House of Commons Hansard Debates for 20 Feb 1995

Mr. Nick Harvey (North Devon): The consequences of the President of the Board of Trade's decision not to refer the Trafalgar House bid are vast not only for this case and the many consumers whose interests it affects, but rather more for the precedent that it will set for the future. I echo the comments of the right hon. Member for Copeland (Dr. Cunningham) in expressing disappointment that the Government did not choose to bring the matter to the Chamber of their own accord.

The stock market is already preparing itself for the prospect of a wave of takeover bids for regional electricity companies. The Trafalgar House bid sets a precedent for the takeover of utilities by companies that do not have the supply of utilities as a core business. Questions legitimately and reasonably must be addressed about the commitment of those firms towards the electricity industry.

There is a central contradiction in the decision not to refer the bid, between the Government's stated objectives when they privatised the electricity companies and the attitudes implicit in the decision to give the bid the green light. The prime example is the golden share. The

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Government's golden share was intended to protect companies such as Northern, presumably because the Government believed that ownership was a matter of public interest. Certainly, previous Secretaries of State for Trade and Industry have seen the provision of power to several million customers as a matter of public interest. There was enough of an interest to ban bids from state-owned firms from abroad, which have been tipped by some to follow the Trafalgar House example now.

Most people naturally presumed that the public interest was the justification for the golden share in the first place, and that its purpose was to provide a defence against precisely such a bid. Perhaps the Government would like to explain the purpose of the golden share in the light of the fact that it has been used only to delay a takeover, rather than to prevent one.

Another central argument about the privatisation of the industry and a stated objective of the Government was on the importance of regional identity. Under the present set-up, there is scope for substantial input from regional electricity companies into their respective regions, whether it is in the arts, sport or any other issue of community importance. Without saying anything specific on this case, I believe that the likelihood of foreign or multinational companies which bid for the regional companies having the same high commitment to the regions is minimal.

Even if the company headquarters remained in Newcastle, decision making would in reality move to London, to the detriment of the north. There have been notorious examples in other cases, when promises that have been given about corporate headquarters have been nakedly broken after the event.

Another stated objective of privatisation was to deliver the efficiency and strength that would benefit customer, employee and company alike. Yet a precedent is now being set for allowing takeover bids from companies which have manifestly failed to prove that they can improve investment or even long-term customer care.

We have been offered only four promises on the maintenance of standards, and the President of the Board of Trade admitted this evening that they had no legal substance whatever. The assurances need to be judged in the light of certain economic truths. Takeovers create a self-perpetuating climate of insecurity, and that has already added £1 billion to the value of the regional electricity companies on the market.

Dividend payments will rise, as they must if the price of shares is not to drop, leaving companies even more vulnerable. Prices in turn will rise, as the price cap allows, to provide the cash flow needed to maintain high dividends and, for the very same reason, jobs will be cut. Investment will not be exempt from the squeeze required to keep shareholders happy, and that runs to the core of the problems that have beset British industry for such a long time.

As a nation, we distribute far more in dividends than our competitors-- double the proportion, for example, of Germany or Japan. The results are higher prices for customers, the threat of redundancy for workers and the loss of essential investment in the industries.

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Mr. Barry Porter (Wirral, South): Does the hon. Gentleman have evidence for his assertion that prices are higher or that customers are in some way disadvantaged because of dividend policy? There is no evidence of that.

Mr. Harvey: It is self-evident that if more is given out to shareholders in the form of dividends, less will be available for investment, salaries and any other cost that a company might incur. Serious questions need to be asked about Trafalgar House's commitment to fulfilling the Government's stated objectives at the time of privatisation. What was the purpose of the golden share? How committed is Trafalgar House to the region or to investment? How determined is it not to shed jobs for the sake of maintaining dividends? What evidence is there that the takeover is not simply designed to give Trafalgar House tax advantages? Has not the company admitted that financial engineering is part of the rationale of the bid? Will the customer benefit from the new ownership?

Those questions will undoubtedly return when other regional electricity companies are subject to takeover bids. For that reason, the bid should have undergone a more thorough and impartial investigation at this time. The President of the Board of Trade's explanation that he had two different pieces of advice from the two regulators and chose one rather than the other does not stand up to much examination. The Director General of Fair Trading has a general concern on competitive issues, but the Director General of Electricity Supply has a much more specific interest in the industry. The fact that either of them raised serious concerns or interests should have amounted to a case for a reference to the Monopolies and Mergers Commission. The idea that the two were looking at the same issues does not seem to be right at all.

