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Lord Cochrane of Cults: My Lords, I am sorry to disagree with the noble Earl but he went through a large number of possible definitions of sustainable development, each one of which confused me more, and I dare say other noble Lords. The only point where I felt he touched upon a true grain of fact was when he said—if I heard him correctly—that no development is in the ultimate sustainable. I believe, if I can remember back to school certificate days, that used to be called entropy; that is, that energy went permanently down hill. Gas, inherently, is an extractive industry. We cannot sustain development in gas indefinitely; we can prolong it only by wise use, as other noble Lords have said. By using it wisely we will make the position better for our grandchildren and our grandchildren's grandchildren but eventually the day will come when there is no gas. There is no possibility of any fermentation process—which, as far as I can make out, is the only alternative source of gas—achieving what would be necessary. Therefore the noble Earl has put forward an idea that is worthy but which is incapable of definition and does not, as other noble Lords have said, sit happily in the Bill. For that reason I must tell my noble friend that, although I admire his objective, it is, alas, not achievable.

The Minister of State, Department of Trade and Industry (Lord Fraser of Carmyllie): My Lords, I begin by commenting on what the noble Lord, Lord Peston, had to say. No doubt your Lordships' House is grateful to him for his observations but in my personal opinion that was quite unnecessary. I do not believe any of us thought he had acted with any impropriety in the smallest degree. I am grateful to my noble friend Lord Cranbrook for taking the trouble to keep me informed of the development of his thinking over the summer on this important question. I certainly recognise the concepts used by him in describing sustainable development. However, it is one which seems to me to be broad and he will recall that in his preface to the White Paper the Prime Minister commented that,

I clearly agree with that. That is a policy which is followed across government. We must build environmental concerns into all our policy in the same way as we must take account of costs in the pursuit of environmental objectives. The ideas of sustainable development can indeed be an important guide to the Government in forming their policy.

As regards the way in which the Bill is structured, we have given weight to the principles of sustainable development in framing our proposals. In particular we have maintained the director's duties in respect of the efficient use of gas and provided new duties in respect of the environment. As my noble friend Lord Skelmersdale pointed out, those are to be found in what will be new Section 4(2)(b). We have placed a licence obligation upon all suppliers to provide energy efficiency advice and, perhaps more importantly, we

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have structured the regulatory regime in a way which will allow the forces of the market to be harnessed in the cause of energy efficiency. All of those measures will contribute towards achieving the aims of sustainable development.

However, in trying to extend the principles of sustainable development to being a statutory duty of the director the matter is more difficult. The difficulties arise because of the very broad nature of the director's powers and the very wide-ranging meaning which the phrase "sustainable development" might have. In short, we appear to be stuck upon the horns of an unresolvable dilemma. If the regulator were allowed to put his own interpretation on "sustainable development" it would create, in our view, an unacceptable risk that he could use the phrase to pursue a wide range of political and social objectives. That could create problems of accountability and could also lead to uncertainty in the industry.

Agenda 21, which will be familiar to those who followed the debate on sustainable development, was adopted at the Rio Summit and contains a full discussion of sustainable development. It runs to no fewer than 470 pages, and if the director were in effect authorised to pick and choose from a document of that size it is not difficult to see what difficulties might emerge.

There is a further problem. My noble friend Lord Cranbrook has suggested that we might define sustainable development by reference to guidance from Ministers. As he pointed out, that is the approach used in the case of the Environment Agency. However, that approach would unacceptably cut across the independence of the regulator in this context. The whole purpose of the regulatory regime which has been set up for the privatised industries is that political interference by Ministers should be prevented by appointing independent regulators with clearly defined statutory duties. To include that broad set of highly desirable goals seems to us to introduce an unacceptable degree of obscurity, important as they are.

To allow those duties in effect to be varied by Ministers would run contrary to the principle that we have been trying to establish; namely, that the regulator should be independent and should not be subjected on a day-by-day basis to interference by Ministers. While the noble Lord, Lord Bruce of Donington, may not entirely agree with me, it is our conclusion that it was the constant political interference with industries which was one of the principal difficulties which arose in the old days of nationalisation. It is our view that a duty in relation to sustainable development defined by Ministers would upset the integrity of the regulatory system.

I hope that my noble friend will appreciate why we continue to have anxieties about introducing this duty in this particular context. However, I hope that I have reassured him that his commitment to the concept of sustainable development is widely shared. The Government certainly support it and we believe, as he does, that it is a concept that should inform policy on a far wider basis than simply the matter that is covered by the Bill. On that basis, I invite my noble friend to withdraw his amendment, although I appreciate that he may wish to reflect on what I have said.

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4 p.m.

The Earl of Cranbrook: My Lords, before I comment on my noble and learned friend's remarks, I should like to refute absolutely the suggestion of my noble friend Lord Skelmersdale, which was put rather more tentatively by the noble Lord, Lord Peston, that we should hesitate to legislate to make things better and to move forward. Where on earth would we be if we took that line on everything? The opportunity for legislative initiative would disappear altogether. I refute the suggestion. The fact that consideration of the objectives of sustainable development was not among the duties given to the regulators of water or electricity is totally irrelevant. The debate has moved forward. As I explained, we are in a new arena and in a new time frame. I believe that we have to look forward.

