Electricity Privatisation

HC Deb 16 January 1991 vol 183 cc909-49

Mr. Speaker

I must announce to the House that I have selected the amendment in the name of the Prime Minister.

7.14 pm

Mr. Frank Dobson (Holborn and St. Pancras)

I beg to move, That this House deplores the ill-advised privatisation of the electricity supply industry, which is already proving costly to the taxpayer, to electricity consumers and to the balance of trade, which will further set back efforts to protect the environment because of its promotion of energy sales instead of energy saving, and which will increase the country's dependence on fuel imports. I also commend to the House that it rejects the Government's amendment, which appears to have been drafted by Dr. Pangloss himself, as it clearly suggests that "all is for the best in the best of possible worlds. It reads rather like the City pages used in their reports about the Secretary of State for Energy in the months leading up to the privatisation of the distribution companies. Unfortunately, his fan club turned rather sour once it discovered what was really happening.

I have some quotes here which do not come from left-wing papers. Today's Financial Times states that the privatisation of the generators is becoming farcical. The Times described privatisation as "a recipe for chaos". In the days before the sale of the distribution companies the Financial Times stated: Even before dealings in the new electricity shares have started, the voice of aggrieved punters is being heard in the land. That bastion of Tory party rectitude, The Daily Telegraph, stated: The biggest privatisation of all … has fallen at the last hurdle … If this is the Government's idea of popular capitalism, then it is the life and pensions salesmen who should be breaking out the champagne. In case The Daily Telegraph has gone over the wall and turned into a collection of lefties, The Times in its genteel way described the right hon. Gentleman's view that the number of people buying electricity shares proved the popularity of privatisation as "genteel rot". It continued: This has nothing to do with people's capitalism, only with the way they price 'em. I shall come to that in a few minutes. The Independent, which is certainly not of a left-wing persuasion, described the privatisation for most small investors as, not a huge success, but a huge waste of time. I can continue quoting the allegedly more serious newspapers. The Daily Mail is a serious newspaper which has seldom been accused of supporting the Labour party. It stated that the situation reflects the yawning gulf between starry-eyed official talk about a share-owning democracy, and the grubbier reality in which the system is slanted to favour the fat cats while the small shareholder gets shoved aside. If I had said that, I should have been denounced as an extremist. Indeed, I said it before the Daily Mail which was almost quoting me. It endorsed what I said. As everybody recognises, the Financial Times is the most serious newspaper on these matters. It described the companies as being sold on a "dodgy prospectus". That comes from all those people who used to form the principal part of the chorus of the right hon. Gentleman's fan club.

The electricity industry needs to be treated more seriously than it is being treated by the Government. It is of crucial importance to everybody—to people in their homes, to transport, to industry and to commerce. In this country as in every other, it forms the basic sinews of a modern, technological society. I regret to say that it is treated like a plaything by the Government.

The industry's well-trained and dedicated staff are being treated like chattels. They open their newspapers one day to discover that they will be sold to one company, but the next day the papers contain a denial of such a plan. They do not know what they are doing or where they are going. Those people, who have dedicated their lives to securing a supply of electricity to their fellow citizens, are being treated like dirt.

Anyone who has seen the ludicrous Frank N. Stein advertisements or the more recent Star Trek advertisements with a touch of "Hi-de-Hi" will know that the industry has become the plaything of Tory ideologues and Tory advertisers. I say that deliberately because a leading member and supporter of the Tory party and a former parliamentary candidate who stood against my hon. Friend the Labour Chief Whip masterminded and created those wondrous advertisements. It is a Tory racket and anyone studying the advertisements will know that they have been produced and promoted by people who do not take the electricity industry seriously.

No one is looking after the consumer or the interests of the taxpayer and the environment. The Government want a quick sale and the City want a quick buck—they are both after as much as they can get.

Before the Government set about it, the electricity supply industry of England and Wales had net assets of £37,000 million—that is what the right hon. Member for Hertsmere (Mr. Parkinson) told the Tory conference in 1988 when he was Secretary of State for Energy. He also said that it was an industry on which all of us rely, and in whose successful future we all have an interest. It is worth considering the basis on which the right hon. Gentleman arrived at the value of £37 billion—presuming, of course, that people try to tell the truth from the platform at the Tory conference. The distribution companies, plus the grid companies, were worth £16 billion according to the audited accounts signed by City auditors. The Government sold them for about £5 billion. If one adds in the £3 billion debt that those companies must repay to the Government, it means that the Government sold off £16 billion of public assets for half their proper price. We warned about that repeatedly and raised it in debate and during Question Time. I also wrote several letters to the present Secretary of State for Energy to say that he was selling the taxpayer short. He ignored what we said and denied our claims.

Last week I had to listen to the right hon. Gentleman on "Today" on Radio 4—I had to do so because the BBC did not want a countervailing view. He said that no one, but no one had said before the event that he had underpriced the shares. I understand that I am no one, but I am the no one who warned him. Several other of my hon. Friends also rank among the no persons who warned him.

The Secretary of State said all along that he would not accept the value from the audited accounts. Basically, his response was that the shares would be worth what they fetched on the open market. Judged by the right hon. Gentleman's own criteria, on the first day of dealings those shares fetched 60 per cent. more than he asked for them. By his own standards he was wildly wrong.

Never mind about the right hon. Gentleman's criteria. We believe that we are right in believing that he lost £8 billion on that transaction. That taxpayers' money would have repaired all our ill-repaired schools and hospitals—to which reference was made in our previous debate. That money would pay for building 30,000 homes for our homeless. It would still leave enough to knock £100 off every poll tax bill. That is the type of money that the right hon. Gentleman blew by getting it wrong and underpricing the shares.

The right hon. Gentleman has wasted an enormous amount of taxpayers' money—our money. He is now proposing to sell National Power and PowerGen. According to the lies and leaks that have been peddled by his PR advisers, he is proposing to sell them for about £3 billion. Again, the audited accounts show that the assets which he is prepared to sell for £3 billion are worth £13 billion. If he does not like us referring to the audited accounts—as an accountant he obviously knows what value one can put on those accounts—we can use some other comparisons.

PowerGen has 18,000 MW of plant which is to be sold for £1.5 billion. Let us compare that with Sizewell B nuclear power station, which represents 1,200 MW of plant. It, too, will cost £1.5 billion. Obviously there is a new principle in operation: when the taxpayer is selling, £1.5 billion gets 18,000 MW; when the taxpayer is buying, £1.5 billion gets 1,200 MW. There is something wrong there—no one is interested in protecting the taxpayer.

The Secretary of State may say that nuclear power is rather expensive. Normally he says that it is not, but for these purposes he may deploy the opposite argument. I should be the last to deny how expensive nuclear power has been and will prove to be. However, even in my most fervent enmity towards nuclear power I would not claim that a discrepancy in values between 18,000 MW and 1,200 MW was quite correct. The right hon. Gentleman has a lot of talking to do to justify that.

Let us assume that one nuclear power station which no one needs and to which most sensible people are opposed is not a relevant consideration. Let us consider the plans for National Power. It says that, by the end of the century, it intends to acquire 4,000 MW of gas-fired generating plant. Estimates produced by Siemens, which has already been awarded some of the contracts for that plant and is one of Europe's major producers, show that one can obtain 4,000 MW of gas-fired plant for the magic figure of about £1.5 billion. So £1.5 billion gets us 4,000 MW, but the right hon. Gentleman plans to sell 18,000 MW of plant for the same amount. He is underselling again.

We have deliberately described the privatisation as "ill-advised" because the right hon. Gentleman employs more than £50 million worth of advisers who give him such poor advice on valuation. If people believe it is shocking that the right hon. Gentleman is getting 50 million quid worth of duff advice, the electricity industry companies are, between them, getting another £100 million quid worth of duff advice. They are buying it all from the City at the expense of the taxpayer and the electricity consumer.

Mr. Conal Gregory (York)

I am listening with interest to the hon. Gentleman. Perhaps he can account for why 98 per cent. of employees in the electricity industry applied successfully for shares? In the most unlikely event of a Labour Government ever coming to power again, will the hon. Gentleman assure the House that, should they renationalise the industry, they will continue to pay dividends to those who have invested much of their savings in that great industry?

Mr. Dobson

I might be accused of making almost any remark in respect of electricity privatisation, but the last thing that I would say is that buying shares is a bad bargain—and if one is working in the industry, they are an even better bargain than for others. It is perfectly reasonable for people to buy shares that are being sold not just at a rock bottom price, but at a price that goes through the bottom and comes out the other side. I will explain shortly what a Labour Government will do after the next general election.

The city firms have been giving the Secretary of State lousy advice and bad value for money—and have guaranteed that he gets poor value for money for the taxpayer. The leading companies involved are Kleinwort Benson, James Capel, Herbert Smith, Peat Marwick, Price Waterhouse and Ernst and Young. I ask my right hon. and hon. Friends whether they can think of anything that those companies have in common besides having substantial amounts of money bunged at them by the Government for giving duff advice.

Mr. Ronnie Campbell (Blyth Valley)

They are all giving money to the Tories.

Mr. Dobson

That may be true, but they also have in common the fact that they were all criticised by Department of Trade and Industry inspectors for falling down on the job in respect of their involvement in other companies. The DTI report on Ramor Investments criticised Price Waterhouse, and that on Orbit Holdings criticised Peat Marwick. Ernst and Young came under criticism in the DTI report on Orbit Holdings.

Perhaps the most famous DTI report of recent times concerned the scandal involving Harrods and the House of Fraser. The company which came in for criticism in that case was Kleinwort Benson—the Government's leading adviser for the electricity privatisation. The report makes it clear that Kleinwort fell down on the job and failed to check the assets of the Fayed brothers, and asserted wrongly that their assets were worth several billion dollars. So Kleinwort certainly were not too good at valuation in that instance. The firm made other statements about the background of the Fayeds that persuaded people to attach credence to statements about them, having failed to undertake the necessary investigations—so that what Kleinwort asserted to be true proved to be false. Not only that, but Kleinwort persuaded its clients to retain public relations advisers to peddle the false information that the Fayeds and Kleinwort were producing.

Herbert Smith, the Government's legal adviser, was also criticised by the DTI in connection with the House of Fraser. The inspectors described both companies as complementing each other's efforts in an unco-ordinated way. They were surprised that Kleinwort and Herbert Smith appeared able to accept as credible the value of at least $1 billion which the Fayeds attributed to their assets. Whatever Kleinwort and Herbert Smith were good at, clearly they were not too good at valuing and checking assets.

The Government's lead broker, James Capel, features in the DTI's report on Consolidated Gold Fields, which states: We consider that Capels hindered the Company's attempts to obtain information about the interest in its shares". The report describes an important letter sent by Capel as inadequate.

The Government have just announced that Smith New Court has been called in to add a bit of weight and professionalism to the sale of the generating companies because such a mess was made of the distribution companies. Lo and behold, on the page facing the DTI's remarks about Consolidated Gold Fields, there is a comment—I freely confess that I discovered it only by accident—about the very people who have been brought in to add more weight and professionalism to the Secretary of State's activities: We consider that Smith New Court seriously hindered the Company's attempt to pursue its right under section 212 with a view to identifying who had been buying a substantial number of its shares. My hon. Friend the Member for Cardiff, West (Mr. Morgan) will shortly tell the House who was buying and selling those shares, and who the hell Smith New Court was working for in the sale of South Wales Electricity shares on the first day of their issue, because that matter still needs to be cleared up.

The DTI inspectors also said of Smith New Court: Moreover we consider that Smith New Court did not understand their responsibilities under the Act, and that they did not make any serious attempt to seek proper legal advice. That is the quality of advisers that the Secretary of State is employing these days. Are they the kind of people who should be on the Government's payroll? One can understand why the Secretary of State got things so wrong. One can understand those firms liking such lucrative contracts, but the taxpayers will want to know whether they are getting anything in return. The Secretary of State for Energy, the Secretary of State for Trade and Industry and the Chancellor of the Exchequer were all involved in making the appointments, but I still have not been told whether those advisers were vetted beforehand. If their records were checked, one wonders what those companies have to do to be struck off. If such activities do not qualify them for exclusion from the Government's list, I do not know what would.

That was not the only City racket involved in the sale of the generating companies. The Secretary of State paid out no less than £49 million of taxpayers' money in underwriters' fees. He agreed to underwrite the only risk, which was that the Gulf crisis might smash the market in the middle of the flotation. The Secretary of State paid £49 million to City companies to underwrite assets being sold at half their proper value—and everyone in the City knew that. That leads to the riddle of when is an underwriter not an underwriter. These days, and when the Government are involved, the answer is, when they have to take a risk. If the underwriters have to take a risk, the Government underwrite the underwriters. That is a charmed circle beyond belief, but neither you, Mr. Deputy Speaker, nor I can break into it. We are not ancient, established City firms. We are not part of that charmed circle whose members regularly get money for old rope. Given all the livery companies that exist, such as the Goldsmiths Company and the Cordwainers Company, perhaps there should be a Money-For-Old-Rope Makers company, whose motto could be, "All that is safely gathered in."

It is even more of a closed and charmed circle than some people realise. The lead underwriters had a hand in determining the value of the generating companies' shares. It is a safe bet that they did not advise the Government to make them too pricey. If the advisers acted rationally—and anyone who gets paid £49 million for doing nothing must be fairly rational—they probably advised the Secretary of State to keep the price of the shares pretty low, so that there would be no risk. The advisers kept the price low, and then told the Secretary of State, "You had better protect us against any risk over the Gulf." The Secretary of State removed the risk, kept down the price of the shares, and then bunged the underwriters £49 million.

