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Ms Church: I very much welcome the fact that a number of my constituents in Dagenham are now able to pay by direct debit and get a saving on their gas-- [Interruption.] I must tell the Minister that, in my constituency, far fewer people than in his constituency or those of other Conservative Members are able on economic grounds to take advantage of paying by direct debit. It is our constituents who are suffering from the changes in the pricing structure of British Gas. It is our constituents who will suffer as a result of the Gas Bill. I welcome the Minister's intervention, because I welcome the opportunity to tell the people of this country just what the Bill will mean for them.
The Bill is seriously flawed-- [Interruption.] The Minister may laugh, but he will find out what the flaws are soon enough. That does not worry Conservative Members, a good many of whom--one can see it already in their faces--will not be here after the next general election, when these measures come into full force in 1998, when the so-called competition takes off. Others among them who may be here after 1998--I doubt whether there will be so many of them--know that they will be sitting on the Opposition side of the House. Labour Members know that we will be sitting over there, picking up the pieces if this flawed Bill becomes law. We know how difficult it will be to address the inequities that the Bill will introduce. The Financial Times leader of 3 March summarised the situation perfectly when it said that the
"Bill leaves too much of importance to the suppliers' licence, and so to the interpretation of the Regulator. It has placed an extra burden on the utilities' regulatory regime, at a point when its achievements and powers are already under question . . . In particular, the implications for pricing remain obscure." It would be churlish not to welcome the Government's climbdown from their much-heralded free market dogma, when clause 6(6), to which my hon. Friend the Member for Wallsend (Mr. Byers) has already referred, states:
"The area of the licence may not artificially exclude an undue proportion of premises likely to be owned or occupied by elderly persons or persons who are disabled or who are likely to default on the payment of charges."
The key question, however, is what will be considered as artificial? Will it be considered as artificial if firms choose to supply only to the wealthier cities or boroughs, or if they choose to ignore regions of high unemployment or choose only the areas that give the highest returns? The fact is that the two
objectives--protecting the poor and promoting competition--are absolutely irreconcilable. In a competitive environment, profits can be made only by attracting the custom of the wealthy while opting out of the more costly accounts of the less well-off. Wait and see. It is already happening.
Mr. Nigel Evans: I am enjoying the hon. Lady's rant, but what would she say to the people who have heard all
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this before? The Labour party came up with the same fears about British Telecom, saying that the poor who use public telephone boxes would not be able to use them because they would not be working, that no more would be installed and that the costs would go through the roof. The opposite has happened.Ms Church: And Conservative Members never listen, so we shall continue telling them. The hon. Gentleman does not know it, but my constituency has fewer people connected to the BT service than in almost the entire country. Why? Because they cannot afford the cost of connection to the service.
Mr. Stuart Bell (Middlesbrough): And installation costs are the highest in Europe!
Ms Church: I thank my hon. Friend for his assistance.
For the Government to deny that simple market truth is either plain incompetence or, at worst, a calculated deception. Because the specific terms have been left to the suppliers' licences rather than being included in primary legislation, the role of the regulator is critical to the market. Yet I was shocked last week to hear the Director General of Gas Supply maintain that it was her premise that she should not be mixed up in politics. Unfortunately for Mrs. Spottiswoode, she is mixed up in politics- -all consumers are not equal, but they all need gas. She should shut herself away with Orwell's "Animal Farm". Perhaps after that she might realise that some gas consumers are more equal than others--but not many of them in Dagenham, I fear.
The regulator cannot escape the fact that her decisions, her actions or her failure to act will affect the lives of people throughout the country. A regulator is not some hidden hand in a virtual world of licences, technical jargon and "undue proportions". A regulator is affecting the real world, the real lives and the real hardship of the British people.
Cross-subsidy is not some evil, unmentionable disease. It is about gas supply and fair gas pricing.
Mr. Tim Smith: Has the hon. Lady noticed that, since the regulator was established some seven years ago, the effect of the regulator's activities on the people whom she has been describing has been to reduce gas prices by 20 per cent. in real terms? Is that not a benefit to consumers?
