HL Deb 07 July 1986 vol 478 cc10-9

3.5 p.m.

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

My Lords, I beg to move that the Bill be now further considered on Report.

Moved, That the Bill be further considered on Report.—(Lord Belstead.)

On Question, Motion agreed to.

Schedule 2 [Gas Consumers' Council]:

[Amendment No. 60 not moved.]

Clause 3 [Abolition of Corporation's special privilege]:

Lord Stoddart of Swindon moved Amendment No. 61. Page 2, line 39, at end insert— ("( ) The Secretary of State shall not make an order under subsection (1) above until it appears to him to be in the national interest to do so.")

The noble Lord said: My Lords, I make no apology for returning to this matter, since the energy scene is ever changing, as, indeed, is the financial situation. The Bill itself is not in the national interest. It may very well be in the Tory Party interest; but the Tory Party interest is increasingly divorced from the national interest. In this House we are, I hope, concerned with the overall national interest, and we do not allow our personal political prejudices to cloud our judgment as to what is best for the British people.

Given that the Government are determined to have their way over the principle of privatisation, there is absolutely no reason why this House should not say "Yes" to the principle, as it has done on Second Reading, but nevertheless say to the Government that privatisation should proceed only when it is in the national interest for it so to proceed.

The Government plan a flotation in the autumn. They have already announced details of how the flotation will be managed, who is to receive preferential treatment, and so on. But, already, doubts are being expressed by financial journalists about the wisdom of selling off British Gas at the present time. Max Wilkinson, writing in the Financial Times on 19th June, said a number of things. I should like to quote some of them. He says: For it may well be argued that now is the worst time in a decade to be trying to sell off a major energy company. Oil prices are less than half their level last autumn, and are about 40 per cent. below their level in 1975 after allowing for inflation".

He goes on to say: As a result, gas salesmen can no longer laugh off the competition from fuel oil in industrial markets, as they have been used to doing. The prices British Gas can charge are thus under strong competitive pressure, just as the era of cheap North Sea gas supplies is drawing to a close. Even though North Sea gas costs have fallen in sympathy with oil, gas now being developed in deeper, more hostile waters will cost five or six times as much as the cheap and abundant supplies from the Southern basin which were the basis for British Gas's remarkable expansion in recent years. The heady period of growth for the UK gas industry is probably almost over. It may well prove to be one of the ironies of history that British Gas's great years of high risk, adventure and vision came to an end at about the time that it ceased to be a nationalised utility".

In another part of the article Mr. Wilkinson says: British Gas therefore faces a classic combination of a nearly mature market, rising costs and increasing scarcity of supplies. British Gas's mainstream business, therefore, lacks the lustre of British Telecom, which was sold so successfully in 1984 as a company riding the crest of advancing technology towards new horizons of growth. On the other hand the weakness of the powers now agreed for the regulatory authority ensures competitive gas suppliers will have the minimum chance of penetrating British Gas's established markets".

He concludes the article: Nevertheless, with strong positive cash flow, pre-tax profits of around £1 billion and a partly captive market, British Gas will clearly be a safe investment well able to pay good dividends. A few fast bucks may be made on the flotation, no doubt; but when the dust has settled it is likely to be seen as a solid, safe and fairly boring stock in a little changed competitive environment. If that is so, historians of the Thatcher years may ask: 'Why did they bother to privatise it at all?'

I think that says most of it. But since that article was written yet another OPEC meeting has broken up in disarray, and there seems to be no prospect that they can take any concerted action to raise oil prices or to prevent them from falling even further from their present low level. These factors alone demand a cautious approach, and there may be others nearer the time of flotation which ought to give the Government pause.

The industry belongs to the nation, not to Ministers or to the Tory Party, and it is to the nation's interest that the Government should be looking. It is for this reason that I ask support for this amendment—that is, unless the Government decide, in their wisdom, to accept it.

