Lords Sitting of 9 July 1986

Preamble
The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.
Prayers—Read by the Lord Bishop of Manchester.

Swan Deaths: Anglers' Lead Weights
Baroness Nicol: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what support they have given to the Lead Development Association's campaign to reduce incidents of lead poisoning in swans by encouraging the use of non-toxic weights by anglers.
The Minister of State, Department of the Environ-ment (Lord Elton): My Lords, the Lead Development Association has launched a scheme to persuade anglers to dispose of their lead fishing weights by arranging a number of collection centres where representatives of angling clubs may bring lead weights for disposal in return for the going rate for lead scrap. My honourable friend the Parliamentary Under-secretary of State for the Environment has welcomed the introduction of the scheme and commended it to all Anglicans—I am sorry, my Lords: to all anglers, of whatever denomination!—and to angling clubs.
Baroness Nicol: My Lords, I am grateful to the Minister for that reply, and I am sure that someone will get him off the hook before the end of this Question! Will he accept that we support him in his praise for the Lead Development Association? It is public-spirited, and I am sure that it will be helpful. Can the noble Lord tell the House whether the proposed by-laws have been used by water authorities to ban the use of lead shot? Can he also tell us whether a non-toxic alternative for dust shot has yet been developed?
Lord Elton: My Lords, I am glad that the noble Baroness agrees that it is an excellent scheme. As to the water authorities, my right honourable friend the Minister of Agriculture, Fisheries and Food issued a model by-law to the water authorities in July last year which will enable them, if they wish, to make by-laws to prohibit the use of fishing weights, but as far as I know they have not yet done so. I am not aware as yet of a satisfactory alternative to dust shot as opposed to larger shot, but if events have overtaken me I shall write to the noble Baroness.
Lord Somers: My Lords, does the noble Lord agree that very little will be achieved by persuasion, and that uncoated lead will have to be banned altogether if progress is to be made? Is it not possible to make it compulsory, if lead has to be used, that it is coated with a non-toxic metal?
Lord Elton: My Lords, I am not competent to answer the noble Lord's technical question about preventing lead being harmful when ingested by swans, though I suspect that the grinding effect of the process in the gizzard would remove the coating and render it toxic in any case. As to legislation, we have gone out to consultation and have also consulted the Nature Conservancy Council about the desirability of legislation. We are considering the result of those approaches and will come to a decision shortly.
Viscount Mersey: My Lords, can my noble friend go a little further on the question of legislation" 1 asked much the same Question in January 1985, and I think it was he who answered it, promising legislation towards the end of 1986. Is that still the case?
Lord Elton: My Lords, the undertaking was to legislate if it proved that the voluntary process which is now being tried was not successful. The consultation is to determine whether it has been successful, and we shall know the answer shortly.
Lord Kilbracken: My Lords, are not non-toxic weights in most cases every bit as efficacious as lead weights? Does the noble Lord know why anglers persist in using lead?
Lord Elton: My Lords, I can only imagine that it is because they prefer it, but what the reason is for their preference I do not know.
Viscount St. Davids: My Lords, does the House consider that the Lead Development Association should be commended for its action and, what is more, for its general conservationist attitude, in that it hopes that that and other lead will go into lead accumulators and batteries which will power electric boats, which will thus cause even less pollution of our inland waterways?
Lord Elton: My Lords, I have for long been aware of the noble Viscount's interest in the matter, but I do not think that I have ever discovered him so ingenious in bringing it to your Lordships' notice.
Lord Rugby: My Lords, as the swan swallows hook, line and sinker, are not the hook and line equally toxic, especially when it is a barbed hook?
Lord Elton: My Lords, something like 3,000 swans a year die a very unpleasant death as a result specifically of lead poisoning. There may well be other unpleasant deaths, but we are addressing ourselves to the poisoning aspect. It is a large problem and one which should be tackled, and I think we must do that.
Lord Mackie of Benshie: My Lords, can the noble Lord say whether the swan population is rising as a result of the measure, or is it still falling?
Lord Elton: My Lords, I think it is a little early to say, as this will be the first breeding season affected by the experiment. If the noble Lord will ask a Written Question later, I may be able to answer it.

Metropolitan Police Establishment: Recruiting
2.41 p.m.
Lord Mellish: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will give up-to-date figures of new recruits to the Metropolitan Police; and what is the present establishment figure.
Viscount Davidson: My Lords, a bulk intake of recruits on 30th June brought the strength of the Metropolitan Police to 26,920. My right honourable friend has recently increased the establishment to 27,515.
Lord Mellish: My Lords, I am grateful to the Minister for quoting those excellent figures. There has been some success. May I ask him a few questions arising from the figures?
Noble Lords: One!
Lord Mellish: May I ask the noble Lord one question, my Lords? In the happy event that the establishment figures are reached, does the commissioner have the right to say to the Home Secretary that he can prove that the Metropolitan Police needs even more men, and what sort of reception is he likely to get? Secondly, can he say how the attempts are going to recruit among ethnic minorities? I know that the police are trying hard. What success are they having?
Viscount Davidson: My Lords, as my right honourable friend has announced, following a review to establish where there were specific needs for additional manpower, the Metropolitan Police is to receive an increase in its establishment of up to 1,200 over the next four years on top of the increase of 50 for drugs work agreed in principle last October. In addition, increases of up to 600 in the civil staff ceiling should release at least 400 officers for operational duty. Two hundred more will be released by the commissioner's reorganisation of the force. Altogether, therefore, there will be increases of up to 1,850 in the operational strength of the force.
So far as the ethnic minorities are concerned, out of 1,256 recruits last year, 44 were from the ethnic minorities. There are now 302 in the force as a whole compared with 138 in 1981. My right honourable friend has made clear that this is still too few, and he strongly supports the efforts that the commissioner is making to increase the number of black and Asian recruits.
Lord Renton: My Lords, is it accepted by Ministers that special constables have an important part to play in helping the police on certain special occasions? Can my noble friend say to what extent the number of special constables will be increased within the metropolitan district?
Viscount Davidson: My Lords, the Government are extremely keen to support special constables, but I am afraid that I do not have the answer to my noble friend's specific question.
Lord Boyd-Carpenter: My Lords, can my noble friend say whether the new establishment figure is satisfactory to the commissioner, or whether he is still asking for more?
Viscount Davidson: My Lords, as my noble friend will know, the exact number of police officers required depends upon the level and degree of policing aimed at. The commissioner's assessment was based on one particular view of what the level of policing should be. The Government took full account of that view but also had to take account of the needs of other police forces and other public services. I am unable to tell my noble friend whether the commissioner is satisfied or not.
Baroness Elliot of Harwood: My Lords, will my noble friend say how many of the new recruits to the police are women?
Viscount Davidson: My Lords, I am afraid that I do not have the figures. I shall write to my noble friend.
Lord Carmichael of Kelvingrove: My Lords, is the Minister aware that the American experience of recruiting ethnic minorities seems to be rather better than ours? Are there any lessons to be learnt—I am sure that the commissioner has looked at the problem—from the American experience that could be of value here?
Viscount Davidson: My Lords, I shall convey the noble Lord's remarks to the commissioner.
Lord Mackie of Benshie: My Lords, will the noble Viscount say why the release of 600 staff from, I suppose, office duties, results only in 400 police for other duties?
Viscount Davidson: My Lords, no. I cannot, I am afraid.
Lord Wigoder: My Lords, will the noble Viscount remind us how many extra officers the commissioner asked for?
Viscount Davidson: My Lords, so far as I remember, the commissioner asked for another 3,000. He will be getting 1,850.
Lord Mellish: My Lords, is the Minister aware that the need for extra police is so overriding today that it is really quite extraordinary? I recognise that there is little he can do in respect of deployment. Is he aware, however, that in the Brixton district there have been eight murders in as many weeks and that mugging and raping are going on, while there has also been a move into the area of Caribbean gangs who are using guns in order to peddle drugs? Does he not agree that it really is about time that areas like Brixton were swamped, if that is the right word, with police officers who will deal with these thugs?
Viscount Davidson: My Lords, all I can say, I think, is that I will convey the noble Lord's remarks to the commissioner.

Engineers and Technicians: Training
2.46 p.m.
Lord Taylor of Blackburn: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they have received the Engineering Council document A Call to Action: Continuing Education and Training for Engineers and Technicians, and if so, what action they intend to take.
The Earl of Swinton: My Lords, the Government welcome the attention drawn to this important document which has indeed been received by the Department of Education and Science and a number of other departments. We recognise the urgent need to increase participation by key sectors of the labour force—such as engineers and technicians—in regular, flexible and up-to-date continuing education in order to secure growing competitiveness of British goods and services. We shall encourage colleges and universities to develop continuing education for engineers along the lines suggested by the report's "Good Practice". We are considering the report's evidence of need for further funding incentives for institutions and its call for further publicity and support for individuals, employers and professional institutions.
Lord Taylor of Blackburn: My Lords, while thanking the noble Earl for that reply, may I ask whether he is aware that Britain is falling behind in continuing education and training and also in the new technologies and developments that are taking place so rapidly? Is he prepared to recognise that without the training of engineers, our competitiveness in the world will go down?
The Earl of Swinton: Yes, my Lords. I am very grateful to the noble Lord for asking this question. This is a report that we wish to publicise as much as possible. What he says is very much the message that comes out of it. The essential message, I believe, is the need to bring about a change in attitude so that all the individuals concerned see the necessity for keeping themselves up to date and well trained.
Lord Avebury: My Lords, is one reason for the need to ensure better continued training the fact that it has taken us so long to change from three-year to four-year degree courses? To revert to a question that I asked the noble Earl on a previous occasion, what is the Government's policy on the supply of engineering graduates, bearing in mind that the transition from three- to four-year degree courses means a decline of 25 per cent. in the number qualifying in any one year if the number of places remains the same?
The Earl of Swinton: My Lords, I have read the report but that is not one of the messages I draw from
286
it. I shall write to the noble Lord with the answer to his question.
Lord McIntosh of Haringey: My Lords, we have listened with care to what the noble Earl said about the consideration being given by the Government to further funding. Can he give the House any indication as to when that consideration will result in a decision by the Government and an announcement of that decision? Is it not also the case that, apart from the issue of funding, there is a grave need for breaking down the barriers between different grades of engineers? Is it not absurd that in 1986 there should still be a distinction between technician engineers and engineering technicians, quite apart from the distinction between graduate engineers and those with other engineering responsibilities and duties?
The Earl of Swinton: My Lords, the report came out less than a month ago. Obviously, it has budget implications. I cannot therefore tell the noble Lord when we intend to take a decision. But I should make it clear that the Government take the view that the cost of updating training should normally be paid by the beneficiaries, who are usually the employers. However, we recognise that if this work is to expand in the way we think necessary, development funds are required and we have made a start by increasing the pickup programme to £6 million this year.
With regard to his second question, what the noble Lord said seemed to strike me as a lot of sense. However, I am afraid I have not been briefed on it and I shall have to write to him with the answer.

EC Budget
2.51 p.m.
Lord Campbell of Croy: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what are the effects for the United Kingdom of the ruling by the European Court of Justice that the 1986 budget of the European Economic Community is illegal.
The Secretary of State for Employment (Lord Young of Graffham): My Lords, the European Court of Justice ruling that the 1986 EC Budget is illegal means that the budget authority must adopt a new, legal budget. As Presidency, we are trying to achieve agreement on such a budget as soon as possible. This strategy was approved by the ECOFIN Council on 7th July. Failure to secure early agreement would mean that the Community will have to operate on provisional twelfths. The Budget Council agreed on proposals for a legal budget for 1986 on 7th–8th July, and these are now being considered by the European Parliament.
Lord Campbell of Croy: My Lords, I am grateful to my noble friend for his reply. I congratulate the Council of Ministers upon their marathon in reaching a revision of the budget. Does the revised budget have to be agreed by the European Parliament? If so, is tomorrow the last practical day when this can be done? Does the revision also have to go back to the European Court?
Lord Young of Graffham: My Lords, my understanding is that we have until the end of July to achieve this agreement, and that it is a matter only for the European Parliament.
Lord Bruce of Donington: My Lords, is the noble Lord aware that the ultimate co-operation between the European Parliament and the Council of Ministers is likely to produce only marginal effects with regard to the British taxpayers? Is the noble Lord aware that the original budget as put forward by the council, and as agreed therefore by Her Majesty's Ministers, contained a proposed expenditure of no less than £2,000 million on the storage of surplus commodities, their destruction, or their selling off at a fraction of their price? Will the noble Lord agree that this part of the budget not only is insane but, in the light of poverty in the world and the reduced aid to the developing countries, is positively obscene?
Lord Young of Graffham: My Lords, the noble Lord is entitled to his opinion on this. However, I think that it is rather wide of this Question. We are talking about the mechanism for agreeing a budget. Within the Twelve that budget has been agreed by the Council. It will, I hope, shortly be agreed by Parliament and I hope that we shall proceed in an orderly way to look at all items of expenditure within the Community including the CAP.
Lord Broxbourne: My Lords, my noble friend the Minister confirmed that Article 164 of the Treaty of Rome places a duty on the European Court of Justice to ensure the observance of law in the interpretation and application of the treaty. Are not the complex and comprehensive provisions of Title II of the treaty governing the budgetary arrangements and the relations between Commission, Council and Parliament a very necessary aspect of this jurisdiction?
Lord Young of Graffham: My Lords, I confess that I wish I had sufficient knowledge about the Treaty of Rome or about any of the documents so that I knew what Article 164 stood for, or indeed Title II. The general principles which the noble Lord enunciated sound sensible. I am sure they are ones that are followed.
Lord Hatch of Lusby: My Lords, has it been drawn to the attention of the noble Lord that in the revised budget an enormous amount of money—several hundreds of millions of pounds—is being added to its CAP section while £40 million is being cut from the proposed allocation of money to the developing world? Is this not a sordid commentary on the outlook of the Community in respect of its budgetary principles and its place in the real world?
Lord Young of Graffham: My Lords, I am grateful to the noble Lord, Lord Hatch. "Sordid" is a word of his choice. I suspect that it is his commentary on the particular budget. Within a budget of 35,079 mecu many changes take place. They are changes agreed by the Twelve. I hope very much that Parliament will in due course endorse those changes.
Lord Bruce of Donington: My Lords, is the noble Lord aware that he did not answer my question? Will he not come clean and agree with my description that the enlarged compulsory expenditure of the Community under the guarantee section of the European budget is in the existing circumstances insane and obscene?
Lord Young of Graffham: My Lords, I am grateful to the noble Lord, Lord Bruce of Donington. I am perfectly aware that I did not answer his question because I think that this is another question, and that it is too far from the point on the Order Paper.
Lord Hatch of Lusby: My Lords, the noble Lord answered me by saying that he hoped Parliament would approve the revised budget. Does this mean that the Government therefore agree with the cut that is being made in the revised budget for overseas aid and the great increase in the allocation for the CAP?
Lord Young of Graffham: My Lords, I was commenting on the use of the word "sordid" which is the choice of the noble Lord, not mine. We are one of twelve. If a revised budget is agreed by the Council—and it was agreed over the night of 7th–8th—it covers a large number of items. This is one of them. I take it that the United Kingdom, as a member and partner in Europe, must agree with the proposals.

Business
Lord Denham: My Lords, it may be for the convenience of the House if I announce that the Report stage of the Gas Bill will be adjourned at approximately 7 p.m. for approximately 1 hour and that during this adjournment a Prayer to annul the Firearms (Variation of Fees) Order 1986 will be taken.

Gas Bill
2.58 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 5 [Public Gas Supply Code]:
Lord Stoddart of Swindon Lord Stoddart of Swindon moved Amendment No. 150:
Page 74, line 41, at end insert—
("( ) A public gas supplier shall in the case of credit meters ascertain at intervals of not more than 4 calendar months, the consumption of gas by the tariff consumer and recover any charges due to him.
( ) Where a prepayment meter is installed the tariff for gas supplied shall not exceed the total of the following—

(a) such proportion of the standing charge as is payable by credit meter consumers;

(b) the cost of gas supplied;

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(c) a sum not exceeding 0·1 per cent. of the annual charge (this sum to be used to insure the contents of prepayment meters);

(d) a sum not exceeding two-and-a-half per cent., of the customer's net weekly income where an agreement has been reached for recovery of previous charges.

( ) Prepayment meters shall be recalibrated as soon as is practicable after the granting of any price increase and in any event not later than one calendar month after such an increase. Prepayment meters shall be emptied by the public gas supplier at intervals of not more than three calendar months.")
The noble Lord said: My Lords, this amendment was discussed when we last sat. I have no wish to waste the time of the House by discussing it any further. I beg to move Amendment No. 150 standing in my name and that of the noble Lord, Lord Gallacher.
Baroness Gardner of Parkes: My Lords, I should like to ask the House whether the fact that this matter was discussed previously but not decided means that it may come back for further discussion today, or whether it should simply be moved? I should like briefly to comment that this amendment, if accepted, would be inhibitory in terms of all advances and improvements that are definitely about to take place in terms of remote meter reading and coinless meters. I therefore oppose the amendment.
2.59 p.m.
On Question, Whether the said amendment (No. 150) shall be agreed to?
Their Lordships divided: Contents, 87; Not-Contents, 107.

DIVISION NO.1

CONTENTS

Airedale, L.

Hampton, L.

Amherst, E.

Hatch of Lusby, L.

Ardwick, L.

Hayter, L.

Avebury, L.

Hirshfield, L.

Aylestone, L.

Hunt, L.

Banks. L.

Irving of Dartford, L.

Barnett, L.

Jeger, B.

Beswick, L.

Jenkins of Putney, L.

Birk, B.

Kilbracken, L.

Blease, L.

Kilmarnock, L.

Blyton, L.

Leatherland, L.

Bottomley, L.

Listowel, E.

Bowden, L.

Lockwood, B.

Brockway, L.

McCarthy, L.

Bruce of Donington, L.

McIntosh of Haringey, L.

Caradon, L.

Mackie of Benshie, L.

Carmichael of Kelvingrove, L.

McNair, L.

Chitnis, L.

Mais, L.

Cledwyn of Penrhos, L.

Milford, L.

Crawshaw of Aintree, L.

Mishcon, L.

David, B.

Morton of Shuna, L.

Davies of Penrhys, L.

Mulley, L.

Dean of Beswick, L.

Nicol, B.

Denington, L.

Northfield, L.

Diamond, L.

Oram, L.

Donaldson of Kingsbridge, L.

Parry, L.

Elwyn-Jones, L.

Plant, L.

Ewart-Biggs, B.

Ponsonby of Shulbrede, L.

Ezra, L.

[Teller.]

Falkender, B.

Reilly, L.

Fitt, L.

Rhodes, L.

Foot, L.

Ritchie of Dundee, L.

Gallacher, L.

Ross of Marnock, L.

Glenamara, L.

Sainsbury, L.

Gormley, L.

Seear, B.

Grey, E.

Sefton of Garston, L.

Grimond, L.

Silkin of Dulwich, L.

290

Stallard, L.

Wallace of Coslany, L.

Stoddart of Swindon, L.

Wells-Pestell, L.

Strabolgi, L.

White, B.

Taylor of Blackburn, L.

Wigoder, L.

Taylor of Mansfield, L.

Williams of Elvel, L.

Tordoff, L. [Teller.]

Wilson of Rievaulx, L.

Underhill, L.

Winterbottom, L.

NOT-CONTENTS

Alport, L.

Kinnaird, L.

Annan, L.

Lauderdale, E.

Arran, E.

Layton, L.

Beloff, L.

Lucas of Chilworth, L.

Belstead, L.

Luke, L.

Bessborough, E.

McFadzean, L.

Blake, L.

Macleod of Borve, B.

Blanch, L.

Mancroft, L.

Boyd-Carpenter, L.

Margadale, L.

Brabazon of Tara, L.

Masham of Ilton, B.

Broxbourne, L.

Maude of

Burton, L.

Stratford-upon-Avon, L.

Butterworth, L.

Melville, V.

Caccia, L.

Mersey, V.

Caithness, E.

Milverton, L.

Campbell of Alloway, L.

Morns, L.

Campbell of Croy, L.

Mottistone, L.

Carnegy of Lour, B.

Mowbray and

Constantine of

Stourton, L.

Stanmore, L.

Murton of Lindisfarne, L.

Cottesloe, L.

Nugent of Guildford, L.

Craigavon, V.

Penrhyn, L.

Cullen of Ashbourne, L.

Radnor, E.

Davidson, V.

Rankeillour, L.

De Freyne, L.

Reay, L.

Denham. L. [Teller.]

Renton, L.

Derwent, L.

Rochdale, V.

Dilhorne, V.

Rodney, L.

Drumalbyn, L.

Rugby, L.

Effingham, E.

St. Davids, V.

Ellenborough, L.

Sanderson of Bowden, L.

Elliot of Harwood, B.

Selkirk, E.

Elton, L.

Shannon, E.

Fortescue, E.

Shaughnessy, L.

Gainford, L.

Skelmersdale, L.

Gardner of Parkes, B.

Smith, L.

Geddes, L.

Somers, L.

Glanusk, L.

Strathcarron, L.

Glenarthur, L.

Sudeley, L.

Gray, L.

Swinton, E. [Teller.]

Gridley, L.

Terrington, L.

Hailsham of

Thorneycroft, L.

Saint Marylebone, L.

Thurlow, L.

Halsbury, E.

Tranmire, L.

Hardinge of Penshurst, L.

Trenchard, V.

Harvington, L.

Trumpington, B.

Henderson of

Vaux of Harrowden, L.

Brompton, L.

Vickers, B.

Henley, L.

Vivian, L.

Hives, L.

Whitelaw, V.

Home of the Hirsel, L.

Wise, L.

Hooper, B.

Wynford, L.

Hylton-Foster, B.

Young, B.

Ilchester, E.

Young of Graffham, L.

Ironside, L.

Zouche of

Killearn, L.

Haryngworth, L.

Kimball, L.

On Question, amendment agreed to.

3.7 p.m.
[Amendment No 151 not moved.]
Lord Stoddart of Swindon Lord Stoddart of Swindon moved Amendment No. 152:
Page 75, line 5, leave out ("six") and insert ("three")
The noble Lord said: My Lords, this amendment was taken with Amendment No. 135 Therefou, I beg to move.
Lord Diamond Lord Diamond had given notice of his intention to move Amendment No. 153:
Page 75, line 6, at end insert—
("( ) Any reference in this schedule to the duties and powers of the Director shall be subject to the provisions of section (Directorate of Gas Supply).")
The noble Lord said: My Lords, I do not suppose that I shall achieve the same success, so this amendment is not moved.
[Amendment No. 153 not moved. ]
Lord Diamond Lord Diamond moved Amendment No. 153A:
Page 75, line 41, at end insert ("provided that it has been read by a full-time employee of the gas supplier or of an electricity supplier approved for this purpose by the gas supplier")
The noble Lord said: My Lords, this amendment is in connection with the measurement of gas consumed, and seeks to give power to the gas supplier not only, in effect, to send out his own employee to read the gas meter but also to rely on the services of an employee of an electricity supplier approved for this purpose by the gas supplier. The words are merely an attempt to elicit from the Government—there must be some history about this—their view on a gas meter being read once and at the same time an electricity meter being read by an employee of one or other instead of both companies.
Obviously it has its economic aspects. Obviously it is economic in the use of manpower, but it has its unemployment aspect. On one occasion when I asked an officer of the company reading the gas meter whether the experiment of reading both meters at the same time had been tried or discussed, his answer was the obvious one, "That would merely provide more unemployment, wouldn't it guvnor?" And of course I very much understand that point of view.
There must have been discussions about this point. This is only a probing amendment. I should be grateful if the Government would indicate their attitude with regard to this, and at the same time say whether, as I imagine is the case, there is no bar to the new successor company making such arrangements with the electricity supply company in the future if it so desired. I beg to move.
Baroness Gardner of Parkes: My Lords, I wish to oppose this amendment. It unfortunately is rather out of touch and out of date. This appeared to be a good idea, and I myself thought it might be, although of course it might have resulted in loss of jobs. I took up this matter with the gas authority as recently as two weeks ago. They say that although this has been discussed millions of times in the past—it has been an old chestnut coming up again and again—they think it will never happen because now the move is towards remote meter reading where no one will need to get access into your home at all, and the meter would be read long distance.
Lord Belstead: My Lords, may I say a word a little more generally. Paragraph 5 of Schedule 5, to which this amendment is addressed, needs to be read together with Clause 17 of the Bill. Under that clause a gas meter may not be used unless it has been stamped by, or on the authority of, a meter examiner appointed by the Secretary of State. Before stamping, or authorising
292
the stamping of, the meter the examiner has to be satisfied that the meter conforms with prescribed standards as to its accuracy. We have that assurance before we come to the point of the amendment.
Paragraph 5 simply deals with the meter as evidence of the quantity of gas supplied. That can be used as prima facie evidence by the public gas supplier or by the consumer. On this basis this amendment might have an effect that the noble Lord, Lord Diamond, does not intend. It would suggest that only the gas supplier can rely on the meter reading and not, for example, the consumer in response to an estimated reading from the public gas supplier. I do not think that that is something that the noble Lord was after.
The noble Lord is after another point, and he specifically said to me, "Would it be possible to have joint meter reading with the electricity industry?" The answer is yes, there is no bar so far as the Bill is concerned, but it is something that has been studied on a number of occasions over the last 15 years or so but has simply been found to be impracticable. The areas and regions of the two industries do not coincide, and each has its separate meter reading cycles and computer billing systems. There are great difficulties, but there is no bar so far as this is concerned.
I was interested in what my noble friend Lady Gardner of Parkes said. Not only would this amendment have unlooked for effects so far as consumers are concerned, but from what my noble friend says we may be moving out of the area where we have so much personal meter reading, and it is going to be done increasingly in other ways which I think would be of benefit to consumers, particularly customers who have to be out of their flats or houses for long periods during the day.
Lord Diamond: My Lords, I am grateful to the Minister. I was only anxious to get the Government's reaction to an idea which I said must have been thought of many times, and I am glad to have confirmation that it has been and that there are good, mechanical reasons why it has not been adopted hitherto. Although I understand that this is in the long-term future, it may be that we shall not have the pleasure of officers inspecting our gas meters at all in time to come. Having heard the answer, and having been told—which was my main anxiety—that there is no bar on an arrangement of this kind being made in future if it is desirable to do so, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Belstead Lord Belstead moved Amendment No. 154:
Page 76, line 6, leave out ("consumer") and insert ("customer").
The noble Lord said: My Lords, this is simply a drafting amendment. As the word "customer"has been used only two lines above it seemed to us to be consistent to use it in this particular line. I therefore beg to move.
[Amendment No. 155 not moved.]
3.15 p.m.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No.156:
Page 76, line 31, at end insert—
("Restriction of gas prices to tariff customers
The public gas supplier may seek to alter his prices in accordance with the following formula:
T=( l+RPIt-X )Pt-1+Yt-Kt
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where T is the average price per therm;
RPIt = the percentage change (whether positive or negative in value) in the Retail Price Index between that published with respect to the relevant year t and that published with respect to the immediately preceding April, provided that if there is a material change in the retail price index there may be substituted such basis to take account of the change, or other such index as the Director, in conjunction with the Public Gas Supplier, the Gas Consumers' Council and the Trade Unions in the industry, shall determine
X = a value to be determined each year after consultation with the Supplier, the Gas Consumers' Council and the Trade Unions in the industry;
but which in any relevant year shall not be lower than 4 per cent. unless Parliament by affirmative order approves anything lower than 4 per cent.
Pt-1 = Pt-2 1 + RPIt - X )
but, in relation to the first Relevant Year, Pt_t (and, accordingly, in relation to the second Relevant Year, Pt-2) shall have a value of the cost of gas per therm at the date of flotation;
Yt = Allowable Gas Cost per therm in Relevant Year t;
Kt = the correction per therm (whether of a positive or negative value) to be made in Relevant Year t (other than the first Relevant Year) which is derived from the following formula—
Kt =Tt-1-(Qt-1Mt-1) (1+It)
in which Qt 100
Tt-1 = Tariff Revenue from Tariff Quantity in Relevant Year
t-l;
Qt-1 = Tariff Quantity in Relevant Year t-l; Qt = Tariff Quantity in Relevant Year t; Mt-1 = Maximum Average Price per therm in Relevant Year It-l;
1t = the interest rate in Relevant Year t which is equal to, where Kt (taking no account of It for this purpose) has a positive value, the Specified Rate plus three per cent. or, where Kt (taking no account of I, for this purpose) has a negative value, the Specified Rate.
2 In this Condition—
"Allowable Gas Cost" means the aggregate of the following amounts namely—
(1) the amounts paid or payable by the Supplier at any time to each vendor of gas (not being an associated company)—

(a) for, and wholly and exclusively related to, the quantity of gas delivered to the Supplier in the Relevant Year for the Supplier's Gas Supply Business (being payments of purchase price in pounds sterling, or, if not in pounds sterling, converted to pounds sterling at the spot rate of exchange in London for purchasing the relevant foreign currency as quoted by Barclays Bank plc at the close of business on the date of payment thereof); or

(b) as Capacity Charges in respect of the Relevant Year, but—

(i) excluding any payments of interest and of any other amount payable by the Supplier because of any failure by the Supplier to perform its obligations or make any payment to vendors under its contract to purchase the gas so delivered;

(ii) deducting, where payment for gas is due more than 30 days after the end of the month of its delivery,
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a sum equal to the interest on the price of the gas for the period from 30 days after the end of the month of delivery to the date of payment, at the Specified Rate.

(2) (a) where, under the terms of a contract with a vendor of gas (not being an associated company), the Supplier has made a payment ("initial payment") with respect to gas not taken by it before the Relevant Year and in that Relevant Year, the Supplier either takes gas by reason wholly or partly, of that initial payment or, having taken gas in that Relevant Year for which consideration has been paid or would otherwise be payable, is allowed a credit by reason, wholly or partly, of that initial payment (provided that the consideration which has been paid, or which would otherwise be payable, has not been included under paragraph 2(1) above)—

(i) the amount of that initial payment to which the gas so taken is attributable, and

(ii) an amount representing interest on that payment compounded annually from the date of payment calculated at the Specified Rate for the period beginning with that date and ending on the last day of the month in which the gas is taken or, as the case may be the credit is allowed (and for this purpose payments and gas taken by reference to them shall be treated on a first in/ first out basis),

(b) where any initial payment has been mack by the Supplier and, in the Relevant Year, either the terms of the contract have the effect, or it is shown to the reasonable satisfaction of the Director, that an gas will not be available for delivery or credit which might otherwise have been allowed to the Supplier by reason wholly or partly of that payment will no lunger be allowed, such amount over such period as the Director after consultation with the Supplier shall determine is a fair amount to be included in respect of any one or more Relevant Years;
(3) where any gas which is delivered to the Supplier is purchased by it for a consideration which is not wholly pecuniary or where gas and anything other than gas are purchased as part of the same transaction or arrangement by the Supplier, the amount which the Supplier demonstrates to the reasonable satisfaction of the Director would be the pecuniary consideration for the gas if negotiated at arm's length as between a willing vendor and a willing purchaser;
(4) where gas is purchased otherwise than at the Point of Delivery, such amount as is demonstrated to the reasonable satisfaction of the Director is or would be payable by the Supplier under a third party contract negotiated at arm's length for transporting the gas to the Point of Delivery and for any processing or treatment of the gas which is necessary to render it of suitable quality for entry into the Supplier's Transmission System;
(5) (a) where the Supplier in a Relevant Year appropriates to the Gas Supply Business gas which it produced itself or which it acquired from an associated company ("Own Gas"), the Supplier shall furnish to the Director as soon as practicable after the end of that year a written statement of the amount which the Supplier shall certify to the best of its information, knowledge and belief represents no more than the market value (as defined in the Oil Taxation Act 1975) of such gas, together with an explanation of how any such amount has been arrived at and the amount so certified may be included as an Allowable Gas Cost on an interim basis provided it is not greater than the amount with respect thereto included or to be included (either on a provisional or final basis) by the Supplier or associated company in its return to the Oil Taxation Office of the Inland Revenue (or such other department of the Inland Revenue as is appropriate) but if it is greater, the lower amount shall be included;
(b) in the event of it being ascertained by the Oil Taxation Office of the Inland Revenue in agreement with the Supplier, or determined in legal proceedings that the market value of any Own Gas for the purposes of the Oil Taxation Act 1975 (or, in the case of Own Gas the subject of a tax exempt contract, as defined in section 1 (3) of the Gas Levy Act 1981, by any departrment of the Inland Revenue in agreement with the Supplier, or in legal proceedings, that the market value of any Own Gas for any other tax purposes) is different from the amount

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permitted by sub-paragraph (a) above to be included on an interim basis for the purposes of the Allowable Gas Cost, the difference shall be reflected in an appropriate manner in the Allowable Gas Cost for the purposes of the formula described in paragraph 1 above and reported by the Supplier to the Director promptly after it has been ascertained or determined;
(6) an amount equal to the gas levy payable to the Secretary of State by the Supplier under the Gas Levy Act 1981 in respect of the aggregate quantity of gas of which account is to be taken for the purposes of calculating the amounts referred to in sub-paragraphs (1), (2), (3) and (5) above;
(7) any amount (whether or not similar to or different from expenditure of the kinds or amounts previously mentioned) which, after written application by and consultation with the Supplier, is determined by the Director to be a cost of gas acquired by the Supplier for the Supplier's Gas Supply Business or to be a cost otherwise fairly related to the gas acquired;
but no amount shall be a component of Allowable Gas Cost both under sub-paragraph (7) above and any other of the preceding sub-paragraphs or under more than one of those sub-paragraphs and for the purposes of this definition of "Allowable Gas Cost", the delivery of gas shall be treated as taking place at the Point of Delivery.
"Allowable Gas Cost per therm" means the Allowable Gas Cost in the Relevant Year divided by the Relevant Quantity in the Relevant Year.
"Average Price per therm" means Tariff Revenue in the Relevant Year divided by the Tariff Quantity of gas supplied in that Relevant Year.
"Capacity Charges" means any amounts which are of a recurring nature and are paid or payable by the Supplier in respect of the Relevant Year to a vendor of gas in order to reserve the availability to the Supplier of deliveries of gas in the year in which the amounts relate but not being any amounts which would fall to be treated in whole or in part as an advance payment (directly or indirectly) for gas.
"Relevant Quantity" means the aggregate of the following namely—

(l)the quantity of gas in therms delivered to the Supplier in the Relevant Year and purchased by it (otherwise than from an associated company) for the Supplier's Gas Supply Business being calculated where the price of gas is fixed by reference to an agreed calorific value, using that value, but if the agreed calorific value used in determining the price of the gas differs from the calorific value as measured, the Supplier shall give written notification to the Director of the amount of the difference;

(2) the quantity of Own Gas in therms appropriated by the Supplier in the Relevant Year to the Supplier's Gas Supply Business other than gas from the Rough reservoir.

"Relevant Year" means each complete financial year of the Supplier ending on 31st March in respect of which the Supplier is required to deliver to the Director a copy of each of the accounting statements referred to in paragraph 2(b) of Condition 2.

"Specified Rate" means the average of the Treasury Bill Discount Rate (expressed as an annual percentage interest rate), published weekly by the Bank of England, during the period in respect of which the calculation falls to be made.

"Tariff Quantity" means the aggregate quantity of gas, in therms, supplied by the Supplier to tariff customers in the Relevant Year and taken into account for the purposes of determining Tariff Revenue.

"Tariff Revenue" means the turnover (measured on an accruals basis and including standing charges) derived from the supply of gas in the Relevant Year to tariff customers falling within the ordinary activities of the Gas Supply Business, after deduction of value added tax (if any) and any other taxes based directly on the amounts so derived.

3.—(1) If in respect of any Relevant Year the Average Price per therm exceeds the Maximum Average Price per therm by more than 4 per cent. of the latter, the Supplier shall furnish an explanation to the Director and in the next following
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Relevant Year the Supplier shall not effect any increase in prices unless it has demonstrated to the reasonable satisfaction of the Director that the Average Price per therm would not be likely to exceed the Maximum Average Price per therm in that next following Relevant Year;
(2) if, in respect of any two successive Relevant Years, the sum of the amounts by which the Average Price per therm has exceeded the Maximum Average Price per therm is more than 5 per cent of the Maximum Average Price per therm for the second of those years, then in the next following Relevant Year the Supplier shall, if required by the Director, adjust its prices such that the Average Price per therm would not be likely, in the judgment of the Director, to exceed the Maximum Average Price per therm m that next following Relevant Year;
(3) if in respect of each of two successive Relevant Years the Average Price per therm is less than 90 per cent of the Maximum Average Price per therm, the Director after consultation with the Supplier, may direct that, in calculating K, in respect of the next following Relevant Year, there shall be substituted for Tts-1 in the formula set out in paragraph 1 above such figure as the Director may specify being not less than Tt-1 and not more than 0· 90 (Qt-1Mt-1).
4.—(1) Where the Supplier publishes any change in the price of gas (which shall include any change in standing charges) which it proposes to make to tariff customers, the Supplier shall not later than the time of such publication provide the Director with—

(a) a written forecast of the Maximum Average Price per therm, together with its components, in respect of the Relevant Year in which the change of price of gas is to take effect and also in respect of the next following Relevant Year, and

(b) a written estimate of the Maximum Average Price per therm, together with its components, in respect of the Relevant Year immediately preceding the Relevant Year in which the change in price of gas is to take effect unless a statement complying with paragraph 4(5) below in respect of that first mentioned Relevant Year has been furnished to the Director before the publication of the proposed change in gas price;

(2) if within three months of the commencement of any Relevant Year the Supplier has not published or effected any change in price as is referred in sub-paragraph (1) above the Supplier shall provide the Director with a written forecast of the Maximum Average Price per therm together with its components, in respect of that Relevant Year;
(3) any forecasts as aforesaid shall be accompanied by such information as regards the assumptions (such as economic growth, exchange rate changes and energy prices) which are critical features thereof as may be necessary to enable the Director to be reasonably satisfied that the forecasts have been properly prepared on a consistent basis;
(4) not later than 6 weeks after the end of a Relevant Year the Supplier shall send to the Director a statement as to whether or not in its opinion paragraph 3(1), (2) or (3) applies in respect of the Relevant Year and its best estimate of what K is likely to be in the following Relevant Year;
(5) not later than 3 months after the end of a Relevant Year the Supplier shall send to the Director a statement, in respect of that Relevant Year, showing—

(a) Allowable Gas Cost;

(b) Relevant Quantity;

(c) Tariff Revenue;

(d) Tariff Quantity;

(6) the statement referred to in sub-paragraph (5) above shall be—

(a) accompanied by a report from the Auditor that in his opinion such statement fairly presents Allowable Gas Cost, Relevant Quantity, Tariff Revenue and Tariff Quantity in accordance with the requirements of this Condition and that the amount of Tariff Revenue and, so far as applicable, the amount included as Allowable Gas Cost are in accordance with the Supplier's account-ing records which have been maintained in accordance with Condition; and

(b) certified by a director of the Supplier that no amount included within Allowable Gas Cost represents other than bona fide consideration for gas delivered for use in

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the Gas Supply Business or an amount permitted under this Condition to be so included;

provided that where any component of Allowable Gas Cost requires to be determined by, or to the satisfaction of, the Director or is subject, under paragraph 2(5)(b) of this Condition, to adjustment, and the determination or adjustment has not been made by the date when the statement under this paragraph is sent to the Director, that statement and the report and certificate in respect of it may be qualified accordingly.").

The noble Lord said: My Lords, I beg to move Amendment No. 156 which seeks to incorporate within the structure of the Bill that part of the proposed authorisation that deals with the restriction of gas prices to tariff customers. In general it follows the text of the conditions laid down in the original proposed authorisation, save in regard to the definition of the X factor, which in the amendment is stated as,
"a value to be determined each year after consultation with the Supplier, the Gas Consumers' Council and the Trade Unions in the industry but which in any relevant year shall not be lower than 4 per cent. unless Parliament by affirmative order approves anything lower than 4 per cent".
Perhaps I should explain the use of the term "4 per cent." before I go any further. The X factor in the formula is in fact referred to by a figure only, but in his correspondence with me, in particular the letter he wrote to me dated 16th May, the noble Lord said:
"changes in this part of the price are limited to X per cent. below the rate of inflation".
Therefore, I was torn between the desire to put the simple figure "4" or "4 per cent." as referred to by the noble Lord in his correspondence with me.
If, however, the noble Lord agrees the amendment, I have no doubt that at a later stage in the Bill one could substitute "4" instead of "4 per cent.", whichever the noble Lord thinks correct in the circumstances. Mathematically I think it should be the factor of 4, but in deference to the noble Lord I inserted "4 per cent." because that was referred to by him.
The primary purpose of this amendment is to get the price mechanism, the restriction of gas prices to tariff consumers, into the Bill itself. We argued this not at great length but at some length at the Committee stage of the Bill. For our part we think that including the restriction of gas prices, including the gas price formula, in the authorisation has its dangers. Proposed authorisations can of course be altered without the consent of your Lordships' House. Indeed, there is already an amendment to the Department of Energy proposed authorisation, which revises the previous ones, which your Lordships were able to debate at the Committee stage.
As your Lordships will recall, it was finished long before 30th June, despite the restricted time we spent in Committee.
If your Lordships look at the new proposed authorisation it will be found that it differs very materially indeed from the proposed authorisation that your Lordships had in mind when debating the Bill in Committee. I am not passing any judgment at this stage, but there will be other occasions in the course of the afternoon's debate. I am not making any complaint that the changes that have been made may be beneficial or may be regarded as controversial or even obnoxious. I am not passing any observation on
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the merits of the new proposed authorisation compared with the old one, which I take it was read by all your Lordships with the greatest possible interest and detail. It is sufficient for my purposes that alterations have taken place.
If alterations can take place without the consent of another place and without the consent of your Lordships, as they have, since we debated it in Committee—and the alterations are material I can assure your Lordships; indeed, those who have ploughed their way dilligently through this new authorisation will know quite well how materially it differs from the old one—it could be done again. So on the first principle we on this side of the House would like to have this in the Bill.
When the noble Lord was debating the question in Committee—he dealt with it very thoroughly and very courteously in view of the time of night it was and the stresses under which we were all operating at that time—he used these words:
"It is essential for the consumers' interests that we should have a real price control formula and that the value of X should he set for a substantial period".—[Official Report, 3/6/86; col. 950]
This was in complete contradiction to the argument that he had for the reliance on the authorisation itself, because it will be within your Lordships' recollection that he was arguing that it would be necessary 10 have the greatest possible flexibility. That was the reason for the whole of the authorisation as such, rather than having it in the Bill.
I am inviting the noble Lord now to have the best of both worlds. We are offering a situation where we do not ask that he should have the whole authorisation in the Bill; therefore, he has the degree of flexibility that he requires. Secondly, in a field where he wants constancy—the Minister has referred to constancy in his own speech on the subject—then he has that, too, because we have given him stability. We have said:
"which in any relevant year shall not be lower than 4 per cent. unless Parliament by affirmative order approves anything lower than 4 per cent."
What could be more stable than that? The noble Lord now has his constant figure.
Since we debated the issue some anxieties have been expressed on this side of the House and by the noble Lord, Lord Diamond, as to when the X factor would be announced. Some of us, including myself—I must apologise for this—attributed entirely unworthy motives to its postponement. I could only hazard the guess that they would postpone it for as long as they could until they knew which way the share market was going. This is entirely unworthy of me, because within a fortnight the noble Lord himself announced a factor of 2.
We are suggesting in this amendment that we have a factor of not lower than 4. Why do we do this? On this side of the House we have made it quite clear. I must underline that belief and say that I believe it is still true that the main purpose of this Bill is to put money in the hands of the Exchequer so that it may make tax reductions in the run up to the election. That is an observation that has become increasingly adopted by organs of public opinion normally in support of the Government, who continously refer now to the proceeds of the sale of assets being applied

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in the reduction of taxation or, rather, to enabling the Chancellor to apply these sums to what is called "negative expenditure", as I believe the new account-ing term is, although it is quite unknown to the accounting profession. Reductions in public expenditure by applying capital receipts against it may enable the Chancellor to make tax deductions before the election.
The noble Lord is nothing if not a firm supporter of the Government of his own party, but he strenuously denies this argument. There is no question at all of there being any effect on public expenditure; there is no question of the money being available for tax cuts. The noble Lord was much more high-minded than that. The noble Lord's argument was that it would free British Gas from the restrictions under which it had previously been working and which apparently will now be enshrined in a Bill some 110 pages long in the most explicit terms. The other reason the noble Lord gave with all sincerity was that the industry would function more efficiently. The very fact of the ownership of the industry being transferred from the palsied hands of the Chancellor of the Exchequer to the young and vigorous hands of the City institutions and overseas shareholders and a fraction of the ordinary individual shareholders in the United Kingdom transform the whole spirit of the industry, give it a new zest, a new drive, and make it more profitable. This was the burden of what the noble Lord said. If that is the case, the assumption is that there will be a considerable increase in efficiency.
The noble Lord apparently values that by a factor of 2 when he deducts it from the movement in the retail price index. May I suggest to him that he is being a little modest? Does he really value the benefit to the consumer in terms of price of the magnificent transformation that he proposes to make under this Bill only as a factor of 2? Is it worth all the time and trouble? Is it worth all the vast expenditure that will be made in the flotation, the millions that will pour into the pockets of the underwriters, the advisers and the City of London merely to achieve for the consumer a miserable 2 per cent. off the RPI? The consumer may not think it is worth all that trouble.
On the other hand, I willingly accept that the noble Lord may have arrived at the factor of 2 after meticulous calculation, after looking at the profit forecasts for the next five or six years, which will undoubtedly already have been prepared. Indeed, one city analyst in one firm of city underwriters employed by the noble Lord's department has already forecast that no fewer than £629 million will be available to investors by way of dividend next year. At least, so it is reported in the Daily Telegraph. I have not seen the document because these documents are not automatically supplied to your Lordships' House or its Members. But, at any rate, this is one opinion.
All these lush funds which are lying about, instead of going to the Exchequer in terms of a dividend available to the taxpayers who, after all, owned this concern, will go into the pockets of private shareholders, mainly institutional. But if there is all this lush money lying about, how does the noble Lord justify merely a factor of 2? If he does not justify a
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factor of 2, will he present to the House his reasons for objecting to 4.
I am quite sure that the noble Lord has had adequate time to examine the amendment It was put down in good time He has obviously had a word with his advisers, the statisticians, and the City of London and, doubtless, he will be able to prove to your Lordships' House why a factor of 4 would bring disaster upon the new plc, alternatively, he may feel disposed to accept it So that he can put his money where his political mouth is, as it were, and on the basis of proving his own expectations, I hope that he will most willingly accept the minimum factor of 4.I beg to move.
3.30 p.m.
Lord Sanderson of Bowden: I think that this is an important amendment that has to be debated yet again, no doubt, because it is the view of the Labour Opposition that it should be written into the Bill I should like the Minister when he replies to deal with this new idea about the X factor because it seems to me that to have a value to be determined each year after consultation with the supplier, the Gas Consumers' Council and the trade unions in the industry is not the normal way that a business runs its affairs The newly privatised gas plc will surely fix its prices I thought from our debates which have gone on for many hours that the Director of Ofgas would examine that particular price and decide whether it was fair and reasonable It seems to me that perhaps it is a question not of beer and sandwiches round a table for hours and hours on end but, if your Lordships' House is anything to go by, bacon and eggs at 2·30 in the morning.
However, there is one other point that I wish to raise, as the noble Lord, Lord Bruce of Donington, has been good enough to raise it It is this question of 2 per cent which, as we know, has now been announced. If this Bill goes through—and I quote from the press release—it,
"will ensure that the element of the charge to tariff customers covering the delivery of gas is held at a level of 2 per cent below the rate of inflation".
If the rate of inflation is 23 per cent., I can well understand that 2 per cent does not sound very much But when the rate of inflation is as low as this Government have brought it, surely that is a fair and reasonable percentage to be considering.
Finally, I was very interested by what the noble Lord, Lord Bruce of Donington, had to say about this particular flotation. We have heard his views before; we know them well But I was also interested in what he said earlier on in the debates at the Committee stage I quote from col 368 of the Official Report where the noble Lord, Lord Bruce of Donington, said:
"I am not decrying personal or individual shareholdings".
This Bill is an attempt to widen share ownership I consider that the utterances that the noble Lord has made on the whole question of this particular flotation do not exactly go along with his view that personal and individual shareholding is to be applauded.
Lord Diamond: My Lords, I think we ought to be absolutely clear in our minds as to what all this algebra

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means before we are asked to decide whether or not to support this amendment. I am not very good at algebra, but I think I know what it means and I think therefore that I have every reaon to support the amendment. As I understand it, this amendment has two major points, one of principle and one of such large detail as almost to be considered as being of principle, too.
The first point is the bringing into the statute of what is probably the most important safeguard for the consumer in the new circumstances in which there will be a complete private monopoly. Where the customer—and we are talking about 16 million of them—can go only to one shop as a result of government legislation, it is surely right that the customer should be protected most of all as to the price that he or she (and, probably it will be she) is to be asked to pay. As that is the most important safeguard, it surely ought to go in the Bill; at present it is not in the Bill. It is in an authorisation, a document which is not only capable of being altered but which has already been altered since we started to discuss it. As has previously been pointed out, we on this side of the House are not at the moment concerned with whether the alterations are good or bad. We are concerned only with the fact that it has already been altered, and therefore nobody can possibly assert that it is incapable of alteration.
I go further and say that of course it is capable of alteration. The Bill provides later on—and we shall be coming to it—that this protection of the consumer as regards the price formula is capable of being altered as easily as kiss your hand; indeed it is. All that has to happen is for the director of gas supplies to have a word with the chairman of the new gas corporation plc and say, "Yes, thank you very much for your letter. I see your point. Let's alter it to so much". It is as easy as that, and that is what the Bill provides. If the two of them do not agree, there is very different procedure, but if they do agree on what should happen, the alteration can be done with ease.
Therefore one says that it should not be left to those two individuals to decide among themselves on the fate of the major safeguard of 16-million plus consumers in this country. The protection should be in the Bill. That is the first thing that this amendment does. It takes the protection out of the authorisation and puts it into the statute—and I should have thought that that would have your Lordships' support.
Of course, there is always the argument that putting something in a statute gives it not only strength but also permanency. If you want permanency, that is fine; but those of us on this side of the House take the view that we cannot foretell the future for all time. Therefore, you must have an element of flexibility, and so variation in a major respect must be possible. That is why in regard to the X factor (a most important element in it all) it is provided that it should be possible for Parliament by affirmative order to approve something lower than the figure at present proposed; and that is more to the advantage of the gas supplier.
It will then be for the Minister to explain to Parliament the various reasons, and no doubt with
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the assistance of his persuasive capacity and his logic —and bearing in mind that the present Government have an enormous majority in both Houses—the will of Parliament will be expressed. So there is no problem there.
That is the first major point of this amendment. It is one which appeals to me and also, I very much hope, to your Lordships. It gives secure protection to the consumer on the main problem of price, but without making that too inflexible.
The second is a point of detail, but as I have said, it is such an important detail that it has almost to be regarded as another principle; that is, the X factor. I return to what I said at the start—we want to be absolutely clear about this. The only way to achieve that in the procedure of a Report stage is, for example, for myself as one of your Lordships to put forward my understanding of what it means before the noble Lord the Minister replies so that the noble Lord the Minister can say "Yes, you have it right", or "No, you are wrong in certain particulars".
As I understand it, this factor applies to that part of the charge which is arrived at by reference to variable items in the cost of supplying the gas other than—and I repeat, other than—the cost of the gas itself. I think we are on fairly easy mathematical grounds here because, as I understand it, the cost of gas—that is to say the material with which you start your purchase of gas—is roughly half the total cost of what is supplied at the gas tap of the consumer. The other half is the cost of the provision of the pipes and everything else in terms of supply. So, if I may put it this way in familiar accountancy terms, the raw material is roughly half. It is only the other half therefore to which the 4 per cent. applies; it is only the other half to which the questions of the retail price index and inflation apply.
Why do I say that, my Lords? For the simple reason that that first half, the cost of the gas itself, is passed directly on to the consumer. If the cost goes up, the price goes up, and if the cost goes down, the price goes down. It is simply cost-plus as far as that element is concerned. It is only the other half which is subject to a fixed starting point added to by the level of inflation.
Now, my Lords, what is that fixed starting point? That is the first question. That fixed starting point is the present price. We are always so ready in argument to assume that what exists must be the right answer—the present price—but no one has ever attempted to justify the present price. Indeed, we know that the present price is partly a remuneration to the nationalised industry which has been producing and supplying gas and partly a return to the Government in the form of taxation. We know for a fact that the price need not have been so high if the Government had not wished, first, to levy certain taxes and, secondly, to get a surplus in the form of taxation returning to the revenue. So we know that we are starting with a price that is higher than it need be in ordinary free market terms, and it is that starting price which is to be continued, and increased. So it is not surprising, that already the successor company is thinking of and looking to very large profits indeed in its first year, because it is starting off with a very large agreed price for its fixed, tied 16,500,000 customers before the year starts. It is a nice position to be in so long as you are not a consumer!

