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Mr. Jimmy Wray (Glasgow, Provan) : Does the Secretary of State agree that his statement is hypocritical as far as nursery education is concerned? That is one item on which the Government say that they are spending 26 per cent. more. Can the Secretary of State tell me why it is that, although, in 1977, 29,000 children received nursery education and now in 1988, 38,000 children receive nursery education, the Government are spending £300,000 less on Scottish nursery education and £3 million less than in 1977 in Strathclyde region?

Mr. Rifkind : The hon. Gentleman's comments on local authority expenditure may say something about the priorities of the local authority in question. Strathclyde regional council is probably responsible for more resources than any other local authority in Scotland or, probably, in the United Kingdom as a whole. If it does not attach the importance to nursery education that the hon. Gentleman wishes, he should address his comments there.

Mr. John McAllion (Dundee, East) : Will the Secretary of State tell us whether he has included in the allocations this afternoon a sum to cover the cost of the latest scheme promulgated by the Scottish National party on Tayside regional council? It recommends that people who pay poll tax in full and early should be given a 5 per cent. discount.

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When it was pointed out to the nationalists on Tayside by an official that the costs of their scheme for helping the better off would have to be borne by the poor, the nationalists responded by saying that they were a party that represents the rich as well as the poor. I know that the Secretary of State does not share their point of view and I ask him, if money is made available, to ensure that their madcap scheme never comes into being.

Mr. Rifkind : The hon. Gentleman must understand that he has put me in a very difficult position. I have to say that it does not surprise me that the nationalist party should behave in a way that is so inconsistent with its theoretical position. Angus district council, for example, which is the only council that is under nationalist control, will co-operate fully in collecting the community charge ; and now that the nationalists on Tayside, as the hon. Gentleman has claimed, wish to provide incentives to ensure that the community charge is raised as quickly and as smoothly as possible, I look forward to welcoming their continuing support in every possible way.

Mr. Tony Marlow (Northampton, North) : I wonder whether I could ask my right hon. and learned Friend if he can explain kindly to my English constituents why it is that per capita expenditure in Scotland is, and always has been, much higher than it is in England. I think he can reassure them that it is not because the Government are trying to reward Scotland for a predilection for voting Socialist, but perhaps has something to do with the fact that Scotland is heavily over-represented in the House, which enables a massive distortion in the pressure for the allocation of public expenditure. May I suggest to him, as a member of a Cabinet that wishes to cut public expenditure, that the easiest way to do that would be to cut the number of hon. Members from Scotland in the House? Could he further say that, if there is any party in the House that has any silly ideas for tinkering with the proposal for devolution, the condition precedent for anything like that taking place would be a massive reduction in Scottish seats in the House?

Mr. Rifkind : I have to say to my hon. Friend that he is certainly right in saying that institutional arrangements for the representation of Scottish constituencies in Parliament have not done any harm with regard to the allocation of resources in the United Kingdom over the years, but he must bear in mind that the nature of many Scottish constituencies is somewhat different, from a geographical point of view, from his own slightly more compact constituency. Although Scotland may have only 9 or 10 per cent. of the population in the United Kingdom, its land mass represents 30 to 40 per cent. of the total land mass of Britain and, as a consequence, expenditure on roads, houses, schools and health cannot have the same benefits of scale that are sometimes available to his constituency and, perhaps, mine.

Mr. George Foulkes (Carrick, Comnock and Doon Valley) : I am grateful to you, Mr. Speaker, for restoring me to my traditional position of sweeper.

Does the Secretary of State recall his visit to Cumnock and Doon Valley in the summer? If he does, he will be aware that the people of Cumnock and Doon Valley will judge whether he is to be considered a Santa Claus or a Scrooge in the light of his statement, and on the basis of whether it will enable the Cumnock and Auchinleck

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bypass, which was so drastically cut from the programme last year when everything was ready to go ahead, to be restored to the programme? Can he give me an assurance that it will go ahead in the next financial year, and can he say whether, in his extensive provisions, he has made just a modest little contribution for an appropriate celebration when Heart of Midlothian return with the UEFA cup?

