Privatisation

HL Deb 25 November 1987 vol 490 cc601-37

2.59 p.m.

Lord Ezra rose to call attention to the financial and economic aspects of Her Majesty's Government's privatisation programme and to the case for introducing effective competition, and to move for Papers.

The noble Lord said: My Lords, I beg to move the Motion standing in my name on the Order Paper. I believe that in tackling the question of privatisation this afternoon we shall be discussing one of the major policies pursued by the Government, in the course of which a number of enterprises have already been privatised and a number more are due to be privatised. It therefore seems to me that this is the right time to be taking stock of the situation.

I am indebted to those noble Lords, all of whom have considerable knowledge of the subject, who wish to speak in this short debate. I particularly appreciate the fact that the noble Lord, Lord Young of Graffham, will be replying. I am also very pleased that the noble Lord, Lord Mason of Barnsley, should have chosen this debate for his maiden speech, because he is a person whom I have known for many years and particularly knew, of course, when he was Minister of Power in the late '60s.

In order to cover this ground about privatisation I think it is necessary, albeit briefly, to have a look at the history. It all started in 1945 with the Attlee Government when the major measures of nationalisation were taken. It has become popular since to criticise the so-called Morrisonian principle. It was Herbert Morrison who devised the ways in which these nationalised industries should be run. I personally can see nothing wrong with the Morrisonian principle. It was the way in which that principle was applied that went wrong.

The Morrisonian principle was very simple. It was based on the thesis that the basic services and industries of the country should be run under public control but by independent boards and that those independent boards should be left free to run the enterprises so long as they had regard to the public interest in all respects and that they broke even in their operations. I cannot think of a better way of putting it.

The trouble is that right from the start the thing went wrong. I speak with certain knowledge, because I was involved in one of these nationalised enterprises from 1947 right through to 1982, so I ran the whole gamut of all the political changes that we had in Britain in that period. And I can say that the very Attlee Government who thought up this major principle in fact prevented it from being properly applied, because in the coal industry—if I may cite that as an example—prices had been held during the war by what was called the gentlemen's agreement with the private coal producers and that gentlemen's agreement was imposed on the nationalised enterprise. The result was that when the energy situation changed in the 1950s, the coal industry of Britain, instead of having built up substantial reserves, had none.

That was one illustration of how it went wrong. But all governments, I am afraid, used the nationalised industries in this period, which lasted from 1945 to 1979—because that was when the present Government came to power—as a means of applying their policies. This was totally inconsistent, in my opinion, with those enterprises achieving commercial success and performing their duties according to statute.

So I have no doubt that changes had to be made. Indeed during this period such was the concern with this matter that three White Papers were issued—in 1961, 1967 and 1978—to try to correct these anomalies, but they did not do so. Some of these White Papers even introduced further anomalies which further complicated the situation. So I have no doubt at all that a different solution had to be found. The question we have to ask is whether the privatisation solution is the right one, and that is what I should now like to address myself to.

I have tried to work out what I believe are the Government's objectives in privatisation. I am sure the noble Lord, Lord Young of Graffham, will be able to correct me if I have left anything out. But having carefully read what has been said on this subject by government Ministers, I have come to the conclusion that there are four objectives. The first is the diminution of the public sector, which I can see from the noble Lord, Lord Young, is a correct one. The second is to bring about the impact of competition and market forces on these enterprises; that is two right out of four. The third is to provide additional financial resources for the Treasury, and the fourth is to widen share ownership. It appears that I have got three right out four according to the noble Lord, Lord Young.

A noble Lord

Four out of four.

Lord Ezra

The problem is that I have not been able to put those objectives in order of merit, because the Government have somewhat changed the emphasis as time has gone on, as I shall now try to show. If you take the privatisations which have so far occurred they fall into two categories. The first category is those enterprises which were in a competitive situation and remain in a competitive situation—such enterprises as Cable and Wireless, Amersham International, Britoil, Associated British Ports, Enterprise Oil, Jaguar, National Freight and National Bus.

These were all, it could be argued, in a reasonably competitive situation. Therefore it is not unreasonable that they should enter the private sector and compete freely without the intervention of government. Generally speaking, they have all done fairly well, but then most of them were doing pretty well anyway; otherwise they could not have been sold. They might have done just as well under public ownership. We do not know. But I think that there is a case in logic for saying, if they are in the competitive sector, let them be fully in it.

But it is the second category on which I should like to concentrate; that is, the category of virtual monopolies in the supply of public utility services. I believe that all of us in this House and elsewhere in the country are a bit concerned about this problem. We have had two public utilities so far privatised, telecommunications and gas, and we have two more which are likely to be privatised according to Government pronouncements, electricity and water. The problem that we have found in your Lordships' House during the course of the privatisation debates on telecommunications and gas is that we felt that the competition objective did not seem to have been met in the proposals which were put before us and finally passed through the processes of legislation, which is a matter of grave concern.

What we have been faced with is that, instead of having public monopolies, we have private monopolies. The Government have taken the view that a private monopoly is better than a public monopoly so long as it is effectively regulated. But I must say that on this side of the House we have grave concern about the proposals for regulation in the case of those two enterprises.

If we take the position in relation to competition, for example, so far as telecommunications is concerned the Director-General of Oftel had an objective to promote competition. When it came to gas, however, the Director-General of Ofgas merely had to enable competition and that clause was introduced into the Bill only as a result of an amendment. So I must say that I come to the conclusion that, of the four objectives which I identified, the competition objective seems to have gone into last place.

We are all aware of the problems that have arisen over telecommunications. The feeling, which is fairly general among the public, justly or unjustly, is that service has suffered in the interest of achieving good financial results. A lot of work will have to be done to correct that impression. In the case of the gas industry, whereas there is a quite substantial degree of regulation as regards the domestic market, there is none for the industrial market. The Office of Fair Trading is at present looking into that issue.

At the moment therefore there is concern about the way in which these public utilities have been put into the private sector. I wish to consider the two big candidates for privatisation in the future. They are water and electricity. The first thing that can be said about these two is that they are services and products which effect everybody in the country. Everybody has to use water; everybody uses electricity. So dimensionally they are much more important even than telephones—although no doubt we all use those—but certainly more important than gas, because not everybody uses gas.

This issue has to be treated with particular care. We have noted in the case of water that, whereas the Government started off by praising the integrated river system that has been developed in this country and proposing that the system should be privatised in its integrity, they have now changed their minds. They have now decided that the statutory powers of the water authorities should be given to a new authority and that they should retain simply the more industrial aspects of the business; namely, the supply of water and the treatment of sewage.

That change has created a strong opposition view within nine of the 10 water authorities. In other words, the management is not in support of what has been proposed. It is saying that the emphasis should be given to maintaining the integrity of the water supply system. Indeed I get the impression that it is saying that it would rather remain in the public sector and continue to operate the integral system than be privatised on the basis the Government are now proposing.

But there is a third problem. Even on the basis which the Government are now proposing very little competition will be introduced. Apparently the Government have not thought out ways in which by franchising, by subcontracting and by management contracts some element of competition could be introduced into the system. We seem to be falling into the worst of both worlds. We seem to be on the verge of giving up what is generally admitted to be a very successful integral water supply system and going into a system which even if it is split will have no element of competition in it. I think that this requires much further consideration before decisions are reached.

In the case of electricity exactly the same kind of argument applies, because we now have an integrated electricity system in which the grid, the generation and the distribution elements are totally integrated. That has led to our having one of the most secure and technically efficient systems in the world. There is no doubt about that. But the Government have said that they want to introduce competition on privatisation. I agree with that principle, but the way in which that will be done has raised many issues. Only in today's Financial Times Mr. John Baker of the CEGB wrote an article on the subject in which he pointed out, in effect, that if the Government were to go ahead with what apparently they intend the lights might go out. We have the problem of seeing how this will be worked out. How will these basic integrated utilities be privatised in such a way that competition can be introduced without jeopardising security of supply?

I conclude by saying that I think these issues are so important, so complex and have led to such differing views both within and outside the industries that before the Government proceed any further with either of them they should put together all the options in a consultative document and let us have a major national debate on the whole issue. I beg to move for Papers.

3.15 p.m.

Lord Thomas of Swynnerton

My Lords, all noble Lords, particularly those on this side of the House, will be most grateful to the noble Lord, Lord Ezra, for introducing this debate on what is after all one of the most important aspects of this Government's policy. The noble Lord began on an historical note and so shall I. Edmund Burke in his Thoughts On Scarcity in November 1795 remarked that: The moment that government appears at market all the principles of market are subverted". That remark was not made by my noble friend Lord Harris of High Cross or indeed any member of what might be called the libertarian wing of the Conservative Party. It was made by one who is looked on by many as the prophet of the paternalist wing of the Conservative Party. It is a remark therefore which suggests that this country's tradition, unlike the tradition of our Latin and German neighbours on the Continent, was in the past one of free enterprise. That good advice by Edmund Burke obtained until the late 19th century.

Here again I dispute with the noble Lord, Lord Ezra, as to when the beginning of that history was. After all it was nearly 100 years ago that Sir William Harcourt speaking from the Liberal Benches in another place remarked: We are all Socialists now". He was probably referring to one of those companies—telephones—which has only recently been denationalised.

All of us know how in the course of the late 19th and 20th centuries the idea of public ownership took hold of the imagination of many members of the political classes of this country. I do not refer only to members of the Labour Party but to the Liberal Party, high-minded civil servants and in some cases to members of the Conservative Party too. Looking back, given the apparent failure of capitalism in the 1920s and 1930s and the terrible shock which the First and Second World Wars gave to the civilised order throughout the civilised world, we perfectly understand how the experiment of nationalisation was introduced.

I think, however, that many of us on all sides of the House—it is clear that the noble Lord, Lord Ezra, is among them—would now feel that that experiment of nationalisation had not solved all the problems that it was supposed to solve by the end of the 1970s. It had not solved, for example, the problems of dealing with labour relations in a very large workplace. It had not solved the question of how to raise money for public enterprises. It had not really even solved how to do its own accounting. Do I dream or have I read recently that before nationalisation British Telecom had only one accountant in the entire enterprise?

