Water Privatisation: Exchequer Receipts (Hansard, 26 February 1992)

§ Baroness Blatch
My Lords, the National Audit Office report published on 14th February 1992 relates to the arrangements made for privatising the water authorities and refers to a number of factors affecting the valuation of the industry. As the report indicates, net Exchequer receipts are expected to total some £3.6 billion.

§ Lord Dean of Beswick
My Lords, is the Minister aware that on Appendix 5 the figure of valuation was not £3.6 billion but £5.25 billion? Will the Minister inform the House why the Government have reneged on their corporate responsibility to safeguard the finances of the taxpayers and ratepayers of this country who lost those assets without compensation? Why have the Government taken such a course? Is it not clear that there has been a monumental dereliction of duty?

§ Baroness Blatch
My Lords, the noble Lord singled out the appendix. I should have preferred him to take the appendix as supporting the conclusions of the National Audit Office. My right honourable friend the Secretary of State had two primary duties. The first was to establish a regulatory regime in order to allow the companies to finance their functions and to create a reasonable return. His second duty was to protect the interest of consumers, which he did by putting in place a price control regime. As regards the illustrative figures to which we are referring, the conclusions of the report state: The illustrative net proceeds used in the Department's calculations were based on hypothetical assumptions and were not seen as achievable in practice … However, given their hypothetical nature, the final outcome cannot be judged against the large movement in illustrative proceeds which occurred during the regulatory process … The Department therefore managed to achieve the successful establishment and privatisation of 10 companies within a new regulatory regime. This was a notable achievement indeed".

§ Lord Dean of Beswick
My Lords, is the Minister aware that she has made no case for distributing nearly £1.8 billion of public money to people in the private sector? She will have to do better to convince Members of this House and the public that that was not a dereliction of duty of the worst kind.

§ Baroness Blatch
My Lords, the audit report acquitted the Government totally of the noble Lord's allegation. Furthermore, it commended the Government for the exercise which they undertook. It commented on timing but it commended the Government for their achievement. We now have 10 successfully privatised companies with a programme of £28 billion to be spent during the next 10 years. That could not have been achieved by keeping those companies within the public sector. It will be interesting to know whether that is what the noble Lord's party plans to do if it should ever come to power.

Lord Bruce of Donington
My Lords, is it not the case that this squalid deal, which resulted in selling off the authorities at a much lower price, was done without the consent of the taxpayer, even after the injection of some £1.5 billion of public funds into the companies concerned and a wholly unauthorised write-off of £5 billion owed to the National Loan Board?

§ Baroness Blatch
My Lords, the noble Lord also takes one illustrative figure and does his sums on that basis. The net proceeds into the Exchequer were £3.6 269 billion. Today the National Economic Development Council has produced an in-depth study on the water companies. It states: The overall conclusion of this study is that the future potential for the UK water industry is extremely good and that on the whole the industry is responding well to the challenge brought about by the restructuring of the industry following privatisation in 1989 and by the substantial increase in the levels of capital expenditure". I believe that that report acquits the Government and that the Government acted with entire propriety throughout the whole exercise.

Lord Bruce of Donington
My Lords, the Minister has queried figures that I cited to her as being purely illustrative. If she reads the report she will find that the figures which I gave were not illustrative but were actually carried out in fact: that £1.5 billion of taxpayers' money was provided and that more than £5 billion was written off the loan to the National Loan Board.

§ Baroness Blatch
My Lords, I shall read from a different part of the report which states: The estimates of illustrative proceeds at this stage were provisional and subject to a number of caveats … There was no suggestion that these proceeds could be realised for any particular profile". The noble Lord is using illustrative tables and coming to a hypothetical, so-called loss to the public purse. I am afraid that he is entirely wrong.

§ Lord Campbell of Alloway
My Lords, is the Minister aware that figures and statistics bandied haphazardly across the Floor of this House are sometimes confusing to some of us? Is she also aware of any squalid impropriety in a deal which saved the water industry from a situation which the European Commission was not prepared to tolerate?

§ Baroness Blatch
My Lords, I am grateful to my noble friend. To call the exercise "squalid" was unacceptable parliamentary language in this context. The report is in the public domain. Everything which the Government did in floating the water authorities is also in the public domain, as are all the figures. It is for people to make up their own minds, but squalid the exercise was not.

§ Lord Peyton of Yeovil
My Lords, apart from the use of unacceptable parliamentary language, would my noble friend think it interesting to examine, perhaps with the Leader of the House, the questions that have been asked this afternoon because they are notable for their lack of interrogatives?

§ Baroness Blatch
My Lords, that is a matter for my noble friend the Leader of the House.

§ Lord Peston
My Lords, I am sure that the Minister understands such issues much better than I do. First, will she accept that, on reading the document, it appeared to me that the net proceeds were £3.6 billion and that the assets were worth a good deal more? Will she accept that some of us who are less expert than she is came to that conclusion? Secondly, the Minister said that the effect of the exercise was to help the consumer. Is it not the case that water privatisation has led to a series of monopolies? Is it not also the case 270 that the price being charged to the consumer has risen drastically in real terms and that therefore, having obtained the asset at those low prices, the owners of the companies are exploiting their monopoly power at the expense of the consumer?

§ Baroness Blatch
My Lords, I believe that the Government have achieved all their objectives in floating the water authorities. We have a most buoyant water industry, unfettered by Treasury rules, which is achieving all the objectives that the Government set for it. I entirely refute the noble Lord's comment that at the time the water authorities were worth more. My right honourable friend the Secretary of State took advice throughout the whole process. A price was set on the shares three weeks prior to flotation, a 10 per cent. premium was set and the shares came in below that premium. I believe that that was an accurate assessment on the part of my right honourable friend.