tell me what it is about, it would be helpful.
§ Baroness Fisher of Rednal
My Lords, I was trying to be particularly helpful to the noble Baroness. It was not any kind of trick question. I can talk on the one subject at one time. I do not want to keep the House any longer than is necessary. I understand and appreciate very much the great concern of the noble Baroness for the safety angle we have been discussing at length and the work that she has done to endeavour to overcome some of our difficulties. If she would say that she would accept this amendment, perhaps I can curtail the observations I want to make with the permission of the House.
§ Baroness Macleod of Borve
My Lords, at Report stage I am not allowed to address the House again, as the noble Baroness will be aware.
§ Baroness Fisher of Rednal
My Lords, I presume from that that the amendment will not be accepted. The genuine concern that the noble Baroness, Lady Macleod, has about safety, which is recognised by all Members in this House, is something we wanted extended in our amendment to make quite sure that satisfactory standards of service and supply to consumers are maintained. I do not want to go into the philosophy behind the Bill. That is the philosophy of the Government, and it is quite right that they should be putting forward that philosophy. But in putting it forward, I think it is important, because gas is one of the natural assets that we have, that the supply is recognised by all consumers generally. Consumers need to understand that their supplies and their services will be maintained. It depends on whether you are going to put in gas central heating, gas cooking, gas heating and spend money. You need to understand fully that the service and the supply to consumers are maintained. For that reason, I move my amendment.
§ Lord Underhill
My Lords, I wish to support my noble friend in her amendment for the reasons I gave previously; but I must remind the House of those reasons. I should like to pay my tribute to the keen interest and conscientious way in which the noble Baroness, Lady Macleod, looks at these important questions of safety. She has tried to deal with safety in her own amendment. As I said in the debate on Amendment No. 15, the question goes far beyond safety. We must not look only at the necessary safeguards purely from the aspect of safety. There are also other aspects. The noble Earl in his reply dealt adequately with the other points.
The amendment of the noble Baroness, Lady Macleod, relates to the powers of the Secretary of State to direct the corporation under Clauses 9 and 10 of the Bill to exercise its power to dispose. The Government have said they have no intention of doing certain things, but we have been told time and again (and I cannot over-emphasise this point) that it is not what the Ministers say in this House with all their good will; it is the words in the Bill that matter. We have been told time and again by noble and learned Law Lords on the Cross-Benches that it is what the words of the Bill say; and they would repeat this if they were here.
The noble Earl has said previously that the powers are in the Bill. The Government have intention at present to do only certain things. Therefore, there are powers in the Bill, if not for this Government, if not for this Secretary of State, for disposal of any part of the transmission system or distribution system of gas. They are in the Bill, even though the Government have no intention, they say, of acting under them at present. The words "at present" were made clear by the Secretary of State in a debate in the other place and on Second Reading by the noble Earl in this House.
Therefore, we must consider what will be the effect if any part of the transmission or distribution system was disposed of. There is the important question of ensuring that there will be the maintenance of the necessary supplies. There will also be the question of the maintenance of essential standards. Therefore, we cannot leave this solely to the question of safety. We must take in the other two points, and these are the two points which are concerned with my noble friend Lady Fisher's amendment to add, taking the amendment of the noble Baroness, Lady Macleod, dealing with safety provisions, also:and that satisfactory standards of service and supply to consumers are maintained ".I am not saying that they will be imperilled but they could be imperilled if further disposals of the type I mentioned were carried out by this Government or a future Government.
It would be wrong for this House not to make provision in the Bill to ensure that these two questions of standards are looked at as well as that of safety. I am hoping that the noble Earl will accept; but in reply to my noble friend Lord Jacques he would not give an answer whether he would accept and I am therefore disappointed that he may decide not to accept the amendment to the amendment. Why? Surely the Government believe that essential standards of 160 service must be maintained. I am certain the Government believe that essential supplies of gas must be maintained. Why not put it in the Bill? If tile Government say certain provisions are elsewhere in the Bill then, as my noble friend Lady Fisher said, there are proposals similar to the amendment of the noble Baroness, Lady Macleod, later in the Bill. Surely repetition does no one any harm.
I would want to ask the Government, if they are disposed not to accept the amendment to the amendment, why they will not do so. One would think that the safeguards proposed are ones which the Government believe in. Much as I support the work of the National Gas Consumers' Council, I must say, with respect to Lady Macleod, you cannot say that we will leave this question solely to the Consumer Council. The Consumer Council has a job to do. Surely we have to leave this to legislation, something written into the Act that the Secretary of State will observe, that the British Gas Corporation will observe. Therefore, this amendment should not confine itself to the safety provisions; it should also take in the two other points which are the subject of my noble friend's amendment, which I hope the House will support.
§ Lord Davies of Leek
My Lords, I concur with the remarks of my noble friend that we cannot leave this just to the Consumer Council. In a two- or three-minute speech I want to spike down what I consider to be a fundamental point not mentioned anywhere in the Bill. Having had experience of telephone wires and underground methods of carrying energy from point A to point B—maybe hundreds of miles apart—I know that an essential factor in protecting the safety of the users of that energy, whether it is gas or electricity, is that the maps giving the direction and the placing of pipes must be kept and secured for generations. We know about old coal mines in various mining areas that have been found and nobody knew of their existence because of lack of keeping documents. That is the only point I want to make in this short but important addition on this amendment—that somewhere or other the Secretary of State should take the responsibility. The corporation and he himself should be responsible for authorising accurate documentation that must be at the disposal of local authorities and any people who are concerned with the safety of individuals in the usage of the corporation's gas. If I spoke longer, I would be reiterating. I have made the point.
§ 7.2 p.m.
§ The Earl of Shrewsbury
My Lords, I should like to support the amendment of my noble friend Lady Macleod. I am sure your Lordships agree that it is essential that safety is of prime importance when an item such as gas is being considered. There have over the past few years been a number of occasions throughout the country when most unfortunate accidents involving gas have occurred. My noble friend is most correct in tabling this amendment. However, I should like to say that surely Lady Fisher's comments and her amendment are covered by my noble friend's amendment. If one is going to have safety precautions taken in a gas main, that has to be conducive to an efficient service in the first place.
§ The Earl of Mansfield
My Lords, it may help if I speak first of all to the amendment to the amendment, moved by the noble Baroness, Lady Fisher. I said originally that the wording which has been adopted in this amendment, and which closely followed the latter part of the old Amendment No. 18A—in effect if not in actual drafting whatever the intention, was vague in concept of standard of service and supply, and the Government simply cannot accept an amendment drafted in that form.
The matter goes a great deal further than that. I spent several minutes trying to meet the points of the noble Lord, Lord Underhill. So far as I can see, he does not attempt to answer; he merely repeats. I do not think that it is very profitable it I merely repeat the same things which I said on the last amendment. But if he thinks that it is as good a thing when legislating to insert desirable words and phrases, however imprecise they are, and scatter them through the Bill on a basis of a little of what you fancy does you good and a lot of what you fancy does you even more good, I must point out that that is not a good basis for a Bill of this nature.
May I say this to the noble Lords, Lord Underhill and Lord Davies. If we are going to talk about safety provisions and general safety, Clause 14 replaces Section 31 of the 1972 Act, the Act which places the responsibility fairly and squarely on the Secretary of State. I suggest that that particular clause, to which we can come later on, is perfectly satisfactory so far as that is concerned.
To return to Lord Underhill's point, it we are going to try to bring this concept into the Bill, then the place to do that is Clause 17 which deals with this part of the consideration. It plays no part in this clause of the Bill.
So far as my noble friend's amendment is concerned, I have already paid tribute to her for the great efforts that she has made to put her point of view across, to get it accepted by the Government and to "hatch out"—if that is the phrase—an amendment which is legally sensible and which at the same time achieves what she wants. That she has done. I indicated earlier that the Government are prepared to accept this amendment, and I repeat that. I believe that it represents a contrasted proposal. It will meet concerns expressed in Committee and it avoids the problems to which reference has been made.
I again pay tribute to my noble friend for her efforts in pursuing this matter, and I hope that her amendment will command support from all sides of the House. Before I sit down, I should like to amplify one matter to do with the maps referred to by the noble Lord, Lord Davies. There are provisions in Section 39 of the Gas Act and in Section 35 of the Pipe-lines Act dealing with the deposit of maps with local authorities. Both the Gas Corporation and private suppliers will be covered.
§ Lord Davies of Leek
My Lords, I am grateful. That means that it is on the record that that responsibility will be carried on.
§ Lord Underhill
My Lords, before the noble Earl 162 sits down, may I ask a question? He said that my remarks were better suited for Clause 17. The rubric of Clause 17 says:Acquisition of rights to use pipe-lines belonging to Gas Corporation ".I was referring to the possibility of using the powers in the Bill to dispose of any part of the existing pipeline. The powers are in the Bill. It could not surely be under Clause 17. Can the noble Earl advise me?
