HL Deb 29 April 1986 vol 474 cc140-60

3.14 p.m.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead)

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

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

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD ABERDARE in the Chair.]

Clause 1 [The Director General of Gas Supply]:

Lord Stoddart of Swindon moved Amendment No. 6A: Page 1, line 11, at end insert— ("( ) The Secretary of State, after consultation with the Director General, shall appoint four Directors with such functional responsibilities as the Director General may from time to time determine.").

The noble Lord said: I beg to move Amendment No. 6A. I make no apology for returning to this matter since the regulation of this monster private monopoly is indeed of paramount importance. Moreover, depending upon the progress of business today, this may be the last opportunity that we shall have of discussing the matter on Clause 1; but we shall have to wait and see.

We all tried from the Opposition Benches last Thursday to impress upon the Government and Members of the Committee opposite that we did not believe that the regulatory provisions in the Bill were strong enough, and that a single person in the office of director general would be in an extremely weak position vis-à-vis the new private monopoly, British Gas plc. The noble Lord, Lord Ezra, tried through his amendment to solve the problem by creating a commission and commissioners with special responsibilities for important sectors of the gas supply business. That was rejected out of hand almost contemptuously by the noble Lord, Lord Gray of Contin. A similar attitude was taken in respect of my own amendment—Amendment No. 4—which I withdrew because I wanted to consider what had been said from all sides of the Committee. Indeed the same cavalier attitude was taken towards the amendment of the noble Lord, Lord Diamond, which sought to appoint separate directors for Scotland and Wales. That was how we were treated.

Members of the Committee on the Front Bench opposite really must realise that we are serious in our concern over the lack of strong regulation. They must understand that we have a duty in this House to revise and improve defective legislation, and that if the Government will not treat our fears and doubts seriously and recognise that we are not prepared to be ridden over roughshod, we shall have to adjust our actions and attitudes accordingly.

We are right to be concerned about the regulatory procedures, because we have an example before us. We have the example of the actions of British Telecom since it has been privatised. We all know that the Director-General of Oftel was quite impotent when British Telecom plc decided that it was in their interests, and the interests of their shareholders, that the price to domestic telephone consumers should be raised outside the RPI, and above the RPI minus X formula. That was the first indication that we had that the Director-General of Oftel would not be able to regulate the telecommunications industry in the way in which we had expected that he would do so.

Lord Bruce-Gardyne

My Lords, I apologise for interrupting the noble Lord but he has made rather a serious allegation about Oftel. Is it not the fact that Oftel did indeed investigate the tariff increase, and that Oftel satisfied itself that the increase was entirely in conformity with the formula laid down in the licence?

Lord Stoddart of Swindon

Oftel may very well have satisfied itself that it was in accordance with the formula; but what Oftel certainly did not do was to convince the rest of us and the public that BritishTelecom plc had not raised prices to domestic customers over and above that formula. Indeed, that was not in accordance with the assurances which were given to my noble friend during the pasage of the Telecommunications Bill through this House. Those are the facts of the matter, and that of course is simply one example, and an example which exacerbates our concern.

We saw yesterday in the Guardian, and perhaps in other newspapers, that British Telecom have decided to end the free repair of emergency telephone equipment. I do not know whether my noble friend Lord Bruce can remember, but I believe that we were given certain assurances in regard to the emergency telephone service while the Telecommuniations Bill went through this House. But now what we find is that in the interests of the shareholders British Telecom have decided to withdraw, out of normal hours, their free repair service of the emergency telephone system.

This of course means that the taxpayer has been had twice. First of all his assets were sold at half price, and, now that they have been sold to BritishTelecom, the taxpayer, through the health service and through the police service, is going to pay, as a result of this particular action, an extra £20 million over and above what we would have expected to pay to a nationalised publicly-owned BT. That is £20 million more out of the taxpayers' pocket and into the pockets of British Telecom, who have done very well, thank you, up to now and are obvioulsy going to do a lot better.

What does this mean in respect of this particular Bill? Assurances were given in another place, I believe, that the free inspection of appliances for the elderly and handicapped living alone would be maintained. There is nothing in the Bill to ensure that it will be maintained. All we have is the assurance of the publicly-owned British Gas Corporation. But there is no assurance that, once it becomes privatised, the service of free inspection of appliances for the elderly and handicapped living alone will continue.

There is nothing in this Bill, and nothing that the director will be able to do, to ensure that that continues. Is that to be the same in respect of the emergency service, which at the present time is free, or is that to be taken away as well? I think all of us on this side of the Committee are right to be concerned about the powers of the director and the proper regulatory control of a privatised British Gas.

The noble Lord, Lord Harris of Greenwich, and my noble friend Lord Ponsonby of Shulbrede both warned the Government Benches last Thursday night that their cavalier attitude was unacceptable. I repeat now that the Official Opposition and all others not on the Government Benches—and perhaps on the Government Benches as well—expect their views and amendments to be treated properly and seriously. I hope that the Government will take that on board.

I withdrew my Amendment No. 4 last Thursday to consider what had been said during the course of the various debates. Having considered that, I have decided to table this amendment to give the Committee and the Government a further opportunity to improve Clause I of the Bill. As noble Lords will see, we propose in our amendment that: The Secretary of State, after consultation with the Director General, shall appoint four Directors with such functional responsibilities as the Director General may from time to time determine. It will be noted that in this amendment we have not sought to tie the director general's hands in relation to the functional responsibilities he allocates to his four directors. I am sure that we could all make suggestions. I am sure that suggestions will be made later in this debate.

For example, the noble Viscount, Lord Torrington, last Thursday when he spoke on Lord Ezra's amendment, said in col. 1301: I might have been tempted to be in favour if the breakdown between the duties had been slightly different from the way they were phrased". Therefore this amendment helps him. In this amendment we have, I hope, met the very point about which the noble Viscount was concerned. I hope that proves the point also that the Opposition do listen to what other people say, and are not hidebound as the Government seem to be.

It would be open, therefore, for the director general to appoint his directors to be in charge of those disciplines which he believed were most relevant and useful to his regulatory function, and there is the added benefit that he would from time to time, as he felt circumstances required, change and reallocate those disciplines. The beauty of the amendment is that, as well as ensuring that the director general does not stand alone between the consumers and British Gas plc, it provides that degree of flexibility which is the essence of up-to-date regulation.

