Electricity and Gas Industries

HC Deb 02 July 1991 vol 194 cc227-69 7.13 pm

Mr. Frank Dobson (Holborn and St. Pancras)

I beg to move, That this House deplores the abject failure of the Government to prevent unrestrained increases in the profits of the gas and electricity companies and in the pay and perks of their Directors; notes that these profits, which are being achieved at the expense of the customers, damage the long-term interests of the country and result from policies which promote energy sales rather than energy saving, harm the environment, add to the trade deficit and reduce investment in research and development; and calls upon the Government to introduce effective measures to protect the interests of customers and to use its powers as a major shareholder in National Power and PowerGen to block those policies which the Prime Minister has said he deplores.

Mr. Deputy Speaker (Sir Paul Dean)

I inform the House that Mr. Speaker has selected the amendment in the name of the Prime Minister.

Mr. Dobson

The past few months have exposed the Government's electricity privatisation for the squalid racket that it has become. It is a racket that has been conducted at the expense of taxpayers and of customers. I remind Conservative Members that the electricity companies' assets were built up from the bills paid by customers, yet they were sold off at a fraction of their real value. According to the books, those assets were worth £29 billion, but they were sold for a little more than £12 billion. The Government say that they do not accept those figures and that the audited accounts count for nothing—the only real value of the companies was what the stock exchange would pay.

When the regional electricity companies were sold in December, the Government put the part-paid shares on the market at 100p each and, before the end of the day's trading, they were trading at 160p, a loss to the taxpayer of £1.2 billion in two and a half hours. No profligate Labour council can compare with that.

Nothing daunted, in February the Secretary of State put National Power and PowerGen on the market, again at 100p for a part-paid share. By the end of the first day's trading, the shares were trading at 137p—a loss to the taxpayer of another £0.4 million.

Mr. Patrick Nicholls (Teignbridge)

The hon. Gentleman is very concerned about losses to the taxpayer, but will he confirm that he stands by the pledge given by the hon. Member for Dagenham (Mr. Gould) to The Times on 14 September 1989 that dividends would be taken from taxpayers without any recompense? Is that what the hon. Gentleman calls loss to the taxpayer—confiscation by the state?

Mr. Dobson

If the hon. Gentleman can do no better than quote from the Tory party brief, of which, as usual, I managed to get a copy from the photocopier, he should not bother us.

Mr. Nicholls

Yes or no?

Mr. Dobson

Perhaps the hon. Gentleman should be breathalysed so that we can get some sense out of him.

Mr. Nicholls

On a point of order, Mr. Deputy Speaker. Labour party policy has been quoted to the hon. Gentleman, who owes the House an explanation. Will he say yes or no?

Mr. Deputy Speaker

Order. Let us get on with the debate.

Mr. Dobson

I owe the House nothing; the hon. Gentleman owes us an apology.

According to the Government's own figures, and according to the figures in the Financial Times, by 14 June this year shares in the regional electricity companies, which had gone on the market at 100p each, had at some stage traded at more than 200p. Some have fallen back since, but the Government sold the regional companies at a valuation that they have given to me—and I accept their figures for the sake of argument—of £5.2 billion. By 14 June the stock market valuation had increased to £7.4 billion, an increase of 44 per cent. During the same period, the stock market had risen by only 16 per cent.

National Power and PowerGen were sold by the Government at a valuation of £2.2 billion. They are now worth £2.7 billion on the stock market, an increase of 22 per cent. During the same period, the stock market as a whole rose by only 2.7 per cent. Those increases were at the expense of the taxpayer and were the result of the gross incompetence of the Secretary of State and, even more so, of the expensive collection of advisers from the City who advised him on the sale. In total, he has spent more than £500 million on City advice and underwriters' fees during the electricity privatisation process. If anyone dismisses that as an inconsiderable sum, I remind them that it is approximately the same amount as Lloyd's lost last year and about which there was much moaning and gnashing of teeth in the City. Of course, there was no moaning and gnashing of teeth about this £500 million because the City received it—it did not lose it.

Last year, prices to the consumers of domestic electricity were increased at a rate that was intended to be higher than the rate of inflation. As a result of the Government's incompetence, inflation soared, so the prices were not as high as inflation. However, this year, once again, prices for the domestic customer have been increased at a rate higher than the general rate of inflation.

The profits that have been announced over the past few weeks have been dramatically higher than the estimates that the Government made as recently as December last year. In the case of South Western Electricity, the profits were 48 per cent. up on the Government's estimate of December last year. What has maddened people most are the directors' pay increases which are so large that they beggar description. Since privatisation, there have been cuts in staff and further cuts are proposed. There have been cuts in research and development, and massive further cuts are proposed. There have already been cuts in training and further reductions are proposed. Coal and gas imports are being proceeded with at a rate that is becoming increasingly damaging to the balance of payments. All round the country, people are receiving reports of increasing interruptions to electricity supply. It is clear to everyone that the system of regulation is totally feeble.

All that I have described is a far cry from what the Tories promised. In their White Paper of February 1988, they set out what they called "principles" governing electricity privatisation. In view of what has happened, the list looks like a sick joke. The first principle was Decisions … should be driven by the needs of the customer. None of the customers who have written to me over the past few weeks has said that he needs the electricity bosses to get pay increases ranging from 50 per cent. to 200 per cent.

The White Paper went on to say: Competition is the best guarantee of customers' interests. Perhaps the Tories should tell that to the domestic customers who still have to buy their electricity from a local monopoly because there is no competition for them and because only businesses can shop around.

Mr. Anthony Coombs (Wyre Forest)

rose—

Mr. Dobson

Business users have seen 15 per cent. reductions in the price of electricity to them, while domestic customers have seen their prices rise by more than 20 per cent.

Mr. Coombs

Will the hon. Gentleman give way?

Mr. Dobson

No, I will not give way for the moment. The White Paper went on to say: All who work in the industry should be offered a direct stake in their future, new career opportunities". The words "new career opportunities" must ring strangely in the ears of the 8,000 people from the industry who will lose their jobs as a result of rationalisation. The words will ring even more rottenly in the ears of the scientists at the central electricity research laboratory, one of the leading electrical laboratories in the world, which National Power intends to close because it is not doing stuff that is of immediate benefit to the shareholders. People throughout the country are disgusted by the pay rises that the directors of the companies are giving themselves. As I have already said, there is a combination of greed and opportunity. The directors have supplied the greed and the Government have supplied the opportunity.

It is no use the Prime Minister heaping blame on the directors. The Cabinet authorised the increases and knew what would happen. It is no good the Cabinet pretending that it had nothing to do with the increases and washing its hands of the matter. It is as though Pontius Pilate were about to become the patron saint of the Tory party.

Mr. Malcolm Moss (Cambridgeshire, North-East)

Will the hon. Gentleman confirm to the House that, under the regulatory pricing formula, the salary increases about which he has spoken cannot be passed on to the consumer? They must be found out of operational efficiency.

Mr. Dobson

I must confess that it is not at all clear to me that that is the case. That is certainly not the response that the newspapers and the rest of the media have got when they have approached Professor Littlechild, the regulator.

In the Government's own prospectus for all the electricity companies, it is clearly stated that directors' pay will be increased to levels which are more appropriate to a private sector company. In other words, the directors will get massive increases. The Cabinet must have known that when it approved the terms of the prospectus before the launch. It must have known when it approved the prospectus what had happened up to that point with salaries in British Telecom and British Gas. From when British Telecom was in public ownership until the point at which the Government approved the prospectus, the chairman's salary had risen by 550 per cent.—from £67,000 to £374,000. The salary of the chairman of British Gas, from when the industry was in public ownership until the point at which the prospectus was approved, had risen by 323 per cent.—from £68,000 to £220,000. Those facts must have been known to the Secretary of State and his colleagues when they approved the prospectus.

Ministers' knowledge would not have been based only on the experience of those companies. The Secretary of State was not satisfied with observing what had happened elsewhere. He sought advice from the City and, of course, the taxpayer had to pay for it. Coopers and Lybrand Deloitte advised him from 1989 until 1990 on salaries for the directors and senior executives of what were to become privately owned companies. I asked the Secretary of State to place that advice in the Library, but he refused today to do so because, he said, it was "confidential". I bet it is. If the advice was placed in the Library, it would reveal that the Secretary of State and the Prime Minister knew all about the increases that the Prime Minister now deplores. For the Prime Minister to deplore in public what he has approved in private is sheer humbug. To do so on television is mega-humbug. It is no good for Tory Members to moan on about the increases and to say that they are shameful, extreme and should not have gone ahead. They voted for the privatisation and they knew what was happening because they knew, as well as I or any of my hon. Friends did, what had happened in the other privatised industries. It is too late for them to claim that they did not know.

Mr. James Arbuthnot (Wanstead and Woodford)

Which would the hon. Gentleman prefer—high salaries for chief executives and prices going down in real terms or low salaries for chief executives and prices going up in real terms, as happened under Labour?

Mr. Dobson

Over the period in question, both gas and electricity prices have gone up in real terms, so the hon. Gentleman does not offer me a proper choice.

All the Tories here today, especially members of the Government, knew what was happening. If they genuinely deplore the increases, the question that arises is what they are going to do about them. The answer appears to be nothing. When the matter was first raised with the Prime Minister, he told the House that he condemned the increases. He said that the Government could do nothing about them, even at National Power and PowerGen, where they own 40 per cent. of the shares. He said that they had said that the Government had no intention of using their shareholding."—[0fficial Report, 27 June 1991: Vol. 193, c. 856.] That statement was not quite true and certainly was not the whole truth because the prospectus actually says: Her Majesty's Government does not intend to use its rights as an ordinary shareholder to intervene in the commercial decisions of National Power or PowerGen. It does not expect to vote its shareholdings on resolutions moved at general meetings although it retains the power to do so. If the Government did not want the power to do so, they could have given up the power in the prospectus. It is no good their saying that that is not so.

Will the Secretary of State tell us whether, if another shareholder moves to block the increases at the annual general meeting, which I understand will be in September, the Government will sit on their hands? Will they show that their attitude to the increases is all words and no action? Will they perhaps remember that the people who are getting the increases are the very people who have benefited most from the massive income tax cuts at the higher levels over the past few years? Will the Government remember that they are the very people who, the Government think, should not pay national insurance on their income above £20,000? Will they think about that before deciding what to do at the annual general meeting?

Other people—admittedly, not many Conservative Members—claim that the increases are justified on the ground that they are the rate for the job. If the rate for the job of chief executive of PowerGen and National Power was right at £75,000 last year, how can it be right at £200,000 this year? These are not new and better people who have been specially recruited; it is the same old lot getting twice the money.

Sir Graham Day, the chairman of PowerGen, says that the increases are morally justified, but he is scarcely an objective judge. He has been a director of no fewer than four privatised companies. He has been chairman of three privatised companies and is still chairman of two of them. From his point of view, privatisation appears to be a game of musical chairs; every time the music stops he is sitting in the chair. In addition to being chairman of Cadbury Schweppes, of PowerGen and of the Rover Group and a director of British Aerospace, he is—God help us—on the national health service policy board. He believes that the increases are justified. No doubt he tells that to the nurses.

In an interview in the Daily Express in 1988—I always like people to give interviews to the Daily Express—Sir Graham said what he looked for in a good employee. No doubt he found it in Mr. Ed Wallis, the chief executive of PowerGen. He said that it is somebody who also tries to give a little more than he is paid for. At £200,000 a year, Ed Wallis will have his work cut out satisfying Graham Day.

The directors of National Power and PowerGen, who have pocketed enormous increases, are responsible for running only two of the four companies that were created from the old Central Electricity Generating Board. The other companies are the National Grid Company and Nuclear Electric. Not only are those directors paying themselves more, but there are more directors. In 1988–89, the CEGB, running all four functions, had only 10 directors. At the latest count—it keeps increasing—the four successor companies had no fewer than 41 directors. In 1988–89, the CEGB's 10 directors, poor devils, managed on joint pay of £646,000. I have not been able to obtain the figures for the board members of Nuclear Electric, but before the new increases the directors of the other three companies that resulted from the break-up of the CEGB—National Power, PowerGen and the grid company—were getting £2 million between them, and I expect that after the current round of increases that total will rise to between £4 million and £5 million.

At the same time, those directors are urging pay restraint on staff and are keeping the staff's pay increases down to less than 10 per cent. Many of the staff will find that galling. The employees of East Midlands Electricity will find it particularly galling. Hon. Members will recall the blizzards in the east midlands, when those staff performed heroically in dreadful, cold, vile conditions to restore the supply. Their pay increases will be kept below 10 per cent., but the directors, who sat in their warm, air-conditioned offices will award themselves about 50 per cent.

Mr. Simon Burns (Chelmsford)

Warm and air-conditioned? Will the hon. Gentleman give way?

Mr. Dobson

No. If the hon. Gentleman cannot make a decent joke from a sedentary position, I am damned if I will let him stand up to do it.

The other regional companies all say that these big salary increases are justified because their profits have increased. When one asks why their profits have increased, they say that it is because the cost of coal has fallen and because they had higher sales in a bad winter. Those are the economics of the madhouse: a director is paid more because of bad weather. We have heard much about cold weather payments, but the idea of somebody doubling his salary as a cold weather payment is preposterous. With all this interest in the weather, you, Mr. Deputy Speaker, can see why PowerGen is sponsoring the weather forecast.

We can expect every regional electricity company to increase top salaries by about 50 per cent. Compared with the enormous increases of National Power and PowerGen, a 50 per cent. increase is beginning to seem moderate, but it will not seem so to the 6 million pensioners and poor families who cannot afford to keep warm in winter—even in an average winter—because gas and electricity cost too much. It will not seem reasonable to the growing number of people who are out of work, to people in the private sector who are taking pay cuts to help keep their firms afloat, to people whose homes are being repossesed because they cannot pay their mortgage or to people who cannot pay massively increased rents.

