ORDERS FOR SECURING COMPLIANCE (Hansard, 10 April 1989)

§ Mr. Michael Spicer
I beg to move amendment No. 22, in page 18, line 3, leave out 'has contravened and is likely again' and insert 'is likely'.

§ Mr. Deputy Speaker (Mr. Harold Walker)
With this it will be convenient to take Government amendments Nos 23 to 25, Government amendment No. 27 and amendment No. 191, in clause 46 page 35, line 45, at end add— `(e) include a financial statement surveying costs for each area board during that year.'

§ Mr. Spicer
I merely want to say, by way of proposing the amendments, that there was some discussion about these issues in Committee. I believe that the hon. Member for Cardiff, West (Mr. Morgan) in particular argued that the director general should have powers to take action if he has clear reasons for believing that action contrary to licence conditions is likely to be taken. If the amendments are acceptable to the House that point will be met. The director general will be able to take action if he has legitimate reasons for believing that action contrary to licence conditions is likely to be taken.

§ Mr. Tony Blair (Sedgefield)
The purpose of amendment No. 191 is to ensure that, when the director general makes a report to the Secretary of State— as under clause 46 of the Bill he will be obliged to do— on his activities during the year, he includes a financial statement surveying the costs for each area board during that year. It is entirely appropriate on this day, when we will be debating a series of amendments concerning the rights and needs of consumers, that we ask what price the consumers will be required to pay for this legislation. At the end of the day— no matter how many discussions that people who are fond of debating the industry structure may wish to have—what the ordinary consumer will ask is, "Will privatisation improve the service and will it bring down bills?"
The boast of the Secretary of State about this legislation was that this privatisation is somehow different from gas and British Telecom because there is no monopoly. The criticism that was implicitly acknowledged by him was that gas and British Telecom had gone wrong as privatisations because there was a monopoly element in relation to consumers. However, for the vast majority of consumers, that is exactly what has happened here. The consumer will deal with the same electricity board as now, with no ability to transfer custom if he is dissatisfied with the service, and with no opportunity to hold the electricity board publicly accountable, because it will no longer be publicly owned.
4.45 pm
If we have learnt anything from privatisation, it is surely that, when one turns a public monopoly into a private monopoly, one combines in the worst way possible public service and private profit. One has the need to use without the right to choose. That will exactly describe the plight of Britain's 22 million electricity consumers following privatisation.
When we examine what the Bill includes for consumers, we must point out first that there will be no choice in relation to the area board used and that, of course, the grid system will be a monopoly owned by those area boards.
595 The only element of competition comes twice removed from the consumer in generation. Yet I believe that, if the Committee stage of the Bill accomplished anything, it exploded the notion that the duopoly that will be created—big G and little G owning the generating capacity—will make it at all likely that there will be any true competitive element operating within the scheme. In other words, as it became increasingly apparent during Committee, the Government are driven to rely on the public sector regulator to give any credibility at all to their notion of public accountability.
We have been told of all the independent power projects that are due to flood the system. We have consistently asked for details of the 20 power projects that the Government say are awaiting us in the new privatised structure, but we have not yet been given them. At one point in Committee I thought that we might have been promised them, but perhaps we can have them now. I suspect, however, that on examination many of those projects will turn out to be nothing more sophisticated than bids by various fuel suppliers or power plant builders to ensure that they are in on the act after privatisation.
The Secretary of State continually said throughout the Committee proceedings that this was no longer a cost-plus system. I suppose he meant by that that we were no longer in a situation where the costs would be simply passed on to the consumer. Yet it is extremely difficult to envisage how that is not the case. Most of the contracts for power generation will be long term. Many will be on a take-or-pay basis. If the regulator is involved at all, he will be involved when those contracts are first concluded and agreed.
The licence agreement that governs the area boards in what they charge the consumer will operate according to the formula RPI minus X plus Y. We do not know what X is, we do knot know how Y is formulated, and we find in the licence conditions that, even after the formula has been set for the area boards, they will be permitted to exceed it by what is called in the licence "the permitted percentage". That is an excess by which the area boards will be able to exceed whatever targets the regulator sets. Yet again, when we look at the licence to discover what the permitted percentage is, another blank appears. So often in our debates, when we get down to the detail of what awaits the consumer after privatisation, we face a blank. The truth is that this is a bill without any specific charges in it at all.
If we wanted any proof as to what will happen to prices after privatisation, the proof is with us already—it was 9 per cent. last year, because of privatisation raising the rate of return, and 6.5 per cent. this year. We now know that the rate of return will be raised from 5 to 8 per cent. for nationalised industries. I suspect that that is to provide the colour of an excuse, so that area boards and the privatised electricity industry will have written into their regulatory structure a minimum rate of return of 8 per cent. Perhaps the Minister and the Secretary of State can confirm that. If the Secretary of State is right—although we can never be sure when dealing with figures whether he is right or wrong—he is talking about £30 billion of investment over the next few years, at an 8 per cent. rate of return. That will have a dramatic upward pressure on prices. In relation to the nuclear industry, we know that the higher the rate of return, the higher the nuclear tax that consumers will pay for nuclear power.

