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Mr. Paddy Tipping (Sherwood): The President of the Board of Trade has not mentioned the privatised water companies. What would he say to Severn Trent Water which, the day before the Budget, announced an increase in profits of 75 per cent. to £160 million, but offered its customers a rebate of only £4 a year? That is not value for money for the customer.
Mr. Lang: The hon. Gentleman seems to overlook the fact that the water industry has for a long time needed increased capital investment. Like all publicly owned utilities and nationalised industries, it has been starved of resources over the years. It is now in a position to raise the necessary money through the private sector and in the market. Yorkshire Water plans to invest no less than £2.5 billion over the next 10 years. Such an upgrading of the system could not have been contemplated under the previous arrangements, but can be now.
The privatised utilities have benefited not only consumers, shareholders and the Exchequer, but the economy. The privatised industries are investing in modern infrastructure that will benefit Britain for decades to come, and they have had an unparalleled record on investment since privatisation. More than £25 billion has been invested by BT on modernising the network and installing new technologies, and more than £4.5 billion was invested in telecommunications last year. Fifteen billion pounds has been invested in water to date, which answers more specifically the question asked by the hon. Member for Sherwood (Mr. Tipping). Our water companies are now delivering some of the cleanest water in Europe. By comparison, under the Labour Government, capital investment fell in electricity, gas, telecommunications and water.
Against that background, it can be said with certainty that independent regulation of the utilities. operating at arm's length from the Government and with competition introduced wherever possible, has worked well. It
provides incentives for companies to improve their performance and mechanisms to ensure that customers benefit from the improvements. The regulators have also required the utility companies to meet demanding new standards of service. As a result, customers have benefited in respect of price and quality of service.
There is never a shortage of ideas for changes to the regulatory system. Where those changes would help the regulators with their job and improve public understanding of what is being done, the regulators themselves are quick to respond.
The regulators have wide powers under existing legislation to introduce changes to regulation, but they are all putting increasing emphasis on consultation before taking major decisions. They actively encourage public debate through consultation papers, explanatory reports and discussion at conferences and other open occasions. The wider involvement of interested parties raises the quality and integrity of decision making as the regime develops.
Some of the regulators have appointed, or are considering the appointment of, groups of advisers to help with specific issues or for continuing advice. That is a sign of a flexible and responsive regulatory system. In addition, as competition develops--for example, in the telecommunications market--the regulator seeks to remove detailed interventionist rules. That will allow companies to respond more flexibly and innovatively to customer needs and market developments.
The current structure is highly adaptable, so there is at present no case for fundamental change. As I said, the regulatory system is in an evolutionary phase. The process will no doubt continue, and rightly so. The Government will certainly continue to keep the system under review to ensure that it reflects the developing market.
As the system evolves, however, it will build on a record of solid achievement. Independent regulators and increasingly tight price formulae, with an incentive element built in, have been delivering impressive results to customers and developing impressive utility companies at the same time, but competition rather than regulation is the key to even greater improvements.
There is no doubt that there is scope for more competition and, therefore, more consumer choice, especially in the energy and water sectors. Competition between suppliers is already a fact of life in telecommunications and for medium and larger users of electricity and gas. It has produced clear benefits, which are important for the international competitiveness of British industry.
We are determined to press ahead with the further opening up of the markets. The first phase of the introduction of competition to the domestic gas market will take place next year, with full competition in 1998. The electricity industry is also preparing for full competition in 1998. Also in 1998, all users of electricity and gas will have the opportunity to benefit from competitive choice--on top of the large reductions in energy prices which they have already experienced or which are in the pipeline.
There is also scope for extending competition in the supply of water and waste water services, in the first instance for larger users. Consequently the Government are working on proposals with the Director General of Water Services and will publish a consultation paper early
next year. This all shows that, as a result of the Government's policies, we have a dynamic evolving utilities sector which is increasingly delivering, at lower cost than before, the services that customers want.
We have not restricted our efforts to deregulate and increase competition to the private sector.
Mr. Tim Smith (Beaconsfield):
Is my right hon. Friend aware that his announcement that electricity customers are likely to benefit from reductions of, on average, up to £90 in their bills next year is extremely welcome? What effect does he expect that and, in particular, the £50 National Grid rebate, to have on the retail prices index?
