Lords Sitting of 10 April 1986

Preamble
The House met at three of the clock: (Prayers having been read earlier at the Judicial Sitting by the Lord Bishop of Oxford): The LORD CHANCELLOR on the Woolsack.

Ionising Radiation: Medical Exposure
Lord Campbell of Croy: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what action is being taken to improve the protection of the population from the effects of ionising radiation in medical processes, including diagnostic radiography.
The Parliamentary Under-Secretary of State, Department of Health and Social Security (Baroness Trumpington): My Lords, improvements to the protection of patients subjected to ionising radiation for medical purposes are continually being made by the professions concerned. Good professional practice has been reinforced by regulations in some areas, notably to ensure the safety of equipment and to regulate the practice of nuclear medicine. Later this year the Government will bring forward regulations further reinforcing existing good practice by implementing an EC directive on this subject.
Lord Campbell of Croy: My Lords, I am grateful to my noble friend for her reply, which is reassuring, but because almost all the radiation to which the population is exposed, apart from that in the natural environment, comes from medical sources, is it not highly paradoxical that there is pressure for more scanners and modern X-ray equipment while at the same time bodies such as Greenpeace are trying to scare the public about radioactivity from the nuclear industry, which is about 100 per cent. less in its effect upon the population? Both the medical processes and the industry are beneficial in purpose and are needed.
Baroness Trumpington: My Lords, as my noble friend Lord Campbell of Croy rightly says, medical exposures are much more significant. It is the Government's policy to ensure that exposure of the population to radiation from whatever source is kept as low as reasonably practicable. The most recent survey by the National Radiological Protection Board showed that medical uses of radiation constituted 11.5 per cent. of the total radiation exposure of the population, compared with 0.1 per cent. from discharges from nuclear installations. Eighty-seven per cent. of total radiation exposure comes from natural background sources.
Baroness Gardner of Parkes: My Lords, in view of the fact that probably the most common form of diagnostic radiography is dental X-rays, I wonder whether my noble friend the Minister can comment on any protection advised for dentists or patients?
Baroness Trumpington: My Lords, detailed guidance is given in the Code of Practice for the Protection of Persons against Ionising Radiations arising from Medical and Dental Use. The ionising radiations regulations include a number of requirements to ensure the protection of staff, such as the requirements for measuring and regulating the doses they receive.
Lord Ennals: My Lords, does the noble Baroness the Minister accept that, when the document to which she referred is published, the House will want to consider it very carefully? Does she further accept that, in terms either of diagnosis or of treatment by radiological methods, there is always a balance of advantage and disadvantage in which medical judgments are clearly essential? Finally, is the noble Baroness satisfied that the whole list of regulations, both international and national, to which we are bound, are being effectively fulfilled by the practitioners?
Baroness Trumpington: My Lords, regulations already in force require X-ray equipment to be constructed and maintained, and treatment to be undertaken, so that exposures can be restricted so far as is reasonably practicable commensurate with the clinical purpose.
Baroness Gardner of Parkes: My Lords, is the Minister aware that people come to a surgery and check for any excess radiation which is escaping from machines and that this has been extremely valuable, certainly in the dental profession? Is she aware of a similar situation with medical X-ray equipment, and is that also checked?
Baroness Trumpington: My Lords, the Health and Safety Executive is responsible for enforcing the ionising radiation regulations. Their inspectors visit premises and seek to agree with the health authority any action necessary to ensure compliance with the regulations; and where agreement is not reached, the HSE has power to issue a Crown enforcement notice requiring the health authority to take the necessary action.

Herstmonceux Observatory: Atomic Clocks
3.5 p.m.
Lord Gainford: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether there are any plans for the future of the atomic clocks in the observatory at Herstmonceux, Sussex.
The Earl of Swinton: My Lords, the need for the Royal Greenwich Observatory to maintain an independent group of atomic clocks has been greatly reduced by the availability of co-ordinated universal time, via satellite. In consequence the SERC does not intend to replace all the atomic clocks at the observatory as they become unserviceable.
Lord Gainford: My Lords, I thank my noble friend for that Answer. Can the noble Earl say whether, considering the contribution that this country has made to the world in the matter of time and navigation—the Greenwich meridian is a notable item—we are therefore to rely on other countries for our time? What will happen to our traditional six pips?
The Earl of Swinton: My Lords, it may come as a surprise and perhaps a shock to my noble friend to learn that we rely on other countries for our time at the present moment. This will not change, because the independent clocks throughout the world are co-ordinated in France; and in fact the headquarters have always been in Paris and a co-ordinated universal time is available via the Navstar Global Positioning System satellite service. However, I can cheer up my noble friend by telling him that the observatory will in fact continue to provide the six pips by reference to the international atomic timescale available by satellite and its remaining clocks.
Lord McIntosh of Haringey: My Lords, is it not the case that the Question asked and the Answer just given raise a much more general question of the future of the observatory at Herstmonceux, and the SERC's intentions in relation to that observatory? Will the Minister intercede through the usual channels to ensure that this House has an opportunity to discuss this much more serious and wide-ranging issue?
The Earl of Swinton: My Lords, as the noble Lord said at the end of his supplementary question, this is a very wide-ranging issue. In fact there is no connection between the two: neither has anything to do with the other. The decision not to replace the atomic clocks has nothing to do with any proposed move by the Royal Observatory.
Baroness Masham of Ilton: My Lords, may I ask my noble kinsman whether this is a field of science where there is especially good international co-operation, particularly with Europe?
The Earl of Swinton: My Lords, I am delighted to tell my noble kinswoman and the House that this is indeed the case. I think we have all seen on television recently the international experiments with Halley's Comet in which a number of countries, including Russia, joined. Also, of course, in the field of astronomy, the astronomers get together internationally very much in this field.
Viscount Mountgarret: My Lords, I wonder whether my noble friend, instead of concerning himself with clocks giving universal time, will consider encouraging those atomic clocks that we do have to concentrate more on extended hours of British Summer Time.
The Earl of Swinton: Perhaps, my Lords, we ought to send them up in meteorological balloons.
Lord Ennals: My Lords, is this not the final blow to our great British national sovereignty, that Greenwich no longer controls timing throughout the world?
The Earl of Swinton: No, my Lords. I did say in my first supplementary answer that the international timing, since its inception, has been controlled from Paris.
Lord Mowbray and Stourton: My Lords, is it not true that in the last resort it is our great friend the sun up above us which controls the time?
The Earl of Swinton: Sometimes, my Lords, during Question Time in this House, I wonder who on earth does control the time.
Lord Elwyn-Jones: My Lords, is this not one of those rare occasions on which the Government would be well advised to put the clock back?
The Earl of Swinton: No, my Lords.

Greater London Enterprise Board
3.10 p.m.
Lord Orr-Ewing: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether, in view of the large sums of taxpayers' and ratepayers' money involved, they will now set up an inquiry into the financial affairs of the Greater London Enterprise Board.
Lord Brabazon of Tara: My Lords, there are powers in the Companies Act 1985 to investigate the affairs of companies. However, the police are already making inquiries into various allegations concerning the Greater London Enterprise Board and I see no reason for exercise of those powers at present. The situation is being kept under review and any further information my noble friend has about the Greater London Enterprise Board will be considered.
Lord Orr-Ewing: My Lords, can my noble friend tell me what progress is being made? Is it true that one prosecution for fraud has been successful and that three others are pending? Are these numbers correct? Now that the GLC has been disbanded, is it for the London councils to monitor the manner in which this company is operating and to see that the moneys that they have spent and loaned to this company are being properly spent and are creating adequate jobs?
Lord Brabazon of Tara: My Lords, in answer to my noble friend's first supplementary, I gather that police inquiries are well advanced and that there has already been one successful prosecution. As regards the future ownership of the Greater London Enterprise Board, it is a matter for the boroughs themselves to decide whether or not to join. I gather that so far 12 out of 33 London boroughs have decided to become members and that a further six are considering their position. It is, of course, up to them, then, to take an interest in what happens.
Lord Renwick: My Lords, on the question of jobs, is my noble friend aware that when the GLC set up the

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Greater London Enterprise Board the target was 10,000 jobs a year by 1984–85 and that by December 1985, after liquidations and the failure of various companies within GLEB, its estimate of the jobs created was 1,992, which, after expenditure on GLEB, amounts to something between £20,000 and £30,000 a job?
Lord Brabazon of Tara: My Lords, I was not aware of the particular figures that my noble friend has quoted. But it is now, of course, a matter for the London boroughs to decide whether or not they want to continue with this.
Lord Bruce of Donington: My Lords, while applauding the decision of Her Majesty's Government to keep a very close watch on the very legitimate investigations that have been suggested by the noble Lord, Lord Orr-Ewing, will the noble Lord now recommend that the London Residuary Body, which has rather more leisure to deal with these matters, should conduct further investigations into the activities of the housing associations which, in 1983, resulted in the resignation of two councillors from the GLC? It may well be that further information will now come to light.
Lord Brabazon of Tara: My Lords, I am not entirely sure what relationship the housing associations have with the Greater London Enterprise Board. The Question relates to the Greater London Enterprise Board. I do not have, at the moment, any information regarding the housing associations.
Lord Bruce-Gardyne: My Lords, reverting to the original Question, has my noble friend noted that the auditors to the Greater London Enterprise Board calculate that between 60 and 90 per cent. of the £67 million involuntarily invested by London ratepayers in this organisation has disappeared in three years? Is there not a strong case for a new and independent inquiry into where this money has gone and even conceivably to whom?
Lord Brabazon of Tara: My Lords, I said in my original Answer that the police were investigating matters concerning the Greater London Enterprise Board. Of course, there is a world of difference between fraudulent activity and plain incompetence. I did say that I would take note of any further information that we received on the Greater London Enterprise Board in deciding whether we should investigate under the Companies Act.
Lord Mellish: My Lords, as we are talking about jobs and their provision in London, would it not be a good idea to follow the pattern established by this Government in setting up the London Docklands Development Corporation that has provided 28,000 new jobs since 1981? In fact, 37 per cent. of the firms that have come in are brand new firms that would not have come in but for the improvement of the area. Would it not be a good idea, in order to avoid the complications that have been mentioned in this question and answer session involving GLEB and people of that kind, to follow a pattern already proved to be successful and continue it?
Lord Brabazon of Tara: My Lords, the noble Lord, Lord Mellish, makes a good point, but the Question relates, of course, to the financial affairs of the Greater London Enterprise Board. I am sure that the successor boroughs to the Greater London Council will take note of what the noble Lord has said in deciding whether or not they wish to continue with the Greater London Enterprise Board.
Lord Cledwyn of Penrhos: My Lords, while taking the critical questions that have been asked fully into account, is it not the case that the noble Lord's right honourable friend the Secretary of State for the Environment has in fact urged London boroughs to join the enterprise board? Are the Government proposing to make funds available to the enterprise board? Can the noble Lord say quite clearly whether or not the Government support the future of the enterprise board?
Lord Brabazon of Tara: My Lords, I can say clearly, as I hope I have made clear, that the future of the enterprise board is now a matter for the London boroughs. Since the abolition of the GLC, it is right and proper that those boroughs should have the right to make their own decision about this sort of matter.
Lord Cledwyn of Penrhos: But, my Lords, does not the fact that the noble Lord's right honourable friend has urged the boroughs to join the enterprise board mean that the Government themselves see a future for the enterprise board?
Lord Brabazon of Tara: My Lords, I am not entirely sure of the extent to which my right honourable friend has urged the London boroughs to join the Greater London Enterprise Board. My noble friend Lord Elton, in a statement last month, when he refused the application of the GLC to give a further £8 million to the Greater London Enterprise Board, made clear that it was a matter for the boroughs to decide. As I said earlier, only 12 of the 33 boroughs have so far decided to become members.
Lord Molloy: My Lords, was not one of the ideas behind the establishment of the Greater London Enterprise Board to look after, during the interim period, many of the cultural and educational aspects that had been within the safekeeping of the GLC until such time as the London boroughs might be able to help? Is that still the situation—that they are safe until agreement has been reached with the London boroughs? Was not this one of the ideas behind the creation of the Greater London Enterprise Board?
Lord Brabazon of Tara: My Lords, with respect, the noble Lord is, I think, slightly confused as between the Greater London Enterprise Board and the residuary body. The Greater London Enterprise Board has been in existence for a number of years and was set up by the GLC.
Lord Orr-Ewing: My Lords, can my noble friend advise the boroughs that while a total of 1,992 jobs has been created by GLEB at vast cost to the ratepayers, 28,000 were created by the London Docklands

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Development Corporation? Is there not a lesson to be learnt here? Is my noble friend aware that Haringey Council, under Mr. Bernie Grant's leadership, earlier this week gave another £100,000 interest-free loan to GLEB? Is this correct? Surely this company, if it does not get all these grants from London borough councils, is not trading at a profit and, if not trading at a profit, it has an obligation to go into liquidation at the earliest moment.
Lord Brabazon of Tara: My Lords, as to whether I should give advice to the London boroughs on joining the Greater London Enterprise Board, I feel that we spent an enormous amount of time last year on the abolition Bill specifically to give powers of this sort to the boroughs to make up their own minds about what they should do. As regards the £100,000 interest-free loan that Haringey has given to the Greater London Enterprise Board, I am not entirely sure of the details. I understand that the company did change its articles of association in order to allow London boroughs to take over control on payment of £100,000 each. It may be that this is the £100,000 in question.
Lord Sefton of Garston: My Lords, arising from the reply of the noble Lord the Minister to the noble Lord, Lord Mellish, does he not agree that the excessive development taking place in the South East of England is denuding now, and will denude completely, any prospect of further investment in the northern regions of this land?
Lord Brabazon of Tara: My Lords, I am looking again at the Question on the Order Paper. I fail to see any connection between the question which the noble Lord, Lord Sefton, has asked me and that on the Order Paper.
Lord Sefton of Garston: My Lords, if the noble Lord cannot see any relationship between the developments in the South East and developments in the northern regions of this country, I suggest that he should resign.
The Lord President of the Council (Viscount Whitelaw): My Lords, I think that it is for me to say this. First, I do not think that the noble Lord would suggest that I do not know much about the North of this country. If he did, he would be very unwise. Secondly, the point at issue is not that. The Question is about the Greater London Enterprise Board's finances. The supplementary question of the noble Lord had nothing to do with that at all, if I may humbly say so. The rule of this House, recently put forward by the Procedure Committee, is that questions completely wide of the original Question should not be permitted. I think it is my job on behalf of the whole House to try to make sure that that rule of the Procedure Committee is properly upheld.
Lord Sefton of Garston: My Lords—
Noble Lords: Order!
Lord Bruce of Donington: My Lords, is the noble Lord aware that the affairs of an independent limited company should not be treated with levity in this
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House? Does he agree that it is most unwise to use the privilege of this House to allege insolvency against a company until the audited accounts justify that? Is he prepared to say that so far as the Greater London Enterprise Board is concerned he will be unmoved by any party propaganda and will await its finally published and audited results before allowing himself to be made a party to its partisan denigration?
Lord Brabazon of Tara: My Lords, I hope that I made clear in my original Answer that we have powers under the Companies Act 1985 to investigate such affairs. We have decided at the moment that we can see no reason to do so, because the police are investigating certain allegations. The police have not asked us for help at this stage. If they were to do so, we should stand ready to assist. That is as far as I can go on this subject this afternoon.

The British Fashion Industry
3.23 p.m.
Baroness Lane-Fox: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what steps they are taking to encourage expansion of the British fashion industry.
Lord Brabazon of Tara: My Lords, the Government consider that the British fashion industry has an important role to play in contributing to the prosperity of the British textile industry as a whole. We have therefore encouraged the British Fashion Council to pursue its activities in co-ordinating the promotion of British fashion. We are currently considering a report, which we commissioned from the British Clothing Industry Association, on the future role of the British Fashion Council. Government receptions have been held at Lancaster House and No. 10 Downing Street for overseas buyers, media representatives and UK designers participating in five successive British fashion weeks.
Baroness Lane-Fox: My Lords, I thank my noble friend for that informative reply. May I further ask whether he would agree that it is a tribute to our training that London is the centre of fashion, sustained by the flair of the young designers, and that is what eventually turns the industry into a great earner of foreign currency? Does my noble friend agree that that deserves every bit of encouragement that we can give it?
Lord Brabazon of Tara: My Lords, I am very happy indeed to agree with my noble friend and to pay tribute to the success of the British fashion industry and wish it continuing success.
Lord Strabolgi: My Lords, is the noble Lord aware that there have been rumours in the press that the Government are proposing to close down a good number of polytechnics and training colleges? If this is true, how does this equate with the Government's wish to expand the fashion industry?
Lord Brabazon of Tara: My Lords, I can tell the noble Lord that my right honourable friend the Secretary of State for Trade and Industry is announcing, or has announced this afternoon, that he intends within the next few months to introduce a £4½ million scheme to help centres of higher and further education to buy advanced textile and clothing machinery. Although all institutions running appropriate courses will be eligible to apply, we intend to concentrate assistance upon those universities, polytechnics and colleges that provide a particularly wide range of education in this area. The rate of grant will be 50 per cent. of equipment costs. I think that that gives the lie to the suggestion that we are running down education in this area.
Lord Glenamara: My Lords, is the noble Lord aware that, in spite of what the noble Baroness has just said, by far the most successful fashion school in Britain is in the polytechnic of Newcastle-upon-Tyne, which is already making a useful contribution to our export earnings? In the cuts which the Government have announced that they will make in higher education numbers, will the noble Lord ensure that such excellent fashion schools are not decimated?
Lord Brabazon of Tara: My Lords, I have just informed the House of the extra money which is being made available for equipment, and so on. I have no doubt that the polytechnic to which the noble Lord refers, with the reputation that he says it has, must be in the forefront for being granted some of this money.
Lord Auckland: My Lords, bearing in mind that we import a large number of fashion goods of excellent quality from the Nordic countries and Scandinavia, can my noble friend say that incentives are given to exporters to export, in particular, to countries such as Finland where we can export fashion goods of as good a quality, if not better, than these we import from such countries?
Lord Brabazon of Tara: My Lords, we give considerable support to the clothing industry in export schemes. The budget of the British Overseas Trade Board in 1985–86 was £1.1 million. That is very high in comparison with other industries. We have helped to organise or promote, as I said at the beginning, a lot of shows here, and also helped exporters to exhibit at shows overseas.
Lord Bruce of Donington: My Lords, the noble Lord in reply to the question addressed to him by my noble friend Lord Glenamara spoke of the amount of money which had been allocated by the Government in respect of equipment, "and so on". Can we have his assurance that the words "and so on" include specifically the answer to the question by my noble friend with regard to the support of design facilities?
Lord Brabazon of Tara: My Lords, the figure of £4½ million which I mentioned earlier is new money for colleges and centres of higher education to buy advanced textile and clothing machinery. At the moment I am not aware of the total figure given in the education field. This money I mentioned is new money.
Viscount Montgomery of Alamein: My Lords, is my noble friend aware that the fashion industry, of which I was once a member of an ancillary part, embraces a large number of activities other than those connected directly with textiles? Furthermore, is he aware that all these activities with regard to a number of different industries probably benefit by the minimum of interference from government?
Lord Brabazon of Tara: My Lords, as I said in my original Answer, we are certainly not trying to interfere. We are trying to assist where we can in the promotion of British Fashion Week and that kind of thing. I would not have called that interference. I hope that that will be regarded in a positive light.
Lord Avebury: My Lords, the noble Lord has said that a total sum is made available to the polytechnics and it is for them to decide how this is divided up among the student numbers; so how can he be sure that, while the Government are giving £4½ million to the polytechnics for the acquisition of new and better machinery, the money that they are taking away will not result in declining student numbers in the design faculties of the polytechnics, and thus inadequate human resources for the maintenance and development of a flourishing design industry?
Lord Brabazon of Tara: My Lords, I am not entirely aware of how the money available to polytechnics is divided up, but if polytechnics receive grants to buy advanced textiles and clothing machinery, I should have thought it would be unwise if they did not allocate within their budgets the amount of money to allow the students to use the machinery.
Baroness Lane-Fox: My Lords, will my noble friend the Minister not agree that the fashion industry is helped not only by training but also by the good luck that certain members of our Royal Family happen to be great trend-setters in fashion themselves?
Lord Brabazon of Tara: My Lords, my noble friend is quite correct. I understand that the Princess of Wales has taken part in one of these receptions to promote British fashion.

Business
Lord Denham: My Lords, at a convenient moment after 3.30 this afternoon my noble friend Lord Elton will, with the leave of the House, repeat a Statement that is to be made in another place on local government finance: block grant multipliers.

Gas Bill
3.32 p.m.
The Minister of State, Scottish Office (Lord Gray of Contin): My Lords, I beg to move that this Bill be now read a second time.
The Bill represents a major step forward in the Government's programme of transferring state business into private ownership, a programme which has proved highly popular with the public at large and with the employees of the businesses concerned.

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Indeed, noble Lords may be aware that attempts to stir up the employees of British Gas to take industrial action against privatisation have been defeated by the good sense of those employees who voted the proposals down.
The Government believe that their proposals offer the prospects of a better and more efficient gas industry. These proposals will free management from unnecessary bureaucratic intervention, change attitudes, and offer new opportunities for innovation and growth. They will allow employees to take a direct stake in the company through share ownership. They will offer special opportunities for the small investor to buy shares and to enjoy real ownership in place of the nominal ownership of today. They will lead to increased efficiency to the benefit of gas consumers and shareholders alike.
The Government's proposals before us represent the outcome of long and careful study of the questions of regulation, consumer protection and safety in the gas industry by my right honourable friend the Secretary of State. Detailed work has been in progress since the last election, including studies of gas industries and of regulation overseas. The Bill has been drafted most carefully by the parliamentary draftsman, and there are real and good reasons for adopting the approach to the regulatory structure which we have proposed. Our proposals will fully protect the consumer after privatisation.
Competition provides the best protection, and every opportunity has been taken to open up and reinforce competition between fuels and within the gas market. Where this is not possible, we propose strong and effective regulation to be enforced by the director of a new regulatory body, Ofgas. He or she will be advised by an independent consumer body—a strengthened and streamlined gas consumers council, which will take up consumer complaints. British Gas will be obliged for the first time to make public the basis on which it prices gas to industrial customers, and publish a schedule of maximum contract prices. This is an important step towards greater market transparency in industrial energy prices which will help industrial consumers in negotiating contracts.
British Gas has negotiated individual contracts with its larger customers for many years. This has suited both British Gas and its customers very well, and the CBI, representing both large and small consumers, and those representing specialist sectors have made it clear that they want this to continue. Our approach gives British Gas the ability to respond flexibly to customers' needs and to take proper account of market forces. For smaller domestic and commercial consumers the system of published tariff prices will of course continue.
The arrangements set out in the Oil and Gas (Enterprise) Act to allow direct supplies of gas to consumers by others than BGC will continue. The only restrictions which will be placed on such supplies will be safety ones. A new provision is that other companies will be allowed to become public gas suppliers in areas where British Gas does not operate.
The common carriage provisions in the Oil and Gas (Enterprise) Act which allow others to convey gas through the British Gas pipeline network have been
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strengthened. Again to increase market transparency, British Gas will be obliged to publish information for potential users of its supply system, including examples of typical prices. There are new provisions to require British Gas to provide back-up supplies if a third party's supply is temporarily interrupted. This will enable other suppliers to achieve greater security of supply for their customers. To strengthen these competition provisions, and in response to the views of the Energy Select Committee, a competition duty has been added to the Bill to guide the Secretary of State and the director. The duty is directed at the contract sector—supplies above 25,000 therms a year—where the Bill ensures that there can be competition.
Competition begins upstream, and I would remind the House that the Government have recently announced a new policy offering new freedom in gas imports and exports. British Gas will be able to import gas and gas producers will be able to apply for waivers of the landing requirement. The Government will continue to look after the national interest, particularly so far as security of supply is concerned. Regulation is primarily directed at the tariff market where there can be no competition in gas supply to the individual consumer. It would clearly be absurd to allow two or more gas pipes down every street. Here, prices will be controlled by a price formula which will set a maximum price which can be charged, policed by the Ofgas director.
I would at the outset like to stress that, while privatisation will open new opportunities for the industry as a whole, it will not of itself lead to any changes in the way in which local gas supplies are managed by the British Gas regions. British Gas has no plans to change its present structure with separate regional managements, including those in Scotland and Wales, so there is no reason to fear that privatisation will mean less local autonomy or that all problems will have to be referred to some remote centralised authority.
I now turn to the detail of the Bill. The regulatory system is contained in Part I based on a system of authorisation of gas suppliers. The Director General of Gas Supply appointed under Clause 1, supported by the Office of Gas Supply (Ofgas), will monitor and enforce authorisation conditions and other requirements laid on gas utilities called public gas suppliers in the Bill. The director will also have powers to initiate changes to the authorisation which affect tariff consumers.
Clause 2 sets up the independent Gas Consumers Council. The council will act as the consumers' voice and will contain representatives from each of the British Gas regions. These representatives will work with council staff located in the regions near to consumers, dealing with complaints on a local basis and keeping in close touch with consumers' views. Clause 3 abolishes British Gas's special position as a gas utility under the present Gas Act 1972.
Clause 4 is an important clause which sets out the general duties of the Secretary of State and the Ofgas director. It requires them both to exercise their functions so as to ensure that authorised gas suppliers satisfy all reasonable demands for gas in Great Britain so long as it is economical to do so. This clause also làys duties on the Secretary of State and the director to

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protect consumer interests, to promote efficiency and economy on the part of authorised suppliers and to promote efficiency in gas use. This last duty will enable the director to support British Gas in its considerable energy efficiency initiatives and programmes.
Many noble Lords will, I am sure, be aware of the commitment of British Gas to improving the efficiency with which gas is used, which they see as vital to the long-term future of the gas industry in the ever-growing competition with other fuels. The activities of British Gas in this area include full participation in the monergy campaign organised by the Department of Energy in this energy efficiency year and the annual gas energy management awards which last year celebrated their tenth anniversary. These awards are given for the most outstanding examples of improvements in the efficient use of gas in industry and serve to publicise what can be done in this important area.
A further important duty is to protect the public from dangers arising from gas transmission and use. This is essential to ensure that the director carries out his functions with safety foremost in his mind. Finally, there is the competition duty I have already mentioned.
Clauses 5 to 8 set out the arrangements for authorising gas suppliers under the general oversight of the director of Ofgas.
My noble friend has made available to those intending to speak in the debate and in the Library of the House copies of the draft authorisation for British Gas, published by the Government, which will be granted for an initial period of 25 years. Among other matters it requires British Gas to draw up and publish proper accounts covering the gas supply business separate from any other activities it undertakes. It sets out the price formula for tariff customers and an additional requirement that standing charges should not rise faster than the rate of inflation, an important protection for the elderly and others who consume only small amounts of gas. It contains provisions to improve transparency in the contract market and for carriage of gas for others.
The authorisation requires British Gas to give the director and the Gas Consumers Council the information they need to carry out their jobs effectively. For the gas consumers council it is an important new power given to a consumer body for the first time, which will allow it to get to the bottom of complaints about gas supply. Also to help consumers British Gas will have to publish codes of practice describing the gas supply services it offers tariff customers and advice to those who have difficulty paying their bills—the so-called "disconnection code"—which British Gas will continue to publish jointly with the electricity industry. For the protection of the public in general, the 24-hour emergency service for escapes will continue.
These are not the only obligations laid on British Gas. Returning to the Bill, Clauses 9 to 15 set out the terms under which public gas suppliers supply gas. These are carried over more or less intact from the current Gas Act of 1972. Public gas suppliers are given a general duty to meet any reasonable demands in
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their authorised area for gas supply provided it is economical to do so. Also carried over from current legislation is the obligation to supply any customer within 25 yards of a main or already connected to the supply system as long as they take less than 25,000 therms a year, and generally to charge on a published tariff. These duties will be enforced by the Ofgas director. Clause 15 brings into effect the gas supply code set out in Schedule 5 which covers, among other matters, the limited cases where a public gas supplier can disconnect a supply and the very narrow circumstances in which a public gas supplier has rights of entry. Right of entry cannot be exercised, except in an emergency, without a magistrate's warrant.
Clauses 16 and 17 cover the quality of gas supplied and the testing of meters, the latter a responsibility which will remain with the Department of Energy's oil and gas measurement branch. Gas safety regulations are strengthened by Clause 18 by bringing them under the Health and Safety at Work Act, so that the Health and Safety Executive can use its full and wide range of powers and so that the gas industry can be treated consistently with other industries. Other safety points covered in the Bill worth mentioning at this stage are that the maximum response time for reports of escaping gas has been halved from 24 to 12 hours, and that for the first time public gas suppliers will be obliged to make safe gas leaks on the customer's side of the meter.
The provisions of the Oil and Gas (Enterprise) Act on common carriage, which I have already mentioned, are set out and strengthened in Clauses 19 to 22. Where British Gas and a prospective user of its pipeline grid cannot agree in negotiations, the director will have the power to step in and set a fair charge for the conveyance of gas. This is a power which has been transferred from the Secretary of State in line with our general objective of removing gas regulation from the political field.
Clauses 23 to 26 empower the director to amend public gas suppliers' authorisation conditions. He can do this by agreement with the public gas supplier or, in the case of matters affecting tariff consumers, by referring the matter to the Monopolies and Mergers Commission. The director must modify the authorisation to include the substance of any recommendations by the MMC.
If British Gas is apparently abusing its market position in the contract market, it will be for the Director General of Fair Trading to make anticompetitive or monopoly references to the MMC under competition legislation. Clause 27 allows for MMC recommendations made under this right to be incorporated in the authorisation. This is an important sanction which can bring price regulations into the contract market if British Gas behaves unfairly either towards its contract consumers or in competition with other energy suppliers.
We believe we have the right split of responsibilities between Ofgas and the Office of Fair Trading. In the contract market, where gas is in strong competition with other fuels, the OFT is the appropriate body to investigate any malpractice by British Gas as it has the experience of competitive practices across the whole of industry to draw on. The Ofgas director's knowledge,

