§ House again in Committee.
§ Baroness Gardner of Parkes moved Amendment No. 26:
§ After Clause 2, insert the following new clause:
§ ("Local consumer councils.
§ —(1) It shall be the duty of the Gas Consumers' Council to appoint in accordance with a scheme under this section individuals to be local representatives of the Council in such localities as are specified in the scheme.
§ (2) It shall be the duty of such individuals representing the Council—
- (a) to be available for receiving on behalf of the Council representations from consumers or prospective consumers of gas in the locality;
- (b) to consider and investigate any matter which appears to affect the interests of gas consumers or prospective gas consumers;
- (c where action appears to them to be requisite as to any matter referred to in paragraph (b) above to make representations to the Council; and
- (d) where action appears to the Council to be requisite as to any functions assigned to it by this part to assist the Council in making representations to achieve that action in any way in which the Council considers appropriate.
§ (3) A scheme under this section—
- (a) shall have regard to the special requirements and circumstances of different regions and areas in Great Britain with, in the first instance, specific arrangements appropriate to each of the marketing regions of the successor company, and shall come into force on being approved by the Secretary of State;
- (b) may be varied from time to time by the Council and, if the variation affects the number of local representatives, by the Secretary of State;
§ (4) The scheme shall be prepared by the Gas Consumers' Council within a period of twelve months beginning with the appointed day.").
§ The noble Baroness said: I notice that for the purposes of discussion Amendment No. 26 has linked with it Amendments Nos. 26A, 27, 28 and 28A. I make clear that those other amendments are not my amendments, and I shall not be supporting them.
§ In looking at my Amendment No. 26 I am surprised to see that the names of Lord Diamond and Lord Whaddon have been added to mine. I know that these noble Lords are quite within their rights to add their names, but it is the usual courtesy in your Lordships' House to ask the person who has originally put the amendment down if they have any objection, or if they wish to encourage someone adding his name. So I am surprised that neither of those noble Lords approached me nor gave me any indication that he intended to add his name to my amendment. I am all the more surprised because I sat next to Lord Whaddon at tea last Thursday. He explained to me that he was going to Poland today or yesterday (or perhaps it was last Monday he went to Poland); but we had an occasion to have a conversation, and not a word was mentioned.
§ I make clear that I have put this amendment down because of my personal experience on the North 880 Thames Gas Consumers' Council, of which I was fortunate enough to be a member for some years. I am delighted to welcome support—
§ Lord Diamond
As the noble Baroness has been kind enough to give way, and as she has accused me and my colleague of discourtesy, I should say that no discourtesy was intended. I am totally unaware of the practice to which the noble Baroness has referred. Normally it is regarded as a pleasant compliment to one's own amendment if other names are added to it, particularly from the other side of the Committee. I have never heard (I am sorry if it is my fault) of the practice that it is normal to seek the permission of the person in whose name an amendment is before adding one's own name.
§ Baroness Gardner of Parkes
I thank the noble Lord for that explanation, and of course I accept it. Had he approached me and suggested adding his name I would have done my best to discourage him, because there are so many amendments to this Bill under his name that I think it is a disincentive to have the amendment accepted. Unfortunately, throughout the course of this Bill the noble Lord has rather tried our patience in terms of time. Therefore, I do not think his name being added to it particularly helps. I am hoping that his good motives and the support of other Members of the Committee, and the fact that the amendment is good, will be sufficient in itself to persuade the Minister to accept it. I certainly accept that Lord Whaddon would never intend any discourtesy, either, but this is a point I felt I should like to make.
In moving this amendment I had thought it was a fairly simple, straightforward amendment, and a fairly small one. I was hoping that it would come up before dinner because my husband is a candidate in the local elections today and I should like to have popped off to help him rather than be kept waiting here an hour for us to resume.
The reason for the amendment is that the Bill contains no specific arrangements for local representation. The proposed new clause aims to introduce a statutory basis for genuine grassroots representation. I consider that the ad hoc arrangements presently proposed for the new council are not likely to be an effective way of achieving a sound basis for local representation.
The aims of this new clause are, first, to put the responsibiliity on the Secretary of State to appoint local representatives. That is in the first subsection. The second subsection outlines the duties of the individuals appointed. That is highly relevant because I know from the time when I was appointed that one needs to know what the responsibilities and duties are. It also gives authority to those people appointed to deal with individual complaints themselves, but to be responsible to the council. The third subsection sets out the requirement to appoint members for each of the marketing regions of the gas supplier, and ensures that the number of members cannot be altered without the approval of the Secretary of State.
That is Amendment No. 26. I hope the Minister will be able to accept that amendment in its present form. I should not be happy to add any of the other 881 amendments—Amendments Nos. 26A, 27, 28 or 28A—because in each case they take away from the simple, clear structure proposed in Amendment No. 26. Each of those other amendments is restrictive and seems to me to indicate the setting up of a vast new bureaucracy. That is something we wish to avoid. We want to retain the good of the present consumer council arrangement, but we certainly do not want to set up yet another little empire.
It is the genuinely local element of representation that I think is important. If people have a concern or a worry or feel that there is an injustice, they like to be able to know that there is someone within reach of them whom they can see, and that they can contact that person, who will come to see them and look into the problems about which they are concerned or are complaining. That is different from setting up a vast machinery whereby a whole lot of people meet in a room somewhere remote from the consumers. This would be a way of dealing with things on a local level. I hope that the Minister will accept this amendment and that the Members of the Committee will support me in it. I beg to move.
§ The Deputy Chairman of Committees (Lord Hayter)
Amendment No. 26 is to insert the new clause as set out on the Marshalled List. As an amendment to that, Amendment No. 26A is in the name of Lord Diamond.
Lord Diamond moved, as an amendment to Amendment No. 26, Amendment No. 26A.
In subsection (1), after second ("Council") insert ("established")
§ The noble Lord said: I listened carefully to what the noble Baroness said and followed her argument. Her amendment would be clearer as well as stronger if the word "established" were to be inserted at the place indicated, so as to show that the local representatives, as they are described here, would, as she has said, be available to local consumers, because they would be established in the locality and therefore have a place, an address and telephone number at which they could be contacted. There is no point in having them there if they cannot be contacted. This amendment was put down partly to suggest to the Committee that the spirit of this amendment would be improved by adding the word "established". Secondly, it was put down to clarify—putting down amendments is a normal method of seeking clarification—the intentions of the noble Baroness.
§ Amendment No. 27 really concerns the same point. I need do more than mention that. I am not moving that at the moment. Amendment No. 28 is a paving amendment. Amendment No. 28A is suggesting that, beginning with the appointed day, there should be a 3-month period instead of a 12-month period (which is a quite separate point) for the preparation by the Gas Consumers Council of the scheme. Twelve months to prepare a scheme! It is not 12 months to prepare and implement a scheme but 12 months merely to prepare it. If it takes 12 months to prepare it and then you have to seek to implement it and find the people, there is bound to be an enormous delay in getting the scheme going.
§ I thought that the noble Baroness would therefore prefer, in as much as we are only talking about the 882 preparation of a scheme, that the Gas Consumers Council should be invited to prepare its scheme within a period of three months. Surely that gives it ample time to prepare it. Then after that, and after getting whatever improvement is provided in the amendment of the noble Baroness, to get it implemented in the normal way would take a good deal of time too. I hope that with those explanations the Committee will find these amendments an improvement. I beg to move.
§ Lord Stoddart of Swindon
Although I did not add my name (and neither did any of my colleagues) to the amendment of the noble Baroness, we were in fact sorely tempted. As a matter of fact, at Report stage in the House of Commons the Labour Party moved a new clause in practically identical terms to this. It was new Clause 6. Therefore, as I said when I spoke to Amendment No. 19, I consider this amendment to be complementary (or it would have been complementary) to my Amendment No. 19 et al had that amendment been carried. But it cannot be complementary any longer because it was not carried.
Therefore, we have to consider the matter on its own or at least in conjunction with the concession which was given or indicated by the Minister in relation to Amendment No. 20 by the noble Baroness, Lady Macleod of Borve. What this amendment seeks to do is to ensure that there is local representation, that there are local people to whom the general public can turn if they are in difficulties. There is no great formality about it, so far as I can see, but it establishes this principle that we believe that local representation is good; that local people should be involved; that they will assist the consumers locally and in so doing will also assist the National Gas Consumers Council itself. Therefore, I think it is an amendment which should be supported.
As a matter of fact, I believe that it probably would be improved—I think it would make it rather tighter and more helpful—if the amendment which was proposed by the noble Lord, Lord Diamond, were accepted. I think it would improve it, but even if that was not accepted I believe that the amendment would at least go some little way towards what we were seeking to achieve earlier on in Amendments Nos. 19, 21 and 29.
We shall certainly support the amendment and I shall be interested to hear, as will all of us, what the noble Lord, Lord Belstead, has to say. He has been in an expansive mood today. He has been quite kind. The atmosphere in the Committee today has been quite different from the atmosphere in the first two days. I am glad of that and I believe that the noble Lord, Lord Belstead, will be very glad of it. He will improve the atmosphere very much if he gives a favourable reply in relation to the amendment of the noble Baroness, Lady Gardner of Parkes. That would really make us feel that we are getting somewhere and that the noble Lord was listening very closely to what we were saying.
§ 8.15 p.m.
§ Lord Sanderson of Bowden
I too think that on this particular amendment we ought to look very closely at what the noble Baroness, Lady Gardner of Parkes, is getting at. I come again to the evidence given in the 883 Select Committee in the other place by the chairman of the Gas Consumers Council. Here, I think we are very interested to see that, though perhaps the wording of the amendment is not in line with what Miss Sheila Black said then, she said:We would like there to be available some advisers to the local commissioner, commissars"—I did not like that word—or whatever. He should be able to draw on his own advisers. They might have legal experience, accounting experience, special consumer knowledge".I think that at this stage we ought to ask the noble Lord the Minister to take this back, to have a look at the wording of the noble Baroness's amendment, to realise that in this Chamber at any rate there is a very strong reason for believing that regional interests are important and ought to be recognised. Although we are totally against any structure that is not conducive to the consumer interest per se just because it is a structure, we want to look closely at making sure the consumers are properly catered for. I think that was recognised earlier today. We talked about the possibility of a change in the Gas Consumers Council set-up. I think that this particular area of regional considerations with proper advisers to the regional representative ought to be looked at carefully and perhaps, after further consultation, the Government may think there is some merit in this particular amendment.
§ Viscount Hanworth
Throughout this Bill, what we are really concerned with is trying to protect the consumer. One has the horrid feeling that this is going to be a very difficult job. Of course, one also realises that, on the other side of the coin, the Government do not want to frighten off anybody who is taking over the gas industry by producing anything which may in the end produce difficulties for them commercially. That, I think, puts the situation fairly. I am sure that the Government really want to protect the consumer but we are not convinced that there are sufficient provisions in this Bill to make sure that that will happen.
I think that this amendment is one of the efforts to put more in the Bill to ensure that this angle of consumer protection will be thought about throughout and cannot easily be avoided. Therefore, I would say that although the Government may not accept this amendment as it stands, once again they ought to consider how much they could put in the Bill with merit and in fact convince us that they are really concerned for the consumer problems.
§ Lord Belstead
I am grateful to my noble friend Lady Gardner for tabling this new clause because it undoubtedly has given us an opportunity to have a quite wide-ranging but short debate on the way that the new consumers council will be represented at local level. I can assure my noble friend that we share the same aim. We are committed to the formation of a new Gas Consumers Council in a manner which will enable it to carry out its work in the most practical way possible to ensure full protection of consumers' interests.
884 I would ask the noble Viscount, Lord Hanworth, to bear in mind that under the Bill as drafted the new Gas Consumers Council will I think I am right in saying, not be excluded from carrying out any of the functions undertaken by the present National Gas Consumers Council. Indeed, with the addition of Clause 33, which is still some way off, the extra functions which are explicitly written on to the face of the Bill for the new Gas Consumers Council so far as appliances and so on are concerned act as an assurance that consumer affairs will be carefully looked after by this Bill.
Coming back to the amendment, certainly we fully accept that there must be some effective local presence in order to take up complaints at the grass roots level and to keep in close touch with the views and needs of consumers. It means that the difference between those who support this amendment and the Government is not a case of whether, but of how. I made clear on behalf of the Government at Second Reading that arrangements are now being made to ensure that there will continue to be a council office in each British Gas region, with slightly different arrangements in London and the South-East area, to which I referred earlier today. I should like to give an assurance that a consumer representative will be appointed from each British Gas region as a member of the full council, to work with the office staff. Indeed, five members have already been designated in addition to the new chairman-designate of the new council, Sheila Black, and they have also formed an organising committee to ensure a smooth change-over to the new council.
One question which I know this committee is examining in detail at the present time is that of local representation. This is a matter on which they propose to consult widely. Different views have been expressed by the existing regional councils and by individuals on what arrangements at local level would be best to ensure that the new body remains closely in touch with local opinion and can deal efficiently with local problems. I understand that these views and those of the organising committee are to be discussed this month by the National Gas Consumers Council, on which the chairmen of all the regional councils sit. I understand the meeting will be entirely devoted to this important subject. It is against the background of this advice that will be coming up from the existing regional councils and the national council that the initial decisions on the structure of local representation, I think, really ought to be made.
This is perhaps where I part company with some of your Lordships, because the Government believe that we really ought to give the responsibility to the new Gas Consumers Council, and particularly to the members appointed from each of the regions to make particular arrangements for effective local communication and to adapt those arrangements to meet changing circumstances in the light of the needs of each particular region. As I have explained, they will be doing that in the light of what the existing national council and its regional councils have to say.
The new council which is to be set up already has duties and functions under this Bill. It is clear that, as consumer representatives, they can carry out their role only if they maintain effective channels of communication with local consumers. My noble 885 friend Lord Sandys, several hours ago now, reminded us that in paragraph 4 of Schedule 2 the Bill gives the new council a wide power,to do anything which is calculated to facilitate, or is incidental or conducive to, the performance of any of its functions under this Act".We have therefore given the new council power to go with the responsibility to decide how local representation ought to be worked out. For these reasons the Bill does not seek to spell out a specific local structure.
I should like, if I may, to turn just for a moment to the amendments in the names of the noble Lords, Lord Diamond and Lord Whaddon. I have made it clear that, at this stage at any rate. I cannot accept the amendment of my noble friend Lady Gardner because we feel that it is the new Gas Consumers Council, in the light of advice coming from the old council and the regional councils, which ought to make up its mind on how best to organise local representation—and of course this amendment would lay down a structure.
These amendments, of course, are attached to Amendment No. 26. I hope I am not being discourteous when I say that if I do not wish to accept, on behalf of the Government, Amendment No. 26, therefore I do not think I ought to go into too much detail over the noble Lords' amendments. But may I say that I would not see any difficulty, if Amendment No. 26 were to be passed, with Amendment No. 26A; that is declaratory, and clear drafting. I do not think I would see much difficulty with Amendment No. 27 either. It is the intention that offices will be established; I have talked about this at some length previously and so I will not weary the Committeee with it again.
As regards Amendment No. 28, the noble Lord, Lord Diamond, will appreciate from my earlier remarks that I share his view that local representations should be the responsibility of the council and not that of the Secretary of State directly. The noble Lords, Lord Diamond and Lord Whaddon, have also suggested that the Gas Consumers Council should be obliged to complete the preparation of the proposed local scheme within three, rather than 12, months, as proposed by my noble friend. That is the last of the noble Lords' associated amendments.
I should like to assure the Committee that we intend to have the local offices of the new council fully in being from the day the British Gas authorisation comes into force on the appointed day. The establishment of further contracts with volunteers and local organisations and expertise will be a matter for the regional council representatives and the council itself. I am sure they will want to make initial contacts as soon as possible. I think that imposing a three months' deadline might lead to difficulties, but I believe that it is going to be perfectly possible to see that there is no gap in the arrangements; but that is harking back to a previous amendment of the noble Lord's.
Finally, coming back to my noble friend's amendment, I should like to say that all your Lordships have expressed yourselves in favour of it in one way or another, even though my noble friend did not exactly invite your Lordships to attach your names to it. My noble friend Lord Sanderson said in round terms that he thought the Government ought to take 886 the amendment away and look at it. I think that is what I ought to do. When a Government spokesman finds himself in a position where he says, as I did, that it is our view that it is right that local representation should be worked out, the least such a spokesman can do, on behalf of the Government, is to say, as I do, that I should like to take the matter away and read what has been said by your Lordships in this debate.
However, I would ask your Lordships, on your side, even though you may not agree with what the Government are saying on this particular point, to bear in mind that we are genuinely concerned—not on ideological grounds but genuinely concerned—about putting into the Bill a structure which quite soon the new Gas Consumers Council, in the light of advice which it will receive from its predecessors, may feel would not be quite the right judgment to take. We shall all know more in a few weeks' time after the meeting which is taking place this month. I would ask your Lordships to let me take the amendment away and think about it again on Report.
§ 8.30 p.m.
§ Lord Williams of Elvel
I am grateful to the noble Minister for his response to this amendment. Before accepting his offer to take this away so that it max be further studied by the Government, perhaps I may refer him to Notes on Clauses and in particular to the comment on subsection (3). Perhaps I may quote it verbatim. It refers to Clause 2(3) and says:This requirement is designed to reflect the need for a proper account to be taken of the views of gas consumers in different parts of Great Britain".As I understand the noble Lord there is no dispute between us. All sides of the Committee agree on this particular question.
The Notes on Clauses then go on:The requirement follows current practice in relation to the Regional Gas Consumers' Councils and is logical given that complaints arise at local level".It seems to me that it is logical if that is the case, as the Notes on Clauses say, that the Government should consider whether the amendment of the noble Baroness, Lady Gardner, is not the minimal amendment that satisfies the logic in their own Notes on Clauses. I hope that when the noble Lord agrees to take the amendment away and look at it he will do so in the light of the logic of the Notes on Clauses which the Government themselves have provided.
Secondly, may I just refer very briefly to the evidence given by Miss Sheila Black to the Select Committee on Energy? I am glad that the noble Lord, Lord Boyd-Carpenter, is not in his place because I am sure his blood pressure would rise if I were to mention that Miss Sheila Black was a member of the Price Commission, although she was a member of the Price Commission under the aegis of my predecessor as chairman who was, of course, the noble Lord, Lord Cockfield.
Miss Sheila Black is a very distinguished authority on consumer affairs; but I really have to press on the Government the argument that I think the noble Lord, Lord Diamond, used early on: that a chairman or a chairman-designate of a national council is not really very interested in having very strong regional representation—"She would say that, wouldn't she?"
887 However, I think that the noble Lord, Lord Sanderson, was right in drawing attention to the fact that even the chairman-designate of the national council pressed an arrangement along the lines of the amendment moved by the noble Baroness, Lady Gardner. I hope very much that the noble Lord will give us the assurance that, in taking away the amendment and looking at it, he will look at it in a constructive manner, in the logic of the Notes on Clauses and in the constructive manner which I think the chairman-designate of the Gas Consumers' Council would wish.
§ Lord Belstead
The noble Lord has used a device which at one and the same time I find appealing but highly irritating. The noble Lord has of course picked out from evidence which has been given in the Select Committee the part that he likes and agrees with; and the part that he does not like he says he does not agree with and is suspicious of.
Nonetheless, the noble Lord is onto quite a good point in stating that the chairman designate of the new Gas Consumers' Council gave evidence in the sense that there was need to think in a constructive way about local representation, and it is precisely this point which my noble friend Lord Sanderson picked up in asking the Government to look again at the amendment. I shall try to do so constructively.
§ Baroness Gardner of Parkes
We have had an interesting reply from my noble friend the Minister. I cannot quite decide whether I am satisfied with it, because when he started off by saying that it was a case not of whether to have it but of how to have it, I was very pleased. I thought it was only a matter of looking at a few minor words and sorting our something between us. But then when he went on to say that there was no need for the present National Gas Consumers Council to consult widely, I wondered how widely that was and how long it meant.
I was hoping that the meeting to which he referred would take place very soon, so that we could have a more definite decision before we get to the next stage of the Bill. But it seems to me from what he said that he, at least, concedes the principle of this local representation and that the main difference between us is whether the Gas Consumers' Council or the Secretary of State makes these appointments. That seems to me to be one of the essential differences between us.
I am hoping that between now and the next stage we shall be able to persuade my noble friend the Minister that the way it is put in my amendment is desirable. I am willing to accept any tidying up of words or anything which makes the amendment better or more efficient; but the principle of it is something that we must follow. At this stage, I shall happily withdraw the amendment this evening, in the belief—I have great faith in the Minister—that he will do something between now and the next stage. If not, I give him due warning that I shall be back again.