§ Mr. Geoffrey Lofthouse (Pontefract and Castleford)
Does my hon. Friend appreciate—does the Minister appreciate—that during the past three years the CEGB's costs for the nuclear fuel cycle have increased by £460 million? That is a 53 per cent. increase. Who will pay for that—the consumer?

§ Mr. Blair
My hon. Friend is absolutely right to point out that rise. He is also right that it will be the consumer who will pay along with the taxpayer, as we shall see later.
The irony of the Bill is that, whereas the profit from the electricity industry moves to the private sector, much of the risk and liability stays in the public sector. The Government can no longer seriously maintain that prices will fall. Although it is true that back in the heady days of 1987 when the Secretary of State was first talking about the proposals he wrote an article in the Daily Express How I am going to cut your electricity bills". We get little from the Government even to remotely suggest that bills will come down. Instead they have mounted a fairly defensive exercise to say that bills will not go up as much as Labour says.
The truth is that replacing the downward pressure on costs—that was the slogan of the Government—is an inexorable upward pressure on costs as a result of privatisation. The Government's only real hope of prices falling after electricity privatisation lies in fuel costs coming down. In other words, something entirely extraneous to the process of privatisation. That is the only vestige of respectability that the argument for falling prices has left.
I have often said that one of the extraordinary things about the Bill as it moves through the House is that whether the discussion has been about prices, the nuclear tax or the costs of flotation, even the least curious Conservative Members would want to know what it is going to cost their constituents. The cost of flotation is a prime example of that.
The analysis we provided in Committee suggested that the cost of flotation, as a percentage of the proceeds, would be about 5 per cent. If that calculation is repeated on figures such as those given in the newspapers regarding what the industry will fetch on the market—about £18 billion—we are talking about flotation costs of about £900 million, which represents a £25 premium or special additional surcharge on every household in the country.
Yet we have been consistently denied any explanation from the Government as to whether they think that that calculation is wrong or wildly inaccurate. They have given no estimate themselves as to what they consider to be the costs of flotation. If they say, "We never normally provide that" then perhaps it is about time that they did. Surely that is one of the things that we are entitled to take into consideration when deciding whether to support this Bill.

§ Mr. Alexander Eadie (Midlothian)
Does my hon. Friend realise—it was published quite recently—that because the Bill is doing so badly the Government intend to spend another £20 million on advertising?

§ Mr. Blair
My hon. Friend is absolutely right. If £20 million were the sum total we would consider that we had got off fairly lightly, but, unfortunately, that is not so. The CEGB has allocated £76 million this financial year to be spent on privatisation—this does not include the cost of the flotation itself; it is all pre-flotation costs. That does not include the promotion costs of the flotation or, 597 perhaps most important, any of the costs of the area boards or of the national grid as a result of privatisation. That is why it is right to ask for figures from the Minister so that we know exactly what we are up against.
One interesting aspect of the presentation given by Mr. Baker to electricity board managers a short time ago was a document presented by Lazard Brothers, who are advising the new National Power—big G—on the financial aspects of the privatisation. That document says quite clearly exactly what we can expect as consumers and taxpayers from privatisation. It states: The challenge to be faced in the reorganisation of the industry cannot be overstated. A restructuring of this sort so close to flotation is unprecedented in its scale and complexity … the reorganisation of the electricity industry raises fundamental problems of logistics. It also states that a considerable marketing exercise will be required to establish the commercial credibility of the new National Power company. All of this, helpfully admitted by Lazards, will be paid for by us, the consumer and the taxpayer. We shall have advertisements promoting a sale that no one wants. That is what is so wrong with this privatisation.
We have had opinion polls that show almost 70 per cent. of the population oppose the privatisation, as they oppose water privatisation. The Government made no effective attempt to persuade public opinion during the Committee. They believe that if they have a majority here that obviates the need to explain to people why they are carrying on with this privatisation process. The answer is that they are doing it for no other reason than privatisation itself.
This essential public service that we all need to use will be privatised at enormous cost to the consumer and the taxpayer at a time of immense uncertainty in the industry. There can be nothing more irresponsible than to embark upon that process, but I am afraid that there is nothing more typical of the Government.

