Major defends bosses' 1,000% rise in pay
Cedric Brown fields Commons questions as Labour accuses privatised indu stries' chiefs of `playing National Lottery' in the boardroom
Wednesday 25 January 1995
Ordinary people struggling to pay their bills were "fed up with the same small group playing the boardroom equivalent of the National Lottery", Tony Blair, the Labour leader, declared.
According to a dossier prepared by Gordon Brown, the shadow Chancellor, Edmund Wallis and John Baker, chief executives of PowerGen and National Power, have received pay rises of 1,000 per cent since privatisation of the industry in 1988-89, while many other utility bosses have secured increases of more than 400 per cent.
Payments to the boards of the two companies and the National Grid totalled more than £5.3m, compared with £600,000 to the old Central Electricity Generating Board, Mr Brown said. Labour research showed that Mr Wallis of PowerGen received nearly £1.3m last year in pay and income from executive share options, and Mr Baker of National Power more than £1.1m, he said. The old Central Electricity Generating Board paid its highest director £106,000.
Mr Baker and Mr Wallis have the opportunity to make another £1m this year. Mr Brown said: "The directors of these companies are year-on-year millionaires at the expense of millions of consumers." Additionally, the board of National Power had awarded itself an increase in remuneration of 25 per cent, while employees collected just 4.25 per cent. The Government retains a 40 per cent shareholding in both companies.
Elected remuneration committees and specific shareholder approval of directors' pay should be a feature in all publicly quoted companies, Mr Brown said. But the privatised utilities - often effective monopolies able to pass pay-rise costs on to customers- called for additional action in the form of new powers for regulators to penalise excessive awards by cutting prices. Labour's commitment to tax executive share options as income was also reaffirmed yesterday. A document produced by Mr Brown said thattax relief on discretionary options was "totally discredited" and chairmen and senior executives of the privatised utilities showed "the most outrageous examples of how share-price management and executive share options can be combined to produce risk-free fortunes".
In the Commons, Mr Major firmly ruled out intervention, despite the Government's remaining 40 per cent holding in the two electricity supply companies. During heated exchanges in Prime Minister's Questions, he told Mr Blair: "Having put the companies in private hands we are not going to retain control over detailed decisions . . . What you and your colleagues have been about recently sounds very much like the beginning of a pay policy."
Kenneth Clarke, the Chancellor, emphasised yesterday that the management of British Gas had cut the real price of the fuel by 20 per cent since the industry was sold off. He left little doubt, however, of the Government's desire for the private sector toput its own house in order.
It was inevitable that when companies performed spectactularly some individuals would earn spectacular rewards, he said. It was up to shareholders to ensure that pay and perks were kept within bounds.
Mr Clarke later met the Institute of Directors as it unveiled proposals for full disclosure of salaries and benefits in companies' annual reports.
Inside Parliament, page 5
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