Gas Bill

HL Deb 18 October 1995 vol 566 cc748-809

3.30 p.m.

Report received.

Clause 1 [General duties under 1986 Act]:

The Earl of Cranbrook moved Amendment No. 1:

Page 1, line 21, at end insert— ("(d) to contribute to the objectives of sustainable development").

The noble Earl said: My Lords, there has been an exceptionally long time between the Committee and Report stages of the Bill. That has given us a long interval for reflection. It has not been an eventless time. Among the material events which I wish to bring to your Lordships' consideration are the publication of the report by the, Select Committee on Sustainable Development of this House and the commendably prompt reply to that report by the Government which was published last week. By what I say today, I do not wish in any way to pre-empt the debate on that report, which is to take place next week on 26th October.

Perhaps I may refer your Lordships to the remarks I made in Committee, to be found in Hansard at cols. 346 and 347 on 22nd June, which, in order to be as brief as possible, I do not intend to repeat. I was concerned on that occasion and on other occasions, that some noble Lords were still uncertain about the meaning of the term "sustainable development". The original core definition sprang from the World Commission on Environment and Development whose report was published in 1987. In that, sustainable development was defined as: Development that meets the needs of the present without compromising the ability of future generations to meet their own needs".

It may be that we need an up-dated version. Yesterday I attended a conference at which I heard an official repeat the Government's up-dated refinement of that concept. That is important in terms of our considerations today. It is the hottest off-the-press that I can possibly get hold of since, as I say, I heard it yesterday. The objectives of sustainable development were defined as: To achieve economic development to secure higher standards of living now, and for future generations; to protect and enhance the environment now, and for future generations".

I should be most grateful to my noble and learned friend on the Front Bench if he will confirm that this is a current government definition to which we can work and which is well understood across the whole of government.

I hope also that, in the course of his reply, my noble and learned friend will confirm the Government's undoubted commitment to sustainable development. My own view is that it is a very explicit and strong commitment.

Perhaps I may outline briefly the grounds for that. First, I should mention the international commitments that have been entered into on behalf of the nation. Your Lordships will all be aware of the United Nations Conference on Environment and Development at Rio in 1992 where the Prime Minister committed our nation to Agenda 21, the global process for implementing sustainable development. On the same occasion, again on behalf of the United Kingdom, the Prime Minister also signed the Framework Convention on Climate Change. Both of those are extremely important in relation to this afternoon's consideration of the Gas Bill.

Secondly, within the European Union there is legislation and commitment to which the United Kingdom adheres. The famous European Union treaty of 1993, commonly called the Maastricht Treaty, includes among the objectives of the Union: to promote economic and social progress which is balanced and sustainable".

That same treaty also amended Article 2 of the Treaty of Rome to redefine its objectives as: sustainable and non-inflationary growth respecting the environment".

That is what we are talking about in terms of sustainable development.

The Government have adhered also to the Fifth Action Programme of the Community which is entitled Towards Sustainability. That was approved by a resolution of the Council, at which, of course, the United Kingdom was represented, in February 1993.

Thirdly, on the domestic front, the national commitment to sustainable development was reaffirmed in the 1994 White Paper, Cm No. 2426 and the United Kingdom programme on climate change, commonly called CCP, was described in Cm No. 2427, both of which appeared in January 1994. Again, the Prime Minister indicated his firm support in an introductory foreword to each of those documents.

That is where I see the Government standing. I hope that my noble and learned friend will confirm that there is resolute determination to work towards the objective of sustainable development, which is shared right across the country and across all parties.

I mentioned events that were important which have occurred between Committee and Report stages of the Bill. I should refer your Lordships to the origins of my own anxiety about these matters which I outlined in Committee. At that time, I told the Committee that I had gained perceptions on those issues as chairman of a small working group of the Round Table on Sustainable Development. There was a further meeting of the Round Table on 25th September. The minutes are public documents and are available publicly from the Secretariat in the Department of the Environment. Paragraphs 22 and 24 of that meeting are relevant and will indicate to your Lordships the strong support given by the Round Table and its two co-chairmen, one of whom is Mr. John Gummer, the Secretary of State for the Environment, the other being Professor Sir Richard Southwood.

Among other important events that have occurred between Committee and Report stages, I referred your Lordships to the publication of the report by your Lordships' Select Committee on Sustainable Development. In particular, I draw attention to paragraph 4.62 which contains the comment in emboldened type: Privatisation has put in place a different legal and institutional framework which, together with aspects of the Government's thinking, requires a new approach to the implementation of at least a part of the Climate Change Programme. The decision to hand considerable discretionary powers to the utility regulators, without previously clarifying their role in relation to national environmental policy, is an issue that needs to be addressed".

That issue has been addressed very briefly but inadequately in the Government's reply, since it takes the Electricity Act as a model. Surely we should look forward beyond a past event. We should look at where we stand now on the issue of sustainability. Secondly, the Government's reply refers to the requirement for the regulator to take account of the "physical environment". In Committee, we deleted the word "physical" on a proposal from my noble and learned friend's predecessor on the Front Bench.

