House of Commons Hansard Debates for 21 Nov 1994

Mr. Heseltine: I shall not give way.

The new leader of the Labour party, the right hon. Member for Sedgefield (Mr. Blair), tells us that he wants to repeal clause IV. My right hon. and hon. Friends will find it surprising that a reference to privatisation produces a belly laugh among Labour Members, with the exception of the right hon. Member for Sedgefield. That shows that,

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although a small handful of my colleagues may disagree with my views on privatisation, a united Labour party rejects its leader's views on clause IV.

Several hon. Members rose --

Madam Speaker: Order. Hon. Members should not persist in rising; it is obvious that the Secretary of State is not giving way at this stage.

Mr. Heseltine: The dilemma for the Labour party, which has conveniently brought the Royal Mail and the Post Office into the debate, is most clearly revealed by the press release that the right hon. Member for Copeland (Dr. Cunningham) issued today explaining what he sees as the alternative way forward. He has listed a range of suggestions that he thinks will solve the problem.

A significant proportion of those proposals are already Government policy and I shall tell right hon. and hon. Members what they are. We have already made clear our determination greatly to expand the commercial opportunity for post offices. After all, 19,000 post offices are already in the private sector. We have made it clear that we intend to help those organisations to automate their services to widen their ability to compete.

Mr. Campbell-Savours: They are in the public sector.

Mr. Heseltine: They are not in the public sector. That is the point that the hon. Gentleman cannot understand. Nineteen thousand post offices are owned individually by men and women in this country. They are private sector shops in towns and villages. We want to help them to go on flourishing in that environment and we have made that clear.

The right hon. Member for Copeland listed some other changes, but he merely restated the opportunities that are already available to the Royal Mail under the private finance initiative--our private finance initiative and we have always made it clear that it was broadly available to the public sector. The British Broadcasting Corporation is taking advantage of the opportunities that the right hon. Member thinks he has discovered for himself, but which he would find listed in the Government's policy statements. None of the things that the right hon. Member lists goes to the heart of the matter.

Dr. John Cunningham (Copeland): I am grateful to the right hon. Gentleman for giving way and I thank him for his kind opening remarks, of which at least 50 per cent. were kindly intended. As he seems to think that everything in the Post Office is fine now and that he has cracked the problem, why did his right hon. Friend the Chancellor of the Duchy of Lancaster, in a letter to the Prime Minister, say: "For his part, Michael made it clear that he regards greater commercial freedom for the Post Office as essential to its long term health"?

If all is fine now, why does the Secretary of State want greater commercial freedom?

Mr. Heseltine: I made the point to my colleagues, as I did to the House a few minutes ago and to the Select Committee when it first discussed the matter, that the Royal Mail could be a world-class, competitive company, but that to become such it must operate in the competitive world with the freedom to raise and be responsible for its

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cash, just like British Telecom. That is what I believe to be right. Persuading the last tiny rump of my party of the wisdom of those views is a task to which I shall set the rest of my political career, but do not ask me to stand at the Dispatch Box and tell the House something which I profoundly believe to be untrue. I believe that there is a huge opportunity for the Royal Mail.

I wish to make a further point, and the right hon. Member for Copeland has helped me along the journey. If it was all so simple, if it was simply a question of changing the odd rule here or there in the way that the right hon. Gentleman's press release suggests, why did not the Labour Government do so between 1974 and 1979? I do not want the House to be left with the impression that the Labour Government did not face the dilemma: they certainly did, but what did they do? Instead of doing all those simple little things that the right hon. Gentleman would have us face, when they had to decide between letting the Royal Mail and the Post Office free in the public sector and cutting the capital programmes in the public sector, they cut the capital investment programmes of the Post Office by one third between 1974 and 1979. If it was so simple, perhaps the Post Office was in some special straitjacket.

Why did not the Labour Government let the electricity industry be free to expand, as apparently they could have done? Why did they cut capital investment in it by 25 per cent. between 1974 and 1979? The answer is simple: in power, the Labour party realised that the disciplines of the public sector bound the whole of the public sector and that it was not possible to be credible if one thought that one could find some illusory piece of jiggery-pokery to change the odd Treasury rule. That is the real world.

