Privatised Utilities

Oral Answers to Questions — Trade and Industry – in the House of Commons at 1:49 pm on 19 March 1997.

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Mr. Alan W. Williams:

To ask the President of the Board of Trade what plans he has to modify the powers of the regulators of the privatised utilities. [19426]

Photo of Mr Bill Michie Mr Bill Michie , Sheffield, Heeley

To ask the President of the Board of Trade what recent representations he has received regarding reform of the regulatory system for the privatised utilities. [19444]

Photo of Mr Eddie Loyden Mr Eddie Loyden , Liverpool, Garston

To ask the President of the Board of Trade what recent representations he has received regarding reform of the regulatory system for the privatised utilities. [19450]

The Minister for Competition and Consumer Affairs (Mr. John M. Taylor):

The Government receive representations on the regulation of the privatised utilities from time to time and have recently received a copy of the report of the independent Commission on the Regulation of Privatised Utilities.

Mr. Williams:

When the privatised utilities make profits of over £10 billion a year with a rate of return of 20, 15 and even over 40 per cent., is it not clear, as the Select Committee on Trade and Industry has said, that the initial price controls unduly favoured shareholders over consumers? As a former energy Minister has said, we need a radical overhaul of utility regulation. Would not that provide the best tax cuts of all that would benefit most people on the lowest incomes?

Mr. Taylor:

The Labour party never seems to have any word of approval for success. The Select Committee on Trade and Industry report, to which the hon. Gentleman alluded, stated: Customers get over 70 per cent. of efficiency improvements while shareholders get under 30 per cent. If the Labour party would like to take its last chance to come clean on a windfall tax, I can assure it that consumers, customers, small shareholders and pension fund beneficiaries would like to know its position.

Photo of Mr Bill Michie Mr Bill Michie , Sheffield, Heeley

Bearing in mind that 10 regional electricity companies have already been taken over and that there is another takeover in the pipeline—quite a few takeovers have involved United States companies, including Yorkshire Electricity—does not the Minister agree that we must toughen the regulations and give more power to the regulator so that company accounts are more transparent and there is greater defence of the consumer? If the Government do not adopt that approach, the new regulator will be nothing more than a paper tiger.

Mr. Taylor:

The hon. Gentleman's homework will lead him to the conclusion that mergers are for the Monopolies and Mergers Commission and, likewise, matters of fair trading are for the Office of Fair Trading. Meanwhile, I do not think that anyone could say that the regulators lack powers or accountability. They are answerable to consumers, the MMC, Select Committees, the National Audit Office and judicial review. That is a great deal of accountability.

Photo of Mr Eddie Loyden Mr Eddie Loyden , Liverpool, Garston

Can the Minister really claim that the regulators have been forceful enough in making those companies—which are near-monopolies—respond to their first responsibility: to provide a good service to consumers? Most of the so-called efficiency in those industries is gained by scrapping jobs. That is one reason why the employment figures in this nation are so high.

Mr. Taylor:

The fact of the matter is that the new arrangements—to which Labour did not, of course, subscribe, and which it has hindered all the way—have brought very considerable benefits to consumers, in increased standards of service and lower prices. The price of domestic gas is down by 20 per cent. and British Telecom charges are down by 40 per cent. in real terms. Those are significant benefits to consumers.

Photo of Mr Keith Hampson Mr Keith Hampson , Leeds North West

As a member of the Select Committee, may I draw my hon. Friend's attention to two points? The Committee pointed out that, in the early stages, the gains to shareholders could not have been accurately assessed because no one knew how far they could be quantified. Moreover, the evidence of Professor Littlechild, printed by the Committee, is that he "dealt"—that is the word— with the windfall in the early stages by transforming the price reviews thereafter to the point at which this country now has the cheapest electricity and gas for industrial users of any country in Europe.

Mr. Taylor:

I am extremely grateful to my hon. Friend for drawing that to the attention of the House. Those privatisations have been remarkable achievements. They were all original. They were entirely new in terms of system and method, but the results are outstanding.

Photo of Sir Peter Emery Sir Peter Emery , Honiton

Will my hon. Friend ask our right hon. Friend the Secretary of State to ask the chairmen of the public utility companies to calculate and publish their estimates of what the increase in costs might be if any Government saw fit to introduce a windfall tax, so that the consumer can know now what the increase in the cost of gas, electricity and telephone calls would be?

Mr. Taylor:

The challenge for my right hon. Friend is very important, and I think that I am allowed to say on behalf of the President of the Board of Trade that the answer is yes, we will seek those costings. The electorate will want to know what they are, as will consumers, small shareholders and pension fund beneficiaries.

Photo of Mr Den Dover Mr Den Dover , Chorley

Does the Minister accept that all my constituents think that the regulators have done a marvellous job in keeping prices down? Will he pay tribute to the privatised utilities, which have made enormous efficiency savings and gains, to the benefit of everyone across the country?

Mr. Taylor:

My hon. Friend is absolutely right. There have been great efficiency savings and reductions in prices, but Opposition Members do not seem to be interested in anything that is good for consumers. However, I remind them that we are.

Photo of Nick Harvey Nick Harvey Shadow Spokesperson (Trade and Industry)

In the light of the obvious need to review the powers of regulators, and in the light of the growth of competition, which is welcome, is not it time to consider the creation of an office for the regulation of all the utilities together? It could share expertise and experience, ensure consistency of approach and avoid duplication and would be a really powerful regulator across all these industries.

Mr. Taylor:

I have heard arguments and quite constructive debate along those lines, but it would be wiser to have a little more experience of the good operation of the present system, whereupon it would be quite proper to return to the consideration that the hon. Gentleman has in mind.

Photo of Mr Spencer Batiste Mr Spencer Batiste , Elmet

Does my hon. Friend recall that, in the late 1970s, the then nationalised industries cost the taxpayer £500 million a year in subsidy? Will he confirm that, for the past seven years, the privatised industries have contributed on average nearly £9 billion each year? Does not that demonstrate that Labour's hostility to privatisation would have caused much damage to this country and its industry in the 1980s and 1990s, just as the windfall tax would do if they were ever in a position to put it in place?

Mr. Taylor:

My hon. Friend is right. He is also right to return to the warnings about a windfall tax. The turnaround that he described has indeed been spectacular, and the main beneficiary has been the consumer.

Photo of John Battle John Battle , Leeds West

Are not the Government's claims of energy price cuts proving to be another great Tory myth? Is the Minister aware that, as he spelled out in his written reply to me on 25 February, Britain is 11th out of 15 in the European league tables showing reductions in prices to residential electricity consumers since 1990, which is after privatisation? Is he aware that even Greece has cut prices by more than a quarter during that period?

The truth is that prices in Britain have risen in real terms. The Minister admitted as such, so will he now accept that as the truth at the Dispatch Box? The Tories' record shows that current domestic prices are well up on 1990 prices. Labour will address regulatory reform to put the consumer first for a change. Consumers have been short-changed under this Government, and they will be better off under Labour.

Mr. Taylor:

That was a diatribe, not a question. But if it was a question, the answer is no.