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It is that fixed price, that half of it which refers to overheads and things like that, which is subject to the variation we are talking about. The noble Lord the Minister has proposed 2 per cent. and as I understand it that has been agreed with the prospective chairman of the successor company.
My Lords, may I say two things? First, I am not surprised that that has been agreed. There could not have been a more helpful figure so far as the company is concerned. Secondly—and I mean this very sincerely—I am most grateful to the noble Lord the Minister for having arranged for this figure to be made available to us well before our discussion on Report. I attached enormous importance to the provision of that facility. I made it very clear during Committee stage that on these Benches we regarded it as absolutely vital because it could mean the difference between a virtual cost-plus future and an efficient future. So it was that I was very anxious indeed that we should be able to debate this, and we are, and for that I am most grateful.
But what is that figure? It is 2 per cent. of one half. Again, I claim no knowledge of mathematics but I regard that as being equivalent to 1 per cent. of the whole, so we are talking about a possible reduction of 1 per cent. of the price as an inducement to efficiency. I put it to all your Lordships, wherever you are sitting in this House, who have experience of increasing efficiency in your factories, in your retail businesses, your mines, or whatever particular line of industry you are familiar with—that every one of your Lordships would regard a target of 1 per cent. increase in efficiency per annum as a wholly miserable target. The whole of my accountancy experience leads me to assert that without fear of contradiction at all.
Why is the figure put in at 4 per cent.—which is equivalent to 2 per cent. on the whole—only? I will tell your Lordships. It is because the higher figure that I wanted to put into the amendment was not acceptable to the noble Lord, Lord Bruce of Donington, who has great current accountancy experience—mine is a little out of date—and he, with his usual generosity and soft-heartedness towards the Government was not prepared to listen to arguments from me that the figure should be a minimum of 5 per cent., so it has gone down at 4 per cent. We have to have regard for one another's views. The noble Lord is in practice at present whereas I have long since ceased to practise. Therefore his experience is more up to date than mine, and that is why we have the figure of 4 per cent. That figure of 4 per cent. is a minimum; indeed it is. The figure proposed by the Goverment is a figure which virtually means that this new company would start off with an inflated price, inflated by Government action in the past—and would continue with that price plus RPI with the sole exception of 1 per cent. per annum knocked off to cover the whole of its possible increase in efficiency. That is a push for inefficiency of a kind which I hope your Lordships will not accept. Therefore, I hope that the House will agree to incorpo-rate this in the statute.
Lord Harmar-Nicholls: My Lords, I would not pretend to understand the technicalities behind this amendment. I have hardly understood a word about the X factor and so on, taken in the context of the
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whole of the amendment, but there are parts of this that I am entitled to say that I do understand.
The noble Lord, Lord Bruce of Donington, made a big point that one had to leave room for variation. The noble Lord said that his amendment left room for variation, that all it had to do was to come back to this House for approval of a regulation supporting the change, and that was it.
The one little bit I do know about it is this. If it is admitted on all sides (and my noble friend also made the point) that you have to anticipate the possibility of variation, and if before you can arrive at any variation, as is shown in the X value paragraph, there must be consultation with the supplier, the Gas Users Council and the trade unions in industry, and if you want a speedy decision, or a reasonably speedy one, on a variation that is seen to be necessary (and all sides have said they think that situation is likely) it has to go through that gamut, there is no question of getting a speedy change.
When you are running a big industry—or a little one for that matter—you often meet situations where speed is important, where you need to give a decision on something, and certainly you must give a decision on what you are going to charge for your product. So, to my mind, from my knowledge of Parliament and what goes on when one has to consult with trade unions and consumer councils, the whole of this amendment means that you are not likely to be able to meet the needs as speedily as desired.
My final word is this. I think it is positively ridiculous to expect an assembly like this to be able to give a reasonable decision on a matter of this sort of technical detail. It is a positive nonsense to think that for one minute, even if we were to put this amendment into the statute. I doubt whether many of my noble friends or noble Lords opposite know what it is all about. Why should they know about something as technical and detailed as this?
So, what do we come to? We come to what are the real motives of those who are moving the amendment and those who are resisting it. Those motives have to be taken into account. We know that the noble Lord, Lord Bruce of Donington, the noble Lord, Lord Diamond, and many noble Lords who would support these amendments if they were pushed to a vote are against privatisation in any circumstances. We know that they want to use parliamentary procedures to avoid privatisation and—
Lord Diamond: My Lords, the noble Lord is absolutely wrong and I should be grateful if he would withdraw. We have explained many times that we are governed by the Second Reading. We have stated what our views are and all the amendments coming from these Benches are directed towards introducing competition and improving efficiency in the new privatised gas industry.
Lord Harmar-Nicholls: My Lords, if the noble Lord will forgive me, I have sat with him for 36 years in another place and here—
Baroness Seear: My Lords—
Lord Harmar-Nicholls: May I just answer this question first, because it is rather personal? I have sat with the noble Lord and gone through this sort of exercise again and again and, if he will allow me to say so—and I have a great respect for him: we are friends outside as well as inside—it is not what he says that I pay attention to, but what he does. And what he has done in relation to this Bill leaves me in no doubt that he does not want this industry privatised and all his moves are in the direction of trying to prevent its being privatised. Certainly I will give way.
Baroness Seear: My Lords, if I may say so, the noble Lord, Lord Harmar-Nicholls, has overlooked the fact that since the day when he sat in another place with my noble friend, my noble friend has suffered a sea change, and a very good one. He has joined the Alliance, which in no circumstances is opposed to the idea of privatisation as such. What we are concerned about is protection for the consumer and that is why we support this amendment. This is privatisation making a private monopoly, and it is the monopoly element that we oppose, not the privatisation element. This amendment is about trying to protect the consumer by ensuring that there is efficiency and that the benefit of that efficiency goes to the consumer. The noble Lord must not recall the regrettable past of my noble friend; he must look at his entirely acceptable and agreeable present.
Lord Harmar-Nicholls: My Lords, if I may reply to the noble Baroness on that, I concede that the noble Lord now sits on a different Bench from that when I first knew him. I have not seen such a change as the noble Baroness describes but I am prepared to kill the fatted calf for him yet. I have not seen in his actions or in the way he approaches the politics and the economics of this country so great a change as the noble Baroness seems to think has taken place.
What I am saying is that we cannot be expected to understand the details of this. I think it is a nonsense to pretend that we in an assembly such as this are in a position to put such a provision directly into a statute. But, since they do not want privatisation and we do, at the end of the day it becomes a battle of the experts. The noble Lord will have had his experts advising him. My noble friend will have his own experts. One is against it and the other is for it, both on grounds of principle, but in view of the fact that I believe in privatisation I shall believe the advisers to my noble friend. That is why I would not vote for the noble Lord's amendment.
Lord Belstead: My Lords, it is clear from the intervention of my noble friend Lord Harmar-Nicholls—to whom I am grateful because I very much agree with much of what he said—that we differ on the basic principle of the Bill: namely, the privatising of British Gas. That said, though, I should have thought there was one thing on which all parts of the House could agree. That is that this Bill gives an opportunity to produce an idea—in this case it is the formula—for giving an undertaking to the ordinary customer, the tariff consumer, that he or she is going to be protected so far as the monthly bills for gas are concerned.
Indeed, it is because we feel very deeply that this is what we need to do that the formula which is in the
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licence intended for British Gas in the future has one very simple thing in it—even though it runs to a lot of pages, just as this amendment does. That is, it gives to the tariff consumer a guarantee that prices will not rise above the formula which has been put into the licence. Indeed, if British Gas step out of their ground and if they were inadvertently to get their sums wrong in any year or were in any way, also inadvertently, to overcharge, two major safeguards are included in this formula. One is that the Director General of Gas Supply can step in and set prices for the subsequent year. The other is that, before he feels he has to do that, what is called a correction factor can be taken forward in the interests of the consumer to the subsequent year; it is said that the public gas supplier has overcharged and therefore a correction factor of 3 per cent. shall operate on the gas price for the subsequent year, to the detriment of the public gas supplier but very much to the advantage of the customer.
One thing I have been very interested to see is that—I know this has happened inadvertently because the noble Lord, Lord Bruce, and the noble Lord, Lord Diamond understand these things whereas my mathematics are not very strong—entirely inadver-tently they have decimated the correction factor in their splendid Amendment No. 156, so that instead of giving the customer a 3 per cent. advantage over the market rate for a correction if British Gas were to overcharge in any year, they have so applied the correction factor K that I do not think it would actually work at all for the future. But that is by the way.
Let us come to the real reasons for this amendment. If I may say so, they are basically two. The first is that both noble Lords have made it clear—and they have been quite consistent in this at all stages of the Bill—that they would like to see the formula written into the Bill. Let me briefly explain why it is in the licence. It is because we genuinely believe that if it were necessary in the interests of the customer to change any aspect of the price formula, not to mention other things in the authorisation, you would have to come back to Parliament with a new Bill if you insisted on putting the authorisation into the Bill.
I was disturbed when the noble Lord, Lord Diamond, said that so far as this price formula—the guarantee to the customer—was concerned, in fact it could just be changed by a flick of the fingers. With great respect to the noble Lord, I would part company with him on that. If the noble Lord cares to look at the licence, he will see that what has to happen is that British Gas, no sooner than five years, has the right to go along to the director and say, "We should like to have a change to the price formula" or to anything else in the authorisation. The director has to consider the matter and then has the right to go to the Monopolies and Mergers Commission to decide whether it would be in the interests of the customer, because, let us not forget, we have taken enormous trouble to see that both the director and the Monopolies and Mergers Commission have the customer very much in mind in discharging their duties on anything concerned with this Bill.
So if the noble Lord will forgive my crossing swords with him on this point, what is known as the disapplication provisions of the price formula can

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come into effect only if the effect of making a change will be in the interests of the customer. We have to get that absolutely clear—
4 p.m.
Lord Diamond: My Lords, I am grateful to the Minister. Is the Minister therefore saying that Clause 23, which provides for modification by agreement, does not apply to the price formula, which is part of the authorisation? The first part of Clause 23 states,
"the Director may modify the conditions"—
it does not exclude anyone—
"of a public gas supplier's authorisation."
It then goes on to point out that that has to be done by agreement.
Lord Belstead: I am inviting the noble Lord to look at page 19 of the licence. This is one of the occasions when there is an advantage in the licence not being in the Bill. The noble Lord is troubled because he is reading from Clause 23. We are not looking at Clause 23 at the moment. We are looking at the licence and I am saying to the House that, under the terms of the licence, it is necessary to go through the various steps that I set out to your Lordships and it could never be against the interests of the customer that we would find a change being made in the price formula. That is the first thing that the amendment is about. Incidentally—and I realise that both noble Lords are trained accountants and they feel that the factor is not correct—there is a 2 per cent. factor because there is a divisor of 100 in the authorisation.
Very briefly, I should like to say thank you to my noble friends Lord Sanderson of Bowden and Lord Harmar-Nicholls, who both then made the point that if one looks at the amendment one sees a pretty uninviting alternative. If your Lordships care to look at the top of page 4 of the Marshalled List, you will see that the alternative of noble Lords opposite is that the efficiency factor, which is to work for the benefit of the individual customer, will be a value to be determined each year after consultation with the supplier, the Gas Consumers' Council and the trade unions in the industry.
As my noble friend Lord Sanderson of Bowden asked: how much beer and sandwiches will have to be consumed before you get a quadripartite agreement on an efficiency factor which, under this amendment, will have to be agreed not for a period of, say, five years ahead, but every single year, so that the poor, old tariff customer will never know from year to year what the agreement will be? That is one point in reply.
The other point is that we think that 2 per cent. is right for a very simple reason deriving, again, from what my noble friend said. If you are talking about an inflation rate which is low in single figures, which the present Government have spent so much effort trying to achieve, and when you consider that British Gas has a very good efficiency record compared to the targets which it has been asked to achieve in the nationalised regime, then, if there is an efficiency factor of 2 per cent. which will run for a period of years, there must be a law of diminishing returns over the amount of efficiency which the organisation can achieve as the years go by.
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I suggest to your Lordships that on the two grounds of the fact that the efficiency factor will run for, I trust, a period of years and certainly, I trust, will not be agreed annually, and that it is in the context of, mercifully, a low inflation rate at the present time, and, I trust for the foreseeable future, then the figure which has been reached after very close scrutiny by my right honourable friend is the right one and it is the one which ought to remain in the formula.
Lord Bruce of Donington: My Lords, I am most grateful to the noble Lord for having replied to the points that I ventured to lay before your Lordships. Since the noble Lord, Lord Harmar-Nicholls, with his usual felicity, was good enough to make reference to what he conceived to be my motives, may I say to him immediately that he does not criticise from a point of advantage and may well care to take into account the fact that he himself admitted, when he ventured to discuss this amendment, that he did not understand it anyway? May I suggest that in future the noble Lord confines his natural and disarming modesty to himself and does not necessarily project his own feelings and his own sensibilities on to others?
The noble Lord, Lord Sanderson of Bowden, was kind enough to emphasise—and I am very pleased that he did—my approval of ordinary individuals acquiring shares in companies. In order that he may not have to reassert my belief in that, I unhesitatingly affirm that that is the case. I should be very glad if the majority of our citizens had sufficient funds at their disposal to enable them to save in this way—because saving is all it is. It is not owning and controlling.
If the noble Lord will look at the information made available by British Telecom, he will find that the foreign ownership of shares in British Telecom, by value, is roughly seven times as great as the value of shareholdings held by individuals in this country. But I give the noble Lord the point. He has no need to re-emphasise it. I entirely agree with individuals having sufficient funds to be able to save in whatever way they like, whether in building societies, in equity shares or in anything else under the sun.
Lord Sanderson of Bowden: My Lords, by leave of the House, may I say that I am sure the noble Lord, Lord Bruce of Donington, will be delighted to know that the number of private people in this country who now own shares has risen by 16 per cent? There has been a very substantial increase over the last 18 months.
Lord Bruce of Donington: My Lords, I accept for the moment what the noble Lord has said, but it is not really relevant to the argument. I felt bound to reply to the noble Lord, in order to avoid the necessity of him reminding me in the future of my own feelings on this subject.
As regards the reply of the noble Lord, Lord Belstead, I must say that I am disappointed. If I heard him correctly, he made a point about beer and sandwiches and about how long it would take for agreement to be arrived at between the supplier, the Gas Consumers' Council and the trade unions. If the noble Lord had read the amendment carefully he would know that a value has to be determined after

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consultation. It does not necessarily mean after agreement between all the parties concerned. Consult-ing is consulting.
I know that the Government are not disposed to adopt this course of action very often, because they have to do what they do in accordance with she who must be obeyed. We know that there is very little consultation in these matters. But that is all its amounts to, and it certainly does not produce beer and sandwiches in the way that the noble Lord has suggested. In any case this applies only if a rate below 4 per cent. is anticipated.
The noble Lord has still given no explanation of why he rejects the 4 per cent. and prefers the 2 per cent. Perhaps I may also remind the noble Lord that in addition to the funds made available for dividend by the increases in efficiency which he himself has evaluated, there is the further factor that during the years that lie ahead—and the noble Lord can correct me if I am wrong—the amount of the gas levy which at the moment enters into the price that the consumer pays is to be progressively reduced and ultimately eliminated. If I am wrong, perhaps the noble Lord will tell me; but certainly under the original Act there is a phased reduction in the amount of the Government's gas levy. Is it not right that the consumer should have the benefit of this?
There are minor differences between the noble Lord, Lord Diamond, and myself, which he has described. Between us we arrived at an admirable compromise of 4 per cent. which I think is very reasonable in all the circumstances. I am surprised that the Minister cannot accept it.
But the most important point of all is the incorpo-ration of this part of the authorisation in the Bill. The noble Lord reinforced it once again. He was given a chance to say that Clause 23 of the Bill had some impact in regard to the matter, but, being honest, once again he referred to the authorisation. The authorisation is the real bible for him in this whole question, and he has not assured the House, and he cannot assure it, that the authorisation cannot be altered without the prior consent of the House. He knows that quite well. The proposed authorisation has already been changed. There is no reason why, after the passage of this Bill, it cannot be changed without Parliament's consent.
We think this is wrong, particularly in the case of a private monopoly. We therefore reiterate the argument. We think that this is the honourable course, the one that gives the noble Lord the flexibility he requires in all the remaining parts of the authorisation, but singles out this one point to put into the Bill, and it will lead to the legitimate protection of the British public. The British public will have cause for regret if this part of the authorisation does not go into the Bill. I am very sorry indeed that the noble Lord and some of his supporters at any rate cannot give this amendment the support that it deserves. Therefore I regret that I must press this amendment to a Division.
4.13 p.m.
On Question, Whether the said amendment (No. 156) shall be agreed to?
Their Lordships divided; Contents, 93; Not-Contents, 125.

DIVISION NO.2

CONTENTS

Airedale, L.

Kilbracken, L.

Amherst, E.

Kilmarnock, L.

Ardwick, L.

Kirkhill, L

Attlee, E.

Leatherland, L.

Aylestone, L.

Listowel, E.

Banks, L.

Llewelyn-Davies of Hastoe, B.

Barnett, L.

Lloyd of Kilgerran, L.

Birk, B.

Lockwood, B.

Blease, L.

Longford, E.

Blyton, L.

Mackie of Benshie, L.

Boston of Faversham, L.

McNair, L.

Bottomley, L.

Milford, L.

Briginshaw, L.

Mishcon, L.

Brockway, L.

Molloy, L.

Bruce of Donington, L.

Morton of Shuna, L.

Caradon, L.

Mulley, L.

Carmichael of Kelvingrove, L.

Nicol, B.

Cledwyn of Penrhos, L.

Oram, L.

Crawshaw of Aintree, L.

Phillips, B.

David, B.

Ponsonby of Shulbrede, L.

Davies of Penrhys, L.

[Teller.]

Dean of Beswick, L.

Prys-Davies, L.

Denington, B.

Ritchie of Dundee, L.

Diamond, L.

Rochester, L.

Donaldson of Kingsbridge, L.

Ross of Marnock, L.

Elwyn-Jones, L.

Scanlon, L.

Ennals, L.

Seear, B.

Ewart-Biggs, B.

Shackleton, L.

Ezra, L.

Shepherd, L.

Falkender, B.

Silkin of Dulwich, L.

Fitt, L.

Soper, L.

Gallacher, L.

Stallard, L.

Gladwyn, L.

Stoddart of Swindon, L.

Glenamara, L.

Strabolgi, L.

Graham of Edmonton, L.

Taylor of Mansfield, L.

[Teller.]

Tedder, L.

Grey, E.

Tordoff, L.

Grimond, L.

Underhill, L.

Hampton, L.

Wallace of Coslany, L.

Hanworth, V.

Walston, L.

Hatch of Lusby, L.

Wedderburn of Charlton, L.

Hayter, L.

Wells-Pestell, L.

Hirshfield, L.

White, B.

Hooson, L.

Wigoder, L.

Houghton of Sowerby, L.

Williams of Elvel, L.

Hunt, L.

Wilson of Rievaulx, L.

Jeger, B.

Winterbottom, L.

Jenkins of Putney, L.

NOT-CONTENTS

Abercorn, D.

Craigavon, V.

Bauer, L.

Craigmyle, L.

Beaverbrook, L.

Cullen of Ashbourne, L.

Belhaven and Stenton, L.

Davidson, V.

Beloff, L.

De Freyne, L.

Belstead, L.

Denham, L. [Teller.]

Bessborough, E.

Derwent, L.

Birdwood, L.

Dilhorne, V.

Blyth, L.

Drumalbyn, L.

Boyd-Carpenter, L.

Dundee, E.

Brabazon of Tara, L.

Ellenborough, L.

Brentford, V.

Elliot of Harwood, B.

Broxbourne, L.

Elton, L.

Bruce-Gardyne, L.

Fanshawe of Richmond, L.

Burton, L.

Fortescue, E.

Caithness, E.

Gainford, L.

Cameron of Lochbroom, L.

Gardner of Parkes, B.

Campbell of Alloway, L.

Glanusk, L.

Campbell of Croy, L.

Glenarthur, L.

Carnegy of Lour, B.

Gray, L.

Carnock, L.

Gridley, L.

Cathcart, E.

Hailsham of Saint

Coleraine, L.

Marylebone, L.

Constantine of Stanmore, L.

Halsbury E.

311

Hardinge of Penshurst, L.

O'Brien of Lothbury, L.

Harmar-Nicholls, L.

Orr-Ewing, L.

Harvington, L.

Pender, L.

Henderson of Brompton, L.

Penrhyn, L.

Henley, L.

Perth, E.

Hives, L.

Peyton of Yeovil, L.

Home of the Hirsel, L.

Plummer of St Marylebone,

Hooper, B.

L.

Hunter of Newington, L.

Rankeillour, L.

Hylton-Foster, B.

Renton, L.

Killearn, L.

Rochdale, V.

Kimball, L.

Rodney, L.

Kinloss, Ly.

Rugby, L.

Kinnaird, L.

St. Davids, V.

Knollys, V.

Sanderson of Bowden, L.

Lauderdale, E.

Selbourne, E.

Lindsey and Abingdon, E.

Selkirk, E.

Long, V. [Teller.]

Shannon, E.

Lucas of Chilworth, L.

Sharples, B.

Luke, L.

Skelmersdale, L.

McAlpine of Moffat, L.

Soames, L.

McFadzean, L.

Somers, L.

Macleod of Borve, B.

Stodart of Leaston, L.

Mancroft, L.

Strathcarron, L.

Margadale, L.

Sudeley, L.

Marsh, L.

Swinton, E.

Masham of Ilton, B.

Terrington, L.

Massereene and Ferrard, V.

Teynham, L.

Maude of Stratford-upon-

Thorneycroft, L.

Avon, L.

Thurlow, L.

Melville, V.

Tranmire, L.

Mersey, V.

Trenchard, V.

Milverton, L.

Trumpington, B.

Montgomery of Alamein, V.

Vaux of Harrowden, L.

Morris, L.

Vickers, B.

Mottistone, L.

Vivian, L.

Mowbray and Stourton, L.

Whitelaw, V.

Murton of Lindisfarne, L.

Wise, L.

Newall, L.

Wolfson, L.

Nugent of Guildford, L.

Wynford, L.

On Question, amendment agreed to.

4.21.p.m.
[Amendments Nos. 157 and 158 not moved.]
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 159:
Page 77, line 18, leave out ("in writing").
The noble Lord said: My Lords, I spoke to this amendment with Amendment No. 133.1 beg to move.
Lord Gallacher Lord Gallacher moved Amendment No. 160:
Page 77, line 19, at end insert ("seek an order from the relevant court to—").
The noble Lord said: My Lords, this amendment is concerned with the problem of those for whom paying gas bills presents great difficulty, which I presume includes many of us, as well as of those who are unable to pay, which unfortunately includes some of us. The purpose of the amendment is to change Schedule 5 to the Bill so that before cutting off a customer's supply British Gas plc would be obliged to seek an order from the relevant court.
The problem of bad debts has been aggravated by the times in which we live, and particularly by such factors as insecurity of employment and the granting of credit too easily—especially hire-purchase credit, which is consequently too dear as a result. It should be said that, so far as concerns the present situation, the vast majority of gas consumers are good payers. The British Gas Corporation, as it now is, is sympathetic to
312
the minority of people who are not good payers. That is evidenced by its code of practice relating to non-payment of accounts.
However, we feel that it is not sufficient simply to use the weapon of disconnection rather than to seek a court order. In the year 1984–85, one-third of a million gas consumers, I am advised, were disconnected. A public limited company may take a different attitude towards poor payers from that which British Gas has taken hitherto. Such a company may feel obliged or even justified in being tougher with its customers than was the British Gas Corporation. That toughness may manifest itself despite the extensive powers given to British Gas plc in the Bill to require security for connection in the first place, as detailed in Clause 11.
If the amendment were to be accepted and a court order was required before disconnection, then it is argued that the court would have regard to the relevant circumstances surrounding the debt. The mere procedure of seeking a court order may itself prompt some debtors to pay before the hearing. In Amendment No. 160 we use the phrase "relevant court" because we feel that it leaves open which court is to be used and would allow for possible changes in the court system for debt claims that may take place in the future. It also takes care of the position in Scotland, where a different court system operates. However, we are not adverse to spelling out the names of the courts in which action might be taken if the sponsors of Amendment No. 160 wish to pursue that course.
British Gas already has powers to take customers to court under the Gas Act 1972. However, it rarely uses those powers and, as will be seen from the figures I have already given, British Gas seems to prefer to choose disconnection, with the consequential high deposit that is required of consumers for reconnection after their supply has been cut off. The purpose of the amendment is to force British Gas plc not to recover debts but simply to spell out to debtors a procedure that is clear, and so that even-handedness will apply in the distressful situations that sometimes arise as regards bad debts. I beg to move.
Baroness Gardner of Parkes: My Lords, I oppose this amendment very strongly as I believe that it would create a cumbersome, time-consuming and expensive procedure that would rebound on all gas consumers. It is essential for the gas authority to retain disconnection as the ultimate way of dealing with non-payment. As I have mentioned at previous stages of the Bill, in the energy industry bad debts are one of the really great worries. I have already quoted the case of the electricity industry, which has millions of pounds of bad debts in the London area alone.
In this country, there is a proportionately small number of disconnections. I think I misheard the noble Lord, because I thought he mentioned a figure of something like a quarter of a million disconnections. I would ask the noble Lord to correct me if I am wrong, but I was listening to his speech and I understood him to mention a total of a quarter of a million disconnections last year. I do not believe it was anything like that number.
We in this country have a very small number of disconnections compared with other countries in the

313
world. That is because we have an admirable code of practice whereby every care is taken to ascertain the reason why there is non-payment before anybody's supply is disconnected. A person who has difficulty in paying their account and who discusses with one of the energy authorities how he or she might gradually pay off the debt is given every opportunity to do so. Disconnection is a weapon that has to be used when a person evades payment in every possible way. Such evasion cannot be allowed, because when it is evasion gradually builds up, with other people copying to the point where huge debts accumulate of the kind that now exist in Southwark, where the council is not collecting council rents and is millions of pounds out of pocket.
Another point that deserves comment is the suggestion that a huge deposit is asked for upon reconnection. That is only the case if a person who has a very bad history of non-payment, and who has had to be disconnected, again requests a credit meter. However, if such a person is prepared, as is usually the case, to change to a prepayment meter, then no deposit is requested. That is the most usual course of action. With a DHSS case, a fuel direct payment is made, and again there is no difficulty. So there is plenty of social assistance available to the person who is in real need. It is absolutely essential to deal with bad payment by means of disconnection, and the court procedure would be intolerable.
4.30 p.m.
Lord Bruce-Gardyne: My Lords, I entirely agree with everything that my noble friend Lady Gardner of Parkes said in objecting to this amendment. It seems to me that there is one relevant piece of evidence which we might have if possible, and it is this. The noble Lord, Lord Gallacher, said that once British Gas went into the private sector it would suddenly transform itself into a wicked, free-booting, entrepreneurial affair, disconnecting everyone on sight and at the drop of a hat—and I paraphrase the implication of what the noble Lord said.
The fact is that we have a precedent for this situation in the shape of British Telecom. All sorts of allegations have been made against British Telecom since it passed into the private sector—most of them, so far as I can make out, wholly without foundation. But so far as I am aware, there is one allegation which has not been made; that is, that British Telecom has gone round in all directions cutting off everyone's telephone. I am not aware that there is any evidence whatever that British Telecom in the private sector has been any more insistent and impatient to disconnect telephones because of non-payment of bills than when it was in the public sector. I admit that I can see no earthly reason why British Gas should be expected to transform its behaviour in a way that British Telecom has not.
The basic objection to this amendment is, of course, that it would mean that the additional cost which would result from delays in obtaining settlement of bills by British Gas would inevitably be carried by the other users of the service and the system. Once again, therefore, I am bound to say that we have evidence of the anxiety of the Benches opposite to load the
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burdens on the consumer, and I cannot believe that that is in the interests of either British Gas or the public in general. Therefore, I hope that the House will resist the amendment.
Lord Diamond: My Lords, we are always grateful to the noble Baroness, who speaks with great knowledge, authority and experience which the rest of us do not enjoy, about what is happening at present in the nationalised gas industry. It is very encouraging to hear what she has to say and to learn how concerned are the Government with the interests of the consumer. That is excellent.
The noble Lord, Lord Bruce-Gardyne, asks why the successor company should change its skin. We see no reason why it should. We just want to make sure that it does not by making provision in the Bill (as there is a Bill going through Parliament) to see that the existing good practices, of which the noble Baroness reminded us, continue.
The noble Lord, Lord Bruce-Gardyne, says that there is no reason to suspect that, so why bother at all? In that case, why have any legislation at all if there is no reason for suspicion? Why have all this business of a huge authorisation with dozens of conditions? Why have a formula as to price? Why not leave it that the industry charged reasonably in the past and will continue to charge reasonably in the future, knowing that there is a great commercial drive to satisfy the customer? You do not make a profit unless you have happy customers; so why not leave it to the normal commercial motives?
But we do not. We take great care in the Bill, in many clauses, and with many conditions in the authorisation, to provide for the eventuality that there will be a change of mind—possibly not until there has been a change of personnel, but that will happen year after year. Therefore, we must provide for that.
The noble Lord, Lord Bruce-Gardyne, says that there is no evidence that British Telecom is doing anything very different from what happened before privatisation. There is considerable evidence. There have been a considerable number of complaints about certain changes in free services, and there have been a considerable number of complaints on other matters. We know that the level of complaints has more than doubled since British Telecom was privatised. I do not have a breakdown of the figures, but I hope that the Government do and can therefore tell us whether the complaints include complaints about prices or whether—as I have previously said in the Chamber and as I mention again in order to be perfectly fair—increase in complaints is due not to increased misdoings on the part of British Telecom, but merely to an increased awareness among consumers that they now have rights of complaint which they were not aware of previously. We shall not know until there has been an analysis. All I can say is that, superficially, the complaints have doubled.
Lord Bruce-Gardyne: My Lords, I am grateful to the noble Lord, Lord Diamond, for giving way. I think he must have misheard what I said. I said that I accepted that there was evidence of a considerable number of complaints about the conduct of British Telecom in the private sectior. I ventured to say that the evidence

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suggested that most of the complaints were entirely without foundation. However, what I queried was whether there was any evidence whatsoever—
Lord Campbell of Alloway: My Lords, are we not on Report?
Baroness Gardner of Parkes: My Lords, my noble friend should ask leave of the House to speak again.
Lord Diamond: My Lords, I took it that the noble Lord, Lord Bruce-Gardyne, was intervening to correct a fact. As far as I am aware, every noble Lord is allowed to challenge any other noble Lord on a question of fact without asking the leave of the House, and so I acquit the noble Lord of any discourtesy.
We are back to the fact that there has been a great increase in the number of complaints. Until the Government are good enough to give us a breakdown of that number and we know the precise causes we can only assume that there has been an increase in the number of complaints because there has been an increase in the number of dissatisfied customers. Those are the reasons why we think it better to have this provision in the Bill—I see that noble Lords and the noble Baroness are conversing and I do not want to intervene in a private discussion—and why we are very much concerned to see that the present attitude continues and that there should be an order from the court before there are rare or frequent (whichever it is) decisions to cut off supplies.
May I ask the Minister whether he finds it convenient that we proceed according to the list of groupings, or whether, as we have started on this one amendment, we should stick to it?
Lord Belstead: My Lords, I think we should stick to the groupings, if your Lordships are prepared to do that; otherwise we shall be constantly chopping and changing.
Lord Diamond: My Lords, I am grateful to the Minister because, as I understand it, the House will find it convenient to discuss with Amendment No. 160 my Amendments Nos. 160A, 160B and 160C. Except for Amendment No. 160C, these provide an alternative to the wording suggested by the noble Lord and cover very much the same ground. The amendments suggest that an order should be sought from the court to cut off a supply. The question of expenses is covered in the same way as in the Bill. Amendment No. 160B is consequential.
I say immediately to the noble Lord, Lord Gallacher, that there is nothing between us as to whether or not we spell out the individual courts. I thought it convenient to set them down, and they can be corrected or omitted. In sub-paragraph (7) of Amendment No. 160B the obligations to pay the expenses of reconnection is repeated.
Amendment No. 160C is of a rather different character. It states:
"There is a duty on all suppliers of gas to provide an adequate network of facilities for payment of bills and access to information and advice".
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We have touched on this question previously. I think we touched on it at about nine o'clock in the morning after a fairly extended sitting in your Lordships' Chamber, and I do not think that everybody was at the top of their form at that hour. Of course, the Government would have been, but I am hoping that they have reconsidered the view that they then took, which was that they sympathised with the amendment but thought that what was in the authorisation was adequate and there was no reason to put it in the Bill. I think that was the only major difference between the two sides of the Committee on that point. I hope that they will now take the view that it is very important that the facilities should be provided and should be seen to be provided.
There is no difficulty if this goes into the Bill. There is no long-term restriction or difficulty about it. For all time there should be:
"a duty on all suppliers of gas to provide an adequate network of facilities for payment of bills",
and for all time they should provide,
"access to information and advice".
This is not something that will change with changing circumstances, and therefore it is far better that it should be incorporated in the Bill itself rather than be left to a variable—I repeat, variable—authorisation.
As we are discussing this question of authorisation, perhaps I may say to the noble Lord that, as I understand it—and I must preface my remarks in that way—the Bill itself is very clear. Clause 23, which is the clause to which I was referring, provides for the modification of the authorisation by agreement between the director and the gas supplier. What the noble Lord was saying on a previous amendment does not alter one word of that. It is far better that we should understand this from the start and know where we are. We are discussing a Bill which is based on having one single gas supplier—one single gas supplier, nobody else—for the whole of the country, for all normal households, tariff customers; and that one supplier is entitled and required to do everything that is set out in the authorisation.
It is most important to know what that one supplier will do. The terms of the authorisation have therefore been published, but they are altering—they have altered since we started our discussions. I am making the point that they can be altered at any time in the future by either the various processes to which the Minister referred, or—and I shall be grateful if the Minister will contradict me if I am wrong—Clause 23, simply by the agreement of the director and the public gas supplier. The clause states:
"Subject to the following provisions of this section"—
which sets out the detail—
"the Director may modify the conditions of a public gas supplier's authorisation".
It is provided that there shall be agreement between the two of them.
I think that is really very straightforward, and we should bear it in mind. I hope therefore that I have made clear the purpose of the amendments standing in my name. In the meantime I strongly support the amendment which is at present before your Lordships' House.
4.45 p.m.
Lord Belstead: My Lords, let me just set at rest the mind of the noble Lord, Lord Diamond, on a matter which does not have anything to do with this amendment: as I said before, the authorisation cannot be changed in a way which would be detrimental to the interests of the consumer. The noble Lord mentioned Clause 23. It is true that changes to the authorisation can be made, but it must be by agreement between the director and the public gas supplier. As the noble Lord will well know, the very first duty of the director under Clause 4(2) is to consider the interests of customers and consumers. That must come at the top of his list.
Turning now to this amendment, with very great respect to the noble Lord, because I think he is the one who made the assertion, we are not talking here of whether we are putting something in the licence or in the Bill. The rules about whether one can cut off anyone's supply of gas have been in the law for about 100 years. They have not been in a licence; they have been in the statute law. If your Lordships care to look at the Bill, you will see that there they are again in Schedule 5. It is a very long schedule, but the situation is just the same as it has always been for years and years. So we are not talking about that.
We are talking about the attempt which is being made in these amendments to say that before the gas supply of anybody can be cut off the supplier has to go to court. As my noble friend Lady Gardner of Parkes said, this entails some real difficulties. The obvious difficulty is that going to court takes time. It is not like trying to have a sanction against someone who has a hire purchase arrangement on a television or a refrigerator, for instance. While one is waiting to go to court, the gas meter is clocking up and a very considerable debt can begin to accumulate.
In addition, there is the question of how many times the public gas supplier would have to go to court—which was the essence of my noble friend's point. As I understand it, there are more than 34,000 disconnections every year in Great Britain, and there is no question but that the weight of work on the courts would greatly increase. Having said that, let us remember that nonetheless the customer has some protection from the courts in the event of a considered disconnection. Where a defaulting customer refuses a supplier entry for the purposes of disconnection, there must be an application for a magistrate's warrant under the terms of the Rights of Entry (Gas and Electricity Boards) Act 1954. Before granting a warrant a magistrate must be satisfied that access is reasonably required, that a right of entry exists, and that the requirements of the enactment conferring the right have been complied with.
So the customer is by no means prevented from having the protection of the courts. The Government are saying: why should we change the statute law which has been the same for about 100 years in this matter, and suddenly bring into play the full rigour of the courts every time it is, sadly, necessary to consider a disconnection?
There is one last observation that I should like to make. In this group of amendments we have Amendment No. 160C, in the name of the noble Lord Lord Diamond, which would require,
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"all suppliers of gas to provide an adequate network of facilities for payment of bills and access to information and advice".
I assume that means showrooms. We can do better than that. As your Lordships may remember, the industry introduced a code of practice on paying electricity and gas bills, and under the terms of its licence British Gas will be required to continue to observe that code. It has already stated its intention to maintain the existing code, which gives particular protection to elderly and disabled people during the winter months.
If I may say so, I think that my noble friends Lord Bruce-Gardyne and Lady Gardner were right to be suspicious of these particular amendments. I think that they would change the law (which has been in existence for a very long time) in a way that would not be reasonable. I do not think it would be reasonable to the gas supplier, nor to the customer, nor to the courts. On those grounds I resist the amendment.
Lord Gallacher: My Lords, I have listened with interest to the Minister's reply and to the speeches in opposition to this amendment. First of all, I should say that when I quoted the figure relating to the number of disconnections, I quoted accurately the figure given to me covering the two years 1984 and 1985 It is significantly less than the figure quoted by the Minister, and I shall make further inquiry regarding the figures that I have. It may be that included in my disconnections are electricity disconnections; that may explain the discrepancy, but I shall certainly look into it.
As to the cost of implementing the proposal in the amendment, one cannot rule out of consideration of the matter some future restructuring of court costs and the claim that the consumer movement has repeatedly made that there is room in the country for small claims courts. Indeed, successful exoperiments have been made with small claims courts, where disputes can be resolved amicably and at considerably less cost than in either the county court or the High Court. That is one reason why we used the phrase "relevant court" in the amendment.
It is also wrong to assume that because a case is taken to court—if it gets there, that is—the court will necessarily take a legalistic and severe view of the debtor. It is within my knowledge that in many instances the court takes a sympathetic view and is sometimes able to make an arrangement between the debtor and the creditor which to some extent may be more favourable than would be the case if the creditor acted within his rights, which are given to him in this case in a schedule to the Bill.
Although the noble Lord said that there is the traditional right to apply to the magistrate for warrants in order to enter to disconnect etc., in the schedule as it now stands there is no mention of court action and the emphasis is totally on disconnection at the discretion of the public gas supplier. In addition to that, the question of reconnection is very much within the discretion of the public gas supplier. And the charge that the public gas supplier is entitled to make for reconnection, on the assumption that he decides to do it, is also at his discretion, although the phrase "reasonable expenses" is used. That, as we well know, may mean different things to different people.

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We are not seeking in the amendment, as the noble Lord, Lord Bruce-Gardyne, indicated, to threaten consumers. On the contrary, we are seeking to give them additional protection. The noble Lord said that he was paraphrasing my remarks. All I can say is that I hope that I am not around when he is criticising them.
It appears to us that the right of court action which British Gas has under the 1972 Act is being given up, or, if not, it is certainly not spelt out in the Bill as clearly as it was in the 1972 Act. If its debt position is getting difficult, a public company may make certain decisions. I am aware of commercial decisions and would not wish to constrain British Gas as a plc from being any less commercial in its decisions on bad debts as any other public company. I am well aware that too lenient an attitude may lead to a situation which is finally an embarrassment and to a considerable trading loss.
It would be reasonable and fair to keep the provision in the Bill and to give the court the opportunity to adjudicate where bad debt claims arise. Even if administered generously, the mechanism of disconnection may prove hard for people who find themselves, often through no fault of their own, as I say, in that position. I am not talking about the habitual debtor but those who come upon hard times and difficult days. In such cases courts can sometimes do things which may not be possible in the normal creditor/debtor relationship. Nevertheless, I take note of what the Minister said, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Deputy Speaker (Lord Nugent of Guildford):
My Lords, Amendments Nos. 160A, 160Band 160C not moved.
Lord Diamond: On the contrary, my Lords.
The Deputy Speaker: Amendment No. 160A, my Lords—Lord Diamond.
Lord Diamond: My Lords, I spoke to this amendment because it was the wish of the Minister who is in charge of the Bill at the moment that it should be discussed with the other amendment. We all know that that is in the discretion of the mover and of nobody else. May I ask him whether, as a result of that co-operation, I am to be denied the right, which I otherwise would undoubtedly have had, of replying, as the mover of the amendment?
Lord Belstead: My Lords, as the noble Lord knows, we have developed a system of grouping amendments in your Lordships' House. The Government provide suggested groupings on a sheet of paper. We try to do it the day before the debate. It is given, first of all, to all the parties. Provided that the grouping is agreed—and the noble Lord is the leader of his party—it is put in the office. Even then, noble Lords individually can depart from it if they so wish when they come to their amendments. If the noble Lord wishes to say, "I do not like the grouping. This is not the way that I wish to do it", nobody can prevent him. When we came to this group, which was to be
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Amendments Nos. 160, 160A, 160B and 160C, the noble Lord was good enough to ask me whether it was my wish that we should stick to the group. I said I thought that it was better that we should That is the way that we dealt with it In those circumstances, there is a right of reply for the noble Lord who moves the original amendment but not for noble Lords who have their names down to the other amendments.
Lord Diamond: My Lords, I am grateful for that ruling
Lord Belstead: Interpretation, my Lords.
Lord Diamond: My Lords, one would have to take advice to see whether it is correct. It is an encouragement to Members of your Lordships' House not to agree to grouping, as you deny yourself the right of reply But there is an opportunity for any noble Lord to say "By leave of the House, I should like to respond to the Minister's reply, as I should have been entitled to had I not agreed to the grouping that he suggested" I agreed to the grouping and on my own initiative suggested that we should agree to it, and so let me say, with the leave of the House, that I am sorry that the Minister's comments on the amendments were based on a misunderstanding.
I hope that I may have this attention, because this may affect our future arrangements The misunderstanding arose from the fact that we are trying to put dissimilar amendments together to discuss them at the same time The desire on all sides is to save time But Amendment No 160C is of a different character, and it was with regard to that one and not to the others that I was saying that the provision should be in the Bill It is not in the Bill or in the schedules That was the only point I wanted to make on that.
On the other amendments, I sought to say that we should have regard to the court The noble Lord replied to that in two rather contradictory answers. First, he said that going to the court would hold up everything Secondly, he said that there was no need to put the provision in the Bill because there is already power to go to the court I never find—
The Deputy Speaker: My Lords, I think I should interrupt the noble Lord There is nothing in front of the House The noble Lord, Lord Gallacher, asked leave to withdraw Amendment No 160 and leave was given The implication of the remarks of the noble Lord, Lord Diamond, is that he wishes to move one of his amendments I therefore propose to call the amendments one by one That will give him a chance to move whichever he wishes and to put himself in order to make the speech with which he is proceeding. I call Amendment No 160A, Lord Diamond.
Lord Diamond Lord Diamond had given notice of his intention to move Amendment No. 160A:
Page 77, leave out lines 20 to 23 and insert—
("(a) seek an order from the court to cut off the supply to the premises by disconnecting the service pipe at the meter (whether the pipe belongs to the supplier or not) or by such other means as he thinks fit, and
(b) if such an order is granted recover any expenses incurred in so doing from the customer.")
The noble Lord said: My Lords, I am most grateful to the Chair. The amendment was previously called and I said that I was moving it. That is why I ventured to address remarks to the House, which I am now concluding. Although I am not persuaded by the Minister's two contradictory arguments, it is not our desire to press the amendment to a Division. It was our desire to highlight the difficulties that arise because a reference to the court is not a clear provision in the Bill. I am sorry that the Minister has not been persuaded by the arguments of either the noble Lord, Lord Gallacher, or myself. There is nothing further that I want to do about it, and so I beg leave to withdraw the amendment.
The Deputy Speaker: My Lords, the amendment has not yet been moved, and so the amendment is not moved.
[Amendment No. 160A not moved. ]
[Amendments Nos. 160B, 160C and 161 not moved. ]
5 p.m.
Lord Stoddart of Swindon Lord Stoddart of Swindon moved Amendment No. 162:
Page 79, line 37, at end insert—
("Emergency service safety

.—(1) The supplier shall provide an effective and continuously attended service for the receipt by telephone of reports of escapes of gas supplied, or believed to be supplied, by the supplier. Effective arrangements shall also be made for the receipt at the suppliers points of contact during their normal working hours of such reports made in person. The supplier shall by appropriate means secure that adequate publicity is given to the ways it can be contacted for the purpose of reporting such escapes.

