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9.25 pm
Mr. Nick Gibb (Bognor Regis and Littlehampton): The Bill is the product of the contradiction and deceit that lie at the heart of new Labour. Since the election and before, the spin and presentation from new Labour have been that Labour has learned the lessons of the 1980s, that it acknowledges the success of privatisation, and that business and the free market are good for the economy. It may not be the spin and presentation that have emanated from some Labour Members in the debate, but that is the spin and presentation that emanate from Millbank towers.
The reality that is evident in the Bill and elsewhere, and that has been particularly evident in the debate, is that Labour dislikes, distrusts and does not understand the workings of business and the free market. Labour opposed every privatisation of the 1980s and 1990s. No Labour Member was more vociferous than the Prime Minister when he was shadow Secretary of State for Energy at the time of the privatisation of electricity in 1988. In the Second Reading debate on the Electricity Bill, he made three predictions about the effect that privatisation would have, which he no doubt thought were far-sighted, but which have been proved wholly wrong. His first prediction was:
The second prediction was even more wrong:
It gets worse. In 1988, the Prime Minister said:
As my hon. Friend the Member for West Worcestershire (Sir M. Spicer) said in an excellent article in The Daily Telegraph, the Utilities Bill and the Financial Services and Markets Bill
The Bill reveals the truth that new Labour has not really understood how competition works, or how it delivers better quality and lower prices. The Government have not really understood the free market. Although they have learned to use the language of business and the private sector, the reality of their policy is intervention and regulation. The Government say one thing, but they do quite another.
Today's debate has revealed how many Labour Members do not even use the language. I suspect that they will not be welcomed in Millbank towers as part of the new Labour media machine.
The Conservative approach to the utility sector is to promote competition wherever possible, which itself provides downward pressure on prices. Where competition has not yet been introduced--or where it is not possible to introduce it, because a particular element is a natural monopoly, for example--a regulator is put in place to mimic competition and to protect the consumer.
The Bill reveals the fact that the Government believe that the consumer is always better protected by regulations and that regulation is beneficial for its own sake, even when a utility is fully exposed to a fiercely competitive market. It demonstrates that, like the Prime Minister, new Labour has still not learned how powerful the marketplace is in delivering for the consumer.
The danger of the approach taken in the Bill is that all those new burdens and costs will stifle competition, and so disadvantage the consumer; that more powers for the
Secretary of State will add to the regulatory risk and increase the costs of capital; and that the combination of all those increased costs and burdens will lead to higher, not lower, charges for consumers.
The Conservative approach--which has led to huge price reductions, better services and a whole range of new opportunities and choices for consumers--has also resulted, as hon. Members have mentioned today, in a massive decrease in the number of disconnections: in electricity, from 80,000 a year before privatisation to only 373 last year.
The essence of the Government's misunderstanding of the importance of competition can be discerned in the Bill, which reorders the priorities of the regulator and demotes the promotion of competition to a second order objective.
The Bill has been severely criticised by industry, and particularly by Ian Byatt, the current water regulator. Last week, in a lecture at the Royal Aeronautical Society, he said:
The hon. Gentleman went on to complain about the electricity pool and so-called rigged prices. However, whatever its faults--it will be a subject of debate in Committee--we should remember that it was put in place when there were very few operating companies in the market. It was certainly better than having prices fixed by the Secretary of State.
The hon. Member for Twickenham (Dr. Cable), speaking for the Liberal Democrats, expressed concerns that the Government have to be sure that the Bill will not move the pendulum too far in the direction of over- regulation. He quite rightly pointed out the danger that such action would increase the cost of capital. He also said, as Conservative Members have, that such action would inevitably result in higher costs being passed on to consumers.
The hon. Member for Hove (Mr. Caplin) accepted that the number of disconnections had decreased, but said that the number of complaints had increased. Does he not accept that, when those industries were in the state sector, no one would bother to complain, because one would be lucky if the telephone was even answered when one was trying to register the complaint? The whole ethos has changed since privatisation.
"outside of the Conservative party . . . it is barely in issue that prices will rise because of privatisation."
Since privatisation, electricity prices have fallen by 29 per cent. in real terms. Gas prices have fallen by 29 per cent. in real terms. Telephone charges have fallen by 50 per cent. in real terms. Therefore, let us be clear. If the Labour party had had its way, we would not have had the falls in electricity, gas and telephone charges since those companies were privatised.
"I would have thought that it was . . . virtually impossible that anyone would build a power station and invest hundreds of millions of pounds, unless they received a guarantee covering the
31 Jan 2000 : Column 866capital cost, the fuel cost and, probably . . . the operating costs, too . . . the idea that we will have an influx of power stations, all competing on the grid, is nonsense."
He was wrong again. There has been an influx of new power stations, all competing on the grid: 27 new power stations, producing 18,500 MW of electricity. Fifty independent power producers have entered the generation market since privatisation, with a total market share of some 21 per cent. It would have been difficult for the right hon. Gentleman to get it more wrong. It would be something that we could laugh at--but for the fact that the man who got it wrong is now the Prime Minister.
"We are proud that we took the"--
electricity--
"industry into public ownership. When we come to power it will be reinstated as a public service for the people of this country, and will not be run for private profit."--[Official Report, 12 December 1988; Vol. 143, c. 681-84.]
That might look like yet another broken promise by the Prime Minister, but the Bill actually goes some way to achieving some of his objectives of reintroducing state controls. It contains huge swathes of new regulatory burdens, increased powers for the Secretary of State to intervene in the minutiae of the functioning of all four major utility sectors, and huge new powers to impose limitless fines. It adds enormous compliance burdens on utility companies, the huge cost of which will ultimately be passed on to the consumer.
"will establish an entirely new form of government, the like of which this country has not experienced before: rule by regulator."
He made that point again in today's debate.
"Now we have a Bill which shows how difficult Governments can find it to translate good intentions into sensible legislation. I find the Bill over-complicated because it is over-prescriptive. Nothing is left to good sense."
Mr. Byatt went on to conclude that
"the Regulator will be festooned with detailed requirements . . . All laudable, all already being carried out, all, however, because of detailed over-prescription, likely to raise the costs but not the effectiveness of regulations."
The point was well summarised by Roger Barnard, of London Electricity, who said:
"This Bill's enlargement of the scope for discretionary intervention by regulators, politicians and advocates is likely to extract a high price from utility industries, and all consumers will pay it."
This has been an interesting debate. The hon. Member for Ochil (Mr. O'Neill), the Chairman of the Select Committee on Trade and Industry, mentioned the translation of minor savings and efficiencies in the early years into significantly higher profits for the companies. However, he fails to understand that, at the time, all the experts underestimated quite how inefficient those companies were when they were in the state sector.
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