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on the other hand, will clearly be concentrated on gas matters, and he will have the greater expertise in the tariff market to protect domestic and other small consumers of gas. Using enforcement powers given under Clauses 28 to 30, the director can take swift and effective action to require the public gas supplier to comply with the terms of the authorisation and other matters in the Bill, including the obligation to supply.
Clauses 31 to 33 cover the investigation of complaints both by the director and the gas consumers council. The director will investigate any complaints which relate to enforcement matters. The new clause introduced in another place makes it explicit that, as well as complaints on gas supply matters, the council can investigate all complaints relating to the use of gas, including the sale, installation, servicing and safety of appliances. We believe that the Bill now gives the council full powers to protect gas consumers. Other functions of the director and the council set out in the remaining clauses of Part I of the Bill include a power for the director to publish information and advice to tariff consumers and a duty on the council to advise the director.
I make no apology for concentrating on this part of the Bill as it covers the regulatory structure which will be in place for many years to come. We believe it is an effective structure which provides for strong regulation where it is necessary, but which gives British Gas and other gas suppliers proper commercial freedom in other areas. It removes regulation from the political arena, and places it in the hands of an independent Director General.
Part II of the Bill contains the necessary powers to enable British Gas to be transferred to the private sector and are similar to those in the Telecommunications Act 1984. I do not think I need describe these in detail.
Finally, I would draw attention to one clause in Part III. Clause 63 allows the Secretary of State to give directions to British Gas and other public gas suppliers on the granting of an authorisation to secure that, where gas producers have provided geological and other information in gas purchase negotiations, public gas suppliers will not be able to use that information in their exploration and production business to acquire an interest in gas or oil production licences or in applying for such licences.
This is a Bill of major importance. It encourages competition where possible. It offers full and effective protection to the consumer. It represents a further major step in the Government's privatisation programme, rolling back the frontiers of the public sector and returning businesses to the private sector where they belong. It will lead to a real and positive participation by the public and the industry's own employees in the ownership of one of our major industries. It will enable British Gas to build on its already successful operations for the benefit of employees, consumers and the nation as a whole. I commend this Bill to your Lordships.
Moved, That the Bill be now read a second time.—(Lord Gray of Contin.)
3.53 p.m.
Lord Stoddart of Swindon: My Lords, I should like first to thank the noble Lord, Lord Gray of Contin, for
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explaining the Bill to us in detail. I was rather surprised to hear him say that this was an industry which was being returned to the private sector, because the gas industry has never been entirely in the private sector. It has always been partly in public ownership since its inception. He painted a rosy picture of the Bill, and during its subsequent stages through this House we shall seek to show that it is not such a rosy picture at all and that the control mechanisms which he described are not as they were described.
We all know that the Bill before us today has nothing to do with making the gas industry more efficient; nothing to do with giving the consumer a cheaper and better service; little, if anything, to do with the profitability of the industry or providing a more secure gas supply; and not even anything to do with competition, which is the Government's ark of the covenant, as we heard again from the noble Lord this afternoon. I know that noble Lords on all sides of the House and the public know that this Bill is to transform a public monopoly into a private one. It is about selling off assets owned collectively by all the people of this country and held in trust by Her Majesty's Government simply to provide the money to fuel the Chancellor's promised tax bonanza next year, in time to bribe the electorate into voting the Conservative Party a third term of office. Of course the noble Lord, Lord Gray, and his colleagues in the Government deny publicly that this is the main reason for gas privatisation, but in the privacy of their consciences they know perfectly well that what I have said is true and that the facts are on my side.
Indeed, we should examine the facts. First. we should ask whether British Gas under public ownership is efficient. The answer to that must be a resounding "Yes", not because I say so but because the Secretary of State, by his great praise of British Gas, its chairman and its board and of the way the industry is run and its achievements over the years, by implication, says it. Even more important, the management consultants Deloitte Haskins and Sells, which the Department of Energy appointed to study the efficiency of British Gas, underlines that in its report.
This is what the report said:
"British Gas management and employees can look back at many excellent achievements, the principal being the conversion from town to natural gas and the substantially increased share of the energy market. These have been combined with a good safety record, a significant improvement in customer service and good industrial relations. Finally, the BGC has generated sufficient profit and cash flow to meet financial targets and to self-finance its investment programmes. 'We consider that the management and employees of any commercial organisation could be proud of such a record, and also that it reflects well on the sponsoring Department of Energy'."
In the light of that, it is certain that there is no basis on the grounds of efficiency for privatisation. I underline this by reminding noble Lords that in the 1950s and 1960s the gas industry was very much in the doldrums and near the point of collapse. But as a result of being in public ownership, and through near miraculous organisation, the industry was able quickly to seize the opportunity provided by the discovery of North Sea gas and haul itself up by its bootstraps. In 10 years it not only constructed the gas grid but converted

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13 million consumers, with 30 million appliances, to take North Sea gas. By comparison, the Dutch took four and a half years to convert 2 million customers and the Japanese, those paragons of efficiency, took 12 years to convert 5 million consumers to gas. Thus the efficiency record of British Gas cannot in any way be criticised.
But if there is no basis for privatisation on the grounds of efficiency, what about profitability? Have the Government grounds for complaint on that score? The answer must surely be that they have no such grounds.
In 1984–85 British Gas turned in a profit on a current cost basis of £736 million, including interest receivable. On an historic cost basis that figure rises to no less than £1,003 million. That is a lot of money by any standards. In addition, as the noble Lord knows, £500 million was paid directly to the Government through the gas levy. The corporation is financing the whole of its capital expenditure from internal sources, and in terms of productivity British Gas staff have performed well above the average and are unequalled in this achievement, except perhaps by workers in the electricity supply industry.
In terms of percentage return on capital employed, on an historic cost basis British Gas stands comparison with any other major industry in the private sector, including well known blue chip companies such as ICI. So, if the pretence of low efficiency and bad profitability cannot be sustained, can the Government argue that the performance of British Gas, however good at present, might be improved by opening up the industry to competition? Personally, I believe that in some circumstances competition can be a spur to greater efficiency, but in spite of what the noble Lord has said—and he knows it—this Bill does not, indeed cannot, introduce real competition in the supply of gas.
After privatisation, British Gas will remain as it is now, the only gas undertaking which can supply and deliver to people's homes and businesses throughout the country a supply of gas; so that there will be no greater competition now and we shall have transferred enormous monopoly power to a private organisation and will have done so without the stringent controls which should accompany such a transfer of power. Your Lordships do not have to believe me alone about monopolies. Indeed, the Conservative manifesto of 1983 pledged that a Conservative Government would most certainly not merely replace state monopolies with private ones, as that would waste an historic opportunity to ensure that they do not exploit their positions to the detriment of their customers.
That was what the Conservative Party said in 1983. Today, they are in this House breaking that promise because they are converting a public monopoly into a private one. When this Government privatised British Telecom noble Lords from all Benches agreed that it was not in the best interests of customers and the nation to transfer what was a natural monopoly from public to private hands. But gas is even more a natural monopoly than telecommunications and perhaps even more vital to our national life and economy. Those noble Lords who expressed doubts about the
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privatisation of British Telecom must have even deeper doubts about the privatisation of British Gas, particularly since in the case of British Telecom the Government at least had the figleaf of competition from Mercury, albeit only on the restricted trunk network, to hide their nakedness. But in the case of British Gas there is not even a figleaf to hide behind and the Government are exposed starkly to the charge that competition cannot and will not result from privatisation.
Since that is the case, it surely would be reasonable to expect that the Government would come forward with proposals for a really strong regulatory regime that would safeguard not only the interests of all gas consumers but also the national interest, bearing in mind the extreme importance of this valuable energy source to our economic and social well being. But that is not the case. I repeat: that is not the case. The new regulatory body, Ofgas, given very narrow powers of control and hedged around by all sorts of impediments on its scope for action, will be able to keep the new company only on the lightest of reins. That was what the Secretary of State wanted and what Sir Denis Rooke wanted, because they said so to the Select Committee. And that is what in fact they have got.
The House of Lords Select Committee's report on the regulation of the gas industry emphasised the need for strong regulation of an industry which is a natural monopoly, but the Government took scant heed of the recommendations produced unanimously by the Select Committee. Indeed, so incensed were the committee at being brushed off by the Secretary of State that they took the unprecendented step of tabling their own amendments at Report stage in another place. Those amendments, as the noble Lord knows, were not carried but will undoubtedly be returned to during the later stages of the Bill in this House.
As I have said, the regulation is to be of the lightest sort and, in spite of what the noble Lord said in opening, so far as I can see Ofgas will not have the same sort of powers and opportunities for intervention as Oftel. As we saw recently when British Telecom decided to increase domestic tariffs well above the rate of inflation, in spite of the retail price index minus X factor, the director of Oftel stood by hopelessly and could not intervene because his powers did not enable him to do so.
Those who took part on the Telecommunications Bill will remember that this was not our understanding during the Committee stage of that Bill. Indeed, Ministers gave us assurances when the Telecommunications Bill proceeded through this House. The Ministers consistently sought to reassure us that all consumers, including domestic consumers, would be treated fairly and would be protected by the RPI-X formula. So much for ministerial assurances! Certainly British Telecom customers have not yet seen any benefit from privatisation, unless the "Dial-a-Dirty-Joke" service can be said to add anything other than disrepute to the telephone service.
What domestic customers have suffered is swingeing price increases, reduced maintenance service, an increase in the purchase of foreign equipment and unemployment, or the threat of it, for many of those employed by British Telecom. I would remind the House, if it needs reminding, that it is the workers of

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all kinds in British Telecom and British Gas who deserve a large measure of credit for the successes that they have achieved.
If that is what has happened in British Telecom, what are we to expect of a privatised British Gas which will be under lighter control and with virtually no competition except in the case of appliances sales? In the matter of prices, for example, I wonder how the customer will fare. The price control system which is included in the draft authorisation provides a formula related to the retail price index minus X (which is the efficiency factor) plus Y (which represents the future cost of gas factor). The director of Ofgas will have some control over the X factor, which is the efficiency factor, but none at all over the Y factor, which is the future price of gas. Thus, he will be able to intervene only in relation to costs other than the costs of gas itself and British Gas therefore will be in complete control, without let or hindrance, of the gas costs.
Since the gas cost represents 50 per cent. of the retail price, that is a very big power indeed. And, bearing in mind the experience of British Telecom, it does not bode well for the tariff customers of British Gas, let alone business customers who will have no protection at all. Furthermore, there is no firm provision relating to standing charges, again despite what the noble Lord has said. Those have caused much vexation and dispute and even hardship over the years.
The new privatised organisation is charged only with using its best endeavours to prevent standing charges from exceeding the rate of inflation. Whatever the Government's legal interpretation of the words "best endeavours", the public will see them as a let-out for privatised British Gas; and in Committee we shall certainly use our best endeavours to impose a duty on British Gas not to increase standing charges above the rate of inflation. But even though the authorisaton makes some provision, however defective, for price control it does not take account of the risk that British Gas could use its monopoly position to reduce standards of service as an alternative to raising prices.
Certainly, theoretically the director of Ofgas could intervene in service provision, but neither he nor the gas consumers council will be sufficiently resourced to allow them to monitor performance. The figure of £3 million to finance both bodies—and that is the figure that was mentioned in another place—is derisory. That, in itself, will ensure that British Gas plc will be able to exploit its monopoly position with the minimum of public control. We shall certainly, during later stages, wish to ensure that Ofgas and the gas consumers council are properly resourced in order that they can collect, publish and monitor their own performance indicators and are given a real say in the preparation of the codes of practice, including the code on disconnections, and not merely consulted on their presentation to the public.
Then there are the showrooms, a vital contact point between the supplier and the customer. There is no safeguard at all for their retention and nothing in the Bill or authorisation can stop British Gas plc from embarking upon wholesale showroom closures as an asset-stripping exercise to benefit the shareholders at the expense of the customers.
Safety is another matter which will concern the House. While acknowledging the good safety record of
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British Gas, I believe the opportunity exists to write into this Bill safeguards in a number of areas including the safety of appliances and the training and standards of installers and contractors. I will not elaborate further on this aspect because I know that the noble Baroness, Lady Macleod of Borve, whose experience and knowledge we all respect, has taken a special interest in this subject of gas safety and will undoubtedly deal with safety—I hope she will—in her speech later on.
As I said earlier, gas is a prime fuel and a vital national resource. It should not be wasted; its conservation is essential to the long-term good of this country. It will be all too easy for privatised British Gas to exploit gas reserves to the full, to maximise profits in the short term while ignoring the long-term interests of the nation. Yet there really is no provision in this Bill or in the authorisation to put a duty on British Gas plc to conserve gas. Consequently, depletion policy and a large part of energy policy will be in private hands and left to the exigencies of market forces. That is a prospect which certainly worries the Opposition and should concern noble Lords in every part of the House. It would be useful if the noble Lord, Lord Belstead, who is to reply to this debate, could comment particularly on this aspect of the Bill.
There is one final point on regulation. The authorisation does not form part of the Bill, and as far as I can see it can be modified without proper reference to Parliament. We believe that the authorisation, suitably strengthened and amended, of course, should be included as a schedule to the Bill, thus needing parliamentary consent to any alteration in its terms. If the Government were agreeable to this course of action, some of our fears at least would be alleviated, and, again, perhaps the noble Lord, Lord Belstead, would let us know in his winding up whether he would be receptive to such a proposal.
I should like now to turn to Part II of the Bill, dealing with the transfer of British Gas to the private sector. I must make the point that, due to the imposition of the guillotine in the House of Commons, this part of the Bill did not receive all the attention there that it deserved; nor, indeed, did the noble Lord in his opening remarks pay much attention to it, either. However, it is a very important part of the Bill. We shall therefore wish to examine it closely at Committee stage; and, indeed, my noble friend Lord Bruce, who is an expert on this matter, may very well wish to deal with some part of it in his winding-up speech. But there are some comments that I would like to make at this point.
First of all, can we be told what arrangements will be made for the flotation? What price is to be set for the shares, and what is the total amount of money that the Government expect to get from the sale? A glance at the accounts of British Gas shows that the total value of assets exceeds £16,000 million. When privatisation was announced, all the indications were that the Government expected to reap £8,000 million from the sale of the assets. Is that still the Government's view in the light of the sharp drop in oil prices from 28 dollars a barrel at the time of the announcement to around 12 dollars a barrel at the present time? I should like an answer to that from the noble Lord.

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Could he also say something about the costs of flotation? I understand that the costs of floating British Telecom amounted to £200 million. That was a much smaller flotation. What are the costs going to be in the case of British Gas—£300 million, £400 million, £500 million or what? The House is entitled to have that information, and I hope that the noble Lord will give it to us when he winds up.
The House is entitled to have this information (it is entitled to have a lot more, but it is particularly entitled to have this financial information) especially bearing in mind the gross underpricing of the British Telecom share issue and the consequent loss to the taxpayer of £1,500 million immediately following the flotation and of £3,000 million if the peak market price is taken as the measure of the loss. The British Telecom issue was a disgrace and a national financial scandal, the extent of which was revealed, certainly in part, by ITV's "World in Action" programme on 3rd March this year. One participant in that programme described the British Telecom issue as tantamount to selling £10 notes for £5, while another made the point that the loss to the taxpayer on the BT sale, represented more than the cost of building the Channel tunnel or providing 60 new hospitals. That was the extent of the loss.
What is certain is that the issue price was set far too low, allowing large speculators, many of them foreigners, to make huge fortunes overnight at the expense of the taxpayer. While ordinary people were limited to purchasing 800 shares, the City slickers set about getting round the limit, and many of them did so—some by means unknown to me, but other individuals were simply able to make a killing by personally acquiring shares allocated to merchant banks. "World in Action" named one individual who had acquired 50,000 BT shares in this way and another who had acquired no less than 237,000 shares by a similar device. So much for wider share ownership, which the noble Lord mentioned in his opening remarks.
How on earth can this happen, one may ask? Again, "World in Action" put it succinctly. It was asking for trouble, they said, to ask the City to price the shares when it was the City itself which would be buying most of the shares. That was like asking an estate agent to value your house when he himself was the buyer. Nobody in their right mind would do that—I would not, noble Lords on this side would not, most noble Lords on that side would not, and I am sure the noble Minister would not. But that is precisely what the Government did, and it was, as I say, a disgrace.
We are entitled to ask what the Government propose for the British Gas issue to prevent a recurrence of the British Telecom scandal. Do they intend to obtain independent advice as to the issue price? Will they test the market? What will they do to safeguard the taxpayers from being ripped off yet again? What notice do they intend to take of the Public Accounts Committee on the arrangements for the sale of public assets?
There is one further point that I wish to make about Part II, and that concerns the purchase of shares by
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foreign nationals. As I understand the Bill, there is to be a limit of 15 per cent. of the total stock that can be owned by a single foreign national. If I am correct in my reading of that figure, I find that very worrying. There seems to be nothing to prevent three or four energy firms in Holland from getting together and taking control of British Gas plc, and with it a substantial part of energy policy. This surely cannot be right, and unless there are substantial assurances on this matter by the noble Lord when he winds up this debate we shall certainly put down amendments to limit foreign holdings and ensure that British Gas remains under the control of the British people.
Could the noble Lord also confirm that the Government intend the flotation to be handled in foreign financial centres as well as London, including New York, Hong Kong, Tokyo and Zurich? Will this in itself not encourage foreign ownership of British Gas; and is not the reason for this polyglot flotation the fact that the Government know that the issue is too big and too concentrated to be absorbed by British people and by British institutions alone?
To sensible people who have a care for the country's the consumers' and the taxpayers' interest, who are concerned about the delivery of monopoly power to private control, who wish to see the energy future of our country safeguarded and conserved, and therefore believe that the public must have a strong and broadly-based stake in the energy industries, the Government's decision through this Bill to sell off British Gas will be seen as lacking any logical or sensible basis and will regard it as it should be regarded—as a sordid, cynical, financial exercise designed to save the Tory Party from disaster at the next general election.
We have heard a great deal from the Benches opposite just lately about propaganda on the rates, but anything they have been able to allege against Labour councils pales into the palest insignificance when set beside this blatant multi-million pound attempt to grease the electorate's palm just before a general election. I sincerely trust that the good sense of this House will be able at least to write some essential safeguards into the Bill. I also believe the electorate will realise that this Bill has no relevance to the industrial, economic and social problems we face as a country and will also see that their long-term good, and that of the nation, is being sacrificed to short-term party political expediency.
Let me say in conclusion that this Bill has no friends, apart from the Government and Sir Denis Rooke. It is a bad Bill, produced for the most disreputable of reasons and brought for enactment at a most inauspicious time in the energy industry. The Labour Party opposes the Bill. It will continue to abhor the measure and will in due course take steps to bring this great industry back under proper public control, where it rightly belongs.

Local Authority Block Grant Multipliers
4.21 p.m.
The Minister of State, Department of the Environment (Lord Elton): My Lords, with your Lordships'

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permission, I will now repeat a Statement being made by my right honourable friend the Minister for the Environment, Countryside and Local Government in another place. The Statement is as follows:
"With permission, Mr. Speaker, I shall make a Statement about a complex technical matter to do with the operation of the block grant system established by the Local Government, Planning and Land Act 1980. I hope the House will bear with me.
"Generally, block grant is paid to compensate authorities for differences in their expenditure needs and in their rateable resources. But, in addition, subsection (6)(a) of Section 59 of the 1980 Act gives the Secretary of State a power to determine block grant multipliers to limit changes in the grant entitlements of individual authorities from year to year. In every year since 1981 my right honourable friend and his predecessors have used this power to set safety nets to protect local authorities against undesirable losses in any one settlement. In two years it has also been used to set caps on increases, to prevent undesirable gains by some authorities at the expense of all other authorities.
"Each year since 1981 my right honourable friend and his predecessors have used the power to "safety-net" grant losses arising from particular features of successive settlements. In 1981–82 a cap was also applied to grant gains resulting from the introduction of the new grant system.
As far as 1986–87 is concerned, my right honourable friend the Secretary of State made it clear in his provisional announcement to the House in July last year that he proposed to use these powers to restrict windfall gains resulting from the decision to dispense with expenditure targets. We also stated on many occasions our intention that the grant effects of abolishing the GLC and the metropolitan county councils should be neutral at ratepayer level. We gave effect to these intentions in the multipliers set out in the rate support grant report which the House approved in January.
"Thus, in each year since 1981 the Secretary of State interpreted the powers in subsection (6) (a) of Section 59 of the 1980 Act in such a way as to limit certain factors affecting grant entitlements, but not others. For example, we have made changes to the way grant related expenditure assessments are calculated, often as a result of representations made by local government. In every year successive Secretaries of State have proposed that the effect of these changes should be mitigated by the setting of safety nets. What we have never sought or agreed to do is to protect authorities from the grant effects of their own expenditure decisions. It would have run counter to one central purpose of government policy in this area to do so.
"This approach had the general support of the local authority associations. It has been embodied in the rate support grant reports for each of the six years 1981–82 to 1986–87, all of which have been approved by this House. It has not previously been challenged. However, this year for the first time a handful of authorities have questioned whether subsection (6)(a) of Section 59 can be used to achieve the objective I have just described. They
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maintain that the Secretary of State's power is restricted to limiting changes in the overall amount of grant payable to an authority for one year, compared with the previous year. One authority has already taken court action on this, and I understand that a number of other authorities are considering similar action.
"I must make it clear that I do not believe that the powers could be used in any sensible, practicable fashion under this alternative interpretation. For example, it would require the Secretary of State to include within any safety net the effect of grant reductions arising solely because authorities' own rateable resources had increased. It would also require the Secretary of State to take account of grant which authorities had lost solely as a result of their own expenditure decisions. That would be a nonsense. No reasonable authority would expect the Secretary of State to operate the powers in this way.
"Such an interpretation would cast doubt on the grant entitlement for every local authority for 1986–87 and for every previous year back to 1981–82, under the rate support grant settlements which this House has approved. It would clearly be most unsatisfactory if a procedure which has been followed since 1981–82 were to be overturned, particularly since throughout this period there has been a broad measure of agreement on what the subsection meant between the department and the local authority associations, many of those members would face wholly unmanageable losses of grant if any other interpretation of the 1980 Act were to become accepted. The Government are not prepared to allow that to happen and believe we must take action to preserve the status quo.
"Obviously the position must be clarified. The Government will therefore be bringing forward a short Bill during this Session of Parliament to remove any doubts about the interpretation of the Secretary of State's powers in relation to multipliers for past years and for the future."
My Lords, that concludes the Statement.
Lord Dean of Beswick: My Lords, I am extremely grateful to the Minister for repeating in this House the Statement made in another place by the Secretary of State. May I ask: is it not a fact that this particular measure has been triggered by the fact that the city of Birmingham has chosen to challenge the Government in the courts? I understand the case is to be heard as early as next week. Does it not indicate that the Government may have been acting illegally for six years? It appears that they are breaking with precedent by using their majority in Parliament in a somewhat hurried way because they fear the possibility that they may lose the case against Birmingham in the courts.
Perhaps I may ask the Minister what effect the proposals, as outlined in the Statement, will have on rate support grant assessments already made for the current year. Will the provisions in the forthcoming Bill allow for retrospection in order to right any wrongs that may have been inflicted on local authorities over the past six years? We have consistently been reminded both in this House and in another place that when an issue is before the courts the sub judice rule applies. Do I take it, as a layman, that the Government

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are absolved from the sub judice rule in this particular case?
The Minister made the point that practice over the past six years had had the support of the local authority associations. Would the Minister understand if I informed him that my information (and I believe it to be correct) is that the Association of County Councils and the Association of Metropolitan Authorities are submitting affidavits to the court in support of the Birmingham case?
Finally, does the Minister recall that some weeks ago when he made a Statement on the rates more than one Member of your Lordships' House pressed the point as to when the Government might return to the simplicity of a rate support grant system that was understood by most people, instead of these perpetual announcements which seem to be forthcoming at regular intervals? Bearing that in mind, it is a sad day when a government can act for six years and then suddenly have to bring in a Bill as an emergency measure to right a wrong that they may have been doing to local authorities over the past six years.
Baroness Stedman: My Lords, we on these Benches are also grateful to the Minister for repeating the Statement, which seems to be trying to establish the Secretary of State's legal position in setting the multipliers and to spell out, as it were, the Government's legal position in an attempt to prevent a legal challenge by Birmingham and a few shire counties. In a very simplistic way, as I understand it, the multipliers are set so that where an authority has increased resources it receives less grant and where it has reduced resources it gets more grant.
The 1986–87 grant movements, as a result of abolishing targets and the safety net, and so on, were implemented through the multipliers. I believe that the Government were at fault because they did not take the actual base position for 1985–86 but fixed a notional one which would exceed the grant level. Some authorities lost grant—my own in Cambridgeshire did—in the period of transition to a notional basis. When the grant was capped to help with abolition costs, some authorities then lost more grant. In effect, they were "done" twice over.
Is the Minister aware that following Birmingham's action the Association of County Councils took legal advice? It was advised that the consultation procedure had been carried out within the law, but its advice drew attention to four shire counties which in its counsel's opinion may have been improperly penalised within the procedure laid down. I understand that the Birmingham court hearing has not yet been concluded, and I would question whether we ought even to be discussing it in our House and whether it is not sub judice. If Birmingham succeeds, will the Secretary of State have to re-open the whole question of grant and start all over again, or will he remedy the situation only in Birmingham and the four shire counties? If so, how will he do it, and at whose expense?
Can the Minister also confirm that there is a similar muddle in the new transport set-up in the London boroughs, where the multipliers have been used and the safety net removed so that boroughs have been
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deemed to have acquired extra or less expenditure and have therefore had less or more grant than was taken into account when they were fixing their budgets and levying their rates? It now appears that some of the boroughs may well have received too much and may have to pay it back. As the rate is now fixed, the Government will have to re-introduce the safety net in order to allow the grant to be repaid over a period.
This is a very sorry muddle, and it only goes to show how absurd the present system is, with a block grant and multipliers which arbitrarily allow any Secretary of State to manipulate the grant. It is a messy way of doing it. It is arbitrary, and it is unfair. I suspect that the powers were being used more extensively than was wise, which is why the local authorities are being provoked into challenging the reasonableness of the Secretary of State's powers.
I cannot say with hand on heart that we welcome the proposal of yet another local government Bill in this Session, albeit a short one. I hope that at the end of that next run the formula will be clarified and that the Secretary of State, the Members of your Lordships' House, laymen, councillors and officers will all be able to understand and interpret it fairly.
Lord Elton: My Lords, the noble Lord, Lord Dean of Beswick, asked a number of questions. He is right, of course, to say that the bringing of the case by Birmingham was an important factor, but this is a matter which is of concern to local authorities other than Birmingham. The Statement does not cover any court case specifically, and is not therefore sub judice. I can tell the noble Lord that no rule has been broken.
If the case were to be lost—here I do not wish to break the sub judice rule—if the principle that it is sought to establish as being a valid interpretation of the law were established in place of the existing interpretation, the effect would be damaging to local authorities up and down the country on a totally unpredictable basis, because until I st April there were 414 of them and there are now 426. Every rate settlement for every authority for six years would have to be calculated—that is 2,496 calculations—before it was known how the money would be shuffled around among the local authorities. That is clearly unacceptable.
If the law is in doubt in that way, it clearly should be clarified. That does not affect the Government's position on the undertaking as to grant re-cycling, which is what I think the noble Lord was referring to. He might be interested to know that the indications are that the amount is above the £500 million guarantee by something more than £100 million already.
I do not doubt that having seen the action brought by Birmingham the local authority associations have turned their attention to the same issue. But until, I think, the middle of February, when this case was brought to court, there was a general agreement as to what the law was. None of your Lordships opposite has suggested, as I had expected it might be suggested, that we were moving the goalposts during the game. We are putting the goalposts exactly where they belong and where everybody thought they were since kick-off.

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The noble Baroness asked a question about the transport grant, I think specifically in London. I shall have to have leave to answer that by correspondence. I shall put a copy of the letter in the Library. I have two things in common with the noble Baroness. The first is that I do not welcome the prospect of another local government Bill, and, secondly, I am not here to defend the present system. She will, I hope, look with renewed interest at the Green Paper.

