Lords Sitting of 14 February 1992

Preamble
The House met at eleven of the clock: The DEPUTY CHAIRMAN OF COMMITTEES (Lord Ampthill) on the Woolsack.
Prayers—Read by the Bishop of St. Albans.

Small Businesses: Condition
Lord Molloy Lord Molloy asked Her Majesty's Government:
What is their response to recent surveys showing rising redundancies and economic hardship among small businesses.
The Parliamentary Under-Secretary of State, Department of Employment (Viscount Ullswater): My Lords, redundancies and economic hardship in businesses of any size are to be regretted. Training and enterprise councils (TECs) and local enterprise companies (LECs) in Scotland, working in partnership with other relevant agencies, continue to reinforce the progress that the Government have made in supporting and developing small firms. The level of business start-ups remains buoyant. Insolvencies still represent only 2 per cent. of all businesses. All the essential ingredients for recovery are now in place: low inflation and lower interest rates. The Government are proud to have one of the most favourable tax regimes for small firms in Europe.
Lord Molloy: My Lords, I am grateful to the noble Viscount for the research that went into that reply. However, it is a pity that he left out some vital features; for example, the fact that the chairman of CBI Small Companies has said that the past four months have been really dreadful, that the CBI itself says that there is no hope for recovery and that some of our primary economists, especially the Oxford economists, say that at this rate, and with the Government's policy, we shall have almost 3 million unemployed by 1993.
Why do the Government not take notice of such factors? We do not wish to keep harping on such matters, but we shall continue to do so because we have to; indeed, this sort of Question is a very suitable instrument. Perhaps the Government will start listening to what we have to say. If we did not wish to see recovery in the country, then both sides of the House would be totally irresponsible. I do not believe that that is the case. I believe that we must listen to one another's argument.
Viscount Ullswater: My Lords, it is important to show the dynamism in the economy. I believe that there is a great deal of it. Since 1979, there have been over 2 million new registrations for VAT. In 1991, the National Westminster Bank estimates that there was a total of 460,000 new business starts; that is only slightly fewer than the half million in 1990. Moreover, throughout 1991, around 1,000 new starts have taken
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place each week under the enterprise allowance. That shows that people are not afraid of starting up in business.
Lord Boyd-Carpenter: My Lords, the encouraging point about what my noble friend has just said is the fact that a very large number of people seem to judge the situation appropriate for starting a small or, indeed, a large business. Will my noble friend continue to give them such encouragement?
Viscount Ullswater: Yes, my Lords. My noble friend makes an important point. I believe that it is also important to note that the number of self-employed has risen by over 70 per cent. since 1979. That is a great encouragement.
Lord Judd: My Lords, does the Minister not realise that there is growing exasperation with the Government's complacent attitude? The state of small businesses and their prospects depend upon the general condition of the economy. What are the Government going to do about a situation in which investment in manufacturing industry dropped by 15 per cent. in 1991? That is the largest drop for 10 years. Is that not grave news for the whole economy of the nation?
Viscount Ullswater: My Lords, if there is a fall from an all-time record, one is bound to show a drop. It is important to get the economic situation right. Bearing down on inflation, and the use of interest rates to do so, has proved to be successful.
Lord Hooson: My Lords, is it not be possible for the Government to stimulate the domestic economy? I have in mind small businesses such as building firms. Can they not be stimulated by releasing the funds that are available to local government for the purpose of more housebuilding? That would stimulate the domestic economy. With the so-called world recession, there is no chance of an export-led recovery from the recession. Therefore, the domestic economy must be encouraged.
Viscount Ullswater: My Lords, I believe that the situation as regards such receipts is being carefully looked into. However, I am sure the noble Lord realises that councils have amassed a considerable amount of debt which also has to be paid by the taxpayer and the charge payer.
Lord Renton: My Lords, is it not clear from the answer that my noble friend has already given that there are thousands—perhaps tens of thousands—more small businesses in operation and solvent now compared with 1979? Does my noble friend have any figure which indicates the present number of such businesses compared with the situation in 1979?
Viscount Ullswater: My Lords, I do not think that I have the number at my fingertips. However, I shall endeavour to find out the information and write to my noble friend. The most important thing to which he referred is that the impression is always given that every small business is in debt. It is right to say that at least half of them are in credit at the bank.
Baroness Phillips: My Lords, if everything is going so well—I must confess that I thought the Minister was speaking about another part of the world—why are there shops closed in Oxford Street, Regent Street and the New Kings Road? That is something that I have never seen in my lifetime. Why are they closed? Are those businesses doing so well that they are able to close their shops?
Viscount Ullswater: My Lords, I do not think, from this Dispatch Box, that I can give reasons for shop closures in any particular area. However, there is no doubting the fact that businesses are doing well in all sorts of areas, although there are temporary problems with the recession.
Baroness Turner of Camden: My Lords, is the Minister—
The Earl of Lauderdale: My Lords,—
Noble Lords: Front Bench!
The Lord Privy Seal (Lord Waddington): My Lords, I believe that the convention of the House requires that my noble friend should have the opportunity to speak next.
The Earl of Lauderdale: My Lords, when writing to my noble friend Lord Renton, will my noble friend the Minister take steps to make his reply more widely available so that we may all know these happy figures?
Viscount Ullswater: My Lords, I have now found the figure for which I was searching. Since 1979 there have been over 2 million new registrations for VAT. That indicates the size of the increase in the number of small businesses.
Baroness Turner of Camden: My Lords, is the Minister aware that during the 1980s a very large number of people invested redundancy payments in starting up small businesses because they were tempted into the enterprise culture? A large number of those businesses have failed. Can something not be done to assist people in that situation? For example, can the banks not assist through schemes like the small business loan guarantee scheme? Those people are in a worse situation now than they would have been if they had never attempted to start small businesses.
Viscount Ullswater: Yes, my Lords. The noble Baroness mentioned the banks. The banks are taking a very responsible attitude towards assisting small businesses. Only today I saw an advertisement in the Daily Telegraph for a small business guide which is available, free of charge, from Barclays Bank. The guide explains the ins and outs of profit and loss accounts, cash flow forecasts and business plans. Not only the Government, but the banks also are assisting enormously with small businesses.
Lord Molloy: My Lords, does the Minister agree that the Government should consider the appalling social effects of what we have been talking about on ordinary people? We realise that repossessions are now increasing simply because the breadwinner is out of work. We acknowledge that the increase in National Health Service prescription charges is going
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to hit the family when the breadwinner is out of work. Those are some of the effects of the disastrous policy this Government are following. It is about time they considered the ordinary people of this country.
Viscount Ullswater: My Lords, I do not believe that the Government are being quiet on that. We have paid over £600 million in 1991 for mortgage interest through income support. Three hundred and ten thousand mortgages were helped in that way. The increase in repossessions is now slowing down significantly. All the measures taken together, including the measures taken by the building societies, will save some 40,000 repossessions this year.
Lord St. John of Fawsley: My Lords, is the Minister aware that among the small businesses that have disappeared is Jarrolds of Knightsbridge, in the Brompton Arcade? It has disappeared with a great number of photographs which I left there to be framed, and other people's pictures—wedding photographs, and so on. What can be done to get those photographs back? What is my noble friend prepared to do about it?
Viscount Ullswater: My Lords, I deeply regret the obvious sadness that my noble friend has experienced in that disappearance. I shall take steps to see what I can do.
Lord Mackie of Benshie: My Lords, I appreciate what the enterprise groups are doing in Scotland and England. Is the Minister aware that their efforts are being totally frustrated by the general state of the economy? Following the point made my noble friend Lord Hooson that a stimulation is needed, does he agree that small businesses do not need a penny off income tax or anything like that. What they need is the ability to pay income tax—in other words, to make a profit. A stimulation in the economy is the only way that they will get out of the mess.
Viscount Ullswater: My Lords, conquering inflation remains the Government's priority. High inflation is far more damaging to the profits of small firms than high interest rates. The stimulation will return within the next months and small businesses will be greatly assisted by that.
Lord Mowbray and Stourton: My Lords, if affairs in this country are as bad as noble Lords opposite would have us believe, why are the Japanese able to invest here? They are finding the climate good for investment. For example, their Nissan company is not only manufacturing new cars over here, but selling them at a profit. Can the Government also confirm that Nissan is producing more cars per man hour than other car manufacturers in this country?
Viscount Ullswater: Yes, my Lords. The investment demonstrates the ability of the workforce in this country to produce a good product. The United Kingdom remains a favourite location for inward investment. More than half of the inward investment into the European Community was received during 1990. I now understand that it is the favourite location for German investment as well.

Competition and Service (Utilities) Bill
11.21 a.m.
The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Reay): My Lords, I beg to move that this Bill be now read a second time.
The Competition and Service (Utilities) Bill implements the commitments made by the Government in The Citizen's Charter White Paper which was published last July to strengthen the position of the customers of the former state-owned utilities.
It will give a better deal to 25 million customers. In future customers can be confident that all the regulators will have the toughest powers held by any of them today to set standard. They will have the right to be told what those standards are; they will be told clearly what redress they have if those standards are not met; and if they have a dispute with a utilitity, they will be able to ask a regulator to resolve it.
This Bill is the fruit of privatisation which has made competition and regulation possible. When the utilities were publicly owned, neither competition nor independent regulators existed. No one was specifically charged to protect the consumer. Still less was any independent body equipped with statutory powers to uphold the customer's interest. There was no one to cap prices; no one to set standards; no one to ensure compensation or to resolve disputes. The result was poor services and high prices. Ten years ago, when British Telecom was still nationalised, more than 250,000 customers were waiting over two months—many for far longer—for a new telephone to be installed. Waiting lists will not be found today. If BT is late by even one working day, the customer is entitled to compensation. Before privatisation of BT, there was virtually no choice of handset. Today the choice is huge—over 13,000 pieces of equipment have been approved since 1981.
In the five years before privatisation, domestic gas prices increased by 2 per cent. a year in real terms. In the five years since British Gas was privatised, prices have fallen by 2 per cent. a year in real terms. From April, British Gas will be required to do even better and cut its prices by 5 per cent. a year in real terms.
Likewise BT has seen its price cap tightened successively from 3 per cent. below inflation to 4.5 per cent. below, and now 6.25 per cent. below inflation. Given that inflation is running at around 4 per cent. that means that prices will have to be cut in money terms. All in all, telephone users have seen their prices fall by 27 per cent. since privatisation in real terms.
As far as concerns electricity prices, domestic prices have fallen over the past seven years by 2 per cent. in real terms, whereas they rose between 1974 and 1979 by 22 per cent. in real terms. Under the current price cap formula domestic electricity prices are pegged to the Retail Prices Index until 1993. Industrial electricity prices are now lower in real terms than at any time since 1970.
Domestic electricity disconnections are at their lowest recorded level and are continuing to decline.
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The most recent figures available, for the period July to September 1991, show a 28 per cent. reduction on the same period in the previous year. Regional electricity companies are now required to produce codes of practice protecting customers against disconnection.
British Gas has halved the number of disconnections since privatisation, and they are now at their lowest recorded level ever.
Ofgas—the gas regulator—has recently agreed with British Gas a comprehensive new package of key standards which will come into force in April 1992. It includes compensation for individual customers, if, for example, British Gas fails to keep an appointment.
The regulators have sought to ensure that the quality of service offered by the utilities matches what would be provided in a competitive market. As a result, all the utilities operate consumer service guarantee schemes. Domestic consumers are now entitled to compensation of one month's line rental charge for each day that BT falls short of its target for the installation and repair of telephones.
New service standards for the electricity companies came into force in July last year. Failure to comply with those standards will result in compensation of between £10 and £50 for individual customers. In the water industry a scheme has been agreed setting out customers' rights on appointments, account queries, complaints and interruptions to water supply. It is accompanied by a quick compensation scheme.
As my right honourable friend told the other place at Second Reading, the regulators have accomplished their achievements by a mixture of using their powers under primary legislation, licence conditions and informal arm-twisting.
The immeasurable improvement in services that has resulted from privatisation can best be illustrated by comparisons in telecommunications, both because that utility has been privatised longest and because it offers its customers the widest range of services. At the time of privatisation 75 per cent. of call boxes were working; today 96 per cent. are. In 1984 86 per cent. of faults were cleared in one day, today 95 per cent. are. The level of calls failing through congestion is only a fifth of that in 1984.
Then there is investment. £20 billion has been invested by the telecommunications industry since privatisation. In real terms, current levels of investment are over 40 per cent. higher than 10 years ago.
The water industry is investing no less. The water companies will be spending £28 billion before the turn of the century—more than £5,000 a minute—on rebuilding the water industry's infrastructure, and constructing new sewage treatment works and reservoirs—in short, in catching up on the years when water was a state-owned utility and a low priority among all the other claims for Treasury finance.
It is hardly surprising that a recent survey carried out on behalf of the National Consumer Council found that consumer satisfaction with telecommunications, gas, electricity and water was noticeably greater than with those utilities still in the public sector.

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The Bill sets out to build on these achievements. As The Citizen's Charter announced, we intend to bring the powers of all regulators up to the level of the strongest. In most respects it is the electricity regulator —the last to be established—which has the strongest powers. So Part I of the Bill sets out to bring the powers of the telecommunications, gas and water regulators up to the level of the electricity regulator. In addition, all the regulators will be given new powers with respect to complaints handling procedures and dispute resolution.
As a result of the Bill, all the regulators will have power to set guaranteed service standards for individuals; set overall performance standards; establish compensation schemes where individual service falls below the standards set; ensure that utilities establish and publicise complaints procedures; resolve disputes over standards; and, where my right honourable friend the Secretary of State provides, resolve disputes over billing.
So far as concerns the setting of guaranteed service standards for individuals, these are already set for electricity and water under provisions in their privatisation legislation. The Bill will provide a statutory basis for such standards in the case of telecommunications and gas. Guaranteed standards might include a requirement to repair a fault on a customer's telephone line within one working day; to restore a failed power supply within 24 hours; to reply to a customer's letter within 10 days; and to keep an appointment to visit on a certain day, even at a particular time of day.
Overall performance standards are complementary to guaranteed service standards for individuals in that they apply to a utility's performance as a whole. Since they are measured across the whole company, they can cover aspects of service which would not fall within the individual standards. So, for example, there could be a requirement that a certain percentage of telephone boxes should be working at any given time. Overall standards can also seek to place an incentive on the utility to out-perform the individual standards. For example, whereas an individual customer might be able to claim compensation for a power cut which lasted more than one day, the electricity company could be subject to an overall standard requiring it to restore supply to 80 per cent. of its customers within three hours.
Where guaranteed service standards are not met, the Bill provides that the telecommunications and gas customer is entitled to compensation, just as under existing legislation the electricity and water customers are so entitled. The amount of compensation and the manner in which it is paid are for the regulators to decide and set out in their regulations.
There will be a duty on the regulator to collect and publish information on the levels of performance achieved and the compensation paid for failures to meet guaranteed standards. There will also be a new duty on the utilities to publish overall performance standards and their achievement against those standards.
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The Bill extends to all utilities the requirement currently imposed in detail on electricity companies only to establish a complaints procedure which has been approved by the director general. Before establishing their complaints procedure, utilities will have first to consult representative consumer bodies.
The Bill also confers new powers on the regulators to determine disputes between the customer and the utility over terms of supply. Those powers are modelled on those in the Electricity Act. Examples of the different types of dispute might be: the size of the deposit demanded before a telephone connection is made; the reasonableness of an estimate given by a water company for the cost of connecting a property to a water main; or a dispute over the amount of security required by a gas company before it will start laying a service pipe to a property. Where a dispute over the terms arises before a customer has received a supply of gas or electricity, the regulator will have powers to require the customer to be supplied, pending his decision on the dispute. In the case of telephone services, the Bill will ensure that deposits are assessed according to criteria approved by the director general. Those measures will help to redress the balance of power between the customer and the supplier which could otherwise abuse its monopoly position.
Another area covered is that of disputes over billing. In telecommunications, disputed accounts remain the most frequent source of complaint to OFTEL. The Bill will enable the Government to make regulations authorising the regulators to resolve such disputes over the accuracy of bills. We intend to trigger those powers for the Director General of Telecommunications soon after Royal Assent.
The Bill empowers Ofgas to set standards of performance for gas suppliers on the promotion of the efficient use of gas by consumers. The electricity regulator already has those powers.
The sort of standards which might be set by the director general could include a requirement to make available, by a certain date, an energy efficiency adviser in every gas or electricity showroom, the publication of guidance booklets or the provision of a free telephone information service. As with the other standards I have described, it will be for the regulator to decide what the standards themselves should be. We have put those powers into the Bill because we recognise that improving energy efficiency is the quickest and most cost effective way of contributing to a reduction in CO2 emissions.
Part II of the Bill introduces new possibilities for competition. In telecommunications, competition is already being progressively introduced and will be extended further following last year's duopoly review. In electricity supply the monopoly element of the industry is to be reduced in stages with the 1MW monopoly threshold being reduced to a tenth of that size in 1994 and abolished altogether in 1998. So the Bill is confined to extending competition in the gas and water industries.
I shall begin with the gas competition provisions. At present only British Gas has the right to supply householders and small firms who use 25,000 therms

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a year or less and are within 25 yards of a gas main. Yet customers at or below the 25,000 therms threshold account for two-thirds of the total gas market.
The Bill gives the Government powers to end that monopoly which we intend to reduce by stages. As my right honourable friend the Secretary of State for Trade and Industry said in another place, we should expect the initial reduction to be to a level not lower than 2,500 therms, and to take place in the next Parliament.
Such a reduction would open up to competition about 7 per cent. of British Gas's market, giving some 200,000 businesses, like the big firms, the right to buy gas from anyone, with the possibility of obtaining better terms and lower prices. After that, the next stage will be a review in 1996 to determine the date at which the monopoly will end, opening the rest of the market to competition.
The statutory rights of small customers to a supply of gas at a non-discriminatory price will remain so long as competition is limited. We shall consider lifting British Gas's statutory obligation to supply only once there are enough competitors to provide all customers with a viable alternative.
The Bill also increases the scope for competition in water services. There are technical limitations on the scope for competition in water, not least among them being the problem of pumping water or sewage across long distances in order to compete in another area. The costs of overcoming such problems pose very high barriers to new entrants to the market. As a result of those limitations, when we privatised water, we introduced the concept of comparative competition, in which the regulator uses the performance of the most efficient water companies as a yardstick to set standards for the others. However, despite that, we have found that there are possibilities to extend direct competition further.
There are three areas in which we consider direct competition should be made possible. The first is where a water user is situated close to the boundary between two water companies, or undertakers as they are known. The Bill will enable such a customer demand water and drainage services from any supplier rather than the one appointed to serve his area. A neighbouring supplier's mains may be more conveniently situated to serve that particular customer. The other two prospects that we have identified for competition are areas where currently no customer is connected to the services of an existing undertaker, and single large users; that is to say, those whose annual use of water is at least 250 megalitres. Those cases are covered by one provision, for "inset appointments". An inset appointment gives an undertaker the right to serve an area within the appointed area of another undertaker.
The regulator will also be able to require an existing undertaker to provide a bulk supply of water to an intending competitor who might otherwise be deprived of a means to serve his own customers. A new provision is also made for the transfer for treatment of sewage from one undertaker to another.
Of the miscellaneous provisions of the Bill, I shall mention one only. Provision is already made in the
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Electricity Act to ensure that a public electricity supplier does not make a charge to disabled customers who need to have their meters moved to a more convenient position. Since disabled people may also need to read their gas or water meters, it seems right that they should be able to ask for those meters also to be moved free of charge. The Bill therefore makes provision to prohibit gas and water companies from charging their disabled customers for that service.
To sum up, then, the Bill has two themes: service to customers, and competition. Our aim is to ensure that customers of the regulated utilities will enjoy higher standards of service than they do now, and have clear rights of redress. Service to customers is a fundamental tenet of The Citizen's Charter. Consumers are becoming increasingly aware of the standards they can and should expect from the utilities, and their expectations are rising. I have already demonstrated how some of the standards set out in The Citizen's Charter are already being achieved by the utilities, often voluntarily. The Bill significantly strengthens the regulators' powers to ensure, by setting standards, that the utilities respond to their customers' needs and requirements.
We are also removing barriers to competition in the supply of gas, water and sewerage services. Competition is the greatest of all spurs to efficiency and we believe that its disciplines should be encouraged even in industries which used to be considered "natural monopolies". The Bill therefore takes forward the possibilities which we have identified for increasing competition in those industries. We hope to see a growing number of competitors entering those markets and taking up the opportunities which will become available as a result of the Bill. Eventually, competition may develop to a point where the powers of the regulator can be diminished. Meanwhile, we believe our dual approach is the right one. The Bill will add to the ways in which the customers of the regulated utilities will have more choice, enjoy better standards of service, be better informed about the standards they can expect, and enjoy a means of redress in cases where they are not met. I beg to move.
Moved, That the Bill be now read a second time —(Lord Reay.)
11.38 a.m.
Lord Williams of Elvel: My Lords, the House is grateful to the Minister for introducing the Bill.
I have to say that it is one of the most extraordinary Bills with which I have had to deal in your Lordships' House, being, as it is, devoted entirely to correcting past mistakes. Clauses 1 to 10, for instance, amend the Telecommunications Act; Clauses 11 to 19 amend the Gas Act; Clauses 20 to 25 amend the Electricity Act; and Clauses 25 to 33 amend the Water Industry Act. Those are all Acts put forward by the Government and which went through both Houses of Parliament. They are now found, as was predicted at the time, to have some serious flaws. Those serious flaws arise from the very nature of privatising monopolies: when one privatises a monopoly, one is bound to have the type of trouble with which the Bill is designed to deal.

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It is particularly absurd that this Bill should come before us amending no fewer than four different Acts without any apology from the Government for the mistakes that they have made. There is something very odd about dressing it all up as what is called the Citizen's Charter—some White Paper that was issued on services apparently.
We approve the principle of the Bill. We would like to see the regulatory mechanisms of the privatised monopolies strengthened. We would like to see service to the customer much better than it is. If there is a possibility of competition—I shall come to that when I deal with Part II of the Bill—we would like to see that competition. When I say that we approve the principle of the Bill, that does not mean to say that we approve of the Bill in all its detail. When we reach the Committee stage we shall be seeking to amend the Bill in a number of different ways; in particular we shall seek to strengthen the regulatory powers to a greater degree than the Bill does as at present drafted.
The particular improvements that are needed are, first, that the consumer must have a greater voice in deciding what he or she wishes to see by way of service. At the moment only in the Gas Consumers Council is that voice strong: none of the other privatised monopolies has a council similar in status and power to the Gas Consumers Council. Why not? Why should there not be that kind of arrangement for others?
What about the non-domestic consumer? The domestic consumer may have a voice through consumer associations, but we have recently had a barrage of complaints from non-domestic consumers; for instance, as regards electricity. Customers find their prices going up well above the prices that their competitors on the Continent of Europe are paying. What rights of redress has industry got when that happens?
The second area where we wish to amend the Bill is in what I call the area of "vulnerable consumers". I refer to disabled and elderly people. The matter of performance standards and what is to be the proper measure of performance for disabled and elderly consumers of these services must be carefully spelt out. For instance, we cannot have disconnections without proper notice. We cannot have demands for deposits for connections or unrealistic repayment schedules for those who are in arrears and are hard up. We must have an assurance concerning the interests of those who are unable, either physically or mentally or who are too old, to be able to enjoy the normal standards of service and benefit from them. We must have an assurance that special arrangements will be made for them.
The third area where we shall seek to amend the Bill is in the application of these performance standards. I do not wish to criticise consumer representative bodies. It is important that we should know precisely what the consumer himself or herself feels rather than what, say, the National Consumer Council or the Consumers' Association feel. I am not saying that these bodies are not representative in some form for the customer, but direct access through market
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research to what the customer really wants as opposed to what others believe the customer really wants would be a sensible way of going about solving the problems.
When the performance standards are set, to my mind there is only one sanction which makes sense and that is the price sanction. If utilities do not meet their performance standards they must be hit in their profit and loss account. That is the only thing that matters. I would like to say that directors' salaries should also be hit. If that can be achieved that would be a bonus. However, let us leave it to the profit and loss account for the time being.
The fourth area where we shall seek to improve the Bill is on the performance of the regulators themselves. Regulators have serious conflicts of interest. They have to have regard for the interests of the industry which they are regulating and for the interests of the consumer. That is in the nature of regulation of a monopoly. They cannot go too far either way. But who will regulate the regulators to make sure that they strike the right balance and do not simply go overboard one way or another? The Government have not addressed that problem. Will the regulators be answerable to Parliament? How can we achieve accountability of the regulators? Will there be an ombudsman who will look after the problems that I have described and decide on them? How can we set that up? All these are questions which we shall be wanting to debate in Committee.
The fifth area concerns disputes about billing. As your Lordships know, British Telecom has a contract direct between the company and the customer. There is no independent check on BT bills. There is no independent check on the meters that it uses. Anyone who has looked carefully at a detailed British Telecom bill will always have found mistakes. I have found plenty in my time.
Secondly, as regards billing, the regulator, if he is allowed to determine disputes, must, for goodness sake, give the reasons why he decides one way or the other. Simply to issue a fiat saying "I decide that the company is right" or, as the case may be, "The customer is right" is not good enough. We must have something better than that.
I now turn to the question of competition which, as the noble Lord quite rightly said, is dealt with in Part II of the Bill. We will have to see how the breaking of the monopoly in gas supply works. There are good reasons for that monopoly, not least the safety reason. When that monopoly is broken or diminished there will be certain safety problems that the Government will have to face because it will no longer be the responsibility of British Gas to ensure safety when its monopoly is broken. That is as I understand it and no doubt if I am wrong the noble Lord will reassure me in his reply.
As regards water firms, the competition measures in the Bill are hardly worth talking about. As the noble Lord quite rightly said, one cannot have water companies competing with one another. The nature of the industry does not allow it. I remember taking part in a debate in your Lordships' House on a White Paper which was produced on the water industry

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before privatisation. The only serious proposal for competition among water companies was that they would send plumbers into each other's territories. Therefore, plumbers would cross from the Welsh Water area into the Severn Trent area and compete with the plumbers of that area. That is the farcical nature of the White Paper that was produced and it is also the farcical nature of how stupid one can get when one speaks about competition among water authorities or companies.
Lord Mulley: My Lords, my experience is that it is extremely difficult to get a plumber in the area in which you reside.
Lord Williams of Elvel: My Lords, I do not know where my noble friend resides. I understand that BT has a service which has been advertised widely. It is known as the Yellow Pages. If he looks through those pages he might be able to find himself a plumber.
The Bill is a series of what I regard as fairly minor measures. It needs to be strengthened. It has been cobbled together without an overall review of the regulating function in privatised monopolies. The Minister claimed that privatisation had been popular, disagree. All the polls show that privatisation has on balance been unpopular. People have noticed the rise in directors' salaries. People have noticed heavy price increases. People have noticed the large profits that privatised monopolies have made. People have also noticed that the privatised industries have become homes for Cabinet Ministers who have lost their jobs or perhaps I should say have been liberated.
The Bill goes nowhere near far enough to straighten out the mess that ill-considered privatisation has left. In Committee we shall attempt to toughen it up. I am quite clear that a proper resolution of the problem will have to await a new government.
11.50 a.m.
Lord Ezra: My Lords, as the noble Lord, Lord Reay, explained, the purpose of the Bill is to strengthen the position of customers of the privatised utilities. That is to be achieved by increasing the powers of the regulators in certain respects. The Bill also aims to increase competition in the gas and water supplies industries to some degree.
The four sectors concerned—telecommunications, gas, water and electricity—were all privatised between 1984 and 1989. In view of that, a more thorough-going review might have been expected than is contained in the Bill. I concur entirely with the views expressed by the noble Lord, Lord Williams. So far as it goes, the Bill contains desirable provisions. Customers' rights in regard to standards of performance, complaints procedures and the settlement of disputes are all strengthened. In each case the regulator is given powers to ensure that those new consumer safeguards are applied. I should find it helpful if, when he replies, the Minister could elucidate one or two points.
The obligation of the utilities to comply with the standards laid down by the regulator seems to be rather more loosely worded for gas and electricity than for telecommunications. Is there any reason for that? Secondly, while the regulator is given powers to
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determine billing disputes, he is apparently not expected to give any reasons for his determination —a point made by the noble Lord, Lord Williams. Would it not be desirable to correct that and make sure that the regulator gives reasons for his determination? Thirdly, is enough being done to safeguard the interests of disabled people? That is another matter referred to by the noble Lord, Lord Williams. The Royal Association for Disability and Rehabilitation and the citizens' advice bureaux are concerned that the Bill does not sufficiently ensure that disabled people have adequate and affordable access to essential services from the utilities. An amendment safeguarding the interests of disabled people was introduced in another place but withdrawn because the Government contended that it was unnecessary. Will the Minister please elucidate that point, which is of considerable concern to Members of this House?
The Bill raises some wider issues. One relates to the role of the regulators—another point made by the noble Lord, Lord Williams. The question has been asked whether there should be a more clearly defined separation of the economic regulation function on the one hand and the consumer protection function on the other. As the noble Lord, Lord Williams, stated, gas is the only utility with some independent consumer representation. The view of the Consumers' Association is that there should be,
"properly resourced consumer representation bodies for all the utilities, separate from the regulator, or, at least with semi-independent status within the regulatory body".
I shall be glad to know the Minister's opinion on that proposition, with which I concur.
Although the word "competition" looms large in the title of the Bill, the issue is touched on in only a limited way. In Part II provision is made for the Secretary of State to modify or remove the 25,000 therm limit in relation to the Gas Act 1986. The Minister has indicated that a new limit of 2,500 therms will in due course be imposed. That is certainly a desirable extension of competition. In the case of water, Clauses 34 to 41 increase the possibility of competition between the water companies but, as the noble Lord, Lord Williams, emphasised, it will have only little impact.
Therefore, welcome as the moves are, they are of a very limited nature. The fundamental issue in relation to the privatised utilities is that when they were transferred into the private sector, they were left in a largely monopolistic situation. Hence the continued increase in the powers of the regulator to counterbalance that monopolistic power. Surely a more fundamental reappraisal of the competitive aspect is called for. The key issue is whether competition can really come in those sectors until there has been a major restructuring of the dominant enterprises. Will the Minister indicate whether the Government have in mind to consider that wider issue?
Finally, I wish to refer to the question of energy efficiency as it relates to the gas and electricity industries. While the regulators were given broad powers to promote energy efficiency in the privatisation legislation, in the opinion of many noble Lords