Ms Church: Much of any gain that has been made has, of course, been made by the better off at the expense of the worse off. Relatively, the price of gas has fallen more for the better off than for poorer people. [Hon. Members:-- "No."] Hon. Members must believe that. It is due to the price structure that British Gas has introduced, which the Bill will perpetuate. [Interruption.] I shall explain--very simply, because the hon. Member for Croydon, South (Mr. Ottaway) clearly still does not understand. If people are able to pay their bills by direct debit, because they are wealthy and have a lot of money in their bank accounts, they will pay less per therm than my constituents in Dagenham, who cannot pay by direct debit because they
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have no money in their bank accounts. I am sorry that Conservative Members do not understand that, but it is a fact.Mr. Nigel Evans: As the hon. Lady knows, British Gas has already said that a discount will be available as soon as possible to those who pay in cash and on time.
Ms Church: Many of my constituents in Dagenham cannot pay their bills on time, because they are trying to pay for school meals, electricity and food from the local supermarket. They are living on income support-- living at subsistence level--and they cannot afford to pay their bills on time. Many, indeed, have prepayment meters and find it very difficult to make the payments. So what do they do? They turn their heating off. [Interruption.] I will continue, if the hon. Member for Ribble Valley (Mr. Evans) will let me. These are important points, and I am grateful to Conservative Members for giving me a chance to spell out the position because they do not understand.
Cross-subsidy and the obligations that we owe our fellow citizens do not bring tears to the eyes of Conservative Members. We should not be surprised at that, because they have spent 16 years widening the gap between rich and poor--committing increasing numbers of our children to living in poverty, and in cold and damp houses where their young lives are blighted by illness. I know that, because I see them in my surgeries every week. Conservative Members do not understand that mutual obligation, and do not recognise the society in which I want my children to grow up.
Undoubtedly, all this strikes Conservative Members as being a long way from the technicalities of the Gas Bill. That only demonstrates how little they understand or care about the consequences of their policies. Last week, the Director General of Gas Supply said of British Gas's gas care register, the free safety checks and British Gas's safety record:
"Some of it is right and we don't want to put that at risk". But what will be put at risk by the Bill? I should like to look at the gas care register of elderly and disabled people. As British Gas puts it, there will be
"extra help for those who need it".
British Gas now has 160 home service advisers, one for each 150,000 customers. Their job includes making home visits to
provide--free--adapter devices, advice on gas use and advice on cooking for some of the most vulnerable people in society. I gained first-hand experience of the value of such support services last Friday when I accompanied Erika Aldridge, a home service adviser, on a visit to an elderly disabled customer in Dagenham. She was offered a contour tap to enable her to ignite the sole means of heating in her small bungalow; for years she had not been able to turn it on properly, and lately she had not been able to click the switch into the ignition position.
The tap was not simply handed to that woman with the words "Grandma, get on with it." Erika Alridge kindly helped and encouraged her to use it, and after three or four attempts she was able not only to turn on the gas for her fire but to click on the ignition. As she did that, on her own, her face lit up with joy: she would no longer have to depend on a 70-year-old neighbour to come in every morning and help her light the fire. On that
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occasion, I also found out about "bumpons" and "knobbles". The Minister looks puzzled; I give way to him.Mr. Eggar: I am well aware of the various services that are provided. The hon. Lady, however, does not appear to be aware that the terms of the licence will place on independent gas suppliers a similar obligation to that currently placed on British Gas. What is she going on about?
Ms Church: The Minister is making my point for me. If those obligations are so important to elderly and disabled British Gas customers- -which they are--why is the provision not in the Bill? Why has it been stuck in the licence, with the result that adherence to the licence conditions will depend on the regulator?
Mr. Eggar: I am sorry to keep interrupting the hon. Lady. The reason is simple: the obligations currently imposed on British Gas by the Gas Act 1986 are also imposed in the licence. We are simply following precedent.
Ms Church: For decades, British Gas has carefully built up a professional service, but we know that the independent suppliers will not do that, because it would cost a lot of money. The idea of social responsibility in the provision of an essential service such as gas, the notion that there is a large social benefit to be gained from ensuring that our needy citizens are well looked after and the basic principle that we are one nation with mutual obligations and responsibilities are entirely alien to Conservative Members. The Minister needs to know that professionals like Erika do not come cheap. British Gas employs only people with degrees in home economics, and gives them substantial training. Not everyone has the right combination of personal qualities and technical competence to do such work. Given the cost--and there will be a huge on- cost--does anyone seriously think that the same standard of service will be provided by the independents? Where will be the incentive, in a competitive environment, to provide such service for the most costly and least sought- after customers? The Government have dramatically increased the number of elderly people living in the so-called "care in the community" system; they must understand that such policies elicit certain obligations.
