HL Deb 19 May 1986 vol 475 cc80-123

7.53 p.m.

The Minister of State, Ministry of Agriculture, Fisheries and Food (Lord Belstead)

My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved, That the House do now again resolve itself into Committee.—(Lord Belstead.)

Lord Stoddart of Swindon

My Lords, before the House again resolves itself into Committee, I feel that I must make some comment about the time that we are entering upon this business. I must express my concern and, indeed, displeasure that we should be entering upon this Bill, perhaps the most major and most contentious Bill, at eight o'clock in the evening. Noble Lords opposite will know that we expected to enter upon this Bill at a much earlier hour, certainly not later than four o'clock. I simply cannot understand why the Government decided to put down the Armed Forces Bill in front of the Gas Bill.

The Armed Forces Bill, judged by the discussion that took place on it this afternoon, certainly produced a fair amount of contention. It aroused a great deal of interest, as one can see from the number of noble Lords from all sides who spoke. We have lost a lot of time. I do not know until what hour the Government intend to sit tonight. What is certain is that we have lost nearly a day's debate on the Gas Bill.

What is more—noble Lords will understand what I am talking about—we have lost time during an important period when noble Lords may have wanted to be here to vote. Now, of course, they have made their other arrangements and they may have left the premises. That is unfortunate. From the Opposition point of view, I cannot call it a dirty trick, because I am sure that there was no intention to play a dirty trick on the Opposition. But the Government will understand that the Opposition—I mean the whole Opposition—are discontented over what has gone on in relation to the Gas Bill.

I do not intend to divide on the Motion, That the House do resolve itself into Committee. That would perhaps be a little unreasonable. We can perhaps get a couple of hours, or three hours, on it. I am tempted to have a Division. Nevertheless, I want to be reasonable with the Government. I hope that the Government, during discussions that I hope will take place between the usual channels, will also be reasonable with us.

We are entitled to express the views that I have expressed. I hope that the noble Lord, Lord Belstead, the Deputy Leader of the House, who has heard what I have been saying, will consider the matter seriously and will agree that the Opposition have been injured and that discussion of the Bill has been injured, and that when the time comes he will see that proper discussion regarding additional time for the Committee stage of the Bill will be fruitful.

Lord Belstead

My Lords, I quite understand why the noble Lord, Lord Stoddart of Swindon, has spoken about the late start of the Bill. We, indeed, share his regret that the Bill did not start earlier in the afternoon. It was agreed through the usual channels that a Bill would be taken beforehand. That Bill proved, as the noble Lord rightly said, to have attracted more interest than perhaps we had thought.

I have listened carefully to what the noble Lord has said. One matter with which I do not agree is that starting after dinner means that the Bill has been injured. Some of us are at our best after dinner. Let us hope that this will be the case as we again discuss the Bill in Committee.

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD WELLS-PESTELL in the Chair.]

Clause 4 [General duties of Secretary of State and Director]:

The Deputy Chairman of Committees (Lord Wells-Pestell)

In calling Amendment No. 47, I should remind your Lordships that the debate upon it was adjourned at the previous sitting pursuant to Standing Order No. 55. Unless, therefore, any noble Lord wishes to continue the debate, I shall now put the Question.

8 p.m.

Lord Bruce of Donington

I regret to inform the Committee that I have, in this instance, to continue the debate on Amendment No. 47 because, of course, it was at a very late hour that the amendment was discussed. Precisely because of that the proceedings were somewhat attenuated, and the amendment did not get a thorough airing. The amendment was:

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."). This is one of the most important amendments to the Bill. It seeks to insert into the statute, 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". Supplies and materials bought by British Gas in the year 1984–85—no accounts are yet available for the year 1985–86—amounted in total to about £1 billion. That was spent mainly in the United Kingdom for the purchase of all the supplies—other than gas—that are needed by the British gas industry. A very substantial proportion of the spending of £1 billion per annum accounts for a very large amount of employment in the manufacturing industries of this country. When industries were nationally owned—for example, British Telecom—there was always the assurance, which did not require any legislation, that the utmost effort would be made by the management of British Telecom to get most of its supplies from this country. Indeed, as we were told in the Second Reading debate on the British Telecommunications Bill, some 95 per cent. came from the United Kingdom. It did not need any regulation or statute to accomplish that.

One of the great advantages of a nationalised industry is that those who run it, from the managing or governing director down, know perfectly well that they are answerable to both government and Parliament and, through them, to the country. This therefore makes it very easy for them, without having any legislative constraints placed upon them, to follow policies in the purchasing field which they know are in the best interests of British industry, in particular of British manufacturing industry, and through industry to the economy at large. The more people are employed in manufacturing industry—as the noble Lord should know very well by now—the more people are employed in those other industries which supply and serve manufacturing industry. The multiplier factor may be as high as two-and-a-half times. In other words, every time a person in the primary industry becomes unemployed it does not create merely one other unemployed person, but probably two-and-a-half because that is the figure generally accepted by economists as being the multiplier factor. This is therefore a matter of very great importance indeed.

The noble Lord, Lord Brabazon of Tara, when he was taxed with this point—true enough, it was almost one o'clock in the morning—delivered himself of the observation: 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"—[Official Report, 8/5/86; col. 948.] He went on to outline the virtues of competition in this matter. But, as if to clinch the point, having said that even if he accepted the amendment we put forward, which made it obligatory upon the successor company, broadly speaking, to buy wherever possible British manufactures, he concluded by saying: 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".—[col. 949.] The noble Lord still has time to reconsider this matter if he wishes. He will agree that in order to shorten our proceedings I gave him notice that I would raise this point so that he could seek specific advice. Article 30 of the Treaty of Rome reads as follows: Quantitative restrictions on imports and all measures having equivalent effect shall without prejudice to the following provisions be prohibited between Member States". Article 31 goes on to enlarge upon that.

The question I have to ask the noble Lord on that point is whether he considers that this amendment, if incorporated into the Bill itself, would amount to a "quantitative restriction". If the noble Lord still thinks it does, I would invite him—and this is one of the reasons I gave him notice; there have been oceans of cases before the European Court—to say whether he has any case law which would back up his contention, because it would be very helpful to us to know.

For the moment, however, I am prepared to accept what the noble Lord has said. If I accept what he has said, I ask the Committee to consider what flows from it. It means that Her Majesty's Government know perfectly well that a publicly-owned industry, without any regulations whatsoever, and in the general interests of the British economy, can buy British. But to put restrictions on a private company means that that company, if it is to pursue its short- and medium-term profit, is bound to buy in the open market.

The noble Lord and the Government knew perfectly well at the time they introduced their privatisation Bill that the new privatised company would not follow, or could not be compelled to follow, the policies pursued by the publicly owned undertaking. This exposed once again the hollowness of the whole Bill. The Bill has nothing to do with the prosperity of British Gas. It has nothing to do with the welfare of the consumer or the quality of the services. It is a pure money-raising exercise that the Government want to carry through in order to bribe the electorate prior to the election. The fact that they declined to accept the amendment underlines the whole point. If they wanted to be of assistance to British industry why did they deliberately deprive it of the safeguards it had through the existence of the public corporation and throw it to the winds of a private enterprise company responsible to nobody but its shareholders and not bound in any way to give any preference to British-produced manufactures whether they be pipes, appliances, cookers or whatever?

I still hope that at this stage the Government, if they are completely dedicated, as we are told, to the national interest, as a safeguard to British industry as well as the British public, will see the wisdom of accepting this amendment and showing their good faith. Otherwise, the country will know exactly the truth that lies behind their propaganda claim that the whole thing has been done for increased efficiency and the benefit of the consumer. I beg to move.

Lord Taylor of Gryfe

On these Benches I would like to support the amendment that the noble Lord, Lord Bruce of Donington, has so persuasively moved. We have the example of British Telecom before us, and I think that is not reassuring from the point of view of all of us who are concerned about the survival of British manufacturing industry. No such provision was contained in the British Telecom Bill that this House passed, and before British Telecom was privatised some 95 per cent. of its requirements were taken from British industry. Since then a good deal of its ordering of new supplies has been placed in other countries.

Now, it may be said by the Minister that to discriminate in favour of British manufacturing is a violation of the Treaty of Rome, and the noble Lord, Lord Bruce of Donington, dealt with that point, but surely the Treaty of Rome does not limit the capacity of a British-owned industry to work closely with its suppliers in the development of research and development within our country so that almost automatically it becomes the supppliers when bids are invited. This is the case and was the case in the development of System X in the telecommunications industry with British Telecom and GEC and Plessey, who worked together to ensure that Britain had an excellent piece of plant and was competitive in every way.

Now, if British Gas is going to be set free in the proposals of the Bill before us, I do suggest that it is important to British industry, and particularly for the future of the manufacturing sector, that there should be some guidelines to the company so far as the encouragement of British manufacturing is concerned. The nationalised industries as a whole had something like 90 to 95 per cent. procurement from British sources and it would be a serious blow to British manufacturing capacities if we were not to advise in this Bill or lay down a marker to the new board of British Gas as to what Parliament would expect them to do in discharging their responsibilities.

I do not think that any agreement of this kind will necessarily featherbed British industry because there are many competitors in the field of supplies in heavy engineering who are supplying the gas industry. It is not a monopoly situation, so the consumer will not be exploited as a result of such arrangements, but I would seriously ask the Government to look at this question in the light of some recent statements we have had on the state of the economy and the steady deterioration in the position of British manufacturing industry, particularly in the engineering section. I would ask them to lay upon the new company some kind of obligation to pay attention to the national welfare in that regard.

8.15 p.m.

Lord Sanderson of Bowden

This is indeed an important point raised from the Opposition Benches and I do not cavil at the point that it is in the interests of all British industry to buy British as much as possible. I look forward to hearing what the Minister has to say about our commitment to the Treaty of Rome and to seeing whether or not a clause of this sort would be breaking that treaty.

However, I did think that British Gas was already a signatory to the Memorandum of Understanding between the United Kingdom Offshore Operators Association and the Government, under which companies in the United Kingdom sector agree to give British suppliers of goods and services full and fair consideration. I do think we have to be careful where we tread in this matter. If I was a director of a company that made appliances for the UK gas industry and I was intent on increasing my business, I should wish to export. I should know (and I have quite a lot of experience of this in my own neck of the woods in the textile trade) that if we did not export we should not survive. I think it is extremely important, and I understand and sympathise with the view that British Gas should buy British and has bought British in every case where it is possible. Indeed great help and assistance has been given by the "Better buy British" campaign in this country, but I do think we want to look very carefully before we actually say to the British Gas Corporation that we insist, as the amendment seems to imply, that it buys British wherever possible.

Lord Bruce-Gardyne

I very much agree with what my noble friend Lord Sanderson was saying and I want to add that I do find the attitude of the Opposition parties somewhat bizarre. We have heard a great deal during the course of the debates on this Bill about the need to protect the consumer from the dangerous intentions of the British Gas Corporation in the private sector. I must admit that I have always felt, and indeed argued at other stages of this Bill, that the real anxiety is more likely to concern the well-being of the suppliers of British Gas and the shareholders of British Gas than the consumers, for whom Sir Denis Rooke seems to believe that he undoubtedly knows best. I find it hard to reconcile the proposition which lies behind this amendment with the protestations we have heard from the Opposition parties about the need to defend the consumer.

The noble Lord, Lord Taylor, told us there were ample suppliers and ample competition to ensure that even if this amendment were accepted the consumer would not lose out. If in fact these suppliers can offer the best terms to British Gas in the interests of the consumer, then they will get the business anyway. The assumption behind this amendment must be and can only be that it is important for the consumer to suffer so that the suppliers from British industry can be given a distorted competitive edge in the business.

I so much agree with my noble friend Lord Sanderson that if we go down this road we are inviting reciprocal treatment in our export markets. I am sure that cannot be wise and I must say I hope very much that, whatever may be the considerations under the Treaty of Rome, my noble friend advises your Lordships to resist this particular amendment.