(2) The public gas supplier shall make safe all escapes of gas whether by cutting the supply of gas or otherwise, free of charge. Where repairs are associated with a supply of gas, the first half hour of work associated with that repair shall be carried out without charge to an individual tariff customer.

The noble Lord said: My Lords, as noble Lords will recall, a similar amendment, Amendment No. 103A, was moved at Committee stage. But in fact the amendment now before us differs from that amendment in some respects. I can perhaps remind noble Lords that the last sentence of Amendment No. 103A at Committee stage read:
"Where repairs are associated with a supply of gas, the first half hour of work associated with that repair shall be free of charge".
My new amendment, in its last sentence, says:
"Where repairs are associated with a supply of gas, the first half hour of work associated with that repair shall be carried out without charge to an individual tariff customer".
So there is a difference. I have sought to tighten up the amendment in the hope that the noble Lord, Lord Belstead, will be able to accept it. The new wording specifies that only tariff customers would be entitled to the half hour's repair work without charge—that is, without charge to him as an individual. The free service would not extend to larger customers; it would be confined to the tariff customer.
We had a long discussion about the matter at Committee stage. I do not propose to go over the same ground again except to emphasise that this service is available at the present time. I also wish to remind the House that at Committee stage the noble Lord, Lord
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Gray, remarked that British Gas had said that it intends to continue its present policy. My point is that although British Gas may give the assurance at this stage, there is no guarantee that such an assurance will be honoured in the future by a privatised British Gas. The composition of the board will undoubtedly change. With it, so may policies. There will be all sorts of different pressures on the board of a privatised British Gas, including pressure to maximise profits for distribution to shareholders. As we know, British Telecom is now to charge for repairs to the 999 system out of normal hours. We fear that the same will happen in the case of the emergency safety service and the first half hour's work without charge to the individual consumer.
The safest course is to include this provision in the Bill. I hope that the noble Lord will be sympathetic. He can lose nothing at all. I have no doubt that his brief, at the top, says, "Resist". I hope that he will resist the "Resist". The amendment makes no difference, or very little difference, to the Bill. I would go further and say that if the noble Lord has difficulty about including it in the Bill, I would accept an assurance that he will include the words in the revised authorisation—that is, in Condition 11 dealing with the emergency service. It would be good to have this additional provision in the Bill to safeguard the customer. If the noble Lord is prepared either to accept the amendment or to agree that it should be put in the authorisation, he will engender goodwill on this side of the House. I am sure that at this stage of the Bill the noble Lord wants to do that—and we want him to do it.
I appeal, therefore, to the Minister either to say to the department, if it is advising him to resist, that he will not accept its advice and that he will accept the amendment, or at least to give an undertaking that he will amend Condition 11 of the authorisation in the way that I suggest. I beg to move.
Lord Belstead: My Lords, this amendment is all about providing an emergency service to deal with escape of gas and British Gas is called out to deal with the escape. If the escape is on British Gas's side of the Bill iself. Paragraph 13 of Schedule 5 requires a public gas supplier to prevent escapes of gas or make safe. When we discussed this in Committee it was explained from this side that where a statutory duty is placed on a body and no statutory provision is made for charging, that body must carry out the obligation free of charge. Schedule 5 says nothing about charging in this respect.
I wish to say first, therefore, that there can be no question of customers being charged if they suspect an excape of gas and British Gas is called out to deal with the escape. If the escape is on British Gas's side of the meter—that is to say, it is in the supply network up to the house, and, indeed, up to the meter that may very well be under the stairs—then British Gas must undertake work both to prevent the escape and to maintain supplies to the customer without making any charge. This applies however long the work takes.
In addition, we have put a new obligation into the Bill. It is that British Gas, if this Bill becomes law, must deal with escapes of gas on the customer's side of the meter; that is, in the home. This has never been in

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must make the installation safe on the customer's side of the meter without charge, however long this takes. If, however, the escape if from an appliance belonging to the customer that needs repair work done before it can be operated safely, then, of course, it is for the customer to ask British Gas or any other competent repairer to do the work. It would not be sensible to require in the Bill that British Gas has to do all those repairs free of charge, since this would be an unreason-able and open-ended obligation.
As we discussed in Committee, British Gas currently operates the policy of not charging for the first half hour of repair work done during a call to deal with an escape. It is this point that the noble Lord wants the Government to put into the Bill. The Government have explained previously that this half hour policy will continue after privatisation. I understand that the chairman of British Gas is going to make this clear to the Secretary of State. I take the opportunity to put this on the record now. I have tried to explain that the law as it stands gives very comprehensive protection for the consumer so far as free protection after an escape of gas is concerned; that we have put a new obligation in the Bill for British Gas to deal with escapes of gas on the customer's side of the meter; and that British Gas must make the installation safe without charge however long this takes. To want to put this additional provision in the Bill as the noble Lord does is asking more than I am prepared to offer. I repeat the assurance which has been given, but to put that in addition onto the face of the Bill is a matter to which I cannot respond.
If British Gas fails to carry out its obligations properly it is guilty of negligence. Then the normal remedies for such negligent action are available to customers who might have suffered damage. This is referred to in Clause 28(3) and becomes very important indeed if there were to be some major disaster. However, let us remember that we are talking in the context of an industry which has taken very great care and has a good record. I am sorry that I cannot go all the way to meet the noble Lord but I hope that the assurances I have given have convinced your Lordships that the protection provision for the escape of gas is very reasonable as it is on the face of the Bill.
Lord Somers: My Lords, on a point of information, can the noble Lord say whether British Gas will be responsible for the repairs to systems that are already installed in a house before the date of denationalisation?
Lord Belstead: My Lords, yes. If the noble Lord, Lord Somers, glances at Schedule 5, paragraph 4, he will see that there are, not surprisingly, duties laid on the customer to treat the pipes in the house in a reasonable way. It is therefore not possible for complete neglect to take place—not reporting that rust is forming, or something of that kind—and to expect after a catastrophe that the customer should get off scot free. Under Schedule 5 there is a duty on the customer to do his bit. However, in that context the answer to the noble Lord is, yes.
Lord Stoddart of Swindon: My Lords, I thank the noble Lord for the assurances that he has given but I am afraid that we remain divided about this. I am sorry that he has not been able to come some way towards meeting what I asked for. He said that the chairman of British Gas has been in touch with the Secretary of State and has assured him that this service will be continued; that is, as long as he is the chairman. His assurance can last for only three years, since he will be the chairman for only three years.
As an alternative I asked the noble Lord—I understand his difficulties about accepting it in the Bill—whether these words could be tagged on to Condition 11 of the authorisation, which the amendment repeats. The last sentence says:
"Where repairs are associated with a supply of gas, the first half hour of work associated with that repair shall be earned out without charge to an individual tariff customer".
If the noble Lord had only assured me that he would tag those words on to paragraph 2 of Condition 11 I would have been able to withdraw this amendment and honour would have been satisfied on all sides: the honour of the Gas Corporation, the Secretary of State, the noble Lord, Lord Belstead, and my own. It was such a simple request. I am sorry that he was not able to accept it. Because I feel so strongly about it, he has forced me into a position where I shall have to divide. But he still has the chance to get up now and say, "Let us put it in Condition 11".
Lord Belstead: My Lords, I have spoken twice but if the House, just this once, will allow me to speak a third time very briefly I will say this. The Bill is continuing the law as it exists at the present time except that we are taking an extra step forward and putting into statute the fact that on the customer's side of the meter—in other words, in the home—there will be a statutory duty in future for British Gas to make safe after an escape. That is a free service, although, as I have explained, the half-hour business comes in if there is other work to be done. It is the half-hour business on which the noble Lord is pressing me. The noble Lord is being reasonable, as he has been throughout our consideration of the Bill. I entirely understand the reason why he says that if we could have put it into the licence there could have been agreement here. But, on behalf of the Government, I am trying to say that we are going further in statute than any Government has gone before. I am repeating an assurance which the chairman of British Gas is giving to my right honourable friend, that the entirely non-statutory assurance which has been given up to now will be continued for the future.
Talking of honour, the chairman and the board of British Gas will become the chairman and the board of the new plc. Knowing their integrity, I am absolutely sure that their assurance will be honoured by the new company.
Lord Stoddart of Swindon: My Lords, I accept the honour of the chairman of British Gas, but, as I said, he will be there for only a limited period of time. I do not know that I am allowed to speak any further on this. I must, I am afraid—regretfully, as a matter of fact—press the amendment.
5.16 p.m.
On Question, Whether the said amendment (No. 162) shall be agreed to?
Their Lordships divided; Contents, 87; Not-Contents, 125.

DIVISION NO.3

CONTENTS

Airedale, L.

Kilmarnock, L.

Ardwick, L.

Kirkhill, L.

Aylestone, L.

Lawrence, L.

Banks, L.

Leatherland, L.

Barnett, L.

Llewelyn-Davies of Hastoe, B.

Blease, L.

Lloyd of Kilgerran, L.

Blyton, L.

Lockwood, B.

Boston of Faversham, L.

Longford, E.

Bottomley, L.

Mackie of Benshie, L.

Bowden, L.

McNair, L.

Briginshaw, L.

Masham of Ilton, B.

Brockway, L.

Meston, L.

Brooks of Tremorfa, L.

Milford, L.

Bruce of Donington, L.

Molloy, L.

Caradon, L.

Morton of Shuna, L.

Carmichael of Kelvingrove, L.

Nicol, B.

Chitnis, L.

Northfield, L.

Cledwyn of Penrhos, L.

Oram, L.

Crawshaw of Aintree, L.

Phillips, B.

David, B.

Ponsonby of Shulbrede, L.

Davies of Penrhys, L.

[Teller.]

Dean of Beswick, L.

Prys-Davies, L.

Diamond, L.

Rhodes, L.

Donaldson of Kingsbridge, L.

Rochester, L.

Elwyn-Jones, L.

Ross of Marnock, L.

Ennals, L.

Scanlon, L.

Ewart-Biggs, B.

Seear, B.

Ezra, L.

Sefton of Garston, L.

Fitt, L.

Shepherd, L.

Gallacher, L.

Silkin of Dulwich, L.

Gladwyn, L.

Stallard, L.

Glenamara, L.

Stoddart of Swindon, L.

Graham of Edmonton, L.

Strabolgi, L.

[Teller.]

Taylor of Blackburn, L.

Grey, E.

Taylor of Gryfe, L.

Grimond, L.

Taylor of Mansfield, L.

Hampton, L.

Tordoff, L.

Hanworth, V.

Underhill, L.

Hatch of Lusby, L.

Wallace of Coslany, L.

Hayter, L.

Walston, L.

Houghton of Sowerby, L.

Wells-Pestell, L.

Hunt, L.

White, B.

Irving of Dartford, L.

Williams of Elvel, L.

Jeger, B.

Wilson of Rievaulx, L.

Kilbracken, L.

NOT-CONTENTS

Abercorn, D.

Coleraine, L.

Airey of Abingdon, B.

Colville of Culross, V.

Alexander of Tunis, E.

Constantine of Stanmore, L.

Bauer, L.

Craigavon, V.

Belhaven and Stenton, L.

Craigmyle, L.

Beloff, L.

Cranbrook, E.

Belstead, L.

Cullen of Ashbourne, L.

Bessborough, E.

Davidson, V.

Blyth, L.

Denham, L. [Teller.]

Boston, L.

Derwent, L.

Boyd-Carpenter, L.

Digby, L.

Brabazon of Tara, L.

Drumalbyn, L.

Brougham and Vaux, L.

Dundee, E.

Broxbourne, L.

Eccles, V.

Bruce-Gardyne, L.

Eden of winton, L.

Burton, L.

Ellenborough, L.

Butterwoth, L.

Elliot of Harwood, B.

Caithness, E.

Elliott of Morpeth, L.

Cameron of Lochbroom, L.

Elton, L.

Campbell of Alloway, L.

Erroll of Hale, L.

Campbell of Croy, L.

Fanshawe of Richmond, L.

Carnegy of Lour, B.

Feversham, L.

326

Fortescue, E.

Murton of Lindisfarne, L.

Gardner of Parkes, B.

Nugent of Guildford, L.

Geddes, L.

O'Brien of Lothbury, L.

Glanusk, L.

Orkney, E.

Glenarthur, L.

Orr-Ewing, L.

Gray, L.

Pender, L.

Gridley, L.

Penrhyn, L.

Hailsham of Saint

Peyton of Yeovil, L.

Marylebone, L.

Plummer of St. Marylebone,

Halsbury, E.

L.

Hardinge of Penshurst, L.

Portland, D.

Harmar-Nicholls, L.

Rankeillour, L.

Henley, L.

Renton, L.

Hives, L.

Ridley, V.

Hooper, B.

Rochdale, V.

Hunter of Newington, L.

Rodney, L.

Hylton-Foster, B.

Rugby, L.

Keith of Castleacre, L.

St. Aldwyn, E.

Killearn, L.

St. Davids, V.

Kimball, L.

Salisbury, M.

King of Wartnaby, L.

Sanderson of Bowden, L.

Kinnoull, E.

Selborne, E.

Knollys, V.

Selkirk, E.

Lauderdale, E.

Sharpies, B.

Layton, L.

Skelmersdale, L.

Lindsay, E.

Soames, L.

Lindsey and Abingdon, E.

Somers, L.

Long, V.

Stodart of Leaston, L.

Luke, L.

Strathcarron, L.

McAlpine of Moffat, L.

Sudeley, L.

McFadzean, L.

Swansea, L.

Macleod of Borve, B.

Swinton, E. [Teller.]

Mancroft, L.

Terrington, L.

Margadale, L.

Teviot, L.

Maude of Stratford-upon

Teynham, L.

Avon, L.

Tranmire, L.

Mersey, V.

Trumpington, B.

Milverton, L.

Vaux of Harrowden, L.

Montagu of Beaulieu, L.

Vickers, B.

Montgomery of Alamein, V.

Vivian, L.

Mottistone, L.

Wynford, L.

Mowbray and Stourton, L.

Young, B.

Resolved in the negative, and amendment disagreed to accordingly.

5.25 p.m.
Lord Diamond Lord Diamond moved Amendment No. 162 A:
Page 79, line 44, at end insert ('" and it is hereby declared for the sake of removal of doubt that such preventative action shall be at the expenses of the supplier. ")
The noble Lord said: My Lords, I beg to move Amendment No 162A. I hope it will be for the convenience of the House if, with this amendment, there can be discussed the two following amendments in my name, Amendments Nos. 162B and 162C.
On the issue of discussing amendments, perhaps I may make one further point to the noble Lord who is in charge of the Bill. There is no difficulty whatever about agreeing groupings. The noble Lord slightly misunderstood me on the last occasion. I share the view that, within reason, groupings are helpful to the discussion, and save time. But I put to the noble Lord, Lord Belstead, a question which perhaps he will be good enough to consider at his leisure. Here we have three amendments in my name. Having moved the first amendment and having spoken to the other two amendments, I have the right to reply to the one debate on all amendments. Therefore, where a grouping of amendments takes place in the name of one noble Lord, that noble Lord has his full unrestncted right, without seeking the leave of the House, first, to move the first amendment and to speak to all the amendments, and, secondly, to reply to the debate on all the amendments.
However, on a previous occasion one had a grouping of amendments which comprised an amendment moved by one noble Lord and three other amendments moved by other noble Lord. The second noble Lord found himself in the position that, having merely spoken to those other amendments, the first noble Lord had the right of reply and the other noble Lord, who had consented to the grouping, had no such right, as interpreted by the noble Lord, Lord Belstead, who I think is right.
This therefore raises the problem of what we do about groupings: do we group merely the amendments of one noble Lord or do we alter the interpretation? I leave it to the noble Lord the Minister. I am sure that he has taken the point, and I am sure that he will be good enough to look at the matter at his leisure during the very long Recess which we shall all enjoy.
The amendment which I move is to be inserted at the end of line 44 on page 79 of the Bill. Line 44 is still the same provision in Schedule 5 regarding the prevention of escapes of gas, and deals with the problem of who is to pay. The amendment states:
"and it is hereby declared for the sake of removal of doubt that such preventative action"—
it should read "preventive" action; it is a misprint—
"shall be at the expenses"—
and again there is a misprint; it should read "expense"—
"of the supplier".
We have accepted that it is a proper statement of the law that, where there is a statutory obligation which says nothing to the contrary, the person upon whom that obligation is placed is the person who has to foot the expense. That we have accepted. The noble Lord the Minister has said that that is the situation, and we have no wish to challenge it.
However, in a previous debate we tried to make it clear that that is not a matter of general knowledge. We made it clear that we, my noble friend Lord Ezra and myself, for example—and I now refer to col. 1108 of 5th June—regarded ourselves as normal individuals, and we did not understand that. We believe it is reasonable to assume that masses of other gas consumers will not automatically understand it, either, and therefore it should be stated. Therefore, we have this amendment, which is a declaratory amendment which removes any doubt about it and is put in merely for that reason,
"that such preventive action shall be at the expense of the supplier".
I hope that the noble Lord will accept this amendment. It does no more than make the same knowledge available to all. There are all sorts of people who will want to know, and who will not know without consulting counsel, as to what is the effect. We know from letters that we have had from citizens advice bureaux, and so on, that this is the kind of question that they are being asked from time to time, and how are they to turn up anything and find the answer? If they have the Act they turn up the relevant section and the Act says, if your Lordships accept the amendment, what I am proposing. It is helpful and makes matters clearer if this amendment is accepted.
We then come to the other two amendments which are grouped but which are really different matters.
328
They are grouped because they refer to the same subsection. Amendment No. 162B is that on page 80, in line 1, we should,
"leave out ('twelve') and insert ('eight')".
If your Lordships will be good enough to refer to page 80, line 1, it is on the same question of prevention of escapes of gas. As at present drafted, the Bill proposes:
"If a public gas supplier fails within twelve hours from being so informed effectually to prevent the gas from escaping, he shall be guilty of an offence and liable on summary conviction to a fine".
He is allowed 12 hours, and if he does not do it within 12 hours he is liable to a fine. It is treated as a criminal offence. Therefore, one has to allow plenty of leeway.
We suggest that 12 hours is not leeway but an inducement to the corporation to be casual. This is because—and this was asserted and accepted in our previous discussion—the target time is two hours, and that is the average time taken. It is two hours, not 12: not even eight hours, as proposed in the amendment, but two hours. The difference between two hours and eight hours is adequate. If one left it at 12 hours one would be encouraging the inadequate response to alarms about escaping gas.
Why is the figure of 12 hours put in? It is for no good reason. It is in the Bill, but for no good reason. It is merely half of the 24 hours that used to be provided. It used to be 24 hours, and now the Government propose 12 hours. That is a step in the right direction, but one ought to go a little further and think about it more carefully.
Therefore, I suggest that eight hours should be provided. I know that it is a criminal offence and that one has to err on the safe side in terms of not fining people unnecessarily, but there is a double escape here. The following subsection says:
"In any proceedings for an offence under sub-paragraph (2) above it shall be a defence for the Public gas supplier to prove that it was not reasonably practicable for him effectually to prevent the gas from escaping within the said period of twelve hours".
Therefore, if he did his best and failed to prevent the escape within 12 hours—perhaps the roads were blocked by snow and he tried and could not get there—he would not be guilty of an offence. He is covered.
We need not take too much care about fining a gas supplier for not dealing with an escape, because if he does his best and tries he is not liable in any event. It is only when he does not do his best, and when he does not do his best there is a limit in the Bill of 12 hours, there is a target time of two hours, and eight hours is the fullest amount one should allow if one does not want to encourage sheer disregard of escapes. I beg to move.
Lord Brabazon of Tara: My Lords, regarding Lord Diamond's first amendment, No. 162A, I think my noble friend Lord Belstead covered most of the ground on that when he said on the last amendment that, where a statutory obligation is created, the person on whom the obligation falls must foot the bill unless specific provision is made for the recovery of costs.
The noble Lord, Lord Diamond, in his amendment seeks to give publicity to this, and I accept that that is

329
necessary. That is why we have it in Condition 11 of the authorisation, where paragraph 2 says:
"The Supplier shall make available when requested by any person details of its emergency service, stating that the Supplier will make safe, whether by cutting off the supply of gas or otherwise, free of charge all escapes of gas",
etc. Therefore, the point in the first amendment is satisfactorily covered without need for the amendment.
Turning to the question of the response time, as the noble Lord pointed out we are in this Bill already reducing the response time by half, from 24 hours to 12 hours. The noble Lord seeks to reduce it still further to eight hours. I am afraid that I cannot agree to that. The fact is that British Gas have stated, quite rightly—and given an assurance to the Secretary of State which covers safety services including the emergency service—that they will continue their current practice of aiming to respond to uncontrolled escapes in fact within one hour (not two hours) of being informed, and that with escapes which have been controlled—for example, by the customers themselves switching off at the meter—they will aim to respond within two hours.
My only argument with the noble Lord on this amendment is the question of it being a criminal offence. We have already halved it from 24 hours to 12 hours. I think that is certainly not an inducement to be casual on the part of British Gas, and we have every assurance that they will not be casual. As they are going into the private sector it is in their own commercial interests not to be casual, because they want to promote their fuel to the consumer as being safe, and they want to honour their commitment. Therefore, I hope that the noble Lord will agree to withdraw these amendments.
Lord Bruce of Donington: My Lords, I have one small query. The noble Lord indicated that paragraph 2 of Condition 11 in the revised authorisation covered substantially the point made by the noble Lord, Lord Diamond, when he moved the amendment, that,
"it is hereby declared for the sake of removal of doubt that such preventive action shall be at the expense of the supplier."
I listened carefully to the noble Lord when he made his response, and the impression I got from his reply was that that point was already covered under paragraph 2 of Condition 11 of the revised authorisation. It may be that I was wrong, but I am bound to inform the noble Lord that paragraph 2 of Condition 11 reads as follows:
"The Supplier shall make available when requested by any person details of its emergency services, stating that the Supplier will make safe, whether by cutting off the supply of gas or otherwise, free of charge all escapes of gas which it supplies"—
and then this is the crucial wording—
"and the extent to which a customer may be liable for the costs of repairs associated with an escape".
On reflection, does the noble Lord still say that paragraph 2 of Condition 11 in the revised authorisation covers the first amendment put forward by the noble Lord, Lord Diamond?
Lord Brabazon of Tara: My Lords, with the leave of the House, yes, the first amendment put forward by
330
the noble Lord, Lord Diamond, was a way to secure publicity for this service which is outlined in Condition 11. I am saying that it is there already.
Lord Diamond: My Lords, these are unhelpful replies. We have been into this area before and the Minister merely repeats the arguments used on a previous occasion, when we are making quite different points and are relying on his objections on a previous occasion to secure the good will of the Government by meeting those objections and putting forward amendments accordingly on a different basis. It was said previously that it was clear what the law was and that there was no need to state it. We said it was not clear and that we should state it, and therefore we put it in the Bill merely as a declaratory proposition. It cannot hurt anybody to have it in the Bill in that sense.
Moreover, as the noble Lord, Lord Bruce, says, the provision contained in Condition 11 is not the same. It is a provision which merely says that a certain part of the expense of stopping the escape will be borne by the supplier and a certain part will be borne by the customer, and the extent to which a customer may be liable for the costs of repairs associated with an escape. So it is not the same thing. What we want to do is to secure the continuing rights of the consumer. It is in the interests of all of us—all flat dwellers, for example, whether they are above or below escaping gas in a block of flats—that the escape should be ended at the earliest possible moment. Therefore, it is right that it should be fully known and incorporated in the Bill itself. It is an act in the public interest, and should be covered by a statutory obligation. It is not very helpful when the Minister merely continues to rely on what he has said previously.
In relation to the period, I am delighted to hear how that the period had gone down by half since we last discussed it. When we last discussed it two hours were stated. It is now in Hansard as the target period, and it is now one hour. I am delighted to hear that, and it shows how reasonable is the figure that I put forward. To move from one hour to eight hours is surely enough time to cover any eventuality. The Minister did not spend one moment on dealing with this argument, but as the Bill says it does not matter how long you take, you do not commit an offence if you do your best to stop the leak. The Minister said nothing about that, and there it is written into the Bill. I read it out to your Lordships. There is adequate and full cover for the eventuality that the gas company is prevented through forces of nature or in some other way from carrying out its obligation. In those circumstances, eight hours is surely sufficient.
I am therefore suggesting to the House that one should show one's unhappiness about the lack of concern shown by the Government by taking one of these amendments to a Division. I should not want to bother the House about two of them because the point I want to make is as much an expression of dissatis-faction with the Government's continuing refusal to have regard to any amendment, however helpful, however much it meets previous difficulties and previous doubts. It is part of the purpose of the vote to put that to the test. Therefore, I think the best thing would be to vote against the first amendment and to let the other two go.
5.45 p.m.
On Question, Whether the said amendment (No. 162A) shall be agreed to?
Their Lordships divided; Contents, 79; Not-Contents, 110.

DIVISION NO.4

CONTENTS

Airedale, L.

Hunt, L.

Ardwick, L.

Irving of Dartford, L.

Aylestone, L.

Jeger, B.

Barnett, L.

Kilbracken, L.

Blease, L.

Kilmarnock, L.

Blyton, L.

Kirkhill, L.

Boston of Faversham, L.

Leatherland, L.

Bottomley, L.

Llewelyn-Davies of Hastoe, B.

Bowden, L.

Lockwood, B.

Briginshaw, L.

McNair, L.

Brockway, L.

Milford, L.

Brooks of Tremorfa, L.

Mishcon, L.

Bruce of Donington, L.

Molloy, L.

Caradon, L.

Morton of Shuna, L.

Carmichael of Kelvingrove, L

Mountevans, L.

Chandos, V.

Nicol, B.

Chitnis, L.

Phillips, B.

Cledwyn of Penrhos, L.

Ponsonby of Shulbrede, L.

Crawshaw of Aintree, L.

Prys-Davies, L.

[Teller.]

Rhodes, L.

David, B.

Ritchie of Dundee, L.

Davies of Penrhys, L.

Rochester, L.

Dean of Beswick, L.

Ross of Marnock, L.

Diamond, L.

Scanlon, L.

Donaldson of Kingsbridge, L.

Seear, B.

Elwyn-Jones, L.

Sefton of Garston, L.

Ennals, L.

Shepherd, L.

Ezra, L.

Silkin of Dulwich, L.

Fitt, L.

Stallard, L.

Gallacher, L.

Stoddart of Swindon, L.

Gladwyn, L.

Taylor of Blackburn, L.

Glenamara, L.

Taylor of Gryfe, L.

Graham of Edmonton, L.

Taylor of Mansfield, L.

[Teller.]

Tordoff, L.

Grey, E.

Underhill, L.

Grimond, L.

Wallace of Coslany, L.

Hampton, L.

Walston, L.

Hanworth, V.

Wells-Pestell, L.

Hatch of Lusby, L.

White, B.

Hayter, L.

Wilson of Rievaulx, L.

Houghton of Sowerby, L.

NOT-CONTENTS

Abercorn, D.

Davidson, V.

Alexander of Tunis, E.

Denham, L.

Bauer, L.

Derwent, L.

Belhaven and Stenton, L.

Drumalbyn, L.

Belstead, L.

Eden of Winton, L.

Blyth, L.

Ellenborough, L.

Boston, L.

Elliot of Harwood, B.

Boyd-Carpenter, L.

Elliott of Morpeth, L.

Brabazon of Tara, L.

Elton, L.

Broxbourne, L.

Fanshawe of Richmond, L.

Bruce-Gardyne, L.

Feversham, L.

Burton, L.

Gardner of Parkes, B.

Butterworth, L.

Geddes, L.

Caithness, E.

Glanusk, L.

Cameron of Lochbroom, L.

Glenarthur, L.

Campbell of Alloway, L.

Gray, L.

Campbell of Croy, L.

Hacking, L.

Carnegy of Lour, B.

Hailsham of Saint

Carnock, L.

Marylebone, L.

Coleraine, L.

Hardinge of Penshurst, L.

Colville of Culross, V.

Harmar-Nicholls, L.

Constantine of Stanmore, L.

Harvington, L.

Craigavon, V.

Henderson of Brompton, L.

Craigmyle, L.

Henley, L.

Cranbrook, E.

Hives, L.

Cullen of Ashbourne, L.

Hooper, B.

332

Hunter of Newington, L.

Portland, D.

Hylton-Foster, B.

Rankeillour, L.

Kimball, L.

Renton, L.

King of Wartnaby, L.

Rochdale, V.

Knollys, V.

Rodney, L.

Lauderdale, E.

St. Aldwyn, E.

Lawrence, L.

St. Davids, V.

Layton, L.

Salisbury, M.

Lindsay, E.

Sanderson of Bowden, L.

Lindsey and Abingdon, E.

Selborne, E.

Liverpool, E.

Selkirk, E.

Long, V. [Teller.]

Sharpies, B.

McFadzean, L.

Skelmersdale, L.

Macleod of Borve, B.

Somers, L.

Mancroft, L.

Stodart of Leaston, L.

Massereene and Ferrard, V.

Sudeley, L.

Maude of Stratford-upon

Swansea, L.

Avon, L.

Swinfen, L.

Mersey, V.

Swinton, E. [Teller.]

Milverton, L.

Terrington, L.

Montgomery of Alamein, V.

Teviot, L.

Mottistone, L.

Teynham, L.

Murton of Lindisfarne, L.

Tranmire, L.

Nugent of Guildford, L.

Trumpington, B.

O'Brien of Lothbury, L.

Vaux of Harrowden, L.

Orr-Ewing, L.

Vivian, L.

Pender, L.

Windlesham, L.

Penrhyn, L.

Wise, L.

Peyton of Yeovil, L.

Wynford, L.

Plummer of St Marylebone,

Young, B.

L.

Resolved in the negative, and amendment disagreed to accordingly.

5.54 p.m.
[Amendments Nos. 162B and 162C not moved. ]
Lord Gallacher Lord Gallacher moved Amendment No. 162D:
Page 80, line 25, leave out paragraph 14 and insert—

("14 Where an escape of gas reported to the supplier relates to gas supplied by another gas supplier authorised under the Act, the supplier shall act as if he had supplied the gas The supplier will be able to recover the cost of such emergency repairs either—

(a) by standing agreement with the other supplier, or

(b) by charging that other supplier per call-out. ").

The noble Lord said: My Lords, Amendment No. 162D is concerned with paragraph 14 of Schedule 5, which is headed, "Information as to escapes of gas". We feel that the paragraph as drafted is in need of strengthening, and the purpose of the amendment is to delete the existing paragraph and to replace it entirely with the one which appears in the amendment. It seems to us that the paragraph as it stands places certain duties on a public gas supplier in respect of escapes of gas which are not his escapes but those of another gas supplier, whether public or otherwise.
Under the paragraph as drafted, if such escapes occur and it comes to the notice of a public gas supplier that they have occurred and he knows that they are not his escapes, all that the paragraph as drafted obliges him to do in order to escape responsibility is to pass the information on as soon as reasonably practicable either to the person who appears to the public supplier to be responsible or, in the case of an escape affecting the authorised area of another public gas supplier, to that other public gas supplier.
It seems to us that in this vital area of safety the duties which paragraph 14 currently impose are nowhere near strong enough, and certainly not strong enough from the point of view of protecting the general body of the public. They seem to be more

333
concerned simply with stating the legal position of a public gas supplier who knows about an escape which is not involving his supply. Amendment No. 162D would in our opinion give better protection to the public because it would oblige the public gas supplier, as soon as he became aware of an escape of gas, not his, to take action in the matter and thereafter, having taken action in order to protect the public, to recover the costs of the action that he had taken in respect of emergency repairs either on the basis of a standing agreement with the other supplier or simply by charging that other supplier on a call-out basis. That seems to us to be preferable, to be better and to be safer. I hope that the Government will find it possible to accept it. I beg to move.
Lord Brabazon of Tara: My Lords, we touched on this in Committee. As was then pointed out, paragraph 14 is a new provision. It recognises that in future gas may be supplied by another company but that British Gas will remain by far the most familiar company in the mind of the public so that any escape might be reported to them. I am sure that with their experience British Gas can be relied upon in the circumstances to take whatever steps are appropriate.
In terms of resources, they will be by far the best equipped to deal with escapes. But I do not believe that it will be appropriate to tie the hands of British Gas now in establishing whatever arrangements seem best between themselves and any third party in the future. We have already effected significant improvements in the Bill in respect of the escapes provisions, and we do not feel that it is either necessary or appropriate to go further. The record of British Gas in this area is second to none, and as I think I said on the last amendment, they have a strong commercial interest in promoting gas as a safe fuel and in honouring their commitments. I hope, therefore, that the noble Lord will agree to withdraw this amendment.
6 p.m.
Lord Gallacher: My Lords, the noble Lord the Minister seeks to disarm me by telling me how good British Gas is in this area. That is not in dispute. The noble Lord the Minister seeks further to disarm me by telling me that after privatisation British Gas will be by far the largest public gas supplier; and that is not in dispute. What the noble Lord did not touch on was why, if it is necessary to make a provision of this kind in order to give information about escapes of gas, he considers paragraph 14 as currently drafted superior to the amendment we have put down. With due modesty, since I did not draft it, I think that the amendment we have put down is superior and will give the public better reassurances than they currently have. I do not doubt that in a situation in which there was an escape of gas not being the responsibility of British Gas plc they will take pretty prompt action to deal with it in the interest of the industry.
Nevertheless, the effect of paragraph 14 as currently drafted is the apportionment of liability, or the non-apportionment of liability, rather than, as it seems to us, any real sense of urgency so far as the protection of the public is concerned. In these circumstances I found the answer of the noble Lord
334
the Minister mildly disappointing. One only hopes that the situation will never arise; but if it does, the record will show that an attempt was made to deal with it.
Having made that rather caustic observation which I hope the noble Lord the Minister will not worry about unduly—I know he will not—I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 163 to 165 not moved. ]
Lord Gallacher Lord Gallacher moved Amendment No. 166:
Page 82, line 46, at end insert—
("Services to consumers

.—(l)The public gas supplier shall maintain in every area convenient points of contact for the consumer which shall sell appliances and offer services to customers including payment of bills, advice on installation and servicing of appliances, and advice on general energy matters as well as the use of gas.

(2) The public gas supplier will offer advice on the purchase, installation and use of appliances, positioning of gas meters; servicing and safety checks and pass word schemes for the protection of the blind, free of charge to elderly and registered handicapped people.

(3) The point of contact shall be available for lodging of complaints on all matters connected with gas whether or not arising directly from gas supply. The point of contact shall keep a record of all complaints received.

(4) At the point of contact the supplier shall use his best endeavours to resolve complaints. If he is unable to do so he shall refer the matter to the local Trading Standards Officer If the Trading Standards Officer is unable to resolve such complaints, he shall forward the complaint to the Gas Consumers' Council. Both the supplier and the Trading Standards Officer shall forward any relevant documents together with the complaint to the Council. At all times the consumer will be kept informed. ")

The noble Lord said: My Lords, we return to the showroom question which we discussed in Committee and which we believe to be a subject of considerable importance to consumers and therefore worthy of reconsideration on Report.
The object of this amendment is to protect the existing service which showrooms offer to all groups of consumers because they are an integral part of the gas industry and as such, are used for rather more than the retailing of appliances. My advice is that at the present time only some 20 per cent. of the business conducted in showrooms relates to retailing. If that is an accurate figure, it shows they have a fairly wide use above and beyond the business of selling. The provision of showrooms by British Gas is particularly important in outlying and rural areas. That service has been of value to consumers and is regarded by them as an integral part of the gas business.
As currently constituted, however, it seems to us that the Bill is trying to reintroduce showroom closures by the back door, by the device of excluding them from the definition of the gas business. One purpose of the amendment is to include their continuity in statute without being unduly specific about location.
Although there is satisfaction with the showroom service at the present time, I am advised that the number of showrooms is declining and that of the 800 which exist at present, this represents a decrease of 100 by comparison with the position which existed in 1980–81. The amendment goes rather beyond that, or at least would seek an additional function for the gas showrooms above and beyond that which it currently

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undertakes. For example, we would wish to see showrooms available for use by customers not merely as a point of contact for service or the ordering of spares—and that is very important—but also, as the amendment proposes, as an area where advice could be given to the handicapped. It would serve also as a point at which complaints by customers involving British Gas plc might be considered. We think this takes on an even more important role because of the refusal of the Government to re-establish regional gas consumers' committees. I know a concession has been made on an earlier part of the Bill during the Report stage, but in our view, welcome as it is, it does not go far enough.
More important, however, we suggest that the showroom might be used as a place whereby complaints could be resolved without the necessity of channelling them to the Gas Consumers' Council, which will be a national body. To this end we suggest in sub-paragraph (4) of the amendment that if such complaints arise and are not capable of resolution between the customer and the spokesman for British Gas, the services of the local trading standards officer might be used at that stage to get the matter resolved; and by so doing it would take a considerable workload from the shoulders of the Gas Consumers' Council.
Your Lordships will see set out in sub-paragraph (4) the manner in which we think the machinery might operate. I believe that trading standards officers are willing to give this service because it represents an informal kind of arbitration which is often best conducted on the spot, and conducted at or about the time of the complaint, rather than being put into the procedural mill and reaching the national parties a long time after the complaint in question arose, when there may be difficulty in establishing the facts or the situation as it existed at the time. We feel that although we have already had a refusal on this from them, the Government might care to have second thoughts about it. For that reason I beg to move.
Lord Belstead: My Lords, the first sub-paragraph of this amendment seeks the maintenance in every area of a point of contact for the consumer, in other words, the continuation of existing showrooms. It is this commitment in the amendment which is not acceptable. Certainly it is quite clear that British Gas will wish to go on selling appliances, and they have already given an undertaking that showrooms will continue to offer full range of services covering all of the matters to which the noble Lord has referred in the amendment.
Your Lordships will also recall that the draft authorisation of British Gas is going to require the preparation of codes of practice on the services available to tariff customers and on the payment of bills. Therefore, there will be a strong incentive to develop services and to make available to customers as much information as possible. But that said, a provision, a duty to keep showrooms open even if they are uneconomic is something which we really cannot put in the Bill.
If I may quickly say so, I think there are good answers to almost all the rest of the amendment; for instance, the second sub-paragraph, which has a
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number of elements. Of course, it is a normal part of the activities of retailers of goods of whatever description to advise customers on the most suitable items to meet their needs and tastes. Particular considerations do, of course, arise, in relation to the installation and use of gas appliances. The new training initiative recently announced by the Health and Safety Executive with the publication for consultation of an approved code of practice on standards of training in safe gas installation, together with the creation of an independent, broadly based certification body, will do a great deal to improve standards in this area. British Gas, of course, offer full servicing facilities and an inexpensive five-point safety check to all customers. We have already talked a lot in this Bill about the elderly and the disabled, but I should like once again to reassure your Lordships that British Gas will continue to offer free safety checks to the elderly and the disabled.
The noble Lord also seeks to make showrooms the point of contact for complaints. I have no complaint about that, although I do not think it is reasonable to single out in statute British Gas, and British Gas alone, for statutorily having to have a complaints record.
Finally, as to sub-paragraph (4) of the amendment, the supplier will of course want to do his utmost to resolve complaints. We have provided in the Bill for comprehensive arrangements for the director and the Gas Consumers' Council to deal with the full range of complaints and, indeed, your Lordships will recall that the purpose of Clause 33 is to ensure the Gas Consumers' Council can investigate any complaint relating to appliances. I think it is unnecessary, therefore, to require, as the amendment does, that trading standards officers should act as an intermediary. I hope that what I have said shows that we can and will go a very long way in this Bill to meet what is wanted in this amendment; but to accept a duty that showrooms should be kept open in every area whether they are economic or not is something which I do not think we can put into the Bill.
Lord Ezra: Surely, my Lords, the underlying proposition of this amendment is that in every area in which a public gas supplier operates there should be publicised a point of contact to which the tariff customer could go to lodge his complaints, to seek advice or service or for other purposes related to the supply of gas. It seems to me this is a totally reasonable proposition which should appear either in the Bill or in the authorisation. If no point of contact is given, how is the consumer to be able to relate to the gas supplier in matters of day-to-day requirements and how can complaints be submitted first to the gas supplier before going to the consumer's council or being dealt with in other ways?
Lord Gallacher: My Lords, disappointment with the Minister's reply is well encapsulated in the speech made by the noble Lord, Lord Ezra. I think what the Minister fails to grasp is that British Gas plc is a different organisation. We have the feeling that the regional aspect of British Gas, with which the public has been familiar since 1948, even if it does not totally disappear—I refer to Segas and North Thames Gas and the various other regions up and down the

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country—and even if it is not physically dissolved (and we have been given assurances that this will not happen), is likely to be somewhat overshadowed by the fact that we are now to have a single company running the business.
To the extent what we fear is a sense of remoteness so far as consumers are concerned, and I must tell the Minister that we are not reassured by the way in which, although he has found some good things to say about the amendment, on balance he is unable to accept the propositions it contains. The idea that the public gas supplier shall maintain in every area a point of contact does not mean that, if there is a showroom in town A and it is felt by British Gas that that showroom would serve the area better if it were moved to town B, British Gas would be precluded from making such a switch. "Area" is not defined and it is a fairly wide term. Therefore, if on economic grounds British Gas decided that there was a better showroom with more space available—and that is often a major consideration in the retail trade—in another location, then we see the amendment as allowing that kind of change to take place. We would certainly not wish to inhibit British Gas from making improvements of that kind in its showroom network which ultimately would be to the advantage of the consumer.
While we appreciate that nobody these days, in retailing or anywhere else, can afford to carry on for too long showrooms which are not as profitable as they might be, 1 do not think that in the interests of customer relations it is stretching the potential claims upon British Gas' profits to suggest that at least the maintenance of these points of contact should rank alongside the fairly lavish advertising campaigns in which they indulge from time to time on television and elsewhere. Therefore, it seems to us that a physical arrangement of this kind is highly desirable for consumers and I cannot believe that British Gas, as it now is, would attempt to argue otherwise.
Similarly, in the matter of facilities for consumers, all that the Minister has said leads us to think that in point of fact the role for these showrooms is likely to be greater rather than less. If safety checks on a five-point basis and things of that kind are to be handled by British Gas through the showrooms, surely it would not be unreasonable to suggest that the showrooms might be given a place in the Bill and, by this process, seek to reassure consumers.
In dealing with complaints, the suggestion we make, that the trading standards officer might come into the picture at some stage, is a good one. I am aware that for a variety of reasons the Director General of Fair Trading is disenchanted with codes of conduct covering the service trades and that in point of fact he is contemplating their abandonment in favour of a legal obligation to be placed in a Bill which no doubt will come before your Lordships in due course, obliging all traders to trade fairly. I wish him joy in attempting to encapsulate that legal concept in a Bill. But, in the meantime, given the fact that we are not to have regional gas consumers' councils, and that therefore a complainant will in the normal way have to find his or her way to the Gas Users Council in London, I think this simple intermediate step, which could be provided at no great cost to anybody, would
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represent a gesture by British Gas in favour of a new method of dealing with customers' complaints—a method which is cheap for the customer and equally cheap for the supplier and which may very well set a pattern for the service trades as a whole. Therefore, taking all these things into account and bearing in mind the support I had from the noble Lord, Lord Ezra, for which I am grateful, I feel that we should test the opinion of the House on this amendment.
Lord Belstead: My Lord, with the leave of the House, may I just make one very quick observation? Noble Lords, for understandable reasons, have gone rather wider than I had expected on the amendment and they have started to talk about a complaints procedure. Let us remember that earlier on in our proceedings on this Bill the House has accepted an amendment from my noble friend Lady Gardner of Parkes which will ensure that it will be possible in future for there to be voluntary "trouble-shooters" for complaints for the Gas Users Council in districts and localities, in addition to the fact that there will be regional representation on the Gas Users Council as well. Therefore, with respect to the noble Lord, Lord Gallacher, if somebody in the future is going to have a complaint it will not be necessary to have to find someone in London to take on the complaint. There will almost certainly be district representation.
Lord Sanderson of Bowden: My Lords, I entirely endorse what my noble friend the Minister has said. Would the noble Lord, Lord Gallacher, not agree that we are dealing with the retail business? As he must know, if you are going out to sell things to the general public up and down the land you need points at which you can sell those things. It seems to me, if one studies the development of the retail trade in this country, as in any of the large stores and so on, that they must be responsive to customers up and down the land. That. I am sure, will be the intention of the new company. I know that many people do not like the terms "the market" or "market forces" and so on, but surely, if gas is to be successful in competition with other forms of energy, it must have a network which is effective and widespread.
Lord Diamond: My Lords, I agree entirely with what the noble Lord, Lord Sanderson, has just said. Of course there will, without any compulsion from a clause like this, be a development by the Gas Corporation of points of contact with the customer where it can sell its products and ideas. That is why this amendment puts no limit whatsover in its definition of "area" on the Gas Corporation. What it does do is to enable to happen the very thing the Minister says should happen.
The Minister has just reminded us that the noble Baroness, Lady Gardner of Parkes, has moved an amendment under which there will be a point of contact. There will be the volunteers who will be glad to help in dealing with complaints from members of the locality. My anxiety was to find out how the consumer would know. How would the consumer get at these persons? What was the answer given by the noble Baroness, Lady Gardner of Parkes? They would go to the gas showroom and there they would see the list. Without a gas showroom they would not know. But at the gas showroom they would see the list of

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volunteers and would know whom they should ring up if there was a difficulty.
We are not talking about the normal good relations between the gas corporation and its customers and the development of its business, which we hope will go ahead. We are talking about the case where difficulties arise and where a complaint has to be dealt with. This is a sensible provision which provides the very point of contact without which the amendment of the noble Baroness is virtually meaningless and helps very little indeed. Under that inexpensive arrangement, with the services of volunteers, there will be a possibility—provided that there are points of contact in every area—of complainants making their complaints known without going through the whole business of getting in touch with London. This arrangement is much simpler. It avoids tempers rising and attitudes getting sour. A complaint will be dealt with quickly and conveniently. I am sure that this is a very good amendment and I hope that the noble Lord in whose name it is will feel disposed to pursue it.
6.22 p.m.
On Question, Whether the said amendment (No. 166) shall be agreed to?
Their Lordships divided; Contents, 70; Not-Contents, 101.

DIVISION NO.5

CONTENTS

Ardwick, L.

Kilbracken, L.

Attlee, E.

Kilmarnock, L.

Aylestone, L.

Kirkhill, L.

Blyton, L.

Llewelyn-Davies of Hastoe, B.

Bottomley, L.

Lloyd of Kilgerran, L.

Bowden, L.

McNair, L.

Brockway, L.

Mishcon, L.

Brooks of Tremorfa, L.

Molloy, L.

Bruce of Donington, L.

Morton of Shuna, L.

Caradon, L.

Nicol, B.

Carmichael of Kelvingrove, L.

Oram, L.

Chandos, V.

Phillips, B.

Chitnis, L.

Pitt of Hampstead, L.

Cledwyn of Penrhos, L.

Ponsonby of Shulbrede, L.

Crawshaw of Aintree, L.

[Teller.]

David, B. [Teller.]

Prys-Davies, L.

Davies of Penrhys, L.

Rea, L.

Dean of Beswick, L.

Rhodes, L.

Diamond, L.

Ritchie of Dundee, L.

Donaldson of Kingsbridge, L.

Robson of Kiddington, B.

Elwyn-Jones, L.

Rochester, L.

Ennals, L.

Ross of Marnock, L.

Ezra, L.

Seear, B.

Fitt, L.

Sefton of Garston, L.

Gallacher, L.

Silkin of Dulwich, L.

Glenamara, L.

Stallard, L.

Graham of Edmonton, L.

Stoddart of Swindon, L.

Grey, E.

Taylor of Blackburn, L.

Hampton, L.

Taylor of Gryfe, L.

Hanworth, V.

Taylor of Mansfield, L.

Hatch of Lusby, L.

Tordoff, L.

Hunt, L.

Underhill, L.

Irving of Dartford, L.

Walston, L.

