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House of Commons

Monday 12 December 1988

The House met at half-past Two o'clock


[Mr. Speaker-- in the Chair ]

Oral Answers to Questions


Electricity Privatisation

2. Mr. Speller : To ask the Secretary of State for Energy if he will ensure that Her Majesty's Government take on no liability for the cost of decommissioning any nuclear power stations built after the electricity generating industry has been privatised.

The Secretary of State for Energy (Mr. Cecil Parkinson) : After privatisation, electricity customers will continue to pay, as they do now, the anticipated costs of decommissioning. The electricity industry already makes full provision for these costs and will continue to do so over the lifetimes of future stations. But the Government are taking powers in the Electricity Bill to enable them to contribute, subject to parliamentary scrutiny, to unanticipated increases in the costs arising from changes in public policy.

Mr. Speller : Does my right hon. Friend agree that once an industry is privatised it is the duty of the private owner to take all risks and not to pass them to anyone else? I do not question for a second the need for payment for existing plants that Governments of all complexions have put up in the past, but how does my right hon. Friend cover the case after privatisation of people being told by the private owner that Government will carry the cost of insurance?

Mr. Parkinson : As I pointed out, it will be for the industry to make provision for anticipated costs. However, if the nuclear installations inspectorate suddenly decided that, instead of allowing the decommissioning of power stations to take place over X years, they should take place in half X years, that could give rise to costs. That is an example of a change in public policy that the company would not have been able to anticipate. In those circumstances, and only in those circumstances, it would be reasonable for the taxpayer to contribute.

Mr. Lofthouse : Is the Secretary of State aware that Mr. Christopher Harding, chairman of British Nuclear Fuels, recently told a Select Committee that BNF was contractually committed to the CEGB to the tune of £1,400 million to take nuclear waste at its disposal plant? Will that cost fall on the private sector, or will it be met by the Government?

Mr. Parkinson : The hon. Gentleman makes a mistake which seems to be entrenched in the thinking of

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Opposition Front Bench spokesmen. Nuclear costs are being incurred now. Last year, £700 million was set aside in the accounts of the CEGB to meet the cost of future decommissioning and waste processing. A huge provision--to date, £3.5 billion--has been set aside, and that is built into the prices that customers are presently paying.

Dr. Michael Clark : In the forthcoming Bill, will my right hon. Friend consider quite precisely what the limits of expenditure may be for the private sector when it inherits the nuclear power stations so that investors will know precisely their liabilities and the best possible price can be obtained for Big G and Little G?

Mr. Parkinson : We are saying that all anticipated costs will have to be met--as they are now and as they have been for the last 30 years, although that seems to take the Opposition by surprise--by the customer. Those costs will continue to be paid. We are proposing to expose those costs and to say that if there is to be an increase in payment or a grant as a result of a change in public policy, we shall come to the House and explain it. For the first time, the House will know about nuclear costs and can have justified to it any costs incurred by the Government in making these grants.

Mr. Blair : Is the Minister not aware that the costs anticipated by the Central Elecriticity Generating Board are generally thought to be incredibly low? Is it not the case that his Bill will provide for grants or loans up to £2.5 billion per time? Why should the private sector take the profit while the public sector retains the risk?

Mr. Parkinson : I had hoped that the hon. Gentleman was being misquoted in the press, but clearly he is totally misinformed. What exists at the moment is a liability to meet decommissioning costs. At present that is paid by the customer, but it is totally underwritten by the Government. We are saying that in future a third party will be available to share part of that risk. That party is the shareholder. The more risk that we leave with the Government, the higher the price that the industry will obtain. From what the hon. Gentleman says, one would think that it is the City which receives the price and the taxpayer who pays it. It is the other way round. If he got that into his head, he might start to understand these matters.

Mr. Stern : On a directly related subject, does my right hon. Friend agree that it will fall to the privatised industry to bear the costs-- however great they may be, at any time in the future--of the poisons that have been poured into the atmosphere by fossil-fuelled power generation for an untold number of years?

