Competition and Service (Utilities) Bill

HL Deb 14 February 1992 vol 535 cc931-63

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.

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.

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.

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 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 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.

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 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 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 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 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 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 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 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 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 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.

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 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 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 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 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 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 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: 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 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; 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 —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 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 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 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.

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.