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We have had two days' debate on the problems contained in the Bill. It appears that Conservative Members talk about everything but the electricity industry and the consequences for the economy. I have listened intently to find out what is behind the privatisation proposals. The hon. Member for Fylde (Mr. Jack) spoke of the environmental consequences of using nuclear power, and that is the only point the Prime Minister has made about privatising electricity. She has said that it will provide environmental benefits for the world. No mention has been made of the economic benefits to the nation of privatising the generating boards.
The Secretary of State has stated four principles to support the Bill. He says that the supply of electricity should be driven by the needs of the customer. That
Column 846implies that the customer would have a direct input on the supply of electricity. There is no suggestion in the Bill, however, that the customer would have any such influence. Therefore, that reason does not represent a major pillar of principle to justify the privatisation.
The Secretary of State has also said that competition is the best guarantee of customers' interest. Once again, the Government seem to take the view that anything publicly owned is more efficient and better able to meet the best interests of the customer if it is privatised. Nothing in the Bill says that that will be so. I suspect that the Minister had a great deal of difficulty grappling with the complexity of the national grid. His best effort was to come forward with two generating companies, one to generate 30 per cent. and the other 70 per cent.
Such percentages have been proposed more to deal with the nuclear side of generation than for anything else. If the percentages were more equally divided between the two companies, the problems of dealing with the liabilities of the nuclear industry that are beginning to develop would face the companies. National Power has been made as big as it is--70 per cent.--as an inducement to people in the private sector to take on the difficult generating capacity of the nuclear industry.
The Bill outlines a regulatory framework to promote competition, oversee prices and protect customers under the national monopolies that remain. The Government, who are exponents of the theory of the private market, accept in the legislation that it will create monopolies. So regulations will be imposed to protect customers from those monopolies. One of the main points made by Conservative Members is that the public monopoly of the CEGB does not serve the nation efficiently. The Bill provides for monopolies of supply companies in the geographical areas for which they are responsible. There will be no competition in those areas, and no option for customers to choose between different sources of supply. That is a complete contradiction of the Government's philosophy, which is to break up the monopoly of the CEGB.
Another technical dilemma that the Minister must have faced when considering this legislation was that of how to deal with the national grid, a unique technical apparatus that could not be broken down into smaller companies. So the Minister has come up with a mechanism of two, rather than several, companies.
One of the most appalling aspects of the legislation is the demanding commitment that 20 per cent. of the electricity supply be drawn from nuclear power. That is almost to impose on the privatised supply industry a commitment to take 20 per cent. of its power generation from nuclear energy, even though it is now proving to be one of the most expensive sources of energy produced by the CEGB. The signs are that the private monopolies--that is what they will be--will be only too pleased to invest in nuclear energy ; but the experience of development of nuclear energy leaves much to be desired. The Magnox stations, the first nuclear power stations, were built with an overrun of two and a half years. The AGR at Dungeness B had an overrun of 10 years. Private industry would be reluctant to invest capital in nuclear projects with such large overruns.
The Government's position accords more with their philosophy of privatisation than with improving the nation's electricity supply. The Government's fourth principle is that security of supply must be maintained, but
Column 847such security depends more on diversity of supply--by coal, oil, gas and nuclear power--than on the privatisation of the CEGB. The Bill owes more to dogma than to any desire to improve the efficiency of the supply system, and I feel sure that the Committee will amend many of the proposals in the Bill to make it comply with the industry's needs. Some of its clauses are ill thought out.
Another thing that disturbs me about the legislation is that the privatised supply industry will not be committed to complying with the EEC regulations on environmental standards. Numerous hon. Members have expressed their concern about the environmental effects of coal and oil--the problems of acid rain, and so on. The regulations on refurbishing and replacing existing plant require no investment in ensuring that that is done in accordance with EEC standards. So, while the nation--and even Conservative Members--express concern about the consequences of coal burning for the environment, the legislation does not commit the private companies to doing anything about them. The CEGB has been a major innovator and has conducted much research into the development of electricity. Its technology has been at the forefront of power generation. The suggested private companies that will take over from the CEGB will be more reluctant to invest in research and development for the nation's future generating capacity.