§ Mr. Peter Hardy (Wentworth)
I suppose that any Government are obliged to give serious consideration to the values or dogmas that they hold dear. However, they also have an obligation to the nation to see that the application of those dogmas is not prejudicial to the interests of the community and the country. Unfortunately, there is cause for grave concern about the effects of Government policies on the price of the electricity paid for by the domestic consumer and by industry.
Since the introduction of the Bill I have had a number of discussions with people engaged in the special steels industry. Only the other day I met people from the Iron and Steel Trades Confederation—men who work in the Rotherham works of the engineering steels industry, who are represented by my hon. Friend the Member for Rotherham (Mr. Crowther) and myself. We meet representatives of that industry frequently and high on the agenda is the price of electricity. In our area we produce steel by the electric arc method and the price is significant.
Those steel workers who were worried about the price of electricity have, during the past decade, broken world record after world record. They take pride in the superb achievements of their works and the knowledge that their skill has made them most competitive. They deeply resent the fact that, last year, there was a 9 per cent. increase in 598 electricity charges followed by a 6 per cent. increase this year. Those price increases could take the competitive edge off their industrial endeavours.
They are conscious of the fact that if we are to build from the ashes of deindustrialisation that the Government have inflicted on the country during the past decade, industries with the potential to export should be able to expect Government assistance and encouragement rather than the introduction of enormous economic strategic disincentives.
For example, I calculated that last year's electricity price increase would make a 4 per cent. increase in the cost of our steel production inevitable. When the special steels industry of Britain is competing with that of Germany, Japan and other steel producers, it is nonsense for the Government deliberately to embark on a policy that forces up the industry's prices and takes off its competitive edge. However, that is what has happened.
My hon. Friend the Member for Sedgefield (Mr. Blair) virtually invited the House to look at the realities of this increase. When the 9 per cent. increase was imposed, the Secretary of State—who I know cannot be with us, but I doubt whether he or the Under-Secretary could deny this—made it absolutely clear that the increase was necessary to provide the electricity industry with an investment capacity. However, the industry had already budgeted for an investment of just over £1,000 million, of which the Secretary of State for Energy appeared to be unaware. He said that we had to make an increase in excess of £1,000 million so that the CEGB could invest.
5 pm
The Minister knows that, in Committee, I made a number of attempts to secure from him the actual record of investment following that 9 per cent. increase in prices. Capital expenditure by the electricity supply industry in 1987–88 was £1,089 million and that approved in 1988–89 was £1,474 million—little more than the amount that would have been spent by the industry without the 9 per cent. increase in prices. The amount planned for next year is little more than would have been fulfilled by the electricity supply industry without this year's 6 per cent. increase in prices—let alone the 9 per cent. increase of last year.
I know—as do the steel workers of my area—why the 9 per cent. and 6 per cent. increases were applied. It was to ensure that, despite the existing burdens on domestic consumers—millions of whom find it difficult to pay their bills—and despite the enormous trade deficit we have as a result of the Government's incompetence and negligence, consumers must also bear the burden of increased costs of production.
The Government give no priority to industry, and I regret that organisations such as the CBI and others that are supposed to represent Britain's important industries tend to be supine in their criticism of Government policies which are not in the interests of British industry. Sooner or later, a Government will have to take office who recognise that the job of exporting and matching the enormous deficit now facing the United Kingdom requires a different set of priorities. Such a Government would not force industry and domestic consumers to bear enormous price increases only in order to provide the Government with a sweetener to enable them to privatise the industry.

§ Mr. Frank Haynes (Ashfield)
In Committee and on Report we have been constantly told that the Bill is in the interests of the consumer. That is a lot of rubbish. It is really in the interests of the people who will buy into the industry. It is all right for the Minister to tell us, both in Committee and on the Floor of the House, that ordinary people will be able to buy into the industry. In previous privatisations the Chancellor of the Exchequer had the nerve to stand at the Dispatch Box and say that pensioners would be in the queues to buy shares in the privatisation of our public industries. Some pensioners may have bought a share or two but it was not long before they flogged them to the big-money folk who moved in to buy them off. Organisations and people with big money are the ones who have bought up willy nilly the industries that the Government have privatised.
My hon. Friend the Member for Sedgefield (Mr. Blair) mentioned the regulator who will be acting not in the interests of the consumer but, once again, in the interests of those who will get a rake-off—those whom Conservative Members represent. Conservative Members represent the people with pockets of money—I am not joking. They have put so much money in their pockets that they cannot find enough pockets to hold it.
My hon. Friend the Member for Sedgefield mentioned big G and little G, which reminded me that in my youth there were two first-class Warner Brothers film stars—Humphrey Bogart and Edward G. Robinson. They were always talking about getting hold of big G. They robbed banks and folks in the street for big Gs, which they used to call greenbacks. That is what the Bill is all about. I understand big G and little G and it hurts me because Opposition Members represent ordinary folk in the street. Conservative Members represent people in big business—by God, they look after them.
While the Minister is listening, I shall tell him something else. I am terribly disappointed that the Secretary of State is not here. He is swanning around in Concorde in the Soviet Union when he should be here delivering this wicked Bill for the privatisation of electricity. He has ducked out of his responsibility and nipped across to have a word with Gorbachev, perhaps to try to convince him to sell off his electricity industry. He will have a job over there, although it appears that he has a simple job here.

§ Mr. Hardy
I knew that the Secretary of State was away but I did not know that he was travelling in Concorde. If so, his journey time must be short enough to allow him to fulfil both his obligations—the one here and the one in Russia.

§ Mr. Deputy Speaker
Order. I fail to see how any of this can possibly arise under any of the amendments before the House.

§ Mr. Haynes
No. I shall duck out of that one.
I am making the point that the Secretary of State should be here, delivering the Bill through the House on the last day on Report, and Third Reading, instead of swanning around in the Soviet Union. Too many Secretaries of State swan around in different places of the world. Half of them live in the stratosphere instead of here, doing their jobs on behalf of the people they are supposed to represent.
I am getting a bellyful from my constituents who, as I told the Minister in Committee, had a bellyful of Sid, when 600 the Government were flogging off gas. All we saw when we switched on our televisions was Sid. All of a sudden, Sid disappeared and the Secretary of State seems to keep disappearing on this Bill too. In Committee I also suggested that the Government ought to consider seriously their advertisements. My constituents tell me that they know all about our electricity industry, yet the Government keep putting advertisements on television telling us all about it. It is all in the interests of flogging off the industry to those people who have plenty of money but who want to make more. The Secretary of State keeps bumping up the price of electricity—by 9 per cent. last year and by seven point something this year, after we were told that the increase would be 6 per cent. The Minister is riot looking at me—he is looking around the Chamber. I am trying to educate him about my constituents' feelings but I shall be happy to give way to him if he wants to intervene.