Furthermore, since the Bill and the authorisation are so complicated, the director general can do with some high level support. I say this because it would appear that not even the noble Lord, Lord Gray, who together with his noble friend Lord Belstead, is piloting this Bill through your Lordships' House, really understands the Bill if his reply to a question from the noble Baroness, Lady Burton, is anything to go by. The Committee will recall that the noble Baroness in her comments said at col. 1300 to 1301:

The Committee will recall that at the moment under the present proposals the gas industry will not be compelled to disclose the profits it makes from the domestic consumers when it shows its accounts. There will be no way of showing how much those profits from the domestic consumers have contributed to some cross- subsidisation, whereas if we had the commissioners which my noble friends have been talking about, we should at least have one who would deal with tariff consumers. I think that should be borne in mind and perhaps when the noble Lord, Lord Gray of Contin, comes to reply he will deal with that particular point, with the transparency of the accounts that will be shown, and say whether or not the profits received from the domestic consumers of gas will be disclosed. The noble Lord, Lord Gray of Contin, at col. 1308 replied: The noble Baroness asked me about separate accounts. We shall be debating that subject at some length on later amendments; for example, there is Amendment No. 68 in the name of the noble Lord, Lord Diamond. However, it is already the case that under Condition 2 of the draft authorisation British Gas will be obliged to publish full information about the profits of the gas supply business. In addition, the director will have full ability under Condition 7 to call for any further information that he might consider appropriate. Under Clause 35 of the Bill, the director has the ability to publish as much information as he considers expedient to give to tariff customers. That will ensure that if the director wishes to publish further information about the finances of the industry in the interests of consumers, he will be able fully to do so. I wonder whether that is correct?

The noble Lord, Lord Gray, referred to Condition 7 of the BGC authorisation, and the director's right to publish information he receives. He implied by his reply that it will be possible for the director to publish the accounts for the tariff customer as distinct from the public gas supply industry as a whole. However, the authorisation in Condition 7 severely limits the director's right to publish some information, and I have no doubt that the noble Baroness had that in mind. In paragraph 1 of Condition 7 the British Gas Corporation is required to furnish accounts along with other information to the director. However, BGC is not required to furnish information if the director is acting: (a) under Section 23 of the Act"— that is, modification by agreement; or, (b) under Section 24 of the Act"— that is, making reference to the Monopolies and Mergers Commission; and, (c) under Section 35 of the Act"— which relates to the publication of information and advice.

3.30 p.m.

In addition, under Section 35 the director cannot publish information which might prejudice the interests of BGC. He cannot publish information under that section. The transparency of accounts for tariff customers cannot be an enforcement matter under Sections 28 to 30, since it is not a condition or requirement under the terms of the authorisation. These powers to investigate complaints under Section 31 are limited to enforcement matters, so the director cannot use that section either.

Given all this it is hard to see what specific assurances the noble Lord, Lord Gray, was giving. Certainly his remark that if the director wishes to publish further information about the finances of the industry in the interests of the consumers he will be fully able to do so simply does not seem to be the case. I have said that to illustrate the complexity of the Bill and to try to show that even the noble Lord, Lord Gray of Contin—who must have studied this Bill day in day out at very great length—does not seem to understand exactly the implication of the Bill and of what replies he is giving in this Committee. I, and I am sure the noble Baroness, Lady Burton, will be interested to have his further answers to the points that I have just raised.

In my view our amendment gives the Committee another opportunity to see that the regulatory regime is adequate or, better still, gives the Government the opportunity to make amends for the brush off they gave us last Thursday, either by accepting the amendment as it stands or by giving an undertaking to consider it seriously between now and Report stage and to come back to the House or to the Committee with their own amendment to achieve what we are seeking in our amendment. I beg to move.

Baroness Burton of Coventry

I should like to add a few minutes to this point. I was glad to hear what the noble Lord, Lord Stoddart, said and I fully support it. In our debate on Thursday when I supported the amendment moved by my noble friends Lord Diamond and Lord Ezra, which the Committee was not able to accept, I tried to explain that I was worried about the domestic consumer in this legislation. I also said that one of my chief worries was not so much what Professor Carsberg had not done in the case of domestic consumers and British Telecom, but over the fact that I thought primarily that the legislation was to blame rather than Professor Carsberg. But I am not so sure now that I hold to that belief.

I should like to give the Committee another example of my worries. I read in The Times today that British Telecom is now proposing to reduce charges to business users holding more than 20 lines. I have no objection to charges being reduced to users of more than 20 telephone lines. What I take exception to is that a statement was then made quite definitely that British Telecom proposed to recoup the expense of lowering the charges to these people with all these telephone lines by increasing the charges to the domestic consumer. That I believe is absolutely disgraceful. I hoped I might have a chance of raising it today so that the noble Lord, Lord Contin, could give me an answer.

I know that concerns British Telecom and not this legislation. As we all know, when the matter arose in the House British Telecom and the Government were able to produce reasons so that if an increase that was too much was added to an increase that was too little and below the mean that was allowed, then the average achieved was permissible. But I do not think that is right; I think that is sharp practice. The sooner that Professor Carsberg, whom I have defended and whom I hope to defend in the future, gets on to that the better. As I understood it, Professor Carsberg did not feel that he could intervene on that aspect until at least a year had elapsed to see whether or not British Telecom was justified.

However, I am now back to this today because as I read the amendment it does not mention appointing commissioners, but it seeks to appoint four directors to help the director general.

If I remember correctly, when I raised on Thursday the issue of the transparency of the accounts—because at the moment British Gas is not compelled to show the profits made from the consumer and thereby prevent cross-subsidisation—the noble Lord, Lord Gray of Contin, told me that, if he so wished, the director general could call for this to be done. I do not think he should call for it to be done; I think it should be in the legislation. Be that as it may, one of the proposed directors could probably attend to that. I am wondering whether the noble Lord, Lord Gray, can comment to the Committee on the attitude of British Telecom (presumably permitted also under the legislation for British Gas) of increasing charges to domestic users to pay for reductions in charges to those who are bigger users.