Lord Brabazon of Tara

I will not repeat all the arguments that I used the other evening in dealing with this amendment. Perhaps I may start by going to Article 30 of the Treaty of Rome, which the noble Lord, Lord Bruce of Donington, particularly focused upon. The noble Lord indeed quoted the article, as follows: Quantative restrictions on imports and all measures having equivalent effect [and I would like to highlight those words] shall without prejudice to the following provisions be prohibited between member states. This amendment would require the Secretary of State and the director to exercise their functions under the Bill in the manner best calculated to ensure that due account is taken of the purchasing policy of public gas suppliers in relation to British manufacturers and suppliers. The clear intention of the proposed duty in the amendment is that the Secretary of State and the director should exercise their functions under the Bill differently in relation to two public gas suppliers, who are otherwise in exactly the same position, by favouring one of those gas suppliers who bought all British goods and disadvantaging the other who purchased a mixture of British, French and German goods. The effect of this would be that public gas suppliers would know that, in order to get favourable treatment from the Secretary of State and the director, they had to favour British goods over the goods offered by manufacturers and suppliers in other member states. The imposition of this duty in the Bill would therefore amount to a measure having equivalent effect to a restriction on imports, which is prohibited by Article 30.

Lord Taylor of Gryfe

I should like to ask how far industry in France is supplied from outside France. I have in mind the telecommunications industry, the gas industry and the nuclear industry.

Lord Brabazon of Tara

I do not have an answer to that, but I do not think that that is really the point. At the moment British Gas has a record of about 90 per cent. being supplied by British suppliers and most of that is won in competition and not just because they are British suppliers. I would go further than that. To answer the point made by my noble friend Lord Sanderson, who spoke about British Gas and offshore procurement, I would point out that British Gas is a party to the memorandum of understanding and the code of practice between the UK Offshore Operators Association and the Government under which companies operating on the United Kingdom continental shelf agree to give British suppliers of goods and services a full and fair opportunity to compete for orders. There is therefore no need for any new provision on offshore procurement in the Bill.

As I said last time, British Gas has an excellent record on this. For instance, as regards the Rough Field, 85 per cent. of the £700 million worth of orders generated were placed with British industry. I am sure that Members of the Committee are aware of the role of the Offshore Supplies Office; but if they are not perhaps I may remind them that the office assists in the promotion of the UK offshore supplies industry both at home and abroad. Procurement for the UK continental shelf is monitored to ensure that UK suppliers are given a full opportunity to tender for and win orders on a competitive basis. Taking the whole of the industry—not just what British Gas have done—this has been extremely successful in that in 1985 the total orders for operators was some £3.42 billion and the UK share was 80 per cent. of that.

Returning to the amendment, the noble Lord, Lord Bruce of Donington, asked me whether I had any case law to support this interpretation of Article 30. The answer is that I do not have any at present, but I am advised that that would certainly be the interpretation of this article if it were to come before the courts. I should have thought that that would be fairly obvious from what I have said.

The noble Lord then went on to talk about the supply of cookers, heaters and other appliances. I must tell him, first, that a vast number of cookers and heaters are not even supplied by British Gas; at the moment they are freely available on the open market as it stands, and quite a number of them are already imported. As has already been mentioned during the Committee stage of this Bill, the noble Lord will be aware that early next year the Department of Trade and Industry is proposing to introduce more stringent safety measures on the import of that type of equipment. However, I do not think that that is relevant to this amendment. As I say, a large number of these appliances are already outside the control of British Gas and are brought from elsewhere.

The noble Lord also seeks to compare the position of the present corporation and the new private sector company. This is not what we are debating. The noble Lord proposes to put a restriction in terms of nationality into the statute. We must object to that, and not to the final decisions of the management of British Gas, which already has an excellent record of purchase from British firms, and I see no reason why that should not continue.

My noble friend Lord Bruce-Gardyne quite rightly said that the Bill was about promoting efficiency and good value for the customer. I would refer the Committee to just a little further up the page from where it is suggested that the amendment should be made to the Bill, to Clause 4(2)(b). That states that one of the duties of the director and the Secretary of State is: to promote efficiency and economy on the part of persons authorised by or under this Part to supply gas". I am not quite sure how that would necessarily fit in with the amendment proposed by the noble Lord, Lord Bruce of Donington. I am quite certain that British industry can produce the goods to which the noble Lord referred efficiently and economically. However, let us suppose, for example, that British Gas went out to tender for a piece of equipment, and that that equipment produced by a German or French company was cheaper than that offered by British manufacturers. Where would we stand? Does the director insist on his role in Clause 4(2)(b) to promote efficiency and economy, or does he go to the noble Lord's amendment and say that the equipment must be British?

For all those reasons, and for the same reasons as I gave the other evening, I must reject this amendment and hope that the Committee takes the same decision as it did the other night.

Lord Bruce of Donington

I have listened to the noble Lord. He really cannot have it both ways. The amendment that I have put before the Committee does not say that British products shall be preferred; the noble Lord puts words in my mouth which were not there and they certainly are not in the amendment. The amendment simply says: to ensure that due account is taken of the operations of British manufacturers and suppliers in the procurement policy". That is all that is asked for. The noble Lord assures me that that is already the case. Therefore, what is his objection to the amendment? I invite the noble Lord's acute perception as regards this matter. He must know that the policies of a public corporation, responsible as they are to Ministers, to Parliament and ultimately to the people, are essentially long-term as well as short-term ones. A public corporation is not concerned with short-term profit. It may be concerned, and indeed should be concerned, with efficiency and with giving the customer the best possible value. There can be no complaint about British Gas as a public corporation on that account.

One thing that the Government have not been able to do when bringing forward this privatisation Bill is to allege that as a nationalised industry this industry has been inefficient. They have never made that allegation. They dare not so so. In fact, they dare not even attack it on grounds of profitability. It is an industry under public ownership which has taken care of efficiency but which nevertheless at the same time has sought to safeguard its own long-term interests and those of its customers as well as British industry generally.

The new successor company is a private limited company responsible not to the country, not to a Minister, not to the Government, but only to its shareholders. If the noble Lord were to survey the whole climate of the institutional and indeed private shareholder atmosphere in the City of London today, he would discover—and he knows this perfectly well—what they are after. They are after a short-term buck as quick as they can get it. We are afraid that when this industry is privatised the sheer pressure from the institutions, the pressure of the market in shares itself, will be to seek short-term profit and short-term capital gains.

I should like for a moment to address myself to the remark made by the noble Lord, Lord Bruce-Gardyne. The noble Lord is such an expert in these affairs. With the full knowledge that this bull market on stocks and shares cannot go on indefinitely, you can bet your life that the shareholders of the new British Gas company will seek as quick a buck as possible as long as they can possibly do so. This is what we want to safeguard against, and this is the reason why this amendment is put down. Once again it does not seek preferential treatment. It seeks that "due account is taken". The words are precise. They do not permit of any particular exaggeration.

When are the Government and their supporters going to take the attitude towards their own manufacturing industries in this country that is taken in other countries among their friends in Europe—in France and in Germany—and in Japan, Korea, and anywhere else? They are proud to look after their own industries. They do not mouth this wretched cackle so well beloved of the City that they must stand up to competition wherever it may come from, fair or unfair—in the case of Korea, as the noble Lord knows perfectly well, miserably unfair at that. I am sorry that the noble Lord cannot accept this amendment. A question of principle is involved in it, and the Committee will have to decide which way it is going to go.

8.31 p.m.

On Question, Whether the said amendment (No. 47) shall be agreed to?

Their Lordships divided: Contents, 42; Not-Contents, 60.

Airedale, L. Kilmarnock, L.
Barnett, L. Lockwood, B.
Blease, L. [Teller.] McGregor of Durris, L.
Bruce of Donington, L. McNair, L.
Carmichael of Kelvingrove, L. Mar, C.
Cledwyn of Penrhos, L. Nicol, B.
Crawshaw of Aintree, L. Phillips, B.
David, B. Pitt of Hampstead, L.
Dean of Beswick, L. Prys-Davies, L.
Gallacher, L. [Teller.] Raglan, L.
Grey, E. Seear, B.
Hampton, L. Silkin of Dulwich, L.
Hanworth, V. Stewart of Fulham, L.
Hatch of Lusby, L. Stoddart of Swindon, L.
John-Mackie, L. Taylor of Blackburn, L.
Kilbracken, L. Taylor of Gryfe, L.
Tordoff, L. Williams of Elvel, L.
Underhill, L. Wilson of Rievaulx, L.
Walston, L. Winchilsea and Nottingham, E.
Wells-Pestell, L.
Whaddon, L. Winstanley, L.
White, B.
Auckland, L. Inglewood, L.
Beaverbrook, L. Kimball, L.
Belstead, L. Kinloss, Ly.
Brabazon of Tara, L. Lane-Fox, B.
Brougham and Vaux, L. Layton, L.
Broxbourne, L. Lindsey and Abingdon, E.
Bruce-Gardyne, L. Long, V. [Teller.]
Butterworth, L. Lucas of Chilworth, L.
Caithness, E. Lyell, L.
Cameron of Lochbroom, L. Macleod of Borve, B.
Campbell of Alloway, L. Marshall of Leeds, L.
Campbell of Croy, L. Mersey, V.
Cathcart, E. Middleton, L.
Coleraine, L. Munster, E.
Cox, B. Murton of Lindisfarne, L.
Craigavon, V. Norfolk, D.
Cullen of Ashbourne, L. Pender, L.
Davidson, V. Rankeillour, L.
Donegall, M. Renton, L.
Dundee, E. Rodney, L.
Elliot of Harwood, B. St. Aldwyn, E.
Elliott of Morpeth, L. Sanderson of Bowden, L.
Elton, L. Sandys, L.
Faithfull, B. Skelmersdale, L.
Fortescue, E. Swinton, E. [Teller.]
Gibson-Watt, L. Torrington, V.
Glenarthur, L. Trumpington, B.
Gray of Contin, L. Vaux of Harrowden, L.
Grimston of Westbury, L. Wynford, L.
Hooper, B. Ypres, E.

Resolved in the negative, and amendment disagreed to accordingly.

8.39 p.m.

Viscount Hanworth moved Amendment No. 48:

Page 3, line 28, at end insert— (" ( ) to promote the interests of the purchasers and other users of gas fittings';").

The noble Viscount said: This amendment is to give powers to the Secretary of State, to promote the interests of the purchasers and other users of gas fittings". In 1980 the Monopolies and Mergers Commission published a report on gas appliances. They were concerned that the British Gas Corporation was almost a monopoly in this area. The Government first decided that the corporation should withdraw its retailing operations, but in the event the corporation made the necessary changes itself.

It seems incredible that the Government should not take the power to prevent this happening under privatisation, and should leave no deterrent or remedy except by a complete re-run of the earlier and relatively recent investigation by the commission. The noble Lord the Minister should surely say why, with a privatised industry, the situation which I have described is less likely to arise. Otherwise, surely, logically, he should agree the amendment. I beg to move. The consequential amendments are Nos. 64, 118, 120, 121, 122C, 129C, 134C and 135.

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

Perhaps I could get clear with the noble Viscount, who has so succinctly moved Amendment No. 48, that he is also speaking to Amendment No. 48A and Amendment No. 52, which according to my list are grouped with No. 48.

Viscount Hanworth

I certainly was not moving Amendment No. 48A. That is a much more important amendment, and, if it were earlier in the day and we had not just had a Division, it is one that I would certainly have divided upon. This particular amendment is important, but it is nothing like as important as No. 48A.

Lord Gray of Contin

Might I ask the noble Viscount about Amendment No. 52?

Viscount Hanworth

I am not certain. I may not move that amendment.

Lord Gray of Contin

I find it very difficult, even after three years, to get used to the procedures in your Lordships' House and Committee. I understood that the groupings of amendments had been agreed by the usual channels. Perhaps that is not the case. While I am delighted that the noble Viscount has included a very substantial list of consequential amendments, when he announced that list it came as news to me. I had not realised that we were also including those amendments. But I am happy to have them dealt with in that way.

