Leading Article: Job losses that might benefit the consumer

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IT WAS only to be expected that John Edmonds, the head of the GMB general union, would react angrily to the news of 25,000 redundancies at British Gas. Yesterday's announcement was better for British Gas employees than it might have been. The company's annual rate of job losses will actually fall from 6,700 for the next three years to 2,500 for the two years after that. But redundancies are understandably hard to sell to union members, and Mr Edmonds could be forgiven his knee-jerk hostility.

But Cedric Brown, chief executive of British Gas, made a feeble case for the job losses when he spoke on the radio yesterday. He could have pointed out that sad though the redundancies are, they will be carefully phased in over five years. More than half of the staff who will leave British Gas during that period would probably have gone anyway. Others may be tempted by the company's redundancy package, which will amount to an average of more than pounds 39,000 per person, with another pounds 13,100 in extra pension contributions.

'But that is only half the story,' Mr Brown might have continued. 'By cutting out staff we don't need, we cut our costs. That allows us to keep paying dividends to our 2 million shareholders. It also allows us to cut gas prices to our 18 million domestic customers. Were it not for past redundancies, we wouldn't now be charging 21 per cent less for our product in real terms than we were in 1986. That saving, incidentally, more than counterbalances the 17.5 per cent VAT on gas that will come fully into effect by April 1995, and whose imposition cost the Government so dearly. If we pass on to our consumers the pounds 600m we will save from this new restructuring, we shall be able to cut prices by almost another 7 per cent. So don't complain about the redundancies. They will benefit the wider public.'

Instead of making these points, however, Mr Brown put the blame squarely on the Government and its regulators. His shareholders might thank him for doing so: for the more convincing British Gas can make its hard-luck story, the less sharply it will have to cut its prices in future. But once there is proper competition in the gas market, the regulators can get out of the business of setting prices - and there will be no further need for such obfuscation.