The new private monopolies will be more likely to make domestic consumers pay high prices than to make major industrial consumers do so. I can foresee pressure being applied by the larger consumers to privately owned monopolies to reduce the costs to British industry. The burden imposed by the Government with this Bill may be mainly offset by the importation of so -called cheap coal, which will put our indigenous mining industry in jeopardy. Any private enterprise worth its name is more concerned about its investors than its customers. It is a myth put about by Tory Members that the legislation is mainly designed for the consumer, who will have no influence on the privatised industry, and who will be given no safeguards in the legislation.
The major regulatory factor imposed by the Government was enacted recently by the Minister of State, who imposed 9 per cent. and 6 per cent. increases on CEGB supplies. That regulatory factor will be used by the Government under the Bill to impose higher prices on the industry.
Mr. Quentin Davies (Stamford and Spalding) : The most striking aspect of the Bill is the boldness and originality of the concept that it embodies. Until now, only two models for the organisation of electricity generation and distribution, or variations or combinations of them, have been practised in the Western world. The first is the model of the public or private sector vertically integrated utility company with an effective regional monopoly. That is the model which obtains in Germany and the United States and household names in those countries, such as RWE and Con- Edison, are excellent illustrations of it. The other model is the nationwide, vertically integrated, publicly owned monopoly, of which EDF in France and the CEGB in England and Wales are among the most distinguished examples.
Column 848My right hon. Friend the Secretary of State has launched today a completely new departure which represents a third option that has never been tried before. Its novelty and originality appeared to the hon. Member for Sedgefield (Mr. Blair) as a condemnation in themselves. That may be an interesting sidelight on the intellectual state of the modern Labour party, but it is a short-sighted view to take. I am convinced that, in a number of respects, the new model represents a real advance on previous thinking in this important area of industry.
I shall highlight three of the aspects in which the Bill represents such an advance. First, for the first time, we shall have real competition in power generation in this country. That means that for the first time the British public will have the assurance that resources in this area are being used efficiently, and they will be the first public in the world to have that assurance. The CEGB, unique among monopolies in world history, may have been able to avoid generating any monopoly costs of its own. It may be that it does not suffer from overmanning, from feather-bedding of any kind or from cosy relationships with particular suppliers: we shall see. There are two possibilities : either we shall have the evidence that, until now, electricity has indeed been generated as cheaply as possible, or we shall succeed in saving those monopoly costs.
The second important benefit that the Bill will bring is the assurance that all existing generating capacity in this country will be used efficiently, including that standby or surplus primary capacity that exists at present in British manufacturing industry. Under the present regime, there is no way that that existing capacity can be used efficiently, since, effectively, the electricity produced by it can be offered for sale only to the CEGB, which is itself the major competitor of these potential suppliers. That anomaly will be removed by the separation of the national grid from the generating industry.
The third great advance represented by the Bill, which has not been mentioned in the debate so far but is worthy of the attention of the House, is that, for the first time, we shall achieve real diversification among suppliers of electricity in this country. I do not just mean diversification between alternative sources of energy. Theoretically, we can achieve that even with a single monopoly producer. That has already been achieved under the CEGB regime, although arguably to a very inadequate degree. Diversification between suppliers does not just mean diversification between alternative sources of energy. It does not just mean the benefit of achieving the cost reductions through competition that I have already mentioned. It means that we shall also be diversifying those investment risks that are so crucial in the electricity generation business.
At present, only one body of men takes the key investment decisions about where and how new generating capacity will be constructed. In future, a whole range of companies will take those decisions. Precisely because the uncertainty of the assumptions that need to be made when investment decisions are taken in this sector is so high, particularly the uncertainty of the assumptions that must be made about the future costs of energy, and because the lead times in respect of construction and commissioning in this sector of industry are so long, those risks are inordinately high and anything that we can do to reduce those risks is well worth while.
Column 849I have no doubt that, left to itself under the present regime, the CEGB, if decided as it apparently has, that we shall need approximately 12,000 MW of additional power between now and the end of the century, it would proceed in its normal way to construct four or five conventional thermal or nuclear power stations. Perhaps we should invest more in alternative renewable sources of energy, or in gas turbine- generated energy which, as the House knows, has the highest thermal efficiency of all, about 56 per cent. Thermal efficiency, unlike energy prices, does not vary, except very slowly with improvements in technology.