Since then he has apparently learnt his lesson. His friends have been telling all the City pages, "We have learnt our lesson and we probably will not give them any underwriting fees for the generating companies". It is a bit late because in some of the City pages they are saying that the Secretary of State need not have given them such fees for the distributing companies; and by God he need not have done because their shares shot up by 60 per cent. in the first hour of trading.

I shall leave the squalor of all that money and return to the subject of what the Government said that they were about. The industry was sold using the slogan of the right hon. Member for Hertsmere—"Power to the people." That is not usually a prominent slogan at Conservative party conferences—at least not the British Conservative party. However, what the right hon. Gentleman did not mention, even at the Conservative party conference, was that a considerable number—15 per cent.—of the people in question would be in Wall street and Tokyo, because that is where 15 per cent. of the distribution companies' shares have gone. We are told that the Secretary of State is so scared that he will not be able to sell the generating companies that he is contemplating an even bigger proportion being sold abroad.

To be fair to the right hon. Member for Hertsmere, when he set out on the grand project of selling the electricity industry it may not have been his intention to sell it to foreigners. Little else that he said he intended to do at the outset has come about. Since he came up with the original structure, the Government have withdrawn the Magnox reactors from the sale. A little later the present Secretary of State withdrew the advanced gas-cooled reactors from the sale, which forced the Government to set up two nuclear electric companies, one in England and Wales and one in Scotland, to keep the nuclear part of the industry in public ownership.

Perhaps I should explain to some of my colleagues that the right hon. Member for Hertsmere had obviously thought of some of the problems connected with nuclear power because, when addressing a meeting of the Adam Smith Institute—one has to be a bit anti-Government ownership to address the Adam Smith Institute—he said: It is not in the gift of this or any Government to attempt to legislate the proportion of nuclear well into the next century. He did not do too badly because he set up an arrangement whereby, by law, when any nuclear power station is running, its output will be used, even though stations capable of producing electricity at half the cost will stand idle. He introduced a nuclear levy to pay for that. Like the state in Marxist theory, the nuclear levy was supposed to wither away and, like the state in Marxist practice, the levy has increased. Contrary to all the promises, the nuclear levy is increasing this year and has not been reduced—as the Secretary of State will confirm, it has gone up again.

So the deepest wishes of the right, hon. Member for Hertsmere were not fulfilled. When he spoke to the Adam Smith Institute he promised an end to Government interference in the electricity industry. Grecian 2000's answer to Citizen Smith, "Power to the people" Hertsmere said: We are devolving to Lord Marshall, to Bob Malpas … accountability for the industry. And we are devolving to them the power to run their businesses without … interference. I do not know whether you have ever been interfered with by the right hon. Member for Hertsmere, Mr. Deputy Speaker, but if as a result of his interference one ceases to be the chairman of a major industry, or if one ceases to be the chairman as a result of the acquiescence of his successor, as was the case with Bob Malpas, I think one would interpret it as interference. When they lose their jobs, most people regard it as interference of the worst type. Lord Marshall and Bob Malpas have gone.

As a result of all this ideological lunacy from the Government the electricity industry is in a mess. I do not usually claim many things for myself, but earlier this summer, as a result of leaks to me, we discovered that the Secretary of State was proposing to sell PowerGen by private treaty to Hanson Trust. I believe that I came to this Dispatch Box to give the reason why the Secretary of State had to abandon that. I and several of my colleagues pointed out that if Hanson Trust bought PowerGen it would cost the taxpayer in excess of £700 million in tax savings for Hanson Trust. The right hon. Gentleman dismissed our arguments. However, when the proposed sale to Hanson Trust was eventually abandoned, at least one of the Government leakers—perhaps it was not in the Department of Energy but one of the then Chancellor of the Exchequer's leakers—made it clear that the sale had been abandoned because the Chancellor, who is now the Prime Minister, had said, "We are not going to let you do it. If you sell the industry for that small amount we want it to be clear profit and we will not see the profit wiped out like that."

There is another aspect of that matter. Smith New Court were involved in that attempted sale to Hanson because Richardson of Smith New Court was acting as the go-between. Will the Secretary of State tell us whether it is because he wants Richardson to act as a go-between in some trade sales for parts of the generating companies that he has been invited back?

People in the industry and running it do not know whether they are coming or going. Today it is not clear whether the Secretary of State will sell all of National Power and PowerGen. The latest information from the Secretary of State on television and radio last week was that he was going to sell 60 per cent. and retain 40 per cent. of the shares for two years, until after the next general election. However, within one day the City pages were beset by people ringing up to say that they might sell some, or all, of the 40 per cent. and might not wait for two years to do so.

Tonight, the Secretary of State has the opportunity to tell us whether he is sticking by what he said last week or whether there will be a further revision of the many revisions that have taken place. Will the Secretary of State lurch into yet another expedient in his efforts to get rid of this industry? Also he owes it to the people of Scotland, and those who work for the Scottish companies, to tell us what is intended for them. Are they to be disposed of with a 100 per cent. sale, or will some of their assets be retained until after the next general election?

The Government amendment refers to successful restructuring of the industry and its virtual passage into private ownership. As the nuclear part of the industry has not been sold, and if he does not sell 40 per cent. of the generating companies, when the next Labour Government bring the company back into public ownership, 52 per cent. of the assets of the industry will be back in public ownership. After all the farcical nonsense to which the people in the industry have been subjected, the right hon. Gentleman and his predecessor will have managed to get rid of 48 per cent. of the industry's assets to their friends in the private sector.

I now come to the issue mentioned by the hon. Member for York (Mr. Gregory). On being told that the Government might retain 40 per cent.—

Dr. Michael Clark (Rochford)

The hon. Gentleman said that the Labour Government would bring the grid company back into national ownership. Can we deduce from that that the Labour Government will not be bringing the generating and distribution companies back into national ownership?

Mr. Dobson

We have made it as clear as it is possible to make it—by writing it down, by printing it, by holding press conferences, by issuing documents about it, by talking on television and radio about it, and by talking about it here—that all along our strategic intention has been to bring the grid company back into public ownership. I know that this House is a sort of secret society, but it is going too far when an hon. Member who was present the last time we discussed this appears to have forgotten what our policy is.

We believe it crucial to do that for the sake of everyone in the country and for its industrial future, and we shall do it. It will remain our primary objective. What we shall do about the rest of the industry—about the 40 per cent. shares, if there are 40 per cent. shares—we shall determine when we are in government and when we know what the position is. Our basic objective all along has been the grid company back in public ownership. We shall restore the obligation of the electricity industry to supply people with electricity, and we shall place that obligation on the grid company. We shall shift the emphasis from energy sales to energy saving, and place that obligation on all parts of the industry. Likewise, we shall place all the following obligations on all parts of the industry: we shall protect the environment; we shall husband our indigenous fuel resources; we shall seek to protect the balance of trade; and we shall seek to reduce our country's growing dependence on imported fuels.

We believe that these are sound policies and we shall impose all those obligations on the industry—and bring the grid company back into public ownership to further our policies. How the industry will be organised and whether we shall sell the part that the Government have not sold will be decided when we come to office. In short, we shall ensure that this industry pursues the interests of the consumers and ceases to he the ridiculous plaything of a lot of yuppies, rogues and grafters in the City.

7.51 pm

The Secretary of State for Energy (Mr. John Wakeham)

I beg to move, to leave out from "House" to the end of the Question, and to add instead thereof, congratulates the Government on the restructuring of the electricity supply industry in England and Wales, the highly successful flotation of the regional electricity companies and its plans for floating National Power and PowerGen; and welcomes the many benefits this privatisation will bring to consumers, employees and the taxpayer. I find it somewhat surprising that the Opposition should choose to hold this debate at this time The persistently colourful if consistently unfounded rhetoric about write-offs, sell-offs and rip-offs that we heard today from the hon. Member for Holborn and St. Pancras (Mr. Dobson) has become an increasingly familiar refrain in recent months—and this occasion, I suppose, would not be complete without the sound of him barking up all the wrong trees again.

So let me return the attention of the House to what this privatisation is all about. From the outset, the aim of the sale has been to introduce competition to the industry, to maximise benefits for customers and for the taxpayer and to give the industry's employees a stake in their own businesses. All these objectives have now been demon-strably achieved.

First, we have a market in electricity in England and Wales where none existed before. That represents a fundamental change. The generators bidding to put power on the grid now have to look not only at their own costs but at the prices charged by their competitors. That should increasingly benefit all customers in the long run, and from the earliest stages of the vesting of the new industry structure there was already plenty of evidence of strong competition in supply to industrial customers with more than one megawatt of demand.

Secondly, the legislation, as we promised, has given significant new rights and protections to customers. The Electricity Act 1989 provides for an enhanced right of supply for customers and for the standards of service to be set and monitored. It also creates the office of the Director General of Electricity Supply as a powerful guardian of the customers' interests.

It is worth pointing out too that the non-fossil fuel obligation has also had the effect of giving an unprecedented boost to a large number of new and renewable generating projects in this country. Under the Renewables Order 1990 the 12 regional electricity companies have contracted with 75 projects with installed capacity of 170 MW. More than two-thirds of this capacity is entirely new and it will nearly double the amount of renewable capacity in England and Wales.

Thirdly, the first stage of the privatisation, the sale of the RECs, has now been accomplished and has proved a major success for the taxpayer. We believe that it has been the most successful privatisation yet—the latest success in more than a decade of privatisation successes under this Government.

Mr. Malcolm Bruce (Gordon)

Would it not be appropriate for the Secretary of State to explain in some detail what criteria he used to determine success? Was it the mark-up that occurred immediately after flotation and hence the under-pricing? Was it the take-up; or was it the degree of risk taken by the City? On all counts the policy has failed.

Mr. Wakeham

If the hon. Gentleman will contain himself, I shall do my best to explain, later in my speech, why I believe privatisation has been a great success. The Opposition long claimed that it could not be done and that the sale would have to be abandoned—[HON. MEMBERS: "No."] The predecessor of the hon. Member for Holborn and St. Pancras specifically said that the sale would have to be abandoned. I would never accuse the hon. Member for Holborn and St. Pancras of dealing seriously with the privatisation of the industry, and I dismiss his remarks, but his predecessor made it abundantly clear that he thought that the sale would have to be abandoned.

Mr. Dobson

Did not my hon. Friend the Member for Sedgefield (Mr. Blair) say that the Government would not be able to privatise the nuclear part of the electricity industry, and was he not proved absolutely right?

Mr. Wakeham

I am sure that the hon. Gentleman did say something like that, but his predecessor made it absolutely clear that the privatisation would have to be abandoned.

In the event, the Opposition could not have been proved more wrong. The overwhelming response to the offer showed that a huge number of people remain ready to back the Government's privatisation programme. Some City experts predicted that we would be unable to raise more than £4 billion from the offer. In the event, we are raising more than £5 billion from the sale of the shares and we shall raise almost £3 billion of further proceeds from the injection of debt, arriving at a total return to the tax payer of nearly £8 billion—

Ms. Marjorie Mowlam (Redcar)

What about the original price of £20 billion quoted by the Government?

Mr. Wakeham

I shall come to that.

In the process we have also attracted more investors than ever before. More than 5 million applicants made over 12 million applications, and the regional electricity companies tell me that the majority of the investors have stayed on their registers. Contrary to the Opposition's argument, that is not because shareholders do not believe that their allocation is worth selling. One quarter of all applications were for only 100 shares, and 10 million of the 12.75 million applications were for 500 shares or less. So, with the shares having been allocated to about three quarters of all who applied and with virtually all REC customers receiving an allocation, we believe that we have satisfied the majority of applicants.

There has been a massive response from the industry's own employees. Almost 98 per cent. of eligible employees took part in the regional electricity companies' offers. In total, nearly 84,000 employees and almost 21,000 pensioners applied for and received shares under the various employee and pensioner offers for the 12 regional electricity companies. Between them, they were allocated some 160 million shares. Collectively, they now own over 7 per cent. of their own companies.

In all these important respects the privatisation has been totally vindicated but, characteristically, none of this has prevented the Opposition from trying to have it both ways. First, they said that it could not be done. Now they claim, with an Alice-in-Wonderland logic, that a public offer which was 10 times oversubscribed was a failure. That, presumably, can be only on the basis of comparing the proceeds of the sale with the replacement cost of the companies' assets. But that is an utterly meaningless exercise. Companies are sold on their expected earnings and dividends, not on the theoretical replacement cost of assets. If the assets had been sold at that price, the hon. Gentleman would have had to ask himself what price electricity would have to reach if a reasonable return were to be made on those very inflated figures.

Mr. Dobson

Does not the Secretary of State accept that if the Government were trying to protect the consumer and taxpayer there was a fundamental contradiction in their plans? He says that if the industry had been sold at its proper value, private shareholders would have held the consumers to ransom.

Mr. Wakeham

No, the hon. Gentleman has misunderstood me. The hon. Gentleman would have wished the industry to be sold at the ridiculous valuation that he put upon it. That would have been the current cost accounting valuation. That is not a value that the business would fetch in the market place. In that case, his proposition as to what to charge for electricity would have been irreconcilable. Using our basis, we were able to strike a reasonable balance between the price of electricity and a return for shareholders. The price of the business was commensurate with the profits and dividends that they were earning.

In all the hon. Gentleman's extravagant speeches he has said that he believes that the businesses should be valued on the current cost accounting basis, but very few people agree with him. According to the hon. Gentleman's terminology, the issue was a give-away, due to the subsequent rise in price, with a stock market under the shadow of war. The hon. Gentleman's remarks have not improved his employment prospects. If, however, his foresight matches his hindsight, he should have a great future ahead of him in the City, though I would advise prospective employers against rushing to him at once.