§ Lord Diamond
I think that the amendment before the Committee at the moment is an amendment to Amendment No. 26; that is to say, Amendment 888 No. 26A which is in my name. Therefore it is appropriate that I should delay the Committee again for a moment or two first to say that we are very grateful to the noble Baroness, Lady Gardner of Parkes, for putting down the amendment; secondly, to say that we very much appreciate her strong attitude towards it; and, thirdly—and equally importantly—to say that it would be churlish of anybody on this side not to recognise that the Minister has understood very fully what we are driving at, and has made a number of statements (which are wholly in line with what we are seeking) as to the ultimate purpose. When I say "we" I refer to the fact that my noble friend Lord Whaddon and I both have our names to the amendment. Therefore, we very much hope that at the end of the day we shall have a totally satisfactory clause in the Bill covering what is genuinely wanted, both by those who have spoken in the debate and by the new council which is considering the matter at the moment.
I was wondering whether the noble Lord the Minister could use his best offices to try to persuade the council to have its recommendations available by the time we reach the Report stage. It would be a pity if we had to go through the same process at Report stage of not knowing what the Government were going to do and having to leave it over until the following stage of Third Reading. So I very much hope that we shall be in a position to know much more precisely what the Government have said. I am most grateful for the indication that has been given and for the understanding. I beg leave to withdraw Amendment No. 26A.
§ Amendment to the amendment, by leave, withdrawn.
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 27 to 29 not moved.]
§ Schedule 2 [Gas Consumers' Council]:
§ [Amendment No. 30 not moved.]
§ Lord Stoddart of Swindon moved Amendment No. 30A:
Page 65, line 20, at end insert—
("(1A) Any contract of employment with either the National Gas Consumers' Council or a Regional Gas Consumers' Council in force immediately before the transfer date shall become a contract of employment with the Gas Consumers' Council, on the transfer date, upon the same terms and conditions of the said contract of employment. The rights and liabilities of the National Gas Consumers' Council and the Regional Gas Consumers' Council under any agreement or arrangement for the payment of pensions, allowances or gratuities shall be vested in the Gas Consumers' Council upon the transfer date and accordingly any period of employment with the National Gas Consumers' Council or a Regional Gas Consumers' Council shall count for all purposes as a period of employment with the Council.
(1B) Access to the pension scheme of the public gas supplier will be retained following transfer of undertakings.").
§ The noble Lord said: I shall be very brief about this amendment which is really asking for information. It has been put down because we are a little concerned about the position of people employed by the present National Gas Consumers Council and the regional councils. We know that there will be considerable 889 upheaval following the passing of this Bill. Large-scale redundancies will occur and conditions of service will be considerably altered. There seem to be no proper arrangements for the transfer of staff from the present consumers organisations to the new Gas Consumers Council, nor for those numbering, I think, about 100 who are to be made redundant. Can the noble Lord say whether there is any knowledge of the exact terms of the severance arrangements? We are entitled to know that and the staff are entitled to know that. Also, I understand that staff transferred will be employed under Civil Service arrangements; but it is not clear to me what this means in terms of alterations to salaries, conditions of service and pension arrangements.
§ At present there is an exact correlation between conditions of service of employees of British Gas and those of the National Gas Consumers Council and the regional gas consumers councils, but after vesting day all this will change and employees of the National Gas Consumers Council will become civil servants. Can we have the assurance that the transferred employee will be no worse off? What arrangements will there be to safeguard the conditions of existing employees? What discussions are taking place with the relevant trade unions? Are there any outstanding points of disagreement at the moment?
§ On the question of pensions, can the noble Lord say what is to happen? Will employees have the choice of whether to transfer their existing benefits and rights to the Civil Service scheme, or will these be compulsorily transferred? If existing rights and benefits are to be frozen, under what conditions will they be frozen—at existing salary levels or dynamised to salary as well as cost of living?
§ I say that advisedly, because I happen to be a member of the parliamentary pensions fund. My pension will be frozen at the level of 1983, when I ceased to be a Member of the House of Commons. All I shall get in enhancement is the cost of living; it will have nothing to do with salary. That will make a considerable difference to the pension which I otherwise would have had, had I been able to remain a Member of another place. That really is important. Is it to be at existing salary levels or dynamised to salary as well as cost of living? I should like to know that.
§ I should not like the employees of the National Gas Consumers Council or anybody else to be treated in the way that Members of Parliament are treated. I hope that they will be treated much better than that. All those who have served in the House of Commons will agree with me. I do not want to delay the Committee any longer, but I hope that the Minister can give me some assurances on these points.
§ Lord Sanderson of Bowden
I should like to draw to the attention of the Committee just one point on this amendment and ask whether the noble Lord the Minister has any clearer guidance for us on this matter. It concerns those who will continue in employment, because as I understand it the whole thing will stop and then start again and people will be taken on. I noticed that it was discussed at great length in another place. The Under-Secretary of State there said that he hoped that those currently employed will have the best possible chance of trying for the new jobs available. I 890 am probing whether that can be taken any further and whether the Minister can give us any further assurances on that particular point.
§ 8.45 p.m.
§ Lord Belstead
I recognise the concern that lies behind the amendment moved by the noble Lord, Lord Stoddart, and the importance which noble Lords opposite attach to protecting the interests of those presently working in the gas consumers councils is fully acknowledged by the Government; and clearly, from the intervention of my noble friend Lord Sanderson, he is also concerned with this matter.
The Government are also anxious that the necessary changes arising out of the Bill should as far as possible not impact adversely on those who have given such excellent service in the past. However, I ask noble Lords to acknowledge that there is some scope for rationalisation, improvement and streamlining of the exising structure, the net effect of which will be to offer a more effective service to the consumer, whose interests, after all, these bodies must ultimately reflect.
It is the Government's policy to standardise the terms and conditions of employment of non-departmental public bodies, such as the new consumer council will be, on terms which are analogous to those in the Civil Service. So my first answer to the noble Lord, Lord Stoddart, is that terms and conditons of employment for the future for the new gas consumers council when the Bill becomes law will be on the level of the Civil Service.
As has been made clear in another place, we are taking the opportunity as the occasions arise to pursue this policy, which was begun two years ago with the London Regional Transport Act 1984 and the creation of the London Regional Passenger Committee, and to extend the rationalisation to the consumer body for the gas industry. I say this because the tasks which consumer councils perform and the responsibilities with which they are charged are much more akin to those of the Civil Service than the industry over which the consumer bodies have an oversight, whether that industry be in the public sector or in the private sector.
The new consumer council for gas will be a strong new public body for protecting the public interest in this important area. At this point perhaps I may pay tribute to the excellent service which has been given by the staffs of the current councils. It is, I regret, going to be necessary for some staff to be made redundant as the change in terms and conditions of service demands this. It will be open to existing employees to apply for jobs with the new council, and they will of course receive full compensation payments on terms which are analogous to the British Gas redundancy scheme.
My noble friend Lord Sanderson asked whether the arrangements for existing staff would be favourable so far as getting jobs in the new Gas Users Council is concerned. All the existing staff will be or have been informed about new posts, and proper arrangements have been made in this way, without giving a special position to existing staff. I am however glad to be able to say that whereas the forecast for the numbers of staff in the Gas Consumers Council when the Bill was before another place in Committee was about 50, my 891 advice is that there are now likely to be a starting number of about 75 staff in the Gas Consumers Council, and so the opportunities for employment in the new council will be the more. It is clearly a very relevant consideration that staff of the existing councils will be experienced in dealing with gas consumers and their complaints, and that alone will obviously give a current employee who wishes to apply for employment with the new council that slight advantage.
The noble Lord, Lord Stoddart, asked me about pensions. It would not be appropriate for those re-employed by the new council to stay with the British Gas pension fund. The purpose of the change, as I have explained, is for employees of the new council to be employed on terms analogous to those in the Civil Service. This will include their membership of a pensions scheme analogous to that of the Civil Service. Current employees re-employed by the new council will be able to freeze their existing pension within the British Gas scheme and then start afresh with the Civil Service analogous scheme, or transfer across their length of service entitlements to the Civil Service analogous scheme under the public sector transfer arrangements—whichever is more favourable to them. Perhaps I should add—and I add it simply as a matter of fact—that those who are re-employed will be receiving redundancy entitlements as well as in effect their going into jobs in the successor council.
So all is not perhaps as difficult as the noble Lord, Lord Stoddart, may have felt in putting down his amendment. Nonetheless, there are some difficulties with regard to redundancies, and I have not shirked having to say that that is the case. I hope I have given the Committee as much detail as possible in answer to this amendment.
§ Baroness Seear
May I ask the noble Lord the Minister whether "analogous to" is bureaucratese for "the same as", or is he implying that there is in fact some difference?
§ Lord Belstead
It is supposed to be the same, but one has to look at the small print to see whether it is exactly the same, hence the use of the word "analogous".
§ Baroness Macleod of Borve
Just for clarification, may I ask my noble friend the Minister whether, now that the employees are to be civil servants, the Department of Trade and Industry will be their employers? If not, will it be the Department of Energy, as it was in my time?
§ Lord Belstead
No, the sponsoring department for the consumers council will be the Department of Trade and Industry, and the relevant Minister is my right honourable friend the Secretary of State for Trade and Industry.
§ Lord Stoddart of Swindon
I thank the noble Lord for that information. Clearly this is a complicated matter and I shall want to read what the Minister has said. He did not answer this question, but I take it that discussions are continuing with the trade unions about 892 those matters. I hope that they are. No doubt the trade unions will read the Hansard report of our debate as well. I should like to consider what the noble Lord has said.
I have one further point to make. At present the staff of the consumers council are not subject to the Official Secrets Act. Will they become subject to that Act when they become civil servants? If so, how does that square with their role as consumer representatives wanting to inform consumers about matters that might put them outside the Official Secrets Act? The Minister might like to consider that point.
§ Lord Belstead
I regret to say that I cannot answer that skilful and difficult question, but I shall write to the noble Lord. I did not reply to the question that the noble Lord raised about dynamised pensions, and I am not furnished with an answer. I should like to look into that point. It is important that the noble Lord should have a reply and I shall write to him fairly swiftly on that point as well.
§ Amendment, by leave, withdrawn.
§ Lord Diamond moved Amendment No. 30B:
§ Page 65, line 26, at end insert ("other than relating to numbers").
The noble Lord said: The schedule that we are discussing states in paragraph 3(1) that,
the Council may, with the approval of the Secretary of State as to numbers and terms and conditions of service, appoint such staff as it may determine".
The council, of course, relies very largely on its staff to be able to carry out its duty of protecting the consumer both locally and nationally. It is therefore important that the council should have reasonable freedom to act in a responsible way in appointing such staff as it may determine. However, sub-paragraph (3) states that,
That consent of the Treasury shall be required for the giving by the Secretary of State of an approval for the purposes of subparagraph (1) above",
to which I have just referred. In other words, the consent of the Treasury is required as to both the numbers of staff and the terms and conditions of service.
§ I accept—and we have discussed this previously—that the terms and conditions of service are an appropriate field in which the consent of the Treasury should be obtained, particularly as these are Civil Service appointments. What I cannot accept is that the Treasury should have the responsibility of deciding because it has to determine and it has a complete power of veto. I cannot accept that the Treasury should be burdened with that power in relation to the size of the staff, the numbers, which the council, which is a responsible body appointed by the Secretary of State, may determine as necessary for its purpose.
§ I do not need to dilate further on that matter. We have discussed the same point previously. I hope that the noble Lord who has been so understanding of many of the amendments will understand the purpose of this amendment. I hope he will share my view that the council should have a reasonable opportunity of deciding the numbers without having to refer to the 893 third party, which is not in a position to be there at first hand and know as well as the council does. I beg to move.
§ Lord Belstead
The noble Lord asks that the Government recognise that he has a genuine concern that the council should be fully staffed to represent the interests of gas consumers and to deal swiftly and effectively with their complaints. I hope that I am not misrepresenting anything that the noble Lord has said in saying that such is my feeling.
I ask the noble Lord to take on board the Government's concern on behalf of those who pay their bills for gas. We are setting up a system whereby the consumers council will have the cost of running it met by British Gas and other authorised gas suppliers through annual authorisation fees. That means that members of the public using gas, and industry using gas, will be the real payers of the cost of the Gas Consumers Council. I would have thought that for that reason alone it must surely be right to have some check on the expenditure of the council or at least some oversight. That is provided by the mention of the Treasury in Schedule 2.
As has been made very clear in another place, the Government will ensure that the council has sufficient resources in terms of funding and manpower to carry out its functions effectively. If the staff of the council are to have terms and conditions of service as civil servants, I would have thought, if I may add another and rather different point, that the sub-paragraph mentioning the Treasury really does not do much more than add transparency to what are normal procedures within government, of which the noble Lord was aware many years before I ever knew about them. For those reasons I would have thought that the provision for the Treasury in Schedule 2 is not unreasonable. Indeed, I believe it is necessary to have mention of the Treasury if at the end of the day the demands made upon finance by the Gas Consumers Council come down to the payers of the gas bills.
Lord Bruce of Donington
We are much obliged to the noble Lord for his candour in mentioning a point that we shall come to at a later stage. He has brought it up much earlier: the fact that the consumer of gas will under this privatisation Bill have to pay through his gas bills for the privilege of being safeguarded. That is something that has not been made very public so far and I hope that it will be picked up.
If the Minister will refer to Schedule 2, paragraph 3, he will find in sub-paragraph (1) that,the Council may, with the approval of the Secretary of State as to numbers and terms and conditions of service, appoint such staff as it may determine".What on earth is the reason for the Treasury looking over the shoulder of the Secretary of State? It looks very much as though originally the department had a good idea, and then with the interdepartmental committees it obviously went to the Treasury and the Treasury said, "We cannot have paragraph 3(1) on its own; we must have some control over the Secretary of State". Here we are dealing essentially with a policy matter, and also a matter of method that has been dealt with by a number of noble Lords and noble Baronesses on both sides of the Committee.
894 The noble Lord has said that we can rely on the Secretary of State to make the safeguards effective. Indeed, he has brought forward many arguments. At one stage the Minister said that it was going to be demand led (shades of the common agricultural policy in Europe). He pointed out also, in a moment of considerable frankness and affability, when he gave an indication of which way his mind was moving, that in the case of Oftel the numbers had doubled in a very short time. Therefore he gave us hope.
There really is no reason why, if we have a reasonable Secretary of State—and I would assume the Secretary of State is a responsible person for the purposes of this Act anyway—he could not have been entrusted with the task, together with the council, of determining the numbers. I do not think the noble Lord is really reflecting very favourably upon his own Secretary of State, or indeed on the genuineness of his own argument when he implied earlier on that it would be demand-led.
§ 9 p.m.
§ Lord Diamond
I hesitate always, but particularly in this case, to suggest that perhaps my amendment has not been fully understood. Therefore, as it cannot be that, it must be that the amendment does not mean what I think it means. The amendment was intended to make it absolutely clear that the Treasury retains the right of approval regarding terms and conditions of service which, if I may say so, is not quite what the Minister seemed to be understanding. I hope, I repeat, that the amendment makes that absolutely clear.
What the amendment is pointing to is the adequacy of numbers being decided by the responsible body which knows how many staff it requires. It is as simple as that. It is responsible because the Secretary of State has taken on the duty of seeing that it is responsible. This responsible body comes to the conclusion that it needs X number of staff, and I think that is a sufficient safeguard for the public.
Obviously, the Treasury then are concerned with the terms and conditions of service. So I hope that on the assumption that the noble Lord the Minister has not quite fully taken that on board, and on the assumption that my amendment means what I intended it to mean, the noble Lord the Minister will give it perhaps a little further consideration.
§ Lord Belstead
If I may say so, I do not wish to pour cold water on the noble Lord's riposte. But although my reply may have been a little loose and made it seem as though I felt that the amendment was at large instead of referring only to the Treasury control over numbers, there are still the two points: first of all, that it is the consumers of gas who will be paying the costs of the new council, and of course the numbers of staff manning the council will have some effect on the total expenditure. There is that, and there is the point which perhaps I mentioned rather too quickly, but I would have thought that this paragraph gave what I call the normal transparency to procedures within the government, in that all governments' Secretaries of State have to work within the agreements of the government in which they serve for collective responsibility, including collective responsibility for finance. Hence the mention of the Treasury, referred 895 to several times in important legislation when the noble Lord was Chief Secretary to the Treasury.
§ Lord Diamond
I am sorry to delay the Committee, but of course the noble Lord the Minister is right, it was mentioned several times when I was Chief Secretary. What I am seeking to do, as I have said on previous occasions, is drawing on six long years of experience as Chief Secretary, to distinguish between those parts of the Treasury's duties which are inevitable, and therefore have to be accepted, and those parts which are not inevitable. Therefore there is no need for a Treasury Minister to irritate all his colleagues by exercising this kind of veto unnecessarily.
I want to make that distinction, and I want the Committee to move on to the current situation. Of course, it would be irresponsible of me, as the Minister has indicated, to suggest this procedure, knowing that the cost falls on the consumer, unless I had considered what the cost was. I have done my best to do that and I have been greatly assisted by the careful calculation that was made in another place by the Labour Member who was an ex-Secretary of State himself. He was moving an amendment which incorporated the establishment of a much more expensive and much wider ranging system of consumer councils, the original Labour proposal in another place. He worked this out and gave the figures to the Ministers at the committee and he was not contradicted. The total cost therefore to the average consumer, the consumer who pays £200 a year for his gas bill, is one penny over 10 years. Every 10 years, one penny is added to his bill. That is the total cost. You arrive at that figure of course because the number of customers is so enormous; the figure of 16½ million has already been referred to, and you only have to do the arithmetic to know that the consumer is far better off having the widest possible protection and having to pay for it every 10 years, with the large sum of one penny added to his bill.
So I do not think the noble Lord the Minister is on very solid ground when he accuses me of being slightly irresponsible in not thinking of the cost in advance. Of course I have thought about it; it is in my nature so to do. Therefore, I do not think that that is an argument which can hold any water at all. There is no better bargain for the tax consumer than to pay his one penny every 10 years and to get the protection that is provided in the full scheme—not the watered down scheme—of consumer councils, local councils and national councils which we have had.
So I want to ask the Minister in those circumstances whether he ought not to be prepared to consider the suggestion that is made in this amendment.
§ Lord Belstead
There is nothing between the Government and noble Lord, Lord Diamond, on what a good deal it is for the consumer to have a properly staffed and properly funded consumers council both now and in the future. Indeed, dare I say, perhaps the noble Lord, Lord Diamond, and I do not see entirely eye to eye with the noble Lord, Lord Bruce, who seems to feel that the fact that the gas consumer will have to pay, through his bills, for the new consumers council 896 is a revelation which ought to be noised far and wide because people will not like it. I believe that people will not mind this because the cost will be small and the benefits will be great.
It is difficult for me to say that I will take away the amendment and consider it because even though the noble Lord, Lord Diamond, may have had a damascene conversion as regards mentioning the Treasury in a provision of this kind, the present Treasury has had no such conversion. Therefore, I cannot accept the amendment.
§ Lord Diamond
I have to take that disappointing answer in conjunction with the many helpful replies which the Minister has given and to accept that he is not pursuing the tactic which was previously apparently being pursued of brushing aside every amendment, no matter what was its content. I must take that into account and thank the Minister for the consideration given so far. I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment Nos. 31 and 32 not moved.]
§ The Deputy Chairman of Committees (Lord Strabolgi)
Amendment No. 33 has been withdrawn and transferred.
§ [Amendment No. 33 had been withdrawn from the Marshalled List.]
§ On Question, Whether Schedule 2 shall stand part of the Bill?
§ Lord Diamond
Perhaps I may explain to the Government Front Bench that two amendments have not been moved so that a short discussion can take place on schedule stand part, this being a shorter way of dealing with the two problems.
I should like an explanation in regard to paragraph 2. This states:The Council may pay to any member such sums, whether by way of remuneration or allowances or otherwise, as the Secretary of State may with the approval of the Treasury determine".I require a reconciliation of these apparently very wide powers and the fact that these are to be Civil Service employees paid Civil Service rates of remuneration or analogous rates. Therefore, we should like to know whether there is anything hidden in the paragraph which the noble Lord the Minister would like to explain to the Committee.
The other amendment which was not moved refers to paragraph 5 which states:It shall be the duty of the Council to comply with any notice given by the Secretary of State with the approval of the Treasury requiring it to perform duties of a financial nature specified in the notice".It is not clear what the words "of a financial nature" mean. I shall be grateful if the Minister can explain.
§ Lord Brabazon of Tara
I shall be delighted to answer the query concerning paragraph 5. It merely means that the Gas Consumers Council must keep proper books, as is perfectly normal in bodies of this nature. It will ensure that the financial aims and priorities are established and that expenditure can be properly scrutinised.
897 The books of the council must be properly audited. Government guidelines are laid down for the way in which non-departmental public bodies such as the Gas Consumers Council should manage their finances, and I refer the noble Lord to a publication issued by the Cabinet Office and the Treasury called Non-Departmental Public Bodies: A Guide for Departments. I can assure the noble Lord that there is nothing sinister in this. It is merely a requirement to keep properly audited books of account.