§ The Earl of Mansfield
My Lords, I was trying to scratch around—if that is the phrase—to find bits of the Bill which could possibly, as it were, embrace the imprecise words, but nevertheless genuine intention, of the noble Lord. It seems that I have not altogether succeeded; I shall try harder.
§ Baroness Fisher of Rednal
My Lords, regarding the amendment, I and my noble friends are disappointed regarding what we would have said was a very clear amendment. I cannot see anything imprecise. I would have thought that the man in the street could have understood those words. There are a lot of words in the Bill which many people will not understand at all. It seems a strange observation that the noble Earl should make about it. Its wording reads:and that satisfactory standards of service and supply to consumers are maintained ".I should have thought that it was absolutely clear to everybody.
I am pleased that the noble Earl brought out the point about Clause 14 of the Bill which I made in the previous debate. I do not know whether the noble Baroness, Lady Macleod, hatched out (as he describes it) her amendment from the safety regulations, because they are identical, so the hatching out must have been what I would call a job well done. The only difference —and perhaps the noble Earl did not make this point—is that the safety regulations that the Secretary of State has are related to the word "may", while, as the noble Baroness, Lady Macleod, quite rightly said, she had the word "shall", which I think all of us agree would be much better. But despite the late hour, because we feel that this as in important matter, it is our intention to bring it back at a later date. In the circumstances, I beg leave to withdraw the amendment to the amendment.
§ Amendment to the amendment, by leave, withdrawn.
§ Baroness Macleod of Borve
My Lords, I should like, if I may, to thank my noble friend very briefly but very sincerely indeed for agreeing to this amendment, as I understand he has. Certainly it has been part of the Government's philosophy to put into this Bill the safety angle. I have been very grateful to my noble friend and his colleagues for all that has been done to help me over the drafting of this amendment, and I should like that to be recorded. I gather that my noble friend is agreeing to this amendment.
§ On Question, amendment agreed to.
§ Lord Skelmersdale
My Lords, I think perhaps this might be an appropriate hour to adjourn for dinner; I suggest that we return at eight o'clock. I beg to move.
§ Moved accordingly, and, on Question, Motion agreed to.163
§ [The Sitting was suspended at 7.13 and resumed at 8 p.m.]
§ Lord Bishopston moved Amendment No.25:
Page 12, line 31, leave out subsection (5) and insert—
(" (5) A direction given under subsection (3) above or an order made under subsection (4) above shall provide that the Corporation may retain or, as the case may be, the Secretary of State shall pay to the Corporation, an amount representing the net book value of the property and rights disposed of together with any tax or other residual liabilities or, where the disposal consists of shares in a relevant subsidiary such a proportion of that amount as is represented by the proportion of shares disposed of together with any costs arising from the disposal.").
§ The noble Lord said: My Lords, during the Committee stage, we dealt with Clause 11 and, in putting two amendments before your Lordships, we drew attention to the fact that this clause, which refers to the powers of the Secretary of State as regards disposals by the gas corporation, provides two alternative methods by which the Secretary of State may achieve the removal of a subsidiary from the corporation. Under subsection (1), he may direct that the corporation shall sell a subsidiary or an asset, and under subsection (4) he may transfer to himself part or all of the corporation's shares in a subsidiary. We also drew attention to the fact that the clause provides for either the whole or a part of the shareholding to be transferred.
§ The amendment which we moved at that time provided that the reimbursement to the corporation of the value of its investment and the outstanding liabilities should be proportionate to the part of the shareholding transferred. We were unable to convince the Government or the Committee that the two amendments—which, I think, were Nos. 24 and 25—should be incorporated into the Bill. During the debate, the noble Earl agreed that any costs incurred by the corporation in the course of a disposal, and any residual tax liabilities relating to the assets disposed of, should be deducted from the proceeds payable to the Government, but he would not agree that the written-down value of the assets should also be deducted.
§ It may be difficult to sustain the argument that any profit realised on a sale of assets—that is to say, if the amount realised exceeded the written-down value—should be retained by the corporation, although many would take a different view. It may be said that the Government can, with some justification, claim that this profit should accrue to the shareholder; in other words, the Government themselves. But the amendment which I am moving is about not profits but liabilities. That is the very big difference and it is one of some importance. It is about liabilities which remain with the corporation when it no longer owns the assets. When asked how these assets were to be written off, the noble Earl simply said that that was a matter for the corporation.
§ There seems to be some confusion on this aspect in the Government's mind, at least, between the actual movement of cash following a disposal and the treatment of the transaction in the accounts. The noble Earl seemed to be under the impression that any sums retained by, or refunded to, British Gas would result in the corporation having liquid cash at its disposal. In column 162 of the Official Report of 11th May, the noble Earl referred to "large sums of money in its account". That is not really so and, to the extent that money was not required for reinvestment—which, 164 itself, is subject to Government approval—it would flow back to the Exchequer as, indeed, does all the corporation's surplus cash, and would then be available for reallocation to the best advantage over the economy as a whole.
§ It seems to me that, the House having debated the previous two amendments in relation to the powers of the Secretary of State concerning disposals by the corporation, this amendment is essential. The important aspect to which I have drawn the attention of the House is the fact that it is about not profits but liabilities which remain with the corporation when it no longer owns the assets. Some people would say that this is a form of daylight robbery, but it is an important point which needs clarification from the Government.
§ In view of the case put forward by my noble friends in Committee, and the fact that the House did not accept the amendments, we believe that this amendment is of great importance, because it seems that the liabilities will remain after these financial transactions have come about. I hope that the Minister can give the House some satisfaction on this amendment; not least to clarify the position, but, more important, to protect the interests of the corporation in the job which it will have to do after the legislation is enacted. With those words, I commend the amendment to the House. My Lords, I beg to move.
§ 8.8 p.m.
§ The Earl of Mansfield
My Lords, as I understand it, the effect of the noble Lord's amendment would be to provide that, upon a disposal of assets, the gas corporation shall have first call on the proceeds for an amount representing not only the costs of disposal and any residual tax liabilities, but also the net book value of the assets disposed of. I think that that is what the amendment amounts to. As the noble Lord said, we discussed this in the context of Amendments Nos. 24 and 25 in Committee, and the general point remains that the Government cannot accept a general requirement that the corporation retains the net hook value of assets disposed of, because that would, in effect, reduce the flow of funds to the Exchequer. There is no reason why the British Gas Corporation should retain a constant volume of resources when the effect of disposal would be to reduce the scope of the corporation's activities.
I have listened to what the noble Lord said today, and I have also looked back at the Official Report, and I do not think the position has changed since I spoke on the evening of 11th May. I shall not repeat all the arguments, and so weary the House, but it is right to say that, when the scope of the gas corporation's activities is being diminished, it does not make very much sense for the corporation, none the less, to retain this constant volume of funds.
The Bill provides that the proceeds from a disposal should pass to the Consolidated Fund for optimum allocation across the economy as a whole. This is the general rule, and it is one which, one would think, should be respected. There is no question of in any way hindering the corporation in its main business, which is the supply of gas, because the gas corporation's future financial needs will be dealt with, as for any other nationalised industry, by the normal process of annual agreement and investment plans and borrowing 165 from the National Loan Fund to the extent that internally generated funds require to be supplemented.
I appreciate that this is something which does not commend itself to the British Gas Corporation. Nevertheless, this is Government policy and I think the corporation will have to come to accept it. We have indicated that we accept that there may well be a case for the corporation to be reimbursed for costs incurred in the course of a disposal and for any tax liabilities remaining after the disposal. But the Bill already provides scope for this. It provides scope for such reimbursement as the Secretary of State determines. If in a particular case the gas corporation sees a particular argument for its retaining all or part of the book value of the assets—for instance, if there is an outstanding loan to the corporation which was raised specifically in connection with the assets—it will have the opportunity to advance that argument to the Secretary of State when he consults the corporation under Clause 11(1).
If the Secretary of State should agree with the gas corporation's argument in that particular case, the Bill provides sufficient flexibility to permit him to reimburse the corporation, as appropriate. So the Bill does not rule out reimbursement of all or part of the book value of an asset if in a particular case the Secretary of State were to consider it to be justified. But, as I have said, there is no case for making such reimbursement a general principle, and in general terms we should expect reimbursement to be limited to any related costs and tax liabilities. What I can say is that the corporation will have the opportunity to argue for a greater degree of reimbursement on a case-by-case basis. That is the position as I see it. I hope that the noble Lord will, in the circumstances, withdraw his amendment.
