Gas Bill

HL Deb 03 June 1986 vol 475 cc795-966

9.2 p.m.

House again in Committee on Clause 7.

Lord Stoddart of Swindon moved Amendment No. 68A:

Page 6, line 12, at end insert— ("(d) conditions requiring the public gas supplier to seek consultation with any organisation appearing to them to be appropriate with a view to the conclusion between the supplier and that organisation of such agreements as appear to the parties to be desirable with respect to the establishment and maintenance of machinery for the settlement by negotiation of terms and conditions of employment of persons employed by the supplier, with provision for reference to arbitration in default of such settlement in such cases as may be determined by or under the agreements; (e) conditions requiring the public gas supplier to seek consultation with any organisation appearing to them to be appropriate with a view to the conclusion between the Corporation and that organisation of such agreements as appear to the parties to be desirable with respect to the establishment and maintenance of machinery for the promotion and encouragement of measures affecting the safety, health and welfare of persons employed by the supplier and the discussion of other matters of mutual interest to the supplier and such persons, including the training and education of such persons and efficiency in the operation of the services of the supplier; and (f) conditions requiring the public gas supplier to make provisions for such pension arrangements as it may determine, by making such payments as they may determine towards the provision of such pensions, or establishing and maintaining such schemes as they may determine for the payment of such pensions.").

The noble Lord said: This is a very important amendment, although all it seeks to do is to carry forward provisions that already exist in the Gas Act 1972, in Sections 35 and 36. However, I cannot stress too strongly the importance of the amendment and the need to write its provisions into the present Bill.

I shall deal now with the first part of the amendment, which concerns the establishment of proper negotiating machinery. I shall not read out the provision because that would take far too much time; but it deals with the establishment of machinery and it arranges for consultation in relation to that machinery for the proper negotiation of wages and conditions of service.

It is essential in our view that something of that sort should be written into the Bill. I say that because of my own experience in a nationalised industry—the electricity supply industry—where, as the noble Lord, Lord Belstead, will realise, similar provisions apply. In that industry, I negotiated at every level from time to time, and sometimes at all levels simultaneously; at local level, regional level, and national level. I therefore know what it is like to negotiate under the conditions that a statute gives to one.

There is the feeling of confidence that one is entitled to have and retain proper and up-to-date negotiating arrangements and procedures for settling disputes; that one is entitled to sit down and talk with one's employers about conditions of service. What it gave me was a feeling of belonging. One felt that because one had those rights, one belonged to the industry and was a part of that industry. From the point of view of modern industrial relations, that is precisely what we want. Indeed, that is what the Government say they want. They want to see both sides of industry working together. Indeed, we want to get rid of the concept of there being sides in industry, because we believe that all those who work in an industry, whether in a management capacity or on the shop floor, should feel part of the industry and should want it to succeed.

As I have said, such arrangements as those that existed and still exist in the electricity supply industry, and at the present time in the gas industry, engender a feeling of equality between both sides and instil confidence between them. The staff of the British Gas Corporation would be less fearful of their position under privatised British Gas if those arrangements were backed by statute. I hope that the Committee and the Minister will accept the argument in that respect.

The second part of the amendment deals not with negotiation of terms and conditions of appointment but with consultation within the industry; consultation for the promotion and encouragement of measures affecting the safety, health and welfare of persons employed by the supplier and the discussion of other matters of mutual interest to the supplier and such persons, including the training and education of such persons and efficiency in the operation of the services of the supplier.

Again, I can claim personal experience of working under these conditions because in the electricity supply industry, as in the gas industry, there was written into the statute a provision for proper consultation to take place between the employers and the employees on a wide range of matters. Those matters include the vital aspects of health and welfare, safety, efficiency and education and training. I have said this before, but it is worth repeating that the ordinary chaps in any organisation, the ordinary workers in any organisation have a great deal to offer, if only they could be motivated and given the means whereby they could make that contribution. That really is all we are asking for.

I was the secretary of one of these consultative organisations—at a power station, as a matter of fact—so I really know what I am talking about. It was good to see representatives from the top level of management, the power station superintendent taking the chair one year and the workers' representative taking the chair the following year, to see how the discussion arose and to observe the interplay of people's knowledge and experience and how this worked to the benefit not only of the workers themselves—which, of course, it did—but also of the organisation, giving better understanding in it and better working of that organisation.

I found this consultative committee an educative experience and it showed me how people, given the opportunity, can work together for the good of their organisation and the good of their fellows. For example, in the matter of safety in any organisation, but particularly in one where engineering is involved, in a power station, where electricity is a dangerous substance, or in the gas industry, where gas is a volatile and dangerous substance, safety is very important—in fact vital.

Under these arrangements which we are proposing, people at work would actually be supervising their own safety and when they are supervising their own safety, when they are involved, they ensure that the practices in an organisation or on a site at a power station are of the best because they have the facilities for examining and improving them. So we want to write into the Bill the opportunity and the arrangements, when gas is privatised, for people to be able to contribute and be consulted about the range of matters mentioned in the amendment.

Then we come to pensions. We are suggesting here that: Conditions requiring the public gas supplier to make provisions for such pension arrangements as it may determine, by making such payments as they may determine towards the provision of such pensions, or establishing and maintaining such schemes as they may determine for the payment of such pensions". I understand that existing pension arrangements are to be carried forward in the first instance. I understand this, but I am still not clear whether there is any guarantee that they will apply to new employees as well as existing ones. In other words, will there be two pension schemes: a Rolls-Royce scheme for existing employees, and a Model T Ford scheme for new employees? Will index-linking be guaranteed for all employees and for all retired employees?

If I may, I should like to take this opportunity to thank the noble Lord for his letter of 19th May explaining the position in relation to frozen pensions. The position was as I feared: those with frozen pensions will not be any better off under privatised British Gas than they are at present. I think that is unfortunate. The present gas corporation has given assurances about all these matters but the existing board will not be in office for ever, and perhaps not for long after the appointed day. A future board may well wish radically to alter and worsen the existing arrangements. The only real safeguard for employees is to write these provisions into the statute. By this amendment I am proposing that we should do just that and I commend the amendment to your Lordships. I beg to move.

9.15 p.m.

Lord Diamond

One of the strengths of the Committee is the great variety and depth of experience that is brought to bear from time to time by noble Lords. Listening, as we all have, to the wise words of the noble Lord, Lord Stoddart, is bound to impress everyone in the Committee, as it has impressed me, of the great understanding and depth of experience he has in these matters. I say that because not always are we all able to speak out of our own knowledge and experience. We each have knowledge in some fields but those of us who have to carry out this task of reviewing legislation often have to speak on matters on which, inevitably, we do not have first-hand experience. Now we have been listening to first-hand experience and I hope that the Government will have regard to that.

I hope the noble Lord the Minister will not take my words amiss if I say that if there is one attitude which to a certain extent separates the two sides of the Committee it is that on willingness to consult. If the Government care to consider their record, from Cheltenham onwards, they will find that they have unnecessarily put themselves into trouble at times through the lack of priority they have given to the need for prior consultation; not telling people until after the event what they have decided instead of seeking their views and feelings in advance. It is for that reason—and I am not going into detail because the noble Lord, Lord Stoddart, has done that so well—that I hope the Government will give a sympathetic response to the speech that we listened to with such pleasure.

Lord Ezra

As someone who has had some experience of being involved in a large-scale enterprise, I should like to say that I fully support the noble Lord, Lord Stoddart. I think it will be important in this legislation that there are some clauses in it—whether they be precisely what is proposed or something else is a matter for the Government to decide—which pay regard to the need to stimulate full participation on the part of those who work in the enterprise.

The gas industry as presently constituted has a very good record of participation. I believe that we should carry that forward into any new way in which it is organised. I believed that this should be introduced into the Bill in some form which recognises the human aspect of what is proposed as well as the commercial and political aspects.

Lord Belstead

I too listened with interest to the speech by the noble Lord, Lord Stoddart. I recognise that the noble Lord speaks from personal experience of the matters covered by Amendment No. 68A, and I respect him for that. Indeed, I have learned a thing or two in listening to him.

However, I suggest to the noble Lord that two of the paragraphs in Amendment No. 68A—that is, paragraphs (e) and (f)—are already covered statutorily. As regards the second limb of the amendment, paragraph (e), Section 2 of the Health and Safety at Work etc. Act 1974 already places obligations on suppliers in respect of safety, health and welfare matters. As the noble Lord will know from his experience, Section 2 of the 1974 Act is quite comprehensive in its provisions.

So far as concerns the final paragraph, paragraph (f), and the matter of pensions, to which the noble Lord quite understandably attached considerable importance, British Gas has made clear that the fears that some people have invoked about pensions are groundless and that British Gas intends to continue the current practices after privatisation. But it is not just a question of giving an undertaking. Paragraph 29 of Schedule 8 to this Bill makes it quite clear that the corporation's existing pension obligations will be carried forward to the successor company. So my answer to the more detailed questions about pensions by the noble Lord, Lord Stoddart, is that the obligations of the successor company will be the same as the obligations for pensions which the corporation shoulders at the present time.

We are left with the first paragraph, paragraph (d). The amendment provides that there should be a statutory requirement on British Gas to consult on terms and conditions of employment, and this provision is fleshed out in paragraph (d). I should like to make two comments. The purpose of the regulatory regime that we are trying to establish by this Bill is to control the supply of gas. I suggest that there are no grounds for giving the director a role in such matters as terms or conditions of employment. I do not think that it would be appropriate to make provision for placing obligations on the public gas supplier through the authorisation in this respect.

However, for its part British Gas has made considerable efforts, through regular reports which it has issued, to keep employees informed of developments arising from privatisation. In one such report British Gas has stated that it sees the existing negotiation and consultation arrangements which have served the industry well in the past carrying it into the future. I understand that British Gas has made clear in writing that any alteration in the negotiation and consultation arrangements will be a matter for joint consideration between management and unions. I think that is a very important assurance and one that I would expect from managers of the quality of those to be found in British Gas.

This is a very serious amendment, and in answering on behalf of the Government I can say that the Health and Safety at Work Act already places obligations on suppliers, as it does on all other employers, for safety, health and welfare matters. Schedule 8 to the Bill makes clear that British Gas's existing pension obligations will be carried forward to the successor company. However, the existing negotiation and consultation arrangements and any questions of arbitration are matters for joint consideration between management and unions, as they are for any other company in the private sector, and not for a condition in the authorisation. This would be to impose an obligation on British Gas in the future that would not be imposed on any other private sector company, great or small. On that point, with regret, I cannot agree with the amendment.

Baroness Seear

Will the noble Lord the Minister think again about his comments on paragraph (e)? He has told us that the Health and Safety at Work Act covers the requirements for safety, health and welfare; but as I understand it, "welfare" ranges much wider than the requirements in the Health and Safety at Work Act, which is concerned with health and safety. I have not turned up the Act but I think that it does not make any reference to welfare, or at any rate not in any extensive terms.

What is even more important is that this amendment suggests a provision which was in the nationalisation Act—and anybody who has had any contact with the gas industry knows that it has worked remarkably well—to consult on matters of training, education and efficiency. As the noble Lord, Lord Stoddart, has said, it has done a great deal to educate both management and workforce in what is meant by training, education and efficiency and where their value lies. It is no answer to say that the Health and Safety at Work etc. Act covers the most important matters that are included in that paragraph.

I also ask the Minister to think again about this. He says that it is not appropriate to require the private sector industry, as it will be, to carry forward the negotiating rights that the industry has had and has operated most successfully, as is agreed on all sides. Why should it be regarded as inappropriate to require it to carry that forward when it is, after all, benefiting from 40 years of efficient joint working inside the industry? It is not a private sector industry in the pure sense to be compared with any other private sector industry. It is inherently a great industry which has largely been the product of joint work between the two sides. Will the Minister please think again on this amendment?

Lord Bruce of Donington

I trust that the noble Lord will think again about this. This is a part of the Bill on which some endeavour is being made to establish within the framework of the authorisation that kind of regime which is already practised by some of the finest private enterprise firms in this country. Many firms in this country—and I shall not name them in this debate—follow precisely all the stipulations put forward by my noble friend, who has had great personal experience in them.

From time to time in the earlier part of this Parliament, in the first flush of the Government's term of office and when the self-induced deflation of the economy began to have some impact upon the country and perhaps a little on government morale, our attention was invited to our German colleagues. It was pointed out that what was wanted in British industry was the co-operation among capital, management and labour that subsisted in Germany. If he casts his mind back, the noble Lord may remember the days when Mitbestimmung was freely bandied about the House.

It is no good the Government trying to project the political philosophy held by some of their leaders, the Thatcher and Tebitt ones who believe arrogantly in the right of management to manage—in those harsh terms, too. I well remember the observations of the right honourable Lady when she was in either Malaysia or Indonesia, and she did not seem to know which. She observed how lucky the employed people in the United Kingdom were to be able to hang on to a job. That is not the voice of a Government who are attuned to the compelete necessity within modern industry, whatever branch, of a degree of constructive co-operation.

As one who has had some experience in industry, as against the more extensive experience of my noble friend Lord Stoddart, let me venture this observation. Leadership does not mean getting obedience to management by fear; by the stick. Nor does it of necessity mean getting co-operation by tendering the carrot. Neither fear nor regard for personal fortune is always the best impulse to action. The best impulse to action and the best way of exercising leadership is to bring out the best in people, to bring out their latent abilities, and actually to extend their abilities. There is no better way of doing that than by consultation.

Why is it not possible for the Government to swallow the ideology imposed upon them from up top and to embrace the ordinary common sense factors of business which all those Members of the Committee who have had any experience at high level of managment in companies know perfectly well are the only acceptable way and, finally, the only profitable way, of running an industry? Failure to implement this would confirm the ordinary working person's suspicion that, once again, the "them and us" attitude is being inculcated from on top. People matter. It is not purely a question of being afraid of the sack on the one hand or even of being avaricious for increases in pay or increases in their own personal profit on the other. People like to identify themselves with what they are doing. They do not like being alienated from it emotionally or intellectually purely by the imposition of cash considerations—what has been referred to as the naked cash nexus twixt man and mammon. Men are inspired within society by working co-operatively with other people. The only managements that are successful are those that realise this.

I hope sincerely, in the light particularly of what my noble friend Lord Stoddart has said and the words that have fallen from the lips of those who have spoken from the Alliance Benches, that the Government will give further consideration to this matter. In our view, it is the minimum that they can do.

9.30 p.m.

Lord Belstead

The noble Baroness, Lady Seear, expressed concern that the Health and Safety at Work etc. Act does not cover the welfare of employees. I should like to set the noble Baroness's concern at rest. Section 2 of the Health and Safety at Work etc. Act says, It shall be the duty of every employer to ensure, so far as is reasonably practicable, the health, safety and welfare at work of all his employees". The section goes on, Without prejudice to the generality of an employer's duty under the preceding subsection, the matters to which that duty extends include in particular—". It then lists the one to which the noble Baroness, I know, attaches particular importance because I have heard her speak about it so often. That is, the provision of such information, instruction, training and supervision as is necessary to ensure, so far as is reasonably practicable, the health and safety at work of his employees". Then, again, the section returns later to welfare. I believe therefore that I was justified in stating that Section 2 of the 1974 Health and Safety at Work etc. Act is comprehensive.

Baroness Seear

I am sorry to interrupt the noble Lord. Frankly, what is understood by welfare under the Health and Safety at Work etc. Act is something quite different from what is meant by welfare in industry. If one looks at the composition of the Health and Safety Executive one will not find there people who are expert in the other matters referred to in this paragraph. These are matters of welfare, efficiency and training. The word "welfare" is extremely vague. I do not believe that anyone in industry would say that the Act covers what is generally understood as welfare, and certainly not training or efficiency, or that the executive is competent to do anything much about those aspects.

Lord Belstead

That shows a rather sad confidence in Bills passed through both Houses of Parliament. All that I can say is that I do not agree with the noble Baroness on this point. I should like also to raise a point with the noble Lord, Lord Ezra, who referred to the importance of participation. One of the great benefits of privatisation is that employees will be able to take a personal stake, through a shareholding in their industry, in a way that was not possible under nationalisation. That is something which has not occurred under previous governments and is occurring under the present Government. As it is quite clear that those who are working for British Gas at the present time are looking forward to privatisation, perhaps it would be better for noble Lords opposite to listen rather than to laugh.

May I come finally to the remarks of the noble Lord, Lord Bruce. The question was once again raised about negotiation and consultation arrangements, despite the fact that I recorded to noble Lords that an absolutely cast-iron undertaking had been given by British Gas that the present arrangements will continue. The noble Lord is experienced in these matters. He said that there are private sector companies operating very well in relation to negotiating machinery with their workforces. I accept that from the noble Lord, but these are companies which do not have any statutory provisions along the lines proposed in the amendment. I do not see that such statutory provisions would improve the excellent relations which already exist between British Gas's management and its employees.

The undertaking which has been given by British Gas—that the present negotiation and consultation arrangements will continue and that if they were to be changed that would be a matter for both managers and employees—is one in which we should have confidence. I am saying that we should trust British Gas as obviously the employees are trusting their management.

Lord Diamond

Before the noble Lord sits down, may I apologise to the Committee and say that I did not see that undertaking in the course of the fairly wide reading that I undertook before proposing certain amendments in this Chamber? Can the noble Lord the Minister direct me to the place in the Bill where this undertaking is couched?

Lord Belstead

If the noble Lord, Lord Diamond, would care to look at col. 661 of Hansard of 6th February 1986 in the Standing Committee, there he will see that my honourable friend Mr. Buchanan-Smith recorded the undertaking which British Gas had given to its employees.

The whole point of the debate which we have been having for the past 25 minutes is that two of the limbs of the amendment are already covered in statute. Those are the limbs of the amendment which deal with health and safety and welfare at work, and pensions. However, there is one limb which is not covered specifically in statute with regard to suppliers. I have said therefore that we should look at the undertakings which have been given. There is also general employment legislation, but neither noble Lords opposite nor I have gone into that this evening.

Lord Stoddart of Swindon

I thank the noble Lord for his generous remarks about my initial contribution. I am afraid that he misunderstands the amendment. The noble Lord said that the Bill deals with the supply of gas. It of course deals with the supply of gas and of ensuring the maintenance of a supply of gas. But one cannot maintain a supply of gas if one has bad labour relations. If one has bad labour relations people might take industrial action and that might affect the supply of gas. Therefore good labour relations and proper arrangements for good labour relations are essential. We are therefore at one with him and all we are trying to do by this amendment is to help the noble Lord and the Government to achieve their aim of getting a secure supply of gas.

However, the noble Lord sought to show that the Health and Safety at Work etc. Act covered all the points which are made in paragraph (e) of the amendment. Clearly they are not covered. While it is true that the Health and Safety at Work etc. Act provides for the setting up of safety committees and safety officers, it does not do so in the sense that we are asking for such arrangements within the Bill. The arrangements for which we are asking are in addition to and wider than the provisions of the Health and Safety at Work etc. Act. They are provisions which already exist within the gas industry and which are already much wider than those provided for within the Health and Safety at Work etc. Act. Therefore, we are asking for the maintenance of that wider consideration of safety and, indeed, of health and welfare.

When the Health and Safety at Work etc. Act deals with health and welfare, it does so in the most narrow way. Indeed, the noble Baroness, Lady Seear, pointed that out and she is well experienced in these matters. The type of arrangements about which I am talking relate, for example, to proper health care at work. The Health and Safety at Work etc. Act does not cover that at all. It is possible—it has been done, and I have done it myself—through the arrangements at work to negotiate, to consult and to persuade the employer that there should be a nurse at the place of work. There is nothing in the Health and Safety at Work etc. Act which says that an employer must have a nurse on the premises, but it is something which is desirable and, if the arrangements exist for consultation, it can be provided through that consultative machinery.

However, there is one other element which certainly is not in any way covered in the Health and Safety at Work etc. Act and which is implicit in paragraph (e) of Amendment No. 68A, and that is the discussion of efficiency. That really is absolutely crucial.

If we are to involve people in the industry, to interest them in the industry, we must be prepared to discuss with them the efficiency of that industry, how it works, how it is financed, how well it is doing and how they can help to make it more successful. That is not contained in the Health and Safety at Work etc. Act; there is no mention of it, but that is what we are after here. I should have thought that that was a most desirable objective.

Without boring the Committee, let me describe how it works at ground level. In a power station—and I am sorry to return to power stations but I know a little about them—there is an annual maintenance programme. In my experience one matter which was dealt with through the consultative machinery was discussion of the annual maintenance programme and how it could be best carried out in the shortest possible time in order that the turbo-alternators—the turbines—could be generating electricity in the winter when people needed it. It was entirely sensible and reasonable. That is the type of matter that we are getting at. I understand that the noble Lord, who perhaps has not had that type of experience, should misunderstand what I am trying to get at. I hope that I have been able to enlighten him about it.

In conclusion, it really is intolerable that employees who have been engaged under certain conditions with certain rights, should now find that those conditions and rights are to be removed from them quite arbitrarily. There is no negotiation about it. We are, by Act of Parliament, taking away rights which they have enjoyed for over 40 years. We are doing it arbitrarily without any consultation at all. It is a wicked thing to do. I do not know where the noble Lord gets the idea that employees are looking forward to privatisation. I have no evidence of that. The employees would be content to continue to do the job they have been doing over such a long period of time so efficiently on the same basis. I must press this amendment.

9.45 p.m.

On Question, Whether the said amendment (No. 68A) shall be agreed to?

Their Lordships divided: Contents, 62; Not-Contents, 94.

DIVISION NO. 5
CONTENTS
Airedale, L.	Listowel, E.
Attlee, E.	McCarthy, L.
Brockway, L.	McGregor of Durris, L.
Brooks of Tremorfa, L.	Mar, C.
Bruce of Donington, L.	Molloy, L.
Caradon, L.	Nicol, B.
Cledwyn of Penrhos, L.	Oram, L.
Crawshaw of Aintree, L.	Phillips, B.
David, B.	Ponsonby of Shulbrede, L. [Teller,]
Dean of Beswick, L.
Diamond, L.	Raglan, L.
Elwyn-Jones, L.	Ritchie of Dundee, L.
Elystan-Morgan, L.	Seear, B.
Ennals, L.	Sefton of Garston, L.
Ezra, L.	Shannon, E.
Gallacher, L.	Shepherd, L.
Galpern, L.	Stedman, B.
Graham of Edmonton, L. [Teller.]	Stoddart of Swindon, L.
	Taylor of Blackburn, L.
Grey, E.	Taylor of Gryfe, L.
Hampton, L.	Turner of Camden, B.
Hanworth, V.	Vernon, L.
Hirshfield, L.	Wallace of Coslany, L.
Houghton of Sowerby, L.	Walston, L.
Howie of Troon, L.	Wedderburn of Charlton, L.
Hylton, L.	Wells-Pestell, L.
Jeger, B.	Whaddon, L.
John-Mackie, L.	White, B.
Kagan, L.	Willis, L.
Kilmarnock, L.	Wilson of Langside, L.
Kinloss, Ly.	Wilson of Rievaulx, L.
Lawrence, L.	Winstanley, L.

NOT-CONTENTS
Allenby of Megiddo, V.	Elliott of Morpeth, L.
Alport, L.	Elton, L.
Arran, E.	Faithfull, B.
Bauer, L.	Gainford, L.
Belhaven and Stenton, L.	Gardner of Parkes, B.
Belstead, L.	Gibson-Watt, L.
Bolton, L.	Gisborough, L.
Brabazon of Tara, L.	Glanusk, L.
Brentford, V.	Glenarthur, L.
Brougham and Vaux, L.	Gray, L.
Butterworth, L.	Gray of Contin, L.
Caccia, L.	Gridley, L.
Caithness, E.	Haig, E.
Cameron of Lochbroom, L.	Harmar-Nicholls, L.
Campbell of Alloway, L.	Harris of High Cross, L.
Campbell of Croy, L.	Harvington, L.
Chelmer, L.	Hives, L.
Craigavon, V.	Holderness, L.
Craigmyle, L.	Hooper, B.
Davidson, V.	Inglewood, L.
De L'Isle, V.	Kaberry of Adel, L.
Denham, L. [Teller.]	Killearn, L.
Derwent, L.	Kimball, L.
Eden of Winton, L.	Kinnaird, L.
Elliot of Harwood, B.	Lane-Fox, B.

Lauderdale, E.	Rochdale, V.
Layton, L.	Sanderson of Bowden, L.
Long, V. [Teller.]	Sandford, L.
Lucas of Chilworth, L.	Sandys, L.
Macleod of Borve, B.	Savile, L.
Margadale, L.	Sempill, Ly.
Massereene and Ferrard, V.	Shaughnessy, L.
Maude of Stratford-upon-Avon, L.	Skelmersdale, L.
	Stockton, E.
Mersey, V.	Stodart of Leaston, L.
Middleton, L.	Strathclyde, L.
Monk Bretton, L.	Swinfen, L.
Monson, L.	Teviot, L.
Mottistone, L.	Thomas of Swynnerton, L.
Munster, E.	Torrington, V.
Norrie, L.	Trefgarne, L.
Orkney, E.	Trenchard, V.
Orr-Ewing, L.	Trumpington, B.
Pender, L.	Ullswater, V.
Plummer of St Marylebone, L.	Vaux of Harrowden, L.
	Windlesham, L.
Rankeillour, L.	Young, B.
Redesdale, L.	Zouche of Haryngworth, L.
Renton, L.

Resolved in the negative, and amendment disagreed to accordingly.

9.54 p.m.

Lord Diamond moved Amendment No. 68B:

Page 6, line 12, at end insert— ("and ( ) conditions requiring the public gas supplier not to use privileged information obtained as a result of activity in one sector to the benefit of activities in other sectors.")

The noble Lord said: We are still dealing with the section of the Bill in which we find that an authorisation of a public gas supplier may include certain conditions. One of the conditions that is being suggested in this amendment is a condition requiring, the public gas supplier not to use privileged information obtained as the result of activity in one sector to the benefit of activities in other sectors.

There may be several examples of this of which I am ignorant, because I cannot claim to have direct experience as a public gas supplier or as any other form of gas supplier. But I am told that under the new circumstances being created, where we are now going to have a private monopoly, and under the new freedom of that private monopoly—namely, the freedom to engage in activities beyond and behind those activities to which British Gas at present is limited—there will arise occasions when the new public gas supplier will inevitably become privy to technical information of enormous value which it could then use to its own benefit in activities of its own carried on for its own shareholders and against the interests of competitors in that same field.

That is a situation which is, I shall not say intolerable, but something which has to be taken care of. This is a first attempt at an amendment to draw the attention of the Committee to the situation and to ask the Government what they are proposing to do to protect those whose information could be used in this way against their interests. I beg to move.

Lord Ezra

I should like to support the noble Lord, Lord Diamond, in this amendment, because in our opinion, in deciding to privatise the gas industry, with the very substantial powers which they will possess in this area in which they are going to move, the Government have not taken fully into account the impact that it could have on certain competitors. This could be particularly so in the case of exploration in the North Sea. Effectively, the gas industry is going to remain the sole purchaser of gas found in the North Sea. Although, in theory, others could use this gas, in practice that is the way it is worked out.

In purchasing gas found in the North Sea, they would have access to a great deal of geological information, and this could be used to their advantage in quoting for other areas of the North Sea in order to explore on their own behalf. At a later point in this Committee stage I shall be proposing with my noble friend Lord Lloyd of Kilgerran, in Amendment No. 146, an elaboration of this point. But I think the Government have to explain to us, as the gas industry is going to move into the private sector, how they envisage them operating fairly in connection with others in the private sector.

This is an aspect of the Bill which we have not so far encountered but which we are now raising, and it is solely a consequence of the measures which the Government propose to take. Having decided to take this measure, there are certain things which follow. One of them is the privileged position into which the private gas industry can move in relation to other people in the private sector. We should like to know what views the Government have on this problem.

10 p.m.

Lord Bruce of Donington

If I may, I should like to reinforce the point that was made by the noble Lord, Lord Diamond, and also by the noble Lord, Lord Ezra. When the British Gas Corporation becomes British Gas plc, with its own memorandum and articles of association which incorporate it formally within the normal company structure, instead of having full-time members of a board it will have a board of directors. Progressively, as the Government get rid of their shareholding, as they are bound to do because we all know they want the money—and most of the shares will go to institutions—the institutions will appoint, and as shareholders will have the right to appoint, directors to the board of British Gas plc.

There is nothing, so far as I can see, in the memorandum and the articles of association (though it is the articles which are important here) which prevents any institution from nominating to the board of British Gas plc a gentleman who is a director of half a dozen other companies, sometimes competitors in the same field. True enough, the Government have their golden share which they can use, if they wish, if they remember and if they have the nouse to do so, to prevent control passing into foreign hands. But the Government have no right, under the articles of association, to object to any nomination to the board of directors being put forward by, say, the Prudential Assurance Company, any one of the merchant banks or any one of the pension funds. They cannot veto any of the appointments that are made by the large institutional shareholders.

As directors of the new British Gas plc, the directors will be privy to certain information: if they are going to be directors they have to be; they cannot function without knowledge of what is going on inside the company. Some of these directors who are appointed from the institutions, as I say, may have other directoral interests, as indeed is common over large sections of British industry at this time. That is why this particular clause, in my view and on that narrow ground alone, is necessary in order to ensure that the true interests of the corporation are adequately protected in the manner that, as a national concern, they ought to be.

Lord Belstead

I think that all noble Lords who have spoken are on to an important and valid point where gas purchasers are concerned. I know that many oil companies have expressed concern that the problem which is raised in this particular amendment could arise. It is for that reason that we have included in Clause 63 of the Bill a provision enabling my right honourable friend to give directions to a public gas supplier when its authorisation is granted—which is exactly the same method as this amendment endeavours to put forward—to ensure that no unfair commercial advantage is obtained from information provided by oil companies during gas sales negotiations.

It is also provided that any producer harmed by the misuse of information in contravention of a direction can go to the courts against British Gas for civil damages, and as a safeguard in instances where producers might feel constrained from taking action due to the pressures of their commercial relationship with the supplier, the clause also provides for the Secretary of State to bring civil proceedings against a public gas supplier who is in contravention of such a direction. The amendment proposing an additional condition in British Gas's authorisation, therefore, on this particularly important ground is not necessary.

I should like to mention one other thing if I may. Whereas I think the point about the misuse of information arising from gas purchases—in other words, geological or geophysical data—has to be protected and indeed I have just responded to noble Lords on that point by reference to Clause 63, with respect to the noble Lords who have spoken, I do not think that the position of a public gas supplier in respect of the use of any miscellaneous technical information is any different from that of any large company. I do not see that the need for any special provision, aside from the case of gas purchase which is dealt with in Clause 63, would be necessary. Any smaller company doing business with British Gas can protect its technical information either through the use of general patent law or through the conclusion of specific contracts covering the use of any information handed over. But I return to the original point. I think that the noble Lords have a valid point so far as the possible misuse of information is concerned where we are talking about gas purchases, but I hope your Lordships may feel that Clause 63 covers it.

Lord Bruce of Donington

Before the noble Lord sits down, would he clear up one point arising on Clause 63 to which he referred? The noble Lord will note that Clause 63 (1) says: On granting an authorisation to any person under section 7 above. the Secretary of State may give to that person … It gives him the power to do so upon application for authorisation. Would the noble Lord tell me what will happen if authorisation is in fact given without the Secretary of State having given a direction on the original application under subsection (1)?

Lord Belstead

May I say to the noble Lord, Lord Bruce, that the direction is in fact being drawn up at the moment. It will have the effect of placing an obligation on British Gas not to pass geological or geophysical data obtained during sales negotiations to people in that company or any associate company which is involved in obtaining licences or interests in licences. If the noble Lord feels that this is not properly reflected in Clause 63—I hesitate to say we may return to this when we get to the clause, because I was taken at my word previously and we had another debate—the noble Lord clearly could return to it when we get to Clause 63. That is what is going on now, and I thought I ought to reveal that to the Committee.

Lord Ezra

The trouble with Clause 63 is that it deals largely with remedial action to be taken after damage or alleged damage has been done. We are trying to ensure that under the conditions of authorisation this misuse of privileged information should be regarded as a condition, and therefore I would have thought it not unreasonable that this should be included in support of the intention in Clause 63. Let us take it as read that the gas industry in its privatised state will still be a very large enterprise with monopolistic aspects, and therefore that those who are in competition with it are not unreasonable in saying that they should to some degree be protected by that very situation.

The amendment that is being proposed is doing no more than saying that they should not misuse privileged information. I would have thought it was entirely compatible with Clause 63 and that it would lay down, before the damage has been done and the actionable situation has been created, that as a condition of licences being granted to the public gas supply authority they should beware of misusing privileged information. I therefore hope, on those grounds, that the Minister takes this back and thinks about it further.

Lord Belstead

With respect to the noble Lord, Lord Ezra, I think that for once he is not correct. I think that the timing of Clause 63 is the same as the timing of the condition which noble Lords are attempting to put forward in this amendment. The enforcement provisions in Clause 63 are along exactly the same lines as those for authorisation conditions and there is therefore no reason for duplication. I am, in fact, saying that in Clause 63 we are doing exactly what noble Lords are wanting us to do in the amendment which has been put forward.

Lord Diamond

I am grateful to the noble Lord the Minister for the consideration he has given to the point. He has clearly taken the point that this is a matter of concern for a lot of potential competitors, which arises out of the action of the Government in creating this very large, very powerful and very monopolistic concern. What the Minister is really saying is that when we get to Clause 63 we shall be capable of being satisfied that the very thing we want is there.

I am bound to confess to your Lordships that I am not as familiar with Clause 63 as I am with other clauses. Clause 63 is such a long way ahead that somebody of my age doubts very much whether he will live long enough to see it debated. But on the assumption that I am more fortunate than I deserve to be, we shall, I think, have to wait until we get to that clause. We shall bear very much in mind what the Minister has said and very much hope that we shall find the complete satisfaction which we and many others are anxious to find in the words of that clause. Therefore, for the time being, I hope your Lordships will give me permission to withdraw the amendment. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Diamond moved Amendment No. 68C:

Page 6, line 12, at end insert— ("and ( ) such conditions as appear to the Director to be requisite to ensure the long term future of gas supplies by promoting and monitoring a continued research and development programme to be undertaken by any persons authorised to supply gas under this Act.")

The noble Lord said: Again we are on the point of the conditions which the authorisation may include. We take the view that once this large monopoly has been created the natural stimulus towards continued research will be somewhat reduced. When you are in a private monopolistic position, you have no need to go to the extent to which you have to go when you are in a different situation. Therefore, there seems to us to be a need to insert in the provisions of the Bill words which will have the effect of ensuring a research and development programme, and of giving the director the responsibility of promoting and monitoring it. I think that the words speak for themselves. I beg to move.

Lord Ezra

I believe that this amendment proposed by my noble friend Lord Diamond is of considerable importance, because one of the things from which we suffer in this country is that in our industrial development we think too short term. The exigencies of the market emphasise that. The exigencies of the institutional investors emphasise that. Therefore, because we are talking about a very valuable national asset—namely, an essential ingredient in our energy supplies—there ought to be a condition that those who benefit from an authorisation to undertake this operation should have an obligation to undertake the necessary long-term research, so as to secure not only that we as a nation benefit from the supply of gas for as long as possible, but that we also make the very best use of it. It would seem that this is an extremely reasonable provision in the interests of the nation and could quite fairly be included in the conditions for authorisation.

10.15 p.m.

Lord Whaddon

I should like to support the amendment. The gas fields are inevitably of limited life and it is of the most profound interest to the country to maximise the use of the gas during the time that it is available. It is of such interest to the nation but not necessarily in the interests of private shareholders to maximise the long-term utility. They may be tempted from time to time to consider that the interests of the shareholders are best served by short-term maximisation of profit at the expense of long-term maximisation of utility to the nation.

I was very interested some years ago to see work going on in the United States. I was quite astonished to see the tight controls kept over gas companies by the state authorities to ensure that gas wells were not allowed to blast at the maximum rate of production if that resulted in the reduction of the total ultimate yield from the fields. They were required to take out the gas at a reduced rate so as to maximise the yield over a long period, even though that was against the immediate interests of the shareholders. Such a situation plainly applies in the United Kingdom.

Also in the United States, tremendous research effort had gone into the use of the energy. One has only to look at the developments in Louisiana and Texas in such areas as the total energy aspect of gas utilisation. Whereas we often seem to encourage the housewife and the industrial user to use as much gas as possible, in the United States there are endless efforts to conserve the energy which is there by nature to be extracted once—and then it has gone. I remember seeing even the very pressure stored in the gas as it comes out of the ground being used to drive turbines to produce electricity. I have yet to hear of that being used in the British fields.

Gas has also been used widely in the United States to work small generators in local housing developments to produce electricity and central heating and hot water—the whole energy needs of a housing development. This is a much more efficient use of energy than I have seen in the United Kingdom. It would be very much in the interests of this country in terms of industrial development and efficiency if we could insist that the new private company should be required to use some of its enormous power to investigate thoroughly the scientific possibilities which are at present not being utilised properly in this country.

Not only is gas of interest as a fuel, which is certainly the main use, but, again looking at the United States, there are considerable sales of gas for chemical synthesis. How much use has been made of it for chemical synthesis? Yet that is possibly of much greater economic interest for the future of the country than simply burning it. We are taking out of the national sector and putting into the private sector an enormous economic power. We should surely be justified in requiring this economic giant to use a little of its stength to boost research to get the most benefit for the next generation. I have the greatest pleasure in supporting the amendment.

Lord Stoddart of Swindon

I wish to support this amendment, which is very important indeed. The amendment makes reference to, such conditions as appear to the Director to be requisite to ensure the long term future of gas supplies". It does not make mention of North Sea gas supplies, because of course North Sea gas is going to run out. We know that it is going to run out and that it is finite. We know, because we have the estimates contained in the Brown Book, just about when it is going to run out. As the noble Lord, Lord Ezra, quite rightly remarked, not only from his own experience but also from his work on the Select Committee on overseas trade, the great trouble with this country is that we have a short-term outlook instead of long-term outlook.

The reason why Japan is so successful and Britain is not so successful in their export markets is because Japan plans for 10 years and Britain plans for two. I am afraid that the same sort of thing—although not quite in terms of those figures—is likely to happen to gas supplies when the industry is privatised.

The noble Lord opposite has told us many times that although there will be a virtual monopoly for the sale of gas, there will nevertheless be competition with other forms of energy; with electricity, with coal, and with oil. Under a privatised industry, market share will be vital. Profits are to be maximised. Let there be no mistake about that. There can be no reason other than the Government's need for £7,000 million or £8,000 million to hand out to the electorate before the next election. There can be no reason for privatisation other than that the private owners are going to maximise profit, and therefore they will need to maximise market share.

The danger is that in order to obtain that market share, they will drive down the price of gas, so that they may sell more of it at the expense of the market share of their competitors. Is not that how it will work? Am I wrong in suggesting that? Is that not what private enterprise is all about? I always thought that it was. Perhaps I am wrong, and perhaps the Minister will tell me if I am wrong and explain why. However, in my experience that is what private enterprise is all about.

When I ran a shop (I really am giving the Committee my history tonight, am I not?) I was concerned to get more trade than my competitor down the road. I was in fact doing what the newly-privatised gas corporation will do, and that was to increase my market share. The amendment would help to deal with that situation. It would, as the noble Lord, Lord Ezra, said, place an obligation upon the monopolists to look after the country and real interests of the nation.

There is one final point that I want to make, and I return to my original remark. We are not only talking about North Sea gas. We have to talk about gas because it will still be needed when the North Sea supplies run out. That will require a great deal of research and development into alternative sources of gas—for example, from coal, from naphtha, or from whatever other source it may come. Those developments, that research, will cost a great deal of money, and that is what this amendment talks about. I believe it is a good amendment and that the Minister would be showing sound sense and helping the Committee if he accepted it; or if it is not correctly drafted, if he would say that he will come back with his own amendment at a later stage.

Viscount Trenchard

Are we not taking a rather long time on some not very necessary provisions? I know that noble Lords opposite do not approve of privatisation, but if we are going into life histories perhaps I may say that I spent my working life in large private enterprises which have an investment, as British Gas has and will have, of a size which makes market share only of interest over a five-year, ten-year, or fifteen-year span, and which have kept research and development at a high level because they must.

Noble Lords oppostie do not appear to understand competition. It may be that in the noble Lord's shop he was only thinking short term, but there is no possible way that Bitish Gas will only be thinking short term. It will be in long term competition with all the other long-term energy producers putting their investment in, looking 15 and 20 years ahead on new forms of power stations and the like. There is no way that the City of London would continue investment in a company such as British Gas if it gave up doing R & D effectively and on a long-term basis.

I wonder what noble Lords are really up to tonight in proposing these amendments in spite of the extraordinarily conciliatory attitude of my noble friend on the Front Bench. He has met their points, in my view, fairly unnecessarily in a lot of areas already, but they are continuing to press quite unnecessary amendments only because they wish to reiterate periodically that privatisation is a bad thing in gas and the only reason the Government are doing it is in order to get money, which is not correct.

Having seen, from a government point of view, the immense load on Ministers, I know there is one very good reason for privatising everything possible; that is, to bring the public sector down to a size that responsible Ministers and senior civil servants can deal with efficiently and adequately. What noble Lords opposite are saying is for a Second Reading debate. Do we really have to go on listening to it, dragged up on every blooming amendment? I am sorry.

Viscount Massereene and Ferrard

My noble friend knows very well that what the Opposition are up to is to filibuster. But regarding natural gas, which we have only had for a short time, when I was younger we always had gas from coal. You do not need a lot of research to have gas from coal, because we always used to have it.

I could not understand the noble Lord, Lord Whaddon, who spoke earlier. So far as I remember, he deplored the scarcity of natural gas that we would soon have. At the same time, he advocated running turbines by gas to make electricity. If you are so frightened of the scarcity of gas, for heaven's sake, we have all the nuclear power stations and everything to make electricity, and you do not need to waste your gas making it.

10.30 p.m.

Lord Whaddon

If I may explain a little to the noble Viscount, there is a limited life to the gas. At the moment we have a vast supply, but it will eventually run out. I am saying that we owe it to future generations to maximise the utility of that gas. Once it has gone, it has gone.

Perhaps I may point out that in the United States they have put the private companies particularly under pressure from the state authorities. They have put enormous effort into maximising the extraction of utility from the gas. It seems to me that even under our state authority we have not done as much as we might have done. I am very concerned about what the future holds. I think that the private company can perform efficiently—I am not at this stage opposing it in principle—but it is imperative that we give it the right framework and set it off on the right foot.

As to running the turbines, what I am saying is this. In the United States there has been a great deal of work on what they call total energy—getting the maximum utility out of the gas. For example, if gas is used to heat a boiler, the waste gases which come out are themselves hot enough to be used for central heating or for running refrigerators. They have made effective use of those gases. As I pointed out, when the gas emerges from the ground it comes out at tremendous pressure. To the best of my knowledge we simply use reduction valves to reduce the pressure of the gas and get it into the mains. In the United States I have seen the pressure of the gas used to drive turbines and to produce electricity, thus maximising the economic utility of the gas. One can point to a thousand ways in which the country would derive benefit from carefully studying the economics of gas utilisation.

There is one further point, while we are on the subject. A vast amount of gas is used in gas stoves. I have seen many examples of modern gas stoves which look beautiful but which operate with the whole gas stove getting exceedingly hot when being used. Such stoves are cheap to make, and it is more expensive to make gas stoves which have adequate insulation, but they are much more energy efficient. We have this giant industry which is being privatised, and since we are hiving off a great slice of British economic activity we should lay down the condition that it should use some of its wealth on research for the future.

Lord Sanderson of Bowden

I must say I find this an extremely strange part of the proceedings. I suppose one must couple this amendment with Amendment No. 84, which presumably will be moved later by the noble Lord, Lord Stoddart of Swindon, and is on the subject of research. It seems to me that Members on the Benches opposite would like to see the oil companies of this country nationalised and thereby be able to write into a Bill something that will demand that they carry out research. It seems that the gas corporation, when it is turned into a private company, will be failing in its duty if it does not carry through a thorough research programme, which it is doing at the moment, and carry it through in such a way that it will realise that gas supplies from the North Sea will one day run out and the company will want to continue in business as a public limited company. Surely, therefore, market forces will demand, and the company will realise, that if it is to stay in business like any other good company then research and development is necessary. I do not see any reason why that should be written into the Bill.

Lord Stoddart of Swindon

May I say how delightful it was to hear the noble Viscount, Lord Trenchard, enter into this debate; and, indeed, the noble Viscount, Lord Massereene and Ferrard, and the noble Lord, Lord Sanderson of Bowden.

However, may I say to the noble Viscount that we have not been filibustering. I do not think that he can apply that word to our debates. Certainly they have been wide debates. They have been good debates, and they have been relevant debates; but they certainly have not been filibusters. I have been keeping a record of the time in fact spent on each amendment and the amount of time each noble Lord has spoken. Bearing in mind the difficulties of this Bill, I can assure the noble Viscount that we have kept our remarks to the barest minimum. We have tried to help the Government and to be reasonable in getting the Bill through. All we want is a reasonable response from the Government as to time, and perhaps concessions, which I hope we shall continue to get throughout the Bill.

I want to answer the noble Viscount, Lord Trenchard. He really has a great faith in private industry and believes that, left to itself, private industry will of course embark upon research and development and that it is in its own interests to do so. I agree that such would appear to be the case, but I must remind the noble Viscount that it is not always the case. Perhaps I may remind him of the disaster which overtook the British motor car industry because they failed to invest and continued to distribute profits to shareholders when the industry was on the brink of collapse and that in order to save it from collapse it had to be taken into public ownership.

A noble Lord

Oh, no!

Lord Stoddart of Swindon

Oh yes! All one has to do is read the Ryder report to see what happens in a private industry which does not invest.

Viscount Trenchard

Perhaps the noble Lord will allow me for one moment to say that my comments were on British Gas. It is a huge company which would have to be backed in the energy world, by the City of London. I am as aware as he is of its past history and of all the different arguments which can be advanced about lack of competitiveness and lack of research. My comments applied to British Gas in the energy industry. It is a huge company which would have to be financed by the City, and it would have to be long term.

Lord Stoddart of Swindon

I thought I heard the noble Viscount speak not only about the position of British Gas but also about his own experience in industry, which I do not think is actually in British Gas. What I said about the motor industry—which is big business by any standards and has been better business in the past—is absolutely true. The noble Lord, Lord Diamond, is only seeking through this amendment to ensure that British Gas, when it is privatised, continues to do its duty in the public interest. As the noble Lord, Lord Ezra, pointed out, because British Gas has a private monopoly, it also has obligations. We are seeking to see that it carries out those obligations.

This has been an interesting debate which really livened up, and I hope that the noble Viscount, Lord Trenchard, will favour us with more of his comments later on in the night.

Lord Graham of Edmonton

I very much hope that the noble Viscount, Lord Trenchard, who obviously speaks with much experience of industry in general, will forgive those like myself who, as often as we can during the debates and as the night wears on, will profess that we are not as well equipped as he is to understand not only the nature of the Bill but also the views on the irrelevance of the amendments. There was a certain petulance in the outburst of the noble Viscount, Lord Trenchard, and almost impatience. He seemed to be conveying the message "Get on with it. We know you are against the Bill. You know that we are in favour of it. Why waste our time?"

The noble Viscount, who has much more experience in this place than I have, will certainly not need telling by me that one of the purposes of the Committee stage in a Bill is to persuade noble Lords such as myself who understand the political reasons why the Bill was proposed and who also subscribe to the political motives for opposition to the Bill. But I have listened as often as has the noble Viscount to the arguments during the Committee stage of this Bill, and at each sitting I have been fascinated by the background knowledge and technical skill of Members from all parts of the Committee.

As the night wears on—and "wears on" may be the operative phrase—we shall see some very attractive amendments brought forward: for example, those tabled by the noble Lords, Lord Harris of High Cross and Lord Bruce-Gardyne, which I am absolutely certain will provide the Committee with an opportunity not only to listen to what those noble Lords have to say but also perhaps to hear arguments that we shall want to rebut. Then there are amendments tabled by the noble Lords, Lord Campbell of Alloway and Lord Henderson of Brompton, and those of the noble Viscount, Lord Hanworth, and the noble Baroness, Lady Masham. I am absolutely certain that they would take offence if there were any suggestion that, by seeking to amend the Bill in its present form, they were actually lending themselves to some process which was not in the best interests of the country. Then I see the name of the noble Baroness, Lady Gardner of Parkes, and many others.

Tonight those of us who oppose the Bill's political thrust are trying to persuade the Government that they do not have every detail right. I have heard the noble Viscount, Lord Trenchard, speak more than once on subjects that I know he has knowledge of. As the night goes on, I look forward to hearing him explain to us when amendments are moved that they have some technical fault or are not meretricious and that we should not accept them as improvements to the Bill.

Speeches will be made in the Chamber which the noble Lord will say smack of Second Reading contributions. Not all of us will have come to the debates as well prepared as the noble Viscount, Lord Trenchard, when he makes his contributions as he moves, seconds or speaks to amendments. I confess now that, as the night wears on, I may have to rely on something that smacks of a Second Reading debate to support some of my arguments. I am afraid that those are some of the consequences of a Committee stage on a Bill as massive as this one.

