Utilities Bill

House of Commons, 27 July 2000.

Michael Lord (Deputy Speaker, Central Suffolk and North Ipswich)

I draw the House's attention to the fact that privilege is involved in Lords amendments Nos. 8, 9, 11 and 203. If the House agrees to any of those Lords amendments, I shall ensure that the appropriate entry is made in the Journal.

TRANSFER TO AUTHORITY AND COUNCIL OF FUNCTIONS, PROPERTY ETC.

Kim Howells (Labour, Pontypridd)

I beg to move, That this House agrees with the Lords in the said amendment.

Kim Howells (Labour, Pontypridd)

The amendments are concerned with the consumer council, and, in a few cases, the authority. There are three sub-sets within the group. The first set make arrangements for independent adjudication of disputes about the council's rights of access to information from the authority or from companies. The second group affect the council's powers to report on its investigations. Finally, a set of miscellaneous, minor amendments improves and corrects the drafting of the Bill.

Eric Forth (Conservative, Bromley and Chislehurst)

We are obviously in for a long evening because there is much important material in the Lords amendments. Fortunately, the House has a lot of time in which to deal with the Bill, in contrast with the last matter before us on which important changes to the rights of individual citizens were disgracefully railroaded through the House under a guillotine. The Utilities Bill is not in the same category as the Football (Disorder) Bill, but it introduces important measures that require our mature consideration. I will not detain the House unduly on this group, nor will I linger on each amendment. It would be far from my mind to do that. My eye has lit, however, upon amendment No. 38, the wording of which could give rise to worries under some interpretations. The Minister will wish to leaf through his notes to consider the amendment. Of course, he will already have done so, because he is doubtless well acquainted with every one of the amendments before us. We shall wish, over the next few hours, to tease out just how well he has read them. For now, however, I wish to ask only about amendment No. 38. The amendment states: Information relating to a particular individual or body may be included in a report to be published under section (5)(b) if— (a) that individual or body has consented to the publication; (b) it is information that is available to the public from some other source; or (c) it is not information the publication of which would or might, in the opinion of the Council, seriously and prejudicially affect the interests of that individual or body. It may well be thought that paragraph (a) is relatively uncontroversial, and one cannot argue with the proposition that if an individual or body has consented, it is perfectly proper for publication to proceed. We can dispose of that provision without further ado. Paragraph (b) is more problematic, however. Real questions arise about "some other source". Wording so loose and general must give rise to some concern. There is no further definition, and no restriction is proposed. What if the other source were to be one normally bound by confidentiality?

Kim Howells (Labour, Pontypridd)

If it were commercially confidential, it would not be available to the public. We are discussing information already available to the public from other sources.

Eric Forth (Conservative, Bromley and Chislehurst)

I am grateful. We are discussing a duplication of effort, then. Information already available elsewhere will simply be rearranged and represented. That being so, one wonders how worthwhile the amendment is.

Kim Howells (Labour, Pontypridd)

Let me try to help the hon. Gentleman. On this Bill, I have been constantly accused of including all sorts of Henry VIII powers and so on. With this amendment, I am trying to include the briefest provision possible, and am finding myself criticised for it by the hon. Gentleman, who is usually a fount of common sense in these matters.

Eric Forth (Conservative, Bromley and Chislehurst)

I am glad to hear that—as I would have expected of him—the Minister has paid close attention to the matter, exercised his judgment and decided that, on balance, the amendment is acceptable if not actually beneficial. The most worrying of the three paragraphs in amendment No. 38 is (c), which states: it is not information the publication of which would or might, in the opinion of the Council, seriously and prejudicially affect the interests of that individual or body. Here, we enter a judgmental area. It would appear that the council is being given the power to take the decision. That is a serious judgment in any case, but we will have to be more than usually satisfied to give it explicitly to the council. As hon. Members well know, making available information, in particular about an individual or body, can be extremely prejudicial in many ways. If the body is a commercial business, it could seriously affect its share value, for example. In some circumstances, it could prejudice the degree of confidence that the public have in a public body. In the case of an individual, I do not need to tell hon. Members about the damaging or deleterious effect that publication of information about them might have. Almost daily, there are cases where the publication of information can be damaging to an individual. I wonder what safeguards might exist. Paragraph (c) simply states, baldly that in the opinion of the Council the information should not be judged seriously or prejudicially to affect interests. There is nothing to say what recourse an individual or body might have if the council judged that publication was not prejudicial, but the individual felt that it was.

Kim Howells (Labour, Pontypridd)

As I am sure the right hon. Gentleman knows, other parts of the Bill contain stringent provisions to ensure opportunities for appeal about the demand for information, in which case the decision would go to an adjudicator. In this case, the adjudicator will, temporarily, be the authority or regulator, who is paid a great deal of money to make such decisions.

Eric Forth (Conservative, Bromley and Chislehurst)

I am only partly reassured by that intervention. The timing of these events is crucial. If the information is already in the public domain—about me, for example—and I then tell that highly paid adjudicator that I do not believe that it is right and he agrees, the damage has already been done. If the information is already in the public domain, what is the point of that highly paid adjudicator coming to my rescue?

Kim Howells (Labour, Pontypridd)

The right hon. Gentleman has a good point, but as he said, it is all to do with timing. The adjudicator would adjudicate on the initial offering up of the information, not subsequent to it being offered up. If the information was delivered on request, the adjudicator would prevent it from being put in the public domain if he felt that it would be harmful to the company involved.

Eric Forth (Conservative, Bromley and Chislehurst)

If the Minister is telling me that he is satisfied that there is a mechanism whereby, before the information is in the public domain, the individual or body would be apprised of the fact, that is sufficient.

Kim Howells (Labour, Pontypridd)

indicated assent.

Eric Forth (Conservative, Bromley and Chislehurst)

I gather that that is what the Minister is telling me. If he is satisfied that mechanisms exist properly to protect individuals and bodies from potential damage, of course I accept his word. He has studied the matter and given it his mature consideration, and that is his view. Therefore, on that basis, I am prepared to accept what he says. That brief exchange shows—I am sure that I do not need to persuade you of this, Mr. Deputy Speaker—the value and necessity of the scrutiny that we are undertaking. It is one thing for a Bill to go through all its stages in this House and to go to another place, it is another for the Lords to have amended it. It is equally essential, is it not, for us to have the opportunity to consider what has been suggested and to determine how appropriate it is? I pay the Minister yet another tribute—he stands high in my regard anyway. At least with this Bill we are not being constrained by the usual jackboot of a guillotine motion. The Football (Disorder) Bill, which we have just considered, was a disgrace. However, the Minister is content for us to debate this Bill properly and to consider it. I pay tribute to him and, indeed, to the Whip on duty, who is also generously allowing the House proper time to consider the matter appropriately. Having obtained the assurances that I had hoped for, I am satisfied that I need not challenge the Government on this matter any further.

PUBLICATION OF ADVICE AND INFORMATION ABOUT CONSUMER MATTERS

Kim Howells (Labour, Pontypridd)

I beg to move, That this House agrees with the Lords in the said amendment.

Kim Howells (Labour, Pontypridd)

The amendments to clause 6 in this group are designed to tidy things up, if you do not mind my saying so, Mr. Deputy Speaker. They are concerned with the provision of information to consumers and others. Therefore, I commend them to the House

Eric Forth (Conservative, Bromley and Chislehurst)

Amendment No. 143 caught my eye in this group. Interestingly, it would insert after clause 102 a new clause entitled, "General restrictions on the disclosure of information", which follows somewhat in the spirit of our previous debate, and it runs to two and a half pages. One would have thought that under normal circumstances, an item of such gravity, substance and scope would have encouraged the Minister to say a little more about his views, given that it covers important and wide areas. Even right at the beginning, the new clause states: Information which…has been obtained … by virtue of the provisions and…relates to the affairs of any individual or to any particular business— we are in the same territory as for the previous group of amendments about which we had a brief exchange— shall not be disclosed during the lifetime of the individual or so long as the business continues to be carried on, except as provided below. That could raise several questions—although not about the lifetime of the individual, which is a fairly open-and-shut and definitive matter. The phrase so long as the business continues to be carried on requires a little more exploration. I shall assume that, for these purposes, the word "business" is used in the generic sense and that it covers public and private companies, and presumably even partnerships and so on. Might the business be brought to an end voluntarily—wound up or put into liquidation? The business might be temporarily suspended. My hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb) and the Minister are far more expert in such matters than I could ever be. There are several different ways in which the business might cease to trade. The new clause uses—unusually—the more colloquial phrase as long as the business continues to be carried on. Does that form of words hold water? Its accuracy and usefulness bear examination. The question requires a brief response from the Minister. The question of consent arises under subsection (2), which states that: Subsection (1) does not apply to a disclosure made with the consent of the individual or the person for the time being carrying on the business. Does that imply that only one person is involved in carrying on the business? Surely it cannot do so. Does it imply that only the consent of one of the people carrying on the business is needed? In normal circumstances, more than one person would be involved in carrying on a business and thus consent should be required from all or a majority of them, or from someone who has been given legal power to give such consent. The provision does not make that clear, although I am sure that real substance and meaning lie behind it. It would be useful if the Minister would clarify the matter before the Bill makes much more progress. The new clause notes that subsection (1) does not apply to disclosure in a large number of circumstances; for example, if it is made for the purpose of facilitating the performance— or— is required by a notice under section 38(1 A). Matters become complicated when we reach paragraph (d) which states that the subsection does not apply to disclosure if it is made by one licence holder to another and is required by that other licence holder for purposes connected with the carrying on of relevant activities. By the time one reaches that stage, matters seem to be at arm's length and second hand. I assume that the provision is watertight, although the details make me wonder about that. Subsection (4) gives a detailed list of provisions under which subsection (1) will not apply. The most worrying is paragraph (h). Knowing me as he does, the Minister will not be surprised that I mention that paragraph in passing—indeed, my hon. Friend the Member for Bognor Regis and Littlehampton might also be worried about it. It states that disclosure of information under subsection (1) will not apply in pursuance of a Community obligation. I assume that that means a European Union obligation.

Andrew Stunell (Liberal Democrat, Hazel Grove)

The right hon. Gentleman will have to wash his mouth out.

