HL Deb 11 June 1986 vol 476 cc261-312

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.


Clause 30 [Validity and effect of orders.]:

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 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 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 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 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 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 moved Amendment No. 138A:

Page 40, line 32, at end insert—

  1. ("(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.
  2. (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.
  3. (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 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 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 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 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.

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.
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.
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 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 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 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 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 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 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 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.

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 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 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 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 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 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.

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 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.

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.
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 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 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.

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 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 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 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 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 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 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 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 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.

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.

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.
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.
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 had given notice of his intention to move Amendment No. 144FA:

After Clause 49, insert the following new clause:

("Special Share-holder

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

The noble Lord said: 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 moved Amendment No. 144G: 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 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 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 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. 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 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.

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.

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.
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.
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 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.

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