I also read something else which I thought was particularly bad. It was not only that charges to domestic consumers were to be raised, but apparently the worst blow was to fall on the unfortunate domestic telephones users who do not use their telephones enough. Whether the Minister or the people in charge of British Telecom believe that doing that will make people use them more, I do not know, I do not understand it. But when the noble Lord, Lord Gray of Contin, replies, will he tell the Committee whether he thinks it will be possible for British Gas under this legislation to behave as British Telecom has done, and so to ignore the ordinary domestic consumer so that prices to him continually rise when there is no necessity for them to do so?

Lord Boyd-Carpenter

The noble Lord, Lord Stoddart of Swindon, seemed to be in a rather irritable mood at one part of his speech. As one who listened fairly carefully to most of the proceedings of the previous day on this Committee stage, I thought that his criticisms of my noble friends were wholly unjustified. On the contrary, I thought that my noble friends showed exemplary patience during proceedings which—shall we say?—did not err on the side of brevity, and certainly during one speech, where brevity was not a very conspicuous feature. Therefore I think the noble Lord, Lord Stoddart of Swindon, with his threat that if the Government's attitude did not change he would find it necessary to revise his attitude, was a little difficult to understand. The justification for it is certainly not apparent—at any rate, not to one noble Lord who sat through the proceedings of the previous day.

This amendment is quite narrow in scope, although it has been widened even into discussing the working of another Act. I am intrigued a little at the importance which noble Lords opposite and in the Alliance seem to attach to the mere numbers in the controlling and supervising body. They started last week by going for three commissioners. Now they want one director general and four assistant director generals. Inflation has moved from three to five, which is a rather rapid rate in the course of the week. With respect, it is extraordinarily naïve—I am surprised to observe any naïvety in the person of Lord Stoddart of Swindon—to believe that the mere numbers of people appointed to this directorate, as opposed to what is done in respect of their powers, is of any real significance.

No one believes for a moment that if the Bill stands as it does (and I hope it will) that the director general will be alone. He will have a staff, probably if past form is to be followed, which many of us would regard as excessive in size. These bodies are apt to grow. Whatever else he is, he will not be alone; and to ask, as the noble Lord, Lord Stoddart of Swindon, did, "What can this poor man himself do against this powerful corporation?" is wholly unrealistic.

I ask the noble Lord, Lord Stoddart of Swindon, to think a little further. If the director general is to be provided—he might well have said saddled—with four subordinates all appointed by Ministers, the director general's position is a great deal weaker than it would be if he were left as the sole ministerial appointee. Those of us who have served in public authorities know that the more members of the authority there are who are appointed by the Minister the less is the authority of the chairman or of the director general. I see the noble Lord, Lord Williams of Elvel, shaking his head. I hope he is not going to quote the Price Commission to me, because if he does I shall have quite a lot to say about the Price Commission from which during his chairmanship I suffered a certain amount of boredom—"tedium" is the more courteous word. I suggest that this official, the director general, is going to be in a much stronger position if he is the sole ministerial appointee, with the rest of the staff—and there will be a staff—being his appointees, his subordinates, without any challenge to his authority. Therefore, if the intention of the noble Lord, Lord Stoddart of Swindon, is, as he appears to suggest, that of strengthening the position of this important functionary, I suggest to him with very great respect that he is going wholly the wrong way about it and that the sensible way would be to leave the director general to appoint his own staff.

We certainly want to see a strong character appointed to that post; I wholly agree. We want a man of the highest qualifications and abilities, because it would be a great mistake to suggest that it is only noble Lords opposite or those in the Alliance who are interested in the position of the consumer. We are all immensely concerned with the position of the consumer, but we are not discussing that, on which there is broad agreement of the Committee, but the particular mechanism for providing this protection. I suggest to the Committee that the noble Lord's rather naïve idea that there is safety in numbers is somewhat misleading.

Lord Harris of Greenwich

May I start by saying to the noble Lord, Lord Boyd-Carpenter, who has just resumed his seat, that often I find him a very persuasive advocate even when I do not happen to agree with his conclusion. However, I did not find his speech this afternoon so persuasive. Let me explain why. As I understand it, his argument is that if the Minister has powers to appoint a number of people rather than one, that undermines the position of the principal officer concerned with the matter. That is a curious doctrine.

Let me take two or three examples. I was chairman of the Parole Board. The Home Secretary appointed 50 members of the board. Did I feel that that undermined my position as chairman of the Parole Board? Of course I did not. The Home Secretary appoints the Commissioner of the Metropolitan Police. He also appoints five Assistant Commissioners of the Metropolitan Police and a Deputy Commissioner. Is it seriously to be argued that that undermines the position of the Commissioner of the Metropolitan Police? One has only to go through examples of that kind to see how thin is the basis of the argument we have heard from the noble Lord, Lord Boyd-Carpenter.

Lord Boyd-Carpenter

Will the noble Lord allow me?

Lord Harris of Greenwich


Lord Boyd-Carpenter

We are concerned here not with an organisation such as those the noble Lord has described but with a board in which it is proposed to appoint a director general. Is the noble Lord seriously suggesting that the position of that director general is going to be strengthened by ensuring that he does not appoint his own subordinates but that they are appointed by the Minister?

3.45 p.m.

Lord Harris of Greenwich

With great respect, the noble Lord has just repeated the point which I have endeavoured to answer. I do not think that that is a persuasive argument, for the reasons that I have cited already. This is constantly done, and if the noble Lord would encourage me to do so I could find plenty more. The director general, or whoever is the principal officer, appointed by a Secretary of State does not feel that he is in some mysterious way undermined because the Secretary of State has appointed others to subordinate positions.

Lord Boyd-Carpenter

I am sorry, but—

Lord Harris of Greenwich

I shall give way in just a second, if I may. That is why I find the argument put by the noble Lord, Lord Boyd-Carpenter, unimpressive. Of course I acknowledge the fact that the noble Lord says, I am sure rightly, that he is concerned about the position of the consumer. Speaking for my noble friends, I am sure that we shall gladly support any proposal emanating from the noble Lord which strengthens the position of the consumer so far as this Bill is concerned. What does concern us—this relates directly to the point made by my noble friend Lady Burton of Coventry—is that in the previous examples where we have transferred power from a public monopoly to a private monopoly the position of the consumer has already been gravely undermined, and we see nothing in this Bill which satisfies us that we have learnt from that experience.

