I wonder whether Conservative Members will dare to venture out in the next few weeks to canvass during the local government elections. I wonder whether that possibility offers them any great opportunities or is a pleasant prospect to them.
The Financial Secretary to the Treasury might like to come to my constituency and knock on one or two doors. Perhaps he could introduce himself with the words, "I am here from the Government. I have come to help you." I am sure that one of the instinctive responses from the people he spoke to would be that they consider that the Government are extremely unfair. I am sure that the right hon. Gentleman would be offered many anecdotes to back up that instinct, but what would come out most strongly is how unfair people consider share option schemes and other pay excesses in the privatised utilities. People feel incensed about that. They feel that it is wrong and that the Government should do something about it.
People are angry because their basic sense of reasonableness has been offended by such excessive pay increases and share option schemes. They are angry that directors and the like are receiving mega sums of money, which those people could not possibly dream of, unless, perhaps, they won the lottery. People are also angry that the Government either do not want to, or cannot, do anything about those excesses—either way, people are angry.
People are aggrieved not only because their basic sense of fairness has been offended but because those excesses carry a basic hallmark of the Government and their policies—their inability to act. Week after week, the Prime Minister came to the Chamber and said that such share options were not the Government's responsibility. He said that the Government had merely been responsible for privatising the utilities and introducing the regulations that govern them. He claimed, however, that the Government were not responsible for share option schemes and other pay excesses. Then, suddenly, one Prime Minister's Question Time, in one sentence, the right hon. Gentleman sold a dummy that sent all his hon. Friends the wrong way, when he said that he was concerned about the issue. He had claimed that it was nothing to do with the Government and all to do with the utility companies and their directors, but, suddenly, he accepted that the issue caused him concern. He did not promise any action, however, but said that the Government would await the Greenbury report. That is unacceptable.
The Greenbury committee, however well intentioned, is equivalent to the captains of industry reporting on themselves. It is no substitute for the Government taking a view and proposing some measures to deal with the matter. It is almost as though a new word has entered the English language. In future, "to Greenbury" may mean to delegate an issue which one feels uncomfortable about and about which one has no real idea what to do, in the basic hope that it will go away.
That seems to be the Government's attitude. They feel uncomfortable about share options, but they have no idea what to do about them. They hope that if they refer the problem to some committee that will report some months later, the steam will go out of the issue and it will go away. In that way, they hope that they will not have to make any difficult choices.
That is not the public's reaction to share options. They are angry at the unfairness, because directors vote for such schemes for themselves. Those directors decide how much money they should award themselves. Most people do not feel that that is right, not least because the Government have created the circumstances by which directors can make such decisions. The public also believe that directors are voting themselves pay increases through share option schemes to reward themselves for doing precisely the same job as they did before their companies were privatised. That may not be true of every utility, but it is true of the water industry, whose chairmen and chief executives are doing precisely the same job, with no more competition than that to which they were subject before privatisation. Those individuals have voted pay awards for themselves.
Share option schemes do not represent an attempt to involve executives in the ownership of a company. They are not the means by which, in the long term, executives will receive genuine rewards for the way in which they have managed their company and because that company has become more efficient. Those share options are one-way tickets, because it is not possible to make a loss. If the share price goes down, the executives suffer no loss; they simply fail to make a windfall gain. That offends people, including many in industry who may have made arrangements in the past whereby they took a stake in a company as managers and directors. They lost as well as gained when share prices went down and up. Those individuals sat on a company board for a number of years and were genuinely responsible for the management and running of their company as part-owners of it. They benefited or lost accordingly. Share option schemes do not operate in the same way. They are one-way bets, which result in winners only and no losers. That offends people greatly.
I am sorry that the hon. Member for Beaconsfield (Mr. Smith) is not in his place, but today he repeated the argument he made in Committee about retained profits. I accept that they are an important means of investment, but as the Opposition made clear in Committee, the problem with this country is the low level of retained profits. Share option schemes are an incentive because, although the beneficiaries may not keep them for a long time—usually they sell them quickly to make a profit—executives are keen to pay out dividends to boost share prices in the short term. In that way, those executives make their gains by selling the shares that are part of their share option scheme packages. That is what they are all about. They are not an incentive to retain profits for investment.
Reasonable people are offended when they hear about cases like that of one of my constituents, whom I saw today. Mrs. Wells, from Darnall in my constituency, lives beside a brook. In the past few months, the river served by that brook has gone into full flow several times due to heavy rainfall, and when that happens, the brook becomes an open sewer. As it flows over my constituent's garden wall, it carries with it raw sewage, which then flows past my constituent's home. That pollutes the river, creates an awful smell and attracts rats, which have even entered her home.
My constituent has asked Yorkshire Water to invest sufficient money in its next five-year capital programme to deal with the problem, but it has said that it cannot afford to do so. It has told her that it does not have sufficient money from its retained profits to afford that. In the next five years, however, what Yorkshire Water will pay in share option schemes to its directors is more than it would cost it to make a modest investment to deal with the raw sewage that passes the home of someone who lives 50 yd from a major shopping centre. That is unacceptable. It is another reason for people's outrage and why they believe that share option schemes are grievously unfair and action is needed to tackle them.
The Labour party has made a number of basic proposals to deal with the problem, and that the Government could adopt if they were minded to. We have argued for greater disclosure. It is all right for Conservative Members to say that shareholders are told about share option schemes, but why were we treated to the performance of Cedric Brown before the Select Committee on Employment? He had to have his pay package extracted from him as if having teeth drawn without anaesthetic. He did not want to give that information and others have been embarrassed by what he said, because he was too up front. The name of the game has been to vote pay packages through in such a way that companies hope that no one notices what is going on. Nasty questions will thus be avoided. There must be a better system of disclosure.
The Cadbury proposals must be extended, so that separate remuneration committees, made up of those who do not stand to benefit, vote for share option schemes. Basic reasonableness must be introduced into the system. It should be a basic tenet of the operation of such share schemes that the people who benefit from them do not vote for them. Go and ask the public about that. I do not believe that anyone would find one person in a hundred who felt that that proposal was unfair. Why do the Government not do something about that?
Why are not the schemes taxed as income? Conservative Members say that there is only £6,000 of untaxed income. Many people who live in my constituency do not earn £6,000 a year, let alone £6,000 of untaxed income. For many people, £6,000 is a great deal of money. When Conservative Members say that it is only £6,000, they badly misjudge public opinion.
Why should the regulator be worried about share option schemes? We have clearly demonstrated that they are linked to prices, profits and investment. They make up one package, and the Government have to adopt an opinion of the whole. The regulator has been given powers, which we believe need to be extended.
The new clause is fundamentally mild and moderate. As my hon. Friend the Member for Barking (Ms Hodge) said, it is reasonable and moderate. We have not asked for all the things that we have said need to be done. We ask only that a report be made to the House to let the House know precisely what is going on and what is the impact of those schemes; whether, in total, the Exchequer and the British public gain or lose from those schemes.
We have already had a clear demonstration that the Government are incapable of acting on the issue. Are they now also incapable of providing information about it? Or is it not their capacity that is in doubt, but their desire to produce a report on that issue? Are they so embarrassed about it that they want to avoid further debate? If that is the case, people will not judge them kindly for their disgraceful attitude towards the issue. The Government should be prepared to produce a report and let the people know precisely what is going on.