HC Deb 07 March 1988 vol 129 cc6-7
4. Mr. Prescott

To ask the Secretary of State for Energy if, when he last met the Confederation of British Industry, he received a copy of the report it commissioned from the Oxford Economic Research Association on "The Privatisation of the Electricity Supply Industry"; and if he will make a statement on its conclusions.

Mr. Parkinson

I have received a copy of the report and I shall be discussing it with the Confederation of British Industry shortly.

Mr. Prescott

Does the Secretary of State accept the conclusion of the reporters, who are convinced supporters of his privatisation programme, that a 15 per cent. price increase is totally unjustified on the ground of an increased rate of return on investment? Does he, therefore, accept their statement that the price increase is concerned only with increasing the value of the assets, which supports the view of the Opposition that the 15 per cent. price increase is totally unjustified and is really a privatisation tax to benefit the Treasury, paid for by the consumer, which will produce higher prices and higher unemployment?

Mr. Parkinson

No, Sir, we do not accept either the conclusions or the reasoning of the report, and if the hon. Gentleman read it carefully, he would not either. We do not believe that short-run marginal costs are a sensible basis for pricing electricity. We do not think that the fluctuations that would follow from such a policy would be acceptable to the hon. Gentleman or to anybody else in the country.

Mr. Prescott

That is competition.

Mr. Parkinson

No, it is not.

Dr. Michael Clark

Is my right hon. Friend aware that the increase in the subscription rate of the Confederation of British Industry over recent years has been considerably higher than the increase in electricity prices? Is he also aware that during the past five-year period that subscription rate has increased by twice the rate of the increase in electricity prices to industry? Does he consider that that might be one reason why the number of manufacturing companies in the CBI has fallen, and is that not a case of people in glass office blocks?

Mr. Parkinson

My hon. Friend has put forward an interesting set of facts of which I was not aware until now. The CBI has grossly over-reacted to our proposals, and its assessment of the impact on the overwhelming majority of its members is totally wrong.

Mr. Heffer

In an interesting article in the Sunday Express yesterday the right hon. Gentleman made the point: We are ending monopoly wherever possible. This won't mean that households will be able to choose between rival electricity"—

Mr. Speaker

Order. The hon. Gentleman is an old parliamentary hand. He must paraphrase, not quote.

Mr. Heffer

I am not reading it, Mr. Speaker; I am just referring to it.

On that basis, how can the right hon. Gentleman say, "We are now introducing competition in the industry," when we already have a good industry giving good electricity prices? How can he argue about competition? We are not buying suits, clothes or shoes, and it will be the same electricity, whoever supplies it. Are not the Government involved in doctrinaire nonsense?

Mr. Parkinson

I hope that the hon. Gentleman will follow his reading of my article by reading the White Paper, in which I explain that although distribution is a natural monopoly, generation is not, and generation accounts for 80 per cent. of the costs of electricity. It is perfectly possible to introduce competition into that part which represents 80 per cent. of the customers' bills and to regulate the rest.

Mr. Thurnham

Does my right hon. Friend agree that his proposals will allow more decision-takers to be involved in the industry? The Opposition should recognise that that is healthier for both the suppliers of generation equipment and the consumers of electricity.

Mr. Parkinson

I believe that our proposals will open up good career opportunities for many people working in the industry. I do not like the present structure, whereby the average area board consists of two people—usually they have come in from outside the board—and about 12 non-executives. I believe that, in future, there will be scope for promotion within the business for people who have devoted their lives to it. I hope that the Opposition will welcome that.