The flaws in the Bill are too numerous to mention, but some questions need answers from the President of the Board of Trade. [Interruption.] The energy consultants Gas Strategies reported last week--the hon. Member for Falmouth and Camborne (Mr. Coe) obviously has not read the report yet-- that
"Significant imbalances between supply and demand are likely to lead to price instability."
What safeguards will there be for the consumer? The consultants also stated:
"It is inevitable that some of the thirty or so companies will pull out or be forced out of the gas business as it evolves." What proof of the financial strength will the regulator require before granting a licence? Will the regulator act promptly to deal with suppliers who take a chance in an unstable market and end up with no gas to supply? Will the regulator ensure that the price is directly related to the cost of supply for all new entrants? At what point will
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there be considered to be enough competition for the imposition of a levy to cross-subsidise and protect the more expensive customers? Why cannot the fundamental duty to supply be laid down in the Bill itself rather than in the licences? As my hon. Friend the Member for Stockport (Ms Coffey) pointed out, how can the regulator be considered to have adequate powers and independence when the Secretary of State can veto a reference to the Monopolies and Mergers Commission?The Bill is another measure that is entirely consistent with the Government's record: it will fatten up the rich at the expense of the poor. We all know, however, that it will be another nail in the coffin of this Tory Government--a coffin that is now well nailed down. The President of the Board of Trade thinks that he can get the Bill past the British people without a murmur of protest by promising lower gas prices, but he is wrong- -and, at the next general election, he and his Government will find out just how wrong.
7.59 pm
Mr. Alan Duncan (Rutland and Melton): The hon. Member for Dagenham (Ms Church) has given a lively and spirited performance which will earn rave reviews, at least from Conservative Members. We could not but perceive from her endearing little chuckles in the middle of her speech that part of it was a bit of an act. One does not have to go to a west end theatre for such an excellent performance but I fear that the theme of her speech and those of her hon. Friends cast them all as prophets of doom and gloom. Opposition Members were nit-picking rather than cherry-picking.
Ms Church: The hon. Gentleman has no sense of humour.
Mr. Duncan: The hon. Lady says that I have no sense of humour but I assure her that I enjoyed every moment of her speech and I congratulate her on it. I shall enjoy reading it.
In debating the Bill, the hon. Member for Dagenham and her colleagues have not been able to tell the wood from the trees. There are great advantages in the continuing advance of competition, and challenging the whole principle will deny to her and to my constituents the benefits offered by the gas and other industries. The House will be aware of my interest in oil. Two years ago, that interest spread to an interest in gas. The Minister will remember the small private Member's Bill that I piloted, aimed at deregulating the supply of gas to caravans. The regulations so liked by the hon. Member for Dagenham were stopping the sensible supply through pipes of butane and propane gas. Thanks to the co-operation of the Minister and the procedures in the House that apply on Fridays, caravan owners can now benefit from the supply of gas piped from tanks. We are moving from basically the same principles to a larger operation.
Mr. Peter Hain (Neath): The hon. Gentleman mentioned an interest in gas. Do he or any of his hon. Friends--perhaps I should more accurately say how many
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of them--have an interest in the competitor companies that will be invited into the market on such favourable terms as those in the Bill?Mr. Duncan: I am not aware of any such details. I am here to debate the principles of the legislation, not to listen to the usual complaints by the hon. Gentleman.
Some 30 years ago, Britain was principally fuelled by coal and oil and only partly by gas. It is now fuelled by oil, gas and coal, and the increase in production of North sea oil, much of which I say to the hon. Member for Banff and Buchan (Mr. Salmond) was not Scottish, coincided with the rise of Britain as a gas-producing country. In 1965, offshore gas had a mere 7 per cent. share of the market for energy. It is now 50 per cent.
The discovery, production and supply of gas has been a great success story and as the industry expanded, the nationalised company of the time could not cope with it. The Gas Act 1986 started the process of denationalisation. Inevitably, when transferring a massive nationalised concern with millions of household consumers to ownership by shareholders, there is a period of transition during which the nature and identity of the business is essentially a half-way house between nationalisation and full privatisation. It was right that in managing that transition, the Government ensured a proper regulatory regime. That was primarily to protect the consumer, within certain bounds and that is exactly what has successfully been done.
