§ Mr. Peter Walker
I have now received the second response of the Yorkshire electricity board to the Monopolies and Mergers Commission report published in September 1983 (Cmnd. 9014). This describes progress on steps taken by the board to meet the commission's conclusions. I am placing copies of the board's response in the Library of the House.
The board has responded positively to many of the MMC's recommendations and significant progress has been made since my statement to the House on 28 February 1984 concerning the YEB's initial response.
The commission's central conclusions dealt with the board's role in setting key medium-term objectives and the 70W need for quantified goals based on those objectives to be delegated throughout the organisation. I am disappointed that in certain areas the board felt unable to include in its response specific proposals for action in response to the commission's recommendations. I shall, in particular, take a close interest in the board's progress in setting and achieving quantified cost-reduction objectives as recommended by the commission. The new chairman of the board has informed me that he is in the process of making organisational and other changes with this aim in view. I have asked him to report his progress to me not later than the end of June this year.
While I note that the board has decided not to establish an audit committee, I am pleased to see that it is taking steps to increase the participation of the non-executive members in the formulation of such objectives and in the consideration of strategic questions. I also welcome the fact that the board's decision to reduce the number of YEB areas from seven to four will facilitate the devolution of responsibility and objectives to appropriate managerial levels.
The role of non-executive members is an issue which is relevant throughout the industry and my hon. Friend the Parliamentary Under-Secretary has recently offered guidance on this to all non-executive board members. Copies of this guidance have been placed in the library.
In my statement on 28 February 1984 I indicated my intention of following the board's progress in responding to the commission's conclusions on its manpower plan (conclusions 3 and 33) and the varying costs of maintenance in the different board areas (conclusion 26). I note that a severance scheme has now been introduced in relation to the reorganisation which will enhance the board's ability to achieve the optimum rate of staff rundown and that the board is continuing to carry through a detailed analysis of comparative maintenance costs. The scope for further progress in both these spheres should be improved by the board's initiative in reducing the number of areas.
In conclusion 36 of the report the commission proposed separate and fully detailed profit and loss accounts for both the appliance retailing and contracting activities. In agreement with the Electricity Council I announced last July measures applying to all area boards, including revised cost allocation guidelines, separate accounts and financial objectives, which fully meet the commission's concern and should help to demonstrate that the boards are competing profitably and fairly in those activities. The issue of supply security standards (raised in conclusion 20) also has industry-wide implications and is presently under review by the Electricity Council.
I should like to take this opportunity to convey the Government's thanks to the MMC for its thorough and stimulating investigation. Its findings have clearly been of considerable use to the Yorkshire board in helping it reduce costs and increase efficiency, and have also been of benefit throughout the industry.