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"British Gas? Isn't that the company which has all those over-stocked, rather unfriendly showrooms in Britain's high streets?"
The reality is that British Gas has become an unfriendly company with hardly any showrooms because so many have been closed under Mr. Giordano's chairmanship. He also comments on the difficulties that British Gas has encountered with public resentment and shareholder outrage at pay settlements in the company. He writes of Mr. Cedric Brown:
"Alas, the issue of his pay, which has been so unfairly dealt with, has consumed an inordinate amount of energy during the past few months. There has been a fog of confusion and misinformation." Indeed there has. That fog of confusion and misinformation was created by the board of directors, who refused to reveal to shareholders at the last annual general meeting the pay deals that had been made.
Mr. Duncan: Showrooms are a hoary old chestnut. Does the hon. Gentleman believe that British Gas should be obliged to subsidise retail outlets when one can buy gas appliances from a wide range of retailers and pay one's gas bill free of charge at 19,000 or more post offices?
Mr. Salmond: Scottish Power, a privatised utility, is expanding its showroom network throughout Scotland and moving south of the border. It is surprising that British Gas is retreating from Britain's high streets at precisely the time that other privatised utilities are expanding their showroom network and seem to regard that as a particular advantage in the competitive marketplace. As to salary levels in British Gas, I will quote from supporting comments for one of the resolutions that I sincerely hope will upset the apple cart at the company's annual general meeting and restore some sanity to its top leadership. The resolution was submitted not by me but by Pensions and Investment Research Consultants, and it details what has happened in terms of the pay deals negotiated behind the scenes. It states:
"Companies have been asked by PIRC and by others to provide full disclosure on the issue of pay. PIRC welcomes British Gas commitment to the principle in future. PIRC notes that the review
Column 637of the remuneration for executives was not announced at the April 28 1994 AGM, yet the salary rises were backdated to that point and for the chief executive backdated to before the AGM, to January 1994. The Chairman"--
"was appointed an annual salary (for a two-day week) of £450,000 at the AGM, yet the terms were not disclosed at the AGM or indeed in any of the quarterly statements."
That situation was defended by the hon. Member for Rutland and Melton. Details of salary settlements were kept not just from the general public but from shareholders at the AGM. If any Conservative Member, arguing for a competitive market, can defend senior executives who do not have the guts to go before their own shareholders to explain and to defend huge salary increases that the public find offensive, I shall be interested to hear that defence. Events in British Gas have provoked outrage among the public. It is interesting that Conservative Members do not realise that there is a shareholders' army set to march on the AGM to right the wrongs in the company.
The House should examine not just what Mr. Giordano and Mr. Brown have done wrong but the structure that Parliament established in 1986, which allowed a company that the public once held in high esteem to become widely despised by the public and wholly hated by its shareholders.
I explained earlier how moving to an open market can provoke problems as well as create opportunities. I gave the example of the people of Rosehearty and Sandhaven in my constituency. In Banff and Buchan terms, they are substantial villages of several hundred people. They live within a few miles of St. Fergus gas terminal, which is one of the largest in Europe. The flames from St. Fergus light up the evening sky. Those villages have wanted a gas supply for many years. One might criticise the structure of the nationalised British Gas which rationed gas supplies to consumers throughout the country, but my villagers' hopes were raised when they received a commitment from British Gas after privatisation that supply would be extended to their villages.
At that time, British Gas in Scotland had the ability to operate a formula whereby the cost of connecting rural communities could be approached imaginatively. It assumed a number of connections over the years, which allowed the high initial cost to be offset on the assumption that more customers would be attracted in the longer term. By that means, villagers in St. Fergus, St. Combs, Inverallochy and Cairnbulg were connected to a gas supply at a cost of £40 per household in the early 1990s. Villagers in Sandhaven and Rosehearty are now being offered connection at more than £1,000.