§ Mr. Michael Spicer
I have certainly been listening to the hon. Gentleman, but it takes some concentration because he always makes the same speech. If he made a different one, it would be easier to listen with intense interest.

§ Mr. Blair
Ministers are so difficult to educate.

§ Mr. Haynes
I must keep repeating my message until I get it across; some of these Ministers are really thick. They do not listen.
The Opposition are talking sense. We hear a lot of technical rubbish from the Government, but when we get back to our constituencies we hear in no uncertain terms about what people there think about the Government's actions. At the moment, we are talking about the privatisation of electricity——

§ Mr. Deputy Speaker
Order. We are talking about the amendments before the House.

§ Mr. Haynes
Come on, Mr. Deputy Speaker, be fair. I am talking about the costs and price of privatisation, and I am telling the Minister how my constituents feel. I am speaking of lower-paid workers, not Members of Parliament, particularly Conservative Members who hold seven or eight directorships as well as this job.
My hon. Friend the Member for Bolsover (Mr. Skinner) raised a point of order earlier about where the money was really going to go. It will not go to the people we represent—it will go to the people the Conservatives represent. The Conservatives always look after their kind, but, as the Minister knows full well, come the next election we shall occupy the Government Benches and the Minister will be here only if he wins his seat.
I am repeating myself for a specific purpose. We shall put the electricity industry right when we return to power, and it will be under public control so that the people out in the country can take the decisions—not a small clique of 300 or so Conservative Members deciding matters for 60 million people in the country. It is true that the Government gave fair warning in their manifesto that they intended to privatise this and other industries. My notes at this point read, "Consumers—ha! ha! ha!" This is a big joke; the Government are not interested in the consumer.
The Government Benches are empty today, but here comes the little lad from Bosworth who made a contribution in Committee last week. I hope that the hon. Member for Bosworth (Mr. Tredinnick) will make one today. Occasionally he makes sensible contributions about 601 this privatisation. He has probably been outside the Chamber preparing his speech, which I can see on his knees. I hope that he will tell us his real feelings about the people in his constituency. I know plenty of people there; Bosworth is not far from my constituency. At one time it was Labour-controlled——

§ Mr. David Tredinnick (Bosworth)
Not any more.

§ Mr. Haynes
It will go back to being so——

§ Mr. Deputy Speaker
Order. Bosworth is not mentioned in the amendments. I hope that we shall get back to them now.

§ Mr. Haynes
Privatisation affects Bosworth as well as my constituency or Sedgefield or the Minister's constituency. It involves every constituency—even Doncaster, Mr. Deputy Speaker. I do not think that you will pull me up for mentioning Doncaster, which will be seriously affected by the privatisation of electricity. It has a race course, with occasional night racing, for which lights are needed. The race course will be affected by the prices which we will enjoy following privatisation. So put that in your pipe and smoke it, Mr. Deputy Speaker, if you do not mind my saying so. Mr. Deputy Speaker is fair; he gives us the opportunity to speak our feelings, which is what I am trying to do this afternoon. I know that you have pulled me up a couple of times, Mr. Deputy Speaker, but you did not really mean it. The important thing is that many people at the lower end of the income scale are wholly dependent on social security benefits—yet the Government have cut them. Such people will really feel the massive price increases that are on the way.
I know how this will end up: more people will have their electricity cut off, and Members of Parliament will face real problems. When Labour returns to power after the next election, we shall put all that right. We shall reduce the number of cut-offs, introduce fairness and put the money where it is needed, not into the pockets of the rich.
I remember my hon. Friend the Member for East Lothian (Mr. Home Robertson) holding up his poll tax form from Scotland. The poll tax is another way in which the Government are robbing the poor whom we are trying to look after. My hon. Friend held up his poll tax demand and said that it was for £1,000 less than he had paid last year. That shows what the Government are up to. The lower paid and those just above the border line will pay——

§ Mr. Tredinnick
Will the hon. Gentleman inform the House next that since the privatisation of the gas industry there have been far fewer disconnections?

§ Mr. Deputy Speaker
Order. I hope that he will not do so on this group of amendments.

§ Mr. Haynes
You are right, Mr. Deputy Speaker, gas is not mentioned in the amendment. The hon. Gentleman has got himself in a mess and should rephrase his question.

§ Mr. Tredinnick
I am sorry if I misled the hon. Gentleman. Since the privatisation of the gas industry the 602 number of disconnections has fallen, so it is likely that the number of disconnections in the electricity industry will likewise fall because of the downward pressure on prices.

§ Mr. Haynes
The hon. Gentleman has not done his homework. I am suggesting that, because of previous privatisations, prices have risen and gas cut-offs have trebled. After this privatisation there will be more and more cut-offs of electricity——

§ Mr. Hardy
Does my hon. Friend agree that, in addition to the people who may be disconnected, a growing number of people are likely to need special concessions in the form of pre-payment meters, tokens and so on? These people will pay more for their electricity than those who can afford to pay the higher bills without much trouble.

