House of Commons Hansard Debates for 2 Jul 1991

Mr. Dobson : Over the period in question, both gas and electricity prices have gone up in real terms, so the hon. Gentleman does not offer me a proper choice.

All the Tories here today, especially members of the Government, knew what was happening. If they genuinely deplore the increases, the question that arises is what they are going to do about them. The answer appears to be nothing. When the matter was first raised with the Prime Minister, he told the House that he condemned the increases. He said that the Government could do nothing about them, even at National Power and PowerGen, where they own 40 per cent. of the shares. He said that they had said that

"the Government had no intention of using their shareholding."--[ Official Report, 27 June 1991 : Vol. 193, c. 856.]

That statement was not quite true and certainly was not the whole truth because the prospectus actually says :

"Her Majesty's Government does not intend to use its rights as an ordinary shareholder to intervene in the commercial decisions of National Power or PowerGen. It does not expect to vote its shareholdings on resolutions moved at general meetings although it retains the power to do so."

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If the Government did not want the power to do so, they could have given up the power in the prospectus. It is no good their saying that that is not so.

Will the Secretary of State tell us whether, if another shareholder moves to block the increases at the annual general meeting, which I understand will be in September, the Government will sit on their hands? Will they show that their attitude to the increases is all words and no action? Will they perhaps remember that the people who are getting the increases are the very people who have benefited most from the massive income tax cuts at the higher levels over the past few years? Will the Government remember that they are the very people who, the Government think, should not pay national insurance on their income above £20,000? Will they think about that before deciding what to do at the annual general meeting?

Other people--admittedly, not many Conservative Members--claim that the increases are justified on the ground that they are the rate for the job. If the rate for the job of chief executive of PowerGen and National Power was right at £75,000 last year, how can it be right at £200,000 this year? These are not new and better people who have been specially recruited ; it is the same old lot getting twice the money.

Sir Graham Day, the chairman of PowerGen, says that the increases are morally justified, but he is scarcely an objective judge. He has been a director of no fewer than four privatised companies. He has been chairman of three privatised companies and is still chairman of two of them. From his point of view, privatisation appears to be a game of musical chairs ; every time the music stops he is sitting in the chair. In addition to being chairman of Cadbury Schweppes, of PowerGen and of the Rover Group and a director of British Aerospace, he is--God help us--on the national health service policy board. He believes that the increases are justified. No doubt he tells that to the nurses.

In an interview in the Daily Express in 1988--I always like people to give interviews to the Daily Express --Sir Graham said what he looked for in a good employee. No doubt he found it in Mr. Ed Wallis, the chief executive of PowerGen. He said that it is

"somebody who also tries to give a little more than he is paid for."

At £200,000 a year, Ed Wallis will have his work cut out satisfying Graham Day.

The directors of National Power and PowerGen, who have pocketed enormous increases, are responsible for running only two of the four companies that were created from the old Central Electricity Generating Board. The other companies are the National Grid Company and Nuclear Electric. Not only are those directors paying themselves more, but there are more directors. In 1988-89, the CEGB, running all four functions, had only 10 directors. At the latest count--it keeps increasing--the four successor companies had no fewer than 41 directors. In 1988-89, the CEGB's 10 directors, poor devils, managed on joint pay of £646,000. I have not been able to obtain the figures for the board members of Nuclear Electric, but before the new increases the directors of the other three companies that resulted from the break-up of the CEGB--National Power, PowerGen and the grid company--were getting £2 million between them, and I expect that after the current round of increases that total will rise to between £4 million and £5 million.

At the same time, those directors are urging pay restraint on staff and are keeping the staff's pay increases

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down to less than 10 per cent. Many of the staff will find that galling. The employees of East Midlands Electricity will find it particularly galling. Hon. Members will recall the blizzards in the east midlands, when those staff performed heroically in dreadful, cold, vile conditions to restore the supply. Their pay increases will be kept below 10 per cent., but the directors, who sat in their warm, air- conditioned offices will award themselves about 50 per cent.

Mr. Simon Burns (Chelmsford) : Warm and air-conditioned? Will the hon. Gentleman give way?

