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Points of Order
3.32 pm
Mr. David Winnick (Walsall, North) : On a point of order, Mr. Speaker. I know that the subject of tomorrow's debate is aid to developing countries, but has the Minister for Overseas Development asked to make a statement on the horrific events in Iran? There are millions of people in this country who, whatever they think about the regime in Iran, are deeply concerned about and horrified by what has occurred, and they want the maximum amount of relief to be given. There was a passing statement by a Minister last Friday, but I and many other hon. Members would wish an oral statement to be made by the appropriate Minister.
Mr. Speaker : I have had no indication that the Government propose to make a statement on this matter today. However, as the hon. Gentleman has correctly stated, there will be a debate tomorrow, when these matters will be relevant.
Mr. Ieuan Wyn Jones (Ynys Mo n) : On a point of order, Mr. Speaker. Yesterday there was a near miss between two aircraft over mid-Wales when a British Midland aircraft and a Dan Air aircraft came within four seconds of a collision. It is a very serious matter, because there have been a number of near misses over mid-Wales in recent years. Has the Secretary of State for Transport made an application to make a statement to the House because of the serious nature of the incident? If not, what can be done to prevail upon him to do so?
Mr. Speaker : The hon. Gentleman has made his point. I have had no request for a statement, or any indication that the Government propose to make one, on that serious matter.
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Mr. Michael Latham (Rutland and Melton) : On a point of order, Mr. Speaker. I raise this matter with some difficulty, because the supplementary question of the hon. Member for Bolsover (Mr. Skinner) was sheer magic and none of us would have missed it for the world. However, in the past, you have declined to take the supplementary questions worded in that way, referring to departmental Minister's duties for a specific day. Is that policy now to be changed because, if so, it may affect the behaviour of other hon. Members when we table our questions?
Mr. Speaker : Normally, matters of that kind would be brought to me by the Table Office. What was the question?
Mr. Dennis Skinner (Bolsover) : It was Question 74, about official duties.
Mr. Speaker : That was passed as in order by the Table Office.
Mr. Geoffrey Lofthouse (Pontefract and Castleford) : On a point of Order, Mr. Speaker. May I draw your attention to Question 79, which was tabled to the Lord President of the Council by the hon. Member for Ealing, North (Mr. Greenway)? Do you agree that such questions, which cost probably 40 or 50 times more than the snuff in question, are a complete waste of money and of precious parliamentary time?
Mr. Speaker : I had better not give my views publicly about some of the questions on the Order Paper.
STATUTORY INSTRUMENTS, &c.
Ordered,
That the draft Legal Advice and Assistance (Scope) (Amendment) Regulations 1990 be referred to a Standing Committee on Statutory Instruments, &c.-- [Mr. Lightbown.]
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Opposition Day
[15th Allotted Day]
Electricity Privatisation
Mr. Speaker : I have selected the amendment in the name of the Prime Minister.
3.36 pm
Mr. Frank Dobson (Holborn and St. Pancras) : I beg to move, That this House deplores the privatisation of the electricity industry, which will cost every family in Britain over £1,000, damage the environment and undermine the balance of payments ; and believes this too high a price to impose upon the British people.
First, we object to the electricity privatisation because the industry will be sold off for a third of its proper value. Secondly, we believe that measures to prevent acid rain have been reduced and put back. We also believe that the structure of the industry hinders investment in energy efficiency and energy saving. Thirdly, there is a danger of over-rapid depletion of our fuel reserves, especially natural gas. Fourthly, we believe that electricity privatisation is increasing coal imports, thus threatening the balance of payments. Fifthly, we object to the enormous sums of money that are being poured out on advice from City advisers and public relations advertising companies that are intimately involved with the Tory party. Sixthly, we believe that people are being expected to pay a scandalous price for nuclear power under the privatisation arrangements and it is about time that the Government came clean. For all those reasons, we believe that the electricity privatisation amounts to a bad deal for taxpayers and electricity customers. The Secretary of State has been praised for sorting out the mess that he inherited from his right hon. Friend the Member for Hertsmere (Mr. Parkinson). Although we recognise that it was a terrible mess, and to the extent that it is possible to sort out such a mess, the Secretary of State has sorted it out, I am nevertheless reminded of the dung beetle. We admire the skill and persistence with which the dung beetle moves it ball of dung, but our fascination with the process should not distract us from recognising that, at the end the substance being moved remains a ball of dung--and so it is, with the structure of electricity privatisation.