Jeger, B.

White, B.

John-Mackie, L.

Wilson of Rievaulx, L.

Kagan, L.

NOT-CONTENTS

Alexander of Tunis, E.

Boston, L.

Bauer, L.

Boyd-Carpenter, L.

Belstead, L.

Brabazon of Tara, L.

Blake, L.

Bridgeman, V.

Blyth, L.

Brougham and Vaux, L.

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Broxbourne, L.

Mancroft, L.

Bruce-Gardyne, L.

Mansfield, E.

Burton, L.

Massereene and Ferrard, V.

Butterworth, L.

Maude of Stratford-upon

Caithness, E.

Avon, L.

Cameron of Lochbroom, L.

Mersey, V.

Campbell of Alloway, L.

Milverton, L.

Campbell of Croy, L.

Montgomery of Alamein, V.

Carnegy of Lour, B.

Mottistone, L.

Carnock, L.

Munster, E.

Colville of Culross, V.

Murton of Lindisfarne, L.

Constantine of Stanmore, L.

Newall, L.

Craigavon, V.

Nugent of Guildford, L.

Craigmyle, L.

O'Brien of Lothbury, L.

Cullen of Ashbourne, L.

Orr-Ewing, L.

Davidson, V.

Pender, L.

Derwent, L.

Peyton of Yeovil, L.

Dilhorne, V.

Plummer of St Marylebone,

Drumalbyn, L.

L.

Eden of Winton, L.

Portland, D.

Elliot of Harwood, B.

Rankeillour, L.

Elliott of Morpeth, L.

Rochdale, V.

Elton, L.

Rodney, L.

Fanshawe of Richmond, L.

Russell of Liverpool, L.

Feversham, L.

Salisbury, M.

Gardner of Parkes, B.

Sanderson of Bowden, L.

Geddes, L.

Selborne, E.

Glanusk, L.

Skelmersdale, L.

Glenarthur, L.

Slim, V.

Gray, L.

Somers, L.

Greenway, L.

Stodart of Leaston, L.

Hailsham of Saint

Swansea, L.

Marylebone, L.

Swinfen, L.

Hardinge of Penshurst, L.

Swinton, E. [Teller.]

Harmar-Nicholls, L.

Teviot, L.

Harvington, L.

Teynham, L.

Henderson of Brompton, L.

Tranmire, L.

Henley, L.

Trefgarne, L.

Hives, L.

Trumpington, B.

Hooper, B.

Vaux of Harrowden, L.

Hylton-Foster, B.

Vickers, B.

Knollys, V.

Whitelaw, V.

Lauderdale, E.

Windlesham, L.

Layton, L.

Wise, L.

Lindsay, E.

Wynford, L.

Long, V. [Teller.]

Young, B.

Macleod of Borve, B.

Young of Graffham, L.

Resolved m the negative, and amendment disagreed to accordingly.
6. 30 p.m.
[Amendment No. 167 not moved. ]
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No 167A.:
Insert the following new Schedule:
("Definition of the Gas Supply Business

1 The Gas Supply Business means the procurement, treatment, storage, transmission and distribution by the supplier of gas for sale and safe delivery through pipes to customers in Great Britain and the conveyance of gas for third-party suppliers and in this paragraph—

"procurement" means the acquisition of gas by the supplier from other persons and the taking into the Transmission System of gas produced or manufactured by the supplier,

"treatment" means the cleansing, odorisation, heating, cooling, compression, decompression, liquefaction and conversion to gaseous state of gas and any other operation necessary to transmit gas safely through pipes to customers or to render it suitable for consumption,

"storage" means all storage of gas after its procurement by the supplier including, after procurement, its storage by the supplier in offshore installations,

"transmission and distribution" means the conveyance, including the provision and installation of meters and associated controls, of gas belonging either to the supplier or to other persons,

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"Transmission System" means the facilities used by the supplier for the conveyance of gas in a gaseous state, including the storage of gas in the course of its conveyance, either within Great Britain or between any of the supplier's offshore gas storage installations and its first place of receipt onshore Great Britain, including facilities for the conveyance of gas in a liquid state or for its conversion into a gaseous state.

2. For the avoidance of doubt there shall be included in the Gas Supply Business if, and to the extent that, they are undertaken by the supplier for the purpose of such business, the following activities namely—

(i) the design, procurement, installation testing commissioning, maintenance, repair, replacement and operation of any plant and machinery, including pipe work and transport;

(ii) research and development;

(iii) commercial and administrative functions including—

planning;

purchasing and stores;

marketing and promotion of gas;

selling;

accounting and finance;

personnel management;

and other general management and administrative activities to the extent that they are undertaken by the supplier for the purpose of the Gas Supply Business.

(iv) installation of gas appliances or supplies (from the outlet of the meter on the customer's premises) or work undertaken under the terms of a repair, maintenance or installation contract with gas customers, including safety checks and emergency and all other work related to the supplier's safety obligations and in pursuance of its statutory safety duties;

(v) exploration for and production or manufacture of gas;

(vi) consultancy exclusively related to the requirements of gas supply in Great Britain.").

The noble Lord said: My Lords, your Lordships will recall that on 3rd June in Committee we had the opportunity of considering Annex A to the proposed authorisation to be granted by the Secretary of State to the British Gas Corporation. Annex A was important for this reason. It endeavoured to supply some definitions as to what constituted the gas supply industry. It included certain items and it excluded other items. We desired Annex A to the proposed authorisation to be incorporated in the Bill. The amendment before your Lordships on that occasion was identical to Annex A.
The noble Lord, Lord Belstead, was fully seized of the importance of Annex A and when my noble friend Lord Stoddart of Swindon pointed out the desirability of having it in the Bill, for reasons of accounting treatment among other things, the noble Lord still said that he did not think it necessary. This is what has come to be known as the "flexible approach" to the matter because if it was in the Bill it would of course be inflexible.
But the noble Lord clinched his argument at the end by saying this:
"There is nothing sinister in the way that we have drawn Annex A. It is simply that for accounting purposes we believe that the annex correctly defines the business of supplying gas. It is for that reason that I would hope that we can leave Annex A as it is".—[Official Report, 5/6/86; col. 1151.]
Just so, but what does one find? Before making such a reply the noble Lord would obviously refer very carefully to his brief on the subject and he would, I take it, have felt it unwise to depart from his brief. Nevertheless he was speaking on behalf of Her Majesty's Government and I think we were entitled on that occasion to rely on his words:
"I would hope that we can leave Annex A as it is".
We are talking now about the Committee stage of the Bill on 3rd June. But on 30th June we have a revised proposed authorisation, in which, among other things, the nomenclature used in the original authorisation was changed and it became Schedule 3. One cannot complain about that but on the basis of the assurances of the noble Lord that he,
"would hope that we can leave Annex A as it is",
I am bound to say that the new Schedule 3 is not as it was.
In the course of his zeal in following the brief—and I am afraid that it may have escaped the noble Lord's mind at the time, or it may have escaped his mind since—certain crucial words have been omitted from Schedule 3 that were in Annex A. If the noble Lord will refer to Annex A as it was he will find "transmission and distribution" defined as meaning:
"the conveyance, including the provision and installation of meters and associated controls, of gas belonging either to the Supplier or to other persons".
In Schedule 3 the words,
"including the provision and installation of meters and associated controls",
have been omitted. Tut, tut, my Lords. I was hoping that we could leave Annex A as it was, but it is a little more than that. When we turn to the section of Schedule 3 dealing with,
"For the avoidance of doubt",
the original Annex A said:
"For the avoidance of doubt there shall be included in the Gas Supply Business if, and to the extent that, they are undertaken by the Supplier for the purpose of such business, the following activities namely".
The amendment followed faithfully the original proposed authorisation which the noble Lord hoped we could leave as it was; Schedule 3 omits research and development. It may well be that, somewhere in the text of some other obscure document with which I have not been acquainted, these words appear in some other convoluted way. That may well be so Your Lordships are aware that we on this side of the House do not have a high-powered Civil Service behind us to draft our briefs or to provide us with the research documents. We have no assistance whatsoever. We act in an entirely unpaid capacity. I have searched for the reappearance of these words that were in Annex A but are not in Schedule 3 and I cannot find them. Perhaps I have made a mistake. But it draws once again, or should do, the attention of the House to the fact that authorisations are not immutable, and that even after the most definite assurance given by the noble Lord as recently as 3rd June last, by some sudden conjuring trick words disappear.
There may be a perfectly innocent explanation for this. If so, I shall be very glad to have it; but in the meantime I must respectfully draw the attention of the noble Lord to what appears on the face of it—that the original principle on which the noble Lord stood and which he invited the House to accept seems in the event to have gone astray somewhere.
Lord Diamond: My Lords, the Government have a point to answer; in fact they have two points to answer. The first major point is that we have been asking time and again for the authorisation, at all events when it is finalised, to go in the Bill or in a schedule so that it can

343
be seen and everybody will know what it is about. Certainly, if it has to be altered, then at the latest possible stage—but it certainly should go in. It should go in, if you like, with a control clause which says that it can be varied by a certain procedure. If it is to be varied, well and good—it can be varied by a certain procedure.
Already we have in the Bill a series of clauses which set out the procedure—a procedure by agreement: procedure where there is not agreement; procedure of going to the courts; procedure of having the Monopolies and Mergers Commission involved; procedure of having fair trading legislation involved. All that is already in the Bill. What we do not have is the authorisation itself. That is the first point, which again illustrates very well that there have been several alterations.
My second point—and there are three—is that there is continual alteration without the alterations being brought to the particular attention of the House. We are spending all our time trying to consider this Bill * with totally inadequate resources. We are giving an enormous amount of time voluntarily to examining each line of the Bill to see where it can be improved. But, as I have said, not much indication is being given of the alterations to those of us who are concerned with the Bill.
My third point is different. I hope no one believes that it is purely technical and that it does not matter how one defines gas business. It matters enormously. It matters in arriving at the price which every customer will pay for his gas. The definition has an effect on the costings, on the accounting, and on the way in which the price formula will work—and therefore on the price at which 16½ million customers will pay for their gas. It is important. It is not a technicality, and we are right to spend a great deal of time looking at that matter carefully.
Lord Belstead: My Lords, I hope that neither noble Lord will feel that I am being unfriendly when I say that they are not even making a mountain out of a molehill—I am so sorry; is the noble Lord going to make a speech?
Lord Stoddart of Swindon: I am, my Lords, but a very brief one, and I thank the noble Lord for giving me a chance to do so. I come to the Dispatch Box merely to support the remarks of the noble Lord, Lord Diamond, about lack of information and to emphasise to noble Lords opposite that all the opposition parties in this House and in another place must work on their own account. They do not have the research assistance and the secretarial assistance that is available to the Government.
We are upset, and the Government ought to take note of that. We were not informed of the detailed changes in the revised authorisation. Nor were we informed that there was a new draft authorisation. I picked up that information from the press, in an announcement that was made by the Secretary of State in one of his press releases. It was then that I knew something was afoot. I make that point to the noble Lord I understand his difficulties and I understand the Government's difficulties, but I want them to understand our difficulties as well, and to try to ensure
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that the Opposition is properly informed and properly supplied with information and papers to enable it to do its job of opposing properly. After all, we on these Benches are Her Majesty's Opposition, and the Alliance is entitled to consideration as well.
Lord Belstead: My Lords, I am surprised that the noble Lord, Lord Stoddart, is worried about informa-tion on the Bill. I believe that I am correct in saying that I wrote to noble Lords who are concerned with the Bill about alterations that had been made to the authorisation. As I said when we debated this Bill two days ago, the redraft of the authorisation was placed in the Printed Paper Office.
The point that I really want to make is that changes to the authorisation have been made for only two reasons. They are not even molehills of reasons; they are hardly any reasons at all. Changes have been made in order to tidy up the drafting, and that is why I use the phrase that they are hardly any reasons at all.
However, some important changes have been made, I agree, in order to take into account views that have been expressed in this House. It is on that point that I believe I am right in saying that where changes of that kind were made, I drew the attention of noble Lords opposite to those changes. In this particular case, the noble Lord, Lord Bruce, has raised two matters which, with respect to him, are not points at all.
The words referred to by the noble Lord concerning matters have merely been moved from paragraph 1 of the former authorisation to sub-paragraph (b)(i), and research and development has not disappeared at all. It has simply been moved to the opening words of paragraph (l)(a) of the schedule. If noble Lords will forgive me for saying so, if they will be prepared to read the new authorisation just once they will see that the words which they are complaining have just disappeared are there larger than life after all.
6.45 p.m.
Lord Ezra: My Lords, do noble Lords opposite not agree that in a Bill of this importance it is rather surprising that the definition of what we are talking about should not figure in the Bill itself, so that it may be fully debated and agreed upon? I find it rather surprising that it should be relegated as a schedule in the authorisation and be capable of being changed from time to time. I hope that for that fundamental reason noble Lords opposite will consider it appropriate that the definition of what the whole Bill is about should figure in the Bill itself.
Lord Bruce of Donington: My Lords, I am most grateful to the Minister for his reply. I draw his attention to the effect of the original Annex A, where research and development was a separate sub-paragraph (2) of paragraph 2, it being considered of sufficient significance. The reference that the noble Lord has made to research and development has been put in paragraph 1(a) but it is subject to a qualification. The noble Lord will be well aware of that qualification when I read it to him:
"Research and development and the conveyance of gas for third party suppliers".
That is not the same as research and development taken on its own. It is not always possible, as the noble

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Lord, Lord Stoddart, has made clear, for us who have no facilities, and who have not the resources that noble Lords opposite have at their disposal in respect of such documents, to be able to trace everything through in absolute detail. The fact is that the noble Lord wanted Annex A left as it was. It was not left as it was. In the case of research and development, it is by no means in the same unambiguous terms as it was in Annex A.
Lord Belstead: My Lords, with the leave of the House, we have been over the ground as to whether the Annex ought to be in the licence or in the Bill. I remain of the same view. The noble Lord, Lord Bruce, is, if I may say so, somewhat misreading the text. I believe that there is a full definition of research and development at the bottom of page 36 of the authorisation.
Lord Bruce of Donington: I still do not regard the Minister's reply as being satisfactory, my Lords. I record once again our protest at not being notified formally of the extent of the alteration to Annex A. In order to save time, however, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 16 [Standards of quality]:
[Amendment No. 168 not moved.]
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 169:
Page 16, line 30, leave out ("public gas supplier") and insert ("person authorised to supply it by or under section 6, 7 or 8 above.").
The noble Lord said: My Lords, this amendment was spoken to with Amendment No. 84. I beg to move.
On Question, amendment agreed to.
Clause 18 [Safety regulations]:
[Amendments Nos. 169A and 169B not moved.]
Lord Stoddart of Swindon Lord Stoddart of Swindon moved Amendment No. 170:
Page 19, line 18, leave out ("may") and insert ("shall").
The noble Lord said: My Lords, in moving this amendment it may be for the convenience of the House if we discuss Amendment No. 171 at the same time. If accepted, Clause 18(4) would then read:
"Regulations made under subsection (2) above shall make provision for prohibiting any person not licensed by the Health and Safety Commission".
The objective of this amendment is, of course, to bring in a compulsory registration scheme for gas installers. The noble Lord, Lord Belstead, will be aware that a voluntary scheme already exists through CORGI—that is, the Confederation for the Registration of Gas Installers. It has worked reasonably well. However, I believe, as do many people in the industry, that the time has now come for a compulsory registration scheme to be introduced. We now have the means through this Bill, and I hope we have the will, to bring about that desirable project.
There are many compulsory licensing schemes. Gas is, of course, a very dangerous substance, but there are other dangerous substances. As an example of where a compulsory licensing scheme exists, we can go to asbestos. Organisations which engage in removing asbestos are required to hold a licence to do so They are also obliged to take responsibility for the work of their employees. Gas is potentially more dangerous since it carries a greater risk of injuring other people in addition to those handling it.
I understand that the Government have said that in the public interest they are anxious to ensure that high standards of gas safety exist. Indeed, during our debates in Committee the Government showed themselves to be most concerned that safety regulations should be strong, and I accept that that is their view. The problem, of course, is to find the most practicable way of achieving it.
Again I understand that the Government's opposition to compulsory registration is based partly on a fear of excessive bureaucracy and cost, and partly on the fear of giving a commercial advantage to a restricted number of companies. With respect, if those are the Government's arguments I do not accept them. In the first place, the fear of bureaucracy seems quite groundless. A compulsory scheme need be no more bureaucratic or costly than the proposed voluntary certification scheme. In the asbestos licensing system the Health and Safety Executive has devised the simplest method of licensing. This starts from the assumption that all applicants who fulfill the objective criteria for registration are given a licence to begin with.
The period of validity of the licence varies according to certain judgments made by the issuing authority. The licence then periodically comes up for renewal and can be withdrawn at any time in the light of reports of the licensee's performance. The underlying assumption, at least initially, appears to be that an applicant is competent. A similarly non-bureaucratic basis from which to start with the compulsory licensing of gas installers would be to approve initially all CORGI registered installers. Therefore, there is a simple way of bringing in a compulsory system. It can be built on the voluntary system which already exists.
I turn now to commercial advantage. Established gas installers, including those in the heating and plumbing trades, readily acknowledge that compulsory registration probably would tend to favour them since they are the people with experience over many years of competent work with gas. Indeed, around 70 per cent. of the training given to craft apprentices is common to heating and ventilating, plumbing and gas-fitting apprenticeships. The overriding consideration in this matter is the safety of the public: and on that I feel sure we all agree. Commercial considerations are surely of a secondary nature. The fear of giving commercial advantage to the established trade with any consequent effect on the cost of work is, in my view, a red herring and I hope that the Government will not use that argument in reply.
To illustrate the point, a comparison can be drawn with MoT tests for road vehicles. It is clear enough that the introduction of the MoT test resulted in some advantage to motor manufacturers and to garages

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which undertook MoT tests and repair work; but it also resulted in a considerable improvement in the standard of vehicles on the road. We all accept that. We know that the standard has improved arising from the compulsory MoT testing of vehicles over three years old. Would anyone now argue—I am sure the Minister will not—that the MoT test should cease with all the dangers for road safety which that implies simply because the motor trade benefits from the existence of the compulsory scheme?
At present, the Government's intention, as we know, is to put their faith in an approved code of practice for standards of training in safe gas installation. The code of practice is still out for discussion and that is why I have not returned to it at this stage. But, as I understand it, the code will not be mandatory. In the event of prosecutions of an installer, failure to comply with the code would place the onus on the installer to prove his competence in some other way. Again, compared with road transport that exposes the risk which is inherent in relying on voluntary arrange-ments. Thus, would the Government ever contemplate making driving licences voluntary and putting drivers on their honour to train to the Highway Code standard and obey the code throughout their driving career without supervision? That is absurd. However, we are debating here something which is just as dangerous, and perhaps more dangerous, than driving. That is why we believe that there should be a compulsory registration scheme.
The scale of the possible risk is illustrated by estimates from CORGI that indicate that around 30,000 individuals currently engaged on gas associated work are doing so in firms that are not on the CORGI register. Therefore, there are around 30,000 people who are possibly not qualified messing about with a dangerous and volatile substance. Put another way, at present there is a nearly 50 per cent. chance that a member of the public will end up having gas-associated work carried out by an operative who is not covered by CORGI registration and whose competence is therefore subject to no accepted form of supervision.
The experience of CORGI in terms of rejection and inspection statistics indicates that a number of the firms operating in the market are not of the appropriate calibre to ensure the safe use of gas. That has already been discovered through a voluntary system, so that we now know that, because of the voluntary system, there are people who may enter our houses tomorrow who are not competent and who could put the lives of ourselves and our families, and the existence of our property in danger. I believe that we should take the opportunity presented to us in this Bill because this is the best way of doing it, to tighten up the whole position, ensure the safety of the public and bring to an end some of the cowboy firms which put the lives of people in danger.
I hope that I shall receive a sympathetic response from the Minister and that he will accept these amendments. The Minister has an opportunity to make a name for himself tonight, to be highly popular and to go down as the man who was wise enough and all-seeing enough to ensure that we have a safe system of gas installation, with people installing gas
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appliances who have been tried and tested and who are competent to go into people's homes and repair their appliances properly without putting life and property at risk. I beg to move.
7 p.m.
Lord Graham of Edmonton: My Lords, I intend to be very brief in following the point made by my noble friend Lord Stoddart. It is not a question of knocking the present system. In fact there is a great deal of good and satisfaction to be obtained from the voluntary method whereby, under the umbrella of CORGI, the industry is attempting to do a very good job. However, if one looks at lines 20 to 35 on page 19, of the Bill, the enormity of the damage and danger is apparent. The noble Lord, Lord Stoddart, or I myself certainly will not wish to be accused—nor shall we stand accused—of being alarmist, but we are dealing with a very important issue.
Perhaps I may say at once that the Minister might feel that some of my questions may be better answered by letter following this Report stage of the Bill, and I quite understand that position. We on this side of the House are concerned with what may happen in the future in comparison with our present situation. I should like the Minister to tell me, if not tonight then perhaps later in a letter, how he envisages not only the maintenance but also the improvement of the existing system in giving security of mind not merely to the organisation (that is the new gas corporation), the employers or employees, but, more importantly, to the consumers of gas.
I understand that CORGI, which if not wholly funded is primarily funded by the gas corporation to the extent of £1½ million to £2 million, has a system which covers a national network with a number of inspectors. I am told however that there are far too few inspectors to do the whole job. In his reply I should like the Minister to tell me how he sees an improvement being made in the number of inspectors who inspect installations.
I wonder whether the Minister can tell me that he is satisfied that the arrangements for the new kind of body which is envisaged will pay proper regard to the various trade associations of which it will be composed. I understand that there has been some talk of underwriting the maintenance of a future CORGI to the extent of about three years. In view of the billions of pounds that are involved, surely the Minister could do a little more to secure the peace of mind of all concerned by underwriting such an organisation for a far longer period than three years—perhaps for 10 years, or even 15 years.
The noble Lord, Lord Stoddart, has made a very telling point. We all agree that it is right and proper that everyone in the business ought to subscribe to the standard of inspection and the discipline which is part of the CORGI organisation, but as the noble Lord has pointed out, perhaps half of the businesses at the moment are not even registered. We should like to be sure that everybody who enters our homes, factories and offices to tinker about with gas is at least under the umbrella of a bona fide organisation.
Perhaps the Minister can also tell us his views in this respect on Clause 2, which, as he knows, deals with the responsibilities of the Gas Consumers' Council, and

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Schedule 2 which also deals with the council. How will the new body be related to the functions of the Consumers' Council and work closely with it? Can the Minister tell us how trade associations and their members will have the opportunity of making an input into the quality of training and the precise detail of the training that needs to go into making gas installers competent?
I understand that the Minister may write to me later. The questions I have raised are all of general interest, but certainly they are in support also of the case that has been made out by my noble friend Lord Stoddart.
Lord Belstead: My Lords, the purpose of this amendment is to provide that any person allowed to reconnect a fitting or restore a gas supply under subsection (4) must be licensed by the Health and Safety Commission. There is nothing between noble Lords opposite and the Government concerning safety and the improvement of standards of training and competence. It has already been made clear in the debates on this Bill that the Health and Safety Commission is planning to introduce an approved code of practice for installers. Noble Lords have referred to this code already this evening. The Commission is also working on proposals for an independent successor body to CORGI (the Confederation for the Registration of Gas Installers).
The main reason I resist this amendment is that the Health and Safety Commission has made it plain on several occasions that it does not consider that a full scheme of licensing would be an appropriate step at this point. I do not think that one has to look very far for the reason. It is that in the last few years we have made a great deal of progress, in the way that I have just described, in beginning to produce a new independent successor to CORGI—despite the fact that CORGI has done a tremendous amount of good work—and in the production of a new code of practice, and we do not believe, as the HSC does not, that an absolutely blanket scheme of licensing would be appropriate.
Perhaps I may pick up very quickly one or two of the points which were put to me. The noble Lord, Lord Stoddart, referred to the dangers of asbestos. With respect to the noble Lord, this is a very different kind of problem. The hazard concerned is on a quite different scale. I understand that between 700 and 800 people die every year as a consequence of the terrible hazard of asbestos, and a very much smaller number of people are exposed to that hazard, compared with the dangers of gas.
The noble Lord, Lord Graham of Edmonton, asked me a series of questions and put those questions in the context of Clause 18, which we are at present discussing. Perhaps I may remind the noble Lord that the great advantage of Clause 18 is that it extends the purposes of Part I of the Health and Safety at Work Act 1974 in respect of gas safety matters, which means that the enforcement and other powers of the Health and Safety at Work Act 1974 will be available in regard to gas safety matters. I know from the way in which the noble Lord spoke that he will welcome that.
The noble Lord asked me about inspectors so far as concerns gas. The noble Lord did not say so, but it is
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of course the case that recruiting ceased for a time so far as concerns HSC inspectors. As I understand it, recruiting is again taking place and I think the outlook is good.
The noble Lord asked me about the relationship with the Gas Consumers' Council. Of course we have recognised the important contribution to gas safety made by the present Consumers' Council. Of course it is represented on the HSC committee. It is likely that the future council will take over this role and we hope that it will be involved with the successor to the CORGI organisation. I shall be very happy to write a letter to the noble Lord in answer to any of the other points about which he asked me, if he will allow me to do so.
I am sorry to resist the amendment, but I do so for this reason. The objective of the Government and of noble Lords opposite is precisely the same. We want to see greater safety and better training. But, as with many other things, we are talking about the art of the possible. The Health and Safety Executive has said that it does not at this stage want to see a blanket licensing procedure, and nor do we.
Lord Stoddart of Swindon: My Lords, in practically his opening sentence the Minister said that about 800 people die from asbestos-related diseases every year. Many of them are dying because for years asbestos installation was not under a compulsory licensing scheme. When in the 1950s and 1960s asbestos lagging in power stations was removed, it was slapped around with a hammer. Dust was created all over the place and asbestos was lying everywhere. It is because people inhaled the dust and had that contact with asbestos that we now have that death rate. When it was discovered that asbestos caused asbestosis, lung cancer and other diseases, a compulsory registration scheme was introduced and asbestos had to be treated with the respect that it deserves. I know that because I was associated with the electricity supply industry and worked in a power station.
What the Minister says is not valid. However, I appreciate what he said about the Health and Safety Executive, although I do not agree. We have too long delayed imposing a compulsory registration scheme for gas installers. We do not know how many unreported accidents, burns and near gassings have occurred because of incompetent and inefficient installation of appliances in the home. There may have been thousands and thousands, but we do not know. I do not want to delay the House longer, but I believe that it is right that we should have a compulsory registration scheme. Because we feel so strongly and because it is about time the opinion of the House was tested, I intend to divide the House on the amendment.
7.12 p.m.
On Question, Whether the said amendment (No. 170) shall be agreed to?
Their Lordships divided: Contents, 47; Not-Contents, 79.

DIVISION NO.6

CONTENTS

Ardwick, L.

Carmichael of Kelvingrove, L.

Attlee, E.

Cledwyn of Penrhos, L.

Brockway, L.

Crawshaw of Aintree, L.

Bruce of Donington, L.

David, B. [Teller.]

351

Dean of Beswick, L.

Lloyd of Kilgerran, L.

Diamond, L.

McNair, L.

Elwyn-Jones, L.

Mishcon, L.

Evans of Claughton, L.

Molloy, L.

Ezra, L.

Morton of Shuna, L.

Gallacher, L.

Nicol, B.

Glenamara, L.

Phillips, B.

Graham of Edmonton, L.

Pitt of Hampstead, L.

Gregson, L.

Ponsonby of Shulbrede, L.

Grey, E.

[Teller.]

Hampton, L.

Ritchie of Dundee, L.

Hatch of Lusby, L.

Robson of Kiddington, B.

Houghton of Sowerby, L.

Rochester, L.

Howie of Troon, L.

Ross of Marnock, L.

Irving of Dartford, L.

Seear, B.

Jeger, B.

Silkin of Dulwich, L.

John-Mackie, L.

Stoddart of Swindon, L.

Kilmarnock, L.

Taylor of Mansfield, L.

Kirkhill, L.

Underhill, L.

Llewelyn-Davies of Hastoe, B.

White, B.

NOT-CONTENTS

Alexander of Tunis, E.

Lindsay, E.

Annandale and Hartfell, E.

Liverpool, E.

Ashbourne, L.

Long, V. [Teller.]

Bauer, L.

Mansfield, E.

Belstead, L.

Maude of Stratford-upon-

Blake, L.

Avon, L.

Brabazon of Tara, L.

Mersey, V.

Bridgeman, V.

Milverton, L.

Brougham and Vaux, L.

Montgomery of Alamein, V.

Burton, L.

Mottistone, L.

Cameron of Lochbroom, L.

Munster, E.

Campbell of Alloway, L.

Murton of Lindisfarne, L.

Campbell of Croy, L.

Napier and Ettrick, L.

Carnegy of Lour, B.

O'Brien of Lothbury, L.

Carnock, L.

Pender, L.

Colville of Culross, V.

Peyton of Yeovil, L.

Cottesloe, L.

Plummer of St Marylebone,

Craigavon, V.

L.

Craigmyle, L.

Rankeillour, L.

Cullen of Ashbourne, L.

Renton, L.

Davidson, V.

Renwick, L.

Dilhorne, V.

Rochdale, V.

Drumalbyn, L.

Selborne, E.

Eden of Winton, L.

Shannon, E.

Elliot of Harwood, B.

Sharpies, B.

Elliott of Morpeth, L.

Skelmersdale, L. [Teller.]

Elton, L.

Stodart of Leaston, L.

Fanshawe of Richmond, L.

Swansea, L.

Ferrers, E.

Swinton, E.

Gardner of Parkes, B.

Teviot, L.

Glenarthur, L.

Thurlow, L.

Gray, L.

Tranmire, L.

Greenway, L.

Trumpington, B.

Harmar-Nicholls, L.

Vaux of Harrowden, L.

Henley, L.

Vickers, B.

Hives, L.

Whitelaw, V.

Hooper, B.

Wise, L.

Hylton-Foster, B.

Wynford, L.

Kinloss, Ly.

Young, B.

Lauderdale, E.

Young of Graffham, L.

Layton, L.

Resolved in the negative, and amendment disagreed to accordingly.
Lord Brabazon of Tara: My Lords, in moving that further consideration on Report be now adjourned, I suggest that we do not return to the consideration of this Bill before ten minutes past eight.
Moved accordingly, and, on Question, Motion agreed to.

Firearms (Variation of Fees) Order 1986
7.20 p.m.
Lord Swansea Lord Swansea rose to move, That an humble Address be presented to Her Majesty praying that the order [S.I. 1986 No. 986] be annulled.
The noble Lord said: My Lords, I should declare an interest as a lifelong shooter. I have taken an interest in shooting in all its forms. I am a member of the council of the National Rifle Association, and I am at present the acting chairman of the British Shooting Sports Council. This body was formed some years ago and now comprises ten national governing bodies of various shooting sports representing every aspect of shooting throughout the United Kingdom. It co-ordinates the views of all those bodies and acts as a channel of communication with the Home Office. It is recognised by the Home Office as representative of all shooting interests.
We have had firearms control in various forms since about 1920. The present legislation is based on the Firearms Act 1937, which was consolidated with other subsequent Acts into the Firearms Act 1968, the Act which is at present in force. For many years the fees for grant, renewal or variation of a firearm certificate were purely nominal; in other words, five shillings for a first grant and two shillings and sixpence for a renewal or variation. It was recognised at the time that the renewal fee could be much lower than that for a first grant. In 1969, however, these fees started an unpleas-ant upward spiral. The fee for a grant became £2 10 shillings and for renewal £1 5 shillings, and progressed upwards in successive increments until fixed in 1980 at £25 for a first grant and £20 for a renewal. Throughout the period, a differential was maintained between the grant and renewal, the latter varying between 50 per cent. and 80 per cent. of the fee for a first grant.
After a lengthy period of discussion in the Home Office, a new scale of fees is proposed in the present order. Generally speaking, the new fees are broadly acceptable bearing in mind that there has been no increase since 1980. They can therefore be said to reflect the rate of inflation since then. Indeed, I must welcome the fact that the fees for shotgun certificates remain unchanged and that the fees for variation of a firearm certificate and its replacement have actually been reduced. However, it is now proposed to raise the fee for renewal of a firearm certificate to £33, the same as for an initial grant. It is this aspect of the order in particular that I wish to bring to your Lordships' notice. I feel that it is unacceptable, unreasonable and illogical.
There has been no change in the substance of the law since the 1937 Act. Section 27 of the current act of 1968 sets out the criteria by which a chief constable must be guided in assessing an application for a firearm certificate. Subsection (3) says that the same considerations apply for a renewal as for a first grant. It is reasonable that proper inquiries should be made regarding a first grant to establish the bona fides of an applicant. The certificate comes up for renewal every three years. If there has been no change in the circumstances in the meantime, it is reasonable to assume that the renewal should not call for the same exhaustive inquiries. This, I believe, is reflected in the fact that from the very beginning of firearms legislation there has always been a differential between the fees for a grant and for a renewal.
The present system has worked for the last 49 years as well as any licensing system can be expected to work. However, the fee for a renewal is now to be raised by 65 per cent., the same as the fee for a grant.

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I hope that my noble friend will be able to tell your Lordships what justification there can be for this, and in what way the circumstances of the working of the Act have changed to necessitate this quite outrageous increase after 49 years.
The Home Office working party which reviewed the working of the Act two or three years ago produced some worksheets that purported to show the length of time taken by the police over the various stages of the processing of applications for grant and for renewal. It obtained the figures from a survey of a sample of police forces over the country. Not surprisingly, it got a very wide variety of replies, with the Metropolitan Police leading the field by several lengths. With such widely differing figures, the survey is really of little value. It is obvious that there is little, if any, uniformity in practice among police forces. I have heard from several sources that there is little effort in some forces to make economic use of manpower. There are examples of sending two men on an inquiry when one would do and of failing to telephone before a visit to ascertain whether the applicant is at home so that a visit which is abortive has to be repeated. I do not believe that much credence can be attached to the timings on the worksheets. I certainly do not believe that in 99 per cent. of cases of renewal it is necessary to spend exactly the same length of time on each stage as for a grant. In the case of a variation, where one might expect some further inquiries to be made to establish the need for another firearm, the fee is actually to be reduced. This is what makes the order so illogical.
In the report of the Home Office working party no mention is made of the intention to regard renewal of a firearm certificate as bearing the identical workload of an initial grant. Even more serious is the total omission to state that a provision of the law that has been ignored for nearly 50 years is now to be enforced without warning. Whether this omission was deliberate on the part of the working party with intent to deceive or whether it was through forgetfulness is immaterial. The result is that the shooting public feels strongly that it has been conned.
The fees in recent years have been supposed to balance the costs of administration. But if one looks at the services rendered in other respects by police forces, one finds that no fees are charged. There is no fee, for example, when a crime prevention officer comes along to your house to advise on security. The scale of fees is reaching a point where it is a major disincentive to legitimate ownership of firearms. Shooting in all its various aspects is a sport that is growing in popularity among all classes and among all income groups in this country. It is no use saying that shooters are all rich, wealthy men, because that is simply not the case. We have seen the great success by shooters from Great Britain in international competition in recent years especially in the Olympics where our shooters gained four medals. That had never been done before by shooters from this country.
Let us consider the case of a young person who wishes to take up target rifle shooting. He applies to join a club—and the cost of that in itself is going up all the time. He has to undergo a period of probation before the club will back up his application for a
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firearm certificate. He cannot therefore obtain a rifle until he has been an active member of the club for some time. He may be lucky enough to get hold of a fairly inexpensive rifle—a beginner's rifle if you like—which might cost £50 or considerably more. On top of that he has the cost of his firearm certificate which will now be £33 in the first instance and £33 at every renewal. One cannot therefore be surprised that many young people are deterred from taking up shooting as a sport simply because of the cost.
We must then consider those for whom a rifle is a tool of their trade. A farmer may need a ·22 rifle for vermin control on his farm. It is possible to find a cheap rifle for, say, £5 or £10 but when one adds to that the cost of the firearm certificate one gets an entirely different picture.
Then there is the gamekeeper, the stalker and the professional deer culler. The latter's work is very necessary in some parts of the country where numbers of deer have to be kept under control. Deer cullers are therefore employed, but here again the cost of their firearms certificates is a very important aspect in their budgeting. It is getting to the stage where the scale of fees is becoming a tax on a recreation. I do not think any of your Lordships would welcome that.
The shooting interests, regrettably, were not brought into direct consultation on the level of fees. We were presented with it as a fait accompli when the order was about to be laid. It has happened again, as it has in the past, that the order has been laid very shortly before a parliamentary recess when there was little time in which to table a Prayer and have it debated.
A few weeks ago I went with a deputation from the British Shooting Sports Council to the Home Office and had a long discussion with my noble friend's honourable friend in another place. We were unable to persuade him to vary the order. In fact, it was due to be laid only a few days after that meeting. The only crumb of comfort we were given was that a Home Office review body would take another look at the working of the fees and in particular the police timings on which the costs are based, and perhaps review the fees in two or three years. However, if the Home Office are prepared to hold such a review in two or three years one must wonder why they are not prepared to have a second look now before this order comes into effect.
I dare to hope that it is not too late even now for the Government to withdraw this order for further consideration, and I hope that we may get some encouragement from my noble friend. I beg to move.
Moved, That an humble Address be presented to Her Majesty praying that the order [S.I. 1986 No. 986] be annulled.—(Lord Swansea.)
7.35 p.m.
Lord Cottesloe: My Lords, as one who was, so to speak, born and bred on firearms and has devoted to their use a lifetime of interest and practice, I wish to support most warmly what my noble friend Lord Swansea has said. I can say this, though he cannot: he is one of the most brilliant and consistent rifle shots of his time.
I have to declare an interest, though not a financial one, as having been for some years the chairman of the

355
National Rifle Association and as currently being the deputy president of that organisation. Our president is His Royal Highness the Prince of Wales. It is an organisation founded in 1860,
"to foster markmanship throughout the Queen's Dominions and to give permanence to the volunteer forces of the Crown".
I am told, and I believe it to be true, that in the United States of America the incidence of firearms crime is almost non-existent in the agrarian states of the Middle West where there is virtually no firearms control, and greatest in such states as New York, where the control is so strict that it is almost impossible for a citizen legally to possess a firearm at all. That should be a lesson to anyone, be he in the Home Office or in the police force, who thinks that severe restriction on firearms will stamp out firearms crimes. Such restrictions will serve only to defeat their own purpose.
I therefore support most warmly the Motion of the noble Lord, Lord Swansea. I understand that it is not the custom to divide the House on such a Motion, but I hope that the Government will take to heart the dramatic lesson that I have outlined.
7.38 p.m.
Lord Burton: My Lords, I also should like to support my noble friend Lord Swansea. I see from what my honourable friend the Minister said in another place that this order is intended merely to recover the costs of issuing certificates or licences for weapons and not, as some suspect, to price people out of keeping weapons. It is clear from the Government's statement what their intentions are but there are those who have a sneaking suspicion that this is not what the police intend.
When the working party to investigate these matters was set up a great mistake was made. The working party consisted of Home Office officials and police. I understand that no users' representatives were on this committee. The method used of calculating the costs was typically laborious and inefficient, in accordance with so many practices used by our police forces today. A system of worksheets was established which have produced vastly varying answers.
The order does not apply to Scotland but I take it that an exactly similar order will follow for Scotland as soon as this order is passed. It is not inappropriate to make some references to Scotland which are totally in line with England and Wales, particularly as the working party guidelines will apply to Scotland.
The Northern constabulary—which I think covers the biggest land area of any of our police forces—has a highly efficient firearms department. They have under their jurisdiction over 23,000 firearm certificates or shotgun licences. They have large numbers of visiting foreigners who require firearm certificates to permit them to stalk deer. They thus issue over 10,000 certificates every year. Having such a large area to cover their inspection charges could be expected to be higher than for many other areas, but even on these worksheets for costing their expenses came out below the £33 average for firearm certificates for the country as a whole.
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However, this department employs one constable and two civilian clerks. It would not be unreasonable to assume that their wages amount to no more than £25,000—they may not amount to as much as that, but I do not know precisely what they are. On these wages alone therefore their costs for issuing licences and certificates are no more than £2.50 per document. On top of this of course there will be insurance, office equipment and telephone charges, and all the usual overheads. We then have the expenses of the inspection of the weapons, and, not to be forgotten, the time it takes the chief officer of police to sign his name.
However, what is important is that the documentation costs are in fact substantially lower than those brought out by the work sheets. If these are wrong, is it not possible that all the costing are wrong, and is it not possible that there is an in-depth need for investigation into our police efficiency?
I understand that there are nearly 700 burglaries a year in which shotguns are stolen—I do not know how many rifles are stolen. Therefore, over 700 weapons per year are currently being stolen. Is not this alone a reflection on the law and order state of our country? How many, I wonder, of these weapons are recovered. In Switzerland almost every household has a firearm, as the part-time army keep their own weapons in their own possession. What a difference here, my Lords! I wonder how many certificate-holders become involved in an armed crime in any one year. Very few I suspect; but yet they are being penalised for the inefficiency of our police in detaining those who are misusing firearms, and having to pay for this.
Some forces spend a great deal of time, and thus expense, on inspecting land on which these innocent individuals wish to use their weapons. Some of the individuals subjected to this scrutiny are far more experienced users of weapons than the officers making the inspection. I know of cases where unreasonable restrictions have been placed on these innocent individuals, who have been taken to the Crown Court. In one case in particular the superintendent represent-ing the police was given the most monumental dressing down by the judge—and he richly deserved it. I gather that that case alone will have cost the police £5,000 in expenses. That is enough to have given 150 free firearms certificates at the currently proposed rate.
I, after holding a certificate for 40 years, had a restriction placed on my certificate last week. I refused to accept this, pointing out that the police had contravened the working party's recommendations on two counts and had also contravened the Firearms Act. I told the police that I intended to appeal to the sheriff. I am pleased to say that I heard this morning that my certificate has been reinstated. However, I understand that this is a widespread state of affairs throughout the country, and much police time is, as a result, being wasted.
Briefly, there are one or two other points which should be scrutinised. Overseas visitors coming here for a week's stalking are having to pay a considerable sum for permission to use a rifle—they have to pay nothing to use a shotgun. It seems quite unreasonable that, as my noble friend Lord Swansea has just said, a renewal should cost as much as an initial application. My noble friend also drew attention to the question of

