. After section 38 of the 1986 Act there shall be inserted the following section—
"Duty to consider representations and give reasons.
38A.—(1) The Secretary of State may by order exercise any one or more of the powers conferred by subsections (2) to (4) below.
(2) This subsection confers power to provide that, before the Director makes a specified decision in relation to a licence holder, the Director—
(3) This subsection confers power to provide that, where the Director makes a specified decision in relation to a licence holder, the Director shall as soon as practicable give to the licence holder a written notice explaining why it appeared to him to be appropriate to make the decision.
(4) This subsection confers power to provide that, where a specified decision made or proposed to be made in relation to a licence holder will or may materially affect any specified person, any provision made by virtue of subsection (2) or (3) above shall, with any specified modifications, apply in relation to that person.
(5) Nothing in any order made under this section shall require the Director to disclose any information the disclosure of which he considers would or might seriously and prejudicially affect the interests of a particular individual or body of persons, whether corporate or unincorporate.
(6) An order under this section—
(7) In this section
and references to a licence holder include references to an applicant for a licence." ")
Amendment No. 193 refers to the annual report that the director general must now make on the state of the industry. The amendment was put down in the other place by my colleague the noble Lord Peston, and the Government have agreed to require the regulator to draw up an annual report which will be presented to Parliament. The report will assess the progress of competition and the extent of improvements in price and customer services.
The Government have conceded considerable ground in allowing the amendment, not least because I understand that they repeatedly refused Labour amendments in Committee that required the assessment of competition in the pilot areas before competition was extended nationwide. I believe that the amendment is a good second best option.
Some progress has been made with regard to customer protection, although we do not think that the Government have gone far enough to ensure that those on low incomes will not suffer the adverse effects of competition. The Government have had to introduce a large number of technical amendments to their Bill, particularly in the House of Commons, which suggests that the details of the legislation were not thought through properly before it reached the Floor of the House. That is water under the bridge, and I know that the Chairman of the Standing Committee commented on that point.
The amendment connects the role of the regulator with competition policy. The relationship between the regulator and competition policy will remain an essential point of focus in the future brave new world. Labour Members intend to keep a very close eye on competition. If consumers suffer any deleterious effects when the Bill becomes an Act, it may be necessary to re-examine the arrangements and perhaps even the definition of the powers of the regulator and the director general.
Although the Minister has given his assurances in that regard today—we are grateful for those assurances and we take them at face value—we do not always get every jot and tittle of legislation correct in this place, and we often underestimate the effects of legislation on our constituents. I hope that the Minister will agree to reserve the right to return to the issue if necessary, as the relationship between the role of the regulator and competition will remain central to any future debate on energy policy.
I, too, welcome the amendment. At one stage I considered amending it, but I decided to accept the Minister's verbal assurance—he is an honourable man—that the Director General of Ofgas will get the message as to what should be included in the annual report.
The amendment says that the report should include a statement about effective competition and a general survey of developments in respect of such competition. Will the report also explore the success or otherwise of the pilot areas? My hon. Friend the Member for Leeds, West (Mr. Battle) touched upon that issue, although he might have pursued it a little further. Will the terms of the report cover the performance of competition in the pilot areas?
I hope that the Minister will ensure that the Director General of Ofgas accepts as part of his remit in the next 18 months an investigation of the growing claims about potential price cuts in the first pilot area in the west country. I do not know whether the Minister's fingerprints were on the weekend press reports, which stated:
Whitehall sources now expect prices to fall by 25℅ in the West Country.
There is no reason why the director general or Ministers cannot report on whether that target has been achieved.
Will the Minister say whether his Department is responsible for such assessments? The price cuts were first estimated at 10 per cent, but we are now talking of cuts of 25 per cent. in the west country pilot area. That is a very interesting benchmark against which to gauge the success of competition. Will the Minister say whether the press reports are, shall we say, reasonably inspired? If they do not have his fingerprints on them, does he endorse their estimate of the price cuts in the pilot area?