Mr. Parkinson : Yes. We hear a great deal about this. If I catch your eye, Mr. Speaker, I shall take part in the later debate. In that debate we shall talk about the costs of alternative sources of energy, which are substantial. Each year, as taxpayers and customers, we are spending an amount equal almost to the total amount of grants for which the Electricity Bill will provide.

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Coal Industry

3. Mr. Eadie : To ask the Secretary of State for Energy what discussions he has had with the chairman of British Coal about future contraction of manpower in the coal industry.

Mr. Parkinson : I meet the chairman of British Coal regularly to discuss all matters affecting the industry.

Mr. Eadie : The Secretary of State must be aware that productivity in the coal industry has increased by 75 per cent., that operating costs have decreased by 30 per cent. and that in the first quarter of this year British Coal made an operating profit of £190 million. Why must there be pit closures and redundancies for miners as a consequence of these figures?

Mr. Parkinson : I confirm that the improvements in productivity and so on are as the hon. Gentleman has set out, and I compliment those who work in the industry on them. Moreover, that operating profit is made up substantially from surface mining, and large losses are still being made by some deep-mine pits. Until those losses can be eliminated, there will, I am afraid, continue to be pit closures.

Mr. Thurnham : Would not the prospects for employment in the industry be much improved if there were an acceptance of six-day working? Is this not the way forward for the industry?

Mr. Parkinson : If we can add modern working practices to the £6 billion worth of investment the Government have made in equipment in the industry in the past 10 years, the prospects of the industry will be brighter.

Mr. Skinner : The Secretary of State made it clear earlier that billions of pounds of taxpayers' money is to be used to bail out the nuclear power industry. My hon. Friend the Member for Midlothian (Mr. Eadie) and I are asking why it is, if the Secretary of State can find the money to bolster nuclear power in the way that he has just announced, that he cannot do the same to stop contraction in the pits. There is 300 years- worth of coal beneath the ground and the Secretary of State should be maximising production of coal, using more manpower than is employed in the coal-fields with the result that we are less dependent on nuclear power which, in the Secretary of State's own words, is costing the taxpayer a fortune.

Mr. Parkinson : Nuclear power is being paid for entirely by the customers of the electricity supply industry. We are talking about the possibility of grants if there is a change in public policy. As the hon. Gentleman pressed the point, I can tell him that there is a precedent for subsidising losses in an industry--the coal industry, which we have subsidised to the tune of £1 billion per year for every year since we have been in power. What is more, the CEGB estimates that is is paying about £500 million more than it needs to pay for its coal. The answer to the hon. Gentleman is that there is a subsidy, it is being paid for by the taxpayer and the customer, it amounts to £1.5 billion and it is being paid to the coal industry.

Mr. Barron : In the matters that he discusses with the chairman of British Coal, has the Secretary of State discussed whether there are likely to be compulsory redundancies in the next round of redundancies to be

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announced next August? Can the Minister give us an assurance that compulsory redundancies will not be within any agreement?

Mr. Parkinson : The question of compulsory redundancies has never been raised with me and I am sure that the hon. Gentleman will confirm that under this Government redundancies have been paid on a far more generous scale to those in the industry than ever before. We have no reason to wish to depart from that.

British Coal

4. Mr. Patchett : To ask the Secretary of State for Energy when he last met the chairman of British Coal ; and what matters were discussed.

9. Mr. Cummings : To ask the Secretary of State for Energy when he next intends to meet the chairman of British Coal ; and what he proposes to discuss.

11. Mr. Win Griffiths : To ask the Secretary of State for Energy when he last met the chairman of British Coal ; and what was discussed.

The Under-Secretary of State for Energy (Mr. Michael Spicer) : As my right hon. Friend has just said, he and I have regular meetings with the chairman of British Coal to discuss all aspects of the coal industry.

Mr. Patchett : Did the Minister discuss with the chairman the future funding of the pressurised fluidised bed project in Grimethorpe in my constituncy? If private funds are not forthcoming, will the Government make money available to enable the project to be completed and made commercially viable, or is the Minister happy to throw away Britain's lead in this technology?

Mr. Spicer : As the hon. Gentleman will probably know, the chairman has written recently to my right hon. Friend the Secretary of State suggesting a new hybrid technology called the topping cycle. We shall be discussing this matter with British Coal. We shall want to assess with British Coal the level and nature of possible industrial interest in the proposal.

