Debts of pounds 22.5bn written off for privatisations

DONALD MACINTYRE

and WILL BENNETT

A total of pounds 22.5bn in debt has been written off by the Government ahead of successive privatisations since 1979, the Treasury has admitted.

The figure comes to light in the midst of the inter-party row over the level of debt the taxpayer will have to fund for rail privatisation - and coincides with a a fierce conflict between ministers and the nuclear industry over how much debt it will have to shoulder when it, too, is privatised.

The largest single debt - more than pounds 6bn at current prices - was that of the former water companies. This morning, damning criticisms of mismanagement by Yorkshire Water will be made by the National Rivers Authority when an inquiry into the region's water shortage begins.

The figures, released in a Commons answer to the Labour shadow minister Brian Wilson, by the Treasury Minister Michael Jack, also show that the amount of debt written off vastly exceeds the amount "injected" into newly privatised industries - or, in other words, carried by the industry rather than the taxpayer. That figure was pounds 13.94bn at current prices.

Mr Wilson, a transport spokesman, said last night that he had asked the question because of the pounds 2bn or more debt expected to be written off in respect of both the Channel Tunnel Rail Link and of Railtrack. Mr Wilson claimed: "The taxpayers' interests have been ruthlessly set aside in order to give privatised companies a clean sheet. This is equivalent to every household giving the shareholders of privatised companies a cheque for pounds 2,000 and then saying: `forget about it'."

The new figures come as British Energy is locked in a struggle with Whitehall over whether it should come to the stock market with pounds 1bn in debt as ministers want, or whether, as the industry wants, only pounds 500m, with the rest being written off by the taxpayer.

At the inquiry which opens in Leeds this morning, Yorkshire Water will be accused of ignoring warnings of an impending crisis, failing to reduce leakage from mains over many years, breaking its own rules for operating reservoirs and delaying measures to cut demand.

The report has been compiled by Dr John Mawdsley, water resources co- ordinator of the NRA, a watchdog body which is about to become part of the new Environment Agency.

He says that Yorkshire Water's failure to reduce leakage from mains and water pipes over many years contributed significantly to last year's drought in the region and that leakage in Bradford has actually increased since the company tried to tackle the problem.

The NRA calculates that the Yorkshire region will need substantial extra water resources to meet a predicted shortfall over the next 10 years. The watchdog body believes that drought orders asked for by Yorkshire Water in 1984, 1989, 1990 and 1991 "were probably not justified by the weather conditions".

On Friday, Yorkshire Water announced that Trevor Newton, its managing director, was taking early retirement at the age of 53. The chairman, Sir Gordon Jones, has also announced his retirement.

Fattened for market: The price of disposal

pounds million

Amount Amount

(Cash) (1995-96

Year Company prices)

1980-81 British Steel 509.3 1,105.2

1980-81 British Aerospace 60.0 130.2

1980-81 National Freight Corporation 100.0 217.0

1980-81 British Airways 160.0 347.2

1982-83 British Transport Docks Board 81.3 150.2

1984-85 BT 2,789.9 4,689.9

1986-87 BAA 43.5 67.3

1988-89 British Steel 3,980.0 5,478.5

1989-90 Harland & Wolff 422.5 543.6

1989-90 Short Brothers 390.0 501.8

1989-90 Water Companies 5,028.3 6,469.6

1991-92 Scottish Electricity Companies 1,043.6 1,170.0

1994-95 British Coal 1,633.4 1,678.3

Total 16,241.8 22,548.8