Lord Boyd-Carpenter

The noble Lord did not answer the question I put to him. I did not put to him the question whether the position of the director general would be undermined. I asked the opposite question: whether it would be strengthened.

Lord Harris of Greenwich

To answer the precise point the noble Lord, Lord Boyd-Carpenter, has put to me, I do not think that is the central question. The central question is as I put it: does it undermine the position of the director general for Ministers to appoint these senior subordinates? The answer to that question is: no, it does not.

Lord Taylor of Gryfe

The examples which have just been quoted by my noble friend Lord Harris related to the Parole Board and the Metropolitan Police. With due respect, they are not trading organisations in the way that the Gas Board will be a trading organisation, and I think we might strengthen our argument from these Benches if we quoted the experience of trading organisations such as the British Railways Board and other boards in the nationalised sector, where it is not uncommon for a Minister to appoint a director general or a head of a nationalised industry and make subsequent appointments for consumer interests: director of supplies, finance director, and so on. In my experience in nationalised industries, in no sense did that in any way diminish the responsibility of the director general or the chief executive. So, with due respect to the noble Lord, Lord Boyd-Carpenter, his argument is not supported by the event.

Lord Diamond

I should like to support very strongly the amendment that has been moved so persuasively by the noble Lord, Lord Stoddart of Swindon, and to explain why we on these Benches welcome it as an attempt to do what we ourselves failed to do, which was to persuade the Committee that the present arrangement was wholly unsatisfactory and unlikely to achieve the purposes of the Government.

As the noble Lord, Lord Boyd-Carpenter, has just repeated, the purpose of the Government is to ensure adequate protection for the consumer. That is one of the purposes which arise because you have an existing public monopoly with the protection which that provides being turned into a private monopoly which, by definition, has no protection for the consumer unless it is provided by statute. We are dealing with a statute which provides that very protection. I am glad that we start off on common ground: how can we best achieve the common purpose stated by the Government and by the Opposition parties of protecting the consumer where you have the circumstances which I have described?

The noble Lord, Lord Boyd-Carpenter, has produced a novel argument. Of course, he is a reliable and highly respected Member on the Conservative Benches—highly reliable in the sense that he can always be relied on to get up and produce from the top of his head quite good arguments in support of what he has just heard the government spokesman say. That is a great skill in which he excels, if I may say so.

Lord Boyd-Carpenter

If I may say so, those are highly complimentary observations. But I point out to the noble Lord that I have not yet had the privilege, and neither has he, of hearing what the Government spokesman is going to say on this amendment. I do not know what he is going to say.

Lord Diamond

The noble Lord does know. It is written in the Bill which he has read. The noble Lord said—and if he said it, no doubt it is true—that he was here until five to eleven on Thursday night. Is that correct? There is no answer. He said that he was here until five to eleven last Thursday and heard everything that was then said.

I tried then to put before the Committee arguments which, if he has not heard and if the Committee wishes me to repeat, I shall gladly do so. These were arguments to try to persuade the Committee that what he is saying is wholly novel, wholly unproved and, one might say, on the face of it implausible. It is implausible that one person will act on his own against a chairman and board of high calibre and enormous experience, entrenched in their work and supported by an experienced, long-term staff of high calibre and high remuneration, as befits such calibre. It is implausible that he will be able to stand up and make representations to such a chairman and board the more readily if he is on his own.

I said that that was implausible. What I mean is that I regard it as nonsense. I hope the noble Lord will forgive me using those terms. It is nonsense to suggest that a man is better equipped to cope with that situation on his own than if he has colleagues who are able and who have authority.

Lord Boyd-Carpenter

Will the noble Lord allow me to intervene?

Lord Diamond

The noble Lord has a slight attack of impatience, but I shall give way if he wants me to.

Lord Boyd-Carpenter

The noble Lord has wholly misrepresented me in saying that I suggested that this man should be on his own. On the contrary, I suggested, as he will see if he reads Hansard, that he should have subordinates of high calibre and ability appointed by himself.

Lord Diamond

I know that the noble Lord said that. I heard him. But they are of high calibre and low status. What we are concerned with is people who have the status, or very close to the status, of the director general himself; people who can impress by their ability and by their status; by the number of pips. We are all familiar with that. We do not regard a general as being—well, I shall not pursue it; I have no need. Everybody understands the position. A man of status acting on his own is likely to be strengthened if he has colleagues, experienced and of high calibre, acting with him.

The noble Lord seemed to raise the minor objection that four such directors should not be appointed by the Secretary of State. If he prefers to put down an amendment saying that they should be appointed by the director general, so long as they have that status, we would look at that with considerable care and, indeed, would welcome it. I can well understand why the noble Lord, Lord Stoddart, has drafted the amendment in this way so as to make it the more acceptable to the Government.

Everybody is aware of the fact that there is grave concern about the way these provisions in a previous Bill are proving to be unsatisfactory. The provisions in this Bill, so we are told in the Notes on Clauses, are copied from the provisions in the Telecommunications Bill; the Bill that set up British Telecom. We are therefore entitled to ask whether they are working well. The Committee has already heard that they are not. I am bound to underline what has already been said because it has been said modestly and the whole tragic position has not been put fully.

The noble Lord, Lord Stoddart, said that he had read in the Guardian that the telephone emergency services were no longer to be supplied free; that they would have to be paid for. The noble Lord, as usual, was modest in quoting his authority. His authority was the Guardian. My authority is the spokesman who came on television on the one o'clock programme to explain the view of British Telecom. He said that it was going to do this, and it was going to do it because the powers to do it were included in the prospect us and the public had bought shares on the basis of that prospectus. That is what he said. There is no question about whether it intends to do it, how it intends to do it and the authority that it is claiming for that.

What it is claiming is that it is running a business. It is running a business and it is not concerned with services, not even emergency services. It is running a business. It is not even concerned with the fact that every original shareholder who still holds his shares has made a very substantial profit indeed on paper on his shares if he still holds them. He may very well have sold them at a great profit already.

The representative was not even concerned with a capital profit. That is put on one side. It is taken for granted that there will be a large capital profit and, in addition, that the shareholders should reasonably expect the board of British Telecom to charge for what has never been charged before in respect of emergency services so as to make sure of adding, if possible, to the dividend on top of the capital gain. That is the situation, or part of the situation, which we want to avoid being repeated.