The annual report should cover the impact of the pilot area projects, and it should deal also with regional pricing. I hope that the director general will include a special section in his report about the impact, not of this Bill, as the Minister chided me earlier, but of other decisions that will lead to discriminatory regional pricing. We shall need to know the consequence of those decisions—the amount of the differential in gas prices.
The Minister has spent most of his parliamentary lifetime since I have known him, all those years—[Laughter]—over some years—attacking British Gas, but I repeat that, in fairness, British Gas produced in Merthyr Tydfil, in Rhymney and in many other parts of the country, a uniform, reasonably priced system of gas. That gas was securely delivered, with a tremendous record of safety and of bringing natural gas to our regions.
I doubt whether that gas pipeline system, which will now be privatised, would have been built, had it not been by the public sector. It was the success story—a great technical achievement—of, yes, a public monopoly. That monopoly created a gas pipeline structure that is one of many things that we can be really proud of, in infrastructural terms. Let us not deride the historical contribution that British Gas has made.
In addition, at least British Gas did not discriminate against us because we were a long way from the North sea. I hope that the Minister will ensure that the annual report of the Director General of Gas Supply includes an assessment of the regional pricing that emerges, not necessarily as a result of the Bill, but as a result of a combination of factors, of which the Bill may be one, contributing towards discriminatory pricing of one type or another.
I assure him that we shall keep a vigilant eye on it, but it is hard to know exactly what tariff is being charged in place x, y or z. Such comparisons should be an integral part of the annual report that the amendment establishes for the Director General of Gas Supply.
It is inconceivable that any report would not specifically cover the pilot area performance. I will draw the director general's attention to the argument that the hon. Member for Merthyr Tydfil and Rhymney (Mr. Rowlands) makes about regional pricing. It is interesting that, at present, British Gas is free to differentiate on a regional basis and it has chosen not to do so; who knows what it will do in future?
I have read all sorts of comments about what might happen to prices, but it is interesting that, universally, it has been said that prices will decrease as soon as there is competition. Those decreases will be welcomed by consumers, whether they are 10 per cent., the 15 per cent. that a company has spoken about openly, or the speculation about as much as 25 per cent. Consumers will ultimately benefit from the introduction of competition.
May I gently pick up the remarks of the hon. Member for Leeds, West (Mr. Battle)? Yes, there are very many technical amendments to the Bill. I claim some foresight. I said on Second Reading that we would be revising the Bill extensively. The reason is that I have always been determined that we would consult, and respond to anxieties when expressed.
The hon. Member for Merthyr Tydfil and Rhymney has been kind enough to comment twice on the yellow document that I have introduced. That is a feature at the present stage of consideration, at the previous Commons stages and at the Lords stages. It is an innovation—I believe that it has never been done before. It was designed deliberately, on a technical Bill, to help hon. Members through.
I say this to the hon. Member for Leeds, West. I cannot claim that, even in spite of all that consultation and the further forthcoming consultation on licences, we shall not find that there are aspects that, with the benefit of practical experience, we would have wanted to do differently or that we need to amend—I think especially of the licences. Everyone must understand and appreciate that.
So far, the way in which the House and the other place have dealt with the issue shows that we can, in a reasonable spirit, tackle a complex technical piece of legislation in a way that responds to the various different interests and, ultimately, the interests of consumers throughout the country and our constituents.
I thank the hon. Gentlemen for the debate. It has been a useful exchange.
("(2) In sub-paragraph (1) of paragraph 1 of that Schedule, for the words from "placing in" to the end there shall be substituted the following paragraphs—
"(4) The Secretary of State shall by regulations provide that, in such cases and to such extent as may be provided by the regulations, a public gas transporter shall pay, by way of compensation for any loss sustained by any person in consequence of the exercise of those powers, such sum as may be determined in accordance with the regulations.
