COMMENT : Too late to stop the great electricity giveaway

`There is a strong case for handing some of the money back to shareholders to recycle through the market to companies in more urgent need of funds'

The good news is that electricity privatisation has become so notorious as a giveaway that an embarrassed Treasury is determined not to let it happen again with the few remaining sales it has on the stocks. The bad news is that the long-term fallout from the electricity fiasco in 1990 is likely to set the political agenda for utility regulation for years to come, and may indeed become the inspiration for a much harsher regime if Labour returns to power.

The Government sold the 12 regional electricity companies four years ago for £5bn. Today they are worth more than three times as much, and can afford to hand back in cash to their shareholders more than the entire price paid to the Exchequer.

The jointly owned National Grid alone, which was thrown into the pot almost free, is by itself worth almost as much as that original sale price for the RECs. Shareholders seem to have got the rest of the industry for nothing. There is such a thing as a free lunch.

The arithmetic of the privatisation is not quite as simple, of course, as a trebled share value. To the extent that privatisation has been a spur to efficiency - which it has been - the economy as a whole has gained, and some of that benefit flows to the Treasury

But, on balance, it is hard to see the electricity sale as anything but a massive transfer of wealth from taxpayers to shareholders. There was some modest benefit for customers, but it is clear that Stephen Littlechild, the electricity regulator, could have squeezed out a lot more. The lesson is that privatisations on tight timetables under pressure from the need to reduce the PSBR can be bungled just as much as any other hastily executed sale. The RECs should have been sold off gradually, which would have realised for the Government more of the unexpectedly high efficiency gains of the most recent years.

That is water under the bridge. The sensible question is, where do we go from here? Is it wrong in today's circumstances for Northern to hand out to shareholders more than they paid for the company?

In principle, it is a good deal easier to defend the scheme than its detractors make out. Here is a company with high cash flow, low risk and low debt, with strictly limited investment possibilities. There is a strong case for handing some of the money back to shareholders to recycle through the market to companies in more urgent need of funds, even if it means the banks - now awash with unwanted money - taking over some of the financing.

The cautious way to redistribute is through high dividends, since these can be cut back if a company finds it needs the cash after all. But the RECs are such stable businesses that surprises are unlikely. Little harm will be done by accelerating the process and handing over a lump sum.

That is what was anyway going to happen as a result of the grid flotation. The issue is not whether the RECs should hand back money to shareholders, but how much. The scandal, the underpricing of the original sale, is a four-year-old story.

Pilks sets new style in remuneration

The terms of Nigel Rudd's appointment to the Pilkington chair make refreshing reading after the recent litany of boardroom greed. This is not the usual tale of an overpaid rent-a-chairman. In fact, Mr Rudd, one of the most highly regarded managers around, will not be paid at all for his part- time contribution to the glass manufacturer. Instead Williams, his main employer, will receive compensation for the time he is away.

Now that a combination of market sentiment and the Accounting Standards Board has put paid to Williams' acquisition ambitions, Nigel Rudd has come to the same conclusion as his former partner, Brian McGowan - there are plenty of in-house managers with enough talent to run the business, leaving him time to do what he really enjoys somewhere else.

Whatever Pilks pays for his two or three days a month, it will get good value if his performance at East Midlands, his only other major chairmanship, is anything to go by. He put together the most imaginative and fair redistribution of wealth yet seen in the electricity industry's efforts to get rid of its mountains of cash.

As a rescue candidate, Pilkington is not in the same league. Under chief executive Roger Leverton, the company has got to grips with the problems that afflicted it as a sleepy family business. But if anyone can provide the driving force to change the Pilks culture, Nigel Rudd is as good a choice as any.

Reality overtakes Europe's airlines

Even as he puffed out his chest, threatening to take a long, hard look at the latest plea for crutch-money from yet another debilitated state airline, Neil Kinnock must have known that expectations of tough action following tough talking from the European Commission are pretty low. Iberia, Spain's national carrier, currently waving its cap around in Brussels for a cool £650m, after having received rather more than that just three years ago, must reckon its chances of being rescued from gross inefficiency are more than reasonable. After all, its case is no less pressing, certainly to the Spanish government, than those of Air France, Olympic of Greece and TAP of Portugal, all of which have flown off with permission for generous hand-outs.

For all the understandable anger and frustration of the successful privatised airlines, British Airways to the fore, at this seemingly never-ending distortion of competition, the fact remains that state carriers are still potent symbols of national prowess, backed by enormous political clout. The best fair-competition intentions of the Brussels commission have been no match for the discreet interference of governments determined to protect their airlines.

But as he prepares to wag a reproachful finger at Iberia, Neil Kinnock, in his first big test as transport commissioner, can take heart from the fact that time is in favour of the fair-competition lobby.

Airlines like Air France and Iberia, finally, are having to work for their money, cutting costs with uncustomary savagery. The reason for this lies, however, less with Brussels' admonitions than with the need of governments to raise privatisation revenues, and the prospects of full liberalisation of the European airline market in 1997.

Start your day with The Independent, sign up for daily news emails
i100 In this video, the late actor Leonard Nimoy explains how he decided to use the gesture for his character
Arts and Entertainment
Secrets of JK Rowling's Harry Potter workings have been revealed in a new bibliography
arts + ents
Robert De Niro has walked off the set of Edge of Darkness
news The Godfather Part II actor has an estimated wealth of over $200m
Arts and Entertainment
Fearne Cotton is leaving Radio 1 after a decade
radio The popular DJ is leaving for 'family and new adventures'
Robbie Savage will not face a driving ban
football'Mr Marmite' faced the possibility of a 28-day ban
Life and Style
Nearly half of all young people in middle and high income countries were putting themselves at risk of tinnitus and, in extreme cases, irreversible hearing loss
It was only when he left his post Tony Blair's director of communications that Alastair Campbell has published books
people The most notorious spin doctor in UK politics has reinvented himself
ebooksA special investigation by Andy McSmith
Life and Style
The new model would be a “pedal assist” bike in which the rider’s strength is augmented by the engine on hills and when they want to go fast
Arts and Entertainment
arts + ents
Life and Style
Arts and Entertainment
James Franco and Zachary Quinto in ‘I Am Michael’
filmJustin Kelly's latest film tells the story of a man who 'healed' his homosexuality and turned to God
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower