Scotland's gas turn-off

Scotland? There is open speculation that the

place will simply disappear. And yet, apart

from some small fuss from the unions and

the SNP, the rest is silence.''

BEFORE shares in British Gas were first offered to the public, back in

December 1986, there was a lot of heated debate about the wisdom of

replacing a nationalised monopoly with a private-sector monolith.

Was the Thatcher privatisation drive, while promising a stiff dose of

market rigour and the cobweb-dispersing winds of competition, simply

delivering more of the same, apart from inflated reward packages to

another complacent boardroom and risk-free windfall gains to punters

everywhere?

This side of Hadrian's Wall there was an equally high-octane

subsidiary debate about whether, if British Gas were to be broken up, a

viable privatised Scottish gas supply company could emerge from the

rubble.

The North British economy had been through a bad time, losing one

corporate headquarters after another. The promises of Ernest Saunders,

made in the heat of the Distillers takeover, had already proved

threadbare, before the DTI inspectors moved into Guinness. A number of

other chunky independent Scottish companies had fallen to hungry

predators. The battle for a separate Scottish TSB had been fought

through the courts and lost.

Scotland's economy was shedding some big corporate limbs and replacing

them with thin twiggy growth in danger of snapping when the next chill

wind blew through it. We were in danger of becoming a branch economy

with a capital B.

So some big Scottish names put their weight behind calls for British

Gas to be broken up into a number of private companies, including the

creation of Scottish Gas plc. Such a solution would not only inject more

competition into the UK gas market, they argued, it would start to

reverse the grievous losses of corporate autonomy Scotland had suffered

in the first half of the 1980s.

Sadly, Scottish advocates of a gas break-up proved to be ahead of

their time. Their kind of model was adopted much later, when electricity

and English water were privatised. But, despite all the objections, gas

was sold off in one piece.

Where are these voices now, I wonder, now that British Gas is to

undergo its most radical restructuring since that 1986 sale, in the wake

of last year's Monopolies and Mergers Commission inquiry?

For, far from creating a second opportunity to create an independent

Scottish Gas, the proposals floated by the British Gas board just before

Christmas could deprive Scotland of what little higher management

function it currently enjoys.

British Gas wants to scrap its traditional regional structure and

create five business divisions covering public gas supply, contract

trading, transportation and storage, retailing, and the service and

installation of gas central heating. It also wants to shed 20,000 jobs,

nearly a third of its current workforce, by 1997.

If that is what happens, what will become of the Granton, Edinburgh

regional headquarters of the quaintly-named British Gas Scotland? There

is open speculation that the place will simply disappear. And yet, apart

from some small fuss from the unions and the SNP, the rest is silence.

The MMC inquiry was the culmination of a bruising 18-month

confrontation between British Gas and the then-regulator Sir James

McKinnon. Less than a year ago, he, through Ofgas, was telling the MMC

British Gas should be carved up into 12 regional companies with separate

pipeline and gas-purchasing businesses.

In its final report last August, the MMC accepted some of the break-up

arguments, recommending that British Gas sell off its trading arm by

1997 and proposing a phasing-out of BG's domestic supply monopoly by

2002.

But, by last month, the monolith's survival was assured. First, on

December 17, British Gas revealed details of its own restructuring

plans, abandoning its current regional structure and replacing it with

the five new functional businesses.

Four days later, after MPs had departed for the Christmas hols, Trade

and Industry Secretary Michael Heseltine announced he was rejecting the

MMC's two main recommendations. British Gas would not be broken up,

provided it separated its transport and trading activities. However, the

domestic supply monopoly would be abolished by 1998.

In the wake of Mr Heseltine's announcement, the new Ofgas

director-general Ms Clare Spottiswoode reserved the right to call for

divestiture of parts of British Gas, if there was any sign of accounting

or cultural fiddling between the proposed separate business units. But,

she added in words which distanced her from the stance of her

predecessor, she was determined that the British Gas national monopoly

would not be replaced with a series of regional monopolies.

The relief etched on the face of British Gas chief executive Cedric

Brown was striking. The fears etched on the faces of many of BG's

workers and regional managers were less well documented. For the rest of

us, with Christmas and Hogmanay looming, the significance of what was

happening got lost somewhere between the turkey and the black bun.

In the cold light of a new year, the implications for the Scottish

interest look profound. The opportunity to create a Scottish gas utility

was lost back in 1986. Now we face the prospect of losing our branch

headquarters of the UK utility as well.

As regular readers will know, I do not always see eye to eye with the

SNP on the structural weaknesses in the Scottish economy or what to do

about them. But, on the threat posed by the British Gas restructuring

plan, the nationalists' forebodings are well-founded. This time the SNP

is not crying wolf.

So why are the other voices, raised so vociferously in 1986 in favour

of a break-up of British Gas and the creation of a separate Scottish Gas

company, now so silent? If we are to have a privatised ScotRail,

operating trains on track owned by a quite separate Railtrack, why is it

not possible to envisage a Scottish Gas, supplying customers through a

pipeline network, owned and operated by a quite different company?

With the electricity utilities, including ScottishPower and

Hydro-Electric, moving rapidly into the gas market and Mr Heseltine's

tighter timetable for ending BG's domestic supply monopoly, the issue of

regional monopoly no longer has even the force it had back in 1986.

There is a significant Scottish business waiting to be unlocked from

the Granton headquarters of British Gas Scotland, but the argument for

that course of action is going by default. Even the SNP, in warning of

the implications of the British Gas proposals, is pitching not for the

creation of a separate Scottish Gas but for the siting of the

headquarters of two of the five functional businesses proposed by BG in

Scotland.

One of the problems in getting any head of political steam behind the

former option is the relative invisibility of the Granton operation and

those who run it. In all my years as a business journalist, I cannot

remember the last time I visited the place. I have got to know the

senior personnel in depth in many other large Scottish companies. I

would be hard pushed even to name names at Granton.

That was as true in British Gas's days as a nationalised industry as

it is now. But such below-the-parapet anonymity does not invalidate the

main point. The British Gas restructuring plan will strip Scotland of

any meaningful corporate presence. Let's give this important issue a

real public airing before it is too late.