Michael Heseltine – 1995 Speech on Regional Electricity Companies

The speech made by Michael Heseltine, the then President of the Board of Trade, in the House of Commons on 20 February 1995.

I beg to move, to leave out from “House” to the end of the Question and to add instead thereof: ‘applauds the improvements in performance in the electricity supply industry since privatisation; welcomes the benefits which customers are receiving in terms of lower prices and improved service; supports the continuing development of competition in the electricity market and the maintenance of effective regulation where this is necessary; and notes that the Director General of Electricity Supply will continue to promote competition and protect the interests of consumers.’. In anticipation of this debate, I spent some time looking at the Opposition motion. If I may, I shall take the motion as my text. I hope that the right hon. Member for Copeland (Dr. Cunningham) will forgive me for sticking to the subject as expressed on the Order Paper.

Apparently, the reason for deploring what I have not done is that the bid by Trafalgar House for Northern Electric was unpopular with the majority of Northern Electric’s shareholders who turned up at a meeting on 15 February. That is the first reason.

The second reason is that, apparently, Trafalgar House has no experience of running a private domestic monopoly energy utility”. The third reason is that the concerns of the Director-General of Electricity Supply about his ability to regulate a regional electricity company which becomes subsumed within a larger group were ignored. The fourth point, to which the right hon. Member for Copeland referred, is the ongoing inquiries being made by the Securities and Futures Authority”. The fifth point is the expiry on 31st March 1995 of the golden share held by the Government in the 12 regional electricity companies”. Those are the reasons which the Labour party gave notice that it wished to draw to the attention of the House tonight.

I am at something of a loss to understand the thinking behind those reasons. Perhaps we can explore just what Labour Members have in mind. It seems that, if a company has a meeting at which an undefined, unprescribed number of shareholders turn up, and if a majority of those who turn up hold a particular view, no matter how few they are, no matter the views of the others and no matter whether proxies are registered from the majority, the fact that those who turn up hold a view should be the determining factor. That is a curious constitutional innovation in the way in which British public companies should be run.

I find it fascinating that the Labour party believes that the view of a small number of possibly wholly unrepresentative shareholders should be the basis on which the President of the Board of Trade reaches his judgment. What about all the other shareholders who did not turn up? What about the majority who may not have expressed an opinion? Supposing that they were against the view of the small minority who did turn up? Am I supposed to ignore them? Am I not supposed to listen to their views and to a range of other people’s opinions on the matter?

The fact is—[Interruption.]

Madam Deputy Speaker (Dame Janet Fookes)

Order. There are too many seated interventions. I expect Front-Bench Members in particular to set a good example.

Dr. John Cunningham

I apologise, Madam Deputy Speaker; you are absolutely right.

It is no good the right hon. Gentleman coming out with this fraudulent nonsense about listening to people’s views. He did not want to listen to any views. He did not want to come to the House, and he did not want to make a statement. He did not want to answer a private notice question, and he did not want a debate. The truth is that, with perhaps one or two exceptions, he did not want to listen to views.

Mr. Heseltine

The right hon. Gentleman could have put all that in his motion, in which case I would have addressed it. My point, to which the right hon. Gentleman has no answer, is that nothing is so lacking in intellect or logic as the suggestion that I should take the views of a minority of shareholders as the determining factor in such a matter.

The nearest equivalent I can think of immediately is the mass meeting of the trade union movement at which a minority of vocal militants were able to dominate the scene, which led to strike action. This is the sort of technique that the right hon. Gentleman thinks should be introduced in British public affairs. I am not prepared to have anything to do with such an argument.

Mr. Martin O’Neill (Clackmannan)

Will the right hon. Gentleman give way?

Mr. Heseltine

No, because I want to make a bit of progress.

I move on to the next argument paraded, which is the absence of any experience on the bidders’ part of running a private domestic monopoly energy utility. This is said by the party that, for 40 years, has nationalised industry after industry after industry so that it can put trade unionists, civil servants and politicians in charge of the commanding heights of the British economy. This is the party that, for 15 years, has sat on the Opposition Benches.