The salary of the chairman of British Gas has increased by 66 per cent. from £220,000 to £370,000. Last year, gas prices increased by 14 per cent. and profits and directors' pay increased. It would appear that the attitude of the bosses of British Gas to customers is "Pay up and shut up." They seem to have changed the motto from "Tell Sid" to "Sod Sid".

Who will stick up for the customer? I hope that the Secretary of State will not say that it will be the Office of Electricity Regulation. This year, despite the falling cost of coal and other costs, OFFER nodded through domestic price increases of more than 10 per cent., despite the Government's target for inflation to fall to 5 or 6 per cent. That was a good increase for the electricity companies, but people tell me that it was not the regulator's fault. They say that poor Professor Littlechild had to accept the formula that the Government had given him and that OFFER had to accept the increases. If that is true, it seems to me, if I may use an elderly phrase, that the Government have set up an OFFER that cannot refuse.

What we want is an OFFER that can refuse. My doubts about the regulatory system are not confined to the system: I have doubts about Professor Littlechild, the regulator. His friends tell me that he invented the system that he is running, so he has something to answer for. From most of his public pronouncements and documents he seems to be more of an ideologue than a public servant. He seems to be one of those people, rather like Ministers, who recite the words "Competition is good for customers" and think that once they have said that everything is settled. The only problem is that competition has been good for moderate-sized business customers who have been able to shop around, but domestic customers cannot shop around and continue to be faced with a local monopoly that is shoving up its prices far quicker and higher than its costs.

The regulators for the electricity, gas, water and telecom industries are not working well enough and most people recognise that they need to be substantially improved. We have been promised improvements in the Prime Minister's citizens charter. If the documents leaked to my hon. Friend the Member for Dunfermline, East (Mr. Brown) are correct—they usually are—it does not appear that the citizens charter will strike fear into the hearts of the directors of those utilities.

I understand from other sources that the Department of Energy has said in the review that it does not want changes to be made because it is satisfied with the regulatory system already in place. All that I can say is that if it is satisfied with that, it will be satisfied with anything. Almost everybody in the country and in the business realises that there are things wrong with the regulatory system. It is far too feeble and is not doing the job that is necessary.

Mr. Richard Page (Hertfordshire, South-West)

Clearly, the hon. Gentleman is convinced that his party will win the next general election. I hope that in the tail of his speech he will come to the Labour party's policy. I understand that part of that policy is to renationalise the grid. How much does the hon. Gentleman think that that will cost and how soon after the general election will it occur? Will he elucidate Labour party policy for us?

Mr. Dobson

I hope that if the hon. Gentleman waits a "page" or two he will be satisfied.

One of the problems about everybody's legitimate concern about top pay is that it has covered up many other developments which have been revealed in the interim results and which will damage the country and the customers. National Power has made it clear that it is about to make savage cuts in research and development spending. The central electricity research laboratories are threatened with closure. The company said in a letter to my hon. Friend the Member for Cardiff, West (Mr. Morgan) that it would no longer carry out research into what it described as national problems. If National Power will not carry out research on national problems, who will? If no one in this country does research on those major problems, the research that we—

Mr. Andrew Hargreaves (Birmingham, Hall Green)

Is this another priority commitment?

Mr. Dobson

We now have someone apparently so cloth-eared that he can predict what we will say.

If the research is not done here, it will be done in Germany, Sweden, France and the United States, and we shall have to buy the equipment that we need from those countries instead of making it here.

National Power has also said that it wants to burn gas, whatever effect that may have on our limited gas reserves. The company recognises that those reserves are not enough, so it is already setting about importing more gas from Norway, whatever impact that may have on our balance of payments. National Power says that importing foreign coal is a "central plank" of its fuel strategy, whatever its impact may be on the balance of payments and on Britain's coal industry.

National Power has also said that it intends to burn orimulsion, which is undoubtedly the filthiest fuel in the world. Why will it do that? It will do all those things because they are in the short-term interests of the people running the company and in what those people believe to be the short-term, popular interests of the shareholders. That is their first and only consideration. They do not consider the long-term interests of customers or of this country.

We believe that privatisation is a shambles. We can amply demonstrate that it has damaged the interests of customers. It has outraged most people by the levels of pay given to its bosses. We do not believe that most people are satisfied with the profits accrued so rapidly—profits which are so much greater than those which the Secretary of State was responsible for predicting in December. We do not believe that the great experiment is succeeding, or that the electricity industry should have been subjected to a giant experiment. We believe that the people working in the industry deserve the minimum of change and disturbance, if they are to be allowed to do their work. We have said all along that we will bring the National Grid Company—[Interruption]—back into public ownership. [HON. MEMBERS: "A priority."] It will be a high priority, I assure hon. Members.

Mr. Phillip Oppenheim (Amber Valley)

Will the hon. Gentleman give way?

Mr. Dobson

If the hon. Gentleman will give way to me, I shall continue.

We will bring the grid company back into public ownership and give it additional duties and powers. For a start, it will have a duty to maintain security of supply—a duty that no one has at present—and a duty to consider the impact of the industry on the balance of payments, on the environment and on our fuel reserves. We shall also change the rules for the regional electricity companies and oblige them under their licences to invest some of the profits in energy conservation and efficiency.

The system that the Government have established encourages more and more sales of electricity. Almost everyone apart from the Government recognises that energy saving, not energy sales, must be the priority for the future and that is the priority that the industry will have after the next general election, when we implement our policy.

Mr. Oppenheim

On a point of order, Mr. Deputy Speaker. Is it in order for me to ask whether it is in order for the Labour Front-Bench spokesman to say that he would give the House an idea of how much it would cost to buy back the industry and then totally fail to do so?

Mr. Deputy Speaker (Mr. Harold Walker)

Order. Let us get on with the debate.

7.46 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 continuing with its successful policy of privatising nationalised industries; notes the recent successful privatisation of the electricity supply industry in Great Britain; and welcomes the benefits that privatisation of the electricity and gas industries has brought and will bring to consumers, taxpayers and employees.". It is less than six months since the House held a debate on electricity privatization—at the Opposition's instigation—under the shadow of the then imminent Gulf War. The privatisation has now been completed with outstanding success.

The hon. Member for Holborn and St. Pancras (Mr. Dobson) has expressed great indignation about a great many related issues, which I will deal with in due course, without anywhere acknowledging or seeming to recognise that the points that he raises are dwarfed in importance by the continuing impact of privatisation, which is already serving the interests of customers, the taxpayer and employees far more effectively than any form of Government intervention.

Let me refer the House again to the principles underlying the privatisation of the gas and electricity industries, and the transformations that they have already brought about within the energy market.

First, for the customer, privatisation has introduced guaranteed standards of performance. Only yesterday, guaranteed standards for electricity were introduced. Offer—the Office of Electricity Regulation—has set standards for restoring supplies after faults, repairing company fuses, providing a meter and many other services. If those standards are not met, the electricity consumer is entitled to compensation. Domestic customers can get £10 if an appointment is not kept and £20 if supply is not restored on target. The regulator has made it clear that he will examine standards of service when he resets the price formulae.

For gas, the resetting of the price formula will shortly be accompanied by a package of standards of service. I expect those to include obtaining a supply, continuity of supply, meter reading, billing and appointments. The setting of those standards will be a significant step forward in customers' rights.

If customers are not served properly by privatised utilities, for the first time there is a proper means of independent redress. We have set up independent regulators. They have extensive powers to put matters right. If the existing terms of the licence are not strong enough, the regulators can refer the matter to the Monopolies and Mergers Commission. New, tougher licensing conditions can he created where they are needed.

Not only are standards of service set and guaranteed but prices are kept down by regulation.

Mr. Rhodri Morgan (Cardiff, West)

The Secretary of State said that all this was happening for the first time. Will he take it from me that the East Midlands electricity board introduced guaranteed service standards, with refunds, back in 1985?

Mr. Wakeham

This is the first time that such standards have been set right across the industry, and the important point is that the regulators will be independent of the industries.

Since privatisation, domestic gas prices have fallen by 11 per cent. in real terms and standing charges by 20 per cent. in real terms. Price control provides a strong incentive to efficiency. It has been remarkably successful in producing efficiencies in gas supply which have enabled British Gas to increase its profits as well as to pass the benefit of real price reductions to the consumer. As a result, for the future, the price formula is being tightened still further. From next year, British Gas must meet the price target of RPI minus 5 rather than RPI minus 2. Restraining profits, as the Opposition's motion advocates, is a recipe for inefficiency.

Electricity prices for domestic consumers have fallen by about 2.5 per cent. in real terms over the past seven years. What a contrast to the position under Labour, when prices rose by 22 per cent. in real terms—up 2 per cent. every six weeks. In future, regulations will protect consumers from unjustifiable increases. For a three-year period, prices are regulated by reference to the retail prices index.

Mr. Burns

I have been listening carefully to my right hon. Friend, but may I check that I heard him aright? Did he really say that electricity prices for domestic users have fallen by 2.5 per cent. over the past seven years whereas under the Labour Government they increased by 22 per cent. in real terms, and that pensioners, the disabled, those on low incomes and the unemployed faced price increases in their electricity bills every six weeks?

Mr. Wakeham

That is correct. My hon. Friend is listening very carefully to what I am saying, and I am grateful to him for it.

Of course, competition is the best guarantee of customer service, efficiency and keen pricing, so we have taken steps to ensure that competition is introduced wherever possible in the electricity industry. Already competition is working for the customer. Thousands of industrial and commercial companies have had to pay lower prices for electricity. Professor Littlechild said in his director general's report for 1990 that some customers had achieved as much as 15 per cent. savings as a result of competition. Competition in generation will keep the costs of electricity down in the future as new generating projects come forward.

It would be nonsense to return to the days of nationalisation when Governments intervened in an arbitrary fashion, when customers had no real means of redress and when it was not even worth complaining. Now we have real incentives for efficiency and customer service. That is why the privatised industries are leading the way. That is why we want to extend such benefits to the public sector through the citizens charter.

Those are the benefits for the customer. For the taxpayer, the privatisation of the electricity industry will raise proceeds of more than £14 billion. The privatisation of gas raised proceeds of £8 billion. Given that the Labour party's policy proposals imply increases in public expenditure of some £35 billion, the proceeds from privatisation should not be dismissed by them in such cavalier fashion.

Growing profits brought about by efficiencies unlocked by privatisation, even at a time of falling real prices, mean greater tax receipts for the Treasury. It is nonsense to say that growing profits damage the long-term interests of the country; growing profits are needed to finance the requirements for capital investment to maintain and expand the electricity and gas supply systems. In addition, the taxpayer is no longer left to finance a poor record of mismanaged investment in massive projects, not finished on time or to cost, and poor profitability.

Improving prospects, rising share prices, cost-cutting and greater efficiency in all the companies should be welcomed. They represent a clear gain to the nation in contrast to the old order of rising prices to consumers with no means of redress, and very little incentive for improved efficiency. Those were very real costs and burdens on the nation.

What are the benefits for employees? For the first time they are able to own a real stake in their industries. They were also able to participate directly in the benefits of the flotation itself. Ninety-eight per cent. of employees in the electricity industry took up shares. Four and a half years after privatisation, 87 per cent. of employees of British Gas hold shares in their company. Those employees have much to fear from the return of a Labour Government. The hon. Member for Dagenham (Mr. Gould) has made it clear that shareholders in privatised industries would be punished by a Labour Government.

For the future, under our policies employees can participate in the growing success and growth in their companies through share save schemes.

Mr. Jack Thompson (Wansbeck)

What would the Secretary of State say to the 250 employees at a power station in my constituency who now face redundancy? What about their share in the industry? Their jobs have gone, and the few shares that they may have bought before they realised that there was a prospect of losing their jobs will not keep them for the rest of their lives.

Mr. Wakeham

Everyone is unhappy about anyone who is made redundant, in whichever part of the country it may be. A whole range of overmanning problems and inefficiencies existed and privatisation has been directed to try to improve matters. One regrets redundancies for whatever purpose. I know that the companies concerned are seeking to do what they have to do by voluntary means if at all possible, although that is strictly a matter for them.

Mr. Peter Hardy (Wentworth)

On the same point, is the Secretary of State aware that, before the Electricity Bill was presented to the House, I asked his predecessor whether it was not clear that privatisation was liable to result in redundancies and a reduction in the size of the labour force in the electricity supply industry? The right hon. Gentleman's predecessor said in the House that, so far from there being redundancies, privatisation would lead to more employment in the industry. That hardly bears out the experience of my hon. Friend the Member for Wansbeck (Mr. Thompson).

Mr. Wakeham

An efficient electricity industry producing low-cost electricity is an important factor in our industrial growth, and will certainly improve the number of jobs.

Mr. Anthony Coombs

My right hon. Friend rightly emphasised the improvements in efficiency, competitiveness and accountability that privatisation has brought with it. He also mentioned the benefits to the taxpayer as a result of privatisation proceeds. My right hon. Friend will have heard the hon. Member for Holborn and St. Pancras (Mr. Dobson), the shadow Secretary of State for Energy, say that a high priority of any future Labour Government would be to spend money on renationalising the national grid. Will my right hon. Friend take the opportunity of asking the hon. Gentleman again what that would cost? Last week, Labour's spending policies were costed at an extra £35 billion—15p on the lowest rate of income tax—and renationalisation costs were not included in that. The hon. Member for Holborn and St. Pancras says that renationalisation is a high priority, so he should tell us what the effects of that policy would be.

Mr. Wakeham

My hon. Friend is absolutely right in saying that the Labour party's proposals were costed at some £35 billion extra. That is worth repeating because it is important that people in Britain should know what the Labour party's policies imply. Moreover, that figure does not include the cost of renationalisations conducted under those policies. Having said that, I think that the most serious question about the renationalisation of the national grid is how the grid would operate in relation to the private sector part of the industry—the part that the Labour party does not intend to renationalise, if I understand its policies correctly. I think that we would find that many of the inefficiencies inherent in the old system would be brought back by the bureaucrats who would then be running the national grid. That is a serious matter.