§ Lord Bishopston
My Lords, the position is still far from clear. The noble Earl will recall that when the matter was debated earlier my noble friend Lord Bruce of Donington suggested to the House that the original capital of the corporation did not come out of the funds of the taxpayer. He referred to the balance sheet of the British Gas Corporation and suggested that it would indicate where the money came from. My noble friend said it came from subscription to gilts and all the rest of it, with which the noble Earl is quite familiar, and that if there were to be any realisation of assets and the corporation were allowed to keep the proceeds of the enforced sale of its assets, the prudent way would be to reduce some of its debts.
I recall that in a previous debate in Committee I referred to the fact—I shall be corrected if I am wrong—that the Bill anticipated the indebtedness of the corporation after the changeover had taken place. My noble friend said that the obvious way to do it was to reduce some of the debts. He said that if you sell an asset for which you no longer have any use but still want to retain the credit rating for the company, although you cannot use it immediately on things like research and development, an application for the reduction of debt would seem to be the obvious way out of it. It does not necessarily follow that the funds which are available after the sale of assets, whether North Sea oil or gas, are necessarily funds which go into the Consolidated Fund, which I anticipate is 166 the intention of the Government in this case. I am not sure that the noble Earl has answered satisfactorily the main part of my argument, that the amendment is not about profit but about a liability which remains with the corporation when it no longer owns the assets. It would be helpful if the noble Earl could clarify that aspect, which is of real concern.
§ The Earl of Mansfield
My Lords, I am not entitled to speak again, and I think that I have already covered the point as to liability in the way that the corporation can argue the case on a case-by-case basis. Therefore, I am afraid that I cannot help the House any further.
§ Lord Bishopston
My Lords, this matter will have to be further considered. With the leave of the House, I beg leave at this stage to withdraw the amendment in order that we can consider what further action to take later.
§ Amendment, by leave, withdrawn.
§ [Amembnent No. 26 not moved.]
§ Clause 12 [Supply of. gas by other persons]:
§ Lord Beswick moved Amendment No. 27:
Page 15, line 4, at end insert—
(" (3) Notwithstanding the provisions of subsections (1) and (2) above, the Secretary of State may, by order, provide that consent will be required for all gas to be supplied through pipes in Great Britain except gas supplied by or to the Corporation.
(4) An order under subsection (3) above may he made at any time but only where it appears to the Secretary of State to be desirable in order to ensure the efficient use of gas and the effective conservation of natural gas resources.").
§ The noble Lord said: My Lords, I beg to move Amendment No. 27 which concerns the care, conservation and planned use of what must inevitably be finite resources. We debated the amendment at Committee stage and I was then privileged to have a reply from the noble and learned Lord, Lord Mackay of Clashfern, for which I was very grateful. He went into a good deal of detail, and I said then that I must look at what he had said and consider it. On that basis, I withdrew the amendment. Since then, I have looked at the reply as objectively as possible and I shall try to deal with the five main arguments which the noble and learned Lord advanced. I shall seek to show that the arguments do not amount to a good enough case against the amendment.
§ First, there was the point made by the noble and learned Lord the Minister that the amendment would prevent competition by introducing bureaucratic interference. I am bound to say that I find it difficult to accept this point about bureaucratic interference, since the whole of the Bill is concerned with interference. Almost every clause gives power to the Minister to interfere. May I just insert, incidentally, that I do not like the word "bureaucratic" because mostly we are talking about hard working, conscientious civil servants. I do not like the way in which they are referred to. I do not think that the noble and learned Lord can advance this argument of bureaucratic interference against this amendment. Moreover, I put it to him that there is nothing in the amendment, anyhow, which would prevent competition from working. The amend- 167 ment would come into play only if the interests of overall energy policy or conservation were at risk.
I am assuming that the Government take seriously the question of conservation. I have read with considerable interest what the noble Lord, Lord Skelmersdale, said on 19th May in the debate which we had on coal and the environment. I quote from his speech then. He said:
meaning the Government's energy policy—
involves ensuring that all fuels are used efficiently and cost effectively and that our energy resources are developed to meet our long-term needs ".
§ Of course I agree wholeheartedly with what the noble Lord said, and I assume that in "all fuels" he included gas. I am sure that the House approved of the philosophy which he stated so well on that occasion, but this amendment is consistent with that philosophy. There is no party issue about it. It is entirely consistent with the philosophy which he then advanced.
§ In addition, the Government have made frequent reference to their powers under the Energy Act 1976 to control the use of gas in power stations. I cannot understand why they find it so difficult to accept this amendment which would give them a reserve power to control the use of gas in other non-premium cases.
§ Secondly, the noble Lord reiterated that market forces would be much more effective than Government intervention in identifying the best use of gas. I must say that there is no sound evidence for this at all. I know that there is a party argument about market forces, but I do not want to introduce party philosophy. But in this particular case there is no evidence to show that market forces of themselves would be a sufficient guarantee that our finite resources are being used in the most cost-effective way. On the other hand, there is considerable evidence in Europe to suggest that market forces would result in gas being used for crude heat purposes, where national considerations would suggest that use should be made of other fuels.
Experience shows that while market forces may allocate resources in the best way or the most profitable way on short term considerations, they are a bad way of deciding the use of resources when one comes to think about long-term policy. Nor are market forces equipped to take into account such matters as national security. I imagine that the Select Committee on energy had this point in mind when thay said about oil depletion policy, in paragraph 16 of their recent report:
Equally it is important to realise that the objectives of policy may differ sharply as between the short, medium and the longer term. It may not in practice he possible to prevent the application of policy for the short term from closing options for the longer term ".
§ I do not believe that the market forces argument is the conclusive one, if the noble Lord will permit me to say so.
§ The noble Lord having dismissed a point I made earlier and argued the merits of market forces, went on to say that in any case the Government had powers to control the rate of depletion under the 1975 Act. Of course, this is true. The Government do have power to control the depletionwithin broad limits at the source of supply, but the amendment would provide additional protection at the place where it is needed—namely, in 168 the market. The Government by saying that they have controls, recognise the possible need for intervention in the market, and the amendment I am moving provides the criteria for that intervention.
§ Fourthly, the Minister said that the consent procedure for private supplies in the range from 25,000 to 2 million therms has only been introduced for safety reasons. That is true as far as it goes, but that does not conflict with the view I am expressing in support of this amendment. While the current procedure will be used in every single case to check the safety arrangements, exept where there are general orders, there is no intention of the amendment coming into play in every single case. The requirement for consent would only be introduced at the Government's discretion and would not hinder competition.
§ Finally, the Minister said that the amendment does not help to increase our knowledge of gas reserves. I agree with the noble Lord; it does not increase our knowledge of gas resources and reserves, and there are other ways in which we must try to increase our knowledge of what is going on beneath the seas.
§ The uncertainty about gas reserves will be there whether we have my amendment or not. The amendment does at least recognise that there might be difficulties about reserves, and it suggests that the Government may require contingency powers to deal with any depletion problem which may arise. The Government say that competition will lead to a lot more gas being discovered. There is no guarantee of that. It may be so, and more gas could be discovered—but one thing is certain: if gas is discovered and used today, it cannot be used tomorrow. Gas reserves are finite and gas needs to be depleted in such a way, and in accordance with a sensible conservation policy, as to give maximum economic benefit to the nation as a whole and not just to the oil companies who may now come into the business.
Those consumers investing in gas-burning equipment need some guarantee that gas will be available to them on a long-term basis. This amendment provides a means of helping to ensure that gas will not be wasted if we find that reserves are being exhausted before alternative supplies are available. In this amendment we are not suggesting—and I am certainly not suggesting—that the Government should abandon all faith in market forces. They do have a part to play. We are certainly not saying that the Government should change their proposed three-tier system of gas supply. What we say, and I reiterate this, is that past experience shows that the position can change, and change dramatically, in the energy scene. Our amendment provides a backstop in case the unforeseen should happen again. I will quote once more from the report of the Select Committee, paragraph 92:
It would be sensible for the Government to retain some form of reserve powers to influence depletion rates should this prove necessary ".
§ I suggest that it would be sensible to accept the advice in that report, and I beg to move that this amendment be accepted.
§ Lord Lovell-Davis
My Lords, perhaps it is not surprising that I should intervene in a matter which concerns energy conservation. I suppose that I have spoken more in your Lordships' House about energy 169 conservation than I have on any other single subject. I was of course responsible as a junior Minister in the Department of Energy for introducing the "Save It!" energy conservation campaign. It was while getting this campaign going between 1974 and 1976 that I became convinced that an overall policy of energy conservation, backed by powers which could be called into play if necessary—and that is all this amendment provides for—was vital to achieving worthwhile targets, and that the matter could not simply be left to market forces. Persuasion is what we tried and it worked in many areas. I would not decry the efforts made by the Department of Energy or by householders and many responsible companies who saw the wisdom of energy conservation and of making the most efficient and cost-effective use of fuel.