The explanation is that changes in British Gas have totally eliminated management autonomy in Scotland, so the previous formula has been vetoed by the London headquarters. Also--this is interesting in the context of competition--British Gas argues that it cannot afford the substantial outlay of connecting small villages if it cannot be protected from another company supplying those households in the future after British Gas has met the high initial cost. The move to competition is not helping people to obtain a gas supply but actively hindering the extension of the network. A once reasonable connection charge has
Column 638become highly inflated. The House must deal with that real situation, which is confronting rural households the length and breadth of the country.
There are objections in principle to the Bill. The question of competition has not been fully thought through and cannot be dealt with while TransCo remains in the hands of British Gas. I see no reason why the Opposition should not vote against the Bill in principle, because it does not offer that protection, as well as making some factual points through the reasoned amendment. For that reason, if no one else divides the House on Second Reading, my party and Plaid Cymru will certainly do so.
Mr. Tim Smith (Beaconsfield): The hon. Member for Banff and Buchan (Mr. Salmond) is very concerned about clause 5. I understand that, but I do not see it as a reason for him to vote against the Bill, which has considerable merit. In 1982-83, I served on the Standing Committee which considered the Telecommunications Bill, which led to the privatisation of British Telecom. Apart from a speech made by Mr. John Golding, who was sponsored by the Post Office Engineering Union, which now appears in the "Guinness Book of Records", I remember that Labour Members indulged in various scare stories about what would happen when British Telecom was privatised. They said that prices would rise, that the service would deteriorate and that the number of call boxes would be decimated. The exact opposite happened. In real terms, prices dropped dramatically. The service improved tremendously because BT started to employ salesmen rather than order takers and a telephone line could be connected within 24 hours. The number of call boxes that work is now much higher than it was when the business was nationalised.
We have seen the same pattern with every privatisation measure brought before the House since 1982. We saw the same pattern with the Gas Bill in 1986. The same claims were made about what would happen when British Gas was privatised as a monopoly. Labour Members said--this is on the record-- that prices would rise and that the service would deteriorate. In fact, as we have heard during the debate, the price of gas in real terms has fallen by 20 per cent. since the business was privatised. Every consumer of gas has benefited. Shareholders, including the hon. Member for Banff and Buchan, have also benefited because profits and dividends have risen. As I said in an intervention, it is possible in such circumstances that customers and shareholders can benefit.
The hon. Member for Banff and Buchan suggested that the fact that we introduced the Bill meant that we had got the legislation wrong in 1986. He seemed to think that once one had legislated on something, it was never possible to amend the legislation in any way, or alternatively, that if one did amend it, it was an admission of guilt or fault. Clearly, we have moved on from 1986. An element of competition was built into the Gas Act 1986 so that, as we have heard during the debate, industrial customers have benefited significantly. My hon. Friend the Member for Rutland and Melton (Mr. Duncan) told the House that there are now 25 independent gas companies supplying industrial consumers and that the price to those consumers has fallen dramatically. I suggest
Column 639that it is sensible to move on from there to see whether it is possible to bring an element of competition into the supply of gas to domestic consumers.
People sometimes suggest that the Government have run out of radical ideas. I suggest that the Bill is an extremely radical measure. There is no major capitalist country in which there is genuine competition in the supply of gas to domestic consumers. The idea that one can retain the pipes in one company and then generate competition by supplying gas from different suppliers down those pipes is relatively recent. The Bill represents a substantial step forward.
It is not surprising that it is difficult to envisage precisely how the new system will work. That is why it is right that legislation should be relatively flexible and not too prescriptive. It is right that many of the terms and conditions under which the competitors of British Gas will operate should apply under licences granted by the Director General of Gas Supply because it will be easier for her to alter the terms than it will be for the House to amend primary legislation.
Over the past few weeks, there has been a lot of debate about the role of the regulators. It is true that the regulators have considerable power; it is right that they should have considerable independence. The hon. Member for Stockport (Ms Coffey), or the hon. Member for Dagenham (Ms Church)--I cannot recall which--suggested that there was not sufficient accountability. Accountability does not mean that Select Committees should give directions to the regulator. It is right that the regulators should be accountable. It is reasonable that they are confined to a clear and relatively narrow objective, which is to ensure that the system operates in the interests of consumers.