In the past few years, the services offered by these privatised industries to customers have been transformed. There are now guaranteed standards of service, backed up through our regulatory regime by tough financial penalties for failure to meet them.

When Labour was in office, no such guarantees existed: customers were subjected to unaccountable, inefficient and unregulated monopolies. Little wonder, then, that disconnections for debt in both industries have plummeted to half the intolerable level we inherited from Labour.

On every count—prices, services, standards, disconnections, investment—the privatised record beats the nationalised record hands down. That is the background against which the hon. Member for Holborn and St. Pancras has criticised the recently reported board pay levels.

Let me state clearly our policy on directors' pay. The Government's view is that salaries should be sufficient to recruit, retain and motivate. Most companies in the private sector have a remuneration committee consisting of non-executive directors. It is their task to determine the pay of the chief executive and senior directors.

The same now applies to the companies we have privatised. The current salary levels are a matter for those companies. Government approval was not sought—nor was it required.

The first point is that increasing directors' salaries has no effect on prices to consumers. The price formula is intended to exert downward pressure on costs. It does that by regulating prices without regard to any subsequent increase in costs which, like directors' salaries, are within the control of the company.

It is not for the Government to second-guess the views of the companies. But that does not mean we should not express a view about salary levels. We have done so. The Government believe that it is essential that pay at all levels reflects the economic facts of life and the importance of beating inflation. The rate at which salary levels for directors in privatised companies move to private sector levels needs to be moderated to take this into account. Directors need to exercise both leadership and restraint.

Secondly, the salary levels are not out of line for companies of comparable size. The companies themselves have pointed out that British Gas ranks amongst the six largest and most profitable United Kingdom companies, whereas the chairman's basic salary ranks 38th in a survey of the United Kingdom's top companies. Similarly, PowerGen ranks 60th in the United Kingdom list of top companies and the chief executive's pay is ranked 97th.

Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak)

None of us wants to go in for spurious statistics. However, referring to the link that Sir Graham Day has made between the pay of the chief executive of PowerGen and that company's ranking in the FT100 index, does my right hon. Friend really accept the balderdash that running a privatised monopoly is as difficult as running an industry such as GKN or any other company that has to withstand the heat of the day and losing money? If we are arguing that the position of the privatised monopolies is the same as that of a company that has to earn its money the hard way, we are on hard and stony ground.

Mr. Wakeham

It is not for the Government to second-guess the salaries that companies pay—[Interruption.] I have expressed my views about some of the salary levels and the rate of increase and would simply add that it is not correct to say that PowerGen is a monopoly—

Mr. Beaumont-Dark

It is 85 per cent. a monopoly.

Mr. Wakeham

It is nothing approaching that—it is more like 30 per cent. A good many other companies are in the business.

Mr. Dobson

I can understand why the right hon. Gentleman is saying that the Government do not want to second-guess the companies, but if that is of no consequence to the Government, why did they spend taxpayers' money on getting advice from Coopers and Lybrand Deloitte about the salaries that should be paid to those people?

Mr. Wakeham

As the hon. Gentleman has not read the report and does not know what is in it, I do not know whether he knows that that is the position—

Mr. Harry Barnes (Derbyshire, North-East)

Does the right hon. Gentleman?

Mr. Wakeham

I am not prepared to refer off the cuff to a report that I told the hon. Member for Holborn and St. Pancras earlier that I was not prepared to reveal to the House.

Mr. Simon Hughes (Southwark and Bermondsey)

In two consecutive sentences the Secretary of State has said that he is unhappy about the increases that have been awarded—paradoxically, to the executive directors by the non-executive directors and to the non-executive directors by the executive directors; and that their relative pay was lower given their importance in the British industrial sector. That does not lead us to any clear conclusion. Is it his view that the increases should be reduced before the annual general meetings, and what is he going to do about it? The Chancellor invited the heads of the banks to see him because they were over-charging. Will the right hon. Gentleman invite the heads of the privatised industries to see him so that he can tell them to reduce their salaries?

Mr. Wakeham

The important point is that the salary increases—and it is the increases of which I disapprove—do not affect the price to the consumer—[Interruption.] That is an important point. It is absolutely right.

The purpose of privatising the industries was to allow the directors and shareholders to make those decisions. The public interest is protected by the regulator because of the price of the product. Therefore, it is not appropriate for the Government to intervene in such cases. We have no grounds on which to intervene in the case of the companies that are 100 per cent. privatised because we have no shares. We retain a 40 per cent. shareholding in National Power and PowerGen. We made our position quite clear in the prospectus. The hon. Member for Holborn and St. Pancras read it out correctly. I am amazed that he thinks that breaking our word would be a small matter. That view reflects more on a potential Labour Government than on anything else. The Government do not accept that it is a small matter to break our word.

Mr. Dobson

Just to clarify a point about the next Labour Government, will the right hon. Gentleman confirm that the Government's own prospectus makes it clear that, on entering Government, Her Majesty's Opposition intend to appoint directors and to exercise the powers of a 40 per cent. shareholder?

Mr. Wakeham

If that should ever arise, I strongly suggest that the hon. Gentleman takes legal advice on his powers as a shareholder and on the way in which he should operate. If he does, he will find that he has to operate within certain constraints. The hon. Gentleman would be well advised to consider such matters carefully.

Mr. Christopher Hawkins (High Peak)

rose—

Mr. Wakeham

I shall give way, but this will be the last time.

Mr. Hawkins

If the Government do not intend long term to exercise the shareholders' duties of restraint in such matters, should they not consider relinquishing their shares so that others can fulfil those duties and act as a restraint? There is something exceedingly curious about the British. When really high incomes are paid to pop singers, tennis players, top footballers and television presenters, that does not seem to worry the British; but as soon as somebody in industry starts to earn a high salary, there are screams and shouts of abuse. That is an odd priority for a nation. Does my right hon. Friend agree that it is not the pay levels that are objectionable as much as the speed of the increases, their timing and the example that is being set to workers at a time when many other people are losing their jobs? Does he agree that the scale, timing and example are beyond belief?

Mr. Wakeham

My hon. Friend heard what I said, and what he has said is not very different—although I have not expressed any views about pop stars and tennis players.

Mr. Michael Grylls (Surrey, North-West)

Does my right hon. Friend agree that the consumers' interest—we are here to represent the consumers, as we no longer run the companies—is better served when directors are paid a market salary, as they can now be paid under privatisation, than was the case under nationalisation, when the salaries were set by Parliament so low that the best people could not be recruited?

Mr. Wakeham

My hon. Friend is absolutely right. Not only are the people not the same, but they are not doing the same job. Indeed, they are doing extremely different jobs and a number of them have been recruited in the market—

Mr. Geoffrey Lofthouse (Pontefract and Castleford)

rose—

Mr. Wakeham

I said that I had given way for the last time.

What is the Labour party's position on this matter? Its most recent policy review document, "Opportunity Britain", gives the distinct impression that the private sector has nothing to fear from the unlikely prospect of a Labour Government. It states that, more than ever before British industry now needs a long-term commitment from Government, but not in the form of indiscriminate subsidies or second guessing industry". That was only three months ago, but, as we have seen today, those words are at best hollow and at worst totally misleading.

The reality of Labour's policy is distinctly different from the rhetoric, for what the hon. Member for Holborn and St. Pancras has done today—in sharp contradiction of his party's policy statement—is to propose a series of policies precisely to second-guess successful British industries by seeking to control pay and profits and to interfere in the decisions of management.

Indeed, I wonder whether the right hon. and learned Member for Monklands, East (Mr. Smith) is aware of the line that the hon. Gentleman is taking. But, as is often the case, as soon as Labour's policy is challenged, it falls apart at the seams. Labour Members' policy on industry has not changed. They think they know better than industry how industry should be run, in spite of all the evidence since the second world war that that is not so.

That is true of the issue of pay, about which the hon. Member for Holborn and St. Pancras made great play. On that subject, too, Labour's divided and muddled position lacks credibility. How would Labour Members seek to control pay? The answer is not clear. Their party leader believes that the trade unions can simply be persuaded to moderate their pay claims at the same time as a minimum wage is introduced.

If you're a Government that acts in a way that stimulates the economy properly … the moderation of wage claims is something a Government can really ask for", he says. But as the leader of one big union admitted, any idea that the unions could be so persuaded is "deranged".

The truth is that Labour's plans for a minimum wage would, at the same time as destroying hundreds of thousands of jobs, lead to a pay explosion throughout the economy. Labour would have no way of controlling it without resorting to the sort of statutory controls that failed dismally in the 1970s.

That is precisely what Labour offers—a return to the corporatism that should have died its death during the winter of discontent, a return to pay policies and credit controls and a return to the failures of nationalisation, red tape and bureaucratic interference. The hon. Member for Holborn and St. Pancras let the cat out of the bag. Labour has not changed, and never will.

Unlike our opponents, we believe in free enterprise and in the private sector. Our privatisation programme—now being copied throughout the world—has transformed vast sectors of British industry, bringing extensive benefits to customers, to the taxpayer and to the employees of those industries. Throughout the rest of the 1990s it will continue to do so.

I commend the amendment to the House.

8.13 pm

Mr. Geoffrey Lofthouse (Pontefract and Castleford)

I am glad to have this opportunity to put a point to the Secretary of State that I would have raised had he given way to me a few moments ago. While he clearly disapproves of the colossal increases that members of senior management of the electricity companies have received, he defends those increases. Indeed, he spent several minutes of his speech defending them.

It is clear that the Secretary of State and his Department have become impotent in the dealings with privatised industries. That being so, one wonders why we need a Secretary of State for Energy. He spoke at length about the inefficiency of those industries when they were in the public sector. Is he suggesting that those who were running them at that time were inefficient because their salaries were fixed by Government? In other words, is he suggesting that they did not do their best in their jobs because they were not satisfied with their salaries?

Would the right hon. Gentleman suggest, for example, that Sir Walter Marshall was inefficient because he was dissatisfied with his salary? Has the right hon. Gentleman forgotten that Mr. Baker and Mr. Wallis were members of the teams who were running the so-called inefficient electricity industry of those days? Are we to believe that the new people, because of their much higher salaries, will work that much harder?

Either deliberately or inadvertently, the Secretary of State did not comment on what is likely to happen as a result of the decisions that are currently being made by the new, highly paid executives who are responsible to no one, not even to the right hon. Gentleman and his Department. Is he aware that those decisions will have a great bearing on the energy needs and supplies of the country? For example, their decisions will result in thousands of miners being thrown out of work and the sterilisation of millions of tonnes of British coal because British Coal is unable at present to meet foreign competition.

Mr. Baker, with his £200,000 a year salary, said recently that he intends to import 50 per cent. of the coal he needs. If that happens, our mining industry—as a result of decisions taken by people who are not democratically responsible to anyone—will be wiped out. Not only will thousands of jobs go, but, more importantly, our ability to meet our energy needs in the future will also disappear. Once our millions of tonnes of coal have been sterilised, that resource will never be retrieved.

After the medium term, perhaps after the longer term, we shall be at the mercy of supplies from abroad. For how long will their prices remain low? Supplies of gas and oil are finite and while we are using—in my view, wasting —gas for the generation of electricity and sterilising our coal, we must consider what we shall do to meet our energy needs in the very long term.

In a few moments from now, contracts will probably be agreed between British Coal and the electricity supply industry. Those contracts will involve the use of much smaller tonnages of coal than are now being used. If that is so, the coal industry will be so run down that only a dozen pits and 10,000 to 12,000 men will be left. An industry of that size will never again be able to meet the demands of the electricity supply industry. Is that wise policy? The effect on the balance of payments will show that it cannot be wise policy but simply to meet short-term market fluctuations or political dogma.

The Government say that if—God forbid—they win the next election, which is unlikely, they will privatise the coal industry. I hope that the Minister will answer these questions seriously. Does the Secretary of State or any of his colleagues really believe that, once they have slaughtered and butchered the coal industry, right down to the decisions by Mr. Baker and Mr. Wallis, the industry will be saleable? If British Coal cannot meet competition and win contracts now, what chance has a small private coal industry? Who will want to buy it? That is the problem facing the Government.

I regret, and I believe that the country will live to regret, the decisions taken, simply on a commercial basis, to wipe out what this country has always been privileged to have—a major source of energy supplied by coal. The action to wipe out that energy supply is nothing short of criminal. I hope that the Government have at least some control or persuasive powers over the negotiations to take place shortly. I hope that they will be based not purely on commercial factors but on security of supply. That is a major aspect and if we do not bear that in mind the country will regret the day that the Government implemented that foolish policy.

8.22 pm

Mr. John Hannam (Exeter)

This is another of Labour's groan and grumble half days. Give them a few headlines showing success by private industry and away we go with a whingeing and whining debate. It usually starts with the prospectus and launch of a newly privatised company. If the share price is right and the issue is successful, we hear cries of foul on the basis that the public has been denied the right return. If the issue flops because the share price has been set too high, we hear the same yells of derision. Luckily the Government have been so successful with their privatisations that the flops have not occurred. Labour Members cannot have it both ways.

The next stage of the groan and grumble campaign occurs when the new companies produce extremely satisfactory results at the end of their year's trading. Labour Members then squeal that the consumer is being ripped off. They would like to see poor results at the end of the first year so that they could point to the failure of privatisation.

The privatisation programme has brought higher standards from the private sector into the energy supply industry. The results show in improved profitability, lower prices in real terms and the introduction of competition. In the past five years, electricity and gas prices have fallen in real terms for industrial and domestic consumers. As my right hon. Friend said, what a contrast with Labour's record in the 1970s, when electricity prices rose by 2 per cent. every six weeks.