Mr. Dobson : No. If the hon. Gentleman cannot make a decent joke from a sedentary position, I am damned if I will let him stand up to do it.

The other regional companies all say that these big salary increases are justified because their profits have increased. When one asks why their profits have increased, they say that it is because the cost of coal has fallen and because they had higher sales in a bad winter. Those are the economics of the madhouse : a director is paid more because of bad weather. We have heard much about cold weather payments, but the idea of somebody doubling his salary as a cold weather payment is preposterous. With all this interest in the weather, you, Mr. Deputy Speaker, can see why PowerGen is sponsoring the weather forecast.

We can expect every regional electricity company to increase top salaries by about 50 per cent. Compared with the enormous increases of National Power and PowerGen, a 50 per cent. increase is beginning to seem moderate, but it will not seem so to the 6 million pensioners and poor families who cannot afford to keep warm in winter--even in an average winter--because gas and electricity cost too much. It will not seem reasonable to the growing number of people who are out of work, to people in the private sector who are taking pay cuts to help keep their firms afloat, to people whose homes are being repossesed because they cannot pay their mortgage or to people who cannot pay massively increased rents.

The salary of the chairman of British Gas has increased by 66 per cent. from £220,000 to £370,000. Last year, gas prices increased by 14 per cent. and profits and directors' pay increased. It would appear that the attitude of the bosses of British Gas to customers is "Pay up and shut up." They seem to have changed the motto from "Tell Sid" to "Sod Sid".

Who will stick up for the customer? I hope that the Secretary of State will not say that it will be the Office of Electricity Regulation. This year, despite the falling cost of coal and other costs, OFFER nodded through domestic price increases of more than 10 per cent., despite the Government's target for inflation to fall to 5 or 6 per cent. That was a good increase for the electricity companies, but people tell me that it was not the regulator's fault. They say that poor Professor Littlechild had to accept the formula that the Government had given him and that OFFER had to accept the increases. If that is true, it seems to me, if I may use an elderly phrase, that the Government have set up an OFFER that cannot refuse.

What we want is an OFFER that can refuse. My doubts about the regulatory system are not confined to the system : I have doubts about Professor Littlechild, the regulator. His friends tell me that he invented the system that he is running, so he has something to answer for. From most of his public pronouncements and documents

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he seems to be more of an ideologue than a public servant. He seems to be one of those people, rather like Ministers, who recite the words "Competition is good for customers" and think that once they have said that everything is settled. The only problem is that competition has been good for moderate-sized business customers who have been able to shop around, but domestic customers cannot shop around and continue to be faced with a local monopoly that is shoving up its prices far quicker and higher than its costs.

The regulators for the electricity, gas, water and telecom industries are not working well enough and most people recognise that they need to be substantially improved. We have been promised improvements in the Prime Minister's citizens charter. If the documents leaked to my hon. Friend the Member for Dunfermline, East (Mr. Brown) are correct--they usually are--it does not appear that the citizens charter will strike fear into the hearts of the directors of those utilities.

I understand from other sources that the Department of Energy has said in the review that it does not want changes to be made because it is satisfied with the regulatory system already in place. All that I can say is that if it is satisfied with that, it will be satisfied with anything. Almost everybody in the country and in the business realises that there are things wrong with the regulatory system. It is far too feeble and is not doing the job that is necessary.

Mr. Richard Page (Hertfordshire, South-West) : Clearly, the hon. Gentleman is convinced that his party will win the next general election. I hope that in the tail of his speech he will come to the Labour party's policy. I understand that part of that policy is to renationalise the grid. How much does the hon. Gentleman think that that will cost and how soon after the general election will it occur ? Will he elucidate Labour party policy for us ?

Mr. Dobson : I hope that if the hon. Gentleman waits a "page" or two he will be satisfied.

One of the problems about everybody's legitimate concern about top pay is that it has covered up many other developments which have been revealed in the interim results and which will damage the country and the customers. National Power has made it clear that it is about to make savage cuts in research and development spending. The central electricity research laboratories are threatened with closure. The company said in a letter to my hon. Friend the Member for Cardiff, West (Mr. Morgan) that it would no longer carry out research into what it described as national problems. If National Power will not carry out research on national problems, who will ? If no one in this country does research on those major problems, the research that we--

Mr. Andrew Hargreaves (Birmingham, Hall Green) : Is this another priority commitment ?