However, it would be wrong for any individual or single body of men to reserve to himself or to themselves the decisions that will need to be taken in this area. It is important to diversify the source of those decisions. Diversification of risk in this area, as with diversification of risk in any area, means reduction of risk. Over time, reduction of risk means reduction of cost. Here again, we are scoring a real advance in the Bill.
Finally, I wish to say a few words about the distribution companies. It is utterly absurd for Opposition Members to hint, as they have done in the debate, that we should somehow attempt to break the natural monopoly in distribution. Surely they do not seriously mean to say that we should duplicate or triplicate the enormous fixed assets involved in a domestic distribution network.
In the Bill, we have gone over to a concept that has not been mentioned by Opposition Members, but which they would do well to contemplate. It is the concept of yardstick competition, the ability of both the market and regulators to assess the economic performance of a distribution company by reference to the performance of other comparable companies in the same sector of activity. It is an entirely new concept to be introduced into the electricity industry. It is full of promise and makes me confident that I can commend to the House as much the proposals on distribution as those on the generation of electricity.
I am convinced that, in years to come, the British public and the British media will give accolades of gratitude to my right hon. Friend the Secretary of State both for the boldness with which he has conceived the structure of the electricity industry as enshrined in the Bill and for his courage in putting over, and, I believe, already successfully persuading a great part of the establishment in the generating and distribution sectors of the industry to accept, the merits of his new concept. I believe also that in the coming months we shall see his success in persuading the House of the merits of that concept also.
Dr. Lewis Moonie (Kirkcaldy) : When wind power becomes a commercial proposition, I shall be first in the queue to buy shares in Tory Back Benchers. We have just heard one of the most flatulent contributions from a Conservative Member during a debate in which the contributions from those on the Conservative Benches have rarely risen above the banal. They seem to think that we are talking about self-evident truths. They suggest that privatisation must mean competition and a better deal for consumers. No one has yet provided us with the slightest piece of information that might support that contention.
Column 850What are the United Kingdom's electricity needs? We need a cheap source of power, a secure supply, environmental safety and regard to the satisfaction of increased demands in future. After privatisation, however, the industry will have one aim only, and that will be to maximise profitability on behalf of shareholders. It will seek to maximise the return on the capital that is deployed. It will pursue that aim through minimal price competition, through the development of a cartel, as we see in so many industries that are dominated by a few producers. It will seek the cheapest source of supply. In doing so, it will have minimal regard to strategic issues such as future investment in plant. It will show minimal concern for the consumer and minimal regard for indigenous sources of supply. Unemployment and misery will be caused as a result.
The need for profitability will lead the industry to sell as much electricity as possible. There will be no incentive for it to save energy and it will use all that is produced. It will minimise the drive for the creation of new plant, as it will wish to maximise the return of capital. This may lead in future to under-development, gaps in provision and shortages for consumers. Consumers will face increasing prices, increasing insecurity and probably a reduction in safety.
The main problem is that the power requirement in future will increase, and all methods of generating it have environmentally deleterious effects. We have heard nuclear power described so glowingly by Conservative Members, but perhaps that is an inappropriate term. There is the problem of low- level emission radiation, which is generally accepted by my profession to be a bad thing. There is the more unlikely but finite possibility of catastrophic accidents at nuclear plants. In a crowded country such as ours, such accidents would sterilise a large section of our land. There is the problem of storage of spent fuel and its processing. There is the problem of decommissioning power stations when they have reached the end of their useful life. There is the problem also--it has not been mentioned by Conservative Members--of difficulties in the supply of fuel. We do not produce our own fuel for nuclear power stations, and there is no guarantee of stability in price or in supply. The fuel comes from South Africa, Namibia, Zaire and Bolivia, for example. These are countries which have poor safety records for their workers, and the likelihood of stable future political conditions cannot be guaranteed.
At present, nuclear power is not a good option. We have that admission from the lips of the director of the South of Scotland electricity board, Mr. Miller. There is no doubt, however, that there are future possibilities for the supply of nuclear generated electricity. We have the fast breeder technology and the developments at Dounreay. There is also the possibility of nuclear fusion. I shall return briefly to these possibilities and developments at the end of my speech.