The voluntary campaign we launched was perhaps adequate for making moderate progress towards moderate levels of conservation. What it did not do was ensure that our energy resources would be used most effectively, particularly in the long term. Market forces do not have a particularly good track record when it comes to making allowances for long-term problems and for national security. My noble friend Lord Beswick said that they do not have a very good record in Europe, where gas has been wastefully used. I think they have a bad record in so far as the coal industry is concerned, which is a vital element of our overall energy policy. I believe that the coal industry as the prey of market forces has been run down unnecessarily and dangerously—not only here but in Europe as a whole.
However, this amendment does not involve the use of the sort of powers that I happen to consider are necessary for mounting an effective programme of energy conservation. All it represents, as my noble friend has said, is a backstop, a fall-back position from which the Secretary of State can ensure that large quantities of gas are not used wholly wastefully, particularly important if competition in gas supplies does not lead to the discovery of the huge new supplies of gas that we hope for, that the supplies that are available are used to the maximum economic benefit of the nation as a whole, whether by private or public sector.
As has been pointed out in this House many times, gas reserves are finite, however large they may seem to promise to be, and gas once burnt is gone for ever. Everyone interested in energy conservation, including the Select Committee on Energy, as my noble friend Lord Beswick has just pointed out, and many other international bodies, recognise the sense in Governments retaining reserve powers to influence depletion rates. The controls made available by this amendment would act as an additional buffer, possibly like a railway platform buffer, one never to be used, against the potentially worst outcome of our uncertainty about the supply and the reserves which may be available. I can see every reason for including this amendment in the Bill, especially since it applies only to gas and would be used only on occasions of absolute necessity and, with few disadvantages to anyone in doing so.
§ The Lord Advocate (Lord Mackay of Clashfern)
My Lords, as the noble Lord, Lord Beswick, has said, we discussed this particular amendment fairly 170 fully in Committee, and the noble Lord has rehearsed to your Lordships, in perhaps more eloquent language than I could have used myself, what I said on the last occasion. Hearing it from him makes it seem even more impressive than hearing it from myself.
The need for powers in relation to conservation is not really in issue. As I said on the last occasion, the Secretary of State does have powers to control depletion at source. He also has powers under the Energy Act 1976 to make orders regulating or prohibiting the use of any form of energy, whether gas, electricity, coal or oil, where it appears desirable to the Secretary of State for the purpose of conserving energy. This seems to me, with respect, to meet the point that the noble Lord, Lord Lovell-Davis, was making.
I do not understand that this amendment really has very much to do with conservation. The conservation powers exist independently of this regime. The fact that the amendment does not in any way control the use of gas by the gas corporation perhaps indicates that. This amendment has the effect of enabling the Secretary of State in certain circumstances to require that the larger users who are using gas through the private system require the Secretary of State's consent. The whole purpose of the three-tier arrangement is to adjust the need for consent to the safety factor, and, for reasons which have been explained, at the top level it is not thought that safety requires the Secretary of State's intervention for that purpose.
Accordingly, it is quite alien to the scheme to introduce this amendment as if it were an amendment directed to conservation. All it does is to enable the Secretary of State, in the circumstances rather ambiguously and vaguely described in subsection (4), to impose a condition of consent on private supplies at the top level. On the basis of what we have said, such consent is not necessary to ensure safety. Therefore, it is completely unnecessary in our view because the interests of conservation are adequately served otherwise. It is, in our submission, a confusion between consents which are required for safety and consents which are required for conservation. Although perhaps I need not repeat the word "bureaucratic", it is an unnecessary intervention on the part of the Secretary of State that this amendment is looking for. If the noble Lord is not prepared to withdraw this amendment, I would invite your Lordships not to give effect to it.
§ Lord Beswick
My Lords, I am sorry that the noble and learned Lord was not convinced by what I said, and equally sorry that I feel unable to be convinced by what he said. The wording of the amendment, I would have thought, was quite simple, that permission will be given to put this gas through the common carrier pipeline provided that it appears to the Secretary of State to be desirable in order to ensure the efficient use of gas and the effective conservation of natural gas resources. That seems a fairly straightforward requirement.
I undertook to study carefully what the noble and learned Lord said on the last occasion. I do not think I should be any the wiser if I looked again at what he has just said. I think the best thing we can 171 do here is to show our disapproval of what he said by going into the Division Lobby.
§ 8.36 p.m.
§ On Question, Whether the said amendment (No. 27) shall he agreed to?
§ Their Lordships divided: Contents, 35; Not-Contents, 58.
|DIVISION NO. 2|
|Beswick, L.||Lovell-Davis, L.|
|Birk, B.||McNair, L.|
|Bishopston, L.||Milner of Leeds, L.|
|Blease, L. [Teller.]||Oram, L.|
|Chitnis, L.||Phillips, B.|
|Cledwyn of Penrhos, L.||Rochester, L.|
|Collison, L.||Stewart of Alvechurch, B.|
|David, B. [Teller.]||Stewart of Fulham, L.|
|Fisher of Rednal, B.||Stone, L.|
|Hampton, L.||Strauss, L.|
|Hatch of Lusby, L.||Tanlaw, L.|
|Hooson, L.||Taylor of Gryfe, L.|
|Howie of Troon, L.||Thurso, V.|
|Jeger, B.||Underbill, L.|
|John Mackie, L.||White, B.|
|Kirkhill, L.||Wilson of Langside, L.|
|Llewelyn-Davies of Hastoe, B.||Wynne-Jones, L.|
|Lloyd of Kilgerran, L.|
|Abinger, L.||Inglewood, L.|
|Airey of Abingdon, B.||Killearn, L.|
|Auckland, L.||Kitchener, E.|
|Avon, E.||Lindsey and Abingdon, E|
|Baker, L.||Long, V. [Teller.]|
|Belstead, L.||Mackay of Clashfern, L.|
|Boardman, L.||Macleod of Borve, B.|
|Boyd of Merton, V.||Mansfield, E.|
|Brookeborough, V.||Mar, C.|
|Brougham and Vaux, L.||Margadale, L.|
|Campbell of Alloway, L.||Merrivale, L.|
|Campbell of Croy, L.||Mersey, V.|
|Cockfleld, L.||Monk Bretton, L.|
|Cork and Orrery, E.||Mottistone, L.|
|Craigmyle, L.||Mountevans, L.|
|De La Warr, E.||Renton, L.|
|Donegall, M.||Rochdale, V.|
|Eccles, V.||St. Just, L.|
|Ferrers, E.||Sharpies, B.|
|Fortescue, E.||Skelmersdale, L. [Teller.]|
|Gainford, L.||Swansea, L.|
|Gardner of Parkes, B.||Teviot, L.|
|Glenarthur, L.||Tranmire, L.|
|Hives, L.||Trefgarne, L.|
|Holderness, L.||Trenchard, V.|
|Home of the Hirsel, L.||Vaux of Harrowden, L.|
|Hornsby Smith, B.||Wise, L.|
|Hylton-Foster, B.||Wynford, L.|
§ Resolved in the negative, and amendment disagreed to accordingly.
§ [Amendment No. 28 not moved.]
§ Clause 14 [Safety regulations]:
§ 8.45 p.m.
§ Lord Tanlaw moved Amendment No. 29:
Page 19, line 41, at end insert—
(" (10) Where the relevant authority is the Secretary of State there shall be paid out of moneys provided by Parliament to
persons appointed to carry out the functions referred to in subsection (2) above and any other functions arising from regulations made under subsection (1) above such remuneration and such allowances as may be determined by the Secretary of State with the approval of the Treasury and, where appropriate, such pensions as may be so determined may be paid out of money provided by Parliament to, or in respect of, those persons.
(11) Every person who is a supplier during any period, not being the Corporation, shall pay to the Secretary of State such proportion as the Secretary of State may determine of—
§ The noble Lord said: My Lords, I beg to move Amendment No. 29, which inserts the two new subsections as printed on the Marshalled List. I think that perhaps it was because of the lateness of the hour when this amendment came up during the Committee stage that it was not given proper debate—that was recorded by some noble Lords at the time. Therefore, it may be helpful if I refresh the memory of some noble Lords as to the reasoning behind these new subsections as proposed under the amendment.
Under Clause 13 of the Bill, which introduces a new Section 29B of the 1972 Act, the Secretary of State may prescribe standards for gas supplies through pipes and may appoint:
competent and impartial persons to carry out tests ",
to ensure that these standards are complied with. Under the Bill as it stands at the moment, there is no provision for the cost of employing these extra staff and nor is it said exactly how many extra staff from the department will be involved. Numbers have been quoted, but from the replies given during the Committee stage on 11th May the numbers still have not altered very much and therefore nor has my reason for proposing these new subsections.
§ Under Clause 14, the Secretary of State may make safety regulations and, in fact, the noble Earl the Minister, who is not in his place at the moment, said as regards previous amendments which were discussed today—namely, Amendments Nos. 11, 24 and 24A—that these safety regulations will be satisfied under this clause and that the safety arrangements will be quite satisfactory before the Secretary of State gives consent to any private supply. Therefore. there will be a need for extra staff who are competent enough to decide whether the arrangements made by a would-be supplier are, in fact, satisfactory.