Nationalisation has not shown itself particularly responsive to public interest. I remember that I once asked a question in your Lordships' House about whether post could not be restored on Sundays. I was rather sharply sat upon by my noble friend who answered me, and I was told that it was not the Government's business to answer on behalf of the Post Office. But if not the Government, who was responsible? Your Lordships may guess that I became involved in an extremely long and abortive correspondence on that subject.

While this apparent failure was being counted we also saw the revival, as it seemed, of capitalism. In the 1960s and 1970s the products which really made people happy, such as food, clothing, holidays abroad and consumer durables, all seemed to be produced from the free sector. Far from seeing the end of capitalism in the 1920s and 1930s, it was evident that that was not going to happen.

Therefore, it is understandable that a government such as the one who are now in power and who are concerned with the freedom of the individual and with trying to increase responsibility should also be embarking on a course of privatisation. They have done so, as have many other governments throughout the world who have perhaps not embarked so fully on that course as yet and who are not specifically conservative governments. Such governments include social democrat and one or two Communist governments who have begun to re-explore the definition of the line between the interests of the state and the interests of the economy.

What must be and will be surprising to historians is that this Government were relatively slow in suggesting that a programme of privatisation could be embarked upon. It was not until 1984 that such a programme really began. Can the fact that it was only in 1984 that my noble friend Lord Young of Graffham joined the Government be significant? Perhaps it is not entirely that.

In conclusion, I wish to ask my noble friend several questions. First, the noble Lord, Lord Ezra, made, as all of your Lordships will probably agree, a very good point concerning the difficulty of dealing with a private monopoly. We all understand the background to the nationalisation of British Gas. However, now that that has been done the lesson of British Gas should be learnt and in future, even if it be conceded that there should be a monopoly, consideration should be given to the splitting-up of the company, perhaps into regional units. We are all aware that there is a great deal of latent competition in relations between the unions which is now too often diverted and wasted in sporting rivalry.

Secondly, how long does my noble friend think that the so-called "golden share" which the Government continue to hold in nationalised industries will last? How long will the 15 per cent. maximum on an individual shareholding in a number of companies last? How long does he anticipate that the ban on foreign ownership, which has been mentioned and which is included in the Bill privatising some companies, will last? Does that provision not clash with the expectations which we all have for a revived European economy after 1992, when my noble friend Lord Cockfield has completed his work in creating a tariff-free and non-tariff-free union in Europe?

Thirdly, should not one of the privatised companies which we shall be seeing in the future consider the suggestion which was imaginatively made some years ago by Mr. Sam Brittan, whereby each adult member of the community should be able, upon application, to receive a share? There is a certain irony in the idea of a government putting up for sale the shares of a company which they had previously supposed belonged to them.

Although I have other interesting questions which I should like to put to my noble friend, I see that I have now spoken for eight minutes and I must sit down.

3.25 p.m.

Lord Mason of Barnsley

My Lords, I intervene in this debate to express my anxieties over privatisation and the pending privatisation measures for the electricity and coal industries. However, I must first say that I am very concerned at the dominant privatisation theme in the legislative programme of the Government. It has become a fetish and a mania; it is not all for the good of our people and the nation.

As your Lordships will surely know, it panders to one of the worst instincts of mankind—that of greed. It creates an atmosphere that is generating a get-rich-quick society. In the South and in the City we have a generation of quick-quid kids. In the provinces, privatisation is egging on those with a few pounds in the bank to invest, buy now and be rich tomorrow. Thousands of our people may be taken for a ride, urged on by every privatisation measure. Who knows how many old people are kidded on to invest their hard-earned savings by mass advertising? They have been sucked into that maelstrom of get-rich-quick activity and have recently seen their life savings threatened with the slump in share prices. It is not over yet.

I believe that those human matters are part of the financial and economic aspects of the Government's privatisation programme and should not be forgotten. I ask myself, "What of our young people? How are they being affected?". A survey recently carried out by McCann Erickson revealed that British teenagers: have short-term goals and many are practical and materialistic". It went on to say: The overriding discovery was the feeling that money was the doorway to modern life". A similar survey was carried out in Europe. It revealed: that teenagers valued friendship and love above money. They also placed greater value on the welfare state than did young Britons who see wealth as the route to happiness". In other words, the motivating force in life for many of our young people is materialism. What a reflection upon our society! The mania for privatisation is much to blame. That is the moral aspect of privatisation.

Now we have the Government pressing ahead with the privatisation of electricity and the possibility of carving the CEGB up into rival generating companies. They are now preparing the sale and, I fear, rigging the market with a massive price increase ready for the get-rich-quick privateers. They are allowing the CEGB the freedom to import more electricity from France and probably from Iceland in due course. They are doing that irrespective of the long-term threat to the security of our supplies. But, even worse, there is the encouragement to import more coal, all under the guise of competition. What I really fear is that that may well be the forerunner of privatisation of the coal industry.

My industry is the coal industry. I went underground at 14 years of age. I worked there for 14 years in a seam which was 1 ft. 10 inches high. Even the mice were bow-legged where I worked! I have served as a mineworkers' sponsored Member of Parliament for nearly 35 years and, as the noble Lord. Lord Ezra, mentioned, as Minister of Power in 1968–69. I have lived in Barnsley—a coalmining town—all my life. I have never left those from whence I came.

I have witnessed at first hand the severity of the recent run-down of the coal industry. What is disturbing is the recent ruthless drive to cut costs, become competitive and break even in a given time-scale, irrespective of the social and heartrending consequences in the coalfield. That creates tension in the pits, bitterness between management and men and wholesale unemployment with no real planning by the Government to offset the huge job losses.

I fear that this Administration does not have enough feeling for the misery, the heartbreak, the uncertainty and the hopelessness to be found in mining communities. They have no feeling for the widespread dereliction following in the wake of a rapid rundown of a major traditional basic industry. British Coal Enterprise is a laudable trier but it is only pinpricking the problem. That is why, from Barnsley, echoing all the problems of the British coalfields, the Coalfields Communities Campaign began. That campaign includes 77 local authorities which have banded together, representing 14 million people and expressing to Parliament and to Government their concerns and the fears and worries of the people they democratically represent.

In the Barnsley area, unemployment is 17.4 per cent. Male unemployment is 21.7 per cent. Those are distressing figures. Even now two more pits, Redbrook and Woolley, are threatened with closure and with the likelihood of another 1,300 job losses. There are no falling unemployment figures in Barnsley.

There is no plan to combat or neutralise that frightening and demoralising trend. There are now 46 unemployed persons in the Barnsley area chasing every one vacancy. There is a constant uncertainty in the minds of miners and their families. They see no hope, no future, no planning for stability in their industries and in their communities. They cannot budget for the future. Morale is at a low ebb; and trade too is depressed.

Now we have hovering over us the threat of privatisation of the coal industry. To break it up, to sell it off to private speculators, is going back to the pre-vesting days of cut-throat competition with district against district, pit against pit and man against man. And that they all fear. What an atmosphere in which to live! For the satisfaction of privateers, our coal miners, our pit people and their families, will have to suffer yet again. I give notice that I shall fend off this threat; and I sincerely hope that I shall have some support from your Lordships' House having given due warning of the danger that I see before us.

3.32 p.m.

Lord Marsh

My Lords, it is a very real honour and a very considerable pleasure to have the opportunity of following the noble Lord, and to congratulate him upon his speech which was as robust as we would all have expected it to be. I think it is possible that not every word and every view which he expressed was shared totally by everyone in the Chamber. I believe I can take the liberty of saying on behalf of all noble Lords present that should be at any time decide to campaign for the presidency of the National Union of Mineworkers he will receive enthusiastic, unqualified all-party support. We look forward to hearing from the noble Lord in times to come.

Like many other noble Lords present, I have been at one time or another involved with most of the major nationalised industries. Like many others, I became convinced by bitter personal experience that the nationalisation programmes of the 1940s, 1950s—and I was still convinced as a late developer in the mid-1960s—did not in fact work to the national advantage, to the workers' advantage and certainly not to the consumers' advantage.

As the noble Lord, Lord Thomas of Swynnerton, said, there has been a growing recognition of this throughout the world. Even governments in Eastern Europe and the Chinese Communist Party are considering and discussing the possibilities of private as against the state ownership of industrial and commercial activities. Today total Pavlovian opposition to privatisation in principle is confined to the Opposition Front Bench together with some of the older members of the Albanian Communist Party.

We need to adapt the views of the past to be more in keeping with the situation and the conditions of today. There is no doubt that the introduction of a more competitive environment is one—and only one—of the important benefits of privatisation.

In a world-wide society which is very much concerned with the interests of the consumer, it is a dangerous mistake to believe that there are not areas where some forms of competition can be positively harmful to the interests of the consumer. Competition of itself can become as much of an ideology as nationalisation. There are areas where it can positively damage the interests of the consumer.

Twenty years ago—a common opening to many comments made in this Chamber—the government of which I was a member considered a proposal for a direct rail link from Victoria to Heathrow at a cost of £11 million. The problem was that at that time all the main airlines ran their own bus services. The rail link could not be viable as long as the company bus services ran in competition with it. There was an argument within the government between those of us who wanted the rail link because we said it was cheap and efficient and others who said that to interfere with the right of the private airlines to run buses on that route was against the interests of the consumer.

We took a decision and the project was abandoned. The opportunity for a cheap and efficient link with the country's biggest airport was lost and never again will we be able to afford something on that scale. The irony and the paradox was that once that policy had been accepted, in due course the bus services vanished as well and the consumer was left with the option of a £20 taxi fare and a rotten journey.

I give that as an example of a situation where one has to be careful about becoming too obsessed and too uncritical about competition for its own sake. I fear greatly that we could make a similar mistake with the privatisation of electricity.

I have no doubt that a better service can be provided if we inject a considerable degree of privatisation into the present electricity industry in this country. There are many areas where it cannot or will not provide a service comparable to that which can be obtained from high street shops or local craftsmen. There are many areas, some large and some smaller, where one can criticise the levels of efficiency which exist in that industry.

In the particular case which has already been raised of the CEGB, there are very real doubts. Those doubts arise not because of some campaign of the CEGB. I certainly have not spoken to anybody from that organisation. There is effective scope for competition within the CEGB; but when one reads in documents published by organisations like the Centre for Policy Studies (for whom I have a great respect) that the board should be fragmented into as many as 10 or even more different undertakings, I must confess that I am horrified by the suggestion.