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who participated in the debates, those did not go far enough. Some additional powers for the promotion of the efficient use of gas are covered in Clause 15 of the Bill. However, in view of the overriding importance of energy efficiency, especially in connection with environmental issues, that is surely another matter which should be reviewed at greater depth. If the CO2 emissions standards as laid down by the Government are to be achieved, the gas and electricity industries will have a much greater role to play than is presently envisaged. That has not been sufficiently identified in legislation, even as amended by the present Bill.
11.57 a.m.
Lord Allen of Abbeydale: My Lords, in the course of the years I have had a good deal of experience of legislation. I begin by echoing the point made by the noble Lord, Lord Williams of Elvel, that it is perhaps the most remarkable Bill that I have ever come across. It is not until one reaches Clause 50 that one finds a clause that stands on its own. The first 49 clauses amend or add to existing statutes. If the reader wishes therefore to understand them he has to sit surrounded by tomes containing a number of other Acts of Parliament to find out what is really happening. It must be something of a record to amend or add to legislation on that scale.
Listening to the Minister's introduction, I was much struck by the rather lengthy panegyric that he outlined of all the marvellous things already achieved, not all of which I confess are visible to the naked eye. I began to wonder why we needed the Bill. However, it is quite a pleasure to be able to welcome a move designed to strengthen the position of the consumer in relation to privatised utilities. I can only hope that officials are sharpening their pencils to be ready for the next customers in line, especially British Rail. I say that with particular feeling since, in the course of what should have been a half hour's journey up to London this morning, I managed to sit in two trains which broke down.
It is some comfort to find the needs of consumers being increasingly recognised in the Community as well as in this country as, for instance, in the draft directive on unfair contract terms. Although the Bill is in general to be applauded, there are some grounds for unease. It struck me that there is no provision for regulating the regulators. However, the noble Lord, Lord Williams, has already taken that point and I need not pursue it further. Both previous speakers have shown that the consumer will not necessarily end up having representation in the other utilities of the standard already achieved in the gas industry.
Three points seem to me candidates for examination at a later stage. They are important in view of the possible time factor. The Government may welcome the opportunity of hearing about them and considering appropriate amendments so as to avoid possible trouble at later stages of the Bill.
The first point relates to the powers of the telecommunications regulator to determine arguments about billing. As the Minister explained, this area accounts for a high percentage of disputes. The
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Consumers' Association tells me that it has many cases on its books of consumers meeting stalemate with BT; for example, about calls made when the owners of a house were on holiday and the house was shut up. Such disputes tend to be resolved in the end simply by the subscriber paying up in order to avoid the sanction of disconnection. I doubt whether any subscriber goes through BT's detailed contract before signing up and even if he does he would hardly be likely to quarrel with the provision that BT is entitled to recover payment for all calls which its equipment shows have been made on a particular line. However, there is the difficulty that the network cannot claim to be completely secure.
I gather that if a number of lines go into a block of flats it is quite possible, if someone knows how, to rig the system so that calls on line A are registered on line B. That is not such a rarity. I also understand that the increasing use of mobile telephones is tending to add to the risks and to the number of disputes. When the point about the block of flats was raised in another place, the Government's answer was based on hope rather than assurance. It seemed to be suggested that it could be left to the director general to help, but it appears to me that he has no power at present to challenge a charge to which the operator can claim to be entitled under the contract. What I am suggesting therefore is that it would be right to make a significant extension of his powers in the Bill so that he would not be strictly bound by the terms of the contract but would have the power to determine a dispute according to what, in the circumstances, was fair and reasonable.
My second point relates to the provisions, welcome as they are, about compensation schemes where the utility fails to meet guaranteed service standards. So far, so good! But there will be instances where the customer suffers financial loss falling outside the scope of compensation schemes as envisaged at present. To go to BT again, although comparable difficulties have arisen with other utilities, buried in its contract is an exclusion clause which states that BT accepts no responsibility for the consequence of events beyond its reasonable control. The Bill, as I read it, will still leave it to BT to determine whether a particular problem is indeed beyond its reasonable control.
When the Scarborough telephone exchange was put out of action for a week by a fire in 1989 and people and businesses were cut off, BT carried out an internal inquiry which concluded that the spread of the fire was not its fault. In consequence it limited compensation to a not very generous payment in respect of the loss of the line rental for the missing week. BT may have been perfectly right in its conclusion. But who was to know? There was no outside judgment; it was decided by BT alone. The consumer is in a pretty weak position to take legal proceedings against the utility. There is much to be said for extending the power of the regulator to determine a dispute of that kind to enable him to make his own inquiry and to ensure that the operator is not sheltering behind the exclusion clause to avoid the payment of compensation.
My third and final point can be made briefly because it has already been dealt with by the noble

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Lords, Lord Williams of Elvel and Lord Ezra. It is a plea for those who are both poor and elderly or disabled. For some of them, the telephone, with its access to support services, can make all the difference to whether it is possible to continue a reasonable existence. These people are not in the habit of ringing up Los Angeles or Tokyo and benefiting from the low charges for those calls but they face what we understand are the highest charges in the Community for their local calls. Their real problem of course can be that of getting a telephone at all.
Although deposits, I understand, are now limited to £150, that can be a formidable sum for the kind of people we are talking about. I hope that it may be possible to make some provision on the face of the Bill to help them. That would be in entire accord with the community care policy of enabling the elderly and the disabled to lead as normal lives as possible. We may be told that the solution is for local authorities to help by using their powers under the Chronically Sick and Disabled Persons Act 1970. But the criteria for help under that Act are very tightly drawn, and local authorities, with their financial problems, are tending to look even more narrowly at applications for help. In the same context, although there has been a great improvement over disconnections for gas and electricity, things still do go wrong. There should be a specific requirement for performance standards in relation to the poor and disabled or elderly, covering, to take one example out of many, the need to increase the availability of tokens for the token meter. I could go on to urge that all telephones should be fitted with an inductive coupler to help the millions who wear a hearing aid. The suggestion might receive a particular welcome in this House. But I had better stop there.
I realise that the points I have been making could be said to be matters of detail. But they are important. In a sense the whole Bill is an accumulation of points of detail. It would be an even better Bill if it included provisions on the issues I have touched on.
12.8 p.m.
Lord Renwick: My Lords, the Bill seems to be producing quite strong reactions from all parts of the House. I have a strong reaction to it as well. I welcome it as another step in a process that started in this country, pretty well alone in the world, of privatising services that had up until that point been state monopolies. Most of them were running at appalling losses. They had bad relations with their workforces, who had little to be proud of because they were employed by organisations which did not contribute value added as in many cases they do now. There was a lack of self-respect generated by being part of organisations which did not contribute to the service of the nation.
I believe that the Bill is totally justified, three or four years after the deregulation of the services. It breaks new ground. Certain aspects of regulation have to be adjusted. That justifies the wide scope of the Bill in covering the four services. It is timely. However, as other speakers have said today, care must be taken regarding the new role of the regulator and the development of his role in the four services covered by
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the Bill. I do not think that we can do more than see how matters develop but we must be very careful that in all cases the vested interests of the various players are carefully defined.
I shall make only a small contribution this morning, specifically in relation to the telecommunciations area. I declare an interest, in that I am a parliamentary adviser to the Telecommunications Managers Association and a director of a firm of technology consultants whose interests are in energy and information technology. I also have an interest, as do all of us in this House, as a consumer.
One of the points I should like to make relates to the detail of the Bill and the extent to which it covers consumers, both domestic and small businesses. I believe that the restriction to only one line needs to be reconsidered in this modern world of communications. I ask my noble friend to consider again—I know that the matter has been discussed in another place —whether restricting the individuals and premises covered by the Bill to those with a single line is satisfactory. I believe that today even domestic consumers need two lines—one out, one in—and perhaps even a third line for the children. Possibly one needs a fourth for the burglar alarm and a fifth for the fax machine. This is an age of communications. Although we pay for them, the advantages of rapid communications are enormous. A small business which is restricted to one line will lose a lot of trade because customers will find it difficult to contact the firm. BT now offer a call waiting service but very few people use that service. Surely there is a justification for including businesses with two or more lines. At later stages of the Bill I may well push for up to five lines.
I also believe that the range of services should be extended to cover data transmission. We do not understand, as perhaps our children do, the opportunities for new uses of communications between computers and other more sophisticated uses of the telephone system. That aspect could be covered by only a simple addition to the Bill.
The other point I should like to make relates to the fact that the Bill applies only to telecommunications providers with a 25 per cent. or greater share of services. The matter was raised by my honourable friend Mr. Ian Bruce in Committee in the other place, to some effect. Instead of promoting competition that restriction would probably give British Telecom the opportunity to advertise that only its services were regulated by OFTEL and could therefore be trusted. That provision should be reviewed and perhaps extended to cover service providers having a 25 per cent. share in a particular area. That would cover the new cable companies which are now being set up. In certain areas those companies will in a very short time account for 25 per cent. of the available services. Therefore they should come under the Bill. Such companies will want to compete. They will want to compete on the basis of standards and of standards of service. Therefore I believe that they would not be averse to being brought into the protection of the Bill.
For the reasons I have given I wish the Bill success. There are one or two minor amendments to be made

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to it, but I believe that it is justified to continue what the UK alone in Europe is doing in establishing standards of privatisation and standards of commercialisation for our great national services in a way that is good for the country and good for the consumer.
12.17 p.m.
Lord Hacking: My Lords, perhaps I should begin my words to your Lordships by apologising to the noble Lord, Lord Allen of Abbeydale, and any other noble Lord who may have been disturbed by the commotion just now on these Benches. A few minutes ago the noble Lord, Lord Bruce of Donington, was on fire. It was only as a result of the fire-fighting exercise conducted by the Cross-Benchers that the flames, sparks and smoke from the noble Lord's left-hand hip pocket were extinguished. Therefore, in your Lordships' House we should be grateful for the utility of our water.
Nobody would quarrel with the premise that the providers of utility services should be subject to certain disciplines, particularly since they have until very recently operated as monopolies. Indeed, the noble Lord, Lord Ezra, argues that they still operate chiefly as monopolies, a proposition with which I disagree. Be this as it may, there is no quarrel that the providers of utility services should be subject to certain disciplines.
Nobody, therefore, would argue that there should not be an independent champion of customers' rights. Nobody would argue with the principle that there should be published quality standards and targets for the providers of utility services. Nobody would argue with the principle that the customers of those services should be compensated when the providers fall below those standards. Nor would anybody quarrel with the proposal for independent procedures for the resolution of disputes and handling of complaints.
The purpose of my intervention is to raise three points of specific concern and one point of general concern and then return in more detail to those points at Committee. Those anxieties have been put to me principally by British Telecommunications plc, so in that sense I hope that I am balancing the contribution made by the noble Lord, Lord Allen of Abbeydale.
I turn first to the enforcement of standards of performance. In the provisions of the Bill concerning the gas and electricity industries, there is a standard of reasonableness applied concerning the enforcement of standards. I refer specifically to Clause 12 in relation to the gas industry and the new proposed Section 33C(3) of the Gas Act 1986, to Clause 23 relating to electricity and the new proposed subsection (3) to Section 40 of the Electricity Act 1989. But with regard to the provision of telecommunication services, the test of reasonableness has not been applied. I should therefore be grateful if the Minister would consider that point. I should certainly like to return to it at Committee.
My second point of concern relates to the independent procedures for resolving disputes. I suggest that there are two lacunae. First, there is no obligation on the Director-General of Oftel (or the
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other directors-general) to state their reasons for their adjudications. Secondly, it follows that there is a limitation to due process of law; in other words, a limitation on the parties who are not satisfied with the adjudication to take the point to a court of law as a matter of judicial review.
My third point concerns the complaints procedures referred to in Clause 4—the new proposed Section 27E(2) (b) of the Telecommunications Act 1984. Before any modification in complaints procedures can be accepted it has to be approved by the director-general. That gives the regulator a significant degree of day-to-day responsibility for the running of what should be a private company operating in a competitive market.
That brings me to my general point. Have the Government hit the right balance between the freedom of competition and the imposition of a regulatory regime? When the Minister opened the debate, it was noticeable that he contrasted the operation of all the main industries affected by this Bill before and after privatisation. He indicated that there had been a substantial improvement in the quality of service. As the Minister argues, that comes out of the new competition regime and the benefits of that regime.
It is clear from the example I cited that it is a matter of concern that the regulatory regime in the provisions of this Bill could bite across the freedom of competition and hence prove a brake upon it. Those are the only observations that I have to make. I shall return to the matter in more detail in Committee.
12.24 p.m.
Baroness Gardner of Parkes: My Lords, I welcome the Bill. I have considerable interest in those parts of the Bill which deal with both electricity and gas. However, like every consumer, I am also interested in British Telecom. I therefore intend to say a few brief words on that subject.
As I am sure have many noble Lords, I have received much correspondence from all sides. In its communication British Telecom made a good point. It said:
"Natural justice would suggest that a company should not have a liability for matters beyond its control—for instance, the inevitable, short term deterioration in maintenance performance following the extensive damage done to our overhead cabling in the hurricane of 1987".
British Telecom goes on to say that as the Bill is worded at the moment it is silent on practicality. That is important in terms not only of a natural disaster such as a hurricane but of industrial activity which deliberately sets out to destroy the effectiveness of the system. I am thinking of the glass that was put into baby food. That was deliberately designed to interrupt the industry. What would be the situation if someone deliberately took action to vandalise or put out of action a number of pay phones, where a high percentage is required for their standard of operation.
With regard to the pay phones I have a small personal complaint. When a British Telecom card is used—card operation is a marvellous thing—it costs lop for every section. Just as one is about to finish a brief conversation, the next portion of 10p clicks over.

