Lords Sitting of 11 June 1986

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

Tourist Industry: Booking Cancellations
Lord Hatch of Lusby: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government how many tourists they estimate to have cancelled their visits to this country as a result of the bombing of Libya, what the economic loss will be and what help they are offering to the British tourist industry.
The Secretary of State for Employment (Lord Young of Graffham): My Lords, precise details of the number of cancellations by prospective tourists, since the attack on Libya, are not available. At worst, the tourist industry had estimated that the number of visitors from the United States of America could be down as much as 15 per cent. this year, representing a drop in tourist spending of some 3 per cent.
Nevertheless, there are signs of an early upturn in business. The Director-General of the British Tourist Authority, who recently returned from the United States, has said that forward bookings are now "back on the right track" and that tourist inquiries of BTA offices are returning to their former levels. I can also assure your Lordships that the Government are taking all possible steps to convey the message to prospective visitors that Britain is a very safe and enjoyable destination.
Lord Hatch of Lusby: My Lords, is it not ironic that an action which was described by the British and American Governments as making the world a safer place to live in has had as its first impact a sense of fear so far as American tourists are concerned? Although I realise that the Minister cannot give precise numbers, is it not the case that the tourist industry itself estimates that 30 per cent. of the American tourists expected will not come this year, which represents 30 per cent. of a quarter of all the tourists expected in Britain?
Lord Young of Graffham: No, my Lords. I must leave the sense of irony to the noble Lord; I do not share it. I should have thought that making the world safe from terrorists was the best possible way to lay the foundation for a good international tourist business. But I must tell your Lordships that it appears that the temporary drop in the number of American tourists came primarily from those who were coming on group tours. The vast majority of American tourists coming under their own resources continue to come. Indeed, if I may quote from the Director-General of the British Tourist Authority, who is just about to retire after 40 years in the tourism business, he said:
250
"Consumer inquiries at BTA's five offices in the United States are returning to former levels, with the New York office alone reporting in excess of 500 inquiries a day during the past week"—
and that was last week. He went on to say:
"If there is one thing I have learned in my 40 years of promoting travel to Britain, it is never to underestimate the power of recovery of the American travel market."
Lord Annan: My Lords, is the noble Lord not puzzled by the tenor of this Question and the inference in it? Surely it is the kidnapping and murder of American citizens, and the hijackings of American aircraft, that may have dissuaded some Americans from crossing the Atlantic. And is it not a fact that many American tourists, when they cross the Atlantic, want to visit not merely this country but other European countries? Might it not be the fact that some European countries have not responded as strongly as this country which has dissuaded American tourists from coming?
Lord Young of Graffham: My Lords, if I may make a confession to your Lordships' House, I have often felt some puzzlement in looking at the origin of some of the Questions from the noble Lord. But I must say that we should not forget that, also, before whatever action was taken against Libya, an American family, including an 18 month-old baby, was blown out of an American plane by terrorist action. What we have to do is work together in a concerted effort to reduce the level of terrorism and to make this a world safe to travel in.
Lord Beloff: My Lords, does my noble friend the Minister agree that we must look at all possible sources for the reluctance of some Americans to visit us? May I call his attention to a remark made to me by an American who frequently visits this country and has done so over many years? What depresses him is what he finds for the first time this year—concerted anti-American propaganda, of which we have had some very marked examples in Questions in your Lordships' House in recent months?
Lord Young of Graffham: My Lords, I should make it very clear that we welcome visitors from all countries to our shores. We welcome those who speak our language as well as those who do not. Our overriding desire is to ensure that those who come to our shores wish to come here again.
Lord Parry: My Lords, will the Secretary of State and the House accept my apology for late entry? I came in when the noble Lord was in fact speaking. Has he had an opportunity which I have missed, to congratulate British Airways on its massive initiative in having recouped a very great deal of the lost traffic by a splendid and professional appeal to the United States, to its people and to their interest in a little free travel? If he has the opportunity to do that now in the discussion here, could he also end it on the very positive note that there are a great many American people already appearing here and that the trade, the people of Great Britain and everyone in this House welcome their presence?
Lord Young of Graffham: My Lords, I am very glad to hear what the noble Lord has said.
Lord Kinnaird: My Lords, is this not a strange Question? What is it trying to say? It seems to me that it is saying, "Never stand up to a bully in case you get hurt."
Lord Shackleton: My Lords, is the noble Lord aware that some Canadians are alleged to have cancelled coming to Europe for fear of Sikh terrorists blowing up Air India planes, and that the Libyan terrorists are not the only ones in this world?
Lord Young of Graffham: My Lords, I am very grateful to the noble Lord. That surely demonstrates, once more, that an essential part of the policy of all civilised nations must be to eliminate terrorism, whence-ever it comes. Just to assure all your Lordships, may I say that for the first three months of this year, which are the only months for which we have yet published figures, the number of visits increased by 10 per cent. to 2·6 million and that visits from North America increased by 15 per cent., while spending was constant and increasing. I suspect that we shall show a drop, particularly from North America, in April and May, but I have no doubt that with many events to come we shall see a resumption of the sustained growth of this economy.
Lord Ponsonby of Shulbrede: My Lords, will the noble Lord not agree that the question of terrorism may have been only a single contributory factor in the particular decisions that have been taken and that probably the pound-dollar relationship had more impact on the tourist figures? We hope that the so-called cancellations may be only postponements of decisions to visit the United Kingdom. I think they are and that many Americans may be visiting over a number of years and can easily postpone a visit and come next year.
Lord Young of Graffham: Yes, my Lords, as well as the pound-dollar relationship, there was the dollar-deutschemark relationship and the dollar-French franc relationship. The American dollar dropped in purchasing power which initially must have affected some decisions. But we have seen in the past six months a drop in the price of oil. We are now beginning to experience a considerable reduction in the cost of transatlantic fares and I have no doubt that all these things will level out.
Lord Kennet: My Lords, while I agree with much that the noble Lord has said, may I ask him to beware of falling into the trap of rewriting history? Is it not the case that the cancellations became apparent, not after the hijackings and assassinations which he has mentioned, but after the attack on Libya?
Lord Young of Graffham: No, my Lords; it is not for me to say what is in the mind of Americans. But I suspect that it had a great deal to do with the singling out of Americans wherever they were overseas.
Lord Molloy: My Lords, will the noble Lord the Minister agree—I think he is bound to do so—that all civilised people and all civilised nations must be totally and absolutely opposed to any form of terrorism and to any financiers of terrorists? Will he not further
252
agree—and perhaps the United States acknowledges this in that the President of the United States has agreed to the extradition of IRA terrorists, who are financed by organisations in the United States—that we have behaved in an exemplary manner? The argument really is about this: there can be right ways, tough ways and hard ways, and there can also be wrong ways and dangerous ways, of dealing with appalling terrorists.
Lord Young of Graffham: My Lords, that is a long way from the Question, which is specifically about Libya. But I will agree that we must deal with terrorism in the best way possible. The best way is often a firm way, but we must deal with it.
Lord Mellish: My Lords, is the Minister aware that cancellations may well have something to do with our lousy weather?
Lord Young of Graffham: My Lords, this morning I had the great distinction and pleasure of taking the Secretary General of the People's Republic of China, Hu Yaobang, down the River Thames. I regret to inform all in your Lordships' House that it did not stop raining. That did not help the tourist industry.
Baroness Fisher of Rednal: My Lords, does the noble Lord the Minister recall that the Prime Minister herself went to the United States, spoke on television, and appealed to American tourists not to cancel their bookings, saying that Britain is a much safer place than New York? Was she not so concerned about the loss of revenue to the tourist industry that she went on breakfast television, noonday television and every other television network in the United States to make that appeal?
Lord Young of Graffham: My Lords, my right honourable friend the Prime Minister gave an interview which was shown on American television and which I believe did a great deal towards reassuring American tourists. The wife of the President, Mrs. Nancy Reagan, announced that she was coming to London for the Royal Wedding. What we have seen and what the BTO is reporting now is a resumption of the former situation. I hope that the cancellations will just turn out to be an unhappy incident.
Lord Hatch of Lusby: My Lords, is it not a peculiar form of priorities for the Prime Minister of this country to go on American television to appeal for the tourist industry when the Government have always said—and the noble Lord himself has constantly said—that the Government cannot intervene with regard to manufacturing industry? Considering that it requires a 3 per cent. increase in service industries to make up a 1 per cent. reduction in manufacturing industry, is it not a peculiar set of Government priorities that the Prime Minister should be heading the drive of the tourist industry—in other words, the service industries—but removing herself and the Government from any intervention in the collapse of manufacturing industry?
Lord Young of Graffham: My Lords, I expressed a sense of puzzlement at the motives behind the original

253
Question. I must confess to be even more puzzled at this supplementary question. If my right honourable friend the Prime Minister is asked to give an interview to be shown on American television, what could be more natural than that she should say that this country is a safe place to be, and invite American tourists to come back? We need industry, we need the service sector, we need tourism—we need everything that creates wealth and promotes jobs.
Viscount St. Davids: My Lords, with regard to my noble friend's sense of puzzlement, is he not surprised that the noble Lord who asked the Question is unable to link courage and fear? Is he not aware, as I am sure he is, that any time I have had to do anything particularly courageous, I have felt very considerable fear up to the point of being physically affected? If one is courageous is not the ultimate result that one's friends back one considerably more because of one's courage?
Lord Young of Graffham: My Lords, we are now straying a very long way indeed from the Question. I think that we should let it go at that.

Gibraltar: Future
2.50 p.m.
Lord Vernon: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether, in the interests of good Anglo-Spanish relations and in the light of the remarks by the King of Spain during his recent visit to this country, they will now reconsider their attitude to the future of Gibraltar.
Baroness Hooper: My Lords, the British and Spanish Governments are discussing their differences over Gibraltar in the friendly and co-operative spirit that befits two European allies and partners. Those discussions are taking place against the background of the British Government's commitment to honour the wishes of the Gibraltarians.
Lord Vernon: My Lords, I thank the noble Baroness for that reply. Is she aware, however, that circumstances have changed very dramatically over the past few years; that Spain is now a democracy and a member of the European Community? Would it not be in the interests not only of Great Britain and Spain but also of the people of Gibraltar in the longer term that sovereignty over Gibraltar should be transferred to Spain, subject to the necessary safeguards, such as a lease-back or any other arrangement that may be appropriate?
Baroness Hooper: My Lords, we are fully aware of the changes and transformations that have occurred in Spain over the past few years, and not least of the importance of Spain's entry into the European Community in that context. The important point in this respect is that the process of negotiation has begun and that the climate has been improved. As King Juan Carlos himself said here in this Parliament, there remains a long way to go. It is very important to us that discussions on sovereignty at all times take place
254
against a background of firm political commitment to the Gibraltarians.
Lord Boyd-Carpenter: My Lords, is my noble friend aware that relations between this country and Spain are not helped, but are indeed hindered, by linking them with a claim to override the wishes of 27,000 British subjects who, so far at any rate, have indicated that they desire to remain British? Will my noble friend advise our Spanish friends that pressing that point will do harm and not good?
Baroness Hooper: My Lords, we are fully aware of the wishes of the people of Gibraltar. We fully intend to respect those wishes and I believe that the Spanish Government are fully aware of that commitment on our part.
Lord Cledwyn of Penrhos: My Lords, we have noted with great interest what the noble Baroness has said. Is she aware that on 13th May Sir Joshua Hassan said that it was his firm intention to introduce a new impetus in the near future in respect of the Brussels Agreement on Gibraltar? Will the noble Baroness tell the House what form that impetus has taken thus far?
Baroness Hooper: My Lords, the Chief Minister of Gibraltar has always been fully consulted about and involved in negotiations. He himself welcomed the references made by the King of Spain during his speech to this Parliament to the progress that was being made. At present I am not in a position to inform the noble Lord of any new impetus since 13th May. I can only say that with the British presidency of the European Community coming up the incidence of meetings and contact between Spanish ministers and the British Government will, if anything, increase. Within that context, I have no doubt that more progress will be made.
Lord Gladwyn: My Lords, is there any reason to suppose that the inhabitants of Gibraltar, any more than the inhabitants of the Falklands, should have a veto on any decisions as to their future that may be arrived at, after negotiation, which, in the opinion of the Parliament in Westminster, are in the interests of those inhabitants, of this country itself, and indeed of the peace of the world?
Baroness Hooper: My Lords, any attempt to make a comparison between Gibraltar and any other particular part of the world can be difficult and dangerous. I can only reaffirm to the noble Lord that Her Majesty's Government have guaranteed to the people of Gibraltar that their wishes will be taken into consideration in any negotiations.
Lord Morris: My Lords—
Viscount Hanworth: My Lords—
The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead): My Lords, it must be one noble Lord or the other. We have heard one noble Lord from the Liberal Benches. Perhaps we may now hear my noble friend and then the noble Viscount.
Lord Morris: My Lords, I am grateful to my noble friend the Deputy Leader of the House. Bearing in mind the provisions of the Gibraltar Act, would my noble friend not agree that it is rather more important that the people of Gibraltar should reconsider their attitude towards the Kingdom of Spain rather than the United Kingdom reconsider its attitude towards the future of Gibraltar?
Baroness Hooper: My Lords, since the full opening of the frontier in February of last year there has been increased contact and co-operation between the Spanish people and the people of Gibraltar. I believe that such contact can only be good and of benefit to the ultimate outcome
Viscount Hanworth: My Lords, might it not be a useful step forward if Spain were to offer dual nationality to those in Gibraltar?
Baroness Hooper: My Lords, it is not for me now to pre-empt the negotiations that are currently in progress. It may be that Spain would make such an offer and we would consider it at the time.
Lord Elwyn-Jones: My Lords, as these negotiations are taking place in a friendly and constructive fashion, might it not be more helpful that they should be continued rather than made sour by ill-advised questions in your Lordships' House?
Baroness Hooper: My Lords, I can only agree wholeheartedly with the noble and learned Lord.
Lord Molloy: My Lords—
Noble Lords: No!
Lord Molloy: My Lords, it takes more than a trivial remark to prevent me from saying what I have to say. I am very concerned about the future of the people of Gibraltar. Therefore I ask the noble Baroness whether she is in a position to tell the House this afternoon that before any ultimate decision is made the people of Gibraltar, who have always exhibited such great loyalty to Great Britain, will be fully consulted, and that nothing will be done until such consultation has taken place?
Baroness Hooper: My Lords, I believe that I have already said enough to convince the noble Lord that that will be so. We are all very concerned about the wellbeing of the people of Gibraltar.
Lord Kennet: My Lords, is the noble Baroness aware that her use of the verb to "honour" governing the noun the "wishes" of the inhabitants will be observed with the greatest interest throughout Europe? Is the noble Baroness in a position to comment further on what that phrase means in this context? How does it differ from "abide by", or "pay attention to", or "give overriding value to"?
Baroness Hooper: My Lords, the British people have a reputation for honouring their agreements in the international context, and my use of those words will be applied in that particular context also.

Rented Accommodation: Government Action
2.57 p.m.
Lord Grimond: My Lords, I beg leave to ask the Question standing in my name on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government what steps they are taking to increase the availability of rented accommodation.
Lord Skelmersdale: My Lords, in the next Parliament we hope to introduce legislation to reform the Rent Acts in order to encourage the supply of homes for renting in the private sector. More immediately, in the current Housing and Planning Bill we are seeking to extend the assured tenancy scheme for new property so that it will cover also property that has been improved, repaired or converted. We continue to encourage local authorities to bring empty properties back into use and to give priority to people with special needs, and we provide substantial funding for housing associations.
Lord Grimond: My Lords, is the Minister aware that I greatly welcome his undertaking that the Rent Acts will be amended and also that empty accommodation will be made available to occupiers? Is the Minister aware also that, excellent though owner-occupation is in many ways, it will never solve the problems of the homeless, and that in addition to the admirable projects he has mentioned, there must be more resources made available to provide accommodation for renting?
Lord Skelmersdale: My Lords, I am grateful for the noble Lord's welcome of the announcement I have just repeated. So far as concerns homeless families, which I understand to be the noble Lord's particular worry, finding permanent accommodation for homeless families is of course a major priority for local authorities in the few localities where homelessness is a serious problem, and it is taken into account when making HIP allocations.
New building, however, is not always the best answer. A great deal can be done to improve utilisaton of existing housing, both public and private. In some cases there are far too many empty dwellings, and that is an affront to the homeless. The Audit Commission has estimated that if authorities could improve their reletting times by around 20 per cent. an additional 20,000 dwellings could be made available for occupation.
Lord Renton: My Lords, in considering further legislation will my noble friend bear in mind that many more premises, or parts of premises, would be let if it were not so difficult to get rid of tenants who turn out to be unsatisfactory or are unable to live happily with other occupants in the same building?
Lord Skelmersdale: My Lords, I agree with my noble friend to the extent that our aim must be to create conditions in which landlords have the confidence to let, to improve their property and to provide more rented accommodation. Equally, the tenants must have a measure of security, and it is that balance which we need to achieve.
Lord Wallace of Coslany: My Lords, is the noble Lord aware that it is utterly futile to talk about the mobility of labour unless adequate rented accommodation at reasonable rents is made available?
Lord Skelmersdale: Yes, my Lords, I fully agree with the noble Lord.
Lord Orr-Ewing: My Lords, is my noble friend aware that it is very welcome news that the Government are to grasp this nettle of the Rent Act? Will he bear in mind, when framing the legislation, the very admirable report by His Royal Highness the Duke of Edinburgh and the admirable debate we had in this House, from which many good lessons emerged which could be incorporated in the legislation?
Lord Skelmersdale: Yes, my Lords, I confirm to my noble friend that both the report of the inquiry into British housing chaired by His Royal Highness the Duke of Edinburgh and the recent debate on that subject, and linked subjects, are undergoing great scrutiny by my honourable friend.
Lord Crawshaw of Aintree: My Lords, will the noble Lord accept that I agree with what the Minister said about the necessity of providing for lower paid workers? Is it not rather remarkable, however, that this year the housing associations, to which the Minister has paid great tribute, are in real terms receiving less money than last year? Moreover, as the allocation is, quite rightly, being given mostly to the inner cities, many of the local housing associations are this year in great difficulties. They do not have sufficient allocation even to keep the staffs they have built up over the years. As housing associations are a means of providing proper accommodation at a reasonable rent for lower paid people can the Minister at least consider refunding the money that has been taken away from so many housing associations so that the position can be improved?
Lord Skelmersdale: My Lords, it is true that this year's provision for the housing associations' gross programme is the same, more or less, in cash terms as for last year. Some housing association schemes will, of course, also be funded by local authorities. The problem to which the noble Lord has drawn my attention is, I confess, new to me and I will certainly look into it.
Viscount St. Davids: My Lords, has the noble Lord noticed that at this very moment the Government are busy advising African nations that the best way to produce more food is to remove restricting laws which inhibit the proper working of agriculture? Is not sauce for the goose sauce for the gander?
Lord Skelmersdale: My Lords, I am afraid I find it rather difficult to identify the relevance of that supplementary question to the Question asked by the noble Lord opposite.
Lord Dean of Beswick: My Lords, the Minister referred to the Government's intention to repeal the Rent Act, but is he not aware that the last time a Conservative government did that, in 1957, no extra houses for letting were produced at all? All that happened in taking away the protection from the tenant was to force up rents and introduce Rachmanism, which no one wants to see return. Since the Government took office there has been a loss of 820,000 properties for rent in all sectors, the waiting lists have increased from just over 1 million to 1.2 million, the homeless have increased from 53,000 to 83,000, and requests for sheltered and wheelchair accommodation now stand at a quarter of a million. Does not the Minister agree that the measures outlined in his Answer to the noble Lord, Lord Grimond, are totally inadequate to deal with the problems we now face?
Lord Skelmersdale: No, my Lords, I do not see that at all. What I do see is the ability of your Lordships' House to identify and learn from the lessons of history. I have no doubt that we shall also do that on this occasion.
Lord Winstanley: My Lords, in regard to the further steps that the Government are taking, may I ask that they do not overlook the need to increase the availability of rented accommodation for university students in urban areas, bearing in mind that many are in desperate difficulties and that some are being outrageously exploited?
Lord Skelmersdale: My Lords, we most certainly will not overlook that. There are, of course, special housing associations to look after this problem which in certain university and polytechnic towns and cities are meeting the problem very well.
Baroness Macleod of Borve: My Lords, is my noble friend aware that a councillor from the London Borough of Southwark recently admitted that over 2,000 dwellings were ready for occupation but were empty? If my noble friend is aware of that fact will he draw the attention of the housing Minister to it?
Lord Skelmersdale: My Lords, I am grateful to my noble friend. I was not aware of the statement by the councillor and I will most certainly draw the attention of my honourable friend to the facts that my noble friend has revealed. This goes to show how important it is to have the downtime on let properties as short as possible so that more people can be housed as rapidly as possible.

Salmon Netting: Legislation
3.8 p.m.
Lady Saltoun of Abernethy: My Lords, I beg leave to ask the Question standing in the name of the noble Lord, Lord Chelwood, on the Order Paper.
The Question was as follows:
To ask Her Majesty's Government whether they will have sufficient powers without substantially amending the proposed salmon legislation to control, restrict and if necessary end all commercial netting for salmon in UK waters, in order the better to conserve the Atlantic salmon.
Lord Belstead: My Lords, netting for salmon and migratory trout is already tightly regulated in United Kingdom waters. Existing legislation provides powers further to restrict and, in appropriate circumstances, terminate commercial netting for salmon in England and Wales and, subject to minor exceptions, elsewhere in the United Kingdom.
Lady Saltoun of Abernethy: My Lords, even at this late stage will not the Government consider increasing the weekly close time, particularly in Scotland, from only 42 hours per week?
Lord Belstead: My Lords, we are taking powers in Clause 3 of the Salmon Bill to enable weekly close times in Scotland to be increased by statutory instrument. I fully understand the reason why the noble Baroness has asked this Question, and I have to say, in responding in the way I have, that we must also consult all interested parties before we take a final decision.
Lord Moran: My Lords, is the noble Lord aware that I greatly welcome the announcement in Committee in another place yesterday that the Government are to establish a standing advisory committee on salmon conservation under an independent chairman? That goes a long way towards meeting the wishes of those of us who argued for a national salmon policy when the Salmon Bill was being considered by your Lordships' House.
On a specific point, may I ask whether the restrictions on drift netting for salmon off North-East England, announced by the Government last November, are all in force during the current season?
Lord Belstead: My Lords, I am grateful to the noble Lord, Lord Moran, for his welcome for the announcement made in Standing Committee in another place by my right honourable friend the Minister of State that a standing advisory committee on salmon conservation is to be set up. Indeed, that was a response to opinion in another place but also very much took into account the views expressed on all sides of your Lordships' House.
I know that it is the firm intention that the restrictions on the north-east fishery should be in place during this season. I cannot guarantee that all of them are in place at this moment, but I will write to the noble Lord to give the exact state of play. However, I repeat that it is our intention that they shall be in place during this season.
Lord Kimball: My Lords, would my noble friend agree that the passing through this House of the Private Member's Bill dealing with safety at sea would be an ideal opportunity to insist that the trawlers operating in the Northumberland drift net fishery
260
should put their numbers and their licence numbers on top of their wheelhouses so that we are able properly to police this fishery from the air?
Lord Belstead: My Lords, this is a point that was made by my noble friend during the passage of the Salmon Bill a couple of months or so ago. I am therefore familiar with it. Indeed, I am sure that the Government would wish to look with interest on the proposal if it were to form part of a Private Member's Bill.
Lord Mackie of Benshie: My Lords, is the Minister aware that the traditional salmon netting round the coast of Scotland is under sufficient regulation and that to talk of ending salmon netting there would be a severe blow to the many communities which derive considerable income from it?
Lord Belstead: My Lords, I am interested to hear that view from the noble Lord, which certainly the Government will take with seriousness.
Lord Glenamara: My Lords, further to the question of the noble Lord, Lord Mackie, is the noble Lord the Minister aware that the fishermen of Northumberland have netted salmon for many years and that the danger to the Atlantic salmon does not come from their activities? Will the noble Lord bear that in mind?
Lord Belstead: My Lords, we certainly made it clear during the passage of the Salmon Bill that we were bearing precisely in mind the view expressed by the noble Lord, Lord Glenamara. The noble Lord will remember that further restrictions are to be introduced so far as the north-east drift net fishery is concerned, and their effects will be reviewed after three years. I am sure that the noble Lord will agree that we must not pre-empt that review.
Lord Moran: My Lords, have the Government taken note of the fact that Norway has recently announced conservation measures, including the banning of monofilament nets from 1988, the ending of all drift netting for salmon from 1989 and the extension of the close season by two weeks? Will this not leave this country and the Republic of Ireland in the unenviable position of being the only countries which are represented in NASCO that will not have announced radical measures to conserve Atlantic salmon stocks?
Lord Belstead: My Lords, Great Britain already controls salmon fishing very tightly and has a better record on conservation than many countries. I believe that the further measures contained in the Salmon Bill will be recognised internationally as enhancing that contribution.

Business
Lord Denham: My Lords, it may be for the convenience of the House if I announce that the Committee stage of the Gas Bill will be adjourned at approximately 7 p.m. for approximately one hour and that during this adjournment the Third Reading of the Housing (Scotland) Bill will be taken.

Gas Bill
3.13 p.m.
Lord Belstead: My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.
Moved, That the House do now again resolve itself into Committee.—(Lord Belstead.)
On Question, Motion agreed to.
House in Committee accordingly.
[The LORD NUGENT OF GUILDFORD in the Chair.]
Clause 30 [Validity and effect of orders.]:
Lord Diamond Lord Diamond moved Amendment No. 125ZA:
Page 36, line 8, at end insert—
"(8A) Notwithstanding the provisions of section 7(6) of this Act the Secretary of State may, subject to subsection (8C) hereof, revoke an authorisation under section 7 by 30 days notice in writing given to the supplier at its registered or principal office if the supplier fails to comply with a final or provisional order under the preceding subsections of this section which has been confirmed under those subsections and such failure is not rectified to the satisfaction of the Secretary of State within three months after the Secretary of State has given notice in writing of such a failure to the supplier.
(8B) Subject to the following subsection, the Secretary of State shall, notwithstanding the provision of section 7(6) aforesaid, revoke an authorisation under section 7 three months after he has given notice in writing to the supplier of the third such unrectified failure.
(8C) Where an application has been made to the Court under subsection (1) above, no such revocation shall be made until the validity of any final or provisional order in question has been confirmed by the Court.")
The noble Lord said: I beg to move the amendment standing in my name on the Marshalled List. The purpose of moving this amendment is to explain the attitude of these Benches. This is an important amendment but it is not the most important amendment among those coming before the Committee today. I say "today" because agreement has been reached that the business of the Committee shall be completed today. I understand that by "today" we do not mean tomorrrow at two o'clock, three o'clock or four o'clock in the morning.
We must have regard to that agreement and to the fact that it is quite impossible to give anything like adequate consideration to the amendments that are still before us for discussion at Committee stage. All these amendments refer to a part of the Bill which was guillotined in another place and therefore we have not our normal duty of taking a second look at the Bill but the double duty of taking a first and a second look at many of its provisions. In the circumstances if the agreement to which I have referred is to be kept—and obviously I cannot speak for Conservatives or members of any other party who may wish to speak, but so far as these Benches are concerned an agreement means an agreement—it will be quite impossible for us at the Committee stage to move all the amendments that we think deserve attention. Therefore we can only take the line of not moving them now and transferring them to the Report stage for consideration then. This is one such amendment. If there is no Member of the Committee who desires to speak to this amendment, I shall seek the Committee's permission to withdraw it.
Amendment, by leave, withdrawn.
Clause 30 agreed to.
Clause 31 [Duty of Director to investigate certain matters.]
Lord Stoddart of Swindon Lord Stoddart of Swindon had given notice of his intention to move Amendment No. 125A:
Page 36, line 15, at end insert—
(" ( ) has come to his attention in the normal administration of his functions;").
The noble Lord said: This, too, is an important amendment, though perhaps not as important as the one which has just been withdrawn. I concur with the noble Lord, Lord Diamond, in his strictures (which is what I think they were) on the inadequate time that has been available to discuss, and discuss properly, the provisions of this Bill. The noble Lord is quite right; an agreement has been reached that we shall complete this stage of the Bill by eleven o'clock tonight or thereabouts, and certainly "today" means today and not tomorrow.
As Members of the Committee will realise, that would mean that discussion would have to be restricted on some very important amendments, particularly in relation to Part II of the Bill which will be discussed later. In the light of those circumstances, like the noble Lord Lord Diamond, and his colleagues, we are compelled not to move a number of amendments which we otherwise would have moved. I think that this situation is most regrettable, and the noble Lord must understand that we shall wish to come back to these matters at Report stage, when I sincerely trust that adequate time will be given to enable us to discuss them fully and properly, as this Chamber is entitled to do. I shall not now move the amendment.
[Amendment No. 125A not moved.]
On Question, Whether Clause 31 shall stand part of the Bill?
Lord Diamond: I do not need to go over all the ground again, but it will be obvious to the Committee that part of our duty in perusing a Bill at Committee stage is to raise questions as to whether the clause should stand part of the Bill so as to obtain a clearer understanding of the Bill and to see whether it requires amendment in any particular respect. Of course it is our responsibility to do that during the Committee stage.
We cannot carry out our responsibilities in the time allotted and therefore, so far as concerns these Benches, we shall not be raising questions on many of the clauses as to whether they should stand part of the Bill, as we would have done but for the restriction in time. Therefore, we shall be compelled to raise them at Report stage, and if necessary to move amemdments at a later stage, for example at Third Reading, if that proves necessary in terms of the explanations which we need but for which at present we have no time to ask.
Lord Belstead: I think perhaps I ought very briefly to say a few words in reply to the noble Lord and to the noble Lord, Lord Stoddart. The Committee ought to be aware, when the noble Lord, Lord Diamond, calls in aid the fact that this Bill was guillotined in another place, that after the guillotine was imposed the discussion on the guillotined clauses never in fact ran

263
up to the time when the guillotine would have fallen at each successive moment. Therefore it is reasonable for me on the government side to make the point, which is a valid one, that discussion was not curtailed in the way that is being suggested, although it is true that a guillotine was imposed.
Regarding discussion being curtailed in Committee, we are grateful to noble Lords on the Benches opposite for agreement that we can finish the Bill today. As to whether there has been a full opportunity for the Committee to have a full discussion on the Bill so far, I leave it to all those who have kindly sat through the long sessions to decide that.
Clause 31 agreed to.
[Amendments Nos. 126 to 130 not moved.]
Clauses 32 and 33 agreed to.
[Amendment No. 131 not moved.]
Clause 34 [General functions]:
[Amendments Nos. 132 and 132A not moved.]
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 133:
Page 38, line 35, at end insert—
("( ) It shall also be the duty of the Director, after consultation with the Secretary of State and the Gas Consumers' Council, to establish and consult with, as appropriate, an advisory body for matters affecting small businesses; and in establishing such a body under this section the Director shall have regard to the desirability of having members who are familiar with the special requirements and circumstances of small businesses.").
The noble Lord said: I beg to move the amendment standing in the names of my noble friends Lord Stoddart of Swindon and Lord Gallacher. This amendment deals with the general functions of the director as expressed in Clause 34. We seek to impose an additional duty on him in the exercise of his more general functions. The Committee will note that we propose to insert:
"It shall also be the duty of the Director, after consultation with the Secretary of State and the Gas Consumers' Council, to establish and consult with, as appropriate, an advisory body for matters affecting small businesses; and in establishing such a body under this section the Director shall have regard to the desirability of having members who are familiar with the special requirements and circumstances of small businesses".
We on this side of the Committee have taken careful note of the general trend in the Government's policies of paying special attention to the problems of small businesses. We are well aware that they will argue that the functions that we suggest can already be assumed by the director acting alone or in consultation with the more general body of the consumer councils and other machinery created under the legislation. Exactly the same argument could have been used by the Government in relation to their own structure.
It has long been the policy of successive governments to have the affairs of small businesses dealt with essentially by the Department of Trade and Industry or the equivalent departments before that large department was established. However, this Government feel that the problems of small businesses are so great and so important that they have decided to appoint a special Minister—notably, the noble Lord, Lord Young of Graffham.
Aside from his major preoccupation of massaging the unemployment figures and effecting changes in the retail price index, it cannot be denied that he has had some impact in that field, and long may it continue. Any endeavours in the interests of small businesses made by him when he is not engaged in the statistical adjustments to which I have referred will be greatly welcomed. We on this side of the Committee are fully sensible of the encouragement that ought to be given to small businesses, the special account that should be taken of their problems and in some cases the special dispensations that they should be given.
If they were given half the advantages or dispensations that are accorded to large conglomerates, big industrial companies and the City of London generally, we should be highly delighted. We share the Government's views that the successful development of small businesses can contribute significantly to the recovery of the country from the disastrous consequences of seven years of Tory rule.
In those circumstances, it is not necessary for me to argue the merits of the amendment. All we are doing is asking the Government to live up to their own philosophy. Noble Lords opposite know quite well that for a policy to be successful not only has it to animate the higher reaches of government but it should be translated all the way down the line; the writ should run not only in Whitehall but all the way down the line.
The amendment gives the Government the most magnificent opportunity to translate their often expressed philosophy, however imperfectly it may be carried out in practice, down to the lower reaches and particularly in this field which is so important to the nation as a whole. In the hope that the noble Lord will immediately agree the amendment for the reasons I have stated, I beg to move.
Lord Elliott of Morpeth: I have a great deal of sympathy with the speech made by the noble Lord, Lord Bruce. It is a few years ago now but I once initiated in another place a debate on the problems facing small and medium-sized businesses. As a consequence of having initiated that debate, and also being very conscious indeed of the considerable problems that face small businesses at this time, I have sympathy with the amendment. I therefore appeal to my noble friend to consider such an advisory body. With the noble Lord, Lord Bruce, I feel that small businesses have a great deal to contribute to our national well-being and to the national economy as a whole.
I believe that it is, as the noble Lord rightly said, an integral part of the philosophy of the party which I support, and of the government of the day, that the smallest businesses should receive the greatest encouragement. I therefore support the amendment.
3.30 p.m.
Lord Ezra: I too, should like to support the amendment. I feel that small and medium-sized businesses play an increasingly important role in this country, a role to which I believe all parties subscribe. It is important therefore that their interests should be safeguarded as much as possible so that they may

265
continue to help towards the regeneration of industry in Britain.

One of the safeguards that small businesses should have is for it to be ensured that under the new regime for gas their interests and possible complaints or concerns will be adequately and quickly dealt with. A separate body to do that, manned by people who are familiar with the problems of small businesses, would seem to be appropriate.
Viscount Hanworth: The amendment, in part, deals with what I was trying to put forward in a previous amendment. One is worried because there will be competition among various fuels and small businesses cannot change overnight from gas to electricity, and so on, as perhaps most larger companies can. One feels that it is vital that small businesses should be protected and encouraged as much as possible. The amendment goes a long towards doing that.
The Minister of State, Scottish Office (Lord Gray of Contin): I can start on a note of agreement with those noble Lords who have spoken because the Government also agree that small businesses are crucial to this country's long-term success. As noble Lords are aware, we took a great deal of trouble to discuss our proposals for the privatisation of the gas industry with a wide range of interested parties, including a number of individual companies and of course the CBI. None of those interested parties expressed the view that there was a need for more than one body to represent consumer interests to be set up under the Gas Bill.
We are providing just that in the form of the Gas Consumers Council. The council is given the responsibility to deal with complaints from all types of customer and will naturally equip itself to deal with all the problems of those customers whether they be small businesses, domestic consumers or large industrial consumers. The type of advisory group which the noble Lord, Lord Bruce, and his friends have proposed in Amendments Nos. 133 and 143 would therefore be unnecessary.
I also suggest that it would be curious to provide, as Amendment No. 133 seeks to do, that complaints made by small businesses should be handled by a body which would not be independent of British Gas and that complaints from all other customers should be handled by the Gas Consumers Council which is an independent body. As for the suggestion contained in Amendment No. 143 that the Gas Consumers Council should establish a group within the council to concentrate on the problems of small businesses, I point out to the Committee that the Gas Consumers Council will be able to organise both itself and its staff in the way that it sees fit. If problems from small businesses prove to be a large proportion of the complaints received, no doubt the council will gear itself to deal with that problem.
It is impossible to predict the types of problems with which the new council will deal. It may be, for instance, that schools and colleges, or horticultural and agricultural groups will form the most vociferous complaints group. I suggest that it would be unwise to tie the council's hands in the way proposed by the
266
amendment. It would be better to leave the council able to meet consumers' needs as it sees fit in the light of experience.
I am anxious to make progress and therefore I am going to follow the example given by others by being brief in my reply to the suggestions which have been made. I am also anxious to enter into the spirit of goodwill which obviously abounds within the Committee today. I paid particular attention to the contribution made by my noble friend Lord Elliott and I am prepared—this I shall do without commitment—to take this matter away again and to look at it very carefully. I know that noble Lords would wish me to go further than that, but I cannot do so at this time. I am not satisfied that the creation of yet another body is the way to achieve what I think we all seek to do, but I am prepared to take this amendment away, to examine it again and to give consideration to what has been said, before Report.
Lord Diamond: Before the noble Lord who is in charge of the amendment decides what advice he will offer to the Committee, may I suggest to the noble Lord the Minister—I am not asking for any further commitment—that, in giving further consideration to the views behind the amendment, he might consider whether it would be appropriate, when appointing members of the consumers council, that one such member should have special knowledge of and interest in small businesses.
Lord Gray of Contin: That is a reasonable request. I shall certainly draw the attention of my noble friends and my right honourable friends to what the noble Lord, Lord Diamond, has said.
Lord Bruce of Donington: The noble Lord is at his genial best this afternoon. Without any hesitation, I accept his assurance, albeit qualified in the terms that he has qualified it, that he will look at the matter again. In token of the mutual warm regard that there is on this matter, I ask the leave of the Committee to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 134 to 135D not moved.]
Clause 34 agreed to.
[Amendments Nos. 136 and 137 not moved.]
Clause 35 agreed to.
[Amendment No. 138 not moved.]
Clause 36 agreed to.
Clause 37 [Fixing of maximum charges for reselling gas]:
Baroness Burton of Coventry Baroness Burton of Coventry moved Amendment No. 138A:
Page 40, line 32, at end insert—

("(4) If any person resells any gas supplied by a public gas supplier at a price exceeding the maximum price fixed under this section and applicable thereto, he shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 3 on the standard scale.

