House again in Committee on Clause 7.
moved Amendment No. 68A:
Page 6, line 12, at end insert—
("(d) conditions requiring the public gas supplier to seek consultation with any organisation appearing to them to be appropriate with a view to the conclusion between the supplier and that organisation of such agreements as appear to the parties to be desirable with respect to the establishment and maintenance of machinery for the settlement by negotiation of terms and conditions of employment of persons employed by the supplier, with provision for reference to arbitration in default of such settlement in such cases as may be determined by or under the agreements;
(e) conditions requiring the public gas supplier to seek consultation with any organisation appearing to them to be appropriate with a view to the conclusion between the Corporation and that organisation of such agreements as appear to the parties to be desirable with respect to the establishment and maintenance of machinery for the promotion and encouragement of measures affecting the safety, health and welfare of persons employed by the supplier and the discussion of other matters of mutual interest to the supplier and such persons, including the training and education of such persons and efficiency in the operation of the services of the supplier; and
(f) conditions requiring the public gas supplier to make provisions for such pension arrangements as it may determine, by making such payments as they may determine towards the provision of such pensions, or establishing and maintaining such schemes as they may determine for the payment of such pensions.").
The noble Lord said: This is a very important amendment, although all it seeks to do is to carry forward provisions that already exist in the Gas Act 1972, in Sections 35 and 36. However, I cannot stress too strongly the importance of the amendment and the need to write its provisions into the present Bill.
I shall deal now with the first part of the amendment, which concerns the establishment of proper negotiating machinery. I shall not read out the provision because that would take far too much time; but it deals with the establishment of machinery and it arranges for consultation in relation to that machinery for the proper negotiation of wages and conditions of service.
It is essential in our view that something of that sort should be written into the Bill. I say that because of my own experience in a nationalised industry—the electricity supply industry—where, as the noble Lord, Lord Belstead, will realise, similar provisions apply. In that industry, I negotiated at every level from time to time, and sometimes at all levels simultaneously; at local level, regional level, and national level. I therefore know what it is like to negotiate under the conditions that a statute gives to one.
There is the feeling of confidence that one is entitled to have and retain proper and up-to-date negotiating arrangements and procedures for settling disputes; that one is entitled to sit down and talk with one's employers about conditions of service. What it gave me was a feeling of belonging. One felt that because one had those rights, one belonged to the industry and was a part of that industry. From the point of view of modern industrial relations, that is precisely what we want. Indeed, that is what the Government say they want. They want to see both sides of industry working together. Indeed, we want to get rid of the concept of there being sides in industry, because we believe that all those who work in an industry, whether in a management capacity or on the shop floor, should feel part of the industry and should want it to succeed.
As I have said, such arrangements as those that existed and still exist in the electricity supply industry, and at the present time in the gas industry, engender a feeling of equality between both sides and instil confidence between them. The staff of the British Gas Corporation would be less fearful of their position under privatised British Gas if those arrangements were backed by statute. I hope that the Committee and the Minister will accept the argument in that respect.
The second part of the amendment deals not with negotiation of terms and conditions of appointment but with consultation within the industry; consultation for the promotion and encouragement of measures affecting the safety, health and welfare of persons employed by the supplier and the discussion of other matters of mutual interest to the supplier and such persons, including the training and education of such persons and efficiency in the operation of the services of the supplier.
Again, I can claim personal experience of working under these conditions because in the electricity supply industry, as in the gas industry, there was written into the statute a provision for proper consultation to take place between the employers and the employees on a wide range of matters. Those matters include the vital aspects of health and welfare, safety, efficiency and education and training. I have said this before, but it is worth repeating that the ordinary chaps in any organisation, the ordinary workers in any organisation have a great deal to offer, if only they could be motivated and given the means whereby they could make that contribution. That really is all we are asking for.
I was the secretary of one of these consultative organisations—at a power station, as a matter of fact—so I really know what I am talking about. It was good to see representatives from the top level of management, the power station superintendent taking the chair one year and the workers' representative taking the chair the following year, to see how the discussion arose and to observe the interplay of people's knowledge and experience and how this worked to the benefit not only of the workers themselves—which, of course, it did—but also of the organisation, giving better understanding in it and better working of that organisation.
I found this consultative committee an educative experience and it showed me how people, given the opportunity, can work together for the good of their organisation and the good of their fellows. For example, in the matter of safety in any organisation, but particularly in one where engineering is involved, in a power station, where electricity is a dangerous substance, or in the gas industry, where gas is a volatile and dangerous substance, safety is very important—in fact vital.
Under these arrangements which we are proposing, people at work would actually be supervising their own safety and when they are supervising their own safety, when they are involved, they ensure that the practices in an organisation or on a site at a power station are of the best because they have the facilities for examining and improving them. So we want to write into the Bill the opportunity and the arrangements, when gas is privatised, for people to be able to contribute and be consulted about the range of matters mentioned in the amendment.
Then we come to pensions. We are suggesting here that:
"Conditions requiring the public gas supplier to make provisions for such pension arrangements as it may determine, by making such payments as they may determine towards the provision of such pensions, or establishing and maintaining such schemes as they may determine for the payment of such pensions".
I understand that existing pension arrangements are to be carried forward in the first instance. I understand this, but I am still not clear whether there is any guarantee that they will apply to new employees as well as existing ones. In other words, will there be two pension schemes: a Rolls-Royce scheme for existing employees, and a Model T Ford scheme for new employees? Will index-linking be guaranteed for all employees and for all retired employees?
If I may, I should like to take this opportunity to thank the noble Lord for his letter of 19th May explaining the position in relation to frozen pensions. The position was as I feared: those with frozen pensions will not be any better off under privatised British Gas than they are at present. I think that is unfortunate. The present gas corporation has given assurances about all these matters but the existing board will not be in office for ever, and perhaps not for long after the appointed day. A future board may well wish radically to alter and worsen the existing arrangements. The only real safeguard for employees is to write these provisions into the statute. By this amendment I am proposing that we should do just that and I commend the amendment to your Lordships. I beg to move.
One of the strengths of the Committee is the great variety and depth of experience that is brought to bear from time to time by noble Lords. Listening, as we all have, to the wise words of the noble Lord, Lord Stoddart, is bound to impress everyone in the Committee, as it has impressed me, of the great understanding and depth of experience he has in these matters. I say that because not always are we all able to speak out of our own knowledge and experience. We each have knowledge in some fields but those of us who have to carry out this task of reviewing legislation often have to speak on matters on which, inevitably, we do not have first-hand experience. Now we have been listening to first-hand experience and I hope that the Government will have regard to that.I hope the noble Lord the Minister will not take my words amiss if I say that if there is one attitude which to a certain extent separates the two sides of the Committee it is that on willingness to consult. If the Government care to consider their record, from Cheltenham onwards, they will find that they have unnecessarily put themselves into trouble at times through the lack of priority they have given to the need for prior consultation; not telling people until after the event what they have decided instead of seeking their views and feelings in advance. It is for that reason—and I am not going into detail because the noble Lord, Lord Stoddart, has done that so well—that I hope the Government will give a sympathetic response to the speech that we listened to with such pleasure.
As someone who has had some experience of being involved in a large-scale enterprise, I should like to say that I fully support the noble Lord, Lord Stoddart. I think it will be important in this legislation that there are some clauses in it—whether they be precisely what is proposed or something else is a matter for the Government to decide—which pay regard to the need to stimulate full participation on the part of those who work in the enterprise.The gas industry as presently constituted has a very good record of participation. I believe that we should carry that forward into any new way in which it is organised. I believed that this should be introduced into the Bill in some form which recognises the human aspect of what is proposed as well as the commercial and political aspects.
I too listened with interest to the speech by the noble Lord, Lord Stoddart. I recognise that the noble Lord speaks from personal experience of the matters covered by Amendment No. 68A, and I respect him for that. Indeed, I have learned a thing or two in listening to him.However, I suggest to the noble Lord that two of the paragraphs in Amendment No. 68A—that is, paragraphs (e) and (f)—are already covered statutorily. As regards the second limb of the amendment, paragraph (e), Section 2 of the Health and Safety at Work etc. Act 1974 already places obligations on suppliers in respect of safety, health and welfare matters. As the noble Lord will know from his experience, Section 2 of the 1974 Act is quite comprehensive in its provisions. So far as concerns the final paragraph, paragraph (f), and the matter of pensions, to which the noble Lord quite understandably attached considerable importance, British Gas has made clear that the fears that some people have invoked about pensions are groundless and that British Gas intends to continue the current practices after privatisation. But it is not just a question of giving an undertaking. Paragraph 29 of Schedule 8 to this Bill makes it quite clear that the corporation's existing pension obligations will be carried forward to the successor company. So my answer to the more detailed questions about pensions by the noble Lord, Lord Stoddart, is that the obligations of the successor company will be the same as the obligations for pensions which the corporation shoulders at the present time. We are left with the first paragraph, paragraph (d). The amendment provides that there should be a statutory requirement on British Gas to consult on terms and conditions of employment, and this provision is fleshed out in paragraph (d). I should like to make two comments. The purpose of the regulatory regime that we are trying to establish by this Bill is to control the supply of gas. I suggest that there are no grounds for giving the director a role in such matters as terms or conditions of employment. I do not think that it would be appropriate to make provision for placing obligations on the public gas supplier through the authorisation in this respect. However, for its part British Gas has made considerable efforts, through regular reports which it has issued, to keep employees informed of developments arising from privatisation. In one such report British Gas has stated that it sees the existing negotiation and consultation arrangements which have served the industry well in the past carrying it into the future. I understand that British Gas has made clear in writing that any alteration in the negotiation and consultation arrangements will be a matter for joint consideration between management and unions. I think that is a very important assurance and one that I would expect from managers of the quality of those to be found in British Gas. This is a very serious amendment, and in answering on behalf of the Government I can say that the Health and Safety at Work Act already places obligations on suppliers, as it does on all other employers, for safety, health and welfare matters. Schedule 8 to the Bill makes clear that British Gas's existing pension obligations will be carried forward to the successor company. However, the existing negotiation and consultation arrangements and any questions of arbitration are matters for joint consideration between management and unions, as they are for any other company in the private sector, and not for a condition in the authorisation. This would be to impose an obligation on British Gas in the future that would not be imposed on any other private sector company, great or small. On that point, with regret, I cannot agree with the amendment.
Will the noble Lord the Minister think again about his comments on paragraph (e)? He has told us that the Health and Safety at Work Act covers the requirements for safety, health and welfare; but as I understand it, "welfare" ranges much wider than the requirements in the Health and Safety at Work Act, which is concerned with health and safety. I have not turned up the Act but I think that it does not make any reference to welfare, or at any rate not in any extensive terms.What is even more important is that this amendment suggests a provision which was in the nationalisation Act—and anybody who has had any contact with the gas industry knows that it has worked remarkably well—to consult on matters of training, education and efficiency. As the noble Lord, Lord Stoddart, has said, it has done a great deal to educate both management and workforce in what is meant by training, education and efficiency and where their value lies. It is no answer to say that the Health and Safety at Work etc. Act covers the most important matters that are included in that paragraph. I also ask the Minister to think again about this. He says that it is not appropriate to require the private sector industry, as it will be, to carry forward the negotiating rights that the industry has had and has operated most successfully, as is agreed on all sides. Why should it be regarded as inappropriate to require it to carry that forward when it is, after all, benefiting from 40 years of efficient joint working inside the industry? It is not a private sector industry in the pure sense to be compared with any other private sector industry. It is inherently a great industry which has largely been the product of joint work between the two sides. Will the Minister please think again on this amendment?
I trust that the noble Lord will think again about this. This is a part of the Bill on which some endeavour is being made to establish within the framework of the authorisation that kind of regime which is already practised by some of the finest private enterprise firms in this country. Many firms in this country—and I shall not name them in this debate—follow precisely all the stipulations put forward by my noble friend, who has had great personal experience in them.From time to time in the earlier part of this Parliament, in the first flush of the Government's term of office and when the self-induced deflation of the economy began to have some impact upon the country and perhaps a little on government morale, our attention was invited to our German colleagues. It was pointed out that what was wanted in British industry was the co-operation among capital, management and labour that subsisted in Germany. If he casts his mind back, the noble Lord may remember the days when Mitbestimmung was freely bandied about the House. It is no good the Government trying to project the political philosophy held by some of their leaders, the Thatcher and Tebitt ones who believe arrogantly in the right of management to manage—in those harsh terms, too. I well remember the observations of the right honourable Lady when she was in either Malaysia or Indonesia, and she did not seem to know which. She observed how lucky the employed people in the United Kingdom were to be able to hang on to a job. That is not the voice of a Government who are attuned to the compelete necessity within modern industry, whatever branch, of a degree of constructive co-operation. As one who has had some experience in industry, as against the more extensive experience of my noble friend Lord Stoddart, let me venture this observation. Leadership does not mean getting obedience to management by fear; by the stick. Nor does it of necessity mean getting co-operation by tendering the carrot. Neither fear nor regard for personal fortune is always the best impulse to action. The best impulse to action and the best way of exercising leadership is to bring out the best in people, to bring out their latent abilities, and actually to extend their abilities. There is no better way of doing that than by consultation. Why is it not possible for the Government to swallow the ideology imposed upon them from up top and to embrace the ordinary common sense factors of business which all those Members of the Committee who have had any experience at high level of managment in companies know perfectly well are the only acceptable way and, finally, the only profitable way, of running an industry? Failure to implement this would confirm the ordinary working person's suspicion that, once again, the "them and us" attitude is being inculcated from on top. People matter. It is not purely a question of being afraid of the sack on the one hand or even of being avaricious for increases in pay or increases in their own personal profit on the other. People like to identify themselves with what they are doing. They do not like being alienated from it emotionally or intellectually purely by the imposition of cash considerations—what has been referred to as the naked cash nexus twixt man and mammon. Men are inspired within society by working co-operatively with other people. The only managements that are successful are those that realise this. I hope sincerely, in the light particularly of what my noble friend Lord Stoddart has said and the words that have fallen from the lips of those who have spoken from the Alliance Benches, that the Government will give further consideration to this matter. In our view, it is the minimum that they can do.
The noble Baroness, Lady Seear, expressed concern that the Health and Safety at Work etc. Act does not cover the welfare of employees. I should like to set the noble Baroness's concern at rest. Section 2 of the Health and Safety at Work etc. Act says,
The section goes on,"It shall be the duty of every employer to ensure, so far as is reasonably practicable, the health, safety and welfare at work of all his employees".
It then lists the one to which the noble Baroness, I know, attaches particular importance because I have heard her speak about it so often. That is,"Without prejudice to the generality of an employer's duty under the preceding subsection, the matters to which that duty extends include in particular—".
Then, again, the section returns later to welfare. I believe therefore that I was justified in stating that Section 2 of the 1974 Health and Safety at Work etc. Act is comprehensive."the provision of such information, instruction, training and supervision as is necessary to ensure, so far as is reasonably practicable, the health and safety at work of his employees".
I am sorry to interrupt the noble Lord. Frankly, what is understood by welfare under the Health and Safety at Work etc. Act is something quite different from what is meant by welfare in industry. If one looks at the composition of the Health and Safety Executive one will not find there people who are expert in the other matters referred to in this paragraph. These are matters of welfare, efficiency and training. The word "welfare" is extremely vague. I do not believe that anyone in industry would say that the Act covers what is generally understood as welfare, and certainly not training or efficiency, or that the executive is competent to do anything much about those aspects.
That shows a rather sad confidence in Bills passed through both Houses of Parliament. All that I can say is that I do not agree with the noble Baroness on this point. I should like also to raise a point with the noble Lord, Lord Ezra, who referred to the importance of participation. One of the great benefits of privatisation is that employees will be able to take a personal stake, through a shareholding in their industry, in a way that was not possible under nationalisation. That is something which has not occurred under previous governments and is occurring under the present Government. As it is quite clear that those who are working for British Gas at the present time are looking forward to privatisation, perhaps it would be better for noble Lords opposite to listen rather than to laugh.May I come finally to the remarks of the noble Lord, Lord Bruce. The question was once again raised about negotiation and consultation arrangements, despite the fact that I recorded to noble Lords that an absolutely cast-iron undertaking had been given by British Gas that the present arrangements will continue. The noble Lord is experienced in these matters. He said that there are private sector companies operating very well in relation to negotiating machinery with their workforces. I accept that from the noble Lord, but these are companies which do not have any statutory provisions along the lines proposed in the amendment. I do not see that such statutory provisions would improve the excellent relations which already exist between British Gas's management and its employees. The undertaking which has been given by British Gas—that the present negotiation and consultation arrangements will continue and that if they were to be changed that would be a matter for both managers and employees—is one in which we should have confidence. I am saying that we should trust British Gas as obviously the employees are trusting their management.
Before the noble Lord sits down, may I apologise to the Committee and say that I did not see that undertaking in the course of the fairly wide reading that I undertook before proposing certain amendments in this Chamber? Can the noble Lord the Minister direct me to the place in the Bill where this undertaking is couched?
If the noble Lord, Lord Diamond, would care to look at col. 661 of Hansard of 6th February 1986 in the Standing Committee, there he will see that my honourable friend Mr. Buchanan-Smith recorded the undertaking which British Gas had given to its employees.The whole point of the debate which we have been having for the past 25 minutes is that two of the limbs of the amendment are already covered in statute. Those are the limbs of the amendment which deal with health and safety and welfare at work, and pensions. However, there is one limb which is not covered specifically in statute with regard to suppliers. I have said therefore that we should look at the undertakings which have been given. There is also general employment legislation, but neither noble Lords opposite nor I have gone into that this evening.
I thank the noble Lord for his generous remarks about my initial contribution. I am afraid that he misunderstands the amendment. The noble Lord said that the Bill deals with the supply of gas. It of course deals with the supply of gas and of ensuring the maintenance of a supply of gas. But one cannot maintain a supply of gas if one has bad labour relations. If one has bad labour relations people might take industrial action and that might affect the supply of gas. Therefore good labour relations and proper arrangements for good labour relations are essential. We are therefore at one with him and all we are trying to do by this amendment is to help the noble Lord and the Government to achieve their aim of getting a secure supply of gas.However, the noble Lord sought to show that the Health and Safety at Work etc. Act covered all the points which are made in paragraph (e) of the amendment. Clearly they are not covered. While it is true that the Health and Safety at Work etc. Act provides for the setting up of safety committees and safety officers, it does not do so in the sense that we are asking for such arrangements within the Bill. The arrangements for which we are asking are in addition to and wider than the provisions of the Health and Safety at Work etc. Act. They are provisions which already exist within the gas industry and which are already much wider than those provided for within the Health and Safety at Work etc. Act. Therefore, we are asking for the maintenance of that wider consideration of safety and, indeed, of health and welfare. When the Health and Safety at Work etc. Act deals with health and welfare, it does so in the most narrow way. Indeed, the noble Baroness, Lady Seear, pointed that out and she is well experienced in these matters. The type of arrangements about which I am talking relate, for example, to proper health care at work. The Health and Safety at Work etc. Act does not cover that at all. It is possible—it has been done, and I have done it myself—through the arrangements at work to negotiate, to consult and to persuade the employer that there should be a nurse at the place of work. There is nothing in the Health and Safety at Work etc. Act which says that an employer must have a nurse on the premises, but it is something which is desirable and, if the arrangements exist for consultation, it can be provided through that consultative machinery. However, there is one other element which certainly is not in any way covered in the Health and Safety at Work etc. Act and which is implicit in paragraph (e) of Amendment No. 68A, and that is the discussion of efficiency. That really is absolutely crucial. If we are to involve people in the industry, to interest them in the industry, we must be prepared to discuss with them the efficiency of that industry, how it works, how it is financed, how well it is doing and how they can help to make it more successful. That is not contained in the Health and Safety at Work etc. Act; there is no mention of it, but that is what we are after here. I should have thought that that was a most desirable objective. Without boring the Committee, let me describe how it works at ground level. In a power station—and I am sorry to return to power stations but I know a little about them—there is an annual maintenance programme. In my experience one matter which was dealt with through the consultative machinery was discussion of the annual maintenance programme and how it could be best carried out in the shortest possible time in order that the turbo-alternators—the turbines—could be generating electricity in the winter when people needed it. It was entirely sensible and reasonable. That is the type of matter that we are getting at. I understand that the noble Lord, who perhaps has not had that type of experience, should misunderstand what I am trying to get at. I hope that I have been able to enlighten him about it. In conclusion, it really is intolerable that employees who have been engaged under certain conditions with certain rights, should now find that those conditions and rights are to be removed from them quite arbitrarily. There is no negotiation about it. We are, by Act of Parliament, taking away rights which they have enjoyed for over 40 years. We are doing it arbitrarily without any consultation at all. It is a wicked thing to do. I do not know where the noble Lord gets the idea that employees are looking forward to privatisation. I have no evidence of that. The employees would be content to continue to do the job they have been doing over such a long period of time so efficiently on the same basis. I must press this amendment.
On Question, Whether the said amendment (No. 68A) shall be agreed to?
Contents, 62; Not-Contents, 94.
DIVISION NO. 5
|Airedale, L.||Listowel, E.|
|Attlee, E.||McCarthy, L.|
|Brockway, L.||McGregor of Durris, L.|
|Brooks of Tremorfa, L.||Mar, C.|
|Bruce of Donington, L.||Molloy, L.|
|Caradon, L.||Nicol, B.|
|Cledwyn of Penrhos, L.||Oram, L.|
|Crawshaw of Aintree, L.||Phillips, B.|
|David, B.||Ponsonby of Shulbrede, L. [Teller,]|
|Dean of Beswick, L.|
|Diamond, L.||Raglan, L.|
|Elwyn-Jones, L.||Ritchie of Dundee, L.|
|Elystan-Morgan, L.||Seear, B.|
|Ennals, L.||Sefton of Garston, L.|
|Ezra, L.||Shannon, E.|
|Gallacher, L.||Shepherd, L.|
|Galpern, L.||Stedman, B.|
|Graham of Edmonton, L. [Teller.]||Stoddart of Swindon, L.|
|Taylor of Blackburn, L.|
|Grey, E.||Taylor of Gryfe, L.|
|Hampton, L.||Turner of Camden, B.|
|Hanworth, V.||Vernon, L.|
|Hirshfield, L.||Wallace of Coslany, L.|
|Houghton of Sowerby, L.||Walston, L.|
|Howie of Troon, L.||Wedderburn of Charlton, L.|
|Hylton, L.||Wells-Pestell, L.|
|Jeger, B.||Whaddon, L.|
|John-Mackie, L.||White, B.|
|Kagan, L.||Willis, L.|
|Kilmarnock, L.||Wilson of Langside, L.|
|Kinloss, Ly.||Wilson of Rievaulx, L.|
|Lawrence, L.||Winstanley, L.|
|Allenby of Megiddo, V.||Elliott of Morpeth, L.|
|Alport, L.||Elton, L.|
|Arran, E.||Faithfull, B.|
|Bauer, L.||Gainford, L.|
|Belhaven and Stenton, L.||Gardner of Parkes, B.|
|Belstead, L.||Gibson-Watt, L.|
|Bolton, L.||Gisborough, L.|
|Brabazon of Tara, L.||Glanusk, L.|
|Brentford, V.||Glenarthur, L.|
|Brougham and Vaux, L.||Gray, L.|
|Butterworth, L.||Gray of Contin, L.|
|Caccia, L.||Gridley, L.|
|Caithness, E.||Haig, E.|
|Cameron of Lochbroom, L.||Harmar-Nicholls, L.|
|Campbell of Alloway, L.||Harris of High Cross, L.|
|Campbell of Croy, L.||Harvington, L.|
|Chelmer, L.||Hives, L.|
|Craigavon, V.||Holderness, L.|
|Craigmyle, L.||Hooper, B.|
|Davidson, V.||Inglewood, L.|
|De L'Isle, V.||Kaberry of Adel, L.|
|Denham, L. [Teller.]||Killearn, L.|
|Derwent, L.||Kimball, L.|
|Eden of Winton, L.||Kinnaird, L.|
|Elliot of Harwood, B.||Lane-Fox, B.|
|Lauderdale, E.||Rochdale, V.|
|Layton, L.||Sanderson of Bowden, L.|
|Long, V. [Teller.]||Sandford, L.|
|Lucas of Chilworth, L.||Sandys, L.|
|Macleod of Borve, B.||Savile, L.|
|Margadale, L.||Sempill, Ly.|
|Massereene and Ferrard, V.||Shaughnessy, L.|
|Maude of Stratford-upon-Avon, L.||Skelmersdale, L.|
|Mersey, V.||Stodart of Leaston, L.|
|Middleton, L.||Strathclyde, L.|
|Monk Bretton, L.||Swinfen, L.|
|Monson, L.||Teviot, L.|
|Mottistone, L.||Thomas of Swynnerton, L.|
|Munster, E.||Torrington, V.|
|Norrie, L.||Trefgarne, L.|
|Orkney, E.||Trenchard, V.|
|Orr-Ewing, L.||Trumpington, B.|
|Pender, L.||Ullswater, V.|
|Plummer of St Marylebone, L.||Vaux of Harrowden, L.|
|Rankeillour, L.||Young, B.|
|Redesdale, L.||Zouche of Haryngworth, L.|
Resolved in the negative, and amendment disagreed to accordingly.
moved Amendment No. 68B:
Page 6, line 12, at end insert—
( ) conditions requiring the public gas supplier not to use privileged information obtained as a result of activity in one sector to the benefit of activities in other sectors.")