My noble friend Lady Burton, who is an expert in looking after the consumer, said, if I may say so, innocently and in good heart that she had no objection to the contract customers, the non-tariff customers, being charged less. She had no objection to the people with more than 20 lines being charged less. But let us follow that a little further.

Why are they being charged less? Is it for no good reason? Not at all; they are being charged less so as to eliminate competition. That is the purpose. The Telecommunications Act provides some protection in that it allows opposition companies to come into the field and, if they can, compete with large suppliers of the same service. I am talking about the telephone service. That is what is provided for. How does big business get rid of competition? We all know. It is by undercutting the competition mercilessly until they have gone bankrupt. The very big boys are able to do this the more so if they have other customers whom they can charge in order to cover their costs and make a profit out of them in place of the others.

At the back of the mind of British Telecom in starting this battle of reducing the charges to the large, 20-line customers is to eliminate the competition which it is not enjoying. How can it do that? It can do it by charging the small customer. Those are two examples, added to the third one which we all know, inasmuch as every private telephone user is now paying more than he would have paid had telephones not been privatised. The charges have already been increased. So we have three solid cases to put before the Government as to why the Government's desire of protecting the consumer and ensuring some measure of competition will not work, because it has not worked on the same clauses that are being copied and put into this Bill.

It is for that reason that we oppose it strongly and wish to impress on the Committee the need to have not what was called in the other place a "tadpole"—a word which would not fall naturally from the lips of one Member of this Committee. We do not want to have a tadpole attempting to carry out these enormous responsibilities but we want to have, if you like, not a commission, such as every state in the United States has found to be necessary on its experience (and every one is still continuing to do so) but a group of directors with authority and status who could achieve this purpose. This is a solid amendment, and I hope that the Committee will support it.

4 p.m.

Baroness Carnegy of Lour

I did not intervene during the discussions on previous similar amendments, but I listened to them with enormous interest and I have been thinking about them since. It seems to me that in arguing this afternoon for having five directors instead of one on this regulatory body, noble Lords opposite have compared it to the board of British Rail, for example. The noble Lord, Lord Taylor of Gryfe, suggested that because the board of British Rail is appointed by the Government it would be desirable that there should be five directors on this regulatory body in connection with the gas industry, also appointed by the Government.

The noble Lord, Lord Harris of Greenwich, suggested that because members of the Parole Board are appointed by the Government that is an argument for having five directors of this regulatory body, rather than one. We have just heard from the noble Lord, Lord Diamond, the argument in which he seemed to be likening what would be going on in the gas industry to something like a football match, where you had the board against the regulatory body and unless there were plenty of people in both teams it would not work.

The question we are really discussing, it seems to me, is whether there should be a director of gas and his staff, whom he has chosen. We shall see later that the Government are suggesting that the number of that staff should be limited, and there is a mechanism for doing that. His own staff will be backing him up. They will be very senior people, I should have thought, and because they are chosen by the director rather than by the Secretary of State it would not necessarily mean that they would be weak in argument. It seems to me that the parties who are constantly in discussion are telling us that they do not want a lot of appointments by the Secretary of State because they fear that would make them too political; and so to be arguing for five instead of one seems to me to be rather extraordinary. It seems to me to be a perfectly satisfactory arrangement to have a director appointed—able and well paid, with clear, strong duties—and staff whom he has chosen and whose number is controlled. There is surely nothing wrong with that as a managerial arrangement. I should have thought the public would find it very odd if this Committee were to decide to have five directors instead of one on such slim arguments.

Lord Ezra

Noble Lords on the Government Bench opposite must by now surely be aware that the main reason motivating us on this side of this series of amendments is our concern about the efficacy of the regulatory machinery. We are moving into uncharted seas in British industry. As was pointed out in the Second Reading debate, the Government themselves in their manifesto of 1983 said that in privatising it would not be their intention to transfer monopolies simply from the public to the private sector. Apparently they have changed their minds on that score and, they having changed their minds, we must now make absolutely certain that private monopolies are regulated effectively in the interests of the consumer.

We are not necessarily saying that the director general should have four, five or whatever number of directors to support him, whether they are called commissioners or something else. Underlying all these amendments is our grave concern, in this new industrial situation which is being created by this proposed government measure, that too little attention appears to have been paid to the regulatory mechanism. I think it would help us a great deal on this side of the Committee in looking at the public interest—because this is not a political issue but a matter of public interest as regards safeguarding the consumers—if the noble Lord, Lord Gray of Contin, should he be replying to this debate, were to say that the Government accept that there is a serious issue here, that they will consider this matter and will come forward with proposals at a later stage.

The Minister of State, Scottish Office (Lord Gray of Contin)

I think we have had a very useful debate this afternoon. Certainly I suggest that it is a much more constructive debate than we had on any of the amendments we discussed on this subject last Thursday. However, I must take issue straightaway with the noble Lord, Lord Stoddart of Swindon, in respect of the inference, if not the actual suggestion, which he made that the Government had not been taking seriously the points of view represented by the Opposition last week. Indeed, I think he said they felt they had been ridden roughshod over, and I must take exception to that. I think we covered about half a dozen amendments during a whole day's sitting; and I feel that my noble friend Lord Belstead, along with myself, listened very carefully to everything that had been said. The mere fact that we did not agree with most of it surely does not indicate that we were not prepared to give due consideration to what was said.

It is a funny sort of world if, because you do not accept an amendment, you are obviously behaving in a cavalier style. Whatever criticisms the noble Lord may have of our Front Bench, I do not think that during my short three years' experience of this Chamber I have ever heard any of our Ministers on the Front bench be other than courteous to those sitting on the Opposition Benches. I rather resent the implication which the noble Lord included in his remarks and I am most grateful to my noble friend Lord Boyd-Carpenter for so quickly seizing upon that point and pointing out the fact that indeed it would hardly have been surprising in the circumstances if Ministers had become a little bit irritable. Sitting on these Benches and looking across at the other side, we saw plenty of irritable faces on that side, over the delay which was taking place throughout the day.

