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House of Commons

Wednesday 15 May 1996

The House met at half-past Nine o'clock

PRAYERS

[Madam Speaker in the Chair]

Privatisation

Motion made, and Question proposed, That this House do now adjourn.--[Mr. Bates.]

9.35 am

Mr. John Marshall (Hendon, South): When Baroness Thatcher formed her first Administration in 1979, she was committed to a policy of privatisation because she believed that it would increase industrial efficiency, that it would lead to higher investment once the industries were removed from the dead hand of the Treasury, that the industries would provide a better service for the consumer and that that was in the national interest.

It is significant that in 1978-79, the external financing requirement of the nationalised industries was £2 billion. It is ironic that today they pay into the Treasury as much in corporation tax as they took out of it that year for their financial needs. The true extent of the Thatcherite revolution can be seen from the fact that when the Leader of the Opposition went to the United States he assured the Americans that it was safe in his hands.

Privatisation has led to a massive increase in investment. For example, British Telecom has invested more than £20 billion and it has given £7.6 billion back to the taxpayer in corporation tax. The water industry has invested £15 billion--with Thames Water investing £2.5 billion and South West Water investing more than £1 billion. PowerGen has invested more than £2 billion.

Investment has been accompanied by a massive increase in efficiency. For example, in British Telecom the number of full-time employees fell from 241,000 in 1984 to 137,500 in 1995. At the same time, the number of exchange line connections increased from 19,828 to 27,077 and the number of connections per employee increased from 82 to 197--an increase of 140 per cent. over 11 years.

British Gas, PowerGen, National Power, British Airways, the British Steel Corporation and the regional electricity companies have also experienced increases in efficiency. For example, British Steel saw a reduction in the number of its employees from 67,000 in 1986 to 40,000 in 1995. Turnover per employee more than doubled over that time and productivity increased by 50 per cent. PowerGen did even better in terms of productivity--it doubled over five years.

London Electricity's sales per employee increased by one third over four years. Over four years, it reduced the number of its employees by 26 per cent. and it increased capital expenditure by 22 per cent. British Airways--the world's favourite airline--is no longer subsidised and it

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saw a growth in productivity of 60 per cent. between 1987 and 1995. In British Gas sales per employee increased by 120 per cent. between 1985 and 1994.

There are those who would say that the reduction in the number of employees created unemployment, but that is not true. One has to look at employment in the economy as a whole. One does not increase employment in the energy-intensive industries by forcing them to pay more for their gas and electricity. The price of gas and electricity has dropped in real terms, which has led to increased employment in energy-intensive industries because they are now much more competitive. We have to recognise that it is unfair to force pensioners and the low paid to pay more for gas, as happened when the industry was nationalised as compared with when it is in the private sector.

Productivity increases have been accompanied by a dramatic rise in the quality of customer service. When I lived in Ealing in the early 1980s, I remember getting off the train and trying to use a pay telephone at the station. One could guarantee that many telephones would not work. I shall cite some figures that demonstrate the huge improvement in the pay telephone service in this country. In 1987, there were 80,000 pay telephones, of which 77 per cent. usually worked--that is, 61,600 telephones. Today there are 128,000 pay telephones, of which 96 per cent.--or 122,880 telephones--usually work.

Dame Elaine Kellett-Bowman (Lancaster) rose--

Mr. Marshall: No, I shall not give way as the debate is time limited. We have lost three minutes due to prayers--which is a worthy cause--so I shall not give way to anyone.

The number of working pay telephones has increased by 99.5 per cent. since 1987. What is true of pay telephones is equally true of other BT services. In 1984, only 74 per cent. of residential telephones were installed within the timeframe promised to the customer. Today the figure is 96.6 per cent. In 1984, 76 per cent. of private circuits were completed by the promised date. Today the figure is 98.4 per cent. It is no wonder that in January this year the Director General of Oftel said:


BT has delivered to the customer not only better services but lower prices. Local calls now cost 34 per cent. less in real terms than before privatisation. The price of a local call in Britain is lower than in Germany, and our local call areas are twice as large as in Germany, four times larger than in the United States and 12 times larger than in Canada. The price of national calls has fallen by 64 per cent. and the price of international calls has fallen by 46 per cent. in real terms.