The noble Lord said: We are still dealing with the section of the Bill in which we find that an authorisation of a public gas supplier may include certain conditions. One of the conditions that is being suggested in this amendment is a condition requiring,
"the public gas supplier not to use privileged information obtained as the result of activity in one sector to the benefit of activities in other sectors."
There may be several examples of this of which I am ignorant, because I cannot claim to have direct experience as a public gas supplier or as any other form of gas supplier. But I am told that under the new circumstances being created, where we are now going to have a private monopoly, and under the new freedom of that private monopoly—namely, the freedom to engage in activities beyond and behind those activities to which British Gas at present is limited—there will arise occasions when the new public gas supplier will inevitably become privy to technical information of enormous value which it could then use to its own benefit in activities of its own carried on for its own shareholders and against the interests of competitors in that same field.
That is a situation which is, I shall not say intolerable, but something which has to be taken care of. This is a first attempt at an amendment to draw the attention of the Committee to the situation and to ask the Government what they are proposing to do to protect those whose information could be used in this way against their interests. I beg to move.
I should like to support the noble Lord, Lord Diamond, in this amendment, because in our opinion, in deciding to privatise the gas industry, with the very substantial powers which they will possess in this area in which they are going to move, the Government have not taken fully into account the impact that it could have on certain competitors. This could be particularly so in the case of exploration in the North Sea. Effectively, the gas industry is going to remain the sole purchaser of gas found in the North Sea. Although, in theory, others could use this gas, in practice that is the way it is worked out.In purchasing gas found in the North Sea, they would have access to a great deal of geological information, and this could be used to their advantage in quoting for other areas of the North Sea in order to explore on their own behalf. At a later point in this Committee stage I shall be proposing with my noble friend Lord Lloyd of Kilgerran, in Amendment No. 146, an elaboration of this point. But I think the Government have to explain to us, as the gas industry is going to move into the private sector, how they envisage them operating fairly in connection with others in the private sector. This is an aspect of the Bill which we have not so far encountered but which we are now raising, and it is solely a consequence of the measures which the Government propose to take. Having decided to take this measure, there are certain things which follow. One of them is the privileged position into which the private gas industry can move in relation to other people in the private sector. We should like to know what views the Government have on this problem.
If I may, I should like to reinforce the point that was made by the noble Lord, Lord Diamond, and also by the noble Lord, Lord Ezra. When the British Gas Corporation becomes British Gas plc, with its own memorandum and articles of association which incorporate it formally within the normal company structure, instead of having full-time members of a board it will have a board of directors. Progressively, as the Government get rid of their shareholding, as they are bound to do because we all know they want the money—and most of the shares will go to institutions—the institutions will appoint, and as shareholders will have the right to appoint, directors to the board of British Gas plc.There is nothing, so far as I can see, in the memorandum and the articles of association (though it is the articles which are important here) which prevents any institution from nominating to the board of British Gas plc a gentleman who is a director of half a dozen other companies, sometimes competitors in the same field. True enough, the Government have their golden share which they can use, if they wish, if they remember and if they have the nouse to do so, to prevent control passing into foreign hands. But the Government have no right, under the articles of association, to object to any nomination to the board of directors being put forward by, say, the Prudential Assurance Company, any one of the merchant banks or any one of the pension funds. They cannot veto any of the appointments that are made by the large institutional shareholders. As directors of the new British Gas plc, the directors will be privy to certain information: if they are going to be directors they have to be; they cannot function without knowledge of what is going on inside the company. Some of these directors who are appointed from the institutions, as I say, may have other directoral interests, as indeed is common over large sections of British industry at this time. That is why this particular clause, in my view and on that narrow ground alone, is necessary in order to ensure that the true interests of the corporation are adequately protected in the manner that, as a national concern, they ought to be.
I think that all noble Lords who have spoken are on to an important and valid point where gas purchasers are concerned. I know that many oil companies have expressed concern that the problem which is raised in this particular amendment could arise. It is for that reason that we have included in Clause 63 of the Bill a provision enabling my right honourable friend to give directions to a public gas supplier when its authorisation is granted—which is exactly the same method as this amendment endeavours to put forward—to ensure that no unfair commercial advantage is obtained from information provided by oil companies during gas sales negotiations.It is also provided that any producer harmed by the misuse of information in contravention of a direction can go to the courts against British Gas for civil damages, and as a safeguard in instances where producers might feel constrained from taking action due to the pressures of their commercial relationship with the supplier, the clause also provides for the Secretary of State to bring civil proceedings against a public gas supplier who is in contravention of such a direction. The amendment proposing an additional condition in British Gas's authorisation, therefore, on this particularly important ground is not necessary. I should like to mention one other thing if I may. Whereas I think the point about the misuse of information arising from gas purchases—in other words, geological or geophysical data—has to be protected and indeed I have just responded to noble Lords on that point by reference to Clause 63, with respect to the noble Lords who have spoken, I do not think that the position of a public gas supplier in respect of the use of any miscellaneous technical information is any different from that of any large company. I do not see that the need for any special provision, aside from the case of gas purchase which is dealt with in Clause 63, would be necessary. Any smaller company doing business with British Gas can protect its technical information either through the use of general patent law or through the conclusion of specific contracts covering the use of any information handed over. But I return to the original point. I think that the noble Lords have a valid point so far as the possible misuse of information is concerned where we are talking about gas purchases, but I hope your Lordships may feel that Clause 63 covers it.
Before the noble Lord sits down, would he clear up one point arising on Clause 63 to which he referred? The noble Lord will note that Clause 63 (1) says:
It gives him the power to do so upon application for authorisation. Would the noble Lord tell me what will happen if authorisation is in fact given without the Secretary of State having given a direction on the original application under subsection (1)?"On granting an authorisation to any person under section 7 above. the Secretary of State may give to that person …"
May I say to the noble Lord, Lord Bruce, that the direction is in fact being drawn up at the moment. It will have the effect of placing an obligation on British Gas not to pass geological or geophysical data obtained during sales negotiations to people in that company or any associate company which is involved in obtaining licences or interests in licences. If the noble Lord feels that this is not properly reflected in Clause 63—I hesitate to say we may return to this when we get to the clause, because I was taken at my word previously and we had another debate—the noble Lord clearly could return to it when we get to Clause 63. That is what is going on now, and I thought I ought to reveal that to the Committee.
The trouble with Clause 63 is that it deals largely with remedial action to be taken after damage or alleged damage has been done. We are trying to ensure that under the conditions of authorisation this misuse of privileged information should be regarded as a condition, and therefore I would have thought it not unreasonable that this should be included in support of the intention in Clause 63. Let us take it as read that the gas industry in its privatised state will still be a very large enterprise with monopolistic aspects, and therefore that those who are in competition with it are not unreasonable in saying that they should to some degree be protected by that very situation.The amendment that is being proposed is doing no more than saying that they should not misuse privileged information. I would have thought it was entirely compatible with Clause 63 and that it would lay down, before the damage has been done and the actionable situation has been created, that as a condition of licences being granted to the public gas supply authority they should beware of misusing privileged information. I therefore hope, on those grounds, that the Minister takes this back and thinks about it further.
With respect to the noble Lord, Lord Ezra, I think that for once he is not correct. I think that the timing of Clause 63 is the same as the timing of the condition which noble Lords are attempting to put forward in this amendment. The enforcement provisions in Clause 63 are along exactly the same lines as those for authorisation conditions and there is therefore no reason for duplication. I am, in fact, saying that in Clause 63 we are doing exactly what noble Lords are wanting us to do in the amendment which has been put forward.
I am grateful to the noble Lord the Minister for the consideration he has given to the point. He has clearly taken the point that this is a matter of concern for a lot of potential competitors, which arises out of the action of the Government in creating this very large, very powerful and very monopolistic concern. What the Minister is really saying is that when we get to Clause 63 we shall be capable of being satisfied that the very thing we want is there.I am bound to confess to your Lordships that I am not as familiar with Clause 63 as I am with other clauses. Clause 63 is such a long way ahead that somebody of my age doubts very much whether he will live long enough to see it debated. But on the assumption that I am more fortunate than I deserve to be, we shall, I think, have to wait until we get to that clause. We shall bear very much in mind what the Minister has said and very much hope that we shall find the complete satisfaction which we and many others are anxious to find in the words of that clause. Therefore, for the time being, I hope your Lordships will give me permission to withdraw the amendment. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
moved Amendment No. 68C:
Page 6, line 12, at end insert—
( ) such conditions as appear to the Director to be requisite to ensure the long term future of gas supplies by promoting and monitoring a continued research and development programme to be undertaken by any persons authorised to supply gas under this Act.")
The noble Lord said: Again we are on the point of the conditions which the authorisation may include. We take the view that once this large monopoly has been created the natural stimulus towards continued research will be somewhat reduced. When you are in a private monopolistic position, you have no need to go to the extent to which you have to go when you are in a different situation. Therefore, there seems to us to be a need to insert in the provisions of the Bill words which will have the effect of ensuring a research and development programme, and of giving the director the responsibility of promoting and monitoring it. I think that the words speak for themselves. I beg to move.
I believe that this amendment proposed by my noble friend Lord Diamond is of considerable importance, because one of the things from which we suffer in this country is that in our industrial development we think too short term. The exigencies of the market emphasise that. The exigencies of the institutional investors emphasise that. Therefore, because we are talking about a very valuable national asset—namely, an essential ingredient in our energy supplies—there ought to be a condition that those who benefit from an authorisation to undertake this operation should have an obligation to undertake the necessary long-term research, so as to secure not only that we as a nation benefit from the supply of gas for as long as possible, but that we also make the very best use of it. It would seem that this is an extremely reasonable provision in the interests of the nation and could quite fairly be included in the conditions for authorisation.
I should like to support the amendment. The gas fields are inevitably of limited life and it is of the most profound interest to the country to maximise the use of the gas during the time that it is available. It is of such interest to the nation but not necessarily in the interests of private shareholders to maximise the long-term utility. They may be tempted from time to time to consider that the interests of the shareholders are best served by short-term maximisation of profit at the expense of long-term maximisation of utility to the nation.I was very interested some years ago to see work going on in the United States. I was quite astonished to see the tight controls kept over gas companies by the state authorities to ensure that gas wells were not allowed to blast at the maximum rate of production if that resulted in the reduction of the total ultimate yield from the fields. They were required to take out the gas at a reduced rate so as to maximise the yield over a long period, even though that was against the immediate interests of the shareholders. Such a situation plainly applies in the United Kingdom. Also in the United States, tremendous research effort had gone into the use of the energy. One has only to look at the developments in Louisiana and Texas in such areas as the total energy aspect of gas utilisation. Whereas we often seem to encourage the housewife and the industrial user to use as much gas as possible, in the United States there are endless efforts to conserve the energy which is there by nature to be extracted once—and then it has gone. I remember seeing even the very pressure stored in the gas as it comes out of the ground being used to drive turbines to produce electricity. I have yet to hear of that being used in the British fields. Gas has also been used widely in the United States to work small generators in local housing developments to produce electricity and central heating and hot water—the whole energy needs of a housing development. This is a much more efficient use of energy than I have seen in the United Kingdom. It would be very much in the interests of this country in terms of industrial development and efficiency if we could insist that the new private company should be required to use some of its enormous power to investigate thoroughly the scientific possibilities which are at present not being utilised properly in this country. Not only is gas of interest as a fuel, which is certainly the main use, but, again looking at the United States, there are considerable sales of gas for chemical synthesis. How much use has been made of it for chemical synthesis? Yet that is possibly of much greater economic interest for the future of the country than simply burning it. We are taking out of the national sector and putting into the private sector an enormous economic power. We should surely be justified in requiring this economic giant to use a little of its stength to boost research to get the most benefit for the next generation. I have the greatest pleasure in supporting the amendment.
I wish to support this amendment, which is very important indeed. The amendment makes reference to,
It does not make mention of North Sea gas supplies, because of course North Sea gas is going to run out. We know that it is going to run out and that it is finite. We know, because we have the estimates contained in the Brown Book, just about when it is going to run out. As the noble Lord, Lord Ezra, quite rightly remarked, not only from his own experience but also from his work on the Select Committee on overseas trade, the great trouble with this country is that we have a short-term outlook instead of long-term outlook. The reason why Japan is so successful and Britain is not so successful in their export markets is because Japan plans for 10 years and Britain plans for two. I am afraid that the same sort of thing—although not quite in terms of those figures—is likely to happen to gas supplies when the industry is privatised. The noble Lord opposite has told us many times that although there will be a virtual monopoly for the sale of gas, there will nevertheless be competition with other forms of energy; with electricity, with coal, and with oil. Under a privatised industry, market share will be vital. Profits are to be maximised. Let there be no mistake about that. There can be no reason other than the Government's need for £7,000 million or £8,000 million to hand out to the electorate before the next election. There can be no reason for privatisation other than that the private owners are going to maximise profit, and therefore they will need to maximise market share. The danger is that in order to obtain that market share, they will drive down the price of gas, so that they may sell more of it at the expense of the market share of their competitors. Is not that how it will work? Am I wrong in suggesting that? Is that not what private enterprise is all about? I always thought that it was. Perhaps I am wrong, and perhaps the Minister will tell me if I am wrong and explain why. However, in my experience that is what private enterprise is all about. When I ran a shop (I really am giving the Committee my history tonight, am I not?) I was concerned to get more trade than my competitor down the road. I was in fact doing what the newly-privatised gas corporation will do, and that was to increase my market share. The amendment would help to deal with that situation. It would, as the noble Lord, Lord Ezra, said, place an obligation upon the monopolists to look after the country and real interests of the nation. There is one final point that I want to make, and I return to my original remark. We are not only talking about North Sea gas. We have to talk about gas because it will still be needed when the North Sea supplies run out. That will require a great deal of research and development into alternative sources of gas—for example, from coal, from naphtha, or from whatever other source it may come. Those developments, that research, will cost a great deal of money, and that is what this amendment talks about. I believe it is a good amendment and that the Minister would be showing sound sense and helping the Committee if he accepted it; or if it is not correctly drafted, if he would say that he will come back with his own amendment at a later stage."such conditions as appear to the Director to be requisite to ensure the long term future of gas supplies".
Are we not taking a rather long time on some not very necessary provisions? I know that noble Lords opposite do not approve of privatisation, but if we are going into life histories perhaps I may say that I spent my working life in large private enterprises which have an investment, as British Gas has and will have, of a size which makes market share only of interest over a five-year, ten-year, or fifteen-year span, and which have kept research and development at a high level because they must.Noble Lords oppostie do not appear to understand competition. It may be that in the noble Lord's shop he was only thinking short term, but there is no possible way that Bitish Gas will only be thinking short term. It will be in long term competition with all the other long-term energy producers putting their investment in, looking 15 and 20 years ahead on new forms of power stations and the like. There is no way that the City of London would continue investment in a company such as British Gas if it gave up doing R & D effectively and on a long-term basis. I wonder what noble Lords are really up to tonight in proposing these amendments in spite of the extraordinarily conciliatory attitude of my noble friend on the Front Bench. He has met their points, in my view, fairly unnecessarily in a lot of areas already, but they are continuing to press quite unnecessary amendments only because they wish to reiterate periodically that privatisation is a bad thing in gas and the only reason the Government are doing it is in order to get money, which is not correct. Having seen, from a government point of view, the immense load on Ministers, I know there is one very good reason for privatising everything possible; that is, to bring the public sector down to a size that responsible Ministers and senior civil servants can deal with efficiently and adequately. What noble Lords opposite are saying is for a Second Reading debate. Do we really have to go on listening to it, dragged up on every blooming amendment? I am sorry.
My noble friend knows very well that what the Opposition are up to is to filibuster. But regarding natural gas, which we have only had for a short time, when I was younger we always had gas from coal. You do not need a lot of research to have gas from coal, because we always used to have it.I could not understand the noble Lord, Lord Whaddon, who spoke earlier. So far as I remember, he deplored the scarcity of natural gas that we would soon have. At the same time, he advocated running turbines by gas to make electricity. If you are so frightened of the scarcity of gas, for heaven's sake, we have all the nuclear power stations and everything to make electricity, and you do not need to waste your gas making it.
If I may explain a little to the noble Viscount, there is a limited life to the gas. At the moment we have a vast supply, but it will eventually run out. I am saying that we owe it to future generations to maximise the utility of that gas. Once it has gone, it has gone.Perhaps I may point out that in the United States they have put the private companies particularly under pressure from the state authorities. They have put enormous effort into maximising the extraction of utility from the gas. It seems to me that even under our state authority we have not done as much as we might have done. I am very concerned about what the future holds. I think that the private company can perform efficiently—I am not at this stage opposing it in principle—but it is imperative that we give it the right framework and set it off on the right foot. As to running the turbines, what I am saying is this. In the United States there has been a great deal of work on what they call total energy—getting the maximum utility out of the gas. For example, if gas is used to heat a boiler, the waste gases which come out are themselves hot enough to be used for central heating or for running refrigerators. They have made effective use of those gases. As I pointed out, when the gas emerges from the ground it comes out at tremendous pressure. To the best of my knowledge we simply use reduction valves to reduce the pressure of the gas and get it into the mains. In the United States I have seen the pressure of the gas used to drive turbines and to produce electricity, thus maximising the economic utility of the gas. One can point to a thousand ways in which the country would derive benefit from carefully studying the economics of gas utilisation. There is one further point, while we are on the subject. A vast amount of gas is used in gas stoves. I have seen many examples of modern gas stoves which look beautiful but which operate with the whole gas stove getting exceedingly hot when being used. Such stoves are cheap to make, and it is more expensive to make gas stoves which have adequate insulation, but they are much more energy efficient. We have this giant industry which is being privatised, and since we are hiving off a great slice of British economic activity we should lay down the condition that it should use some of its wealth on research for the future.
I must say I find this an extremely strange part of the proceedings. I suppose one must couple this amendment with Amendment No. 84, which presumably will be moved later by the noble Lord, Lord Stoddart of Swindon, and is on the subject of research. It seems to me that Members on the Benches opposite would like to see the oil companies of this country nationalised and thereby be able to write into a Bill something that will demand that they carry out research. It seems that the gas corporation, when it is turned into a private company, will be failing in its duty if it does not carry through a thorough research programme, which it is doing at the moment, and carry it through in such a way that it will realise that gas supplies from the North Sea will one day run out and the company will want to continue in business as a public limited company. Surely, therefore, market forces will demand, and the company will realise, that if it is to stay in business like any other good company then research and development is necessary. I do not see any reason why that should be written into the Bill.
May I say how delightful it was to hear the noble Viscount, Lord Trenchard, enter into this debate; and, indeed, the noble Viscount, Lord Massereene and Ferrard, and the noble Lord, Lord Sanderson of Bowden.However, may I say to the noble Viscount that we have not been filibustering. I do not think that he can apply that word to our debates. Certainly they have been wide debates. They have been good debates, and they have been relevant debates; but they certainly have not been filibusters. I have been keeping a record of the time in fact spent on each amendment and the amount of time each noble Lord has spoken. Bearing in mind the difficulties of this Bill, I can assure the noble Viscount that we have kept our remarks to the barest minimum. We have tried to help the Government and to be reasonable in getting the Bill through. All we want is a reasonable response from the Government as to time, and perhaps concessions, which I hope we shall continue to get throughout the Bill. I want to answer the noble Viscount, Lord Trenchard. He really has a great faith in private industry and believes that, left to itself, private industry will of course embark upon research and development and that it is in its own interests to do so. I agree that such would appear to be the case, but I must remind the noble Viscount that it is not always the case. Perhaps I may remind him of the disaster which overtook the British motor car industry because they failed to invest and continued to distribute profits to shareholders when the industry was on the brink of collapse and that in order to save it from collapse it had to be taken into public ownership.
Oh yes! All one has to do is read the Ryder report to see what happens in a private industry which does not invest.
Perhaps the noble Lord will allow me for one moment to say that my comments were on British Gas. It is a huge company which would have to be backed in the energy world, by the City of London. I am as aware as he is of its past history and of all the different arguments which can be advanced about lack of competitiveness and lack of research. My comments applied to British Gas in the energy industry. It is a huge company which would have to be financed by the City, and it would have to be long term.
I thought I heard the noble Viscount speak not only about the position of British Gas but also about his own experience in industry, which I do not think is actually in British Gas. What I said about the motor industry—which is big business by any standards and has been better business in the past—is absolutely true. The noble Lord, Lord Diamond, is only seeking through this amendment to ensure that British Gas, when it is privatised, continues to do its duty in the public interest. As the noble Lord, Lord Ezra, pointed out, because British Gas has a private monopoly, it also has obligations. We are seeking to see that it carries out those obligations.This has been an interesting debate which really livened up, and I hope that the noble Viscount, Lord Trenchard, will favour us with more of his comments later on in the night.
I very much hope that the noble Viscount, Lord Trenchard, who obviously speaks with much experience of industry in general, will forgive those like myself who, as often as we can during the debates and as the night wears on, will profess that we are not as well equipped as he is to understand not only the nature of the Bill but also the views on the irrelevance of the amendments. There was a certain petulance in the outburst of the noble Viscount, Lord Trenchard, and almost impatience. He seemed to be conveying the message "Get on with it. We know you are against the Bill. You know that we are in favour of it. Why waste our time?"The noble Viscount, who has much more experience in this place than I have, will certainly not need telling by me that one of the purposes of the Committee stage in a Bill is to persuade noble Lords such as myself who understand the political reasons why the Bill was proposed and who also subscribe to the political motives for opposition to the Bill. But I have listened as often as has the noble Viscount to the arguments during the Committee stage of this Bill, and at each sitting I have been fascinated by the background knowledge and technical skill of Members from all parts of the Committee. As the night wears on—and "wears on" may be the operative phrase—we shall see some very attractive amendments brought forward: for example, those tabled by the noble Lords, Lord Harris of High Cross and Lord Bruce-Gardyne, which I am absolutely certain will provide the Committee with an opportunity not only to listen to what those noble Lords have to say but also perhaps to hear arguments that we shall want to rebut. Then there are amendments tabled by the noble Lords, Lord Campbell of Alloway and Lord Henderson of Brompton, and those of the noble Viscount, Lord Hanworth, and the noble Baroness, Lady Masham. I am absolutely certain that they would take offence if there were any suggestion that, by seeking to amend the Bill in its present form, they were actually lending themselves to some process which was not in the best interests of the country. Then I see the name of the noble Baroness, Lady Gardner of Parkes, and many others. Tonight those of us who oppose the Bill's political thrust are trying to persuade the Government that they do not have every detail right. I have heard the noble Viscount, Lord Trenchard, speak more than once on subjects that I know he has knowledge of. As the night goes on, I look forward to hearing him explain to us when amendments are moved that they have some technical fault or are not meretricious and that we should not accept them as improvements to the Bill. Speeches will be made in the Chamber which the noble Lord will say smack of Second Reading contributions. Not all of us will have come to the debates as well prepared as the noble Viscount, Lord Trenchard, when he makes his contributions as he moves, seconds or speaks to amendments. I confess now that, as the night wears on, I may have to rely on something that smacks of a Second Reading debate to support some of my arguments. I am afraid that those are some of the consequences of a Committee stage on a Bill as massive as this one. Noble Lords have explained and defended the amendment that we are now discussing. I am learning something new not just every day but on every amendment. I had not realised how easy it is for the Government to improve the Bill. They should just listen to what is said. The noble Lord the Minister who is in charge of this amendment has a reputation for listening and for explaining why, more often than not, he cannot accept the amendment, and he gives good reasons for that decision. I can assure the noble Lord the Minister that I intend to listen to all of the reasons that he advances. Because it is a Committee stage there may be times when we shall need to come back to a point, even though he may feel that he has satisfied us. I look forward very much to hearing contributions from, among others, the noble Viscount, Lord Trenchard, and for however late the debate goes on he can be assured that I shall be here with him.
