HL Deb 09 July 1986 vol 478 cc365-446

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 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—

  1. (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
    2. 366
  2. (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,

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 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 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 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 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 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 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 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 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 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 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 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.

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.

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 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. (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. (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.
  3. (3) (i) The area shall in all respects be fairly typical of areas of gas supply in the United Kingdom.
  4. (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. (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. (6) Any such licence shall be incorporated into written agreement to be entered into between the old and the new suppliers.
  7. (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. (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. (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 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 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 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; 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.
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.
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 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 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 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 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 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 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 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 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, 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 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 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 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 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, 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 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 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 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: 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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 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.

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 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 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—

  1. (a) the price of crude oil has on every day been above US$ 15 a barrel and
  2. (b) the Financial Times 30 Share Index has been above 1350 daily at the close of business and
  3. (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 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 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 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 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 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 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 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 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 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 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 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 had given notice of his intention to move amendment No. 196:

After Clause 49, insert the following new clause:

"Regional Development.

  1. .—(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. (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 moved Amendment No. 196B:

After Clause 49, insert the following new clause:

("Special Shareholder.

  1. .—(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. (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. (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. (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.

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 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 moved Amendment No. 197A:

("Before Clause 51 insert the following new clause:

("Trustees

  1. .—(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. (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. (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 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: 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 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 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 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 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: 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 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- 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 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 moved Amendment No. 197AD:

After Clause 54, insert the following new clause:

("Rate of dividend on ordinary shares.

  1. .—(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. (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. (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: 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. 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.

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 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:

  1. (a) ten year financial summary to and including the end of the year covered by the accounts submitted;
  2. (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;
  3. (c) statistics for the Regions for the year covered by the accounts submitted;
  4. (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 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 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.

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 moved Amendment No. 197AF:

After Clause 57, insert the following new clause—

("Form of accounts of the successor company.

  1. .—(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. (2) They shall be annexed to the accounts prepared, presented and published by the successor company a statement showing—
    1. (a)in respect of its gas supply business—
      1. (i) turnover, costs and profits, relating to its tariff customers;
      2. (ii) turnover, costs and profits, relating to its non-tariff customers;
    2. (b) turnover, costs and profits in respect of activities not included in its gas supply business that is to say:—
      1. (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;
      2. (ii) trading in gas appliances;
      3. (iii) exploration for and production or manufacture of gas;
      4. (iv) consultancy, unless solely related to the require-ments of gas supply in Great Britain.
    3. (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.
    4. (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:—
      1. (i) the allowable gas cost
      2. (ii) the specified rate
      3. (iii) the tariff quantity
      4. (iv) the tariff revenue
        • used in the calculation of the maximum average price per therm.").

On Question, amendment negatived.

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. .—(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. (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. (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 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 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 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 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 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 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 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.