Eric Forth (Conservative, Bromley and Chislehurst)

I am sure that the hon. Gentleman is not trying to provoke me; he is much too nice for that. I am merely wondering about the wording. Is it legally watertight? I was elected to the European Parliament in the good old days when it was an institution of the European Economic Community. I was relaxed about that. I became more worried when it passed through various ghastly transformations into, first, the European Community—dropping the word "Economic", which worried me as much as it worried many others—and then the European Union. Where does this Community thing come in? Is it "the Community"? The word begins with a capital, which makes it rather grand and important. Why is the body not described as the European Union? Is the Minister trying to hide something? Is there a sinister plot? The serious point is that I need to know whether the word "Community" is being used correctly. If so, what does it mean in this new clause? What does it cover? Is it the European Union in all its manifestations? Is it all the arms, branches and bodies of the EU? What exactly is a "Community obligation"? Is it only a directive or could it be something else? It certainly cannot be anything to do with the European convention on human rights. Many people get confused about that, but I know it cannot be the convention because that is a matter for the Council of Europe. Will the Minister give us some help to interpret this seemingly innocent provision? It may be inaccurate, useless or even misleading. I want to know the extent of the obligations that arise from that, albeit rather loose, wording of "Community". We need to know much more about that. Subsection (5) contains a long list of some very important people. It talks about The persons and bodies specified for the purposes of subsection (4)(a) and about a Minister of the Crown. Presumably, that means any and all Ministers of the Crown—we know that they are omniscient, omnipotent and ubiquitous. I want clarification on whether that does indeed cover, as a generic term, Parliamentary Undersecretaries of State as well as Ministers proper—Ministers of State and Secretaries of State. The subsection then lists the Competition Commission and all sorts of directors of very important things. Then, rather oddly, it says: a local weights and measures authority in Great Britain. Out of that seemingly innocent element, a couple of intriguing questions arise as to whether the local weights and measures authority is suddenly thrust to the same level of prominence and competence as Ministers of the Crown on one hand and the Civil Aviation Authority on the other. More intriguing is the inclusion of the term "in Great Britain." I assume that it was included advisedly, and I just want to ask in passing what happens outside Great Britain and why those who are not blessed to be in Great Britain are not to be given the benefits of the provision. It would help me to know, before I give my approval to the amendment, whether people outside Great Britain have some other means of being satisfied by these provisions. I do not want to delay the House unduly. I could have picked up many more of what I consider to be anomalies and slacknesses. We shall go into a lot of other things in more detail as required—I know that my hon. Friend the Member for Bognor Regis and Littlehampton, on the Front Bench, is itching to get his teeth into all this nonsense—but I think that I am really asking, given the extent to which the Government are prepared to accept these amendments from another place, whether they are really satisfied that the amendments are tightly drafted, that they are viable in terms of the law, that this whole thing holds water and that we shall not be creating even more trouble for ourselves than might already exist. That is the general thrust of my remarks. I just wanted to take a few detailed examples to give what I said a slightly sharper edge, but I have probably cited enough to give a flavour. I am asking the Minister, in his usual charming but competent way, to put our minds at rest, to take us through the matter, and to display his mastery of the material, as he usually does. If he did, I would find that very satisfying.

Kim Howells (Labour, Pontypridd)

Flattery will get the right hon. Gentleman everywhere. I thank him. I think that I referred to him as the hon. Gentleman earlier; it must have been because I had dashed into the Chamber, and was clearly the result of a rush of blood to the brain. Lords amendment No. 143, which the right hon. Gentleman is very concerned about, is, as he knows, part of a larger group of amendments which carry forward the well-established convention that it should be a criminal offence to make an unauthorised disclosure of information obtained under legislation that empowers public authorities to require information from individuals and businesses. That is already the case under the Gas Act 1986 and the Electricity Act 1989, but the sections in those Acts differ slightly from each other. The amendments repeal both those sections and substitute a single regime which will apply to both Acts, as is appropriate where a single licensing authority operates aligned licensing regimes. The new clause which, essentially is Lords amendment No. 143—the right hon. Gentleman is right to point out that it is a long amendment—prohibits disclosures and then defines certain exceptions where disclosure is permitted. That is a complicated process, and the right hon. Gentleman is right to highlight it. As a rule, the exceptions are for disclosures between regulatory authorities to facilitate the performance of the receiving authority's statutory functions. The publication powers conferred on the authority and the council elsewhere in the Bill are generally exceptions to the prohibition on disclosure as well. Each is usually subject to its own harm test, limiting, in other words, what may be disclosed without the consent of those to whom the information in question relates. The new clause will also apply to information obtained under the Bill, for example, by the Gas and Electricity Consumer Council under clause 24, with which I am sure that the right hon. Gentleman is familiar. 5 pm The right hon. Gentleman asked an important question about the definition of a business that has ceased to trade and what happens if a business is in suspension. Business has either been wound up or it has not. If it has been suspended temporarily, but not wound up, business continues. That is a difficult one, but I am glad that the right hon. Gentleman raised it because it gives me a chance to clarify it for the House. I was fascinated by the right hon. Gentleman's search for the definition of "Community". He almost had me believing that we could substitute "Commonwealth" or something else for it. I have to remind him that he was a member of a Government who signed the country up to Maastricht. It is awful to have to say that this late in the term, but they did. The phrase "Community obligations" refers to the obligations of the European Union as it exists now and the European Community as it existed previously in timeless legislation. That is defined in schedule 1 of the Interpretation Act 1978, with which I am sure that the right hon. Gentleman is as familiar as I am. The right hon. Gentleman properly asked about the areas of this great country that are not included. Northern Ireland is the missing element. That is because the Weights and Measures Act 1986 does not extend to Northern Ireland. Lords amendment agreed to. Lords amendments Nos. 5 to 7 agreed to.

PAYMENTS BY LICENCE HOLDERS RELATING TO NEW ARRANGEMENTS

Helen Liddell (Labour, Airdrie and Shotts)

I beg to move, That this House agrees with the Lords in the said amendment.

Helen Liddell (Labour, Airdrie and Shotts)

Amendments Nos. 8 to 11 relate to clause 8. This gives the authority powers to modify payment conditions in licences to reflect the establishment of the authority and the council. Amendments Nos. 8 and 9 make it clear that the authority can modify payment conditions to recover expenses incurred by the Secretary of State in establishing both the authority and the council, and that any preparatory costs incurred by the Secretary of State can be recovered. Amendment No. 10 will facilitate the transition from the old to the new payment conditions by permitting the directors general, the Secretary of State, or both, to carry out the required consultation on the new conditions prior to the establishment of the authority. The new conditions can then be in place from the date that the new bodies are established.

Edward Leigh (Conservative, Gainsborough)

While waiting for us to reach this group, I have been trying to understand what amendment No. 8 means. We are told that it relates to line 21 of page 5. Clause 8(3)(2) refers to the expenses of the Secretary of State in relation to the establishment of the Authority or the Council. The amendment replaces the word "or" with "and". I am not sure why the other place felt that that was necessary. Will the Minister explain that to me, please?

Helen Liddell (Labour, Airdrie and Shotts)

I think that the other place believed that it was a tidying up and a clarification. There has been lengthy debate in both Houses and this is an opportunity for us to ensure the clarity of the legislation wherever the two new authorities come into play. It is a common-sense provision. I do not feel particularly strongly about it, but it tidies up the legislation and makes it much more coherent. The hon. Gentleman will know that I am always willing to accept good suggestions.

Nick Gibb (Conservative, Bognor Regis and Littlehampton)

I should like to help the Minister in answering my hon. Friend's question. This is one of many tidying-up and redrafting amendments. The Bill was incompetently drafted. The clause is an example of bad drafting. It is clear when one takes the word "and" out and puts "or" back in that the clause will not be satisfactory. There have been more than 600 Government amendments to the Bill. It is a classic example—it is just one of many—of a poorly drafted Bill being brought to the House in a rush. I am grateful to my hon. Friend the Member for Gainsborough (Mr. Leigh) for raising this issue.

Helen Liddell (Labour, Airdrie and Shotts)

I shall not get involved in questions of grammar with the hon. Gentleman. However, I merely point out that, when we started to consider the Bill, he said that he supported its broad thrust, but claimed that there would be 1,000 amendments. With the benefit of hindsight, we can say that it is not often that he is right—and he is wrong again. Labour Members are anxious for the Bill to reach the statute book. It will ensure that consumers of energy get the full benefits to which they are entitled. It should lead to a reduction of 10 per cent, in wholesale electricity prices. I am not surprised that some Conservative Members wish to delay it. Amendment No. 10 will facilitate the transition from the old to the new payment conditions by permitting the directors general and the Secretary of State—or both—to carry out consultation on the new conditions prior to the establishment of the authority. The new conditions can then be in place from the date that the new bodies are established Amendment No. 11 deals with concerns expressed in Committee that the Secretary of State's powers in clause 8(8) to direct the inclusion of payment conditions were too widely drawn. The amendment ensures that the powers of direction can be used only in relation to the expenses of the council, and the expenses of the Secretary of State in relation to the establishment of the authority and the council.

Eric Forth (Conservative, Bromley and Chislehurst)

As the House knows, this matter relates to payments by licence holders relating to new arrangements generally. It also refers to the arrangements that are to be made under the Bill whereby the authority can modify the condition of licences. More specifically, before modifying the conditions of a licence, the authority is required to consult the licence holders. These are important provisions, so it is important that we understand them properly. I want to pause for a moment to consider amendment No. 10, which would insert the words: Any consultation undertaken by the Director General of Gas Supply, the Director General of Electricity Supply or the Secretary of State before the commencement of subsection (6)— the subsection that refers to the modification of the conditions of a licence and the requirement for consultation— shall be as effective for the purposes of that subsection as if undertaken by the Authority after that time. In effect, it says that if something happens before something, it will be as effective as if something had happened after something. I am slightly confused by that provision. I have no doubt that there is an elegant explanation for it and that the Minister will provide it shortly. However, for the time being, the meaning of it defeats me. I am not sure what the purpose of those words is and whether they will achieve it. Like other hon. Members, I understand the point behind the original words in subsection (6), which states that, before the conditions of the licence are modified, the Authority shall consult the licence holder. It may be my fault for not spotting this point earlier, but it might not have been a bad idea for the obligation to consult to be somewhat wider. I can imagine circumstances in which the modifications of the conditions of one licence could—and almost certainly would—affect people other than the licence holder, especially if the conditions were eased or payments were reduced. As my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb) pointed out, more than 600 amendments have already been made to this rather imperfect Bill. I am not at all surprised by that, but I shall not dwell on the point—you would not want me to, Mr. Deputy Speaker—about whether the consultation should go wider. However, I want to dwell for a moment longer on amendment No. 10. We need much more clarity about the amendment's purpose in referring to consultation being as effective if it is undertaken before the commencement of subsection (6) as it would be if it were undertaken afterwards. We need to know why those words should be included and what they add to the Bill. More pertinently, we should ask whether such wording risks confusing licence holders. Indeed, it may even confuse the authority and the director general more than it will help them. Before we agree to the amendment, we must be satisfied that it adds value and clarity. My fear—subject to the Minister explaining the amendment fully, as I am sure that she will—is that the amendment may serve to confuse, and not to clarify. The last thing that we want at this stage, and that the Government would want, is for words to be added to the Bill that would confuse people and undermine its purpose.

Helen Liddell (Labour, Airdrie and Shotts)

It is a pity that the right hon. Member for Bromley and Chislehurst (Mr. Forth) was unable to join us in Committee, where we had considerable discussion on these matters. If he had had the time to refer to the Official Report, he might not be questioning these issues. The measures concern the arrangements for the transition from having two authorities to having a single authority. They also aim to guarantee that there will be maximum consultation to ensure that everyone is content, and comfortable with the legislation. A similar provision appears in the Deregulation and Contracting Out Act 1994. The right hon. Gentleman is probably more familiar with that than I am because it was introduced by the Administration of which he was a member. It is important that we have the correct transitional arrangements and, without this provision, we would find ourselves unable to consult until after the establishment of the authority and the council, which would mean that consultation would be curtailed and would cause delay. Given that the right hon. Gentleman's colleagues in this House and the other place have welcomed the measures, I do not expect him to be too discommoded by the amendments. Lords amendment agreed to [Special Entry]. Lords amendments Nos. 9 to 11 agreed to [Some with Special Entry].