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However, with Mercury the card only clicks over 1p at a time. That seems to me to be much fairer. Moreover, why is it that in every government building there are only British Telecom pay phones and none from Mercury? There is no choice or competition. Is that deliberate government policy or is it just by chance that old BT telephones were converted into BT pay phones and card phones? It is certainly an irritation for people.
Also irritating is that the very useful and effective itemised bills are not available in country areas, such as where 1 live. It is simply not possible to have them. From one quarter to the next my bill increased from £20 to over £100. When I asked for an itemised bill I was told that they were not yet available in the area. I hope that changes will take place.
With regard to the entirely different issue of electricity, the problem is that the consultation paper brought out by Professor Littlechild, following the government amendment introduced in the other place, proposed very advanced procedures such as telephonic scanning. By that means the meter can be read from a central station. In the years when I served on the London Electricity Board the aim was to have such operation. Initially the idea was to have someone driving up and down one's street in a van to do it, but eventually it was aimed to do it from a telephone. Now, reorganising a pacemaker can be done over the telephone. Such advances are coming. However, it would be very unwise to impose such conditions at such speed that people cannot possibly keep up with them.
Another area of concern is meter fraud. Under the Bill I understand that one will be able to have one's own meter. That has always caused great difficulty. Fraudulent use of electricity is widespread. Those who have seen the black museum of meters which have been adapted or changed—some have been adapted to run backwards—know how important it is for the supplier to be able to test and assess the meter. If it is found that the meter has been tampered with, a right to replace that meter will be needed. For every person who gets free electricity, it costs every other person who pays his bill a little bit more. That is quite unjust. Therefore there are a number of amendments which should be brought forward on behalf of the electricity industry.
Another point concerns blocking proceedings for 28 days. If someone were paying on instalments, that might create complications. This is not the moment to go into detail and I shall return to that point later.
With regard to the Gas Consumers Council, on which I served as a member in the North Thames area for some time, one must be careful to protect the good things that we already have. It has been pointed out by the Consumers' Association, and indeed most of us know it, that the Gas Consumers Council is unique and eminently satisfactory.
I noted that the noble Lord, Lord Williams of Elvel, said this Bill had been drawn up to correct past mistakes. I wish to ensure it does not create new ones. I shall table amendments in Committee to ensure that the Gas Consumers Council retains its strong and
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unique position. I take a tiny bit of personal credit for that in that I was involved in persuading the noble Lord, Lord Belstead, to accept—
Lord Ezra: My Lords, why does the noble Baroness want the council to remain in a unique position? Why could the good example set in the gas industry not be applied elsewhere?
Baroness Gardner of Parkes: My Lords, I take that point. From the point of view of consumers it would be desirable to set up such bodies in other utilities. I have no view on the matter of whether this Bill is the correct vehicle in which to set up such new bodies. However, I certainly do not wish the Bill to destroy any such bodies. As long as one satisfactory precedent exists, there is the possibility that others may follow in due course.
The structure of the gas industry is an important factor here. The gas industry comprises one central system as compared with the electricity industry which comprises a number of different bodies in different regions. I acknowledge there is scope to set up similar consumer organisations in the other utilities. I shall not spell out the kind of amendments I intend to table in Committee but they will be simple amendments. They will seek merely to insert the word "council". That word was used in the gas legislation to determine the Gas Consumers Council. Ofgas has a responsibility for all aspects of the gas supply up to a consumer's meter. Everything on the other side of the meter inside one's property comes under the jurisdiction of the Gas Consumers Council. The Gas Consumers Council works well with the gas companies and has been able to smooth out many thousands of potentially difficult complaints.
A manager of one of the regional gas boards said to me recently that every time a minor complaint was received by Ofgas it became a major complaint and was time consuming to resolve. However, the Gas Consumers Council and the gas companies can sort out people's problems much more directly. I want to see that valuable link retained. I believe the Government would not wish to see any harm done to a body that is proving so successful. If the Government wish to establish more consumer bodies —the noble Lord, Lord Ezra, suggested that—that would be welcome. However, I shall table amendments to ensure that the Gas Consumers Council retains its unique position and retains the right to be consulted on consumer issues.
12.33 p.m.
Lord Elliott of Morpeth: My Lords, as is customary I declare an interest. I am president of the Water Companies' Association and chairman of two water supply companies in the north east of England. I speak for the association of which I am president and for the Water Services Association, which has approached me as it is concerned about an aspect of the Bill. I hope your Lordships will forgive me for speaking briefly about a matter which is mainly technical, but which is of great consequence to the

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water industry in England and Wales and to the quality of service that companies provide to their customers.
Water undertakers have for many years been able to require as a condition of connection to a water main that a separate service pipe is provided to each house or building on the premises in question. The control which this has given them over the water supply system has resulted in much benefit to their customers. The alternative to separate supply pipes is common supply pipes—that is, a single pipe providing a common supply to all houses or buildings in a development. In this situation responsibility for maintenance of a customer's pipework and for mending leaks is difficult to identify and enforce. This can result in poor supplies and waste of water—in some cases a great deal of water may be wasted—and, on occasion, pressure on water resources. Separate supply pipes have thus formed an important part of the water industry's strategy for improving standards of service.
Clause 46(3) of the Bill seeks to restrict to cases where they would otherwise have difficulty in discharging their statutory obligations the ability of water undertakers to require separate service pipes. The industry understands that the impetus for this change has to come from the Office of Water Services, which believes that for certain developments such as blocks of flats it may not be wholly reasonable to insist on separate supply pipes because of the cost involved. This may well be so and some curb upon water industry powers might therefore be appropriate. However, the wording goes much wider than what is necessary to accommodate the point made by the Office of Water Services. The view of the water industry is that the wording is so wide as seriously to dilute its powers to require separate supply pipes. If the clause is enacted as it stands, a significant increase in common supply pipes, and a consequent reduction in the quality of service, is considered by the industry to be inevitable. This surely cannot be the intention of the Government.
The reasons for this are as follows. The clause refers to water undertakers' statutory obligations. These are, however, comparatively few—although they are important—being confined to the supply of water of sufficient quantity, pressure, and quality. The circumstances where the discharge of these obligations would justifiably require the installation of separate service pipes are limited in the extreme. Thus there has been an inevitable increase in common supplies. It is really, however, in the discharge of their functions to improve and maintain services to customers that separate service pipes are very much desired by companies. Perhaps in that lies a clue as to how the clause should have been phrased. I must remark in passing that it is a matter of regret that there was no prior consultation with the water industry before the introduction of the Bill in another place about the practical effect of this clause as presently worded.
I therefore submit that Clause 46(3) does not at the moment make good operational sense. This is the view of the water industry and it is certainly my view as
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chairman of two water supply companies. I hope in consequence that my noble friend will take full note of the points I have made.
12.38 p.m.
Lord Ashbourne: My Lords, I wish to make only a brief intervention in this debate to raise the issue of premium rate telephone services, sometimes known as "chatlines" or "0898 numbers". This Bill claims to be about increased protection for consumers and there are many aspects of the Bill that I welcome, especially the new arrangements for those who have a dispute about their telephone bill. But the Bill wholly fails to address what the chairman of British Telecom once called a "blight on the industry". The Government have missed the opportunity provided by this Bill to do anything about the problem of chatlines.
Let me make clear that I am all for technological advance. Since 1984 we have seen many welcome innovations in telephone services such as greater competition, more reliable pay phones and the advent of the fax machine. Indeed the basic concept of premium rate services is a helpful one, allowing much useful information—for example, stock exchange prices, weather forecasts and cricket scores—to be obtained by telephone.
The difficulties arise because, as with so many industries, there are cowboys who want to make a quick buck, especially through providing sleazy pornographic services. Sadly, people get addicted to such services and huge telephone bills result. Quarterly bills of £500 or £1,000 are not uncommon and in some cases, quarterly bills of £4,000 have been recorded. Who makes such calls? It is often teenagers, the lonely and the unemployed. It is often people who are not telephone subscribers and who, therefore, will not be faced with the bill.
I can predict the Government's response to my anxieties because I know what was said in another place. They will say that enough is being done. I know about the existence of ICSTIS—the Independent Committee for the Supervision of Standards of Telephone Information Services—call-barring and codes of practice. I ask how it can be said that enough is being done when you can walk a few yards from this House and buy a so-called newspaper advertising thousands of services with titles like "Sex Slave", "Talking Dirty" and "Willing Housewives".
Instead of widespread exploitation, we need sensible controls. Instead of ICSTIS we need a statutory committee. Instead of call-barring (opting out from such services) we need to be able to opt in in the same way that you can only obtain an adult channel on cable TV if it is specifically requested. Surely this Bill needs to be amended to include those further controls. When the Minister winds up, perhaps he will give an indication as to what may be the Government's reaction to those suggestions. If he does that, the House will be greatly in his debt.
12.41 p.m.
The Earl of Clanwilliam: My Lords, it surprises me that the parties opposite have cavilled at the provisions of this Bill. I greatly support the Bill. The

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Government have innovated the privatisation of utilities in this country, as my noble friend Lord Renwick said. They have increased the popularity, efficiency and profitability of those utilities. Do the parties opposite wish us to return to the days of failing public utilities which have to be supported by ever-increasing levels of taxation?
That is enough of that. I now turn to the Bill. It extends significantly the powers of the directors general and, in key areas, it changes the nature of those powers. Hitherto, they have acted as regulators in accordance with specific duties laid down in primary legislation. Now they are being asked to act as adjudicators. They are asked to decide, on the basis of evidence presented by two parties, whether bills are properly to be paid, whether individual service standards have been met, and so on. Those are very different functions. The Minister explained that that is the intention of the Bill.
I take telecommunications as an example although similar arguments apply to all industries affected by the Bill. Section 3 of the Telecommunications Act 1984 specifies that the director must, among other things, ensure the provision of services. That section which defines and limits the role of the regulator does not and cannot apply when the director general is adjudicating a dispute between a service company and its customers. However, the Bill does not provide any alternative framework defining the powers and duties of the director in this area. I suggest that that may be a weakness.
The Government indicated in another place on 16th January (col. 1174 of Hansard) that they were considering applying the Tribunals and Inquiries Act to adjudications under this legislation. I welcome that suggestion, but perhaps the Minister will confirm that that is to happen.
As the noble Lord, Lord Hacking, said, it is particularly worrying that under the powers for dispute resolution there is no obligation to follow "due process". That point has been covered by noble Lords on both sides of the House. The insertion of a clear and binding requirement for the director or his appointees to give reasons and for either party to the dispute to be able to appeal on a point of law would improve the legislation and would enable both sides of the dispute to understand how and why they were wrong.
The Bill gives wide powers to the directors general to ordain overall standards and—with the consent of the Secretary of State—standards applying to individual customers. That is manifestly right and to be welcomed. If a company fails its customers, it should compensate them. However, my noble friend Lady Gardner of Parkes has clearly pointed out that the Bill does not make exceptions for natural disasters and that is an anomaly which should be put right by this Bill.
The Bill creates an absolute duty for telecommunication companies to meet overall standards even if circumstances mean that it is not practical to meet those standards. The gas and electricity undertakers have the lesser duty of conducting their business in a way that can reasonably be expected to lead to
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achieving such standards. The noble Lord, Lord Hacking, mentioned that. It seems contradictory that there should be a different obligation for the gas and electricity utilities. Surely the obligations as regards telecommunications should be brought into line with those for gas and electricity.
Another anomaly concerns the degree of required compliance with a licence condition. The director general of telecommunications has a duty to make a licence enforcement order following a licence breach even if the offending party is taking satisfactory steps to eliminate the cause of the breach. Indeed, Clause 44 of the Bill specifically excludes gas companies but does not exclude the telecommunications companies. Given the Government's expressed intention to standardise the powers of regulators, it seems odd that those matters have not been brought into line.
I hope that the Minister will accept my congratulations on his introduction of the Bill. Perhaps he will be able to give some information as regards whether the director should give due process for his reasons in cases of arbitration and there should be no liability for causes outside the licensees' power and control and that the application of the Tribunals and Inquiries Act should apply to this Bill.
12.47 p.m.
Baroness Platt of Writtle: My Lords, first, I must declare an interest as a non-executive director of British Gas. Secondly, I must apologise to the House for my late arrival this morning. As a non-executive director I was helping to launch a campaign to encourage more girls and women into science and engineering. My honourable friend Virginia Bottomley, the Minister for Health, had agreed to speak and I could not let her down as I had promised to chair the meeting. However, I shall read with particular attention in Hansard the earlier part of the debate.
The Bill sets out to increase competition among the utilities, a principle of which I greatly approve, as they should serve the customer better. I have now been a member of the British Gas board for nearly three years. It is five years since privatisation. During that time I have seen a considerable increase in its competitive spirit both in this country and abroad and especially in terms of a more customer-oriented approach within the UK.
British Gas welcomes the increase in competition and has agreed to the principal recommendations of the Office of Fair Trading, the more competitive tariff formula and the original Monopolies and Mergers Commission recommendations of a few years ago. It has carried those out in practice and in good faith.
All that is good news in the light of the Bill. In the coming year the distribution system will be hived off into a separate division which will mean transparency in costs and more competitors. From April of this year British Gas has voluntarily agreed to reduce the tariff threshold from £25,000 to £10,000. Thus, competition will develop, and we have agreed to help it.
There are one or two points I wish to make to show the other side of the penny. I was one of those who, perhaps like many of your Lordships, bought shares in

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the company at Sid's behest long before I had any connection with it. The legitimate interests of many small shareholders must be safeguarded and they must feel fairly treated in terms of value for money originally paid for the shares. That is particularly so as we want to encourage more people to become shareholders in the United Kingdom.
Part of that value for money will depend on British Gas thrusting into foreign markets for business. It is already doing so in terms of exploration, production, distribution and sales in developing a successful global gas company. However, a successful overseas company is heavily dependent on expertise and profitable business in the UK. It will be difficult to build on a weak national base; yet its international success will be a considerable boost to the prosperity not only of its shareholders and employees but of UK Limited.
During the late 1960s and early 1970s the coalgas industry was going downhill. By now it would have been out of business had it not been for the experimentation and introduction of natural gas by the company operating in those days. Today it is a thriving business with a strong domestic market. However, it is easy to forget the tremendous initiative of those days; setting up a whole new transmission system and changing everybody's fittings to accommodate the new gas. It has a much higher calorific value and can be transmitted at higher pressures.
Gas is hazardous and safety has always been high on the list of priorities at British Gas. That must be so for all distributors. British Gas has not skimped on research to improve safety. The intelligent pig which tests the pipelines for leaks internally was developed by British Gas and is now being sold internationally. Much development has been carried out to make the installation and repair of pipelines less likely to require the holes in the road that cause disruption to traffic. That kind of research and development and insistence on safety costs money. In encouraging competition, such safety and development must not be jeopardised. It could easily be forgotten by those outside the business.
One of the strengths of our British political system is that it evolves, developing checks and balances to ensure that too much power is not concentrated with one group or individual. To an extent the privatisation of the major utilities sought to achieve a balance by appointing regulators to oversee the conduct of the privatised companies. But little attention has been given to the issue of the accountability of the regulators themselves.
While some of the respective Secretaries of State have certain powers over the regulators they are fairly limited. But this Bill gives a whole new set of powers to the regulators with few supervisory powers residing with the Secretaries of State. The Bill increases the powers of the regulators without a corresponding increase in accountability.
Examples of the additional powers being granted to the regulatory directors can be seen in Clause 11. At line 21 on page 13 of the Bill, Clause 11 reads:
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"The Director may, after consulting … from time to time—
(a) determine such standards of overall performance in connection with the provision of gas supply services by public gas suppliers as, in his opinion, ought to be achieved by them…
(2) Different standards may be determined for different public gas suppliers.
(3) It shall be the duty of every public gas supplier to conduct his business in such a way as can reasonably be expected to lead to his achieving the standards set under this section".
As a result of the way in which the overall clause is currently drafted we are in danger of having a director as lawmaker, judge, jury and executioner with no court of appeal. My noble friend Lord Clanwilliam referred in particular to that extension of powers. I question whether this is really the kind of structure that Parliament wants to have put in place. One way of plugging the gap would be to make amendments so that the power to make regulations should rest with the Secretary of State and not be placed upon the director. I hope that serious consideration will be given to that suggestion.
I wish to make clear the fact that I am not seeking to reduce the present powers of the regulators. My concerns are about the additional powers being given to the regulators in the Bill and how future regulators may build upon those powers. As the Bill stands the directors general will be able to make regulations to suit their own purposes and preferences. Although for the most part the present regulators may have performed well, the system could be abused. These powers and the decisions taken are not open to challenge unless legally incorrect. The process of judicial review could be considered but legal opinions question whether the process is really suited for overseeing the way in which powers are being exercised by regulators.
I was interested to hear the noble Lord, Lord Hacking, refer to the need for a statement of reasons by the regulator, which has great merit. If there is a major dispute between the regulators and the companies which they control it may be said that there is the opportunity to put the issue to the Monopolies and Mergers Commission. But that is a lengthy and cumbersome method to use and at too high a level.
I agree with my noble friend Lady Gardner about the work of the Gas Consumers' Council, particularly in relation to minor matters. However, I am now referring to major matters. There has also been the suggestion of involving the Council on Tribunals. Perhaps we shall hear that more can be done through that route. It seems to me that we need either a tribunal or a larger, specially-appointed committee, perhaps composed of Privy Counsellors who will make objective judgments on utility regulation. I am not laying down how the committee should be composed because that is a matter for the Government. It might be a Select Committee composed only of Members of both Houses or it might include other people with judicial and commercial experience relevant to the kind of decisions that they would need to make. The main purpose of the Select Committee would be to ensure that there is a proper balance within the framework in

