House of Commons Hansard Debates for 15 May 1995

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It is important that a message goes from Parliament to the boardrooms of utilities, to reinforce the message sent by Nolan last week, to the effect that directors cannot continue to cash in their chips at an alarming rate to enrich themselves. Twelve directors of the privatised utilities have become millionaires. Those directors cannot afford to continue in that way and ignore the true needs of their shareholders, their companies and, specifically, the needs of 18 million gas consumers.

Mr. Hain: I support new clause 2, because, for successive months, the Government have been engulfed in sleaze involving not just the behaviour of successive Ministers, as well as of certain Back Benchers, but that of the privatised utilities. The Government have been engulfed by that sleaze because of their failure to get to grips with those privatised utilities and the way in which they are taking the country for a ride. After all, the gas bills that we pay enable the gas directors and others to enjoy the life of Riley. As has been exposed in the past year, our money has paid for the successive share options that they have given themselves and their massive salary increases, which have repeatedly rained upon us, month after month. The new clause is a valuable vehicle because it opens the window on that aspect of Government sleaze. It is obscene that six British Gas directors have been able to award themselves £7 million of share options. They are among the top 50 directors of privatised utilities who have awarded themselves £40 million in share options. Across the board, 131 utility bosses have awarded themselves £100 million-worth of share options.

The new clause would curb that practice, which is particularly reprehensible because it is a form of insider dealing. Those directors are not agreeing to remuneration terms and salary levels that are openly declared and accountable to those attending the annual general meetings. They are stuffing share options in their own back pockets and, at the same time, determining, according to the priorities they set for their company, the value of those shares. They have effectively created a mechanism from which they benefit. That objective is quite different from the other possible business objectives of British Gas, or any other privatised utility. Those directors' performance should be judged by much more rigorous, sensible and acceptable business targets, such as the levels of investment and productivity reached. The extent to which those targets have been met might well lead to the payment of bonuses. Investment is a critical target for any serious industry such as British Gas. Jacking up the share prices and benefiting from them through freebie share options is in direct conflict with investment, because the more share values are driven up, the higher the dividends that are paid to satisfy the insatiable thirst for higher returns on those shares, which, in turn, results from the short-termist economy that the Government have established. Those payments are made at the expense of the needs of British Gas.

The practice of British Gas directors represents a microcosm of what is wrong with the British economy. The Government have created a short-term, speculative, money-for-nothing economy. The behaviour of the British Gas directors exemplifies that. That small elite, in their privileged position, think that they can simply exploit that

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economy for all they are worth. The share option manoeuvre is a particularly reprehensible example of such exploitation.

As my hon. Friend the Member for Edinburgh, South (Mr. Griffiths) has said, it is not surprising that the share option manoeuvre is part of the wider picture of Cabinet Ministers leaving the Cabinet room for the boardroom. Lord Walker helped to privatise British Gas and he has now ended up on its board. I do not think that my constituents can understand the extent to which Members of Parliament are indifferent to the sleaze that now grips them.

Mr. Patrick McLoughlin (West Derbyshire): The hon. Gentleman has stressed how former Cabinet Ministers have joined the boards of particular companies. If there were a Labour Government at some time in the future, what would he think about sponsored trade union members acquiring ministerial responsibility for those industries by which they had been sponsored?

Mr. Hain: I do not think that the hon. Member has the power to invite me to take on a job.

Mr. McLoughlin indicated dissent .

Mr. Hain: The hon. Gentleman is not being as charitable as I thought. Is he seriously trying to suggest that I as a sponsored Member--I represent Post Office interests--might be barred from taking up a post in the unlikely event of being offered such a responsibility? That is nothing like someone in Cabinet, responsible for a privatisation that handed millions of pounds in share options and other means to the board, being invited by that very board to serve on it. That is the old boys network in operation. Those people are systematically lining each others' pockets. That is quite different from the example that the hon. Gentleman quoted.