Paragraphs 4.60 to 4.66 are important in the Select Committee's report. They touched on the Government's Climate Change Programme and mentioned that that is: arguably the most advanced and articulate part of the Government's sustainable development strategy, the principal measures of which were designed to accelerate the rate of investment in improved energy efficiency".

I now comment on the amendments. It is clear from what I said that the objectives of sustainable development have a strong economic and social content. Therefore, they are directly relevant to the role of the director as already defined in the Bill. In respect of a non-renewable resource such as gas the objectives of sustainable development are not to prevent its use but to promote its wise use and probably to extend its availability across generations, if possible, so that efficiency in use must be a most important element among those objectives.

As it was the conclusion of the working group to the Round Table to which I referred, including those most closely involved—that is to say, the generators and distributors of energy, including gas on that occasion, who had joined the group for the day—that market forces would not of themselves promote efficiency, it is clear that some intervention by someone will be needed. It seems to me perfectly clear in the context of the Bill, and in the context of the regime that has been established, that that person is the regulator and that that duty falls on the regulator.

If it is my noble and learned friend's opinion that the duty towards the environment which is already in the Bill clearly implies a duty to promote efficiency in the use of gas and that that duty clearly falls on the regulator, I hope that he will say so. I believe that could go some way towards resolving the issue. It is important that such things should be said because we know that what is said on these occasions is increasingly referred to in future circumstances.

I now refer to my amendments specifically. I have given considerable thought to the words that I have used in the amendments. I believe that I have achieved a much more realistic and acceptable form of words which I hope that my noble and learned friend will find is entirely in accordance with his own thinking. First, the amendments would require the director to contribute towards sustainability, rather than being in any way bound to secure its achievement, which is clearly something beyond the director's means. Secondly, rather than attempt to find a definition of "sustainable development" to write directly into the Bill, I learnt a great deal by listening to, participating in and reading what occurred during the debate on what is now the environment Act. Therefore, I have put in a form of words which follows the same line as that taken within that Act; that is to say, in exercising the duty to contribute towards sustainability, the director will follow guidance provided by the Secretary of State and will not of course himself attempt to define that duty.

I suppose that the amendment that I am moving formally is Amendment No. 1. I link it with Amendments Nos. 2, 5 and 10. I do not link it with Amendment No. 4 because that was my attempt to be a grammarian and I believe that it is grammatically unnecessary. It refers to a word "and" which could perfectly well stay in place unperturbed by anything that might happen this afternoon. I do not intend to move Amendment No. 4 as I believe it to be superfluous.

Clearly I have tabled almost exactly the same amendments in two possible positions. Again, I would be most grateful for comment from my noble and learned friend on the Front Bench. I consider that this is a primary duty which should appear in the position in which I have placed it in Amendment No. 1, but it is possible that it can or should be placed further on in the Bill as a subsidiary duty, as in Amendment No. 5. I beg to move.

Lord Skelmersdale

My Lords, even if I were not an adviser to British Gas I would be torn by the amendments. On the one hand, as my noble friend Lord Cranbrook said, sustainable development is an important objective and one which we should all support. However, the question is: who should actually do it on any particular occasion? Is it really, as the amendments suggest, a matter for the gas regulator? A regulator's primary duties under the Bill are to ensure that people get gas, to promote competition and to ensure financial viability of the companies supplying and transporting it. I suggest that a duty to promote sustainable development sits very uneasily with these. Much of the contribution that I made in earlier debates on the Bill centred around regulatory discretion. I believe that there is quite simply too much and that the Bill has extended those powers still further.

In my view, the regulatory structure cannot support such a wide-ranging power to determine possible policy issues. That is surely a matter for the Government. Indeed, my noble friend highlighted what governments both here and overseas are doing in that respect. Such a power would inevitably add to the uncertainty that already exists in the energy market.

It is not beyond the wit of man to imagine a situation where a company has invested to enter the market and the market is then changed by a regulatory decision in the name of a personal interpretation of sustainable development. There would be little chance to appeal, even if the reasoning behind the situation were known. That cannot be right. However, I see that we shall be discussing that matter in relation to a later amendment. What is even more perplexing is that that duty would apply to the gas industry and not to other fuels. It could lead to restrictions on gas but leave competing fuels such as oil, which is even more polluting—in fact considerably more polluting—untouched.

I support other amendments that the Government have brought forward to widen the environmental scope of the Bill. However, this proposal would be going a little too far especially—and I give my answer to my noble friend's question—in view of Clause 1(2)(b) where it is quite clear that the Secretary of State and the director shall have a duty: to promote efficiency and economy on the part of persons authorised … to carry on any activities, and the efficient use of gas conveyed through pipes". I believe that that was one of the things that my noble friend requested. I hope that my noble and learned friend the Minister will, first, confirm what I have said; secondly, agree with me; and, finally, say what else the Government intend as a matter of policy in terms of the efficient use of gas.

3.45 p.m.

Viscount Caldecote

My Lords, I should like to support the amendment moved by my noble kinsman. I have no doubt—indeed, I am sure that we all agree—that we have a most important responsibility to future generations to maintain the environment and sustainable development. My noble kinsman made a very strong case for the amendment both to honour our international agreements and to look after the benefits of future generations in this country.