As regards paragraph 2, this relates to members of the council and not to the staff. The staff will, of course, be under Civil Service pay. This paragraph provides for the payment of members of the council just as the chairmen of the national and regional gas consumers councils are paid today. Members who are regional representatives and the chairman will be paid salaries consistent with those of members of other statutory consumer bodies with similar responsibilities. Both these and other members will be paid a travel and subsistance allowance. It is quite in order that these payments should be determined by the Secretary of State as the members are appointed by him. I hope that clarifies those two paragraphs.
§ Lord Williams of Elvel
Can the noble Lord tell the Committee who will be the accounting officer for the Gas Consumers Council?
§ Lord Brabazon of Tara
The short answer is no, I cannot at this stage; but perhaps I may write to the noble Lord with the answer.
Lord Bruce of Donington
I should like to make a further observation on paragraph 5 for clarification. I find that the description of the kind of operations that the noble Lord has mentioned (which are purely matters of accounting, so far as I can see) such as "to perform duties of a financial nature" is a rather droll way of expressing an obligation to keep accounts.
There have been a number of references to accounts in various statutes over the years, but this is the first time that I have seen such functions described in this way. Would the noble Lord mind taking another look at this phrase, because financial duties could be legally construed as something entirely different? For example, if the council, with the approval of the Secretary of State, were able to buy or take a lease on premises, it could do that quite properly. But of course political gusts of wind often change direction, and it seems to me that paragraph 5 may give a subsequent Secretary of State the power to order the council, as a financial duty, to flog off its premises at half the price. Such things are not entirely unknown. The Government are busy flogging off things at half price all the time.
Perhaps we can take another look at the term "financial duties" to see whether, by the Report stage, we can work out something which expresses the sentiments of the noble Lord rather more accurately in terms either of management or of accounting, or whatever meets more precisely the general sentiments that he was good enough to offer the Committee in explanation.
§ Lord Brabazon of Tara
Certainly I agree to do that. I am satisfied that what I have said outlines the nature of the duties which must be performed by the Gas Consumers Council in keeping proper books and that kind of thing. I have no reason to believe that any Secretary of State could in fact order such matters as the noble Lord has described. I imagine that this particular paragraph represents standard practice, but I shall certainly check to find out and make sure that I am right in saying so.
§ Schedule 2 agreed to.
§ Clause 3 [Abolition of Corporation's special privilege]:
§ 9.15 p.m.
§ Lord Bruce of Donington moved Amendment No 34:
Page 2, line 39, at end insert—
("( ) The Secretary of State shall not make an order under subsection (1) above until it appears to him to be in the national interest to do so.").
The noble Lord said: I beg to move Amendment No. 34. I refer Members of the Committee to Clause 3 of the Bill, where it says:
As from such day as the Secretary of State may by order appoint for the purposes of this section and the following provisions of this Part (in this Act referred to as "the appointed day") the privilege with respect to the supply of gas through pipes conferred on the British Gas Corporation (in this Act referred to as "the Corporation") by section 29 of the 1972 Act shall cease to exist".
This amendment seeks to add by a separate subsection:
The Secretary of State shall not make an order under subsection (1) above until it appears to him to be in the national interest to do so".
In some ways, to introduce an amendment of this kind for the consideration of the Government is to flatter them, and I sincerely trust that they accept it in the spirit in which it is put forward because it presupposes an apprehension in the minds of the Opposition that the Government are capable of thinking in terms of the national interest. Indeed, one sincerely hopes that this may eventually be so. Anything that we on this side of the Committee can do to assist the Government in thinking occasionally in terms of the national interest will, I trust, be sincerely welcomed by them and indeed give cause for loud hand-clapping in the country at large.
§ It is already quite clear and it is indeed generally accepted among the rank and file Conservative Members in another place, and by quite a large number here, that the whole Bill is not in the national interest. It is common knowledge—and the noble Lord need not bother to deny it—that even members of the Cabinet think that the Bill is a nuisance anyway and is entirely irrelevant. There is a common consensus that the whole purpose of the Bill is merely in order to raise money so that there may be tax handouts before the next general election. We are all on common ground here. If the Government were candid, they would admit that this is the real case for the Bill.
§ Nevertheless, we now have a Bill which, as it stands, will give power in law on the appointed day for the Government by order to achieve this transformation and to cease to authorise the British Gas Corporation, 899 with its highly successful operations over the years (to which great tribute has been paid from all sides of the Committee, including the Government Benches, by way of crocodile tears) to have any authority to do anything more about gas supplied or charged for or anything else under the sun. That is the purpose of Clause 3. We assume that the appointed day will be coterminous with the transfer date referred to in Clause 49, which gives the Secretary of State the power to effect the transfer of all the assets, rights and liabilities of the corporation to the successor company.
§ That marks a great change. Control of the operation will pass from a large corporation, which is responsible through the Government to Parliament and which is generally sensitive to the public, to a private plc which, by definition, and indeed by advertisement by the government for the City of London, is responsible to nobody else but its shareholders, although it is curbed and controlled by regulating machinery set up within the legislation.
§ Time passes; time will pass even after this Committee stage. The political climate in the country may change. We shall not know until tomorrow what change there has been as a result of today's electoral activities. It is by no means certain that the right honourable Lady the Prime Minister will be in office on the appointed day. There is already open gossip in all parts of Westminster as to who her successor will be. She may decide to retire to Dulwich. That will produce a different political circumstance.
§ Hitherto the Government have operated under the notion that anything that is said by "She who must be obeyed" is automatically in the national interest. That shows how emotional chivalry can produce intellectual apathy among members of the Government. But that may not always be so. We know perfectly well that there are prominent members of the Conservative Party and of the Government in both this House and another place who cannot see the sense of turning a public monopoly into a private monopoly unless of course it was split into competitive components. Things may change and change considerably.
§ Moreover, it would not be in the public interest or even in the Government's political interest to leave uncertain for too long the time that will elapse between the operation of Clause 49 (the transfer date of the assets and liabilities to the successor company) and the date for the issue of the shares, which by that time would be held by the Government for issue on a date to be determined under Clause 57(6), I believe it is. In short, the Government may decide on those grounds alone that they ought to pause and to recoil from taking a step that is not in the national interest anyway. It is there purely to serve an electoral purpose.
§ By that time in control of the Conservative Party and the Government there may be people who have regard to the national interest and who are interested in phasing oil exploration and the pace of research and development, without leaving it to straightforward commercial considerations. Indeed, by that time a further factor may have occurred. Oil prices may have gone down even more, producing even more uncertainty. Flotation circumstances might portend very bad things happening. It is commonly agreed in 900 the City that the bull market at present obtaining cannot go on for ever. How do they know that it will be propitious to take this step?
§ We are trying to help the Government and to give them a way out should they find themselves embarrassed by a whole series of circumstances that they have not the nous to apprehend but that may occur. Say that the noble Lord gets the Bill, say that the ultimate perfection after the application of the majority applies and the Bill is made law, and then there is a pause and any of these things happens! The noble Lord at least has the opportunity of invoking the national interest that he can describe in whatever glowing political terms he may wish. He might suddenly, for the credit of his party, declare the national interest, and the whole operation could be suspended.
§ The amendment gives discretion to the Government. It is not a wrecking amendment. We are not seeking to defeat the main purposes of the Bill. We are seeking to give the Government some flexibility. If they are wise, they will retreat from a situation that might be untenable and that could involve considerable political embarrassment and place the country in even more difficulties than those that will arise as a result of the passage of the Bill.
§ Lord Gray of Contin
The noble Lord, Lord Bruce of Donington, has an interesting technique of trying to suggest that the views that he holds so passionately are shared by many noble Lords on this side. I am sorry to disillusion him. I am afraid that it is a fallacy that cannot go uncommented upon or uncorrected. The noble Lord must not suggest that there is nothing between us as to whether the Bill is necessary. My noble friends on this side are firmly convinced that the Bill is necessary. That is why it has been given wholehearted support in another place and why it is being given wholehearted support here.
This is a revising Chamber. As we go through the Bill there are occasions when noble Lords suggest ways in which they feel it might be improved. It is the purpose of this Chamber to try to argue those points and discuss various ways in which changes might improve the Bill. However, it is for the Government, any government, at the end of the day to decide whether those suggestions are credible and whether the Bill would be improved by incorporating what is proposed. I know exactly how the noble Lord feels. He repeats accusations about the reasons for the Bill so often that sometimes I feel he is trying to convince himself. He is certainly not convincing us. He is trying to convince himself.
In any event, to get down to the meat of the amendment, it seeks obviously to introduce the national interest as a criterion in the Secretary of State's decision as to whether or not to make the appointed day order under Clause 3. On the appointed day, the regulatory regime will come into force. This regime is in a number of ways better than what exists at present. It provides better protection for the consumer and also enhanced safety provisions. On and after the appointed day, the Health and Safety executive will, for example, be able to make use of more flexible safety provisions in Clause 18. It is important that these provisions should be 901 implemented at an early stage as British Gas's authorisation will take effect at the same time.
It is clearly necessary to establish public confidence in the new public gas supplier and the regulatory regime. Our aim in privatising British Gas is to create an environment where market forces can control and shape the nature of the industry within the overall framework of regulation set out in the Bill. We believe that this is where the national interest lies rather than in the development of an interventionist regime requiring reference to central government or to Parliament at every turn. Parliament will already have decided that the introduction of the new regulatory regime is in the national interest by approving the Bill. The form and content of the regulatory regime will have been fully debated both here and in another place during the passage of the Bill. The authorisation of British Gas will also have been very fully discussed and considered, and will have been granted to the corporation before the appointed day.
We are satisfied, therefore, that the national interest will have been fully explored before the Bill becomes law, and that the addition of the criterion put forward in the amendment is really unnecessary. I do not suppose I shall be able to convince the noble Lord of that, but he indicated that this was not a wrecking amendment and I have tried to persuade him that it is an unnecessary amendment. I hope that having carefully considered what I have said he might be prepared to withdraw his amendment.
§ 9.30 p.m.
§ Lord Stoddart of Swindon
I do not know whether or not my noble friend and I shall agree to withdraw the amendment because, frankly, the speech of the noble Lord which we have just heard shows a degree of complacency which the noble Lord does not usually reveal.
In this amendment—and it is a simple and reasonable amendment—we have asked that the Government should not take steps under this Bill when it becomes an Act if the national interest at that particular time is thought to militate against making an order to implement the Bill. All kinds of events can happen between now and then. We are talking about energy. We are not talking about chocolate or sweets or anything like that, but about a great national resource. We are talking about a great national resource at a time when energy sources are in very grave doubt all over the world, in every sense.
For example, we do not know at this stage what the price of oil will be. There are all kinds of rumours and views about what the oil price may be in the next few months. It may be 15 dollars a barrel or 10 dollars a barrel, and Sheikh Yamani has mentioned 5 dollars a barrel. If the price of oil reduces to 5 dollars a barrel inevitably the value of the gas fields will also decline. Under such circumstances the value of the assets will be of a quite different order than at the present time. The value of the assets will be seen as being devalued by those expected to buy them. Therefore, the Government may very well feel that this is not an appropriate time to sell because they would get only half the price that they had expected to obtain.
902 It would be in the national interest, would it not, to delay the implementation of the Bill in those circumstances? It would certainly be in the interests of the taxpayer, although it may very well not be in the interests of the Conservative Party. However, in this Committee we are not interested in the fortunes of the Conservative Party: we are interested in the good of the country and of the taxpayer generally. That is one instance when the national interest may very well demand that the implementation of this Bill is delayed.
There is then the general energy situation, which has been muddied, clouded and dirtied, if I may say so, by the nuclear accident at Chernobyl. We do not know what effect that accident will have on sources of energy or on decisions that will be made in relation to the production of energy in the future. Over the next few weeks it may very well become clear exactly which way we shall move. The Government may hold to their decision to build more nuclear power stations. In all the circumstances I believe that that would be the wrong decision. However, they may decide upon it. On the other hand, they may decide not to proceed. Indeed, public opinion may persuade them that they ought to have an advance closing programme of existing power stations. That too would have an effect not only on oil prices but also on coal prices. Inevitably that would also have an effect on gas prices. It might put them up.
If there is to be an energy shortage because of the Chernobyl accident, as there may very well be because of the perceptions of those producing and using energy, it may be in the national interest and in the Government's interest to delay the implementation of this Bill to take advantage of the higher price which the Government might receive. Then they would have more money to bribe the electorate before the next general election. I suppose that that would be in the national interest because the taxpayers would get some money back, and it would also be in the Conservative Party's interest. Therefore, I cannot understand why the Government will not accept this amendment.
It is an eminently reasonable amendment. It is about the national interest, and I hope that we are all concerned about the national interest. I hope that the noble Lord will take into account the very real points which my noble friend has made. The noble Lord knows a lot about energy; he has been in the energy field for a long time. I knew him in the other place and he was very good at energy matters. He has a good background. He must know that what I have just said in relation to energy prices and the energy scene has a relevance. Therefore, this amendment has a relevance, and I hope that he will take it seriously.
§ Lord Gray of Contin
I have listened very carefully to what the noble Lord said, and I agree with him that at present it is very difficult to make predictions in the energy field. It would be a very dangerous prediction to forecast the price of oil in six months' time. The noble Lord is correct about that. However, we have been through all this before. The price of oil can rise as quicky as it can fall; we found that in 1974 and again in 1979.
I shall not be drawn into an argument about nuclear power. No doubt in due course there will be 903 opportunities in this Chamber to discuss these points, and I believe that it would be too much of a diversion to deal with them in depth this evening. However, there is little doubt that, whatever the situation may be in world-wide terms, we in this country are extremely fortunate. We have an abundance of fossil fuel and we have a healthy nuclear power industry. The development of all those sources of energy will continue, as it will with certain of the alternative sources which are proving to be worthwhile, whereas some of those which have not been successful will no doubt be phased out. However, I do not think that that particularly relates to the amendment that we are discussing tonight.
In talking about the national interest the noble Lord, Lord Bruce of Donington, sought to specify the criterion of national interest as that the Secretary of State should consider when he acts under Clause 3 to appoint a day. I am surprised that the noble Lord seeks to take away from the Secretary of State the duties which are set out in Clause 4 of the Bill as those which should guide his action under Clause 3. Those duties are much more specific in pointing to the consumer interest than the vague phrase "national interest", which after all could be interpreted on a very wide basis. I suggest to the noble Lord that indeed I can outdo him in my advocacy of consumer interests. I do not believe that what the noble Lord seeks to do—I appreciate that the amendment is to some extent a probing amendment—adds anything to what we are already trying to do. I hope that on reflection the noble Lord will withdraw it.
Lord Bruce of Donington
I am grateful to the noble Lord. I am bound to say that I find it very difficult to visualise a situation in which, on the appointed day, the whole activities of the British Gas Corporation, about which there has been but little complaint over the past 10 years, would suddenly suffer a degree of danger in terms of safety if action were not taken immediately on the basis suggested by the noble Lord. It is completely ridiculous. The Gas Corporation (which will have its name changed but its employees will remain the same) will for some time until commercial pressures begin to press upon it do what it has been doing very successfully so far.
I am disappointed that the noble Lord has been unable to take advantage of the opportunity I afforded him of reconsidering the whole matter on the basis of the national interest. The national interest is something, to use the Government phrase, the Government ought to "keep under review" every day. All I am doing is affording them an opportunity to do so. It should be regarded by them as a neat way out of an impossible situation in which they might easily find themselves over this next three or four months, even in political let alone economic terms. If the noble Lord declines to accept my help in this matter by my giving him a perfect and honourable way out of this untenable situation, I shall confer my generosity upon him no longer and ask the leave of the Committee to withdraw the amendment.
§ Amendment by leave withdrawn.904
§ Lord Bruce of Donington moved Amendment No. 35:
Page 2, line 39, at end insert—
("( ) No order shall be made under subsection (1) above unless a draft of it has been approved by both Houses of Parliament.").
§ The noble Lord said: The noble Lord rejected the advice that I tendered him and the opportunity I gave him to save his face in certain circumstances. But now we come back to the harsh question of duty and parliamentary approval for the action that is taken. We said earlier, and I ventured to suggest to the Committee earlier when discussing the last amendment, that this was a very momentous occasion. The power under the Bill should not be exercised except in circumstances of considerable ventilation in both Houses of Parliament. This amendment provides that any order made under subsection (1) should be subject to annulment in pursuance of a resolution of either House of Parliament. I should have thought that the noble Lord would be able to agree with this immediately, appreciating the gravity of the situation that might conceivably arise. I am sure that he would not want to take a momentous step without either House of Parliament being able to consider the matter further. I beg to move.
§ 9.45 p.m.
§ Lord Diamond
I understand that it is to the convenience of the Committee that this amendment should be discussed with the following amendment, No. 35A, which is in my name and which proposes, instead of the affirmative resolution proposed by the noble Lord, Lord Bruce of Donington, who moved the amendment prior to this one, the negative form as being sightly less onerous. Let me make it absolutely clear that I would have preferred the amendment which has just been moved by the noble Lord, Lord Bruce of Donington, but the Government have given no sign that they are prepared to move in the way that we think they should and therefore this is a second but less-favoured alternative.
Perhaps I could use this opportunity to make it clear that the reason I did not support the previous amendment verbally was that there is considerable difficulty in my mind in interpreting the words "in the national interest". It is very difficult to say that the national interest is not the national interest as interpreted by the Government of the day. Therefore, if it appears to the Secretary of State to be in the national interest, then that is very little protection to those who do not share the same views.
However, as the Governnment have turned that down I am sure that they will recognise that this is, as has been said, a most important occasion. The Government are taking a most important and highly responsible step which they could regret very much if they made a mistake. I should have thought that they would have welcomed the opportunity to consult Parliament, if not in the positive way suggested by the amendment which has been moved at all events by giving Parliament the opportunity to make its views known under the negative procedure, which my more modest amendment proposes.
§ Lord Gray of Contin
I thank both noble Lords who have spoken for tabling these two similar 905 amendments. I have listened carefully to the points raised during the debate. First, it may be helpful if I explain to the Committee what is the practical effect of an order under Clause 3. The type of order is what is commonly known as a commencement order. It will indentify a particular day, called the appointed day, on which the bulk of the provisions in Part I of the Bill will come into force. Clauses 1 and 2 will come into force before the appointed day so that before that day the Director General of Gas Supply and his staff may be appointed and the Gas Consumers Council may be set up.
On the appointed day, the regulatory regime and the authorisation which will already have been granted to British Gas will come into force. Both will have been fully debated here and in another place during the passage of the Bill. The only remaining question which could be relevant to a debate on the appointed day order would be the date specified in the order. A debate would be totally inappropriate when the provisions had just been subject to the fullest scrutiny and debate in both Houses of Parliament.
Therefore, I think that making the appointed day order subject to affirmative resolution procedures—which is the effect of both amendments—is really unnecessary and probably undesirable. It would cause delay and inflexibility in introducing the new regulatory regime, which will bring real advantages to consumers, and it could also mean that the transfer of the ownership of the industry to its employees and the public at large could also be delayed. I hope that perhaps on reflection, and in view of what I have said, noble Lords of both opposition parties will agree that such a delay would be highly undesirable, and for those reasons will consider withdrawing their amendments.
§ Viscount Hanworth
I think the noble Lord simply does not realise how many of us have the gravest doubts about the privatisation of the gas industry. As one said on Second Reading, the obviously sensible course, were it not for the fact that the Government want the money for the next election, would have been to find out how things went with British Telecom. They ought not to rush into another privatisation, which is opposed by a very large number of people. What these amendments really seek to do is to say, "For goodness sake, at the last moment leave yourselves the opportunity of waiting and having more sense than rushing ahead bald-headed."
§ Lord Sanderson of Bowden
I take issue with what has just been said over the question of what is the purpose of this Bill. I have listened at great length to the noble Lord, Lord Bruce of Donington, who seems to take issue with the City on every possible occasion and to take isssue also with the views of the Conservative Party on every possible occasion. But surely one of the great advantages of this Bill is that there is wider share ownership in prospect. It may not please members of the Opposition and particularly those on the Alliance Benches, but 14 per cent. of adults now own shares; that is 6 million people. That is a great improvement on the numbers in 1976, when only 1.8 million people in this country owned shares. It may also interest the Committee to know that 900 906 employee shareholding schemes are now in operation, whereas in 1979 there were only 30.
In the context of this Bill surely we must get away from the fact—which I know the Opposition Benches long to put to us—that this is a purely money-grabbing operation on the part of the Government. My view is that wider share ownership by individuals is something that this Government ought to pursue, and pursue as fast as possible.