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which the privatised utilities operate. They supply services to virtually every household and citizen in the land.
We must make sure that there are effective methods for the complaints and suggestions of those customers to be heard. We must also make sure that the privatised companies are not interfered with unduly to the detriment of their shareholders, employees and future customers. There should be a channel for any relevant body to air what it may see as major grievances. There could also be advantage in giving the regulators themselves the opportunity to make their case on issues and to state the reasons for their decisions through the procedures of the committee.
I hope that my noble friend will discuss with my right honourable friend the Secretary of State the possibility of setting up such an independent, objective group of Members of both Houses of Parliament, some of whom would need long-standing experience in the commercial world. In that way there would be a proper channel of appeal on major matters of policy from customers, shareholders, all the privatised utility companies and their regulators. Nobody could feel that their legitimate interests had not been given a fair hearing. Indeed, I have seen that idea mooted in the press. It is the kind of proper parliamentary check and balance that we normally create in our democracy in this country in order to make clear that justice will be achieved between conflicting demands.
Without such a channel of appeal on major matters, power is concentrated too much in the hands of one person. However reasonable such a person is, too much concentration of power can easily lead down the slippery slope to unreasonableness in the exercise of that power. The utility companies accept that they must help to encourage competition. However, if there is no fair right of independent appeal, commercial success on behalf of shareholders may suffer. That is no way of encouraging a shareholders' democracy. Objective justice must be seen to be done.
1 p.m.
Lord Desai: My Lords, as many noble Lords have pointed out, the Bill before us is, by and large, a set of corrigenda; indeed, the longest list of corrigenda that I have seen compared to previous Bills. We are making corrections, amending in various places and pointing out parts which could have been better drafted. As my noble friend Lord Williams pointed out, perhaps a bit of forethought might have been used at the original point of forming the legislation or perhaps the warnings given should have been heeded, whereas they were not.
Before I turn to the detailed matters mentioned by noble Lords, I should like to put forward some general principles which could have been followed when privatisation was first undertaken. Since the days of Adam Smith economists have seen no great virtue in either private or public ownership of natural monopolies. It is very much a matter of circumstances, tastes and institutions as to whether one or the other solution would be appropriate.
When privatisation was undertaken, I believe that there was a muddle in the minds of many people;
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namely, that somehow, if you privatise a natural monopoly, it is possible to improve performance by something called "competition". As my noble friend Lord Williams, the noble Lord, Lord Ezra, and other noble Lords pointed out, there are natural monopolies in which competition cannot be introduced because of the nature of the product. The water service is one example. It is not possible to think of competition in regard to the water services.
Therefore, one has to fall back on a different way of guaranteeing the two aspects outlined by the noble Lord, Lord Ezra: first, the economic regulation of the monopoly so that the monopoly power is not abused, and, secondly, consumer protection. However, if we are to do that we must have a proper regulatory mechanism. The present Bill arises from the fact that a proper regulatory mechanism was not thought of initially over the five years during which various Bills were introduced. Now we have to correct such legislation in many places.
One inescapable conclusion arises from the remarks made by many speakers. Once again, I believe that the Bill will prove to be too timid. I believe that it will have to be corrected in many places and we may still have to return to it at a later stage to deal with certain problems. Moreover, as has already been implied, it is rather late in the day to start dealing with some of these matters which should have been dealt with long ago.
Basically, so far as concerns noble Lords on this side of the House, there are one or two points of absolute importance. As regards natural monopolies, because they cover utilities, it is absolutely essential that we think of consumers as being entitled to good services rather than just thinking of a service as something which can be contracted. That is an important point. It is not enough to say that 95 per cent. of the people are satisfied with the service. The small minorities are most important; for example, the disabled, the poor and the elderly. It is small groups of people here and there with special problems who must be looked after. It is not good enough just to look after the majority. Everyone has to be looked after, because some of the services are vital to the health and sometimes the lives of people. Therefore, the first principle is that we must ensure that special groups of people are catered for by the natural monopolies.
Secondly, it is most important that we have direct consultation with consumers over and above consumer councils. The noble Baroness, Lady Gardner of Parkes, said what a good job the Gas Consumers' Council had done and suggested that the concept should be extended to other natural monopolies. However, I agree with my noble friend Lord Williams who said that it is not just representatives of consumers who have been elected in some way or a consumer association which it is important to consult; it is very important to consult consumers directly by methods of market research, opinion polls, and so on. I say that because the individual consumer is often not adequately represented in such matters.
Thirdly, I believe that it is most important—and many noble Lords have drawn attention to this fact

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—to regulate the regulators. It is not only important that regulators should have adequate powers to carry out their task, but we must also have a framework whereby the regulators are accountable to publicly-elected bodies. There must be supervision to ensure that regulatory powers are not misused and that regulators do not get into collusion; in other words, that there should be no producer culture of regulation.
When privatisation was undertaken it is somewhat astonishing that we did not follow the good example of the United States, which has for a long time held the opinion that, although utilities are privately owned, they should be very properly and publicly regulated. There is much literature on the fact that public regulation of private monopolies is the way forward. As noble Lords know, the public regulators in the United States can be very tough. That is an example which we ought to be following.
A further matter which ought to be mentioned is the fact that there seems to be some asymmetry here; that is, some rules which apply to water and gas do not seem to apply to telecommunications. The noble Lord, Lord Hacking, referred to this in his speech. We should be given a reason as to why in some matters, especially telecommunications, certain utilities seem to be treated differentially more favourably than water or gas.
It is important to remember that large profits represent efficiency on the part of competitive firms; they just represent market power on the part of monopolies. Therefore we must always bear in mind the twin aspects involved: economic regulation of the natural monopolies and consumer protection. Both of those aspects must be simultaneously looked after so that private monopolies operate efficiently but also in the public interest.
Baroness Gardner of Parkes: My Lords, before the noble Lord concludes his speech, perhaps I may draw his attention to the fact that, although noble Lords opposite have referred to "corrections" as regards the Bill, when I mentioned the word I was quoting something said by a Member of the other side of the House. I should prefer to use the word "improvements".
Further, does the noble Lord agree that many of the improvements are matters which could not have been envisaged at the time of drafting? Although we have discussed such improvements today, it is very much easier with hindsight to see where things could have been better in such Bills. However, such issues have come to light only as time has progressed.
Lord Desai: My Lords, I thank the noble Baroness for that intervention. As regards the first point she made, I agree: we on this side of the House believe them to be corrections. The noble Baroness may wish to think that they are improvements, but that is a matter of perception. In reply to her second point, I should stress that I was not a Member of the House at the time when such Bills were discussed. But as an academic economist I can tell the noble Baroness that many of us anticipated such problems.
Lord Williams of Elvel: My Lords, I hope that the noble Baroness will allow me to intervene because I was present during some of those debates.
Baroness Gardner of Parkes: My Lords, yes indeed; I have no objection.
Lord Williams of Elvel: My Lords, the noble Lord, Lord Ezra, and myself—I remember it well—put forward many such points during the passage of the Telecommunications Act, the Gas Act and the Electricity Act. Indeed, I put forward all of them from this Dispatch Box.
1.9 p.m.
Lord Reay: My Lords, quite a number of points have been raised during the course of an interesting debate. I know that in some cases this is advance warning of intended amendments. Nevertheless, I shall try and treat them as if answers are required—at least to as many points on which I think I can throw any light.
The noble Lord, Lord Williams, began with a complaint that the Bill showed that nothing previously had worked, and that all the Government were doing was seeking to amend previous legislation. We are benefiting from experience that we have gained during the course of the privatisation of the utilities. As I explained in my opening speech, OFFER is the most recent regulator and generally has the strongest statutory powers. The Bill aims to bring the level of the other regulators' powers up to the level of OFFER's generally speaking. The biggest changes are for OFTEL and Ofgas which were set up earlier.
The noble Lord said that no competition was possible for water. He overstated that. I made it plain that there are difficulties in introducing competition into water, but we consider that it is possible to some degree, particularly where customers can have a choice between different suppliers because of their geographical situation and in the case of single large users, which under the Bill will be treated as inset appointments. That could include new green-field sites, possibly new towns and large companies. For example, large chemical works or pulp paperworks could be covered under the provisions.
The noble Lord raised the matter of consumer councils and suggested that the other utilities should have something equivalent to the Gas Consumers' Council. There are customer representative committees for all utilities which have evolved in the form which is most appropriate to each of those utilities. We do not see a need to replicate the Gas Consumers' Council for electricity, water and telecommunications.
The representative committees vary. For electricity, there are 12 committees matching the regional companies; in the case of water there are 10 committees, each covering a geographical area; in telecommunications there are four territorial committees, plus two specialist committees representing small business and the disabled; and there are over 160 local committees. Those committees have gained expertise in their different fields and they provide customers with valuable sources of advice. We think that to change from this existing structure would be a

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confusion for customers, and it would be some while before any new consumer committees could acquire the expertise to be effective.
The noble Lord asked me what the safety provisions would be once the gas threshold was removed. There are safeguards which apply to all gas suppliers. Under Section 4 of the Gas Act the Secretary of State and the director general have a duty to protect the public from dangers arising from the distribution, transmission and supply of gas. Under Section 18 of the Gas Act, transmission, distribution, use and supply of gas through pipes are brought within the scope of Part I of the Health and Safety at Work, etc. Act. Those statutory requirements will remain when the threshold is lowered.
The noble Lord suggested that the regulators should he able to consult consumers directly, rather than through the medium of representative bodies. They will certainly be able to conduct market research, for example, if they consider that to be a useful exercise.
The noble Lord raised the issue of the regulation of the regulators. The regulators are already accountable. They operate within a statutory framework; they are required to make an annual report to the Secretary of State. That report must be presented to Parliament. They are also subject to the scrutiny of the appropriate Select Committee, and their decisions can be subject to judicial review. So we do not see them as being unregulated.
The noble Lord, Lord Ezra, who was joined by my noble friend Lord Clanwilliam, raised the issue of regulators allegedly not being required to give reasons for their decisions. In all cases, regulators must give reasons for their decisions, otherwise they run the risk of being judicially reviewed. The noble Lord, Lord Ezra, said the Bill did not go far enough, in his opinion, on energy efficiency. That is his view. I said that under the Bill we would consider the promotion of energy efficiency to be a highly important matter. Energy efficiency improvements are pursued by the Government through other means. They have helped the United Kingdom achieve a 25 per cent. increase in GDP over the past 10 years with virtually no change in energy consumption and the Energy Efficiency Office's budget for 1992–93 will be 40 per cent. greater than for this year. There are many initiatives that we are taking.
The noble Lord, Lord Ezra, suggested that the Bill did not sufficiently address the interests of the disabled. Director generals all have a responsibility to take account of the interests of the disabled under their general duties in all of the four Acts. Those general duties will cover the provisions in Part I of the Bill and will be reflected in the way in which the directors use their new powers in the Bill.
The noble Lord, Lord Ezra, who was joined again by the noble Earl, Lord Clanwilliam, raised the matter of differences on the duty to comply with overall performance standards between the utilities. There is a power for all regulators to take enforcement action by making statutory orders, and there is an obligation
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on all the utilities to meet the standards set. The difference that exists is based on a different approach which has developed in the different industries.
The noble Lord, Lord Allen of Abbeydale, referred to the Chronically Sick and Disabled Persons Act 1970 and suggested that the criteria under the Act were too stringent. The criteria, I understand, are for the individual local authorities to decide. He registered a complaint—if that is not too strong a word—that I was annunciating all sorts of advantages of privatisation which he claimed were not visible to the naked eye. Of course, not everything is visible to the naked eye—or to anyone's naked eye—for example, electricity or gas. Neither of them of course are visible. If it is the case that not everyone is sufficiently aware of the advantages of privatisation, then I do not think that he can complain that I should have repeated them to your Lordships.
The noble Lord, Lord Allen, also raised the question of the problem posed by people tapping into other people's telephone lines and having to pay for the illegal use of their telephones. If a telephone line is tampered with—and that occurs outside the customer's premises,—then British Telecom is only entitled to the cost of calls that have been legally made. He raised the matter of hearing-aid users, and he talked about inductive couplers. It is a condition of British Telecom's licence that it must meet all the reasonable demands for telephones capable of being inductively coupled. Telephones in lifts and in public call boxes must be capable of being inductively coupled. BT also make available portable couplers. That is described in the booklet, BT's Guide for the Disabled which was published this year and is generally available. I recommend that the noble Lord consults that.
The noble Lord referred to problems that were outside BT's control. In setting standards for the utilities, it would be for the director general to decide whether there should be any exemptions from paying compensation for certain circumstances.
I was grateful to the noble Lord, Lord Hacking, for the news that he and his colleagues had ensured that the noble Lord, Lord Bruce of Donington, was not prematurely removed from our midst by fire. Perhaps that event came as a portent to show that even the Fire Service should no longer be a monopoly.
My noble friend Lord Renwick raised the matter of the Telecom section and its application to a wider number of customers and a wider group of operations. I should like to point out that the restriction to single line premises only applies to business premises. Residential customers can have any number of lines, and the Bill will still apply. The Bill should be restricted to operators who enjoy a virtual monopoly—that is to say, BT in Kingston. Where competition applies, the Bill should not do so. The Bill implements The Citizen's Charter, and therefore in our view should not cover large business. A single line restriction will cover the majority of small business customers. I hope that that goes some way to dealing with my noble friend's anxiety.
My noble friend Lady Gardner of Parkes complained that itemised telephone bills were not