Gas Bill
4.38 p.m.
Second Reading debate resumed.
Lord Ezra: My Lords, the debate in which we are involved at present raises a number of very important issues. We are concerned with the biggest privatisation measure so far contemplated by the Government. We are concerned with the transfer of a major monopoly from the public to the private sector and with a measure which is intended to last for at least 25 years. On those three counts, I believe that in this debate we shall be considering many issues crucial not only to this country's future energy success but to its economic organisation in general.
The problems that we face are made all the more acute by the fact that at present we are living in a rapidly changing energy scene. As the noble Lord, Lord Stoddart, indicated in his forceful speech, the Government's original intention to privatise the gas industry was made at a time when the world energy situation was very different and when the price of oil was at a much higher level than it is now and when, therefore, the value of the gas industry stood at a much higher level.
The sale of the assets of the gas industry at the present time would clearly have to reflect the substantial reduction in the market value of oil. But it is the generally accepted view that in due course the oil situation could well be reversed. I believe that this is quite right. I was myself involved in all sorts of views being expressed in the mid-'sixties about cheap oil being available indefinitely. The situation did indeed change in the early 'seventies and it could change again in the late 'eighties or the early 'nineties. So there is a very major issue of public policy raised by the period when this massive sale is to take place.
I believe that there are two major issues of policy which need to be considered in connection with this Bill, and there are a number of detailed points relating to the proposed legislation. The first major issue of policy is the question of the transference of monopoly from the public sector to the private sector. I should like to ask the noble Lord, Lord Belstead, to indicate to us when he replies the extent to which the Government have considered alternative possibilities.
Many have, in fact, been suggested in the public debate which has taken place on this measure. For example, it might easily have been possible for the gas pipeline itself to remain in public ownership, but for the various gas authorities, including of course the British Gas Corporation and other suppliers, to have been authorised under a franchising agreement to use
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it. This would have introduced a greater degree of competition, but at the same time would have preserved in the ownership of the nation those assets which cannot, as the noble Lord, Lord Gray, properly said, be replicated or duplicated without an enormous waste of resource. Have alternatives of this sort been seriously considered?
If they have been so considered, then have the Government seriously considered whether the regulatory machinery which they are proposing is really adequate? Obviously their answer to that would be, yes, but how seriously have they looked at the experience in other countries, particularly in the United States? I should like to draw your Lordships' attention to a very important document entitled Lessons from America, issued by the Association for the Conservation of Energy, which has analysed very closely the regulatory system operated in the United States. All I can say is that it goes very much further than the regulatory system now proposed. Not only are the regulatory bodies larger and more substantially financed, but their powers of intervention are more considerable.
The Government have admitted that, as this is not a case in which competition automatically arises because there is a simple transfer of monopoly, this has to be put right by interposing a regulatory body. It must follow from that reasoning that the regulatory body should have adequate powers and I must say that I join the noble Lord, Lord Stoddart, in raising this question. I hope that we shall be going into that very fully at subsequent stages of this debate.
But there is another question of public policy which this raises, and that relates to the energy scene. The Secretary of State for Energy in another place, during the course of the debates there, made it clear that in his opinion one of the main reasons for transferring the gas corporation from public to private ownership would be to remove it from the thralldom of government intervention. He graphically described his experiences of the sorts of intervention which he himself and the Treasury continually had to bring to bear on these bodies and said, "What we are trying to do is to free them from this situation". Any one of us could think of many ways in which this could be achieved without selling off the whole enterprise.
But be that as it may, the fact is that this is now being done in relation to one of the three nationalised energy industries. So we are going to have the gas industry which will benefit, according to the Secretary of State for Energy, from the fact that it will no longer have government breathing down its neck, but we shall still be left with the electricity industry and the coal industry in that sorry situation. I think that the electricity industry was entirely justified in raising major fears arising from this situation in the evidence which it gave to the Select Committee on Energy in another place. So I think we are entitled to know how it is that the Government reconcile this new and freer status for gas, but retaining the present thralldom involving continued government intervention for electricity and for coal.
The problem in energy goes wider than that, because all sorts of other issues can arise. For example, under the new regime would the gas industry as a private concern be free to reopen negotiations for the purchase

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of the Sleipner gas on which the Government intervened—possibly rightly, in the light of subsequent events—to frustrate? If the newly privatised gas corporation wished to renew this endeavour, what would the Government's position then be?
Furthermore, the Government have deprived the industry of its activities so far as oil exploration and production in the North Sea are concerned, and a separate company was formed and privatised. Would it be possible for the new privately owned gas industry to go back into the market, bearing in mind that it has behind it one of the strongest cash generating operations in the whole country and that it could obviously outbid and defeat anybody in that endeavour? Would it be free to move heavily into gas operations in other parts of the world? Would it be free to move downstream into the manufacture of appliances and equipment, which so far it has not done?
We need to know the answers to these questions, because this step could fundamentally change the nature of this operation. I am not saying whether for good or ill, but it could change it and we need to know before this fundamental step is taken whether this degree of commercial freedom would be available to the new private gas enterprise.
On more specific matters, the question of pricing was raised by the noble Lord, Lord Stoddart. I must say that while the principles of the tariff price formula are easy enough to appreciate, the way in which it is set out in the authorisation is not of such a nature as to make it comprehensible to the average domestic purchaser of gas. The trouble is that nobody really knows how the operation of this formula will work out in practice. What will happen, clearly, is that the formula will be applied year after year, that the gas tariff user who is very largely a captive customer—people do not change their installation because they do not like the price of the gas or the electricity that they are using—will have to put up with the vagaries of this new system.
Perhaps I may refer back to the document on the United States. The matter of price changes is a subject for major public debate. The regulatory body acts in a way as a sort of adjudicator. Every time the operators wish to increase their prices they have to put their case publicly. It is then debated by all interested parties who wish to do so and the decision is reached as to what might be done. What I am concerned about is that no provision appears to be made for consultation before price changes are made in accordance with this formula. Under existing arrangements, as I understand it, the British Gas Corporation notifies the National Gas Consumers Council of proposals to change the tariff but under the new arrangements this will be entirely automatic.
I am a little unclear as to what will happen in 1992. Is that the year in which this whole system is intended to be reviewed, or is it merely a year in which it could be stopped? My opinion is that if the Government still wish to go ahead with this tariff structure there ought to be provision at a fairly early date after it is brought into operation—after, say, two or three years—for it to be thoroughly reviewed in order to see how this entirely novel approach to pricing tariff gas operates in
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practice. I hope that in replying the noble Lord the Minister will take account of this proposal.
The next point, which caused a good deal of debate in another place and I am sure will cause debate here, concerns energy conservation and efficiency. I must say that in reading the reports of the debates in another place I was extremely surprised at the Government's rejection of the reasonable amendment put forward by the chairman of the Select Committee on Energy. The Government, after all, are keenly committed to energy efficiency. The Secretary of State for Energy has done a remarkable job and has often been praised in this House and in the other place for the work that he is doing to promote energy efficiency. As the noble Lord, Lord Gray, said, there is indeed a reference to this in the Bill as drafted, but the additional and more pointed reference that was proposed in the amendment in another place surely would have reinforced the whole endeavour.
It was stated in that debate by the Government that they could not accept this because it would put a liability on gas which did not fall on either electricity or coal. But by the Government's own admission they keep breathing down the necks of the electricity and coal industries and so, presumably, they could impose on them exactly the same condition if that was the problem—not indeed, I hasten to say, that there is any need to impose such conditions on these industries. They are all vigorously pursuing this endeavour. What is puzzling is the Government's reluctance to agree that this should be included in the way already proposed—and I hope that we shall propose again in this House—in the Bill.
Another point which is bound to be raised during our further deliberations on this Bill is the question of safety. As the noble Baroness, Lady Macleod, will be dealing with this later on, I shall be limited in my comments except to say that concern has already been expressed about the extent to which the Health and Safety Executive will be in a position to carry out a proper monitoring of the increased safety regulations that are being introduced. It is the executive which will have to carry out this monitoring.
Finally, I should like to touch on the National Gas Consumers Council which has existed very effectively over many years. There has been a national organisation, and there have been regional organisations which have enabled people in localities to go to their own consumer representatives. This is no longer to be the case. Is that right? Should we not be continuing this grass roots connection with the consumer body? It would be interesting to hear the Government's views on why this is being changed.
Those are some of the points in this important proposed legislation to which I feel we shall be coming back at later stages in our deliberations. What we have to try to achieve is a system for the future running of the gas industry which would give reasonable freedom and encouragement to the management and those working in it to perform their task efficiently, as indeed they have done in the past, and, at the same time, give adequate assurances to the consumers and to the public in general that their interests will be safeguarded. There are, I am afraid, many of us who feel that the balance between those two objectives in the Bill is not adequate.
4.56 p. m.
Lord Boyd-Carpenter: My Lords, my noble friend Lord Gray of Contin and the noble Lord, Lord Ezra, both said (and rightly) that this is a Bill of very great importance. I would add also that it is an historic measure for it is the first proposal—and it may be far from the last—to reverse the drive into public ownership which marked the policy of the Labour Government in 1945 and the years following the war.
Gas is one of the three major industries that were nationalised during that Parliament as a matter of deliberate general policy with a view of shifting the structure of our economy very substantially from the private sector into the public sector. I follow this Bill with a certain personal nostalgia because I am one of the few Members of your Lordships' House (though I shall refer in a moment to another) who not only served in the House of Commons at the time of the gas nationalisation measure was going through but had the quite traumatic experience of serving on the standing committee which had to deal with the Bill. It did so against the background of a possibly incipient general election, with the Opposition therefore obviously concerned (shall I say?) to have full discussion of the measure and the Government equally naturally concerned to get it through as quickly as possible.
Some of your Lordships may recall that as a result of that clash of effort the standing committee dealing with a large part of the Bill sat continuously for two days and two nights with the exception only of the hours between 1 p.m. and 4 p.m. when under the rules it was forbidden. The fact that the Bill went through and became an Act is a direct result of what was done by one of your Lordships. The noble Lord, Lord Diamond, was chairman of that standing committee, and under the rules at that time there was no provision whatever for the relief of the chairman of a standing committee. If he left the chair, proceedings would stop. It was a most remarkable performance of stamina and also of good manners and care which enabled the noble Lord, Lord Diamond, to endure that ordeal, with the unhappy result, from our point of view, that the Bill went through. I am delighted to see the noble Lord in his place. I have always greatly admired him since that day, and I know only too well from that experience what a formidable figure he can be, whether in the impartiality of the Chair or in the more partial exercises of debate.
I hope that your Lordships will forgive me for that personal reminiscence, but it is rather an experience for me to see that the wheel has now come around and that the measure then to nationalise the gas industry is now to be repealed, and to see the industry—and I take the point of the noble Lord, Lord Stoddart, that it was not at that time wholly private—in large measure returned to the private sector.
The noble Lord, Lord Stoddart of Swindon, enjoyed himself, as did the House, with his speech. If he will allow me to say so, it was rather a period speech. It was of the period of the nationalisation Act, when it was assumed so happily that with public ownership all would be well. Indeed, the noble Lord himself used the expression that nationalising an industry meant that it was held in trust for the public.
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Experience has shown that, on the contrary, what belongs to all belongs to no one. Indeed, the great Morrisonian dream of nationalisation has turned out to be—to use the language of moderation to which I am always addicted—a disappointment. It is therefore always gratifying for some of us to see that the wheel has come around and that we are to reverse that mistake.
The noble Lord, Lord Stoddart, seemed to think that those of us who favour the change were arguing that the industry is at present inefficient. I make no such argument. I must confess that at the lowest levels—at the level of the fitter who comes, or does not come, when one's gas apparatus goes out of action—the gas industry's efficiency can be criticised. At that level, there is not perhaps quite the same approach to the customer as that which one would expect to find in the private sector. I would not go beyond that, and certainly I would not seek to argue that, at the higher levels at any rate, the industry is in general other than reasonably efficient.
However, that does not, as the noble Lord seemed to think, conclude the matter. However good one is, and I am sure your Lordships will agree with this, one can always be better. In particular, one can be better if the conditions are made easier to do one's work.
It seems that if one takes an industry out of the public sector and out of the inhibitions that government control imposes upon it, one makes it easier for those in charge of that industry to operate even more efficiently. It has been said on several occasions, from both sides of the House, that government interference has forced the gas boards to put up their prices when they did not want to do so. It is certainly the case that when they required more capital they have had to get in the queue for the public investment programme. Neither of those will be the case when the industry has been privatised.
Therefore, those responsible for the industry—and no one knows this better than the noble Lord, Lord Ezra—will realise how much that greater freedom will help them in taking the decisions that are right for the industry at the time when it is right to take them.
Lord Stoddart of Swindon: My Lords, I was interested to hear the noble Lord say that the industry has had to queue to get money from the public investment programme. He will be aware that not only is the gas industry self-financing in respect of capital expenditure but also that it has been lending money to the Government.
Lord Boyd-Carpenter: My Lords, I am perfectly well aware of the financial position at the moment, particularly resulting from exactly what I was saying a moment or two ago about the governments of the day insisting upon increases in gas prices for the very purpose of making the industry self-financing, and thereby relieving demands on the public investment programme. I am greatly indebted to the noble Lord, Lord Stoddart, for giving me the opportunity to explain that point. It is freedom from being forced to put up one's prices because one is not allowed to go to the market for new capital. That is one of the great advantages that I see in the privatisation of the industry; the freeing of the industry from the trammels of government control.

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There is also the important question of morale. Those of us who have served, as I have, in both the public and private sector can inevitably sense a difference in atmosphere. It is a difference not deriving from the higher moral or intellectual qualities of the people concerned but from the system. If one works in a publicly-owned industry—whether as the chairman or managing director, at the coal face, in the gas works or wherever else it may be—one knows that whatever happens the industry is not going to close down and leave one without a job. If one works in the private sector, one has no such assurance.
In the private sector, one knows that if one's conduct—whether as chairman or managing director, as a striker in an important works or as an individual who is going slow—undermines the working of that company, when such action goes beyond a certain point that company will go bust and one will be out of a job. It is a great stimulus to people at all levels to know that their living, their pay and their pension, maybe, are dependent upon the success of the enterprise for which they work.
Lord Ezra: My Lords—
Lord Boyd-Carpenter: My Lords, if the noble Lord will allow me to continue for a moment, I may add that in the private sector such is only too apparent. I give way to the noble Lord.
Lord Ezra: My Lords, will the noble Lord kindly indicate whether what he said was the spur to success in the private sector would apply to a private monopoly of the size of the British Gas Corporation?
Lord Boyd-Carpenter: My Lords, I believe that it must apply throughout the private sector, whether or not it be a monopoly. I was going to come to the matter of the monopoly in a moment, but the straight answer to the noble Lord's question is that my observation applies to both. The knowledge, even if one has a monopoly, that one can bust the show by being inefficient, by striking or by taking wrong decisions at the board table is a stimulus in both cases. It may be a somewhat smaller stimulus where one has something of a monopoly; I give the noble Lord that point.
As the noble Lord, Lord Ezra, has led me to the subject of the monopoly, I shall now deal with it. It is something of a mistake—and this is relevant to the noble Lord's intervention—to describe the gas industry as a monopoly. It is not. If it is too bad in its performance then there is the electricity industry competing. And if gas prices rise and the industry's service to the consumer is too bad, more and more customers will shift from one to the other. The gas industry is at the disadvantage that, whereas the electricity industry is present throughout the country, the gas industry does not serve a great many rural areas, as the noble Lord knows. So in this particular case, the stimulus is there.
I am not asking your Lordships to take that argument from me; I ask your Lordships to judge from experience. We have seen privatisation going ahead vigorously over the past year or two. We have seen some results of it. Jaguar was privatised, and since
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privatisation its profits have risen 80 per cent. Your Lordships will also recall Amersham International, whose profits have increased tenfold since privatisation. In the case of Associated British Ports, the company chairman made a very pertinent comment. He said that privatisation has meant quicker decision-making and freedom to use the company's assets in a more efficient and imaginative way. If your Lordships would like one final example, there is the National Freight Consortium which was denationalised in 1982 and by the end of 1984 its profits had risen by no less than 293 per cent.
Therefore, in taking the gas industry in the same direction and over the same route we are not going into untried and unknown country. We are taking a course which has already been taken in the case of some very substantial enterprises. We can see how British Telecom is rising to the challenge. It is a course which has been successful. Noble Lords may explain it as they like, but it is a fact. If one is advocating a change which has worked in the case of other people and worked well, surely that at least creates a presumption that there is something to be said for it in the present case. I believe that the change which this Bill will bring about—and I do not underrate its magnitude—is a very considerable one.
I quite appreciate that the quasi-monopoly or the semi-monopoly aspects to which the noble Lord, Lord Ezra, referred a minute or two ago complicate the matter in some way, and in the interests of the consumer and of the public it is necessary to have some measure of control. No doubt your Lordships in Committee will wish to discuss the details of the control and its effectiveness but at the moment, during the Second Reading of this Bill, we are concerned only with the principle. I think there is no difference between us as to the value of having some system of control and regulation in the public interest, and whether the Bill has it exactly right is a matter for debate in Committee.
At this point I should like to take up the observation of the noble Lord, Lord Stoddart of Swindon, about foreign investment. I find intensely depressing the attitude of the Labour Party generally to foreign investment in British industry. I welcome the maximum possible foreign investment in British industry. The Labour Party is inconsistent. At one time it puts forward a programme to stop British investors from investing abroad, and indeed orders them under penalty to withdraw from investments, in order to invest at home for the perfectly respectable purpose of producing investment which would create employment. It is surely inconsistent to do that in respect of British investment and then indulge in the xenophobic attitudes which we have heard this afternoon from the noble Lord, Lord Stoddart of Swindon, and seen elsewhere, such as in the British Leyland connection and many others. Surely one should welcome the idea that foreign investors think that it is well worth investing in British industry. This should be an encouragement to us.
The supply of a large amount of foreign capital to British industry should appeal to all those—and I hope that includes all of us here—who are desperately anxious to see employment increase in this country. I hope that the noble Lord, Lord Stoddart, will allow me

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to say that I find his attitude toward foreign investment in this case immensely depressing, because I know that it is not only his personal view but it appears to be that of his associates in the Labour Party.
I think that we all want to wish the great gas industry and all those who work in it good fortune in its new shape when this Bill is law. I believe that the members of this industry will receive an uplift in their morale, that those who guide it will appreciate the gain from the greater freedom of operation and that those who work in it will grasp happily the opportunity to become shareholders in the company.
There is all the difference in the world psychologically in being a theoretical shareholder as a British citizen in a publicly-owned affair and being an actual shareholder in a specific company that pays one dividends out of its profits. We have seen in other directions how employee share ownership has done so much good. Until recently I was chairman of a company where over 90 per cent. of the workers became employee shareholders, and the good effect upon the morale of that company was impressive and encouraging to see. We want to see this same approach brought into what is now a part of the public sector. This is a good step.
Finally, taking up one remark of the noble Lord, Lord Ezra, when he said that it would be odd to have gas in private ownership and electricity in public ownership, I say to the noble Lord that there is another solution to that problem. I am sure he will not mind my saying that it is unlikely that anybody would wish to invest money in a denationalised coal industry, but an electricity company might be a very attractive measure to take at some future time. If that step is taken, it disposes of the noble Lord's difficulty. I am always anxious to relieve the noble Lord of any of his difficulties. I have seen him cope with so many difficulties that if one can relieve him of even an iota of this one, one sits down happily satisfied.
5.16 p.m.
Lord Kirkhill: My Lords, I rise this afternoon, following debate in the other place, to make my contribution to this Second Reading discussion on a Gas Bill which I believe we must regard as imperfect. Whether or not one applauds the view of the other place that the industry should indeed be privatised—and it goes without saying as I speak from this side of the House that I do not, and indeed I associate myself entirely with the formidable remarks made in the earlier stages of the debate by my noble friend Lord Stodart of Leaston—by my noble friend Lord Stoddart of Swindon (I made the mistake because Lord Stodart of Leaston is a fellow-Scot)—nevertheless we must take a realistic view of the fact that industry is about to be privatised.
It is clear that following upon privatisation the British Gas Corporation will remain a major utility whose functioning will be a legitimate subject of public interest both in relation to private domestic customers and to business and industrial customers. I hope that your Lordships as usual will be far-sighted in ensuring that the legislation will be carefully examined when we come to the Committee stage.
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I believe that we must take trouble to foresee possible problems which may arise. For example, there are the views of the Scottish Council, Development and Industry which have been drawn to my attention, and such concern as it expresses is the more compelling in that it emanates from a national Scottish organisation which is clearly non-political and, if not wholly, at least partially, bi-partisan in approach. Of course, this Bill is applicable to the United Kingdom as a whole but it has a Scottish dimension to which in due course I wish to draw attention.
There are three aspects of this Bill to which your Lordships might give a few minutes of your time this afternoon. There are, first, the centralisation tendencies which might be inherent in the reorganisation of the corporation after privatisation; second, the position of small businesses and the protection against potential monopoly power of the reformed gas corporation; and, thirdly, the subject of the supply infrastructure, the network pipelines and distribution facilities. Clearly, there is a danger in the Bill as it stands that remoter areas may be marginalised in respect of new developments.
As to centralisation, the gas industry in Scotland is a not inconsiderable industry in its own right. It accounts, including contractors, for approximately 8,000 jobs. It has 1 million domestic customers, 6,000 industrial customers and 36,000 commercial customers. It invested in its last accounting year £20 million and paid out £57 million in wages and salaries. It is on a rising trend in its share of fuels used in Scotland. It is a measure of my absolute honesty in making that last remark that I was at one time, as some of your Lordships may recall, chairman of the North of Scotland Hydro-Electric Board.
This not inconsiderable industry has to have regard for the management of resources in Scotland. It is already the case that personnel management, investment in the distribution system and marketing to customers are devolved to management in Scotland. Not only does this make sense from a regional development point of view—having, that is, as many decision-making powers as possible in Scotland—but it also makes sense from a commercial point of view. While it is desirable to have these functions in Scotland, it is also desirable to have these functions as close as possible to present and future customers. It is therefore in the best interests of the development of the industry that it should continue to have a devolved management style—at least that which exists, and preferably more.
Although, in his introduction, the Minister of State, the noble Lord, Lord Gray of Contin, seemed satisfied that it may be the intention of the present Secretary of State for Energy and of the current management of the British Gas Corporation to continue, or even to develop, management autonomy in the regions of the United Kingdom, the Bill is curiously quiet on the subject. To ensure that this view is perpetuated through additional years, future governments, future owners and new generations of managers, an additional clause is required in the Bill.
This should have the effect that the successor company to the present British Gas Corporation has

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functions of management dispersed to its existing operating regions and that these independent functions should be further developed. To this end, I commend the idea that for each of the regions of England and Wales, and for Scotland, there should be a least one non-executive director to the board of directors of the successor company written into the memorandum of association of the new company.
The second area of concern to which I draw your Lordships' attention is the position of non-tariff customers. An arbitrary line is drawn in the legislation to the effect that those organisations consuming more than 25,000 therms per annum of gas should be placed in a different category to those under that figure. Customers of the British Gas Corporation under 25,000 therms per annum are predominantly in the domestic sector. There are also some very small businesses. But the 25,000-therm threshold above which this Bill presently offers no protection from abuse of monopoly power is a very low level in relation to many gas users.
As a guide to the order of magnitude involved, a building employing about 100 people solely for space heating purposes is liable to use 25,000 therms per annum or more. This is a point to which the Minister, I believe, must give serious attention. Clearly, relatively small businesses are being placed outwith legislative protection against monopoly power. Of course, below the threshold of 25,000 therms per annum, the Bill gives regulation. That gives price control. Above that limit, it does not.
Very large gas customers may have the muscle in fuel markets to protect themselves by threatening to switch to other fuels. But this is unlikely to be the case for many, if not most, of those above the 25,000 therms per annum level. It is the exception rather than the rule that companies will have invested in their heating process or even their production processes in such a way that they can switch between fuel at no cost. Deciding not to use gas will in almost all cases involve a cost. It will involve investment costs in new equipment. This places the smallest companies open to abuse of the monopoly power of the new privatised company.
In the other place, the Select Committee on Energy has already considered this point. In my view, the Bill has failed adequately to respond to its arguments. Much play has been made of the so-called Portillo amendment. This was an amendment to Clause 4 of the Bill which ensures that the Director General of Gas Supply should have a supervisory role in respect of third party use of the gas corporation's pipeline system. However, this access to the pipeline system has already existed for some time. The Oil and Gas (Enterprise) Act has given access to independent gas producers for supply of large industrial users using the transmission system of the existing British Gas Corporation, To date, the facility has not been used. Therefore, it must surely remain an academic and open question whether such access is in effect a real restraint on monopoly supply conditions. Even if it is, it is likely to apply only at the highest level of fuel consumption.
When we come to the Committee stage of the Bill, I hope that your Lordships will make amendments to
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the Bill in two areas affecting contract customers. I refer first to the right of supply. Contract users—those above the 25,000 therms per annum limit—should retain the right of supply. For those who are existing gas users, an obligation should be placed on the British Gas Corporation to continue to supply them under their existing contracts or for a further 12 months after vesting day, whichever is the longer. Without such an amendment, the right of supply enshrined in the Bill for domestic and very small industrial users will be excluded from the broad mass of business customers. To give an indication of the importance of this, average industrial consumption in Scotland in 1984–85 was only 50,000 therms. The average commercial consumption was only 5,000 therms. It is clear from these figures, and the figures that I mentioned earlier about the spread and the numbers of customers, that, assuming any reasonable distribution of usage, thousands of companies must be involved. We must certainly try to ensure that at least for a period of 12 months these people should have access to gas supply.
The third area of concern that I would commend to your Lordships' attention is that of the supply infrastructure; that is, the further development of the pipeline network. Like the other major utilities—electricity, telephones and water—the gas industry should have obligation of supply. To be realistic, this should not be a supply up every ben and down every glen but a supply that may reasonably be expected to be economic. As it stands the Bill is very careful to ensure that the existing pipeline network remains. But it is decidedly unclear about new pipeline development.
The words in the Bill,
"wherever it is economical to do so",
are clearly inadequate. New distribution of population and new distribution of industry from time to time will have an important bearing on the development of the infrastructure generally. Gas is a part of that. There is a fear in outlying areas that the obligation to expand the network to new customers will not be strong enough. Even in more populated areas developers of residential or industrial property need a clear indication of whether gas supplies will be available. To prevent currently less populated areas being marginalised by this legislation, assurances are needed on the pipeline development.
I commend to your Lordships that the Director General of Gas Supply should have powers to supervise a stated formula. This formula should be the basis of judging whether it is economic to provide a new pipeline. I believe that this is something to which we must give most serious consideration at Committee stage.
In conclusion, some of these views might be interpreted—I am sure that they are—as special pleading for the Scottish interest. I do not pretend that this is not the case, but the only point that is peculiar to Scotland in the Bill is that Scotland may represent one of the fastest growing areas in the United Kingdom for further expansion of the gas industry. I should like to see that happen. However, in seeking the Scottish interest on centralisation, on protection of its non-tariff customers and on a further development of the supplies infrastructure, I am also talking about the

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regional development interest which must be true for most parts of the United Kingdom.
Throughout the private sector and the public sector we have seen the development of the centripetal forces this century which tend to draw power, decision-making, employment opportunity and further development, as some of the best brains in the country get sucked into this, the South East of England. We should have regard to this phenomenon in framing legislation for the gas industry as it passes from the state to the private sector.
It cannot be taken for granted that the private sector is less centralised than the public sector. Examples abound of conglomerate companies headquartered in the South East of England, whose decision-making functions are at the periphery and where at the periphery, they are constricted to a most limited range of production decisions.
It cannot be healthy for the development of Scotland and other regions of the United Kingdom that this process continues. We cannot take it for granted that in the private sector the gas corporation will become less, rather than more, centralised. For this reason, in the interest of its present and future customers and because I oppose the main thrust of the Bill, I strongly commend to the House that we make amendment at Committee stage on these three important points to which I have just drawn attention.
5.34 p.m.
Lord Bruce-Cardyne: My Lords, I am sure that your Lordships will have listened with great interest to what the noble Lord, Lord Kirkhill, had to say about anxieties on over-centralisation and management under the Bill. I should like to have seen a rather more radical solution than that proposed in the Bill, with the British Gas Corporation broken up into its constituent regional parts. However, that is something on which I should like to speak in a moment.
I so much agree with what my noble friend Lord Boyd-Carpenter had to say about the intrinsic advantages of privatisation and the intrinsic burdens carried by businesses retained in the public sector. For my part I must say that the greatest advantage to stem from privatisation must be, or should be, the expansion of consumer choice. I listened with interest and agreement to what my noble friend Lord Boyd-Carpenter said about the reality of competition which the British Gas Corporation would face in the private sector—as indeed it does in the public sector—from competing sources of energy. That I entirely accept.
I must say that we seem to have undergone something of a sea change on the Government Benches in the scope which seems to have been contemplated in the past for competition within this industry. The noble Lord, Lord Stoddart, was unkind enough to quote from the Conservative Party's manifesto at the last election. As I recall, the noble Lord quoted what one might call a general undertaking. There was a more specific undertaking to the effect that the Government were committed to increasing competition specifically in the gas industry.
It must be said that that has not happened. I find it interesting to note that more recently we had a
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comment from one of my right honourable friends, the Financial Secretary to the Treasury, who said:
"Although it is clear that privatisation can bring substantial benefits to both employees and the companies concerned, the main prize, if competition can be increased, is for the consumer … The key here is to ensure that greater competition goes hand in hand with returning industries to the private sector".
In this case I think it has to be said that that key has largely been thrown away. I would be the last to suggest that manifesto commitments are some form of holy writ. That has always seemed to me to be an absurd doctrine. But I am bound to say that I think we are entitled to some explanation or at any rate a clearer explanation than we have had hitherto of precisely what happened to our intentions as regards the introduction of greater competition into this industry.
I have studied with great interest the comments of my right honourable friend the Secretary of State for Energy, who has alleged on various occasions that there was never competition in pipelines to the front door. I believe that he is wrong about that but admittedly one would have to go back a very long way before one found it. However, that is not what we were talking about. I imagine that we were talking about the possibility of a flotation of the British Gas Corporation in its component regional parts on the lines of the flotation which is being carried through to law in the case of the National Bus Company. That is not the only pattern. Other patterns have been suggested. The noble Lord, Lord Ezra, suggested a pattern. What we are confronted with, beyond a peradventure of doubt, is the straightforward transfer of a fully fledged monopoly into the private sector.
I must recall another comment of my right honourable friend the Financial Secretary to the Treasury, when he said:
"It is a great mistake to believe that all the nationalised monopolies are in any sense natural monopolies.".
Activities such as electricity generation, the production and marketing of gas, etc., are in no sense natural monopolies. I suppose that, as Malvolio might have said, some have natural monopoly thrust upon them.
How are we to explain this transformation? I must admit that I cannot help feeling it might have something to do with the attitude of the present management of the British Gas Corporation. We have heard a lot about the possible behaviour of the British Gas Corporation once it moves into the private sector. Listening to this carefully I found it a little difficult to recognise the British Gas Corporation as we know and love it.
The attitude of Sir Denis Rooke has always seemed to me to be one of magisterial disapproval for the whole concept of competition and consumer choice. I am bound to say that there have been times during the transition of this legislation through another place—and even before it reached another place—when Sir Denis Rooke's attitude towards it has seemed to some of us a little too proprietorial by half. I noted that he told the Select Committee in another place that:
"The Government had so far satisfied the conditions set by the corporation",
for its privatisation. I must say that that was big of him.