Mr. Dobson : We now have someone apparently so cloth-eared that he can predict what we will say.

If the research is not done here, it will be done in Germany, Sweden, France and the United States, and we shall have to buy the equipment that we need from those countries instead of making it here.

National Power has also said that it wants to burn gas, whatever effect that may have on our limited gas reserves.

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The company recognises that those reserves are not enough, so it is already setting about importing more gas from Norway, whatever impact that may have on our balance of payments. National Power says that importing foreign coal is a "central plank" of its fuel strategy, whatever its impact may be on the balance of payments and on Britain's coal industry.

National Power has also said that it intends to burn orimulsion, which is undoubtedly the filthiest fuel in the world. Why will it do that? It will do all those things because they are in the short-term interests of the people running the company and in what those people believe to be the short -term, popular interests of the shareholders. That is their first and only consideration. They do not consider the long-term interests of customers or of this country.

We believe that privatisation is a shambles. We can amply demonstrate that it has damaged the interests of customers. It has outraged most people by the levels of pay given to its bosses. We do not believe that most people are satisfied with the profits accrued so rapidly--profits which are so much greater than those which the Secretary of State was responsible for predicting in December. We do not believe that the great experiment is succeeding, or that the electricity industry should have been subjected to a giant experiment. We believe that the people working in the industry deserve the minimum of change and disturbance, if they are to be allowed to do their work. We have said all along that we will bring the National Grid Company-- [Interruption.] --back into public ownership. [Hon. Members :-- "A priority."] It will be a high priority, I assure hon. Members.

Mr. Phillip Oppenheim (Amber Valley) : Will the hon. Gentleman give way?

Mr. Dobson : If the hon. Gentleman will give way to me, I shall continue.

We will bring the grid company back into public ownership and give it additional duties and powers. For a start, it will have a duty to maintain security of supply--a duty that no one has at present--and a duty to consider the impact of the industry on the balance of payments, on the environment and on our fuel reserves. We shall also change the rules for the regional electricity companies and oblige them under their licences to invest some of the profits in energy conservation and efficiency.

The system that the Government have established encourages more and more sales of electricity. Almost everyone apart from the Government recognises that energy saving, not energy sales, must be the priority for the future and that is the priority that the industry will have after the next general election, when we implement our policy.

Mr. Oppenheim : On a point of order, Mr. Deputy Speaker. Is it in order for me to ask whether it is in order for the Labour Front-Bench spokesman to say that he would give the House an idea of how much it would cost to buy back the industry and then totally fail to do so?

Mr. Deputy Speaker (Mr. Harold Walker) : Order. Let us get on with the debate.

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7.46 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 :

"congratulates the Government on continuing with its successful policy of privatising nationalised industries ; notes the recent successful privatisation of the electricity supply industry in Great Britain ; and welcomes the benefits that privatisation of the electricity and gas industries has brought and will bring to consumers, taxpayers and employees.".

It is less than six months since the House held a debate on electricity privatisation--at the Opposition's instigation--under the shadow of the then imminent Gulf War. The privatisation has now been completed with outstanding success.

The hon. Member for Holborn and St. Pancras (Mr. Dobson) has expressed great indignation about a great many related issues, which I will deal with in due course, without anywhere acknowledging or seeming to recognise that the points that he raises are dwarfed in importance by the continuing impact of privatisation, which is already serving the interests of customers, the taxpayer and employees far more effectively than any form of Government intervention.

Let me refer the House again to the principles underlying the privatisation of the gas and electricity industries, and the transformations that they have already brought about within the energy market.

First, for the customer, privatisation has introduced guaranteed standards of performance. Only yesterday, guaranteed standards for electricity were introduced. Offer--the Office of Electricity Regulation--has set standards for restoring supplies after faults, repairing company fuses, providing a meter and many other services. If those standards are not met, the electricity consumer is entitled to compensation. Domestic customers can get £10 if an appointment is not kept and £20 if supply is not restored on target. The regulator has made it clear that he will examine standards of service when he resets the price formulae.

