HC Deb 14 May 1993 vol 224 cc1108-14

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Arbuthnot.]

2.35 pm
Mr. Hugh Dykes (Harrow, East)

It was interesting to note in the previous debate how the will of the House was manifested in favour of the Government not rushing into out-and-out deregulation. In that case, it was the highly important subject of Sunday trading. I was a supporter of the Shops (Amendment) Bill throughout its various stages. That particular process may now have lapsed, but I am sure that we shall return later to that agonising debate. It is one aspect of the importance of avoiding rushing into out-and-out deregulation that I wish to raise today.

I am grateful to the Under-Secretary of State for Technology for coming here to reply in this Adjournment debate. As he has just returned from an important visit overseas, I am even more grateful to him for being on the Treasury Bench today—although I know he will not mind my saying, given the importance of the subject, that at least the Minister for Industry, if not the President of the Board of Trade, should have been on duty to respond to the debate.

Although it is an Adjournment debate, there is, as you know, Madam Deputy Speaker, a respectable tradition in the House that matters of overriding political importance —not just local or marginal matters reflecting the particular interests of the Member concerned—can be raised on the Adjournment. I wish to air a big national subject, and that is a convenient way of doing it.

I did not select a Friday for this debate, although I am grateful to the Chair for having done so. If the debate had taken place in the Monday to Thursday period, more attention might have been paid to it. I hope that the press will give publicity to the subject, for it will become part of a significant debate in the months to come. Lest my hon. Friend the Minister thinks that I am growing excessively radical in, perhaps, the wrong sense, bearing in mind the last few years of political developments under a Conservative Government, I wish to reassure him that that is far from the case. All that I am doing is espousing the idea of a return to the commonsense, middle ground of British politics, which is particularly necessary in this matter.

The subject for debate on the Adjournment of the House are deregulation and privatisation but, if I may, I shall take them in reverse order. I have to declare a direct interest as the founder shareholder of a company in the City that has been involved in virtually all the successful privatisations that have been carried out by the Government since 1979, beginning with the first tranche of the British Telecom shares issue, followed by the privatisation of British Gas and other nationalised industries. It is true to say that, both pragmatically and objectively, it has been a successful programme, the effects of which, in most cases, have been beneficial to the economy. Most people, even Opposition Members, would agree, with that conclusion.

The programme has not been successful in all respects. In practical terms, the effects have not always been quite what was expected. For instance, in real terms, electricity is now more expensive as a consequence of privatisation than it was before, so privatisation has not always worked exactly in the way that we hoped. None the less, the overwhelming conclusion must be that it has been a success. Bearing that in mind, the irony of my suggestion is that we should have second thoughts now. This country has privatised more industries than any other country in the occidental world and elsewhere. The argument now, I believe, is that we should have serious second thoughts about further privatisation.

I pay tribute to our deceased colleague, the hon. Member for Christchurch, for his work on the railways, which are a good example of where the Government should have second thoughts and pause to ensure that we get the structures and the legislation right. I share the anxieties and fears of many people, including many loyal Conservatives, that we shall get it wrong for the sake of the inevitable, inexorable pressure of previous ideology, at a time when the era of Thatcherism has been fading away and should continue to fade away rapidly. I hope that we are returning to mainstream central conservatism for a long time ahead.

Robert Adley, whom we in the House lament, had a number of important points to make on the subject, not least in the report of the Select Committee on Transport. The Railways Bill has been amended in Committee with few second thoughts, which is a pity. I hope that there will be an opportunity for the Department of Transport and other parts of government to think carefully before rushing into an ill-considered, complicated structure for the sake of old ideological pressures that will not be in accordance with modern practical realities. A limited number of franchises, but only a few, may eventually be awarded to outside applicants, but I should like to see the essential component maintained so that British Rail is involved as an original applicant in its own right, subject to the final structure of the track authority and franchisers.

We are apparently approaching the final sell-off in British Telecom shares. Is it right for the Government, for old-fashioned, out-of-date ideological reasons, automatically to say that they must sell off the remaining shares? Why not keep 10 to 15 per cent. in public hands, bearing in mind the strategic and security aspects of telecommunications, which is a legitimate argument? Why should not the Government maintain and conserve a successful commercial investment that has done very well and would provide an interesting commercial sector dividend for the Treasury?

