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Mr. Jimmy Hood (Clydesdale) : We are well aware that the hon. Gentleman made this point earlier in Committee. Indeed, I referred to it in Committee when, unfortunately, the hon. Gentleman had briefly left the Committee room. If we sell off Torness to the English market so that it provides low-base, low-cost electricity to England, where will we in Scotland find a market for exporting our still-excess electricity?
Mr. Bruce : The hon. Gentleman makes a fair point. We have massive excess capacity in Scotland for which the South of Scotland electricity board has admitted that it will not be able to find a market. Having invested in that capacity, hon. Members should address the way in which we can ensure, that it is used to the maximum benefit for both the Scottish consumer and the British taxpayer. Closing a station does not seem to give the maximum benefit for the money invested.
I accept that having reached our present position--I do not think that we should have got here--we are left with the problem of excess capacity. All that I am suggesting is that that course of action should be examined because there is no possibility of securing the future of the coal industry in Scotland, about which the hon. Member for Clydesdale (Mr. Hood) is so legitimately concerned, if we have massive excess capacity. If Torness turns out to be the SSEB's cheapest investment, the SSEB might argue left to its own devices, that having made that investment, it might well choose to close the coal capacity and substitute Torness. There is therefore an argument that taking Torness out of the equation would help to create the balance that would ensure the coal industry's future.
Mr. Bruce : I am grateful to you for putting me on the right track, Mr. Deputy Speaker. However, I hope that you will accept that costs relating to the continuing nuclear power industry are relevant to this new clause because the way in which those costs can be absorbed so as not to disadvantage the Scottish consumer is a point of real interest. The Government's new clause gives me cause for concern, because it means that, regardless of the
Column 225commercial judgment of the successor companies, Scottish consumers will have to pay more and more towards the cost of servicing that excess capacity. That will be particularly true if we fail to find a market for it and I have not met many people who have confidence that we shall secure such a market.
It seems extraordinary that we should continue to fund the nuclear industry in Scotland and close a nuclear power station at a time when the Central Electricity Generating Board is applying for planning permission to build up to four more nuclear power stations. If there is a requirement for nuclear capacity to meet the non-fossil fuel argument--leaving aside the merits and demerits of that
argument--surely the sensible thing is to ensure that before we build new power stations we organise the existing capacity to ensure that it is fully utilised. To close power stations
When the Minister replies I hope that he will have taken on board the fact that suggesting that this is a technical amendment is not good enough. The question that the Minister must answer is, if the nuclear subsidiary is to receive, as of right, funding from its parent companies, which is what they will be post-privatisation, will that funding simply be the transfer of funds provided by the taxpayer through the provisions of what will then be the Electricity Act, or will they be funds over and above those funds, which can then be recovered from the consumer in the form of increased prices? The Minister must accept that two sources of funds are provided for. One is the ability of the industry to raise revenue and the other is the up to £6 billion that has been provided from taxpayers towards the cost of what is the substantially nuclear debt of writing off the nuclear decommissioning costs.
In response to the hon. Member for Carrick, Cumnock and Doon Valley, the Minister has already suggested that decommissioning is included in the provision of Hunterston A. If that is the case, we are entitled to know how much of that cost will be met by the taxpayer and how much will be borne by Scottish consumers. If that is not made clear, the new clause will seem to be about securing additional charges on the Scottish consumer towards the cost of the nuclear industry on top of what the taxpayer will have to invest. That might put a rather different complexion on the intervention made by my hon. Friend the Member for Caithness and Sutherland (Mr. Maclennan) that the early investment in nuclear power may well have been beneficial to the consumer but from now on the Scottish consumer may find that he is paying through the nose. I should be grateful if the Minister could tell us exactly what the new clause means in that context.
Mr. Alexander Eadie (Midlothian) : I am not as blase about the cost structure of nuclear power or about its great advantages as the hon. Member for Gordon (Mr. Bruce). As you rightly said, Mr. Deputy Speaker, there is room for a debate so that we can get all the facts, figures and consequences of that. I repeat that I am not blase about the great benefits --
Column 226Mr. Malcolm Bruce : Nor am I.
As my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) said, the new clause affords us the opportunity to talk about the question of commercial judgment. Taxpayers' money is involved and we want some guidance and explanation from the Minister. When we are talking about commercial judgment we have great difficulty in even getting the Minister or his right hon. Friend the Secretary of State to come to the Dispatch Box to explain what is happening on coal burn in Scotland.
