Privatised Utilities (Hansard, 4 December 1996)

§ 2. Mr. Hanson
To ask the President of the Board of Trade when he next expects to meet the regulators of privatised utilities to discuss profit levels. [5782]

§ The Minister for Science and Technology (Mr. Ian Taylor)
The regulation of the privatised utilities is a matter for the independent regulators. I have regular 1025 meetings with the director general of the Office of Telecommunications to discuss telecommunications matters generally.

§ Mr. Hanson
Is the Minister aware that, since privatisation, electricity companies alone have had profits of £9 billion? Does he agree that that hardly smacks of firm regulation in the interests of prices for consumers? Will he say how he intends to ensure further regulation of privatised utilities, and will he support Labour's call for a windfall tax to put the money to good use?

§ Mr. Taylor
I certainly will not support Labour's absurd windfall tax, which would penalise the consumer first. It would also penalise the investment proposals of the privatised utilities and greatly damage their long-term success. Industrial electricity prices have fallen 15 per cent. in real terms, which is of enormous benefit to industry. Even some elements of the Labour party, such as the Fabian Society, know that the attempted fiddling of Labour Front Benchers with the RPI minus X formula is ultimately likely to damage consumers as well as the industries.

§ Mr. Quentin Davies
Has my hon. Friend seen reports that Mr. Cruickshank, the Director General of Telecommunications, has expressed anxiety about the threat of a windfall tax and suggested that it would make it difficult for him to fulfil his regulatory responsibilities? Does that not clearly imply that, in the event of such a tax being imposed, he would feel that he had to relax correspondingly some of the price constraints that he currently imposes on British Telecom to maintain satisfactory investment in our communications industry? Would that not mean that a windfall tax would be paid directly by consumers?

§ Mr. Taylor
That is an assumption that one might reasonably make. I have seen remarks attributed to the director general voicing those concerns. The simple fact is that the Labour party has not fully understood the implications of independent regulators. If an independent regulator is looking at stimulating competition in the industry and looking after consumer interests, it is likely that he will raise a question mark about madcap schemes that are likely to damage the industry.

§ Mr. Malcolm Bruce
Will the Minister accept from me that the Liberal Democrats oppose a windfall tax, because we believe that it is wrong in principle and would be difficult to enforce? If there are excess profits within the utilities, that money has come from the consumers and should go back to them. Will the Minister ensure that measures are introduced to ensure that the consumers benefit? As I represent one of the areas of the country that has the coldest and longest of winters, will he also ensure that the regulator does more to use what resources exist within the utilities to increase energy efficiency and reduce fuel poverty?

§ Mr. Taylor
I certainly accept the hon. Gentleman's comments about energy efficiency. Various aspects of the Government's policy and that pursued by my right hon. Friend the Secretary of State for the Environment prove that we take that issue seriously. The whole purpose of regulation is to benefit the consumer as well as to 1026 stimulate investment. The RPI minus X formula gives an incentive to industry to increase efficiency and profits and then to plough back more in investment. I am sure that the independent regulators will have noted what the hon. Gentleman has said.

§ Mr. Hawkins
Does my hon. Friend agree that one of the nonsenses of the Labour party's windfall tax proposal is that it arises out of the politics of envy, which is so prevalent on the Labour Benches? The Labour party did not do its calculations correctly, because it thought that that tax would hit only the bosses of the privatised industries, and it did not realise when it announced its proposal that it would directly attack consumers. But the penny has dropped with the consumers. It is too late for the Labour party to back out of that proposal, even though it has tried to back out of everything else that it has always really stood for.

§ Mr. Taylor
The Labour party's inability to focus on the real issues that interest consumers is increasingly apparent. I also point out that the windfall tax would not help pensioners in any way. That is another matter that the Labour party must address quickly.

§ Mr. Battle
I wonder whether the Minister is even aware that no less a body than the Institute of Directors, not known to be a supporter of the Labour party, has said of our plans for a one-off windfall levy: We acknowledge that some of the utilities do have spare funds at the moment and that the economic impact of the tax might therefore be insignificant. What will the Minister do to ensure that, when the regional electricity companies are taken over, they remain within the reach of the regulator and that their profits are not hidden or spirited away? Recently, the hon. Gentleman's predecessor, the Minister for Energy, went before the Select Committee and said that he believed that the system of regulation was so ad hoc and unaccountable that it needed to be overhauled. Does the Minister support that suggestion, or will consumers have to wait for the election of a Labour Government to tackle that problem?

§ Mr. Taylor
Given the basis of the windfall tax, consumers must look forward with dread to the arrival of a potential Labour Government, because of the damage that would do to their interests in relation to those industries.
I am sure that the hon. Gentleman has read about the great concern registered by the Confederation of British Industry about the impact of the tax, not least on the cost of capital, which would ultimately feed through into higher prices for the consumer.
As for the competition policy exercised by my right hon. Friend the President of the Board of Trade, such facts are taken into account when he comes to any conclusion. Regulation and its impact are of continuing importance to the interests of the industry and the growth of competition within it. The Director General of Electricity Supply recently made detailed proposals about such competition for 1998.

§ Mr. Atkins
Has my hon. Friend had conversations with the Director General of Telecommunications about the increasing problems of the cloning of digital 1027 telephones, which causes immense inconvenience to many people, not least some of my constituents, particularly when they realise that the machines and devices used for the cloning of their telephones can be bought in the average store? That equipment can damage, with impunity, the rights and interests of ordinary people who use their mobile telephones in the ordinary way.

§ Mr. Taylor
I am grateful to my right hon. Friend for raising that matter, because cloning costs the mobile telephone industry about £100 million a year; therefore, that impacts on the public as well in certain areas. Although the problem will be reduced as we move to digital mobile telephony, know as GSM, it is nevertheless always possible that the criminals will become more sophisticated. In those circumstances, I warmly welcome the private Member's Bill that has been tabled by my hon. Friend the Member for South Dorset (Mr. Bruce), and I commend it to the House.