I believe that there is a very real danger—perhaps this was emphasised and brought out by my noble friend Lord Skelmersdale—that privatisation, successful as it has been, produces intense pressure for cost cutting and short-term profit-making in an increasingly competitive scene. That occurs sometimes at the expense of sustainable development and the environment. I therefore strongly support the amendment.

Lord Peston

My Lords, before dealing with the substantial amendment, I thought that it might be useful if I were to say a word or two about interests. Your Lordships may wish to know that I am not a paid consultant of British Gas and, indeed, have never been a paid consultant of British Gas. Therefore, I do not and did not have anything to declare. However, I was, but am no longer, a non-executive director of a firm of which British Gas was a client, although I did not advise that company.

On 29th March 1994 (at col. 1062 of Hansard) I intervened to make some remarks on the Government's then forthcoming plans for extending competition; indeed, the matter that we are debating today. Last week I was asked by a journalist whether I ought to have mentioned at that time in 1994 an indirect relationship with British Gas. My reply, off the cuff, was "Maybe". Having now looked at what I actually said at the time, I believe that my answer should have been simply, "No, I had nothing to declare". Without wishing to appear holier than thou, I am confident that, like all noble Lords, I acted ethically, and I shall continue to do so.

I turn now to the amendment. I am in some difficulty in that respect because I am totally in agreement with the noble Earl about the importance of sustainable development. However, I am also in agreement with the view of the noble Viscount, Lord Caldecote, that there is always a danger that the pressures of competitive business enterprise cause one to neglect some of those matters. It is important that we bear that in mind. My problem is the following. Perhaps in due course I will express it interrogatively. Although we support these objectives, is this a Bill in which we ought to start on this, so to speak? Is there anything special about gas that requires us to say, "This is where we put it into legislation"? I suppose that the answer to that is that this is the only Bill we have before us. If we want to include this measure somewhere, for the moment this is where we have to put it. I suppose that the noble Earl, Lord Cranbrook, could say that this is a fairly innocuous amendment anyway.

I am torn on this matter. If the Minister were to say "Yes" to his noble friend, I would not then want to say "No". However, my position is that I would rather see all of this incorporated in a more general form of legislation than start to deal with different bits of legislation. I find it hard to be what I would regard as sensible but supportive. I am not 100 per cent. persuaded that this is the best place for the measure but equally, wearing my economist's hat, I am not against it. I am trying to have it both ways as usual.

Lord Ezra

My Lords, I wish to support the amendments spoken to by the noble Earl, as indeed I did in Committee. He has raised an important issue and we should seize every opportunity of emphasising it. The noble Lord, Lord Peston, has raised a perfectly valid question. Are we right to introduce this provision in specific items of legislation rather than more generally? I do not know whether in the near future we will have any vehicle for a more general treatment of the subject. I therefore feel strongly that we should seize the present opportunity rather than wait for some uncertain future opportunity.

Furthermore, I was much impressed with what the noble Earl had to say about the need to conserve and to use as efficiently as possible valuable natural resources, and gas is certainly one of those. I also agreed with the noble Viscount, Lord Caldecote, when he said that, while we are all generally in favour of competition, not least from these Benches, nonetheless the sudden change from a monopoly situation, in which a tradition of caring for the consumer has been inherent in the way in which gas has been supplied, to a competitive situation could well lead to cutting corners and seeking to increase margins, perhaps in conflict with these wider social considerations. Therefore I think that in a Bill of this sort affecting such a basic issue it is perfectly proper that the reference to sustainable development should be introduced in the way in which the noble Earl has suggested.

Lord Bruce of Donington

My Lords, I have no particular technical interest in this Bill except that, it being a Bill and ultimately becoming an Act, it will be the responsibility of the Secretary of State to be accountable to Parliament for its conduct. Your Lordships will be aware that, within a different context altogether, there has been some discussion recently in another place as to the responsibility of a Secretary of State for policy on the one hand or for operations on the other. I would like to be clear in my own mind, because it is not clear from the Bill, who will be responsible to Parliament for the proper carrying out of the provisions of the Bill. Clause 1 of the Bill before your Lordships states, The Secretary of State and the Director shall each have a duty to exercise the functions assigned to him by or under this Part in the manner which he considers is best calculated". I have searched through the Bill and I cannot find the delineation of duties in any particular regard specifically directed towards the Secretary of State on the one hand or the director on the other. Amendment No. 2 that has been so ably spoken to by the noble Earl, Lord Cranbrook, mixes up the two. Amendment No. 2 states, In so far as subsection (1)(d) above affects the Director, in performing … he shall have regard to guidance from the Secretary of State". What happens if the Secretary of State gives the wrong guidance to the director? How will the delineation of responsibility be established between them? These are not extreme matters involving the rather graver matters implicit in the Prison Service, but they are matters of some significance. I would like to know just how we are going to delineate specifically the responsibilities of the Secretary of State for which he can be called to account by Parliament and those for which he is not responsible. I must apologise for having introduced this question of principle, but perhaps it might be convenient for the noble and learned Lord to clarify it at this time.

