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Dr. John Cunningham: Read that again.
Mr. Heseltine: Yes, I will. If the right hon. Gentleman cannot understand that, I shall be happy to read it again. The words are in the Opposition amendment and I thought that Opposition Members could read their amendments. It
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is clear that the right hon. Gentleman wants an opportunity to discuss recent pay awards and option schemes in British Gas. That is a legitimate thing for him to do and I am not complaining. He did not hear a word of protest from me. I am merely putting that subject on the agenda, so that when he gets up and does so, it will come as no surprise. Indeed, it might even encourage some of my hon. Friends to hang about to hear what the right hon. Gentleman has to say--not that he will not have said it all before.Nevertheless, I want to deal with that matter seriously. It is suggested that the regulator should be able to impose pressures on gas industry prices to deal with unjustified salary and share options awarded to senior employees. The House will want to know that the turnover for British Gas is £9.698 billion--nearly £10 billion. Total board pay and share options are under £10 million, which works out at 0.09695 per cent. of turnover--less than 1,000th of total turnover. Worked out in terms of the effect on the average domestic customer, it means that if there were no directors, stock options or bonuses, the price to that customer would be reduced by 50p a year. British Gas has succeeded in bringing down prices by 20 per cent., which is £77 for the average domestic customer. So, if one got rid of all the senior directors, bonuses and options and did not replace them, one would save 50p--for a board of directors who have saved customers £77 a year.
I have this question for the right hon. Member for Copeland. Will he not replace that remuneration? Will there be no directors? Where would he recruit them, what would he pay them and how much would that take back from the 50p that he implies would be saved? Does he really think that he could run British Gas and all those other companies with no directors and no cosy soft jobs for pensioned-off trade unionists? He had better not tell them that this side of a general election campaign.
The Opposition are trying desperately to confuse the public about the transformation that they are trying to bring about in Labour party policy on the issue. That policy lacks any credibility because they have had to abandon--or half of them have had to
abandon--everything that they have ever believed in on the issue. That is a slight exaggeration, because some Labour Members have certainly not abandoned those beliefs.
I have before me a reference to the hon. and learned Member for Leicester, West (Mr. Janner), who is rather keen on advising people about remuneration. I understand that he is making a killing out of advising directors in the private sector about stock options and remunerative packages-- [Interruption.] I am not complaining, but observing that a member of the Labour party is making a killing out of all that. Having done so, in another capacity he is teaching them to present themselves as well as possible, in a friendly and smiling fashion on television, to rationalise and justify to the British people the remuneration packages that he has told them how to get-- [Interruption.]
Mr. Deputy Speaker: Order. I hope that the Secretary of State warned the hon. and learned Member for Leicester, West (Mr. Janner) that he intended to refer to him. There is a code in the Chamber, which Madam
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Speaker has re-emphasised, that if hon. Members are to be referred to, they should be done the courtesy of being forewarned.Mr. Heseltine: I respect that judgment, Mr. Deputy Speaker. I shall convey to the hon. and learned Member for Leicester, West the fact that I did not give him warning and that I have referred to that matter. As it has been in national newspapers and as he has set himself up as an authority on the matter, he might have come to the House today to participate in the debate. He is an endangered species--he is hunting with the hounds and with the hares. He jolly nearly got himself outlawed in the House a week ago.
The Opposition amendment reveals that the Labour party has been forced to abandon its opposition to privatisation. It has been forced to recognise that every Government of any significance in the world are moving in the direction that this Government pioneered. Labour Members know that that is in tune with the mood of the people and that is why they have abandoned their long-held views.
Conservative Members have long-held views on the strength of the private competitive world, which offers better services, and is the most effective on quality and prices. We stick to our views and we will stick to this legislation.