§ All the discussions that we have had on safety have been about how the safety regulations will be implemented. We have been given assurances. The point of the amendment is to find out what is behind these assurances in terms of numbers of staff, how they will operate and how the costs will be met when they arise. Moreover, under subsection (2), the relevant authority may authorise persons to enter premises, examine and test appliance and, where necessary, seal off any fitting or any part of the gas supply system. Presumably, yet further staff will need to be appointed for these purposes, as described.173
§ The relevant authority in the case of supplies made by British Gas will, of course, be the corporation and, as hitherto, the corporation will undertake these tasks at its own expense. However, in the case of private supplies, the relevant authority is the Secretary of State. Yet no provision is made in Clause 14, as it is in Clause 13, for meeting the costs of employing these staff. The noble Lord, Lord Skelmersdale, will recall that lie agreed with the principle of even-handedness which should be retained in the Bill.
§ The amendments proposed in these two new subsections would require the same arrangements as are made under Clause 13 to he made for the recovery of costs incurred in respect of private supplies. If this is not done, the costs will fall on the taxpayer. Moreover, British Gas will be required to meet costs in respect of its own supplies from which the private supplier would be excused.
The amendment would also provide an opportunity for questioning the Government on the numbers of staff. The noble Earl will recall that, in his reply to me during the Committee stage on 11th May, at col. 206, he said:
The eight to 10 staff do indeed cover the department's requirements for all Part 11 purposes, including staff required to monitor common carrier work in Clauses 15 to 17 ".
I shall come back to that in a couple of minutes.
§ The Department of Energy does not have locally-based staff, as does the corporation, to carry out these duties. They do have some, but they are based, as it emerged during the Committee stage, in Leicester. Can we get some clarification from the Government? Are all the safety regulations as shown in Clause 14 to be met from the Leicester base?—in which case it seems rather an expensive way of doing it in terms of travel costs alone. Are there enough officers to fulfil these duties? Alternatively, do the Government perhaps have in mind that officers of the British Gas Corporation should be, as it were, contracted to carry out the functions shown as belonging to the Secretary of State? If that is so, it would certainly be expected that the Secretary of State should meet the costs and recover them from the supplier. This amendment would not be necessary if we had these very straightforward answers to the questions which were raised during the Committee stage. I hope that the noble Lord will take this opportunity to clarify this matter, because they are quite basic and simple questions.
§ If I may return to what lie said, it may be helpful to noble Lords to know some of the duties, as designated in the course of the Bill, which the Secretary of State and his staff in the Department of Energy have to carry out. I think I mentioned during the Committee stage of the Bill that it would have been helpful if Opposition spokesmen could sometimes have had more direct access to members of the department in order to get answers to these questions, which are quite specific and concern numbers. Hopefully, if they are, so to speak, ready in the Box with their pencils sharpened, they will be able to give the noble Lord the answers to some direct questions that I shall ask him.
§ First, on the number of staff required, the noble Lord either has to say whether it is one, two or six. This concerns drawing up or approving schemes for the disposal of assets. The Government have already 174 recognised in other parts of the Bill that it will be a complicated business and I do not expect engineers, technical or safety staff will be involved in this. This will be much more like accountancy staff and professional staff dealing with valuations. So, with regard to Clauses 9 to 11, perhaps the noble Lord can say whether the existing staff of the department will be able to meet this function or whether extra staff will be involved.
§ There is also the question of giving consent for private supplies of gas of 25,000 therms to 2 million therms. These consents have to be given. Will extra staff be required? Then there is the matter of attaching conditions to these consents and checking the safety arrangements in each case. This comes under Clause 12. Will the department handle this without extra staff, or will more staff be involved under Clause 12? What about receiving and checking the notifications for supplies above 2 million therms? This requires regular monitoring of supplies. Will the department or the Secretary of State need extra staff? Again, this comes under Clause 12.
§ Then we come to the question of consultation with private suppliers about standards of quality and prescribing standards for private supplies in Clause 13. This is another separate function. How many staff would the Secretary of State require for this purpose? Also under Clause 13 the Secretary of State has to check that the gas complies with the prescribed standards, and he also has to issue charges for the monitoring of gas quality. This seems to be another new function. How many extra staff will be involved here?
§ The drafting of safety regulations falls under Clause 14 and is what we are discussing at the moment. Because of the questions that we are still having to ask from this side of the House, I believe that detailed safety regulations would require a very considerable amount of thought and, indeed, extra legislation if some of the things that the Government have said are to come about. Furthermore, in Clause 14 the Secretary of State has to ensure that private suppliers conform to these safety regulations. How will this be monitored, and will it require extra staff? There is also the receiving of the British Gas Corporation's pipe-line plans and arranging for publication. Will this be done through normal Government publication departments? Will it have to be contracted out, or will extra staff be required to receive the representations about the pipe-line plans? Will this be carried out in a straightforward manner by existing members of the department, or will more staff be required?
§ Another duty of the Secretary of State is to consider representations and decide whether to give a direction to the BGC. Again, will this be handled by the Department of Energy without taking on extra staff, or will it require more people? Then there are the consultations with British Gas, making representations about directions, the drafting of directions and deciding how much shall be paid to the British Gas Corporation. I think that this comes under Clause 15. There is the matter of receiving applications about modifications to existing pipe-lines. There are other steps which are shown in Clause 15. I am not quite sure what extra work is involved, or whether or not any extra work is involved. These are matters that are 175 over and above what is happening at this moment to the supply of gas. It is not said, except by the noble Lord himself, that only another 8 to 10 staff are required.
The noble Lord also said, and this is another reason why I have brought forward this amendment:
We cannot envisage there being more than the maximum figures stated in the explanatory memorandum. But if we are wrong, we shall have to look at this again, and in the light of experience very naturally we shall have to change it."—[Official Report, 11/5/82; col. 206.]
I am not asking the noble Lord to give us the exact figure, but merely to tell us the figure to the nearest 10 staff. He said not more than 10–8 to 10 staff—but let us have the nearest 10 to the number required to fulfil the functions under the Bill.
§ There are three or four other directions of which no doubt the noble Lord is aware; namely, receiving applications about the use of pipe-lines, deciding on the directions after consultation with the British Gas Corporation and the applicant, and deciding on the appropriate charges for carriage of gas. This last point could be a particularly complex one. These matters are covered in Clause 17.
§ I have given a sort of check list of duties that the Secretary of State has taken on himself to perform under this Bill and although we, on this side of the House, have objected about his many powers, all the noble Lord has to do is merely to add up the numbers from these duties and give us the total. Alternatively, if he says that no extra staff are required, perhaps he can explain why there is so much slack in the department to take up these extra duties without having to take on extra staff. All I am saying is that they should not be able to do this extra work because they should be so busy and exercised with their present duties. These questions are straightforward and simple, and I look forward to a straightforward and simple reply from the noble Lord. I beg to move.
§ Lord Bishopston
My Lords, I rise to support the noble Lord, Lord Tanlaw, on what of course is the second time round on a matter of very great importance, because it deals with the matter which has concerned the House for some weeks now—that of safety. Even the amendments which were carried this afternoon in their various forms do not really get rid of some of the real anxieties which many people feel.
The amendment, as the noble Lord, Lord Tanlaw, has said, is concerned with safety. It is also concerned with manpower. As a background one might look at the Explanatory and Financial Memorandum, to which the noble Lord made reference. That tells us, regarding the effect on public service manpower, that Parts I, III, IV and V of the Bill are not expected to have any significant effect on public service manpower, and the administration of Clauses 12 to 17 will initially require 8 to 10 staff in the Department of Energy and might eventually require a total of 40 to 50 staff. Other provisions of Part II of the Bill are not expected to have any significant effect on public service manpower.
Of course, we are concerned about the effect on manpower but also about the use to which such manpower would be put, especially when it concerns safety. Although it is getting late at night—I think it was 10.15 p.m. on the last occasion we debated this: as 176 the noble Lord said, rather late at night—we are still trying to get some satisfactory answers from the Government about the plans they have to deal with consumers and safety, and the public interest when the changes take place.
One needs to look at what was said by the noble Earl in moving the Second Reading of the Bill, on 20th April, when he spoke about some of the changes which are the background of our concern on this occasion. One must appreciate what changes are likely to take place when privatisation of the gas enterprise takes place so that we know what aspects of safety will be our main concern. The Minister said at column 469:The Government's proposals will bring enterprise and competition into the British gas market ".They will certainly bring some doubt and concern for safety, because the whole thing will be put into the melting pot. It is important to know what changes will be taking place, what the effect may be, and how we can so organise the safety aspect so as to give the kind of assurances which the public would expect.