Lord Cochrane of Cults

My Lords, I am sorry to disagree with the noble Earl but he went through a large number of possible definitions of sustainable development, each one of which confused me more, and I dare say other noble Lords. The only point where I felt he touched upon a true grain of fact was when he said—if I heard him correctly—that no development is in the ultimate sustainable. I believe, if I can remember back to school certificate days, that used to be called entropy; that is, that energy went permanently down hill. Gas, inherently, is an extractive industry. We cannot sustain development in gas indefinitely; we can prolong it only by wise use, as other noble Lords have said. By using it wisely we will make the position better for our grandchildren and our grandchildren's grandchildren but eventually the day will come when there is no gas. There is no possibility of any fermentation process—which, as far as I can make out, is the only alternative source of gas—achieving what would be necessary. Therefore the noble Earl has put forward an idea that is worthy but which is incapable of definition and does not, as other noble Lords have said, sit happily in the Bill. For that reason I must tell my noble friend that, although I admire his objective, it is, alas, not achievable.

The Minister of State, Department of Trade and Industry (Lord Fraser of Carmyllie)

My Lords, I begin by commenting on what the noble Lord, Lord Peston, had to say. No doubt your Lordships' House is grateful to him for his observations but in my personal opinion that was quite unnecessary. I do not believe any of us thought he had acted with any impropriety in the smallest degree. I am grateful to my noble friend Lord Cranbrook for taking the trouble to keep me informed of the development of his thinking over the summer on this important question. I certainly recognise the concepts used by him in describing sustainable development. However, it is one which seems to me to be broad and he will recall that in his preface to the White Paper the Prime Minister commented that, sustainable development is difficult to define. But the goal of sustainable development can guide future policy". I clearly agree with that. That is a policy which is followed across government. We must build environmental concerns into all our policy in the same way as we must take account of costs in the pursuit of environmental objectives. The ideas of sustainable development can indeed be an important guide to the Government in forming their policy.

As regards the way in which the Bill is structured, we have given weight to the principles of sustainable development in framing our proposals. In particular we have maintained the director's duties in respect of the efficient use of gas and provided new duties in respect of the environment. As my noble friend Lord Skelmersdale pointed out, those are to be found in what will be new Section 4(2)(b). We have placed a licence obligation upon all suppliers to provide energy efficiency advice and, perhaps more importantly, we have structured the regulatory regime in a way which will allow the forces of the market to be harnessed in the cause of energy efficiency. All of those measures will contribute towards achieving the aims of sustainable development.

However, in trying to extend the principles of sustainable development to being a statutory duty of the director the matter is more difficult. The difficulties arise because of the very broad nature of the director's powers and the very wide-ranging meaning which the phrase "sustainable development" might have. In short, we appear to be stuck upon the horns of an unresolvable dilemma. If the regulator were allowed to put his own interpretation on "sustainable development" it would create, in our view, an unacceptable risk that he could use the phrase to pursue a wide range of political and social objectives. That could create problems of accountability and could also lead to uncertainty in the industry.

Agenda 21, which will be familiar to those who followed the debate on sustainable development, was adopted at the Rio Summit and contains a full discussion of sustainable development. It runs to no fewer than 470 pages, and if the director were in effect authorised to pick and choose from a document of that size it is not difficult to see what difficulties might emerge.

There is a further problem. My noble friend Lord Cranbrook has suggested that we might define sustainable development by reference to guidance from Ministers. As he pointed out, that is the approach used in the case of the Environment Agency. However, that approach would unacceptably cut across the independence of the regulator in this context. The whole purpose of the regulatory regime which has been set up for the privatised industries is that political interference by Ministers should be prevented by appointing independent regulators with clearly defined statutory duties. To include that broad set of highly desirable goals seems to us to introduce an unacceptable degree of obscurity, important as they are.

To allow those duties in effect to be varied by Ministers would run contrary to the principle that we have been trying to establish; namely, that the regulator should be independent and should not be subjected on a day-by-day basis to interference by Ministers. While the noble Lord, Lord Bruce of Donington, may not entirely agree with me, it is our conclusion that it was the constant political interference with industries which was one of the principal difficulties which arose in the old days of nationalisation. It is our view that a duty in relation to sustainable development defined by Ministers would upset the integrity of the regulatory system.

I hope that my noble friend will appreciate why we continue to have anxieties about introducing this duty in this particular context. However, I hope that I have reassured him that his commitment to the concept of sustainable development is widely shared. The Government certainly support it and we believe, as he does, that it is a concept that should inform policy on a far wider basis than simply the matter that is covered by the Bill. On that basis, I invite my noble friend to withdraw his amendment, although I appreciate that he may wish to reflect on what I have said.

4 p.m.