In his press release, the right hon. Member for Copeland gives the game away. He says clearly at the end of it:

"The Government's political problem is that if they accept our proposals it would be transparently clear that earlier privatisations had not been necessary and future privatisations would be called into question."

If the right hon. Gentleman is saying that past privatisations were unnecessary, why is the Labour party desperately trying to abandon clause IV? Why does it resolutely refuse to threaten to renationalise any part of the public sector that we have privatised? The reason is that its leadership knows that the theories are bust, that the concepts are bankrupt and that across the world there is hardly a Government who are prepared to defend the doctrinal obsessions that led us down that blind alley of nationalisation.

Mr. Mike O'Brien (Warwickshire, North): If the President says that more commercial freedom is essential for the Post Office to succeed, and if he is not prepared to change the Treasury rules, is he not in effect condemning the Post Office to decline in the future? In his letter, the Chancellor of the Duchy of Lancaster clearly says that he told the Cabinet Committee that this was the last opportunity before the end of the 1990s to do anything about commercial freedom for the Post Office. The President of the Board of Trade is not prepared to provide that commercial freedom. He has rejected what was called in the letter the "Prescott option". Therefore, is he not condemning the Post Office to decline?

Mr. Heseltine: I know what the House would do if I pursued the logic of the hon. Gentleman's argument. The

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first time that money was raised to threaten a constituent company of the hon. Gentleman, he or it would be in my office saying that it was unfair. The first time that the Royal Mail invested overseas and lost money, the Labour party would demand a statement. The first time that anything within the activities of the organisation became politically sensitive, demands would be made for a debate in this place. The House has always behaved in that way, and I believe that it always will. The short-term political opportunism of Opposition Members will always override this country's commercial interests. That is why the only way forward is to liberate Britain's wealth-creating processes from state ownership and put them into the hands of the private sector, with all its existing accounting disciplines.

Mr. Peter Hain (Neath): Will the right hon. Gentleman give way?

Mr. Heseltine: Madam Speaker made it absolutely clear that many hon. Members wish to speak in this debate, and I have already given way several times.

The gas competition Bill will aim to bring genuine competition to the gas market by creating a framework that will allow competition to be phased in to the domestic market, starting from April 1996. The average domestic gas consumer, who has already benefited from a fall in gas prices of more than 20 per cent in real terms since privatisation, will reap further benefits. I cannot authenticate the claims of those who want to enter the marketplace, but it is common to hear suggestions of price reductions approaching 10 per cent. Under the Bill's provisions, newly licensed suppliers will be able to enter the domestic gas market, providing 18 million customers with choice for the first time. Competition will place powerful downward pressure on costs and prices and will provide a strong incentive for efficiency. It will promote innovation and development of the products and services that customers will choose.

Gas suppliers will be required to adhere to codes of practice in order to meet certain social obligations regarding procedures for debt and disconnection, the care of older and disabled customers and the provision of energy efficiency advice. We will have the opportunity to discuss this matter at length when the Bill comes before the House for a Second Reading.

I now turn to the privatisation of the commercial activities of the Atomic Energy Authority. As my right hon. Friend the Minister for Energy and Industry made clear last February, ownership and the safe management of the UK's atomic energy and nuclear responsibilities will remain in the public sector. The technology wing of that organisation, which deals with science, engineering and business and selling technical, environmental and safety advice, will be privatised.

The privatisation process will enable AEA Technology to realise the full potential of its commercial activities, allowing it the freedom to sell its services as it is and not as the Government see fit. It will benefit consumers and, of course, add to national

competitiveness.

It is some time since we debated coal in the House. On 12 October I was pleased to announce that we had identified the preferred bidders for the regional coal companies and certain care and maintenance collieries. Subject to further detailed negotiations with each of the preferred bidders, we aim to complete the sales by the end of this year.

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It might interest the House to look back over the past two years at what was said and what has actually happened as a result of the privatisation process. British Coal has ceased operation at all but 16 pits, including one which is in development. All of these pits will transfer under the privatisation packages.

Four other pits where British Coal has ceased operations are the subject of bids as part of the privatisation process, and an interest in another one-- Frances-- is being pursued. In addition, nine pits that British Coal had closed were licensed to the private sector in 1994. A total of about 30 collieries are likely to be operating in the private sector in 1995, compared with the 16 that British Coal currently runs.

