It's the real power of Gas

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The serried ranks of middle-class delegates filed into the huge hall, and found their seats. Above them was the immense sweep of the conference platform, with 15 seated grandees looking down upon the scene. But for three things, this might have been a Conservative party conference. First, all 15 shiny, well-preserved, besuited bigwigs looked like Cecil Parkinson. Second, TV and other cameras had been banned from the hall. Third, the delegates thought they might actually achieve something. This was Wednesday's British Gas AGM - as we now know, the floor lost. And if the scene was pure Tory, the drama turned out to be all Old Labour, with angry activists outvoted by the block votes of pension funds and financial institutions. They left in disconsolate mood.

Now, sitting in their kitchens and lounges, out shopping or playing with the kids, the Gas shareholders, like Mr Nadin (Letters, opposite), should reflect not on their failure, but on their success. Not just in winning a moral victory, but in representing something genuinely important in the way that people can exercise power.

For much of the past hundred years true sources of power were easily to be found. National government exercised substantial control over the economy, the natural monopolies and most utilities. Much of civic life was the province of local government - the Corporation. The rest was parcelled up between large private companies (whose operations were easily affected by decisions taken in Westminster), or in associations such as trade unions (which sought expression through the political process). The citizen's capacity to affect things was clearly invested in votes cast at general or local elections.

The world changed. The evolution of the global economy increasingly limited the freedom of action of national governments. Stock and money markets, multinational companies and agencies such as the EEC became recipients of a first great diffusion of power.

In Britain, the Thatcher government presided over a second great diffusion. The privatisation of monopolies and utilities shifted power from Whitehall to the shareholders of BT, British Gas and the water companies. Sid was invited to inherit control from the State ("the shareholding democracy"). Local government lost most of its direct powers - but not (as some believe) to Westminster. The sale of social housing to tenants (the "property-owning democracy"), enhanced powers for parent governors and local management of schools ("parent power and freedom to choose"), compulsory tendering for council services, GP fundholding, hospital trusts ("patient power") and the next-step agencies in the Civil Service - all tended to relocate important powers beyond the easy reach of elected authorities. Today the most used phrase at the beginning of any ministerial statement seems to be "this is not a matter for the Government ..."

The third diffusion is not a by-product of any policy. Increasingly, informal associations of individuals have sprung up, coming together in pursuit of particular interests or enthusiasms. From single-issue pressure groups, to the producers of fanzines, a form of "cultural democracy" has taken root, in which people expect to have their say.

To the pessimist, the consequence of all this is the creation of "Quango Britain", a state where effective power is wielded by unelected and unaccountable elites for their own advantage. The new university offering huge golden handshakes, the sudden closing of the accident ward and the utility paying executives telephone numbers for drawing breath all exemplify Quango Britain.

But this is only part of the truth. In some ways, the impulse that lay behind such initiatives as the Citizen's Charter has been far more successful than we have realised. It has accelerated a shift towards consumer activism: parents really are making demands in schools, patients and their families really are putting pressure on trusts and, as we saw this week, shareholders really are campaigning for their view of how companies should be run.

In some cases, there is a formal structure for this expression. But in others, the force of public opinion is mediated through the columns and letters pages, the studio audience and the radio phone-in. Elites, such as those who run the Lottery grants, are learning about the new democracy the hard way.

If you are sceptical about this, consider the true impact of the great Gas revolt. Having given their proxy votes to the Parkinson lookalikes, the pension funds are letting it be known that they now want to see a "quiet change" in the policy on executive remuneration. They are worried about British Gas's image with the public. Sure enough, other companies are also looking at their practices. On Wednesday, in the London Arena, the ordinary shareholders may have lost the battle, but they haven't lost the war.