The Minister just said that he was determined to listen, consult and respond, so that the Bill might be amended as appropriate, but perhaps I should congratulate him on his neat attire and dapper appearance at the Dispatch Box, because he might have given a slight appearance of having been dragged backwards through a hedge, kicking and screaming a little, because we have had a long history of battling to include the amendment in the Bill.
The Minister may remember that I wrote to him initially, without success, and then brought delegations to visit him, when he said that he would be able to consider the matter further. It was not until we received a letter from the chairman of British Gas that we were aware of any progress.
The Minister took that as being of some comfort, but the terms of the letter were something of a mass, in which the chairman said that, in the case of small businesses, British Gas would give
sympathetic consideration … on an ex-gratia basis.
I did not feel that that went anything like far enough. We did not press the matter any further in this House, but I am pleased to say that, when the Bill went to the other House, strong feelings were expressed. I am grateful to Baroness Nicol and the eight peers who spoke about that issue at various stages in the other House.
Strong anxiety was expressed by six trade associations, led by the British Retail Consortium, about the need for stronger action. I was delighted when Lord Fraser of Carmyllie, after the Government reshuffle and his appointment, was able to propose an amendment showing that there would be regulations. However, I wish to express my anxiety that those regulations may not go far enough—although, as they are couched, we cannot be too sure exactly where they do go.
British Gas originally spoke about businesses with only a turnover of £250,000, and then said that they could go up to £500,000. That is far too low a limit, and I find it difficult to understand why there should be any limit. If one private company—we are now discussing private companies—causes damage to another private company, why should there be any restriction on the statutory right to compensate that other business? There is a lack of logic.
My right hon. Friend the Minister will be aware that I wrote to him and sent on a letter from the British Retail Consortium on that subject. I hope that he will bear it fully in mind.
Reading the Official Report of the debate in the other place on 25 October, I see that Lord Peston said:
we have moved seven-eighths of the way towards our destination. I am not sure whether it is a constitutional point or a point of honour but since the regulations are in response to your Lordships' demands it seems clear that the Government will introduce them corresponding to what we have discussed. It would be appalling if the Government, having introduced the regulations in response to what we have said, formulated them in a way which did not bite on the issues we have put forward."—[Official Report, House of Lords, 25 October 1995; Vol. 566, c. 1133.]
That sums up my worries, because there are strong anxieties.
In my letter to the Minister, which I faxed the other day to his office, I drew attention to the fact that £500,000 by no means covers 90 per cent. of all small businesses, which I think he had been led to believe at an earlier stage. The British Retail Consortium says that many of its members would not be covered.
Only a third of the members of the British Hardware Federation would qualify. Only half of the membership of British Small Shops and Stores would qualify. Spar (UK) Ltd, which works for most of the smaller retailers, estimates that only half of its members would be able to apply for compensation. Equally, the Association of British Chambers of Commerce is concerned that many of its members will fall outside the threshold.
I do not think that there should be any limit but, if the Government are determined that the figure should be lower, I refer my right hon. Friend the Minister to the Companies Act 1989, in which a small company is defined as one whose turnover is not more than £2 million. If that definition is used in that Act, why can it not be used in the Bill? It is poor logic to say that there should be a limit.
At the outset, my right hon. Friend was not overly keen on statutory compensation, thinking that it would be a burden that would be passed on to consumers. That perhaps reflects his Department's old-fashioned thinking about nationalised industries, in which all costs were passed on to consumers. We should instead consider it as an incentive to make firms avoid incurring costs in the first place.
Representatives of North West Water came to see the Minister as part of a delegation. They told him that they try to conduct business in a way that led to the minimum amount of damage because they were aware that they have a statutory duty to pay compensation. If North West Water can regard the legislation as good in this respect, I am sure that it will be good for British Gas and any other utility that might be causing damage on such a scale.