Mr. Dobson

Occasionally, like other people, I indulge in flights of fancy. However, on every occasion that we have questioned the valuation of this industry's assets, we have quoted from the audited accounts of the companies, signed by allegedly reputable City auditors. If the right hon. Gentleman believes that current cost accounting valuations are irrelevant at this point, why was it that when the assets of the national grid were calculated for the purpose of dividing them between the distribution companies the current cost net assets were divided up? When that division was made, was not each distribution company's share decided on the basis of each distribution company's current net assets, using the current cost accounting convention? If the money was divided up and allocated between the distribution companies on that basis, why is it irrelevant for this sale?

Mr. Wakeham

It is perfectly reasonable to use the current cost accounting valuation method in order to compare like with like. A current cost accounting valuation is a perfectly proper accountancy basis, but that is not the basis upon which businesses can be sold. They are sold on the basis of a return on investment. If one seeks to obtain current cost accounting valuations of an investment, one is bound to end up with the industry remaining in the hands of the state. The hon. Gentleman obviously wants the industry to remain in the hands of the state. I understand, therefore, why he wants the current cost accounting valuation formula to be employed. On that basis it is impossible to privatise the industry.

The hon. Gentleman referred to the value of the assets in current cost accounting terms, and what he said was correct, but the point to be made about the premium is simple. The value of the stock market moved significantly between the day we settled the price and the price at which dealing started. The nearest comparison with electricity shares must be the water company shares. We find that 34p of the premium was due entirely to the movement in the stock market at that time. The market moved during a period of nearly three weeks. When this transaction took place there was a degree of uncertainty about the war in the Gulf and the market moved. The decision that we made at the time was right. [Interruption.] If the hon. Member for Holborn and St. Pancras ceased to laugh for a minute and listened to what I am saying, he would learn something. If he does not intend to do so, I might just as well continue with my speech. At the time that we made the decision, every City commentator said that we had priced the issue on an extremely tight basis. Many said that the yield should be around 9 per cent. It was 8.4 per cent. It is easy to be wise after the event, but we priced it on what was a proper and fair basis at that time. Then the market moved. That accounted for the premium.

The hon. Member for Holborn and St. Pancras referred to the Government's decision to sell only 60 per cent. of the shares in National Power and PowerGen as a mess-up. I suppose that that somewhat milder term than the ones he has used on previous occasions must be welcomed. However, that does not make his assertion any the less wrong. The generators have markedly different characteristics and a different position in the market from the 12 regional electricity companies. In those circumstances, we are selling only 60 per cent. now, for precisely the reason that the hon. Gentleman was arguing for—to maximise the return to the taxpayer. Surely he should welcome that—[Interruption.] The hon. Member for Holborn and St. Pancras is too quick to comment and too slow to listen. The point of my remark was to show the radically different nature of the generating companies from the regional electricity companies. What we did for the regional electricity companies was right for them and what we are doing for the generators is right for them. We are correct in both judgments.—[Interruption.] The hon. Member for Cardiff, West (Mr. Morgan) and the hon. Member for Holborn and St. Pancras are wrong on both instances and are at least consistent. Except for the hon. Member for Cardiff, West, everybody learns something, but that does not make what we have done wrong. They are different cases and have to be dealt with differently. We believe that we are acting in the best way to maximise the return.

Let me make clear our position on retaining the remaining 40 per cent. of National Power and PowerGen. For those who, unlike the hon. Member for Holborn and St. Pancras, did not hear me on the radio the other morning I shall repeat our views. First, the Government will commit themselves to retain those shares until 31 March 1993—three years from vesting date. That will give the senior managers of the company, many of whom worked with distinction for the CEGB, a substantial period of time in which to bring about any necessary changes. Until that date I shall neither float the shares nor be prepared to entertain offers from trade buyers.

Secondly, I should make it clear that I am not committing the Government to dispose of their holdings on or immediately after I April 1993. They may sell the shares in 1993, 1994, 1995 or at a later date. That will properly depend upon market conditions and opportunities. The Government will consult the directors of the company before making any decision on a sale.

Thirdly, all other things being equal, the Government would prefer to sell the shares in a way that contributes to wider share ownership. However, I have a duty to the taxpayer to maximise the proceeds from the sale of these important national assets. To that end I must have the option of selling the shares to one or more trade buyers. It is not possible to say what will happen in two years' time or later and I therefore propose to make it clear in the prospectus that some time after two years I have the option of selling the shares in either company through a flotation, a trade sale to one or more companies or through a private placement. The Labour party also threatened that if it were to win power at the next election, it would use the Government's 40 per cent. retained stake in the industry as a means of renationalising the national grid.

Mr. Dobson

We have not said that. All we said is that we would use the powers available to a major minority shareholder with 40 per cent. All the other things will have to be considered once we get into office.

Mr. Wakeham

Perhaps the hon. Gentleman suffers from leaks as well, but I am happy to accept what he says. Of course, the renationalising of the national grid is clear. That is a matter for the Labour party, but I scarcely think that further threats of renationalisation are likely to appeal to the shareholders in the industry or to boost Labour's electoral prospects.

Mr. Peter Hardy (Wentworth)

The Minister emphasised the point that workers in the industry would own 7 per cent. of the distribution companies. Does he anticipate that any different position will apply for the generating companies and does he accept that it would be wrong and anomalous for a different arrangement to apply within different parts of the electricity supply industry? Will he assure the House that he recognises that, although employees in the industry may own 7 per cent. of the equity of the distribution companies, that is probably only a third and certainly less than half the shareholding of people who are not resident in this country and that many in the industry and outside it find that deplorable?

Mr. Wakeham

We want to encourage employees in the generating companies to take up their entitlement of employee shares. It is not absolutely possible for the arrangements for employees in the generating business to be on exactly the same basis because, for example, we have some obligations to the employees of Nuclear Electric who were at one time to be employees of National Power. As far as I know—I shall check the details—the terms are the same or comparable, but if I am wrong I shall write to the hon. Gentleman.

On the question of privatisation generally, Opposition Members face an awkward political dilemma.

Privatisation was pioneered in this country and has now been taken up by countries all over the world. It is manifestly popular and successful. However, it has not prevented the reluctant converts to the market economy sitting on the Opposition Benches from voting against every privatisation measure that we have brought before the House. The Opposition voted against the privatisation of British Telecom, British Gas, British Airways, the British Airports Authority, water and now electricity. At least that has the virtue of consistency, which seems to have been a theme of this debate, but it does not reflect —

Mr. Alexander Eadie (Midlothian)

I get the feeling that the right hon. Gentleman is reaching the end of his remarks. I hope that he will comment on the direct question posed by my hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson) about what will happen to the electricity industry in Scotland.

Mr. Wakeham

I do not have direct responsibility for the industry in Scotland. In all privatisations it is not the practice to announce the percentage of shares to be sold until a relatively short time before the privatisation. Therefore, I would not have expected my right hon. Friend the Secretary of State for Scotland to have yet stated his position on that. The reasons I have used as the basis for my decision to sell only 60 per cent. of the generating companies are not the same as those applying in Scotland because Scottish companies are integrated and are not generating companies operating in the same way in a new market. That was at the heart of the reason why I thought it right for the taxpayer to retain 40 per cent. of the shares. I cannot give a direct answer, but I can say that, as far as I know, no decision has yet been made—I would not have expected one—and the arguments used for the decision in England and Wales are not the same as those applying in Scotland.

I was referring to the Labour party's dilemma— their opposition to privatisation in practice and their acceptance of market forces to a greater extent than in the past.

Mr. Harry Barnes (Derbyshire, North-East)

Was it not the case that market forces were seriously interfered with at the time of the share flotation because there was an electricity supply crisis caused by the severe weather conditions that especially hit the east midlands? The Minister did not make a statement about that severe crisis, no offer of Government help was made and there was no declaration of an emergency because it would have seriously affected the market and the sale of East Midlands electricity shares. Some hon. Members from the east midlands have not been able to have the meeting with the Minister that he promised in order to discuss these matters.

Mr. Wakeham

The hon. Gentleman can have a meeting with me if he wants, but he should recall that there was a debate in the House which he could not attend—

Mr. Barnes

I did; it was my debate.

Mr. Wakeham

Let me finish. There was a debate, and it was perfectly appropriate for my hon. Friend the Under-Secretary to give a full account of the position.

In the western world, and increasingly in the communist world, the argument about whether market mechanisms represent the most efficient way of allocating resources and meeting human needs appears to have been decisively won. I thought that we had all become believers in the market economy, but Opposition Members still hesitate about the creation of a market in electricity and a sale which produces a clear and welcome separation between the objects of regulation and those of ownership.

I invite the House to reject the Opposition's motion. They have demonstrated confusion, both in principle and practice. By contrast, we have taken a state monopoly and set it on the path to full competition. We have ensured a better deal for consumers, we have achieved an excellent return for the taxpayer, and we have given more than 80,000 employees a stake in the future of their industry. I commend the amendment to the House.

8.21 pm

Mr. John McAllion (Dundee, East)

We heard much from the Secretary of State about the successful sale of the distribution companies in England and Wales. I think that he said that the sale had been totally vindicated, that it had been a major success and that it was the latest and biggest in the line of privatisation successes for the Government.

There was never any danger of the sale not being successfully concluded by the Government. If the price is pitched low enough, buyers will always be prepared to make a quick profit, which is exactly what happened with the sale of the distribution companies. The substantial premiums enjoyed in post-privatisation trading proved that the sale was nothing less than a wanton giveaway at the taxpayers' expense, by a Government who are now so profligate with public assets that they do not realise when they have been ripped off by their own supporters. We should be grateful that, unlike British Aerospace, the Government did not pay someone to take the distribution companies off their hands.

My hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson) raised the issue of whether the Scottish companies will be given the same treatment that National Power and PowerGen received in the past week. I know that the Secretary of State said that he was not directly responsible, but a Scottish Office Minister is on the Front Bench who should be able to pass information to the Minister who will reply to the debate.

I have three specific questions to which not only I but the people of Scotland have a right to hear an answer. First, will less than 100 per cent. of the equity in the two Scottish power companies be sold in the first instance? Secondly, will shares be offered in a linked package that can be split only when dealings commence? Will Scottish Hydro-Electric and Scottish Power be sold together in one flotation? Critically, will the Government consider a minority trade buyer for the remaining blocks at any point after 1993?

The answers to those questions are vital, not only for the Scottish electric supply industry but the whole Scottish economy, which is so tightly integrated that, if the Government intervene or interfere with power generation, they interfere with the prospects for the Scottish coal industry, they call into question the viability of Scotland's railway network and they affect the prospects of the Scottish power engineering industry. The whole Scottish economy can be affected by the outcome of those decisions.

I can well understand why the Government are anxious about the flotation prospects of the power companies. Their huge debt burdens and capital investment requirements could make prospective buyers nervous about the prospect of investing in them. I understand why the Government are offering only 60 per cent. of the equity in the first instance: they fear an almighty flop if they do otherwise and that the market will not respond to a 100 per cent. flotation.

I understand, too, why the Government are considering allowing a trade buyer to take up the remaining blocks in two or three years' time: they know not only that any such trade buyer would thereby acquire a block of shares that would serve as a tremendous platform for the takeover of the company, but that stock exchange rules would require anyone with that number of shares to make a bid for the whole company.

The Government well understand that such a scenario will foster hopes among potential small investors of windfall takeover profits in two or three years' time, when they can sell their shares to the person who bids for the entire company. By holding out such a scenario, the Government hope to make a success of the sale of the power companies.

If the answers to my questions are, yes, less than 100 per cent. equity will be put on sale in the summer, yes, the companies will be sold in a linked package and, yes, trade buyers will be offered the remaining blocks in the future, a series of other questions arise. First, what are we to make of the Minister's claim that there will be the maximum benefit to customers if the electricity companies fall under the monopoly control of a single person or company? He said, for example, that he expects enhanced rights of supply and improved standards of performance to benefit customers.

Earlier tonight, I spoke to my hon. Friend the Member for Paisley, South (Mr. McMaster), who drew to my attention what is happening under Scottish Power in the run-up to privatisation, never mind what might happen in its aftermath. He told me that one of his constituents, a 74-year-old pensioner who struggles to get by on an income of only £48.50 a week, had a budget account with Scottish Power, which it mismanaged to the extent that she suddenly found that she had arrears of £190. It contacted her and said that it expected her to repay the arrears at about £14.10 a week from an income of £48.50.

My hon. Friend intervened and asked Scottish Power to send an engineer to check the electricity supply to ensure that the figures were correct. Once the engineer had called and checked, the pensioner received a bill of £20 for his visit. Is that what the Minister means by enhanced rights of supply and improved standard of performance for customers in the aftermath of privatisation? The reality for customers is that standards and performance will be much worse and more costly than under the public sector.

How will the decisions that are being taken about the privatisation of the Scottish power companies affect current negotiations between the Scottish Office and Scottish power companies about the debt burden which the privatised companies will inherit? If, as is entirely possible under the Government's current strategy, Scottish Power and Scottish Hydro-Electric end up in the control of someone such as Lord Hanson, the question arises, why should the taxpayer write off accumulated debts incurred by the Scottish power companies when the main beneficiary will be the majority shareholders in the companies? Surely, if the likes of Lord Hanson want the power, they should accept the responsibility of the debt that goes with it. We are talking about big sums, because Scottish Power's most recent balance sheet shows about £509 million in long-term borrowing. Taxpayers and voters will want to know why they are expected to pay for someone else's profits in that way.