(5) Where the commission by any person of an offence under subsection (4) above is due to the act or default of some other person, that other person shall be guilty of the offence; and a

267
person may be charged with and convicted of the offence by virtue of this subsection whether or not proceedings are taken against the first-mentioned person.

(6) In any proceedings for an offence under subsection (4) above it shall be a defence for the person charged to prove that he took all reasonable steps and exercised all due diligence to avoid committing the offence.").

The noble Baroness said: I am sorry to break the continuity, but I hope that the great goodwill coming from the noble Lord, Lord Gray of Contin, will last through this amendment. I am sure that it will come as no surprise, and I hope it is not necessary to remind him, that he answered a Question of mine dealing with the resale of electricity on 5th December last. He had the Government Statement printed, and it may be helpful to the Committee if I quote the first paragraph of that Statement:
"The Government expect to deal with this subject not by making overcharging a separate criminal offence but as part of the proposed new legislation on misleading price indications announced in my noble friend Lord Lucas's Statement of 4th March to this House. When the necessary powers become available under that legislation we would expect to introduce an order which would require those who resell electricity to give itemised bills which include a statement showing the number of units charged for, the rates applied and the statutory maximum rate. The general provisions of that legislation, under which it would be a criminal offence to give a misleading price indication, or to fail to comply with an order, would then apply to those bills and the information given in them. The present civil remedy would also continue to be available".—[Official Report, 5/12/85; col. 1404.]
Following that statement, the noble Lord, Lord Gray, was asked whether legislation might be expected this Session. The noble Lord said that he could not be specific but that legislation would be forthcoming as soon as parliamentary time permitted.
After those preliminary remarks, which I hope are relevant, I come to the actual amendment. My original Questions arose from the report of the Director General of Fair Trading on the resale of electricity where there were complaints of considerable abuse. This concern was upheld and remedies suggested, but the Director General of Fair Trading did say that there was less evidence of abuse for resale of gas than for resale of electricity. Without in anyway weakening the amendment, that comment, I believe, would be accepted.
At present, I understand, the position is that under the Gas Act 1972, British Gas, the supplier, sets the maximum charge, whereas, for the first time under this Bill we are discussing, the Director General sets the maximum that can be charged on resale. I believe, the various gas consumers councils believe, the general public and, I think, Members in both Houses believe that overcharging by landlords for the resale of gas should be made a criminal offence. The fact that overcharging was a criminal offence would be a deterrent to landlords considering exploiting their position. They would no longer have just the tenant to deal with.
Without this safeguard, all those interested in this problem wonder how the Minister would suggest that tenants deal with the matter. We are talking about a minority of landlords. But they do much harm to the reputable majority who want a remedy as much as we do. There is no getting away from the fact that some landlords whose rents are controlled find that they can make a profit on the resale of gas. They buy it at a fixed
268
rate and sell it at a much higher rate to their tenants. All of us, I am sure, wish to protect tenants against this unscrupulous minority.
From the reply given to me on 5th December concerning electricity and from subsequent information reaching me that may, or may not be correct, I am not clear what action, if any, has definitely been decided upon by the Government. What is done over electricity is important to us today because of what the Minister of State for Energy said on 27th February at col. 1154, in Standing Committee F on the Gas Bill. I can perhaps quote some of his remarks. The Minister of State said:
"It might be helpful if I describe the action that the Government propose to take over the recommendations of the Director General of Fair Trading on the resale of electricity. The Director General discovered clear evidence of abuse in overcharging for electricity. As a result of his report, the Government intend to introduce an order requiring that the price charged for electricity by landlords should be clearly set out in an itemised statement and that the landlord must be responsible for stating the maximum price. Failure to comply with the order, or charging a different price from that shown on the statement, would give grounds for prosecution by a trading standards officer".
The Minister went on to say:
"I am in genuine doubt about whether we should, through this primary legislation, introduce a criminal offence, given that the problem is less with gas than it is with electricity … should evidence arise comparable to that found by the Director General of Fair Trading for electricity, of overcharging for gas, a similar order could be made".
I have nearly finished the quotation and I believe that it will save the Committee's time if I continue with it. The Minister went on to say:
"Although such an approach means some delay over the problem of overcharging, it means that gas will be dealt with on all fours with electricity, which seems commendable. Where there is overcharging, although there may be electricity meters without gas meters, there will be few gas meters without electricity meters. I feel that the procedures should be the same so that the person who is being overcharged is familiar with them and that to have different procedures for gas and electricity could lead to confusion … I acknowledge that there is abuse, although less with gas than with electricity".
I have three questions for the Minister. The first—it is the one to which the amendment is directed—is to ask whether the Government will make overcharging by landlords for the resale of gas a criminal offence? A secondary and minor point is to ask whether it is necessary or indeed essential that action on electricity resale should be taken prior to any action on the resale of gas? If so, my third question is to ask exactly what action is to be taken, and when? I beg to move.
3.45 p.m.
Lord Brabazon of Tara: I am grateful to the noble Baroness for moving this amendment. It was probably myself who answered her most recent Question on the matter relating to the resale of electricity rather than gas. As the noble Baroness reminded us, this question has been looked at from time to time in respect not only of gas but also of electricity. Most recently, there was the report of the Director General of Fair Trading last year.
The DGFT pointed out that there was far less evidence of abuse in respect of gas than electricity, and made no recommendations about resale of gas. Our view is that the introduction of a criminal sanction is not needed, and, more importantly, would not be helpful to a tenant. In circumstances where a tenant

269
has been overcharged, he is likely to be nervous of initiating criminal proceedings against the landlord because of the inevitable result this would have of damaging the often delicate relationship between landlord and tenant. We believe that the tenant has some incentive to take action where he has the prospect of recovering the amount he has overpaid. There would however be no such incentive in instituting criminal proceedings, and I believe therefore that a criminal penalty would be ineffective in discouraging overcharging by landlords. That is the answer to the noble Baroness's first question.
I would briefly point to the action the Government have taken in response to the director general's report in respect of electricity where there is evidence to suggest that there is a problem. As the noble Baroness said, we propose to bring in as soon as possible—I cannot, as she will be aware, go any further than that and cannot pre-empt what might be in the Queen's Speech—a consumer goods and services Bill. Once that is on the statute book, an order will be made that will require the price being charged for electricity by landlords to be clearly set out in an itemised statement. Failure to comply with this order, or the giving of a misleading statement, would give rise to a prosecution by a trading standards officer.
I can reassure the noble Baroness that if at any point there was evidence to suggest that a significant problem had emerged in relation to the resale of gas, a similar order could be made speedily. That answers the question raised by the noble Baroness that we do not at this stage propose to introduce both at once. But if a problem did arise, I can give the assurance that we could speedily do so.
I believe that the most effective way of providing protection for the consumer in the present situation is to enable him to recover the excess through civil action, as we have done in the Bill. As I have already explained, there will be available in the new consumer goods and services Bill a facility for providing additional enforcement if this becomes necessary. I hope that on the basis of what I trust have been reassuring words the noble Baroness will feel able to withdraw the amendment.
Lord Gallacher: The Minister's reassurance is not totally satisfactory. While admittedly this problem, on the basis of the evidence collected by the Office of Fair Trading, is linked to electricity rather than gas, there may well be tenants using gas who are equally disadvantaged. The failure to deal with the problem of overcharging in respect of electricity may, perversely enough, encourage a spread of the problem to charging for gas. Therefore, while one is to some extent reassured by the Minister's statement that in forthcoming legislation there will be powers to make orders to deal with electricity, it appears that with regard to the present position it is only electricity that is considered to be in need of treatment and that the position on gas can remain much as it is. I think that that, too, is probably an unsatisfactory state of affairs, but it is a matter for the noble Baroness, Lady Burton of Coventry, to judge.
I also felt that there was an element of indecision in the Minister's statement when he said that the tenant might be reluctant to see criminal prosecutions
270
brought against his landlord in case the tenancy itself were prejudiced. But he seemed to feel that if the trading standards officer received evidence of overcharging against the statement of charges to be made and subsequently initiated prosecutions that would preserve a relationship between the tenant and the landlord which would not be harmed by action by the trading standards officer compared with direct action by the tenant. I think that is a little unreal and unworldly. We do not find it particularly reassuring.
Neither did the Minister say very much about whether the creation of British Gas as a private and profit-making company has any bearing on this situation. The electricity authorities, I well know, have co-operated extensively in an attempt to eliminate this problem. Their only difficulty has been that the law does not allow them to do very much about it until such time as the Minister takes the action which he indicated may be going to be taken in his reply to the noble Baroness this afternoon. I therefore feel that there may be something to be said for providing such legislation in this Act. To that extent we on these Benches are in support of the amendment, although I shall obviously leave it to the judgment of the noble Baroness, Lady Burton, as to whether or not she feels that the assurances that she has been given go far enough.
Lord Ezra: My Lords, I should like to support the view of the noble Lord, Lord Gallacher. It seems rather unrealistic to argue that a tenant who is concerned to keep on good terms with his landlord would somehow be ready to take civil but not criminal proceedings. I think that there is no difference between the two with regard to good relations.
We are concerned that there should be adequate sanction against those who may take advantage of their situation in the resale of gas, to make sure that they will be deterred from overcharging. We feel that the present provisions in the Bill do not go far enough.
Baroness Burton of Coventry: The reply was given certainly in the spirit of what seemed to be good will. However, it did not get us very far. In fact, it did not advance us one iota from what I, and I am sure the Committee, knew.
This is an amendment about which, as I have said, all the gas consumer councils and people who are subject to this overcharging feel very strongly. It seems incredible to me that the noble Lord should talk about the good relationship with the landlord being affected if this were made a criminal offence. I can assure him that good relations are at the moment severely jeopardised by people who have not the knowledge to tackle their landlords on this matter, for fear of the embarrassing position in which they will be put. They have no alternative about that at all.
The noble Lord talked about the goods and services Bill. We have heard quite a bit about this, and from information that has been coming to me we are not sure what will be in this goods and services Bill. We might well find ourselves, after the next Queen's Speech, with no goods and services Bill. I gathered from what the noble Lord said today that, if the goods and services Bill was forthcoming, I shall not say that he would hope but we might expect to find in it the

271
question of overcharging, and so on, for electricity, but nothing at all to do with gas.
I feel that people who are subject to this kind of over-sale by landlords should have some protection. They have none at the moment. I therefore propose to test the opinion of the Committee on this matter.
3.54 p.m.
On Question, Whether the said amendment (No. 138A) shall be agreed to?
Their Lordships divided: Contents, 93; Not-Contents, 116.

DIVISION NO. 1

CONTENTS

Airedale, L.

Lloyd of Hampstead, L.

Amherst, E.

Lloyd of Kilgerran, L.

Ardwick, L.

Longford, E.

Attlee, E.

McGregor of Durris, L.

Aylestone, L.

Mackie of Benshie, L.

Banks, L.

McNair, L.

Birk, B.

Mayhew, L.

Blease, L.

Milford, L.

Blyton, L.

Molloy, L.

Boston of Faversham, L.

Monson, L.

Bottomley, L.

Murray of Epping Forest, L.

Brockway, L.

Nicol, B.

Bruce of Donington, L.

Oram, L.

Burton of Coventry, B. [Teller.]

Parry, L.

Phillips, B.

Caradon, L.

Pitt of Hampstead, L.

Carmichael of Kelvingrove, L.

Ponsonby of Shulbrede, L. [Teller.]

Chitnis, L.

Cledwyn of Penrhos, L.

Prys-Davies, L.

Crawshaw of Aintree, L.

Rhodes, L.

David, B.

Ritchie of Dundee, L.

Davies of Penrhys, L.

Robson of Kiddington, B.

Dean of Beswick, L.

Rochester, L.

Diamond, L.

Seear, B.

Elwyn-Jones, L.

Shackleton, L.

Ezra, L.

Shepherd, L.

Fisher of Rednal, B.

Silkin of Dulwich, L.

Foot, L.

Simon, V.

Gallacher, L.

Stallard, L.

Gladwyn, L.

Stamp, L.

Glenamara, L.

Stedman, B.

Graham of Edmonton, L.

Stoddart of Swindon, L.

Grimond, L.

Strabolgi, L.

Hampton, L.

Strauss, L.

Hanworth, V.

Taylor of Blackburn, L.

Harris of Greenwich, L.

Taylor of Gryfe, L.

Hatch of Lusby, L.

Taylor of Mansfield, L.

Houghton of Sowerby, L.

Turner of Camden, B.

Hughes, L.

Underhill, L.

Irving of Dartford, L.

Wallace of Coslany, L.

Jeger, B.

Walston, L.

Jenkins of Putney, L.

Wells-Pestell, L.

Kennet, L.

Whaddon, L.

Kilbracken, L.

White, B.

Kilmarnock, L.

Williams of Elvel, L.

Kinloss, Ly.

Willis, L.

Leatherland, L.

Wilson of Langside, L.

Llewelyn-Davies of Hastoe, B.

NOT-CONTENTS

Ailsa, M.

Bessborough, E.

Aldington, L.

Boyd-Carpenter, L.

Allenby of Megiddo, V.

Brabazon of Tara, L.

Alport, L.

Braye, B.

Ampthill, L.

Brookes, L.

Annan, L.

Brougham and Vaux, L.

Auckland, L.

Broxbourne, L.

Bauer, L.

Bruce-Gardyne, L.

Belhaven and Stenton, L.

Butterworth, L.

Belstead, L.

Caccia, L.

272

Caithness, E.

Lovat, L.

Cameron of Lochbroom, L.

Lucas of Chilworth, L.

Campbell of Alloway, L.

McFadzean, L.

Carnegy of Lour, B.

Macleod of Borve, B.

Cathcart, E.

Mancroft, L.

Constantine of Stanmore, L.

Manton, L.

Cork and Orrery, E.

Margadale, L.

Cottesloe, L.

Marley, L.

Cowley, E.

Maude of Stratford-upon-Avon, L.

Davidson, V.

De Freyne, L.

Merrivale, L.

De La Warr, E.

Mersey, V.

Denham, L. [Teller.]

Milverton, L.

Drumalbyn, L.

Morris, L.

Dundee, E.

Mottistone, L.

Eccles, V.

Murton of Lindisfarne, L.

Eden of Winton, L.

Noel-Buxton, L.

Effingham, E.

Norfolk, D.

Ellenborough, L.

Nugent of Guildford, L.

Elliott of Morpeth, B.

Orkney, E.

Elton, L.

Orr-Ewing, L.

Faithfull, B.

Porritt, L.

Ferrier, L.

Portland, D.

Fisher, L.

Rankeillour, L.

Fortescue, E.

Reay, L.

Fraser of Kilmorack, L.

Renton, L.

Gainford, L.

Rochdale, V.

Glanusk, L.

Rodney, L.

Glenarthur, L.

Rugby, L.

Gray, L.

St. Aldwyn, E.

Gray of Contin, L.

St. Davids, V.

Gridley, L.

Saltoun of Abernethy, Ly.

Grimthorpe, L.

Selkirk, E.

Hailsham of Saint Marylebone, L.

Sempill, Ly.

Shaughnessy, L.

Halsbury, E.

Skelmersdale, L.

Hardinge of Penshurst, L.

Soames, L.

Harris of High Cross, L.

Stodart of Leaston, L.

Hives, L.

Strathcona and Mount Royal, L.

Home of the Hirsel, L.

Hooper, B.

Swansea, L.

Hylton-Foster, B.

Swinfen, L.

Kaberry of Adel, L.

Swinton, E. [Teller.]

Kimball, L.

Terrington, L.

Kinnaird, L.

Tranmire, L,

Lane-Fox, B.

Trumpington, B.

Lauderdale, E.

Vivian, L.

Layton, L.

Whitelaw, V.

Liverpool, E.

Young, B.

Long, V.

Resolved in the negative, and amendment disagreed to accordingly.
Clause 37 agreed to.
4.3 p.m.
Lord Stoddart of Swindon Lord Stoddart of Swindon moved Amendment No. 139:
After Clause 37, insert the following new clause:
("Duty to maintain the safety of gas fittings.
.—(1) If any person who resells any gas supplied by a public gas supplier for use in a gas fitting provided by that person fails to maintain such gas fitting in a safe working condition that person shall be guilty of an offence and liable on summary conviction to a fine not exceeding level 4 on the standard scale.
( ) It shall be a defence for the person charged to prove that he took all reasonable steps and exercised all due diligence to avoid committing the offence.").
The noble Lord said: I beg to move Amendment No. 139, which stands in my name and that of my noble friend Lord Williams of Elvel. It is to insert a new clause. This matter is aimed at private landlords who install cheap and/or secondhand appliances which turn out to be dangerous. It is also aimed at those who fail to carry out proper repairs to appliances.
In the last amendment, which was so admirably moved by the noble Baroness, Lady Burton, we were talking about money and about people being defrauded. That of course is important enough. However, in this new clause we are talking about people's safety and even their lives, because we all know that badly installed or badly made, defective appliances can cause injury and death. That is why we seek to insert this new clause in the Bill—so that landlords who install such fittings know perfectly well that they can be subject to the criminal law if the fittings are not safe and kept in a safe condition.
When the noble Lord, Lord Brabazon, resisted the last amendment he said that the question of price should not be a matter for the criminal law. That is a matter of opinion. I think that it probably should have been. However, surely there cannot be any question that any person who puts another person's life at risk should be subject to the criminal law. That is why in this new clause we seek to make such an offence subject to the criminal law.
Many noble Lords will have seen the recent programme "That's Life", which highlighted a number of deaths that had occurred through the use of defective and sometimes badly installed water heaters. Most of those deaths have occurred in privately-rented premises. Therefore, there is a clear need to do something positive to prevent people's lives being put in danger by unscrupulous landlords who will not keep their fittings in good order and who will install, and are now installing, secondhand appliances which are not fit to be installed.
In the Bill, and certainly in Clause 4, the director has powers to ensure that public gas suppliers keep the public safe. That of course is absolutely essential. However, there is nothing in the Bill which protects the position of people who are subject to unscrupulous private landlords who put their lives at risk by installing defective appliances and not properly maintaining those appliances. I believe that the public should be protected. Indeed, they should have been protected long before now. We seek to clear up the law. We can do it by means of this new clause. I hope that the noble Lord, Lord Brabazon, who is to reply, will be able either to accept this new clause or at least assure me that the Government take this matter seriously, and that they will take it away and by the Report stage bring forward their own amendment for the protection of the public. I beg to move.
Lord Elliott of Morpeth: I interject only on one point. I wholly agree with the noble Lord, Lord Stoddart, on the responsibility of landlords with regard to installation. I do not think that there is any argument there. Landlords should be required to install safe appliances. However, there is the other half of the problem which the noble Lord, Lord Stoddart, raised, which concerns maintenance. I think that one ought to give a thought here to the responsibility of tenants as against landlords. Can landords always know whether appliances are being reasonably maintained by tenants? Is not a somewhat unfair responsibility being proposed in this new clause for landlords in that tenants are bound to have a better idea whether an appliance is safe and working than
274
landlords who quite often own vast areas and vast numbers of properties? Therefore, I think that one ought to have a moment of caution with regard to the responsibility of landlords in the second half of the noble Lord's new clause—that is, the area of maintenance.
Lord Stoddart of Swindon: Perhaps I may just reply to that particular point because it is an important one. Indeed it is well understood. Of course tenants too have a responsibility for their own lives. That is accepted. I thought we had covered that in fact by the second section of the new clause, which reads:
"It shall be a defence for the person charged to prove that he took all reasonable steps and exercised all due diligence to avoid committing the offence."
I think that that is what we should expect of a landlord. Quite clearly he will inspect his premises and the appliances from time to time. We would expect that of him as a matter of fact, because he, rather than the tenant, owns the appliance. The landlord therefore has the responsibility. But if after having done that the tenant is then negligent and knocks the thing around, or knocks the gas stove around or takes it apart and does not put it together properly, that would be a proper defence. That is why we have put that second part in, because we understand the position of the landlord and wish to protect that position.
Lord Boyd-Carpenter: May I ask the noble Lord another question arising out of his original speech moving this amendment? The noble Lord used the expression "unscrupulous private landlords", and suggested that this amendment was directed against such people. Is it intended that this should apply only to private landlords? If a local authority or a housing association, or any other owner other than a private landlord, allows the equipment to get into bad order and a tragedy results, are they not covered by the clause? If so, why is the noble Lord picking solely on private landlords?
Secondly, I wonder whether the noble Lord has considered that in any event without this amendment if someone is injured because his landlord has installed or failed to maintain defective machinery of this sort, obviously under the ordinary common law he will have a right to sue for any damages he suffers. It may well be that it is more satisfactory to an injured person to recover substantial damages than to see a necessarily limited criminal penalty imposed on his landlord.
Lord Stoddart of Swindon: Those are two perfectly reasonable questions. The reason I referred to unscrupulous private landlords is that of course, generally speaking, local authority dwellings are unfurnished and the appliances will be provided by the tenant; therefore, the appliance belongs to him and he is responsible for its maintenance. Usually these appliances are installed in private furnished places, although I do accept the stricture of the noble Lord, Lord Boyd-Carpenter, that there are certain local authority and private housing associations which do furnish completely and install a cooker or some other appliance which may belong to them. In that sense, the noble Lord is probably right—I should not have referred only to private landlords. There are other

275
landlords who could neglect their duty and the new clause does cover them. It does not refer to unscrupulous private landlords. I hope I have covered that particular point.
The other point the noble Lord, Lord Boyd-Carpenter, raises is that if someone is injured he would have the opportunity to go to court and claim damages. That would not be taken away by this new clause; as I understand it, he would still be able to do that. He or she could still claim damages. But, in the same way as the noble Lord believes in the nuclear deterrent, we believe that if this is a criminal offence it will be a deterrent against the purchase and installation by private landlords or by any landlord of appliances which were not safe. It will also be an incentive to them to keep those appliances safe. I do thank the noble Lord for raising these two important points and I hope I have been able to satisfy him on them.
4.15 p.m.
Lord Boyd-Carpenter: I do not want to prolong this discussion, but I wonder why the noble Lord, Lord Stoddart of Swindon, thinks a criminal penalty—which sounds rather a powerful weapon, though presumably it would be distinctly limited in its impact—is more of a deterrent to a landlord. I am glad to know he accepts that his clause would bite on public as well as private landlords. It is much more of a deterrent to know that if someone is badly injured, for example, the damages in accordance with present levels of damages awarded by our courts would be enormous. We are talking of tens of thousands of pounds and certainly we are talking of amounts far larger than would be imposed by way of criminal penalties. I wonder whether perhaps the noble Lord does not appreciate that the real deterrent, apart from any questions of conscience, the real physical deterrent to having defective apparatus of this sort is the risk of having to pay enormous damages.
Lord Stoddart of Swindon: If that were so, if the criminal law were no deterrent, why are we sitting here at all? Why do we pass laws making certain things a criminal offence if we do not think they will deter people from committing offences?
As I said earlier, under the new clause the tenant would have the protection of the criminal law acting as a deterrent. Certainly I think the criminal law has a deterrent effect. If a person believes that he may be hauled before the courts and fined, I think it imposes a certain discipline on him. In fact it is additional to the point that the noble Lord makes—that if a person causes death or injury, he may be sued in the courts and may be told by the courts that he will have to pay considerable damages. In fact this is an additional protection, not an alternative.
Baroness Macleod of Borve: It seems to me that this is a very important clause. As I read it, it should cover all rented accommodation, whether it be a bed-sitting room, a furnished house, or an unfurnished house not actually owned by the person inhabiting it. I think this is very important.
I am not quite certain that this amendment as it is put down is actually correct. I entirely agree with the
276
principle, and I am looking forward to hearing what the noble Lord the Minister has to say because I think that private people have to be protected and there are very few ways in which they can be protected from faulty installations in property that they do not own. That is why I think it is so important and I look forward to hearing what the noble Lord the Minister has to say.
Lord Diamond: I hope when the noble Lord the Minister comes to reply he will be able to make clear something which I find totally unclear—and I am not a lawyer. Where a landlord who deserves to be prosecuted is prosecuted and, if necessary, is sent to prison (which is a very great deterrent, I should have thought) is it impossible for the tenant to take separate proceedings for damages in a civil court?
Lord Brabazon of Tara: We have had an interesting debate on what is, I think, a very important matter. I am grateful to all noble Lords on all sides who have expressed their concern about it. As we have already explained during our debates on Clause 18 amendments, matters concerning gas safety are the responsibility of the Health and Safety Commission. They, through the Health and Safety Executive, administer the gas safety legislation which will, following the passage of this Bill, become relevant statutory provisions for the purposes of the Health and Safety at Work Act 1974.
One of the pieces of legislation which the Health and Safety Commission enforce currently is the Gas Safety (Installation and Use) Regulations 1984. Regulation 34 requires that no person shall use a gas appliance, or permit a gas appliance to be used, if at any time he knows or has reason to suspect that it is unsafe on one of five specified grounds. These include inadequate flueing, insufficient air for combusion, or escapes of gas.
This means that there is at present a responsibility on both the tenant and the landlord to ensure that any gas appliance which is used is safe, and noble Lords will note that if an offence is committed under Regulation 34 the maximum penalty is a fine not exceeding £2,000, rather than level 4 (presently £1,000) proposed by noble Lords in this amendment. It is twice as much as the amendment proposes.
I can understand the noble Lord's desire to lay the main burden of the responsibility on the landlord, but I agree with what my noble friends Lord Elliott of Morpeth and Lord Boyd-Carpenter have said, that the tenant should also have a responsibility not to use an appliance which he suspects to be unsafe, since in practice he is far more likely to be aware of such a situation than the landlord. Therefore, I believe that the current provision under the 1984 regulation is the right one. It puts an onus on both parties to check that the appliance is safe. Obviously, if the tenant informs the landlord that he thinks something is wrong then by virtue of the words "has reason to suspect" the landlord must take notice of that because he would thereby have reason to suspect.
However, should it ever be considered that a provision along the lines suggested in this amendment would be appropriate, health and safety regulations under the 1974 Act as extended by Clause 18(1) of the

277
Bill could be made. I, too, saw the programme to which the noble Lord, Lord Stoddart of Swindon, referred regarding open flue water heaters. I would remind the noble Lord and the Committee that installation of these is no longer permitted under the gas safety regulations—I think it is Regulation 25 of the 1984 regulations—so that prevents their installation. Only room-sealed appliances should be used in bathrooms.
I would also point out to the Committee, and I hope to the public at large, that British Gas have agreed to publicise the importance of having these old water heaters properly serviced and maintained, and that they will make a free safety check on any reported to them. I hope that will help that particular situation. The provisions already in force under the regulations, which are similar to those proposed in the amendment, are satisfactory. Therefore, there is really no need for this amendment.
I would just answer quickly the point that the noble Lord, Lord Diamond, raised. There is no objection in principle, if the statute expressly permits, to both a criminal sanction and civil damages. I think civil damages would be allowed in this as well as the statutory sanction.
Lord Stoddart of Swindon: I thank the noble Lord for what he has said, but I am not sure that what he has told me satisfies me that the position is covered. As I understand it, the regulations under the Health and Safety at Work Act do not cover people who resell gas; they cover the people who install appliances. Therefore, the person who is liable is the installer. That is my impression of it, but does the noble Lord wish to intervene?
Lord Brabazon of Tara: The regulation reads as follows:
"No person shall use a gas appliance or permit a gas appliance to be used".
That covers not only the user but the person, who could be the installer or the landlord, who permits a gas appliance to be used.
Lord Stoddart of Swindon: In the light of that explanation, I shall certainly have to look at what the noble Lord has said. If the regulation has the meaning that the noble Lord says, then it may very well cover the position I have in mind. We all agree that it is right that the position should be covered. The best thing I can do with this is to take it back, have another look at it, and particularly Regulation 84 under the Health and Safety at Work Act, and if I find that the position has not been covered then we reserve the right to come back to this at Report stage. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 38 [Power to require information etc.]:
[Amendments Nos. 140 and 140A not moved.]
Clause 38 agreed to.
Clause 39 agreed to.
Clause 40 [General duty to advise Director]:
[Amendments Nos. 141, 141A and 142 not moved.]
Clause 40 agreed to.
[Amendment No. 143 not moved.]
Clauses 41 to 44 agreed to.
On Question, Whether Clause 45 shall stand part of the Bill?
Lord Diamond: I raise this point shortly. Clause 45 provides for bodies corporate and others being guilty of offences. I want to be assured that the clause is not too draconian, as it might seem to be on casual reading. Subsection (1) of Clause 45 talks about a body corporate being guilty of an offence, and if that is attributable to neglect on the part of a director or similar officer then that officer, as well as the body corporate, shall be guilty of that offence. That is fine and straightforward.
When we come to subsection (2), it says:
"Where the affairs of body corporate are managed by its members",
which is not a very clear picture to me, then the same rule applies,
"in relation to the acts and defaults of a member";
and a member can be prosecuted,
"in connection with his functions of management as if he were a director of the body corporate."
I am always a little hesitant about these clauses which pretend that somebody is not what he is and deems him to be doing something else, and gives him a different title, and then proceeds to put him in gaol. I am really asking for an explanation or reassurance, and perhaps for an example and precedent, that we are not being too tough under the provisions of Clause 45(2) on people who are not directors but are in fact only members.
Lord Belstead: There is a precedent in the sense that subsection (2) provides that subsection (1) shall apply to the members of a body corporate responsible for the management of its affairs as if they were directors. We find that in the case of a nationalised industry such as British Gas.
Lord Diamond: I should have said (only I am anxious to save time) that of course one is familiar with this in a nationalised industry, We are talking about privatising this industry, and what I am asking therefore is for a precedent in a privatised industry, in the private sector of the economy, of people being treated in this way.
4.30 p.m.
Lord Belstead: I should like to look at this again. The precedent that I have is the Gas Act 1972, Sections 43(4) and 44(5). It may be that those two precedents suffer from the criticism which the noble Lord is levelling at me. I have given the noble Lord some information in reply to his question. If I might have a further look at it possibly I might write to him.
Lord Bruce of Donington: I too am a little puzzled about the wording of this clause. A "body corporate" is essentially an inanimate object. It may have a legal

279
personality, but it can act only through its officers or through its servants. If we are to make a distinction between the body corporate itself and the individuals who are responsible for acting on its behalf and indeed for activating the company, we are getting into rather complicated grounds to which the provisions of the normal Companies Acts might well apply.
The noble Lord will recall that under the Companies Acts the occasions on which a director or an officer can have an action brought against him are clearly specified. I would hope that in this case, which will apply presumably to British Gas plc, the occasions on which an officer or director of the company can be prosecuted, where they are not already covered by the provisions of the Companies Acts and similar Acts, could be rather more closely specified than as put in this general form. The inquiry is quite a friendly one and if the noble Lord can help to elucidate the position a little that would help.
Lord Belstead: I am a little surprised that the noble Lord, Lord Bruce, has intervened in that way because I understood that the noble Lord, Lord Diamond, was satisfied with subsection (1). But once again perhaps I can read what the noble Lord, Lord Bruce, has said and if there is anything which we feel we need to add I shall write to the noble Lord, Lord Bruce.
I am sorry that my answers to the noble Lord, Lord Diamond, were not satisfactory. They were not satisfactory. The noble Lord was quite right to say what he said to me. The key to this is that the system of regulation has to apply to the existing British Gas Corporation until vesting day, that is why we have to cover the British Gas Corporation as we know it now. That is why subsection (2) is necessary and that is why the answers I gave are correct, although I did not explain why they were correct.
Clause 45 agreed to.
Clauses 46 and 47 agreed to.
Clause 48 [Interpretation of Part I]:
[Amendment No. 144 not moved.]
Clause 48 agreed to.
Clause 49 [Vesting of property etc. of Corporation in a company nominated by the Secretary of State]:
Lord Diamond Lord Diamond moved amendment No. 144ZA:
Page 49, line 3, at beginning insert ("Subject to subsection (1A) below").
The noble Lord said: This is an amendment which I hope the Committee will feel is well worth pursuing. I therefore beg to move. I am sorry that my diction is suffering a little. I have been biting my tongue so many times every time we have come to clause stand part that it is getting a little sore. However, I shall do my best to make clear my views to the Committee. This is a paving amendment for Amendment No. 144ZC, which I think may conveniently be discussed at the same time. That provides that the transfer date for this huge gas business shall not be prior to the end of the period of eight weeks throughout which the price of crude oil has on every day been above 15 United States dollars a barrel.
We have previously been discussing Part I of this Bill. We have done the best we can in recognition of our duty to improve the Bill and we have concentrated on matters such as looking after the consumer better, looking after safety better, and matters of that kind. We have now come to Part II which deals with the transfer of the undertaking of the British Gas Corporation and we shall now try to do our duty similarly in improving this part of the Bill.
One of the obvious ways of improving this part of the Bill is to try to secure that a good price, if possible the best possible price, is obtained for an asset which belongs to the nation and which the Government are seeking to sell. The Government show every sign of being in a hurry to sell. It is not very good if you are a seller to be in a great hurry, because you will have to accept the price that is available at that time. If you accept that, and it is a time at which the price has dipped, you will not get as much for the sale of your asset as you would if you were to wait until the price has recovered.
I do not need to justify my statement that the Government are in a great hurry. We all know what estimates the Chancellor has put in of the moneys which he expects to collect by virtue of floating off these national assets and using the money, as we all know it has been made absolutely clear, for current purposes, namely, the reduction of taxation. He needs everything he can lay his hands on. He has made that very clear and the pressures of public expenditure make it even clearer. So there is no doubt whatever that the Chancellor is under very great pressure to sell the shares in the gas undertaking; in other words, to sell the assets of the present nationalised company as fast as he jolly well can.
We are concerned whether that is the best way of protecting the nation's purse and disposing of the nation's assets. I do not think it is. Therefore, an amendment has been introduced in order to give some protection to that sale. The protection proposed is to wait for such a period as that when the crude oil price expressed in dollars has broadly settled down into a figure which is, on the basis of those who are knowledgeable in this field, reasonable to start to base a sale on. I am afraid that I have not ascertained exactly what the price per barrel is today—
Lord Ezra: Eleven dollars.
Lord Diamond:—but it has been descending towards 10 dollars a barrel. I gather from my very knowledgeable friend Lord Ezra that it is at the moment about eleven dollars a barrel.
A report was issued by the United States Department of Energy at the end of April, quoted in The Times, which gave a warning that cheap oil was unlikely to last much beyond the end of this year and that prices will gradually move back to between 25 and 32 dollars a barrel by the mid-1990s. It also feared that the price could go as low as 10 dollars a barrel. It is quite conceivable, as it is now eleven dollars, that the Chancellor might be tempted, as a result of the pressures that are upon him, to try to float the sale of these shares at a time when the market was immensely depressed because of the dollar price per barrel.