For gas, the resetting of the price formula will shortly be accompanied by a package of standards of service. I expect those to include obtaining a supply, continuity of supply, meter reading, billing and appointments. The setting of those standards will be a significant step forward in customers' rights.

If customers are not served properly by privatised utilities, for the first time there is a proper means of independent redress. We have set up independent regulators. They have extensive powers to put matters right. If the existing terms of the licence are not strong enough, the regulators can refer the matter to the Monopolies and Mergers Commission. New, tougher licensing conditions can be created where they are needed.

Not only are standards of service set and guaranteed but prices are kept down by regulation.

Mr. Rhodri Morgan (Cardiff, West) : The Secretary of State said that all this was happening for the first time. Will he take it from me that the East Midlands electricity board introduced guaranteed service standards, with refunds, back in 1985?

Mr. Wakeham : This is the first time that such standards have been set right across the industry, and the important point is that the regulators will be independent of the industries.

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Since privatisation, domestic gas prices have fallen by 11 per cent. in real terms and standing charges by 20 per cent. in real terms. Price control provides a strong incentive to efficiency. It has been remarkably successful in producing efficiencies in gas supply which have enabled British Gas to increase its profits as well as to pass the benefit of real price reductions to the consumer. As a result, for the future, the price formula is being tightened still further. From next year, British Gas must meet the price target of RPI minus 5 rather than RPI minus 2. Restraining profits, as the Opposition's motion advocates, is a recipe for inefficiency. Electricity prices for domestic consumers have fallen by about 2.5 per cent. in real terms over the past seven years. What a contrast to the position under Labour, when prices rose by 22 per cent. in real terms--up 2 per cent. every six weeks. In future, regulations will protect consumers from unjustifiable increases. For a three-year period, prices are regulated by reference to the retail prices index.

Mr. Burns : I have been listening carefully to my right hon. Friend, but may I check that I heard him aright? Did he really say that electricity prices for domestic users have fallen by 2.5 per cent. over the past seven years whereas under the Labour Government they increased by 22 per cent. in real terms, and that pensioners, the disabled, those on low incomes and the unemployed faced price increases in their electricity bills every six weeks?

Mr. Wakeham : That is correct. My hon. Friend is listening very carefully to what I am saying, and I am grateful to him for it. Of course, competition is the best guarantee of customer service, efficiency and keen pricing, so we have taken steps to ensure that competition is introduced wherever possible in the electricity industry. Already competition is working for the customer. Thousands of industrial and commercial companies have had to pay lower prices for electricity. Professor Littlechild said in his director general's report for 1990 that some customers had achieved as much as 15 per cent. savings as a result of competition. Competition in generation will keep the costs of electricity down in the future as new generating projects come forward.

It would be nonsense to return to the days of nationalisation when Governments intervened in an arbitrary fashion, when customers had no real means of redress and when it was not even worth complaining. Now we have real incentives for efficiency and customer service. That is why the privatised industries are leading the way. That is why we want to extend such benefits to the public sector through the citizens charter.

Those are the benefits for the customer. For the taxpayer, the privatisation of the electricity industry will raise proceeds of more than £14 billion. The privatisation of gas raised proceeds of £8 billion. Given that the Labour party's policy proposals imply increases in public expenditure of some £35 billion, the proceeds from privatisation should not be dismissed by them in such cavalier fashion.

Growing profits brought about by efficiencies unlocked by privatisation, even at a time of falling real prices, mean greater tax receipts for the Treasury. It is nonsense to say that growing profits damage the long-term interests of the country ; growing profits are needed to finance the requirements for capital investment to maintain and

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expand the electricity and gas supply systems. In addition, the taxpayer is no longer left to finance a poor record of mismanaged investment in massive projects, not finished on time or to cost, and poor profitability.