What concerns me about the way in which the Labour party is moving is that it wants to try to go back to the bad old days of the nationalised industries. The difficulty was that although the 1948 White Paper said that the nationalised industries would operate at arm's length and that Ministers would not interfere in their day-to-day affairs, the history of what happened over the next 30 years showed that no Minister of any political party could resist the temptation to interfere in their affairs.
"to secure that, so far as it is economical to meet them, all reasonable demands in Great Britain . . . are met".
The Bill says that the regulator shall have a duty
"to secure that licence holders are able to finance the carrying on of the activities which they are authorised . . . to carry on" and a duty
"to secure effective competition".
There are three major and substantial responsibilities for the regulator which are embodied in clause 1. It seems likely that the hon. Gentleman has not read the Bill if he did not get as far as clause 1.
The difficulty when these businesses were publicly owned, nationalised industries was that Ministers interfered in their day-to-day management for a raft of
Column 640different reasons. I remember when their prices were held down artificially to meet an objective of the income or prices policy of the Government of the day. That meant that those industries made losses and that the taxpayer had to subsidise them. No Governments were able to resist the temptation--
It is not possible to establish a regime under which those companies remain in the public sector, but under which the Government set up a regulator who regulates their affairs. That is not an option. The only solution is to move those businesses into the private sector and then to establish a degree of independent regulation. The far better option is, as far as possible, to introduce competition into the affairs of a particular industry. That is what the Bill would do and for that reason, I very much welcome it.
I do not believe that the powers of the regulator should go further than those set out in the Bill. What concerns me about what Labour Front-Bench Members are now saying about the system of regulation is that we would return effectively to the bad old days. They would give new powers to the regulators. They would give to the regulators, for example, the power to start interfering in the day-to-day affairs of the business. We already know that Labour plans to give the regulator power to fix the level of remuneration of board members. That is just for starters. I suspect that Labour will be unable to resist the temptation to suggest that the regulator should also be concerned about employment levels in the business. That was always a major consideration when these businesses were nationalised industries; they were effectively employment creation agencies. In other words, employment was held at artificially high levels to ensure that unemployment did not rise. I do not believe that that was a legitimate use of nationalised industries, yet that is precisely what happened.
Mr. Salmond: I am not sure where the hon. Gentleman's argument is leading. Is he saying that the previous ideological battle between members of the two Front Benches about the ownership of any industry will be replaced by a debate about the extent of the powers of the regulator? If that is the sum total of the debate, I suggest that they all sit on the same Bench.
Mr. Smith: The hon. Gentleman underestimates the importance of the issue which I am discussing. I am not suggesting that it is trivial, as he apparently believes. The power of the regulator is absolutely fundamental. It is terribly tempting to give the regulator this power or that power because we do not like this abuse or that abuse. None of us has liked what has been going on in the privatised utilities. Nobody looks on it with favour, but the answer to the problem is not to add to the powers of the regulator.
There is no doubt that when these businesses were nationalised industries, employment was a very important factor. That is why even the Treasury underestimated the ability of businesses to reduce their costs and the speed at which they could do it once they were privatised. That is certainly what happened with the regional electricity
Column 641companies. They drove their costs down far more quickly than anybody anticipated. They did that, of course, by increasing productivity and reducing staffing levels. That has happened throughout the industries which have been transferred to the private sector. They are far more efficient and more cost-effective than they were.
It would not be sensible to revert to the kind of system that we had before and that is why the Labour party's policies worry me. The proposals in the Bill are the best way forward. They will introduce a substantial element of competition in the supply of gas to the domestic customer and that is extremely welcome.