A referral to the MMC would have been appropriate and desirable, considering the precedent that the case will set. On Wednesday last week when the issue was briefly debated, Conservative Members claimed that those pressing for a referral to the MMC did not understand the market. The truth is quite the opposite. We understand the market only too well--well enough to understand the difference between competition and monopoly, well enough to understand the difference between a company that is subject to all the rigours of the market and a company whose customers have nowhere else to go, and well enough to understand the difference between a chief executive and a management team whose salaries reflect a genuine market value and those who are in the privileged position of having a trapped market. We understand that the regional electricity companies are fundamentally different from the majority of other private companies, and that is why they are regulated. That is why a case such as this should be referred to the MMC. The electricity industry is not internally competitive. It provides a necessity that people cannot do without and, as such, it has social obligations to its region and customers. That was the reason behind the golden share and the reason why there is a regulator.

This situation is typical of the many problems that the Government's economic policy is running into. The Government's "hands-off" approach is undermining Britain's competitive aspirations. It seems that

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asset-stripping, job-shredding, executive riches and financial engineering are now the ideals of the laissez-faire system. Those who claim--as the Government do--to be the champions of the free market must find that something of an embarrassment.

A sound takeover proposal has nothing to fear from a referral to the MMC for investigation. If Trafalgar House could have proved that the various fears that had been raised were unfounded and that the customers, employees, the region and the company would not be disadvantaged, that would have become apparent. Unfortunately, the opportunity has been missed, so the fears remain. The President of the Board of Trade has declared open season. The customers of Britain stand to lose out.

8.29 pm

Mr. Hartley Booth (Finchley): We have had this evening from the right hon. Member for Copeland (Dr. Cunningham) a parade of verbiage which has not done his argument any favours. He talked about exploitation, a licence to print money and ripping off the consumer. From hon. Members behind him on the Opposition Benches we had a parade of fat cats, as if we were not well aware that that was the dream of the Labour party. It dreams about the horror of fat cats. In the mythology of the Labour party, fat cats are companies that make profits. That is what Labour Members want to get rid of--any company that makes a profit.

Opposition Members have shown no appreciation of what privatisation produces. They have shown no understanding of how it reduces the interference of bureaucrats and the lack of motivation that prevails in a state-organised utility or company. To quote the words of a former Treasury Minister:

"When the government owns, an owner's concerns dominate its thinking. If we look at parliamentary records for the 40-year period after World War II-- when nationalisation was at its peak--debates on the state-owned industries focused on such things as investment needs, losses, debts, labour relations, and strike records. Little time was spent on Parliament's more diffuse obligation to consumers." The Opposition have shown little, if any, understanding of the market. There has been a reference or two to customers, but the regulator was not referred to as a constraint on an entrepreneur and a business, which is what he is in practice. No, not at all. The regulator was paraded before us as an example of the alleged failure of my right hon. Friend the President of the Board of Trade. Opposition Members have shown no appreciation of the role of the investor and the City. There was a reference from the Conservative Benches, but none came from the Opposition Benches, to the fact that probably everyone in the Chamber, many millions of people in the north of England and many millions of people who are represented by Opposition Members have a stake in what was going on. They have a stake not because they are direct investors but because they have pensions or policies. They have a small stake in the City institutions that happened to vote in the majority to put the bid through in what is referred to in the motion as the "meeting of 15th February".

Nor is there any understanding on the Opposition Benches of the performance of the electricity companies since privatisation. The right hon. Member for Copeland said that I was wrong when I intervened to say that there had been price reductions since privatisation. I can give

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him and the House my source. It is a small booklet available in the Library of the House of Commons. It says:

"In the case of manufacturing industry, the latest DTI figures"-- this was published last year--

"show that average electricity prices have fallen in real terms by nearly 7 per cent. in recent years.

Domestic consumers are also starting to benefit from lower prices. Overall, real terms domestic electricity prices have fallen by over 3 per cent. since privatisation, and by 7 per cent. in the last two years."

I challenge the Labour party. Perhaps it has better figures. There have been real reductions in prices to both domestic and manufacturing consumers of electricity. Instead of the proper appreciation of the industry that we would have expected from Opposition Members, the politics of envy has been paraded intermittently through the debate. It positively replaces the understanding of management and its role.