281
I hope the Minister will not say that this is a very imprecise form of measurement. It may be slightly imprecise, and if the Minister prefers a formula which gives greater precision nobody would be better pleased than I would. But it is as an amateur that I use the language, which is the common language in the market at the moment, of talking about the dollar price of crude oil. That is a sufficient indicator. So what I am suggesting is that we must have a minimum of 15 dollars in relation to anybody's estimates of the extent to which the price will improve in the not too distant future. In particular, we must have some measure of stability in the price. Therefore, I have suggested a period of eight weeks throughout which the price has on every day been about this minimum.
Again, the Government may say that they do not like eight weeks, that they would prefer six weeks or 12 weeks, or some other formula to determine a stable price. The formula does not matter. What we are concerned with is getting a good price, and, if possible, the best price, for the sale of our national assets. I think this is a very important aspect to bear in mind. We know that the Chancellor is under enormous pressures, and I think therefore that there ought to be inserted in the Bill a provision to encourage him to take a longer view and to withstand being pushed around by those who are pressing him to get cash at whatever cost in the long term to the nation. I beg to move.
Lord Boyd-Carpenter: This is a very odd amendment indeed. It is a matter on which one can speculate as to the motives that lie behind it. But taking it first of all, as courtesy demands, at its face value, it is a very odd proposal indeed. Of course, the price of oil at any one time certainly would be a factor in the view which the market would take of the sale of the gas industry. But the noble Lord, Lord Diamond, knows perfectly well that it will be only one factor and that the price which the Government would feel able to seek would depend not merely upon the price of oil but on a whole variety of other factors—the general state of the market, the general state of confidence or lack of confidence in the economy and the competing claims of other considerable financial transactions such as the large takeover activities that are taking place. There will be a whole variety of factors of which this is only one.
There might well be a situation in which all the factors, bar the price of oil, pointed to this being the right moment to go ahead with the transfer. But if you carried this into law, the Government would have to sit by, watching the price of oil daily and see that opportunity go. The whole thing, with respect, would be a very great nonsense, and I suspect that no one knows that better than the noble Lord, Lord Diamond.
As I see it, this is simply an attempt to delay the denationalisation of the industry. The noble Lord, Lord Diamond, and his noble friends have made it perfectly clear that they oppose this denationalisation. They are entitled to their view just as some of us 30-odd years ago were entitled to our view that the industry should not be nationalised. But the Second Reading and earlier Committee proceedings of this
282
Bill and the proceedings in the other place have taken place and the general principle has been accepted by Parliament that denationalisation is to go forward. Therefore, to try to hamper by one limited piece of legislation such as this those who have to handle the actual marketing of the industry I really think goes against the whole way in which we try to conduct our public affairs in this country.
I appreciate, as I am sure the Committee appreciates, that one of the most difficult problems that the Government have to face in any denationalisation project is the price which they are going to ask for the shares. I would be the last man to say that in previous rounds the Government have always been right. In one or two cases their decisions, at any rate, have been very questionable. I think that one must accept that the Government want to get the highest price they reasonably can consistent with the whole of the considerable operation of marketing the shares going ahead. It is a difficult enough task, particularly when, as the Government know, if the price that they ask for and get seems to public opinion to be too low they will be very much criticised. There will be all sorts of remarks about selling the family silver and other clichés to which we have become almost drearily accustomed in the last year or two.
But the Government have to take the responsibility of setting the price and the Government therefore have to take the responsibility, once Parliament has decided on denationalisation, as to the timing of the marketing operation. I suggest to the Committee that it would be quite ludicrous to take just one factor—perhaps not even the most important one—that could affect the price obtainable, and tie everything by law to that. I hope that the Committee will not treat this amendment very seriously.
4.45 p.m.
Lord Bruce-Gardyne: I am marginally more in sympathy with the noble Lord, Lord Diamond, on this amendment than is my noble friend Lord Boyd-Carpenter; but I must say, not much. In particular, I could not agree more with the noble Lord, Lord Diamond, in his proposition that the formula suggested is imprecise. There is not one price for oil; there is a whole series of prices for oil and it is very much open to question which particular price might be appropriate if one were to espouse his basic concept at any given moment. I very much agree with what my noble friend Lord Boyd-Carpenter had to say about the other factors which could have a much more significant impact on the price that the Government obtain for this asset when it comes to putting it into the private sector.
Apart from that, I have myself always felt that the return to the Exchequer should not be the overriding consideration in these operations. Personally I have always thought—and I still think—that the overriding consideration should be the enhancement of choice to the consumer and the provision of enhanced competition. I very much regret, as I have said before, that the Government have chosen to avoid that opportunity in the context of this particular legislation. Having done so, I think that, as my noble friend Lord Boyd-Carpenter has said, there are obviously all sorts of considerations which should

283
determine the precise timing and the price that the Government are likely to get.
The only reason that I have some slight sympathy with the noble Lord's amendment is that I increasingly wonder whether the Government are going to find the climate for the disposal of this particular asset to be particularly alluring this autumn. We are seeing gas prices sliding in pursuit of oil prices. I have said on many occasions that I have a nasty suspicion that any widow or orphan who entrusted his or her savings to the tender mercies of Sir Denis Rooke to look after them as the guardian of an investor in a private sector corporation might have cause to regret that choice. I certainly think that the background could well be less than ideal; less ideal than it otherwise would have been, in any case, given these other considerations, by the time this autumn comes along.
Having said that, I would submit to the Committee that this particular amendment can hardly be the most appropriate way to try to ensure that the Government get their timing right. In fact, I think it could be quite easy to imagine that there could not be a much worse way of tying the Government's hands as to the precise timing of this disposal.
Lord Stoddart of Swindon: I should like to get up and support the noble Lord, Lord Diamond—
Lord Boyd-Carpenter: Surprise, surprise!
Lord Stoddart of Swindon: I am glad that it is not a surprise to the noble Lord, particularly since he was speculating about the motive behind the amendment. The motive behind the amendment is quite clear. In fact, the noble Lord, Lord Diamond, spelled it out and there is no reason to disbelieve him when he says that the motive behind this amendment is to protect the taxpayer, to protect the owners of the existing organisation, which it seems to me is an entirely laudable thing to do. Bearing in mind the experience with British Telecom, where millionaires were made overnight at the expense of the taxpayer, it seems to me that the noble Lord, Lord Diamond, should be commended for his efforts to ensure that we do not have another British Telecom situation thrust upon us because of the oil price.
I do not want to speak for too long, but the oil price is indeed important. It is important because the British Gas contracts with third parties are, as I understand it, tied to the oil price. Therefore, the lower the oil price, the lower the assets in the gasfields of the British Gas Corporation and the lower the value of the British Gas Corporation's own assets. That is bound, in turn, to affect the view of people who wish to invest in the new privatised British Gas.
Although I agree with the noble Lords, Lord Boyd-Carpenter and Lord Bruce-Gardyne, that it is only one element which investors take into account, it could now be a very large element because the pressure on oil prices, and the lowering of oil prices, not only reduces the perceived assets, the value of the gas assets of the gas corporation, but has an effect on perception as to the future gas price and, therefore, the profits that can be made from gas, particularly since there is now—and we have heard a lot about competition from
284
electricity—the very acute competitive pressure from the electricity industry on gas prices.
Only last week the chairman of the Electricity Council stated that any lowering of the gas prices later this year would be matched by the electricity industry. The price war is now on. Is this the most propitious time, when there could be a price war in the autumn, to launch the sale of British Gas, when the reason for that price war is the depressed price of oil? It seems to me that the noble Lord, Lord Diamond, has been perfectly logical and has acted logically in putting down this amendment, in order to draw the attention of the Committee to the problems which exist and to try to protect the taxpayer.
We are serious people in this committee and we have a care, I hope, for the assets of the people. They belong to all the people at the moment and we ought to have a care for them. We are all taxpayers and, though we in this Committee have no financial role, we are nevertheless known for protecting people and for looking after the overall and best interests of the country. Therefore, it seems to me that the noble Lord, Lord Diamond, has drawn our attention to an important matter.
According to the newspapers, the sale is already under way. The Observer last Sunday stated:
"Countdown begins for gas privatisation: Telecom hype for British Gas",
while in The Times this morning there is an article headed "British Gas Warms Up". It is all very nice to have these articles from journalists, but our job here is to see that when the Bill leaves this House it is the sort of Bill which will be good for the country. Therefore, I support the noble Lord, Lord Diamond, in his amendment and I am glad that he put it down to enable us to have this discussion.
Lord Taylor of Gryfe: I should like to support my colleague, my noble friend Lord Diamond. I accept all that has been said by the noble Lords, Lord Boyd-Carpenter and Lord Bruce-Gardyne, that this is not a perfect formula, but it gives us the opportunity of inviting the Minister to say what are the considerations which will influence him in the timing of taking British Gas to the market.
I accept that the price of oil is not an overwhelming factor. There are other factors—the competition of other issues in the market at the moment; the weight of issues that are overhanging the market; the state of the market in general and the fact that it is substantially a "bear" market at the moment, particularly in the energy sector. So this might not be the best time to sell this important national asset. I always like to think that in looking at this matter the House of Lords should constitute itself as a kind of board of directors of the national assets, or custodians of the national assets, and consider whether this is the right time to dispose of assets of the company. Undoubtedly, this is not the right time.
The record of the Government in disposing of state industries has not been a good one. If you look at the post-mortems which usually occur in the Public Accounts Committee in another place, you will see the record of prices that have been set for the disposal of national assets. That indicates that the Government have not been very successful or wise in terms of the

285
national interest in the disposal of these assets. Amersham was a case in point, as was British Telecom, where the taxpayer did not get value for the assets which were then sold in the market.
What we are inviting the Minister to tell us today are the considerations, and what kind of remit he will give to the distinguished merchant bank which is handling this quotation. Will it have to sell at the best possible price at the best possible time, or dispose of the asset in order that the Treasury will get sufficient money to pay for tax concessions before the next general election? If it is the latter, it is bad stewardship in safeguarding the national assets.
I notice that people are calculating the kind of price that might be realised for the disposal of British Gas, as though I billion here or there were of no account. It may fetch £5 billion or even £6 billion—as though £1 billion does not matter in terms of disposing of a great national asset. So I invite the Minister, in the light of this amendment, to tell us a little more about how best we are going to realise the maximum advantage in disposing of British Gas.
Lord Sanderson of Bowden: There is always a right time and a wrong time to dispose of an asset, to float a company or whatever. I suppose that one could go on arguing this all evening. After all, it could be that if this Bill had passed into an Act at the beginning of this year the stock market would have been considered at the wrong level. Much to the surprise of many people, in the first three months of this year there was the most enormous hype—I think that word was used by the noble Lord, Lord Stoddart of Swindon—in the general price of the market. I am all for listening to the Minister to find out exactly what considerations are taken into account when a flotation of this size comes to the market, but to tie the hands of the Government and to say that under this amendment one has to wait until these conditions are fulfilled is going totally in the wrong direction.
It is very interesting to note that a very large company is coming to the market. Before one makes general statements about the price of shares, one ought to see what the relative prices of the British Petroleum Company and Shell Transport and Trading have been over the past few months. I have not noticed that there has been a significant downturn in the prices of these major companies in the oilfields. They are affected by the state of the oil market but they are big enough to withstand the ups and downs in the oilfields, which is not possible in the smaller companies. We should look at that when we are considering how free a hand the Government should have to float this large company on the market.
5 p.m.
Lord Brabazon of Tara: We have had an interesting discussion on this amendment and I must say straight away to noble Lords opposite that the only matter about which I can probably agree with them is that the Government are indeed concerned to get a good price for the sale of the British Gas Corporation. I am sure that the noble Lord, Lord Diamond, has seen the report published recently by the stockbrokers Wood Mackenzie which throws some light on this aspect—the effect of lower oil prices on British Gas.
Lord Stoddart of Swindon: I am sorry to intervene so soon but I could not help hearing what the noble Lord said. The Government expect "to get a good price". What I expected the noble Lord to say is that the Government will get the best price. That is what it is all about.
Lord Brabazon of Tara: I am quite happy to rephrase my original remark. The Government are concerned to get the best price. Having said that, it is nearly impossible to get absolutely the best price, as the noble Lord will be aware.
I was mentioning the report by the stockbrokers Wood Mackenzie which throws some light on this amendment and on the impact of the oil price on the valuation of British Gas. The report makes clear that the effect of lower oil prices on British Gas' business is highly complex. It concludes however that,
"profits, over a period, should not be under undue risk",
and that,
"investors wishing to have an energy flavour to their portfolio … might find this company an attractive way to achieve such an exposure".
It is clear then that while the effect of lower oil prices is far from straightforward, there is no need for the excessive caution which this amendment seeks to impose. The noble Lord, Lord Diamond, said that the general perception was that oil prices would rise next year and thereafter as well. All I can say to the noble Lord is that this will surely be reflected in the market's assessment of British Gas even if it is sold, as expected, later this year.
Perhaps I could also just mention the purpose of Clause 49 in which this amendment is placed. Clause 49 is the fundamental provision for vesting British Gas's undertaking in a successor company on a transfer date to be fixed by the Secretary of State. The transfer date is not of course the date of flotation. It is reasonable to assume that the transfer date will be some weeks ahead of any proposed flotation date to allow the new company to establish itself and to trail the proposed sale of shares. The noble Lord, Lord Stoddart, was quoting from the newspapers, including The Times—I am very pleased to hear that he is allowed to quote from The Times newspaper—in saying that that process has already started. That is obviously a matter for the journalists and not for me. To the extent that oil prices may be relevant to the sale—and we believe they are of only limited relevance—it is the flotation date which matters rather than the vesting day or the transfer date.
My noble friends Lord Boyd-Carpenter and Lord Bruce-Gardyne quite rightly said that a number of other factors would have to be taken into consideration. I can confirm what they have said. The flotation will proceed only if the Government are satisfied that a fair price can be obtained against the background of prevailing market circumstances.
The noble Lord, Lord Taylor of Gryfe, asked me to throw further light on that, and this I will do. The most important consideration will be the company's value to investors at any particular point in time and they will judge this against the profitability of other companies and the overall state of the market. The Government will of course consider most carefully the

287
timing of the proposed sale but oil prices are only one of many factors against which a decision on timing will be made. I am afraid to say therefore that I cannot really—
Lord Bruce-Gardyne: I apologise for interrupting my noble friend but he made a rather important statement just now and I want to make sure that it is clear. He said that the Government would choose the flotation date on the basis that a fair price could be obtained against the prevailing market conditions, or words to that effect. Does he mean that a fair price could be obtained in the estimation of the Government in general terms, or the price that could be obtained would be a fair one given the conditions in the market place? There is a distinction there.
Lord Brabazon of Tara: I said,
"a fair price can be obtained against the background of prevailing market circumstances".
That is what I said.
I therefore feel that this matter of the oil price is not of the relevance which the noble Lord's amendment gives it. It would fetter the discretion of my right honourable friend the Secretary of State in deciding the best time to make the vesting order. Therefore, I cannot accept it.
Lord Ezra: Is the noble Lord saying, as the noble Lord, Lord Bruce-Gardyne, was trying to elicit from him, that the Government's prime concern will be to estimate a fair price in relation to any given set of market conditions? Does that mean that they are relatively indifferent to the market conditions and that all they will seek to ensure is that they will get a fair price in relation to those conditions?
Lord Brabazon of Tara: I think that that is what I said.
"The most important consideration will be the company's value to investors at any particular point in time and they will judge this against … the overall state of the market".
Obviously, we will attempt to get the very best price that is possible at the time of the sale.
Lord Ezra: That, I believe, is the issue upon which we appear to be divided. We are saying that this sale should take place in favourable market conditions—by "market" I do not refer only to the price of oil, although I agree that that is very important—not at a level which is judged by the Government to be fair in respect of any market conditions. There appears to be a fundamental difference between us. If the noble Lord is right in his preliminary assertion, which was amended after the intervention of the noble Lord, Lord Stoddart, that the Government would be aiming to get the best price, they must surely be seeking to dispose of these assets in the best market conditions. Is that what the noble Lord really means?
Lord Brabazon of Tara: I do not really believe that the market works like that. Who is to judge when the best market conditions will take place? We might have just missed them for all I know. I do not feel—
Lord Bruce-Gardyne: I would sit down quickly if I were you.
Lord Brabazon of Tara: I am not going to take my noble friend's advice at this point but I shall fairly speedily sit down. The Government will seek a fair price in the light of all the circumstances and these will include market conditions.
Lord Stoddart of Swindon: The noble Lord has put me in a terrible difficulty. I do not quite understand what we are doing now. What the noble Lord seems to be saying is that the Government will go ahead and dispose of the assets at the best price they can get bearing in mind the market conditions as they stand at the point of sale. I am right? That is what he is saying, is it not? But where does the value of the asset come in? The value of British Gas must be so many thousands of millions of pounds. I believe it is about £16 billion. At what point do they say, "Thus far and no farther down"?
Does the noble Lord understand what I am getting at? If I had a car to sell, or if I had a house to sell, with a market value of £50,000, how far down might I be prepared to go to sell that property? Would the figure be £50,000, £40,000, £30,000 or £10,000? In other words, bearing in mind the market position at the time of the sale, to what extent are the Government prepared to devalue the undertaking they are selling?
Lord Brabazon of Tara: The noble Lord has answered his own question, when he said the house that he used as an example had a market value of £50,000. That is the price at which we would attempt to sell the house—£50,000. The noble Lord should not confuse the asset value, which we will come to in a later amendment, with the market value of the company.
Lord Stoddart of Swindon: I will not pursue that point because we would be here all night.
Lord Diamond: I anticipated that at the outcome of this discussion we would be more discontented than we were at the beginning, and that is the case. If I may say so pace the noble Lord who keeps challenging my motives, I wish that he would stop doing so because I do not challege his. I am talking about the noble Lord, Lord Boyd-Carpenter. The noble Lord is perfectly free to get up and support the Government over every single amendment, because he no doubt feels that way as a good Tory and wants to support the Government. That is fine, but he need not challenge my motives every time that he does so.
I am trying to see to it that the Exchequer gets as much as it reasonably can out of the sale. That is our duty in this Committee. The arguments that have been put against the amendment by noble Lords who have spoken on the other side have mainly been that that is a consideration but it is not the only consideration. Of course it is not. There are all sorts of other considerations, such as the condition of the market. I invite the noble Lord, Lord Boyd-Carpenter, to follow up the logic of his statement and put down an amendment saying what the condition of the market must be before the Government shall sell.

289
The noble Lord would find that a little difficult to do. I found it impossibly difficult to put down any form of words that would be intelligible in the statute and define the condition of the market—although I hope of course that any trustee selling an asset on behalf of the beneficiary would have general regard to the condition of the market. So I am limited to putting down amendments that are intelligible and that refer to an important condition—a very important condition.
I have already said that 15 dollars a barrel is not as precise a definition as I would like, but it is general parlance and everybody knows what is meant. Every day the papers tell one that the price has gone up by £1 a barrel or has gone down by £1 a barrel. What they mean is a particular Kuwaiti quotation, but it does not matter because everybody knows what is meant. At the moment, the price is depressed.
The report did not say quite that which the Minister thought it did. The report to which I referred from the United States Department of Energy, which cannot claim to be supporting this side of the Committee or the other side, gave a warning that cheap oil is unlikely to last much beyond the end of this year. Cheap oil means oil at 10 or 11 dollars a barrel. It stated also that prices will gradually move back up, to between 25 and 32 dollars a barrel, which is a very different figure, by the mid-1990s. That is not quite what the noble Lord said and it does not support his argument about selling next year; one can wait a little longer to see how the market is moving.
The amendment is a fair attempt to protect the Chancellor against the pressures under which he exists. When we pressed the Minister to tell us what the Government are saying, he read out a form of words that was an insult to the intelligence of the Committee. It said precisely nothing—absolutely nothing. I took very careful note of what was said the first time. If the Minister will forgive me, I have regard to the brief that he read out and not to the trimming that he attempted to put on it off his own bat. What the Government will do is that stated in the brief, and it means absolutely nothing. I am not surprised that one of his noble friends invited him to sit down as quickly as possible.
We have had no assistance whatsoever offered to us in protecting the public purse on the sale of this asset. We are asked not to restrict the discretion of the Chancellor—the man who has disposed of assets with such brilliance hitherto, especially on the last occasion, which was British Telecom! He disposed of that with such brilliance that anybody with a spare dollar in his pockets on the New York Stock Exchange could make money by selling the stock the same day. I am not a little Englander. I am known to be a full European and a most enthusiastic one. I believe in neighbours, but I see no reason why British assets should be sold for the benefit of speculative New Yorkers on the New York Stock Exchange who can clear their account in one day and make a very nice profit. Millions were made in the one day, never mind in the first week.
Such is the brilliance of the Chancellor with whose discretion I am invited not to interfere. We would all of us be guilty of total negligence in this Committee if
290
we did not seek to limit the discretion of a person who has behaved in that way with British assets, especially contemplating the present situation—a situation in which, as everybody knows, the market has moved down; a situation in which oil is depressed, as everybody also knows; a situation in which one has a huge amount of stock to float onto the market. The only way in which one is going to float it is by giving such a discount that one can be assured of getting it underwritten. The price has already dropped in general estimation. The value of the flotation of the company has already dropped since this measure was first put forward, and since the Government first introduced this Bill in another place, by something like £2 billion.
I hope that I have established, first, what are my motives; secondly, why I believe that a limitation on the discretion of the Chancellor is necessary; finally, why I believe that this is the best possible option available to those of us who have the responsibility of drafting amendments and for putting them down for discussion. In those circumstances I do not propose to budge one inch.
5.18 p.m.
On Question, Whether the said amendment (No. 144ZA) shall be agreed to?
Their Lordships divided: Contents, 81; Not-Contents, 111.

DIVISION NO. 2

CONTENTS

Ardwick, L.

Kilbracken, L.

Attlee, E.

Kilmarnock, L.

Aylestone, L.

Kinloss, Ly.

Banks, L.

Kirkhill, L.

Birk, B.

Llewelyn-Davies of Hastoe, B.

Blease, L.

Lovell-Davis, L.

Blyton, L.

McGregor of Durris, L.

Bottomley, L.

Mackie of Benshie, L.

Brockway, L.

McNair, L.

Bruce of Donington, L.

Molloy, L.

Buckmaster, V.

Mulley, L.

Caradon, L.

Nicol, B.

Carmichael of Kelvingrove, L.

O'Neill of the Maine, L.

Chandos, V.

Parry, L.

Chitnis, L.

Phillips, B.

Crawshaw of Aintree, L. [Teller.]

Prys-Davies, L.

Rhodes, L.

David, B. [Teller.]

Ritchie of Dundee, L.

Davies of Penrhys, L.

Rochester, L.

Dean of Beswick, L.

Rugby, L.

Denington, B.

Seear, B.

Diamond, L.

Sefton of Garston, L.

Donaldson of Kingsbridge, L.

Shackleton, L.

Elwyn-Jones, L.

Shepherd, L.

Ennals, L.

Simon, V.

Ezra, L.

Stallard, L.

Falkender, B.

Stedman, B.

Fisher of Rednal, B.

Stoddart of Swindon, L.

Foot, L.

Strabolgi, L.

Gallacher, L.

Taylor of Blackburn, L.

Gladwyn, L.

Taylor of Gryfe, L.

Glenamara, L.

Taylor of Mansfield, L.

Graham of Edmonton, L.

Tordoff, L.

Hampton, L.

Turner of Camden, B.

Hatch of Lusby, L.

Underhill, L.

Heycock, L.

Wallace of Coslany, L.

Houghton of Sowerby, L.

Walston, L.

Hughes, L.

Wells-Pestell, L.

Irving of Dartford, L.

White, B.

Jeger, B.

Williams of Elvel, L.

John-Mackie, L.

Ypres, E.

291

NOT-CONTENTS

Ailsa, M.

Lawrence, L.

Airey of Abingdon, B.

Layton, L.

Allenby of Megiddo, V.

Liverpool, E.

Bauer, L.

Long, V.

Beloff, L.

Lucas of Chilworth, L.

Belstead, L.

Lyell, L.

Boyd-Carpenter, L.

McAlpine of Moffat, L.

Brabazon of Tara, L.

McFadzean, L.

Braye, B.

Macleod of Borve, B.

Brougham and Vaux, L.

Mancroft, L.

Bruce-Gardyne, L.

Manton, L.

Butterworth, L.

Margadale, L.

Caccia, L.

Marley, L.

Caithness, E.

Marshall of Leeds, L.

Cameron of Lochbroom, L.

Maude of Stratford-upon-Avon, L.

Campbell of Alloway, L.

Carnegy of Lour, B.

Merrivale, L.

Cathcart, E.

Mersey, V.

Constantine of Stanmore, L.

Middleton, L.

Cork and Orrery, E.

Milverton, L.

Cottesloe, L.

Morris, L.

Craigavon, V.

Mottistone, L.

Cullen of Ashbourne, L.

Orr-Ewing, L.

Davidson, V.

Peel, E.

De La Warr, E.

Pender, L.

Denham, L. [Teller.]

Plummer of St Marylebone, L.

Drumalbyn, L.

Dundee, E.

Porritt, L.

Eccles, V.

Portland, D.

Eden of Winton, L.

Rankeillour, L.

Ellenborough, L.

Reay, L.

Elliot of Harwood, B.

Renton, L.

Elliott of Morpeth, B.

Rochdale, V.

Elton, L.

Rodney, L.

Erroll of Hale, L.

St. Davids, V.

Faithfull, B.

Saltoun of Abernethy, Ly.

Ferrier, L.

Sanderson of Bowden, L.

Fortescue, E.

Selkirk, E.

Fraser of Kilmorack, L.

Sempill, Ly.

Glanusk, L.

Skelmersdale, L.

Glenarthur, L.

Stodart of Leaston, L.

Gray, L.

Strathcona and Mount Royal, L.

Gray of Contin, L.

Grimthorpe, L.

Swansea, L.

Hailsham of Saint Marylebone, L.

Swinfen, L.

Swinton, E. [Teller.]

Hardinge of Penshurst, L.

Terrington, L.

Harmar-Nicholls, L.

Teynham, L.

Harris of High Cross, L.

Tranmire, L.

Hives, L.

Trumpington, B.

Hooper, B.

Ullswater, V.

Hylton-Foster, B.

Vaux of Harrowden, L.

Ingrow, L.

Vivian, L.

Kaberry of Adel, L.

Westbury, L.

Kimball, L.

Wolfson, L.

Kinnaird, L.

Young, B.

Lane-Fox, B.

Young of Graffham, L.

Lauderdale, E.

Resolved in the negative, and amendment disagreed to accordingly.
5.26 p.m.
Lord Diamond Lord Diamond moved Amendment No. 144ZZA:
Page 49, line 3, at beginning insert ("Subject to subsection (1B) below,").
The noble Lord said: This amendment refers to "subsection (1B) below", which is contained in Amendment No. 144ZD, and I assume the Committee will wish to consider that at the same time. Amendment No. 144ZD states:
"The transfer date referred to in subsection (1) above shall be subsequent to the day on which Parliament has considered the precise figure of the Efficiency Factor included in the price formula under which a public gas supplier shall be authorised to charge tariff customers for gas supplies".
In short, this amendment seeks to ensure that Parliament will have an opportunity to consider the figure of the efficiency factor, which we have not been promised on Report but which we still hope will be available on Report. If not, we shall do everything we can to insist on it being available before the Bill leaves your Lordships' House. The amendment seeks to ensure that Parliament should have the opportunity to consider the figure of the efficiency factor, which we understand is at the moment under discussion, and has been for a very long time, between the Government and the British Gas Corporation.
Why do I attach the utmost importance to Parliament—that is, both Houses—having an opportunity to consider that one figure before the Bill completes its passage through Parliament? It is because in my view it is the most important single figure in the whole Bill. May I be permitted to explain? Under the Bill, which transfers to a private monopoly what is at present a public monopoly, the protection of the consumer (which everybody admits is essential under a private monopoly) is ensured by giving the consumer such protection as to the price that he knows he will not be overcharged.
The consumer is not in a position to go elsewhere for what he needs. I am speaking now about the tariff consumer—the 16½ million tariff consumers who have to buy at this shop and cannot buy anywhere else. They cannot compare the price at one shop with the price at another shop. They are compelled to obtain their gas from this source only. Therefore it is the duty of the Committee to protect the consumer, as everyone recognises.
How is the consumer protected? The consumer is protected by having a price which will be fair in relation to the changing circumstances day by day and year by year, and that is not simply a cost-plus price. Apart from the efficiency factor, for all practical purposes this is a cost-plus price, and we all know that the last thing to be entrusted to a monopoly is a cost-plus method of calculating the sale price to a tied consumer. Therefore another element has to be introduced. The Government recognise this—we are on totally common ground at this point—and have introduced that other factor. It is called the efficiency factor.
One does not charge cost-plus overheads, etc., plus a measure of profit plus the variation in the way in which prices move from year to year. One takes off an efficiency factor to encourage improved efficiency and to allow the consumer to obtain the benefit of that increased efficiency. That is the efficiency factor. That factor has not been disclosed. I shall not go so far as to say that it has not been agreed, because I do not know that. All I know is that it has not been disclosed and that this Committee knows nothing about it, nor does the other place.
This amendment seeks to make sure that this Chamber will know about it, because, if the efficiency factor is a small figure, for all practical purposes it does not alter the basic principle of cost-plus charging. I do not want to weary the Committee with all the difficulties that have arisen with cost-plus charging in public life but I hope that we are all aware of them and can recollect them. We have to avoid cost-plus charging even where there is no monopoly. Where

293
there is a monopoly we have to avoid it like the plague. It would be cost-plus charging if it were a minimal efficiency factor. It would not be cost-plus charging if it were a substantial efficiency factor.
If one is seeking to protect the consumer, the whole basis on which approval of this Bill should depend is whether the consumer will be charged a reasonable price or overcharged. The consumer will be charged a reasonable price if the efficiency factor is substantial. He will be overcharged if the efficiency factor is small or negligible. Therefore in order to carry out our responsibility for protecting the consumer, we have to know what will be the efficiency factor. If the Government are not in a position to give that information now, they must give it as soon as they can and certainly before this Bill leaves this House.
One knows that the factor must be fixed before the shares go on the market, because, first the Government, in the person of the Minister himself, have said so and, secondly, no shareholder will touch this transaction with a bargepole unless he knows exactly what it will be. It might make all the difference to future profits or losses. He will not touch the shares at all unless he knows the efficiency factor exactly. It has to be in the prospectus and the Government have to make a statement about it. They know they have to do this and have said that they will do so.
I am simply asking that the figure which the Government will give the public shall be given to Parliament first, so that Parliament can decide whether the consumer is being adequately protected. That is the first duty of Parliament when agreeing to the privatisation of such a fundamental service as the supply of gas to 16½ million households. I beg to move.
Lord Bruce of Donington: We on this side of the Committee should like to offer our support to the noble Lord, Lord Diamond, in pressing for urgent and favourable consideration by the Committee of these two amendments, which should be taken together.
As the noble Lord, Lord Diamond, has said, there can be no doubt that until we know the extent of the efficiency factor it will not be possible for us to know the impact of this privatisation Bill upon the amounts paid out by the 16 million consumers of gas in this country for the continuation of the service with which they have been so successfully provided by the corporation that is responsible through the Minister to Parliament.
I am well aware that rumours have been bruited—as appears from today's Times, if I may quote from the City column:
"The other aspect of the package is the X factor in the formula for controlling gas prices. After prolonged discussions between the Treasury, the Department of Energy and Sir Denis, a formula allowing British Gas to raise prices annually by 2 per cent. below the rate of inflation appears to have been agreed".
We should like to know whether that speculation is true. In any event, if it is true then the Government should come clean and provide Parliament with the opportunity of discussing the matter. There is a world of difference between an efficiency factor of 2 to be taken into account in the price formula and an efficiency factor of, say, 5—a very great difference indeed.
294
It is extremely important that the public, who of course will not be informed by the popular press as to the significance of this particular figure, should be aware of the consequences to their gas bills of the figure being fixed. The amendment that is now put forward by the noble Lord provides for notification of the figure to Parliament. Therefore Parliament is provided with an opportunity to discuss the figure and to consider how it has been reached. So far, the Government have been very coy about the considerations that they have in mind—the various factors and the weight that is attached to them for the determination of the figure. They may have given a hint, but the population at large and the 16 million gas consumers do not have a clue as to what considerations the Government have in mind.
Even the discerning readers of the Wapping-produced Times and the Tory broadsheet, the Daily Telegraph, let alone the more independent Financial Times, are still not aware of the various considerations entering into the efficiency factor. As the noble Lord, Lord Diamond, pointed out so succinctly, consideration by Parliament should precede the transfer date so that everybody may know exactly where they stand.
I am well aware that in the report of the House of Commons Select Committee on Energy on the regulation of the gas industry, at Appendix 2, there appear certain tentative speculations on the assumption of variable efficiency factors. I am not a continuous viewer of the television screen, but I doubt whether those illustrations have appeared anywhere on television, and I can testify that they have not appeared at all extensively in those portions of the press that are popularly bought by the general public.
The noble Lord is known as a most reasonable man. I appeal for his support for what his right honourable friend the Prime Minister calls open government. I invite him to come clean and to provide full explanations, with adequate illustrations, of exactly what the consequences will be for the consumer of the application of the efficiency ratio at various levels so that everyone knows. That should be accompanied by an explanation as to exactly what it means and exactly what considerations the Government have in mind. At the same time it should be explained to the people at large what the effect will be of the changes in accounting practice, to which I shall refer later when we discuss the various accounting factors relating to the Bill. What will be the effect of those changes on the forecast profits, which have to be taken into account in determining the efficiency factor?
Nothing can be lost by being open and straightforward about that. By and large, the population is already highly suspicious of the Bill, as is well known. I am bound to remind the noble Lord that in a recent Gallup poll nearly 80 per cent. of the population expressed distrust of the Government's trustworthiness. That is one of the reasons; they do not believe that the Government have been forthcoming with them and they ought to explain more frankly, openly and honestly exactly what they are doing.
The amendment of the noble Lord, Lord Diamond, may lack the degree of precision that he would like, but undoubtedly at Report stage he can amend it to

295
meet the exacting requirements of parliamentary counsel and parliamentary draftsmen. But I implore the noble Lord in the best interest of good government to accept the amendment.
5.45 p.m.
Lord Belstead: There is nothing sinister in the efficiency or X factor in the price formula which is to be found in the authorisation and which is the subject to the two amendments moved by the noble Lord, Lord Diamond. It is a factor that will be set prior to privatisation when the scope for improved efficiency has been fully assessed, and the idea is that it will ensure that customers benefit. As I think on all sides we agree that that is highly desirable, it is also highly desirable that we should get the efficiency factor right.
I gave an assurance to the noble Lord, Lord Diamond, some days ago on a previous debate on the Bill that we were not deliberately delaying a decision on the efficiency factor but that we should need to announce the value of it well before flotation. I cannot give either noble Lord the assurances that they want this afternoon, but I understand that an announcement is likely to be made on the efficiency factor shortly.
Lord Diamond: I am grateful to the Minister. I accept what he says, that discussions are still going on, but I do not think that they are going on with quite the sense of urgency that a government who have high regard for the two Houses of Parliament would adopt. His final promise was that an announcement would be made shortly. Happily we are on common ground that there is nothing sinister about the efficiency factor. I never said that there was. There might be something sinister about the Government being unwilling to disclose it to the Houses of Parliament.
We agree that the efficiency factor has to be fixed before flotation. I said that the noble Lord had been good enough to assure me on that. That is for the common sense reason that no one would buy a single share if it were not. He says that it will be fixed shortly. The only question is whether that will be before the Bill has left your Lordships' House. If he can go a little further and say that the Government have to provide the figure before flotation, they will provide it shortly and that means before the Bill leaves your Lordships' House, I should say that I was grateful and sit down. Is he prepared to give that assurance? If he is not, why not? The sinister side then comes up. I hope that he can give that assurance and that therefore we need not think what to do about the amendment just yet.
Lord Belstead: I cannot give the assurance for which the noble Lord asks. I am sure that we shall be doing our best, and I have no doubt that I shall be able to say something more shortly.
Lord Diamond: I am grateful to the Minister. We are content to take small—almost invisible—crumbs on this side of the Committee, as we know that we shall be voted out every time that the Government want to do so. We are permanently in a minority. We understand that and we understand that that is the way that democracy functions in this great country of ours. That being so, we have to be satisfied with the
296
minimum sized crumb. Will the noble Lord be good enough to say what he meant when he said that he would be making an announcement shortly? Will that be before or during the Report stage and no later than that? If it is later than that, it will be of no use to us.
Lord Belstead: I am afraid that I have exhausted the offerings that I can make to the noble Lord, except to say that "shortly" means shortly.
Lord Bruce of Donington: May I press the noble Lord a little further? It is not unknown for governments to defer announcements until after Parliament has gone into recess and on occasion by a planted Written Question to be replied to officially on the last day that Parliament is sitting. That device must be known to the noble Lord and to the great department in which he has some interest. Can the noble Lord give Parliament the assurance that the announcement will be made before Parliament goes into the Summer Recess, because that might assist us a little?
Lord Belstead: I must say that I am disappointed in the noble Lord. He started his remarks on this amendment by generously saying that I was a reasonable man who would treat in all fairness the Committee and the things that we do. Now the noble Lord is suggesting that I shall make some announcement just after the House has gone into recess. Perhaps the noble Lord was not saying that, but I am not sure.
Lord Bruce of Donington: I hasten to disassociate the noble Lord from the machinations of the department of government in whose hands the Bill finally rests. We well know that if matters were left to the noble Lord as the Minister of State of the department responsible for this wretched Bill, things might be considerably different, but he is not in that position; he is the spokesman of the department concerned; he is not the Minister responsible. Surely it should be within the noble Lord's competence to find out by a suitable reference, which can be across the Committee on paper, whether the announcement will be made before Parliament goes into recess.
Lord Belstead: It had crossed my mind that that is what the noble Lord, Lord Bruce, meant. I could not credit though that the noble Lord was casting aspersions upon my right honourable friend the Secretary of State who has produced an admirable Bill which will be excellent in the effects that it has upon customers.
I shall for a moment return to the original reason for the amendment being tabled. The noble Lord, Lord Diamond, has at heart the customer's interests and so does the noble Lord, Lord Bruce; but so do the Government. It is in that context that I repeat the undertaking that I gave a little while ago: we hope to be saying something more about this matter shortly.
Lord Diamond: It is difficult for the Member who has moved the amendment to interpret the word "shortly". The essence of the difference between us, which is small but important, is not the date and what "shortly" means; it is whether Parliament will have an opportunity to consider the matter. Why should the