The Opposition motion refers to the Government paying more regard to the sale than the saving of energy. Although GDP has increased by 25 per cent. in real terms under this Government, energy consumption has remained virtually unchanged. Privatisation has put a downward pressure on prices under the regulatory regime and brought greater efficiency, greater flexibility in energy generation and greater consumer protection. For example, British Gas, which announced record profits of £ 1.3 billion despite bringing down gas tariff prices by some 14 per cent. in real terms since privatisation, has now brought gas costs down to about the lowest level in the whole of Europe.

Why has there been such a dramatic improvement? Since privatisation, British Gas has attracted a million new customers and productivity has leapt from 160 to 221 customers for each employee. Investment has dramatically increased. Last year, capital expenditure rose by over 50 per cent. to £1.2 billion. That amount was close to the total profits announced by that company and represents future security of supply for the British people.

The one element that has been lacking in the gas sector is competition, but a 90 per cent. limit has now been set on the sale of North sea gas to British Gas. It enables producers like Agas, BP, Mobil and Quadrant to supply gas to industrial customers in competition with British Gas. The role of Ofgas, the regulator of British Gas, has been steadily strengthened thanks to the diligence and perseverance of James McKinnon, its chairman. His new pricing structure means that domestic charges should fall by 5 per cent. a year over the next five years, with a further fall of 15 per cent. over the following five years. I look to Mr. McKinnon to devise a consumer repayment system on similar lines to those drawn up by the electricity regulator. He must also sort out the problem of the British Gas contract price increase of 30 per cent. for some of the United Kingdom's industrial users of gas, whom we want to enter electricity generation. I have great confidence in Mr. McKinnon and his ability to find a solution to that problem.

I am convinced that the electricity privatisation will be the biggest and most successful of all the Government's privatisations. The four new companies and 12 regional companies have all produced immensely popular flotations, followed by higher-than-expected profits in their first year. It is a success story and it should not be decried by the Labour party. Increased sales due to the colder spring and apprehension last year about the Gulf war have resulted in better-than-expected yields in the first year's profits. It is anticipated that, as the competiton in the electricity market hots up, with independent generators coming forward, downward pressure on prices will also increase.

It should be made clear that, under the price mechanism control written into the regime, the large pay increases that are causing such a stir cannot be passed on to the consumer. Consumers of electricity can benefit from a unique set of compensation payments available as from yesterday if the electricity companies fail to fulfil their obligations. They will receive £10 if an appointment on a specific day is broken; £20 if, within 24 hours of a fault occurring the supply is not restored; £20 if a meter is not supplied within five days of an order; and £10 if supply is interrupted through the fault of the company and is not restored within four hours. Other compensation payments are also available.

All those measures add up to an era of increased protection for consumers of gas and electricity, a new and environmentally protective supply and use of energy, and a reduction in costs. I forecast that during the next decade the new companies will produce even better results. They will be reflected not necessarily in higher profits but in higher investment and lower prices.

As for the recent spate of huge salary increases in the newly privatised industry, I asked for information from the Library on the relative position of those salaries compared to the salaries of heads of similar sized companies. The Guardian list shows that they are obviously still on the low side.

The hon. Member for Holborn and St. Pancras (Mr. Dobson) mentioned research going to Germany, so I asked for comparisons with equivalent chief executives abroad. Recently produced figures show that the executives in leading power generating companies in Germany still earn, on average, up to 50 per cent. more that Mr. Baker of National Power. The average pay of the seven-person executive body of the VEW generating plant in Dortmund is £213,000. In STEAG of Essen the average pay of the five-person executive body is £216,000; and the chief executive of Florida Power and Light in the United States earns £395,000. As The Independent quoted on 5 June British bosses lag in pay stakes despite big rises". These examples give a slightly clearer picture of the pay levels of our chief executives than do the statements by the Opposition spokesman. I agree with my right hon. Friend the Secretary of State that in this time of recession the improvements in their salary levels should have been phased in over a longer period, but I expect that the same row would have erupted among the Opposition even if that had occurred.

I reject the Opposition motion, which shows that the Labour party still does not have much clue about the workings of industry. All that Opposition Members want to do is to try to score short-term party political points. I urge the House to reject the motion.

8.31 pm

Mr. John McAllion (Dundee, East)

It is part of the survival plan of this Government to try to choose the moment of the next general election when their prospects of winning it are at their highest. That has involved them in trying to create an image that can be sold to the voters. Part of the image-making process has involved trying to persuade voters that the Tories can create a fairer Britain—an opportunity Britain, a phrase that they borrowed from somewhere else—and a Britain of decent public services and of equal citizens led by citizen John himself. The Prime Minister has even boasted that he will deliver what the communists have been struggling unsuccessfully to achieve for more than 100 years: the classless society.

We now know the sort of classless society that the Prime Minister had in mind. It is a society in which the bosses of the privatised industries, from National Power and PowerGen through British Telecom to British Gas, have awarded themselves five and six-figure salary increases—£50,000 here, £150,000 there and £160,000 in one case. Those are merely the increases in salary; the salaries themselves are much higher again—in the case of the chief executive of British Gas, £370,000 a year. We are expected to accept that these increases are fair, even though we know that these are the same men who have thrown thousands of their own workers on to the dole and told them to get by on £41.40 a week dole money and, if they cannot find a job within a year, on £39.65 income support. The Prime Minister, who claims to believe in the classless society, is the same Prime Minister who condones this sort of grotesque inequality and unfairness.

One of the excuses trotted out in defence of the privatised bosses' pay hikes is that the increases are necessary to raise the salaries to a level appropriate for a private sector company. On breakfast television this morning a spokesman for the Institute of Directors with all due solemnity assured anyone watching at that time of the morning that the average company director of a private sector company earns just £40,000 a year. He said that the sort of increases that the privatised bosses were awarding themselves were not typical of the private sector. So becoming a private sector company cannot in itself explain why at National Power the boss had to award himself £50,000 over and above the £85,000 that he was already receiving. Nor does it explain why the boss at PowerGen had to award himself another £124,000 over and above the £76,000 that he was already earning. It certainly does not explain the extra £150,000 awarded to the chief of British Gas, which was already a private company when he was earning £220,000 last year.

So there must be some other explanation for these huge hikes in salary. The spokesman for the Institute of Directors stumbled on this morning, trying to patch together some sort of defence. He said that being in the private sector meant running greater risks, which in turn deserved higher rewards. He gave a few examples, mentioning that the new bosses can now be declared bankrupt, which they could not be before. But then, all the directors who are paid only £40,000 a year can be declared bankrupt. The argument does not stand up or justify people awarding themselves an extra £150,000 a year.

On went the spokesman as best he could, trying to defend the indefensible. He said that these directors can now go to gaol: they could not before. Some might argue that they should go to gaol for having awarded themselves such huge salary increases, but if they do not commit fraud or break the law, for which they should go to gaol anyway, where is the risk? How many bosses are there behind bars in Britain, banged up because they took risks in the free market? That shows the complete nonsense of the argument and it exposes the useless arguments in defence of these increases that we have heard from Conservative Members.

The truth is that these greedy bosses are using privatisation to cash in and to line their own pockets. No one, least of all Tory Members, should be at all surprised by that development. Tory Members have blindly supported, for more than a decade, a philosophy based on the pursuit of financial gain. I can well remember being told by Tory Members that there was no such thing as society, that the good Samaritan was a sap and that it is all about, "What I want at a time when I want it and at the place I want it." That was their creed and it has now become the creed of their creation, the privatised bosses.

It was those same Ministers who, under the spell of the right hon. Member for Finchley (Mrs. Thatcher), created the very situation which they and the Prime Minister now condemn but do nothing about. That would be laughable were it not so tragic for the rest of us.

We are told that profit-related pay goes some way to explaining how all this has come about. When the right hon. Member for Blaby (Mr. Lawson) introduced profit-related pay in one of his early Budgets he claimed that it was designed to achieve a level of pay that would enable workers to be priced into jobs instead of being priced out of them. He warned that in a free economy it is the responsibility of employers and management to control industry's costs, and its wage costs in particular. He went on to warn that there can be no excuse for failure to discharge that responsibility—yet failing to discharge it is precisely what these privatised bosses have done. They have put themselves first with no thought of the impact on the cost structure of their industries.

These huge pay hikes are bound to bring about a deep sense of unfairness among the workers in the electricity industry and elsewhere in the economy. If workers are told that they have to accept lower pay rises to keep their pay increases as low as or even lower than the rate of inflation, they will look up and see the bosses awarding themselves increases sometimes of 20 times the rate of inflation. How can anyone tell them to accept that as fair? It will not work. The workers will rightly conclude that what is good enough for the bosses should be good enough for them, too.

These huge increases will achieve a wages spiral—massive rises at the top will create a demand for similar rises all the way down to the shop floor. What chance is there of economic recovery or of pulling out of the recession if we are all paying ourselves more than we produce, just like the privatised bosses in the electricity industry do?

Privatisation was recently described as selling people what they already own at less than its true value. In other words, it was a con, a rip-off and a fraud perpetrated on the people of this country. So, too, are the pay increases that these privatised bosses have awarded themselves. They are a disgrace, and so are the Prime Minister and the Government to have allowed them to get away with it.

8.39 pm

Mr. Malcolm Moss (Cambridgeshire, North-East)

This is Labour's choice of debate on its Supply day and the public might be forgiven for thinking that the Opposition might have taken the opportunity to praise the work force in the electricity supply industry for their tremendous and remarkable efforts in the past three years to turn an industry under state control into three important and profitable privatised industries. The Opposition could have welcomed the price reductions for electricity and gas and the injection of competition into generation. Some 20 new schemes have already been put forward and there are great hopes for renewables and combined heat and power. They could also have congratulated the National Grid Company on its expert handling of the pooling of prices which the Opposition said would not work. It is working brilliantly. They could have congratulated the 12 regional electricity companies and the two generating companies on exceeding the profit forecasts that were set out in their prospectuses.

The Opposition denigrated the efforts of all those who work in the power industries. They dismissed price reductions as fairly irrelevant and whipped themselves into a fury of sham indignation about the salaries of a few key managers and directors while totally ignoring the benefits of privatisation to the consumer. They did that because of misplaced allegiance to the dogma of nationalisation.

Mr. Dobson

The hon. Gentleman says that everyone in the electricity industry should take credit for what the hon. Gentleman regards as the transformation of the industry. Why did only the directors receive a 12.5 per cent. bonus on privatisation? None of the staff received such a bonus.

Mr. Moss

As the hon. Gentleman knows, the staff participated in the shareholding at the time of privatisation. The percentages are 95 for gas, 98 for the regional electricity companies and 98 for the generating companies. Those people will have benefited from the share profits and high dividends.

The Opposition confirmed that a Labour Government would give high priority to the renationalisation of the national grid. Obviously, that is to be Labour's vehicle for controlling and dominating the electricity supply industry. The grid controls the pricing pool and distribution and would give Labour Ministers maximum opportunity to interfere at will. That is Labour's hidden agenda and no doubt we shall see more of it.

Labour's interventionist policy is tantamount to blackmail and seeks to bring the regional electricity companies and the generating companies into line with what Labour thinks is best for industry. It is a knife at the jugular vein of the electricity supply industry. We were not told the time over which such events would take place, and we were certainly not told about the costs. How are shareholders in the regional electricity companies to be compensated for the proportion of their shareholding in the national grid company? The motion refers to, unrestrained increases in the profits … pay and perks of … Directors". There are three essential questions about the salary increases. First, are the structure and operational objectives of the privatised companies and the two generating companies different from when they made up the CEGB? The answer is yes, because they are now competing with each other, with nuclear electricity and with the newcomers in the generating industry. They have new responsibilities to shareholders and have to contend with a regulatory framework which seeks to protect consumer interests. They are not the same commercial operations as before.

Secondly, are the jobs of the senior managers materially different? The answer is yes. Their performance now is ultimately measured by the City institutions, the regulatory authority and the director general. That measurement is precise and is devastatingly effective, as many managing directors have found to their cost. Decision-making is fully exposed to public scrutiny because the evidence of decisions is shown in yearly accounts and balance sheets. Senior management is also scrutinised by the regulatory authority in terms of the quality of customer service and on environmental matters, which are now extremely important.

Thirdly, are not National Power and PowerGen among the top 100 largest companies in the United Kingdom economy, and does not that inevitably mean that they will have to pay the United Kingdom market price for quality labour at managing director or any other level? I reiterate the evidence quoted by my hon. Friend the Member for Exeter (Mr. Hannam). The Guardian of 13 June compared the salaries of the managing directors of National Power and PowerGen with the salaries in the United Kingdom's major companies. The results were surprising. The salaries quoted for the managing directors of National Power and PowerGen are tiny compared with some of the salaries being paid to the captains of industry.

The director general of the CBI said that the executive pay of the leading private power generators in Germany is, on average, 50 per cent. more than the salaries paid to the managing directors of Britain's two generating companies.

Further evidence on executive pay parity is contained in the table produced by P-E International which shows that United Kingdom executive pay ranks seventh in the 11 European countries that were measured, even when adjusted for the relative cost of living. It was 10th in the league table on absolute figures. Switzerland was on top followed by Germany, Spain, France, Italy, Portugal and the United Kingdom. That evidence shows that pay in the energy industry is not excessive when measured against other executive pay in the United Kingdom, against other energy utilities in Europe and against average executive pay in the EC countries.

I understand that Labour is in favour of the single market and convergence of salaries and wages. Would it oppose a convergence of salaries for top executives to bring them into line with our European competitors? The pay rises came to light as a result of the publication of preliminary results for the year ending 31 March 1991. The salaries have already been paid. The decisions about increases—labelled insensitive and embarrassing by some Opposition Members—were taken in the previous financial year, that is, before 31 March 1990. With hindsight, that can be seen as an attempt at equalisation with salaries in comparable United Kingdom industries of similar size. The gap must be made up. We can question the phasing, but if these men were to be replaced tomorrow salary levels of the current order would have to be offered to attract the right calibre of applicant.