Another important question is, who will make the important decisions about the future capital investment programmes with which these power companies are faced? The European Commission's large combustion plants directive will have to be applied by the Government. That means that flue gas desulphurisation equipment will have to be retrofitted to the coal-fired power stations at Longannet and Cockenzie. We know that retrofitting at Drax in Yorkshire is costing £650 million, so whoever takes control of the Scottish power companies will have to make an early decision on the immense and urgent capital projects facing the Scottish electricity industry.

That is not the only investment decision in the pipeline; there are also plans to upgrade the Scottish interconnector with the south. Almost the only argument that the Government put forward to justify the sale of the Scottish power companies was that it would facilitate the sale of surplus Scottish electricity to the English market. However, the investment required—about £100 million —to upgrade the interconnector would have to compete with the investment that is required to retrofit FGD equipment at Longannet and Cockenzie.

Which of these investment projects will come first? Which will have the higher priority accorded to it? Who will make the decisions? Even if the decisions are both positive, and retrofitting and upgrading of the interconnector go ahead, what will be the impact of those investment decisions on the competitive pricing of Scottish electricity? It certainly will not make it any cheaper in the short or the long run.

Two years ago, the former Secretary of State for Scotland said: England is short of electricity and for a few years it will have to purchase it either from the Scottish industry or through the French industry or through building extra capacity. The right hon. and learned Gentleman pointed out: the 5,000 megawatts of spare Scottish capacity might prove the cheapest option for the English power industry in the long run. But it might not prove the cheapest option if major capital investments must be made by the Scottish power industry and if, as a result, the price of Scottish coal goes up. Remember, it is a privatised English industry, which will look not to the interests of Scotland, or indeed of England and Wales, but solely to the interests of its shareholders who will make those decisions. The sanguine view held by the former Secretary of State for the prospects for the future of the Scottish industry can be called into question.

In the years ahead, much cheaper coal will be available to the English power companies. It is now being brought in from all around the world. Associated British Ports is planning a big coal importing facility close to Immingham, which will be able to accommodate the largest ships for carrying coal—Cape size ships. They enable the United Kingdom to benefit from direct shipments from South Africa, Colombia, the United States and Australia. Scottish coal will have to compete with all that cheap coal. This is a serious matter.

Certainly, the interests of the electricity users and the interests of the Scottish people and the Scottish economy will not even arise in the calculations of a privately owned electricity industry. Those who doubt that should look to the example that has been set by a privatised British Steel, as it slowly strangles the Scottish steel industry and in the process shows nothing but contempt for a Scottish Office that is powerless to do anything about British Steel. The irony is that, having created one Frankenstein's monster which they cannot control, the Government are creating a new family of Frankenstein's monsters which they will not be able to control. It is difficult to overestimate the folly of the Government's drive towards privatising the electricity industry.

Vital national issues are at stake in this industry. We could be on the eve of a Gulf war which will send the price of oil spiralling. Many experts predict that gas prices will double over the next 10 years. The future of the nuclear industry is grim, to say the least. More than ever, we need a Government in charge of energy policy and directing it towards an integrated energy policy; yet the Government are selling off our electricity industry and leaving the key decisions on investment and strategy to private sector companies rather than taking responsibility themselves. It is sheer madness.

Workers in the power engineering industry, such as those at Babcock in Renfrewshire, have technology and expertise which is unrivalled anywhere in the world, but they must face the fact that key decisions about their home market will be made not by the Government but by the private sector interests which will take over control of the electricity industry.

Coal, a vital national resource, depends upon key investment decisions which will be taken by the electricity supply industry. That, too, has been surrendered by the Government to those who have no concern for national interests, national security or anything else. Indeed, there is even talk of winding up the Department of Energy and doing away with the role of the Secretary of State for Energy—which, given the present incumbent, some people may think is not a bad idea. The answer is not to do away with the Department of Energy or the role of the Secretary of State but to change them, and the people of Britain will do that at the next general election.

8.35 pm

Mr. Alick Buchanan-Smith (Kincardine and Deeside)

As ever, the House was entertained by the hon. Member for Holborn and St. Pancras (Mr. Dobson). I certainly was, but I should have regarded his speech as slightly more credible if he had gone wider than the issue of flotation, which he made the centre of his speech. Flotation is obviously an important issue, but the hon. Gentleman's comments might have been more credible if, on the general issue of flotation, the Labour party did not always try to have it both ways. I refer the hon. Gentleman and other Labour Members to their comments on the recent flotation of BP shares, when the Government were equally heavily criticised for having set the price too high. The hon. Gentleman described the flotation as a failure. My right hon. Friend the Secretary of State exposed the hon. Gentleman's failure to appreciate how assets are valued and particularly how markets can change between the fixing of a price and flotation. The hon. Gentleman's speech was also incredible because it did not deal with the wider issue. He chose to ignore the many benefits that electricity privatisation has brought, on which I should like to dwell.

A surprising benefit of electricity privatisation, but perhaps one of the most significant, has been the number of direct contracts that are springing up between North sea producers of gas and onshore generators of electricity. In taking together privatisation of the gas industry and privatisation of the electricity industry, we have clear evidence before our eyes of the way in which the market has opened up and the fact that new competition exists. This can be seen in the proposals to pipe gas from the North sea into the east end of London and generate it into electricity, where the main consumption takes place. This opening up of the market was brought about only by the privatisation of those two industries. No one can deny that it opened up competition in a major way.

Mr. Dobson

In referring to proposals for a gas-fired power station in the east end of London, is the right hon. Gentleman referring to Thames Power's proposals? Does he agree that it might have been wise to point out to the House that that company intends to import gas from abroad, not to use British gas?

Mr. Buchanan-Smith

No; I was referring to the proposals by Conoco, which is involved in a consortium. That is direct evidence. There is a great deal of other evidence of contracts under discussion involving projects along the east coast of England where gas may be piped ashore to generate electricity.

That underlines two other points. The first, which again stems from Government legislation, is the importance, on the gas side, of the role of the regulator, which is making possible the common use of the British Gas pipeline. The positive role of the regulator, James Mackinnon, is another example of the way in which Government policies are leading to success. Secondly, we have witnessed not only the opening-up of competition but the more efficient use of energy—something that the hon. Member for Holborn and St. Pancras passed over very quickly in his opening speech. The generation of electricity from gas is leading to much efficient conversion, through combined cycle generation, and I hope that a number of proposals on combined heat and power will also shortly come into effect. That is another example that the privatisation of the gas and electricity industries together is leading not only to more competition but to a much more efficient use of energy than we have had in the past—certainly much more efficient than was apparent under the nationalised industries.

There is also a major widening of competition in the contracts between generators and industrial users. The hon. Member for Dundee, East (Mr. McAllion) referred specifically to what is happening in the Scottish industry, so let me take an example from the Scottish industry. What was one of the first contracts between a generating company and a major industrial user? To many people's surprise, one of the smaller generating companies, Scottish Hydro Electric, obtained a contract with British Oxygen for that company's activities throughout the United Kingdom. If direct contracts between generators and major industrial users do not open up competition, I do not know what does. Moreover, the privatised structure has allowed not only more competition but more enterprise on the part of a relatively small company in obtaining a United Kingdom-wide contract, giving it the opportunity to develop a far larger market and to enjoy new-found vitality.

I hope that, when Scottish Hydro Electric is floated, it will be on the basis of a complete sale. Through its enterprise, the company has shown itself to be highly attractive to investors—particularly small investors. I speak as a consumer of the power generated by Scottish Hydro Electric. Like many others, I shall be delighted to invest in the company that generates the electricity that I use, which, in the short period since privatisation, has shown itself to be a company that is prepared to go out and win markets throughout the rest of the United Kingdom.

Dr. Kim Howells (Pontypridd)

Does the right hon. Gentleman agree that, when a contract runs out, a large industrial company may be able to shop around for alternative sources of supply, but that the ordinary domestic consumer will not only be unable to shop around but will have to make up for the earnings that the district regional company will lose when such a large industrial concern changes its source of electricity?

Mr. Buchanan-Smith

The hon. Gentleman used the critical words "shop around". When the contract ends, industrial users of electricity can shop around. That will impose on the generating companies the disciplines of the market which will make them more efficient. Given the role of the regulator, there will also be a far greater certainty of the domestic consumer benefiting from the rigours of the market.

I have one further point to make about Scottish Hydro Electric. Despite pressures from those of us who represent constituencies in the north of Scotland, who pointed out that it was somewhat anomalous that the company—albeit for historical reasons—should have its headquarters in Edinburgh, outwith its area of operation, nothing was done. It is significant that in the past few days—after the privatisation of the company—it has miraculously chosen to move its headquarters to Perth, in the area in which it operates. We pressed such a move on the Government and on Ministers for many years, but only when the company was privatised did it choose of its own volition to respond to the consumers in its area and move its headquarters. I welcome that decision and commend the management on it.

I find it difficult to understand some of what Opposition Members have said about nuclear power. One of the things that the privatisation process has done is to expose the nuclear industry to the high costs involved. That did not happen when the whole industry, including the nuclear industry, was nationalised. There was a change in the Government's policy on privatisation, which I welcomed, but that end was nevertheless achieved as a result of the privatisation process. As a result, the nuclear industry, which—in my judgment, correctly—has been kept in the public sector, has been given a new market discipline. I should have thought that Opposition Members would welcome that.

I hope that the industry will respond; I believe that it will. In terms of production costs, Scottish Nuclear Fuels has a very good record relative to nuclear companies elsewhere in Britain and in the world. I hope that the Government will continue to support the nuclear industry. It is important that we should maintain a proportion of our electricity supplies from that source to ensure variety of supply, security of supply—which will obviously be necessary from time to time—and the development of new technologies.

I believe that, so far from proving the case that privatisation has not worked, by ignoring the wider issues —the real benefit of competition, for example—the hon. Member for Holborn and St. Pancras has condemned his own case. I hope that the House, too, will condemn it tonight.

8.46 pm

Mr. Malcolm Bruce (Gordon)

The right hon. Member for Kincardine and Deeside (Mr. Buchanan-Smith) made a good fist of justifying a policy whose limited benefits and interesting consequences were certainly not forecast or foreseen by the Government when they embarked on the privatisation of the electricity industry. The privatisation strategy has changed almost daily under different Ministers and in different circumstances. The right hon. Gentleman is entitled to point out the consequences, but he is not entitled to claim credit on behalf of the Government and praise the far-sightedness of Ministers who launched the projects.

Part of the problem with the whole exercise is that it has been undertaken fundamentally for ideological purposes, with no real thought about how to serve the interests of the industry or the consumer. That is why it is flawed. The Liberal Democrats made it clear that we accepted the need for changes in the structure of the industry. Throughout the proceedings on the Electricity Bill, we tabled amendments in an attempt to achieve such changes. We were proved right in a number of cases—not the least of which concerned the withdrawal of nuclear power from the flotation. When we first suggested that, we were ridiculed by the then Secretary of State. He said that our suggestion was absurd and that nuclear power was a wonderfully profitable operation which would command support once its profitability had been clearly demonstrated to the market. When it did not command that support, the Secretary of State claimed that it was terribly clever of him to have identified the fact that nuclear power was such a loss-maker and to have withdrawn it from the flotation. That argument was touched on by the right hon. Member for Kincardine and Deeside.

It is fair to say that the Government's electricity privatisation plans were not only ideologically motivated, but were ill thought-out and shambolic. Privatisation has also been a cheapskate exercise in terms of what has been achieved on behalf of both taxpayers and those who have sought to purchase shares, many of whom failed to be allocated any shares at all.

The Secretary of State said tonight that he thought that the total yield from the sale of the electricity industry would be about £8 billion. That is a far cry from the £20 billion that the Government originally thought would be the likely yield from the industry. That suggests that the price was pitched very low indeed.

When the Minister replies, I hope that he will tell me whether my calculations are correct. The money resolution to the Electricity Bill amounted to more than £6 billion for contingencies, debt write-offs and related costs of the flotation and that is before we consider advertising, underwriting and other consequential costs. On that basis, it appears that the net return to the Government from the sale of the entire industry is under £2 billion. That is a very poor return for an industry of such crucial importance. Regardless of the debate on whether we are talking about current cost accounting or replacement cost accounting, that figure is a tiny fraction of the worth of the industry to the United Kingdom economy by any measure that we care to use—current, capital or any other kind of accounting.

The hon. Member for Dundee, East (Mr. McAllion) referred to the rather anomalous situation in Scotland which has developed in an extraordinary way. Originally, the Scottish companies thought that they were going to be substantially disadvantaged by being placed at the end of the queue. However, ironically, the chaos and confusion that has reigned in England and Wales compared with the relative consistency of approach in Scotland has given the Scottish companies an opportunity which, as the right hon. Member for Kincardine and Deeside pointed out, they have not been slow to exploit.

If you, Mr. Speaker, were to drive to Aberdeen airport, as I frequently do, going north out of Aberdeen you would pass a very large poster just short of the turning for the airport. That poster is an advert for Hydro Electric and it states: We charge over the border at every opportunity. That is a sign of that company's success in selling our electricity to English consumers and good luck to the management operating in those circumstances. It shows that there is a market for that power, but it does not give a clear tilt to the idea that there is a coherent, consistent United Kingdom-wide market operating in any predictable direction.

We have a problem and the Minister should respond to the questions posed by the hon. Member for Dundee, East and tell us whether the flotation of the Scottish companies is likely to take place in about May. Will there be a full flotation and what would happen to the 40 per cent. if there was not? Presumably that percentage would be held by the Secretary of State for Scotland and that would have the advantage of helping to anchor those companies within Scotland.