Noble Lords have explained and defended the amendment that we are now discussing. I am learning something new not just every day but on every amendment. I had not realised how easy it is for the Government to improve the Bill. They should just listen to what is said. The noble Lord the Minister who is in charge of this amendment has a reputation for listening and for explaining why, more often than not, he cannot accept the amendment, and he gives good reasons for that decision. I can assure the noble Lord the Minister that I intend to listen to all of the reasons that he advances. Because it is a Committee stage there may be times when we shall need to come back to a point, even though he may feel that he has satisfied us. I look forward very much to hearing contributions from, among others, the noble Viscount, Lord Trenchard, and for however late the debate goes on he can be assured that I shall be here with him.

Lord Brabazon of Tara

We have had an interesting debate on this amendment. In my opinion, the beginnning of the amendment seeks to place on the Secretary of State, the director and the public gas supplier an impossible task. It is not possible for them to ensure the long-term future of gas supplies whatever amount of research and development is put into it.

Turning to the substance of the amendment. I cannot possibly accept the implication made by noble Lords opposite that British Gas will not engage in extensive research and development. As my noble friend Lord Trenchard said, and I share his faith in private industry, any forward-looking business knows that it must have an energetic and healthy research programme to preserve the long-term future of its markets. That is no less true of gas than of any other business because it faces strong competition from the other energy industries.

The noble Lord, Lord Stoddart, asked me what private enterprise was all about. I shall answer him. Private enterprise is all about developing the North Sea, for instance, by the oil companies. That was not done by a public company; it was done by the oil companies. Consider the amount of money they have put into research. Consider the amount of money put into research by ICI, GEC or any of our leading companies.

The past record of British Gas speaks for itself, with expenditure running at over £50 million a year and a long string of research successes. I shall give two examples. It has invented something called the intelligent pig, which I had never heard of before this evening. It can check wear and tear on pipelines without having to take them out of service, and it is a world beater.

To take up another point that the noble Lord, Lord Stoddart, and perhaps the noble Lord. Lord Whaddon, mentioned, what about the British Gas programme of investment in synthetic natural gas from coal? That is exactly the sort of thing that it is doing.

Lord Stoddart of Swindon

Under public ownership!

Lord Brabazon of Tara

Under public ownership, and it will wish to continue to do it under private ownership because, for its shareholders and customers, it will wish to continue in business into the foreseeable future.

It is inconceivable that British Gas should cease to engage in research. I can see no justification for imposing bureaucratic controls, enforced by the director, which could in my opinion only stultify and not invigorate what is already a great success story. I urge my noble friends to reject the amendment.

10.45 p.m.

Lord Bruce of Donington

I am disappointed with the noble Lord on this one. In particular he should have paid attention to his noble friend Lord Trenchard. The noble Viscount said that such things were normal practice in industry, but the noble Lord replied that it was impossible and could not be done. Can he not understand that what is at stake is regard for the short-term and long-term interests of a company? Those are not always susceptible to logic.

As the noble Lord will know well, at the moment in the City investors are after short-term income and short-term capital gains. That is the mood of the market. How long the bull market will last—the business of making money out of money rather than making things—is altogether another question. But shareholders, and therefore the directors who represent them, cannot be immune to the mood of the investor. Not every investor wants to be there for life and make a long-term investment. At the moment most are after short-term gains.

All that the amendment seeks is to place an obligation on the industry to do something that the noble Viscount says that it will do anyway. What harm will be done by putting the provision in? It is merely an insurance policy to make quite sure that within the monopoly in the national interest—I know that that is a term that makes the noble Lord shudder—something shall be done.

The noble Viscount made an interesting intervention about the financing of British Gas. He clearly has not read his balance sheet. There are £16½ billion assets and all but £214 million is financed from inside the company. The City of London is not at present financing British Gas. Be that as it may, there is no reason at all why ordinary, reasonable people cannot agree that this is a most sensible precaution to take in the national interest. I sincerely hope that the noble Lord will think again.

Lord Diamond

I am grateful to everybody who has participated in the debate on this important amendment. I am particularly grateful because everybody is of one mind. Everybody, including the Minister, is clear that it is wise to engage in long-term research and development programmes. Everybody is clear as to the wisdom of that. The question that arises is whether it is necessary to incorporate that in a clause in the Bill. That is the only question.

I do not know what experience others may have had, but my experience in government and in industry has taught me that research and development are matters that one likes to undertake, and the first thing one does is go to the Government to see whether one can get a grant. If I may recall my period as Chief Secretary, the amount of public expenditure incurred on R & D in the aircraft industry, for example, was very considerable indeed. The noble Viscount, Lord Trenchard, has experience of that area. I am waiting for him to contradict me.

Viscount Trenchard

I endeavoured to say that in this industry at this time—I use my Unilever background—I could not see any possible alternative for British Gas, which would have to take a long-term view, but to invest and to continue to invest heavily in research and development. I could argue with the noble Lord about all sorts of different industries and what has caused lack of research and development in different industries. We might not agree. There are a myriad of reasons in different industries. Can we stick to this one? Does the noble Lord believe it conceivable that British Gas, with the degree of long-term investment that it must have, will not invest in the future of the corporation even after gas runs out?

Lord Diamond

It is because I can, and it is because I believe it to be in the national interest that British Gas plc should have a measure of encouragement, that it is necessary for this amendment to be pursued.

Of course, British Gas has regard at present to the long-term future and accordingly to long term research. No one is criticising British Gas. No one who is proposing the extinction of British Gas and its replacement by a privatised company is criticising British Gas. Everyone opposite, including all Ministers, praise continually the efficiency of British Gas. We are in the difficulty of not understanding fully why such an efficient organisation should not be allowed to continue to run its affairs with this efficiency. Our difficulty is in failing to understand fully why a large organisation that engages in long-term research should not be allowed to continue to do so. The organisation is now being totally altered in its nature so that it has to have to regard to a shorter term interest. Anyone who contradicts this view has never in his life visited the Stock Exchange. He does not know the first thing about an annual balance sheet. Every company has to produce an annual balance sheet. Mostly they are produced at six-monthly intervals; indeed many of them appear every three months. When someone tells me that one does not need to have regard to the short term, it makes me wonder where I have been living during the past 79 years. I am bound to say to the noble Viscount, Lord Trenchard, that I found his speech helpful and stimulating—very stimulating!

In my experience, directors of private industries have to have regard to their share quotations and their dividends policy. Their need to raise further capital makes it essential to have regard to the short term and to show profits. We are moving to a situation where this previously perfectly successful company—successful, efficient, and research minded—will now have to have regard to the short term. Its future capital requirements will have to come from the market. The Minister knows that I am right in saying that. The Government have made it absolutely clear that no more money is coming from them. The industry has to finance its own development. As further development has to come from the market, the industry is required to have more regard than at present to the short term. We are therefore suggesting very modestly that it should have the encouragement of knowing through legislation that the nation expects it to have regard to longer term investment in research than would otherwise be the case. The Minister wanted to correct me on something?

Lord Brabazon of Tara

I wondered whether the noble Lord could explain to me how the constraints which he supposes come from the City have affected the research and development programmes of companies such as Shell, Esso, BP, ICI and so on.

Lord Diamond

I am grateful to the noble Lord because, as the noble Viscount, Lord Trenchard, has done, he has put forward a picture of this private monopoly being in total competition with other industries. He is talking about ordinary commercial organisations which are in daily competition. He is trying to compare those with a private monopoly which has total sole monopolistic power. I cannot put it too strongly.

If it were an ordinary competitor, with real competitors in industry engaged against it, it would be in a different situation. It would have to engage in research to survive. We know that. But that is not the situation. We are moving from the situation where there has been encouragement through Government ownership, and having to have regard for the national interest, to a situation where the company must have more regard for the short-term interest. We are therefore proposing a simple encouragement. If the noble Lord the Minister does not like the words "ensure the long term future", we shall think of others. I think that the Minister is right in drawing our attention to the fact that the wording is a little strong. I said that it was a first attempt. But he knows the spirit behind the amendment. It is a spirit which I should have thought that the whole Committee would want to support. I certainly hope that they will do so when it comes to the vote.

10.57 p.m.

On Question, Whether the said Amendment (No. 68C) shall be agreed to?

Their Lordships divided: Contents, 50; Not-Contents, 95.

DIVISION NO. 6
CONTENTS
Airedale, L.	Howie of Troon, L.
Ardwick, L.	John-Mackie, L.
Attlee, E.	Kagan, L.
Blease, L.	Lloyd of Kilgerran, L.
Boston of Faversham, L.	Lovell-Davis, L.
Brooks of Tremorfa, L.	McCarthy, L.
Bruce of Donington, L.	McGregor of Durris, L.
Caradon, L.	McNair, L.
Cledwyn of Penrhos, L.	Nicol, B.
Crawshaw of Aintree, L.	Pitt of Hampstead, L.
David, B.	Ponsonby of Shulbrede, L.
Dean of Beswick, L.	Raglan, L.
Diamond, L.	Seear, B.
Donaldson of Kingsbridge, L. [Teller.]	Shepherd, L.
	Stedman, B.
Elwyn-Jones, L.	Stoddart of Swindon, L.
Ezra, L.	Taylor of Blackburn, L.
Falkender, B.	Turner of Camden, B.
Falkland, V.	Vernon, L.
Gallacher, L.	Wallace of Coslany, L.
Graham of Edmonton, L.	Walston, L.
Hacking, L.	Wedderburn of Charlton, L.
Hampton, L.	Wells-Pestell, L.
Hanworth, V. [Teller.]	Whaddon, L.
Henderson of Brompton, L.	White, B.
Houghton of Sowerby, L.

NOT-CONTENTS
Abinger, L.	Layton, L.
Allenby of Megiddo, V.	Long. V. [Teller.]
Alport, L.	Lothian, M.
Bauer, L.	Lucas of Chilworth, L.
Belhaven and Stenton, L.	McAlpine of West Green, L.
Belstead, L.	Macleod of Borve, B.
Bessborough, E.	Marshall of Leeds, L.
Bolton, L.	Maude of Stratford-upon-Avon, L.
Brabazon of Tara, L.
Brentford, V.	Mersey, V.
Brougham and Vaux, L.	Middleton, L.
Butterworth, L.	Monk Bretton, L.
Caccia, L.	Monson, L.
Caithness, E.	Montgomery of Alamein, V.
Cameron of Lochbroom, L.	Mottistone, L.
Campbell of Alloway, L.	Munster, E.
Campbell of Croy, L.	Norrie, L.
Cathcart, E.	Onslow, E.
Cork and Orrery, E.	Orkney, E.
Cowley, E.	Orr-Ewing, L.
Cox, B.	Pender, L.
Craigavon, V.	Plummer of St. Marylebone, L.
Davidson, V.
De L'Isle, V.	Rankeillour, L.
Derwent, L.	Redesdale, L.
Eden of Winton, L.	Renton, L.
Elliot of Harwood, B.	Sanderson of Bowden, L.
Elliott of Morpeth, L.	Sandford, L.
Elton, L.	Sandys, L.
Faithfull, B.	Savile, L.
Ferrers, E.	Sempill, Ly.
Gainford, L.	Shaughnessy, L.
Gardner of Parkes, B.	Skelmersdale, L. [Teller.]
Gibson-Watt, L.	Stockton, E.
Gisborough, L.	Strathclyde, L.
Glanusk, L.	Swinfen, L.
Glenarthur, L.	Teviot, L.
Gray, L.	Thomas of Swynnerton, L.
Gray of Contin, L.	Thorneycroft, L.
Gridley, L.	Torrington, V.
Haig, E.	Trefgarne, L.
Harvington, L.	Trenchard, V.
Hives, L.	Trumpington, B.
Holderness, L.	Ullswater, V.
Hooper, B.	Vaux of Harrowden, L.
Kaberry of Adel, L.	Windlesham, L.
Kimball, L.	Young, B.
Kinnaird, L.	Young of Graffham, L.
Kitchener, E.

Resolved in the negative, and amendment disagreed to accordingly.

11.6 p.m.

Lord Diamond moved Amendment No. 69:

Page 6, line 24, at end insert— (" ( )to comply with any direction given by the Director as to the manner in which the accounts of the public gas supplier are to be prepared and published; and as to the formulation of indicators of standards of service to be published with accounts;").

The noble Lord said: Here again we are dealing with the conditions which might be contemplated in a provisional authorisation. I do not think that any of the conditions at present contemplated in the authorisation cover these points. There are similar references but they do not cover these points, and I should have thought that these are quite uncontentious. There is first the question of preparing the accounts and their publication, and the director ought to be involved in that. There are other amendments which go into the matter in much more detail which we shall discuss later.

The other point is the formulation of indicators of standards of service. We attach great importance to that. At present there are a number of useful schedules and graphs and other methods of giving an indication of the progress being made by the present British Gas Corporation. We would think it essential that the future accounts should not be limited merely to those required by the Companies Acts, and there should in addition be full information given to indicate the kind of service being provided.

We are all at one in wanting to strengthen the protection of the consumer. I think we are all at one in realising that the protection of the consumer needs to be strengthened in the new circumstances, and one way of showing that the consumer is being looked after is to have some method of comparing the standards of service year by year. I beg to move.

Lord Bruce of Donington

I hope that the noble Lord will find himself able to accept this amendment. If he is not ideologically constrained so to do, may I request that he gives some reply to a question that I raised earlier? I was brief about it, and shall be brief again unless I am interrupted by the noble Viscount, Lord Trenchard. The noble Lord will recall that I wanted some assurance as to the amount of information that would in future be given in the accounts of British Gas plc.

I drew the attention of the noble Lord, Lord Brabazon—or the attention of the noble Lord, Lord Belstead, before him—to those items of statistical information which were contained in the current accounts of British Gas. I sought for some assurance that the same statistical range would be continued by British Gas plc. Perhaps the noble Lord could inform the Committee without equivocation whether it is the intention of British Gas plc to publish their accounts in precisely the same form, with precisely the same content, as the accounts put out by the corporation in the past.

I think that it is necessary, particularly in the new circumstances where the company is operating under private control, for the particulars requested by the noble Lord, Lord Diamond, to be incorporated in any case. Many of them are already incorporated in the accounts of the British Gas Corporation at the moment: but further particulars are still required in the light of the privatisation Act itself. I hope that the noble Lord can get rid of this amendment by agreeing to it and so enable us to press on and make progress with the Bill.

Lord Brabazon of Tara

I, too, hope that we can press on and make progress with the Bill. I hope I can also satisfy noble Lords on the main points of this amendment. Subsections (7) and (8) of Clause 7 provide wide-ranging powers to include conditions in an authorisation. Subsection (8) (a) already provides that the authorisation may require a public gas supplier to comply with any direction given by the director on a matter specified in the authorisation. This could extend to directions as to the manner in which the accounts of the public gas supplier are to be prepared. The amendment is therefore unnecessary as the powers are already in the Bill.

Turning to the accounting requirements in the draft authorisation, I would point out that Condition 2 sets out clear requirements for accounting over and above the Companies Act 1985 requirements. That is as far as I can go at the moment to answer the noble Lord, Lord Bruce of Donington. It obliges British Gas to draw up and publish specified accounting statements representing a true and fair view of the gas supply business separate from any business it may undertake. It also gives a role to the director in the cost allocations between the gas supply business and the other businesses.

Of course, over time the director may take the view that there should be modifications to the requirements to reflect changing circumstances. The Bill sets out in later clauses the procedures for making such modifications. In addition the director is enabled by Clauses 34 and 38 of the Bill to publish appropriate information, advice and reports. In these circumstances a power to issue directions relating to information in the company's accounts is unnecessary.

The noble Lord, Lord Bruce of Donington, asked me what will be contained in future annual reports of British Gas. This is a matter for the company, but I would remind the noble Lord that the director will be able to call for any information which he believes is needed for him to exercise his functions, and he has the ability to publish the advice that he considers appropriate in the interests of consumers.

Turning to the subject of the indicators of the standards of service raised in the amendment by the noble Lord, Lord Diamond, this was a matter raised by the Select Committee on Energy in another place. As we made clear in our reply to them, we do not believe that it would be appropriate to make legislative provision in respect of indicators of performance. The fundamental responsibility for maintaining standards will be for the supplier who stands to lose custom to his competitors if customers are not satisfied. Within the new regulatory arrangements the Gas Consumers Council will be able to monitor the standards of service which British Gas offers via the complaints it receives. This will provide a good measure of those areas which are of real concern to consumers. The council will be able to refer to the director any deterioration which they discover in the quality of gas supply services to tariff customers, and he will be able to propose modifications to British Gas's authorisation if he feels that is necessary. But, as I have said, it will be in British Gas's own commercial interests to maintain its standards, and the corporation has publicly acknowledged the importance of customer care. I hope I have given a sufficient answer to enable the noble Lord to withdraw his amendment.

Lord Bruce of Donington

There is one point on which I am afraid I shall have to correct the noble Lord. Does the noble Lord really think that condition No. 2 in the authorisation covers the matters that I detailed, direct from the existing accounts of the British Gas Corporation? He must think I am daft if I am going to accept that kind of explanation. He knows perfectly well that this authorisation does not cover all of the ground that is covered at the present time in the accounts of British Gas.

The noble Lord declined. moreover, to give any assurance that the new accounts will do so. He was invited to give an assurance that the accounts of British Gas plc will contain the same information as do the existing accounts of the British Gas Corporation. He can weave his way round that with whatever qualifications, but he declined to give that assurance. The Committee can derive only one inference from that. It is that the accounts of British Gas plc will of course comply with the Companies Acts but will give the minimum possible information in addition.

11.15 p.m.

Lord Diamond

I am grateful to the Minister for the full answer that he gave in regard to the amendment which I moved and I am grateful to all those who contributed to this discussion. Normally, when a Minister says that everything that is being asked for is to be found in the Bill, a mover of an amendment will be wise to say, "Well, I am very grateful. I withdraw the amendment. I will consider very carefully what has been said and will look into it".

I do not propose to do that for the reason that I was able to follow completely, while the noble Lord the Minister was speaking, everything that he was saying. He made it all absolutely clear. He made it absolutely clear, for example. that so far as the accounts were concerned he was limiting any undertaking or any expression in the Bill to what is already under Condition 2. Condition 2, as your Lordships know, because we have already covered it tonight, refers to the need for British Gas plc to draw up accounts showing its gas business separately from its other business. That is very interesting, and relevant to the discussion we had some time ago, but it is totally irrelevant to this particular amendment.

What this particular amendment asks for is that consumers should be able to see what service they are getting: not only what profits are being made in total, not merely what profits are being made on the gas business, but what service they are getting. As has been pointed out by the noble Lord, Lord Bruce of Donington, the British Gas Corporation tries to give a very full indication of the results of its activities, what we the recipients of those activities experience; the corporation tries to give the results of its own activities by the various schedules, graphs, pictures and other information which it publishes—all over and above any requirement that the company law sets upon an ordinary company.

What the Minister is making absolutely clear is that we will get a statement which is very helpful in a different context but is totally irrelevant in this context, namely, a statement as to what profit the future corporation is going to make on its gas business. But we are not necessarily going to get any of the indicators which every consumer is entitled to see in order to be satisfied that we are getting reasonable service in total out of the activities of the privatised gas company.

It is part of our duty to protect the consumer. One of the ways of protecting the consumer is to show the service that the consumer is getting and to compare one year with another year—is it as good? is it better than it was last year? and so on—and, by that comparison, to keep the new British Gas plc up to scratch in providing services. We are not going to get this unless we achieve it by our votes. Therefore, I am bound to say that I must test the feeling of the Committee on whether the consumer should be protected in this way.

11.19 p.m.

On Question, Whether the said amendment (No. 69) shall be agreed to?

Their Lordships divided: Contents. 46; Not-Contents, 92.

DIVISION NO. 8
CONTENTS
Airedale, L.	Hatch of Lusby, L.
Ardwick, L.	Irving of Dartford, L.
Birk, B.	John-Mackie, L.
Blease, L.	Lovell-Davis, L.
Boston of Faversham, L.	McCarthy, L.
Brooks of Tremorfa, L.	McIntosh of Haringey, L.
Bruce of Donington, L.	McNair, L.
Carmichael of Kelvingrove, L.	Mayhew, L.
Cledwyn of Penrhos, L.	Meston, L.
Crawshaw of Aintree, L.	Molloy, L.
David, B.	Morton of Shuna, L.
Dean of Beswick, L.	Nicol, B.
Diamond, L.	Pitt of Hampstead, L.
Donaldson of Kingsbridge, L.	Ponsonby of Shulbrede, L. [Teller]
Donoughue, L.
Elwyn-Jones, L.	Prys-Davis, L.
Ennals, L.	Raglan, L.
Ewart-Biggs, B.	Ritchie of Dundee, L.
Ezra, L.	Robson of Kiddington, B.
Falkender, B.	Rochester, L.
Falkland, V.	Seear, B.
Foot, L.	Shepherd, L.
Gallacher, L.	Stedman, B.
Graham of Edmonton, L. [Teller]	Stoddart of Swindon, L.
	Taylor of Blackburn, L.
Grey, E.	Tordoff, L.
Hampton, L.	Turner of Camden, B.
Hanworth, V.	Vernon, L.

Wallace of Coslany, L.	White, B.
Wedderburn of Charlton, L.	Wigoder, L.
Wells-Pestell, L.	Winstanley, L.
Whaddon, L.

NOT-CONTENTS
Abinger, L.	Kitchener, E.
Alexander of Tunis, E.	Long, V. [Teller]
Alport, L.	Lucas of Chilworth, L.
Bauer, L.	McAlpine of West Green, L.
Belhaven and Stenton, L.	Macleod of Borve, B.
Belstead, L.	Marshall of Leeds, L.
Bessborough, E.	Maude of Stratford-upon-Avon, L.
Bolton, L.
Brabazon of Tara, L.	Mersey, V.
Brentford, V.	Middleton, L.
Brougham and Vaux, L.	Monk Bretton, L.
Bruce Gardyne, L.	Monson, L.
Butterworth, L.	Montgomery of Alamein, V.
Caithness, E.	Mottistone, L.
Cameron of Lochbroom, L.	Munster, E.
Campbell of Alloway, L.	Norrie, L.
Campbell of Croy, L.	Onslow, E.
Cathcart, E.	Orkney, E.
Coleraine, L.	Orr-Ewing, L.
Cork and Orrery, E.	Rankeillour, L.
Cowley, E.	Redesdale, L.
Cox, B.	Renton, L.
Davidson, V.	Renwick, L.
Denham, L. [Teller]	Sanderson of Bowden, L.
Eden of Winton, L.	Sandford, L.
Elliot of Harwood, B.	Sandys, L.
Elliott of Morpeth, L.	Savile, L.
Elton, L.	Sempill, Ly.
Faithfull, B.	Skelmersdale, L.
Ferrers, E.	Stockton, E.
Fortescue, E.	Strathclyde, 1.
Gainford, L.	Swansea, L.
Gardner of Parkes, B.	Swinfen, L.
Gibson-Watt, L.	Teviot, L.
Gisborough, L.	Thomas of Swynnerton, L.
Glanusk, L.	Thorneycroft, L.
Glenarthur, L.	Torrington, V.
Gray, L.	Trefgarne, L.
Gray of Contin, L.	Trenchard, V.
Gridley, L.	Trumpington, B.
Harvington, L.	Ullswater, V.
Hertford, M.	Vaux of Harrowden, L.
Hives, L.	Westbury, L.
Holderness, L.	Windlesham, L.
Hooper, B.	Young, B.
Kaberry of Adel, L.	Young of Graffham, L.
Kimball, L.

On Question, amendment agreed to.

Resolved in the negative, and amendment disagreed to accordingly.

11.28 p.m.

Lord Stoddart of Swindon had given notice of his intention to move Amendment No. 70: Page 7, line 7, leave out subsection (13).

The noble Lord said: I am in some difficulty about this particular amendment. The fact is that subsection (13) is completely incomprehensible and I find it difficult to say anything about it. What I should like to ask is that we have an explanation sent to us concerning the Bill and therefore not waste the time of the Committee tonight. I will not therefore move the amendment.

[Amendment No. 70 not moved.]

On Question, Whether Clause 7 shall stand part of the Bill?

Lord Diamond

I do not know whether other noble Lords may wish to contribute to this discussion. I want to say one or two words about this clause because it is a most important and very large clause to which we are now saying goodbye. I think it right to say that we on these Benches are grateful to the Government for the concessions made on some points which we put forward. There are, however, one or two questions arising and I thought it would save the time of the Committee if, instead of putting down an amendment, I asked a question at this stage.

I think I can limit myself to two questions. One relates to costs. We have of course discussed the costs in the earlier part of this clause and this is broadly a cost-plus arrangement. We know that there is an efficiency factor, but the efficiency factor has not been described. It has not been measured. It is a secret at the moment, and therefore this is, broadly speaking, at this stage still a cost-plus arrangement.

The first question I want to ask the Government is: what will happen to the variety of overhead expenses which are best expressed in terms of top level salaries, board salaries, chairman's salary and so on? Is it the case that they will remain at the present figure? Is it the case that the board will be free to decide what salaries are appropriate in the new circumstances for the chairman and the executive directors? These are all expenses which are part of the overhead expenditure which in effect merely gets passed on to the consumer. That is the first question that I want to ask.

The second question is a rather unusual one, which arises out of the many references which have been made to making greater and more efficient use of the power of gas to generate electricity. It has been referred to on more than one occasion. It is the case, I believe, that under the new structure British Gas plc will be free to do more or less anything it wants. Indeed, that was part of our case with regard to privacy of information and using in a responsible fashion information which has been obtained privately.

So what I am asking the Government, if they are able to answer now, is: in what circumstances will the new gas corporation be prevented from generating electricity? It has already been made clear that it has surplus power which might be conveniently and economically used for that very purpose. Is it the case that under the electricity undertakings there is a monopoly of electricity generation which cannot be broken into or breached by any other organisation? There must be limits to that, because so many people have small or even fairly large private generators. Is it the case that there may be a monopoly on the distribution of electricity?

One part of the question of competition—and it interests us very much in relation to the future programme of the Government in terms of nationalisation—is how far they will allow this company, by its articles, to trade freely in every way it wants, including the generation of electricity. Those are the two questions to which I shall limit myself at the moment. If I have given the Government an opportunity to refresh their memory and to find out the answers, I shall gladly give way to them now.

Lord Bruce of Donington

We would not wish to prolong the proceedings on this clause for very much longer, and I shall not add anything to what the noble Lord, Lord Diamond, has said. I thought, however, that when my noble friend Lord Stoddart withdrew Amendment No. 70 he was seeking an explanation from the Government as to the meaning of subsection (13). It is quite proper that any Member of the Committee, whether from the Opposition or from any other Bench, asks the Government for the meaning of a clause or a subsection; and the reason the amendment was put down in the first place was to afford the Government an opportunity of explaining what subsection (13) meant. I now raise it formally on the Question whether the clause stand part, so that before we part with the clause we can have an explanation of just what subsection (13) means. That is all.

Lord Brabazon of Tara

I would gladly have given the noble Lord, Lord Stoddart of Swindon, an explanation of the meaning of subsection (13), but I did not have an opportunity because he did not move the amendment. Therefore I could not. But if the noble Lord, Lord Bruce of Donington, would like me to do so now, my noble friend Lord Belstead will deal in a moment or two with the points made by the noble Lord, Lord Diamond. I shall be as brief as I can.

It is important to understand the sequence of events which will take place to enable British Gas to supply gas legally once the provisions of Part I of the Bill come into operation. On the appointed day, the corporation's supply privilege under the 1972 Act will come to an end. This is achieved by Clause 3 of the Bill. British Gas will therefore need to have an authorisation which takes effect from the appointed day in order to be able to run its system legally. Clause 5 makes it a criminal offence to supply gas through pipes to premises without an authorisation. The effect of the amendment, which was not moved—to remove subsection (13)—would I fear have been that British Gas would not have been allowed to supply gas from that date and all its customers would therefore have been cut off.

Lord Stoddart of Swindon

Then I am glad that I did not move it.

Lord Belstead

I must apologise to the noble Lord, Lord Diamond, for not being in my place when he began his remarks on the Question whether the clause stand part. As I understand it, the noble Lord put three points, only one of which I missed. The one I missed was in regard to how the efficiency factor will work in the price formula. This is a matter to which we shall be returning. We had a chance to debate it on the last occasion the Committee met, but there are amendments down again. It is a factor to be deducted from the retail price index in order to fix the non-gas costs. The way in which it will be fixed is in order to give a spur to efficiency in the company. Perhaps I may ask the noble Lord to wait until we come to the formula, as otherwise we shall be in danger of debating this not once but several times.

The noble Lord's two other questions were about salaries—indeed, top level salaries. Once the company is in the private sector this will be a matter for the directors, subject to the approval of shareholders at general meetings. The other point which I heard the noble Lord putting concerned the freedom of action of British Gas in generating electricity. The answer is that British Gas will not be prevented from generating electricity so long as it obtains the necessary planning consents for any plant, generating or distribution that is needed.

Lord Diamond

I am grateful to the noble Lord. In fact, I was slightly misunderstood. I was not asking any question about the efficiency factor. I was merely saying that we have the efficiency factor, which is some deterrent to the increase in overhead charges such as top level salaries. but not a sufficient deterrent. The effect is that these increases which the noble Lord has indicated may well happen will simply be passed on to the consumer, as I feared was the case.

We are grateful for the information. We shall return to this at Report stage to deal with any lack of control that there appears to be in the Bill in its present form.

Clause 7 agreed to.

Clause 8 [Authorisation of other persons]:

Lord Bruce of Donington moved Amendment No. 71: Page 7, line 15, after ("authorise") insert ("by order").

The noble Lord said: With permission, I shall take Amendments Nos. 71 and 72 together. The reason for these amendments must be self-evident from their text. It is to make quite sure that the authorisations issued to persons other than the ones dealt with in the previous subsection are in fact laid before Parliament and approved by both Houses. We consider that to be necessary because, as the Committee will appreciate, we have had an opportunity in all the matters covered under Clause 7 to ventilate those issues at some necessary length, including the proposed authorisation itself. We think in those particular circumstances that it is reasonable that the amendment should be made, that the authorisation should be made by order, and that a draft of the order should be laid before and approved by both Houses of Parliament. I beg to move.

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

I feel a certain sense of déjà vu in responding to the debate on these amendments, and I am grateful to the noble Lord, Lord Bruce of Donington, for not going over the ground that he covered in very similar amendments to Clause 7. The proposal to require a draft authorisation under Clause 8 to be subject to affirmative resolution by both Houses of Parliament is even more unacceptable than the similar proposal for Clause 7. I suggest that authorisations granted under Clause 8 will be for small companies, the overwhelming majority of which will be supplying one customer or a small group of customers. A supplier authorised under this clause will not have the same duties or privileges as those placed on a public gas supplier by the Bill. For example, they will have no statutory obligation to supply, they will have no exemption from normal planning legislation, and they will not be able to use the compulsory puchase powers provided in the Bill. Their relationship with those customers will be a normal contractual one.

The arrangements for those authorisations will continue to be largely the same as exist at present under Section 29 of the Gas Act 1972 as amended by the Oil and Gas (Enterprise) Act 1982. At present, the only matter that is considered before granting a consent for such a supply is safety. We propose that that should continue unchanged. Against that background and with that explanation, I hope that the noble Lord will agree that any involvement of Parliament would be inappropriate, and that he will consider withdrawing his amendment.

Lord Bruce of Donington

The noble Lord said that there were no other conditions. If he will refer to Clause 8 (5) he will find, for example, the wording. the grantor is of the opinion that the main is not, and is not intended to be, a relevant main", and other stipulations. There are other stipulations made there. I still think that the circumstances are sufficiently unique in themselves for Parliament to have an interest in them. After all, Parliament has an interest in them now, and there is no reason why that should not continue.

Lord Gray of Contin

I have nothing that I can usefully add to what I have said already to the noble Lord. The effect of his amendments would be to require an authorisation under Clause 8 to be granted by order. That order would be required to be approved by both Houses of Parliament. The amendments mirror very much Amendments Nos. 62 and 63, which sought to impose the same requirement on authorisations granted under Clause 7.

As I explained when I made my first contribution. I really do not see that such a provision is desirable, any more than I thought it was desirable in respect of the previous clause. The noble Lord has given the Committee no new arguments. He has merely gone over the same ground. I am thankful to him for not going over it in quite so much detail, but he has made the same points, and so I must give him the same answer.

11.45 p.m.

Lord Bruce of Donington

I am sorry about that. I take the noble Lord's point, and I have no wish to go over the same ground again. I remain, of course, profoundly dissatisfied with the situation obtaining under Clause 7. We shall have to give this matter our further attention, because it is a matter of such great importance; but I have no desire to detain the Committee in the meantime, and I ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 72 not moved.]

Lord Stoddart of Swindon moved Amendment No. 73:

Page 7, line 34, at end insert— ("( ) such conditions as appear to the grantor to be requisite or expendient having regard to the final use of the gas supplied, and to conditions on the supply of such gas laid down by the Health and Safety Executive")

The noble Lord said: I beg leave to move Amendment No. 73, standing in the name of my noble friend Lord Williams of Elvel and that of myself. This amendment ties in with Amendment No. 67, in that again we are trying to ensure that third party suppliers have the same considerations of energy efficiency as would the public gas supplier. It would clearly be nonsensical for the public gas supplier to refuse to sell gas to power stations for bulk steam raising on the grounds of energy efficiency if the would-be purchaser could go to another supplier and obtain such supplies. That would clearly be absurd.

I do not want again to go through all the arguments that we went through on Amendment No. 67, but perhaps I could reiterate that it would be quite energy inefficient to allow gas to be used in power stations where its overall thermal efficiency would be converted from about 90 per cent. if burned directly, to about 35 per cent. if burned to generate electricity in power stations. That is, of course, if it is not used in connection with combined heat and power. If it is used in connection with combined heat and power, that is a different matter, but unfortunately our enthusiasm for CHP in this country does not seem to be very good. I regret that very much.

There is one further point which I think I should make in relation to this matter. At the present time the Government, of course, have some control over the Central Electricity Generating Board. They could, I suppose, prevent them directly from buying gas to burn in power stations. But although we have the denials of this, there are nasty rumours going round that the next big industry to be privatised is the electricity industry. Of course, if those rumours were to turn out to be true, perhaps not in this Session of Parliament but in the next, then the Government would lose all control over the electricity supply industry in the matter of burning gas simply for power generation. That would be entirely inefficient.

The second part of the amendment ensures that whoever supplies gas has to meet with the objective approval of the Health and Safety Executive. Not to do so would be tantamount to the HSE being in the position of enforcing conditions after a major incident rather than acting in a much more constructive role by preventing an incident. That is clearly absurd, and we want the HSE to have the power to prevent accidents rather than have an inquest on the accidents after they have occurred. I beg to move.

Lord Gray of Contin

The noble Lord is yet again seeking to stamp his, what I might call, doctrinal view on to the Bill by making statutory provision for gas to be directed to premium use. Such a proposal which we have consistently argued against in another place runs completely counter to the Government's policy of giving free rein to market forces.

During its passage the Opposition viewed Clause 12 of the Oil and Gas Enterprise Bill, on which Clause 8 is closely modelled, as a vehicle for discouraging the use of gas for steam generation. The then Secretary of State made clear that as gas commanded a higher price in premium markets, suppliers looking for markets for gas should be able to choose the premium markets without the imposition of arbitrary rules and restrictions. That is still the case.

Noble Lords also seek to introduce the possibility of conditions reflecting the requirements of the Health and Safety Executive. This is quite unnecessary. The formal requirements of gas and health and safety legislation will automatically attach to such suppliers. Moreover, Clause 8(4)(a) already permits the attachment of conditions requisite or expedient in the light of the duties at Clause 4(2)(c). to protect the public from dangers arising from the … user of gas supplied through pipes". This is perfectly adequate to satisfy the needs of safety. For those reasons I cannot accept the amendment, and I suggest that the noble Lord might consider withdrawing it.

Lord Stoddart of Swindon

I would have considered withdrawing the amendment if the noble Lord had not mixed up thermal efficiency with doctrine. Overall thermal efficiency has nothing to do with doctrine. I am concerned that gas supplies should not be wasted. But gas supplies will be wasted—make no mistake about that—if we burn gas, which is a premium fuel, in power station boilers to raise steam which will then be converted by a generator into electrical power.

The amount of electrical power will be 35 per cent. of the overall thermal efficiency and 65 per cent. will either go up the chimney of the power station or will be dissipated in the cooling water. That is what we are talking about. That is not doctrine. That is simple common sense, I should have thought. To allow a premium fuel to be dissipated and sent into the atmosphere to the extent of 65 per cent. of its thermal value is absurdity. We are seeking to conserve this prime fuel which is in only finite supply.

Therefore, it seems to me that there is only one way in which we can decide this question, as there is clearly a great difference of view between the Minister and myself. He accuses me of being doctrinal when I am talking about energy efficiency matters. Therefore, I think we must test the view of the Committee. Perhaps the noble Lord, Lord Ezra, wishes to intervene before I finally make a decision?

Lord Ezra

I feel that the noble Lord, Lord Stoddart, has an important point. It has been the policy of successive governments in this country, as I well know from my past experience, to minimise the use of gas in power station generation. The proper fuels to be used for that purpose are coal, oil in certain circumstances, and nuclear energy. To use gas for that purpose is totally wrong, yet here we have legislation which will enable that to be done.

As this measure is to transfer the gas industry from public to private ownership it does not seem incompatible that at the same time as that is done—just as they do in the United States—certain conditions should attach to that transformation. To make the best use of the country's energy resources seems to be a perfectly laudable and desirable aim in the public interest. Therefore I should have thought that the noble Lord, Lord Stoddart, had a very good point. For the life of me I cannot see what this has to do with political doctrine. As he rightly said, it has to do with energy efficiency. Let us make the best use of the energy resources that this country possesses. We are not talking about introducing new policies but about continuing with well-tried existing policies.

Lord Gray of Contin

I think that the noble Lord will agree that this Government have always made it absolutely clear that they do not support administrative controls on the use of gas. It is far better to leave such matters to be determined by market forces. I explained that position earlier and I simply cannot accept an amendment which seeks to impose such controls. There is no case for imposing such controls and I am afraid that I cannot accept the amendment.

I make no apology for suggesting that the noble Lord was being doctrinal, because though the noble Lord, Lord Ezra, may not be being doctrinal he is following a doctrinal point of view. It has been a point of view put forward by the Official Opposition when discussing energy policy for as long as I can remember.

The Opposition always wants to determine the ultimate use of fuels. We do not. We believe in leaving it to the market to determine the use of fuels. The noble Lord, Lord Bruce, may laugh, but it is a fact. The noble Lord has not been in the other place for many years, so he has not perhaps heard the debates that have taken place.

Lord Bruce of Donington

I am laughing at the doctrine.

Lord Gray of Contin

I am not surprised that the noble Lord is laughing at the doctrine. That is his choice of a joke and not mine. I am afraid that I cannot accept the noble Lord's amendment.

Lord Stoddart of Swindon

I really cannot understand the noble Lord. He mixes up doctrine with common sense. I am the least doctrinaire of persons. The reason the Labour Party has taken the line that is has is that it has received sound advice from experts and people working in the energy industries. It is not because the Labour Party thinks that to use energy efficiently is good socialism; it is because it is sound common sense.

Lord Bruce of Donington

Which is socialism.

Lord Stoddart of Swindon

That may be, but we will not go into that subject at the moment. We are trying to convince the noble Lord, but he will not be convinced and I rather fear that it is he who is being doctrinal about market forces. It is the Government who are being doctrinal in believing that our energy problems can be solved by handing the control of all energy sources and future energy policy over to private enterprise and market forces. That is doctrine. Energy efficiency is common sense.

Indeed, at the present time his own department is running a programme about energy efficiency which is called "Monergy"—and I support it. We are talking about the same thing. We are talking about using gas at 90 per cent. of its thermal potential instead of at 35 per cent. That is energy efficiency. I should have thought that the Energy Efficiency Office would be cheering this amendment and urging it upon the Minister. Quite clearly, whether it is or not. the Minister will not be moved by arguments of sound common sense; and therefore in those circumstances there is only one course to take, which is to test the view of the Committee.

11.59 p.m.

On Question, Whether the said amendment (No. 73) shall be agreed to?

Their Lordships divided: Contents, 61; Non-Contents, 92.

12.7 a.m.

Lord Bruce of Donington moved Amendment No. 74:

Page 7, line 40, at end insert— (" ( ) conditions requiring the supplier to publish, from time to time, a schedule of its maximum and minimum prices and a statement of its general policy on negotiating contracts.")

The noble Lord said: I beg to move Amendment No. 74, which seeks, at page 7, line 40, to add a further condition which may be included within the authorisation granted under the clause. The amendment is to place the third party gas supplier, if I may call him that, in a similar, although not identical, position to the public gas supplier. As the Committee will recall, the proposed conditions—there is nothing finite or statutory about them—contain a price formula which we shall be discussing slightly later this morning; but, nevertheless, there is an indication of price policy within them. We think it right that, just as the public gas supplier makes public its price policy, so too the third party gas supplier should not be put on precisely the same footing but should be required to disclose what its prices and its price policy are.

This is a simple explanation of the purposes of the clause, which I trust the Government will find sufficiently brief. So unexpectedly brief is it that we hope sincerely that the Government will have the wisdom to accept it and expedite business. I beg to move.

Lord Gray of Contin

The noble Lord, Lord Bruce of Donington, becomes even more persuasive when he is brief, but in tabling Amendment No. 74 he and his noble friend may have overlooked the fact that the conditions which need to be attached to Clause 8 authorisations are extremely limited in character. This is because in the main supplies under Clause 8 authorisations will be on a one-to-one basis with the terms of supply freely negotiated between the two parties. Thus it would be quite inappropriate to direct that prices must be published.

As we have already made clear, there is very real competition in the contract sector of the market, with fuel oil, gas oil, electricity and coal. Where suppliers of the size of British Gas are concerned, it is important that there should be greater transparency in contract prices within the framework of appropriate controls to prevent anti-competitive practices. Hence British Gas will be required to publish maximum schedule prices. However, a requirement to publish minimum prices would undermine BGC's commercial negotiating position, or, indeed, that of any other supplier, in relation to its competitors in energy markets. There is no requirement for oil companies, for example, to publish their minimum prices, and placing such an obligation on gas suppliers would really be very unfair.

As to negotiating policy, while Condition 5 of British Gas's authorisation will require publication in relation to the contract market, the same considerations as those in relation to prices apply as far as Clause 8 gas suppliers are concerned—that is, supplies will be freely negotiated on a one-to-one basis without the need for the kind of regulatory oversight that is necessary for a public gas supplier. In the unlikely event that a Clause 8 supplier were to abuse its market position, the normal remedies would be available under existing competition law, the Competition Act 1980 or the Fair Trading Act 1973. In view of that fairly full explanation, perhaps the noble Lord will withdraw his amendment.

Lord Bruce of Donington

I am grateful to the noble Lord. I should be glad if he would explain to me exactly how the Fair Trading Act will apply to these particular circumstances. Doubtless somewhere among his papers he has been carefully briefed as to the circumstances in which the two Acts he mentioned are of help to us on this issue. Perhaps he will explain a little further.

Lord Gray of Contin

No, I am afraid that I cannot explain any further because that is the end of my briefing. But I shall certainly write to the noble Lord with a further explanation.

Lord Bruce of Donington

This is not good enough. One understands that owing to the particular composition of your Lordships' House the Government are presented with difficulties from time to time in not having Ministers who are directly from the department from which the Bill originates. I am pleased that we have the benefit of the presence of the noble Lord, Lord Belstead, and the noble Lord himself, but the absence of Ministers directly from the department from which the Bill originates does have its disadvantages. And where we do have a Minister directly from the originating department—this is no fault on the part of the noble Lord or of any of the noble Lords on the Government Benches here today —it is unfortunate that there cannot be any flexibility. They are scared stiff of going outside their briefs, and that is the disadvantage that we have. If we had the benefit of the presence of the Under-Secretary of State for the Department of Trade and Industry—who, after all, is somewhat concerned in trading matters—perhaps he could bring a degree of flexibility.

The noble Lord is really telling us that no matter what arguments and no matter what reasons for amendments are brought forward from this side of the Committee, he cannot go outside his brief other than to make the elementary and rudimentary denunciation of everything we say as doctrinaire. That is a cheap way of avoiding an argument. It is really not good enough for the noble Lord to say that he has nothing further in his brief. The noble Lord may be able to satisfy himself. I am sure that he will be able to satisfy noble Lords behind him who will go through the Lobby anyway, as will a number of noble Lords outside who will not have heard the noble Lord's remark. I do not believe, however, that it adds to the dignity of the Chamber in considering a complicated and technical Bill that requires complete understanding of its provisions by the Ministers introducing it.

12.15 a.m.

Lord Gray of Contin

I am sorry that I made a facetious remark that was obviously wasted on the noble Lord. If not able to give him a detailed answer, I took the most courteous action that I could think of. This was my suggestion that I would write to the noble Lord and perhaps elaborate a little more. I did not expect the kind of abuse that the noble Lord has thrown across the Floor at me. I shall return such abuse with my usual courtesy, and I reiterate that I shall write to the noble Lord.

Lord Bruce of Donington

The noble Lord should not misunderstand me. I did not intend to be personally offensive to the noble Lord. I regard the noble Lord as a most agreeable Minister. Occasionally, however, one has to answer argument with argument. Although no one likes to be defeated in argument, it falls sometimes to the lot of people to have that inflicted upon them. The noble Lord should not resent it. I bear nothing but the highest degree of amiability towards him. I agree willingly that he is the most courteous of Ministers.

Lord Gray of Contin

I am grateful to the noble Lord—and undefeated!

Lord Bruce of Donington

In the light of what the noble Lord has said and the fact that we are not getting much further, I ask leave to withdiaw the amendment. We shall return to it at a later stage of the Bill.

Amendment, by leave, withdrawn.

Lord Bruce of Donington moved Amendment No. 75:

Page 7, line 40, at end insert— (" ( ) The grantor shall in making such an authorisation have regard to—

1. (a) the national interest;
2. (b) the ability of such persons or persons of any class to finance the supply of gas under this section for the duration of the authorisation; and
3. (c) the ability of such persons or persons of any class to provide for a continuous supply of gas far the duration of the authorisation.").

The noble Lord said: The principles behind the amendment have already been discussed in connection with the public supplier of gas; that is to say, that the grantor of an authorisation shall have regard to the national interest, to. the ability of such persons or persons of any class to finance the supply of gas under this section for the duration of the authorisation and to, the ability of such persons or persons of any class to provide for a continuous supply of gas for the duration of the authorisation".

We do not live in an ideal world. We do not live in a world that is altogether governed by the ideology, if I may use the term inoffensively, of the party opposite. We live in a real world. There would seem to be no reason why a third party supplier of gas should not be required to have regard to the national interest. There is no reason why it should not be required to produce the evidence that it can finance the supply.

The noble Lord may have led a sheltered life. I can perhaps pull the veil aside as to what sometimes happens in reality. It is possible within the futures market now to deal in gas futures without anyone having any gas at all to deal in but merely gambling on the ability to acquire it at a higher or lower price according to whether it is a put or a call at a later stage. You do not need to have the actual gas in your possession to contract to supply it. The state of the commodity market, particularly the commodity futures market, occasionally gets a little precarious. I am quite sure that noble Lords who have experience of the City will agree with that. It is not always the most stable of dealing operations to operate in that way.

In helping the Government on their way with this operation, we are seeking to make quite sure that they are dealing with reality; that the people who are invited to become third-party suppliers of gas shall be required to be able to finance the operation. They should not be the kind of individual or company that goes out of operation after a comparatively short time, because this can he injurious to people who enter into contractual relations with them. We are dealing with a vital energy supply to which easy alternatives cannot often be found within a very short period of time. One is therefore trying to protect industry.

Once again this may sound like ideology to the noble Lord opposite, but these are matters of ordinary everyday common sense which operate in the real world which I invite the noble Lord to join some time—yea, even to penetrate. I am quite sure that when he does so he will find himself drawn by the sheer process of logic—for which I am sure he must be renowned in one sphere or another—to the logic of the amendment which has been put forward. Because I am so sure that I can convince the noble Lord on this occasion, I shall not argue it further. I sincerely hope that the noble Lord will see fit to accept it. I beg to move.

Lord Brabazon of Tara

The amendment which the noble Lord, Lord Bruce of Donington, has moved concerns the considerations which the Secretary of State and the director should have regard to in granting authorisations under Clause 8 to ordinary suppliers, that is, those suppliers who do not wish to become public gas suppliers with the special rights and duties which they would obtain in the context of Clause 7.

Although Clause 8 itself lays down the procedures for authorisation of ordinary suppliers, I must remind noble Lords that the duties, set out in Clause 4, which guide the Secretary of State and the director in all their functions under the Bill, apply equally to the granting of authorisations under Clause 8 as to those under Clause 7. It is therefore already the case that the primary duties of the Secretary of State and the director at Clause 4(1)(b) require them to do what is suggested at paragraph (b) of the amendment: to secure that persons authorised under Part I—both public gas suppliers and other suppliers— are able to finance the provision of gas supply services". This duty balances with that at Clause 4(1)(a) to secure all reasonble demands for gas, but does mean that efficient operators must be able to earn a return on the capital employed on an ongoing basis. The words at paragraph (b) therefore merely duplicate what is already in the Bill.