We have had an interesting debate on this amendment. In my opinion, the beginnning of the amendment seeks to place on the Secretary of State, the director and the public gas supplier an impossible task. It is not possible for them to ensure the long-term future of gas supplies whatever amount of research and development is put into it.Turning to the substance of the amendment. I cannot possibly accept the implication made by noble Lords opposite that British Gas will not engage in extensive research and development. As my noble friend Lord Trenchard said, and I share his faith in private industry, any forward-looking business knows that it must have an energetic and healthy research programme to preserve the long-term future of its markets. That is no less true of gas than of any other business because it faces strong competition from the other energy industries. The noble Lord, Lord Stoddart, asked me what private enterprise was all about. I shall answer him. Private enterprise is all about developing the North Sea, for instance, by the oil companies. That was not done by a public company; it was done by the oil companies. Consider the amount of money they have put into research. Consider the amount of money put into research by ICI, GEC or any of our leading companies. The past record of British Gas speaks for itself, with expenditure running at over £50 million a year and a long string of research successes. I shall give two examples. It has invented something called the intelligent pig, which I had never heard of before this evening. It can check wear and tear on pipelines without having to take them out of service, and it is a world beater. To take up another point that the noble Lord, Lord Stoddart, and perhaps the noble Lord. Lord Whaddon, mentioned, what about the British Gas programme of investment in synthetic natural gas from coal? That is exactly the sort of thing that it is doing.
Under public ownership!
Under public ownership, and it will wish to continue to do it under private ownership because, for its shareholders and customers, it will wish to continue in business into the foreseeable future.It is inconceivable that British Gas should cease to engage in research. I can see no justification for imposing bureaucratic controls, enforced by the director, which could in my opinion only stultify and not invigorate what is already a great success story. I urge my noble friends to reject the amendment.
I am disappointed with the noble Lord on this one. In particular he should have paid attention to his noble friend Lord Trenchard. The noble Viscount said that such things were normal practice in industry, but the noble Lord replied that it was impossible and could not be done. Can he not understand that what is at stake is regard for the short-term and long-term interests of a company? Those are not always susceptible to logic.As the noble Lord will know well, at the moment in the City investors are after short-term income and short-term capital gains. That is the mood of the market. How long the bull market will last—the business of making money out of money rather than making things—is altogether another question. But shareholders, and therefore the directors who represent them, cannot be immune to the mood of the investor. Not every investor wants to be there for life and make a long-term investment. At the moment most are after short-term gains. All that the amendment seeks is to place an obligation on the industry to do something that the noble Viscount says that it will do anyway. What harm will be done by putting the provision in? It is merely an insurance policy to make quite sure that within the monopoly in the national interest—I know that that is a term that makes the noble Lord shudder—something shall be done. The noble Viscount made an interesting intervention about the financing of British Gas. He clearly has not read his balance sheet. There are £16½ billion assets and all but £214 million is financed from inside the company. The City of London is not at present financing British Gas. Be that as it may, there is no reason at all why ordinary, reasonable people cannot agree that this is a most sensible precaution to take in the national interest. I sincerely hope that the noble Lord will think again.
I am grateful to everybody who has participated in the debate on this important amendment. I am particularly grateful because everybody is of one mind. Everybody, including the Minister, is clear that it is wise to engage in long-term research and development programmes. Everybody is clear as to the wisdom of that. The question that arises is whether it is necessary to incorporate that in a clause in the Bill. That is the only question.I do not know what experience others may have had, but my experience in government and in industry has taught me that research and development are matters that one likes to undertake, and the first thing one does is go to the Government to see whether one can get a grant. If I may recall my period as Chief Secretary, the amount of public expenditure incurred on R & D in the aircraft industry, for example, was very considerable indeed. The noble Viscount, Lord Trenchard, has experience of that area. I am waiting for him to contradict me.
I endeavoured to say that in this industry at this time—I use my Unilever background—I could not see any possible alternative for British Gas, which would have to take a long-term view, but to invest and to continue to invest heavily in research and development. I could argue with the noble Lord about all sorts of different industries and what has caused lack of research and development in different industries. We might not agree. There are a myriad of reasons in different industries. Can we stick to this one? Does the noble Lord believe it conceivable that British Gas, with the degree of long-term investment that it must have, will not invest in the future of the corporation even after gas runs out?
It is because I can, and it is because I believe it to be in the national interest that British Gas plc should have a measure of encouragement, that it is necessary for this amendment to be pursued.Of course, British Gas has regard at present to the long-term future and accordingly to long term research. No one is criticising British Gas. No one who is proposing the extinction of British Gas and its replacement by a privatised company is criticising British Gas. Everyone opposite, including all Ministers, praise continually the efficiency of British Gas. We are in the difficulty of not understanding fully why such an efficient organisation should not be allowed to continue to run its affairs with this efficiency. Our difficulty is in failing to understand fully why a large organisation that engages in long-term research should not be allowed to continue to do so. The organisation is now being totally altered in its nature so that it has to have to regard to a shorter term interest. Anyone who contradicts this view has never in his life visited the Stock Exchange. He does not know the first thing about an annual balance sheet. Every company has to produce an annual balance sheet. Mostly they are produced at six-monthly intervals; indeed many of them appear every three months. When someone tells me that one does not need to have regard to the short term, it makes me wonder where I have been living during the past 79 years. I am bound to say to the noble Viscount, Lord Trenchard, that I found his speech helpful and stimulating—very stimulating! In my experience, directors of private industries have to have regard to their share quotations and their dividends policy. Their need to raise further capital makes it essential to have regard to the short term and to show profits. We are moving to a situation where this previously perfectly successful company—successful, efficient, and research minded—will now have to have regard to the short term. Its future capital requirements will have to come from the market. The Minister knows that I am right in saying that. The Government have made it absolutely clear that no more money is coming from them. The industry has to finance its own development. As further development has to come from the market, the industry is required to have more regard than at present to the short term. We are therefore suggesting very modestly that it should have the encouragement of knowing through legislation that the nation expects it to have regard to longer term investment in research than would otherwise be the case. The Minister wanted to correct me on something?
I wondered whether the noble Lord could explain to me how the constraints which he supposes come from the City have affected the research and development programmes of companies such as Shell, Esso, BP, ICI and so on.
I am grateful to the noble Lord because, as the noble Viscount, Lord Trenchard, has done, he has put forward a picture of this private monopoly being in total competition with other industries. He is talking about ordinary commercial organisations which are in daily competition. He is trying to compare those with a private monopoly which has total sole monopolistic power. I cannot put it too strongly.If it were an ordinary competitor, with real competitors in industry engaged against it, it would be in a different situation. It would have to engage in research to survive. We know that. But that is not the situation. We are moving from the situation where there has been encouragement through Government ownership, and having to have regard for the national interest, to a situation where the company must have more regard for the short-term interest. We are therefore proposing a simple encouragement. If the noble Lord the Minister does not like the words "ensure the long term future", we shall think of others. I think that the Minister is right in drawing our attention to the fact that the wording is a little strong. I said that it was a first attempt. But he knows the spirit behind the amendment. It is a spirit which I should have thought that the whole Committee would want to support. I certainly hope that they will do so when it comes to the vote.
On Question, Whether the said Amendment (No. 68C) shall be agreed to?
Their Lordships divided: Contents, 50; Not-Contents, 95.
DIVISION NO. 6
|Airedale, L.||Howie of Troon, L.|
|Ardwick, L.||John-Mackie, L.|
|Attlee, E.||Kagan, L.|
|Blease, L.||Lloyd of Kilgerran, L.|
|Boston of Faversham, L.||Lovell-Davis, L.|
|Brooks of Tremorfa, L.||McCarthy, L.|
|Bruce of Donington, L.||McGregor of Durris, L.|
|Caradon, L.||McNair, L.|
|Cledwyn of Penrhos, L.||Nicol, B.|
|Crawshaw of Aintree, L.||Pitt of Hampstead, L.|
|David, B.||Ponsonby of Shulbrede, L.|
|Dean of Beswick, L.||Raglan, L.|
|Diamond, L.||Seear, B.|
|Donaldson of Kingsbridge, L. [Teller.]||Shepherd, L.|
|Elwyn-Jones, L.||Stoddart of Swindon, L.|
|Ezra, L.||Taylor of Blackburn, L.|
|Falkender, B.||Turner of Camden, B.|
|Falkland, V.||Vernon, L.|
|Gallacher, L.||Wallace of Coslany, L.|
|Graham of Edmonton, L.||Walston, L.|
|Hacking, L.||Wedderburn of Charlton, L.|
|Hampton, L.||Wells-Pestell, L.|
|Hanworth, V. [Teller.]||Whaddon, L.|
|Henderson of Brompton, L.||White, B.|
|Houghton of Sowerby, L.|
|Abinger, L.||Layton, L.|
|Allenby of Megiddo, V.||Long. V. [Teller.]|
|Alport, L.||Lothian, M.|
|Bauer, L.||Lucas of Chilworth, L.|
|Belhaven and Stenton, L.||McAlpine of West Green, L.|
|Belstead, L.||Macleod of Borve, B.|
|Bessborough, E.||Marshall of Leeds, L.|
|Bolton, L.||Maude of Stratford-upon-Avon, L.|
|Brabazon of Tara, L.|
|Brentford, V.||Mersey, V.|
|Brougham and Vaux, L.||Middleton, L.|
|Butterworth, L.||Monk Bretton, L.|
|Caccia, L.||Monson, L.|
|Caithness, E.||Montgomery of Alamein, V.|
|Cameron of Lochbroom, L.||Mottistone, L.|
|Campbell of Alloway, L.||Munster, E.|
|Campbell of Croy, L.||Norrie, L.|
|Cathcart, E.||Onslow, E.|
|Cork and Orrery, E.||Orkney, E.|
|Cowley, E.||Orr-Ewing, L.|
|Cox, B.||Pender, L.|
|Craigavon, V.||Plummer of St. Marylebone, L.|
|De L'Isle, V.||Rankeillour, L.|
|Derwent, L.||Redesdale, L.|
|Eden of Winton, L.||Renton, L.|
|Elliot of Harwood, B.||Sanderson of Bowden, L.|
|Elliott of Morpeth, L.||Sandford, L.|
|Elton, L.||Sandys, L.|
|Faithfull, B.||Savile, L.|
|Ferrers, E.||Sempill, Ly.|
|Gainford, L.||Shaughnessy, L.|
|Gardner of Parkes, B.||Skelmersdale, L. [Teller.]|
|Gibson-Watt, L.||Stockton, E.|
|Gisborough, L.||Strathclyde, L.|
|Glanusk, L.||Swinfen, L.|
|Glenarthur, L.||Teviot, L.|
|Gray, L.||Thomas of Swynnerton, L.|
|Gray of Contin, L.||Thorneycroft, L.|
|Gridley, L.||Torrington, V.|
|Haig, E.||Trefgarne, L.|
|Harvington, L.||Trenchard, V.|
|Hives, L.||Trumpington, B.|
|Holderness, L.||Ullswater, V.|
|Hooper, B.||Vaux of Harrowden, L.|
|Kaberry of Adel, L.||Windlesham, L.|
|Kimball, L.||Young, B.|
|Kinnaird, L.||Young of Graffham, L.|
Resolved in the negative, and amendment disagreed to accordingly.
moved Amendment No. 69:
Page 6, line 24, at end insert—
(" ( )to comply with any direction given by the Director as to the manner in which the accounts of the public gas supplier are to be prepared and published; and as to the formulation of indicators of standards of service to be published with accounts;").
The noble Lord said: Here again we are dealing with the conditions which might be contemplated in a provisional authorisation. I do not think that any of the conditions at present contemplated in the authorisation cover these points. There are similar references but they do not cover these points, and I should have thought that these are quite uncontentious. There is first the question of preparing the accounts and their publication, and the director ought to be involved in that. There are other amendments which go into the matter in much more detail which we shall discuss later.
The other point is the formulation of indicators of standards of service. We attach great importance to that. At present there are a number of useful schedules and graphs and other methods of giving an indication of the progress being made by the present British Gas Corporation. We would think it essential that the future accounts should not be limited merely to those required by the Companies Acts, and there should in addition be full information given to indicate the kind of service being provided.
We are all at one in wanting to strengthen the protection of the consumer. I think we are all at one in realising that the protection of the consumer needs to be strengthened in the new circumstances, and one way of showing that the consumer is being looked after is to have some method of comparing the standards of service year by year. I beg to move.
I hope that the noble Lord will find himself able to accept this amendment. If he is not ideologically constrained so to do, may I request that he gives some reply to a question that I raised earlier? I was brief about it, and shall be brief again unless I am interrupted by the noble Viscount, Lord Trenchard. The noble Lord will recall that I wanted some assurance as to the amount of information that would in future be given in the accounts of British Gas plc.I drew the attention of the noble Lord, Lord Brabazon—or the attention of the noble Lord, Lord Belstead, before him—to those items of statistical information which were contained in the current accounts of British Gas. I sought for some assurance that the same statistical range would be continued by British Gas plc. Perhaps the noble Lord could inform the Committee without equivocation whether it is the intention of British Gas plc to publish their accounts in precisely the same form, with precisely the same content, as the accounts put out by the corporation in the past. I think that it is necessary, particularly in the new circumstances where the company is operating under private control, for the particulars requested by the noble Lord, Lord Diamond, to be incorporated in any case. Many of them are already incorporated in the accounts of the British Gas Corporation at the moment: but further particulars are still required in the light of the privatisation Act itself. I hope that the noble Lord can get rid of this amendment by agreeing to it and so enable us to press on and make progress with the Bill.
I, too, hope that we can press on and make progress with the Bill. I hope I can also satisfy noble Lords on the main points of this amendment. Subsections (7) and (8) of Clause 7 provide wide-ranging powers to include conditions in an authorisation. Subsection (8) (a) already provides that the authorisation may require a public gas supplier to comply with any direction given by the director on a matter specified in the authorisation. This could extend to directions as to the manner in which the accounts of the public gas supplier are to be prepared. The amendment is therefore unnecessary as the powers are already in the Bill.Turning to the accounting requirements in the draft authorisation, I would point out that Condition 2 sets out clear requirements for accounting over and above the Companies Act 1985 requirements. That is as far as I can go at the moment to answer the noble Lord, Lord Bruce of Donington. It obliges British Gas to draw up and publish specified accounting statements representing a true and fair view of the gas supply business separate from any business it may undertake. It also gives a role to the director in the cost allocations between the gas supply business and the other businesses. Of course, over time the director may take the view that there should be modifications to the requirements to reflect changing circumstances. The Bill sets out in later clauses the procedures for making such modifications. In addition the director is enabled by Clauses 34 and 38 of the Bill to publish appropriate information, advice and reports. In these circumstances a power to issue directions relating to information in the company's accounts is unnecessary. The noble Lord, Lord Bruce of Donington, asked me what will be contained in future annual reports of British Gas. This is a matter for the company, but I would remind the noble Lord that the director will be able to call for any information which he believes is needed for him to exercise his functions, and he has the ability to publish the advice that he considers appropriate in the interests of consumers. Turning to the subject of the indicators of the standards of service raised in the amendment by the noble Lord, Lord Diamond, this was a matter raised by the Select Committee on Energy in another place. As we made clear in our reply to them, we do not believe that it would be appropriate to make legislative provision in respect of indicators of performance. The fundamental responsibility for maintaining standards will be for the supplier who stands to lose custom to his competitors if customers are not satisfied. Within the new regulatory arrangements the Gas Consumers Council will be able to monitor the standards of service which British Gas offers via the complaints it receives. This will provide a good measure of those areas which are of real concern to consumers. The council will be able to refer to the director any deterioration which they discover in the quality of gas supply services to tariff customers, and he will be able to propose modifications to British Gas's authorisation if he feels that is necessary. But, as I have said, it will be in British Gas's own commercial interests to maintain its standards, and the corporation has publicly acknowledged the importance of customer care. I hope I have given a sufficient answer to enable the noble Lord to withdraw his amendment.
There is one point on which I am afraid I shall have to correct the noble Lord. Does the noble Lord really think that condition No. 2 in the authorisation covers the matters that I detailed, direct from the existing accounts of the British Gas Corporation? He must think I am daft if I am going to accept that kind of explanation. He knows perfectly well that this authorisation does not cover all of the ground that is covered at the present time in the accounts of British Gas.The noble Lord declined. moreover, to give any assurance that the new accounts will do so. He was invited to give an assurance that the accounts of British Gas plc will contain the same information as do the existing accounts of the British Gas Corporation. He can weave his way round that with whatever qualifications, but he declined to give that assurance. The Committee can derive only one inference from that. It is that the accounts of British Gas plc will of course comply with the Companies Acts but will give the minimum possible information in addition.
I am grateful to the Minister for the full answer that he gave in regard to the amendment which I moved and I am grateful to all those who contributed to this discussion. Normally, when a Minister says that everything that is being asked for is to be found in the Bill, a mover of an amendment will be wise to say, "Well, I am very grateful. I withdraw the amendment. I will consider very carefully what has been said and will look into it".I do not propose to do that for the reason that I was able to follow completely, while the noble Lord the Minister was speaking, everything that he was saying. He made it all absolutely clear. He made it absolutely clear, for example. that so far as the accounts were concerned he was limiting any undertaking or any expression in the Bill to what is already under Condition 2. Condition 2, as your Lordships know, because we have already covered it tonight, refers to the need for British Gas plc to draw up accounts showing its gas business separately from its other business. That is very interesting, and relevant to the discussion we had some time ago, but it is totally irrelevant to this particular amendment. What this particular amendment asks for is that consumers should be able to see what service they are getting: not only what profits are being made in total, not merely what profits are being made on the gas business, but what service they are getting. As has been pointed out by the noble Lord, Lord Bruce of Donington, the British Gas Corporation tries to give a very full indication of the results of its activities, what we the recipients of those activities experience; the corporation tries to give the results of its own activities by the various schedules, graphs, pictures and other information which it publishes—all over and above any requirement that the company law sets upon an ordinary company. What the Minister is making absolutely clear is that we will get a statement which is very helpful in a different context but is totally irrelevant in this context, namely, a statement as to what profit the future corporation is going to make on its gas business. But we are not necessarily going to get any of the indicators which every consumer is entitled to see in order to be satisfied that we are getting reasonable service in total out of the activities of the privatised gas company. It is part of our duty to protect the consumer. One of the ways of protecting the consumer is to show the service that the consumer is getting and to compare one year with another year—is it as good? is it better than it was last year? and so on—and, by that comparison, to keep the new British Gas plc up to scratch in providing services. We are not going to get this unless we achieve it by our votes. Therefore, I am bound to say that I must test the feeling of the Committee on whether the consumer should be protected in this way.
On Question, Whether the said amendment (No. 69) shall be agreed to?
Their Lordships divided: Contents. 46; Not-Contents, 92.
DIVISION NO. 7
|Ardwick, L.||John-Mackie, L.|
|Blease, L.||Lovell-Davis, L.|
|Boston of Faversham, L.||McCarthy, L.|
|Brooks of Tremorfa, L.||McIntosh of Haringey, L.|
|Bruce of Donington, L.||McNair, L.|
|Caradon, L.||Molloy, L.|
|Cledwyn of Penrhos, L.||Monson, L.|
|Crawshaw of Aintree, L.||Morton of Shuna, L.|
|David, B.||Nicol, B.|
|Dean of Beswick, L.||Pitt of Hampstead, L|
|Diamond L.||Raglan, L.|
|Donaldson of Kingsbridge, L.||Seear, B.|
|Elwyn-Jones, L.||Shepherd, L.|
|Ennals, L.||Stedman, B.|
|Ezra, L.||Stoddart of Swindon, L.|
|Falkender, B.||Taylor of Blackburn, L.|
|Falkland, V.||Turner of Camden, B.|
|Gallacher, I.||Vernon, L.|
|Graham of Edmonton, L. [Teller].||Wallace of Coslany, L.|
|Wedderburn of Charlton, L.|
|Hacking, L.||Wells-Pestell, L.|
|Hanworth, V.[Teller]||Whaddon, L.|
|Howie of Troon, L.||White, B.|
|Irving of Dartford, L.|
|Abinger, L.||Harvington, L.|
|Allenby of Megiddo, V.||Henderson of Brompton, L.|
|Alport, L.||Hives, L.|
|Bauer, L.||Holderness, L.|
|Belhaven and Stenton, L.||Hooper, B.|
|Belstead, L.||Kaberry of Adel, L.|
|Bessborough, E.||Kinnaird, L.|
|Bolton, L.||Kitchener, E.|
|Brabazon of Tara, L.||Lawrence, L.|
|Brentford, V.||Layton, L.|
|Brougham and Vaux, L.||Long, V. [Teller]|
|Butterworth, L.||Lothian, M.|
|Caithness, E.||Lucas of Chilworth, L.|
|Cameron of Lochbroom, L.||McAlpine of West Green, L.|
|Campbell of Alloway, L.||Macleod of Borve, B.|
|Campbell of Cray, L.||Marshall of Leeds, L.|
|Cathcart, E.||Maude of Stratford-upon-Avon, L.|
|Cork and Orrery, E.|
|Cowley, E.||Mersey, V.|
|Cox, B.||Middleton, L.|
|Craigavon, V.||Monk Bretton, L.|
|Davidson, V.||Montgomery of Alamein, V.|
|Denham, L. [Teller.]||Mottistone, L.|
|Eden of Winton, L.||Munster, E.|
|Elliot of Harwood, B.||Norrie, L.|
|Elliot of Morpeth, L.||Onslow, E.|
|Elton, L.||Orkney, E.|
|Faithfull, B.||Orr-Ewing, L.|
|Ferrers, E.||Pender, L.|
|Gainford, L.||Rankeillour, L.|
|Gardner of Parkes, B.||Redesdale, L.|
|Gibson-Watt, L.||Renton, L.|
|Gisborough, L.||Renwick, L.|
|Glanusk, L.||Sanderson of Bowden, L.|
|Glenarthur, L.||Sandford, L.|
|Gray, L.||Sandys, L.|
|Gray of Contin, L.||Savile, L.|
|Gridley, L.||Semphill, Ly.|
|Skelmersdale, L.||Trefgarne, L.|
|Stockton, E.||Trenchard, V.|
|Strathclyde, L.||Trumpington, B.|
|Swansea, L.||Ullswater, V.|
|Swinfen, L.||Vaux of Harrowden, L.|
|Teviot, L.||Windlesham, L.|
|Thomas of Swynnerton, L.||Young, B.|
|Thorneycroft, L.||Young of Graffham, L.|
Resolved in the negative, and amendment disagreed to accordingly.
had given notice of his intention to move Amendment No. 70:
Page 7, line 7, leave out subsection (13).
The noble Lord said: I am in some difficulty about this particular amendment. The fact is that subsection (13) is completely incomprehensible and I find it difficult to say anything about it. What I should like to ask is that we have an explanation sent to us concerning the Bill and therefore not waste the time of the Committee tonight. I will not therefore move the amendment.
[ Amendment No. 70 not moved.]
On Question, Whether Clause 7 shall stand part of the Bill?
I do not know whether other noble Lords may wish to contribute to this discussion. I want to say one or two words about this clause because it is a most important and very large clause to which we are now saying goodbye. I think it right to say that we on these Benches are grateful to the Government for the concessions made on some points which we put forward. There are, however, one or two questions arising and I thought it would save the time of the Committee if, instead of putting down an amendment, I asked a question at this stage.I think I can limit myself to two questions. One relates to costs. We have of course discussed the costs in the earlier part of this clause and this is broadly a cost-plus arrangement. We know that there is an efficiency factor, but the efficiency factor has not been described. It has not been measured. It is a secret at the moment, and therefore this is, broadly speaking, at this stage still a cost-plus arrangement. The first question I want to ask the Government is: what will happen to the variety of overhead expenses which are best expressed in terms of top level salaries, board salaries, chairman's salary and so on? Is it the case that they will remain at the present figure? Is it the case that the board will be free to decide what salaries are appropriate in the new circumstances for the chairman and the executive directors? These are all expenses which are part of the overhead expenditure which in effect merely gets passed on to the consumer. That is the first question that I want to ask. The second question is a rather unusual one, which arises out of the many references which have been made to making greater and more efficient use of the power of gas to generate electricity. It has been referred to on more than one occasion. It is the case, I believe, that under the new structure British Gas plc will be free to do more or less anything it wants. Indeed, that was part of our case with regard to privacy of information and using in a responsible fashion information which has been obtained privately. So what I am asking the Government, if they are able to answer now, is: in what circumstances will the new gas corporation be prevented from generating electricity? It has already been made clear that it has surplus power which might be conveniently and economically used for that very purpose. Is it the case that under the electricity undertakings there is a monopoly of electricity generation which cannot be broken into or breached by any other organisation? There must be limits to that, because so many people have small or even fairly large private generators. Is it the case that there may be a monopoly on the distribution of electricity? One part of the question of competition—and it interests us very much in relation to the future programme of the Government in terms of nationalisation—is how far they will allow this company, by its articles, to trade freely in every way it wants, including the generation of electricity. Those are the two questions to which I shall limit myself at the moment. If I have given the Government an opportunity to refresh their memory and to find out the answers, I shall gladly give way to them now.