Lord Bruce of Donington
The noble Lord's response to the argument is one example of the increasing sensitivity of the party opposite to the irrelevance of this particular Bill. But the purpose of my rising is to ask the noble Lord a purely technical question which I am quite sure he will be able to answer immediately. Line 1 of Clause 3 says:As from such day as the Secretary of State may by order appoint".Can the noble Lord inform us whether that order will be in a form in which it can be prayed against in either House of Parliament? Will it be in the form of a statutory instrument or will it be just an order that nobody knows about? This is a purely technical query and there is no barb of any sort in it.
§ Viscount Hanworth
I cannot understand how it is possible to argue that share ownerhip is of the slightest importance, though of course in a company such as Vickers it means a lot. Shareholders have no control and they will not attend annual meetings. I think this is a complete and utter red herring.
§ Lord Gray of Contin
I always have the greatest regard for the views expressed by the noble Viscount, Lord Hanworth, who is normally very constructive and forward-looking in his attitudes. However, I must say that I am rather disappointed tonight and I am saddened that he takes such a gloomy view of what is envisaged. Perhaps I have not fully understood the policy of his party, but I thought they were in favour of wider share ownership and of encouraging those who are employed in an industry to be able to participate in shareholdings and to feel part of—
§ Lord Gray of Contin
The noble Viscount says that is a different matter, but it is not without a relationship to what we are talking about. However, the noble Viscount has his own view on that. I thought that my noble friend Lord Sanderson of Bowden really took a much more—
§ Lord Gray of Contin
Conservative view; the noble Lord has answered for me! Indeed, it is a much more Conservative view because it is the essence of what this Government have been seeking to do for seven years and what we all hope they will continue to do for another seven years.
The noble Lord, Lord Bruce, asked me about the type of order. I can tell him that there is not an order. Perhaps I may refer the noble Lord to Clause 64(2), which may be of assistance to him; it is spelt out there 907 and the answer is available to the noble Lord. I do not think I shall persuade noble Lords opposite of the folly of pursuing the amendments which they have tabled in this case. I was not persuaded by their arguments and even after a second go at those amendments I am still not persuaded. Perhaps the noble Lord will consider withdrawing the amendment.
Lord Bruce of Donington
We are most anxious to press ahead with business without undue delay and I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 35A not moved.]
§ Lord Bruce-Gardyne moved Amendment No. 36:
§ Leave out Clause 3 and insert the following new clause:
§ ("Transfer of operations of the British Gas Corporation to the private sector.
§ 3.—(1) The British Gas Corporation (referred to below in this section as the Corporation) shall submit to the Secretary of State written proposals providing for—
- (a) the disposal, in preparation for the dissolution of the Corporation, of the whole of their undertaking, with such exceptions only as may be specified in or determined in accordance with the proposals;
- (b) the disposal of the whole or any part of the undertaking, or of any particular property, rights or liabilities, of any of their subsidiaries the disposal of which appears to the Corporation to be appropriate in preparation for the dissolution of the Corporation; and
- (c) the arrangements to be made in preparation for the dissolution of the Corporation for any matter for which provision appears to the Corporation to be appropriate for the purposes of or in connection with the dissolution.
§ (2) Without prejudice to the generality of subsection (1)(c) above, the arrangements there mentioned may include provision for the making by the Corporation or any subsidiary of theirs, to persons employed by them or any such subsidiary who do not by virtue of any disposal in pursuance of the proposals fall to be treated as employed by any other person, of payments by way of compensation in respect of the loss of their employment.
§ (3) The proposals shall be submitted before the end of the period of three months beginning with the day on which this section comes into force or such further period as the Secretary of State may from time to time allow by notice in writing to the Corporation.
§ (4) In this section "the Corporation's disposal programme" means (as the case may require)—
- (a) the proposals submitted by the Corporation under this section;
- (b) those proposals as approved by the Secretary of State under subsection (7) below; or
- (c) the proposals formulated by the Secretary of State under subsection (8) below;
- (subject, in a case within paragraph (b) or (c) above, to any modifications under subsection (10) below).
§ (5) The Corporation's disposal programme shall describe—
- (a) the general approach the Corporation plan to adopt in relation to the manner in which disposals for which the programme provides are to be carried out (including the intended time-scale for major stages in implementing the programme);
- (b) the general scope and purpose of such disposals and the estimated effect at each such stage of the disposals carried out up to that time on any remaining operations of the Corporation and any of their subsidiaries;
- (c) the measures (if any) which the Corporation propose to take, for the purpose of preparing for any such disposals, by way of reorganisation of the structure or operations of the Company and any of their subsidiaries; and
- (d) the manner in which the Corporation's main objectives and duties are to be implemented in relation to the proposals included in the programme.
§ (6) Without prejudice to the generality of subsection (5)(c) above, the measures there mentioned may include the formation 908 or promotion of new subsidiaries and the reconstruction, amalgamation, dissolution or winding up of any existing subsidiaries.
§ (7) The Secretary of State may approve the Corporation's disposal programme without modifications or with such modifications as, after consultation with the Corporation, he thinks fit.
§ (8) If any proposals submitted by the Corporation under this section appear to the Secretary of State to be so defective, with respect to any matters those proposals are required in accordance with subsection (5) above to describe, as to be unsuitable for adopting (with any appropriate modifications) as a basis for carrying out the disposals mentioned in subsection (1) above the Secretary of State may, after consultation with the Corporation, formulate proposals of his own to have effect as the Corporation's disposal programme in substitution for the Corporation's proposals.
§ (9) When the Secretary of State has approved the Corporation's disposal programme or formulated proposals of his own to have effect as that programme, it shall be the duty of the Corporation to implement the programme before the end of the period of three years beginning with the day on which this section comes into force or before such date after the end of that period as may be prescribed.
§ (10) The Secretary of State may from time to time, at the request of the Corporation or of his own motion, make such modifications in the Corporation's disposal programme as, after consultation with the Corporation, he thinks fit.
§ (11) The exercise by the Secretary of State of any of his powers under the preceding provisions of this section requires the consent of the Treasury.").
§ The noble Lord said: I must admit that the more I listened to the noble Lord, Lord Bruce of Donington, and the noble Lord, Lord Diamond, the more I began to think that there may be some merits in this Bill which I have not always entirely appreciated. I must also admit that this amendment has somewhat far-reaching implications and I apologise to your Lordships for inflicting it upon you at this late hour. But although its implications are somewhat far-reaching, I venture to hope that it will commend itself to my noble friend on the Government Front Bench.
I venture to hope this essentially for three reasons. First, it is designed, I believe, to fulfil the commitments which were contained in the manifesto which the Conservative Party put to the electorate at the last election, and I just want to recall one or two brief phrases. It reads:
A company which has to satisfy its customers and compete to survive is more likely to be efficient, alert to innovation and generally accountable to the public. In the next Parliament we shall seek means of increasing competition in the gas industry".
I am making selective quotations. It goes on:
Merely to replace state monopolies by private ones would be to waste an historic opportunity".
§ Secondly, subsequent to the last election my right honourable friend the Financial Secretary to the Treasury, who is of course the Minister responsible for the privatisation programme, made a very important keynote speech to which I made reference in the Second Reading debate on this Bill. I shall not weary the Committee by repeating the quotations which I gave on that occasion, but, as I see it, the essence of the speech of my right honourable friend in another place was encapsulated in three propositions: that privatisation alone was not enough, that competition and the development of competition was essential, and that gas, among other industries, whatever else it might be, was not a natural monopoly. I venture to submit to your Lordships that this amendment 909 enables the Government to take gas out of the position of a monopoly.
§ 10 p.m.
My third reason for thinking that this, admittedly fairly major, change to the Bill will appeal to my noble friend on the Front Bench is that it is the Government's own clause. I am sure that my noble friend will immediately recognise its provenance. I just wanted to remind the Committee of what was said by my noble friend Lord Brabazon on 11th June last year in favour of this proposition. He said:
In the Government's view it is inevitable that in monopolies of this sort the operators and their staff are protected from the normal pressures which force businesses to consider what their customers want, to think of new ways of meeting that demand, and to control costs and operate efficiently … Competition is the best way of introducing pressure on the industry's costs … To make a success of the free market we have to tackle the structure of the industry, the dominance of the large public sector operators".—[Official Report, 11/6/85; cols. 1133–1134].
This was, as I am sure my noble friend will recognise, in support of precisely the proposition which is encapsulated in this amendment.
I listened with considerable interest to what the noble Lord, Lord Bruce of Donington, had to say about Clause 3. He seemed to think that it was designed to achieve the most remarkable changes. I have been reading the Notes on Clauses and they make it absolutely clear that it is not designed to achieve any changes at all—none whatsoever. The important point is the statement in the clause that,
the privilege with respect to the supply of gas through pipes conferred on the British Gas Corporation … by Section 29 of the 1972 Act shall cease to exist
is entirely invalidated in practice by the provisions of Clause 7(9) and Clause 8(5) of the Bill. They make it absolutely clear, as the Notes on Clauses make it clear, that this represents no change whatsoever from the position which was introduced by the Oil and Gas (Enterprise) Act 1982.
§ It was subsequent to the passage of that legislation that the undertakings were written into the Government's manifesto at the 1983 election. So the reality, which I must say seemed to be light years removed from the comments on Clause 3 by the noble Lord, Lord Bruce of Donington—I suspect that his reading matter must not recently have included the Notes on Clauses—is that this clause effectively makes no transition whatsoever.
§ It would be helpful to find out why the commitments that were advanced at the time of the 1983 election and subsequently for the need for genuine introduction of competition into this industry subsequently somehow got lost along the way, as I am bound to say they were somewhat when we look at the clause as it stands. I still do not feel that we have had a clear explanation about this. My right honourable friend the Secretary of State for Energy has talked about there never having been in the history of this country competing gas pipes going up an individual street. He is wrong about that historically. That is precisely what happened 130 or 140 years ago. I am not suggesting for a moment—and I do not think anyone would—that we should return to that position but that does not mean to say that the only alternative to competing supplies to the householder is to have the 910 wholesale transfer holus-bolus of Sir Denis Rooke and his monopoly into the private sector.
§ The alternative route is to take the course that was taken in the case of the National Bus Company. The clause that I am proposing this evening is designed to achieve precisely that for the British Gas Corporation; to dismantle it into its component parts so that we break up not only the monopoly role of the corporation as a supplier but also, I would venture to argue, possibly even more important, the monopoly role of the corporation as a purchaser. The more that I listen to the arguments from the Opposition Benches, the more that I feel we are living in cloud-cuckoo-land. We are presented with the appalling thought of a gas corporation that is going to rip off the consumer.
§ When I look back at the record of the gas corporation hitherto and the statements of its chairman, what worries me is not that the corporation will rip off the consumer, but that it will rip off the supplier and very probably its shareholders. Those are the people who are at risk from a corporation that seems to me, from its experience hitherto, to be dedicated to the maximisation of market share and to the acquisition of market share by vigorous underpricing on the basis of a sort of Reithian, magisterial approach to the consumer and the conviction that the corporation must know best. It is that aspect that worries me and to which, I am bound to say, we have not received a very clear response from the Government.
§ The other argument that we hear from my right honourable friend the Secretary of State for Energy is that to follow the route of the National Bus Company in breaking the British Gas Corporation into its component parts would delay the process of privatisation. I am bound to say that even if that were true—and I am not convinced that it is, because there is no evidence that it has been true in the case of the National Bus Company—it would be better to delay a little to get it right than to proceed at the maximum possible pace and get it wrong. I am bound to say also that one wonders a little about whether this autumn will be the ideal time to float a major energy utility, given the surrounding market conditions.
§ Frankly, I still feel that the real architect and manufacturer of this legislation as it stands is the chairman of the British Gas Corporation, I think that his fingerprints are all over this Bill to an extent that I find highly undesirable, both from the point of view of potential suppliers and also, I suspect, from the point of view of his potential shareholders.
§ The hour is late and I do not want to delay the Committee. I venture to remind my noble friends of the lesson we have seen from the actions of the regulator in the case of Oftel and British Telecom. I do not see the picture that is frequently represented from the other side of the Committee. What we are seeing is a fundamental conflict of interests that is not easily resolved. It is not an acceptable substitution for competition. We are seeing just at this moment that Oftel is expecting British Telecom to desist from price competition with Mercury. It is not by any means clear to me that that sort of desistance can be in the interests of a proper commercial activity for British Telecom.
§ I think that here, too, there is an example of the dangers of that sort of regulation as an alternative to 911 competition. I do not think there is such an alternative, and I believe that if my noble friends will accept this amendment as drafted, drawn from their own legislation, we shall have a far better market pattern than we shall with the clause as it stands in the Bill. I beg to move.
§ Lord Williams of Elvel
I find this a most interesting amendment. I am afraid that we on this side of the Committee may be trespassing somewhat on a family feud between those on the opposite side who wish to see the Conservative Party manifesto put into action and those who do not wish the Conservative Party manifesto of 1983 put into action. As I understand it, the amendment's purpose is to suggest an improved form of privatisation. In other words, the movers of the amendment—the noble Lord, Lord Bruce-Gardyne, was very clear on Second Reading that he took this view—feel that the way in which the Government are setting about this privatisation is an unsatisfactory one.
I want to make it perfectly clear from these Benches that we disagree with the principle of privatisation and we have said that many times. I am not going to say it more than twice, possibly, in my response to the amendment of the noble Lord, Lord Bruce-Gardyne, but I want to make it perfectly clear that we regard privatisation, the question of whether the industry should be privatised, as one which is entirely political and one which has, for the purposes of this Committee, been settled, and what we are trying to do at the moment is to consider how far we can improve the processes by which that main purpose is achieved.
The movers of the amendment, I believe, have to answer some quite substantial questions about the import of their amendment if they are to present (if I may put it like this) a complete and fully rational case. The first question is: how can we be sure, if this amendment is pursued, and indeed accepted by the Government, that the investment plans, which are perfectly understandable in an integrated industry, are understandable if the industry is split up as the movers of the amendment propose? How can we be sure that the allocation of capital in a very capital-intensive industry is made in a way which is both sensible and does not involve over-investment? Those who are proponents of the integrated industry will argue that since British Gas has access to all relevant information centrally through its regional sales organisations, particularly on investment in supply, it is able to direct investment in a rational and sensible manner, and that this feature would be entirely removed if the industry itself were to be split up into its component parts.
The next question which I think the movers of the amendment have to answer is: how does a disintegrated industry (if I can use that expression) take advantage of the opportunities that British Gas has of estimating weather patterns, for instance, across the country, and forecasting accurately so as to minimise the supply requirement? Again, we come back to the question of investment, and, if the industry is disintegrated, we may see over-investment in order to cope with that particular problem.
Then there is the question which again would need to be raised as to how the disintegrated industry would 912 meet its full supply obligations, its full public interest obligations; how it would handle industral relations (at the moment there is a very clear trade union structure within the integrated industry) how, as a disintegrated industry, it would handle its training programmes (would they be left to each individual component?); how it would handle its research and development into the whole question of gas technology; and how one can enforce national standards which obviously are desirable across the whole country when you have a series of privately owned individual gas companies.
§ 10.15 p.m.
§ These are questions which I raise because I am sure that the movers of the amendment will wish to address themselves to them and since without some further pursuit of these points it will be very difficult to reach a view. As I understand it, there are essentially three solutions to the present gas industry problem. The first is our solution, which is for the Government to withdraw the Bill. However, I understand that the Government do not wish to withdraw the Bill. The second is the Government's solution which is, and I think is recognised on all sides of the Committee, to create a private monopoly—a private monopoly which we on this side of the House believe is inadequately controlled and with inadequate representation for consumers, and all the other things we have been discussing today. The third possibility is that put forward by the movers of the amendment, the noble Lords, Lord Bruce-Gardyne and Lord Harris of High Cross. They say that neither of those two options is the right solution but that the Government should adopt quite a different stance and break the whole thing up.
§ So far as we are concerned on this side of the Committee we would be very interested to hear what response the Government are to make to their noble friend on the substance of this amendment. I come back to where I started; it seems to us that we are perhaps interfering in a family quarrel about what are the real objectives of the Conservative Party. However interesting that may be, it does not obscure the fact that by moving this amendment the noble Lord, Lord Bruce-Gardyne, has posed a very serious question for the Government and we, like him, will be interested to hear the response.
§ Lord Ezra
The amendment moved by the noble Lord, Lord Bruce-Gardyne, raises a very important point, as the noble Lord, Lord Williams, has just made clear. The underlying significance is that it implies that the Bill, as drafted, changes nothing at all so far as British Gas is concerned. However, what it does do is imply a degree of risk for third parties. On this side of the House we feel that the third party most likely to be adversely affected unless suitably protected is the consumer. The noble Lord, Lord Bruce-Gardyne, takes the view that the third parties most likely to be affected are the suppliers and the potential shareholders.
Whatever it might be, this transference as proposed in the Bill as it now stands implies a risk for third parties which previously did not exist, and therefore the whole purpose of the amendments which we are so lengthily and in such detail going through is to try to 913 erect certain barriers to protect those third parties. If that is all that the Bill is achieving—namely, to create risk where previously there was no risk—is not a possible fourth solution to defer the application of Clause 3 until we can work all this out?
§ Lord Harris of High Cross
In supporting the noble Lord's amendment, I have to express regrets and whatever apology is appropriate that so far I have been unable to take an extensive part in these debates. I have attended to what has been said while I have been here, and I have read Hansard with some care. All I have read and heard leaves me in no doubt that the method by which the Government, under pressure from those higher forces we have heard of, have chosen to denationalise the British Gas Corporation has the most serious deficiencies.
As an economist, I have an abomination for monopoly. Indeed, I was partly moved towards wishing to break up the monopoly that the noble Lord, Lord Diamond threatened to establish over the discussions of this Committee stage. Many strong supporters of the Government have expressed misgivings over what is the statutory entrenchment of a private monopoly. There is a good deal of literature on this kind of issue, and, as a professional economist, I would argue that a public monopoly is almost always even more objectionable and disreputable than a private monopoly. It is second or third best.
The reason is one that noble Lords on the Government Front Bench have given, that the reality of what is called public control—of which the noble Lord, Lord Williams, wants more—or rather the reality behind public control is of course political control, which leads to policies of pricing and investment and all that he was talking about, which are governed by short-term, often party-electoral expediency rather than by long-term economic criteria.
When I have had doubts about whether to sustain the Government in the Lobby against their adversaries, I have thrown caution to the winds and lent my support to the Government on every occasion because I have rejoiced to hear Ministers get up and say that one cannot trust politicians—"even us" they say—with these monopoly powers. I recall the noble Lord, Lord Bruce of Donington saying in the most artless way that I have ever heard him say anything that all that Ministers have to do is to take a self-denying ordinance and tell their civil servants not to interfere in pricing and investment policies—as though that would last long, or survive a change of government. The issue that the noble Lord, Lord Bruce-Gardyne, has raised means that we do not have to make this second or third rate choice of accepting a monopoly.
Of course, as he said, one cannot have competition in delivering gas to individual households, but the distribution of gas can be divided among half a dozen or more private regional companies, between which there could be comparison in performance. That would make up a régime which, on the whole, would promote gains in total efficiency, as the more enterprising regions set an example to the laggards.
The dispersal of initiative and responsibility invariably yields better results over any but the very 914 shortest period. As the noble Lord, Lord Bruce-Gardyne, has said, there are special advantages in breaking the monopoly and monopsony power of British Gas as a single buyer from the North Sea and elsewhere. At the same time, if we had this kind of regime, we could settle for a much less oppressive regulatory regime and allow the noble Lord, Lord Diamond, to sleep more peacefully in his bed.
Why have the Government thought that decentralisation is appropriate for breaking up the National Bus Company? Why are they proposing to apply the regional or area devolution proposed by the noble Lord, Lord Bruce-Gardyne, to denationalising the water supply companies, when they get round to it? And why is more serious consideration not being given to decentralisation in the supply and distribution of gas? To say that the Secretary of State and the chairman of the British Gas Corporation are satisfied simply increases my apprehensions and indeed my certainty that this is not the best way of proceeding.
I shall simply say that I shall tramp through the Lobby for exercise and refreshment with the noble Lord, Lord Bruce-Gardyne, if he feels so disposed; but I certainly regard this as a kind of paving Motion, because if this kind of clause is not acceptable we shall come back at odd moments through the gruelling days ahead to offer a number of specific amendments that will weaken the oppressive monopoly of Sir Denis Rooke and will open a few cracks and crevices to competition. That is what the Government should be contemplating under this amendment.
§ Lord Gray of Contin
I listened carefully to what my noble friend Lord Bruce-Gardyne and the noble Lord, Lord Harris, had to say. I know that my noble friend has held strong views on this matter for a long time and he and I have discussed it from time to time. I must confess that I was impressed but not surprised when I saw the new clause that had been tabled. However, I must tell them that we too have done a certain amount of homework. We spotted, as my noble friend confirmed, that the new clause is based on Section 47 of the Transport Act 1985, which permitted the transfer of the operations of the National Bus Company to the private sector as separate undertakings.