The other main source of supply is coal, of which we have vast indigenous supplies. At present, it is relatively cheap, and it is likely to remain so. Coal-fired power stations are cheaper to build than nuclear stations and are generally safer and more economical. Smaller coal-fired power stations are suitable for combined heat and power projects, especially when the fluidised bed method of burning the stuff is used, which offers a more efficient utilisation of fuel.
Column 851Of course there are problems with coal. Burning coal emits sulphur and nitrous oxides which can be removed by burning low-sulphur coal which ex-miners in my constituency, if they were given the chance, would be delighted to produce, because my constituency sits on about 12 ft of such coal. Alternatively, and more expensively, the emissions may be treated by scrubbing the noxious gases on a sluice. Carbon dioxide is also a problem. Conservative Members have made much of that problem, but we must recognise that burning coal does not produce much carbon dioxide compared with the burning of fuel generally and the loss of the biomass in the tropical rain forest. It is interesting that an American company which is about to build a power station has agreed, as part of the deal, to replace a proportion of the biomass in the tropical area, thereby reducing the contribution of the emissions to the overall load of carbon dioxide in the atmosphere. We must surely consider that, but it has not been considered so far in this country. It is possible to diminish the effects of carbon dioxide release if we are prepared to take action. Sadly, other alternatives like wave, wind, tidal power, geothermal or solar sources are not yet commercially viable. Bearing in mind cost and feasibility, such alternative power supplies can only be considered in future. What are the needs for a national strategy? We must consider the long-term need for cheap, secure and expanding supplies of energy. At present, coal is undoubtedly the cheapest option.
Nuclear power is currently too expensive and too risky, even if we consider the pressurised water reactor programme, which I believe should be abandoned. Perhaps, in future, nuclear energy will have a part to play. We should continue to invest very heavily in research into ways to make that a reality, particular in fast breeder technology and nuclear fusion. Sadly, the Government are reducing their investment in those areas. We must also study the safety aspects more carefully, particularly with regard to the decommissioning programme on the Magnox stations. Nuclear power may well have a role to play in future, but it has very little role to play at present other than in providing expensive electricity for a hapless consumer.
The main alternative must be to maximise the efficiency of utilisation of supplies. There will be no incentive for a privatised electricity industry to do that. Its incentive would be to sell as much as possible. As responsible politicians, our incentive should be to minimise consumption through better insulation and utilisation and through the use of energy- efficient appliances and storage systems like those used by the North of Scotland Hydro-Electric Board. We must consider the development of alternative sources and carry out feasibility studies on wind, wave and tidal power. If we do that, we can be certain of a secure supply of energy in future. The Government's proposals do not offer us that option.
Mr. Frank Haynes (Ashfield) : I have listened to this debate over the past two days, but I have not yet heard anyone raise the question of safety and nuclear power. I have heard many contributions, particularly from Conservative Members.
I am perhaps nearly the oldest member in the Chamber at the moment--and I am not speaking about you, Mr.
Column 852Deputy Speaker. I am not trying to drag you into this argument. I remember the days as a lad when we had candles and oil lamps. I was born in 1926 so I remember all that. We also had gas, but we did not have electricity. It was around but only if one could afford it. It was there, but what happened? The electricity suppliers were not bothered about expansion ; they were concerned only about pouring money into their pockets through profits.
The Secretary of State for Energy wants to take us back to the Victorian era, and we ain't going. I will tell him that straight. The Secretary of State had better watch out when the Bill goes upstairs to Committee because I will be a member of that Committee. I will be whipping that Bill for the Opposition and I want to see the Secretary of State in his place every time we sit. I am sure that we shall have a good argument in Committee.
Competition has been mentioned time and time again, but it has not yet been proved to me where the competition will be. There will be one industry that provides electricity, as there is today. I welcomed the election of a Labour Government in 1945, and they were a marvellous Government. They saved the electricity industry and they expanded it nationwide, so that everyone who wanted electricity could have it.
The hon. Member for Stamford and Spalding (Mr. Davies) spoke about electricity. All he knew about it when he was a baby and had nappies on was that he put his hand on the wall and switched on the light. That was not the case when I was a kid. All he had to do was to switch on an electric heater, but we had to hug ourselves to keep warm. I remember the days of trams. When the track was being relaid, we would get the wooden blocks to burn for warmth. These lads do not know anything about that because they were not born then. The Secretary of State can take the grin off his face or I shall knock it off in Committee--by God, I shall.