I am reassured by my noble and learned friend's comment that the duty to promote efficiency is firmly placed upon the regulator.

The political issue is twofold. First, my interest in the matter arose from the clear statement that market forces would not of themselves produce tendencies towards efficiency and that those two considerations are totally separate. The second political issue is that, in a nationalised industry, policies of this nature can be promulgated through the administrative system. Once industries have been denationalised, government policy has to be imposed through the regulator. I recognise that one man's national policy guidance is another man's political interference. However, we are left with the dilemma that once an industry is privatised and is thereby freed from the shackles of perpetual government interference, there has to be regulation in order to bring considerations of national policy to bear. Those were the two key anxieties that prompted me to bring the matter forward.

My noble and learned friend will recognise that it is not fair to say that, under the amendments that I propose, the regulator would be free to put forward his own interpretation and to pick and choose. I believe that the model provided by the Environment Agency is the right model because it allows the infiltration of national policy guidance in the way I outlined.

I shall take the opportunity to think again. I am grateful to all Members of the House who contributed to this short debate. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Ezra moved Amendment No. 3:

Page 1, line 26, leave out paragraph (a).

The noble Lord said: My Lords, in moving Amendment No. 3, I shall speak also to Amendment No. 8, which is in the name of the noble Lord, Lord Clinton-Davis, and myself.

The purpose of the amendments is to ensure that in performing the general duties laid down in the Bill the Secretary of State and the director shall have an obligation to exercise those functions in a manner which they consider best calculated to protect the interests of consumers of gas. Particular reference is made to those who are disabled or of pensionable age.

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At the Committee stage on 22nd June I moved a differently worded amendment to emphasise the importance of protecting the interests of consumers of gas. That was opposed by the noble Earl, Lord Ferrers, who spoke on behalf of the Government, and voted against in a Division.

Amendment No. 8 is of a different order. It lays down that the Secretary of State and the director shall consider the interests of consumers in performing their other functions. I very much hope that in this revised form the Government will be able to accept the amendment. I should have thought that the Government would have little difficulty in doing so. During previous debates on the Bill both the Secretary of State in another place and the noble Earl, Lord Ferrers, in this House stressed the importance of protecting consumers' interests. Indeed the Bill does so, in many ways, particularly in regard to those who are disabled, of pensionable age or have difficulty in paying. The intention seems to be that the long-established procedures of British Gas in those regards should be continued under the new market arrangements. The amendments that I propose are consistent with those clear intentions.

The wording in the Bill as it now stands in Clause 1 is very similar to the wording in Section 4 of the Gas Act 1986. However, the context is entirely different. Then British Gas was the sole public gas supplier. It was widely assumed that the procedures then in operation would continue. In regard to the domestic market of 18 million households the emphasis right up to the present has been on social obligation, customer service, safety and security of supply and a special concern for those who are disadvantaged. With the opening up of the domestic market, which is the purpose of the present Bill, the old values are likely to be replaced by the new values of competitiveness, profitability, shareholder value and growth. These are likely to become relatively more important, as indeed the noble Viscount, Lord Caldecote, mentioned in connection with the previous amendments.

That would be all right if we were talking about an ordinary commodity for which you could shop around in the supermarket. But this is no ordinary commodity. It is the primary source of domestic heating for the vast majority of households in this country. There is no knowing how competitiveness within the gas sector will work out so far as concerns individual households, so special safeguards are required.

At Standing Committee in another place the Minister, on being questioned about why safeguarding the consumers' interests was not regarded as a primary duty, said:

    "If the primary duty"—

of supply—

    "did not exist, the secondary duty—

of safeguarding consumers' interests—

    "could not be delivered. Assuming that the primary duty exists and that therefore the secondary duty is being delivered, the regulator would have to weigh them up. She would have no reason to give higher priority to the primary rather than the secondary duty".

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I find that somewhat complex reasoning. If, according to the Minister, there is no reason to give higher priority to the primary rather than the secondary duty, it is totally unclear why the distinction should be made in the wording of the Bill.

There are broader reasons for giving a higher priority to consumer safeguards than are given in the Bill. There is a growing suspicion of the privatised utilities. There has, in the view of the public, been too much of a swing away from consumers and towards other stakeholders, in particular shareholders. There is a growing feeling of uncertainty and resentment. I believe it is necessary to recognise that the public need some reassurance. This amendment would go some way to providing that reassurance and is consistent, as I have already indicated, with other provisions made in the Bill to safeguard particular aspects of consumers' interests. There is undoubtedly the fear that the development of competition could be accompanied—I do not say that it will be—by a lowering of standards. It must surely be a prime objective of this legislation to make sure that that does not occur. Requiring the Secretary of State and the director to consider how the interests of consumers of gas can best be protected under the new arrangements seems to be an important step in that direction. I beg to move.

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