Throughout the world the trend is towards more integrated systems precisely because of the complexity of the electricity industry. In this country the problems are even greater than they are in many others. In the United Kingdom we are faced within the next decade with the need to de-commission the eight old Magnox stations. We have the problem of coming to terms with the AGRs; we have the problem of developing a nuclear strategy. I am in favour of a nuclear strategy which follows the Chernobyl disaster.

These problems are massive and it really would be madness to seek to pass those issues over to a multitude of newly-formed companies. The financial needs are colossal to be able to cope adequately with these problems. The costs of insurance and the capital requirements are so massive that these are areas where only a centralised authority can cope.

There are plenty of areas within the CEGB where private enterprise can be introduced. As I said in my opening remarks, there are times when competition can be pursued to the point of absurdity. Given the implications of the financial cost, operating efficiency and the nuclear programme, I have no doubt that such a policy would result in one of those occasions where we would have in fact pursued the right policy to the level of absurdity within one area.

3.38 p.m.

Lord Grimond

My Lords, my noble friend Lord Ezra, who with his usual acumen very wisely chose this subject, must be delighted that already his own speech and the three which have followed have justified this debate even if nothing further were said at all. I add my congratulations to those which have already been expressed to the noble Lord, Lord Mason, on his splendidly uncontroversial speech. Long may we have that type of "uncontroversy", which, if I may say so, is something of which your Lordships' House is particularly in need.

So far as I am concerned, there are only three reasons for introducing privatisation: less Government control—which has to some extent been achieved; a more direct involvement of the workers in their industries—which has been very little achieved; and competition for the benefit of the consumer. Here I follow what was said by the noble Lord, Lord Marsh, that the essential person is the consumer and that is very often forgotten. To my mind, competition is his best defence but, alas, so far it would seem that the interests of the public sector borrowing requirement and, indeed, large profits for institutions and, in some cases, for boards, have been more important.

If competition is to be effective, it must be effective in the areas in which the ordinary consumer is interested. It is no good saying that there is much competition on the air routes between London and Japan. The people in the north of Scotland want competition in the north of Scotland. That is where competition may count and where it may be difficult to introduce. With regard to that, I am totally unconvinced by the view that bigger airlines are going to provide a better service to the consumer or user. Certainly, that has not happened in America and I do not believe it will happen here.

There are many areas in which we cannot have competition and many areas where we ought not to have it. There are certain services which should not be run for profit and certain services which should be run on behalf of the people as a whole and where competition may be quite inappropriate. If there are cases where we cannot have competition then in my view, which is an old-fashioned one, the best security for the the consumer is parliamentary control. I have no faith in regulatory bodies or consumer associations. They often become tame running dogs of the industries which they are supposed to control. However, a Minister has to defend what he is doing and, on occasion, he may be thrown out of the Cabinet or defeated at the polls, which is effective and very often the best control outside competition.

I also accept the view that the troubles are not wholly due to lack of competition. For example, I understand that the steel industry in this country has become extremely efficient, though it is still nationalised. Ownership and competition are, of course, two different matters. I believe that the noble Lord, Lord Bruce-Gardyne, who follows me, has suggested that part of the troubles of the private monopolies which we have created is not so much lack of competition as the attitude of those who run them. I agree with that.

I believe that, where competition can be exercised and is properly exercised, it is extremely important and has been much neglected, but there are areas, apart from the issue of whether it should or should not be exercised, where it cannot be exercised—for example, the railway and other networks, pipelines and so forth. Here I follow the suggestion of my noble friend—which I am not sure he made this afternoon but has certainly made before—that we might look at the proposition of retaining the network under public control and licensing out its use to various users who may be changed from time to time according to whether or not they give a good service. That would seem to be a very useful line of approach and one which has not been much explored.

The noble Lord, Lord Thomas of Swynnerton, also pointed out that there is something to be said, if we privatise companies, for breaking up regional or national groups. I agree that there are certain operations which should not be broken up, but there is a good case for allowing Scotland, for example, to run some of its main services. It seems to be big enough, can attract the capital and might develop a very useful comparison with colleagues south of the Border. Comparative competition is certainly worth something. I urge the Government in their future privatisations to look at that question, first retaining any networks, as they are to some extent doing, in public control. Secondly, the Government must consider treating Scotland, Wales and possibly the regions of England as separate entities.

Another point which has already been raised and which I wish to support is the suggestion that, if we want to achieve one of the main purposes of privatisation—to widen real control—we should consider not only temporary shareholding or small shareholding but far greater control in the public. We should look at giving out the shares more widely to the population. It was suggested that when oil was discovered in the North Sea, a share should be given to every family in this country. In principle that seems an eminently sensible suggestion and I do not know why it was rejected. However, I ask the Government to look at that.

As I have said already, it is quite apparent that these matters have received totally inadequate consideration. There are all sorts of both main and side issues which have been neglected in favour of looking at the short-term interests of the public sector borrowing requirement and the needs of the Treasury. This is a matter of far greater importance. I fully support my noble friend in asking the Government to look again at these matters and to look at them in the long term.

3.45 p.m.

Lord Bruce-Gardyne

My Lords, I should like to join with other noble Lords in warmly congratulating the noble Lord, Lord Mason. All of us who served with the noble Lord in another place were not surprised to hear such a splendid contribution to our debate this afternoon. It leads us to look forward with even keener anticipation to future occasions when he will be released to indulge in full controversy.

I should like to pick up the point the noble Lord made when he talked about the prospects of those who have been beguiled by the advertisements into buying shares in privatisation issues and who now face the loss of their life savings. The fact is that the shares, if the holders have hung on to them, are continuing to show—with the one exception of Britoil—an extremely handsome profit, notwithstanding the recent fall in the stock market. Therefore, I do not believe that they have too much to complain of, as yet at any rate.

I am sure that all noble Lords agree on congratulating the noble Lord, Lord Ezra, for introducing this topical subject. I was fascinated by his opening remarks about the desirability of the original Morrisonian concept. Listening to his highly experienced and historical perspective of how it all worked out, I could not help feeling that he made the Morrisonian concept sound a bit like Red Biddy—nothing wrong with the product, just the uses to which it had been put. I cannot help feeling that perhaps one followed from the other.

However, the noble Lord identified four arguments for privatisation and was generally felt to have scored four out of four. He also suggested that perhaps with time the competition concept had slipped back in the order of priorities. I am bound to say that I have some slight sympathy with what he said in that respect. I want to quote very briefly to your Lordships some remarks of my right honourable friend, the Minister for privatisation. He said that, activities such as electricity generation, the production and marketing of gas, coal production and sale, telecommunications … bus transport, sewerage treatment and disposal are in no sense natural monopolies". I feel that I have been cheating, because that was my right honourable friend the Minister for privatisation in the autumn of 1983. Since then, we have seen some industries go into the private sector—here I am thinking particularly of telecommunications and the production and marketing of gas—under rules which perhaps have not gone very far to emphasise the absence of a national monopoly.

The noble Lord, Lord Ezra, and certainly other noble Lords have suggested that we have witnessed a tendency in some instances, notably gas and British Telecom, although not all—for example, the privatisation of the bus industry where genuine competition was introduced and achieved—not to break up monopolies because by maintaining them it maximises the revenue to the Treasury and enhances the prospects of a generalised sale to small shareholders.

That may have been a factor, but I cannot help thinking that there was not at least one other which was perhaps even more important, referred to by the noble Lord, Lord Grimond; namely, the influence of those who manage and operate these industries. It is clear that the main reason why British Telecom was put into the private sector, with only a somewhat marginal competitor to keep it on its toes, was the fond and, I think, deluded belief that it would achieve the co-operation or acquiescence of the British Telecom unions. That was similarly the case for British Gas. The real reason, I am sure, British Gas was privatised as a monoply was, frankly, that Whitehall was scared by the formidable presence of Sir Denis Rooke. I am afraid that Sir Denis himself had far too much to do with drafting the Bill which carried him into the private sector. I hope that we do not have a repetition of that situation with the electricity industry.

The noble Lord, Lord Marsh, expressed considerable reservations about the desirability, in all circumstances, of the enhancement of competition for consumer choice. I believe that the onus of proof is on those who believe that the consumer will be more satisfied by the perpetuation of a monopoly. The example the noble Lord cited of competition on the route to Heathrow was, I thought, surprising. He said that we are now condemned to travelling by taxi. That might be his lifestyle, but I must say that it is not invariably mine. I sometimes travel by Tube. It costs only £1.50, although it is not a very good service. I am sure that more competition—for example, the freeing of the taxi system—would not be unhelpful in that context.

In the case of electricity—to which inevitably, noble Lords have referred extensively—the key, surely, is going to be the relationship between the future electricity generating system and British Coal. As Mr. John Baker of the CEGB, pointed out in an article in the Financial Times this morning—referred to by the noble Lord, Lord Ezra—coal accounts for 50 per cent. of its costs. Of course, it must be true that unless the CEGB, or its successor bodies, is released from its incestuous relationship with the coal industry there will not be much prospect of genuine operation of consumer choice in that area.

I accept what the noble Lord, Lord Marsh, said about the complexity of achieving liberalisation and consumer choice in this area, but I honestly submit to my noble friend that the essence of the privatisation scheme is, and ought to be (as my right honourable friend who was then the Minister responsible for privatisation pointed out five years ago) the achievement of wider consumer choice. That does predicate the establishment of genuine competition. We do not want further legislation put before us, such as that for gas, which has been too much moulded and organised by those who run the industry.

3.45 p.m.

Lord Kirkhill

My Lords, in rising to thank the noble Lord, Lord Ezra, for introducing this debate I confine my remarks to matters pertaining to the electricity supply industry, with which I have been associated and about which I believe I know something of its scope and importance.

I start from the conviction—indeed, the proposition, given what has occurred in those industries privatised to date—that the possible privatisation of the electricity supply industry does not necessarily mean that we shall end up with a better or a more efficient industry. A recent study by the International Energy Agency concludes that there is no evidence to support the claim that private ownership always equals efficiency. Therefore, it follows that if the Government are determined to privatise electricity they cannot afford to get it wrong. That is self-evident. As the noble Lord, Lord Ezra, said, electricity affects every man, woman and child in the country. It is therefore clearly essential to put the customer first and to provide reliable and reasonably priced supplies of electricity which are competitive with other forms of energy.