Mr. Dennis Skinner (Bolsover) : The big fat slug will have to gobble it up.
Mr. Dobson : My hon. Friend should not refer to slugs and the Chancellor of the Duchy of Lancaster in the same breath.
The distribution, transmission and generating parts of the electricity industry in England and those parts of the Scottish boards that are to be sold off are worth at least £38 billion. There are a number of ways of calculating those assets, but the lowest reasonable figure is about £35 billion. I do not know whether the Secretary of State is prepared to challenge that figure. When I asked him whether he could tell me the values of the various boards that were to be sold, he told me :
"Asset values are contained in the relevant annual report and accounts."-- [ Official Report, 12 February 1990 ; Vol. 1511 c. 92. ]
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I checked carefully through those reports and accounts and the highest estimate that I came upon was £38 billion for the industry or £35 billion. That is the net asset value, using current cost accounting. It does not include the merits of taking over an industry with highly trained, highly skilled and highly educated staff who have gone about their job efficiently in the past and who a new owner can reasonably expect will go about it efficiently in future. All we are talking about is the fixed assets.I take as an example the generating board's last annual report. Peat, Marwick, McLintock, the distinguished city accountants, said : "We have audited the accounts in accordance with approved Auditing Standards. In our opinion the accounts which have been prepared under the current cost convention give a true and fair view of the state of affairs of the board and its subsidiaries."
The auditors of the other boards signed similar certificates. Pear, Marwick, McLintock also said that the fixed assets of the generating board alone amounted to £26 billion. If we take an average estimate of the total assets of the industry, we can reckon that it is worth £35 billion. Then we must ask : what price are the companies to be sold for? James Capel, the Government broker, is advising energy correspondents that they will be sold for about £10 billion. That is £5 billion for the distribution companies, £4 billion for the generating companies and just £1 billion for all the assets of the electricity boards in Scotland.
In a parliamentary answer, the Minister denied that James Capel is saying that. Because I usually believe the Minister and we expect honesty in parliamentary answers, I checked with the journalists who produced those articles. At my request, they have gone through their shorthand notes of the briefings from James Capel, and in some cases they cross-checked with the other broker, Warburg, and both brokers said that £10 billion is the sum for which they expect the industry to be sold.
If the industry is to be sold for only £10 billion, that is a shortfall of £28 billion or £25 billion, which works out at more than £1,000 per family. The Chancellor of the Duchy of Lancaster, the chairman of the Tory party, last week had the brass-faced cheek to talk about Labour spending and Labour waste. There will be no Labour waste like this. This is Tory waste with a vengeance. The sum of £1, 000 per family--£20 a week per family for a whole year--is too much to lose on this shabby transaction.
British people and our European partners will be asked to pay a big price by way of increased or not reduced environmental damage. Measures against acid rain will be postponed and reduced. Until the Prime Minister made her speech at the United Nations, which the Evening Standard modestly described as
"Maggie's plan to save the world",
we were going to have flue gas desulphurisation equipment on 12,000 MW of coal-fired plant. Now that figure has suddenly been reduced to 8,000 MW, and there is no real commitment to it--there is a firm commitment only to 4,000 MW.
The reason is that the Secretary of State has been informed by his fancy- pants City advisers that, if he goes through with flue gas desulphurisation on this scale, it will be hard to sell the electricity industry. In other words, his friends in the City are interested not in an environmentally friendly industry but only in a dirty one.