My hon. Friend the Member for Garscadden said that he thought that this debate would give the Minister the opportunity to give some information to the House about what is happening on the so-called agreement or understanding reached between the South of Scotland electricity board and British Coal. There can be no argument about it : the Secretary of State and his hon. Friends are responsible for the South of Scotland electricity board and for all the costs that are likely to be involved and, as my hon. Friend pointed out, billions rather than millions of pounds are involved in relation to SSEB debt. Commercial judgment must enter discussions about coal burn. The Standing Orders would not permit me to go into all the details and arguments in favour of a greater coal industry in proportion to the nuclear power industry in Scotland. I hope that the Minister will not try to argue that nuclear power is much cheaper than coal. We have the figures : that argument is finished. It is now recognised that nuclear power is more expensive than coal. The Minister will probably argue that there are good, sound environmental reasons for nuclear power. We will later have an opportunity to challenge that argument.
Opposition Members are trying to extract from the Minister some information about what is happening to the coal burn agreement. He cannot stand back and say that it is a matter for commercial judgment, then put down a new clause involving not millions but billions of pounds, and ask the House to agree. We are entitled to an explanation. What is the agreement? How many millions of tonnes of coal are involved for the Scottish coal industry? As my hon. Friend the Member for Garscadden said, we want also to know what it involves in respect of opencast and deep mining.
I have a vested interest in the matter. There are two pits in my constituency. I hear of all the financial problems of the SSEB. A press release by British Coal states that it will not be 3.5 million tonnes and that it may be 2 million tonnes of coal. We want to know how much will be opencast and how much will be deep mined.
Mr. Deputy Speaker : Order. I hesitate to interrupt the hon. Gentleman, but I hope that he will not go too far down that road. The new clause specifically deals with funding relating to nuclear power stations.
Mr. Eadie : Thank you for your guidance, Mr. Deputy Speaker. However, as we are talking about moneys, and as the Scottish Office talked about exercising commercial judgment, Opposition Members have a right to challenge the Government's commercial judgment in introducing this new clause which, by implication, means that they will
Column 227be responsible for solving the SSEB's debt to the extent of billions of pounds. We were told that there were problems with the financing of British Coal, so we are entitled to question the Minister on how he can reconcile the commercial jugdments that he talked about with his proposal to solve the SSEB's debt to the extent of several billions of pounds.
The Secretary of State for Energy has been more forthcoming than the Scottish Office Minister. I give due credit to the right hon. Gentleman. He tried to be helpful, but I cannot say that about the Minister who is to reply to the debate. Like a parrot, he repeated that it is a matter for commercial judgment. As moneys are involved and as we are talking about commercial judgment and the commercial viability of the SSEB, we are entitled to hear the Minister explain the implications.
I should love to debate the matter in greater detail, but I do not want to stray too far. We are talking about moneys and the deep-mine coal industry and their implications in relation to the debt. I hope that the Minister will let us know what the coal burn really is and what the present stage of the negotiations is. He cannot say that he does not know. He has been in close contact with it and has said that he is responsible for the SSEB. He must know what is happening. The Minister's reply will be closely scrutinised by my hon. Friends. In deference to you, Mr. Deputy Speaker, I leave it at that, but we want information, and information we must get this evening.
Mr. Foulkes : I am grateful for that information, Mr. Deputy Speaker. You will be fully aware that the Minister, the hon. Member for Galloway and Upper Nithsdale (Mr. Lang), represents a constituency which is contiguous with mine, Carrick, Cumnock and Doon Valley. The name of his constituency is almost as unwieldy as mine, but his constituency is equally as beautiful. We know him well, not only in the House but in the south-west of Scotland. When we think about the Minister, the two words that most commonly reach our lips are--
Mr. Foulkes : No, not "small majority" but "smooth" and "bland". I am sure that you will agree, Mr. Deputy Speaker, that the Minister was very smooth and particularly bland in introducing the amendment in his usual low voice, quickly glossing over what he described as technicalities. As my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) and I said, and as even the proportionally represented hon. Member for Gordon (Mr. Bruce) agreed--that is quite a spectrum of opinion to start with--the amendment has some substantial implications, and I wish to ask a few questions about them.
First, as the Minister said, the prime purpose is to ensure that the parent company cannot escape the liabilities of the subsidiary. But what about the other way
Column 228round? I hope that the Minister will answer that question. New clause 6 seems to demonstrate that some aspects of the licence conditions are not intended to apply to subsidiary companies. For example, apart from generation and supply, licence conditions could be avoided by using a subsidiary company to perform certain tasks. I hope that the Minister will check that. If that were to be the case, it would be a worrying loophole, and I hope that the Minister will consider doing something about it. If there is no loophole, I hope that he will give an assurance to that effect.
