Discretionary Share Option Schemes in the Privatised Utilities

Part of New clause 1 – in the House of Commons at 5:30 pm on 3rd April 1995.

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Photo of Margaret Hodge Margaret Hodge , Barking 5:30 pm, 3rd April 1995

I understand what you say, Mr. Deputy Speaker. I was trying to juxtapose the two areas of public interest.

It adds insult to injury when people cannot even hold those responsible for such huge gains made through discretionary share option schemes to account for their actions. That is the purpose of the new clause.

We have already witnessed a massive unfair pay explosion among the bosses of the private monopolies. For example, last year the board of National Power awarded itself a 25 per cent. increase in remuneration, which was in stark contrast to the 4 per cent. average increase for its employees. The gap between the pay of people in the boardroom and people on the shop floor is even more stark. A comparison of last year and the year before privatisation shows that the total remuneration package for the highest-paid directors of the privatised utilities rose by an average of 321 per cent. In three of the privatised utilities, the directors gave themselves rises of more than 400 per cent. The boss of North West Water heads what I consider to he the roll of shame with an increase of 619 per cent.

Share option schemes are another side of the same coin. Some £500 million was paid out to just nine directors of PowerGen and National Power last year alone. That is an average of more than £500,000 each, which would be enough to pay for an extra 30 staff in a hospital or more than 100 full-time places in a good nursery school. Have we got our national priorities right? In addition, a further £18 million is yet to be cashed in by the very same directors and chief executives. Last year alone, the chief executives of PowerGen and National Power earned more than £l million each in pay and share options, and they are set to make a further £1 million each in the coming year. It is a scandal of momentous proportions.

The greatest scandal of all is National Grid, as this year alone its chairman could make an astounding £2 million, almost £1.8 million of which is immediate share option profits. That is in a company that is yet to trade properly. With such handouts, the Government are giving private ownership a bad name.

Those are just a selection of the abuses being committed by the private utilities. We object not to rewards for excellence, entrepreneurship or enterprise but to the fact that the bosses of those private monopolies vote themselves handsome packages whereas their employees are forced to tighten their belts and consumers must make ends meet. More often than not, they are not new people who have been attracted into those industries since privatisation but the same old faces who arc making a quick buck because there is nobody around to stop them doing so. That is the unacceptable face of capitalism.

The new clause simply seeks to make this area a little more transparent and open it up to public scrutiny. Parliament has a duty to monitor the operation of those share option schemes. Furthermore, I cannot see the argument against taxing share options as income. People have a right to know what is happening, how much a small number of very well-paid people are earning and what potential revenues are being lost to the public purse by the Government's refusal to tax share options as income. The new clause simply provides a new opportunity to put that information in the public domain.

The Government have claimed that those issues are the business of shareholders, and the hon. Member for Beaconsfield seemed to support that view. In a private monopoly that serves a vital public interest, such a contention is wrong. The Government have a responsibility to consider the interests of the general public, consumers and the environment. Shareholders could have greater opportunities to hold their utility bosses to account by electing a remuneration committee, to include people who are not on the board of directors. It could be told the pay and perks of individual board members and could vote on their remuneration.

The Government have a duty to act to safeguard the interests of taxpayers and consumers. Monopoly industries simply cannot be left to their own devices in the hope that, at some time in the future, some sort of competition will emerge.

Last week, we were lobbied by users and workers of the health and education services. The contrast between their situation and that of the people whom we are discussing tonight could not be more stark. It is a classic case of private greed against public need; of the interests of the many against the privileges of the few.

There is widespread public concern that the House and the Government have got their priorities badly wrong. The new clause provides the means of starting to undo that damage. We should start to hold the privatised utilities to public account. New clause 1 provides the foundation for doing so and I commend it to the House.