The noble Viscount has tabled his interesting amendment, which seeks to promote the interest of purchasers and users of gas fittings. I imagine that his main interest is in appliances for this purpose, and also to promote competition between fuel suppliers.

The noble Lord will be aware that steps were taken in another place to add a new clause, Clause 33, to the Bill to make it clear that the Gas Consumers Council would be able to investigate complaints relating to gas appliances. It is that body which properly acts as the advocate and promoter of gas consumer interests, and it is right that they should be able to investigate a full range of complaints. But a duty on the Secretary of State and the director would be meaningless. Neither has any functions under the Bill in the area of gas appliances. There is already considerable competition from other firms in the supply and installation of appliances, and normal competition law applies as in any other normal commercial activity. The appliance area of the market is already under the eye of the Director General of Fair Trading, and the normal MMC and OFT controls are perfectly adequate to ensure that the new utility and other suppliers compete on proper terms. There is therefore no reason to give the Secretary of State or Ofgas any functions or duties in this area.

As to the question of promoting competition between fuels, the noble Viscount indicated that he was taking that amendment separately, so I shall deal with that in due course when we reach it. In the meantime, perhaps what I have said will convince the noble Viscount that the amendment which he is proposing, Amendment No. 48, is unnecessary. Perhaps he will consider withdrawing it.

Lord Bruce of Donington

Before the noble Lord sits down, I wonder whether he could answer me this question. If he would turn to Clause 4(2)(c) he will see the words: to protect the public from dangers arising from the transmission or distribution of gas through pipes"— and then come the important words— or from the use of gas supplied through pipes". Will the noble Lord inform us whether he still wishes to say that, in those circumstances, within the existing terms of the Bill, the supply of gas has no concern at all with the appliances?

Lord Gray of Contin

I am not suggesting that the supply of gas has no concern at all with the appliances. What I was suggesting was that the terms of this amendment deal principally with appliances as opposed to the supply of gas, and that there are already ways in which this is taken care of. I think I did my best to spell those out for the benefit of the noble Viscount.

Lord Bruce of Donington

But how is gas used unless one sets fire to it when it comes out of the pipe? The word "use" is in the phrase "from the use of gas". It can only be used with an appliance. Surely the noble Lord must agree that, even under his own Bill, there is some concern for the gas supplier with the appliances. It is in his own Bill.

Lord Gray of Contin

I am afraid the noble Lord is getting a little away from the subject we are discussing. The noble Viscount's amendment clearly says: to promote the interests of the purchasers and other users of gas fittings". The noble Lord is widening the argument very considerably by what he is saying. I have dealt with the point raised by the noble Viscount, and I have given him my answer. I suggested to the noble Viscount that perhaps he might be prepared to withdraw his amendment.

As far as the use of gas is concerned, the noble Lord refers to safety in the use of gas. The director has a legitimate interest in this but is not concerned with the regulation of the sale of appliances, which is the subject of this amendment.

Lord Bruce of Donington

The use of appliances.

Lord Gray of Contin

The sale of appliances, not use.

Lord Stoddart of Swindon

Let us take the amendment as it is printed: to promote the interests of the purchasers and other users of gas fittings". I take it that what we mean by "gas fittings" is a whole range of commodities which would attach to the gas main and to the appliance itself. The great problem here is that gas is a highly dangerous, volatile substance, and it is absolutely essential that standards relating to fittings are of the best. I believe that that is what the noble Viscount, Lord Hanworth, is getting at: that, in fact, the purchasers of such fittings should be protected against the sale by unscrupulous merchants of inferior fittings.

I believe that that is a proper matter in which the Secretary of State and the director should interest themselves. After all, bad fittings can result in fires, and perhaps even in explosions. That is why it is essential that we have some protection for the consumer within the Bill. I think that that is altogether reasonable.

Viscount Hanworth

I am certainly willing to withdraw this amendment, but I am not wholly satisfied that the Minister has taken the points I was trying to make or that I have taken the points that he was trying to make. So, without any commitment, I would ask him whether, with his advisers, he will read what I said because it seems that things have gone wrong in the past and I do not see what provisions there are in the Bill to prevent them going wrong in the future. That is really the case; and so I would ask him to have another look at what I said and I shall certainly have another look at what he said. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Viscount Hanworth moved Amendment No. 48A:

Page 3, line 28, at end insert— ("( ) to maintain and promote effective and fair competition between persons engaged in commercial activities connected with the supply of fuel and power.").

The noble Viscount said: This is a much more important amendment and it goes right to the root of the problem of privatising gas. The intention is quite clear from the wording: it is to give the Secretary of State and the Director of Ofgas the power to promote effective and fair competition in the commercial activities between the four main suppliers of fuel and power. In effect, that is between coal, gas, oil and electricity. I would stress that these are only enabling powers. All governments usually like to have enabling powers, but apparently that is not so in this case.

In another place no real arguments were advanced against a similar amendment, and even less so, late at night, on Amendment No. 37 in this Chamber. In fact I then castigated the Minister's reply in rather strong terms for his failure to give any reasons against the amendment. The point is that in the past all governments have tried to keep the four fuels in some sort of balance because no one wants more sudden switches from, say, coal to oil or gas than can be avoided. Today we have a subsidy for coal because the CEGB is obliged to pay about twice as much for coal as it would for other sources. We also have a government levy of £1 billion (or is it £2 billion?) on gas. No doubt the Government will find ways in the future of continuing this; but this amendment is far narrower. What we face after the passage of this Bill are nationalised coal and electricity industries competing against a privatised gas industry. It would be possible for the new owners of the gas industry to resort to dubious commercial tactics which could not be matched by their controlled nationalised competitors.

The sale of this would not arise. You have only to refer to the situation which occurred with gas appliances, which I mentioned in my previous amendment. But even more important is the distortion which can result from a misguided short-term pricing policy, as set out in paragraph 47 of the report of the Select Committee on Energy referring to the development and depletion of gas resources.

No doubt the Government's opposition to other amendments on these lines is simply that they do not want to frighten prospective buyers by inserting provisions in the Bill which are relatively undefined. But if the Government insist on privatisation, against the wishes of most people and without any mandate, they really must see that so far as possible it will work in the national interest and in the consumer's interest. Unless the Government can produce some powerful arguments against this amendment, I shall try to introduce it again at the Report stage. I am really sorry that on two occasions (Once in the other place and once the other night) no solid, reasonable argument was put forward by the Government. If they really are afraid that these sorts of provisions are going to make it more difficult to sell off the gas, I would say to them please have the guts to get up and say so. I beg to move.

Lord Gray of Contin

It is correct, of course, that we discussed this amendment with Amendment No. 37 the other night. Indeed, the noble Viscount at that time indicated it was not his intention to move Amendment No. 48A. As I recall, on 8th May at col. 918, he said: 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". However, the noble Viscount is of course perfectly entitled to change his mind. I know that this is a subject in which he has a great interest and of which he has considerable knowledge. Naturally I am only too happy to deal with the matter again now and I hope that I shall be able to persuade him on the third occasion.

Promoting competition between fuels is something which we believe already exists to a very great extent. We believe that the strong and effective competition which exists just now is likely to continue. The Government need no persuasion that in general the best protection for consumers is competition, where the efficient thrive and customers can choose the best fuel for their purposes in the light of the service they receive.

The Gas Bill is not the place to encourage competition between different fuels. Competition is achieved by the stimulus of market forces, and needs no bureaucratic intervention from government. We have of course given the Secretary of State and the director a duty, in Clause 4(2)(d), to enable competition to take place in the contract area of the gas market. I am not sure whether the noble Viscount intended to go beyond that in the amendment which we are now discussing, but we believe that a competition duty, of the kind which was accepted in another place, makes sense in the light of the opportunities for competition within gas supply introduced under the provision of the Oil and Gas (Enterprise) Act 1982 and carried forward in this Bill.

No such duty is necessary or appropriate to stimulate competition between fuels. Indeed, it would fall entirely out of the scope of this Bill, and I am sure that we have all read in the press about the negotiations which are taking place outside this building in order to try to ensure the efficiency of a different fuel altogether.

But, so far as this Bill is concerned, we are talking about the gas industry and about the efficiency of that industry. We believe that the competition duty now included in the Bill is the right one and that a duty in respect of purchasers and users of gas appliances, as I said a little earlier, would be inappropriate. The noble Viscount, I think, indicated that if I was unable to convince him on this occasion, he would return to this subject at Report stage, and of course he is absolutely entitled so to do. In the meantime, I would invite him to consider withdrawing this amendment.

Baroness Seear

How can the noble Lord the Minister say that market forces deal with competition between these industries when two of them are under government control on pricing? We know perfectly well that there have been occasions when, as a result of government requirements, prices have been both held down and put up in nationalised industries. Where are market forces in those circumstances?

9 p.m.

Lord Gray of Contin

With respect to the noble Baroness, one has only to consider forms of home central heating to find that there is very considerable competition between fuels. It is not uncommon to hear of a householder changing completely from one fuel to another because he feels that the second fuel might be more economical for his needs.

Baroness Seear

That may well be the case in particular circumstances, but the noble Lord the Minister has not answered my point. You cannot have genuine market forces at work between industries when the pricing of two of them is controlled by what the Government tell them to do. There are no market forces there. It may be the only way to do it and it may be a bad way to do it, but there are no market forces operating.

Lord Stoddart of Swindon

The noble Lord's reply really exposes this Bill for what it is. As my noble friend Lord Bruce of Donington said earlier, this a Bill about getting money to bribe the electorate, because there was no rationality about the replies he gave to the noble Viscount, Lord Hanworth, and the noble Baroness, Lady Seear. The noble Lord knows perfectly well that, in the matter of energy, market forces simply cannot be a substitute for an energy policy.

The noble Lord said that there was adequate competition between the fuels and he instanced central heating. But when somebody puts a central heating system into his home it is a heavy capital item. If I, for example, spend £1,500 putting a gas central heating system into my home, it is unlikely that the following year, because electricity prices are marginally lower, I am going to rip out the gas central heating system. After making a capital investment of £1,500, I am not likely to switch over and spend another £1,500 in installing electric storage heaters. The noble Lord knows that what he said is nonsensical and that, in that respect, competition simply cannot exist.

What the noble Viscount, Lord Hanworth, is trying to do is to ensure that there is a fair balance between all the fuel industries, particularly between gas, electricity and coal. He was quite right to suggest that there could be circumstances in which a privatised British Gas could use its monopoly power to gain an unfair share of the market through predatory pricing. It would be able to do that because it was free to operate within this market which the noble Lord talks about, but coal and electricity would not be able to operate within that same market in the same way. That is what the noble Viscount was getting at and it was a highly relevant contribution that he made.

I have said before, and I repeat it now, that the Bill is a nonsense and the Government's adherence to market forces in the pricing of fuels is also a nonsense. How on earth can we make proper decisions about our future energy needs and how those are to be met, unless we are prepared to take all the fuels together? For example, if gas—again using its monopoly power—decided on a predatory pricing policy which could undermine the electricity industry, that in turn would necessitate less coal being taken to burn in power stations and therefore coalmines which would otherwise be viable would be closed down, while others which ought to be open for the long-term good of the energy needs of this country would not be sunk. That is what it is all about and the noble Lord, Lord Gray, knows that.

The unfortunate thing about this Bill and the unfortunate thing about the noble Lord is that, because he has his brief and has to maintain his position in relation to that brief, he will not listen to or accept very reasonable amendments which are put forward from this side of the Committee. I urge the noble Lord to rethink his position and go back to his right honourable friend the Secretary of State and say, "We really are getting some decent arguments from the House of Lords. The House of Lords is getting its teeth into the Bill, so far as it is allowed to get its teeth into the Bill and so far as it is allowed time to get its teeth into the Bill, and it is exposing the weaknesses which were not exposed or which were overruled in the House of Commons". I urge the noble Lord to give better attention than he has done to the very reasonable amendment which has been moved by the noble Viscount, Lord Hanworth.

