HL Deb 11 March 1992 vol 536 cc1322-4

3.7 p.m.

Lord Dean of Beswick asked Her Majesty's Government:

Whether the recently published annual returns of British Gas show that the objectives set by the Government for the privatised gas industry are now being achieved.

Lord Cavendish of Furness

My Lords, yes.

Lord Dean of Beswick

My Lords, I thank the Minister for that short Answer. However, he must be aware that a recently published report showed that British Gas had made just over £1.5 billion profit last year. That resulted in British Gas being on a collision course with Ofgas. We should bear in mind that during the passage of the Bill on the privatisation of the gas industry the Government indicated through various Ministers that the protection of the consumer would be safeguarded by the Government and Ofgas ensuring that British Gas would be prevented from adopting a monopoly position at the expense of the consumer. Has the industry addressed that matter? If it has not, when does it intend to do so?

Lord Cavendish of Furness

My Lords, since privatisation, domestic gas prices have fallen in real terms by about 13 per cent; industrial gas prices have fallen by about 29 per cent; and standing charges have fallen by about 22 per cent. Disconnections are now at their lowest level since records began. Competition is beginning to develop in the contract market and some 10 companies are now supplying gas in direct competition with British Gas. The Competition and Service (Utilities) Bill strengthens the powers of Ofgas and introduces standards of service for British Gas. It also strengthens the complaints procedure.

Lord Ezra

My Lords, bearing in mind the announcement today of the agreement reached between the Office of Fair Trading and British Gas on the extension of competition in the gas sector as regards commercial and industrial premises, will the Government indicate whether that is the full extent of the amount of competition they wish to see in that sector or whether this is a matter they will return to?

Lord Cavendish of Furness

My Lords, I welcome the agreement that was announced this morning. We are fully committed to the development of competition in all areas of the gas market. However, it must be recognised that this may take some time to occur.

Baroness Ewart-Biggs

My Lords, can the Minister say how many gas consumers have had their supply disconnected in the past year and whether the Government are satisfied with that situation?

Lord Cavendish of Furness

My Lords, following pressure from Ofgas, the number of domestic gas consumers disconnected for debt has fallen dramatically from a peak of nearly 61,000 in the year ending December 1987 to just over 18,600 in the year ending December 1991.

Lord Taylor of Gryfe

My Lords, does the Minister accept that the achievements he has listed have been to some extent the result of the pressure and effective operation of Sir James McKinnon, the Ofgas controller? Will he take Ofgas as an important model to be applied to other monopoly industries which have been privatised?

Lord Cavendish of Furness

My Lords, it is a great pleasure to agree with the noble Lord and to pay tribute to the work of Sir James McKinnon. We shall indeed use it as a model for the future.

Lord Mowbray and Stourton

My Lords, can my noble friend say what can possibly have got into the minds of noble Lords opposite who appear so unhappy with the news which he has given us?

Lord Cavendish of Furness

My Lords, I am not sure that they are unhappy. Perhaps they are disguising their real happiness at the good news.

Lord Donoughue

My Lords, does the Minister accept that the announcement this morning, though welcome, was of a limited nature? Does he agree, not only in relation to gas but also other monopolistic private utilities, that the developments show that we need a more systematic reappraisal of the role and objectives of the private utilities and the role of the regulators, which are developing in a rather ad hoc way, with the interests of the consumer and considerations of the environment being given a much higher statutory role?

Lord Cavendish of Furness

My Lords, I cannot agree with the noble Lord. The Bill which has just passed through the House addresses the problem of making the powers of all the regulators match the powers of all the most powerful regulator.

Lord Williams of Elvel

My Lords, does the noble Lord accept that the Bill which is passing through your Lordships' House has not yet been passed by the House? One of the features of the gas industry which is much approved on all sides of the House is the Gas Consumers' Council which has had a very strong influence in representing the consumer to both the regulator and British Gas. Is it not a pity, therefore, in the light of the noble Lord's recent comment, that that type of consumer council is not being extended to all the other utilities covered by the Bill?

Lord Cavendish of Furness

My Lords, this Question is limited to gas.

Lord Dean of Beswick

My Lords, in his reply to my supplementary question the noble Lord gave figures indicating how the price has been reduced in real terms. However, there is no doubt that Ofgas showed deep concern about the £1.5 billion plus profit that had been made and what it meant to the industry. It is not a question of sour grapes on this side of the House. Are the Government satisfied that the protection they promised the consumer is now a reality or close to being achieved?

Lord Cavendish of Furness

My Lords, I could not conceive of the noble Lord, Lord Dean of Beswick, suffering from sour grapes. The return on capital of British Gas on current cost accounting is 7.4 per cent. before tax and interest, which is hardly out of the way. Two-thirds of the profits made were generated from outside diversification. Perhaps it is worth saying that for every pound of profit British Gas spent £2 for the future of the business.