So, if right hon. and hon. Members will excuse the expression, flue gas desulphurisation has been put on the back burner and the Government have gone for cheap
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options. They say that there will be a big increase instead in the burning of natural gas, but even British Gas has doubts that there are sufficient reserves on the British continental shelf to meet the demand for gas from the electricity generating sector on the scale envisaged. In any case, there are better uses for that gas. It should be used for direct heating or industrial purposes, or for chemical feedstocks, long before it is used for generating electricity.Mr. John Marshall (Hendon, South) : What would the Opposition do about flue gas desulphurisation? Would they meet the cost from higher electricity prices or by a higher subvention from the taxpayer?
Mr. Dobson : I do not know whether the hon. Gentleman has attended previous debates, when we have made our view clear. We believe that Britain is under an obligation to meet its international agreements, which currently means fitting 12,000 MW of plants with flue gas desulphurisation equipment. We have also said that in so far as the generating companies persuaded the Government to postpone implementing that obligation, so that they will incur additional costs when it is eventually installed, the companies themselves--not their customers--will have to meet that cost. [Hon. Members :-- "How?"] They will have to meet that cost out of the money that they would otherwise have paid their shareholders. It is entirely up to them.
If we do not have sufficient supplies of British natural gas to feed all the gas-fired power stations that are envisaged, the question arises of natural gas imports. We import too much of it already, which damages our balance of payments, and it would be absurd to harm it further. In any case, what would be the source of any additional supplies? The Soviet Union is entering a period of instability, as is the middle east. In the past, Algeria has been one of our major suppliers, but the recent local elections there can scarcely make anyone feel that there will be stability in that country in future and that it will be a continuing stable source of natural gas. We might find ourselves in the lunatic situation in which our gas supplies were vulnerable and we had no influence on their cost. Instead of going for flue gas desulphurisation, the Government are going for depletion of gas reserves and reliance on insecure foreign sources. We believe that that is too high a price to pay for electricity privatisation.
The Government propose switching instead to burning low-sulphur coal. It is a pity that they did not think of that over the past 10 years, when they permitted British Coal to close no fewer than 49 low-sulphur pits. That wiped out the Kent coalfield and, reduced the Scottish coalfields to one pit and the Welsh coalfields to five--and they were the coalfields that produced low-sulphur coal.
What will be the effect on our balance of payments if we have to import low -sulphur coal? I imagine that the Chancellor of the Exchequer would have a few views about that. A very cavalier attitude is taken by the Department of Energy and the big generating companies. What about the security of coal supplies and their price? We have been told that Department officials and the generating companies believe that supplies of low-sulphur coal will be secure and that the price will be all right. They are the very people who said in the past that we could rely on imported oil from the middle east, but then OPEC hit them and they were taken by surprise.
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They are the self-same people--they continue in the same manner--who said that nuclear electricity would provide us all with cheap power, that it might be so cheap that it would be given away. The only giveaway now is that the truth is out at last about the cost of nuclear power, and it is costing electricity consumers a fortune. We believe that all that would be too high a price to pay for electricity privatisation.One of our major objectives at the moment should be energy saving. Everything we do should be geared to promote that, but the new structure of the electricity industry will hinder energy saving, because it has been set up to promote sales. As my hon. Friend the Member for Pontypridd (Dr. Howells) pointed out, the chairman of the biggest electricity board in the country was talking in grandiose terms last week in Scotland about the job of the electricity industry being to compete with British Gas and to get as big a share of the market as possible. There was no talk about restriction, energy conservation or anything else. All he wants is more sales and more profit from them.
The problem is that, due to the ramshackle Parkinsonian regime that the Secretary of State has inherited, there is an unnatural break between electricity distribution and generation. If there were all-purpose electricity boards in various parts of the country, they could face an easy question. They could ask themselves how to cope with an extra 1,000 MW of demand, and could calculate whether it was better to invest money in reducing demand by 1,000 MW by improving energy conservation, or whether it would be cheaper to build new generating capacity.