Labour Members have never run any serious industry in their lives, yet they now claim the right to run the whole of the British economy. I have never heard—[Interruption.]

Madam Deputy Speaker

Order. Hon. Members must contain themselves.

Mr. Heseltine

If Labour believes that a company making a takeover bid must have had specific experience in the particular industry, it should say so. The fact is that lack of experience has never stopped Labour Members pursuing any policies of any sort in any circumstances. I cannot believe that they seriously believe that this argument should weigh with me.

I move on to the concerns of the Director General of Electricity Supply about his ability. Here I thought that the right hon. Gentleman asked some important questions, but I was intrigued that he managed to avoid any reference to the Director General—

Mr. Allan Rogers (Rhondda)

Condescending.

Madam Deputy Speaker

Order. I am sorry to interrupt the Secretary of State, but I have made the point before that a continual running commentary from a sedentary position is not acceptable.

Mr. Heseltine

I come back to the point. How can the right hon. Member for Copeland pray in aid the views of the Director General of Electricity Supply, important though his views are, without reference to the Director General of Fair Trading? There was a difference between the two regulators, which I freely admit, so I had to weigh the advice that I was given from two different regulators. I chose to follow the advice of the Director General of Fair Trading.

I found it absolutely fascinating, having listened to what I thought at the beginning of the right hon. Gentleman’s speech were to be paeans of praise for the Director General of Electricity Supply, that he provided a catalogue of criticism on how the industry had been badly regulated, how prices—apparently—had been allowed to go up and how consumers had been ripped off. But all that is the responsibility of the Director General of Electricity Supply, the one person who, according to the motion, I am supposed to listen to, as opposed to the Director General of Fair Trading.

Dr. John Cunningham

Of course, the right hon. Gentleman is talking nonsense. The Director General of Electricity Supply can work only within the regulations laid down by the right hon. Gentleman and his right hon. and hon. Friends. The Director General of Electricity Supply is as much a victim of this hopeless, hapless system as are the consumers who are paying the price.

Mr. Heseltine

Now we have—I have not got the words down, but we will have them all in the morning, as they will be carefully recorded—an apparently hapless system that is so unsatisfactory. So I gather that the Labour party, if it ever had the chance, would want to change it. [HON. MEMBERS: “Yes.”] That is very interesting. Would I be right in thinking that that would be the case not only for the electricity industry, but for a range of other industries? [HON. MEMBERS: “Yes.”] Yes, it would change industry after industry after industry. Where would the Labour party stop?

Mr. Stuart Bell (Middlesbrough)

At the utilities.

Mr. Heseltine

It would stop at the utilities. So am Ito understand that the National Freight Corporation, British Airways and British Steel, and all those other privatised companies, have been given a clean bill of health? Are they now safe from the predatory instincts of the Labour party? We are talking only of the utilities. That is what one might call a halfway house. All the utilities are under threat from the Labour party.

Dr. Cunningham

No, they are not.

Mr. Heseltine

No, they are not. Let us not talk about a divided party. Let us not have references to splits. Are we for clause IV or are we against clause IV? Are we dealing with clause IV(a) or clause IV(b)? Who is the great arbiter between clause IV(a), (b), (c), (d), (e), (f) or anything else’? Is it the spokesmen for the party above the Gangway, below the Gangway, on their feet, on their bottoms? Who speaks for the Labour party?

Mr. George Mudie (Leeds, East) rose—

Mr. Michael Clapham (Barnsley, West and Penistone) rose—

Mr. Heseltine

I shall give way to both hon. Members.

Mr. Mudie

Will the President be serious about a matter that may be funny to him, but is of extreme importance to millions of consumers? The man whom the President has to represent consumers, the regulator, advised the President not to allow Trafalgar House to take over 100 per cent. of Northern Electric, and that 25 per cent. was needed for transparency. The man responsible for protecting consumer interest put that position. Will the President take that advice, which would give the customer some protection, or will he sweep it aside?