I understand that some of the directors of utility companies have received huge pay increases. They may well have demoralised some of their employees by taking rises when others have taken pay cuts. That may be a management mistake, but it has nothing to do with the politics of envy. That, and the failure of the Labour party to make the broader point, shows exactly where Labour Members are coming from.

What of the performance of the Labour party with nationalised electricity? We have heard a great deal of rhetoric, but we have not yet heard precisely what was the Labour party's performance during its last tenure of office. Prices rose by 2 per cent. Was that between 1974 and 1979? No. Was it per year? No. Was it six monthly or even three monthly? No. Every six weeks electricity prices rose 2 per cent. between 1974 and 1979. That is the performance of the Labour party. It cannot get away from it. Comments such as the one that we heard a few moments ago from the hon. Member for Tyne Bridge (Mr. Clelland), in which he suggested that we raised prices artificially moments before privatisation, totally fail to recognise that the Labour party increased prices 2 per cent. every six weeks between 1974 and 1979. It was a hypocritical statement. What about concern among the customers? That was a bust fuse, too.

8.38 pm

Mr. Barry Sheerman (Huddersfield): I wish to deal with a different issue--the possible changed ownership of the regional electricity companies in the context of its effect on the strength, diversity and success of local and regional economies. You and I share the same region, Mr. Deputy Speaker, so I am sure that you will not mind me referring to our region as an example of the issue that it is most important for the House to consider.

Whatever can be said about privatisation, the efficacy of regulation and the balance of benefits to consumers or shareholders, there is one indisputable fact. Electricity, water and, to some extent, gas companies can and do act, under private or public ownership, as positive forces in the building and rebuilding of a viable industrial base in the regions of Britain.

There is clear evidence of strong support and commitment to the regions on the part of the utilities and certainly my local regional company, Yorkshire Electricity. The company is built on its relationships in Yorkshire. It expanded its involvement in the economic

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development of the region. The company is active in assisting small, medium and other enterprises on a variety of issues. It involved itself extensively in a range of local initiatives such as the Yorkshire and Humberside Development Association. It supports local universities and works to develop profitable partnerships with training and enterprise councils, chambers of commerce and the institutions that seek to secure a dynamic life for the region. Opposition Members would be poorer if we did not recognise some of those facts.

In that respect, Yorkshire Electricity is not dissimilar to some of the other privatised utilities. All three companies have put themselves at the heart of the economic and industrial regeneration of the region, whatever else we may think of them.

Given the constraints of European directives, Yorkshire Electricity and many other regional electricity companies have consistently tried their utmost to maintain their position as significant purchasers of locally derived goods and services. In other ways, such as in its proactive role in local campaigns involving disabled people, children and the environment, Yorkshire Electricity has become a familiar and reliable member of the local community. Opposition Members understand that.

At a time when the arts are increasingly dependent on private-sector sponsorship, local electricity companies, such as Yorkshire Electricity, have become most important benefactors and have fulfilled valuable social and cultural roles in the regions.

The Minister for Energy and Industry (Mr. Tim Eggar): I apologise for interrupting the hon. Gentleman in full flow, but I have been listening carefully to what he has said and he seems to be giving us a eulogy to privatisation. Can he confirm that?

Mr. Sheerman: I am trying to point out that, under both public and private-sector ownership, Yorkshire Electricity, NORWEB and Northern Electric have played an important role in supporting the regional economy. Perhaps, after hearing something that he might like, the right hon. Gentleman will hear a few things that he will not like. I am trying to give a reasonably well-balanced group of remarks. In concert with local authorities, regional electricity companies have developed effective partnerships on a range of questions, including public lighting, crime prevention and energy efficiency. We have observed the growth of an awareness on the part of those companies that their future prosperity and development are inextricably linked to that of their consumers and the community that they serve. On that basis, they represent a major regenerative influence and have the potential to diversify and develop exciting initiatives in the regional economies.

Opposition Members would be foolish to ignore that, but the move that the President of the Board of Trade has set in train will at one stroke destroy all that potential. He is often seen as a man of action, rather than deep thought. In this instance, his thoughtlessness could do incalculable damage to our other goals and objectives in the regions. He espouses many other causes to try to help the development of local industry and small and medium-sized enterprises. He expresses concern about regional diversity and growth and about the ability of small and medium-sized enterprises to flourish. Indeed, his competitiveness White Paper, his interest in regional

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supply networks, local sourcing and business links all point to a commitment to, and concern for, a successful and diverse regionally rooted economy.