Lord Sanderson of Bowden

My Lords, I think that at this stage we have to consider the whole question of what is meant by the national interest. It is my view that this Government would not be bringing forward this Bill unless they considered denationalisation to be in the national interest. The plc created will have the ability to raise money in the market and carry out its proper tasks. But one of the most important things is that if one looks back on the record of the last 15 years with regard to the nationalised industry, British Gas, one will see that the manipulation of gas prices is a matter which has not been appreciated by the British public at all, and particularly as they were mani-pulated in the late 1970s. We were living as if there was no tomorrow. Of course, there were no cheap national resources that would go on forever and a day. That is clearly being seen now. We are having to go further for gas supplies—going deeper and costing more money. But that was not considered by the Government of the day, and we have to pay the price for it.

The noble Lord, Lord Diamond, gave me credit for saying in the debate on one of the many amendments which were put before your Lordships recently that I knew something about industry. I will not argue today about the role of the regulator versus the public limited company's role with its board, but surely the national interest means, in the long term, wider share ownership.

The noble Lord, Lord Bruce of Donington, has told us on many occasions that he has no objection to small shareholders but an absolute aversion to institutions and, it seemed to me, the City in general. If one does not encourage wider share ownership one will never get the influence of the institutions of the City of London moderated. Surely arguing for wider share ownership and a spread of wealth through the ownership of homes and through the ownership of shares is something that is in the national interest. But we are dealing with this matter, and we have to face the facts. We must take on this whole question of the national interest as a matter of principle.

When I look at the recent announcement about social ownership I must say it looks to me as though it is a repackaging of re-nationalisation, and I for one will strongly resist this amendment.

Lord Diamond

My Lords, I rise briefly to support very fully the amendment moved by the noble Lord, Lord Stoddart. In reply to the speech to which we have just listened, according to my Marshalled List we are talking about page 2, line 39, which deals with the abolition of the corporation's special privilege and starts off", "As from such day". The amendment refers to making an order which is the order fixing the day. What we are therefore considering is not the general principles of which the noble Lord has reminded us, but the day on which the present monopoly of gas supply shall cease to exist. It is that day—not the general principles, which have been decided at Second Reading, whether or not we like them—with which we are seeking to deal, in order to prevent the Government being pressed into forgetting the national interest as a result of the cash flow to which they are increasingly becoming subjected and anxious.

Now that we know that other privatisation measures which were going to produce cash for the Chancellor (for whatever purposes he needs it) will no longer take place, there will inevitably be great pressure upon the Chancellor not to have regard to the national interest but to have regard to temporary cash flow difficulties. Every businessman knows, and all of us know, the competing pressures of long-term national interest and short-term cash flow, to which everybody is subject from time to time, and how easy it is to make the wrong decision.

I am not claiming for myself the ability to determine what is the national interest. I have always taken the view that only a government can determine it, and that it is within a government's prerogative so to say. I know that this is not a generally accepted view, but it is mine.

However, the amendment seeks to limit the choice of date to a date that will clearly be, in the Government's view, in the national interest. I hope in those circumstances that this amendment will be fully supported, as it deserves to be.

Lord Boyd-Carpenter

My Lords, this is a very odd amendment indeed, because it is surely to be assumed that any Secretary of State in any government will act in accordance with what is his view of the national interest. I appreciate that noble Lords opposite do not feel that the provisions of this Bill are in the national interest. They have made that abundantly clear, and at full length. Equally, as my noble friend behind me has said, there are many of us on this side who believe very strongly that this is very much in the national interest. But surely to lay down that the Secretary of State can act only when it appears to him to be in the national interest is somewhat insulting to any Secretary of State. For that reason alone, I hope that we shall reject it.

Lord Brabazon of Tara

My Lords, this amendment seeks to introduce, as has been explained and debated, the national interest as a criterion in the Secretary of State's decision as to the appointed day under Clause 3, and to give Parliament a role in the timing of the order.

We have debated these points fairly fully during the Committee stage, and I am sorry that we have not persuaded noble Lords that this amendment is not necessary. Perhaps I could therefore briefly rehearse our views again.