Many of us are worried that the industry in Scotland may be floated as two independent companies based in Scotland in the short term, but those companies may merge or be taken over by interests from outside Scotland. That might not be in the long-term interests of the Scottish economy or the Scottish consumer.

There is a further concern in that Scotland offers one of the best potentials for developing renewable energies in Europe, but it is still not clear whether the regime that is being established will help or hinder that development. There is no evidence to suggest that the development will be brought forward at the pace that many of us would like.

Ironically, the Government have been so embarrassed by the under-pricing of the flotation of the regional companies in England that after some convolutions they have decided to float only 60 per cent. of the generating companies when the industry comes to market. The Government have created an uncertainty to which the Secretary of State for Energy alluded earlier. The Government have created the nucleus for the renationalisation of the industry if that is the wish of a future Government. That is an odd position for them to have adopted given that, in general, they have tried to create a privatisation regime which would make re-nationalisation difficult and would not create the sort of football uncertainty in which industries have been kicked backwards and forwards in the past.

The issues that were raised during consideration of the electricity privatisation legislation have not been settled. We do not have a regime that is likely to encourage greater energy efficiency or conservation or the development of renewables and the reduction of our dependence on imports. Given the windfall accruing to the new companies, the suggestion mooted by myself and my hon. Friend the Member for Berwick-upon-Tweed (Mr. Beith) during consideration of the Electricity Bill, that all consumers not currently connected to the national grid should be connected and that that should be part of the terms of the privatisation, could now be afforded. The electricity industry's public relations have been substantially damaged by the mismanagement of the flotation. In rural areas, connection to the national grid might be a way of rebuilding confidence and demonstrating that privatisation does not mean that people in remote areas who require connection for socially desirable purposes should remain cut off because the market is no longer interested in them. The market can afford now to provide that connection and it should do so. People in rural areas are entitled to expect that.

If we have, as I believe as a nation we should have, an objective for electricity, it should be to promote conservation and the efficient use of our resources to ensure the rapid, efficient development of renewable alternatives to existing sources and to encourage diversity and reduce our dependence on imports. The Government are not entitled to claim that their privatisation is likely to achieve any of those things.

The Government have created a market, but one which they did not predict and one that has produced results which they could not have forecast and which has no coherent sense of direction. It may end up almost anywhere and result in a quite different set of speeches in a debate on the electricity industry in two, three, four or five years' time. If the right hon. Member for Kincardine and Deeside is honest, he will be forced to acknowledge that.

It is time that the Government came clean about what they believe the future of the electricity industry should be in the national interest in practical terms. Frankly, the rhetoric as to whether it should be a nationalised industry or a privatised one, or whether the market should solve the problem, is irrelevant. If the industry does not meet our national interests, our economy will suffer extreme consequences. The Government have manifestly failed to demonstrate that the privatisation of electricity will meet the national interests which we believe are necessary and which I have defined. In a few years' time, I believe that they will be found wanting.

8.57 pm

Dr. Michael Clark (Rochford)

You will have noticed during this debate, Mr. Deputy Speaker, that there have been references to doubts about the continuity of electricity supplies when the generators are privatised. Are you aware that, while clockwork clocks are working in the Chamber, we do not have a continuity of supply to our electric clocks even before the electricity generators are privatised?

Some people wonder why we should want privatisation of the electricity industry. I have heard people in the street ask, "Why should we have privatisation when so many nationalised assets belong to the people already? They are our assets and they belong to us. Why should they be privatised and transferred to us in other ways?" I heard that said also about the privatisation of the water industry in particular and, to some extent, about the privatisation of the electricity industry. Even sceptics would agree that road transport performs far better when privatised, that British Telecom offers more choice, has better technology and is giving a far better service to the public in private ownership than it did in public ownership, and that the steel industry has changed from a loss maker to a profit maker as it has gone into private hands.

If proof is wanted of a new attitude that is brought about by privatisation, let us consider the privatisation of council houses—one of the greatest reforms of the Thatcher years, second only, probably, to handing the unions back to union members. Nobody believed that we, the people, owned council houses. Certainly the occupiers of council houses did not believe that they owned them, and those who did not live in council houses did not believe that they owned them, any more than Russian peasants believed that they owned the collective land that they were reluctant to farm. When council houses were owned by councils and occupied by tenants, no one bothered to paint their front doors bright colours, build extensions, or tidy their gardens as they do when they own their own property. When one really owns something, one invests in it, cares about it and has control over it, and that applies whether that is individual or collective ownership, or whether ownership is through using one's own money and savings or through a mortgage or borrowed money. So it is with nationalised industries. It is only when nationalised industries are privatised and are truly owned by individuals that people begin to care about them.

British Telecom shareholders are now quite rightly in uproar about the proposal to spend £50 million—some even say £100 million—on changing BT's logo and repainting all its vans and assets. I share their concern, particularly as the proposed logo seems to be nothing more than Mercury blowing his own trumpet.

As my right hon. Friend the Secretary of State has said, there is no doubt that the electricity privatisation is an outstanding success. The Jeremiahs said that the shares would not be sold, that there would be no demand for them and that privatisation would not work. In particular, the employees said that privatisation would not work. I attended meetings in Essex and elsewhere in this country, and hundreds of employees said that privatisation would not work, that the electricity industry would crumble, that we would not have continuity of supply, and that we would press light switches and nothing would happen. The directors of the Central Electricity Generating Board said that it would not work, and that we could not have proper control of a grid system if generators were outside public ownership.

However, when the electricity industry was offered to the public it was a record privatisation. There were 13 million applications, and 98 per cent. of eligible employees applied. They were not all Tories—many of them must have been Labour voters. I wonder who the 2 per cent. who did not buy shares were. Could it be that the 2 per cent. of employees who did not buy shares were the managers and directors who doubted whether the privatisation would work? I do not think so, for two reasons. First, under nationalisation, the number of managers and directors in the electricity industry was far greater than 2 per cent. of the employees. Secondly, those same managers and directors are now busy organising consortia to build new power stations, coming up with schemes and projects to put up new plants, and arranging management buy-outs if they possibly can.

There has been a total reversal of the pessimistic views of the managers and directors. There is now realism. They are wholeheartedly entering into the privatisation process and bringing in more plant, capacity and equipment to help to create the competition that privatisation is all about.

Also, 97 per cent. of valid customers applied for shares, and 70 per cent. of all those who applied were able to get share allocations, all except the greedy who applied for far too many and were rightly ruled out perhaps because of their greed.

The hon. Member for Holborn and St. Pancras (Mr. Dobson) said that far too little money was raised on privatisation, that another £8 billion could have been raised and that it would have paid for repairing all schools in the country and taken £100 off everyone's community charge. That may be so—£8 billion may do that; the hon. Gentleman did the calculation; I did not. However, I suspect that, if the price of electricity shares had been doubled to attempt to raise that extra £8 billion, no extra money would have been raised. On the contrary, far less would have been raised because I for one would not have bought my shares at twice the present price, and most people would think exactly the same.

I now refer to electricity prices. Relative to the recent past, electricity prices in this country are quite good. The Government have an excellent record. Over the past four years electricity prices fell by 4 per cent. in real terms. That is equivalent to about I per cent. in real terms each year. Under the Labour Government electricity prices rose, not by 1 per cent. per year but by 2 per cent. every six weeks. Therefore, our record is excellent in keeping price increases down. In the last year alone the price rise for electricity was 4 per cent. below inflation. The safeguards that have been brought in for the early years of privatisation mean that there should not be an increase above inflation until at least March 1993.

Although United Kingdom electricity prices are satisfactory relative to the recent past, we have to consider how they compare with prices outside the country. I do not think that they compare well with prices abroad. Yesterday I had a meeting with two main board directors of ICI who were talking to me about the chlorine industry which is a heavy user of electricity. They pointed out to me that the price of electricity to industry here is 2.9p per kWh, in Germany 2.4p per kWh, in the Netherlands 1.9p per kWh and in Italy, France and the United States 1.5p per kWh—almost half what British industry pays. Granted, the chlorine industry in this country is a beneficiary of the so-called large industrial consumer scheme which brings the price of electricity down to 2.4p per kWh; that enables the industry to compete with Germany at least if not with France and the United States.

The chlorine industry, which also produces alkali as a by-product, is a cornerstone of British industry. It is a globally competitive business. It is an important element of the United Kingdom economy, contributing £800 million a year to exports. It employs 18,000 directly and 54,000 indirectly. Yet the large industrial user scheme will be withdrawn as a result of privatisation and ICI will find that its chlorine industry can no longer compete with France and the United States. If the Secretary of State were here, he would know that the transitional arrangements for electricity privatisation last for eight years for the nuclear industry, eight years for renewables, five years for private generators, three years for British Coal, but only one year for large industrial consumers.

What are large companies like ICI to do? They are very worried about the loss of cheap electricity; they will have to pay many millions extra for electricity. They may stop investment in chlorine and alkali plant. Even worse, they may take their investment abroad. That would be much worse because it would never come back to this country, whereas, if they stop investment here, there is always an opportunity later for them to renew the investment and build here.

Ironically, the solution comes from the same source as the problem itself, namely, privatisation. If privatisation, by removing subsidies, puts up electricity prices to large users, privatisation would also enable them to build their own power stations and bring prices down again. It is the ICIs of the world that will build their own gas-fired generators and bring prices down by entering into consortia with the oil companies, the generators or the regional electricity companies.

There is another solution to high electricity prices. The high prices are to a large extent based on the fact that our coal prices are high. I give credit to the British coal industry. It has increased productivity, introduced high technology and brought prices down 40 per cent. in the last five years. But the fact remains that British coal is considerably more expensive than coal brought in from abroad.

So if we are to continue to use British coal we must bring prices down even further. British Coal said recently in response to threats from National Power that it will bring in at least half of its coal for electricity generation from abroad: We are confident that when talks with National Power start we can put forward a competitive package. We think we can offer them a deal. That was reported in the Financial Times on 15 January. I hope that British Coal can offer National Power a good deal because it is important that our coal industry should survive. It must survive not only for the sake of employment in Britain which is important, or social reasons, which are significant, but because British coal is a form of indigenous energy which we cannot afford to ignore.

A case could possibly be made for abandoning coal for electricity generation in favour of home-produced gas or oil from United Kingdom continental shale. But we cannot make the case for abandoning our coal in favour of foreign coal. There seems to be a scheme to abandon our coal in favour of either 100 per cent. foreign coal—which does not make much sense—or 50 per cent. foreign coal which does not make much more sense.

The case for maintaining a British coal industry is particularly relevant at times such as this when the world may go into conflict. The Gulf crisis and other crises like it could affect international shipping as well as oil supplies. Yet to continue to maintain the high price of electricity for domestic or industrial use, particularly in export-led industries, makes no sense either. We must have internationally competitive electricity prices. That means that we must have internationally competitive prices for domestically produced coal.

The privatisation of the electricity industry is forcing down the cost of generating and distributing electricity. I am convinced that privatisation of the mining industry will bring down the price of coal, to the benefit of both the coal mining industry and the electricity industry and, indeed, our whole economy. Electricity privatisation has been a great success. I am sure that in due course privatisation of the coal industry will also be a great success, not least for those who work in it.

9.12 pm

Mr. Geoffrey Lofthouse (Pontefract and Castleford)

I am grateful to the hon. Member for Rochford (Dr. Clark) for some of his remarks, particularly as he holds the position of Chairman of the Energy Select Committee. He has expressed his anxiety about the coal industry on previous occasions.

I shall be brief because I know that other hon. Members wish to speak. The House will not be surprised if I direct my remarks to the effect that privatisation of the electricity industry has had on the coal industry. I am pleased that the Minister with responsibility for the coal industry is in his place.

Mr. Dobson

At present.

Mr. Lofthouse

At present, as my hon. Friend the Member for Holborn and St. Pancras (Mr. Dobson) says. In his opening remarks, my hon. Friend referred to the duff advice that the Secretary of State has received from all these highly paid advisers. The previous Secretary of State, the right hon. Member for Hertsmere (Mr. Parkinson), about whom we do not hear much these days, was in receipt of some first class advice in the Energy Select Committee report on the privatisation of electricity. The Committee sat for a long time and listened to much expert evidence. It came to a unanimous conclusion in its report. It advised the Government that they were in danger of receiving ill-conceived and misjudged advice. That proved to be the case. We heard this evening from my hon. Friend that the advice that the Government received from City advisers and others was later found to be wholly incorrect. If that right hon. Gentleman had taken the advice and delayed the privatisation of electricity until he had had time to think the matter out, he would not have got himself into such a mess and had to be replaced by the present Secretary of State to salvage something from it.

We are always expressing concern about the effect of electricity privatisation on the coal industry. We are aware that, since the miners' strike in 1984, the coal industry has come under attack from the Government. They have been hell-bent on running it down. From time to time, we have pointed out in this Chamber and in Select Committee reports that to run down the industry to the extent that the Government intend borders on the criminal. We have pointed out that, if we close so many mines that we cannot meet demand, we shall put ourselves in the hands of foreign competitors. We have been told all the time that that will not happen, because British Coal will eventually be able to compete. I have never accepted that, and I do not accept it now.

The Private Bill Committee, of which the hon. Member for Rochford was Chairman, took evidence and produced a special report on the application of the Associated British Ports to extend the ports at Immingham. Although the Committee accepted the case for the port, it made it clear that the decision was based on certain provisos. What were they? Paragraph 22 states: Before the Committee came to make a formal decision on, first, the amendment proposed by the British Coal Corporation, and, secondly, the Preamble itself, we agreed that if the bill were allowed to proceed, this would be subject to conditions set out in paragraphs 25 and 26. Paragraph 26 states: In our view it is the Government's duty to take whatever steps are necessary, in the overall national interest, to protect the indigenous coal-mining industry. That was finally accepted by the House, but none of the Committee's provisos about the coal industry has been honoured by the Government.