However, all that is hot air if we judge it by the effects of the right hon. Gentleman's failure to refer the bid for Northern Electric to the Monopolies and Mergers Commission. All the effort that is being put into a range of initiatives by chambers of commerce, TECs, local authorities, universities and colleges could be utterly wasted if his decision on the ownership of regional utilities remains unchanged. What is more, regional economies on the brink of real growth and development will fall back into decline, with yet another positive influence hived off to London or beyond.

Too often, we have witnessed the effects of a takeover that results in the ownership of a company transferring to a national or international conglomerate. The Government have not been very forthcoming about those sorts of decisions. To the detriment of local companies and whole regions, decisions are no longer made in the regions, or even in this country. Down- sizing, asset stripping and the mean bottom line are all that counts. Local and regional loyalties are consigned to the waste bin. The Government's policies have initiated and hastened that process time and again.

In our region, an example is the disastrous effect of the Government's initiatives and legislation on the brewing industry. Look at the, perhaps unintended but disastrous, consequences of the change in the franchising system for regional television. We have lost the independent Yorkshire Television, which has combined with Tyne Tees and is soon likely to be taken over by Granada. Time and again, the Government's policies carelessly destroy the viability of local and regional industries. It is a sad day when a political party--whatever its other ideological follies and sheer wrong-headedness--abandons values that, at one time, it held dear. There was a time when the Conservative party believed profoundly in the diffusion of economic power and saw the strength of our democracy being rooted in strong regional prosperity. Today, they have sacrificed that belief, like so many others, on the altar of market forces with tragic consequences that will leave our regions permanently damaged, demoralised and disheartened.

8.45 pm

Mr. Piers Merchant (Beckenham): I must start by declaring a minor interest. Like hundreds of thousands of people, including no doubt some Opposition Members, I hold a few shares in regional electricity companies, but not in Northern Electric or in Trafalgar House. This has been an interesting debate for me as I had some knowledge of the predecessor to Northern Electric, the North Eastern electricity board, when I represented Newcastle upon Tyne, Central in the 1980s, before I gracefully withdrew to enable the present hon. Member for Newcastle upon Tyne, Central (Mr. Cousins), who has unfortunately left the Chamber, to pursue his political career, which I gather that he is still contemplating.

Much play has been made of the involvement of regional electricity companies, such as Northern Electric, in the general good of the regions. Before the companies were privatised--under the old nationalised set-up-- the

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regions and areas in which they operated received little support, yet the hon. Member for Tyne Bridge (Mr. Clelland) seemed to be extolling the virtues of nationalisation and promised that, when he had the opportunity, he would return electricity to state ownership. That would certainly strip away any opportunity for regional support to come from the unit serving the area.

I do not believe that the fact that ownership might change need in any sense alter a company's commitment to a region. When I was in the north- east, it was evident that many of the companies that gave great support to the region--I will not be unfair by picking out one or two--were branches of national concerns. They were not locally based or local companies, but simply had regional offices there. In certain cases, they had decided as a matter of policy to support certain regions. There is no necessary connection between where the corporate headquarters of a company is and ownership resides, and where its loyalty can be found, in terms of support for an area in which it operates. If that were the case, virtually no regional support would emerge from such companies. It would all be channelled to the area in which it had its corporate headquarters--central London or elsewhere. That simply is not the case.

For some time, I worked for Northern Engineering Industries, which was a proud north-eastern company, connected with the electricity industry in that it supplied generating plant. Eventually, Rolls-Royce took over NEI, which ceased to have its corporate headquarters in the north-east. At the time, there were many scares and it was said that when Rolls-Royce took over there would be wholesale redundancies in the north-east. That did not happen. There were some--I was one--but it was hardly wholesale. People also said that there would be wholesale reorganisation and that all the power would seep off to London or Derby, with no control left in the area. That turned out to be totally untrue. Control remained in the area and almost as many decisions were made there as before.

It was said that control would be completely lost, but the company--I refer to NEI but the same applies to Northern Electric--was ultimately controlled by its shareholders, the majority of whom did not reside in the region in any case. Moreover, like any large company, the company depended on the operation of capital, which in turn was largely controlled by the City. So the idea that the power base is automatically transferred when a company is taken over flies in the face of fact.