Mr. Heseltine

I would seriously like to help the hon. Gentleman. The Director General of Electricity Supply has responsibilities, which he is discharging. I understand that he is in conversation with Trafalgar House. Certain assurances have been given, and those are now being discussed by the regulator. It is right and proper that that should be taking place. What the outcome of those discussions will be, I do not know, because that is something within the purview of the director general. But the right hon. Member for Copeland raised some important questions, on which I want to be as helpful as I can to the House, such as the timing of the announcement.

It is perfectly true that, on Monday last week, I left for India. During that afternoon, I reached a judgment about the matter. It followed from that judgment, because I was interested in the assurances that Trafalgar House was offering, that officials in my Department pursued the matter, which they did.

Of course, it was not possible to announce the outcome, because we did not know at that stage whether such assurances would be forthcoming. It is also perfectly true that it fell to my hon. Friend the Under-Secretary of State for Corporate Affairs to make the statement. I would be the first to say that I felt uncomfortable, because I could see how the circumstances were developing. I shall share exactly with the House the dilemma that I faced.

I knew that I was leaving for India. It was a very important trip, as the House would recognise. There was nothing that I could have done, or that I would have wanted to do, to avoid it, and I am sure that no one in the House would have asked me to do so. But I knew that, if I were to have made the statement, it would have had to wait until I had returned on Thursday. I did not believe that information of such sensitivity would hold between Monday and Thursday.

Therefore, I took the initial decisions, and I instigated the consultations that were to lead to the assurances which were forthcoming, and which are now the subject of discussion. I believe that, in that way, I behaved perfectly properly.

Dr. Cunningham

Will the President tell the House whether those assurances are legally enforceable?

Mr. Heseltine

No, they are not legally enforceable. But that is not the end of the matter, because the powers of the director general remain. He has powers first—as he is now doing—to discuss the matters with Trafalgar House; and, secondly, he has powers to refer Trafalgar House to the Monopolies and Mergers Commission, if, in future, he should in any way feel the need to do so. So it is important to understand the balances that exist.

Dr. Cunningham

If the regulator determines that a reference should be made to the Monopolies and Mergers Commission, would the right hon. Gentleman accept that decision, or would he overrule it?

Mr. Heseltine

As the right hon. Gentleman knows, once that process is under way, I am in a quasi-judicial position. [Interruption.] Hon. Members must understand that someone in my position, a position which this House has put me in, as a quasi-judicial authority, is extremely constrained, and rightly so, in their actions. I cannot prejudge matters. I have to listen to all representations, I have to take all such matters into account, and I have to be guided by the very clear legislative framework within which I operate. The judgments are often complicated, finely balanced and difficult, but I reject utterly and absolutely any suggestion that such matters are not carried out in the proper and full way.

Mr. John Gunnell (Morley and Leeds, South)

Will the President comment on the assurances that have been given? Trafalgar House does not have a reputation for being a company in which there is total transparency. It is felt that cash assets are being transferred from one member of the group to another. Have we assurances that such movements will be transparent, so that Northern Electric’s consumers may be sure that they are not paying to prop up some other member of the group?

Mr. Heseltine

The hon. Gentleman raises essential questions, and those exact issues are now being discussed by the director general and Trafalgar House. The director general is bound to do that. It is not for me to say that I support him in doing so. It is his legal duty so to do. I understand, as does the House, that that process is now under way. I also understand the need for that transparency, and the public confidence which would flow from it, to be in place.

Dr. Cunningham

Those are important points, as the right hon. Gentleman says. A question now arises over the apparently independent regulator having a right to make a reference to the Monopolies and Mergers Commission. Is the President of the Board of Trade saying that he would respect that independent right? If the regulator were to act in such a way, would the President intervene again to refuse the reference?

Mr. Heseltine

I have no power to stop the director general referring the matter to the MMC. I have a right to challenge the view of the MMC in the recommendations that it makes, but afterwards. That would be done in public, after public debate, and I would have to account in public to this House or wherever appropriate for any decision that I took. I would hope that, like any Secretary of State from any party, I would exercise that discretion and make those decisions in the way in which the House would expect me so to do.