§ Mr. Haynes
Exactly. The Secretary of State has talked about the pre-payment meter with a card. That is more costly to the consumer, but the Secretary of State did not mention that. People in the lower income groups will be hit hard.
I am being bombarded by representatives of industry who tell me of how their industries will be affected by the increased costs of electricity. Industry is telling us in no uncertain terms that it is not looking forward to privatisation. I see that the Minister is busy. I hope that he does not need to send his Parliamentary Private Secretary to find an answer to my questions. The problems that I am putting to the Minister are simple and he should fully understand them because the problems in his constituency must be similar to the problems in mine in connection with what will happen after privatisation. People are asking how they will pay their bills. They want to know whether they will be cut off or whether they will have a pre-payment meter put in and pay extra. Will industry in the Minister's constituency pay more and more which will then be reflected in prices? Bread, a necessity of life, will increase in price because of privatisation. That is why we keep pressing the Minister, as we did in Committee, about exactly what will happen under the Bill.
The Government do not listen and that is why Ministers repeat themselves at the Dispatch Box. They will not listen to home truths from Members who really represent the people. Our constituents tell us and we bring the information to the House. There are real problems now in the constituencies, quite apart from the problems that will exist after privatisation. The situation will get worse, but it is a waste of time asking the Minister to consider the issues that we are putting forward. The Minister will not be able to answer my next question because his right hon. Friend the Secretary of State for Energy is not in the Chamber. He is in Moscow, talking, I hope, to Gorbachev.
The Bill will hit our constituents and at this eleventh hour I ask them to withdraw the Bill and leave the industry under public control. That is where it will be when we are in government.

§ Mr. Alan W. Williams (Carmarthen)
Amendment No. 191 asks distribution companies to include a financial statement surveying costs for each area board during that year.'. That is a modest request. People are greatly concerned about what the Electricity Bill holds in terms of future prices. The same concern applies to the Water Bill because water prices are likely to rise by 50 per cent. or more in the 603 next few years. The Bill will create a private monopoly because there will he no real competition and no alternative source of supply for the consumer. Each area board will have to make a profit for its shareholders and at the end of the day such profit can come only from the bills that are sent to consumers.
Last year there was a 9 per cent. increase in price and this year there will be a further 6 per cent. rise. There is no justification for either of those rises and it is quite clear that they were imposed simply to fatten the industry for privatisation. About 80 per cent. of our industry relies on coal and the productivity record of our coal industry has been stupendous. There has been a more than 50 per cent. improvement in productivity in the last five years, so there is no justification for the price rises.
At the first sitting of the Standing Committee in January we discussed prices, franchises and the future investment policy of the Central Electricity Generating Board. The justification given for last year's price rise was that the electricity industry needed to embark on a massive investment programme of £45 billion. At that first sitting the arguments advanced by the Secretary of State on that £45 billion figure were torn to shreds. There is no way that the industry requires investment on that scale. It obviously needs new power stations, not PWRs, but proper environment-respecting coal-powered stations. Thanks to my hon. Friend the Member for Sedgefield (Mr. Blair), the figure of £45 billion was knocked into shape. The Government were talking about outturn prices in the year 2000. The correct figure turned out to be £13 billion at present prices. In Committee we destroyed the case for last year's 9 per cent. increase and this year's 6 per cent. increase.
As I have said, the ordinary consumer is greatly concerned about the future price of electricity. That concern is shared by industry. In my part of the world, in south Wales, industry has the highest proportion of electricity demand of any region. Fifty-nine per cent. of electricity produced in south Wales goes to industry. The Merseyside and North-Western electricity board area has the second highest with 56 per cent. Industry faced a price rise of 9 per cent. last year and 6 per cent. this year, but who knows what sort of increase it will face in the years ahead? Such increases affect the competitiveness of British industry.

§ Mr. Jack Thompson (Wansbeck)
My hon. Friend is on an important issue and in some ways the matter has gone full circle. The only source of energy for operating industrial machinery is electricity. Machines cannot run on gas or oil or on any other energy source. An increase in electricity prices to the coal industry, which consumes a huge amount of electricity, will push up coal prices and create pressure on the coal industry.