I shall come back to that in a moment or two, but first let me say to my noble friend that I was relieved about one thing: that it never has been his intention that in privatising the British Gas Corporation we should break it up to the extent of breaking up the distribution, although that would be the logical conclusion if we were to break it up completely. The environmental consequences of such a break-up would cause havoc throughout the country. No doubt my noble friend took that into account when he decided that he could not go quite as far as that.
My noble friend also suggested that the way the British Gas Corporation was being privatised had the hallmark of Sir Denis Rooke stamped all over it. The fact that he has been a highly successful chairman of the corporation and that he has not expressed concern about the way in which the Government propose to privatise—
§ Lord Gray of Contin
The noble Lord must be fair. Sir Denis Rooke has not come out publicly and said that he agrees with every conceivable thing that the Government seek to do, but he has said that in his view they have proceeded with the privatisation measure in the way most acceptable to the industry. That is a certain commendation which I am not too bashful to accept.
I do not think it can be said that because he has approved it that necessarily means that it is not good. I think what he has said is an additional reason for thinking that we have it just about right; just as when Britoil was privatised the chairman of BNOC, who is now a Member of this House, was sympathetic to what was being created. He felt that the time had come when it was right for Britoil to go into the private sector.
The noble Lord, Lord Williams of Elvel, presented a number of questions to my noble friend about the amendment. I shall not attempt to answer those because it is for my noble friend if he sees fit to take them up. The noble Lord, Lord Ezra, suggested that it might be a good idea to delay implementation of the Bill. He will not be surprised to learn that I can hardly go along with that. The sooner that it is through Parliament and is implemented, the better for the consumer, for those who work in the industry and for those who seek to acquire shares and become a part of the new corporation.
If I may return to Section 47 of the Transport Act on which the amendment is based, the situation in relation to gas is quite different. Where transport is concerned there are regional transport authorities and it makes sense for local transport policy to be formulated in the light of the choices available. No such choices exist in the case of gas, the backbone of which is the integrated transmission network established by British Gas since the advent of natural gas.
Attempts have been made to argue that splitting the corporation into area boards serving different parts of the country would introduce greater competition. It is probable that few pieces of legislation have received more consideration by the Secretary of State for Energy than that now before the Committee. My right honourable friend looked at all the options available to him. Although the possibility was considered, my right honourable friend has made clear on a number of occasions that it soon became evident that splitting the corporation into regional companies would not achieve greater competition. Each consumer would still be faced with a single supplier of gas; the economies of scale available through the integrated transmission and distribution system would be put at risk; and there would be the added disadvantage for consumers of greater regional diversities in price and disruption in the pattern of supply. The Government concluded therefore that the interests of consumers would best be served by keeping British Gas as an integrated unit.
There is a further point. The existing Clause 3 has no bearing on the disposal of the corporation as such. It simply enables the regulatory provisions in Part I of the Bill to be brought into operation. It is essential therefore that it remains in place. I have listened carefully to the arguments deployed by my noble friend 916 Lord Bruce-Gardyne and by the noble Lord, Lord Harris of High Cross, but I am not persuaded that there would be any benefit to consumers in splitting the corporation in the way suggested. Indeed, as I have indicated, splitting up the corporation would have positive disadvantages for the consumer. I am sure that when my noble friend considers the consumer in this way he may be prepared to withdraw the amendment.
§ 10.30 p.m.
§ Lord Bruce-Gardyne
I have listened with great care and interest to my noble friend's reply. I am grateful to him for giving what I believe is the first considered explanation from the Government Benches of what seems to have been a remarkable volte-face between the last election and the drafting of the legislation. I must honestly tell my noble friend that I am not by any means convinced by the arguments that he has advanced for safeguarding the consumer. I remain of the view that the performance of competing regional boards might be a much better way of judging the interests of the consumer and also the interests of the suppliers. My noble friend did not reply to that point.
However, the noble Lord, Lord Williams of Elvel, posed a number of interesting and important questions about the issues arising from the concept of this clause. As it seems perfectly possible in this Chamber to produce something very similar by way of amendment at a later stage, the noble Lord will perhaps do precisely that and so enable us, at that later stage, to have a lengthier discussion about the important issues that he raised and that other noble Lords have raised in this area. In the meantime, with sadness and regret, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Clause 3 agreed to.
§ Clause 4
§ [General duties of Secretary of State and Director]:
§ Lord Stoddart of Swindon moved Amendment No. 37:
Page 3, line 3, at end insert—
("( ) to ensure that gas supplies are managed and used in accordance with national interest and without detriment to other fuels and energy sources;").
§ The noble Lord said: This is a very important amendment. It should be discussed at great length but, at this time of night, I shall have to shorten what I intended to say following the long debate on the previous amendment that did not, however, proceed to a vote. That suprised me, bearing in mind the strong views of the noble Lord, Lord Bruce-Gardyne. This amendment is concerned with managing energy supplies in the national interest without detriment to other fuel sources.
§ The amendment attempts to put the gas industry into a national energy policy framework. The Government have always indicated that the best energy policy is one which depends totally on the operation of the free market. That is a concept with which we fundamentally disagree, because energy is not susceptible to the free market. Investment decisions are long term and cannot be left to the free 917 play of market forces. For example, how on earth at the present time can one make investment decisions about building new power stations or digging new coal mines? We know perfectly well that by the turn of the century the price of coal will have moved up from its present low level on the world market. We know perfectly well that by the year 2000 coal will be in much greater demand and the price will be at a premium whereas at the moment it is at a discount.
§ Is it right that we should make a decision at this point in time not to sink new mines which we shall need after the turn of the century when North Sea oil begins to run out? Is it right that we should make that decision on the basis of discounted coal prices? If we take the decision with world coal prices at their present level, then we shall not sink coal mines which we shall need at the turn of the century. That is why one cannot leave energy matters to the free play of the market place.
§ The same is also true with other energy sources. I have mentioned before that we have to have a policy in relation to our power stations as to how we generate electricity, what the mix of fuels will be, how much electricity we shall generate from coal, oil, nuclear power, and what effort we shall make in the renewable energies field and in the field of conservation. One cannot look at those factors in isolation. They all need to be integrated because they are all part of the same policy. That is a policy of adequate energy, not for tomorrow or next year, or even the end of this decade, but well into the next century. That is why it is necessary that our fuels should be managed in an integrated manner.
I am not the only person who says this. There are many other people who say it. Indeed, I noticed in the May issue of Circuit News—which the Electricity Council kindly send me every month—an article by Mr. Philip Jones, who was of course not only the chairman of the Electricity Council but worked at a high level in the Department of Energy, so he knows his onions. He not only knows them from the point of view of the electricity industry but of the whole energy scene because he has worked in the department. This is what he had to say:
Britain needs a basic energy plan to help it make the best use of natural resources well into the 21st century"—
he is looking much further ahead than I have been looking tonight—
Electricity Council Chairman Philip Jones told a congress of civil engineers last month.
The wealth of energy resources made Britain the envy of other industrialised nations, but he wondered whether history would show that these resources had been mismanaged through a lack of proper planning and co-ordination. Although the four main energy industries—electricity, gas, coal and oil—have individual objectives, they clearly did not operate in isolation.
'If we continue to compartmentalise the energy sectors and fail to recognise their interdependence, then we may well fail to gain the maximum advantage from the country's resources,' he said.
In actual fact we are compounding the existing compartmentalisation of the energy market and of the various fuels.
§ Gas itself is a premium fuel. It is a fuel which is easily used and easily transmitted. However, under private enterprise, under private control, without any governmental control apparently, it may very well be that those resources, which are scarce resources, could 918 be used in a wasteful fashion by, for example, predatory prices against the electricity industry in order that the gas industry can get a higher market share at the expense of the electricity supply industry. That would be wasteful of our resources, and that is what I am talking about in this amendment.
§ If that happened, it would mean that replacement programmes for power stations would be badly affected, with knock-on effects elsewhere. It also means that gas, which, as I mentioned before, is a premium fuel, would be depleting at a faster rate to take advantage of lower prices; and this in turn would lead to shortages in the future, with detriment not only to the domestic consumer but to industry as well.
§ Therefore, for all those reasons it seems to me that we need some amendment written into this Bill. I believe that my amendment would do this; but there are also some other amendments which are similar and which deal with some of the same points. It seems to me that we must have something like this in the Bill in order to ensure that we and the privatised gas industry pursue an energy policy which is not merely in the interests of the shareholders, but in the interests of the nation.
§ I am afraid that the present Government simply do not have a good record. They are hooked on the idea that market forces will sort out the energy scene, that market forces will do everything that is necessary to ensure that at the appropriate time we have an adequacy of fuels and various types of energy.
§ Through the Oil and Gas (Enterprise) Act 1982 the Government threw away any influence they had over the North Sea. They have allowed our oil reserves to be depleted at a very fast rate to the extent that they are now prepared to deplete them at a high rate just at the time when oil prices are very low. They completed their policy of getting out of energy planning by the Oil and Pipelines Act which went through this House in, I believe, 1985.
§ I am losing my voice, and I really have said all I need to say at present. I shall be interested to hear what the noble Lord has to say, and I shall sit down and wait for him. I beg to move.
§ 10.45 p.m.
§ Viscount Hanworth
At the outset I ought to declare an interest in so far as I am, to some degree, connected with the EMA trades union which is concerned with electric power generation. I have down an amendment, Amendment No. 48A, which is similar to this one. I propose not to move mine but to speak to this one.
This amendment is intended to give the Secretary of State and the director of Ofgas power to promote effective and fair competition in commercial activities connected with the supply of fuel and power. In other words, there must not be unfair competition with electricity and coal. In my Second Reading speech I stressed that difficulties would be likely to arise when one of the three main energy providers was privatised and the other two—that is, electricity and coal—were not.
Over the years all governments have been anxious to keep a balance between gas, electricity and coal so that each of them remains competitive. When gas is 919 privatised it would be possible for the new owners to resort to dubious commercial tactics which could not be matched by the nationalised competitors. The power given in this amendment might never be used, but it would act as a deterrent against unfair competition. If it is claimed that that would not arise, one need only refer to the situation which occurred with gas appliances.
But, more importantly, the distortion which can result from a misguided pricing policy is set out in paragraph 47 of the report of the Select Committee on energy, development and depletion of United Kingdom resources. I find it hard to know why the Government might be (I hope they will not be) opposed to this amendment, as they were in the Commons.
The Government usually seem to want powers which Parliament strives to deny them. Possibly the explanation was that they had not time to think about the amendment or they did not want to frighten prospective buyers by inserting provisions which are relatively undefined. But if the Government really want privatisation to work in the national and the consumer interests, they must take the necessary powers to be sure that it does. I hope that even if the Minister cannot agree this amendment tonight, he will at least consider what I am trying to say.
§ Lord Bruce-Gardyne
Like the noble Viscount, Lord Hanworth, I have tabled a later amendment, Amendment No. 49, which, like the noble Viscount's amendment, is effectively subsumed in the same argument. So, like the noble Viscount, I should like to say a brief word on this amendment rather than move my own amendment at a later stage.
I, too, share the anxieties which have been expressed on both sides of the Committee about the implications of competition between a privatised gas corporation and the CEGB still in the public sector and required to purchase the bulk of its supplies from the National Coal Board at prices which, frankly, do not remotely reflect current market levels. My noble friend the Minister of State will know that recently the Department of Energy has been regularly saying that price negotiations between the CEGB and the coal board are entirely a matter for those two bodies. That is absolute rubbish. Are the Government seriously saying that if the CEGB decides to take its supplies exclusively from imported coal or switch over a mass of power stations to oil, it will be at liberty to do so? If the Government are saying that, then indeed we can contemplate, I think, a fair and open area of competition between a privatised gas corporation supervised by Ofgas and the CEGB as a competitive supplier. But I would be amazed to hear that that is really what the Government are saying. So long as the CEGB is required to take the bulk of its supplies at way above market prices in order to keep the Coal Board in the style of life to which it is accustomed, then clearly there could be a situation where the British Gas Corporation in the private sector was taking market share not by predatory pricing in the sense of cross-subsidisation (such as that about which Oftel is pursuing an argument with British Telecom at the present time) but by perfectly commercial pricing 920 which the CEGB was unable to meet. I think that this is a major issue on which, for the reasons which have already been advanced, we need to know the Government's thinking. Certainly, mine was intended to be only a probing amendment and I shall join with other noble Lords in listening anxiously to what my noble friend has to say.
§ Lord Ezra
The issue raised by noble Lords who have spoken on both sides of the Committee is of such far-reaching importance that I hope that we shall be able to do it justice either now or at some later stage. There is this fundamental issue of a change in the whole deployment of the energy resource of the country with, as has been pointed out, two major enterprises remaining under public control and one now being put under private control. Unless there is some long stop or provision of the sort proposed under this amendment, it looks as if there could be very serious situations arising at some future date as a result of the inequality of this situation.
§ Lord Belstead
I must say that I think it comes all right from my own side of the Committee to hear expressions of concern about how the public utilities which remain in the public sector are going to fare compared with a great public utility which is being put into the private sector. I am sure that the noble Lord, Lord Ezra, will take it in good part when I say to him that I do not think that it lies in his mouth, having over three days now from that side of the Committee criticised the intention of my right honourable friend the Secretary of State for Energy in putting British Gas into the private sector, then to stand up at the end of a long day to say to the Government that that is unfair because British Gas will do too well.
The fact of the matter is that this is a nonsensical amendment because neither the noble Viscount, Lord Hanworth, nor the noble Lord, Lord Stoddart, to both of whom I listened with interest, addressed themselves to the missing ingredient in their speeches—which is: how is this going to be done? When the Government say that we are suspicious, as indeed we are, that Ministers and civil servants might be expected to work out some sort of grand plan in which all the industries are allocated a role which they must carry out, and according to a rigid set of rules, I think that we have some reason to have that suspicion. When we say that, on the contrary, we believe that business and individuals should make up their own minds about the best kind of fuel for their needs, and that the industry should go out into the market place and sell their products in the way that they understand best, the proof of the pudding is in the eating: by the complaints to which I have been listening over the past ten minutes, that what is going to be the inevitable consequence of the privatisation of British Gas is that British Gas is going to do too well.
I am suspicious, too, but in the nicest possible way, of what the noble Lord, Lord Stoddart, has said about compartmentalisation. With respect to the noble Lord—who, I know, knows a great deal more about this subject than I do—surely what the Government are trying to do with the gas industry in this Bill is the very opposite of compartmentalisation. Privatisation is going to be one of the ways in which energy can be 921 opened up to competition between the different fuels. At any rate, we believe that this is the right way to secure the national interest without imposing bureaucratic controls on the operation of the market.
We have all rather spoken at large at the end of today's debate on this particular amendment. May I end by saying something specific? The noble Lord, Lord Stoddart, finished his remarks by talking about gas depletion policy. The objective of the Government is to try to promote the maximum economic development of our gas resources, and at present about 75 per cent. of our requirements in gas are supplied from the United Kingdom continental shelf. By the mid-1990s this is likely to increase to over 90 per cent. If I may say so, I think that is desirable.
However, noble Lords with experience of these matters—the noble Lord, Lord Ezra, not least—will know better than I do that the rate at which gasfields are developed depends on a number of factors: the rate at which licences are issued, the speed with which oil companies pursue the exploration and appraisal of fields and the demand for gas. The Government believe that it is right to let market forces determine these questions rather than to impose again some arbitrary or over-regulated framework which could rapidly lead to the kinds of problems which occurred in the United States in the 1970s, when over-control of prices for gas at the well-head led to massive shortages of supplies.
I hope noble Lords will forgive me for perhaps having spoken with some asperity; but, really, to have thrown at us at the end of a long debate, having been told for three days that this Bill is not much good and ought to be viewed with suspicion, that the trouble with the Bill is that British Gas is going to do too well, is a little more than I can take.
§ Viscount Hanworth
I do not think that the noble Lord has really appreciated the spirit in which this amendment has been put forward. He has not really answered anything. I do not mean to be unkind, but in certain ways it is what one might almost call a political speech. Nobody has suggested that there should be a rigid framework or that the Government should rush in. The powers are there only in case they have to be used. The noble Lord has not addressed the point that the CEGB has to take coal at an enormous price, when it could go out and buy it much cheaper. All that he has not appreciated at all, and I earnestly ask him to go back and have a look at what we were trying to say to him, because he simply has not addressed himself to a problem which is going to arise. He has just rather cheaply—and I am afraid I must say "cheaply"—argued that British Gas is going to do too well.
That is not the point at all. We are talking about certain areas which may possibly need protection. The Government know perfectly well that they never would allow, and never have allowed, the three fuels to get right out of step, because what happens?—you change from gas to oil, and all the rest of it. That is not what a government want to happen. So I most earnestly ask the noble Lord to take this matter back and next time get a somewhat better brief which gives the reasons he is really against it rather than make a whole lot of cheap points. I am sorry: I do not mean to be rude, but that is what they were.
§ Lord Bruce-Gardyne
I do not honestly think that my noble friend has grasped the essence of the argument, if I may say so. He talks about the operation of competition, but we are talking here about competition which is something like tethering a goat. We have not been told under what rules the goat will be tethered. I am bound to say to my noble friend that he has not really enlightened us one whit about that in connection with these amendments.
§ Lord Ezra
I must say that I too was somewhat concerned about the cavalier manner in which the noble Lord spoke on this subject. After all, we are having a very serious debate, and when we raise matters of fundamental energy policy and express concern about what could happen as a result of the major change which is contemplated in this Bill, we expect at least to have a serious response from the other side of the Committee.
§ 11 p.m.
§ Lord Stoddart of Swindon
I must say that I was surprised that the noble Lord should say what he did and in the tone that he used. He does not usually speak with asperity, and I am surprised that he should have chosen this particular amendment on which to use asperity, because this is virtually a non-political amendment.
It is an amendment concerned with the proper use of our energy resources. The noble Lord said that we were afraid that the gas industry, when privatised, would do too well. What we are concerned about is not that it will do too well, but that it will act badly against other energy industries. What we are seeking to find out—and what the noble Lord, Lord Bruce-Gardyne, is seeking to find out—is what the Government are proposing to do to see that British Gas plc does not act badly against other energy industries which will be under constraints different from those of the gas industry.
The noble Lord also talked abut the missing ingredient. He wanted us to tell him how we were proposing it should be done. We are proposing how it should be done in the amendment. But the only reason we have had to put down an amendment of this sort is that the Government have brought this Bill forward. The amendment would not be necessary if we did not have this Bill, because the energy industries—the coal industry, the electricity industry and the gas industry—would all be in public control and therefore, presumably, even under this Government, working within the public interest.
What we will be left with is the coal industry and the electricity industry under public control, and the gas industry with access to premium fuel in private ownership. That is where the imbalance will lie. The amendment seeks to correct what could be an imbalance and an improper use by the privatised British Gas plc of the monopoly power which is being given to it under this Bill.
I hope that I and other noble Lords have made clear to the noble Lord, Lord Belstead, what this is all about and that we are serious about it. It is a matter which concerns not only the Labour Party, the Liberal Party and the SDP, but noble Lords on all sides of the 923 Committee. I hope that the noble Lord will take that on board. It is rather too late to go into a very long discussion about the matter, but I assure the noble Lord that we shall have to come back to it. I shall beg leave to withdraw the amendment, unless the noble Lord has anything else to add, though I think perhaps it would be better if he did not add anything. Perhaps he ought to think about it. Therefore, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Lord Ezra moved Amendment No. 38:
§ Page 3, line 5, leave out (", so far as it is economical to do so,").
The noble Lord said: This amendment suggests that the words,
so far as it is economical to do so",
should be omitted. I can explain very briefly indeed the reason for this amendment. It is felt that the words "all reasonable demands" in the clause are sufficient protection without including as well the words,
so far as it is economical to do so".
We feel that persons who under this clause are authorised to supply gas through pipes should make all the efforts they reasonably can to meet the demand; in other words, they should meet "all reasonable demands". To include the words,
so far as it is economical to do so
gives them a further let-out which we do not think should be provided. After all, those who are authorised to supply gas under this provision will be put in a pretty strong market position and they should have certain obligations, among which should be the obligation to meet "all reasonable demands". I beg to move.
§ Lord Kirkhill
At this late hour I think it would be for the convenience of the Committee if I were to speak to the next amendment, Amendment No. 39, which appears on the Marshalled List in the names of the noble Lords, Lord Taylor of Gryfe, Lord Carmichael of Kelvingrove and myself. While Amendment No. 38, which has just been explained by the noble Lord, Lord Ezra, is not exactly the same as Amendment No. 39, the general thrust of the two amendments is not dissimilar, though I think the amendment in the names of the other two noble Lords and myself—indeed, I do not think; I am fairly certain—goes somewhat further, and I believe necessarily so.
