That may be true, but they also have in common the fact that they were all criticised by Department of Trade and Industry inspectors for falling down on the job in respect of their involvement in other companies. The DTI report on Ramor Investments criticised Price Waterhouse, and that on Orbit Holdings criticised Peat Marwick. Ernst and Young came under criticism in the DTI report on Orbit Holdings.
Perhaps the most famous DTI report of recent times concerned the scandal involving Harrods and the House of Fraser. The company which came in for criticism in that case was Kleinwort Benson—the Government's leading adviser for the electricity privatisation. The report makes it clear that Kleinwort fell down on the job and failed to check the assets of the Fayed brothers, and asserted wrongly that their assets were worth several billion dollars. So Kleinwort certainly were not too good at valuation in that instance. The firm made other statements about the background of the Fayeds that persuaded people to attach credence to statements about them, having failed to undertake the necessary investigations—so that what Kleinwort asserted to be true proved to be false. Not only that, but Kleinwort persuaded its clients to retain public relations advisers to peddle the false information that the Fayeds and Kleinwort were producing.
Herbert Smith, the Government's legal adviser, was also criticised by the DTI in connection with the House of Fraser. The inspectors described both companies as complementing each other's efforts in an unco-ordinated way. They were surprised that
Kleinwort and Herbert Smith appeared able to accept as credible the value of at least $1 billion which the Fayeds attributed to their assets.
Whatever Kleinwort and Herbert Smith were good at, clearly they were not too good at valuing and checking assets.
The Government's lead broker, James Capel, features in the DTI's report on Consolidated Gold Fields, which states:
We consider that Capels hindered the Company's attempts to obtain information about the interest in its shares".
The report describes an important letter sent by Capel as inadequate.
The Government have just announced that Smith New Court has been called in to add a bit of weight and professionalism to the sale of the generating companies because such a mess was made of the distribution companies. Lo and behold, on the page facing the DTI's remarks about Consolidated Gold Fields, there is a comment—I freely confess that I discovered it only by accident—about the very people who have been brought in to add more weight and professionalism to the Secretary of State's activities:
We consider that Smith New Court seriously hindered the Company's attempt to pursue its right under section 212 with a view to identifying who had been buying a substantial number of its shares.
My hon. Friend the Member for Cardiff, West (Mr. Morgan) will shortly tell the House who was buying and selling those shares, and who the hell Smith New Court was working for in the sale of South Wales Electricity shares on the first day of their issue, because that matter still needs to be cleared up.
The DTI inspectors also said of Smith New Court:
Moreover we consider that Smith New Court did not understand their responsibilities under the Act, and that they did not make any serious attempt to seek proper legal advice.
That is the quality of advisers that the Secretary of State is employing these days. Are they the kind of people who should be on the Government's payroll? One can understand why the Secretary of State got things so wrong. One can understand those firms liking such lucrative contracts, but the taxpayers will want to know whether they are getting anything in return. The Secretary of State for Energy, the Secretary of State for Trade and Industry and the Chancellor of the Exchequer were all involved in making the appointments, but I still have not been told whether those advisers were vetted beforehand. If their records were checked, one wonders what those companies have to do to be struck off. If such activities do not qualify them for exclusion from the Government's list, I do not know what would.
That was not the only City racket involved in the sale of the generating companies. The Secretary of State paid out no less than £49 million of taxpayers' money in underwriters' fees. He agreed to underwrite the only risk, which was that the Gulf crisis might smash the market in the middle of the flotation. The Secretary of State paid £49 million to City companies to underwrite assets being sold at half their proper value—and everyone in the City knew that. That leads to the riddle of when is an underwriter not an underwriter. These days, and when the Government are involved, the answer is, when they have to take a risk. If the underwriters have to take a risk, the Government underwrite the underwriters. That is a charmed circle beyond belief, but neither you, Mr. Deputy Speaker, nor I can break into it. We are not ancient, established City firms. We are not part of that charmed circle whose members regularly get money for old rope. Given all the livery companies that exist, such as the Goldsmiths Company and the Cordwainers Company, perhaps there should be a Money-For-Old-Rope Makers company, whose motto could be, "All that is safely gathered in."
It is even more of a closed and charmed circle than some people realise. The lead underwriters had a hand in determining the value of the generating companies' shares. It is a safe bet that they did not advise the Government to make them too pricey. If the advisers acted rationally—and anyone who gets paid £49 million for doing nothing must be fairly rational—they probably advised the Secretary of State to keep the price of the shares pretty low, so that there would be no risk. The advisers kept the price low, and then told the Secretary of State, "You had better protect us against any risk over the Gulf." The Secretary of State removed the risk, kept down the price of the shares, and then bunged the underwriters £49 million.
Since then he has apparently learnt his lesson. His friends have been telling all the City pages, "We have learnt our lesson and we probably will not give them any underwriting fees for the generating companies". It is a bit late because in some of the City pages they are saying that the Secretary of State need not have given them such fees for the distributing companies; and by God he need not have done because their shares shot up by 60 per cent. in the first hour of trading.