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I confess that what worries me is perhaps to some extent the mirror image of some of the anxieties which have been expressed in other parts of your Lordships' House this afternoon. I do not think that the major hazard is that Sir Denis Rooke will be engaged in the maximisation of profits regardless of all other considerations. I should have thought that he had made it absolutely clear time and time again that, on the contrary, profit is about the last thing he is interested in or the last thing with which he will be remotely concerned once he has moved into the private sector. I believe that the anxieties are of a different nature. I think that Sir Denis Rooke's purpose will be to maximise market share for the corporation of which he is the ultimate master and grandee.
The noble Lord, Lord Ezra, asked a number of questions about what the British Gas Corporation would be allowed to do: whether it would be allowed to go back into the North Sea after oil, and into product manufacture in the UK market. As I understand it, the answer to these questions has already been given by Sir Denis Rooke: not only does he intend to do this but he will brook no interference in being able to do precisely that. Therefore, I share some of the anxieties to which the noble Lord, Lord Ezra, referred about the position, for example, of the electricity industry. We need to know what the position will be.
I hope that the noble Lord, Lord Ezra, will forgive me for saying so, but at present the electricity industry is bound hand and foot to the National Coal Board. It is obliged to take supplies from the National Coal Board and, let us face it, it is pretty well obliged to take them at the price which the National Coal Board dictates. These are conditions which the Government lay down and which they require.
Once Sir Denis Rooke and his corporation have gone back into the private sector, what will stop him marching into and taking a market share from the electricity industry precisely because the electricity industry is hamstrung by its commitments to its major supplier of resources, the Coal Board? This is not a matter which Ofgas can be expected to handle. We cannot expect Ofgas to say to Sir Denis Rooke "Oi, you are cheating, you are taking market share from the poor old CEGB, not because you are indulging in what in any genuine sense could be regarded as predatory pricing but because the CEGB is obliged to take its supplies of raw material at a vastly inflated price from the National Coal Board and the Government say it must". We cannot expect Ofgas to deal with the rights and wrongs of that sort of competition.
I share some of the anxieties that have been expressed about the nature of the regulatory authority which, under this legislation, is being given to Ofgas. However, I must tell your Lordships that sometimes it seems that in any case the regulator of a monopoly industry which is moved into the private sector is faced with an impossible conflict of interests. I submit that we have already seen this in the case of British Telecom.
As we all know, British Telecom wished to switch a substantial proportion of its supplies of System X machinery from its UK suppliers to a Swedish
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supplier, and the UK suppliers were up in arms about it. Eventually Oftel said that they could take a bit from Sweden but not too much. By definition, in the private sector British Telecom has a proper obligation to its shareholders to acquire its equipment in the best market and at the best price it can obtain, but as the lone customer for producers of System X machinery in this country if it was to take its custom eleswhere, they would be left without a customer.
Therefore, there is an impossible conflict of interests there. That stems from the nature of the monopoly, and I believe that we are kidding ourselves if we really think that regulation will be a satisfactory substitute for the forces of genuine competition and competition in relation to consumer choice. Sadly, I believe, that that is the opportunity that we have thrown away in this legislation.
There is one area where at least the degree of choice could be enhanced, and that is over the matter of exports and imports. To my mind it has always been absolutely crucial that producers of North Sea gas should have given to them for the first time freedom to export their product, because otherwise it is impossible to judge whether Sir Denis Rooke is exploiting his monopsony position to the detriment of future North Sea supplies.
Therefore, I listened with great care to what my noble friend said on this subject in introducing the Bill this afternoon. My noble friend who will reply to the debate will correct me if I misheard him, but my understanding was that he said that British Gas will be able to import gas, and that gas producers wishing to export will be able to apply for waivers. Well, well, that is rather a different proposition.
What is to be the role of Sir Denis Rooke in the adjudication on whether or not waivers are to be allowed? From Sir Denis Rooke's attitude hitherto one has a suspicion that, to put it mildly, he would regard any such waivers as a diabolical liberty. Therefore, once again we are not seeing anything approaching the concept or the possibility of genuine consumer choice at either end of the scale.
Finally, I want to refer briefly to the prospect, which hopefully this Bill holds out, of a vast enhancement of small shareholders. Like other noble friends, I believe passionately in the virtues of a shareholding democracy, and I totally reject the narrow-minded attitude of the noble Lord, Lord Stoddart, and his strictures on the success of the British Telecom flotation in this respect. I think that we have good reason to hope that at least the flip side of the disadvantages of transferring British Gas into the private sector as an effective monopoly would be to enhance its appeal to private individual shareholders on a very large scale.
However, it has to be said that the climate has changed, and one is bound to wonder, what sort of demand there could be, or indeed should be, come this autumn, from the widows and orphans for such a flotation as this in the present environment of the energy market. Above all, we should bear in mind the point, to which I have already referred, that time and time again the chairman of the corporation, Sir Denis Rooke, has made it clear that profitability is the very last thing to which he will be minded to have an eye when he inherits his kingdom. Against that

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background I think that the widows and orphans are bound to take a second look before they plunge into this particular venture.
Therefore, I welcome the prospect of the departure of another great institution from the dead hand of the public sector, but I am bound to say that the way in which it is being carried out on this occasion has thrown away an opportunity which we may have cause to regret.
5.50 p.m.
Baroness Burton of Coventry: My Lords, on my files at home I have a most excellent article by the noble Lord, Lord Bruce-Gardyne, written relatively recently for the Sunday Telegraph. Having listened to the noble Lord today, I am quite sure that the House will accept my word that the article was witty, very humourous and well-informed, and it also gave me some comfort. It gave me comfort because in the past my knowledge of the noble Lord was as a financial pundit; I thought that he knew everything about financial affairs, an area in which I am very deficient. Having read what the noble Lord had to say on various financial aspects of this Bill, I took comfort, because I thought that, after all, perhaps there was a place for the layman's opinions on these erudite matters.
If I could come to my noble friend Lord Ezra and his most excellent speech, I only want, if I may, to take three points out of it. I was glad that he referred to the position of the regulatory authorities in the United States of America, because a great deal was made of this in another place in Committee stages and in the report of the Select Committee on Energy. I hope, after all, that—as indeed my noble friend Lord Ezra did—we shall look more at the achievements in that direction, because they are even more highly regulated than we would hope to be and it seems to have brought great benefits without stifling the expansion of the industry.
Secondly, my noble friend spoke of the electricity industry and its fears if suggested privatisation of its industry should be along the lines of what we are discussing today for the gas industry. I have had considerable contact with the consumers of the electricity industry who are indeed most fearful of what may arise in the future. Lastly, in his speech my noble friend referred to captive customers and gas charges, and said that they had no idea how these would work out. I want to come to those points later in what I have to say.
I share the indignation of the noble Lord, Lord Stoddart, on this matter. I tried, as I am sure have other Members of the House, to read all I could about this Bill, about what took place in another House at the Committee and Report stages and all the press and media had to say, and there was a great deal. Out of all that I have not been able to discover one single good reason for privatisation of the gas industry. I say that not as one necessarily opposed to privatisation as such, but as one wholly opposed to the transition of a public monopoly into a private one.
A Second Reading debate in our House gives one the opportunity to state fundamental worries and objections, and details can be left to Committee.
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Today I would hope, in partnership with my noble friend Lord Ezra, to try to reflect what these Benches feel on this matter. But I want to say something now which is purely from me and which does not reflect, creditably or otherwise, on my noble friends. I am not in favour of setting up two bodies. I believe that the establishment of a gas consumers council was a mistake. My fear is that it will have no real power and that it tends to emphasise the old contention that consumers only want to complain. In other words, I believe that to separate the Director General of Gas Supply (Ofgas) from consumers was an error of judgment.
Perhaps I had better say here that I have much respect and admiration for the National Gas Consumers Council, for the work it has done and for the enthusiasm of all its members, local, regional and national, under the leadership of Sheila Black and John Hosker. I have known Miss Sheila Black for more than 20 years, and I was delighted to see that she has been named as chairman designate of the gas consumers council. I am quite sure that she will do all in her power to see that that council is effective, and I should like to say that I shall do all in my power to help her.
I hope that nobody will doubt my pedigree on consumer affairs, so am I the only one in feeling like this? Speaking generally, I think the answer is, no. Speaking specifically, such a plan or proposition would not have been acceptable to the Secretary of State, to Sir Denis Rooke or to the City. Why not, my Lords?—because it would have meant a stronger regulatory body, and a strong regulator was not relished by Sir Denis, and therefore not by the Secretary of State, who saw problems enough ahead without that further obstacle. Certainly it was felt that strong regulation would not encourage financial participation from the City.
The House has a perfect right to ask "What would you have done instead?" In our debate on 27th November I said that, concerning the privatisation of British Gas, it seemed to me that some regulatory body must be set up and that, furthermore, this must be independent both of the gas industry and of the Government. It should be accountable both to the public and to Parliament. Obviously it must have the power to monitor what is going on in the industry, to make such information public and, above all, to be seen to take action on behalf of the consumer.
On the 27th November we were discussing a Motion dealing with nationalised industries which became private monopolies. The Motion did not refer solely to the gas industry, and indeed did not refer to any particular industry. But having spoken of the necessity for establishing a regulatory body to deal with the privatisation of British Gas, I wondered whether we should have one such body for the gas industry only or one general body to regulate public utilities in the United Kingdom. My mind moved towards that procedure but, at the same time, the privatisation of British Gas could not be proceeded with without (and I would repeat the word "without") a regulatory body, whatever subsequently might grow from it.
Personally I should like to see the establishment of a strong, tough regulatory body that would adequately protect the consumer as regards prices and the terms

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and conditions of supply. That, in my opinion, would have been much better than the establishment of two bodies under the Bill; namely, Ofgas and a gas consumer council. As I want to make clear, this is a personal point of view only, but perhaps it may be worthy of consideration in future privatisation policy.
I would not expect the noble Lord, Lord Belstead, even if he were so inclined, to comment on this in his winding-up speech, but I should be grateful if he could see whether it is possible for further thought to be given to this when future privatisation policies are under discussion, because I think that the field should be widened as much as possible and it might well be that this has some possible effect on future plans.
On 2nd July 1985, at col. 1044 of the Official Report, the noble Lord, Lord Gray of Contin, assured us, referring to gas, that,
"It is the Government's firm intention that the regulatory arrangements to be established will adequately protect the consumer as regards prices and the terms and conditions of supply".
It may be that I want the impossible. As I said a moment ago, I want a strong, tough regulatory body, but I want it composed of, or at least containing, strong, tough consumer-minded members, which is not at all the same thing as consumer representatives. However, I believe that such a solution could be a considerable factor leading to the adequate and proper consideration for all we ordinary customers in the world of monopoly and big business.
The regulator, or regulatory body, must have a wide enough brief to protect consumers from monopoly pricing, but at the same time this brief would have to be tightly drawn. There are many complaints that Professor Carsberg at Oftel is not doing all he could to protect the consumer. As the House knows, I feel strongly on how British Telecom has treated the ordinary domestic consumer, but, in all honesty, I suggest that it is the legislation that is at fault and not Professor Carsberg. We in Parliament have been warned. Time and time again in Standing Committee attention has been drawn to this point. That responsibility has now passed to our House. It must be seen by everyone that public accountability was removed from British Telecom, and the same is now happening to British Gas.
The truth is, I believe, as I said at the beginning, that there is no justification at all for privatising British Gas. As with British Telecom, privatisation is being used to strengthen a monopoly. I suggest that surely we have cause to worry when we see a government getting rid of a healthy industry (one which has paid dividends in the past and would certainly do so in the future) for the sake of a capital gain. After all, this industry is modern, efficient and profitable. Indeed, it is so profitable that it found its pricing policies distorted by Ministers' decisions to conceal tax increases in gas prices, as with water and electricity. We all remember the chiefs of the gas, water and electricity industries complaining that the Treasury was forcing them to raise their prices higher than was necessary, which had the same effect as raising taxes but with less political embarrassment.
At the beginning of my remarks I said that I was not necessarily opposed to privatisation as such. Why? It is always satisfactory to answer one's own questions,
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because I receive much better answers than I do from the Government, if the noble Lord, Lord Belstead, does not mind my saying so. Why did I say that? I did so because I thought that the original and primary purpose of privatisation was surely to bring greater efficiency to state enterprises so that all concerned—managers, workers and consumers—would feel they were getting a better deal. Indeed, Mr. Kenneth Baker said in another place on 5th February, when presenting government plans for selling the water industry to the private sector, that this privatisation would bring benefits to the customers, to the industry and to the nation in improved quality, more efficient service, greater commitment of the staff and more awareness of customer preference. Well, we shall see. But on gas the Government are now bringing privatisation as such into disrepute.
The noble Lord, Lord Belstead, must be aware that criticism from the Government's own supporters underlines this fear. During debates in another place those who in principle supported the transfer of British Gas to the private sector considered that the Bill panders unduly to the corporate interests of British Gas. As the House is aware, British Gas will not be required to disclose the monopoly profits which it makes from domestic consumers after privatisation. The licence also makes it clear that Ofgas will have no direct power to prevent British Gas from making a cross-subsidy between its domestic and industrial consumers.
The captive consumers for domestic gas will not yet have had the opportunity of studying the restraint, or otherwise, imposed upon charges to be decided by British Gas. Members of Parliament are completely confused. I think it may be more correct to say that they are completely foxed as to the exact meaning of the words used, which I suspect is what they are supposed to be. Without wishing to inflict algebraic formulae upon the House or upon the captive consumers of British Gas (that must include most of us) perhaps I had better say quite simply, quoting from the Daily Telegraph of 12th December:
"British Gas is to be required to keep its prices below the level of inflation by a percentage yet to be revealed, plus a percentage—yet to be revealed—for rising costs of raw materials".
Really, one can hardly believe it!
The Times leader on the same date, 12th December, said:
"The formula for controlling prices to tariff customers (residential consumers and the smallest business users) is therefore hopelessly complex and by that token less effective".
It is obvious to us all that the proposals we are discussing today provide British Gas with maximum monopoly power combined with minimum restraints on the use of that power.
Someone, the other day, asked me if I remembered that the Conservative election manifesto pledged that it would not,
"merely replace state monopolies by private ones as they would waste a historic opportunity to ensure they do not exploit their positions to the detriment of customers".
No, my Lords, I had not so remembered, but doubtless the Minister will correct me if my informant was wrong, and if I do not hear him say so I shall assume that my informant was correct.

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Aggrieved customers will not be able to appeal directly to the regulators, but will have to make complaints to the Consumer Council or to the Office of Fair Trading. Indeed, the fear expressed is that the proposed regulatory body will have rather too little to do. I consider, as I think is obvious from what I have tried to say, that the Government have their gas privatisation scheme wrong every step of the way. The House of Commons Select Committee on Energy, to mention one of its mildest criticisms, fears the creation of a powerful and ineffectually restrained monopoly. The Economist described Ofgas as a "regulatory dwarf". The Financial Times said:
"With British Gas ministers show every sign of getting the balance badly wrong, putting short-term political gain above the long-term interests of consumers. It is not too late for the proposals to be rethought".
That was on 2nd December. We are now at 10th April and I have not seen much evidence of rethinking.
Nobody could say that Opposition Members in the Commons Standing Committee have not tried to do just that. In fact, they tried so hard that discussion had to be guillotined with the result that we in your Lordships' House have received a Bill with many of the important issues not even considered by committee members. It was not only Opposition Members who tried. As we may quote directly only from a Minister in another place, may I remark in general terms on what was said by the chairman of the Commons Select Committee on Energy at Report stage? He doubted whether under a newly privatised British Gas the motive would be other than pure and simple profit.
In conclusion, I make three points: first, having said that I think the setting up of two bodies under this legislation is a mistake, I shall do all I can to make the gas consumers council effective. Secondly, I liked a comment made to me that it is not clear what customers gain from the sale of an asset they have already paid for; to which I would add that it is an efficiently-run asset at that. Lastly, my underlying fear is that the Bill transfers enormous powers from a public monopoly to a private monopoly with no real accountability. I believe that fear is shared by many, irrespective of party, and I hope that our House will endeavour to make the industry more accountable.
6.9 p.m.
Baroness Carnegy of Lour: My Lords, the noble Baroness is clearly not an enthusiast of the Bill, but she was not as virulent in her attack as the noble Lord, Lord Stoddart. I imagine one of the reasons for the noble Lord's virulence is perhaps the subject on which I want to touch—the social implications of the Bill.
The noble Lord, Lord Ezra, and my noble friend Lord Boyd-Carpenter have emphasised that this is an important measure on its own account and also that it is a major step in the Government's privatisation programme. It is in that context and the context of the whole privatisation programme that I want briefly to refer to the social effects that seem likely to emanate from this Bill—effects not just for millions of people who use gas or for many thousands who work in the industry but for all of us, every man and woman in this country, and how we see the way forward in our lives, how we see the way we are going to be living in years to come, the way we earn, the way we see our methods
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of saving. Although I am not sure from my own experience whether every customer considers that there is as little room for improvement in customer service by the gas industry as the noble Lord, Lord Stoddart, has indicated, the people who work in the industry certainly deserve the opportunities that this Bill affords.
A number of noble Lords who have spoken have copious personal experience of what it is like to try to run, or to be a politician with responsibilities in a department concerned with running, a cost-effective, high-quality enterprise within the public sector. Those who have this experience know well the effect of political pressures on management in general and on man management in particular; and that applies whether it is in a nationalised industry or in the health service, in the education service or wherever. If anyone has any doubts about the effect of such pressures. they have only to glance at the recent history of the coal industry or the education service.
In a sense, given the system, the problems, it seems to me, are not always the fault of politicians or of the people who work in a particular enterprise. They are simply built into the system itself. When a person works in the state sector, even if it is in an enterprise the public position of which is that it is as nearly as possible autonomous, he or she is constantly reminded that pay, conditions of service, the nature of the job and the continued existence of the job at all are not. as in private industry, a matter for workers, management and customers, but a matter for politicians. The worker in the state sector hears constant political discussion about how much he should be paid, whether his workplace is overmanned, whether the demand for his product is rising or falling, whether its price is right and so on.
It seems to me very understandable that the worker may feel pretty helpless about his own chance of influencing his own employer and his own business. He feels pretty helpless about influencing his job and living standards and freedom of manoeuvre. In fact, he feels very largely at the mercy of the whims of policiticians. That feeling among the workforce is one major difficulty for managers who are trying to manage well, and, added to that, there is the constant unpredictability of the context set for the business as a whole by politicians. This often makes such managers appear defensive when they appear before the public: and all this gives the general public the impression that not only those working in the public sector but all of us are far more at the mercy of events that we cannot control than is the case. I believe that that contributes more than anything else to the continuing sense of "them" and "us" and the blaming of "them" for what we cannot change, which still dogs our society.
This Bill does many things, and one of the most important things of all is that it will give those who work in the industry a chance to develop that industry free of Government interference, to compete with oil and with electricity, to buy and sell and to move into pastures new. It will also give those who work in the industry a chance to invest in it. Further, it will give to many hundreds and thousands of people—and they are not all, I believe, the widows and orphans who will be so easily put off as my noble friend Lord BruceGardyne suggests—a chance, if they so desire, to buy

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a few shares in gas as they have done in British Telecom and Britoil, to follow the fortunes of their shares, to read the reports and generally to take an interest in the success of that part of the economy.
I believe that the dislike of the noble Lord, Lord Stoddart, of this Bill is linked to the fact that he dislikes the new opportunities that are arising for people to become share-owners, to become popular capitalists. I would refer him to the remarks of his noble friend Lord Bruce of Donington yesterday, who said that the Government cannot stand aside from their duty to promote generally in the country policies that mean the greatest good for the greatest number; they have to take into account the interests of the nation as a whole. The noble Lord is nodding his head; he agrees that he said those things. He certainly did not then go on to suggest that the people as a whole will benefit most from privatisation. He and his noble friend do not believe that.
I believe that the vast majority of these people are coming to the conclusion that they like being involved in the system, being involved in owning some shares and having a say in the management, not only of their own firm but of the other firms which play such a great part in the economy. I believe it is a growing movement and is something that people increasingly are going to understand. I believe that it is very important for the future of this country, and for that reason, as well as for many other reasons, I support the principle of this Bill.
6.18 p.m.
Lord Sandys: My Lords, it is indeed an historic occasion this afternoon, as my noble friend Lord Boyd-Carpenter has said, to see once again a Gas Bill before your Lordships' House. As an amateur in this field, it has given me the opportunity to look back on your Lordships' discussions and indeed on discussions in Parliament over the past 150 years on Gas Bills; I understand that there have been nearly 2,000 of them altogether. That incorporates a very large number of Private Bills and Private Acts, quite apart from the major legislation before us this afternoon. Perhaps I may be allowed to congratulate my noble friend Lord Gray of Contin on his lucid and comprehensive introduction to this Bill—a shorter speech by far in 20 minutes than the speech which came from the lips of that great advocate Lord Jowitt on 22nd June 1948 when he took 46 minutes to introduce the nationalisation of gas on that occasion.
What interested me was the reason advanced by Lord Jowitt for that nationalisation. It was quite different from the reasons which I believe were in the background. Perhaps I may be allowed to quote a portion of the report of Sir Geoffrey Heyworth's committee of 1945 on the gas industry. The brief quotation is as follows:
"The existing structure is restrictive of future progress. In other words, the existing forms of organisation no longer suit the present-day conditions and are even less likely to meet the problems of the future".
That is an innocuous statement, if ever there was one. But what was the real reason for nationalisation? We are left in doubt by certain speeches, but it comes into your Lordships' debate later. It is suggested that
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the real reason behind nationalisation was the pressure being brought to bear on the then government by the National Union of Mineworkers that it was highly important that the gas industry and the coal industry should be seen in the same context. It is interesting, therefore, that Lord Jowitt shows that, because, no less than 20 years earlier, in 1928, the National Fuel and Power Committee recommended,
"a substantially greater measure of freedom".
There you have two directly opposed views: the nationalisation view of 1948 and the earlier one, with which I am sure many of your Lordships would agree today.
I turn from 1948 and the Bill to 10th December 1985 when my right honourable friend the Secretary of State for Energy introduced the Second Reading of this Bill in another place. He has set about this task of returning the gas industry to the private sector after a very careful study. It is most interesting to see in his opening remarks that he refers to a committee which he set up as long ago as 1983 to examine how gas industries operate on a world basis and consider and come to conclusions as to what solution is the right one. Far from the situation suggested by noble Lords opposite, that the Government have set about it in a totally doctrinaire manner, here is the Secretary of State considering on a very wide basis how gas is operated throughout the world and reaching his own conclusions before drafting the Bill and presenting it in another place.
I should like to take up one point mentioned by the noble Lord, Lord Stoddart, when he said, "There is nothing which will prevent showroom closures." This may be a relatively small issue but I believe that in the situation as a whole—and I am quite sure that the noble Baroness, Lady Burton, would agree with this—the gas showroom is a very important place. It has been suggested that the showrooms would close. We have no information on the precise intentions at the present time, but it was stated as long ago as 1980 by the Monopolies and Mergers Commission that the present situation as regards showrooms was against the public interest. I am quite certain that my noble friends and the Government as a whole have considered most carefully the position of showrooms, but it is clear from the Monopolies and Mergers Commission that the position at the present time is far from satisfactory.
My noble friend Lord Gray of Contin referred in his opening remarks to new oportunity for innovation and growth to put a new structure in place for many years to come. I also agree entirely with my noble friend Lord Boyd-Carpenter that this legislation will take decisions at a time which is right for industry. This is the core of so much of our thinking.
In closing my brief remarks perhaps I may quote the chairman of Cable and Wireless, because his report in 1983–84 put so much of the thrust of this particular aspect—that is, the timing of the decisions—on the necessity to get timings rapidly, at the right moment, before the industry. This is what he said:
"The outstanding results achieved by the group reflect to a large degree the increased vigour with which business objectives have been pursued since the company was privatised in November 1981."

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More recently, he also stressed the value of new management freedoms when he said:
"A striking example of this was our completion—in four days—of arrangements to acquire control of the Hong Kong Telephone Company … Reference back to the Treasury and other Government Departments would have made this impossible."
My Lords, need one say more on that issue?
6.25 p.m.
Lord Williams of Elvel: My Lords, perhaps I may start by declaring a small conflict of interest. I am chairman of a company called Barclay Exploration and Production plc, which is a small company exploring in the North Sea. It is a very minor company in the context of the company we are discussing, but I feel I have to put it before your Lordships as a possible conflict, partly because this company would hope to become a supplier in the future to whatever authority is set up under this new legislation and partly because, in view of the remarks of the noble Lord, Lord Ezra, I feel this company might easily be gobbled up by the British Gas Corporation once it is in a position to do so.
Having declared that conflict of interest—and I hope your Lordships will allow me to proceed—I still come back to the basic question of why the Government have introduced this legislation in the first place. A number of noble Lords have asked that particular question this afternoon. The noble Lord, Lord Boyd-Carpenter, took us back in history to 1948–1949, when he served under the strenuous chairmanship of the noble Lord, Lord Diamond, and said that at the time he was concerned about the legislation that was passing so quickly before an election. He then jumped forward 35 years and came up in 1986, saying he was glad to see that in some ways the frontiers of socialism were being rolled back. The noble Lord, Lord Boyd-Carpenter, might like to reflect that in those 35 years there were a number of Conservative Governments of which the noble Lord, Lord Boyd-Carpenter, was himself a very distinguished member, and that the policy of maintaining these monopolies in the public sector had the support of successive governments, both Labour and Conservative, for all those years.
Why is it suddenly at this point that we have a major programme of privatisation of what by any standards is a monopoly? There seem to be two reasons advanced. One, advanced by the noble Lord, Lord Boyd-Carpenter, the noble Baroness, Lady Carnegy, and the noble Lord, Lord Sandys, is that in some sense companies become more efficient or more active or more dynamic immediately after privatisation. I see the noble Lord, Lord Brabazon of Tara, nodding on the Government Front Bench because he will remember that we had this particular discussion last night in our debate.
I am sorry the noble Lord, Lord Boyd-Carpenter, was not in his place at that time because I did go to some lengths—and I hate quoting myself—to try to demonstrate that I had done considerable research into the performance of pre-privatised industries and post-privatised industries. If I may say so, I had no solid evidence that privatisation by itself brought any increased efficiency at all. This was the result of many days of research. I quoted the examples of Jaguar and
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Britoil. I also quoted the examples of British Telecom and British Airways. All these had increased their profit prior to privatisation and had increased their efficiency prior to privatisation.
I do not see that the position is different in the case of British Gas because I had the honour when I was chairman of the Price Commission of studying British Gas at very close quarters. I am bound to say that we started off with the idea that a nationalised industry such as this should be subject to the most vigorous procedures of investigation. We felt it was incumbent on us to apply the most specific methods, and I put in charge of that investigation no less than the deputy chairman of Unilever, who was a deputy chairman of the Price Commission at the time. His report was that the British Gas Corporation was an extremely efficient organisation, working well. Obviously there were some disadvantages and some defects—no organisation is perfect—but by comparison with private sector companies it stood up very well. The further efficiency argument does not seem to me to stand up.
Then there is the financial argument. The noble Lord, Lord Bruce-Gardyne, believes that the widows and orphans of Wigan may well walk away from this issue when it is made. This is a point that again came up in our discussion yesterday. This is an enormous operation and it is a question of whether the market at any future date will actually stand the weight of this issue without—and I come back to this—a massive sale to foreign investors. We on this side of the House are not opposed to foreign investors. If I may say so, it was the noble Lord's right honourable friend the Chancellor of the Exchequer, who imposed a 5 per cent. tax on American depository receipts, who appears to be opposed to foreign investors. We are not opposed to foreign investors. We are opposed to foreign control of these monopolies; and therein lies a very great difference. I think that was the point the noble Lord, Lord Stoddart of Swindon, was making.
May I come to three very specific points in the Bill, about which I must admit I am somewhat confused? A number of noble Lords have raised the question of regulation, and this is a proper issue on which your Lordships will be concentrating during the Committee stage. I listened carefully to what the noble Lord, Lord Gray of Contin, said on the question of regulation and how he took us through the Bill in a very elegant and, if I may say so, clear manner. But as a result of that I came out with an extremely confused view of what the system of regulation was going to amount to.
We appear to be having three, if not four, possible bodies or gentlemen who can intervene: the director, the Director General of Fair Trading, the gas consumers council and the Monopolies and Mergers Commission. All of them appear to be able to intervene at a different stage, in different circumstances and at different parts of the operations of the new privatised organisation. Not only that. but the Monopolies and Mergers Commission is specifically instructed under Clause 24, as I understand it—and no doubt the noble Lord, Lord Belstead, when he replies for the Government, will correct me if I am wrong—to disregard the criteria that the Monopolies and Mergers Commission is itself set under the Fair Trading Act 1973.