Mr. Lang : I shall deal with that specific point now in a way which I hope will reassure the hon. Gentleman. If he reads the new clause, he will find that it is concerned solely with the activities of nuclear generating companies.
Mr. Foulkes : I am grateful for the Minister's intervention, but I am not totally reassured by it. There are still activities in which nuclear generating companies will be involved. By allocating tasks to a subsidiary company, the supply and generating companies could avoid their legal liability.
That is not a party political point. Therefore, it is in the public interest for hon. Members to be assured that the provision is watertight. I hope that the Minister will consider that.
Secondly, nuclear costs are a major matter. There is still uncertainty about nuclear debt, and there are provisions for write-off. We are suspicious about the position in Scotland. The huge, almost entirely nuclear, debt in Scotland of £2.7 billion is almost exactly the equivalent of what the Government might expect to get from the floatation of the companies. Therefore, there is a major incentive for the Government to use taxpayers' money to write off the debt. As usual in respect of privatisations, we are concerned about that matter. It is an abuse of taxpayers' money.
Opposition Members are concerned also about the other costs which, in the past and even at present, have been greatly underestimated. I refer to the two additional nuclear costs. One is the disposal of the waste and the second is the decommissioning of the power stations which are vital and central to the amendment.
I know that my hon. Friend the Member for Cunninghame, North (Mr. Wilson) has a particular constituency interest in the closure of Hunterston A and I will in no way trespass on his responsibility. I know that he is deeply concerned about employment in his constituency and the implications of its proposed closure. Some of my constituents work at Hunterston, so I share his concern. However, I have been suspicious about the entire episode. I shall use the phrase of the singer Max Bygraves, "I wanna tell you a story", about Hunterston A.
I am sure that my hon. Friend the Member for Cunninghame, North, as I do, receives weekly reports from the South of Scotland electricity board about the operation of Hunterston A and Hunterston B. Those reports tell us who is visiting, who has had slide shows, and what incidents there have been. I must confess that they are scrupulous in defining and giving information about
Column 229incidents that have taken place. Those weekly reports were telling the success story of Hunterston A--how well it was doing, how efficient and marvellous it was, and what a long-term future it had. Then suddenly there was an announcement that the SSEB was to close it.
I waited then with anticipation for the next weekly report from the SSEB. Of course, it was a model of careful writing and one had to read between the lines to get to the truth. It was probably written by my old friend Tom James. Clearly, the stated reason for the closure of Hunterston A had nothing to do with the real reason, which is why I intervened earlier.
I accept completely and unreservedly the Minister's assurance that it is now the Government's intention to say that the costs of the decommissioning of Hunterston A must be taken on by Scottish Nuclear Limited. However, I also know Donald Miller. I have known him over the years as deputy chairman and as chairman. I know his persuasive power and the way he keeps on going. As my hon. Friend the Member for Midlothian (Mr. Eadie) said, he is like a tiger on the question of the coal contract with British Coal.
I have discussed with Donald Miller, too, the cost of decommissioning. He said that he believes that the cost of decommissioning is finite, it can be calculated, and that he has made an allowance for it. I confidently predict that he has it wrong. He has underestimated and the cost will be much greater. There has not been a full decommissioning of a Magnox power station in this country or elsewhere, and it must still be decided whether it will be dismantled piece by piece, whether it will be encased in concrete, or what will happen. All the options must be considered.
The cost of dealing with that decommissioning is a major problem. I predict that pressure will be put on the Government to get the taxpayer to take on board some, if not all, of the cost of decommissioning and other costs, too. I hope that the Government will stick to their guns and that it will not be the taxpayer who takes on that responsibility. As privatisation approaches and the Government realise the real cost, they will become increasingly worried about the burden around the necks of the companies soon to be privatised. The only explanation that I can envisage for the early closure of Hunterston A is that the Government are looking for some way of getting that debt taken on by the taxpayer and not taken on by the future private company.
My second point concerns the site at Chapeldonan in my constituency, which is a designated site that has been owned by the SSEB for more than a decade. The SSEB has said that it will build a nuclear power station there. It is a blight on the area around Girvan. At Girvan the development of the town is constrained on the west side by the sea and on the south and east sides by hills. The only place where housing and industry can be developed is to the north, but that site is owned by the SSEB and has been reserved for a nuclear power station. Over the past few years, Kyle and Carrick district council and myself as the local Member of Parliament--
Column 230on Kyle and Carrick district council, as well as the Labour councillors, have been anxious to get the SSEB to declare Chapeldonan surplus to requirements. It will not need another nuclear power station. The hon. Member for Gordon and my hon. Friend the Member for East Lothian (Mr. Home Robertson) know that Torness power station was not needed and that it provided capacity well in excess of demand. It will certainly not need Chapeldonan.