In the present circumstances, we all know that the boards would opt to invest money in energy conservation, because it would be cheaper than buying new generating plant. However, under the new separated regime that the Government are wishing on the country, the decision would not be reached in such a way, because generating and distributing companies would make more money the more electricity they sell. That is why we are saying that, when Labour comes to power, we will impose an obligation on distributing companies to invest money in energy conservation and efficiency.
Dr. Michael Clark (Rochford) : While it is true that energy companies will make more money the more electricity they sell, is it not also true that consumers will want to buy less electricity because the less they buy the less money they will pay? Therefore, consumers will be interested in energy conservation.
Mr. Dobson : The hon. Gentleman's logic is that we should double the price of electricity and so double the consumer's interest in energy conservation. That seems to be a perverse way to go about things.
Another enormous cost that the Government are imposing on the taxpayer and the electricity user is the cost of advice on privatisation which they are obtaining from the City, allegedly to the benefit of all. Unless the score has increased--I rather think it has and he has got his 50--at the moment, according to official figures, the Secretary of State has 47 companies advising him on privatisation, including 13 estate agents--which is unlucky for some, or indeed for all of us, as they are estate agents--and 10 firms of accountants. The electricity boards are employing many
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more companies. More than 130 City companies are employed by the Secretary of State and the electricity boards to advise them on electricity privatisation.Mr. Graham Allen (Nottingham, North) : Any MPs?
Mr. Dobson : There is probably the odd MP here and there--I am not sure--but I trust that they are not Opposition Members.
The Secretary of State is spending more than £50 million on those 47 companies, but the boards say that they will not tell me how much they are spending, and I have written to all of them. Two boards told local newspapers who inquired that they did not know how much they were spending on City advisers. I got the journalists to ring back and ask how the boards were going to pass the cost on to the customer. They said, "We are working it out and it will probably be set out in our annual reports."
Mr. Skinner : They could be friends of the family.
Mr. Dobson : Yes, they could. I was struck by the thought the other day that the Tory party was once going on about a famous book called "Jenny lives with Eric and Martin." On the Tory side now, it is "Nigel lives with Barclays and Money" and "David lives with Cable and Wireless." There are quite a few of them around. It is a pity that the Secretary of State has not said that he will not take a job with any of these privatised companies. My hon. Friends are not given to cynicism, but we do not need to be cynics to ask whether the Secretary of State is fixing himself up with a cushy number in Eastern Electricity, or whether he is trying to protect the interests of the electricity consumer. We know what the answer to that question is.
Mr. Doug Hoyle (Warrington, North) : My hon. Friend has probably read in the press, as I have, that the Secretary of State for Energy may be the Prime Minister's adviser on the date of the next election. When the Tory party loses the next election, perhaps the cause of our cynicism will be confirmed when the Secretary of State for Energy takes up a job with a privatised company, just as the Secretary of State for Wales took a job with British Gas.
Mr . Dobson : The Secretary of State for Wales did not just take a job with British Gas ; he took a job with two firms of City advisers that advised on the sale of British Gas, both of which are also giving advice to this Secretary of State. It is a question of "double your money". I cannot understand why the electricity boards will not tell their customers how much they are paying for their advisers. What do they have to hide?
A more basic question is whether the Secretary of State needs all this advice. He proposes to sell the electricity industry for a third of its real value--for what, in a street market, might be described as two thirds off the list price. At that price, the shares could be sold on a stall in Petticoat lane. The Secretary of State should remember the old slogan, derived from the founder of Tesco : "Pile 'em high and sell 'em cheap." That is what the Secretary of State intends to do. He does not need 50 million quid's worth of advice to tell him how to do it.