What do we see now? The sponsors of the Bill, Associated British Ports, are not to be the major shareholders in a company which is to be formed. Who are to be the major shareholders? We must believe recent reports. The Financial Times of 15 January tells us that National Power and PowerGen are to form a company along with Associated British Ports, but that the two power companies are to have 80 per cent. control of Associated British Ports. I do not know whether that was known during the passage of the Bill. It will be a cosy little arrangement.

We now see the reason for Mr. John Baker's speech yesterday, which was reported today in the Yorkshire Post and other newspapers. He is supposed to have made the speech at a privatisation briefing to regional newspaper editors. I think that that was the speech to which the hon. Member for Rochford referred. Mr. Baker said that, as far as he was concerned, 50 per cent. of the coal required by National Power and PowerGen would come from imports.

Dr. Michael Clark

Perhaps I can help the hon. Gentleman by telling him that there was no knowledge in the Committee at that time of any other owner of the establishment or the new jetty. At that time, the Committee had every reason to believe that the people who were applying for permission to extend the jetty would own it for some considerable time. In Committee, we asked about the possibility of sale, but there was no suggestion of that. A Bill parallel to that relating to Immingham, which contained a clause that required the company to have the ability to sell at any time it wanted, was thrown out, not least because it also contained a clause to enable it to sell the installation.

Mr. Lofthouse

I accept that explanation from the hon. Gentleman. Nevertheless, on 15 January it was reported that National Power and PowerGen would take an 80 per cent. stake in Associated British Ports. We then had another report from Mr. Baker, about plans to import 50 per cent. of the fuel necessary to generate electricity. National Power and PowerGen will take over the port that will receive that 50 per cent. of imported coal.

The hon. Member for Romford will be well aware that, just three weeks ago, the Secretary of State told the Select Committee on Energy that the only fuel that will be provided for electricity generation in the next decade will be gas. If that is so, the Minister must realise that there will be no future for the coal industry, especially if the ports start to receive imported coal.

A few months ago, I told the House that I foresaw a coal industry of 10,000 men by the late 1990s. I was told that I was scaremongering, but I believe that we shall be left with a coal industry that employs 10,000 men at between 10 and 12 pits. I should like that confirmed or denied.

No wonder some of the hierarchy at British Coal—I have a big question mark against their names—were reported on 8 January as saying that British Coal must be privatised. That is what the commercial director of British Coal, Malcolm Edwards, said. I wonder how much effort has been made by some of that hierarchy in the past few years to enable our coal industry to compete with foreign competition. How keen have they been to meet that competition? The same Malcolm Edwards told the Select Committee that he could not wait for the day of privatisation of British Coal. He will have to look sharp, however, because there will be little left of British Coal to privatise.

Once again, I must remind the Minister and his Department of their responsibility to the mining communities. They must prepare the way for other jobs to enable those young men who have previously found employment in the mining industry to be given alternative work. They cannot be left on the scrap heap, as has happened hitherto.

9.23 pm

Mr. Malcolm Moss (Cambridgeshire, North-East)

Time is running out, so I shall be brief.

If one were inclined to believe the Opposition, one would think that the only important thing about the privatisation process is the amount of money that one gets from the sale of the assets. Nothing could be further from the truth. The proceeds from the sale are obviously important for the Treasury, the taxpayer and public spending, but there are many more important consequences.

The hon. Member for Holborn and St. Pancras (Mr. Dobson) kept going on about a half-price sale. He does not seem to understand that, whether one adopts current cost accounting or historical cost accounting, ultimately people will only pay what they think the assets are worth. They are only important to the lender who is lending money against those assets, or to the purchaser who believes that they will generate income or profit. The price to earnings ratio and the price per share are critical in that calculation.

One might argue about the price at which the assets of the electrical supply industry were sold, but in future the taxpayer will not be required to spend one penny on replacing plant and generating capacity. The case was made for a site on the Humber estuary at a cost of £1.5 billion, which was discussed on Monday in connection with the Killingholme Generating Stations (Ancillary Powers) Bill. That investment is being made by PowerGen and National Power, and not a penny is coming from the taxpayer. The whole of this country's generating capacity will eventually be replaced by privatised companies investing their profits and reserves.

Earlier, I tried to assist my right hon. Friend the Secretary of State when he tried to quote a Labour Front Bench spokesman. I believe that he was referring to the remark made by the hon. Member for Kingston upon Hull, East (Mr. Prescott) in a press release dated 31 October 1987: I make this prediction: this Government will not succeed in privatising electricity before the next election. It is a non-runner. Labour has said on a number of occasions that privatisation could never occur, yet it has been successful. There is highly motivated management in all 12 electricity companies, and in the two major generating companies.

The president of the New York power authority recently visited Britain, when I had an opportunity to meet him. As the head of one of America's leading power utilities, he came here to see what Britain was doing, and he concluded that we are now the front runners in the world in respect of the new way forward for the electricity supply industry.

Above all, privatisation has introduced competition. Major new projects are planned, involving not only combined cycled gas but combined heat and power projects. That has given a tremendous boost to the renewables industry, such as waste disposal. That would not have been possible without the new structure and the non-fossil fuel obligation.

As to price, industrial consumers have enjoyed fairly substantial decreases, with reductions of 15 per cent. not unheard of. Privatisation has been much attacked, maligned and misrepresented. Most of that has been a knee-jerk reaction to the historically accepted wisdom of the unions and of the coal lobby. Contrary to the predictions of Labour Members, privatisation has proved to be, and will continue to be, a great success for the taxpayer, the industry, its work force, shareholders, and the consumer.

9.27 pm

Dr. Kim Howells (Pontypridd)

It is not for me to suggest to the Government how they should privatise their industries, but I have never seen much sense in creating two massive generating companies where there was one before. Many opportunities existed for fragmenting the generating sector to create real competition, but that did not happen. Instead, we have privatisation proposals that are not so much unimaginative as desperate. That is understandable, given the litany of disaster that has plagued the privatisation process since the Government's plans were first drawn up.

Britain's nuclear capacity was hived off because the City panicked in the belief that it could not be sold. The old Central Electricity Generating Board supremo and long-time champion of nuclear energy, Lord Marshall, could not stomach that piece of political revisionism, and he took off for less machiavellian pastures. Mr. Bob Malpas, brought in from that citadel of political acumen, British Petroleum, stayed long enough with PowerGen to take part in the Hanson option travesty, before heading for the hills peppered with arrows from Mr. Ed Wallis's bow.

The Secretary of State is a business man of some repute who, it has been reported, has insisted on staying at his post to see this business through to the bitter end. Few can doubt his capacity for taking punishment. After all, he has had to rescue the privatisation of the electricity distributing companies from the shambles that he inherited from his predecessor, the right hon. Member for Hertsmere (Mr. Parkinson). He may be capable of absorbing further punishment—coming from all sides judging by what I have read in the newspapers—as the privatisation of the generators proceeds.

I have no doubt that the right hon. Gentleman has the staying power to see that one through, too. He may see it through, but, by any standards, it would be the most curious flotation. Why does the Secretary of State believe that any investor should put money in one of the generating companies rather than the other? When the privatisation was mooted National Power, with its nuclear sector, looked promisingly dominant—there was always the lure that perhaps the rules might be bent in future to allow National Power to acquire substantial chunks of its smaller competitor—but I do not think that that is any longer the case. Both generating companies are now much of a muchness. Where is the lure for the potential investor, and especially for pension fund managers, the big banks and other large institutional investors, none of whom are renowned these days for their adventurism?

Recently a writer in the journal, Power in Europe commented: That phantom of the early Thatcher years, 'the new generation of shareholders', still floats around, but has never taken on much substance despite the vast amounts of public money thrown at it. Buy them both, then the Government may say, spread the risk, even if you're not spreading it very far. This, however, makes the competitive ideals of privatisation into so much hot air. Two companies with the same shareholder profile, fighting each other like the two cats of Kilkenny, is not an idea which carries a great deal of conviction. The sale of the regional electricity companies had a good press. In the Daily Mail on 4 November Michael Walters wrote: Get greedy. There is still time to clamber aboard the electricity privatisation gravy train if you have already had one go and fear you may not get enough. The Sun put it even more simply, saying: The shares are priced at £2.40, so how come I'm only paying £1? Obviously hon. Members may provide their own answer to that question. It is not a silly contradiction in terms.

I have no doubt that a similar press reaction may greet the sale of the generators, as the Secretary of State strains every nerve and muscle, cuts every corner and offers every conceivable incentive to offload them. If he is successful in overcoming the difficulties, the right hon. Gentleman will have succeeded not only in reducing the future responsibilities of his Department to the management of the rumps of the nuclear and coal industries, but in sounding the death knells of those industries.

If the generators are to be believed, in 1993 there will be a great increase in coal importation and an unprecedented increase in the amount of natural gas burnt for power generation. I am afraid that the spectre of short-term considerations will displace the best of national energy strategies, such as they were.

To overcome statutes governing emissions into the atmosphere from power stations, premium low-sulphur coal will be imported and that premium fuel, natural gas, will be burnt in increasing quantities.

I fear that the new fiscal requirements will promote less rather than more research and development into systems of clean energy burn and into the application of the so-called fifth fuel—better building design, better insulation and greater efficiency of energy use. There will be an incentive for the chairmen of the companies to press for more use of electricity, for higher sales and higher profits.

I should like to know where this tendency stands in relation to the Government's much-heralded enthusiasm for a reduction in carbon dioxide and waste emissions into the environment, and to know what is to become of the great expertise and skills enshrined in our coal and nuclear industries.

I do not believe that this is the way to conduct the affairs of a business at the core of our economy. The generation and supply of electricity must be more, in policy terms, than the object of speculation by people seeking to make a fast buck. I have no doubt that the dedication and excellence of many of the staff at National Power and PowerGen will ensure that the lights continue to burn in this country, but I bitterly regret the missed opportunities in the break-up of a state monopoly for which I had no great love.

The Government could at the very least have ensured a degree of real competition which might have benefited consumers; real diversification of ownership and technology; incentives to seek and explore newer, more benign generating technologies; and the opportunity for sources of raw energy materials such as coal to have played a real part in the development and use of those technologies.

Instead, we are left with a barely separated pair of siamese twins which are more likely to caress each other than compete against each other. I fear that sooner rather than later those caresses will turn to price fixes and we shall be confronted by corporations of awesome power which will repay their creator, the Government—and the electorate whom they purport to represent—with the slaps of monopoly abuse, not the kisses of a dutiful child.

9.36 pm

Mr. Rhodri Morgan (Cardiff, West)

Tonight we have been discussing what has gone wrong with this privatisation. Why has the Secretary of State lost so much of his reputation for financial canniness, why is this privatisation described as farcical in the Financial Times today, and why are relations between the management of National Power and PowerGen and the Department of Energy described as being "at rock bottom" in today's Evening Standard?

To find out what has gone wrong we must look at the three great untruths of the late 20th century, which hon. Members will have heard before. The first is, "The cheque is in the post;" the second, "Of course I will still want to privatise you in the morning, or at least 60 per cent. of you;" and the third, "This flotation has been excellent value for the British taxpayer."

The next stage in this privatisation is the issuing of the pathfinder prospectus on 1 February. The Secretary of State is hopeful about that procedure because the path that he will be hoping to find is the one that he has lost in the past few weeks—it could not have been more aptly named. The trail has gone cold for him and it has been a useful exercise in this Supply day debate to work out exactly what has gone wrong.

Three things seem to have gone wrong. First, the right hon. Gentleman has now decided to agree with us that, in respect of the distributors' flotation, he was tucked up by the City. He was advised by people whose ability to look after the interests of the taxpayer was not of the first calibre. He took their advice and sold the shares a: what must be judged—the briefing given to the press by the Department of Energy agrees with this judgment—to have been a gross undervaluation of the assets that were got rid of. The Secretary of State would like to make that up by means of the generator sales. He believes that by using an entirely different technique he will cut out the lead underwriters. He intends to sell only 60 per cent. so that if the shares subsequently shoot up in value he will still have 40 per cent. left to sell at the higher price.

The Secretary of State missed that opportunity when the distributing companies were floated. He did not listen to our advice or to that of independent commentators in universities or City firms who were not directly involved in the flotation. Furthermore, he did not listen to the advice of those involved in the industry at both management and union level. If the Secretary of State made a mistake when he floated the distribution companies he should not try to cover his tracks when floating the generating companies to get himself back into the good books of the Public Accounts Committee when in a year or so it considers the privatisation of the electricity supply industry. If a mistake was made and the distribution companies were undervalued, it would be better if the Secretary of State came to the House of Commons to plead for forgiveness and said, "Yes, I made a mistake. I had lousy advisers. I did it in a rush. I did not consider the best interests of the taxpayer. I tried to sell the industry as quickly and as cheaply as I could in order to get it out of the way and I hoped that the Government's public relations ma chine would be able to deal with all the problems that might arise", rather than attempt to correct his mistakes by using an entirely different technique to sell the generating companies.

The Secretary of State has appointed new advisers to assist with the sale of the generating companies. He hopes that they will be able to overcome some of the problems that arose when the distribution companies were sold, due to the embarrassing rise on the first day to a 60p premium in some cases and to the even greater embarrassment of finding that one company that had been privatised only the year before—Welsh Water—immediately leapt in and bought a 10 per cent. predatory stake in South Wales Electricity, a distribution company that had been floated only the day before.