Lord Sandys

The suggestion was made by the noble Lord, Lord Stoddart, that this is a reasonable amendment. I suggest that this is a very unreasonable one, because we are looking at a world energy situation and three of the fuels concerned have a world energy content. Whether the generation of electricity depends on coal—and let us assume that a proportion of it does—coal is drawn from markets other than our own domestic market. It is drawn from Australia, Poland and many other countries in the world, and to suggest that we can be Little Englanders in this regard is to delude ourselves.

While I have every respect for what the noble Viscount, Lord Hanworth, has suggested, in that the proposition is that there should be some attempt to control the scope of pricing, it is right outside the terms of this Bill and my noble friend has said exactly that. Surely the noble Viscount knows, as we all do, that the pricing of petrol and other fuels depends very largely on the world market.

Viscount Hanworth

I am afraid that that is not quite what I said. What I said was that the Government had, for a long time, tried to keep a reasonable balance in prices between the four fuels. But I then went on to say that this amendment was concerned with a far narrower field and that was to keep fair competition between them. This amendment is concerned only with fair competition and not with fixing prices.

Lord Williams of Elvel

Perhaps I may just add a short word to what the noble Viscount has said. The amendment calls for the Secretary of State, who presumably is responsible across the range of these various fuels, to maintain and promote effective and fair competition". Effective and fair competition means among other things that the advertising which is engaged in by the privatised British Gas Corporation or the coal board should be consistent with what is allowed by companies or organisations which, as the noble Baroness, Lady Seear, pointed out, may be under the control of the Secretary of State.

We saw two or three years ago the intense competition between two nationalised industries—the electricity industry and the gas industry—in advertising. Some of us would like to see that a proper balance is struck between a privatised gas operation advertising in a relatively unrestricted manner and public utilities such as coal and electricity, which I think the noble Lord will agree, and from what he said the other day, will remain in public ownership at least for the time being so that we do not have a total imbalance in exactly the market, as my noble friend Lord Stoddart said, which is the new market where capital investment comes and which will remain unprotected.

All the noble Viscount, Lord Hanworth, is saying is that the Secretary of State in the discharge of his functions should have regard to this and should maintain and make sure that nothing untoward occurs, particularly in the realm of marketing to first-time consumers—I think people are liable to change their minds. In his reply the noble Lord cast aside this aspect. I do not want to follow my noble friend Lord Stoddart in a general discussion on energy prices because I do not think that is a very fruitful line at the moment—we shall come to that—but I should like the noble Lord just to respond to the point of marketing by a private British Gas against a public coal board and a public electricity board. This is the point that the noble Baroness, Lady Seear, was making.

Lord Gray of Contin

I have already dealt in some detail with the amendment proposed by the noble Viscount. I respect his view but I am afraid that I disagree with him on this issue. He has said that he may wish to return to this at a later date.

There is a wide philsophical gap between the party opposite and the Government and there is no point in our trying to bridge that because we would not have it any other way. I would suggest that the party opposite is still wedded to an approach of state planning in energy industries—

Lord Williams of Elvel

Perhaps I may—

Lord Gray of Contin

The noble Lord is perhaps trying to dissociate himself from that suggestion—and I am very glad if he is—but the Government do not agree with that and it will always be best to allow market forces—

Lord Williams of Elvel

May I—

Lord Gray of Contin

I was going to deal with the noble Lord's noble friend first.

Lord Williams of Elvel

I do not dissociate myself at all from the views of my noble friends and, if I may say so, the noble Lord the Minister is being slightly mischievous in suggesting that I was doing so. I was trying to concentrate the Minister's mind on a particularly narrow point in order to help him with his thinking, which seems sometimes to be somewhat diffuse. I was concentrating his thinking on the point made by the noble Baroness, Lady Seear, and I was trying to focus that on advertising and marketing as between a public company—a plc—and a nationalised industry.

Lord Gray of Contin

I am sorry if the noble Lord thought that I was mischief-making. That certainly did not enter into my thinking. Nevertheless, I am glad that he has reaffirmed that he is one of them, which is good to know.

Perhaps I may return to the point which was made by the noble Lord, Lord Stoddart. The thinking of the party opposite is always governed by this overall desire to have a state planning system for energy, with everything cut and dry—this source of energy must not do this, and this source must not do that. That is completely alien to our beliefs. We believe that market forces in energy development are in the best interests of the consumer and that consumers should be left to choose for themselves the fuels that are best suited to their own needs. This is the right way to proceed and this is precisely what the Bill will do.

The noble Lord, Lord Williams of Elvel, quite rightly drew my attention to the fact that I had not dealt in detail with what the noble Baroness had said. We had an exchange across the Floor but I had not really answered her point. The noble Baroness has identified one of the main reasons why we are seeking to remove the British Gas Corporation from the artificial constraint of government, to enable it to compete unhindered and to expose it to the realistic effect of market forces—

Lord Williams of Elvel

Perhaps I may—

Lord Gray of Contin

I am sorry, the noble Lord must be patient. He may not agree with what I am saying, but I believe that this Bill will be for the benefit of British Gas in the long term and for the benefit of its consumers in the long term.

Baroness Seear

The noble Lord referred to artificial constraints under which British Gas, as a public sector industry, labours. In doing so he is admitting that coal, gas, and electricity are operating under artificial constraints and therefore cannot be in a market relationship to a privatised gas industry. That is what I am trying to say. I could not have put it better.

9.15 p.m.

Lord Gray of Contin

I do not think that it is quite what the noble Baroness was saying. The point I was making in arguing with the noble Baroness is that until now the British Gas Corporation has been very much subject to the views of Ministers, which it will not be once it is privatised. Indeed, that applies to any industry in which energy Ministers, Treasury Ministers, or any other Ministers, are involved. I feel that this is a good move. It is a move in the right direction to relieve the British Gas Corporation from the constraints of ministerial discipline and to let it operate entirely on its own.

The noble Lord, Lord Williams, made a point about marketing. There is no reason for there to be any conflict because one fuel industry is in the public sector and the other is in the private sector. This has been the situation for many years as regards oil and gas, or electricity for that matter. There has not been any difficulty so far as the advertising budgets of the public sector industries are concerned. Indeed, the public sector industries carried out very major advertising campaigns from time to time.

As regards the private sector, obviously oil is the main supplier—or has been until now—in the private sector and it has been able to take on the public sector and to compete very favourably with it. We believe that by removing the constraints of government from the British Gas Corporation the corporation will be able to do even better than it has. I am not suggesting that it has not done well.

Lord Stoddart of Swindon

The noble Lord still has not dealt with the point raised by the noble Baroness, Lady Seear. As I understand it, she wanted to know what will be the situation in relation to a coal industry and an electricity industry which are still under public constraint, and a gas industry freed from that constraint. In other words, one at any rate of the points which arises in my mind is what would happen if a privatised gas industry rapaciously exploited the North Sea reserves in order to make quick profits by selling gas at a cheap rate to undermine the other fuel industries?

The other point is this; and the Minister will have to deal with it. If he is in favour of a free market and if he is in favour of competition does that mean that the noble Lord intends to free the Central Electricity Generating Board from the necessity to buy British coal? In other words, is he going to say to the CEGB that it may now buy coal from anywhere in the world? If that is the case, what will happen to our own coal mining industry? How many further coal mines will be closed? How many more miners' jobs will be lost? What are the long-term implications? Those are the questions that the noble Lord must answer. He has not answered them. He is evading those questions. The noble Baroness, Lady Seear, is entitled to a straight answer to her question and I am entitled to an answer to my further questions arising from her question.

Lord Gray of Contin

Perhaps, but not under this amendment.

Viscount Hanworth

I know the noble Lord is doing his best, but his best is no better than it was on Amendment No. 48. He simply does not address himself to the points at issue—namely, fair competition and a reserve power for the Government, but not one that has to be used. We heard all that was said about using the power, but no one is suggesting that it is used like that. Why we should disagree on this matter still utterly defeats me.

The noble Lord goes on talking about market forces, which is nothing more than a red herring. As has been pointed out by almost every speaker tonight, and the noble Lord knows it perfectly well, the gas industry has a levy of £1 billion or more imposed upon it and the CEGB is forced to take coal at uneconomic prices. We are not talking about that; we are talking about fair competition. The noble Lord has said nothing this evening that in any way answers this amendment, which is concerned purely with fair competition and a reserve power.

I do not like bringing these matters back again and again but I think that the Minister ought to go away and produce some reasonable arguments because I cannot see what is between us. Therefore I fear that I shall probably raise this matter once again on Report in the hope that we may obtain some more reasonable reasons for opposing the amendment.

In the meantime, at this time of night—and it is highly unfortunate of course that it should be late, because, if this amendment had come up at the reasonable time of 4 p.m., then I think that, had I divided the Committee (which I had intended to do) we should without any doubt have won this amendment—I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 49 to 51 not moved.]

Viscount Hanworth moved Amendment No. 52:

Page 3, line 28, at end insert— ("( ) to promote effective competition between persons engaged in commercial activities connected with the supply or use of gas through pipes.")

The noble Viscount said: This is another amendment which I think would be useful in the Bill. I shall not put it higher than that. I hope that perhaps the noble Lord will take a better view of this amendment than he has of some of the other general amendments that were meant to improve the Bill. I beg to move.

Lord Gray of Contin

The noble Viscount certainly did not give us very much to go on about this amendment, and I think he is probably as short of notes on it as I am. As I explained a little earlier, in the list which I was given the amendment was grouped with Amendments Nos. 48 and 48A, and I therefore think that during the discussion on those two amendments we pretty well covered what I imagine the noble Viscount had in mind in tabling Amendment No. 52. So rather than weary the Committee by going over the arguments again, I think that perhaps the noble Viscount may be prepared to withdraw the amendment.

Viscount Hanworth

I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Viscount Hanworth moved Amendment No. 52A:

Page 3, line 28, at end insert— ("(3) The functions assigned to the Director referred to in subsection (1) above include in particular those described in sections 7(7)(a), 8, 11(4), 19 to 22, 23, 24, 26, 29, 31, 32(3), 34(1), 34(2), 34(4), 35(1), 36, 37, 38, 39(1), 39(2), 39(4), and in Schedules 1(4), 3(3), 4(2)(2), 4(4)(2) and 5(3)(3), together with those described in sections 7(2), 8(1) and 16 and in Schedule 3(1).")

The noble Viscount said: This amendment covers the idea of putting down clearly all those sections in the Bill which concern the director, so that without reading through the whole Bill his staff and others can see quite clearly what are their duties. It is an unusual thing to do but I think it has some merits, and I therefore beg to move.

Lord Williams of Elvel

The noble Lord, Lord Belstead, when he was replying to an amendment concerning the functions of the director, referred the Committee to Notes on Clauses and particularly to Annex A in the notes on Clause 1, spelling out the duties of the director. Some Members of the Committee on this side were not entirely happy that the duties of the director should be relegated to an annex in Notes on Clauses, which so far as we can see has no particular legal validity. Therefore, the thought (which I think is a proper and sensible thought) emerged that the noble Lord might consider putting the duties of the director fairly and squarely in the Bill rather than relegating them to an annex in Notes on Clauses. I think we should support this amendment.

Lord Gray of Contin

I cannot accept this amendment. I do not believe that it would be right to accept it for several reasons, and I shall try to explain to the Committee why I cannot do so.

The first is because I believe that including a list of functions in Clause 4, as the amendment seeks to do, would not be helpful to the layman, since there are functions on the director relating to other clauses in the Bill which are not listed but which are also important. For example, the principal duties to supply on a public gas supplier under Clauses 9 and 10 are to be monitored and enforced by the director. If the noble Viscount's amendment was included in the Bill, a customer who considered that a public gas supplier had breached one of these duties might be misled into thinking that the director had no role in the matter, since Clauses 9 and 10 are not included in the list of functions. I believe that it is far better for the Bill to stand as it is, and for the functions to speak for themselves.