The Opposition accuse the Government of promoting these large increases as the price for compliance with the privatisation process. That overlooks the benefit of privatisation not only to consumers but to shareholders. Privatisation raised £12 billion for the taxpayer—£8 billion from the regional electricity companies and about £4.3 billion from the two generating companies. It reduced Government subsidies and reduced any requirement on the PSBR in future years. By holding back 40 per cent. of the privatisation of the generating companies the Government will be able to benefit the taxpayer as a result of the growth of future profits.

As I have said, employee share ownership is high and has led to strong motivation of the work force to bring about the significant changes of the past few years. Profits are good for employees, shareholders and taxpayers. The year-end accounts that have just been published for PowerGen show that this year PowerGen will pay £92.5 million in corporation tax. The taxpayer would not like to lose that money, which would be available for investment. The report and account goes on to say: The capital programme includes the two CCGT power stations at Killingholme and at Rye House. The Opposition opposed the private Bill on Killingholme all the way. These cost approximately £290 million and £240 million respectively at current price levels. The company is already committed to flue gas desulphurisation refitting at Ratcliffe at a cost of £250 million. In addition, PowerGen is investing significant sums at existing major power stations in order to secure their continued profit-making potential for the future. We then come to the crux of the report, where it says: It is expected that this substantial expenditure will be financed from internal resources". There we have another advantage of privatisation. This is money not from the taxpayer or from the Government. This capital investment is made as a result of profits.

The utilities are regulated for consumer protection on a scale hitherto never envisaged. Just one example of the impact of the director general can be seen in the case of gas. Mr. McKinnon of Ofgas has negotiated for the coming year a change in the RPI minus X formula for pricing, which will mean approximately 15 per cent. lower prices over the next five years. The accusation that the directors general are toothless is misplaced. Labour's motion is misguided and prompted by outmoded conceptions of state control and interference in industry. Shareholders in the privatised state industries have been warned: beware the Labour hidden agenda.

8.51 pm

Mr. Simon Hughes (Southwark and Bermondsey)

I will take up two of the invitations extended by the hon. Member for Cambridgeshire, North-East (Mr. Moss). I pay tribute to the staff of the two industries concerned which supply us with a crucial element of our national economy. Secondly, it is right to acknowledge that the cost of electricity and gas to the domestic consumer has gone down.

The hour and a half of the debate so far has largely been a dialogue of the deaf. The Government have pretended that there is nothing wrong with their new model privatised gas and electricity industries and the Labour party has protested that there is nothing right about them. Neither is right. When the Bills that privatised the two industries went through the House, my hon. Friend the Member for Gordon (Mr. Bruce) was the spokesman for our party. We have argued a consistent position throughout the decade of debate on privatisation. It is that the Government's proposals would not achieve real competition, although we were not opposed to the privatisation of either industry. We regarded proper competition in a privatised industry as an acceptable way forward because it would give consumers power and benefits.

However, what has gone wrong has manifested the weakness of the non-competitive element of what are now private monopolies, as has been mentioned before, and not private sector competing companies, apart from a few exceptions. Our argument was that if we were to go down the road of privatisation, it could be done in certain sectors on a trial basis to test the market and, secondly, it should be done while giving far greater powers to the consumer and ensuring greater regulation thereafter. After half a decade or more of privatised gas, and a year or so of privatised electricity, our predictions have been proved right.

There have been technically unrestrained increases in both profits and pay. They are not restrained by the regulatory process, although prices are. Of itself, that is not a problem, and restraint mechanisms might introduce problems. The Labour party's two proposals for controlling profits—price capping and a special lump sum tax—have major flaws. Price capping has an environmental disadvantage because by encouraging the use of energy by reducing prices artificially, one discourages conservation. A special lump sum tax offends against the regulations and the legislation that brought the industries into operation, as the Secretary of State pointed out. I should be interested to know how any Labour spokesman thinks that it would be possible to have a new form of lump sum tax without getting into difficulties over large-scale compensation for the shareholders.

A more topical and provocative recent issue is the scale of the pay increases awarded to senior executives. The Government are not being consistent on this. The hon. Members for Cambridgeshire, North-East and for Exeter (Mr. Hannam) were so keen to defend the industries that they failed to recognise the major criticism of these recent pay increases. The Prime Minister and the Secretary of State have made that criticism, but have failed to say what they will do about it. The criticism is not that these industries may have to pay people a high price to be competitive with the private sector, nor that they may have to pay a high price to be competitive with industries in Europe. I accept both those arguments. The criticism is that it is not possible to justify paying such large sudden increases at a time when the policy of the country and of those industries is to urge on their staff restraint in pay increases of between 10 and 6 per cent., when those people start off at a lower wage.

It is unacceptable and it should not be possible for people who are already at the top of their industry's income levels to award themselves whopping increases just because, they believe, it is justified by comparisons with Europe or the rest of the private sector. What offends is the level and speed of the increases at a time when we are in a recession and, as the hon. Member for Pontefract and Castleford (Mr. Lofthouse) said, jobs will suffer directly in these industries. I fail to understand how these people can look the employees whom they sack in the face when they have awarded themselves such massive pay increases.

Furthermore, it is unacceptable for the Prime Minister and the Secretary of State to say that nothing can be done. This may not be the most accurate of parallels, but it serves. If the Government can call in the heads of banks, entirely privately, to tell them that the way that their policies are impinging on other people is unacceptable, then they can surely call in the heads of companies in which they have a 40 per cent. shareholding to tell them that such pay increases are unacceptable.

As I said in my intervention to the Secretary of State, it is a pretty clear exercise in backscratching when the non-executive directors award the executive directors their salary increases, the executive directors award the non-executive directors their salary increases and they are advised by consultants who are appointed by the directors, so they cannot claim that they are getting independent consultative advice, especially when the advisers get a large fee for their consultancy and the advice is that salaries should be increased considerably. That does not wash.

The Labour party talks about the damage caused to the long-term interests of the country and the harming of the environment, and the industry has only begun to do what it should. It has begun to consider that energy efficiency measures are part of the remit of the regulator. It should now extend that remit to include energy conservation requirements in the gas and electricity industries. At the moment, the shareholders' interests appear to be given far greater priority than the interests of energy efficiency and conservation. We recommend that both those matters are put in the cost indices which the regulator has to establish when regulating the industry.

The argument about the increase to the trade deficit is not as clear as the Labour party suggests. I understand the argument that it has a direct impact on the coal industry. That is clear and I know that that is the genesis of the argument. But the reality is that if prices are kept down, the price to manufacturing industry goes down, therefore, the price of manufactured products such as steel goes down, the ability to export increases and the trade balance is affected beneficially rather than disadvantageously. That argument is not entirely clear. In addition, an extra tariff on fuel imports would offend against GATT and the European energy charter which we in the House debated only a couple of weeks ago and appeared, on an all-party basis, to support.

Lastly, I want to propose some suggestions for making the privatised industries more effectively responsive to the consumer interest. We must protect those on low incomes far better than we are. That means the abolition of standing charges and legislation to prevent those unjustified cut-offs which still happen. I give but one example of a disabled pensioner whose supply was disconnected and was told that it would cost £50 for it to be restored with no proof that he was the cause of the problem which caused the local electricity board, in this case in London, to disconnect the supply.

The best way to keep down bills for people on low incomes is to encourage energy efficiency and conservation to ensure that their homes do not need so much heating and are not cold and damp, and so on. It is part of a comprehensive environmental policy. Moreover, the rip-offs that private owners often impose on their tenants are unjustifiable.

Secondly, the directors general should have their terms of reference widened to include non-monopoly services such as wiring and equipment fitting. Thirdly, as has been recommended over many years but nothing has happened, we should not just take the statistics of the industry as being the statistics which determine exactly how many complaints are being made. That needs to be independently monitored.

Lastly, a point made clearly by all objective commentators, regulation is a secretive process. The regulator is not accountable in any of these cases. If we are to have effective regulation of privatised industries, we must give the regulator some power and the consumer and the consumers' representatives some teeth. At the moment, the so-called free-market industries give the consumer very little power.

9.1 pm

Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak)

This is an interesting and important debate because we are talking about an essential element for the society in which we live. Profit should not be a dirty word because without profit nothing is created. There is no money to invest unless there is a profit from labour and from capital.

The privatisation of the monopolies has yielded many benefits for Britain. Some £12 billion or more has been available from the people's money to invest in the health service, education, roads and many other important things in Britain. In freeing those companies from direct state control they have been able to borrow money instead of its being part of the public sector borrowing requirement. The companies have been able to do essential and necessary things while the money has been free to use.

One of the problems of the argument that we as Conservatives have with socialists is that sometimes comments on salaries are made more from the politics of envy and malice than of common sense and justice. Many people say that if people earn more than they do it is not right or decent. We will always have people who invent something or do things which enable them to become hugely successful and we should honour them for that, whether it is the Alan Sugars of this world, who build companies such as Amstrad from nothing, making themselves worth £200 million or £300 million, or anyone else. No one in his right mind should have any argument with that. Creating with vision something from nothing is something that we should all support. Such people create real wealth, hope and opportunity for everyone.

Some people, however, have not created the companies that they run; they have merely been taken on board as managers to do a decent job. I make no secret of the fact that, had I been in charge, I would not have privatised the water industry, which strikes me as the classic example of an absolute monopoly. Unless we are willing to carry a bucket 10 miles and back, none of us can go anywhere else for our water. The same applies to the electricity and gas industries. Some of the arguments that are currently being advanced show not that the directors are underpaid, but that they lack an understanding of the real world.

Many of those directors were happy to jog along on £40,000, £50,000, £60,000 or £70,000 a year before. If people believe that, on privatisation, those same directors will rush off to other companies unless they are paid another £250,000 or £350,000, they will believe anything. Not only this country, but the whole world, experiences industrial and employment problems. Would those men really rush off to America, France and Germany because they thought that they would not be paid another £250,000 a year?

Of course, entrepreneurs must be paid. Those who are genuinely able to create growth must be paid for it. But let us consider what has happened. Between 1930 and 1950, company directors expected to earn between seven and 10 times more than their average employee; between 1950 and 1980, they expected to earn between 12 and 20 times more than that employee. Suddenly—perhaps because of the influence of a few mad entrepreneurs in America—chief executives are expecting to earn between 40 and 70 times more than their average employees.

If that were backed up by productivity, it would seem worth while. Between 1980 and 1990, however, the productivity of some of those great men—without whom industry would supposedly crumble—has risen by 150 per cent., while their salaries have risen by 320 per cent. I believe that it should be the other way round. I believe in the creation of wealth. That is why I mentioned Alan Sugar of Amstrad, who is worth every penny of the millions that he has made: after all, he created the company. Why do people imagine that they should be paid exorbitant sums without producing exorbitantly good results?

I accept that, for some of those people, it all becomes a macho business. They do it more for the ego and the status than for reasons of greed. There are, of course, the Sir Ralph Halperns of this world; they are good at some things, but, whatever else Sir Ralph did five times a night, he was not creating profits. With his £1 million-a-year income, he produced a company that is now almost bankrupt.

Those who lead businesses should create something before they receive their rewards, on a basis of the earnings per share on the capital employed and the creation of genuine prosperity. They should not think merely of being able to increase prices and get away with it.

I suggest three things, not just for privatised industries, but as an amendment to the Companies Act 1989 which should apply to all executive directors. First, the salaries of executive directors should have to be agreed by all the shareholders at an annual general meeting and they should be explained before they are passed. Secondly, non-executive directors who form part of the remuneration committees should be appointed for six years on a non-extendable basis so that they would be truly non-executive and truly independent. Thirdly, directors' contracts should run for three years. They should not be rolling contracts so that if they are sacked because of inefficiency they run off with £1 million so that it might be worth being sacked instead of running the company.

If we did that, and directors were worth their money, they would easily be able to find other jobs and so would cost more than the mediocre people who run many of our businesses today. It is not a way of cutting salaries but of cutting down to size people who think that, because they are lucky enough to be running privatised monopolies or other companies and the money looks so good, they should have their hand in the till. That is the way to increase productivity, prosperity and capitalism, not some of the seedy things that go on now.

9.11 pm

Mr. Peter Hardy (Wentworth)

The previous two speakers have given the House some useful information. The hon. Member for Southwark and Bermondsey (Mr. Hughes) rightly drew attention to the need for transparency of power and capacity in the regulator. Experience makes it clear that that is the case. When we were discussing this in Committee, in regard to both gas and electricity, the hon. Member for Gordon (Mr. Bruce) and some of my hon. Friends emphasised that point. I agree also with the hon. Member for Birmingham, Selly Oak (Mr. Beaumont-Dark). He has demonstrated that there is little regard for efficiency or the principles that once inspired the Conservative party. It is an outrage that the Government have used the word "successful" twice in the amendment.

Mr. Morgan

They do not believe it.

Mr. Hardy

Of course, they do not believe it. No one in Britain in his right mind believes it.

I have mentioned before, but it is worth mentioning again, that last year I took part in a major debate in Budapest on the economy of eastern Europe. The European Conservative group, led by Conservative Members, presented a paper that urged the east Europeans to privatise all their assets. As an example they quoted British Gas. The document said that, after substantial costs had been incurred, the British Government received £1.74 billion from the sale of British Gas. The Conservative group said that, because of the money received from the sale, Britain was helped enormously and there was greater capacity to invest. It urged eastern Europe to do the same.

I spoke in the debate immediately after them and pointed out that we had sold British Gas for one tenth of what it was worth and that the figure quoted in the document was one tenth of the asset value of British Gas. I said that I would not argue about the merits of privatisation or suggest that everything should be under state control because I believe in a mixed economy. However, I said that I did not think that British Gas was a sensible example to offer eastern Europe.

Mr. Peter Rost (Erewash)

Will the hon. Gentleman give way?