I have again listened very carefully indeed but, you know, there have been relatively few new arguments presented by noble Lords opposite. It has been a rehash of the same arguments, perhaps dressed up a little differently in the hope of attracting the support of some of my noble friends. I think my noble friend Lord Torrington was mentioned, but I doubt very much whether the wording of this amendment is likely to change my noble friend's view very much; and no doubt he will himself consider very carefully what has been said in this debate.

We have already discussed at some length the possibility of a commission or additional directors for Ofgas. The Opposition may feel that it is third time lucky for them. I do not think that they will be lucky because their arguments have not been any better today than they were last week. As I have already said, there is a basic philosophical difference among the sides of the Committee on how to bring about the most effective regulatory organisation. We believe that it is important that the responsibility for regulating the gas industry should rest with one individual, the Director-General of Gas Supply, and it should then be up to him to take whatever steps he feels necessary to achieve the necessary staff distribution.

The director general will be at liberty to give members of his staff responsibilities under him for particular areas. I imagine that that will be the sensible way for him to run his office and his affairs. If he wishes to assign staff to different functional areas or on a geographical basis, that will be a matter for him to decide. He may call the heads of branches "directors" if he wishes. Again, that is a matter for his judgment. The Secretary of State has no need to play a part in that. The director general will also be able to take on the services of consultants if he feels that he needs advice on any particular issue.

As I have said, flexibility is the key. Why four directors, for instance? Flexibility and freedom of action properly go with the responsibility. I reiterate that the final responsibility must rest with the director general.

The noble Lord, Lord Stoddart, made a number of points which I feel I should answer. He referred first to the free repair of telephone emergency equipment and related that to this Bill. He mentioned the withdrawal of the free repair service. I am glad that he did not see fit to draw a parellel with gas, because we have inserted in the authorisation to be granted to British Gas Condition No. 11 which will specifically require the British Gas Corporation to provide a continuous service for dealing with reported escapes of gas and to advertise such a service. That condition, like all conditions of the authorisation, is enforceable by the director general under his powers contained in Clause 28. In addition, Schedule 5, paragraph 13 ensures that a public gas supplier must deal with escapes of gas and make them safe on both its side and the customer's side of the meter without charge.

The noble Lord, Lord Stoddart, also asked me about the publication of information. He argued that it is not possible for the director general to publish information. I do not agree with the noble Lord. I do not think that he has correctly interpreted the provisions of Condition No. 7 of the authorisation. It is possible for the director general to collect the information necessary to ensure that British Gas is adhering to its obligations to avoid undue preference to its tariff consumers under Clauses 9 and 14. It will be possible for the director general to publish whatever information he wishes under the provisions of Clause 35. If the noble Lord looks more closely at Condition No. 7 of the authorisation, he will see that the director general can require British Gas to make reasoned comments on the accuracy of the information which he proposes to publish. I therefore reject completely the criticism made by the noble Lord on that subject.

4.15 p.m.

When the Committee last met we had some discussion on the issues raised by the noble Baroness, Lady Burton. I answered them in considerable detail at the time. The noble Lord, Lord Stoddart, was good enough to include in his speech extracts from Hansard of the exchanges that we had in which the noble Baroness asked me about increases in charges to pay for reductions to business consumers. I can assure the noble Baroness that that will not be possible under the regime that we have proposed because, as noble Lords opposite will no doubt appreciate, the price control formula is designed specifically to control prices in the tariff sector. It does not, as in the case of the BT formula, apply to an average of both industrial and domestic consumers. There is therefore no possibility of pushing up domestic prices while lowering industrial prices so as to keep the average within the limit, as in our case tariff sector prices only are covered. I am glad to be able unreservedly to give the noble Baroness the assurance that she seeks that under our system such changes would not be permitted.

The noble Lord, Lord Diamond, who when we last met gave us the benefit of his researches at some length, contributed to the discussion again today. I do not know whether it has to do with brevity or with whether the points he made today were better, but his succinct delivery was much more impressive, and had I been of such a mind, I might almost have been persuaded by some of his remarks.

The noble Lord of course has the great advantage of having been a Chief Secretary to the Treasury. In that capacity in another place he had the experience of suffering a great many insults from the other side, as is common practice there. I am sure therefore that he will not take it amiss if in the kindest posible way I poke a little fun at him this afternoon. He suggested that the director general will be better equipped to deal with the BGC board on his own. That is nonsense. Schedule 1, paragraph 4 provides: The Director may, … appoint such staff as he may determine". Those appointments will all be Civil Service appointments and will have to be cleared by the Treasury. That is one of the points about which we argued recently. If the director general considers that the best way—

Lord Harris of Greenwich

May I ask the noble Lord a precise question? These are Civil Service appointments to be approved by the First Civil Service Commissioner. Can it be made clear precisely who gives authority for the appointments?

Lord Gray of Contin

The appointments are ultimately all approved by the Treasury. They cannot be made without the authority of the Treasury.

Lord Harris of Greenwich

I am putting a point of some importance. There was a dispute about Mr. Levene's appointment to the Ministry of Defence. Undertakings were given that in the future all appointments of the character of Mr. Levene's would be cleared by the First Civil Service Commissioner. Is that the case here or is it not?

Lord Gray of Contin

Obviously appointments are made by the director general. I hope within the next few moments to be made aware of the answer to the question that the noble Lord has asked. Yes, they are Civil Service Commissioner appointees, but perhaps I can get full particulars for the noble Lord and communicate with him. As I was saying, if the director general considers that the best way to fulfil his functions and duties under the Bill is to appoint certain staff to particular posts with certain specifications, this he can do. If he wants to call upon—

Lord Stoddart of Swindon

Would the noble Lord mind giving way?

Lord Gray of Contin

May I just carry on for the moment? The noble Lord will be speaking again. As regards the various titles which were suggested for different directors, or whatever they may be as laid down in the amendment, the director has the power to appoint deputies. He can call them deputy directors or deputy director generals. In military terms, he can give them as many pips as he likes. It is entirely up to him. Therefore, I cannot accept that the concern of the noble Lord, Lord Diamond, about the director acting on his own is justified. I am not suggesting that the noble Lord does not sincerely hold that view; but I am trying to persuade him that his fear in this regard is not justified.