OBJECTIVES AND DUTIES UNDER 1986 ACT

Helen Liddell (Labour, Airdrie and Shotts)

I beg to move, That this House disagrees with the Lords in the said amendment.

Helen Liddell (Labour, Airdrie and Shotts)

I do not want to delay the House unduly. Amendment No. 12, together with amendments Nos. 14, 15 and 17, clarify what is meant by the functions of the authority and the Secretary of State for the purposes of clauses 9 to 11 and 13 to 15. They also clarify what is meant by activities subject to obligations for the purposes of the finance duty in sub-paragraph (2)(b) of clauses 9 and 13. Clauses 9 to 11 and 13 to 15 contain obligations that relate to the functions of the authority and Secretary of State. Clauses 9 and 13 set out their principal objective and general duties; clauses 10 and 14 oblige the authority to have regard to social and environmental guidance, and clauses 11 and 15 contain important obligations concerned with health and safety. Following Royal Assent, the functions of the authority and the Secretary of State will be largely contained in the amended Gas Act 1986 and Electricity Act 1989, but both will also have functions under stand-alone provisions of the Utilities Bill—that is, provisions that do not simply amend the existing Gas and Electricity Acts. For example, clause 4 requires the authority to prepare, consult on and publish a forward work programme, and clause 26 empowers the authority to publish a notice issued by the consumer council setting out its reasons for refusing to supply information. 5.15 pm The amendments make it clear that references to the functions of the authority or the Secretary of State in clauses 9 to 11 and 13 to 15 relate to their functions under the provisions of the Bill, as well as to their functions under the amended Gas Act 1986 and Electricity Act 1989. Similarly, the amendments make it clear that, for the purposes of the finance duty in subsection (2)(b) of clauses 9 and 13, the reference to the activities of licence holders that are subject to "obligations" extend to stand-alone obligations under this Bill, as well as to obligations under the amended Gas Act 1986 and Electricity Act 1989. Amendments Nos. 13 and 16, which were divided on in another place, would place the authority and the Secretary of State under a duty to exercise their functions in the manner that they consider best calculated to secure a diverse and viable long-term energy strategy. The authority and the Secretary of State must, as part of their primary duty, consider the needs of future, as well as existing, consumers. That requirement necessarily imports longer-term thinking about security of supply into their processes. We accept that many people think that it would be desirable to make this even clearer in the Bill, and the Government are therefore prepared to accept the amendments. Let me deal briefly with amendments Nos. 228 and 235, to assist the House. Each of those repeal provisions of the Gas Act 1986, which are replaced by equivalent provisions contained in the Bill. Amendment No. 228 repeals the latter half of section 47(7) of the Gas Act, which is the equivalent of paragraph 10 of schedule 1 to the Bill. Amendment No. 235 repeals paragraph 15(2) of schedule 7 of the Gas Act, which is the equivalent of clause 5(9) of the Bill. Finally, amendments Nos. 234 and 241 repeal spent provisions of the Gas Act and the Electricity Act respectively, which are concerned with the compulsory purchase of land in Scotland.

Nick Gibb (Conservative, Bognor Regis and Littlehampton)

The Bill started life as the Department of Trade and Industry's great flagship Bill, with 134 clauses and a new regulatory regime for all four utilities—gas, electricity, telecommunications and water. On Second Reading, the Secretary of State introduced the Bill in glowing, almost adulatory terms. He said: The Bill is forward-looking. It sets out a new framework for utilities regulation that is fit and appropriate for the 21st century. The Bill puts utilities regulation on a sure footing for the 21st century, and is good for consumers, good for competition and good for the utilities.—[Official Report, 31 January 2000; Vol. 343, c. 795.] That was on 31 January but, by 2 March, it was clear that, for the telecommunications industry and the water utilities, the Bill was bad for consumers, bad for competition and bad for the utilities. That is why both water and telecommunications were withdrawn from the Bill in a humiliating admission of incompetence by the Government, especially the Secretary of State. I warned the Minister in Committee that there would be 900 amendments, not 1,000, as she said. In the event, there were more than 600. If I exaggerated, I did so only slightly. The Government made strenuous efforts to reduce the number of amendments by merging some of them to get the number down to 600.

Helen Liddell (Labour, Airdrie and Shotts)

Perhaps I should be delighted that the hon. Gentleman has joined us, because I understand that he was an accountant in a previous life. If he thinks that the difference between 600 and 900 is slight, I am glad that he never did my tax returns.

Nick Gibb (Conservative, Bognor Regis and Littlehampton)

It is slight in this context. Huge efforts were made by civil servants to redraft amendments to ensure that they conformed with that figure.

Andrew Stunell (Liberal Democrat, Hazel Grove)

Does the hon. Gentleman agree that, whether the discrepancy in his accounting is large or small, it is not as great as chopping the Bill in half and adding back 600 bits?

Nick Gibb (Conservative, Bognor Regis and Littlehampton)

The hon. Gentleman makes a good point, especially as those 600-odd amendments were to a Bill of 134 clauses. The Government could almost have started again with more efficiency than just accepting 600 amendments, the vast majority of which dealt with poor drafting and poor policy analysis. I do not wish to be unkind, but it became abundantly clear in Committee that the Ministers were not up to speed with what was going on; they were certainly not driving the policy forward. This flagship Bill, which was part and parcel of the Government's so-called modernisation programme, has become a huge embarrassment to them, and the House even considered referring it back to Committee. It started as one of those eye-catching initiatives with which the Prime Minister likes to be personally associated, but it has finished up as an example of how not to legislate. Even the Secretary of State, who is absent today, is trying to avoid being associated with it. The essence of the Bill is to change the role of the regulator from that of an economic regulator to one of regulating for the sake of it. The gas and electricity regulators were put in place when the industries were privatised in 1986 and 1989 to deal with the fact that they were effectively monopolies and to ensure that those monopolies did not exploit their position. They were also charged with promoting competition—a role that they have carried out in an exemplary fashion during the past 11 or 14 years. The retail prices index minus X formula applied by the regulators has given the industries huge incentives to cut costs, increase efficiency and become more customer focused. Electricity and gas prices have fallen by 30 per cent, in real terms since privatisation and huge competition exists in the gas and electricity industries. In 1988, when the Prime Minister led for the Opposition in opposing the privatisation of electricity industry, he said: outside of the Conservative party…it is barely in issue that prices will rise because of privatisation. The truth is that they have fallen. On competition, he said: I would have thought that it was…virtually impossible that anyone would build a power station and invest hundreds of millions of pounds, unless they received a guarantee covering the capital cost, the fuel cost and, probably … the operating costs, too … the idea that we will have an influx of power stations, all competing on the grid, is nonsense.—[Official Report, 12 December 1988; Vol. 143, c. 681–84.] The truth is that there has been an influx of new power stations, all of which are in competition. There are 27 new power stations, and 50 new independent power producers have entered the generation market since privatisation with a total market share of 21 per cent. Under the Bill, the Government are changing the role and obligations of the regulators. That role would also be amended under the Lords amendments. It is important to understand the philosophy behind the Bill. It is set out in a pamphlet, entitled "Regulating in the Public Interest", written by Dan Corry in 1994. Some hon. Members might not be aware that Dan Corry is one of the Government's huge army of special advisers. He said that his pamphlet tries…to take us back to the reasons that we have regulation in order to see whether this leads us towards a different vision for the way forward. Interestingly, he continued: Once we accept that regulation is here to stay, we are into the world of how we should use it. This is a classic issue of interventionism in the workings of the economy.

Michael Spicer (Conservative, West Worcestershire)

I declare an interest as president of the Association of Electricity Producers. Does my hon. Friend agree that the situation is even worse than he suggests because the concept of social regulation will replace that of economic regulation and because the system that will replace the existing markets system is largely contract based and anticompetitive in many respects?

Nick Gibb (Conservative, Bognor Regis and Littlehampton)