The Opposition seemed to believe that they could change the position and that, if they had state control of industry, the market could be ignored. That does not happen in reality. They now seem to believe that they can insulate an individual company against the operation of the capital market and that Northern Electric could be retained as a private company and protected against takeover bids. That, too, is wrong.

Trafalgar House has given guarantees, as my right hon. Friend the President of the Board of Trade said.

Mr. Rooney: Name them, then.

Mr. Merchant: It has guaranteed that it will give sufficient financial and management resources to enable Northern Electric to carry out its statutory and licence obligations; it will ensure that the Director General of

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Electricity Supply is provided with such information from any company in the Trafalgar House group as he requires in relation to the exercise of those functions.

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

Mr. Merchant: I shall give way to the hon. Gentleman in a minute. First, I shall finish answering the question posed to me by naming two other guarantees: Trafalgar House will co-operate with the DGES in ensuring appropriate financial separation and financial independence for Northern Electric; and it will ensure that Northern Electric agrees to appropriate licence amendments.

Moreover, it is clear that if those assurances are breached, the DGES can refer the matter to the MMC, under the Electricity Act 1989.

Mr. Mullin: Did the hon. Gentleman not hear the President of the Board of Trade say that the guarantees given by Trafalgar House were not binding?

Mr. Merchant: If I remember correctly, my right hon. Friend said that they were not "legally" binding, but a guarantee is not invalid if it is not legally binding. In all our activities, we give guarantees that are not legally binding. The important qualification is that, under the Electricity Act, the DGES can still refer the matter to the MMC if those guarantees are broken.

Opposition Members, particularly those who represent north-east England, should rely less on what a few shareholders may have said at a public meeting that they attended, but should weigh up what would be in the best interests of the region. I do not speak in support of the Trafalgar House bid and I understand why people in north-east England feel strongly about the need to retain regional identity among the companies that operate up there. I hope that, if Trafalgar House goes ahead with its bid, it will give further guarantees about maintaining the headquarters of Northern Electric in the region and other links with the region.

Opposition Members should be careful, however, because takeovers are not necessarily bad and Northern Electric may be strengthened, having been taken over by a large outside company. It may benefit from being part of a bigger organisation with access to more capital and expertise; more markets for its products, as well the ability to draw on existing markets; and more financial strength to back it. Consumers may benefit from the better service that would thereby be provided. Opposition Members spoke of the critical job losses under Northern Electric. As part of a larger organisation, instead of simply being made redundant, people could be transferred to other jobs within that organisation. Consumers may benefit from lower prices and a better service as a result of a takeover, and current shareholders in Northern Electric may gain a better return. So the advantages of a takeover should be weighed in the balance. Neither must we forget the role of the regulator and his considerable power to protect consumers' interests.

We should look at the motives of Opposition Members who spoke strongly against the Trafalgar House bid and want it stopped or referred to the MMC. I understand their regional affections but some of their arguments are muddled and they do not see the positive benefits. I suspect that the smoke screen that has been thrown up is to hide the desire of sections of the Labour party to return Northern

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Electric to public ownership, perhaps not in the direct way referred to by the hon. Member for Tyne Bridge, but in a more subtle and dangerous way, by extending the power of regulation and control in such a way that the company could not operate in a free market but would be at the whim of political manipulation and control. We should not allow this debate to pass without marking the success of privatisation of the electricity industry. We must not allow one debate, important though it is, to obscure that fact. We are the only large European country to have reduced our electricity prices. Even including VAT, the price of electricity in this country is the fourth lowest in Europe, so all the talk about the rapid rise of electricity prices is inaccurate. Small companies pay among the lowest prices in Europe; since 1993, disconnections have been reduced by 95 per cent., and the number of complaints has fallen by 30 per cent. New options such as "Fuel Direct" are available for people who have difficulty paying. Customers who do not receive proper service now receive payment for default and there has been a revolution in management skills and attitudes. Whereas, in 1979, the taxpayer had to foot the bill when losses amounted to £50 million a week, now the Exchequer, and therefore the taxpayer, receives net proceeds of £48 million a week.

The case for privatisation has now been made, in terms not just of rhetoric but of hard fact and experience. I fear that this debate is motivated by a desire to spoil the truth with scares about what might happen in hypothetical situations. Using one example, every negative outcome that could possibly be conjured up has been used in an attempt to spoil the truth that should be put clearly before the House: privatisation has been a success for all involved, but particularly for the consumer.