Mr. Andy Stewart : When my hon. Friend next meets the chairman, will he ask him to consider making suitable premises available in Wales for the Union of Democratic Mineworkers to recruit new members? My hon. Friend will be aware of the hostility of Welsh local authorities to the union's decision to expand into Wales, they apparently not believing in democracy.

Mr. Spicer : I and the House have noted what my hon. Friend has said. It is for the chairman to decide whether that action would be appropriate. There would have to be discussions with the union.

Mr. Hardy : Has the Minister discussed with the chairman the position of former miners who accepted redundancy on conditions that now seem to be rather less than well founded? Is he aware that some of my constituents accepted redundancy on the assumption and the advice that they were entering into early retirement, asumption and advice that now appear to justify their sense of betrayal?

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Mr. Spicer : The arrangements were made purely voluntarily. The redundancy arrangements have been more than generous in the past and were welcomed by most of those concerned at the time.

Mr. Raffan : When my hon. Friend next meets the chairman, will he impress upon him the need to keep individual Members fully informed about the British Coal Opencast Executive's plans for individual constituencies? Will he impress upon the chairman that there is widespread concern on both sides of the House about the working methods of the executive and the need for the chairman to keep the executive on a shorter leash than he does now?

Mr. Spicer : I shall pass on what my hon. Friend has said about opencast coaling. All sides of the industry and local authorities are pleased with the new guidelines that have been issued by the Department of the Environment to ensure that everyone knows where he stands in terms of planning applications for opencast coaling. I think that those planning applications will prove fruitful in the end.

Mr. Douglas : Has the Minister had an opportunity to discuss with the chairman his recent visit to the Longannet complex and the precarious nature of the complex given the impending privatisation of the South of Scotland Electricity Board? Will he comment on the contractual relationship between the SSEB and British Coal, and the need to ensure that coal from the deep mines in the Longannet complex is burnt in the attendant power stations?

Mr. Spicer : I can tell the hon. Gentleman that my visit to the Longannet complex was impressive-- [Interruption.] I mean that I was impressed. I said to the representatives of the complex that if the present rates of increased productivity continue and if thereby it is possible to produce coal at a competitive price the complex will stand in a good position. Under privatisation, and with our plans to expand the interconnector between Scotland and the rest of the United Kingdom, the coal can produce electricity which can be sold freely into the British system. We are offering every opportunity so long as Longannet continues to improve its competitiveness.

Offshore Oil and Gas (Safety)

5. Mr. Doran : To ask the Secretary of State for Energy what recent consideration he has given to the improvement of safety in the offshore oil and gas industry.

15. Mr. Ernie Ross : To ask the Secretary of State for Energy what recent consideration he has given to improvements in safety in the offshore oil and gas industry.

The Minister of State, Department of Energy (Mr. Peter Morrison) : Safety standards remain under continuous review.

Mr. Doran : Some months ago the Secretary of State announced his intention to introduce statutory safety committees and safety representatives for the North sea and as the Minister will know that announcement was warmly welcomed by Opposition Members. Since then, however, we have heard nothing. Will he give us some idea when the regulations will be introduced?

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Mr. Morrison : The hon. Gentleman is absolutely correct. The consultation document will, I hope, be available in about the middle of January. The period of consultation will then last for six weeks, and I hope that the necessary regulations will be introduced as soon as possible thereafter.

Mr. Ernie Ross : The Minister will know that the Select Committee on Employment recently received evidence from the Health and Safety Commission on its responsibility for health and safety offshore. It confirmed to us in a note that it had subcontracted that responsibility to the Minister's Department. Given the record of accidents in the North sea, does the Minister honestly think that one arm of Government is getting value for money from his Department?

Mr. Morrison : I am aware that the Select Committee looked at the matter carefully. I read the evidence from beginning to end, and was aware of some of the points being made.

As the hon. Gentleman will know, during the public inquiry Lord Cullen has a remit to look into the matter very carefully. The present safety regime is operated according to the majority report of the Burgoyne committee set up by the then Secretary of State, the right hon. Member for Chesterfield (Mr. Benn).