Turning now to paragraph (c) of the amendment, the purpose of Clause 8 is to provide for the authorisation of suppliers where they can satisfy the director in the light of his primary duties at Clause 4(1) that they can satisfy a particular demand. Moreover, under Clause 4(2)(a) the director has to exercise his functions in granting authorisations in the manner best calculated to protect the interests of consumers in respect of the continuity of supply.

Clearly, however, the director would be failing in his duties if he did not ascertain the quantity of gas available to a supplier and the period of availability, since under Clause 8(3) he has power to specify a time limit for an authorisation. But the contractual details of supply will be primarily a matter for a contract between supplier and customer and it is best to leave such questions for negotiation between the two of them.

Turning lastly to paragraph (a) of the amendment, which seeks to bring in a mention of the national interest as a guiding principle for the director and the Secretary of State, I would say to the noble Lord that the Government's aim in setting out the guidelines for actions under the Bill has been to define more closely the considerations which should be taken into account in order best to see where the national interest lies. It would not therefore be right simply to refer to the national interest and enable the Secretary of State or the director (who will of course be an appointed official and not a member of the Government who has to defend his actions to Parliament in the normal way) in effect to disregard what has been set out in Clause 4 in the light of his own personal judgment of where the national interest lies.

I therefore believe that the noble Lord's concerns on this score are already satisfied to the extent appropriate by the provisions of Clauses 4 and 8 and it would be wrong to change the Bill in the way proposed. I hope that with that explanation the noble Lord will be happy to withdraw his amendment.

Lord Ezra

On a matter of elucidation, where in Clause 8 does it refer to Clause 4 in toto? I see a reference to Clause 4(2)(c), but where is there reference to the clause as a whole?

Lord Brabazon of Tara

It does not have to do so. Clause 4 covers the whole of those sections.

Lord Bruce of Donington

I have listened carefully to the noble Lord. I am bound to say that he has, to some extent, allayed the anxieties that lie behind the clause. I shall put on one side what the noble Lord said about the national interest, which is a matter to which I shall return at a later stage, possibly the Report stage, because we on this side of the Committee think that the national interest is an all-pervasive condition that must be considered by us. As to the balance. the noble Lord has satisfied me. Clause 4(1)(a) refers to "this Part", which of course means "this Part of the Act", and, therefore, it covers the point raised by the noble Lord, Lord Ezra.

Moreover, the other provisions of subsection (2) fairly cover, although not in quite the same way as I would wish them to do so, the points which I have raised in paragraphs (b) and (c) of the amendment. We are not doctrinaire on this side of the Committee. The noble Lord has spoken to and interpreted his clauses quite reasonably. We are happy to accept what he has said, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Stoddart of Swindon moved Amendment No. 76: Page 8, line 10, leave out ("As soon as practicable after") and insert ("Before")

The noble Lord said: I beg to move Amendment No. 76 standing in my name and that of my noble friend Lord Williams of Elvel. Perhaps it will be for the convenience of the Committee if, together with this amendment, we take Amendments Nos. 77, 78 and 79. I shall be quite brief.

The effect of the amendments taken together would mean that subsection (6) would read as follows: Before granting an authorisation under this section, the grantor shall", seek the comments of the Health and Safety Executive and the supplier.

These amendments essentially tidy up the process so that the HSE has at least a chance to comment before the authorisation, and not after. That really should not cause any delay, and I should have thought it was a perfectly sensible and reasonable thing to do. The HSE, after all, is an important body and has an important role. It seems absurd that it should be sent a copy of the authorisation, but not be given the opportunity to comment upon it. I shall leave the matter there, and I am interested to hear the noble Lord's reply. I beg to move.

12.30 a.m.

Lord Brabazon of Tara

The noble Lord, Lord Stoddart, seeks to introduce consultation arrangements, particularly with the Health and Safety Executive, on Clause 8 authorisations. We do not believe that statutory provision for an extended consultation process is either necessary or desirable, since essentially an authorisation under Clause 8 would relate to a supply agreement between two parties and we wish to add to the prospects for competition and not reduce them. I recognise the noble Lord's concern about safety which, indeed, we fully share on this side of the Committee. But the requirements of the gas and health and safety legislation automatically attach to such supplies, and the establishments concerned will be subject to inspection by health and safety inspectors.

Moreover, the director will be able to attach safety conditions to such authorisations, using his powers in Clause 8(4)(a). No doubt he will seek the advice of the Health and Safety Executive before doing so. I can assure noble Lords, therefore, that safety, which is of prime concern, will be properly catered for in the proposed authorisation arrangements. As my honourable friend said in another place in Standing Committee, we have specifically discussed the Bill's provisions with the Health and Safety Executive, which considers them to be adequate to meet the situation. The Health and Safety Executive considers that the provisions are adequate and do not require any further legislation.

So far as public gas suppliers are concerned, their interests will be with the possible effects on the monopoly area. Clause 8(2) requires the applicant to give notice of the application to the public gas supplier, who will be free to make representations or objections if he wishes to do so. Clause 8 already fully looks after the interests of public gas suppliers, and I do not think that anything further is necessary. With that explanation, I hope that the noble Lord will be satisfied.

Lord Stoddart of Swindon

Yes, I think I can be satisfied. Clearly I shall want to read what the noble Lord has said, and it may well be that if I am not entirely satisfied having read those words I shall wish to return with an amendment at Report stage. For the time being, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 77 to 79 not moved.]

Clause 8 agreed to.

Clause 9 [General powers and duties]:

Lord Ezra had given notice of his intention to move Amendment No. 80:

Page 8, line 27, after ("supply") insert— ("( ) to promote the efficient use by consumers of gas supplied through pipes;").

The noble Lord said: When we discussed Amendment No. 67 the noble Lord, Lord Belstead, gave certain assurances about co considering the points made at that time, which are similar to the point made in Amendment No. 80. On the assumption that he will consider both amendments, I do not move this amendment.

[Amendment No. 80 not moved.]

Lord Bruce of Donington moved Amendment No. 81: Page 8, line 28, leave out (", so far as it is economical to do so,").

The noble Lord said: This clause as it now stands, giving the general powers and duties of the supply of gas by public gas suppliers, lays on them the duty, to develop and maintain an efficient, co-ordinated and economical system of gas supply; and (b) subject to paragraph (a) above, to comply, so far as it is economical to do so, with any reasonable request for him to give a supply of gas to any premises.

Subsection (1)(b)gives the new enterprise the power to decline to connect a prospective consumer of gas, in circumstances over which the public gas supplier has complete control and remains the sole arbiter. One can imagine circumstances where gas is urgently required for a variety of reasons but owing to the distances involved or other circumstances the public gas supplier does not particularly want to supply it because it is not going to make the same profit out of it. This we do not think is really acceptable.

Quite clearly there is a difference between something that is completely outrageous and something that may be quite reasonable, if determined independently. But to make the public gas supplier the sole arbiter of what is economic is giving the public gas supplier too much power in his own hands. We should much prefer to have that eliminated and leave the words "with any reasonable request". If the term "reasonable request" means what it says there is no necessity to inhibit it further by the words, so far as it is economical to do so". It would make the position much fairer if those words were eliminated. That would leave the public gas supplier in the following position, subject to paragraph (a) above, to comply with any reasonable request for him to give a supply of gas to any premises. I beg to move.

Lord Belstead

As presently drafted Clause 9(1)(b) requires a public gas supplier to provide a supply of gas in response to any reasonable request, if it is economical for him to do so. This duty is made subject to the duty in Clause 9(1)(a) to develop and maintain an efficient, co-ordinated and economical supply of gas in order to make it clear an t a supplier is not required to meet a specific demand which might put at risk the maintenance or development of his overall system. This is put into the Bill in the interests of all consumers, and this duty is, I think I am right in saying, identical to the 1972 Act.

I have listened carefully to the noble Lord and I understand his reservation, but I would say this in reply. First, the economical qualification was considered necessary when the British Gas Corporation has been in the public sector, and I should have thought it was even more appropriate now that it is being transferred to the private sector. Moreover, to require British Gas to meet requests for gas which were uneconomic to provide would prejudice intolerably its viability. We all want to see the gas industry expanding well into the next century, as an industry which is able to provide an essential service for domestic customers at a reasonable price and to industrial customers who need low costs to maximise their ability to compete. If one removes the economic qualification, as this amendment would, it could result in British Gas having to provide gas to a large volume of customers at an uneconomic price.

The noble Lord will say to me that that is not quite fair because the amendment says that there will be a criterion and the criterion will be as to whether the request is reasonable. As I understand it, the criticism of the noble Lord, Lord Bruce, was that having the economical qualification here was at the discretion, at the decision, of the supplier. With respect to the noble Lord, that is not so. The obligations in Clause 9 are subject to enforcement by the director. It is therefore the case that the supplier would have to pass in view before the director to determine whether or not it was right to say that a supply would be economical. The decision on whether a supply is economical or not lies with the director, and therefore the conclusion that I reach, if I may say so on behalf of the Government, is that if we were to accept Amendment No. 81, somebody would have to decide whether a request was reasonable or not, and presumably that somebody at the end of the day would have to be the court.

In the case of the Bill as drafted, somebody has to decide as to whether or not a supply is economical. In the way in which the Bill is drafted, that will be the director under Clause 28. With respect to the noble Lord, I think that that is the right way of proceeding simply because it mirrors what has always been the case in legislation. at any rate since the 1972 Act. Since the 1972 Act, the economical provision has been there. I think it ought to remain there.

Lord Stoddart of Swindon

I find that most interesting because when I was arguing earlier that to protect the interests of employees we should listen to the 1972 Act, I was told that this was not relevant because the Government believed in the market economy and that private enterprise should be free. Now we find that privatised British Gas needs the protection of the statutes in respect of providing a supply of gas. In other words, as I read it, what the Act is seeking to do is to ensure that, irrespective of whatever else may be done, the privatised British Gas makes a profit. In other words, it has nothing to do with market forces at all.

Written into this Bill (because, apparently, it was in the 1972 Act) we shall have a provision which will enable the British Gas Corporation, on the grounds that it is not economical to do so, to refuse a supply of gas; and that, in some instances, anyway, will protect the profits. So the market obviously is not pure; it does not operate. The market has now to have the protection of legislation through this Bill. I find that most odd, bearing in mind that other protections for which we have asked for other people, including consumers and employees of British Gas, have been dismissed as not being relevant to the Government's declared objective of setting the gas industry free.

I believe that this amendment is a good one. I think that "reasonable" ought to cover the situation quite adequately. I think that there is no further need to qualify "reasonable". I believe that if the words "economical to do so" were deleted then, at least, it would be even-handed in relation to the supplier and to the consumer. In the Bill as it stands, without the amendment, it is not even-handed, it is on the side of, it is weighted towards, the supplier. I urge the noble Lord, because he is a reasonable man, to consider what has been said and to consider the amendment because it will, as I say, bring about a balance which is not at present within the Bill.

The final observation I have to make, because the 1972 Act is cited, is this. The 1972 Act refers to a nationalised industry. A nationalised industry is in a different position in relation to the public from that of a private industry. A public industry in the last analysis is answerable to Parliament through a Minister and his department. The whole situation is completely different. It was probably necessary in legislation to put the words "economical to do so" because those industries are not required to make a profit. Generally speaking, they are required to balance their books in accordance with a government's financial policy. So I think the publicly-owned industries needed that protection, but it was quite wrong and quite unnecessary that private industries should have that same protection. After all, as the noble Lord keeps telling us, they are going to be free of control and they are going to compete in the market.

Lord Ezra

There seems to be a bit of belt and braces in this, because not only does paragraph (b) have the words, so far as it is economical to do so and, with any reasonable request but it is subject to paragraph (a), which also talks about, an economical system of gas supply". So we have "economical" coming in twice and "reasonable" once. It looks as though we are giving safeguards to this privately-owned enterprise which are somewhat excessive.

12.45 a.m.

Lord Belstead

Clause 9, with respect to the noble Lord, Lord Stoddart, does not protect British Gas; and with respect to the noble Lord, Lord Ezra, who I think is saying much the same thing, Clause 9 sets obligations on British Gas and any other public gas supplier to meet any reasonable demands, where those are economic. I do not think one can interpret this as being a protection for British Gas. But I will go just a little further than that and say that I think it is important for the Committee to note that when we reach the next clause. Clause 10, it contains a specific duty to supply, which is not subsidiary to the general duty to supply in Clause 9. Therefore a public gas supplier cannot refuse to give a particular supply which is required under Clause 10 because there is an argument that it would not be economic.

I raise this because it is important to note, if the Committee will forgive me for looking ahead, that when we come to Clause 10(1)(a) and (b), in paragraph (a) there is the old responsibility that the gas supplier must supply anyone who is situated within 20 yards of a relevant main. However, paragraph (b) is a new provision which has not been in statute before. It says that if you are connected by a service pipe to a main then you have got to be supplied also, however far away you may be. Therefore additional obligations are being placed on the public gas supplier when we come to Clause 10, and I repeat that the specific duty to supply in Clause 10 is not subject to Clause 9.

If I may add one final point before I sit down, I would say to the noble Lord, Lord Stoddart, that I do not think he is right to argue that British Gas was not required to make a profit under the 1972 Act. In Section 14 there was an obligation to do more than break even and to make profits appropriate to the business. We are not therefore talking about such a quantum leap as all that when we talk about privatisation. We are talking about a corporation, which we all know has proved it can be profitable, going into privatisation and, we hope, becoming even more profitable.

Lord Bruce of Donington

We are grateful to the noble Lord for having reminded us that all the various public utilities that have been privatised by the Government always make a profit before they are privatised. We are extremely grateful for that reminder.

I take the noble Lord's point about Clause 9(1)(a) which says, to develop and maintain an efficient, co-ordinated and economical system of gas supply". Of course that refers to the whole system, and nobody is disputing the necessity for the whole system as such to function economically. That does not necessarily mean that every part of the system itself, taken by itself, has to function economically.

The noble Lord is a lawyer and I should be grateful if he would define for me, in legal terms, exactly what "economic" means, bearing in mind that economics is an art and not a science. What is unecomonical? Quite clearly, if something makes a loss, that may he described as uneconomical. If an operation breaks even when there is an expectation of profit, it can be deemed that even that is uneconomical. If the prevailing rate of profit in relation to capital employed in a business is below that currently prevailing, that operation can also be described as uneconomical. What I am bothered about is that here we have a national system where it is forbidden for any part of it to be uneconomical. I do not think that is reasonable.

I know exactly what the noble Lord has in mind concerning Clause 10, and I agree we are coming to that. That deals with the 25-yard factor. What happens at 26 yards is a matter for some speculation. That may still be reasonable and it may even be economical, for that matter. One does not really know.

I should have thought that the words we suggested were the most sensible way of dealing with it. After all, what is reasonable depends on the individual circumstances in any particular case, and I should have thought that a director was just as capable of being reasonable as a court. A court is not always the sole arbiter of what is reasonable. One has only to read some judgments to realise that.

I cannot understand why the noble Lord is not prepared to accept the amendment, particularly bearing in mind, as my noble friend Lord Stoddart has said, that under the present regime, dealing with a public corporation, the words of the 1982 Act can always be interpreted as indicating that the ultimate resort is to Parliament, where questions can be put down and pressure can be exercised and the public interest generally satisfied in a reasonable fashion. I am very sorry that the noble Lord is unable to accept the amendment.

Baroness Seear

On a rather different approach, it may be that at this late hour I am getting befuddled, but I do not think that the drafting of this clause is really very clear. You have, as the noble Lord, Lord Ezra, said, the use of the words "economic" and "economical" in these two paragaphs (a) and (b), and it seems to me that there is some confusion. It is not the substance or the meaning to which I am objecting. It is simply that I do not think it is drafted in a very clear way. Will the Minister have another look at it and see whether he is saying precisely what he wants to say?

Lord Belstead

The noble Baroness is troubled because the words "economical" and "economic" both appear in the clause. I can not see that there is anything wrong with that. The noble Baroness may feel that there is unnecessary duplication. Of course I shall be happy to look at it and take advice, but I think subsection (1)(a), concerning the development and maintenance of an efficient, co-ordinated and economical system of gas supply, is understandable. It is also understandable to speak of having to comply with any reasonable request so far as it is economical to do so. The two paragraphs are saying rather different things.

Lord Diamond

I am grateful to the Minister for what he hinted and would ask him whether he would go just a hit further. We do not want to press this when there is uncertainty about it, but perhaps the Minister would merely say that he will look at the words to make sure that the drafting is right, that it means what he wishes it to mean, and that all the words are necessary.

There is the point that the "economical system" mentioned in paragraph (a) refers to an economic supply—economic so far as the producer is concerned—whereas in paragraph (b) the words are "so far as it is economical to do so" when supplying gas, and that probably means economical as far as the recipient is concerned. We have the further complication that any reasonable request might well be interpreted by a court as including the fact that it is economical. It might well be said that you cannot have a reasonable request if you are asking for something which is wholly uneconomic.

So there is no hostility about this and no party point; it is just that we want to be quite clear where we stand before we take a view. The Minister was very helpful earlier on and, if he would just say that he will look at it. without any promise at all that he will bring in a different amendment, so far as these Benches are concerned we would prefer that. At the end of the day it is, of course, for the noble Lord who moved the amendment to decide what he wants to do.

Lord Belstead

I do not want to waste time, but I do not want it to seem that the Government are uncertain here. It seems that paragraphs (a) and (b) are saying different things, and may I make the point that paragraph (b) is subject to paragraph (a). Paragraph (a) is the main part of subsection(1), to develop and maintain an efficient, co-ordinated and economical system of gas supply". Subject to that, if there is a reasonable request for a supply it must be granted, provided that it is economical to do so.

The reason for these two paragraphs is in order to preserve the situation where it would not be possible to force British Gas in the future to give a supply which would run British Gas into a wholly uneconomical position, which would not be to the advantage of British Gas and would certainly not be to the advantage of all the customers who are receiving their supplies from British Gas. As I understand it, that is the position. Perhaps noble Lords would like to look at what I have said and I, of course, will look at what noble Lords have said.

Lord Bruce of Donington

The noble Lord has invited us to take a further look at this and has indicated—and I understand it is specifically without commitment; I would not want to suggest that he has made any commitment—that he will look at it. On the basis that we are both going to look at this again, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Gallacher moved Amendment No. 82:

Page 8, line 30, at end insert— ("( ) to comply with standards of customer service as may be laid down and from time to time amended by the Director, after consultation with the Gas Consumers' Council and other relevant bodies")

The noble Lord said: This amendment is somewhat similar to one which was debated on the Telecommunications Bill. It is a useful amendment in that it ieads customers of British Gas plc to know what to expect after privatisation. It ensures that an authorised supplier under the Bill knows the level and quality of staff which he will need to meet agreed standards of customer service, and I think it is common ground between us that the British Gas Corporation already manages to combine efficiency with service standards and, equally important, an excellent trading result.

The Government have chosen price control via the tariff formula as their main method of regulation. With a private monopoly supplier, a danger exists, however, of cuts in standards of quality to maintain or enhance profits, especially if the tariff formula begins to pinch a bit. We therefore regard it as essential that standards of service are laid down by the director of Ofgas, after consultation with the Gas Consumers' Council, and also that the director ensures that these standards are complied with. The amendment will also allow the director to collect information about standards and to monitor quality control. There is the suggestion that British Telecom after privatisation has stopped giving information which would allow the Director General of Telecommunications to monitor standards. If that is so it is very important that the same defect is not allowed to arise in regard to British Gas.

The amendment is valuable and desirable in ensuring the continuance of consumer protection. It is modest in scope and intent and therefore I hope that the Government will feel able either to accept it or to say something helpful about it. I beg to move.

1 a.m.

Lord Belstead

I am glad that the noble Lord, Lord Gallacher, has moved this amendment because for once, instead of the Government saying that they feel that the amendment goes too far, the amendment is rather too modest and not specific enough. If one looks at the Bill and the general scene, one sees that the situation is more encouraging than the amendment would make one think.

Perhaps I may simply and quickly say this. Talking of customer service, Schedule 5 to the Bill carries over most of the existing provisions of Schedule 4 to the Gas Act 1972, commonly known as the gas supply code. The provisions of the code contain the terms on which gas is supplied by public gas suppliers. Such a statutory relationship has existed between gas supplier and consumer since Victorian times.

We have also provided a second tier of protection for the consumer. Condition 12 of the draft authorisation requires British Gas to issue codes of practice, describing the nature of service available to tariff customers in relation to gas supplied by it, and explaining the various methods of paying bills. The director and the Gas Consumers' Council must be consulted about each such code, and may make representations about the operation of the codes. Underpinning this is the duty on the director in Clause 4 to carry out his functions in the manner he considers best calculated to protect the interests of consumers.

Within the new regulatory arrangements, the new Gas Users Council will be able to monitor the standards of service which British Gas offers via the complaints it receives. This will provide a good measure of those areas which are of real concern to consumers. The council will be able to refer to the director any deterioration which it discovers in the quality of gas supply services to tariff customers, and he will be able to propose modifications to British Gas's authorisation, if he feels this to be necessary. Finally—and the Government have said this many times—it will be in British Gas's commercial interests to maintain its standards; the corporation has publicly acknowledged the importance of customer care.

I suggest that that is a formidable array of provisions to ensure good service to the customer. By comparison this amendment, which I welcome because it gives the opportunity to have this discussion, does not make clear in what form standards of customer service should be laid down nor how they would be enforced. I like to think that the provisions in the Bill and the authorisation really are providing a good deal for the consumer in the future. On those grounds, I hope that the noble Lord, Lord Gallacher, will agree and may feel that after this discussion it is right to withdraw the amendment.

Lord Graham of Edmonton

The Minister criticises the amendment on two grounds. First, he says that it is unspecific when it refers to "standards of customer service". Perhaps the Minister is leading us to believe that if the amendment had been more specific and had spelled out the standards of customer service that we have in mind it may have been more acceptable. But then the Minister went on to point out that it would need to be a very good extension of those words to fit what is already in the Bill—in other words, if we had spelled it out. That spelling out is already covered in the range of matters to which the Minister was kind enough to draw our attention.

I listened to my noble friend Lord Gallacher, and he said that it was essential to have an amendment of this kind made to the Bill. I would not say that it is essential, but it is highly desirable. Although the Minister himself is satisfied that there are provisions in the Bill, they are not on the face of the Bill. Perhaps they are not hidden, but one needs to look for them. Perhaps we are suspicious that the previous good standards and qualities of those who are in charge of our gas business, in seeking out what the consumer needs, may not be accepted as fully as possible unless those responsible are frightened by the Government's determination that they shall carry out responsibilities of that kind.

We are concerned not only about consultation with the consumers' council. The amendment also makes mention of "other relevant bodies". The Minister should take it on board that part of the purpose of this amendment is not merely to channel all consumer-orientated matters through the Gas Consumers Council. There are other bodies which, in my view, may very well have something relevant to say. Although the Minister is satisfied that there is no need for this amendment but that, on the other hand, it is deficient because it does not spell matters out, it is the kind of amendment that he ought to be prepared to consider.

If we are to have this Bill, then we on this side of the Committee are saying that there continues to be a need to assure millions of people, and certainly thousands of people involved in the consumer lobby who have given their time and energy over the years to serving consumers' interests, that the structure they have built up and enjoyed will not be diminished. Later amendments begin to spell out a number of matters that we on this side of the Committee believe need to be tackled in detail. I wait to hear whether or not my noble friend Lord Gallacher wishes to press his amendment at this stage, but the Minister did not satisfy me that there is no need for it.

Lord Gallacher

I thank the Minister for his remarks. It seemed to be that he was damning the amendment with faint praise. Having twice denied me the opportunity of success with earlier amendments, I believe that the Minister is ensuring my redundancy. In the normal way that would alarm me, but having regard to the duties imposed upon me I look forward to it with relish, with or without compensation.

The Minister has failed to read into the amendment all that is really there. It is true that the amendment is modest in its language and in its intent, and I know that the Minister would expect no more of me than that. Nevertheless, if one takes what is in the amendment and compares it with that which the Minister has recited as being already in the Bill, then it may be seen that the amendment serves to reinforce what is already there.

The amendment will be welcomed by those who are somewhat concerned about the protection of consumer interests once one confers a monopoly on a public limited company which must have the supreme duty, as has already been pointed out, of putting the interests of its shareholders above even those of its consumers. They are not able, as consumers in the market place generally are able, to look elsewhere, by transferring their custom for gas from British Gas plc to some other body because there just will not be some other body. To that extent, therefore, although the amendment may appear on the face of it to be superfluous, I believe that it is useful.

The amendment begins by acknowledging that there are standards of consumer service already laid down. But it also goes on to say that from time to time the director of Ofgas may amend those standards. One assumes that the director of Ofgas will be on the side of the consumer and that therefore any amendments he makes are likely to be of the kind that will strengthen standards of service rather than diminish them. Furthermore, it allows the director of Ofgas to bring into the scheme of things the Gas Consumers Council. What better body to approach about improving standards of service than the body which was specifically charged with protecting the consumer?

Then, as my noble friend, Lord Graham of Edmonton, pointed out, the area of consultation is widened still further by allowing consultation with other relevant bodies, and we are modest enough not to encumber the Bill by spelling out the names of relevant bodies, allowing that to be at the discretion of the director and with the Gas Consumers Council playing a part in suggesting to the director other bodies who have similar interests at heart and may therefore be worth consulting so far as the amending of existing standards is concerned.

Therefore I think that in its totality this is a good amendment. The Minister's response to it was somewhat half-hearted, I feel. We shall not press it to a Division because of the lateness of the hour. We shall look at what he had to say and if we feel it necessary so to do we shall come back at Report stage a little less timid, a little less modest; and perhaps next time the Minister will be complaining that we are far too aggressive. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Diamond moved Amendment No. 82A.

Page 8, line 30, at end insert— (" and ( ) to maintain and develop adequate services for elderly and disabled consumers, including the checking of appliances free of charge, after consultation with the Director, the Gas Consumers' Council and organisations representing elderly and disabled people.").

The noble Lord said: I beg to move this amendment, which refers once more to the elderly and disabled. We have already had a discussion on this topic but not on this precise amendment.

First of all, we are talking now about the duty, as I understand it, of any public gas supplier. We are not talking purely about the successor company. The amendment proposes that there should be not only the maintenance of an adequate service for the elderly and disabled consumers but that there should be a development. That is very important indeed—that we should move with the times. May I spend on minute reminding the Committee of what the situation was perhaps 20 years ago with regard to wheelchairs, for example? There was nothing but difficulty for those in wheelchairs, whereas now if you go to a concert hall, if you go to the airport, if you consider the toilet facilities there, you realise that any number of places have made provision for people in wheelchairs. Indeed, if this Chamber were to be rebuilt it would be built on the basis that wheelchairs would have ready access without the difficulties which are apparent at the moment. So there is a need to have this in mind, to develop adequate services for elderly and disabled consumers.

The amendment goes on to say not only that, but: including the checking of appliances free of charge, after consultation with the Director, the Gas Consumers' Council and organisations representing elderly and disabled people. It is right that the director should be consulted, and it is clearly right that the Gas Consumers Council should be consulted because it is obviously the body most fitted for this purpose. It is right that organisations representing elderly and disabled people should be consulted. They have a great deal of knowledge and experience on this matter.

It is right, I think, that the amendment should specifically refer to the inclusion of the checking of appliances free of charge. That of course, as we all know, is the present situation. But the present situation will not necessarily continue into the future. We have the recent example of Oftel where a charge is now to be made for calls to emergency services, which was not previously the case; they were previously free. Many noble Lords will have heard the explanation, just as I heard it, given on the radio by the spokesman for Oftel. I cannot remember his exact words, but this is the import of them. He said that the subscribers to the capital of Oftel had had regard to the prospectus, that there was nothing in the prospectus about free calls for emergency services and the subscribers therefore expected the management to manage accordingly. So it was going to make charges to increase the profits slightly and increase, therefore, the interest of the shareholders.

That is the model we have in front of us, and therefore it is right that we should have regard to that and to protect the consumer by referring, as the amendment does, to the "checking of appliances free of charge" as a continuous service, as it ought to be, for the elderly and the disabled.

That is the amendment. I hope that the noble Lord the Minister will be able to give us at least a sympathetic and understanding reply as it is a matter of common interest across the Chamber. I beg to move.

1.15 a.m.

Lord Campbell of Alloway

It is not entirely clear to me, at all events, how the statutory duty imposed by Clause (9)(1) paragraphs (a) and (b), is to be enforced, or indeed whether breach of it is intended to give rise to an action for damages for breach of statutory duty. These matters have in other Acts received clarification. Without clarification it is always left as one of the most difficult matters which any court, even up to the Appellate Committee of your Lordships' House, has difficulty in resolving.

One then comes to the amendment, which proposes another statutory duty, and, without repeating the problem, the same considerations apply. As Amendment No. 84ZB came into the list long after Amendments Nos. 82A and 82B, I wonder whether the noble Lord, Lord Diamond, might consider that the certitude of the form of enforcement proposed by Amendment No. 84ZB could perhaps have some attractions in view of the incertitude of the nature of the statutory duty and its enforcement, and whether it gives rise to an action for damages under Clause 9(1) in any event.

Lord Belstead

I first refer to Amendment No. 82A on the maintenance and development of adequate services for elderly and disabled consumers, including the checking of appliances. The noble Lord, Lord Diamond, has put his case for that amendment. My noble friend Lord Campbell has now referred to certain difficulties which he sees in Amendment No. 82A and, as I think the Committee knows, my noble friend feels that his own amendment, Amendment No. 84ZB, is superior to the other amendments.

I am in a position where, on behalf of the Government, in response to Amendment No. 63A in the names of my noble friend Lady Macleod of Borve and the noble Lord, Lord Stoddart of Swindon, I offered to bring forward a requirement in the authorisation about ensuring publicity of special services for the elderly and disabled, and I have also offered to insert a specific mention of the elderly and disabled in Clause 4.

I leave that point for the moment and come to the second of the two amendments, Amendment No. 82B, about drawing up a code in order to help consumers who are having difficulties in paying their bills. I remind the Committee that one of the codes of practice which British Gas will be required to produce under Condition 12 of the proposed authorisation will provide information and advice about payment of bills, with help, in particular, for those who have difficulty in paying.

This code will have to be prepared in consultation with the director and with the Gas Consumers' Council. British Gas has made clear its intention to continue with the existing joint code of practice with the electricity industry, which sets out clearly what help is available for those who cannot pay their bills, and it gives particular mention to the blind, the sick, the severely disabled and the elderly. Noble Lords may already know of this code. Indeed, I have a copy with me among my papers, and your Lordships may also have copies in your own possession.

Perhaps I may come back to Amendment No. 82A. In this amendment the noble Lord, Lord Diamond, is seeking to place a duty in the Bill which would require all gas suppliers: to maintain and develop adequate services for elderly and disabled consumers". In fact, we had a brief debate about this matter w hen we discussed Amendment No. 46A on 8th May when, on behalf of the Government, I pointed out my concern about casting in stone the provision of existing services. As I have said, we have already agreed that we shall include something in the authorisation about the services provided, and I have offered to put in Clause 4 of the Bill an explicit duty on the Secretary of State and the director in regard to elderly and disabled people.

I realise that this is not to the taste of my noble friend Lord Campbell of Alloway who will be moving his Amendment No. 84ZB in a few moments' time, but I say to the noble Lord, Lord Diamond, that I hope he may feel that I have taken on board the spirit of compromise that has so frequently been pressed on me and my colleagues on the Front Bench. I hope that the noble Lord, Lord Diamond, will feel that, though I am not going so far as to accept the amendments which he is now moving. I have gone quite a long way to try to see that the Government not only respond to the case which is being put on behalf of elderly and disabled people but that we have something on the face of the Bill. In those circumstances, the noble Lord may feel that it is reasonable for him to withdraw these amendments.

Lord Graham of Edmonton

The Minister asks the Committee to recognise that at a later stage we may perhaps see something much more positive and concrete, but we are now debating Amendments Nos. 82A and 82B which relate to specific matters on which it is absolutely crucial that certain members of our community should be satisfied. From my own experience as a parliamentarian—and not only in this Chamber—I certainly know that there are members of our community who need to be satisfied, and their families need to be satisfied, that it is recognised that they are in a special position, and that by virtue of their age or disability they require special treatment.

The noble Lord, Lord Diamond, drew our attention not merely to the need for adequate services for the elderly and disabled consumers, including the checking of appliances, but to the condition "free of charge". We all know of tragedies that have occurred when elderly people were confused, tired and feckless. We would be appalled after such a tragedy if we were told that one of the causes was defective installation which became lethal because an elderly person had looked at his or her budget and said, "I cannot afford it", or, "I cannot afford it this week—or this month". We know that as a community we should never forgive ourselves. Certainly as parliamentarians we would not do so.

What the amendment seeks to do, in my view perfectly properly, is to keep pushing the noble Lord the Minister and those who have responsibility for such matters to remember that, although the form of words appers to be all-embracing, we must bear such incidents in mind. If he tells us that elderly and disabled consumers will not find themselves in difficulties because of cost, that will be all right.

I heard the noble Lord the Minister say something about the mandatory nature of the provisions that will apply to the authorised user. I fully recognise that he may say that the provisions have cost implications. I am not disabled or elderly but on the margin, and I am sure that most consumers would think it perfectly proper to pay a fraction of a penny more per unit to ensure that the costs are not borne by those who cannot afford them, and thereby perhaps save a life.

Amendment No. 82B—

Lord Diamond

I am sorry to interrupt the noble Lord, but I did not move Amendment No. 82B.

Lord Graham of Edmonton

I did not think that the noble Lord had.

Lord Diamond

I did not move Amendment No. 82B for the good reason that on the document suggesting which items should be taken together, it was not mentioned. I did not wish to interrupt the noble Lord the Minister. One does not do that because it would be a discourtesy. He may have been briefed to answer both amendments. I want to move that amendment. It relates to a separate point, and I want a separate answer. I hope, therefore, that this discussion can be brought back, as I originally intended, to refer only to Amendment No. 82A, and we can discuss Amendment No. 82B later.

Lord Graham of Edmonton

I accept that. The first time I turned to the detail of Amendment No. 82B was when the noble Lord the Minister referred to it. I am certain that he was trying to be helpful, but I take the point and I shall leave my remarks on that amendment until later.

Lord Sanderson of Bowden

I was not one who welcomed the reply that the noble Lord the Minister gave to the noble Baroness, Lady Macleod, but I should like to reiterate my thanks to him for his thoughtful reply to that amendment. I feel that Clause 4 is one of the most important clauses in the Bill. It relates to general duties put upon the Secretary of State and the director in relation to the elderly, the disadvantaged and the disabled. Before we reach the Bill's next stage we shall want to see what will be proposed in that clause. It might answer some of the problems and worries of those who are pressing the amendment.

Lord Diamond

I shall deal only with Amendment No. 82A. I thank the noble Lord the Minister for what he said. I was not clear about what he said. May I ask him whether I understood him correctly, and that when he considers what should be incorporated in the undertaking that he has already given with regard to introducing something into Clause 4, he will take into account not only what was said at that stage, but will also take into account what could not have been taken into account then (because we ad not reached it) and what has now been said? I ask for no more than that he will, as it were, postdate his undertaking and consider the matter as it now is rather than as it was before the amendment was moved.

Lord Belstead

Without giving any commitment, I undertake to do that.

Lord Diamond

I am grateful to the Minister. He has been most helpful. In those circumstances we get back to the position where we can say that we shall look carefully at what the Minister produces in the very relevant Clause 4. I am sure that the noble Lord, Lord Campbell of Alloway, will forgive me for saying, as I am no lawyer, that I had no desire to be more royalist than the king. If the Government's legal advisers thought it unnecessary to spell out what he thinks it necessary to spell out, I had rather left it at that. We shall be listening carefully to what he has to say.

But in all the circumstances, and having listened to what everybody has had to say on the topic—and I am grateful for the speech to which we have just listened—I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

1.30 a.m.

Lord Diamond moved Amendment No. 82B:

Page 8, line 30, at end insert— (" and ( ) to draw up, in consultation with the Director, the Gas Consumers' Council and organisations representing consumers who have difficulty in paying bills, a Code of Practice for the protection of such consumers from hardship. A code drawn up under this section shall include provisions to prevent the unreasonable disconnection of gas supply to elderly and disabled people.").

The noble Lord said: It is not necessary for me to spend a great deal of time on this amendment because the words speak for themselves. The amendment would put a responsibility on any gas supplier to consult, the Director, the Gas Consumers' Council and organisations representing consumers who have difficulty in paying bills, and after that consultation to draw up, a Code of Practice for the protection of such consumers from hardship". I have no need to go into it in more detail. We have discussed the point. I just wanted to underline the fact that anybody who has had a constituency to look after knows that this matter comes up time and time again.

I want to ask the noble Lord again to be understanding about this amendment and to take it into account in the consideration that he is to give to all these matters prior to putting down an amendment on Clause 4. I beg to move.

Lord Belstead

I apologise for assuming that the noble Lord was moving both Amendments, Nos. 82A and 82B. Without repeating what I said before, let me say that Condition 12 of the draft authorisation provides exactly what he is asking for. It provides that there must be a code; that it must deal with those who have difficulty in paying bills; that it must be prepared in consultation with the director; and that it must be prepared in consultation with the Gas Consumers Council. The difference between what I am saying and what the noble Lord is putting to the Committee is that he would wish to write all that on the face of the Bill.

I shall look at all this in the round, but we are now beginning to get onto rather different ground. My original undertaking to the noble Baroness, Lady Macleod, was to do certain things in regard to services for elderly and disabled people. But it would not be productive this evening to say that I am not going to look carefully at Amendment No. 84B to see whether there is any move that I can make in the direction that the noble Lord has put forward. I simply rest my case at the moment and say that the authorisation is faithfully carrying out what the noble Lord wants. It is true that that is in the authorisation and not in the Bill. I shall have a look at the whole thing again before we get to the next stage of the Bill. I hope that the noble Lord feels that that is a reasonable response.

Lord Diamond

I am grateful to the noble Lord. It is a reasonable response. He has taken the essential point. We want to see the provision in the statute so far as we can achieve that. What he proposes for Clause 4 will be by its nature a statutory provision. He has been good enough to say certain things. I shall not even attempt to reiterate what he said because I do not want to add to it or detract from it. We heard what he said. We are grateful to him. In those circumstances, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Bruce-Gardyne moved Amendment No. 83:

Page 8, line 31, leave out from ("supplier") to end of line 33 and insert—

1. (" (a) to avoid undue preference to, or undue discrimination against, any person or class of persons from whom he purchases gas: and
2. (b) to avoid undue preference in the supply of gas to persons entitled to a supply in pursuance of section 10(1) below:

and for the purposes of paragraph (a) above a public gas supplier may be regarded as having shown undue preference, or exercised undue discrimination, if he favours his own gas producing business or that of another person from whom he purchases gas.")

The noble Lord said: I realise that the clause before your Lordships this evening is essentially concerned with the various wickednesses which Sir Denis Rooke and his great corporation might perpetrate upon consumers when they have fled into the private sector. I have sometimes argued already on this Bill that I do not quite see Sir Denis and his corporation behaving in this manner of wickedness towards consumers. I am more concerned about the way in which, on the basis of past performance, they might be inclined to behave either towards, conceivably, their shareholders or, very possibly, their suppliers.

The purpose of the amendment, with which I am happy to be associated with the noble Lord, Lord Harris of High Cross, is to try to make sure that the British Gas Corporation, as a monopsony purchaser of gas, shall not improperly discriminate against alternative suppliers of its raw materials, possibly, for example, by purchasing more expensive gas from third parties than it could obtain from other suppliers on the United Kingdom Continental Shelf.

I submit to your Lordships that this is not a wholly academic proposition. The BGC, Sir Denis Rooke up front, entered into a contract for the supply of gas from the Frigg field in Norway on terms which have caused, I think it is fair to say, persistent embarrassment to successive Governments ever since, not least by making it impossible, without extremely onerous consequences, for successive British Governments to put the taxation of fuel oil in this country on to a base more competitive than that which prevails in the rest of the European Community.

Subsequently, as we know well, the BGC embarked upon proposals to import gas from the Sleipner field. It was seeking to purchase very large quantities of gas from that field, as my noble friend will be aware, on terms which, certainly to many of the independent alternative suppliers from the North Sea, appeared to threaten the prospect that these supplies from the Norwegian Continental Shelf could be used in the 1990s in order artificially to depress the prices at which the BGC was buying other supplies from the United Kingdom Continental Shelf, and to deter exploitation of gas resources from the United Kingdom Continental Shelf.

In the end, the Secretary of State for Energy intervened to prevent that deal proceeding; but once the BGC has gone into the private sector, and in the light of the assurances which have been given by the Secretary of State about there being no question of any restraints on the freedom of Sir Denis and the BGC to purchase imported supplies under whatever terms and in whatever circumstances they may choose, we could easily have a repetition of the Sleipner deal, with no possibility of Government intervention.

If the British Gas Corporation were to be dispatched to the private sector as a non-monopsony supplier, there would be no reason to worry. The fact is that it is being dispatched as a monopsony supplier. On that basis, it seems to me, and also, evidently, to the noble Lord, Lord Harris of High Cross, that private sector suppliers from the North Sea need some assurance about the freedom of the corporation to behave in a potentially discriminatory fashion towards suppliers after this legislation has gone through. The purpose of the amendment is to secure such an assurance from my noble friend. I beg to move.

Lord Williams of Elvel

This is an important amendment. I declared at Second Reading my interest, and I hope that your Lordships accept that I should be able to speak on the matter. I do not want to personalise the issue. But the problem is that the British Gas Corporation has a wide variety of cost in its supplies. It is moving from a relatively low cost situation to a relatively high cost situation. In other words, the southern North Sea basin has yielded gas for British Gas at prices that were negotiated fairly early in the history of the North Sea. The contracts in which those prices are embodied are starting to run out. British Gas will have to purchase some rather more expensive gas. As the noble Lord, Lord BruceGardyne has said, the Government have intervened to ensure that the purchase from the Sleipner field will not take place.

The problem that the amendment addresses is very serious. Successive governments have spent much time and money encouraging an independent sector in exploration and production in the North Sea. It would be a great mistake, in our view, if any public gas supplier, any privatised British Gas, should use its discriminatory powers—I hate to use the word "monopsony" but one is obliged to use it—as a sole purchaser of gas to discriminate against those companies that have been set up in certain contexts, encouraged by the British Government to produce gas, with the intention of selling that gas to the gas supplier, British Gas, or whatever its successor may be.

I find the amendment wholly to the point. It poses a further question. That question is how we, as a community, are to discover the real cost of gas to the privatised British Gas. At the moment, it is almost impossible to discover the answer because British Gas is itself a producer, a taker, a purchaser and also a distributor. There has to be some demarcation line between the point of product on and the point of purchase. Everyone should have a fair crack at being able to sell the gas that they produce to British Gas, the privatised British Gas.

There is inevitably a tendency—I am not saying it is more than a tendency because I do not want to personalise it—for a major gas distributor to rely on its own sources, or indeed to exert pressure and to discriminate against other sources. I believe that this is a matter to which this amendment very satisfactorily addresses itself. Because of the way the amendment is framed, which would essentially require any privatised British Gas to publish what the costs are of its different sources. it would have the advantage of exposing to the public exactly the purchase price of various sources of gas that the privatised British Gas wishes to tap. The public could make absolutely certain—indeed the director will make absolutely certain if this amendment is accepted by the Government—that there is no discrimination between one form of company, one form of produces or one country, and that the new privatised British Gas is selecting its sources at the best available price and from the best available sources.

It does not seem to me that this amendment is in conflict with what the Government wish in the Bill. I believe that it is a matter that the Government should take very seriously. I agree with the arguments that the noble Lord, Lord Bruce-Gardyne, has set out. I believe that this is something which we all should know. I believe that British Gas in its privatised form, with the enormous purchasing power that it has, should at least be required to publish the information; and that there should be some arrangement that it should not discriminate against those companies that successive British governments have, over the years, tried to set up. Speaking from these Benches, I would wish to support the amendment that the noble Lord, Lord Bruce-Gardyne, has so ably moved.

1.45 a.m.

Viscount Torrington

I too must declare an interest in the subject as the noble Lard, Lord Williams of Elvel, has done. I am associated with a company which is also an independent, or a putative independent, producer of gas. I believe that very shortly in this Chamber we shall be debating the Financial Services Bill. We shall hear a lot in that Bill about Chinese walls and dual capacity. I do not think that there is anything in this Bill which imposes a Chinese wall between British Gas as a gas producer and British Gas as a gas supplier or reticulator. British Gas will be the only company in this business which will be a dual capacity company.

In its dual capacity, and that part of its dual capacity which involves it in the production of gas, it is in very few cases, if any, the sole owner of any gas production rights. There will be other groups of companies with it. But to bring North Sea gas fields on line there is in effect a queue, quite apart from the question of price paid for gas. Fields have been found and are potentially awaiting development.

There is therefore a worry on the side of the independent industry on two factors. The first is the price that they will be paid for their gas. If, for example, they are in a consortium of which British Gas is not a part, will such a consortium be offered a rather lesser price than a consortium of which British Gas is a member? Secondly, will a field which has been discovered, and is awaiting development, and which British Gas is not a party to or a partner in, get pushed behind in the queue when it comes to development to bring fields on line?

Therefore here is a strong worry on the part of the independent industry about this aspect, and I have to say that I think that the amendment put forward by my noble friend Lord Bruce-Gardyne would have a strong appeal to the independent industry. It would be most helpful if it or something like it were included in the Bill. The industry is going through a very difficult time, because most members of the industry are also involved in oil production, and oil prices are very low. It is almost a question of survival for many companies which have worked very hard over the past few years. If something along the lines of my noble friend's amendment were included in the Bill, it would be helpful.

Lord Belstead

I recognise the concern which my noble friend Lord Bruce-Gardyne has expressed about the effectiveness of regulation in British Gas's upstream activities once British Gas has been transferred to the private sector. The amendment would not only require suppliers to avoid undue preference in the supply of gas as currently expressed at Clause 9(2) of the Bill but would also extend this to gas purchases. As I think the Government have explained on an earlier occasion, we do not believe it would be right to extend the powers or duties of the director upstream.

I was interested in the intervention of my noble friend Lord Torrington, because my noble friend recorded his own interest in this particular area of operations. My noble friend was quite clear in what he said; namely, some of the independents would be interested in an amendment of the kind which the noble Lord, Lord Bruce-Gardyne, is putting forward.

The reason I was interested in my noble friend Lord Torrington's intervention was that, as many Members of the Committee may be aware, when the oil companies came to give evidence to the Select Committee on Energy they specifically expressed their opposition to what essentially is in the amendment, in terms which were powerful and with which the Government agree. The evidence was that they wanted competition between sellers in the United Kingdom continental shelf to be allowed, and they did not want the regulator to become involved in upstream purchases.

When Sir Denis Rooke gave evidence to the Select Committee on 10th December 1985 he firmly rejected the idea that the corporation might use its influence as a potential buyer of gas to discourage an oil company from applying for acreage in which the corporation was also interested. He also went on to say that, the idea that necessarily developing one's own gas is always better than buying from somebody else was wrong. The United Kingdom continental shelf is a competitive area and companies producing gas have had since 1982 the opportunity to sell gas to persons other than the British Gas Corporation.

However, in addition to Sir Denis Rooke's evidence, it is right to remember that British Gas is not just a free agent in these matters. There is already a comprehensive regime in place in relation to the licensing of the United Kingdom continental shelf and the development of gas and oil fields. I think that all noble Lords who are taking part in this brief exchange probably know about this very much better than I do.

Moreover, competition legislation itself, in particular the monopoly provisions of the Fair Trading Act, offers protection against significant cases of the abuse of a monopoly situation in relation to the acquisition of gas from the United Kingdom continental shelf, and there is already the possibility of a reference to the Monopolies and Mergers Commission. To accept the amendment would mean giving the director a role in vetting gas purchase contracts, which we believe would be clearly against the best interests of gas consumers and gas producers alike.

I assure noble Lords that, while we share their keenness to avoid any unfairness which could arise in the purchase of gas, we believe that existing competition law should be adequate to tackle it. I shall certainly look at this debate. because expressions of view have come from all parts of the Committee. I shall look at this debate with care when we have the opportunity to look at Hansard.

However, I ask the Committee to take on board that evidence to the Select Committee—and I am not talking about the evidence of the chairman but about the evidence of oil companies—was against this amendment. The Government have felt consistently that the solution which this amendment would try to find would not be desirable. There are in competition legislation enough safeguards in order to see that things are kept right, and the effects which the amendment seeks to address are in fact effects which can be dealt with by competition legislation.

Lord Bruce-Gardyne

I am grateful to my noble friend for that reply, and particularly his assurance that he will look carefully at what has been said in Hansard. I am not all that convinced by what he said about the evidence given to the Select Committee. Shell, one of the companies concerned, did indeed express objections to the possibility of the regulatory office moving upstream, but Shell alone, and on the other hand Britoil, to mention but one, took a precisely contrary view. Of course it is true that Sir Denis Rooke objected to any suggestion of such regulation applying upstream, but then, as Mandy Rice-Davies used to say, "He would, wouldn't he?" What else are we to expect? I do not think that that is a convincing argument.