The Earl of Cranbrook

My Lords, before I comment on my noble and learned friend's remarks, I should like to refute absolutely the suggestion of my noble friend Lord Skelmersdale, which was put rather more tentatively by the noble Lord, Lord Peston, that we should hesitate to legislate to make things better and to move forward. Where on earth would we be if we took that line on everything? The opportunity for legislative initiative would disappear altogether. I refute the suggestion. The fact that consideration of the objectives of sustainable development was not among the duties given to the regulators of water or electricity is totally irrelevant. The debate has moved forward. As I explained, we are in a new arena and in a new time frame. I believe that we have to look forward.

I am reassured by my noble and learned friend's comment that the duty to promote efficiency is firmly placed upon the regulator.

The political issue is twofold. First, my interest in the matter arose from the clear statement that market forces would not of themselves produce tendencies towards efficiency and that those two considerations are totally separate. The second political issue is that, in a nationalised industry, policies of this nature can be promulgated through the administrative system. Once industries have been denationalised, government policy has to be imposed through the regulator. I recognise that one man's national policy guidance is another man's political interference. However, we are left with the dilemma that once an industry is privatised and is thereby freed from the shackles of perpetual government interference, there has to be regulation in order to bring considerations of national policy to bear. Those were the two key anxieties that prompted me to bring the matter forward.

My noble and learned friend will recognise that it is not fair to say that, under the amendments that I propose, the regulator would be free to put forward his own interpretation and to pick and choose. I believe that the model provided by the Environment Agency is the right model because it allows the infiltration of national policy guidance in the way I outlined.

I shall take the opportunity to think again. I am grateful to all Members of the House who contributed to this short debate. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Ezra moved Amendment No. 3:

Page 1, line 26, leave out paragraph (a).

The noble Lord said: My Lords, in moving Amendment No. 3, I shall speak also to Amendment No. 8, which is in the name of the noble Lord, Lord Clinton-Davis, and myself.

The purpose of the amendments is to ensure that in performing the general duties laid down in the Bill the Secretary of State and the director shall have an obligation to exercise those functions in a manner which they consider best calculated to protect the interests of consumers of gas. Particular reference is made to those who are disabled or of pensionable age.

At the Committee stage on 22nd June I moved a differently worded amendment to emphasise the importance of protecting the interests of consumers of gas. That was opposed by the noble Earl, Lord Ferrers, who spoke on behalf of the Government, and voted against in a Division.

Amendment No. 8 is of a different order. It lays down that the Secretary of State and the director shall consider the interests of consumers in performing their other functions. I very much hope that in this revised form the Government will be able to accept the amendment. I should have thought that the Government would have little difficulty in doing so. During previous debates on the Bill both the Secretary of State in another place and the noble Earl, Lord Ferrers, in this House stressed the importance of protecting consumers' interests. Indeed the Bill does so, in many ways, particularly in regard to those who are disabled, of pensionable age or have difficulty in paying. The intention seems to be that the long-established procedures of British Gas in those regards should be continued under the new market arrangements. The amendments that I propose are consistent with those clear intentions.

The wording in the Bill as it now stands in Clause I is very similar to the wording in Section 4 of the Gas Act 1986. However, the context is entirely different. Then British Gas was the sole public gas supplier. It was widely assumed that the procedures then in operation would continue. In regard to the domestic market of 18 million households the emphasis right up to the present has been on social obligation, customer service, safety and security of supply and a special concern for those who are disadvantaged. With the opening up of the domestic market, which is the purpose of the present Bill, the old values are likely to be replaced by the new values of competitiveness, profitability, shareholder value and growth. These are likely to become relatively more important, as indeed the noble Viscount, Lord Caldecote, mentioned in connection with the previous amendments.

That would be all right if we were talking about an ordinary commodity for which you could shop around in the supermarket. But this is no ordinary commodity. It is the primary source of domestic heating for the vast majority of households in this country. There is no knowing how competitiveness within the gas sector will work out so far as concerns individual households, so special safeguards are required.

At Standing Committee in another place the Minister, on being questioned about why safeguarding the consumers' interests was not regarded as a primary duty, said: If the primary duty"—

of supply— did not exist, the secondary duty—

of safeguarding consumers' interests— could not be delivered. Assuming that the primary duty exists and that therefore the secondary duty is being delivered, the regulator would have to weigh them up. She would have no reason to give higher priority to the primary rather than the secondary duty".

I find that somewhat complex reasoning. If, according to the Minister, there is no reason to give higher priority to the primary rather than the secondary duty, it is totally unclear why the distinction should be made in the wording of the Bill.

There are broader reasons for giving a higher priority to consumer safeguards than are given in the Bill. There is a growing suspicion of the privatised utilities. There has, in the view of the public, been too much of a swing away from consumers and towards other stakeholders, in particular shareholders. There is a growing feeling of uncertainty and resentment. I believe it is necessary to recognise that the public need some reassurance. This amendment would go some way to providing that reassurance and is consistent, as I have already indicated, with other provisions made in the Bill to safeguard particular aspects of consumers' interests. There is undoubtedly the fear that the development of competition could be accompanied—I do not say that it will be—by a lowering of standards. It must surely be a prime objective of this legislation to make sure that that does not occur. Requiring the Secretary of State and the director to consider how the interests of consumers of gas can best be protected under the new arrangements seems to be an important step in that direction. I beg to move.