Mr. Hardy

No. I intend to be brief.

Interestingly, I was followed in that debate by the leader of the German equivalent of the Confederation of British Industry. That gentleman said that he had no objection to privatisation in principle, but that if the public asset was sold for markedly less than its true worth, it was a corrupt act. That was not my view—it was the view of the right wing. It was the view of the intelligent business men in Germany. I wish that the Government's economic motivation matched that which has been displayed by the growth and investment in Germany in recent years.

Instead, the position in Britain is scandalous. There is complete disregard for the fact that 20 million people are on or below the poverty line. How do they feel when they see these obscene examples? How do the captains of the wealth-producing industries feel when they see the burdens heaped on their shoulders by the pricing policies adopted by these public monopolies?

Steel has been mentioned. Under this Administration, thousands of jobs have been wiped out in my area. Our remaining industry is special steels. Investment has taken place and we have the finest plant in Europe, skilled and highly motivated work forces and traditional markets, but all that is imperilled by appalling electricity price increases.

Mr. MacKenzie and others involved in the steel industry and other heavy-energy using industries have been to see the Minister with responsibility in this matter. I took representatives of the Iron and Steel Trades Confederation to see the Minister to complain about the fact that the imposition of the latest round of price increases threatened markets and the continuation of and achievements in that vital industry.

No regard is paid to manufacturing industry. It is about time the Government began to understand the point made by my hon. Friend the Member for Pontefract and Castleford (Mr. Lofthouse) that this lot, highly paid as they are, are making us dependent on imported coal, of which there is no security of supply. This lot are determined to wipe out the British coal industry and make us dependent on overseas sources which will take us to the cleaners when we have wiped out our industry. This lot are completely unconcerned about the fact that, before the 1990s are over, the balance of payments implications will involve about £1 billion.

We are already in a grievous and devastating economic position. The Government must go down in history as evil in their results, stupid in their approach and utterly amoral in their character.

9.17 pm

Mr. Phillip Oppenheim (Amber Valley)

The Labour party's motion is interesting as much for what it leaves out as for what it includes. For example, there is no mention of British Telecom. Not long ago, the Labour party warned us that, if that industry were privatised, those without telephones would face bleak prospects, prices would rise faster than inflation, people in rural areas would not have access to the system and there would be a reduction in the number of call boxes. There were also horror stories about engineers being electrocuted as a result of people attaching non-BT equipment to the system.

What is the reality? The number of telephone lines has increased by 20 per cent., 4 million more people now have telephones, prices have fallen by 20 per cent. in real terms, people in rural areas now get telephones faster than ever before and the number of call boxes has increased by 11,000.

Mrs. Llin Golding (Newcastle-under-Lyme)

The hon. Gentleman is speaking in the wrong debate.

Mr. Oppenheim

The hon. Lady says that I am speaking in the wrong debate. I suggest that she read the Government's amendment and recall that the hon. Member for Wentworth (Mr. Hardy) gave a great diatribe about the steel industry. The Government's amendment says that this House congratulates the Government on continuing with its successful policy of privatising nationalised industries". British Telecom is a privatised national industry. To continue with my points, no one has been electrocuted as a result of the installation of non-BT equipment.

The hon. Member for Wentworth told us about how awful things were in the steel industry. He said that it was in a terrible state and that what the Government were doing to the coal industry would damage our balance of payments. Under the Labour Government's tutelage, the British steel industry was the world's largest loss maker and our iron and steel trade faced a chronic deficit. Now, British Steel is one of the most successful steel manufacturers in the world—admittedly in difficult world conditions at the moment. For the first time in many years, we export far more iron and steel than we import. That is a great success.

Mr. Morgan

Tell us about Lloyd's of London.

Mr. Oppenheim

The hon. Gentleman asks me to tell him about Lloyd's of London. What would he like me to tell him? Perhaps he could be more specific. There is deafening silence.

I remind the Opposition of their attitude to British Telecom and to the steel industry because it shows the reality of Labour. Labour always supports the status quo and it always opposes change, especially if it harms the interests of their friends in the public sector unions.

One of the main advantages of privatisation for all companies—whether or not they are utilities or semi-monopolies—is that they have the freedom to raise capital. It is worth reminding the House of what used to happen when state-run industries had to wait in the Treasury queue behind other deserving causes such as the national health service when they wanted to raise capital. The Opposition are fond of complaining about crumbling sewers, dirty beaches and polluted rivers, but that situation arose under the system of state ownership when the water industry did not have the freedom to raise its own capital on the free market. Now the water industry is at least able to raise money on the open market and to make record investment in cleaning up our rivers and beaches and restoring sewers.

A factor that is equally important as the freedom to raise capital in the privatised industries is the freedom from political interference. The Opposition want me to deal specifically with the electricity industry, so it is worth reminding ourselves of what used to happen in the electricity industry. The British electricity industry was forced to buy expensive United Kingdom coal, which protected the British coal industry. That resulted in an unproductive industry, with low-paid miners doing a difficult and dangerous job, mining uneconomic coal to produce over-priced electricity. That, in turn, resulted in job losses throughout industry because industry paid more for electricity than it should have paid.

In addition, politicians made a mess of the nuclear programme which is as classic a case of disaster caused by political meddling and interference as one could hope to find. In 1965, it was decided, for political reasons, to go ahead with advanced gas-cooled reactors instead of the cheaper, off-the-shelf, American-made pressurised water reactors, which was the technology chosen by the French. That decision was shrouded in secrecy, but the outcome was that a small, relatively weak United Kingdom consortium was chosen to build a reactor that was far more complex and expensive than the American option. By the early 1970s, all of the five AGRs which had been commissioned were in deep trouble. Even now, Dungeness operates at only a fraction of its planned output. In 1974, as a result of that debacle, Arthur Hawkins, the chairman of the Central Electricity Generating Board, called it a catastrophe and said that it must never be repeated. He argued for the purchase of the American PWRs, but what happened? He was overruled by politicians who decided to go ahead with yet another over-engineered design for the SHGWR, which was later abandoned on safety grounds after many costs had been incurred.

After all that waste, PWRs were ordered in 1979. So, the dreams of scientists, technocrats and politicians ended as 40 years of gigantic waste of talent and resources, and, after all that, United States reactors were ordered. What could that talent and those resources have achieved if directed elsewhere in the economy where they could have been best deployed and had they been directed by the market rather than by politicians? How much better would the industry have performed if it had not been lumbered with high-cost electricity in those years as a result of ill-thought-out and politically inspired nuclear programmes and as a result of the protection given to the United Kingdom coal industry which enabled it to sell high-cost coal to the generators who had no choice but to buy it?

It is fair to say that, although the utilities have been privatised, especially coal and gas, they do not operate in a complete market environment. They are semi-monopolies, which is precisely why the Government introduced regulation. Most people would agree that the regulation is a great advance on the old system. In the water industry, for example, the water providers' role and the pollution control role have been separated very successfully with the creation of the National Rivers Authority. The NRA is now taking aggressive action against polluters which was never taken when it was the responsibility of the state-run water boards to control pollution.

In the gas and electricity industries, regulators have powers to look into efficiency and into any excess profits that are made when agreeing to the prices that the utilities want to charge. Surely that is the point. If the regulators feel that top salaries are an unjustified burden or that they arise as a result of excess profits, they can act in their capacity to limit prices. That is why the regulators' role is extremely important. If salaries are justified in terms of the performance of the executives, there is no problem. If the salaries represent inefficiency, exploitation or excessive profits, the regulator has the power to limit the price rises in the utilities.

Some Opposition Members, especially the hon. Member for Wentworth, seemed to feel that high payments were immoral. I believe that the hon. Member for Wentworth actually used the word "immoral". Would he use that word about the very large sums earned by many well-known Labour supporters, such as Glenda Jackson, who is standing as a Labour candidate? I could quote many more examples. I cannot take seriously Labour's claim—

Mr. Dobson

There are many cinemas available.

Mr. Oppenheim

Does the hon. Gentleman want to intervene? If he does, he may go ahead.

Mr. Dobson

The unique feature about the next Member of Parliament for Hampstead and Highgate is that, when she appears at a cinema, people have a choice of cinema to attend.

Mr. Oppenheim

I do not know whether that was meant to be funny.

The hon. Member for Wentworth said that high payments were per se immoral. All I was trying to point out was that there was an element of hypocrisy because so many prominent Labour supporters earn vast sums for doing far less productive jobs than the captains of industry do. I cannot take seriously Labour's claim that we have not introduced enough competition into the system and that high salaries are due to that lack of competition when Labour has opposed every attempt by the Government to introduce more competition into the utilities.

The problem is that Labour has not yet realised that privatisation is far better for industry and for consumers than is nationalisation, even though Labour's socialist colleagues in New Zealand, Australia, Sweden and even, to an extent, France—not to mention the former socialist countries in the eastern bloc—have embraced privatisation. That means that only Labour, Cuba and North Korea are still in the anti-privatisation camp—the hon. Member for Holborn and St. Pancras (Mr. Dobson) and Kim Il Sung.

Labour Members are too prone to forget that the Government get a large share of the profits of privatised companies in tax and dividends. The privatised companies pay far more now to the Government than they did as nationalised industries when Labour was in power. I ask the hon. Member for Holborn and St. Pancras how many hospitals and schools Labour would have to close without that money. How many hospitals and schools would Labour have to close to fund its expensive renationalisation programme? The hon. Gentleman said that, under a future Labour Government, the renationalisation of the grid would be a high priority. A priority is born, and I was privileged to be present at its birth. Where does a "high" priority come in the order of priorities, relative to an absolute priority or a top priority? If the hon. Gentleman can tell me what the difference is, I shall happily give way. Again, there is a deafening silence.

At the root of the Opposition's attitude is their desire to meddle with and control industry. The arrogance of Opposition spokesmen in that respect is breathtaking. Few of them have had any experience of business—I except the hon. Member for Coventry, North-West (Mr. Robinson), who presided over Jaguar in its darkest days of state ownership—but, despite that, they seek to preach to successful industrialists and to tell them what to do, as they did in the 1970s.

I would take Labour Members' concern about salaries more seriously if they expressed more concern about salaries in the public sector. In the past few years, Derbyshire county council has appointed no fewer than two ex-Labour councillors and an ex-Labour Member of Parliament to jobs that pay more than £40,000 a year. The brother of the hon. Member for Bolsover (Mr. Skinner), the chairman of Derbyshire Labour party, has been appointed by the county council to a well-paid job as a minder for Japanese business men, despite the fact that he was sacked for corruption by the county council under a previous regime. His wife also has a well-paid job in the county council's public relations department—a service that it needs. Such jobs for the boys are far more damaging than paying executives the market wage that industries need to pay to keep them.

9.30 pm

Mr. Harry Barnes (Derbyshire, North-East)

I shall return to the subject—the privatised electricity and gas industries—which has little to do with Derbyshire county council.

A measure to privatise the electricity industry in Northern Ireland is going through its parliamentary stages. All the parties in Northern Ireland, apart from the almost non-existent Conservative party, oppose electricity privatisation, yet despite that consensus the Government are continuing with the measure. If there is one part of the kingdom where consensus should be observed, it is Northern Ireland. That measure should be dropped.

I have little time to develop the points that I should like to make, but I wish to mention the flotation of shares in East Midlands Electricity, which coincided with disastrous weather conditions. Those weather conditions and the flotation of East Midlands Electricity produced important political consequences that have not yet been considered by the Government.

Early on 8 December, there was a 14-hour severe blizzard and ice accretion throughout the east midlands, including the constituency of the hon. Member for Amber Valley (Mr. Oppenheim). It spread from Chesterfield in the north to past Coventry in the south. For an average of 34 hours, 815,000 customers, or some 2 million people, lost supplies, and many lost supplies for much longer. A week later, 14,500 customers were still without supplies.

On the third day of that emergency, East Midlands Electricity was floated. At that time, 300,000 customers still had no electricity. What was the impact of that emergency on the flotation? How did it affect the value of shares? Amazingly, it seems to have had no impact. That may be explained by the fact that the emergency was kept quiet by the Government so that people would not understand the difficulty that East Midlands Electricity was facing at its birth. No state of emergency was declared. People clearly needed a state of emergency to be declared, whereby the Government would recognise their plight.

By contrast, when there were gales in the south of England in 1987 the Minister immediately came to the Dispatch Box to explain that, because of the emergency, Bellwin moneys would be available to help local authorities to handle the crisis. Nothing like that happened at the flotation of shares in East Midlands Electricity.

The company has now produced a report on the blizzard. It makes various suggestions for technical improvements and talks of providing better communications, but it fails to raise the question why the Government did not declare at the time that a serious emergency had occurred.

The Department of Energy or the Select Committee on Energy should now investigate the matter. Clearly people were not given the emergency provisions and services that would have been available if the Government had tried to tackle the emergency by working hand in glove with East Midlands Electricity plc.

9.36 pm

Mr. Rhodri Morgan (Cardiff, West)

It is a pleasure to wind up the debate, because this may be our last opportunity in this Parliament—which has been my first Parliament—to discuss what is perhaps the biggest set of measures that it has had the chance to consider.

The process of privatisation, on which we are looking back, can be said to have started in November 1987—or even earlier, in the 1987 Conservative election manifesto. In legislative terms it is three and a half years since the publication of the White Paper, the paving debate, Second Reading and so on. We now have a useful opportunity to judge whether privatisation has been the roaring success described in the Government amendment or the mess that the Opposition believe it to be.

It is fair to say that the Government used to regard electricity privatisation as the jewel in the crown of the four years of this Parliament. In the light of the Prime Minister's recent expression of concern about the top people's salaries and the perks in the electricity and gas industries, we ask the Government why the Conservatives' jewel in the crown of this Parliament has gradually become a rescue job, as it did in 1989, when the previous Secretary of State resigned and the present Secretary of State—who is not now in the Chamber—had to take his place. Then, from being a rescue job, why did it become the national scandal that the Prime Minister and the Secretary of State evidently now think it is, judging by their attacks on its consequences, such as the way in which the gravy train has been milked by those at the top, and the disparity between the deal given to consumers and taxpayers and that given to those running the industry?