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always available. The situation with itemised billing is that it is now available to 79 per cent. of BT's customers and 100 per cent. of Mercury's and it should be available to 90 per cent. of BT's customers by the end of 1993.
My noble friend also feels that the Bill does not adequately recognise the Gas Consumers' Council. The Bill in no way attempts to downgrade the role of the Gas Consumers' Council. We consider that it plays a most useful role. Clause 18 sets this out in relation to the new powers in the Bill for the Director General of Gas Supply to determine disputes over the terms of supply and individual service standards. The clause also covers the role of the Gas Consumers' Council should the Secretary of State give the director general powers to determine billing disputes.
On the suggestion that the Bill should specify that the Gas Consumers' Council be consulted over standards, a number of the clauses require the Director General of Gas Supply to consult persons or bodies appearing to him to be representative of persons likely to be affected. This enables him to consult the most appropriate organisations, including, for example, the National Consumer Council and Age Concern. In any case the Gas Consumers' Council is so clearly the most representative of these interests that the director general will inevitably consult it.
My noble friend thought that there was no power to provide for exceptions for guaranteed service standards and therefore an obligation to provide compensation. I may have answered this, but perhaps I should more fully say that the new Section 27A(3) (c) enables the Director General of Telecommunications to provide for exceptions for guaranteed service standards and therefore for the obligation to provide compensation.
My noble friend Lord Elliott of Morpeth spoke about Clause 46. I am aware that water companies are worried that Clause 46(3) will seriously restrict their ability to require separate service pipes to premises. I am grateful to my noble friend for explaining these worries so clearly and fully. I wish to give further thought to what he said before we come to the Committee stage of the Bill.
My noble friend Lord Ashbourne expressed his horror at certain premium rate services and made a proposal that there should be opting in. This was a matter which the Monopolies and Mergers Commission considered in 1988 and it rejected the idea of opting in as not being in the public interest. It recommended a range of safeguards which are now in place. The safeguards have been successful. Many services have been cut off by BT and Mercury on the recommendation of ICSIS and OFTEL. In 1990 over £200,000 was paid in compensation to subscribers whose telephones had been used to phone chat lines and one-to-one services without their authority.
The market is changing in response to the safeguards that are in place. Only about 20 per cent. of premium rate services are now what could be called adult services and chat lines which my noble friend described. So in our view the regulatory framework has worked.
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I believe that I have dealt with most of the points raised by my noble friend Lord Clanwilliam. He asked what progress is being made on the matter of the Council on Tribunals. My department has begun discussions with OFTEL about the possibility of the Council on Tribunals having supervision over the dispute powers given to the Director General of Telecommunications under the Bill. The role of the council in relation to the other regulators' powers is, however, a matter for the respective departments.
My noble friend Lady Platt of Writtle raised matters relating to British Gas. The timetable which we envisage for ending the gas monopoly will allow competition to develop progressively and give British Gas time to adjust to changes in the market. This would ensure that customers benefit from competition while recognising the interests of shareholders. Sir James McKinnon, the Director General of Gas Supply, has already advised British Gas that it will not suffer financial damage in the tariff market as a result of the change in the monopoly threshold.
My noble friend suggested that there could be greater checks on the powers of the Director General of Gas Supply. Ministers are satisfied that the current balance of power between the regulators and the utilities is correct. There is a system of checks and balances in place. For example, each regulator reports annually to the Secretary of State and, as I said, these reports are presented to Parliament. Regulators can be called before a Select Committee and their decisions are subject to the discipline of judicial review.
In the case of gas, this system has worked well since privatisation, with the regulator and British Gas together providing an impressive performance with reduced gas prices, improved standards and the lowest ever level of disconnections.
In conclusion, when we published The Citizen's Charter last July we promised to strengthen the powers of the four regulators of the privatised utilities. This Bill delivers the promises we made by giving the regulators strong and flexible powers to require high standards of service for the utilities' customers. In addition, it tackles some barriers to competition in gas and water services.
Customers' expectations are rising. They will no longer accept the poor service, the delays and the general inconvenience when dealing with the utilities which they had to put up with during the dark ages of state ownership. But that era is behind us. The age of enlightenment has now dawned. The public will not, I believe, easily be lured back to accept the tenets of the discredited religion of state ownership, despite the wiles of its surviving priesthood. This Bill rings in the new age. I unhesitatingly commend it to your Lordships and ask you to give it a Second Reading.
Lord Hacking: My Lords, before the noble Lord sits down, I would be grateful if he could deal with two points that I raised in my speech. If he is unable to deal with them now, perhaps he could write to me before the Committee stage.
Lord Reay: My Lords, I give the noble Lord an undertaking to read Hansard and reply in writing to any matters with which I have not dealt.
Lord Hacking: My Lords, I wanted to save the Minister from dealing now with the more general points I raised. One concerned the enforcement of standards of performance and the reasonable test that is applied with the gas and electricity industries but not with the telecommunications industry. The other point was that I did not understand the Minister's reply on the reasons and the reasonable tests. I should be grateful if he could also deal with that in correspondence.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Prison Security Bill
1.27 p.m.
Lord Hesketh: My Lords, I beg to move that this Bill he now read a second time.
The primary purpose of the Prison Security Bill is to create a new criminal offence of prison mutiny. It is directed at the kind of serious misconduct which, whatever form it takes, has as its intention the overthrow of lawful authority in a prison. The Bill is a direct response to the very serious disturbances at Strangeways Prison and a number of other prisons in April 1990. These led the previous Home Secretary to appoint an inquiry chaired by Lord Justice Woolf to examine the disturbances and to announce that the Government would introduce legislation to create a new offence of prison mutiny.
I am sure that noble Lords will need little reminding of the scenes we witnessed in our prisons in April 1990. The governor and his staff lost control of Strangeways Prison for 25 days. The interior of the prison was wrecked. Almost 200 prisoners and staff were injured and the damage caused will cost around £60 million to repair.
The conduct that led to wholesale destruction there and elsewhere is simply unacceptable. Its consequences are still with us. There is a shortage of prison places in North-West England which is causing prisoners to be kept in police cells. That is not good for the prisoners and nor is it good for the police. The experience of the disturbances also profoundly affected the prison service staff who were involved. Some of them are still suffering from the consequences of that experience.
Some might say that these disturbances were provoked by crowded and insanitary conditions. The Government do not accept that the conditions could justify the conduct which we saw and of which we heard. They accept that in some prisons conditions must be improved; and in a moment I shall relate briefly some of the measures we have in hand to improve those conditions. But poor conditions will not explain the further serious disturbances we saw last year at new prisons such as Moorland and Brinsford, where the conditions were good and the regime was not oppressive.
Since the 1990 disturbances, Lord Justice Woolf has reported and the Government have issued a White Paper in response to his report. That proposes improvements to regimes and conditions, and also in
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the field of security and control. The two are linked. We hope that making prisons more decent places in which to live will help to reduce tensions and to prevent a climate in which mutinous behaviour could develop. Prisons with good regimes and fair treatment for prisoners are more likely to be stable and safe. Similarly, improving security and control will enable staff to work constructively with inmates in the knowledge that if there is a breakdown of order, it can more easily be contained.
We are improving sanitation in our older prisons. We remain on course to end the degrading practice of slopping out by the end of 1994. We have agreed to appoint an independent complaints adjudicator this year. We have also begun work on developing a code of standards to help bring about humane and decent conditions in all our prisons. That will cover, among other things, physical conditions and access to work and visits.
Through our prison building programme, we provided 2,500 additional places last year. Another 2,000 will be provided by May this year, and 550 new places are being added at existing establishments. All of those have access to integral sanitation and are built to a better, more modern design.
We are also taking measures to improve security and control in our prisons to make it harder for a mutiny to begin or develop. In the current financial year we are spending £16 million on measures to improve physical security, including the installation of x-ray machines in prisons holding Category A prisoners. That will make it harder to smuggle in weapons that could be used in a mutiny.
We have also issued a new contingency planning manual and a new security manual, which take account of many of the security proposals in the Woolf Report. All those measures will help to contain serious incidents or to deal with them when they arise.
The Prison Security Bill complements those measures. We are improving our prisons, but we need also to deter prisoners from wrecking them. The new offence of prison mutiny, which is designed specifically to deter serious disturbances in our prisons, will bring home to prisoners more clearly than before the severe consequences of mutinous conduct.
There is, of course, a range of other measures which can be used to deal with prisoners involved in disturbances. Those include bringing prosecutions for criminal damage, offences against the person, and the offences in the Public Order Act. There are a number of disciplinary offences too. But those have not stemmed the flow of serious disturbances in our prisons. We have come to the view that something else is needed.
The maximum penalty that a governor may impose for a disciplinary offence is 28 days' loss of remission. That penalty is severe enough to deal with the great majority of prisoners who cause trouble, but it is insufficient to deal with very serious disturbances of the kind to which I have already referred. Moreover, disciplinary penalties will have no effect if the prisoner is discharged before his case can be heard.
The penalties provided by the law for the criminal offences that I have mentioned are adequate, but the

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offences themselves are not tailor-made for the sort of behaviour that might constitute mutiny in a prison. They do not directly address the most serious problem which this Bill seeks to address, which arises from the formation of a common purpose to overthrow lawful authority in the prison. They may be applied to the behaviour which follows that, but, if that behaviour takes place behind the closed doors of a prison, it may not be possible to determine who committed the offences. What is more, the instigators may not be at the forefront of the action and may escape prosecution under the existing law.
I turn now to the Bill itself. The new offence of prison mutiny is contained in Clause 1. That makes it an offence for two or more prisoners to take part in a prison mutiny. If convicted, such prisoners face a penalty of up to 10 years' imprisonment. The case must be tried in the Crown court and only with the consent of the Director of Public Prosecutions.
Clause 1 defines what is meant by a mutiny. We could have left that undefined, or relied on a dictionary definition. The Pocket Oxford Dictionary (Fourth Edition) defines mutiny as the refusal of a body of persons under discipline to obey orders, and it helpfully cites the example of the mutiny of the Bengal native troops in 1857. Prisoners, of course, are not soldiers, but they are subject to the lawful requirements of the governor and his officers. We have therefore looked elsewhere for an appropriate definition.
We have followed the recommendation of the Prior Committee in its 1985 report on the prison disciplinary system. The Bill provides that a prison mutiny occurs when two or more prisoners engage in conduct intended to further a common purpose of overthrowing lawful authority in a prison.
When the Bill was introduced in another place, the definition of mutiny was somewhat wider. It also included —again as recommended by the Prior Committee—collective disobedience to lawful authority in such circumstances as to subvert order in a prison. That provision was perceived in another place as going too wide, and capable of penalising any disobedience by prisoners, no matter how trivial. That was never the Government's intention. My right honourable friend the Home Secretary, on consideration, decided that the narrower definition in the Bill now before your Lordships would not only meet the Government's needs, but would make their intentions clearer on the face of the Bill.
The offence of mutiny as now drafted is intended for the most serious disturbances in our prisons. The test in Clause 1(2) is a strict one. It will not penalise minor acts of disobedience, nor passive protests about a particular aspect of the regime, but it will be available for the serious disorder we have witnessed in some prisons in the past two years, so long as it can be proved that at least two prisoners had a common purpose of overthrowing lawful authority in the prison.
There was also some anxiety in another place that a minimum of two prisoners was too low a number to trigger an offence of prison mutiny. The Government
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considered raising the minimum, but in the end decided to leave it as it was. Any number higher than two is arbitrary. Two was the minimum recommended by the Prior Committee. It is also the number required in the Army Act definition of mutiny, which the Prior Committee took as a model. It would no doubt be a very rare occurrence for the conduct of two prisoners only to get out of control. But, in prison, two prisoners determined to overthrow authority can easily set off a serious disturbance which can quickly escalate to involve others who join in the mayhem. The Bill provides that only two of those involved in a disturbance need have a common purpose of overthrowing lawful authority. That puts a realistic burden on the prosecution and seems right in principle and in practice.
The Bill provides that the intentions and common purpose of prisoners may be inferred from the form and circumstances of their conduct. That is a commonsense provision which is also found in the Public Order Act 1986.
"Taking part" in a mutiny will include both active and passive participation. Prisoners may be drawn towards the scene of a disturbance: to offer moral support, out of curiosity or simply to watch. Their presence adds to the problems of control. Under the Bill, if they are given a reasonable opportunity to leave the scene in safety and fail without reasonable excuse to do so, they will be regarded as taking part in the mutiny itself.
I turn now to Clause 2 leaving behind the issue of mutiny in a prison. Clause 2 deals with the related security issue of assisting escapes. It does several things. First, it widens the scope of the offence in Section 39 of the Prison Act 1952. Under Section 39, it is an offence to convey anything into a prison with intent to facilitate an escape. We looked at this offence carefully in the aftermath of the escape of two IRA remand prisoners from Brixton prison last year. It is doubtful whether it is an offence at present to send anything into a prison by post with intent to facilitate an escape. I am sure that noble Lords will agree with me that it should clearly be an offence, and Clause 2 makes it so.
Secondly, Clause 2 increases the penalties for two escape-related offences. The first is the offence of assisting a prisoner to escape which I have just mentioned. The maximum penalty rises from five to 10 years' imprisonment. The second is the offence in the Criminal Justice Act 1961 of harbouring an escaped prisoner. Here the maximum rises from two years to 10 years.
The purpose of raising these penalties is partly to reinforce society's disapproval of this conduct and partly to correct an anomaly in the law. The maximum penalty for the related offence under the Criminal Law Act 1967 of impeding the apprehension of a person believed to be guilty of an arrestable offence is 10 years' imprisonment. We are taking this opportunity to align the penalties and remove this anomaly. The new penalties in Clause 2 will not apply retrospectively; that is to say, to offences committed before the commencement of the Act.

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Finally, Clause 3 provides for the Bill's short title, commencement and extent. We want the offence to be available as soon as possible; that is, two months after Royal Assent. The provisions do not extend beyond England and Wales. There was some concern in another place that the Bill should also extend to Northern Ireland. In view of this, perhaps I could explain that the extent of the Bill was decided by Ministers collectively, taking into account the view of my right honourable friends the Secretaries of State for Scotland and Northern Ireland that, because of the differing legal provisions and other circumstances in those other parts of Great Britain, the Bill should not extend beyond England and Wales.
This Bill is a direct response to the scenes of destruction which we witnessed in a number of our prisons in April 1990 and which we have seen since then in other prisons, notably Moorland and Brinsford last year. For whatever reason, a number of prisoners in England and Wales have been determined to cause as much destruction as possible. This Bill is aimed directly at such behaviour. It signals our disapproval and will act as a clear warning to those who act in such a way in future. It is a specific response to a specific situation.
I am advised by my right honourable friend the Secretary of State for Northern Ireland that a similar situation does not exist in the Province. Although there have undoubtedly been some very serious incidents in prisons in Northern Ireland, their prisoners are not in a state of mutiny as some of ours undoubtedly have been in the past two years. This may owe something to the constructive atmosphere generated by the strategy document promulgated by the Northern Ireland Prison Department. A criminal offence of mutiny is not needed in the Province. To introduce one without the background of the disturbances we have had would only damage the confidence of the community in the prison system in Northern Ireland. Mutiny is already a disciplinary offence under the Northern Ireland prison rules carrying a maximum penalty of 180 days' loss of remission, in other words the equivalent of a 12-month sentence.
As far as escape-related offences in Clause 2 are concerned, there are already many differences in the legislation governing these offences in Northern Ireland and in England and Wales. Some offences in the Prison Act (Northern Ireland) do not appear in the Prison Act 1952. Of those which do appear, some are differently formulated. There are also many differences in penalties. For example, offences of escape, rescue and prison breach are all dealt with under the common law in England and Wales. There is therefore no maximum penalty. In Northern Ireland, those matters are all statutory offences with fixed maximum penalties of three, seven and seven years respectively.
It would not be right to make piecemeal amendments to the Northern Ireland legislation in this Bill. There is no advantage in seeking parity between the jurisdictions for its own sake. Decisions for Northern Ireland must be made on the basis of what is needed for the Province.
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That completes my description of this short but, I hope, useful measure. When it has received Royal Assent prisoners will be told of it when they first enter prison. We hope that it will deter the kind of conduct to which it is addressed. I commend the Bill to the House.
Moved, That the Bill be now read a second time.—(Lord Hesketh.)
1.44 p.m.
Baroness Ewart-Biggs: My Lords, I thank the noble Lord for having introduced this Bill and I also congratulate him on having risen so splendidly to the occasion of taking on these extra responsibilities. As he said, the Bill came into being as a response to the serious disturbances in our prisons last year, in particular in Strangeways, when there were unprecedented acts of disorder and violence.
As noble Lords will remember, Lord Justice Woolf was asked to set up an inquiry. His recommendations were welcomed by all those concerned with penal issues. I believe it is generally thought that, if his recommendations and those of Judge Stephen Tumim, the Chief Inspector of Prisons, were implemented, our prison system would be immensely improved.
I was glad to hear the noble Lord outlining the measures by which the Government plan to improve the prison regime. I was also glad that he stressed the importance of that. However, I did not agree with him so much when he said that this Bill complemented the measures that were to be taken to improve the prisons. We seriously question whether the provisions contained in the Bill will have the effect of remedying the crisis in our prisons.
We believe that the new offence created is unnecessary and will do nothing to reduce the likelihood of prison riots. Prisoners involved in violence, damage and disorder can already be charged with a wide range of serious criminal offences. If the severe penalties available for these existing offences do not deter rioters, neither will a new offence. Moreover, it must be remembered that Lord Justice Woolf rejected a special measure to deal with prison riots and disturbances and decided that there was no call for the creation of a specific offence of prison mutiny. Therefore, it is difficult to understand exactly who wanted this Bill.
We know that there is a consensus among prison reform groups that the new offence is unnecessary and that in their view it has the sole objective of placating the public after Strangeways and related riots. The Minister mentioned the Public Order Act 1986 which in our view makes the new offence unnecessary. That Act provides, first, for a statutory offence of riot defined as 12 people or more; secondly, for an offence of violent disorder which consists of three people or more; thirdly, for an offence of affray; and, fourthly, for a summary offence of threatening, abusive or insulting behaviour—all of which can be committed in prison.
The Government's White Paper The Prison Disciplinary System of England and Wales was published in response to the Prior Committee's report,