4.59 pm
Dr. John Cunningham (Copeland): I beg to move,
That this House declines to give the Gas Bill a Second Reading because it believes that the Bill fails to provide effective safeguards for consumers against the deleterious consequences of deregulation of the domestic gas market; is damaging to the interests of many sections of the population, including elderly people, those with low incomes, and those living in South West England, Wales and other parts of the United Kingdom distant from beaching points; fails to provide adequate resources for health and safety monitoring of the implications of deregulation; does not require suppliers to provide the financial surety necessary to guarantee security of supply to consumers; does not address the question of regional electricity companies attempting to enter the gas market; fails effectively to emphasise the need for energy efficiency; and omits any regulatory provision to enable price cuts to consumers where there are unjustified salary and share options awarded to senior employees. We have just listened to a predictable rant by the President of the Board of Trade, which is now his everyday performance when he comes to the Chamber. On this occasion, as on previous occasions, we give him two out of 10 for content but slightly higher marks for artistic impression, except when he resorted to a squalid attack on my hon. and learned Friend the Member for Leicester, West (Mr. Janner) without doing him the courtesy of notifying him in advance. It is indicative of the depths to which the right hon. Gentleman has descended that he should do that despite the recent admonishment of Madam Speaker about such personal attacks in the Chamber. The President of the Board of Trade had a lot of say about many matters except the Bill. That is not surprising because, when he talked about the Bill, he demonstrated that he knows little about its implications. Even when the Minister for Energy and Industry whispered the answers in his ear, he confused some of his responses, as I shall demonstrate in a moment.
The right hon. Gentleman talked about 1985 and 1988. We could all remind him where he was in 1988. He was writing a book called "Where There's a Will", which was
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deeply critical of the Government's policies. It was all about intervention, doing more to support British industry and creating jobs. No one has done a bigger flip-flop than the right hon. Gentleman since coming back to office, except possibly his colleague who has just been appointed a Minister having travelled from the Labour party, through the SDP, to the Conservative Benches.Ms Angela Eagle (Wallasey): Does my right hon. Friend agree that, as the President of the Board of Trade had nothing to say about executive pay except to justify it, he seemed to be at odds with the Prime Minister?
Dr. Cunningham: My hon. Friend is right. I do not know whether the President noticed, but, in the middle of his pathetic rant, even the chief executive of British Gas walked out. So I do not think that he has convinced many people in the Chamber or elsewhere by his performance today.
Mr. Graham Riddick (Colne Valley): They are all going now. [Interruption.]
Mr. Deputy Speaker: Order. For the record, no one who should be here has walked out.
Dr. Cunningham: It is a pity about the President's performance because this legislation is not only complex but important as it covers the safety and security of the supply of gas to many millions of people. The Bill comes at a time of huge public dissatisfaction with the Government's privatisation policies and the conduct of those in charge of privatised industries. It comes at a point when public and political mistrust of the powers, duties and performance of industry regulators is high and widespread.
That the Bill is before the House at all owes more to the humiliating failure of the President of the Board of Trade to convince even his colleagues that the Post Office should be privatised than to any other reason. His isolation on that issue was further confirmed by the report of the Select Committee on Trade and Industry last week.
The Bill's complexity, with 17 clauses, six schedules and some 68 pages of detailed proposals, is predictable enough, but much has been left out of the Bill and will be known and understood only when licences for gas suppliers are published. It is typical of this Government that they invite the House to accept the proposals in the absence of vital information in those licences. A second criticism is that the Bill leaves too much to the interpretation of the regulator. At a time when the regulatory regime has been found wanting, that is completely unacceptable to us.
Dr. Hampson: Does the right hon. Gentleman accept that the Trade and Industry Select Committee, which has a Labour chairman and produced a unanimous report, said that British Gas should be deregulated as rapidly as possible for the sake of domestic customers, and that we were leading the world in terms of consumer choice at the meter? Does he also accept that the Committee agreed unanimously that there would be lower prices for customers, wherever they were in the United Kingdom and, in particular, that private competitors to British Gas
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entering the market have even talked of abolishing standing charges? Does he, as Labour party spokesman, accept each of those points?Dr. Cunningham: No, I do not, and I shall come to the Select Committee's recommendations a little later.
Mr. Spearing: Will my right hon. Friend give way?
Dr. Cunningham: I shall give way to my hon. Friend in a moment. It is well established that there has been widespread disagreement between British Gas, Ofgas and the Department of Trade and Industry about the Bill. That no doubt accounts for the absence of information on the suppliers' licences today. In many respects, the proposals are simply a leap in the dark. Last December, the Trade and Industry Select Committee concluded--I shall quote rather than paraphrase, as the hon. Member for Leeds, North- West (Dr. Hampson) did, from the report:
"We found no correlation between competition in the industrial market and what is envisaged for domestic supply, and could find no parallel examples abroad".