Welsh Water used the same advisers as the Government used for the flotation of the electricity distribution companies. How could it be right for Kleinwort Benson, which had advised the Secretary of State for Energy on the sale of the electricity distribution companies, to advise Welsh Water at the same time on how to acquire a 10 per cent. stake in a company that was being privatised by the Department of Energy? How can it be right for Smith New Court, the Secretary of State's new advisers on the stockbroking side, which has, as a non-executive director, a previous Secretary of State for Energy, to have advised Welsh Water on how to acquire a 10 per cent. stake in South Wales Electricity when it was also the client stockbroker for South Wales Electricity? That is working on both sides of the fence in a way that John le Carre would not dare to put into a spy novel about double crossing. That, however, is what is happening and that is the calibre of the people who are used by the Secretary of State.

Another reason why privatisation has gone seriously wrong is that people are beginning to appreciate more and more how chaotic is the structure of the industry that has been devised. By 1994, and completely by 1998, generating companies will be able to supply us with electricity as well as to generate it. Distributors of electricity will also be generating it.

That will be unique throughout the civilised world. There will be a dual supply electricity function. We shall not know exactly from whom we should obtain our electricity and we shall not know whose primary function it is to supply electricity. There will not be the simple three-way structure that most people understand— generating companies, a transmission monopoly and distribution companies. There will be double generating companies and double distribution companies. Any company will be able to supply a new housing estate with electricity. Supplies will be obtained from any company or from a middleman and there will be stock market trading. Such a chaotic dual structure is beginning to frighten people. They believe that that is not a sensible structure for what has already been described as the backbone of any civilised industrial and domestic society.

Another reason why I think that the Secretary of State will perhaps get only half the number of non-executive directorships when he resigns as it looked as if he might get a year ago—it will only be about 50 now—is that he has lost any idea as to what the privatisation of electricity supply is for. He has tried today to give some of the original reasons for it. He said that it is to promote competition. We know that if he intended to promote competition, he should have been breaking the generating side into far more than two. He should have been selling off power stations to their employees or creating a minimum of four of five companies. The two companies will create a registered duopoly that will cause trouble for time immemorial. That is not the way to promote competition.

The Secretary of State said that it would promote wider share ownership, but we know that even with the distribution companies, contrary to what the hon. Member for Rochford (Dr. Clark) said—I may have misheard him—it looks as if 95 per cent. of British consumers did not apply for shares. Wider share ownership is hardly being achieved by an ojective of reaching 5 per cent. of the British public. I realise that the hon. Member for Rochford said that he bought shares and perhaps his wife and children did too. However, as far as one can tell, roughly 95 per cent. of consuming families did not apply or obtain shares in their local distribution company. I shall be happy if the Under-Secretary of State corrects those figures when he replies.

Conservation is extremely important and the contribution being made by the new structure to the conservation of energy is zero. At the time of yet another major crisis in the middle east that must be at the forefront of our minds.

Mr. Harry Barnes

I want to use this intervention to put the record straight. Earlier the Secretary of State, in replying to an intervention, said that I was not present during a debate on east midlands electricity. In fact, it was my debate during proceedings on the Consolidated Fund. I spoke for 34 minutes and my hon. Friend the Member for Cardiff, West (Mr. Morgan) spoke for 22 minutes and it was the Secretary of State who was not present.

Mr. Morgan

Nobody who was there at 5.30 in the morning will forget that debate. I do not think that I have yet fully recovered from it.

Having established the problems that the Secretary of State has with his credibility following the deterioration in the view that is now being taken of whether this is a feasible exercise, we come to the question of what he should do now. What we are getting is vast doses of creative accountancy. Most of the Conservative contributors to the debate have tried in the patronising way of insurance brokers and accountants—with which the Conservative party is richly stocked—to talk down to Opposition Members as if we know nothing about economics. We are opposed not to economics but to creative accountancy. In explaining why £35 billion worth of assets, as advertised in the prospectus given some years ago to the Conservative party conference by the right hon. Member for Hertsmere (Mr. Parkinson), will raise no more than £10 billion they are saying that that is what the market will bear and that we should understand that. In fact, it shows the fraud of the privatisation process. The Secretary of State is telling us that one is buying not a company, the management or the assets but an artificially created Government-rigged income stream and if that is the income stream, the City advisers will say what should be paid for it. If that is privatisation, it is a fraud on the taxpayer and the purchasers because they are not buying a private company but a form of rigged national savings from the Government.

Mr. Hugo Summerson (Walthamstow)

Will the hon. Gentleman give way?

Mr. Morgan

That would be unwise given the instructions of the Government Front Bench.

The Secretary of State and I had a conversation on the night on which the previous Prime Minister resigned. He had been the campaign manager for the previous Prime Minister for all of eight hours. I said to him, "If you can do for electric privatisation what you did for the campaign of the right hon. Member for Finchley (Mrs. Thatcher), I do not think that privatisation of the electricity supply industry will go very far." I did not realise that he would take me at my word.

In a previous life, the Secretary of State was a practitioner in insolvency. He called in the receiver for the campaign of the previous Prime Minister. I suggest that he now calls in the receiver for the privatisation of the electricity supply industry.

9.49 pm

The Parliamentary Under-Secretary of State for Energy (Mr. David Heathcoat-Amory)

We have been debating the success of creating a modern and competitive electric supply industry. The flotation of the regional electricity companies last December received massive public endorsement. Quite naturally, that success has left the Opposition in some confusion, because, with millions more small shareholders and millions of new shareholders, millions fewer people will be prepared to tolerate a return to centralised, state-owned industries. That is why they said that it would not work and that the sale would not take place.

That was denied by the hon. Member for Holborn and St. Pancras (Mr. Dobson), who has become rather forgetful. In October 1987, his predecessor—perhaps this is why he is his predecessor—the hon. Member for Kingston upon Hull, East (Mr. Prescott), said: The Government's privatisation programme is in tatters ‖ I make this prediction: this Government will not succeed in privatising electricity before the next election. Privatisation is taking place, and it does work. It takes the Labour party to describe more than 12 million applications for shares as a failure.

If Labour Members are bad forecasters, they are even worse accountants. The hon. Member for Holborn and St. Pancras and his hon. Friends persist in comparing the proceeds of the public sale of the regional electric companies with the replacement cost of the assets sold. There is no excuse for that, because they have been given several accountancy lessons by my right hon. Friend the Secretary of State. By now, they should know that that is not a fair or valid comparison, but I shall try to illustrate it in language that the hon. Member for Holborn and St. Pancras can understand.

Has the hon. Gentleman ever tried to sell his car at replacement cost? If he tried to sell his car outside his home at the price of a new car, he would not have much luck, but he is inviting the Government to put a replacement-cost price tag on the shares for sale. It is a wholly misleading and bogus comparison, but perhaps it gives us a glimpse of what a mess the national accounts would be if the Labour party took office again.

As my right hon. Friend the Member for Kincardine and Deeside (Mr. Buchanan-Smith) said, we heard a lot of the wisdom of hindsight from Opposition Members. We were in no position to know that the market would rise after the price was set, and we were not to know what a popular success the flotation would be. We therefore had to devise a way of reducing—

Mr. Morgan

rose—

Mr. Heathcoat-Amory

Will the hon. Gentleman forgive me? He pushed me right up against the clock; and I have some other remarks to make.

We therefore had to find a way of reducing the allocation to institutions and overseas investors, which we did, while continuing to give preference to registered customers, in so far as the rules of the stock exchange allowed. Ninety-seven per cent. of customer applications received shares, and a quarter of all applications were met in full. We have taken another giant step forward in wider share ownership, and Conservative Members take pride in that.

I hope that we will proceed to the flotation of the generating companies over the next two months. The competitive and market positions of those two companies are, of course, very different from those of the 12 regional companies, and there are therefore corresponding differences in the offer structure.

My right hon. Friend the Secretary of State described why we will retain, for the time being, 40 per cent. of the shares. This will still ensure that the companies are placed firmly in the private sector, and the Government will be able to participate in any future increase in the value of the generating companies. It is therefore a mark of confidence in the future of the companies, and in no way a retreat from our belief in private sector ownership and operation.

The hon. Members for Dundee, East (Mr. McAllion) and for Gordon (Mr. Bruce) mentioned Scotland. The flotation of the Scottish companies is planned for May or June. The details will be decided by my right hon. Friend the Secretary of State for Scotland in the light of market conditions at that time. The Under-Secretary of State for Scotland—my hon. Friend the Member for Eastwood (Mr. Stewart)—has listened to hon. Members' detailed points.

The programme of privatisation upon which we have embarked is already achieving a double benefit—substantial proceeds for the taxpayer and wider share ownership, particularly a high degree of employee share ownership. My hon. Friend the Member for Rochford (Dr. Clark) reminded the House that some 98 per cent. of eligible employees have taken up shares in the regional companies.

The hon. Member for Cardiff, West (Mr. Morgan) was dismissive about the number of shareholders that these companies now have, but we know that it is a far more genuine form of public ownership than having one monolithic state corporation controlled by a handful of politicians and civil servants in Whitehall.

Mr. Morgan

rose—

Mr. Heathcoat-Amory

I am answering the hon. Gentleman's points. He also referred to two generating companies, which he described as a duopoly. I remind him that there are three in England alone. The hon. Gentleman perhaps forgot Nuclear Electric plc, as well as the Scottish companies and the growing number of independent generators.

The hon. Member for Pontefract and Castleford (Mr. Lofthouse) mentioned coal. I respect his comments, as I respect him. The electricity market puts all fuel suppliers under pressure, but I believe that British Coal will continue to win a substantial share of the market if it maintains the productivity improvements that have occurred in recent years.

Energy efficiency was mentioned and forms part of the Opposition's critical motion. It is alleged that energy efficiency is somehow put at risk by the new electricity structure which we have created. The reverse is the case. Instead of electricity costs being buried in state monopolies, we have created a system of open competitive pricing, so that the customer can choose the most price-efficient, most energy-efficient, supply. Exactly the right price signals are now sent to those who are in a position to take energy-saving measures.

So it is with the generators—instead of simply passing through all their costs on the old cost-plus basis, we have now created a structure whereby they will make more money by being more fuel efficient. The clearest possible incentive for energy efficiency is now built into the system.

We have developed a successful formula of public regulation and private operation. This has guided our reforms in the Water Act 1989, the Environmental Protection Act 1990 and the Electricity Act 1989.

The Opposition's reaction to these developments is to go back to nationalisation, state control and political interference, putting ownership, regulation and control back in the same hands. That is a recipe for stagnation and inefficiency.

Mr. Don Dixon (Jarrow)

rose in his place and claimed to move, That the Question be now put.

Question, That the Question be now put, put and agreed to.

Question put accordingly, That the original words stand part of the Question:—

The House divided: Ayes 226, Noes 297.

Division No. 39]	[10.00 pm
AYES
Adams, Mrs. Irene (Paisley, N.)	Ewing, Harry (Falkirk E)
Allen, Graham	Ewing, Mrs Margaret (Moray)
Alton, David	Fatchett, Derek
Anderson, Donald	Faulds, Andrew
Armstrong, Hilary	Fearn, Ronald
Ashton, Joe	Fisher, Mark
Banks, Tony (Newham NW)	Flynn, Paul
Barnes, Harry (Derbyshire NE)	Foot, Rt Hon Michael
Barron, Kevin	Forsythe, Clifford (Antrim S)
Battle, John	Foster, Derek
Beckett, Margaret	Foulkes, George
Beggs, Roy	Fraser, John
Beith, A. J.	Fyfe, Maria
Bell, Stuart	Galloway, George
Bellotti, David	Garrett, John (Norwich South)
Benn, Rt Hon Tony	Garrett, Ted (Wallsend)
Bennett, A. F. (D'nf'n & R'dish)	George, Bruce
Benton, Joseph	Gilbert, Rt Hon Dr John
Bermingham, Gerald	Godman, Dr Norman A.
Bidwell, Sydney	Golding, Mrs Llin
Blair, Tony	Gordon, Mildred
Blunkett, David	Graham, Thomas
Boateng, Paul	Grant, Bernie (Tottenham)
Boyes, Roland	Griffiths, Nigel (Edinburgh S)
Bradley, Keith	Griffiths, Win (Bridgend)
Bray, Dr Jeremy	Grocott, Bruce
Brown, Gordon (D'mline E)	Hardy, Peter
Brown, Nicholas (Newcastle E)	Harman, Ms Harriet
Brown, Ron (Edinburgh Leith)	Hattersley, Rt Hon Roy
Bruce, Malcolm (Gordon)	Haynes, Frank
Buckley, George J.	Heal, Mrs Sylvia
Caborn, Richard	Henderson, Doug
Callaghan, Jim	Hinchliffe, David
Campbell, Menzies (Fife NE)	Hoey, Ms Kate (Vauxhall)
Campbell, Ron (Blyth Valley)	Hogg, N. (C'nauld & Kilsyth)
Campbell-Savours, D. N.	Home Robertson, John
Canavan, Dennis	Hood, Jimmy
Carlile, Alex (Mont'g)	Howarth, George (Knowsley N)
Clarke, Tom (Monklands W)	Howells, Geraint
Clay, Bob	Howells, Dr. Kim (Pontypridd)
Clelland, David	Hoyle, Doug
Clwyd, Mrs Ann	Hughes, John (Coventry NE)
Cohen, Harry	Hughes, Robert (Aberdeen N)
Cook, Robin (Livingston)	Hughes, Roy (Newport E)
Corbett, Robin	Hughes, Simon (Southwark)
Cousins, Jim	Illsley, Eric
Cox, Tom	Ingram, Adam
Cryer, Bob	Janner, Greville
Cummings, John	Johnston, Sir Russell
Cunliffe, Lawrence	Jones, Barry (Alyn & Deeside)
Dalyell, Tam	Jones, Ieuan (Ynys Môn)
Darling, Alistair	Jones, Martyn (Clwyd S W)
Davies, Rt Hon Denzil (Llanelli)	Kaufman, Rt Hon Gerald
Davies, Ron (Caerphilly)	Kennedy, Charles
Davis, Terry (B'ham Hodge H'l)	Kilfedder, James
Dewar, Donald	Kirkwood, Archy
Dixon, Don	Lamond, James
Dobson, Frank	Leadbitter, Ted
Doran, Frank	Leighton, Ron
Douglas, Dick	Lestor, Joan (Eccles)
Dunnachie, Jimmy	Lewis, Terry
Dunwoody, Hon Mrs Gwyneth	Litherland, Robert
Eadie, Alexander	Livingstone, Ken
Evans, John (St Helens N)	Livsey, Richard