I listened carefully to what my noble friend said about competition policy and the role of the Office of Fair Trading and the Monopolies and Mergers Commission in this area, which of course one accepts. But it is a much more cumbersome procedure, and unfortunately we are still up against the consequences of the decision that the Government took, which I continue to believe was misguided, to pass the British Gas Corporation back into the private sector as a monopoly performer.

In those circumstances I hope that my noble friend will consider carefully what has been said during this short debate and the significant arguments advanced by my noble friend Lord Torrington and the noble Lord, Lord Williams, as well as by myself, and reconsider with care whether there is not a case for providing some assurances for the suppliers to this monotholic monopsony corporation when it is passed to the private sector. On the basis of my noble friend's assurance of careful examination of what has been said, at this hour I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

2 a.m.

Lord Stoddart of Swindon moved Amendment No. 84:

Page 8, line 33, at end insert— (" ( ) It shall be the duty of the public gas supplier to settle from time to time with the Director a general programme of research affecting gas supply and other matters affecting their functions. which will also include matters affecting the supply of gas for a specified forward period as well as matters affecting the general policy of the gas supplier towards all classes of customer and, insofar as it is practicable, consideration of the supply and demand of other energy sources, and staffing projections; before presenting such a programme to the Director, the public gas supplier shall consult with his workforce in such councils as are specifically established for that purpose.").

The noble Lord said: I beg to move Amendment No. 84, standing in my name and that of my noble friend Lord Williams of Elvel. Depending on who was to reply for the Government, I was going to say that I should probably be accused of being doctrinaire in returning to this matter because we have had some discussion on Amendment No. 68C. But the amendment before your Lordships' Committee is rather different. It is different in one respect anyway, because it seeks to maintain consultation with the workforce. Certainly the amendment is similar to provisions in Section 3(3) of the 1972 Act.

As noble Lords will know, the British Gas Corporation currently lays before the Secretary of State a corporate plan which takes into account the medium to long term prospects for the industry. It also looks at all aspects of the energy market and its relation to other fuels, manpower planning, pricing and purchasing policy, other such matters. As I have said, it is subject to detailed consideration with the workforce. As I have also already said this evening, I believe such consultation with the workforce is good for the industry, good for management and good for the working people themselves.

Such a requirement carried over to the public gas supplier will ensure that the benefits of planning are not lost. In addition, it will maintain a unique form of employee involvement. As I have said, I shall probably be accused of being doctrinaire, but the fact of the matter is—I make no apology for reiterating the view I have taken in previous debates—that gas is a premium fuel, it is a finite fuel. It ought not to be wasted and it ought to be subject to proper planning.

I know that the Government take a different view. They believe that the market will sort out all these problems and that eventually supply will equal demand and private enterprise will be able to to settle within the various industries what fuels are used, the rate of depletion and what-have-you. But it will not work. Energy planning simply cannot work in that way. That is the reason why we put this amendment down and why I have moved it this evening.

We have had a previous discussion on this subject, and therefore I shall not take up the time of the Committee in reiterating many of the arguments that have already been used; but I have to say that we think this is an important aspect. Whether the Minister has had time to think again abort the Government's attitude since we last debated the subject, I do not know, but I shall be interested to hear what he has to say. I beg to move.

Lord Brabazon of Tara

As the noble Lord, Lord Stoddart of Swindon, reminded us, we had a pretty full debate on Amendment No. 68C on the whole subject of research and development, and I therefore do not propose to cover again the ground on which, if I did not convince noble Lords opposite with my reply, I at least managed to convince a majority of the Committee. I shall therefore concentrate on the two aspects of this amendment which are different.

This amendment seeks to seta public gas supplier's R & D programme in the context of supply and demand. As I think we have made clear in debate earlier, there is at present a free market and the Government would not wish to direct a public gas supplier to organise its R & D programme in such a way as to do anything other than to take account of the influence of market forces. There is already considerable competition with other fuels, and public gas suppliers will no doubt wish to direct their research efforts in such a way as to enable them to expand their markets.

Turning to consultation with the workforce, we also believe it would be wrong to impose any statutory requirement in this area. British Gas and other public gas suppliers will, I am sure, use the appropriate negotiating machinery to deal with these matters. I am afraid that the noble Lord, Lord Stoddart of Swindon, will probably now accuse me of being doctrinaire, but I submit that there is the world of difference between what is appropriate to include in the statute for a nationalised industry and what is appropriate for a private sector company.

Nationalised industries are creatures of statute and their duties and powers are appropriately encompassed in the statute. Private sector companies have articles and memoranda of association. Moreover, it is part of the make-up of industrial and commercial life for such companies to make major investments in research and development. I am sure that the noble Lord will recognise this from his own experience, and, although I very much doubt whether I have been able to convince the noble Lord, I must ask him at this stage, anyway, to withdraw his amendment.

Lord Stoddart of Swindon

I have listened to what the noble Lord has said and it is quite clear that we are not going to convince one another this evening, anyway. I maintain that, in spite of the fact that British Gas is to be privatised, it is necessary in the interests of our energy sources and their conservation that some control and some obligations are placed upon the privatised British Gas. However, as I have said, I do not think that we are going to agree on this, and, certainly at this stage, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Stoddart of Swindon moved Amendment No. 84ZA:

Page 8, line 33, at end insert— ("(2A) It shall be the duty of the public gas supplier to promote, insofar as is practicable, measures leading to the conservation of gas; such measures shall include

1. (a) development and promotion of energy efficient appliances;
2. (b) advice to consumers on the use of such appliances in such a way as to secure the most efficient use of gas.")

The noble Lord said: I beg to move Amendment No. 84ZA, which stands in my name and in that of my noble friend Lord Gallacher. We believe that at the present time the British Gas Corporation does a fair amount in ensuring that the appliances which they sell and which customers buy are energy efficient and, of course, safe. We also believe that at the present time they give advice to consumers on the use of appliances, and in such a way as to secure the most efficient use of gas. I know, for example, that at the present time the Gas Corporation is developing a new type of domestic central heating boiler. Certainly, in parts of the country they are encouraging people to instal this new type of boiler which uses gas more efficiently, to the benefit of the nation and of energy efficiency generally, and also to the benefit of the consumer in that he pays less for his heat.

This sort of development is altogether acceptable. We want to see more of that type of development. We want consumers to have more advice available to them and we want to see a relationship maintained between the new privatised British Gas plc and the customers which will ensure the best use of gas and the development of new appliances and more efficient appliances. As we have said repeatedly, we have every confidence that the present British Gas Corporation does all these things; and they do all these things because they are a public corporation and they have a public duty to do them. If they do not do these things the public has a remedy to ensure that they do do these things.

But when British Gas is privatised the public will really have no remedy at all and it may not be in the best interests of British Gas shareholders for the privatised company to continue with the energy-efficiency measures that have become an everyday part of the British Gas service to the public. That is why we move this amendment: not that we do not trust the assurances given by British Gas that they will continue their present policy but because we know that, inevitably, privatised British Gas will change. The nature of the board will change; the personnel and the nature of the whole organisation will change. The objectives of the organisation will be different; and we simply want to ensure that the privatised corporation does have this duty and obligation which was described very well by the noble Lord, Lord Ezra. in an earlier debate. I keep remembering his phrase because I thought it was such a good one: that where you grant a monopoly, the monopoly must accept obligations as well. This is one of the obligations we seek to place upon the new organisation, and I commend the amendment to the Committee.

Lord Ezra

The amendment proposed by the noble Lord, Lord Stoddart of Swindon, is very much in line with others we have debated throughout these discussions relating to the promotion of energy efficiency. It is something which I believe most of us feel very strongly about. Naturally, there are some who take the view that this is a matter best left to the enterprise when it is privatised. There are others, however, who feel that this is of such overwhelming importance that it should be mentioned as a condition of the granting of the authorisation. We on this side certainly hold that view. The Government, in an earlier discussion conceded that they would consider introducing something to this effect and I therefore hope the. will extend that consideration to this amendment.

Lord Brabazon of Tara

I think we are all agreed that energy efficiency is a good thing, and none more so than the present Government, who have an enormous programme going on this year and continuing: that has been referred to already in this debate. and it has been mentioned frequently at other times.

The noble Lord, Lord Ezra, reminded us that my noble friend Lord Belstead made a concesssion during our discussion on Amendment No. 66 and had been prepared to extend the provision of the authorisation to cover the subject of energy efficiency. Therefore, to some extent the amendment moved by the noble Lord, Lord Stoddart, is covered.

The noble Lord, Lord Stoddart, quite rightly mentioned that British Gas has an excellent record in research and development, and he mentioned in particular the development of, I think, a new kind of central heating system. He said—I hope I do not misquote him—that was because British Gas was a public corporation; it was in the public sector and it was marvellous that it should do this sort of thing. Perhaps I take a slightly more cynical view of this. I am sure he is right and that that is one of the reasons, but I also happen to believe that one of the reasons why it does it is because it wants to sell that central heating system in competititon with electricity or other forms of fuel.

That is something which will continue to arise. The specific duty that this amendment seeks to impose in relation to the development of gas appliances would not be consistent with the aim of the Bill overall, or with the Government's approach which has been to set up regulatory arrangements for the supply of gas. The manufacture and development of appliances is a normal commercial undertaking carried out by a large number of private firms in this country. There is no inherent monopoly attached to such activities, and there is no reason to set out specific regulatory provisions for them, beyond the normal fair trading requirements of competition law which apply generally. I therefore believe that that particular part of the amendment would be quite wrong, to set a specific obligation on public gas suppliers, when they are in competition with a lot of other people who are also producing gas appliances. For the rest of the amendment, we will certainly read most carefully what has been said; and in our deliberations, and with the commitment which we gave on Amendment No. 66, we will take into account what has been said.

2.15 a.m.

Lord Graham of Edmonton

The Minister used as one of his arguments for not imposing these duties that the public gas supplier will be in competition with other forms of energy. If we believe in the concept of energy efficiency and the development and promotion of energy efficient appliances why, in the area in which we can have some input, do we decide not to do that? It is said that it would be unfair. But it is a challenge. It might he seen to be onerous, but we are talking in terms of a massive concept.

Others in the Committee know more about the weight of what we arc talking about, but I, as an uninformed layman in these matters, am well aware of the enormous impact that can be made on costings if we get it right. If the Minister is saying, as I believe he is. that he agrees with the concept and that the Government are doing a lot in the energy conservation field—and I do not dispute that—what we are saying is that we want to see it on the face of the Bill.

The Minister constantly points out that things are unnecessary or would be extraneous. We have a Bill of 116 pages and if the Minister were to accept a fraction of the amendments on the basis of increasing the weight of the paper, or the size of the Bill, it would not amount to very much. The Minister leaves in my mind a slight impression that he does not wish to do something which he believes is right, because it may be unfair to those who, once the industry is privatised, have to make it work. The Government must rise above those considerations. We are talking about the national interest. We are talking about getting the best use out of national resources. We are not into the argument of privatisation or public ownership. We want as a nation to maximise every ounce of power and energy that we can get out of our national resources.

Paragraph (b) of the amendment reads: advice to consumers on the use of such appliances in such a way as to secure the most efficient use of gas. I know that the Minister will tell me in one way or another that, by another part of the Bill or by promised amendments, that will be covered or can be seen to be covered. It might be that when we see the print we will accept that. But the Minister should accept that I am very much in the business of wanting to make sure that those who will undoubtedly risk their capital—those who will manage, own or have shares in the new arrangements—will have responsibilities.

I use again the phrase that my noble friend Lord Stoddart repeated, of the noble Lord, Lord Ezra. With monopoly or near monopoly situations there are obligations and responsibilities. This amendment which the Minister can see has support from more than one part of the Committee is a modest way of trying to underline and stress what we think are valuable ways of looking after the national interest.

Lord Brabazon of Tara

I am sorry that I have not been able to satisfy the noble Lord, Lord Graham of Edmonton. I am not sure whether the noble Lord was in his place for the long and interesting debate on Amendment No. 66 in which my noble friend Lord Belstead agreed to bring something back before the next stage extending the provision of the authorisation to cover energy efficiency. As I said just a few moments ago, we would take into account what has been said today on that subject.

The only quibble I had with this amendment was with paragraph (a) "development and promotion of energy efficient appliances", where I said that British Gas is in competition with a large number of private sector firms which are producing gas appliances, and that it would be unfair to put down in statute in Clause 9 of the Bill that it should have to do something when none of its competitors has to do it. I am not saying that it will not do it. It will do it because it wants to sell efficient gas appliances, because it is in its commercial interests to do so.

Lord Dean of Beswick

But does the Minister really think that when the Bill becomes an Act the people who become the shareholders in this body will pay a high regard to conservation, bearing in mind that their main objective in privatisation is to make it pay commercially, with the priority being their own interests?

I listened with some interest to the Minister's claim regarding the Government's record on energy conservation. I cast back my mind to just over 12 months ago, to when members from the various parties on this side of the Chamber questioned the wisdom of the Government placing 15 per cent. VAT on such items as double glazing, which has a very profound effect on energy saving. We were met with complete deafness. It went ahead anyway, as have other measures related to the building industry.

An international debate is about to start as to whether nuclear energy will be retained or gradually phased out. I would not predict what the eventual decision will be. But if the electricity and energy being provided at present by nuclear power stations and nuclear sources is removed from the balance sheet and is no longer available, the saving of energy will become absolutely vital to the world as we know it. To talk in terms of leaving such an important facet of our public life to the private sector is complete and utter nonsense. What has been said so far from the Government does not in any way give a guarantee that they see the seriousness of what they are doing. I hope that if the Minister rises again he will give some better guarantees or better answers than he given so far.

Lord Brabazon of Tara

Perhaps I could point the noble Lord, Lord Dean of Beswick, to Clause 4 of the Bill which is arguably the most important clause in the Bill. I refer to Clause 4(2)(b). One of the prime purposes of the Bill is, to promote efficiency and economy on the part of persons authorised by or under this Part to supply gas through pipes and the efficient use of gas supplied through pipes". I think that that answers the question.

Lord Dean of Beswick

I am sorry to rise again, but I do not think it does where the main motive for what is being done is profit in the private sector. Unless the guarantees are included, as stated by previous speakers from the various Benches. I cannot see any such thing happening to the degree that we want it to. That is why I say that the amendment should be considered more seriously than it has been so far.

Lord Williams of Elvel

Perhaps I may ask the noble Lord, Lord Brabazon, a question on a point of clarification. With reference to paragraph (b) of the amendment. and given what the noble Lord, Lord Belstead, said to the Committee on Amendment No. 66, is it the intention to include in the authorisation that the public gas supplier shall be required to give, advice to consumers on the use of such appliances in such a way as to secure the most efficient use of gas"? Is that something that the noble Lord, Lord Belstead has in mind?

Lord Brabazon of Tara

This is certainly one of the matters we shall take into consideration when we draft this new clause in the authorisation.

Lord Stoddart of Swindon

I have listened to what has been a very interesting and wide-ranging debate, and I am particularly grateful to my noble friends for taking part and for shedding new light on this very important matter.

Amendment No. 68C is really a different amendment. It reads: Such conditions as appear to the Director to be requisite to ensure the long term future of gas supplies by promoting and monitoring a continued research and development programme to be undertaken by any persons authorised to supply gas under this Act". Amendment No. 84ZA, which I have just moved, is rather more specific and is directed towards the domestic consumer. It is therefore a different amendment. Certainly it deals with energy efficiency but it is specific in its direction.

Lord Brabazon of Tara

If the noble Lord will allow me to intervene, I was referring throughout to Amendment No. 66, which we had discussed.

Lord Stoddart of Swindon

I am sorry. I thought that the noble Lord was referring to Amendment No. 68. I now understand that he was referring to Amendments Nos. 66 and 67, which are of course similar. I misheard the noble Lord. Provided we have an assurance that the specific matters I have mentioned will be taken into account in any amendment to the authorisation, then I believe it would be right to withdraw the amendment at this stage. We will of course have the opportunity of seeing what words are used in the amendment to the authorisation.

Amendment, by leave, withdrawn.

Clause 9 agreed to.

2.30 a.m.

Lord Campbell of Alloway moved Amendment No. 84ZB:

After Clause 9, insert the following new clause:

("Code of Practice for supply to elderly and infirm.

.—(1) The Secretary of State shall, prior to such day as may he appointed by him in accordance with section 3 of this Act, issue and approve a Code of Practice relating to the provision of special services by gas suppliers for domestic customers qualified to receive state benefits by reason of age or infirmity; and from time to time he may issue or approve alterations to such a Code.

(2) The Secretary of State shall consult the Director and the Council before issuing or approving such a Code, or issuing or approving any alteration to such a Code under subsection (1) above.

(3) Failure on the part of any person to comply with any provision of a code issued or approved under subsection (1) above shall not of itself render that person liable to criminal or civil proceedings but—

1. (a) any such code shall be admissible in evidence in any such proceedings; and
2. (b) if an of its provisions appears to the court conducting the proceedings or to any revisory court to be relevant to any question arising in the proceedings it shall be taken into account in determining that question.

(4) The Secretary of State shall lay before Parliament—

1. (a) copies of any code issued by him under subsection (1) above and of any alteration made by him in any such code; and
2. (b) copies of any code approved by him under subsection (1) above and of any alteration approved by him in any such code;

and if either House of Parliament passes a resolution requiring the code or alteration mentioned in paragraph (a) above, or the approval mentioned in paragraph (b) above, to be withdrawn the Secretary of State shall withdraw it accordingly; and where he withdraws a code issued by him or his approval of a code he shall issue or approve a code, as the case may be, in substitution for the code previously issued or approved.

(5) No resolution shall be passed by either House under subsection (4) above in respect of any code or alteration after the end of the period of forty days beginning with the day on which a copy of the code or alteration was laid before that House; but for the purposes of this subsection no account shall be taken of any time during which Parliament is dissolved or prorogued or during which both Houses are adjourned for more than four days.").

The noble Lord said: This amendment stands in my name and the names of the noble Viscount, Lord Hanworth, the noble Baroness, Lady Masham of Ilton, and the noble Lord, Lord Henderson of Brompton. The amendment is to insert after Clause 9 the new clause printed on the Marshalled List.

At the outset, as in the case of all other noble Lords on all sides of the Committee who have spoken on this matter. I wish to express my appreciation to my noble friend the Minister for the various commitments undertaken to assist the elderly and the infirm that were given on Amendment No. 63A, subject to consideration as to what might be said on this amendment and renewed on Amendments Nos. 82A and 82B.

The concern of the Government for the elderly and infirm is such that, in a sense, we cannot fall between all the stools and achieve no concession at all. The point is whether, in the view of the Committee, a Clause 4 concession (if I may so stylise it) related to a code of practice under Condition 12 of the draft authorisation which has no legal efficacy, which has no sanction and which has what I think was called by the noble Lord, Lord Stoddart, no public remedy, is as a matter of principle the sort of concession that appeals to the Committee; or whether the Committee would wish to see the sort of concession which quite clearly confers enforceable rights, legal rights, not in the authorisation but in a code of practice which has sanctions and affords (to use the homely phrase) a public remedy.

The objections to Amendment No. 63A are on record and require no repetition. The form of the concession to be made is somewhat in the air, but the principle of it is not. It is related to Clause 4. It is related to the authorisation. Whether or not that, as a matter of principle, is acceptable to the Committee is entirely a matter for the Committee. This is in every sense of the word a probing amendment for clarification. I so informed my noble friend the Minister well in advance of this opening speech.

The main attribute of this amendment, which differs from the form of the proposed concession under Clause 4, is that this amendment proposes a legally enforceable code of practice which is subject to parliamentary approval. That does not obtain under Amendment No. 63A or, indeed, under Amendments Nos. 82A and 82B. Very briefly, in this amendment subsection (1) enjoins the Secretary of State to issue a code of practice relating to the provision of special services by gas suppliers for the elderly and the infirm.

Subsection (2) enjoins the Secretary of State to consult with the director and the council before issuing or approving the code. Subsection (3), in accordance with the will of your Lordships' House as expressed on many previous occasions since 15th January, defines with clarity the legal status of the code, which is neither that of primary legislation nor of subordinate legislation in the sense that breach of the code involves liability, but which has to be taken into account in any proceedings if relevant to any question arising in the proceedings. In this sense the code, if relevant, has legal efficacy. It affords equality of legal protection for the elderly and the infirm, with some sanctions for observance on the part of the gas supplier. The proceedings in which the code will be admissible. if it is relevant, include proceedings arising under Schedule 5 which, by reason of Clause 15, are presumed to have legal effect as primary legislation. In this sense, if it is relevant the code will serve as an aid to the enforcement of primary legislation where the interests of the elderly or infirm are concerned.

Subsection (4) requires the Secretary of State to lay the code before Parliament, and this is wholly appropriate having regard to the importance of the code and to its impact on primary legislation. Any proposal to introduce a code of practice always warrants the vigilance of this Chamber to ensure that its legislative role is not usurped and also to ensure that the status of the code is always defined with requisite clarity as regards its effect in law. The procedure for resolution for withdrawal was first introduced in the Mental Health Act 1963 for the Mental Health Commission code, and this procedure was last used in the Animals (Scientific Procedures) Act 1986, on the amendments which came from another place. Subsection (5) ensures a minimum period of 40 days between the laying of the code and the passing of any legislation.

This code gives a quality of legal protection akin to that given in the Commons' amendments for the protection of the animals used in the scientific procedures which come under the Animals (Scientific Procedures) Act, and the type of protection for the elderly and the infirm proposed by this amendment is of exactly the same quality. It is suggested that that is not only a reasonable form of protection but that it is essential.

It is considered that a mere code of guidance such as would have arisen under Amendment No. 63A would really not be appropriate. For example, under the Transport Act there is such a code for the construction of vehicles to assist the elderly. That was a code of guidance, and it has no legal effect. Also. there is no legal effect to the Mental Health Act code. However, in this context it may be said that the question of the status of codes did not really enter into the consideration of this Chamber before some time earlier this year and that no due consideration was given to the status of the Mental Health Act code when it came before Parliament.

If this amendment is broadly acceptable to the Committee, the hope is that my noble friend, in accordance with his helpful undertaking to keep an open mind as to what would be said, may also take this suggestion on board and indeed possibly submit the form of this draft, for which I take sole responsibility, to a proper parliamentary draftsman for his tender mercies.

In conclusion, as we are dealing with legal efficacy and questions of principle, I should like to make the point that there is here no question of any confusion arising with the public gas supply code in Schedule 5 to the Bill. That is a statutory code enshrined in primary legislation by Clause 15. It is not a code of practice. Assuredly, it is not a code of guidance. It is part of statute law. It is not suggested that it would be appropriate to encumber the statute with special provisions for services to the elderly or the infirm, or recklessly to afford adequate means of protection.

The amendment does not conflict with any principle of the Bill. It is assuredly devoid of any political intention. The question ready is whether the Committee, either today or at the end of the day, as a matter of principle, considers that there should be a code of legal efficacy along these lines or whether the Committee thinks that a Clause 4 concession, as I put it, relating to the authorisation and the code which relates to Condition 12, is adequate. The question is: which appeals to the Committee? In that spirit, I beg to move.

Lord Belstead

The amendment of my noble friend Lord Campbell seeks to require the Secretary of State to issue a code of practice covering special services to the elderly and disabled and to provide apparatus for the enforcement of the code's provisions. I listened carefully to my noble friend, and I understand exactly what it is he is aiming to achieve. He was most generous in giving me a briefing of what he intended to say, and what he was aiming to achieve, before we came to the Committee today. But I have to say that I am still extremely doubtful as to whether this really is the most desirable way to set about ensuring that the gas industry continues to act in the very responsible way in which it has acted up to now in these matters.

As I made clear earlier today when debating Amendment No. 63A, put down by my noble friend Lady Macleod and the noble Lord, Lord Stoddart, we are ready to re-examine—I have given an assurance that we will—Condition 12 of the authorisation to devise some wording to place an obligation on British Gas to publicise the special services which it provides for the elderly and disabled. I also gave an undertaking to re-examine the drafting of Clause 4 to provide specific guidance to the Secretary of State and the director in relation to the elderly and the disabled to underpin the change in the authorisation and to have something on the face of the Bill.

I think that requiring British Gas to publicise the services that it offers is the right approach in this case. I say that for these reasons. First, one of our most important aims in privatising British Gas has been to try to remove the kind of political interference that there has been from governments of all shades of opinion in the day-to-day affairs of British Gas which has, I believe, proved counter-productive to consumers in the past. I do not believe that putting an obligation on the Secretary of State to issue a code of practice, as proposed in my noble friend's amendment, will be consistent with trying to achieve that.

The Government's proposal, which I shall he very ready to bring forward on Report, will ensure that the director will be able to take full account of the special needs of the elderly and the disabled in exercising his functions, but it will not impose a code written by the Secretary of State. The requirement to include a description of services for the elderly and disabled in information that British Gas will be obliged to publish under Condition 12 will be subject to the enforcement provisions of Clause 28 of the Bill. I assure the Committee that there could he therefore no question of British Gas evading a responsibility to give wide publicity to the services that it provides. It would also mean that the new consumers council, which the Committee will remember is to have a member to represent the interests of the disabled, will be able to comment on the services to be provided under Condition 12 of the authorisation. The new consumers council will, I am sure, be taking that task seriously.

Finally, the reason I am worried about my noble friend's amendment is that it seeks to involve Parliament in the setting of a code of practice for the elderly and disabled. I must tread carefully in suggesting that Parliament should not have a part in that, but I do not believe that we should be sensible to add to the burdens of Parliament in the way proposed in the amendment at the very time that we are making proper provision for the monitoring and control of the gas industry by the director of Ofgas and the new consumers council, to whom I believe we can better leave the job.

It is for those reasons that I am worried about the amendment. I shall fulfil the undertaking that I have given to my noble friend, look carefully at what he said and compare the case that he made to the undertakings that I have given to my noble friend Lady Macleod and the noble Lord, Lord Stoddart, but I felt that in answer to my noble friend's amendment I had to set out my concerns, and I have now done so.

Lord Campbell of Alloway

At this hour it only remains for me to thank my noble friend for having listened with an open mind to what I had to say and to say that I am delighted to be able to return the compliment and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 84A and 84B not moved.]

Schedule 3 agreed to.

Schedule 4 [Power of public gas suppliers to break up streets, bridges etc.]:

2.45 a.m.

Lord Stoddart of Swindon moved Amendment No. 85: Page 72, line 18, leave out ("may be") and insert ("possible").

The noble Lord said: This is a small amendment but it is rather necessary. I had better read out paragraph 1(3). It states: A public gas supplier shall do as little damage as may be in the exercise of the powers conferred by this paragraph". and so on. What on earth does, as little damage as may be mean? I should like an explanation from the Minister. I have thought about it and tried to assess "damage as may be". I know what "possible" means. It means that the contractor shall use all possible care and do as little damage as possible. People will understand that. But when we see in a Bill that, A public gas supplier shall do as little damage as may be", the mind begins to boggle.

No doubt the noble Lord has a brief and will tell me that that is a legal term or something like that, but to the ordinary person and certainly to me it looks like gobbledegook and reads like nonsense. I beg to move.

Lord Brabazon of Tara

I am grateful to the noble Lord. Lord Stoddart of Swindon, for having moved the amendment. In Committee I have gained the impression that noble Lords on the Opposition Benches think that the existing legislation is probably superior to the Bill that we are introducing. I must tell the noble Lord that the words "may be" go back to the 1972 Act. In fact, they go back to the Gas Works Clauses Act 1847. There is therefore some reluctance on my part that we should change something which goes back that far. However, in view of what the noble Lord, Lord Stoddart, has said, I am happy to accept the Amendment if he wishes to press it now, having heard my explanation of how far the words go back.

Lord Stoddart of Swindon

That is a kind invitation, which I accept.

Schedule 4, as amended, agreed to.

Clause 10—[Duty to supply certain premises]:

[Amendment No. 86 not moved.]

Lord Stoddart of Swindon moved Amendment No. 87:

Page 10, line 31, at end insert— (" ( ) Any question arising under subsection (7) above—

1. (a) as to whether a supply of gas was demanded or received for a standby supply;
2. (b) as to whether any premises have a separate supply of gas or have a supply (in use or ready for use for which a standby supply of gas is required) of electricity, steam or other form of energy; or
3. (c) as to the amount of the said sum to be specified in the agreement,

shall in default of agreement be determined by arbitration by the Director.")

The noble Lord said: This amendment is designed to make it clear in this clause where there is a dispute between the supplier and the customer as to the necessity for a new or increased supply of gas, or as to the payment to be made by the customer in relation to any agreement, it should be settled through arbitration by the director. Gas suppliers will be in a powerful monopoly position following the passage of the Bill. In contrast, customers will be in a comparatively weak position. We do not want a situation where an overhearing gas supplier can dictate his terms to the customer without there being any sort of protection. Nor do we wish the customer to be subjected to inordinate delay through long-winded procedures.

The Government will undoubtedly claim that the Director has adequate powers to seal with this sort of situation under Clause 28. Indeed, that was claimed in Committee in another place. The Minister then promised to look at the matter and come back to the House. but he never did so. Perhaps we can get a reaction from the noble Lord, Lord Gray of Contin, when he replies. Why should the customer not see in Clause 10 absolute and necessary protection, which under the amendment would be direct and speedy and not subject to the somewhat lengthy procedures under Clause 8? I hope that the Government will take this seriously and will consider the position. I look forward to hearing what the noble Lord has to say.

Lord Gray of Contin

The amendment has a similar theme to those tabled by my noble friend, Lady Gardner. They draw our attention to the changes in arbitration arrangements which have been included under the Bill as a result of the new structure for regulation which has been adopted, with a regulatory body, Ofgas, headed by a Director General of Gas Supply.

Clause 10 sets out the supply duties which attach to a public gas supplier. Subsection (8) makes clear that there is no obligation in relation to a supply for standby purposes unless a written contract is entered into guaranteeing a reasonable return. The provision has been carried forward from paragraph 4 of Schedule 4 to the Gas Act 1972. What has not expresssly been carried forward is the provision as to arbitration set out in paragraph 4 (2) of Schedule 4 to the 1 972 Act. There are very good reasons for this, since under our new regulatory system any dispute on supply matters can in effect be referred to the director of Ofgas for a ruling.

This arises because under the regulatory regime the Director General of Gas Supply has the task of ensuring that supply obligations are properly met. If a customer considers that his request for a standby supply has been unreasonably refused, he can refer the matter to the director to take enforcement action under Clause 28, on the grounds that the supplier is failing to comply with his obligation to supply under Clause 10(1) and thereby contravening that obligation. In deciding this issue, the director would have to consider whether the public supplier's failure to give the supply under subsection (1) was justified under subsection (8), which, in a particular case, might involve the director considering all or any of the matters referred to in this amendment.

If the director, for example, was satisfied that the public gas supplier had required the person to enter into a contract which gave them more than a reasonable return, the public gas supplier's failure to give the supply could not be justified by subsection (8), so that the director would be able to make an enforcement order against the public gays supplier. As regards the director's role, it will, of course, be open to him, using his powers under Clause 35, to publicise his role in settling disputes of this kind.

The amendment which the noble Lords propose is unnecessary, given the role of the director, and I therefore suggest to the noble Lord that he might be prepared to withdraw it. Apart from anything else, I fully accept that it is a detailed explanation that I have given. The noble Lord will probably wish to study carefully what I have said before reaching a conclusion. He could always return to the matter at a later stage if he felt so inclined. However, I feel that once he has had an opportunity of studying what I have said, he will conclude that the amendment that he proposes is unnecessary.

Lord Stoddart of Swindon

The noble Lord has made a very reasonable suggestion. I shall certainly study closely what he has said. Is he repeating that, under Clause 28, the director has adequate powers? Is it also right to believe, from my leading of Clause 28, that the procedure could be quite long winded and that the customer may very well be injured? I wonder whether the noble Lord can comment on those queries?

Lord Gray of Contin

I do not believe that the customer would be disadvantaged in any way by the procedure that I have set out. Certainly, there are powers under Clause 28. I tried, in my explanation, to relate how those powers were connected with other clauses in the Bill and the various functions of the director of Ofgas in this connection. The noble Lord would perhaps prefer to study what the record reveals before deciding what he wishes to do further.

3 a.m.

Lord Bruce of Donington

I have just one small question. Is it correct to assume that Clause 28 comes into operation only when the director is satisfied that a public gas supplier is contravening or has contravened and is likely again to contravene? In other words, there has to be something happening before the director makes up his mind to take action on this section. But the amendment moved by my noble friend deals with a rather more preliminary stage. Has the noble Lord taken that on board as well as Clause 28, which is no substitute for the amendment put forward by my noble friend? Clause 28 comes into operation ex past facto and the amendment put forward by my noble friend seeks to avoid this situation arising in Clause 28. Will the noble Lord agree that that is a fair summary of the position? I agree that my noble friend should take the opportunity of looking at the matter again. But am I correct in that assumption so far?

Lord Gray of Contin

Yes, the noble Lord is correct to some extent. Under Clause 28 the provisional order procedure is a quick way to deal with urgent cases when the customer might be damaged. The noble Lord is perfectly correct. The amendment which his noble friend has moved is dealing on a broader front than that dealt with by Clause 28. Clause 28 is a provisional order procedure. It is a quick way to deal with urgent cases.

Lord Stoddart of Swindon

We had better have a look at the discussion. I thank the noble Lord for the detailed way in which he has dealt with the amendment. We shall look at what he has said. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 10 agreed to.

Lord Diamond moved Amendment No. 87A:

After Clause 10 insert the following new clause:

("Avoidance of cross subsidisation.

—(1) A public gas supplier shall, in any financial year during which he supplies goods or services otherwise than in pursuance of subsection (1) of section 10 above, avoid cross-subsidisation between one part of his gas supply business and another and between his gas supply business and any other business.

(2) For the purposes of subsection (1) above and without prejudice to subsection (7)(c) of section 7 above, the supplier shall furnish to the Director, in such manner and at such times as he may reasonably require. such documents, accounts, estimates, returns or other information as he may require to determine whether the tariffs and charges fixed by the supplier in respect of the goods and services which the supplier provides involve cross-subsidisation.

(3) For the purposes of this section "cross-subsidisation" shall be defined as the unreasonable allocation of costs by the supplier when fixing tariffs and charges; and "financial year" shall he defined in accordance with section 227 of the Companies Act 1985.")

The noble Lord said: I beg to move this amendment, to insert the new clause as set out on the Marshalled List.

Without bothering the Committee to read it in detail, the clause—as the rubric shows—is directed towards avoidance of cross-subsidisation. Cross-subsidisation is defined in the clause as meaning, the unreasonable allocation of costs by the supplier when fixing tariffs and charges". The evil which the clause seeks to avoid is the possibility of unfair competition arising through the unreasonable allocation of costs between different kinds of business which the gas supplier is to carry on.

Perhaps I may divide it into two classes of business—the regulated and unregulated. The regulated business is the supply of gas to a vast number of tariff companies. The unregulated business is a number of different kinds of business. It is clearly possible for the gas supplier so to divide his costs that there would be unfair competition with regard to those who are customers in the unregulated business. He would, in effect, be charging a disproportionate amount of his overhead expenses and costs, for example, to the regulated market, thereby increasing the charges to the vast number of tariff consumers. He would then be in a position to compete unfairly with the unregulated market.

I hope that I have made the position clear. It is simply a question of unfair competition arising where one has a private monopoly of this kind. It is an evil which this new clause seeks to avoid, and I hope that the Government will look upon it with favour. I beg to move.

Lord Gray of Contin

I have listened carefully to what the noble Lord, Lord Diamond, has said. Perhaps the Committee will bear with me if I go into a little detail in my reply, because it may save us time later if I explain fully the position.

It is important that there should be proper safeguards against unacceptable behaviour by a gas supplier damaging to the interests of the consumers or competitors. I therefore welcome the opportunity provided by the new clause to talk about cross-subsidy. I believe, however, that the Bill and draft authorisation already meet the concerns of the noble Lord, Lord Diamond.

First, let us consider the tariff market. In addition to the specific provisions in the Bill protecting tariff consumers, including the provisions relating to no undue preference, there is direct control over prices by means of the price formula set out in the draft authorisation. The formula, monitored and enforced by the director, will ensure that there is no room for British Gas to manipulate prices. We have also provided in Condition 2 of the draft authorisation for the publication of the full accounts of the gas supply business. The director will have full information about and a clear role in the allocation of cost between gas supply and the other activities that British Gas undertakes. This will ensure that the accounts are properly drawn up and reflect the costs rightly attributable to the gas supply part of the business.

As regards the contract market, there is strong competition, but we have nonetheless provided safeguards against anti-competitive behaviour generally, and this would include cross-subsidised predatory pricing. Here the Director General of Fair Trading has a role. Competition and fair trading legislation apply, and in addition there is specific provision in Clause 27 that the authorisation may be modified to take account of any order made by the Secretary of State following an investigation by the Monopolies and Mergers Corn mission.

On appliance retailing and servicing, the corporation was the subject of a Monopolies and Mergers inquiry in 1980. As a result, British Gas reformed its accounting procedures. That demonstrates how fair trading law operates. The Director General of Fair Trading also looked at installation and contracting last year, when there were allegations of cross-subsidisation of work. Again, that demonstrates that there are proper safeguards to deal with anti-competitive behaviour. As we have built in full safeguards, the new clause proposed by the noble Lord is unnecessary. Although, as I have explained, cross-subsidisation to enable unfair and anticompetitive pricing is an abuse, a blanket prohibition of cross-subsidy (as the new clause would require) would not be right. It is important that British Gas should be able to provide free safety checks and undertake other essential safety work free or at below full cost.

In view of what I have said and the explanation which I have given, I wonder whether the noble Lord is prepared to withdraw his new clause.

Lord Bruce of Donington

I wonder whether the noble Lord will clarify a point by reference to page 24 of the accounts of the British Gas Corporation for the year 1984–85. The noble Lord himself brought in the safeguards as regards the control alleged to be exercised by virtue of the formula itself, over any increases in the price per therm. I should like to refer the noble Lord to page 24 and to the operating costs for the year 1984–85 which are set out on that page. He will find there: salaries, wages and associated costs, 6.64p; replacement expenditure, 1.171p; other trading costs 5.48p; depreciation 2.03p; monetary working capital and costs of sales adjustments, 0.33p; and total operating costs per therm, 16.19p.

Will the noble Lord tell me whether, in respect of any item incorporated in operating costs which are per therm—and I refer now to his formula amounting to 16.19p—there is any element there of costs that are not strictly allocable to the processing and distribution of gas? It is a simple question, and I should like his observations upon it because that would enable me at any rate to make up my mind to what extent the amendment put forward by the noble Lord, Lord Diamond, is necessary in the circumstances, bearing in mind the formula that we shall discuss at a later stage.

Lord Gray of Contin

I do not think that the question that the noble Lord asks refers directly to the amendment that the noble Lord, Lord Diamond, has put down. What it refers to is something directly within the noble Lord's own profession. The kind of information that he seeks would depend largely on the kind of audit that is carried out and the kind of docket that is given. The figure that the noble Lord quoted to me may contain other items. I cannot guarantee that the figure that the noble Lord has picked out of the accounts of the British Gas Corporation is restricted solely to the relevance of this amendment. As the noble Lord knows only too well, in a set of accounts you cannot specifically say of a miscellaneous group of figures that they are isolated to one particular issue. They may include a number of different items.

Lord Bruce of Donington

I am anxious not to take advantage of the noble Lord in this respect. The noble Lord referred to the ratio mechanism described in this apparently abstruse series of formulae which have been incorporated in the authorisation. The noble Lord put that forward as being some safeguard against there being any possibility of cross-subsidisation; otherwise I should not have risen to my feet on the subject.

It is not an auditing matter. It is a purely management and indeed a government matter. These figures are charged as operating costs in respect of the processing and supply of gas as distinct from its prime materials and their cost and the gas levy, to which we can return at a later stage. I want a general assurance—which is not a matter of audit but a matter of management and a matter of government knowledge of how the thing works—as to whether these operating costs are strictly attributable to the processing and supply of gas to the customer. That is the only question I have to ask. It is not a technical matter requiring any highbrow auditing or accounting ability. It is purely a question of fact, the answer to which I should have thought the noble Lord would be able to supply.

3.15 a.m.

Lord Gray of Contin

I certainly call supply it. The answer is simple. The answer is "No". You cannot give any guarantee. Good gracious the noble Lord is much more acquainted with reading balance sheets than I am, but when he picks at random—

Lord Bruce of Donington

Not at random.

Lord Gray of Contin

—selected item or a selected group of items as he has done, I cannot give any guarantee that that is the only thing which is included in those figures. No, the answer is "No".

Lord Bruce of Donington

Then the noble Lord cannot give any guarantee about the formula?

Lord Gray of Contin

I can give a guarantee about the formula inasmuch as it is set out in the appropriate part of the Bill. I cannot give a guarantee about a set of figures which the noble Lord produces in that way. The noble Lord has picked some, figures out of the annual accounts. If the noble Lord wishes, I shall look into this further and find out exactly what it contains; but I could not possibly give him the guarantee that he seeks at this time. With the greatest respect, it is substantially wide of the amendment which the noble Lord moved.

Lord Bruce of Donington

With the greatest possible respect this is not wide of the amendment because the noble Lord himself adduced the formula as a protection. These items to which I have referred apply to specific categories within the formula. If the noble Lord looks at the Select Committee report of another place at Appendix 2 he will find out that these figures are also picked out there as illustrating the working of the formula. It was the noble Lord who brought in the formula. I am merely seeking some reassurance from him as to the working of it in regard to the cross-subsidisation factor that was referred to by the noble Lord, Lord Diamond.

I have no desire to take advantage of the noble Lord in this matter. I am quite content not to receive the answer now, but I should like an answer to it because until the noble Lord spoke I was beginning to look with a little scepticism—if the noble Lord, Lord Diamond, will forgive me—at his amendment. Now I am beginning to wonder whether I ought to support his amendment because I do not think, as I am at present advised, that the formula gives the degree of protection which the noble Lord indicated that it did. That is all.

Lord Gray of Contin

The noble Lord has chosen one set of figures out of the hundreds of figures which would be available to him in the annual report. I have said that I will look into this and that I shall let him know what is included in those figures.

Lord Diamond

I am most grateful to the noble Lord for the very full answer which he gave in the first place. I assume that the noble Lord, with his usual courtesy when he writes to the noble Lord, Lord Bruce of Donington, will be good enough to send me a copy of his letter.

The trouble is that at this hour of the morning one's intelligence is working at such a low level that at the moment I cannot see the catch in what the noble Lord the Minister has said. It seems to me that he has given me a very reasonable answer to the problem I raised. It seems to me that he accepts that cross-subsidisation is something to be avoided, except for the very narrow area he mentioned where certain activities are undertaken at no charge to the customer—one can understand the reason for that—but that in other respects provisions both within the Bill and other Acts with reference to fair trading and to the MMA to which he referred give the protection which the clause seeks.

I did not read out the details of the clause because it was not necessary at that point. However, at this stage I am bound to say that in subsection (2) of the proposed new clause there is detailed reference to the documents, accounts, estimates, returns and other information that the director may require to satisfy himself that there is no cross-subsidisation. I was not absolutely sure when listening to the noble Lord that there is adequate provision of that information in the protective clauses to which he was referring, so I must repeat my gratitude. I shall consider most carefully what the Minister has said in Hansard at a more reasonable hour of the day and beg leave of the Committee to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 11 [Power to require security]:

Lord Gallacher moved Amendment No. 88:

Page 11, line 14, at end insert— ("and such security shall not exceed one-twelfth of the anticipated annual payment for supply of gas.").

The noble Lord said: Clause 11 of the Bill is concerned with power to require security, and Amendment No. 88 would seek to limit that security to one-twelfth of the anticipated annual payment for the supply of gas. It also seeks to ensure that what is known, I suppose, in the trade as "red lining"—that is to say, the practice of demanding substantial deposits in areas where there is a poor record of payment—cannot occur.

It is not unknown for the fuel boards and for British Telecom to ask for very high deposits, and in fairness to those bodies I should also say that other traders do likewise in similar circumstances, though perhaps they say less about it. Such disadvantaged customers living in or moving into red-lining areas are those who cannot generally afford to live elsewhere and they may therefore suffer from the poor payment record of their predecessors.

What the amendment does is ensure that the public gas supplier has a stated policy about the level of deposit which would enable new consumers to know their likely out-go on moving in and to plan accordingly. I am sure that, at whatever level of society we find ourselves, we are all aware of the pressure on cash resources when moving house. A stated policy of the kind suggested should not be difficult for a public gas supplier to achieve.

The British Gas Corporation already has a profile of average use. Various gas regions also produce guides as to therms used by consumers on an equipment basis; so that it should be possible to draw up a kind of ready reckoner of the sort of equipment in individual homes and base a scale on such ready reckoners. For those reasons, I feel that the amendment is reasonable and I hope that the Government, if not able to accept it, will at least say something favourable about it and in this connection I am also aware that Amendment No. 100 has a distinct bearing on the same problem. I beg to move.

Lord Brabazon of Tara

I fully recognise the concern which the noble Lord has expressed, that the less well off in our society should not be able to take advantage of their entitlement to a supply of gas because they are unable to find the necessary security payment. We understand the anxieties to which the need for security payments gives rise. At the same time, we have to recognise that the Bill, like current gas legislation, places onerous supply obligations on public gas suppliers and there has to be a counterweight to those. Security payments are one.

The noble Lord, Lord Gallacher, does not seek to remove the right to require security altogether in relation to customers entitled to a supply under Clause 10 of the Bill. Clearly he recognises that where a customer has a poor payment record, or no record at all, it is not unreasonable that a public gas supplier should be able to obtain security in respect of charges which are likely to arise. But this security must be realistic. The noble Lord is seeking to limit security to no more than one month's charges, which would not even offset the charges due at the first meter reading.

It is really all a question of balance. There is of course no fixed amount or formula specified in the Bill with regard to security payments and ultimately it would be for the director to determine whether or not an amount demanded was unreasonable, in enforcing the public gas supplier's duty to supply under Clause 10(1). We consider this to be the right approach to deal with the amount of security deposits; in other words, leaving it ultimately with the director to decide. Therefore, I hope that the noble Lord will accept my explanation.

Lord Graham of Edmonton

I very much hope the Minister will reflect upon what he has said. He has enormous confidence in the director being able to reach the right balance. The Minister has pointed out that the clauses in the Bill, quite properly, talk in terms of security, but my noble friend Lord Gallacher points to the reality. There are many thousands of families, if not hundreds of thousands, who find it hard to find more than what is asked for in this amendment—that is, the average of one month's supply of gas.

One reason why the Minister resisted this was not merely the principle of specifying but because that which was asked for would be unrealistic. That was the term used. The Minister must therefore have some idea of what is realistic. We are talking about people who may be feckless and who certainly will be careless, but who also in many instances will be unlucky. There are sections of the community who are unlucky.

What this amendment is seeking to do is to limit the amounts. The Minister can accept from me, as he can from many other Members of Parliament or public representatives with constituents at one level or another, that there are people who would find anything which he might find realistic to be very unrealistic. The reality of life as it is lived at a certain level is very different from that which the Minister and perhaps those behind him find it to be. All the amendment is asking the Minister to do is to put a floor—not a ceiling—below which the supply will not be given unless a minimum payment is made. I think this is a very reasonable amendment. The Minister feels that all can be left to the director. I do not think it can. And even if it is left to the director I see nothing wrong in some indication being given to him as to what Parliament believes is a reaonable amount. We are asking for humanity: not compassion, but humanity. I see that the spokesman for humanity on the other side is ready to leap to her feet.

Baroness Gardner of Parkes

Funnily enough, I do not intend to approach this at all in the way the noble Lord, Lord Graham, seems to expect. I happen to be on the London Electricity Board, and the major worry for them is bad debts; and the major reason for that is people who move from address to address without notifying a change. It is not a case of poor unfortunate people in the majority of cases. This represents many millions of pounds every year just in the London area. It represents a sum of such size that it has an effect on every other consumer in the London area.

The bad debts problem is something that no one has been able to solve. Therefore, I think that to suggest limiting it to one month's supply—or one month's anticipated supply, let us remember, because it might be that the anticipated supply is exceeded many times by the actual usage—would be inadequate. As was said, when the quarterly bill came in it could be that there was no money to meet the other two months because the person had deliberately vanished. Where these deposits are demanded, certainly in terms of electricity supply (and I am sure it is the same with gas), are cases where the consumer cannot be identified, where the consumer is simply unknown. This is the real difficulty: getting hold of a consumer and being able to make sure that that person is related to a supply at an address. That is why you have to ask for security, and I think it is very important in the interests of consumers in general.

The point was made about consumers moving from house to house and being in difficulties because it is hard to meet expenses at the time of moving, but that is not the situation. If that consumer was someone who had his bill paid up-to-date and notified where he was moving from and going to, there would be no question of security being asked for. The security is asked for only if the person has a long-standing bad debt record or is completely unknown and unidentified. Therefore, I do not think that the asking of a security is unreasonable, and I do not think the asking of a security equal to three months' anticipated usage, where it is a quarterly meter that is being installed, is unreasonable either. But this amendment which is for only one-twelfth, or one month's supply, could result in an increase of bad debts which would be against the interests of all other consumers, as has proved to be the case in the electricity industry.

3.30 a.m.

Lord Diamond

I am not very happy that the contribution that has just been made by the noble Baroness, Lady Gardner of Parkes, touches the problem raised in this amendment. Of course there is a problem of people moving from address to address, and that has created, as the noble Baroness said, a continuing and regular problem to which no solution has been found. But just as she is anxious that the innocent should not pay for the defects of the guilty by having too small a deposit, we are anxious that the same thing should not happen through those who are in permanent residence having to pay for those who move from residence to residence and deliberately try to avoid payment of their gas bill.

I find that the amendment is a reasonable one. It is proper that Parliament should take a view. It should not leave everything to an individual to make a judgment—after all, we have our responsibilities and we must stand up to them—and should say what the maximum security should be. It is a different issue of people moving, and to that one would have to direct one's mind in the legislation, if it was a legislative matter. But that is not essentially the problem which we are discussing at the moment. We are discussing the maximum security that should be given, and I find the figure in the amendment reasonable. If the noble Lords who are responsible for the amendment take the same view, I shall be very happy to support them.

Lord Brabazon of Tara

May I take up a couple of points, one of which was made by my noble friend Lady Gardner of Parkes in connection with what was said by the noble Lord, Lord Diamond. My noble friend rightly said that much of the problem was caused by people moving from short let to short let and disappearing after, say, six months without paying their bills. They are not necessarily the people to whom the noble Lord, Lord Graham, referred who cannot afford to pay their bills. Quite frankly, they are the people who "do a bunk".

Where the Bill as it stands, giving power to the director, is superior to the amendment proposed is in the point which was almost touched upon by the noble Lord, Lord Diamond; that is, that the clause states that a reasonable security for the payment of money may become due. That leaves flexibility for the director to decide how much security is reasonable, and it could vary between one case and another. I should have thought it was much better to have that flexibility with the director so that he can decide, rather than have something set in stone and fall foul of the sort of problems to which my noble friend Lady Gardner referred—

Lord Graham of Edmonton

Will the noble Lord give way?

Lord Brabazon of Tara

We are at Committee stage and the noble Lord has ample opportunity to come back. I should like to take up a point made by the noble Lord, Lord Graham of Edmonton, about the less well-off in society and not those who are deliberately trying to cheat the gas board out of the money due. As the noble Lord may be aware, British Gas offers a number of different arrangements for the less well-off, as does the Department of Health and Social Security. These are outlined in the code which has already been referred to this evening. There is the system of fuel direct for those on supplementary benefit who find difficulty in balancing their books. Gas bills are paid direct to the gas board from social security benefits. There is also the opportunity to have a meter installed—

Lord Stoddart of Swindon

A pre-payment meter.

Lord Brabazon of Tara

I am grateful to the noble Lord. There is the opportunity to buy stamps which can be used against the bill, or indeed to make a regular monthly payment against the bill. So there are plenty of ways in which the people with whom the noble Lord, Lord Graham of Edmonton, is concerned can be helped.

Lord Graham of Edmonton

People are telling me of the kind of people who are to be affected and for whom this clause is designed. I used as an illustration those people for whom the request to pay more than one month's supply estimated would be too much. The Minister says that those are not at all the kind of people for whom it is designed; it is the kind of people to whom the noble Baroness, Lady Gardner of Parkes, referred. Where is this clarified in the Bill? All it says is that someone who wishes to obtain a supply of gas shall be called upon to make a payment. We are debating the size of the payment. The Minister can tell me from where he gets the evidence on which he indicates the kind of people concerned? It is his own idea of the kind of people. My idea of the kind of people are the ones I have described, for whom a limit in the size of the deposit is necessary.

Baroness Gardner of Parkes

Perhaps I may come back on this point to say that I consider that my amendment which comes up later is a better way of dealing with this and of helping those who really need to make only a small deposit, people who are genuine cases. I shall be discussing this when we reach my amendment, but I think that my amendment is preferable to this one.

Lord Gallacher

I think we are all agreed that the problem of debts is a very real one, not merely for British Gas, British Gas plc, the electricity boards, British Telecom—you should talk to funeral undertakers! You should also talk to people who rent out television sets. it is widespread and we do not seek in this amendment to minimise it. What we seek to do, perhaps unsuccessfully, is to mitigate it for certain categories of people by specifying the kind of security which we think is fair and reasonable in the circumstances.

It has been suggested that one-twelfth of the estimated annual bill is not fair and reasonable and is therefore not to be commended as an amendment. But the Minister did not say what he would regard as fair and reasonable. I think he will agree that he put all his faith first of all in the capacity of the director general to adjudicate in these matters. Indeed, he went so far as to say that it would be reasonable for the director general to adjudicate on the basis of different cases requiring different deposits. That seems to me to be a fairly harsh system of justice and one which the director general may be able to undertake, but which would, I think, be burdensome to him and his office. It is one which I think we should seek to avoid if at all possible.

The Minister also suggested that the various methods of payment which the gas board currently has are available as an alternative. They are indeed, once you have the supply turned on. But initially one has to find a fairly substantial sum of money in what I call the red-line districts to get the gas turned on. Moving house can be very difficult. I am not talking about the moonlighters or anything of that kind but of people who may be starting house for the first time, because it is very often in red-line districts that the cheapest houses are to be found. These days, with house prices going through the roof, it is very often necessary for first-time buyers to begin in districts of that kind. As I said when moving the amendment, it is a time when even creditworthy people are under considerable financial stress, living from week to week if not from day to day.

I believe that the Committee should be seeking to do a little more than the Minister offered in his remarks. The noble Baroness, Lady Gardner of Parkes, also emphasised the nature of the problem based on her experience of serving on an electricity board, and we are all aware of it. She said that her Amendment No. 100 was superior. But though I referred to Amendment No. 100 in moving my amendment, the Minister did not indicate that he had a view on Amendment No. 100, either sympathetic or otherwise. I think that in all the circumstances it would be worth while testing the opinion of the Committee.

3.41 a.m.

On Question, Whether the said Amendment (No. 88) shall be agreed to?

Their Lordships divided: Contents, 38; Not-Contents, 67.

DIVISION NO. 9
CONTENTS
Airedale, L.	Hatch of Lusby, L.
Alport, L.	Irving of Dartford, L.
Blease, L.	Nicol, B.
Boston of Faversham, L.	Ponsonby of Shulbrede, L. [Teller.]
Brooks of Tremorfa, L.
Bruce of Donington, L.	Prys-Davies, L.
Carmichael of Kelvingrove, L.	Raglan, L.
	Roberthall, L.
Chandos, V.	Seear, B.
Cledwyn of Penrhos, L.	Shepherd, L.
Crawshaw of Aintree, L.	Stedman, B.
David, B. [Teller.]	Stoddart of Swindon, L.
Dean of Beswick, L.	Taylor of Blackburn, L.
Diamond, L.	Tordoff, L.
Donaldson of Kingsbridge, L.	Turner of Camden, B.
	Wallace of Coslany, L.
Ewart-Biggs, B.	Wells-Pestell, L.
Ezra, L.	White, B.
Gallacher, L.	Williams of Elvel, L.
Graham of Edmonton, L.	Willis, L.
Hanworth, V.

NOT-CONTENTS
Abinger, L.	Kimball, L.
Bauer, L.	Kitchener, E.
Belhaven and Stenton, L.	Long, V. [Teller]
Belstead, L.	Lucas of Chilworth, L.
Bolton, L.	McAlpine of West Green, L.
Brabazon of Tara, L.	Marshall of Leeds, L.
Brougham and Vaux, L.	Mersey, V.
Butterworth, L.	Middleton, L.
Caithness, E.	Monk Bretton, L.
Cameron of Lochbroom, L.	Montgomery of Alamein, V.
Campbell of Croy, L.	Mottistone, L.
Cathcart, E.	Munster, E.
Clinton, L.	Norrie, L.
Coleraine, L.	Orkney, E.
Cork and Orrery, E.	Pender, L.
Cowley, E.	Rankeillour, L.
Cox, B.	Renwick, L.
Davidson, V.	Sanderson of Bowden, L.
Denham, L. [Teller]	Sandford, L.
Eden of Winton, L.	Sandys, L.
Elliot of Morpeth, L.	Skelmersdale, L.
Elton, L.	Strathclyde, L.
Fortescue, E.	Swansea, L.
Gardner of Parkes, B.	Swinfen, L.
Gibson Watt, L.	Teviot, L.
Glenarthur, L.	Thomas of Swynnerton, L.
Gray, L.	Torrington, V.
Gray of Contin, L.	Trefgarne, L.
Gridley, L.	Trenchard, V.
Harvington, L.	Ullswater, V.
Hives, L.	Vaux of Harrowden, L.
Holderness, L.	Westbury, L.
Hooper, B.	Young, B.
Kaberry of Adel, L.

Resolved in the negative, and amendment disagreed to accordingly.

3.48 a.m.

Lord Gallacher moved Amendment No. 89:

Page 11, line 14, at end insert— (" and except where a public gas supplier in response to fuel hardship installs a suitable meter, he shall not require any security.").

The noble Lord said: This amendment links closely with the previous amendment and indeed foreshadows a later amendment, Amendment No. 100A. Amendment No. 89 seeks to limit the obligation on prepayment metered consumers to pay a deposit because it is often such consumers who are sometimes in hardship over fuel prices.

Prepayment metered customers already pay more for gas than do credit customers. In addition, people in this group are unlikely to obtain a prepayment meter unless they already owe cash to the board or to British Gas PLC. Eliminating the security provisions will make life for this group somewhat easier. Already by using a prepayment meter they are on a pay-as-you-go system where default on the bill for fuel means immediate cut-off. In those circumstances there is no case for demanding additional security, and because of that we feel that Amendment No 89 is justified. I beg to move.

Lord Brabazon of Tara

As I said when speaking on the last amendment, the Government recognise the advantages which attach to prepayment meters where there is fuel hardship.

Under paragraph 3(2) of Schedule 5 to the Bill, a public gas supplier must, if required to do so by a tariff customer, supply, an appropriate meter (whether a prepayment meter or otherwise) for ascertaining the quantity of gas supplied". The final decision as to the propel performance of this obligation would of course rest with the director in his enforcement role, since this is one of the relevant requirements to which Clause 28 of the Bill applies. We are of course considering here the question of the right to security in relation to such meters, and paragraph 3(2) of Schedule 5 also provides for security to be paid to a public gas supplier in recognition of the customer's obligation to take proper care of the meter supplied. This applies whatever type of meter is installed.

Turning now to the substance of the amendment, it seeks to exclude from the circumstances in which security may be required by a public gas supplier those in which, in response to fuel hardship, a suitable meter has been installed. The amendment does not in fact define what is meant by fuel hardship, but I think it is important to recognise that we are setting out here the provisions controlling the supply of gas to consumers. Those provisions must be fair to all consumers and it is not the gas industry's task to provide support for the less well off. That is properly for the social security system and noble Lords will be well aware of the additional resources that this Government have made available to cover heating needs since they came into office—indeed, £140 million a year more in real terms than was provided in 1978.

In general, the industry of course responds sympathetically to genuine cases of need. Indeed, the code of practice on paying electricity and gas bills, which British Gas proposes to retain in response to Condition 12 of the draft authorisation, makes clear that a deposit will not be requited if a prepayment meter is installed and appropriate arrangements are made to pay off outstanding debts.

Clearly there may not be the same need for security with slot meters as in relation to credit meters, and British Gas recognises this. But circumstances may arise, such as where a meter has frequently been broken into, when a deposit would be appropriate. In view of the supply obligations on public gas suppliers under the Bill, I believe it would be wrong to remove the possibility of requiring a security deposit by introducing a general fuel hardship criterion. That would confuse the role of the gas supply industry and that of the social security system and I have no doubt that it would be to the disadvantage of the vast majority of gas consumers who are willing and able to pay their bills regularly. I must therefore reject this amendment.

Lord Donaldson of Kingsbridge

May I ask the noble Lord whether, if the consumer wants to have a pay meter—which I think is what the noble Lord has been talking about—any charge is made for putting in the meter?

Lord Brabazon of Tara

I understand that there may be a charge. I think I am right in saying that a charge can be made but that one is not always made.

Lord Gallacher

I found the Minister's reply somewhat disappointing, though not surprising. He referred to paragraph 3(2) and stated that the onus is placed on public gas suppliers to supply an appropriate meter, whether prepayment or otherwise. He did not tell the Committee what constitutes an appropriate meter. Who makes the judgment? Is the public gas supplier's judgment as to the appropriateness of a meter challengeable or is it entirely a decision reserved for the public gas supplier? If it is entirely the decision of the public gas supplier, then I think that the protection afforded by paragraph 3(2) is perhaps rather less than the Minister indicated to the Committee.

We did not attempt to define fuel hardship within the context of the amendment. I think that the reference to the social security system is one measure of fuel hardship, though not necessarily a complete and accurate measure, because there are many people who do not qualify for social security under the rules as at present defined but who nevertheless could be considered hardships cases. It would have been wrong to seek to link hardship to a social security qualification because in the process we may have been excluding some deserving cases. For that reason I think that it would have been unwise, apart from the difficulties of definition, to have attempted such an exercise in an amendment of this kind.

I do not want to engage in an argument with the noble Lord the Minister about the relative generosity of different governments regarding heating allowances under social security payments. As an old "met" man I am aware that there was a great deal of confusion this year about who was and who was not entitled to heating allowances based, it is understood, on social security officers sticking their heads out of windows. They did not wet their fingers, but merely relied upon the effect of the exterior temperature, presumably upon their noses, ears and other exposed parts. but not too many exposed parts, I hope.

Neverthless, there are genuine cases of hardship which are not relieved entirely by social security payments, no matter how generous they may appear to be in total. It is rather tough on the consumer to say that if the prepayment meter has been broken into an appropriate deposit is necessary. The consumer may or may not have control over such a situation. One is aware that meters are broken into by members of the family, and in those cases it would not be unfair to require a security payment, but where it is a straight forward burglary and the forces of law and order have been unable to solve the burglary, apprehend the burglar and obtain a return of cash, a decision to require a deposit based on those circumstances in some of our inner cities seems to me to be fairly harsh.

Again, the noble Lord the Minister had nothing to say about Amendment No. 100A with which this amendment is linked, but we shall wait to see what is his attitude to that amendment when it is reached. I am glad that he does not require a deposit from me. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Gardner of Parkes moved Amendment No. 90:

Page 11, line 36, at end insert— ("( ) Where any security is required by the provisions of this section to be given to the supplier, the security may be by way of deposit or otherwise and of such amount as the person required to give the security and the supplier may agree on or as, in default of such agreement, may he determined by arbitration.")

The noble Baroness said I shall speak also to Amendments Nos. 91, 100 and 101. I originally put down Amendments Nos. 90 and 91 as one amendment, but for technical reasons, apparently, it has been necessary to divide them and I now produce them as two amendments. Amendments Nos. 100 and 101 are merely consequential upon the other amendments.

The purpose of my amendment is to make it clear that there should be a right to independent arbitration in relation to a deposit. I emphasise independent arbitration. I have heard my noble friend say that the director would have the right to act as an arbitrator, but I should like to be satisfied that that was a completely independent arbitration and that he was not acting as both judge and jury.

At present, many people believe that arbitration is a minor matter and not important, but in the North Thames area of London alone there is a case every week. That is not an inconsiderable number. In such cases the local gas consumer council appoints its secretary as the independent person acting on behalf of the consumer. The matter is then argued out with the gas board. That has proved effective.

This is important in the type of case where someone may not have a bad payment record but is simply not known and cannot or will not produce the security required. They are told that they must have a prepayment meter and they say that they do not want one; they want a quarterly bill and cannot manage the security, or think that it is unreasonable. That is the sort of case that is gone into in great detail by the arbitration procedure and a decision is made as to whether the person can pay a minimal security or perhaps none at all. Through the arbitration they may be able to establish their good character and in that way all is well.

On the last amendment the point was made about meters that are broken into. That is a regular source of loss. It is not only the money that is lost out of the meter, but I believe that every meter repair carried out by the London Electricity Board costs about £17.50. The repair bill per annum is very great. Action is being taken for these meters, within a period of years, not to require money and not to contain it, and I am sure the same applies to the Gas Board. The temptation for someone to break into the meter, causing extensive and expensive damage, will be removed. The meter will be operated instead by a prepaid key or card which can be bought and may be recharged. In some instances it is hoped that a key will operate only one meter, and so there will not even be an incentive for someone to steal a key that has cost £10, or whatever amount it will be; it will not work any other electric meter. I am sure that the gas authorities are just as progressive with that as are the electricity authorities.

It will be a means whereby even the DHSS will be able to give someone a paid key for their meter, knowing that it can be used only for fuel to provide warmth and cannot be applied to another use. It will have no resale value and no value to a robber. There will be no temptation to that person or to a burglar to break into a meter because there will be no money in it. When that day comes, it will solve quite a lot of the problems that arise over deposits for meters.

To return to the basic point, it is important that the public should be able to see that they have an independent person acting on their behalf and standing clearly for them against the Gas Corporation. I wait to hear from the Minister whether he can satisfy me that the director general will be that independent. I am not clear about that. Even if he is in name to act as the independent person, he will hardly have the time to do the job. He will have so much else to do according to the Bill, and will be rather fully occupied. I do not know whether there will be power for him to delegate his authority on a regional or local basis to an arbitrator. I should like to hear from the Minister on these matters. I beg to move.

4 a.m.

Lord Williams of Elvel

We should like to support the amendment moved by the noble Baroness. In our view the problem comes in the phrase which is in the Bill as at present drafted in Clause 11(1)(a), which describes "reasonable security". In default of the Government wishing to limit the amount of security, which the Committee has already decided on, our worry is that people who may not understand or may imperfectly understand what their rights and privileges are may have difficulty in knowing what "reasonable security" might be.

If every case of a demand for security has to go to the director for arbitration, as I think the noble Baroness said, he will be involved in enormous numbers of cases. At the same time we are not entirely happy that there will be an objective, sensible and rational way of proceeding which is comprehensible to the people who will be affected.

As my noble friend Lord Graham of Edmonton has said, those who will be affected will be those who cannot read the Bill, or the Act as it will become, in all its detail. They will not undertand very well what the procedures are and they will find great difficulty if they are approached by a public gas supplier—British Gas—which says, "You must pay this up front" or, "You must pay a deposit", or whatever it may be. They will have great difficulty in determining whether it is something that they should take to the director, whether they should lie back and accept it, or whether they should take it evenually, as we are dealing with a statute, to the courts.

The amendment provides a way out, though we are not happy that it is not quantified, by introducing the concept of arbitration by a body or bodies which in the normal way, as the noble Baroness, Lady Gardner of Parkes, says in one of her consequential amendments—this is if there is no agreement between the two parties on who should be the arbiter—will be the director. The amendment seems to provide a way out of the difficult dilemma where the consumer who wishes to be connected to the gas main can understand quite simply what his or her rights are, get the matter settled with reasonable dispatch and not have to go to a major bureaucracy. As I understand it, that is the spirit of the amendment, and we on the Opposition Benches should like to support it.

Lord Graham of Edmonton

I too see a great deal of merit in the amendment, though I am bound to say that it raises some questions. For instance, line 3 states: security may be by way of deposit or otherwise". I wonder whether the noble Baroness, Lady Gardner of Parkes, or the Minister can tell us what sort of security "or otherwise" could be. What are we talking about? The deposit is reasonably well understood, for we arc talking about cash, but what does "or otherwise" mean? Does it mean goods, commitment or a guarantee?

When we were debating the Previous amendment the noble Lord, Lord Donaldson of Kingsbridge, asked the Minister whether the mere request for a prepayment meter would lead to a charge being made. The Minister replied "in some circumstances". We are into the realm once more or some amorphous body—it may be the director—having some flexibility or discretion in these matters. The Minister should reflect again on the simplicity of the amendment which was moved by my noble friend Lord Gallacher, which he would not accept, and which provided for one-twelfth. That amendment had the merit of simplicity and certainty, but that has gone by the board. I hope that we may return again to the issues that it raised.

My noble friend Lord Williams of Elvel talks in terms of the amendment that is before us doing away with great bureaucracy, but I am intrigued by the situation in which the supplier says to the prospective recipient of the service, "I want a deposit from you of £200" and the recipient says, "That is unreasonable. I think that a reasonable figure is £50". Apparently we are envisaging a dispute about whether the appropriate figure is £50 or £200, for example.

If the amendment were carried there would be recourse to arbitration. That means that some time must elapse and that some evidence must be provided. Perhaps some investigation of means will have to be undertaken. At that stage, the arbitrator—as the noble Baroness, Lady Gardner of Parkes, has said, he or she must be eminently independent, and especially independent of both the supplier and the recipient—will make a judgment. That is not going to happen at the drop of a hat. There will be a period of time. I look forward to the views of the Minister on the workability of what is proposed. No doubt the noble Baroness will also comment on the questions that I have raised. Certainly, however, the noble Baroness has provided those who could be distressed if too onerous a figure was asked for, with some opportunity of pleading their case. Whether or not this can be done literally overnight remains to be seen.

Baroness Gardner of Parkes

In replying first to the point raised about the words "or otherwise", I would say that there is no provision, so far as I know, for taking premium bonds or savings certificates. I see no reason why that sort of thing should not be acceptable but it may be rather a nuisance to the authority holding them. The words "or otherwise" really mean, I believe, an assurance given by a third party willing to guarantee that your bill will be paid. I was asked to do this for one of my children. If she could produce a bill paid by her mother, she could have a gas supply on my guarantee that I would pay her bill if she did not. That is one form of interpreting "or otherwise".

As to arbitration, it is at the moment a simple, rapid and effective system operated by the local consumer councils. The secretaries of the councils are full-time paid officials who are always available. The highest number of arbitrations—one a week—are within the North Thames region. Some parts of the country have only two or three in a whole year. What is important is that the process should he available. In the case of referral to the director. the problem is not the number of arbitrations but the fact that so many other issues are also going to him. Obviously, these decisions must be made at a much lower level. That is a different point.

A code of practice may be the answer but the Bill makes no provision as to how long a deposit may be held. My noble friend the Minister may be able to reply to this point. I know that in the case of electricity, the deposit is only held for a certain time until you have proved that you are a satisfactory payer. Like myself, someone may have arrived from Australia. There have always been plenty of sharp people arriving from that part of the world. Such a person would have no credit rating in this country. If, after being here a year, you have paid your bills reliably, it is quite right that you should have the benefit of your money back rather than it being held permanently on deposit even though interest is paid. The electricity board, after that period of time, releases the deposit money. It is not held for the whole time that you receive the supply. It is held only for such period as required. I hope that the Minister will be able to say that this point is to be covered in a code of practice. I have not put down an amendment, because I hope that the matter is covered in some other way.

4.15 a.m.

Lord Brabazon of Tara

The amendment that my noble friend has tabled draws our attention to the change in the arbitration arrangements introduced under the Bill as a result of the new structure for regulation adopted with the regulatory body Ofgas headed by the Director General of Gas Supply. Clause 11 gives a public gas supplier a power to require security in respect of a supply of gas. Paragraph 3 of Schedule 5 gives a similar power in respect of supply of a meter by a public gas supplier.

These provisions have been carried forward from Schedule 4 to the Gas Act 1972. What has riot expressly been carried forward, however, are the provisions as to the nature of security and as to arbitration set out in paragraphs 30 and 31 of Schedule 4 to the 1972 Act. There are very good reasons for this since under our new regulatory system any dispute on security deposits can in effect be referred to the director of Ofgas for a ruling. This arises because under the regulatory regime the Director General of Gas Supply has the task of ensuring that obligations to supply gas or to supply meters are properly met. If, to take the case of Clause 11(1), British Gas demanded what a potential consumer considered to be an unreasonable security, the consumer can refer the matter to the director to take enforcement action under Clause 28 on the grounds that the supplier has failed to give a supply of gas under Clause 10(1), that failure not being justified under Clause 11(2), which only enables a public gas supplier to refuse to give a supply if a person has refused to give reasonable security. The director can then decide what, in his opinion, a reasonable security would in the circumstances be, and if he decided that the amount was unreasonable he could make an enforcement order requiring British Gas to supply on those terms.

The noble Lord, Lord Williams of Elvel, asked what would be meant by "reasonable". As I said earlier, I think this could perhaps vary in different cases, but "reasonable" is a legal word which is often used in statute, and I understand has a lot of case law to support it. Similar considerations apply to the other references to reasonable security in Clause 11 and paragraph 3 of Schedule 5. It will of course be open to the director, using his powers under Clause 35, to publicise his role in settling disputes.

That I think is an important point. His role can be publicised in the decisions he makes in these matters. Therefore it will get out to the wider public. I am not suggesting for a moment that the average customer will necessarily understand the Bill in the way that I have attempted to explain it. For that reason I am sure that people who have these problems will, as they do now, perhaps go to the local Gas Consumers' Council, their Citizen's Advice Bureau, or perhaps the local social security department, and they will be pointed in this direction. It may be that the approach will be made for them.

My noble friend Lady Gardner of Parkes asked about the duration of a deposit. The Bill does not specify how long such security may be held beyond specifying that the security must be reasonable. If a customer establishes a good payments record a deposit may no longer be reasonable. It will therefore be for the director. guided by his duties in Clause 4, to judge what would be appropriate to a particular case.

I think that I have given a reasonable explanation that the Bill has a proper system for independent review of security deposits, and that the express provisions on arbitration—as in the 1972 Act—are therefore redundant. Those duties are now taken up by the Director General. I therefore hope that my noble friend will he satisfied with my reply.

Lord Williams of Elvel

May I ask the noble Lord for clarification on two points? The first is the role of the director in arbitration. He has explained that the director has powers under certain provisions to arbitrate and to impose on the gas supplier the requirements to supply on a reasonable basis of security. He presumably therefore also has the power to impose on the potential consumer, because he is an arbitrator. Supposing that the consumer decides that the decision of the director is unreasonable. If I understand aright the Bill as drafted, he can have recourse to the courts. As the noble Lord said, the courts have a certain amount of case law on what is reasonable. Is that the procedure that the Government have in mind? I ask that for clarification and not in any sense in a hostile spirit.

I should like clarification on this second point. Can the noble Lord give us any estimate of the number of cases of arbitration of this nature that are liable to come before the director? We believe that there will be an enormous number of cases and the director and his office will not be able to handle them.

Lord Brabazon of Tara

To answer the first question of the noble Lord, Lord Williams, yes, I think that that would be the procedure that would be adopted. If the customer did not agree with the director, he would have to go to the courts. At present I cannot give an estimate of the number of cases which might come up before the director, but I remind the noble Lord that the director will not be entirely on his own; he will have a reasonable staff. I am not suggesting that any of these cases would necessarily have to go right up to the top.

Lord Graham of Edmonton

Will the noble Lord reflect on the additional burdens or, as we understand it, the existing burdens that already fall within the purview of the director? The purpose of the amendment is to take away not the power or the stature of the director, but the sheer weight of what could be termed minor responsibilities in the context of his being the prime person in charge of a massive industry. I know that not all the decisions which fall on the office of the director will be taken by that one man. However, the Minister, in his concluding remarks, alluded to this matter by saying that he will have staff. He will need a big staff, and they will all need to be managed, controlled and directed. They will be the director's staff.

The merit of this type of amendment is to shift partly away from the director. The noble Baroness, Lady Gardner, said that the consumer councils—local consumer bodies—could very well have the personnel who are independent of both the supplier and the recipient. That strengthens enormously the case which the noble Baroness and others, including myself, have made for a relevant and satisfactory consumer representative body, not merely at national level but at regional and local level as well.

Therefore the Minister ought to reflect on the value of diffusing the power from the centre. When one listens to what the director has responsibility for overseeing as well as managing, one realises that he will have very great difficulties indeed.

Baroness Gardner of Parkes

The question has been raised as to how many of these cases there would be likely to be. I can tell the Committee that in the North Thames gas consumer area, which has just under 2 million consumers and covers an area of over 1,000 square miles, 15,000 complain s were handled in 1984–85; but of those complaints only 47 were arbitration cases and that number was, I understand, by far the greatest number anywhere in the country. Therefore we are not talking about a very major item. Anything that touches our pockets is always a sensitive matter.

I think that the public would be happier if they could communicate more directly with the person who is to act on their behalf. It is for that reason that I was quite cheered by the remark of my noble friend when I thought he said that possibly these people would go to their local consumer council who might forward the matter for them to the director. I should like my noble friend, between now and the next stage of the Bill, to look at the matter and to see whether there is any way in which there could be a more formal arrangement so that the consumer council has a real right to do that. It would be more satisfactory for members of the public.

People are always concerned at the thought that they have to write to someone remote from them, perhaps distant from them geographically, and some people are not very good at setting matters out on paper. Some people will simply be genuinely distressed at being asked for a deposit and will want to be able to get a very quick, instant answer. I think that they can get that better from their local consumer council.

However, the Minister has answered the matter thoroughly. In view of what he has said, I should like to study all the statements and their implications. Therefore at this stage I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Stoddart of Swindon moved Amendment No. 90A: Page 11, line 39, after ("rate") insert (", which shall not be less than the market rate.")

The noble Lord said: I beg to move Amendment 90A, which stands in my name and in that of my noble friend Lord Williams of Elvel. I think it may be for the convenience of the Committee if we discuss also Amendments Nos. 90B, 100A and 100ZB. The purpose of the amendments is to be rather more fair than is proposed in the Bill to those who deposit money with the gas board by way of security.

On page 11 of the Bill it says in Clause 11(4): Where any money is deposited with a public gas supplier by way of security in pursuance of this section, the supplier shall pay interest, at such rate as may from time to time be fixed by the supplier with the approval of the Director, on every sum of 50p so deposited for every six months during which it remains in the hands of the supplier.

I do not think that that is being even-handed. It seems to be left to the supplier, although he has to have the agreement of the director, to fix the rate of interest. The Bill could be clearer than that. It may be that my wording, "the market rate", does not clarify the position as it should be clarified, but it ought to be clarified that there is a given rate which should in any event be related to the market rate that is paid.

The second point is the six months. When the Gas Corporation receives the money it will get interest on it for every day that it holds that money. It is not every six months, but for every day. If I or any noble Lord, or anybody else, deposits money in a bank we do not expect not to get any interest if it is held by the bank or the building society or the TSB for only five months 23 days, as an example.

We are not being even-handed in this Bill, and the amendments which I propose would be rather fairer to the person who deposits the money, who, in any event, would probably be not a rich person, and perhaps even a poor person. We should be even-handed, and the amendments I have suggested help to redress the situation. I hope that the noble Lord will be sympathetic to these amendments. I understand that perhaps the drafting may need some alteration, but I hope that he will at least accept the principle, and I shall be interested to hear his reply. I beg to move.

Viscount Chandos

On behalf of the Alliance Benches I should like to support the amendments proposed by the noble Lord, Lord Stoddart of Swindon. I should begin by declaring an interest in that I am a director of the bank which is an adviser to the British Gas Corporation. The purpose of the payment of interest on any deposit from a user of the gas services is to ensure that the security that he is providing by way of a deposit is merely security and not an additional charge. Particularly in view of the Government's rejection of the earlier amendment limiting the maximum size of the deposit, it is all the more important that the rate of interest paid on such a deposit truly reflects the market rate. As my noble friend Lord Diamond said in commenting on that amendment, our strong preference on these Benches is for Parliament to have the greatest possible say in matters of detail such as this.

One question that I should like to ask the noble Lord the Minister is the question of the tax treatment of the interest paid on any deposit with the supplier of gas. It is quite possible that a consumer is increasing his borrowings from a building society or a bank to make that deposit, and under the present legislation I do not believe that that interest would be tax deductible. In order to achieve true symmetry one would suggest that the interest paid by the Gas Corporation or any other gas supplier should not be subject to income tax.

4.30 a.m.

Lord Brabazon of Tara

We have already had a number of interesting debates on the question of security deposits. I accept that they are not a popular measure, but I believe that there is reluctant acceptance that they represent an important counterweight to the supply and other obligations which will rest on public gas suppliers under the Bill.

Of course we recognise that where security has been required the consumer should receive a proper sum as interest on his deposit. In this connection I should explain that there will be a change in the arrangements determining interest compared with the Gas Act 1972. Paragraph 30 of Schedule 4 to the 1972 Act requires the corporation to pay interest on every sum of 50p for every six months it remains with the corporation at such rate as may from time to time be fixed by order of the Secretary of State with the approval of the Treasury. Similar powers were introduced under the Gas Act 1948 with the specific intention of enabling the interest rate to be varied from time to time in accordance with general trends rather than continuing the fixed rate of 4 per cent. established in standard clauses for private legislation. So we have gradually moved forward.

Under the latest standing order of 1982, No. 655, under the provisions of the Gas Act the rate currently stands at 10 per cent. However, we consider the procedures in existing legislation to be cumbersome, a statutory instrument having to be made by the Secretary of State every time the rate is changed. I think noble Lords on all sides will agree that rates are changing quite rapidly at the moment. That is why we have provided in the Bill for the rate to be fixed by the public gas supplier with the approval of the director. Given the director's enforcement role in relation to Clause 11(4) under Clause 28(8), the obligation to pay interest under Clause 11(4) is a relevant requirement enforced by the director under that clause.

We believe that there is no danger that consumers will receive interest at an unjustifiably low rate since in the first place the director will be required to approve the rate and in the second the director could, if necessary, issue an enforcement order to ensure that the agreed interest is paid by the public gas supplier. Market rates would in any event need to be tied to some regularly published index, and that is one difficulty with the noble Lord's amendment.

As to the period over which interest should be payable, we believe that six months strikes a reasonable balance between the interests of consumers and suppliers, and we do not believe that a shorter period would be appropriate. The director will need to have regard to the duties of Clause 4 in agreeing the rate of interest, and will therefore have to take full account of the interests of consumers as a consequence of Clause 4(2)(a). The noble Viscount, Lord Chandos, whom we welcome to our debate at this hour, asked me a technical question about the tax treatment of these interest payments. I am afraid I do not have the answer to that at the moment. I could perhaps write to the noble Viscount with the information.

I can assure the Committee that the director will act if necessary to ensure that there is no abuse of the public gas supplier's powers to require security. I therefore hope that the arrangements that we propose in the Bill are much less cumbersome than the existing arrangements which require the rate to be fixed by statutory instrument every time it should change. I hope therefore that the noble Lord will see his way clear to withdraw his amendment.

Lord Donaldson of Kingsbridge

I hope that the noble Lord will impress upon his right honourable friend the Chancellor of the Exchequer that a deposit is not an investment in this case and that it would be absolutely unjust that small people—and only small people are asked for deposits—should be taxed on the interest on that money.

Lord Brabazon of Tara

I said that I would let the Committee know the answer as to whether they were or not; but I certainly take the point that the noble Lord makes.

Lord Stoddart of Swindon

I am quite surprised that I should have received such an unsympathetic response to what are four very reasonable amendments. Of course I accept that the method used is preferable to the making of a statutory instrument. That I accept. What I do not accept is that the provision as regards interest is tight enough to protect the person who is depositing the money.

In another part of the Bill in relation to the pricing, we have used in the price formula—I forget now what it is precisely—the rate charged by, I think, the National Provincial Bank; or perhaps it is Barclays Bank. I am not sure. Why on earth could we not tie it to that? That would certainly be more satisfactory than the rate being fixed by the supplier. I really cannot accept that six months is a reasonable period and that three months is a less reasonable period than six months. If the noble Lord were depositing money, wherever it may be and whether it is for security or what have you, it would be his money. If he deposited £ 1,000 in, say, a building society and left it there for 5½ months and the building society said, "We are sorry, but you have not left it here for six months so you can have no interest," surely he would not accept that.

But, as I read it, that is what we are asking depositors to accept in this Bill. I hope that, now that I have put it to the Minister in that sense, he will think again about his response to the amendment. It would be unfair of me to ask him to come forward now and say, "I have heard what you have said. It will change my mind." Of course he cannot do that. What I should like him to do is that which we have done so many times on this side of the Committee: to say that he will read what has been said, that he will give the matter some consideration and that perhaps between now and Report stage we can have a further discussion about it to see whether we can reach some accommodation.

Lord Diamond

Before the noble Lord responds further—and I am grateful to him for indicating that he is about to say something more—would he be good enough to say not merely what his view is but why his view is that six months is better than three months? I listened very carefully to what he said previously. He said that the Government's view is that six months is better than three months. That is a very interesting statement but it is devoid of any argument. What we are interested to hear is the argument as to why six months is better than three months.

Lord Brabazon of Tara

Perhaps I may first answer the question just posed by the noble Lord, Lord Diamond: why is six months better than three? As I said orginally, this is what we consider to be a reasonable length of time, balancing the interests of the consumer and the supplier.

The noble Lord, Lord Stoddart, talked about having £1,000 deposited with a building society. I have to tell the noble Lord that the likely sum of money involved in this sort of deposit is, I understand, about £140. The amount of interest accruing on that over a three-month or six-month period is not likely to be very much. Also, to some extent it is a reducing balance bacause the consumer is using gas during that period. I make that point.

I am afraid I cannot give the noble Lord the assurance that he seeks from me—that I will look at this matter. I prefer the way we propose in the Bill as it stands, which is for the director to have the final say as to the rate; and he is an independent man, as the noble Lord must recognise. If there is a disagreement over what the supplier has proposed then it is the director who will have the final say. I think that, independent arbritrator as he is in this case, he is perfectly well able, if he feels it right, to base his rate on Barclays Bank or whatever it might happen to be. I think it perfectly reasonable to give him the power to set this rate; that is to say, if he does not agree with what the public gas supplier has suggested.

Lord Bruce of Donington

Before the noble Lord sits down, may I ask him to indicate whether he has any objection to adopting as a standard rate the specified rate that is defined specifically in the proposed authorisation which is being authorised to gas suppliers and which contains the formula in which an interest rate is used as part of the formula in certain circumstances? The specified rate under the definition clause of the particular condition contained in the authorisation is quoted to mean the average of the Treasury bill discount rate, expressed as an annual percentage intrest rate, published weekly by the Bank of England during the period in respect of which the calculation falls to be made. Would there be any objection in principle to adopting that as a base, with the addition of a specific percentage which bankers are sometimes constrained to pay as an extra amount above the discount rate itself?

Lord Brabazon of Tara

I have looked at the relevant part of the authorisation and I see the specified rate to which the noble Lord refers. What I cannot put my finger on at the moment is how often that rate changes during the operation.

Lord Bruce of Donington

It is published weekly.

Lord Brabazon of Tara

I know the Treasury bill rate is published weekly but that would be an extremely complicated form of calculating a deposit, if you are working on a weekly changing rate. I should have thought that in general terms one could probably set a rate for a reasonable length of time, say, three months or six months. I think that to tie the director down to watching the weekly Treasury bill tender every Friday afternoon would be putting a rather onerous task upon the man, because all these deposits are not necessarily running simultaneously over a six-month or three-month period. I do not really think we can tie the director down to that kind of specification.

4.45 a.m.

Lord Stoddart of Swindon

I really am amazed that the noble Lord cannot see that although he has said he wants balance and he thinks that the balance is kept within the Bill between the supplier and the consumer, the balance of advantage, under the provisions of the Bill, must be with the supplier. If money is deposited with the gas corporation for 5½ months at, say, 10 per cent. of the £140, that will amount to nearly £7. Under the Bill, the gas corporation, or British Gas plc, will benefit to the tune of £7 and the consumer will have lost £7. How can that be a proper balance? The balance is weighted against the consumer. What I am trying to do is to make it rather fairer, understanding that it would be difficult to pay consumers interest on money deposited for a week. I am trying to be fair to both the consumer and the supplier. But it seems to me that the noble Lord is being most unfair to the consumer and very generous to the supplier.

It is quite plain that he is not going to give an assurance that he will look at it again, but I feel sure that he will think about it again in the light of what has been said, when he reads it in Hansard. I shall not press this amendment at this stage, but it may very well be—indeed, I am confident—that I shall bring forward a further amendment, perhaps better drafted, at the next stage of the Bill.

Lord Bruce of Donington

May I ask the noble Lord to bear one point in mind when he is giving his further consideration. It is that the deposit paid by the consumer tends to he a permanent arrangement; in other words, the deposit tends to remain there. He pays his bills in the normal way and the deposit is required as security. It is not that it suddenly becomes repayable to him after three or four months. It is held as a quasi-permanent security against the amount.

Baroness Gardner of Parkes

If the noble Lord will give way, I think that is not correct. The six-monthly term is possibly used in the Bill because it is usually held for one year, which would be a period of two six months. So that might be why it has been phrased in this way. But it is not held as a permanent security and it would be very wrong if it were.

Lord Donaldson of Kingsbridge

But is the electricity that is used knocked off the deposit, or do you have to send a separate cheque so that the £140 deposit plus the amount for the quarter's electricity is in the company's hands?

Baroness Gardner of Parkes

As I understand it, until a period of one year has elapsed in which you have been paying separately and independently for either your telephone or your electricity, you are paying in addition. But after one year that amount can be applied to the next bill, plus any amount of interest that you would be due.

Lord Stoddart of Swindon

I think the noble Baroness, Lady Gardner of Parkes, has given more helpful information than the Minister did—

Lord Diamond

The noble Baroness knows what she is talking about.

Lord Stoddart of Swindon

I agree entirely. The noble Lord has said in a different way what I was saying. But in the light of what has been said, and certainly in the light of what the noble Baroness has said, I shall consider the position between now and Report stage. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 90B and 91 not moved.]

Clause 11 agreed to.

Clauses 12 and 13 agreed to.

Clause 14 [Fixing of tariffs]:

Lord Diamond moved Amendment No. 91A: Page 14, line 8, after ("may") insert ("after consultation with the Gas Consumers' Council").

The noble Lord said: Before we come to the substance of the amendment I am bound to make one short comment having regard to the fact that we have just passed two clauses, Clauses 12 and 13, with not a single word being said on them. It is very relevant that that should be at this point because we have now reached the stage at which the guillotine started to apply in another place. We in this Chamber therefore have a double responsibility: not merely the responsibility of having a second look at the Bill but the responsibility of having a first and second look at the Bill because from now on large parts of the Bill have not been considered at all.

I now come to Amendment No. 91A, which proposes that before fixing the tariff—noble Lords will recollect that this clause provides for the fixing of tariffs by the public gas supplier—the supplier shall consult the Gas Consumers Council. I should have thought that that was a reasonable and sensible provision. It is reasonable because the Gas Consumers Council is charged with responsibility for keeping an eye on the tariffs and should therefore be kept informed prior to the tariff being fixed at what it is proposed to fix it. So it is very reasonable that the council should be able, if necessary, to make any representations to the public gas supplier before the tariff is fixed.

It is also sensible because if, after having consulted the Gas Consumers Council, the tariff is then fixed, and if then there are objections by consumers the gas supplier has a very valuable ally in the Gas Consumers Council and can say quite properly that before the tariff was finally fixed the Gas Consumers Council was consulted, and therefore the consumers' representative was consulted. It is both a sensible and a reasonable provision, and I hope that the Government will regard it as such. I beg to move.

Lord Gray of Contin

I did not notice whether the noble Lord mentioned it, but I think we are dealing with Amendment No. 93 along with Amendment No. 91A.

Lord Diamond

I did not deal with anything beyond Amendment No. 91A because the list that has been circulated shows Amendment No. 91A on its own.

Lord Gray of Contin

My apologies. I appear to be looking at a different list.

Lord Diamond

We have thought that on several occasions.

Lord Gray of Contin

In any event, I am grateful to the noble Lord for moving this amendment, which gives me the opportunity to discuss the role of the Gas Consumers Council in relation to a public gas supplier's tariffs.

We recognise the views that have been expressed, that there should be the fullest possible role for the council in matters affecting consumers' interest. Clearly the matters of tariffs is one which most intimately affects those interests. It may be helpful to examine the first role of the director in relation to tariffs. Under the authorisation the director will of course have a large measure of control over prices for tariff customers. Within that overall control he will not seek to intervene in the way in which the tariffs are set, although it is one of the areas in which the director will have an enforcement role, in ensuring that the obligations on public gas suppliers in Clause 14 are met.

As Clause 14 makes clear, the public gas supplier will be required to publish not only tariffs but also the principles on which charges are to be made. That should provide the necessary assurances that, in the overall framework of price control, tariffs are being set in a way that is both fair and non-discriminatory, as required by Clause 14(3).

Although the director has no direct role, Clause 14 is one of the clauses to which the director's enforcement powers under Clause 28 of the Bill apply. If the public gas supplier failed in any of his duties under Clause 14(1) or 14(3), the director would be able to make an enforcement order which, if not complied with, would open the way for damages by anyone whose interest were adversely affected. The regulatory regime therefore provides an effective and reliable means of policing a public gas supplier's tariff obligations.

As to the Gas Consumers Council, Condition 8 of British Gas's draft authorisation will require them to inform the council of any change in the price of gas or in the principles of charge. It would be open to the council to advise the director, using its powers under Clause 40, if it was concerned about any aspect of tariffs.

It is clearly right that the director should have the primary role in relation to such an important matter as tariffs and that enforcement powers should be available to him. But the council will have an important advisory role through which it will be able to exert considerable influence. I hope that in view of that explanation noble Lords will be persuaded that it is not necessary to press their amendment.

Lord Diamond

No; I am sorry, but I have listened very carefully to what the noble Lord the Minister has said, and I am sure that on this occasion he is reading the right brief. Even so, I cannot see that he has given any kind of careful consideration to the main point of the amendment.

The main point of the amendment is that the consumers' council—the watchdog of the consumer—should be consulted. That is what it is there for. The noble Lord said it would be consulted when the tariff is changed or any principle of charging is changed. We want it consulted when the charge or the tariff is fixed in the first place. Of course the director has a considerable input, as he should. We are talking about a consumer council, and the first thing it will want to know is what is the consumer going to be charged. That is a very reasonable, common sense point of view. How can the consumer council function if it is not kept informed?

The council wants to be consulted in the sense that this Government (I repeat for the second time) do not seem willing to take on board. It wants to be consulted before the decision is made and not after the decision is made. It wants to be consulted before the tariff is finally fixed. I press that point of view very strongly on the Government.

It is right that the consumer council should be so consulted. It is sensible and helpful that the gas supplier, having listened to the representations, if any, that the consumer council chooses to make, and having taken those on board, should be able to say to any possible complainant, when the tariff is finally fixed and the charge is made, that those charges have been advised to the watchdog of the consumer and have been accepted. Therefore, I am bound to ask the Minister to give this matter further consideration. The reply he has given does not meet this very reasonable amendment. I say to the Minister—and I hope noble Lords will be good enough to listen to what I say and will take the same view—that it is only right and reasonable that the consumer council should be consulted. I hope the noble Lord the Minister will have further thoughts on the matter now.

5 a.m.

Baroness Gardner of Parkes

I think there is a case for having consultation with the consumer council but I must point out to the Committee that it can be a rather hollow exercise. This process goes on now between the various energy authorities and their consumer councils. Every consumer council automatically believes that there should be no increase in anything. When that sort of attitude is taken the exercise is pointless. Other consumer councils and consultative bodies decide that they should be the people setting the charges and more or less try to dictate to the energy authority, and that is equally useless.

However, one area where there is a role for consultation with the consumer councils is in deciding the way in which charges should be varied. I understand we already have a clear definition in the Bill that the cost cannot go above inflation. That point is therefore covered. But there are periods when different systems of charging have been tried. Standing charges have been brought in or special reductions for a little used tariff have been implemented and found to be unsuccessful and have been changed. These changes have usually been made at the request of the consumer council.

Originally they asked for a rebate for low users of gas and electricity and it was implemented at the request of the old age pensioners, who asked the consumer councils. When it was enforced it was found that it did not help the old age pensioners but only the person who had a second home and hardly used it, or the person who was smart enough to have a meter reading and get all his bills paid in one quarter and next time have nothing on the meter and thus get a big rebate. Some people were smart enough to learn how to fiddle the system.

Again, in the end the consumer council asked to have the method of charging changed. In that way the consumer council has a role, but if one is considering whether the consumer council should say whether or not the price should go up then every consumer council will automatically say it should not.

Lord Donaldson of Kingsbridge

May I differ from the noble Baroness, having been concerned in the consumer world many years ago? It is absolutely essential that any consultation should be made before the decision is final. Of course every consumer council will say the price is too much, and they are usually right, but it does not alter the result. But consultation must go before and the consumer council can at least then put the argument which is put to it by the customers. That should be the routine.

Lord Bruce of Donington

Can the noble Lord clear up one point of construction on Clause 14(1)? At present it reads as follows: Subject to the following provisions of this section, the prices to be charged by a public gas supplier for the supply of gas by him shall be in accordance with such tariffs as may be fixed from time to time by him, and those tariffs,"— then follow the words I wish to query— which may relate to the supply of gas in different areas, cases and circumstances, shall be so framed". Why are the words which may relate to the supply of gas in different areas, cases and circumstances", put in at all? Why cannot those words be entirely omitted? The reason I ask is because it carries an implication which the noble Lord may be able to correct. This is a genuine inquiry as to exactly what is the interpretation. It may be interpreted that the supply of gas itself—that part of the price that relates to the supply of gas—may vary according to the area in which the gas is supplied. Is that the implication that one is to derive from that particular sentence, and if not, why is it there at all? The noble Lord will appreciate that it will have certain implications when we come to discuss the formula at a later stage.

Lord Gray of Contin

First of all, I take issue with the noble Lord, Lord Diamond, on this matter. He was by way of scolding me a little and, with the greatest respect, I would remind him that he put down this amendment only yesterday afternoon, so it was really a very late thought which gave very little time for consultation by the department concerned. Therefore I think that it is a little unfair of him to be rather tetchy in his remarks.