As for the question whether the advisers are giving value for money, I commend all hon. Members to look at
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the evidence, when the full details are published on Wednesday, that Kleinwort Benson gave to the Select Committee on Energy about its advice on the privatisation of the nuclear part of the electricity industry. During that public session, the company made it crystal clear, in answer to questions from my hon. Friends and, to be fair from Conservative Members that it did not have the faintest idea about anything to do with nuclear power. It said that all the information on which it had based its advice came from the Central Electricity Generating Board and that, if the CEGB's advice was wrong, there was nothing that Kleinwort's could do about it, because it did not know enough about the industry to challenge and question that information. What contribution did Kleinwort's make to the proceedings? It continued to advise the previous Secretary of State for Energy that it could sell off the industry, which proved to be impossible.I have made inquiries as to whether Kleinwort's received its fee in full. By and large, the Government are in favour of payment by results. I gather that Kleinwort's got every penny of the fee that was due to it--not every penny of what it deserved, because in that event, it would have had to pay us. On the only occasion when evidence has been given about the question of this advice, those people gave bum advice that has damaged the interests of the country and even the interests of Conservative Members of Parliament.
Mr. Max Madden (Bradford, West) : Before my hon. Friend leaves that interesting line of inquiry and revelation, has he discovered whether any of these well-paid advisers are contributing to Tory party funds, thereby squaring the circle?
Mr. Dobson : I have not had time to go through them, but suspicions occasionally spring to mind, and I shall come to them in a moment. The way in which the public relations firms are involved is best described by several American political phrases such as "gravy train", "pork barrel", "sleaze bucket"--you name it, they are in it. Let us consider first the public relations and marketing advisers. The Secretary of State is not usually portrayed as an arrogant or puffed up person, but apparently he is not content with one public relations and marketing adviser to the Energy Department and the electricity supply industry, so he has appointed two-- one from the Energy Department and the electricity supply industry and one for himself. Dewe Rogerson has been appointed public relations and marketing adviser to the Energy Department and Lowe Bell Communications has been appointed special public relations and marketing adviser to the Secretary of State. A director of Dewe Rogerson is a Tory Member of Parliament and Lowe Bell Communications is chaired by Tim Bell who, if rumour is correct, is scarcely ever out of 10 Downing street.
How were those people appointed? Another company called Valin Pollen International previously had the job of advising the Department and the industry. Tenders were then invited for the new separate jobs. I am told that three companies applied for each job and that Valin Pollen did not proceed with its application. Dewe Rogerson got one contract and Lowe Bell got the other. So I inquired a bit further and asked who was the unsuccessful applicant for the Dewe Rogerson job--and lo and behold, it was Lowe
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Bell, and when I asked who the unsuccessful applicant was for the Lowe Bell job, lo and behold it was Dewe Rogerson.In theory, there are rules governing such appointments, laid down and reinforced by the Prime Minister. Those appointments break four rules. There was no proper tendering procedure. Appointing a personal public relations adviser is contrary to those rules which also lay down that no public relations advisers may have direct contact with the press or the news media. We now know that Lowe Bell and Dewe Rogerson have contacts with the news media. The appointments involved intimate friends of the Tory party. The whole thing stinks, and the Secretary of State knows it.
Sir Nicholas Bonsor (Upminster) : Perhaps the hon. Gentleman is not aware that almost every major company in the country has direct interests in the Conservative party, because they are determined to keep the Labour party out.
Mr. Dobson : I should have thought that the last way to commend the propriety of those appointments was to say that the people concerned were determined to seek a return of a Tory Government rather than a Labour Government. That is not usually a basic criterion on which public contracts are awarded. The hon. Gentleman, who is an old Etonian, has let the cat out of the bag.
Mr. Allen : May I correct the record in one particular? The biggest contributor to the Tory party, British and Commonwealth Holdings, no longer contributes to the Conservative party as it went bust a fortnight ago.
Mr. Dobson : That organisation was probably doing something useful, whereas these people just have their snouts in the trough.