British Gas faced competition from the moment that the 1986 Act was enacted, initially for the supply from others to consumers of more than 25,000 therms a year and thereafter to consumers of more than 2, 500 therms. For those who do not appreciate such volumes, that is equal to the annual consumption of about four households. The regulator has successfully imposed a price regime corresponding to the retail prices index minus 4 per cent.
British Gas is not a monopoly. Since the 1986 Act broke up what was at that time a monopoly, about 60 per cent. of gas comes from other suppliers. There are 25 other companies supplying wholesale gas and among them are Alliance, Amerada Hess, Calor, Enron, South Wales Gas, Southern Gas, Sterling Gas and United Gas. All 25 companies are already competing with British Gas at a time when British Gas faces regulation and competition.
Mr. Michael Clapham (Barnsley, West and Penistone): The hon. Gentleman speaks about the introduction of competition to the domestic market and about the demand from companies which use gas to generate power. Is he aware that the supply-demand ratio may become insecure? The Bill contains no reference to who will be the supplier of last resort, and that could jeopardise the future.
Mr. Duncan: The hon. Gentleman has a point and it will be addressed in Committee. However, I shall deal with it now by saying that it is already addressed by the geographical pattern of licences. Anyone who applies for a licence for a geographical area will have no way in which to distinguish in supplying gas through the existing pipelines whether he is supplying a house containing a disabled person or in which the main earner has a low income. The distinctions which the hon. Gentleman and
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his colleagues have been trying to draw are entirely contrived and artificial. The guarantees for which he asks will be properly addressed in the detail of the licences in the same way as the licence held by British Gas properly addresses those matters. The hon. Gentleman should bear in mind that the benefits of privatisation are already massive.Mr. Duncan: I shall come to that in a moment. Let us look first at the basic price. The price of gas to the domestic household has gone down by 20 per cent. not just in money terms but in real terms since privatisation in 1986. We have the lowest industrial gas prices in Europe. The network supplying gas used to consist of cast iron pipes, but that has been upgraded. Verges are being dug up for the laying of yellow polyethylene pipes. Between £1.3 billion and £2.2 billion a year is being invested in the pipeline network. That would have been unimaginable under the nationalised system.
Much of the profit in British Gas is invested, much goes to shareholders and much goes to the Inland Revenue. Last year, £504 million was paid in tax and that pays for hospitals and schools and for other projects for which the hon. Member for Barnsley, West and Penistone (Mr. Clapham) often asks for more money. British Gas has an expanding and significant global presence which would have been unthinkable under the financial constraints of nationalisation. Despite all those benefits, which are evident even during the transitional phase, it is right to move on. That is what the Bill does. Having gone through the transition of the company being subject to regulation and competition, we should enhance the climate of competition so that the benefits to wholesale consumers can be transferred in equal measure to household consumers. The pessimism of the hon. Member for Dagenham and her hon. Friends is ill placed. Within a few years she will have to eat her words.
Ms Church: Will the hon. Gentleman give way?
Mr. Duncan: I look forward to the hon. Lady doing that now.
Ms Church: Will the hon. Gentleman confirm that a greater proportion of his constituents pay by direct debit, that a greater proportion pay their bills promptly, and that fewer are on income support and less able to pay their gas bill than many of my constituents?
Mr. Deputy Speaker (Mr. Michael Morris): Order. I think that three questions are enough.
Mr. Duncan: The hon. Lady advances the typical socialist argument-- just because some benefits cannot be spread to all they should be spread to none. It appears that she would deny to those of her constituents who benefit from competition and the direct debit system the benefits that they are already enjoying. The price of her recommendation is that she would confiscate from her constituents and from mine the benefits that they enjoy, just because those same benefits have not yet been extended, as they surely will be, to the rest of her constituents.
Even now, cards are coming through our letter boxes asking domestic consumers to put their names on a register expressing an interest in receiving an alternative
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supply of gas for their cookers and heaters. Even now, companies are preparing for the benefits of competition that will derive from the Bill, which I trust will be given a Second Reading tonight. I was pleased that the hon. Member for North Devon (Mr. Harvey), in what I thought was an initially ambivalent speech, came down in favour of voting for the Bill. I welcome that because this primary legislation is right. It provides for an equitable regime of duty and obligation on the part of licence holders. There will be a licensing system which will properly supply all parts of this country. The benefits of competition will spread, and--who knows?--some companies might even compete for business by deciding to abolish the standing charge. That is not unthinkable; it is perfectly possible. I look forward to the day when it becomes part of the marketing objectives of the companies that are going to queue up for licences to supply. There is not just competition within the gas industry; there is competition between gas and other sources of energy. That is the global picture which the hon. Member for Dagenham signally failed to assess.I should like to pick up a point about what should be in law and what should be in a licence. I can understand some people feeling that all the guarantees and standards that they wish to preserve should be enshrined in the letter of the law--but there is a problem with that. This is a rapidly developing market, taking on new technology, new structures and new competitive methods. If we put all the details in law, we should forever have to come back to the House to amend, update and change the law. It is right to put the parameters in law, and then to leave it to the Secretary of State and the licensing system to ensure that the guarantees which the hon. Lady rightly seeks are given legal effect.