§ Mr. Williams
My hon. Friend is right. Increases in the price of electricity feed right through industry and result in increases in the price of raw materials such as coal and the price of the manufactured goods that we need to sell on world markets. It crucially affects competitiveness.
Faced with increased charges, many major industries, the large consumers, may decide to opt out of supply from the distribution companies and provide their own independent supply. That will have a knock-on effect on the domestic consumer because prices to the householder will go even higher. We should remember that electricity 604 costs hear heavily on elderly people, families and the low paid. That compounds the retail prices index. Electricity costs are a small part of a rich person's budget, but for the low paid and the elderly—people who spend most of their time at home—the electricity bill forms a large chunk of their outgoings.
The Bill talks about some kind of mythical downward pressure on prices that might come from increased efficiency. However, shareholders will demand their cut. Where can that money come from other than from higher prices? I recently had a look at the 1987–88 annual report of the CEGB, which has a 50-year history. In the last 30 years electricity prices have fallen in real terms and have dropped below the retail price index.
Part of the reason for that is increased efficiency in t he running of power stations and the generating of electricity. Another part of the reason is that, generally, fuel costs have fallen in real terms.
5.30 pm
I cannot see why the Bill should not contain a clause saying that, over the next 10 years, electricity prices need not rise in real terms so that that pattern is continued. British Coal has offered the CEGB a 10-year price agreement under which the price of coal would be fixed to the retail prices index. In the past five or six years, coal prices have fallen, and that could be continued for the next 10 years. Fuel costs represent the major cost in generating electricity, and 80 per cent. of our electricity comes from the burning of coal, so there is no reason why electricity prices should increase in real terms over the next 10 years.
As a result of the amendment, a financial statement surveying the cost of each board would be submitted every year. That is a simple safeguard for consumers. I am certain that the Bill will inevitably lead to higher electricity prices, but there must be transparency about what is happening.

§ Mr. George J. Buckley (Hemsworth)
I agree with my hon. Friend that increased electricity prices are the inevitable result of privatisation. However, will not the main pressure to increase prices, as has been stated by the Minister in Committee, be a result of the higher return on capital investment that is bound to be demanded from a privatised electricity industry?

§ Mr. Williams
My hon. Friend is right. The Government are increasing the rate of return. In an electricity industry in the hands of private shareholders, there are dangers that that will be pushed further. Another pressure on the cost of electricity is the nuclear component that the Government insist on having—the nuclear quota or nuclear tax. The four PWR stations will cost at least £1 billion each, and the electricity that they produce will be uneconomic especially at the high discount rates that the Government are talking about.
The Bill is a cause of great worry for the domestic consumer. People are concerned that, as with water prices, electricity prices will go through the roof over the next few years. That is why the Government should be listening to public opinion. Some 70 per cent. of the people are opposed to the Bill.

§ Dr. Kim Howells (Pontypridd)
I commend amendment No. 191. A financial statement for each area board would allow some visible mechanism 'whereby a proportion of the profits that the area boards will undoubtedly rake off from the business of selling electricity can be diverted into vital 605 research and development by our universities, our centres of research and our centres of excellence. That might put them on a par with the research and development carried out by the large multinational corporations. They will be selling us technologies that at the moment may not be profitable, but in the future will be both vital and profitable. For example, renewable energies and clean burn technologies are being developed and investigated at Grimethorpe. Research is being carried out into the decommissioning processes, about which we know so little but which those on the Government Front Bench blandly assume will be carried out with impunity. There is also research into the storage of nuclear waste. The Government have already admitted that there is a good case for a nuclear tax, which is what it will amount to—let us not try to gloss over it. In other words, there will be a rake off of profits to sustain a ringfence nuclear industry.
Instead of that, why should not a proportion of the profits that will undoubtedly accrue in large amounts go into research and development? That would ensure that in the 21st century we shall not be held hostage by the technologies that will otherwise be designed and developed by the multinational corporations in Japan, the United States and Germany. Why can we not develop them here, so that British industry will be in the forefront of these industries? This amendment would give us some purchase on this otherwise hostile Bill, and mean that the state can insist that the electricity industry pays attention to research and development because, if it does not, the electricity supply industry will fall badly behind.

§ Mr. Frank Doran (Aberdeen, South)
My hon. Friends have made out a clear case as to why amendment No. 191 should be accepted. The principal reason is that, as the consequence of the Bill, the price of electricity will increase considerably. Last year, there was an increase of 9 per cent., and this year an increase of 6 per cent. in England and Wales and 8.5 per cent. in Scotland, all as a direct consequence of the Bill. Additional costs will result from the nuclear levy, and costs of flotation and various other associated costs, and the need for the new privatised companies to increase profits for their shareholders.
We must ask what the Government have to be afraid of that makes them oppose our amendment No. 191. We are simply asking that, in his annual report, the director includes a financial statement so that the consumer can see what the costs are in the various area boards. The Government have claimd that the Bill will introduce competition, but they are refusing us the opportunity to see how that competition will operate in practice and how the costs of the boards match up to one another. That is a simple service to provide the consumer, and the best person to provide it is the director. That is why we have tabled our amendment.
The Government amendments relate mainly to the powers of the director in relation to the companies, and in particular the sanctions that the director will have to ensure compliance with the Act and the various licence conditions. Amendment No. 22 will strengthen the hand of the director. Under the Bill as previously drafted, the director would have had to show that there had been a previous contravention by the licence holder. We argued against that in Committee and were pleased that the Government agreed that the director could anticipate a 606 contravention on the part of a licence holder. However, amendment No. 25 lets the licence holder off the hook to a certain extent because it gives the director the power to negotiate. I am concerned about that, and I ask the Minister to explain how he sees that operating.
I am particularly concerned about clause 46, which requires the director to produce an annual report. Specifically, clause 46(2)(b) requires him to set out in his annual report any final or provisional orders made by the Director during that year". That will exclude boards or licence holders who have transgressed, but who are able to get into a negotiating position because of amendment No. 25, and avoid any publicity that might result from their transgression and the adverse effect on their business that that might involve.
I am also concerned about what would be involved in the failure of any board or licence holder to recognise the order of the director. Apart from the issue of a provisional order or a final order, there is no real sanction on the continually transgressing boards.