The Minister at the Second Reading said, at columns 469 and 470:This Bill will open the way for persons other than BGC to supply gas by pipe to all consumers except those who have a statutory right to require BGC to supply gas on demand. For this purpose it creates three tiers of gas consumer. First, consumers whose premises take more than 2 million therms a year may be supplied without the Secretary of State's consent, subject only to a notification procedure which will provide a check on the estimated rate of consumption and cater for circumstances where the rate subsequently drops below 2 million therms a year for at least three years. Secondly, consumers whose premises take less than 2 million therms a year but who do not benefit from BGC's statutory obligation to supply may be supplied with the Secretary of State's consent. The Secretary of State has made it clear in another place that he will only be prepared to give consent where he is satisfied with the safety arrangements proposed. Thirdly, consumers who have the benefit of BGC's statutory obligations to supply, namely those whose premises take less than 25,000 therms a year and are within 25 yards of a BGC main, may be supplied only if BGC do not object to the giving of consent by the Secretary of State ".He went on to say:The ability of other suppliers to compete effectively with the BGC will be enhanced by the provisions of the Bill concerning the use of BGC pipelines by other parties ".There is this whole hotchpotch and uncertainty by the three grades, or aspects, of consumers who will be supplied. We shall have the BGC gas pipelines, and we shall have the private sector gas pipelines as well. In the last few weeks the House has been trying desperately to get some assurances as to the areas of responsibility. When we are discussing manpower effects of legislation we need to know who is going to do what and the areas of responsibility between the public and the private sector.
As we have said many times, the matter is one of concern. During the passage of this Bill here, and indeed in another place, no real pattern or plan of proposals seems to have been very clear. We understand that the Secretary of State may prescribe standards for gas supply through pipes and may appoint competent persons to ensure that safety standards are complied with. That is all very well, but one has the problems about who is going to take responsibility, who is going to carry out the work, and of course the locations.
177 I have mentioned the three categories of consumer because this may concern industry, and the commercial or private sector. We shall be having gas supplied in the built-up areas where profitability is assured, and one anticipates that the private sector may have a special interest there. One can imagine the poor old gas corporation having to supply gas to the Scottish Highlands and Islands and other places in the British Isles where gas is needed but is not commercially profitable. We shall have these problems which will affect manpower.
The subject of supply is not a party political matter, as I said earlier. Whether or not we like the idea, once a change takes place then safety must be assured. It is the duty of this House, and indeed of Parliament as a whole, to make sure that there are adequate precautions. Clearly when fragmentation of the gas supply takes place there will be a good deal of doubt. Noble Lords are anxious, whatever our views should be, that we should produce and distribute gas in such a way as to ensure that nothing endangers human life through inadequate safety measures.
I noticed at the end of the Bill that among the repeals is Section 26 of the 1972 Act, which deals with safety. That is repealed by this Bill, as indeed is Section 27. We have a real concern and indeed a duty to ensure that this Bill, when that repeal takes place from the 1972 Act, provides for adequate safety precautions, as the 1972 Act had, and that in this new, changing and evolving situation the plans that we envisage and the safeguards we put in the Bill are really adequate. This, therefore, is another area of concern.
Of course, safety is more easily ensured with one national publicly-owned gas undertaking with a single authority answerable to Ministers and Parliament. But, in the changing situation of privatisation, we shall have the hiving-off of some lucrative aspects of gas supply, appliances and so on, where the commercial aspect will be all that matters. One hopes that the safety precautions will be adequate. I am not in any way critising the need for a profitable return, because private enterprise must make a profit. One just hopes that the public service and safety aspects will not be simply a sideline, to be accommodated while the main objective is fulfilled.
As I say, it is much easier, as we now know, for a publicly-owned authority to fulfil those tasks and be answerable for them. What is not so easy is to ensure that the same high standards which we have come to associate with the BGC will continue when a number of private agencies share the tasks. The big difference between the BGC and private agencies is that private suppliers are, and must be, concerned with profit as commercial operators. That does not necessarily apply, of course, to the BGC, which we recognise, is first and foremost concerned as a public service to satisfy public demand and meet the demands of the public, often regardless of cost. One knows the criticisms we get—this applies especially to Members of the other place—from constituents who think that gas should be supplied just where they want it, whether or not it is likely to be commercially viable to the gas board. One can imagine who will do the hard slog in future and who will get the financial benefit. That is by the way of course, as what we are discussing is how the fety aspects can be safeguarded.
178 Clause 14 enables the Secretary of State to make safety regulations, and somehow he will have to satisfy himself that the safety arrangements are satisfactory. Undoubtedly he will be advised by the BGC and the experts in the Department of Industry, but no arrangements seem to have been made in the clause to recover the costs of checking for safety, including the entry of premises, the examination of appliances and the checking of gas piping from private suppliers to consumers, as under Clause 13, subsection (5) of which gives us details of how the obligations are to be carried out:There shall be paid out of money provided by Parliament to the persons appointed…such remuneration and such allowances as may be determined by the Secretary of State with the approval "—as always—of the Treasury".May we he told who, under Clause 14, will pay? One presumes it will be the taxpayer. If anything goes wrong with a privately-purchased gas appliance or supply, perhaps late at night, or if there is a smell of gas, then, although there may be some responsibility for safety (and checking that there are no explosions in the homes of our people and in industry) on private enterprise, I think it will be the BGC who will get the telephone call to come out and do something about it.
The responsibility for checking and taking action in emergencies and other situations is unclear. Indeed, the noble Lord, Lord Skelmersdale, in Committee on 11th May gave various answers which he anticipated would reassure noble Lords, but the more one reads them the more one becomes confused as to what they meant. He said:The broad picture is that there are two levels of safety coverage when an incident occurs involving gas. Looking at the first level — that is, the coverage provided by the supplier of gas—the BGC is at present given rights of entry to deal with potential dangers by virtue of regulations under Section 31 of the Gas Act 1972. Where a private supplier seeks the Secretary of State's consent to supply gas under Clause 12, the gas standards branch will advise the Secretary of State as to the adequacy of the proposed safety arrangements, and one of the points checked will be that the arrangements include a contractual right of entry for emergency personnel provided by the private supplier ".—[Official Report, 11/5/82; col. 205.]Although, therefore, responsibility is taken by the private supplier to some extent, the public sector is involved either through the gas corporation or the Department of Energy in terms of those who must make the necessary checks. That will of course involve much more manpower, anyway.
Later on, the noble Lord went on to say; at col. 205:I would imagine that in practice the contractual rights of entry would, where appropriate, follow the broad pattern of the rights given to BGC.….I am not being personal, but imagination is hardly an assurance or a safeguard where safety is concerned. I am not in any way criticising the noble Lord on that point because, to be quite honest, if I had his job to try to explain his Government's Bill and legislation before the House and to justify what the Government are doing, I would probably not do it as well as he does it. But there is no excuse of course, because whoever is on the other side of the House pressing this kind of legislation has an obligation to be quite clear about what it is sought to do in privatisation, what the effects will 179 be, and what safeguards are necessary to match up to the demands.
At col. 205—which is very instructive in many ways—the noble Lord told us that,The second level of coverage is the overall monitoring and investigation by the Department of Energy in the person, if I may put it that way, of the gas standards branch. In the case of gas supplied by BGC, the gas standards branch will continue the monitoring and investigation role it currently fulfilsLater on the noble Lord said:The gas standards branch will not be undertaking routine inspections of all private gas supplies; the day-to-day emergency work will be provided by the private supplier, and perhaps that answers one of the worries of the noble Lord, Lord Tanlaw ".Maybe, having read it again, he is more worried than he was at the beginning.
However, if the work of the private supplier is the responsibility of the private supplier, how are the public who are benefiting from his supplies to know to whom to go in case of breakdown of appliances or in case of emergency? How would it be known that the supply comes from a private pipe-line? I do not want to widen the area of doubt, but earlier we had a debate in which the noble Lord referred to the compatibility of gas in the pipes. I think that he alluded to the fact, or possibility, that the gas supplied by the private sector would not be of such a high quality as that supplied by the public sector at the present time. So we ought to make sure that the consumer knows whether his gas comes through private pipes to his establishment, whether he is classed as domestic, commercial or industrial--and that is not always easy.
If the gas from a private supplier comes through BGC pipes, who do you ring up at eleven o'clock at night if you smell gas? Do you ring up BGC, as I think most people would, to be on the safe side, or do you ring the private supplier? You might have from a private supplier an appliance which might not be up to the standards which are expected at the moment by the BGC. This is one part of the discussion on the gas showrooms aspect which we debated earlier. The BGC, being responsible for safety, has always ensured that the appliances that it supplies are up to the expected standards, and if the BGC is to service them, as it has done, it will not want unnecessary work arising from avoidably low standards of production.