In that regard I am pleased to note that the Secretary of State for Energy intends, so he says, to give high priority to customer service in framing his privatisation legislation. That is one area of the legislation which will be very closely examined as and when it comes before your Lordships' House. For example, there is much to commend a system of rebates to customers who suffer poor service. I consider that that is one aspect to which the Government should give serious consideration. Indeed, I understand that such a system already exists as a private scheme in the East Midlands area.

In my view, therefore, the electricity supply industry, if ultimately privatised, should be motivated by customer needs rather than methods of generation and the pursuit of technical excellence. I know that that view is not shared by everyone but, on balance, it is a view I wish to sustain. I recognise, as does everyone else, that the electricity distribution system is a natural monopoly, but the privatised retailing company or companies which result from the Government's reorganisation of the industry must be strong enough to strike hard bargains with competing generating companies and to deal effectively with rivals such as British Gas. In my view it is abundantly plain that generation is the only area where competition can be introduced into the industry.

Splitting up the CEGB is fraught with problems and that part of the present CEGB set-up which is at present giving the Government most concern is the national electricity grid. That ought to be a separately-owned organisation designed to encourage competition between rival generating companies and to ensure that the end users of electricity receive the cheapest possible supplies. In saying that, I part company with certain other noble Lords.

Of course, if privatisation is to go ahead the Government must draw up plans for a regulatory system for electricity, as they did for gas. I realise that the gas regulatory system has its critics, but if one studies the American experience one must reach the conclusion that the simpler the regulatory system, the fewer disadvantages are built into the system. I therefore believe that the regulatory system must be simple and that it must ensure that electricity and gas can compete on an equal footing.

In an industry which impinges on most aspects of our national life, planning for the future is a necessity. Interruptions for reorganisation of the industry for privatisation and subsequent acclimatisation to the new structure must not constrain the new plant construction programme of the industry as it seeks to ensure a continuous and reliable supply of electricity in the years which lie ahead.

Those are the general remarks that I wanted to make. However, in these closing moments I want to be rather more specific. For approximately four years I was chairman of the North of Scotland Hydro Electric Board. I fully realise that the hydro board remit is under the purlieu of the Secretary of State for Scotland. However, he, as it were, is caught in the slipstream of privatisation anyway, so I put to the Minister and his colleagues one or two thoughts to which I think they must give very serious consideration.

The hydro board was set up by the legendary Tom Johnston. Included in its charter was a social clause, the implication of which was to help to revitalise and regenerate the Highland areas of Scotland. The hydro board was sustained in this by his initial enthusiasm and by the continued support of my noble friend Lord Ross of Marnock and his successors.

The hydro board area covers approximately a quarter of Britain's land mass but, in terms of electricity supply, is responsible for about 2 per cent. of Britain's population. The hydro board today can claim that more than 99 per cent. of the people within its area of responsibility are supplied by electricity. In other words, the supply reaches the remote glens; the supply, in subterranean fashion, goes under the sea to some of the islands; the supply of diesel generation in some of these other islands is sustained. All of that is totally uneconomic. There can be no question of that. How therefore does it continue and how is the continued link-up sustained? It is sustained because in terms of unit cost, the general body of consumers in the hydro board area subsidise it. The area open for competition in such a situation seems to me at best to be doubtful, and I seriously suggest that the Government should give very careful consideration to that particular difficulty in the hydro board area.

4.3 p.m.

Lord Winstanley

My Lords, as my noble friend Lord Ezra made absolutely clear in his admirable opening speech, this is a matter of the utmost importance. However, I hope that my noble friend will not misunderstand me if I say that I think that sometimes we attach too much importance to the basic question underlying this issue: that is, the question of nationalisation or privatisation.

Politics seems to have been monopolised and preoccupied with the question of whether certain essential services should be within public or private hands. Not only from my work in your Lordships' House but in another place too, and indeed from being responsible for the running of a very major citizens' advice enterprise, I believe that what really matters to the customers who depend on these organisations for goods and services, or to the employees who depend on organisations for their livelihoods, is not who owns the shop but what sort of a deal it actually gives them in terms of accountability, sensitivity to their needs, and so on.

Unhappily, it seems that we have reached a situation where organisations upon which we depend for goods or services of one kind or another have become bigger and bigger. I like to see smaller enterprises; I think they can be made much more accountable, and they can be much more easily scrutinised. Nevertheless I accept that certainly so far as concerns the science-based industries, there really is no substitute for size. There have to be some very big organisations. However, I believe that in politics in this country we have never yet devised a satisfactory system of administering large-scale enterprises so as to make them competitive, sensitive to the needs of those who depend on them for goods and services, responsive to the needs of their employees and perhaps also responsive to the broader general needs of society.

The profit motive is not enough. I have nothing against profits, particularly if I am fortunate enough to have a share in them. However, I believe that what can be profitable in the short-term can sometimes be very damaging indeed in the long-term. Let me give a hypothetical example. If we move to the situation where water conservation and water supplies are privatised, and when most water supplies are metered so that people are paying in accordance with the amount of water used, there will then be a clear incentive to those who are selling water to encourage customers to consume more and more. That cannot be to the national good, although it could be to the good of the profit of the organisation. I do not believe that we are wise to see economic salvation at this time by persuading people to consume more and more of things of which we have less and less, and that most certainly applies to the field of energy. So I do not believe that the profit motive can be the only motive upon which the success of these organisations can be judged. In my honest view the one criterion—if not the only one—on which success really should be judged is that of customer satisfaction.

How do we judge that? I personally regret the disappearance of parliamentary scrutiny in many of these areas. I was much struck on another occasion some time ago by a speech of the noble Lord, Lord Beloff, in which he appeared to suggest that when we have exchanged what has been a public monopoly for an essential service and transferred it into a private monopoly, somehow we should devise a means of retaining some kind of parliamentary scrutiny. That is the kind of matter to which my noble friend Lord Grimond referred to a few moments ago. So I should like to see that; but how we are going to do it I do not know.

I am not suggesting for a moment the kind of absurd suggestion which the noble Lord, Lord Marsh, appeared to impute to some of us: that the day-to-day management of British Rail should be conducted by your Lordships' House. I am not saying that at all. I am saying that the retention of parliamentary scrutiny in a monopoly, whether it be in public or private ownership, is very important indeed. Of course I acknowledge that the satisfaction and morale of employees is very important.

The noble Lord who has made an admirable maiden speech will remember that we saw much of each other in another place. He will also remember that as Minister of Defence he visited one of Her Majesty's Royal Ordnance factories, of which I happened to be the medical officer at the time. He will know that that Royal Ordnance factory is not privatised. I have no idea whether it is more profitable or whether its output is better; but I do know that the morale among its employees is nothing like as high as when it was in national hands. Therefore the whole question of employee morale is also an important aspect. However, I believe that somehow customer satisfaction has to be the most important criterion.

I should like to make one practical suggestion, which I hope the noble Lord will consider. In due course I should like to see the appointment of an ombudsman charged with the supervision of non-governmental essential public services. I know that we have Oftel; I know that we have the Gas Consumer Council and the other bodies. However, I believe that an ombudsman with the powers to examine complaints in industry and to examine papers and discover why those complaints have not been dealt with, would be helpful. It would be helpful not only in monitoring consumer satisfaction (which I believe is the most important criterion) but it would also be a means of raising the standard of consumer satisfaction. So I hope that when he comes to reply the noble Lord the Secretary of State will consider that suggestion.

4.10 p.m.

The Earl of Lauderdale

My Lords, I sat for a mining constituency, and I should like to join in the plaudits to the noble Lord, Lord Mason, on his maiden speech. When he spoke about working a longwall 18 inches thick, I remembered how, when going down the pits in my constituency, I felt like the ham in a sandwich which was being squeezed. The resonance of a mining voice is welcome. Another aspect of the noble Lord, Lord Mason, is his patriotism. We all saluted his work as Secretary of State for Defence. We know him not only as a miner but as a patriot. He is very welcome here.

I should like to join with others and thank the noble Lord, Lord Ezra, for introducing this debate. I shall return to his conclusion, with which I greatly sympathise. I will focus on the electricity industry, but first I must throw a couple of bouquets to the Government, of course in the nicest possible way. I welcome my noble friend Lord Young who is to answer the debate. I remind him, because it may not yet have been brought to his attention, that this House has no Minister, let alone one of Cabinet rank, in the Department of Energy. That department's treatment of this House has at times been condescending, if not off-hand.

Before the Secretary of State announced the last increase in electricity prices he wrote to all Conservative Members of Parliament, but he never bothered about us. I put down a dozen Questions to the Department of Energy for Written Answer after our debate in July. Noble Lords will probably agree with me that the replies were at best opaque. However, there is more joy in Heaven over one sinner who repents. So I hand another bouquet to the Secretary of State. He has now admitted to what we said in the House three and a half years ago: lights will be going out if by the end of the century we do not have an additional 13 gw of generating capacity. The Government have now recognised that need. How they will go about achieving it is another matter.

The Government have also admitted, although not quite so frankly, that the eight years during which no new generating stations were commissioned was a period of Conservative Government. I speak as a Conservative, and it is a matter which worries me all the time. However, I say, "Well done. Better late than never".

Will Her Majesty's Government still be in time on this matter? There is a 10-year lead time for building power stations. We have been promised six PWRs and four coal-fired power stations by the end of the century. But how can they be in place by then? We have been assured that privatisation will not interfere. But how will private enterprise, which is only to be in place the day after tomorrow, as it were, raise funding now for imaginary projects promoted by enterprises which will not be born for at least another year? What about the planning delays? I do not know the answers. But I hope there are some. I hope they are better than the ones we have hitherto received from the department.

Next, are the Government quite sure that four new coal-fired power stations can be in place by the end of the century? And if they are will they be free to buy their coal from wherever they wish? How many will be beside the seaside? What is the future for colliery-tied stations? Will, as the noble Lord, Lord Mason, indirectly suggested, privatisation affect British Coal?