I also have a second reason why I cannot accept the amendment. This is because it is totally unnecessary. The Bill already sets out quite clearly what the director's functions are. Clause 4 lists duties which the director must use as guidelines when exercising his functions. There can be no doubt as to what those functions are. In addition, it is important to note that the duties set out in Clause 4 guide the Secretary of State as well as the director. It would again risk misleading the layman if one was only to give a list of clauses which referred to the director's functions and failed to give those of the Secretary of State.

I recognise that noble Lords have raised an important point by tabling this amendment and that we should indeed try to set out our legislation in the most helpful way possible for the general public. However, for the reasons that I have stated, I do not think this would be achieved by the amendment, and I hope that the noble Viscount will be prepared to withdraw it.

Viscount Hanworth

I can only say that I wish that the noble Lord had given the same attention to my amendment, Amendment No. 48A, as he has given to this one, which is of little consequence. I am impressed by what he said, and I shall, with pleasure, withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 4 agreed to.

Lord Taylor of Gryfe moved Amendment No. 53: After Clause 4, insert the following new clause:

("Regional development.

. To achieve the fullest contribution to regional development—

  1. (a) the regional management responsibilities of the Corporation prior to vesting day shall be at least sustained by the successor company and this requirement shall appear in the Memorandum of Association for that company; and
  2. (b) the board of directors of the successor company shall include at least one non-executive director with special responsibility for Scotland, and similarly for each of the distribution regions of England and Wales.")

The noble Lord said: This amendment ought to appeal to the Minister since it concerns regional development, with specific reference to Scotland. As will be seen from the three names printed above the amendment, they represent Members of this House who have a deep concern for Scotland and its economic welfare. I am sure that the Minister will understand the anxieties which exist and which were reflected recently in the municipal and local government elections in Scotland, in which there was a complete rejection of the Conservative Government.

That is not because of weaknesses perhaps in the rating system or the health system exclusively, but it reflects a feeling in Scotland that too much is being centralised in London to the disadvantage of regional development in that part of the country. That is true of other parts of the United Kingdom too. That is accentuated not only by the creation of the new privatised, centralised industries. The recent mergers and takeovers in the City tend to centralise economic power and decision-making in London. For that reason, I was encouraged by the Scottish Council (Development and Industry), which is an organisation not unfamiliar to the Minister, to put down this amendment.

9.30 p.m.

The Scottish Council (Development and Industry) is representative of local authorities, banks, industry, the universities and all parts of the commercial and social life of Scotland. In its submission on this amendment it has said that it is not arguing the question of private or public ownership of the gas industry; it is concerned about the tendency to centralise the organisation which may follow the passing of the Bill. It acknowledges that in the House of Lords on Second Reading the noble Lord, Lord Gray, as Government spokesman, gave an assurance that no dilution of existing management automony is intended under the structure post-privatisation, but the council goes on to argue that those assurances are worthwhile in the short run but are not binding on successor governments or, even more importantly, are not binding on successive managements of British Gas plc.

The council points out that in the Airports Bill which is currently before the House there is a specific assurance with regard to the retention of local authority interest in the management structure of BAA. The council argues that it expects that the structure to be proposed will be similarly copied by gas and that we are in great danger of creating a centralised, monolithic management structure if the Bill goes through without any of the suggested commitments.

Scotland is a rather special place, as the noble Lord the Minister well knows. It has only 10 per cent. of the population of this country, but it has 30 per cent. of the country's land mass. It has special problems in the distribution of gas, telecommunications and so on that should be understood, but are not always understood south of the Border.

We do not suggest that any special arrangements should be made for Scotland, but that other regions should be catered for. I had experience for some years as the member of a nationalised industry board. My experience in a centralised organisation suggests that it is easy to be superficial about the problems of the regions if all one's might, social and commercial life are centralised in London. I suggest to the noble Lord the Minister that a gesture towards a commitment to regional policy should be acceptable.

During the past year Scotland's regional development grant was cut by 50 per cent. and it is for that reason that there is great resentment, a growth of Scottish nationalism, and a rejection of the Government which indicate a deep unease in Scotland. I suggest to the noble Lord the Minister that that may be to some extent alleviated if the amendment is accepted. I beg to move.

Lord Sanderson of Bowden

I, too, have a great interest in what happens north of the Border, and I have great sympathy with a great deal of what the noble Lord, Lord Taylor of Gryfe, said. I have had a close look at the amendment and under paragraph (a) I agree that, the regional management responsibilities of the Corporation prior to vesting day shall be at least sustained by the successor company". It is important that the noble Lord the Minister should give us an assurance as to that fact.

I take issue with the noble Lord, Lord Taylor of Gryfe, with regard to paragraph (b). The British Gas Corporation, as it is structured, has a board which, I understand from looking at the report and accounts, has six full-time directors plus a chairman and five part-time directors. The noble Lord, Lord Taylor, with his great experience, will realise that this size of board is manageable in any public company. But underneath that, immediately below the board, there are at present regional chairmen. I should like to know from the noble Lord the Minister what is the intention for the future in respect of those regional chairmen. They form, obviously, an important and necessary link between the regions and the central body. It would not be easy but, I suppose, not impossible to have a board of directors that contained 12 non-executive directors each coming from a different region. While fully accepting the important position that Scotland holds and the special problems that is has—I hope that there will be a Scotsman appointed upon merit to the board of the new privatised British Gas—one has to look carefully at the structure of the intended board before going down the road proposed in paragraph (b) of this amendment, although I have a lot of sympathy with paragraph (a).

Lord Gray of Contin

It is useful, I believe, to have a discussion of this sort. I am grateful to the noble Lords who tabled the amendment for giving us the opportunity. I should like to reassure noble Lords that British Gas has no plans to change its regional structure. I can give my noble friend Lord Sanderson the assurance he seeks regarding regional chairmen.

British Gas has, over the years, made considerable investments in extending its facilities around the country in order to provide a supply of gas and associated services as widely as possible. It has created an integrated network which is constantly growing, and has involved itself in extensive research in order to maximise the service provided to customers. Indeed it has sought to make the most efficient use of gas and to reduce costs. We all applaud BGC for these efforts.

It is because of the successful, integrated nature of BGC that we are privatising it as a whole, and are carrying over the general and the specific duties to supply. The directors of BGC must carry on these duties irrespective of the area involved, and there is certainly no reason to suppose that, following privatisation, BGC will seek to meet these duties to supply in a way which would demand a different regional structure from that adopted at present. It will, in any event, be for the new BGC plc to decide for itself whether the assets employed by a particular part of the country are ideal for providing an efficient and effective service.

It is our ambition that British Gas should be exposed to normal commercial disciplines in a much more real way than through the central control of Whitehall. This is probably in keeping with what the noble Lord, Lord Taylor, has in mind. Imposing a requirement on the newly privatised company to include in the Memorandum of Association an obligation to maintain the level of regional management responsibility in the way proposed by this new clause would run totally contrary to this ambition and would be an unacceptable and unnecessary fettering of BGC plc's ability to meet its obligations as it sees fit. Moreover, such an amendment would actually prevent BGC plc from reorganising a particular aspect of its regional activities in order to provide a more cost-effective and efficient service to its customers.

Noble Lords have also proposed that the board of directors should include at least one non-executive director to have special responsibility for each of the 12 existing marketing regions. This would be an extremely cumbersome, and, in my view, unnecessary requirement. BGC at present handles its business in Scotland and Wales most sensitively, and I fail to see how this would be improved by the amendment. As a Scot myself, I can confirm the experience of my right honourable friend the Minister of State for Energy that there is absolutely no difficulty in getting matters resolved on a local basis in Scotland. Indeed, anyone who has been in the other place and has had frequently to raise constituency issues on this matter would, I am quite sure, confirm that that is the case.

The way in which British Gas have organised their administration means that consumers in Scotland enjoy benefits of scale as well as recognition of a well-devolved administration. I am perfectly confident that they will continue to enjoy these benefits. Indeed, it is in the best interests of BGC plc that they should. Within the framework of duties and privileges of BGC in this Bill it is vital that the company should be allowed to organise its operations in the way it sees fit. Noble Lords are leading us in the direction of regional differentiations of rigid decentralisation, with all the inefficiencies and losses of economies of scale that that might entail and of a regime of inflexible controls.

I believe that we have struck just about the right balance in the Bill with regard to this. I can assure noble Lords that it is certainly our intention that the consumers in Scotland—and Wales, too, although this amendment specifically relates to Scotland—will have the same privileges and opportunities as far as their relationship with the new BGC plc is concerned as they have at present. In view of what I have said, I hope that the noble Lord will be prepared to withdraw his amendment.

Baroness Macleod of Borve

Before the noble Lord sits down, I wonder whether he could confirm that at present BGC is divided—not at board level perhaps, but under board level—into twelve regions. If he agrees with that, can he tell noble Lords whether he would hope that after privatisation those twelve regions would still exist?

Lord Gray of Contin

This will have to be a matter for the new BGC plc, but the present arrangements are working very well and I can see no reason why they would wish to change them. Certainly what they would not wish to do, I am quite sure, is to engage upon a process of centralisation such as the noble Lord, Lord Taylor, suggested, because that would not be in the best interests of the new privatised corporation. However, ultimately that decision must be for the new corporation.

Lord Mackie of Benshie

It is interesting that the noble Lord said that it is an opportunity for discussion. What he has done is to reject the suggestion wholly and completely. To say that the new board must decide for itself, and that he has no doubt it will be sensible, is to go against all the experience we have had of centralised boards so far if there is no statutory obligation on them to cater for the regions. They can of course put up some form of front and centralise even more behind that. But I think that the noble Lord has treated this in a rather cavalier way. He has said that it is up to the new privatised boards to decide for themselves what they will do.

It is scandalous that regional matters—national in the case of Scotland—should be totally ignored in this way, and that the Minister should say that they will decide and that no doubt they will be sensible. It is quite extraordinary that the noble Lord should ignore a body, the Scottish Council, which has done such sterling work for Scotland, and should simply say that he is certain that the privatised board will be sensible. I do not think that this is a proper answer. I very much doubt whether it will be sensible. It is a monopoly.

Lord Gray of Contin

I shall go a little further, if that is what the noble Lord seeks me to do. I shall tell him that British Gas Corporation has told us that it is its intention to keep the 12 regions. However, ultimately at the end of the day, obviously, when a company is being privatised, it must be for the new BGC plc to shoulder that responsibility. But certainly it is its intention to have the 12 regions, exactly as my noble friend Lady Macleod asked me. However, I think it a mistake to write this into legisaltion.

9.45 p.m.

Lord Gallacher

I have listened carefully to the Minister's statement, particularly his opening statement, and I shall certainly read it in detail when it appears in Hansard. But it seemed to me, listening to that statement, that the Minister, while giving an indication that British Gas when it becomes a public limited company will maintain a regional structure such as that which has now, is reserving his options in the matter. He used a phrase about altering the regional structure if such alterations were warranted in order to make the best possible use of assets. That would not be unreasonable for a public limited company to want to do, and I think it is the fact that it may want to do that which is probably giving concern to the Scottish contingent in the Committee this evening and which certainly worries us here so far as the other regions of British Gas are concerned. It ties in, of course, with the fairly adamant refusal of the Government when we asked for regional consumer councils to be preserved, though there the sole authority for rejection was apparently some of the evidence given by the chairman designate of the National Consumer Council to a Select Committee in another place. I think that what is being asked for here is not unreasonable and that given the size and the spread of the business after privatisation some form of regional involvement should be written into the memorandum of association. I think that those who have drafted this amendment have been modest in asking for only a non-executive director; so in that sense he will not carry a great deal of clout so far as the board is concerned. Nevertheless, his regional background and regional experience will be invaluable to the board and I think the Minister might give us a slightly better assurance than he has hitherto so far as Amendment No. 53 is concerned.