If a company wants to supply gas but does not meet the stipulations in the licence, it is a far more rapid remedy if the Secretary of State removes that licence than if the company goes through the courts for a number of years, supposedly for having failed to observe the terms of the law. So guarantees to the consumer are much better for being in licence form than if we included them in the more cumbersome structure of the Bill.
Another important point concerns the question: why should a supplier of gas feel any less inclined to supply gas to someone who is disabled, just because that someone is disabled? We have heard the cry from the Opposition that the Bill will stop gas going to the disabled. I find that suggestion incomprehensible, and I call on the Opposition Front-Bench spokesman to explain what is meant by it--if he cares to repeat the allegation.
I do not accept what has been said about safety either. There are fewer problems with safety, largely as a by-product of more modern equipment for the supply and use of gas. Because the lack of investment hanging over from nationalisation has been so rapidly solved, there are now fewer safety problems and risks associated with the supply of gas.
As for complaints, I heard the hon. Member for Barnsley, West and Penistone mention VAT. Certainly, there were problems when it was announced that VAT would be charged on domestic fuel. A lot of people phoned up, not necessarily to complain but to inquire about how to pay their bills. As the measurement system does not distinguish between an inquiry and a complaint, the apparent number of complaints is a fallacious statistic.
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All that happened was that a great many people--understandably, given that VAT was to go on their bills--phoned up to find out how it was going to work.Mr. Clapham: Is the hon. Gentleman suggesting that the great British public did not complain about VAT and just accepted that it should be added to fuel bills?
Mr. Duncan: That is not the point that I am making, which is that the total number of complaints which the Labour Front-Bench spokesmen and their colleagues measured and then claimed were related to the performance of British Gas have nothing whatever to do with its performance. They were the fall-out from a political decision made in the Budget--nothing to do with safety, customer satisfaction or the performance of British Gas.
Mr. O'Neill: The hon. Gentleman will probably be aware of, but has probably not yet read, the research paper produced by the Library which gives a breakdown of complaints and inquiries received by Ofgas. It shows that, in 1993, Ofgas received 1,658 complaints; in 1994 it received 2,203. In the same period, the number of inquiries fell from 184 to 115--so it would appear that the imposition of VAT does not support the hon. Gentleman's argument.
Mr. Duncan: I suggest that the hon. Gentleman is being disingenuous. The figures put to us were not from Ofgas: they were from the Gas Consumers Council, based on a 20,000 sample-- [Interruption.] I can wave my copy of the research document as easily as the hon. Gentleman can--I have seen the figures in it. The hon. Gentleman will appreciate that the numbers are very small indeed--250 out of 20 million customers ain't bad. I commend British Gas on its standards.
There has been a great deal of complaint to the effect that those who work for British Gas are dramatically overpaid. I do not agree. Had the hon. Member for Clackmannan (Mr. O'Neill) been present at the meeting of the Employment Select Committee last week, he would have seen the hon. Member for Wallasey (Ms Eagle) squirming at the answers that she got from Cedric Brown, chief executive of British Gas, and from Richard Giordano, chairman of British Gas to her accusation about how the share option scheme worked. It was shown to be completely wrong. The whole point of the share option scheme is that British Gas has to work steadily up the FTSE 100, not just in competition with its own past performance but in competition with all other FTSE 100 companies, before the company so much as earns a penny. Had those executives been paid according to what they have saved consumers since the privatisation of British Gas, they would now be worth billions, not millions.
The consumer is protected by a regulatory regime which has meant prices falling. The shadow Chancellor implies that if the chief executive and his boardroom colleagues gave back their share options, customers would be much better off, but the director general of Ofgas, Clare Spottiswoode, has said:
"British Gas could pay their directors 10 times the amount they currently are, and the consumer would not pay an additional penny." She said that on the "Today" programme on 9 March this year.