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Perhaps I may read out the first two of these for the benefit of the House:
"To have regard to the desirability of maintaining and promoting effective competition between persons supplying goods and services in the United Kingdom, and of promoting the interests of consumers, purchasers and other users of goods and services in the United Kingdom in respect of the prices charged for them in respect of their quality and the variety of the goods and services supplied".
Instead, as I understand it, the Monopolies and Mergers Commission is directed to Clause 4 of the Bill, which specifies the requirements on the director himself as follows:
"The Secretary of State and the Director shall each have a duty to exercise the functions assigned to him by this Part in the manner which he considers is best calculated—

(a) to secure that persons authorised by or under this Part to supply gas through pipes satisfy, so far as it is economical to do so, all reasonable demands for gas in Great Britain; and

(b) without prejudice to the generality of paragraph (a) above, to secure that such persons are able to finance the provision of gas supply services.".

The criteria of public interest between the Fair Trading Act and this new Bill are wholly different. I ask your Lordships to put yourselves in the position of the chairman of the Monopolies and Mergers Commission, asked by the director to study a particular problem and asked by the Director General of Fair Trading, on the other hand, to study another problem referred to him by the director general perhaps in the same industry. He is required to reply, so far as I can see, to two entirely different sets of criteria on what is in the public interest. I believe the noble Lord will wish to respond to that point when he replies for the Government.
The second problem I have relates to the question of wider share ownership, employee share ownership and employee control. I see that the Government appear to be in something of a dilemma. I think this is the origin of the British Telecom problem. If the Government wish to see employee ownership they will have a lot of support from this side of the House. We have no particular problem over employee ownership. But if the Government wish to see a proper return to the taxpayer for the asset the Government are selling then there may be a conflict between the two, because the proper way to secure the highest possible price for the Government for the sale of this asset may be in total contradiction to the price that is required to ensure that the employees can participate and indeed that wider share ownership criteria are met. I think myself that, technically, the right way to achieve the sale of British Gas, if it has to be done, is by way of tender. In that way you will get the price that the market at the appropriate time thinks is the maximum price it is prepared to offer.
The problem with tender is that naturally you can never be quite certain that you are going to get the issue away. Therefore you have to have an underwriting, and therein lies the problem. If you have an underwriting you have to fix the price well before the event and, as we have seen in the case of many privatised industries, the price in the market can run away with you during the period of the underwriting. You will get the problem that you had with British Telecom, which may or may not have been deliberate (I take no view on that) where people could come in
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and make substantial profits on the first day—nay, in the first hour—of trading. That is something which I am sure the Government and your Lordships will not wish to see repeated.
Lastly, I think we have to pay attention to the workforce. A great deal has been said about management in industries under public ownership or in industries under private ownership. Not enough, I believe, has been said about the workforce. The British Gas Corporation has a highly skilled workforce: it is 50 per cent. composed of skilled workers. Those skills do not come cheaply and they must be respected. There is a tendency, if the British Gas Corporation is privatised—and there must be a tendency—for the corporation to look towards short-term earnings rather than long-term investment. If it looks towards short-term earnings there will be a tendency to disregard the proper interests of its workforce.
The trade unions in the industry claim, I think rightly, that the British Gas Corporation does not carry an excessive workforce. The number of therms sold per employee has risen by 30 per cent. In the past 10 years labour costs, as a percentage of total costs, have fallen by 20 per cent. This is a proud record for the trade unionists in the industry, and their legitimate concerns should be regarded. They warn that privatisation will not serve their interests, the interests of the employees or the interests of the consumers. They believe the standards of service will diminish and become more costly as the change in ethic takes place towards the short-term nature of profits that the company will have to generate. And the trade unions should know, because it is their members, working in harmony with management, who have turned the industry into one which is justifiably proud of its record, not only to the individual customer but to the nation as a whole. It is their work which has made the corporation the successful enterprise that it is.
I think I have said enough. I should like the noble Lord, Lord Belstead, if he will, to reply to the questions that I have raised. However, I must make one fundamental point. I join with my noble friends on these Benches and with the noble Baroness, Lady Burton, and the noble Lord, Lord Ezra, in being fundamentally opposed to this legislation. I believe this is a bad policy. I believe it is a policy which was never correctly put before the electorate and that it is a policy designed to get the Government out of a financial hole. In so far as we can amend it at every stage, I believe on this side we should do so.
6.38 p.m.
Baroness Macleod of Borve: My Lords, the hour is getting late and there is some further business after we have finished this Second Reading; so I intend to be as brief as possible, bearing in mind that this is a very lengthy and particularly complicated Bill, certainly from my reading of it. Other noble Lords will perhaps feel the same. But I certainly welcome the Bill, as do others on this side of the House. Before I start my few remarks on the Bill, I too should like to pay my tribute to the noble Lord, Lord Gray, for the way in which he introduced the Bill so succinctly and so helpfully to the House.

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The nationalisation of gas, as we know, took place in 1948. I had the privilege—and I say that having chosen my words—of being appointed as the first chairman of the National Gas Consumers Council. If I may say so, that perhaps taught me more than anybody in this Chamber could know about the running of British Gas from the inside as well as from the consumers' angle. One must be part of a vast organisation like that to appreciate all that it does.
In passing, I should like to pay tribute to the present chairman, Sir Denis Rooke, who was the vice-chairman when I first joined the consumers council. He became chairman of the Gas Board nearly 10 years ago. Without his imagination, his organisation and his will to get through and to bring the gas industry in this country up to date—all that he has done and is still doing—the gas industry might not be in the efficient state in which it is now.
I saw North Sea gas come in under the Norfolk and Suffolk borders. Gas became non-toxic so that, as I understand it, people could no longer put their heads in gas ovens and hope to be found dead in the morning. I am not quite certain whether that is a good thing or not, but at least people cannot do that. I had the most extraordinary experiences, when North Sea gas was being taken on, of the dedication of the workers of British Gas. There were elderly cookers in the south-eastern region. By "elderly" I mean cookers that were at least 50 years old with which certain old ladies had grown up. They were not going to part with them under any circumstances. The cookers had to be brought up to date and made completely different. That was done by the willing hands of those who were trained to do it. They made those cookers safe and capable of use with North-Sea gas. That was a very great achievement in those days up and down the country.
In my view, and I think in the view of most Members on this side of the House, the present efficiency of British Gas has earned privatisation, because if the industry is privatised those in the industry who have worked so hard will be able to have a stake in it. From 1948 onwards British Gas has had to endure almost a nanny state. It has had the problem of having the mandarins of Whitehall and government departments looking at it over its shoulder. It has not had a really free hand to go forward as it could have done. However, it has managed to go forward in very difficult circumstances. It took a great deal of hard work to have 16.5 million customers and a turnover of £6,913 million in March 1985 and to be the largest energy consumer in the country.
The other place put in some very long hours and very hard work to try to make the Gas Bill the efficient Bill that we now have before us. One clause to do with the gas consumers council was recommended and taken on board by the House of Commons at Report stage. At that time it was Clause 6. It will not be Clause 6 when we next see the Bill. I should like to say a word about it. The knowledge of consumer affairs that the noble Baroness, Lady Burton of Coventry, has is second to none in this Chamber. Her enthusiasm for consumer affairs is also very great. I am sorry that she felt that it was wrong that there should be a different body for gas consumers to have a say, as there will be in the future.
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It seems to me that the number of staff and members of the consumers council must be very flexible, because as a result of Clause 6 the remit of its work will be very much greater than it was in my day, when we had a large number of people working for us. I am very glad to see that the consumers council's work is to be put in statutory form. The clause provides that the new council will have powers to investigate complaints from gas customers about sales, installations and the maintenance of gas appliances and fittings whether they are in people's homes or for sale in shops and intended for use. The consumers council will also have the power to investigate safety matters. That is all in addition to a statutory duty to investigate complaints about gas supplies. I could not find it anywhere in the Bill, but I am sure that the Minister will know whether that also covers industrial users. Perhaps he could tell me when he winds up this debate.
Two noble Lords very kindly said that I would speak about safety, and I shall endeavour to do so. The first thing that come to mind is gas showrooms. I hope that they will be kept on as a prelude to safety, not only through selling of appliances but through the knowledge that the assistants have of installation of gas appliances. That is terribly important. There are problems because there are now many thousands of sales outlets other than gas corporation showrooms. That is where the "cowboys" do or can come in. That is why it is vitally important that the training of the installers of gas appliances should be made as mandatory as possible. It is very difficult to ensure training when we have so many do-it-yourself shops and there are no mandatory requirements for the installation of gas appliances.
There should be a register of qualified installers which, in my view, should be kept everywhere that appliances are sold. We are all well aware that if the installation is wrong it could lead to ignition and then possibly to an explosion. There will need to be a great deal of public awareness about the problems of installation.
I was interested to see that the Government will continue independent meter reading. I should like to urge that the fact that meters should be read quarterly should be part of the Bill. They are read quarterly in all the areas about which I know. That is important when elderly people, and perhaps young people as well, are saving their money to pay certain bills. If the gas man does not come to read the meter they may perhaps get into debt. I should like the meter to be read on application, such as in the case of a death or a move, which would have to be paid for by the consumer.
I look on this as a very great, a very important and a very caring industry, and beginning today we are legislating for the next 25 and possibly even 50 years. So it is very important—and I am afraid that I give my noble friend the Minister due warning—that we dot the i's and cross the t's, because in the future there will be not the people who are now working for British Gas; there will be the inheritors of those people and we do not know what their standards may be. Their standards will probably be as good as they are now, but unless we do our best with this Bill we cannot be certain about safety for consumers in the future.
I should like to finish by paying tribute, as other noble Lords have done, to all those from Sir Denis

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Rooke downwards—to all the fitters and the people we meet in the streets, to the 93,000 who are employed by British Gas—for all that they do to keep safe the consumers of gas, who are, on the whole, a happy lot. Those people who are employed by British Gas are dedicated and have earned the right to have a financial say in the industry to which, in many cases, they have given all their working lives. In view of that, I hope that this Bill will go through without much hesitation.
6.52 p.m.
Lord Sanderson of Bowden: My Lords, at this hour of the evening I shall try not to detain your Lordships long. First, perhaps I also may applaud the way in which my noble friend Lord Gray of Contin introduced the Bill to us today. For the last 40 years, British Gas has been a nationalised industry. I do not have the advantage of my noble friends Lord Boyd-Carpenter and Lady Macleod of Borve, who were on the scene at the time of the nationalisation of that great industry. But it seems to have become the accepted wisdom of those 40 years that monopolies are so important, and have so much potential power to harm customers, that they must be controlled directly by government.
Has ownership by the state been a guarantee of good service or value for money? That is one of the principal points that we in this House have to consider during the passage of this Bill. My feelings on the subject are that customers' interests are best protected not by state ownership of monopolies, but through a combination of genuine public ownership and effective regulation. That is particularly so on the subject of safety, so far as the gas industry is concerned.
I believe that what matters to the customers who are dependent on those organisations is what kind of deal they get in terms of competitiveness, prices—and we have heard a great deal about gas prices over the last few years—sensitivity to complaints and, above all, safety regulations. They are more interested as customers in those things, than in who actually owns the business.
But what are those who work in the industry—and the noble Lord, Lord Williams of Elvel, mentioned the workforce in the industry as being very important people whom we must consider very carefully in dealing with this Bill—really looking for? What kind of situation are they looking for at their workplaces? I believe that they are looking for good sensitive management, good labour relations and good wages and there will be a great asset for that workforce if they have a stake in their own business.
It is not insignificant to note that when British Telecom was privatised 96 per cent. of the workforce took an interest in that business. I hear what is said from the Opposition Benches about the Government's attempts to promote real public ownership, direct ownership by members of the public and by employees. I have heard the siren voices that say, "Ah, but the small shareholders in BT have fallen by the wayside and they now hold a very low percentage of the total equity of that company".
If I have a criticism of the Government's policy, it is that we have not moved fast enough to make it possible for the number of small shareholders in
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Britain to grow. We are miles behind our competitors abroad. We are miles behind France and the United States in this regard. Perhaps the personal equity plan, as proposed in the Finance Bill in the other place, will give a reasonable start to much wider share ownership becoming a possibility. And of course we have the greatly improved share option schemes which have been encouraged by the Government.
In connection with the privatisation of British Gas—and some noble Lords have mentioned this point—we are entitled to know what are the plans for flotation for small shareholders. If there is one criticism of the British Telecom issue, it is that we must look much more closely at the interests of small shareholders, particularly those in Britain, when we come to deal with this important bit of legislation. We are duty bound to look closely at British Telecom, warts and all, and at what has happened.
Leaving aside the fact that 96 per cent. of British Telecom employees took up shares in the company, we have to consider whether that business is flourishing or floundering. That matter has to be considered while we are dealing with this Bill. I believe that the business is flourishing. I believe that the position described by the Financial Secretary to the Treasury, John Moore, in July 1985, where the commercial development of British Telecom was, was,
"centred on engineering concepts rather than on market and commercial needs",
has now changed. I believe that that is for the good.
I should like to turn for a moment to the question of industry. This was debated at length yesterday and there was a great deal of talk about the decline in manufacturing industry. I have a particular point which I wish to raise in connection with industrial gas pricing policy. Only this week, I was in Aberdeen at a factory where we were trying to decide what form of energy we should use in the future. All I would say to your Lordships on that subject is that we were looking favourably upon gas as a means of energy for that factory. One of the biggest considerations was the thought that industrial gas pricing policy would be not in the hands of the Government, but in the hands of private industry in the future.
I say that advisedly, because many of your Lordships will remember the difficulties we had in industry in the 1970s when, in the period 1974–79, industrial gas prices went up in real terms by no less than 112 per cent. I find it very difficult when I listen to members of the Labour Party opposite speaking about the decline in manufacturing industry. If only they were trying to run, as we in those years were trying to run, industry they would realise the difficulty we were facing with energy prices. Where indeed could you find help from a government when the inflation rate in 1979 was running at well nigh 20 per cent.? It is not the best moment to be running an industry in this country when energy prices are going through the roof and when inflation is doing the same.
I believe—and perhaps there is a glimmer of light on the Benches opposite—that home ownership is something that the people of this country really genuinely desire. I also happen to believe that wider share ownership is something that the people of this

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country will come to appreciate as years go by. We must encourage it in every way possible. But as we consider this Bill I come back to what was said in this House at the Second Reading of the Telecommunications Bill, when the noble Lord, Lord Glenamara, said:
"What the Government are proposing to do with a great company is a sheer disgrace. The Bill is irresponsible and ill informed. It will create chaos in what is the most sensitive of public utilities. It will weaken our national economic effort, for good communications are the lifeblood of the economy. It will result in higher charges for residential and rural subscribers. What a foolish inept measure it is".
I believe that we have to look at the record of British Telecom as we go into detailed discussions on the proposals before us. I for one believe that British Telecom is safer in its present hands and I trust that, when we come to vote on the question of British Gas, that great industry will go down the same road.
7.2 p.m.
Lord Monkswell: My Lords, as a gas consumer, when I receive my quarterly gas bill it is one sheet of paper. It usually gives me a little tremble of the heart before I open the envelope and read it, because there is always a little doubt as to whether I can afford to pay that bill. But in general terms I can budget for that expense and within a reasonable margin I can anticipate what the bill will be. When one has a Bill of 116 pages one almost has a heart attack because one knows that we are all going to pay very heavily for that Bill.
I have a number of detailed criticisms about the Bill before us. I have also two rather broader and major criticisms. Perhaps I may start by saying a few words on the details and then go on to the broader aspects. Clause 4 refers to enabling competition in the supply of gas to non-domestic premises—that is the guts of it—which effectively says that there will be no competition allowed for domestic consumers. At this stage, I must pay tribute to noble Lords on the other side of the House who have so ably supported the arguments that we have made and will make on this side of the House. That last remark refers particularly to the noble Lord, Lord Bruce-Gardyne.
My next criticism is that the Bill specifically enables what one might describe as the "big boys" supplying more than 2 million therms to have virtually a free hand. Another criticism is that the Bill requires consumers to pay for the laying of new pipelines. Another criticism is in regard to the fact that the Bill ensures a reasonable return of capital to the gas supplier to provide standby supplies. It does not specify over what period that reasonable return of capital is to be calculated. One of the disadvantages of privatisation is that almost by definition it will require the managers of that industry to take a very short-term perspective in terms of profit and loss, whereas the current gas industry can take a rather longer-term perspective.
The next problem is that capital payments may have to be made prior to supply. If a new consumer comes along and says, "I want a gas supply to be laid to my door", not only does he have to pay for it but he has to pay for it before the gas supply is laid. Another little problem is that the Bill enables variation in the price of gas from area to area. One has only to look at what
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happens at the moment with the price of petrol. In the urban areas, where competition is intense, the price of petrol may be described in some respects as quite reasonable. But if one goes to the rural areas, or if one goes to the North of England or Scotland where competition is not so intense, the price of petrol is crippling to the ordinary consumer. In rural areas, people are forced to use private car transport because the Government have destroyed the bus services.
Within the Bill there is a clause that actually enshrines standing charges. Something that pensioners' groups in particular but also other groups which have at heart the interests of deprived, poor and impoverished people have been arguing and pressing for is the abolition of standing charges. Yet this Bill enshrines them. It lays the responsibility for safety on the Health and Safety Executive. Yet even now the Health and Safety Executive is overstretched in fulfilling the requirements laid upon it in other areas. In industry, in commerce and on building sites the Health and Safety Executive is hard-pressed to enforce even minimal standards.
My final minor criticism—this is not really a minor criticism—is that within this Bill there is an insurance (or an assurance) that persons overcharging for the resale of gas—that really means landlords who make a charge for the supply of gas to people who pay rent—are absolved of any criminal liability for overcharging for that gas. All that is required is that such persons pay back to the poor consumer the amount that they have overcharged. When young people are being forced by government decree to move their place of lodging every two weeks in some cases, there is a very slim chance that those consumers will challenge the supplier of resale gas to pay them back the odd penny or the odd quid that they have been overcharged. That is a scandal.
I now turn to the broad effects of the Bill: the essential effects, the privatisation effects. At the moment, under nationalisation the gas consumer—the member of the public at large—if he feels abused by the gas corporation or affected in any way by the operations of the gas corporation, has two options. He can either go to the National Gas Consumers Council or he can go to his Member of Parliament to pursue a resolution of that grievance through the channels of democracy and parliamentary procedure. That costs him nothing, but what will be the situation after privatisation?
Effectively, we shall have a national gas consumer council with, I suspect, much less power and offering much less access to the ordinary member of the public. The other avenue for the alleviation of abuse will be the courts; that is the way that people must seek the alleviation of abuse by any private undertaking or firm. That will be a paradise for the lawyers, and it will deny the ability to achieve justice to all but the rich in this country.
My final criticism of this Bill is its cost. Her Majesty's Government will effectively be selling off assets that are owned by us all. We must recognise here that we are in some respects the non-preferred shareholders of the undertaking in that we do not have a vote. If one thinks in terms of every member of the electorate having an equal share in the British Gas Corporation, then one is approaching a shareholding

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of 40 million. As a result of selling off the shares of British Gas, if the flotation of British Telecom is anything to judge by, the number of shareholders will reduce from 40 million to 2 million. It could only be a Conservative Government who could sell that as being a wider ownership of shares.
The other factor is that not only will the sale reduce the number of shareholders, but also the very mechanism by which that is done will ensure that the corporation's assets are sold cheaply expensively. I shall explain that remark. The shares will be sold at less than their market value to ensure that they are sold, as has been described before. But in the process of selling those shares, the Government will shell out millions and millions of pounds to persuade people that that is a good idea.
Another point is that, if one looks at public pronouncements by the Government over the past six months or year, one can see that they have been underselling the assets of the corporation. When speaking about the British gas industry, they have not been saying "This is a marvellous and profitable industry, and the only reason why we are getting rid of it is that it does not fit into our portfolio". There have been numerous stories in the newpapers and on television about the possible doubtful future of British Gas and of the whole gas industry. If one bears in mind the reduction in the price of oil over the past few months, and realises that the price of gas is tenously but significantly related to the price of oil, then the value of British Gas in the eyes of the market is being played down.
What will be the result after the shares have been sold? As I have said, they will be sold below their market value, and so immediately there will be an increase in the market value of those shares. The managers of that industry will then be compelled, because of market forces, and because of the ability of the shareholders to get rid of them if they do not like them, to maximise their profits. To do that, they must either increase prices or reduce the services that they are providing. One of the areas of service which is defined and which I worry about is that of safety.
For a number of reasons that I have mentioned, I hope that this Bill will not see a full passage through Parliament. However, I am also a realist. I realise that however much we speak, and however many Divisions we may have in this Chamber, it will not change the end result for British Gas one iota. We may make one or two minor variations to the clauses and to this, that and the other in the Bill, but at the end of the day, British Gas will be privatised. No matter how much hot air we may expel in this Chamber, it will be as effective as a fart in a thunderstorm.
7.15 p.m.
Viscount Hanworth: My Lords, this has been a good debate and many speakers have made clear their doubts about the Bill. The Minister has done little to reassure the House, because we genuinely doubt whether privatisation and the provisions of the Bill can possibly achieve the Government's avowed objectives. Having said that, I shall now give my own views which, in the main, express what has already been said in rather different words.
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The Government are again selling off assets without justification for doing so. With gas, it cannot lead to useful competition, and if the consumer is to be adequately protected, any flexibility of working under private ownership is illusory. Moreover, it disturbs an existing system that will take a very long time to settle down under new management control.
The Government's record so far of getting a good price for shares on privatisation is, to say the least, not reassuring, with an estimated loss of more than £1 billion for British Telecom if compared with the later market price of the shares. In all, there has been a loss of about £1½ billion on their privatisation programme. The money that the Government gain has not been used in helping the competitiveness of our industries, which are vital to the future prosperity of this country. Moreover, although they get some immediate capital, they lose the money that British Gas pay them; for the last four years, it has been £1 billion a year.
Some of the arguments made by the Government in favour of privatisation are just eye-wash. They really seem to believe that greater share ownership by small investors has some relevance. It has no relevance unless it is done in the way that is proposed by Vickers Shipbuilding, and that approach is not applicable to the gas industry. To give an example, employee shareholding in British Telecom is about 1.8 per cent.
An interesting argument—but one that is spurious if one analyses it—put forward on television by the Minister for the privatisation of the water industry was that it freed capital funding from Treasury control. Such Treasury funding was, he said, in competition with other interests such as roads, national health, and education. If, however, the country can afford what it would like to spend in capital investment, then allocation should be made on a balanced assessment of priorities, which is exactly what the Treasury tried to do.
It must be remembered that the market place will provide capital only if it is profitable to do so, and almost inevitably that will mean raising water rates at the consumer's expense. The argument is also flawed because it would be possible to retain full government ownership, as is the case with British Nuclear Fuels, but to leave them to find the capital without it being included in the public sector borrowing requirement. I am afraid that one of the Government's less obvious and more devious motives is that charges, as with British Telecom, can be raised with much less direct criticism and political cost to the Government.
As I have said before, the sensible course for privatisation would be to move slowly and learn from the experience of those industries which are already privatised. The Government are doing nothing of the sort, and do not even leave time for bringing to Parliament a well thought out and well drafted Bill. Surely this unseemly rush is in order to sell more of the family silver to finance their pre-election benefits and, I suggest, to privatise enough industries to make certain that no responsible future government could reverse the process except in a few cases.
The Government are now going far beyond their declared policy at the last election, when there was no mention of privatising gas or water. It is obvious that the Government will not now withdraw this Bill, but it

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could be converted into enabling legislation to be brought into effect if the present Government were to be re-elected, either amended in the light of experience or left unamended. This is not a novel idea: it is exactly what the Government did with British Shipbuilders before and after the last election.
There is another important angle to this. There is and always must be a very close connection between our three energy providers—coal, gas and electricity. It would upset the balance of the present healthy, competitive relationship between the gas and electricity industries if the gas industry is transferred to the private sector while the electricity supply industry remains in the public sector for an unspecified and perhaps unlimited period. This is inevitable as the objectives, financial parameters and institutional constraints on a private company are, by definition, different from those on a public utility. It cannot be in the national interest deliberately to disadvantage the competitive position of such a strategically vital industry as electricity.
In this connection, let us remember that the CEGB is obliged to take most of its coal from the Coal Board at a cost of about three times that at which it could import coal of a similar quality. I wonder, if the Government think of privatising that industry, what precisely they will do about the coal. It would be far wiser, if this Government were returned at the next election, to consider both these industries together for denationalisation, if at all. That is another reason why I recommend only enabling legislation.
Let us try and get a perspective on this issue by looking back to the past. The Labour Government, largely for doctrinal reasons, favoured and promoted nationalisation. In many cases it did not work out as they had hoped, so they took a more commonsense approach and talked about a mixed economy. Now, when nothing has changed, this Government have become dogmatic on privatisation. This swing of the pendulum from one extreme to another is not the way to run a country.
My party does not in principle have strong views on this issue, but it ought to be judged pragmatically and not on party dogma. It is very worrying that a major reorganisation, even if desirable, takes years before any benefit results. In this case there is a possibility that if the Labour Opposition were elected, there would be renationalisation. This situation produces intolerable uncertainty and the sort of problems which were experienced by the steel industry. I think nearly everybody would agree that a great deal of their trouble was due to this uncertainty and the nationalisation - denationalisation - renationalisation situation.
My party is also concerned that this Bill fails to introduce competition and produces a private monopoly without effective regulatory machinery. It also provides inadequate protection for the consumer in every area of concern. This point has been powerfully made by many speakers and I am sure it will be brought up in many amendments when we come to the next stage of the Bill.
7.25 p.m.
Lord Bruce of Donington: My Lords, the House is always grateful to the noble Lord, Lord Gray of Contin, when he introduces a Bill, as he always tackles the task with an urbane cheerfulness which sometimes almost becomes infectious. I thought that today, considering the task that he had, he performed very skilfully indeed. He was faced with an impossible task, which was to provide one good reason why the gas industry in the United Kingdom should be privatised. He could not provide one reason that stood up in any way to the arguments that were produced by my noble friend Lord Stoddart of Swindon, who had not had the advantage of seeing the speech of the noble Lord before he answered it, but who accurately anticipated it. Not one of the contributions from the Conservative Benches this afternoon has in any way touched any of the basic arguments that were put forward by my noble friend Lord Stoddart of Swindon. There have been some endeavours.
Let us attune ourselves to the genial mood in which the noble Lord introduced the Bill in order to recapture some of the magic he was conjuring up. The first advantage mentioned was that the industry would be free from government interference. I thought of that somewhat nostalgically when I listened to the speech of the noble Lord, Lord Sanderson, who was complaining about the high prices of energy and the burden that they imposed upon British industry. I well recall the noble Earl, Lord Gowrie, who was in the same position as the noble Lord, coming to the House and announcing a Government-imposed increase in the price of gas to be fixed at a rate 10 per cent. above the rate of inflation. Of course governments have interfered.
From the commonsense point of view—and we are talking now about an experienced Government in power with all the trappings of office and great resources at their disposal—if the Government say to themselves, "There is something wrong with the gas industry; it is being interfered with", all they have to do is to send a memorandum down to their officials (and if it were done in Churchillian form it would have at the top, as the noble Lord, Lord Boyd-Carpenter, well knows, "Action this day") or down to the Permanent Secretary demanding, "Pray stop interfering with the gas industry". There is no neeed to privatise the industry in order to ensure that it is free from interference. The noble Lord knows that perfectly well. I am bound to say that even the degree of interference that has come from the Government of the noble Lord, measured in quantitative terms, is likely to be rather less than the interference that they themselves are legislating for by the establishment of Ofgas.
The fact of the matter is that the reason why the gas industry has functioned, by and large, in the public interest has been because those who manage it know perfectly well that in the final analysis it is subject to the rule of Parliament. They know that in the final analysis the Minister for Energy, whoever he may be, has to answer to the public. This imposes a discipline. Where that discipline is not already there by reasons of managerial loyalty and dedication to the task. it is imposed by the consciousness that in the ultimate they are responsible to the public. So let us get away from