297
Government be unwilling to give Parliament that opportunity? They have a huge majority in the other place and a reliable majority in this place. They can achieve their purpose, no matter how dissatisfied Parliament may be—and I hope that it will not be—with the efficiency factor when it is disclosed.
I cannot understand the Government's hesitation. I should have thought that the Government would be prepared to say that they will undertake to see that the negotiations are completed in sufficient time to put the decision in front of your Lordships before the Bill leaves the House.
I have no need to press the noble Lord the Minister any more. He has gone as far as he can go. He has been good enough to say that an announcement will be made shortly. We are in Committee and we shall be coming to the Report stage later. We shall have an opportunity on Report to air our views on this matter again if—and I hope it is not the case—we have not received the information within the next two or three weeks, if that is what "shortly" means.
I repeat that we shall do everything in our power to persuade the Government during the Bill's remaining stages to see that it does not leave this place until your Lordships have had the opportunity to consider that figure, which is crucial for protecting the consumer. On that basis I hope that the Committee will agree that on balance, this being the Committee stage, with the Report stage to follow, and a Third Reading after that, I should ask for permission to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 144ZB to 144ZD not moved.]
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 144A:
Page 49, line 12, after ("Corporation") insert ("and the Director").
The noble Lord said: This is a relatively minor amendment and I hope one which will be accepted easily by the Government. When choosing the successor company in its shell form, if I may put it like that, the Secretary of State may, as the Bill is presently drafted,
"after consulting the Corporation, by order nominate",
the successor company.
It is our belief that the director, who will after all have overall powers under the statute to control the industry, should be consulted even at this early and relatively unimportant stage on which company and what form it should take before the Secretary of State makes his order.
I say that because the company—although it will be a company limited by shares owned wholly by the Crown—may have certain characteristics which the director may find objectionable in the context of it being the shell company into which the assets of the British Gas Corporation will be pushed. I do not believe that the issue is complicated or important. I hope that the Government will see fit to accept the amendment. I beg to move.
Lord Brabazon of Tara: We recognise the widespread desire to give the director the fullest
298
possible role in relation to the industry. However, it would be inappropriate formally to involve the director in matters relating to the vesting or the flotation of the company. The Director General of Gas Supply is appointed under Clause 1 to act as a regulator for the gas industry. Ofgas will be an independent regulatory body. We have already had a number of debates about the director's functions under earlier clauses. It is important to remember that those functions are assigned to the director by Part I of the Bill. The director has no functions under Parts II or III of the Bill. That is made clear by Clause 1.
The director will be responsible for ensuring that public gas suppliers and others meet the full requirements of the regulatory regime, whether set out in the Bill or in the authorisation conditions. He will have the enforcement powers necessary to ensure that that happens and he will be able to modify public gas suppliers' authorisations if that is necessary. He will also have a number of other functions in relation to gas supply matters.
The Secretary of State is at present the guardian of the nationalised British Gas Corporation. It is the Secretary of State who appoints the transfer date and nominates the successor company under Clause 1, and who gives directions as to the issuing of securities in the successor company under Clause 51. Clearly, it is right that he should consult the corporation about the identity of the company to be nominated as the successor company as it is to that company that all property and rights will be transferred. We do not believe that there is any purpose in consulting the director, who has no relevant functions, although there is nothing to prevent the Secretary of State from consulting him informally if he wishes to do so. I feel that the amendment is another attempt to fetter the Secretary of State's discretion in a way which is unnecessary and inappropriate. I therefore cannot accept it.
Lord Williams of Elvel: I am grateful to the noble Lord for his response. I hear all that he says. He merely outlined what the director's responsibilities are under the Bill as proposed. If we can have an assurance that the company that will be nominated will be a "clean" company, without assets and liabilities other than the proceeds of its paid up share capital—in other words, it is a "clean" company without any problems—then I shall be happy to withdraw the amendment and shall not move Amendment No. 144B.
6 p.m.
Lord Brabazon of Tara: As the noble Lord says, we really come to that on the next amendment. However, I am quite happy to speak on that amendment now and to give the explanation that the noble Lord, Lord Williams, seeks. The successor company to be nominated by the Secretary of State will be a registered company with no assets and liabilities, and with an authorised share capital of £50,000 with a paid-up share capital of two £1 shares owned by the Secretary of State or his nominee. In other words,it will in all respects be a "shell" company which will not have traded until vesting day. This "shell" company has already been formed in preparation for vesting but will be entirely dormant until then. It is not proposed

299
to vest the corporation's assets in a company already trading on the market, nor is it a route to a back-door merger. If the noble Lord examines subsection (2) closely, he will see that the company to be nominated must be wholly owned by the Crown. Therefore, the successor company will need to be one specifically set up for the purpose. I hope that this explanation will clarify the noble Lord's mind.
Lord Williams of Elvel: I am grateful for the noble Lord's full explanation, which does indeed answer the points that I wished to make. We have incidentally discovered another interesting fact—that a company has already been formed in the ownership of the Secretary of State to receive the assets of British Gas for privatisation. I mention that in passing. It has already happened. In the light of what the noble Lord has said, I have the assurances that I wanted. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 144B not moved.]
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 144C:
Page 49, line 15, at end insert—
("( ) An order made under subsection (2) above shall include the successor company's Articles of Association.")
The noble Lord said: We come now to the very important question of the special share arrangements contained in the draft articles of association which the noble Lord on the Front Bench opposite has been kind enough to make available to us. The status of the privatised British Gas, whether it is to continue to be a British company in the full meaning of the word or whether it is to be directly or indirectly controlled by foreign interests, is, in my view, one of the fundamental questions dealt with in the Bill. We are, of course, not suspicous. Far be it from us to be suspicious about the noble Lord's right honourable friend the Secretary of State for Energy. I cannot help noting, however, that under Article 10(5) of the articles of association as at present drafted it is stated:
"The Special Shareholder may, after consulting the Company and subject to the provisions of the Act, require the Company to redeem the Special Share at par at any time by giving notice to the Company and delivering to it the relevant share certificate".
In other words, the Secretary of State or other agent of the Crown who, under Article 10 of the draft articles of association, is empowered to hold this share, may, if he feels it appropriate, require the company to redeem the share. Under those circumstances, all the rights attached to the special share, which prevent foreign interests—I shall not go into the legal jargon—holding collectively more than 15 per cent. of the privatised British Gas, are immediately removed. For us, this is a very fundamental question. We have argued it on previous occasions; we have argued it on other Bills in respect of other organisations that are being privatised. Indeed, only yesterday, in your Lordships' House, we had a prolonged discussion about the status of the special share in the Airports Bill.
Our amendment puts what I would call the minimalist position. In other words, we seek to ensure—and this is the minimum that we
300
require—that the articles of association of the successor company shall be in parliamentary form; that is to say, that they will be included in the order that the Secretary of State makes, and, as such, will be submitted to Parliament. There is, if I may say so, a maximalist formula, which is contained in Amendment No. 144FA in the names of the noble Lords, Lord Diamond and Lord Whaddon, that would make the special share the object of a new clause on the face of the Bill. The Government can accept whichever of these amendments they think fit, but one of the amendments, in our view, they must accept.
It is intolerable for us to accept that we can privatise a major industry, a very large company, which has in many respects a natural monopoly position, without having an assurance which only Parliament can renege on, which only Parliament can cancel, that it will not fall under the control, direct or indirect, of people who might be working against British interests. This argument has been made on a number of occasions in a number of places—in another place as well as in your Lordships' House—on other Bills, and I do not want to elaborate it. For us this is an extremely important matter. I beg to move.
Lord Diamond: I do not want to delay the Committee but I wish to assure the noble Lord, Lord Williams of Elvel, that I support entirely what he has put down. It is, as he says, a minimal provision. It does not go anything like as far as I should like it to go. The noble Lord will not mind my saying so, I know. He probably agrees. But it is the minimum, and it is not a bad policy when dealing with a Government that have an inlaid majority to ask for the minimum. I support the noble Lord on that basis.
Lord Brabazon of Tara: I am grateful to the noble Lord for this opportunity to address the question of the articles of association since these are, of course, fundamental to the activities of the new company. Let me say straight away that I understand the desire of noble Lords to ensure that the draft articles of British Gas, which have been public for some months and which were made available to noble Lords at the beginning of the Committee stage, should be established as the articles of the successor company. However, I hope to demonstrate to noble Lords why a statutory arrangement would be inappropriate.
As a matter of company law, articles can always be changed by shareholders' vote. To set them by secondary legislation, as proposed in the noble Lord's amendment, would deprive shareholders of their normal rights. This would be a completely unwarranted interference in the normal rights of shareholders. A statutory arrangement would also be unworkable. A need to change the articles could arise at any time for a variety of reasons. It would be extremely difficult to effect changes speedily if the articles had been laid down in legislation. But overriding all these considerations is a more fundamental point. The only legitimate Government interest in the articles of association of what will be a private company is the limitation on shareholdings. This is protected by the special share referred to by the noble Lord, Lord Williams, which effectively entrenches the limitation in the articles. The Government's interest is therefore fully protected.

301
As regards the special share, the articles of the company state that certain specified matters including the 15 per cent. limitation on shareholdings are deemed to constitute a variation of the rights attaching to the special share. Under the Companies Act 1985, rights attached to a particular class of share cannot be varied unless inter alia the holders of 75 per cent. of the shares of that class consent to the variation. Since the special share constitutes a class of its own, its rights, including the 15 per cent. limitation, cannot be varied without the Government's consent. I accept that the explanation that I have given does not go so far as the noble Lord, Lord Williams of Elvel, would hope. I believe, however, that I have explained the workings of it in any case.
Lord Williams of Elvel: I am afraid that I find the noble Lord's explanation less than wholly convincing, as I am sure he probably expected. It is certainly true that the articles of association of a public company can be changed under normal circumstances by a special resolution that requires 75 per cent. of those present and voting. But these are not normal circumstances. This is a privatised monopoly. It does not seem to me relevant in any way to refer to the normal activities of a private company, to the normal rights of shareholders of a private company, when we are talking about British Gas plc.
Furthermore, the rights of shareholders, as the noble Lord himself has remarked, are affected by the draft articles of association. Here the shareholders cannot change certain articles in the articles of association by the normal procedures of a special resolution. I am asking: why not put the whole lot in the order? The order can be changed; there is no problem about that. Orders have been changed; orders have been revoked. The only point is that if an order is changed after a suitable resolution by shareholders, then it is submitted to Parliament and Parliament has the right to pronounce on it. That is the minimal position, and I am afraid we cannot move from that position.
Lord Bruce of Donington: May I ask the noble Lord to elucidate one point? He said that circumstances might arise that would necessitate a change in the company's articles. In previous debates in Committee one of the strong points that the Government have called in aid is the intention of the new plc in a whole number of respects to do exactly the same as the corporation has hitherto done—to pursue the same policies over a very wide field. Will the noble Lord give the Committee some account of the circumstances that he or the Government have in mind? He referred to "in certain circumstances". Can the noble Lord give an account or description of the circumstances that his department has in mind?
Lord Brabazon of Tara: No, not really. I cannot give a reason why the company might wish to change its articles of association. I am sure that there could be various different reasons. I said that with regard to the Government their interest in the articles of association was restricted to the limitation of holdings in which the special share is important. That is a matter which cannot be changed whereas they might want to change something relatively minor.
6.12 p.m.
On Question, Whether the said amendment (No. 144C) shall be agreed to?
Their Lordships divided: Contents, 75; Not-Contents, 102.

DIVISION NO. 3

CONTENTS

Airedale, L.

Kirkhill, L.

Ardwick, L.

Llewelyn-Davies of Hastoe, B.

Attlee, E.

Lloyd of Kilgerran, L.

Aylestone, L.

Lovell-Davis, L.

Birk, B.

McGregor of Durris, L.

Blease, L.

McIntosh of Haringey, L.

Blyton, L.

McNair, L.

Boston of Faversham, L.

Mulley, L.

Bottomley, L.

Nicol, B.

Brockway, L.

Oram, L.

Bruce of Donington, L.

Phillips, B.

Carmichael of Kelvingrove, L.

Ponsonby of Shulbrede, L.

Chandos, V.

Prys-Davies, L.

Chitnis, L.

Rhodes, L.

Cledwyn of Penrhos, L.

Ritchie of Dundee, L.

Crawshaw of Aintree, L.

Rochester, L.

David, B. [Teller.]

Seear, B.

Dean of Beswick, L.

Shackleton, L.

Denington, B.

Shepherd, L.

Diamond, L.

Silkin of Dulwich, L.

Elwyn-Jones, L.

Simon, V.

Ewart-Biggs, B.

Stallard, L.

Ezra, L.

Stedman, B. [Teller.]

Falkender, B.

Stoddart of Swindon, L.

Fisher of Rednal, B.

Strabolgi, L.

Foot, L.

Taylor of Blackburn, L.

Gallacher, L.

Taylor of Gryfe, L.

Glenamara, L.

Tordoff, L.

Graham of Edmonton, L.

Turner of Camden, B.

Grey, E.

Underhill, L.

Hampton, L.

Wallace of Coslany, L.

Hanworth, V.

Walston, L.

Harris of Greenwich, L.

Wells-Pestell, L.

Hatch of Lusby, L.

Whaddon, L.

Hughes, L.

Wigoder, L.

Irving of Dartford, L.

Williams of Elvel, L.

Jeger, B.

Wilson of Langside, L.

John-Mackie, L.

NOT-CONTENTS

Ailsa, M.

Ferrier, L.

Allenby of Megiddo, V.

Fraser of Kilmorack, L.

Alport, L.

Gibson-Watt, L.

Arran, E.

Glanusk, L.

Bauer, L.

Glenarthur, L.

Beloff, L.

Gray, L.

Belstead, L.

Gray of Contin, L.

Brabazon of Tara, L.

Hailsham of Saint Marylebone, L.

Broxbourne, L.

Butterworth, L.

Hardinge of Penshurst, L.

Caccia, L.

Harmer-Nicholls, L.

Caithness, E.

Hives, L.

Cameron of Lochbroom, L.

Hooper, B.

Carnegy of Lour, B.

Hylton-Foster, B.

Coleraine, L.

Ingrow, L.

Colville of Culross, V.

Kaberry of Adel, L.

Colwyn, L.

Killearn, L.

Constantine of Stanmore, L.

Kimball, L.

Cork and Orrery, E.

Lane-Fox, B.

Craigavon, V.

Lauderdale, E.

Cullen of Ashbourne, L.

Lawrence, L.

Davidson, V.

Liverpool, E.

Denham, L. [Teller.]

Long, V.

Drumalbyn, L.

Lucas of Chilworth, L.

Dundee, E.

Lyell, L.

Eden of Winton, L.

McAlpine of Moffat, L.

Elliot of Harwood, B.

McFadzean, L.

Elliott of Morpeth, B.

Macleod of Borve, B.

Faithfull, B.

Margadale, L.

303

Marshall of Leeds, L.

Sanderson of Bowden, L.

Merrivale, L.

Seebohm, L.

Mersey, V.

Selkirk, E.

Middleton, L.

Skelmersdale, L.

Milverton, L.

Stanley of Alderley, L.

Morris, L.

Stodart of Leaston, L.

Mottistone, L.

Strathclyde, L.

Mountevans, L.

Swansea, L.

Murton of Lindisfarne, L.

Swinfen, L.

Newall, L.

Swinton, E. [Teller.]

Onslow, E.

Tranmire, L.

Orr-Ewing, L.

Trumpington, B.

Pender, L.

Tryon, L.

Plummer of St Marylebone, L.

Ullswater, V.

Vaux of Harrowden, L.

Rankeillour, L.

Vickers, B.

Reay, L.

Vinson, L.

Renton, L.

Vivian, L.

Renwick, L.

Westbury, L.

Rochdale, V.

Wolfson, L.

Rodney, L.

Young, B.

St. Davids, V.

Young of Graffham, L.

Saltoun of Abernethy, Ly.

Zouche of Haryngworth, L.

Resolved in the negative, and amendment disagreed to accordingly.
6.20 p.m.
[Amendments No. 144D to 144F not moved.]
Clause 49 agreed to.
Lord Diamond Lord Diamond had given notice of his intention to move Amendment No. 144FA:
After Clause 49, insert the following new clause:
("Special Share-holder

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

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

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

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

The noble Lord said: It is perfectly clear from the answer which the Government gave to an amendment which proposed a good deal less than is required in this amendment that the Government will not give way at all at this stage on this amendment. Therefore, I am simply making it clear that we shall return to this amendment but that it would be a waste of the Committee's time to try to pursue it at this stage. Therefore, if no other noble Lord wishes to speak on this amendment, I do not propose to move it.
[Amendment No. 144FA not moved.]
Clause 50 agreed to.
Clause 51 [Initial Government holding in the successor company]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 144G:
304
Page 51, line 4, leave out ("securities") and insert ("ordinary shares")
The noble Lord said: I beg to move Amendment No. 144G. It may be for the convenience of the Committee if I also speak to Amendments Nos. 144H, 144J, 144K, 144L, and 144N. The objective of these amendments is to ensure that the Secretary of State has discretion only to ask for the allotment of shares—that is, ordinary shares in the successor companies—to himself rather than securities of a general nature. This amendment attempts to probe the Government's intentions in regard to the balance sheet which British Gas plc will have when it comes to be floated.
Perhaps I have started this debate rather late in the day, because I read in Monday's Financial Times that:
"British Gas has lost its battle to be privatised without debt in its balance sheet. It is to have about £2.5bn of borrowings, which will moderate the corporation's ability to make acquisitions and large investments.
"The shape of the balance sheet was one of the most important issues to be settled before the flotation, due to take place at the end of November. By choosing to burden British Gas with debt, the Government is preventing it becoming too dominant in the oil industry. At present, it has no net borrowings, whereas other oil groups carry significant debt".
It is certainly true that over the years British Gas has accumulated surpluses, and it is certainly true that it has no long-term debt on its balance sheet. It is in theory quite sensible for a government who are deciding to privatise such a company to ensure that it does not become too dominant in the oil industry and—this was a point which the noble Lord, Lord Ezra, made—that it should not be in a position to be able to go out and make acquisitions right, left and centre well outside its normal remit.
However, there are two problems. The first is that it is surely the province of the directors of a plc to decide how much debt they should have in their company in relation to the equity which the company has. It is not for the Secretary of State or anybody else to intrude on the authority of the board of directors in that area.
Secondly, it is perfectly clear that British Gas has accumulated its surpluses due to the fact that it has had a virtual monopoly, and it is the consumers who have actually paid the money to make up that surplus. Therefore, I can certainly see the logic in loading the balance sheet of British Gas with debt—maybe even of £2.5 billion—as long as British Gas were to use that £2.5 billion perhaps to refund some of the money which the consumers had paid, which had given rise to the accumulated surplus of British Gas. It certainly does not seem sensible for the Secretary of State to appropriate that money in the way in which he appropriated the total assets of Enterprise Oil without compensation at all to the British Gas Corporation.
The amendments are of a slightly technical nature and I accept that there may be provisions in the Companies Acts, and certainly in listings particulars, which would make these amendments slightly defective. However, it is the principle which I think Members of the Committee will wish to discuss.
The decision may by now have been taken. It we are to believe the Financial Times, the decision has been taken. If we are to believe the Financial Times, the decision is to be announced in the next few weeks, which may or may not be equivalent to the expression

305
used by the noble Lord, Lord Belstead, a little earlier, when he said "shortly". I very much hope that the Government would announce what they propose to do about the balance sheet of British Gas well before the Report stage in your Lordships' House. I very much hope that they would answer this debate and be prepared to debate with us whether it is not a proper use for the surplus which British Gas has accumulated that there should be some rebate to the customers who have provided that surplus.
Furthermore, I ask the Government to justify the figure—if it is the figure of 2.5 billion—in relation to the equity capital of the business, to explain to us on what basis they have lighted upon this figure, and to say whether the directors of British Gas plc are to be invited to comment on that figure. These are the problems to which I believe the Government have to respond, and it is in seeking answers to these questions and problems that I beg to move the amendment.
Lord Belstead: I hope that the noble Lord, Lord Williams, will not think that I am being in any way dismissive, because the noble Lord has every right to have an interest in the proposed capital structure of the company. Obviously it is a matter in which the Committee has a right to be interested. However, at the moment it is premature to expect that I can answer detailed questions, not least about the figure of £2.5 billion, because the capital structure is a matter requiring careful consideration with the corporation itself and with City advisers. Therefore, I really cannot be as forthcoming as the noble Lord and indeed perhaps the Committee might wish.
The noble Lord obviously recognises that to substitute "shares" for "securities" in this group of amendments would make it impossible for the company to issue debentures to my right honourable friend. This would, of course, make it impossible to introduce debt into the successor company. As the noble Lord made clear, he is moving these amendments first of all on a probing basis.
Although no decisions have yet been made one thing I am certain of is that it is important that the Secretary of State should have the necessary flexibility to require the company to issue debentures, if this seems the right way to achieve the sort of financial package likely to prove attractive to investors. The capital structure of the company is still under consideration, as I have said, and an announcement will be made most certainly at the appropriate time. But the one thing I am absolutely certain about on this group of amendments is that we really must retain the necessary flexibility in order to be able to deal with the capital structure as seems best.
This is perhaps a rather inadequate reply, but it has to be inadequate under the circumstances. The effect of the additional amendment, No. 144N, which I know the noble Lord wanted to take with the other amendments, more or less falls, because I am not able at this particular stage to go further than I have on the other amendments.
6:30 p.m.
Lord Diamond: The noble Lord who moved this amendment I suspect must feel as unhappy as I do, not
306
only at the answer we have had on this amendment, but at the whole attitude of the Government in denying to the Committee information which they are prepared to give to the press, but which they do not want the Committee to be aware of until the Bill has left this Chamber. It is really making a laughing stock of the Committee to ask us to approve a Bill, yet not to give us the essential information which we need in order to do so while, at the same time the outside world is made aware of it.
That leak to the press did not just happen. The Financial Times did not find something under the carpet as it woke up one morning. This is information which has been given to the Financial Times by people authorised to give it. I hope they were authorised to give it. I hope we are not going to have another episode such as that which we have recently experienced and which we are glad to be rid of. This is information which has been given. It is information within the knowledge of the Government, and information which they want to deny to the Committee. I just do not understand it or see the point of it. If the Government want to keep it secret from everyone, well and good. But why give it to the press and not give it to the Committee? It cannot be the case that the Government have not anticipated what the shape of the balance sheet will be. The noble Lord told us in the discussion on the last amendment that the company is already formed; the successor company already exists. That successor company must have a balance sheet. That company has got to know whether it will have securities or debentures, or whatever. I shall not say that the Government are coy, but I shall say that they are deliberately withholding information from this Committee which they gave to the press. It is a wholly unsatisfactory way of dealing with your Lordship's Committee, and I hope when the time comes your Lordship's Committee will say so.
Lord Bruce of Donington: Perhaps I may amplify what the noble Lord, Lord Diamond, has just said. The noble Lord referred to the Financial Times, but the leak has been a good deal more extensive than that. If it had been to one paper only, it might have been accidental, but I see that in The Times for today we have the following piece:
"Sir Denis would plainly have liked a debt-free corporation to bring to market, but that was never a realistic proposition, given the scope it would have given the company for substantial acquisition-making. Reluctantly he has agreed to the injection of some £2.5 billion of debt, reducing the value of shares to be sold in the City from around £8 billion to £5 billion".
That is in the financial columns of The Times and is on substantially the same lines as that which was noted by the noble Lord in the Financial Times. The fact that the two articles differ slightly in the text is possibly due to the fact that representatives of both papers were present and gave their own construction when the leak was made. This is how it is done. The Government are expert at leaks. We have leaks prior to the Budget. One has only to read the Sunday papers to discover what is going to be in the budget on the following Tuesday.
Why do the Government try to conduct their business in this way? It is not straightforward. If in fact the Government have decided on what they are going to do and are prepared to leak it to the press as they obviously have done, they should make a declaration

307
to Parliament and to this Committee. If they decline to do so, the Committee can draw its own conclusions, and I hope the country will draw its own conclusions as well.
Lord Belstead: In view of the hostile reaction from the noble Lords, Lord Bruce of Donington and Lord Diamond, I should say that we are as a matter of fact—although noble Lords might not suspect it—conducting a short discussion on a group of amendments which would make it impossible for the company to issue debentures to my right honourable friend. It is that which I am resisting.
I am also saying that at the moment we still want the necessary flexibility to decide the best way forward, because we are still being given advice by City advisers, and we are taking advice also from the corporation itself. I have said no more than that. I think that is a reasonable attitude to take.
Lord Diamond: I am sorry, but the noble Lord, Lord Belstead, tried to make the technical point that the acceptance of the amendment would cause difficulties about issuing debentures at a later stage. That is not the issue; everyone knows it is not the issue. If the amendment is not acceptable in that respect, let the noble Lord say so and move on to the other respect.
Why is this information, which is needed before going on flotation—and which obviously has been discussed and given to at least two most responsible financial papers—being kept from your Lordships' Committee? Are the Government ashamed of it? I cannot see that there is anything to be ashamed of. It is something to be justified and explained. I can see no reason at all why the Government should hide it. It is bound to come out later. All we ask is that the Government should reasonably take Parliament into its confidence and let us all know what they are proposing about some most important issues. That is all.
It is a very reasonable request. We just want the Government to tell us what they are proposing to do, and why. The Government will not even say when they are going to tell us. They know it will be published shortly, but the noble Lord the Minister did not even say "shortly" on this one. He went back on "shortly" and said, "At an appropriate date". It is what the Government consider appropriate to their plans, appropriate to their secrecy, and appropriate to their lack of openness in dealing with Parliament. I repeat what I said before: this is not the way to treat Parliament, and I hope Parliament will register its dissatisfaction.
Lord Stoddart of Swindon: I must confess that I am now more puzzled at this stage of the debate than I was at the beginning. I am certainly much more puzzled now than I was when the Bill started its passage through the House of Commons and, indeed, through the House of Lords.
My noble friend Lord Williams of Elvel is an expert; he is an economist. My noble friend, Lord Bruce of Donington is an accountant; so he is an expert. The noble Lord, Lord Diamond, is also an accountant—and not only that; he was Chief Secretary to the Treasury for six years and so he is an expert.
308
Probably he is the expert of experts. He knows what all this means.
Of course, most of us in this Committee and, indeed, most people in the House of Commons, are non-experts. What we cannot understnad first of all is what the noble Lord, Lord Diamond, cannot understand; that is, why on earth the Government are so secretive. Why do they conduct their affairs in such a way that those of us in Parliament who have to vote and make decisions, as we no doubt shortly will on this amendment, are not informed of what the Government have in mind?
My impression when this Bill started was that the Government were going to issue shares to the public in order that they could have a holding in British Gas. To a simple, non-expert fellow like me, that meant that they were going to issue ordinary shares that you and I, and all of us, could buy, in the first instance perhaps at a reduced rate, through certain agencies, after which we could sell or buy as we wished on the Stock Market, getting a dividend that would be published every day, certainly in the Daily Telegraph and perhaps in The Times and in other newspapers.
That is something I can understand. But when I read in the Financial Times that it is now to be different, that in fact the Government have something else in mind, that they are thinking of floating British Gas with 2½ billion of debt and will then only issue £5,000 million of ordinary shares, I become bewildered. I know, of course, that as an ordinary member of the public I can buy shares, and no doubt will be enabled to do so. Whether or not I will is, of course, another matter. I shall have to think about it.
The noble Lord says, "Don't think too long". That gives us a clue, does it not? He says, "Don't think too long" because he thinks they are going to be snapped up. Why does he think that they are going to be snapped up? Is it because he thinks they are going to be cheap? Is that not right? The only reason why they would be snapped up and why I would not be able to get some is because they will be cheap—probably too cheap.
Let us get back to the proposition that instead of floating on the Stock Market 7,000 or 8,000 million ordinary shares the Government now have it in mind to float £5,000 million of ordinary shares and 2½ thousand million of debt. I know about the shares. I know that I shall be able to buy these shares through some broker, or perhaps my bank or the post office, but how do I get a bit of this debt?
The noble Lord, is right; I do not get it. I am not going to be enabled to get a bit of the debt, even though perhaps those who get hold of a bit of the debt will get a good rate of interest. I do not know, because I am an ordinary member of the public and not an expert like my noble friends and the noble Lord, Lord Diamond, who was the Chief Secretary to the Treasury for six years and knows about these things. The noble Lord will see why I am puzzled, and why I have been most surprised at this apparent change of heart by the Government.
I think the noble Lord will realise why the ordinary mortal, the person who is not an expert like my noble friends, or not an expert who writes for the Financial Times or The Times, is puzzled and why we need more

309
information from the Government, and why we are asking for more information from the Government, which apparently the noble Lord cannot give us. But how can we make progress without the proper information? The Government, of course, are the Government. They would like to get their legislation with the least possible bother; I realise that. But Parliament is Parliament, and this Committee of the House of Lords is part of the great British Parliament. This Opposition is Her Majesty's Opposition, and we are entitled, therefore, not only on our own behalf but on behalf of Her Majesty, to have the proper information from the Government before we proceed with the business of this Committee.
I hope I have made myself plain to the noble Lord as an ordinary lay member of the public. The noble Lord has a duty to ensure that the public understand this legislation, or at least understand the benefits they can get from this legislation when it is passed. At the moment, far from increasing their understanding the Government have confused it. I hope the noble Lord can therefore help me, and, by so doing, help the public to understand exactly what the Government are about.
6.45 p.m.
Lord Diamond: I am sorry to pursue this, but I must. It is very good of the noble Lord who has just spoken to refer to the fact that I had the privilege of being Chief Secretary to the Treasury for six years. During those six years, when I had the responsibility of getting Finance Bills through Committee with Mr. Macleod leading from the Conservative side—and the noble Lord who has been a Minister in the other House will confirm this—if I had attempted to deal with that Committee in the way that Ministers are dealing with this Committee I would have been torn to bits. I would not have attempted to deal with it in that way. I certainly would not have lasted for six years.
I do not want to put it on a political basis. I refer to my experience as chairman for nearly six years of the Royal Commission on the Distribution of Income and Wealth. This was an all-party organisation. Members of that Royal Commission were drawn from every walk of life, every philosophy, and every kind of political background. We had to report about the City, among other things. One of our reports dealt with the City. The first thing we did was to take evidence from City representatives far and wide; and the first thing in taking evidence was to find out the gearing that they regarded as appropriate and right in a variety of circumstances. The gearing is the ratio between shares and debt. Without going into detail, everybody who is familiar with the City will know that you must know what the gearing is in making an assessment of a company.
We have asked the Government to give us some help on this. They say not one word except, "We will tell you when it is appropriate". I do not want to call that insulting language, but it is not far off it if you are taking a real interest in a Bill and trying to help it forward, and if all you are told is that you will be given the information when it is appropriate. That is what we used to tell our children in the nursery.
310
The press has been told. It has been told that the gearing has been worked out, and it is two to one. That is £5 billion in shares and 2½ billion in securities, in loan. That is the gearing. It is very simple: two to one. We can understand that. If we are told that that is a fact, we can debate it and see the arguments for and against; and the Government will no doubt be able to say why they think that that kind of gearing is appropriate in these circumstances. It is a matter of opinion. The Government can justify themselves. It is nothing to be ashamed of; it is not a sin. But it is a relevant issue in dealing with this privatisation and in securing the best possible terms.
If the Government will not say the exact amount of debt they are proposing that the company should be loaded with, or the nature of the debt—whether it is transferable debt, or a series of debentures; whether they are going to institutions, or whether they are going to individuals—can they at all events say what the gearing will be? That will be of some help to us. Can they say they have discussed this, they cannot of course fix the total price yet but they do know what the proportions will be? All the indications from two respectable organs of the press are that the proportions, namely the gearing, will be 2:1. Can they at any rate say that, to help us?
Lord Williams of Elvel: If the Government are not prepared to say that, would they be prepared to comment on a further except from the Financial Times from which I quoted?
"The exact form of the debt has not been fixed, but one possibility is that British Gas would refinance in stages its obligation through sales to the public of long-term debt, repaying the Government over the next two years to fill gaps in its sales of gilt edged stock".
This would,
"allow the Government to finetune the timing of revenues from its privatisation programme".
Again, the Financial Times seems to me to have got it pretty well right. I suspect that is what the Government have in fact decided. Is the noble Lord prepared to confirm that that is the case? If he is not, and if he is not prepared to give us any more information, then I am afraid the only alternative we have is to try to prevent the Secretary of State from issuing securities to himself and confine him to ordinary shares. That is why we shall have to press the amendment.
6.52 p.m.
On Question, Whether the said amendment (No. 144G) shall be agreed to?
Their Lordships divided: Contents, 70; Not-Contents, 84.

DIVISION NO. 4

CONTENTS

Airedale, L.

Carmichael of Kelvingrove, L.

Alport, L.

Chandos, V.

Ardwick, L.

Cledwyn of Penrhos, L.

Attlee, E.

Crawshaw of Aintree, L.

Barnett, L.

David, B.

Blease, L.

Dean of Beswick, L.

Bottomley, L.

Denington, B.

Brockway, L.

Diamond, L.

Brooks of Tremorfa, L.

Elwyn-Jones, L.

Bruce of Donington, L.

Ennals, L.

311

Ewart-Biggs, B.

Mulley, L.

Ezra, L.

Nicol, B.

Falkender, B.

Oram, L.

Foot, L.

Phillips, B.

Gallacher, L.

Pitt of Hampstead, L.

Glenamara, L.

Ponsonby of Shulbrede, L. [Teller.]

Graham of Edmonton, L. [Teller.]

Prys-Davies, L.

Hampton, L.

Rea, L.

Harris of Greenwich, L.

Ritchie of Dundee, L.

Hatch of Lusby, L.

Rochester, L.

Heycock, L.

Seear, B.

Houghton of Sowerby, L.

Simon, V.

Hughes, L.

Stoddart of Swindon, L.

Irving of Dartford, L.

Strabolgi, L.

Jeger, B.

Taylor of Gryfe, L.

John-Mackie, L.

Taylor of Mansfield, L.

Kagan, L.

Tordoff, L.

Kirkhill, L.

Turner of Camden, B.

Llewelyn-Davies of Hastoe, B.

Underhill, L.

Lloyd of Kilgerran, L.

Wallace of Coslany, L.

Lovell-Davis, L.

Walston, L.

McGregor of Durris, L.

Whaddon, L.

Mackie of Benshie, L.

Wigoder, L.

McNair, L.

Williams of Elvel, L.

Molloy, L.

Wilson of Langside, L.

NOT-CONTENTS

Allenby of Megiddo, V.

Long, V.

Arran, E.

Lucas of Chilworth, L.

Bauer, L.

Lyell, L.

Beloff, L.

Macleod of Borve, B.

Belstead, L.

Marshall of Leeds, L.

Birdwood, L.

Maude of Stratford-upon-Avon, L.

Brabazon of Tara, L.

Broadbridge, L.

Merrivale, L.

Butterworth, L.

Mersey, V.

Caithness, E.

Morris, L.

Cameron of Lochbroom, L.

Mottistone, L.

Campbell of Croy, L.

Moyola, L.

Carnegy of Lour, B.

Murton of Lindisfarne, L.

Coleraine, L.

Newall, L.

Colville of Culross, V.

Orr-Ewing, L.

Constantine of Stanmore, L.

Pender, L.

Cork and Orrery, E.

Plummer of St Marylebone, L.

Cowley, E.

Davidson, V.

Rankeillour, L.

Denham, L. [Teller.]

Reay, L.

Drumalbyn, L.

Renton, L.

Eden of Winton, L.

Renwick, L.

Elliott of Morpeth, B.

Rochdale, V.

Ferrier, L.

Saltoun of Abernethy, Ly.

Fraser of Kilmorack, L.

Seebohm, L.

Gibson-Watt, L.

Selkirk, E.

Glanusk, L.

Skelmersdale, L.

Gray, L.

Stanley of Alderley, L.

Gray of Contin, L.

Stodart of Leaston, L.

Greenway, L.

Strathclyde, L.

Hailsham of Saint Marylebone, L.

Swansea, L.

Swinfen, L.

Hardinge of Penshurst, L.

Swinton, E. [Teller.]

Harmar-Nicholls, L.

Tranmire, L.

Hives, L.

Trefgarne, L.

Hooper, B.

Trumpington, B.

Hylton-Foster, B.

Tryon, L.

Ingrow, L.

Ullswater, V.

Kaberry of Adel, L.

Vaux of Harrowden, L.

Killearn, L.

Vinson, L.

Kimball, L.

Wolfson, L.

Kinnoull, E.

Young, B.

Lauderdale, E.

Zouche of Haryngworth, L.

Lindsey and Abingdon, E.

Resolved in the negative, and amendment disagreed to accordingly.
7 p.m.
Lord Brabazon of Tara: I think we have reached a suitable stage to resume the House. In doing so I would
312
suggest that we do not return to further consideration in Committee of the Gas Bill until 8 o'clock.
I beg to move that the House do now resume.
Moved accordingly, and on Question, Motion agreed to.
House resumed.

Housing (Scotland) Bill
Read a third time.
Clause 1 [Extension of right to purchase and of "secure tenancy"]:
Lord Gray of Contin Lord Gray of Contin moved Amendment No. 1:
Page 1, line 10, leave out subsection (2).
The noble Lord said: My Lords, it may be for the convenience of the House if I speak to Amendments Nos. 1 and 6 together. All the amendments related to housing association matters tabled at this stage in the Bill in my name arise from the amendments your Lordships' House chose to make, against the advice of the Government, at Report.
It is one of the conventions of drafting practice that is is the duty of the draftsman to ensure that Bills pass from one House to the other in a legally correct form; a form in which they could become law. So four of my amendments might be described as drafting. These are two of them. Your Lordships' House decided at Report to exempt from the right to buy tenants of housing associations which have a stock of less than 250 houses. I will not comment on that decision except to say that in moving these amendments I am not in any way indicating that the Government accept or reject that proposal. My purpose is simply to satisfy the legal proprieties.
As it now stands the amendment lies in an odd place in the Bill. Clause 1 is about the extension of the right to buy. Exemptions from the right to buy (and there are a number of them) lie in Schedule 1 to the Bill, which contains the bulk of the amendments to the Tenants Rights Etc (Scotland) Act 1980. Amendment No. 1 thus deletes the exemption for small housing associations from Clause 1 and Amendment No. 6 replaces it, somewhat altered, in that appropriate part of Schedule 1.
The exemption itself has some problems of application in practice. The exemption implies a test of the size of an association upon the result of which depends whether or not the association is in or out of the right to buy. But it is not clear when this test should be applied. If, for example, an association with 260 houses and thus in the right to buy, then received applications to buy from 11 tenants; does the last applicant get his house or not? Assuming that he did not, but that the association, fortified with receipts, built a few more houses, once again exceeding the 250 limit, does the original tenant now have the right to buy?
We felt that this doubt and the possibility that associations might oscillate in and out of the right to buy was unfair and probably unworkable. The draftsman too, felt that the exemption was likely to be regarded as defective in such circumstances.