8.58 pm

Ms Ann Coffey (Stockport): The Under-Secretary of State for Corporate Affairs made it clear to the House on Wednesday, in the debate on Northern Electric, that ownership of the regional electricity companies should be decided by the market, and that the Director General of Fair Trading, in his statutory advice, said that the merger did not raise any competition concerns. That is hardly surprising, as Northern Electric, like the other regional electricity companies, will be a monopoly supplier in the domestic market until 1998.

I am interested in the other public interest aspects of the bid. So far, they have been dealt with via advice to the President of the Board of Trade from the regulator and the Director General of Fair Trading, which has led to some discussion about the extent of the regulator's concern and the response of the President of the Board of Trade to that concern. I am further interested in why the regulator has not used his powers under the Electricity Act 1989, to which the Under-Secretary of State referred in the debate in the House last Wednesday, to refer the bid to the Monopolies and Mergers Commission on public interest grounds.

Section 12(1) of the Act says:

"The Director may make to the Monopolies and Mergers Commission . . . a reference which is so framed as to require the Commission to investigate and report on the questions--

(a) whether any matters which--

(i) relate to the generation, transmission or supply of electricity in pursuance of a licence; and

(ii) are specified in the reference,

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operate, or may be expected to operate, against the public interest; and

(b) if so, whether the effects adverse to the public interest which those matters have or may be expected to have could be remedied or prevented by modifications of the conditions of the licence." Public interest is the key phrase. This goes beyond the definition of the director general's role in the Government's amendment, which says that the Government

"notes that the Director General of Electricity Supply will continue to promote competition and protect the interests of consumers."

Public interest has a common law interpretation, and it may be considered as something to be distinguished from the private interests of individuals so that the expression is akin to the economic doctrine of the greatest good of the greatest number. Public interest is synonymous with public benefit. The question, of course, is whether a particular thing that is in the public interest is a question of the times and is a question of fact, to be decided in the light of all the circumstances and conditions as they exist at the present time.

It is easy to see how the MMC can decide whether a monopoly situation operates against the public interest by increasing prices or whether economies of scale outweigh that advantage. Even then, however, there are considerable problems in practice--I refer the Minister to the brewing industry. Ultimately, of course, the objective facts must be evaluated, and at the end it comes down to individual judgments. The President of the Board of Trade is an elected member of a democratically elected Government, totally committed to the free market, and believing that public interest is served by the free market. That is his belief.

What of the regulator, however, who is supposedly independent and unfettered by such ideology? Why has he not referred the matter in the light of the following issues? First, some £300 million in tax payments to the Treasury would be lost if the bid goes ahead. Is that not a matter of public interest? I can certainly think of things that the Treasury could spend £300 million on--raising nurses' pay beyond the miserable 1 per cent. that they have been given, for instance, and perhaps giving local education authorities the money to fund the teachers' 2.7 per cent. increase in salary which currently looks as though it will be funded by lost jobs.

Secondly, there will be further job losses in addition to those already lost. In that context, it is specific not only to this bid but to other electricity companies. Some 10,939 jobs have been lost since privatisation and it is likely that the number of job losses will increase as the regional electricity companies come under increasing pressure to give ever larger returns to shareholders to keep them happy. Is that not a matter of public interest? If the regulator feels that those issues are not of public interest and do not merit referral to the MMC, he has a very narrow definition of public interest--as narrow as that of the President of the Board of Trade. Perhaps public interest is ultimately a matter of individual judgment based on individual belief. I do not know what the regulator's personal beliefs are, but in this bid, after the abdication of responsibility by the President of the Board of Trade, the regulator was the last protector of public

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interest in the widest definition of the greatest good for the greatest number--a definition that I know is not shared by the Government.

It is important that the regulator should refer the bid to the MMC so that we can have a proper examination of the public interest and the public can see the independence of the regulator operate; otherwise he will open himself to a critical examination of his independence on public interest issues and bring into dispute the whole regulation system.

9.4 pm

Mrs. Angela Knight (Erewash): The hon. Member for Stockport (Ms Coffey) referred to the public interest. The interest taken in the debate by Opposition Members is shown by the number who are present; but I believe that the hon. Lady confused the public interest with interest to the public, given the allegations that she made. Let me point out to her that the public interest is best served by cheap electricity and an efficient company. An inefficient company will result in job losses and high prices; we want jobs and low prices, and both have been provided following the privatisation of this company and many other formerly nationalised concerns.

