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9.48 am

The Financial Secretary to the Treasury (Mr. Michael Jack): I congratulate my hon. Friend the Member for Hendon, South (Mr. Marshall) on securing the debate, and on the robust and enthusiastic way in which he has endorsed a revolution in the way in which business is done in this country. I am grateful to him for giving us the opportunity to take stock of our privatisation programme's successes, which he so eloquently put before the House. I hope that the Opposition will take the opportunity of taking stock of what he has said by reading his perceptive comments. It is sad that they are not here in large numbers to hear what we have to say.

The Labour party now talks about being in favour of private enterprise, but, as my hon. Friend mentioned, in practice, it has consistently opposed each privatisation. It talks about promoting stakeholding, but, again, it has opposed privatisation, which has offered the opportunity for real stakeholding by millions of consumers and shareholders in this country's key industries.

It is worth reminding ourselves of the fundamental nature of the changes that my hon. Friend has attested to. In 1979, nationalised industries cost the taxpayer some £50 million a week. Now privatised industries contribute some £55 million a week to the Exchequer. We have increased the size of the private sector by an amount equivalent to 9 per cent. of gross domestic product.

In 1979, nationalised industries accounted for more than 11 per cent. of GDP; now it is around 2 per cent. Forty-eight major businesses and dozens of others have been privatised, with Railtrack to follow next week. A total of 950,000 jobs have been transferred into the private sector. Proceeds have totalled £64 billion, helping to reduce Government debt, to restore public finances and to free up resources for private investment. My hon. Friend rightly drew our attention to the fact that we have increased the number of shareholders from 3 million to 10 million, more than tripling the number of people with a real stake in this country's major businesses.

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We have provided the framework for competition and real choice, putting the consumer in the driving seat as the privatised industries have to focus on meeting the consumer's aspirations as well as those of their shareholders. That consumer aspect makes such a fundamental difference between the old nationalised approach and the privatised approach.

Before privatisation, nationalised industries operated in a regime that was against the interests of the public, in whose name they were ostensibly run. Their prices were set at the whim of Whitehall as their management were shielded from the commercial realities of competition and the profit motive. They had no incentive to improve service to their customers, and their investment needs often went unfulfilled as commercially sensible investment was routinely squeezed out in the face of more pressing public spending needs.

The resulting inefficiencies were paid for by the customer through higher prices and poor service, by the taxpayer through subsidy, and by the economy generally through underinvestment. As my hon. Friend rightly said, privatisation has dealt with those issues. In contrast, the transfer to the private sector, where there is the discipline of the market or, where necessary, of independent regulation, has transformed the performance of our once nationalised companies.

A key factor in achieving that has been to introduce competition, wherever possible. That offers the best long-term benefits to consumers. As my hon. Friend rightly pointed out, we see the effects of that in telecommunications, where prices are down and where choice and quality are up. Telecommunication prices have fallen by 40 per cent. in real terms and, as someone whose teenage son has discovered his first girlfriend, I can now, because of the large reduction in bills, allow him to use the telephone without fear. Telephone calls cost less than in France, Germany or Italy.

Most customers have greater choice of telecommunication supplies. All have access to Mercury for long-distance calls. There are some 4.5 million mobile telephone subscribers, twice as many as in most European countries, a true communication revolution occasioned by the advent of privatisation.

In gas and electricity, there has been substantial change. So far, larger industrial customers have benefited from competition in supply. As a result, industrial prices for gas and electricity are at their lowest level since 1970, but domestic customers are soon to benefit. From 1998, they will be able to choose supplies. Nine companies have been licensed to supply gas in the south-west. There are pilot schemes and price reductions range from 15 per cent. to 20 per cent. That will maintain the momentum of price reductions--gas bills have already fallen by 17 per cent. In general, privatisation has meant that typical household bills for gas, water and electricity have fallen by £75 per year.