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The implication put about by the hon. Member for Dunfermline, East (Mr. Brown)--that high salaries cost the consumer--is no more than a political point about something which, on the most generous calculation, would be worth 6p a month.Dame Elaine Kellett-Bowman (Lancaster): I understood our right hon. Friend the Secretary of State to say that if the executives were not paid a bean, it would save gas consumers a penny a week.
Mr. Duncan: My hon. Friend is right. However many fingers we have, we know that only pennies are involved, whether it be one penny, fourpence or sixpence. The amount is small. The policy of criticising boardroom salaries in the pretence that they somehow cost the consumer money is a distasteful exercise in trying to buy votes. The hon. Member for Dunfermline, East has bought a sixpenny vote on the issue of Cedric Brown's income, yet, if he were ever to get into office, he would slap sixpence on income tax to grab the money off everyone else.
The so-called reasoned amendment picks up on themes that are unfounded. It says that the Bill is
"damaging to the interests of many sections of the population, including elderly people".
It says that the Bill
"fails to provide adequate resources for health and safety" but that is not so.
The amendment talks about guarantees that will be in the licence, even though they were not in the Bill because circumstances will change. It once again talks about regulatory provision to enable price cuts to consumers where there are unjustified salaries and share options. If the Labour party fails to support the competition that will arise from the Bill, the real benefit of its promise is an enormously generous penny, twopence, threepence and fourpence a week--bully for that. If that is the price of its principles, I can understand why the hon. Gentleman has put such a low price tag on them.
The Bill is the final step to privatisation. It is clear that the Labour party will attack it all the way, but will it reverse it? We do not know. It will not say whether the answer is yes or no. Even on the day that I am speaking, it appears that clause IV will be replaced by clause four and a half and that the rearrangement of the dinosaurs in the Labour party's constitutional museum will merely mean that the promise to nationalise will be replaced by a promise to own industries in public--a mere semantic change, but the same principle remains. It will not even tell us the words of the clause IV replacement.
I predict that it will not be long before the Labour party has to eat its words in the amendment. All that the debate will have revealed is that the Labour party remains an anti-business party. It cares about votes. It does not care about consumers. It will stir up grievance and milk it for all it is worth. It will deploy every method of negative politics that it can. It will deny to its constituents what we will not: the inestimable advantage to consumers, to shareholders and to the economic improvement of the country that will arise from the passage of the Bill.
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8.22 pmMr. Alex Salmond (Banff and Buchan): I assure the hon. Member for Rutland and Melton (Mr. Duncan) that his speech, in its own way, was every bit as amusing as that which preceded it. When the hon. Member for Dagenham (Ms Church) was making her vigorous denunciation of the Bill and all its works, one of his hon. Friends shouted out, "Who wrote this stuff?" I assume that Tim Bell wrote the hon. Gentleman's speech as I have never heard such an extravagant defence of the extravagances of British Gas.
Not all the oil and gas in the North sea would be in Scottish waters if Scotland were independent--just 90 per cent. or so--but I make no territorial demands nor have I any designs on Rutland, so perhaps the hon. Gentleman would abandon his territorial demands on Scottish resources.
I declare an interest as a shareholder in British Gas, albeit a modest one. Perhaps more appropriately, I hold 2,000 shareholders' proxies, so I shall go to the annual general meeting of British Gas on 31 May with the intention of tackling some of the excesses that the hon. Gentleman finds so congenial. I assure him, however, that the vast majority of private shareholders in the company are in open revolt.
I have heard it said that if the Select Committee on Trade and Industry says something, a consensus should exist in the House on the Select Committee's views. I even detected a nod from the Minister when one of his hon. Friends said that. I do not know whether some sort of contract has been offered or whether, from now on, any Select Committee recommendation will be immediately accepted by hon. Members on both sides of the House. It would be an interesting venture if the Government went down that road. However, they are unlikely to do so. I did not sit on that Select Committee, but I was a member of the Select Committee on Energy which preceded it. I remember that some of us were unenthusiastic, to say the least, about the process of privatisation in the electricity industry. Nevertheless, as privatisation was being proposed we agreed to try to make sensible recommendations in that context. It would have been unfair for people to say that that implied support for privatisation. It is legitimate for a Select Committee to make recommendation within a context set by the Government without conceding the point of principle.
