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Mr. Byers: I read the comments of Ian Byatt, the water regulator, with interest and am disappointed that he has been so critical. I should have thought that most regulators would support our approach of an arm's length relationship between them and the Government.
Mr. Byers: The hon. Gentleman is right, but Mr. Byatt is the only regulator who is uncomfortable. I regret that we have not taken him with us and hope that his successor will be more supportive of the proposals. I am sure that he or she will be.
Mrs. Linda Gilroy (Plymouth, Sutton): Will my right hon. Friend also take account of the briefing from Ofwat's national customer council? It says:
- "We consider that there are shortcomings in the Government's proposals which mean that the Consumer Council for Water will not be as independent and powerful as possible".
Mr. Byers: There may be concern about whether the Consumer Council for Water has fewer powers, but the structure of the independent consumer councils and the powers that they will have represent a significant advance. I accept that concern has been expressed, particularly about water, but hope that as we take the Bill through the House people will see exactly what the Government propose. I also hope that we can address those concerns and convince them of the steps that we are taking.
Mr. Archy Kirkwood (Roxburgh and Berwickshire) rose--
Mr. Michael Fabricant (Lichfield) rose--
Mr. Byers: I shall give way once more, to the hon. Member for Roxburgh and Berwickshire (Mr. Kirkwood), but then I must make progress.
Mr. Kirkwood: The Secretary of State said that there had been extensive consultation before the Bill's publication. That is accepted on all sides, but has he reflected the degree of concern, which I have picked up, about the six-figure salaries that some utility directors have acquired? The moves to link transparency on financial packages to service delivery are welcome, but would not it be better to have separate remuneration package votes at each annual general meeting to make sure that people know exactly what is going on?
Mr. Byers: The hon. Gentleman raises an important point. The House is considering specific proposals for greater transparency for the utilities in respect of directors' remuneration and the service standards that
they provide. Given the concern expressed about the remuneration of directors in the utilities sector, we thought it appropriate to use the Bill as an opportunity to take specific powers.
Wider consultation is still taking place about directors' remuneration in all companies. When we have considered the responses that we receive, I am sure that the hon. Gentleman's proposal will be one of the issues that we shall want to examine; but we want to examine the remuneration given to all directors, not just those in the utilities.
Mr. Butterfill:
Might it not be right to adopt the suggestions made by the National Association of Pension Funds in its response to the Government consultations, relating to corporate governance and approval of the work of the remuneration committees of the companies concerned?
Mr. Byers:
That is an important point. We have discussed with the National Association of Pension Funds and other institutional investors how we can deal with concerns about the remuneration of directors. I hope that, when we respond to the consultation document--which I trust we will within two or three weeks--our response will command broad support among such organisations.
The Bill has four main objectives: to secure a fair deal for consumers, particularly the disadvantaged; to provide more effective competition in the utilities markets; to ensure that the utility sector contributes to environmental objectives; and to modernise the regulatory framework, making it more consistent, transparent and accountable.
The Bill seeks to put the consumer at the heart of utility regulation. We believe that competition is the best way of serving consumer interests, but in some areas it is not yet an effective discipline. In those areas, we will pursue tough but fair regulation in the interests of consumers; in areas in which competition is developing, there is still work to be done in ensuring minimum standards of service and building consumer confidence in the new competitive markets.
The Bill contains a package of consumer measures. It requires regulators to put consumers first; it enables regulators to impose financial penalties on companies for non-compliance with service standards; it includes measures to encourage shareholders to link directors' pay with service standards; and it establishes independent consumer councils to act as consumer champions. It gives regulators a new primary duty to protect the interests of consumers. To build consumer confidence in the utilities, we need minimum standards of service in both the competitive and the monopoly markets.
Mr. Christopher Chope (Christchurch):
Will the right hon. Gentleman give way?
Mr. Byers:
I hope that I shall be able to do so later, when I have made some progress.
The Bill will fill an important gap by allowing regulators to impose financial penalties for breaches of licence conditions, other obligations and service standards. Those penalties will be used to address company failures such as the mis-selling mentioned by my hon. Friend the Member for Chorley, interruption of supply, and delays in reconnection.
