Previous Section Back to Table of Contents Lords Hansard Home Page

Lord Beaumont of Whitley: My Lords, I entirely take the noble Lord's point and accept what was said by his

4 May 2000 : Column 1169

noble friend. However, it is that measure in the Bill of which I approve and I was protesting against her disapproval of it being in the Bill.

Lord Kingsland: My Lords, I did not attribute any mischievous motive to the noble Lord; but having heard what he has just said I urge him to look again at Hansard because I believe that my noble friend was making quite a different point.

I turn to the Bill. I want to make three observations, the first two rather tersely and the third, I fear, at greater length. My first observation concerns Clause 13, which deals with the objectives. The clause states:

    "in carrying out their respective functions under this Part is to protect the interests of consumers in relation to electricity conveyed by distribution systems, wherever appropriate by promoting effective competition between persons engaged in, or in commercial activities connected with, the generation, transmission, distribution or supply of electricity".

Does the Minister see any circumstances in which it would not be appropriate to achieve such consumer benefits by promoting effective competition between persons engaged in the generation, transmission, distribution or supply of electricity? I understand that, as regards the National Grid, such competition is impossible to generate. But apart from that, would the Minister accept that the generation of competition between these commercial actors will always benefit consumers?

My second point of detail concerns the use of privileged and confidential information which the authority and the National Consumer Council can, on occasions, require a licence holder to yield. I was most interested in what the noble Lord, Lord Borrie, said about potential inconsistencies between this Bill and the Competition Bill. Perhaps I should also add the Financial Services Bill and the Freedom of Information Bill. They all deal with the difficult question of privileged and confidential information and the circumstances in which it is publicised or passed on to third parties.

Perhaps I may invite the Minister to consider whether this is not an appropriate moment in the legislative timetable to iron out the differences between the various Bills and Acts so that we can have a common approach to the treatment of privileged and confidential information. It is a matter of extreme importance to the way in which licence holders conduct their business.

I accept that there will always be circumstances in which it is necessary for a regulatory authority to obtain such information; but, equally, I suggest to the Minister that the circumstances in which such information is passed on ought to be most carefully considered. Only when it is really necessary to do so--and then on the basis of an objective test--should permission be given to a regulatory authority to pass such information on to other parties.

The point I want to make at greater length concerns the question of penalties. As the noble Lord, Lord Borrie, pointed out, Clause 58 introduces a new Section 27 into the Electricity Act 1989. Essentially, the clause states that new Section 27A will, where a

4 May 2000 : Column 1170

licensee breaches the condition of a licence, or a requirement of the Act, or a specific performance requirement, that licensee will be vulnerable to a penalty. As the Bill stands, that penalty is of unlimited scale. I believe that the current provisions are not only incompatible with existing legislation, but also threaten the undertaking that the Secretary of State will have given that the Bill conforms with the European Convention on Human Rights.

Perhaps I may explain the position which the Opposition propose to take in Committee on this matter. As regards unlimited penalties, the only constraints on the regulator in the Bill are, first, that the penalty must be reasonable in the circumstances; and, secondly, that at some stage there will be produced under new Section 27B some policy guidance. It would be extremely helpful to the House if the Minister could produce a draft of the policy guidance before the end of the Committee stage.

To the extent that the policy guidance constrains the circumstance in which the penalty can be unlimited, I am sure that the guidance will be favourably received by the Opposition. However, to the extent that the regulator has the widest discretion to impose a penalty of unlimited scale, there is clearly a danger that such a penalty will fall foul of the criminal provisions of Article 6.1 of the European Convention on Human Rights.

The second point I want to make about new Section 27A is that it introduces the potential for multiple jeopardy. As the noble Lord, Lord Borrie, will recall, in the course of the long passage of the Competition Bill 1998 through this House great care was taken to ensure that where a regulator in either the gas or electricity industries decided that a particular matter was more appropriately dealt with by the competition provisions under the aegis of the Director-General of Fair Trading rather than under the regulatory provisions, the regulator would go down the Competition Bill route and would forgo his right to use, say, in the case of electricity, Section 25 of the Electricity Act 1989.

However, no such limitation is introduced into proposed new Section 27A. In other words, it would be possible for the electricity regulator, the new joint regulator, not only to penalise a licence holder under the Competition Act, but also to penalise the licence holder under the Electricity Act at the same time. In my submission, that is totally against the spirit of what the Government decided when they were promoting the Competition Bill 1998 in your Lordships' House.

There is also double jeopardy in another sense because under the Electricity Act there is already a power for individuals who are adversely affected by a licensee who fails to perform to an appropriate standard. A provision already exists which requires the licensee to pay compensation to an adversely-affected party.

Thirdly, with respect to penalties, in the Competition Act the circumstances in which a penalty can be imposed are limited by the requirement that the wrongful act is committed intentionally or negligently. No such constraint exists in this Bill.