Lord Clinton-Davis

My Lords, I support the amendment ably moved by the noble Lord. He has put forward a number of extremely salient points which cannot be divorced from the general expressions of concern—indeed, resentment—about certain actions affecting public utilities which have been expressed in recent months. Those expressions make it encumbent on the Government to address the issues that are set out in these two amendments.

The Government got themselves into an awful mess when referring to primary and secondary obligations when the matter was in another place. It is all very well to say, as the Government do, that this obligation towards consumers' interests is implicit. Unfortunately, they might have got away with that had it not been for the interventions of the Minister with responsibility in this area, Mr. Eggar. Unquestionably, he referred to this categorisation of interests: that primary interest was not that of the consumers; secondary obligations were the consumer interests.

How does one square talk of primary and secondary interests with the assertion made more or less at the same time that those are duties which can run alongside each other? That is what the noble Lord, Lord Ezra, seeks to recognise. However, because the matter was allowed to be confused by the Minister elsewhere, we now have to ensure that the public are not confused about it. I should have thought that the drafting before the House is consistent with what the Government have expressed, albeit in confusing terms as their purposes, their objectives.

I believe that what was said by my noble friend Lord Peston when we debated these matters in Committee is right: the consumer must be seen to come first. I hope that when the Minister replies to the debate he will recognise that that is not an unworthy objective. It is one which the Government should have no difficulty in accepting in principle. I find it incomprehensible that the matter was not addressed at a much earlier stage in the Bill.

However, I look forward to the Minister saying that this is an amendment which the Government are now able to accept both in principle and intent. The wording may be slightly wrong, but what we want to hear from the Minister is an acceptance in principle of what we state: that there is a need, because of the circumstances to which the noble Lord, Lord Ezra, and I have alluded, for ensuring that the confusion that has arisen is cleared up—and cleared up along the lines of the amendment.

4.15 p.m.

Lord Fraser of Carmyllie

My Lords, the noble Lord, Lord Ezra, has made much of the interests of the consumer being of the highest importance. I entirely agree with that. What concerns me is that the provisions of the clause that we propose achieve that objective in a balanced and tested way. However, I fear that the way in which the noble Lord puts it disrupts that balance.

It may be a little difficult if one considers these duties in terms of primary and secondary duties rather than in the context of ensuring that there is a supply of gas. That is the way in which we understand the clause to be framed.

The first duty—let me leave out "primary"; it is potentially confusing—is to secure so far as it is economical to meet them, all reasonable demands in Great Britain for gas conveyed through pipes and to ensure that all reasonable demands are met. That may not mention the word "consumer". But there is no doubt that the duty is to protect an important consumer interest; namely, to ensure that gas is available to meet demands. That seems a very obvious consumer interest.

The second duty is in essence to secure that licence holders can finance their business. Again, there may be no mention of the consumer, but that duty has two impacts on the director, both of benefit to the consumer. The first concerns who is licensed. The director has to consider whether they are able to finance their business. She must see evidence of reasonable financial soundness. That clearly is equally of importance to consumers.

The second impact of that duty concerns the licensee's terms of trading. That is at the heart of the regulatory system. In performing those further duties—to promote low prices and improve service—the director must do that subject to ensuring that companies are able to finance the licensed business. In our view, it would not be in the interests of consumers if the director were to pursue what might be described as "consumer objectives"—narrowly defined—so aggressively that companies went out of business. It is not her duty to prop up inefficient companies, but she should not drive suppliers out of business by setting targets that they are unable to meet.

The third duty is to secure effective competition. Again, our clear view is that that is a benefit to consumers by providing them with choice and the opportunity of lower prices. As the noble Lord will know, prices have fallen further in the competitive industrial gas market than in the monopoly domestic market that exists at present.

In essence, there is nothing between us. We believe that the consumer should be put first, and that we have done that. We have done it with a set of duties aimed at ensuring that there is a viable competitive market meeting consumer demands. Then we set out more detailed consumer protection duties in the clause. They are necessary, subject to the first requirement that there should be a viable competitive market. I hope that the noble Lord will be satisfied that we are not confused about the way in which it is set out, but will realise that the way in which it is arranged will ultimately be in the best interests of the consumer.

Lord Ezra

My Lords, I thank the noble and learned Lord for that explanation, which is similar to the one given to me by his noble colleague at an earlier stage. However, I am still concerned about it. The Minister has set out logically that we must have a supply; that we must ensure that people handling the supply are financially viable; that we must ensure that there is effective competition; but also that the interests of consumers are safeguarded in all that. There is a clear distinction in the wording of the Bill on page 1 between the first three objectives, which are grouped under a single heading in subsection (1), and the relegation of the consumers' interests to a secondary position. What Mr. Eggar said in another place is difficult to follow: that in the event the regulator would probably consider everything in subsections (2) and (1) on a par. However, that is not what the Bill says and people will go by the Bill.