The electricity supply industry, as is patent to anyone who reads the newspapers, is in a perfect tizzy at present. The Electricity Council, the CEGB and the area boards are all at one another. It is in that context that the Secretary of State summarised his national energy policy in The House magazine on 6th November: Economies grow best where markets operate … We want customers to be able to choose the energy they want". What a policy statement! It is rather as if our national defence policy was couched in terms such as: "We want each part of Britain freely to choose how to defend itself". One can picture Trident for Kent and Chatham; Star Wars for Yorkshire and Fylingdales and Nuclear-free zones for Glasgow and Liverpool. The Secretary of State's words do not take us far, even as the germ of a philosophy. How does his philosophy, as it is set out, assure the provision of adequate power supplies? Competition does not assure it. When will the customer-first principle mean that Norwegian gas imports are acceptable from the Troll field? They have already been banned from Sleipner.

Does his customer-first principle mean that there will be freedom to export gas? The Written Answer I had on that was not opaque; it was obscure. Is the spreading of share ownership the chief aim of privatisation? If so, I am in favour of it on that count alone. Or is it (this is much more important) designed to obtain the cheapest power for industry? If that is the case, will the Government stop kow-towing to the environmental lobby à la Layfield?

To get their Bill through this place, the Government will need a Minister here from the Department of Energy. They will need to produce answers much better than those we have had of late. So I take up a point made by the noble Lord, Lord Ezra, that in view of all the muddle and confusion that exists in the electricity supply industry, we should have a consultative document soon. I would put it a little differently. Could we please have a little glasnost—just a little like the Russians have?

4.17 p.m.

Lord Dean of Beswick

My Lords, I must first do something that I have not done before in your Lordships' House. I wish to apologise for the fact that unfortunately this is one occasion when I cannot stay for the reply. There is an important meeting that requires my presence.

I thank the noble Lord, Lord Ezra, for introducing this debate, which has concentrated mainly on the two subjects that will occupy a great deal of your Lordships' time in the not too distant future. I fully agree with the request made by the noble Lord, Lord Ezra, and the noble Earl, Lord Lauderdale. We should have a consultative document on the privatisation proposals so that we can look at them in depth to see what is best for the future of the industries that we are discussing. It is possible that we may arrive at an acceptable consensus by doing that.

I join other noble Lords in complimenting my noble friend and colleague from another place on his forceful maiden speech. I am of course talking about my noble friend Lord Mason of Barnsley. It was a speech of the high standard that we have come to expect from him. It was delivered with some fervour. One has to live in a mining community (I do not) to understand people's fears and what pit closures mean in terms of the run down of industry, the loss of jobs, and the destruction of the area's social fabric. My noble friend did a tremendous service for that area and for the industry in which he has spent most of his life by bringing those matters forcefully to your Lordships' attention. We look forward to hearing from him many times in the future.

I do not wish to say much about the proposals for electricity. I do not always agree with the noble Lord, Lord Marsh, but I think that he made the case far more eloquently and thoroughly than I could. He outlined the possible dangers to the industry of the Government's proposals. I can almost see the destruction of our power station development programme with all that means—a lack of overseas orders, and so forth. I agree with the noble Lord, Lord Marsh, on that point.

None of your Lordships have said much about water. It would not do us any harm to take a minute or two to look at that industry. Some of your Lordships will know that before the Recess I questioned the noble Lord, Lord Belstead, about the handing back of the water industry to the private sector. I challenged the fact. It was not a correct statement. They never belonged to the private sector anyway. That theme ran through the general election in some of the Government's press briefings. It is totally erroneous to say that the water boards, as they are at present formed, were taken from private people. They were not. They were owned in the main by the local authorities. I happened to be the leader of the Manchester City Council at the time when our water holdings were taken from us—I have to say without one penny in compensation. I stand to be corrected on the figure because it is a long time ago, but the holdings then were valued at over £280 million. The same thing happened to Liverpool, Birmingham and cities in Yorkshire; they were all taken over. A special Bill was passed, and they did not receive any compensation.

I tried to obtain from the Minister, by way of Written Answer, a figure of the notional value today of the water holdings that were taken over in the 1972 Act. He said that the information is not forthcoming. However, I have it on good authority that the figure is approximately £30 billion. Much of that would not have existed except for the initiative of local authorities in the past.

We shall have more time to discuss this issue when the Bill begins to emerge. Perhaps the Government will consider whether local authorities, if they wish, could put in bids to buy back at some form of reasonable discount, the facilities and holdings that were taken off them without compensation. If a totalitarian government were to behave in this way we should expect it of them; but we are supposed to be a democratic society. I can tell noble Lords that that action under the then Minister, Mr. Peter Walker, left a nasty taste in the mouths of many people in local government.

I should like to raise some points regarding a very recent announcement on privatisation, and on how not to do it. I refer to the Statement yesterday on BREL. Noble Lords who were present yesterday when the Statement was made will know that I quoted the Minister in a debate in another place last week who said that BREL had a future under British Rail. The quote is in yesterday's Hansard of your Lordships' House. Within a week he is making an announcement that they are going to flog it off. The workforce of BREL have not been at the top of the league in wages. They have never been a high-wage sector. They perform well. In the same reply in the debate in another place the Minister said that they had been 70 per cent. successful in their tendering.

I suggest to noble Lords that any organisation that is 70 per cent. successful in all its tenders has not done badly and would certainly survive, if my information is correct. But, no, my Lords! The Government have taken a totally unnecessary political approach to that system. We may well end up by losing a very important part of our manufacturing base in this country. Since 1982 our balance of payments in manufacturing goods has a deficit of over £7 billion and is getting worse, not better. This type of activity, in my opinion, subscribes to that situation.

I am almost at the end of my time limit. I put this plea to the noble Lord who is a caring Minister. How would he feel if he were in the workforce in the BREL workshops? They have persistently raised this question as to whether they were going to be sold off or fobbed off. I recall that the noble Lord, Lord Marsh, was himself a former chairman of British Rail. I believe that he would not have dealt with the workforce in such a cavalier and uncaring way. These 7,000 men—all that is left of a workforce of over 30,000—have done everything that is asked of them. They have behaved in a most reasonable way. They are now literally being flogged off in the industrial workplace to the highest bidder. That is the worst kind of privatisation, and one that we do not wish to see. Once again perhaps I may thank the noble Lord, Lord Ezra, for giving me the opportunity to put forward this issue.

4.26 p.m.

Lord Basnett

My Lords, the Motion of the noble Lord, Lord Ezra, is most timely because after almost a decade we can begin to see the effects of denationalisation. It is timely because the debate has begun with reference to the privatisation of electricity and water. The privatisation programme has been costly: a direct cost of £700 million; an estimated indirect cost of almost £3,000 million; and a loss of direct revenue. For these costs and losses we were given the prospect of cheaper products, better services and wider share ownership.

However, it has to be said that that has not been significantly realised in those industries providing a widespread and widely-needed public service—a point made by the noble Lord, Lord Ezra. British Telecom has been the subject of widespread complaints—a 116 per cent. rise, for instance, in complaints about bills. British Gas has weakened its consumer councils, and there are rumbles from industry about its pricing policy. In all the privatised industries only 4½ per cent. of the shares are owned by the employees, whereas in the gas industry 18 per cent. are owned by the Japanese. Some would argue—and we have heard those arguments today—that this is due to the failure to introduce effective competition. Others would argue—and I count myself among them—that the introduction of competition in naturally integrated monopolies where the public interest requires public regulation will not lead to lower prices or to better services.

Nowhere is that more true than electricity and water, where the Government struggle to reconcile what is irreconcilable. In electricity the national grid is the key to an integrated power system, an integrated system that is the best guarantee that the lights will stay on. Such a system ensures the lowest cost available power supplies are used at any one time. It ensures that substantial system savings come from the ability to plan well in advance. It ensures with its size and control a lower margin of power station capacity over demand.

It is not surprising that the Monopolies and Mergers Commission— which investigated the grid earlier in 1987—accepted without question the logic of the integrated system. The question must be raised: on this issue are the Government prepared to repudiate the professional advice of the CEGB, of the engineers in the national grid; and, by taking the national grid out of CEGB control, hazarding the reliability of supply of electricity to the British people? It would do more than that, however. With the loss of efficiency there would be a rise in prices. Prices are already set to rise and we know the reason for that. But there would be more to come. If we set up the grid as a separate generation, it is estimated that such a step could add several hundred million pounds annually in costs.

Yet another question needs to be asked. Have the Government entirely abandoned the principles they laid down in their own legislation in the Energy Act 1983, that private generation should not increase the cost of electricity to the consumer? But one fundamental question remains. Our energy supplies rely almost totally on fossil fuels, the supply of which is finite. With no foreseeable possibility of a significant increase in renewable energy sources, our concern for the future must lead us to conserve and balance the use of those supplies. Can competition do that?

A number of other questions arise. Are the Government seriously content to allow private generating companies following privatisation to buy as much coal as they like from international markets, irrespective of the consequences for the British coal industry? Why do the Government seem prepared to require private generators to construct and operate a minumum proportion of nuclear power stations while the Government are not prepared to require them to buy even a minimum proportion of British coal? Can the Government seriously believe that companies smaller than the size of the CEGB, given the high capital cost and long lead time, could provide us with the future nuclear component we need in our energy policy?

Competition will not supply us with an effective energy policy. I hope your Lordships will support the suggestion of the noble Lord, Lord Grimond, that the Government should think again and introduce a wider debate on this subject.

4.33 p.m.

Lord Harris of High Cross

My Lords, I join in congratulating the noble Lord, Lord Ezra, on what I regard as his boldness in bringing this Motion before us. After all, the fact that his formidable talents, devoted over a lifetime to the National Coal Board, did not produce a more fruitful outcome is, in my view, the most plain indictment of the failure of the Morrisonian model of nationalisation.

In readiness for the rather gloomy reflections of the noble Lord, Lord Basnett, I go back to my earliest Questions for Written Answer which I put down when I first came here as an innocent and happier recruit to your Lordships' House. In October 1980 I asked politely the amounts of taxpayers' money sunk into the nationalised industries since 1945. From the detailed Answer of the noble Lord, Lord Cockfield—those were the days—I can summarise the tally as follows. In the 20 years 1960 to 1980 more than £25,000 million was lavished in grants and in write-offs of capital and revenue deficits, in which the Coal Board was second only to British Steel. We must bear in mind the change in prices since 1978–79 and ponder that we are talking about something like £50,000 million at today's values.