Improving prospects, rising share prices, cost-cutting and greater efficiency in all the companies should be welcomed. They represent a clear gain to the nation in contrast to the old order of rising prices to consumers with no means of redress, and very little incentive for improved efficiency. Those were very real costs and burdens on the nation.

What are the benefits for employees? For the first time they are able to own a real stake in their industries. They were also able to participate directly in the benefits of the flotation itself. Ninety-eight per cent. of employees in the electricity industry took up shares. Four and a half years after privatisation, 87 per cent. of employees of British Gas hold shares in their company. Those employees have much to fear from the return of a Labour Government. The hon. Member for Dagenham (Mr. Gould) has made it clear that shareholders in privatised industries would be punished by a Labour Government.

For the future, under our policies employees can participate in the growing success and growth in their companies through share save schemes.

Mr. Jack Thompson (Wansbeck) : What would the Secretary of State say to the 250 employees at a power station in my constituency who now face redundancy ? What about their share in the industry ? Their jobs have gone, and the few shares that they may have bought before they realised that there was a prospect of losing their jobs will not keep them for the rest of their lives.

Mr. Wakeham : Everyone is unhappy about anyone who is made redundant, in whichever part of the country it may be. A whole range of overmanning problems and inefficiencies existed and privatisation has been directed to try to improve matters. One regrets redundancies for whatever purpose. I know that the companies concerned are seeking to do what they have to do by voluntary means if at all possible, although that is strictly a matter for them.

Mr. Peter Hardy (Wentworth) : On the same point, is the Secretary of State aware that, before the Electricity Bill was presented to the House, I asked his predecessor whether it was not clear that privatisation was liable to result in redundancies and a reduction in the size of the labour force in the electricity supply industry? The right hon. Gentleman's predecessor said in the House that, so far from there being redundancies, privatisation would lead to more employment in the industry. That hardly bears out the experience of my hon. Friend the Member for Wansbeck (Mr. Thompson).

Mr. Wakeham : An efficient electricity industry producing low-cost electricity is an important factor in our industrial growth, and will certainly improve the number of jobs.

Mr. Anthony Coombs : My right hon. Friend rightly emphasised the improvements in efficiency, competitiveness and accountability that privatisation has brought with it. He also mentioned the benefits to the taxpayer as a result of privatisation proceeds. My right hon. Friend will have heard the hon. Member for Holborn and St.

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Pancras (Mr. Dobson), the shadow Secretary of State for Energy, say that a high priority of any future Labour Government would be to spend money on renationalising the national grid. Will my right hon. Friend take the opportunity of asking the hon. Gentleman again what that would cost ? Last week, Labour's spending policies were costed at an extra £35 billion--15p on the lowest rate of income tax-- and renationalisation costs were not included in that. The hon. Member for Holborn and St. Pancras says that renationalisation is a high priority, so he should tell us what the effects of that policy would be.

Mr. Wakeham : My hon. Friend is absolutely right in saying that the Labour party's proposals were costed at some £35 billion extra. That is worth repeating because it is important that people in Britain should know what the Labour party's policies imply. Moreover, that figure does not include the cost of renationalisations conducted under those policies. Having said that, I think that the most serious question about the renationalisation of the national grid is how the grid would operate in relation to the private sector part of the industry--the part that the Labour party does not intend to renationalise, if I understand its policies correctly. I think that we would find that many of the inefficiencies inherent in the old system would be brought back by the bureaucrats who would then be running the national grid. That is a serious matter.

In the past few years, the services offered by these privatised industries to customers have been transformed. There are now guaranteed standards of service, backed up through our regulatory regime by tough financial penalties for failure to meet them. When Labour was in office, no such guarantees existed : customers were subjected to unaccountable, inefficient and unregulated monopolies. Little wonder, then, that disconnections for debt in both industries have plummeted to half the intolerable level we inherited from Labour.

On every count--prices, services, standards, disconnections, investment-- the privatised record beats the nationalised record hands down. That is the background against which the hon. Member for Holborn and St. Pancras has criticised the recently reported board pay levels.

