Privatisation Proceeds (Hansard, 13 March 1997)

§ 2. Mr. Jessel
To ask the Chancellor of the Exchequer what estimate he has made of the contribution of forecast privatisation proceeds in 1998–99 to the expenditure plans set out in his "Financial Statement and Budget Report". [18520]

§ The Chief Secretary to the Treasury (Mr. William Waldegrave)
The Red Book assumed privatisation 480 proceeds of £1½ billion in 1998–99, reflecting the Government's continuing commitment to privatisation. Privatisation reduces borrowing and secures long-term benefits for UK taxpayers and consumers.

§ Mr. Jessel
I believe that £l½ billion works out at about £80 a head for every man, woman and child in the UK. If the Labour party were to attempt to stop privatisation, would not it have to increase the rate of VAT by about 1 per cent. or income tax by about 1p in the pound, or a bit of each, to raise the same amount of money?

§ Mr. Waldegrave
My hon. Friend is right; the absence of the predicted income from privatisation proceeds seems to have been missed by the right hon. Member for Dunfermline, East (Mr. Brown), who says that he will stick to our plans. Unless the right hon. Gentleman has done yet another U-turn on the matter, the Opposition are £1½ billion short on this, which contributes to the £12 billion gap that they have during the first two years, which is part of their £30 billion spending gap in general.

§ Mr. Stevenson
Is the Minister aware that, according to figures produced by the House of Commons Library, since the Government embarked on their privatisation policy, privatisation receipts show a shortfall of £5.7 billion compared with the share market price the day after privatisation? Does not that show remarkable Government incompetence, and that the Government are prepared to pay any price in their dogmatic pursuit of privatisation?

§ Mr. Waldegrave
No, it does not show any such thing. If we cast our minds back, on each of those occasions the Labour party either said that such businesses could not be privatised or would not be sold—or it tried to talk the market down. The hon. Gentleman helpfully makes another point, which is that the Labour party's proposed so-called windfall tax is based on the idea that there was a windfall—some 15 years ago in many cases. How one taxes the present shareholders to catch up with an alleged windfall 10 years ago is rather odd.

§ Mr. Congdon
Given the success of the privatised industries in reducing prices while paying more than £2.5 billion a year into the Treasury, does my right hon. Friend think that it is somewhat perverse to reward that success by imposing a windfall tax? What incentive is there for such companies to be profitable when their success would be rewarded by the Labour party plundering their profits?

§ Mr. Waldegrave
The Labour party justified that policy on the basis that it thought that some of the executives in those firms were too highly paid, but the proposal makes no difference to executive pay. It is a random tax on a selection of successful businesses, such as British Telecom, which has delivered a 40 per cent. cut in real terms in its prices to the consumer. It shows Labour's real underlying approach to industry: if it is successful, Labour does not like it.

§ Mr. Milburn
Do the Government intend to privatise the Post Office?

§ Mr. Waldegrave
The figures in the Red Book do not include any potential receipts from the Post Office. 481 They include the privatisation of National Air Traffic Services, which has been announced, and there are plenty of other candidates in line that will continue to make the privatisation receipts flow. This is a major gap in Labour's plans to which it has not yet found any answer.

§ Mr. John Marshall
Will my right hon. Friend confirm to the House whether the figures include receipts from the proposed privatisation of London Underground? Will he confirm also that, unique among privatisations, the receipts from that privatisation will be used to increase investment in London Underground?

§ Mr. Waldegrave
My hon. Friend is quite right: the Red Book does not include any assumptions about London Underground.