§ Mr. Michael Spicer
In speaking to amendment No. 191, the hon. Member for Sedgefield (Mr. Blair) designated today as consumer day. I must tell the House that, after the passage of the Bill, every day will be consumer day. I shall tell the hon. Member for Ashfield (Mr. Haynes), all others who contributed to the debate and anyone else who cares to listen why that is so. The generating side of the business, which the hon. Member for Sedgefield designated as twice removed, accounts for about 70 per cent. of all the costs that pass through to the consumer. Therefore, it is of some direct interest to the consumer. That side of the business will be subject to stringent competition.
We know of 20 projects with cost structures that are considerably below those that are now the average for the CEGB. I can inform the House of some of them because they are in the public domain. These include Barking, Corby, Roosecote, Leicester and Brigg. I cannot refer to them all because some of them are commercially confidential. However, the cost structures that we have seen are considerably below those of the CEGB.
The Government's case does not rest on the existence or otherwise of 20 new independent projects that will represent anything up to 7.5 GW of potential electricity. Our case rests on fundamentally altering the structure of the generating side of the electricity industry We are changing an industry in which there is only one supplier of electricity in England and Wales. It is that supplier which determines the cost structure of the industry and then passes the consequences of that straight through to the consumer. The fact that we are interposing a new set of pressures on the generating side of the industry constitutes our basic argument that we are doing more for the consumer in one piece of legislation than the Labour party will ever contemplate doing, even in its wildest dreams.
5.45 pm
I call in evidence the pronouncements, for example, of the chief executive designate of National Power, Mr. Baker, whom the Opposition are especially keen to quote. There are also the pronouncements of Mr. Malpas, the chairman designate of PowerGen. The Opposition do not seem to understand that those gentlemen's pronouncements signal a radical change in attitude on the part of undertakings which, for the first time, are having to think 607 about the market place. Mr. Baker's speech, which was of particular interest to the Opposition in its leaked form, made the position clear for future employees. He was categoric when he said, in effect, "Unless we start to realise that we are in competition from now onwards with other companies, your jobs and our business will be at stake." That is precisely the change in attitude that I call in aid in justifying the argument that the Bill is in the interests of consumers.

§ Mr. Rhodri Morgan (Cardiff, West)
Are the private generators to which the Minister has been talking willing to proceed on anything other than a take-and-pay basis?

§ Mr. Spicer
I can tell the hon. Gentleman what I told him only the other day. The motivation of the companies does not reside in any price structure that is either imposed on them or given to them, or in conditions of the sort to which the hon. Gentleman has referred. Instead, it resides in their knowledge of the efficiency with which they will be able potentially to compete with existing players. They know that they have new technologies, ideas, management structures and practices that will enable them to compete with the successor bodies.

§ Mr. Blair
Perhaps the Minister will care to confirm something that he was not prepared to commit himself to in Committee. Under the contracts concluded by area boards and the duopoly structure—PowerGen and National Power—that the Government are setting up, there will be no yardstick competition prevailing.

§ Mr. Spicer
The question of contracts is one that is yet to be settled. I have never made any bones about that. There is no secret about it. Nor is there any secret about the fact that the Government intend that the contracts should not be agreed to in a way that will prevent future and further competition.
As for competition——

§ Mr. Blair
Will the Minister give way?

§ Mr. Spicer
I shall let the hon. Gentleman intervene later. I wish to develop an important argument.
The hon. Gentleman based his speech on the argument that we are doing nothing for the consumer. I have said already that that is manifestly untrue in respect of generation. Even if the considerations and worries that the hon. Gentleman has presented were realities, the fact remains that the generation side of the industry is to be changed radically. The hon. Gentleman cannot get away from the fact that there is one monopoly supplier. That supplier is to have his monopoly broken, and from now on the industry will be geared up to encourage new entrants.
Incidentally, the amendment refers to area boards. I thought that we would be able to agree that the Bill refers to public electricity suppliers. Area boards will be abolished by the Bill. However, I put that on one side. Opposition Members have argued that competitive pressures will bear too strongly on the public electricity supply companies. For example, large companies or smaller companies will have a right not to contract with their local public electricity supply company. The supply companies will face pressures that have never existed in the past. As they will have the right to charge the tariff structures that they wish to introduce under the regulatory conditions, undoubtedly there will be a measure of competitive pressure that does not presently exist.
608 Where competitive pressures do not exist, there will be the regulator and the regulatory rules. For the first time, the regulator will have the consumer as one of his prime responsibilities when he comes to focus upon his duties. The regulatory duties that relate to the consumer are spelt out in a way that is different from anything which has existed in the past. That is denied by the hon. Member for Sedgefield, but it is a fact that duties will be placed upon the regulator to regard as paramount the interests of consumers.
Under the Bill, there is a right to the supply of electricity that did not exist previously for anyone with connections, or potential connections, more than 50 yd away from the mains supply. That is another consumer right that has been introduced. There is to be a panoply of new consumer rights under the Bill. At least give us the credit for that. If the companies do not meet certain standards, moneys will be returned to consumers. That is a brand new provision. That is something which the hon. Member for Sedgefield might acknowledge in a debate that is about consumers.