The main reason I urge second thoughts on privitisation and deregulation is the apparently upcoming privatisation of the Post Office. Even right-wing colleagues in the House and in the parliamentary Conservative party are having serious second thoughts about the arguments for Post Office privatisation. Again, I use the word deliberately in the conventional sense of privatisation in structural terms, but other parameters may be considered in the future. I hope so. I hope that the Department of Trade and Industry and the President of the Board of Trade will be open minded on the issue. I am encouraged by the delays that appear to be occuring. My hon. Friend the Minister has had hearings with people outside, with colleagues in the House and, I am sure, with Opposition Members. I remember that years ago we both rebelled against the abolition of the Greater London Council, so I am sure that he is not the kind of person to be an unthinking supporter of the Centre for Policy Studies and its old arguments and ideological nostrums, which have now been bypassed by the passage of time and by the return to pragmatic Conservative common sense.

The public want this Conservative Government, whom they re-elected last year—I was as delighted about that as my hon. Friend the Minister—to concentrate on the revival and recovery of the British economy, the revival and reconstruction of our essential social services and a return to common sense in education policy. They do not want us to go on at excessive length about old pre-occupations with old-fashioned ideology on privatisation, particularly when it clearly is not necessary for the Post Office.

Future structures may be needed because Post Office management, supported by employees and, I am sure, unions, would like the Post Office to be free to go into the marketplace for future investment and capital requirements, which it cannot do at the moment because of the shackles of Treasury control and the need for a minimum return.

All sorts of options can be considered and I certainly advocate the idea of a public corporation with the Government still involved through, perhaps, a minority shareholding—such as with British Telecom, if the Government do not sell their remaining shares. An employee-management buy-out might be the right way forward. That would offer the freedom that we saw in the successful privatisation of the National Freight Corporation, which represented popular capitalism at its best, with amazingly successful results. Van drivers with the NFC now have £150,000 of capital or more, and as a result they are as addicted as my hon. Friend and I to the modern welfare capitalist system.

That may be the approach. However, the old-fashioned idea of a sell-off for its own sake, simply because the Treasury still needs money to reduce the deficit, is depressingly familiar. It is otiose and out of date for a unique body that is part of the public sector in a real sense and also has links with the Crown which have to be borne in mind in the future.

My final comments—I want to give my hon. Friend a chance to reply—will be about deregulation. We now use that term in two senses, which causes a certain amount of confusion. Although I am in favour of it, I am not thinking primarily today of deregulation in the sense of a bonfire of controls. In fact, despite the fact that I am a supporter of the bonfire of controls and of getting rid of excessive red tape and bureaucracy, as anyone with common sense would be—I suppose that it would be a wider part of the citizens charter—I find it slightly amusing that the Government are now relaunching that as a policy although we have been in power since 1979. I thought that we were supposed to have done it before. I am thinking more of deregulation in areas such as the Sunday trading legislation that the House debated earlier, in which the Government could still be tempted to say that they remained, empirically, out-and-out deregulators, if that is not a contradiction in terms—I sometimes think that it is. That would be a great pity.

I shall raise two points to which it may be difficult for my hon. Friend to respond, as they are not in the province and ambit of his Department—but no doubt we can both consult our colleagues in other parts of the Government later. As a London Member, I wish to refer specifically to deregulation plans for London buses and black taxi cabs. I apologise for the fact that, because my hon. Friend was abroad, I could not give him notice that I intended to raise that subject, too.

In terms of deregulation as a general principle, the time has come when we can return to pragmatic, sensible, middle-of-the-road Macmillan-type Conservatism. I hope that, as we have been assured discreetly and privately by our colleagues, that is a genuine return by the Government to common sense and to the centre ground. I therefore hope that deregulation will no longer be a central plank of our policy in general terms. I feel strongly that deregulation of the buses in London would be a disaster. All the evidence points to such a policy being quite wrong. The present limited contract franchise system is adequate and successful for London.

We do not, of course, contemplate deregulating the tube, which would be rather a difficult matter to engineer, I presume, as there is no intrinsic competition that one could create alongside tube trains. We have seen how regulation and a certain restricted framework for London's black cabs have produced the best result. There is competition between individual cabs and cab companies, yet the restrictive regulatory framework for qualification and control provides us with the blessing of the best taxi service of any capital city in the world that I can think of.