We would not wish to prolong the proceedings on this clause for very much longer, and I shall not add anything to what the noble Lord, Lord Diamond, has said. I thought, however, that when my noble friend Lord Stoddart withdrew Amendment No. 70 he was seeking an explanation from the Government as to the meaning of subsection (13). It is quite proper that any Member of the Committee, whether from the Opposition or from any other Bench, asks the Government for the meaning of a clause or a subsection; and the reason the amendment was put down in the first place was to afford the Government an opportunity of explaining what subsection (13) meant. I now raise it formally on the Question whether the clause stand part, so that before we part with the clause we can have an explanation of just what subsection (13) means. That is all.
I would gladly have given the noble Lord, Lord Stoddart of Swindon, an explanation of the meaning of subsection (13), but I did not have an opportunity because he did not move the amendment. Therefore I could not. But if the noble Lord, Lord Bruce of Donington, would like me to do so now, my noble friend Lord Belstead will deal in a moment or two with the points made by the noble Lord, Lord Diamond. I shall be as brief as I can.It is important to understand the sequence of events which will take place to enable British Gas to supply gas legally once the provisions of Part I of the Bill come into operation. On the appointed day, the corporation's supply privilege under the 1972 Act will come to an end. This is achieved by Clause 3 of the Bill. British Gas will therefore need to have an authorisation which takes effect from the appointed day in order to be able to run its system legally. Clause 5 makes it a criminal offence to supply gas through pipes to premises without an authorisation. The effect of the amendment, which was not moved—to remove subsection (13)—would I fear have been that British Gas would not have been allowed to supply gas from that date and all its customers would therefore have been cut off.
Then I am glad that I did not move it.
I must apologise to the noble Lord, Lord Diamond, for not being in my place when he began his remarks on the Question whether the clause stand part. As I understand it, the noble Lord put three points, only one of which I missed. The one I missed was in regard to how the efficiency factor will work in the price formula. This is a matter to which we shall be returning. We had a chance to debate it on the last occasion the Committee met, but there are amendments down again. It is a factor to be deducted from the retail price index in order to fix the non-gas costs. The way in which it will be fixed is in order to give a spur to efficiency in the company. Perhaps I may ask the noble Lord to wait until we come to the formula, as otherwise we shall be in danger of debating this not once but several times.The noble Lord's two other questions were about salaries—indeed, top level salaries. Once the company is in the private sector this will be a matter for the directors, subject to the approval of shareholders at general meetings. The other point which I heard the noble Lord putting concerned the freedom of action of British Gas in generating electricity. The answer is that British Gas will not be prevented from generating electricity so long as it obtains the necessary planning consents for any plant, generating or distribution that is needed.
I am grateful to the noble Lord. In fact, I was slightly misunderstood. I was not asking any question about the efficiency factor. I was merely saying that we have the efficiency factor, which is some deterrent to the increase in overhead charges such as top level salaries. but not a sufficient deterrent. The effect is that these increases which the noble Lord has indicated may well happen will simply be passed on to the consumer, as I feared was the case.We are grateful for the information. We shall return to this at Report stage to deal with any lack of control that there appears to be in the Bill in its present form.
Clause 7 agreed to.
Clause 8 [ Authorisation of other persons]:
moved Amendment No. 71:
Page 7, line 15, after ("authorise") insert ("by order").
The noble Lord said: With permission, I shall take Amendments Nos. 71 and 72 together. The reason for these amendments must be self-evident from their text. It is to make quite sure that the authorisations issued to persons other than the ones dealt with in the previous subsection are in fact laid before Parliament and approved by both Houses. We consider that to be necessary because, as the Committee will appreciate, we have had an opportunity in all the matters covered under Clause 7 to ventilate those issues at some necessary length, including the proposed authorisation itself. We think in those particular circumstances that it is reasonable that the amendment should be made, that the authorisation should be made by order, and that a draft of the order should be laid before and approved by both Houses of Parliament. I beg to move.
I feel a certain sense of déjà vu in responding to the debate on these amendments, and I am grateful to the noble Lord, Lord Bruce of Donington, for not going over the ground that he covered in very similar amendments to Clause 7. The proposal to require a draft authorisation under Clause 8 to be subject to affirmative resolution by both Houses of Parliament is even more unacceptable than the similar proposal for Clause 7. I suggest that authorisations granted under Clause 8 will be for small companies, the overwhelming majority of which will be supplying one customer or a small group of customers. A supplier authorised under this clause will not have the same duties or privileges as those placed on a public gas supplier by the Bill. For example, they will have no statutory obligation to supply, they will have no exemption from normal planning legislation, and they will not be able to use the compulsory puchase powers provided in the Bill. Their relationship with those customers will be a normal contractual one.The arrangements for those authorisations will continue to be largely the same as exist at present under Section 29 of the Gas Act 1972 as amended by the Oil and Gas (Enterprise) Act 1982. At present, the only matter that is considered before granting a consent for such a supply is safety. We propose that that should continue unchanged. Against that background and with that explanation, I hope that the noble Lord will agree that any involvement of Parliament would be inappropriate, and that he will consider withdrawing his amendment.
The noble Lord said that there were no other conditions. If he will refer to Clause 8 (5) he will find, for example, the wording.
and other stipulations. There are other stipulations made there. I still think that the circumstances are sufficiently unique in themselves for Parliament to have an interest in them. After all, Parliament has an interest in them now, and there is no reason why that should not continue."the grantor is of the opinion that the main is not, and is not intended to be, a relevant main",
I have nothing that I can usefully add to what I have said already to the noble Lord. The effect of his amendments would be to require an authorisation under Clause 8 to be granted by order. That order would be required to be approved by both Houses of Parliament. The amendments mirror very much Amendments Nos. 62 and 63, which sought to impose the same requirement on authorisations granted under Clause 7.As I explained when I made my first contribution. I really do not see that such a provision is desirable, any more than I thought it was desirable in respect of the previous clause. The noble Lord has given the Committee no new arguments. He has merely gone over the same ground. I am thankful to him for not going over it in quite so much detail, but he has made the same points, and so I must give him the same answer.
I am sorry about that. I take the noble Lord's point, and I have no wish to go over the same ground again. I remain, of course, profoundly dissatisfied with the situation obtaining under Clause 7. We shall have to give this matter our further attention, because it is a matter of such great importance; but I have no desire to detain the Committee in the meantime, and I ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[ Amendment No. 72 not moved.]
moved Amendment No. 73:
Page 7, line 34, at end insert—
("( ) such conditions as appear to the grantor to be requisite or expendient having regard to the final use of the gas supplied, and to conditions on the supply of such gas laid down by the Health and Safety Executive")
The noble Lord said: I beg leave to move Amendment No. 73, standing in the name of my noble friend Lord Williams of Elvel and that of myself. This amendment ties in with Amendment No. 67, in that again we are trying to ensure that third party suppliers have the same considerations of energy efficiency as would the public gas supplier. It would clearly be nonsensical for the public gas supplier to refuse to sell gas to power stations for bulk steam raising on the grounds of energy efficiency if the would-be purchaser could go to another supplier and obtain such supplies. That would clearly be absurd.
I do not want again to go through all the arguments that we went through on Amendment No. 67, but perhaps I could reiterate that it would be quite energy inefficient to allow gas to be used in power stations where its overall thermal efficiency would be converted from about 90 per cent. if burned directly, to about 35 per cent. if burned to generate electricity in power stations. That is, of course, if it is not used in connection with combined heat and power. If it is used in connection with combined heat and power, that is a different matter, but unfortunately our enthusiasm for CHP in this country does not seem to be very good. I regret that very much.
There is one further point which I think I should make in relation to this matter. At the present time the Government, of course, have some control over the Central Electricity Generating Board. They could, I suppose, prevent them directly from buying gas to burn in power stations. But although we have the denials of this, there are nasty rumours going round that the next big industry to be privatised is the electricity industry. Of course, if those rumours were to turn out to be true, perhaps not in this Session of Parliament but in the next, then the Government would lose all control over the electricity supply industry in the matter of burning gas simply for power generation. That would be entirely inefficient.
The second part of the amendment ensures that whoever supplies gas has to meet with the objective approval of the Health and Safety Executive. Not to do so would be tantamount to the HSE being in the position of enforcing conditions after a major incident rather than acting in a much more constructive role by preventing an incident. That is clearly absurd, and we want the HSE to have the power to prevent accidents rather than have an inquest on the accidents after they have occurred. I beg to move.
The noble Lord is yet again seeking to stamp his, what I might call, doctrinal view on to the Bill by making statutory provision for gas to be directed to premium use. Such a proposal which we have consistently argued against in another place runs completely counter to the Government's policy of giving free rein to market forces.During its passage the Opposition viewed Clause 12 of the Oil and Gas Enterprise Bill, on which Clause 8 is closely modelled, as a vehicle for discouraging the use of gas for steam generation. The then Secretary of State made clear that as gas commanded a higher price in premium markets, suppliers looking for markets for gas should be able to choose the premium markets without the imposition of arbitrary rules and restrictions. That is still the case. Noble Lords also seek to introduce the possibility of conditions reflecting the requirements of the Health and Safety Executive. This is quite unnecessary. The formal requirements of gas and health and safety legislation will automatically attach to such suppliers. Moreover, Clause 8(4)(a) already permits the attachment of conditions requisite or expedient in the light of the duties at Clause 4(2)(c).
This is perfectly adequate to satisfy the needs of safety. For those reasons I cannot accept the amendment, and I suggest that the noble Lord might consider withdrawing it."to protect the public from dangers arising from the … user of gas supplied through pipes".
I would have considered withdrawing the amendment if the noble Lord had not mixed up thermal efficiency with doctrine. Overall thermal efficiency has nothing to do with doctrine. I am concerned that gas supplies should not be wasted. But gas supplies will be wasted—make no mistake about that—if we burn gas, which is a premium fuel, in power station boilers to raise steam which will then be converted by a generator into electrical power.The amount of electrical power will be 35 per cent. of the overall thermal efficiency and 65 per cent. will either go up the chimney of the power station or will be dissipated in the cooling water. That is what we are talking about. That is not doctrine. That is simple common sense, I should have thought. To allow a premium fuel to be dissipated and sent into the atmosphere to the extent of 65 per cent. of its thermal value is absurdity. We are seeking to conserve this prime fuel which is in only finite supply. Therefore, it seems to me that there is only one way in which we can decide this question, as there is clearly a great difference of view between the Minister and myself. He accuses me of being doctrinal when I am talking about energy efficiency matters. Therefore, I think we must test the view of the Committee. Perhaps the noble Lord, Lord Ezra, wishes to intervene before I finally make a decision?
I feel that the noble Lord, Lord Stoddart, has an important point. It has been the policy of successive governments in this country, as I well know from my past experience, to minimise the use of gas in power station generation. The proper fuels to be used for that purpose are coal, oil in certain circumstances, and nuclear energy. To use gas for that purpose is totally wrong, yet here we have legislation which will enable that to be done.As this measure is to transfer the gas industry from public to private ownership it does not seem incompatible that at the same time as that is done—just as they do in the United States—certain conditions should attach to that transformation. To make the best use of the country's energy resources seems to be a perfectly laudable and desirable aim in the public interest. Therefore I should have thought that the noble Lord, Lord Stoddart, had a very good point. For the life of me I cannot see what this has to do with political doctrine. As he rightly said, it has to do with energy efficiency. Let us make the best use of the energy resources that this country possesses. We are not talking about introducing new policies but about continuing with well-tried existing policies.
I think that the noble Lord will agree that this Government have always made it absolutely clear that they do not support administrative controls on the use of gas. It is far better to leave such matters to be determined by market forces. I explained that position earlier and I simply cannot accept an amendment which seeks to impose such controls. There is no case for imposing such controls and I am afraid that I cannot accept the amendment.I make no apology for suggesting that the noble Lord was being doctrinal, because though the noble Lord, Lord Ezra, may not be being doctrinal he is following a doctrinal point of view. It has been a point of view put forward by the Official Opposition when discussing energy policy for as long as I can remember. The Opposition always wants to determine the ultimate use of fuels. We do not. We believe in leaving it to the market to determine the use of fuels. The noble Lord, Lord Bruce, may laugh, but it is a fact. The noble Lord has not been in the other place for many years, so he has not perhaps heard the debates that have taken place.
I am laughing at the doctrine.
I am not surprised that the noble Lord is laughing at the doctrine. That is his choice of a joke and not mine. I am afraid that I cannot accept the noble Lord's amendment.
I really cannot understand the noble Lord. He mixes up doctrine with common sense. I am the least doctrinaire of persons. The reason the Labour Party has taken the line that is has is that it has received sound advice from experts and people working in the energy industries. It is not because the Labour Party thinks that to use energy efficiently is good socialism; it is because it is sound common sense.
Which is socialism.
That may be, but we will not go into that subject at the moment. We are trying to convince the noble Lord, but he will not be convinced and I rather fear that it is he who is being doctrinal about market forces. It is the Government who are being doctrinal in believing that our energy problems can be solved by handing the control of all energy sources and future energy policy over to private enterprise and market forces. That is doctrine. Energy efficiency is common sense.Indeed, at the present time his own department is running a programme about energy efficiency which is called "Monergy"—and I support it. We are talking about the same thing. We are talking about using gas at 90 per cent. of its thermal potential instead of at 35 per cent. That is energy efficiency. I should have thought that the Energy Efficiency Office would be cheering this amendment and urging it upon the Minister. Quite clearly, whether it is or not. the Minister will not be moved by arguments of sound common sense; and therefore in those circumstances there is only one course to take, which is to test the view of the Committee.
On Question, Whether the said amendment (No. 73) shall be agreed to?
Contents, 61; Non-Contents, 92.
DIVISION NO. 8
|Airedale, L.||Hatch of Lusby, L.|
|Ardwick, L.||Irving of Dartford, L.|
|Birk, B.||John-Mackie, L.|
|Blease, L.||Lovell-Davis, L.|
|Boston of Faversham, L.||McCarthy, L.|
|Brooks of Tremorfa, L.||McIntosh of Haringey, L.|
|Bruce of Donington, L.||McNair, L.|
|Carmichael of Kelvingrove, L.||Mayhew, L.|
|Cledwyn of Penrhos, L.||Meston, L.|
|Crawshaw of Aintree, L.||Molloy, L.|
|David, B.||Morton of Shuna, L.|
|Dean of Beswick, L.||Nicol, B.|
|Diamond, L.||Pitt of Hampstead, L.|
|Donaldson of Kingsbridge, L.||Ponsonby of Shulbrede, L. [Teller]|
|Elwyn-Jones, L.||Prys-Davis, L.|
|Ennals, L.||Raglan, L.|
|Ewart-Biggs, B.||Ritchie of Dundee, L.|
|Ezra, L.||Robson of Kiddington, B.|
|Falkender, B.||Rochester, L.|
|Falkland, V.||Seear, B.|
|Foot, L.||Shepherd, L.|
|Gallacher, L.||Stedman, B.|
|Graham of Edmonton, L. [Teller]||Stoddart of Swindon, L.|
|Taylor of Blackburn, L.|
|Grey, E.||Tordoff, L.|
|Hampton, L.||Turner of Camden, B.|
|Hanworth, V.||Vernon, L.|
|Wallace of Coslany, L.||White, B.|
|Wedderburn of Charlton, L.||Wigoder, L.|
|Wells-Pestell, L.||Winstanley, L.|
|Abinger, L.||Kitchener, E.|
|Alexander of Tunis, E.||Long, V. [Teller]|
|Alport, L.||Lucas of Chilworth, L.|
|Bauer, L.||McAlpine of West Green, L.|
|Belhaven and Stenton, L.||Macleod of Borve, B.|
|Belstead, L.||Marshall of Leeds, L.|
|Bessborough, E.||Maude of Stratford-upon-Avon, L.|
|Brabazon of Tara, L.||Mersey, V.|
|Brentford, V.||Middleton, L.|
|Brougham and Vaux, L.||Monk Bretton, L.|
|Bruce Gardyne, L.||Monson, L.|
|Butterworth, L.||Montgomery of Alamein, V.|
|Caithness, E.||Mottistone, L.|
|Cameron of Lochbroom, L.||Munster, E.|
|Campbell of Alloway, L.||Norrie, L.|
|Campbell of Croy, L.||Onslow, E.|
|Cathcart, E.||Orkney, E.|
|Coleraine, L.||Orr-Ewing, L.|
|Cork and Orrery, E.||Rankeillour, L.|
|Cowley, E.||Redesdale, L.|
|Cox, B.||Renton, L.|
|Davidson, V.||Renwick, L.|
|Denham, L. [Teller]||Sanderson of Bowden, L.|
|Eden of Winton, L.||Sandford, L.|
|Elliot of Harwood, B.||Sandys, L.|
|Elliott of Morpeth, L.||Savile, L.|
|Elton, L.||Sempill, Ly.|
|Faithfull, B.||Skelmersdale, L.|
|Ferrers, E.||Stockton, E.|
|Fortescue, E.||Strathclyde, 1.|
|Gainford, L.||Swansea, L.|
|Gardner of Parkes, B.||Swinfen, L.|
|Gibson-Watt, L.||Teviot, L.|
|Gisborough, L.||Thomas of Swynnerton, L.|
|Glanusk, L.||Thorneycroft, L.|
|Glenarthur, L.||Torrington, V.|
|Gray, L.||Trefgarne, L.|
|Gray of Contin, L.||Trenchard, V.|
|Gridley, L.||Trumpington, B.|
|Harvington, L.||Ullswater, V.|
|Hertford, M.||Vaux of Harrowden, L.|
|Hives, L.||Westbury, L.|
|Holderness, L.||Windlesham, L.|
|Hooper, B.||Young, B.|
|Kaberry of Adel, L.||Young of Graffham, L.|
Resolved in the negative, and amendment disagreed to accordingly.
moved Amendment No. 74:
Page 7, line 40, at end insert—
(" ( ) conditions requiring the supplier to publish, from time to time, a schedule of its maximum and minimum prices and a statement of its general policy on negotiating contracts.")
The noble Lord said: I beg to move Amendment No. 74, which seeks, at page 7, line 40, to add a further condition which may be included within the authorisation granted under the clause. The amendment is to place the third party gas supplier, if I may call him that, in a similar, although not identical, position to the public gas supplier. As the Committee will recall, the proposed conditions—there is nothing finite or statutory about them—contain a price formula which we shall be discussing slightly later this morning; but, nevertheless, there is an indication of price policy within them. We think it right that, just as the public gas supplier makes public its price policy, so too the third party gas supplier should not be put on precisely the same footing but should be required to disclose what its prices and its price policy are.
This is a simple explanation of the purposes of the clause, which I trust the Government will find sufficiently brief. So unexpectedly brief is it that we hope sincerely that the Government will have the wisdom to accept it and expedite business. I beg to move.
The noble Lord, Lord Bruce of Donington, becomes even more persuasive when he is brief, but in tabling Amendment No. 74 he and his noble friend may have overlooked the fact that the conditions which need to be attached to Clause 8 authorisations are extremely limited in character. This is because in the main supplies under Clause 8 authorisations will be on a one-to-one basis with the terms of supply freely negotiated between the two parties. Thus it would be quite inappropriate to direct that prices must be published.As we have already made clear, there is very real competition in the contract sector of the market, with fuel oil, gas oil, electricity and coal. Where suppliers of the size of British Gas are concerned, it is important that there should be greater transparency in contract prices within the framework of appropriate controls to prevent anti-competitive practices. Hence British Gas will be required to publish maximum schedule prices. However, a requirement to publish minimum prices would undermine BGC's commercial negotiating position, or, indeed, that of any other supplier, in relation to its competitors in energy markets. There is no requirement for oil companies, for example, to publish their minimum prices, and placing such an obligation on gas suppliers would really be very unfair. As to negotiating policy, while Condition 5 of British Gas's authorisation will require publication in relation to the contract market, the same considerations as those in relation to prices apply as far as Clause 8 gas suppliers are concerned—that is, supplies will be freely negotiated on a one-to-one basis without the need for the kind of regulatory oversight that is necessary for a public gas supplier. In the unlikely event that a Clause 8 supplier were to abuse its market position, the normal remedies would be available under existing competition law, the Competition Act 1980 or the Fair Trading Act 1973. In view of that fairly full explanation, perhaps the noble Lord will withdraw his amendment.
I am grateful to the noble Lord. I should be glad if he would explain to me exactly how the Fair Trading Act will apply to these particular circumstances. Doubtless somewhere among his papers he has been carefully briefed as to the circumstances in which the two Acts he mentioned are of help to us on this issue. Perhaps he will explain a little further.
No, I am afraid that I cannot explain any further because that is the end of my briefing. But I shall certainly write to the noble Lord with a further explanation.
This is not good enough. One understands that owing to the particular composition of your Lordships' House the Government are presented with difficulties from time to time in not having Ministers who are directly from the department from which the Bill originates. I am pleased that we have the benefit of the presence of the noble Lord, Lord Belstead, and the noble Lord himself, but the absence of Ministers directly from the department from which the Bill originates does have its disadvantages. And where we do have a Minister directly from the originating department—this is no fault on the part of the noble Lord or of any of the noble Lords on the Government Benches here today —it is unfortunate that there cannot be any flexibility. They are scared stiff of going outside their briefs, and that is the disadvantage that we have. If we had the benefit of the presence of the Under-Secretary of State for the Department of Trade and Industry—who, after all, is somewhat concerned in trading matters—perhaps he could bring a degree of flexibility.The noble Lord is really telling us that no matter what arguments and no matter what reasons for amendments are brought forward from this side of the Committee, he cannot go outside his brief other than to make the elementary and rudimentary denunciation of everything we say as doctrinaire. That is a cheap way of avoiding an argument. It is really not good enough for the noble Lord to say that he has nothing further in his brief. The noble Lord may be able to satisfy himself. I am sure that he will be able to satisfy noble Lords behind him who will go through the Lobby anyway, as will a number of noble Lords outside who will not have heard the noble Lord's remark. I do not believe, however, that it adds to the dignity of the Chamber in considering a complicated and technical Bill that requires complete understanding of its provisions by the Ministers introducing it.
I am sorry that I made a facetious remark that was obviously wasted on the noble Lord. If not able to give him a detailed answer, I took the most courteous action that I could think of. This was my suggestion that I would write to the noble Lord and perhaps elaborate a little more. I did not expect the kind of abuse that the noble Lord has thrown across the Floor at me. I shall return such abuse with my usual courtesy, and I reiterate that I shall write to the noble Lord.
The noble Lord should not misunderstand me. I did not intend to be personally offensive to the noble Lord. I regard the noble Lord as a most agreeable Minister. Occasionally, however, one has to answer argument with argument. Although no one likes to be defeated in argument, it falls sometimes to the lot of people to have that inflicted upon them. The noble Lord should not resent it. I bear nothing but the highest degree of amiability towards him. I agree willingly that he is the most courteous of Ministers.
I am grateful to the noble Lord—and undefeated!
In the light of what the noble Lord has said and the fact that we are not getting much further, I ask leave to withdiaw the amendment. We shall return to it at a later stage of the Bill.
Amendment, by leave, withdrawn.
moved Amendment No. 75:
Page 7, line 40, at end insert—
(" ( ) The grantor shall in making such an authorisation have regard to—
(a) the national interest; (b) the ability of such persons or persons of any class to finance the supply of gas under this section for the duration of the authorisation; and (c) the ability of such persons or persons of any class to provide for a continuous supply of gas far the duration of the authorisation.").
The noble Lord said: The principles behind the amendment have already been discussed in connection with the public supplier of gas; that is to say, that the grantor of an authorisation shall have regard to the national interest, to.
"the ability of such persons or persons of any class to finance the supply of gas under this section for the duration of the authorisation"
"the ability of such persons or persons of any class to provide for a continuous supply of gas for the duration of the authorisation".
We do not live in an ideal world. We do not live in a world that is altogether governed by the ideology, if I may use the term inoffensively, of the party opposite. We live in a real world. There would seem to be no reason why a third party supplier of gas should not be required to have regard to the national interest. There is no reason why it should not be required to produce the evidence that it can finance the supply.
The noble Lord may have led a sheltered life. I can perhaps pull the veil aside as to what sometimes happens in reality. It is possible within the futures market now to deal in gas futures without anyone having any gas at all to deal in but merely gambling on the ability to acquire it at a higher or lower price according to whether it is a put or a call at a later stage. You do not need to have the actual gas in your possession to contract to supply it. The state of the commodity market, particularly the commodity futures market, occasionally gets a little precarious. I am quite sure that noble Lords who have experience of the City will agree with that. It is not always the most stable of dealing operations to operate in that way.
In helping the Government on their way with this operation, we are seeking to make quite sure that they are dealing with reality; that the people who are invited to become third-party suppliers of gas shall be required to be able to finance the operation. They should not be the kind of individual or company that goes out of operation after a comparatively short time, because this can he injurious to people who enter into contractual relations with them. We are dealing with a vital energy supply to which easy alternatives cannot often be found within a very short period of time. One is therefore trying to protect industry.
Once again this may sound like ideology to the noble Lord opposite, but these are matters of ordinary everyday common sense which operate in the real world which I invite the noble Lord to join some time—yea, even to penetrate. I am quite sure that when he does so he will find himself drawn by the sheer process of logic—for which I am sure he must be renowned in one sphere or another—to the logic of the amendment which has been put forward. Because I am so sure that I can convince the noble Lord on this occasion, I shall not argue it further. I sincerely hope that the noble Lord will see fit to accept it. I beg to move.
The amendment which the noble Lord, Lord Bruce of Donington, has moved concerns the considerations which the Secretary of State and the director should have regard to in granting authorisations under Clause 8 to ordinary suppliers, that is, those suppliers who do not wish to become public gas suppliers with the special rights and duties which they would obtain in the context of Clause 7.Although Clause 8 itself lays down the procedures for authorisation of ordinary suppliers, I must remind noble Lords that the duties, set out in Clause 4, which guide the Secretary of State and the director in all their functions under the Bill, apply equally to the granting of authorisations under Clause 8 as to those under Clause 7. It is therefore already the case that the primary duties of the Secretary of State and the director at Clause 4(1)(b) require them to do what is suggested at paragraph (b) of the amendment: to secure that persons authorised under Part I—both public gas suppliers and other suppliers—
This duty balances with that at Clause 4(1)(a) to secure all reasonble demands for gas, but does mean that efficient operators must be able to earn a return on the capital employed on an ongoing basis. The words at paragraph (b) therefore merely duplicate what is already in the Bill. Turning now to paragraph (c) of the amendment, the purpose of Clause 8 is to provide for the authorisation of suppliers where they can satisfy the director in the light of his primary duties at Clause 4(1) that they can satisfy a particular demand. Moreover, under Clause 4(2)(a) the director has to exercise his functions in granting authorisations in the manner best calculated to protect the interests of consumers in respect of the continuity of supply. Clearly, however, the director would be failing in his duties if he did not ascertain the quantity of gas available to a supplier and the period of availability, since under Clause 8(3) he has power to specify a time limit for an authorisation. But the contractual details of supply will be primarily a matter for a contract between supplier and customer and it is best to leave such questions for negotiation between the two of them. Turning lastly to paragraph (a) of the amendment, which seeks to bring in a mention of the national interest as a guiding principle for the director and the Secretary of State, I would say to the noble Lord that the Government's aim in setting out the guidelines for actions under the Bill has been to define more closely the considerations which should be taken into account in order best to see where the national interest lies. It would not therefore be right simply to refer to the national interest and enable the Secretary of State or the director (who will of course be an appointed official and not a member of the Government who has to defend his actions to Parliament in the normal way) in effect to disregard what has been set out in Clause 4 in the light of his own personal judgment of where the national interest lies. I therefore believe that the noble Lord's concerns on this score are already satisfied to the extent appropriate by the provisions of Clauses 4 and 8 and it would be wrong to change the Bill in the way proposed. I hope that with that explanation the noble Lord will be happy to withdraw his amendment."are able to finance the provision of gas supply services".
On a matter of elucidation, where in Clause 8 does it refer to Clause 4 in toto? I see a reference to Clause 4(2)(c), but where is there reference to the clause as a whole?
It does not have to do so. Clause 4 covers the whole of those sections.
I have listened carefully to the noble Lord. I am bound to say that he has, to some extent, allayed the anxieties that lie behind the clause. I shall put on one side what the noble Lord said about the national interest, which is a matter to which I shall return at a later stage, possibly the Report stage, because we on this side of the Committee think that the national interest is an all-pervasive condition that must be considered by us. As to the balance. the noble Lord has satisfied me. Clause 4(1)(a) refers to "this Part", which of course means "this Part of the Act", and, therefore, it covers the point raised by the noble Lord, Lord Ezra.Moreover, the other provisions of subsection (2) fairly cover, although not in quite the same way as I would wish them to do so, the points which I have raised in paragraphs (b) and (c) of the amendment. We are not doctrinaire on this side of the Committee. The noble Lord has spoken to and interpreted his clauses quite reasonably. We are happy to accept what he has said, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
moved Amendment No. 76:
Page 8, line 10, leave out ("As soon as practicable after") and insert ("Before")
The noble Lord said: I beg to move Amendment No. 76 standing in my name and that of my noble friend Lord Williams of Elvel. Perhaps it will be for the convenience of the Committee if, together with this amendment, we take Amendments Nos. 77, 78 and 79. I shall be quite brief.
The effect of the amendments taken together would mean that subsection (6) would read as follows:
"Before granting an authorisation under this section, the grantor shall",
seek the comments of the Health and Safety Executive and the supplier.
These amendments essentially tidy up the process so that the HSE has at least a chance to comment before the authorisation, and not after. That really should not cause any delay, and I should have thought it was a perfectly sensible and reasonable thing to do. The HSE, after all, is an important body and has an important role. It seems absurd that it should be sent a copy of the authorisation, but not be given the opportunity to comment upon it. I shall leave the matter there, and I am interested to hear the noble Lord's reply. I beg to move.
The noble Lord, Lord Stoddart, seeks to introduce consultation arrangements, particularly with the Health and Safety Executive, on Clause 8 authorisations. We do not believe that statutory provision for an extended consultation process is either necessary or desirable, since essentially an authorisation under Clause 8 would relate to a supply agreement between two parties and we wish to add to the prospects for competition and not reduce them. I recognise the noble Lord's concern about safety which, indeed, we fully share on this side of the Committee. But the requirements of the gas and health and safety legislation automatically attach to such supplies, and the establishments concerned will be subject to inspection by health and safety inspectors.Moreover, the director will be able to attach safety conditions to such authorisations, using his powers in Clause 8(4)(a). No doubt he will seek the advice of the Health and Safety Executive before doing so. I can assure noble Lords, therefore, that safety, which is of prime concern, will be properly catered for in the proposed authorisation arrangements. As my honourable friend said in another place in Standing Committee, we have specifically discussed the Bill's provisions with the Health and Safety Executive, which considers them to be adequate to meet the situation. The Health and Safety Executive considers that the provisions are adequate and do not require any further legislation. So far as public gas suppliers are concerned, their interests will be with the possible effects on the monopoly area. Clause 8(2) requires the applicant to give notice of the application to the public gas supplier, who will be free to make representations or objections if he wishes to do so. Clause 8 already fully looks after the interests of public gas suppliers, and I do not think that anything further is necessary. With that explanation, I hope that the noble Lord will be satisfied.
Yes, I think I can be satisfied. Clearly I shall want to read what the noble Lord has said, and it may well be that if I am not entirely satisfied having read those words I shall wish to return with an amendment at Report stage. For the time being, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[ Amendments Nos. 77 to 79 not moved.]
Clause 8 agreed to.
Clause 9 [ General powers and duties]:
had given notice of his intention to move Amendment No. 80:
Page 8, line 27, after ("supply") insert—
("( ) to promote the efficient use by consumers of gas supplied through pipes;").
The noble Lord said: When we discussed Amendment No. 67 the noble Lord, Lord Belstead, gave certain assurances about co considering the points made at that time, which are similar to the point made in Amendment No. 80. On the assumption that he will consider both amendments, I do not move this amendment.
[ Amendment No. 80 not moved.]
moved Amendment No. 81:
Page 8, line 28, leave out (", so far as it is economical to do so,").
The noble Lord said: This clause as it now stands, giving the general powers and duties of the supply of gas by public gas suppliers, lays on them the duty,
"to develop and maintain an efficient, co-ordinated and economical system of gas supply; and (b) subject to paragraph (a) above, to comply, so far as it is economical to do so, with any reasonable request for him to give a supply of gas to any premises."
Subsection (1)( b)gives the new enterprise the power to decline to connect a prospective consumer of gas, in circumstances over which the public gas supplier has complete control and remains the sole arbiter. One can imagine circumstances where gas is urgently required for a variety of reasons but owing to the distances involved or other circumstances the public gas supplier does not particularly want to supply it because it is not going to make the same profit out of it. This we do not think is really acceptable.
Quite clearly there is a difference between something that is completely outrageous and something that may be quite reasonable, if determined independently. But to make the public gas supplier the sole arbiter of what is economic is giving the public gas supplier too much power in his own hands. We should much prefer to have that eliminated and leave the words "with any reasonable request". If the term "reasonable request" means what it says there is no necessity to inhibit it further by the words,
"so far as it is economical to do so".
It would make the position much fairer if those words were eliminated. That would leave the public gas supplier in the following position,
"subject to paragraph (a) above, to comply with any reasonable request for him to give a supply of gas to any premises."
I beg to move.
As presently drafted Clause 9(1)(b) requires a public gas supplier to provide a supply of gas in response to any reasonable request, if it is economical for him to do so. This duty is made subject to the duty in Clause 9(1)(a) to develop and maintain an efficient, co-ordinated and economical supply of gas in order to make it clear an t a supplier is not required to meet a specific demand which might put at risk the maintenance or development of his overall system. This is put into the Bill in the interests of all consumers, and this duty is, I think I am right in saying, identical to the 1972 Act.I have listened carefully to the noble Lord and I understand his reservation, but I would say this in reply. First, the economical qualification was considered necessary when the British Gas Corporation has been in the public sector, and I should have thought it was even more appropriate now that it is being transferred to the private sector. Moreover, to require British Gas to meet requests for gas which were uneconomic to provide would prejudice intolerably its viability. We all want to see the gas industry expanding well into the next century, as an industry which is able to provide an essential service for domestic customers at a reasonable price and to industrial customers who need low costs to maximise their ability to compete. If one removes the economic qualification, as this amendment would, it could result in British Gas having to provide gas to a large volume of customers at an uneconomic price. The noble Lord will say to me that that is not quite fair because the amendment says that there will be a criterion and the criterion will be as to whether the request is reasonable. As I understand it, the criticism of the noble Lord, Lord Bruce, was that having the economical qualification here was at the discretion, at the decision, of the supplier. With respect to the noble Lord, that is not so. The obligations in Clause 9 are subject to enforcement by the director. It is therefore the case that the supplier would have to pass in view before the director to determine whether or not it was right to say that a supply would be economical. The decision on whether a supply is economical or not lies with the director, and therefore the conclusion that I reach, if I may say so on behalf of the Government, is that if we were to accept Amendment No. 81, somebody would have to decide whether a request was reasonable or not, and presumably that somebody at the end of the day would have to be the court. In the case of the Bill as drafted, somebody has to decide as to whether or not a supply is economical. In the way in which the Bill is drafted, that will be the director under Clause 28. With respect to the noble Lord, I think that that is the right way of proceeding simply because it mirrors what has always been the case in legislation. at any rate since the 1972 Act. Since the 1972 Act, the economical provision has been there. I think it ought to remain there.
I find that most interesting because when I was arguing earlier that to protect the interests of employees we should listen to the 1972 Act, I was told that this was not relevant because the Government believed in the market economy and that private enterprise should be free. Now we find that privatised British Gas needs the protection of the statutes in respect of providing a supply of gas. In other words, as I read it, what the Act is seeking to do is to ensure that, irrespective of whatever else may be done, the privatised British Gas makes a profit. In other words, it has nothing to do with market forces at all.Written into this Bill (because, apparently, it was in the 1972 Act) we shall have a provision which will enable the British Gas Corporation, on the grounds that it is not economical to do so, to refuse a supply of gas; and that, in some instances, anyway, will protect the profits. So the market obviously is not pure; it does not operate. The market has now to have the protection of legislation through this Bill. I find that most odd, bearing in mind that other protections for which we have asked for other people, including consumers and employees of British Gas, have been dismissed as not being relevant to the Government's declared objective of setting the gas industry free. I believe that this amendment is a good one. I think that "reasonable" ought to cover the situation quite adequately. I think that there is no further need to qualify "reasonable". I believe that if the words "economical to do so" were deleted then, at least, it would be even-handed in relation to the supplier and to the consumer. In the Bill as it stands, without the amendment, it is not even-handed, it is on the side of, it is weighted towards, the supplier. I urge the noble Lord, because he is a reasonable man, to consider what has been said and to consider the amendment because it will, as I say, bring about a balance which is not at present within the Bill. The final observation I have to make, because the 1972 Act is cited, is this. The 1972 Act refers to a nationalised industry. A nationalised industry is in a different position in relation to the public from that of a private industry. A public industry in the last analysis is answerable to Parliament through a Minister and his department. The whole situation is completely different. It was probably necessary in legislation to put the words "economical to do so" because those industries are not required to make a profit. Generally speaking, they are required to balance their books in accordance with a government's financial policy. So I think the publicly-owned industries needed that protection, but it was quite wrong and quite unnecessary that private industries should have that same protection. After all, as the noble Lord keeps telling us, they are going to be free of control and they are going to compete in the market.
There seems to be a bit of belt and braces in this, because not only does paragraph (b) have the words,
and,"so far as it is economical to do so"
but it is subject to paragraph (a), which also talks about,"with any reasonable request"
So we have "economical" coming in twice and "reasonable" once. It looks as though we are giving safeguards to this privately-owned enterprise which are somewhat excessive."an economical system of gas supply".
Clause 9, with respect to the noble Lord, Lord Stoddart, does not protect British Gas; and with respect to the noble Lord, Lord Ezra, who I think is saying much the same thing, Clause 9 sets obligations on British Gas and any other public gas supplier to meet any reasonable demands, where those are economic. I do not think one can interpret this as being a protection for British Gas. But I will go just a little further than that and say that I think it is important for the Committee to note that when we reach the next clause. Clause 10, it contains a specific duty to supply, which is not subsidiary to the general duty to supply in Clause 9. Therefore a public gas supplier cannot refuse to give a particular supply which is required under Clause 10 because there is an argument that it would not be economic.I raise this because it is important to note, if the Committee will forgive me for looking ahead, that when we come to Clause 10(1)(a) and (b), in paragraph (a) there is the old responsibility that the gas supplier must supply anyone who is situated within 20 yards of a relevant main. However, paragraph (b) is a new provision which has not been in statute before. It says that if you are connected by a service pipe to a main then you have got to be supplied also, however far away you may be. Therefore additional obligations are being placed on the public gas supplier when we come to Clause 10, and I repeat that the specific duty to supply in Clause 10 is not subject to Clause 9. If I may add one final point before I sit down, I would say to the noble Lord, Lord Stoddart, that I do not think he is right to argue that British Gas was not required to make a profit under the 1972 Act. In Section 14 there was an obligation to do more than break even and to make profits appropriate to the business. We are not therefore talking about such a quantum leap as all that when we talk about privatisation. We are talking about a corporation, which we all know has proved it can be profitable, going into privatisation and, we hope, becoming even more profitable.
We are grateful to the noble Lord for having reminded us that all the various public utilities that have been privatised by the Government always make a profit before they are privatised. We are extremely grateful for that reminder.I take the noble Lord's point about Clause 9(1)(a) which says,
Of course that refers to the whole system, and nobody is disputing the necessity for the whole system as such to function economically. That does not necessarily mean that every part of the system itself, taken by itself, has to function economically. The noble Lord is a lawyer and I should be grateful if he would define for me, in legal terms, exactly what "economic" means, bearing in mind that economics is an art and not a science. What is unecomonical? Quite clearly, if something makes a loss, that may he described as uneconomical. If an operation breaks even when there is an expectation of profit, it can be deemed that even that is uneconomical. If the prevailing rate of profit in relation to capital employed in a business is below that currently prevailing, that operation can also be described as uneconomical. What I am bothered about is that here we have a national system where it is forbidden for any part of it to be uneconomical. I do not think that is reasonable. I know exactly what the noble Lord has in mind concerning Clause 10, and I agree we are coming to that. That deals with the 25-yard factor. What happens at 26 yards is a matter for some speculation. That may still be reasonable and it may even be economical, for that matter. One does not really know. I should have thought that the words we suggested were the most sensible way of dealing with it. After all, what is reasonable depends on the individual circumstances in any particular case, and I should have thought that a director was just as capable of being reasonable as a court. A court is not always the sole arbiter of what is reasonable. One has only to read some judgments to realise that. I cannot understand why the noble Lord is not prepared to accept the amendment, particularly bearing in mind, as my noble friend Lord Stoddart has said, that under the present regime, dealing with a public corporation, the words of the 1982 Act can always be interpreted as indicating that the ultimate resort is to Parliament, where questions can be put down and pressure can be exercised and the public interest generally satisfied in a reasonable fashion. I am very sorry that the noble Lord is unable to accept the amendment."to develop and maintain an efficient, co-ordinated and economical system of gas supply".
On a rather different approach, it may be that at this late hour I am getting befuddled, but I do not think that the drafting of this clause is really very clear. You have, as the noble Lord, Lord Ezra, said, the use of the words "economic" and "economical" in these two paragaphs (a) and (b), and it seems to me that there is some confusion. It is not the substance or the meaning to which I am objecting. It is simply that I do not think it is drafted in a very clear way. Will the Minister have another look at it and see whether he is saying precisely what he wants to say?
The noble Baroness is troubled because the words "economical" and "economic" both appear in the clause. I can not see that there is anything wrong with that. The noble Baroness may feel that there is unnecessary duplication. Of course I shall be happy to look at it and take advice, but I think subsection (1)(a), concerning the development and maintenance of an efficient, co-ordinated and economical system of gas supply, is understandable. It is also understandable to speak of having to comply with any reasonable request so far as it is economical to do so. The two paragraphs are saying rather different things.
I am grateful to the Minister for what he hinted and would ask him whether he would go just a hit further. We do not want to press this when there is uncertainty about it, but perhaps the Minister would merely say that he will look at the words to make sure that the drafting is right, that it means what he wishes it to mean, and that all the words are necessary.There is the point that the "economical system" mentioned in paragraph (a) refers to an economic supply—economic so far as the producer is concerned—whereas in paragraph (b) the words are "so far as it is economical to do so" when supplying gas, and that probably means economical as far as the recipient is concerned. We have the further complication that any reasonable request might well be interpreted by a court as including the fact that it is economical. It might well be said that you cannot have a reasonable request if you are asking for something which is wholly uneconomic. So there is no hostility about this and no party point; it is just that we want to be quite clear where we stand before we take a view. The Minister was very helpful earlier on and, if he would just say that he will look at it. without any promise at all that he will bring in a different amendment, so far as these Benches are concerned we would prefer that. At the end of the day it is, of course, for the noble Lord who moved the amendment to decide what he wants to do.
I do not want to waste time, but I do not want it to seem that the Government are uncertain here. It seems that paragraphs (a) and (b) are saying different things, and may I make the point that paragraph (b) is subject to paragraph (a). Paragraph (a) is the main part of subsection(1),
Subject to that, if there is a reasonable request for a supply it must be granted, provided that it is economical to do so. The reason for these two paragraphs is in order to preserve the situation where it would not be possible to force British Gas in the future to give a supply which would run British Gas into a wholly uneconomical position, which would not be to the advantage of British Gas and would certainly not be to the advantage of all the customers who are receiving their supplies from British Gas. As I understand it, that is the position. Perhaps noble Lords would like to look at what I have said and I, of course, will look at what noble Lords have said."to develop and maintain an efficient, co-ordinated and economical system of gas supply".
The noble Lord has invited us to take a further look at this and has indicated—and I understand it is specifically without commitment; I would not want to suggest that he has made any commitment—that he will look at it. On the basis that we are both going to look at this again, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment No. 82:
Page 8, line 30, at end insert—
("( ) to comply with standards of customer service as may be laid down and from time to time amended by the Director, after consultation with the Gas Consumers' Council and other relevant bodies")
The noble Lord said: This amendment is somewhat similar to one which was debated on the Telecommunications Bill. It is a useful amendment in that it ieads customers of British Gas plc to know what to expect after privatisation. It ensures that an authorised supplier under the Bill knows the level and quality of staff which he will need to meet agreed standards of customer service, and I think it is common ground between us that the British Gas Corporation already manages to combine efficiency with service standards and, equally important, an excellent trading result.
The Government have chosen price control via the tariff formula as their main method of regulation. With a private monopoly supplier, a danger exists, however, of cuts in standards of quality to maintain or enhance profits, especially if the tariff formula begins to pinch a bit. We therefore regard it as essential that standards of service are laid down by the director of Ofgas, after consultation with the Gas Consumers' Council, and also that the director ensures that these standards are complied with. The amendment will also allow the director to collect information about standards and to monitor quality control. There is the suggestion that British Telecom after privatisation has stopped giving information which would allow the Director General of Telecommunications to monitor standards. If that is so it is very important that the same defect is not allowed to arise in regard to British Gas.
The amendment is valuable and desirable in ensuring the continuance of consumer protection. It is modest in scope and intent and therefore I hope that the Government will feel able either to accept it or to say something helpful about it. I beg to move.
I am glad that the noble Lord, Lord Gallacher, has moved this amendment because for once, instead of the Government saying that they feel that the amendment goes too far, the amendment is rather too modest and not specific enough. If one looks at the Bill and the general scene, one sees that the situation is more encouraging than the amendment would make one think.Perhaps I may simply and quickly say this. Talking of customer service, Schedule 5 to the Bill carries over most of the existing provisions of Schedule 4 to the Gas Act 1972, commonly known as the gas supply code. The provisions of the code contain the terms on which gas is supplied by public gas suppliers. Such a statutory relationship has existed between gas supplier and consumer since Victorian times. We have also provided a second tier of protection for the consumer. Condition 12 of the draft authorisation requires British Gas to issue codes of practice, describing the nature of service available to tariff customers in relation to gas supplied by it, and explaining the various methods of paying bills. The director and the Gas Consumers' Council must be consulted about each such code, and may make representations about the operation of the codes. Underpinning this is the duty on the director in Clause 4 to carry out his functions in the manner he considers best calculated to protect the interests of consumers. Within the new regulatory arrangements, the new Gas Users Council will be able to monitor the standards of service which British Gas offers via the complaints it receives. This will provide a good measure of those areas which are of real concern to consumers. The council will be able to refer to the director any deterioration which it discovers in the quality of gas supply services to tariff customers, and he will be able to propose modifications to British Gas's authorisation, if he feels this to be necessary. Finally—and the Government have said this many times—it will be in British Gas's commercial interests to maintain its standards; the corporation has publicly acknowledged the importance of customer care. I suggest that that is a formidable array of provisions to ensure good service to the customer. By comparison this amendment, which I welcome because it gives the opportunity to have this discussion, does not make clear in what form standards of customer service should be laid down nor how they would be enforced. I like to think that the provisions in the Bill and the authorisation really are providing a good deal for the consumer in the future. On those grounds, I hope that the noble Lord, Lord Gallacher, will agree and may feel that after this discussion it is right to withdraw the amendment.
The Minister criticises the amendment on two grounds. First, he says that it is unspecific when it refers to "standards of customer service". Perhaps the Minister is leading us to believe that if the amendment had been more specific and had spelled out the standards of customer service that we have in mind it may have been more acceptable. But then the Minister went on to point out that it would need to be a very good extension of those words to fit what is already in the Bill—in other words, if we had spelled it out. That spelling out is already covered in the range of matters to which the Minister was kind enough to draw our attention.I listened to my noble friend Lord Gallacher, and he said that it was essential to have an amendment of this kind made to the Bill. I would not say that it is essential, but it is highly desirable. Although the Minister himself is satisfied that there are provisions in the Bill, they are not on the face of the Bill. Perhaps they are not hidden, but one needs to look for them. Perhaps we are suspicious that the previous good standards and qualities of those who are in charge of our gas business, in seeking out what the consumer needs, may not be accepted as fully as possible unless those responsible are frightened by the Government's determination that they shall carry out responsibilities of that kind. We are concerned not only about consultation with the consumers' council. The amendment also makes mention of "other relevant bodies". The Minister should take it on board that part of the purpose of this amendment is not merely to channel all consumer-orientated matters through the Gas Consumers Council. There are other bodies which, in my view, may very well have something relevant to say. Although the Minister is satisfied that there is no need for this amendment but that, on the other hand, it is deficient because it does not spell matters out, it is the kind of amendment that he ought to be prepared to consider. If we are to have this Bill, then we on this side of the Committee are saying that there continues to be a need to assure millions of people, and certainly thousands of people involved in the consumer lobby who have given their time and energy over the years to serving consumers' interests, that the structure they have built up and enjoyed will not be diminished. Later amendments begin to spell out a number of matters that we on this side of the Committee believe need to be tackled in detail. I wait to hear whether or not my noble friend Lord Gallacher wishes to press his amendment at this stage, but the Minister did not satisfy me that there is no need for it.
I thank the Minister for his remarks. It seemed to be that he was damning the amendment with faint praise. Having twice denied me the opportunity of success with earlier amendments, I believe that the Minister is ensuring my redundancy. In the normal way that would alarm me, but having regard to the duties imposed upon me I look forward to it with relish, with or without compensation.The Minister has failed to read into the amendment all that is really there. It is true that the amendment is modest in its language and in its intent, and I know that the Minister would expect no more of me than that. Nevertheless, if one takes what is in the amendment and compares it with that which the Minister has recited as being already in the Bill, then it may be seen that the amendment serves to reinforce what is already there. The amendment will be welcomed by those who are somewhat concerned about the protection of consumer interests once one confers a monopoly on a public limited company which must have the supreme duty, as has already been pointed out, of putting the interests of its shareholders above even those of its consumers. They are not able, as consumers in the market place generally are able, to look elsewhere, by transferring their custom for gas from British Gas plc to some other body because there just will not be some other body. To that extent, therefore, although the amendment may appear on the face of it to be superfluous, I believe that it is useful. The amendment begins by acknowledging that there are standards of consumer service already laid down. But it also goes on to say that from time to time the director of Ofgas may amend those standards. One assumes that the director of Ofgas will be on the side of the consumer and that therefore any amendments he makes are likely to be of the kind that will strengthen standards of service rather than diminish them. Furthermore, it allows the director of Ofgas to bring into the scheme of things the Gas Consumers Council. What better body to approach about improving standards of service than the body which was specifically charged with protecting the consumer? Then, as my noble friend, Lord Graham of Edmonton, pointed out, the area of consultation is widened still further by allowing consultation with other relevant bodies, and we are modest enough not to encumber the Bill by spelling out the names of relevant bodies, allowing that to be at the discretion of the director and with the Gas Consumers Council playing a part in suggesting to the director other bodies who have similar interests at heart and may therefore be worth consulting so far as the amending of existing standards is concerned. Therefore I think that in its totality this is a good amendment. The Minister's response to it was somewhat half-hearted, I feel. We shall not press it to a Division because of the lateness of the hour. We shall look at what he had to say and if we feel it necessary so to do we shall come back at Report stage a little less timid, a little less modest; and perhaps next time the Minister will be complaining that we are far too aggressive. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
moved Amendment No. 82A.
Page 8, line 30, at end insert—
( ) to maintain and develop adequate services for elderly and disabled consumers, including the checking of appliances free of charge, after consultation with the Director, the Gas Consumers' Council and organisations representing elderly and disabled people.").
The noble Lord said: I beg to move this amendment, which refers once more to the elderly and disabled. We have already had a discussion on this topic but not on this precise amendment.
First of all, we are talking now about the duty, as I understand it, of any public gas supplier. We are not talking purely about the successor company. The amendment proposes that there should be not only the maintenance of an adequate service for the elderly and disabled consumers but that there should be a development. That is very important indeed—that we should move with the times. May I spend on minute reminding the Committee of what the situation was perhaps 20 years ago with regard to wheelchairs, for example? There was nothing but difficulty for those in wheelchairs, whereas now if you go to a concert hall, if you go to the airport, if you consider the toilet facilities there, you realise that any number of places have made provision for people in wheelchairs. Indeed, if this Chamber were to be rebuilt it would be built on the basis that wheelchairs would have ready access without the difficulties which are apparent at the moment. So there is a need to have this in mind, to develop adequate services for elderly and disabled consumers.
The amendment goes on to say not only that, but:
"including the checking of appliances free of charge, after consultation with the Director, the Gas Consumers' Council and organisations representing elderly and disabled people."
It is right that the director should be consulted, and it is clearly right that the Gas Consumers Council should be consulted because it is obviously the body most fitted for this purpose. It is right that organisations representing elderly and disabled people should be consulted. They have a great deal of knowledge and experience on this matter.
It is right, I think, that the amendment should specifically refer to the inclusion of the checking of appliances free of charge. That of course, as we all know, is the present situation. But the present situation will not necessarily continue into the future. We have the recent example of Oftel where a charge is now to be made for calls to emergency services, which was not previously the case; they were previously free. Many noble Lords will have heard the explanation, just as I heard it, given on the radio by the spokesman for Oftel. I cannot remember his exact words, but this is the import of them. He said that the subscribers to the capital of Oftel had had regard to the prospectus, that there was nothing in the prospectus about free calls for emergency services and the subscribers therefore expected the management to manage accordingly. So it was going to make charges to increase the profits slightly and increase, therefore, the interest of the shareholders.
That is the model we have in front of us, and therefore it is right that we should have regard to that and to protect the consumer by referring, as the amendment does, to the "checking of appliances free of charge" as a continuous service, as it ought to be, for the elderly and the disabled.
That is the amendment. I hope that the noble Lord the Minister will be able to give us at least a sympathetic and understanding reply as it is a matter of common interest across the Chamber. I beg to move.
It is not entirely clear to me, at all events, how the statutory duty imposed by Clause (9)(1) paragraphs (a) and (b), is to be enforced, or indeed whether breach of it is intended to give rise to an action for damages for breach of statutory duty. These matters have in other Acts received clarification. Without clarification it is always left as one of the most difficult matters which any court, even up to the Appellate Committee of your Lordships' House, has difficulty in resolving.One then comes to the amendment, which proposes another statutory duty, and, without repeating the problem, the same considerations apply. As Amendment No. 84ZB came into the list long after Amendments Nos. 82A and 82B, I wonder whether the noble Lord, Lord Diamond, might consider that the certitude of the form of enforcement proposed by Amendment No. 84ZB could perhaps have some attractions in view of the incertitude of the nature of the statutory duty and its enforcement, and whether it gives rise to an action for damages under Clause 9(1) in any event.
I first refer to Amendment No. 82A on the maintenance and development of adequate services for elderly and disabled consumers, including the checking of appliances. The noble Lord, Lord Diamond, has put his case for that amendment. My noble friend Lord Campbell has now referred to certain difficulties which he sees in Amendment No. 82A and, as I think the Committee knows, my noble friend feels that his own amendment, Amendment No. 84ZB, is superior to the other amendments.I am in a position where, on behalf of the Government, in response to Amendment No. 63A in the names of my noble friend Lady Macleod of Borve and the noble Lord, Lord Stoddart of Swindon, I offered to bring forward a requirement in the authorisation about ensuring publicity of special services for the elderly and disabled, and I have also offered to insert a specific mention of the elderly and disabled in Clause 4. I leave that point for the moment and come to the second of the two amendments, Amendment No. 82B, about drawing up a code in order to help consumers who are having difficulties in paying their bills. I remind the Committee that one of the codes of practice which British Gas will be required to produce under Condition 12 of the proposed authorisation will provide information and advice about payment of bills, with help, in particular, for those who have difficulty in paying. This code will have to be prepared in consultation with the director and with the Gas Consumers' Council. British Gas has made clear its intention to continue with the existing joint code of practice with the electricity industry, which sets out clearly what help is available for those who cannot pay their bills, and it gives particular mention to the blind, the sick, the severely disabled and the elderly. Noble Lords may already know of this code. Indeed, I have a copy with me among my papers, and your Lordships may also have copies in your own possession. Perhaps I may come back to Amendment No. 82A. In this amendment the noble Lord, Lord Diamond, is seeking to place a duty in the Bill which would require all gas suppliers:
In fact, we had a brief debate about this matter w hen we discussed Amendment No. 46A on 8th May when, on behalf of the Government, I pointed out my concern about casting in stone the provision of existing services. As I have said, we have already agreed that we shall include something in the authorisation about the services provided, and I have offered to put in Clause 4 of the Bill an explicit duty on the Secretary of State and the director in regard to elderly and disabled people. I realise that this is not to the taste of my noble friend Lord Campbell of Alloway who will be moving his Amendment No. 84ZB in a few moments' time, but I say to the noble Lord, Lord Diamond, that I hope he may feel that I have taken on board the spirit of compromise that has so frequently been pressed on me and my colleagues on the Front Bench. I hope that the noble Lord, Lord Diamond, will feel that, though I am not going so far as to accept the amendments which he is now moving. I have gone quite a long way to try to see that the Government not only respond to the case which is being put on behalf of elderly and disabled people but that we have something on the face of the Bill. In those circumstances, the noble Lord may feel that it is reasonable for him to withdraw these amendments."to maintain and develop adequate services for elderly and disabled consumers".
The Minister asks the Committee to recognise that at a later stage we may perhaps see something much more positive and concrete, but we are now debating Amendments Nos. 82A and 82B which relate to specific matters on which it is absolutely crucial that certain members of our community should be satisfied. From my own experience as a parliamentarian—and not only in this Chamber—I certainly know that there are members of our community who need to be satisfied, and their families need to be satisfied, that it is recognised that they are in a special position, and that by virtue of their age or disability they require special treatment.The noble Lord, Lord Diamond, drew our attention not merely to the need for adequate services for the elderly and disabled consumers, including the checking of appliances, but to the condition "free of charge". We all know of tragedies that have occurred when elderly people were confused, tired and feckless. We would be appalled after such a tragedy if we were told that one of the causes was defective installation which became lethal because an elderly person had looked at his or her budget and said, "I cannot afford it", or, "I cannot afford it this week—or this month". We know that as a community we should never forgive ourselves. Certainly as parliamentarians we would not do so. What the amendment seeks to do, in my view perfectly properly, is to keep pushing the noble Lord the Minister and those who have responsibility for such matters to remember that, although the form of words appers to be all-embracing, we must bear such incidents in mind. If he tells us that elderly and disabled consumers will not find themselves in difficulties because of cost, that will be all right. I heard the noble Lord the Minister say something about the mandatory nature of the provisions that will apply to the authorised user. I fully recognise that he may say that the provisions have cost implications. I am not disabled or elderly but on the margin, and I am sure that most consumers would think it perfectly proper to pay a fraction of a penny more per unit to ensure that the costs are not borne by those who cannot afford them, and thereby perhaps save a life.
Amendment No. 82B—
I am sorry to interrupt the noble Lord, but I did not move Amendment No. 82B.
I did not think that the noble Lord had.
I did not move Amendment No. 82B for the good reason that on the document suggesting which items should be taken together, it was not mentioned. I did not wish to interrupt the noble Lord the Minister. One does not do that because it would be a discourtesy. He may have been briefed to answer both amendments. I want to move that amendment. It relates to a separate point, and I want a separate answer. I hope, therefore, that this discussion can be brought back, as I originally intended, to refer only to Amendment No. 82A, and we can discuss Amendment No. 82B later.
I accept that. The first time I turned to the detail of Amendment No. 82B was when the noble Lord the Minister referred to it. I am certain that he was trying to be helpful, but I take the point and I shall leave my remarks on that amendment until later.
I was not one who welcomed the reply that the noble Lord the Minister gave to the noble Baroness, Lady Macleod, but I should like to reiterate my thanks to him for his thoughtful reply to that amendment. I feel that Clause 4 is one of the most important clauses in the Bill. It relates to general duties put upon the Secretary of State and the director in relation to the elderly, the disadvantaged and the disabled. Before we reach the Bill's next stage we shall want to see what will be proposed in that clause. It might answer some of the problems and worries of those who are pressing the amendment.
I shall deal only with Amendment No. 82A. I thank the noble Lord the Minister for what he said. I was not clear about what he said. May I ask him whether I understood him correctly, and that when he considers what should be incorporated in the undertaking that he has already given with regard to introducing something into Clause 4, he will take into account not only what was said at that stage, but will also take into account what could not have been taken into account then (because we ad not reached it) and what has now been said? I ask for no more than that he will, as it were, postdate his undertaking and consider the matter as it now is rather than as it was before the amendment was moved.
Without giving any commitment, I undertake to do that.
I am grateful to the Minister. He has been most helpful. In those circumstances we get back to the position where we can say that we shall look carefully at what the Minister produces in the very relevant Clause 4. I am sure that the noble Lord, Lord Campbell of Alloway, will forgive me for saying, as I am no lawyer, that I had no desire to be more royalist than the king. If the Government's legal advisers thought it unnecessary to spell out what he thinks it necessary to spell out, I had rather left it at that. We shall be listening carefully to what he has to say.But in all the circumstances, and having listened to what everybody has had to say on the topic—and I am grateful for the speech to which we have just listened—I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
moved Amendment No. 82B:
Page 8, line 30, at end insert—
( ) to draw up, in consultation with the Director, the Gas Consumers' Council and organisations representing consumers who have difficulty in paying bills, a Code of Practice for the protection of such consumers from hardship. A code drawn up under this section shall include provisions to prevent the unreasonable disconnection of gas supply to elderly and disabled people.").
The noble Lord said: It is not necessary for me to spend a great deal of time on this amendment because the words speak for themselves. The amendment would put a responsibility on any gas supplier to consult,
"the Director, the Gas Consumers' Council and organisations representing consumers who have difficulty in paying bills,"
and after that consultation to draw up,
"a Code of Practice for the protection of such consumers from hardship".
I have no need to go into it in more detail. We have discussed the point. I just wanted to underline the fact that anybody who has had a constituency to look after knows that this matter comes up time and time again.
I want to ask the noble Lord again to be understanding about this amendment and to take it into account in the consideration that he is to give to all these matters prior to putting down an amendment on Clause 4. I beg to move.
I apologise for assuming that the noble Lord was moving both Amendments, Nos. 82A and 82B. Without repeating what I said before, let me say that Condition 12 of the draft authorisation provides exactly what he is asking for. It provides that there must be a code; that it must deal with those who have difficulty in paying bills; that it must be prepared in consultation with the director; and that it must be prepared in consultation with the Gas Consumers Council. The difference between what I am saying and what the noble Lord is putting to the Committee is that he would wish to write all that on the face of the Bill.I shall look at all this in the round, but we are now beginning to get onto rather different ground. My original undertaking to the noble Baroness, Lady Macleod, was to do certain things in regard to services for elderly and disabled people. But it would not be productive this evening to say that I am not going to look carefully at Amendment No. 84B to see whether there is any move that I can make in the direction that the noble Lord has put forward. I simply rest my case at the moment and say that the authorisation is faithfully carrying out what the noble Lord wants. It is true that that is in the authorisation and not in the Bill. I shall have a look at the whole thing again before we get to the next stage of the Bill. I hope that the noble Lord feels that that is a reasonable response.
I am grateful to the noble Lord. It is a reasonable response. He has taken the essential point. We want to see the provision in the statute so far as we can achieve that. What he proposes for Clause 4 will be by its nature a statutory provision. He has been good enough to say certain things. I shall not even attempt to reiterate what he said because I do not want to add to it or detract from it. We heard what he said. We are grateful to him. In those circumstances, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
moved Amendment No. 83:
Page 8, line 31, leave out from ("supplier") to end of line 33 and insert—
and for the purposes of paragraph ( a) above a public gas supplier may be regarded as having shown undue preference, or exercised undue discrimination, if he favours his own gas producing business or that of another person from whom he purchases gas.")
The noble Lord said: I realise that the clause before your Lordships this evening is essentially concerned with the various wickednesses which Sir Denis Rooke and his great corporation might perpetrate upon consumers when they have fled into the private sector. I have sometimes argued already on this Bill that I do not quite see Sir Denis and his corporation behaving in this manner of wickedness towards consumers. I am more concerned about the way in which, on the basis of past performance, they might be inclined to behave either towards, conceivably, their shareholders or, very possibly, their suppliers.
The purpose of the amendment, with which I am happy to be associated with the noble Lord, Lord Harris of High Cross, is to try to make sure that the British Gas Corporation, as a monopsony purchaser of gas, shall not improperly discriminate against alternative suppliers of its raw materials, possibly, for example, by purchasing more expensive gas from third parties than it could obtain from other suppliers on the United Kingdom Continental Shelf.
I submit to your Lordships that this is not a wholly academic proposition. The BGC, Sir Denis Rooke up front, entered into a contract for the supply of gas from the Frigg field in Norway on terms which have caused, I think it is fair to say, persistent embarrassment to successive Governments ever since, not least by making it impossible, without extremely onerous consequences, for successive British Governments to put the taxation of fuel oil in this country on to a base more competitive than that which prevails in the rest of the European Community.
Subsequently, as we know well, the BGC embarked upon proposals to import gas from the Sleipner field. It was seeking to purchase very large quantities of gas from that field, as my noble friend will be aware, on terms which, certainly to many of the independent alternative suppliers from the North Sea, appeared to threaten the prospect that these supplies from the Norwegian Continental Shelf could be used in the 1990s in order artificially to depress the prices at which the BGC was buying other supplies from the United Kingdom Continental Shelf, and to deter exploitation of gas resources from the United Kingdom Continental Shelf.
In the end, the Secretary of State for Energy intervened to prevent that deal proceeding; but once the BGC has gone into the private sector, and in the light of the assurances which have been given by the Secretary of State about there being no question of any restraints on the freedom of Sir Denis and the BGC to purchase imported supplies under whatever terms and in whatever circumstances they may choose, we could easily have a repetition of the Sleipner deal, with no possibility of Government intervention.
If the British Gas Corporation were to be dispatched to the private sector as a non-monopsony supplier, there would be no reason to worry. The fact is that it is being dispatched as a monopsony supplier. On that basis, it seems to me, and also, evidently, to the noble Lord, Lord Harris of High Cross, that private sector suppliers from the North Sea need some assurance about the freedom of the corporation to behave in a potentially discriminatory fashion towards suppliers after this legislation has gone through. The purpose of the amendment is to secure such an assurance from my noble friend. I beg to move.
This is an important amendment. I declared at Second Reading my interest, and I hope that your Lordships accept that I should be able to speak on the matter. I do not want to personalise the issue. But the problem is that the British Gas Corporation has a wide variety of cost in its supplies. It is moving from a relatively low cost situation to a relatively high cost situation. In other words, the southern North Sea basin has yielded gas for British Gas at prices that were negotiated fairly early in the history of the North Sea. The contracts in which those prices are embodied are starting to run out. British Gas will have to purchase some rather more expensive gas. As the noble Lord, Lord BruceGardyne has said, the Government have intervened to ensure that the purchase from the Sleipner field will not take place.The problem that the amendment addresses is very serious. Successive governments have spent much time and money encouraging an independent sector in exploration and production in the North Sea. It would be a great mistake, in our view, if any public gas supplier, any privatised British Gas, should use its discriminatory powers—I hate to use the word "monopsony" but one is obliged to use it—as a sole purchaser of gas to discriminate against those companies that have been set up in certain contexts, encouraged by the British Government to produce gas, with the intention of selling that gas to the gas supplier, British Gas, or whatever its successor may be. I find the amendment wholly to the point. It poses a further question. That question is how we, as a community, are to discover the real cost of gas to the privatised British Gas. At the moment, it is almost impossible to discover the answer because British Gas is itself a producer, a taker, a purchaser and also a distributor. There has to be some demarcation line between the point of product on and the point of purchase. Everyone should have a fair crack at being able to sell the gas that they produce to British Gas, the privatised British Gas. There is inevitably a tendency—I am not saying it is more than a tendency because I do not want to personalise it—for a major gas distributor to rely on its own sources, or indeed to exert pressure and to discriminate against other sources. I believe that this is a matter to which this amendment very satisfactorily addresses itself. Because of the way the amendment is framed, which would essentially require any privatised British Gas to publish what the costs are of its different sources. it would have the advantage of exposing to the public exactly the purchase price of various sources of gas that the privatised British Gas wishes to tap. The public could make absolutely certain—indeed the director will make absolutely certain if this amendment is accepted by the Government—that there is no discrimination between one form of company, one form of produces or one country, and that the new privatised British Gas is selecting its sources at the best available price and from the best available sources. It does not seem to me that this amendment is in conflict with what the Government wish in the Bill. I believe that it is a matter that the Government should take very seriously. I agree with the arguments that the noble Lord, Lord Bruce-Gardyne, has set out. I believe that this is something which we all should know. I believe that British Gas in its privatised form, with the enormous purchasing power that it has, should at least be required to publish the information; and that there should be some arrangement that it should not discriminate against those companies that successive British governments have, over the years, tried to set up. Speaking from these Benches, I would wish to support the amendment that the noble Lord, Lord Bruce-Gardyne, has so ably moved.
I too must declare an interest in the subject as the noble Lard, Lord Williams of Elvel, has done. I am associated with a company which is also an independent, or a putative independent, producer of gas. I believe that very shortly in this Chamber we shall be debating the Financial Services Bill. We shall hear a lot in that Bill about Chinese walls and dual capacity. I do not think that there is anything in this Bill which imposes a Chinese wall between British Gas as a gas producer and British Gas as a gas supplier or reticulator. British Gas will be the only company in this business which will be a dual capacity company.In its dual capacity, and that part of its dual capacity which involves it in the production of gas, it is in very few cases, if any, the sole owner of any gas production rights. There will be other groups of companies with it. But to bring North Sea gas fields on line there is in effect a queue, quite apart from the question of price paid for gas. Fields have been found and are potentially awaiting development. There is therefore a worry on the side of the independent industry on two factors. The first is the price that they will be paid for their gas. If, for example, they are in a consortium of which British Gas is not a part, will such a consortium be offered a rather lesser price than a consortium of which British Gas is a member? Secondly, will a field which has been discovered, and is awaiting development, and which British Gas is not a party to or a partner in, get pushed behind in the queue when it comes to development to bring fields on line? Therefore here is a strong worry on the part of the independent industry about this aspect, and I have to say that I think that the amendment put forward by my noble friend Lord Bruce-Gardyne would have a strong appeal to the independent industry. It would be most helpful if it or something like it were included in the Bill. The industry is going through a very difficult time, because most members of the industry are also involved in oil production, and oil prices are very low. It is almost a question of survival for many companies which have worked very hard over the past few years. If something along the lines of my noble friend's amendment were included in the Bill, it would be helpful.
I recognise the concern which my noble friend Lord Bruce-Gardyne has expressed about the effectiveness of regulation in British Gas's upstream activities once British Gas has been transferred to the private sector. The amendment would not only require suppliers to avoid undue preference in the supply of gas as currently expressed at Clause 9(2) of the Bill but would also extend this to gas purchases. As I think the Government have explained on an earlier occasion, we do not believe it would be right to extend the powers or duties of the director upstream.I was interested in the intervention of my noble friend Lord Torrington, because my noble friend recorded his own interest in this particular area of operations. My noble friend was quite clear in what he said; namely, some of the independents would be interested in an amendment of the kind which the noble Lord, Lord Bruce-Gardyne, is putting forward. The reason I was interested in my noble friend Lord Torrington's intervention was that, as many Members of the Committee may be aware, when the oil companies came to give evidence to the Select Committee on Energy they specifically expressed their opposition to what essentially is in the amendment, in terms which were powerful and with which the Government agree. The evidence was that they wanted competition between sellers in the United Kingdom continental shelf to be allowed, and they did not want the regulator to become involved in upstream purchases. When Sir Denis Rooke gave evidence to the Select Committee on 10th December 1985 he firmly rejected the idea that the corporation might use its influence as a potential buyer of gas to discourage an oil company from applying for acreage in which the corporation was also interested. He also went on to say that,
was wrong. The United Kingdom continental shelf is a competitive area and companies producing gas have had since 1982 the opportunity to sell gas to persons other than the British Gas Corporation. However, in addition to Sir Denis Rooke's evidence, it is right to remember that British Gas is not just a free agent in these matters. There is already a comprehensive regime in place in relation to the licensing of the United Kingdom continental shelf and the development of gas and oil fields. I think that all noble Lords who are taking part in this brief exchange probably know about this very much better than I do. Moreover, competition legislation itself, in particular the monopoly provisions of the Fair Trading Act, offers protection against significant cases of the abuse of a monopoly situation in relation to the acquisition of gas from the United Kingdom continental shelf, and there is already the possibility of a reference to the Monopolies and Mergers Commission. To accept the amendment would mean giving the director a role in vetting gas purchase contracts, which we believe would be clearly against the best interests of gas consumers and gas producers alike. I assure noble Lords that, while we share their keenness to avoid any unfairness which could arise in the purchase of gas, we believe that existing competition law should be adequate to tackle it. I shall certainly look at this debate. because expressions of view have come from all parts of the Committee. I shall look at this debate with care when we have the opportunity to look at Hansard. However, I ask the Committee to take on board that evidence to the Select Committee—and I am not talking about the evidence of the chairman but about the evidence of oil companies—was against this amendment. The Government have felt consistently that the solution which this amendment would try to find would not be desirable. There are in competition legislation enough safeguards in order to see that things are kept right, and the effects which the amendment seeks to address are in fact effects which can be dealt with by competition legislation."the idea that necessarily developing one's own gas is always better than buying from somebody else"
I am grateful to my noble friend for that reply, and particularly his assurance that he will look carefully at what has been said in Hansard. I am not all that convinced by what he said about the evidence given to the Select Committee. Shell, one of the companies concerned, did indeed express objections to the possibility of the regulatory office moving upstream, but Shell alone, and on the other hand Britoil, to mention but one, took a precisely contrary view. Of course it is true that Sir Denis Rooke objected to any suggestion of such regulation applying upstream, but then, as Mandy Rice-Davies used to say, "He would, wouldn't he?" What else are we to expect? I do not think that that is a convincing argument.I listened carefully to what my noble friend said about competition policy and the role of the Office of Fair Trading and the Monopolies and Mergers Commission in this area, which of course one accepts. But it is a much more cumbersome procedure, and unfortunately we are still up against the consequences of the decision that the Government took, which I continue to believe was misguided, to pass the British Gas Corporation back into the private sector as a monopoly performer. In those circumstances I hope that my noble friend will consider carefully what has been said during this short debate and the significant arguments advanced by my noble friend Lord Torrington and the noble Lord, Lord Williams, as well as by myself, and reconsider with care whether there is not a case for providing some assurances for the suppliers to this monotholic monopsony corporation when it is passed to the private sector. On the basis of my noble friend's assurance of careful examination of what has been said, at this hour I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
moved Amendment No. 84:
Page 8, line 33, at end insert—
(" ( ) It shall be the duty of the public gas supplier to settle from time to time with the Director a general programme of research affecting gas supply and other matters affecting their functions. which will also include matters affecting the supply of gas for a specified forward period as well as matters affecting the general policy of the gas supplier towards all classes of customer and, insofar as it is practicable, consideration of the supply and demand of other energy sources, and staffing projections; before presenting such a programme to the Director, the public gas supplier shall consult with his workforce in such councils as are specifically established for that purpose.").