On the appointed day the regulatory regime will come into force. This regime is in a number of ways better than exists at present. It provides better protection for the consumer and enhanced safety provisions. It is important, therefore, that these provisions should be implemented at an early stage as British Gas's authorisation will take effect at the same time and it is clearly necessary to establish public confidence in the new public gas supplier and the regulatory regime.

As we have made clear on many occasions, one of our aims in privatising British Gas is to create an environment where market forces can control and shape the nature of the industry within the overall framework of regulations set out in the Bill. We believe that this is where the national interest lies, rather than the development of an interventionist regime requiring reference to central government or Parliament at every turn. My noble friend Lord Sanderson made that point very clearly.

Parliament will already have decided that the introduction of the new regulatory regime is in the national interest by approving the Bill. The form and content of the regulatory regime will have been fully debated both here and in another place during the passage of the Bill. The authorisation of British Gas will also have been fully discussed and considered, and will have been granted to the corporation before the appointed day. I would remind noble Lords that several alterations have been made to the proposed authorisation as a result of consideration by your Lordships' Committee.

The noble Lord, Lord Stoddart, said that he did not believe that privatisation, or, in fact, the Bill were in the national interest. I am afraid that I have to disagree with the noble Lord. As my noble friend Lord Boyd-Carpenter said, we would not be bringing this Bill forward if we did not consider it to be in the national interest. Therefore, we are satisfied that the national interest will have been fully explored before the Bill becomes law and that the addition of the criterion put forward in the amendment is unnecessary. Therefore, I urge noble Lords not to accept the amendment.

Lord Stoddart of Swindon

My Lords, the noble Lord, Lord Brabazon, will not be surprised to learn that I fundamentally disagree with what he has said. Of course British Gas plc will raise money on the market, but the whole issue at stake is how much money will be raised on the market, and the amount of money which is raised on the market may very well be dependent upon the time when the flotation is made. It may very well be that there could be a conflict of interest between the Secretary of State and the Chancellor of the Exchequer, the latter being desperate for money by the Budget of next year, because the Chancellor, being desperate for money, may very well try to force the flotation at a time which is not in the national interest and not in the interests of the taxpayer. Therefore, we have tabled this amendment in order to give the Secretary of State for Energy some standing and some extra force when he is arguing the point with his right honourable friend the Chancellor of the Exchequer. That is why we have put down this amendment.

We perfectly understand that Ministers will interpret the national interest according to their lights, but nevertheless it could very well be that the departmental Secretary of State for Energy will have a conscience about floating British Gas at the wrong time. As I say, this amendment will give him some strength to argue with other forces within the Cabinet who are so desperate for money that they will sell off British Gas at virtually any price, whether or not it is in the national interest to do so. That is why we moved the amendment, and I believe that we should in fact test the feeling of the House by proceeding to a Division.

3.23 p.m.

On Question, Whether the said amendment (No. 61) shall be agreed to?

Their Lordships divided: Contents, 81. Not-Contents, 91.