Mr. Rifkind : I will bear in mind the latter suggestion on the likely achievements of that football club, which is well known to me. My visit to Cumnock and Doon Valley was a very pleasant experience and I have become familiar with the perspective of the hon. Gentleman about the needs of his constituents. Matters involving the individual allocation to local authorities have still to be determined. I shall bear the hon. Gentleman's comments in mind.

Mr. Ernie Ross : On a point of order, Mr. Speaker. I wonder whether you heard, when my hon. Friend the Member for Dundee, East (Mr. McAllion) was making a

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factual statement referring to the comments, on the record, of the SNP on Tayside regional council, that the hon. Member for Banff and Buchan (Mr. Salmond) said, "It's all lies." I am sure that you would want him to explain that he was not suggesting that my hon. Friend was telling lies when he gave that factual report.

Mr. Speaker : I did not hear that.

Mr. Salmond rose--

Mr. Speaker : Let me deal with the matter. I was listening carefully to the hon. Member for Glasgow, Maryhill (Mrs. Fyfe) and I was trying to interpret "twit"--what I understood to be an endearing term in Scotland although it is less so in England--so I did not hear what else was going on. Does the hon. Member for Banff and Buchan want to correct that?

Mr. Salmond : Yes. The word I used was "rubbish" and I am happy to stick to that.

Mr. Speaker : In that spirit, we shall move on.

[Following is the table :

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£ million                                                                                                                                     

                                            1988-89           1989-90                    1990-91                    1991-92                   

                                            1988-89           1989-90                    1990-91                    1991-92                   

                                            1988-89           1989-90                    1990-91                    1991-92                   

                                           |Net     |Gross<3>         |Net     |Gross<3>         |Net     |Gross<3>|Net     |Gross<3>         


Agriculture                                |197     |198     |211     |204     |205     |210     |200     |200     |210     |210              

Industry                                   |267     |289     |261     |277     |307     |260     |280     |310     |280     |310              

Tourism                                    |15      |16      |16      |17      |19      |20      |20      |20      |20      |20               

Transport                                  |615     |616     |660     |700     |701     |680     |740     |740     |750     |750              

Housing                                    |639     |882     |698     |599     |1,057   |720     |640     |1,020   |680     |1,150            

Other environmental services               |693     |750     |710     |706     |768     |740     |720     |780     |750     |800              

Law, order and protective                                                                                                                     

   services                                |681     |692     |692     |741     |744     |710     |760     |760     |780     |780              

Education                                  |2,186   |2,188   |2,226   |2,354   |2,360   |2,290   |2,400   |2,400   |2,480   |2,480            

Arts and libraries                         |88      |88      |94      |95      |95      |100     |100     |100     |100     |100              

Health and social work                     |2,830   |2,838   |2,948   |3,182   |3,189   |3,070   |3,310   |3,320   |3,450   |3,460            

Other public services                      |125     |125     |130     |122     |122     |130     |130     |130     |140     |140              

LA current expenditure not                                                                                                                    

   allocated to services                   |40      |40      |41      |37      |37      |40      |40      |40      |40      |40               

Nationalised industries external financing |134     |134     |-74     |-61     |-61     |-190    |-210    |-210    |-       |-                


                                           |<4>8,510|8,856   |8,610   |8,973   |9,543   |8,780   |9,130   |9,610   |9,680   |10,240           

Note: Figures for 1990-91 and 1991-92 are rounded to the nearest £10 million.                                                                 

<1>White Paper (Cm. 288-II) figures adjusted for pre-survey changes.                                                                          

<2>Figures reflect survey changes and changes since the Autumn Statement. Some figures may be subject to detailed technical amendment.        

<3>Gross provision consists of total net provision plus capital receipts and for housing, from 1989-90, some Scottish Homes' loan repayments. 

<4>The figure differs from the net outturn figure of £8,720 million shown in the Chancellor's Autumn Statement for 1988-89; the main          

differences are continued spending by local authorities above the level provided for and NHS pay settlements.]                                



That the draft Grants by Local Housing Authorities (Appropriate Percentage and Exchequer Contributions) Order 1989 be referred to a Standing Committee on Statutory Instruments, &c.-- [Mr. Neubert.]

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Orders of the Day

Electricity Bill

Order read for resuming adjourned debate on Question [12 December], That the Bill be now read a Second time.