I shall leave the squalor of all that money and return to the subject of what the Government said that they were about. The industry was sold using the slogan of the right hon. Member for Hertsmere—"Power to the people." That is not usually a prominent slogan at Conservative party conferences—at least not the British Conservative party. However, what the right hon. Gentleman did not mention, even at the Conservative party conference, was that a considerable number—15 per cent.—of the people in question would be in Wall street and Tokyo, because that is where 15 per cent. of the distribution companies' shares have gone. We are told that the Secretary of State is so scared that he will not be able to sell the generating companies that he is contemplating an even bigger proportion being sold abroad.
To be fair to the right hon. Member for Hertsmere, when he set out on the grand project of selling the electricity industry it may not have been his intention to sell it to foreigners. Little else that he said he intended to do at the outset has come about. Since he came up with the original structure, the Government have withdrawn the Magnox reactors from the sale. A little later the present Secretary of State withdrew the advanced gas-cooled reactors from the sale, which forced the Government to set up two nuclear electric companies, one in England and Wales and one in Scotland, to keep the nuclear part of the industry in public ownership.
Perhaps I should explain to some of my colleagues that the right hon. Member for Hertsmere had obviously thought of some of the problems connected with nuclear power because, when addressing a meeting of the Adam Smith Institute—one has to be a bit anti-Government ownership to address the Adam Smith Institute—he said:
It is not in the gift of this or any Government to attempt to legislate the proportion of nuclear well into the next century.
He did not do too badly because he set up an arrangement whereby, by law, when any nuclear power station is running, its output will be used, even though stations capable of producing electricity at half the cost will stand
idle. He introduced a nuclear levy to pay for that. Like the state in Marxist theory, the nuclear levy was supposed to wither away and, like the state in Marxist practice, the levy has increased. Contrary to all the promises, the nuclear levy is increasing this year and has not been reduced—as the Secretary of State will confirm, it has gone up again.
So the deepest wishes of the right, hon. Member for Hertsmere were not fulfilled. When he spoke to the Adam Smith Institute he promised an end to Government interference in the electricity industry. Grecian 2000's answer to Citizen Smith, "Power to the people" Hertsmere said:
We are devolving to Lord Marshall, to Bob Malpas … accountability for the industry. And we are devolving to them the power to run their businesses without … interference.
I do not know whether you have ever been interfered with by the right hon. Member for Hertsmere, Mr. Deputy Speaker, but if as a result of his interference one ceases to be the chairman of a major industry, or if one ceases to be the chairman as a result of the acquiescence of his successor, as was the case with Bob Malpas, I think one would interpret it as interference. When they lose their jobs, most people regard it as interference of the worst type. Lord Marshall and Bob Malpas have gone.
As a result of all this ideological lunacy from the Government the electricity industry is in a mess. I do not usually claim many things for myself, but earlier this summer, as a result of leaks to me, we discovered that the Secretary of State was proposing to sell PowerGen by private treaty to Hanson Trust. I believe that I came to this Dispatch Box to give the reason why the Secretary of State had to abandon that. I and several of my colleagues pointed out that if Hanson Trust bought PowerGen it would cost the taxpayer in excess of £700 million in tax savings for Hanson Trust. The right hon. Gentleman dismissed our arguments. However, when the proposed sale to Hanson Trust was eventually abandoned, at least one of the Government leakers—perhaps it was not in the Department of Energy but one of the then Chancellor of the Exchequer's leakers—made it clear that the sale had been abandoned because the Chancellor, who is now the Prime Minister, had said, "We are not going to let you do it. If you sell the industry for that small amount we want it to be clear profit and we will not see the profit wiped out like that."
There is another aspect of that matter. Smith New Court were involved in that attempted sale to Hanson because Richardson of Smith New Court was acting as the go-between. Will the Secretary of State tell us whether it is because he wants Richardson to act as a go-between in some trade sales for parts of the generating companies that he has been invited back?
People in the industry and running it do not know whether they are coming or going. Today it is not clear whether the Secretary of State will sell all of National Power and PowerGen. The latest information from the Secretary of State on television and radio last week was that he was going to sell 60 per cent. and retain 40 per cent. of the shares for two years, until after the next general election. However, within one day the City pages were beset by people ringing up to say that they might sell some, or all, of the 40 per cent. and might not wait for two years to do so.
Tonight, the Secretary of State has the opportunity to tell us whether he is sticking by what he said last week or whether there will be a further revision of the many revisions that have taken place. Will the Secretary of State lurch into yet another expedient in his efforts to get rid of this industry? Also he owes it to the people of Scotland, and those who work for the Scottish companies, to tell us what is intended for them. Are they to be disposed of with a 100 per cent. sale, or will some of their assets be retained until after the next general election?
The Government amendment refers to successful restructuring of the industry and its virtual passage into private ownership. As the nuclear part of the industry has not been sold, and if he does not sell 40 per cent. of the generating companies, when the next Labour Government bring the company back into public ownership, 52 per cent. of the assets of the industry will be back in public ownership. After all the farcical nonsense to which the people in the industry have been subjected, the right hon. Gentleman and his predecessor will have managed to get rid of 48 per cent. of the industry's assets to their friends in the private sector.
I now come to the issue mentioned by the hon. Member for York (Mr. Gregory). On being told that the Government might retain 40 per cent.—