It was the objective of the earlier pioneers of nationalisation to overthrow capitalist production for profit. How well they have succeeded. Was it their intention to enthrone losses as a way of life for a large part of British industry? We might blame the failure on the exploitation of monopoly power by the unequal forces of aggressive trade unionism and appeasing management. The symptoms, we recall, were over-manning, industrial unrest, weak incentives to efficiency, misdirection of capital and recurrent deficits. But in fairness I believe that we should dig deeper.

We find that the underlying sources of most mischief stems from the truism that public ownership unavoidably means political control. So-called public ownership in the so-called public interest was in my view always a fraudulent prospectus. It was never the public but the politicians who ruled the roost and still rule the roost in coal, steel, railways and electricity. I was not surprised that the recent arbitrary and in my view unjustified hoist in electricity prices was denounced by Labour spokesmen as being politically motivated. They should know. For years in power they and in their turn Conservative Ministers regularly played the party game in the same way. For years the investment programmes and pricing policies of the commanding heights of the British economy were the periodical playthings of Chancellors pursuing short-term electoral calculations rather than long-term economic objectives.

Elementary economic theory—as I hope the noble Lord, Lord Peston, will agree—offers strong arguments why public utilities should be vested in the control of government. But in the light of mature practical politics, I believe that there are still stronger arguments why the control of production should be put beyond the reach of politicians. Nationalisation was another example of putting the cat in charge of the cream jug but it turns out not to have been in the best interests even of the cat.

The worst error of nationalisation was therefore that it united economic monopoly in the same hands as political power. Friedman has long taught that where monopoly is inevitable the choice is between three evils: you can have private monopoly, public monopoly or regulation. We have tried public monopoly and found it sadly wanting. Now in British Telecom and most culpably in British Gas, the Government have fallen for a private national monopoly moderated by a severe regime of regulation. In Professor Carsberg they have found a remarkable regulator, who sees his job as simulating the pressures of a competitive market. If it will not damage the professor to say so, I know him and like him well and I have the highest regard for his qualities of both intellect and courage, which he will need. However, I do not think he would mind my saying that I have an even higher respect for the impersonal forces of a competitive market wherever it can be activated. The more competition we can mobilise, the more we can rely on general laws and the less on complex regulation which must test the power even of Professor Carsberg.

Thus I come from a different route to support the noble Lord, Lord Ezra, in his call for more competition in future acts of denationalisation. In electricity and water where competition in local distribution is ruled out, we must still endeavour to break up the monopoly of supply. I was disappointed that the noble Lord did not give a lead in calling for the denationalisation of coal, which was left to the noble Lord, Lord Bruce-Gardyne. The National Coal Board, after all, was always the most contrived and artificial of all monopolies, where competition could and still can bring the largest gains to consumers, employees, taxpayers and overburdened politicians.

That case was powerfully argued in a CPS paper by Professor Colin Robinson and Allen Sykes, a formidable academic and a long-experienced practical businessman. They have both now produced an even more remarkable paper which is entitled Current Choices. In this paper they discuss six options of which only two would offer the benefits of genuine competition in both generation and regional distribution. Their conclusion, with which I fully agree, is that all the monopoly expedients would be worse than leaving things exactly as they are, because if we left them exactly as they are at least it would leave open the competitive option for the future.

What I should like to say with some impudence from the Cross-Benches is that I, and I believe some others, expect rather more from the present Secretary of State than from his predecessor. But he has been served notice by many speakers that if he thinks of any repetition of monopoly-mongering on the model of British Gas he will not only bring his party's nationalisation programme into difficulty; he will bring it into final disrepute.

4.40 p.m.

Lord Peston

My Lords, I should like to join with others in congratulating the noble Lord, Lord Mason of Barnsley, on his maiden speech. Perhaps I may also echo the earlier remarks that I really look forward to the day when he makes a controversial contribution to your Lordships' House. Following my old friend Lord Harris, perhaps I may also say that I am sorry to hear that he has lost his innocence. I always thought it was his most endearing characteristic, and indeed what enabled him to be so effective in propagating his views. I must also tell him that I at least still believe in the correctness of elementary economic theory.

I should like to say a few words about, as it were, the history of all of this and disperse some of the mythology. Indeed, the noble Lord, Lord Dean, made one of the key relevant points. It simply is not the case either here or abroad that what happened was that efficient, viable private enterprises were taken into public ownership by doctrinaire socialists. We should not forget how many enterprises were taken into the public sector because of private sector failure. That is the true history. Sometimes that private sector failure placed our nation in peril, and that was why these enterprises were often thought of as more appropriately being in the public sector.

The noble Lord, Lord Dean, mentioned the importance of municipal enterprise. The reason we had so much municipal enterprise was that the relevant job was simply not done by the private sector, or not done properly. We should not forget the history of all of this when considering what is happening now. Nonetheless, I do not want to harp entirely on the past although I must say, following Lord Ezra's "four words" of what it was all about, that I have three points instead. What most strikes me is how well senior management in the privatised enterprises seem to have done for themselves. Perhaps I am wrong and I should assume that that was a purely chance effect, but I wonder.

They also pay considerable attention to their shareholders, and it seems to me that the great worry here is that consumers come last. I have to say—which is why I make the point of believing in elementary and old-fashioned economics—that I believe that the sole rationale for enterprise in any form whatever and the sole way in which to judge it is whether it produces at least cost goods and services that consumers want. That is the relevant criterion. Customers should not come last; they should always come first.

Although certain aspects of the privatisation programme can be discussed on their merits others just seem to me to be overwhelmingly doctrinaire. In particular I am most concerned about the sale of the remaining shares in British Petroleum—not about the debacle with the stock market crash. However, I wonder whether I am the only Member of your Lordships' House who really is worried about the fact that a significant part of British Petroleum is now in foreign hands, and allegedly in the hands of financial interests from Kuwait. There is a national interest aspect to this, even to those of us who would regard ourselves generally as internationalists in this country, and I should like to hear the Secretary of State's view on that.

Perhaps I may say a few words about the possible privatisation of electricity. It seems to me that there are only two solutions. Either we can find a way which is competitive both with respect to production and distribution, or the industry should stay in public hands. The idea of a private monopoly suitably regulated is worst of all.

I must tell noble Lords opposite that I have racked my brains to try to find a decentralised, competitive solution, partly for academic interest. I would genuinely like to be able to think it through because I think it is quite an interesting practical question. I have to confess that I cannot find a way of doing it without destroying all the advantages of optimising the grid system on which the efficient operation of electricity depends, as other noble Lords have said. Therefore, I look forward to hearing whether the Government have discovered, as opposed to the rest of us, some way through this problem.

What I shall certainly say is two things. I do not believe that the electricity supply industry has failed the nation. It might be able to do better, but the notion that we are privatising it because it has demonstrably failed the nation is absurd. I think there is a real danger, however, that a doctrinaire, privatised and botched competitive alternative would fail the nation and, to use that curious expression, the lights would go out. That is a worrying matter.

I said I would not harp on the past but what happened with British Gas was disastrous, because one could have found ways to decentralise British Gas to some degree and it would have been an experiment worth pursuing. It is a great pity that we did not have that experiment in order to learn from it. I also have to say that the position of British Telecom seems to me to be pathetic at the present time. We ought to look more carefully at whether we can introduce some degree of competition into British Telecom in those kinds of services, albeit at this late date.

More generally on competition—and I certainly believe that where possible competition is the best form of protection for the consumer—the Secretary of State is in a difficult position. In particular he is in a difficult position because one of the bodies most of us hoped might be of help to him in competition policy, the Monopolies and Mergers Commission, seems to have simply lost interest in competition. As an economist, perhaps I may say that their report on British Caledonian and British Airways was simply absurd.

I pity the poor Secretary of State—as I gather he has no choice in the matter, given their recommendations—having to go ahead with a report which has no foundation in economic theory and precious little empirical evidence to support it. I throw that in en passant because my main concern is the future of competition policy and whether the Secretary of State ought to be thinking—and perhaps he will when the Liesner Committee reports—of alternative structures for promoting competition in this country.

There is not much more I want to say. I am somewhat sympathetic to Lord Ezra's view that we ought to think again and explore the matter further and have a consultative paper. I suppose that if the consultative paper were to consist of an argued, thought-through policy document by the Government, I should welcome it, but if it is simply to say a lot of anodyne remarks such as "We are going ahead", then I certainly shall not.

I conclude by saying that I believe in this area, even though there seemed to be some immediate gains on the government side from what they were doing, that we are storing up problems for the future. I for one certainly expect to sit in this House one day and hear Ministers from that side explaining to us why, in order to save them, they are having to take certain enterprises back into public ownership.

4.48 p.m.

Lord Diamond

My Lords, it was a great pleasure for me to listen to the excellent maiden speech from an old colleague, not least because he brings to this House a complete integrity of character coupled with, I should have thought, a unique combined experience in the highest political offices of the land and, as he has pointed out, in the lowest strata of the mines in which he was confined.

My noble friend Lord Ezra dealt, as far as he was able to in the time available, with the question of competition. There are other planks in the Government's programme and I want to deal first with that of the spread of share ownership. We have heard a lot about these 9 million additional shareholders, and I want, with your Lordships' patience, to share with you an examination of what this really amounts to.

There has certainly been a large addition to the number of shareholders. In terms of shareholdings, the proportion of shares held by individuals—which was the purpose expressed in the Government's programme of widespread share ownership—has made no impact whatever. I should like to justify that statement. Last year the number of shares held by individuals in all companies was 24 per cent. The number of shares held in privatised companies was similar and falling, because the longer the shares had been held and the longer the period since privatisation, the more shares were being sold. Individual shareholders in British Gas, for example, account for 28 per cent. of the shares issued; in British Telecom it is 23 per cent.; in British Airways, 14 per cent. That is the extent of the greatly proclaimed credit sought by the Government for having spread share ownership widely among individuals. It does not exist.

The reason is simple to see. First, the shares were spread extremely thinly when they were issued. Your Lordships will remember that the British Airports Authority allotted 100 shares to each of over 2 million applicants. Secondly, the method used by the Government attracted speculators galore; people who wanted to come in and go out quickly. By September of this year, on average over half the original shareholders in all privatised companies had sold out. That is in spite of the great inducements to hold on by way of bonus shares, discounts and so on.

Naturally, the earlier the privatisation took place, the greater the number of shareholders who had sold out. Therefore, when one examines the share registers of Amersham, for example, which was privatised in 1982, 90 per cent. of the original shareholders have sold out. Where have the shares gone? As we all know, they have gone to the institutions as before.