I have had few moments to myself over the past two days because I have been busy on the Front Bench whipping the Bill. The House will hear the reports of the success that we shall have in the argument in Committee. We shall not win the vote, but we shall win the argument, and the Secretary of State and his team will see that what they have produced in the Bill is not what the British public wants. 9.12 pm
Mr. Kevin Barron (Rother Valley) : It is good to follow such a stirring speech by my hon. Friend the Member for Ashfield (Mr. Haynes). His stirring contribution was short, but his contribution in Committee may be longer. It may be longer than the Secretary of State's contribution--but we shall have to wait and see.
First, I want to thank my hon. Friend the Member for Midlothian (Mr. Eadie) who, for 16 years, has given great service to the Labour party as my predecessor on the Front Bench energy team. With his customary elegance, he showed once again in his contribution yesterday his skill in highlighting the contradictions in Government policies. My hon. Friend said that the Government's blatant preference for the use of nuclear power cannot be argued on price. The Bill has certainly given up the ghost of arguing that. I, like him, resent the attempts to build up the case for nuclear power by attacking the coal industry--which he highlighted yesterday.
Column 853The real effect of the Bill will be felt in every shop, office, factory and home in Great Britain. That was pointed out by the right hon. Member for Selby (Mr. Alison) who is not in his place now --who said that the coal and electricity industries are inextricably linked. The issue is inseparable from the future of many industries such as the railways, power engineering and major industrial energy users such as the steel, glass and chemicals industries.
I have a briefing, which the Chemical Industries Association Ltd. sent to me. It comments on the effects of the Bill on the prices that those industries, as big consumers of energy in this country, will have to pay.
Under the heading "Prices and Price Control", the CIA explains that it does not accept the reasons given for increasing electricity prices by more than 8 per cent. this year, by a further 6 per cent. next April and possibly the same again in 1990. It goes on to say that it believes that any price control formula should take 1987 as its base year--excluding the privatisation sales booster increases that the Government imposed earlier this year.
The proposals have already affected electricity costs ; there is no doubt about that. The price increases that the Government forced on the industry last April, together with next April's price hike amount to an increase of more than 15 per cent. Those added costs are all directly related to the substance of the Bill.
On 3 November 1987, the Secretary of State for Energy tried to dismiss the price increases by saying that they were to do with raising revenues in the industry. He said :
"In considering the targets for these years, the Government have had to take into account the fact that, although in the recent past the electricity supply industry has had surplus capacity, that position is now changing. On current forecasts, the Central Electricity Generating Board envisages that at least 13 GW of new capacity will be needed to meet demand by the end of the century."--[ Official Report, 3 November 1987 ; Vol. 121, c. 801.]
The Government moved into funding privatisation of the electricity supply industry in November 1987.
For many years the medium-term development plan that was used by the CEGB was the one thing that set prices for the electricity supply industry that took into account all the costs of new build, and so on. The report dealing with the period from 1986 to 1993 said : "On the assumptions upon which these forecasts are based, retail tariff increases over the plan period will be below the rate of general inflation."
I put it to the Secretary of State that that is certainly not what happened in April this year or what is planned for April next year. Perhaps the Secretary of State can be forgiven. He has great difficulty in understanding the price implications. The House will recall that yesterday, when my hon. Friend the Member for Sedgefield (Mr. Blair) said that private sector electricity in comparable industrial countries was expensive, the Secretary of State said : "Prices in Japan are almost twice ours, and prices in West Germany are about 50 per cent. higher."--[ Official Report, 12 December 1988 ; Vol. 143, c. 689.]
That shows what a muddle the Government are in. It is obvious to most informed commentators that under private ownership the price of electricity will rise, although we shall have to wait and see whether prices will be as high as in Germany and Japan.
Dr. Michael Clark (Rochford) : The hon. Gentleman has been talking about prices. Will he take into account the fact that, in the five years to October this year, electricity prices have risen by 2.8 per cent. per annum whereas during the five years of the last Labour Government they rose by 22 per cent. every year?