Question again proposed, That the Bill be now read a Second time.

[Relevant documents : Third report of the Energy Committee of Session 1987-88 on the Structure, Regulation and Economic Consequences of Electricity Supply in the Private Sector (House of Commons Paper 307), and the third special report of the Committee of the same Session containing the Government's observations on the third report (House of Commons Paper 701).]

Mr. Speaker : There were some inordinately long speeches earlier yesterday afternoon. I propose, therefore, to limit speeches to 10 minutes between 6 pm and 8 pm today. I hope that right hon. and hon. Members who are called after that time will endeavour to keep to that limit, because it enables all who wish to be called to be accommodated.

I must announce to the House that yesterday, I selected the reasoned amendment in the name of the hon. Member for Banff and Buchan (Mr. Salmond).

4.28 pm

The Secretary of State for Scotland (Mr. Malcolm Rifkind) : As I listened yesterday to the opening speech of the hon. Member for Sedgefield (Mr. Blair), I could not help but note that he presented himself as a champion of the consumer and based many of his arguments on benefits that the consumer would enjoy if a Labour Government could be elected or if Labour policies could be pursued.

In the kindest and gentlest way possible, I exhort the hon. Member for Glasgow, Garscadden (Mr. Dewar) not to be tempted in a similar direction. If he sought to present himself as a champion of the Scottish consumer, I should have to remind him that, under the present Government, electricity prices in Scotland have increased by the equivalent of 2 per cent. in real terms, whereas from 1974 to 1979 they increased by no less than 20 per cent. in real terms. That phenomenon was repeated throughout the United Kingdom.

Let us judge the Opposition not by their words but by their deeds, because that will provide us with a fine basis on which to determine the implications for the consumer. An additional factor is that the Bill allows for the first time for compensation to be given to the consumer in the event of an inadequate service being provided. I understand that the Opposition are to vote against that provision, which is unprecedented in this country.

I listened with great care yesterday to the hon. Member for Glasgow, Cathcart (Mr. Maxton) who, having made his contribution to the debate, appears to have decided that it was not necessary to be present for the second day. [Hon. Members-- : "He is here."] We should be very pleased indeed if the hon. Gentleman could return every time we mentioned his name. He bewailed the fact that there was not to be a separate Scottish Bill and implied that the Government had made an improper and unacceptable decision in that respect. I wished to be absolutely fair to the hon. Gentleman, so I examined his argument, which I found totally devoid of

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coherence. He did not at any time explain, for example, why it was acceptable for the Labour Government to bring together 53 Scottish undertakings with 500 English undertakings in a single Act of Parliament in 1947, but unacceptable for a Conservative Government to return to the private sector, in a much simpler way, the consequences of that nationalisation.

I presume that the hon. Member for Cathcart has paid the Bill cursory attention and will know that, of 103 clauses, only five refer exclusively to Scottish affairs. That means that, if we had accepted his advice, we should have burdened the House with two major Bills, largely identical in form and substance.

Mr. George Foulkes (Carrick, Cumnock and Doon Valley) : The Secretary of State will recall that one of my questions yesterday elicited that response from the Secretary of State for Energy. To read the Glasgow Herald and The Scotsman one would have thought that I was not here yesterday, but we are getting used to that. If the hon. Member for Glasgow, Govan (Mr. Sillars) had asked the question, we should all have read about it on the front page of every newspaper.

Does not the Secretary of State agree that the arguments advanced yesterday by my hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) were valid? When the industry was nationalised, we had one Minister and one Department to deal with it. Now, however, the Secretary of State for Scotland has separate responsibilities. The reason that he did not want to have a separate Bill for Scotland was that he would have had to appoint a Scottish Committee to consider it. He does not have the troops to man Scottish Standing Committees, just as he does not have the troops to man the Select Committee on Scottish Affairs. Why does not the right hon. and learned Gentleman come clean?

Mr. Rifkind : The hon. Gentleman said that he was puzzled that his remarks did not get into the press ; his most recent contribution provides us with a convincing explanation for that. As I have tried to explain, 98 of the 103 clauses do not refer specifically to Scotland, so to insist on a separate Bill of a comparable size would therefore have been absurd. It was certainly not the policy pursued by the Labour Government when it nationalised the industry, in a much more complex way, in 1947, and I do not recall the Labour party objecting to that decision.