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this silly argument which no doubt the noble Lord, -Lord Belstead, may enlarge upon when he replies, that the real reason for privatisation is to get rid of government interference. Let the Government tell themselves not to interfere. That eliminates that one.
The next argument was that it would be more efficient in the private sector. I listened with some interest to the noble Lord, Lord Boyd-Carpenter, with whom I shared a presence in the other place for a period of time. I am bound to say that I found his arguments just as unconvincing as did the noble Baroness, Lady Macleod. There was the noble Baroness, saying what a wonderful person Sir Denis Rooke was, how he had managed to reinvigorate the whole gas industry, how he had managed to command loyalty, and all the rest of it. All that the noble Lord, Lord Boyd-Carpenter, could do was to hazard a possibility that responsibility to shareholders somehow imposed a greater sense of urgency and efficiency than the dedication to which the noble Baroness paid ample tribute and that has been reinforced. Really, that will not ride. Indeed, the accounts themselves—
Lord Boyd-Carpenter: My Lords, if the noble Lord is suggesting that that was my only argument, he did not do me the courtesy of listening to my speech. The noble Lord may care to remember that I made the important point that after privatisation the industry will be free itself to go to the market for capital as and when it wants, and not forced into the queue of the government investment programme with all the problems that those of us who have been in that position know is involved.
Lord Bruce of Donington: My Lords, I was coming to the noble Lord. The noble Lord must not be too impatient.
Lord Boyd-Carpenter: My Lords, will the noble Lord—
Lord Bruce of Donington: My Lords, I shall certainly deal with the very point that the noble Lord makes.
Lord Boyd-Carpenter: My Lords, that is not my only argument.
Lord Bruce of Donington: My Lords, if the noble Lord will allow me to continue, we know perfectly well this nonsense, purely for the convenience of the Treasury, of the incorporation of the nationalised industries' borrowing requirements within the public sector borrowing requirement. The noble Lord knows that it is a lot of nonsense. So do all those in the Treasury know that it is a lot of nonsense that they should be subject to that particular constraint. In any case, so far as the British Gas Corporation is concerned, it has financed itself. It has been self-financing precisely owing to the efficiency upon which the noble Lord, Lord Boyd-Carpenter, sought to cast some only modest—I shall not put it any higher—misgiving.
The third argument was that it would lead to a wider shareholding and that it would contribute towards a people's democracy. I must say that some of the references to the sentiments of shareholders that noble
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Lords have uttered this afternoon are a little strange to me. To imagine for one moment that the holder of, say, 100 or 500 shares imagines himself in any way to own part of the business, shows that noble Lords must be living in fantasy. The noble Lord, Lord Bruce-Gardyne, knows better than that.
When they buy a small number of shares, what are they looking for? They are looking for a rise in price to make a quick profit. That is all they are looking for. They buy, usually in a bull market, and sell out, hopefully, before the top, but often not. Often, they hang on and the shares come down again. They are bought in by the institutions, who sell them again near the top of a bull market. So we have it. But the main motive in acquiring a small number of shares is to make a capital profit upon them. And undoubtedly, as the noble Lord will confirm—he may have read The Times on the subject—the employee who buys shares in the company in which he is employed, as evidenced by experience, buys them mainly for the quick profit. This is precisely what happens.
Lord Bruce-Gardyne: My Lords, the noble Lord has referred to me more than once. I assure him that I know none of the things that he has attributed to me. What I do know is that there are more than 1.6 million shareholders in British Telecom today, which suggests that the overwhelming majority have stayed with the company and show every intention of continuing to do so.
Lord Bruce of Donington: My Lords, in that case, I must draw the noble Lord's attention, although I shall not read it to him, first to page 31 of The Economist for 22nd to 28th February. But, more particularly, since it is shorter, I must acquaint him with what The Times had to say on the subject on 15th February in an article headed "One Telecom does not make a revolution". It says:
"The CSO's Bible, Financial Statistics, reveals that the personal sector was a net seller of company securities to the tune of some £900 million".
This is in the year 1984.
"In the third quarter of 1985, the personal sector was a net disinvestor from company securities, disposing of some £750 million. This is depressing confirmation of the continued existence of the ICI syndrome, when workers dispose of their share issues on the day they receive them".
The article goes on:
"Putting it another way, the great British public got shot of its shares very quickly as soon as it discovered there were further calls to pay on them".
Indeed, the number of individual shareholders has remained fairly consistent over the last three years at 6 per cent. of the total adult population. If the noble Lord wants confirmation, I refer him to the Written Answer of the Financial Secretary to the Treasury published only three weeks ago in which he put the figure of individual shareholders at 2.7 million. That is 6 per cent. of the adult population.
I am not decrying personal or individual shareholdings. I wish that the policies of the Government would enable people to have sufficient money to be able to acquire them. As it is, some 50 per cent. of the population own about 4 per cent. of the national disposable wealth. The real wealth lies at the top where 1 per cent. own some 20 per cent. of the

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national wealth, according to figures published by the Central Statistical Office. Thereby hangs the tale. This gives the lie to the propaganda that the party opposite puts out concerning the extension of people's capitalism. The number amounts to 2.7 million out of an adult population of 42 million. And those shareholdings are mainly concentrated in the top 10 per cent. who own some 54 per cent. of the disposable assets in the United Kingdom.
The Financial Times puts it very much better and answers both arguments at once. I refer noble Lords to the Financial Times of 17th March which states:
"Indeed, to the extent that privatisation issues have been on more favourable terms than a pure competitive tender, in order to attract the small investor, the effect has been regressive: a redistribution from the general body of taxpayers to the 10 or 20 per cent. minority who are potential purchasers of shares".
So let us dispose of all this nonsense that one of the main purposes was to further people's capitalism—at a miserable 6 per cent. The argument does not stand up. We know the real reason. My noble friend Lord Stoddart of Swindon stated it, and I shall be interested to hear the answer. His statement—which I shall repeat—is the public perception of what is happening. Noble Lords will know tomorrow the public perception of what is happening.
We know quite well the real reason for this, apart from the ideological reasons which may have inspired the noble Lord to do a double somersault over the years. The main reason is to raise money in order to be able to have a tax relief bonanza immediately prior to the election. Let the noble Lord answer that point. Better still, let him answer the other three, and see how he can wriggle out of what the people's perception is.
Moreover, it is also quite clear on the basis of what happened in British Telecom that the number of individual shareholders and the effective power organised by them or apprehended by them will be minuscule. It will go to the institutions when it does not go abroad. There will be no real power in the hands of the fragmented shareholdings of any of these companies.
Noble Lords who have attended annual general meetings, as I have, know perfectly well that shareholders in companies may be interested in their dividend cheque but are never moved to attend annual general meetings. Only companies which get involved in some terrific controversy or whose performance is very poor are favoured with the attendance of more than 20 shareholders at an annual general meeting, even though it may be arranged at the Connaught Rooms.
What will happen in this case is exactly what happened in British Telecom. We hope that one thing will not happen, and this goes to the roots of the matter. When the shares were allocated in British Telecom there were block allocations to stockbrokers and others on the understanding that individual share allocations were to be made. We know perfectly well that that was not done. As my noble friend Lord Stoddard of Swindon pointed out, there was fraud in the City. Many people got away, and the Director of Public Prosecutions found it difficult to enforce the Theft Act provisions that were reproduced in the prospectus. What guarantee will the Government give that that will not happen again?
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This Bill, and the will behind it, will result in the transfer of a highly successful public corporation which has given good service to the public, which has been responsive to its needs and which has good prospects, to a tiny fraction of the country's population, consisting mainly of the rich and powerful. They are already sufficiently sustained by the Government, who are by no means concerned with the general will, and at a price, as in the case of British Telecom, that will undoubtedly involve the taxpayer in a loss.
We are back to this point. Only the dire political necessity of putting on a good face at the next general election is responsible for the Bill and its introduction and the whole phoney concept of the deduction from the public expenditure figures of what the Government now call, in terms that are not familiar to the accounting profession, negative expenditure; in other words, revenue. That is a completely phoney concept.
I hope that the Government will have second thoughts, even at this stage, and withdraw the Bill. The Bill in itself, and the proposals behind it are, in my considered opinion, a public scandal and a fraud on the taxpayer.
7.45 p.m.
Lord Belstead: My Lords, this has been an interesting debate. Many of your Lordships have spoken, I know, either from a close knowledge of, or a close interest in, the energy industry. The noble Lord, Lord Bruce, who has just spoken, and the noble Lord, Lord Boyd-Carpenter, were members of another place when the gas nationalisation measure went through both Houses of Parliament and became law in 1948.
Indeed, as he told us, my noble friend was on the standing committee on the 1948 Bill. I am encouraged that in his speech he so obviously supported my right honourable friend the Secretary of State, who has consistently stressed that privatisation of the gas industry will be good for the consumer and for the employee and for the nation as a whole.
As my noble friend Lord Gray of Contin made clear at the beginning of this afternoon's debate, the proposals put forward in this Bill represent the culmination of a very substantial amount of work which has been done by my right honourable friend and his department over the last three years. The noble Lord, Lord Ezra, asked to what extent we had considered alternative possibilities. The Bill was drafted only after the most careful scrutiny of the regulatory systems in a number of other countries and a full review of the existing and past arrangements for the control of the gas industry and other utilities here in Great Britain. In particular, every effort has been made to ensure that on the two vital questions of safety and consumer protection this Bill should represent a real advance on the situation which we find at present.
I do not dissent at all from noble Lords who have said that the gas industry has chalked up an impressive record since the conversion to natural gas in the early 1970s. We are confident that in the private sector British Gas will continue to grow and to develop its business. I believe that my noble friend Lord Boyd-

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Carpenter showed very clearly in his speech that opening up the industry to the normal disciplines and the advantages of the market are bound to lead to increased efficiency.
In attacking the principle of privatisation as it is found in this Bill from the Opposition Front Bench, noble Lords opposite are disgregarding that there will be increased incentives for both management and employees because there will be strengthening of links between performance and reward through direct shareholdings. Over 300,000 employees have now bought shares in privatised companies. I know that the noble Lord, Lord Bruce, has been critical of this in the last part of the speech which the noble Lord delivered in winding up from the Opposition Front Bench
However, I am also mindful that both my noble friend Lady Macleod (who has unrivalled knowledge of this industry) and my noble friend Lady Carnegy said that employees of British Gas most certainly deserve the advantages which this Bill will afford. I should like to give an assurance to my noble friend Lord Sanderson of Bowden that the terms under which British Gas shares will be offered to employees will be publicised widely among staff nearer the time of sale so that they can have a direct stake in British Gas's future success and prosperity.
However, as my noble friend Lord Sanderson also said, more than this we want to see the widest possible ownership of shares among the public. I was grateful to my noble friend Lord Bruce-Gardyne for reminding us that of the 2.1 million shareholders at the time of the British Telecommunications offer, around 1.7 million still hold their original purchases. I believe that this is a clear indication that the benefits of a stake in the country's industrial base are now recognised by a large cross-section of the British public who, I have to tell the noble Lord, Lord Stoddart, will hear with incredulity what he said about the Labour Party working for renationalisation if it was to be returned to office.
I can only imagine that the general public will simply think that they have to take on the chin this additional expenditure on top of the £24 billion additional expenditure in a full year, to which Labour in its programme is now apparently pledged. In the interests of pension funds, the old and the young, private and institutional investors, I think that when we come to the Committee stage of this Bill we shall want to know a little more about what that undertaking means, if the Opposition Front Bench is re-elected.
For our part, we are confident of the widespread welcome from the public that the opportunity to share in the future of the gas industry will bring, and that it will be a move—which I know the noble Lord, Lord Bruce, wishes to see—to increase the number of people who hold shares in this country.
We are also clear that the proposals which are set out in the Bill represent the best deal that can possibly be laid before consumers. Clause 4 of the Bill lays a duty on my right honourable friend and the director to protect the interests of consumers. For the first time a formula will be set out to establish a maximum price that can be charged. This will ensure that the price of
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gas to tariff customers is strictly and fairly controlled under the oversight of the director. The noble Lord, Lord Stoddart, and the noble Viscount, Lord Hanworth, both expressed some suspicion about all this.
It means that no longer will any government be able, as in the past, to intervene to push up prices to the detriment of the consumer. Despite the fact that the noble Lord, Lord Bruce, said that this was something at which we should all aim, as he and I both know, if one looks back over past records, the itch to interfere has been something which governments of all political parties have not been able to resist.
Lord Stoddart of Swindon: My Lords, I apologise for intervening, but in the light of what the noble Lord said about government interference, tonight will he give the assurance that has been sought about the gas levy? Will the Government make further depredations in relation to the gas industry by indirect means, by unnecessarily increasing the gas levy?
Lord Belstead: My Lords, I shall not give any such assurance this evening. I am saying that an absolutely cast-iron guarantee is being given for the first time in the gas industry that there will be a formula for domestic tariff consumers and all who are on the tariff; that there will be absolutely fair play as regards their price formula. It is a formula which I admit is complicated, but its principle is straightforward. It sets a limit on changes in the price of gas by reference to changes in gas costs—the y factor—and the reference to the rate of inflation which must be reduced by an efficiency or x factor. This will put a discipline on the company to achieve real reductions in the costs under its control and will ensure that customers share in the benefits. The formula will therefore provide protection for customers and will be fair to investors.
The noble Lord, Lord Ezra, said that he was not sure what would happen after a period, and he asked whether it was five years in relation to the formula. There is built in to the authorisation condition that describes the formula the opportunity for a break after five years when the director can make a reference to the Monopolies and Mergers Commission for a new or revised formula. However, the Bill also gives the director the opportunity to initiate changes to the authorisation at any stage, and if circumstances were to change and make an earlier review appropriate, there would be full and proper provision for this.
Lord Stoddart of Swindon: My Lords, I am sorry to interrupt the noble Lord again, but it is quite important that we get this question on prices absolutely straight. During the debate on the Telecommunications Bill we had the self-same assurance that domestic consumers would be protected by the RPI minus X formula. The noble Lord is giving us the same assurance tonight, but so far as domestic consumers were concerned, and our understanding in this House, it was broken because the domestic consumers of the telecommunication services were handed out a swingeing increase far above the rate of inflation. What were the assurances worth in the case of British Telecom, and can the noble Lord say whether the assurances that he is giving today are better than those which is noble friend Lord

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Cockfield gave during the passage of the Telecommunications Bill?
Lord Belstead: My Lords, with respect to the noble Lord, I do not accept what he has said about the effect of the price formula under the Telecommunications Act. Nonetheless, in essence, the noble Lord is saying: what about cross-subsidisation? I am telling him and the House that the formula will prevent cross-subsidisation because when we come to debate the formula in Committee, as we undoubtedly shall, we shall see that the formula with the price element, deducted from which is the X factor from the RPI, gives the customer a formula which will be fair to him or her as well as being fair to the investor.
I should now like to turn to consumer matters in the Bill. The Gas Consumers Council has always been a priority in preparing this legislation. I believe that the new Gas Consumers Council, which is to be found in this measure, will be able to operate widely in the same way as the existing councils which have carried on such sterling work ever since the days when my noble friend Lady Macleod was the first chairman of the National Gas Consumers Council.
I was glad that my noble friend welcomed the fact that the new statutory powers are in the Bill to deal with all Gas Consumers Council complaints, including industrial complaints, about which my noble friend particularly asked, and those relating to appliance sales, installation, servicing and safety, on which my noble friend laid such emphasis. We have listened to a wide range of views on this important issue, and Clauses 32 and 33 of the Bill will enable the council to investigate a full range of complaints and to take the necessary follow-up action.
In opening, my noble friend Lord Gray has already said that the staffs of the new council dealing with complaints will continue to be located in the regions near to consumers. In essence, the noble Lord, Lord Ezra, asked what this would mean in practice and whether there will continue to be offices in the regions. I am pleased to be able to tell the House that it is the Government's intention that the present regional structure, with a separate staff and office to serve each British Gas region, should continue in the future.
Some noble Lords have spoken of the importance which consumers attach to the ability to be able to turn to an office in the locality which is used to dealing with local problems and with the British Gas management in the area. The Government propose to keep the present gas offices serving each of British Gas's regions located in the regions of Britain, but with one exception. We believe that in London it will be more efficient to house the staffs dedicated to dealing with the North Thames Region and the South Eastern Region together with the headquarters organisation for the council. This will have the considerable extra benefit of giving those managing the staff from the centre valuable direct involvement with complaint handling.
The noble Baroness, Lady Burton, suggested in her speech that there could be some contradiction between the work of the consumers council and the director of Ofgas. Clause 31 of the Bill makes clear that consumers who have complaints concerning matters
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relating to the obligations of British Gas should go directly to Ofgas, who will then have the duty to investigate, and who can, if it is appropriate, take enforcement action. There is no question, therefore, of the consumers council in some way having crossed lines with the director of Ofgas, I believe that Clause 31 makes that as clear as it necessary to make it.
Baroness Burton of Coventry: My Lords, the Minister must have misunderstood me, or I was not clear. I was referring to the new Clause 8 and the new Clause 6. My understanding is that any decisions which the Gas Consumers Council reaches after investigation cannot be dealt with by the council but will then have to be referred either to the director of Ofgas or to the OFT. I thought that separation was a mistake.
Lord Belstead: My Lords, may I look at that point? If I may, I am not going to reply to the noble Baroness on that, and I do not agree with the noble Baroness about the undesirability of it. It is something to which we must return when we get into Committee.
Perhaps I may finally add on the consumers council that under the general enabling provisions of the Bill the council will be free to set up its own arrangements to ensure that it maintains proper contact with local consumer opinion. I understand that the organising committee are proposing to consult widely with the existing councils on the best way to achieve this. These proposals will ensure that customers are going to get an even better service in the future than they have done before.
I should like to assure the noble Lord, Lord Stoddart, that both the Gas Consumers Council and Ofgas will be given full financial resources, which they need, through finance which will be provided from the annual authorisation fee which the Ofgas director will levy on British Gas and other suppliers.
May I turn for a moment to the important question of safety? Clause 4 lays a duty on both my right honourable friend and the director to protect the public from dangers arising from the supply of gas through pipes. The Government are fully committed to improving the safety of gas, building on the excellent record of the industry to date.
The noble Lord, Lord Stoddart, indicated that he thought that there were areas where safety would need to be tightened up. Of course the Bill makes a number of important improvements which greatly contribute to safety. For instance, Clause 18 is going to give the Health and Safety Executive powers to make codes of practice on safety matters, and those codes will be enforceable. Under the Bill there will be important improvements to the requirements for dealing with escapes of gas by halving the statutory response time and extending the obligation to deal with escapes to the customer's side of the meter.
There will be the continuation of British Gas's 24-hour emergency service, with free safety checks for the elderly and disabled. There is going to be an increase in the number of health and safety inspectors, and in the amounts of time which the executive devotes to gas safety. A new emphasis on the importance of training for gas installers through the Health and Safety Executive's enforceable code of

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practice will be backed up by a new independent CORGI organisation, about which my noble friend Lady Macleod spoke. New regulations on safety standards for appliances, including imported gas appliances, are being prepared now, as this Bill is going through both Houses, by my right honourable friend the Secretary of State for Trade and Industry. I think I can claim that safety provisions for the new privatised industry are going to be stronger than ever before, but doubtless this is something we shall discuss later in the Bill.
Many of your Lordships have expressed concern that the Bill, as your Lordships see it, does not do enough to promote competition. We have consistently maintained that it would be a nonsense to provide for a regime which would allow suppliers to run two sets of pipes up the same street, so the Bill preserves the present monopoly. But the director has the duty, under Clause 4, to promote competition in the contract market.
I have such a regard for the experience of the noble Lord, Lord Ezra, in this whole field of energy that I must confess to him that I was a little surprised at the cautious view I understood him to express about the lack of opportunities that there were to get movement from one form of heating usage, in either the domestic or the industrial market, to another. I make the point that the British Gas Corporation at the moment has only about 35 per cent. of the energy market. There is fierce competition with coal, electricity and oil, about which the noble Lord must know enormously more than I ever can.
For many years BGC has negotiated individual contracts with its largest customers, and this is going to continue, and has been welcomed, may I make it clear, by the CBI, particularly as the Bill requires publication of maximum prices and pricing policy. The Bill therefore gives British Gas the ability to respond flexibly to the circumstances of individual customers, and to take proper account of competitive forces.
Lord Ezra: My Lords, as the noble Lord referred to my intervention on this point, I wonder whether I may explain what I meant. Of course there is competition now, and there will continue to be, in new business. What I was saying was that where, in the domestic sector or in a large part of the commercial and industrial sectors, there are existing installations, variations in price are unlikely to move people to indulge in the capital cost of changing. The vast bulk of the market is fixed for some time because of the capital involvement. Of course there is new business all the time, but that is a smaller proportion.
Lord Belstead: My Lords, of course I understand that, and I accept what the noble Lord has said as being sound common sense. But the noble Lord does not mention any figures in that intervention. My advice is that about a million decisions are made each year on central heating boilers, and over a million households typically buy either an electric or a gas fire. Therefore, as the years go by an enormous amount of decisions are being made domestically as to whether a family is going to go down the road of coal, oil or gas. Therefore I stick to the point that there are
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opportunities to be had, but perhaps we can return to this again in Committee.
Perhaps at this moment I may simply assure the noble Lord, Lord Kirkhill, and the noble Lord, Lord Williams of Elvel, that the Bill ensures that any abuse of the flexibility which exists for the contract market under the Bill can be properly dealt with. The Office of Fair Trading, acting if necessary on a complaint from an individual, will have the necessary powers under competition law to oversee the contract sector and refer any problems to the MMC. The Bill enables the authorisation given to British Gas to be changed to introduce formal regulation of the contract sector if the MMC were so to recommend.
The noble Lord, Lord Williams, specifically asked me in his speech about, as the noble Lord saw it, a contradication between the powers there are under the Fair Trading Act for the Director General of Fair Trading and what is going to happen when referrals are made to the Monopolies and Mergers Commission through the OFT under this Bill. I do not think that there is a problem here. I do not accept the difficulty to which the noble Lord referred in relation to the criteria which the MMC should consider in carrying out its tasks.
There are, of course, special factors in the gas industry—for example and most notably, safety—which the MMC will need, and will be able properly to take into account in considering any reference made to them by the director of Ofgas, and for that reason the Bill refers the MMC and the director to Clause 4 under the Bill.
Perhaps I may also add in passing on the subject of competition, on a subject which practically none of your Lordships mentioned, that the provisions in Clauses 19 to 22 of the Bill, which carry forward the arrangements for the carriage of third party gas in BGC's pipeline network—the common carriage regime—introduced under the 1982 Act, have been strengthened. In particular the Bill will now permit the director to set terms for supplies of back-up gas if a third party's supply of gas is temporarily interrupted. We believe that these changes will provide a greater inducement for other suppliers to use BGC's network.
May I, in time which remains to me, try to do two things? First, I feel I must reply to a point which has been put to me by many of your Lordships about, as some of your Lordships see it, the Bill setting up a private instead of a public monopoly. As my right honourable friend the Secretary of State has made clear, where competition is not possible in the supply of gas to smaller consumers the Government have set up what we believe is an effective regulatory system to protect consumers who will in future have an independent regulatory body, Ofgas, to appeal to, operating within an open and publicly-stated regulatory system. However, where competition is possible action has been taken to reinforce that.
Many of your Lordships have spoken about the competitive position of gas against other fuels. As I have already suggested, this competition is in some sectors intense, as is evidenced by the price cuts which British Gas has had to make in the industrial sector to respond to lower oil prices. But this competition is perhaps too strong for many of your Lordships, who

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fear for the health of the other energy industries; namely, coal and electricity. I think that many noble Lords opposite would really prefer the present system, where the Government can interfere in the affairs of all the industries to the detriment of consumers and the industries alike. This is perhaps the reason why many noble Lords say that they will seek greater regulation in the industrial market under this Bill, contrary to the views of the CBI and other industrial energy users.
The other matter I must try to fit in before I finish is a brief answer to one or two of the questions I have not dealt with. I thank my noble friends Lord Sandys and Lady Macleod for raising the question of gas showrooms because it gives me the opportunity to say a word in reply to the noble Lord, Lord Stoddart; namely, that the current account of British Gas shows that it makes a profit on appliance trading and there is therefore a considerable incentive to retain showrooms. It is true there is a closure programme for uneconomic showrooms, but opportunitites have been taken to open profitable new outlets. The point I should like to get over is that it will be in the commercial interests of British Gas to offer an efficient and attractive service to customers. Under the draft authorisation British Gas will be required to produce a code of practice describing the nature of the service available to its tariff customers, and they will have to consult the director about the presentation of that code. So the eyes of many consumers will be on British Gas to see that it is doing what consumers want concerning the showrooms.
I should reply to the noble Lord, Lord Kirkhill, who put several points about gas supply. If I may I shall write to him on some of these matters, but I shall pick up just one. The Bill already provides in Clause 9 an obligation on British Gas to supply industrial customers where it is the public gas supplier's duty to comply in so far as it is economical to do so with any reasonable request for a supply of gas to any premises. This duty will be enforced by the director of Ofgas. As regards existing contracts with BGC, paragraph 28 of Schedule 7 to the Bill ensures that any agreements with BGC to supply gas are automatically carried over to the new company, which will be privatised.
Lord Kirkhill: My Lords, I apologise for interrupting the Minister at this very late stage. I want to emphasise to him that my concern was exactly as he said, but with an emphasis on the possible marginalisation which can occur in the remoter areas. He will see that on the record tomorrow, and I hope he will write to me.
Lord Belstead: My Lords, I agree with the noble Lord. If I may I shall read the record tomorrow and write to the noble Lord, as I said I would, if I feel it is necessary to do so.
Finally, although I know the noble Lord, Lord Williams, put interesting points to the House about the desirability of tendering for flotation and other thoughts as well, all of that will have to wait until our discussions in Committee and probably until the Government announce exactly how the flotation will be carried out. Nevertheless, I shall pick up a point or two made to me by the noble Lord, Lord Stoddart, at
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the end of his speech. The noble Lord asked me a number of questions about the flotation. The draft articles of association of the company which were made public during the proceedings in Standing Committee in another place made clear that there would be a golden share to provide a restriction on shareholding so that no single shareholder, or any group acting together, can own more than 15 per cent. of the shares—a figure with which I know the noble Lord is familiar. But there can therefore be no question of foreign investors acting together to build up a sufficient shareholding to take over the new company.
The noble Lord also asked a number of questions about the details of the flotation. If the noble Lord will forgive me at this late hour, I think perhaps we should wait until the Committee stage of the Bill.
Lord Ezra: My Lords, before the noble Lord concludes, will he briefly answer the point I raised. which was also raised by the noble Lord, Lord Bruce-Gardyne? Will the privatised gas industry be able to re-engage in those activities which in its nationalised form it was prevented by the Government from doing, and particularly will it be able to go back into oil in the North Sea?
Lord Belstead: My Lords, again we must debate this when we come to Committee stage. I am surprised that the noble Lord asked me this question. My reading of the proceedings in Committee in another place is that the Government were asked again and again why British Gas was to be allowed to go back into other operations apart from the supply of gas. It seems to me that the noble Lord is suspicious of that. I should have thought that this was something that we should want to encourage; but, as I say, perhaps we can discuss the nuts and bolts of this when we reach Committee stage.
When my noble friend Lord Boyd-Carpenter spoke earlier he reminded us of the hard-fought measure which brought the nationalisation of gas into being some 40 years ago. This Bill has been the subject of detailed consideration in another place, and we shall wish to subject it to close scrutiny in the coming weeks. If it is for the convenience of your Lordships, we shall place Notes on Clauses for the benefit of us all in the Printed Paper Office as soon as my noble friend Lord Gray and I can possibly do so.
My Lords, we believe that this is a Bill which offers the right regulatory framework for the future of the private sector gas industry. I therefore commend it to the House.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Airports Bill
Brought from the Commons; read a first time, and to be printed.