Madam Deputy Speaker: Order. I am not sure that it has anything to do with new clause 2 either. Perhaps the hon. Gentleman would return to the point.

Mr. Hain: I am pleased to do so, Madam Deputy Speaker. Your intervention was welcome-- [Interruption.] --but not for the reasons about which right hon. and hon. Conservative Members are now happily smirking. I am happy to defend my argument, but the hon. Member for West Derbyshire (Mr. McLoughlin) introduced a red herring. Without disobeying your dictum, Madam Deputy Speaker, I should like to say that it was interesting to note the reports in the Sunday newspapers that a number of Ministers were considering pressing the Prime Minister to dismiss them early, so that they could take early retirement and get in before--

Madam Deputy Speaker: Order. I have exercised my judgment: the hon. Gentleman is quite out of order.

Mr. Hain: I accept your judgment, Madam Deputy Speaker, since I have absolutely no option. I was unreasonably provoked by the hon. Member for West Derbyshire and perhaps you will bear that in mind, in mitigation.

I return to my central argument. Many of my constituents cannot pay their gas bills because they cannot even obtain a supply of gas to their homes. The Minister may be weary of my quoting that example, but many people who live up valleys in my constituency--in the

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Swansea valley, in villages such as Cwmllynfell and Rhiwfawr and, at the top of the Dulais valley, in Seven Sisters and Banwen--have campaigned for years for gas to be supplied up to their villages, and I have supported their campaign.

Gas has been supplied, in some cases, to places less than a mile away from those villages. British Gas has informed me that the total cost of supplying those villages with gas would be less than £3 million; yet six of its directors have received £7 million in share options--more than twice the cost of supplying gas to those villagers who desperately need it. It is a straight trade-off. My constituents do not understand, and I do not understand, how the Government can possibly defend a position whereby share options are dished out like confetti raining down at a wedding or on some similar occasion, when my constituents cannot obtain a gas supply that would cost half the sum that British Gas directors have awarded themselves in share options.

There is a straight trade-off between the creation of millionaires and the misery resulting. New clause 2 would give the Government the power to instruct the Director General of Gas Supply and ensure that that abuse-- that type of insider dealing and lining of pockets by senior utility bosses, specifically of British Gas--should cease. The gas industry is, yes, a privatised operation now; nevertheless it should, as a national champion, set high ethical standards that are respected by customers throughout the country and that will cause low-income customers especially to understand that they are in a fair society--not an unfair society rigged against them, in which millionaires continue to make money yet, if customers cannot pay their bills, their gas supply is cut off. That type of discrimination and exploitation should end. New clause 2 may give the Government a vehicle for ending it.

Mr. Clapham: New clause 2 and amendment No. 54 are enormously important.

New clause 2 seeks to impose price penalties on companies where there is excessive executive pay. My hon. Friends have given many examples to show how needful that is.

Clause 54 requires companies to publish details of executive remuneration as a standard of the licence condition. It seems perfectly fair that people should have access to information about remunerative packages paid to executives of utilities.

In some of the press reports about what is likely to happen in the nuclear industry, it has been suggested that a provision similar to new clause 2 would be part of any new legislation for privatisation of the nuclear industry. Perhaps the Minister will enlighten us as to whether that is correct.

New clause 2 gives the Secretary of State responsibility for directing the regulator as to the way in which executives' salaries should be taken into account when setting maximum charges for gas supply, transportation and shipping. That gives the Government indirect power to solve the problem of excessive executive pay packages--the most prominent example being, I suppose, the doubling of Cedric Brown's basic salary at the same time as British Gas showroom staff were asked to take pay cuts.

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Subsection (1) of new clause 2, makes it plain that

"The Secretary of State shall from time to time issue guidance to the Director as to the matters he is to take into account in exercising any powers specified in the conditions of a licence granted under section 7 or 7A of the 1986 Act to limit, vary or otherwise control the charges set by a licence holder for the supply, transportation or shipping of gas."