Mr. Richard Caborn (Sheffield, Central)

Will the President give the House his view on the notice presented by Offer, in terms of changing and varying the licence in relation to section 11(2) of the Electricity Act 1989? If there is an objection in 28 days, there could well be a referral to the MMC.

Will the President give us the Government’s view about that variation of the licence which, I think, was printed in The Financial Times on 10 February, particularly in light of Northern Electric’s position on pricing when it can effectively give shareholders about £380? That point was referred to a little earlier by my right hon. Friend the Member for Copeland (Mr. Cunningham). That was effectively price control, which could now vary the licence conditions that were printed in The Financial Times on 10 February. Will the right hon. Gentleman gives us his view about that?

Mr. Heseltine

The hon. Gentleman raises a complicated issue. It is not a straightforward issue, and I will not give him an answer off the cuff. However, I will ensure that he gets a proper answer, because these are highly complex and technical legal matters, and the House is entitled to be properly informed. Either my right hon. Friend the Minister for Energy and Industry will reply to the hon. Gentleman in his response to the debate, or I will ensure that the Chairman of the Select Committee receives a letter setting out the matter in detail.
We have now dealt with the substance of one of the legitimate concerns. I hope that the House feels that I have dealt with it at some length, and I do not apologise for that.

I was surprised at the suggestion that, if the takeover is successful—I do not know whether it will be successful or not—that is somehow centralising the decision-making in London. As I understand it, Trafalgar House has made it clear that it will leave the headquarters of Northern Electric where it is presently based. It will therefore remain a provincially based company.

I could not understand how the Labour party could argue in that way when, during the last half-century, Labour nationalised provincial company after provincial company and centralised the control of those companies in London. I do not understand why Labour should find it extraordinary that this Government have returned all those companies to provincial headquarters.

The fact that the water and electricity companies and the gas industry now have major provincially dominated headquarters is a very important part of the Government’s process of spreading power throughout the country, as opposed to centralising it in London. It is not in the Labour party’s gift to suggest that we are trying to centralise powers by the back door—

Mr. Allan Rogers (Rhondda)

Will the President give way?

Mr. Heseltine

No, I want to say something else—

Mr. Rogers

The right hon. Gentleman is not telling the truth.

Mr. Deputy Speaker (Mr. Geoffrey Lofthouse)

Order. Did I hear the hon. Member for Rhondda say that the Secretary of State was not telling the truth? If so, I hope that on reflection he will want to withdraw that comment.

Mr. Rogers

I said that the President of the Board of Trade was misleading the House. I will withdraw the remark that he is not telling—

Mr. Deputy Speaker

Order. That will not do at all. The hon. Gentleman must rephrase his comment.

Mr. Rogers

I never said that he was deliberately—

Mr. Deputy Speaker

Order. The hon. Gentleman must withdraw that comment.

Mr. Rogers

I withdraw my comment, Mr. Deputy Speaker.

Mr. Heseltine

We all make such mistakes. However, if I had made that mistake, I would have admitted it more quickly than the hon. Gentleman did.

Mr. Rogers

Will the right hon. Gentleman give way?

Mr. Heseltine

The hon. Member for Rhondda (Mr. Rogers) has just corrected himself. He should just sit there.

Mr. Rogers rose—

Mr. Deputy Speaker

Order. It is clear that the President of the Board of Trade is not giving way.

Mr. Heseltine

Thank you very much, Mr. Deputy Speaker. I am not giving way.

The most distressing feature of the debate, of the speech made by the right hon. Member for Copeland, and of many of the comments made by Labour Members is the relish with which they want to portray a major British company like Trafalgar House in the least favourable light.

Trafalgar House is one of our leading overseas companies. It falls to my Department, and it is my privilege, often to spend a lot of time with the export managers, directors and executives of that company, travelling the world trying to obtain business. I wonder what kind of impact Labour Members feel it makes on the people whose lives are devoted entirely to trying to further British interests when they have to listen to the carping criticism that we have heard from Labour Members.