The Committee went on to say:
"We could find no hard evidence to suggest that competition as currently conceived would deliver substantial reductions in gas purchase prices".
Those are two conclusions of the Trade and Industry Select Committee.
Important questions have been raised about fundamental aspects of the Bill by all the leading consumer bodies, the Gas Consumers Council, the National Consumer Council--
Dr. Hampson: On a point of order, Mr. Deputy Speaker. May I register the fact that the right hon. Gentleman has misinterpreted a Select Committee of the House by quoting passages entirely out of context--
Mr. Deputy Speaker: Order. That has nothing to do with the Chair. Hon. Members' interpretation of other hon. Members' speeches is entirely up to them. There are plenty of opportunities in the House for hon. Members to make corrections.
Dr. Hampson: Further to that point of order, Mr. Deputy Speaker.
Mr. Deputy Speaker: Order. I have ruled on that matter.
Dr. Cunningham: The hon. Gentleman seems to be about to take leave of whatever senses he has left.
Mr. Spearing: A few moments ago, my right hon. Friend mentioned the Bill's unexpected consequences. Is he aware that, in Bromley by Bow in my constituency, we have a depot containing 20,000 spare units in multiple for gas consumers throughout south-east England? A year ago, the depot was to be expanded under an efficient British Gas; it is now to be closed consequent on the requirement of competition. Does not that show that
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safety and consumer satisfaction will be reduced in south-east England, with redundancies and the closure of that depot?Dr. Cunningham: Yes, my hon. Friend is right. That closure was announced on 1 January this year.
Mr. Robert Banks (Harrogate): The right hon. Gentleman has misled the House. May I quote from the conclusions of the Select Committee on Trade and Industry, which clearly say:
"There will be benefits to consumers from the increased choice and lower costs flowing from the liberalisation"--
Mr. Deputy Speaker: Order. If I heard the hon. Gentleman correctly, he said that the Opposition spokesman had misled the House. I must therefore ask him to withdraw that phrase.
Mr. Banks: Perhaps I should have said "misquoted" the Select Committee report. May I point out that the conclusions clearly show that the Trade and Industry Select Committee recognises that there will be advantages to consumers from competition, and lower prices for consumers. It is as clear as a bell.
Dr. Cunningham: I quoted the report of the Select Committee and I stand by that.
Dr. Hampson: Misquoted. It was out of context.
Dr. Cunningham: The retention of the Gas Consumers Council is to be welcomed. It is important that such a body, independent of the regulator, the industry and the Government, should speak out for gas consumers. The council will need to be especially vigilant in the proposed new competitive domestic market. It must be adequately funded.
The Select Committee and unions working in the gas industry, including the GMB, which sponsors me, have raised important questions. These concerns are reflected in the amendment. Briefly, they are matters of consumer protection, consumer safety, energy efficiency, standards in the industry, regulatory weakness, openness and transparency of government and regulator alike.
It is interesting to reflect on what British Gas thinks about these matters. I have a minute of a meeting called by Mr. Peter Sanguinetti--it is an internal memorandum--during December 1994. The minute reads:
"There were many comments about the problems caused by the executive and the board making decisions without considering the impact of their actions internally as well as externally. The inevitable conclusion is that we have the potential for a crisis just about every week for the next two months at least."
The memo with the minute refers to the withdrawal of services and shops, TransCo having problems with United, which is not paying its bills, the fact that almost 200 members of staff who now have no jobs will be encouraged to leave and TransCo no longer operating leakage survey teams. It appears that TransCo's staff will only go into homes and make the gas supply safe. They will not repair appliances. New debt and disconnection policies are foreshadowed for April. It is possible that disconnections will increase. Meter reading is to be contracted out. That is quite a contrast with what the President of the Board of Trade was saying about the
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maintenance of current levels of service by British Gas. He is completely wrong about that, as he was about many other things.Mr. Heseltine: It seemed that the right hon. Gentleman was not happy about the contrast between what he said and what the Select Committee reported. Is he aware that the conclusion reads:
"We believe that some further safeguards are required, but most of the fears now appear to have been unfounded or exaggerated, especially as regards the transitional period."