If the Government abandon a return to common sense and pragmatism and say, "No, no, we must continue. The Centre for Policy Studies is still alive and kicking, and we owe it to all the acolytes who did their research years ago to fulfil their views and wishes in future legislation" our own supporters as well as the general public will be profoundly disappointed. The Government now have a wonderful opportunity to say that second thoughts are legitimate in politics, and that this is a good example. I hope that my hon. Friend will reassure me and the House that that is the case.

2.48 pm
The Parliamentary Under-Secretary of State for Technology (Mr. Edward Leigh)

As always, the House will be grateful to my hon. Friend the Member for Harrow, East (Mr. Dykes) for putting his views forward in such a forthright manner. The Conservative party is, of course, a broad church and if a broad church is to work it is important that we have various different strands of thinking. My hon. Friend has always been assiduous and consistent in advancing his ideas and he has done so again today. I am grateful to him, as the whole Government will be.

My hon. Friend mentioned the Centre for Policy Studies two or three times, but the Centre for Policy Studies does not run the Government. It is a think tank and we listen to its views as much as we listen to the views of our Back Benchers. I am sure that my hon. Friend will agree that all those various views are condensed into effective policy making. Of course, the Government have noted what he has said today about privatisation of British Rail, about deregulation in general and about London taxis. I hope that my hon. Friend will forgive me if, despite the fact that he raised wider transport matters today, I do not venture into that territory. He will know that as a Minister at the Department of Trade and Industry, I am not responsible for transport matters. In view of the seriousness with which my hon. Friend has conducted the debate today, I hope that he will be satisfied if I inform my right hon. Friend the Secretary of State for Transport of his views. I have no doubt that my right hon. Friend will be able to give him a reply.

I apologise for the fact that my right hon. Friend the President of the Board of Trade is not able to be here today. I hope that my hon. Friend will be satisfied with my humble presence. I shall do my best in the little time available to me to answer some of his points. As he said, his subject is wide. Normally on these occasions, it is simple for those briefing the Minister to divine what will be the subject of the debate. This is such a broad debate that I hope that my hon. Friend will not be too disappointed if I do not launch into a full-scale defence of changes in Sunday trading laws, or of the privatisation of this or that industry. I shall do my best to take up some of his points.

To return to the theme with which I opened, what unites us in the Conservative party is much greater than what divides us. All in the Conservative party are united on the great importance of our deregulation initiative which my right hon. Friend the President of the Board of Trade has made an absolute priority for himself. My hon. Friend alluded to that, so I hope that he will forgive me if I spend a few moments towards the end of my speech telling the House about our progress on the deregulation initiative. It is an important matter which falls within the general title of the debate.

The Government's privatisation programme, as my hon. Friend mentioned, goes back almost 14 years and stems from the strong belief that enterprise flourishes best and provides better services to customers if management is free to manage without interference from the Government in commercial matters. Privatisation is a natural partner to deregulation. Our privatisation programme has released 46 major companies and many more smaller businesses from the straitjacket of state control. Bureaucratic and political interference in commercial decisions have been cast off. Since privatisation, the companies have had the freedom to grow and to develop within the discipline of a competitive market.

The benefits of privatisation have been clearly demonstrated by improvement in the performance of individual companies, whether in productivity, profitability or better-quality products. My hon. Friend mentioned electricity prices. Domestic prices have risen slightly in real terms by 2.5 per cent. in total, but the director general is reviewing the supply price control which is due to be revised on 1 April. As Minister with responsibility for telecommunications, I am far more familiar with BT. There has been a dramatic fall in prices in telecommunications across the board. There is no doubt that privatisation has generally resulted in a much better service being available to the consumer and in a fall in prices. Above all, it has resulted in much greater investment, especially in the water companies and in telecommunications.

New regulatory regimes have been created for the utilities. New markets in utility services have been created and the monopoly element of the businesses needs special attention in the interests of customers and to provide incentives to increased efficiency. The regulators have an important role in promoting competition in the new markets and providing opportunities for new entrants to introduce new ideas and services to the benefit of customers. It has been recognised that regulation is in itself a barrier to entry in the markets. Our objective has been to promote the minimum regulation necessary to provide proper protection for customers while enhancing the prospects of competitive development of the markets.