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inspections without prior notification. This is exactly what happened to me last week. On two occasions not one policeman, who is all that is necessary, but two policemen came out to my house. On both occasions I had not been notified and I was not at home. However, as it happened, on the second occasion I met the police car coming down the drive. I wondered what the trouble was, stopped it and we returned and inspected the weapon. However, it was quite unnecessary expenditure, and yet we are being asked to pay for this.
Finally, there are those of us who would like to help the police, but here we have a typical example of innocent persons being harassed, of police time being wasted and the liberty of the subject being infringed.
7.45 p.m.
The Earl of Shannon: My Lords, I too should like to speak in support of the Prayer moved by the noble Lord, Lord Swansea. It would appear that there are two reasons which one can suspect for making this order. One must surmise that the first is in order to achieve a policy of restrictions by financially penalising the innocent. I suppose that this has been done by authorities throughout recorded history, and no doubt it will be difficult to dissuade the Government from treading this well-worn, if very reprehensible, path.
Secondly, we believe that this is in order to cover the costs of the administration of the scheme, and here, like other noble Lords who have spoken, I think we want to look at the facts. Again, like other noble Lords, 1 shall have to rely on my own personal circumstances. I have held a firearm certificate for well over 40 years, and for many of those years I have been happily renewing the certificate by post without any trouble at all.
However, some years ago, again without warning or previous appointment, an inspector and a sergeant from the local county constabulary arrived at my house. Fortunately, I was in and I asked them what they wanted. They said that they had brought the renewal form for my firearm certificate. So I thanked them very much. Then they wanted to offer assistance in filling in the form. I forbore to tell these young gentlemen in uniform that I had been filling in this form quite happily before they were even born. However, we settled down and I filled in the form. They then noiced that I was asking for a variation, and so the inspector very clearly told me that I would have to pay an extra fee. As politely as I could I pointed out that the variation was downwards and no fee was payable. Oh, no, he knew much better; after all, he was a police inspector, and he insisted on having the extra fee. Therefore, I paid it because, after all, the fee might have been changed without my knowledge. This meant that about two or three weeks later back had to come another police car with two members of the local constabulary to return the certificate and the money, because of course the fee was not payable.
On a later occasion, involving a different local county constabulary, I changed my address so I had to tell the local police that the address then on my firearm
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certificate needed changing; and also that I no longer required a shotgun certificate and I should like to surrender that, which I did. This was all happily done and my certificate came back bearing the new address. However, suddenly a fortnight later through the letter-box popped an envelope with a brand new shotgun certificate which I had neither asked for nor paid for. I must admit here that I was guilty of being rather slow in returning it to the local police, and I regret to say that 10 days later another shotgun certificate popped through the letter-box.
On a later occasion I did at least receive a renewal form by post from this local constabulary, and of course it carried the usual notice that I should fill in the form and return it to the local police, because if I failed to do so and held weapons without the certificate being renewed, it would be a terrible offence, and so on. Therefore, as I was instructed not to send it by post but to hand it in to the local police station, I filled it in within three days and handed it in to the local police station.
Some seven weeks later (by which time the certificate was very well out of date, so I suppose that I was guilty of holding the weapon without having renewed the certificate) a member of the constabulary arrived—I must admit only one this time—again without warning or appointment. Again, fortunately I was at home and he said that he had come to inspect the weapon. I was a little surprised. I explained that they had been a long time returning my certificate to me and that I supposed the weapon was unlicensed.
I inquired rather tentatively whether he had read the file. The reply was, "Oh, no". He explained that he had found a piece of paper on his desk that morning telling him to call on me and inspect the weapon. I explained that the certificate required that this weapon should be kept in the armoury of a rifle club, which is where it was, and so it was not at my home, and if he had looked at the certificate, he would not have had this unnecessary journey to inspect a weapon which the certificate clearly said should be somewhere else. I also tentatively suggested that I would rather like the certificate back again, and that they had been rather a long time about it. He explained that they were rather busy.
It is not all bad. Once, when I was producing and testing bullet-resisting glass in my company, I was in the metropolitan police area. I had on my firearms certificate a large number of assorted weapons with ammunition to suit for testing purposes. Here there was only one short visit, with an appointment, by a well-briefed inspector of the metropolitan constabulary who declared himself fully satisfied with the security of the weapons and ammunition, and we heard nothing more. It was quickly and efficiently done.
I do not flatter myself that I have had any special treatment. Plenty of other people must have had similar experiences. Therefore, personally I consider that when it comes to wasting police time the public are absolute amateurs; the police are much more efficient at it themselves. I think clearly they do not need any extra money. What they need in many local constabularies is to tidy up their own internal administration. That is why I support this Prayer.
Lord Mishcon: My Lords, the House is indebted to the noble Lord, Lord Swansea, for his courage and his ability to take advantage of a procedure not often taken advantage of; namely, to challenge, as he is entitled to do, by way of asking for the annulment of an order that comes before us. Too many orders go through our House—ones that require affirmative resolution and those that require negative resolution—and they go through on the nod. It is a correct procedure of our democratic rights that we have listened tonight to a Prayer for an annulment of an order relating to firearm fees.
We have also been entertained to a remarkably interesting debate. I was almost moved to tears and then to laughter by the various adventures through which the noble Earl, Lord Shannon, has been in the course of the last 40 years while holding a firearms certificate, including his adventures in recent years. I was so glad that the story, which seemed an awfully sad one from the police point of view and the time they had expended, ended up with a compliment to the Metropolitan Police by whom he was treated with great efficiency and promptitude.
There are a few issues here that are quite serious and worthy of the attention of the House. The first is that we always ought to be looking at the question of proper administration, and seeing that our procedures, be it in regard to licence fees or whatever, are carried out with due efficiency by either government departments or authorities such as the police authorities. It does no harm; in fact it does a lot of good.
The history of firearms and the fees attached to them is not a happy one. It did not start with the experiences of the noble Earl, Lord Shannon. It started with an embarrassed Minister of State whose name was Leon Brittan, and it was in 1980. When he then introduced, with considerable embarrassment, an increase in fees which was then challenged, he promised to review the situation—and I quote him—"in months and not years", and he hoped that things would be properly streamlined in the course of that review.
One of the things that goes wrong in administration is when Ministers make promises of that kind, no doubt supported at the time by their efficient civil servants, and the review does not take place within months at all. This one took quite a few years. When the Minister of State at that time said that there ought to be a review he referred to figures that have not been mentioned specifically in this debate, and it was said that there was great disparity between various regions and police forces. We are having this debate during the dinner hour and therefore I am not taking up the time of those engaged upon the Gas Bill, which is possibly of greater importance than the firearms order, although at times I am not all that sure. I think that possibly I can say what the disparity was. It was said when the estimates were produced by the various authorities that it cost over £127 to issue a firearms certificate in London, but in Wiltshire it cost £15. The Metropolitan Police thought that it cost them £34 to issue a shotgun certificate, but in Wiltshire, which seems to be extremely efficient (or certainly it was in 1980) the job could be done for £6.
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This is not a very satisfactory history, because when the result of the review was eventually produced again it was challenged. Now we have another review promised and this time not in months—but one feels that something is going a bit wrong with efficient administration in the Home Office in regard to this matter.
I move quickly to the next point. Is it of importance socially, quite apart from any other consideration, that the fees for firearms certificates and their renewal should remain very reasonable? I suggest that it is. I had a different record from the noble Lord, Lord Swansea. I had a record of being a complete danger to my fellows who were participating at Bisley. I was looked upon as a complete danger, certainly to my neighbours. I had the reputation in my own regiment, which was a proud one during the war, of being more of a danger to my fellow soldiers than I ever was to the enemy. My reputation here is very different from that of the noble Lord, Lord Swansea.
However, it is a fact that there are many young people who are taking up this sport and doing it perfectly honourably and properly. We are all interested in seeing that our young people observe the law and observe regulations, and to discourage the observance of the law by having unreasonable fees is to start many young people off on the wrong course. That worries me. People might be tempted to use a firearm without a certificate because of the high cost of the original licence fee and then the renewal fee. Once they have broken those regulations they might break others. From that point of view it is an important social question.
I hope that the Minister, who is a reasonable Minister, will say that he has been so influenced by the examples that have been given this evening of the possible injustice in the renewal fee being the same as the original fee, and is so anxious about the suggested inefficiencies, that he will do something about this regulation. If it has to go through this evening, because we cannot challenge this in a Division—as indeed the noble Lord, Lord Cottesloe, pointed out—I hope that there will be at least a promise that this matter is not just going to be looked into in the general sense of that term, but examined very closely.
I have one other observation to make before I sit down. I hope no one will regard it as irrelevant. I cannot let the opportunity of a discussion on firearms pass without reminding the House of something I have raised before and which I have certainly raised with the Minister; that is, the uncontrolled sale of imitation firearms to youngsters. I sent the Minister an example of an offer, with the most fascinating pictures of firearms, that came through a letter box with a very colourful brochure addressed to a youngster of 16, to the horror of his parents, inviting him to purchase these firearms, which were very good imitations. I hope that the Minister will not think I have introduced an irrelevancy. I have given him notice of the fact that I intended to raise it, and I hope he can say something by way of assurance about the control that definitely ought to exist, if indeed it is not a restriction, on the purported sale of these imitation firearms, especially to young people.
8 p.m.
The Parliamentary Under-Secretary of State, Home Office (Lord Glenarthur): My Lords, I have listened with care to the views of my noble friend Lord Swansea and others of your Lordships this evening. I know that my noble friend's decision to move this Motion was not taken lightly and that it stems from a very real and deep-rooted concern for the future of shooting sports. In his capacity as acting chairman of the British Shooting Sports Council, he speaks on behalf of a large section of the shooting community.
I think my noble friend knows that I thoroughly enjoy shooting of all kinds. To that extent, as I am the holder of both sorts of certificate, I suppose I ought to declare an interest as well; but I so much agree with the noble Lord, Lord Mishcon, and with my noble friend Lord Swansea that shooting is a pastime which young people should be encouraged to participate in, particularly through club activities for those who enjoy small bore or even full bore rifle and pistol shooting. We can be proud of our achievements internationally in that field, and we look forward to further success at the forthcoming Commonwealth Games in Edinburgh, when my noble friend Lord Swansea is representing Wales for the fifth time.
However, regrettable though it may be, the recreational use of firearms is one which must be controlled in the public interest by a licensing system, and it has been the policy of successive governments that fees and charges should as far as practicable reflect the cost of the procedures to which they relate. As my noble friend said, there are, of course, other fees which have not in the past covered costs. This Government are determined that they should do so, and all the fees for which my right honourable friend the Home Secretary is responsible are regularly reviewed. Since 1980, when the firearm fees were last increased, controlled drug licensing, aliens registration and vehicle removal charges (which, incidentally, involve a considerable use of police resources) have been increased considerably to reflect more fully the administrative costs. In the financial year 1985–86, it is estimated that the cost to the police of administering the firearm licensing system in England and Wales outstripped income from firearm fees by about £650,000, and will do so in the current financial year by about £700,000. It would clearly not be right to allow this situation to continue.
My noble friend Lord Swansea and the noble Lord, Lord Mishcon, went into some of the background to all this. Perhaps I can pick it up in 1982, when my noble friend Lord Whitelaw, then Home Secretary, established a joint Home Office and Association of Chief Police Officers Working Party to try to achieve a more uniform approach to the administration of the Firearms Act 1968. Its report published in April 1984 made a number of important recommendations aimed at streamlining police procedures. I am glad to say that most of these were welcomed by the shooting community and have now been implemented. The working party also drew up a series of standardised procedures in the form of the worksheets we have heard about, and recommended that these be used to review the level of fees to recover costs.
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Accordingly, the fee levels proposed in the current order have been costed strictly on the basis of those worksheets, with the exception of the shotgun issue and renewal fee. In accordance with the working party recommendation, the shotgun issue fee would have been subject to a slight reduction and the renewal fee would have been increased slightly, but since the one would have balanced the other in terms of total cost recovery we have decided to leave both at their existing levels. I am glad that my noble friend Lord Swansea welcomes that, as your Lordships will know there is also, rightly, a good deal of public concern about the use of shotguns in crime and we should clearly want to avoid any indication that shotguns could be obtained more easily, which might be the effect of a reduction in the shotgun issue fee.
I turn now to the point which I know chiefly concerns my noble friend Lord Swansea; that is, the size of the increase for the renewal of a firearms certificate. He suggested that perhaps more time should have been allowed for consultation before laying the order. The fees have been costed on the basis of the worksheets in the working party repon. which was published over two years ago. The shooting press accurately predicted what the level of fees would be more than a year ago, and my honourable friend the Minister of State gave the BSSC advance notice of the new fee levels in a letter dated 22nd May; so I cannot really accept that the Government have acted precipitately, given the fact that these fee levels were based on a report published two years ago.
The reason for this increase lies in Section 27(3) of the Firearms Act 1968, which requires that the same considerations should apply to the renewal of a firearm certificate as to the grant. The chief officer must be satisfied that the applicant for renewal has a good reason for having the firearm and that he can be permitted to have it in his possession without danger to the public safety or to the peace. In conducting their inquiries the police must follow through the same procedures as with the initial application to ensure that he applicant's circumstances have not changed. This was reflected in the worksheets that were published quite openly in the working party report over two years ago. But I should stress that we are talking here about the time it takes to process an average application of all types. I am not sure whether my noble friend Lord Burton fits into that category. It may well be that an application from a longstanding member of a rifle club who owns but a few firearms can be processed by the police without undue difficulty. But not all applications are of this type. Some will involve land checks both in local and other force areas, and others will necessitate longish journeys, such as the one my noble friend Lord Burton referred to, by the conducting officer in rural areas.
If we are to maintain the integrity of the controls on Section 1 firearms, a thorough review must be conducted at the time of renewal, and overall we believe that the proposed fee is a fair reflection of the cost involved in processing an average application of this type. There is no suggestion that we are trying to price people out of the use of firearms in the way that has been indicated. Perhaps I could say to the noble

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Earl, Lord Shannon, that at the time of renewal applicants can seek to vary the certificate without additional charge to confirm the point that he made.
As to the matter of differential, my noble friend Lord Swansea quoted the fact that hitherto there had been a differential of 25 per cent. or so between the issue fee and the renewal fee. The sample surveys on which fees were costed in the past have been shown to be inaccurate. What we now have is a system which, as objectively as possible, seeks to standardise and assess the actual work carried out by the police in issuing the various certificates. In its examination of the matter the working party assessed that the issue and renewal fees should be the same.
Of course I share the views that have been expressed by a number of your Lordships about the need for economical use of police manpower. I do not go quite as far as my noble friend Lord Burton in his strictures about the police. He slightly overdid it; but it is important that those who need to renew their certificates keep closely in touch with their police forces to avoid the need for excessive journeys, and police will see to that as well. I am sure they do.
To go some way towards meeting the concerns expressed, we have decided to set up a small working party, on which the British Shooting Sports Council will be represented, to re-examine the worksheet relating to the renewal fee. If the working party assesses that the fee is excessive, we shall seek to introduce a further fee order in advance of the introduction of the normal fees order in about two or three years' time. I do not think that we can be much fairer than this, although my noble friend Lord Burton suggested that we ought to be able to do it sooner. It is important that this is looked at and that is what has been said by my honourable friend in another place and I gladly repeat it now.
As to the shooting community not being represented on the original working party, as I think my noble friend Lord Burton suggested, this was considered very carefully at the time but it was decided that such representation would not be appropriate because the administration of the Firearms Act 1968 is entirely the responsibility of chief officers of police. But the working party certainly invited interested bodies to submit written evidence and that was taken into account.
The noble Lord, Lord Mishcon, raised a separate matter and kindly gave me notice about it. It was about imitation firearms. I certainly share his concern about some of the material of which he furnished me with copies. While there are no general controls on the importation, display or sale of imitation firearms, it is an offence under Section 18(1) of the Firearms Act 1968 to possess an imitation firearm with intent to commit an indictable offence or to resist or to seek to prevent arrest. Such offences carry a maximum penalty of 14 years' imprisonment at present but the Criminal Justice White Paper proposes to increase this to life imprisonment. Under the Firearms Act 1982, any imitation firearm which is readily convertible to fire live ammunition is subject to the stringent controls imposed on actual firearms by the 1968 Act.
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As to the plans for the future, I can tell the noble Lord that consideration has been given to introducing further controls. The difficulty is that there are probably millions of replicas and toys in circulation, many of which resemble actual weapons and, to be effective, any ban on imitation firearms would need to be co-ordinated with some kind of amnesty to retrieve those already in circulation. In practice, this would prove difficult to achieve. Even if controls were introduced, criminals could still make imitation firearms which, under conditions of stress, might well be accepted as the real thing. Nevertheless the noble Lord raises an important point. I have assured him, and I assure him again now, that this is a matter on which we shall, of course, continue to keep a very close eye.
It has been suggested that police time could be substantially saved if the period of validity of certificates was to be lengthened, although this matter has not been raised tonight. All that I can say to this is that, although it would be a way of reducing the cost, we have looked closely into this possibility but our view remains that neither could be achieved without amendment to the Firearms Act 1968 and there are no plans to do this at present.
In conclusion, of course, I accept that increases of fees are never welcome but it is now six years since the firearms fees were last increased. Costs have risen substantially, particularly police costs. A firearm and shotgun certificate is valid for three years and the increases for the issue and renewal of a firearm certificate amount to approximately £3 and £4 a year. It has never been our policy to set deterrent fee levels in the way that was suggested and it can hardly be said that the net effect of this package will be to price the shooter out of his chosen sport. We attach considerable importance to recovering the cost of administering the firearm licensing system. We believe that the proposed level of fees will go some way towards achieving that, so I hope that my noble friend will be reassured to some extent anyway and perhaps particularly by the fact that we will look again at the work sheets in the way that I have suggested.
Lord Swansea: My Lords, there is much that I should like to say but I feel that I must not trespass too much on your Lordships' goodwill. Time is getting on and I think that the House is anxious to return to a subject of slightly greater national importance. My noble friend's reply was not unexpected. I just wonder how much his own heart was in it. I must not be unkind to him because he has been a member of a team representing your Lordships in our annual match against the other place that takes place at Bisley every year and I think that he has some sympathy with the shooting interests. I am grateful to other noble Lords who have taken part in this debate and, arising from what some of my noble friends have said, I have personal experience of (shall we say?) inefficiency on the part of the police, but I shall not embarrass my noble friend by telling him that story now. I may tell him privately another time.
It was necessary for me to lay a Prayer simply because of the procedure laid down in the Bill for orders such as this. They are subject to negative

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resolution procedure and, therefore, the only way of getting them talked about is to lay a Prayer such as I have done today. I have thought for a long time that orders made under this Act—and the Act affects public safety and various other matters—should be subject to affirmative resolution so that the government of the day would be obliged to lay them before Parliament and have them debated. But that would involve amendment to the Act, which we cannot expect during the lifetime of this Parliament.
Another thing that we should like to see is an extension of the period of validity of a firearm or shotgun certificate. That, too, would need primary legislation so we cannot expect that in the immediate future. But those are ways in which, as it were, the blow could be softened towards legitimate users. As it is, we are promised this review, which we hope will take place reasonably soon. I am glad to have my noble friend's assurance that the shooting interests will be represented on that working party and brought into consultation. Bearing in mind that it is the convention in your Lordships' House that we do not vote against an order, I beg leave to withdraw the Motion.
Motion, by leave, withdrawn.

Gas Bill
8.17 p.m.
Consideration of amendments on Report resumed.
[Amendment No. 171 not moved.]
Clause 18 [Safety regulations]:
[Amendment No. 172 not moved.]
Clause 19 [Acquisition of rights to use pipe-lines]:
Lord Diamond Lord Diamond moved Amendment No. 172A:
Page 21, line 7, after ("prejudice") insert ("either the carrying out of his duty under section 4(2) of this Act so far as that section applies to the provisions of this Section, or").
The noble Lord said: My Lords, I beg to move Amendment No. 172A. I think that it will be convenient to take with it Amendment No. 172B and 1 gather that it is thought to be convenient (though I am not sure that that is right) to take Amendment No. 172C as well.
We are now on that clause of the Bill which deals with the use by other persons of pipelines belonging to a public gas supplier. There may be circumstances under which the director is brought in in order to enable another person to use the public gas suppliers' pipelines. Clause 19(3) provides:
"Where, after further considering an application under subsection (1) above, the Director is satisfied that the giving of directions under this section would not prejudice the conveyance by the pipe-line of—

(a) the quantities of gas which the public gas supplier requires or may reasonably be expected to require to be conveyed by the pipe-line in order to secure the performance by the supplier of his duties under sections 9(1) and 10(1) above and his contractual obligations; and

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(b) the quantities of gas which any person who has a right to have gas conveyed by the pipe-line is entitled to require to be so conveyed in the exercise of that right,

the Director may give such directions to the supplier".

We discussed this in the context of the usefulness of being able to find a tiny measure of competition in this area. It is very difficult to find, but there may be in this particular area a small measure of competition.
Your Lordships will remember that the competition would arise where a person obtains access to an unusually cheap supply of gas, finds a customer, arranges to transport that gas from the cheap source to the customer, but finds the usual difficulty of matching the supply of gas to the needs of the customer and has therefore to make arrangements for any gas left over in the gas field for which he has rights. The only way in which he can dispose of any surplus gas in that way is to the only purchaser who is around—and that is the public gas supply in question, the British Gas Corporation, who therefore have to enter into arrangements with him for that purpose; and the director has the responsibility of encouraging it.
But the clause does not put it quite strongly enough. The clause as drafted says that the director may give such directions. In Amendment No. 172B we say not that he may, but that he shall in certain circumstances. The amendment reads:
"shall give whenever when he considers that competition in the supply of gas through pipes will thereby be facilitated, and in all other cases"
he may give such directions. So where the director is satisfied that competition will be facilitated, it is his duty to give the necessary directions.
The Government looked upon this amendment with some sympathy, but had certainly one difficulty, which was the fear that this duty might conflict with the general duty of the director under Clause 4(2) of this Bill. So the first amendment is introduced in a prefatory manner to avoid that difficulty. Therefore, the first amendment would make the clause read:
"Where … the Director is satisfied that the giving of directions under this section would not prejudice either the carrying out of his duty under section 4(2) of this Act so far as that section applies to the provisions of this Section or the conveyance by the pipe-line",
etc. That is an attempt to meet completely the anxiety that the noble Lord the Minister expressed that this suggested amendment might—he did not say it would, but might—result in a conflict of duties. So I hope that disposes of that element. There will now no longer be a conflict of duties. I hope the Minister now feels it is right to put on the director a duty, where competition can be facilitated, of giving the necessary directions to the gas supplier so that this tiny measure of competition can take place.
Amendment No. 172C is of a somewhat different nature but it has been grouped and I therefore invite your Lordships now to pay attention to it. This comes in at a later stage on page 21, line 37. This clause defines the directions which the director may give under this section for securing one of the additional purposes which would now apply if the amendment is accepted. It says:
"for securing to the applicant the right in the circumstances described immediately below, to sell to the public gas supplier, for

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so long as the applicant has the right to have the specified quantities of gas conveyed in the manner referred to in subsection (4)(a)(i) above, gas up to such an amount, not exceeding 20 per cent. of such quantities"—
we discussed the reason for the 20 per cent. on the last occasion and therefore I do not think I need refer to the reason for it again. I said then that this was the right formula, but 20 per cent. could read any other percentage which the Government thought from their knowledge of the circumstances to be more appropriate—
"as may be agreed between the applicant and the public gas supplier or failing agreement may be determined by the Director; and the said circumstances are that the Director has reasonable cause to believe that the giving of directions will facilitate a measure of competition and that such directions are needed to prevent discrimination by the public gas supplier against producers in the United Kingdom continental shelf and that any remedial action which the Office of Fair Trading could otherwise take would be too little or too late".
The last words, of course, are virtually the words of the Minister himself, who when replying to the debate made clear that there were certain anxieties in his mind. He said that there had been a statement or an undertaking by British Gas Corporation that there would not be discrimination by the public gas supplier against producers in the United Kingdom continental shelf; the reason for that being here is the usual reason, that however grateful one is for that undertaking, and however much one appreciates the present force of it, it cannot be held to be of permanent value because, of course, in the nature of things individuals and chairmen of companies do not live forever.
For example, if I may remind your Lordships, I have said to my noble friend Lord Ezra, "Why did you allow these things that happened in the Coal Board to happen?" I criticised my noble friend on those grounds and he replied, "Well, I am no longer chairman of the Coal Board. I have no responsibility for what the Coal Board does or has done since I ceased to be chairman". Chairmen do resign. I am not talking about their longevity, but the fact that in the nature of things after reaching an age which is not far off middle age they are expected to resign. That is what happens.
Therefore, one is expressing no discourtesy or lack of belief in the integrity of all the present and future board of the British Gas Corporation in saying that an understanding of the position which they have expressed is very helpful but by no means binding on their successors. Therefore, one needs something in the statute to make sure that the situation will continue. So we are very grateful to them for their statement that there will be no discrimination by the public gas supplier against producers on the United Kingdom continental shelf, but we feel it is better to put it in the statute.
The rest of it refers to the remedial action which the Office of Fair Trading could take. That again is a reference to what the Minister himself had to say. He thought it was a measure of the way the Office of Fair Trading could help, but of course the procedure for getting matters put right through the Office of Fair Trading is a very lengthy one and it is feared that by the time a decision under that procedure takes effect it would be far too late. In fact it is doubtful whether they would be able to assist in many of the circumstances which this amendment contemplates. Therefore words
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have been added in this amendment to the effect that it is feared,
"that any remedial action which the Office of Fair Trading could otherwise take would be too little or too late".
Therefore where you have a situation in which the director fears that the Office of Fair Trading cannot be of any present adequate help, there has to be the procedure which this amendment proposes.
I hope I have sufficiently explained the purpose of the amendment and why we are coming back to it. I am grateful to the Minister for the consideration he gave at the time and indeed also for the consideration he has given since the Committee stage, as well as for his courtesy in discussing the matter with me. I think the best way to clarify the situation is to debate these amendments. I beg to move Amendment No. 127A.
8.30 p.m.
Lord Belstead: My Lords, I should like to refer first to the second of the noble Lord's group of amendments. If I may say so, I think that if we were to draw attention only to the competition aspects of any particular common carriage arrangements we would not permit the director to consider his safety duty under Clause 4. I do not believe that would be right, and I would recommend that we ought to leave the Bill as drafted in this particualr respect so that the director can consider all his duties in coming to a conclusion as to what he ought to do under Clause 19.
As regards this amendment, No. 127A, it will be necessary, in that context, for the director to bear in mind once again his other duties in reaching a decision. Clearly he would not be able to give a direction under Clause 19 in the interests of promoting competition if in doing so there was any risk of jeopardising the whole transmission system. It is the clear intention of Clause 4(2) that in exercising his functions the director will have to consider all his duties and to balance one with another according to circumstances. So once again I feel that the reference to Clause 4(2) is sufficient in this particular context.
As to the third amendment in the group, No. 127C, it is very similar to the one tabled by the noble Lord in Committee concerning purchases of a residue of gas from a producer when the bulk has been sold in a common carriage deal. I am glad the noble Lord welcomes the assurance which has been given by British Gas about not discriminating against producers on the United Kingdom Continental Shelf offering gas in these circumstances, but that it will consider offers of any such gas on their merits—that is, the price and all terms and conditions of the proposed supply—in the context of the total requirement for new gas supplies from time to time.
Of course, the noble Lord would like to see this written in on the face of the Bill. I can only say that we do not believe it would be right to involve the director in the purchase of gas; and it follows that we cannot accept an arrangement which would enable the director to issue directions to British Gas to purchase residual gas.
There remains the question of whether competition law would be effective if there were any abuse here. Although I appreciate the concern of the noble Lord, both in his speech and in the amendment, I would

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hope that the Office of Fair Trading could never be accused of taking action "too little or too late". I must say also that I think that would be rather a strange phrase to have on the face of a statute.
I think it is fair to remind the House that the common carriage provisions, as set out in this Bill, have already been strengthened since their introduction originally in 1982. I believe these arrangements offer a considerable incentive to competition and that we have provided for the appropriate level of involvement for the director, backed up by competition law. I realise the noble Lord, Lord Diamond, is seeking to push in very much the same direction as the Government in this matter; but, for once, I feel that the noble Lord is perhaps going a little too far and asking a little too much. It is for that reason that I resist this amendment.
Lord Diamond: My Lords, I am grateful to the noble Lord for his consideration. I did not completely follow his argument on the earlier part because I thought that the use of the words,
"either the carrying out of his duty under Section 4(2) or"
would cover the point. We are not diminishing in any sense the consideration he has to give. However, if the noble Lord feels that it is inappropriate I cannot do more than put this matter before him, as indeed I have done.
The noble Lord is quite right in his view that we do not believe there is any law of the Medes and the Persians with regard to the purchase of gas and the limiting of the duties of the director to gas purchasers. We know, for example, that the director has a responsibility with regard to price, and we know that the overall price charged to the consumer will depend as to one-half on the cost of gas purchased. It is therefore right and sensible that there should be some attempt to keep that cost down by providing a modicum of competition in the only area where we can see it possibly being provided: namely, in the entrepreneurial activity of an individual who finds a source of gas and seeks to match it with the supply that a customer requires.
I am glad that the Minister thinks that we are pushing in the same direction. I agree that I am going a little more strongly on the same point, because the whole of this Bill denies competition in any real way and I was hoping that this would be a small way in which we could introduce it. However, if the noble Lord is not prepared to alter the Bill then I will say again that I am grateful to him for his consideration and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 172B, 172C and 173 not moved.]
Clause 20 [Construction of pipe-lines]:
Lord Belstead Lord Belstead moved Amendment No. 174:
Page 23, line 10, leave out (" 1:1,500,000") and insert ("6 miles to the inch").
The noble Lord said: My Lords, I beg to move Amendment No. 174 and I should like to speak also to Amendments Nos. 204 and 205. Your Lordships will
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no doubt recall that during our debate in Committee on amendments to Clause 20 I agreed to consider an amendment to the Bill which was put forward by noble Lords opposite to require a larger-scale map in order to show more clearly the proposed route of a pipeline. Therefore, I am glad to be able to come back with this amendment in response, which will require a scale which is about four times larger than that previously required on the face of the Bill. I hope it may be felt that this is a reasonable response to a reasonable request. I beg to move.
Lord Stoddart of Swindon: My Lords, I should like to thank the noble Lord for his consideration of the amendment which I moved at the Committee stage which, if I am not mistaken, would have made the scale 1:10,000. This is about 4½ times better than was proposed originally, and of course I am very pleased that the noble Lord has moved this amendment. I welcome it and thank him for putting it down.
On Question, amendment agreed to.
[Amendment No. 175 not moved. ]
Lord Diamond Lord Diamond moved Amendment No. 175A:
Page 24, line 35, after ("so") insert ("to consult the local planning authority and").
The noble Lord said: My Lords, page 25, line 35, deals with that part of the Bill under which there is considered the construction of pipelines, and subsection (7) reads:
"Where the Director proposes to give directions … it shall be his duty before doing so to give to any person whom he proposes to specify in the directions—
(a) particulars",
etc. But it does not say that he is required to give notice to the local authority, which is a very obvious thing for him to do, so it is natural that we should seek to put it in the Bill.
We discussed this earlier, and the noble Lord the Minister thought there was enough protection, so far as a local authority was concerned, in that a general development order would cover the activity and that would involve a local authority. My anxiety, which was expressed at the time, was that the general development order was covered by a separate statute and that under a separate statute the relevant Minister, who had the power to revoke such an order, could presumably do so, perhaps for reasons not connected with the particular cause in question, which was not a very happy situation. The debate was left with the Minister saying that, without commitment, he would look at the matters raised to see whether it was necessary for the Government to do anything further to meet the points made. I certainly confirm that it was understood that it was without commitment. So this amendment has been put down to revive the issue and to invite the Minister to say what conclusions he has reached after further consideration. My Lords, I beg to move.
8.45 p.m.
Lord Belstead: My Lords, I think I can satisfy the noble Lord on this. The parent legislation is the Town and Country Planning General Development Order 1977. Under that, British Gas may indeed, without planning permission, lay a main, pipe or other

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apparatus underground. The reason tor the exemption is that, as British Gas has statutory supply and other obligations, it has been felt right that it should have corresponding rights and privileges. The effect of the order on the new British Gas will be that an amending order will be made, in parallel with British Gas's authorisation as a public gas supplier, to see that the new British Gas, if this Bill becomes law, is covered.
Therefore, it only remains for me to say the most important thing, which is that eight weeks before the commencement of operations for the laying of a high-pressure pipeline British Gas must, as a condition under the general development order, give notice in writing to the local planning authority of its intention to carry out that development, identifying the land under which the pipeline is to be laid. I hope that the noble Lord, Lord Diamond, may feel that the matter really is covered, but in other legislation.
Lord Diamond: My Lords, I am most grateful to the Minister. I think that covers the matter completely. Therefore, I beg to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 22 [Effect of directions]:
[Amendment No. 176 not moved.]
Clause 23 [Modification by agreement]:
Lord Diamond Lord Diamond moved Amendment No. 176A:
Page 27, line 3, after ("may") insert ("with the consent of the Secretary of State").
The noble Lord said: My Lords, somewhere among all these papers I have the reason for suggesting that Amendment No. 176A is a good amendment. Page 27, line 3, deals with the modification of a public gas supplier's authorisation. We have now started on the series of clauses under which the authorisation may be varied. The first one is Clause 23, under which the conditions within the authorisation can be modified by agreement. That is a very simple matter indeed, as I have already indicated, of the two main individuals concerned getting together and agreeing some alteration without a word to Parliament, without an order and without any other real safeguard of the public interest. Therefore, in line 3 of page 27, I suggest that there should be inserted the words:
"with the consent of the Secretary of State"
after the word "may", so that the subsection would read:
"Subject to the following provisions of this section, the Director may with the consent of the Secretary of State modify the conditions of a public gas supplier's authorisation."
I know that it may be very convenient for the two parties mainly concerned—the director and the public gas supplier—to be able to agree a modification without reference to anybody else, and I know that the director has his duties. But I am sure that circumstances are bound to arise where there should be an overall view and a decision based on knowledge which is beyond that of the director himself, but which is within the knowledge of the Government, and therefore of the Secretary of State, which would necessitate the consent of the Secretary of State. Otherwise, a decision could be made—perhaps with
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the best of intentions—without the fullest knowledge and without the fullest consideration of the Secretary of State.
It is not a difficult or delaying matter. If it were a small alteration, the Secretary of State would agree it immediately. If it were a large alteration, the Secretary of State would, I hope, take time to consider it, as he should, even though the two parties—the public gas supplier and the director—have agreed. Although the director has his duties (and they are set out in the Bill) this is an added part of the wisdom to which he should have regard before reaching a conclusion. I think it would be a check and a long stop and entirely in the interests, the overall and long-term interests, both of the public gas supplier and of the consumer. I therefore beg to move.
Lord Bruce of Donington: My Lords, I urge the noble Lord to accept the amendment that has been put forward by the noble Lord, Lord Diamond. Many of our debates both in Committee and at the Report stage have been concerned with the gas supplier's authorisation. Time after time the noble Lord has said that it is quite unnecessary to have certain provisions in the Bill because certain matters are in the gas supplier's authorisation. We have already seen that authorisations can be changed without any reference to Parliament. Indeed we have already been provided with a revised authorisation that differs in many material respects from the previous authorisation.
Perhaps I may draw the noble Lord's attention again to the revised authorisation. The noble Lord will observe that there is a completely new schedule at the end dealing with the restriction of disclosure and use of protected information. This is an entirely new form in the proposed authorisation. We on this side of the House for the present purposes assume, somewhat reluctantly and completely reserving our position, that it is desirable to have certain matters incorporated in the statute itself and that the director is there principally to protect the interests of the consumer. There are other protections of course of a more nebulous character which the noble Lord has given us. I can point out to him at least 10 occasions during the course of the Committee stage when the noble Lord has referred to assurances given to him by the present management of British Gas that it will continue to do the same in the future as it has done in the past, so much so that one really wonders why it was necessary to privatise it at all. Evidently it is going to carry on in very much the same way as before. The only thing that differs is that private capital is going to get its share of the pelf that would otherwise have gone to the taxpayer.
However, on this point it surely must be conceded that a third party is involved in any modification of the public gas supplier's authorisation. Quite clearly there is the public gas supplier himself or itself; clearly there is the consumer or, as the noble Lord has more recently referred to him, the customer. One interest is the supplier and the other is the customer, who is protected, albeit inadequately in our view, by the Director General of Gas Supply himself. However there is surely a third party—the Government themselves, and, through the Government, Parliament. It must be a matter of parliamentary

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interest and therefore of the Secretary of State's interest in any public gas suppliers' authorisation modification.
I will not hesitate to say that for my own purposes I should have much preferred Parliament to be involved in this but the noble Lord, Lord Diamond, has been much more modest and inserted "the Secretary of State". In order to facilitate progress of business on this important Bill, I feel that the noble Lord ought on this occasion to accept the amendment. It cannot possibly prejudice the text of the Bill in any way but gives the Secretary of State a little say in the modification of authorisations which otherwise may proceed apace without him by a cosy arrangement between the director and the supplier. In the interests of good government the noble Lord might see fit on this occasion to expedite the progress of the Bill through the House and accept without further ado this modest amendment moved by the noble Lord, Lord Diamond.
Lord Belstead: My Lords, this amendment would give the Secretary of State a straightforward right of veto over modifications to a public gas supplier's authorisation—
Lord Bruce of Donington: Yes, my Lords.
Lord Belstead: I am sorry, my Lords. Am I saying something exceptionable?
Lord Bruce of Donington: No, we are agreeing with you.
Lord Belstead: My Lords, I am now going to show why I disagree.
There are two reasons why we are worried about what would be a straightforward veto. The first is that there is a reserve power to be found in the relevant clauses for the Secretary of State in effect to require that, in respect of a modification which could be put through an independent Monopolies and Mergers Commission investigation under Clauses 24 to 26, this ought to be done.
I think all of us in the House know perfectly well why this was put in the Bill. It was because there could be some risk, as indeed I am advised happened in the United States, that the regulatory authority might become too closely identified with the interests of the supply industry rather than those of its customers. If noble Lords will forgive me for saying so. I got the impression that perhaps the noble Lord, Lord Bruce, and the noble Lord, Lord Diamond, had to some extent neglected this important reserve power which is to be found in these clauses so far as the Secretary of State is concerned.
The other reason why I am worried about this amendment is that it would be a straightforward veto and it has always been our intention to try to avoid direct political responsiblity for the Government in the question of modifications but to leave it if possible to agreement between the director and the gas supplier. But, again, let us not forget that in reaching agreement of that kind the director is operating under his Clause 4 duties. The first and most important of those Clause
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4 duties is that the director, just like the Secretary of State, has to have care for the consumer at the top of his list of priorities.
I therefore feel that the approach which we have provided here has in it the right checks and balances. If we were to accept the amendment it would bring the Government right back into the arena with a direct veto on alterations to the authorisation. I shall not conceal from your Lordships that we should very much like to avoid that.
Lord Stoddart of Swindon: My Lords, before the noble Lord sits down, perhaps I may say this. We consider this an important amendment. I follow what he says about veto, but nevertheless I should have thought that he might perhaps have come forward with an alternative suggestion. I am sure that the noble Lord, Lord Diamond, and I are open to reason. We believe that the Secretary of State has a role here. I had hoped that the noble Lord could say to us that even though he did not agree that there should be a direct veto he accepted that the Secretary of State should be consulted. What is the noble Lord's view of that?
9 p.m.
Lord Belstead: My Lords, if the House will allow me to speak a second time, I would say that I sought to explain that the first of the two reasons why I said we had reservations was that the Secretary of State does have a role. He has a reserve power, if he believes that a modification reference ought to go to the Monopolies and Mergers Commission.
Lord Bruce of Donington: My Lords, that is a different question.
Lord Belstead: No, my Lords, it is not a different question; it is the same question, but it is a different answer.
Lord Bruce of Donington: My Lords, I really must take the noble Lord up on that. I do not want to prolong the proceedings unduly but—
Lord Brabazon of Tara: My Lords, we are at Report stage and the noble Lord has spoken once.
Lord Bruce of Donington: My Lords, then with the leave of the House—
Lord Brabazon of Tara: No, my Lords.
Lord Bruce of Donington: Very well, my Lords.
Lord Diamond: My Lords, I am grateful to the Minister for giving this matter his attention. I am bound to admit that I am somewhat confused. First, let us deal with the slightly irrelevant part of the noble Lord's answer, which dealt with the power of the Secretary of State to be involved in references to the Monopolies and Mergers Commission. That comes under a separate clause and not under the clause that we are considering, which deals with modification by agreement. Therefore, the reserve power to which the noble Lord referred does not touch on the main point of my amendment.

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I am most grateful to the Minister for his statement that he recognises that there is a possibility—and this is the whole basis of the amendment—of the director of the monitoring authority and the supplier getting (I believe the noble Lord said) a little too close together. That is the danger; and the danger of that happening is infinitely greater under the clause as drafted, where there is nothing to prevent, subject to what I shall say in a minute, the gas supplier and the director reaching agreement. That is of much greater relevance in this clause than in the clauses that deal with alterations to the authorisation by refrence to the commission or by other methods. Therefore, it is in regard to Clause 23 that we are most concerned, and we do not feel that the Minister has given the House any good reason why consultation should not take place and why such a safeguard should not be introduced. The words are:
"with the consent of the Secretary of State".
That is a clear safeguard.
The Minister went on to say that as a matter of principle—and I understand this very well from the point of view of Conservative policy—the Government do not want to become involved too closely in an industry that is being privatised, and that it should be allowed to run free. Of course it does not run free, because it is given a private monopoly. It is therefore in a very special position.
I remind the Government that under this Bill they are doing something that no previous Conservative Government have ever attempted to do, which is to provide a monopoly for a utility without any of the safeguards that are normally provided—such as profit control, dividend control, and all the rest of it. None of that is present. The Government are departing from previous Conservative policy in relation to monopolies and are proposing a method that is totally new and which gives much more freedom to the gas supplier than is given to any of the similar monopolies or utilities in the United States or any of the utilities that have operated in this country in the past or which are still operating. Some of them are still operating and, in the water supply industry, for example, they are operating within the constraints to which I have already referred.
I understand the desire of the present Government to have no close connection with the actions of the gas supplier. What I do not understand is the Minister's dislike of the amendment to subsection (1) because, as he says, it constitutes a veto. I draw your Lordships' attention to subsection (4), which reads:
"The Director shall not make the modifications without the consent of the public gas supplier and if, within the time specified in the notice under subsection (2) above, the Secretary of State directs the Director not to make any modification, the Director shall comply with the direction".
I do not know what a veto is if that is not a veto. Perhaps I may put it in a shortened form: the director shall not make the modification without the consent of the public gas supplier, and if the Secretary of State tells the director not to make the modification, the director shall comply. I should have thought that was very clear. Unless I have totally misundestood the impact of that subsection, it is a very clear expression of a veto on the part of the Secretary of State. I believe therefore that the amendment to subsection (1) is a far simpler statement of the total situation.
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I do not know whether the Minister wants to say anything with regard to subsection (4) before we finish with this amendment. If he does not, all I can say is that for the reasons I have given I do not regard his answer as by any means convincing. I should have thought that we would be far better off with the safeguard I suggest in the amendment. If the Government are not prepared to consider the public interest to that extent there is nothing further that I can do but seek leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 176B, 177, 177A, 177B and 177C not moved.]
Lord Diamond Lord Diamond moved Amendment No. 177D:
After Clause 23, insert the following new clause:
("Creation of Area of Alternative Supply to Tariff and Non-Tariff Customers.

(1) Five years after the transfer date referred to in section 40 the Director shall, subject to subsection (2) below, designate an area, as defined in subsection (3) below, of gas supplied through pipes to tariff and non-tariff customers.

(2) (i) Prior to such designation the Director shall consult the existing public gas suppliers in the area, the Council and the Local Authorities covering the area.

(ii) The designation shall be subject to the approval of the Secretary of State, which approval shall not be unreasonably withheld.

(3) (i) The area shall in all respects be fairly typical of areas of gas supply in the United Kingdom.

(ii) The area shall contain no more than 2 million tariff customers.

(4) The Director shall, after fully consulting the bodies referred to in 2 (1) above, determine the terms of a licence or licences under which a licensee or licensees shall have the exclusive right to supply gas through pipes in place of the existing supplier or suppliers.

(5) Without prejudice to the generality of the terms referred to in subsection (4) above, such licence shall define the starting date, the period of the licence, the method of arranging extensions of such period and the conditions under which such a licence could be revoked.

(6) Any such licence shall be incorporated into written agreement to be entered into between the old and the new suppliers.

(7) The licensee or licensees shall be such persons or bodies as, having satisfied the Director of their suitability in all respects to carry out the terms of the licence, offer the highest bid in open tender in respect of an annual licence fee payable to the licensor, such fee being not less than 4 per cent. of the value as determined by the Director, of the capital investment by the licensor in the area.

(8) In carrying out their functions under this section the Secretary of State and the Director shall at all times have regard to the need for there to be a viable area of gas supply which can serve as a comparison with the services supplied and the charges made by public gas suppliers in the rest of the United Kingdom.

(9) For the sake of removal of doubt it is hereby declared that any provision of this Act affecting public gas suppliers shall have effect with regard to suppliers licensed under this section as to any other supplier.").

The noble Lord said: My Lords, this amendment deals with the creation of an alternative supply to tariff and non-tariff customers. However, may I first explain that through some oversight, for which I must accept full responsibility, the words "Five years" appear as the first words of the amendment whereas the amendment I drafted referred to "Between five and seven years" but that did not get printed. I realise that one is limited to the words of the amendment but the House will, I am sure, be willing to listen to why I

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propose "Between five and seven years" and if, to my considerable satisfaction, the amendment should be acceptable to the Government then we can deal with the problem by a manuscript amendment here and now.
This is a very important amendment which has had some airing and which, on reconsideration, I thought ought to start off with a period which is a little less stark than the plain, "Five years after the transfer date". The amendment therefore proposes five to seven years after the transfer date. It gives a minimum of five years for the new gas supplier to settle down in his responsibilities. It is a long period but it may be that there is a lot to be done and that is why the amendment provides for a minimum of five years.
I am bound to refer to the fact that the Minister misread the amendment on the last occasion we discussed this subject as meaning that there should be a licence for five years. That is not the case. We are merely saying that five years after the transfer date certain things shall happen. Therefore, it is now my intention to suggest to your Lordships that between five and seven years—that is, a minimum of five years to settle down and another two years to put alternative supply arrangements into operation—
"the Director shall… designate an area … of gas supplied through pipes to tariff and non-tariff customers".
The amendment gives the necessary detail to which I referred on a previous occasion, and which I therefore need not repeat, of how this area shall be defined and how the licence to a new operator in this area shall be drawn, and the necessary major conditions within that licence. This all leads up to the suggestion that inasmuch as there is no competition whatever provided for under this Bill one has to search, by whatever means one can, to provide if not direct competition at all events an area of comparison.
I do not claim for this designated area an area of competition but I do claim that it can be a very useful area of comparison. One can compare the results achieved by a new licensee in this typical area—it has to be a typical area—with the results achieved in the rest of the country. That is the purpose of the amendment. The amendment refers to:
"The licensee or licensees shall be such persons… as, having satisfied the Director of their suitability in all respects to carry out the terras of the licence, offer the highest bid".
I am bound to refer to the question of:
"their suitability in all respects to carry out the terms of the licence".
That was obviously not taken on board by the Minister when he replied to this point at an earlier stage and sought to show that there was difficulty in having a licensee who might not be able to finance his undertakings. The point is covered in subsection (7) of the proposed new clause, which says that:
"The licensee or licensees shall be such persons… having satisfied the Director of their suitability in all respects to carry out the terms of the licence".
So that area is covered.
Then the amendment deals with the way in which a licensee shall be chosen. The licensee will have the responsibility of supplying gas in this small area, which is small but typical and useful as a comparison with the way in which the business of supplying gas is being carried out in the rest of the country. It is not an
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essential part of the amendment that the highest bid shall be the major determinant of who should be the new licensee, but it seems to me to be a normal method of determining it. It is of course the highest bid among bidders, each one of whom has to satisfy the director:
"of their suitability in all respects to carry out the terms of the licence".
The licensor has to have some income to bridge the gap which is now arising on this small area, and therefore the amendment refers to a fee:
"being not less than 4 per cent. of the value as determined by the Director, of the capital investment by the licensor in the area".
I think that that is a fair figure to represent some continuing return to the British Gas Corporation, as it would be, for losing for the time being—it might be a very long time or it might be a short time—the income from this particular area.
Subsection (8) is an important subsection which states that:
"In carrying out their functions under this section the Secretary of State and the Director shall at all times have regard to the need for there to be a viable area of gas supply which can serve as a comparison with the services supplied and the charges made by public gas suppliers in the rest of the United Kingdom".
I remind your Lordships that in no other case of privatisation is there such a complete lack of competition as there is in this case. So far as concerns British Telecom, we all know that Mercury was established for the purpose of providing competition, which it is in the process of doing. Indeed, if one finds it convenient to use its services instead of British Telecom's, one will find that it is cheaper by some 20 per cent. as a result of using less manpower. That is a useful comparison in order to enable one to get an assessment of how efficient British Telecom is in running its business.
Similarly, there should be some measure of comparison to ascertain how efficiently British Gas will run its new, privatised, problem-free monopoly. I suggest that this area would offer a method of doing it. There are certain difficulties—not very great difficulties—but I think that various other provisions in the amendment which I need not read out at length would cover them and would produce what I am sure most people would regard as a essential concomitant to the privatisation of gas; namely, a modicum if not of competition at all events of comparison. It is for those reasons that I beg to move this amendment.
9.15 p.m.
Lord Belstead: My Lords, there are two reasons why I am still concerned about this particular amendment, which we discussed at Committee stage. The first reason is that the business of supplying gas is necessarily a long-term one in which the assets are depreciated slowly and decisions have to be made over long planning periods in order to acquire new gas. One of the questions on which this amendment is silent is how the new, franchised area gas company will in fact obtain access to supplies of gas in order to meet its demands. I think it is fair to say that the running of a gas industry is not the same as, for instance, providing television programmes, where the assets are shortlived and can be disposed of for alternative use if the franchise is ended; and of course that is exactly what

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happens in certain cases in the case of independent television. That is different, and raises problems that are not addressed in the amendment.
If the noble Lord will forgive me, that leads me to my second concern, which is the proposal that the franchised gas supply should go to the highest bidder. He said, as the amendment says, that the highest bidder shall be properly qualified for the task. But if the franchise is to go to the man who bids highest, there will be dangers that in digging as deep as possible into his pocket the candidate may stretch himself too far.
There are then the important duties set out in Clause 4 of the Bill to guide the Secretary of State and the director in their functions. They run a great deal wider than the considerations in the amendment, and they could well be neglected. I am thinking of the interests of consumers, the interests of safety and other important questions.
It was, among other reasons, in the interests of consumers that the Government came forward in the privatisation proposal with the suggestion that British Gas should be privatised as a whole and not split into regional organisations. There are in the amendment the beginnings of the danger of the desire to split the industry without addressing the difficulties that that would raise. Those are the two reasons why I find difficulty with the amendment. I am sorry that the Government cannot support it.
Lord Diamond: My Lords, I am grateful to the Minister, but, if he will forgive me for saying so, he has repeated what we already know. The Government do not propose to embarrass the British Gas Corporation in any way by providing competition—although he may not have put it in those words. In support of that philosophy he produced arguments which are not arguments against the proposal. There is no difficulty in overcoming them.
The Minister said that if the highest bidder was chosen we should be endangering the financial viability of the operation. That is not so. The duty is laid on the Secretary of State to be completely satisfied about financial viability. He has to be satisfied that, notwithstanding that the competitor has put in the highest bid, he is the right person. That occurs every time a buyer has to choose among bids to supply a certain commodity. He does not choose the highest bidder on that one consideration. He satisfies himself on all the conditions, such as after-supply service, quality, reliability, financial viability and so on. That is why in many cases the Government, for example, as a large purchaser do not always buy at the lowest price. They have to take all those other factors into account. Similarly, in this case there would be a requirement on the director to be satisfied as to the suitability of those bidding for the licence to carry out its terms in all respects; and that would cover the question of financial viability.
I am not persuaded by that argument, and nor am I persuaded by the argument about the long-term build-up of assets. Of course, the assets are long term;
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that is why, instead of a direct purchase and sale it is sensible to deal with the matter by means of a licence. That is why that happens with television. The licensee has the use of the facilities, as has a lessee of premises. He has to maintain them and hand them over at the end of his lease or licence in the condition in which he was given them in the first place, or else pay compensation for the difference. That is the normal arrangement. There is no difficulty whatever about the licensee being able to pay a fair rate for the use of these facilities. There is no difficulty about contracts for the supply of gas. He would stand in the shoes of the British Gas Corporation in that respect, as he would do in all other repects. That is the provision of the licence.
Had the noble Lord said that if only a provision had been included in the amendment about X, Y or Z then the Government would have been glad to accept the proposal for a measure of comparison, one would have understood that. But the noble Lord has not approached the matter in that way. He has merely said that the Government are against providing any form of competition even if it is only by way of comparison and has then proceeded to put forward an argument or two which he thinks relevant but which, as I hope I have satisfied your Lordships, are no barrier whatever to the implementation of this scheme.
I must say that, on this occasion, I feel that the Government are being totally blind to the needs of the new gas corporation having some stimulant and having some measure of competition. This is the only measure regarding competition that we have suggested for inclusion in the Bill. There is nothing else. No one on the other side has put forward a single scheme to provide for competition. The Government have not put forward in the Bill or in any subsequent amendment any suggestion for providing competition. This is a pure monopoly. The Government are sticking to their view that, no matter what suggestion is made and no matter how minimal the competition is to be, in this case, as opposed to other cases of privatisation, there shall be no competition whatever. I am therefore bound to say that on this occasion I cannot ask leave to withdraw the amendment.
9.27 p.m.
On Question, Whether the said amendment (No. 177D) shall be agreed to?
Their Lordships divided: Contents, 20; Not-Contents, 51.

DIVISION NO.7

CONTENTS

Airedale, L.

Molloy, L.

Bruce of Donington, L.

Pitt of Hampstead, L.

Crawshaw of Aintree, L.

Ponsonby of Shulbrede, L.

Dean of Beswick, L.

Robson of Kiddington, B.

Diamond, L.

Ross of Marnock, L.

Elwyn-Jones, L.

Seear, B.

Gallacher, L.

Stoddart of Swindon, L.

Grey, E.

Taylor of Blackburn, L.

Kennet, L. [Teller.]

Taylor of Gryfe, L. [Teller.]

Kilmarnock, L.

Whaddon, L.

381

NOT-CONTENTS

Auckland, L.

Elliot of Harwood, B.

Beloff, L.