Mr. Alexander Eadie (Midlothian) : The Secretary of State has argued positively and specifically that there should be only one Bill. Perhaps he will explain why, when I raised the matter earlier this year, he told the House that he and his right hon. Friend the Secretary of State for Energy had not yet made up their minds.

Mr. Rifkind : We had not made up our minds then because we wanted to identify the extent of the difference between a Scottish Bill and an English Bill. We decided that it would be pretty silly for the United Kingdom Parliament to deal with two major Bills 97 per cent. of whose provisions were identical. I suspect that the hon. Member for Midlothian (Mr. Eadie) might have reached the same conclusion had he thought about the matter. I recollect that, at the beginning of the last Labour Government's period of office, they proposed to introduce provisions for elected assemblies for Scotland and Wales in a single Bill. It took several months, if not years, of

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argument to persuade them that that was not entirely appropriate. Opposition Members should look to their own record.

I shall concentrate on the elements of the electricity industry that are distinctive to Scotland, but first, I shall comment on the main thrust of the Opposition's arguments yesterday. It emerged clearly from the eloquent speech of the hon. Member for Sedgefield that the Labour party in the 1980s remains wedded to the concept of monopoly. We have known for many years that monopoly, whether private or public, is undesirable if it can be avoided. The Monopolies and Mergers Commission exists precisely to try to prevent the emergence of unnecessary monopolies.

I had hoped that the Opposition would address the matter from the same starting point as the Government : we have had a state monopoly for 40 years and if it is possible in any way significantly to diminish the monopoly element in the electricity industry we should do so. We should not be divided on that on a doctrinal basis. The Government have never sought to suggest that electricity is an industry that can be considered suitable for the application of classical concepts of competition. Of course that is not possible, and of course aspects of the electricity industry are natural monopolies. Nevertheless, it is clear that under the Bill it will be possible to introduce real competition in a number of sectors of the electricity industry for the first time. For example, independent generators will have the opportunity to come forward, and in various parts of the United Kingdom there will be competition between generators.

In addition, industrial bulk purchasers of electricity will have the opportunity to choose where to purchase their electricity. [ Hon. Members :-- "In Scotland?"] The provision will apply in Scotland. If hon. Members had read the Bill, they would know that provision for common carriage for electric power applies throughout the United Kingdom, and that bulk purchasers in Scotland will not be obliged to purchase all their electricity from the generator in their area. In addition, the opportunity available to Scotland to export surplus electricity will mean considerable competition as regards the best terms for that, which will be of considerable benefit to the Scottish consumer.

No one has suggested for a moment that perfect competition will be available in the electricity industry. The hon. Member for Sedgefield seems to suggest that, if we cannot have perfect competition, a monopoly is preferable. That is totally at variance with the experience of the rest of the Western world, and against the interests of the British public, whether in Scotland or in England. The Opposition's assumption that the electricity industry under state control has had a perfect record of planning for the future needs to be examined. [ Hon. Members :-- "No one has said that."] I am sorry, but the hon. Member for Sedgefield said specifically that the whole purpose of nationalisation was to get away from 80 per cent. over-capacity in the electricity industry. I have to inform the Opposition that over-capacity is not a problem of the past. In England there is under-capacity and in Scotland there is not 80 per cent. but almost 100 per cent. over-capacity. That offers considerable benefits to the Scottish electricity industry. As a Scottish consumer I am

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not complaining about that phenomenon, but whether the British taxpayer has benefited from that system is another matter.

Mr. Rhodri Morgan (Cardiff, West) : Does the Secretary of State accept that if, at any time in the past three years, with the opening of Torness coming up, he could have doubled the size of the interconnectors, Scotland would be exporting 2 GW instead of 1 GW to England, and the problems of the Scottish coal mining industry in the past two years would have been solved? The right hon. and learned Gentleman must accept responsibility for planning alongside the Secretary of State for Energy in the past two years.