Let me state clearly our policy on directors' pay. The Government's view is that salaries should be sufficient to recruit, retain and motivate. Most companies in the private sector have a remuneration committee consisting of non-executive directors. It is their task to determine the pay of the chief executive and senior directors. The same now applies to the companies we have privatised. The current salary levels are a matter for those companies. Government approval was not sought--nor was it required.

The first point is that increasing directors' salaries has no effect on prices to consumers. The price formula is intended to exert downward pressure on costs. It does that by regulating prices without regard to any subsequent increase in costs which, like directors' salaries, are within the control of the company.

It is not for the Government to second-guess the views of the companies. But that does not mean we should not express a view about salary levels. We have done so. The Government believe that it is essential that pay at all levels reflects the economic facts of life and the importance of beating inflation. The rate at which salary levels for

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directors in privatised companies move to private sector levels needs to be moderated to take this into account. Directors need to exercise both leadership and restraint.

Secondly, the salary levels are not out of line for companies of comparable size. The companies themselves have pointed out that British Gas ranks amongst the six largest and most profitable United Kingdom companies, whereas the chairman's basic salary ranks 38th in a survey of the United Kingdom's top companies. Similarly, PowerGen ranks 60th in the United Kingdom list of top companies and the chief executive's pay is ranked 97th.

Mr. Anthony Beaumont-Dark (Birmingham, Selly Oak) : None of us wants to go in for spurious statistics. However, referring to the link that Sir Graham Day has made between the pay of the chief executive of PowerGen and that company's ranking in the FT100 index, does my right hon. Friend really accept the balderdash that running a privatised monopoly is as difficult as running an industry such as GKN or any other company that has to withstand the heat of the day and losing money? If we are arguing that the position of the privatised monopolies is the same as that of a company that has to earn its money the hard way, we are on hard and stony ground.

Mr. Wakeham : It is not for the Government to second-guess the salaries that companies pay-- [Interruption.] I have expressed my views about some of the salary levels and the rate of increase and would simply add that it is not correct to say that PowerGen is a monopoly--

Mr. Beaumont-Dark : It is 85 per cent. a monopoly.

Mr. Wakeham : It is nothing approaching that--it is more like 30 per cent. A good many other companies are in the business.

Mr. Dobson : I can understand why the right hon. Gentleman is saying that the Government do not want to second-guess the companies, but if that is of no consequence to the Government, why did they spend taxpayers' money on getting advice from Coopers and Lybrand Deloitte about the salaries that should be paid to those people?

Mr. Wakeham : As the hon. Gentleman has not read the report and does not know what is in it, I do not know whether he knows that that is the position--

Mr. Harry Barnes (Derbyshire, North-East) : Does the right hon. Gentleman?

Mr. Wakeham : I am not prepared to refer off the cuff to a report that I told the hon. Member for Holborn and St. Pancras earlier that I was not prepared to reveal to the House.

Mr. Simon Hughes (Southwark and Bermondsey) : In two consecutive sentences the Secretary of State has said that he is unhappy about the increases that have been awarded--paradoxically, to the executive directors by the non-executive directors and to the non-executive directors by the executive directors ; and that their relative pay was lower given their importance in the British industrial sector. That does not lead us to any clear conclusion. Is it his view that the increases should be reduced before the annual general meetings, and what is he going to do about it? The Chancellor invited the heads of the banks to see

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him because they were over-charging. Will the right hon. Gentleman invite the heads of the privatised industries to see him so that he can tell them to reduce their salaries?

Mr. Wakeham : The important point is that the salary increases--and it is the increases of which I disapprove--do not affect the price to the consumer-- [Interruption.] That is an important point. It is absolutely right.

The purpose of privatising the industries was to allow the directors and shareholders to make those decisions. The public interest is protected by the regulator because of the price of the product. Therefore, it is not appropriate for the Government to intervene in such cases. We have no grounds on which to intervene in the case of the companies that are 100 per cent. privatised because we have no shares. We retain a 40 per cent. shareholding in National Power and PowerGen. We made our position quite clear in the prospectus. The hon. Member for Holborn and St. Pancras read it out correctly. I am amazed that he thinks that breaking our word would be a small matter. That view reflects more on a potential Labour Government than on anything else. The Government do not accept that it is a small matter to break our word.