What I do not understand from the new clause is who will take over the ownership of the Chapeldonan site if it is not sold before privatisation. Will it be the SSEB, the new privatised company, or will it be its subsidiary? [Interruption.] The more my hon. Friend the Member for Glasgow, Pollok (Mr. Dunnachie) waves his finger, the longer I will take, because it distracts me. Or will ownership be taken over by Scottish Nuclear Limited?
That is an important issue and that is the reason why I wrote to Donald Miller at the SSEB saying that the only advantage of privatisation--it sticks in my gullet a little to say this--is that it has made the people who are generating and will generate power look seriously at the costs. My hon. Friend the Member for Midlothian has said that nuclear power is not cheap, as the Government previously pretended--it is more expensive--and they have now realised that. I hope that we shall reach the stage when the SSEB will say that the Chapeldonan site is no longer required and that it can be sold and used for much needed industry and housing developments in the Girvan area.
My fourth and penultimate point--
My fourth point is that Chapelcross near Annan is an anomaly. The Minister said that the legislation applies to power generation in Scotland, but in Chapelcross there will be the anomaly of a nuclear power station based in Scotland, but providing electricity for an electricity supply company based in England. I am not sure how the provisions of the new clause and some of the other Scottish provisions in the Bill will apply to that situation. Will they apply to the siting of the establishment or the siting of the company that owns and operates that establishment? The question of cross- border relationships is an important one.
What is interesting is that the SSEB suddenly decides to close Hunterston and that British Nuclear Fuels plc decides to replace Chapelcross. One begins to suspect in those circumstances that many strange things are going on and that other factors are involved, as I have already shown in the case of Hunterston. It is also interesting to consider the other factors relating to Chapelcross, such as the pressures arising from the requirement for the supply of plutonium for weapons as opposed to power generation. Tritium is also provided at the related plant at Chapelcross and there is intense pressure on Chapelcross because of America's shortage of tritium and the relative shortage of plutonium.
Those of us who live in the south-west of Scotland are a bit fed up as we are becoming surrounded by nuclear establishments which are of no benefit to the local inhabitants, including the Minister of State, who lives not far from me. Those establishments are creating additional hazards and problems for us.
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I am concerned about the Bill in general. I appreciate that the new clause is a belated attempt by the Government to patch up some of the difficulties, but it creates further difficulties. Today I have highlighted my suspicions and worries. I hope that the Minister will take the opportunity of this important debate to try to answer some of our concerns; otherwise we shall seek more occasions in the next few days, weeks and months to pursue our concerns until we get the answers, which are especially needed by the people of south-west Scotland.
Mr. Home Robertson : I share the views expressed by my hon. Friends the Members for Carrick, Cumnock and Doon Valley (Mr. Foulkes) and for Midlothian (Mr. Eadie) about the tough practices of the present chairman of the South of Scotland electricity board. Some might say that the chairman has used sharp practices to manage that board. It is tempting to consider that a privatised SSEB could not possibly behave as badly as the present board. One could cite a number of examples of such behaviour, such as the way in which the board has handled the coal contract. In my constituency we have the bizarre situation in which large quantities of coal, which have been shipped halfway around the world from China, are being burnt at Cockenzie power station when the necessary coal to feed the grid could easily be mined from the Scottish coalfields.
I wonder whether the nuclear subsidiaries will enjoy the same facilities as the present SSEB and get a year's holiday from the rates? The Minister will be aware of my correspondence with him about how the SSEB has managed to take advantage of the rather curious provisions dealing with the rating of public utilities. On 25 May 1988 in one of the famous press releases to which my hon. Friend the Member for Carrick, Cumnock and Doon Valley has drawn attention, the SSEB claimed credit for contributing electricity to the grid from Torness in my constituency. In July 1988 it confirmed that it was putting 682 MW into the national grid. On 1 October 1988, however, the SSEB signed a certificate and submitted it to the assessor of public utilities in Scotland to say that it was generating nil at Torness, and hey presto--that ensured that it avoided paying more than £1 million in rates for the coming year. That is one way to fix the books in preparation for the privatised regime.
