Monopolies and Mergers Commission: Privatised Utilities (Hansard, 2 December 1996)

§ The Minister of State, Department of Trade and Industry (Lord Fraser of Carmyllie)
My Lords, reference to the MMC is mandatory for certain large water mergers under the Water Industry Act 1991. My right honourable friend the President of the Board of Trade has stated that he will continue to consider other mergers on their individual merits.

§ Lord Haskel
My Lords, I thank the Minister for that Answer. However, is he not aware that there is a lot of disquiet about the inconsistency of government policy 466 towards such mergers and takeovers? There is disquiet about the future ownership of these essential services, which in many cases are monopolies as far as the customer is concerned. Does the Minister agree that, by stating that bids will be so referred until the election, speculation in the shares of such companies will be quietened, a period of reflection will be created, and the new Government will be able to look at the position with a fresh eye without too much unalterable change having taken place?.

§ Lord Fraser of Carmyllie
My Lords, I do not accept that there has been either disquiet or concern about this. In relation to the regional electricity companies, as far back as August 1995 my right honourable friend the President of the Board of Trade set out the issues to which he would pay particular attention in considering any merger involving those companies. As I indicated in my Answer, under the terms of the Water Industry Act 1991, referring water mergers to the MMC is not a matter of choice for the President of the Board of Trade; it is mandatory. I can give the noble Lord this undertaking: the President of the Board of Trade will observe the law. What astonishes me about the noble Lord's proposal is that he might be inviting the President of the Board of Trade to breach the law because he does not have the power to refer anything and everything to the Monopolies and Mergers Commission; he can do so only within the definitions allowed to him.

§ Lord Borrie
My Lords, is the Minister satisfied that the powers of the specific industry regulators are adequate (either to obtain information or otherwise to regulate the privatised industries in the public interest) if the seats of governance of so many more of them are removed to the United States of America?.

§ Lord Fraser of Carmyllie
My Lords, as matters stand at the moment, the view is that the powers of the regulators are sufficient. However, if the position changes, the regulators may wish to alter the conditions that are set out in the licences to ensure that they have adequate information and can be satisfied that true competition is operating in each and every sector. It is for that reason that in the decision of August 1995, to which I referred, the President of the Board of Trade indicated that he would have particular regard to the necessity for the regulator to have a proper set of comparators. In short, yes, we believe that the powers are sufficient, but if the regulators were to indicate that there had to be some change, we should pay careful regard to that. It would appear, however, that the powers that are necessary can be adjusted through the conditions in the licences.

§ Lord Wyatt of Weeford
My Lords, is the noble and learned Lord aware that the real disquiet in this area is the threat posed by the windfall tax, which would deprive millions of ordinary shareholders of the value 467 of their shares in order to punish a few so-called fat cats over whom they have no control whatever? That is common theft, and I hope that it will be stopped.

§ Lord Fraser of Carmyllie
My Lords, I offer one particular way to ensure that there is no such windfall tax—the answer may be rather obvious—and that is the return of this Government. The Government are firmly opposed to the tax. However, despite a long debate in the other place recently, those of us who take an interest in this matter are astonished that, given all that has been made of the desirability of a windfall tax, no one has the clearest idea of how issues such as non-hybridity should be tackled were such a tax to be introduced. Nor do we have an idea as to exactly what utility may be involved in such a windfall tax.

§ Baroness Turner of Camden
My Lords, can the noble and learned Lord tell the House what steps will be taken to ensure that when mergers take place there is consultation with the workforces, as laid down under European legislation and, I believe, under the TUPE regulations?

§ Lord Fraser of Carmyllie
My Lords, clearly before the President of the Board of Trade makes any reference to the Monopolies and Mergers Commission he is bound under statute to take advice. That he has done and will continue to do, both up to the general election and beyond it. But if there are those who have representations to make they can make them. As I am sure the noble Baroness is aware, they regularly make such representations.