5.15 pm

The Minister will be aware, from the Select Committee on Trade and Industry report on the domestic gas market, that the evidence given to the Committee showed that the cost per therm of gas left little room for competition. The report showed that the cost of gas is likely to be about 21.5p--43 per cent. of the total cost per therm. Those were the figures given by British Gas. Transportation and storage was given as 22.5p--45 per cent. of the cost per therm. The supply and trading costs were given as 6p--12 per cent. of the cost per therm, which is reckoned at 50p. That leaves very little room for any changes to be brought about as a result of competition. I think it is generally accepted that the cost of gas to all the companies likely to be involved in the domestic market will be very similar. Transportation and storage costs will also be very similar. That leaves only trading costs, in which there is likely to be a great deal of competition.

Therefore, not only is it important that consumers are given the opportunity to evaluate the performance of the companies, which may be reflected in some of the price changes that come about, but it is important that they have access to the information regarding the remuneration packages paid to the directors. That is all the more important when it is obvious that the focus of competition will be on that very small part of the cost of a therm of gas.

The powers set out in new clause 2 would allow the regulator to ensure that directors' pay not justified by performance was funded from shareholders' pockets rather than higher prices.

Relying on the future recommendations of the Greenbury committee--to which the Minister referred during discussion in Committee--is not on, because one might liken the Greenbury committee to putting the mice in charge of the cheese. The committee is made up of millionaires, many of whom draw large salaries from their business activities. If they are to make judgments about the remunerative packages to be paid in the utilities, many Labour Members will not expect the Greenbury committee to come up with dramatic or radical changes to the remunerative packages proposed for executives in the utilities. The Government's response to new clause 2 will show the general public how serious they are about wishing to tackle the problem of directors who award themselves increases unjustified by performance. If the Government oppose the clause, they will demonstrate that the Prime Minister is unwilling or unable to give any substance to his claims of concern about excesses, and that the Tories remain the party of those who would turn a blind eye to the privatisation rip-off and corporate sleaze.

I would expect the Minister to take new clause 2 and amendment No. 54 on board. As well as being necessary for the regulator to control corporate access, amendment

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No. 54 is justified on its own merits. Consumers should be able to discover easily how much the directors of public utilities are paid and to assess whether it is a fair amount. Opposition to the new clause is a vote to continue to prevent the utilities from being held accountable to the public.

Ms Coffey: The Government's response to the recent outrage over the profits that the chairmen of the public utilities have earned--or rather, not earned, for that is the problem--has been low level. The Government's response demonstrates how out of touch they are with what the ordinary member of the public feels about what is happening.

The public do not regard gas as a just another commodity, even though the Government have been trying hard to persuade them that it is. Gas is not seen as a commodity by the public, but as an essential service for which they have to pay out of their income. Over recent years, most of the public have suffered a cut in their income. They have to manage within a limited income. Their pay may have increased minimally, in line with inflation, but they still have to pay all their bills out of a limited income.

Gas is a service for which the public have to pay. The Government have gone to great pains to explain that the benefits of privatisation have included a decrease in the price of gas, but the decrease has affected some consumers and not others. It is not the price of the service that irritates the public beyond belief, but seeing something which belonged to them, and which was transferred to the private market for their benefit, being used by a few people to line their own pockets. That has caused public outrage.

The money that the directors and chairman have earned is beyond the wildest dreams of most working people in this country and seems out of all proportion to anything that people could reasonably earn by the job that they do. People have rightly asked what the chairman has done to earn so much money. The answer is not that the chairman has done anything to earn the money, but that he has got the money because he is the chairman and is able to award himself the money. The ordinary people of this country-- particularly those who have been asked to make sacrifices and those who work in the public sector--do not like that system.