The House will want to remember precisely the validity of the forecasts that were made when we took our difficult but courageous decisions two years ago. The Chairman of the Select Committee on Trade and Industry, the hon. Member for Sheffield, Central (Mr. Caborn), told us that we would have only 15 pits in two or three years' time. The hon. Member for Livingston (Mr. Cook), the Opposition spokesman on trade and industry, made his position clear: that 50 pits had been in operation at the time of the general election and that in the next month or two there might only be 15. For the hon. Member for Livingston to be only 100 per cent. out is, by his standards, to score a bull's eye. It is worth looking at the matter in more detail.

Mr. Michael Clapham (Barnsley, West and Penistone) rose --

Mr. Heseltine: The House will need to look at productivity--output per man shift in tonnes--if it wants to know why this great industry declined so far and so fast--

Mr. Adam Ingram (East Kilbride): We know why.

Mr. Heseltine: I wonder whether the hon. Member for East Kilbride (Mr. Ingram) does know why. I will tell him. In 1978-79, when the Government were elected, output per man shift in tonnes was 2.31. In the 24 weeks to the end of October, it was 13.04 tonnes. That is why the private sector is finding ways in which to open pits that British Coal closed.

Mr. Bill Etherington (Sunderland, North) rose --

Mr. Heseltine: The next great canard to which we had to listen with nauseating regularity was that if we closed the pits we would destroy the mining equipment industry. In the three months to July, mining equipment exports were up by 17 per cent. on a year ago. We had a whole Select Committee report about the devastating consequences on employment of four proposals. I have asked for the figures and I have here the figure for unemployment in the travel-to-work areas for the coalfields in October 1992 --254,248, an average of 11.6 per cent. I asked for the latest unemployment figure. It has gone down to 227,900 and the average unemployment rates have fallen from 11.6 per cent. to 10.8 per cent.

Mr. Skinner rose --

Mr. Heseltine: In the real world, all the forecasts made by the Labour party have been proved to be fallacious.

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They were nothing more than what we knew them to be at the time--scaremongering from the worst of political motives.

Several hon. Members rose --

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse): Order. It is obvious that the President of the Board of Trade does not intend to give way at this stage.

Mr. Heseltine: Nothing more illustrates the difference between the achievements of this Government's industrial strategy and the Labour party's empty phrases than the recent speech by the right hon. Member for Sedgefield (Mr. Blair) at the Labour party conference on the subject of the information revolution. I shall quote one sentence that gives the flavour of what he said.

"We should be investing in the new electronic super highways--satellite and telecommunications technology that is the nerve centre of a new information economy--doing for the next century what roads and railways have done for this one."

Let us assume that we are prepared to pass over the fact that, between 1974 and 1979, the previous Labour Government cut the road programme from £1.8 billion a year to just £1 billion a year. That gives us the clearest indication of what a Labour Government do to the infrastructure of our country.

Mr. David Blunkett (Sheffield, Brightside): The right hon. Gentleman does not know what highways we were talking about.

Mr. Heseltine: I will tell the hon. Member for Sheffield, Brightside (Mr. Blunkett) what highways I was talking about. I was talking about the highways to which his leader referred in his party conference speech.

The fact is that since this Government pursued their strategy for the telecommunications industries in the 1980s, we have seen the liberalisation of the marketplace and the privatisation of British Telecom. Since 1991, more than £27 billion has been invested in the networks--£22 billion by British Telecom, £2 billion by Mercury and more than £3 billion by cable companies.

New markets have opened up in mobile telephony and the United Kingdom market is almost twice as large as that of any other European Union country. We have 122,000 public telephone boxes, of which 96 per cent. actually work. When we began on this journey, we had only 80,000, of which 75 per cent. worked. In 1984, BT had 9,000 km of high-capacity fibre; in 1994, it has 2.5 million km. BT's prices are down by 35 per cent. and those of some of its competitors are down by more. There has been a 30-fold improvement in call reliability. There are 146 new public telecommunications operators, including 18 national licensees, and more are on the way. New technologies are being delivered in radio, opto-electronics and digital applications. The consequences of the 1980s' revolution in telecommunication have been more choice, more reliability, better quality, higher efficiency, lower prices and perhaps the best platform from which to expand into the future to be found in western Europe.