Prisoners: Aftercare
8.18 p.m.
The Earl of Longford The Earl of Longford rose to ask Her Majesty's Government whether they will take steps to improve the arrangements for the aftercare of prisoners.
The noble Earl said: My Lords, we have had many debates on prisons and prisoners in the last 30 years. The aftercare of prisoners has often been touched on, but I cannot recall an occasion when we devoted a whole debate to that subject. I admit that every now and then we have had an arresting discussion about it.
There was a debate in June 1961, 25 years ago, when Lord Montgomery made his maiden speech. He was following a report of a committee initiated by Peter Thompson who is now the director of the Matthew Trust. Lord Montgomery asked the question "What are we to call the present aftercare organisation?" Was it a shambles, a nonsense, a mess? He decided that those words would not do. The organisation looked like being a complete dog's breakfast, which was a favourite expression of the Field Marshal. The Lord Chancellor, Lord Kilmuir, inquired "A dog's breakfast?", not being familiar with the words. "A dog's breakfast", said Lord Montgomery, impatiently, according to the report. "You will not find in a dictionary. It is exactly the opposite of the cat's whiskers". That was Lord Montgomery on the subject of aftercare in the good old days.
Now we are in 1986, not 1961, and the organisation has been considerably hotted-up, developed and expanded. In view of the enormous increase in crime, which has certainly doubled since then, I would not say that the service rendered is obviously more adequate for the ex-prisoner. I am not going to argue that everyone who leaves prison should automatically be able to go to the state and say, "Please find me a job without any effort on my part". I am not a follower—I am afraid I am the opposite of a follower—of Mr. Norman Tebbit, with his idea of getting on your bike and so on. But at the same time I think there is a responsibility on the individual ex-prisoner, as there is on anybody else, to try to find work.
It happened that yesterday I was visiting a prison and I shared a taxi by chance with a man who had been in prison, although in a prison far removed from the one that I was visiting. I asked him what he was doing now. He said, "I am writing crossword puzzles". I said, "Are you making a good living?" He was making, apparently, a very good living. At any rate, he paid for my taxi, so I suppose that he was in clover. I said to him, "Why did you take this up?" "Well", he said, "I couldn't find anything else". Of course you can argue that anybody can make a living out of writing crossword puzzles. I gather that it only takes half an hour for you to write one, if you know the trick—and I learnt all this from him.
That of course is very creditable, but we must assume that most people have not got that particular gift and therefore the state has a heavy responsibility for helping people to find work for themselves. It is a hackneyed expression, a kind of cliché, to talk about our prison service as the Cinderella of the social services. That may be hackneyed, but it is true. Nevertheless, the aftercare of prisoners, I think, can be distinguished within the Cinderella as a Cinderella to end Cinderellas, though it certainly does not end them. It is certainly the most neglected section of the prison system.
It is not difficult to understand why this is likely to be so. It is fairly easy to identify the responsibility of the Home Secretary, and, under him, the Home Office, with the treatment of prisoners who are directly under his control. It is much harder to nail down the responsibility of the Home Secretary, whether Mr. Hurd or any other Home Secretary, for the many thousands of ex-prisoners who are at large in the world, though theoretically, of course, quite a few of those are under supervision.
As it happens, I have a high regard for the present Home Secretary, though I have met him only twice. Within a few weeks of assuming office, he gave a notable address to the New Bridge for ex-Prisoners. He discussed his general approach to penal problems in impressive terms but he did not attempt at that time—and that was soon after he came in last autumn—to indicate the way in which his thoughts were moving; and I hope that they are moving in regard to aftercare. I hope that we shall hear more from the Minister this evening as to how his thought is now proceeding.
For many years, the care of prisoners leaving prison was left to voluntary bodies. I am sure myself that there will always be a special role for voluntary bodies. There is indeed a general argument for voluntary action throughout the social services but I think that in the case of prisoners there is a special reason. Many prisoners, when they leave prison, are fed up with the whole world of restrictions, the whole official world. Usually when they have been to prison they have been themselves partly blameworthy, though they may have been kept in prison for too long and may not have been treated as well as they should have been. But, anyway, there they are.
They have been in prison; they have been pushed about, hardly able to move without getting somebody's permission for maybe a number of years, or maybe they have been in prison for the first time. They come out and they really do not want to have anything more to do, so far as they can help it, with the official world. That is where the voluntary bodies undoubtedly can make a special contribution. It is not the only contribution they can make but it is a special contribution in this field.
Many of us, looking back, campaigned for a number of years for the assumption of a large responsibility by the state for ex-prisoners. The year 1966 was a crucial one in that story. In that year, aftercare became the statutory responsibility of the Probation Service. From then on, every prisoner, in theory at least, coming out of prison was entitled to go to a probation officer and say, "Please help me". That did not exist before and I am putting it quite crudely; but there has been, on paper at least, a remarkable change since 1966.
Mr. Christopher, now chairman of NACRO, when he gave evidence on behalf of NARCO to an inquiry a few years ago said this, and it is rather interesting:
"In 1966 when aftercare became the statutory responsibility of the Probation Service and there were discussions about the future of NADPAS [which was the preceding body] I advocated the establishment of a new organisation—and with the support of Jack (now Lord) Donaldson".
I am very sorry, and I know that the noble Lord is very sorry, that he cannot be with us tonight. But with the support of Lord Donaldson, Mr. Christopher

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established NACRO. He is convinced, as I am, that there is a very big role for voluntary bodies in this field.
NACRO has done splendid work and so have other voluntary bodies, if I may say so: voluntary bodies such as APEX and the New Bridge which, 30 years ago, I founded with two friends and of which today I am president. We at the New Bridge are indeed fortunate to have as our chairman the noble Baroness, Lady Ewart-Biggs, who will be speaking later, and, as our director, Commander Charles Paterson, who brings all the flexible understanding of human nature that I associate with the Royal Navy. Of course I have nothing against the air force or against the army, but I just feel that that might be a naval quality.
I must leave other speakers to describe the work of their own organisations but I will just offer a few general thoughts and one or two concrete suggestions. The NACRO working group in October 1983 called for a new approach. I repeat that call this evening. There has been no sign of a new approach. I do not think that anyone can say that there has been a new approach since 1983. I think that we must just ask ourselves whether any new approach can now be worked out, adumbrated, even.
The ex-prisoner is a handicapped person, whether male or female. Ex-prisoners are handicapped in the first place by the temperament that landed them in prison for the first time, and possibly for the nth time. They are handicapped, secondly, by the experience of prison. I have known prisoners, even, if I may say so, very distinguished noble Lords, who have benefited from the experience of prison. But few of us suppose that even under an ideal system prison is likely to benefit rather than damage a man or a woman, especially if it is prolonged. Prisoners are handicapped, thirdly, by the stigma attached to ex-prisoners, some of which perhaps is inevitable but most of which should he avoided in a society claiming to be founded on Christian principles.
An additional handicap is the villainous attitude adopted towards prisoners and ex-prisoners by many elements in the press. They batten on the fact that it is impossible to obtain legal aid for a libel action and many are the lies peddled by papers like the Sun and a new entrant, Today. I do not suppose your Lordships read those papers, so that you do not quite know what I am talking about. But if you ever sink to the level of reading the Sun and this other one—what is it called? I think it is called the News of Today. No, it is not the News of Today. I am getting a little confused between the News of the World and Today. At any rate, your Lordships have got the picture.
Papers like those peddle these lies about prisoners and ex-prisoners, they hope, with impunity. Well, perhaps they will not always find the impunity that they look for. I say that some of the stigma is inevitable. When I was chairman of a bank I was often asked whether I would re-employ someone who had been convicted of stealing. I used to reply—and would still reply—that it would be unlikely that such a person would be well suited to re-employment in a bank in that particular occupation. But I expressed my readiness then, and I would do the same today, to interview personally anyone dismissed from the bank and to do my best to obtain for him alternative
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employment. Whatever happens, in my opinion we cannot shake off this responsibility for ex-prisoners. We cannot manage to dismiss them from our minds and assume that because they have gone wrong once, therefore, we are shot of them.
These handicaps as they exist today, whatever may be the case in an ideal society, constitute the framework within which we are carrying on this discussion. Most of us in this House, and indeed most of the public, are sympathetic to the handicapped; at any rate to some forms of handicap. The assumption—and it is, generally speaking, a correct assumption—is that they are not to blame for their handicaps. Today we have to recover our understanding of the Gospel message: Jesus Christ said that if one sheep is lost it is right to leave the other 99 and seek the lost one in the wilderness. We must take it that that was said without reference to the virtue or otherwise of the lost sheep.
Modern psychiatry comes in here to join hands with Christian tradition. There has been in this respect an advance in the last 20 years but it has gone along with a natural and understandable public hostility to criminals because of the terrible increase in crime. Serious minded people today are much less ready than they were some years ago to identify the goodies and the baddies. Whenever I try to help someone convicted of serious crimes—and I have been visiting prisoners on and off for 50 years—I ask myself whether I am quite certain that under his circumstances I should have behaved any better.
To come down to practicalities, let us look at one or two detailed points. I have given the noble Lord notice, and I shall not develop them too far because think he knows the points at issue. First of all, there is the ex-prisoner's financial situation. On release, prisoners serving over 14 days are eligible for a discharge grant which normally amounts to £27.50 or £64.20 for those who are homeless. The discharge grant is equivalent to, and paid instead of, the ex-prisoner's first week's social security entitlement. This point may be raised by other speakers, but I put it to the noble Lord that this is totally inadequate in view of the special needs of the prisoner when he first comes out. One can think of clothes or the funds necessary to look for a job. One can think of many peculiar features in the situation. I must ask the noble Lord whether he will at least take up with his noble friend the question of this grant.
The voluntary bodies, NACRO, NAPO and for that matter the New Bridge, have long argued that prisoners should receive a resettlement grant to take account of the financial problems and needs of the period immediately following release. It should be equivalent to the average weekly industrial wage. The noble Lord has had notice of that question and I hope he will be able to say something to encourage us.
Then there is homelessness. It has been estimated that over half of those discharged from prisons in London and the South East are "quite possibly homeless". Here I would deliver one sharp criticism of our rulers. There is a current cause for concern in the freeze since April 1985 of Home Office grants to new hostels for offenders. These hostels are run by voluntary organisations. The cost to the Home Office of the aftercare hostel scheme in 1983–84 was £4¼

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million, and this was about the same as running Bedford Prison in that year. Bedford Prison has an average prison population of 321, whereas the number of beds in the aftercare hostel scheme is over 4,000. Informed estimates suggest that at least another 1,500 places are needed. I would again, having given notice, ask the noble Lord whether he can say anything about relaxing the freeze on hostel places. I could also talk about employment, but I think other speakers will be able to develop that. There is obviously a crying need.
I would mention two other points before I close. Speaking now from the point of view of the New Bridge in particular—but all these points are generally common to the voluntary bodies—there has been a great development since I first became involved in the subject in befriending during imprisonment. When, with others, I first started the New Bridge, we were thinking entirely of the period after imprisonment; but now there is a great deal of stress being laid in the voluntary bodies on befriending during imprisonment. That is becoming ever more important.
What people in the New Bridge say depresses them at the present time—and my noble friend Lady Ewart-Biggs may speak in more detail about this—and depresses most people concerned with the subject, is the inadequacy of the briefing given to prisoners on discharge. Honestly, standing here I do not know who should take the main responsibility. There is no doubt at all that the ordinary prisoner is not at all clear in his mind how to proceed when he leaves prison. That is a subject to which a great deal more thought ought to be given.
Speaking on behalf of the voluntary bodies in a general sense—no one has asked me to speak on their behalf, but I have been involved with this for so long that I feel entitled to do so—naturally I do not deny that I hope much more financial support will be forthcoming not only for the New Bridge but for the other voluntary bodies in this field. The Home Secretary in the fine address to the New Bridge which I mentioned earlier ended on this note:
"The personality and commitment of those who serve in the prison service and the probation and social services, and those who work with voluntary groups such as the New Bridge, helping and befriending those released from prison and working with offenders in the community, are crucially important".
That was a tribute well paid and well received.
The present Home Secretary I accept as a man of exceptional ability. I once took him for an old Wykehamist, but that turned out to be a mistake. He is an old Etonian scholar, but some old Etonians would say that was the same thing. He is a brilliant and high minded man. Let us see what he can do for us all in this regard. Will he run his term—he cannot be there for ever—without doing anything at all for aftercare? Will he make a real impact on this subject? I hope we shall receive an encouraging answer from the noble Lord who is so acceptable on these matters tonight.
8.38 p.m.
Lord Hooson: My Lords, I am sure the whole House is very grateful to the noble Earl, Lord Longford, for introducing this subject this evening. Indeed, I could not help thinking as he opened his speech that while he
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has breath in his body we shall not be allowed in this House at least to forget our responsibilities to prisoners and ex-prisoners.
I was first interested in the problem of aftercare by one of the pioneers in this field, Merfyn Turner, the founder of Norman House, or Dr. Merfyn Turner as he now is, having received a well deserved honorary degree in recognition of his great services. That was in the 1950s. I remember visiting there in the early 1960s when, as I can well imagine, the late Lord Montgomery was entirely justified in describing the aftercare services as being a dog's breakfast. Certainly since that time a great deal has been done but in an ever-increasing field. No doubt the involvement of the probation and aftercare services—that is, their official involvement—and the system of grants for voluntary hostels run by voluntary bodies—although there is a freeze on that at the moment—have been of great value.
Many places have been provided for people who have come out of prison in the first instance, although there is a great deal yet to be done. Yet one has the feeling that the whole thing is a "first aid" approach. The problem is ever increasing, as are the problems facing ex-prisoners described so graphically and realistically in various documents—for example NACRO have issued Preparation for Release, the submission to the Inspectorate of Prisons, and The Re-settlement of Ex- Offenders, and similar documents. I suppose that if one were to continue simply with the first-aid approach—and it needs to be continued in any event—the whole service would need more money. It needs greater personnel and greater involvement by the voluntary bodies, and in particular their involvement at an earlier stage within the prisons so that they know exactly who they are dealing with and what problems they are going to face.
I am sure that there is much greater scope for the involvement of voluntary bodies and individuals who can be persuaded, through the various voluntary organisations, to take an interest in ex-prisoners. As the noble Earl, Lord Longford, so graphically pointed out, the problems facing ex-prisoners within the country, whether they are first-time ex-prisoners or whether they have been in and out of prison for many years, are enormous. I feel we tend not to appreciate fully the problems that they face.
I have no doubt whatever that the change from the hostel idea to the house idea has a great deal to commend it. Norman House always made a tremendous impression on me and, in particular, their idea of the second-stage house. The second-stage house is the old Victorian parsonage somewhere in London which was adapted as the second house, where ex-prisoners lived together, having passed in the first stage through Norman House. They formed a community. They were, and still are, self-supporting through their own earnings. I believe that these days they do not even have resident housekeepers or anything like that. There are 14 ex-prisoners at a time there. Some have been there for a long time; some went on to some success (there were even two, at least, professional successes from the house). Others lived very sensible, useful lives and still do. Some died there, and others were recidivists and fell by the wayside.

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I am told that the first quality one needs if one is absorbed by this kind of work and becomes one of those people who are dedicated to helping in the aftercare service is to get rid of any over-optimistic ideas one may have. One must be prepared realistically to face the fact that what the ex-prisoner really needs is a friend he can phone, can rely on and take advice from. Very often there is really nothing more one can do than that, because one must gradually build up self-respect, confidence and so on.
However, to return to the second-stage house, I think it is right to say that the ex-prisoners fund themselves and that by and large they have been successful, although of course there are bound to be people who fall by the wayside. I think the extension of this idea could be very beneficial.
There has been a freeze on the grants for hostels. I hope the Home Secretary has also been looking at the possibility of voluntary bodies being able to set up not so much hostels as houses, where people can be under the maximum pressure to restructure their own lives. It seems to me that is the key. When people have been institutionalised for so long, as many have, it is very important that they be given the maximum opportunity to restructure their own lives and to find themselves within a society. Within the second house they have a society entirely composed of ex-prisoners, where they can support each other.
I should like to broaden the approach to this debate a little. What are we trying to achieve with the whole penal system within this country? The Victorians at least had a theory about it. They had a purpose. The idea was that there was a large stone cell where a man was kept on his own—though we put three or four in such cells now—and where he could communicate with his Maker. There was the belief that that was important. The Victorians had a belief and a policy with regard to their penal system. Indeed, when I started at the Bar there was still an optimistic approach on penal policy and there were still a considerable number of idealists around who wanted to achieve reform, or something, within the prison system. They wanted to reform the inmates, and so on.
What is the present approach? Is it merely containment? What is it? In this country we are so ignorant, I find, of experiments that have been conducted in other countries. We think that we have been in the vanguard of development of prisons, whereas in fact we have been left behind years ago. May I suggest that we are approaching the stage where one should have something like a Royal Commission to look at the whole question of the penal system within the country, to ask: what are we trying to achieve and how are we going to achieve it?
May I suggest, for example, that consideration should be given to the aftercare service being made part of the prison sentence? Perhaps I may just illustrate what I have in mind. So many problems arise from what may be called the almost dedicated prisoner, who may be in and out of local prisons—in for 12 months, 18 months or two years; then back for six months, and then probation, into community service and back inside again. There are many of them today.
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Suppose we had a sentence of 12 months, structured in such a way that the first four months were served within a local prison in confinement and the second four months were served in open or semi-open conditions. That is, we could have camps where they could do work for the benefit of the community. As an example, prisoners serving part of their sentence in Finland do a great deal of work on the roads. In Portugal they do a great deal of work on helping to restore or build municipal buildings. Where is the comparable effort in this country?
I suggest that the third period of four months could be spent in preparation for eventual freedom, in trying to restore a position within the community and getting accustomed again to ordinary civilian life. I suggest that the sentence should be structured in that way, so that every prisoner really is subject to almost a compulsory preparatory stage, instead of the voluntary aftercare which occurs at the moment. Then we could take it even further than that at a later stage.
The truth is that of course within the prison system there is an aristocracy of prisoners, as we all know; and they will have nothing to do with the aftercare service. Others, by and large, are interested in what they can get out of it: one cannot blame them for that. Some of them know how to run the system and I cannot help thinking, when reading some of the NACRO reports, that when one pushes for additional money and although they do need money, very often when a fellow has just come out of prison and has been given £60, he will probably blow it straight away. Let us be realistic about this. Some need money and will use it sensibly but many others will not. That is one of the problems. There has to be, I think, a graduated system of getting them ready to be involved again in ordinary life.
The truth is that, save for one other country in Western Europe, we have a higher proportion of our population in prison than any other country. It really is time, from the point of view of our own self-interest, that we had a broad look at the whole penal system, including aftercare, to see what we can do to make sure that we hand on to the next generation a better-thought-out system than we have endured during this generation.
8.49 p.m.
Lord Hunt: My Lords, in his opening remarks the noble Earl, Lord Longford, said, I think, that the subject we are debating tonight has been touched upon from time to time but that this is the first time that it has been looked at in depth. I looked through Hansard for the past three or four years to check my facts, and I think he will agree with me that the wider subject of what to do with offenders while in prison and after, and whether or not they should be in prison, has come up quite frequently. It is a frequent topic in your Lordships' House. I believe we shall be discussing it again next week under a different guise.
That all seems to be a measure of the importance of the subject and the concern felt by a number of your Lordships, and of the perplexity as to what we are doing, whether we should be doing it as we are—the conviction of many of us is that we should not—and what should be done about it. We should therefore be grateful to the noble Earl, and we should be grateful to

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my noble friend Lord Hooson for his interesting remarks. He may be interested to know that when I first thought about what I should say this evening I had in mind to develop the very thought that he put forward. I am glad that he did it, because I shall cut it out of my speech.
The noble Lord put forward the idea of a two-stage sentence. In a certain form that originated in proposals made by Home Office officials some three or four years ago. I believe that it was in the run-up to the Criminal Justice Act 1982. The idea has been developed in speeches in this House, and I am particularly interested in it. This evening, however, we are talking about the situation that we are in and the need for aftercare.
I do not intend to repeat what has been so clearly and so cogently said by both noble Lords about why prisoners need more help on leaving prison than they are currently receiving, but I should like to stress the compelling practical argument for providing it. It is in the public interest, not just that of individual prisoners and not just on the grounds of homelessness. In one form or another, we should be spending much more to help ex-prisoners settle back into the community from which they came. I suggest that our main concern this evening should be about those who go frequently to prison—recidivists—in particular for persistent offences against property.
The cost involved in developing and putting more resources into aftercare would be more than compensated by the staggering aggregate of costs involved in the whole process of the commission of crime—the loss to and compensation of victims; the cost incurred by the police in investigation, in arrest, detention and prosecution; the judicial costs of the trial; and, most significantly, the sheer cost of keeping a prisoner in custody. I believe that at present it is £250 a week.
Research, including Home Office research, does not support the statements that have been made by some people, including politicians who should know better, that crime cannot be attributed to homelessness and joblessness; or, put the other way round, that not having a job and going out without anywhere to stay is not conducive to crime. I am the first person to say that that does not justify crime, but research has clearly shown that it is conducive to crime.
I do not think that many people sufficiently accept that prison alone as a punishment is not a deterrent for more than a very few people, and especially for recidivists. On the contrary, the more often they go in and the longer they stay the less able they are to cope in the community when they come out.
We are perpetuating a vicious and expanding circle of repetitive crime. There is an urgent need to break out of it. The point was particularly well made by the director of NACRO in a letter to The Times on 3rd May 1984. Vivian Stern, the director, was commenting on the Home Office statement of the national objectives and priorities for the probation service. I should perhaps have made it clear that I am particularly concerned with the probation service. Miss Stern said:
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"If society genuinely wishes to reduce the offending of ex-prisoners aftercare must not simply be an afterthought".
The National Association of Probation Officers commented on that same statement. I will not quote them, but they made the same point at greater length.
However I will quote, with his permission, from a speech made by my noble friend Lord Harris of Greenwich when he was speaking in a debate on an Unstarred Question asked by the noble Lord, Lord Wells-Pestell, on 16th May 1984. Again, the subject was the Home Office statement published on 1st May 1984 on the probation service's objectives and priorities. Lord Harris said:
"If we are going to try to reduce the number of people who get sucked back into prison after a relatively short time in the community, I believe that it is absolutely essential that people at risk"—
that is, people at risk of re-offending—
"emerging from prison … should get all the help that the probation service can give them."—[Official Report, 16/5/84; col. 1481.]
I do not suggest that it is exclusively the probation service that should be involved. Your Lordships all know of the very good credentials in this field of Lord Harris. At that time he was speaking as president of the National Association of Senior Probation Officers.
I could go on quoting. I could quote from the Tory Reform Group's document Imprisonment in the '80s, which was published in September 1983, but I am not sure where the Tory Reform Group stands in the popularity polls of the party opposite.
Lord Harris pointed to the probation service. As the noble Earl mentioned, for something like 30 years it has been the main agency for providing statutory and voluntary aftercare for ex-prisoners. Until quite recently its main responsibilities were reflected in its title. It was the Probation and Aftercare Service. I admit that the shortening of that title made it much less cumbersome to deal with, but I sometimes wonder whether the very reference to "Aftercare" is not objectionable and seen as "wet" by many supporters of the party opposite and other people in the country.
From certain views that have been expressed, the inference is all too easily drawn that the punishment of prison is perceived as not enough and that offenders must suffer the consequences of their misdeeds through continuing disadvantages in the community, even when they have completed their custodial sentence. In so far as that is true of some points of view, I say that it is not merely unjust, it is sheer folly. The fact is that we cannot sensibly separate, or place in a descending order of priority, the main functions of the probation service, the main service about which I am talking this evening, as the Home Office policy statement purported to do: advice to the courts; social work with prisoners during custody and with their families; supervision of offenders serving sentences in the community; and, of course, aftercare for ex-prisoners. These are an inseparable, and all of them equal in importance, sequence of duties; and to a large extent they complement one another. To state the obvious, aftercare is the necessary helping hand back into the real world after the unreal world of prison.
The help needed is increasing. The noble Earl made that point. It is increasing greatly. Lord Windlesham, the current chairman of the Parole Board, told me the other day that homelessness among prisoners being

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assessed for parole amounts to rather more than one-third of the total number being assessed, and something like 10,000 prisoners are assessed for parole every year. I understand also that homelessness has increased by some 70 per cent. during the past six years. Therefore, if the Government genuinely wish to break this vicious circle of crime, one essential step is to restore the higher priority for aftercare to the probation service.
To conclude, I have some questions within the noble Earl's Unstarred Question. Will the Government review their statement of 1st May 1984 on the priorities of the probation service, in terms of its staffing and resources, taking into account the arguments advanced about the importance of this subject of aftercare during this debate?
Turning to the wider issue, which my noble friend so wisely developed briefly in his speech, will the Government consider again the case for giving higher priority to all non-custodial measures, as well as post-custodial measures, to deal with crime, taking into account, if nothing else, the contrasting costs of custody on the one hand and treatment in the community on the other?
9.1 p.m.
Lord Kagan: My Lords, I shall try to avoid repeating what the noble Earl, Lord Longford, and the noble Lords, Lord Hooson and Lord Hunt, said, except to emphasise that the extension of voluntary help to the probation service is the answer, particularly in the case of young people who get sent to prison. We must accept that, before going to prison for the first time, most young people lack parental control and reject school control. They grow up finding their own way, surviving and making their own decisions. But within 10 minutes of going into prison they are deprived of all possibilities of making any decisions. Every decision is made for them and they are then in a complete moral vacuum. Once they have served their sentence and are allowed out, they are in exactly the same position as a man coming up from the deep-sea to the surface without a decompression chamber.
The answer must be an extension of the probation service into the voluntary sector—and I know that noble Lords opposite approve of privatisation. I am sure that many retired people—ex-teachers, ex-bank managers, ex-churchmen and so on—who have a lot of time to spare and little interest with which to fill it, would volunteer lo serve under the aegis and with the co-operation of the probation service.
The important point is that they should enter the life of the prisoner almost on the day that he enters prison, and not afterwards. He would then have help from psychologists and the probation service. Incidentally, there should be more autonomy for the probation service, because at the moment it is looked at in prison as either a necessary, or an unnecessary, encumbrance. At some point it will become apparent which volunteer reacts well to the prisoner and gets response from him. From that moment on a relationship will develop between them.
The disadvantage of the professional probation officer is that every now and then he is changed or the prison is changed, and it is a continuation of the relationship which matters. That person would be a
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link between the prisoner and his mother, his sweetheart, his family or whatever, and he would create hope and a vision of help at the end of the tunnel. In that way, the prisoner would be guided, through the facilities which exist in prison for training, into learning a job or a skill, and through that link with the outside world would find somebody who was prepared to offer him a job. He would then be integrated slowly, steadily, safely and reliably into society, instead of being jettisoned, as now, out of prison and back to the old environment, where he may drift back into recidivism.
This is nothing new. Strangely enough, in the First World War and during the Russian Revolution, when 6 million adults were killed during the terrible massacres that took place, there were hundreds of thousands of orphaned children adrift who did not know their origin. They were inherited by the state and were called bezprizornie. The Soviet Union did not handle the problem with a lot of cash, because they did not have it. In those days, socialism was still an ideal. But they gathered the children together in schools and then assigned to each child an adult who befriended him or her and who related to them. It is remarkable how well that system worked.
This is not a new experiment. It is not a question of pouring more and more money into the prison service. It might be a good idea to offer to the prison service ex-teachers, rather than continue what is happening now. As the noble Lord, Lord Hooson, pointed out, you would have to change the system. There needs to be a whole fresh look, also, at the relationship with the prison officers. But the key is to identify a person who will act as a moral bailee, or as a moral relative, and who will help the inmate into his future life.
My other suggestion is that if a Royal Commission comes about it should spend quite a lot of time looking at Holland, in particular, as well as at Sweden and Denmark. They have a different attitude in Holland towards prisons, because during the German occupation a lot of people were imprisoned and it almost became a hallmark of respectability to have been in prison. A lot of people who collaborated with the Allies went to prison. The prejudice which exists here does not exist there. One thing is a fact: they have a smaller proportion of the population in prison and make a better job of rehabilitating them. Thank you, my Lords.
9.8 p.m.
Baroness Seear: My Lords, last year at the request of the Howard League I had the privilege of carrying out a small study (much aided by professional assistance) into the question of women in prisons. I am not suggesting that the problems of women and the problems of men are in this matter necessarily identical but I doubt whether the differences are really very great. Until that time, though I was chairman of APEX and therefore at second hand had some knowledge of these questions, I frankly would claim to have no knowledge of this subject. As we would say in the academic world, crime was not my subject. What struck me overwhelmingly was the difficulty of finding out what we thought we were doing by locking up so many people in prison.