We can compare the earnings and the share options of the chairman of British Gas with what nurses are able to earn and what they have been asked to take in wage increases. The British public regard nurses as just as valuable as the chairman of British Gas. They see an enormous disparity between the two sets of earnings, which they believe to be inequitable and unfair. They cannot understand why the Government are unwilling to do something about that. The Government are not willing to criticise the system or to take action to ensure that the British sense of equity and fairness is not outraged. The British people ask why, in a privatised industry, one person's contribution should be considered so valuable that he can earn an inordinate amount of money in an annual salary and become a millionaire through the exercise of share options, while other employees who contribute to that industry are rewarded with wage cuts and, in some cases, redundancy. The British people wonder why the chairman is worth so much and an

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employee is worth so little in comparison. In an industry, everyone contributes and everyone's contribution is valuable and worth while. The Government's argument has always been that huge salaries are paid and chairmen receive enormous amounts of money through exercising their share options because it is important that a private utility has the best possible chairman. The Government say that they are simply following the practice of the private market. The private market may adopt that practice, but there is a great deal more competition in the private market than in the public utilities. British Gas is a monopoly, the regional electricity companies are monopolies and the water companies are monopolies. People think that perhaps it is not so hard to manage a monopoly when consumers have no option but to buy the service being sold. The analogy between British Gas and what is happening in the private market elsewhere does not hold up. The public utilities will always be a special case because they sell essential services and they will always have to be open to regulation to ensure that they do not rip off the public through price increases. That is why we have regulation. The public know that, and they bitterly resent what is happening.

The purpose of the new clause is to give to the regulator an opportunity to look at what is happening and to relate the remuneration of the chairman of British Gas and his executives to the company's performance. There must be some sort of performance-related pay. There must be some reason to award oneself hundreds of thousands of pounds in bonus, albeit through share options. The person involved has to have done something to earn the money-- it is not just manna from heaven--and it is difficult to see what has been done for such sums to be earned in British Gas.

People might understand the bonus or level of salary if they could see what it had been paid for. A number of criteria for measuring the performance of British Gas could be drawn up. They could include its performance in terms of customer care, in terms of helping low-income customers and in terms of ensuring that services are accessible to the public, its investment record and its relationship with its employees.

As my hon. Friend the Member for Neath (Mr. Hain) said, in this country too much time is spent considering companies' and industries' performances simply in terms of their share prices and their dividend yield. Criteria which go beyond that should be applied in determining the quality of a company. British Gas, the regulator or the Minister could show the lead and apply such criteria to the public utilities to set an example to the rest of British industry. It could be shown that the criteria should involve not merely short-term success, but the long-term health of an industry.

I hope that the Minister will respond positively to the amendment. In previous debates on the subject, he has said that the Opposition have been motivated by the politics of envy and do not like people to earn too much money. We do not like people being awarded too much money when they have not earned it. The important word is "earning". In this country we believe that people should earn what they receive and we believe that everyone's contribution to an industry is important.

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The Minister should recognise the public sense of outrage at what is happening. Most members of the public believe that there will be a continuing inequity, and that the gap in earnings between those who do a decent day's work and those who sit in the boardroom is becoming too big. Sitting in the boardroom and good management are important, but gas fitters and the people who do the job are also important. Those people must be justly rewarded. One man or group of people should not be rewarded far in excess of other people.

Mr. Eggar: I enjoyed the speech of the hon. Member for Stockport (Ms Coffey), not least because she suddenly had to correct herself a number of times during her prolonged peroration to say that the Labour party is sometimes in favour of management and sometimes in favour of high pay, as if the new Labour piece was getting into her brain and she was remembering the right words so as not to undermine her credibility with the current trend within the Labour party. New clause 2 is extremely pernicious, for all the words uttered in particular by the hon. Member for Clackmannan (Mr. O'Neill) from the Front Bench. It would fundamentally undermine the basis of the regulatory system as the independence of the regulator is the cornerstone of the way in which regulation is approached, not just here but in virtually every country around the world.

5.30 pm

The reason for and the importance of the regulator's independence is that it removes political interference from the management of the regulated utility. New clause 2, more unashamedly than any previous amendment, seeks to reassert political control over the management of the gas industry.