I was referring to the position of the Secretary of State as regards the price of electricity and suggesting that it would rise under private ownership. This will happen mainly as a result of the Government's obsession with nuclear power--an obsession which, to be fair, was not entertained by the current Conservative Government alone, but an obsession that has failed the nation in its promise of fuel so cheap that it would eventually not be worth printing electricity bills requesting payment for it.
The reality of that obsession has been the failure to meet construction targets on costs, times and production levels. At their peak, Magnox stations have only ever produced 3.8 GW, compared with an expectation of 5 GW. The AGRs, which by 1975 were planned to provide some 8 GW, have a current output capacity of 2.7 GW. After many years we have learnt the truth about the economic cost of Britain's nuclear power programme.
Mr. Tony Marlow (Northampton, North) : The hon. Gentleman says that the Conservative party has an obsession with nuclear power. He seems to think that, by definition, nuclear power is much more expensive than electricity generated in any other way. Why is it that in France, which has much more nuclear power than we have, electricity is much more cheaply produced than here?
Mr. Barron : Let me direct the hon. Gentleman's attention to the Library note on the cost of electricity generation in Britain compared with that in France. He will see from that independent assessment that the cost of electricity generated by privatised nuclear power in France is far higher than that generated in the public sector in Britain.
Mr. Quentin Davies rose --
In October 1987, in a television interview, Lord Marshall described the British nuclear power industry. For perhaps the first time since the nuclear industry had been set up in Britain, people who knew about it were beginning to tell the truth.
In "Brass Tacks" on BBC--I hope it is not too difficult for Conservative Members to accept that we still have a British Broadcasting Corporation-- the interviewer referred to a letter that had been sent by the CEGB to the "Stop Sizewell B" campaign in December 1986 which said that Magnox stations had been saving consumers about £250 million a year. In answer to a question, Lord Marshall said :
"You are correct to say on the Magnox stations as a whole, whether or not Magnox has been an economic bargain or not in the narrow sense does depend on their performance in the future and the price of coal in the future, so in that sense it's jam tomorrow."
The interviewer then said :
"And that's also true of the AGRs?"
Lord Marshall replied :
Column 855"That is bound to be the case because we've only got some of them working just in the last few years."
If even the most ardent supporter of nuclear power accepts its failure, why will not the Government?
The Bill contains a nuclear levy and tax. Will the Secretary of State for "Nuclear" Energy tell us exactly what the nuclear levy in clause 31 is for? Is it to finance the expensive Magnox and AGR costs now and the PWR costs in future? Does it also include the cost of building the new family of PWRs? What is clause 31 for?
The Secretary of State for Energy (Mr. Cecil Parkinson) : Clause 31 is straightforward. At the moment, a cost for nuclear energy is built into an electricity bill. It is being paid now. It has been paid for the past 30 years. We are isolating it and demonstrating exactly what it is. If there is a difference between that and fossil fuel prices, we shall spread it over all fossil fuels. It is not a new tax or anything invented ; it identifies the expense.
Let me make one other point. The hon. Gentleman has probably forgotten that the AGR programme was imposed on Britain by a Labour Government.
What the right hon. Gentleman has said is that this is to pay for a nuclear programme. It is to pay for the PWR programme that the CEGB has said in evidence is more expensive than British coal. It is the penalty that consumers will have to pay for the Government's obsession with nuclear power.
As the debate got nearer, the sound of the bugle of retreat was heard louder and louder. We are now led to believe that the nuclear levy is to pay for the nuclear programme. In The Observer on Sunday, the Department of Energy said :
"the levy would not, as expected, go to subsidise the multi-billion pound construction of a new family of nuclear reactors. A department spokesman said National Power, the new generating company responsible for nuclear energy, will be expected to raise the finance on the market like everybody else."
If that is so, why the levy?
We are led to believe that the reason for that decision is, according to the Secretary of State in his speech yesterday to maintain a strong nuclear industry. Yet the British nuclear industry has never been strong, either in security of supply or economics. It is not the diversity of supply that concentrates the minds of industrial and domestic consumers, but security of supply, and it is that which the Bill puts at risk.