If the Government were to move a little and cut out the phrase in subsection (2), Subject to subsection (1) above", and simply continue with (d), to protect the interests of consumers", so that there was a certain logical progression, much of the concern of those who favour putting greater emphasis on consumers would be removed. The difficulty is with the emphasis and clear distinction between the protection of the interests of consumers on the one hand and all the matters contained in Clause 4(1) on the other. I consider the promotion of, efficiency and economy on the part of persons authorised to be of equal importance. I should like to see all those points listed in one series. I do not necessarily suggest that the interests of the consumer should come first. I should like to see that, but there is a certain logic in ensuring that there is a supply; that it is properly handled; that it is financially viable; that there is competition; and that the interests of consumers are protected. I can see nothing wrong with doing that.

I should like to know whether the noble and learned Lord would be prepared to reflect on that and perhaps bring forward an amendment at the next stage which would achieve those objects. It would remove the feeling of apprehension that somehow the protection of the interests of consumers is regarded as being of secondary importance. The Government have denied that. Let them demonstrate that denial by making a change in the wording. I ask the Minister to address that point.

Lord Fraser of Carmyllie

My Lords, with the leave of the House, perhaps I may reply. There is still confusion between us. I do not accept that we have in any sense relegated the consumer duties in the way that the noble Lord continues to insist. However, if he would accept that I will make no commitment on the matter, I shall look again at the way in which the clause is framed. Having addressed an argument to him in which I indicated that I do not believe there is relegation of consumer interests, he will appreciate that I cannot offer a commitment at this stage.

Lord Ezra

My Lords, if the noble and learned Lord is prepared to reconsider the point and come forward with a suggestion at the next stage, I shall be happy to withdraw the amendment. I look forward with great interest to what I am sure will be a helpful proposal at Third Reading. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 4 and 5 not moved.]

The Earl of Cranbrook moved Amendment No. 6:

Page 2, line 18, after ("of") insert ("— (i)").

The noble Earl said: My Lords, Amendment No. 6 proposes, together with Amendment No. 7, to add the words: the use of gas conveyed through pipes", as one of the duties of the regulator. It will be one of the points that the regulator will have to take into account. The debate which we have just held emphasises the importance of gas to consumers. I was not aware of it but the noble Lord, Lord Ezra, told us a moment ago that the majority of British households depend upon burning gas for heating, warmth and probably cooking. The net effect is that it is the consumer who burns the gas.

In my previous comments on an earlier amendment, I referred to the importance of the Government's climate change programme. A key element of it is the control and management of emissions of carbon dioxide. Burning gas produces carbon dioxide. Thus, around the country hundreds, thousands and, no doubt, millions of consumers contribute to national carbon dioxide emissions by burning gas, by using the product delivered to them by pipes. That is what we are talking about. Undoubtedly, it has a powerful environmental impact in contributing towards the carbon dioxide load in the atmosphere.

My basic argument has not changed. Any source of carbon dioxide in the country needs to be managed. Efficiency is one way in which emissions can be abated and there are many others. Therefore, I come up against the problem which concerns me: how does the national policy and the national strategy for the control of carbon dioxide emissions feed through to the millions of us who consume gas in our own houses, in order to keep ourselves warm, cook our food and have warm baths? How do we feed that through, if not through the regulator? If the regulator is already given the duty to take account of the effects on the environment of activities connected with the conveyance of gas through pipes, he merely has a duty to have regard to the effects on the environment of the laying of the pipelines and related activities. These are undoubtedly important environmental concerns, but the primary environmental concern must be the use of gas by consumers. I hope I have made that point. I strove to make it earlier and the reply which I received (at col. 442 of Hansard for 22nd June 1995) from the Minister on the Front Bench at the time was simply: I am not keen on that".

I genuinely believe that the topic deserves fuller discussion and that the policies for which my noble and learned friend is now responsible need to be laid out for the benefit of those who will read this debate in Hansard. I very much hope that my noble and learned friend will say that he has no problem in accepting the amendment. If not, I hope that he will make it clear that somehow or other this important issue is already covered. I beg to move.

4.30 p.m.

Lord Fraser of Carmyllie

My Lords, I am grateful to my noble friend for raising the question of whether the director's duties should extend to the effect on the environment of the use of gas. While my response may be summed up by saying that I am not keen on what my noble friend proposes, I hope nevertheless that I shall extend to him the courtesy of a considered argument.

My first point is this. The principal issue in this area is the efficient use of gas. The director already has a duty under the Bill to promote the efficient use of gas conveyed through pipes. It is an important duty; and it is on the basis of that duty that licences contain provisions designed to promote energy efficiency in the gas market.

These include not only the requirement on suppliers to provide energy efficiency advice, but reforms designed to harness the power of the market in favour of energy efficiency by providing incentives to suppliers to compete in what might be called "warmth solutions" rather than simply therms of gas. We therefore feel that it is difficult to know what a duty in respect of the environmental impact of gas use could add which is not already covered by that efficiency duty.

It might perhaps extend to giving the director a duty to seek to raise prices in order to reduce consumption. But it appears to us that decisions of that nature ought to be for government, through the instrument of taxation, and not for the independent regulator. As my noble friend will appreciate, raising taxes for that purpose is not an approach which immediately attracts widespread public support.

