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House of Lords

Wednesday, 21st June 1995.

The House met at half-past two of the clock: The LORD CHANCELLOR on the Woolsack.

Prayers—Read by the Lord Bishop of Portsmouth.

Privatised Industries: Consumer Safeguards

Lord Dubs asked Her Majesty's Government:

    Whether they consider that the safeguards against the abuse of the monopoly or near monopoly of the privatised public utilities are adequate.

The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish): My Lords, yes. The Government believe that their approach of promoting competition where possible and regulating utility prices elsewhere has protected the consumer. It has also benefited both consumers and the wider economy, as shown by price reductions and service improvements.

Lord Dubs: My Lords, does the Minister agree that many consumers do not believe that they have been adequately protected by the present regime covering, in particular, water, electricity and gas? Consumers feel that, although some prices may not have gone up, they should have gone down more than they have. The activities of the management of those industries and their sheer corporate greed make one wonder whether a bit of competition is not what is needed in those industries.

Lord Mackay of Ardbrecknish: My Lords, first, I welcome anybody from the party opposite to the ranks of those of us who believe in competition. The noble Lord said that prices may have come down. That is an interesting use of the word "may", because prices in two of the three industries mentioned have come down. That is in stark contrast to the warnings given by the party opposite at each and every privatisation when it said that prices would go up. For example, the price of gas has fallen by 23 per cent. in real terms, and the real industrial price of electricity has come down by 14.5 per cent. in the past five years. Of course in the water industry prices have had to increase, but that is because it has had to invest a vast amount of money to ensure that we have clean waters around our shores and in our rivers. That is what has been done—£15 billion has been spent on that over the past five years. I should have thought that noble Lords would welcome that.

Lord Renton: My Lords, is my noble friend aware that, if we are to judge by results, it is worth bearing in mind that before we started to privatise nationalised industries, they were losing collectively £50 million per week? According to the latest privatised industries accounts which are available, they have been making £50 million to the benefit of the Treasury.

Lord Mackay of Ardbrecknish: My Lords, my noble friend is absolutely right to draw attention to those facts. British Airways is now the leading international airline in

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private hands. Companies like British Steel are now making a profit. Yesterday I read a report that it is among one of the most profitable steel companies in the world. What a change that is from 15 years ago.

Lord Taylor of Gryfe: My Lords, since this matter was last raised in the House, I commended to the Minister a statement by the regulator of Ofgas, Clare Spottiswoode, who said that she did not know her terms of reference, and her annual report to Parliament was not worth the paper that it was written on. The lady concerned has since received a substantial increase in salary as a result of that confession. Can the Minister comment on that?

Lord Mackay of Ardbrecknish: My Lords, as to the second part of the noble Lord's question, the lady has received an increase in salary but nothing like the increase which the Labour Party predicted that she would receive. It was wrong about that as it is wrong about so many other matters when it comes to speculation. But the noble Lord should recognise—and I am sure that he does—that the pay increase reflects the fact that her job has changed since she was appointed. Since then, the Gas Bill has given her extra functions and the Government have brought forward the opening up of the domestic gas market to competition.

Lord Clark of Kempston: My Lords, does my noble friend agree that the continual carping against the privatisation of this Government is extremely stupid in view of the fact that, as my noble friend Lord Renton pointed out, the amount of money going to the Exchequer, rather than subsidies being paid by the taxpayer, has proved that that economic policy is absolutely right? Does my noble friend also agree that the dead hand of nationalisation from which we suffered in the past is so well behind us?

Lord Mackay of Ardbrecknish: My Lords, my noble friend is absolutely right, although he is unkind to use the word "stupid". I believe that "misguided" would perhaps be a better word to use. Of course, when one goes through the history of the past 15 years, one realises that the opposition of the parties opposite to each and every privatisation was even more misguided. To each and every one there was the promise of renationalisation. Where is that promise now? Is it dead, with the old Labour Party?

Lord Stoddart of Swindon: My Lords, has the Minister, like the rest of us, received the latest report from the Post Office which paints a glowing picture of how well it is doing under public ownership; how great are the profits; how it is improving; and how much it is contributing every year to the Treasury? I sincerely hope that the Government have no plans to privatise the Post Office. I seek his assurance on that.

Lord Mackay of Ardbrecknish: My Lords, some noble Lords will appreciate that I have not had much time to read some of the contents of my mailbag. I have not read that report, but I have read in the press that the Post Office is improving its service and doing better than it was. That is to be widely welcomed, and my right honourable friend Mr. Michael Heseltine has made clear our position in regard to the Post Office.

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Of course, the success of a related firm, British Telecom, has been quite astronomical. Do your Lordships remember the predictions made by the party opposite that on privatisation there would be no phone boxes working in the country? There are now 50 per cent. more phone boxes and almost all of them work, in stark contrast to the situation in the days of the dead hand of state control.

The Earl of Lauderdale: My Lords, does my noble friend the Minister agree that there are also better things ahead, inasmuch as the privatisation of the grid will be of great benefit in cash terms to domestic consumers of electricity?

Lord Mackay of Ardbrecknish: Yes, my Lords; I agree with my noble friend. I believe that there is considerably more good news to come for electricity consumers. New distribution controls will lead to further falls in domestic prices this year. Of course, the early abolition of the nuclear element of the fossil fuel levy ought to lead to a reduction of something like 8 per cent. for all customers during 1996.

Lord Eatwell: My Lords, is the Minister aware that one of the abuses that has most disturbed members of the public is the extraordinary increase in salaries and share options which the directors of privatised industries have awarded themselves? I am sure that the noble Lord is aware—although some of his colleagues do not seem to be—that the Prime Minister has denounced those practices; indeed, he called them distasteful. However, why has he said so much and done nothing?

Lord Mackay of Ardbrecknish: My Lords, I believe that my noble friends were expressing their surprise at the noble Lord's line of questioning. Perhaps they expected him to join us in praising the success of the privatised industries or to explain why the Labour Party was not going to renationalise them if they think that they are so awful. The last time that I appeared at the Dispatch Box answering such a question I underlined the point that the Government condemn excessive and unjustified salary increases at any level. My right honourable friend the Prime Minister has made those points on a number of occasions in response to the Leader of the Opposition in another place. We are awaiting the outcome of the Greenbury Committee and, as my right honourable friend the Prime Minister said, we shall consider any proposals that require legislation.

Viscount Mountgarret: My Lords, as a matter of interest, can my noble friend say how an industry when privatised can make £50 million a week and yet, when nationalised, it seems to lose £50 million a week? Is it something to do with management?

Lord Mackay of Ardbrecknish: My Lords, as experience all over the world has shown, the point that my noble friend makes is absolutely right: industries when privatised are markedly more successful than they were when nationalised. That is why both this country and many other countries in the world—including, interestingly, ones which appear to have governments of the Left—have gone down exactly the same road. I would need much more time to explain the matter. However, the

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fact is that industries work much better when privatised. I believe that that is why the party opposite is no longer pledging to renationalise.

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