The noble Lord said: I beg to move Amendment No. 84, standing in my name and that of my noble friend Lord Williams of Elvel. Depending on who was to reply for the Government, I was going to say that I should probably be accused of being doctrinaire in returning to this matter because we have had some discussion on Amendment No. 68C. But the amendment before your Lordships' Committee is rather different. It is different in one respect anyway, because it seeks to maintain consultation with the workforce. Certainly the amendment is similar to provisions in Section 3(3) of the 1972 Act.
As noble Lords will know, the British Gas Corporation currently lays before the Secretary of State a corporate plan which takes into account the medium to long term prospects for the industry. It also looks at all aspects of the energy market and its relation to other fuels, manpower planning, pricing and purchasing policy, other such matters. As I have said, it is subject to detailed consideration with the workforce. As I have also already said this evening, I believe such consultation with the workforce is good for the industry, good for management and good for the working people themselves.
Such a requirement carried over to the public gas supplier will ensure that the benefits of planning are not lost. In addition, it will maintain a unique form of employee involvement. As I have said, I shall probably be accused of being doctrinaire, but the fact of the matter is—I make no apology for reiterating the view I have taken in previous debates—that gas is a premium fuel, it is a finite fuel. It ought not to be wasted and it ought to be subject to proper planning.
I know that the Government take a different view. They believe that the market will sort out all these problems and that eventually supply will equal demand and private enterprise will be able to to settle within the various industries what fuels are used, the rate of depletion and what-have-you. But it will not work. Energy planning simply cannot work in that way. That is the reason why we put this amendment down and why I have moved it this evening.
We have had a previous discussion on this subject, and therefore I shall not take up the time of the Committee in reiterating many of the arguments that have already been used; but I have to say that we think this is an important aspect. Whether the Minister has had time to think again abort the Government's attitude since we last debated the subject, I do not know, but I shall be interested to hear what he has to say. I beg to move.
As the noble Lord, Lord Stoddart of Swindon, reminded us, we had a pretty full debate on Amendment No. 68C on the whole subject of research and development, and I therefore do not propose to cover again the ground on which, if I did not convince noble Lords opposite with my reply, I at least managed to convince a majority of the Committee. I shall therefore concentrate on the two aspects of this amendment which are different.This amendment seeks to seta public gas supplier's R & D programme in the context of supply and demand. As I think we have made clear in debate earlier, there is at present a free market and the Government would not wish to direct a public gas supplier to organise its R & D programme in such a way as to do anything other than to take account of the influence of market forces. There is already considerable competition with other fuels, and public gas suppliers will no doubt wish to direct their research efforts in such a way as to enable them to expand their markets. Turning to consultation with the workforce, we also believe it would be wrong to impose any statutory requirement in this area. British Gas and other public gas suppliers will, I am sure, use the appropriate negotiating machinery to deal with these matters. I am afraid that the noble Lord, Lord Stoddart of Swindon, will probably now accuse me of being doctrinaire, but I submit that there is the world of difference between what is appropriate to include in the statute for a nationalised industry and what is appropriate for a private sector company. Nationalised industries are creatures of statute and their duties and powers are appropriately encompassed in the statute. Private sector companies have articles and memoranda of association. Moreover, it is part of the make-up of industrial and commercial life for such companies to make major investments in research and development. I am sure that the noble Lord will recognise this from his own experience, and, although I very much doubt whether I have been able to convince the noble Lord, I must ask him at this stage, anyway, to withdraw his amendment.
I have listened to what the noble Lord has said and it is quite clear that we are not going to convince one another this evening, anyway. I maintain that, in spite of the fact that British Gas is to be privatised, it is necessary in the interests of our energy sources and their conservation that some control and some obligations are placed upon the privatised British Gas. However, as I have said, I do not think that we are going to agree on this, and, certainly at this stage, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
moved Amendment No. 84ZA:
Page 8, line 33, at end insert—
("(2A) It shall be the duty of the public gas supplier to promote, insofar as is practicable, measures leading to the conservation of gas; such measures shall include
(a) development and promotion of energy efficient appliances; (b) advice to consumers on the use of such appliances in such a way as to secure the most efficient use of gas.")
The noble Lord said: I beg to move Amendment No. 84ZA, which stands in my name and in that of my noble friend Lord Gallacher. We believe that at the present time the British Gas Corporation does a fair amount in ensuring that the appliances which they sell and which customers buy are energy efficient and, of course, safe. We also believe that at the present time they give advice to consumers on the use of appliances, and in such a way as to secure the most efficient use of gas. I know, for example, that at the present time the Gas Corporation is developing a new type of domestic central heating boiler. Certainly, in parts of the country they are encouraging people to instal this new type of boiler which uses gas more efficiently, to the benefit of the nation and of energy efficiency generally, and also to the benefit of the consumer in that he pays less for his heat.
This sort of development is altogether acceptable. We want to see more of that type of development. We want consumers to have more advice available to them and we want to see a relationship maintained between the new privatised British Gas plc and the customers which will ensure the best use of gas and the development of new appliances and more efficient appliances. As we have said repeatedly, we have every confidence that the present British Gas Corporation does all these things; and they do all these things because they are a public corporation and they have a public duty to do them. If they do not do these things the public has a remedy to ensure that they do do these things.
But when British Gas is privatised the public will really have no remedy at all and it may not be in the best interests of British Gas shareholders for the privatised company to continue with the energy-efficiency measures that have become an everyday part of the British Gas service to the public. That is why we move this amendment: not that we do not trust the assurances given by British Gas that they will continue their present policy but because we know that, inevitably, privatised British Gas will change. The nature of the board will change; the personnel and the nature of the whole organisation will change. The objectives of the organisation will be different; and we simply want to ensure that the privatised corporation does have this duty and obligation which was described very well by the noble Lord, Lord Ezra. in an earlier debate. I keep remembering his phrase because I thought it was such a good one: that where you grant a monopoly, the monopoly must accept obligations as well. This is one of the obligations we seek to place upon the new organisation, and I commend the amendment to the Committee.
The amendment proposed by the noble Lord, Lord Stoddart of Swindon, is very much in line with others we have debated throughout these discussions relating to the promotion of energy efficiency. It is something which I believe most of us feel very strongly about. Naturally, there are some who take the view that this is a matter best left to the enterprise when it is privatised. There are others, however, who feel that this is of such overwhelming importance that it should be mentioned as a condition of the granting of the authorisation. We on this side certainly hold that view. The Government, in an earlier discussion conceded that they would consider introducing something to this effect and I therefore hope the. will extend that consideration to this amendment.
I think we are all agreed that energy efficiency is a good thing, and none more so than the present Government, who have an enormous programme going on this year and continuing: that has been referred to already in this debate. and it has been mentioned frequently at other times.The noble Lord, Lord Ezra, reminded us that my noble friend Lord Belstead made a concesssion during our discussion on Amendment No. 66 and had been prepared to extend the provision of the authorisation to cover the subject of energy efficiency. Therefore, to some extent the amendment moved by the noble Lord, Lord Stoddart, is covered. The noble Lord, Lord Stoddart, quite rightly mentioned that British Gas has an excellent record in research and development, and he mentioned in particular the development of, I think, a new kind of central heating system. He said—I hope I do not misquote him—that was because British Gas was a public corporation; it was in the public sector and it was marvellous that it should do this sort of thing. Perhaps I take a slightly more cynical view of this. I am sure he is right and that that is one of the reasons, but I also happen to believe that one of the reasons why it does it is because it wants to sell that central heating system in competititon with electricity or other forms of fuel. That is something which will continue to arise. The specific duty that this amendment seeks to impose in relation to the development of gas appliances would not be consistent with the aim of the Bill overall, or with the Government's approach which has been to set up regulatory arrangements for the supply of gas. The manufacture and development of appliances is a normal commercial undertaking carried out by a large number of private firms in this country. There is no inherent monopoly attached to such activities, and there is no reason to set out specific regulatory provisions for them, beyond the normal fair trading requirements of competition law which apply generally. I therefore believe that that particular part of the amendment would be quite wrong, to set a specific obligation on public gas suppliers, when they are in competition with a lot of other people who are also producing gas appliances. For the rest of the amendment, we will certainly read most carefully what has been said; and in our deliberations, and with the commitment which we gave on Amendment No. 66, we will take into account what has been said.
The Minister used as one of his arguments for not imposing these duties that the public gas supplier will be in competition with other forms of energy. If we believe in the concept of energy efficiency and the development and promotion of energy efficient appliances why, in the area in which we can have some input, do we decide not to do that? It is said that it would be unfair. But it is a challenge. It might he seen to be onerous, but we are talking in terms of a massive concept.Others in the Committee know more about the weight of what we arc talking about, but I, as an uninformed layman in these matters, am well aware of the enormous impact that can be made on costings if we get it right. If the Minister is saying, as I believe he is. that he agrees with the concept and that the Government are doing a lot in the energy conservation field—and I do not dispute that—what we are saying is that we want to see it on the face of the Bill. The Minister constantly points out that things are unnecessary or would be extraneous. We have a Bill of 116 pages and if the Minister were to accept a fraction of the amendments on the basis of increasing the weight of the paper, or the size of the Bill, it would not amount to very much. The Minister leaves in my mind a slight impression that he does not wish to do something which he believes is right, because it may be unfair to those who, once the industry is privatised, have to make it work. The Government must rise above those considerations. We are talking about the national interest. We are talking about getting the best use out of national resources. We are not into the argument of privatisation or public ownership. We want as a nation to maximise every ounce of power and energy that we can get out of our national resources. Paragraph (b) of the amendment reads:
I know that the Minister will tell me in one way or another that, by another part of the Bill or by promised amendments, that will be covered or can be seen to be covered. It might be that when we see the print we will accept that. But the Minister should accept that I am very much in the business of wanting to make sure that those who will undoubtedly risk their capital—those who will manage, own or have shares in the new arrangements—will have responsibilities. I use again the phrase that my noble friend Lord Stoddart repeated, of the noble Lord, Lord Ezra. With monopoly or near monopoly situations there are obligations and responsibilities. This amendment which the Minister can see has support from more than one part of the Committee is a modest way of trying to underline and stress what we think are valuable ways of looking after the national interest."advice to consumers on the use of such appliances in such a way as to secure the most efficient use of gas."
I am sorry that I have not been able to satisfy the noble Lord, Lord Graham of Edmonton. I am not sure whether the noble Lord was in his place for the long and interesting debate on Amendment No. 66 in which my noble friend Lord Belstead agreed to bring something back before the next stage extending the provision of the authorisation to cover energy efficiency. As I said just a few moments ago, we would take into account what has been said today on that subject.The only quibble I had with this amendment was with paragraph (a) "development and promotion of energy efficient appliances", where I said that British Gas is in competition with a large number of private sector firms which are producing gas appliances, and that it would be unfair to put down in statute in Clause 9 of the Bill that it should have to do something when none of its competitors has to do it. I am not saying that it will not do it. It will do it because it wants to sell efficient gas appliances, because it is in its commercial interests to do so.
But does the Minister really think that when the Bill becomes an Act the people who become the shareholders in this body will pay a high regard to conservation, bearing in mind that their main objective in privatisation is to make it pay commercially, with the priority being their own interests?I listened with some interest to the Minister's claim regarding the Government's record on energy conservation. I cast back my mind to just over 12 months ago, to when members from the various parties on this side of the Chamber questioned the wisdom of the Government placing 15 per cent. VAT on such items as double glazing, which has a very profound effect on energy saving. We were met with complete deafness. It went ahead anyway, as have other measures related to the building industry. An international debate is about to start as to whether nuclear energy will be retained or gradually phased out. I would not predict what the eventual decision will be. But if the electricity and energy being provided at present by nuclear power stations and nuclear sources is removed from the balance sheet and is no longer available, the saving of energy will become absolutely vital to the world as we know it. To talk in terms of leaving such an important facet of our public life to the private sector is complete and utter nonsense. What has been said so far from the Government does not in any way give a guarantee that they see the seriousness of what they are doing. I hope that if the Minister rises again he will give some better guarantees or better answers than he given so far.
Perhaps I could point the noble Lord, Lord Dean of Beswick, to Clause 4 of the Bill which is arguably the most important clause in the Bill. I refer to Clause 4(2)(b). One of the prime purposes of the Bill is,
I think that that answers the question."to promote efficiency and economy on the part of persons authorised by or under this Part to supply gas through pipes and the efficient use of gas supplied through pipes".
I am sorry to rise again, but I do not think it does where the main motive for what is being done is profit in the private sector. Unless the guarantees are included, as stated by previous speakers from the various Benches. I cannot see any such thing happening to the degree that we want it to. That is why I say that the amendment should be considered more seriously than it has been so far.
Perhaps I may ask the noble Lord, Lord Brabazon, a question on a point of clarification. With reference to paragraph (b) of the amendment. and given what the noble Lord, Lord Belstead, said to the Committee on Amendment No. 66, is it the intention to include in the authorisation that the public gas supplier shall be required to give,
Is that something that the noble Lord, Lord Belstead has in mind?"advice to consumers on the use of such appliances in such a way as to secure the most efficient use of gas"?
This is certainly one of the matters we shall take into consideration when we draft this new clause in the authorisation.
I have listened to what has been a very interesting and wide-ranging debate, and I am particularly grateful to my noble friends for taking part and for shedding new light on this very important matter.Amendment No. 68C is really a different amendment. It reads:
Amendment No. 84ZA, which I have just moved, is rather more specific and is directed towards the domestic consumer. It is therefore a different amendment. Certainly it deals with energy efficiency but it is specific in its direction."Such conditions as appear to the Director to be requisite to ensure the long term future of gas supplies by promoting and monitoring a continued research and development programme to be undertaken by any persons authorised to supply gas under this Act".
If the noble Lord will allow me to intervene, I was referring throughout to Amendment No. 66, which we had discussed.
I am sorry. I thought that the noble Lord was referring to Amendment No. 68. I now understand that he was referring to Amendments Nos. 66 and 67, which are of course similar. I misheard the noble Lord. Provided we have an assurance that the specific matters I have mentioned will be taken into account in any amendment to the authorisation, then I believe it would be right to withdraw the amendment at this stage. We will of course have the opportunity of seeing what words are used in the amendment to the authorisation.
Amendment, by leave, withdrawn.
Clause 9 agreed to.
moved Amendment No. 84ZB:
After Clause 9, insert the following new clause:
( "Code of Practice for supply to elderly and infirm.
.—(1) The Secretary of State shall, prior to such day as may he appointed by him in accordance with section 3 of this Act, issue and approve a Code of Practice relating to the provision of special services by gas suppliers for domestic customers qualified to receive state benefits by reason of age or infirmity; and from time to time he may issue or approve alterations to such a Code.
(2) The Secretary of State shall consult the Director and the Council before issuing or approving such a Code, or issuing or approving any alteration to such a Code under subsection (1) above.
(3) Failure on the part of any person to comply with any provision of a code issued or approved under subsection (1) above shall not of itself render that person liable to criminal or civil proceedings but—
(4) The Secretary of State shall lay before Parliament—
and if either House of Parliament passes a resolution requiring the code or alteration mentioned in paragraph ( a) above, or the approval mentioned in paragraph ( b) above, to be withdrawn the Secretary of State shall withdraw it accordingly; and where he withdraws a code issued by him or his approval of a code he shall issue or approve a code, as the case may be, in substitution for the code previously issued or approved.
(5) No resolution shall be passed by either House under subsection (4) above in respect of any code or alteration after the end of the period of forty days beginning with the day on which a copy of the code or alteration was laid before that House; but for the purposes of this subsection no account shall be taken of any time during which Parliament is dissolved or prorogued or during which both Houses are adjourned for more than four days.").
The noble Lord said: This amendment stands in my name and the names of the noble Viscount, Lord Hanworth, the noble Baroness, Lady Masham of Ilton, and the noble Lord, Lord Henderson of Brompton. The amendment is to insert after Clause 9 the new clause printed on the Marshalled List.
At the outset, as in the case of all other noble Lords on all sides of the Committee who have spoken on this matter. I wish to express my appreciation to my noble friend the Minister for the various commitments undertaken to assist the elderly and the infirm that were given on Amendment No. 63A, subject to consideration as to what might be said on this amendment and renewed on Amendments Nos. 82A and 82B.
The concern of the Government for the elderly and infirm is such that, in a sense, we cannot fall between all the stools and achieve no concession at all. The point is whether, in the view of the Committee, a Clause 4 concession (if I may so stylise it) related to a code of practice under Condition 12 of the draft authorisation which has no legal efficacy, which has no sanction and which has what I think was called by the noble Lord, Lord Stoddart, no public remedy, is as a matter of principle the sort of concession that appeals to the Committee; or whether the Committee would wish to see the sort of concession which quite clearly confers enforceable rights, legal rights, not in the authorisation but in a code of practice which has sanctions and affords (to use the homely phrase) a public remedy.
The objections to Amendment No. 63A are on record and require no repetition. The form of the concession to be made is somewhat in the air, but the principle of it is not. It is related to Clause 4. It is related to the authorisation. Whether or not that, as a matter of principle, is acceptable to the Committee is entirely a matter for the Committee. This is in every sense of the word a probing amendment for clarification. I so informed my noble friend the Minister well in advance of this opening speech.
The main attribute of this amendment, which differs from the form of the proposed concession under Clause 4, is that this amendment proposes a legally enforceable code of practice which is subject to parliamentary approval. That does not obtain under Amendment No. 63A or, indeed, under Amendments Nos. 82A and 82B. Very briefly, in this amendment subsection (1) enjoins the Secretary of State to issue a code of practice relating to the provision of special services by gas suppliers for the elderly and the infirm.
Subsection (2) enjoins the Secretary of State to consult with the director and the council before issuing or approving the code. Subsection (3), in accordance with the will of your Lordships' House as expressed on many previous occasions since 15th January, defines with clarity the legal status of the code, which is neither that of primary legislation nor of subordinate legislation in the sense that breach of the code involves liability, but which has to be taken into account in any proceedings if relevant to any question arising in the proceedings. In this sense the code, if relevant, has legal efficacy. It affords equality of legal protection for the elderly and the infirm, with some sanctions for observance on the part of the gas supplier. The proceedings in which the code will be admissible. if it is relevant, include proceedings arising under Schedule 5 which, by reason of Clause 15, are presumed to have legal effect as primary legislation. In this sense, if it is relevant the code will serve as an aid to the enforcement of primary legislation where the interests of the elderly or infirm are concerned.
Subsection (4) requires the Secretary of State to lay the code before Parliament, and this is wholly appropriate having regard to the importance of the code and to its impact on primary legislation. Any proposal to introduce a code of practice always warrants the vigilance of this Chamber to ensure that its legislative role is not usurped and also to ensure that the status of the code is always defined with requisite clarity as regards its effect in law. The procedure for resolution for withdrawal was first introduced in the Mental Health Act 1963 for the Mental Health Commission code, and this procedure was last used in the Animals (Scientific Procedures) Act 1986, on the amendments which came from another place. Subsection (5) ensures a minimum period of 40 days between the laying of the code and the passing of any legislation.
This code gives a quality of legal protection akin to that given in the Commons' amendments for the protection of the animals used in the scientific procedures which come under the Animals (Scientific Procedures) Act, and the type of protection for the elderly and the infirm proposed by this amendment is of exactly the same quality. It is suggested that that is not only a reasonable form of protection but that it is essential.
It is considered that a mere code of guidance such as would have arisen under Amendment No. 63A would really not be appropriate. For example, under the Transport Act there is such a code for the construction of vehicles to assist the elderly. That was a code of guidance, and it has no legal effect. Also. there is no legal effect to the Mental Health Act code. However, in this context it may be said that the question of the status of codes did not really enter into the consideration of this Chamber before some time earlier this year and that no due consideration was given to the status of the Mental Health Act code when it came before Parliament.
If this amendment is broadly acceptable to the Committee, the hope is that my noble friend, in accordance with his helpful undertaking to keep an open mind as to what would be said, may also take this suggestion on board and indeed possibly submit the form of this draft, for which I take sole responsibility, to a proper parliamentary draftsman for his tender mercies.
In conclusion, as we are dealing with legal efficacy and questions of principle, I should like to make the point that there is here no question of any confusion arising with the public gas supply code in Schedule 5 to the Bill. That is a statutory code enshrined in primary legislation by Clause 15. It is not a code of practice. Assuredly, it is not a code of guidance. It is part of statute law. It is not suggested that it would be appropriate to encumber the statute with special provisions for services to the elderly or the infirm, or recklessly to afford adequate means of protection.
The amendment does not conflict with any principle of the Bill. It is assuredly devoid of any political intention. The question ready is whether the Committee, either today or at the end of the day, as a matter of principle, considers that there should be a code of legal efficacy along these lines or whether the Committee thinks that a Clause 4 concession, as I put it, relating to the authorisation and the code which relates to Condition 12, is adequate. The question is: which appeals to the Committee? In that spirit, I beg to move.
The amendment of my noble friend Lord Campbell seeks to require the Secretary of State to issue a code of practice covering special services to the elderly and disabled and to provide apparatus for the enforcement of the code's provisions. I listened carefully to my noble friend, and I understand exactly what it is he is aiming to achieve. He was most generous in giving me a briefing of what he intended to say, and what he was aiming to achieve, before we came to the Committee today. But I have to say that I am still extremely doubtful as to whether this really is the most desirable way to set about ensuring that the gas industry continues to act in the very responsible way in which it has acted up to now in these matters.As I made clear earlier today when debating Amendment No. 63A, put down by my noble friend Lady Macleod and the noble Lord, Lord Stoddart, we are ready to re-examine—I have given an assurance that we will—Condition 12 of the authorisation to devise some wording to place an obligation on British Gas to publicise the special services which it provides for the elderly and disabled. I also gave an undertaking to re-examine the drafting of Clause 4 to provide specific guidance to the Secretary of State and the director in relation to the elderly and the disabled to underpin the change in the authorisation and to have something on the face of the Bill. I think that requiring British Gas to publicise the services that it offers is the right approach in this case. I say that for these reasons. First, one of our most important aims in privatising British Gas has been to try to remove the kind of political interference that there has been from governments of all shades of opinion in the day-to-day affairs of British Gas which has, I believe, proved counter-productive to consumers in the past. I do not believe that putting an obligation on the Secretary of State to issue a code of practice, as proposed in my noble friend's amendment, will be consistent with trying to achieve that. The Government's proposal, which I shall he very ready to bring forward on Report, will ensure that the director will be able to take full account of the special needs of the elderly and the disabled in exercising his functions, but it will not impose a code written by the Secretary of State. The requirement to include a description of services for the elderly and disabled in information that British Gas will be obliged to publish under Condition 12 will be subject to the enforcement provisions of Clause 28 of the Bill. I assure the Committee that there could he therefore no question of British Gas evading a responsibility to give wide publicity to the services that it provides. It would also mean that the new consumers council, which the Committee will remember is to have a member to represent the interests of the disabled, will be able to comment on the services to be provided under Condition 12 of the authorisation. The new consumers council will, I am sure, be taking that task seriously. Finally, the reason I am worried about my noble friend's amendment is that it seeks to involve Parliament in the setting of a code of practice for the elderly and disabled. I must tread carefully in suggesting that Parliament should not have a part in that, but I do not believe that we should be sensible to add to the burdens of Parliament in the way proposed in the amendment at the very time that we are making proper provision for the monitoring and control of the gas industry by the director of Ofgas and the new consumers council, to whom I believe we can better leave the job. It is for those reasons that I am worried about the amendment. I shall fulfil the undertaking that I have given to my noble friend, look carefully at what he said and compare the case that he made to the undertakings that I have given to my noble friend Lady Macleod and the noble Lord, Lord Stoddart, but I felt that in answer to my noble friend's amendment I had to set out my concerns, and I have now done so.