Lord Diamond

No, no; I am not tetchy at all.

A noble Lord

Just natural.

Lord Diamond

I am just inviting the noble Lord the Minister to share in the joy that we all have in discussing amendments on the Gas Bill at five minutes past five in the morning. The Minister is absolutely right. These amendments were put down only yesterday, and the reason for that is that it was the first day back after the Recess.

Lord Gray of Contin

First day back after the Recess or not, in any event it was still a very short time for the department to have an opportunity of studying it. I was grateful to my noble friend Lady Gardner of Parkes, who was her usual constructive self, and I agree entirely with her that there is a wide range of issues on which the consumers' council should be consulted and on which, having been consulted, it can be of very great assistance.

But so far as concerns the control of prices—and I return to the actual amendment moved by the noble Lord, Lord Diamond—this is a matter for the director, who will have enforcement powers in relation to charges and tariffs. There is really no direct role for the consumers' council in setting such charges, unlike the nationalised industry structure at present, since the matter is purely one for the director. Therefore, as regards this particular issue there is not a role for the consumers' council in the way that there is in many other areas and on many other issues. Does the noble Lord wish to intervene?

Lord Diamond

No, I am listening.

Lord Gray of Contin

All right. The noble Lord, Lord Bruce, asked me about Clause 14(1), and different areas, different cases and different prices is really what he had in mind. This is dealt with by Amendment No. 92, which we shall debate later. The wording permits different tariffs so long as they do not conflict with the non-discrimination provisions in Clause 14(3) or Clause 9(2). But that is something that we shall come to when we discuss Amendment No. 92 a little later.

I really do not think that the noble Lord, Lord Diamond, has taken a particularly strong point on this issue. I will not disagree nor argue with him about the role and the merit of the consumers' council on a wide range of issues, but in regard to this particular issue there is no direct role for it since this is a matter for the director to decide.

Lord Diamond

I am sorry that I have not been able to impress the point on the noble Lord the Minister, though I have tried twice. He says that there is no role and that is all up to the director. There is no earthly reason why, though the director has the final responsibility, the consumers' council should not be brought into consultation. I am not giving a role to the consumers' council in the sense of making it an authority on this matter or giving it a power to fix the rate. I am suggesting in this amendment that the consumers' council should be consulted. Consulting means before the final decision is made. It should be told what is likely to happen so that it can make representations, if necessary, and those can be listened to and taken into account. There is no question of the director's role being reduced or the consumer council's role being changed into fixing the rate. It is one of being consulted.

I was impertinent enough to suggest earlier that if the Government have any defect it is that they are disinclined to consult. They have found themselves in trouble on several occasions over that disinclination. Consultation costs nothing other than a little time, but it produces a great deal of good will. As I hope I have made clear to the Government and the Committee, I feel strongly on this point.

The consumer council is there. It has a reasonable function. It is recognised as being the consumers' watchdog. We need to strengthen the consumers' representation when we are creating a private monopoly. It is only right and sensible that the consumer council should be seen to be playing a part. The part is only that of consultation; it is nothing more than that. I hope therefore that if the noble Lord the Minister does not give way or give any indication that he will consider this matter seriously and bring us something useful at another stage, the Committee will support me in the view that I have put forward on this amendment.

Lord Gray of Contin

The noble Lord is correct. There is no reason why there should not be consultation. The director can consult the consumer council on any issue. It is highly likely that he will frequently consult the consumer council, but that does not mean to say we need necessarily write that into the Bill.

Lord Diamond

I am sure that the noble Lord the Minister is trying to be helpful, but I do not consider that remark helpful. We are considering this Bill. We are a Chamber of Parliament exercising its function on a point upon which the other Chamber has been denied the possibility of exercising its function. We are deciding on the shape of a piece of legislation. It is legislation which involves the fixing of a tariff. I shall read out the provision: Subject to the following provisions … the prices to be charged by a public gas supplier for the supply of gas by him shall be in accordance with such tariffs as may be fixed from time to time by him. Those are clear, strong and stark words. They are capable of being understood by everybody. That is the legislation that the noble Lord the Minister now proposes to pass. All we are saying is, soften it a little. At that point give a power of consultation only to the consumers' watchdog. I do not need to go over the ground again. That is the point of view that I take strongly.

5.14 a.m.

On Question, Whether the said amendment (No. 91A) shall be agreed to?

Their Lordships divided: Contents, 32; Not-Contents, 63.

DIVISION NO. 10
CONTENTS
Airedale, L.	Chandos, V.
Blease, L.	Cledwyn of Penrhos, L.
Brooks of Tremorfa, L.	Crawshaw of Aintree, L.
Bruce of Donington, L.	Dean of Beswick, L.

Diamond, L.	Roberthall, L.
Donaldson of Kingsbridge, L. [Teller.]	Seear, B.
	Shepherd, L.
Ezra, L.	Stedman, B. [Teller.]
Gallacher, L.	Stoddart of Swindon, L.
Graham of Edmonton, L.	Taylor of Blackburn, L.
Hanworth, V.	Tordoff, L.
Hatch of Lusby, L.	Turner of Camden, B.
Irving of Dartford, L.	Wallace of Coslany, L.
John-Mackie, L.	Wells-Pestell, L.
Ponsonby of Shulbrede, L.	White, B.
Prys-Davies, L.	Williams of Elvel, L.
Raglan, L.

NOT-CONTENTS
Abinger, L.	Kaberry of Adel, L.
Bauer, L.	Kimball, L.
Belhaven and Stenton, L.	Kitchener, E.
Belstead, L.	Long, V. [Teller.]
Bolton, L.	Lucas of Chilworth, L.
Brabazon of Tara, L.	McAlpine of West Green, L.
Brougham and Vaux, L.	Marshall of Leeds, L.
Caithness, E.	Maude of Stratford-upon-Avon, L.
Cameron of Lochbroom, L.
Campbell of Croy, L.	Mersey, V.
Cathcart, E.	Middleton, L.
Clinton, L.	Monk Bretton, L.
Coleraine, L.	Montgomery of Alamein, V.
Cork and Orrery, E.	Mottistone, L.
Cowley, E.	Norrie, L.
Cox, B.	Orkney, E.
Davidson, V.	Pender, L.
Denham, L. [Teller.]	Rankeillour, L.
Eden of Winton, L.	Sanderson of Bowden, L.
Elliott of Morpeth, L.	Sandford, L.
Elton, L.	Sandys, L.
Fortescue, E.	Skelmersdale, L.
Gardner of Parkes, B.	Strathclyde, L.
Gibson-Watt, L.	Swansea, L.
Glenarthur, L.	Swinfen, L.
Gray, L.	Teviot, L.
Gray of Contin, L.	Torrington, V.
Gridley, L.	Trefgarne, L.
Harvington, L.	Trenchard, V.
Hives, L.	Ullswater, V.
Holderness, L.	Vaux of Harrowden, L.
Hooper, B.	Westbury, L.

Resolved in the negative, and amendment disagreed to accordingly.

5.21 a.m.

Lord Stoddart of Swindon moved Amendment No. 92 Page 14, line 9, leave out from ("tariffs, ') to ("shall") in line 11.

The noble Lord said: This is an important amendment which seeks to ensure that a gas supplier shall not discriminate between customers in different areas in the matter of tariffs. As the clause stands, the gas supplier can impose a multiplicity of tariffs throughout the country, or that is how it appears. This would undoubtedly lead to unfairness and result in a public outcry, certainly from those customers who might be paying higher gas prices than their fellow citizens in another part of the country, or even in a different part of the same county.

The clause unamended could very well result in people in remote areas, such as Cornwall or parts of Wales, for example, paying more because the gas supplier can claim that his delivery costs in supplying gas through a long and expensive pipeline are higher than those incurred in supplying customers who are relatively close to the storage point A gas supplier may well claim that his costs in a densely populated area are far less than in a sparsely populated one, and accordingly fix a higher tariff for the customers in sparsely populated areas. A supplier may also claim that his overheads are very much lower in urban areas than rural ones—for example, in showrooms, where the turnover of customers and cash would be many times higher in urban areas than rural areas.

The price of gas to domestic customers is currently virtually the same throughout the country, unlike petrol, the price of which can very substantially according to the part of the country in which it is sold. It would be invidious indeed if the position of domestic gas reverted under privatisation to one where its cost varied according to geography. Scotland, Wales and the North would be likely to fare badly while the South-East, with its concentrated population and prosperity, would fare rather better.

This is an amendment which should appeal to the fair-mindedness of your Lordships and, indeed, to the Government. It is certainly one which the Government should accept. If they did so, it would at least give some indication that they saw Britain as one nation.

Lord Gray of Contin

I am glad that the noble Lord has moved this amendment because it gives us an opportunity to talk about the method of charge to consumers and the question of discrimination. Let me say at once that I am fully and strongly in favour of ensuring equality between consumers as far as possible. As noble Lords will be aware, there is already a duty on the Secretary of State and the director in respect of protection of consumers' interests, and there is an avoidance of undue preference duty on public gas suppliers in Clause 9 in respect of the supply of gas, and in Clause 14 in respect of the fixing of tariffs. It is the effect of the amendment on this latter undue preference duty which causes me most difficulty.

When preparing the Bill, my right honourable friend gave considerable thought to the way in which an avoidance of undue preference duty should be imposed on public gas suppliers. Noble Lords will be aware that the Gas Act 1972, as amended by the Gas Act 1980, requires the corporation to avoid undue discrimination in fixing tariffs for supplies to premises of under 25,000 therms. A similar duty existed in the Gas Act 1948 exept that it extended to all suppliers of gas. The limiting of the requirement was designed to mirror the restriction of the supply duty to customers requiring less than 25,000 therms.

There was, therefore, a considerable precedent of couching the undue preference duty in respect of tariffs in the way that it is couched in the Bill. As noble Lords have already pointed out, precedent is not always necessarily a good reason for maintaining the existing position, but in this case there were other powerful reasons why we concluded that the existing duty was right and appropriate. It is possible that circumstances might arise in future whereby charging on a uniform tariff across the country no longer represented a fair or equitable distribution of the cost of providing the gas and that it was right, in order to avoid unfair discrimination between consumers, that a supplier could charge according to different tariffs in different areas. We believe that it is essential to provide flexibility in the Bill to allow for such a situation, and I cannot therefore agree to accept the amendment which might in itself result in undue discrimination against certain groups of consumers in the circumstances I have described. In view of the explanation I have offered, I invite the noble Lord to withdraw the amendment.

Baroness Gardner of Parkes

I should like the Minister to explain how the amendment, if passed, would affect people in areas where at present there is no gas. I know many people in country areas who would like to have a gas supply but who have no hope whatever of getting that supply. Their only hope might be through agreeing to a more expensive supply, so making it worthwhile for someone to run a gas pipe to those areas. I am wondering whether the amendment, if passed, would prevent such an action.

Lord Gray of Contin

The effect of the amendment would be to remove the existing provision in Clause 14(1) which allows tariffs to vary in different areas, cases and circumstances. I would have thought that there could be certain areas of the country where it would be very expensive to provide gas and that, even if there was a supplier prepared to provide gas, this could rule out any possibility of supply to those areas.

5.30 a.m.

Lord Bruce of Donington

I am sorry that the noble Lord does not see fit to pass the amendment. The noble Lord knows perfectly well that a supplier is not required to supply where it is uneconomic or unreasonable. That point is covered. We need not raise that hoary horse again. The point about it being more than 25 metres away is covered. Here the publicly owned corporation finds itself able, within very small margins indeed, to charge a standard tariff all over the country with very little discrimination between areas. I believe that there are differing standing charges in three broad areas: the general, the northern and the midland. Otherwise, there is a standard tariff. The noble Lord again makes the point that we must have flexibility. Surely he wants to give the supplier the option, where the supplier thinks that he can get a little more in certain circumstances, to vary from the norm.

I should like to deal with the other point with regard to Clause 14 generally. In his previous discussions on this matter the Minister, in referring to Clause 14, has consistently referred to the powers of the director. If the noble Lord reads through Clause 14 from top to bottom he will find no mention of the director at all. Subsection (1) says: Subject to the following provisions of this section, the prices to he charged by a public gas supplier for the supply of gas by him shall be in accordance with such tariffs as may be fixed from time to time by him". There is no mention of the director at all. That, coupled with this delightful little sentence that has been slipped in, to give what the noble Lord describes very pleasantly as flexibility, now throws an entirely new light on the price formula itself and gives some indication as to why the term "maximum average tariff" has been used in the formula that we shall be discussing presently. It begins to make it all look extremely fishy. That is probably the reason why the Daily Telegraph was moved to observe that it will be a very relaxed control in terms of the authorisation.

Baroness Gardner of Parkes

I think that the noble Lord, Lord Bruce of Donington, did not understand my point. I felt that if a supplier was able to supply only at the present rate there might be people who would like gas, would be willing to pay a little more to have gas, and yet have no hope of ever getting it.

If his amendment provided for a more equal and continuing price for those presently on a supply, or who can be directly connected to one, that is different. But if there is not a provision to enable someone to run a completely new supply to a part of the country which was totally uneconomic at the present charge, it might preclude the expanding use of gas to areas where people would like to have it. That was my point.

Lord Bruce of Donington

I am grateful to the noble Baroness. If such conditions exist I would have no objection to a special clause or provision in the Bill dealing with that specific case. I object to the generality of the whole provision being destroyed simply because it might inhibit two or three persons from paying over the odds. They should be covered separately; that is a much more sensible, logical and fair way of proceeding.

Viscount Trenchard

In Clause 14(3), for instance—and there are other phrases in Clause 14—it says quite clearly that a supplier: shall not exercise any undue discrimination against any person or class of persons". If he did so the director would come in automatically.

Lord Gray of Contin

The arrangments for fixing tariffs under Clause 14 of the Bill are similar in every respect to those under Section 25 of the 1972 Act. The provisions do, of course, permit tariffs to be framed to reflect different areas, cases and circumstances. But British Gas has chosen to apply a uniform charge for each therm of gas supplied to credit meter customers, but to vary the standing charge to reflect the cost of supply on a regional basis.

The arrangements for pre-payment customers are slightly different. In addition to regional variations in the standing charge, there are also minor variations in the higher rate per therm which is charged on the first 39 therms, which permits British Gas to recover the full fixed costs in the case of such customers.

These differences also reflect the need to match the overall tariff with the cost of supply. There are also some special cases, particularly in Scotland where there are isolated networks not connected to the national transmission system and where the charges in some cases differ from the national tariffs. I shall refer to them again.

I can confirm that it is the intention of British Gas to continue its present policy of fixing tariffs. The duty at Clause 14(3), to which my noble friend referred, not to show preference or to discriminate in fixing tariffs, ensures that the tariffs in place must be fair to customers and share out equitably the burden of recovering the costs of supply. Noble Lords seek to require in the Bill that tariffs should be uniform across the country. While we are now in the happy position that such uniformity at least as regards the rate per therm is consistent with the obligation for tariffs to be fair, we cannot guarantee that this will remain the case for ever.

The noble Lord, Lord Stoddart, quoted as an example the electricity boards and the variations in the price of electricity which takes place through those boards. Even within the boards controlled in England and Wales, which are all controlled by the one body—the Central Electricity Generating Board —there are differences. Of course there are quite substantial differences in Scotland I am happy to say on this occasion to the advantage of the Scots, although that is not always so. Indeed, it even varies from the South of Scotland to the North of Scotland. The North of Scotland Hydroelectric Board provides the cheapest electricity in the whole country, and the South of Scotland Electricity Board comes second.

The noble Lord raised the point about the director and Clause 14. The obligation to fix tariffs in the way set out in Clause 14 is enforced by the director under the provisions set out in Clause 28 and the definition of "relevant requirement" in subsection (8) of that clause.

Those were the main points which the noble Lord raised which I wished to answer I am afraid that I cannot change my view or what is said initially. I am not able to accept the amendment.

Lord Stoddart of Swindon

I must say that I find that a very disappointing reply. The noble Lord must not try to catch me out on electricity prices, because he is talking about something which is quite different. The 12 area boards in England are separate boards. They are not one monopoly, as indeed are the South of Scotland Board and the North of Scotland Board; they are separate entities. The price of electricity charged by the CEGB to the 12 area boards is a standard price, and any variations which occur are because of different costs within the area boards. That is the position with relation to electricity. But with relation to gas it will be a monopoly. There will be no separate area boards; there will be no separate distribution areas or separate companies. The position here is quite different.

I am even more worried and frightened now about the situation than I was before I moved the amendment. What I thought the noble Lord was going to be able to do was to give me reassurance and say, "You really need not worry about that. You have misread the Bill. It is our intention that there should be virtually standard prices throughout the country because we believe that is right". But instead the noble Lord has told me the reverse. He has now told me that the Government envisage circumstances where there will be perhaps significant variations in prices in the future throughout the country, and various parts of the country may well have to suffer.

What I said in my opening remarks was quite correct. Some areas of the country, perhaps the poorest areas of the country, will be hard hit as a result of Clause 14 if it is not amended. Under those circumstances, I would be failing in my duty as a Member of this Committee if I did not press this matter to a Division. It is necessary that we test the feelings of the Committee. It is a pity that we did not have the opportunity to see the Minister's reply and circulate it to people in the nether regions of this island. If we had circulated the Minister's reply to Scotland—

Lord Campbell of Croy

Scotland is not a nether region.

Lord Stoddart of Swindon

I am sorry; I did not mean it in the sense that the noble Lord, Lord Campbell of Croy, has taken it. It is a remote region from London—let me put it that way—but there are other regions as well. Had they been able to see the noble Lord's reply I feel sure that noble Lords from Scotland and particularly from Wales, and perhaps Cornwall as well, would have been here in the Committee to vote, and not to vote for the Government but for the amendment. Nevertheless, I feel it only right that I should test the feeling of the Committee.

5.43 a.m.

On Question, Whether the said amendment (No. 92) shall be agreed to?

Their Lordships divided: Contents, 30; Not-Contents, 59.

DIVISION NO. 11
CONTENTS
Airedale, L.	Ponsonby of Shulbrede, L.
Blease, L.	Prys-Davies, L.
Brooks of Tremorfa, L.	Raglan, L.
Bruce of Donington, L.	Roberthall, L.
Chandos, V.	Seear, B.
Cledwyn of Penrhos, L.	Shepherd, L.
Crawshaw of Aintree, L.	Stedman, B.
Dean of Beswick, L. [Teller.]	Stoddart of Swindon, L.
Diamond, L.	Taylor of Blackburn, L.
Ezra, L.	Tordoff, L.
Gallacher, L.	Turner of Camden, B.
Graham of Edmonton, L. [Teller.]	Wallace of Coslany, L.
	Wells-Pestell, L.
Hanworth, V.	White, B.
Hatch of Lusby, L.	Williams of Elvel, L.
John-Mackie, L.

NOT-CONTENTS
Abinger, L.	Hooper, B.
Belstead, L.	Kaberry of Adel, L.
Bolton, L.	Kimball, L.
Brabazon of Tara, L.	Kitchener, E.
Brougham and Vaux, L.	Long, V. [Teller.]
Caithness, E.	Lucas of Chilworth, L.
Cameron of Lochbroom, L.	McAlpine of West Green, L.
Campbell of Croy, L.	Marshall of Leeds, L.
Cathcart, E.	Maude of Stratford-upon-Avon, L.
Clinton, L.
Coleraine, L.	Mersey, V.
Cork and Orrery, E.	Middleton, L.
Cowley, E.	Monk Bretton, L.
Cox, B.	Montgomery of Alamein, V.
Davidson, V.	Mottistone, L.
Denham, L. [Teller.]	Norrie, L.
Eden of Winton, L.	Orkney, E.
Elliott of Morpeth, L.	Pender, L.
Elton, L.	Rankeillour, L.
Gardner of Parkes, B.	Sanderson of Bowden, L.
Gibson-Watt, L.	Sandford, L.
Glenarthur, L.	Sandys, L.
Gray, L.	Skelmersdale, L.
Gray of Contin, L.	Strathclyde, L.
Gridley, L.	Swansea, L.
Hives, L.	Swinfen, L.
Holderness, L.	Teviot, L.

Torrington, V.	Ullswater, V.
Trefgarne, L.	Vaux of Harrowden, L.
Trenchard, V.

Resolved in the negative, and amendment disagreed to accordingly.

5.52 a.m.

Lord Gallacher moved Amendment No. 93:

Page 14, line 15, at end insert— (" ( ) Before fixing such tariffs the supplier shall seek the comments of the Gas Consumers' Council in such a way that sufficient and reasonable time is given for consultation.").

The noble Lord said: If Amendment No. 93 had been grouped with 91A, we would have spoken to it at that time. It is not so grouped and therefore I feel it appropriate to say something about it now. It is doubly appropriate because I think the information that we got during the discussion on Amendment No. 91A must have come as a very considerable surprise to Members of the Committee, because it is fairly clear from what the Minister said at that time that if the Gas Consumers Council is to have no standing in the matter of prices, not even in a consultative capacity, the value of the Gas Consumers Council has been depreciated more than somewhat. Indeed, at an earlier stage of the Bill the Government made fairly strong claims for the power of this body and for its influence on behalf of consumers following the creation of the private monopoly.

I think that to deny the Gas Consumers Council even a consultative role in this vital matter of prices is quite unacceptable, and even though the Committee has in effect already agreed with the proposition that it should not have any standing in this matter I think it is important to use Amendment No. 93 as an opportunity to give notice that certainly at the next stage of the Bill a further challenge will be mounted. The hope must be that in the country as a whole, between now and Report stage, the information about the role of the Gas Consumers Council will percolate throughout the consumer movement so that it becomes fully aware just how unimportant the body is likely to become if the Bill is not amended.

My noble friend Lord Bruce of Donington queried—as I would have queried—the reference to the director in Clause 14 of the Bill; that is to say, the standing of the director so far as tariffs were concerned. The Minister has told us that the position is covered by the reference to the director in Clause 28. However, the point I should like to make is that if price increases are in accordance with the tariff and if thereafter the director agrees to those increases, the possibility of very considerable friction between the Gas Consumers' Council and the director must surely arise, if not in the short term certainly in the long term. In order to avoid the possibility of that friction and in order that the Gas Consumers' Council should feel that it has some standing in this matter, reconsideration should be given to the council's role so far as prices are concerned, as is proposed in Amendment No. 93.

This is a very complex matter and it has been made more complex by the decision taken just now, which allows the gas supplier to vary tariffs on a regional basis. Here again, we are in a comparatively new ball gams as regards gas prices. It may be fair, it may be equitable; but it is certainly going to be difficult for consumers to understand that the gas supplier has this power and is likely to make use of it. I suggest that this further emphasises the importance of the consultative role in pricing matters of the Gas Consumers' Council.

Just how complex this can be I will illustrate to your Lordships by quoting from a leaflet which came to our house the other day with the gas bill. At an earlier stage the noble Lord, Lord Belstead, referred to this in part; but of course he referred to that part of the information which was favourable to the point of view he was expressing at the time. The leaflet is dated May 1986 and it comes from British Gas (shown in heavy type) South Eastern (shown in very light type). I am quite convinced that one of the by-products of this Bill will be the disappearance of the regions, despite the assurances we were given that they are not to disappear. It says: The standing charge in your gas tariff is being reduced by £1 a quarter". That is the information the noble Lord, Lord Belstead, conveyed to us last night. When I read that, I threw my tartan tammie in the air. Then I read on. It said: At the same time the price per therm will be increased by 1p". So I got my tartan tammie back again. The effect of the changes will be to increase an average domestic gas bill by less than 2 per cent.".

Then I read further in this leaflet, which finally told me that, the reduction in the standing charge has been made possible partly because of greater efficiency and partly because the standing charge rebate scheme is being withdrawn. No rebate will be available for gas used after the first meter reading on or after May 1st Before you know whether you are better off or worse off, you have three calculations to make. First, you have reduced your standing charge by £1. Secondly, you go to the bill for the corresponding quarter of last year and increase the price of the gas you burned in that quarter by 1p per therm, to see what the effect of that is. Finally, if you are not a substantial user of gas, as many old people are not, then you have to see what the effect is of withdrawing the standard charge rebate scheme. At the end of that computation you know whether you are better or worse off as a result of the generosity of British Gas, South Eastern Division, towards its customers.

I mention this to illustrate the complexity of this issue of prices and to press once again for reconsideration of the provison in the Bill to deny the Gas Consumers' Council the opportunity even of being consulted on the matter. Therefore I feel that Amendment No. 93, which seeks simply to invite the comments of the Gas Consumers' Council, for the benefit of the supplier, in such a way that sufficient and reasonable time is given for consultation, is an entirely proper amendment, and one which I think ought to have the support of this Committee. I beg to move.

6 a.m.

Lord Hatch of Lusby

The Minister cannot use the excuse on this amendment that he has only had short notice to consider it, because it was put down well before Amendment No. 91A. It seemed to me that in professing to argue the case over Amendment No. 91A the Minister was using a circular argument. What he appeared to be telling the Committee was that the director has complete responsibility for fixing the tariff and that therefore the Gas Consumers Council can have no role in it because it is the director who fixes the price. But what he has never done is say why he considers that the Gas Consumers Council is not a proper body to be consulted by the director before that price for the tariff is fixed.

As I understand it, the whole case of this Government right from the beginning of the Bill for the privatisation of the gas industry is that it will spread control of this monopoly industry on a wider basis than it has been under nationalisation. But surely a crucial part of that control is the role of the consumer, and very properly the Gas Consumers Council has been created in order to represent that role. But as the Minister himself admitted during his discussion on the earlier amendment, price is an essential part of the consumer interest. What he has not said is why, if price is an essential part and if he sets up a Gas Consumers Council, it is not proper that the director should be instructed to consult with that council before he fixes the tariff.

I want to ask him two questions. First, whom will the director consult? No single Person will fix a tariff. Obviously he must have some financial experts, some technical experts. He will consult people. Why is it that the Minister is so obdurate in refusing to agree that the consumer council is a perfectly legitimate body and, in fact, an essential body to participate in the fixing of that tariff?

Secondly, the Minister said in his discussion of Amendment No. 91A that the consumer council would be consulted when tariffs were varied. If the consumer council is to be consulted when tariffs are varied surely it would be logical for the council to be consulted when the tariff is fixed. Where is the difference? The Minister, despite the probing on Amendment No. 91A, has never told us what is his objection to the consumers having an advisory role, which will not in any way detract from the final authority of the director, but will be an advisory role when the director is making that decision as to what should be the original tariff. I think that the Committee is entitled to hear from the Minister some valid reason for his objections, because as matters stand now all he is saying is that it is not in the Bill and therefore it is not worth considering.

Lord Gray of Contin

We have already discussed the question of the consumers council and we shall have further opportunities to discuss the duty of the council when we deal with amendments to Clause 32. We shall have opportunities to discuss the power of the council when we deal with Clause 33.

There is very little that I can say on this amendment that goes further than the reply that I gave to Amendment No. 91 A. The two amendments are very similar indeed. That, I assume, was why on the list which I had they were grouped, though I am not complaining about that. I should like to point out that the director's role in relation to prices will be to ensure that British Gas will keep within the maximum set by the formula. In ensuring that this happens properly there will be no need for the director to consult the consumers council. He will be given all the information he needs under the provisions of the authorisation.

With regard to the consultation with the council, when we come to Clause 33 we find: The Council shall have power to investigate any matter (not being a matter which it is its duty to investigate under section 32 above) which—

1. (a) appears to it to be a matter to which subsection (2) below applies",

and so it goes on. So the council will have a perfect right to investigate any matter which is referred to it. But that is a matter different from the director's role in fixing the tariff in the first place.

Under the provisions of the authorisation the director has plenty of advice available to him. The advice which he would receive from the consumers council is not necessarily the kind of advice which he particularly needs in order to fix the tariff. If after the tariff is fixed it is referred to the consumers council by any group of people which is unhappy about this, the council will have a perfect right to investigate. This is laid down in Clause 33, to which we shall come in due course. That makes no difference to the role of the director in the first instance.

The noble Lord, Lord Hatch of Lusby, asked me why I am so opposed to the consumers council being involved at the beginning and being consulted before the director makes his tariff judgment. I have no particular reason for not agreeing with him on this other than that I do not see that that is the role of the consumers council. If the consumers council has the matter referred to it by groups of people who are dissatisfied, that is the time for the consumers council to come in. But I see no necessity to bring it in in the first instance. We shall no doubt return to this point in due course.

As to the other comments that were made, I am afraid that I really cannot add to what I said in reply to the earlier amendment which related to exactly the some subject.

Viscount Trenchard

Will my noble friend confirm one point? If the director general wished to take advice from the consumers council before setting the tariff, I imagine that there is nothing on earth to stop him. In employing a director general we are employing somebody of considerable calibre. There are obviously a mass of other matters besides the consumer viewpoint on the setting of the tariff initially, but I imagine that there is nothing to stop a sensible director general consulting the consumers council before he fixes it.

Lord Gray of Contin

My noble friend is absolutely correct. Indeed, when I answered the noble Lord, Lord Diamond, earlier, I said that there was nothing to prevent the director from taking whatever advice he wished, but that I was not prepared to see that written into the Bill.

Lord Williams of Elvel

Will the Minister confirm that his response is subject to Clause 42 of the Bill, concerning disclosure?

Lord Gray of Contin

No, my response had nothing to do with Clause 42. I was responding to the questions that were asked of me, and I related them to Clauses 32 and 33, which deal with the council.

Lord Williams of Elvel

I was referring to the Minister's response to his noble friend on the question of the director general being able to consult whoever he wanted. That is of course subject to general restrictions on disclosure of information. That is the point to which I was trying to alert the noble Lord.

Lord Gray of Contin

I am sorry; I misunderstood the noble Lord. That is obviously correct.

Lord Graham of Edmonton

The Minister puzzles me, because if he understands what we are trying to say then surely he must understand that in no way does one wish to whittle away at the ultimate responsibility and power, or at the necessity for a decision to be taken in the way that the Bill lays down. However, we are concerned about the stature and standing of the consumer council.

As the noble Viscount, Lord Trenchard, quite rightly pointed out, the director will be a man of considerable substance, importance and knowledge. So, too, will the people on the council be, one assumes, men and women of intelligence, experience and perception. We are not about building up an alternative block of power: we are about giving a meaningful role to a very important body of people. There is a danger of that body being looked upon as a sham and as a tame poodle.

The matter about which the consumer will be more interested than any other is the price of the goods. He will be interested in the quality of the service, too, but mainly the price of the goods. All the amendment says is that the supplier shall seek the comments of the council. Big deal! What is the noble Lord giving away? The amendment says that before the tariff is fixed the views and comments should be sought of a group of people of importance and intelligence, who are by their very nature a little nearer to the consumer's point of view than is the director himself.

Frankly, the Minister is avoiding the main purport of the amendment, which is to give increased stature to the council. He leaves in my mind and in the minds of many people outside this Committee a suspicion that the Government have no intention of providing that very important body with work of substance for it to do. I cannot for the life of me understand why the Minister is not prepared to provide the director with a responsibility to seek the council's views or comments.

The Minister says that there is nothing wrong with the council taking on board a complaint, grievance or request after the director has arrived at his view. What a way to run a business! What a way to run a consumer advisory body! One must wait until someone complains. That puts one in one's place. One's views are not respected or sought until someone complains. If there is no trigger or mechanism by which the views of the consumers council will be sought, then even an intelligent discussion—not a complaint—about the factors that will lead to a change in the tariff will not be possible.

This is a very modest amendment. Certainly people outside the Committee will share my view that the Minister is reducing the stature and the work of the consumer council if he resists it. I beg to move.

6.15 a.m.

Lord Diamond

I did not intend to take part in this discussion because I had the privilege of discussing an earlier amendment on much the same point. But if I am not mistaken I fear that the Minister is misleading the Committee.

Fortunately we have once more had an intervention from the noble Viscount, Lord Trenchard, who always adds greatly to our discussions. He has based the whole of his case of the fixing of the tariff by the director. He says that the director is a man of substance and would therefore take sensible steps and, if necessary, consult the consumer council. He must be reading a different clause from the one I am reading and have quoted from earlier. I am reading Clause 14 which says: Subject to the following provisions of this section, the prices to be charged by a public gas supplier for the supply of gas by him shall be in accordance with such tariffs as may be fixed from time to time by him". I do not see anywhere in the clause where it says that the prices are fixed by the director. The prices are fixed by the gas supplier.

The noble Lord the Minister, when he was appealed to by his noble friend, said "Yes, of course my noble friend is right." But I think that once more his noble friend is wrong, and I ask the Minister to be absolutely clear on this point and let the Committee know whether what he previously said is right or whether what he now says is right; namely, that this clause is wrong and that the charge is not fixed by the supplier, as the clause plainly says, but is fixed by the director as is imagined to be the case by the noble Viscount, Lord Trenchard. We need to have an absolutely clear answer to that question.

The noble Lord cannot say with regard to this amendment, as has already been pointed out, that his advisers have not had time to look into the matter and advise him. The amendment has been tabled for a considerable time and we should now like to have a clear answer.

Lord Gray of Contin

I have already said that I had no objection to the amendments not being grouped. I know that this amendment was tabled before the other amendment and I am perfectly happy with that.

I can certainly give the noble Lord the answers he seeks. As regards Clause 14, I did correct the position when I answered the previous debate and said that the supplier comes in at Clause 14 but the director comes in through Clause 28. I made that clear afterwards.

I certainly had no intention of misleading the Committee, but the note which I received from my advisers was not as clear as it might have been and if I did in any way mislead the Committee I apologise for doing so. However, I remind the noble Lord that I put right the matter when replying to the next amendment.

I am afraid that I cannot agree that there would be benefit in confusing the role of the council and the director in the way proposed by the amendment. We want a strong, effective director with full powers to control the industry. That is what we have provided for. The consumer council will aid and assist him in areas not concerned directly with the enforcement of obligations, which is right and proper. But to confuse the two roles would weaken both and lead to less protection for the consumer.

The consumer council has many useful roles to perform and we shall come to them in due course, but I think that it would be a great mistake to confuse those roles with the role of the director. In reply to the noble Lord, Lord Graham of Edmonton, so far as the Government are concerned there is certainly no intention to weaken the position of consumer councils at all. We see them as very important bodies. As at present, they will consist of people who are highly respected in the areas in which they operate and who perform a very useful role indeed, but that role must not be confused with the role of the director, which is quite separate.

Baroness Seear

The last thing that I want to do is prolong this discussion—goodness knows, it has gone on for long enough—but we really must get on to the record that the Minister (I say this with the greatest respect) is deeply confused about this matter, because it is a theory of consultation that is practised throughout industry that it does not interfere with the executive responsibility of the director. It is consultation and not negotiation. There is an absolutely fundamental difference and there is no infringement of the proper role of the director. He is only asked to seek comments. That is consultation. He is not asked to negotiate. He has the final say. It has nothing to do with infringing the role of the director. We really must get that clear and on the record.

Lord Gray of Contin

It is absolutely clear. There is no confusion about it. The noble Baroness is perfectly correct, and I am happy for it to be on the record. There is no confusion about it at all. The confusion would come in if we were to accept this amendment and confused the role of the director with that of the consumer council. The two must be kept absolutely separate.

Lord Diamond

I am sorry that I have to come back to this point, but a short time ago when I asked the noble Lord the Minister whether it was the case that under Clause 14 the tariff was fixed by the gas supplier he said, yes, it was fixed by the gas supplier but under Clause 28 it was the director who fixed it. That is not the case.

I know that we have not yet arrived at Clause 28, but I must ask the Minister to reconsider what he has said. Clause 28 merely gives the director, when he is satisfied that a public gas supplier is contravening or has contravened any relevant condition, the power, by a final order [to] make such provision as is requisite for the purpose of securing compliance with that condition That is all that Clause 28 provides.

So I come back to the point that it is not the director, an independent person, who fixes the tariff but the interested gas supplier. It is because it is the gas supplier who fixes the tariff that it is essential for the consumer council to be brought in by way of consultation. It is a very simple question, and I am putting to the Minister that he has not accurately informed the Committee.

Lord Gray of Contin

I certainly have not been misleading the Committee, but the noble Lord has been trying—not trying; I apologise: he has inadvertently been confusing the Committee. In fact, he is tying us all in knots. If the noble Lord will look at Clause 28, he will see on page 33, at line 36: 'relevant requirement', in relation to a public gas supplier, means any requirement imposed on him by or under section 9(1) or (2), 10(1), 11(4), 12(1) or 14(1) or (3) above or any provision of paragraphs 1 to 4 and 14 of Schedule 5 to this Act"; and we shall come to Schedule 5 in due course. The two should be read together.

Clause 14, which relates to the fixing of tariffs, and Clause 28 should be read together. Clause 14 relates to the supplier and Clause 28 to the director:

where the Director is satisfied that a public gas supplier is contravening, or has contravened and is likely again to contravene, any relevant condition or requirement, the director shall by a final order make such provision as is requisite for the purpose of securing compliance with that condition or requirement". The director is very much involved unless he is wholly satisfied with the tariff which has been fixed by the supplier under Clause 14.

Lord Diamond

I am waiting for the noble Lord the Minister to say whether or not the gas supplier fixes the tariff. If he has got it wrong, and in fixing the tariff has contravened a certain condition, we all know that under Clause 28 the director has certain powers. It is a simple question. Who fixes the tariff? In Clause 14 it says in plain English that it is the gas supplier.

Lord Gray of Contin

I have already answered the noble Lord.

Lord Diamond

No.

Lord Gray of Contin

Yes, I have already given the noble Lord a full answer.

Lord Stoddart of Swindon

Answer "yes" or "no".

Lord Bruce of Donington

I am not trying to pull a fast one on the noble Lord, but will he concede the possibility that the drafting of Clause 14 in relation to Clause 28 has been mistaken? If the noble Lord had put in Clause 14 anything that associated it with another clause, that association should have been written into the clause. We have one clause which is in conflict with other clauses. That is not necessarily fatal to the Bill. It often happens. Bad drafting can always happen. There is no reason why the noble Lord should be so apologetic and try and bluff his way out by referring to another clause which deals with enforcement. Why does he not say, "I am not quite happy about this yet. I should like to take it away. The intention of Clause 14 is to make the director responsible. It does not specifically do so. I shall introduce a Government amendment that does what I want it to do."? There is nothing wrong in that.

Lord Belstead

On this side of the Chamber I am responsible for the Bill, and I think that we have said all that we are going to say on this amendment.

Lord Gallacher

If that is the Government's final position on this clause at this stage, we find the answers unsatisfactory. There is obviously no sympathy with the concept of giving the Gas Consumers' Council any role as regards prices. It has also emerged that the supplier is entitled to fix the prices. Provided that he does so in accordance with the tariff, and unless there is any infringment of that tariff, the director has no jurisdiction in the matter.

We have opened up deficiencies in the Bill over the whole area of prices which certainly alarm Members on this side. If it had not been for the fact that we had already tested the principle of giving the Gas Consumers' Council a role as regards prices, I should have tested the Committee's opinion on Amendment No. 93. I shall not do that, but on Report we shall return to the issue and, in the meantime, we shall regard it as our duty and our privilege to give the widest possible publicity to the Government's position in view of what we regard as the totally unsatisfactory role not merely for the Gas Consumers' Council but, as it now emerges, for the director himself as regards prices. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6.30 a.m.

Viscount Hanworth moved Amendment No. 93ZA: Page 14, line 15, at end insert ("(1A) The tariffs referred to in subsection (1) above shall not apply until the Director has certified that he is satisfied that they are fair and reasonable having regard to the provisions of this section and of Part 1 of this Act generally".).

The noble Viscount said: We are all concerned that the tariffs should be properly fixed in the best possible way. But there is a doubt—and it has been shown in the past 10 minutes or so—as to exactly what are the powers of the director. This amendment is an attempt to state clearly what they are, and I read it out: The tariffs referred to in subsection (1) above shall not apply until the Director has certified that he is satisfied that they are fair and reasonable having regard to the provisions of this section and of Part 1 of this Act generally". As there is a doubt, that would clear it up. I think that it is in line with what the Minister has been trying to tell us, and there is great merit in inserting the amendment in the Bill. I beg to move.

Lord Gray of Contin

In proposing this amendment the noble Viscount raises the important question of the basis for setting tariffs. Condition 3 of the draft authorisation will set a maximum price by means of a pricing formula. That formula relates changes in tariffs to changes in the actual cost of gas and the rate of inflation less the efficiency factor X. It has been designed to control tariffs in a fair and reasonable manner. It also ensures that British Gas has a strong incentive to cut the costs which are within its control and that customers benefit from the expected efficiency savings.

The director will be responsible for monitoring and enforcing that formula. The draft authorisation also provides for his direct involvement in setting tariffs in certain circumstances where the maximum price set by the formula has been exceeded. The director will also be responsible for enforcing the requirements of Clause 14, so he will have to be satisfied that tariffs are in compliance with the requirements of that clause, including, for example, that they are not discriminatory. To go further than that and to replace that system of clearly established rules by the general requirement that the director be satisfied that tariffs are fair and reasonable would not produce satisfactory results. It would, in effect, transfer the responsibility for pricing to the director.

The incentive for efficiency which the price control formula brings would be lost. In its place there would grow a cumbersome and bureaucratic system, as the justification for each and every price change had to be scrutinised. I believe that our proposals for controlling tariffs represent proper protection for the customer. The rules are clear and fair, and the proposed amendment could not benefit customers. Therefore, I trust that noble Lords will withdraw it.

Baroness Seear

Has the Minister not now said that in certain circumstances the fixing of the tariff would be transferred to the director if he was not satisfied, and so on? If it is to be transferred to the director, it must be transferred from someone. That someone, I understand, is the supplier. That is the point that we have been trying to get clear. The supplier therefore fixes the price initially. That is what we were told he did not do. So he does fix the price: that is what we have been trying to get clear.

This is no political point. We are trying to understand. The noble Lord has now said that in certain circumstances it is transferred from him. It can be transferred from him only if he has it, and so he must have it in the first place in order that it is possible for it to be transferred. Am I now understanding how we should read the Bill? The supplier fixes the tariff. It is only after then that, if the director is not satisfied, he comes in. That reconciles Clauses 14 and 28, as I understand it.

Lord Gray of Contin

The supplier must set the tariff according to the provisions of Clause 14, and the enforcement of this obligation is dealt with by Clause 28. That is the relationship between Clauses 14 and 28 and between the supplier and the director.

Lord Bruce of Donington

I am sorry to have to reproach the noble Lord, but he has confused himself now. When he was dealing with Amendment No. 93ZA he said that he objected to it—this can be read in Hansard tomorrow—on the ground that it transferred the responsibility of fixing the tariff to the director. When he was explaining Clause 14 in its entirety—again, this can be read in Hansard—he was endeavouring to convince the Committee that Clause 14 already provided for the director to fix the price. I am in the recollection of the Committee and that of Hansard, because that is exactly what he said. When we said that under Clause 14 it was the supplier who fixed the price, the noble Lord said, "No, it is not; the director has the responsibility of fixing the price". Now the noble Lord objects to Amendment No. 93ZA on the ground that it would give the responsibility to the director, which he says is provided by Clause 14 in any event. Really! Such contributions do not contribute to clarifying the Bill in any way. Why does the noble Lord not take a look at the entire clause again?

Viscount Hanworth

It is clear from what has been said that we should look at this again before Report. It may be that the Bill is just not clear, in which case some amendment is required. One would hope that the Government will put it forward. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Stoddart of Swindon moved Amendment No. 93A.

Page 14, line 20, at end insert— ("(2A) A standing charge fixed by a public gas supplier shall in any one year rise no higher than the retail price index. (2B) Before a standing charge is fixed by a public gas supplier he shall notify the Director who shall investigate the components and levels of such a charge. (2C) Where in the light of such investigation the Director is satisfied that—

1. (a) the services provided and paid for by the standing charge have been reduced; or
2. (b) the public gas supplier has achieved significant cost reductions in the components making up such a charge,

then he may give direction to the public gas supplier to reduce standing charges or to increase them by amounts in any one year less than the increase in the retail price index.").

The noble Lord said: We have already had a debate on standing charges with Amendment No. 62A, when the noble Lord, Lord Belstead, was good enough to make a concession; and, of course, on Amendment No. 84B. He has said that he will see whether he can amend the wording of Clause 12 on the authorisation, which is a welcome concession. Unfortunately, he told me in advance that this amendment will be resisted. That is most unfortuntate because the amendment differs from Amendment No. 62A to the extent that it seeks to provide that standing charges in any one year do not increase at a greater rate than the retail prices index, and requires the director to be notified before any standing charge is fixed so that he may investigate the components that make up the standing charge. If he believes it relevant, he can direct that the standing charges shall be reduced or increased by a lesser level than the RPI.

There are good reasons why the amendment should be supported and should be accepted by the Government. It is all too easy to load expenditure on to the standing charge. If this is done, it operates to the detriment of users of small quantities of gas, who are usually among the poorest of the population.

As the noble Lord and all Members of the Committee know, there is already much public opposition to standing charges, especially among the elderly who feel that they are helping to subsidise consumers of large amounts of gas. It is essential, therefore, that the director should be able to show that the level of standing charges is fair and reasonable to all consumers. He should also be able to direct reductions in that charge where he finds that significant cost reductions have been achieved in any of the elements that make up the charge. For example, large cost reductions may be possible in metering charges through the adoption of centralised meter reading. Clearly, consumers should share in the benefits through lower standing charges. We are also told that privatisation will lead to lower administration charges, and since these are bound to be reflected in standing charges consumers should be entitled to benefit should these lower administration costs really come about, which I very much doubt.

I remarked in the previous debate that standing charges are still a live issue. They have become less of a live issue because, in relation to bills, under the publicly owned gas corporation they have not gone up in real terms due to public pressure. I repeat, however, that there are fears that when British Gas is privatised there will be the temptation to load costs on to standing charges. I believe that the amendment that I have moved will help and, if adopted, will certainly bring about fairness and an understanding among the public of what the standing charges mean and the realisation that they will be adjusted in accordance with any reduction made in the overhead charges of the privatised British Gas Corporation.

Lord Gray of Contin

We have debated standing charges on earlier amendments and we have explained that we believe the right approach is to prevent standing charges rising faster than inflation. This is the requirement set out in Condition 4 of the authorisation, and I note that the noble Lord's amendment takes the same approach. My noble friend agreed to reconsider the wording of the condition so that the obligation may be framed in a more direct way which avoids the use of the phrase "best endeavours". The phrase may have a strong legal compulsion, but I accept that it rings oddly to the lay reader, and I am of course anxious to avoid any misunderstanding when we agree on the substance.

I have explained that the RPI-X+Y price formula set out in the draft authorisation covers both the standing charge and the rate per therm. Under the formula, there will be a strong incentive for British Gas to achieve a real reduction in all the costs under its control, whether they are recovered through the standing charge or through the rate per therm. Customers will benefit from increased efficiency through the efficiency factor in the formula.

Further, I have explained that putting the limit on increases in the standing charge explicitly in the Bill would limit the flexibility of the director to propose adjustments to the regulatory controls in the light of changing circumstances. This is why the Government propose to set out the financial regulatory requirements in the authorisation, and have put in the Bill a mechanism for making amendments. The amendment would introduce unnecessary and undesirable inflexibility into the controls over standing charges and I trust I have explained why it would be better to leave the controls in the authorisation.

But this amendment attempts to go further and provide that the director shall investigate the components and levels of such a charge. Such a provision is unnecessary. The authorisation gives the director full powers to investigate such matters as the make-up of the standing charge and he may call for any information he believes may be necessary. If he considered that the controls of standing charges were producing results contrary to the interests of consumers he would be able to take steps to rectify the situation by initiating a modification to introduce a better form of control.

The third subsection of the amendment provides that if there have been significant cost reductions in the components making up such a charge, then the director may intervene. Such a power would, be quite contrary to the Government's approach in setting out a regulatory system for British Gas. The Government's intention has been to ensure that the rules for the setting of prices are clearly stated at the outset so that British Gas and consumers can understand the nature of the obligations. Where adjustments to the system are needed then we have provided where necessary for a proper independent examination of the question by the MMC. It has not been part of our approach to subject the privatised British Gas to the kind of day-to-day intervention which has been such a bad feature of its nationalised industry past. I believe that this amendment risks recreating such a system and I cannot therefore recommend it to the Committee.

6.45 a.m.

Lord Bruce of Donington

Before the noble Lord sits down, may I again draw his attention to his text from which he has just so kindly read. He said that if the director found it necessary to alter the system of control he could do so. If the noble Lord will refer to the words that he used he will find that he said words to that effect. Are we to understand that it lies within the discretion of the director to amend the formula? The noble Lord has been treating the formula as something which is eternal and which is a safeguard against consumers. Are we to understand that the director himself can amend the formula already contained in the authorisation? If so, we should know more about it.

Lord Gray of Contin

No. The director cannot change the formula. The formula can only be changed if the authorisation were changed.

Lord Bruce of Donington

That is a system of control.

Lord Gray of Contin

Not by the director. The director cannot change the formula.