313
Accordingly, the second amendment in the pair provides that once the right to buy applies, because the association stock has reached 250 houses, it should apply thereafter no matter how the stock numbers may vary. I trust your Lordships will see this as only a minor divergence from the exemption made, and one which is made in the spirit of good drafting. I beg to move.
Lord Carmichael of Kelvingrove: My Lords, we are grateful to the Minister for the gracious way in which he moved his amendments and also for the spirit in which he moved them. I would also thank him for having written me with more explanation of the reasons for the amendment. He will appreciate that I received the letter on a very complicated subject only today. Without the slightest reservation, I accept his good faith. As he said in the letter, already we know that draftsmanship cannot always express exactly what was meant and intended by the House. However, largely because this House very wisely passed a couple of amendments, there is an opportunity to look at the Bill again in another place.
Although I cannot see any obvious points which will be changed, I hope the Minister will realise, that we on this side and all those who supported the amendments will nevertheless wish to reserve our position until a close examination can be made of the full intent of what is a very complicated and technical amendment. I should like to reinforce the points made by the noble Lord when he said that he trusted that we would take this letter as an evidence of good faith. I have no hesitation at all in accepting his good faith in this matter. I would only thank him for accepting the amendments agreed to at the last stage of the Bill in the spirit in which that was done. I hope the amendments, with the polishing up that his draftsmen have given them, will have the effect that this House intended when they were passed.
Lord Mackie of Benshie: My Lords, I should like to thank the Minister for the full explanation he has given us in his letter and in his speech. I am glad to see they are tidying up the Bill so that it leaves this House in a workable form. To me, this is a very good sign because if they were going to remove it forthwith they might not have bothered; so I am full of hope. I think that the amendment limiting the number to 250 is a substantial one, I suppose, in a way and I can see the force of it. Any small association, if it is going to stay small, has its reasons. If it is going to grow, then it comes into the common position with the other associations. I think there are a lot of arguments for fixing a point and leaving it at that. That then leaves it to the associations themselves to decide what they are going to do. I can see the force of moving in and out of the no-selling area. I thank him again for tidying this up. I trust that it has the meaning that I have put upon it, though he has explained that that is not necessarily so.
The Earl of Selkirk: My Lords, I thank my noble friend for the letter of explanation which he sent and with which I fully agree. He says that there are complications which might arise. They are not the only complications which might conceivably arise under this Bill. There are a great many cases of
314
interpretation which are going to be difficult, I have no doubt. This seems to be a very minor one compared with some of the others which we shall have to ascertain. I am grateful to my noble friend and I have no further comment to make.
On Question, amendment agreed to.
Clause 9 [Extension of power of islands and district councils to indemnify certain heritable creditors]:
Lord Gray of Contin Lord Gray of Contin moved Amendment No. 2:
Page 8, line 45, leave out from ("Treasury") to end of line 10 on page 9.
The noble Lord said: My Lords, it may be for the convenience of the House to speak to Amendments Nos. 2 and 9 together, since they cover what is essentially the same point. The effect of these two amendments is to remove the definition of the expression "heritable security" from this Bill and from the Housing Associations Act 1985.
I am advised that it would now be better if the definition of "heritable security" were to be removed both from the Bill and from the Housing Associations Act 1985. We have reached this view because, with the passing of time, the expression has a meaning now generally understood by those using the statute and we believe that it could, in fact, lead to confusion if it continues to be defined in statutes where no deviation is intended from the general and well understood meaning of the expression.
I apologise to your Lordships for bringing forward these minor and somewhat technical drafting amendments at such a late stage, but I am sure that your Lordships will appreciate this attempt to tidy up the statute book in a small way. My Lords, I beg to move.
Lord Carmichael of Kelvingrove: My Lords, I thank the noble Lord for his explanation. From the information that I have received from those who are particularly specialised in this field, it appears that this is a clearing-up of something that should be welcomed by everyone. Therefore, we see no reason to oppose the amendments.
On Question, amendment agreed to.
Clause 14 [Payments etc. in Community-based housing associations]:
Lord Carmichael of Kelvingrove Lord Carmichael of Kelvingrove moved Amendment No. 3:
Page 10, line 44, leave out paragraph (b) and insert—
("(b) the granting of a tenancy of a dwelling to a person described in subsection (2) below who is not an employee or the close relative of an employee of the association; but only if the granting of the tenancy is made under the published rules required under the Housing Associations Act 1985.").
The noble Lord said: My Lords, this is an amendment which is very close to the one I moved at Report stage and which has become something of a cause célèbre in the whole question of housing associations, the sale of houses and the letting of houses. I withdrew the amendment then, but said that I would, if necessary, reintroduce it when I had received more advice. Since then, far from receiving

315
advice, I have had a very large correspondence from housing associations in Scotland. If I may mention just a few of these associations, to give the noble Lord the Minister some indication of the feeling in Scotland about the benefits that could accrue, or that are assumed to accrue, to members of housing associations because their families may be given houses, your Lordships will realise why I and others wish to raise this problem again.
One of the representations that I have received is from the Three Towns Housing Association Limited, the three towns being Ardrossan, Saltcoats and Stevenston. The letter is a very heartfelt plea in which the chairman of the committee, Mr. John McDonald, said:
"Residents in the area who are nominated by the District Council, who are legitimately at the top of their waiting list or transfer list are having to be refused houses because they are related to members of the Committee".
In this instance, there is a special case within a special case. He continued:
"As this area consists of small communities, most of whom have remained stable over the years, most residents are inter-related. We are already losing one member of the committee, and possibly several others, who do not feel that they have a right to prevent relatives from obtaining housing in the area".
Although the Minister comes from an area some distance away, I think he will be familiar with the Ardrossan, Saltcoats and Stevenston part of Scotland, and will appreciate that these are three towns where there has been a stable community over a very long period and that the association of families is therefore fairly continuous. Since we have no clear definition of a close relative, it is very difficult to make any decisions in a case like this, unless there is a great deal more flexibility on the part of the Government in this section of the Bill.
Another association which has written to me is the Linthouse Housing Association Limited, who wrote, quite boldly and correctly:
"The time will come when no decent, caring parent will volunteer to serve on such a Committee when they learn that their families are debarred from housing within their place of birth. This can only spell disaster for the future and encourage less suitable types to formulate Committees".
One of the marvellous things about housing associations has been the quality of the people who have set them up. They are people with little or no experience, many of whom had never been to a trade union meeting, a church meeting or any other meeting. But something had motivated them and they became involved in the community, and the more people get involved in the community at this level the richer the community becomes.
These people say, quite rightly, that not only are they leaving their houses night after night to take part in these committees, and worry about problems, which is a big enough penalty for their families, but when their families are due for housing in the area where they wish to be housed they will not be given a house. So it is understandable that they will almost certainly decide that it is not worth the effort and will decide to give up. I cannot say whether others of the same quality will take their place, but if they do they will be in the same position and, when their families legitimately expect to be housed, they will not be given
316
the opportunity because the parents are on the committee of a housing association.
I will end with this letter, although there are many others who have been in touch with me and some of my colleagues over the last few weeks. This is from the Key Housing Association Limited of Broomielaw Street, Glasgow, and they state:
"Key Housing Association was set up by the Scottish Society for the Mentally Handicapped to provide housing and hostels in the community and prevent people from being put in an institution. Key works closely with the Branches of the Society, whose members are parents and close relatives of people with a mental handicap. Approximately 50% of our Committee members have a close relative who could be housed by the Association, but who are denied the right to hostel or housing because of Schedule 16".
They continue:
"The dilemma facing Committee members in this situation is whether to put the welfare of the greater number of mentally handicapped people requiring accommodation before that of their own son or daughter. Where they do this they take the risk of nothing happening whilst they are still serving on the Committee or within a year of resigning, which will necessitate the relative requiring supportive housing or hostel accommodation".
They go on:
"Many of our Committee members are awaiting the outcome of the Lords decision on the proposed amendment to exclude a tenancy from the definition of 'benefit' before they themselves decide on whether or not to resign at our AGM in June. They feel that the price to pay for their contribution to Committee is too high and see no alternative than to withdraw from Committee entirely".
I think noble Lords in all parts of the House have great sympathy with groups such as that, and we have all tried to impress on the Minister the great amount of voluntary effort that has been put in by people in the community who want their own area to be improved. Also, organisations such as the Key Housing Association Limited, spastics groups and other bodies in the community have a specific interest in helping people who, very frequently, by the nature of things are related.
I know that the Minister has been through this before, but there is the old story that dripping water sometimes wears away a stone. Although I would never consider the Minister to be stony hearted, I know that he has a whole department behind him which takes a lot of shifting. I hope that, because of what was said previously and is continuing to be said, as well as the extra evidence we are getting as this Bill proceeds, the more powerful will the case become and the more courage will that give him to agree with what I know he, in his heart of hearts, believes is a very worthwhile amendment. I hope that he will do something about it tonight, or at least promise that we can look forward to the next stage in another place with a little more hope than we have had up to now. I beg to move.
Lord Mackie of Benshie: My Lords, I will not take up much time as the arguments have all been put. The noble Lord, Lord Carmichael, said one thing which I think is terribly true. More and more evidence is coming forward to show that the position is upsetting a great many committees. These people are committed because of some personal experience in nearly every case. It is grossly unfair that they should be put in a position different from councillors who let many more houses and are not subjected to this restraint.

317
Surely it is possible to produce a code of conduct in the case of letting to relations of members of the committee so that this can be done fairly. In fact, very often it goes the other way and being a relation makes it much more difficult to get a house. But to exclude it altogether will I feel destroy a great many well motivated committees. I hope the Minister has reconsidered the position.
Lord Taylor of Gryfe: My Lords, perhaps I may add a sentence or two to the pleas of the noble Lords, Lord Carmichael of Kelvingrove and Lord Mackie of Benshie. Like both of them, I have been approached by individuals who are involved in the housing association movement. I have the greatest respect for them because they are taking up these duties with a strong community interest. It seems unfortunate that people who are prepared to give their time in the interest of building a community in this way should be discriminated against. That is what it means.
If you are a member of the Glasgow City Council there is no prohibition on your relatives getting a council house. Indeed, it used to be a feature of Glasgow Corporation that being a member of the council was a positive advantage in bringing you up the list, but I shall not dwell on that. I simply want to say that people who do this voluntary service in housing associations should not be discriminated against as they are in this case.
The whole purpose of the housing association is to build communities. People join a housing association in the hope that they will be able to improve the environment of their community. It is surely not a bad thing that they should even hope that their children will not be debarred from occupying some of the areas which by their efforts they have enriched. I appeal to the Minister in this case to depart from his brief and to respond to what is a case of good sense and good humanitarian principle.
Lord Gras of Contin: My Lords, I could not very easily depart from my brief on this issue because my own view coincides entirely with the brief I have in front of me. I can well understand why noble Lords opposite have repeatedly tabled this amendment in both Houses. There are a number of emotive examples where anomalies could be caused by the strict application of what is, after all, sensible legislation designed to avoid workers in the housing association movement being subject to accusations of self-interest. That is the purpose of the legislation.
But I doubt very much that removing the general controls is the way to tackle the problem found in one, albeit important, sector. It cannot be right that members of a committee of a housing association who are elected from a very limited group within the community should be able to grant themselves the prime gift available to them—namely, a tenancy. While the committee is elected, it is elected by a small band, the members of the association, which does not usually include even all the tenants. This is not democracy compared with that which forms the foundation of local councils, with which some comparison has been made in the past and again tonight.
318
The safeguard offered by this amendment is that the granting of tenancies would be subject to the allocations policy of the association, but even that is decided by the same small band of members of the committee.
Lord Taylor of Gryfe: My Lords, I am sorry to interrupt the noble Lord but could he not say further that the rules of the association are monitored and approved by the housing corporation, which is outside the scope of the independent authority of these little associations to which he refers?
Lord Gray of Contin: Yes, my Lords, but I do not think that changes the principle. The members of the committees are in a position to grant themselves or their relations tenancies. Wherever that pertains, those people are in danger of being accused of showing favouritism towards their own. I do not think that that is right. I do not think it is realistic to compare the situation of those who are elected to those associations with those who are elected to local government. The kind of electorate is quite different; and even if the elections to local government are often on very small turnouts there is the opportunity for a much wider and larger cross-section of the community to take part in those elections. Therefore, I do not think it is a fair comparison or even a comparison at all.
The case of small specialised associations was raised where, for example, parents set up an association to care for their handicapped children in later years. I can see that the rules bite hard. But I see no reason why the parents should actually be committee members. They can still be members of the association without being committee members. The association's committee, which acts as the trustee of the association's interest, could take its decisions in the light of advice from a group of well-informed and interested parents. The committee would grant the tenancies, but not to its members or their families, and the advisers could receive tenancies.
As I said at the outset, I can understand why this amendment has been tabled. I know that there is pressure outside. I know that noble Lords have been written to on this subject. But I cannot accept that all committees of housing associations should come under threat of suspicion merely to avoid what may be a minor administrative difficulty for a few. I am afraid that, although I certainly have great sympathy with those who are involved, I feel that we cannot deviate on this matter. With regret, I must ask the noble Lord to withdraw his amendment. If he insists on pressing it I am afraid I must ask my noble friends to resist it.
Lord Carmichael of Kelvingrove: My Lords, we are all disappointed, not merely with the Minister's reply but with the fact that the Minister says that he agrees with the reply. We have always had a much higher opinion of the Minister than that. However, the noble Lord made a number of points. He said that the members of the association need not be members of the committee. But everyone knows that in these organisations the committee members are the ones who have the drive. The people within the organisations are likely to be the ones who started it and want to improve their locality.

319
The noble Lord, Lord Taylor of Gryfe, made a strong point when he said that the housing associations have their codes of practice and letting policy supervised by, passed and accepted by the housing corporation. The housing corporation makes a great effort to ensure that the association letting rules are fair and correct. I say to the Minister that, particularly in the small communities, the strongest possible way of keeping everyone on the committee on the straight and narrow path is public opinion, which will know very quickly if someone gets preference over someone else merely because he happens to be a committee member.
The Minister has never dealt with the question of close friends. There is no way of dealing with it. It has been said by a number of people (including myself on the last occasion) that sometimes friends are much closer than relatives. There is no restriction on them.
I do not like to do this to the Minister because he is normally so sympathetic; but I believe that this House must also show some sympathy with those people who go out night after night in all weathers, leaving their families, to attend meetings; to try to get things done; to lead deputations to local authorities and to the Government; and who spend a great deal of time and energy—and, in many cases, money—in order to build up something for the community, for a part of the community, or for disadvantaged people in the community.
I believe therefore that this House should show a certain amount of empathy with those people by making its view known. Reluctantly, I feel that we must press this matter to a Division.
7.30 p.m.
On Question, Whether the said amendment (No. 3) shall be agreed to?
Their Lordships divided: Contents, 49; Not-Contents, 53.

DIVISION NO. 5

CONTENTS

Airedale, L.

Kirkhill, L.

Ardwick, L.

Lloyd of Kilgerran, L.

Blease, L.

Mackie of Benshie, L. [Teller.]

Brooks of Tremorfa, L.

Bruce of Donington, L.

McNair, L.

Carmichael of Kelvingrove, L.

Molloy, L.

Chitnis, L.

Mulley, L.

Cledwyn of Penrhos, L.

Nicol, B.

Crawshaw of Aintree, L.

Phillips, B.

David, B.

Ponsonby of Shulbrede, L. [Teller.]

Dean of Beswick, L.

Diamond, L.

Prys-Davies, L.

Elwyn-Jones, L.

Rea, L.

Ennals, L.

Ritchie of Dundee, L.

Ezra, L.

Rochester, L.

Ferrier, L.

Seear, B.

Gallacher, L.

Simon, V.

Graham of Edmonton, L.

Southwark, Bp.

Hampton, L.

Stoddart of Swindon, L.

Harris of Greenwich, L.

Strabolgi, L.

Houghton of Sowerby, L.

Taylor of Gryfe, L.

Hughes, L.

Underhill, L.

Jeger, B.

Williams of Elvel, L.

John-Mackie, L.

Wilson of Langside, L.

Kagan, L.

Young of Dartington, L.

Kilmarnock, L.

320

NOT-CONTENTS

Abinger, L.

Lauderdale, E.

Auckland, L.

Layton, L.

Bauer, L.

Lindsey and Abingdon, E.

Belstead, L.

Long, V.

Birdwood, L.

Lyell, L.

Brabazon of Tara, L.

Mersey, V.

Caithness, E.

Murton of Lindisfarne, L.

Cameron of Lochbroom, L.

Napier and Ettrick, L.

Carnegy of Lour, B.

Perth, E.

Coleraine, L.

Plummer of St Marylebone, L.

Colville of Culross, V.

Constantine of Stanmore, L.

Renton, L.

Cork and Orrery, E.

Renwick, L.

Davidson, V.

Rochdale, V.

Denham, L. [Teller.]

Saltoun of Abernethy, Ly.

Elliott of Morpeth, L.

Seebohm, L.

Glanusk, L.

Shannon, E.

Gray, L.

Skelmersdale, L.

Gray of Contin, L.

Stanley of Alderley, L.

Greenway, L.

Stodart of Leaston, L.

Harmar-Nicholls, L.

Strathclyde, L.

Hives, L.

Swinfen, L.

Hooper, B.

Swinton, E. [Teller.]

Hylton-Foster, B.

Trefgarne, L.

Ingrow, L.

Trumpington, B.

Kimball, L.

Ullswater, V.

Kinloss, Ly.

Wilberforce, L.

Resolved in the negative, and amendment disagreed to accordingly.
7.38 p.m.
Clause 15 [Extension of sections 44 and 45 of 1985 Act to Scotland]:
Lord Gray of Contin Lord Gray of Contin moved Amendment No. 4:
Page 12, line 26, at end insert—
("( ) in subsection (3), at the end there shall be added the words"; and a dwelling is also publicly funded for this purpose if it is in Scotland and housing association grant has been paid in respect of a project which included its improvement or repair or, where it and another dwelling are both provided for letting under the project, the improvement or repair of that other dwelling.";").
The noble Lord said: My Lords, this amendment arises from the exemption from the right to buy for charitable housing associations that the House decided on at Report. Unlike my other housing association amendments, it is not of a drafting nature but is intended to ensure that tenants are treated as evenhandedly as possible.
The amendment's purpose is to extend the HOTCHA scheme—that is, home ownership for tenants of charitable housing associations—to tenants of charitable housing associations whose houses have been improved or repaired with housing association grant. It is needed because a number of houses that were taken out of the right to buy by the general exemption of charitable housing associations are older houses that the existing provisions relating to HOTCHA do not cover. Thus, tenants of those houses would, without the amendment, receive neither the right to buy nor the transferable discount available under HOTCHA. They would understandably be angry to have their aspirations so thwarted.
In my efforts to explain the scheme succinctly to the House at Report stage, I may have oversimplified it, and I welcome the opportunity to put matters right. Under HOTCHA a tenant of a charitable housing association who cannot buy his existing house is able to apply the discount he might otherwise have received

321
to the purchase of a house on the open market. The value of the house bought is limited by a ceiling related to the costs, in that area, of the kind of house a first-time buyer might be expected to buy. There are also corresponding safeguards on the maximum discount which can be applied.
The transaction is conducted through another, non-charitable association. Having chosen his house the tenant asks the acquiring association to buy it and to sell it to him after applying the discount he has achieved on his existing house. The balance of the cost is paid to the acquiring association by way of housing association grant. These costs are met from the overall allocation to the Housing Corporation and have to be controlled to avoid an untoward limitation of the movement's scope for development.
But to return to the amendment. To qualify for HOTCHA the tenant must occupy a house which was provided by housing association grant. This grant was introduced in 1974 and there are many houses belonging to the older established housing associations which were provided using public finance in a variety of guises. Being older, the estates on which these houses are situated have often been repaired or improved and housing association grant has been paid on this work. The amendment simply provides that where a house is in a scheme or estate on which housing association grant has been paid for repairs or improvements then, if the landlord is a charitable housing association to which the right to buy does not apply, the tenant is eligible for HOTCHA.
We hope in this way to have ensured that as many as possible of the tenants of housing associations have access to the right to buy, either directly or through HOTCHA. That is in line with the expressed intention of the Bill, which received a good measure of support in this House. I trust the amendment will be welcomed. I beg to move.
Lord Carmichael of Kelvingrove: My Lords, I listened with care to the Minister and I should certainly like to give what he said considerably more thought. I should like to raise two points. First, is there such a clause in English legislation? I understand that no such clause applies to England, and that means there is a difference in treatment between the two countries.
The second point, which has been glossed over perhaps because of the lack of appreciation of the real problem, is that the housing associations will not, at the end of the day, receive enough money from the sale of a house to build a replacement. Moreover—and this is extremely important—there is a time gap. One cannot sell a house today and get the money for it in a fortnight's time and build another house in a month's time. There will be a long gap. The housing associations were set up to keep communities together and create vibrant communities in some of the older areas. They will not be able to replace houses as quickly as might be thought by those who worded this clause.
The Minister has given us an opportunity to see his words. Obviously the Bill will be going to the other place where, as they should be, these matters can be digested and discussed at more leisure. However, I
322
should like to know whether a similar clause exists in English legislation. If the Minister cannot tell me tonight perhaps he will let me know later and I will pass on the information to whoever raises this issue at another time.
The Earl of Selkirk: My Lords, I believe that this is an improvement to the Bill. There is a curious situation with this complex arrangement between this Act and the Housing Associations Act 1985 where some of the clauses belong to Scotland and some to England. One thing done by the Bill is to bring Clauses 44 and 45 into the Scottish Act where they were not before. I believe that to be an advantage because it brings in more definitely the question of improving houses with repairs and maintenance. That is an important and, in many ways, unique part of the housing associations. It brings in the point—which I had omitted to notice—that if one has a charitable association one wants to use the HOTCHA system. I believe that is right. Therefore, I welcome the amendment.
7.45 p.m.
The Earl of Perth: My Lords, I agree with the noble Earl, Lord Selkirk. This is a terribly complicated situation. The noble Lord, Lord Gray of Contin, wrote a letter to various noble Lords outlining his proposals. In that letter he said that he hoped we would agree this to be a fair and useful extension of the aims we had originally achieved in carrying the amendment on Report. Therefore, I too thank the Minister for bringing forward the amendment. All in all, I think it is useful.
Lord Gray of Contin: My Lords, I am grateful to my noble friend Lord Selkirk and to the noble Earl, Lord Perth, for their support.
The noble Lord, Lord Carmichael, asked one or two questions. He asked whether there is a similar clause in English legislation. The answer is that there is no parallel clause. My advice is that it may be that the same problem does not occur to the same extent as it does in Scotland. The noble Lord also asked about HOTCHA sales. I will consider the point he raised and write to him with a full explanation.
On Question, amendment agreed to.
Lord Mackie of Benshie Lord Mackie of Benshie moved Amendment No. 5:
After Clause 19, insert the following new clause:
("Functions of local authorities with respect to persons who are homeless or threatened with homelessness.
.—(1) The Housing (Homeless Persons) Act 1977 shall be amended in accordance with the following provisions of this section.
(2) In section 1(2) (homeless persons and persons threatened with homelessness) after paragraph (c) there shall be inserted the following paragraph—
"(d) it does not provide the ordinary facilities of a residence and it is inappropriate for his needs, or it is unreasonable for him to continue to live in it."
(3) In section 4 (duties of housing authorities to homeless persons and persons threatened with homelessness) after subsection (6) there shall be inserted the following subsection—
"(7) Where a local authority has a duty under subsections (4) and (5) above "accommodation" shall be defined as either—

(a) a separate dwelling house that shall not be over-crowded as defined in section 89 of the Housing (Scotland) Act 1966 and shall meet the tolerable standard as defined in section 14 of the Housing (Scotland) Act 1974, or

323

(b) in exceptional circumstances where a separate dwelling house as defined in (a) above is not appropriate to the needs of an applicant accommodation that is appropriate and reasonable in all the circumstances." ").

The noble Lord said: My Lords, this amendment when last discussed raised a tremendous amount of sympathy in this House. The noble Lord, Lord Gray, pointed out that the amendment I moved at that time was technically wrong. I withdrew it and said that we would bring forward an amendment at a later stage. That is what I am now doing.
The issue hinged on what was a point of law. I understood the noble and learned Lord, Lord Elwyn-Jones, to say that in law it was right but not in practice. The House heard of accommodation which was described as adequate, but I think that everyone realised that the accommodation itself, although it could be called accommodation, was not the sort of accommodation in which one would permit or like one's own family to live. The matter caused a great deal of stir and many people are worried about it.
The Government now have an opportunity to put right the situation in Scotland through this Bill and I hope they will grasp this opportunity. In 1985 there were in the region of 18,000 homeless applicants in Scotland. Those are Shelter figures. Shelter believes that the figure is likely to exceed 20,000 in 1986. We must have the definitions of what is "homeless" and what is "accommodation" sensibly applied. That is what we seek to do in the amendment.
There are a number of arguments. I shall not repeat them all because we went through this matter thoroughly on the last occasion. In a Scottish case the noble and learned Lord, Lord Wheatley, remarked:
"I reject the argument that as long as accommodation was available it did not matter what the nature of the accommodation was. In my view it must be reasonable in all the circumstances. A pigsty might be accommodation, but not reasonable accommodation".
Of course this is true, but it is carrying the comparison to extremes. Though I myself have known some very comfortable pigsties, they are not places where I should like to live, nor would I like anyone else to live in them. We are simply asking the Government to put the position back to what it was before, and I think that that is a reasonable request.
We are not impressed by the argument that has been put forward by the Minister in another place who said that he would "wait and see". That is a good Asquithian phrase, I dare say, but in this case it appears to me to be nonsense. The statistics that have been collected do not show and would not show the anomalies that have been occurring, nor the attitudes that local government may be driven to adopt owing to a shortage of cash. We only want to put right a decision which is admitted by lawyers legally to be based on paper and not on practicality. We want the Government to rectify this decision and return to common sense. That is what this amendment tries to do.
There is concern in Scotland, and in fact the General Assembly of the Church of Scotland moved an addendum to the report of the Church and Nation Committee saying:
"The General Assembly notes with grave concern that a recent judgment in the House of Lords … has disclosed serious
324
deficiencies in the provisions made for homeless persons, and urges Parliament to bring forward legislation with utmost urgency to restore the rights of homeless families to be decently housed".
That appears to me to be a good request from a reputable source. I beg to move.
Lord Carmichael of Kelvingrove: My Lords, I should like to support the noble Lord, Lord Mackie, who moved the amendment and say that this is again a situation where much concern is shown by public opinion in Scotland and by those who are very much involved in the problems of housing, and particularly the housing of homeless people. I have received the views of the Dundee Liaison Committee on Homelessness which urges us:
"to bring in legislation to undo the damage done by the House of Lords".
That is perhaps an over-enthusiastic reaction to the decision of the judicial committee of the House of Lords which did not do damage but merely interpreted the law correctly. Perhaps more appropriate is something which the Scottish Legal Action Group has suggested:
"The Group urges the Secretary of State for Scotland to bring forward legislation urgently to ensure at least a return to the status quo existing before the House of Lords decision".
This is our concern. The noble Lord, Lord Mackie, cited the opinion of the noble and learned Lord, Lord Wheatley, and mention has been made of the opinion of the noble and learned Lord, Lord Denning, before the House of Lords gave its final decision. The opinions of all the other legal people until this decision from the House of Lords was that there was an implicit qualification on accommodation. Quite correctly, the decision on appeal was that there was no word on the face of the Act (and in the last few days we have heard quite a lot about putting things on the face of a Bill) that qualifies in any way the question of accommodation.
We all know that that is a nonsense. No matter what the law itself may actually state, we know that it was never the intention of those who put forward the legislation in the first place, though the strict legal interpretation may leave no room for doubt. Therefore, we are making a plea to the Minister that we should return to the previous situation as regards the question of the definition of accommodation, and return to the terms in which everyone in Scotland, and also I imagine in the United Kingdom, really believed that accommodation was defined.
There have been many precedents and many instances of retrospective legislation. The one defence of retrospective legislation that I can accept arises in a situation in which the legal profession of the entire nation has believed that something was the intention of Parliament and then suddenly on closer examination of the actual words of the Act finds that this is not the position. There have been a number of instances where retrospective legislation has restored a situation to that which everyone had believed it to be earlier.
We are asking the Minister to do something similar today. We are asking not for retrospective legislation but for legislation that will be operative from the moment the Act receives the Royal Assent, but which will restore the position to that which everyone had believed it to be before. I very enthusiastically support the views of the noble Lord, Lord Mackie of Benshie.
Lord Stodart of Leaston: My Lords, both noble Lords who have spoken on this amendment have quoted from a document which I possess and which has been sent to me and many others by Shelter. I have read this document with considerable care and I am bound to say that if what is in it is correct, as I am sure it must be, there have been major differences of view among some of the most eminent legal luminaries in the land. The noble Lord, Lord Mackie, has quoted the noble and learned Lord, Lord Wheatley, on the pigsty and said that it was not reasonable accommodation. According to the notes, that case went on to the Appellate Committee of this House where the noble and learned Lord, Lord Fraser, wholeheartedly and entirely accepted that accommodation provided must be reasonable. Then, later on, in what is called the Puhlofer case we were told that the word "reasonable" had to be excluded because that was the law.
I say somewhat sadly that all of this argument leaves a very simple farmer such as myself somewhat bewildered and I am relying totally on the clear springs of lucidity which characterise the utterances of my noble friend the Minister to give me a clear answer to two questions that I shall put to him.
The noble Lord, Lord Carmichael, made reference to what I find is the general drift of the notes from Shelter and said that what this amendment is asking for is a return to the status quo; not retrospective legislation, but from now onwards to have things as they were before the Puhlhofer judgment. I should like my noble friend to say whether this is precisely the effect of this amendment. If it is, was the situation prior to the Puhlhofer judgment unsatisfactory?
8 p.m.
Lord Wilberforce: My Lords, I shall say only one or two words as it is getting late and I shall keep my comments brief. As we all know, this amendment arises from a decision that was given by this House in its appellate capacity. I certainly do not wish to enter into a discussion as to whether that decision made legal sense or not. It is a decision that has been given. Another decision could have been given which went the other way. There it is.
One understands the desire of people concerned with housing to redress the balance and correct what is undoubtedly a difficult situation, but it is necessary to face the fact that this Act of 1977 is a very difficult Act. It always has been—it has been commented on a number of times judicially—because it puts local authorities in an impossible situation.
The Act gives to a certain category of people defined in a particular way priority as regards local authorities for the provision of accommodation—priority over a number of very meritorious people who may have been for years on the housing lists and who find themselves now displaced in favour of people coming into the area possibly for the first time and who are by the Act given statutory priority over those who have been waiting. This is particularly acute, as one knows, in English boroughs, particularly in the Borough of Hillingdon, where a great number of people arrive from Heathrow Airport and say: "We satisfy the requirements. We are entitled to immediate priority. We must go on regardless of the housing needs of people in the neighbourhood".
326
To say that the amendment is intended to restore the situation as was thought to exist before the House of Lords decision is, if I may respectfully say so, rather begging the question. We do not know exactly how far the Act of 1977 was intended to go. It was a benevolent and thoroughly goodhearted Act but, I must say, ill thought out because of the dilemma in which it puts local authorities.
One finds here in both parts of the Act—the one which contains the definition of homeless persons and the one which defines the duties of local authorities—very difficult words:
"it is unreasonable for him to continue to live in it"
in the first part, and
"appropriate and reasonable in all the circumstances"
in the other part. Was it intended to give so wide a priority to a class of persons as those words define? We do not know.
I certainly should be in favour of redressing the balance to some extent as against the House of Lords legal decision. I think that that has created a difficult situation. Whether it is right to go so far as this amendment does seems to me rather less clear.
I feel, and I think that the House ought to understand, that if this amendment is accepted there is bound to be a great deal of litigation and there are bound to be cases of great hardship the other way on account of people coming in and saying, "It is unreasonable for me to live there" or "The house is not appropriate for me to live in and I must be given priority over the people in the neighbourhood". It may be that the correction goes too far and creates hardships in other directions.
To take a definite position on the amendment is difficult. I should be inclined to support it as, on the whole, a well intentioned amendment and perhaps leave it to another place to see whether some correction, modification or scaling down are necessary on the wording used, which I must say I feel goes rather too far in the direction of providing priority for a particular class of persons. With that, I would give the amendment a qualified approval, but only a qualified one.
The Earl of Perth: My Lords, I have heard the case and in particular the noble and learned Lord, Lord Elwyn-Jones, mentioning the legal problems; but all the same I have a feeling that we must do something. At Report stage the noble Lord, Lord Gray, said that the Government were going to wait. They had come to the conclusion that it would be premature to consider the possibility of amendments until and unless it was demonstrated that local authorities were taking a different approach to the discharge of their responsibilities. How long does one wait? Who judges? Does someone say "Now is the moment. Three or four cases have gone wrong and so we had better move", or what?
Surely it is much better that we should accept the amendment as it is or have the Government agree that they will put in an appropriate amendment in the light of what we have just been hearing? We should ask them at least to do that. It is wrong to say that we should wait until the matter is quite clear. At that time there may have been half a dozen cases of great hardship and that would be wrong.

327
If the noble Lord does not accept the amendment, I hope he will at least give us an undertaking that the Government will consider it further and in another place bring in an amendment, which is what we all want, in the form that we all want.
Lord Gray of Contin: My Lords, this amendment has aroused the conscience of the House and it has led to some interesting and useful contributions. I am particularly grateful to the noble and learned Lord, Lord Wilberforce, for what he had to say. He has highlighted the difficulty that the Government would be in if we accepted the amendment. Indeed, as a result of what he said, my view that the Government simply could not accept the amendment in its present form is wholly confirmed.
This matter has been raised before, notably when the Bill had its Report stage in another place early in March and again at the Report stage in this House last month. When the matter was brought before this House last month at Report stage I was able to announce the outcome of the consideration that the Government had been giving to the matter. I told the House that we had concluded that an early amendment to the Housing (Homeless Persons) Act would not be appropriate. We believe that it would be premature to consider such an amendment unless and until it can be demonstrated that local authorities are taking a different approach to the discharge of their responsibilities to homeless people. We have no evidence, and nor have we been given evidence this evening, that such is the case. We shall, however, keep the position closely under review through the regular quarterly statistics and other information coming to hand, and I indicated that we should welcome any supplementary evidence that Shelter or other voluntary bodies might care to submit to us.
Apropos of what noble Lords have received from Shelter, my noble friend Lord Stodart of Leaston asked me exactly what the amendment did and whether it would put things back to exactly where they were before. The noble and learned Lord also referred to that. The amendment defines what accommodation will count as fulfilling an authority's duty. If an authority placed a homeless family in other accommodation—for example, bed-and-breakfast—it would not have fulfilled its duty and could be open to applications for judicial review. That is quite different from the present position where an authority would be fulfilling its duty by placing the applicant in bed-and-breakfast accommodation but must have regard to the code of guidance which says that that should be used only as a last resort and even then as a temporary measure.
The noble Lord may not have intended to open up the practice of authorities to judicial review in that way, but that is the effect of the amendment and it is not acceptable. There will inevitably be circumstances in which authorities have to provide temporary accommodation for an initial period.
Secondly, the amendment stresses the need to provide permanent accommodation, and that is, I suspect, its main purpose. The code asks that permanent accommodation should be secured as soon as possible. I believe that we should think carefully
328
before making that mandatory. We have said that we shall monitor that, and monitor it we will. I accept that we may need to think again when there is more evidence, but it would be a great mistake to rush in at the present moment. With the greatest respect to the noble Lord, Lord Mackie of Benshie, I am not at all satisfied that the amendment which he has proposed and which the House is considering tonight would achieve what he hopes it will achieve, nor am I satisfied that it would even be an improvement on the present situation.
I know that your Lordships wish to reach a conclusion on the matter, but let me quickly say why I believe that the amendment is defective. In the first place, subsection (2) seeks to provide that a person shall be regarded as homeless if he has accommodation but,
"it does not provide the ordinary facilities of a residence and it is inappropriate for his needs, or it is unreasonable for him to continue to live in it".
What are the "ordinary facilities of a residence", however? That is not defined either here or elsewhere in statute. What is meant by "appropriate for his needs"? A millionaire might consider that a fashionable address in Edinburgh was appropriate to his needs. The Tenants' Rights, Etc. (Scotland) Act 1980 includes the concept of accommodation being
"reasonably suitable to the needs of a tenant",
but it takes half a schedule to define the phrase.
The noble Lord has used three undefined expressions in one sentence. In the lack of any definition of what those phrases mean, it is left to the local authority in the first instance to interpret them as it sees fit. That is likely to give rise to exactly the same problems as the noble Lord alleges arise under the present Act, where local authorities have a discretion to decide what constitutes "accommodation".
Secondly, subsection (3) seeks to provide that, where a local authority accepts that it has a duty to secure accommodation for a homeless person, that accommodation shall take the form of a separate dwellinghouse, which is not overcrowded and which reaches a tolerable standard or, in exceptional circumstances where a separate dwellinghouse is not appropriate, such accommodation as is appropriate and reasonable. What are those exceptional circumstances? I am not trying, and I know that the noble Lord will not for one moment think that I am, politically to shoot down his amendment; I am trying to point out that the amendment, with which I have dealt in some detail, will create more problems than it will resolve. For that reason, I am afraid that I cannot accept the amendment. I must suggest to the noble Lord that he withdraws his amendment, but if he insists I must ask my noble friends to reject it.
The Earl of Selkirk: My Lords, my noble friend said that he could not accept the amendment. I can readily understand that, because we are dealing with a narrow and difficult subject. In the past 50 years—if I may take one word from the amendment—what has been regarded as tolerable has obviously changed greatly. What we were prepared to tolerate 50 years ago is probably different now.
As the noble and learned Lord, Lord Wilberforce, has said, we have an unacceptable decision made by

329
the House in its judicial capacity. We should give the Government the chance to improve the amendment or if they want to, to take it out in the other place. We should put the amendment in to make the Government think. I do not want to be too harsh on them if I can possibly help it, but it is proper that this is a matter which the House should not let rest. Something has gone astray. We should show that we want to correct the position slightly. I agree with the noble Lord that "tolerable" accommodation is difficult to define. The present definition is wrong. The Government should be asked to put the amendment into more acceptable words. If the noble Lord presses the amendment I shall support it.
Lord Mackie of Benshie: My Lords, it has been a fascinating debate. I am disappointed that the noble Lord the Minister did not say that he would look at the matter in another place. He has reiterated that the Government will monitor what goes on. That is not good enough. Not that I suggest the noble Lord means it in this way, but monitoring is often a device for doing nothing.
The noble and learned Lord, Lord Wilberforce, put me in a perfect pother when I thought he was going to damn the whole proposal. Happily he came around to saying that the amendment perhaps went too far but that he was inclined to support it. The argument he was putting forward about the Act was a political and not a legal one. He suggested that the Act creates an injustice for people who have been on the waiting list for a long time while providing for homeless people who are in dire need and who come into an area.
I wholly agree with the noble Earl, Lord Selkirk, that we should put this matter to the Government. We should not leave it as it is because the House has clearly expressed an opinion that the House of Lords, in its judicial capacity, has left the position such that "accommodation" can be defined as any sort of cover.
The amendment may not be perfect. I should find it reasonably easy to follow the instructions contained in it. I think that the views expressed by Members are such that the House should express its opinion.
8.15 p.m.
On Question, Whether the said amendment (No. 5) shall be agreed to?
Their Lordships divided: Contents, 51; Not-Contents, 42.