Elliott of Morpeth, L.

Belstead, L.

Elton, L.

Brabazon of Tara, L.

Enniskillen, E.

Brougham and Vaux, L.

Gardner of Parkes, B.

Burton, L.

Gibson-Watt, L.

Caithness, E.

Glenarthur, L.

Cameron of Lochbroom, L.

Gray, L.

Carnegy of Lour, B.

Greenway, L.

Carnock, L.

Harmar-Nicholls, L.

Craigmyle, L.

Harvington, L.

Davidson, V.

Henley, L.

Denham, L. [Teller.]

Hives, L.

Donegall, M.

Hooper, B.

382

Kimball, L.

Selborne, E.

Layton, L.

Skelmersdale, L.

Long, V.

Stodart of Leaston, L.

Lyell, L.

Swinton, E. [Teller.]

Macleod of Borve, B.

Trumpington, B.

Mottistone, L.

Vivian, L.

Murton of Lindisfarne, L.

Whitelaw, V.

Orkney, E.

Windlesham, L.

Orr-Ewing, L.

Wise, L.

Pender, L.

Wynford, L.

Rankeillour, L.

Young, B.

Rochdale, V.

Resolved in the negative, and amendment disagreed to accordingly.
Clause 24 [Modification references to Monopolies Commission]:
[Amendments Nos. 177E to 179A not moved.]
Clause 25 [Report on modification references]:
[Amendment No. 179B not moved. ]
Lord Diamond Lord Diamond moved Amendment No. 179C:
Page 30, line 1, after ("applies") insert ("and an application has been made to the Restrictive Trade Practices Court for the purpose of determining whether such an agreement is in the public interest").
The noble Lord said: My Lords, may I, as a courtesy to those who have gone to all the trouble of printing the Marshalled List, at all events move the occasional amendment, even if it seems that many noble Lords have tabled amendments and no longer believe in what they have put down. I certainly believe that this is an amendment which your Lordships ought to consider, and therefore I beg to move Amendment No. 179C.
This amendment refers to the part of the Bill where we are still concerned with modifications to the authorisation, and this particular subsection relates to reports on modification references. The subsection reads:
"Where, on a reference … the Monopolies Commission conclude that the public gas supplier is a party to an agreement to which the Restrictive Trade Practices Act 1976 applies,"
and then the amendment proposes to insert the words:
"and an application has been made to the Restrictive Trade Practices Court for the purpose of determining whether such an agreement is in the public interest".
The same point was discussed at an earlier stage, when I was under the mistaken belief that there had been a printer's error and that in line 2 on page 30 the word "not" had been omitted from the words "shall exclude from their consideration". The explanation for that was not that it was a printer's error, but that indeed this should be excluded from their consideration because there would have been the intervention of the Restrictive Trade Practices Act. I am not sure that there would have been. If there had been, it would make a difference.
Therefore, I have sought to amend the clause to make it absolutely clear—and this was the basis of the Minister's argument—that a condition governing this clause would be that:
"an application has been made to the Restrictive Trade Practices Court for the purpose of determining whether such an agreement is in the public interest".
If that was so, and if that were included, the rest of the subsection would be understandable, intelligible and acceptable. However, without that it would not, and therefore I beg to move.
Lord Belstead: My Lords, this is the second bite at this particular cherry. On the previous occasion in Committee I thought that the noble Lord was receptive to the argument that if the Monopolies and Mergers Commission pronounced on matters that fall under the Restrictive Trade Practices Act, there would be danger of confusion in the MMC's jurisdiction and the Restrictive Trade Practices Court jurisdiction. The noble Lord comes back now with this amendment
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which would require the MMC to consider the public interest in the case of any agreement where no application had been made to the RTP Court.
It is unfortunately the case that agreements are frequently entered into falling within the remit of the Restrictive Trade Practices Act, which the parties do not refer to the RTP Court. If the Monopolies and Mergers Commission came across such an agreement, the noble Lord's amendment would require the MMC to investigate whether this would be properly in the scope of the RTP Court.
This would lead again to the kind of confusion to which I referred the noble Lord in the previous debate. I do not think it would be a satisfactory way of legislating. I realise that the noble Lord may have in mind that there may be a danger of cases falling through the net here. I am advised that if the MMC were to come across an agreement which they believed fell within the scope of the RTP Act, they would ensure that it was properly followed up under the procedures under the Act, and that there would therefore be no chance of the agreement simply being left unnoticed. I hope that with that assurance the noble Lord may feel that this has been of some use, and that it would be right to withdraw the amendment.
Lord Diamond: My Lords, I am grateful to the Minister, and I am glad I put down the amendment again in this form to bring out this point. I was anxious that on the noble Lord's previous description of the matter there might be circumstances under which neither court would be functioning and the issue would fall between two stools. The Minister has helped me in an area which is not the easiest one to follow by giving an assurance that that simple proposition does not stand, and there would not be a slipping between two stools. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 179D not moved.]
9.45 p.m.
Lord Diamond Lord Diamond moved Amendment No. 179E:
Page 30, line 11, at end insert-
("(3A) The draft of a proposed report of the Monopolies Commission on a reference under section 24 above shall be sent to the Director 14 days prior to the making of a report under the following subsection.")
The noble Lord said: My Lords, I understand that it would be convenient if Amendments Nos. 179F and 179G were taken at the same time. If I am wrong, no doubt the Minister will tell me. I have had no time to look at the grouping. This amendment arises at page 30 of the Bill. We are considering the same issue of a report on the modification reference. The amendment proposes that at line 11 there should be an additional subsection to give the draft of a proposed report to the director " 14 days prior to the making of a report under the following subsection", and that is the relevant subsection where a report of this kind has to be made.
This is an amendment seeking to improve adminis-trative convenience. It is an amendment concerning

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the frequent practice of sending a report in its draft form to the person mainly concerned before publish-ing it formally, so that there will be an opportunity to have any major error of fact eliminated from the report, in case such a fact had been made within the knowledge of the person to whom the report is sent. It is a normal practice. My recollection is that when the director of Oftel was giving evidence to a Select Committee in the other place he made the point that being brought into a decision of the Monopolies Commission in a comparable way would be very helpful to him.
I therefore imagine that it would be helpful to the director of Ofgas. That is the reason for making the suggestion to bring the director into the picture and to avoid the kind of mistake which can creep in if a report is published without giving those mainly concerned an opportunity of looking at the draft report.
Line 15, which is the second amendment, proposes to leave out "on" and to insert "14 days after". Line 15 refers to what happens when the director receives the report. It says:
"the Director shall… on receiving such a report, send a copy of it to the public gas supplier and to the Secretary of State".
My amendment would insert:
" 14 days after receiving such a report, send a copy of it to the public gas supplier and to the Secretary of State".
That would give him an opportunity of considering the matter before having immediately to part with it and give his comments. Again it is merely an admini-strative arrangement to enable the director, who has now been brought into the picture, to have time to think about what he proposes to say and what his comments would be to the Secretary of State.
The next amendment, on line 16, provides that at the moment no less than 14 days after the report is received by the Secretary of State the director shall send another copy to the consumer council. The third amendment, Amendment No. 179G, proposes that he should include a note of those parts of the report as to which he proposes to offer detailed advice to the Secretary of State, thereby making the gas supplier and to a certain extent the consumer council aware of the way his mind is moving. This does not in any sense alter the purpose of the clause. It merely adjusts the timing so that the director is brought in at an appropriate time to give him time to think about it and time to advise those whom he should advise of what is in his mind. I think it would improve the arrangements and, for the reasons I have given, it would be welcome to the director. I beg to move.
Lord Brabazon of Tara: My Lords, I appreciate the concern that the director should be given time to consider a report and the need for advice to be given to the Secretary of State. I hope to persuade the noble Lord that the regime established in the Bill already caters for these matters. The noble Lord's proposed new subsection would require the director to be sent a copy of the draft MMC report. The noble Lord also seeks to allow the director 14 days to consider the MMC's report before sending a copy to the public gas supplier and the Secretary of State.
The director will have been responsible for initiating the MMC report and will have given evidence as to the
386
need for a proposed modification. He will therefore be familiar with the subject matter. His concern will be with its conclusions and recommendations. It is not necessary for him to act immediately on receiving a report, even if it contains conclusions and recommendations leading to modification action, although he will no doubt wish to act promptly to remedy any deficiency in the authorisation. In any event, the director is required, under Clause 26, to give notice of proposed modifications and allow a period of 28 days for representations or objections to be made.
The noble Lord also seeks to require the director to advise the Secretary of State of those parts of the report on which he proposes to offer detailed advice. The director has a general duty under Clause 34 to advise the Secretary of State that in any event, since the director is required to make modifications in the circumstances outlined in Clause 26 and identified in an MMC report, he will need to publish his intentions, as we have already discussed. There is no reason for him to go further than this since the Secretary of State has no role in deciding whether a modification should be made following an MMC report. I hope the noble Lord will agree that the regime which we have devised is the right one and will agree to withdraw these amendments.
Lord Diamond: My Lords, there is no great matter of principle involved here; there is the matter of giving the director more time than the Minister now proposes. I recognise that we are all pushing in the same direction. I thought the additional time given to the director would be of convenience to him and of benefit generally. If the Government are satisfied that the existing arrangements will work, so be it. They have been good enough to consider it and I am grateful to them for that. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 179F, 179G and 179H not moved.]
Clause 26 [ Modification following report]:
[Amendments Nos. 179J, 179K and 179L not moved.]
Lord Belstead Lord Belstead moved Amendment No. 180:
Page 31, line 22, at end insert ("and to the Council").
The noble Lord said: My Lords, there were several amendments made in another place to ensure that the Gas Consumers' Council was kept fully informed at various stages in the authorisation modification procedure. This amendment will require the council to be notified by the director of how he intends to implement a change to the authorisation after a Monopolies and Mergers Commission report and completes this provision of information. I commend the amendment to your Lordships' House. I beg to move.
On Question, amendment agreed to.
[Amendment No. 181 not moved.]
Clause 27 [Modification by order under other enactments]:
Lord Diamond Lord Diamond moved Amendment No. 181 A:
Page 31, line 25, leave out from ("in") to ("section") in line 26.
The noble Lord said: My Lords, I beg to move Amendment No. 181A, however inadequately in the pressure of events. With this I gather (but there has been some change of events) that it will be convenient to consider Nos. 181B and 181C. Page 31 of the Bill is dealing with the modifications following a report, and the first amendment refers to line 25, which at the moment reads:
"Where in the circumstances mentioned below … the Secretary of State by order exercises any of the powers specified in Parts I and II of Schedule 8 to the Fair Trading Act 1973 of section 10(2)(a) of the Competition Act 1980, the order may also provide for",
certain modifications.
These amendments are put down to leave out, in line 25, the words:
"Parts I and II of Schedule 8 to the Fair Trading Act 1973",
and, in line 26, the words:
"section 10(2)(a) of the Competition Act 1980".
My recollection may be at fault, but I think the sole purpose of putting down these amendments was to invite the Minister to be good enough to say to what they refer and what relevance they have to this Bill, and to the modifications which are being considered under the Bill. Therefore, these are probing amendments, and I beg to move.
Lord Brabazon of Tara: My Lords, Clause 27 provides for the modification of the conditions of a public gas supplier's authorisation where the Secretary of State by order exercises his powers under the specific parts of the Competition Act and the Fair Trading Act following a report from the Monopolies and Mergers Commission into a monopolies situation, a merger reference or an anti-competitive practice relating to the supply of gas through pipes.
The Secretary of State already has very wide-ranging powers under competition legislation to enforce recommendations made by the Monopolies and Mergers Commission following their reports to him on monopoly, anti-competitive and merger references. Clause 27 is a logical adjunct to those powers to allow the Secretary of State's orders under those powers also to provide for the modification of a public gas supplier's authorisation, if that is requisite in relation to any other provision made by the order.
Section 56 of the Fair Trading Act enables the Secretary of State to exercise his powers to remedy or prevent the adverse effects specified in a report on a monopoly reference. The powers in Schedule 8 of the Fair Trading Act enable the Secretary of State, among other things, to declare it to be unlawful to make or carry out any agreement specified in the order. The order may require any party to such an agreement to terminate it, or may declare it to be unlawful to withhold supplies or services specified in the order. An order may also provide for the division of a business by the sale of any part of the undertaking or assets.
Section 73 of the Fair Trading Act enables the Secretary of State to exercise the Fair Trading Act Schedule 8 powers to remedy or prevent the adverse
388
effects specified in a report on a merger reference. Section 10(2)(a) of the Competition Act enables the Secretary of State, upon receipt of a report of a competition reference which concludes that there is an anti-competitive practice which is operating, or may be expected to operate against the public interest, to make an order prohibiting that practice.
Amendment 181C requires the approval of the director before any modification is made under Clause 27 to the authorisation. Where it is appropriate I have no doubt that the Secretary of State will consult the director, and indeed the director has a duty under Clause 34 to give information, advice and assistance to the Secretary of State on any matter in respect of which any function of the director is exercisable. But decisions on whether and how to implement recommendations of the Monopolies and Mergers Commission on monopoly, anti-competitive and merger references are the statutory responsibility of the Secretary of State, and I submit it would be wrong to dilute that responsibility. With that, I hope fairly full explanation, I trust that the noble Lord will be satisfied.
10 p.m.
Lord Diamond: My Lords, I am grateful to the noble Lord the Minister for what he has said. If he will forgive me for saying so, some of it needs time to consider and to investigate. It is very helpful that he has said what he has said in directing us to the relevant parts of the Acts which are referred to here. I entirely accept the philosophy behind it as he has explained it.
I am afraid that I was guilty when moving Amendment No. 181A of not speaking to Amendment No. 181C. Line 29 refers to:
"the modification of the conditions of a public gas supplier's authorisation to such extent as may be requisite".
Instead of "may" my amendment proposes to insert the words as printed so that the provision would read:
" …gas supplier's authorisation to such extent as in the joint opinion of the Secretary of State and of the Director may be requisite to give effect".
One of the reasons why I included the director was that I considered he should be brought in. I have listened to what the noble Lord had to say about that. The other reason was that it seemed to me, with the greatest possible respect, that the clause is not at all clear at the moment. As it stands, it says at the beginning:
"Where in the circumstances mentioned in subsection (2) below the Secretary of State by order exercises any of the powers"—
and then there is provision for the modification of the conditions of a public gas supplier's authorisation—
"to such extent as may be requisite to give effect to or to take account…".
It says "as may be requisite" but it does not say in whose opinion. There seems to be a non sequitur after line 2, which refers to the Secretary of State exercising any powers; I suppose, by implication, what the draftsman had in mind was that the words "as may be requisite" should be read as meaning "requisite in the opinion of the Secretary of State".
However, with the greatest respect, I did not think that it said so and therefore I am proposing that this should be made absolutely clear by amending the clause and by using the words,

389
"in the joint opinion of the Secretary of State and of the director".
I apologise for not having made that clear when I was moving Amendment No. 181A and I hope the Minister will feel able to respond to that aspect.
Lord Brabazon of Tara: My Lords, I hope that I did in fact respond to Amendment No. 181C in my original reply, and I think the noble Lord will find that when he reads what I said: he will find that I have in fact given the reasons for the way this is set out. I would also draw the noble Lord's attention to the Government amendment which is coming up in a moment or two, No. 181E. I think that also may be of assistance to him.
Lord Diamond: My Lords, I am grateful to the noble Lord, I shall certainly read most carefully what he has had to say, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 181B and 181C not moved.]
Lord Diamond Lord Diamond had given notice of his intention to move Amendment No. 181D.
Page 31, line 29, leave out ("may") and insert ("the Secretary of State after consulting the Director considers to").
The noble Lord said: My Lords, I imagine this is to be taken separately. I think I have already made the point and I shall not move the amendment.
[Amendment No. 181D not moved.]
Lord Belstead Lord Belstead moved Amendment No. 181E:
Page 31, line 29, leave out ("be requisite to give effect to or to take") and insert ("appear to him to be requisite or expedient for the purpose of giving effect to or of taking.").
The noble Lord said: My Lords, I beg to move Amendment No. 181E and at the same time I should like to speak to Amendment No. 194C. As currently worded, doubt has been expressed as to whether in all circumstances it would be requisite—that is the word in the Bill—or necessary to make an authorisation modification to give effect to or take account of an order by the Secretary of State following a reference that conditions controlling the contract market should be included in a public gas supplier's authorisation. And to ensure that there should be no problem we propose that the word "expedient" should be added in Amendment No. 181E.
Again, in order to ensure that there is no doubt that such a change could run wider than intended, we are also seeking in Amendment No. 194C to Clause 48 to make clear that authorisation conditions may not extend beyond those currently permitted under Clause 7; in other words, conditions consistent with the broad vires for public gas supplier's authorisations at the outset. I hope your Lordships may feel that the first of these two amendments is a sensible clarification of the text and will agree that the safeguard in Amendment No. 194C ought also to be agreed to when we reach that amendment to the Bill. My Lords, I beg to move.
On Question, amendment agreed to.
Lord Diamond Lord Diamond had given notice of his intention to move Amendment No. 181F.
Page 32, line 1, leave out subsection (3).
The noble Lord said: My Lords, I do not know whether it was intended that this amendment should be discussed with any other amendment—
Lord Brabazon of Tara: My Lords, with leave, I think it is consequential on the noble Lord's Amendment No. 181A, to which I have replied.
Lord Diamond: My Lords, I can only apologise for not having spoken to it earlier and will not move this amendment.
[Amendment No. 18IF not moved.]
Lord Diamond Lord Diamond moved Amendment No. 181G:
Page 32, line 3, at end insert—
("( ) There shall be attached to an authorisation granted to a public gas supplier under section 7 above an annex setting out with regard to each condition thereof the extent to which it is subject to modification under sections 24 to 27 inclusive and under the enactments therein referred to.").
The noble Lord said: My Lords, this is an attempt to ask somebody to clarify the situation, which is very confusing indeed. We have an authorisation granted under Clause 7. It is a very large document with very many conditions, and there have been references during our debates to this condition being susceptible of amendment, to that condition being susceptible of amendment, to one condition being susceptible of amendment under one procedure and to another condition being susceptible of amendment under another procedure, and it is frightfully difficult to find out what the overall position is.
I know that every condition is subject to amendment by agreement and, therefore, that can be be stated as a preface to such an annex, but it is not that with which I am concerned. I am concerned with the extent to which other conditions are subject to modification by the other methods referred to in these various clauses. It is a brave attempt to get clarity into the Bill and I do not know of any other way of doing it.
I am bound to recognise that it is not absolutely standard practice for an annex of this kind to be affixed and that there may be legal, interpretational difficulties about it. But it would be helpful if something along these lines could be done. I assure the Minister that the present position, for anybody trying to understand the Bill and the impact of these various modification clauses on the authorisation, is very difficult indeed. So the amendment would make life easier for those who have to refer to the Bill and to work under it. My Lords, I beg to move.
Lord Belstead: My Lords, the noble Lord's amendment is seeking further clarity about the extent to which conditions of an authorisation may be modified using the procedures in the Bill, and would require the Secretary of State to add an annex to any authorisation to say what conditions could, or could not, be modified under the provisions of the Bill. The simple answer is that any conditions could be modified by these provisions since the wording of Clause 27 means that an authorisation could be changed to take account of a Monopolies and Mergers Commission recommendation under general competition law,

391
whatever circumstances arose, because the annex would simply say "all conditions", and I do not believe the amendment would be a helpful one.
Lord Diamond: My Lords, if that is the situation, I am bound to accept it from the Minister who is more fully advised than I am, because I can rely only on my own advice, which is not very adequate. I am grateful to the Minister for what he has said. It makes very clear what was not clear to me before. The simple answer is that all of these clauses apply to all of the conditions. That being so, I do not think there is any purpose to be served by having an annex or by continuing this discussion any further. I therefore beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 181H:
Page 33, line 36, at end insert (", or 18").
The noble Lord said: My Lords, perhaps I may also speak to Amendment No. 181J. Noble Lords will note that Clause 28 of the Bill deals with orders for securing compliance with certain provisions. At the end of Clause 28 when defining "relevant requirement", as referred to in earlier parts of the clause, it says:
"in relation to a public gas supplier, means any requirement imposed on him by or under",
and then a whole series of sections are listed which I shall not repeat. The amendment seeks to add "18" into the list so as to bring Clause 28 within the disciplines of Clause 18 of the Bill.
It may well be that the noble Lord can tell me that the safety regulations incorporated in Clause 18, with which we have already dealt, cover every safety contingency dealt with in that clause. If that is so, the amendment that I propose to Clause 28 is quite unnecessary. If, however, all the safety regulations are not covered by the Health and Safety at Work etc. Act, I think the noble Lord will agree that it is necessary that Clause 28 should be subject to the disciplines implied in Clause 18.
Perhaps the noble Lord will just clarify that point. On the assumption that he can clarify it satisfactorily I should of course, for the sake of time, propose to ask the leave of the House to withdraw the amendment. The amendment is put down purely for clarification in order that we may be quite sure that the matters dealt with in Clause 28 are fully covered and that it might conceivably be necessary to bring Clause 18 within the ambit of the definition set out at the end of the present Clause 28. I beg to move.
Lord Belstead: My Lords, Clauses 28 to 30 set out the procedure under which the director can make enforcement orders against public gas suppliers. If the supplier does not comply with such an order, the way is open for any person who suffers loss or damage from that failure to seek civil damages before the courts. The director also has the power under subsection (8) of Clause 30 to seek an injunction to require compliance with the order. This procedure applies to the enforcement of the relevant requirements listed in Clause 28(8) and the conditions of a public gas supplier's authorisation. The noble Lord's amendments seek to
392
broaden the definition of the relevant requirements to include those under Clause 18, and indeed paragraphs from Schedule 5.
Clause 18(1) extends Part 1 of the Health and Safety at Work Act 1974 so as to enable health and safety regulations to be made relating to gas safety. The 1974 Act provides wide-ranging powers for the enforcement of safety regulations by the Health and Safety Executive with, ultimately, criminal sanctions for breaches. Unless such regulations provide otherwise, a breach of a duty imposed by the regulations gives rise to a civil right of action for damages.
We believe that that is the right way to secure compliance with obligations concerning gas safety, and that it would be inappropriate and unnecessary to give additional powers to the director to take action against public gas suppliers under the Bill's enforce-ment provisions. I hope that will answer the case that the noble Lord made for the amendment.
Lord Bruce of Donington: My Lords, I am happy to say that that answer completely satisfies me, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 181J not moved.]
Clause 29 [Procedural requirements]:
[Amendment No. 182 not moved. ]
Clause 30 [Validity and effect of orders]:
10.15 p.m.
Lord Diamond Lord Diamond moved Amendment No. 182A:
Page 36, line 8, at end insert—
"(8A) Notwithstanding the provisions of section 7(6) of this Act the Secretary of State may, subject to subsection (8C) hereof, revoke an authorisation under section 7 by 30 days notice in writing given to the supplier at its registered or principal office if the supplier fails to comply with a final or provisional order under the preceding subsections of this subsection which has been confirmed under those subsections and such failure is not rectified to the satisfaction of the Secretary of State within three months after the Secretary of State has given notice in writing of such a failure to the supplier.
(8B) Subject to the following subsection the Secretary of State shall, notwithstanding the provision of section 7(6) aforesaid, revoke an authorisation under section 7 three months after he has given notice in writing to the supplier of the third such unrectified failure.
(8C) Where an application has been made to the Court under subsection (1) above, no such revocation shall be made until the validity of any final or provisional order in question has been confirmed by the Court.").
The noble Lord said: My Lords, this is an important amendment, and before reading it to your Lordships I shall explain why I thought it necessary to have a discussion on this topic. We are here dealing with the effect and validity of the orders arising out of the various modifications, either by agreement or otherwise, under the provisions that we have already debated. My problem is that I cannot anywhere see what is to happen if the gas supplier—I shall not say, thumbs his nose in relation to the orders—does not carry out the orders. Perhaps at this stage I ought to read the amendment to your Lordships. It states:

393
"Notwithstanding the provisions of section 7(6) of this Act"—
that is, the major authorisation—
"the Secretary of State may,"—
and I underline the word "may" at this stage—
"subject to subsection (8C) hereof,"—
with which I shall deal in a moment—
"revoke an authorisation under section 7 by 30 days notice in writing given to the supplier at its registered or principal office if the supplier fails to comply with a final or provisional order under the preceding subsections of this section which has not been confirmed under those subsections and such failure is not rectified to the satisfaction of the Secretary of State within three months after the Secretary of State has given notice in writing of such failure to the supplier".
That is the subsection in which we deal with the supplier not complying with the orders. The words "final or provisional order" need not bother your Lordships, as they are the words in the Bill.
We are dealing here with an order that has been confirmed and where there is a failure to rectify it to the satisfaction of the Secretary of State within three months. That is to say, the gas supplier is given three months to make the adjustments required to the satisfaction of the Secretary of State, and then only after the Secretary of State has given notice in writing of such a failure to the supplier.
This is not a harsh proposal by any means. The supplier knows what is in store because the order has been made and the provisional order may have been confirmed. The supplier therefore knows very well what he is required to do and there will have been a hearing, possibly, before one court or another. If he has not carried out the directions which the order imposes on him, and he has received a notice from the Secretary of State giving him, as it were, three months' warning but has still not carried it out, surely something should happen. The amendment proposes that something should happen—that the Secretary of State should, if he is satisfied and if he thinks it to be the appropriate action, revoke the authorisation. I repeat, subsection (8A) states:
"the Secretary of State may … revoke an authorisation".
That is subject to subsection (8C), which states:
"Where an application has been made to the court under subsection (1) above, no such revocation shall be made until the validity of any final or provisional order in question has been confirmed by the Court."
That is, where the public gas supplier is taking the view, "I am not going to comply with this direction because it is not valid, and I am going to apply to the court to say to the director or the Secretary of State that it is not valid"—and that view is open to be taken by any gas supplier—and the court has not yet reached a conclusion, then the Secretary of State is not allowed, even if he thinks it right, to revoke the authorisation.
The authorised party must have full opportunity of going to the court and getting the order declared invalid, or whatever the procedure may be, and having the matter settled by the court before the Secretary of State is on firm ground in considering a revocation. But there must be some end to the time over which a public gas supplier can refuse to comply with the order of the director and, therefore, with the modification in the conditions. Power is therefore given, with those safeguards, to the Secretary of State, who may in those circumstances revoke an authorisation.
Subsection (8B) goes further than that. It states:
"Subject to the following subsection,"—
that is, again referring to the matter being settled by the court so that if the matter has been before the court and has been settled by the court as being a valid order, the provisional order being confirmed by the court—
"the Secretary of State shall, notwithstanding the provision of section 7(6) aforesaid,"—
that is, the section under which the authorisation is granted—
"revoke an authorisation under section 7 three months after he has given notice in writing to the supplier of the third such unrectified failure.".
That is to say, where you have three occasions running under which modifications have been ordered upon the gas supplier and the gas supplier has neither carried them out nor applied to the court to declare them invalid (or if he has, the court has declared them valid) and they are still unrectified, then the Secretary of State shall give three months' notice of his intention to revoke. At the end of that period—that is. three months after the last of the three unrectified failures that have been demonstrated—he shall revoke the authorisation.
These powers are very moderate, having regard to the conditions under which a revocation will take place. They contemplate an unwillingness or a refusal by a public gas supplier to comply with orders which are given in order to rectify the situation and in order to put right a breach of the authorisation. Surely that must lead at some stage or other to the revocation of the authorisation. If an authorised party simply refuses to carry out the terms of the authorisation, in my view it is not sufficient that people who have rights against him may sue him for damages. That is a long and expensive process. It is not sufficient that that should take place—if it is possible, as I believe it to be.
It is essential that the authorisation should be revoked so that the gas supplier can be replaced with another gas supplier who will carry out his duties properly and in the interests of the industry, the consumers and indeed of all concerned. That is why this clause is there. I cannot see that this gap is otherwise filled, and therefore I beg to move this amendment.
Lord Bruce of Donington: My Lords, I cannot help feeling that the noble Lord, Lord Diamond, must have moved this amendment slightly with his tongue in his cheek, because of course owing to the rejection of earlier amendments that have been moved by the noble Lord it is not the case that there is any possibility of this private monopoly being broken by competition. It is quite true that the noble Lord anticipates a breach of the authorisation, and its application to Clause 7 means that it refers to a public gas supplier of course.
Let us assume for the moment that the supplier (in this case the British Gas Corporation) submitted to the procedure that would be put into operation here in the event of any breach, and suppose the breach took place in the summer so that the revocation became operative round about January in the middle of freezing weather. On the assumption that the public supplier complied with the revocation, I presume it

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would mean that the gas supplies from the gas supplier who was in default, and who would be the only one affected by the order, would be cut-off from the population.
I pay tribute to the noble Lord for having brought forward the amendment, because it raises the question of how on earth one disciplines a public supplier when there is only one. Just what would the noble Lord do in the event of a gross default in a whole series of respects by this private monopoly? Just how would he act and just how effective could he be under the existing legislation? In the normal way, on the assumption that the state was a majority shareholder in British Gas plc, the noble Lord would be able to exercise his vote in replacing the management with someone more amenable to both the provisions of the Bill and his own wishes in the matter; but since he merely has a special share which can only be used in entirely different circumstances, he would have no power. How would the private monopoly be disciplined by the Bill, by the Secretary of State or by the director in the event of its declining to comply?
10.30 p.m.
Lord Belstead: My Lords, with regard to the mechanism, both noble Lords have overlooked the fact that that is catered for in the existing Schedule 2 to the authorisation, which at paragraph l(c) states that the revocation procedure can be invoked by the Secretary of State if a public gas supplier fails to comply with an enforcement order. That is the place to look for the power.
The Government's position is clear. The best way to ensure compliance is to open the way for civil damages through the pocket of the supplier company. It will then be for the board and the shareholders to decide what to do.
Lord Diamond: My Lords, will the noble Lord be kind enough to repeat where the power is to be found in the authorisation?
Lord Belstead: Schedule 2, my Lords, paragraph l(c) of the latest revision of the authorisation. Rather like the Wimbledon championships, play has to be continuous.
Lord Diamond: My Lords, I am grateful to the noble Lord for referring me to Schedule 2, which is headed "Revocation of Authorisation". It says:
"The Secretary of State may at any time revoke this authorisation by 30 days' notice in writing… in any of the following circumstances",
and then it sets out the circumstances.
The power is there to revoke. I think that that deals with the anxieties of the noble Lord, Lord Bruce. It refers to revoking the authorisation by 30 days' notice. That would cause total havoc. One cannot imagine that that is a remedy.
Schedule 2 does not refer to the difficulty that I had in mind, and that is what is stated in the Bill. We have the various modification clauses, and they result in the power of the director to make provisional and final orders modifying the terms of the licence and, where necessary, calling upon the gas supplier to mend his ways. That is provided in the Bill. If those conditions
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are set out in the Bill, it should say what happens if they are not complied with. As far as I am aware the Bill does not state—and the Minister has not indicated that it does—what is to happen if the orders are not carried out and the required modifications are not made. That must be stated in the Bill if the procedures under which the orders arise are stated. The Bill is inadequate in not providing the method by which one puts an end to the continual breach; and I say that because the amendment provides in subsection (8B) for three such unrectified failures.
We have not had sufficient consideration of the difficulty. I assure the noble Lord, Lord Bruce, that it is a serious amendment. Although I know that it is difficult, the amendment is an attempt to show that it is possible to make some sense of the various clauses which affect the authorisation. I am grateful to the noble Lord for saying that the amendment is at fault for not having said so, but it contemplates that in the considerable length of time that is involved—we are talking about three unrectified failures—the Secretary of State would take steps to appoint another public gas supplier in place of the one already appointed. The provisions in the Bill refer to public gas suppliers generally.
The amendment is intended to be serious. It points the way in which a possible solution to the difficulties can be found, and to the fact that a subsidiary document which is not included in the Bill could not possibly be equally valid. Once more, I have demonstrated that the amendment is useful. Nevertheless, the Government have stated that they are not prepared to accept it. If they are not prepared to accept it, we must bow to that force, and in those circumstances I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 31 [Duty of Director to investigate certain matters]:
[Amendment No. 182B not moved.]
Lord Diamond Lord Diamond moved Amendment No. 183:
Page 36, line 27, at end insert—
("( ) Any reference in this section to the duties and powers of the Director shall be subject to the provisions of section (Directorate of Gas Supply) below.")
The noble Lord said: My Lords, with the leave of the House, I should like to discuss also Amendments Nos. 185, 187, 188, 189, 190, 192 and 193.
I hope that the noble Lord, Lord Stoddart, will recover his voice in due course and will be able to proceed with his duty of speaking to the amendments which he has put down and to which I would have attached my name had I realised that he was going to have vocal difficulties. The difficulties are understandable. I have had to have recourse to a glass of water from time to time.
This is a final attempt to persuade the Government of the need to strengthen the position of the Director of Gas Supply, who is the monitor. I have tried to persuade them from time to time that it is essential to strengthen his position. The clause refers to a later clause under which the details of the strengthening are

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set out. I have referred to that previously. The House will not require me to describe it again. The purpose of the amendment is to demonstrate that his responsibilities are enormous and varied. All sorts of things have been included in the Bill which have been the subject of amendments which have not been moved in the interests of saving time. I refer to the responsibilities which include, first, at page 36, line 27, the investigation of complaints.
Amendment No. 185 refers to the responsibility of investigating all complaints put forward by the consumers' council. Amendment No. 187 refers to the responsibility of keeping the whole industry under review. Amendment No. 188 refers to the responsibility of publication of information and advice. The next amendment refers to the responsibility of keeping a register. Amendment No. 190 refers to the responsibility of fixing resale prices. Amendment No. 192 refers to the responsibility of seeking information. And, finally, Amendment No. 193 refers to the responsibility of conducting a general survey of the supply of gas.
These are enormous and varied responsibilities. They are only a small part of the total responsibilities put upon this single individual—a far too heavy load, as we have maintained throughout, for one person to carry, no mattter what his staff is. The contemplated staff is, in my view, wholly inadequate to deal with the duties arising, even in the early days. I hope therefore that the Government will take on board that the arrangements made for protecting the consumer, which rely mainly on the Director General of Gas Supply, are wholly inadequate because of the nature of the provisions creating a gas supplier. There should be a much stronger organisation. The amendment leads up to that strengthening of the organisation. My illiustration of the various responsibilities shows how necessary that strengthening is. I beg to move, once more in the hope that the Government will realise how serious we are about this fundamental and important issue.
Lord Bruce of Donington: My Lords, the House will be grateful to the noble Lord, Lord Diamond, for having raised this question once again. There can be no doubt about the technological development of the gas industry over the next 10 to 15 years. On top of that, one has to consider its existing complexity at a time of changing economic and financial conditions, and the competition that may occur from other sources of energy, whether fossil fuels or whatever. Clearly, the functions of the director of Ofgas, in the protection of the consumer in the broadest possible sense, combined with the specific matters to which the earlier and paving amendments referred, will need a much more comprehensive organisation if the consumer is to be thoroughly protected in the general interests of the public at large.
The noble Lord has said once or twice in answer to arguments for incorporating certain provisions in the Bill that it would be undesirable to include them because any alteration to them would necessitate new parliamentary action and amending Bills. Here, if the noble Lord accepts the amendment, he never need use what it proposes unless this becomes necessary. It is a
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matter for the Government of the day whether or not they use the provisions of this clause. If it is necessary, it is there without the need for new legislation to be brought forward. If they do not think it necessary to use it, then it need not be used.
I should have thought that the arguments of the noble Lord, Lord Diamond, were quite compelling. The Government ought to open the gates for themselves should they ever desire to go in.
10.45 p.m.
Lord Belstead: My Lords, this is the third bite at this cherry. We had amendments earlier on in the Bill saying that there should be three commissioners of gas supply. We then had an amendment on the first day of Report saying that there should be two assistants to the Director General of Gas Supply. Now there is this amendment, and the group in which the noble Lord has included it, which all hang upon Amendment No. 194. The noble Lord, Lord Diamond, spoke to that amendment two days ago. That would set up a directorate of gas supply in which additional officers would be available to assist the director.
In spite of the arguments of the noble Lord and the noble Lord, Lord Bruce, I am afraid my reply must remain the same: that this must be the responsibility of the director. As your Lordships know, the director general designate is very well qualified to organise his own office. It is on that ground that I resist this amendment.
Lord Diamond: My Lords, I was only faintly hopeful that the noble Lord would be moved. I thought it right to make one final attempt and to include all the remaining references in that one attempt. The noble Lord has been good enough to repeat the Government's view. There is nothing more we can do about it except to ask the leave of your Lordships' House to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 184 to 186A not moved.]
Clause 34 [General functions]:
Lord Diamond Lord Diamond moved Amendment No. 186B:
Page 38, line 35, at end insert—
("( ) Such reviews shall in particular consider the supply of and demand for gas within Great Britain, and the efficient use of gas and the efficiency of appliances of systems using gas.").
The noble Lord said: My Lords, I think that this amendment speaks for itself. After the statement of the general functions of the director, there is the added duty of carrying out such reviews as the amendment indicates. The director will have an enormous amount of information by the time he has been in his job some year or more. It is only sensible that that information should be sifted and analysed, and the results brought to public attention.
The reviews for which he is responsible, therefore, should include something more than just a review of his activities in relation to a particular gas supplier. In our view they should go much wider and should consider the supply and demand for gas within Great Britain as a whole. Somebody has to do it. He is the

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person with the most information. By this time he will have more information on it than probably the Secretary of State. It is right, therefore, that he should be invited to carry out such a review. Not only should the reviews cover a supply and demand for gas but should also cover,
"the efficient use of gas and the efficiency of appliances of systems using gas".
It is of vital importance that the efficient use of gas should be incorporated in his review. As we all know, the Government themselves very much support the drive for the efficient use of gas. It is most important in the whole of our economy that we should be just as efficient in the use of gas as we are efficient in the extraction of gas and in the supply of gas. In the use of gas we should also consider the efficiency of the appliances of the systems using gas. These are all very large and very important matters. I am sure that noble Lords appreciate them without my going into them at great length.
My noble friend Lord Ezra has frequently referred to the importance of the efficient use of gas, and my noble friend Lord Hanworth has referred to the importance of the efficiency of appliances of systems using gas. These are very important matters and I therefore hope that the Government will find it possible to include this further duty for the benefit of the whole of our country, because it is wholly in the national interest that the review should take place and that the thoughts, the conclusions and the analyses should be made available. I beg to move.
Lord Brabazon of Tara: My Lords, this amendment gives me an opportunity to explain why we have Clause 34(1) in the Bill. The purpose of this subsection is to require the director to build up expert knowledge about activities connected with the supply of gas through pipes so that he is in a position to carry out his functions on the basis of a real knowledge of the gas industry.
The field of review has been deliberately drawn wide in drafting this subsection, so that the director can review such matters as those mentioned in the amendment, in order to build up a thorough background knowledge of the industry against which to carry out his job.
By singling out certain subjects in the manner of the amendment, the director would have to give these priority, and this could well distort his picture of the industry, given the limited time he will have at his disposal for such matters. Upstream activities, for instance, are highly peripheral to his main functions. And knowledge appropriate to his main functions is scarcely mentioned. For instance, why should safety not be mentioned?
I hope the noble Lord will accept my assurance that the subjects mentioned in his amendment are fully covered by the clause but that particularisation would lead to distortion, and I hope he will see his way to withdrawing the amendment.
Lord Diamond: My Lords, I had not appreciated what the noble Lord said, but he speaks with advice and authority. If he says that all the topics which I have mentioned are already covered in the clause, there is
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no need to cover them twice over and I therefore beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 186C not moved.]
Lord Stoddart of Swindon Lord Stoddart of Swindon moved Amendment No. 186D:
Page 38, line 41, at end insert—
("( ) It shall also be the duty of the Director to collect information and to request information from the public gas supplier relating to contracts for the supply of gas to the public gas supplier in order that he may satisfy himself that any allowable gas cost has been prudently incurred to meet the requirements of tariff customers.").
The noble Lord said: My Lords, I beg to move Amendment No. 186D. Before I speak to this amendment, may I say that I did of course hear what the noble Lord, Lord Diamond, said earlier. He suggested that I had lost my voice. I am sure that the noble Lord will be pleased to learn that I have recovered it.
I feel sure that the noble Lord will have heard the debate in the House which arose yesterday on a Motion moved by the Leader of the House, when my noble friend Lord Cledwyn and the noble friend of the noble Lord, Lord Diamond, Lord Harris of Greenwich, made reference to the difficulties that we are having over time during the present Session. At that time I think that they raised certain matters which were taken into account and listened to, and which I feel sure will be acted upon by the noble Viscount the Leader of the House.
Like the noble Lord, Lord Diamond, I believe that we have been under a grave time constraint so far as this Bill is concerned, because it is a complicated and long Bill with many clauses, and it deserves the utmost scrutiny. However, it is our wish to make progress, and for that reason, and in order to recognise the difficulties that the Government themselves have got into and to try to assist them, as is the duty of all noble Lords, we have not moved certain amendments tonight and there are others that we shall not move at a later stage.
Having said that, I want to add that we believe that all the amendments we have tabled both in Committee and at this stage are essential amendments which needed a great deal of discussion. They deserved more consideration by the Government than they have been given.
I now turn to this important amendment. It states:
"It shall also be the duty of the Director to collect information and to request information from the public gas supplier relating to contracts for the supply of gas to the public gas supplier in order that he may satisfy himself that any allowable gas cost has been prudently incurred to meet the requirements of tariff customers".
We are most concerned that so far as the allowable gas cost is concerned the director is going to have insufficient powers—indeed, no powers at all—to ensure that that allowable gas cost (which is 50 per cent. of the total cost of delivered gas) is reasonable so far as the customer is concerned. So far as we can see from the Bill, and, indeed, from Condition 3 of the authorisation, the director has no real power to investigate the components of the allowable gas cost. We believe that to be a serious omission. He has no power of entry to the gas undertaking's premises or

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access to their books and papers. That is a deficiency, because without it he cannot have any influence at all on this 50 per cent. component of delivered gas, the allowable gas cost. The Bill is highly deficient in that respect. That is why in a small way—and it it is only a small way—we have put down this amendment for the consideration of the noble Lord, and to give him an opportunity to tell us exactly how the director is going to have some real influence over the 50 per cent. of the cost of delivered gas. That is important. It is important for the Bill, and it is important for the future customers of the gas industry. I hope that the noble Lord will respond to this amendment. I feel sure that he will not be able to satisfy us, but we shall be most obliged if he will try. I beg to move.
Lord Ezra: My Lords, I should like to support this amendment moved by the noble Lord, Lord Stoddart, because, as he rightly said, in the cost of tariff gas the supply of the gas itself naturally plays a large part. We believe that the director should have access to all this information so that he can satisfy himself that the make-up of costs passed on to the tariff customer is fair. I hope that the noble Lord in replying to this amendment will tell us either that he will accept it or that it is, in the opinion of the Government, firmly implied in the wording as presented in the Bill.
11 p.m.
Lord Belstead: My Lords, I can give an assurance to the noble Lord, Lord Ezra, that the director will have full powers under Condition 7 of the authorisation to obtain information about the components of gas cost to ensure that British Gas properly reports the true cost of gas to him. But I think that is as far as my assurance can go because although I understand the concern to which the noble Lord, Lord Ezra, gives voice—and I listened carefully to what the noble Lord, Lord Stoddart. said—the argument that has been put on this amendment runs flat in the face of the arguments that have been put to the Government in the preceding days on this Bill.
I have heard put more than once the arguments that the great danger of this Bill will be that British Gas will do too well and that one has to be extremely careful of the position of the electricity industry, and indeed possibly of the coal industry as well but particularly of electricity, because the British Gas Corporation in its privatised form will be able to forge ahead in the private sector.
It is no good putting that argument forward and in the same breath saying that it may be that British Gas will be buying its gas so extravagantly that what is needed is to have the director constantly sitting on the shoulder of British Gas and guessing its purchasing policy. The two arguments do not run together and I do not accept the amendment.
Lord Diamond: My Lords, I am sorry that the noble Lord does not accept the amendment and I am even more sorry to hear the argument he has adduced in favour of that refusal. With regard to unfair competition versus electricity, for example, this is an argument that has been put forward by Members on his own side when they have been available and have been here to move their amendments, or not too tired
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to deal with the matter. It is not our problem In any event we are not concerned with that argument in the way that the noble Lord has indicated. We are concerned here—it has been stated many times and made clear to everybody who was willing to listen— that where one has the present situation with a number of energy sources under one aegis and you then take one of them out, put it under a different aegis and leave the others under the old aegis, you then have a new situation to which you have to have regard because they are working in and for somewhat different purposes.
The suppliers of services under a nationalised industry have to take more account of the public interest and of the consumer interest than they would of a privatised industry. That argument has nothing whatever to do with this point and is not in conflict with this at all, in my view. Indeed, I should go further and say that it is vital that the director should have this duty to collect information from the public gas supplier relating to contracts for the supply of gas to the public gas supplier (that is to say, the acquisition of gas) because without that he will not be able to satisfy himself as to the element which amounts to one half of the cost of gas and the price of gas which is to be charged to the consumer.
This raises an extremely difficult issue—it is not straightforward at all—that the director should apply his mind to. It is not sufficient for him merely to have the restricted power that the noble Lord says he has. He has to consider the whole question of alternative suppliers, of the way in which the market is working, the problems of the continental shelf. He also has to consider the mass of literature that is accumulating to demonstrate and argue that under the proposed regime of the Bill there will be no pressure whatsoever to keep down the price of gas and that the price of gas will inevitably rise. There will be no pressure to economise, as one knows. Whatever British Gas plc pays for its gas from its North Sea sources, including what it pays to itself for supplies from its own fields, will be passed on to the consumer as part of the cost.
Therefore, it is absolutely vital that the provisions of this very modest amendment should apply. I am sorry that the Minister has turned it down. He is really on very poor ground in this case. If the noble Lord, Lord Stoddart, wants to exercise not only his voice, as he has now done again—and I am glad to hear him in good voice—but also his ambulatory powers, I would support him.
Lord Stoddart of Swindon: My Lords, the noble Lord, Lord Belstead, certainly drew yet another red herring across the trail of this amendment. He knows perfectly well that the reason different arguments have to be adduced on different parts of the Bill is that the Government simply have no rational approach towards energy policy. That is the reason. I am not going to rehearse yet again the arguments as to why there should be an energy policy. We have had those arguments. I do not want to go into them again, though I could do so at very great length, and I feel confident that I would be able to convince the noble Lord that my case is right and that his case is wrong—that is, the noble Lord, not the noble Lord's government. He is a rational person and amenable in