The Government may say, "What about employee shareholdings? Were they not a great success as regards privatisation?". Noble Lords can judge for themselves. Employee shares were offered on extremely attractive terms and any employee would have been extremely foolish not to buy them. In fact, 1½ million shareholders did just that. The best response was in British Telecom where no less than 85 per cent. of the employees bought employee shares at the advantageous terms. What happened next? For the first time in its history there was a strike at British Telecom. That is hardly the best argument to demonstrate that issuing shares to employees improves industrial relations in the way that is pretended.

It has become increasingly evident that the Government have only one overriding purpose. It was mentioned by my noble friend, and the noble Lord, Lord Young, shrugged his shoulders. It is to continue the £5 billion a year flow of receipts from the sale of the nation's assets in order to reduce taxation. It is that which is propelling the Government forward, no matter how difficult the market or how impossible the achievement of competition—which they now claim to be their prime objective although they did not at the time of the privatisation of the gas industry.

I should like to make my position absolutely clear. There is nothing wrong with selling assets in order to invest in other assets or to pay off the nation's debts. However, this Government are determined to carry on with this once-and-for-all sale of assets—assets which they hold in trust for future generations—and to misappropriate the proceeds by reducing the burdens of present taxpayers. The Minister shook his head, but I should like to ask him what advice he would have given as a practising solicitor to any trustee who came along and said, "I am proposing to sell the capital for the benefit of the present life tenants because it would be convenient for them, they rather like it and they rather like me doing it". He would tell them that it was a plain misappropriation and was not on. This is on all fours with that situation.

I ask your Lordships to bear in mind what is happening across the Channel in France. At the moment they have a similar-sized privatisation programme. They have used the whole of the capital receipts for capital payments. They have repaid government debts with part of the receipts and the rest has been further invested in the remaining public sector. In France the final outcome is that the value of the nation's net assets has been wholly maintained. In the UK the nation's assets have been permanently reduced. We know that it is neither prudent nor proper to use capital receipts in this way. I am bound to ask this question: when will the consciences of government supporters in both Houses compel the Government to halt this rake's progress?

4.53 p.m.

Lord Bruce of Donington

My Lords, I should like to congratulate my noble friend Lord Mason of Barnsley on his frank, sincere and forthright contribution to this debate. In modern times it is good that moral values are occasionally brought into the consideration of our affairs. I enjoyed his speech enormously.

I agree with the noble Lord, Lord Diamond, that one of the main objectives of the Government in their privatisation programme has been to provide money out of capital from assets realised at a fraction of their real value. Had that been done by local councillors it would probably have attracted the attention of the district auditor and resulted in their suspension from office. On a national scale, the privatisation proposals have been a complete scandal and the noble Lord knows that.

The cash received has been applied not in relief of taxation generally but in relief of direct taxation, which carries with it obvious connotations. However, the main reason for the privatisation programme is simple. Expressed in economic terms, it is the further massive transfer of economic power back into the hands of capital. That is quite clearly the motive for it.

In introducing their original privatisation programmes, the Government were careful enough to list a number of motives which they tried out with varying degrees of success. First of all they privatised because they wanted to free the industries concerned from government interference. They abandoned that excuse when it was pointed out to them that in order to achieve that end all they had to do was to stop interfering. They then said that the real motive was to achieve increased efficiency within those particular industries. They abandoned that argument also when it was pointed out—and the figures are available—that the remaining nationalised industries, with the exception of coal and British Rail, to which special considerations apply, were also operating quite profitably, thank you. Indeed, it is noteworthy, as my noble friend Lord Peston pointed out, that the Government have been careful to privatise only those industries which were already making a profit at the time.

The third motive that was put forward was that in general ideological terms it was desirable to have people's capitalism more efficiently established. The noble Lord, Lord Diamond, dealt very effectively with that argument. Of course power has not returned to the people. According to the chairman of the Stock Exchange, from whom I received a letter this morning, the total number of shareholders now is roughly 9 million. The noble Lord, Lord Diamond, also pointed out that fact. The great bulk of the capital shareholdings are not in the hands of individual shareholders. Indeed, as the Minister knows perfectly well, in respect of all the industries that have so far been privatised—excluding for the moment BP, to which special considerations apply and to which I shall not refer over-much, being merciful to the Minister, who would probably prefer to forget it—the total number of individual applications for shares was 9,532,281. According to the latest data available, there remain 5,531,097 today. Over 4 million of the original individuals who made application for shares in those new industries have disposed of them. As everybody knows, they made a quick buck out of selling at the premium at which the shares were subsequently quoted.

The argument about the people's capitalism certainly cannot apply. If further illustration is necessary one has only to refer to the recent TSB meeting, which 480 shareholders attended in order to express their views. Unfortunately, those views were ignored and the chairman produced 10 times as many proxy votes out of his pocket. So much for shareholder democracy at company meetings!

No, the real purpose of privatisation is to pass back and reinforce the power of capital in this country. Indeed that is quite logical, because of course capital is now the power in this country, with the Government acting purely as its agent. The more quickly conditions are established for the operation of market forces—which is the avowed object of the Government—the better will capital like it, regardless of the consequences, regardless of the social effect of the operation of market forces and regardless of the complete absence of priorities in terms of national interest, the environment or anything else.

This afternoon I was a little surprised to observe that after the length of time that has elapsed since the privatisation of some industries, there has not been very much praise for their performance in regard to the customer, who was supposed to be the principal beneficiary. I should have thought that the House would have heard loud, gushing testimonials today about how well these now private monopolies and privatised companies have been serving the public interest. We have not heard a word about that. No doubt when the Minister rises to speak, from his sheaf of papers he will provide us with his customary optimistic estimate of consumer reaction as perceived by him.

It will not wash. Privatisation has served that one ideological purpose only and the time is not far distant—particularly in view of the events of 19th October on the London Stock Exchange—when the people will realise that they are already committed by the Government not only to a casino-like Stock Exchange and futures market but also that the fate of British industry is in the hands of forces that the Government themselves cannot and do not wish to control.

5.6 p.m.

The Secretary of State for Trade and Industry (Lord Young of Graffham)

My Lords, I also should like to join in congratulating the noble Lord, Lord Ezra, and say how grateful I am to him for initiating this debate today. It is perhaps a great opportunity to put right some of the misconceptions that appear fairly prevalent in your Lordships' House this afternoon, first about the Government's policy; and, secondly, about the record in the nationalised industry sector over the past 30 or more years, and certainly about the aims of nationalisation.

All of us, whichever side of the House we sit on, look to find ways in which we can govern the country and help its economy in a way that will produce a fairer society which distributes its benefits to all its members. In order to do that we must have a more prosperous society; and surely, above all else, that should have been realised over the past three or four decades. Looking at the long history of the experiment of nationalisation, we realise that although it may have produced many things, it did not produce a good economic record in those industries, whatever may be said now.

I freely confess that the noble Lord, Lord Ezra, receives three marks out of four for his account of the objectives of privatisation of the nationalised industries; but it did not produce money for the Treasury. A little later on in winding up this debate I hope to deal with that topic. However, there is one essential difference between those industries then and now which I should like to point out and which could perhaps serve as an answer to many of your Lordships' remarks this afternoon. The difference between the old nationalised industry sector and the present private monopolies, albeit they are monopolies, is that today it is worthwhile complaining. Today people complain about British Telecom and have mounted a large campaign. I can assure all noble Lords that each and every director of British Telecom is fully aware that the service is not perfect. But who complained in 1980? No one. No one complained because there was no one to listen. Should we remember those good old days when we had a choice between two telephones—a Trimphone or nothing? Consider the choice that one has today. Look at the services available.

Let us remember the time when there were 4,000 privileged people in the country who could have a car telephone because the monopoly was held by BritishTelecom and no one else. Today there is over 90 per cent. coverage of the country and 220,000 people share the benefits of having cellular telephones from Racal or Cellnet. Some estimates say that there will be half a million by 1990. All that was denied to the people of the country because a nationalised industry held the monopoly.

One has to look not only at the conduct of the industries themselves but in the realm of what else came from privatisation. Incidentally, at least 5,000 new jobs have been created by that one small matter.

I should also like to say, speaking generally, that I have heard a great deal of criticism this afternoon about our plans for privatising the electricity industry. Those plans have yet to be formulated. Consultations have yet to take place. We have to consider what will be best for the economic future of our country and our citizens. It there is one constant it is surely resistant to change and if there is one truth, one that we should try to live with, it is that we should look with our eyes open at what is being proposed, when it is being proposed, and then to see if it will actually work and therefore be worth doing.

If I may make a minor prophecy, it is that when our plans do come forward they will come forward conscious of the need for us to ensure that we will have a supply of electricity available well into the 21st century and that we shall be conscious of the need for competition to ensure that this supply will be competitive for the whole of British industry and commerce.

I should like to say to the noble Lord, Lord Ezra, that he should also look at this matter in some detail. I hope that the noble Lord will then take the opportunity of raising the matter at that time, as indeed when we come on to matters dealing with other industries.

I am also grateful to my noble friend Lord Thomas of Swynnerton. Alas! he pays me too much credit because it was nothing to do with my arrival in the Government in 1984 that the privatisation programme did not date from there. However, I can take some credit for an earlier period. My first job, when I was special adviser to the then Secretary of State for Industry, was privatisation. Indeed, Cable and Wireless, British Aerospace and Amersham International are all companies which have flourished since they have gone into the private sector.

I think that not many of us in this House can recall that when Cable and Wireless were actually privatised the total market value of the company—a company whose market share was shrinking—was some £460 million. It was nearly 10 times that amount only a few weeks ago. It is now a company which is girdling the world with electronic highway, with an unrivalled international reputation that has been transformed during this decade, and that transformation, I believe, owes a great deal to the fact that it is now in the vigorous competitive world of the private sector. That can be said for every single company that has gone into the private sector. Surely, we should compare the past three to four decades of comparative failure in the public sector and our experience, so far, of almost uninterrupted success as soon as the companies have been privatised.

The noble Lord has set me some difficult questions which I am not sure I can answer regarding whether we would be better to have had a regional network for some of the companies that have previously been privatised. I can say this: I doubt if the accounting structures were there at that time which would have enabled that to have happened. The golden shares were clearly set out in the prospectus of the company; and as for changing the 15 per cent., or the percentage of that, that was also set out in the prospectus. I can see little reason at the present time—although I am always open to argument and reason—as to why it should be changed.