My hon. Friend makes a good point, and I shall deal with some of the comments in the newspapers and on Second Reading. That pamphlet is, in essence, a blueprint for the Bill. The key point is that the Government believe that, because the regulators exist for those industries, they should be used to deliver some of the Government's social and political programmes. If the Government had their way, we would also have a regulator for the supermarkets, for car retailers and for a number of other things. The interventionist instincts of the Labour party and of those who share its philosophy are alive and kicking and prevalent in the Bill. The amendments are the key to that philosophy. That is why the order of the objectives for the regulator has been changed. That is why the Bill gives the Secretary of State the power to direct the authority to take into account directives from the Secretary of State on social matters when regulating the utilities. That is the fundamental difference that the Bill brings to the role of the regulator. It begs the question: what happens when the market, the industry or a sector of the industry becomes fully competitive? If we believe that the regulator's role is to mimic competition, once a sector becomes competitive, the regulator's role is effectively redundant and should disappear. The Health and Safety Executive can deal with safety issues; the Competition Commission can deal with any anti-competitive forces or alliances; but the specific role for a regulator of that particular sector of that industry should go. The electricity supply industry is one such example. It is highly competitive, so now is the time to remove the regulator from that sector altogether. If one believes, as the Government seem to, that the regulator has a wider role even in a fully competitive market—even when competition has fully arrived—there can be no rolling back of the regulator's role. That point was put to the Secretary of State during the Second Reading debate. He was asked whether he believed that there is still a role for the regulator when the utility sector involved … is fully exposed to fierce competition. His answer was: As a general rule, my personal view is that regulators are not appropriate in those circumstances, and I should much rather have the discipline of an effective market.—[Official Report, 31 January 2000; Vol. 343, c. 793.] That is his personal view, which contradicts the basis of the Bill that he has proposed. He tries to justify it by saying that, in many areas, the market is not perfect and thus a role for the regulator remains, but no market is absolutely perfect. However, most markets do not—apart from the utilities and financial services sectors—have a regulator. Provided that there is fierce competition, there is no need for a regulator to mimic competition. If, in those circumstances, the regulator remains, its role has become something else: a regulator for the sake of regulation, for the sake of intervening for policy purposes. Therefore, it is in essence a return to increased state control. It is that to which my hon. Friend the Member for West Worcestershire (Sir M. Spicer) referred when he wrote in The Daily Telegraph that the Utilities Bill and the Financial Services and Markets Bill will establish an entirely new form of government, the like of which this country has not experienced before: rule by regulator. Neil Bennett in The Sunday Telegraph called it the near renationalisation of the gas and power industries. It is why, during the Second Reading debate, my hon. Friend said: regulators are being given social and political objectives, which are antithetical to competition. We are witnessing a parallel system of government emerging. He went on to say: That is socialism by regulation; it is socialism on the sly and it is nationalisation by the back door. I hope that one of our first objectives when we return to government will be to dismantle all the regulatory apparatus, except for that which focuses on competition because competition is the true friend of the consumer.—[Official Report, 31 January 2000; Vol. 343, c. 828.] I tell him here and now categorically that, when we return to power, we will significantly reduce the role of the utility regulators and confine their role to that of mimicking a competitive market and to promoting competition. I have tried to establish that the Bill creates a whole new type of industry regulator, with wide new objectives, obligations and powers. It is those extra duties that the Government have imposed on it that will involve Ofgem—or GEMA as it should now be called—in higher cost, all of which will be passed on to the industry and thence on to the consumer. In fact, industry will suffer three forms of increased costs as a result of the Bill. The first is higher licence payments to cover the increased costs faced by the regulator himself. The second relates to the higher cost incurred directly by industry as it implements the social and other obligations required of it. The third is the higher cost of capital that results from greater regulatory risk. That is why the Bill has been so poorly received by industry, despite all the alleged consultation. Indeed, Ian Byatt, the erstwhile water regulator, said of the Bill when it included water: The Bill's enlargement of the scope for discretionary intervention by regulators, politicians and advocates is likely to extract a high price from utility industries, and all consumers will pay it. Clauses 9 and 13 are two of the most important clauses in the Bill. They set out the objectives of both the Secretary of State and the regulator, and thus constitute the lodestone on which the whole direction of regulation of the utilities is based. Those "objective" clauses not only change the regulator's role, but change the order and priority of other objectives. 5.30 pm The Gas Act 1986 and the Electricity Act 1989, which privatised the industries concerned, are similarly worded, setting out the regulators' objectives as established at the time of privatisation. Three key objectives were specified. The first was to secure that all reasonable demands for electricity were satisfied. The second was to secure that licence holders were able to finance the carrying on of the activities involved. The third was to promote competition. There were three equal duties, relating to security of supply, financial viability and the promotion of competition. That is the current regulatory regime. Under the Bill, however, the primary objective is to promote consumers' interests. Issues such as security of supply and financial viability have been downgraded to second place. The great achievement of the current regulatory regime is this. The RPI minus X formula gave industry incentives to reduce costs while maintaining financial viability, at the same time as delivering lower prices to the consumer. Everyone knows—even Labour pretends to accept—that the private sector is more efficient than the state sector. The RPI minus X formula was established to ensure that a proportion of that saving was passed on to the consumer. Of course, once a fully competitive market has been established there is no need for a formula, because the market itself will deliver the price reduction. The RPI minus X formula is only a mechanism enabling the benefits derived from efficiency savings to be shared; it does not, in itself, deliver efficiencies. It is the effect of being in the private sector that delivers the forces leading to greater efficiency. The regulator needs to be aware—this is the point of the amendment—that he cannot simply pluck the "X" figure from the air, and expect efficiencies to be delivered. There comes a point at which diminishing returns start to kick in. After a number of years in the private sector, the huge efficiency savings resulting from release from the lethargy of the state sector will no longer be kept up. Efficiency will continue to increase, but not at the same dramatic rate. That is why, under the existing system, there was always a prime duty to maintain the financial viability of the companies. Demoting that objective means that the regulator is almost forced to put such concerns very low on his list of considerations—which leads to the real danger of over-prescriptive and draconian regimes. There is another real danger, of which we are beginning to see signs in the utilities even before the implementation of the Bill. In Yorkshire, for example, Kelda, which owns Yorkshire Water, has sought to transfer all the assets of its business to a mutual trading company. Ofwat has said no to that, but the proposal is significant. Because of what is now widely regarded as an excessively draconian regime, the returns—the income—that Ofwat is allowing the water companies to make are so low that the market value of shares in the companies is below the book value of the assets that they own. If they simply sold all their assets, such as buildings and pipelines, and deposited the money in a building society, they could generate a significantly higher income than they are making from the provision of water services. Yorkshire Water wanted to sell its assets, and to sell them to a mutual trading company. The assets would have been sold in exchange for debt, so the mutual trading company would have been 100 per cent, debt financed. There is no doubt that interest on debts must be paid, although there is an element of choice governing whether a company pays a dividend. In this case, the regulator would not be able to force the funders of the asset to take a lower return. The regime has therefore become so unattractive that equity capital—entrepreneurial, innovative, private-sector business—does not want to run the business. It wishes to withdraw and to leave the supply of water to a mutual trading company. The danger of large mutual companies is that they have reduced incentive to innovate and to provide improved services. Philosophically, they are in many ways akin to the state sector. As the Financial Times said yesterday in an editorial: mutual ownership…leaves big questions as to how the new managers could be kept sharp in pursuit of efficiency. The point that the Minister has to take into account is that, although Ofwat has refused to allow the restructuring, in the long run there is nothing that any regulator can do to stop equity owners from withdrawing their capital from businesses that are impossible to run at a profit because the regulatory regime is too harsh. Mutualisation is effectively the renationalisation of those industries by over-regulation. If the Bill results in over-burdensome regulation in electricity and gas, as there is in water, we could see—I am not sure, but we may already be seeing it in gas distribution—similar trends in those industries. The replacement of equity funding with debt is the first step in that process. The purpose of our amendment in lieu is to put financial viability higher up the regulator's consciousness. It is important that the regimes are carefully balanced. The Bank of England has a similar imperative. Anyone can cure inflation by raising interest rates to 100 per cent, and killing the economy totally. The truth is that, to get interest rate policy right, we have to keep inflation down and growth steady. That is the trick of economic policy. That is also why the Governor of the Bank of England has to write to the Chancellor explaining why inflation has fallen to below 1.5 per cent. Similar constraints have to be imposed on the utility regulator, to ensure that the regulator does not drive out equity capital in the provision of investment funds to electricity and gas. Our amendment would help to achieve that. Our amendment in lieu is important and could do much to save the gas and electricity industries from the problems being faced in water. Without it, we run the risks associated with mutualisation and the effective renationalisation of those industries. I hope that the Government will accept it at this late hour. However, I suspect that the words of the Prime Minister back in 1988, may prevail. He said: We are proud that we took the— electricity— industry into public ownership. When we come to power it will be reinstated as a public service for the people of this country, and will not be run for private profit.—[Official Report, 12 December 1988; Vol. 143, c. 681–84.] I trust that that is no longer the Government's policy, and that they will demonstrate their commitment to the private sector by accepting our amendment. However, if they are not prepared to accept the amendment, I hope very much that the House will vote to accept it.

David Wilshire (Conservative, Spelthorne)

It might benefit the House if I were to point out that—although it is not, strictly speaking, a declarable interest—many of my constituents earn their living by working for the successors to British Gas. I approach the debate from that direction. I also understand from listening to the speeches of other hon. Members that there is a general wish not to prolong matters too much. I shall attempt not to do that. The Minister rightly said that Lords amendments Nos. 12, 14, 15 and 17 were seeking simply to expand the statement that "so and so shall arise out of this part" to "so and so shall arise out of this part or the Act itself." I am not a lawyer or a parliamentary draftsman. However, I am puzzled about why, if the legislation provides that something shall arise out of the Act, it should also state that something shall arise out of one part of the Act. It seems to be an excessively belt-and-braces approach to say that something will arise from both the Act and a part of the Act. Surely to goodness we know that "this part" is a part of the Act itself. Why is the Minister so keen, at a very late stage in our consideration of the Bill, to urge us to support including repetition in the Bill? I should be grateful for some clarity on that point. I am also concerned about Lords amendments Nos. 16 and 17. If I heard the Minister correctly, the Government have made a concession. They initially preferred to have no reference in this part of the Bill to the long-term supply of energy. In a debate in the other place, they tried to prevent Parliament from saying that the long-term provision of energy matters sufficiently to be mentioned in the Bill. I suppose we should be grateful for the concession, but it is worth making the point that they tried to exclude any such reference. My hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb) made it clear that, if we were the Government, we would not be starting from here, but the Government are starting from here and have decided to overturn the existing arrangements for the regulator and introduce new requirements. If they are determined to do that, they have the majority, and no doubt they will use it. It is extraordinary in those circumstances to resist any reference to the long-term supply of energy for the British people. In the absence of a realistic justification, that seems to reveal the Government's hidden agenda and to show that their real focus is not on the consumer's interests, as they claim. It suggests that, if they are not interested in the long-term supply, they are really only interested in control and regulation. That reveals their prejudice. The Government see that we have successful businesses, following the Conservative Government's privatisation of the industry. We are being asked to approve legislation that is aimed, as is always the case with the Labour party, at wrecking a successful business. The Government cannot tolerate financial success or bring themselves to understand that through such success comes prosperity and the underpinning of long-term viability for all sorts of enterprises. The Government are now conceding the point, presumably because they want to get away by 7 o'clock, and thereby conceding that they ought to consider other factors rather than wrecking successful businesses out of spite and prejudice. I would be grateful if the Minister could explain how I am wrong.

Andrew Stunell (Liberal Democrat, Hazel Grove)

The debate seems to be rather wide-ranging, but the amendments in this group and the clauses to which they relate go to the heart of some of the Bill's aims. I want to respond to some of the points made by the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) in support of the amendments in lieu. Neither the Lords amendments nor the amendments in lieu make any significant difference to the impact of the Bill, but it is legitimate to discuss them. I agree with many of the hon. Gentleman's points about the construction and history of the Bill and the disappointing way in which it has proceeded. It was cut in half and had 600 amendments added in Committee, we now have the Lords amendments, and we can see further difficulties lying ahead. There are also some missed opportunities. Some of them are the result of an absence rather than an excess of regulation. In Committee and elsewhere, the Liberal Democrats tabled amendments to try to give the regulating authorities greater power and influence, particularly in the area of environmental control. I want to tackle the central argument that the hon. Gentleman deployed. The energy supply industry in the United Kingdom has never been completely deregulated and left to the mercies of unregulated rampant market forces. The Conservative Government never thought that that was an option and it is certainly not one for the future. The hon. Gentleman said that it would be absolutely bonkers to lift all regulation except that relating to competition. It would be particularly bonkers for hon. Members representing rural constituencies. If one simply left competition to run unhindered, rural consumers would pay higher prices than urban consumers because the cost of supplying them would be greater. 5.45 pm The hon. Gentleman may contradict me, but I do not believe for a moment that he has brought to the House a new Conservative policy on energy supply which is that rural consumers should pay the full price for the product and therefore pay more. Nor do I believe that he is in favour of dismantling the regulatory framework relating to the security or safety of supply. In some respects, it is absolutely transparent that the quick soundbite of getting rid of all regulation except that relating to competition is bonkers.

Nick Gibb (Conservative, Bognor Regis and Littlehampton)

The hon. Gentleman deliberately misunderstands my point. The regulator was put in place at the time of privatisation. There were rules about security of supply and so on before the regulator was appointed. I am talking about restoring the role of the regulator to that of an economic regulator in order to mimic competition. When competition is fully established, that role would be withdrawn from the regulator. However, all the other rules and regulations about safety and security of supply that existed before privatisation would continue.