My right hon. Friend the President of the Board of Trade did a masterly demolition job on the motion. In their speeches so far, Opposition Members simply have not made their case. The motion refers to a meeting at which an unknown number of shareholders expressed concern about, or indeed opposition to, the proposed takeover. I have an answer for those shareholders: they do not need to sell their shares.

Another point--which has been answered time and again--relates to the Director General of Electricity Supply and his ability to regulate the industry. I was astounded when I saw that in the motion; I can only assume that it was tabled by someone who was not present last week when my hon. Friend the Member for Brecon and Radnor (Mr. Evans), the Parliamentary Under-Secretary of State for Corporate Affairs, concentrated on that and many other pertinent points relating to the takeover.

The third aspect of the motion that strikes me is the concern about the removal of the golden share from the regional electricity companies, which would apparently make them vulnerable to "predatory or hostile bids". A well-run, efficient company, looking after its customers and employees, need not fear a hostile takeover as it will know how to fight such takeovers effectively. If a company is insulated from the market place, it is insulated from the needs of its customers and will no longer act in the best interests of those customers. That is why companies must be left to trade openly and fairly.

If a lesson is to be drawn from the debate and the bid, it is that if regional electricity companies want to defend themselves from takeovers they must continue to reduce consumer prices. I also believe, however, that takeovers and amalgamations often produce a combined strength--to which my hon. Friend the Member for Scarborough (Mr. Sykes) referred--allowing companies to compete in an international market place which they would not have been able to do alone.

Mr. Mullin: Does the hon. Lady agree that one of the problems of the takeover culture that exists in British industry, and especially in the City of London, is that it

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obliges companies to be remorselessly short- term in their thinking? One effect of regular takeovers is that everyone is concerned with making the fastest possible buck in the shortest possible time, which is not necessarily conducive to the long-term interests of either companies or customers.

Mrs. Knight: Remarks such as that can be made only by someone who has lived in a sheltered world, perhaps a lecturing establishment, rather than working for companies. If the hon. Gentleman had worked in industry, he would know what an extraordinary comment that was. If--as his expression suggests--he has now decided that he has worked in industry, I suggest that he go back and find out what it is all about.

Mr. Mullin: Will the hon. Lady give way?

Mrs. Knight: No. I have already given way once, and the hon. Gentleman will no doubt have an opportunity to have his say later if he catches your eye, Mr. Deputy Speaker.

It was extraordinary that, in the somewhat mournful diatribe with which he opened the debate, the right hon. Member for Copeland (Dr. Cunningham) should talk about the sale of the national grid. I have news for him: the national grid has not yet been sold. No doubt the right hon. Gentleman is already putting down yet more markers against privatisation. He criticised the difference between the sale price of the regional electricity companies and their valuation now, implying that the companies had been underpriced in the first instance. That increase in the valuation of the companies shows the improvement in their performance since privatisation. We should be proud of that: it demonstrates precisely what privatisation has done.

The hon. Gentleman then quoted one year's electricity price increase. What a selective use of statistics! I also obtained the statistics from the Library, which was the hon. Gentleman's source, and they show a continuing trend of price reduction. Long may that last. In the debate the anti- privatisation lobby has come back out and reared its ugly head. I am sure that we all recall the debate on British Airways when the hon. Member for Glasgow, Garscadden (Mr. Dewar) said that British Airways would be the pantomime horse of capitalism, if it was anything at all. British Airways is now the world's favourite airline.

When we debated British Telecom privatisation Opposition Members said that the public telephone box would be threatened with extinction. The number of call boxes has doubled, and what is more they work. These things mean something to people. British Gas prices have fallen since privatisation but that was never projected by Opposition Members. I do not know whether any of them read the journal Science in Parliament which is sent to us. The one which arrived last week had articles on nuclear power and nuclear privatisation by Greenpeace, which is in favour of privatisation. That is a turn-up for the book, and the articles are well worth reading.

As the House knows, I spent many years in industry before being elected to Parliament. In the years before privatisation the experience with nationalised companies, the state monopolies, was quite different and poorer from what happens today. Those companies, including the electricity companies, frequently ransomed British industry. They were able to do that because they were in state control and, ultimately, they were responsible to the

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