I should like to join with all in your Lordships' House in welcoming the noble Lord, Lord Mason of Barnsley. He will bring great lustre to this House, and I look forward to debating with him on many future occasions. There is little I can say to him about his contribution today save to say this. Coal will continue to be a major contributor to the base-load supply of electricity for our foreseeable future. Nevertheless, it will be for industry to demonstrate that it can supply coal reliably and competitively.

Perhaps I may pay tribute to British Coal for its half-year results which show a steadily increasing productivity and efficiency. There has been an increase of 45 per cent. in productivity and a drop of 23 per cent. in colliery operating costs; I hope that it will continue.

As regards the main theme of the noble Lord, I should like to say only this. There was much that the noble Lord found bad where I found cause for hope for the future; and much in which he found good where I, alas, could not share his views. There will no doubt be other occasions on which we can debate these matters.

I am grateful to the noble Lord, Lord Marsh, who was not only a distinguished chairman of one of our nationalised industries, but was almost the first man to persuade me to think of entering the public sector some seven or eight years before I actually did. However, I should like to point out to the noble Lord—who I am sure needs no lessons from me in competition—that if the link between the airport and the railway station had been so worthwhile, but was not put there because there were buses, perhaps the noble Lord should consider that if those buses finally vanished, it might well be because there was no actual demand for that particular service. If we had put the railway there, we would have found ourselves with yet another white elephant, which has so often come about because mere Ministers have made decisions which should have been left to other economic forces. I hope that this House can see that as time goes by, Ministers will be asked less and less often to make such decisions—and it is hoped that we shall then see that the market will actually work.

I should like to say to the noble Lord, Lord Grimond, that of course part of our actual involvement, part of our espousal of the privatisation programme, is to establish better worker-involvement. We have tried many ways of getting better worker-involvement. Indeed, there was an experiment in the late 'seventies when trade unions, or workers, came on the boards; but that did not seem to work. Today we have a very large proportion of employees who are actually owners of shares in their company. Therefore, if that does not provide a sense of ownership—and all the evidence from speaking to those who do, is that it does—I do not see what will. If parliamentary control would be the best—and I am the last person to go against parliamentary control—control of a nationalised industry, then I suspect we should have seen a better economic record over those decades. But it was quite the contrary. What parliamentary control actually did was not to ensure better management of the nationalised industries, but to ensure time after time that what should have been basic commercial decisions were actually made for political motives.

I am grateful to my noble friend, Lord Bruce-Gardyne. His achievement of wider consumer choice is not of course the first priority in privatisation; but it is however a very important one. It is also one that I have no doubt he will remind me of when the particular plans come through for electricity and, as time goes by, there are other objectives. It is part of the general improvement of an economic well-being in the country.

That brings me to the remarks of the noble Lord, Lord Kirkhill. He said that—and he was quoting—private ownership does not always equal efficiency. I would of course agree with the noble Lord that it does not. But the corollary is not true, either. In fact I could say: does public ownership ever achieve efficiency? because, as yet, there is still no proof that anything in the public ownership is more efficient than it would have been outside it. From all the evidence we have had—and we have heard much this afternoon; and I should like to go on all the evidence—efficiency is not improved in the public ownership. That is for reasons which have already been put forward.

However, where I should like to join the noble Lord is on the subject of rebates to customers for poor services. This I believe is a very good idea. However, I would ask the noble Lord; what actually happens if rebates are given by nationalised industry? The state pays. On the other hand, when rebates are given by private companies then the shareholders have to pay and the pressure, once again, falls upon the directors. That is when you see rebates of that sort beginning to have effect. One of the other great difficulties we had with the nationalised industry sector was to avoid being bankrupt again, in any sense at all; the balance between management and employees was not there. That was another example.

I am grateful to the noble Lord, Lord Winstanley, who said that no one has devised a system to make large organisations responsive to the needs of customers. I hope very much that what is beginning to be exhibited in the case of British Telecom is pressure at long last being put upon those who are in the seats of power within those organisations that they should be responsive to the needs of customers. British Telecom is a mammoth organisation with nearly a quarter of a million people. I do not believe that this is in any way worse than an ombudsman. I am not sure what an ombudsman would actually achieve, although it is an interesting suggestion that I shall take away with me and think about. However we must I think apply pressure to those who run those companies that they must pay attention to the needs of shareholders.

I am very grateful to my noble friend Lord Lauderdale for his comments. He is of course absolutely right in pointing out that there has been a delay of eight years in the construction of new power stations. I sometimes ask myself why is it that to my knowledge we are the only Government in the entire world that has invested in one and the same person in that he should he the Minister for sport and the Minister for planning. Sometimes I ask myself: is it because the British middle-class fought for town planning inquiries? Is that how we spent our time? I must say that the reason we have a delay of eight years in the construction of new power stations is simply because of the vagaries of our planning system. If we could find a way through that, we might have a more efficient industry. But it is part of our democratic tradition and no one on this side of the House is insisting that we should do away with it. However we should realise that many of these decisions are made not by central government but by local government and through the planning system itself.

The Earl of Lauderdale

My Lords, I am grateful for what my noble friend said. But how will he deal with these planning difficulties, if we are to get 13 new GW by the year 2000, six new PWRs, and four new coal-fired stations if they remain?

Lord Young of Graf ham

My Lords, through perseverance and hard work. Hopefully, the public will begin to realise that many of the problems which have been undertaken and looked at in respect of the first PWR inquiry will not have to be repeated every single time at every single inquiry. There is no other way and we have to do two things: first, provide planning permissions in order to get these built; and, secondly, make sure that finance is available. One of the reasons we are looking at the electricity supply industry going into the private sector is in order that more methods of finance should be available. The noble Lord, Lord Dean of Beswick—

Lord Bruce of Donington

My Lords, I am most grateful to the noble Lord for giving way. He is well within his time. Can he say whether prior, and a good time prior, to the formulation of plans for the electricity power industry to which he has referred, the Government will issue a discussion White Paper before the legislation itself is formulated, so that there can be a full discussion not only in this House but generally by the public about the nature and extent of the plans that the Government propose.

Lord Young of Graffham

My Lords, a discussion paper is, of course, green and a White Paper is normally not that. Let us get the consultations with the electricity supply industry out of the way; then the Government will come forward with their plans. I have little doubt that they will be the subject of a debate or two in your Lordships' House, because this matter has certainly incurred a great deal of interest this afternoon and no doubt will continue to do so. I think I can do no more than say that we are, first, going through a period of consultation. I think we should get through that before we promise even more.

I am grateful to the noble Lord, Lord Basnett, whose figures on the cost of privatisation I found a little curious. They did not compare with the cost with which I am familiar. So many nationalised industries are contributing more in taxes on profits than they used to contribute before privatisation in dividends to the Treasury. That is because company after company that has come into the private sector is doing better than it used to.

I have also heard a great deal about British Telecom. I think that many of your Lordships, who are aware of the dissatisfaction of the public at large, at times forget that today British Telecom is still investing some £6 million each and every day of the year in new equipment and is bringing on stream two new exchanges a day. The basket of prices has dropped some 13 per cent. in real terms since privatisation. A waiting list of a quarter of a million people has disappeared. Of course we are not satisfied with the telephone system that we have today. But would we not have been better perhaps to have privatised British Telecom 15 years earlier? We might then all be very satisfied with the service.

I am grateful to the noble Lord, Lord Harris of High Cross, who drew attention to public ownership in the private interest being a faulty prospectus. That is a prospectus about which I would certainly agree with him. He happily used good words about what I thought was a very interesting paper from the Centre for Policy Studies on electricity privatisation. But I am very well aware that he will be watching closely what the Government do about their electricity privatisation and that he will be ensuring that we keep competition elements very much to the fore.

The noble Lord, Lord Peston, said that he had a great belief in old-fashioned economics and then proceeded to confound that belief in almost everything he said afterwards. The noble Lord must be a patient man, because he may have to wait some time to hear us stand up and say that we are about to take back into ownership some of the industries that we have privatised. I suspect he will have to wait as long for that as he will have to wait to see the lights go out, which is another emotive phrase that many of your Lordships have used this afternoon about the future prospects of the electricity industry in the private sector.

Again the noble Lord, Lord Diamond, gave some figures which I found difficult to follow. During the period when the noble Lord had some responsibility for the nation's affairs, the individual shareholder was rapidly following the path of the dodo. We were seeing the decline of shareholders until they became nothing but a fond memory. However many we have lost, let us see how many we have today—three times as many as we had a few years ago. The noble Lord said that people are getting out. He was quite right. In the case of British Telecom, 222,539 employees were holders of shares at the time of privatisation. More than a year later in the 1986 accounts, the number had gone to 221,906—nearly 600 down. That shows us something, does it not? There are over 220,000 people who continue to be shareholders. Of course the numbers have gone down.

May I just make one other point? which is very important indeed? The noble Lord said that we require the money and the noble Lord, Lord Bruce of Donington, made the same point. If you see the PSBR that this Government have as a percentage of our GDP, it is not only declining with the proceeds of privatisation but, more importantly, it has declined each year excluding the privatisation proceeds. If we needed the privatisation proceeds for that, which is a pre-eminent aim, we would have acted accordingly.

The noble Lord compared us to France. A few days ago we announced that unemployment was 9.8 per cent. and going down. If you look at the unemployment in France, you draw another conclusion. Alas, I should like to congratulate the noble Lord, Lord Bruce of Donington, who gave us a marvellous vintage speech, the sort of speech that we heard to our cost in the '40s and '50s. He made one point with which I agree, that the customer is the one who will determine. The customer is the one who will be satisfied as a result of our programme.

Lord Ezra

My Lords, I should Like to thank all noble Lords who have participated in this debate. I think they have shown remarkable skill in concentrating so much wisdom and experience in such a limited time. In particular, I feel that what was said about the prospective privatisation will be very carefully heeded by government. These are going to be very difficult issues and I am glad that the noble Lord, Lord Young of Graffham, has made it clear that we shall have many further opportunities for debate on these subjects. With that, I beg leave to withdraw my Motion.

Motion for Papers, by leave, withdrawn.