Mrs. Margaret Ewing : Has the Minister's Department made any assessment of the costs involved in enhancing safety regulations on the North sea, and will he give a commitment that all costs will be met?

Mr. Morrison : None of the specific costs are available to me at present, but no cost is too high for proper safety.

Gas Industry

6. Mr. Rost : To ask the Secretary of State for Energy when he last met the chairman of British Gas to discuss the recent Monopolies and Mergers Report on the gas industry.

Mr. Peter Morrison : My right hon. Friend met the chairman of British Gas three weeks ago, and the MMC report was among the topics discussed.

Mr. Rost : In view of the MMC's devastatingly critical report on British Gas's discriminatory pricing in the industrial market, which has confirmed all the criticisms made by industry over a long period, will my right hon. Friend give an assurance that the director-general of Ofgas will in future be given powers to monitor and control the industrial as well as the domestic market?

Mr. Morrison : As my hon. Friend knows, the director-general of Ofgas is currently discussing with British Gas the recommendations in the MMC report and how they can best be put into practice. He will have power, with British Gas, to come forward with amendments to the authorisation. In the event of their not being able to agree, it will be for my right hon. and noble Friend the Secretary of State for Trade and Industry to come forward with his new regulations.

Mr. Malcolm Bruce : Does the Minister accept that the reference of British Gas and industrial prices to the MMC was forecast by many of us who were involved in the passage of the privatisation legislation? We warned that

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this would happen. Does the Minister now accept that those in industry, particularly high energy users, are very disillusioned about the effects of privatisation? Having been ripped off by British Gas for four years, they are extremely concerned that they will be ripped off by the electricity industry as well.

Mr. Morrison : I think that the hon. Gentleman will remember that at the time of the passage of the Bill privatising British Gas it was consistently made clear that British Gas would be subject to the normal laws relating to competition, and the right process was put into practice-- namely, that the Gas Comnsumers Council could make a recommendation to the director-general of Fair Trading. That is precisely what has happened in the event. As the hon. Gentleman knows and my hon. Friend the Member for Erewash (Mr. Rost), has said, the recommendations from the MMC have been brought forward to make British Gas more competitive. That seems the right way to proceed.

Electricity Council

7. Mr. Flynn : To ask the Secretary of State for Energy when he next intends to meet the chairman of the Electricity Council ; and what matters he proposes to discuss.

Mr. Michael Spicer : My right hon. Friend and I meet the chairman of the Electricity Council regularly to discuss a range of issues.

Mr. Flynn : The next time the Minister meets the chairman, will he take the opportunity to discuss the vast potential for tidal power which, if linked with pump storage hydro-electric schemes, could produce a fifth of our national electricity requirements in a way that is entirely demand- responsive and would contribute to base load electricity? Why do we not pay more attention to tidal power? It does not pollute, produce radioactivity or add to our burden of carbon dioxide ; it is free, it has enormous power, it is British and it is eternal.

Mr. Spicer : The figure is even greater than the one that the hon. Gentleman mentioned. The Mersey and Severn barrage proposals could produce 6.5 per cent. We are taking a great and close interest in this. The Government have sponsored a good deal of research, particularly environmental research, on the basis of which decisions will be taken in the new year. We shall have those research studies before us then and we shall be able to form a view about the environmental aspects because, as the hon. Gentleman knows, there are environmental questions. Thereafter, it will be a matter of whether the industry decides to go ahead. It will do so on the basis of the non-fossil fuel obligation, which applies as much to renewables, particularly tidal power, as to nuclear power--a point often forgotten by the Opposition.

Dr. Glyn : Is my hon. Friend aware of the severe power cuts in Windsor--which lasted, with short intervals, for two days--and of the fire? When he has consultations with the chairman, will he please ask for a proper explanation of why the cuts occurred for so long and how such cuts can be prevented in the future?

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Mr. Spicer : I shall certainly pass on what my hon. Friend has said and I shall try to obtain an answer as soon as possible.