When the present Secretary of State took over in 1989 the patient was looking very sick indeed. The right hon. Gentleman came in as the company doctor for the Government's legislation. One could say that the patient was suffering from pylons. The right hon. Gentleman took a couple of months to review the situation; then he made some changes in the legislation. If I list those changes, hon. Members will see why the present legislation is almost unrecognisable compared with what was originally proposed.

First, the right hon. Gentleman decided to take the nuclear side of the industry out of the privatisation altogether. Secondly, he cancelled the three pressurised water reactors which were in the programme but which had not yet been started. Thirdly, he delayed everything by six months.

The fourth decision was to change the whole basis of the pool arrangements, and the fifth was to sell PowerGen and National Power together instead of separately. The sixth was to retain 40 per cent. of those two companies in the public sector. The seventh change, which was perhaps not intended at the time, was that the Government managed to lose the chairmen of National Power and PowerGen in the process.

Those were fairly substantial changes and one must admit that they at least enabled the Secretary of State to take the next step forward and actually float the industries. By that time, however, there had been a severe loss of confidence, as a result of which fact the Secretary of State had to underprice the shares and overdose on perks to get them away. With the run-up to the Gulf war and privatisation running almost concurrently—with a dreadful inevitability—he decided that flotation would proceed but with a massive extension of the perks that we have come to expect from Conservative privatisations.

Just think what the Government did to ensure that the shares got away which the Government had not done in previous privatisations. They made multiple share ownership legal for the first time. People could apply, as many Tory Members did, on their own behalf, on their spouse's behalf—on behalf of Karen and Darren, grandma and grandpa and anyone else living in the same house as them. One could apply on behalf of six or seven people. Notwithstanding the fact that all those people were effectively one electricity consumer, all of them could enjoy the perk of a reduction in their next electricity bill: there could be six or seven reductions in one electricity bill. What an invitation that would have been to the former hon. Member for Ynys MÔn. If he had still been in the House, as he was at the time of the British Telecom flotation, he would have had no difficulty at all with the proposition. Many hon. Members took advantage of it. Many Tory Members will probably be able to pay for the next election campaign and for the school fees for the four children on whose behalf they probably applied out of the profits from the underpricing of the shares, for which they themselves had voted.

My hon. Friend the Member for Wentworth (Mr. Hardy) said that when he put the proposition to the leader of the German equivalent of the CBI at a conference, that gentleman said that it was a corrupt act for the Government deliberately to vote for the underpricing of assets of which they were to dispose. Knowing the strong leanings of the German equivalent of the CBI towards ensuring that the taxpayer gets a good deal—and taxpayers must get a good deal if the House is to be able to hold its head high on matters affecting the disposal of public assets—I could not put it better.

Having decided to allow people to apply on behalf of their children and anyone else living in their house and to receive perks for all of them, the Government decided to extend to them another perk that had never been offered before: people could sell the shares straight away without waiting for the second and third call and still keep the original perk. People were told, "Even if you are no longer a shareholder a year hence, you will still get money deducted from your electrictiy bill provided that you took part in the flotation." Previously, the Government had said, "Obviously you must keep the shares. You cannot expect to have money deducted from your electricity bill a year after you have disposed of your shares for the first-day profit." But so keen was the Secretary of State to get electricity shares away that he allowed people to buy and sell—to engage in staging—but still to get money off their electricity bills.

Is it any wonder, in that gravy-train atmosphere—an atmosphere in which multiple-share applications were legalised for the first time—that top people started to realise that the gravy train does not stop with the Secretary of State but could benefit them? It is no use the Prime Minister and the Secretary of State wringing their hands in this curious ineffectual manner at the way in which top people's salaries have rocketed. It is not so much a matter of shutting the stable door after the horses have been stolen. It is more a matter of the Prime Minister looking at the stable door, having removed the latch and lock himself, and wondering why it is swinging back and forth on its hinges while the distant sound of galloping is heard in the next field or the next county, bemoaning the fact that the top people have got away with the pay and extra perks.

An example has already been cited but it has not perhaps been put in its true context. The chairman of British Gas has had his salary increased in a remarkable way, not only in terms of the actual percentage increases that he has received. We know what a reliable organ The Sun is and, if it happens to be attacking something that a Conservative Government have done, its reports are probably true. The Sun reported that the chairman had received £28,000-worth of perks in the form of goods and work carried out at his house in Bournemouth. A British Gas workman's van had been parked outside his new house in Bournemouth for over a month before somebody finally twigged what was going on and blew the whistle by telling The Sun, which then found out that he had had £28,000-worth of free central heating, tumble dryers and other things. British Gas has lamely attempted to recover the position by saying that many British Gas employees are allowed to try out British Gas products and that that is one of the ways in which employees become involved in the firm. It appears, however, that the chairman is allowed to try out all British Gas's products—all at the same time.

Surely that is not necessary to provide an incentive to senior management who were doing exactly the same job before privatisation. It is an obscenity and an example of the way in which the gravy-train atmosphere has permeated the electricity and gas industries since privatisation. After all, if it is thought necessary to give £28,000-worth of perks to the chairman of British Gas to provide him with an incentive, how would one give an incentive to the chairman of the water and sewage companies?

Are we saying that we should give similar incentives to Treasury Ministers and that if they managed to price the shares of the electricity industry correctly or to get their public expenditure forecasts right we would let them off income tax for a year? Not only would the Queen and the Prince of Wales not pay income tax—the Chancellor of the Exchequer would be in the same position. That is not a principle that we should like to see established, but it is exactly what the Government have engineered for the electricity and gas industries.

Perhaps we should have asked the Secretary of State for Energy whether he would have been willing to take a pay cut or to accept a bonus if he had correctly priced the shares that he sold in the electricity industry. If we had done so, I am sure that the right hon. Gentleman would be leaving the House even sooner than he intends because he would be able to pay attention to far more exciting things, such as being a name again at Lloyd's, where such problems never arise. That would be a way of trying to provide the right hon. Gentleman with an incentive to price the shares correctly so that the taxpayer would get a reasonable bargain. If the right hon. Gentleman is not willing to do that, come the tolling of the liberty bell of democracy at the next election, the Government who will be formed by my right hon. and hon. Friends most certainly will.

9.47 pm

The Parliamentary Under-Secretary of State for Energy (Mr. Cohn Moynihan)

I welcome the opportunity that has been presented by this debate and am delighted, in Opposition time, to set out the success of the privatisation programme. The Opposition lost the argument in the last debate on this subject on 16 January and they have lost it again tonight. Consumers, taxpayers and employees are not gullible. They will have seen through the rhetoric that the Opposition have used once again and instead they will listen to the facts, which are not as portrayed by the hon. Member for Holborn and St. Pancras (Mr. Dobson). They are as follows.

Fact one—the Opposition said that we would never be able to privatise the electricity industry before the election, but we did and it has been a resounding success.

Fact two—we were told that we would not be able to inject competition into the electricity industry, but we have. Competition in generating is growing all the time and it is competition, not Whitehall intervention, that is the best guarantee of efficiency and of ensuring that customers receive good service.

Fact three—consumers are benefiting: prices are controlled and they have new rights and independent regulators to look after their interests. The privatised industries are leading the way in consumer rights which we look to the citizens charter further to promote.

Fact four—share ownership is at a record level. Eleven million people now own shares—25 per cent. of the adult population. It is a clear recognition of the public's desire to share in the success of privatisation.

Fact five—the taxpayer has benefited from privatisation. Not only has there been a direct benefit in terms of the proceeds that have been realised, but privatisation has unlocked efficiency. Nationalised industries overall have had a poor record on profits, investment, productivity and industrial relations. They had combined borrowings of £2.5 billion in 1979. Growing profits mean a growing contribution to the national wealth.

Contrast that with the way in which matters would be on the basis of the contributions under Labour. The hon. Member for Holborn and St. Pancras said that he would renationalise the National Grid Company and give it all sorts of duties. He said that a Labour Government would use their shareholding in National Power and PowerGen to influence—though many of my hon. Friends would say "interfere in"—the running of their businesses. He also said that he would take steps on board pay.

What would that policy mean in practice? It would mean that once again a Labour Government would try to interfere in the running of a business about which they knew nothing. They would interfere in a company that is best left in the hands of those who are skilled at running it and who are accountable to their shareholders for its performance. Once again, the industry would be subject to the dead hand of Whitehall, stifling innovation and interfering in the proper operation of the market.

Electricity prices—in that context the comments of the hon. Member for Wentworth (Mr. Hardy) were rich— which rose by the equivalent of 2 per cent. every six weeks under Labour, would have to go up again to pay for the costly mistakes that would be made. All the benefits of the improvement in performance would be lost, and to no good purpose. Opposition Members have no coherent strategy on how to respond to privatisation. They have simply come before the House again tonight wanting to turn the clock back and repeat all the mistakes of nationalisation and state intervention.

They do not even understand the workings of the electricity market. Still less do they understand the workings of the financial markets. They continue, as we heard tonight—including from the hon. Member for Holborn and St. Pancras, who again is laughing, a mask of insecurity behind his ignorance of financial matters—[Interruption.] Once again he makes simplistic comparisons between assets and proceeds. Opposition Members' weekly cultivation of friends in the City, if they have any, has not resulted in the facts of the financial markets being imparted to the hon. Gentleman.

That being so, I will help the hon. Member for Holborn and St. Pancras with some figures. It is instructive to see how tonight he arrives at the loss of £29 billion. It changes by £1 billion virtually daily; but, then, so does the cost of the programme of any future Labour Government. The hon. Member for Holborn and St. Pancras aggregates, for example, the values of the various privatised companies, in some cases stretching back nearly to the beginning of the 1980s, on an irrelevant replacement cost basis, taking no account of major changes that have occurred in the companies since, and then he compares them with today's market value. By those extraordinary means he arrives at a waste of £27 billion, and then apparently adds £3 billion to give the round figure of £30 billion.

Of course the reality is that the value of a business is nothing more or less than what a prospective purchaser would be prepared to pay for it. Current cost accounting simply measures the replacement cost of assets, some of which may hold little interest for a purchaser, and it is certainly not the amount the taxpayer paid for those assets. So the hon. Gentleman has again conducted a totally futile exercise.

The value of industries such as electricity is based principally on expectations of future earnings. Only by a wholly unjustified increase in prices could the Government have boosted earnings sufficiently to be able to sell the industry for a sum anywhere near the current cost evaluation.

As for the other comparison, with stock market valuations, that the hon. Gentleman made tonight, the shares are rising faster than the overall index of shares. The rising share values of privatised companies since the sale reflect the growth of confidence in the benefits of privatisation as they feed through, including renationalisation and other moves to greater efficiency which improve their prospects.

The value of British Gas, for example, has increased by nearly 80 per cent. on the stock market in the past five years, despite the fact that prices were falling in real terms under the price control formula throughout that period. An even tougher formula, starting next year, is acknowledged to be an extremely demanding target, yet the company still believes that it will be able to increase its dividends, underpinning figure share performance.

Improving prospects, rising share prices, cost-cutting and greater efficiency in all those companies should be welcomed. They represent a clear gain to the nation in contrast to the old order of rising prices to consumers with no means of redress, and little incentive for improved efficiency. Those were real costs and burdens on the nation, as opposed to the wholly fictitious £30 billion conjured up by the hon. Member for Holborn and St. Pancras.

It is remarkable that Labour Members should even mention disconnections. Under a Labour Government in the late 1970s the level of disconnections was substantially higher than at present. Those worst hit were pensioners and the poor, and Opposition Members laughed when we debated the importance of reducing the number of disconnections. The Government have attached importance to introducing a code of practice on disconnections, designed to safeguard the least well off. It provides that no pensioner's household may be cut off during the winter months and, since the introduction of the code of practice, disconnections have fallen to their lowest levels since records began.

My right hon. Friend the Secretary of State outlined clearly the benefits of privatisation as opposed to nationalisation, renationalisation or extended state control. In the 1990s there will be a renewed emphasis on quality of life issues, such as a higher standard of living, a secure and diverse energy supply with improved safety measures, and higher environmental standards. Increasing competition will remain the most effective pressure on companies to deliver those objectives, act efficiently and provide customers with the service that they deserve. On that matter I agree fully with my hon. Friend the Member for Birmingham, Selly Oak (Mr. Beaumont-Dark).

The regulators in the recently privatised industry will set tight and improved standards of service, which will be well publicised so that consumers can assess the standard of service that they can reasonably expect. As my hon. Friend the Member for Exeter (Mr. Hannam) stated, we live in a generation in which everyone is a consumer, and consumer protection and choice are increasingly at the centre of policy-making in Europe. We are consumers not only in shops but when we travel to work and from the moment we arrive home. We expect standards and performance from every item and service that we purchase. Contracts that should spell out guaranteed standards of service, penalties for failure, and means of redress and complaint go hand in hand with a free market economy and an enterprise culture based on competition.

On 2 July 1991 the House of Commons should not be the place for Labour-inspired weary debates in which every contribution by Opposition Members harks back to the days of socialism and state intervention. It is clear from the debate that salaries should be sufficient to recruit, retain and motivate. It is not for the Government to second-guess remuneration. It is not intervention to question whether recent increases meet that test. All levels of pay should take account of the economic facts of life and the importance of beating inflation. Directors must show leadership, and moving to private sector levels should be moderate.