In the Second Reading debate I expressed concern over the question of new pipeline development in less populated areas. The noble Lord, Lord Belstead, said then that he would write to me, and indeed he did. He did so most promptly. He provided me with information on the recent decision to extend the pipeline network in the north of England. He said that Alston, with a population of 1,950 souls, Appleby with a population of 2,400, Kirkby Stephen with a population of 1,550 and Stanhope with a population of 2,400 had been considered too isolated to have a natural gas supply. However, he went on to say that new engineering techniques and the increasing costs of maintaining butane air supplies have led to a reevaluation and that over a period of three years these 924 communities are to receive natural gas. I was of course very pleased to learn of this. Nevertheless this decision is a specific example of the difficulty. It is an example of the fear of many of us who live in the regions; I live in Scotland. The fear is that this decision might have gone the other way had the public gas supplier been already in the private sector.
We have to consider that the current terms of the Bill on extension of the pipeline network, particularly in Clause 4(1)(a), qualified as it is by the phrase that the noble Lord, Lord Ezra, wishes to delete, do not allow regulation of the public interest in any certain way. It would be ridiculous to propose—and I indicated this in my remarks at Second Reading—that every village and hamlet should have a gas supply. That sort of obligation, so far as electricity supply is concerned, is already placed on the North of Scotland Hydro-electric Board, but that body, as I know from my experience as its chairman for some years, has the cost advantage of hydro power with which it can feed such an obligation. Nonetheless some residual responsibility for less populated areas should be imposed on the gas industry. That is my view and that is the purpose behind Amendment No. 39 and in some measure the purpose behind the amendment of the noble Lord, Lord Ezra.
The privatised gas company will have to have primary regard to the interests of its shareholders in arriving at the decision to supply remoter communities, such as the communities which the noble Lord, Lord Belstead, has been telling me in his letter have just been or are about to be linked up. That regard may be served by allocating annual budgets for pipeline extensions. In an expanding gas industry it is at least arguable that there is bound to be pressure of demand from time to time with more project applications than budgets will allow. My fear is that in the allocating of priorities less populated areas will be given a lower ranking. That is the instinct of an executive. There is little doubt about it. Consequently, there will be geographical discrimination between potential customers. I add for the Committee's consideration that, as I read the Bill, it provides only for non-discrimination for existing customers at Clause 9(2) and at Clause 10(1). It is very much how one interprets the Bill at that point which determines how one might see the future for remoter areas.
In the light of what I have been saying, Amendment No. 39 is suggesting as a solution to the problem that there should be a published formula that states the circumstances under which an extension to the pipeline system would be economical. I accept that the formula would of course have to change from time to time. Indeed, the director could adopt a flexible formula, and probably he should do, if he is a skilled executive.
I make one last point. I am not convinced from my own experience in government—admittedly a decade or so ago—that such a formula is not lying around somewhere, and that a Minister could not tell me something about it. I believe that any skilled Civil Service machine would consider that this type of amendment was at least a possibility.
§ Lord Gray of Contin
I am grateful to the noble Lord, Lord Kirkhill, for speaking to his Amendment 925 No. 39 along with Amendment No. 38 at this late hour, and I shall be happy to deal with the points raised on them both.
The noble Lord proposes in Amendment No. 38 to delete the qualifying words,so far as it is economical to do so",from the main supply duty on the Secretary of State and director. Those words have been a feature of legislation since gas nationalisation in 1948, and provide the proper qualification for a general supply duty. I am sure that the noble Lord would agree that it would be a nonsense to give the director and the Secretary of State the duty to secure that all demands should be met, irrespective of their individual circumstances and the economics of giving a supply.
I believe that the points to which the noble Lord was referring can be dealt with more effectively when we reach Clause 10, because that clause spells out in greater detail the obligation on public suppliers.
§ Lord Gray of Contin
I accept the correction that the noble Lord has rightly made. But perhaps he agrees with me that there will be an opportunity when we reach Clause 10 to examine in more detail the obligations upon public suppliers that are spelt out there.
I turn to Amendment No. 39, to which the noble Lord, Lord Kirkhill, spoke. I recognise the importance that the noble Lord attaches to this subject and I acknowledge his experience both as a Minister and as a distinguished chairman of the North of Scotland Hydro-electric Board some years ago. I refer again to Clause 10 of the Bill, which we shall have an opportunity to debate at a later stage, which extends the obligation in existing legislation by requiring a public gas supplier to give and to continue to give a supply of up to 25,000 therms a year, not just to premises within 25 yards of a distribution main but to any premises that are already connected to the main by a service pipe.
Clause 9 of the Bill provides that it is the duty of a public gas supplier to develop and maintain an efficient, co-ordinated and economical system of gas supply. These are substantial obligations and are the clear intention of the Government's determination that the gas industry should extend its network so far as possible, provided that it is economic. Indeed, it is in British Gas's commercial interests to expand its business or for other suppliers to take up the opportunities, if they are unable to do so.
The regulatory system which we are setting up under the Bill provides for the enforcement by the director of the supply obligations set out in Clauses 9 and 10. I do not believe it would be possible to be specific about the application of the Clause 9 duty in relation to a hypothetical development or that a formula could be developed to cover all circumstances. The director, in the exercise of his enforcement duty under Clause 28, will be able if necessary to form a judgment as to 926 whether a particular request should have been satisfied by a public gas supplier under the duty set out in Clause 9. It follows therefore that a duty on the Secretary of State and the director, as proposed in the noble Lord's amendment, would in our view be inappropriate. For those reasons, I ask the noble Lord if he will consider withdrawing his amendment.
§ 11.15 p.m.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 39 not moved.]
§ Lord Diamond moved Amendment No. 39A:
§ Page 3, line 9, leave out ("secure that such persons are able") and insert ("have regard to the ability of such persons").
The noble Lord said: I beg to move Amendment No. 39A. This refers to paragraph (b) of Clause 4 which says, in considering the duties of the Secretary of State and the director:
without prejudice to the generality of paragraph (a) above, to secure that such persons are able to finance the provision of gas supply services.".
§ This lays the responsibility on the Secretary of State and the director to see to it that in exercising his functions he secures that the persons who are authorised to carry out these duties are able to finance the provision of gas supply services. What the amendment draws attention to is the strength of the words "secure that such persons are able", and suggests in their place "have regard to the liabilty of such persons".
§ The reason behind the amendment is I am sure very plain. As it is drafted at the moment, the gas supply will have what I might call a cushion for incompetence and inefficiency in the knowledge that the Secretary of State and the director have been required to "secure", which is a word very near to "guarantee". They have been required to secure that he is able to finance the provision of gas supply services. Clearly that does not mean only at the moment of the grant of the permission, but it means for all time. Therefore it means that the director and the Secretary of State have to see to it that the supply of gas is carried on in such a way that no matter what inefficiencies there are, there will be a sufficient profit to enable the supplier of gas to finance all his requirements, be they small current requirements or be they large capital requirements. I imagine that is not what is intended by the Government; but that is what the clause says, by using such a strong word as "securing" that such persons are able to finance the provision.
§ I quite accept the view that such persons should not be irresponsible, clearly; and I have suggested that the director and the Secretary of State should have regard to the ability of such persons to provide the necessary finance, both immediately and in the future, and that that would be a proper protection. But I think that the present wording goes much too far in the way of almost guaranteeing—I know that the word is not 927 "guarantee" but it means much the same thing—that no matter what happens they will be assured of permission for such a pricing policy and securing such a margin of profit that they will for all time be able, as the Bill says, to finance the provision of gas supply services.
§ Therefore, I hope that the Government will accept that what we are trying to do is remove a cushion for inefficiency and replace it with words which I should have thought carry out the intention of the Government. I beg to move.
§ Lord Gray of Contin
My notes indicate that Amendment No. 39B is grouped with Amendment No. 39A. Perhaps it would be for the convenience of noble Lords if I dealt with it in my reply.
§ Lord Diamond
I am grateful to the noble Lord for reminding me about that. I did not mention it but I said that my argument refers not only to financing immediately but financing in the future; and equally it refers to financing not only from internal sources but also from external sources.
§ Lord Gray of Contin
I am grateful to the noble Lord for clarifying that point. Perhaps it would assist if I explained what the purpose of Clause 4(1)(b) is and how it relates to Clause 4(1)(a). The latter requires the Secretary of State and the director to exercise their functions under Part I of the Bill in the manner each considers best calculated to secure the satisfaction of all reasonable demands for gas. Clause 4(1)(b) requires the Secretary of State and the director to exercise their functions in the manner each considers best calculated to secure that persons authorised to supply gas through pipes are able to finance their supply operations. The second duty is of equal importance to the first.
The words proposed in the first amendment would weaken the duty on the Secretary of State and the director since they would only have to have regard rather than secure the financial viability of gas suppliers. There would be no benefit to consumers if the regulatory functions were exercised in such a way that gas suppliers were driven into bankruptcy.
The second amendment seeks to define the source of financing. Clearly the terms of British Gas's authorisation will exert some influence over the extent of finance generated by the business itself, but British Gas will, like all private sector companies, wish to take advantage of favourable sources of external finance in developing its business. However, these matters are irrelevant to the overall exercise of regulatory functions and need no expression in Clause 4.
I hope I have demonstrated that the proposed amendments are not necessary, and perhaps the noble Lord will be persuaded to withdraw them.
§ Lord Diamond
I am afraid that the noble Lord, although courteous as usual, has not devoted his mind to the argument at all. He certainly has not persuaded us. We want to make as much progress as we can on the Bill. We are moving our amendments, so far as we do move them, and are not withdrawing them (we have withdrawn many amendments and Motions on 928 clause stand part) but we are under the difficulty that no progress is made with the Bill as a whole, including all the future stages of the Bill, if we do not get satisfactory replies during the Committee stage.
I well understand the Minister's desire to deal with a matter shortly, but dealing with it shortly and dealing with it properly can be contradictory. Having listened to the quite unusual, untypical and uncharacteristic outburst from the noble Lord, Lord Belstead (who up to that moment was sweet reasonableness itself and then proceeded through a misunderstanding, not giving himself time to understand the purport of an amendment, to speak with what he himself described as acerbity) I have come to the conclusion that the Minister is perhaps pressing Members of the Committee on this side too hard, and that now is the time really to consider how far the Government want to go tonight in the consideration of this Bill. Therefore I hope there will be some response in that regard.
In so far as concerns the amendment, I have made it absolutely clear that we make no progress on the whole discussion of the Bill if we merely have to transfer arguments from the Committee stage to the Report stage. If it helps the Government to see some superficial progress, I shall gladly seek the leave of the Committee to withdraw the amendment, but on the clear understanding that we shall have to come back at a later stage to this and previous amendments which have been dealt with totally inadequately.
§ Lord Gray of Contin
I certainly would not in any way wish to suggest that we were not giving full consideration to what was being said, even at this late hour. I am sure we would all agree that we were a little slow during the first two days of our deliberations and perhaps it is not unreasonable that we should try to make up a little of that time now. It is really not all that late yet and I think that we are all feeling quite fresh; it seems a pity not to make a little progress, if we can.
Perhaps I may supplement a little what I said to the noble Lord, Lord Diamond. In Clause 4(1)(b) the object is to secure that suppliers can finance their services. This means only that efficient suppliers can do this and not that inefficient suppliers must be tolerated. The Government therefore share the feelings of the noble Lord that such a cushion should not be given. However, I think that really there is not a great deal between us. When I spoke for the first time and described the objects as I did I thought that I had explained the purpose of Clause 4(1)(b) and also how it related to Clause 4(1)(a). I think the noble Lord is perhaps being a little unfair in suggesting that I treated his amendment with less than sincerity or depth, and I feel that when he reads the Official Report he will find that I genuinely tried to deal with the points which he had raised. If I did not succeed, I certainly apologise to the noble Lord.
§ Lord Diamond
I think the Minister has said something relevant to the amendment that I moved. He said that there would be a cushion if it enabled inefficient suppliers to carry on their business. But I do not see anywhere in this clause—and I do not know where else it is in the Bill—that the Secretary of State and the director have the powers to prevent this kind 929 of inefficiency. This is a direct encouragement to inefficiency. As the noble Lord has said that inefficient suppliers could not avail themselves of this cushion, I should be grateful if he would tell me on what part of the Bill he rests that argument.
§ Lord Gray of Contin
Well, I cannot deal with that point immediately, but perhaps I can return to it, if the noble Lord cares to withdraw his amendment and we move on. When I have the information I shall certainly make it available to him. Lo and behold the information seems to have arrived from the Box, and I can now impart it to the noble Lord. The efficiency duty is set out in Clause 4(2)(b).
§ Lord Diamond
There is a reference to efficiency. We shall consider that. I am grateful to the noble Lord for giving me that information. In those circumstances, I seek leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 39B and 40 not moved.]
§ 11.30 p.m.
§ Lord Stoddart of Swindon moved Amendment No. 40A.
§ Page 3, line 10, at end insert—
§ ("(1A) The Secretary of State shall not permit the supply of gas for use for industrial purposes which does not consist of or include the use of a fuel of the gas except in so far as it is required to provide heat or other energy required—
- (a) for a process in which the gas is used otherwise than as a fuel or
- (b) where such a process is one of a series, for any further process in the same series, not being a process in which a bulk product is converted into manufactured articles;
§ For the purposes of the above subsection, the Secretary of State and Director shall require from the suppliers of gas for industrial purposes, periodically or on request, information with respect to the type of gas supplied and the use of the gas supplied.".)
§ The noble Lord said: Again, this is an important issue but it is late at night and I shall deal with it as quickly as I can. The Committee will recognise that Section 29 of the Gas Act 1972 gives British Gas special privileges to monitor the use of gas for purposes other than for fuel. It ensures that as far as possible gas is used as a premium fuel. I mentioned that earlier this evening. As I understand it, the meaning of the phrase "premium fuel" is that it should be used in those cases where another fuel cannot be easily substituted. Clause 3 of the Bill abolishes that special privilege which the BGC at present has. I suppose that under the Bill that is the only course of action the Government can take, but it is a pity that they are taking any action at all.
§ However, in abolishing Section 29 of the 1972 Act the Bill also ends any power of control over the use of gas. I believe that that is unwise. Since gas is a premium fuel and is due to run out in about the year 2030, we should conserve it and use it very wisely indeed.
§ Let me give an example of where it would be absurd to use gas other than as a premium fuel. If, for example, the gas industry were to be allowed to permit 930 electricity generation by gas, that would be an awful waste of the fuel. It would be a waste of gas for this reason. If it is burnt directly in a boiler, I suppose the overall efficiency will be in the region of 85 per cent. If, on the other hand, the gas is used in a power station boiler, overall thermal efficiency in a power station of modern design and probably with a 660W generator would be somewhere in the region of 37 to 38 per cent. Less than half the available energy, therefore, would be achieved from burning gas in a power station compared with its being burnt directly. That is what the amendment is intended to deal with. Such a use of gas would be most unfortunate.
§ In the Bill the Government are losing all means to ensure that gas is used as a premium fuel. The Bill having ended the BGC's role as an agent of energy policy, the amendment would enable the Secretary of State to take on that role. I beg to move.
§ Lord Gray of Contin
One of the Government's aims in privatising British Gas is to create an environment where market forces can control and shape the nature of the industry within the overall framework of regulations set out in the Bill. That is one of the keynotes of the Government's approach to energy issues generally. We do not accept the Opposition's belief that Ministers and civil servants can sit down and work out a grand plan in which all the industries are allocated a role and that all they have to do is to carry it out according to the rules laid down. Real life is not like that.
Noble Lords opposite have experienced that in government before. They have found that these grand plans do not work out as envisaged. Such an approach completely fails to recognise the need for business and individuals to make up their own minds about the best kind of fuel for their needs, and for the industries to go into the marketplace and sell their products in the way that they know best. The imposition of a duty as proposed in the amendment is completely contrary to the Government's approach. It has no place in this Bill nor within the Government's overall approach to the energy industries.
I know that noble Lords are attached to these ideas. I would invite them to learn from the Government's example and to see that privatisation itself is one of the ways in which energy is being opened up to free competition between the different fuels. There is a different philosophy here. I know that the noble Lord will not agree with that. I do not suppose that he wants me to labour the point at this late hour. We could argue about it for a long time. I have tried to explain to the noble Lord as clearly as I can why it is not possible for me to accept the amendment, and perhaps he will consider withdrawing it.
§ Lord Stoddart of Swindon
I shall withdraw it, but not because the noble Lord has given me a satisfactory answer, I assure him. The noble Lord says that the real world is not like the sort of world that we propose in the amendment. But, in fact, a satisfactory energy world is the sort that I have described. I had hoped that the noble Lord would deal specifically with the point that I raised about power stations. Does he agree, especially in Energy Efficiency Year, that it is right that gas, a premium fuel, should be burnt in a way that 931 would extract only 50 per cent. of its potential heat content, throwing the other 50 per cent. into the atmosphere? Of course, if used in combined heat and power, it is a different matter. That would achieve, I suppose, an overall efficiency of between 60 and 65 per cent.
I should like the noble Lord to say whether he really believes that what I have described is an efficient use of fuel and whether, in Energy Efficiency Year, the Government or the Energy Efficiency Office would advise that this was reasonable. Of course not! Those within the office are not daft: they know that this is an absurd way to use a premium fuel. What is to stop the gas industry going to the electricity supply industry and saying, "You are buying coal at £45 a tonne. You have a few gas-fired stations anyway, and you can easily convert. We will sell you gas at the equivalent coal price of £30 a tonne"? Is the noble Lord really saying that this will be pemitted? Or will he say to the electricity industry, "You cannot do that. We will not allow you to buy gas from British Gas plc"? In that case, the Government's argument about the free market in fuels goes by the board.
The noble Lord has to answer this question. Although gas may be plentiful at present and although more gas is being found, the fact is that over a period of time it will diminish and deplete. It is a premium fuel; it is a superb fuel. It is probably the best fuel that we have. It should not be wasted. I hope that the noble Lord will deal with the question seriously, and answer the point specifically about the electricity supply industry.
§ Lord Gray of Contin
The noble Lord knows the Government's commitment to energy efficiency. It has been widely publicised and widely practised. The noble Lord cited combined heat and power as an example of high efficiency use of gas. The Government fully accept this but believe that the market will be a better guide to the best use of gas rather than the kind of administrative rule which the noble Lord suggests.
I shall not become involved in a long debate about the most efficient form of power generation in our power stations. But we have only to look at what has happened in France, where something approaching 80 per cent. of the generation of electricity in power stations is now from nuclear power. Indeed it has been so successful that the CEGB is buying power from France because it is cheaper than the best available to it. That is the market working in practice. We believe that in the long term and the short term the market place will sort out these problems more efficiently than administrative rules such as those the noble Lord suggests.
§ Lord Stoddart of Swindon
That is not good enough. The noble Lord has not answered my question about the electricity supply industry. It would suit the electricity supply industry to build a gas-fired power station. I shall tell the noble Lord why it would suit it, provided that the price of gas was right. The capital cost would be considerably reduced because it would not have to build storage capacity for coal. Nor would it have to build a coal-handling plant. Therefore straightaway it would be able to build a coal-fired 932 station at a lower capital cost. Then it would be able to take a piped supply of gas. That would mean that it would need fewer people to handle the coal and the ash. The noble Lord, Lord Ezra, knows what I am talking about.
It could very well suit the CEGB to take gas provided they were allowed to do so. I repeat this because it seems that in this instance I have to teach the noble Lord something. They then take a premium fuel which can be burnt in a proper boiler at 85 per cent. overall efficiency. They burn it in a power station, and they reduce the overall efficiency to 37 per cent. or 38 per cent., and throw the rest through a chimney. That is not good energy conservation. It is an absurd and disgraceful waste of a premium energy fuel. The noble Lord owes the Committee an answer to that question. Are the Government, or are they not, going to say to the CEGB, "You may not use premium fuel in this way. You shall not burn gas to convert heat from gas into electricity"? That is the first question.
The noble Lord also mentioned France and nuclear power. He should not have mentioned that tonight because I have to tell the noble Lord that if there is one accident in a nuclear reactor in France public opinion will close down the whole nuclear industry in France. Of course, if the wind is in the wrong direction we shall get a counter-blast as well. We shall suffer the effects over here, particularly in Kent. I wish that the noble Lord would not keep on citing France as a great nuclear power which is producing electricity at very low cost. It is a highly subsidised cost, if I may say so. We are getting the benefit through the Channel link at the moment, but it may very well be that in due time we shall even regret having built that link. However, I ask the noble Lord to deal with the point about burning gas in electricity power stations.
§ Lord Gray of Contin
The noble Lord is being extremely unfair. He is being unfair to other fuels. He is highlighting gas. The noble Lord does not say to me, "Is it realistic, is the best way to move forward to burn coal in power stations?" There are those who would argue that to burn coal in power stations is contributing a degree of pollution which could well be avoided. Therefore, the noble Lord has a personal prejudice against nuclear power. I have heard him talk on energy subjects for a sufficient length of time for me to detect that he has an inbuilt prejudice against nuclear power.