Mr. Peter Hain (Neath): I challenge the whole philosophy behind the Bill because the proposition that competition can be left to its own devices and, thereby, automatically establish ideal equilibrium in the gas market is entirely without foundation. We are not dealing with a traditional, conventional area of supply and demand that can be rationed by price. We are not dealing with high-speed consumer gadgetry for which competition is ideal. We are dealing with a key, strategic and essential service. The Bill, in line with the Government's whole policy and their free market mania, is at the expense of public interests and in favour of private interests. The Bill will have three immediate consequences. It will increase cherry picking as the competition focuses and concentrates on the areas where most money can be made at the expense of the rest, which will result in social dumping. Secondly, it will undermine the strategic interests of the British economy by forcing our only national champion-- British Gas--to concentrate on pygmy competition in its own back yard, instead of international competition that can advance the strategic interests of the British economy. The third major defect of the Bill is that it will operate under an inadequate system of regulation, which is not accountable to Parliament and is not seriously democratically accountable. The gas regulator and other regulators are virtually tin gods; a law unto themselves. They are pursuing competition blindly.
One of the immediate consequences of such an approach is the lack of a sensible energy policy. In fact, we do not have one at all because each regulator and each competitive market is pursuing its narrow interests in a compartmentalised fashion and they cannot be aggregated to pursue an energy policy in the public interest. As a result of that free market mania, we are seeing the compartmentalisation of gas into shipping, transportation and supply, which means that the benefits of an integrated service, such as for repairs, are prevented. If one has a problem with one's gas system, wherever it may be situated, somebody from British Gas turns up at one's front door in a van. That van contains all sorts of things. It could contain a thermo-couple for a boiler, a small item for a cooker, something to do with the meter or some other part of the system that has gone wrong. With that one service man or woman and the equipment stored in the van, it is possible to rectify that problem. In future, if there is an emergency of some kind, TransCo will send
Column 642out an operative to deal with the problem and effect a repair. He or she will effect that repair if there is a problem with the meter. Beyond that--
Mr. Nigel Evans rose --
Beyond problems with the meter, other people will have to be called in. The list of various operatives in the Council for the Registration of Gas Installers will have to called on and those people will be invited to-- perhaps--repair a cooker. That will result in an extra call-out charge being imposed on the householder, whereas at the moment there is simply one call-out charge and one person deals with the whole job.
The ethos of an integrated service is being destroyed in front of our eyes. That may be of no interest to Conservative Members, but it certainly interests Labour Members, who have the interests of the people at heart, as opposed to those who wish to make profits out of the system. For example, as a matter of courtesy and good will, the gas man or woman may take a cooker out and replace it with a more modern model, and rather than throw the old cooker on the scrap heap, may install it free of charge in the home of--perhaps--an old woman whose cooker has broken down. That may not be competitive or go along with cost-related charging and all the jargon of the free market, but it reflects an integrated service.
Indeed, it has even been the practice among British Gas workers to look at old, abandoned cookers, strip them down, put some of the parts in their vans and supply them to pensioners when they are in need of such equipment. Again, that service may be provided free of charge and may not conform to the dictates of the market, but it supplies a public service for people in need.
Cross-subsidy will be impossible under the cost-related system of charging, which will be one of the guiding principles of the Bill when it becomes law. A uniform price, which has been one of the cardinal principles of the supply of gas in this country over many generations, will be impossible. We shall no longer have a uniform price. Safety will also be impaired and threatened by this regime. All those are consequences of the compartmentalisation of the industry; the destruction of an integrated service.
I now refer to cherry picking and social dumping. Inevitably, the focus of competition will be in areas where the money can be made. Hon. Members need not accept that proposition from a left-wing Labour Member; they can accept it from the Monopolies and Mergers Commission, which predicted that social dumping and cherry picking would take place when such a regime, or something like it, was advocated. The competitors will not be interested in going up a remote Welsh mountainside to supply gas. They will not be interested in supplying gas at the top of a south Wales valley such as the Dulais valley in my constituency. Gas is supplied only half way up that valley. The competitors will be interested only in making money and in competing where the money can be made--among large users and rich households. Inevitably, there will be differential pricing. Indeed, the Government have conceded that. Rich customers and large users will pay relatively less; poor customers and low users will pay relatively more. That is a form of social dumping and it is already happening.