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As a result of our experience--gained in the teeth of the Opposition--we have been able to persuade our European partners to move to liberalise the European single market by 1998.

Mr. Campbell-Savours: The right hon. Gentleman has forgotten one little thing.

Mr. Heseltine: I bet that I have not, but I shall listen to the hon. Gentleman.

Mr. Campbell-Savours: Has the President of the Board of Trade forgotten that tens of thousands of BT's workers were effectively sacked and replaced at wage rates often 25 or 30 per cent. lower by people working for a company called Manpower? Has it not been a deliberate policy of BT simply to cut wages?

Mr. Heseltine: I am very glad that I gave way to the hon. Gentleman. He has come to the heart of matter. It was precisely because the Labour party thought that it could sustain employment in the mines, in the shipbuilding industry and in the steel industry that it went on regardless of what was happening in the marketplace, of what overseas exporters were doing and of the opportunities to win contracts overseas. It went on and on protecting, subsidising and removing the disciplines of the marketplace because its paymasters in the trade unions would not face the realities of a changing world. The argument that the hon. Gentleman advances is a classic one. The only way in which BT can bring about the communications revolution is to be a world-class competitive company. That means that people will have to move from job to job to be retrained and re-educated and reskilled. Those are the words that the leaders of the Labour party are constantly using. Are we being told that, in power, they would deny the logic of all the things that they say? Has the hon. Gentleman read any of the speeches of the right hon. Member for Sedgefield? Does he begin to understand what his leader is saying to him? The answer is that he does not. Even if he did, he would not care, because the power structure behind the Labour party is that of the producers and against the consumers. It is of the state and not the private sector. Labour Members will never come to terms with the real world, which this Government have embraced, with an enormous increment in wealth to the national economy.

Mr. Patrick McLoughlin (West Derbyshire): Does my right hon. Friend believe that any of the investment that he has just explained in outlining the total of £27 billion invested in networks would have been made if BT had remained a nationalised industry? Would we have seen any of the investment by the cable companies, which will allow us to take advantage of the super-highway?

Mr. Heseltine: My hon. Friend is absolutely right. If BT were still in the public sector, still held back by the restraints of that, it would be begging the Government to be given the freedoms of the private sector to become a world-class company.

Mr. Blunkett: Who stopped BT?

Mr. Heseltine: I am asked who stopped it. I will tell the House who stopped it. It was the Labour party year after year after year which stopped it. It is precisely because BT has proved what can be achieved by turning it into a private sector, world-class company that I want the Royal Mail to have exactly the same opportunities.

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Three other areas are important to the competitiveness agenda that we will pursue. The first is the continuation of the deregulation initiative. The House will be aware of the recent enactment of legislation enabling us to propose procedures and thereafter make changes at a speed not previously available. That is an important aspect of our determination to free up the marketplace while preserving essential protections for the environment and for safety. I am delighted to see my hon. Friend the Member for Tatton (Mr. Hamilton) in the Chamber and I pay tribute to his remarkable work in pursuing our deregulation initiative. As a result of his work and the leadership of Lord Sainsbury, and now Francis Maude, 900 regulations are either in the process of being repealed or are at an urgent stage of reform. We have already notified to Parliament under the new legislative procedures 55 measures that are saving business millions of pounds. That is an important aspect of our market- opening activity.

The House will be fully aware of the recent satisfactory outcome of the GATT negotiations, which we hope to see concluded by the end of this year. That will manifest one of the Government's central beliefs: that there is much gain in widening the world's marketplace and freeing up opportunities for import and export. Nowhere is that more so than in the less prosperous parts of the world, which will gain far more from increased trade than they ever will from increased aid.

The third area relates to the Government's remarkable success story of pursuing policies of inward investment. As announcement after announcement is made about the scale of inward investment to this country, and as we now have 40 per cent. of all inward investment in the European Union from America and Japan, I wish every so often that when Opposition Members see new investment, plant and factories opening in their constituencies, they would recognise that that is happening because the Government's policies have made this country the most competitive European economy in which to invest. Let me make a clear statement on behalf of the Government: we have transformed the competitiveness of this economy and have made ourselves one of the most attractive investment bases in the European Union. The economic outlook is among the best that we have seen in recent years. We have achieved a record of low inflation, low interest rates and have restored public finance to health. We have a range of policies to enhance the competitiveness of this nation. They have required guts and determination from a Government determined to ensure that they lead to the improved performance of our national economy, and nothing will persuade us to throw those opportunities away.