I used the French case purely because, in terms of economics, the French have proved that their nuclear power system is working efficiently, effectively and in a highly competitive manner. I shall not be drawn into the argument about gas. I have already given the noble Lord the answer; it is not the one he wants, but I have given it. So far as concerns gas, the marketplace will determine. British Gas has no problem in disposing of the gas available to it; nor is there a problem in the foreseeable future. I am afraid that I cannot give the noble Lord any more of an answer than that.
§ 11.45 p.m.
§ Lord Stoddart of Swindon
The noble Lord was well trained in another place in stone-walling, and he has stone-walled very well tonight—I will give him credit for that. However, he has a bit of a cheek to talk to me 933 about nuclear power. I did not even mention nuclear power when I opened this debate. It was the noble Lord who brought France and their pressurised water reactors into the debate. Therefore, I do not know why he suddenly attacks me on nuclear power when we are talking about gas and the use of gas as a premium or a non-premium fuel. However, I can see that I shall not get anywhere with the noble Lord tonight. It is an important subject. We shall most certainly return to it at the Report stage; but at the moment I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 40B and 40C not moved.]
§ Lord Diamond moved Amendment No. 41:
§ Page 3, line 18, at end insert ("with particular attention to the protection of consumers of gas from unfair discrimination on a regional or geographical basis").
§ The noble Lord said: The words in the amendment speak for themselves. I suspect that the Government themselves desire that there should not be unfair discrimination on a regional or geographical basis. If it is already provided for, that will dispose of the matter. I shall not go further than that at this stage. I beg to move.
§ Lord Gray of Contin
The amendment seeks to amend one of the subsidiary duties of the Secretary of State and director so as to require them to protect consumers from unfair discrimination on a regional or geographical basis. The Bill already contains substantial protections for such consumers. The primary duty of the Secretary of State and the director under Clause 4(1)(a) is to secure the satisfaction of all reasonable demands for gas in Great Britain, so far as it is economical to do so. That duty applies just as much to a demand for gas in the regions as it does to a demand for gas in London. Under Clause 9(1)(b) public gas suppliers are also obliged to comply, if it is economical to do so, with any reasonable request for a supply of gas to any premises. Clause 9(2) goes on to impose a further duty on public gas suppliers to avoid any undue preference in the supply of gas to persons entitled to a supply under Clause 10.
All of the provisions to which I have referred are enforceable by the director exercising his powers under Clause 28 of the Bill. Moreover, under Clause 31 a disappointed or aggrieved customer can make representations to the director who would have to make a judgment, for example, as to whether the refusal to give a supply, or the terms under which one had been offered, was justified on economic grounds. If he comes to the conclusion that it was not, he is under a duty to make an order against the public gas supplier requiring it to give the supply, and if the public gas supplier does not comply with that order, any person suffering loss or damage as a result can bring an action for damages against the public gas supplier.
We believe that the Bill before the Committee already provides substantial protection against unfair discrimination and that the mechanisms exist to deal with it, should it arise. Therefore I suggest that the noble Lord's amendment is not necessary and perhaps he will consider withdrawing it.
§ Lord Diamond
I hesitate before speaking because there is another name attached to this amendment and I did not wish to prevent full discussion. I am grateful to the noble Lord the Minister. He has given me the very information that I sought. I shall consider it very carefully in relation to the references to the various clauses when I see it in Hansard. I can only repeat my gratitude and seek leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ Lord Gallacher moved Amendment No. 42:
Page 3, line 18, at end insert—
("( ) to protect the interests of consumers in relation to the purchase, installation and servicing of gas appliances ").
§ The noble Lord said: Amendment No. 42 refers to Clause 4(2)(a) to (d). This clause and its subsection protects consumers as to prices, ensures continuity of supply, has something to say about the quality of gas and also seeks to promote efficiency on the part of suppliers; it guards against risk to the public from dangers during the transmission or distribution of gas through pipes. But it has nothing to say about safety in the use of gas in the home.
§ The amendment asks that the use of gas through appliances comes under statutory protection. It seeks to ensure that the appliances manufactured, sold and fitted adhere to certain standards and that the Secretary of State and the director would have the duty to enforce those standards.
§ Recent displays by the Society of British Gas Manufacturers, which were held in the other place, showed imported cookers with parts that melted on contact with heat, cookers which had no heat resistance, and so on. These need to be controlled. Similarly, certain types of gas water heaters are so inadequately designed that they have caused death by carbon monoxide poisoning. Recent television programmes have illustrated some of these.
§ Turning to installations, inadequately or badly installed gas appliances can kill. While Clause 18 of the Bill details some of the safety standards to be put on the use of gas, it seems appropriate to indicate in the general duties of the Secretary of State and the director that they must not only be concerned with gas safety when it enters the premises, but when it is used in premises. That is the object of this amendment. I beg to move.
§ Lord Belstead
The noble Lord, Lord Gallacher, is on to an important point here, but I think it is covered by existing arrangements. The new Gas Consumers Council has been set up specifically to provide effective protection for consumer interests. As I think the noble Lord will be well aware, the new Clause 33 makes it clear and explicit that the new council will be responsible for protecting consumer interests by investigating complaints across a whole range of matters, including those itemised in this amendment.
Then there is the whole question of the sale and marketing of appliances. They are already under the eye of the Director General of Fair Trading and all retailers are subject to the existing competition and fair trading legislation. We propose that this situation should continue whereby the MMC and the OFT can take action to ensure that with regard to these areas the interests of consumers are fully protected.
935 Finally there is the area which the noble Lord put some emphasis on, the safety of appliances and that proper standards of safety should be observed. Here the Department of Trade and Industry, which is responsible for appliance safety, is currently preparing regulations under the Consumer Safety Act 1978 to ensure that all gas cookers, whether they are made at home or overseas, and whether they are new or secondhand, should meet the relevant safety requirements of the existing British Standards Institute standard. It is hoped to introduce these regulations at the beginning of next year. As to installation and servicing, the Health and Safety Commission has approved a draft code of practice on standards of training for gas installers. That was published yesterday. I think I can venture to suggest that when this Bill becomes law standards relating to appliances are going to be higher and tighter than they have been before. I hope that the noble Lord may therefore feel that the amendment truly is covered.
Lord Bruce of Donington
I am sorry that the noble Lord has not taken this on board. The noble Lord has referred to the various powers conferred under Clauses 31, 32 and 33. The noble Lord knows perfectly well that these are investigatory powers; they are not enforcement powers. The noble Lord knows quite well that the only powers that can be enforced are those enforceable by the Director General of Ofgas, and that the Gas Consumer Council has no such powers. If the noble Lord will kindly specify where under Clause 31, 32 or 33 the Gas Consumer Council itself can compel, I shall be very much obliged. But I do not think that the noble Lord can do so.
What the noble Lord is really saying, as a "Little Sir Echo" to his noble friend Lord Gray of Contin, is that, once again, free market forces will ensure that the best possible apparatus will in fact be circulated, that ultimately consumer choice will prevail, that money power will prevail, and that people will tend to buy only the safer items. I observed, I must say, that the noble Lord very heavily qualified his remarks about safety by saying that the Department of Trade and Industry was considering introducing new regulations next year. Since I have been looking after the affairs on this side of the Committee in regard to the Department of Trade and Industry, I have dealt with some regulations. I know perfectly well what they mean. They mean in many cases that, come a year's time, certain wholesalers or certain retailers will be compelled to do certain things. But in the meantime they are under a code of practice.
The noble Lord really cannot get away with this kind of thing. He is extremely plausible about it and says that, even under these new arrangements, it will be much safer, and everything else. He knows that that is a lot of nonsense. He knows that the only way effectively to ensure that the matters in this Amendment No. 42 are dealt with is by powers being given to the director himself. This Committee and the country can take note of the fact that he has declined to do so. The rest, so far as he is concerned, so far as the Government are concerned, is wishful thinking.
§ Lord Belstead
Very briefly (because people do read the Official Report of your Lordships' 936 proceedings) I think it is important that I should say to the noble Lord that, with respect, anybody who reads his speech could feel that standards, so far as appliances are concerned—and that means the appliances which are used by ordinary people every day—will be lower, and therefore there is reason, because of this Bill, to be worried. I sought to go through the three main areas which there are to show that standards will be higher. So far as complaints are concerned, the Gas Consumers Council is specifically enjoined under Clause 33 to be able to investigate complaints—
§ Lord Belstead
That is quite right. So far as the sale and marketing of appliances is concerned, this is already under the eye of the Director General of Fair Trading and the Monopolies and Mergers Commission, and that is a situation which is going to continue. So far as the enormously important matter of the actual standards of the machinery is concerned, particularly imported machinery, it is not a question of wishful thinking so far as the Department of Trade and Industry is concerned. They are currently preparing regulations which they will introduce for all gas cookers, whether they are made at home or overseas.
I really would ask the noble Lord to accept that standards of safety relating to appliances are going to be tighter and are going to be higher as a result of this Bill. I think it is important that that should be said so that consumers and customers can be assured it is so.
§ Lord Gallacher
I thank the noble Lord the Minister for the answer he has given us. In view of that and in view of the assurance he has offered us, particularly about the proposal to ensure standards of safety of the appliances by the Department of Trade and Industry—which I think was the main thrust of a recent television programme on the subject—I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ 12 midnight
§ Lord Ezra moved Amendment No. 43:
Page 3, line 19, leave out paragraph (b) and insert—
(" (b) to promote energy efficiency and economy on the part of persons authorised by or under this Part of this Act to supply gas, and in particular to ensure that in acquiring gas supplies, the principle of least cost resource acquisition is observed;").
§ The noble Lord said: I should like to move this amendment in conjunction with Amendments Nos. 44 and 45. There are in effect two issues raised by this series of amendments. One concerns the question of energy efficiency, which we feel should be strengthened in the references made to it in this Bill. Secondly, there is the question of the principle of least cost resource acquisition. I should like to deal with that first.
§ This principle is well known in the regulation of public utilities in the United States. What it does is to ensure, by means of the regulatory authority, that the utility company acquires the resources that it exploits 937 at the least cost. This is particularly relevant having regard to the tariff price formula, which allows for the cost of the resource to be reflected in the price. That being so, it is a corollary, it seems to us, that the resource cost should be the lowest possible so that the resultant price should be the lowest possible; and we believe that it is a proper obligation to put on the Secretary of State and the director under this clause to ensure that that is done. That is the principle of least cost resource acquisition.
§ There has been much debate about the question of energy efficiency during the passage of this Bill through the other place.Much reference was made to it in this Chamber during the Second Reading. These are quite modest and moderate amendments which seek to ensure that the question of energy efficiency is dealt with more effectively in this Bill. I beg to move.
§ Lord Stoddart of Swindon
I should like to speak to this group of amendments and support very much what the noble Lord, Lord Ezra, has just said about least cost resource. We do not actually have to go over to the United States, because we have a Select Committee on Energy in the other place, and the noble Lord, Lord Ezra, will remember that they carried out an investigation and made a report on conservation. This was just one of the problems which they investigated, and what they found was that the country could save money through not having to build a power station by embarking upon an energy conservation programme.
We do not actually have to go to the United States for proof of this: our own Select Committee in another place investigated it and found exactly the same. It is a concept which ought to be taken note of and acted upon because, as we on this side have said so many times, energy and energy sources are scarce, they will get scarcer as the years go on and we need to conserve them.
Even in 1986, Energy Efficiency Year, which was sponsored not by the Opposition but by the Government, it seems necessary to stress the importance of energy saving to the nation. The Government's stated aim is to reduce the nation's fuel bill by some £7,000 million putting Britain at the top of the international league for energy efficiency. That is entirely laudable and is marvellous. In those circumstances, I should have hoped they would support our amendments tonight, because they help them to do just that.
Energy efficiency benefits all consumers. Householders have lower bills and greater comfort, while business and commerce cut their energy costs, maintaining international competitiveness and increasing their profits without cutting manpower. I could be Peter Walker speaking. That is just the sort of thing he is on about. That is precisely what he is exhorting us to do. So again I ask noble Lords opposite whether they are going to accept our amendments, because we want to help them and we are in tune with the Secretary of State for Energy.
However, despite their public spirited espousal of the benefits of energy saving, the fuel suppliers are all competing to increase market share and sales. Gas is already leading the market share in every sector and is approaching saturation point in the domestic sector, 938 yet they have projected a further growth in sales of 15.6 per cent. over the next four years. This further growth can come from only two sources: from taking market share from still nationalised and regulated competitors or from growth in energy sales. If British Gas is privatised in an unregulated fashion, as the Gas Bill presently proposes, there seems to be no restraint upon their intention to increase sales at the expense of the electricity and coal industries—industries which are still restrained by their public ownership.
The Government's policy on depletion is to extract gas from the North Sea and sell it as quickly as possible. A better return on capital employed by the BGC and any other private gas supplier may be obtained by compelling British Gas to undertake a thorough energy conservation programme, rather than rushing ahead with the increasingly expensive exploitation of gas fields. In Energy Efficiency Year, the opportunity must surely be grasped to ensure that a privatised gas industry actually undertakes such a conservation programme.
Why should energy utilities promote energy saving? As well as having a general duty to ensure that consumers are given information and assistance to allow them to use their energy as efficiently as possible, utilities are a very logical choice to promote energy saving schemes. British Gas has contact with all gas consumers, has the manpower and infrastructure and, moreover, the self-interest of ensuring that consumers use their fuel efficiently. However, experience and the stated expansionist aims of British Gas suggest that the privatised company will be more concerned with expanding its empire and sales, than with helping consumers to lower their onerous fuel bills.
In the United States, to which the noble Lord, Lord Ezra, referred, where many utilities actively and comprehensively promote energy saving, it is undeniably the case that they have done so at the behest of their regulators. But of course our regulator will not be able to do that. To quote from Lessons from America—which the noble Lord has undoubtedly seen—"The Regulation of Gas and Electric Utilities in the USA", which was published by the Association for the Conservation of Energy,It is an unrealistic approach to human nature to expect supply orientated, engineering dominated, utilities and their personnel to change their attitudes for demand reduction without some outside impetus. This impetus has come, in many cases, from Public Utility Commissions.However, a second lesson which we can draw from this experience is that gas and electricity supplies, once having embarked on a programme of energy saving at the aegis of their regulators, rapidly appreciate the benefits of such a programme not only for their consumers, but also for their shareholders. That ought to appeal to the noble Lord, if nothing else does.
The following quotation from a brochure of the Pacific Gas and Electric Company illustrates this point:PG&E has been offering customers conservation and alternative energy options since the mid-seventies. These programmes help our customers regain control over the energy bills and help the company control its costs of doing business.Pacific Gas and Electric offers its residential consumers rebates or no interest loans for energy saving measures, with free installation for those on low incomes. Industrial and commercial energy saving is 939 promoted by a wide range of incentives. As the executive vice-president of the company stated in 1984:Our priority … is to continue to invest in conservation and load management. These programmes have been very effective and are expected to continue to be so in the future … These programmes are considerably less expensive than the cost of adding new capacity and are clearly less risky from an investment perspective".That is the experience from the United States, the greatest capitalist country in the world and where competition is the order of the day. But where monopoly is the case, regulation, and strict regulation, is also the order of the day.
Why on earth do our Government not adopt the same approach? It has been successful in the United States. It has been successful for the consumer, it has been successful for the companies and it has been successful for the shareholders. We have seen that. We believe that our Government have a lot to learn. We are giving them the opportunity in this group of amendments to show that they care about long-term energy conservation. I hope that they will take it either by accepting our amendments or by saying that they accept our arguments and will come forward with their own amendments in due course.
§ Lord Belstead
The first of the three amendments moved by the noble Lord, Lord Ezra, centred upon the principle of least cost resource acquisition. As may be remembered, this was strongly resisted for good reasons in another place when it was discussed. This requirement would extend the director's field of action upstream and into the vetting of the purchase price of British Gas. The Government are clear that this is not appropriate. British Gas has every incentive to purchase its gas supplies cheaply since it is in competition with other fuels and energy sources. Indeed, as my right honourable friend commented in giving evidence to the Select Committee on Energy, if the director of Ofgas could assess better than British Gas what gas purchases the company should be making, the director should really be the chairman of British Gas.
Moreover, a major aim of privatisation is to free British Gas from bureaucratic influence wherever possible. This amendment would bring Ofgas into the area of British Gas's detailed management in an unnecessary way. If the Committee will forgive me for saying so, I am not attracted by the constant references to the United States. My advice is that in the United States the over-control of prices in the 1970s led to massive shortages in supply.
Amendment No. 44 would require British Gas to have an energy saving programme monitored by the director and my right honourable friend. The noble Lord, Lord Stoddart, was generous in what he said about the £7 billion of savings that are being made in the great energy saving campaign at the present time. That is so and is all backed up by British Gas's considerable R & D effort for all sectors.
§ 12.15 a.m.
§ I would only add that the requirement in Amendment No. 44 to have a programme that clearly British Gas already has would not add very much to 940 the strong commitment to energy efficiency. To the extent necessary, the Department of Energy and its Energy Efficiency Office keep in touch with British Gas, and I would not have thought there was any necessity to add to that.
§ Then there is Amendment No. 45, which would require my right honourable friend and the Ofgas director to promote the efficient use of gas by means of advocacy and advice, and for the director to provide financial assistance. Again, all those functions are carried out by the Department of Energy's Energy Efficiency Office over a much wider field than just gas use. In addition, the Ofgas director already has the power to provide information and advice on efficiency of gas use to tariff consumers under Clause 34.
§ The Government are by no means without sympathy for the intention of the amendments, although we believe they are covered by ways that are more suitable. One point that I ought to make is that if the amendments were to be pressed they would be, with respect, in the wrong place. I do not want to split hairs, but Clause 4, which we are on at the moment, deals with the duties, whereas the functions of my right honourable friend and the director are set out later in the Bill. However, there will be further opportunity for debate on this particular matter, as on many other matters, when we reach Clause 9. For the moment, I do not think that this is the right place for the amendments, apart from the fact that the Government would not wish to accept them.
§ Lord Ezra
In view of the fact that the Minister has said that this matter might more appropriately be dealt with under Clause 9, that is something we must obviously take into account. However, I shall comment on the Minister's remarks concerning the principle of least cost resource acquisition.
It is not correct to say that that would be putting the director in the position of running the British gas industry. It would be ensuring that the price formula was properly operated. If the British gas industry was not going to be in a virtual monopoly position vis-à-vis the domestic consumer, and therefore necessitate having a tariff price formula that is meant accurately to reflect the cost of producing the gas in the first place and of acquiring it in the first place, then it would not be necessary to make the proposition about least cost resource acquisition.
That being so, we on this side of the Committee are very disturbed that the proposal is being dismissed so readily. I wish that the Government would at least take it away and think about it. There is a real problem here. The tariff is, in a sense, a cost-plus tariff, and what worries us is if there is no obligation of any sort to acquire least cost resource. The Sleipner gas incident is a case in question. Had it been acquired and developed, and had the price been much higher under the contract than for alternative sources, then the consumer, under the tariff arrangement proposed in this Bill, would automatically have had to pay for it. We believe that that is something that ought to be safeguarded against in the provisions of the Bill. It may be that the way proposed is not the best, but I wish that the Government would at least think about this issue. There is, as we see it, a real problem here.
941 So far as concerns the energy efficiency side, if the Minister is saying that we can properly raise that matter in Clause 9 and elsewhere in the Bill, then we shall return to it. I am prepared to withdraw the series of amendments, provided we may have some assurance that the question of the resource cost will be considered.
§ Lord Belstead
If the noble Lord is putting that question to me in the context of the formula for the consumer tariff, because the matter in the forefront of the noble Lord's mind is his concern that the factor in the formula for passing on the cost of gas to the consumer will lead to an unreasonable burden on the consumer, then that is something we must debate when we come to the formula, which we will not do tonight.
I like to think, from what I have managed to discover about the formula, that it will be a very real defence for the consumer against any unreasonable rises in price, but we must debate the formula in order to be able to worry that out. So I think, if the noble Lord will forgive me for saying so, that rather than giving him an undertaking that we will look at least cost resource as a principle, which we do not like on this side of the Committee, perhaps it would be better, if the noble Lord wishes to raise that again, that he should do so. I also suggest that we return to the other aspect of the subject on the tariff formula when we come to it.
§ Lord Stoddart of Swindon
In relation to the noble Lord's reply on Amendment No. 44, I have no doubt that the present British Gas Corporation are co-operating with his department to a certain degree. I do not know that they have been actual leaders in the field of conservation; certainly I have not noticed it myself. As a customer I have had no approaches from British Gas, and I do not know whether anybody else has had an approach from the corporation, suggesting to me that I should conserve energy and that they would help towards that. Certainly they have not been overanxious to date, but even the co-operation they have been giving to the Government at the present time is as they are presently constituted, as a nationalised industry, as an industry under public control.