Lloyd, Tony (Stretford)	Robertson, George
Lofthouse, Geoffrey	Robinson, Geoffrey
Loyden, Eddie	Rogers, Allan
McAllion, John	Rooker, Jeff
McCartney, Ian	Rooney, Terence
Macdonald, Calum A.	Ross, Ernie (Dundee W)
McFall, John	Ross, William (Londonderry E)
McKay, Allen (Barnsley West)	Rowlands, Ted
McKelvey, William	Ruddock, Joan
McLeish, Henry	Salmond, Alex
McMaster, Gordon	Sedgemore, Brian
McWilliam, John	Sheerman, Barry
Madden, Max	Sheldon, Rt Hon Robert
Mahon, Mrs Alice	Shore, Rt Hon Peter
Marek, Dr John	Short, Clare
Marshall, David (Shettleston)	Skinner, Dennis
Marshall, Jim (Leicester S)	Smith, Andrew (Oxford E)
Martin, Michael J. (Springburn)	Smith, C. (Isl'ton & F'bury)
Martlew, Eric	Smith, Rt Hon J. (Monk'ds E)
Maxton, John	Smith, J. P. (Vale of Glam)
Meacher, Michael	Snape, Peter
Meale, Alan	Soley, Clive
Michael, Alun	Spearing, Nigel
Michie, Bill (Sheffield Heeley)	Steinberg, Gerry
Michie, Mrs Ray (Arg'l & Bute)	Stott, Roger
Moonie, Dr Lewis	Strang, Gavin
Morgan, Rhodri	Straw, Jack
Morley, Elliot	Taylor, Mrs Ann (Dewsbury)
Morris, Rt Hon A. (W'shawe)	Taylor, Rt Hon J. D. (S'ford)
Morris, Rt Hon J. (Aberavon)	Taylor, Matthew (Truro)
Mowlam, Marjorie	Thompson, Jack (Wansbeck)
Mullin, Chris	Turner, Dennis
Murphy, Paul	Vaz, Keith
Nellist, Dave	Wallace, James
Oakes, Rt Hon Gordon	Walley, Joan
O'Brien, William	Wardell, Gareth (Gower)
O'Hara, Edward	Wareing, Robert N.
O'Neill, Martin	Watson, Mike (Glasgow, C)
Orme, Rt Hon Stanley	Welsh, Andrew (Angus E)
Parry, Robert	Welsh, Michael (Doncaster N)
Patchett, Terry	Williams, Rt Hon Alan
Pike, Peter L.	Williams, Alan W. (Carm'then)
Powell, Ray (Ogmore)	Winnick, David
Prescott, John	Wise, Mrs Audrey
Primarolo, Dawn	Worthington, Tony
Quin, Ms Joyce	Wray, Jimmy
Randall, Stuart	Young, David (Bolton SE)
Redmond, Martin
Rees, Rt Hon Merlyn	Tellers for the Ayes:
Reid, Dr John	Mr. Ken Eastham and
Richardson, Jo	Mr. Thomas McAvoy.
NOES
Adley, Robert	Bonsor, Sir Nicholas
Aitken, Jonathan	Boscawen, Hon Robert
Alexander, Richard	Boswell, Tim
Alison, Rt Hon Michael	Bottomley, Peter
Allason, Rupert	Bottomley, Mrs Virginia
Amess, David	Bowden, A (Brighton K'pto'n)
Amos, Alan	Bowden, Gerald (Dulwich)
Arbuthnot, James	Bowis, John
Arnold, Jacques (Gravesham)	Boyson, Rt Hon Dr Sir Rhodes
Arnold, Sir Thomas	Brandon-Bravo, Martin
Ashby, David	Brazier, Julian
Aspinwall, Jack	Bright, Graham
Atkins, Robert	Brooke, Rt Hon Peter
Baker, Rt Hon K. (Mole Valley)	Brown, Michael (Brigg & Cl't's)
Baldry, Tony	Browne, John (Winchester)
Banks, Robert (Harrogate)	Bruce, Ian (Dorset South)
Batiste, Spencer	Buchanan-Smith, Rt Hon Alick
Beaumont-Dark, Anthony	Buck, Sir Antony
Bellingham, Henry	Budgen, Nicholas
Bendall, Vivian	Burns, Simon
Bennett, Nicholas (Pembroke)	Burt, Alistair
Benyon, W.	Butler, Chris
Bevan, David Gilroy	Butterfill, John
Biffen, Rt Hon John	Carlisle, John, (Luton N)
Blackburn, Dr John G.	Carrington, Matthew
Blaker, Rt Hon Sir Peter	Carttiss, Michael
Body, Sir Richard	Cash, William

Chalker, Rt Hon Mrs Lynda	Hicks, Robert (Cornwall SE)
Channon, Rt Hon Paul	Higgins, Rt Hon Terence L.
Chapman, Sydney	Hill, James
Chope, Christopher	Hind, Kenneth
Churchill, Mr	Hogg, Hon Douglas (Gr'th'm)
Clark, Rt Hon Alan (Plymouth)	Hordern, Sir Peter
Clark, Dr Michael (Rochford)	Howard, Rt Hon Michael
Clark, Sir W. (Croydon S)	Howarth, Alan (Strat'd-on-A)
Colvin, Michael	Howarth, G. (Cannock & B'wd)
Conway, Derek	Howell, Rt Hon David (G'dford)
Coombs, Anthony (Wyre F'rest)	Howell, Ralph (North Norfolk)
Coombs, Simon (Swindon)	Hughes, Robert G. (Harrow W)
Cope, Rt Hon John	Hunt, David (Wirral W)
Cormack, Patrick	Hunt, Sir John (Ravensbourne)
Couchman, James	Irvine, Michael
Cran, James	Irving, Sir Charles
Critchley, Julian	Jack, Michael
Currie, Mrs Edwina	Jackson, Robert
Davies, Q. (Stamf'd & Spald'g)	Janman, Tim
Davis, David (Boothferry)	Jessel, Toby
Day, Stephen	Johnson Smith, Sir Geoffrey
Devlin, Tim	Jones, Gwilym (Cardiff N)
Dicks, Terry	Jones, Robert B (Herts W)
Douglas-Hamilton, Lord James	Jopling, Rt Hon Michael
Dover, Den	Kellett-Bowman, Dame Elaine
Dunn, Bob	Key, Robert
Durant, Sir Tony	King, Roger (B'ham N'thfield)
Dykes, Hugh	King, Rt Hon Tom (Bridgwater)
Emery, Sir Peter	Kirkhope, Timothy
Evans, David (Welwyn Hatf'd)	Knapman, Roger
Evennett, David	Knight, Greg (Derby North)
Fairbairn, Sir Nicholas	Knowles, Michael
Favell, Tony	Knox, David
Fenner, Dame Peggy	Lamont, Rt Hon Norman
Field, Barry (Isle of Wight)	Latham, Michael
Finsberg, Sir Geoffrey	Lawson, Rt Hon Nigel
Fishburn, John Dudley	Lee, John (Pendle)
Fookes, Dame Janet	Lloyd, Sir Ian (Havant)
Forman, Nigel	Lloyd, Peter (Fareham)
Forsyth, Michael (Stirling)	McCrindle, Sir Robert
Forth, Eric	MacGregor, Rt Hon John
Fowler, Rt Hon Sir Norman	MacKay, Andrew (E Berkshire)
Franks, Cecil	McLoughlin, Patrick
Freeman, Roger	Madel, David
French, Douglas	Marshall, Sir Michael (Arundel)
Gale, Roger	Martin, David (Portsmouth S)
Gardiner, Sir George	Maude, Hon Francis
Garel-Jones, Tristan	Maxwell-Hyslop, Robin
Gill, Christopher	Meyer, Sir Anthony
Gilmour, Rt Hon Sir Ian	Miller, Sir Hal
Glyn, Dr Sir Alan	Mills, Iain
Goodhart, Sir Philip	Miscampbell, Norman
Goodlad, Alastair	Mitchell, Andrew (Gedling)
Gorman, Mrs Teresa	Mitchell, Sir David
Grant, Sir Anthony (CambsSW)	Moate, Roger
Greenway, Harry (Ealing N)	Monro, Sir Hector
Greenway, John (Ryedale)	Montgomery, Sir Fergus
Gregory, Conal	Morris, M (N'hampton S)
Griffiths, Sir Eldon (Bury St E')	Morrison, Sir Charles
Griffiths, Peter (Portsmouth N)	Moss, Malcolm
Grist, Ian	Moynihan, Hon Colin
Ground, Patrick	Mudd, David
Grylls, Michael	Neale, Sir Gerrard
Hague, William	Nelson, Anthony
Hamilton, Hon Archie (Epsom)	Neubert, Sir Michael
Hamilton, Neil (Tatton)	Nicholls, Patrick
Hampson, Dr Keith	Nicholson, David (Taunton)
Hanley, Jeremy	Nicholson, Emma (Devon West)
Hannam, John	Onslow, Rt Hon Cranley
Hargreaves, A. (B'ham H'll Gr')	Oppenheim, Phillip
Hargreaves, Ken (Hyndburn)	Page, Richard
Harris, David	Paice, James
Haselhurst, Alan	Patten, Rt Hon Chris (Bath)
Hawkins, Christopher	Patten, Rt Hon John
Hayes, Jerry	Pattie, Rt Hon Sir Geoffrey
Hayhoe, Rt Hon Sir Barney	Pawsey, James
Hayward, Robert	Peacock, Mrs Elizabeth
Heathcoat-Amory, David	Porter, Barry (Wirral S)
Heseltine, Rt Hon Michael	Porter, David (Waveney)
Hicks, Mrs Maureen (Wolv' NE)	Portillo, Michael

Powell, William (Corby)	Taylor, Ian (Esher)
Price, Sir David	Taylor, John M (Solihull)
Raison, Rt Hon Sir Timothy	Taylor, Teddy (S'end E)
Rathbone, Tim	Tebbit, Rt Hon Norman
Redwood, John	Temple-Morris, Peter
Riddick, Graham	Thompson, D. (Calder Valley)
Ridley, Rt Hon Nicholas	Thompson, Patrick (Norwich N)
Ridsdale, Sir Julian	Thornton, Malcolm
Rifkind, Rt Hon Malcolm	Thurnham, Peter
Roberts, Sir Wyn (Conwy)	Townend, John (Bridlington)
Roe, Mrs Marion	Tracey, Richard
Rossi, Sir Hugh	Tredinnick, David
Rost, Peter	Trippier, David
Rumbold, Rt Hon Mrs Angela	Trotter, Neville
Ryder, Richard	Twinn, Dr Ian
Sackville, Hon Tom	Vaughan, Sir Gerard
Sayeed, Jonathan	Viggers, Peter
Shaw, David (Dover)	Wakeham, Rt Hon John
Shaw, Sir Giles (Pudsey)	Walker, Bill (T'side North)
Shaw, Sir Michael (Scarb')	Walker, Rt Hon P. (W'cester)
Shelton, Sir William	Waller, Gary
Shephard, Mrs G. (Norfolk SW)	Ward, John
Shepherd, Colin (Hereford)	Wardle, Charles (Bexhill)
Shepherd, Richard (Aldridge)	Warren, Kenneth
Shersby, Michael	Watts, John
Smith, Sir Dudley (Warwick)	Wells, Bowen
Smith, Tim (Beaconsfield)	Wheeler, Sir John
Soames, Hon Nicholas	Whitney, Ray
Speed, Keith	Widdecombe, Ann
Speller, Tony	Wilkinson, John
Spicer, Sir Jim (Dorset W)	Wilshire, David
Spicer, Michael (S Worcs)	Winterton, Mrs Ann
Squire, Robin	Winterton, Nicholas
Stanbrook, Ivor	Wolfson, Mark
Stanley, Rt Hon Sir John	Wood, Timothy
Steen, Anthony	Woodcock, Dr. Mike
Stern, Michael	Yeo, Tim
Stevens, Lewis	Young, Sir George (Acton)
Stewart, Allan (Eastwood)	Younger, Rt Hon George
Stewart, Andy (Sherwood)
Stokes, Sir John	Tellers for the Noes:
Sumberg, David	Mr. Nicholas Baker and
Summerson, Hugo	Mr. Irvine Patnick.
Tapsell, Sir Peter

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 30 (Questions on amendments), and agreed to.

MR. SPEAKER forthwith declared the main Question, as amended, to be agreed to.

Resolved, That this House congratulates the Government on the restructuring of the electricity supply industry in England and Wales, the highly successful flotation of the regional electricity companies and its plans for floating National Power and PowerGen; and welcomes the many benefits this privatisation will bring to consumers, employees arid the taxpayer.