Mr. Kevin Hughes: Hear, hear.

Mr. Eggar: "Hear, hear," says the unreconstructed hon. Member for Doncaster, North (Mr. Hughes).

Despite all the honeyed words of the Leader of the Opposition and occasionally other Labour Front Bench spokesmen about their dedication to make industry more effective and their commitment to competition, what they really feel in their hearts is that they want political control over the management not just of the gas industry but all parts of British industry. They have not really put their hearts into a new clause IV, it is all just part of an elaborate con.

Mr. Nigel Griffiths: We want to know what new Conservatives are thinking and whether new Conservatives are the same as old Conservatives, backing those with their snouts in the trough, the corporate greed and the absolute abuses that have even brought The Sun , the Daily Mail and the Daily Express on to Labour's side on this issue.

Mr. Eggar: That was a pretty feeble attempt by the hon. Gentleman. At least some of the more honourable Labour Members admitted that the Labour party wants to reassert political control of the gas industry. I am delighted to see that the hon. Member for Neath (Mr. Hain) is smiling, as that is straight down his view of where the Labour party should be.

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The Opposition want to go further than reasserting political control. In the terms of the new clause, they want to do it directly by reintroducing an incomes policy through the back door. That is what lies behind new clause 2.

Neither today nor at any stage in Committee have the Opposition introduced a shred of evidence to suggest that there is any logical reason to relate price caps on the one hand to board pay on the other. The reason for that is quite clear. First, even if one takes the total remuneration package for the whole of the British Gas board, which came to some £2.3 million last year--

Mr. Kevin Hughes: Per month?

Mr. Eggar: No, per year. That represents a cost of about 1p per month on each gas consumer's bill.

In addition, we heard some absolutely absurd figures from the hon. Member for Edinburgh, South (Mr. Griffiths). If he follows the precedent of the level of research to which he has risen in the debate when he attends the British Gas annual general meeting, as he has promised to do, he really will be made a mockery. He fails to understand that the vast bulk of the share options to which he referred were offered at only 9p per share below today's price on the stock exchange. The vast sums that he mentioned bear no relation to the potential or actual profit that could be exercised today.

Mr. Nigel Griffiths: The Minister needs a lesson in accuracy as well as economics. The exercised price was 221p and the latest market price is just over £3--302p or 304p--so the difference is more than 9p.

Mr. Eggar: The hon. Gentleman is following his long established tradition in misusing the Short money made available to the Opposition. The vast bulk of those share options were offered at 293.5p and today's price is 302.5p. The difference in broad sums is 9p per share. That is the reality. The hon. Gentleman should at least be honest with the House and accept that those were the terms on which the vast bulk of those share options were made available to current board members.

Mr. Hain: The Minister pooh-poohs the impact on ordinary customers of these bloated share options for British Gas directors and says that it is matter of a few pence on bills. No doubt the arithmetic proves his point. How does he explain to my constituents--who were told that British Gas cannot afford to extend supply to the Dulais valley and the Swansea valley as it will cost about £3 million--that six directors are being offered £7 million in share options? That is not a few pence, and it is a straight comparison. How does he explain the justification for that?

Mr. Eggar: I must congratulate the hon. Gentleman on his persistence on that particular issue. I assume that the voracity of his local papers is absolutely unlimited, as it is the third or fourth time that he has raised the issue. First, I do not accept his figure in regard to the share options. I suspect that he has failed to take account of the price at which the shares were offered, but that is a minor point.