Lord Stoddart of Swindon

I must confess that I am now more confused after that reply than when I started. As my noble friend Lord Bruce of Donington has just pointed out, the noble Lord, Lord Gray, seems to be saying one thing one moment and something different the next. He seemed on the one hand to be saying that the director would be able to intervene and could alter the method of control. Yet in the next breath he says that he cannot alter the method of control because that is sacrosanct within the authorisation. The noble Lord cannot blame noble Lords for being confused when he makes such conflicting statements. But I realise that we are dealing with standing charges. That is our concern in this amendment. That is what we are worried about at the moment.

The noble Lord has assured me that the director, through the authorisation, will be able to control standing charges. I wish that he would explain to me how he can do so. The only reference that I can see is in paragraph 4(1) of Condition 3. Paragraph 4(1) reads: Where the Supplier publishes any change in the price of gas (which shall include any change in standing charges) which it proposes to make to tariff customers, the Supplier shall not later than the time of such publication provide the Director with—

1. (a) a written forecast …;
2. (b) a written estimate",

and so on. There is no further reference to the standing charge, so far as I can see, and that the director has any say over the level of the standing charge. The authorisation all the way through—unless I have misread it—refers to the cost per therm. I can see no other reference other than to the cost per therm.

How does the standing charge fit in with the cost per therm? I may very well be missing something. We have been up all night and I suppose that we may not be as clear-headed as we were this time yesterday morning. Therefore if I am wrong perhaps the noble Lord, Lord Gray, will enlighten me and put me right and tell me how, within the authorisation, the director can amend, alter, reduce or do anything else with the standing charge.

Lord Gray of Contin

Perhaps I may first clarify the question of the modification of the formula about which the noble Lord, Lord Bruce of Donington, asked me. I said that the director could not change the formula alone. I am advised that the director can take steps to introduce a better form of control. The procedures for that are set out in Clauses 23 to 27 of the Bill. If he wishes to amend the authorisation he can do so with the agreement of a supplier under Clause 23, and if that agreement is not forthcoming he may refer a modification to the MMC under Clause 24, which can lead to a modification under Clause 26. It is only right to make that clear. I indicated that he could not do it alone. That would be the procedure he would have to follow if he wished to change the authorisation.

I shall deal with the question of the noble Lord, Lord Stoddart, about changing the standing charges. I dealt with that point when I answered initially. For the benefit of the noble Lord, perhaps I may recall what I said. I have explained that putting the limit on increases in the standing charge explicitly in the Bill would limit the flexibility of the director to propose adjustments to the regulatory controls in the light of changing circumstances. That is why the Government propose to set out the financial regulatory requirements in the authorisation. That leads to what I have just said in answer to the question by the noble Lord, Lord Bruce of Donington, about how that would be achieved.

I repeat again for the benefit of the noble Lord that the amendment would introduce unnecessary inflexibility into the controls over standing charges, which I explained a little earlier.

Lord Bruce of Donington

Perhaps I may clarify the position a little further. The noble Lord is now saying—and I want to crystallise it—that, provided certain procedures are gone through, the director can change the formula. The system of price control is by formula. Therefore so long as he goes through certain prescribed steps in the various sections of the Bill to which the noble Lord has referred, the formula is not inviolable anyway. Is that what the noble Lord is saying?

Lord Gray of Contin

I think that I made it perfectly clear. The director cannot suddenly say. ' I the director, will change the formula and here I am doing it." If the director wants to change the formula there is a distinct procedure which he has to follow in order to achieve that.

Lord Bruce of Donington

So we are not writing on blocks of stone.

Lord Stoddart of Swindon

I must confess that I shall need to read, and read very closely, what has been said during this debate and previous debates on the matter of standing charges, because I am still not satisfied. However, it may very well be that I am not satisfied because I am not clear as to exactly how the t ling works and how the director will have control over the standing charges. In those circumstances it would be as well to withdraw the amendment, but I reserve the right, if I remain dissatisfied with the position, to bring it forward again at Report stage. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 94 and 95 not moved.]

Lord Williams of Elvel moved Amendment No. 95A:

Page 14, line 38, at end insert— ("( ) The terms of such agreement shall be filed with the Director who may publish the terms, as appropriate, subject to section 42 below.").

The noble Lord said: This is a simple amendment which I hope will not give rise to complicated discussions such as we had on the previous amendment. It refers to subsection (4) of Clause 14, and this in turn deals with special agreements which the public gas supplier may enter into with any consumer in certain circumstances when the tariffs in force are not appropriate owing to special circumstances. I leave out paragraph (b) for this purpose.

There is here an important element where the tariff is not appropriate in special circumstances which are left undefined and we may not know about, and it seems to us appropriate that the terms of any such agreement should at least be registered with the director; because the director should be aware of these agreements that may be entered into, and if the director feels it appropriate that market forces may operate and other people may take advantage of similar special circumstances (if there are similar special circumstances) the director may publish those terms.

Clearly our amendment specifies that this is subject to Clause 42 of the Bill, which restricts disclosure of information of a sensitive nature. But subject to that clause it seems to us that there is merit in having these rather mysterious agreements, the circumstances of which are not specified, at least filed with the director, and the director should have the possibility of making them public so that the world can know what they are if he feels it appropriate. I beg to move.

Lord Gray of Contin

I can understand the desire for greater transparency in the contract market. However, by their nature contract market customers are largely able to look after themselves. They are free to negotiate with their suppliers the terms of supply, including prices. Clause 42 places restrictions on disclosure of information, including the need to obtain the consent of the business concerned in respect of information relating to the affairs of that business.

I doubt whether they would welcome publication of those terms which might be damaging to their interests. Under the terms of British Gas's draft authorisation Condition 5 they will in any case be required to publish and update a statement of maximum prices payable by contract consumers, and a general statement of policy as regards its willingness to enter into negotiations for prices for gas supplies to such consumers. This will provide assurance for contract customers without the need for publication of commercially sensitive information.

I also point out that there has been no pressure on the Government from customers in the contract market to introduce such a proposal. That market's customers are happy to negotiate their own terms for supply, including price. In any event, contract customers of British Gas will continue to have the protection of competition law administered by the Office of Fair Trading, which has full powers to require any relevant information in considering whether a problem exists. Although I fully understand the desire for transparency, I think that there are good and valid reasons for maintaining the position we have provided in the authorisation and which exists under competition law.

I cannot accept the amendment, and I think perhaps when the noble Lord has thought about what I have said he will probably agree that it would be a marginal decision, even on his part, whether to press it or not. There are considerable problems. I assume it is a probing amendment and I have tried to explain the reasons why we feel it would be unwise to accept it.

7 a.m.

Lord Williams of Elvel

I am grateful to the noble Lord for his response. I am afraid I cannot accept that competition law will deal with this satisfactorily in the way that it is at present drafted. It may be that the Government in their review of competition policy will produce some different law which will deal with this situation, but up to now they have not given any signs of doing so. We are asking for greater transparency, as the noble Lord recognises. It does not seem to me that this amendment is particularly objectionable to the Government. I cannot see what is the problem of the Minister. I had hoped very much that the Minister might take it away, look at it and recognise the point I am making, that existing competition law will not deal—I am afraid I must disagree with the Minister here—with the questions he has raised. We believe that this is a perfectly sensible amendment for the Government to accept. I leave it at that and I hope the noble Lord will accept it. If he will not, then he must say so and we will see what we will do.

Lord Gray of Contin

I thought I indicated that I could not accept this amendment. I understand perfectly well what the noble Lord seeks to do, and I think I understand why he seeks to do it. From what I have said he will gather that we consider that there are difficulties about it. We believe that the competition law will cover the situation, and perhaps when he has had a chance to read what I have said he might think again about it. If he wants to pursue it on another occasion he will have the opportunity to do so.

Lord Williams of Elvel

I wonder whether the noble Lord would be kind enough to write to me about the difficulties that he mentioned, because I do not really see the difficulties. In the light of what he has said, and in the light of what I hope to receive about the difficulties, I should be very happy to withdraw the amendment. If the noble Lord will agree to write to me I shall ask leave to withdraw the amendment.

Lord Gray of Contin

I happily give the noble Lord that assurance.

Amendment, by leave, withdrawn.

On Question, Whether Clause 14 shall stand part of the Bill?

Lord Diamond

This is the point at which any lack of clarity in a Bill is generally raised by the Opposition and explained by the Government. In Clause 14 we have a very good example of lack of clarity. I refer to subsections (1) and (2), which refer to the fixing of the tariff. I thank the Minister in particular for his courtesy in supplying Notes on Clauses which have been very valuable to Opposition Members in trying to understand in more simple language the meaning of a Bill. Other members of the Committee will no doubt have received the Notes on Clauses. The note on subsection (1) reads as follows: Subsection (1) provides that (except as provided in subsection (4))"— which is a minor point that has no relevance— a public gas supplier shall charge prices for gas supplied in accordance with tariffs fixed from time to time by him". The clause itself, as I have read it out on more than one occasion, states: Prices to be charged … shall be in accordance with such tariffs as may be fixed from time to time by him"— —"him" being the public gas supplier. Subsection (2) says: A tariff fixed"— and this is the tariff that we are talking about by a public gas supplier under subsection (1) above may include a standing charge". So, subsection (1) with subsection (2) are written in the plainest English and make it clear that it is the public gas supplier who fixes the tariff. The Notes on Clauses, for which we repeat our thanks, make it absolutely clear—and I shall repeat it—"shall charge prices for gas supplied in accordance with tariffs fixed from time to time by him"; that is, by the public gas supplier.

I hope that in those circumstances the Minister is going to be good enough to say that he was misled for the second time by his noble friend behind him, the noble Viscount, Lord Trenchard, and slipped into an error which resulted in his misleading the Committee for the time being. I hope that he is going to be willing to say that to make the situation absolutely clear.

Lord Gray of Contin

I think that I already made the situation absolutely clear when I fully explained to the noble Lord that if I had inadvertently misled the Committee in any way, then I apologise. I do not think that I need say more than that. I think that the Committee knows me well enough to know that I certainly would never willingly dream of misleading your Lordships.

Several Lords: Hear, hear!

Lord Gray of Contin

If I inadvertently did so, then of course I apologise. I took the very first opportunity the next time I was on my feet to put the record straight.

Lord Bruce of Donington

I certainly would not wish to accuse the noble Lord, either directly or by inference, of deliberately misleading the Committee. Certainly, that is not in the noble Lord's disposition. He is always very frank, on the basis of material provided to him, in what he says. But I am bound to come back to the point that he cannot possibly escape the fact that it has been proved conclusively not only by the noble Lord, Lord Diamond, but even proved by himself to himself that Clause 14 in its existing form is in conflict with other parts of the Bill and with his interpretation of other parts of the Bill.

All that we want from the noble Lord in regard to Clause 14 is, first, a frank admission from him that Clause 14 in its present form is unsatisfactory. Secondly, we require from him an undertaking that he will carefully examine Clause 14 and produce a form of Clause 14 which, while accomplishing the Government's political purpose—with which we have no desire or right to interfere—at least makes it so absolutely clear that it is unnecessary for its proponents to contradict themselves at least twice every five minutes when explaining it to the Committee. This is all that we require. Otherwise, I am afraid that we are bound to go on record as voting against the clause completely and dissenting from it standing part of the Bill. If, as we possibly expect, the Government and their supporters are constrained to vote for the retention of Clause 14 as it now stands then, hereafter, when the matter is re-examined (as undoubtedly it will be re-examined) they will be exposed to the consequences of their own folly.

Lord Gray of Contin

I am grateful to the noble Lord, Lord Bruce of Donington, for what he has said. With regard to Clause 14, we have dealt at some length with that. We have discussed a good many groups of amendments on the issue and I am not certainly not prepared to take the clause away. The Question will be put to the Committee shortly, Whether Clause 14 shall stand Part of the Bill? I shall certainly advise my noble friends to vote in favour, but if noble Lords opposite feel they must oppose it then that must be their judgment.

7.10 a.m.

On Question, Whether Clause 14 shall stand Part of the Bill?

Their Lordships divided: Contents, 49; Not-Contents, 22.

DIVISION NO. 12
CONTENTS
Belstead, L.	Kaberry of Adel, L.
Brabazon of Tara, L.	Kimball, L.
Brougham and Vaux, L.	Kitchener, E.
Caithness, E.	Long, V. [Teller.]
Cameron of Lochbroom, L.	Lucas of Chilworth, L.
Campbell of Croy, L.	McAlpine of West Green, L.
Cathcart, E.	Marshall of Leeds, L.
Clinton, L.	Mersey, V.
Coleraine, L.	Middleton, L.
Cork and Orrery, E.	Monk Bretton, L.
Cox, B.	Montgomery of Alamein, V.
Davidson, V.	Norrie, L.
Denham, L. [Teller.]	Pender, L.
Eden of Winton, L.	Rankeillour, L.
Elliott of Morpeth, L.	Sanderson of Bowden, L.
Elton, L.	Sandford, L.
Gardner of Parkes, B.	Sandys, L.
Gibson-Watt, L.	Skelmersdale, L.
Glenarthur, L.	Swinfen, L.
Gray, L.	Teviot, L.
Gray of Contin, L.	Torrington, V.
Gridley, L.	Trefgarne, L.
Hives, L.	Trenchard, V.
Holderness, L.	Ullswater, V.
Hooper, B.

NOT-CONTENTS
Bruce of Donington, L.	Raglan, L.
Chandos, V.	Roberthall, L.
Cledwyn of Penrhos, L.	Seear, B.
Crawshaw of Aintree, L.	Shepherd, L.
Diamond, L.	Stedman, B. [Teller.]
Gallacher, L.	Stoddart of Swindon, L.
Graham of Edmonton, L. [Teller.]	Tordoff, L.
	Turner of Camden, B.
Hanworth, V.	Wallace of Coslany, L.
Hatch of Lusby, L.	White, B.
John-Mackie, L.	Williams of Elvel, L.
Ponsonby of Shulbrede, L.

Resolved in the affirmative, and Clause 14 agreed to accordingly.

[Amendment No. 97 not moved.]

[Amendments Nos. 98 and 99 not moved.]

Clause 15 agreed to.

Schedule 5 [Public gas supply code]:

[Amendment No. 100 not moved.]

7.20 a.m.

Lord Williams of Elvel moved Amendment No. 100ZA:

Page 74, line 41, at end insert— ("( ) A public gas supplier shall in the case of credit meters ascertain at intervals of not more than 4 calendar months, the consumption of gas by the tariff consumer and recover any charges due to him. ( ) Where a prepayment meter is installed the tariff for gas supplied shall not exceed the total of the following—

1. (a) such proportion of the standing charge as is payable by credit meter consumers;
2. (b) the cost of gas supplied;
931
3. (c) a sum not exceeding 0.1 per cent. of the annual charge (this sum to be used to insure the contents of prepayment meters);
4. (d) a sum not exceeding two-and-a-half per cent., of the customer's net weekly income where an agreement has been reached for recovery of previous charges.

( ) Prepayment meters shall be recalibrated as soon as is practicable after the granting of any price increase and in any event not later than one calendar month after such an increase. Prepayment meters shall be emptied by the public gas supplier at intervals of not more than three calendar months.").

The noble Lord said: This amendment seeks to protect the consumer in terms of the frequency of meter reading. The current practice is for there to be two meter readings a year, with other bills being estimated. Such estimates can cause hardship to many people, with underestimating being as bad as overestimating. Providing that there will be at least three meter readings per annum means that the incidence of underestimation will be significantly reduced.

The amendment goes further than just looking after credit customers who are among the better off gas consumers. It seeks to protect the low paid, the disadvantaged, and those who are forced into the use of prepayment. For many reasons, mainly budgetary, people prefer prepayment as a way of ensuring that they do not fall into fuel debt. There are a number of elements in this amendment into which I do not propose, at this early or late hour, to go in great detail. There is the question of the standing charge. The amendment ensures that the standing charge is the same as that for credit meter users. At the moment, it is slightly lower. Yet despite its being lower the cost per therm over and above that level is considerably higher. Thus a person who uses the same quantity of gas but has a prepayment meter is likely to end up with a bill that is somewhat higher than that of his or her counterpart who happens to be on credit. Given that, it is usually the poor and disadvantaged who use the prepayment meter, and we believe this situation is undesirable.

The amendment goes rather further than that. The British Gas Corporation of course, not unnaturally, seeks to recover its fuel debt by installing prepayment meters. While this may be a relatively humane way of dealing with debts of this nature, it can be self-defeating because if the calibration of the meter is too high then automatic but self-inflicted cut-off follows. Clearly this is not desirable, particularly in times of severe weather. The amendment seeks to set a ceiling on the rate of recovery.

The final part of the amendment returns to the theme of underestimating. Again, those who suffer tend to be the lower paid and those who are in relative fuel poverty. While on the surface these people get off lightly when prices rise and they are not obliged to pay the higher prices, the shock comes when recalibration occurs, sometimes as much as a year later. Then there is a substantial real price increase.

In all, this amendment gives a new group of rights to the consumer in terms of billing practice, rights which we believe are long overdue and which also go some way in terms of the low paid and elderly to alleviate the problems caused by the present situation. I beg to move.

Lord Gray of Contin

I can assure the Committee that we share a common desire to provide for suitable protection for the consumer. It may be that sometimes we part company on the best approach to achieve such protection. This amendment exemplifies this difference of approach.

Noble Lords are once again seeking to lay down rigid and detailed requirements about credit and prepayment meters which will be onerous for British Gas and, they should note, not necessarily of best advantage to the consumer. The Committee will be aware that we have sought in our proposals to retain flexibility so that the industry can adapt and change for the changing needs of the consumer, can take advantage of new developments and technologies and can implement measures, all of which lead to a better service for the consumer at a lower price. Methods of metering may be a perfect example of an area where such flexibility is desirable.

Meter reading and emptying is expensive. The man hours involved lead to a significant cost which is of course passed on to the consumer. Given that, I do not agree that it would be right to lay a statutory requirement on British Gas and on other public gas suppliers to read meters within specified time limits since that would reduce the flexibility we desire and would require the BGC to carry out an expensive exercise which we do not consider to be as a fixed requirement of advantage to consumers generally.

Noble Lords should be aware that British Gas has invested considerable effort in improving and streamlining its billing and meter reading arrangements. Estimates of gas consumption are produced by sophisticated computer programs that take account of the customer's previous pattern and level of consumption and of the effect of the weather. That process has been developed to provide accurate estimates of the amounts of gas likely to have been used in a household. BGC's current practice means that about two-thirds of their customers have their meters read every six months, but in all cases the customer receives a quarterly bill that includes a facility for the customer himself or herself to correct an estimate if it is considered inaccurate.

I believe that it is far better to allow BGC the flexibility, based on experience, to decide upon the optimum period that enables it to recover fully the cost of gas supply whilst keeping to minimum administrative costs to be passed on to the consumer.

The amendment also covers proposals on prepayment meters. I will deal first with the proposal to regulate the composition of the tariff for prepayment customers. I point out to the noble Lord that we have already provided in the Bill, under Clause 14, that tariffs must be so framed as to show the methods by which and the principles on which the changes are made. We have also included a duty on public gas suppliers to avoid undue preference and undue discrimination in setting tariffs—and those tariffs must of course be in line with the limit set for all tariff gas by the price formula in the authorisation.

Moreover, we have made those duties in Clause 14 one of the relevant requirements that are enforceable by the director under his powers in Clause 28. If a public gas supplier is found to be setting tariffs that do not comply with Clause 14, then the director can issue an enforcement order to require compliance with the duty.

Recalibration of prepayment meters is only occasionally necessary since the appropriate adjustment will be made from the rebate and to the customer from the money collected. As to the emptying of prepayment meters, the normal cycle for emptying is 17 weeks. That reflects the usual levels of consumption and the relatively high staff costs involved. In addition, however, BGC will make a special visit to empty a full meter without charge. I do not agree that it would be reasonable to tie British Gas to any period for emptying prepayment meters, and in particular to a proposal that would make the period shorter, since that would run counter to our whole approach of flexibility. Although I listened carefully to what the noble Lord had to say, I cannot on this occasion accept his amendment.

Lord Williams of Elvel

I am grateful to the noble Lord for his response. I understand from what he says that he recognises that there are genuine problems and that they relate partly to estimates and partly to prepayment meters. I hope that the noble Lord will pass on to the appropriate officials or appropriate director, or whoever it may be, that there is concern on this side of the Committee about those particular aspects. That is really the point of the amendment.

Lord Bruce of Donington

When the noble Lord is giving this matter some thought, will he please take on board that in the case of prepayment meters, which have been dealt with so well by my noble friend, the average charge that the prepayment consumer is made as compared with consumers who have credit facilities and receive bills works out, I am instructed, at something in the region of £4 a week more. I speak subject to correction, and if the noble Baroness in particular can correct me on the basis of her experience, than perhaps she may do so. However, I am told authoritatively that a repayment meter means a significantly higher sum being charged each week.

The other point I should like the Minister to take on board is that if he did agree to the amendment, or to the relevant portion of it in respect of prepayment meters, the period involved might not be a very long one. I go along with what the noble Baroness, Lady Gardner of Parkes, said about this and the use of plastic cards in dealing with the problem. It may well be that the new plc, based on research that must have already been done by the British Gas Corporation, will be able to introduce cards which work in the way described by the noble Baroness. The necessity for any extra charge would then disappear because there would be no additional risk.

We are bound to take the point, however, and re-emphasise the point of my noble friend Lord Williams, that it is unfortunate that the people who can least afford to pay more for their gas are those who have to pay more pro-rata than those who are more fortunately placed. I had hoped for rather more than tears and sympathy from the Government who, after all, are in charge of this legislation and in whose hands it lies to enable there to be some kind of redress.

The point has been made that there are losses by reason of theft, and not always by consumers but by other people who gain access to their premises. I should have thought that the Minister could have expressed some view on whether the 0.1 per cent. of the annual charge would be an adequate premium to cover thefts of that kind. All this would help to reduce the burden on people who, as I said, are very much poorer.

The noble Lord was somewhat unfortunate in referring over much to Clause 14 in connection with the operation of this particular amendment. A cloud hangs over Clause 14 at present and we should perhaps leave any further reference to it until the noble Lord has had time to clarify it. However, I should like to have some assurance that the noble Lord is to give it further consideration. I certainly think that it merits that.

7.30 a.m.

Baroness Gardner of Parkes

I should like to make the briefest of comments. I believe there is an additional charge but the figure of £4 a week is more than I would have estimated it to be. Obviously, the charge is more simply because the costs are more, not that anyone wishes it to be more. However, if one is to have additional requirements as suggested in the amendment, that will push up the costs more and prices will have to increase to meet those costs. The amendment could therefore be not beneficial.

Lord Gray of Contin

I refer briefly to the point raised by the noble Lord, Lord Bruce of Donington. The extra sums collected from prepayment customers are much smaller than the noble Lord imagines. They are only about £20 a year with normal consumption. Some people pay less. The charge only attempts to cover the extra costs associated with emptying such meters. It is not nearly as large as the noble Lord suggested.

As regards the further point raised by the noble Lord, yes, we are aware that this is a difficult area and it is unfortunate that sometimes those who are least able to afford it find themselves in the position of having to pay substantial sums of money. But the Bill carries forward unchanged, in Schedule 5, most of the elements of the statutory contract between the supplier and consumer embodied in the Gas Act, and I believe that these provisions, together with those in the authorisation, strike just about the right balance to ensure adequate protection for the consumer while providing flexibility for optimum efficiency, effectiveness and economy in the industry.

Lord Williams of Elvel

I am glad that the noble Lord appreciates that on this side of the Committee—and I think that he agrees with us—there is considerable concern about this matter, and we may return to it at a later stage. In the meantime, having heard what the noble Lord has had to say, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

The Deputy Chairman of Committees (Earl Cathcart)

Amendment No. 100ZB has gone. Amendment No. 100A follows.

Lord Gray of Contin

No, we are on Amendment No. 101A.

The Deputy Chairman of Committees

I have only just taken over the Chair. Is the amendment No. 101A?

Baroness Gardner of Parkes

I rise just to say that I think the noble Earl the Deputy Chairman of Committeds is right and that the next amendment to be considered is Amendment No. 100A. I was waiting for someone to say "not moved" so that I could then rise and say in respect of Amendment No. 101 "not moved".

[Amendments Nos. 100A and 101 not moved.]

Lord Bruce of Donington moved Amendment No. 101A: Page 75, line 16, at end insert ("and in default of his doing so the consumer shall not be liable to pay rent for the meter in respect of the period of the default;").

The noble Lord said: If members of the Committee will turn to page 75 of the Bill and look at paragraph 4(2), they will find that: A public gas supplier shall at all times, at his own expense, keep all meters let for hire or lent by him to any tariff customer in proper order for correctly registering the quantity of gas supplied; but this sub-paragraph is without prejudice to any remedy the supplier may have against the customer for failure to take proper care of the meter". As it stands this provision appears to us to be too one-sided in favour of the supplier, so we should like at the end of line 16 to add the words: and in default of his doing so"— that is, to keep it in proper order— the consumer shall not be liable to pay rent for the meter in respect of the period of the default". I think that is self-explanatory. The responsibility is clearly on the supplier to maintain the meter in proper order, and to see that it registers correctly. After all, he collects the money from it and that is his revenue. One would think that in the normal way that would be the incentive to do so.

Certainly there is a responsibility laid upon him. As I have found from my own personal experience over the long years of my life, meters occasionally go wrong, not through anybody's fault, and they require correcting. In view of the fact that rent is charged for the meters, this amendment adds an extra incentive—shall we say the stick in addition to the carrot?—in that the supplier will be more likely to do the repair promptly if he realises that in default of his doing it the consumer will not be liable to pay rent for the meter in respect of the period of default.

The noble Lord and his party very often champion the interests of the small business, the little man and the freedom of the individual. I should have thought that this amendment would commend itself to them immediately. I therefore hope that the noble Lord will accept it without further ado. I beg to move.

Baroness Gardner of Parkes

I do not think that this is getting the picture the right way round. The Bill provides that the gas supplier should keep the meter in order. I am sure that if your meter was not in order, and you could prove that, you would not have to pay for any gas that you had consumed. The noble Lord, Lord Bruce, is perhaps too honest when he says that occasionally people make mistakes. There is a museum of all types of electricity meters which show unbelievable ways of tampering with them. Most things that happen to meters are not accidents. Very few things go wrong with meters. The number which are made to go wrong—to stop, go backwards or do something else—is unbelievably large. I think that the Bill is in order as it stands and I do not think that the amendment is necessary.

Lord Graham of Edmonton

I take the opposite view. There should be no danger that a consumer will be charged rent for a meter to which he has no access if it goes wrong because of a fault in the meter—not vandalism. The supplier responsible is adequately protected on the face of the Bill: A public gas supplier shall at all times, at his own expense, keep all meters let for hire or lent by him to any tariff customer in proper order for correctly registering the quantity of gas supplied". That lays the responsibility on the gas supplier.

We say that so long as the gas supplier carried out his responsibilities he receives his rent. It is difficult to say why, but all instruments malfunction at times through no fault of the consumer (there is no tampering) or of the gas supplier. He has not deliberately failed to do something, but something goes out of order. I am not sure about what period we are talking of. This proposal would be an incentive. I think that the noble Lord, Lord Bruce of Donington, talked about the stick and the carrot. If the gas supplier was denied his rent for a day, a week or a month it would make him move that much quicker, because so long as the machine does not function he is being denied something.

I hope that the noble Lord the Minister will be sensible about this amendment, because we have heard all night from him that he hesitates to put further burdens upon the director or the supplier or anyone else. We do not believe that the Government have this right. This is a modest amendment, moved modestly. We are hoping for a modest concession.

Lord Gray of Contin

Perhaps I may first correct the noble Lord, Lord Bruce, about the meters. In the case of British Gas, meters are lent free of charge. The amendment would have no effect on British Gas. I am aware that by the amendment noble Lords are seeking to ensure that protection for the consumer is in no way diminished. I was interested to hear, after the noble Lord moved his amendment, that there are two contrary points of view from each side of the Chamber. In no way do I suggest that the view expressed by the noble Lord, Lord Graham, was not as important as the view expressed by my noble friend, but I pay particular attention to what my noble friend says on this subject because of her wide experience in such matters.

I should like to stress that we are sympathetic to what the amendment seeks to do. It is clearly important that there should be full powers to protect the consumer and enforce the requirements that the Bill places on public gas suppliers.

The Bill places a duty on public gas suppliers in paragraph 4(2) of Schedule 5 to keep all meters in proper order for correctly registering the amount of gas supplied. That duty is one of the relevant requirements which is enforceable by the director under Clause 28 of the Bill. Noble Lords will see that paragraph 4 of Schedule 5 is specified in the list of relevant requirements in Clause 28(8), in line 37, on page 33 of the Bill. That means that if a public gas supplier was failing in its duty to keep a meter in proper order, the director could issue an enforcement order requiring the supplier to comply with the duty. Such an enforcement order would require the public gas supplier to remedy its breach of duty at the earliest practicable time. That is dealt with in Clause 28(7)(b). If it failed to comply with the order, it could then be sued for damages, and that is dealt with in Clause 36 of the Bill.

The 1972 Act did not provide for such an enforcement procedure, so some other provision was necessary. I hope that noble Lords will agree that since the Bill provides a mechanism for enforcing the duty on public gas suppliers to keep their meters in proper order for registering the quantity of gas supplied, the provision in this amendment is unnecessary. Having given that explanation, I suggest that the noble Lord might consider withdrawing the amendment.

7.45 a.m.

Lord Bruce of Donington

I am indebted to the noble Lord for having provided me with different information from that which has come into my possession about the extra charge paid by those who use prepayment meters. I may have to come back again to him on that as soon as I have checked my sources, which I should very much like the opportunity to do. In the meantime, I am quite prepared to accept what he says, pending the provision to me of more reliable information.

I am also indebted to the noble Baroness, Lady Gardner of Parkes, for having clarified my mind a little. I would tend to rely upon her experience rather than my intuition as to what happens at the meter end. It is true that meters rarely go wrong by themselves. They are nearly always assisted in that process. All too frequently they are assisted by the customer. That often happens and it is pointless to say that it does not. However, I am still convinced that there are cases where such machinery goes wrong. In those rare instances, redress ought to be forthcoming to the consumer. Once again I am most indebted to the noble Baroness for what I think is probably a necessary correction to the emphasis that I gave in my opening remarks on the clause.

If I may say so, I was once again a little puzzled by the noble Lord. He said that it was not the practice of the British Gas Corporation to take rent in respect of its meters. I think I have what he said correctly. I therefore wonder why Schedule 5, paragraph 4(2), specifically refers to: keep all meters let for hire or lent by him to any tariff customer". The term "lent for hire" seems to imply that at any rate the new British Gas plc will charge rents for its meters; otherwise the term would not appear in the clause. I should be glad if the Minister could clarify that point. if what he says in the first instance is true, the British Gas Corporation does not now charge rents, but the reference to "let for hire" in the Bill would seem to imply that the new plc is to charge rents. I should be grateful if he would clear that up. If he can do so with a short intervention, I shall give way so that he may do so.

Lord Gray of Contin

Certainly. I am happy to do so. All British Gas meters, whether pre-payment or credit, are on loan free of charge. They are not rented to customers by the BGC. The Bill covers loans or letting because these could both be possibilities in future. British Gas has no intention of changing its present policy.

Lord Bruce of Donington

I am much obliged to the noble Lord, who has confirmed exactly what I thought. There is the possibility that the corporation might want to charge rents in future as distinct from what is done now. That seems to be a rather undesirable development and I am glad that the noble Lord has drawn it to our attention.

Lord Gray of Contin

I must make this clear. I said that the Bill covered both possibilities because they could be possibilities in future. I concluded my remarks by saying that British Gas has advised that it has no intention of changing its policy at the moment.

Lord Bruce of Donington

There are a number of places that are paved with good intentions, as the noble Lord is well aware. I am referring to what is in the Bill. I do not want to make a great point of this issue in view of the time. I am obliged to the noble Baroness, Lady Gardner of Parkes, for tabling the amendment. We shall return to these matters on Report. In the meantime, I ask leave of the Committee to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Gallacher moved Amendment No. 101B: Page 76, line 31, at end insert—

("The Gas Consumers' Council

.—(1) The supplier shall, within three months after the coming into force of section 2 of the Act, give to the Gas Consumers' Council details of its policies for the conduct of its business of supplying gas through pipes and of the general arrangements for the implementation thereof and shall inform the Council, not later than the time of publication or announcement or implementation (if no publication or announcement is made), of—

1. (a) any significant change in any of such policies and general arrangements;
2. (b) and where a price increase under subsection (a) above is sought, two months prior to the making of such a change;
3. (c) any charge in the price of gas (including standing charges), or any change in the principles of other charges for gas supply, which it proposes to make to tariff customers.

(2) The supplier shall furnish to the Gas Consumers' Council, at such times as the Council may reasonably require, such information on matters which are the subject of a representation to it as the Council may reasonably request for the purposes of exercising the functions assigned to it under section 32 of the Act.

(3) This Condition shall not require the supplier to furnish any information or documents in relation to an enforcement matter which it could not be compelled to produce or give to the Director under section 37 of the Act.")

The noble Lord said: The amendment is concerned with the Gas Consumers' Council. The effect of the amendment is to replicate with one significant change the terms of authorisation. The amendment states that the Gas Consumers' Council is entitled to be informed as to how the gas supplier will run its business—for example, the policy on the frequency of meter reading on which Gas Consumers' Council members may have views and experience of importance to the gas supplier. They may even have a view on the economies accruing from estimates of consumption as against actual readings.

The amendment provides also that if British Gas wishes to impose a price increase, it is not sufficient just to inform the Gas Consumers' Council that the price formula is about to be triggered and that indirect variations in price are about to take place. The amendment gives the council the right to two months' notice of the intention of the gas supplier to seek price increases. It also gives, in the same way as the authorisation, the right of the council to obtain information on matters raised with it, but not an enforcement matter under Clause 37.

The difference between the amendment and the authorisation is that the authorisation seeks to place firm rights belonging to the council in such a way that these are transparent rather than tucked away as part of the authorisation itself. The authorisation is, of course, not open to parliamentary scrutiny, much less to alteration. It is felt that the amendment will enable the public to know their rights because they will be written into the Bill, which will have the effect of reassuring the public in the face of the powerful private monopoly which the Bill is creating. I beg to move.

Lord Gray of Contin

I think that we should bear in mind that Condition 8 of the authorisation, which noble Lords are attempting to insert into the Bill, forms an important part of the improved arrangements that we are proposing for the protection of the interests of gas consumers. Condition 8 requires British Gas to provide to the council the background information that it needs on the way that British Gas runs its business; in addition British Gas will have to provide information on charges to its policies and on any changes to gas prices. Under the Gas Act 1972 such information is of course available to the existing councils, and we are ensuring that this situation continues. We are, however, going beyond this in our proposals in the draft. This will require British Gas to meet any reasonable request from the council for information on complaints relating to the supply of gas through pipes made to the council or referred to it by the director under Clause 32 of the Bill, so that the council can properly investigate these complaints and come to an informed conclusion. The information power covers not only complaints from domestic and other tariff customers, but also from industrial contract consumers. I do not want to discuss Clause 32 in detail now. It is a matter for debate later, but I want to point out that because of the information power in Condition 8 of the draft authorisation, complaints will be fully investigated and assessed. The new council will therefore have far greater information powers than the existing councils in this important area.

In framing their amendment, noble Lords have suggested an additional duty on British Gas, to provide a two-months' advance notification of tariff price increases. Obviously, I can understand the motivation behind this amendment, but I wonder whether noble Lords have fully thought through how it would work in practice. It would impose an unreasonable burden on British Gas because flexibility is needed to respond to changing circumstances. The company will be operating as a normal commercial enterprise. Noble Lords will appreciate that in business one cannot always foresee the course of events and how they might impact on one's business or the decisions that may need to be made as a matter of urgency as a consequence of events. It would he wrong, I believe, to tie the hands of the new company in this way, especially as British Gas is under an obligation to comply with the duty imposed on it by Condition 3 of the draft authorisation relating to the prices to be charged to tariff customers.

I hope noble Lords will agree with me that the obligations we have placed on British Gas relating to the provision of information to the Gas Consumers' Council are wide, and necessarily so, and are in fact wider than those existing now. I hope that on this basis noble Lords will consider withdrawing the amendment.

Lord Graham of Edmonton

The Minister once more pleads maximum flexibility for the supplier, even if protecting that flexibility imposes a rigidity upon the ability of the consumers' council to do a more effective job. He stresses again that the role of the consumers' council is substantially to react to complaints. The trigger mechanism for the consumers' council, in the words of the Minister, is merely to react. We see the consumers' council role as being much more than that. There is a fertile area to be tilled and looked after between the supplier and the consumers' council. We are not talking of conflicts of function or conflicts of power. We are talking about elevating and enhancing the stature of the consumers' council in the eyes of the supplier, the director and the Government but, equally importantly, in the eyes of the consumer. We are not talking of the creation of a complaints committee or a complaints procedure which is then called the consumers' council. We are concerned to give it some real functions and some real responsibilities. These will be responsible people.

The Minister disappoints me. What we see despite the noble Lord's remarks, is the emergence of the consumers' council as a second class citizen in making the new arrangement called privatisation work. For the life of me, I cannot understand why the Minister persists in giving me, and those outside who will read the record, the impression that he does not think a great deal about the ability of this group of men and women to act responsibly. It is a very sad response.

8 a.m.

Lord Gallacher

May I say in answer to the response of the Minister—and he will not be surprised to hear this—that it is disappointing. He claims that Condition 8 of the authorisation repeats the position of consumer councils under the Gas Act 1972. This may be so in large measure but surely it does not apply to prices, because that power has very definitely been taken away from the gas consumer councils under the proposals now before us. Clause 32, it is said, gives greater information powers to the Gas Consumers Council. Of course, we shall reach a consideration of that clause in due course.

I take issue with him on the point that to request the supplier to give two months' notice of price increases would be unduly onerous. I think that that might be so if the authorised supplier were an ordinary firm competing with other firms in a commercial market. But this is not the case. We are dealing with what in effect will he a statutory private monopoly. The obligation on such a body to give two months' notice of price increases does not seem to me to be unduly onerous. Indeed, even at the present time it is within my recollection that the regional gas councils give notice to their bodies of intended price increases. There is a certain element of confidentiality about their intentions but nevertheless advance notice is given. Certainly one would expect a private monopoly of this dimension to be capable of giving such information without ruining its chances commercially, and without unduly affecting the position of shareholders.

It has to be said that the authorisation, however good, is not as public a document as the face of the Bill would be with regard to the rights of the Gas Consumers Council. For that reason we would prefer to see something on the face of the Bill as well as the authorisation.

Finally, on the role of the Gas Consumers Council in general, I can only echo the remarks of my noble friend Lord Graham of Edmonton, because it seems to me that this body is definitely not the institution we thought it was going to be. I hope that at a later stage of our consideration of this Bill it will be possible to do something. Perhaps we shall find the Minister in a more sympathetic mood. If not, hopefully the Committee will agree that something further needs to be done to give the teeth back to the consumer machinery with regard to gas users. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Bruce of Donington moved Amendment No. 101BA: Page 76, line 31, at end insert—

("Restriction of gas prices to tariff customers

The public gas supplier may seek to alter his prices in accordance with the following formula:

T = (1+ RPI_t - X/100) P_t-1 + Y_t - K_t

where T is the average price per therm;

RPI_t = the percentage change (whether positive or negative in value) in the Retail Price Index between that published with respect to the relevant year t and that published with respect to the immediately preceding April, provided that if there is a material change in the retail price index there may be substituted such basis to take account of the change, or other such index as the Director, in conjunction with the Public Gas supplier, the Gas Consumers' Council and the Trade Unions in the industry, shall determine;

X = a value to be determined each year after consultation with the Supplier, the Gas Consumers' Council and the Trade Unions in the industry;

P_t-1 = P_t-2(1+RPI_t-1 - X/110) but, in relation to the first Relevant Year, P_t-1 (and, accordingly, in relation to the second Relevant Year, P_t-2) shall have a value of the cost of gas per therm at the date of flotation;

Y_t = Allowable Gas Cost per therm in Relevant Year t;

K_t = the correction per therm (whether of a positive or negative value) to be made in Relevant Year, (other than the first Relevant Year) which is derived from the following formula—

K_t = T_t-1-(Q_t-1 M_t-1)/Q_t (1+I_t/100) in which

T_t-1 = Tariff Revenue from Tariff Quantity in Relevant Year t-1;

Q_t-1= Tariff Quantity in Relevant Year t-1;

Q_t = Tariff Quantity in Relevant Year t;

M_t-1 = Maximum Average Price per therm in Relevant Year t-1;

I_t = the interest rate in Relevant Year t which is equal to, where K_t (taking no account of I_t for this purpose) has a positive value, the Specified Rate plus three per cent. or, where K_t (taking no account of I_t for this purpose) has a negative value, the Specified Rate.

The subscript t represents the Relevant Year and the first Relevant Year shall be the year during which flotation takes place.

2. In this Condition— Allowable Gas Cost" means the aggregate of the following amounts namely—

(1) the amounts paid or payable by the Supplier at any time to each vendor of gas (not being an associated company)—

1. (a) for, and wholly and exclusively related to, the quantity of gas delivered to the Supplier in the Relevant year for the Supplier's Gas Supply Business (being payments of purchase price in pounds sterling, or, if not in pounds sterling, converted to pounds sterling at the spot rate of exchange in London for purchasing the relevant breign currency as quoted by Barclays Bank plc at the close of business on the date of payment thereof); or
2. (b) as Capacity Charges in respect of the Relevant Year, but—
1. (i) excluding any payments of interest and of any other amount payable by the Supplier because of any failure by the Supplier to perform its obligations or make any payment to vendors under its contract to purchase the gas so delivered;
2. (ii) deducting, where payment for gas is due more than 30 days after the end of the month of its delivery, a sum equal to the interest on the price of the gas for the period from 30 days after the end of the month of delivery to the date of payment, at the Specified Rate.

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

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

(b) where any initial payment has been made by the Supplier and, in the Relevant Year, either the terms of the contract have the effect, or it is shown to the reasonable satisfaction of the Director, that any gas will not be available for delivery, or credit which might otherwise have been allowed to the Supplier by reason wholly or partly of that payment will no longer be allowed, such amount over such period as the Director, after consultation with the Supplier, shall determine is a fair amount to be included in respect of any one or more Relevant Years;

(3) where any gas which is delivered to the Supplier is purchased by it for a consideration which is not wholly pecuniary or where gas and anything other than gas are purchased as part of the same transaction or arrangement by the Supplier, the amount which the Supplier demonstrates to the reasonable satisfaction of the Director would be the pecuniary consideration for the gas if negotiated at arm's length as between a willing vendor and a willing purchaser;

(4) where gas is purchased otherwise than at the Point of Delivery, such amount as is demonstrated to the reasonable satisfaction of the Director is or would be payable by the Supplier under a third party contract negotiated at arm's length for transporting the gas to the Point of Delivery and for any processing or treatment of the gas which is necessary to render it of suitable quality for entry into the Supplier's Transmission System;

(5) (a) where the Supplier in a Relevant Year appropriate to the Gas Supply Business gas which it produced itself or which it acquired from an associated company ("Own Gas"), the Supplier shall furnish to the Director as soon as practicable after the end of that year a written statement of the amount which the Supplier shall certify to the best of its information, knowledge and belief represents no more than the market value (as defined in the Oil Taxation Act 1975) of such gas, together with an explanation of how any such amount has been arrived at and the amount so certified may be included as an Allowable Gas Cost on an interim basis provided it is not greater than the amount with respect thereto included or to be included (either on a provisional or final basis) by the Supplier or associated company in its return to the Oil Taxation Office of the Inland Revenue (or such other department of the Inland Revenue as is appropriate) but if it is greater, the lower amount shall be included;

(b) in the event of it being ascertained by the Oil Taxation Office of the Inland Revenue in agreement with the Supplier, or determined in legal proceedings, that the market value of any Own Gas for the purposes of the Oil Taxation Act 1975 (or, in the case of Own Gas the subject of a tax exempt contract, as defined in section 1(3) of the Gas Levy Act 1981, by any department of the Inland Revenue in agreement with the Supplier, or in legal proceedings, that the market value of any Own Gas for any other tax purposes) is different from the amount permitted by sub-paragraph (a) above to be included on an interim basis for the purposes of the Allowable Gas Cost, the difference shall be reflected in an appropriate manner in the Allowable Gas Cost for the purposes of the formula described in paragraph 1 above and reported by the Supplier to the Director promptly after it has been ascertained or determined;

(6) an amount equal to the gas levy payable to the Secretary of State by the Supplier under the Gas Levy Act 1981 in respect of the aggregate quantity of gas of which account is to be taken for the purposes of calculating the amounts referred to in sub-paragraphs (1), (2), (3) and (5) above;

(7) any amount (whether or not similar to or different from expenditure of the kinds or amounts previously mentioned) which, after written application by and consultation with the Supplier, is determined by the Director to be a cost of gas acquired by the Supplier for the Supplier's Gas Supply Business or to be a cost otherwise fairly related to the gas acquired.

but no amount shall be a component of Allowable Gas Cost both under sub-paragraph (7) above and any other of the preceding sub-paragraphs or under more than one of those sub-paragraphs and for the purposes of this definition of "Allowable Gas Cost", the delivery of gas shall be treated as taking place at the Point of Delivery. Allowable Gas Cost per therm" means the Allowable Gas Cost in the Relevant Year divided by the Relevant Quantity in the Relevant Year. Average Price per therm" means Tariff Revenue in the Relevant Year divided by the Tariff Quantity of gas supplied in that relevant Year. Capacity Charges" means any amounts which are of a recurring nature and are paid or payable by the Supplier in respect of the Relevant Year to a vendor of gas in order to reserve the availability to the Supplier of deliveries of gas in the year in which the amounts relate but not being any amounts which would fall to be treated in whole or in part as an advance payment (directly or indirectly) for gas. Relevant Quantity" means the aggregate of the following namely—

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

Relevant Year" means each complete financial year of the Supplier ending on 31st March in respect of which the Supplier is required to deliver to the Director a copy of each of the accounting statements referred to in paragraph 2(b) of Condition 2. Specified Rate" means the average of the Treasury Bill Discount Rate (expressed as an annual percentage interest rate), published weekly by the Bank of England, during the period in respect of which the calculation falls to be made. Tariff Quantity" means the aggregate quantity of gas, in therms, supplied by the Supplier to tariff customers in the Relevant Year and taken into account for the purposes of determining Tariff Revenue. Tariff Revenue" means the turnover (measured on an accruals basis and including standing charges) derived from the supply of gas in the Relevant Year to tariff customers falling within the ordinary activities of the Gas Supply Business, after deduction of value added tax (if any) and any other taxes based directly on the amounts so derived.

3.—(1) If in respect of any Relevant Year the Average Price per therm exceeds the Maximum Average Price per therm by more than 4 per cent. of the latter, the Supplier shall furnish an explanation to the Director and in the next following Relevant Year the Supplier shall not affect any increase in prices unless it has demonstrated to the reasonable satisfaction of the Director that the Average Price per therm would not be likely to exceed the Maximum Average Price per therm in that next following Relevant Year;

(2) if, in respect of any two successive Relevant Years, the sum of the amounts by which the Average Price per therm has exceeded the Maximum Average Price per therm is more than 5 per cent. of the Maximum Average Price per therm for the second of those years, then in the next following Relevant Year the Supplier shall, if required by the Director, adjust its prices such that the Average Price per therm would not be likely, in the judgment of the Director, to exceed the Maximum Average Price per therm in that next following Relevant Year;

(3) if in respect of each of two successive Relevant Years the Average Price per therm is less than 90 per cent. of the Maximum Average Price per therm, the Director, after consultation with the Supplier, may direct that, in calculating K_t in respect of the next following Relevant Year, there shall be substituted tor T_t-1 in the formula set out in paragraph 1 above such figure as the Director may specify being not less than T_t-1 and not more than 0.90 (Q_t-1M_t-1).

4.—(1) Where the Supplier publishes any change in the price of gas (which shall include any change in standing charges) which it proposes to make to tariff customers, the Supplier shall not later than the time of such publication provide the Director with—

1. (a) a writen forecast of the Maximum Average Price per therm, together with its components, in respect of the 945 Relevant Year in which the change of price of gas is to take effect and also in respect of the next following Relevant Year; and
2. (b) a written estimate of the Maximum Average Price per therm, together with its components, in respect of the Relevant Year immediately preceding the Relevant Year in which the change in price of gas is to take effect unless a statement complying with paragraph 4(5) below in respect of that first mentioned Relevant Year has been furnished to the Director before the publication of the proposed change in gas price;

(2) if within three months of the commencement of any Relevant Year the Supplier has not published or effected any change in price as is referred in sub-paragraph (1) above the Supplier shall provide the Director with a written forecast of the Maximum Average Price per therm, together with its components, in respect of that Relevant Year;

(3) any forecasts as aforesaid shall be accompanied by such information as regards the assumptions (such as economic growth, exchange rate changes and energy prices) which are critical features thereof as may be necessary to enable the Director to be reasonably satisfied that the forecasts have been properly prepared on a consistent basis;

(4) not later than 6 weeks after the end of a Relevant Year the Supplier shall send to the Director a statement as to whether or not in its opinion paragraph 3(1), (2) or (3) applies in respect of the Relevant Year and its best estimate of what K is likely to be in the following Relevant Year;

(5) not later than 3 months after the end of a Relevant Year the Supplier shall send to the Director a statement, in respect of that Relevant Year, showing—

1. (a) Allowable Gas Cost;
2. (b) Relevant Quantity;
3. (c) Tariff Revenue;
4. (d) Tariff Quantity;

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

1. (a) accompanied by a report from the Auditor that in his opinion such statement fairly presents Allowable Gas Cost, Relevant Quantity, Tariff Revenue and Tariff Quantity in accordance with the requirements of this Condition and that the amount of Tariff Revenue and, so far as applicable, the amount included as Allowable Gas Cost are in accordance with the Supplier's accounting records which have been maintained in accordance with Condition 2; and
2. (b) certified by a director of the Supplier that no amount included within Allowable Gas Cost represent other than bona fide consideration for gas delivered for use in the Gas Supply Business or an amount permitted under this Condition to be so included;

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

The noble Lord said: Perhaps it is appropriate that at this sprightly hour of the day we consider with fresh minds something that appears on the face of it to be a rather complicated formula. In the course of earlier remarks at a stage in the Bill—now long forgotten because it happened some little time ago—the noble Lord, Lord Belstead, referred, when he was making a passing comment on an amendment that we ventured to put down, to the fact that there were some inaccuracies in the text of the amendments. I have to report that these indeed were printing errors and that endeavours have now been made to set the record right. One or two minor matters apart, the formula presented in the amendment I am now putting before the Committee is in accordance with that contained in Condition 3 of the authorisation which the department of the noble Lord was kind enough to provide us.