At this hour it only remains for me to thank my noble friend for having listened with an open mind to what I had to say and to say that I am delighted to be able to return the compliment and beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[ Amendments Nos. 84A and 84B not moved.]
Schedule 3 agreed to.
Schedule 4 [ Power of public gas suppliers to break up streets, bridges etc.]:
moved Amendment No. 85:
Page 72, line 18, leave out ("may be") and insert ("possible").
The noble Lord said: This is a small amendment but it is rather necessary. I had better read out paragraph 1(3). It states:
"A public gas supplier shall do as little damage as may be in the exercise of the powers conferred by this paragraph".
and so on. What on earth does,
"as little damage as may be"
mean? I should like an explanation from the Minister. I have thought about it and tried to assess "damage as may be". I know what "possible" means. It means that the contractor shall use all possible care and do as little damage as possible. People will understand that. But when we see in a Bill that,
"A public gas supplier shall do as little damage as may be",
the mind begins to boggle.
No doubt the noble Lord has a brief and will tell me that that is a legal term or something like that, but to the ordinary person and certainly to me it looks like gobbledegook and reads like nonsense. I beg to move.
I am grateful to the noble Lord. Lord Stoddart of Swindon, for having moved the amendment. In Committee I have gained the impression that noble Lords on the Opposition Benches think that the existing legislation is probably superior to the Bill that we are introducing. I must tell the noble Lord that the words "may be" go back to the 1972 Act. In fact, they go back to the Gas Works Clauses Act 1847. There is therefore some reluctance on my part that we should change something which goes back that far. However, in view of what the noble Lord, Lord Stoddart, has said, I am happy to accept the Amendment if he wishes to press it now, having heard my explanation of how far the words go back.
That is a kind invitation, which I accept.
On Question, amendment agreed to.
Schedule 4, as amended, agreed to.
Clause 10—[ Duty to supply certain premises]:
[ Amendment No. 86 not moved.]
moved Amendment No. 87:
Page 10, line 31, at end insert—
(" ( ) Any question arising under subsection (7) above—
(a) as to whether a supply of gas was demanded or received for a standby supply; (b) as to whether any premises have a separate supply of gas or have a supply (in use or ready for use for which a standby supply of gas is required) of electricity, steam or other form of energy; or (c) as to the amount of the said sum to be specified in the agreement,shall in default of agreement be determined by arbitration by the Director.")
The noble Lord said: This amendment is designed to make it clear in this clause where there is a dispute between the supplier and the customer as to the necessity for a new or increased supply of gas, or as to the payment to be made by the customer in relation to any agreement, it should be settled through arbitration by the director. Gas suppliers will be in a powerful monopoly position following the passage of the Bill. In contrast, customers will be in a comparatively weak position. We do not want a situation where an overhearing gas supplier can dictate his terms to the customer without there being any sort of protection. Nor do we wish the customer to be subjected to inordinate delay through long-winded procedures.
The Government will undoubtedly claim that the Director has adequate powers to seal with this sort of situation under Clause 28. Indeed, that was claimed in Committee in another place. The Minister then promised to look at the matter and come back to the House. but he never did so. Perhaps we can get a reaction from the noble Lord, Lord Gray of Contin, when he replies. Why should the customer not see in Clause 10 absolute and necessary protection, which under the amendment would be direct and speedy and not subject to the somewhat lengthy procedures under Clause 8? I hope that the Government will take this seriously and will consider the position. I look forward to hearing what the noble Lord has to say.
The amendment has a similar theme to those tabled by my noble friend, Lady Gardner. They draw our attention to the changes in arbitration arrangements which have been included under the Bill as a result of the new structure for regulation which has been adopted, with a regulatory body, Ofgas, headed by a Director General of Gas Supply.Clause 10 sets out the supply duties which attach to a public gas supplier. Subsection (8) makes clear that there is no obligation in relation to a supply for standby purposes unless a written contract is entered into guaranteeing a reasonable return. The provision has been carried forward from paragraph 4 of Schedule 4 to the Gas Act 1972. What has not expresssly been carried forward is the provision as to arbitration set out in paragraph 4 (2) of Schedule 4 to the 1 972 Act. There are very good reasons for this, since under our new regulatory system any dispute on supply matters can in effect be referred to the director of Ofgas for a ruling. This arises because under the regulatory regime the Director General of Gas Supply has the task of ensuring that supply obligations are properly met. If a customer considers that his request for a standby supply has been unreasonably refused, he can refer the matter to the director to take enforcement action under Clause 28, on the grounds that the supplier is failing to comply with his obligation to supply under Clause 10(1) and thereby contravening that obligation. In deciding this issue, the director would have to consider whether the public supplier's failure to give the supply under subsection (1) was justified under subsection (8), which, in a particular case, might involve the director considering all or any of the matters referred to in this amendment. If the director, for example, was satisfied that the public gas supplier had required the person to enter into a contract which gave them more than a reasonable return, the public gas supplier's failure to give the supply could not be justified by subsection (8), so that the director would be able to make an enforcement order against the public gays supplier. As regards the director's role, it will, of course, be open to him, using his powers under Clause 35, to publicise his role in settling disputes of this kind. The amendment which the noble Lords propose is unnecessary, given the role of the director, and I therefore suggest to the noble Lord that he might be prepared to withdraw it. Apart from anything else, I fully accept that it is a detailed explanation that I have given. The noble Lord will probably wish to study carefully what I have said before reaching a conclusion. He could always return to the matter at a later stage if he felt so inclined. However, I feel that once he has had an opportunity of studying what I have said, he will conclude that the amendment that he proposes is unnecessary.
The noble Lord has made a very reasonable suggestion. I shall certainly study closely what he has said. Is he repeating that, under Clause 28, the director has adequate powers? Is it also right to believe, from my leading of Clause 28, that the procedure could be quite long winded and that the customer may very well be injured? I wonder whether the noble Lord can comment on those queries?
I do not believe that the customer would be disadvantaged in any way by the procedure that I have set out. Certainly, there are powers under Clause 28. I tried, in my explanation, to relate how those powers were connected with other clauses in the Bill and the various functions of the director of Ofgas in this connection. The noble Lord would perhaps prefer to study what the record reveals before deciding what he wishes to do further.
I have just one small question. Is it correct to assume that Clause 28 comes into operation only when the director is satisfied that a public gas supplier is contravening or has contravened and is likely again to contravene? In other words, there has to be something happening before the director makes up his mind to take action on this section. But the amendment moved by my noble friend deals with a rather more preliminary stage. Has the noble Lord taken that on board as well as Clause 28, which is no substitute for the amendment put forward by my noble friend? Clause 28 comes into operation ex past facto and the amendment put forward by my noble friend seeks to avoid this situation arising in Clause 28. Will the noble Lord agree that that is a fair summary of the position? I agree that my noble friend should take the opportunity of looking at the matter again. But am I correct in that assumption so far?
Yes, the noble Lord is correct to some extent. Under Clause 28 the provisional order procedure is a quick way to deal with urgent cases when the customer might be damaged. The noble Lord is perfectly correct. The amendment which his noble friend has moved is dealing on a broader front than that dealt with by Clause 28. Clause 28 is a provisional order procedure. It is a quick way to deal with urgent cases.
We had better have a look at the discussion. I thank the noble Lord for the detailed way in which he has dealt with the amendment. We shall look at what he has said. In the meantime, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 10 agreed to.
moved Amendment No. 87A:
After Clause 10 insert the following new clause:
( "Avoidance of cross subsidisation.
—(1) A public gas supplier shall, in any financial year during which he supplies goods or services otherwise than in pursuance of subsection (1) of section 10 above, avoid cross-subsidisation between one part of his gas supply business and another and between his gas supply business and any other business.
(2) For the purposes of subsection (1) above and without prejudice to subsection (7)( c) of section 7 above, the supplier shall furnish to the Director, in such manner and at such times as he may reasonably require. such documents, accounts, estimates, returns or other information as he may require to determine whether the tariffs and charges fixed by the supplier in respect of the goods and services which the supplier provides involve cross-subsidisation.
(3) For the purposes of this section "cross-subsidisation" shall be defined as the unreasonable allocation of costs by the supplier when fixing tariffs and charges; and "financial year" shall he defined in accordance with section 227 of the Companies Act 1985.")
The noble Lord said: I beg to move this amendment, to insert the new clause as set out on the Marshalled List.
Without bothering the Committee to read it in detail, the clause—as the rubric shows—is directed towards avoidance of cross-subsidisation. Cross-subsidisation is defined in the clause as meaning,
"the unreasonable allocation of costs by the supplier when fixing tariffs and charges".
The evil which the clause seeks to avoid is the possibility of unfair competition arising through the unreasonable allocation of costs between different kinds of business which the gas supplier is to carry on.
Perhaps I may divide it into two classes of business—the regulated and unregulated. The regulated business is the supply of gas to a vast number of tariff companies. The unregulated business is a number of different kinds of business. It is clearly possible for the gas supplier so to divide his costs that there would be unfair competition with regard to those who are customers in the unregulated business. He would, in effect, be charging a disproportionate amount of his overhead expenses and costs, for example, to the regulated market, thereby increasing the charges to the vast number of tariff consumers. He would then be in a position to compete unfairly with the unregulated market.
I hope that I have made the position clear. It is simply a question of unfair competition arising where one has a private monopoly of this kind. It is an evil which this new clause seeks to avoid, and I hope that the Government will look upon it with favour. I beg to move.
I have listened carefully to what the noble Lord, Lord Diamond, has said. Perhaps the Committee will bear with me if I go into a little detail in my reply, because it may save us time later if I explain fully the position.It is important that there should be proper safeguards against unacceptable behaviour by a gas supplier damaging to the interests of the consumers or competitors. I therefore welcome the opportunity provided by the new clause to talk about cross-subsidy. I believe, however, that the Bill and draft authorisation already meet the concerns of the noble Lord, Lord Diamond. First, let us consider the tariff market. In addition to the specific provisions in the Bill protecting tariff consumers, including the provisions relating to no undue preference, there is direct control over prices by means of the price formula set out in the draft authorisation. The formula, monitored and enforced by the director, will ensure that there is no room for British Gas to manipulate prices. We have also provided in Condition 2 of the draft authorisation for the publication of the full accounts of the gas supply business. The director will have full information about and a clear role in the allocation of cost between gas supply and the other activities that British Gas undertakes. This will ensure that the accounts are properly drawn up and reflect the costs rightly attributable to the gas supply part of the business. As regards the contract market, there is strong competition, but we have nonetheless provided safeguards against anti-competitive behaviour generally, and this would include cross-subsidised predatory pricing. Here the Director General of Fair Trading has a role. Competition and fair trading legislation apply, and in addition there is specific provision in Clause 27 that the authorisation may be modified to take account of any order made by the Secretary of State following an investigation by the Monopolies and Mergers Corn mission. On appliance retailing and servicing, the corporation was the subject of a Monopolies and Mergers inquiry in 1980. As a result, British Gas reformed its accounting procedures. That demonstrates how fair trading law operates. The Director General of Fair Trading also looked at installation and contracting last year, when there were allegations of cross-subsidisation of work. Again, that demonstrates that there are proper safeguards to deal with anti-competitive behaviour. As we have built in full safeguards, the new clause proposed by the noble Lord is unnecessary. Although, as I have explained, cross-subsidisation to enable unfair and anticompetitive pricing is an abuse, a blanket prohibition of cross-subsidy (as the new clause would require) would not be right. It is important that British Gas should be able to provide free safety checks and undertake other essential safety work free or at below full cost. In view of what I have said and the explanation which I have given, I wonder whether the noble Lord is prepared to withdraw his new clause.
I wonder whether the noble Lord will clarify a point by reference to page 24 of the accounts of the British Gas Corporation for the year 1984–85. The noble Lord himself brought in the safeguards as regards the control alleged to be exercised by virtue of the formula itself, over any increases in the price per therm. I should like to refer the noble Lord to page 24 and to the operating costs for the year 1984–85 which are set out on that page. He will find there: salaries, wages and associated costs, 6·64p; replacement expenditure, 1·171p; other trading costs 5·48p; depreciation 2·03p; monetary working capital and costs of sales adjustments, 0·33p; and total operating costs per therm, 16·19p.Will the noble Lord tell me whether, in respect of any item incorporated in operating costs which are per therm—and I refer now to his formula amounting to 16·19p—there is any element there of costs that are not strictly allocable to the processing and distribution of gas? It is a simple question, and I should like his observations upon it because that would enable me at any rate to make up my mind to what extent the amendment put forward by the noble Lord, Lord Diamond, is necessary in the circumstances, bearing in mind the formula that we shall discuss at a later stage.
I do not think that the question that the noble Lord asks refers directly to the amendment that the noble Lord, Lord Diamond, has put down. What it refers to is something directly within the noble Lord's own profession. The kind of information that he seeks would depend largely on the kind of audit that is carried out and the kind of docket that is given. The figure that the noble Lord quoted to me may contain other items. I cannot guarantee that the figure that the noble Lord has picked out of the accounts of the British Gas Corporation is restricted solely to the relevance of this amendment. As the noble Lord knows only too well, in a set of accounts you cannot specifically say of a miscellaneous group of figures that they are isolated to one particular issue. They may include a number of different items.
I am anxious not to take advantage of the noble Lord in this respect. The noble Lord referred to the ratio mechanism described in this apparently abstruse series of formulae which have been incorporated in the authorisation. The noble Lord put that forward as being some safeguard against there being any possibility of cross-subsidisation; otherwise I should not have risen to my feet on the subject.It is not an auditing matter. It is a purely management and indeed a government matter. These figures are charged as operating costs in respect of the processing and supply of gas as distinct from its prime materials and their cost and the gas levy, to which we can return at a later stage. I want a general assurance—which is not a matter of audit but a matter of management and a matter of government knowledge of how the thing works—as to whether these operating costs are strictly attributable to the processing and supply of gas to the customer. That is the only question I have to ask. It is not a technical matter requiring any highbrow auditing or accounting ability. It is purely a question of fact, the answer to which I should have thought the noble Lord would be able to supply.
I certainly call supply it. The answer is simple. The answer is "No". You cannot give any guarantee. Good gracious the noble Lord is much more acquainted with reading balance sheets than I am, but when he picks at random—
Not at random.
—selected item or a selected group of items as he has done, I cannot give any guarantee that that is the only thing which is included in those figures. No, the answer is "No".
Then the noble Lord cannot give any guarantee about the formula?
I can give a guarantee about the formula inasmuch as it is set out in the appropriate part of the Bill. I cannot give a guarantee about a set of figures which the noble Lord produces in that way. The noble Lord has picked some, figures out of the annual accounts. If the noble Lord wishes, I shall look into this further and find out exactly what it contains; but I could not possibly give him the guarantee that he seeks at this time. With the greatest respect, it is substantially wide of the amendment which the noble Lord moved.
With the greatest possible respect this is not wide of the amendment because the noble Lord himself adduced the formula as a protection. These items to which I have referred apply to specific categories within the formula. If the noble Lord looks at the Select Committee report of another place at Appendix 2 he will find out that these figures are also picked out there as illustrating the working of the formula. It was the noble Lord who brought in the formula. I am merely seeking some reassurance from him as to the working of it in regard to the cross-subsidisation factor that was referred to by the noble Lord, Lord Diamond.I have no desire to take advantage of the noble Lord in this matter. I am quite content not to receive the answer now, but I should like an answer to it because until the noble Lord spoke I was beginning to look with a little scepticism—if the noble Lord, Lord Diamond, will forgive me—at his amendment. Now I am beginning to wonder whether I ought to support his amendment because I do not think, as I am at present advised, that the formula gives the degree of protection which the noble Lord indicated that it did. That is all.
The noble Lord has chosen one set of figures out of the hundreds of figures which would be available to him in the annual report. I have said that I will look into this and that I shall let him know what is included in those figures.
I am most grateful to the noble Lord for the very full answer which he gave in the first place. I assume that the noble Lord, with his usual courtesy when he writes to the noble Lord, Lord Bruce of Donington, will be good enough to send me a copy of his letter.The trouble is that at this hour of the morning one's intelligence is working at such a low level that at the moment I cannot see the catch in what the noble Lord the Minister has said. It seems to me that he has given me a very reasonable answer to the problem I raised. It seems to me that he accepts that cross-subsidisation is something to be avoided, except for the very narrow area he mentioned where certain activities are undertaken at no charge to the customer—one can understand the reason for that—but that in other respects provisions both within the Bill and other Acts with reference to fair trading and to the MMA to which he referred give the protection which the clause seeks. I did not read out the details of the clause because it was not necessary at that point. However, at this stage I am bound to say that in subsection (2) of the proposed new clause there is detailed reference to the documents, accounts, estimates, returns and other information that the director may require to satisfy himself that there is no cross-subsidisation. I was not absolutely sure when listening to the noble Lord that there is adequate provision of that information in the protective clauses to which he was referring, so I must repeat my gratitude. I shall consider most carefully what the Minister has said in Hansard at a more reasonable hour of the day and beg leave of the Committee to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 11 [ Power to require security]:
moved Amendment No. 88:
Page 11, line 14, at end insert—
("and such security shall not exceed one-twelfth of the anticipated annual payment for supply of gas.").
The noble Lord said: Clause 11 of the Bill is concerned with power to require security, and Amendment No. 88 would seek to limit that security to one-twelfth of the anticipated annual payment for the supply of gas. It also seeks to ensure that what is known, I suppose, in the trade as "red lining"—that is to say, the practice of demanding substantial deposits in areas where there is a poor record of payment—cannot occur.
It is not unknown for the fuel boards and for British Telecom to ask for very high deposits, and in fairness to those bodies I should also say that other traders do likewise in similar circumstances, though perhaps they say less about it. Such disadvantaged customers living in or moving into red-lining areas are those who cannot generally afford to live elsewhere and they may therefore suffer from the poor payment record of their predecessors.
What the amendment does is ensure that the public gas supplier has a stated policy about the level of deposit which would enable new consumers to know their likely out-go on moving in and to plan accordingly. I am sure that, at whatever level of society we find ourselves, we are all aware of the pressure on cash resources when moving house. A stated policy of the kind suggested should not be difficult for a public gas supplier to achieve.
The British Gas Corporation already has a profile of average use. Various gas regions also produce guides as to therms used by consumers on an equipment basis; so that it should be possible to draw up a kind of ready reckoner of the sort of equipment in individual homes and base a scale on such ready reckoners. For those reasons, I feel that the amendment is reasonable and I hope that the Government, if not able to accept it, will at least say something favourable about it and in this connection I am also aware that Amendment No. 100 has a distinct bearing on the same problem. I beg to move.
I fully recognise the concern which the noble Lord has expressed, that the less well off in our society should not be able to take advantage of their entitlement to a supply of gas because they are unable to find the necessary security payment. We understand the anxieties to which the need for security payments gives rise. At the same time, we have to recognise that the Bill, like current gas legislation, places onerous supply obligations on public gas suppliers and there has to be a counterweight to those. Security payments are one.The noble Lord, Lord Gallacher, does not seek to remove the right to require security altogether in relation to customers entitled to a supply under Clause 10 of the Bill. Clearly he recognises that where a customer has a poor payment record, or no record at all, it is not unreasonable that a public gas supplier should be able to obtain security in respect of charges which are likely to arise. But this security must be realistic. The noble Lord is seeking to limit security to no more than one month's charges, which would not even offset the charges due at the first meter reading. It is really all a question of balance. There is of course no fixed amount or formula specified in the Bill with regard to security payments and ultimately it would be for the director to determine whether or not an amount demanded was unreasonable, in enforcing the public gas supplier's duty to supply under Clause 10(1). We consider this to be the right approach to deal with the amount of security deposits; in other words, leaving it ultimately with the director to decide. Therefore, I hope that the noble Lord will accept my explanation.
I very much hope the Minister will reflect upon what he has said. He has enormous confidence in the director being able to reach the right balance. The Minister has pointed out that the clauses in the Bill, quite properly, talk in terms of security, but my noble friend Lord Gallacher points to the reality. There are many thousands of families, if not hundreds of thousands, who find it hard to find more than what is asked for in this amendment—that is, the average of one month's supply of gas.One reason why the Minister resisted this was not merely the principle of specifying but because that which was asked for would be unrealistic. That was the term used. The Minister must therefore have some idea of what is realistic. We are talking about people who may be feckless and who certainly will be careless, but who also in many instances will be unlucky. There are sections of the community who are unlucky. What this amendment is seeking to do is to limit the amounts. The Minister can accept from me, as he can from many other Members of Parliament or public representatives with constituents at one level or another, that there are people who would find anything which he might find realistic to be very unrealistic. The reality of life as it is lived at a certain level is very different from that which the Minister and perhaps those behind him find it to be. All the amendment is asking the Minister to do is to put a floor—not a ceiling—below which the supply will not be given unless a minimum payment is made. I think this is a very reasonable amendment. The Minister feels that all can be left to the director. I do not think it can. And even if it is left to the director I see nothing wrong in some indication being given to him as to what Parliament believes is a reaonable amount. We are asking for humanity: not compassion, but humanity. I see that the spokesman for humanity on the other side is ready to leap to her feet.
Funnily enough, I do not intend to approach this at all in the way the noble Lord, Lord Graham, seems to expect. I happen to be on the London Electricity Board, and the major worry for them is bad debts; and the major reason for that is people who move from address to address without notifying a change. It is not a case of poor unfortunate people in the majority of cases. This represents many millions of pounds every year just in the London area. It represents a sum of such size that it has an effect on every other consumer in the London area.The bad debts problem is something that no one has been able to solve. Therefore, I think that to suggest limiting it to one month's supply—or one month's anticipated supply, let us remember, because it might be that the anticipated supply is exceeded many times by the actual usage—would be inadequate. As was said, when the quarterly bill came in it could be that there was no money to meet the other two months because the person had deliberately vanished. Where these deposits are demanded, certainly in terms of electricity supply (and I am sure it is the same with gas), are cases where the consumer cannot be identified, where the consumer is simply unknown. This is the real difficulty: getting hold of a consumer and being able to make sure that that person is related to a supply at an address. That is why you have to ask for security, and I think it is very important in the interests of consumers in general. The point was made about consumers moving from house to house and being in difficulties because it is hard to meet expenses at the time of moving, but that is not the situation. If that consumer was someone who had his bill paid up-to-date and notified where he was moving from and going to, there would be no question of security being asked for. The security is asked for only if the person has a long-standing bad debt record or is completely unknown and unidentified. Therefore, I do not think that the asking of a security is unreasonable, and I do not think the asking of a security equal to three months' anticipated usage, where it is a quarterly meter that is being installed, is unreasonable either. But this amendment which is for only one-twelfth, or one month's supply, could result in an increase of bad debts which would be against the interests of all other consumers, as has proved to be the case in the electricity industry.
I am not very happy that the contribution that has just been made by the noble Baroness, Lady Gardner of Parkes, touches the problem raised in this amendment. Of course there is a problem of people moving from address to address, and that has created, as the noble Baroness said, a continuing and regular problem to which no solution has been found. But just as she is anxious that the innocent should not pay for the defects of the guilty by having too small a deposit, we are anxious that the same thing should not happen through those who are in permanent residence having to pay for those who move from residence to residence and deliberately try to avoid payment of their gas bill.I find that the amendment is a reasonable one. It is proper that Parliament should take a view. It should not leave everything to an individual to make a judgment—after all, we have our responsibilities and we must stand up to them—and should say what the maximum security should be. It is a different issue of people moving, and to that one would have to direct one's mind in the legislation, if it was a legislative matter. But that is not essentially the problem which we are discussing at the moment. We are discussing the maximum security that should be given, and I find the figure in the amendment reasonable. If the noble Lords who are responsible for the amendment take the same view, I shall be very happy to support them.