Mr. Peter Hardy (Wentworth) : Does my hon. Friend realise that he is raising very serious issues which have real implications for the quality and integrity of British public life? Does he recognise that, if those in local government--the Prime Minister and her colleagues are always calling for prudence and good behaviour in local government--conducted themselves in the way in which my hon. Friend is describing to the House, any qualified and respectable chief executive of a local authority would tell those local representatives that, if they maintained that course, or if it could be proven that they had pursued such a course, they could look forward to a considerable period of imprisonment?
Mr. Dobson : I follow my hon. Friend's point. Indeed, because of my concern about the propriety of these appointments, I wrote to the person responsible for judging the propriety of anything done by the civil service --its head, Sir Robin Butler. After immense delay, I received a reply from the Secretary of State saying that he took responsibility. At least Sir Robin Butler did not say that he agreed with it.
Another aspect of the privatisation was still to come--the award of the privatisation advertising contract. A panel was established to choose who should receive that lucrative contract. One member of it was--surprise, surprise--Mr. Tim Bell. Hon. Members will be aware that he was one of the three Tory party PR friends that the chairman of the Tory party wanted to appoint as special advisers to the Home Secretary, the Secretary of State for
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Education and Science and Secretary of State for Health, on the grounds that they were boring or were damaging the Conservative party's interest. That idea was so improper that even Mr. Bernard Ingham--a man not noted for his fastidiousness about the propriety of public behaviour--objected to it.Who did the panel, including Mr. Tim Bell, choose for the advertising contract? It chose the firm Wight, Collins, Rutherford, Scott, Mathews, Marcantionio, whose chairman is Mr. Robin Wight, the man originally selected by the chairman of the Tory party to provide personal public relations advice to the Secretary of State for Education. What a racket ! All those friends of the Tory party scrambled to get their snouts in the trough of electricity privatisation. The people of this country are paying a high price for those people.
I am not being unfair ; I am not raising new standards of behaviour that are required of Governments. I shall judge the Government by the standards that they set, not for themselves, of course, but for local government. The new national code of conduct for councillors says : "It is not enough to avoid actual impropriety. You should at all times avoid any occasion for suspicion"
The Government are guilty on all counts. They are guilty of double standards : others must live up to those standards, but not the Government. What is the result of all this?--National Power adverts in between the halves of world cup matches. I was going to say that, if that is a good use of public money, I am a Dutchman, but as Holland did not do too well last night, perhaps I am not.
I have had passed to me proposals for electric privatisation road shows. I have the document submitted by the people who won the contract. They will receive over £2 million for giving presentations to opinion leaders in Britain, North America, Japan and Europe. It is a good sign of Government priorities that they are prepared to spend £2 million on that, but, as my hon. Friend the Member for Copeland (Dr. Cunningham) said earlier, less than £500,000 on urging people to register to vote. Registering to buy cheap shares in electricity is a top priority, but registering to exercise democratic rights is a low priority. That has always been the Tory way.
That programme, which has been drawn up by Imagination Design and Communications, will lay on 41 road shows--26 in Britain and 13 abroad, in north America, Europe and Japan--at a cost of more than £2 million. That excludes the cost of the time of people in the electricity industry who will be taking part in it or helping to prepare it. The proposal will give presentations in major cities, and we have some wonderful sample menus of these events. People in Bristol will get lamb kebab, and in Paris they will get rack of lamb, if the French farmers will allow it in. In the United States one does not do too well ; one gets spinach salad. In Japan, one gets an amazing concoction called roast duckling chipolata.