There is still one printing error remaining. I refer the Committee to the formula which begins P_t-1 about half way down the page. The formula is as follows: P_t-1=P_t-2 (1+RPI_t-1-X/110) You will see that under the underscoring there appears the figure 110, but of course it should be 100. I trust that the noble Lord will accept my apologies for the printing error, because I would not wish to mislead him in any way.

On the face of it the formula looks complicated, but in reality it is not at all. In essence, it is a cost plus formula with the cost per therm of gas adjusted in accordance with the retail price index change, minus the X factor, to which I shall return later. Similarly, the processing of other operating costs—not the prime costs of the gas—appears in the next part of the formula, except that it does not only include costs; it includes the profit element. Profit, for the purpose of the formula, is part of the cost; it is also minus the X factor. The K factor is merely a correction factor if the estimates of one year happen to be rather out. It does not really present any vast complication.

The problem is that it is a cost plus method. If your Lordships look at the calculations which appear at Appendix 2 of the first report from the Energy Committee in another place, you will find the projections as regards price which take place on the basis of the formula that has been produced. The projected calculations by the Library statisticians of another place are reproduced at paragraphs (XXXVIII) and (XXXVIX) of the Energy Committee report, fromwhich it is possible to see that even with a very modest constant rate of inflation increase—the figure here has been assumed at 4 per cent., but I am well aware that it is now, happily, down to 3 per cent., and long may it remain so, and the X factor is a constant too—nevertheless, the price per therm of gas on those projections increases from 45.92p per therm in 1985–86 to 69.56p in 1992–93. Those figures look horrific on the face of it, but they are probably so gradual that people may not notice them in the passage of time.

However, I am bound to say that one of the most important aspects, in respect of which so far we are shrouded in mystery, is the X factor—the efficiency factor. I think that the Government ought to take us into their confidence about what the X factor really is and what its approximate dimensions are likely to be in percentage terms, because quite clearly it is bound to have a very significant effect on the calculations of the cost increases that will be revamped as a result of the insertion of the efficiency factor: an efficiency factor, for example, of 5 per cent., if that were required, and bearing in mind that great things are expected of this industry which is to be privatised. We are told that privatisation produces a new bound of enthusiasm, of efficiency, drive, of enterprise, and so I hope that the X figure will not be put at so low a figure as will belie the Government's advertised expectations.

We would hope that the results will be as successful as those of this nationalised industry, that has made consistent profits over the last 10 years, and ever-increasing results over the last 10 years, to the benefit of the nation as a whole and with a reasonable element of price stability. If the noble Lord will look at the figures reproduced on page 24 he will find that in the last 10 years where the retail price index on the basis of 1975–76 now stands at 251, in the case of the gas charges per therm they have gone up from 100 to 194.

Those who sometimes expatiate on the alleged inefficiencies of nationalised industries might do well to bear that in mind. There are very few companies in the private sector that can do as well as that. If the Government are going to produce some considerable improvement in efficiency through their new liberation, we shall wait with considerable interest to see it. Can we have an explanation of the X factor, and what it is going to be?

This particular amendment is derived from the Government's own proposed authorisation in a reproduction of Condition 3. There are two slight changes to which I must refer. Instead of the designation Mt we have put in a figure T which is the average price per therm, whereas if the noble Lord will refer to Condition 3 in his own authorisation he will find that they refer to the maximum average price per therm.

We think that the term "average price per therm" is a pretty good one. It is quite unambiguous. It can be related to whichever year it applies. It can be calculated, and we should like to know why the Government prefer to use the maximum average price per therm, or alternatively whether they have any objection to the amendment to their own authorisation which is put here.

The other amendment concerns the original formula as per the authorisation, where the X factor is left shrouded in mystery. I think the figure is to be determined. Yes, X factor is to be determined. We thought that the noble Lord would be obliged to us for saving him the further mental effort by suggesting some means by which it should be ascertained rather than value to be determined. So what we have put in for X is this: a value to be determined each year after consultation with the Supplier, the Gas Consumers' Council and the Trade Unions in the industry".

There are three knowledgeable bodies, all intimately concerned with the industry, each with its own research facilites. Suppliers have research facilities and statisticians. The Gas Consumers Council is composed of people who are well versed in prices and tariffs and have an amateur technique, if I may use the term in parenthesis, which is very often superior in its detached attitude towards matters than those more closely connected with the trade; and finally, of course, in the trade unions, most of which have their own economics departments and trade statisticians.

So while we cannot put a value upon it because the value is still to be determined, we have tried to help the Government by suggesting a way out of their difficulty if they find it awkward to think, because to determine the value of X requires thought. It requires a mental process in which the pros are put against the cons, in which figures are bandied to and fro and in which desirable percentages of efficiency are discussed and mulled over. All this is a very tortuous process in which I trust no party politics will intrude in any way whatsoever. It will all be done presumably in a very disinterested manner. But still it has to be determined.

In commending this long amendment which reproduces the Government's draft authorisation save for the particulars that I have already outlined—if they do not exactly reproduce them that must be another printers' error, because we have provided them with the text of it—I sincerely hope that the Government may feel constrained to accept the amendment. It conflicts with the Government's view that they have already expressed that the machinery for price control should not be in the Bill itself and that it is far better left in the authorisation.

However, that was a long time ago. There has been a lot of argument in the Chamber; there have been contributions from all sides of the Committee since the time when that decision was made. I hope that the wisdom that has come from the lips of our colleagues on the Alliance Benches as well as from Tory Back-Benchers and my colleagues will persuade the Government that this is the best way to put this matter. With that general sentiment, I commend the amendment to the Committee.

The Deputy Chairman of Committees (Baroness White)

In putting the Question, I should point out that the amendment printed on page 35 of the Marshalled List should have the printing error corrected from "110" to "100".

8.15 a.m.

Lord Belstead

I am genuinely grateful to the noble Lord, Lord Bruce of Donington, for making the simple point that although the formula, set out at the moment in the proposed authorisation, looks enormously complicated it is based on a simple principle, a principle on which all sides of the Committee would agree in subscribing—that there should be some guarantee set aside from politics that tariff consumers should know the maximum that they would be called upon to pay for gas every year.

There are two brief points I should like to make before trying to reply to the noble Lord. The first is that I take the point that the noble Lord made to me that the figure of 110 should be put right in the print that we have on the Marshalled List. I accept that. I should like to say that I am sure the noble Lord will not mind my saying that there are still some inaccuracies. It is almost inevitable that this would be so. I shall not go into them now. The noble Lord will accept from me that there will be some, and we could easily talk about them outside the Chamber rather than in it.

The other point is much more substantive. The noble Lord referred to it towards the end of his remarks when he said that he hoped the House would now feel that the place for this part of the authorisation—in other words, the formula—is in the Bill and not in the authorisation. I have the same deep concern about that particular point if the noble Lord were to stick to it, in the sense that it means that the authorisation could not be changed in the future without bringing primary legislation before both Houses of Parliament again; whereas there is a procedure, as I am sure the noble Lord knows, for dtsapplying—and it can be done on an application of the gas supplier. But, of course, it has got to be looked at by the director and it has got to go to the Monopolies and Mergers Commission. But this can be done if we leave it in the authorisation.

May I just say to the Committee that there is nothing sinister at all in my saying that. Obviously, it would only be done, if it had to go to the Monopolies and Mergers Commission, if the change would be in the interests of consumers. Therefore, I am not trying to be combatative when I say that if noble Lords opposite really were to push this to a vote, I would simply have to advise noble Lords on this side of the Committee to stick by the thesis that this authorisation in full ought to be in the authorisation and not in the Bill.

Very briefly, if I may, may I do one more thing before I reply to the noble Lord. I think that it is right just to bear in mind that this is a system—and again I say "thank you" to the noble Lord for making the simple point that he made at the beginning—which, if I may flesh it out, is simply surrounded with safeguards. There is, first of all, the obligation in the authorisation to take all reasonable steps for British Gas to set prices no higher than the maximum determined by the formula. In fact, that is a form of words which the noble Lord and his noble friends have left out of their amendment. At the moment, it is in the authorisation.

There is an interest penalty—and, my goodness! it is 3 per cent. above the market rate—in carrying forward the correction factor if the maximum price has been exceeded in any one year; and that means that it will not pay British Gas deliberately to overshoot. There is a threshold for involving the director and getting him to step in, if the formula is exceeded by more than a certain level. In other words, if British Gas have got it wrong and they overshoot 4 per cent. in any one year, the director then steps in and says that he has to be satisfied by an explanation if there is to be any price increase in the following year. And if there is a 5 per cent. overshoot at any two years that switches on what I would call a red light and the director can step in and set prices.

There is regular provision for information including forecasts and then there is, finally, a matter which we have talked about a lot in the last 15 hours or so, namely, that the price formula includes the standing charge even though, in addition, Condition 4 stipulates that the standing charge may not rise faster than the rate of inflation.

I hope that I have not been tedious in just very quickly going through those safeguards but I think genuinely that they are important and they show, I like to think, that the Government have tried to think about this formula. Nonetheless, the noble Lord has asked me some brief, specific questions. The first question is that the noble Lord wishes to know about the X factor. The difficulty that I am in in answering is that, for some reason which the noble Lord did not reveal, his own amendment and that of his noble friend suggests that X should be set each year. This, of course, would have the equivalent effect of meaning that there would be no formula at all because prices would be set in a discretionary manner each year. Your Lordships will be aware that experience from overseas has shown that such a system would not really be in the long-term interests of consumers, since it would fail to give an adequate incentive to the company to improve its efficiency.

Nonetheless, I am sidling round the point and not answering the noble Lord. It is essential for the consumers' interests that we should have a real price control formula and that the value of X should be set for a substantial period. We propose, when we have determined the likely scope for efficiency gains, to replace the symbol X in the formula with a number, and the only assurance that I can give to the noble Lord, Lord Bruce of Donington, this morning is that we will, indeed, take into account the warning that the noble Lord gave in his words about the X factor; namely, that it has got to be draconian enough. Then the noble Lord asked me a direct question—

Lord Diamond

Before the noble Lord leaves that point, is he going to be able to tell us for certain whether X will be converted into this particular figure by the time we get to Report stage, so that we will know then where we are?

Lord Belstead

I am afraid I cannot give that undertaking. I know the Government will be moving as fast as possible on this; but that is an undertaking I cannot give to the Committee. The noble Lord, Lord Bruce, then asked: why do we talk about the maximum average price? The answer to that is simple. It is because British Gas will be free under the formula to charge less than the maximum. In our formula we have set a maximum average price, and that is why we have called it the maximum average price. As I say, if British Gas wish to charge less, they will be free to do so.

Finally, the noble Lord pointed to the fact that one of the changes—and it is only one of several changes which this amendment would put into the formula—is that there shall be discussions involving the supplier, the Gas Consumers' Council and the trade unions in price determination. The noble Lord asked: what do the Government think of that?

I am very interested about this suggestion for quadrupartite discussions involving the director the supplier, the council and the trade unions in pricing matters, although I may say I am rather horrified at the thought of the amount of beer and sandwiches that might need to be consumed before four such parties could reach agreement on setting prices. The director really does have clear duties, set out in the Bill, including the protection of the interests of consumers under Clause 4 in respect of prices charged. If one involves other parties in pricing, I really think it would weaken that purpose, because their responsibilities would require them to seek other objectives.

I was extremely interested when my noble friend Lady Gardner of Parkes made the point that, however admirable the Gas Consumers' Council is, it is not really much good going to the council and talking about increases in prices, because the council always, whether at local or national level, in the interests of consumers is always going to want to keep prices down. Therefore I say that involving other parties in pricing could weaken the purpose; and we could find that in the end this quadrupartite idea would not actually be in the interests of the consumer.

I would not have thought, even though at first sight the suggestion seemed interesting, that one could actually be serious in pursuing this: in other words, in trying to get agreement from a group within a reasonable period, or that any compromise which was thrashed out after interminable discussions would actually be in the interests of consumers. With respect to the noble Lord, I do not think that one is a runner. I hope I have answered the noble Lord's questions and that your Lordships will not endeavour to insist that this formula should be part of the Bill.

8.30 a.m.

Lord Diamond

If I could say a word in response to what the noble Lord the Minister has said, we are very grateful to him for that very full explanation, and indeed we are grateful to the noble Lord for moving the amendment in such plain terms.

There are at least two anxieties which we have at the present time. The first relates to the fact that it looks as though the Government are trying to get this Bill through without disclosing what X is. X is the difference between having a simple cost-plus price for the consumer to pay, and having a reasonable price for the consumer to pay. This formula, as it stands at the moment, is a simple cost-plus formula, and we all know what that leads to. Those of your Lordships with memories as long as my own will recall wartime contracts, investigations subsequent to the war and the various unfortunate discoveries and embarrassments involving large firms. Those with such long memories will know that the cost-plus contract leads, even among the largest and the most respectable firms (as one would have thought), to grave difficulties.

So one does not want even an organisation as large as the successor company to be engaged in a private monopoly affecting at least 16½ million customers on a cost-plus contract basis. That would be a total criticism of the whole of the Government's proposals to privatise the sale of gas. If there is a real X factor, which so alters the nature of the cost-plus contract as to make the supplier drive for efficiency the whole time, knowing that he will be quite incapable of making a return to his shareholders unless he can achieve considerable annual increases of efficiency, then we have a different attitude. We have a business trying to run as if it were in competition with something as opposed to a business running on the basis that broadly it does not matter what you do. You are on a cost-plus cushion.

So I am bound to say to the Minister that it is extremely disappointing that he cannot promise that we shall know something about the X factor before this Bill leaves this House—at all events, before Report stage. That is the first major difficulty, and we shall certainly have to come back to that.

The second major difficulty is that the noble Lord proposes to reject the idea that the Bill itself, when it becomes an Act, should have within it, if necessary as a schedule, the all-important provision of price fixing. I totally disagree with him that it is beyond the capacity of this House and its advisers to find a means under which there will be equal flexibility as in having it outside the scope of the Bill. It will certainly not be necessary to produce amending legislation—primary legislation as the Minister said—every time you want to alter something like this.

I have been responsible for something like eight Finance Bills and the Committee stages thereof and we have had, as everybody knows, enormous schedules attached to those Finance Bills. It is very frequently the case that there have to be Orders in Council amending certain of the provisions as one goes along, and they are subject to either affirmative or negative resolutions of both Houses of Parliament. There is nothing whatever to prevent the essence of this being incorporated within the Act, as it will then be, in the form of a schedule giving Ministers power to bring before the House affirmative resolutions, or giving power to alter a negative resolution in the way that it would be altered anyway—that is to say, if it were not incorporated.

So it is a major factor in the whole of the Government's attitude to competition that we shall not know what the X factor is. It is a major defect in the Government's proposal for legislation that one of the main legislative proposals will be outside the Act. There is the other situation that, once more, the Government are showing their unwillingness to consult. Once more they are saying, "If anything goes wrong, let the complaint be made and the complainant will no doubt have some form of remedy or other", and that, "We do not believe that you should consult in advance, so as to give those who might at a later stage be complainants an opportunity of expressing their views in advance." We have repeated this point of view many times during the course of the night. I need not go through it again. But on those two major issues I find this proposal wholly lacking.

Lord Belstead

Perhaps I may speak very briefly because of the time. So far as the X factor is concerned, I express my regrets to the noble Lord, Lord Diamond, that I have to repeat that while the Government are indeed assessing the scope for increased efficiency in the gas industry and will set X in the light of their conclusions (and I can assure the noble Lord that the figure will be announced in due course) I cannot, it is the case, give the undertaking which the noble Lord wishes me to give this morning.

On the other hand, when the noble Lord talks of the absolute necessity of putting the formula into the Bill, I would say to him that we debated this on the day that he was not able to be with us a fortnight or more ago. It happened at a late hour and we more or less agreed between both sides of the Committee not to go into any great depth. But the one thing that we did debate on that occasion was the desirability or otherwise of putting into the Bill the authorisation; on that occasion it was the whole authorisation under Amendment No. 84A. The noble Lord will acquit me of discourtesy when I say that I staked out the Government's view on that occasion, and I am afraid that that view remains the same now.

Lord Bruce of Donington

I am grateful to the noble Lord for his reply. I would venture just to correct him on one point. When he was dealing with the determination of the X factor he referred to it as the price being determined by the four parties involved. This is not in the amendment at all. The amendment seeks to establish the X factor. The noble Lord will observe the words used: a value to be determined each year after consultation with the Supplier, the Gas Consumers Council and the trade unions". It is not that they should actually take part in the determination; it should be determined after consultation, not during consultation with the bodies concerned. The noble Lord will agree that that factor has to be taken into account.

I did not quite follow the noble Lord's reasoning on the other point where we differed where I wanted the average price per therm determined whereas he wanted the maximum average price determined. I still have my misgivings about this because the memories are still alive of the undertakings and impressions given in this Chamber during the passage of the Telecommunications Bill. We were given to understand that the rates charge in respect of domestic telephone use was to be subject straightforwardly to the RP minus 2 rule. This did not turn out in the event. What happened was that the price to the domestic subscriber went up by a greater amount than was determined by the formula. The price to the larger consumers in respect of certain long distance calls went up by an amount very much less. The averaging out produced a result in accordance with the formula. We are most anxious to avoid that happening again. We want it to be quite straightforward.

I am not going to press the noble Lord now, but he will understand my anxieties. We want to avoid the situation arising where the general public are given a certain very clear impression. I can provide the noble Lord with a letter written by the Minister to the Economist in which the position was stated in that particular form, which did not afterwards eventuate in the licence itself. If the noble Lord wants that letter, I can most certainly provide it. I am most anxious to avoid that kind of situation.

If the noble Lord will give thought to that aspect—though the matter will be raised again—I shall be most grateful and I am sure that the Committee will be as well. There is nothing to be gained by any kind of subterfuge. Let us have open decisions, openly arrived at, and open government, so that we may know firmly, without any equivocation, precisely what is going to happen.

I now return to the X factor. I am very bothered about the efficiency factor because I have a suspicion that it is all being held up until after the prospectus has been issued and after the issue has been made. I am fearful that the Government themselves may think that if they set the X factor too high, and therefore their estimates of efficiency too high, perhaps the issue price of the shares will be affected thereby, because the increase in price will automatically be restricted.

The noble Lord has always dealt with me very fairly in your Lordships' Chamber, and I have no complaint at all in regard to the way in which he has handled the part of the Bill with which he has been dealing. Will he give me a categorical assurance that the X factor is not being postponed, and that a decision as to its dimension is not being postponed, for purely flotation reasons? If the noble Lord will give me that assurance, it will be of enormous assistance.

I am sorry that I have to refer to one further complicating matter. I regret having to do so because at this early hour of the morning, when we should long ago have finished our breakfasts, the Committee may think it an inopportune moment to raise it. It is an accounting matter. The Committee will recall that when I earlier introduced this particular amendment I referred to the highly successful results of the gas corporation. Those results were on the basis of current cost accounting.

I can understand—and I can provide the noble Lord with the necessary newspaper quotations arid predictions if they would be of interest to him— that the gas corporation is under pressure to change the basis of its accounting from current cost accounting to historic cost. The noble Lord will recall that that is what happened in the case of British Telecom. While the Telecommunications Bill was going through the House, and while public consent to its privatisation was being sought, the figures presented were the current cost accounting figures, which were much lower than those derived from the ordinary historic cost basis; some hundreds of millions of pounds lower.

But once the Bill had gone through the House and had received Royal Assent, and when we came to offer the shares to the public in the case of British Telecom, the Government reverted to historic cost figures to show the investing public what a really fine thing it was. So there was one figure for the passing of the Bill and another figure—a much more optimistic figure —presented to the investing public.

That point raises a totally different issue upon which I do not wish to expatiate any further, except for this purpose. I want to be quite sure that when the figures of any kind are used in this formula they are on a consistent basis; in other words, if the figures of the past are used—and it will be necessary to go into the past for the determination of previous years for the purpose of the application of the formula itself—let them have a constant basis. All the figures should be on a current cost accounting basis or all of them should be on historic cost basis.

I am entitled to ask for that undertaking from the noble Lord because otherwise a gross distortion is produced. In this case, for example, in 1984–85 the retained profits on a current cost accounting basis were £524 million, but on a historic cost basis they were £930 million. That is a considerable difference.

I know that the matter is technical and that the hour is early, or late, according to whichever way one looks at it, but this problem arises largely from the fact that the current cost accounting method—and I shall not go into all the refinements—values the fixed assets of a company (plant, machinery, and so on) at the replacement value rather than their historic cost less depreciation. That means that every year the costs of the company carry a higher depreciation burden than they would have done if historic cost accounting had been used. Since depreciation is one of the factors in costs which enter into whichever formula is used and in whatever circumstances—whether in the authorisation or in the Bill—the noble Lord will I am sure immediately apprehend that consistency in accounting treatment, particularly in regard to depreciation, is of the utmost importance if there is to be a complete avoidance of any fiddle in the calculations that emerge from the application of the formula.

I should be greatly obliged if the noble Lord would respond in such terms so as to enable me, subject to the wishes of any other noble Lords who may speak on the matter, to withdraw the amendment in due course, but with the objective of returning on Report, I must promise him, once again to this whole question, which is of vital significance.

8.45 a.m.

Lord Belstead

Three points arise from the noble Lord's remarks in this short debate. First the noble Lord expressed anxiety arising from the difference of choice which has been made by him and his noble friends, and that of the Government, in choosing either the maximum average price or the average price. The noble Lord explained that he is concerned—and it is his view, not mine or that of the Government—about differences in price rises in British Telecom after privatisation when, so he said, smaller subscribers were facing larger rises than were larger subscribers.

I accept from the noble Lord the literal facts that he gave, but there are very important interpretations about that which I will not go into at the moment because they are outwith our discussions. But on this first point, and because our proceedings are liable to be reported, I have to say that this is a formula in this Bill which applies to tariff customers only. Therefore, if I may say so, any comparison which anyone wishes to make—and I do not accept the comparison with British Telecom—must fall because it cannot apply to this particular formula. The noble Lord is good enough to nod. I really had to make that point.

My second point refers to the direct question that the noble Lord asked me about the use of current cost and historic cost accounting figures for the run-up to privatisation. I can assure the noble Lord, Lord Bruce, that there is no disagreement on the accounting presentation of British Gas's results and that the fullest possible disclosure of the results will be made in due course. We shall, of course, ensure that the results can be interpreted on a consistent basis.

Finally, both the noble Lords, Lord Diamond and Lord Bruce, reverted once again to the X factor. In essence the noble Lord, Lord Diamond, said that the Government had to get it right, and he complained again about the Government not being able to give the X factor at the present time. I quite understand the noble Lord's complaint, but I have been over that ground before.

The noble Lord, Lord Bruce, asked a more detailed question about timing. He asked whether it were the case that the X factor computation was being held up because of flotation. The figure for X will have to be set well ahead of the flotation, since before the sale of shares the whole of the regulatory arrangements must be set up, and I can give the assurance for which the noble Lord asked.

Lord Bruce of Donington

I am greatly obliged to the noble Lord for his answer, as well as for the way in which he has replied and the reasonableness of argument that he has shown. As I have said, we shall once again return to the arguments at a later stage in the Bill. In the meantime, unless any other Member of the Committee wishes to speak, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Williams of Elvel moved Amendment No. 101C:

Page 76, line 35, at the end insert— ("( ) The public gas supplier shall not, in the case of the tariff customer, make an allowance for gas not consumed or a surcharge for gas consumed more than once in any calendar year.").

The noble Lord said: I beg to move Amendment No. 101C in the words as printed on the Marshalled List. This amendment returns to the theme of under-and over-estimating. We previously had a discussion on this point in which the noble Lord, Lord Gray of Contin, was kind enough to recognise that we had difficulties on the question of estimating bills. On the basis that the noble Lord might wish to offer further comment on the question of over- and under-estimating and might give us an assurance that this matter will be taken with great seriousness by the Government, and on the basis that the whole question is of great concern to these Benches, I think I am prepared to listen to what he has to say and to act accordingly. I beg to move.

Lord Gray of Contin

We have already had a substantive debate on an earlier amendment (Amendment 100ZA) where I made plain my concern about the Opposition's desire to tie the hands of British Gas in the way in which it measures the quantity of gas used by a consumer.

This is an area where we consider that it would be most beneficial both to the consumer and to British Gas to allow the supplier flexibility to arrange meter reading as it sees fit. I would also point out that there are many domestic gas consumers who I fear would find it extremely inconvenient if BGC were limited to only one estimated reading in a year. In particular, households where all the occupants are out at work during the week may find it an advantage to have an estimated meter reading rather than arranging to stay at home to give access to a meter reader. Such an arrangement is of particular benefit where the customer has adopted a flexible payment arrangement.

As I have pointed out in response to an earlier amendment, meter reading is extremely onerous and expensive, and the costs are inevitably passed on to the consumer. Given these high costs, we consider it right to allow suppliers the option of taking advantage of new developments and new technology to improve their service to customers and to limit those costs where practicable.

As I think I have said on one or two occasions to the noble Lord, I can see the reason why he has put down the amendments. However, in view of my explanation I hope that the noble Lord will accept that I cannot agree to place a statutory limitation upon a public gas supplier's use of estimates or customers' readings. I must therefore ask the noble Lord to consider withdrawing his amendment.

Baroness Gardner of Parkes

The problem is that the energy authorities do not like to have more than one estimated account, but access is often a major difficulty. Sometimes they can attend 10 or 20 times. They will arrange special appointments and do almost anything to read the meter, but access can be prevented; and that is frequently because someone has a high reading for which they do not want to be billed. However, if someone is given a high bill, they will rapidly send in one of the cards and point out that they owe much less. I do not think that that is a problem.

With regard to the cost of meter reading, when I went on an official visit to France it was interesting to note that the gas and electricity meters are read at the same time. That is an enormous saving in cost. Perhaps we could look at something like that in this country.

Lord Williams of Elvel

I am grateful to the noble Lord, and to the noble Baroness, Lady Gardner, for her intervention. She may have provided the noble Lord with some ideas at which his officials might like to look. We may come back to this point at a later stage. In the meantime I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Williams of Elvel moved Amendment No. 101D:

Page 77, line 14, leave out sub-paragraph (5) and insert— ("(5) If a tariff customer has not, after the expiry of twenty-eight days from the making of a demand in writing by a public gas supplier for a payment thereof paid the charges due from him in respect of the supply of gas from the supplier to any premises, the supplier shall give seven days' notice in writing that he intends to seek recovery of such a debt in a court of competent jurisdiction, and in England and Wales this debt shall be so recoverable as a simple contract debt. (5A) The public gas supplier shall not have the power to cut off the supply to the premises by disconnecting the service pipe, at the meter (whether the pipe belongs to the supplier or not) unless the supplier is in possession of a valid court order permitting him to cut off the supply. (5B) In making such an order the court shall have the power to ascertain any reasonable circumstances that may have led to the default, and shall also have the power to examine the circumstances of the tariff customer and judge whether the action of the public gas supplier is reasonable in those circumstances; the court shall have the power to determine, in cases of cut off of the supply of gas in consequence of such a default, the level of reasonable reconnection charges incurred should the supply be resumed.").

The Deputy Chairman of Committees

I am advised that if this amendment should be agreed to, I would not be able to call Amendments Nos. 102 or 102A.

Lord Williams of Elvel

I come to a point different from that of the previous amendment. The amendment seeks to set out in statutory form the code of practice that should be followed by the corporation in realising its debt—getting in its cash.

British Gas has an excellent record of getting in its cash without resort to disconnection. That is a tribute to the way British Gas has operated the code of practice. We should like to see it continued by the privatised corporation. Under the new dispensation we are not entirely convinced that the consumer has the protection that we think is necessary and in the amendment we set out a procedure which would involve an independent party and we describe the procedures that such a party (the court) should follow to determine various steps. We feel that this or something like it is necessary.

I hope that the noble Lord will consider this amendment sympathetically and that if he cannot accept exactly this amendment, he will see what he can do about accepting something else. I beg to move.

Lord Gray of Contin

The Government are of course fully aware of how unpopular disconnection powers are and how they tend to cause irritation all round. Disconnection is a last resort. It is not a course that any energy body seeks to take lightly.

Public gas suppliers, like the corporation now will have a statutory obligation to supply in respect of the vast majority of existing consumers. The Government have set great store by preserving the existing right of supply of customers within 25 yards of a distribution main. Indeed, we have gone so far as to extend the obligation so that all existing customers connected to such a main, even though more than 25 yards from it, can insist on a continued supply.

These are onerous obligations and it is only right that where customers fail to honour their obligation to pay for gas consumed, there should be the ultimate sanction of disconnection. I can assure the Committee that disconnection is very much a last resort and all possible steps are taken by the industry to avoid it. But it would be grossly unfair and economically damaging to the industry to remove this ultimate sanction, since, unlike goods such as televisions or refrigerators which are one-off items, a gas supply is a continuing one and, if there is no opportunity to discontinue or suspend the supply, the debt will simply go on mounting.

At the same time the Government and the industry accept that there must be protection for the more vulnerable groups in society. That is why the industry introduced its code of practice on paying electricity and gas bills and why British Gas will be required under the terms of its authorisation to continue such a code. British Gas has already stated its intention to maintain the existing code which gives particular protection to the elderly during the winter months.

The amendment seeks the involvement of the courts in the question of disconnection. This system suffers from one of the disadvantages that I have already outlined; that is, the time taken to bring a case before the courts whether for recovery of a debt or for disconnection itself would mean that the debt to the supplier continued to increase, without any certainty as to when it might be fully recovered. In addition, there would be a considerable burden on the courts themselves. But there is already court involvement in a significant number of cases.

Where a defaulting customer refuses a supplier entry for the purposes of disconnection he must apply for a magistrate's warrant under the terms of the Rights of Entry (Gas and Electricity Boards) Act 1954. Before granting a warrant a magistrate must be satisfied that access is reasonably required, that a right of entry exists and that the requirements of the enactment conferring the right (such as the requirement to give notice under paragraph 15 of Schedule 5 to the Bill) have been complied with. These requirements thus give a substantial role to the courts in the matter of disconnection and provide the kind of protection which noble Lords are seeking in the amendment.

As to the costs of reconnection, paragraph 7(6), enabling the public gas supplier to withhold supplies until any default has been made good and the reasonable costs of reconnection paid, provides a defence to the general supply duty under Clause 10. Thus if the withholding of the supply turned only on the reasonable costs of reconnection, the director would be able to step in, using his enforcement powers under Clause 28 if this proved necessary.

The provisions as to supply and discontinuance of supply have been finely balanced in the Bill and there is a significant level of protection for the consumer through the code of practice on disconnection, the involvement of magistrates and the enforcement role of the director. We believe that what noble Lords are seeking is adequately covered in the Bill.

I am grateful to the noble Lord for the brevity of his introduction. I apologise for my rather lengthy reply, but I felt that I had to do him the courtesy of giving him a full explanation since he did not take up too much of the time of the Committee.

9 a.m.

Lord Graham of Edmonton

The Minister has been helpful in pointing out current practice and the intention, but I see nothing wrong with the practice advocated in the amendment. I believe that the Minister once again overstates the burden that will fall upon the supplier if we were to carry some of our amendments. He said that the provision would be grossly unfair and damaging to suppliers. All that the amendment seeks to do, particularly at the top of page 42 in subsection (5A), is to prevent the public gas supplier having, the power to cut off the supply to the premises … unless the supplier is in possession of a valid court order". The Minister proceeded to point out the problems of getting court orders. There are problems. Yes, it will take time. If we seek the remedy of speeding up court procedures, we must bear in mind our experiences over the past two or three days with the hippy caravan. Nothing could be done until someone decided suddenly that something would be done. Laws are inadequate until someone decides, because an intolerable burden is being imposed on others by a nuisance, that something shall be done. If the Minister is saying that it takes time for the law to be implemented, we should recognise that we are talking about consumers who have, unfortunately, landed themselves into difficulties, and we must speed up the procedures of the supplier or the courts.

The Minister talked about a last resort. With my experience of looking after constituents when I was in another place I have the greatest respect for the gas and electricity industries and for councils which have to deal with bad debts. No public authority willingly seeks access to the courts as it realises that that takes time and money and causes distress. The authorities go to the courts only when there is no other course.

As the noble Baroness, Lady Gardner of Parkes, has said, there are those who almost deliberately do not pay until the last minute, and do so regularly. They are exceptions, but they exist. I am not talking about a tiny minority, as the noble Baroness has said, but a sizeable one. The sums involved are large and the cost of recovery and the debt of non-recovery are borne by the rest of us. Most public authorities, however, have ways and means of recognising when people are being deliberately bad in their response, and they are treated accordingly. I have little sympathy with those who have had chance after chance.

At the same time I came across people about whom I had to form a judgment. They had been in difficulties time after time and I formed a balanced judgment. The noble Lord the Minister has said that there needs to be a balance, and in some instances I formed the view that certain individuals should be given the benefit of the doubt, or sympathy.

I have great faith in the ability of public servants to use their nous, their intelligence and the stick and the carrot to get people to pay their debts without having to go to the courts. I see nothing wrong with the amendment, however, and subsection (5B) provides that before the court makes the order it, shall have the power to ascertain any reasonable circumstances that may have led to the default". I happen to know from my experience, too, that the gas company or the electricity board will often decide to be sympathetic in the end following a bureaucratic response or action that has been taken under pressure. This happens sometimes when the circumstances of the individual are examined. I have listened and been sympathetic and I have spoken to someone in the company or board above the person who took the original decision, which might have been a little hasty or slightly unfair.

I see the amendment as one which will make it necessary for the supplier to provide evidence to support the drastic action that it wishes to take. In my view it is the families with young children that will suffer and not the elderly. Very often these are single-parent families, with the parent being a woman. It is these families that will find themselves disconnected. I hope that my noble friend Lord Williams of Elvel, who moved the amendment, will not take lightly or easily the Minister's view that the present practices are adequate.

Baroness Gardner of Parkes

It should be said, I believe, that we impose on our energy authorities in this country a great burden of social problems that should really be the responsibility of the social services. It is quite an education to go to France and to see there that no thought whatever is given to people who have not paid anything. They are cut off in one moment. I would never advocate such action here. Our present procedures are very adequate and very caring, and require no amendment. The court procedures are good and the additional one that has been suggested is too much.

Lord Williams of Elvel

I wonder whether the noble Lord can reply to some of the points made by my noble friend Lord Graham. These were of considerable importance. I wonder whether he will also reassure me on one particular point. In his original reply he said that the proposed authorisation that would become the authorisation contained a requirement to abide by a code of practice. There have been a number of debates during the Committee stage about how such authorisation might be modified. I hope to have an assurance from the noble Lord that one of the things least likely to be modified is the requirement to adhere to the code of practice. The noble Lord can perhaps reasssure us.

Lord Gray of Contin

Obviously, I cannot give the noble Lord an absolute assurance. It will be an issue for the British Gas Corporation to resolve itself. I have sufficient confidence in the corporation to feel sure that it has no intention of removing that requirement from the authorisation.

I should like to deal with one or two points raised by the noble Lord, Lord Graham, if I may have his attention for a moment. I can appreciate the strong feelings he expressed. Like the noble Lord, I came across cases while in the other place of constituents who were cut off and who felt most aggrieved. There were not all that many cases, I am bound to say. In general, I found that there was a very good reason for their being cut off. They had received innumerable warnings—many more than they could have reasonably expected. Nevertheless, that did not reduce the hardship. That is why I had hoped in my original answer to highlight the fact that disconnection is very much a last resort, as it always must be. But to remove it would be a great mistake.

The noble Lord said that he saw nothing the matter with the amendment. I am not critical of the amendment as such. I tried to explain that I did not think that the amendment was necessary or that it would do anything to improve the situation. I believe that the situation is already covered. That was my main reason for not accepting the amendment. I take the points that have been made, but I believe that we have already been able to deal with the solutions within the Bill and the authorisation.

Lord Graham of Edmonton

I should be grateful if the Minister would deal with this point, if I have it right. The amendment proposes that disconnection shall not take place until a court order has been obtained. In order to obtain the court order the case has to be made that it is not unreasonable to disconnect. Under present practices the supplier needs to be satisfied that he has a grievance. This will mainly be the non-payment of bills. He then disconnects. The Minister says there is no difference. For the person in trouble, whether he has the right to plead his case before an independent arbitrator, namely the court, or whether he has no redress, the fact is that he is given notice. When he fails to pay within 28 days he is given a final demand. He fails to pay, and he is then disconnected. There is surely an enormous difference. Can the Minister tell me whether I have got the difference right between the practice which he believes will work and that which this amendment seeks to carry out?

9.15 a.m.

Lord Gray of Contin

I think that the best I car do is to repeat what I said earlier, because the noble Lord may not have picked it up. The amendment seeks involvement of the courts in the question of disconnection. This system suffers from one of the disadvantages which I have already outlined. The time taken to bring a case before the courts—whether for a recovery of a debt or for disconnection itself—would mean that the debt to the supplier continued to increase without any certainty as to when it might be fully recovered. In addition, there would be a considerable burden on the courts themselves. There is already court involvement in a significant number of cases. Where a defaulting customer refuses a supplier entry for the purposes of disconnection the supplier must apply for a magistrate's warrant under the terms of the Rights of Entry (Gas and Electricity Boards) Act 1954. Before granting a warrant a magistrate must be satisfied that access is reasonably required, that a right of entry exists and that the requirements of the enactment conferring the right, such as the requirement to give notice under paragraph 15 of Schedule 5 to this Bill, have been complied with.

In those provisions, I see very real safeguards. One must always make a judgment in these matters. I do not believe that what is suggested in the amendment would be better than what already exists. It is as simple as that. I have explained it twice now. I believe that these safeguards are very full indeed. For those reasons I do not believe that the amendment is necessary.

Lord Graham of Edmonton

I am grateful to the Minister for attempting—as he says, twice—to convince me that the practices which will be carried out under the Bill are no less fair to the person involved than is our amendment.

With great respect, he has slid around the central point. A court order must be obtained if access to disconnect is resisted or refused. In my view, if people are told that unless they pay their bill within seven days, they will he disconnected, there are not that many who will refuse admission. They know that they are guilty, that they have not paid. It would be interesting to have the statistics as to how many notices of intent to disconnect are resisted, or where a court order has to be obtained. In my view the court order is needed in a lower percentage of cases.

The Minister persists in making a great deal of the burden on the courts and the time that is takers up. I give one example of how quickly procedures can be speeded up. I suggest to the Minister that one needs to look very quickly at the bureaucracy that is involved in getting court orders. The last thing I want to do is to burden the courts with very small matters. They may be very small matters, but for a one-parent family with a child, with such hardship, to be cut off is a very big event.

The Minister talks about the debt continuing a little longer. With a debt of, say, £200, if it takes a month to get to court, the court has to make a determination on amount. I accept that. I say that I am prepared to pay my share towards carrying that marginal harden because we are talking about people who in the main need help. The Minister is quite fair in point nig out that if consumers are given good advice, they can be assisted by such methods as prepayment, deferment, and so on. I am certainly not unmindful of the irritation which those who pay rates and taxes feel when others find a way around doing so.

I simply say to the Minister that I am satisfied that the present practice is more likely to be harmful to genuinely—and this is my term—feckless people, and not the real villains. The real villains deserve what they get. However, the feckless people—those who need assistance—will be worse off under the present practice than under the amendment.

Lord Williams of Elvel

I am afraid that the noble Lord has not convinced my noble friend Lord Graham of Edmonton of his case, and I am bound to say that he has not really convinced me. We shall have to read very carefully what he has said, and I suspect that we may be coming at the same problem from a different direction in a very few minutes. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 102 not moved.]

Lord Diamond moved Amendment No. 102A:

Page 77, leave out lines 20 to 23 and insert—

1. ("(a) seek an order from the court to cut off the supply to the premises by disconnecting the service pipe at the meter (whether the pipe belongs to the supplier or not) or by such other means as he thinks fit; and
2. (b) if such an order is granted recover any expenses incurred in so doing from the customer.

In deciding whether to make an order for the purpose of paragraph (a) above the court shall have regard to provisions of the Code of Practice for payment of bills.")

The noble Lord said: I shall move this amendment very briefly, because it is not very different from the amendment—

Lord Belstead

I hope that the noble Lord will forgive me for interrupting him, but will he also be dealing with Amendments Nos. 102AA, 102B and 102C?

Lord Diamond

I was about to make that very suggestion. I shall move the amendment very briefly because it is not so very different from the amendment which has recently been discussed. It was, I understand, thought that had Amendment No. 102 been moved, it would be for the convenience of the Committee if Amendments Nos. 102A, 102AA, 102B and 102C were also discussed at the same time. Therefore, I propose to follow that course.

Amendment No. 102A, which I am now moving, is quite simple. It takes the Bill as it stands and brings in the court. The Bill as it stands says that if a tariff customer has not paid the charges due, the supplier may cut off the supply. The proposed amendment says: "No, you must first seek an order from the court to cut off the supply", and you then proceed in the way in which the Bill itself provides. The difference is quite simple—it brings in the court, and we think that it should bring in the court. We think that it is quite wrong that the only protection that the Bill affords is what is stated in the paragraph.

We go on to say in Amendment No. 102B that "the court" means the High Court. Sub-paragraph (7) says: Where a public gas supplier has cut off the supply of gas"— in this approved manner— the supplier shall not be under any obligation to resume the supply of gas to the customer until he has made good the default and paid the reasonable expenses". That puts the supplier in a perfectly satisfactory position. So the only difference is that we think that the court ought to be brought into such an important procedure affecting in such an important way the living standard of individuals.

I have also been asked to refer to Amendment No. 102C, though that deals with a rather different point. As noble Lords can see, it says: There is a duty on all suppliers of gas to provide an adequate network of facilities for payment of bills and access to information and advice". That is a very reasonable provision in order to assist the would-be payer and to see that there are no undue difficulties or barriers put in his way, so that the difficulties which have been referred to earlier and which necessitate court proceedings need not arise. I beg to move.

Lord Gray of Contin

As the noble Lord, Lord Diamond, pointed out, we have already had a substantial debate on disconnection matters under Amendment No. 101D, which was also tabled by the noble Lords, Lord Bruce and Lord Stoddart. The theme of these amendments is similar and it is rather unfair that they should seek to have two bites at the cherry in this way.

Nevertheless, since they are paired with amendments from the noble Lord, Lord Diamond, and the noble Baroness, Lady Burton, it may be useful if we examine some of the issues again, given the considerable importance which all sides of the Committee attach to this question.

There is already a role for the courts in matters of disconnection, since if entry for the purposes of disconnection is refused, a magistrate's warrant must be obtained under the Rights of Entry (Gas and Electricity Boards) Act 1954. The terms of this Act ensure that a warrant is not issued lightly, since a magistrate must be satisfied on sworn information in writing that the requirements of the relevant enactment have been complied with. Moreover, as an additional protection the director would be able to intervene in a case of wrongful disconnection backed up by his Clause 28 enforcement powers, because that effectively would be a breach of the duty to supply under Clause 10.

The first Amendment, No. 102A, would seek to require the courts to have regard to the requirements of the code of practice on paying gas and electricity bills before granting a court order for the purpose of disconnection. We believe that the courts are already involved to the extent necessary, but the code of practice, to which British Gas have agreed that they will adhere after privatisation, is for the guidance of suppliers in their dealings with consumers. Thus in the event there was involvement of the courts the procedures set out in the code of practice would already have been gone through.

The third Amendment, No. 102C, would require public gas suppliers to provide an adequate network of facilities for payment of bills and access to information and advice. Clearly it will be in British Gas's interest to make available a wide range of facilities for payment of bills, and showrooms will continue to provide an important point of contact for this and other purposes.

Certainly British Gas have closed a number of uneconomic showrooms. There is nothing new in this; and it would be wrong to seek to prevent them taking commercial decisions. However, opportunities have been taken to open profitable new outlets, and showrooms will continue to provide the backbone of customer service. As to information and advice on paying bills, this is already included in the code of practice which British Gas will be required to maintain under the terms of Condition 12 of British Gas's draft authorisation. British Gas also make clear on the bills themselves the methods by which payments may be made.

We are not by any means unsympathetic to the hardship to which disconnections can give rise. Nevertheless, we believe that it is right to carry forward the existing arrangements and to provide for protection of vulnerable groups by other means. We believe that this is achieved by the code of practice, and we do not feel that closer involvement of the courts is either necessary or indeed appropriate. I cannot accept the amendments, and I hope that the noble Lord will consider withdrawing them.

Lord Gallacher

We shall not move Amendment No. 102AA. We are, however, in support of the amendments of the noble Lord, Lord Diamond, Nos. 102A and 102B, and we are also in support of Amendment No. 102C. I note with appreciation the rather sympathetic response the Minister has given to 102C, although not to the other two amendments. I presume that that indicates that when we come to Amendment 106A he may be sympathetically disposed towards it. In the meanwhile we support the amendments tabled by the noble Lord, Lord Diamond.

Lord Diamond

I am grateful to the Minister for the consideration he has given and for his full reply, in particular having regard to the fact that we had a similar discussion only a short time ago. I know he will acquit me of any attempt to be unfair. He said it was rather unfair that we were having a second go. We were not consulted as to any possible grouping with the earlier amendments. Had we been, I would have consented readily because of the similarity of the substance.

Although I am grateful to the Minister for what he said about Amendment No. 102C—which, in effect, was that he agreed with what we said but not with putting it in the Bill; and we prefer that it should go into the Bill—what he said about Amendments Nos. 102A and 102B was, in our view, totally unsatisfactory. We need protection for people who are to be disconnected in this way. It is a very deep interference in their lives and I think that the Committee should take a view on it.

9.30 a.m.

On Question, Whether the said amendment (No. 102A) shall be agreed to?

Their Lordships divided: Contents, 26: Not-Contents, 45.

DIVISION NO. 13
CONTENTS
Airedale, L.	John-Mackie, L.
Blyton, L.	Llewelyn-Davies of Hastoe, B.
Bruce of Donington, L.	Ponsonby of Shulbrede, L.
Cledwyn of Penrhos, L.	Rhodes, L.
Crawshaw of Aintree, L.	Rochester, L.
Davies of Penrhys, L.	Seear, B.
Diamond, L.	Shepherd, L.
Fitt, L.	Stedman, B. [Teller.]
Gallacher, L.	Stoddart of Swindon, L.
Graham of Edmonton, L.	Taylor of Blackburn, L.
Hanworth, V.	Taylor of Mansfield, L.
Hatch of Lusby, L.	Tordoff, L. [Teller.]
Heycock, L.	Williams of Elvel, L.

NOT-CONTENTS
Belstead, L.	Long, V. [Teller.]
Brabazon of Tara, L.	McAlpine of Moffat, L.
Brougham and Vaux, L.	Marshall of Leeds, L.
Caithness, E.	Mersey, V.
Cameron of Lochbroom, L.	Middleton, L.
Coleraine, L.	Monk Bretton, L.
Cottesloe, L.	Montgomery of Alamein, V.
Cowley, E.	Norrie, L.
Davidson, V.	Pender, L.
Denham, L. [Teller.]	Radnor, E.
Eden of Winton, L.	Rankeillour, L.
Elliott of Morpeth, L.	Sanderson of Bowden, L.
Elton, L.	Sandford, L.
Gibson-Watt, L.	Sandys, L.
Glenarthur, L.	Shannon, E.
Gray, L.	Skelmersdale, L.
Gray of Contin, L.	Teviot, L.
Gridley, L.	Torrington, V.
Hives, L.	Trefgarne, L.
Hooper, B.	Ullswater, V.
Kaberry of Adel, L.	Whitelaw, V.
Kimball, L.	Young of Graffham, L.
Kitchener, E.

9.37 a.m.

[Amendments Nos. 102AA, 102B, 102C and 103 not moved.]

Lord Denham

I think that probably, for the sake of all the people who serve us throughout the House, we ought to adjourn at this moment and resume the House. If no noble Lord objects, I beg to move that the House do now resume.

House resumed.

House adjourned at twenty-one minutes before ten o'clock.