Column 643A dress rehearsal for that regime is already occurring in respect of the change introduced by British Gas whereby direct debit customers pay 5 per cent. less. That is a form of social dumping and it particularly hurts people on low incomes who cannot afford to have direct debits. I very much resent the arrogance of many Conservative Members who seem oblivious to the fact that many pensioners in my constituency, and I am sure in constituencies across the country, are frightened about direct debits. They are terrified at the prospect of a bank raiding their accounts, month by month, whether or not they have the money to pay those debits. Why should those people pay 5 per cent. more on their gas bills when they cannot afford those bills anyway? That is a form of direct social dumping.
Other consequences of the Bill worry me a great deal. The obligation to supply is defined in statutory form in section 10(1) of the Gas Act 1986. However, that obligation has been weakened. It has been removed from the new Bill. TransCo simply has an obligation to connect a premises to the network. It no longer has an obligation to supply. It has been said--and I have no doubt about this--that the obligation to supply is in the licence. However, that weakens the obligation. The obligation should be in the legislation where it can be democratically accountable. It should not be in a licence or left to the regulator to police.
Similarly, the obligation to publish prices has been weakened. That provision was contained in section 14(1) of the Gas Act 1986. The Bill deletes that requirement. Why does it do that? That obligation is weakened and it is transferred into the licence. I do not believe that that is an adequate safeguard.
The obligation not to show undue preference or discrimination when setting prices has been weakened. That obligation was also contained in section 14 of the 1986 Act and it is another derogation to the licence and to the regulator. That undermines democratic accountability. Those are warning signals that social dumping will be institutionalised as part of the new competitive regime.
Wales, in particular, will lose out. As it is far away from the points where gas is beached on the east coast, according to British Gas, charges could rise by up to 8 per cent. above those on the east coast. In addition, because Wales has many more low-income households than in the rest of the United Kingdom, social dumping will hit the people of Wales much harder.
Proportionately, half the number of people in Wales are on direct debit in comparison with elsewhere in the United Kingdom. Many more cannot be on direct debit because Wales is the lowest income area of Britain. As a result of the 5 per cent. extra through not benefiting from direct debit; the 8 per cent. extra to pay for gas to be transported from the east coast; and differential pricing, which could be as high as 12 per cent., and which will open up between low users and rich users, people in Wales could pay 25 per cent. more than people elsewhere in Britain. Why should the people of Wales suffer simply because of their geography?
I want to finish-- [Hon. Members:-- "Hear, hear."] I am grateful for the encouragement from the Opposition Front Bench. My major strategic criticism of the Bill is that it does not create a level playing field for competition. There is no reciprocity. British Gas has to compete with many foreign-owned suppliers and companies, when it cannot compete in Europe, where there is no reciprocal
Column 644opportunity to enter European markets. It is having to compete with European companies such as Shell, Elf, Total, Statoil and Norsk Hydro, which have access to our markets while there is no reciprocity for us to have access to their markets.
British Gas is planning to invest up to £2 billion internationally over the next five or six years. It is in a very important market as one of the big international global players. If it is forced continually to fight off competition in its own back yard, it will be prevented from being a big player, and Britain will lose out strategically and economically to companies in Europe, America and elsewhere, which are coming in on much more favourable terms. For all those reasons, I believe that the Bill is the last spasm of a failed Thatcherism and I am totally opposed to it.
Mr. Nigel Evans (Ribble Valley): I have enjoyed many of the speeches this evening, but I did not enjoy the speech by the hon. Member for Neath (Mr. Hain). The hon. Gentleman--a former leader of the Young Liberals--has changed his politics once by moving leftwards, and no doubt he can change them again. I enjoyed the speech of the hon. Member for Dagenham (Ms Church), but not as much as she appeared to enjoy it herself. The hon. Lady was extremely witty, but if she cannot take her speech seriously, I do not see how she can expect the rest of the House to do so.
The message that we are getting loud and clear from the Labour party is that it is in favour of competition, but not the Government's sort of competition. As the Labour party experiences the death of clause IV and grieves over the sad departure of a loved one, it is finding that the vacuum created is rather difficult to fill. The Labour party cannot quite embrace privatisation and full competition because it has been weaned on state control, which is ingrained in its soul.