4 May 2000 : Column 1171

I hope that, over the next week or two, the Minister will take the opportunity to consider the question of penalties and whether it would be appropriate to narrow the discretion in which the regulator can operate. Of course, I have no doubt that the Minister will say to me, "Well, that is all very well. But later on under Section 27 the licensee has a right to appeal".

That is, of course, true. Under new Section 27E, in circumstances where the regulator acts ultra vires or where he breaches some expressly-stated procedural requirement in imposing the penalty or where he gets wrong the date at which the penalty is required to be paid, the decision can be quashed by the court.

However, in my submission there are no circumstances in which the court is capable of reassessing the amount of the penalty. Although the Act states that the tribunal in question can impose a lesser penalty, there are no powers for the tribunal to look at the complaint of the licensee so that that objective can be achieved.

How does this measure up to the European Convention on Human Rights? In my submission, badly. Article 6.1 of the convention requires a hearing to be by an independent and impartial tribunal and requires the hearing to be fair and public. How can the regulator, who determines the penalty, be an independent and impartial tribunal? The regulator decides whether he will pursue the licensee. He assesses whether the licensee has broken the terms of his licence. He then decides what the penalty is. He is an individual appointed by the executive. As has been said in the context of another piece of legislation for which the Minister is responsible, he is legislator, prosecutor and judge, all rolled into one. In my submission, that does not meet the standards laid down in Article 6.1.

Moreover, what rights does the individual have to a fair and public hearing in this procedure? None whatever. He can only make representations. The Minister may say to me, "Well, nevertheless, there is an appeal to the court". In my submission, for the reasons that I have already given, that appeal is wholly inadequate because the facts cannot be reviewed by the court.

I shall listen with keen interest to what the Minister says because he is responsible for another Bill in your Lordships' House: the Financial Services Bill. I wonder to what extent the principle of "Chinese walls" applies to the approach of the Minister.

He will be well aware that, in relation to exactly the same situation in the Financial Services Bill, the Government have come up with a completely different solution: a solution which, although in my view still not attaining the standard required by Article 6.1 of the convention, at least meets it more closely. Under the Financial Services Bill, the regulator can only recommend a penalty. Moreover, the right to go to a tribunal is a right to have the case completely reheard de novo, including a complete rehearing of all the facts.

4 May 2000 : Column 1172

For reasons that the Minister knows intimately, I still do not believe that the Financial Services Bill meets the standard required. However, in my submission, this Bill certainly does not. Therefore, perhaps I may suggest to the Minister that, at least, he should be prepared to go so far as to imitate what he has already done in the Financial Services Bill in Clause 58 of the Utilities Bill.

I have dwelt at some length on this matter; but we in Opposition take it very seriously. We believe that the consumer deserves a fair deal under the Bill. However, it is the licensee who generates the services and in my view the licensee also has rights. He certainly has human rights under the European Convention on Human Rights, which very soon is to become part of the law of the land.

6.15 p.m.

Lord McIntosh of Haringey: My Lords, I am grateful to all noble Lords who have taken part in the debate. The noble Lord, Lord Kingsland, kids himself that he has reaped a rich political harvest out of it. I can assure him that very few points made from the Opposition Benches have not been anticipated and are not capable of response. However, whether I shall have time to respond to every one is quite another matter. Therefore, I make the usual proviso that, if I miss any points, I shall certainly undertake to write to noble Lords. At the same time, perhaps I may say that, as is always my practice with regard to legislation of this kind, I am very happy to meet noble Lords on any and all Benches to discuss matters of mutual interest and concern where potentially we could minimise misunderstanding and disagreement by such a meeting.

My noble friend Lord Judd described this as an "exciting" Bill. I believe that some noble Lords may not entirely agree with that. I have found the study of this subject absorbing. However, I believe that it is fairer to say that a great deal of the Bill is very technical in its application and that, if I am really looking for excitement, I might go elsewhere.

I detect five strands in the debate this afternoon and I shall try to deal with each of them in turn. The first is the accusation that the Bill adds to the cost of regulation and that, in effect, it forms a stealth tax on the consumers of energy to finance the Government's social and environmental programmes. That accusation was made by the noble Baroness, Lady Buscombe, but was not repeated by anyone else. I was grateful for that.

The second strand is the whole issue of financial penalties, alluded to by many noble Lords. The third concerns the whole range of issues about the environment. To that, I believe I must append "energy efficiency" as I do not believe that I can distinguish between the two in debating the issues which have been raised. Then there is a series of questions relating to the consumer council, its powers of research and publication, and the way in which it will operate. Finally, there are questions about fuel poverty. I hope that I can subsume most of the points that have been made into those five general areas.

4 May 2000 : Column 1173

Perhaps I may start with the accusation made by the noble Baroness, Lady Buscombe, that the way in which we are tackling environmental and social issues represents what she called an "open ticket" to environmental and social taxation. I must say that the guidance which is described here and about which the noble Baroness, Lady Buscombe, seems to be not enthusiastic, is guidance and not direction. That is an important distinction and one which was recognised by my noble friends Lord Borrie and Lord Judd. However, my noble friend Lord Judd recognised it in the sense of looking for greater and more specific responsibilities than could be achieved by guidance.