Mr. Dobson : Just to clarify a point about the next Labour Government, will the right hon. Gentleman confirm that the Government's own prospectus makes it clear that, on entering Government, Her Majesty's Opposition intend to appoint directors and to exercise the powers of a 40 per cent. shareholder?

Mr. Wakeham : If that should ever arise, I strongly suggest that the hon. Gentleman takes legal advice on his powers as a shareholder and on the way in which he should operate. If he does, he will find that he has to operate within certain constraints. The hon. Gentleman would be well advised to consider such matters carefully.

Mr. Christopher Hawkins (High Peak) rose --

Mr. Wakeham : I shall give way, but this will be the last time.

Mr. Hawkins : If the Government do not intend long term to exercise the shareholders' duties of restraint in such matters, should they not consider relinquishing their shares so that others can fulfil those duties and act as a restraint? There is something exceedingly curious about the British. When really high incomes are paid to pop singers, tennis players, top footballers and television presenters, that does not seem to worry the British ; but as soon as somebody in industry starts to earn a high salary, there are screams and shouts of abuse. That is an odd priority for a nation. Does my right hon. Friend agree that it is not the pay levels that are objectionable as much as the speed of the increases, their timing and the example that is being set to workers at a time when many other people are losing their jobs? Does he agree that the scale, timing and example are beyond belief?

Mr. Wakeham : My hon. Friend heard what I said, and what he has said is not very different--although I have not expressed any views about pop stars and tennis players.

Mr. Michael Grylls (Surrey, North-West) : Does my right hon. Friend agree that the consumers' interest we are here to represent the consumers, as we no longer run the companies--is better served when directors are paid a market salary, as they can now be paid under

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privatisation, than was the case under nationalisation, when the salaries were set by Parliament so low that the best people could not be recruited?

Mr. Wakeham : My hon. Friend is absolutely right. Not only are the people not the same, but they are not doing the same job. Indeed, they are doing extremely different jobs and a number of them have been recruited in the market--

Mr. Geoffrey Lofthouse (Pontefract and Castleford) rose --

Mr. Wakeham : I said that I had given way for the last time. What is the Labour party's position on this matter? Its most recent policy review document, "Opportunity Britain", gives the distinct impression that the private sector has nothing to fear from the unlikely prospect of a Labour Government. It states that, "more than ever before British industry now needs a long-term commitment from Government, but not in the form of indiscriminate subsidies or second guessing industry".

That was only three months ago, but, as we have seen today, those words are at best hollow and at worst totally misleading. The reality of Labour's policy is distinctly different from the rhetoric, for what the hon. Member for Holborn and St. Pancras has done today--in sharp contradiction of his party's policy statement--is to propose a series of policies precisely to second-guess successful British industries by seeking to control pay and profits and to interfere in the decisions of management.

Indeed, I wonder whether the right hon. and learned Member for Monklands, East (Mr. Smith) is aware of the line that the hon. Gentleman is taking. But, as is often the case, as soon as Labour's policy is challenged, it falls apart at the seams. Labour Members' policy on industry has not changed. They think they know better than industry how industry should be run, in spite of all the evidence since the second world war that that is not so.

That is true of the issue of pay, about which the hon. Member for Holborn and St. Pancras made great play. On that subject, too, Labour's divided and muddled position lacks credibility. How would Labour Members seek to control pay? The answer is not clear. Their party leader believes that the trade unions can simply be persuaded to moderate their pay claims at the same time as a minimum wage is introduced.

"If you're a Government that acts in a way that stimulates the economy properly the moderation of wage claims is something a Government can really ask for",

he says. But as the leader of one big union admitted, any idea that the unions could be so persuaded is "deranged".

The truth is that Labour's plans for a minimum wage would, at the same time as destroying hundreds of thousands of jobs, lead to a pay explosion throughout the economy. Labour would have no way of controlling it without resorting to the sort of statutory controls that failed dismally in the 1970s.

That is precisely what Labour offers--a return to the corporatism that should have died its death during the winter of discontent, a return to pay policies and credit controls and a return to the failures of nationalisation, red

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