The current forecast of demand by the year 2000 is 56.9 GW. Between now and then, over 5,000 MW of coal capacity is to be closed together with over 1,000 MW of oil and nearly 3,000 MW of nuclear power. It is predicted that necessary capacity for the year 2000 will be between 12 or 15 GW. We are led to believe that nuclear power, if it comes on stream, will provide us with about one third of that need. We have heard from the Association of Independent Electricity Producers that the maximum capacity that could be supplied by private generators would be about 4 GW.
Another option that could be used to meet future demand--I do not know whether it is being considered--is the refurbishment, rather than retirement, of coal-fired power stations. A decision on that should be
Column 856taken as soon as possible, since a programme of refurbishment would be carried out over years, not overnight.
Opposition Members would welcome the addition to our electricity supplies of the long overdue combined heat and power schemes. Their contribution will of necessity be small. Given that the applications for new generators, which are talked about but never named, are likely to be top-up stations rather than for baseload generation, there must be a major question about whether the short-termism of the newly privatised industry is adequate to ensure the efficient replacement of retiring stations.
Replacing baseload capacity that is being lost involves many "ifs". We cannot risk any shortfall in supply and, therefore, the building of a big coal-fired power station is imperative. That should not be on a green-field site because we have seen the problems at Fawley, but it could be built somewhere like West Burton. That is necessary if the Government are to show that they are concerned about security of supply. It would bridge the gap between the supply and demand forecast and would enable the CEGB to do what it is good at. No matter what its critics have said, it is good at using proven technology to guarantee security of supply in this country, and a new coal-fired power station in the midlands coalfields would be able to do that.
The Secretary of State has a problem in his reluctance to discuss the strategic role to be played by the British coal mining industry. The Government have chosen to ignore a major fuel supplier in electricity generation. My hon. Friend the Member for Barnsley, Central (Mr. Illsley) said in his contribution to yesterday's debate that British Coal's half- year operating profit was £119 million--the best half-yearly figure that it has reported in 20 years. Unfortunately, the press conference and the debate surrounding that result had an atmosphere more like that of a wake than a celebration, and talk by media pundits of a rundown in British coal mining on top of the 10,000 to 20,000 jobs that have already been lost was totally uncalled for--yet it was not contradicted by British Coal or the Secretary of State for Energy.
Instead, we must grow used to indifference and the perpetual stance taken by the Tory Government to the domestic coal mining industry. Of course the Secretary of State speaks of investing large sums of taxpayers' money, to ensure that we have a modern and competitive coal industry. However, the right hon. Gentleman gave evidence to the Select Committee, which commented that such observations avoided the real issue.
The issue is simple. Today, the British coal industry simultaneously faces two major problems : first, the need to establish a new commercial relationship with the electricity supply industry ; secondly, the unprecedented low level of international seam coal prices. To ignore them, and to suffer more job losses while having increased dependency on imports, will be of no use to this country.
At the heart of the matter is the Government's involvement in the historic pledge argument. The Secretary of State for Energy made an historic pledge at this year's Conservative party conference. I have some experience of historic pledges, and I say to the right hon. Gentleman that there are few occasions on which they are worth the paper they are written on. In my experience, few historic pledges have ever come true. We shall have to wait to see whether that of the Secretary of State does.
Column 857The Select Committee on Energy, with its majority Conservative membership, clearly summed up the Government's attitude in its conclusions. The Select Committee said that it was disturbed at the uneven treatment being given by the Government to coal and nuclear power. The problems of nuclear power have been glossed over, while there has traditionally been emotional hostility towards coal mining. Such hostility does not go back just to my time in the industry but for generations ; the Tory party's hostility to it is well known. It must be difficult for the Secretary of State for Energy to accept that in the last few years the British coal industry has lowered prices by 20 per cent. in real terms, reduced costs by 30 per cent. in real terms, and increased productivity by 75 per cent. in real terms. All that has been done at some economic and social cost to mining communities, with every one of them still having an unhealthy share of the nation's unemployed--very much so. And in his speech yesterday, the right hon. Gentleman said that he did not know the projected likely fossil fuel costs for years to come. The Electricity Bill is not born out of consumer needs, it does not argue the case for privatisation of the electricity supply, and its claims to introduce competition are fictitious. Most Conservative Members have had to apologise when, having trawled through the Bill, they failed to find where it introduces competition.