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which did recommend a special offence. The White Paper came out a year after the Prior Committee's report and there had been a change of mind by that time. The White Paper commented:
"All of these four offences (under the Public Order Act) may be committed inside a prison service establishment. Accordingly the use or threat of violence in connection with a prison mutiny can be dealt with under the general criminal law. Given the restructuring of public order offences in the Public Order Bill, the Government's view is that there is no need for a further specific offence of prison mutiny".
On the debate on the gracious Speech my noble friend Lord Richard made that point when commenting on this Bill. He said:
"It is difficult to think of an example of a mutiny for which the offence is needed".—[Official Report, 6/11/91; col. 230.]
As we all know, the real problems which are so clearly indicated by Lord Justice Woolf are that our prisons are overcrowded, insanitary and a disgrace to a modern civilised nation. The Woolf Report revealed that at the time of the disturbances, Strangeways had certified normal accommodation for 970 prisoners but in effect it held as many as 1,647. The report concluded that that,
"would make it difficult to provide a constructive regime which would have helped to alleviate the dehumanising effects of the insanitary physical conditions within the prison".
That comment was in Lord Justice Woolf s report.
In our view the Bill does nothing to change the disgraceful conditions which exist in our prisons. The disgraceful conditions do not excuse riots, as the noble Lord said, but they certainly, to a great extent, lead to disturbances in prisons.
Considering the provisions of the Bill, and Clause I in particular, we are happy that my right honourable and honourable friends in another place succeeded in persuading the Government to make fundamental changes in the drafting. As it was originally drafted, the offence of prison mutiny could have been committed where no violence or even threatened violence took place. However, Clause 1(2) states that,
"For the purposes of this section there is a prison mutiny where two or more prisoners, while on the premises of any prison, engage in conduct which is intended to further a common purpose of overthrowing lawful authority in that prison".
That is a great improvement. If the change had not been made, the Bill would have encompassed a wide range of non-violent protests for which the draconian penalty of 10 years' imprisonment would have been totally inappropriate.
However, Clause 1(2) contains a provision which gives us considerable concern; namely, that under the Bill as drafted the offence of prison mutiny can be committed by just two people. My colleagues in another place argued that the number was too low and moved an amendment in Committee raising it to 12. The amendment was rejected by the Government. The Minister admitted that there had been forceful arguments in favour of a higher number than the one in the Bill and said that she would reconsider the matter. However, in the end she failed to be persuaded when at Report stage the compromise of six people was put forward. We shall certainly return to the issue in Committee here. We believe that the notion that
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two people can commit the kind of incident in a prison which we are all concerned to tackle seems far-fetched in the extreme.
We also believe that the number of people who can commit mutiny must be higher than the number of people who can live in one cell. It would be quite wrong for behaviour that takes place in a cell to be caught by the legislation and carry a maximum sentence of 10 years. Surely, three men sharing the cramped conditions of a single cell might give rise to many interactions but they should not fall foul of this legislation.
Clause 1(4) also contains a disturbing proposal. The provision makes it possible to convict prisoners of prison mutiny even when the prosecution has not proved an intention or common purpose to overthrow legitimate authority and the prisoners have not used or threatened violence or criminal damage. The clause states:
"Where there is a prison mutiny, a prisoner who has or is given a reasonable opportunity of submitting to lawful authority and fails, without reasonable excuse, to do so shall be regarded for the purposes of this section as taking part in the mutiny".
It is a worrying provision reminiscent of the old Riot Act. Provided that a general order had been given for prisoners to surrender to the authorities, it would make it possible to charge prisoners, who were present during a "mutiny" but not actively taking part in the action, with a serious criminal offence carrying a maximum penalty of 10 years' imprisonment. That seems both draconian and unnecessary. Everyone accepts that the prison authorities must have powers to discipline such prisoners. Rule 47(19) of the prison rules which makes it a disciplinary offence for a prisoner to disobey any lawful order gives such powers. Ten years seems a long time to serve for simply having hung around rather a long time on the fringe of, say, a protest about food.
The Minister explained Clause 2 which, as he so rightly said, has a completely different purpose. He explained the new penalties. At Committee stage we may wish to question him as to the length of penalties. It seems a large increase from five years to 10 years for assisting an escape. Even more striking is the increase from two years to 10 years—five times as long—for harbouring or assisting an escaped prisoner. We may wish to return to the lengthy increases in the new penalties.
In conclusion, we find it significant that in Lord Justice Woolf s exhaustive report containing 204 recommendations designed to prevent future prison riots he did not consider it necessary to propose the creation of the offence of prison mutiny. He made it clear instead that the best deterrent of rioting would be the reform of our antiquated, overcrowded prison system. Prisoners with reasonable conditions have a greater incentive to refrain from destroying them. Indeed, if we look around the world we see that riots are much rarer in prison systems which have civilised conditions, active regimes and a greater emphasis on prisoners' rights.
For that and other reasons that I have given, we do not believe that the Bill is necessary. We believe that it will do nothing to deal with the real problems faced

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by prison governors and prison officers. It merely dwells on the surface of matters and completely fails to get to the heart of what is wrong with our prison system. At best the Bill will do little harm, but there is no reason for adding unnecessary legislation to an already overburdened statute book. If this morning's press reports of the demise of the much decried Asylum Bill are anything to go by, then wasting parliamentary time is surely another consideration.
1.57 p.m.
Lord Donaldson of Kingsbridge: My Lords, I join the noble Baroness in offering my congratulations to a popular Chief Whip for having broken the custom of this House. I have attended the House for 25 years and I have never before seen a Chief Whip come down to the arena and face the public—even though it is not a large public today—in the courageous and powerful way in which the noble Lord has done.
Turning to the less important business, the Bill itself, I agree with everything that the noble Baroness said. As it is a harmless and not very important Bill, it is important that I do not repeat what she said, although it is difficult to resist the temptation. That gives me the opportunity to speak briefly.
I have little to add. I had sought to envisage a situation in which the Bill would be effective and the Public Order Act 1986 would not. I suppose that if three prisoners sat in a cell conspiring to begin a mutiny and were eavesdropped upon, it might be desirable to arrest them for conspiring before they tried to involve others or made any threats. But it is a most unlikely situation. In my humble opinion no judge would give a 10-year sentence for the use of words alone. As soon as any action took place, the 1986 Act would apply. However, as window dressing, the Bill may give some reassurance to the public. As a deterrent—the noble Lord expressed quite strong hopes that it would be effective as a deterrent—it may make prisoners more careful in what they say to one another in case they are overheard conspiring. Any two or three prisoners who are overheard talking about anything are likely to be seen as conspiring about a general revolt; they very often are.
In another place my honourable friend Mr. Maclennan said that he had asked the Prison Governors' Association for its opinion. It told him that it was against the Bill. The right honourable lady the Minister said that she had not at that stage heard from the association. Can the noble Lord tell us whether an answer has yet been obtained from the Prison Governors Association? For the moment I stick to the view that it disapproves of the Bill. That is rather important, because the association's members are the people who will have to operate the Bill when it comes into force.
As regards Clause 2, I think there is a need for more severe sentences to be available for elaborate interventions from outside. It is the type of clause which, if it had been added to a more important Bill, we should have been quite happy to support. By "elaborate interventions from outside" I have in mind the use of helicopters. Such attempts have been planned once or twice and stopped once or twice. On
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one or two occasions they have succeeded. I have in mind also the sending in of firearms or explosives. Terrorist efforts of this kind are bound to continue and will probably become more ingenious and worse. They deserve more serious sanctions. I am entirely in favour of such sanctions. I hope, however, that they will not extend to what we used to call the ordinary decent criminal—the ODC, as we used to call him in Northern Ireland, as opposed to the terrorist—the man who gives his pal a leg-up over the wall or a mother who gives her runaway son a bed. Surely the present penalties are severe enough for people who behave in that way, even though there have to be penalties which must be firmly applied. What I think most of us who are unenthusiastic about the Bill feel is that there is so much urgent work to be done by the Home Office, the prison department and all those concerned to improve what everyone, Government included, regards as the appalling condition of our prisons that it is a serious misapplication of effort to have diverted overworked staff into the quite unnecessary preparation of a Bill of this kind.
One could say a good deal about the details of the Bill but my noble friend on the Labour Front Bench has said most of it. I shall say no more. I entirely agree that Northern Ireland should be left to itself and should not have various changes slipped in through a Bill of this kind. I am happy that we are not adding anything through the Bill to the Northern Ireland arrangements. The Bill is a great disappointment to us all. There is so much that ought to have been done and so much that is not being done. I have not worked out the time between the publication of the Woolf Report and the White Paper. We have not had a word about it in the House and as we now have an election coming on we probably shall not. This is part of the whole putting-off process. It is an effort to satisfy the public which amounts to next to nothing. I cannot thank the noble Lord very much for the Bill, though I think his presentation of it was admirable.
2.3 p.m.
Baroness Mallalieu: My Lords, I have not been in the House for long enough to know that it is unprecedented for a Chief Whip to take the steps and the actions that the noble Lord has taken today. However, from the short time I have been here I have been able to form the view of him that he is well capable of taking care of himself if he descends into the arena; and so his performance has shown.
What I have to say will be brief because I am bound to echo what has been said by those who have spoken before me. The Bill does not seem to merit any prolonged discussion. It is an almost wholly unnecessary little measure. To relate the history of its birth really says it all. In their White Paper of 1986 the Government considered that the use or threat of violence in connection with prison mutiny could be dealt with quite adequately under the general criminal law, and in particular under the Public Order Act. Then came the prison riots of 1990 and the enlightened appointment of Lord Justice Woolf and His Honour Judge Stephen Tumim to prepare a report. The result was, I think it is fair to say, a

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masterpiece, a comprehensive study of the events, an analysis of the causes of those disturbances and 204 recommendations to improve our prison conditions and prison security for the future. One recommendation which the Woolf Report did not consider it necessary to make was for a measure of this nature.
I welcome what the noble Lord has said about the progress being made to implement some of the Woolf proposals. I am sorry that they appear to be taking so long and I am also sorry that a large number of those proposals have not found favour in the Government's White Paper. Instead of setting out to prepare for a comprehensive overhaul of the prison system, including prison discipline, with planned resources, planned rectification of the defects and, in particular, immediate action on the overcrowding which the Woolf Report identified as at the heart of our prison system problem, the Government have instead elected to produce this cosmetic little Bill. The reason is perhaps obvious to us all: a pending election in which the Government want to be seen to be doing something but lack the will or determination to take the steps which need to be taken for the future of the penal system. Their view of this whole subject appears to extend no further than this spring, which may perhaps be a realistic assessment of their tenure of office.
So they have produced a Bill which no one wants; not the Prison Governors Association, not the Prison Reform Trust, not the National Association for the Care and Resettlement of Offenders. No one wants it except for Mr. Baker and perhaps the noble Lord, Lord Hesketh. The Bill is in effect the Government's sop to the public. They wish to be seen to be doing something about disturbances in prison but they lack the courage, the inclination and the strength to tackle the problems. So they have produced a measure to deal with the consequences and not with the causes. In fact it is hard to think of a situation when the provisions of Clause I would be appropriate which is not covered adequately by other legislation.
If a prisoner is violent, or threatens violence, the present law can deal with him. If there is insufficient evidence to convict him under the present law, there will be insufficient evidence under this Bill too. It seems clear that there must be some overt act for a conviction. If he is non-violent—if he sits down, or refuses to obey the instructions of a prison officer or uses dumb insolence—existing prison discipline can surely deal with the matter without resorting to the criminal law, without getting the consent of the Director of Public Prosecutions to do so, as the Bill requires, and certainly without threatening him with a maximum term of 10 years' imprisonment.
It may be said, and indeed it was said by the noble Lord, that this legislation will not be used for minor offences. If so, what on earth is it to be used for? Officers can no doubt deal with internal prison discipline. If violence follows, as this Government themselves said six years ago, the criminal law is adequate to deal with those offences. Nothing has changed.
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Clause 2, which could perhaps be described as the "file in the cake" clause, surprises me. The noble Lord said that he doubted whether somebody sending something into a prison by post to assist an offender to escape would be committing an offence. He may be right, but I am surprised that that conduct is not already covered by the existing provisions of the Prison Act. If there is a loophole in the law in that respect it may be that it needs to be filled. It may also be that the penalties for assisting someone to escape may need strengthening.
However, in my view, there are objectionable features, to which my noble friend Lady Ewart-Biggs has already drawn attention, in Clauses 1(2) and 1(4). The noble Lord said when he introduced the Bill that it was a specific measure to deal with a specific problem. He indicated that that problem essentially was the type of rioting which we saw in 1990. That was certainly not rioting which involved two people. The provisions of the Bill go much further than the scope which he outlined.
What saddens me is that the Government should have chosen to take up parliamentary time with a measure such as this when the prison system is crying out for a proper, comprehensive and far-reaching programme of legislation to bring our prisons out of the mid-1850s into this century. From this proposal and the way in which the Government reacted to the Woolf Report, it looks as if that programme will have to wait until the next government.
2.10 p.m.
Lord Auckland: My Lords, although I intervene from these Benches the views which I express are my own. I intervene with some trepidation following the speeches of so many legal luminaries and others with much more experience of the matter. In my 30 years in this House I have never served on the Front Bench, in shadow or in substance, and I am not likely to do so now.
I intervene for one particular reason. My wife was a magistrate for nearly 25 years and is now on the supplementary list of magistrates. As part of her training she visited a number of top security prisons. That experience and what she saw depressed her enormously. The present regime of slopping out and being locked up in cells for 23 hours a day in some instances, particularly in a hot summer, obviously has a tinderbox effect.
We have all read about and seen on television the dreadful incidents not only at Strangeways prison but also at Lindholme prison, the new prison in Yorkshire. Although the Bill does not apply to Scotland, as my noble friend the Minister—whom I congratulate on his very enlightened speech—explained, for legal reasons which I do not fully understand although I come from Scotland, it should be borne in mind by your Lordships that the riots at Peterhead prison in particular, in which several prison officers were severely injured, and at Perth prison, which is near my grandparents' family home, also caused a great deal of disturbance.
It is my understanding that these are discretionary penalties. It is not intended that every time there is a