Mr.Lang:
I can, with confidence, say that it will drive the RPI downwards. It is more difficult to calculate the precise effect that it will have on the RPI. In the long term, the price reductions that have been coming through in all the utilities that I have mentioned will undoubtedly be of great benefit in reducing the cost of living.
The public sector has also been opened up to the rigours of the marketplace through the private finance initiative. The PFI brings together the public and private sectors to the advantage of both. It brings the enterprise and discipline of the private sector into areas which have, until recently, been regarded as the domain of the public sector. The state cannot and should not try to do everything. We need to find new, innovative and more efficient ways of delivering public services and major capital investments. The PFI enables the Government to move away from being the provider of services to being an intelligent purchaser of services for the taxpayer.
The PFI will generate increased investment in infrastructure and public services. The Government are on course to let contracts worth £14 billion over the next three years--£5 billion this year alone. Substantial progress has already been made across a range of Government activities. For example, a deal was signed earlier this year with GEC Alsthom to supply a new train service for the Northern line. The first tranche of contracts for design-build-finance-operate road projects is due to be signed shortly. A further £500 million-worth of privately financed road schemes was announced by my right hon. and learned Friend the Chancellor on Tuesday. The net result will be the better and more efficient delivery of services.
Sir Michael Grylls (North-West Surrey):
I am listening carefully to what my right hon. Friend is saying about the PFI, which is a marvellous innovation that should be useful. To help it work more efficiently and speedily, will my right hon. Friend consider bringing in outside business men and women to advise Government Departments as they negotiate contracts?
Experience seems to show that, generally, civil servants are not very good at negotiating. If people were brought in from the private sector, the PFI might get going much faster.
Mr. Lang:
My hon. Friend makes a positive suggestion and I am glad that my right hon. and learned Friend the Chancellor is sitting on the Front Bench to
As for the issues that we are considering in the Budget debate, we listen and wait in vain for any sign of the Labour party's policies. The Labour party does not have a view on any issue that arises in the debate. It has no view on taxation; it has no view on the level of interest rates; it has no view on inflation.
Perhaps the right hon. Member for Derby, South (Mrs. Beckett) will enlighten us all today. We know that, in general terms, the Labour party wants to raise spending and introduce more policies that would cost money but, although it generally wants lower taxes, it abstains on my right hon. and learned Friend's Budget when it comes to resolving the issue. What a wonderful posture of high-mindedness and principle the Labour party adopts to seek to persuade the electorate that it represents their interests.
We know that the Labour party wants to raise spending, but we know that it is not prepared to face up to the issues of funding; we know that it wants to reduce taxes, but when we introduce proposals to reduce taxes across the board it abstains. Its sole interest is in party political advantage instead of the national interest. Why else would it take every opportunity to talk down the country?
I should like to offer it a few facts that will help it to stand up for the country for a change.
Our gross domestic product per head is 10 per cent. ahead of that of Europe as a whole. During the past 15 years, our growth has been faster than the average growth of the European Union. Our living standards have risen by 40 per cent. since 1979, whereas they rose by only 1 per cent. under the Labour Government. This year's Budget will help further to increase that figure of 40 per cent. With the fastest productivity growth rate, we have closed three quarters of the gap in manufacturing productivity with France and Germany since 1979--a gap that widened under the Labour Government.
Since 1979, total investment and total investment in the business sector have risen faster than in France, Germany or Italy. The 1980s were the first decade since the second world war in which our economy grew faster than those of Germany and France. The UK now has a higher proportion of its population of working age in work than any other major European Union country.
Those are some signs of the progress that has been made in recent years under this Government. We have achieved success through the huge structural changes that we have made to our economy--making it more competitive and freeing up enterprise. Britain is now well placed to build on the significant progress that has been achieved.
My right hon. and learned Friend the Chancellor has delivered a good Budget for business. He has delivered a Budget that furthers the competitive gains that we have made during the past 16 years. He has delivered a Budget that reinforces the Government's commitment to permanently low inflation and sustained economic growth. He has delivered a Budget that reduces taxes and provides incentives for saving.
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