Mr. Rifkind : The hon. Gentleman has misunderstood my point. Electricity consumers in Scotland demand less than 6,000 MW. As a consequence, we have doubled the capacity in Scotland, and it now stands at 12,000 MW.

Mr. Morgan : The same problem applies in Wales.

Mr. Rifkind : The hon. Gentleman confirms my point, that state control and central planning have not led to a rational distribution in the provision of electricity capacity, which the hon. Member for Sedgefield implied was the purpose of nationalisation in the first place.

The third factor is that, as long as an industry is ultimately controlled by the state and by Ministers, there will inevitably be political interference in the running of that industry. That has been the experience of all nationalised industries, whether under a Labour or a Conservative Government.

One of the electricity industry's crucial requirements is that, as with every other industry in the private sector in the United Kingdom, it should be able to make its own investment decisions based on its investment needs and on the resources that it can raise in order to fund that investment. But the House must be aware that, under successive Governments over many years, the borrowing limits of nationalised industries have in part been determined by their investment requirements and in part by the Government's overall public expenditure policy. It must be the case that the electricity industry, unlike those in the private sector, has been penalised in that it has not been able to plan on the basis of its requirements exactly what its investment requirements may be.

Mr. A. J. Beith (Berwick-upon-Tweed) : What else are the provisions in the Bill relating to nuclear power, except a means of preventing the privatised companies from making their investment decisions and political interference by the Government in the industry's investment decisions?

Mr. Rifkind : The hon. Gentleman is right to say that specific powers in certain aspects of the industry remain available to Governments, but I hope that he is not suggesting that complete control over all the industry's investment decisions is preferable. We have never said that the Government should wash their hands of all matters involving the electricity industry, which has strategic importance in the United Kingdom, as the Bill makes abundantly clear. My point is that, until now, all the industry's investment decisions have been subject to Government control. The fact that in future that will apply to one specific area--nuclear power--is considered a significant improvement by the industry.

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Let me deal now with the specific conclusions that we have reached on the implications of privatisation for the electricity industry in Scotland. We start with three specific features that are peculiar to the industry in Scotland. First, Scotland has a diversity of resources for electricity generation hardly to be found in any other part of the United Kingdom. Oil, coal, hydro, and nuclear are in abundance. That is peculiar to north of the border.

Secondly, as I have already said, we have a surplus capacity which is unprecedented in the United Kingdom and which offers substantial opportunities, as the hon. Member for Cardiff, West (Mr. Morgan) said, through the development of the interconnector, for export to other parts of the kingdom which do not have such a surplus.

Thirdly, Scotland has a substantial nuclear capacity. Over 50 per cent. of Scotland's electricity requirements will be provided by the nuclear part of the industry when the Torness power station has been commissioned.

It is against that background that we examined the precise and proper way to privatise the industry in Scotland. The first question that had to be examined was vertical integration. For a number of years, Scotland's industry has been administered on the basis of vertical integration of generation, transmission and distribution. We did not automatically assume that that was essential ; we looked at the matter with an open mind to see whether it made sense in the Scottish context to divide generation from transmission and distribution.

We came to the conclusion that that would be inappropriate, for two reasons. First, the size of the Scottish market makes it inappropriate. Electricity demand in Scotland is equal to about the equivalent of one English board. Therefore, to divide generation from transmission and distribution would have created relatively small companies whose prospects of economic viability would have been far more uncertain. In addition, we would have had to take into account the fact that, in the north of Scotland, in the area of the Hydro Board, a proportion of the hydro power is dedicated in terms of distribution to particular parts of the north of Scotland, from which it could not be physically separated. For those reasons, plus Scotland's particular demography, we concluded that vertical integration made sense and should be continued.

The next question was whether there should be a single Scottish private company or two. I am bound to say that our announcement that we had concluded in favour of two Scottish companies was widely welcomed on both sides of the House by all political parties. It was not an easy decision, because, while there was a natural desire to prevent the creation of a single private monopoly in Scotland of the kind that would have been achieved if the South of Scotland electricity board's proposal had been adopted, there was on the other hand a recognition that electricity generation in Scotland had been developed on the basis of a single market and, particularly with regard to nuclear power, on the basis that it would be available to consumers in all parts of Scotland.