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prison disturbance those responsible will be sentenced to 10 years in prison. The Bill gives the Crown Court discretion to impose heavier maximum penalties. I believe that the general public will welcome that. Whatever their political persuasion and whatever their walk of life, the public have become sick and tired of such prolonged disturbances and the injuries to prison staff. Prison officers have to be considered as well as the prison governors and the inmates of those establishments.
There are two points which worry me. The first relates to Clause 1(5), which reads:
"Proceedings for an offence under this section shall not be brought except by or with the consent of the Director of Public Prosecutions".
Even to a non-lawyer that makes sense.
I have not had time to give my noble friend notice of this question, but I hope that he will do his best to ensure that prosecutions are brought quickly. All too often prosecutions come very slowly and it is a matter of many months before the defendant is brought before the court, in particular the Crown Court. That is not in the interests of the community as a whole, the prison service, prison staff or indeed the inmates themselves. Therefore I hope that that matter will be looked into.
Another anxiety is that 1994 has been designated as the optimum time when these improvements to prison conditions will have had to be carried out. The Government have an impressive record for new prison building. All governments wish to give and indeed have given the closest attention, within financial constraints, to improving our prisons. I do not agree with some noble Lords opposite that this is a piecemeal Bill or an electioneering Bill. It is a very sad commentary that a Bill of this kind has to be introduced in a civilised country. It is a sad commentary on our times that parliamentary time, whether or not we are near to an election, has to be used for measures of this kind.
I hope that the Government—whichever government is in office after the election takes place—will take very serious note of the Woolf Report, and expedite with extreme urgency the provisions for prisoners in one cell and with proper sanitation. I agree with the noble Baroness that lack of such conditions exacerbates matters. However there was trouble in the new prison in Lanarkshire where there was one prisoner to a cell, and as I said the same happened in the new prison in Yorkshire. I do not believe therefore that it is entirely the old system of three to a cell which creates the problems.
I give a general if rather reluctant welcome to the Bill. It is a great pity that it has to be introduced. However, if the Government had done nothing, they would have been accused of apathy. I hope that, whatever the election brings, the Woolf Report will be implemented as a matter of urgency and that we shall be able to debate it. In the meantime, I give a reluctant welcome to the Bill. I say rather cynically that it is a necessary evil.
Lord Hesketh: My Lords, we have had an interesting debate on the principles of the Bill and I have listened carefully to the points made by noble
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Lords from all sides of the House. I thank noble Lords for the very nice remarks that they made, which had little to do with the Bill. As the discussion proceeded on Second Reading following my remarks, I began on occasion to feel at something of a disadvantage in this particular subject. However, I hope that I shall be able to respond satisfactorily. I feel that the remarks of my noble friend behind me provide some support and hope that I am not quite as lonely as the noble Baroness, Lady Mallalieu, insisted that I should be.
Both the noble Baronesses, Lady Ewart-Biggs and Lady Mallalieu, raised the point that the Government had changed their position from that given in the response to the Prior Report. I must make entirely clear that they did so on the basis of the reports of the rioting in 1990 and rioting that has taken place since then. That material factor is the reason why they changed their view. I have no reason to believe that they were not right to do so.
All noble Lords, and in particular the noble Baroness, Lady Ewart-Biggs, drew attention to factors other than those which I mentioned in my opening remarks, in particular with regard to the Strangeways riot and the matter of overcrowding. I remind noble Lords that four new prisons opened in 1991, providing a further 2,500 places. Four more are due to open by May of this year providing a further 2,000 places. In addition, a further 550 places will be added to existing establishments. I am sure all noble Lords will say that is not the only answer to the problem. I shall not respond to that as it would draw us into a far wider debate than the debate on the issues covered by the small Bill that we are discussing today.
The noble Baroness, Lady Ewart-Biggs, and other speakers asked why the Bill is necessary. We believe that the public order offences of riot and violent disorder and affray require the use or threat of unlawful violence and conduct which could cause a person of reasonable firmness present at the scene to fear for his personal safety. Those elements may be present in a mutiny, but that is not necessarily the case. They might apply to some but not all of the mutineers. That is why we have chosen a different formulation made up not of these but of other elements which I mentioned at the start of the debate. I hope that when she reads my remarks in Hansard, the noble Baroness, Lady Ewart-Biggs, will be satisfied. If that is not the case, I am sure that she will table what she considers to be a satisfactory amendment at the next stage of the Bill.
I thank the noble Lord, Lord Donaldson of Kingsbridge, for generally supporting Clause 2 of the Bill. Both the noble Lord and the noble Baroness, Lady Ewart-Biggs, referred to the sentence of 10 years. It is important to remember that 10 years is the maximum sentence. The judge who will conduct a trial will consider any mitigating circumstances. That brings me to the point made by the noble Lord, Lord Donaldson, as regards prisoners who are engaged in an ordinary line of crime, as it were, rather than terrorism. The noble Lord referred to the case of a mother providing refuge to a son who may have stolen

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a motor car. I am sure that case would be covered by the concept of mitigating circumstances in regard to the period of 10 years.
The noble Lord, Lord Donaldson, also said he was pleased we had not extended the realm of this piece of legislation to Northern Ireland. I am particularly grateful to hear that in view of the extensive ministerial experience the noble Lord, Lord Donaldson, has had in Northern Ireland. His remarks were the high point of my day.
It appears to me that the Public Order Act provokes far more disagreement than the Bill we are discussing. The advantage of this Bill is that specific acts of violence do not have to be proved against individual prisoners. It catches instigators who are not at the forefront of the action. Those are areas that are not covered under present legislation. We believe those provisions will act as a deterrent.
All noble Lords who have spoken today drew attention to the recommendations made by Lord Justice Woolf. Noble Lords also said the Government had not gone far enough and this was a small and paltry piece of legislation when compared with what the Government should be doing. However, we believe this Bill is part of a comprehensive response to the 1990 disturbances. The White Paper indicates that our response is not limited to the many constructive suggestions made by Lord Justice Woolf. I am sure all noble Lords are aware that if we tried to provide a conclusive piece of legislation, we would have to produce a document that would probably weigh heavily on our hands.
The noble Lord, Lord Donaldson of Kingsbridge, asked whether prison governors had responded to the Bill. In last September's White Paper we invited comments on this matter. The text of the Bill has been available since November but the Prison Governors Association has not yet told us what it thinks of the Bill.
Lord Donaldson of Kingsbridge: My Lords, that means that we can rely on the information of my honourable friend Mr. Maclennan that the association disagrees with it.
Lord Hesketh: My Lords, I can only rely on the information which I have to hand. That rather conflicts with the information of the noble Lord, Lord Donaldson of Kingsbridge.
My noble friend Lord Auckland referred to the speed at which it is intended to introduce the carrying out of prosecutions. I noted on a piece of paper that my response would be that I would bring his comments to the attention of my right honourable friend. Having received rather better advice, I shall draw his comments to the attention of my noble friend the Lord Chancellor so that he is aware of my noble friend's anxieties.
I shall read Hansard carefully and if I have not covered certain points, I shall respond to noble Lords by way of written communication in order to clarify any matters which have not been satisfactorily covered. We believe that the Bill forms part of a balanced package of reform. Our general aim is to
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improve both security and control on the one hand and the regimes and conditions in our prisons on the other. In that context, we are seeking to provide a more effective means of dealing with prisoners who destroy prisons and also to deter them from such behaviour in future. We believe that the Prison Security Bill will make a contribution to that.
The noble Baroness, Lady Mallalieu, suggested that only my right honourable friend the Home Secretary and I would believe that this Bill has the value which we think it has. I received some support from my noble friend Lord Auckland and I believe that noble Lords will give to the Bill careful and close scrutiny in Committee. I look forward to resuming our discussions at that time. I commend the Bill to the House.
On Question, Bill read a second time, and committed to a Committee of the Whole House.

Licensing (Amendment) (Scotland) Bill
2.27 p.m.
Lord Macaulay of Bragar: My Lords, I beg to move that this Bill be now read a second time. The Bill is supported across party lines and the importance of its provisions for the licensed trade and licensed hoards and the absence of any political content mean that I am glad to promote in this House a Bill which has been ably steered through another place by a Member of a different political persuasion.
Although there is no opposition to the Second Reading, it is right that I should put on record the reasons why the Bill has been presented and what are its purposes.
The Bill seeks to remove problems experienced by licence holders and prospective licence holders alike in the transfer of liquor licences under the procedures laid down by Section 25 of the Licensing (Scotland) Act 1976. The transfer system was amended by Section 51 of the Law Reform (Miscellaneous Provisions) (Scotland) Act 1990 in the light of a consultative review which took place in 1986. In response to that review anxiety was expressed by certain business interests that the need for a transfer of a licence to take place at quarterly meetings of a licensing board had the effect in certain circumstances that trading on the licence had to stop until the licensing board had reached its decision on transfer of the licence.
In a genuine and reasonable attempt to resolve that problem, Section 51 of the Law Reform (Miscellaneous Provisions) (Scotland) Act introduced a two-stage procedure which permitted prospective licensees to apply for a temporary licence at any time and trade on that basis until the temporary transfer had been confirmed as permanent at the following quarterly board meeting.
That method, known as a two-stage transfer, entailing as it does a mandatory temporary transfer in all cases has been found to be unworkable by those involved in the licensing trade. Solicitors, clients and the licensing boards are encountering grave difficulties in interpreting the Act as amended.

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In particular there is widespread anxiety about the effect of the two-stage transfer on the conveyancing and financing of licensed premises. Prospective purchasers of licensed premises were encountering problems in securing a loan from financiers when they held only a temporary licence since permanent transfer of the licence depended upon the subsequent decision of the licensing board, which could by no means be guaranteed.
The two-stage transfer has given rise to those practical problems. Since January 1991 representations have been received from the licensing boards, the licensing trade and the licensing practitioners about the practical difficulties experienced in the conveyancing of licensed premises and the financing of their sale or purchase.
It has been argued that prospective purchasers of licensed premises need to be assured before making a firm offer for the premises in question that the relevant licence would automatically continue to be valid under their ownership. Banks, breweries and other financiers have indicated some reluctance to lend to a purchaser who holds only a temporary transfer since it is possible that the licensing board might subsequently refuse permanent transfer. Though some clerks to licensing boards have adopted a flexible interpretation of these provisions which permitted their boards to hear applications for both temporary and permanent transfer on the same day, this approach has recently been held to be ultra vires by the Court of Session.
The Government accept that the two-stage transfer procedure is the source of genuine difficulties and therefore they support the Bill. The Bill reinstates the original one-step permanent transfer but retains temporary transfer as an option should anyone wish to take that approach.
Perhaps I may explain briefly the purposes of the various clauses. Clause 1(1) (a) deletes the word "temporarily" from Section 25(1) of the 1976 Act which was inserted by Section 51(2) (a) of the 1990 Act; the effect of this change is to reinstate the one-stage permanent transfer originally provided for by the 1976 Act.
Clause 1(1) (b) substitutes new subsections (1A) to (1C) for subsections (1A) to (1C) of Section 25 of the 1976 Act which were inserted by Section 51(3) of the 1990 Act. The effect of new subsections (1A) to (1C) is to retain as an available option the temporary transfer of a liquor licence at any time provided that the licensing board approves the temporary transfer as permanent at the next appropriate meeting.
New subsection (1A) permits a licensing board to transfer a liquor licence on a temporary basis. The licence so transferred is to have effect until the next meeting of the board or, where the temporary transfer is made within six weeks before the first day of the next meeting, the next following meeting of the board. The temporary transfer of a licence may be made under delegated arrangements (for example, by the clerk rather than the full licensing board) by virtue of Section 5(1) of the 1976 Act.
New subsection (1B) requires that, where an application has been made for the permanent transfer
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of a licence already temporarily transferred under new subsection (1A), the licensing board shall make a decision on the permanent transfer of the licence at the next appropriate meeting.
New subsection (1C) provides that where a licensing board refuses an application for the permanent transfer of a licence which has been temporarily transferred the licence transferred temporarily has effect until the conclusion of any appeal against the board's decision.
Subsection (1) (c) amends the definition of permanent transfer in Section 25(7) of the 1976 Act as inserted by Section 51(6) of the 1990 Act. The effect of this amendment is that permanent transfers are to be construed both as references to permanent transfers under the one-stage procedure reinstated by the Bill and to temporary transfers made permanent under new subsections.
Subsection (2) amends Section 19(1) of the 1976 Act which prohibits canvassing of the licensing board by an applicant for the grant, renewal or permanent transfer of a licence. The effect of subsection (2) is to extend the prohibition to applications for the temporary transfer of a licence under new subsection (1A) and to applications for confirmation of transfer under Section 25(4) of the 1976 Act, as inserted by Section 51(4) of the 1990 Act.
Subsection (3) repeals Section 51(2) (a) and (3) of the 1990 Act in consequence of the revised provisions introduced by subsection 1(a) and (b) of Clause 1. Clause 2(1) contains the Short Title of the Bill and describes its extent and subsection (2) provides that Section 1 of the legislation shall come into effect,
"on such day as the Secretary of State may appoint by order",
and that the commencement order may contain any,
"incidental and transitional provisions and savings as appear to him to be necessary or expedient".
I am sorry to bore your Lordships with such details. But I believe it is right that if people wish to know why the Bill has gone through your Lordships' House they should at least be able to read the details and understand the reasons for the Bill's introduction. There is wide agreement that the only effective solution to the difficulties that I have outlined lies in amending legislation. Accordingly, the Bill reintroduces the original one-step permanent transfer, but retains the option of a temporary transfer if circumstances demand it.
In conclusion—as I am sure your Lordships will be glad to hear—I should mention that the Bill enjoys the support of the Convention of Scottish Local Authorities, the licensed trade and especially the Law Society of Scotland, which have campaigned on its behalf. It is in the interests of all that the Bill should have a trouble-free and certain passage so that current constraints on the sale and purchase of licensed premises can be resolved during the life of this Parliament.
I should point out that the licensed trade is in severe trouble at present. Many hotels and pubs are for sale. Therefore, in order to get things moving, I think that the Bill will help to give the market—to use a terrible phrase—a kick-start. I am sure we all hope that that will happen. On that basis, I commend the Bill to your Lordships' House.

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Moved, That the Bill be now read a second time.—(Lord Macaulay of Bragar.)
2.35 p.m.
The Earl of Strathmore and Kinghorne: My Lords, I am glad to have the opportunity to confirm to the House that the essential measure in the Bill enjoys the full support of the Government. I am most grateful to the noble Lord, Lord Macaulay of Bragar, for agreeing to sponsor the Bill in this House. His willingness to do so clearly indicates the cross-party support which the measure has attracted and the widespread desire which exists to remove unnecessary
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and troublesome constraints currently experienced by the licensed trade in Scotland as regards the sale or purchase of licensed premises.
As the noble Lord indicated, the measure enjoys the support of the Law Society of Scotland, the Scottish Licensed Trade Association and the Convention of Scottish Local Authorities and has received unanimous support in another place. In the Government's view, the Bill satisfactorily addresses the key concern which is the absence of a one-stage permanent transfer and is designed to ensure that that defect can be speedily resolved.
On Question, Bill read a second time, and committed to a Committee of the Whole House.
House adjourned at twenty-two minutes before three o'clock.