Andrew Stunell (Liberal Democrat, Hazel Grove)

What we have established from that intervention is that I am correct: the hon. Gentleman does not seek the dismantling of the regulatory regime. When an industry is privatised, the constraints provided by state ownership are withdrawn and if one does not substitute a regulatory framework rural consumers will pay more, safety corners will be cut, long-term investment will go out of the window and security of supply will become a redundant issue. Quite clearly, the Conservatives do not mean what the soundbite suggests. Let me take the argument a little further because the Utilities Bill addresses some of the issues of social welfare. I give the Minister credit for those provisions, but the Bill is still slack on environmental control. The Minister has missed some opportunities and this group of Lords amendments does not restore the regulatory framework to the extent that I would like. I do not know whether the Conservatives will press the matter to a vote, but the view of the Liberal Democrats is not that we should have excessive regulation, but that we should have regulation which benefits and protects the consumer. That is why we need regulations on safety and supply and the social provision of energy, and that is why we believe that there should be additional regulation relating to the environment.

Nick Gibb (Conservative, Bognor Regis and Littlehampton)

I am grateful to the hon. Gentleman for giving way a second time. If those issues are so important, will he tell the House why his party has not tabled amendments enabling the House to discuss them?

Andrew Stunell (Liberal Democrat, Hazel Grove)

We have tabled a string of amendments on which I shall raise some of those issues. Finally, the hon. Member for Bognor Regis and Littlehampton alleged that somehow the Bill was leading inexorably to a secret renationalisation of the energy companies in the United Kingdom. That is quite amusing given that the profit made from the electricity lighting the lamps in the Chamber is going to a state company—but it happens to be the French state electricity company. That is the outcome of the privatisation process of which the hon. Gentleman is so proud.

Kim Howells (Labour, Pontypridd)

I agree with the hon. Gentleman. If the previous Government had been a bit more rigorous and shown more guts in taking on other member states to break up the monopoly markets that still exist in some parts of the European Union, we might not have been in this situation.

Andrew Stunell (Liberal Democrat, Hazel Grove)

I warn the Minister that the lights might go off if we have any more remarks like that. The much-vaunted privatisation of this country's power companies has resulted in state enterprises elsewhere moving in on our territory. A completely unregulated market in this country would mean that that would happen more often. I will be delighted to vote against the amendment if it is pressed.

Eric Forth (Conservative, Bromley and Chislehurst)

I want to register my mild protest at amendment No. 13, which strikes me as the epitome of guff. It looks innocuous enough, and who would argue with the intention to secure a diverse and long-term energy supply? However, propositions that arouse no argument are usually vacuous and meaningless. I suspect that this one is too. The amendment appears to encourage the development of solar energy, and wind and wave-generated energy. It may also aim to encourage the development of coal as a source of gas, in competition with or to complement natural gas. That is all very well, but is not that at odds with some of the environmental aims espoused by the same people who produced this nonsensical amendment? The amendment does not make clear whether the achievement of a diverse and viable long-term energy supply would be in conflict with environmental aims, and so it does not take us much further forward. I believe that Bills should not contain meaningless terms. The amendment is therefore to be resisted.

Helen Liddell (Labour, Airdrie and Shotts)

I agree whole-heartedly with the right hon. Gentleman. The amendment was introduced by the Opposition in the Lords. The point made by the right hon. Gentleman was made by my noble Friend Lord McIntosh but, in the spirit of co-operation that we have shown throughout deliberations on the Bill, the Government are willing to accept the amendment. However, I am sure that the right hon. Gentleman's words will be heard by his noble Friends in another place.

Eric Forth (Conservative, Bromley and Chislehurst)

I am advised that Liberal Democrat peers in another place tabled the amendment. They are not part of the official Opposition: in fact, they usually do not oppose the Government at all. Even so, I am not impressed with what the Minister just said. It is astonishing that she should have told the House that the spirit of compromise—with which I rarely agree anyway—has led her to agree to the inclusion in the Bill of meaningless verbiage. That will hasten the Bill's progress to the statute book, but it is astonishing and disgraceful for her to admit that she is willing to accept words that she has said that she opposes. It reinforces my determination to vote against the amendment, if the opportunity so to do arises.

Michael Spicer (Conservative, West Worcestershire)

I shall not repeat my Second Reading speech, which my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb) was kind enough to quote at length. However, I want to put it firmly on record that I believe that the regulatory system amounts to socialism on the sly. It has nothing to do with benefits for the industry, and everything to do with income distribution and the Government's political objectives. If that were not so, the Government would have established a totally different trading system, which did not depend on the big companies being able to sew up the contract market. Different arrangements would not have created so much worry among smaller market players, and no referrals to the Competition Commission would have been made. The whole matter would have been dealt with in a totally different way. That needs to be put on the record. This is not an isolated case—it is part of a process that goes right across the regulatory board. Every regulatory regime that the Government are tampering with is putting economic and competition considerations below the wider political considerations. The Government are proactive in this respect, and have that objective in mind. There is no disguise. It is apparent in all the bodies—the Financial Services Authority now has social banking, and integrated transport systems are an objective. In every regulatory regime, the political objectives are more important that the economic objectives. I am very glad to hear from my hon. Friend the Member for Bognor Regis and Littlehampton that when we come into office, we will strip all this bare again and start off with a proper regime that puts competition, the marketplace and genuine economic objectives at the forefront. It will not do what politicians may seek to do, albeit through different means. Income distribution should not be made through a regulatory process that pretends to be of economic benefit to the country.

Helen Liddell (Labour, Airdrie and Shotts)

Well, the splits have been exposed tonight all right. We have seen splits between the official Opposition in this place and the official Opposition in another place. The right hon. Member for Bromley and Chislehurst (Mr. Forth) claimed that amendment No. 13 was defective and that he would oppose it, yet his colleagues in another place supported it. The reason that the Government are accepting it is quite simple: it adds very little to the Bill, but it is better that people get the benefits of the Utilities Bill sooner rather than later. We also saw a split between those on the Front and Back Benches. The hon. Member for West Worcestershire (Sir M. Spicer) complained about new electricity trading arrangements, yet only a couple of weeks ago Baroness Buscombe said: we welcome the merging of the electricity and gas regulators…—[Official Report, House of Lords, 4 May 2000; Vol. 612, c.1143.] She also said that they supported the new electricity trading arrangements. The hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) made exactly the same point. It is always a pleasure when the hon. Gentleman comes to the Dispatch Box; it is like listening to the speech of an old friend, because we hear it so often. We will make sure that we take careful note of what Conservative Members have said tonight—it will be very useful in the forthcoming election. Conservative Members put in place the system of privatisation that was deliberately opposed to the interests of the consumer. We will bear that in mind. The hon. Member for Bognor Regis and Littlehampton complained about telecommunications and water being taken out of the Bill. When he reads his speeches, he should read all of his speeches. I draw to his attention his remarks that the Government would have the support of the Opposition if telecommunications were to be removed from the Bill, when he said: That removal could be carried out in as swift and easy a manner as the Minister wished.—[Official Report, Standing Committee A, 29 February 2000; c. 184.] Despite the fact that this debate has sounded like a Third Reading debate, it was not—it was actually a debate on the Opposition's amendments (a) to Lords amendments Nos. 12 and 15. The Opposition's amendments are technically deficient. Under existing legislation, the regulator and the Secretary of State are under a primary duty to secure that licence holders are able to finance certain of their activities. That is why we are concerned that this and other aspects of existing legislation has led to the interests of consumers being subordinated to those of shareholders. That is why the Bill puts the consumer first. However, it remains important that licence holders are able to finance their activities. That is why the Bill replaces the existing finance duty as an aspect of the primary consumer duty. A balance must be struck between the consumer and the shareholder. That is why the finance duty has been incorporated as an aspect of the interests of consumers. The amendments proposed by the hon. Member for Bognor Regis and Littlehampton would add nothing to the present wording of clauses 9 and 13. They simply introduce a reference to securing finance and to capital investment required. However, it is already clear that the duty in the provisions extends to the securing of finance. The licence holder's provision could not be included could it not secure that finance. I believe that the hon. Gentleman has used this as an opportunity to rehearse the arguments that he has used in the past. 6 pm The hon. Member for Spelthorne (Mr. Wilshire) asks why we are using expressions like arising out of this part". We are referring to the wording of the Gas Act 1986 and the Electricity Act 1989. I urge the House to support the amendments tabled by the Government which make sensible improvements to the Bill and take into account the concerns of all involved.

EXEMPTIONS FROM ELECTRICITY LICENSING

Helen Liddell (Labour, Airdrie and Shotts)

I beg to move, That this House agrees with the Lords in the said amendment.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

With this it will be convenient to discuss Lords amendments Nos. 56 to 69, 102 to 106, 108 to 118, 121 to 124, 164, 165, 167, 169 to 171, 176, 177, 179, 182, 188, 198, 199, 204, 213 to 216, 218, 223, 224, 230, 231, 236 and 244.

Helen Liddell (Labour, Airdrie and Shotts)

In an attempt to assist the House, I will not speak at length on all those amendments. Amendments Nos. 55, 56, 121 and 213 introduce a requirement for the Secretary of State to go out to consultation before granting an exemption under clauses 28 or 85. They require him to produce a notice that sets out the exemption that he proposes to make, together with the reasons why he proposes to do so. A copy of the notice should be served on the Gas and Electricity Markets Authority and the Gas and Electricity Consumer Council. It should be published so as to bring it to the attention of those likely to be affected by the exemption, so that those who wish to make representations have a minimum of 28 days in which to do so. In the context of the new obligation to consult, amendments Nos. 67, 68, 122 and 123 remove the granting of exemptions from the list of decisions that triggers the duty to give reasons under clauses 41 and 86. 6.15 pm That will avoid setting an unfortunate precedent, as exemptions are granted by statutory instrument and it is not usual practice to require the giving of reasons for the making of legislation. This can be distinguished, however, from the giving of reasons for a proposal to grant exemptions, as required by the new consultation procedure. Amendments Nos. 68 and 123 have two further effects. First, in the context of the general requirement introduced for the first time by clauses 41 and 86 to publish reasons for key decisions, they clarify the matters that the authority or the Secretary of State should consider excluding when publishing those reasons. The amendments require that matters should relate to the affairs of a particular individual or body of persons before the requirement to consider exclusion is triggered. Secondly, they ensure that the subsection (5) exception to the duty to give reasons—a decision subject to a disapplication direction by the Secretary of State—applies whether the decision itself was taken by the authority or by the Secretary of State. Taken together, this package of amendments represents a strengthening of the provisions of the Bill. I commend them to the House.

Eric Forth (Conservative, Bromley and Chislehurst)

I want to say a few words about three of the amendments. The first is amendment No. 56. The Minister said that it referred to the Secretary of State giving notice of those likely to be affected. Although that phrase does not appear in the amendment, it requires some explanation. How does the Minister imagine that the Secretary of State will determine those "likely to be affected"? The phrase is so wide and loose that it could mean a great deal or not much at all. As the matter is so important, I should be comforted if she told us a little more about what she thinks those words mean. The amendment states: Before making an order … the Secretary of State shall give notice … and shall consider any representations which are duly made in respect of the proposals and not withdrawn. That might give comfort to some people, but does it take us much further? Of course, one might say that a sensible and responsible Secretary of State—I exclude the present incumbent—would naturally consider any representations; but how much protection does the provision really give? What does "shall consider" mean? Does it mean "glance at", "give a quick look at", "momentarily pause while officials give a summary of? It could mean almost anything.

John Bercow (Conservative, Buckingham)

Ponder?