There is no doubt that if Labour forms the next Government, there will be far more state control than there is at present. The golden share will be held on behalf of the Government and in the interests of the unions, and certainly not in the interests of the consumers. We are seeing the sequel to clause IV, but--as with many sequels--it does not stand up to what went before. The Labour party's message is that it has principles, but if one does not like them, it has other principles.
The only thing worse than a monopoly is a state monopoly. The Government want to introduce competition because it is good for the consumer. The scheme has started with 500,000 consumers and will be extended to 2 million before all 18 million consumers benefit from the extension of competition in the delivery of gas to all consumers. Competition benefits many people in industry, and gas is currently being supplied to 60 per cent. of businesses by companies other than British Gas.
As I said during an intervention on the hon. Member for Dagenham, we have heard the Labour party's fears on privatisation and competition before, and British Telecom was the prime example. BT now has competitors such as Mercury and many other cable operators. In my area in the north-west, Nynex is investing more than £1.8 billion to provide cable entertainment and telephony in direct competition with British Telecom.
Column 645Since privatisation, BT has invested some £22 billion in the telecommunications market, and that has come in the face of competition with cable operators, which are now putting 50,000 people a month on to their systems. That is the sort of competition we want. Thanks to that competition in the telecommunications market, prices have fallen and far more people are benefiting from that. The hon. Member for Dagenham talked about constituents who could not afford to get on to the telephone system.
Mr. Evans: I am not laughing. There have always been people who have not been on the telephone system for one reason or another, but--thanks to privatisation and competition within the telephone market--there are far more public telephone boxes that those people can use than was ever the case before, and far more of those telephones are working than ever before.
We have also heard the argument that many people who are low users of telephones might find that their charges will go up. However, quite the opposite has occurred and low users are now getting rebates. That is not a result of Government legislation, but because it is in the interests of BT to do that.
With regard to the payment of gas bills, I live in a rural area and there are many post offices in villages there. I am delighted that people will now have the opportunity to go to those post offices to pay their gas bills at no charge to them. That will be a shot in the arm for post offices across the country, including those in the constituency of the hon. Member for Banff and Buchan (Mr. Salmond). There has been tremendous downward pressure on prices within British Gas. Analysts have predicted that there will be a further fall of about 10 per cent. in addition to the 20 per cent. that we have already seen. Prices to industrial users have fallen by between 10 and 15 per cent. since competition was introduced. So I look forward to further falls in gas prices for my consumers.
We have heard the old chestnut about a 5 per cent. discount being given to people who can afford to pay by direct debit. Opposition Members say how terrible that is because it is done at the expense of everyone else. Yet British Gas plans to introduce discounts for people who pay promptly in cash or by cheque. That has to be welcomed. Some people try to delay paying their gas bill, electricity bill or any other bill until the last possible moment. I believe that people who take the time and trouble to pay promptly ought to be given every incentive to do so and should benefit from doing so. I see nothing wrong with that whatever.
We have heard a catalogue of scare stories from Opposition Members on various things including safety standards and essential safeguards. Yet those matters are covered in the Bill. We have heard again about cherry picking, but we know that the licence conditions will be sufficient to ensure that cherry picking does not take place. As someone who represents a rural area, I welcome that. I want to ensure that everyone benefits from competition. We shall see that in the pilot in the south-west.
We have also heard that the disabled and the blind will lose out under the Bill, even though they have been told that that will not be the case. It was suggested that there
Column 646should be one number--perhaps 888--for people who have gas leaks or fears about electricity. It would be a good idea if they could dial one number from a telephone. I hope that that will be examined more carefully.
The Labour party talked about cherry picking this evening. The cherry picking in which Labour Members have been involved is picking on Cedric Brown, share options and directors' pay. It is the worst case of the politics of envy that I have seen in a long time. Irrespective of the conclusions of the Greenbury committee, if a Labour Government were elected, they would no doubt act on share options and directors' pay. That can be seen clearly as a diversion from the other cherry picking that they would do. Not only the people at the top of the premier league, but people in division one, division two, division three and all the lower divisions would suffer. A Labour Government would pick on anyone and everyone because they would try to implement a massive programme and would need extra money to pay for it.