The other difficulty that we have with a duty of this nature is that one ought not to look at the environmental impact of burning gas in so far as it goes beyond the questions of efficient usage without considering the alternatives. Most competing fields, as I am sure my noble friend will acknowledge, have significantly greater impacts on the environment because gas is a low carbon fuel which contains virtually no sulphur and does not create noxious products if burnt properly.

A duty for the gas regulator to look at the environmental impact of burning gas alone would, we believe, have a distorting effect on the director's judgment. Looking at the environmental impacts of all fuels strays dangerously into territory that ought to be occupied by Ministers.

Our conclusion therefore is that what ought to be done in this area is achieved by the director's duty in respect of the efficient use of gas. A duty in respect of the impact of the use of gas on the environment would add little; where it might add anything further, it would risk straying into areas which are either very wide or politically very sensitive.

The Earl of Cranbrook

My Lords, I am grateful for that explanation. My immediate reaction is that the amendment I proposed would clarify the driving force behind efficiency in an extremely valuable way, and would focus public attention and gain merit by remaining there. However, again I shall read my noble and learned friend's remarks very carefully. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 7 and 8 not moved.]

Lord Fraser of Carmyllie moved Amendment No. 9:

Page 2, line 26, at end insert ("chronically sick,").

The noble and learned Lord said: My Lords, in speaking to this amendment I shall speak also to Amendments Nos. 21 and 27.

This group of amendments is in response to a point made by my noble friend Lord Boyd-Carpenter in Committee in a debate on an amendment moved by the noble Baroness, Lady David. The noble Lord suggested that we needed to look again at whether the Bill's definition of those who are "disabled or of pensionable age" as requiring special consideration and special services needed to be expanded to encompass those who had suffered very severe and prolonged illness.

Having looked at this point, we accept that the term "disabled" will not cover all the chronically sick, but that there may be cases in which the chronically sick require special services from gas suppliers in a similar manner to disabled persons or those of pensionable age. We will review the social conditions of the licence to see where these cases may be and take into account the views of the Gas Consumers Council. Amendments Nos. 9, 21 and 27 would therefore add references throughout the Bill to the "chronically sick", in addition to disabled people and pensioners. I hope that my noble friend will approve of that set of amendments.

Lord Peston

My Lords, I congratulate the Minister. In responding to the wishes of his noble friend, and to my noble friend Lady David, I believe that he will have pleased all noble Lords. This is as good an example of the meeting of minds in relation to this Bill as we have had. I thank him very much for that.

Lord Boyd-Carpenter

My Lords, I am much obliged to my noble and learned friend for what he said. I shall be interested to know the outcome of the review that he was good enough to promise. I say at once that I feel some gratitude to the Government for their response and for the flexibility that they have shown. I hope that before long it may be indicated to this House what the Government propose to do.

On Question, amendment agreed to.

[Amendment No. 10 not moved.]

The Earl of Cranbrook moved Amendment No. 11: Page 2, line 29, leave out ("1(2)") and insert ("1").

The noble Earl said: My Lords, perhaps I need briefly to explain this amendment. It concerns the definition of "the environment" for which I argued in Committee (col. 449 of Hansard). In Committee, on a proposal from the Government, we removed the word "physical" from the definition of "environment".

My previous argument is reinforced by the fact that if we now confine the definition of the environment simply to this sub-paragraph of Clause 1(2), we in fact restrict it to a definition of the physical environment. So we end up where we were before we removed "physical". I sincerely hope that there was a genuine meeting of minds between my noble friend Lord Ferrers and myself previously on the removal of the word "physical" from the definition of the environment, since we need to have concern for the whole environment, including its living elements. On 2nd June (col. 450), my noble friend Lord Ferrers said that he would take the matter away and consider it. I hope that my noble and learned friend has been able to give it that consideration. Perhaps I may be congratulated on shortening the Bill by the removal of a couple of parentheses and the figure 2! I beg to move.

Lord Fraser of Carmyllie

My Lords, an apology is due to my noble friend in that we have overlooked this point. While we were considering his concerns on sustainable development, there was an incorrect assumption that he no longer wished to pursue this point.

However, I accept that the director's environmental duty should extend appropriately to the impact on wildlife. Although in practice that impact is likely to be limited, I agree that there is no reason to exclude it.

Not for the first time will my noble friend have heard a Minister at this Dispatch Box say that there is some indication that his drafting is incorrect. I wonder whether he will be kind enough to withdraw his amendment. I shall then ask officials to consider urgently with parliamentary counsel whether the matter is sufficiently covered. If it is not, we will ensure that an appropriate amendment is ready at Third Reading.

The Earl of Cranbrook

My Lords, I am grateful to my noble and learned friend. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Clinton-Davis moved Amendment No. 12: After Clause 2, insert the following new clause—

cc765-72
1. MATTERS TO BE TAKEN INTO ACCOUNT BY DIRECTOR IN EXERCISING POWERS TO CONTROL GAS PRICES 3,123 words
cc772-809
2. COMPENSATION FOR DAMAGE OR LOSS CAUSED BY PUBLIC GAS SUPPLIERS' CONSTRUCTION WORK 20,007 words