Sir George Young, Financial Secretary to the Treasury, denied Labour claims that the Government was guilty of insider dealing over the £4bn flotation of its remaining stake in National Power and PowerGen - which came just before Professor Stephen Littlechild, the regulator, announced the prospect of tougher price controls for the 12 regional companies on Tuesday, knocking £3.5bn off the value of electricity shares, and threatening the reputation of London as a sound financial centre.
Sir George revealed, however, that Treasury concerns were such that they consulted lawyers and financial advisers on Friday night, and cleared the prospectus with Professor Littlechild, the head of the Office of Electricity Regulation, before going ahead with the sale.
Shares of the two generators, which went on the market on Monday, tumbled badly in the wake of the regulator's decision to review prices set only eight months ago, while those of the regional companies plummeted.
In the City it is believed Professor Littlechild changed his mind twice over the weekend on whether to announce tighter controls over electricity prices.
Although the Department of Trade and Industry and the Treasury were aware last Friday that he might indicate his views this week, he is thought to have decided on Sunday not to make the statement and then shocked the Government by informing ministers on Monday that he would say something the following day, just 24 hours after the new shares in National Power and PowerGen began trading.
Jack Cunningham, Labour's spokesman on trade and industry, accused ministers of "absolute negligence or complete dishonesty" for not revealing the proposed review. "Is that not `inside information' as defined in part V of the 1993 Criminal Justice Act?" he demanded during yesterday's Commons trade and industry questions. He said it was extraordinary that ministers were not making a Commons statement on the affair, though he welcomed the "belated" announcement by Professor Littlechild. "It is clear that electricity consumers have been massively overcharged, fleeced perhaps of billions of pounds of the past four or five years," he said. "It is clear that electricity shares are overpriced exactly because consumers have been overcharged."
Tim Eggar, the Minister for Energy, retorted that Dr Cunningham had written to the regulator asking for a reduction in prices ahead of 1 April.
Millions of small investors in the regional companies saw the value of their shares plunge dramatically, sparking turmoil in the market and anger among major institutional investors. One said the fiasco made Britain appear like "a banana republic".
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