In future there can be a private appliance connected to a BGC pipe, and who will take the responsibility for that at eleven o'clock at night when poor old Mrs. Bloggs, or somebody else, might be worried about the smell of gas? To whom does she go? I can imagine that if in future the gas corporation were to take a more commercially orientated view of its responsibilities in order to compete with the private sector, it might be excused if it were to say, "If we come out to look at an appliance which is supplied by a private supplier, we ought to make a commercial charge". I am not sure what that would be—it could be £30, £50, or whatever. One could imagine that if the people concerned did not have that kind of money, there would be questions in Parliament as to why the gas board did not fulfil responsibility in a potentially dangerous situation.
Later on the noble Lord assured the House by saying, at col. 205:This residual role of the gas standards branch is in no sense 180 comparable to the day-to-day safety cover provided by the British Gas Corporation. In the case of private supplies, the day-to-day dealing with incidents will be undertaken by personnel provided by the private supplier ".Then my noble friend Lord Underhill said:The noble Lord said that the work will be carried out by a person appointed by the private supplier. Can he explain, not only to myself but to other noble Lords, where that is in the Bill, or will it be covered by regulations?";and the noble Lord said:No, indeed, it is not in the Bill ".So we are not quite sure what plans the Government have for safety. As to many of their intentions, which either may be in the stage of being thought about or, indeed, may be more substantial, if they are not in the Bill then, of course, assurances given with all sincerity, and Which we will of course accept in Hansard, are no substitute for legislative provisions which are absolutely essential in order to safeguard the public interest.
So, my Lords, one could go on. My noble friend Lord Ross of Marnock, who is unable to be with us today, was expressing concern about the Department of Energy, and on a number of occasions he raised the problems of the Scottish areas. All these aspects are aspects of real concern. So we need to know what plans the Government have for safety as between the public and the private sectors, whether the taxpayer is going to be involved in this, and the area of responsibility. We need to know who is going to pay for the checking of the private gas supplies, and what extra staff will be required. Indeed, it may well be that local authorities might be involved in some supervisory role, as indeed they are in other aspects. If that is so we should like to know about it, and also about the aspect of cost there.
Clearly, the fragmentation of the gas supply in the future will also mean the fragmentation of responsibility between the private operators in various parts of the country and, as was pointed out in Committee, in some of the more remote areas, where access is not easy and where much higher costs will be involved. This can all create a very dangerous situation. Indeed, in column 205 on 11th May your Lordships were told by the Minister:The gas standards branch will not be undertaking routine inspections of all private gas supplies; the day-to-day emergency work will be provided by the private supplier.…".So we need some clarification, with these apparent contradictions. There is an absence of the assurances we seek from the legislation in the Bill—and, after all. that is the only way we can be sure that something is going to happen and that safeguards are going to be provided; and assurances given by Ministers, which we do not in any way doubt, are in no way an alternative back-up, which is absolutely essential. But I think that first of all we want to know what is the Government thinking on this particular aspect, and doubtless in amendments which are to follow we hope we shall get some of the answers which we have been anticipating in the past few weeks.
§ 9.23 p.m.
§ Lord Skelmersdale
My Lords, I am glad the noble Lord ended his peroration with that particular phrase. I had a horrible feeling he was asking me to answer 181 all his questions on this amendment, and in many cases, of course, as he fully recognises, they are not appropriate to this amendment. But I will assure him now that I will get to the various points that he raised on the amendments to which they pertain.
My Lords, in effect both noble Lords who spoke to this amendment—the noble Lord, Lord Tanlaw, who moved it, and the noble Lord, Lord Bishopston, who seconded it—have accused me of at the least selective answering on an earlier occasion, and also I think the noble Lord, Lord Bishopston, was heard to accuse me of having a vivid imagination. I think it is only fair to accuse both noble Lords of selective reading and of having an equally vivid imagination, reading between the lines to such an extent that they made me out to say things which I never intended to say and which, in fact, when you look at the Official Report, it will be seen I never said in the first place.
However, let us get on to this particular amendment which was discussed in Committee, as we have been reminded. I explained then that, in the Government's view, provisions on costs of the sort proposed would be misconceived in the context of Clause 14. Perhaps the most important point then, as now, was that the Government's purpose in providing for a residual role for the gas standards branch in relation to private supplies of gas was not to relieve private suppliers of any of the emergency responsibilities currently borne by BGC. On the contrary, we shall expect private suppliers to be equally as diligent as British Gas in providing emergency cover.
Thus, it will be the private suppliers themselves who provide and pay for all the staff required for day-to-day emergency and safety work. There is no doubt about this. I said it on Committee and I repeat it now. The noble Lord, Lord Bishopston, asked how the consumer knows who is responsible for his particular safety worries. The answer is that the consumer pays a bill either to British Gas or for supplies of gas to the private suppliers. It is to the person to whom he pays the bill that he will go when lie smells gas in his house or when there is an explosion or something else goes wrong. That is clear.
The role of the gas standards branch is to provide a means in a particular circumstance to give effect to the public interest in the safety of private gas supplies. As the noble Lord, Lord Tanlaw, has said, the significance of this to the amendment is that the costs incurred by the gas standards branch under Clause 14 will he of a similar order of magnitude to the costs incurred by the branch under the present safety regulations in relation to the Gas Corporation supplies. The Gas Corporation does not pay costs incurred by the branch under the present gas safety regulations, and so there is equality of treatment in our proposal that in the future, when the Gas Corporation is joined by private suppliers, such costs will continue to be borne by the Secretary of State.
Both noble Lords expressed interest in the staffing of the gas standards branch. At present just under 100 staff are in post and about half of these are concerned with gas safety and quality work; that is, the area dealt with by Clauses 13 and 14 of the Bill. In Committee the noble Lord, Lord Ross, asked about the position in Scotland, as the noble Lord, Lord Bishopston, reminded us. In fact, while the gas 182 standards branch has some staff based outside its headquarters for particular functions, those staff concerned with safety are based at the headquarters in Leicestershire and deal collectively with Great Britain as a whole.
The number of gas engineers employed full time on safety matters has risen from three in 1978 to five this year and a sixth post has recently been approved. These gas engineers work closely with the gas examiners in the branch particularly in the gathering of technical information. A significant amount of administrative effort in the branch is also directed to safety work.
The noble Lord, Lord Tanlaw, listed a gamut of things which the gas standards branch will naturally get up to in the course of the activities outlined under this Bill. He did not make clear in his question, and 1 am unable to make clear in my answer, how many will be devoted to each particular of his criteria. The reason is that the number of staff depends directly on the outcome of the private supply opportunities in the Bill taken up by the private suppliers. If there is no such result from this Bill, which is so unlikely it is laughable, there will be no increase in staff required. If there is a large uptake by the private sector of the opportunities given by the Bill there will he a large increase in the number of staff required.
§ Lord Tanlaw
My Lords, I am sorry to interrupt. The noble Lord is saying in effect: "How long is a piece of string?" That is the department's answer to the list of specific questions. Is he saying that that is an answer, or that they have not anticipated a zero, medium or full response to this Bill and therefore not allowed numbers to be given as some estimate of what would be done in any normal company?
My Lords, the estimates are given, as the noble Lord well knows, in the Explanatory and Financial Memorandum which accompanied the Second Reading copy of this Bill. I cannot go further than to say, as it does there, that they might require initially some 8 to 10 staff and eventually 40 to 50 for the administration of Clauses 12 to 17. Another problem is speed. We do not know how quickly nor the extent to which private sector gas suppliers' activities will build up under these provisions. I made this point in Committee. I am assured that any additional work arising from Clauses 9 to 11 of this Bill will be contained within existing staff ceilings. What we arc talking about are Clauses 12 to 17.
The noble Lord asked about the costs of these additional staff. Obviously, it must be a "guesstimate". To give him some idea, to employ from between 8 to 10 staff—a figure I have just mentioned—the salary costs might be in the region of some £100,000. I am trying to be helpful and I should be perfectly willing to write to the noble Lord with the exact force in post in each of the categories that are currently covered by the gas standards branch. I cannot go further than that this evening.
§ Lord Bishopston
My Lords, following the noble Lord's question, I thought the comment of the Minister earlier that he was not sure what uptake there would be by the private sector, was fair. We have been told on Second Reading and many other times that 183 privatisation is necessary to bring competition, lower prices, increased efficiency and so on. There must have been some assessment by the Government, some survey, of what chances there are which other people will come in to take up options on the private sector in order to give the BGC a good run in the competitive sector.
Surely it is a bit much for us to be told that the Government do not really know. The noble Lord rightly asked: how long is a piece of string? The Government ought to be able to tell us the extent of the uptake that they anticipate, that this will be a jolly good thing for the country, and that the British Gas Corporation—no matter how good it is—is going to have a run for its money and there will be a lot of people wanting to come in. That is the statement that we want to know about. It is no good saying that we do not know what uptake there will be and what increase in manpower there will be. We must know these things because of the pattern of responsibility, the checking and examination and who is going to do it, whether it will be the BGC, the private sector or the Department of Energy. All these people should by now be knowing what to expect.