DIVISION NO. 6

CONTENTS

Airedale, L.

Graham of Edmonton, L.

Annandale and Hartfell, E.

Hampton, L.

Blease, L.

Harris of Greenwich, L.

Broadbridge, L.

Houghton of Sowerby, L.

Bruce of Donington, L.

Hughes, L.

Carmichael of Kelvingrove, L. [Teller.]

John-Mackie, L.

Kagan, L.

Chandos, V.

Kilmarnock, L.

Cledwyn of Penrhos, L.

Kirkhill, L.

Craigavon, V.

Mackie of Benshie, L. [Teller.]

Crawshaw of Aintree, L.

David, B.

McNair, L.

Dean of Beswick, L.

Masham of Ilton, B.

Diamond, L.

Molloy, L.

Donoughue, L.

Mulley, L.

Elwyn-Jones, L.

Nicol, B.

Ezra, L.

Perth, E.

Gallacher, L.

Phillips, B.

330

Ponsonby of Shulbrede, L.

Stoddart of Swindon, L

Prys-Davies, L.

Strabolgi, L.

Saltoun of Abernethy, Ly.

Taylor of Blackburn, L.

Seear, B.

Underhill, L.

Seebohm, L.

Whaddon, L.

Selkirk, E.

White, B.

Shackleton, L.

Williams of Elvel, L.

Simon, V.

Wilson of Langside, L.

Southwark, Bp.

NOT-CONTENTS

Abinger, L.

Kimball, L.

Allenby of Megiddo, V.

Layton, L.

Ashbourne, L.

Lindsey and Abingdon, E.

Auckland, L.

Long, V.

Bauer, L.

Lyell, L.

Belstead, L.

Margadale, L.

Brabazon of Tara, L.

Maude of Stratford-upon-Avon, L.

Brougham and Vaux, L.

Caithness, E.

Mersey, V.

Carnegy of Lour, B.

Murton of Lindisfarne, L.

Coleraine, L.

Plummer of St Marylebone, L.

Constantine of Stanmore, L.

Cork and Orrery, E.

Rochdale, V.

Davidson, V.

Skelmersdale, L.

Denham, L. [Teller.]

Strathclyde, L.

Elliott of Morpeth, L.

Swinfen, L.

Elton, L.

Swinton, E. [Teller.]

Gray of Contin, L.

Thorneycroft, L.

Greenway, L.

Trefgarne, L.

Hives, L.

Trumpington, B.

Hooper, B.

Ullswater, V.

Kaberry of Adel, L.

Zouche of Haryngworth, L.

Resolved in the affirmative, and amendment agreed to accordingly.
8.21 p.m.
Schedule 1 [Amendment of 1980 Act]:
Lord Gray of Contin Lord Gray of Contin moved Amendment No. 6:
Page 21, line 37, at end insert—
("( ) where a landlord so mentioned has at no time let (or had available for letting) more than 250 dwellings; or").
The noble Lord said: My Lords, I have already spoken to this amendment. I beg to move.
On Question, amendment agreed to.
Lord Gray of Contin Lord Gray of Contin moved Amendment No. 7:
Page 21, line 50, leave out from ("but") to ("section") in line 6 on page 22 and insert ('is, by virtue of").
The noble Lord said: My Lords, I hope that it will be for the convenience of the House if I speak to Amendments Nos. 7 and 8 together. The purpose of these amendments is to remove—
Lord Diamond: My Lords, I thought we were going on to my amendment. Which Bill are we discussing?
Lord Gray of Contin: My Lords, although the Minister has not changed, the Bill has. While the noble Lord has been refreshing himself we have been studying the Housing (Scotland) Bill, but we are, I think, coming almost to a conclusion. I realise the hour. We are running perhaps 20 minutes late. As I was saying before the noble Lord interrupted me, these amendments are intended—
Lord Diamond: My Lords, I am sorry to interrupt the noble Lord. The instruction from the House was that we would resume at 8 o'clock. I thought that this was the instruction.
Lord Gray of Contin: My Lords, the noble Lord will recall, I think, that my noble friend said "not before 8 o'clock".

331
These amendments are intended to remove unnecessary words. The Bill now requires that an association must have charitable rules and have been granted exemption from tax. But the Inland Revenue will grant tax exemption to an association only if it has, at the time of the application, charitable rules. So the first requirement, to have such rules, is redundant and can be omitted. My amendments achieve this, and I trust that the House will accept them for the simple drafting amendments they are. The effect of the exemption is unchanged. I beg to move.
On Question, amendment agreed to.
Lord Gray of Contin Lord Gray of Contin moved Amendment No. 8:
Page 22, line 8, leave out from ("charities) ") to end of line 10 and insert (", exempt from tax;").
On Question, amendment agreed to.
Schedule 3 [Repeals]:
Lord Gray of Contin Lord Gray of Contin moved Amendment No. 9:
Page 33, line 24, column 3 at end insert ("In section 106(2), the definition of "heritable security".").
The noble Lord said: My Lords, I have already spoken to this amendment. I beg to move.
On Question, amendment agreed to.
Lord Gray of Contin: My Lords, I beg to move that the Bill do now pass.
Moved, That the Bill do now pass.—(Lord Gray of Contin.)
On Question, Bill passed, and returned to the Commons with amendments.

Gas Bill
8.25 p.m.
House again in Committee on Clause 51.
[Amendments Nos. 144H and 144J not moved.]
Lord Diamond Lord Diamond moved Amendment No. 144JA:
Page 51, line 17, after ("value") insert ("per share").
The noble Lord said: In moving this amendment it will perhaps be convenient if we also discuss Amendment No. 144JB. The purpose of the amendment is to make clear that the clause as amended says:
"Shares issued in pursuance of this section—
… shall be of such nominal value per share as the Secretary of State may direct".
There is no problem about that. It then goes on to say:
"and shall amount in total to the value of the net assets of the Corporation as shown in its latest audited Balance Sheet as adjusted";
and there follow a few words to show how you adjust it. That is pure accountancy.
The amendment seeks to assure that the value of the company, for the purposes of the flotation, shall be at least the value of the net assets as valued on the balance sheet brought up to date. That is a very reasonable request. It is to make sure that the country gets at least the cost price, as it were, of the net assets in this flotation.
As every noble Lord who is familiar with the City knows, all companies and all company chairmen keep
332
an eye on their share quotations. When the share quotation gets below the net asset value, they become very concerned and worried about what might happen in the way of predators and in the way of credit. It is accepted all round (is it not?) that the net asset value is a minimum value. It allows nothing for goodwill, for profits or for future profits. It allows nothing for the fact that this company is going to be the sole purveyor of gas to 16.5 million households in the future. It allows nothing for that enormously valuable goodwill and for that asset. It simply says that the asset of the old company is the minimum price that you can get.
I cannot imagine that the Government would want to get less than that. However, we wish to protect the public purse and to protect the Chancellor. We do not want the Chancellor pressurised into a position where he has to consider for a moment selling this enormously valuable company at less than its net asset value. In view of the time and in view of the fact that we started, unfortunately, 25 minutes late, I shall say no more at the moment. I beg to move.
8.30 p.m.
Lord Belstead: On the first amendment, this is a question of drafting. My advice is that it is quite clear that the text is referring to the value of the shares per share. The proposed amendment is therefore not necessary. If one looks at the text the value refers back to the shares, on the drafting. I was not surprised to receive advice that this is not a necessary amendment.
The second is a substantial amendment. It is matter which has been discussed before, and indeed earlier on this afternoon. The Government have consistently made clear their view that valuing companies on the basis of the current replacement cost of their assets is not the way to go about things. The company's value should be seen as the value of the business to investors and depends on a number of factors including the profitability of the company, the profitability of other companies in the same market sector and the overall state of the market.
I am sorry if the noble Lord and the Government do not agree on this but I am afraid that we do not agree with this amendment.
Lord Stoddart of Swindon: Did I understand the noble Lord to say that it is now the Government view that replacement cost is not a good basis for valuing companies? I find that very surprising because gas consumers have been paying prices based on replacement cost over a long period of time. The gas consumers—who have had their gas prices raised in order that they can suit the balance sheet, which is related to replacement cost—having paid extra prices now find that the Government have changed their minds. As taxpayers they will get only half the value upon which they have been paying increased prices. I find that amazing and scandalous.
Lord Belstead: All I can add is that I am surprised that the noble Lord says that. The value of a business must surely be judged by reference to the income that can be generated from its assets or by the value of its assets if they are sold individually on the open market, rather than the accounting value computed by adding together the replacement cost of the assets. I am sorry, but if the noble Lord thinks that, the Government do not.
Lord Bruce of Donington: This is quite intolerable. For many years now the Government themselves have been insisting with regard to nationalised industries that the accounts shall be presented on a current cost accounting basis. I can give the noble Lord many examples, particularly during the early stages of the Local Government Finance (No. 2) Bill which had to be abandoned because of an intervening general election, where the Government, from that very Bench, were producing argument after argument in favour of the validity of current cost accounting methods. They were arguments with which many of us did not agree. Nevertheless, that was the view of the Government and they took it for very obvious reasons. They wanted to put the squeeze on nationalised industries, and impose targets of performance on them that were based upon current cost accounting. They did that because they wanted to tighten their credit control, their loan control, over the nationalised industries. I do not know whether they have departed from this practice since the days of the noble Lord, Lord Cockfield, who was an expert exponent of the art where the indebtedness of nationalised industries featured as part of the public sector borrowing requirement. We all know this. What has happened, as my noble friend Lord Stoddart has said, is that over the years this continuous basis has been adopted. The result is that very considerable reserves will now accrue which will come back to the company and which will be available for dividend distribution by the new British Gas plc. That means a transfer, as a result of this manoeuvre, of hundreds of millions back into the P and L account, all of which has been taken from the consumers. My noble friend Lord Williams of Elvel referred to exactly the same phenomenon in the course of an argument during a previous amendment.
This two-facedness will not do. We all know what the Government have done. The Government have consistently insisted on the presentation of a P and L account on a current cost accounting basis because they wanted to show to the public that nationalised industries were not as profitable as the remainder of industry. This is what they wanted to do. Now that they want to turn gas over to private enterprise, and to privatise, they switch back to historic cost accounting, which, for the current year, will show profits of £400 million greater than the profits which have accrued from current cost accounting.
The manoeuvre is transparent. I sincerely hope that my noble friends will support the amendment.
Lord Belstead: The noble Lord talks about transparent manoeuvre. What the noble Lord, Lord Bruce, has omitted to say is that we are talking about the net asset value being a suitable basis or not for valuation on a flotation. The noble Lord, Lord Diamond, talked about this earlier. As I understood the noble Lord, he said that company directors ought to be concerned if their share price drops below the net asset value. I would agree. That is indeed the case if that net asset value is calculated on the basis of what would be realised on disposal of those assets, since a new owner could then take the company over and dispose of the assets.
However, the figures in the British Gas balance sheet are on a replacement cost basis. They are not the value on disposal. They are therefore not, in the view of the
334
Government, a suitable basis for valuation or a flotation.
Lord Bruce of Donington: Will the noble Lord agree that that is not quite accurate? In the current balance sheet they are expressed at replacement cost net of depreciation.
Lord Diamond: The trouble is that the Minister has not said one word about the alternative way of looking at this; namely, giving an indication of the minimum figure at which the Government would be willing to sell. We are privatising a huge industry. The Minister is not giving us the slightest indication of what the price is going to be. We have suggested a way of arriving at the minimum. There is nothing to prevent selling at more than this. These words mean the minimum. I am afraid that it is totally unacceptable. I am grateful to the noble Lord for what he said about Amendment No. 144JA; namely, that the Bill already means what this amendment makes clear. I therefore have no need to pursue that. But when we come to it in a moment, I shall seek to take the view of the House on Amendment No. 144JB. I therefore beg leave to withdraw Amendment No. 144JA.
Amendment, by leave, withdrawn.
Lord Diamond Lord Diamond moved Amendment No. 144JB:
Page 51, line 18, after ("direct") insert—
("( ) shall amount in total to the value of the net assets of the Corporation as shown on its latest audited Balance Sheet as adjusted (to the nearest million pounds) in respect of variations in assets and liabilities occurring between the date of the Balance Sheet and the transfer date;").
The noble Lord said: We have already discussed the amendment. I beg to move.
8.39 p.m.
On Question, Whether the said amendment (No. 144JB) shall be agreed to?
Their Lordships divided: Contents, 35; Not-Contents, 52.

DIVISION NO. 7

CONTENTS

Airedale, L.

Kilmarnock, L.

Blease, L.

McNair, L. [Teller.]

Bruce of Donington, L.

Molloy, L.

Chandos, V.

Mulley, L.

Cledwyn of Penrhos, L.

Nicol, B.

Crawshaw of Aintree, L.

Phillips, B.

David, B. [Teller.]

Ponsonby of Shulbrede, L.

Diamond, L.

Prys-Davies, L.

Donoughue, L.

Seear, B.

Elwyn-Jones, L.

Simon, V.

Ezra, L.

Stoddart of Swindon, L.

Falkland, V.

Taylor of Blackburn, L.

Gallacher, L.

Underhill, L.

Graham of Edmonton, L.

Whaddon, L.

Harris of Greenwich, L.

White, B.

Houghton of Sowerby, L.

Williams of Elvel, L.

John-Mackie, L.

Wilson of Langside, L.

Kagan, L.

NOT-CONTENTS

Abinger, L.

Brougham and Vaux, L.

Allenby of Megiddo, V.

Caithness, E.

Ashbourne, L.

Campbell of Croy, L.

Auckland, L.

Carnegy of Lour, B.

Bauer, L.

Coleraine, L.

Belstead, L.

Constantine of Stanmore, L.

Brabazon of Tara, L.

Cork and Orrery, E.

335

Craigavon, V.

Mersey, V.

Davidson, V.

Morris, L.

De La Warr, E.

Murton of Lindisfarne, L.

Denham, L. [Teller.]

Pender, L.

Elliott of Morpeth, L.

Plummer of St. Marylebone, L.

Elton, L.

Glanusk, L.

Rochdale, V.

Gray of Contin, L.

Saltoun of Abernethy, Ly.

Greenway, L.

Sanderson of Bowden, L.

Hives, L.

Skelmersdale, L.

Hooper, B.

Stodart of Leaston, L.

Kaberry of Adel, L.

Strathclyde, L.

Kimball, L.

Swinfen, L.

Layton, L.

Swinton, E. [Teller.]

Lindsey and Abingdon, E.

Thorneycroft, L.

Long, V.

Trefgarne, L.

Lyell, L.

Ullswater, V.

Margadale, L.

Vinson, L.

Masham of Ilton, B.

Zouche of Haryngworth, L.

Maude of Stratford-upon-Avon, L.

Resolved in the negative, and amendment disagreed to accordingly.
[Amendments Nos. 144K and 144L not moved.]
8.47 p.m.
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 144M:
Page 51, line 26, at end insert ("which shall only be given if the disposal follows the provisions contained in Schedule (Arrangements for Disposal of Securities of Successor Company) to this Act.").
The noble Lord said: I beg to move Amendment No. 144M. It may be for the convenience of the Committee if I also speak to Amendments Nos. 144R and 144Y. The object of the paving amendment, Amendment No. 144M, and the new schedule, which is Amendment No. 144Y, is to ensure that the highest possible price be received by the Government acting in their fiduciary capacity as representative of the taxpayer when the successor company is finally floated.
I believe that all Members of the Committee would wish to ensure that the episode of the British Telecom flotation can never happen again. In our view the reason that the Telecom flotation went wrong was twofold. First, it was necessary for the purposes of the New York flotation to fix a price, such being the practice in New York, which went into the preliminary prospectus, known in the jargon as the "red herring". Once that price had been fixed, it became impossible to change it. The result was that when the market moved upwards, it was quite quickly found that the price which had been fixed for the New York flotation, which consequently had to be fixed for the London flotation, could not be changed.
The result was the episode about which we all know: that the price at which British Telecom was finally floated on the impact day was unrealistic in terms of what the market on that day would have been prepared to pay. I do not think that there is any disagreement about that in your Lordships' Committee.
The only way to avoid such a problem occurring again is the method we describe in the new schedule which is in Amendment No. 144Y. I hope your Lordships will accept my view that just because an issue goes to a premium in dealings after the issue date, this does not mean it is necessarily a success. In many
336
quarters, in the City of London and elsewhere, if you float a company at a price of, say, 100 and dealings start at 120, then there is a lot of shouting and hurraying, saying, "This is a great success". If the vendor is to receive the fair, highest possible price, the correct premium in dealings after the issue date is zero. Dealings should be at the issue price.
Under the normal arrangements for offer for sale in the United Kingdom, it is very difficult to achieve that position. There is a price at which an offer is underwritten, and there are no arrangements for tendering other than at the price which is underwritten, minus the commissions. This means—and we have seen it not only in British Telecom but in all sorts of other issues—that if it is a success the issue goes to a heavy premium; if it is a failure it is left to the underwriting institutions.
There have been two examples of straightforward tenders in privatisation. One was Enterprise Oil and the other was Britoil, both of which were unsuccessful tenders because they were tenders not underwritten against a rising oil price. It happened that in the tender period the oil price went against both those companies. The successful tender which has taken place and which I put forward to your Lordships' Committee as a model for the tender of British Gas, was the tender for Reuters which took place both in London and in New York. The way it was done was relatively simple, although the technicalities are extremely complex. But for the purposes of the New York market where a fixed price or a range must be indicated in the preliminary or pathfinder prospectus, there was a range. In the case of Reuters it was the dollar equivalent of 200p to 235p.
New York institutions were quite prepared to underwrite the securities being offered on the basis that the striking price in the tender would be in that range. There was provision in that prospectus for a change of the range should the market turn differently during the underwriting period, and there was an arrangement in the prospectus that if that range were to change there would be an announcement and the underwriting institutions in New York would take appropriate note of that.
An offer for sale by tender, assuming it is underwritten, does allow various classes of shareholders to be allotted in full at the striking price. If the Government are intent on encouraging wider share ownership, it is perfectly possible to say that all applications for under 1,000 shares, or whatever it might be, can be satisfied in full. It is perfectly possible to say that applications from employees at the striking price will be satisfied in full. It is perfectly possible, equally, under a tender system to place firm with institutions on priority, and claw back those shares again if the tender shows that there is a requirement from the priority shareholders, like small shareholders or employees, which cannot be satisfied in the normal course of events.
In other words, it is our view that the tender mechanism is the best mechanism for this particular type of issue. It is not only the best mechanism, in our view; it is also the fairest mechanism and the mechanism that will be seen to be fair by the outside world; nobody will be able to complain either that the issue has flopped or that it has gone to a high premium,

337
or that fortunes have been made in the first few hours. The striking price will be the price at which the market will clear.
If I may turn for a moment to the details of the Schedule which is in Amendment No. 144Y, I think we are agreed that the Government should seek to achieve what is specified in paragraph 1 of the new schedule: the highest possible price on the disposal of the securities of the successor company. I believe that that is a position which the noble Lord, Lord Brabazon of Tara, stated quite clearly earlier on.
If I turn to paragraph 2 of the schedule, in the draft articles of association the 15 per cent. rule on foreign ownership is established by the special share arrangements, and there is nothing in paragraph 2 which contravenes anything which the Government intend in the articles of association.
There is a let-out clause in paragraph 3. It may well be that all my arguments are wrong, and that the arguments of other people in the City of London are wrong. It may be that the Government have better arguments, so that they can come before a Joint Committee of the Houses of Parliament to satisfy that committee that the arguments are wrong and that they have found a better way of doing it. I say this genuinely because there may well be a possibility—indeed, there is a certain amount of talk in the City of London about this possibility—that a half-tender, a half-fixed underwriting, might be the right way to go about this flotation, which would be a new technique not yet tried but which is under study in one or two cases. This could be something which the Government, and the advisers to the Government, might wish to persuade Parliament is the right way to go about it.
Paragraph 5 simply reiterates in effect the objective of paragraph 1, that individuals and corporations have a right to tender under paragraph 4 but the price to the Government is what matters.
I do not want to go into very great detail at this time in your Lordships' Committee because we still have much business to do, but I would ask the Government to give full consideration to the points that I have made, to look particularly at the Reuters tender offering which was made and which was successful, and to see whether they agree with us that this is the right way to float British Gas plc. I beg to move.
Lord Sanderson of Bowden: Before we go any further, could I have clarification of what the noble Lord, Lord Williams, is seeking in paragraph 2—
"Not more than 15 per cent. of the voting rights of the successor company … shall be benficially owned or controlled … by nonresidents …?
Is that in total, or in any one particular holding?
Lord Williams of Elvel: I am grateful to the noble Lord, Lord Sanderson. It is in total, and not one holding.
9 p.m.
Lord Belstead: This is an important group of amendments. The new schedule in Amendment No. 144Y puts forward a number of propositions which the noble Lord, Lord Williams, just went through in relation to the disposal of securities when the flotation
338
of British Gas happens. Subject to this main part of the amendment, disposal must achieve the highest possible price, no more than 15 per cent. of the shares should be in foreign ownership—that relates to the question asked by the noble Lord, Lord Sanderson; the disposal shall be by tender unless it is agreed by a Joint Committee of both Houses of Parliament that this would not achieve the highest possible price, and that in considering which individuals or corporations may buy the securities my right honourable friend's sole consideration should be the price offered for the shares.
May I follow the noble Lord in trying to be brief and concentrate on only two of those points; the question of tender and the question of foreign ownership. The requirement to sell the shares in the company in a formal tender, with an obligation to allocate shares to the highest bidder, would mean selling the company in a totally novel way which we could not practically aim to achieve. I say that in the context of privatisations. Selling shares by tender is a procedure which I doubt the small investor would feel able to apply for.
The Department of Energy and its advisers are carefully reviewing all possible methods of sale and will consider carefully the recommendations of the Public Accounts Committee in their three reports into privatisation sales, but in this connection may I remind the Committee that there has been no criticism by the Public Acccounts Committee of the use of the fixed price method in the case of British Telecom. In general the kind of modified tender sales which have been used are more suited to smaller sales where the issue is difficult to price. But once again we have the difficulty that they are not an entirely straightforward method so far as smaller investors are concerned.
I give an assurance to the noble Lord, Lord Williams, that the Government and their advisers will take full account of all the relevant experience in the past, including, when appropriate, the sales such as the sale of Reuters which the noble Lord described briefly. But I make these two simple points on the question of tender. If we are to take the amendment at its face value and say that the flotation shall be by tender, the small investor of the kind about whom the noble Lord, Lord Stoddart, was talking before the dinner break, is not going to get involved in any numbers at all. Even in the case of the modified tender, that is not so easy for the small investor as would be a fixed price, although I assure the noble Lord that the Government's mind is by no means closed and we have taken into account what the noble Lord has said on this.
The other point is the imposition of a restriction of 15 per cent. on foreign ownership. I am advised that restrictions on the sale of shares to foreign persons, or companies, in this Bill would not be permissible under the Treaty of Rome. Even though this is an argument—indeed it is a provision—which has appeared in certain other Bills, in this Bill we believe that it would not be permissible. Even in the event of a decision not to sell any British Gas shares overseas in the flotation, we could not prevent sales to people from abroad purchasing in the United Kingdom market.
Indeed, I wonder whether we would want to. After all, we are today the second highest holder of net overseas assets, I believe, in the world compared with

339
all other countries, and we are attracting into this country investment, particularly from the United States and Japan, which is competitive with practically every other country in the world. I believe that Japanese investment in this country is higher than in any other European Community country, and that is good for jobs and for the economy of the country.
I believe that we should attach considerable importance to maximising the proceeds from the sale, and there is no doubt that overseas sales broaden the market and potentially increase the sale proceeds. Where I come much nearer to the noble Lord is in saying that the Government recognise that the important thing to do is to guard against any dominant influence over the company's affairs being exerted by any one organisation or group buying shares in concert, whether they are foreign or British. But the special share, together with the 15 per cent. limitation on share holdings, will I think achieve this.
Particularly going back to the first part of the amendment, although I know that this is a matter to which the noble Lord, Lord Williams, attaches importance—and the noble Lord spoke about it on Second Reading and has mentioned it since—I think that, for the reasons I have attempted to deploy, the amendment as it stands is not one we can accept.
Lord Williams of Elvel: I am grateful to the noble Lord for his response. He dealt with two points. First, the foreign ownership point. I do not feel particularly strongly about the foreign ownership element in this schedule. This is not really the main point of the argument. I just note in passing that a lot of this stuff about net overseas assets in the possession of the United Kingdom being good for jobs has nothing to do with whether these shares in British Gas are sold to foreigners or not. It is an argument that has no relevance whatsoever. Nevertheless, I do not think that the foreign ownership point is central to the point that I am making.
The noble Lord made another point about tendering which is that the small shareholders would feel inhibited in some way from applying for shares. I have heard this argument advanced before by people in the City of London. I have no evidence at all that this argument is right or wrong. The noble Lord may be right; the noble Lord may be wrong. I have no evidence, and nobody I have ever talked to has any evidence on the subject.
We assume, judging from the newspaper articles that we read almost every day, that there is going to be the same amount of—and I think my noble friend Lord Stoddart mentioned this—hype on British Gas as there was on British Telecom. If you have an advertisement on television every day for six weeks, I can guarantee that small shareholders will start applying for British Gas. If you do not have advertisements like that, if you do not market it like that, they will not.
This has nothing to do with the method of offer, because—and here I return to the central point I made which I do not think the noble Lord quite appreciated—in the initial pathfinder prospectus, the red herring in New York, a range of prices is immediately established. You can go on television and
340
say to all the world, "This is the sort of price range we are going to be in". I gave the figures, which were 200, 235, in the case of Reuters. I simply do not believe that argument about the small shareholder. However, having regard to the late hour and that we have a lot of business to do, and I accept that the noble Lord and his advisers are going to look at it, I beg leave to withdraw this amendment.
Amendment, by leave, withdrawn.
Viscount Chandos Viscount Chandos moved Amendment No. 144MZA:
Page 51, line 26, at end insert—
("( ) The Treasury, in consultation with the Bank of England, shall be responsible for ensuring that the disposal of any such securities shall not interfere with or inhibit the fund-raising activities of other companies already listed on the London Stock Exchange and that the reasonable financing requirements of those companies shall take precedence over the disposal of any securities in the successor company.").
The noble Viscount said: I should perhaps begin by repeating a statement declaring an interest on the grounds that I last made it at a quarter to four in the morning and not all the Committee had the privilege of hearing it. I am a director of the bank advising the British Gas Corporation.
The justifications advanced by the Government over the past seven years for their privatisation programme have been many and varied: the widening of consumer choice, as the noble Lord, Lord Bruce-Gardyne, alighted on this afternoon; the promotion of greater efficiency in the corporation concerned; the widening of share ownership generally and by employees in particular; and the raising of revenue for the Government. Even the supporters of the Government, such as the noble Lord, Lord Bruce-Gardyne, do not always agree with all these justifications all of the time, while those of us on these Benches are even more critical, but constructively critical, of the reasons advanced. On these Benches we believe that the sale of some public corporations has been beneficial to their employees, to consumers and to the country as a whole, and some have not, and some will not be, as we believe is the case with British Gas.
The amendment I have moved this evening is intended to bring to the Committee's attention one danger posed by the disposal of shares in the successor company to British Gas and in particular by their disposal as part of a large, continuing and accelerating programme of public sector asset sales by the Government. The irony is that this massive programme of privatisation is now creating an obstacle to the private sector's orderly, cheap and efficient financing, the ensuring of which was one of the earliest objectives of that very privatisation programme. I shall not risk irritating the noble Lord, Lord Boyd-Carpenter, by harking back to the truths which he regards as cliches, other than by saying that there are good economic and financial grounds for regarding the sale of Government assets as not being a substitute for reduced Government expenditure or increased taxation. So the presentation of the public sector borrowing requirement as being measured after the sale of public assets is misleading and misguided, presenting to the electorate a picture of supposed fiscal rectitude which cannot in reality be justified. That

341
definitional measurement of fiscal rectitude may in turn be misguided. But if it is the standard by which the Government wish to be judged then let the Government at least be consistent in the presentation of their accounts to Parliament and to the nation.
I began by reminding the Committee of this inconsistency because any analysis of the Government's actual deficit in recent years, and that projected for future years, will show a clear and definite trend whereby less and less of that deficit is being financed through the sale of Government debt and more and more is being financed through the sale of shares in companies which were previously Government owned. One of the Government's constant campaigns in recent years has been to encourage companies to raise long-term finance through the issue of loan stock, debentures and bonds rather than through bank borrowing, and the reduction of the Government's own use of the debt market has been seen as an important factor in stimulating such a move.
Once more it is possible to question the validity of the concept of crowding out; for example, by looking at the the vibrant and successful corporate bond market in America throughout the time the US Government have been raising more than 200 billion dollars a year at interest rates consistently lower than in the UK. But even if one could be certain that the reduction of Government borrowing in the debt market was a necessary precondition for the revival of the corporate bond market in this country, this should not be pursued regardless of the consequential effects in other sectors of the market. The effect of the privatisation programme is that the Government, in order to avoid crowding out corporate fund raising in the debt market, are instead risking far worse crowding out of corporate fund raising in the equity markets, which are so much more important to those companies. The privatisation tail is wagging the industrial dog.
The Bank of England is responsible through the Control of Borrowing Order for ensuring an orderly UK capital market, and in an increasingly complex and internationally inter mingled market it performs this duty with great skill and subtlety; but with every month that has passed more and more economists and analysts within the City and outside have found that the forecast call on institutional liquidity, resulting from the projected sale of British Gas, of the water authorities and of other corporations thereafter, represents a major and potentially depressing factor in the expected performance of the United Kingdom equity market.
Furthermore, the heavy programme of fund raising by companies in recent weeks, be they manufacturing companies, retailing and service companies or financial institutions, has been widely reported as being caused by their desire to raise the necessary finance before the autumn, when the sale of British Gas is expected. I would suggest to the Committee that a major manufacturing company that might employ tens of thousands of people would find extreme difficulty in being given a place in the rights issue queue operated by the Bank of England in the last part of this year whatever its requirements and circumstances. Moreover, there is a risk that for a
342
substantial period thereafter, and even before, it will be more difficult and more expensive for such a company and all others to raise equity finance.
I should like to believe that the professional judgment and expertise of the Bank of England could be regarded as sufficient protection for the interests of other companies and that existing procedures were adequate to ensure this. But the ruthless disregard for every type of legitimate interest that the Government have shown thoughout the conduct of this Bill unfortunately does not promote any degree of faith that this would be the case. The independence of the Bank of England may not be able to withstand the Government's desperate determination to sell British Gas whatever the market conditions, as we have discussed before, and whatever the impact on the financing plans of other companies. For that reason, I believe that it is correct for this Bill to be amended to ensure that the political interest and ideological obsession of the Government do not damage the financial strength of British industry. I beg to move.
9.15 p.m.
Lord Bruce of Donington: We on this side of the Committee should like to support this amendment but it will not be necessary for us to repeat the very cogent reasons that have been put forward by the noble Viscount, Lord Chandos, to which I think we would add only this. The Government's philosophy has always been a belief in free competition. Yet in this Bill, as in the Bill for British Telecom, they took powers to exempt themselves from the requirements of the Companies Act in relation to the making of prospectuses, and indeed the offer for sale of shares in companies, by which all other companies, other than British Telecom and apparently this one, remain constrained.
At the present time the Government have in mind a campaign which is described in today's edition of The Times in the following words:
"Domestic gas users are to be offered big incentives to buy shares in British Gas when it is floated on the Stock Exchange in November. The Government is planning to introduce a voucher scheme which will entitle purchasers of British Gas shares to a discount on their gas bills".
At the same time they are going to accompany it, on the same lines as with British Telecom, by mass advertising of British Gas. They are going to do everything they can, completely outside the provisions of the Companies Act relating to prospectuses, to make quite sure that this issue goes.
Is that fair competition between this flotation and that of other companies who for other purposes are seeking to raise money on the London Stock Exchange for the purpose of the legitimate financing of their own activities? I am told that there is a limited amount of finance available. Otherwise, we should not hear all this talk of crowding out to which the Government treat us from time to time. One of the effects of this amendment would be to require the Government to comply with the provisions of the Companies Act relating to the contents and issue of prospectuses in exactly the same way as is required of every other company in the United Kingdom. This is what it would require, and this is very fair.

