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Baroness Buscombe: My Lords, while I thank the Minister for his response I am sorry that he has resisted the amendment. As the Minister observed, we are talking about vital public services. We on these Benches do not seek to defend those who are responsible for repeated failures in supply, for example because of underlying inadequate investment. We agree with the noble Lord in that respect. However, we are talking about companies which use their best endeavours in all circumstances to maintain supply. We shall read with care in Hansard the Minister's response. On that basis, at this stage I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Borrie moved Amendment No. 38:



("(6A) No penalty imposed by the Authority under this section may exceed 10 per cent. of the turnover of the licence holder (determined in accordance with provisions specified in an order made by the Secretary of State).
(6B) An Order under subsection (6A) shall not be made unless a draft of the instrument containing it has been laid before and approved by a resolution of each House of Parliament.").

The noble Lord said: My Lords, in moving Amendment No. 38 I should like to speak also to Amendment No. 81. The amendments deal respectively with electricity and gas. As the Minister indicated a moment ago, as the Bill now stands there is a requirement in Clauses 59 and 95 that any penalty imposed must be reasonable in all the circumstances of the case. My noble friend Lord Currie of Marylebone and I proposed in Committee that there should be a cap or upper financial limit on the penalty that may be imposed. We put forward that case on the lines of the Competition Act 1998 in which the maximum specified is 10 per cent of the turnover of the company.

In response to our amendment tabled at Committee stage the Minister was inclined to believe that a specific limit was unnecessary. However, he recognised that some points had been made in favour of a limit and that the issue merited serious consideration. I understand that the Minister is now willing to agree to such an amendment. He has provided official drafting assistance to arrive at the simplified and--I am sure noble Lords will agree--clear amendments that are

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now before the House. We are extremely grateful to the Minister for his reconsideration of the matter and the trouble that he has taken. I beg to move.

Lord Renton: My Lords, the noble Lord, Lord Borrie, makes a good case for the first part of Amendment No. 38. However, a considerable burden will be placed on both Houses of Parliament if they are asked to approve--which means a positive resolution--perhaps a good number of relatively minor matters. I hope that the Government do not agree to subsection (6B) of the amendment.

Lord Fraser of Carmyllie: My Lords, when one finds a provision in the Competition Act reflected in the Utilities Bill one is dangerously close to joined-up government. That is desirable inasmuch as the penalty, which hitherto has been unlimited in the framework of the Bill, is now subject to a restriction. If the hint is correct and the Minister is prepared to accept the amendment it is a considerable improvement. However, we shall consider the matter further because we are not entirely sure who in practice is the licence holder. If BP Amoco is a single licence holder, a penalty of 10 per cent of turnover does not appear to be much of a restriction. However, more realistically, given the way that the market has developed a penalty that is restricted to 10 per cent of turnover will provide some companies with a degree of comfort.

Baroness Sharp of Guildford: My Lords, noble Lords may recall that at Committee stage I tabled an amendment in very similar terms to that tabled by the noble Lords, Lord Borrie and Lord Currie of Marylebone. I then joined them in urging this matter on the Government. These Benches welcome the fact that the Government have responded positively to these amendments. We join the noble Lord, Lord Renton, in expressing slight surprise at the terms of subsection (6B), in that it imposes a considerable burden on both Houses of Parliament.

Baroness Buscombe: My Lords, we are concerned about the implications of this amendment. I add my voice to the observations of my noble friend Lord Renton and my noble and learned friend Lord Fraser of Carmyllie. We do not regard a maximum penalty of 10 per cent of the turnover of the licence holder as a concession. We suggest that the penalty should be limited to turnover in the United Kingdom. Our concern is that this may set an inflated tariff which in the eyes of the regulator becomes the norm. In particular, in cases where there is only a small breach a penalty of 10 per cent of turnover may amount to an awful lot of money in the circumstances. We believe that it may give the regulator an inflated perception of what is a reasonable tariff. With a cap of this nature there is a possibility that the ceiling may become the norm and set precedents for the future. The Minister will be aware that we on these Benches are keener on

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a proper defence as opposed to a cap, although the latter is better than nothing. We are also concerned that in the long run it may prove to be grossly unfair.

Lord McIntosh of Haringey: My Lords, perhaps the noble Baroness, Lady Buscombe, and the noble and learned Lord, Lord Fraser of Carmyllie, can solve a problem that has worried me all my life. I have never known what a gift horse looks like. If they are good at looking gift horses in the mouth, perhaps when they come back next time they will tell me what they look like. I believe that in accepting these amendments we are doing rather well. The amendments again draw to the attention of the House the issue of a specific upper limit on financial penalties imposed by the authority for contraventions of licence conditions, standards of performance and other specified statutory obligations. The amendments seek to impose an upper limit on any financial penalty of 10 per cent of the turnover of the licence holder concerned, with detailed provisions set out in an order made by the Secretary of State. This introduces a limit on financial penalties analogous to that under the Competition Act 1998, which, as I understand it, was not opposed by the Opposition at that time.

It is right that this is not a concession. We do not think that the Bill as drafted was wrong. As we have repeatedly said, penalties are already limited under the Bill. New Section 27A of the Electricity Act 1989 and new Section 30A of the Gas Act 1986 give the authority a power only to impose such a penalty as is reasonable in all the circumstances of the case. The Bill also provides licence holders with a right to challenge both the imposition and the amount of the penalty in the courts if they consider them unreasonable; and gives the court powers to quash the penalty or to impose a lower penalty if it agrees with the licence holder. I think that those are the protections that the noble Baroness, Lady Buscombe, sought. This imposes a genuine constraint on the level of any penalty.

However, the Government have taken careful note of the views of the House on this point. We have also listened carefully to the points put to us by interested parties outside this House. I note, for example, that the Gas Consumers Council, in contact with officials at the Department of Trade and Industry, recently declared itself in favour of a 10 per cent of turnover ceiling. The noble Lords, Lord Borrie and Lord Currie, who may be presumed to have the ear of the regulator, have tabled these amendments on two occasions.

I recognise that an upper limit would give extra comfort to companies which are concerned about these provisions, although I would stress once again that companies which adhere to their licences and fulfil their statutory obligations have nothing to fear from the financial penalties provisions.

We would not be accepting this amendment if we thought that there was any risk that it would unduly inhibit the operation of these powers. It is of vital importance that any limit which is imposed does not

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undermine the purpose for which these powers are being introduced: to protect the interests of consumers.

I turn for a moment to the precise terms of the amendment. It would give the Secretary of State power to make detailed provisions, for example, in relation to the definition of turnover by order made by affirmative resolution. This appears to strike the right balance in terms of giving the Secretary of State flexibility to vary the precise terms of the order, while providing the appropriate level of parliamentary scrutiny. The amendment also mirrors the equivalent Competition Act provisions in this respect.

As I said earlier, it is clear that the industry would draw some comfort from the amendment; and that it would not damage the Government's objectives. We are, therefore, ready to accept both the amendment under discussion and the identical amendment for gas under Clause 95.

6 p.m.

Lord Renton: My Lords, will the Minister answer my point? The proposed subsection (6B) imposes an unnecessary burden upon Parliament. I do not know of a precedent for positive resolutions having to be made in circumstances like this.

Lord McIntosh of Haringey: My Lords, I thought that I had already given the exact analogy and precedent. The Competition Act 1998 contains an exactly comparable cap on financial penalties and provides for affirmative resolution procedures. I understand that the provision has gone to the Delegated Powers and Deregulation Committee. The pressure on us is always to increase the scope of parliamentary scrutiny. I hope that this will not be seen as a defect of the amendment.

On Question, amendment agreed to.


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