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Utilities (Foreign Ownership)
1 pm
Mr. John Cryer (Hornchurch): I must first thank Madam Speaker for selecting this debate. I also thank my hon. Friend the Minister for Science, Energy and Industry for being here to listen and respond to it. I am sure that my hon. Friend will expect me at some point to call for public ownership of the electricity utilities, and I will not disappoint him in that regard. I support public ownership and see it as the only answer in the long term to the problems in the utility companies.
American companies in particular have bought into the United Kingdom electricity market over the past three years. They now own about 60 per cent. of our electricity distribution and supply companies. The reasons why American companies want to move into Britain are clear. First, British companies represent cash mountains--the money can be siphoned off for use in other, sometimes fairly dubious activities, usually in north America. Secondly, the American firms are fairly fond of our pretty lax regulatory regime. Thirdly, they see Britain as a springboard to the European electricity market at some point in the future.
I should like to make it clear that I am not being a little Englander in criticising the activities of American energy companies, but to me it is as plain as a pikestaff that if the control and ownership of electricity utility companies is concentrated not in Britain but in institutions and individuals thousands of miles away in America, it will be that much more difficult to call those institutions and individuals and to account, to ensure that they act in the best interests of the people they employ and of those to whom they supply electricity.
The American ownership of UK companies that has been taking place over the past three years is merely the latest stage in a process that began in 1989 with the privatisation undertaken by the previous Government. The electricity industry was privatised at rock-bottom prices, and it is almost an exercise in showing how the idea of a sort of people's capitalism, which Baroness Thatcher, the former Prime Minister, evoked, has failed.
Seven million people bought shares in the electricity companies at knockdown prices. Today, only 2 million individuals own shares. The number is still falling and will probably continue to fall for the foreseeable future. Privatisation has not been a form of people's capitalism; in fact, it has meant huge job cuts, attacks on pay and conditions, such as sickness benefits, the greater outsourcing of work, with all that is attendant on that, and huge pay rises for the directors of the privatised companies.
The industry lost 66,000 jobs in nine years, which is about 45 per cent. of the work force. Eastern Electricity, which supplies my area and much of eastern England, has lost 3,000 jobs, while the pay bill for the directors has risen by something like £1.2 million or £1.3 million.
At the same time, the privatised companies have forced employees to bargain in ever smaller units rather than have national collective bargaining. Often the companies have refused to negotiate with full-time union officials, but negotiate directly with lay members to undermine the strength of the unions. That has meant that pay and conditions have been continually attacked through
outsourcing. The inevitable consequence of outsourcing is that work goes to smaller companies that pay lower wages and offer inferior conditions.
The whole process has been and will be exacerbated by the arrival of the big companies with real market power. The Southern Company, for example, which bought SWEB, cut the work force and attacked sick pay entitlement. Incidentally, Southern has an absolutely appalling environmental record in the United States. The idea that our already weak regulatory regime will be able to protect our constituents against the ravages of big companies with market muscle is laughable at best.
Despite all the cuts, the regulator has reduced electricity prices to consumers in England and Wales by only 9 per cent. and in Scotland by only 7 per cent. Price cuts were going to be the one great advantage of privatisation. The idea was that the regulator would be able to reduce prices enormously. In fact, the reductions have been fairly insignificant, or peripheral to everything else that has happened.
At the same time, the regulator cannot even command the supply of electricity. The reality is that since privatisation, thousands of cash meters have been fitted in homes across the country. That means that the number of disconnections has dropped considerably--there are only a handful these days, whereas there used to be 100 or 200 a year. However, if someone cannot afford to feed the meter, he effectively cuts himself off. Therefore, there are still disconnections, although the figures belie that fact.
Eastern Electricity which, as I said, supplies my area, is currently the subject of what looks like a fairly vicious takeover battle between Pacificorp and Texas, two large United States firms. We are now in the absurd situation where jobs, security of supply and people's living standards in eastern England are subject to the whims of a takeover battle that is centred thousands of miles away among individuals and institutions that probably know absolutely nothing about eastern England, and still less about the people whom the company that they are looking to take over supplies or employs.
I have no doubt that both companies regard Eastern Electricity as the cash cow for their activities in north America. I note that Texas has been engaging in some fairly aggressive lobbying since it launched its takeover bid. It wrote to me asking whether I would like to meet the vice-chairman--I have to say that I am not particularly interested in doing so. I understand that it has written to other hon. Members, too.
Texas has a big problem with an old nuclear plant in north America, which it wants to decommission. That would be very expensive, and I am sure that the company intends to divert the cash from Eastern Electricity to America to pay for that decommissioning.
The new management of those companies talks continually about wanting "greater flexibility". The other great refrain is "human resources management". If ever a phrase was worthy of Joseph Goebbels, it is "human resources management". In fact, those phrases mean massive job cuts and the removal of any union or collective representation from the work force, so that the workers can be picked off and kicked when the time is right.
The British electricity industry is now effectively utterly at the mercy of market forces. I cannot see that position changing while we continue to allow the large
companies to dominate the industry. There is another problem on the horizon--the Organisation for Economic Co-operation and Development's multilateral agreement on investment, which means that companies will be able to sue Governments whose laws interfere with those companies' profits.
For example, if a company moved into Britain's electricity supply industry and wanted to burn orimulsion in one of its power stations--orimulsion is the dirtiest fuel on the planet--what would the Government do? The sensible thing, which I am sure that the Government would do, would be to tell the company that it was not allowed to burn it. However, under the OECD's MAI, the company could sue the Government because the prevention of the burning of orimulsion would potentially interfere with the company's profits. Such a case is currently under way in Canada under the North American Free Trade Agreement. The danger is that we are taking that very route.
To my mind, all those problems clearly establish the need for public ownership. The only way that we can make the electricity industry work on behalf of the public is for it to be publicly owned and publicly accountable. Clearly, that becomes increasingly difficult as more electricity companies are owned and run by organisations based in north America. Now is the time for us to move--we should think about taking the companies back into public ownership before the British electricity industry is entirely owned by companies based in north America.
Dr. Ian Gibson (Norwich, North):
I congratulate my hon. Friend the Member for Hornchurch (Mr. Cryer) on obtaining this Adjournment debate, and thank him for giving me the opportunity to add some brief points at what is an appropriate time for my constituents.
The key issue concerns the two American giants that are buying Energy Group plc, of which Eastern Electricity is a major component. Energy Group is valued at billions of pounds, despite the windfall levy, which we were told would cripple it. Far be it from me to suggest a further squeeze to the Chancellor, but the money might not come amiss and might help to alleviate some of the other problems that we face.
My interest stems from my constituents, who pay money loyally to Eastern Electricity. I, too, pay loyally, although I owe £43; if anyone from the company is present, I should say that the cheque is in the post.
I want to take up the issues that were expressed in early-day motion 710, such as whether the companies that are attempting the takeover have the relevant experience and competence. Massive profiteering is almost certain. I want consumer satisfaction to be met through the
provision of cheaper electricity, not least to pensioners, of whom there are many in my constituency. I also want long-term investment to improve services; Eastern Electricity is to be congratulated on improving its services in Norwich, North after consulting me.
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