343
There is another point too. The particular method by which the Government propose to do this—a method which, of course, has been leaked once again by way of kite flying—is one which is going to cost money for those of the 16 million consumers who cannot in any way afford to buy British Gas shares. They do not have the money to do so. The noble Lord seems to be under the illusion that at the present time every adult has adequate funds to invest in the Stock Exchange. That is not so, as the noble Lord should well know if he examines the figures produced by the Treasury and reproduced in Hansard of another place, showing the distribution of wealth in the United Kingdom. The fairest way of going about this would be for the Treasury to subject itself to the same disciplines as those of limited companies under the provisions of the Companies Acts, and the reason we support this amendment is that it would do just exactly that.
Lord Brabazon of Tara: I am aware of the concern expressed by the noble Viscount, Lord Chandos, that an issue of the size of British Gas might impact adversely on the normal fund-raising activities of other quoted companies. I have to say that I do not believe his fears are justified. The Government plan their privatisation programme well in advance and those plans are known and understood by those involved in both the UK and overseas markets.
The noble Viscount referred to the Bank of England, which has for many years, as agent for the Treasury, supervised the timing of all new issues and other fund raising activities to ensure that the demands on the London market at any particular time are not unreasonable. It would therefore be nonsense, for instance, to put pressure on the market by attempting to dispose of British Gas and British Airways at the same time. Moreover, such clashes, by overstretching the absorbative capacity of small investors, would be inconsistent with the Government's objective of securing a wider spread of share ownership among the public at large.
But granted that such clashes are avoided, there is no evidence that investment in share issues such as British Telecom or Jaguar has led to distortion of the market or shortage of funds for other companies seeking to raise money by share issues or by recourse to normal sources of finance. I find it difficult to accept the noble Viscount's argument—
Lord Stoddart of Swindon: May I just ask the noble Lord a question, because he mentioned British Telecom? This issue is of a much greater order than British Telecom. We were talking, I think, about £2 billion in the case of British Telecom. Here we are talking about £5 billion to £6 billion and the situation is surely very much different.
Lord Brabazon of Tara: Yes, I quite accept that it is different. But I do not think anybody would suggest that the whole £5 billion to £6 billion should be raised at one go. I think that is taken for granted—
Lord Stoddart of Swindon: Neither was British Telecom. It was issued in three tranches.
Lord Brabazon of Tara: If the noble Lord wishes to intervene, perhaps he would do so from other than a
344
sedentary position. Perhaps I may continue with my theme. The noble Viscount referred to the extensive fund raising which has taken place in the last few months. I have to say that this is despite the fact that the market well knows that this issue is coming along and, therefore, I think that that totally refutes that argument.
As I have stated before, the Government's objective will be to get the best possible price for British Gas shares. The noble Lord, Lord Bruce of Donington, talked of what is reported in the press today about a possible discount on gas bills and the Government doing everything they can to make the issue a success. I would say to the noble Lord that that is entirely in line with Amendment No. 144Y, paragraph 1, which we have just been talking about and which asks the Government to ensure that the highest possible price is received by the taxpayer. So I cannot see any consistency in the argument of the noble Lord.
The Bank of England already takes care of the concerns which the noble Viscount expresses in his amendment and, therefore, I think that to have an amendment such as this put on the face of the Bill would be thoroughly undesirable. I must also say on looking at the amendment that I should have thought it was an absolute recipe for litigation of any sort, where any company could come along and say, "Hello, we have not been able to raise the amount of money which we might have wanted to raise because British Gas is coming to the market". It would be an absolute recipe for disaster and a whole lot of specious claims.
Lord Williams of Elvel: I was most interested to hear from the noble Lord that the Government intended to make the British Gas issue in a series of tranches. This is not the time to pursue this point, but he will be coming back to it on Report because it is something which I think your Lordships would wish to hear more about.
Viscount Chandos: I find it difficult to accept the suggestion of the noble Lord the Minister that the financing programme of companies in recent weeks was a demonstration of the fear that the privatisation programme over the next two years would create difficulties in the equity market for other companies. The privatisation programme to date has been more limited than the aggregate that is now being talked of by the Government to be achieved before the date of the next general election. It is that change in degree and scale which has caused the greatest comment among analysts and economists in the City, many of whom are in other respects strong supporters of the Government's policies. It is simply not possible to decry those fears as being ill-founded.
I suggested in my opening comments that I regard the Bank of England's supervision of the capital markets as being first class. None the less, it has not to the same extent as I suspect it will have to in the future had to contend with a government selling increasing amounts of shares where there is a strong political objective on the part of the vendor to achieve those sales before the next election. Nothing the noble Lord the Minister has said can have done anything to allay those fears either on this side of the Committee or

345
among those commentators in the City and elsewhere who have raised them independently of myself. However, as the time is now quite late—
Lord Sanderson of Bowden: Before the noble Viscount decides what to do with his amendment perhaps I may ask him this question. Do I take it, as it looks very clear from this amendment, that he does not believe in privatisation, or does he believe in privatisation? It seems that the terms of this amendment leave a wide open door to anyone to object to the privatisation of British Gas at any time.
Viscount Chandos: I said at the beginning of my comments that I and I think my colleagues on these Benches have supported some instances of privatisation and would do so again in the future. It is quite possible to imagine public corporations being sold in tranches or of a size and with a regularity that does not interfere with the financing requirements of the hundreds and thousands of companies that are already in the private sector. What I have been suggesting is that the sale of British Gas and the sale of the other public corporations, such as the water authorities, that is being discussed in the time scale of the next two years is sufficient to cause serious disruption of the equity markets of this country. Despite that, as the time is late and a number of Divisions have already been called, sadly unsuccessfully, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
9.30 p.m.
Lord Diamond Lord Diamond moved Amendment No. 144MA:
Page 51, line 30, leave out ("the Consolidated Fund") and insert ("a fund controlled by the Treasury designated the Consolidated Capital Fund.
( ) Payments out of the Consolidated Capital Fund (up to a maximum of twenty per cent. in each subsequent fiscal year) may only he made for purposes certified by the Comptroller and Auditor General as being the bona fide creation of new national assets and subject to the approval by the House of Commons of detailed estimates submitted to them.")
The noble Lord said: What the clause provides for at the moment is the usual position—that any money received by way of dividends or sale of securities shall be paid into the Consolidated Fund. There is no particular objection to that, except that once it gets into the Consolidated Fund it gets lost, it disappears. It is used for current purposes and we get the classical situation of the family silver being used to pay for the groceries.
What the amendment seeks to do is to save the nation's assets. There is no possible objection to nations, trusts or individuals selling one asset and replacing it with another asset if they want to do that. In their view, it may be beneficial to do so. What the amendment proposes is quite simple. Instead of the assets being paid into an undesignated consolidated fund, there would be started a new fund for capital purposes called the Consolidated Capital Fund. It would be looked after by the Treasury in the ordinary way, and any sales of capital assets would go into that capital fund.
Would the assets stay in that fund for ever? No, because if one looks further on in the amendment, one sees what will happen to the money in that fund:
"Payments out of the Consolidated Capital Fund … may only be made for purposes certified by the Comptroller and Auditor General as being the bona fide creation of new national assets and subject to the approval by the House of Commons of detailed estimates submitted to them."
So the capital fund that is derived from the sale of the nation's assets can only be used for the creation of new assets.
That is secured by having a certificate by an independent and informed authority—namely, the Comptroller and Auditor General. The words "bonafide creation" are necessarily incurred so that the Government do not attempt, and so that any government do not attempt, to deceive the nation by using the funds for purposes that would have arisen anyway on the creation of small assets. They have to be used quite definitely for the bona fide creation of new assets.
In the ordinary way, just as payments out of the Consolidated Fund can only be made on the basis of detailed estimates submitted to the House of Commons, so could the payments out of the capital fund. The reason why the amendment includes the words,
"up to a maximum of twenty per cent. in each subsequent fiscal year"
is that we are impressed by the logic of the Government, who have said to every local authority, "You may sell your capital assets and may use the funds—up to 20 per cent. per year—in the purchase of further local government assets". That is a reasonable way of spreading the use of that money over a period of time. It would not all be spent immediately, and it would not be right that it should be so spent.
Here is a simple provision that will enable the Government to do what they have never been able to do so far, but which in view of the behaviour of the present Government, in selling asset after asset of the nation month after month, becomes necessary; namely, having what every normal business has, which is the separation along the lines of that which the noble Earl, Lord Stockton, recommended in his maiden speech. I refer to the separation between income and capital. One has one consolidated account for ordinary purposes, income purposes, revenue purposes—and one has another account for capital purposes. It is used in that way. It is very simple. It is what every business has. It is something that the Government should have had a long time ago, and it is something that they should now have to do in order to protect their stock of assets. I beg to move.
Lord Gray of Contin: This is a novel thought, straight from the mind of a former Chief Secretary of the Treasury. I wonder what the noble Lord's reaction would have been, when he was Chief Secretary of the Treasury, if somebody had suggested that government sales of any kind should be thus treated. I know that, sadly, the noble Lord's Government were not inclined to privatise in the way that this Government are. Indeed, we might not have been in the difficulties that we were in at that time, in the late 1970s, if the noble Lord's Government had acknowl-

347
edged the potential of some of their assets. However, I wonder what the noble Lord's attitude would have been today. I do not believe that it would be very different from that of any other Chief Secretary of the Treasury.
The Consolidated Fund is that little pot of gold which Chief Secretaries guard to the end. It is a general principle that Government revenue should be paid into the Consolidated Fund. This is true of all sources of Government income, including the major revenue earners such as income tax and VAT. It has often been argued in my part of the country, in Scotland, that if all the money paid by Scots into the road fund had been spent on roads in Scotland we might not have had some of the criticisms that we have had in the past. But that is not the way of the Treasury and the ex-Chief Secretary knows that very well indeed. It is equally true of relatively minor sources such as the authorisation fees to be paid by gas suppliers to the Secretary of State or director under Clause 7 or Clause 8 of the Bill. Establishment of a special purpose fund in this way would therefore run counter to the traditions of government accounting developed over many years and which have worked satisfactorily.
We all know of the problems which a Labour Chief Secretary would have. The most difficult jobs in a Labour Government must be Chief Secretary, Chancellor of the Exchequer and Minister of Defence. Any one of the three positions must be a tremendous load on the shoulders of the occupant.
Payments out of the Consolidated Fund have, of course, to be voted by Parliament on the basis of estimates submitted to it—either the main supply estimates presented with the Budget or supplementary estimates presented throughout the year. So far as principles are concerned, therefore, the existing arrangements adequately safeguard Parliament's right to determine the purposes to which government expenditure should be directed.
I listened very carefully to what the noble Lord had to say. He is never short of ideas. However much we may disagree with him we must acknowledge that he has a most fertile mind. Sadly those ideas do not always fall into line with this Government's obejectives. In this case he has not provided something which could in any circumstances be acceptable to us. Therefore, I must ask him to withdraw his amendment, for the time being at least.
Lord Stoddart of Swindon: Before the noble Lord, Lord Diamond, decides what to do about his amendment, I should like to say to the noble Lord, Lord Gray, that he was being most unfair to the noble Lord, Lord Diamond, and, indeed, to the last Labour Government. We all appreciate—indeed, we have come to appreciate it very much during the debates on this Bill—that the noble Lord, Lord Diamond, is a ex-Chief Secretary to the Treasury. Indeed, his interventions in the debates have been most valuable, not only because of his personal qualities and expertise in accountancy but also because of the experience he had as Chief Secretary.
I have no doubt that the noble Lord, Lord Gray, is thinking that the noble Lord, Lord Diamond, if chief Secretary now, would understand and wish to
348
perpetuate the doctrine of no hypothecation of revenue. That is full understood by all parliamentarians; but the noble Lord, Lord Diamond, is not suggesting anything to the contrary by this amendment. What he has done—and this came from his experience—is to provide a new idea; a new way in which capital assets from the sale of public assets can be used not for immediate tax reliefs but for the good of the country or, in other words, to provide employment opportunities, for example, for those extra two and a quarter million people who have been put on the dole since 1979, when this Government took office.
So in fact the fertile mind of the noble Lord, Lord Diamond, has shown the Government a way to escape from the accusations which we and other people have made against them. One of the main points of our opposition has been that this is a Bill to privatise British Gas not because it is inefficient and does not make money (it is efficient and it does make money) but simply and solely in order to obtain money to bribe the electorate before the next election. In actual fact, accepting the amendment of the noble Lord, Lord Diamond, is a marvellous way of convincing us that we are wrong. If they did that, the main plank of our argument would be taken away from us. The Government would benefit because they would be cleaner than they appear to be at present; and it would also be good for the country in that every year 20 per cent. of this capital fund would be put into the rebuilding of industry or rebuilding of infrastructure. Frankly, I think that the noble Lord, Lord Diamond, is to be congratulated on his amendment and that the Government will be wise to accept it. I am sorry that so far they have not done so.
Lord Gray of Contin: As always, I was interested in what the noble Lord, Lord Stoddart, had to say, but before the noble Lord, Lord Diamond, decides what he will do about this amendment I should like to put one question to him. I suspect that he actually did have an opportunity of trying out this experiment—
Lord Bruce of Donington: No!
Lord Gray of Contin: Oh, yes. Just let me finish. I suspect that he had an opportunity to try out this experiment or to influence his party to try it out, because, if my memory serves me correctly, in 1977, long after which time the noble Lord had ceased to be Chief Secretary to the Treasury but when he was still a member of the Labour Party, his Government sold a massive tranche of BP shares. Did he suggest to his Government at that time that they should put that money into a special fund, or did he acquiesce in the idea that it should go into the Consolidated Fund? That is an interesting thought, and perhaps the noble Lord might be able to enlighten us.
9.45 p.m.
Lord Diamond: Let me answer the question immediately. I hope the noble Lord will not take offence if I preface my answer by saying that he is the person who is paid to answer questions and I am not a person who is paid to answer questions. At that period I had the privilege of being the full-time chairman of the Royal Commission on the Distribution of Income and Wealth, and I kept my mouth shut

349
completely in your Lordships' House. I was not concerned with anything other than that, and if I am asked whether I approved of the way in which the then Labour Government acted in relation to that money I should have to look into all the facts. I do not think that I could answer without having ascertained all the relevant facts.
However, the noble Lord the Minister twitted me about the situation which existed at the time I was Chief Secretary. He asked me what I might have imagined if this had happened when I was Chief Secretary. I gladly answer. I shall tell the noble Lord that for the six years from 1964 to 1970, when I was Chief Secretary, I could not have imagined—and he has been good enough to say that I have a fertile imagination—a situation in which unemployment would rise to seven times the maximum that it was during those six years. I could not have imagined it.
It was accepted philosophy that if unemployment went over 1 million there would be a revolution, and now it is over 4 million. I could not have imagined that. I could not have imagined that the basic rate of interest would have been three times what it was at any time during the period when I had any responsibility in that field. I could not have imagined that any Tory Government would be so irresponsible and unaware of how to manage the economy and to act as a trustee of the nation's assets that they would proceed to dissipate them in the disgraceful way that they have done over these years.
I say to all noble Lords on that side of the Committee that I am astonished at the way that they accept that their Government can sell capital assets and replace them with nothing, year after year. The only senior Conservative politician who has objected has been the noble Earl, Lord Stockton. That is what I say in reply to the noble Lord who twits me about the position when I was Chief Secretary.
That situation never arose because no Government ever for one second contemplated that we should so alter the form of accounts—we had below the line and above the line, the noble Lord will remember—as to deceive the nation as to what we were doing with the money. That could not have arisen then. We acted with propriety. We distinguished between capital and revenue, as every businessman does and as every noble Lord on the other side who has responsibilities in industry also insists on doing. We distinguished between the two.
I suggest now in this situation where the Government are compelling the country to accept the change, with their enormous majorities in both Houses of Parliament, that they might for one moment think about what is the proper and responsible way to look after the nation's assets and adopt the simple device of having a capital as well as an income fund, as all trusts are compelled to do. Every single piece of trust legislation has that division.
The noble Lord may interrupt me if he wishes to suggest that I am wrong. I assert that under trustee legislation every trust fund must be divided in that way. Here are the biggest trustees of all sitting on that Bench, insisting that the Chancellor of the Exchequer may breach the natural trust of looking after the nation's assets by spending and dissipating them in
350
that way. If this provision were adopted it would prevent that.
The noble Lord was wasting the time of the Committee when he talked about how the House of Commons has to vote that money. I have provided for that in the amendment. He went on to say that the House of Commons was already in control of the situation. It is not. That is, like every single statement that the noble Lord has made in answer to my points, wholly wrong. The House of Commons is not in control of that; it is in control of expenditure and not of income. The income is paid into the Consolidated Fund.
What can a Member of the House of Commons do if he wants the Government to spend more on the infrastructure? As the noble Lord knows, he can do nothing. All the Back-Benchers on the Tory side, the Labour side and everybody else put together can do nothing. It is in the Government's gift as to whether expenditure is initiated. The noble Lord knows that. If in the other place the whole House wanted to rebel against the Government and say, "Please reduce unemployment by spending money on the infrastructure", they could not achieve that, no matter how many votes they won. They could throw the Government out of office on a vote of no confidence, but they could not achieve expenditure on capital assets because it is not within the powers of a Back-Bencher to initiate government expenditure. Here is a method to protect the Government's assets.
The only reason that I do not insist on testing the opinion of the Committee at this stage is that it is very, very late and we are terribly pressed to get through the Bill by a given hour. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendment No. 144N not moved.]
Clause 51 agreed to.
[Amendments Nos. 144P to 144R not moved.]
Clause 52 agreed to.
[Amendments Nos. 144S and 144T not moved.]
Clause 53 agreed to.
Clause 54 [Target investment limit for Government shareholding]:
Lord Williams of Elvel Lord Williams of Elvel moved Amendment No. 144U:
Page 53, line 2, leave out ("six months after") and insert ("the date on which").
The noble Lord said: It will be for the convenience of the Committee if I speak also to Amendment No. 144V. There are two points on these amendments. The first relates to the time period in the Bill as drafted that is allowed to elapse before the Secretary of State commits himself to an order fixing the target investment limit. I am sure that the Government will agree that it is necessary to ensure that there is an orderly market in the shares of British Gas plc after flotation. One thing that destroys an orderly market is to have an overhang.
This is a slightly financial type of amendment. If the Secretary of State were obliged to fix his target

351
investment limit on the point of flotation instead of waiting for six months that would ensure that the market does not have that overhang. I think the amendment is reasonable. It is not political; it is purely technical and I hope that the noble Lord, Lord Brabazon, will take that on board.
Amendment No. 144V is of a slightly different nature. Under the Bill as drafted, the Secretary of State is obliged, if he fixes a new target investment limit, to ensure that that new limit is lower than the one it replaces. We see no reason for that provision. We should like to give the Secretary of State freedom of action because, who knows, in the future there may be different Secretaries of State who wish to raise the target investment limit in British Gas plc. For that reason, and very quickly because it is late and the Committee still has a great deal of work to do, I beg to move.
Lord Brabazon of Tara: I am tempted to take these amendments briefly. The purpose of the first (the six-month limit), and there is no dispute on this, is merely a requirement to set the target investment limit immediately, and it would remove the Secretary of State's flexibility and could give rise to practical difficulties in relation to the need, for example, to retain a short-term float of shares which could be allotted to deserving cases, such as lost application forms, during an interim period following the allocation. Those would revert to the Secretary of State if the float were not exhausted.
The arrangement that the noble Lord proposes would, I opine, not work because there might need to be a certain number of shares to be used for the purpose that I have described.
As regards the second amendment, where the noble Lord seeks to enable the Secretary of State to set a higher target investment limit if he chooses, it would run completely counter to the purpose of the clause. As I have already explained, the object is to reduce the level of Government ownership, in line with the overall objective of the proposed sale of shares to take British Gas from Government control and to provide for genuine public ownership and ensure that the
352
Government do not seek to regain a controlling interest in the company once sold. It would defeat the purpose of the target investment limit if it could be raised by order of the Secretary of State.
The target investment limit will in effect prevent shares being bought by the Secretary of State. It is not therefore concerned with further sales or any overhang of shares. I hope that the noble Lord may be able to accept the first explanation. As to the second, I appreciate that there will be a difference between us. I am afraid, however, that I cannot accept the amendment.
Lord Williams of Elvel: I am grateful to the noble Lord. Will he kindly give me an assurance that the six-month time period will be looked at again? This is not a political point; it is a purely technical point. The noble Lord may find that my arguments are a little more persuasive than they appear at this hour of the night when the officials look at the matter again. I believe that, if it is left at six months, there will be a serious overhang in the market when no one is certain in the market how far the Secretary of State is going to go in fixing the new limit. I believe that this will be a problem. I am trying to help the Government.
No doubt, the setting of new limits as we go forward has something to do with what the noble Lord said a few moments ago about selling British Gas in tranches. We look forward to having further discussions on Report.
Lord Brabazon of Tara: I shall certainly look at the first point that the noble Lord makes and write to him. If there is any way in which the Bill can be improved by taking account of the suggestions that the noble Lord has made, we shall be delighted to do so.
Lord Williams of Elvel: I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 144V and I44ZZA not moved.]
Clause 54 agreed to.
Lord Diamond Lord Diamond moved Amendment No. 144VZA:
After Clause 54, insert the following new clause:
("Rate of dividend on ordinary shares.
.—(1) The Secretary of State with the consent of the Treasury shall decide the maximum rate of dividend on ordinary shares payable by the successor company and shall, after every subsequent period of five years, review the position and, with the consent of the Treasury, decide the maximum rate for the ensuing five years.
(2) In reaching the decisions referred to in subsection (1) above the Secretary of State shall have regard to the need to maintain a fair balance between the interests of the shareholders and of the consumers of the products of the successor company.
(3) The decisions referred to in subsection (1) above shall be implemented by order subject to approval by both Houses of Parliament.")
The noble Lord said: This amendment, as opposed to the previous amendment that I had the opportunity of moving, is not, as the Minister was good enough to say then, a novel idea. There is nothing novel at all about this amendment. I am going back to ancient history and precedent. The amendment proposes that the Secretary of State, with the consent of the Treasury, shall decide the maximum rate of dividend on ordinary shares payable by the successor company. This limitation of dividends was absolutely standard, as noble Lords will recollect, with all utility companies. Why?—because you have to reconcile the philosophy of maximising profit in the interest of the shareholder and maximising service in the interest of the consumer. You have to marry those two philosophies where you have a monopoly affecting the consumer on a large scale. That is what utilities were. They had their monopoly. Some exist now—for example, some water companies. The water company that supplies me with my water is such a one. You have the situation where a fair balance between these two philosophies has been arrived at. You get a dividend, but it is a limited dividend. So the consumer is looked after as well as the shareholder.
We are moving over from a public monopoly where the motivation is service to a private monopoly where the motivation is profit. Therefore, the interests of the shareholder are predominant unless the consumer is protected. We spent a great deal of time on Part I of the Bill trying to devise better protection for the consumer. Here I am saying, why not do what we always used to do and to a certain extent still do and have a method of restricting slightly the principle of maximisation of profit so that the consumer, who would otherwise be inadequately represented, can have his interest represented as well?
That was the philosophy behind the limitation of dividends on all the utilities, for example, which went into constituting British Gas Corporation which will now be privatised. It will be privatised as one organisation. It may be right in terms of maximum efficiency. I do not know enough about it to say yea or nay, but that argument has taken place and the British Gas Corporation has won the argument to satisfy the Government that it should be continued as a single integrated organisation.
That is well and good. But one still has the situation where with the private monopoly the consumer is put at a disadvantage unless there is a suitable small brake placed on the principle of maximisation of profit. This
354
has been done over the years, but I am suggesting that it could be improved. The amendment therefore proposes that the Secretary of State shall decide on a maximum rate of dividend on ordinary shares payable by the successor company—that is the dividend limitation—and shall, after every subsequent period of five years, review the position and decide the maximum rate for the ensuing five years.
In short, I am not saying to any private enterprise company, "This will be your maximum dividend for all time." I am saying, "This will be your maximum dividend for five years. If your behaviour over the next five years is such as to satisfy the Secretary of State, then you may be able to persuade him to alter in your favour, if you like, the maximum rate of dividend for the following five years."
I am not saying that—as was the case in all utility company capital structures, and is the case in a number of utility companies that remain today—the accumulation of profits in reserves is also limited. If one makes a profit and has a limitation on the distribution of profits, what will one do with the profit left over? I was familiar with this when I had to look after that side of the Treasury business when we had dividend limitation. What does one do with the amount left over? Does one limit it or allow the companies to accumulate it? In existing utilities there is a limitation on the accumulation of undistributed profit; that also applied in utilities which no longer exist.
I am not proposing that that should apply here. I am proposing that there should be greater encouragement for the shareholder through knowing that there is no limitation on the accumulation of profit. It is perhaps erring slightly too far in favour of the shareholder, but I have to deal with the Committee as I find it. I have to convince the Government to move a small way if they will not move the full distance. I am proposing that there should be dividend limitation, but for only five years and reviewed every five years. I am not proposing that there should be limitation on the accumulation of undistributed profits. There is therefore every encouragement for the new gas plc to be efficient, to make as much profit as possible through efficiency, but not to rest on its laurels, because it will be reviewed every five years.
I think that this is a way forward. It is a way that tries to marry the two principles which are represented on the two sides of the Committee. It is a fair half-way house. I think that it would work very well. I beg to move.
10 p.m.
Lord Bruce of Donington: For our part, we should like to commend this amendment to the Government on grounds of prudent finance and prudent administration. The position of the consumer vis-à-vis the shareholder will of course be dealt with very largely, and certainly in the short-term, by the figure that is put upon the efficiency factor incorporated in the price determination formula. This is the way in which the short-term position of the consumer can be safeguarded, provided that the efficiency factor is put

355
sufficiently high, without of course damaging the company, to ensure consumer protection against any undue increases in price that arise following privatisation and following the removal from the corporation (which then, of course, is a plc) of the political constraints that have exercised some influence, and which continue to exercise some influence, over the corporation itself.
I think that the noble Lord, Lord Diamond, would agree that in the main his proposal deals with the other aspect of the matter. Quite clearly, any restriction on the amount of dividend distributed has little impact upon the total equity capital and income rights together of the shareholder, because what is not distributed in dividend remains to the credit of the reserves and therefore in the worth of the shareholding.
The amendment ensures that a tendency in the case of this monopoly—and it will be a private monopoly—to go for undue dividend distribution for the purposes of keeping up the share price and satisfying the short-term interests of shareholders shall not result in starving the company of its own reserves, which it could use on research and development, as extra working capital, or whatever it might be. As Members of the Committee know perfectly well, it is a very unsound policy indeed to distribute all your profits as dividends, even after making due allowance for depreciation and so on. Provision has to be made for research and development, and provision has to be made in the case of an expanding business for additional working capital.
This amendment tries to ensure a broad public attitude—the attitude of sound public finance in industry and administration—notwithstanding the temptation afforded by privatisation and shareholder pressures on the directors of the privatised company, which will undoubtedly ensue. There are references in today's press to the growing tendency to have regard to short-term interests and high dividends in order to ensure that a public policy is pursued with the minimum of constraint over a monopoly which will not now be under political control but which will be entirely in private hands.
Lord Brabazon of Tara: As the noble Lord, Lord Diamond, explained, the amendment seeks to give the Secretary of State control over the maximum rate of dividend payable on ordinary shares by the successor company. The whole purpose of privatisation is to free British Gas from interference by government in its affairs, to which it is subject at present, and to provide for real public ownership so that consumers and others can take a personal stake in the industry whose services they use.
It is therefore right that British Gas, like any other private sector company, should be able to decide on the appropriate level of dividend and that investors should be able to benefit from their investment through dividends related to the company's performance and not subject to artificial constraints imposed by the Government.
356
The noble Lord, Lord Diamond, spoke about the protection of the consumer in a public monopoly. We have been over these arguments on many occasions during the last six and a half days of consideration of this Bill. This is a highly regulated regime we are imposing on British Gas so far as the tariff customer is concerned. As we have indicated on many occasions, the contract and industrial customer has no wish to be a part of this regulated regime and is quite happy with the arrangements we have set.
The noble Lord, Lord Bruce of Donington, spoke about the efficiency factor in the price formula. This, I have to say, is a decision which the Government have made after a great deal of thought. We believe that price control, not profit control, is by far the best way of ensuring the best both for the shareholders and for the consumers. What the amendment of the noble Lord, Lord Diamond, really seeks to introduce is profit control. Profit control gives no incentive for the company to improve upon its efficiency. Therefore, we have introduced this strict formula of price control so far as the tariff customer is concerned.
Turning now to the point which the noble Lord made that he would not restrict profits, only dividends, I quite accept that. In my opinion, this would only lead to the accumulation of massive reserves by the company's management, which I do not believe would encourage efficiency on their part. I cannot accept that this would be in the interests of either consumers or shareholders. The noble Lord, Lord Diamond, said that dividend control was not a novel idea. I realise that it is not a novel idea, because it was one of the first things which this Government removed when they came into office in 1979. Therefore, I do not think the noble Lord will be surprised that we cannot accept this amendment.
Lord Diamond: I wish the Government Ministers would get some of their facts right, because it would save so much time. The Government did not remove dividend control. There are utility companies existing today supplying water with dividend limitations. I do not know what the noble Lord the Minister is talking about, or who briefed him to make that statement. They are carrying on today. The noble Lord said he wants this new company to run as all other companies run.
All other utility companies supplying utility products in this way, and with a monopoly, have had, and the few remaining ones still have, dividend limitation. I am asking for the normal; it is the Government who are insisting on the abnormal.
The Government say that the proposal I make is profit control. I just do not know what words mean if the Government really believe that. I have especially said there is no profit control: there is limitation on the distribution of profit; there is no limitation on the retention of profit. I said it, and the amendment itself says it.
It really is heartbreaking that the Government are not prepared to treat seriously any single amendment we have moved on this Bill from the word "go". The consumer is not adequately protected. Our whole argument has been that the method of regulation is totally inadequate. The noble Lord the Minister comes along and says there will be a vast accumulation of

357
profits and that is not an encouragement to efficiency. No, it is an encouragement to reducing the price. If you do not want to make such profits you reduce the price to the consumer; that is the philosophy behind the dividend limitation in utility companies at the present day as I am standing here addressing your Lordships. We must be living in totally different worlds. I get my water every day from a company which has its dividend limitation. So I can only say that the Government are not treating any of our amendments seriously. I give up in despair, and beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 55 agreed to.
Clause 56 [Temporary restrictions on successor company's borrowings, etc.]:
10.15 p.m.
On Question, Whether Clause 56 shall stand part of the Bill?
Lord Stoddart of Swindon: The Committee will note that we gave notice of our intention to oppose the Question, That Clause 56 stand part of the Bill. We put down no amendments to the clause but it is an important clause and we had intended to have a debate.
However, time is getting on and we have given our undertaking that we shall finish the Committee stage of this Bill by 11 o'clock, and we intend to see that that undertaking is honoured. But I want to make the point that it has not been possible for us to probe and examine this Bill in the way that we should have liked to. Having made that point, I now sit down and will allow Clause 56 to proceed without a Division.
Clause 56 agreed to.
Clause 57 agreed to.
Lord Bruce of Donington Lord Bruce of Donington moved Amendment No. 144VA:
After Clause 57, insert the following new clause:
("Pre-transfer provisions relating to the Corporation.
.The accounts for the Corporation for the year ended 31st March 1986 and for each succeeding completed year prior to "the transfer date" provided for in section 49 of this Act and for the period from the last completed year until "the transfer date" shall be prepared under the same current cost accounting principles as those used in the preparation, presentation and publication of the Corporation's accounts for the year ended 31st March 1985 and shall include, in addition to those particulars required by the Companies Act 1985 section 228 and where applicable section 229 of that Act, detailed statements comparable with those contained in the Corporation Annual Report and Accounts for 1984–85, with the following sub-heads:

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

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

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

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

The noble Lord said: In order to save the time that was lost by the Government's half-hour underestimate of the business taken at 7 o'clock, and in view of our undertaking, with the Committee's permission I shall
358
discuss this amendment with 144VB and 144VC, even though they would normally have been due for separate consideration.
I am aware that particularly at this time of night, and perhaps even in broad daylight at a more reasonable hour, it is difficult to discuss matters of accounts. Accounts are not the most interesting subject to induce a sense of ecstacy in Members of the Back Benches on either side of the Committee, unless of course they have a specialist interest in these matters. Because of the existing composition of the Committee, I assume that there is an intense interest in accounting matters among those who are present this evening.
The purpose of the first amendment is clear. We have had no indication from the Government yet as to when the transfer date covering the transfer of the assets and liabilities of the corporation to the successor company is going to be. There have been many rumours. What this first amendment seeks is to ensure that for each completed year up to the date of transfer and after 31st March 1985—which therefore includes the year ended 31st March 1986—and for each succeeding completed year before transfer date, or if the transfer date comes before the completion of another year, accounts are presented in the same form as the accounts that have been presented for the year 1984–85.
I should have thought that this was a modest and reasonable amendment. Any director of a company, or any person in public life who has become accustomed to the desirability of the presentation of accounts on the basis of consistency, which is the accepted standard practice thoughout the industrial world and the City of London and adopted by all professional accounting bodies, would regard this as being a desirable thing to do. It may well be that the friends of privatisation, who are so ideologically hidebound, think themselves quite free to abandon ordinary commercial standards, industrial standards and accounting standards. They have shown a degree of eccentricity in this respect, as I have explained before, whenever it has suited their purpose.
But there is an additional reason for moving Amendment No. 144VA, because the accounts as published by the corporation for the year 1984–85 contain a great deal of valuable information which strict compliance with the Companies Act 1985 does not require. It publishes much information which is surplus from the point of view of the rigid requirements of the Companies Act. The corporation is under no legal obligation at the present time to give all this additional information that has been of such value to the country as a whole, or those sections of the community who see it as their task (self-appointed or otherwise) to have some regard to the public interest. So the amendment provides, as the Committee will note, that the various particulars that I have ventured to set out, and which any of the Committee will see already reproduced in the accounts for the year 1984–85, are continued on until the transfer date.
The next amendment carries the same principle forward. It endeavours to impose a responsibility on the successor company for publishing its accounts in exactly the same way. This matter was dealt with by the energy committee in another place in its first

359
report, The Regulation of the Gas Industry, House of Commons Paper No. 15.
These are the conclusions at which the energy committee in another place arrived and which are set out at paragraph 71 of its report, on page xxviii. I quote:
"In its comments upon the evidence of the Electricity Council, BGC disputed the Council's suggestion that after privatisation it should … be subject to any accounting requirements other than those applying to any other private sector company".
That refers to the statutory provisions under the Companies Act 1985. The quotation continues:
"We reject this argument on two grounds. Firstly, British Gas will not, by and large, be competing with other private sector companies but with nationalised energy suppliers. Secondly, its continuing effective statutory monopoly in the gas tariff market, and the legacy of its historically privileged position, means that it will not be comparable to normal private sector companies. It can retain customers with relatively little effort and obtain profits with relatively little risk. In return for this privilege it must accept that it is required to demonstrate openly that it is acting for the public good, as must other monopoly energy suppliers".
I should like to refer the Committee, if I may, to the further observation that has been made by the Electricity Council. At page 182 of the same report, which covers the memoranda submitted to the energy committee and whose conclusions I have already dealt with in my earlier quotation, the Electricity Council says this:
"With the exception of the Scottish Electricity Boards, both industries' published accounts are on a current cost basis and show separately the results of their trading activities. After privatisation, comparisons between the industries will continue to be made; therefore, the published accounts of the successor company to the BGC should be on the same basis and in the same format as that currently adopted by the Corporation".
So I present the Committee with the considered view of the all-party committee in the other place and with the extract from the memoranda which was carefully considered by the committee in another place and upon which its opinion was grounded. I hope therefore that the Committee will acquit me in any way of being partisan about this matter. There is no question of party politics being involved in it. It is purely a question of good administration.
The other parts of Amendment I44VB endeavour to put some further requirements on the new successor company from accounting standpoints than are already the responsibility of British Gas. The reasons for that are very simple. The amendment itself—and for the purpose of saving time, I shall not read it aloud which I am quite sure the noble Lord will appreciate—seeks to have reproduced in the published accounts those vital statistics that will be used by the director general in determining the mathematical outcome of the application of the price-fixing formula. So the directors' own calculations and own conclusions can be checked and can be commented upon on the basis of the published accounts of the new successor company. These additional requirements, which are in fact very minor in a way because they arise only from an analysis which any spreadsheet or computerised spreadsheet will show very quickly and throw up almost instantaneously, impose no particular responsibility on the new British Gas plc.
The third amendment deals with the whole question of transparency and impinges once again on the
360
necessity for the transactions that are involved in this whole sordid business to be made as open as possible. We know quite well that the Government very much prefer to keep everything under a mist of ambiguity which the friendliness of their own media of course faithfully conceal from the British public. But at least perhaps those independent journals that are still capable of producing news and facts that are unpalatable to the Government will be able to obtain the information that they require.
Amendment 144VC provides that, in continuation of what I have already put forward in the other two amendments:
"All the property, rights and liabilities passing from the Corporation to the successor company under the provisions of section 49 of this Act shall be transferred at the value stated in the Accounts of the Corporation as at the transfer date."
This is normal commercial practice on the takeover by one company of another and it ought to present the Government with no particular difficulty unless it reveals too much.
Then it stipulates:
"Within three months from the transfer date or within the period from the transfer date until the first exercise by the Secretary of State of his powers under section 54(5) of this Act, whichever is the less, the Corporation shall prepare, present and publish a statement of affairs showing it financial position immediately following the transfer date".
So we know exactly the opening position accounting-wise of the successor company.
The amendment continues:
"At the conclusion of the transitional period provided for under section 57 of this Act the Corporation shall prepare, present and publish a full account showing its transactions up that date from the date"
with which the previous subsection dealt.
I am well aware that all this sounds very complicated indeed, but there is, in fact, no complication at all. It seeks to lay open to the public gaze, particularly to independent newspapers like the Financial Times—which I am happy to say is still almost unique in having a reputation for complete veracity—and to the discerning individual, who may be interested in public affairs and may not always care to rely on leaked Government statements or blanket statements of ambiguity, the facts about what has happened. So, as I said, the last amendment provides in respect of each critical date—the transfer date and the first flotation date—a complete statement of the accounting position, and of the transactions that have taken place between the dates, so that everybody knows what is happening.
I fear that I have detained the Committee a little long on these three amendments. I am afraid that I cannot apologise for that, because these accounting matters are a little complicated and one's powers of exposition on matters in which one is professionally engaged on a day-to-day basis very often result in utterances in some kind of code, but I have tried to avoid that by explaining these amendments in comparatively simple terms. I sincerely hope that the amendments will find favour with your Lordships. I beg to move.
Lord Belstead: The noble Lord has moved Amendment No. 144VA and spoken to two other

361
amendments. They are of some complexity and I shall do my best briefly to reply to the noble Lord's thorough exposition of his case. The first amendment, on which the other two really hang, is an attempt by the noble Lord to ensure that there shall be absolute and transparent honesty in the accounts of the corporation in the run-up to privatisation.
I would just say on Amendment No. 144VA that the attempt here to require the corporation to prepare accounts for the year ended 31st March 1986 and any subsequent period in accordance with a prescribed accounting principle—namely, current cost convention—and also to require that these accounts should include prescribed detailed financial statements, statistics and ratios, goes well beyond the Companies Act requirements. The amendment would put in place statutory requirements where none existed in the past, as the noble Lord said, and which would be unacceptable because they are far more stringent than those which currently apply to other statutory bodies.
I do not believe it would be right to accept the amendment for a further reason; that is, that the timetable for the passage of the Bill, and for when it receives Royal Assent, is a matter for Parliament. Should this take place after the publication of the corporation's annual report and accounts for the year ended 31st March 1986 the amendment would effectively introduce retrospective legislation. At any rate, the preparation of that annual report and accounts, in compliance with the requirements of the 1972 Act and the directions given by my right honourable friend, is already at an advanced stage. I should like to make it crystal clear in replying to the noble Lord that these accounts can be expected to include relevant and useful detailed statistics, ratios and supplementary financial statements for an appropriate number of years.
The noble Lord said that the second amendment carried on the logic of the first amendment so far as the successor company is concerned. Yes, indeed it does, but if I may say so I do not think it is appropriate for us to state in primary legislation whether the historic or current cost accounting basis should be used by a private sector company. Condition 2 of the draft authorisation requires British Gas to draw up accounts for the gas supply business as a whole, and gives a clear role to the director in scrutinising the allocation of cost between the gas supply business and any other business British Gas undertakes. This will ensure that proper accounts are drawn up which represent a true and fair view of the gas supply business, separate from the other activities that British Gas undertakes, such as appliance trading. The condition also requires the accounts to be audited—an important point overlooked in the amendment.
But in undertaking activities outside gas supply, such as appliance trading, British Gas will be in competition with other companies. We have previously been over the ground that regulation ought to be confined here to where it is needed—namely, to gas supply. It is inconsistent with this approach to seek to regulate the accounts relating to activities outside gas supply, as this amendment would seek to do. The amendment would also require separate accounts for tariff and non-tariff sectors of the market. The noble Lord will forgive me if I say that we have been over this
362
ground more than once in the past and the noble Lord is familiar with the reasons why the Government have resisted that suggestion.
Finally, the noble Lord has put forward a very complicated amendment which is divided into three parts. Perhaps I may reply only to the first part of it. The effect of Amendment No. 144VC would be that all the property rights and liabilities passing from the corporation to the successor company would be transferred on the basis of their values as at the transfer date and would be recorded in the accounting records of the successor company at these values. This is contrary to what is provided in the Bill as drafted, and I would just make clear that Clause 55(4) of the Bill provides that for the purposes of any statutory accounts of the successor company the vesting shall be deemed to have been effected immediately after the end of the last complete financial year of the corporation ending before the transfer date, and that the value of any asset or liability vested shall be taken as the value assigned to it in the accounts of the corporation at that date.
I should like to think that the answers to the three amendments which the noble Lord has put to the Government, although I know they do not go down the same road as the noble Lord would wish, do show that we are making provision in the Bill and in the authorisation for accounts which will accord with what the noble Lord wants, which is a clear demonstration of what the facts are in the company at the moment of privatisation.
Lord Bruce of Donington: I thank the noble Lord for the tone and tenor of his remarks in reply to the representations I ventured to make on behalf of these three amendments. I am not at all surprised that the noble Lord speaking for the Government has been unable to accept the amendments. I fear that until a little more mature consideration has been given by those who advise him to exactly what I said, to exactly what the arguments are and to precisely what the implications are, it would be quite useless for me to argue further with the noble Lord.
The noble Lord, or, rather the Government (because I cannot attribute these characteristics to the noble Lord as being personal ones, any more than I should wish to do so to the noble Lord who has also been dealing with the matter; I speak of the Government as a whole) have treated the Committee with contempt in regard to this Bill. They have relied entirely on their majority, a very large number of whom have not graced the Committee with their presence except at Division time. The Government have been impervious to any logical argument that has been put forward. They have their briefs, and it has been the brief and nothing but the brief.
It would therefore be useless for me to argue further with the noble Lord, and in view of the time I do not propose to do so. However, I should like to express my complete contempt of the attitude of the Government towards this Bill. Judging from the way that they have ventured to deal with the Bill not only in this Committee but also in another place they must think that the Opposition and the public outside are complete idiots. I shall take the opportunity once again to press these matters at a later stage in the Bill,

363
in the hope that by that time the noble Lord will have taken further instructions as to what his responses should be. In the meantime I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 144VB and 144VC not moved.]
Clause 58 [Statements in connection with flotation]:
On Question, Whether Clause 58 shall stand part of the Bill?
Lord Williams of Elvel: I seek very quick clarification from the noble Lord on Clause 58. I have warned the noble Lord that I would be seeking such clarification. Clause 58 refers to the immunities that are granted under the Bill as drafted to various people. They are the Crown, agents of the Crown, those acting on behalf of the Crown, directors of the company, persons responsible for the preparation of, or of any part of, the listing particulars, and so on. All that is perfectly clear. The clause states that those immunities shall apply provided that the Council of the Stock Exchange has agreed the prospectus. The Council of the Stock Exchange really is the place where the buck stops.
Under the Financial Services Bill that is being debated in another place at the moment it is the Government's proposal that the Stock Exchange shall equally be granted immunity from civil proceedings. If the Stock Exchange is granted immunity from civil proceedings by the Financial Services Bill, then I ask this question: If there is a misleading prospectus, or if there is a misleading mini-prospectus, who does one sue?
Lord Gray of Contin: I am most grateful to the noble Lord for having the courtesy to warn my noble friend that he intended to raise this question. That has given me an opportunity to examine the matter and take advice. The answer is quite simple. Clause 58 gives exemption from liability only where the mini-prospectus is not misleading if read with the full listing particulars. If it is misleading, there is no immunity. The clause does not affect liability for statements made in the full prospectus. If those statements were shown to be misleading, liability would follow for those making the statements in the normal way.
The purpose of Clause 58 is, however, to permit the publication of a summary of the full prospectus for marketing purposes, and to ensure—so long as that summary, taken together with the full prospectus, would not be misleading—that no liability arises merely because it is a summary. However, if the summary and the prospectus taken together mislead, liability remains in the normal way. I hope that explanation answers the noble Lord's query and that it will enable him to allow Clause 58 to stand part of the Bill.
Lord Williams of Elvel: I am most grateful to the noble Lord. In fact it does not finally answer my query, but perhaps I may take up the matter with the noble
364
Lord privately and have a conversation about it. It is a very important point.
Clause 58 agreed to.
Clause 59 agreed to.
Clause 60 [Tax provisions]:
[Amendment No. 144W not moved.]
Clause 60 agreed to.
[Amendments Nos. 144X and 144Y not moved.]
Schedule 6 agreed to.
Clause 61 [Interpretation etc. of Part II]:
[Amendment No. 144Z not moved.]
Clause 61 agreed to.
[Amendment No. 145 not moved.]
Clauses 62 and 63 agreed to.
10.45 p.m.
Lord Ezra Lord Ezra moved Amendment No. 146:
After Clause 63, insert the following new clause:
("Right of vendor of gas not to supply certain information.
.—(1) A potential vendor of natural gas to a public gas supplier may elect not to supply certain information to the public gas supplier, for the purposes of relevant negotiations, provided—

(a) that the public gas supplier would be able to obtain an unfair commercial advantage from the said information, if he was in possession of it;

(b) that the vendor has the information's conclusions verified by an independent expert; and

(c) that these conclusions are communicated by the said expert to the public gas supplier.