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a private capacity to decent argument. I will not convince him while he is speaking for the Government, but I would be able to convince him, I feel quite sure, as an individual.
The fact of the matter is that this amendment just goes a short way towards some control over allowable gas costs. I am not going to say that the privatised gas corporation will fiddle the books. No doubt it will not fiddle the books over allowable gas costs. But we are setting up a watchdog, and we want to see that that watchdog can assure himself, and therefore the public, on whose behalf he is operating, that the books are not being fiddled and that the allowable gas cost is fair to the customer.
That is what it is all about. It is as simple as that. I am surprised that the noble Lord and the Government do not agree with us in that respect. There is here a defect in the Bill, and they would have done far better to have given the director more powers in this regard. However, in spite of the invitation of the noble Lord, Lord Diamond, to use my ambulatory powers, I do not intend to do so at this time of night, and I therefore beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Diamond Lord Diamond moved Amendment No. 186E:
Page 38, line 41, at end insert—
("( ) It shall also be the duty of the Director to satisfy himself, by examination of the books of account, papers, documents and all records which he considers it necessary to examine, (for which purpose he shall have access to all premises where any of the forementioned books of account and records are kept), that the information referred to in subsection (2) above, including information relating to any costs incurred and charges made by the supplier of gas through pipes, is correct.")
The noble Lord said: I beg to move Amendment No. 186E. This deals with the same point in the Bill as we discussed on the previous amendment. The amendment is in the name of the noble Lords, Lord Stoddart and Lord Bruce and myself. The first point I want to clarify with the Government is this. I do not know whether there is at the moment a power for the director to have access to all premises where any of the aforementioned books of account and records are kept. What I do know is that it is vital for him to have these powers if he is to do his job properly. He has to inspect original documents; he has to inspect them wherever they may be found, and he has to inspect them with and without notice. Therefore he has to be given access to premises where these books are kept.
That is the first point I want to make, and I should be grateful if the noble Lord the Minister would clarify the situation and say whether the director has that access without the powers given to him in this amendment.
My Lords, the amendment makes it his duty to satisfy himself in all these ways that the information referred to in subsection (2) is correct. Subsection (2) on page 38 states:
"It shall also be the duty of the Director, so far as it appears to him practicable from time to time, to collect information with respect to the supply of gas through pipes, and the persons providing such supplies, with a view to his becoming aware of, and ascertaining the circumstances relating to, matters with respect to which his functions are exercisable."
His functions are very wide and the noble Lord the Minister may say that he has functions with regard to costs incurred and charges made, and that they are already covered. If he does I shall be delighted to hear it. That is the purpose of putting down the rest of the amendment, that the information referred to in that subsection I have just read out, including information relating to any costs incurred or charges made by the supplier of gas through pipes, is correct. It is a straight-forward amendment, the purpose has been made clear and I beg to move.
Lord Belstead: My Lords, the noble Lord asks me a direct question, does the director have a right of entry to gas suppliers' premises to look at accounts and records he might want to peruse? That is a very sensitive matter, as the noble Lord very well knows, and we have thought it not necessary. The reason why we have thought it not necessary is that the Office of Fair Trading and the Monopolies and Mergers Commission do not have such rights of entry and yet they are able to carry out their investigations quite satisfactorily without those particular powers. Meanwhile, as I have said before, the director will have full powers under Condition 7 of the authorisation to obtain information from British Gas about the components of gas costs and other matters. The difficulty with this particular amendment is that really it would make British Gas the director's research tool. According to the amendment the director would have a duty to cross-check every fact he came across in order to check its accuracy, and I do not think it really would be an efficient use of either the director's time or the time of British Gas. There are clear powers in Clause 38 and Condition 7 of the authorisation which give the director full access to the specific information he needs when carrying out his functions. I suggest to your Lordships that this is enough and this amendment goes too far.
11.15 p.m.
Lord Diamond: My Lords, I am grateful to the noble Lord the Minister for what he has said. It confirms me in my view that it was wise to put down this amendment. I am grateful to the Minister for making it clear that, as I feared, there is no power for the director to have access. One may say that certain courts do not have access but, of course, they have powers to require individuals to bring any documents and any matters relating to the dispute before the court. Everybody has to comply with that, no matter how private they are, and of course there are vast penalties for not doing so. I do not think that is a relevant consideration. However, what is a relevant consideration is that I cannot imagine any auditor being able to carry out his functions of auditing and giving a company a certificate without having access to the offices, warehouses, stockrooms and every other place where documents are kept, in case he needs to refer to them.
An auditor naturally walks around and sees any part he wants to see. He may call by appointment or by open invitation. He has to do his duty in that way, not only to detect fraud but to prevent it. The main argument is for fraud prevention. The knowledge that the director or one of his staff could walk in at any time

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and ask to see any document, book or account is an enormous encouragement to propriety; and that is one of the reasons why it is there.
The noble Lord is also quite wrong, if he will forgive my saying so, in suggesting that this examination means that the director has to cross-check every fact: not at all. He never does that. Nor does the auditor. The auditor tests; he picks out individual items which he wants to look at. If he looks at the first, the second, the third, the fourth, the fifth and the sixth, and they are all all right, he need not look at the other 10,000. He has sufficient reason to believe that they are all of a kind. But if he finds, in those first six, that one of them is not superficially in order, he will naturally pursue his inquiries in that area, to satisfy himself that everything is as it should be.
So it is this testing, rather than examining every single item, which is the way in which the director would carry out his duties. This amendment is shown to be necessary to enable the answer—that is to say, the information regarding costs and charges—to be established. Without it, with a director working at arm's length, unable to have access to premises, to documents and to be told only what people think is good for him to hear, it is not going to be satisfactory and it is not going to breed confidence in his duties.
I am sorry the noble Lord the Minister does not see it in this light. It would do no damage whatsoever to the commercial interests of a firm like British Gas, who conduct their affairs with propriety and who would undoubtedly wish to continue to do so; but it would be relevant in other circumstances—and of course we are looking a long time ahead. As we have said so many times, we are not looking at the present chairman or board of British Gas. We hope they live a very long time and enjoy a very happy retirement; but it will be a long retirement, will it not? In the nature of things, people do not go on being directors of an organisation of this kind at my age, for example. They have to retire long before that. Therefore I am bound to say that I think it is a great pity that the noble Lord the Minister does not have regard for normal caution and financial prudence in providing for the duties of the director.
Lord Whaddon: My Lords, may I just add briefly that I find the attitude of the noble Lord the Minister somewhat regrettable—and not only his attitude.
This is an extremely important topic, where the Minister has a duty to balance the rights of the consumer and of the supplier. I must remind the noble Lord that VAT inspectors swarm into offices without any warning to freeze activities and inspect books. If it is right that the Government should look after its own collection of revenue in that way, it is surely right that they should look after the interests of the consumer. With this new private monopoly, the Government are entering a completely new field, in that the company will inevitably be looking above all to the advantage of its shareholders and it is imperative that every possible protection is given to the rights of the consumer. The noble Lord is being less than prudent in casting aside the reasonable rights that 12 million or 15 million consumers expect from him, and I urge him to think again about this amendment.
Lord Diamond: My Lords, I am grateful to my noble friend for what he has said and I agree entirely with his reference to VAT, which is a very relevant point indeed—
Lord Belstead: My Lords, with great respect to the noble Lord, not a third speech!
Lord Diamond: My Lords, the noble Lord the Minister is quite right. I allowed my noble friend to intervene, and I therefore seek the leave of the House to say how grateful I am for what he has said. I now have difficulty in deciding how far to press this matter. I do not think your Lordships would wish it to go to a Division at this hour of the night, and I certainly do not want to cause any more inconvenience than has, apparently, already been caused. Therefore, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Diamond Lord Diamond moved Amendment No. 186F:
Page 38, line 41, at end insert—
("( ) It shall also be the duty of the Director, following receipt of such information relating to contracts for the supply of gas to the public gas supplier, to decide, after consultation with the public gas supplier, and the Gas Consumer Council, whether he will disallow any portion of the allowable gas cost for the purpose of calculating any price or charges made for gas to tariff customers under any authorization granted under section 7.")
The noble Lord said: My Lords, we are still at the pont in the Bill where the duties of the director are being considered. This amendment is somewhat drastic, because it provides for an eventuality for which I cannot see any other way of providing. I have repeatedly referred to the fact that many of us in this Chamber, and very many outside, are extremely anxious about what will happen to the cost of gas, when there will be a situation where the gas will be bought by virtually one purchaser and the whole cost of that will be passed onto the consumer in the price charged. Without any question whatsoever, there is no limitation, there is no deduction for efficiency with regard to the cost of gas—the total cost is passed straight on.
That is not a very satisfactory situation and does not lead to increasing efficiency, which presumably the efficiency factor was designed to achieve so far as other costs are concerned. But the Government have put upon themselves this dreadful bar, this limitation, this blinkering of their sight against anything to do with the acquisition of gas. All the Government are giving the director power to do is to look at what happens once gas has been acquired and is now being delivered to the customer—to that part the director has to have regard. The acquisition of the gas, which after all is what we are talking about, and the price paid for it is nothing to do with him at all. So long as he is satisfied that a certain expenditure has been made on the purchase of gas, that is fine, that goes into the accounts and that goes into the make-up of the price, whatever it is.
It is very obvious, is it not?, that there will be circumstances under which gas can be acquired more cheaply than in other circumstances. We know that there is more than one supplier in the gas fields. We know that there is the difficulty of peak winter supplies which can be dealt with by one method or another. It can be dealt with by making it very convenient for the

407
British Gas Corporation to buy to assure itself of the supplies it needs at peak times but at some considerable cost.
It may be that the director will come to the conclusion that he is not satisfied that it was necessary to incur the whole of that cost, especially in circumstances in which some of the cost was incurred for the acquisition of gas from fields in which the gas corporation has a direct or indirect interest. Therefore, it is necessary, in my view, to give the director some measure of discretion, after consulting the gas supplier himself and after consulting the Gas Users Council which has an interest in the price which the consumer is being asked to pay, in deciding whether or not the price charged for the gas is a proper one or whether the increase in the price should be limited in any way.
That is why he is given power under this amendment, in these circumstances and after this consultation, to disallow any portion of the allowable gas cost for the purpose of calculating the price for charges to be made to the tariff customer. This would be a healthy encouragement to maximum care and drive for efficiency in the purchase of gas, about which the Bill is otherwise totally silent. That is the reason for bringing forward this amendment. I beg to move.
Lord Belstead: My Lords, I must admit to your Lordships that I am guilty of having not discerned that Amendment No. 186F, which the noble Lord is moving, ought to have been grouped with Amendment No. 186D because it has precisely the same effect as Amendment No. 186D. I am afraid, therefore, that my reply must be precisely the same as it was only 25 minutes or half an hour ago. I do not think this is appropriate.
It is not appropriate for the director to sit on the shoulder of the purchasing section of British Gas and to tell it how to do its job. If the director was going to do that, he would probably be organising the purchasing of British Gas anyway. More seriously, if we start this sort of game we are very likely to run into the danger of what happened in the United States where the very artificial constraints on the price of gas led to the stifling of new exploration and development. But, as I say, this really is precisely the same issue that we considered two amendments ago on the Marshalled List; and for the same reasons, I must resist it.
Lord Diamond: My Lords, before the noble Lord sits down, perhaps I may ask him whether he was replying to Amendment No. 186F. I believe that he was referring to a different amendment. Amendment No. 186F is not the same as an earlier amendment, and I believe that the Minister must have been referring in his reply to a different amendment. Will the noble Lord be good enough to say to which amendment he was replying?
Lord Belstead: Amendment No. 186F, my Lords.
Lord Diamond: My Lords, that makes it difficult to understand the Minister's logic, because Amendment No. 186F is a very different amendment which takes power to provide for a reduction in the allowable gas cost. The earlier amendment had nothing whatsoever
408
to do with that subject. It related to the supply of gas and to information with regard to the supply of gas, but it did not relate to the problem of having a discretion with regard to the reduction of gas cost. I cannot therefore regard the Minister's answer as satisfactory in any respect. I am very sorry that the noble Lord has thought fit to reply in that fashion to a very important amendment.
11.31 p.m.
On Question, Whether the said amendment (No. 186F) shall be agreed to?
Their Lordships divided: Contents, 12; Not-Contents, 46.

DIVISION NO.8

CONTENTS

Bruce of Donington, L.

Ponsonby of Shulbrede, L.

Crawshaw of Aintree, L.

Seear, B.

[Teller.]

Simon, V.

Diamond, L.

Stoddart of Swindon, L.

Ezra, L.

Taylor of Gryfe, L.

Gallacher, L. [Teller.]

Whaddon, L.

Kilmarnock, L.

NOT-CONTENTS

Beloff, L.

Gibson-Watt, L.

Belstead, L.

Glenarthur, L.

Brabazon of Tara, L.

Gray, L.

Brougham and Vaux, L.

Harvington, L.

Bruce-Gardyne, L.

Henley, L.

Burton, L.

Hesketh, L.

Butterworth, L.

Hives, L.

Caithness, E.

Hooper, B.

Cameron of Lochbroom, L.

Kimball, L.

Carnegy of Lour, B.

Lawrence, L.

Clinton, L.

Layton, L.

Coleraine, L.

Long, V.

Craigmyle, L.

Lyell, L.

Cranbrook, E.

Mottistone, L.

Davidson, V.

Murton of Lindisfarne, L.

Denham, L. [Teller.]

Rankeillour, L.

Derwent, L.

Selborne, E.

Donegall, M.

Skelmersdale, L.

Eden of Winton, L.

Swinton, L. [Teller.]

Elliot of Harwood, B.

Trumpington, B.

Elliott of Morpeth, L.

Vivian, L.

Elton, L.

Whitelaw, V.

Gardner of Parkes, B.

Wynford, L.

Resolved in the negative, and amendment disagreed to accordingly.
11.40 p.m.
[Amendments Nos. 186G and 187 not moved.]
[Amendment No. 187A not moved.]
Clause 35 [Publication of information and advice]:
[Amendments Nos. 187B and 188 not moved.]
Clause 36 [Keeping of register]:
[Amendments Nos. 188A and 189 not moved. ]
Clause 37 [Fixing of maximum charges for reselling gas]:
[Amendment No. 190 not moved.]
Clause 38 [Power to require information etc.]:
[Amendment No. 190A not moved.]
Lord Belstead Lord Belstead moved Amendment No. 191:
Page 40, line 37, leave out ("in writing")
The noble Lord said: My Lords, this amendment has already been spoken to on a previous amendment. I beg to move.
On Question, amendment agreed to.
[Amendment No. 192 not moved.]
Clause 39 [Annual and other reports]:
[Amendment No. 193 not moved.]
[Amendment No. 194 not moved.]
Clause 40 [General duty to advise Director]:
The Deputy Speaker (Viscount Simon): My Lords, I have to inform your Lordships that if Amendment No. 194ZA is carried I shall not be able to call Amendment No. 194ZB.
Lord Diamond Lord Diamond moved Amendment No. 194ZA:
Page 42, line 23, leave out ("which relates to tariff customers and")
The noble Lord said: My Lords, I beg to move this amendment. On page 42 we are dealing with other functions of the council, and the clause as it is at present drafted reads in the relevant part:
"It shall be the duty of the Council to advise the Director on any matter which—
(a) appears to the Council to be a matter which relates to tariff customers and in respect of which any of the Director's functions are or may be exercisable".
The purpose of the first amendment is to leave out the words:
"which relates to tariff' customers and",
so that the amended subsection would read:
"appears to the Council to be a matter in respect of which any of the Director's functions are or may be exercisable".
The point of the amendment is to make clear that we do not see why this function should be limited entirely to tariff customers. Of course, in the main it will relate to tariff customers, but at the moment I cannot see any principle under which it would be wholly wrong for the council to deal with a matter which happens to relate to customers who are other than tariff customers. That is why I propose this amendment.
Amendment No. 194ZB (referring to page 42, line 24) is an alternative amendment, and of course the two could not be added one to the other. It is merely to give the Government an opportunity of saying— hopefully—which of the amendments they prefer. I beg to move.
11.45 p.m.
Lord Brabazon of Tara: My Lords, this amendment gives us an opportunity to debate the role of the Gas Consumers Council. The duty of the council under Clause 32 is to investigate complaints relating to the supply of gas through pipes, other than enforcement complaints which are for the director, from both tariff and contract customers.
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Under Clause 33 we have now made it explicit that the council is able to investigate other complaints from such customers on appliances, safety, installations, etc. After it has investigated such a complaint, the council will be able, if it considers that it is well founded, to pass the complaint on to the appropriate body to take the matter further. That could be Ofgas, the Office of Fair Trading, trading standards officers, the Health and Safety Executive and so forth. The amendments to Clause 40, however, suggest that the council should advise the director on all matters. That is clearly not appropriate, since it is other bodies that are responsible for many of these matters and not the director.
It is important to realise that the role of the Ofgas director and his office is rather different from that of the other bodies that I have mentioned. The director has general regulatory powers in respect of the industry's day-to-day operations, especially with respect to tariff customers. General advice on tariff consumer matters is therefore very useful to him. However, the other bodies with which the council will communicate are set up to react to specific complaints and evidence and not for general advice. For instance, in respect of contract customers, the Director General of Fair Trading does not launch investigations on the basis of advice but investigates only where there is evidence of unfair monopoly or anti-competitive situations arising.
Thus, although at first sight Clause 40 might appear a little unbalanced, the reason for it is explained by the different nature of the bodies with which the council will be in contact. All bodies are able to receive complaints from the council, but it is only appropriate for the Ofgas director to be given general advice, and it is only appropriate for the director to receive advice that he can act on; hence the limitation to tariff customers.
I hope that that explanation will satisfy the noble Lord and that he will withdraw the amendment.
Lord Diamond: My Lords, I am most grateful to the noble Lord. As he said, it is the first opportunity that we have had to discuss in a general way the functions of the council. He has courteously and briefly described its scope and the reasons why in his view the amendment is unnecessary. There is great force in what he told us. I repeat my gratitude and seek the leave of your Lordships to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 194ZB to 194B not moved].
Clause 48 [Interpretation of Part I]:
Lord Belstead Lord Belstead moved Amendment No. 194C:
Page 48, line 39, at end insert—
("(2A) Nothing in this Part relating to the modification of a public gas supplier's authorisation shall authorise the inclusion in any such authorisation of any condition other than one such as is mentioned in section 7 above or, in the case of a modification under section 23 or 26 above, as would be so mentioned if the references to the Secretary of State in subsection (7)(a) and (c) of the said section 7 were references to the Director.")
The noble Lord said: My Lords, I spoke to this on Amendment No. 181E. I beg to move.
On Question, amendment agreed to.
Clause 49 [ Vesting of property etc. of Corporation in a company nominated by the Secretary of State]:
Lord Diamond Lord Diamond moved Amendment No. 194D:
Page 49, line 3, at beginning insert ("Subject to sub-section (1A) below")—
The noble Lord said: I gather that it will be convenient also to discuss Amendment No. 194F. Amendment No. 194D is merely the paving amendment and states:
"Subject to sub-section (1A) below",
and subsection (1 A) below is the whole purpose of the amendment. It refers to the transfer date.
Perhaps I should preface my remarks by explaining that we have now come to Part II of the Bill. Clause 49 is the start of that part and refers to the transfer of the undertaking of the corporation. This part of the Bill was examined very sparsely indeed by the other place and also by us in Committee, for the reasons to which I have previously referred. We now need to examine it with some care.
Amendment No. 194F reads:
"The transfer date referred to in sub-section (1) above"—
that is the date which the Secretary of State may fix for the vesting of the property in a company nominated by the Secretary of State—

"shall not be prior to the end of a period of eight weeks throughout which—

(a) the price of crude oil has on every day been above US$ 15 a barrel and

(b) the Financial Times 30 Share Index has been above 1350 daily at the close of business and

(c) the Financial Times S.E. 100 index has been above 1650 daily at the close of business."

The purpose of the amendment, which expands considerably an amendment which was discussed previously, is to ensure that, notwithstanding the financial pressures under which the Chancellor of Exchequer clearly works, the right to fix the transfer date should be limited in the sense that it should be propitious. Of course, it is anything but propitious at present.
We fear that the pressures will be such that the wrong date will be chosen. The transfer date is chosen to enable the Government to start the selling process. We are anxious that the process should be undertaken with some care. There should therefore be some guide as to when the transfer date could be fixed and when it could not.
In a previous amendment I referred only to the price of oil being a major factor. It was made clear that many of your Lordships took the view that, albeit the price of oil was a major factor, it was not the only factor affecting the market and the suitability of a flotation date and therefore the suitability of a transfer date.
I realise that the amendment refers to a transfer date, but its only purpose is to effect the transfer of the corporation to a company whose shares will be floated. If the transfer is not imminent there is no point in having a transfer date. The two would follow closely upon each other. The amendment provides that the transfer will be made only in propitious circumstances. Rather than rely on one indicator, three indicators have been chosen. There could have been others. I recognise that there are many aspects of this.
It is difficult to tie down in figures indicators which would give a fair conclusion. The amendment is an attempt. It provides first:
"the price of crude oil has on every day been above US$ 15 a barrel".
I suggested previously that that was a crude definition. It is the way in which the matter is normally described. If preferred, it could be described as "North Sea Brent" crude, but it comes to the same thing. That is what is understood by the expression, and 15 dollars a barrel is a moderate average price for this purpose as indicating a steady market in oil, which has some considerable effect upon the price of shares and the value of British Gas which is about to be floated. That is one of the elements.
When we last discussed the matter, I stated that 15 dollars a barrel was higher than the then price. My noble friend Lord Ezra made clear at the time that the price was then 11 dollars a barrel. I indicated, giving support in the form of an authoritative American report, that the dollar price of oil would recover considerably in the 1990s and that one should not therefore regard 15 dollars as being high and that certainly one should not regard 11 dollars as being adequate. Yesterday, the price was 9.75 dollars. So it has gone below the 10 dollar mark. That is clearly an indication that it would be suicidal to attempt to float the gas corporation's shares at a time when the market is so depressed.
It is not only depressed in respect of that indicator. At the time that the amendment was drafted the FT 30 Share Index stood above 1350. It dropped 30 points yesterday and at yesterday's close of business stood at 1317. To take a further indication of the stock market, there is the equally familiar FT S.E. 100 Index. I suggested, when preparing the amendment, that a figure of 1650 was a reasonable basis below which one should not attempt to sell. That index dropped 32 points only yesterday and stood at 1599. It may have gone up today. I do not know today's prices.
I have given three indications of the state of the market. Why do we need to pay great regard to the state of the market? It is because of the Government's view as to the conditions under which they would consider flotation. It was made absolutely clear on the last occasion that we discussed this matter that the Government did not have in mind waiting until the bear market finished and until the market recovered in oil and the price of shares and became steady. They did not have that in mind at all. They had in mind doing the best they could whatever the market conditions. This was brought out plainly in the Minister's answer. It was the occasion for an intervention by one of his noble friends who thought that he had perhaps said enough and should resume his place. I remember the occasion very well and it is written into Hansard. It underlines what I say.
I am surrounded by noble friends and allies who know a great deal more about this than I do, and I am therefore open to correction. The need is to prevent the Government from selling at the best price they can obtain in a wholly depressed market. I do not know what the position will be in the autumn when the flotation is expected to take place. It may be worse. I do not know. No one can conjecture. At the moment, however, the indications are that it is extremely

413
depressed and that it would be wholly irresponsible to contemplate a flotation now.
It is for those reasons, and to protect the country against the pressures that are clearly upon the Chancellor of the Exchequer at the present time, that I say that the transfer date should be limited to one that would satisfy the conditions in the amendment. There would be stability. There would be three indicators indicating—if not excellent market conditions—reasonable viable market conditions under which one could contemplate attempting to float; attempting to go to the market. I beg to move.
12 midnight.
Lord Bruce of Donington: My Lords, the Minister should be very grateful indeed to the noble Lord, Lord Diamond, for having so kindly slung out a lifeline to him to prevent himself from acting in a manner that would only be interpreted as injudicious.
We from these Benches have said all along that the only reason for this colossal monstrosity of a Bill is to raise money for the Chancellor of the Exchequer so that he can in due course, immediately prior to the election, offer the electorate massive tax remissions by way of bribe. I still repeat that. Incidentally, it has become almost common gossip now, as I said before, in the papers that espouse the cause of the Conservative Party. Everybody knows that.
The noble Lord being a purist may still aver that it is all being done for the highest possible motives; that the industry will be much better when it is privatised; that it is not right for it to be in the public sector; and that the whole thing is a high-minded pursuit of a superior ideology. If that be the case, a few weeks or months do not matter. It is only under conditions of extreme urgency or near bankruptcy—I am not talking about political bankruptcy, because they are in that state already, but financial bankruptcy—that one would dream of selling the family silver at half price.
The noble Lord, Lord Diamond, is preventing them from taking such an injudicious course. This seems to me to be quite a reasonable precaution. The noble Lord, and indeed his noble friend the Minister, lead comparatively sheltered lives. The noble Lord has the misfortune of being advised in financial matters by firms who themselves have a financial interest in the outcome. Therefore, he cannot always reach independent intellectual decisions, particularly in the absence of the noble Lord, Lord Cockfield, who knows this field very well. I should have therefore thought that this amendment would have been most helpful to the noble Lord—a lifeline. It would ensure that conditions of stability are there at the time of the flotation, that there is the maximum negative expenditure result to enable the appropriate tax remissions to take place, and all the ideal conditions which I am quite sure the noble Lord would, in the ordinary way, fully support.
I hope therefore that the noble Lord will accept this amendment as being a way out of his intellectual difficulty and a shelter behind which, in all the current circumstances, he might find it convenient to seek refuge.
Lord Brabazon of Tara: My Lords, the noble Lord, Lord Diamond, said that we had debated this matter
414
before, and that the House had been very sparsely attended—I think he said—at that moment. That is certainly not my recollection. We had a very good debate on it which was followed with a vote in which the amendment was handsomely defeated. All I can say is that this same amendment, with the one qualification of putting in the Stock Exchange Index, is precisely the same in all other respects.
I referred at the Committee stage to the report published by the stockbrokers, Wood Mackenzie, which threw some light on the effect of lower oil prices on British Gas. Their report makes clear that the effect of lower oil prices on British Gas's business is highly complex. It concludes, however, that,
"profits, over a period, should not be under undue risk".
and that,
"investors wishing to have an energy flavour to their portfolio might find this company an attractive way to achieve such an exposure".
Since then there has been another authoritative report published by the stockbrokers James Capel, and they also considered that the longer term impact of oil price movements was largely neutral.
It is clear then that, while the effect of lower oil prices is far from straightforward, there is no need for the excessive caution which this amendment seeks to impose. In any case, the noble Lord, Lord Diamond, quoted from an American report, which I think said that the price of oil was expected to rise sharply into the 1990s. If that is the case, that is no doubt something which will be taken into account by potential investors when they consider the merits of the issue, and will be taken into account in fixing the price of the issue. The transfer date is not of course the date of flotation. It is reasonable to assume that the transfer date will be some time ahead of any proposed flotation date to allow the new company to establish itself and to trail the proposed sale of shares. To the extent that oil prices and stock exchange indices may be relevant to the sale it is the flotation date which matters rather than the vesting day or transfer date.
The flotation will only proceed if the Government are satisfied that a fair price can be obtained in the light of all the circumstances, including market conditions. The most important consideration will be the company's value to investors at any particular point in time and they will judge this against the profitability of other companies and the overall state of the market. I am afraid to say, and I regret to tell the noble Lord, Lord Bruce of Donington, that I do not find this amendment helpful nor—and I am afraid that I cannot remember the exact word which the noble Lord used.
Lord Bruce of Donington: My Lords, a lifeline.
Lord Brabazon of Tara: My Lords, nor do I find it a lifeline. I shall not enter into an argument with the noble Lord, Lord Bruce, about the merits or demerits of privatisation. We have been through that many, many times and no doubt we shall go through it again. Therefore, I have nothing more to add to what I said on the previous occasion. We cannot accept this amendment, which seeks to fetter the Secretary of State's discretion in deciding the best time to make the vesting order and, like the last time, I must ask my noble friends to reject it.
Lord Diamond: My Lords, I am grateful to the noble Lord the Minister for what he has said, and in particu-lar I am grateful to him for using words which are very different from the words which he used on the previous occasion, when he said at col. 287 of the Official Report of 11th June:
"I said, 'a fair price can be obtained against the background of prevailing market circumstances' ".
The noble Lord has now altered that, and it is a very important alteration. He now says that a fair price should be obtained taking everything into account—I am not quoting him word for word; I cannot rely on my memory for that—including market conditions. That is a much more responsible statement, and I am very glad that the Government have moved their position. Clearly, on the previous occasion the noble Lord was not inventing a phrase off the top of his head; he was very carefully reading his brief and sticking to it, as a good Minister should in these circumstances. Every time the noble Lord was asked a question, he merely solidly repeated what was in his brief, and all credit to him for that. The noble Lord will make a good Treasury Minister in due course.
Therefore, I am very glad that the Government have clearly moved their position in this regard.
I do not claim that oil is the only factor; it is an important factor. In spite of what the noble Lord has said, I think that he will find that the Government will not attempt to float until the price of oil has improved and is more stable. That will have its effect both on the value of the shares and on the condition of the market itself. It is not correct to say that the position arising out of the price of oil is totally neutral. In due course a fall in the price of oil will produce an increase in growth in the economy, but that will take time. The first thing that will be seen is not that growth and its benefits, but the disadvantages in this particular context so far as flotation is concerned.
I want to spend a moment on the date of flotation and the transfer date. There is no flotation date in the Bill, and it would be artificial, if not impossible, to refer to a flotation date in an amendment. One can refer to what is in the Bill, and that is the transfer date. Secondly, there is no point in the Government fixing a transfer date at a time when they see that the possibility of flotation is months or years distant. The Government would not contemplate moving to fix a transfer date when there was no possibility of early flotation. It is right to have regard to the transfer date when one is concerned with protecting the public purse. That is all this amendment is about. There ought to be considerable sympathy from all quarters in the House for such an endeavour.
There is no attempt to prevent flotation, or to limit it in any way, except to say, "Please wait until such a time as it is appropriate and helpful to float." That is a reasonable point of view. It does not prevent the flotation or privatisation of gas. It accepts the privatisation of gas and does not deal with whether it should be privatised; it really deals with when. I should have thought the Government would have welcomed the amendment; but they do not. It is not open to us to persuade them to do so. The Minister gave some of the reasons why they cannot accept it at the moment, and we have to be content with that. Having aired the matter and shown how on these Benches we are
416
helpfully disposed towards protecting the public purse and at the same time enabling the Government to have their way, as we have to do in a democratic country, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Diamond Lord Diamond moved Amendment No. 194E:
Page 49, line 3, at end insert ("subject to approval by resolution of both Houses of Parliament").
The noble Lord said: My Lords, I gather it is for the convenience of the House that there should be considered with this amendment, Amendments Nos. 197T, 197U, 197W, and 197X, whatever they are about. Amendment No. 194E relates to the same point in the Bill as did the previous amendment and refers to the transfer date. It protects the position further by saying that the transfer date is,
"subject to approval by resolution of—
there is a misprint there on the Marshalled List—
"both Houses of Parliament".
The amendment speaks for itself. It is a further and important protection. It would be open to Members of both Houses to express their views as to the oil market, the share market, and all the other relevant circumstances, and to say whether they considered it appropriate and propitious to move on a certain day. The amendment would give that opportunity for discussion. It could not possibly alter or delay the Government's intentions. The Government have a solid majority in both Houses and their will would be carried out without question, but the point of the amendment is that there would be an airing of the subject. Both the views of individual Members and the general views outside the Chamber could be expressed and it would be a valuable and helpful discussion enabling the Government to arrive at an appropriate date. It is for that reason that I beg to move.
12.15 a.m.
Lord Stoddart of Swindon: My Lords, yes, I should like briefly to support this amendment. We have similar amendments down. As the noble Lord said, the Government should not spurn the advice of Parliament. It could do no harm, and indeed it might do a lot of good, if more consultation took place between Parliament and the Government. I feel quite sure that the debates we have had in the Chamber on this Bill so far have been most helpful to the Government. Indeed, they have been so helpful to the Government that they have come forward with at least one or two amendments which will improve the Bill and some amendments to the authorisation which improve that.
I do not understand why the Government are so reluctant to take matters to Parliament. Surely they are not afraid of Parliament, and they surely have confidence in the goodwill and the ability of Parliament to discuss things as a matter of course. They are expert at it and indeed they could perhaps point out to the Government where things may be wrong. As I have said, I support this amendment. It is grouped with our own and I hope the noble Lord will be sympathetic and that his reply will give us some encouragement.
Lord Brabazon of Tara: My Lords, there is a certain familiarity about these amendments in that they seek to bring Parliament back into detailed arrrangements under the Bill and we seem to have been over that ground on several occasions in various different aspects. We have consistently argued that it is for Parliament to debate the principles of the Bill. That is what we are doing now and what we have been doing for what seems to be a very long time indeed. In the amendments which follow we shall be debating very fully the arrangements for vesting the corporation's assets in the successor company and for the disposal of the shares when we come to an amendment in the name of noble Lords opposite.
Approval for vesting will have been given when the Bill reaches the statute book. The only matter on which further debate could be relevant would be one of timing. In this the Secretary of State is responsible to Parliament and we can see absolutely no justification whatsoever for requiring this order to be subject to the affirmative resolution procedure, the effect of which would be to introduce unacceptable delays into the various stages which have to be gone through before flotation can take place. I cannot accept this amendment as we have not been able to accept other amendments on similar lines. I must therefore ask noble Lords to withdraw.
Lord Diamond: The Government's reply is not unexpected. I should make it absolutely clear that the reason we wish to bring in Parliament is that we want some public airing of the decisions that the Government are making and, if I may say so, some protection, where protection is needed, of the public purse. It is as simple as that. We are anxious that the mistakes that have been made in the past should not be repeated, and that the drive which is at present afoot to dispose of assets of this kind should not take place for political purposes but only for good economic reasons. That is why we are anxious that there should be, at all events, a public airing which Parliament would provide.
The Minister also said that this seemed to him to be going on for a very long time. Possibly the Minister was not present at the debates on the nationalisation of gas in 1948. I hope that I am not doing him an injustice in suggesting that.
Lord Brabazon of Tara: My Lords, I was only two years old: otherwise, I think I would have been.
Lord Diamond: I am sure that he was reading the reports in Hansard or the Financial Times, even so. Quite obviously, the Minister was a very forward child. Had he been present in 1948 at the time the then-Labour Government were nationalising gas and the then-Conservative Opposition were opposing it, he would realise that to describe the period we have spent on this Bill as "a long time" is a very odd use of the word "long". I invite him to look up the records. I hope that he will not continue to think that we are doing other than the minimum. Indeed, we have jettisoned amendment after amendment, as I have already indicated. On one day alone on these Benches we jettisoned over 42 amendments. We are doing our best to get through the Bill as fast as we can and we
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realise that we have to do our duty whether the Government are listening to us or not. I am grateful to the noble Lord for having explained the Government's view. We do not share it, but there is nothing that we can do about it at this hour. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 194F and 194G not moved.]
Lord Diamond Lord Diamond moved Amendment No. 194H:
Page 49, line 13, at end insert ("whose authorised share capital includes, or is so altered to include, ordinary shares of the kind described in section (Employees' Shareholdings) below.").
The noble Lord said: My Lords, I beg to move this amendment in the name of my noble friend Lady Seear and myself. I gather that it would be convenient to discuss with it Amendments Nos. 196A and 197H. The first amendment inserts at page 49, line 13:
"whose authorised share capital"—
and I am sure that "whose" means the successor company—
"includes, or is so altered to include, ordinary shares of the kind described in section (Employees' Shareholdings) below.".
So the first point that is made is that the share capital should be capable of being of the kind which is referred to as employees' shareholdings.
I now turn to Amendment No. 196A (in the name of the noble Baroness and myself) which proposes a new clause dealing with employees' shareholdings. I had better read it out:
"The ordinary shares referred to in section 49(2) above, shall be called 'Employees' Ordinary shares' and shall amount in total to such a number as the Secretary of State shall determine".
It is left to the Government themselves to decide how large should be this group of shares called "employees' ordinary shares". The second subsection reads:
"Each such share shall be of a nominal value of one-fifth of each ordinary share available or issued to persons other than employees but shall rank pari-passu in all other respects (including voting rights per share,".
In other words, it is making it clear that the employee shareholding shall have five times the voting power per share as every other ordinary share, but in other respects should be exactly the same.
The third subsection says:
"The said 'Employees' Ordinary Shares' shall be issued free to Trustees to be held for the benefit of all those who from time to time constitute the workforce equally but in other respects according to a scheme, the details of which shall be determined by the Secretary of State after consultation with bodies representing workers and employees generally.".
In other words, what we are doing—and the Government must be very sympathetic to this—is spelling out the kind of employee shareholdings we think there should be. First of all, the number of them is a matter for the discretion of the Secretary of State. Secondly, the voting power should be such as to give some reality to the phrase that we are really having employees with some say, or some interest even, in their own company.
At the moment the percentage of shares held by employees is so infinitesimal that it cannot be expected to help employees regard their shareholding as something which enables or encourages them to take a real interest in the company. It cannot do that; but

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they could if the share voting rights were enormously greater. I suggested five, but I would have preferred to suggest 20, or something like that, to give them a real interest. But I have to move slowly, as we do on these Benches, one step at a time, in the hope that the Government will regard that kind of disparity as being appropriate—in other words, favouring the employee shareholders, to give them the feeling, which everyone wants to inculcate, of participation in the company, by having something like a say. That is what the second subsection means.
The third subsection is to make clear that the employees' ordinary shares should be issued free. That is the first point: these are shares which are to be issued free, not shares which are to be subscribed for. Of course, the Government made it clear that some shares will be made available to employees for subscription at preferential rates, which is fine, but we are talking about free shares for employee shareholders. They should be issued to trustees to be held for the benefit of all those "who from time to time constitute the workforce equally". In other words, it is not a question of issuing a free share to one employee who will immediately, or as soon as he reasonably can, sell it, flog it, and make whatever profit he can out of it. It is a permanent trust for the workforce. Of course, they will individually get the dividend on the shares.
Of course, they will individually be able to exercise their voting rights on these shares, but the trustees will hold them for the benefit of all those "who from time to time constitute the workforce". That means that when a worker who has received these shares free and who, during his period of employment, has received dividends ceases to be a member of the firm, when he retires, there is nothing to sell because he has not paid; but when he retires from the firm someone else comes along and, whoever that other person is, he takes over in the sense of being a member of the workforce. That is a much better scheme than ones in which the employees are encouraged to buy, or are given, and then sell as fast as possible.
I repeat that the trustees are to hold for the benefit of all those "who from time to time constitute the workforce equally", but in other respects according to a trust scheme, and the details of that scheme are to be determined by the Secretary of State after consultation with bodies representing workers and employees generally. I need not detain the House. Everybody knows that a trust scheme of this kind will have a number of different provisions and clauses and that they will have to be worked out in consultation with the beneficiaries and with the Secretary of State, representing their overall interests.
So here is a method of providing for an employee shareholding which is a good deal more meaningful than the proposals hitherto made by the Government. These proposals would be more attractive and would be, in most respects, within the discretion of the Government as to their extent and size. They would therefore be acceptable to the Government, we hope. I beg to move.
12.30 a.m.
Lord Belstead: My Lords, if the noble Lord will forgive my saying so, I think this group of amendments are a bit late in the day. On the 18th June
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the Government issued a Statement, making it clear that it is the intention that British Gas employees, past and present, should have every encouragement to take a stake in the new company and the Government will be offering suitably attractive terms. All employees in continuous employment from 1st May 1986 who are contracted to work at least 16 hours a week will be eligible for free shares worth around £70, plus £2 for each year of service. In addition, the Government will provide two free shares for each share purchased by an employee, up to a maximum of £300 of free shares for £150 purchased. It will also be open to employees to purchase up to £2,000 worth of shares at a discount of 10 per cent. For the first time there will also be a free offer, worth around £75, for pensioners. Both pensioners and employees will be able to apply on a priority basis for additional shares.
There is thus every intention of ensuring that employees, past and present, benefit from the proposed sale of British Gas. I therefore suggest that there is no need to make special provision in the Bill—in particular what is proposed in Amendment No. 197H—concerning preference in the issue or allotment of shares.
The new clause (Amendment No. 196A) also proposes that employees' shares should be held by trustees according to a scheme to be determined by the Secretary of State after consultation with employees and bodies representing workers. The difficulty about this is that the trade unions made clear their opposition to the proposed sale of British Gas but were heavily defeated in a ballot. I do not think, therefore, even if we believed such a scheme to be desirable, that it would be appropriate to involve the unions in an arrangement of this kind.
Lord Stoddart of Swindon: My Lords, I am sure the noble Lord would not wish to give the wrong impression. The trade union ballot, which was undertaken by, I think, NALGO, did not ask whether the employees were in favour of nationalisation or not; they were asked whether they were in favour of taking industrial action over nationalisation. That is quite a different thing.
Lord Belstead: My Lords, I do not disagree at all with the noble Lord, and he will agree with me that the union was very heavily defeated. However, the Government have an even more fundamental difficulty with this amendment. In moving it, the noble Lord, Lord Diamond, said that the great thing was to ensure that employees should have their own real interest in the company in which they could hold shares. Yet what do we find when we look at the Marshalled List? We find that the first thing which is going to happen is that the employees' shares are all going to be thrust away into a trust. With respect, I do not think that is the right way. It is a trust in perpetuity, so far as I know. I think that that is not the way to give a real personal interest in share owning to individuals, some of whom may never have held shares in a company before.
We are in fact all going for the same thing: the noble Lord, other noble Lords in all parts of the House, and the Government. But, as I say, I think the amendment is a bit late in the day. We have already gone a long way down the track.
Lord Bruce of Donington: My Lords, before the noble Lord sits down, may I ask him this question? He has mentioned the Government's announcement about their intentions. Can he indicate whether these shares which are to be issued to employees carry voting rights, and, if so, what voting rights they are?
Lord Belstead: My Lords, so far as I know, the voting rights will be the same as the voting rights for other shares. I realise that this does not meet the point which was made by the noble Lord, Lord Diamond, in a rather curious proposal that there should be special voting rights.
Baroness Seear: My Lords, is there any reason why the rights for employee share-owning are not on the face of the Bill? The noble Lord has made the announcement that this is the Government's intention, but it is not embodied in the Bill. We are concerned that there should be reference to this in the Bill.
Lord Belstead: My Lords, with respect, it is detail which is not suitable to the Bill; but it is suitable to a government announcement and the Government announcement has been made.
Lord Diamond: My Lords, it is the Minister's view that this is not suitable for the Bill; but it is our view that it is very suitable for the Bill. An announcement has been made; but the details of the announcement are not very clear, and the voting rights are not very clear. There is no need for us to fall out about it because we are driving at the same objective by only slightly different routes.
The first point that I want to make is one which has already been made by my noble friend Lady Seear and myself: that to have something in the Bill is much more relevant and valuable than an announcement. Secondly, this does not deal with the issue of shares at a special discount or a favourable price. It is entirely up to the Government to decide on the flotation what they want to do about that. Here we are talking about shares which are not paid for, and the Government could, in the circumstances of this clause, provide a much larger number than was contemplated. What the Government announcement refers to is £75 worth of shares free for each employee and ex-employee. That is not an enormous amount, and in terms of voting rights is of no interest at all.
Therefore, I am bound to say that this is an amendment which is, in certain respects, better than the proposal that the Government have made, and I hope that the Government will give it far more consideration than they have done. I am sorry that that is as far as the noble Lord is prepared to go. We cannot do more than put our views before the Government. I hope that they will have further thoughts about it. There is still plenty of time for them to change the voting power of the shares.
I think the Minister said that this is a very odd provision about voting rights; but it is a very normal method of giving a certain group advantage in voting where it is desired to do so. Where employees are unable to buy large quantities of shares and will be given a number free, though there will not be many of
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them, it is far better to give them the feeling that they have some say in the matter. So if they were acting together through trustees and wanted to vote in the same way, their votes could count a little. Therefore, what we have suggested is solid and sensible and it is on the same lines as the Government are proposing, but is somewhat more considered. I cannot expect the Government to change their minds immediately, but I hope that they will give the matter consideration between now and the date of flotation. Having said that, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord Taylor of Gryfe Lord Taylor of Gryfe moved Amendment No. 195:
Page 49, line 15, at end insert—
("and is so constituted as to secure that at least one director has special responsibility for Scotland and at least one for Wales.").
The noble Lord said: My Lords, it is my misfortune to move an important amendment at a very late hour. This happened at the Committee stage, and it happens again this evening. A similar amendment was defeated on a very small vote at Committee stage, and I hoped that by reviving this amendment we might have a larger debate and a greater appreciation of the logic of my case. I had hoped to see the noble Lord, Lord Gray of Contin, in his place on the Front Bench, because he is particularly sensitive to the matters which I am raising. But I am delighted to see the chairman of the Scottish Peers' Association in her place and I congratulate her on her stamina and her interest. She will understand perhaps more than most just what we are talking about in this amendment.
I am encouraged to place this amendment before your Lordships tonight by the representations from the Scottish Council for Development and Industry, which is an organisation in Scotland representing local authorities, trade unions, banks, industries and nationalised industries. It is very concerned about the movement towards centralisation in our economy and wishes to preserve a degree of regional policy being injected into this matter. It is not a purely Scottish matter. It is a question of philosophy, of whether you believe in a greater concentration of power and decision-making in the south-eastern corner of this country or whether you believe in a distribution of decision-making into the regions. I do not want to open up a general economic debate but this country is suffering seriously from a division in our community between a neglected North and a prosperous South. We are suffering also from the fact that with the inevitable movement to greater units in industry and commerce, decision-making is being moved from the regions and people are impoverished intellectually and in every other way by this centralisation of power in the South-East.
This amendment does not represent a change in the existing structure. All it does is to confirm the existing structure, which recognises some provision for regional authority. The gas industry north of the Border is described as Scottish Gas. There is an identification of the people in Scotland with the management and administration of Scottish Gas but there is no provision in the Bill for avoiding a central-isation of power and authority in a central body.
The Minister has already recognised that the abolition of the local consumer councils is included in

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the Bill. This to me represents a further element in the remoteness of this large organisation from the customers, and the people who would use its product.
There are two special interests in connection with Scotland, if I may dwell on Scotland just for a moment. The distribution pattern in the Highlands and Islands presents an entirely different picture from other parts of the United Kingdom. But once you neglect this area of representation in the administration of the gas business you are neglecting an important element.
In addition, most of the gas originates in Scotland and so Scotland has a particular interest not only in ensuring an adequate provision of services to remote areas but also in providing the product. So I am suggesting that in creating this great national monopoly, which is what is happening, there should be some protection for social responsibility in the distribution of power and decision-making and provision for the consumer's voice to be heard. Accordingly, I beg to move Amendment No. 195.
12.45 p.m.
Lord Belstead: My Lords, I fully recognise the concern which has been expressed by the noble Lord, Lord Taylor of Gryfe. It is, of course, British Gas's intention to maintain its existing regional structure. It also recognises the benefits of having staff at regional level who understand the particular problems which customers in those regions face, and it is determined to ensure that this highly valued local interface should be maintained.
One of the purposes of privatisation is to enable the successor company to make management decisions about its operations without government interference. For that reason I am not in the least bit surprised that we have received a number of assurances from British Gas. It is quite wrong to imagine that it would sacrifice the valuable local arrangements that it has. Although it is the case that we want the new company to be as efficient as possible, none of us ought to go away with the idea that that will be achieved at the expense of losing customers in the regions, on whom the success of British Gas in the past has depended and on whom the future will depend as well.
I am saying that, so far as concerns the successor company, in the private situation it is a matter for the company to organise its affairs as it sees best. Indeed, British Gas has given reassurances that it will be very sensitive to the importance of its relationship with the regions. Before I finish, I may say that in the matter that is within the direct scope of the power of the Government, we have taken action. I am sure that the noble Lord will have observed that the new director-designate of the Office of Gas Supply is none other than a very distinguished Scotsman, Mr. James McKinnon, former president of the Institution of Chartered Accountants of Scotland. He is someone who has a very distinguished career in commerce and is a highly qualified Scottish chartered accountant. I do not believe that we could have done better.
Lord Stoddart of Swindon: My Lords, who shall we have for Wales?
Lord Taylor of Gryfe: My Lords, I concur in the Minister's final statement, that one could not do better than hire a Scottish chartered accountant. I thank the Minister for the assurances that he has given. I hope that they will be fulfilled in the Act if not written into the Bill. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 195A and 195B not moved.]
The Deputy Speaker (Lord Cullen of Ashbourne): My Lords, with a slight re-ordering of the amendments, we now move to Amendment No. 196.
Lord Taylor of Gryfe Lord Taylor of Gryfe had given notice of his intention to move amendment No. 196:
After Clause 49, insert the following new clause:
"Regional Development.

.—(1) The regional management responsibilities of the Corporation prior to vesting day shall be at least sustained by the successor company and this requirement shall appear in the Memorandum of Association for that company; and

(2) The Board of directors of the successor company shall include at least one non-executive director with special responsibility for Scotland, and similarly for each of the distribution regions of England and Wales.")

The noble Lord said: My Lords, I have just spoken to this amendment, which is not moved.
[Amendment No. 196 not moved.]
[Amendment No. 196A not moved.]
Lord Diamond Lord Diamond moved Amendment No. 196B:
After Clause 49, insert the following new clause:
("Special Shareholder.

.—(1) The Secretary of State shall, in the Articles of Association of the successor company, provide for a special share to be held by the Secretary of State as a Special Shareholder.

(2) The Articles shall include the provision that if there are, in the opinion of the Special Shareholder, reasonable grounds for believing that any person or relevant persons has obtained, or is attempting to obtain, directly or indirectly, control over the Board or its composition, the special shareholder shall give written notice to the Board that there are such grounds.

(3) From and after delivery of such notice under subsection (2) above the special share shall, if voted against the resolution in a poll on any resolution to appoint, re-elect or secure any Director have a total number of votes which (when added to the total number of votes which may be cast on such a poll in respect of all the voting shares registered in the name of the Secretary of State) shall be one more than the total number of votes which may be cast on such poll in respect of all the voting shares which are not registered in the name of the Secretary of State.

(4) The Special Shareholder may, after giving due notice, also exercise the power of the special share to appoint or dismiss any director.").