Mr. Michael : Does the Minister accept that people will be concerned at the idea that the mere free flow of market forces will determine whether tidal power comes into being? Will the Minister give us an idea of his best estimate of the first date on which the Severn barrage, for example, could be producing electricity into the grid system?

Mr. Spicer : As I said in the last part of my answer to the hon. Member for Newport, West (Mr. Flynn), tidal power will come under the same arrangements under the non-fossil fuel obligation as nuclear power. That is often conveniently forgotten by the Opposition. It will, have an advantage to that extent, because it will be able to compete within that obligation against nuclear power and other forms of renewables.

Nuclear Safety

8. Mr. Hannam : To ask the Secretary of State for Energy how many fatalities there have been among employees in the nuclear power generating industry in the United Kingdom over the last 10 years ; and what are the figures for other forms of energy production.

Mr. Parkinson : I understand that in the 10 years to end March 1988 there were five fatalities among employees in the nuclear power generation industry. None involved radiation. There were 57 other fatalities in the rest of the electricity production and distribution industry, 79 on offshore oil and gas installations and 366 in the coal mining industry.

Mr. Hannam : I thank my right hon. Friend for that interesting reply. Does it not confirm that nuclear power is not only the safest in terms of environmental protection, but offers the greatest degree of safety for employees in the industry? Is it not advisable that all those who have reservations about nuclear power should study that reply carefully?

Mr. Parkinson : Yes, I think that the energy debate has been carried out on a simplistic basis before. If the true costs in terms of lives lost, danger, pollution and damage to the atmosphere are brought into account, the arguments start to be much closer and far less easy to decide about than the Opposition seem prepared to admit.

Ms. Short : I am sure that the Secretary of State does not wish to mislead anyone. A number of recent studies have shown serious estimates of fatalities among the population living near nuclear power stations. Will the Secretary of State give us those figures because they must also be taken into account in estimating the danger of the nuclear industry?

Mr. Parkinson : The hon. Lady is wrong. There is a phenomenon called the leukaemia cluster and there are leukaemia clusters near nuclear power stations. However, there are also leukaemia clusters in New Zealand, where there is no nuclear power of any kind. The phenomenon is not understood and we are investigating it carefully because we want to understand it. I hope that the hon. Lady will start to understand it before she begins to talk in future.

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Mr. Stern : Does my right hon. Friend agree that for local authorities to divert funds is just as good a way of producing fatalities as any other, particularly when those funds are diverted from, for example, social services? Would my right hon. Friend care to estimate the cost in terms of human illness and loss of life of funds being diverted by west country local authorities such as Somerset to put up meaningless opposition to the proposed Hinkley B reactor?

Mr. Parkinson : I congratulate my hon. Friend on the way in which he worked that question into this one. There are better ways of using local authority funds than opposing Hinkley Point C but it is the purpose of local authorities to decide what is in the interests of their taxpayers, and they seem to agree with me.

Electricity (Privatisation)

12. Mrs. Fyfe : To ask the Secretary of State for Energy what are his proposals for price controls after the privatisation of the electricity industry.

17. Mr. Murphy : To ask the Secretary of State for Energy what are his latest proposals for price control on the privatised electricity industry.

Mr. Michael Spicer : Prices charged for supply will be regulated by an RPI X Y formula. Separate controls will apply to charges by the national grid company and by the supply companies for use of their transmission and distribution systems.

Mrs. Fyfe : When the Under-Secretary spoke in Miami earlier this year he was anxious to reassure American capital that the industry would be lightly regulated. Does he stand by that statement? Is he really more anxious to please American capital than the British domestic and industrial electricity user?

Mr. Spicer : The measure of regulation will depend on the degree of competition that we can introduce into the industry. At the generating end of the industry, which represents 70 per cent. of costs, there will be a lot of competition and, therefore, light regulation.

Mrs. Fyfe : Answer the question.

Mr. Spicer : If the hon. Lady will listen, I shall answer her. At the distribution end of the industry, where there is not so much scope for competition, there will be heavier regulation, aimed at ensuring that the consumer benefits all round.

Mr. Murphy : Does the Minister agree that the 15 per cent. increase in electricity prices, which was double what the electricity industry wanted, will have the most disastrous effect on electricity-intensive industries, including the British Steel Corporation in south Wales? What guarantee does he propose to give the House that the burden on industy of increased prices will not be worsened by privatisation?