Freed from the constraints of competing for public funds for investment, privatised companies have been able to spend sums on improving their business on a scale that would not have been possible in the public sector. I make no apology for repeating the points that my hon. Friend mentioned. British Telecom has invested £25 billion and water investment has doubled in five years. A £15 billion programme means that Britain's water is, again as my hon. Friend reminded the House, among the cleanest in Europe and there is £24 billion more to come in the next 10 years.

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It is not, however, just the former utilities that have benefited. As my hon. Friend reminded the House, no one who has experienced the service provided by British Airways, or who has witnessed the business performance of companies such as Rolls-Royce, British Steel or British Aerospace should doubt that they have benefited enormously from taking their rightful place in the private sector.

Despite that, our critics say that the privatisation programme is on its last legs. Nothing could be further from the truth. The privatisation of Britain's railway industry--one of the most complex and far reaching of any of our privatisations--is coming to its climax. The three passenger rolling stock companies have been sold through a competition raising £1.8 billion. Seven franchises have been awarded bids. Bids have been invited for a further five and the pre-qualification process is under way for another eight.

The Railtrack flotation is nearing completion, with shares due to start trading on 20 May. Around £1.9 million registrations were received from the public, clearly showing the all-round interest in Railtrack. I look forward to my right hon. Friend the Secretary of State for Transport announcing on Monday next the outcome of the offer.

I also look forward to that privatisation bringing about a fundamental change for the better in the culture and performance of the railway industry. So much of the carping comment from Labour Members is about service cuts. The reverse is true. The industry is keen to attract new passengers. For example, many franchisees are committed to enhancing services with new rolling stock. On the London, Tilbury and Southend line between Fenchurch street and Southend, the franchisee is to procure new rolling stock for two thirds of the existing fleet.

On the midland main line, the franchisee will procure new air-conditioned trains to run additional stopping services between St. Pancras, Derby and Nottingham. Additionally, services are to be enhanced with a proposed service pattern in 1999 offering a dramatic increase in service levels--for example, 10 more services each week day to and from Derby, 10 each week day for Nottingham and 22 for Leicester. Likewise, the London-Gatwick service will dramatically improve. Although looking to the future, I should like to remind the House that, later this summer, there will be the sale of British Energy, including the most modern of our nuclear generating stations.

Our privatisation programme has not been confined to former nationalised industries. We have been vigorously pursuing a programme to increase the private sector's role in the provision of services hitherto undertaken by the civil service. This year, the Laboratory of the Government Chemist, the Natural Resources Institute and English Heritage's historic property restoration have been transferred to the private sector. Among the civil service candidates for privatisation this year are Her Majesty's Stationery Office and the Chessington Computer Centre. Further candidates are actively being sought. We remain committed to transferring to the private sector activities that will benefit from that.

It is clear, therefore, that our enthusiasm for the privatisation programme remains undimmed, but privatisation is only one part of our drive to bring private sector skills into public service provision. Contracting out is another, but, most exciting, as my hon. Friend

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mentioned, is the private finance initiative. That is directed at enhancing the benefits that the private sector can bring to the management of economy sectors that were once the public sector's exclusive preserve. In particular, we are interested in developing partnerships between the public and private sectors, with the former as purchasers of service and the private sector as provider, with quality and cost-effective public services as a result.

My hon. Friend was right to attest to the Northern line. That £400 million contract requires the delivery of a level of reliability four times that of the best fleet currently operating on the underground. As somebody who used to travel on the route, I can well appreciate my hon. Friend's enthusiasm for that development.

My hon. Friend the Member for Hendon, South also drew the House's attention to one of Britain's best invisible exports. It is not so much invisible in the way in which its profile is exercised. The sale of our expertise in privatisation has made us the envy of the world.

All the change that my hon. Friend the Member for Hendon, South described in accurate detail has clearly brought about a change in the Labour party's attitude, which, in accepting the importance of the private sector, has surely conceded the argument that privatisation is right. Nothing showed that more clearly than its attitude to British Telecom. In 1984, at the time of flotation, the Labour party said that it would return to public ownership the public assets and rights--


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