The document refers to "all-important institutional lunches". The company promises attention to detail, so much so that it will prescribe the folds that are to be made in the table napkins at these lunches. The Government proposed having a presentation in Northampton, but the company thinks that the Northampton presentation should be transferred to Leicester because there are more "high net worth individuals" in Leicester. I do not know what the people of Northampton will think of the idea that they are low net worth individuals. The company promises that there will be an "Executive Mothercare" service for
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people doing the presentations. As those people go around the country, they will all get "Executive King Size bedrooms". The company further proposes to cater for all their "personal idiosyncrasies"--the mind boggles.I was going to talk about the chaos over nuclear power, but it is impossible to make a sensible contribution until we know the estimates of the costs of Sizewell B. The Secretary of State said that he will talk about them. There is not much that we can say about them until we hear him. The right hon. Gentleman should come clean on the figures now and for the future. He should come clean also on something that he has refused to do and disclose the price that the electricity companies will pay Nuclear Electric for the electricity that they are buying from the existing nuclear power stations. The Secretary of State will be praised, rightly, by the Energy Select Committee for letting it all hang out on the old nuclear costs, but I am afraid that, if he let the information out on the old nuclear costs and will not do so on the new nuclear costs, people will just think that he had got it in for Cecil. I cannot believe, even from the right hon. Gentleman's smile, that that could possibly have been his main motivation. People are entitled to know as much about the costs of nuclear power as the Cabinet. We are all entitled to know those figures, so that rational discussion can take place and rational decisions can be reached.
Mr. Geoffrey Lofthouse (Pontefract and Castleford) : Is my hon. Friend aware that the Secretary of State might find himself in some difficulty in providing the costs? Every expert witness, without exception, who appeared before the Energy Select Committee conceded that it was not possible to calculate the true costs of nuclear power. The fact that the Government are shoving forward with their non-fossil fuel requirement--a percentage being for nuclear--shows that they are going ahead with that programme whatever the costs. No one knows those costs.
Mr. Dobson : My hon. Friend is right to caution anyone about making guesstimates about the long-term costs and the time taken to construct nuclear power stations. Remember Dungeness B--construction started in 1965 ; it is still not working properly ; and it is costing between eight and 10 times as much as was originally intended. I do not want to become involved in guesswork, and no one else should. The facts should come out, and we should have a debate in due course, with all the facts before us.
Mr. Jack Thompson (Wansbeck) : For a number of years, we have known that the cost of nuclear electricity generation has increased. Would it not be reasonable to suggest that Nuclear Power should sell some of its land assets to pay for some of the highly expensive electricity from nuclear power--for example, the site at Druridge bay in Northumberland?
Mr. Dobson : I entirely agree with my hon. Friend. So long as either the electricity industry or the nuclear industry possesses land at Druridge bay, at Denver in Norfolk or in Pembroke in south Wales, there is always a danger that someone will want to build a nuclear power station on one of those sites. It will not be a Labour Government, but it would be better if the sites were sold or used for some other purpose.
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Electricity privatisation will cost the people of Britain a fortune. It will damage the environment, it is damaging the reputation of the conduct of public business by the sleazy nature of the public relations exercise and advertising contracts connected with it, and it ought to be stopped.4.14 pm
The Secretary of State for Energy (Mr. John Wakeham) : I beg to move, to leave out from "House" to the end of the Question and to add instead thereof :
welcomes the privatisation of the electricity industry and the internationally recognised benefits which the Government's policies are already achieving through the introduction of real competition, the introduction of new and enhanced rights for the consumer, the emergence of new, cleaner, more efficient and cost-effective generating plant, through the Government's commitment to the protection of the environment and by ensuring that the needs of the customers drive the decisions of the electricity industry.'. The hon. Member for Holborn and St. Pancras (Mr. Dobson) has had his fun and I hope to deal with the matters that he has raised. But there is one point with which I should deal straight away. I was somewhat surprised to hear the hon. Gentleman's comments about the book value of the electricity industry's assets. His assertion that the cost of privatisation would be more than £1,000 per family does not stand up to a minute's scrutiny.