The noble Lord said: My Lords, I can deal with this amendment very briefly. There is already another provision that the Government have taken on board with regard to a golden share, as they call it. It is a method of protecting the company in certain circumstances by having special powers in respect of a director. The proposed subsection (3) sets out the method by which that shall be achieved. That is all I need to say in order to invite the Government to be good enough to explain how they propose to achieve the same objectives. I beg to move.
Lord Brabazon of Tara: My Lords, as the noble Lord indicated, this amendment gives the House an opportunity to debate the special share. I am aware that the view has been expressed that the special shareholding that we propose that the Secretary of State should have in British Gas ought in some way to be given statutory expression. However, I assure the noble Lord that such is not common practice and that it is indeed quite unnecessary, given that what is achieved through the special share is entrenched when established in the articles, and it can be changed only by the initiative of the special shareholder himself. There is, however, some difference between us as to the extent of control which it is appropriate to exert through the special share and I shall try to explain to noble Lords why we believe that what the Government propose is correct.
The amendment seeks to give the Secretary of State power to veto any attempted takeover by requiring the Secretary of State, as special shareholder, to notify the board if he has grounds to believe that a takeover is threatened and by giving him a controlling vote. We believe that what we propose in the case of British Gas will be more effective. In particular, there will be a limitation of 15 per cent. as the maximum percentage of shares of British Gas plc in which any person, or group of persons acting in concert, would be permitted to have an interest. On becoming aware of any interest in excess of this level, the directors of the company would be obliged to ensure the disposal of the excess shares. The situation that the noble Lord seeks to prevent through his amendment, therefore, is already guarded against as nobody with less than 15 per cent. will be able to secure control over the board.
The amendment also seeks to give the special shareholder the power to "hire and fire" any director. We do not believe that it is right to give the Secretary of State such swingeing power or to overrule the votes of ordinary shareholders in this way. In fact, the special share for British Gas will not carry any positive rights, other than the right to attend and speak at general meetings. The special share therefore already gives us all we need without trampling on the usual shareholder and company rights.
We share the desire of noble Lords to prevent any unwelcome takeover and believe that the special share has an important role to play in that respect. We cannot, however, accept the amendment proposed by the noble Lord, but I hope that my explanation of the role of the special share will satisfy him.
Lord Bruce of Donington: My Lords, while the noble Lord is on his feet perhaps he will give us some further information about the special share. At present Article 10, paragraph 5, of the proposed Articles of Association reads as follows:
"The Special Shareholder may, after consulting the Company and subject to the provisions of the Act, require the Company to redeem the Special Share at par at any time by giving notice to the Company and delivering to it the relevant share certificate".
I find that provision a little curious because the whole purpose of the special share, as we have been given to understand it, is that the special shareholder—to wit, the Secretary of State—will always be able to protect the company in the event of any perceived menace of an undesirable takeover, perhaps in another country. That is the whole purpose of it.
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I am curious to know why the Government, under the provisions of Article 10, paragraph 5, apparently envisage wishing to dispose of the share under certain circumstances. Can the noble Lord give us some information about that?
Lord Brabazon of Tara: My Lords, with the leave of the House, as the noble Lord says, the special share would be redeemable at any time at the option of the holder—that is, the government—after consulting British Gas. Thus, at any time the Government could remove the entrenched status of the limitation on shareholdings provision. But they would obviously do so only if they were satisfied that this would be in the national interest.
I should make it clear that although it is difficult to foresee all the eventualities, we do not at present envisage that the Government will wish to redeem the special share within the foreseeable future—perhaps I should not say the "foreseeable" future, as that would be making a commitment beyond that which 1 can go; but certainly in the near future.
Lord Diamond: My Lords, I am grateful to the noble Lord. He has given us much information, and the last piece of information was very welcome. He has indicated the extent to which he prefers the provision he has in mind to the one we have on the Marshalled List. That of course provides for a special shareholder to be given statutory backing. The noble lord is suggesting something different; but he has been very forthcoming and described the situation very fully, and I shall read very carefully what he has had to say in the hope that it will not be necessary to come back to this point at a later stage. Having said that, and repeated my gratitude, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 50 [British Gas Stock]:
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 197:
Page 49, line 40, leave out sub-section (1).
The noble Lord said: My Lords, I beg to move Amendment No. 197, and with the leave of the House I shall speak also to Amendments Nos. 200, 206, 207, 208, 209 and 210.
The first amendment removes the order-making powers in subsection (1). The reason is simply that when the proposed new financial structure for British Gas was announced on 18th June, we made clear the Government's intention to assume responsibility for the British Gas stock and we therefore thought it right to clarify this in the Bill. The following amendments are all consequential on that Amendment No. 197. I beg to move.
Lord Diamond: My Lords, it is very interesting to hear the Government giving the reasons for making share provisions in the Bill itself—or at all events stock provisions, for British Gas stock. I entirely agree that they should be in the Bill, and we hope that this will be regarded as a useful precedent for putting other similar matters in the Bill.
On Question, amendment agreed to.
Clause 49 [ Vesting of property etc. of Corporation in a company nominated by the Secretary of State]:
[Amendments Nos. 195C to 195E not moved. ]
Lord Diamond Lord Diamond moved Amendment No. 197A:
("Before Clause 51 insert the following new clause:
("Trustees

.—(1) The Secretary of State shall appoint a body of Trustees (hereinafter called "the Trustees") to carry out the functions assigned to them by this Part.

(2) The Trustees, who shall act jointly, shall consist of the holders for the time being of the offices of Governor of the Bank of England, Chairman of the London Stock Exchange, Comptroller and Auditor General and Public Trustee.

(3) The expenses and costs incurred by the Trustees in carrying out their duties shall be re-imbursed by the Treaty.").

The noble Lord said: My Lords, this is a very important amendment which I am now moving. I gather that it will be convenient to include it with Amendments Nos. 197C, 197E, 197L, 197Q, 197Y and 197AB. In due course I shall refer to each of those amendments and speak to them.
The amendment that I am proposing provides a new clause under which:
"the Secretary of State shall appoint a body of Trustees … to carry out the functions assigned to them by this Part".
The trustees' duties are described in later amendments that broadly relate to everything that has to be done for the flotation of this company.
The second provision is that:
"The Trustees, who shall act jointly,"
—which of course I need not have stated because so far as I am aware trustees always have to act jointly, but it is put there to make the position clear and to show what full protection there is in the proposal I am making—shall consist of the following eminent persons:
"the holders for the time being of the offices of Governor of the Bank of England, Chairman of the London Stock Exchange, Comptroller and Auditor General and Public Trustee".
That is a very distinguished body, which together brings in all the experience and standing required to carry out the responsible duties which will now, I am suggesting, be put upon it. The Governor of the Bank of England will have regard to the banking and the financial situation, the Chairman of the London Stock Exchange will be able to have full regard to the market situation, the Comptroller and Auditor General will have full regard to the public purse, and the Public Trustee, in an extremely experienced way, will be able to see that the trustees' duties are carried out with full regard to their position.
The next subsection provides that:
"The expenses and costs incurred by the Trustees in carrying out their duties shall be re-imbursed by the Treasury".
Shortly, the first amendment would appoint a body of extremely able, influential and experienced individuals who would together provide all the necessary expertise for the important task that is being put upon them.
I now turn to the task. Amendment No. 197E is merely consequential. Instead of the duties being on the Treasury or the Secretary of State, in relation to the flotation they would be put upon the trustees. They
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would act independently, objectively, at arm's length and free from political pressures; they would no doubt have full regard to their responsibility as trustees to carry out their duties in the national interest in the best possible way.
The next amendment, Amendment No. 197C, is merely transferring the duties to the trustees on behalf of the Crown. Perhaps I should refer to that in its context. Clause 51 deals with the government holding in the successor company. The provision states:
"the successor company shall issue such securities of the company as the Secretary of State may from time to time direct—
(a) to the Treasury or the Secretary of State".
My proposal is that they be relieved of that responsibility and that the trustees should act on behalf of the Crown. They are objective, responsible and knowledgeable people, and it is right that they should be asked to act on behalf of the Crown.
Amendment No. 197L is the next amendment. Clause 51(4) states:
"Shares issued in pursuance of this section"—
that is, to the successor company—
"shall be of such nominal value as the Secretary of State may direct".
The amendment proposes to add the additional provision:
"shall amount in total to such a sum as the Trustees, after taking such advice as they consider necessary, shall determine is the fair value as between a willing seller and a willing buyer of the Corporation's undertaking as a going concern".
There we have the guts of the matter. We have the trustees taking all the advice that they need and together determining what is a fair value of the undertaking as a going concern between a willing seller and a willing buyer.
Those are obvious conditions of a fair valuation. The corporation is a going concern; the circumstances contemplate a willing seller and a willing buyer. There is at the moment no machinery to determine that, other than advice from the Government, who are far too closely connected and an interested party in the arrangement. It needs objectively to be determined by people who have the national interest as their guide but who are at arm's length. They will not be under political or financial pressure to undervalue the corporation in order to secure a quick sale. I could go much further, but I put it in those moderate terms for the moment. They will deal with the matter responsibly and objectively, and the public purse will in that way be wholly protected. The trustees will have regard to longer-term interests than might otherwise be the case.
The next amendment is Amendment No. 197Q. Where at the moment the Bill provides for any dividends or other sums received by the Treasury or the Secretary of State, the amendment provides that they would be received by the trustees, because they would hold the shares and receive the dividends.
Amendment No. 197Y provides:
"(1) The provisions of subsections (1) and (2) above shall not apply to the Trustees".
To put that in context, page 52 deals with the clause under which the Government invest in the securities of the successor company. Clause 53 which relates to the exercise of functions through nominees provides:

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"Any person holding any securities or rights as a nominee of the Treasury or the Secretary of State by virtue of subsection (1) above shall hold and deal with them (or any of them) on such terms and in such manner as the Treasury or, with the consent of the Treasury, the Secretary of State may direct".
Amendment No. 197Y adjusts that provision to the new circumstance of having trustees. It states:
"The provisions of subsections (1) and (2) above shall not apply to the Trustees".
Subsections (1) and (2) relate to the Treasury acting as trustee, which would no longer be the case.
Amendment No. 197AB again puts the trustees in the picture. I have now spoken to all the amendments which have been grouped with the main amendment. I hope that Government will look favourably upon an amendment designed to protect the public purse and to achieve the maximum for the nation from the sale of this undertaking through the expertise of some of the most distinguished members of the City and the public service who will together arrive at what I am sure will be the best impartial, objective and sensible conclusions. I beg to move.
Lord Brabazon of Tara: My Lords, the amendments moved by the noble Lord seem to show that he has no confidence in the Government's ability to handle these matters on their own. He will not be surprised that I fundamentally disagree with him on that. The Secretary of State is the guardian of the existing nationalised gas industry and it is right that he should have the power, with the Treasury, to issue securities and to determine the value of the shares in the nationalised industry's successor.
He has of course appointed advisers to assist him in these matters, and it will be open to him to seek advice from appropriate institutions, including those mentioned by the noble Lord in his amendment. It is the Government's firm intention to consult the Bank of England on these matters and of course the Stock Exchange will have to be satisfied with the arrangements for the sale. I do not think that the noble Lord will be surprised when I say that I cannot accept his amendment.
Lord Diamond: My Lords, I am not surprised to hear that reply. I was hoping, however, that the Government would indicate that they are taking the matter a little more seriously. It is perfectly true, as the noble Lord started by saying, that all this indicates some lack of trust in the wisdom and discretion of the present Government. I am trying to be as objective as possible in examining the record to see what success has been achieved by the Government in arriving at suitable and fair prices for flotations to which they have previously been party. They cannot claim much success. The last flotation, that of British Telecom, was, by general consent, a pretty disgraceful error of judgment. We hope to avoid that by providing the machinery in the amendment.
I am sorry that the Government are not prepared to pay more attention to it. It would be to their credit if they were able to show, by adopting this proposal, that they came with what I might call clean hands to the matter and that their only concern was with the ends of privatisation and not exclusively with the financial results. It is within general knowledge that the purpose
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of the Government's privatisation measure is not merely to privatise. It is principally to provide the cash that they need for the purposes that they have indicated—to sell assets for the purpose of increasing public expenditure or, more particularly, reducing taxation. There is no point in beating about the bush in respect of that purpose. The Government have stated it many times.
The amendment is an attempt to take the matter out of the political arena and to put it in the hands of objective trustees who would surely have no reason to do other than act in the best interests of the nation. I am sorry that the Government are not prepared to adopt the suggestion. I cannot persuade them I can only invite them to think about it with more care than they have done so far. In those circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 51 [Initial Government holding in the successor company]:
[Amendments Nos. 197B to 197H not moved.]
1.15 a.m.
Lord Diamond Lord Diamond moved Amendment No. 197J:
Page 51, line 17, after ("value") insert ("per share").
The noble Lord said: My Lords, in moving this amendment, I should like also to discuss the following amendment. It is necessary, I believe, to put them in context. Page 51 takes us back to the clause dealing with the initial government holding in the successor company. Line 17 at present reads:
"Shares issued in pursuance of this section"—
that is to say, the shares allotted to the successor company—
"shall be of such nominal value as the Secretary of State may direct".
The amendment proposes the wording,
"of such nominal value per share".
It is unnecessary to pursue that too hard, because the Government say that that is the meaning in any event. On the next line, after the words,
"as the Secretary of State may direct",
we add:
"shall amount in total to the value of the net assets of the Corporation as shown on its latest audited Balance Sheet as adjusted (to the nearest million pounds) in respect of variations in assets and liabilities occurring between the date of the Balance Sheet and the transfer date".
This is a method of securing that the value of the net assets shall figure largely in the arrangements made for the flotation. It represents the anxieties that many people have that the value of the shares offered will be at a considerable discount on the assets of the corporation, representing therefore a waste of national assets.
This amendment has been discussed on a previous occasion in a similar form. It now refers to the,
"latest audited Balance Sheet as adjusted to the nearest million pounds)".
There are very large figures involved. We would not want to make difficulties with regard to small details. It is the usual de minimis rule. We hope that the Government will now let us have their views on this

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method of protecting the public purse. That is all we are doing in the part of the Bill. We are putting forward amendments which suggest different ways of protecting the nation's assets. We are by no means preventing the sale, which we recognise, having given a Second Reading to this Bill, has to take place to satisfy the will of Parliament. I beg to move.
Lord Belstead: My Lords, the first of these amendments, Amendment No. 197J, is aimed at paragraph (a) of subsection (4) of Clause 51, which seeks to clarify what is meant by the nominal value of shares. The provision is designed to give the Secretary of State power to choose the nominal value of the shares. It is clear that this must be set "per share", and the proposed amendment is, I would suggest, therefore unnecessary.
But the second amendment to which the noble Lord has spoken, Amendment No. 197K, is far more substantial. It seeks to establish that the valuation of the company ought to be based on the value of net assets as shown in the latest audited balance sheet. The Government have consistently made clear their view that valuing companies on the basis of the current replacement cost of their assets is nonsense. I do not think I need to flesh that out at this hour of the evening. All I would say is that surely the value of a business must be judged by reference to the income which can be generated from its assets, or by the value of its assets if sold individually on the open market, and not by the accounting value computed by adding together the replacement cost of the assets. At any rate, if it were done like that I should be a very suspicious buyer of the shares. I am sorry it is on those grounds that I cannot accept this amendment.
Lord Stoddart of Swindon: My Lords, I am rather surprised to hear what the noble Lord has said about replacement cost. I shall be very brief about this. Over the past few years we have been charging prices for gas on the replacement cost of assets. We have done so for electricity. If it is right to price gas on the basis of replacement cost, why on earth is it wrong to sell those assets at replacement cost?
Lord Belstead: My Lords, we shall not be pricing gas on replacement cost but on a different basis in the future.
Lord Stoddart of Swindon: My Lords, we have been doing it in the past.
Lord Bruce of Donington: My Lords, may I press the noble Lord a little more on the question of valuing the assets at replacement cost? The noble Lord expressed some dismay—indeed, incredulity—that this method had ever been adopted. Surely the noble Lord must be aware that it has been on the insistence of Her Majesty's Government that these nationalised industries have been compelled to use current cost accounting in order that, in terms of the public sector borrowing requirement and minimum capital return, they could exercise the maximum possible discipline on the companies concerned. I am surprised at the noble Lord. The noble Lord knows perfectly well—and it was exemplified in the course of the Local
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Government (Finance) No. 2) Bill which was abandoned by the Government before the last election—that they were all for accounting on a current cost accounting basis. Therefore, the noble Lord should not try to get away with that.
When the noble Lord says that the value of the shares should be based on the expectations of future income, can he give the House some indication as to how many years' purchase of the assumed annual profits is to be taken or has been assumed by the Government for the purpose of valuing them on a potential income basis?
Baroness Gardner of Parkes: My Lords, perhaps I may intervene on this point to say that at the last meeting of the Electricity Council which I attended one of the items on the agenda was consideration of a return to historic cost accounting, and this is becoming very common throughout industry.
Lord Stoddart of Swindon: My Lords, that is what we have been telling the Government for years.
Lord Belstead: My Lords, if the House will allow me to speak for a third time (which I do not think I should ask, but I shall), the point that I would put to the noble Lord, Lord Bruce, is a simple one. We are talking about a flotation. The company's value should be seen as the value of the business to investors and depends on factors, including the profitability of the company. If I was buying shares in British Gas, which I shall not be, I would not buy on any other basis.
Lord Diamond: My Lords, I hear what the Minister has to say, and I think that that is an over-simplistic view of arriving at a valuation. I would have regard to the basis of valuation to which the noble Lord has referred. I would also very much have regard to the value of the net assets. Anyone who ignores that completely must expect to find himself in a little difficulty if a company comes on difficult times and has to sell its assets, or whatever the case may be. It is a very familiar formula, so far as accountants are concerned, to take this measure into account. I would not go so far as to say that this is the whole answer.
The amendment was put down in order to indicate to the Government that there was this figure to be taken into account, and if the Government had said that they would take it into account and would perhaps pay some attention to this, although even more attention to profitability, perhaps one would have been satisfied. However, they have not. They have dismissed this element in valuation completely, and I am bound to say that in doing so they have in my view made an error, which they may—I hope not—live to regret.
However, all I can do is to put before the Government the experience that some of us have had over very many years in this field and hope that the Government will take advantage of it and so far as possible benefit from it. If the Government are not prepared to have any regard to this, there is not much more that we can do about it at this hour of the night other than seek your Lordships' leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 197K to 197Q not moved.]
Lord Diamond Lord Diamond: moved Amendment No. 197R.
Page 51, line 30, leave out ("the Consolidated Fund") and insert ("a fund controlled by the Treasury designated the Consolidated Capital Fund.
( ) Payments out of the Consolidated Capital Fund (up to a maximum of twenty per cent. in each subsequent fiscal year) may only be made for purposes certified by the Comptroller and Auditor General as being the bona fide creation of new national assets and subject to the approval by the House of Commons of detailed estimates to them.").
The noble Lord said: My Lords, this is an amendment which I must move in spite of the lateness of the hour. I think that this amendment is to be taken on its own. Page 51 concerns the initial Government holding in the successor company. The subsection, at line 30, says:
"Any dividends or other sums received by the Treasury or the Secretary of State in right of or on the disposal of any securities or rights acquired by virtue of this section shall be paid into the Consolidated Fund".
That is the normal situation hallowed by experience, and one would expect to find those words at this point in any such Bill as we are now discussing.
Why then am I concerned about it and suggesting something totally different? It is because the Government are behaving in a way totally different from the way in which all previous governments have behaved. It is an extraordinary situation that we have a Conservative government, with their previous reputation of being good housekeepers, acting in this way; that is to say, continuously using capital assets to meet current expenditure. Selling the family silver to pay for the groceries. Continuously doing this and intending, as soon as they get hold of the cash arising out of the sale of the company, to use it once more for current purposes for the reduction of taxation.
Therefore, one shows one's unwillingness to allow that to happen, so far as one can protect the public purse against the Government, by providing that the fund should not be paid into the Consolidated Fund, which is a single fund used for all purposes and hitherto has served satisfactorily because no government have behaved in the way the present Government are behaving. It has been perfectly satisfactory to have a single Consolidated Fund. We now have to have regard to a capital fund to be used for capital purposes. A new fund to be set up, which would have been set up up before had the circumstances arisen, but they have not. The circumstances have arisen cumulatively as a result of the actions of the present Government. There is no precedent of governments behaving in this way on this scale before.
The present position is that the Government are searching for assets to try to turn into cash for current purposes. Unfortunately their path is strewn with difficulties. They have problems like the Royal Ordnance factories; they have problems like the privatisation of water. All these are problems for them. They have a further problem in the recent decision of the Court of Human Rights, which is going to throw a major shadow over the present proposals. I should not be surprised if in some months' or a year's time the Government come back and make an announcement saying that for reasons which they are not prepared to disclose the flotation of gas is no longer to take place. I should not be surprised at all. It would only be a
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continuation of the pattern they have hitherto experienced.
I am not doing anything to prevent this. I am merely saying that in order to protect the public purse the proceeds of that privatisation should go into a consolidated capital fund which would receive all the monies from the sale of assets, and would be used as is described in the rest of the amendment:
"Payments out of the Consolidated Captial Fund (up to a maximum of twenty per cent. in each subsequent fiacal year) may only be made for purposes certified by the Comptroller and Auditor General as being the bona fide creation of new national assets and subject to the approval by the House of Commons of tit-tailed estimates submitted to them.".
The payments out of the Consolidated Fund would continue to be subject to the approval of detailed estimates by the House of Commons. That is the normal pattern and that is fine, but they would have to be of no more than 20 per cent. in each year—that is a familiar figure to the Government in local authority arrangements—and would have to be certified by an independent and knowledgeable party, namely, the Comptroller and Auditor General, as being the bona fide creation of new national assets. If they were used in that way that is fine and one is merely exchanging one asset for another asset. One is selling the asset of the gas business and investing in other assets, whatever they are, whatever the Government decide is the first priority under the certificate of the Comptroller and Auditor General. That would be a perfectly satisfactory solution to the problem.
I am not expecting all that enthusiastic a response from the Government. Anxieties have been expressed many times from both sides of the Chamber, the noble Earl, Lord Stockton, included, about the way in which the present Government are conducting their responsibility of housekeeping for the nation. It is because of that that we want to create this consolidated capital fund and use capital receipts for capital purposes.
It is fantastic that I should have to be standing up here trying to suggest to a Conservative government what they will not accept, that it is proper for the proceeds from the sale of capital assets to be used for capital purposes. I bet anybody here a pound to a shilling that the Government will not depart from their determination not to do that. It is extraordinary that I should have to put that to them; nevertheless that is what I do. I hope that they will give some consideration to this proposal.
Lord Bruce of Donington: My Lords, we on this side of the House would like to endorse what the noble Lord, Lord Diamond, has just said. Because of the lateness of the hour we do not choose to argue further on it, but we should like our views to go on the record.
Lord Belstead: My Lords, the noble Lord and the noble Lord, Lord Bruce of Donington, have both performed the somewhat inelegant feat of standing the traditions of government accounting on their head. The noble Lord, Lord Diamond, knows much better than I do that it is a general principle that Government revenue should be paid into the Consolidated Fund. The noble Lord also well knows that those moneys are well protected, in that payments out of the Consoli-

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dated Fund have to be voted by Parliament on the basis of estimates submitted to it.
The noble Lord devoted the last part of his speech to some prognosis as to what might happen when British Gas is finally to be privatised. I would simply say that the programme of privatisation in this case will generate long-term economic benefits as well as encouraging wider share ownership. I believe it will be good for the industry, for its employees, for its customers and for the economy as a whole.
Lord Diamond: My Lords, there is no point in prolonging the argument. I am grateful to the noble Lord for replying. The reply was on the lines one expected, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 197S not moved.]
Clause 52 [Government investment in securities of the successor company]:
[Amendments Nos. 197T to 197V not moved.]
Clause 53 [Exercise of functions through nominees]:
[Amendments Nos. 197W to 197Y not moved.]
Clause 54 [Target investment limit for Government shareholding]:
[Amendments Nos. 197Z to 197AB not moved.]
1.30 a.m.
Lord Stoddart of Swindon Lord Stoddart of Swindon moved Amendment No. 197AC:
Page 53, leave out lines 20 and 21.
The noble Lord said: I beg to move Amendment No. 197AC, I can deal with this very briefly. Line 21 is in Clause 54(4), and that subsection reads:
"The Secretary of State may from time to time by order fix a new target investment limit in place of the one previously in force under this section: but—
(a) any new limit must be lower than the one it replaces; and".
Those are the words to which we object. We object to them, first, because they seek to bind a future government who may very well wish to increase the government holding in British Gas. That applies not only to a Labour Government who, of course, will be in office after the next election; it could even apply to the present Government. It seems absurd to us that any government should deny themselves or their successors flexibility. As I have said, it is late and I do not wish to make too much of this. Nevertheless, we feel very strongly about it. I beg to move.
Lord Brabazon of Tara: My Lords, I can deal very briefly with this. As the noble Lord moved the amendment very briefly, he will not be surprised at the brief answer that I have to give him. It is that the purpose of this subsection is to prevent the purchase back of British Gas shares through the means here referred to. If the noble Lord's party come to power at some stage in the future and they wish to renationalise British Gas, they will have to do it through primary legislation and not through the means of purchasing shares in the market.
Lord Stoddart of Swindon: My Lords, I must say that that really confirms what I have said: that the Government wish to bind their successors. In effect, a future Labour government would take British Gas back into public ownership. Would the noble Lord not agree that it would be far preferable if they did so by the purchase of shares: or does he think that a future Labour government—or perhaps even a future Conservative government—should renationalise the gas industry by setting up a new nationalised corporation? I should have thought that there could be something between the sides of the House in saying that any future public ownership should be achieved through the buying of shares rather than by the wholesale nationalisation of an industry under a corporation such as we have at the moment on the old Morrisonian principle.
However, it seems that the Government are not with us on this. They wish to use the time of Parliament once again to drive through—or another government will have to drive through—major primary legislation and to sit all hours of the night, whereas it could be done so simply if they would only accept our amendment. However, the noble Lord will not do so and so I shall withdraw it.
Amendment, by leave, withdrawn.
Lord Diamond Lord Diamond moved Amendment No. 197AD:
After Clause 54, insert the following new clause:
("Rate of dividend on ordinary shares.

.—(1) The Secretary of State with the consent of the Treasury shall decide the maximum rate of dividend on ordinary shares payable by the successor company and shall, after every subsequent period of five years, review the position and, with the consent of the Treasury, decide the maximum rate for the ensuing five years.

(2) In reaching the decisions referred to in subsection (1) above the Secretary of State shall have regard to the need to maintain a fair balance between the interests of the shareholders and of the consumers of the products of the successor company.

(3) The decisions referred to in subsection (1) above shall be implemented by order subject to approval by both Houses of Parliament.").

The noble Lord said: My Lords, I beg to move this amendment which is very apposite in view of the exchange which has just taken place, because we on these Benches would prefer that the industry is not disturbed in this way by continual nationalisation, privatisation, nationalisation and privatisation again, as was steel, for example. We would prefer, unless there is a strong case made to the contrary, that a nationalised industry should remain nationalised, and a privatised industry should remain privatised. I have suggested on more than one occasion that the Government would be taking a far more long-sighted view if they would have regard to some of the amendments we have put forward to make the privatisation measure more acceptable in the eyes of those who have a greater regard for the consumer than for the shareholder, and of course a privatisation measure as described in this Bill is wholly in order to give virtually exclusive regard to the interests of the shareholder. This amendment—and this is why what I have said is such a relevant prelude to it—provides that:

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"The Secretary of State with the consent of the Treasury"—
which is very familiar wording—
"shall decide the maximum rate of dividend on ordinary shares payable by the successor company"—
I repeat: "the maximum rate of dividend". I stop there for a moment and remind your Lordships that that is the normal pattern for all utilities, both those which existed before they were nationalised, such as gas, and those which continue to exist at the present time, as in water, where they are carried on as privately-owned utilities, with fixed maximum rates of dividend. Therefore, I am proposing that:
"The Secretary of State should decide the maximum rate of dividend on ordinary shares payable by the successor company and shall, after every subsequent period of five years, review the position".
The purpose of reviewing the position is of course so that the rate of dividend shall not remain static. It will be necessary and wise to increase the rate of dividend if the company is to be encouraged to make increased profits, to have regard to what is a reasonable dividend providing at the same time the interests of the consumer are equally taken into account. Of course, the whole purpose of limiting dividends in all past and present privately-owned utilities is that this balance of the interests of the shareholder and the consumer shall be held so it poses that after every subsequent period of five years the position should be reviewed. This is more of a commercial approach than is at present the case, and it is wise that should be the case so as to encourage greater efficiency and greater search for efficiency of the kind which the efficiency factor is at present designed to achieve.
It goes on:
"with the consent of the Treasury, decide the maximum rate for the ensuing five years."
So every five years there will be a review of the ceiling of dividends. That may not be reached; if it is reached, so much the better.
Subsection (2) reads:
"In reaching the decision referred to in subsection (1) above the Secretary of State shall have regard to the need to maintain a fair balance between the interests of the shareholders and of the consumers of the products of the successor company."
I should have thought that was an acceptable statement of intention whichever view one took about it. If the Government are not prepared to have regard to that, it would indicate they are not willing to have a fair regard to the interests of the consumer, but to have only regard to the interests of the shareholder.
The last subsection of the amendment reads:
"The decisions referred to in subsection (1) above shall be implemented by order subject to approval by both Houses of Parliament".
There is no intention here to keep Parliament out of the discussion. Indeed the views of Parliament would be an essential ingredient, and immensely valuable.
This does not go so far as the present arrangements go for utility companies because it does not limit the amount of accumulated profits. Of course, everybody realises that, if your rate of dividend is limited and you are making profit at a rate which is above the rate of dividend being declared, then the surplus accumulates. And of course in the present utility companies there is a maximum of accumulation.
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Why?—because the intention of the legislation is that, if profits above the level of the maximum reasonable dividend are continuously being made, that is an indication that too high a price is being charged for the product; and in order to keep down the excessive charge for the product—there being a monopoly—what one has to do in the legislation affecting utilities is to limit the accumulation of profits.
That is not provided for here because I do not think it is acceptable to the Government and I do not think it is a wise provision if one wants to encourage maximum efficiency; so that aspect has been left out and I mention it only to show that, far from this being a tough proposal, it is in fact a very lenient one. But it does provide a possible compromise, a halfway house, between those who are hell-bent on nationalisation and those who are hell-bent on privatisation.
I am bound to say to the Government that I do not think they would be unwise to take a longer view of their present intentions and to have regard to a form of privatisation which would be likely to stick—as the present one clearly will not. It is in that sense of trying to help to secure more stability in these industries that I beg to move this amendment.
Lord Sanderson of Bowden: My Lords, I think I must intervene on this particular amendment, and very briefly at that. The noble Lord, Lord Diamond, talked about "consumers rather than shareholders". I think it might interest him to have a look at the press release that came out about the flotation. It says:
"The arrangements will include domestic gas customers who register their interest in advance to purchase a guaranteed allotment of a certain number of shares."
Surely that means that consumers are going to be benefiting, if they want to, by purchasing shares.
In addressing this matter, I am sure the noble Lord, Lord Diamond, as leader in this House of the SDP, must be in fact producing SDP policies. I always thought, in listening to Alliance policies, that they were in favour of wider share ownership and in favour of freedom from dividend control. But here we have a newly-privatised plc, where the Secretary of State (with the consent of the Treasury) is going to decide what that company's dividend should be. That is a very strange sort of policy to be peddling from the SDP Benches; and I must say that I find this particular amendment, coming from such a quarter, most strange.
Lord Brabazon of Tara: My Lords, of course this is an identical amendment to one which was put down at Committee stage. We had a reasonably long debate on it at that stage, and I am afraid that my views have not changed one little bit since then.
The whole purpose of privatisation is to free British Gas from interference by government in its affairs and, as my noble friend Lord Sanderson said, to enable consumers, employees and others to take a personal stake in the industry whose services they use. I would just pick up one point that the noble Lord, Lord Diamond, made when he spoke of existing utility companies being subject to dividend control. There are only a few small water companies which are presently in that position.

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The advantages and disadvantages of dividend control as a method of utility control were examined exhaustively by Professor Littlechild in his report on the approach to price controls in the case of British Telecom. He demonstrated clearly that the disadvantages in terms of disincentive to efficiency were overwhelming, and I cannot accept that such controls are in the interest either of the consumer or of an efficient gas industry.
So far as the consumer is concerned, in this Bill he is very well protected. We are working on a price formula, not a profit formula. A profit formula would lead to the usual disadvantages of cost-plus, where there is no reason to make yourself more efficient because you are allowed to make only a certain amount of profit. Price control which exists in the Bill is much better. You have every incentive to make yourself efficient, and, if you do, I do not see why your shareholders should not take advantage of that through having freedom of dividend payments. So for all those reasons I cannot accept this amendment any more than I was able to accept it last time round.
On Question, amendment negatived.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 197AE:
After Clause 57, insert the following new clause:
("Pre-transfer provisions relating to the Corporation.
. The accounts for the Corporation for the year ended 31st March 1986 and for each succeeding completed year prior to "the transfer date" provided for in section 49 of this Act and for the period from the last completed year until "the transfer date" shall be prepared under the same current cost accounting principles as those used in the preparation, presentation and publication of the Corporation's accounts for the year ended 31st March 1985 and shall include, in addition to those particulars required by the Companies Act 1985 section 228 and where applicable section 229 of that Act, detailed statements comparable with those contained in the Corporation Annual Report and Accounts for 1984–85, with the following subheads:

(a) ten year financial summary to and including the end of the year covered by the accounts submitted;

(b) statistics for the industry for each of the ten years up to and including the end of the year covered by the accounts submitted;

(c) statistics for the Regions for the year covered by the accounts submitted;

(d) performance ratios for each year for the ten year period to and including the year covered by the accounts submitted.").

The noble Lord said: My Lords, I beg to move the amendment standing in my name and I will also speak to Amendments Nos. 197AF and 197AG. At the same time, I would indicate that when Amendments Nos. 197AF and 197AG are called I propose to move them formally but not to speak to them, in order that the amendments themselves get upon the record. These amendments were moved by me in Committee after 10 o'clock at night. They were rather complex and I took them altogether in order, as the noble Lord is well aware, to save time. The noble Lord will be relieved to hear that I do not propose to repeat the arguments that I then stated for the introduction of these three clauses.
My resolve to save the time of the House in this way has not been encouraged by the rather derisory remarks addressed to the noble Lord, Lord Diamond, and myself by the noble Lord in regard to Amendment No. 197R. It seems to me that he was seeking to
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instruct the noble Lord and myself on elementary matters of accountancy and elementary principles of business that are well understood in the City of London, and apparently are well understood everywhere, except on the Front Bench of the Government. We do not take lightly to being lectured by people who, in this instance, do not have the remotest idea of what they are talking about.
These amendments were designed to secure some continuity of accounting treatment. As my noble friend Lord Stoddart has said, and as I said on the previous occasion, the change from the current cost-accounting basis to the former historic-cost basis is a typical ploy of this Government. On the basis of selling the whole privatisation business to the public, current cost-accounting was convenient to them in order that they could show how small the profits were. The change to historic cost-accounting provides them with an admirable opportunity, using a different method of accounting, of showing how profitable it has been all the time, even though it has been under national control.
There is one other thing about it, and if the noble Lord's knowledge of accountancy will permit him to correct me on the matter he may correct if I am wrong. He knows quite well that the whole price structure of this gas industry has been based on costs which, on his own say-so, have been artificially inflated by taking excess depreciation, which is now going to be written back. So the consumer has in fact paid for the capital accretion that accrues to the new shareholders.
My amendment was designed to ensure that there was continuity of accountancy treatment. This is reckoned to be quite respectable in the City of London. Whether or not it has permeated the Government Benches is a matter for them entirely, but it is quite a reputable, respectable and honest stance to take. The other amendments were concerned, first of all, with showing on the basis of a consistent method of accounting exactly the transactions that take place between the date of transfer and the date of flotation. This is all they were designed for, so that it could all be done quite openly. The other amendments were designed to ensure that the accounts published in future by the plc shall contain at least the type and detail of information that the gas corporation has presented to the public so far.
In justice to the noble Lord—and I hope he understood what he was saying—he said at the conclusion of his remarks when he said that the Government were not prepared to accept the amendment:
"I should like to think that the answers to the three amendments which the noble Lord has put to the Government, although I know they do not go down the same road as the noble Lord would wish, do show that we are making provision in the Bill and in the authorisation for accounts which will accord with what the noble Lord wants, which is a clear demonstration of what the facts are in the company at the moment of privatisation".—[Official Report, 11/6/86; col 362.].
I have been through the revised authorisation. I have been through the particular sections that are relevant to it, in particular Condition 2. I would assure the noble Lord—and he can examine it as he wishes—that if the contents of Condition 2 are meticulously complied with, and no more than complied with, they will not show all the particulars that the present gas

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corporation makes available to the public. Nor will the remaining provisions of the Bill when taken in conjunction with the authorisation provide for that.
If the noble Lord is prepared to say to me and to the House that the accounts published by British Gas plc will conform in every way—in continuity, in scope and in detail—with the present accounts, my objections to what he proposes in the conditions are immediately withdrawn. I want to secure continuity and I want to secure honesty. If the noble Lord can do that, we shall be more than satisfied.
However, perhaps I should warn the noble Lord of this. We are drawing towards the closing days of this Government. They are unlikely to be returned thereafter. I warn the Government, with a full sense of responsibility, that if adequate information is not published in accordance with the accounts that are published when British Gas was a public corporation, then we shall; have a detailed exhumation to find out exactly what has happened in terms that retain continuity with what has been done in the past.
I warn in prrticular the noble Lord who addressed the House on the previous amendment, and who seemed to think that he had effectively sealed off the possibility of reacquisition of the shares of British Gas, that he probably has another think coming. I beg to move.
2 a.m.
Baroness Gardner of Parkes: My Lords, one point must be made clear with regard to historic cost and current cost accounting, because all sorts of devious motives have been attributed to their use. I remind the House that current cost accounting became common in business because of the vast rates of inflation which, when at their highest, reached the level of 27 per cent. under a Labour Government. That is what caused current cost accounting to be brought into existence. Now that inflation is right down, business is returning to current cost accounting, because it is now possible to replace one's assets at a realistic figure without that horrible element of inflation.
Lord Stoddart of Swindon: My Lords, I really must intervene to put the noble Baroness right. Current cost accounting was not, and never has been, adopted generally by private business.
Baroness Gardner of Parkes: I know that, my Lords.
Lord Stoddart of Swindon: My Lords, it has been adopted in the nationalised industries. As I tried to explain before, the prices that have been charged and will continue to be charged are assessed on the basis of current cost accounting. But when the industry is privatised, apparently there will be a change to historic cost accounting. Therefore, that will increase the profits, which will then be distributed to the shareholders. Our objection is that prices to the consumer have been artificially increased. The consumer who has paid those prices, and who would continue to pay them, will be contributing to larger distributions to the new shareholders. That is our objection.
Baroness Gardner of Parkes: My Lords, I am aware of the point that the noble Lord made, but my own point also has to be acknowledged.
Lord Brabazon of Tara: My Lords, as the noble Lord has explained—and I am grateful to my noble friend Lady Gardner of Parkes for her comment—the amendment requires the corporation to prepare accounts for the year ended 31st March and for any subsequent period in accordance with a prescribed accounting principle; namely, current cost convention. It requires also that those accounts should include prescribed detailed financial statements, statistics, and ratios that go well beyond the requirement of the Companies Act.
The amendment would put in place statutory requirements where one existed in the past and which would be unnacceptable because they are far more stringent than those that currently apply to other statutory bodies. I do not believe that it would be right to accept the amendment for several other reasons that I shall explain.
First, the timetable for the passage of the Bill and when it will receive Royal Assent is a matter for Parliament. Should that take place after the publication of the corporation's annual report and accounts for the year ended 31st March 1986, the amendment would effectively introduce retrospective legislation. At any rate, the preparation of that annual report and accounts in compliance with the requirements of the Gas Act 1972 and the directions given by the Secretary of State for Energy is already at an advanced stage.
The annual report could be expected to include relevant and useful detailed statistics, ratios and supplementary financial statements for an appropriate number of years. I would add that the provisions of—
Lord Diamond: My Lords—
Lord Brabazon of Tara: My Lords, I should like to finish what I am saying, if the noble Lord does not mind. He has an opportunity to speak after me.
The provisions of Clause 55(4) will ensure that the successor company prepares its first accounts after vesting in a manner consistent with that of the corporation prior to vesting. The form of accounts for the successor company after flotation will, of course, be for its directors and auditors and I see no role for the Government going beyond the Companies Act in this.
A strict interpretation of the amendment would suggest that the prescribed detailed financial statements, statistics and ratios would have to be included in the accounts, whereas the more appropri-ate place for inclusion would be in the annual report outside the accounts.
The amendment also requires, or at least presumes, preparation of accounts for the period from the last completed year until "the transfer date". With a transfer date in the summer or autumn, the seasonal nature of the business will give rise to accounts which are meaningless and possibly even misleading. The expense and effort of producing such accounts would therefore serve no useful purpose.

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For those resons I very much regret that we cannot accept these amendments.
Lord Diamond: My Lords, I was only going to ask the noble Lord whether he has any knowledge of when the House can expect to receive the report and accounts which I understand are due fairly shortly.
Lord Brabazon of Tara: My Lords, I am afraid that at the moment I do not have that information but I will endeavour to find out if they are due in the near future and let the noble Lord know.
Lord Bruce of Donington: My Lords, I am sorry that the noble Lord has been unable to do anything more than reiterate the brief that was read on the previous occasion, but that is all one can expect under the circumstances. I have no alternative, therefore, but to ask leave to withdraw Amendment No. 197AE.
Amendment, by leave, withdrawn.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 197AF:
After Clause 57, insert the following new clause—
("Form of accounts of the successor company.

.—(1) The accounts of "The Successor Company" in respect of each accounting period from the transfer date shall be prepared, presented and published under the same current cost accounting principles as provided for in section (Pre-transfer provisions relating to the Corporation) above in the case of the Corporation, together with the additional statements therein specified.

(2) They shall be annexed to the accounts prepared, presented and published by the successor company a statement showing—

(a)in respect of its gas supply business—

(i) turnover, costs and profits, relating to its tariff customers;

(ii) turnover, costs and profits, relating to its non-tariff customers;

(b) turnover, costs and profits in respect of activities not included in its gas supply business that is to say:—

(i) the installation of gas appliances of supplies (from the outlet of the meter on the customers premises) or other work undertaken under the terms of a repair, maintenance or installation contracts with gas customers, except for safety checks and emergency and all other works related to the suppliers safety provisions and in pursuance of its statutory safety duties;

(ii) trading in gas appliances;

(iii) exploration for and production or manufacture of gas;

(iv) consultancy, unless solely related to the require-ments of gas supply in Great Britain.

(c) the apportionment, as between the costs referred in sub-section (2)(a)(b) above and included within those of the successor company, of the cost of its commercial and administrative functions.

(d) particulars of the application of the maximum average price per therm formula applicable to tariff customers during the period covered by the accounts or, if different, that applicable at the time of the publication of the accounts showing:—

(i) the allowable gas cost

(ii) the specified rate

(iii) the tariff quantity

(iv) the tariff revenue

used in the calculation of the maximum average price per therm.").

On Question, amendment negatived.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 197AG:
After Clause 57, insert the following new clause—
("Accounting provisions relating to property, rights and liabilities

.—(1) All the property, rights and liabilities passing from the Corporation to the successor company under the provisions of section 49 of this Act shall be transferred at the value stated in the Accounts of the Corporation as at the transfer date prepared, presented and published in accordance with section (Pre-transfer provisions relating to the Corporation) of this Act and shall be so dealt with in the accounting records of the successor company.

(2) Within three months from the transfer date or within the period from the transfer date until the first exercise by the Secretary of State of his powers under section 54(5) of this Act, whichever is the less, the Corporation shall prepare, present and publish a statement of affairs showing its financial position immediately following the transfer date.

(3) At the conclusion of the transitional period provided for under section 57 of this Act the Corporation shall prepare, present and publish a full account showing its transaction up to that date from the date of the statement of affairs provided for in subsection (2) above.").

On Question, amendment negatived.
Clause 60 [Tax provisions]:
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 197AH:
Page 57, line 32, leave out subsection (2).
On Question, amendment negatived.
[Amendment No. 197AJ not moved. ]
Clause 61 [Interpretation etc. of Part II]:
[Amendment No. 197AK not moved. ]
[Amendments Nos. 198 and 198A not moved.]
Clause 64 [Provisions as to orders]:
[Amendments Nos. 199 and 199A not moved.]
Lord Brabazon of Tara Lord Brabazon of Tara moved Amendment No. 200:
Page 61, line 14, leave out (", 50(1)").
The noble Lord said: My Lords, I spoke to this amendment with Amendment No. 197. I beg to move.
On Question, amendment agreed to.
Schedule 7 [Minor and consequential amendments]:
Lord Belstead Lord Belstead moved Amendment No. 201:
Page 88, line 25, at end insert—
("(7A) The reference in section 82(4) of the Building Act 1984 (provisions with respect to demolition orders) to a person authorised by an enactment to carry on an undertaking for the supply of gas shall have effect as a reference to a public gas supplier.").
The noble Lord said: My Lords, this is a drafting amendment. I beg to move.
On Question, amendment agreed to.
The Deputy Speaker: My Lords, in lieu of Amendment No. 202 I call Amendment No. 202A, which is a manuscript amendment.
Lord Belstead Lord Belstead moved manuscript Amendment No. 202A:
Page 100, leave out lines 28 and 29 and insert—
" "gas" means any substance which is or (if it were in a gaseous state) would be gas within the meaning of Part I of the Gas Act 1986;
"public gas supplier" has the same meaning as in Part I of the Gas Act 1986";
The noble Lord said: My Lords, I apologise for this manuscript amendment. This is to bring this particular definition in line with Scottish legislation. I beg to move.
Lord Stoddart of Swindon: My Lords, may I say that I am most obliged to the noble Lord for explaining to us just exactly what gas is.
On Question, amendment agreed to.
Lord Belstead Lord Belstead moved Amendment No. 203:
Page 101, line 7, at end insert—
("The Local Government (Miscellaneous Provisions) Act 1976.
23A. In section 33 of the Local Government (Miscellaneous Provisions) Act 1976 (restoration or continuation of supply of water, gas or electricity), for the word "undertakes", wherever it occurs, there shall be substituted the word "person".).
The noble Lord said: My Lords, with the leave of the House I beg to speak to all the rest of the amendments up to Amendment No. 210 at the end of the Marshalled List, as they are all consequential. I beg to move Amendment No. 203.
Lord Diamond: My Lords, I do not object to that. I should like to ask the noble Lord just to consider a little more carefully what he has said. Is he quite sure that there is nothing in any of these many amendments, which we have not yet had the opportunity to consider, which affects the Bill in any material way?
Lord Belstead: My Lords, I am terribly sorry, and I apologise to the noble Lord, but I could not hear what he was saying.
Lord Diamond: My Lords, it was my fault. There are a number of amendments here and many of us have not considered them at all carefully because we were expecting that the noble Lord would speak to each one and explain their content. We do not want to put him to that trouble at this hour, and so I would ask the noble Lord whether he could merely confirm that they do not affect the contents of the Bill in any material way.
On Question, amendment agreed to.
Schedule 8 [Transitional provisions and savings]:
Lord Belstead Lord Belstead moved Amendments Nos. 204 to 209:
Page 103, line 40, leave out ("section 15(1)") and insert ("subsection (1) of section 15").
Page 103, line 43, leave out (" section 20(1) of this Act ") and insert (" subsection (1) of section 20 of this Act and as if any map accompanying that notice and complying with the requirements of subsection (2) of this said section 15 complied with the requirements of subsection (2) of the said section 20")
Page 107, line 23, leave out from ("(1)") to ("any") in line 35.
Page 107, line 37, after ("Act") insert ("which is in force or effective immediately before the transfer date").
Page 107, line 41, leave out from beginning to ("any") in line 42.
Page 107, line 49, leave out first ("to that Stock").
The noble Lord said: My Lords, in response to the noble Lord, Lord Diamond, Amendments Nos. 204 and 205 are consequential on Amendment No. 174. Amendments Nos. 206 to 209 are consequential on Amendment No. 197, which was spoken to. I beg to move.
On Question, amendments agreed to.
Clause 68 [Short title, commencement and extent]:
Lord Belstead Lord Belstead moved Amendment No. 120:
Page 62, line 37, leave out ("except section 50").
The noble Lord said: My Lords, Amendment No. 210 is consequential upon Amendment No. 197. I beg to move.
On Question, amendment agreed to.

Brighton Marine Palace and Pier Bill [H.L.]
Reported from the Select Committee with an amendment and recommitted to an Unopposed Bill Committee.
House adjourned at thirteen minutes past two o'clock.