My right hon. Friend the Minister will be aware that local authorities can reduce a rate assessment when street work is undertaken. That is done without regard to the size of the company involved. If local authorities can be flexible, why does British Gas feel that there has to be a limit? After all, we are no longer dealing with a public utility but with a series of private companies. Why should they be immune from the damage that they inflict on others? Privatised monopolies should be just as accountable and subject to market rules as any other businesses.
Water industry compensation has been on the statute book for many years, but I do not think that the public regard it as anomalous. Indeed, they believe it to be perfectly sensible. We should regard compensation for the gas industry in the same light. If we regarded it as an incentive for it to conduct its operations more profitably, we could all benefit as a result.
I should like my right hon. Friend the Minister to accept in principle the notion that compensation is right. If he believes that there has to be a ceiling, it should certainly be much higher than £500,000. Whatever compensation scheme there is should be transparent, accountable and universal.
I thank my right hon. Friend the Minister for having got the Bill this far. I understand that the consultation period will run for three weeks from this month, and ask him to confirm that, during that time, full account will be taken of the points made by the numerous trade organisations—the Country Landowners Association, the National Farmers Union, the Forum of Private Business, the Association of British Chambers of Commerce and the Association of Convenience Stores—about the need for a much higher limit so that we can draft regulations with which we can all be satisfied.
I apologise for not having been able to table the amendment in my own name at an earlier stage, but it will be appreciated that it has been only a few days since the Bill came back from another place.
I read the report of proceedings in another place and, having also listened carefully to the hon. Member for Bolton, North-East (Mr. Thurnham), I believe that he makes a cogent and logical case, which the Minister should answer. I hope that any response to the hon. Gentleman does not involve our getting stuck on the question of how small a small business is.
The issue of statutory compensation is an important and practical one. I hope that we shall not see wrangles, with our streets dug up and left with holes, while companies have to produce accounts to prove their financial position. That would be intolerable and unacceptable. I hope that this important, local issue can be sorted out positively, and I look forward to the Minister's response.
I congratulate the hon. Member for Leeds, West (Mr. Battle) on his first change to Labour party policy. When the amendment was first introduced, I think I am right in saying that the Opposition spokesman was as sceptical as I was. I must say that the hon. Member for Clackmannan (Mr. O'Neill) also listened to the arguments. In any event, I do not want to spoil the atmosphere of what has been a good-natured exchange.
I congratulate my hon. Friend the Member for Bolton, North-West (Mr. Thurnham) on his determination. As always, I listened carefully to the arguments. I had a major hand in the debate in another place. I shall not go over the arguments about the difference between gas and water or the reasons for deciding access to the public highway.
My hon. Friend's substantive point related to companies with a turnover of £500,000. May I gently say to him and those who associate themselves with his remarks that it is not ideal to have the issue raised at this stage. The first that I knew about the definition, which we raised from £250,000 to £500,000, being queried was when his fax reached me on 31 October. His argument until now has consistently been on behalf of small businesses, so his present argument that there should be no limit at all seems slightly inconsistent. However, I do not wish to argue fiercely with him about that.
There will be a limit, but I am willing to listen to arguments about what exactly it will be. Of course, problems arise with the percentage of small businesses that qualify, because retail businesses have higher turnovers than other small businesses. We are prepared to examine the issue, but need to do so rapidly. We have no time for formal consultation, and the various concerned bodies that have not yet put their views to us need to do so quickly. Having said that, I support the amendment, and commend it to the House.
As this is the last group of amendments, I should like to extend my thanks to the Opposition, my officials and the Clerks of the House for the way we have managed to get through a complex and technical Bill in a good spirit and with maximum co-operation, always mindful of the many benefits that will flow to consumers from the Bill.
I echo the Minister's remarks. Although I came to this Bill at a very late stage, I know of the work that has been done on it by the Clerks of the House and others. I would also offer a word of thanks to the Minister for the book that his Department published, carefully setting out how the amendments relate to the Bill. If other Departments of Government followed that practice, it would greatly help us all—and perhaps improve legislation generally.