4.37 pm

Dr. John Cunningham (Copeland): We fully anticipated that the President of the Board of Trade would come to the House today with a combination of bluff and bluster to cover his embarrassment about the great hole in the Queen's Speech where his party political prize was supposed to be, and he has not let us down. Rather than come naked into the debating Chamber, the President apparently exchanged his loincloth for a White Paper, but it could not disguise his political nakedness. Rather like the emperor's new clothes--or in this case, the President's new clothes-- apparently no one but the President was fooled.

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The Queen's Speech was intended to have as its centrepiece the privatisation of the Post Office, but it is not there. Apparently, the space is being filled not by alternative proposals from the President, who had nothing new to say today, but by Mr. John Maples and what he has to say about what the Government's real programme should be.

Mr. Maples certainly does not agree with the President of the Board of Trade. Mr. Maples said:

"What we are saying is completely at odds with what Tory supporters experience."

On the national health service, Mr. Maples said:

"The best result for the next 12 months would be zero media coverage."

I wonder what his right hon. Friend the Secretary of State for Health has to say about being gagged fully for a year.

Mr. Blunkett: That would be wonderful.

Dr. Cunningham: It would indeed be wonderful, as my hon. Friend says.

On the media--nothing new here, really--he says:

"We need to feed our friends and potential friends in the press with good stories."

On voters and the media:

"The influence of the media on voters' perceptions cannot be overstated."

On my right hon. Friend the leader of the Labour party:

"If Blair turns out to be as good as he looks, we have a problem."

Of course, the President of the Board of Trade has several problems, as we know: declining political credibility; failure to carry his own party with him; failure, above all, to convince the British people that his ideas for Post Office privatisation had any merit whatsoever.

It was nice to have confirmed on the record what we have all known for a very long time--that is, that the yobbos on the Tory Back Benches are organised, planned, prepared and part of that party's approach to preventing sensible and coherent debate in the Chamber of the House of Commons. I wonder what the right hon. Gentleman thinks about Mr. Maples and yobbos.

It was the Prime Minister, only in September, who said in London that he would like to create a yob-free culture in Britain. The Prime Minister wants a yob-free culture in Britain, but the deputy chairman of the Conservative party wants a yobbo-ridden culture on Conservative Benches in the House of Commons. Now we know that there is a vacuous programme from the right hon. Gentleman on what industry and the economy need, and a hidden agenda from his friend the deputy chairman of the Conservative party.

I congratulate the Union of Communication Workers and its members on the excellent campaign they waged to prevent privatisation of the Post Office and Royal Mail. The President's proposals, unfortunately, came back to him from his Cabinet colleagues marked "return to sender". They were from the depths of the Jurassic Park of Tory politics--privatisation, an idea whose time has certainly come and gone. Opposition Members, however, do not accept, as the right hon. Gentleman apparently

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does, that, if the Post Office cannot be privatised, it has to be ossified--deliberately forced into decline to satisfy the failed dogma of the Tory party.

Mr. Den Dover (Chorley): Will the right hon. Gentleman give way?

Dr. Cunningham: I will take the hon. Gentleman as a friendly yobbo.

Mr. Dover: I thank the right hon. Gentleman for that compliment. What is his view of top management's opinion of Post Office privatisation? Surely they are in the best position to judge. They either face problems keeping the Post Office in the public sector or they have freedom in the private sector. Does the right hon. Gentleman not think that their views count?

Dr. Cunningham: I do not know, because I have not had the opportunity of their advice, except from what I have read in the newspapers, but I half suspect that, like many other top managers in privatised industries, they would be thinking of their share options and their salaries, rather like Cedric Brown and Mr. Giordano have been doing at British Gas. But we may return to that matter in a moment.