The important point is that the authority has a range of other statutory duties which have to be weighed when considering how best to contribute to policies. If the Government want to implement social or environmental policies with significant financial implications for consumers or for regulated companies, they are committed to doing so not only by means of guidance but by separate legal provision. It is not our intention to use guidance as a substitute for legal provision. The fact that powers to set energy efficiency and renewable obligations are specifically provided for in the Bill and not left to guidance is proof of this policy and action. The concept of guidance is widely supported. It will ensure that social and environmental matters are properly factored into the authority's decision-making process without compromising arm's-length economic regulation, which is what we aim to achieve.

Before leaving that matter, I should refer to the point made by the noble Lord, Lord Kingsland, about competition, because it does not fit in anywhere else. He asked whether there are any circumstances in which promoting competition is not appropriate. He immediately answered his own question with an example about pipelines, but there are many such areas--electricity generation, gas and electricity supply--which inevitably have monopoly characteristics. Competition cannot always be the right framework. We are simply not going to duplicate gas pipelines or electricity cables. We are going to find ways round the problem by virtual competition. It is still the case that we want to secure benefits for consumers by competition, but we recognise that that will not always be the case. This must, however, be set in the context that this Government have effectively promoted competition.

I was accused of adding excessively to the cost of regulation, costs which have to be borne by consumers. The noble Baroness, Lady Buscombe, referred to the trend in the Ofgem budget. We have to distinguish in the Ofgem budget between the one-off costs for the establishment of the new electricity trading arrangements and the office merger, which are forecast at £68.3 million, and the remainder of the costs. If those costs are struck out, the costs trend is only very slightly upwards. For 1997-1998, it was £29 million; for 1998-1999, £35.7 million; for 1999-2000, £34.5 million; for 2000-2001, £36.4 million. These costs are not sufficient to justify the kind of statements which have been made.

4 May 2000 : Column 1174

The noble Lord, Lord Ezra, asked how much the new electricity trading arrangements will cost the industry and consumers. Of course, all these figures are to be found in the Explanatory Notes which have been supplied with the Bill, particularly in paragraphs 167 to 170. The total central and industry start-up and operating costs for NETA were estimated in the July 1999 NETA document as being between £136 million and £146 million per annum for each of the first five years. If that is passed on to consumers, as it ultimately will be, it will mean an annual increase of less than 1 per cent in electricity prices, compared with the projected 10 per cent fall in wholesale prices which NETA will bring about.

I know that that will not satisfy the noble Lord, Lord Beaumont, who wants more expensive power. However, it is our objective, in the context of this Bill, to bring benefit to consumers. If it were to be a general principle of public policy for the Labour Party, as it is for the Green Party, to have more expensive power, I have no doubt that we would have to put that into a manifesto and that it would be judged by the electorate, as the Green Party's proposals will also be judged by the electorate. After the first five-year period, the operating costs will be about £30 million for the industry as a whole. No amount of money is insignificant, but it is certainly not of the sort that is being suggested.

The noble Baroness, Lady Byford, made a couple of related points. The first was about exemptions for landlords. We expect landlords to be covered by a clear exemption, without needing to apply for it, so there should not be any increase in regulatory costs for them.

With regard to financial penalties and the issue of whether or not there should be a limit on financial penalties, as there is in the Competition Act, the noble Lord, Lord Kingsland, raised, as he did on the financial services market, his fear that there is a contravention of Article 6A of the European Convention on Human Rights and that these will become criminal offences rather than civil offences. We are doing all that we can to ensure that they are civil offences. We believe that they are civil offences. We do not believe that they are in contravention of the European convention. It is for that reason that we do not use the word "offences". We have referred to them as "contraventions" or "breaches of obligations", rather than "offences", which was the word used by the noble Lord, Lord Kingsland.

This, of course, is not new. As the noble Lord, Lord Ezra, pointed out, the Gas Act provides for penalties in rather the same way as this Bill. Although the European Convention has not yet been incorporated into British law, it is available and there have not, as far as I know, been any challenges of the penalty regime. The fact is that the current enforcement system is weak. A regulator is always one step behind companies which breach their obligations, and we need to put this right.

We do not need a limit on the level of penalties. That would undermine the effectiveness of the powers. It has been honourably pointed out by my noble friends

4 May 2000 : Column 1175

Lord Borrie and Lord Currie, who subjected me to friendly fire on this point, that a penalty imposed must be reasonable in all the circumstances of the case. A serious contravention could attract a considerable penalty; a minor contravention could attract only a minor penalty. If we had a limit, we should not be able to impose a penalty which was reasonable in all the circumstances. The Competition Act is different. These are different--

Next Section Back to Table of Contents Lords Hansard Home Page