The manufacturing industry has evolved from the traditional two-tier management-work force structure—the us and them syndrome—which often undermines the effects of industrial relations by creating artificial barriers between management and work force. Those barriers are based on privilege and separation. Today, a team approach dominates in the manufacturing industry. The new style of management has contributed much to loosening the grip of the unions when the Government's industrial relations legislation has given management and the work force the tools to work as a team. However, with that new approach has come responsibility to lead by example, win respect, urge moderation in pay demands in a time of recession, and exercise restraint. That is why my right hon. Friend the Prime Minister was correct to say that he did not believe that excessive salary increases are right. That remains our view. Undoubtedly top directors in the newly privatised companies need motivation, but not, as The Times correctly stated, superleague salaries overnight.

The Government's position is clear: our privatisation programme has been good news for the taxpayer, good news for the consumer and good news for the employee. It is a shame that the Opposition still cling to the socialist principles of interference and deny the benefits of privatisation.

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

The House Divided: Ayes 176, Noes 246.

Division No. 1981	[10 pm
AYES
Abbott, Ms Diane	Ashdown, Rt Hon Paddy
Adams, Mrs Irene (Paisley, N.)	Ashton, Joe
Allen, Graham	Banks, Tony (Newham NW)

Barnes, Harry (Derbyshire NE)	Janner, Greville
Barnes, Mrs Rosie (Greenwich)	Jones, Barry (Alyn & Deeside)
Battle, John	Jones, Ieuan (Ynys Môn)
Beckett, Margaret	Jones, Martyn (Clwyd S W)
Beith, A. J.	Kaufman, Rt Hon Gerald
Bellotti, David	Kinnock, Rt Hon Neil
Bennett, A. F. (D'nt'n & R'dish)	Kirkwood, Archy
Bermingham, Gerald	Lambie, David
Blunkett, David	Lamond, James
Boateng, Paul	Leighton, Ron
Boyes, Roland	Lewis, Terry
Bradley, Keith	Litherland, Robert
Brown, Gordon (D'mline E)	Livingstone, Ken
Brown, Nicholas (Newcastle E)	Lofthouse, Geoffrey
Brown, Ron (Edinburgh Leith)	Loyden, Eddie
Bruce, Malcolm (Gordon)	McAllion, John
Buckley, George J.	McAvoy, Thomas
Callaghan, Jim	Macdonald, Calum A.
Campbell, Menzies (Fife NE)	McFall, John
Campbell, Ron (Blyth Valley)	McKay, Allen (Barnsley West)
Campbell-Savours, D. N.	McKelvey, William
Canavan, Dennis	McLeish, Henry
Carlile, Alex (Mont'g)	McMaster, Gordon
Cartwright, John	McWilliam, John
Clarke, Tom (Monklands W)	Madden, Max
Clwyd, Mrs Ann	Mahon, Mrs Alice
Cohen, Harry	Marek, Dr John
Cook, Frank (Stockton N)	Marshall, David (Shettleston)
Cook, Robin (Livingston)	Marshall, Jim (Leicester S)
Corbett, Robin	Martin, Michael J. (Springburn)
Corbyn, Jeremy	Martlew, Eric
Cousins, Jim	Maxton, John
Crowther, Stan	Meacher, Michael
Cryer, Bob	Meale, Alan
Cummings, John	Michie, Bill (Sheffield Heeley)
Cunliffe, Lawrence	Michie, Mrs Ray (Arg'l & Bute)
Cunningham, Dr John	Mitchell, Austin (G't Grimsby)
Dalyell, Tam	Moonie, Dr Lewis
Darling, Alistair	Morgan, Rhodri
Davies, Rt Hon Denzil (Llanelli)	Morley, Elliot
Davis, Terry (B'ham Hodge H'l)	Mowlam, Marjorie
Dewar, Donald	Mullin, Chris
Dixon, Don	Murphy, Paul
Dobson, Frank	Nellist, Dave
Duffy, Sir A. E. P.	Oakes, Rt Hon Gordon
Dunnachie, Jimmy	O'Brien, William
Eadie, Alexander	Orme, Rt Hon Stanley
Edwards, Huw	Patchett, Terry
Ewing, Harry (Falkirk E)	Pendry, Tom
Ewing, Mrs Margaret (Moray)	Pike, Peter L.
Fatchett, Derek	Powell, Ray (Ogmore)
Faulds, Andrew	Prescott, John
Fearn, Ronald	Primarolo, Dawn
Field, Frank (Birkenhead)	Radice, Giles
Fields, Terry (L'pool B G'n)	Randall, Stuart
Fisher, Mark	Redmond, Martin
Flynn, Paul	Reid, Dr John
Foot, Rt Hon Michael	Richardson, Jo
Foster, Derek	Robinson, Geoffrey
Foulkes, George	Rogers, Allan
Fraser, John	Rooker, Jeff
Fyfe, Maria	Ross, Ernie (Dundee W)
Garrett, Ted (Wallsend)	Rowlands, Ted
Golding, Mrs Llin	Sedgemore, Brian
Gordon, Mildred	Sheerman, Barry
Gould, Bryan	Short, Clare
Grant, Bernie (Tottenham)	Skinner, Dennis
Griffiths, Nigel (Edinburgh S)	Smith, C. (Isl'ton & F'bury)
Hain, Peter	Snape, Peter
Hardy, Peter	Soley, Clive
Heal, Mrs Sylvia	Spearing, Nigel
Hinchliffe, David	Steel, Rt Hon Sir David
Hogg, N. (C'nauld & Kilsyth)	Straw, Jack
Home Robertson, John	Taylor, Mrs Ann (Dewsbury)
Hood, Jimmy	Taylor, Rt Hon J. D. (S'ford)
Howell, Rt Hon D. (S'heath)	Taylor, Matthew (Truro)
Howells, Geraint	Thomas, Dr Dafydd Elis
Howells, Dr. Kim (Pontypridd)	Thompson, Jack (Wansbeck)
Hughes, John (Coventry NE)	Vaz, Keith
Ingram, Adam	Wallace, James

Walley, Joan	Worthington, Tony
Wardell, Gareth (Gower)	Wray, Jimmy
Welsh, Michael (Doncaster N)	Young, David (Bolton SE)
Williams, Alan W. (Carm'then)
Wilson, Brian	Tellers for the Ayes:
Winnick, David	Mr. Frank Haynes and
Wise, Mrs Audrey	Mr. Ken Eastham.
NOES
Adley, Robert	Evennett, David
Aitken, Jonathan	Fairbairn, Sir Nicholas
Alison, Rt Hon Michael	Fallon, Michael
Amess, David	Farr, Sir John
Amos, Alan	Favell, Tony
Arbuthnot, James	Fenner, Dame Peggy
Arnold, Jacques (Gravesham)	Field, Barry (Isle of Wight)
Arnold, Sir Thomas	Fookes, Dame Janet
Ashby, David	Forman, Nigel
Aspinwall, Jack	Forsyth, Michael (Stirling)
Atkins, Robert	Fowler, Rt Hon Sir Norman
Atkinson, David	Fox, Sir Marcus
Banks, Robert (Harrogate)	Franks, Cecil
Beaumont-Dark, Anthony	Freeman, Roger
Bellingham, Henry	French, Douglas
Bendall, Vivian	Fry, Peter
Bennett, Nicholas (Pembroke)	Garel-Jones, Tristan
Benyon, W.	Gill, Christopher
Bevan, David Gilroy	Glyn, Dr Sir Alan
Biffen, Rt Hon John	Goodlad, Alastair
Blackburn, Dr John G.	Goodson-Wickes, Dr Charles
Blaker, Rt Hon Sir Peter	Grant, Sir Anthony (CambsSW)
Bonsor, Sir Nicholas	Greenway, Harry (Eating N)
Boscawen, Hon Robert	Greenway, John (Ryedale)
Bottomley, Peter	Gregory, Conal
Bottomley, Mrs Virginia	Griffiths, Peter (Portsmouth N)
Bowden, A. (Brighton K'pto'n)	Ground, Patrick
Bowis, John	Grylls, Michael
Boyson, Rt Hon Dr Sir Rhodes	Gummer, Rt Hon John Selwyn
Brandon-Bravo, Martin	Hague, William
Brazier, Julian	Hamilton, Rt Hon Archie
Bright, Graham	Hamilton, Neil (Tatton)
Brown, Michael (Brigg & Cl't's)	Hannam, John
Browne, John (Winchester)	Hargreaves, A. (B'ham H'll Gr')
Bruce, Ian (Dorset South)	Harris, David
Buck, Sir Antony	Haselhurst, Alan
Budgen, Nicholas	Hawkins, Christopher
Burns, Simon	Hayward, Robert
Burt, Alistair	Hicks, Robert (Cornwall SE)
Butler, Chris	Hill, James
Butterfill, John	Howarth, G. (Cannock & B'wd)
Carlisle, John, (Luton N)	Hughes, Robert G. (Harrow W)
Carlisle, Kenneth (Lincoln)	Irvine, Michael
Carrington, Matthew	Irving, Sir Charles
Carttiss, Michael	Jack, Michael
Cash, William	Jessel, Toby
Channon, Rt Hon Paul	Jones, Gwilym (Cardiff N)
Chapman, Sydney	Kellett-Bowman, Dame Elaine
Chope, Christopher	Kilfedder, James
Clark, Rt Hon Sir William	King, Roger (B'ham N'thfield)
Colvin, Michael	Knapman, Roger
Conway, Derek	Knight, Greg (Derby North)
Coombs, Anthony (Wyre F'rest)	Knight, Dame Jill (Edgbaston)
Coombs, Simon (Swindon)	Knowles, Michael
Cope, Rt Hon Sir John	Knox, David
Cormack, Patrick	Latham, Michael
Couchman, James	Lee, John (Pendle)
Cran, James	Leigh, Edward (Gainsbor'gh)
Currie, Mrs Edwina	Lennox-Boyd, Hon Mark
Davis, David (Boothferry)	Lightbown, David
Day, Stephen	Lilley, Rt Hon Peter
Devlin, Tim	Lord, Michael
Dickens, Geoffrey	Luce, Rt Hon Sir Richard
Dicks, Terry	Lyell, Rt Hon Sir Nicholas
Dorrell, Stephen	McCrindle, Sir Robert
Douglas-Hamilton, Lord James	McLoughlin, Patrick
Dover, Den	McNair-Wilson, Sir Michael
Durant, Sir Anthony	Madel, David
Eggar, Tim	Malins, Humfrey
Emery, Sir Peter	Maples, John
Evans, David (Welwyn Hatf'd)	Marland, Paul

Marlow, Tony	Smith, Sir Dudley (Warwick)
Marshall, John (Hendon S)	Smith, Tim (Beaconsfield)
Martin, David (Portsmouth S)	Soames, Hon Nicholas
Maude, Hon Francis	Speed, Keith
Maxwell-Hyslop, Robin	Spicer, Sir Jim (Dorset W)
Mayhew, Rt Hon Sir Patrick	Spicer, Michael (S Worcs)
Meyer, Sir Anthony	Squire, Robin
Miller, Sir Hal	Stanbrook, Ivor
Mills, Iain	Steen, Anthony
Miscampbell, Norman	Stern, Michael
Mitchell, Andrew (Gedling)	Stevens, Lewis
Montgomery, Sir Fergus	Stewart, Allan (Eastwood)
Morrison, Sir Charles	Stewart, Andy (Sherwood)
Moss, Malcolm	Stewart, Rt Hon Sir Ian
Moynihan, Hon Colin	Stokes, Sir John
Neale, Sir Gerrard	Sumberg, David
Neubert, Sir Michael	Summerson, Hugo
Nicholls, Patrick	Tapsell, Sir Peter
Nicholson, David (Taunton)	Taylor, Ian (Esher)
Nicholson, Emma (Devon West)	Taylor, John M (Solihull)
Norris, Steve	Taylor, Sir Teddy
Oppenheim, Phillip	Tebbit, Rt Hon Norman
Page, Richard	Temple-Morris, Peter
Paice, James	Thompson, D. (Calder Valley)
Patnick, Irvine	Thompson, Patrick (Norwich N)
Patten, Rt Hon Chris (Bath)	Thurnham, Peter
Pattie, Rt Hon Sir Geoffrey	Townend, John (Bridlington)
Pawsey, James	Townsend, Cyril D. (B'heath)
Peacock, Mrs Elizabeth	Tracey, Richard
Powell, William (Corby)	Tredinnick, David
Price, Sir David	Trippier, David
Raffan, Keith	Twinn, Dr Ian
Raison, Rt Hon Sir Timothy	Vaughan, Sir Gerard
Redwood, John	Viggers, Peter
Renton, Rt Hon Tim	Wakeham, Rt Hon John
Riddick, Graham	Ward, John
Ridley, Rt Hon Nicholas	Wardle, Charles (Bexhill)
Rifkind, Rt Hon Malcolm	Watts, John
Roberts, Rt Hon Sir Wyn	Wheeler, Sir John
Roe, Mrs Marion	Whitney, Ray
Rossi, Sir Hugh	Widdecombe, Ann
Rost, Peter	Wiggin, Jerry
Rowe, Andrew	Wilkinson, John
Sackville, Hon Tom	Winterton, Mrs Ann
Scott, Rt Hon Nicholas	Winterton, Nicholas
Shaw, David (Dover)	Wood, Timothy
Shaw, Sir Michael (Scarb')	Woodcock, Dr. Mike
Shelton, Sir William	Yeo, Tim
Shephard, Mrs G. (Norfolk SW)	Young, Sir George (Acton)
Shepherd, Colin (Hereford)	Younger, Rt Hon George
Shepherd, Richard (Aldridge)
Shersby, Michael	Tellers for the Noes:
Sims, Roger	Mr. Nicholas Baker and
Skeet, Sir Trevor	Mr. Timothy Kirkhope.

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 continuing with its successful policy of privatising nationalised industries; notes the recent successful privatisation of the electricity supply industry in Great Britain; and welcomes the benefits that privatisation of the electricity and gas industries has brought and will bring to consumers, taxpayers and employees.

c269
1. BUSINESS OF THE HOUSE 20 words