What we are concerned about is what will happen when the industry goes under private control, when the Government will have no influence at all on the decison-making powers of British Gas plc. But even when they are under private control, in the national interest we believe that conservation is the right policy. That is what the noble Lord has failed to answer. Bearing in mind that these amendments appear to be in perhaps not the wrong place but not the most desirable place, I, like the noble Lord, Lord Ezra, will withdraw my amendment, presumably we shall be able to return to it under Clause 9, and no doubt we shall do just that.
§ Lord Diamond
I am bound to say, very shortly, that though I am most grateful to the Minister for having drawn our attention to areas or clauses in the Bill where discussion of these matters can perhaps more appropriately take place (and for that we are very grateful) it would really be helpful if he himself would 942 take on board in the meantime that we have two major difficulties. Stripped of all complications, there is a cost-plus price formula. A cost-plus means something added on to the cost, and we are talking about the basic cost of gas. That is one problem.
There is the other problem of a conflict between the long-term national interest of gas conservation and the possible short-term profit maximisation interest of a privatised gas supply company to maximise its sales. The national interest must be protected but without special provision it will not be. I hope the Minister will take on board that these are our real anxieties and that we must come back and debate them fully.
Lord Bruce of Donington
Just to amplify that point, if I may, will the noble Lord give the Committee an undertaking that if the appropriate amendments are introduced within what he says is the context—that is, the context of Clause 9—he will not then plead that the amendments have been introduced in the wrong place and that they ought to have been introduced where they were originally?
§ Lord Belstead
I certainly will not do that, but if we debate the same subject in the same way again on Clause 9, I may give a rather short answer.
§ Amendment, by leave, withdrawn.
§ [Amendments Nos. 44 and 45 not moved.]
§ Lord Stoddart of Swindon moved Amendment No. 45A:
§ Page 3, line 23, after second ("the") insert ("treatment, storage, liquefaction, conversion to gaseous state,").
§ The noble Lord said: Clause 4(2)(c) seeks to protect the public from dangers arising from the transmission or distribution of gas through pipes or from the use of gas supplied through pipes. That clause and subsection gives the Secretary of State and the director general the duty to exercise their functions in a way calculated to ensure public safety in only certain areas.
§ As I said, the Bill currently specifies dangers arising from the transmission or distribution of gas through pipes or from the use of gas supplied through pipes, but this leaves out important elements which are part of the gas supply service processes which BGC currently undertakes and in which any other public gas supplier may become involved; for example, its treatment. Gas is treated in a variety of ways. It is cleaned and odorised, and it may need to be heated or cooled, depending on the use to which it is to be put. It is subject to compression or decompression, again depending on circumstances. In addition, chemicals are added to prevent the drying out of joints in low pressure mains, and thereby to prevent leakage.
§ As regards storage, liquefaction and conversion to gaseous states, any supplier who is endeavouring to ensure a continuous supply of gas to his customers will need to store gas to ensure cover at peak periods. Storage facilities vary from the traditional gas holders, with their associated environmental and safety problems, to the use of underground natural cavities, which BGC is currently developing on the Yorkshire coast. One important and convenient method of 943 storage involves liquefying gas, either natural gas or butane (which is still used to top up supplies), and storing it at low temperatures in liquid form.
§ BGC in 1984–85 had seven such liquefied natural gas storage centres in various parts of the country, including one each in Scotland and Wales. These centres have both underground and overground storage facilities. Obviously, when the gas is to be used it has to be converted back to a gaseous state so that it can be transmitted and distributed in the usual way.
§ There is certainly reference in the licence to safety and to these processes, but liquefaction is specifically excluded from the definition of "transmission system." I think it would be very useful if the noble Lord could comment on what I have said and on the amendment, because it is puzzling that in the Bill the transmission and distribution of gas is the only process mentioned. I think the noble Lord will agree that these other processes are indeed potentially dangerous. Therefore, we need some reassurance on this point. I beg to move.
§ Lord Belstead
The noble Lord, Lord Stoddart, has raised a very important point concerning safety, but I can give the noble Lord an assurance that all the aspects mentioned in his amendment are covered by existing legislation—the Factories Act 1961 and the Health and Safety at Work etc. Act 1974.
Under the latter of those two Acts, two sets of relevant regulations have been made. These are, first, the Control of Industrial Major Accident Hazard Regulations 1984, which oblige persons carrying out such activities to identify major accident hazards, to take steps to prevent or limit the consequences of any major accident, to report any such accident to the Health and Safety Executive, and to provide emergency plans and inform the public of the nature of the hazard, the safety measures and the correct behaviour that should be adopted if an accident occurs; and, secondly, the Notification of Installations Handling Hazardous Substances Regulations 1982, which oblige suppliers to notify the Health and Safety Executive of existing sites where specified quantities of gas are present on site.
I believe that it is right that these operations should be subject to the direct control of the Health and Safety Executive, and in the light of the explanation that I have just given I hope that the noble Lord will feel that in other legislation the matters that he has raised in his important amendment are in fact covered.
§ 12.30 a.m.
§ Lord Stoddart of Swindon
Yes; I thank the noble Lord for the information that he has just given. I accept that regulations exist which deal with the subjects that I have mentioned, but there are two points which I should like to put to the Minister. Certainly one of them was raised in another place during the Committee stage of the Bill, and it concerns the adequacy of the staff of the Health and Safety Executive to deal with these problems, particularly when British Gas is privatised. Whether we like it or not, a publicly-owned industry is more responsive because it is under public control and subject to public 944 pressure. Therefore, we are concerned that the Health and Safety Executive should have adequate staff to be able to deal with the privatised corporation. Apparently it is short of staff.
The other puzzling matter is that the Government in one respect make themselves responsible—and quite rightly so—for certain safety aspects, so it looks rather odd when other aspects of the gas industry are excluded. Perhaps the Minister would like to think about this point and see whether it would be helpful if the Secretary of State or the director had a general oversight, not only of transmission and distribution but of these other responsibilities as well. That would give a certain amount of reassurance. However, I accept absolutely that these matters are covered in other Acts.
§ Lord Belstead
So far as concerns the second point, that is of course indeed the case, though I should just like to look at what the noble Lord has said on that particular aspect. As regards the first point put to me by the noble Lord, the Health and Safety Executive is recruiting inspectors and proposes to increase its effort in respect of gas safety matters by over 60 per cent. The fact of the matter, as I think the noble Lord knows, is that the Health and Safety Executive numbers reached a low point in 1984. There has since been a recovery, and recruitment is taking place at the present time.
§ Amendment, by leave, withdrawn.
§ Lord Ezra moved Amendment No. 46:
Page 3, line 25, at end insert—
(" ( ) for the purposes of paragraph (c) above, to promote the advancement of the skills of the person employed by any persons authorised to supply gas by or under this Part by monitoring the provision by such persons of facilities for and access to training and education;").
§ The noble Lord said: On behalf of my noble friend Lord Lloyd of Kilgerran, I should like to move this amendment. It is intended to support the objectives of Clause 4(2)(c) by promoting training of the personnel involved in this safety work. I therefore think it is self-explanatory, and I beg to move.
§ Lord Brabazon of Tara
I can assure the noble Lord that there is no difference between us on the importance of training. The Government believe that this is important for all employees, though clearly there is an additional spur where the safety of the public is closely connected with the activities of the employees.
I am therefore glad to be able to reassure the noble Lord that expression has already been given to his concern in Section 2 of the Health and Safety at Work etc. Act 1974, which places a duty on all employers to provide information, instruction, training and supervision to their employees, and to conduct their business in such a way as to ensure that persons who are not in their employment are not exposed to risks to their health or safety. With that explanation and the assurance that the matter that the noble Lord has raised is already covered, I hope that he will be satisfied.
Lord Bruce of Donington
Can the noble Lord give the Committee the categorical assurance—and I mean categorical—that the provisions of the Act to which he refers specially cover:the advancement of the skills of the person employed by any persons authorised to supply gas by or under this Part by monitoring the provision by such persons of facilities for and access to training and education"?Will he give the Committee the specific undertaking that those highly specialised matters that are referred to in detail in words that are very clear in the amendment are covered?
§ Lord Brabazon of Tara
I cannot give the assurance that the noble Lord seeks that the wording of the 1974 Act is exactly the same as that in the amendment. However, if he were to look at Section 2 of the Act, I think he would find that in principle the matters covered are the same.
§ Lord Brabazon of Tara
At the risk of taking a little of the Committee's time, it states:It shall be the duty of every employer to ensure, so far as is reasonably practicable, the health, safety and welfare at work of all his employees.(2) Without prejudice to the generality of an employer's duty under the preceding subsection, the matters to which that duty extends include in particular—I come to the most important part:
- (a) the provision and maintenance of plant and systems of work that are, so far as is reasonably practicable, safe and without risks to health;
- (b) arrangements for ensuring, so far as is reasonably practicable, safety and absence of risks to health in connection with the use, handling, storage and transport of articles and substances."(c) the provision of such information, instruction, training and supervision as is necessary to ensure, so far as is reasonably practicable, the health and safety at work of his employees".I think that that covers the point that the noble Lord was asking.
§ Amendment, by leave, withdrawn.
§ Lord Gallacher moved Amendment No. 46A:
Page 3, line 25, at end insert—
("( ) to ensure that the gas supplier maintains proper services for the elderly and disabled including the checking of all domestic gas appliances free of charge.").
§ The noble Lord said: On behalf of my noble friend Lord Stallard, I beg to move Amendment No. 46A standing in his name. This is an amendment designed to give quite definite preferential treatment to certain categories—namely, the elderly and the disabled—first of all, in the matter of maintaining proper services to these categories and, secondly, including the checking free of charge of all domestic gas appliances which they may have.
§ That may seem a fairly sweeping proposal, and I think that it is. Nevertheless, having regard to the profitability of British Gas in its present guise and its likely profitability when it becomes a public company, I think that even at some cost to profits this is a service that might be offered to people who at best may be 946 forgetful and at worst may be of such limited means as not to be able to afford proper servicing of their appliances. In addition, if these appliances are neglected and people are living in proximity to other tenants, there is a possiblity of danger and even injury to such other tenants.
§ For those reasons, it seems to us that this amendment is worthy of consideration and I beg to move it.
§ Lord Belstead
I have listened to what the noble Lord said. He will be aware that British Gas has already made it clear that it will be continuing its free safety checks for the elderly and disabled and will continue the existing disconnection code. In addition, it provides a variety of services to help elderly and disabled people from special adaptions to cookers to free information and advice through home service advisers. The interests of the disabled would also be of particular concern to the Gas Consumers Council which will have at least one member with experience in that area.
There was, however, another aspect to the remarks of the noble Lord. The amendment imposes a duty in relation to a particular supplier. With respect, that is not, I believe, really appropriate. If a duty was to be imposed, it would have to be for public gas suppliers generally. One could not simply lay it on a single supplier. Moreover, the director and the Secretary of State can consider the needs of the elderly and disabled in exercising their duty at Clause 4(2)(a) where they have to protect the interests of consumers of gas generally.
Having said that and having listened to the noble Lord, Lord Gallacher, there may be a point here about publicising special services for the elderly and disabled. In the light of this short exchange, I should like to take that point away, think about it and see whether we can perhaps come back with something that makes it clear that services for elderly and disabled people should be publicised so that those concerned will know that the services exist. I hope that this may go some way towards what the noble Lord, Lord Gallacher, said in moving the amendment.
Lord Bruce of Donington
While the noble Lord is taking it away and giving it his consideration, for which we are very grateful, will he also give consideration to the extent that the undertakings and practice of a nationalised corporation can be binding on the successor company that is an entirely different and private organisation?
§ Lord Belstead
I am not entirely sure that those who are interested in the welfare of elderly and disabled people would want existing services cast in stone for evermore. It is much more likely that they would want to see services improved as time goes on. I shall certainly look at the point that the noble Lord, Lord Bruce, puts. I hope however, that he will accept that we should always be in a moving situation in respect of people who need particular help and not try to cast in stone the state of services previously. Nonetheless, I have said that I will look at the publication side. I shall certainly look, at the same time, at what the noble Lord, Lord Bruce, has said.
§ Lord Gallacher
In view of the promise that the noble Lord the Minister has given about wider publicity for existing services and the assurance that he has given my noble friend Lord Bruce about the future, I beg leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.
§ [Amendment No. 46B not moved.]
§ Lord Bruce of Donington moved Amendment No. 47:
Page 3, line 28, at end insert—
(" ( ) to ensure that due account is taken of the operations of British manufacturers and suppliers in the procurement policy relating to plant, equipment and appliances of a public gas supplier and to monitor the buying policies of such suppliers in this regard.")
§ The noble Lord said: This raises a point that was dealt with at some length during our debates on BritishTelecom. It was pointed out and not seriously contested by the Government that up to the time that it was privatised, it was the policy of BritishTelecom, wherever possible, to make its purchases of equipment, material and the rest from British manufacturers. Indeed, the statement was made and not contested that some 95 per cent. of BritishTelecom requirements were supplied by British manufacturers.
§ I do not need to remind the Committee that under modern conditions companies are very interdependent. The amount of sub-contract and cross-supply operations that goes on in this country occupies a significant proportion of the country's total economy. Therefore a reduction in the percentage of required purchases not only of material and equipment but also of services—a decline in the demand placed by a monopoly industry, normally made upon British manufacturers—can produce very adverse economic circumstances within the country. Indeed it can be shown, though this is not the time of night to show it, that it is precisely the opening of quite large sectors of economy to free competition in other countries differently placed and with labour rates at about 30 per cent. of those obtaining in Western Europe and under conditions sometimes of semi-dictatorship which has resulted in a very considerable decline and has accounted in part for the decline in British manufacturing capacity and has led to an increase in unemployment in the manufacturing industry in the United Kingdom.
§ With regard to British Telecom, when the measure was going through this Chamber, at the time noble Lords were assured by the noble Lord, Lord Cockfield, that so far as he was aware it would be the policy of the new privatised company to continue the same kind of policies which had been pursued when British Telecom was a public corporation. He did not commit himself; he could not. But he certainly gave the Chamber the impression that that was going to be the case.
§ 12.45 a.m.
§ In the case of the successor company, when the company is privatised, if it is going to follow the policies that have been outlined by the noble Lord, Lord Gray of Contin—who as usual washes his hands with the observation that it will all be up to the 948 consumer; it will all be free competition, and this is the best way of regulating the market—then I predict that the new privatised company will seek its supplies from overseas, so far as is possible. In the case of some of these countries—particularly the newly industrialised countries—much of the equipment can be made more cheaply due to the factors which I have described. This would be in sharp contrast with the policies pursued by the very large concerns in other countries in the world. Japan ensures that she is well protected in her own purchases, as does France and Germany. It is only we who—under circumstances of uneven world development, uneven wages structures and uneven political structures which accentuate economic differences—endeavour to throw the market open.
§ With the experience of British Telecom over the past couple of years, during which there has been a decline in the proportion of British manufactures used by British Telecom, I should have thought that on this occasion the Government might stick in an oar for British manufacturers. It is not unreasonable to ask in the national interest that the Government follow the same path which most other countries of the world—including some very prosperous ones—follow for the protection of their own industries.
§ I sincerely hope that suitably chastened by what has happened in British Telecom, the Government at least have the decency to afford some protection to British industry by accepting this amendment.
§ Lord Brabazon of Tara
I have listened carefully to the points raised by the noble Lord. I have to tell him that British Gas has a most excellent record at the moment in buying British goods.
§ Lord Brabazon of Tara
If the noble Lord will allow me to continue my theme, one example of this is their development of the Rough field. The investment in Rough totals some £700 million. Of that about 85 per cent. has been spent with UK companies. This is a massive project and a massive amount of money and a huge benefit and compliment to British industry who won the contracts in the face of stiff worldwide competition. So there was no case of protectionism when those contracts were awarded. This track record is proof that British industry can compete effectively with the rest of the world.
Members of the Committee do not need reminding that one of the cornerstones of the Government's philosophy is to create a sound economic base in this country so that real growth and industrial development can take place. I am sure that those aims will be shared by noble Lords opposite. However, I do not accept that this amendment would advance these aims. British Gas is being privatised so that it can maximise its efficiency, be released from artificial and bureaucratic constraints and face the more realistic disciplines and pressures of the private sector. This Committee knows it is our belief that this will be good for the consumer and for the industry. British Gas's success in the past has depended to a considerable extent on its purchasing policy, and it has been crucial that it made use of the best quality and most reasonably priced goods on the market.
949 Its general record in purchasing from British firms has been as excellent as that in the North Sea. Nothing in the Bill changes that. I am confident that so long as British industry continues to maintain its high standards, its record of success in winning contracts from British Gas will also continue. I cannot accept that it would be helpful for the director or the Secretary of State to have the extra function.
I would, however, point the noble Lord a little further forward in the Bill to the effect of Clause 34, subsection (1) of which requires the director to keep under review activities connected with the supply of gas through pipes. This has deliberately been drafted widely so that the director may keep under review matters such as gas production, appliances and so on, even though he has no specific functions. The latter part of the amendment is therefore already provided for, so far as the director needs to keep those matters under review.
Finally, perhaps the main reason that I cannot accept this amendment this evening is that such a specific focus on British products would be contrary to Article 30 of the Treaty of Rome. For the reasons that I have given, I must ask the noble Lord to withdraw his amendment.
§ Lord Williams of Elvel
I wonder whether the noble Lord could reflect on one or two points that he has made in his reply. In the United States of America the Buy America Act is very influential, indeed predominent, in the purchasing policy of utilities. It was not very long ago that one of the Texan utilities tried to buy a transformer from outside the United States. It was effectively not allowed to do so and was required to go to Westinghouse for its transformer.
Perhaps the noble Lord would also reflect on the Japanese situation, where Japanese utilities are simply not authorised to buy equipment from outside Japan. Perhaps he would also reflect on the French situation where, apart from Westinghouse licences, which are in existence for the nuclear power programme and other electricity generation, French equipment is more or less mandatory for all utilities. Perhaps he would also pay attention to the German situation where, although there is an official disincentive to the purchase of foreign equipment, it so happens that German utilities always buy equipment made by German manufacturers.
I believe that if the noble Lord reflects on these points he will come to the conclusion that in our legislation if we are to privatise this major monopoly we must ensure that its purchasing policies reflect what, after all, is only common practice among our industrial competitors. When noble Lords opposite talk about the free market, I think that they must recognise that there are constraints in other countries. In this amendment we are simply asking that these constraints should be operated here. It does not seem to me that that is a very serious condition to insert into the Bill.
As we all recognise, we have a problem of industrial reconstruction in this country. One of the ways in which many noble Lords have suggested that we reconstruct our manufacturing industry is by the use of public expenditure in the purchase of British-made 950 products. If we are now to allow a major utility to purchase quite freely from the world market—from Japan, America, France or wherever it may be—it seems to me that we are putting ourselves at a disadvantage which other countries do not have, and I believe that the noble Lord would do well to reconsider his position.
§ Lord Brabazon of Tara
I followed the argument of the noble Lord, Lord Williams of Elvel, particularly when he mentioned Germany. He said that although the utilities were under no obligation to purchase German goods, they invariably did so. I was glad they did so othewise they might perhaps be caught by Article 30 of the Treaty of Rome. That does not apply to Japan and the United States.
What I have said so far is that British Gas at the moment buys a very great deal from UK suppliers. It does not because it is forced to do so but because UK suppliers have managed to produce the goods of the quality and in the face of worldwide competition. I see no reason why that should not continue. Having said that, I point the noble Lord, as I said earlier, to the duty of the director, which is outlined further on in Clause 34; but I cannot accept that we can fly in the face of the Treaty of Rome and put such an amendment on the face of the Bill.
§ 12.57 a.m.
§ On Question, Whether the said amendment (No. 47) shall be agreed to?
§ Their Lordships divided: Contents, 5; Not-Contents, 12.
|DIVISION NO. 3|
|Bruce of Donington, L.||Stoddart of Swindon, L.|
|Gallacher, L. [Teller.]||Williams of Elvel, L.|
|Ponsonby of Shulbrede, L. [Teller.]|
|Belstead, L.||Monk Bretton, L.|
|Brabazon of Tara, L.||Morris, L.|
|Brougham and Vaux, L.||Skelmersdale, L.|
|Denham, L. [Teller.]||Swinton, E. [Teller.]|
|Gray of Contin, L.||Whitelaw, V.|
|Long, V.||Wynford, L.|
§ 1.4 a.m.
§ The Chairman of Committees
As it appears that fewer than 30 Lords have voted, in accordance with Standing Order No. 55 I declare the Question not decided, and, pursuant to the Standing Order, the House will now resume.
§ House resumed.