It was on that basis that we put forward the proposals that we announced in the White Paper and subsequently--the creation of two companies in Scotland based on the SSEB and the North of Scotland Hydro-Electric Board, but with certain exchanges on a contractual basis of capacity and other such matters. In addition, a nuclear company was to be created, wholly owned by the south company and the north company, in order to ensure

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availability throughout Scotland of nuclear power in a form that meets the requirements of the Scottish consumer.

We took account of the fact that, until now, there has been a joint generating agreement which has had certain advantages through the application of the merit order scheme, but which has also had certain disadvantages because it has concealed the costs of the two parts of the industry, which is undesirable from the consumers' point of view. Therefore, we sought to develop a system which enabled the merit order approach to continue for the benefit of the consumer, but which created a new transparency with regard to the respective costs of the generation of electricity in the two companies. That can only be to the benefit of the public.

As a result of the decision to create two companies, we have had to consider the role of the regulator. We have accepted from the beginning that in Scotland, as in England and Wales, where there is not proper competition throughout the industry it is necessary to have a director general to deal with regulation and for him to have the primary responsibility of ensuring that, in those aspects of the industry where competition does not apply, the consumer should be properly protected and that other matters should be properly dealt with.

As we have made clear, the director general is a joint appointment by my right hon. Friend the Secretary of State for Energy and me. I noticed that last night the hon. Member for Cathcart expressed some anxiety, incredulity or dubiety about how the director general could be answerable to two Secretaries of State. This is not an unusual phenomenon. The Forestry Commission is answerable to three Secretaries of State in respect of its functions in the various parts of the kingdom. There is no reason why that should not apply in the case of the director general. He will have an office in Scotland, as in England, along with a staff to service the requirements of regulation north of the border. There is no reason to believe that his responsibilities will not be effectively carried out. To consider, instead of that arrangement, having a separate Scottish director general would have been foolish because, in practice, they would have had to work so closely together as to make the separation of their responsibilities one of form rather than substance. If Scotland is to benefit from the substantial export of surplus electricity south of the border, clearly, the questions of regulation, especially of the interconnector and of matters of equal interest to consumers both north and south of the border point to the sort of system proposed in the Bill.

Mr. Jimmy Hood (Clydesdale) : Given that there is to be joint responsibility between the Secretary of State for Energy and himself, will the Secretary of State for Scotland say who will have the casting vote if they disagree?

Mr. Rifkind : Which board is the hon. Gentleman talking about?

Mr. Hood : If the two Secretaries of State disagree, who will have the casting vote?

Mr. Rifkind : My right hon. Friend the Secretary of State for Energy and I live in almost total harmony from one day to the next. In the improbable scenario to which the hon. Gentleman refers, and on the rare occasions when

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Ministers do not agree with one another, there are governmental procedures for resolving problems. There are precedents, even if they do not apply in this context. I advise the hon. Gentleman not to worry too much about that. I am sure that we shall be able to devise an appropriate procedure whereby agreement will be reached.

Mr. Hood : Will the Secretary of State send me written details of the procedure, because I would be interested to see them?

Mr. Rifkind : I shall certainly consider that constructive request, but the hon. Gentleman must appreciate that, as his question is hypothetical, so my answer will be based on an improbable hypothesis.

The role of the regulator is specified in a number of detailed ways in the Bill. I wish to comment particularly on the non-fossil fuel obligation and the attendant levy which is dealt with in the Bill. Liability for a non- fossil fuel obligation applies in principle throughout the United Kingdom but there is no need in the foreseeable future for an order applying it to Scotland because of the high level of nuclear capacity in Scotland, which will be substantially enhanced when Torness becomes available.

Clearly, there will be no need in the foreseeable future for any additional provision for non-fossil fuel. That also applies to the levy, which is a consequence of the non-fossil fuel obligation. Any exports that the Scottish industry may make to the distribution companies in England--this also applies to exports from elsewhere in the United Kingdom or from France --would be subject to that requirement in order to ensure a proper competitive relationship between those supplying the electricity industry.

Mr. Foulkes : Would it be permissible for an English generating company to build a generating station in Scotland, in particular a nuclear power station?