We have spent a good deal of time on this amendment. In many ways, it is a rehash of what we were talking about last Thursday. I do not think that the Committee will wish me to hold back for very long the anxiety of its Members to come to a conclusion on this matter, and I must ask the noble Lord to withdraw his amendment; or, if he persists in pressing it, I must ask the Committee to reject it.

Lord Bruce of Donington

The noble Lord's venture into the realm of a humorous dig at the noble Lord, Lord Diamond, seems to have misfired a little. Indeed, the answer that he has given in relation to the powers of the director general to appoint staff has, I am afraid, got him into a slightly humorous situation, in that we now know that it is the Civil Service Commission that appoints them; he does not appoint them. He can give them various grades or as many pips as he likes, as the noble Lord put it, but the position will have to be resolved far more authoritatively than that. It is quite clear from what the noble Lord has said, where he has not contradicted himself on the matter, that there is an overwhelming justification for this amendment in that one wants appointments of high-powered people made at a higher level altogether to deal with what is truly a formidable executive board of British Gas.

The situation is rendered all the more humorous by the fact that earlier on this afternoon the noble Lord, Lord Lucas of Chilworth, was kind enough to define the position of government as against the nationalised boards, giving government full power to determine policy but leaving the operations of the particular board or industry affected to those in control of it. This is the perfect situation that has obtained up till now.

Let us observe the position. Here is a gas industry which has been conspicuously successful, as anybody who cares to read Appendix Ito the accounts of British Gas covering the past 10 years will immediately be able to appreciate. There can be no complaint whatsoever about the economic and profitable performance of British Gas, functioning as a publicly owned company with the Minister being given general powers of direction, which undoubtedly the Minister has.

I ask the Committee to consider what has happened. Without all this detailed paraphernalia of the Bill, without all the regulation that is proposed in the various documents that are brought with this Bill, the Government are trying to achieve exactly the same purpose that has been achieved over the past 10 years at least—all for the sake of handing over the capital ownership to private shareholders. It must be one of the most ridiculous circumstances that could ever be laid before the British people. This paraphernalia, this complication, the hours and hours spent in debate, the hours and hours spent in drafting clauses in order to safeguard the public interest and to achieve protection for the British public, which they have had for at least 10 years without any regulatory body at all and which has been achieved purely because of the knowledge of the corporation, which is ultimately responsible through the Minister to Parliament, is completely useless in that respect.

The reason why one wants a more powerful regulatory body is very simple. We on this side, and the public at large, do not trust the Government at all to introduce in good faith regulations or Acts which will in fact, as distinct from theory, protect their interests, and they feel like that for good reason. My noble friend Lord Stoddart has given an example this afternoon of what happened to Oftel and British Telecom; and the point was amplified by the noble Baroness a little later on. But to quote what the British Telecom spokesman actually said reveals the true nature of the dilemma. What the spokesman said was: The service that was the free priority telephone repair service for police, fire and ambulance stations and hospitals was previously a drain on BT, but it was absorbed because we were a public corporation. Once we were privatised, we became a company like any other company and all of our customers have to pay the going rate for services. That is exactly the state of affairs that we on this side wish to avoid. We want the regulatory body to be effective, and to be effective it must be manned properly.

We are considering this within the context of the Minister's own Explanatory Memorandum which, at page viii of the Bill gives an idea of what the Government expect to happen in terms of manpower as a result of this Bill. I should like to quote it to the Committee because it is within this context that we consider the Government's real intention of setting up a proper regulatory body. It states: It is expected that the staff of the Director General of Gas Supply and the staff of the Gas Users' Council will together number about 80 to 100. The abolition of the existing National and Regional Gas Consumers' Councils will result in the disappearance of about 100 public sector posts. The conversion of the British Gas Corporation to a public limited company may lead to a small reduction in the number of staff in the Department of Energy. There may be a small increase in the staff of the Office of Fair Trading and the Monopolies and Mergers Commission if a large number of matters are referred to them. It is probable that the net effect on public sector manpower will be a slight reduction. I invite the Committee to consider whether the way the Government were looking at it there is consistent with their determination to have a regulatory body which is propely staffed, not only in terms of numbers but also in terms of quality and rank.

4.30 p.m.

If Members of the Committee care to study the proceedings of the Select Committee on Energy in another place (House of Commons Paper No. 15 published on 15th January last) they will find out the misgivings of this all-party committee. They will find there that the committee is anxious that the director general's department shall have adequate authority. There is the whole question of looking after the Office of Fair Trading aspects of the new plc's activities, a possible reference to the Monopolies and Mergers Commission and certainly duties in connection with the continuity of the policy hitherto carried out by British Gas to buy British supplies wherever possible, which is something British Telecom undertook to do in the early stages.

There are important functions relating to competition, which occupies or should occupy a highly specialised area in the department of the Director-General of Oftel. These merit not merely staff who go through the normal Civil Service Commission and have its approval; they demand that the staff be headed by people of rank, in every way capable of dealing with their opposite numbers in the new British Gas plc. Nowhere is this more necessary than in the finance and accounting field.

British Gas brought forward the suggestion, which was, I think, accepted by the Government—it is so stated in the energy committee report—that once it was privatised it would no longer be required as a plc to produce any more information than is normally required by law under the Companies Acts, as amended by the various other measures that have been brought into the matter by virtue of compliance with the European Community accounting regulations, or to present accounts in any form different from a normal British plc. Hitherto British Gas has produced very informative accounts going far beyond anything that is produced by a plc in the normal way.

Moreover, for regulatory purposes it is necessary not only that this should continue but that it should be enlarged. If the Committee will look at the proposed authorisation, it will find new categories of costs set out under the various conditions in the draft authorisation that do not have any comparable category in even the large and extended accounts which British Gas has been able to produce.

One thing has to be done if there is to be transparency. The published data used by the director general for the purpose of checking whether the authorisation regulations have been carried out must conform with the authorisation in order that everybody may see exactly the basis upon which any price adjustments are made. It will be apparent to those noble Lords who have occupied positions in public life—certainly those noble Lords who have been in commerce or perhaps in large industries—that the accounting requirements set out in the authorisation and their proper checking require people of high status, with fully subordinate staffs to enable the job to be done satisfactorily, particularly as new accounting categories are created and there are areas of ambiguity within the draft authorisation form submitted to the House.