In his speech on 12 October to the Tory party conference in Brighton, the Secretary of State claimed that this was the first privatisation to be regionally based. He said :
"In privatising the area boards, we shall be creating 12 powerful companies, each with its headquarters and decision-making in the region that it serves."
He gave the example, and I am pleased that he did, of the Yorkshire electricity board. He said that the decision that governs the quality and price of electricity supply to my home will be made in Yorkshire by Yorkshire men answerable to the people of Yorkshire, and that domination by London will be a thing of the past.
The Secretary of State obviously has plans to move his Department up to Yorkshire. He is obviously going to appoint a director-general and/or agent who comes from Yorkshire and has offices in Leeds, London and Edinburgh. That must be his master plan, because he knows as well as I do that any major decisions on electricity will be made by the Secretary of State for Energy and the director-general. They will decide the price of electricity ; they will set the nuclear tax and levy ; they will set the costs of transmission ; they will issue the licences for generators and supply boards ; they will be responsible for security and sufficiency of supply.
As has been pointed out by many hon. Members and highlighted by the hon. Member for Havant (Sir I. Lloyd), Chairman of the Select Committee on Energy, the Secretary of State will be involved in detailed obligations in no few than 67 distinct and separate parts of the Bill. The Bill does not offer consumer choice, but says, "Take it or leave it." It has not satisfied the concerns of industries whose energy costs are a major part of their expenditure. It has not satisfied the needs of consumers, nor has it quelled the doubts of the 55 per cent. of the British public
Column 858who want the electricity industry to stay in the public sector. We shall speak for them tonight, and vote against the Bill.
The Parliamentary Under-Secretary of State for Energy (Mr. Michael Spicer) : Let me begin by asking the hon. Member for Rother Valley (Mr. Barron) a question. In answer to an intervention by my hon. Friend the Member for Rochford (Dr. Clark), who asked why electricity prices had gone up by 180 per cent. under the last Labour Government, I believe that he said, "Fuel costs." Does that explain why postal charges went up by 147 per cent., rail charges by 171 per cent., bus fares by 150 per cent. and water charges by 150 per cent? He need not answer now ; a letter will do.
The gist, as I have understood it, of what the hon. Member for Rother Valley was saying when he was not talking about coal--the gist, indeed, of much of what Opposition Members have said over the past two days--is that the British electricity supply industry operates in a state close to perfection. In the imagination of Opposition Members, electricity consumers, distributors and the one producer apparently pull together in almost perfect harmony. Investment decisions planned and executed by that one producer flow through with such precision as to ensure that costs are at a minimum, power stations work with total efficiency, electricity is priced as low as it can be and service can only be described as pastoral.
That imagery has only one flaw : it is not true, and many of my right hon. and hon. Friends have spoken eloquently to that effect over the past two days. Yesterday, particularly good speeches were made by my right hon. Friends for Selby (Mr. Alison) and for Guildford (Mr. Howell) and by my hon. Friend, the Member for Birmingham, Northfield (Mr. King). Today we heard from my hon. Friends the Members for Cambridgeshire, North-East (Mr. Moss), for Eastwood (Mr. Stewart), for Ipswich (Mr. Irvine), for Wyre (Mr. Mans), for Dorset, South (Mr. Bruce), for Thurrock (Mr. Janman), for Stamford and Spalding (Mr. Davies), for Romsey and Waterside (Mr. Colvin), for Fylde (Mr. Jack) and for Birmingham, Hall Green (Mr. Hargreaves). The first part of what my hon. Friend the Member for St. Ives (Mr. Harris) had to say was also eloquent and excellent. All those speeches were in favour of radical change in the industry. Yardsticks in a monopolistic state- controlled industry are, of course, hard to find. But if efficiency is to be measured, for instance, by the rate of return on capital, it must be realised that this is so low in the electricity supply industry that it falls short even of the rate of return rules for new investment in the public sector laid down by the last Labour Government.
When the Government have insisted that rates of return are raised to a realistic level to prepare the industry for the massive new investment in plant and machinery that will be required over the next 10 years, the industry's main response has been not to cut costs but to raise prices. Nor should we be surprised that that should be so, because 80 per cent. of the costs of producing electricity in England and Wales are at present associated with a single producer which is allowed to pass its costs, whatever they are and however they are set, straight through to the customer. We