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I started the study with some questions which are the questions that one would ask in any comparable study in any other sphere: what are the objectives of what we are doing; how are we trying to achieve those objectives; and with what success? Frankly, I think that the objectives of locking people in prison are extremely confused. I do not believe we have a clear idea why we do it. We have a crime problem; we have prisons; and we put the two together. That is about all there is to it. So I would agree very much with my noble friend Lord Hooson that we need a much more fundamental look at the whole question of how we really think we ought to be dealing with the problem of crime and what the purpose of prison is anyway. But that is not the subject we are discussing tonight, though I want to take the opportunity to underline the importance of doing this because it is fundamental to the whole issue.
Tonight we are looking at a narrower and more immediate question about which, without a Royal Commission and indeed without any considerable delay, I believe we could do something and make some contribution at the present time to what is obviously a crying need. Much of what I want to say has already been touched on by other speakers. While in the House tonight there is a good deal of agreement on the point made by the noble Lord, Lord Hooson, we are deeply confused about what we are doing with the use of the prison system. There are in society at large a very large number of people who continue—perhaps because they have not thought very much about it or have not had the opportunity to examine it very much—to believe that shutting people up in prison is the right response to crime. It is a little depressing to know that a large amount of money which could be used in so many other ways is being spent on putting up yet more and more prisons.
Whether we believe in locking people up or whether we believe that this is fundamentally an inadequate response to the problem, there is surely one point about which we must all be agreed: that it simply is not sensible to have a system which has so little effect that people return again and again to prison. As my noble friend Lord Hunt has said, we have a very large problem of recidivism. When I was talking to the governor of Holloway and I used the word "deterrence", he said, "Don't talk to me about deterrence. These people are old friends. They keep coming back". A probation officer in one of the prisons said, "Of course they come back; they simply cannot cope outside". When you have a prison population in which plus or minus 50 per cent. of the people have been there before, there is surely something pretty badly wrong about the arrangements we are making for people after they come out.
There are all kinds of ways of reducing the prison population, but the simplest would be to take steps to reduce the number of people who for one reason or another find their way back into prison after they have been released. As the noble Lord, Lord Hunt, said, to put it at its most hard-nosed level, the cost, as we know, to keep someone in prison is between £200 and £300 a week. That varies, I know, according to different prisons, and the figure is no doubt going up all the time. It surely means that if we can take effective
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steps, by stopping the return of people to prison, to keep them out of prison, that would release money in order to do things in the preventive and aftercare fields which would assist in reducing the numbers. I shall be told—and this is correct—that to some extent it is only a marginal cost and that therefore each prisoner you get out of prison does not save you £300 as the overheads go on. But still it is a considerable saving if you can reduce the number of people who are in prison.
The kind of thing I have very much in mind has already been touched upon, but it came across to me powerfully when I was with the governor of another prison who was saying goodbye to women leaving. There was one woman in her thirties who was not of above-average intelligence. He asked her whether she had her railway ticket, to confirm that she had lodgings arranged in Putney, and whether she had her £60. She replied yes to all three questions. The governor then asked her, "When you get to Euston, what are you going to do?" She replied, "Take a taxi".
I made a quick calculation, as one who takes a taxi all too often, and it was not difficult to predict what the situation was likely to be in respect of that woman in a fortnight's time. A woman such as that needs—does she not?—someone who is prepared to be at the railway station and to take her on the tube instead of in a taxi; someone who could be at the end of a telephone or on whose door she could knock; someone who could keep in touch. One would not need high-powered people to do such work. We already have probation officers' aides. Can we not have more of them?
I am not suggesting that everybody needs such aftercare. Some prisoners will have kept in regular contact with their families. They will go back to their families and will either return to old jobs or obtain new jobs. Such people want to forget all about prison, and that is fine. Aftercare should not be compulsory, but there is a need in some cases for a person who will befriend the prisoner; someone whom the prisoner can get to know, especially over the first two or three months; above all, someone who could help prisoners to obtain some kind of employment and to keep their lodgings.
What happens otherwise is that the social security money only just meets the rent and a bit over. The discharged prisoner then runs out of money and cannot get a job. Sooner or later, they commit some foolish act and find themselves back in prison, with, as one probation officer said to me, some relief on their part because many of them find it is just too difficult to cope in the outside world.
I cannot believe that it would be too difficult to provide aftercare of the kind I have described. I recognise that it is first aid, as my noble friend Lord Hooson said. However, it would surely be useful and in the long run it would be inexpensive first aid. That is one of the first proposals I would urge upon the Government, and it could be implemented quite quickly.
There should be much greater help for people in the way of personal contact and personal befriending, with the helper being able to give assistance with the absolute basics in regard to travelling about, getting

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and keeping accommodation, getting and keeping human contact and preferably getting and keeping employment. In these days of unemployment, for a person who has a prison sentence and who had little to offer in the way of skills before he went into prison, the chance of getting a job after his discharge is pretty bleak.
The second thing I would urge is this. Here I am speaking more as the chairman of APEX, and I should like to pay tribute to the Home Office for the help that APEX has had and in anticipation of the further help it hopes to get. APEX and similar bodies, such as NACRO on a much larger scale, arrange the provision of small training units where young offenders can go to. APEX has 11 such units and NACRO has a great many more.
At those units, young offenders can be trained in skills and they can establish human relationships with people who can counsel them, help them, drive them and assist them in obtaining jobs. I am glad to say that APEX has a good record of getting work for people who have attended such establishments so that they can get into employment, earn some money and get a foot on the ladder again. That, above all else, is what will stop such young people from going back to prison. From society's point of view, as well as from the point of view of the people concerned, that is surely what we want to do.
What I am asking at the present time is for the extension of the probation service so that there is personal contact, increased help and a training establishment which can offer skills and assistance with obtaining employment and which can at the same time (because this is an important part) provide the personal contact and friendship that people in such circumstances need above all else.
9.19 p.m.
Baroness Ewart-Biggs: My Lords, as my noble friend and other noble Lords have said, it is certainly not by a long chalk the first time that my noble friend has brought up some aspect of our penal system for debate in your Lordships' House. I know that all of us who are concerned with this particular part of our national life are always grateful to him for his perpetual commitment, though I must say, by the look of the Government Back-Benches, that perhaps he has not hit on a favourite topic so far as they are concerned.
I think it would be right to say that never before has my noble friend succeeded in making a debate on this subject of the aftercare of prisoners coincide with a time when all seems not to be well within our prison service. Indeed, the situation appears to be very serious at the moment and what is happening must be proof of certain failures within our penal system. First of all, we are faced with a situation in which the prison officers feel themselves to be under such pressure that they can no longer continue to carry out their duties. Secondly, there are a record number of 46,300 prisoners in custody in England and Wales and an unacceptable proportion—a fifth—of those prisoners are unconvicted and awaiting trial. The last statistic I shall give your Lordships is the reconviction rate within two years following release, which for adult men was as high as 58 per cent. in 1981. For young
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offenders, the reconviction rate is even higher, of course.
As noble Lords have already said, those rates are not altogether surprising if we consider the circumstances in which many prisoners are released. If any of us in this House found ourself suddenly on the streets tomorrrow without accommodation or a job, perhaps friendless and with the equivalent of only one week's social security payment in our pockets, how would we cope with the situation? Moreover, ex-prisoners who find themselves in this position also face another serious problem, which is the stigma of having served a prison sentence. So when we consider this state of affairs we can only ask ourselves what has gone wrong, and the noble Lords, Lord Hooson and Lord Hunt, have already asked that question.
I am reminded of a very telling comment made a few weeks ago by Her Royal Highness Princess Anne when she was presenting the awards for the newly established Butler Trust. She referred to the "forgotten service", regretting the fact that we do not regard our prisons in the same light as we regard our schools and hospitals. She said:
"When offenders are put into prison most people forget about them, or would like to forget about them. However, it is expected that these offenders will emerge as changed people".
And she concluded, "How, one might ask?" I felt that that was a very sensible remark for Princess Anne to make.
Surely all the evidence at present points to the tact that the penal policy of this country is still heavily prison-based. Public attitudes are consistently and crudely influenced, and indeed coarsened, by many reports in our national press which focus wholly on horrific crimes that have been committed and the punishments that are meted out, and the call for retribution seems to be the order of the day. Only this morning I read in my newspaper that no less a person than the chairman of the government party, in an address that he gave yesterday in St. James's church, called for stiffer sentences to deter crime. This was inspite of the fact that, as every speaker tonight has said and as I hope to show, stiff sentences without the inclusion of remedial measures in prison do not deter.
Surely this must point to the need for a major shift in both emphasis and resources away from custodial toward non-custodial measures. My noble friend is asking for this in his Question this evening. He is asking for an improvement in the arrangements for the aftercare of prisoners because it is both humane and the only constructive way of dealing with those who offend so as to restore them and enable them to fill a useful place in society.
I was very glad to hear the noble Lord, Lord Hooson, speaking about the wider principles behind our penal system and what we were actually trying to do, whether it was a matter of punishing more people and building more prisons or whether there was another objective behind it. The noble Lord, Lord Hunt, spoke about attitudes. I agree that at present our values seem to be that those who talk about prevention or remedy are considered rather wet and that punishment is considered more appropriate.
I should like for a few minutes to put forward some ideas relating to how the aftercare of prisoners could be improved. It has to be recognised that aftercare

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begins when the offender is first put into custody. This has already been mentioned by the noble Lord, Lord Kagan. He confirmed that in order to help a prisoner to reintegrate into society on release, preparations for the release should start early in his sentence. For instance, as NACRO so clearly showed in its excellent submission called Preparation for Release, there should be an initial interview for prisoners on reception to identify problems needing immediate attention. If a prisoner had a house tenancy, inquiries might be made to see whether the tenancy can be kept open for the time when he is released.
He might have a job that could be kept open. If the crime for which he is in prison is related to drink, drugs, a sexual offence or gambling, some counselling or therapy might be usefully undertaken. The prisoner might be asked whether his dependants are cared for and inquiries made into simple issues such as whether the gas and electricity were turned off. I should have thought that this schedule for prisoners immediately on imprisonment was extremely practical.
Following that, a planned programme of activity during his sentence should immediately be devised with the aim of minimising the brutalising effects of imprisonment and ensuring that the prisoner, when released, takes a constructive place in society. The New Bridge that my noble friend, as he has said, set up many years ago and of which I am now fortunate enough to be chairman, provides an important service. It is a befriending service. The noble Baroness, Lady Seear, mentioned the great need for the befriending of prisoners during their sentence and after their release. We have 125 voluntary associates regularly visiting prisons in various parts of the country. Sometimes they represent the only link that a prisoner has with the outside world. They remain in contact, if necessary, to ease the prisoner's way back into the community. Strong links can be established. Indeed, one of our voluntary associates married the prisoner she had been visiting. So we could not have done better than that.
While talking of the crucial importance of a link, I cannot resist commenting upon what in my view is one of the worst aspects of the prison system though it is not actually concerned with the subject we are discussing. I believe that our policy over visiting in prisons is completely destructive. I do not see how sentenced prisoners, on the basis of 13 visits a year of half an hour each, can keep in touch with a wife, how they can plan to build a life again together during those hasty half-hours and how children can possibly maintain a link with their mother during such minimal visits.
In other countries, visits are actually encouraged. Sometimes this is simply to keep the prisoner in food. Nevertheless, visits are encouraged. They enable the prisoner to maintain a vital link with his family for the time when he comes out of prison. I feel that our visiting policy is not only inhuman and very primitive, but also completely stupid and counter-productive.
The last stage of throughcare, as I think it is called by some organisations, is what happens immediately prior to release. Here again, one must pay tribute to the recommendations in two excellent NACRO documents, the one I have already mentioned and
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another called The Resettlement of Ex-Offenders: Towards a New Approach. However, as has already been said, from their experience of newly-released prisoners New Bridge believe the briefing on discharge to be totally insufficient. There clearly is a case for greater co-operation between the prisons, voluntary organisations and statutory bodies to ensure that offenders are as well equipped as possible before they leave prison. Otherwise, once they are released it may be too late.
Finally, perhaps I may say a word about the major problems facing prisoners when they are released from prison, and what more could be done to assist them. Previous speakers have touched on several of these points. There is general agreement that the worst difficulty which they face is over accommodation. We have already been given the figures for prisoners who are homeless on release. There is no doubt that homelessness is closely connected with reoffending. One can see that, without accommodation, discharged prisoners have problems in claiming social security benefits. They find it difficult to get work, and totally impossible to establish themselves in normal life.
The second major problem is employment. Here the New Bridge has a very high record in finding jobs for its clients. There are three London offices and as many as 45 per cent. of the ex-prisoners who come to New Bridge for employment are found jobs. One must very much admire some of the employers who go out of their way to give work to an ex-offender. Fortunately the relationship between the New Bridge and those employers is a very close one.
Thirdly, there is the very tight financial situation in which an ex-prisoner finds himself. This again has been touched upon. The sum of £64.20 is not very much when one thinks of the initial expenses that he will have in order to try to get himself established. He will have fares to pay in order to look for a job, newspapers to buy and telephone calls to make. That small amount of money will disappear very quickly indeed. I would wholeheartedly support the suggestion which has been put forward by NACRO that there should be a resettlement grant given to all ex-offenders which would be equivalent to the average weekly industrial wage. It would at least mean that an ex-prisoner would not re-offend because he had not one single penny in his pockets.
Arising from these problems facing prisoners I should like to end by putting the following points to the Minister. I had meant to give him notice of these points but I was unable to prepare them in sufficient time. I would therefore ask the Minister to listen to the points I have to make. I hope that the noble Lord will take them seriously. Some are those which have already been put to him. With regard to the accommodation problem, NACRO is most concerned about the fact that the new hostel grants have been frozen. It is awaiting with anxiety the review of the aftercare hostel scheme, which I understand is long overdue. Perhaps the Minister will be able to give us news of that. NACRO believes that 1,500 more hostel places could be filled.
Secondly, in view of the employment problems, it is important that all prisoners eligible for a place on the Community Programme should take it up

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immediately on release. I think that everyone feels that the crucial period is immediately after release. If that can be filled, then the risk of reoffending is lessened.
Many prisoners are not aware that in order to take up these community places they have to have registered as unemployed two months previously. It should therefore be part of the Prison Department policy to tell them of their entitlement to register, because being in prison is equivalent to being unemployed. In many cases they cannot take up these places simply because they have not registered as unemployed.
Although many prisons carry out the checklist proposed by NACRO about which I spoke previously, both on arrival and on departure from prison, not all prisons do so. NACRO would like to see the carrying out of these checklists as part of Prison Department policy. That again is a very practical suggestion.
There is one other small point which I should like to mention. I do not see why one cannot remove the small problems that face prisoners. One is that when they take the Giro cheque representing their grant to a post office they very often have no means of identification—for instance, a birth certificate or some such document. It would seem to be possible for the prison to give them, on discharge, some kind of document or piece of paper which would represent a form of identification.
As all noble Lords have said, I wish that the Government would recognise how very cost-effective is the work of the voluntary organisations concerned with aftercare, especially in comparison with the enormous cost of maintaining people in prison. The New Bridge receives a very small allowance. It now looks as though we might be penalised because we have gone to the private sector to raise more money to finance a further befriending service at the youth custody centres and also to extend our employment service. As we have succeeded in raising some money, which we are using, we might receive less money from the Home Office, which seems to be a very great injustice.
Therefore, I hope that the noble Lord the Minister will listen to what we have said today. We have asked what is the purpose of prison, what place aftercare has in the process, and whether the Government will give aftercare a higher priority in that process. As I say, I hope that the Minister will give us an encouraging answer.
9.36 p.m.
The Parliamentary Under-Secretary of State, Home Office (Lord Glenarthur): My Lords, I join with those others who have expressed gratitude to the noble Earl, Lord Longford, for providing this opportunity to discuss the Government's role in assisting former prisoners to resettle in the community following their release. I am especially grateful for the opportunity that it affords to mention the efforts being made to prepare them for their release because, as the noble Baroness, Lady Ewart-Biggs, and the noble Lord, Lord Kagan, said, that is where the work must start. I can assure the noble Baroness, Lady Ewart-Biggs, that I have listened with great care and interest to the views that have been expressed, and I am grateful to the
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noble Earl, Lord Longford, for giving me notice of the points that he intended to raise.
The noble Lord, Lord Hooson, made some interesting observations about how the penal system generally should be developed, and he was joined in this to some extent by nearly everyone who spoke in the debate. I took note of what was said by the noble Lord, but the penal system does not stand still. It has developed over the years. A number of innovations have been created over many years, some of which have been quite recent, and the penal system will continue to develop. We note the developments that occur abroad. However, not all the circumstances in other countries are comparable, and, as I think the noble Lord acknowledged, that whole question goes considerably wider than the Question on the Order Paper.
The noble Lord, Lord Hunt, followed the noble Lord, Lord Hooson, and to some extent so did the noble Baroness, Lady Ewart-Biggs, on the same broad theme. The cost of imprisonment is substantial. but the social reasons that lead to an increase in crime, which has led to an increase in imprisonment over a few generations, are deep. They have taken a long time to develop; they are difficult to analyse; and they will take time to put right. Nevertheless, we must tackle them on a variety of fronts.
However, despite the statistics on prison population which have been quoted by your Lordships this evening, the phenomenon which we have in this country is not peculiar to Great Britain. The noble Lord, Lord Kagan, referred to Holland, and I have to say that in January I visited Holland and saw the good work that they are doing there. I agree that to some extent it is different. Nevertheless, the noble Lord will recognise that the prison population in Holland is growing substantially and they are also undertaking a substantial prison building campaign.
Non-custodial sentencing is important. It is something that we stress. Sadly, when one visits particularly the youth custody centres one sees that these young people have had nearly every conceivable sort of non-custodial sentence imposed on them before finally they are placed in custody. It is regrettable and it goes a lot deeper than we have been able to cover in this debate, but nevertheless I value the points that were made.
As the noble Lord, Lord Hunt, said, many prisoners have experienced difficulties in one or more of the key areas of homelessness, unemployment, social isolation, lack of basic education and lack of marketable skills. This debate provides an opportunity for me to mention the considerable efforts being made to prepare prisoners for their release; efforts which are aimed mainly at those problem areas.
One of the means of providing help is through courses which have been set up in more than half of the prison establishments in England and Wales. Life and social skills courses or pre-release courses are often included in the education programme, but others are organised and tutored by prison officers and probation officers. The courses tutored by prison officers, who receive special training for this task, are a relatively recent development and they are now running in more than 20 establishments. Care is taken to ensure that

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the syllabus of each course is tailored to reflect the needs of the prisoners taking part, and, in addition to sessions on communications and relationships, subjects covered include looking for a job, personal budgeting, finding accommodation and personal problems such as drug misuse, drinking and gambling.
Although it is not always possible to provide places on courses for all the prisoners who wish to take advantage of them, advice and assistance with specific problems relating to release is always available on an individual basis from staff working in prisons, including prison officers and probation officers. One should add to that that it is important that the prisoners themselves take up the opportunities offered to them at every stage of their prison life.
It is our policy to extend the availability of prerelease courses run by prison officers as resources permit. In addition, the physical education branch of the prison service runs courses for all types of inmates, not only those who are gifted physically. As a result of this there are encouraging instances of prisoners gaining full or part-time employment in jobs teaching disabled people to swim and, via the community sports leaders award scheme, organising groups in deprived urban areas.
An important responsibility of the prison service is to enable prisoners to retain links with the community and, where possible, to help them prepare for their return to it. One of the ways in which this is done is through the home leave scheme. The scheme enables prisoners to spend a few days away from the prison, either at home or in lodgings or a hostel, in conditions of complete freedom. This display of trust goes some way to help to restore self-confidence, and gives prisoners the chance, for example, to contact prospective employers. Overall, home leave can play a useful role in preparing a prisoner for return to life outside and also in helping him maintain family contacts and friendships.
I should at this stage make clear that home leave is not an entitlement; it is a privilege. Prisoners may apply for it. Whether it is granted depends upon a number of factors, including the prisoner's behaviour to date and the prison's assessment as to whether he can be trusted to return to prison on completion of the leave and to refrain from crime while on the outside. This careful approach must surely be right. It would be wholly wrong to release temporarily any prisoner in whom such confidence could not be placed.
At that point I have to draw a little on what the noble Baroness, Lady Seear, said when she referred to the inadequacy of aftercare, because one has to remember that some prisoners are wicked. That is why they are there. Therefore, it is important when one is considering the development of leave systems that the population at large are protected from what might go wrong should that unfortunate event occur.
It is for that reason that Category A prisoners are not eligible for home leave. But not all non-Category A sentenced prisoners are eligible either. There are other eligibility restrictions too: the most important is length of sentence. The scheme is confined to medium and long-term prisoners, partly for resource reasons but also because the longer the sentence the more likely
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the prisoner's family ties are to suffer and the greater the help he will need to maintain them and to prepare for his release.
The report of the Control Review Committee Managing the Long-term Prison System recommended, among other things, that certain aspects of regimes in establishments in lower security categories should be enhanced, in particular those relating to contact between the prisoner and his family and friends in the outside world. My right honourable friend the Home Secretary accepted the merit of this approach and we have now extended the amount of home leave which those prisoners who represent the lowest degree of risk, those in open establishments, may take. Since 1st April this year such prisoners may apply for two day's home leave every four months, once they have completed one-third of their sentence, provided that they are serving sentences of two years or more in the case of men, and 18 months in the case of women. This will make it considerably easier for these prisoners to maintain their family ties and to prepare for and readjust to life outside afterwards.
Pre-release employment scheme hostels are attached to eight prisons and provide an annual capability for some 200 long-term prisoners to spend the last six months of their sentence in ordinary employment, returning to the hostel each evening. The scheme helps prisoners prepare for their return to society in a practical way by providing guidance on how to find employment, covering aspects such as registration, which the noble Baroness Lady Ewart-Biggs referred to, providing work to a regular schedule, dealing with matters such as income tax and national insurance and teaching how to live on a restricted budget—that sort of thing. The scheme is particularly useful for life sentence prisoners who have spent a considerable time in institutions as it provides a halfway house where they can learn how to readapt to everyday things such as travelling alone on public transport. Frequent weekend leaves also enable hostellers to make contacts to ease their return to society. The figure of 200 which I mentioned may not seem large set against the total number of discharges in this category, but we must remember that the majority of long-term prisoners will already have been released on licence before the last six months.
The noble Lord Earl, Lord Longford, referred to discharge grants. A discharge grant is paid to prisoners on release to meet immediate financial needs and it replaces the supplementary benefit which a prisoner could otherwise have claimed from the DHSS for the first week after release. The criteria for eligibility for a grant are therefore broadly similar to DHSS regulations, but grants are not paid to those serving sentences of 14 days' imprisonment or less; to fine defaulters; to civil prisoners; to unconvicted and unsentenced prisoners; or to those prisoners remanded in custody who are later dealt with and discharged from magistrates' courts.
The main reasons for the exclusions are the unacceptable burden which would fall to Prison Department staff in assessing eligibility for a grant when an inmate is released, often at very short notice, from court premises. That is a realistic practical problem which we have to face. Prisoners who do not receive discharge grants are paid a subsistence

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allowance to cover the journey to their destination. No prisoner should therefore be discharged from prison without some funds to meet his needs.
I noted the suggestion made by the noble Earl, supported by his noble friend Lady Ewart-Biggs, about the possibility of introducing a resettlement grant, but one must be realistic about this. Neither this nor an increase in the present scope of discharge grants could be met from current resources. A discharged prisoner should continue to look to the DHSS for any necessary financial assistance.
The noble Baroness raised an interesting point about identification and Giro cheques. I shall certainly consider that to see what can be done, though without any commitment now as I have not had a chance to look into it before now.
The noble Earl, Lord Longford, the noble Lord, Lord Hooson, and others referred to grants given to voluntary aftercare organisations. Of course the role of the voluntary bodies is a most valuable part of many aspects of our social life. I readily acknowledge and welcome the part that is played in relation to the prison side of life.
During 1986–87, the Home Office expects to spend about £6.3 million on grants to voluntary aftercare organisations. The largest of these is to NACRO which receives £626,000 towards the central administrative costs of promoting and developing services and opportunities designed to help offenders resettle and participate fully in the life of the community. In addition, NACRO will receive about £600,000 this year for specific projects and services which it manages and operates for the benefit of offenders and those working with them. Some of those are of an experimental nature aimed at widening and extending the range of aftercare provision.
Although not individually comparable in size with NACRO, which I readily acknowledge is a powerful force, a substantial amount of help is given to various other organisations which provide a network of help to offenders through the provision of day and evening centres, employment projects, defending services (about which both the noble Baronesses, Lady Seear and Lady Ewart-Biggs, feel strongly) and support for prisoners' relatives.
The work of these organisations, albeit on a small scale, is equally important, as I am sure the noble Earl will testify from his involvement with the New Bridge, which, as he said, and as also the noble Baroness said, is one of the bodies supported in this way by the Home Office and which is doubly fortunate in that it has the services of the noble Baroness, Lady Ewart-Biggs, as chairman. The noble Lord, Lord Rhodes, although he is not here, and the noble Baroness, Lady Seear, through their respective involvement with two other Home Office funded organisations, Selcare Trust and Apex, would also no doubt endorse the important role performed by these organisations, as they have done.
The noble Lord, Lord Hooson, referred to hostels versus houses; Norman House. The voluntary aftercare accommodation scheme offers a range of projects. Some are hostels but many are second stage houses, offering a means of moving on to more independent living. The largest part of the aftercare budget is that which supports the aftercare accommo
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dation scheme. That scheme provides financial support to voluntary organisations running hostels and other accommodation projects in which places are reserved for offenders under arrangements with the probation service. The link with the probation service is a close one and it is essential, since projects are accepted into the scheme on the recommendation of the chief probation officer of the area probation service in which they are situated. The offender places are filled by referrals made by the probation service.
There is also a link with the wider special needs in the housing field, since about 70 per cent. of all projects in the scheme are jointly funded with the Department of the Environment under its hostel deficit grant scheme. The scheme has grown considerably since it began in 1965 and now provides support to some 320 projects providing about 4,500 places for offenders. Some 2,000 of these places (that is, nearly half) have been provided since 1979. It was against this background of rapid and substantial growth that my right honourable friend the then Home Secretary, as your Lordships have reminded us tonight, when making funds available for additional places in 1984–85, made it clear that no additional resources could be made available for new places in 1985–86 or for the foreseeable period thereafter.
But, at the same time, he asked officials to undertake a review of the scheme to assess need and effectiveness more accurately and to achieve economies and greater efficiency. In the event, the fact-finding stage of the original review in which the voluntary organisations co-operated so helpfully revealed that, while the scheme was greatly valued by the probation service and the voluntary sector, no objective basis existed either for satisfactorily assessing its effectiveness or the need for its expansion. In the light of these conclusions, it was decided to conduct a comprehensive study of the case for devolving to the probation service the responsibility for grant-aiding voluntary aftercare projects and also for administering and financing the present scheme of administration and bail hostels. The study will involve the widest possible consultation with all those concerned, including the voluntary organisations, and no decisions will be taken on the long-term funding of hostel provision until the outcome of the study is known.
As a first step in the consultation process, a discussion paper is to be circulated to the voluntary organisations in the scheme and other interested bodies and representative agencies. I am sure that there will be a lively response to the paper, which of course will be a good thing since it is essential that every voice should be heard in this important matter. I hope that that goes some way—I believe it does—towards the new approach which the noble Earl, Lord Longford, seeks.
I now turn to the probation service. The first point I may perhaps start with is that raised by the noble Lord, Lord Hunt, when he asked whether the Government would review the statement of objectives of the probation service. I understand that the statement of national objectives and priorities has been generally well received by the probation service and is now being adopted as a guide for local objectives by area probation services. Perhaps I may study the noble Lord's remarks, but if he has in mind any

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particular point that he would like me to take further, I shall be very happy to look at it.
While in custody many prisoners, especially those subject to statutory supervision, will have had contact with a probation officer from their home area, either by visit or by letter, as part of the through-care offered to all prisoners. In 1984 a total of 27,600 young offenders and 11,970 adult offenders were made subject to statutory provision. After release, probation officers, by drawing on their wide experience, are able, as the noble Baroness, Lady Seear, would wish, to assist prisoners with settling back into the community. For those with difficulties of a more specific kind, such as problems of addiction to, for example, drugs, alcohol or gambling, probation officers are able to put ex-prisoners directly in touch with specialist agencies.
Apart from the schemes which are run jointly with voluntary organisations, area probation services have schemes to provide access to accommodation for offenders, including discharged prisoners. Probation officers, for instance, have discretion to place released prisoners in approved probation or probation bail hostels for a short period. Also, as part of their accommodation scheme, most area probation services have landladies who are willing to take released prisoners. The Home Office has approved arrangements to enable suitable landladies to be paid modest amounts for retention of rooms and for compensation for failure to pay rent or for damage caused by probation service clients.
There is, of course, no suggestion that we do shake off concern for ex-prisoners, to use the words used by the noble Earl. I appreciate the concern expressed by your Lordships this evening over the issue of aftercare for prisoners, as indeed does my right honourable friend the Home Secretary, but I hope that this debate, ranging perhaps more widely than just over aftercare, has served to create a greater awareness of how much is being done by the Government directly through the Prison Department and the probation service, and indirectly through important grant-aided organisations, towards the aftercare of prisoners and their rehabilitation within the community. I hope, too, that it has made it clear that we are also studying the arrangements through which this important work is undertaken.
House adjourned one minute before ten o'clock.