Why does the right hon. Gentleman--
Mr. Heseltine: Yes, I shall do so. The conclusion continues: "There will be benefits to consumers from the increased choice and lower costs flowing from the liberalisation of the domestic gas market, but the scale of the benefits and who would benefit is uncertain."
The whole--
Mr. Heseltine: Of course. The paragraph continues:
"Since the Government had already encouraged new suppliers to prepare for entry to the market, we welcome the fact that legislation is to be introduced to comply with the intended timetable, and we emphasise the importance of proceeding in accordance with that timetable".
How can the right hon. Gentleman continue producing canards when the Select Committee, which is chaired by the hon. Member for Sheffield, Central (Mr. Caborn), has patently stated that he is peddling "unfounded or exaggerated" half truths?
Dr. Cunningham: The right hon. Gentleman had better say that to the National Consumer Council, the Gas Consumers Council and the Consumers Association, all of which have raised the same questions in their briefings, which I assume have been sent to every Member of this place. I am not inventing threats or fears. I am merely expressing the views that are held by all the principal consumer associations--
Mr. Heseltine: Will the right hon. Gentleman give way?
Dr. Cunningham: I shall give way in a moment when I have finished my sentence, if the right hon. Gentleman does not mind.
Of course, there is a welcome for the proposals in principle, but questions have been raised about benefits to consumers and services to consumers, as I have been outlining.
Mr. Heseltine: The Second Reading of a Bill is about the principles that lie behind the Bill. As the right hon. Gentleman has now conceded that the Select Committee wants us to go on, as do all the consumer bodies, will he join my right hon. and hon. Friends in the Government Lobby tonight?
Dr. Cunningham: The right hon. Gentleman is strangely mistaken if he does not realise, after all his experience in the House, that we have tabled a reasoned amendment. He had a great deal to say about it but apparently he has not taken on board its implications. The
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jobs of thousands of workers are in question. Many of these people are highly skilled and experienced in safety and maintenance work on behalf of consumers.Section 10 of the Gas Act 1986 contains an obligation to provide a gas supply. That obligation has been replaced in the Bill by a requirement merely to connect premises to the network. The omission of a statutory obligation to supply any consumer who requests that that be done seriously diminishes consumer protection. That, too, is the view of consumer organisations. People should have the right of supply regardless of who they are, what their income is, where they live or how they pay. The Bill gives no such guarantee. It is said that the obligation to supply will be included in licences, but they will be subject to change without the consent of Parliament. That is unacceptable to my right hon. and hon. Friends because we believe that consumers' interests and protection should be at the heart of the Bill. We know from recent events in the electricity industry that shareholders' interests have been paramount in the view of industry chiefs and of Ministers. That attitude should not be replicated in the gas industry.
Consumers and regions throughout the country must be fully protected from discrimination by suppliers. There is the so-called cherry-picking threat. The problem is not comprehensively eliminated by the proposals that are set out in the Bill. Why is a legislative obligation not placed on suppliers completely to prevent discrimination against elderly people, people with low incomes and areas of the country that are deprived and contain many unemployed people?
Consumer protection should be a primary duty of the Secretary of State and the director general, but as the Bill stands that is not so. It is vital that everyone has access to clear and concise comparable information on tariffs. Prices in terms of supply should be presented in a standard form by all companies so that consumers can make an informed decision, or they may well make the wrong decision. The dangers of misleading information and unfair terms are well documented in consumer affairs.
Clause 2 appears to make public safety subject to section 4(1) of the 1986 Act. That should not be so. The duty to secure effective competition should not override safety for the public. There is worrying evidence about the rising number of accidents involving gas poisoning, which reached record levels in 1994, according to the Health and Safety Executive.
British Gas apparently intends to withdraw from the installation and service market for all domestic appliances other than space and water heating. That contradicts what the President of the Board of Trade said. It intends to cease stocking parts for cookers, fires and other appliances, as my hon. Friend the Member for Newham, South (Mr. Spearing) said in his intervention. These are matters that cause us considerable concern, especially when the Gas Consumers Council, in its 1993 annual report, stated:
"Proven incompetence does not yet appear to result in automatic removal of an installer from the Corgi register."
Even when companies are shown to be incompetent in matters of maintenance and safety they are allowed to continue providing a service to consumers.