§ Lord Ezra
My Lords, in considering bids for the private utilities, particularly those in the electricity sector, do the Government take into account not only the possible impact on competition and monopoly but also the impact on the structure of the industry—for example, a return to vertical integration in a big way?

§ Lord Fraser of Carmyllie
My Lords, yes. If the noble Lord looks back to the statement of August 1995, to which I have referred on a number of occasions, one of the issues that the President of the Board of Trade specifically addressed was whether any vertical integration would have any adverse effects. He has not ruled out a greater degree of vertical integration than exists at present, but he has clearly indicated that before further vertical integration is permitted he must be satisfied that there are no adverse effects on competition in that particular area of utility.

Lord Bruce of Donington
My Lords, is the noble and learned Lord aware that an incoming Labour Government will have no more technical difficulty in establishing a windfall tax on utilities than the present Government did in levying a windfall tax on the banks within a couple of years of taking office?

§ Lord Fraser of Carmyllie
My Lords, I suggest that the noble Lord may wish to reflect on exactly what is a utility and who may be subject to this tax. I should have 468 thought that a bank could be easily defined. However, utilities are wide-ranging. If a degree of hybridity were introduced, it would be extremely interesting to see how long it would take for the matter to be resolved. I have no doubt that the shadow Chancellor, Mr. Gordon Brown, is living in an Alice in Wonderland world if he believes that an incoming Labour Government will have any revenue in their first year of office.

§ Baroness Seccombe
My Lords, does my noble and learned friend agree that a windfall tax would be a tax on pension funds and therefore a tax on all pensioners who were dependent on such funds for their income?

§ Lord Fraser of Carmyllie
My Lords, I absolutely agree. My noble friend could not have put it better. The idea that this will have only a neutral impact is complete nonsense. It is not only individual shareholders who will suffer. If the party opposite is not concerned that individual shareholders may suffer, it may at least have some concern that pension funds will equally suffer.

§ Lord Williams of Elvel
My Lords, does the noble and learned Lord agree that the intervention of his noble friend Lady Seccombe was wide of the question?

§ Lord Fraser of Carmyllie
My Lords, if the noble Lord had woken from his slumbers a little earlier, he would have realised that the issue of the windfall tax was addressed to me long before my noble friend intervened.

§ Lord Williams of Elvel
My Lords, if the windfall tax is to be on the agenda, we are quite happy to defend it. What the noble and learned Lord has not proved is that the fat cats in the utilities who benefit from such mergers are to be controlled. Referring to my noble friend's Question, what disadvantage is there in making sure that the fat cats in the utilities do not become fatter as a result of mergers before the next election?

§ Lord Fraser of Carmyllie
My Lords, if the noble Lord had woken from his slumbers during my first response, he would have appreciated that I was being invited to say, on behalf of my right honourable friend the President of the Board of Trade, that every merger should be referred to the Monopolies and Mergers Commission. I have already indicated to the House that in certain circumstances that is mandatory, and that will done. In other circumstances, what lies behind the Question is an invitation to the President of the Board of Trade possibly to breach the law as it stands at present. I give the equally clear undertaking that he will certainly not do that. This has nothing to do with fat cats. However, I admire the noble Lord as being the only Member of the Opposition Front Bench I have yet encountered who is prepared to defend in any respects the detail of a possible windfall tax.

§ Baroness Farrington of Ribbleton
My Lords, does the noble and learned Lord agree that the pensioners referred to by his noble friend Lady Seccombe are concerned about having a guaranteed supply of water?
469 In those circumstances, how can the Government justify failing to refer such bids to the MMC at a time when money is being returned to shareholders and regulators complain about the lack of action to repair leaks in the system?

§ Lord Fraser of Carmyllie
My Lords, a number of the matters raised in that question are for the regulator. Like the noble Baroness, we would hope that the regulator would pay close attention to any shortcomings on the part of the water utilities. I indicate to the noble Baroness—I believe this is the fourth time that I have said it—that, if a merger comes within the terms of the Water Industry Act 1991, it does not lie within the discretion of the President of the Board of Trade. That he makes such a reference is mandatory.