Baroness Seear

I think one must challenge the remark of the noble Lord the Minister that once British Gas is privatised you just leave the matter to the good sense of the privatised company. This is a great national asset which is being sold. It is of great importance to the industry and to the private consumer, and surely we are entitled to write certain conditions into the deal being done between the now public industry and the privatised industry. It is not good enough to say that once it is privatised we must leave it to them to decide. That would be fair enough if it was a new company which had been started by private enterprise and was developing from the grass roots, but it is not. This is a great company which has been built up with public money for public purposes. We are now making this big change and we are absolutely entitled to put in conditions as Parliament sees fit. We should not say that it is just like any other private company and it can do what it damn well likes.

Lord Gray of Contin

I have listened carefully to what the noble Lord and noble Baroness have said since I gave my original wind-up to this discussion; but I have said that there is no intention to change the present structure. The centralised management of British Gas has been in place since 1972 and during the last 14 years there has been none of the centralising tendencies which noble Lords have feared and which have been mentioned tonight. I see no reason why there should be any now. I am afraid I cannot accept that it would be an advantage and that it would be desirable to write into the Bill the sort of proposals which the noble Lord, Lord Taylor of Gryfe, has suggested.

Lord Stoddart of Swindon

Why not?

Lord Gray of Contin

The noble Lord asks, why not? I know that it is within his philosophy to tie everything up in such a way that it would be strangled before it ever got off the ground; that is Labour philosophy. That is how they work, and I am not likely to be persuaded by any of his suggestions so far as this is concerned. I am listening to the noble Lord, Lord Taylor of Gryfe, who has seen the folly of his ways and has moved elsewhere from the rigid Clause 4 attitude of the party opposite. Mind you, I do not know whether he is very much better off where he is, but at least he thinks he is better off for the time being.

Baroness Seear

I do not share that folly, but I do share that point of view.

Lord Gray of Contin

The noble Baroness has a happy knack of making just the right remark at the right time, and of course I accept what she tells the Committee.

I am afraid that I cannot go further than I have already, and I do not think that this amendment would improve the legislation in any way. If the noble Lord insists on pressing it, I shall ask my noble friends to resist it.

Lord Taylor of Gryfe

I am afraid that the Minister has not given the necessary assurances committing the future board of British Gas, which is what we are talking about. He has paid tribute to the efficiency of British Gas in the past, and to the fact that it has been concerned with decentralisation in its management structure. The noble Lord has also said that in another place, of which he was a Member for a number of years, it was easy to raise questions in connection with British Gas and that he obtained responses from Ministers in connection with British Gas. All that is past.

Lord Gray of Contin

If the noble Lord will give way, I did not mean from Ministers; I meant that as a constituency Member of Parliament it was very easy to raise regional matters within the region, and they were always resolved there.

Lord Taylor of Gryfe

That just proves the point. That was why British Gas was a nationalised body with some public responsibility. We are now talking about the creation of a private limited company which will produce a prospectus which will indicate that, if you buy shares in the company, the profits to be reaped will be handsome in terms of dividend. In that prospectus there is no public commitment nor any social responsibility. The company has a responsibility only to service the shareholders, which is a totally different environment from the environment in which British Gas now operates.

In connection with this amendment, I do not propose to discuss the basic philosophical question that divides the Committee on nationalisation or privatisation. We are concerned about a commitment to regional policy in the future administration and management structure of this business. As I said earlier, the Airports Bill, which is currently before the House, specifically requires that a management structure will be presented for Government approval before the vesting date. We are now looking at the management structure of this new organisation and, when we are transforming a public monopoly into a private monopoly, we are entitled to write into the articles of association some protection in this regard.

Consequently, I must tell the Minister that I think we should divide the Committee. This is a matter which we shall discuss with the Scottish Council to see what further pressure can be brought to bear at the Report stage. I propose to raise the matter with the Scottish Peers' Association, which did excellent work on the Housing (Scotland) Bill, which I have no doubt the Minister will recall, to see how far we can press this. In the meantime, I move the amendment and suggest that the Committee should divide.

9.54 p.m.

On Question, Whether the said amendment (No. 53) shall be agreed to?

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

Blease, L. Raglan, L.
Bruce of Donington, L. Seear, B.
Crawshaw of Aintree, L. Silkin of Dulwich, L.
Dean of Beswick, L. Stoddart of Swindon, L.
Gallacher, L. Taylor of Gryfe, L.
Hanworth, V. Tordoff, L.
Hatch of Lusby, L. Whaddon, L.
Kilmarnock, L. White, B.
Mackie of Benshie, L. [Teller.] Williams of Elvel, L.
McNair, L. Winstanley, L.
Pitt of Hampstead, L.
Ponsonby of Shulbrede, L. [Teller.]
Ailesbury, M. Grimston of Westbury, L.
Beaverbrook, L. Hooper, B.
Belstead, L. Inglewood, L.
Blake, L. Kimball, L.
Brabazon of Tara, L. Long, V. [Teller.]
Brougham and Vaux, L. Lucas of Chilworth, L.
Bruce-Gardyne, L. Lyell, L.
Butterworth, L. Margudale, L.
Caithness, E. Marshall of Leeds, L.
Cameron of Lochbroom, L. Mersey, V.
Campbell of Croy, L. Munster, E.
Cathcart, E. Murton of Lindisfarne, L.
Cox, B. Pender, L.
Craigmyle, L. Rankeillour L.
Cullen of Ashbourne, L. Rodney, L.
Davidson, V. St. Aldwyn, E.
Elliot of Harwood, B. Sanderson of Bowden, L.
Elliott of Morpeth, L. Sandys, L.
Elton, L. Skelmersdale, L.
Erroll of Hale, L. Swinton, E. [Teller.]
Faithfull, B. Torrington, V.
Fortescue, E. Trumpington, B.
Gibson-Watt, L. Vaux of Harrowden, L.
Glenarthur, L. Wynford, L.
Gray of Contin, L.

Resolved in the negative, and amendment disagreed to accordingly.

10 p.m.

Clause 5 agreed to.

Clause 6 [Exception to section 5]:

Lord Williams of Elvel moved Amendment No. 54: Page 4, line 7, leave out ("either")

The noble Lord said: In rising to move this amendment, it may be convenient also to speak to Amendment No. 55. The purpose of these two amendments is to ensure that the supplier of gas under the clause which we are now considering should have the financial stability required to perform his task. The Bill as at present drafted requires the Secretary of State, if he objects to the proposal from the gas supplier, to notify either that he is of the opinion that the rate of supply would be unlikely to exceed the required rate or that he is unable to form an opinion.

We should like to suggest to the noble Lord the Minister that he adds to paragraphs (a) and (b) the text of Amendment No. 55, the thrust of which is that the proposed supplier of gas should have the requisite financial stability to continue the supply of gas when he has received authorisation (if he does so), and that because of financial instability for whatever cause such a supply of gas is not interrupted.

The amendment really has two points to it. The first is the direct point which is the supplier himself—that he should have the financial means to continue his supply in an adequate manner. The second is a slightly more complex point. The supplier of gas, in circumstances which we cannot at present envisage but which it is possible to envisage, may be part of a group; and other companies in the group of which the supplier is one may fall into financial problems and the supplier himself may be dragged down by the performance of other people in the group. In other words, if you look at the holding company arrangement (if you like) which has a number of subsidiaries, one of which is the gas supplier, if the other subsidiaries go down financially, then the gas supplier himself would go down.

As we interpret it, Clause 6 requires the Secretary of State to look specifically at the gas supplier and not range wider than the supplier himself to look at the group of which the supplier may be a member. I think it is very important that we have a response from the noble Lord the Minister on this point. We should like to see this amendment in; but, if it is not acceptable to the Minister, we should like to have assurances that the Secretary of State will look wider than at the firm itself, the corporate entity itself, which is the proposed gas supplier, and will look at the group of which it may be a member. I beg to move.

Lord Gray of Contin

I recognise that in general the noble Lords are opposed to the introduction of competition into the gas supply business and that their view of the notification provisions introduced under the—

Lord Stoddart of Swindon


Lord Gray of Contin

No, I shall not give way: I have only just started. I shall give way in a moment. I have just started my remarks. As I was saying, their view of the notification provisions introduced under the Oil and Gas (Enterprise) Act 1982 has not changed.

Clause 6 permits a potential supplier to notify the Secretary of State that he proposes to supply premises with more than 2 million therms a year, without the need for an authorisation and without committing an offence under Clause 5. The exception from authorisation only applies where the Secretary of State is satisfied that the supply is likely to exceed 2 million therms a year, the "required rate". The clause carries foward the provisions of Section 29A of the Gas Act 1972, as introduced by Section 12 of the Oil and Gas (Enterprise) Act 1982.

The rationale behind the provision is that supplies above 2 million therms a year will only be undertaken by companies of substance with considerable experience is handling dangerous substances. Thus not only will they be capable of ensuring that safety arrangements are adequate but will also be of sufficient weight to meet their contractual supply of obligations—I think that is the point the noble Lord, Lord Williams of Elvel, has in mind, if I can have his attention just for a moment—without the application of a test of the kind proposed in the amendment.

The duty on the Secretary of State and the director at Clause 4(1)(b) is similar to the amendment proposed. Clearly, however, the Secretary of State or the director have to take into account a number of considerations in deciding whether to grant an authorisation under Clause 7 or Clause 8; a test as to continuing financial viability is relevant not only in ensuring continuity of supply but also as a guide to the director in exercising his functions under the Bill, not least the operation of price contol in relation to Clause 7 authorisations. No such considerations arise in respect of notified supplies under Clause 6. There have been a number of notifications of supplies of over 2 million therms under the provisions of the Oil and Gas (Enterprise) Act 1982. We believe that the notification provisions serve a useful purpose in promoting competition and that it is right to carry them forward unchanged to Clause 6 of the Bill. Therefore, for those reasons I think that the amendment proposed by the noble Lord, Lord Williams, is unnecessary, and perhaps he would consider withdrawing it.

Lord Williams of Elvel

I am grateful to the noble Lord the Minister for his reply. I wonder whether I could ask him to reply to the second point that I made in speaking to this amendment. I understand that notifications are made and that the Secretary of State has to process them: that is quite proper. I also understand that the Secretary of State has to take all sorts of factors into account. The point that I am really stressing is that notifications may be made by companies which form part of a group. For all sorts of reasons, nothing to do with the company which is making the notification, other parts of the group may get into financial problems and drag with them the notifier. This is the problem—I am afraid I may have put it badly at the time I moved the amendment—that I am trying to get at. The Secretary of State should take into account in considering notifications the financial strength of the whole of the group of which the gas supplier forms a part.

Lord Gray of Contin

Yes, that is a very good point; but I think that, on reflection, the noble Lord will agree that it is covered by what I said under Clause 4(1)(b). That is very similar to the amendment which is proposed. The Secretary of State or the director have to take into account a number of considerations in deciding whether to grant an authorisation under Clause 7 or 8. The important part of my answer was that a test as to the continuing financial viability is relevant not only in ensuring continuity of supply but also as a guide to the director in exercising his functions under the Bill. Whether or not a company is of such merit as to justify the confidence of the director in his belief that that company is of continuing financial viability is relevant. So the fact that the company might be part of a group would presumably be taken into account by the director, so far as his consideration of the merit of that company is concerned.

Lord Bruce of Donington

I wonder whether the noble Lord will again take this point on board. He will recall that Clause 5 of the Bill deals with the prohibition of unauthorised supply, and that Clause 6 deals with exceptions to Clause 5. Therefore, it specifically deals with Clause 5, and it stipulates that the supply has to be in excess of 2 million therms a year. I am not at all sure—and I should be glad if the noble Lord would confirm this—that Clause 4(1)(b) overrides Clause 6 in this respect. But even if it does—and this is something that we may have to consider on Report—the point made by my noble friend Lord Williams of Elvel still applies.

We live in a mad world, at the moment, of merger after merger and take-over after take-over, almost to a point where it has now become obscene and is a matter of some grave disquiet in the City itself. All kinds of individuals take over without due regard being paid to their financial resources. The practice of take-overs these days is sometimes to take over on borrowed money which is afterwards recovered from the company taken over by virtue of a whole series of asset strippings. I trust that the noble Lord does not live in a sheltered world and that he knows these things happen.