As for the claimed success of British Gas since privatisation, I remind the House that the company has been referred to the Monopolies and Mergers Commission twice since privatisation and to the Office of Fair Trading once. It was in constant battle with the previous regulator, Sir James McKinnon. At last year's general meeting of British Gas, which I also attended as a small shareholder in the company, I remember the valedictory series of insults that were levelled at Sir James by the company's board. One of the small shareholders got up and said that James McKinnon could not be too bad a lad as the person who appointed him was a member of the company board and sitting on the platform. He was referring, of course, to Lord Walker. Given the company's track record of constant battles due to the anti-competitive behaviour that Sir James detected, to claim that the privatised company has been an unqualified success is a remarkable argument.
Mr. Tim Smith: I was surprised to hear what the hon. Gentleman said about the relationship between the
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company and the regulator. Surely, by definition there is bound to be a certain degree, to put it mildly, of creative tension. It would be far worse if some kind of cosy relationship existed between the regulator and the company.Mr. Salmond: These things are a matter of degree. I suggest that two referrals to the Monopolies and Mergers Commission and one to the Office of Fair Trading tend to suggest that the Gas Act 1986 had certain flaws. Moreover, the fact that we are debating another Gas Bill to change the ground rules is an implicit admission that the Gas Act 1986 was a failure in terms of introducing proper and effective competition into the gas markets.
I have tried to detect positions of principle in today's debate. With the greatest respect to hon. Members on both sides of the House, however, little of what I have heard today has been about the principle of the Bill. I have a fundamental disagreement in principle. It involves clause 5, which states that TransCo, the transportation company, should continue to be owned by British Gas, although its activities should separated. I object in principle to that arrangement and to clause 5.
I will try to deal with both points of view and to explain to Labour and Conservative Members why they, too, should disagree with that policy in principle. I am attracted to the formulation that the previous Select Committee on Energy advanced for the electricity industry. It took the view that a strong argument existed for the distribution system to remain under public control and under common ownership. It said that that would ensure fair play in the overall market place. If it is no longer fashionable to have common ownership of the means of production and exchange, the Labour party may care to consider whether it might still be possible at least to support common ownership of the means of distribution. Serious ambiguities are left in the system. The company should have a social duty to provide gas supply to areas where it will be extremely costly to provide that supply. That is best catered for within a public sector arrangement.
If the company's safety obligations are placed in the private sector and in a fully competitive environment, that will cause great difficulty. The Labour party might like to consider particularly whether the transportation system would not best be handled within some form of common ownership or public control. I suggest to the Conservatives, too, that the idea that that matter can be left in the hands of British Gas is a fundamental mistake in the privatised structure. One cannot have a truly competitive market in which just one player is left in control--albeit at arm's length- -of the distribution system. To illustrate the substantial doubts of other players, I shall quote from an internal memorandum from a private oil company which hopes to move into UK gas supply in a big way. I shall not identify the company as I received the memorandum for other reasons.
On the subject of introducing competition into the gas market, the company refers to the problems that it foresees in its internal planning:
"British Gas TransCo, through its inability to deliver a competent service to shippers and hence our customers, is severely damaging the perception of gas competition among final consumers. Service standards have worsened since last autumn and British Gas TransCo seem to have taken no effective action to improve the situation. We have asked Ofgas to impose financial penalties for failures to meet set standards. However, penalties are not enough in themselves;
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entering the domestic market with such poor standards of TransCo service would be highly damaging to customers and the reputation of independent suppliers in dealing with the general public." That is evidence of substantial doubts among companies wanting to move into the freed-up competitive gas market about the effectiveness of TransCo at present and the wisdom of TransCo being part of the overall British Gas network.British Gas must be one of two things--a company with a larger responsibility as a utility, or just another oil and gas company competing in the market. The ambiguity and personality split are already evident: Mr. Giordano clearly believes that salary levels should be set on the international oil and gas market, while many British Gas customers, staff and shareholders believe that the company has a special and particular obligation as the gas utility of final resort. Until the Government resolve that matter and identify the future for British Gas, the principles in the Bill will remain fundamentally flawed.
As to the internal machinations of British Gas, I am indebted to Mr. Giordano, writing in tonight's Evening Standard , for crystallising some of my complaints about the company. Referring to the transformation of British Gas under his chairmanship, Giordano states--ironically, I believe--
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