Mr. Spicer : Under privatisation, there will be pressure on costs and therefore price rises will be considerably smaller than they would be in the state-controlled industry. During the past five years of Conservative Government, prices for the domestic consumer have decreased by 10 per cent. in real terms, whereas during the last five years of the Labour Government they increased by

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30 per cent. The hon. Gentleman will know, too, that as a result, British electricity prices now fall within the middle range of European prices. I hope that that answers his question.

Mr. Morgan : When the formula RPI-X Y formula is applied, will the baseline used be that requested by the electricity industry, which asked for price increases half as great as those imposed by the Government last April and next April or will it be the much higher baseline that the Government have decided to put to the industry as a form of hypothermia tax? Will Ministers realise that the example set by the Government last April and this April is the one that the industry will expect to follow and do they not now agree that the 15 per cent. price rise is an absolute disaster for the electricity industry and, above all, its consumers?

Mr. Spicer : The hon. Gentleman does not realise, but will no doubt discover, that the Government do not lay down prices. We set financial targets for the industry. In a monopoly controlled industry those targets are often interpreted in terms of costs being passed straight through into prices, rather than there being any actual effect on costs. Under privatisation, great pressure will be placed on costs. Therefore, Opposition Members' fears will prove unfounded as they are based on the premise that costs must always be passed straight through, into prices which we do not believe.

Nuclear Waste

16. Mr. Kirkwood : To ask the Secretary of State for Energy what is the latest estimate of the cost to the electricity supply industry of disposing of nuclear waste to the year 2000.

19. Mr. Macdonald : To ask the Secretary of State for Energy how much nuclear waste disposal will cost after the privatisation of electricity ; and who will pay for it.

Mr. Michael Spicer : Provisions by the electricity supply industry in England and Wales for dealing with nuclear waste total over £3 billion. After privatisation as now, these costs will be charged to customers in their electricity prices.

Mr. Kirkwood : What evidence does the Minister have that the £3 billion that he has just announced will be enough? Is he aware that there is widespread worry, in the industry and outside it, that that figure will not come anywhere near to meeting the task of effecting safe disposal?

Mr. Spicer : Had the hon. Gentleman been here earlier, he would have heard my right hon. Friend the Secretary of State say that the provisions are made on an audited basis by experts in the industry. We have every confidence in the provisions that have been made for decommissioning.

Mr. Madden : Does the Minister recollect ever receiving letters from the hon. Member for Exeter (Mr. Hannam) or from any other Members of Parliament asking that nuclear waste be dumped in their constituencies or that nuclear power stations be built there?

Mr. Spicer : Clearly, no right hon. or hon. Member would particularly wish to write asking that nuclear waste be deposited in his constituency. That is why Nirex has

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undertaken a nationwide survey and why we, and Nirex in particular, have not agreed to exempt any area. That would be invidious. The answer is that we shall find suitable storage for nuclear waste.

Elderly People (Heating)

18. Mr. Simon Hughes : To ask the Secretary of State for Energy when he last met representatives of charities involved in caring for the elderly to discuss what action his Department can take to relieve the heating problems of the elderly ; and if he will make a statement.

Mr. Peter Morrison : My Department and I are in regular contact with charities concerned with heating for the elderly. Specifically, the Energy Efficiency Office provides financial assistance to Neighbourhood Energy Action and Energy Action Scotland.

Mr. Hughes : With winter death rates for the elderly increasing over summer rates in England and Wales by 31 per cent. ; in Scotland by 32 per cent ; and in Northern Ireland by 33 per cent., compared with increases in Scandinavia of only 9, 11 and at most 13 per cent., is it not time that the Government took action to alleviate the hypothermia death rate among the elderly? Is not the easiest and most effective way the abolition of gas and electricity standing charges?

Mr. Morrison : The direct answer is no. In many cases that would mean increased costs for the very people about whom the hon. Gentleman and I are concerned. He will be aware that significantly increased budgets have been given to community insulation projects and the housing insulation scheme.

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