DIVISION NO.1
CONTENTS
Airedale, L. John-Mackie, L.
Ardwick, L. Kearton, L.
Aylestone, L. Kilmarnock, L.
Banks, L. Leatherland, L.
Birk, B. Listowel, E.
Blyton, L. Llewelyn-Davies of Hastoe, B.
Boston of Faversham, L. Lloyd of Kilgerran, L.
Bottomley, L. McNair, L.
Briginshaw, L. Mayhew, L.
Brockway, L. Mishcon, L.
Bruce of Donington, L. Molloy, L.
Burton of Coventry, B. Morton of Shuna, L.
Caradon, L. Nicol, B.
Carmichael of Kelvingrove, L. Northfield, L.
Cledwyn of Penrhos, L. Ogmore, L.
Crawshaw of Aintree, L. Oram, L.
David, B. Phillips, B.
Davies of Penrhys, L. Ponsonby of Shulbrede, L.
Dean of Beswick, L. [Teller.]
Denington, B. Rathcreedan, L.
Diamond, L. Rochester, L.
Donaldson of Kingsbridge, L. Sainsbury, L.
Elwyn-Jones, L. Seear, B.
Ennals, L. Serota, B.
Ewart-Biggs, B. Shackleton, L.
Ezra, L. Shepherd, L.
Gallacher, L. [Teller.] Silkin of Dulwich, L.
Gladwyn, L. Stallard, L.
Gormley, L. Stoddart of Swindon, L.
Graham of Edmonton, L. Strabolgi, L.
Grimond, L. Strauss, L.
Hampton, L. Taylor of Blackburn, L.
Hanworth, V. Taylor of Mansfield, L.
Harris of Greenwich, L. Tordoff, L.
Hatch of Lusby, L. Underhill, L.
Heycock, L. Wallace of Coslany, L.
Hirshfield, L. Walston, L.
Hunt, L. Wedderburn of Charlton, L.
Irving of Dartford, L. Williams of Elvel, L.
Jacques, L. Willis, L.
Jenkins of Putney, L. Winstanley, L.
NOT-CONTENTS
Aldington, L. Elliot of Harwood, B.
Allen of Abbeydale, L. Elliott of Morpeth, L.
Allenby of Megiddo, V. Elton, L.
Annan, L. Faithfull, B.
Bauer, L. Foley, L.
Belhaven and Stenton, L. Fortescue, E.
Beloff, L. Fraser of Kilmorack, L.
Belstead, L. Gibson-Watt, L.
Bessborough, E. Glanusk, L.
Blyth, L. Glenarthur, L.
Boyd-Carpenter, L. Gray of Contin, L.
Brabazon of Tara, L. Gridley, L.
Brougham and Vaux, L. Hailsham of Saint
Bruce-Gardyne, L. Marylebone, L.
Butterworth, L. Halsbury, E.
Caithness, E. Hayter, L.
Cameron of Lochbroom, L. Hesketh, L.
Campbell of Alloway, L. Hives, L.
Campbell of Croy, L. Home of the Hirsel, L.
Carnegy of Lour, B. Hood, V.
Carnock, L. Hooper, B.
Constantine of Stanmore, L. Hylton-Foster, B.
Cottesloe, L. Killearn, L.
Cullen of Ashbourne, L. Kinloss, Ly.
Davidson, V. Kinnaird, L.
De Freyne, L. Lane-Fox, B.
Denham, L. [Teller.] Lauderdale, E.
Denning, L. Layton, L.
Derwent, L. Long, V.
Drumalbyn, L. Macleod of Borve, B.
Dudley, B. Mancroft, L.
Eccles, V. Montgomery of Alamein, V.
Effingham, E. Morris, L.
Ellenborough, L. Mowbray and Stourton, L.
Newall, L. Shaughnessy, L.
Norfolk, D. Skelmersdale, L.
Nugent of Guildford, L. Somers, L.
Porritt, L. Stamp, L.
Portland, D. Strathcarron, L.
Rodney, L. Strathspey, L.
Romney, E. Sudeley, L.
St. Davids, V. Swinton, E. [Teller.]
St. John of Bletso, L. Vaux of Harrowden, L.
Sanderson of Bowden, L. Vivian, L.
Sandys, L. Young, B.
Selkirk, E. Ypres, E.

Resolved in the negative, and amendment disagreed to accordingly.

3.31 p.m.

Lord Gallacher moved Amendment No. 62: Page 2, line 39, at end insert— ("( ) No order shall be made under subsection (1) above unless a draft of it has been approved by both Houses of Parliament.").

The noble Lord said: My Lords, Amendment No. 62 is of the same kind as Amendment No. 61, but makes an important distinction in that it seeks the authority for the draft order mentioned at page 2 line 39 to be approved by both Houses of Parliament. The purpose of this amendment is to give both Houses the opportunity, before the button is pressed in Clause 3, of saying "yea or nay" to the intention lying behind Clause 3 in the Bill.