(2) The said expert must be agreed between the parties and approved by the Secretary of State.
(3) In the event of the public gas supplier, by reason of such election, discriminating against such potential vendor in any matter, he shall be guilty of an anti-competitive practice, as specified in the Competition Act 1980 and the matters covered by this provision include, without limitation—

(a) the conduct or further conduct of the relevant negotiations; and

(b) the agreement or award of any contract to cover the whole or part of the natural gas to which the information relates.")

The noble Lord said: This amendment is designed to strengthen the impact of Clause 63. It deals with information which could be used to create an unfair competitive situation. The difficulty with Clause 63 is that the information is passed in the first place and restrictions on its use are then imposed. The purpose of the amendment is to ensure that in certain circumstances when a potential vendor of natural gas to a public gas supplier feels that he has to pass to the gas supplier certain information which is relevant to the negotiations he is undertaking for the sale of the natural gas, such information is not used to unfair commercial advantage. Therefore, the proposal is made that in those circumstances the information should be passed to an independent expert who would be agreed by the parties concerned and approved by the Secretary of State.
I am aware of the fact that a number of enterprises involved in the exploration and production of natural gas, both onshore and offshore, are concerned about the situation which could arise from the new gas corporation plc having a dual capacity—namely, as far

365
and away the biggest purchaser of natural gas for resale on the one hand and being involved in the exploration for natural gas on the other; and probably also for oil.
I suggest to the noble Lords opposite that this new clause is a reasonable extension of the measures in Clause 63 to ensure that there shall be fair competition in those circumstances. I very much hope that they will enable us to depart from these lengthy deliberations with a slightly lighter step than we otherwise might by saying that they will consider this, the penultimate amendment on the Marshalled List. I beg to move.
Lord Belstead: As the noble Lord recognises, Clause 63 has been included in the Bill to deal with the problem which he outlined. It will enable my right honourable friend to give a direction to a public gas supplier to ensure that no unfair commercial advantage is gained from information acquired in the course of gas purchase negotiations. The intention of the Government is to give a direction to British Gas which requires the company not to pass on geological and geophysical data obtained during gas purchase negotiations to people in the company or any associate company who are involved in obtaining licences or interests in licences, and the direction will apply to all negotiations for gas supply.
The proposed new clause of the noble Lord would add to these arrangements a right for companies to choose not to make information available to British Gas at all. Of course there is nothing in the Bill or the law as its stands at present which requires companies to give information to British Gas against their will. The Government are indeed aware that some companies have their own in-house rules about the types of information that they are not prepared to reveal to British Gas. But I think that we need to recognise that it is of genuine importance for British Gas that it should be an informed buyer. The contracts that it concludes with gas producers typically require it to buy all the gas that can be produced from the field in question, and it is therefore of the first importance that it should be satisfied about the quantity of gas that is likely to be produced from the field and also that the field will produce at the annual levels and at the swing promised by the producing company. If British Gas were prevented from satisfying itself in this way, there would be a greater degree of uncertainty about its future gas supplies. It is for these reasons that we have Clause 63 in the Bill.
May I just add that I realise that the new clause provides that if a company chooses not to provide information it will provide British Gas instead with the conclusions to be derived from the information, verified by an independent expert. I am uneasy about this provision. Certainly, as a result of the discussions that we have had this evening, we shall have a look at it but I am sure that the noble Lord will recognise that there may be circumstances in which an expert acting in a go-between role, though he has a valuable part to play, can also be fallible. The answers which experts give can depend on the precise questions that they are asked, and confidence in their judgments is bound to be diminished when there is no opportunity to test and question their judgments against the raw data on which they are based.
366
It is for those reasons that I feel I must say that in Clause 63 we have put into the Bill something which is of value, and we should certainly hesitate hard and long before departing from it.
At the end of this very long Committee stage, it would be churlish of me to say to the noble Lord, Lord Ezra, who has been here from the beginning to the end of these proceedings, that I shall not look very carefully at what he has said, but I hope that perhaps on his side he will look carefully at the Government case also.
Lord Diamond: As this is in fact the penultimate amendment on the Marshalled List and is the last amendment on that list to be moved, may I say first of all on behalf of these Benches that we are very grateful to all the Ministers who have taken part in this long Committee stage and who have been here? I cannot go so far as to say that they have listened to the arguments, but they have been here and for that we are grateful. I can congratulate them on their intense loyalty to the Government. Every amendment where the brief was headed "Resist" has been resisted with the utmost vigour and obstinacy.
If I may now be serious, I started the proceedings today by making it clear that so far as these Benches were concerned, we should terminate proceedings by 11 o'clock. Clearly we shall be doing that, albeit difficulties were added to that already immensely difficult task by the dinner break extending for an extra 22 minutes.
Although one would have thought from listening to the responses of the Government for the last 20 minutes or so that they were listening to the arguments—and although for the whole of the period that we have been honoured with the presence of the Leader and the Deputy Leader of the House, the Ministers have been particularly courteous—I hope that the Leader of the House will be good enough to instruct someone to analyse today's proceedings for him, because I am hound to say that so far as I am concerned I do not think that the Government have treated our amendments seriously at all. They have not read them, they have not been prepared for them, they have not dealt with the essential points; and I think that they have relied on my foolishness in saying at the start of the proceedings that they would be brought to an end by 11 o'clock. I feel that very seriously, and it would be wrong of me to hide that from the Committee.
Having expressed my gratitude to the Ministers, I leave it to my noble friend to decide what he will do on this amendment.
Lord Stoddart of Swindon: I agree with the sentiments of the noble Lord, Lord Diamond. I agree with him very much in thanking noble Lords opposite for their attendance and for the courteous way in which they have replied to the many debates on the Bill. But like the noble Lord I have to express my complete dissatisfaction with the replies and the attention given to our arguments.
The Leader of the House is here. He has not been here throughout, and we understand that. He has many things to do, and we appreciate what he does for

367
the House. I ask him to take due note when he reads Hansard of the co-operation of all sides of the Committee in drawing the debate to a close at 11 o'clock. We have withdrawn very many amendments that were important, and we shall come back to them. It is a complicated Bill and it needs time to probe it. We have not had sufficient time to do so. We shall come back to the Bill full of vigour and with many amendments at the Report stage.
Lord Ezra: I was pleased to note that the noble Lord, Lord Belstead, said that he would take Amendment No. 146 away and have a look at it. In so doing I ask him to bear in mind the concern on the part of potential vendors of natural gas about the difficult position in which they may be put in dealing with such a powerful, dual-functioning organisation as the new British Gas plc. They feel that the proposal for the intervention of an independent expert in certain cases would be fair to both sides. In seeking to sell the gas they will have to reveal to somebody the relevant technical information. In certain cases where that geological information could be misused, they would like to do so through a third party approved by all concerned. With those remarks I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 64 [Provisions as to orders]:
[Amendment No. 147 not moved.]
Clause 64 agreed to.
Remaining clauses and schedules agreed to.
House resumed: Bill reported with an amendment.

Royal Observatory: Herstmonceux
11 p.m.
Earl De La Warr Earl De La Warr rose to ask Her Majesty's Government whether they will reconsider the proposal to move the Royal Greenwich Observatory from Herstmonceux.
The noble Earl said: My Lords, I must begin by apologising to my noble friend for the fearsome hour at which we are starting, and to the staff of the House to whom we owe so much for the late hours that they keep. I must also apologise for the absence of my noble friend Lord Chelwood, who was to have put the Question but who sadly is very ill.
The proposal to move the Royal Greenwich Observatory may be seen by many to be a minor affair but it has aroused a degree of opposition, particularly on the part of astronomers and scientists, which in my opinion points to the strong possibility that the Science and Engineering Research Council is on the verge of a serious mistake.
There are many powerful reasons for thinking that a move from Herstmonceux would cause substantial and lasting damage to astronomy in Great Britain and abroad. There would be a grave danger that the Royal
368
Greenwich Observatory would lose its identity. I make no apology for drawing your Lordships' attention to the fact that for 300 years it has been, and still is, one of the marvels of the scientific world. There would be a loss of what I call the "window on astronomy" that exists at the present location because a university campus does not spell easy access for the public. There would be damage also to working relationships with other countries, particularly Spain and the Netherlands, as a result of the disruption of the construction work on La Palma. There might well, and I shall come to this later, be an unacceptable degree of cost to the taxpayer.
Before I deal with those points in detail, I want to say something about the lack of consultation that preceded the announcement by the SERC in March of its proposal that the RGO should move. The profession was not consulted. Not even the heads of the universities to which the observatory may go were consulted. The Royal Astronomical Society was not consulted, and there was not even any consultation with the Astronomy Space and Radio Board whose job it is to oversee the work of the observatory on behalf of the council.
I find that secrecy hard to understand, and the noble Earl, Lord Halsbury, has asked me to say, and I join with him, that we both hope that this matter will cease to be dealt with as though it were one of the Eleusinian mysteries. The SERC is not an oracle. We should like to see the decision dealt with as part of open government.
I turn to the options. I begin with the report produced late in 1985 by a group under Sir John Kingman who was then chairman of the council. I am sorry to have to say that the report was not strong on reasoning, nor was it decisive. It confined itself to offering not a conclusion but four options. The first was to leave things as they are—the status quo option. The second was to merge the RGO with the Royal Scottish Observatory at Edinburgh. The third was to move the RGO to a university campus, and I understand that Cambridge and Manchester would be among the favourites. The fourth was to merge the two observatories and move them to a campus. Surprisingly, one apparently obvious option was omitted, namely, to move the Edinburgh observatory to Herstmonceux. I wonder why.
When the SERC considered these options in March, all it could manage was to discard one option and to decide that the RGO should move somewhere. It could not decide where. The council could not decide either whether it should merge with an observatory or whether it should go to a university campus. The merger with the Edinburgh observatory was said to produce greater flexibility and efficiency. The move to a campus was going to give greater access to computing and microelectronics. Two differing sets of reasons, but either of them said by the council to be better than the existing set-up.
There is no evidence of anything like a cost/benefit analysis and, so far as I know, no evidence of any straight costing. I believe that, under those circumstances, this proposal counts as little more than a kite—a kite that, let us pray, can be hauled down by the council lest it may turn into a Concorde. The

369
opportunity for saving money on this score by a merger is to my mind absolutely minimal.
So far, there has been just one result. The staff of the RGO have been thrown into confusion and anxiety by the announcement. This is bad enough in itself. But coming, as it does, in the middle of construction work on the 4.2 metre William Herschel telescope on La Palma, it is devastating. They are continuing to do their job well in spite of the uncertainty. But there must be a strong possibility that many key staff will be lost. Some have already gone to good and well-paid jobs in industry. It will not suffice to say there will be no move until 1990. A stay of execution, when the sentence still stands, is not likely to put the victim's mind very much at rest. I wonder whether we can get my noble friend to agree on that point.
I also draw attention to the other activities at Herstmonceux. I refer to the equatorial group of telescopes which are used in collaboration with Sussex University for teaching and research and as test beds for new equipment. They are used also for longer-term projects that are the foundation of astronomy. The satellite Laser Ranger is at the forefront of work on such things as continental drift and the earth's rotation. These activities, I must tell your Lordships, are accorded just two lines in the chairman's report of the council's meeting in March. I suggest that they deserve much more attention than that.
I come now to the subject that controls so much of our life, namely, finance. The council has said that a move from Herstmonceux must be self-financing, I believe over a period of five years. As I have said, we have not been privy to its costings, if any, but one thing can be taken as certain. There is no other source of finance available to cover the cost of moving, other than the proceeds of the sale of Herstmonceux Castle. The assumption that this will raise £3.5 million or so, and will be made available to pay for a move, is at the heart of the council's proposals. This raises some rather intriguing questions about which I hope that my noble friend will be able to help us.
First, has the Treasury been consulted? If so, by whom? If it has, does it agree to a sale? Does it also agree that the proceeds of this asset should be used in the way that the council intends? Has the council considered where it should look to find a buyer outside the public sector, for this would be essential for a nil-cost result. How has it arrived at the figure of £3.5 million? All these questions must be answered.
There is one other. Perhaps my noble friend could comment on a report that my right honourable friend the Secretary of State for Education and Science has been approached by my noble friend the Secretary of State for Employment because the latter is concerned on account of the effect on tourism? That would be very useful.
This is primarily a scientific question. I have referred already to the massive opposition from astronomers. Last week there was a meeting of 200 astronomers and scientists which I was privileged to attend, although I am certainly neither an astronomer nor a scientist. Professor Martin Rees—one of the two astronomers from Cambridge, and known the world over for his excellence—spoke for them all I think when he said this:
370
"The RGO is splendidly situated. It is widely known and much visited by the public. It is a shop window for UK science—as such a real asset to the SERC. From their Herstmonceux base the SERC-supported astronomers not only run La Palma but also maintain successful collaboration with many Universities.
Many of us would like to see the RGO maintained there—as an internationally distinguished centre for science and innovation in its own right as well as an essential support for astronomers in Universities."
That seems to me to say it all.
There is such a wide abyss between the views of SERC and those of astronomers, that I believe that it is the Government's duty to make their own consultations and come to their own decision. The issue is so important and covers such a wide spectrum, that nothing less than that will do.
I very much hope that my noble friend will be able to help us with some of the answers in this complex and difficult situation.
11.14 p.m.
Lord ordoff: My Lords, the House will be grateful to the noble Earl, Lord De La Warr, for raising this question. It is no secret that his Question is a successor to a Question put down by the noble Lord, Lord Chelwood. I think that we would all express our regrets that the noble Lord, Lord Chelwood, is ill and cannot be with us. He has been seriously ill, but I gather he is improving, and we hope that his improvement and return to your Lordships' House will be rapid.
Like everybody else who is speaking on this question tonight, I can say without fear of contradiction that I am no expert on the subject. I shall confine myself to a number of questions. Quite honestly, I became interested in this subject only because I was lobbied on it, but I became so interested because of the lobbying that I have no hesitation in standing up and asking the Government a number of questions, some of which touch on the matters which have already been raised by the noble Earl, Lord De La Warr. I hasten to say that I am not speaking tonight as a party spokesman on science, education, astronomy or anything else; I am merely speaking because I have been very moved by the case put forward by the supporters of the Royal Greenwich Observatory at Herstmonceux, and I think that the Government need to answer a number of questions.
Therefore, in addition to the questions that the noble Earl has asked, perhaps I may ask the following. Is it true that SERC did not ask the opinion of its own space and radio board before the meeting in March, when it decided to go ahead with moving the RGO? Is it true that SERC has refused to make public the report of its own panel, chaired by its own former chairman? Is it true that it has not even let this information be seen by the Royal Astronomical Society, which one would have thought comprises people who might well have some comment to make? Is it true that SERC said that a majority preferred to move, but that in fact the truth was that the largest number preferred the observatory to stay where it was and that each of the rest had different ideas as to where the observatory should go? In other words, as the noble Earl has said, there was no clear view as to where it should go, but the largest number of people felt that it should stay where it was.

371
Are the Government aware that two-thirds of the staff have indicated that they would not move to Edinburgh, which is said to be the preferred site in SERC terms? If that is the case, are the Government aware that this team will break up and that the breakup of this team, which has co-operated so well with Spain and the Netherlands in the setting up of the Herschel telescope in La Palma, will be the greatest loss to optical astronomy that this country has known for a very long time? Is it true that the present site is the best observing site in Britain? If that is so, why is it suggested that they should move away?
Is it true that Herstmonceux is within 100 miles of seven top universities dealing with astonomical research in this country? Is it true that it has close links with the University of Sussex, just down the road, and that it has close co-operation with a number of universities up and down the country? If that is the case, is it not true that it is better than being absorbed within one university? Can the Government tell us whether it is true that, of the 31 professors approached by the Royal Astronomical Society, 17 supported the observatory at Herstmonceux staying where it is and only five were against?
Is it true that the total cost of the move is likely to be £6 million or more, and that SERC, again as the noble Earl has said, hopes to get this sale of the castle? Is it true that the castle was given to SERC by the Admiralty? Is it true that one of the possible occupants is the Ministry of Defence; and, if that is true, is it not likely that the Ministry of Defence will want the castle back on the same terms as it was given by the Admiralty in the first place—namely, free? If that is true, where is the balance of the finance?
Is it not true that the archives there are some of the most important astronomical archives in the world? Indeed, some of the oldest working records of astronomy in the world are contained in those archives. Is it not true that, if the observatory moves, those archives either will be broken up or will not be able to be kept near contemporary working documents? Is it not true that, while America and Europe are working on the next generation of optical telescopes, we must play our part if we are to stay within touch of optical astronomy? How is that going to happen if this team is broken up?
There are many questions like this that we need to have answered tonight. I believe from what I have heard, and I am happy to be corrected by the Government if they feel it is right, that if these questions are not answered then it will be true that the Royal Greenwich Observatory is set on a course of destruction. Does the Government not agree that that would not only be sad, but a piece of wanton barbarism?
Mr. Patrick Moore, who is not the greatest professional astronomer in this country but is certainly someone who has perhaps as much feeling for astronomy as anyone who is not a professional astronomer, has made it clear that it is his belief that if the RGO is moved from Herstmonceux it will be reduced to being simply a plaque on a wall in a university somewhere else in the country.
Like the noble Earl I do not believe we can throw away 300 years of excellence, 300 years of our
372
scientific history. I do hope that the Government will take note of what has been said here tonight and will advise SERC to change course when it comes to the point of decision next Thursday.
11.22 p.m.
Lord McIntosh of Haringey: My Lords, the House must be very grateful to the noble Earl, Lord De La Warr, for raising the matter, and for raising it with a persistence which encourages him to stay this late at night in order to do so. It is important that he raised it and that the matter is considered by the House now because the Science and Engineering Research Council is due to make a decision on this matter at a meeting on 18th June.
One must have some sympathy with the SERC in the difficulties that they face. Fundamentally, of course, its problem is one of resources, not just for astronomy but for all the scientific and engineering subjects under its control. When it looks at astronomy it must be aware there have been many changes since Herstmonceux was set up and the observatory moved from Greenwich in 1948. The most important of all is that first-hand observation itself is no longer as dependent on a location in this country as was the case many years ago. The atmosphere of this country, quite apart from improvements in clean air in London over the past 40 years, has never been as good as it is in other parts of the world. The resources being devoted to La Palma in the Canaries and to observatories in California and Australia are evidence of that. If our fundamental effort in observational astronomy is to be in other parts of the world, it does not really matter very much if it is at Herstmonceux or somewhere else. It is also true, as we know from a Question in the House I think a few weeks ago, that the significance of the time signal is now somewhat psychological rather than practical, and the fact that Herstmonceux is on the meridian is not of the importance it was some years ago.
I have listened carefully to the noble Earl, Lord De La Warr, and to the noble Lord, Lord Tordoff, but it has to be said that there has been conflicting evidence from the astronomical community. Yes, it is true that there has been no majority for any particular change, but there has not been a majority for Herstmonceux staying where it is, and those of us who are concerned with regional development may well say that devolution outside the South-East of England is not necessarily a bad thing in planning terms if other things are equal.
Then again there is the issue of separation from universities or inclusion in universities. I do see the argument that an independent research institution can successfully collaborate with a number of universities and many of the universities concerned are in the region of Herstmonceux, but it has been the experience in many scientific disciplines that the isolation of a particular subject from a university, from an academic community with a wide range of disciplines and subjects, is not necessarily the best way of pursuing an academic discipline. In all these matters I start with some sympathy for the Science and Engineering Research Council, and some doubts about the case put by the noble Earl, Lord De La Warr, and the noble Lord, Lord Tordoff.

373
However, having said all those things, I have much greater doubt first about the procedures which the SERC has adopted in coming to this conclusion, and secondly about the extent to which it has taken account of the wider considerations which ought to be taken into account in reaching a decision. It seems that the procedures adopted have been grossly inadequate. Noble Lords have already referred to the fact that the Kingman Report has not been made available even to those most closely concerned, let alone to the public.
One must echo the direct questions of the noble Lord, Lord Tordoff. Why was the report not available to the Royal Astronomical Society? Why was it not made available to the local councils in Sussex? Why was there no consultation with the Astronomy, Space, and Radio Board? Above all, why was there no adequate taking of the views of the staff of the Royal Greenwich Observatory? That must be, in management terms, the worst failure of the Science and Engineering Research Council in the way it went about this matter.
The question has been raised of the valuation of the castle and whether there is any real likelihood of its sale resulting in additional funds to the SERC. Unless that issue is firmly resolved—and it ought to be resolved by the Government in answer to this Question tonight—the SERC is in danger of making a decision on totally inadequate evidence and in danger of making a wrong decision. Let nobody be in any doubt of the seriousness of the decision with which we are concerned.
It is not just a matter of the future of the staff there. Staff in academic disciplines come and go, but in a discipline such as astronomy where there is such a concentration of staff at an observatory, and where the dispersion of other staff among different universities is not going to be dramatically changed, the break up of the largest single group of professionals and scientists, which would happen if a significant number of them refused to go to any new location, would be a tragedy. Adquate attention does not appear to have been paid to that possibility.
Then there is the whole question of education. An independent observatory such as that at Herstmonceux has the opportunity, and takes the opportunity, of participating in the educational aspects of astronomy. Astronomy is one of those subjects which is immediately appealing to young people, and the open days that the RGO has and the visits that are available to the castle and the astronomical exhibition are taken up by many thousands of people a year and have a great value. As the noble Earl said, it is doubtful whether they could continue in the same way if the RGO was to be subsumed within a university campus which is not normally a focus of outside visits.
Above all, we have here a history of 311 years of a public observatory in this country. It was on the same site for nearly 300 years at Greenwich and it has been on the second site for nearly 40 years in Herstmonceux. There has to be a very good case made out not just financially but also in scientific terms for such a change as that which is proposed at the moment without the clear consent and agreement of the scientific and astronomical community and without
374
the arguments being laid open before the public and before those in particular who are specifically involved with the decision.
If it is the case that the only motivation behind the consideration which is now being given by the SERC to this move is a question of funding, and if that is the responsibility of the inadequacy of the Government's grant to the Science and Engineering Research Council, then it is the Government's responsibility to see to it that a wrong decision which would reverberate over the years is not taken on such inadequate grounds, on such secret grounds, on such grounds that are lacking in consultation.
I can do no more than say that unless the Government have adequate answers to the questions which have been put already by noble Lords, then the Government have a very severe responsibility if a wrong decision is taken now.
11.31 p.m.
The Earl of Swinton: My Lords, even at this late hour of the night the House is grateful to my noble friend for raising this topic, which has aroused a significant amount of public debate, and some of it not totally well informed. I should also like to join other noble Lords and my noble friend in wishing my noble friend Lord Chelwood, who put down the original Question, a speedy recovery. We hope to see him back here very soon.
The Royal Greenwich Observatory is a component part of the Science and Engineering Research Council, and the council has the responsibility for ensuring that it functions in the most effective manner and serves the astronomy community in United Kingdom universities to the best of its ability. This is subject only to certain requirements to obtain prior approval from the Department of Education and Science to large capital expenditure and to retaining funds obtained from the sale of capital assets for use elsewhere. My right honourable friend the Secretary of State for Education and Science has final responsibility to Parliament for the research councils, but there is a long-standing practice over many years, observed by governments of both complexions, not to overturn a decision taken by a council on scientific grounds. The decision on the future of the RGO would appear to fall firmly into that category, although the council has yet to take a final decision on its future.
The council will consider the proposals further at its June meeting, as noble Lords have said, and hence this debate is timely since I am sure that the council will take into account the points that have been raised tonight. I think that in view of the pleas for the retention of our scientific heritage expressed tonight it is worth outlining the recent history of the Royal Greenwich Observatory and the situation that has led to the present decision in principle by the council.
As my noble friend and the noble Lords, Lord Tordoff and Lord McIntosh, said, the observatory has had a long and eminent record. The figure of 300 years was mentioned. That 300 years covered the time when it was at its original site at Greenwich before it moved to Herstmonceux in 1948 to take advantage of the clearer Sussex sky and the much lower background illumination. Its beautiful historic setting and the

375
Victorian telescopes in the equatorial group, which now houses the new astronomy exhibition, give the observatory a misleading air of permanence.
The success of the move to Herstmonceux was, however, relatively short-lived so far as professional observational astronomy is concerned, because, although it is, as one noble Lord said, one of the best locations in the UK, there is substantial cloud cover and strong background illumination from Eastbourne. As the noble Lord, Lord McIntosh of Haringey, said, for these reasons in the last few years the large Isaac Newton telescope has been moved to the island of La Palma, which I understand has the best atmospheric conditions for astronomical observations in the northern hemisphere. A second large instrument, the William Herschel telescope, is currently being constructed at this site and when this is completed in 1990 United Kingdom astronomers will have access to a comprehensive range of world class facilities provided at a cost of some £30 million. The site is widely regarded by the international community as one of the best in the world and, indeed, the observatory represents an international collaboration involving the United Kingdom, Spain, Holland, Denmark and others.
On a personal note, I had the great honour to be present when the site was opened by His Majesty the King of Spain. Thus, to a large extent, the Royal Greenwich Observatory has moved to La Palma but, to support the British community's use of the La Palma telescopes and to carry out other tasks such as the Greenwich Time Service, the Nautical Almanac Office, the Satellite Laser Ranger and the maintenance of the libraries and archives, a United Kingdom base is essential.
To put the other work of the RGO in context, in 1986–87 I should perhaps say that 85 per cent. of the staff and 90 per cent. of the budget of the RGO is devoted to the support of the La Palma Observatory. Completely independently of the current consideration of the location of the RGO's UK base, the Science and Engineering Research Council had planned for a reduction of staff at the RGO after completion of the William Herschel telescope. The planned complement after 1990 will be about 125, of whom, at any one time, about 30 will be at La Palma. I understand that it is the council's view that the present support functions of the RGO—which, I repeat, occupy 85 per cent. of the staff and 90 per cent. of the funding—will be best carried out in close cooperation either with a large university experimental astronomy group or by amalgamating the two Royal Observatories—the RGO and the Royal Observatory, Edinburgh, which supports the council's infra-red and microwave telescopes on Hawaii—to form a larger unit with a close association with the University of Edinburgh.
A second reason for proposing the move to a university is that the success of the La Palma observatory will depend to a very large extent on the way the supporting instrumentation and remote operation facilities are developed. Close association with suitable university departments would have many advantages in this respect. The three short-listed
376
sites being considered by the council at its June meeting are Cambridge, Manchester and Edinburgh.
It is thus that these two scientific and functional considerations, coupled with the council's concern over the vulnerability of the relatively small size of the RGO, and particularly its Herstmonceux headquarters, have led to the present proposals. More generally, it is perhaps worth noting that there is a growing feeling that research council institutes, especially those that support university research, should be closely associated with, although remaining distinct from, a university rather than being isolated units. Indeed, this was one of the recommendations of a working party set up by the Advisory Board for the Research Councils in 1983 to inquire into the distribution of research council resources in support of research in its own establishments in universities and elsewhere.
I have touched on the remaining activities of the RGO, all of which are secondary to its main function but nevertheless important. I understand that it is the council's view that none of these functions needs be carried out at Herstmonceux and that it will make suitable arrangement for these other scientific activities. Noble Lords have asked me a number of questions. I will do my best to answer most of them anyway, if I cannot answer them all.
All noble Lords have commented on the apparent lack of consultation by the council on this matter. I understand, however, that there have been a number of phases of consultation. First, during the period of the Kingman Working Group an open invitation to comment was issued both as a press notice and through the Royal Astronomical Society. Secondly, after the January meeting of the SERC the chairman or secretary of the council visited eight universities with significant astronomy departments, including the University of Sussex and the RGO. Finally, after the March meeting of council, when a decision was taken to consider in detail the implications of moving to one of a short list of three sites, council officers embarked on a wide-ranging consultation with the heads of all astronomy groups in UK university departments, the Royal Society, the Royal Astronomical Society and the UK's international collaborators on La Palma. Following on from this, several noble Lords referred to the fact that the Kingman Report has not been published.
This report was an interim one which set out four possible options for the council to consider further. These were in no particular order: first, the status quo; secondly, a move of the RGO to a university site; thirdly, a merger on the Edinburgh site and, fourthly, a merger on another site. The Kingman Report was considered at the January meeting of council, together with a dissenting minority report from one of its members, Sir William McCrea. Further information was requested and at the March meeting the council decided to concentrate on further investigation of a merger on the Edinburgh site and a move of the RGO to Cambridge or Manchester universties. As this was only an interim report, indicating further investigations that were required, the council decided that it would not publish it.
The noble Lord, Lord McIntosh of Haringey, asked me about staff consultation and I understand that the

377
staff side's views were put to all three council meetings; at the two that took place in January and March, and further ones were being put forward in June—
Lord Tordoff: My Lords, I wonder whether the noble Earl would possibly be good enough to answer the question that I asked him about the Kingman Report; namely, is it not the case that the largest number of people actually took the view that the status quo was what was preferred, and that the other options were split widely among the other people?
The Earl of Swinton: My Lords, that must have been a decision taken by the SERC at their meeting. I am afraid I do not know the answer to that.
The noble Lord asked me about the University of Sussex and the relationship with the RGO. I can confirm that there has been fruitful co-operation between the RGO and the Astronomy Group at the University of Sussex. The council would not wish in any way to belittle the mutual benefit of this interaction over the last 15 to 20 years. It would, of course, be very convenient if the present arrangements could provide the environment that the council is seeking for the RGO, and the University of Sussex was one of the universities visited by the council's chairman before the March meeting.
Unfortunately, the present level of interaction falls considerably below that sought by the council, not only with the Astronomy Group, but also with other departments with expertise of use in the development of instrumentation and remote operation facilities. In this context, it is relevant to note that the University of Sussex is still some 20 miles from the RGO and the interests of its Astronomy Group are mainly in the theoretical aspects of astronomy.
The noble Lord, Lord Tordoff, also asked me about the archives. The SERC is aware that the RGO at the Herstmonceux site houses a priceless collection of astronomy archives, as well as one of the most comprehensive collections of rare and current astronomy books. Taken together, these are a unique resource for historians of science and practising astronomers and astrophysicists. The council will ensure that they remain easily accessible and that recent work on cataloguing and conserving will continue and, hopefully, improve in any future arrangement.
Let me now turn to the question of finance. May I make it absolutely clear to the noble Lord, Lord McIntosh, that this is not a proposal in any way brought about because of the lack of funds. It is to improve support for the new telescopes at La Palma. It is anticipated that a move to either a university site or to the Royal Observatory, Edinburgh would result in some recurrent savings. Worthwhile though this would be, however, this is not the driving force for the move, which the council stresses is based on the scientific case.
The other major question is the initial capital financing of any move, which, as my noble friend Lord De La Warr pointed out, would of course have to be met mainly by the sale of the Herstmonceux estate. At its earlier consideration of the future of the RGO, the council stipulated that any move must be self-
378
financing over not more than five years. I understand that the latest costing information obtained by the council suggests that this target could be achievable for each of the short-listed sites.
My noble friend asked me about the Treasury and its attitude. The Treasury has not yet been approached because it requires a full case before it will consider whether the council can retain the proceeds of any sale. I know that the council appreciates the effect of a move from Herstmonceux on local tourism and educational opportunites. I have to say that from an overall national perspective such benefits would become available wherever the observatory was sited. Nevertheless, and despite the fact that these aspects cannot be a prime concern to the council, it is of course willing to consider ways of minimising the impact of any move, and, for example, I am delighted to tell my noble friend Lord De La Warr, has offered to separate the equatorial group of telescopes which houses the new exhibition centre from the rest of the site if any national or local group wishes to make use of them. Discussions are already in hand to this effect.
We have had some erudite contributions this evening. As I have already explained, those considerations which are of scientific timbre—and they nearly all are such—are ones that the SERC must weigh up in coming to its decision later this month, rather than ones which the Government must themselves address. I am sure that the chairman and members of the council will read the Official Report of this debate, which I know will be circulated to all of them, and will take due note of the many points made by noble Lords this evening when they come to their difficult decision on this most important matter.

Insolvency Bill [H.L.]
Reported from the Joint Committee with amendments, and recommitted to a Committee of the Whole House.

Company Directors Disqualifications Bill [H.L.]
Reported from the Joint Committee with amendments, and recommitted to a Committee of the Whole House.
House adjourned at a quarter before midnight.