Nor is there any statutory requirement for individual gas operatives to hold a certificate of competence. Of course, that would never be the case at British Gas with its service and maintenance arrangements. The reality, in
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contradistinction to what the President of the Board of Trade argued, is that the whole culture of gas safety is being revised by the proposed legislation. In future, TransCo will simply make safe or turn off the supply rather than effect comprehensive repairs or replacement. Hitherto, British Gas set and policed the safety standards. That will end with the proposed legislation, if enacted. The social care obligation is also changed by the proposals. We discussed and exchanged views, during the President's speech, about free safety checks being retained. We shall certainly pursue that matter again in Committee. Labour Members were not convinced by what he said about free safety checks being retained and that an automatic three-year safety check would be retained for elderly and disabled people. Will home service advisers continue to give special help to consumers who are blind, elderly, frail or disabled? The right hon. Gentleman said that no change was envisaged. He seems blithely unaware that the number of home service advisers has already been cut by 60 in advance of the legislation. How can he tell the House that those services will be maintained when the number of home service advisers is being so dramatically reduced? He clearly does not know what he is talking about. Those are vital questions and we have just demonstrated that the right hon. Gentleman does not know the answer to them.I can go on. British Gas made clear, in a memorandum in December last year, its decision to review the current provision of adaptors for gas appliances and its intention to review the provision of Brailled controls for gas appliances and to withdraw its literature that is currently available in Braille. So much for the right hon. Gentleman's assurances to the House that no detrimental changes were envisaged.
We have seen the problems that the President of the Board of Trade got himself into over the electricity industry, and the hostile bid for Northern Electric. On Monday 20 February, in this Chamber, he misled me and the House over his power to veto in relation to the actions of Office of Electricity Regulation. The right hon. Gentleman was good enough to write to me on 24 February to confirm that he had misled me in the House on that occasion. Since this is a complex matter, I was quite prepared to accept the apology that he gave in his letter. He placed on record in that letter what he should have told me about his duties and responsibilities in that letter. I have it here, but will not detain the House by reading it out. The right hon. Gentleman appears in the proposed legislation to be giving himself the same powers as the Director General of Gas Supply, who has the power to refer to the Monopolies and Mergers Commission, as he has already done with the Director General of Electricity Supply. Why does he want the power? Why does he believe it necessary? If he envisages using the power, will he announce to the House his reasons for it? We are entitled to some explanation on that issue, too.
Mr. Alex Salmond (Banff and Buchan): The right hon. Member for Copeland is correct. These are vital matters of principle. I know that the right hon. Gentleman has
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tabled a reasoned amendment, which I shall be happy to support, but given the importance of these matters, will he be voting against the Bill itself?Dr. John Cunningham: No. We shall be voting on our reasoned amendment, for the reasons set out in it and in the context of reservations about the proposed legislation. That is our position. The Government are apparently so uncertain of the consequences of the proposals on consumer prices, safety and the industry that they have agreed to a trial. That decision is welcome, especially as so many organisations share our concerns about the Bill. It is clear that the Government dare not proceed with their original grandiose plans to introduce the proposals nationwide all in one go. But apparently, according to the proposed legislation and the associated literature, the trials are to be confined to operational efficiency. As the all-party Trade and Industry Select Committee said, in paragraph 60 of its first report:
"It would be pointless to have a transitional period unless there is full assessment of its consequences and wide consultation, including parliamentary scrutiny, before further steps are taken." The Labour party strongly shares that view.
Recent experiences of privatisation, competition and regulation have shown that regulation is weak and has been ineffective in protecting consumers. Privatised companies put shareholders first. They do not fully disclose all the details of their financial circumstances to regulators and, as we have seen in electricity supply, consumers have been overcharged for years.
The Director General of Gas Supply will have many gas companies to regulate. We cannot be confident of success, especially as recent experience in the gas industry shows that, from December 1986--since privatisation--to January 1995, the price of gas, as measured by the retail prices index, has fallen by 16 per cent. But the price of gas, based on the producer price index, has fallen by 40 per cent.--more than twice as much. The consumer has not received commensurate benefits from that reduction. The consumer has not had the good deal that the right hon. Gentleman was trying to claim that he has had. These proposals come at a time when, in Britain, inequality is worse than at any time in the past 50 years. As the Rowntree report showed, in the past 15 years, inequality in the United Kingdom has grown faster than in any other industrialised country, with the exception of New Zealand. One in four people now lives in a household with an income below half the national average. The bottom tenth of the population is 17 per cent. worse off after housing costs than in 1979. The distribution of income is more unequal today than at any time since the war. In addition, as the British Medical Association reported last week, the widening health gap between rich and poor is a direct result of the Government's wrong priorities and unfair policies.
