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House of Lords

Thursday, 12th January 1995.

The House met at three of the clock: The LORD CHANCELLOR on the Woolsack.

Prayers—Read by the Lord Bishop of Norwich.

The Earl of Powis—Sat first in Parliament after the death of his father.

The Earl of Inchcape —Sat first in Parliament after the death of his father.

Former Nationalised Industries: Comparisons

Lord Orr-Ewing asked Her Majesty's Government:

    How much money they paid each week to subsidise nationalised industries in 1979-80, and how much those formerly nationalised companies paid in tax weekly in 1993-94.

The Parliamentary Under-Secretary of State, Ministry of Defence (Lord Henley): My Lords, nationalised industries used to cost the taxpayer about £50 million per week in 1979-80. In 1993-94, privatised companies paid about £50 million per week to the Exchequer of which about £40 million was tax, the remainder being dividends and interest.

Lord Orr-Ewing: My Lords, is my noble friend aware that that is very good news? However, ought it not to be more widely publicised, possibly by using a page in a newspaper—not the Guardian —to advertise such facts? We would then, perhaps, have the Opposition on our side because it would help to convert the 36 Labour MEPs who are so stubborn as to refuse to recognise just what has been achieved by that privatisation.

Lord Henley: My Lords, I thank my noble friend for that question; it is, indeed, a very helpful one. I shall certainly continue to sing those figures from the rooftops. From what I said, it is pretty obvious that the Treasury receives something of the order of £2.5 billion per annum in tax and other receipts from privatised industries. As my noble friend will be aware, a penny on income tax yields about £2 billion. Therefore, we can see that the benefits of privatisation extend not only to consumers but also, more generally, to taxpayers.

Baroness Castle of Blackburn: Would not the Minister agree that to lump all nationalised industries together in that obscure way is most misleading? Will the Minister help the House by being more specific?

Lord Hailsham of Saint Marylebone: What about Clause 4!

Baroness Castle of Blackburn: For instance, is it not a fact that the nationalised British Gas Corporation made substantial profits before it was privatised and was praised for its great management efficiency by independent consultants? Is the Minister aware that, in

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1985—the year before it was privatised—that nationalised body paid into government funds £900 million? Further, can the Minister give us the figure for the privatised British Gas plc for 1993?

Lord Henley: My Lords, what is more important—

Noble Lords: Oh!

Lord Henley: My Lords, what is more important is the fact that the performance of British Gas has improved no end since privatisation. The number of customers per employee has risen by more than 30 per cent.; gas sales per employee have increased by about 18 per cent.; prices of gas are down by about 23 per cent., excluding VAT; and standing charges are down by 30 per cent. in real terms since privatisation. Further, disconnections are at the lowest level since records began.

Lord Clark of Kempston: My Lords, does my noble friend the Minister agree that, apart from British Gas, if one looks at British Steel (which at one time cost the British taxpayer £1 million per day in subsidies) it will be seen that it now produces the same tonnage of steel with half its former workforce?

Lord Henley: My Lords, my noble friend is correct. Further, I can tell my noble friend that the time now taken by British Steel to produce one tonne of liquid steel is less than five hours. It was over 13 hours in 1979-80.

Lord Bruce of Donington: My Lords, the Minister obviously has a large number of facts at his disposal, in addition to the figures that he has already given to the House. However, will the noble Lord give us the figures regarding the assets of those industries that were written off? Is not the total amount of money involved around £6 billion that is owed to taxpayers?

Lord Henley: My Lords, privatisation proceeds have yielded some £60 billion since we started the policy of selling off. Privatisation proceeds have helped to restore public finance to good shape, thereby freeing resources for private investment. The public debt position as a result is now pretty sound. The net public sector debt is now 38¼ per cent. of GDP compared with 50 per cent. in 1979.

Lord Tebbit: My Lords, does not my noble friend agree that it is refreshing to hear such outspoken support for Clause 4 and nationalisation from the Benches opposite, as we have heard today? Does he not also agree that the figures which he has given suggest that we are having a very much better return from our investment in the family silver since we sold it than when it was locked up and costing us money?

Lord Henley: My Lords, my noble friend is absolutely correct and I think right to point out that the rhetoric from the party opposite is absolutely and totally opposed to privatisation.

Lord Eatwell: My Lords, is the noble Lord aware that the financial success of the privatised utilities is as much a consequence of their being private monopolies as any increase in efficiency? The noble Lord referred

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to the case of British Gas. Will he confirm, for example, that the rate of productivity growth in British Gas has fallen to little more than one-tenth of the rate of the decade preceding privatisation? In these circumstances of the deteriorating growth in efficiency of British Gas, is it not grotesque that the chairman who has never competed for a job in any market in his life should receive a pay rise of 75 per cent.?

Lord Henley: My Lords, it is absolute nonsense to say that the success is a result of the privatised utilities being monopolies. Their success is due to the fact that they have been freed by privatisation and put into the private sector. I give just one example. British Airways' productivity—I think even the noble Lord would accept that British Airways is not a monopoly—per employee has increased by more than 50 per cent. As the noble Lord well knows, when it comes to pay—as my right honourable friend the Prime Minister made absolutely clear—we do not approve of excessive pay increases but in the private sector pay is a matter for the shareholders and not for the Government.

Lord Marlesford: My Lords, will my noble friend join with me in congratulating Mr. Tony Blair on attempting to divest the Labour Party of Clause 4? Does he also recognise that it is an heroic task and that it is likely to take rather more than the next two-and-a-half years to rid the addict from the addiction—an addiction which is not wholly absent even in this House? The addiction will be there for longer than that before the Labour Party can be safely released into government.

Lord Henley: My Lords, I think my noble friend is quite right to point out that on the evidence of the attitudes from the party opposite and the attitudes of their Front Bench it is going to be a positively herculean task to convert that party to give up Clause 4.

Lord Monkswell: My Lords, is it not unfortunate that British industry continues to be assessed by the Government and their supporters on the short-term bottom line? What investment in fixed assets was made in the relevant industries in the relevant periods?

Lord Henley: My Lords, if the noble Lord had listened to me he would know that I had assessed their success very much not just in terms of the profits and proceeds to Her Majesty's Government but also the benefits to consumers. I elucidated a number of benefits to the consumers for which we are all very grateful. I could go on and give more; for example, the reduction in prices at BT—some 35 per cent. down since privatisation—and the fact that there are now 60 per cent. more pay phones than in 1984. If the noble Lord remembers that privatisation Bill, he will recall that we had a great many scare stories from the party opposite about the total disappearance of telephone kiosks in rural areas. In fact, the numbers have increased.

Baroness Castle of Blackburn: Since the Minister is so ignorant about British Gas perhaps I can give him the figure he refused to give to the House: namely, is he aware for instance, as he obviously is not, that in 1993

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the privatised British Gas contributed to government funds not £900 million, as its nationalised predecessor did, but £70 million?

Lord Henley: Yes, my Lords, but I think the noble Baroness is also aware, as I made clear, that British Gas domestic prices are down by 23 per cent. excluding VAT. That is a benefit to consumers, whom the noble Baroness professes to be interested in. Standing charges are down by some 30 per cent. and disconnections are now at the lowest level since records began.

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