LETTERS: Directors' pay in privatised industries

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The Independent Online
From Mr G. W. Rufford Sir: After 40 years in the electricity supply industry, I retired in 1983 on a modest pension. From 1976 I had been deputy chairman (managing director) of Eastern Electricity Board. Board chairman and the deputies were ministerial appointments, so their salary and conditions were determined by Parliament and were often restrained for political reasons.

I recall that one outcome of this arrangement was that some 15 subordinate staff, whose pay was determined by collective bargaining, earned more than the deputy chairman.

Marjorie Mowlam, MP, has said that a Labour government would empower regulators to fix the remuneration of the chairmen and directors of privatised utilities. Involving regulators in salaries and benefits is not only undesirable, it is also unnecessary, because the recent windfalls for utility chairmen and directors are a one-off.

The employment select committee, which is today investigating the pay of directors of the privatised companies, should not do so without taking account of the enormous benefits that privatisation has brought. What we have now is not perfect but the new market-based regime has already produced massive improvements.

Alas, many commentators seem prepared to dismiss the efficiency gains and the more realistic approach to capital investment. They favour state central planning, and recent stories about pay and benefits have been grist to their anti-privatisation mill.

In the case of electricity, I suggest that those who are peddling figures of some £20m in gains by directors should see this in the context of, for example, the £400m saved since disbanding the Electricity Council -a body that stifled initiative and bredbureaucratic blight throughout the electricity industry.

Today's industry is about low-cost operational behaviour and entrepreneurship, instead of cost-plus regimentation; prices are down by 7 per cent in real terms (and falling), and the Government is raking in corporation tax from electricity company profits.

I hope that the select committee, when examining salaries and benefits, will agree with me that the privatised industries will be much better for the UK than the pork barrel political empires that preceded them.

Yours faithfully, George Rufford Woodbridge, Suffolk 24 January