My hon. Friend referred to the Post Office. As he is aware, I am the Minister with responsibility for the Post Office, so I shall deal briefly with that subject. As my hon. Friend agrees, the Post Office is now doing an excellent job. The quality of the first-class service has risen from 74.5 per cent. next-day delivery in 1988–89 to 91.7 per cent. between April 1992 and January 1993. This is the 18th year of subsidy-free profit. Profitability has increased from about £86 million in 1989–90 to £247 million in 1991–92. We have the most comprehensive network of post office counters in Europe and the average queuing time is now just two minutes.

However, the Post Office is facing a period of considerable change and great challenge in the marketplace. Postal services are facing increasing competition from the telecommunications sector. Direct mail marketing, an important part of Royal Mail's volumes, is facing competition from magazine and television advertising. The Post Office must be free to respond to such changes and challenges. It was the realisation of these new opportunities and the need for the Post Office to be able to meet the challenges which prompted the Government to conduct a review of the future organisation and structure of the Post Office.

As my hon. Friend knows, my right hon. Friend the President of the Board of Trade announced the review of Royal Mail and Post Office Counters last July. Let me make it clear to my hon. Friend—as he specifically raised the point today—that that should not necessarily be taken as implying that the Post Office will be privatised. It is no secret that we are looking at options to privatise Royal Mail and Post Office Counters, but we are looking at continued public sector ownership as well as private sector options. No final decisions have been taken and what my hon. Friend has said today will clearly be of great interest to us.

Although the question of the ownership of the Post Office is important, another issue that we are having to consider is the competitive environment in which the future Post Office will operate, whether it is in the private or the public sector. We accept that a degree of monopoly protection for letters is necessary to permit the continuation of a universal service with delivery to every address in the country within a uniform and affordable tariff. I am sure that my hon. Friend will agree that, as far as the public is concerned, that is the most important issue that we have to address. Whatever may be our views on the question of ownership, that is what the public cares about and what we must ensure. I assure my hon. Friend that the Government are wholly committed to those objectives. They are not negotiable and we believe that restrictions are necessary if they are to be achieved.

Although I am always keen to examine the potential scope for deregulation—and we are, indeed, committed to permitting more competition—I do not think that, in the case of mail services, full deregulation is appropriate. I hope that that reassures my hon. Friend. We looked at the matter carefully. The tenor of much of my hon. Friend's speech was that he thinks that, in certain cases, we have tried to deregulate too much. Clearly, in conducting the review, we examined the Post Office carefully. One conclusion that we reached was that full deregulation of the Post Office is impossible. The outcome for rural postal users of a free-for-all would be higher prices and poorer quality of service. I appreciate that my hon. Friend represents an urban constituency, but I suspect that if there were full deregulation of postal services, there could even be some diminution of service in suburban areas such as the area of north London that he represents.

We cannot allow the future provision of our social commitments to be an act of faith or to be provided in a haphazard fashion—but nor will we allow necessary restrictions on competition to become an abuse of monopoly power. That is why we made a commitment in the citizens charter to the creation of a postal regulator to oversee and enforce the provision of a universal service. Even here, however, we are keen to avoid over-regulation. I assure my hon. Friend that we shall not be unleashing a regulator on the multitude of private parcel carriers and delivery services. The role of the regulator will be to police the universal service and to ensure that the Post Office competes fairly where the market can sustain competition.

My hon. Friend made a point of referring to the Post Office. As the Minister responsible, I am glad that he did so. I hope that my few remarks have reassured him that we are not rushing in where angels fear to tread and that we have conducted the most careful review possible of all the options. As my hon. Friend said, we have consulted widely, and I am grateful for what he said in his usual shrewd and assiduous way.

A factor that nationalised industries, privatised industries and private sector companies have in common is that they must all operate more or less under the general regulatory regime existing today. It is a tribute to them all that they have managed so well despite the regulatory burden that has been allowed to accumulate under successive Governments. There is evidence that the rate of accumulation of regulations has been accelerating in the United Kingdom, as it has in many other advanced economies. The consequent burden stifles enterprise and distracts business from its proper task of supplying competitive goods and services.

It is important that we unite both inside the Government and outside to concentrate on the deregulation initiative, and we will do so in a considered manner. We have already drawn up a domesday book of regulations. It has been placed in the Library and my hon. Friend can consult it. The initiative announced by my right hon. Friend the President of the Board of Trade will prove to be one of the most important and most successful aspects of this Government. I am grateful to my hon. Friend the Member for Harrow, East for initiating this debate.

Question put and agreed to.

Adjourned accordingly at Three o'clock.