Leading Article: Shamed face of privatisation

It is ironic that British Gas should now find itself embedded in the public imagination as the unacceptable face of privatisation. Here is a company that initially opposed denationalisation and then successfully resisted its own break-up. Since pr ivatisation it has maintained inefficient practices that even the public sector now frowns upon. Visit any gas showroom and the archaic atmosphere is palpable.

Yet in a matter of weeks, British Gas has created a public relations disaster. It is now known as the company that cuts wages and sacks staff to pay for six-figure pay rises that top managers have awarded themselves.

Thus has British Gas come to embody the worst fears that the public has of an increasingly unfair commercial world. To those facing a combination of job insecurity and declining spending power, the size of the National Lottery jackpot and executive pay rises is hard to conceive. But whereas the first windfall is fascinating, the second is a source of mounting anger.

Amid this heightened emotion, it is important to recognise a few realities. First, fierce competition from rivals means that British Gas probably now has little choice other than to restructure its retail operation in a dramatic fashion. Having hidden their heads in the sand for so long, the company's managers have had to behave with the frightening zeal of the freshly converted. They must take the blame for the apparent brutality of changes that could have been more gradual if made earlier.

Second, the large pay awards enjoyed by senior management are unjustified even by the standards of prevailing market rates. Claims that the increases are warranted by the company's supposed world-class status flatter an organisation that retains many of the characteristics of a poorly run state monopoly.

No company or country, however large, can now avoid the dictates of market competition without eventually suffering the economic consequences. Britain faces challenges that are at least as great now as they were before Thatcherism. Those who think that overmanning and inefficiency can be tolerated are offering false hopes.

But the difficult and painful adjustments that employees are often asked to make require leadership that is respected. Those in charge must recognise that they operate in a society struggling to reconcile some sense of fairness with the need to engender red-blooded competitiveness. In this task the management of British Gas has failed miserably.