§ Mr. Blair
The Bill does not do a single thing for consumers that could not be done separately from privatisation. The hon. Gentleman must make a ca se showing why the Government are privatising the industry. So that the public fully understand, will the hon. Gentleman confirm that the ordinary, average consumer will have no choice but to continue contracting with his area board?

§ Mr. Spicer
The case that the hon. Gentleman must make is in answer to the hon. Member for Ashfield, who said that he wanted to put the industry back into public control. I shall not leave that point alone and I shall certainly address the question "Why privatise?" put by the hon. Member for Sedgefield.
I have already said that customers, including, for instance, those managing large new estates or large blocks of flats, would have the right to opt out—as everyone has—and it might even be a practical proposition—[Interruption.] The hon. Member for Sedgefield is not listening to my answer to his question. Domestic customers will have the right to opt out, and certain managers of large new estates or large blocks of flats may well want to do so——

Several Hon. Members
rose——

§ Mr. Spicer
I have answered one question put by the hon. Member for Sedgefield and I want to deal with his other questions.
One feature for which no Opposition Member has given credit in the context of a debate on consumer rights, although I am sure that they have understood it, is the new place of the consumers' committees within the regulatory body. For the first time, instead of shouting outside the industry and giving the benefit of their advice to anyone who wishes to listen, consumers' committees will be players involved in the regulatory process. They will have statutory rights that they did not have before. At least the Opposition might congratulate the Government on this new innovative approach to the involvement of consumers' committees within the regulatory authority.

§ Mr. Lofthouse
Is the hon. Gentleman saying that domestic dwellings can opt out?

§ Mr. Spicer
I am saying that everyone will have the right to opt out. The question on which, I suspect, the Labour Front Bench will wish to come back to me is whether that is a practical proposition. I have told the House that in certain circumstances the managers of large new estates or large blocks of flats may decide that, at the very least, they want to ensure that their local public electricity supply company understands that they have that right. The pressure that those managers could exert might be satisfactory from the consumers' point of view——

§ Mr. Deputy Speaker
Order. I hope that we can return more closely to the amendments before the House.

§ Mr. Spicer
I hesitate to quarrel in any way with your ruling, Sir, but you allowed the hon. Member for Sedgefield to develop an argument against our proposals in relation to consumers.

§ Mr. Deputy Speaker
Order. The Minister is right. I was a little overrelaxed in allowing a wide debate. The Minister is being given an adequte opportunity to respond to those points which I should not perhaps have allowed. I hope that, now that the matter has been redressed, we shall return to the amendments.

§ Mr. Spicer
You allowed the Opposition to ask why we were going to privatise, Mr. Deputy Speaker. I am sure that they felt that that question was related to the question of surveying costs for, as they described it, each area board, although it will not be an area board. This matter is relevant and, if I may, I should like to answer the question "Why privatise?" It is a fair question in the context of consumerism and prices.
One reason why we wish to privatise is that the country is faced—this relates directly to the question of surveying costs—with a massive investment programme. We have argued about exactly what it will comprise. The central part of our position is that that investment will not take place on the taxpayers' back, as it would in the public sector.
More fundamentally, it will occur in a form that is not dependent upon political decisions taken behind beige doors in Whitehall but has reference to genuine market needs. That must be a better way of engaging in investment decisions than having decisions that are a result of political infighting, as so many investment decisions are at present.
Because of your strictures, Mr. Deputy Speaker, let me leave aside the issue of increasing further public ownership of shares. By "public ownership of shares" we mean increasing ownership from the present 9 million shareholders and particularly increasing ownership of shares by employees—something about which the Opposition have never liked hearing.
I should like to ask the Opposition a question which we have asked before but to which we have not had an answer. Do they or do they not agree with the Labour Whip, the hon. Member for Ashfield, who jumps from the Front Bench to the Back Benches and makes a statement on the Opposition's behalf that he would renation-alise——

§ Mr. Deputy Speaker
Order. We are being led back into a Second Reading debate, but we will not have that. Hon. Members must return to the amendments before the 610 House. I hope that when hon. Members demand flexibility from the Chair they realise the consequences of opening that door.

§ Mr. Spicer
Of course I bow to your ruling, Mr. Deputy Speaker. I shall ask that question later. I serve notice on the Opposition that, when it is in order, I should like them to say whether public control means renationalisation under a different name.
We have not heard much about the Government's amendments, I suspect, because the Opposition basically agree—[Interruption.] I have been answering the points raised by the hon. Member for Sedgefield, and I think that it is fair for the Government to do that. Hon. Members should not provoke me if they do not want answers.
The Government amendments were suggested after discussion in Committee, as were a number of Government amendments that have been tabled in the past few days, as the Opposition recognise. These amendments relate to the power of the director general to deal with matters when it is likely in his view that a public electricity supplier or licence holder will take actions that may break the licence conditions. The hon. Member for Sedgefield asked whether an enforcement procedure would be provided for in subsequent Government amendments. There is such a procedure. It concerns various levels and is allowed for in the Bill, as a reading of the Bill makes clear. There is no question of enforcement being a problem. I can give that assurance.
These Government amendments have been brought forward in a desire to meet the points made by hon. Members in Committee.