As I said earlier, the Minister of the time in the other place—the Secretary of State for Consumer Affairs, I believe—mentioned that the Government's intention was to privatise but the safety aspects may be thought out later. If this measure is going through now with privatisation, surely the House and the country arc right to demand the answer to the safety factor at the same time?
§ Lord Mottistone
My Lords, perhaps I may intervene. Noble Lords opposite are spinning this out in a most ridiculous fashion. What is more, they are saying to my noble friend, "Give us an estimate". He has given you an estimate. You are then saying, "Give us a factual statement". You are asking the impossible. How on earth can he tell you exactly what the Government think may come about? He has given you an estimate. That is quite enough. You are pressing my noble friend unreasonably, and I can only imagine that it is in order to spin out the time.
§ Baroness Llewelyn-Davies of Hastoe
My Lords, may I intervene at this point? I can assure the noble Lord that there is no question of spinning out time. That is not the way that this Opposition behaves. I should like the noble Lord to take that from me.
§ Lord Mottistone
My Lords, perhaps the noble Baroness would allow me to respond immediately to her and say that noble Lords opposite—and I am not particularly singling out her noble friend—have on this amendment spent a great deal of time in making their basic speeches, quite apart from pressing this point. It is fantastic how long it has taken.
§ Baroness Llewelyn-Davies of Hastoe
My Lords, that may be so, but we are not deliberately spinning it out.
§ Lord Skelmersdale
My Lords, perhaps after that intervention tempers may cool just slightly and I may be allowed to get on with my speech. I was endeavouring to explain that, although obviously the Govern- 184 ment have taken soundings as to desirability and whether the prospective private companies would be interested in supplying gas to consumers in the way that has been outlined, both in the Bill and in the explanations given in this House and also in another place, it is absolutely impossible to come down firmly to say that there will be 37½ people required for this particular job. I am sorry, my Lords, but that is the position.
In withdrawing this amendment in Committee, the noble Lord, Lord Tanlaw, made some remarks to which I did not have the opportunity to address myself at that time. I do not know whether the noble Lord has any experience of the current Secretary of State for Energy, but I can assure him that my right honourable friend is a very difficult person indeed on which to "put one over". In any case, there is no question of the Department of Energy "putting one over" the current Secretary of State or any future one, as the noble Lord suggested. The Government are determined to ensure that the administrative procedures associated with private gas supplies ensure proper standards of safety and at the same time are conducted in a businesslike and expeditious manner which does not deter commercial activity. What the noble Lord may have overlooked is that virtually all the gas from fields currently in production is contracted to British Gas, and that private supplies will therefore involve the development of new fields. It is not therefore the case that large volumes of private gas will start flowing around the country the day after Royal Assent. Rather there will be a build-up of activity over a number of years, and staff resources will he deployed as required to deal with the pattern of work which results.
Both noble Lords asked about day-to-day safety cover, and perhaps this is an opportune time to return to the point. Private suppliers will, like the British Gas Corporation, have to comply with safety regulations made under Section 31 of the Gas Act 1972, as reenacted by Clause 14. In the case of large supplies of over 2 million therms per annum, we are talking about suppliers such as oil companies who will have considerable experience in handling dangerous substances such as gas and in providing safety and emergency cover, while the consumer's premises will already be subject to inspection by health and safety inspectors. Smaller private supplies will require the Secretary of State's consent under Clause 12, and this will not be given unless he is satisfied with the safety and emergency arrangements proposed. This provides us with a double check on safety in those areas where it might be necessary.
I have tried to address my remarks to this particular amendment and I hope that I have satisfied the House that there is a proper procedure envisaged under the Bill for those purposes which the noble Lord, Lord Tanlaw, would like to see.
§ Lord Tanlaw
My Lords, I think in some ways this has been an embarrassing debate, because I did present this amendment as shortly as possible and I really think there have been rather hard criticism from the Benches opposite by the noble Lord, who I think was not in the Chamber when the presentation was made. Secondly, the noble Lord, Lord Bishopston, gave perfectly adequate time, I would have thought, for 185 the very detailed check-list of questions on which I asked for a reply—questions which, in proposing this amendment, I said appeared to be quite simple and straightforward and which I would have imagined could have been estimated on the basis that this Bill was going to be a success, in the sense that the private sector would take up the offers arranged in it legally and would set up a system of gas distribution in this country. But I regret that the answers are far from satisfactory.
I question just one small point. The noble Lord said that an extra 10 people could be required and I was interested in his estimate of the cost of the salaries, £100,000. Of course, the noble Lord is aware that salaries are not the only factor. There are also overheads, such as accommodation, and another £50,000 should be added to that figure. 1 should have thought that £20 a square foot was normal in a commercial operation. The question I am really asking is this. Do the Department of Energy require another building, in order to make this Bill operative, if it is successful? It seems to me that no estimates have been made of either numbers or of accommodation, except for the parameter of between 10 and 50 which is in the Explanatory Memorandum.
This debate has exposed a lack of preparation and thinking by the Government in the whole presentation of this Bill. This is one of the longest and most complex Bills. It has been discussed in another place and endless detail has been considered in Committee. The Bill has not been exposed to any filibustering here, as I admit it was in another place, and the Government have had plenty of time to come up with answers to the very reasonable questions that have been raised—questions that any taxpayer would ask, let alone a member of an Opposition here.
The Government have taken the view, not that they do not know or will not say, but that they are not sure. I am afraid that on this amendment the Government's position has become clear. They have proposed this Bill as a matter of doctrine, without full preparation and without full co-operation with the Department of Energy. They have done no estimates as to what will be the effects of this Bill on a main Government department, and as to what will be the manning levels and the eventual cost to the taxpayer. They have just said, "We do not know how successful or unsuccessful it will he. Therefore, we do not know the cost." It is an irresponsible attitude for the Government to take on a major Bill of this sort, so I am afraid that, without any more ado, I should like to put this amendment to the test in the normal way.
§ 9.42 p.m.
§ On Question, Whether the said amendment (No. 29) shall be agreed to?186
§ Their Lordships Divided: Contents, 26; Not-Contents, 51.
|DIVISION NO. 3|
|Beswick, L.||McNair, L.|
|Birk, B.||Molloy, L.|
|Bishopston, L.||Ponsonby of Shulbrede, L.—[Teller.]|
|Cledwyn of Penrhos, L.||Rochester, L.|
|Collison, L.||Stewart of Aivcchurch, B.|
|David, B.||Stewart of Fulham, L.|
|Hatch of Lusby, L.||Stone, L.|
|John-Mackie, L.||Strauss, L.|
|Kirkhill, L.||Tanlaw, L.—[Teller.]|
|Llewelyn-Davies of Hastoe, B.||Taylor of Gryfe, L.|
|Lloyd of Kilgerran, L.||White, B.|
|Lovell-Davis, L.||Wilson of Langside, L.|
|Abinger, L.||Hornsby-Smith, B.|
|Aircy of Abingdon, B.||Inglewood, L.|
|Avon, E.||Kitchener, E.|
|Bellwin, L.||Lindsey and Abingdon, E|
|Beloff, L.||Long, V.—[Teller.]|
|Belstead, L.||Lyell, L.—[Teller.]|
|Boardman, L.||Mackay of Clashfern, L.|
|Boyd of Merton, V,||Mansfield, E.|
|Brougham and Vaux, L.||Margadale, L.|
|Campbell of Alloway, L.||Marshall of Leeds, L.|
|Cockfield, L.||Merrivale, L.|
|Colville of Culross, V.||Mersey, V.|
|Cork and Orrery, E.||Monk Bretton, L.|
|Craigmyle, L.||Mottistone, L.|
|Donegall, M.||O'Neill of the Maine, L.|
|Drumalbyn, L.||Renton, L.|
|Eccles, V.||Rochdale, V.|
|Elles, B.||St. Just, L.|
|Elliot of Harwood, B.||Sharpies, B.|
|Ferrers, E.||Skelmersdale, L.|
|Fortcscue, E.||Teviot, L.|
|Gainford, L.||Trumpington, B.|
|Glenarthur, L.||Vaux of Harrowden, L.|
|Hives, L.||Wise, L.|
|Holderness, L.||Wynford, L.|
|Home of the Hirsel, L.|
§ Resolved in the negative, and amendment disagreed to accordingly.
§ 9.49 p.m.
§ Lord Skelmersdale
My Lords, I do not know whether the House agrees, but it seems to me that this is an appropriate point at which to stop in order to allow tempers to revert to their customarily level course. Therefore, I beg to move that the House do now adjourn.
§ Moved accordingly, and, on Question, Motion agreed to.