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Sims, Roger

Skeet, Sir Trevor

Smith, Sir Dudley (Warwick)

Smith, Tim (Beaconsfield)

Soames, Hon Nicholas

Speed, Keith

Spicer, Sir Jim (Dorset W)

Spicer, Michael (S Worcs)

Squire, Robin

Stanbrook, Ivor

Stanley, Rt Hon Sir John

Steen, Anthony

Stern, Michael

Stevens, Lewis

Stewart, Allan (Eastwood)

Stewart, Andy (Sherwood)

Stewart, Rt Hon Sir Ian

Stokes, Sir John

Sumberg, David

Summerson, Hugo

Tapsell, Sir Peter

Taylor, Ian (Esher)

Taylor, John M (Solihull)

Tebbit, Rt Hon Norman

Temple-Morris, Peter

Thatcher, Rt Hon Margaret

Thompson, D. (Calder Valley)

Thompson, Patrick (Norwich N)

Thurnham, Peter

Townend, John (Bridlington)

Townsend, Cyril D. (B'heath)

Tracey, Richard

Tredinnick, David

Trippier, David

Trotter, Neville

Twinn, Dr Ian

Vaughan, Sir Gerard

Viggers, Peter

Wakeham, Rt Hon John

Walden, George

Ward, John

Wardle, Charles (Bexhill)

Watts, John

Wells, Bowen

Wheeler, Sir John

Whitney, Ray

Widdecombe, Ann

Wiggin, Jerry

Wilkinson, John

Winterton, Mrs Ann

Winterton, Nicholas

Wolfson, Mark

Woodcock, Dr. Mike

Yeo, Tim

Young, Sir George (Acton)

Younger, Rt Hon George

Tellers for the Noes :

Mr. Tom Sackville and

Mr. Timothy Wood.

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith pursuant to Standing Order No. 30 (Questions on amendments), and agreed to.

Mr. Deputy Speaker-- forthwith declared the main Question, as amended, to be agreed to.

Resolved,

That this House welcomes the policies being pursued by Her Majesty's Government to put a decent home within the reach of every family by promoting owner occupation, by securing greater private sector investment in housing and by directing public expenditure effectively towards those people and areas that most need support.

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Electricity and Gas Industries

7.13 pm

Mr. Frank Dobson (Holborn and St. Pancras) : I beg to move, That this House deplores the abject failure of the Government to prevent unrestrained increases in the profits of the gas and electricity companies and in the pay and perks of their Directors ; notes that these profits, which are being achieved at the expense of the customers, damage the long- term interests of the country and result from policies which promote energy sales rather than energy saving, harm the environment, add to the trade deficit and reduce investment in research and development ; and calls upon the Government to introduce effective measures to protect the interests of customers and to use its powers as a major shareholder in National Power and PowerGen to block those policies which the Prime Minister has said he deplores.

Mr. Deputy Speaker (Sir Paul Dean) : I inform the House that Mr. Speaker has selected the amendment in the name of the Prime Minister.

Mr. Dobson : The past few months have exposed the Government's electricity privatisation for the squalid racket that it has become. It is a racket that has been conducted at the expense of taxpayers and of customers. I remind Conservative Members that the electricity companies' assets were built up from the bills paid by customers, yet they were sold off at a fraction of their real value. According to the books, those assets were worth £29 billion, but they were sold for a little more than £12 billion. The Government say that they do not accept those figures and that the audited accounts count for nothing--the only real value of the companies was what the stock exchange would pay.

When the regional electricity companies were sold in December, the Government put the part-paid shares on the market at 100p each and, before the end of the day's trading, they were trading at 160p, a loss to the taxpayer of £1.2 billion in two and a half hours. No profligate Labour council can compare with that.

Nothing daunted, in February the Secretary of State put National Power and PowerGen on the market, again at 100p for a part-paid share. By the end of the first day's trading, the shares were trading at 137p--a loss to the taxpayer of another £0.4 million.

Mr. Patrick Nicholls (Teignbridge) : The hon. Gentleman is very concerned about losses to the taxpayer, but will he confirm that he stands by the pledge given by the hon. Member for Dagenham (Mr. Gould) to The Times on 14 September 1989 that dividends would be taken from taxpayers without any recompense? Is that what the hon. Gentleman calls loss to the taxpayer--confiscation by the state?

Mr. Dobson : If the hon. Gentleman can do no better than quote from the Tory party brief, of which, as usual, I managed to get a copy from the photocopier, he should not bother us.

Mr. Nicholls : Yes or no?

Mr. Dobson : Perhaps the hon. Gentleman should be breathalysed so that we can get some sense out of him.

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Mr. Nicholls : On a point of order, Mr. Deputy Speaker. Labour party policy has been quoted to the hon. Gentleman, who owes the House an explanation. Will he say yes or no?

Mr. Deputy Speaker : Order. Let us get on with the debate.

Mr. Dobson : I owe the House nothing ; the hon. Gentleman owes us an apology.

According to the Government's own figures, and according to the figures in the Financial Times , by 14 June this year shares in the regional electricity companies, which had gone on the market at 100p each, had at some stage traded at more than 200p. Some have fallen back since, but the Government sold the regional companies at a valuation that they have given to me--and I accept their figures for the sake of argument--of £5.2 billion. By 14 June the stock market valuation had increased to £7.4 billion, an increase of 44 per cent. During the same period, the stock market had risen by only 16 per cent.