We have already discussed in Committee the particular problem that his constituents and, to be fair, the constituents of many hon. Members may have with regard to getting on

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to the gas grid system. I explained in detail how the provisions of the Bill will make it possible for public gas transporters other than British Gas to access the national grid and to provide a gas grid system into areas previously been isolated from the grid. I also made it clear that the change in the ability to pay effectively by instalments for the capital works associated with the gas grid should also provide vendors of the services--the public gas transporters--and consumers with possibilities which did not previously exist. As the hon. Gentleman well knows, I cannot say that, as a result of the Bill, those communities will get on to the gas grid system, but there will be opportunities available which did not previously exist. That should at least be some reassurance to him and to his constituents. In fairness to the hon. Gentleman, he has most persistently opposed the Bill. He has always made it clear that he does not support it. I am not quite sure how he squares his opposition to the Bill with the advocacy of the interests of his constituents, when he has at least admitted that the Bill will make it easier for public gas transporters to bring gas to the fairly isolated communities that he represents. Perhaps he and his local paper should reflect on the level of inconsistency in his position with regard to the Bill as a whole.

Madam Deputy Speaker: Order. I remind the Minister that we are not dealing with the whole Bill; we are dealing with one clause and one amendment.

Mr. Eggar: I fear that I have been led down a path that I should not have followed.

Mr. Hain: Enticed.

Mr. Eggar: I was enticed--to use the hon. Gentleman's word--by the nature of the intervention. I am grateful to you for setting me straight, Madam Deputy Speaker.

In discussing the board level salaries in British Gas and other entities, an important factor is persistently overlooked. British Gas is regulated according to an RPI minus X formula--in other words, the price at which it sells is the important factor. If the industry's costs rise above the level anticipated or above those of its competitors, the impact will be felt by the shareholders and not by the customers who have the advantage of the RPI minus X formula. The idea that somehow high salaries are awarded to board members at a cost to the customer simply does not stand up against any scrutiny of the way in which the regulatory system works.

When the level of the RPI minus X formula is reviewed, the regulator in this industry, as in others, must take account of whether she regards the level of cost in that organisation--including the total remuneration of the board--as appropriate when setting X. That normally occurs on a five-year basis, although it may be earlier in the case of gas.

Mr. Nigel Griffiths: When my colleagues and I met the regulator, she spelled out very clearly that she did not even look at salaries in the boardroom. However, the Minister has implied that she examines that cost in arriving at an RPI minus formula.

Mr. Eggar: It is one of the factors that the regulator may wish to take into account when setting the formula. She may choose not to do so; it depends on the way in which she approaches the issue. If new clause 2 were to be supported, it is absolutely clear that there would be political direction

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of the regulator and political interference in the working of the gas industry and that, in effect, an incomes policy would operate through the back door. The hon. Member for Edinburgh, South shrugs his shoulders; it seems extraordinary that the Labour party, which the shadow Chancellor claims is in favour of competition, should take that line. That cannot be the correct way to proceed.

Kevin Hughes: The Minister has referred to an incomes policy. It seems to me that the fat cats already have an incomes policy: grab as much as they can for themselves. Does the Minister seriously think that in excess of £400,000 is a fair salary to receive for three days' work? It is interesting that the first time that Tory Back Benchers spoke in Committee was to defend their mates, the fat cats, and their fat salaries.

Mr. Eggar: The decisions that are taken as to the level of salaries are a matter for the board and the remuneration committees. At the end of the day, the shareholders have the ultimate say about salary levels. They can exercise whatever powers they choose. As the hon. Gentleman knows, the Government have made it clear that we will consider the recommendations of the Greenbury committee. If the committee recommends legislation in this area, we shall not hesitate to legislate if we consider that appropriate. We do not rule out legislation in this area.

New clause 2 is fundamentally flawed. It involves the introduction of an incomes policy by the back door and political direction of the gas industry and it completely contradicts the broad thrust of Opposition policy as advanced by the shadow Chancellor.

5.45 pm

Mr. O'Neill: It would appear that it becomes a political direction for the regulator when the House decides that the salaries and the conditions of directors should be taken into account, yet it is not a political direction if the regulator is required to take account of environmental factors or social responsibilities in relation to the elderly. Those issues are not considered political, but directors' pay is. Somehow the whole regulatory function is transformed because the pay and conditions of a small group of full-time employees--with the exception of the chairman of the company--must be examined by the regulator when determining price levels.