Mr. Rifkind : It is possible for anyone wishing to introduce new generation to seek to do so. They must obtain a licence from the director general. The rules governing the provision of such a licence in Scotland will be no different from those elsewhere in the United Kingdom. Whether, in the next few years, anyone is likely to wish to invest in a new nuclear power station in Scotland is another example of a hypothetical question. The legal procedure to be followed is clear.

As hon. Members will have seen from the Bill and the information provided with it, the capital restructuring that may be required in Scotland is significant, and different from that in England and Wales. Largely as a consequence of the over-provision of capacity in Scotland, there is a high level of debt there. It stands at £2,700 million at present. As the House will have seen, the Bill provides for the Secretary of State to have the power, if he so chooses, to convert some of that debt into equity or debentures or to alter the capital structure of the companies in question before flotation takes place. No decisions have been reached on that at present, but those matters will have to be addressed in order to ensure that important public assets are dealt with in a responsible and constructive way. I shall now deal with the opportunities that will exist for Scotland and many English regions as a result of privatisation.

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Mr. Dick Douglas (Dunfermline, West) : I hope that I am not interrupting the Secretary of State just as he is about to move on the coal industry and his responsibility, together with the Secretary of State for Energy, for ensuring the future of deep mining in Scotland. Surely, before Christmas, he will say something about the threat hanging over Longannet and other deep mining complexes in Scotland.

Mr. Rifkind : There are opportunities, challenges and concerns facing the coal industry in Scotland. We have seen a substantial expansion of the opencast sector of the industry.

Dr. Lewis Moonie (Kirkcaldy) : What opportunities are there for deep mining?

Mr. Rifkind : If the hon. Gentleman will listen, I will tell him. Over the past 10 years, there has been tremendous growth in the opencast sector, so that it is now producing over 50 per cent. of the coal mined in Scotland. The latest decision on the Kilroot power station in Northern Ireland provides further welcome opportunities for coal from the Ayrshire fields. The decision on that was welcomed by Members representing the area as good news for employment. Clearly, we hope to see a substantial future for the deep mining sector. Exports of surplus capacity provide the best prospects. If the two Scottish companies can export a significant proportion of their surplus electricity, it should be possible to see a significant demand for deep-mined coal in Scotland. Much of the answer to the problem lies with the coal industry through improvements in productivity and the quality of coal produced from the deep-mined pits. I hope, together with the hon. Member for Dunfermline, West (Mr. Douglas), that it will be possible to see real developments which will secure the future of those pits. I cannot give any guarantee, but I believe that it will be influenced by the success in exporting surplus electricity in the way I have suggested. One of the most difficult aspects of the Opposition's view to understand is the implication of nationalisation and privatisation for regional policy. Over the years, we have seen a policy of nationalisation pursued by Labour Governments. Whatever the doctrinal or ideological reasons for that or whatever economic justification they may feel their arguments have had for the United Kingdom, there can be little doubt that one of the consequences of nationalisation was the diminution of the private sector in Scotland, Wales and many of the English regions.

In successive nationalisations, we have seen the amalgamation of large numbers of private sector companies, many of them in the regions, and, as a consequence, the concentration of control in the hands of the Government of the day in London. Scottish Members, Welsh Members and hon. Members representing the English regions have been concerned that that has been a weakening factor for the economy of their regions.

Mr. Alex Salmond (Banff and Buchan) : Would the Secretary of State care to estimate the percentage diminution of the Scottish private sector during his tenure of office?

Mr. Rifkind : Nothing that the Government have done in terms of legislation has led to the loss of a single private

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sector company. Under successive Labour Governments, the opposite has taken place. For example, we know that the nationalisation of the electricity industry led to the nationalisation of some 53 separate Scottish undertakings, some of them municipal and others in the private sector. We know that, when British Shipbuilders was nationalised in 1977, it led to the loss of private sector companies such as John G. Kincaid in Greenock, Swan Hunter at Wallsend, Cammel Laird in Birkenhead and other companies in various parts of the United Kingdom.

