Gas turns heat on regulator over pay

A FURIOUS row has broken out over comments made by Sir James McKinnon, director-general of Ofgas, which appear to lend support to union calls for a big increase in pay levels at British Gas.

In a pro-strike leaflet published by Nalgo, which represents 28,000 members of the company's workforce, the regulator is quoted as saying: 'I have been consistently surprised at the low levels of percentage pay increases offered by British Gas to the workforce.'

Cedric Brown, chief executive of British Gas, is angry about the comments and has written to Ofgas complaining that pay is not the regulator's business.

Sir James's comments were made at an on-the-record lunch discussion with senior Nalgo officials. But he claims his words were taken out of context. He has attacked the union for publishing the remarks without telling him.

'I totally oppose inflationary wage settlements as a matter of basic business policy,' he said.

Nalgo has rejected his retraction and maintains that the quote was verbatim and not misinterpreted.

The storm comes as Nalgo ballots its members on a strike, after rejecting a pay offer of 4.3 per cent. British Gas expects the result within days.

Relations between the company and the regulator are sinking fast after a series of disputes. The MMC is now examining the whole of British Gas's business at the company's request.

There has been increasing speculation that Sir James is under pressure from the Government over his outspokenness in dealings with the group and his increasingly tough line.

But he denies such pressure, saying that maintaining the independence of regulators is paramount.

Meanwhile, City analysts are expecting Tuesday's interim results from British Gas to show a loss of pounds 30m to pounds 35m for the three months to June.

Because of the seasonal nature of the profits, attention will be focused on the company's dividend. Analysts are keen to know whether British Gas will maintain its annual 10 per cent increase in the payout.

The company has recommended a dividend for the nine months to 31 December 1991 of 10.25p, compared with 12.5p for the 12 months to 31 March 1991.

Profit comparisons will be difficult as the year end has changed to 31 December from 31 March.

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