We know that in most instances salaries can be justified to a certain extent. They cannot be justified publicly because the remuneration committee does not meet in public. As I understand it, when the salary of the present chairman of British Gas was increased above the company's limit for directors' salaries, that decision was not transmitted to the annual general meeting in the year that it was made. As a result of such a lack of transparency, shareholders are unable to establish the basis on which decisions are taken. They may be able to ask questions at the AGM, but they are not told of the rationale behind the decision in the company papers or in the final accounts.

There is no means of ensuring that shareholders are clear about why certain individuals are receiving such pay awards. The awards may be based on some kind of notional performance, but, if so, one would imagine that the stratospheric levels that have been breached by the pay rises that certain individuals have enjoyed of late would somehow be related to the company's performance. In

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some instances that has been true, but when producing her figures the regulator is not obliged to separate the regulated areas of business from the unregulated areas. Therefore, she is at a certain disadvantage.

There appears to be a link between profit, performance and pay. We know--no one disputes this fact--that the cost of directors' salaries amounts to about 12p per annum per household. It is not significant in terms of profits; we will not reduce prices significantly by cutting directors' salaries to zero. However, the public are concerned about a company that operates in almost monopoly conditions being able to afford to pay its directors salaries that are beyond the expectations and understanding of most ordinary citizens. What we find offensive is the manner in which pay awards are made and reported to the company's shareholders and the fact that the regulator is powerless to take account of them in calculating whether price rises are acceptable. An element of responsibility must be given to the regulator.

Major investors and people representing pension funds and the like repeatedly tell us, as they told my hon. Friend the Member for Edinburgh, South (Mr. Griffiths) just last week, that they are concerned. We must often explain to them that, when in office, the Labour party will have to recognise the protection of the consumer and of the company, its long-term future and the significance of ensuring a steady stream of investment into the company, so that its activities can be funded by means other than purely increasing its bills. We recognise that those three objectives must be balanced and that, to a certain extent at least, responsibility for doing so rests with the regulator and with the regulatory system.

There is a lack of confidence among consumers. As publicity of the pay rises and share options given to senior British Gas executives has increased, people have said, "If they are getting such big rises and doing such a good job, how come I am not getting the service that I think I am entitled to for the whopping bills I am having to pay?" That is why, in the space of three months, the number of complaints increased by 93 per cent. and why the Cabinet has threatened British Gas with withdrawal of its charter mark.

We find, however, that the regulator can do nothing. She cannot question the manner in which the company is being run. We want her to be given the opportunity to take note of such matters. She should be required to take pay into account, not least because of the effect of a significant pay rise on the running of a firm.

If the public feel that executives are not ensuring a good service and are being paid far too much, someone must be able to blow the whistle. We know that not all investors, and not all those who will attend the AGM with their proxy votes, will be that concerned. Many of them have a vested interest in sustaining the remuneration system that affords directors of British Gas and of the companies that they represent the pay that they receive. This is about not the politics of envy but the politics of greed and the ability of a small coterie of interlocking directorships to scratch each other's backs and to ensure that they all get a bit of the action out of companies for which they have some responsibility.

It is difficult for major shareholders to get on to the board and to have an influence. Attempts were made by unions such as the National Union of Mineworkers to influence the investment policies of certain companies in South Africa. They were told that they could not do so

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because commercial judgments were the responsibility of investors. It was proven that sustaining investment in South Africa over the years was not the correct investment decision. The decision of investors ultimately to withdraw from South Africa was a major contributory factor in the ending of apartheid.

I am not drawing analogies between the rate of pay for directors in the former utilities and the working of apartheid, but the same supine attitude that was adopted by people who attended board meetings of major investors in South Africa prevails today at general meetings of some of the utilities. The legitimate concerns of small shareholders and of pension fund contributors and the like are being ignored. One of the most satisfactory and easy ways to take those into account is to give responsibility to the regulator to consider remuneration when she considers price and its relationship to profit.

Ms Coffey: Does my hon. Friend agree that there appears to be some confusion in the Minister's argument? He said that giving such a responsibility would give some political control to the regulator and that, therefore, he is not prepared to have anything to do with it, but then said that if the Greenbury committee makes recommendations the Government might legislate. In legislating, they would be prepared to take political control. Is it just that the Minister is washing his hands of the problem because it is too difficult?

Mr. O'Neill: We shall just have to wait for the Greenbury committee's recommendations. Many of us doubt that it will produce very much. The Prime Minister said:

"we are waiting for recommendations on that, and, when necessary, when the facts are available, we shall decide what action needs to be taken, if necessary, including legislation."--[ Official Report , 2 March 1995; Vol. 255, c. 1182.]

We all know the genesis of the Greenbury committee. It was proposed by the Confederation of British Industry. Its members include those who have benefited from the working of the system. We will all be surprised if it will be able to be sufficiently objective to make recommendations that will satisfy everyone in the House, or at least that will require the Prime Minister to introduce legislation. Most of us believe that it is a fairly cynical exercise.

We want the Government to take this opportunity. We want the regulatory system to be revised. We have been operating under a series of regulators for about 11 or 12 years. This is the first opportunity to examine legislation on a former nationalised utility and, in the light of experience under private ownership, the effectiveness of the regulatory system. That is why we repeatedly returned in Committee to the question of how the regulatory system operates.

We have clearly identified a major shortcoming in the regulatory system: the regulator does not have to take account of the rewards that companies pay their staff when determining prices. The new clause and the amendment would allow the regulator to take account of that, in the same way as she must take account of other issues that are deemed, in most people's eyes, to be political: the environment, the level of gas supplies and the needs of the disabled and elderly, which we recognise. If those are not political issues, heavens above, I do not know what are.

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Members of the public in wheelchairs chained themselves to the gates of the House of Commons because disabled people's rights were not being properly recognised in the House. That is a matter of such controversy by dint of it being political. It is nonsense for the Minister to say that, somehow, the regulator will be drawn into politics if the new clause is accepted. If it is passed, the regulator will be drawn into the real world.

For too long, the major energy regulators in the electricity and gas industries have regarded their areas of responsibility as some sort of free market adventure playground where they can work out their fantasies about perfect competition. That was the kind of thing in which, in the past, only academic economists were able to indulge on the blackboards or whiteboards in their lecture rooms. They were given large, expensive toys with which to play but they did not want to break those toys. They regarded them as being made of porcelain and felt that they should not touch then. Because the system has not been properly considered, it is working against the very people for whom the regulator is supposed to be responsible first and foremost--consumers and shareholders.

6 pm

Mr. Clapham: I mentioned a reference in the press to legislation on the privatisation of the nuclear industry containing a clause similar to new clause 2. The Minister did not refute that similarity. Would my hon. Friend like to develop that point?

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse): Order. I hope that the hon. Gentleman will not develop that point. This debate concerns the gas industry, not the nuclear industry.

Mr. O'Neill: I will not stray, Mr. Deputy Speaker. Suffice to say that, when an industry is privatised, it is difficult to legislate beyond the point of privatisation. A free-standing, independent company is established, whose articles of association are determined not by the privatisation measure but by company law and the regulatory process. The regulatory process under which British Gas operates does not take account of the pay and conditions enjoyed by its directors. The amendment would correct that shortcoming by changing the regulatory regime.

Mr. Hain: Does my hon. Friend agree that the regulatory system is being brought into disrepute and that many customers and citizens feel that it is not protecting them because of massive abuses caused by boardroom excess, with directors awarding themselves share options and so on? People think, "This is not for me." The regulator is supposed to protect the consumer but she is turning a blind eye to greed on a massive scale.

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