When British Steel was nationalised in 1967, it led to the transfer of control to London of Dorman Long and Company and of Colvilles, both from Scotland, of Richard Thomas and Baldwins and the Steel Company of Wales, and of the Consett Iron Company in north-east England. On each occasion that there has been nationalisation, one consequence has been the erosion of the private sector in the English regions and in Wales and Scotland. One of the consequences of privatisation will be a significant move in the opposite direction. It is not just I who take that view. I am sorry that the hon. Member for Gordon (Mr. Bruce) is not present in the Chamber today. Although, as I understand it, there was a limit on the time available to him in yesterday's debate, I am sorry that he did not repeat the remark he made in Central hall, Westminster, on 12 March, when he remarked that the privatisation of the electricity industry "would create powerful corporate headquarters in Scotland, Wales and the regions, which could be engines of growth for these economies."

I am delighted that that is the view of the SLD's energy spokesman. One must assume that its members will go into the Government lobby this evening to help facilitate the creation of powerful corporate headquarters in Scotland, Wales and the English regions ; if they choose not to do so, I shall be interested to know how they reconcile that decision with their own interpretation of the benefits that the Bill will bring.

Mr. Salmond : If the Secretary of State will not say why he has allowed the diminution of Scottish private sector companies, will he say why, if he is asserting that privatisation means Scottish control, he did not argue for a Scottish Telecom, Scottish Gas or Scottish Steel?

Mr. Rifkind : Since the hon. Gentleman and his party came to slightly greater prominence in the last few months, most of Scottish industry has been pointing out how disastrous it would be for the Scottish private sector if his party's views were ever translated into policy. I would be more impressed by the hon. Gentleman's comments if he were not pursuing a policy disastrous for new as well as existing investment in Scotland.

As to previous privatisation, we always seek to identify where it makes sense to implement separate Scottish or English privatisation, but as most right hon. and hon. Members believe in a united kingdom, it is not always appropriate or sensible to split an existing industry. In the case of electricity, we already have a Government-controlled structure of individual Scottish companies, so privatisation presents an exciting opportunity to see two new major Scottish companies established north of the border. The electricity industry has not been part of the Scottish private sector for 40 years. As a result of the Bill, it will be a major part of it, and those who wish to encourage the growth of Scottish-based companies welcome that.

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Mr. Alistair Darling (Edinburgh, Central) : Does the Secretary of State accept, that while the companies' headquarters may be in Scotland, Scotland does not have enough money to buy the companies? The lion's share of the issued shares will probably be owned outside Scotland and possibly abroad. The Government are merely transferring an electricity industry that we now own collectively to individuals who have little or no interest in Scotland.

Mr. Rifkind : The hon. Gentleman now uses arguments contrary to those that he used previously. He will acknowledge that the headquarters of the Scottish electricity industry must be based in Scotland. As a consequence, the industry's requirements will be serviced from within Scotland. As to ownership, both consumers and employees of the Scottish electricity companies will have an opportunity to acquire shares. I cannot anticipate, any more than the hon. Gentleman can, how they will respond to that opportunity. The hon. Gentleman will recall making the same criticisms with regard to the privatisation of the Scottish Bus Group. He now has egg on his face because of the response of the group's employees, who wish to acquire ownership of the companies in which they work.

There are 5 million Scottish consumers north of the border who will have an opportunity to acquire shares, as will Scottish financial institutions and those who work for the industry. If the hon. Gentleman takes the view--

Mr. Norman Hogg (Cumbernauld and Kilsyth) rose

Mr. Rifkind : If the hon. Gentleman will not allow me to finish my remark, I can hardly be expected to give way to him.

I cannot predict what proportion of the electricity industry will be acquired by shareholders resident in Scotland. I can predict that the industry's privatisation will create Scotland's two largest private sector companies and make an enormous contribution to the growth of private sector enterprise north of the border.

Mr. Hogg : Has the right hon. and learned Gentleman noticed that the headquarters of both Scottish electricity boards are already located in Scotland? Also, where does he get his figure of 5 million consumers? Scotland has a population of fewer than 5 million people, and even allowing for that tiny part of the north of England that is supplied by the SSEB, the boards' consumers cannot possibly total 5 million. Finally, given that the North of Scotland Hydro-Electric Board accounts for only 2.5 per cent. of the nation's consumers, how many of them does the Minister estimate will purchase equity in the new companies?

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