I do not mind whether it is under Clause 4(1)(b) or Clause 6(1)(c), which would incorporate the amendment put forward by my noble friend, but just how do the Government propose to deal with this kind of situation, which is certainly not a figment of the imagination? It is easily perceptible within the gigantic casino transactions that are taking place week by week. Your Lordships will remember Al Fayed taking over Harrods, of which I warn the noble Lord we shall be hearing a little more later on.

What do the Government propose to do? Where there is a series of mergers and take-overs and one of the firms taken over is a supplier with the full authorisation under Clause 6, just what does happen? Let us say that slipping through the net of the glorious casino some corporation which may be able to bluff the Stock Exchange and the City that it has funds—not that they inquire over much, anyway—acquires a gas supplier. It decides that it has to pay off the debts by virtue of which it was able to make the acquisition, and it then decides that it will strip this off anyway—it is no longer interested in it. It may well be that there is a cessation of supply and a financial inability to continue supply. What is the noble Lord going to do about it?

10.15 p.m.

It is all very well referring to the predetermined answer to the question and to the predetermined response to the amendment. Let the noble Lord exercise his independent commonsense. What is going to happen? This is the question that my noble friend Lord Williams of Elvel asked and to which he does not have an answer. Why does not the noble Lord answer it?

Lord Gray of Contin

If the noble Lord, Lord Bruce of Donington, would listen, he would hear answers, but he frequently closes his ears to anything which he does not particularly want to hear. I have answered the noble Lord, Lord Williams, in detail already. Perhaps when the noble Lord reads the record he will find out that I did.

The noble Lord included in his comments a number of matters which were irrelevant to this amendment. He is totally obsessed with take-overs in the City. We get lectures about them almost every day we meet. Of course we are grateful to the noble Lord for giving us the benefit of his great experience as a chartered accountant, but there are many highly successful take-overs—

Lord Bruce of Donington

Hear, hear!

Lord Gray of Contin

—and it is wrong of the noble Lord to suggest that every take-over is of dubious merit because that is not the case. I am sure that the noble Lord advises people from time to time about the merit of a take-over. I am sure that his advice is always good and is taken. I do not always take what he says about take-overs as being gospel.

The noble Lord said that I did not fully answer the noble Lord, Lord Williams, and so I shall revert to what the noble Lord, Lord Williams, asked me and try to make the answer a little more clear. In considering notifications the Secretary of State needs to judge only whether or not the supply is above or below 2 million therms per year. He will not need to consult the duties under Clause 4 in coming to such an objective conclusion. If a company can get through the 2 million-therms-a-year test, it will get authority to supply under Clause 6. But the commercial arrangements are a matter for the parties, which will have to form their own judgment in due course on the merits of a particular deal.

The noble Lord, Lord Bruce, when he asked me how the director would deal with these matters did not raise any new point with which I had not dealt in my previous summing up. I explained that in each case it will be a matter for the director and his staff to determine whether the company in question is of continuing standing. The fact that that company might belong to a group will be, as I explained to the noble Lord, Lord Williams of Elvel, a little earlier, for the director to determine; it will be for him to make his own investigations.

Lord Bruce of Donington

The noble Lord is short-circuiting once again. He says "the director". Clause 4 lays the duty on the Secretary of State and the director; it is not only the director.

Lord Gray of Contin

I am not the one who is short-circuiting; it is the noble Lord. This amendment deals with Clause 6. We have moved on from Clause 4 and I referred to Clause 4 only because there is a relationship between them.

Lord Williams of Elvel

Can the noble Lord help me on one point? In his response he said that in considering those who had notified, were in a position to notify, would or might become gas suppliers or are gas suppliers under this clause, the Secretary of State would presumably—I think he used the word "presumably"—consider the other companies of a group of which such a gas supplier might or might not be a member. If the noble Lord can remove the word "presumably" and give us the assurance that the Secretary of State "would" consider the circumstances of other members of a group, that would meet our point.

Lord Gray of Contin

This would be the Secretary of State and the director, and they will use their own means, as they see fit, to examine and explore the financial status of a company. However, I am not going to give the noble Lord that assurance in the middle of an exchange across the Floor during the Committee stage of a Bill. I am too long in the tooth for that.

Lord Stoddart of Swindon


Lord Gray of Contin

Yes, "presumably" is a term of speech in some matters. The Secretary of State and the director would examine the situation in the case of a group and I used the term as explanation that presumably they would investigate thoroughly. The director particularly will be very interested. But I am not going to give any assurances without consideration—certainly not.

Lord Williams of Elvel

I fail to see the problem that the noble Lord the Minister has in giving us an assurance that the Secretary of State and the director would look at other companies in a group when assessing the status of a gas supplier; but if he refuses to do so we shall consider the matter and if we feel strongly about it will come back on Report. I am bound to say that what we are asking the Minister to give way on is not very significant but in view of what he said I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 55, 56 and 57 not moved.]

Lord Stoddart of Swindon moved Amendment No. 58: Page 4, line 31 leave out from ("receiving") to ("the") in line 33 and insert ("a notification from a gas supplier under subsection (1) above and before making a direction or notification under subsections (1) or (2) above").

The noble Lord said: This amendment stands in the name of myself and my noble friend Lord Gallacher. To some degree this is a probing amendment and I can deal with it briefly.

The amendment seeks to write an element of consultation into the process of non-authorised gas supply. As the clause stands, the Secretary of State is in the position of informing the director and the other interested bodies of a decision made. The amendment seeks to clarify that he must inform the bodies before making a direction or notification, thereby giving them the opportunity to comment.

It seems absurd that all the Secretary of State need do is inform the director, the Health and Safety Executive and, any public gas supplier whose authorised area includes the premises or any part of the premises to which the gas supplier's notification relates", that he is doing something after he has done it. It seems reasonable to me that he should inform them that he is about to do it so that if they wish they can make some comment.

It may be that I have the whole thing wrong. That is why I say that this amendment is in the nature of a probing amendment. Therefore I shall sit down and listen to what the noble Lord, Lord Gray, has to tell me about it. I beg to move.

Lord Gray of Contin

I shall try to explain the position to the noble Lord as best I can. The Bill makes no specific provision for consultation on the question of whether or not to accept a notification or to invalidate a notification because the required rate has not been achieved, but it is open to the Secretary of State to consult the director where he thinks it will be helpful to him to have the director's view on any matter arising under the clause.

As to the role of the Health and Safety Executive, as we have already made clear, the assumption is that where supplies of over 2 million therms a year are concerned the customers are likely to be major companies with their own comprehensive safety arrangements, with the premises subject to inspection under the Health and Safety at Work Act. Such supplies automatically attract the requirements of gas safety legislation. There is no requirement for formal consultation with the Health and Safety Executive under Clause 6 since there are no matters under that clause on which their views would be relevant to a decision of the Secretary of State.

The general purpose of the provision is to promote competition. While it is right that a public gas supplier should be notified of a proposed supply within his authorised area, it would not be right to go beyond this. The noble Lord's amendment would make the provisions of Clause 6 more restrictive. The noble Lord indicated that this amendment was in the nature of a probing amendment, and I shall go a little further and tell him that this would be completely at odds with the Government's objectives and the (competition) duty on the Secretary of State and the director at Clause 4(2)(d). So in what I have said, I hope that I have explained to the noble Lord what we seek to do and why I believe that the amendment which he has proposed is not acceptable to the Government. In view of that explanation perhaps he will be prepared to withdraw it.

Lord Stoddart of Swindon

I am not at all sure that I am entirely happy with the reply that the noble Lord has given, but at this late hour I think that my best course will be to read at a later date what he has said, withdraw the amendment and perhaps come back to it at a later stage.

Amendment, by leave, withdrawn.

Clause 6 agreed to.

Clause 7 [Authorisation of public gas suppliers]:

10.30 p.m.

Lord Stoddart of Swindon moved Amendment No. 59. Page 4, line 41, after ("section") insert ("as contained in Schedule (Authorisation to be granted by the Secretary of State for Energy to a public gas supplier under section 7) to this Act").

The noble Lord said: I beg leave to move Amendment No. 59 standing in my own name and that of my noble friend Lord Williams of Elvel. I am afraid that I cannot move this amendment as briefly as I did the last one because this is an important amendment. Indeed, so far as we are concerned, it is a vital amendment. I am extremely put out (if I may put it that way) that this important amendment is being discussed at this time of night. I think that it would have been far better if the Committee could have discussed it when the Chamber was fuller and more Members could have understood just exactly what we were trying to do.

The Committee will know that the BGC operates under statute. It is under the general, though not detailed, control of the Department of Energy and the Treasury, and is ultimately responsible to Parliament for its efficiency and general behaviour. That has been the case since gas was nationalised. But even before then a large part of the gas industry was owned by the municipalities and was therefore under direct public control. In addition, we have the influence of the consumer being brought to bear directly on the BGC through the national council and through the regional councils and their local committees.

Under those circumstances, the BGC has no alternative but to act in the public interest. If it does not do so, Parliament can take positive steps to remedy that position. However, once it is privatised, parliamentary control over the industry becomes virtually non-existent. Although the Secretary of State lays down the conditions of the authorisation, there is no parliamentary input. He does not have to go to Parliament to justify the conditions that he is imposing, nor answer for those that he should impose but is not imposing. Indeed, during the passing of the Bill we cannot discuss the authorisation in any meaningful way and cannot add or delete any conditions, and nor can we amend them in any way. That is unacceptable. For that reason we seek to add the authorisation as a schedule to the Bill.

Members of the Committee will notice that the new schedule that we propose is identical to the proposed authorisation—no more, no less. That is not because we believe that the proposed authorisation is satisfactory; we certainly do not. It is far from satisfactory in much that it proposes, and totally unsatisfactory in what it does not propose. I do not intend to embark on a detailed critique of the proposed authorisation. That would be unfair to the Committee and would be a time-consuming exercise. But, for example, we are not satisfied with the price formula, and are certainly not happy that it is likely to operate for only five years. Therefore, if the Committee agrees to the amendment we shall seek at Report stage to strengthen the authorisation by moving amendments at that stage of the Bill.

We are certainly not happy with the situation whereby changes to the authorisation can be made with the consent of the supplier, provided that agreement is reached with the Director General of Ofgas; nor do we believe that the Monopolies and Mergers Commission should necessarily be the final arbiter of alterations to the authorisation. There may be changes which ought to be made but which do not come within the competence of the MMC.

The safest way of proceeding in the public interest is to write the authorisation into the Bill. It may be argued that by so doing we shall remove flexibility and that the procedure for making alterations to the authorisation will be too cumbersome, but I doubt whether that is so. In any event, if the amendment is agreed we can write into the Bill procedures for amendment by Parliament that will be quick and efficient. What is certain is that if the authorisation is in the Bill everyone will know where to find it and will be able to consult it, and Parliament itself will be able to keep a proper watching brief over the conditions under which a powerful, private monopoly operates. We can ask no less, bearing in mind the great change which will take place to this previously publicly-owned industry.

Noble Lords opposite say they are returning the gas industry to private enterprise. It has never been wholly in private hands; there has always been a big public input. From the time it began, the municipalities (the local authorities) have had a great deal of control and ownership of the industry. By the Bill we are, therefore, creating something which is new, not something that is old and is being returned to. The least we can ask for is what is contained in the amendment, which is to see that the licence which the new private monopoly of British Gas will have will be strong enough and that the public, through Parliament, will have some say in how the licence operates and any amendments which may be made to it. I beg to move.

Lord Belstead

I am grateful to the noble Lord, Lord Stoddart, for moving fairly succinctly this long new schedule to the Bill, which is in fact a rewrite, as he explained, of the authorisation which was made available to the Committee soon after Second Reading so that we could all have a good look at it in order to debate it. I welcome that.