If by any chance the takeover bid goes through—I have no knowledge as to whether it will go through or not—Trafalgar House will then be able to point to its experience of running an electricity company in the United Kingdom as it bids for major world opportunities to install, run and manage electricity facilities internationally.

In this country, we must understand that fighting in the international marketplace today demands a scale of expertise in an ever-toughening competitive world. If, every time we try to put together a major British company to win in the world, we hear carping criticism from Labour Members who constantly talk about rip-offs, the consumers being robbed, soaring prices and any other slanderous attack they can find, they are simply undermining this country’s ability to win in the world marketplace.

Dr. John Cunningham

Will the right hon. Gentleman give way?

Mr. Heseltine

No, the right hon. Gentleman has had a fair go. He knows full well that he and the rest of those on the Opposition Front Bench never miss an opportunity to undermine the excellence of British exporting companies across the world.

Mr. Clapham

Will the right hon. Gentleman give way?

Mr. Heseltine

No, there is another Opposition Member trying to get in on the same act.

We are now winning in the export markets of the world on a scale which would have seemed almost inconceivable two or three years ago. We should be immensely proud of that.

We heard another classic canard from the Labour party. I do not want to blame the right hon. Member for Copeland for originating it. The canard was that prices have been soaring—

Dr. Cunningham

No.

Mr. Heseltine

If the right hon. Member for Copeland did not say that, I apologise straight away. I turn my attention to where the blame should lie, and that is with the Leader of the Opposition. Obviously, there is another split in the Labour party. The Leader of the Opposition says prices are going up, but the right hon. Member for Copeland does not believe they are.

That is a welcome conversion—[Interruption.] The right hon. Member for Copeland should be quiet for a moment and decide which side of the argument he is on. I want to nail the Leader of the Opposition. When the Electricity Bill was before the House, the right hon. Member for Sedgefield (Mr. Blair) said: outside of the Conservative party and the Department of Energy, it is barely an issue that prices will rise because of privatisation.”— [Official Report, 12 December 1988; Vol. 143, c. 684.] What has happened? Prices to customers have fallen. They are down by 9 per cent. in real terms to domestic users in the past two years. Industrial consumers have also seen falls in real terms. That record compares with a real increase of 5 per cent. in industrial prices, and a 22 per cent. increase in domestic prices under the last Labour Government.

The right hon. Member for Copeland cannot deny that he said that the quality of service has not improved. However, there has been an 80 per cent. reduction in the number of domestic customers who have been disconnected. Customer complaints to the regulator are falling. The right hon. Member for Copeland then said that investment was not taking off. However, the electricity industry has increased investment by more than 10 per cent. in real terms since privatisation.

Productivity is also rising. It is perfectly true that the regional electricity companies have reduced staff in comparison to pre-privatisation levels. They have introduced more flexible work patterns and pay bargaining. However, is Labour arguing that we must continue to employ people in companies that could achieve the same results with fewer people? Is that what Labour Members are saying? If they are saying that, how would they achieve productivity gains to pay the real increases in wages, upon which real increasing prosperity depends?

Whenever there were job losses in any industry, Opposition Members never said, “Britain is becoming more competitive.” They tried to pretend that we could freeze—fossilise—our industrial and manufacturing capability in the chaotic world that we inherited from them 15 years ago. That simply is not an option. It was not an option then—that is why they lost power—and it is not an option now. We are winning so much extra export market because we have turned the tide of British productivity.

In this debate, as in all others, Opposition Members cannot come to terms with the fact that it is only within the private sector that we will make the gains upon which the increasing wealth of this country depends. Opposition Members talk about shareholders doing well. I take credit for that and pride in it, because I know that shareholders are the pensioners, the people with the insurance companies, the people who are the savers, and the workers in industry who bought shares in their companies. One should rejoice in that, not condemn it left, right and centre whenever one has an opportunity.

The Labour party cannot come to terms with the fact that, 100 years ago, some lunatic dreamed up the idea called “socialism”. It is bust, it is finished, and that is why Labour Members are on the Opposition Benches, and will stay there.