The people of Britain are fed up with being ripped off or overcharged by people in private monopoly industries giving themselves huge salary increases with apparently no accountability and no care for what Ministers, including the Prime Minister, have to say about it. I remind the hon. Member for Chorley (Mr. Dover) and the President of the Board of Trade what the Prime Minister had to say in his Mansion house speech. At the Lord Mayor's banquet, he said:

"There is more that business could do to further improve its image. There is no doubting the resentment that large and often unjustified pay rises can cause, so I welcome what Sir Brian Nicholson, the president of the CBI, had to say about the need for responsibility in setting the pay of company executives. The power is there to control it, and I hope it will be used."

Apparently, the only member of the Government today who was willing to defend what has happened in British Gas was the President of the Board of Trade--no Back Bencher, no chairman of any Conservative committee, and certainly not the Prime Minister. The only one to defend it was the right hon. Gentleman. I wonder for whom he thought he was speaking. He certainly was not speaking for consumers; he certainly was not speaking for the British people; he certainly, apparently, was not speaking even for his own Prime Minister. I wonder who is really in charge.

On the Post Office privatisation and its future, I hope that the right hon. Gentleman will be a little more forthcoming than he has been so far. It is clear from the letter of his right hon. Friend the Chancellor of the Duchy that the President of the Board of Trade does not think that the Post Office can succeed in the public sector. He seems to think that it will wither and fade away, and that other private sector operators will take over.

The real question is this: are the right hon. Gentleman, the Government and the Conservative party willing to see that happen, are they willing to see more freedom, more latitude and more opportunity for the Post Office in the public sector, or will they simply let it fade away and die? The right hon. Gentleman's argument, apparently, is that

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everything that could be done has been done. That is simply not true. That view is not even shared by senior management of the Post Office, let alone by the Opposition.

We could have changes to the calculation of the external financial limit. We could have the removal of capital expenditure limits. We could have the relaxation of Government scrutiny of specific projects. The President of the Board of Trade had much to say about political interference. Why does he not remove that bit of political interference from the Post Office?

We could have freedom from Department of Trade and Industry interference in proposed training projects, ability for the Royal Mail to enter joint ventures, new freedoms for Post Office Counters Ltd, and the Royal Mail given more latitude in its private finance initiatives. All those things are possible, but the right hon. Gentleman's thesis is that he would rather seek to defend his dogma on privatisation, with the Post Office forced into commercial difficulties.

We do not share that view. What is more, it should be possible, in a sensible country, for us to sit down and agree a way forward for the Post Office with the management, with the UCW, with the Government and with all those who are interested in helping the Post Office to build on its successes. I make that offer to the right hon. Gentleman now. Is he willing to accept it? Why does he not answer--yes or no? The answer is clear. The right hon. Gentleman has been put in his place by the Chancellor of the Exchequer, because the answer to the question is that it is his right hon. and learned Friend the Chancellor of the Exchequer who will not agree to anything of that kind.

I remind the right hon. Gentleman of what he said. He said that he does not believe that the Post Office can succeed in the public sector. However, if we look at the 1994 Blue Book which was published a few weeks ago, we see that British Nuclear Fuels plc has been reclassified to the public sector. The right hon. Gentleman has effectively nationalised British Nuclear Fuels. He never said a word about that, of course; there was no statement and no great speech. Apparently he thinks that British Nuclear Fuels can operate successfully in the public sector, but that the Post Office cannot. That is quite a political flip-flop--quite a head-stand--from the right hon. Gentleman. One successful, profitable company with a huge positive cash flow and lots of business can operate successfully in the public sector, because the right hon. Gentleman has just agreed to its being put there, but the Post Office cannot. The right hon. Gentleman's argument is a complete and utter fraud.

Mr. Gary Streeter (Plymouth, Sutton): On sitting down with trade unions, did the right hon. Gentleman hear this morning the diary tapes of the right hon. Member for Chesterfield (Mr. Benn), in which he described in graphic detail how the previous Labour Government had the life squeezed out of them by trade union power? Does the right hon. Gentleman really think that a future Labour Government would do any better, and if so, why?

Dr. Cunningham: Yes, I believe that a future Labour Government could do better--not only better than that Administration, but a lot better than the present one, too.

The right hon. Gentleman's argument is not only flawed, but it is not borne out by an examination of what has happened over privatisation.

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