National Power and PowerGen were sold by the Government at a valuation of £2.2 billion. They are now worth £2.7 billion on the stock market, an increase of 22 per cent. During the same period, the stock market as a whole rose by only 2.7 per cent. Those increases were at the expense of the taxpayer and were the result of the gross incompetence of the Secretary of State and, even more so, of the expensive collection of advisers from the City who advised him on the sale. In total, he has spent more than £500 million on City advice and underwriters' fees during the electricity privatisation process. If anyone dismisses that as an inconsiderable sum, I remind them that it is approximately the same amount as Lloyd's lost last year and about which there was much moaning and gnashing of teeth in the City. Of course, there was no moaning and gnashing of teeth about this £500 million because the City received it--it did not lose it.

Last year, prices to the consumers of domestic electricity were increased at a rate that was intended to be higher than the rate of inflation. As a result of the Government's incompetence, inflation soared, so the prices were not as high as inflation. However, this year, once again, prices for the domestic customer have been increased at a rate higher than the general rate of inflation. The profits that have been announced over the past few weeks have been dramatically higher than the estimates that the Government made as recently as December last year. In the case of South Western Electricity, the profits were 48 per cent. up on the Government's estimate of December last year. What has maddened people most are the directors' pay increases which are so large that they beggar description. Since privatisation, there have been cuts in staff and further cuts are proposed. There have been cuts in research and development, and massive further cuts are proposed. There have already been cuts in training and further reductions are proposed. Coal and gas imports are being proceeded with at a rate that is becoming increasingly damaging to the balance of payments. All round the country, people are receiving reports of increasing interruptions to electricity supply. It is clear to everyone that the system of regulation is totally feeble.

All that I have described is a far cry from what the Tories promised. In their White Paper of February 1988,

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they set out what they called "principles" governing electricity privatisation. In view of what has happened, the list looks like a sick joke. The first principle was

"Decisions should be driven by the needs of the customer." None of the customers who have written to me over the past few weeks has said that he needs the electricity bosses to get pay increases ranging from 50 per cent. to 200 per cent.

The White Paper went on to say :

"Competition is the best guarantee of customers' interests." Perhaps the Tories should tell that to the domestic customers who still have to buy their electricity from a local monopoly because there is no competition for them and because only businesses can shop around.

Mr. Anthony Coombs (Wyre Forest) rose --

Mr. Dobson : Business users have seen 15 per cent. reductions in the price of electricity to them, while domestic customers have seen their prices rise by more than 20 per cent.

Mr. Coombs : Will the hon. Gentleman give way?

Mr. Dobson : No, I will not give way for the moment.

The White Paper went on to say :

"All who work in the industry should be offered a direct stake in their future, new career opportunities".

The words "new career opportunities" must ring strangely in the ears of the 8,000 people from the industry who will lose their jobs as a result of rationalisation. The words will ring even more rottenly in the ears of the scientists at the central electricity research laboratory, one of the leading electrical laboratories in the world, which National Power intends to close because it is not doing stuff that is of immediate benefit to the shareholders. People throughout the country are disgusted by the pay rises that the directors of the companies are giving themselves. As I have already said, there is a combination of greed and opportunity. The directors have supplied the greed and the Government have supplied the opportunity.

It is no use the Prime Minister heaping blame on the directors. The Cabinet authorised the increases and knew what would happen. It is no good the Cabinet pretending that it had nothing to do with the increases and washing its hands of the matter. It is as though Pontius Pilate were about to become the patron saint of the Tory party.

Mr. Malcolm Moss (Cambridgeshire, North-East) : Will the hon. Gentleman confirm to the House that, under the regulatory pricing formula, the salary increases about which he has spoken cannot be passed on to the consumer? They must be found out of operational efficiency.

Mr. Dobson : I must confess that it is not at all clear to me that that is the case. That is certainly not the response that the newspapers and the rest of the media have got when they have approached Professor Littlechild, the regulator.

In the Government's own prospectus for all the electricity companies, it is clearly stated that directors' pay will be "increased to levels which are more appropriate to a private sector company."

In other words, the directors will get massive increases. The Cabinet must have known that when it approved the

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terms of the prospectus before the launch. It must have known when it approved the prospectus what had happened up to that point with salaries in British Telecom and British Gas. From when British Telecom was in public ownership until the point at which the Government approved the prospectus, the chairman's salary had risen by 550 per cent.--from £67,000 to £374,000. The salary of the chairman of British Gas, from when the industry was in public ownership until the point at which the prospectus was approved, had risen by 323 per cent.-- from £68,000 to £220,000. Those facts must have been known to the Secretary of State and his colleagues when they approved the prospectus.

Ministers' knowledge would not have been based only on the experience of those companies. The Secretary of State was not satisfied with observing what had happened elsewhere. He sought advice from the City and, of course, the taxpayer had to pay for it. Coopers and Lybrand Deloitte advised him from 1989 until 1990 on salaries for the directors and senior executives of what were to become privately owned companies. I asked the Secretary of State to place that advice in the Library, but he refused today to do so because, he said, it was "confidential". I bet it is. If the advice was placed in the Library, it would reveal that the Secretary of State and the Prime Minister knew all about the increases that the Prime Minister now deplores. For the Prime Minister to deplore in public what he has approved in private is sheer humbug. To do so on television is mega-humbug. It is no good for Tory Members to moan on about the increases and to say that they are shameful, extreme and should not have gone ahead. They voted for the privatisation and they knew what was happening because they knew, as well as I or any of my hon. Friends did, what had happened in the other privatised industries. It is too late for them to claim that they did not know.

Mr. James Arbuthnot (Wanstead and Woodford) : Which would the hon. Gentleman prefer--high salaries for chief executives and prices going down in real terms or low salaries for chief executives and prices going up in real terms, as happened under Labour?

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