Eric Forth (Conservative, Bromley and Chislehurst)

I would not go that far. I do not think that any pondering will be done. Will the Minister tell us to what extent the Secretary of State will give consideration under that provision? What effect is that likely to have on the view that the Secretary of State will take? Amendment No. 66 contains the potential for much more substantial problems. I could dwell on them at some length, but I sense that my colleagues want to make progress, so I shall mention them only briefly. The amendment states that where, in consequence of a reference under section 12(1 A), the Commission modifies under subsection (4)(b) the standard conditions of licences of any type, the Authority may make such incidental and consequential modifications as it considers necessary or expedient. Two bodies will be acting simultaneously on much the same matters. It is possible for the Competition Commission to modify the standard conditions of licences—an important enough function—while the authority may make such incidental and consequential modifications as it considers necessary. The questions that I want to ask the Minister are: if the commission and the authority were to be in conflict over that sort of matter, (a) who would take primacy or priority and/or (b), what kind of conciliation process might be envisaged; and when the authority is making incidental and consequential modifications, is it at the sole discretion of the authority to determine what is incidental or consequential? If the amendment allows only incidental or consequential modifications to be made, that implies that something that is beyond the incidental or consequential would be beyond the powers of the authority in terms of the amendment. Is it solely the judgment of the authority as to what falls into that category? All I want to say about Lords amendment No. 204 is: is it not astonishing that at this stage we have before us, presumably in all seriousness and with a straight face, four pages of very important provisions, entitled "Secretary of State's licensing schemes" and going into very considerable detail? I could detain the House, if I was doing my job properly, and go through this in very great detail.

John Bercow (Conservative, Buckingham)

Go on

Eric Forth (Conservative, Bromley and Chislehurst)

I will not on this occasion; I should probably feel a bit guilty as a result. I just want to obtain the Minister's view as to how proper it is, at this stage of the legislative process, to introduce four pages of very detailed provisions without so much as an explanation or a "by your leave" or anything of the kind. Therefore I want to give the Minister the opportunity to tell us something more about the four pages of Lords amendment No. 204 and what it does or does not do, in addition to answering the more detailed questions that I have asked her about Lords amendments Nos. 56 and 66.

Helen Liddell (Labour, Airdrie and Shotts)

I shall deal with Lords amendment No. 204 first, because there is quite a simple answer to the right hon. Gentleman's question. I am sorry that he does not want to go into greater detail; it would suit me and other Labour Members to have an opportunity for a fuller debate on the subject. We enjoyed debating it in Committee—again, the right hon. Gentleman was not able to join us at that stage. Lords amendment No. 204 replaces the existing part I of schedule 7; that is why it is so long. It provides for the Secretary of State to make licensing schemes in order to ensure continuity of licensing for all those who hold gas and electricity licences at the time the licensing provisions of the Bill come into force. That is to ensure that, in the transition, everything can pass over. Licensing schemes will be used to ensure smooth transition from existing licence types in electricity to new licence types, and to incorporate the new standard condition of licences in all existing electricity and gas licences. Therefore, in effect, this is a transitional arrangement to ensure that there is no dislocation. In relation to Lords amendment No. 56, the right hon. Member for Bromley and Chislehurst (Mr. Forth) asks who would be likely to be affected. Generally, the Secretary of State would seek as wide a consultation as necessary. In a case that was essentially local, that might reasonably be restricted to a local consultation. In larger cases, it may be sensible to issue a press notice or to publish the Department's proposals on its website. The phrase used is common in legislation; it allows the precise scope of consultation to be adapted to the circumstances of the case. The right hon. Gentleman also asks about representations not withdrawn, and how much protection is given. Representations will have to be properly considered. In the absence of a proper consultation, there will have been a procedural irregularity, which of course is challengeable in the courts. On Lords amendment No. 66, on the modification of licences, if the commission and the authority are in conflict, the commission takes primacy. The authority's incidental and consequential amendments can only be those that flow from the commission's modifications. I hope that that answers the right hon. Gentleman's questions.

POWER TO REQUIRE SECURITY

Kim Howells (Labour, Pontypridd)

I beg to move, That this House agrees with the Lords in the said amendment.

Kim Howells (Labour, Pontypridd)

I congratulate you, Mr. Deputy Speaker, on getting every one right.

David Wilshire (Conservative, Spelthorne)

More than can be said for you.

Kim Howells (Labour, Pontypridd)

Well said. All the amendments are consequential on the decision to separate electricity supply and distribution. They make mainly minor adjustments to passages of the Bill dealing with connections, uniform prices in Scotland, pre-payment meter provisions, deemed contracts, determination of disputes arising from the duty to connect, billing disputes, standards of performance, transfer schemes, transitional arrangements for former tariff customers and miscellaneous provisions. I understand that the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) wishes to move amendment (a) to Lords amendment No. 120 and amendment (a) to Lords amendment No. 161, which the Government will resist.

Nick Gibb (Conservative, Bognor Regis and Littlehampton)

Late in the Committee stage, among the many hundreds of amendments, new clauses and new schedules, the Government tabled a particularly unpleasant and authoritarian amendment to what is now schedule 4 and clause 83. The new measure gives gas and electricity suppliers the right to enter someone's property and home to install a pre-payment meter against their wishes. Under the existing law, if customers fail to pay their bill and become problem customers they have a choice, if the supplier company finds it appropriate, between disconnection and accepting a pre-payment meter. If customers refuse to accept the installation of a pre-payment meter, they face disconnection. However, it remains their choice; a matter for them. The new provisions, introduced late in the day by the Government, give the electricity and gas supplier the power to enter premises by force to install a pre-payment meter. That is an unacceptable power for one person to have over another, except in exceptional circumstances in which safety is an issue. It certainly should not be a power over future payments. Aside from the issue of forced entry, pre-payment meters are extremely expensive for the customer. The Government's Green Paper illustrated how expensive they are. On page 34, it says: A recent Offer study found that these generally range from approximately £9.50 to £27.50 per annum, although one company had a negative charge of around £4.50. The median surcharge is between £14 and £15 per annum. So the poorest customers pay the highest charges. The Government, who claim to be on the side of the fuel poor, are giving more powers to suppliers to enable them to install pre-payment meters. Pre-payment meters hark back to the dark days when the utilities were state-run monopolies—inefficient, unresponsive, uninnovative monoliths—that tried to force people to pay huge cash deposits simply to become one of their customers. I remember from my student days being forced to pay a £100 deposit before I could be supplied with electricity. Those days, thankfully, have gone and so too should pre-payment meters. Throughout the proceedings on the Bill, Conservative Members have tried to put over the important principle that private sector competition in the utilities has led to falling prices—a 30 per cent, fall in real terms. That has done more to help the fuel poor with their bills than any mountain of regulations that the Government are intent on creating. That 30 per cent, cut would not have happened had Labour had its way in 1986 and 1988, when it opposed the privatisation. It is a result of privatisation that the proportion of homes with central heating has risen enormously since 1986. 6.30 pm The truth is—a truth that those with a left-wing socialist approach still cannot bring themselves to accept despite all the evidence around them—that moving the gas and electricity industries into the private sector and opening up the markets to competition has delivered, and will go on delivering, huge benefits to society and to the least well-off in particular. The Government claim that the market and competition will not serve the least profitable customers, such as the poor or the elderly, but we have tried to explain that a fiercely competitive market with suppliers desperate for new customers and desperate to keep existing customers will develop new innovative products to enable companies to attract every last customer, including poor payers. The Government said that that was nonsense and that massive intervention was needed. I am afraid that, yet again, the Government were wrong. When the industries were privatised, the Conservative Government put in place provisions for the protection of the elderly, the sick, the disabled and those living in rural areas as part and parcel of the process of mimicking competition. When competition arrives, that protection is not necessary. For example, PowerGen has entered into an arrangement with Age Concern to provide a special lower-priced package for the elderly. The scheme is called "Better Deals for all Concerned" and it offers lower standing charges, cold weather rebates, free carbon monoxide detectors, free early warning hypothermia thermometers and free energy efficiency advice. That is just the start; there will be many such schemes in due course provided that the Government do not drive out the entrepreneurial spirit and capital from the industries. Another example is the stay warm scheme introduced by TXU, the owners of Eastern Energy, in May this year. The Minister was at the launch of the scheme, which is specifically for households on low incomes, such as those on state benefit, the disabled, the long-term sick and the elderly. It provides fixed payments for unlimited use of gas and electricity, and those payments are £120 a year less than those groups would have had to pay before. It is an extremely innovative scheme and way of enabling previously unprofitable customers to become highly viable for the industry. For the company, the scheme cuts down on meter readings—it carries out just one meter reading a year—and on the cost of dealing with debt problems. For the consumer, it results in lower bills. The scheme does away with the need for pre-payment meters and it could have never emanated from the industry had it remained under state control. It can not survive in the long run if the Government over-regulate the industry. It has happened only because of competition. The new powers to enter premises to install old-fashioned, unfair, highly expensive pre-payment meters should not have been introduced by the Government. The amendment would add a safeguard to that power so that it can be exercised only if the customer has agreed in writing to have a prepayment meter installed. Competition and enterprise—and not draconian rights-of-entry powers—are the solution to helping the poor and to heating their homes. I urge the Government, at this late stage, to think again about this issue.

David Wilshire (Conservative, Spelthorne)

On amendment No. 71, it seems that we are being asked to approve a draconian power. Clause 46(21)(b) refers to any terms restricting any liability of the distributor for— this is the important point— economic loss resulting from negligence which it is reasonable in all the circumstances for that person to be required to accept. Action must be taken in such circumstances and I do not necessarily disagree with that. However, the other place has said that it is a technical provision. Therefore, it has asked us to approve the removal of all the references to restricting liability, economic loss and negligence. It ask us to accept an amendment in which any terms can be imposed that are reasonable in all the circumstances for that person to be required to accept. There is no reference to economic matters, negligence or loss; the amendment refers only to any terms that are reasonable in all the circumstances. We are back to the old chestnut—defining what on earth is reasonable—and this provision relates not merely to some circumstances, but to all circumstances. The amendment is so draconian as to be worthy of comment from the Minister. He clearly thinks that it does not matter and that he can give people the power to do anything that they like and to impose any terms they like in any circumstances they like. We were offered no explanation whatsoever, and I should be grateful for one.