We need profits in our companies in Britain because we need the investment that will be made with those profits. If the Labour party sees itself forming a future Labour Government and hitting companies that make profits, it must also accept that it will hit essential investments necessary for those companies to grow, flourish, go into the world market and compete.
The Bill will benefit British companies. It will certainly benefit gas suppliers that wish to compete with British Gas. I fundamentally believe that it will benefit the consumers. We are here this evening to protect the consumers and promote their interests. I believe that the Bill will do exactly that.
Mr. Andrew F. Bennett (Denton and Reddish): I have been surprised by the debate. I was disappointed by Conservative Members, who spent more time in a debate on the Gas Bill speaking about telephones and what had happened in the telecommunications industry than they did on comparing what had happened in the gas industry before privatisation and since. Much of the success of British Gas since privatisation has been built on the skills that people learnt while the industry was still nationalised. The emphasis that the nationalised British Gas placed on training and skills for the work force has benefited the company a great deal.
My main disappointment with the debate is that no reference has been made by Conservative Members and very little, I am afraid, by Opposition Members to the environmental consequences of the Bill. The Order Paper tags up the fact that the reports on energy conservation by the Select Committee on the Environment are relevant to this debate, and I had hoped that the Minister might mention that subject in his reply, but the leaked version that was circulating earlier did not seem to contain much concern for energy conservation. The Environment Select Committee, of which I was then a member, under the chairmanship of the hon. Member for Hertfordshire, West (Mr. Jones), carried out a very useful survey and report for the House. We followed it up with further inquiries into energy conservation. It is essential that the Government meet their Rio commitments, but, for all our constituents, it also makes good sense to save energy in the home, in industry and in offices.
Column 647The idea that the only thing that matters at the moment is the price of gas is a major failure. The issue has to be considered in a much wider context. It is much more important for the country and for many people that we consider the price of gas over a period of time. The dash for gas by the electricity generators has not been in the country's long-term interests. It may mean that electricity prices have come down, but it has done a great deal of damage to the coal industry and to people who make mining engineering equipment. If one brings the price down further and further, one certainly makes it harder to encourage alternative forms of energy production--certainly the renewable forms that might be far better for the long-term interests of the country. It also affects exploration. We should not forget the fundamental fact that natural gas is a finite resource. If we use it irresponsibly now, future generations will not be able to use it. I know all the arguments. For the past 20 years, it has been said that the supply will eventually run out, but as fast as people have been saying that, new discoveries have been made. Because it is a finite resource, it will run out in the end. The hope is that, by the time that it starts to run out, alternatives will have been found, but as there is no total logic that says that the two will coincide, it would merely be prudent for us to try to reduce the amount of energy that we waste. It would certainly be good for the environment if we were to do so.
I remind the House that one of the most severe jolts to British industry occurred with the sudden hike in oil prices in the early 1970s. Although I cannot imagine circumstances in which there would be a sudden hike of the same dimensions in the price of natural gas, it is irresponsible to go on consuming natural gas so wastefully. It is important that we deal with the problem and, sadly, the Bill is not an attempt to do that.
Rio required a major reduction in carbon dioxide emissions. Originally, the Government estimated that the Energy Saving Trust should reduce carbon dioxide emissions by 2.5 million tonnes. Last week, the Secretary of State for the Environment revised that figure downwards on the basis that, because of the way in which energy is being generated, it is not necessary to make quite such a big saving. He is still looking for a reduction in the region of 1.3 million tonnes by the year 2000, however, and if that is to be achieved, there must be some money for energy conservation. So far, the Government have not come up with a mechanism for paying for that. Originally, it was hoped that some of the money would come from the gas industry, but the new regulator stepped in and virtually vetoed that.