To get myself on the same network as the noble Lord, I realise that we are debating this point late at night, but there will be another opportunity to debate this matter when the noble Lord and his noble friends come to Amendment No. 101BA. The noble Lord referred to wishing to look at how the authorisation is finally revoked. That will also be dealt with under Amendment No. 63B. We shall have more than one bite at this cherry, and I therefore content myself with saying only three things.

Lord Stoddart of Swindon

When I moved Amendment No. 59 I should have said that it might be for the convenience of the Committee if I spoke also to Amendment No. 84A.

Lord Belstead

I am grateful to the noble Lord. I assumed that we were taking Amendment No. 84A as well. I shall content myself with saying only three things. The first is that I am sure that the noble Lord will not mind if I say that there are certain slips of the pen in the drafting of the amendment which make the amendment considerably defective. I say that only because Amendment No. 101BA has the same printing errors. I know that he will be the first to say, if we start crawling over them, that they create defective amendments. I merely say that for the record.

The second point is that I say from my record that we should not forget that this is a licence—an authorisation—which provides some protections for the consumer which have not been seen before in the organisation of the gas industry. I have in mind Condition 6 in the authorisation, which lays down important new conditions for the protection of people with regard to connection charges. I have also in mind Condition 8, which relates to the provision of information to the Gas Consumers Council, where there is a significant new departure from current practices which requires British Gas to meet any reasonable request from the new Gas Consumers Council for information on complaints on gas supply matters. The new Gas Consumers Council will therefore be able properly to investigate those complaints and come to an informed conclusion. Important points are to be found in the new licence, or authorisation.

The third point is that I want to explain why I have difficulty in being able to accept the amendment, persuasive though the noble Lord was. The reason is very simple. It is that the authorisation, we plan, is to be given to British Gas for a period of at least 25 years. It is a long period, I know. But it is to give certainty to gas consumers that they will continue to receive supplies and that they can happily invest in expensive gas appliances such as central heating systems in the knowledge that gas will continue to be available, and to give confidence to investors who will want to know that the business in which they are buying shares will continue to be able to make profitable use of the assets for a reasonable period.

But, given that the authorisation must be for a reasonable period, provision must surely be made for it to be adaptable to meet changing circumstances so that consumers can be protected, not only in the kind of energy market that we have now, but also in whatever markets develop in future years. If we are to have sensible flexibility for the future, with respect to noble Lords opposite, it does not make sense to freeze the authorisation in statute. That is what this amendment would do. The consequences of accepting Amendment No. 59, which we are now discussing, together with Amendment No. 84A, would be that once any change was made to the conditions contained in the authorisation granted to British Gas, however minor or uncontroversial a change might be, the authorisation would no longer be that set out in the schedule. Hence, British Gas would no longer be a public gas supplier for the purpose of the Act.

The consequences would be that customers would no longer enjoy the extensive protection given by the provisions in Clauses 9 to 15 and Schedule 5 concerning the right to demand a supply if they are within 25 yards of a main, or the continuation of existing supplies, as contained in Clause 10. In addition, British Gas would lose the old historic operational rights of being allowed to break up roads to put in pipes. In other words, if one wanted to change one dot or comma of the authorisation—if one accepted the amendment—it would mean that one would have to have a new Gas Bill. With respect to noble Lords, I do not think that that is reasonable. For that reason I cannot accept the amendment.

Lord Bruce of Donington

I am very sorry indeed that the noble Lord cannot accept the amendment. Surely the confidence of the investing public, of the consumer, of Parliament and of the people is based on the authorisation to which the noble Lord refers. The noble Lord says that he wants flexibility. But he was careful about this. The noble Lord mentioned only such minor amendments that might be effected—the odd dot or comma. He raised the horrifying prospect of coming back to Parliament to get minor matters corrected. By the same token major alterations to the authorisation could be made under pressure from the company's shareholders, under pressure from the institutions, who might, after two or three years, find that some of the conditions, yes, even the safety conditions, contained within the authorisation were much too onerous and meant that not enough profit was being yielded.

Under the somewhat volatile conditions (if I may use the term in a different context) characteristic of the entire energy market including coal and oil, and with a question mark over nuclear power and all the rest, it is quite likely that after a year or so the institutions which invest in British Gas plc—it will in the main be institutions, although for propaganda purposes we shall have a suitable littering of individual shareholders so that it may be dressed up as people's capitalism or something of that kind—may bring pressure to bear for the authorisation to be altered. There the argument of flexibility will have some force because, instead of having to come back to Parliament for the authorisation of major change, it can be done under what the noble Lord calls flexibility, very quickly, without all the trouble.

This Bill is in part being sold to the electorate, to Parliament and to the investors on the basis of the contents of the draft authorisation—and it is only a draft at the moment. As the noble Lord knows full well, there is many a slip 'twixt cup and lip. The final licence to British Telecom was altered from the draft licence before the Bill came into operaton.

What conceivable objection can there be to having its own authorisation drawn up after much consultation with the industry, and after much heart searching by individual Ministers? It may even have gone to Cabinet for all I know, although it is a rare occasion when matters of this kind go to the full Cabinet.

Are we saying that there are circumstances which the noble Lord already envisages which will change the draft authorisation before we go very much further? Surely there has to be some finality about this. I willingly concede that conditions may arise, with or without the pressure of shareholders—though the pressure of shareholders will grow as time passes—where it is quite proper for alterations to be made. We are not talking about commas, or semicolons, or provisions to eliminate "and" and put "but", or matters of that kind. But changing circumstances may produce the necessity for a major review. This ought to be the subject of an amending Bill. In my experience of Parliament in another place and in this place, if the Government require something urgently they normally get it. The existing Government—despite their somewhat precarious position today, to which it is perhaps unkind to refer—could get the matter through another place in a very short time by the sheer volume of votes. There is no problem there. If the amendments are reasonable they coud go through the House and through this Chamber very quickly indeed. Or is the noble Lord assuming that his amendments arising in the future for which he wants flexibility will be so unreasonable that they will be a matter of contentious argument? Surely that will not wash.

We are dealing here with an industry that differs in very significant respects from British Telecom. For example, there are very few physical dangers to which a telephone subscriber is subject. He may occasionally be inconvenienced by lack of maintenance and matters of that kind. He may be inconvenienced by certain breaches of the existing licence of British Telecom. But they are not so vital in terms of the welfare of the individual as any potential relaxation or change of the rules that are incorporated in the authorisation.

I plead with the noble Lord to be reasonable about this. If the Government believe in the authorisation as of now—as they presumably do, otherwise they would not pray it in aid, bring it forward and circulate it—let it be put in the Bill. What is wrong with that? Let the noble Lord explain.

Lord Belstead

I hope the Committee will not think me tedious if I very briefly repeat part of what I have said before. The reason why I part company with what the noble Lord, Lord Bruce of Donington, is saying is simply this. I agree with the noble Lord that there are very important things in the authorisation—and I mention two examples, one being that there are important new safeguards for consumers of gas so far as connection charges are concerned, which is something which is very important, and another being important new provisions giving information- gathering powers to the new Consumers' Council, which I think is very important.

However, there are a lot of other important things in this authorisation. On that I agree with the noble Lord. Where, with respect, I disagree with the noble Lord is that if the Government were to accept this amendment it would mean that if any change was made to any of the conditions, however minor or uncontroversial that change might be, the Government of the day would have to come back to Parliament to get a completely new Bill in order to get a new authorisation in order to go on running the gas supply in this country. That is the inevitable consequence of accepting this amendment.

If I may just go on for a second, the noble Lord then raised the spectre of interests (which he did not really specify, but clearly they were supposed to be sinister interests) getting at the authorisation and making changes which would affect the safety of gas. I acquit the noble Lord of not having looked at the Bill because I know he has looked very carefully at the Bill. The part of the Bill I think the noble Lord, with respect, ought to have referred to is the part that we have not yet come to. When we get to Clauses 23 to 27, the Committee will then find that changes to the authorisation—and this is the part of the Bill called "Modification of public gas supplies authorisations"—man only be made if the director makes a reference to the Monopolies and Mergers Commission, and of course that Commission will have to have regard to the very important duties which are laid on my right honourable friend and on the director in Clause 4, which we have dealt with.

In Clause 4 we find that protection for the consumer is put up front, both in terms of gas supply and in terms of pricing, and so with respect to the noble Lord I reject the suggestion that in some way some sinister influences would be able to get at the authorisation and would make changes which would affect the safety of consumers. The Bill has been very carefully drafted, in the part that we will come to, to make sure that that could not happen.

We are going to come, I expect, in 10 days' time to a subsequent amendment, No. 101 BA, when we will be able to go over this ground again. I ask Members of the Committee not to press this amendment this evening, partly because it is, with respect, defective, and most importantly because it would have the effect of creating a situation where, if one then wanted to make the slightest change to the authorisation, it would need a new Bill.

Lord Sandys

I do think that my noble friend has gone as far as it is possible to do. Perhaps it would be a suitable moment to draw the Committee's attention to the fact that in preparing and examining legislation of this nature the Committee have a particular responsibility. Regarding the stability of the statute book, it is a major matter. My noble friend attempted—and he is quite right to do so—to seek that this statute should remain in operation for at least a generation. If we think back to the state of the gas industry 25 years ago and look at it in 1961, and think of the changes within the industry since that time, this is a real reason to have that degree of flexibility.

Since 1961 the entire operation of North Sea gas has come into being, and changes which were absolutely unheard of have come forward. If we followed the proposal of the noble Lord, Lord Bruce of Donington, we should be forced into a position in which Parliament and naturally your Lordships' House would be obliged, in the course of a number of years, to undertake another primary legislative exercise which would be quite unnecessary.

Lord Stoddart of Swindon

I am most obliged to the noble Lord, Lord Belstead, for the courteous way in which he has dealt with this amendment. As my noble friend Lord Bruce of Donington made quite clear, we do not agree with his reasoning. I say now that I shall not press this amendment tonight; I shall withdraw it, because we should like to look very closely at what the noble Lord has had to say.

However, the noble Lord said that in the proposed authorisation there are protections for consumers not seen before. That may very well be, but protections exist for the consumer under the Gas Act 1972. There is the protection of Parliament itself, and the ability for detailed matters to be discussed by Parliament; and, indeed, there is the relationship between the gas industry and the Minister. Neither the proposed authorisation nor the Bill as a whole is a substitute for what exists at present. It is our view that by this Bill the consumer loses out very considerably, and loses many of the protections which he has by various means at present.

The noble Lord said that the authorisation would be for 25 years. That is in the authorisation itself. I understand that 10 years' notice will have to be given to end that authorisation. Of course, security must be given. I did not want to discuss matters which were in the authorisation; it is the principle about which we are concerned. However, 25 years is a devil of a long time. It is far longer than is given to an independent television company. If my memory serves me correctly, I think that the period there is 15 years, perhaps even less. However, 25 years is a long time, and many things can happen.

The noble Lord said that we shall be freezing the authorisation in the statute. I do not know that we are. The noble Lord seemed to be saying that if we have the authorisation as a schedule to the Bill, because it is a statute we must have a whole new Bill before we can alter that schedule. That clearly is not so. It is possible to have an amending Bill; and, indeed, if the noble Lord accepted this amendment we would co-operate with him in agreeing that the authorisation could be amended by affirmative order. There are all sorts of ways in which we can amend Bills without actually having to have primary legislation and a new Bill. If that is his problem—that, as he says, he fears that he would have to have a new Bill—I am sure that we could meet him on this and I am quite sure that we could write in at a later stage that the schedule, which constitutes the authorisation, could be amended by affirmative order.

The hour is late and I have already said that I shall withdraw the amendment. However, in return for that I wonder whether the noble Lord will have a look in Hansard at what we have said and will think about it between now and the next stage of the Bill. We have listened to the noble Lord and we shall read what he has said, and he also should listen closely to, and read, what we have said, because our fears are real and it could be that we can come to some accommodation. In the meantime, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Belstead

We have had a long day and we have just completed an important amendment. I think perhaps this might be a moment when the House might be resumed if your Lordships agree. I beg to move that the House be now resumed.

Moved accordingly, and, on Question, Motion agreed to.

House resumed.