The historic net value of the industry's fixed assets in its last audited accounts--leaving aside nuclear assets--was £10 billion. The economic value of any particular company is derived not from the asset value that may appear in its book but from a calculation of what the assets are capable of earning. The current cost balance sheets of each electricity company seek to reflect individual assets at their net replacement cost and hence involve a considerable number of subjective judgments. Net replacement cost is not the same as the net cost of the asset to the taxpayer--the actual amount paid, less the amounts written off to date. The latter cost is reflected in the historic cost balance sheets of the companies, which, as I said, amount to about £10 billion.
There appears to be another mistake in the hon. Gentleman's calculations. He appears to have included the current cost of nuclear fixed assets--some £9 billion in the current cost accounts--even though the nuclear stations are to remain in the public sector. But what is £9 billion between friends? We know that to the Labour party it is an insignificant sum.
Mr. Dobson : Would not the right hon. Gentleman agree that the historic cost method of valuation is absurd in relation to the electricity industry? And he is surely not suggesting that the grid companies' assets, which will all be necessary, could be replaced at the historic costs at which they were bought. They would have to be replaced at current costs. That is why the assets are given that value.
I included nuclear assets deliberately. The right hon. Gentleman should remember that the nuclear assets were in fact liabilities. If one takes from the industry the nuclear assets and the nuclear liabilities, its value must increase. It was because the nuclear assets were liabilities that they could not be sold.
Mr. Wakeham : I agree with the hon. Gentleman that historic values are not the only values to bear in mind, but nor are current cost balance sheets. My point was that the
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asset values represent the values that those assets are capable of earning. On that basis, we shall see to it that the industry is sold at its proper value.It is a little over four months ago that I stood here listening to the Opposition voicing their misconceptions about privatisation. From what has been said today, it is clear that they have learnt little since then. Once again, I am pleased to have the opportunity to put the record straight.
The Labour party talks about the price of privatisation ; the rest of the world talks about its benefits. While the eastern bloc moves to privatise whole economies and we advise them how to do it, the Labour party talks about central planning and state intervention. For all the Labour party's glossy pamphlets, it still lives in the past. It is now more than 50 years since Herbert Morrison set out what he saw as the major benefits that would result from nationalisation. They were as follows :
"The quality of service will tend to advance and the prices charged will tend to fall The industries would be more efficiently and economically conducted and their boards and officers would regard themselves as the high custodians of the public interest." That all sounded far too good to be true then, and so it has proved. Few of the anticipated economies of scale have materialised, and major new bureaucracies developed. Without competition, the state sector monopolies quickly became inefficient and overmanned, with low productivity, dissatisfied customers and frequent financial losses. Privatisation is one of the great success stories. During the past 10 years, no fewer than 29 major businesses have been returned to the private sector. British Airways, British Gas, British Telecom, British Aerospace, British Steel, the water companies and many others have been exposed to new commercial and regulatory disciplines and they have thrived. Profits, investment and productivity have risen and customer service has improved.
Mr. Nicholas Soames (Crawley) : Does my right hon. Friend agree that the conditions for those working in those industries have improved materially, to their great advantage?
Mr. Wakeham : I quite agree : my hon. Friend adds to the list of successes in the privatised industries.
Because of those successes, politicians, officials, business men and others from around the world come to London to talk to us and to learn how to privatise their industries. Only at the end of March was the electricity industry reconstructed, when the new statutory and regulatory regimes came into force. However, we have already seen the effects of our policies on the electricity industry. The past few months have seen the emergence of fierce competition to sign up large industrial customers ; that is competition not just between the generators and the generators and the regional electricity companies, but also between the regional electricity companies themselves. New entrants are emerging into the generation market. The Lakeland Power project is a fine example of that, and 22 other projects have sought consents of one kind or another from the Department. In turn, National Power and PowerGen are responding by reviewing their plans and cutting their costs. As a result, the proposals coming forward for new generating plant are increasingly focusing on the development of new, cleaner and more efficient technologies. That will benefit the consumer by lowering costs. It will also minimise the impact on the environment.
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