Kim Howells (Labour, Pontypridd)

I shall try to give the hon. Member for Spelthorne (Mr. Wilshire) an explanation. Ostensibly he is right, and the amendment provides a very wide power, but it must be borne in mind that the provision will come within the scope of section 23 of the Electricity Act 1989, as amended by the Bill. Under that section, in the event of a dispute about the terms offered by a distributor for making and maintaining a connection, either party may refer the matter to the authority for determination. I hope that the hon. Gentleman will view that as the safeguard that he is seeking. In the end, the question of whether it is reasonable in all the circumstances for a person to be required to accept a particular term is likely to become a matter for determination by the authority, especially where the term is novel or unusually burdensome. I turn now to amendment (a) to amendment No. 120 and amendment (a) to amendment No. 161, in the name of the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb). I agree entirely that it is fierce, fair competition that brings all consumers the greatest benefits, and I certainly do not believe that increased state intervention is the way to bring down electricity or gas prices. I agree also that excellent schemes are offered by companies such as PowerGen, which display a great regard for corporate responsibility. Long may that thrive—I am certainly doing all that I can to encourage it. However, we will resist the amendments. The amendments provide that a customer in debt to his supplier could not be required to accept the installation of a pre-payment meter in place of his existing meter. The supply company would be able to install a pre-payment meter in such circumstances only if the customer had agreed to it in writing. That is strange because it would mean that the customer who refused or, worse, forgot—many of us have forgotten to send our returns to such companies as quickly as we should have done—would be almost certain to have his supply disconnected unless he agreed in writing to accept a pre-payment meter. I am sure that the hon. Gentleman cannot intend to increase the number of disconnections that arise from non-payment of gas and electricity bills; but by seriously weakening suppliers' powers to replace credit meters with pre-payment meters when a customer is behind with payments, the amendments would achieve exactly that. I am sure that he is aware that it costs a great deal more to be reconnected than to come to an arrangement for the installation of a pre-payment meter.

Nick Gibb (Conservative, Bognor Regis and Littlehampton)

Essentially, the amendment would simply change the law back to what it was before the Bill was introduced so that suppliers would have no right to enter people's premises to install a pre-payment meter. Despite that, disconnections have fallen over the past few years.

Kim Howells (Labour, Pontypridd)

They have fallen over the past year by about 25 per cent., and I hope that they will continue to fall. However, it is important to remember that a supplier has to get a warrant before he can force entry to install a meter or to disconnect the supply. The existence of a power of entry to install a pre-payment meter does not necessarily mean that companies will use it. Like the hon. Gentleman, I welcome the innovative approach of some companies and the way in which they have sought to get around the problem.

David Wilshire (Conservative, Spelthorne)

It sounds to me as though the Minister objects to the fact that somebody has to get a warrant before they force entry. Is that what he is saying?

Kim Howells (Labour, Pontypridd)

I am not suggesting that at all. It is important that a company should get a warrant before it enters somebody's home.

David Winnick (Labour, Walsall North)

Before an application for entry is made—as my hon. Friend has explained, a warrant will be required—surely all the circumstances will be taken into account. Does my hon. Friend agree that it would be unfortunate if, as a result of disconnection, a household was left with no supply whatever? Children may be involved and the supply may be disconnected as a result of the parents' irresponsibility. There is therefore a case for ensuring that the household has some fuel connection—to either electricity or gas.

Kim Howells (Labour, Pontypridd)

My hon. Friend has expressed the essence of this provision beautifully. It is important that we do not have disconnections, but have pre-payment meters fitted wherever possible. The hon. Member for Bognor Regis and Littlehampton will be interested to learn that one major gas supply company has told Ofgem that it estimates that some 80 per cent, of gas supply disconnections occur because the company cannot illicit a response from defaulting customers, despite oft repeated attempts to do so. How are such people to be persuaded to avoid disconnection by being made to write to their suppliers agreeing to the installation of a pre-payment meter, when they do not communicate in the first place?

Nick Gibb (Conservative, Bognor Regis and Littlehampton)

Those people are exercising their perfect right to refuse a gas company entry, and I believe that they should continue to have that right. The Bill removes people's right to refuse gas companies entry to their house to install meters.

Kim Howells (Labour, Pontypridd)

I have tried to explain to the hon. Gentleman that the Bill contains a great many safeguards. We have confidence in the system. We certainly believe that it is a far better way to proceed than making children, innocent of the shortcomings of their parents, endure the cold, and then subjecting their parents to a hefty reconnection charge. We shall therefore resist the amendment.

INFORMATION TO BE GIVEN TO CUSTOMERS

Kim Howells (Labour, Pontypridd)

I beg to move, That this House agrees with the Lords in the said amendment.

Kim Howells (Labour, Pontypridd)

The amendments deal with the standards of performance and aspects of consultation on renewables and energy efficiency targets, including some of the implications of the trading of obligations between gas and electricity obligation holders, rather than simply gas obligation holders on the one hand and electricity obligation holders on the other.

Andrew Stunell (Liberal Democrat, Hazel Grove)

On the whole, I welcome the amendments. I wish to deal briefly with amendment No. 79, which requires any action by the Secretary of State in making an order to be preceded by consultation with renewable energy generators. I certainly welcome that, and regret that provisions on renewables are still missing from the Bill. We need more action to promote and support renewable generation, as well as simply consulting renewable energy generators before orders come into force. Can the Minister update the House on the DTI's views about the banding of the renewables obligation and the approach that the Government are likely to take in regulating in support of the Bill? I understand that a meeting was held at the DTI yesterday to discuss the banding of technologies. It would be helpful for the House to know the outcome. Is the Minister still as satisfied as Ministers have been in their public declarations in the past that the targets of achieving 5 per cent, of renewable electricity generation by 2003 and 10 per cent, by 2010 are still realistic and feasible? If the Minister is able to reassure us on those points, how would he refute the arguments put forward by those in the industry who believe that the targets are increasingly unrealisable and unrealistic? 6.45 pm In supporting amendment No. 79 and agreeing on the need to include the renewable generators, will the Minister explain how he can reassure them that future investment will be worth while, that their product will be taken up in the market and that the Government's targets will be achieved? That is a vital part of the Government's longer-term policy to comply with the Kyoto agreement. There is definitely a gap in the Bill, and I hope that the Minister will at least give a signal that further work will be done and further proposals will be put before the House.

Eric Forth (Conservative, Bromley and Chislehurst)

We are now wading knee-deep in gobbledegook, especially with amendment No. 81.1 shall give the Minister the opportunity to tell us, succinctly and with his usual clarity, exactly what he thinks amendment No. 81 means. It looks like complete nonsense to me. I suspect that it is to do with environmental strutting and posturing. What it is supposed to achieve is beyond me, but it seems to sanction sleight of hand. If I were to believe in any of the Kyoto nonsense, I should be very suspicious because a provision such as amendment No. 81—if I even begin to understand it—seems to represent almost an invitation to fiddle the books and to pretend that we are doing all sorts of Kyoto things when we are doing nothing of the kind. Amendment No. 81 is akin to the Government policy that, on the one hand, put additional taxes on vehicle fuel—which they claimed was an environmental measure—but, on the other, lowered taxes on domestic fuel consumption. They have never been able to explain the justification for that. I suspect that, if it means anything, amendment No. 81 comes into the same category. I am worried that amendment No. 86 will undermine any viability that may have existed in the adjustments for inflation. As we know from recent examples such as pensions and so on, those adjustments can be of the greatest importance to people of all ages and categories. However, amendment No. 86 seems to provide almost unlimited scope to fiddle the books on inflation. It states: for any such sum to be adjusted from time to time for inflation by a method specified in the order … That is fair enough; one would expect such a provision, but it continues: including such a scale or index or such data in a form not current when the order was made, but in a subsequent form attributable to revision or any other cause and taking effect afterwards… I do not know what that is supposed to mean. I was just about following it until adjustments "by a method specified" were mentioned. That is fair enough, but it then took off into the stratosphere of completely blank cheques, allowing people to produce whatever figures they felt like producing in a form not current when the order was made and for any reason. We are getting into some odd and difficult territory, but as usual in such circumstances, I rely on the Minister to step up to the Dispatch Box and, with great clarity and as succinctly as ever, to set right my anxieties about those matters and tell us exactly what he thinks amendment No. 81 means. When he says what he thinks, it becomes official and fixes matters. I have no doubt that he will tell us equally succinctly about amendment No. 86 and explain the reason why my unhappiness about it is completely unfounded. I cannot wait.

Kim Howells (Labour, Pontypridd)

I do not intend to make the right hon. Gentleman wait. May I deal first, however, with the hon. Member for Hazel Grove (Mr. Stunell)? Taken together, the amendments that he has mentioned try, I suppose, to set out some of the thoughts of another place on where we have got to. For example, the comprehensive spending review was excellent for encouraging renewables. I was glad to see that. A consultation will be conducted by my right hon. Friend the Minister for Energy and Competitiveness in Europe on the banding of technologies. It is far too early to predict the outcome of that consultation, but it is important.

Andrew Stunell (Liberal Democrat, Hazel Grove)

I am encouraged by the fact that there is to be a consultation and that prediction is too early, but, before the door is shut firmly, is the Minister indicating that the door is now at least a little open?

Kim Howells (Labour, Pontypridd)

On the Government side, we are always receptive to constructive arguments and to imaginative approaches to what are important issues. The hon. Gentleman asked whether we were still on line for 5 per cent. It is a big challenge—I give him that—but it is do-able and the CSR will help a great deal. Essentially, we are trying to move the renewables from the margins to the centre of the market. That must be a good thing. The right hon. Member for Bromley and Chislehurst (Mr. Forth) wanted to know more about amendment No. 81. It says that an order may provide that, to a specified level, under-achievement or over-achievement in a particular period of a supplier's obligation may be carried forward into a subsequent period—so-called banking and borrowing. I do not think that it is a fiddle. He will recognise that, sometimes, for example, a power station may be down for a time—an efficient one that does not spew out various pollutants into the air. The company that owns that power station may need a bit of time, going into the following year, to make up for the period when the power station was down, so the measure allows a bit of leeway at the end of the year. However, he is right to highlight the point because it must not be a big percentage of the obligation that the suppliers have. I hope that my saying that from the Dispatch Box will reinforce what he said—that when the Minister says something, it does matter.

Eric Forth (Conservative, Bromley and Chislehurst)

When this Minister says something, it always matters. Therefore, I want to press him a little on two things. He has just touched on one of them. Is he satisfied that there does not appear to be any limit on either the percentage—therefore, that leaves it very open ended—or on the period? I am prepared to accept what he says about the power station example over a limited time, but the amendment, as I read it, appears to allow the possibility of such movements over almost any time. That does begin to look like fiddling.

Kim Howells (Labour, Pontypridd)

Clearly, strict guidelines and time limits, where necessary, must be imposed by the authority. There is no question about that. The right hon. Gentleman is right to raise the matter, but I am sure that he will agree that there must be some flexibility for companies—not too much; I agree about that. The right hon. Gentleman asked about amendments Nos. 85 and 86. Amendments Nos. 80 to 94 are pretty minor. They do not make substantive changes to the renewables power in the Bill, but make some technical adjustments and enable the provision to be more effectively applied. On the specific measure that the right hon. Gentleman asked about, it provides that a different buy-out price may be set for different periods within the overall period of renewables order under clause 61, and that the buy-out price may be adjusted for inflation, which is important in case, suddenly, his party were returned to power and it became rampant again. To return to his earlier point, percentages and periods will be set in the statutory instrument.

LICENCE ENFORCEMENT

Helen Liddell (Labour, Airdrie and Shotts)

I beg to move, That this House agrees with the Lords in the said amendment.