All these considerations add up not to a small director general's department, headed no doubt by a reputable gentleman, but with a small subordinate, albeit skilled, staff. They add up to having a fully effective and powerful organisation ranking in every respect with the executives in British Gas who are their opposite numbers. They need not necessarily have a complete counterpart, one for one, but they require a very high powered body if after this Act has been passed the public of the United Kingdom are to be accorded those safeguards they have now when it is a public corporation. They want to be satisfied that this prosperous and secure state of affairs now, when British Gas is a public corporation, can be guaranteed even after this absurd exercise of privatisation has been carried out. That is why we shall insist on this amendment.

4.36 p.m.

On Question, Whether the said amendment (No. 6A) shall be agreed to?

Their Lordships divided: Contents, 98; Not-Contents, 124.

Airedale, L. Chitnis, L.
Amherst, E. Cledwyn of Penrhos, L.
Ardwick, L. Crawshaw of Aintree, L.
Aylestone, L. David, B. [Teller.]
Banks, L. Davies of Penrhys, L.
Barnett, L. Dean of Beswick, L.
Birk, B. Denington, B.
Blyton, L. Diamond, L.
Bottomley, L. Donaldson of Kingsbridge, L.
Bruce of Donington, L. Elwyn-Jones, L.
Burton of Coventry, B. Ennals, L.
Caradon, L. Ezra, L.
Carmichael of Kelvingrove, L. Fisher of Rednal, B.
Fitt, L. Mulley, L.
Fletcher, L. Nicol, B.
Gallacher, L. Northfield, L.
Galpern, L. Oram, L.
Graham of Edmonton, L. Paget of Northampton, L.
Greene of Harrow Weald, L. Phillips, B.
Grey, E. Pitt of Hampstead, L.
Hampton, L. Ponsonby of Shulbrede, L. [Teller.]
Hanworth, V.
Harris of Greenwich, L. Prys-Davies, L.
Hayter, L. Rathcreedan, L.
Heycock, L. Rhodes, L.
Hooson, L. Ritchie of Dundee, L.
Houghton of Sowerby, L. Rochester, L.
Hunt, L. Sainsbury, L.
Hylton, L. Seear, B.
Irving of Dartford, L. Sefton of Garston, L.
Jacques, L. Serota, B.
Jenkins of Putney, L. Shepherd, L.
John-Mackie, L. Stallard, L.
Kagan, L. Stedman, B.
Kennet, L. Stewart of Fulham, L.
Kilbracken, L. Stoddart of Swindon, L.
Kilmarnock, L. Strabolgi, L.
Kirkhill, L. Taylor of Blackburn, L.
Listowel, E. Taylor of Gryfe, L.
Llewelyn-Davies of Hastoe, B. Tordoff, L.
Lloyd of Hampstead, L. Turner of Camden, B.
Lloyd of Kilgerran, L. Underhill, L.
Lockwood, B. Wallace of Coslany, L.
Mackie of Benshie, L. Walston, L.
McNair, L. Wedderburn of Charlton, L.
Mais, L. Wells-Pestell, L.
Mayhew, L. Whaddon, L.
Mishcon, L. Williams of Elvel, L.
Molloy, L. Winchilsea and Nottingham, E.
Morton of Shuna, L.
Ailesbury, M. Gainford, L.
Allerton, L. Gardner of Parkes, B.
Ashbourne, L. Gibson-Watt, L.
Auckland, L. Gisborough, L.
Belhaven and Stenton, L. Glenarthur, L.
Bellwin, L. Gray of Contin, L.
Beloff, L. Greenway, L.
Belstead, L. Gridley, L.
Bessborough, E. Hailsham of Saint Marylebone, L.
Blake, L.
Boyd-Carpenter, L. Harmar-Nicholls, L.
Brabazon of Tara, L. Harris of High Cross, L.
Braye, L. Hood, V.
Brougham and Vaux, L. Hooper, B.
Bruce-Gardyne, L. Hylton-Foster, B.
Butterworth, L. Kaberry of Adel, L.
Caccia, L Kemsley, V.
Caithness, E. Killearn, L.
Cameron of Lochbroom, L. Kimball, L.
Campbell of Alloway, L. Kinnaird, L.
Campbell of Croy, L. Kintore, E.
Carnegy of Lour, B. Lane-Fox, B.
Cathcart, E. Lauderdale, E.
Cayzer, L. Layton, L.
Chelmer, L. Long, V.
Coleraine, L. Lyell, L.
Cottesloe, L. McAlpine of Moffat, L.
Cox, B. Macleod of Borve, B.
Craigavon, V. Mancroft, L.
Cullen of Ashbourne, L. Margadale, L.
Davidson, V. Marley, L.
Denham, L. [Teller.] Massereene and Ferrard, V.
Dilhorne, V. Merrivale, L.
Drumalbyn, L. Middleton, L.
Dundee, E. Milverton, L.
Elles, B. Montgomery of Alamein, V.
Elliot of Harwood, B. Morris, L.
Elton, L. Mottistone, L.
Erroll of Hale, L. Mowbray and Stourton, L.
Faithfull, B. Murton of Lindisfarne, L.
Fortescue, E. Newall, L.
Fraser of Kilmorack, L. Norrie, L.
O'Brien of Lothbury, L. Sharples, B.
Orr-Ewing, L. Skelmersdale, L.
Pender, L. Somerset, D.
Perth, E. Stodart of Leaston, L.
Peyton of Yeovil, L. Strathspey, L.
Porritt, L. Swansea, L.
Portland, D. Swinfen, L.
Radnor, E. Swinton, E. [Teller.]
Rankeillour, L. Terrington, L.
Reay, L. Teynham, L.
Renwick, L. Thomas of Swynnerton, L.
Rodney, L. Todd, L.
St. Aldwyn, E. Trumpington, B.
St. Davids, V. Vaux of Harrowden, L.
Salisbury, M. Vickers, B.
Sanderson of Bowden, L. Vivian, L.
Sandford, L. Wolfson, L.
Sandys, L. Young, B.
Selkirk, E. Young of Graffham, L.
Sempill, Ly. Zouche of Haryngworth, L.
Shannon, E.

Resolved in the negative, and amendment disagreed to accordingly.

4.45 p.m.

Lord Brabazon of Tara

I think we have reached a suitable moment to take the Statement. I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.