What is true of BT is equally true of British Airways. It made a loss when nationalised, but is now the world's favourite airline. British Steel, which lost markets when in the public sector, has managed to rebuild its export markets. Even motorway service stations, which were the butt of the humorist when the land was owned by the state, perform much better.

The water companies--about which we occasionally hear the odd word of criticism--have improved also. South West Water now has 99.6 per cent. compliance with the drinking water directive and another 50 beaches in

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its area meet European Union standards. The privatised industries have delivered better services and lower prices. Earlier this year, electricity consumers benefited from the flotation of the national grid and saw their electricity bills decrease by £50. Due to the operation of Ofgas, gas consumers will see their gas bills decrease by £50 also. That is what competition and privatisation do for the consumer. Industries such as gas, electricity and telecommunications are much more tightly regulated in the private sector than in the public sector.

Privatisation has also encouraged wider share ownership. There were about 2 million to 3 million shareholders in 1978-79. Today there are 10 million private shareholders--many of whom are employees of the former nationalised industries. I remember visiting National Freight in the mid-1980s. I asked a telephonist whether she owned shares in the company and she replied that she did. She continued, "The only trouble is that I listened to the trade unions and did not buy as many shares as I should have. I would be better off today if I had bought more". The trade unions told my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler) that the privatisation of National Freight would not work, but it has been a major success.

An amusing aside is that some of the trade unions that were so critical of privatisation have been willing to invest in the privatised industries. The National Union of Rail, Maritime and Transport Workers, which is telling people not to invest in Railtrack, has invested in Eastern Electricity--where it took a nice turn--in Thames Water, British Gas and in Cable and Wireless. The GMB is the prize example of a trade union that has invested in privatised stock. It invested £170,000 in British Aerospace, a mere £62,000 in British Airways, £201,000 in British Steel, £230,000 in Enterprise Oil and £131,000 in Cable and Wireless. It has sold its investments of £22,000 in the British Airports Authority, £30,000 in BT and £134,000 in Rolls-Royce. That union has invested a total of £530,000 in privatised stock. I sometimes suspect that, when the Trades Union Congress meets, its members discuss their investments in the privatised utilities and decide which one to go for next.

A document entitled "From Finchley to the World" was published some years ago upon Baroness Thatcher's completion of 10 years in office. It referred to her role on the world stage, but it could have referred also to the fact that privatisation--which is such a success in the United Kingdom--has been copied across the globe. Every Government in the free world--from Russia in the east, to Australia in the south and to Canada in the west--is committed to privatisation policies. Some of the most enthusiastic apostles of privatisation come from the former communist countries: they discovered that the dismal performance of centrally planned economies can be righted only through the introduction of the private sector.

As I said at the beginning of my speech, the Leader of the Opposition said in Washington that he would defend the Thatcherite revolution. I suspect that he said that not out of conviction, but as an act of political cynicism and convenience: he recognises that privatisation is popular with consumers and with the general public.

Privatisation involves much more than simply selling state assets: it involves using free enterprise to provide services for the public and it involves compulsory

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competitive tendering, which has saved council taxpayers £400 million. Those hon. Members who would abolish compulsory competitive tendering must tell the council taxpayers of this country how they would account for the £400 million saving which has led to better service provision by local authorities and to lower council tax bills.

In talking about privatisation, one must mention also the private finance initiative. It is not simply a funding initiative--if it were, it would be bad value for the taxpayer because the Treasury can always borrow more cheaply than a public company. The private finance initiative involves using private sector management skills to accomplish tasks that would not be achieved as efficiently in the state sector. That is demonstrated by the application of the PFI in prisons and the health service and particularly with the new Northern line trains. That is one of the earliest and most successful PFI projects which will allow many of my constituents to travel in better trains next year. Let us hope that those trains are delivered and are up and running before the general election.

Privatisation has led to a much better performance by the British economy. The concept is copied across the world and it has benefited consumers, industrialists and the economy at large. I look forward to hearing the Minister commend it to the House.


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