Helen Liddell (Labour, Airdrie and Shotts)

Lords amendments Nos. 73 and 126 insert into the financial penalties provisions protection against double jeopardy in regard to the Competition Act 1998. They follow closely the terms of the protection against double jeopardy that already applies to licence enforcement orders in the utility statutes. They help to achieve consistency between the provisions inserted by this Bill in both the Gas Act 1986 and the Electricity Act 1989, and provisions that already exist. They also ensure that there is clarity on the interaction between licence enforcement provisions and Competition Act enforcement provisions. Lords amendments Nos. 74 and 127 respond to concerns raised throughout the Bill's passage about the lack of a specific upper limit on financial penalties. The principal limit on the level of financial penalties remains the requirement for a penalty to be reasonable in all the circumstances of the case. We have had lengthy discussions in Committee and on the Floor of the House about the definition of "reasonable". The amendments, however, give licence holders extra comfort, in that they impose an upper limit on the amount of any financial penalty that can be imposed. That limit is 10 per cent, of the licence holder's turnover. Detailed provisions—for example, the definition of turnover—will be set out in an order made by the Secretary of State by affirmative resolution. Lords amendments Nos. 76 and 129 relate to the 12-month time limit applying to the imposition of a financial penalty in cases in which there has been a contravention of an obligation, and no enforcement order has been made. If the amendments are accepted, no penalty may be imposed in respect of such a contravention unless, within 12 months of that contravention, the authority has issued either a penalty notice or a notice under section 28(2) of the Electricity Act 1989 or section 38(1) of the Gas Act 1986, as amended, seeking information for the purpose of its functions in relation to the imposition of financial penalties. When the authority issues a notice under either the Electricity Act or the Gas Act, no further time limits will apply to the imposition of a penalty. The amendments will ensure that the authority has enough time to investigate alleged contraventions and to decide whether to impose a penalty. The authority will be able to determine the amount of any such penalty, particularly in large, complex cases in which it may have difficulty in obtaining information from the licence holder, or licence holders, concerned. That will mean that legitimate investigations of alleged contraventions will not run out of time as a result of licence holders taking too long in supplying the authority with information. That could well happen in the case of companies that did not wish to comply with licence requirements. The amendments remove any incentive for foot-dragging. Lords amendments Nos. 77 and 130 are consequential on Lords amendments Nos. 76 and 129. Lords amendments Nos. 78 and 131 apply to the enforcement provisions of the Gas and Electricity Acts, as opposed to the proposed financial penalties provisions. Lords amendments Nos. 75, 128, 183, 201, 219, 220 and 237 are minor, technical and consequential amendments, replacing a reference to the commencement of a subsection with a more accurate reference to the commencement of a section of the Utilities Act 2000. The Opposition have tabled some amendments— It being Seven o 'clock, the debate stood adjourned. Motion made, and Question put forthwith, pursuant to Standing Order No. 15 (Exempted business) and Order of 25th October 1999, That, at this day's sitting, the Utilities Bill and the Postal Services Bill may be proceeded with, though opposed, until any hour.—[Mr. Pope.]

Helen Liddell (Labour, Airdrie and Shotts)

The Government will resist the amendments that the Opposition have tabled to this group of Lords amendments. I shall speak to those amendments in due course.

Nick Gibb (Conservative, Bognor Regis and Littlehampton)

We have argued long and hard—on Second Reading and in Committee, as well as in the other place—for the Government to introduce a cap on the potential penalty and fines that the regulator can impose on the utility companies for failing to comply with licence conditions or breaching standards of performance obligations. Limitless fines were one of the major concerns that industry had with the Bill. The problem with a penalty regime without a ceiling on the upper fine is that it adds to the level of regulatory risk faced by the utility companies, and that that increased risk leads to demands from the providers of capital for a higher rate of return in compensation. As the industries that we are discussing are highly capital intensive, such demands constitute a significant hit to the profit and loss account, which inevitably will be passed on to the consumer either in higher charges or in charges that are not as low as they would otherwise be. We were delighted, therefore, that the Government eventually backed down and introduced, in the other place, a cap. However, that cap is still high. The fact is that a fine of 10 per cent, of turnover is still sufficiently high to wipe out completely any company that receives one. A significant portion of the regulatory risk will remain, notwithstanding the cap. Therefore, our amendment (a) seeks to reduce the 10 per cent, figure to 5 per cent. Our next concern about the penalty regime hinges on the definition of turnover. The wording of the 10 per cent, turnover cap used in Lords amendment No. 74 echoes that used in the Competition Act 1998, which also has 10 per cent, turnover cap. However, we had to wait several months after implementation of that Act for "turnover" to be defined. When the statutory instrument defining turnover was finally produced, it added to rather than alleviated concerns. In our amendments (b) and (c), we have sought to clarify the definition of turnover to avoid the same problems in this legislation. That will at least save the Minister for Competition and Consumer Affairs the inconvenience of having to produce another statutory instrument, speaking to another Committee on statutory instruments—he and I have already met in several such Committees—and swotting up on his briefings. Our amendments will also remove the uncertainty over whether "turnover" means only the company's turnover in the United Kingdom, or whether any turnover derived from abroad should also be included. The amendments make it clear that the turnover should be derived only from the United Kingdom. Our amendments also deal with the sleight of hand that the Government have perpetrated in the 1998 Act. In that Act, as the Minister knows, the cap for fines was set at 10 per cent, of turnover. However, the definition of turnover in the subsequent statutory instrument—which I think that he introduced—was such that it could be applied to up to three years of turnover. Therefore, at a stroke, he changed the 10 per cent, limit to 30 per cent. That is not an acceptable approach under the 1998 Act, and it certainly should not be an acceptable approach in the Bill. Our amendment (c) defines turnover as a period not exceeding 12 months, so that the maximum fine in the Bill will remain at 10 per cent, and not be tripled by means of a subsequent statutory instrument. I am disappointed—the Minister for Energy and Competitiveness in Europe will be pleased to hear—that the Government will resist our amendments. If they do, however, I shall try to persuade my colleagues to vote for them.

Helen Liddell (Labour, Airdrie and Shotts)

There we have it—soft on price fixers and soft on the causes of price fixing. [Interruption.] At this time of night, I always find it best to be catchy. I resist these Opposition amendments to the Bill's financial penalty provisions. As the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) said, amendment (a) to Lords amendment 74 and amendment (a) to Lords amendment No. 127 seek to replace the cap of 10 per cent, of turnover with a cap of 5 per cent, of turnover. The Government have been consistent on this point. We have always maintained that the primary constraint on the level of any financial penalty is the requirement for the penalty to be reasonable in all the circumstances of the case. We initially resisted the imposition of the cap on penalties on the ground that it was not strictly necessary, but we have also listened to the views of groups inside and outside the House and responded to the growing view that a limit would provide some comfort to companies without unduly constraining the authority's ability to protect consumers' interests. Now that we have done that, the Opposition want to move the goalposts again. No one gains from that. The Government have already done everything that is necessary to respond to the concerns that have been put to us about these provisions. We have introduced a cap on penalties, as requested, analogous to that in the Competition Act 1998, which seemed to be the example that the Opposition referred to most often in Committee and elsewhere when pressing for a cap. The only possible reason for wanting to introduce a lower cap is to protect companies from facing a penalty that would be reasonable in all the circumstances of the case when they have committed a serious contravention. A cap of 5 per cent, of turnover would run that risk, and on that basis the Government cannot accept it. Amendments (b) and (c) to Lords amendment No. 74 and amendments (b) and (c) to Lords amendment No. 127 would insert provisions in the Bill to the effect that the definition of turnover used in relation to the cap on financial penalties shall be the UK turnover of the licence holder in the year preceding the imposition of the penalty. The Lords amendment inserting a limit on financial penalties also states that detailed provisions in relation to the definition of turnover and other matters shall be set out in an order made by the Secretary of State by affirmative resolution. There will therefore be ample opportunity for Parliament to discuss the relevant provisions when the order is made. The definition that the Opposition amendments would insert would pre-empt the debate that will take place when the order is made. The amendments are therefore unnecessary. Amendment (b) to Lords amendment No. 75 and amendment (b) to Lords amendment No. 128 have been linked—very tenuously—to a part of the financial penalties provisions that prevents penalties from being applied retrospectively. The amendment tabled in another place was purely technical. The amendments to the Lords amendments are an attempt to reintroduce a provision that penalties shall be limited to cases of recklessness and intent, similar to the Competition Act 1998 restriction to cases of negligence and intent. The Government have resisted amendments to that effect throughout the passage of the Bill, on the ground that the onus should be on companies to comply with their licence conditions and that such an amendment would work against the interests of consumers. As my noble Friend Lord McIntosh explained in another place, there are valid precedents for our approach, such as the National Lottery Act 1998 and the Broadcasting Acts 1990 and 1996, which were introduced under the previous Administration. Those Acts provide for the relevant regulatory authority to impose financial penalties for contraventions of licence conditions. They do not provide get-out clauses for companies that breach their licences without negligence or intent. There are good reasons for the approach that the Government have adopted. We hold to the view that the onus should be on the licence holder to maintain compliance, especially when the consumers concerned cannot move to another service provider, as is the case with the electricity transmission and distribution companies and the gas transporters. The amendments to the Lords amendments ignore entirely the nature of the powers that we are providing. The authority will have a power, not a duty, to impose financial penalties. Any penalty that it imposes must be reasonable in all the circumstances of the case. It seems most unlikely that any penalty that did not take account of best endeavours by a licence holder to remedy a contravention would be considered reasonable in all the circumstances of the case, and any such penalty would without doubt be liable to challenge in the courts. Consumers none the less deserve proper protection, and the amendments do not help in that respect. For all the reasons that I have set out, I cannot accept the Opposition's proposals. I hope that the hon. Gentleman will not press the amendments to a vote but, if he does, I am afraid that we must oppose them.

HELP FOR DISADVANTAGED GROUPS OF ELECTRICITY CUSTOMERS

Helen Liddell (Labour, Airdrie and Shotts)

I beg to move, That this House agrees with the Lords in the said amendment.

Helen Liddell (Labour, Airdrie and Shotts)

These are technical amendments which are necessary to provide that clause 67 commences at Royal Assent. Clause 67 gives the Secretary of State powers to change electricity licences to implement the new electricity trading arrangements in England and Wales. Commencement at Royal Assent is essential so that the powers can be used in time to bring the new trading arrangements into effect in the autumn. The planned start date for the new arrangements is 21 November this year.

TRANSFER TO AUTHORITY AND COUNCIL OF FUNCTIONS, PROPERTY ETC.

Kim Howells (Labour, Pontypridd)

I beg to move, That this House agrees with the Lords in the said amendment.

Kim Howells (Labour, Pontypridd)

Amendments Nos. 144 and 145 make the drafting of clause 103 slightly more transparent and user-friendly—and it needs it. The amendments assist the reader by inserting into the clause specific references to the interpretation sections in part I and part III of each of the existing Acts. Amendment No. 146 has the effect that section 46 of the Gas Act 1986 applies to the Utilities Bill. This amendment is needed because the Bill itself does not contain any provisions as to the manner of such service. Amendment No. 147 clarifies the scope of the Secretary of State's power under clause 106 to make transitional and consequential provisions concerned with the coming into force of this Bill. The amendment makes it clear that the power to modify any enactment for that purpose extends to Acts passed and subordinate legislation made in the present parliamentary Session. Amendment No. 149 makes provision that a commencement order made by the Secretary of State may contain transitional provisions and savings relating to the provisions being brought into force by the order.