It will be within the knowledge of noble Lords that the Bill was guillotined in fairly early course in another place, and to that extent a substantial part of this important Bill—particularly the financial clauses—has not been considered in the other place. Therefore, although in this House an attempt has been made to consider the Bill in detail, it would be appropriate to give the other place at least the opportunity of looking at the Bill as it emerges from your Lordships' House to decide whether or not to approve the draft order mentioned in Clause 3.

We insist on this side of the House that there is no popular mandate for this measure. There is of course on the basis of the first-past-the-post electoral system; but if one takes the concerted and continuing opposition to the Bill, both by the official Opposition and by the Alliance in this House, then on the basis of the popular vote we are entitled to say that it is doubtful whether, in the country as a whole, there is any disposition to see the privatisation of British Gas as being something which is beneficial to users or indeed to the nation as a whole.

It is important to have a brief look at the history of gas nationalisation because we have tended to concentrate hitherto purely on the advent of North Sea gas, which of course marked a turning point in the affairs of British Gas. The decision to take gas into public ownership followed an independent public inquiry which found that the supply of gas was indeed a natural monopoly. The public inquiry has been vindicated even by this Bill in that the decision to privatise has certainly not caused the present Government in any way to consider doing anything but maintaining it as a private monopoly, although within the framework of a public limited company.

The Second Reading for gas nationalisation took place in the other place on 10th February 1948, and the Minister in charge of the Bill at that time told the House that there were 1,000 within the scope of the Bill. Of these, 350 were non-statutory; 700 were statutory—400 of them companies, and 300 of them municipal undertakings.

The question of compensation to municipalities which were losing their gas undertakings under the 1948 Bill was discussed at considerable length in the other place at the time. The government of the day, a Labour Government, regarded the transfer from municipalities to a new board as being from one public authority to another. That is to say, the enterprises were being taken over as they were with their assets and liabilities. The sum of £2 million only was provided by the Government to municipalities at that time for severance.

I personally regard it as being to the credit of the Opposition at that time—a Conservative Opposition—that they roundly criticised these arrangements as being thoroughly unfair to municipalities, and yet we have in this Bill a reversal of the process. An order was made on the same day as the Second Reading took place to prevent transfers from reserves of municipal gas undertakings for use by the general body of ratepayers, so that British Gas had the advantage not merely of the assets, and not merely took over the liabilities, but took over the reserves as well, and I think that from their point of view they had a very successful deal indeed.

When one has regard to some of the assets still in the possession of British Gas and which will accrue to private shareholders following the passage of this Bill, these assets, certainly in town centres—the sites formerly occupied by gasholders and the like—constitute a valuable piece of real estate for this enterprise. In our opinion these aspects have never been discussed. Therefore, taking the totality of the issue, and having regard to how little consideration was given to the Bill in another place—particularly the latter clauses—we are justified in asking the House to approve an amendment which would require the draft order to be approved by both Houses of Parliament under Clause 3 before that draft order takes effect. I beg to move.

Lord Brabazon of Tara

My Lords, this amendment, which seeks to make the appointed day subject to parliamentary procedure, is similar to the one we have just discussed. It is certainly similar to ones we discussed at Committee stage, and I have no doubt were discussed at length in another place as well. The only remaining questions that could be relevant to a debate would be the date specified on the order. A fuller debate would be totally inappropriate when the provisions have just been subject to the fullest scrutiny and debate in both Houses of Parliament.

I do not accept the noble Lord's accusation that, although the Bill was guillotined in another place, insufficient time was allowed for debate. I understand that after the guillotine fell the time limit was never reached on any particular day, so I think that there has been the fullest opportunity. Certainly, as your Lordships know only too well from the Committee stage, we have had an enormous amount of debate.

This amendment would also cause delay and inflexibility in introducing the new regulatory regime, which, as I said in the course of the last amendment, we believe will bring advantages to consumers, and could also mean that the transfer of the ownership of the industry to its employees and the public at large could also be delayed. I cannot agree with the noble Lord, either, that privatisation has not been a popular measure. I believe from the massive success of the British Telecom privatisation that the population at large agrees with the Government that nationalisation is not the right way to approach these businesses.