In the monopoly market, the additional costs to British Gas of quasi-social obligations for all those on low incomes, elderly and disabled people, have been spread across the whole consumer base. Will those costs now be recovered from vulnerable consumers or will they continue effectively to be shared? I raised that issue when I intervened during the speech of the President of the Board of Trade. I was not convinced by his answers.
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As the right hon. Gentleman said, the Bill does nothing to end excessive salary and share option abuses. I wonder whether the right hon. Gentleman agrees with the Prime Minister, who, in answer to my right hon. Friend the Leader of the Opposition, said:"Yes, I do find these payments as distasteful as the right hon. Gentleman-- as do, I dare say, many other people as well . . . I believe that they bring the system into disrepute."--[ Official Report , 28 February 1995; Vol. 255, c. 837.]
Today the President seemed to be sweeping all that aside in his apparent acceptance of this. Here is the first opportunity for the right hon. Gentleman to act to end those abuses that the Prime Minister finds so distasteful, and he does nothing. There are no such proposals in the Bill. There are no powers for the regulator to cut prices where abuse occurs, to call directors and executives to account. Does the Prime Minister, sorry, the President--I beg his pardon, but we know that he would like to be Prime Minister--approve of Mr. Giordano receiving £450,000 for a two-day week as part-time chairman of British Gas? Does he approve of Mr. Cedric Brown's share options? Does the President realise that, if the recently announced British Gas incentive scheme had been in operation, Mr. Brown would not have qualified for a single share on his or his company's performance over the past three years?
The total productivity of British Gas showed almost no improvement between 1989 and 1994; yet Mr. Brown, Mr. Giordano and their colleagues awarded themselves more than 1 million share options over that period. That was based neither on the company's performance nor on their own performance, and under the new incentive scheme that they have introduced not one of those shares would be available to them on merit. When the share options are set beside the company's performance, they are shown to be completely undeserved; yet the President of the Board of Trade remains silent.
The right hon. Gentleman supported Mr. Brown when the news first broke a few weeks ago. Is that still his position? Would he like to tell us? Is this not all too typical of the present Government?
Mr. Heseltine: What I supported--on a Monday morning edition of the "Today" programme, if I remember rightly--was the announcement by the new chairman of British Gas, Dick Giordano, that he did not want a hidden regime in British Gas. He did not want executives to receive bonuses and share options that added up, in large measure, to what looked like a salary. He therefore put together a remuneration package for Cedric Brown that enabled him, instead of receiving bonuses on top of his salary, to receive a salary that included those bonuses.
That led to a second stage--the increase in salary, which I believe was £75,000. I am the first to recognise that that is a large sum, but the increase was portrayed as an increase in the basic salary to which the bonuses had been added--an increase of many hundred per cent. I said on "Today" that I thought that the chairman was right to create an open regime, enabling everyone to see what was happening; but I have also said many times, in the House and in public, that the Prime Minister is right to be concerned about such matters. I still believe that, which is why I welcome the establishment of a committee under Sir Richard Greenbury to examine the position.
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I leave the right hon. Gentleman with a question that he will not want to answer. If he could fix the salaries of all directors of utilities, including British Gas--which he implies that he would like to do--how much difference does he think that that would make to the cost of gas to the customer? I calculate that, if no directors were paid, 50p a year would be saved. How much does the right hon. Gentleman think that he would save?Dr. Cunningham: The public want action, regardless of whether it makes any difference to their gas bills. The right hon. Gentleman does not seem to recognise that the public are fed up with seeing these people--I shall deal with the others for whom he is responsible in a moment--rip them off and make themselves rich in ways that are unconnected with their performance.
The right hon. Gentleman seems not to have heard what I said. British Gas's total productivity showed almost no improvement; how could anyone qualify for a bonus when it had not been earned? How could those people justify giving themselves more than 1 million share options for which they would not qualify under the new regime that they themselves have introduced? How does the right hon. Gentleman defend that?
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