Several Members raised directors' pay. I want price-regulated utility companies to make a clearer link between directors' pay and the achievement of service standards. The Bill will apply pressure on utility companies to link directors' pay with the level of service provided, by requiring price-regulated utilities to publish the links--if they exist--between directors' pay and the service level achieved. Such transparency is necessary if the regulatory system is to be seen to serve the consumer interest, and, in the long term, it is also in the interests of the companies themselves. If consumers see directors awarding themselves high salaries when service is inadequate, that will not benefit utility companies.
The Bill, however, is about more than "naming and shaming". It provides real incentives for directors to give customer service standards the priority that they deserve. We have already urged the regulators to take account of levels of consumer service and satisfaction when setting new price caps, and the new powers to impose financial penalties will focus minds yet further. Shareholders will see that it is in the interests of the company to demonstrate a clear link between directors' pay and the achievement of service standards.
Hon. Members on both sides of the House have raised the importance of a voice for consumers being effective. Consumers need powerful champions to articulate their needs and interests. Under the current regime, which was established by the Conservatives, consumer bodies are too closely related and connected to the regulator. They have few rights and no guaranteed access to information to discharge their powers fully.
The Bill will establish independent consumer councils for each sector to act as effective consumer champions. More important, they will be independent of the regulator. They will have rights of direct access to the information that they need from the regulator and the utilities to carry out their functions effectively. They will be charged with investigating and resolving complaints. They will provide a single point of contact for consumers. That will end the uncertainty about who consumers should turn to for assistance and advice.
Mr. Chope:
Where in the Bill is there any provision to deal with a situation where the consumer interest is opposed by the Secretary of State himself? He will know that Mr. Callum McCarthy has said that the Secretary of State has been acting against the interests of consumers in imposing restrictions on new gas-fired generation. How will consumers be protected from the anti-consumerism of the Secretary of State?
Mr. Byers:
The hon. Gentleman makes an important point. There is a responsibility on the holder of my office to ensure that there is diverse energy provision. We believe that, by ensuring that a stricter gas consents policy is in place, we can have that diversity of provision. As he knows, there is not a level playing field at the moment. Coal in particular is discriminated against. We have introduced as a short-term measure the stricter gas consents policy to ensure that we can achieve a level playing field. We hope to do that as soon as possible, but he is right: it has those adverse consequences.
The holder of my position has to balance the needs of the consumer with the objective of having a diverse supply of energy and take a judgment accordingly, but the
hon. Gentleman is right to point out that that policy has been criticised by the regulator. There will be an arm's length relationship between the Secretary of State and the regulator, but the Secretary of State will continue to have to act in the wider national interest. Obviously, I hope that we will be able to avoid those few situations where there is a conflict between the two.
The independent consumer councils will be a powerful voice for the interests of consumers. I am pleased that their establishment has been welcomed by consumer groups themselves. Rodney Brooke, chairman of the National Electricity Consumers Council, welcomed the fact that the Bill
I am conscious that one particular concern--it has been raised by some of my hon. Friends--is the position of people who are in fuel poverty. The benefits of competition should be enjoyed by all consumers, not just a few--not just high-volume users, but all people, including those who find it difficult to pay high energy prices.
That is why we have instructed the energy regulators to draw up a social action plan that is aimed at securing efficiency, choice and fairness for the disadvantaged. The Bill backs that up by giving Ministers reserve powers in the energy sector to lay regulations to reduce price differentials between the users of particular payment methods, such as pre-payment meters and frequent cash-payment schemes, and other consumers who might use cheaper payment methods. That goes to the heart of the issue that was raised by my hon. Friend the Member for Bury, North. We need to ensure that all people benefit. As a result of the Bill, Ministers will have a reserve power to intervene if it is essential to do so.
For the first time, all the regulators will have a duty to consider the interests of low-income consumers. The Bill will place regulators under a duty to have regard to statutory guidance issued by Ministers on the social objectives relevant to their particular sector.
"promises better protection and lower prices for consumers . . . we look forward to the creation of a new independent Consumer Council to represent the interest of electricity and gas consumers and to help them with their complaints."
The National Consumer Council has said that it
"is particularly pleased that the establishment of independent consumer councils is among the key planks of this consumer- friendly Bill".
Therefore, there has been a wide welcome from consumer groups.
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