I believe that it is the Opposition that is out of touch on this and not the Government. This is a similar amendment aimed at delaying what will have been discussed and debated at great length now and during other stages, and I must therefore once again ask the House not to accept this amendment.

Lord Diamond

My Lords, I very much regret that the Minister has repeated the most extraordinary statement made by his colleague that the implementation of a guillotine in another place does not affect the issue. I am sure that both the noble Lords will accept that that statement could only have been made by an individual who has not been a Member of the other House and suffered the guillotine procedure. Of course it is impossible, when you have a large committee such as a Standing Committee, to control the timing to the extent to which we are able to do so, here with our very small numbers attending the final stages of our discussions. It is therefore not possible to foresee exactly how many amendments will have to be jettisoned in order to reach the agreed point at the agreed time.

However, to suggest for one second that the guillotine does not affect the freedom of debate in another place is to my mind quite the most extraor-dinary statement which has been made by the Front Bench on this Bill—and my heavens, there have been some! My Lords, just ask the Leader of the other House whether he thinks that the imposition of a guillotine affects the issue! Why else would he impose a guillotine? We are on very safe ground here because colleagues who are of an age to have experienced it will remember that no guillotine was ever imposed in the Committee stage when gas supplies were first nationalised in 1948 or 1949, although the discussion went on for a considerable length of time, as the noble Lord, Lord Boyd-Carpenter, told us at the start of the discussion. I must reject that completely.

In fact, not only has this Bill been guillotined in the Commons, but it has been guillotined here in effect as well. The first guillotine was compulsory. It was a voluntary guillotine here in that we agreed to reach the end of the Bill by a given time on a given day, and within one minute of the clock striking the relevant hour that point was reached. It was reached only by very skilful jettisoning of amendment after amendment. On the last day alone, 42 amendments were not moved from this side of the Chamber. That was quite apart from the number of clauses that were accepted—39 clauses in that one day—without a single comment on clauses standing part, although many of us wished to make comments for the sake of clarification. I do not know how many comments the official Opposition wanted to make; but I wished to make about a dozen and I could not do so because of the time limitation. I therefore hope that we are not going to hear any more, if I may say so, of that nonsense which implies that the guillotine is introduced for the fun of it and does not affect the time spent in Standing Committee in another place on a discussion on a Bill.

I want to speak very briefly indeed in support of this amendment because I think there is additional pressure that has been indicated for this to be done beyond that which existed at the time when we discussed this in Committee. The House will recognise and recollect that we are now in a different situation with a very large measure of privatisation which has been postponed. For example, the privatisation of the water industry has been postponed for reasons which are not very clear to any of us; and the implementation of another private measure dealing with the ROFs has been postponed for reasons which seem to be totally secret. No doubt those reasons are something to do with the defence of the country; otherwise, no Front Bench would be as secretive as the present one has been about the reasons for not implementing the privatisation and the marketing of shares of the ROFs. All this represents a totally different situation and makes it all the more essential that the House should be consulted in the way this amendment so wisely suggests.

Lord Gallacher

My Lords, I shall not echo the words of the noble Lord, Lord Diamond, regarding the effect of the guillotine on our deliberations, except to say that even without a guillotine we have endeavoured in this House on these Benches, at least, to co-operate fully with the Government. Indeed, that co-operation will be carried even further on Amendment No. 62 because we do not propose to seek a Division on it in view of the fact that we have divided on a similar amendment previously. Nevertheless, I think that it is an important amendment. I believe that the Minister's response to it has been disappointing.

The privatisation of British Telecom was a success. Opinions differ as to the basis for that success. On this side of the House we regarded that as a give-away. It is our sincere hope that even though, as I believe I accurately stated, British Gas came by a substantial part of its assets very cheaply indeed (to say nothing of the great good fortune of discovering natural gas in the North Sea) we sincerely hope on this side that there is not to be another give-away in the interests of window-dressing and raising revenue quickly for the Chancellor. That said, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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