The Government are now committed to competition. Whereas electricity consumers will pay about £6 a year towards energy conservation measures, gas consumers will pay virtually nothing. The Government should certainly have taken the opportunity provided by the Bill to propose some mechanism for making the Energy Saving Trust work.
If the regulator must simply obey the law and the law is tightly defined, that is a useful role for a regulator but not very important. The Government say that they want to give the regulator a political role and it is clear that, over the past few years, the regulator has made political decisions. I simply argue that, if it is a political role, it should be exercised by a Minister accountable to this House, not by someone at second hand from the House.
Column 648Earlier in the debate, the President of the Board of Trade said that if we dealt with the benefits that were going to the top executives in British Gas, gas bills would be reduced by only 50p per consumer. If many of my constituents could have the 50p per consumer being squandered by those at the top of the gas industry--the same applies to the other privatised industries--it would make a considerable difference to their expenditure.
Finally, I regret that the Bill makes no reference to the gas industry's environmental responsibilities. The only reference that it makes is to pipes. I gather that that puts the industry on the same footing as the electricity industry, which is responsible for pylons. The gas industry should have a far wider environmental responsibility and should certainly be responsible for conserving supplies of natural gas, which will ultimately run out.
Mr. Martin O'Neill (Clackmannan): The reasoned amendment in my name and that of my right hon. Friends is based on the assumption that we oppose a private monopoly. We are willing to have competition because the record of British Gas is not sound enough to merit our continued support.
When this issue came before the Monopolies and Mergers Commission for consideration some time ago, we argued that British Gas should be allowed to operate in its present form because it was a world-class company, and that it was entitled to have in the United Kingdom a base of a size that enabled it to work extensively abroad. We still hold that view and, therefore, do not oppose clause 5, which the hon. Member for Banff and Buchan (Mr. Salmond) used as an excuse for opposing the Bill in principle. British Gas is a natural monopoly, but it is currently subject to close regulatory processes, Chinese walls and the threat of being split up if it does not operate as a single body.
Mr. Salmond: I do not necessarily expect the hon. Gentleman to share my principles. He seems to have none of his own and seems to be about to recommend to his hon. Friends that they first vote to decline to give the Bill a Second Reading and then abstain on a subsequent vote when the question of Second Reading is put to the test.
Mr. O'Neill: The hon. Gentleman clearly does not take too much time paying attention to the procedures of the House, as he spends most of his time outside the Chamber. The whole point of tabling a reasoned amendment is that we do not oppose the principle of the Bill. If the hon. Gentleman does not understand that fundamental procedural point, he has some learning still to do. We believe that British Gas's role in the domestic market should be opened up to a degree of competition.
I have already referred to the MMC's 1993 report, in which it said:
"We recognise that, while introduction of competition may well result in a reduction in the overall level of prices, some groups may be worse off".
Our amendment seeks to minimise that deleterious effect. Several groups are vulnerable. This has been an effective and wide-ranging debate. While we may not have agreed with everything said by Conservative Members, a number of their speeches were uncharacteristically thoughtful. On cherry picking and social dumping, my hon. Friend the Member for Neath
Column 649(Mr. Hain) said that, as the Institute for Fiscal Studies pointed out in its report of January last year, the average weekly wage in Wales is some £223, whereas in the south of England it is some £290. Even if we have uniform pricing, some areas will experience considerable disadvantage. We shall have to wait to see whether competition can bring down prices in areas such as south Wales to make the new entrants into the business that much more attractive to existing consumers. That is hard to envisage because of distances and consumption.
Some of the evidence given by representatives of British Gas to the MMC has been undermined by the introduction of the direct debit discount. British Gas was able to introduce its own form of cherry-picking in advance of competition taking place. That was a crass public relations error.
The discount was a gross insult to the poorer consumers, many of whom do not have bank accounts. Many of them do not have direct debit facilities. Over the past few months a sizeable television campaign has been waged by the banks and others in support of the direct debit system because many people are still sufficiently unsure of their relationships with banks not to enter into direct debit agreements. British Gas's opportunism undermines its claims about cherry-picking.