Much has been said about the fact that Scotland has a substantial excess of generating capacity over its peak demand and it is relevant to understand the background to that. I am acutely aware of that extra capacity because it has arisen since the construction of Torness nuclear power station in my constituency. When the decision was taken to go ahead with the construction of that nuclear power station there were many predictions of increased demand for electricity. There was also a general acceptance of the bland assurances given over the years that nothing could go wrong at nuclear power stations. Since then, one or two accidents have raised doubts about their safety record. Of greater significance to this debate is our experience of 10 years of a Government who have run down British industry and reduced the demand for energy despite the fact that we have the capacity to produce energy efficiently in Scotland.
A graphic example of the rundown of industry was the closure of the Invergordon aluminium smelter. I understand that we now import more aluminium than Invergordon could ever have produced, but in allowing
Column 232that smelter to close down the Government wrote off one part of the Hunterston power station. That is a curious way to manage our economy and our long-term energy policy.
Nuclear installations function in my constituency and in that of my hon. Friend the Member for Cunninghame, North (Mr. Wilson) and there is widespread public concern that those power stations must be run efficiently and safely. That concern will run through this debate. Much has been said about the cost of decommissioning nuclear power stations, but we should also consider the obvious additional costs of running nuclear power stations to the high standards to which it is imperative that they keep if we are to avoid the sort of accidents that have occurred abroad and, indeed, in Britain. Apart from the ongoing cost of running a power station and the cost of decommissioning such a station, there is also the cost of insuring against accidents at nuclear power stations.
Perhaps the Minister will say what provision has been made for insuring the operators of nuclear power stations in Scotland against the consequences of accidents, large or small. Will the parent company or the subsidiary company be able to indemnify people who may be affected by the emission of radioactive material or as a result of a serious accident at a nuclear power station? The House will not be surprised to discover that that is a matter of considerable concern to my constituents in the Torness area following what happened at Windscale in 1957, at Three Mile Island and, more recently, at Chernobyl. Things can go wrong and massive disruption and massive costs can result.
It would be useful if the Minister could tell us how the operators of the nuclear power stations under the new regime will be able to ensure that such costs can be met in all circumstances. Will the Government insist that the operators idemnify the people affected?
Mr. Home Robertson : Frankly, yes. In recent years I have put that on record several times. At the time when the decision was taken to construct Torness nuclear power station, there was increasing demand for electricity, there were credible forecasts of a need for a new generating capacity in Scotland and evidence was not publicly available, as it is now, of the possibility of serious accidents. Be that as it may, however, Torness nuclear power station has been built and commissioned and it would be absurd to try to turn the clock back now.
The people of East Lothian, Cunninghame, where Hunterston is located, and throughout Scotland are fighting to ensure that in the future the generating plants are operated safely to the highest possible standards. We must also ensure that we have the right economic climate to enable us to take advantage of the power potential in Scotland, whether that means the oil industry, the coal industry, hydro-electric power or nuclear power. Scotland has the capacity to be the power house not only for its own economy, but for the entire United Kingdom. What we require from the Government is the framework to make that possible.
Column 233television, stated that the then Solicitor- General's letter was leaked on the express approval and authority of the Prime Minister's private secretary and press secretary, Mr. Bernard Ingham? There seems to be a contradiction between what the Prime Minister told the House and what Sir Leon Brittan has said on record. The integrity of the Prime Minister is at stake--
Mr. Wilson : I should have been quite happy for my hon. Friend the Member for Walsall, North (Mr. Winnick) to proceed. I am sure that it would be gratifying for all Opposition Members if, at last, the chickens were coming home to roost for the Prime Minister's men. As far as the Prime Minister's Scottish men are concerned, once again we are having an important Scottish debate without the presence of one solitary Scottish Tory Member other than the Minister.
I do not wish to extend this debate long as it has already continued for longer than most of us expected. Although I am speaking from the Dispatch Box, the point that I wish to dwell on, while highly relevant to the new clause, relates particularly to a constituency issue of my own, to which reference has frequently been made in the debate--the proposed closure of Hunterston A nuclear power station in my constituency.
It is worth noting that the SSEB, in framing its announcement, was careful to talk of the "possible" closure of Hunterston A nuclear station, which is of the Magnox design and has been in operation for the past 25 years. I cannot help feeling--particularly when I look at the new clause--that Hunterston A and, by definition, the people who work there are caught up in a fairly high-powered game of poker in which the stakes played for are intricately involved with the privatisation of the electricity industry and what is to be done with the nuclear content. That is objectionable. The record of Hunterston A is second to none--it is the most efficient of the United Kingdom's Magnox stations. The record of its work force is also second to none, having given extremely loyal and diligent service for the past 25 years. I recently visited the Hunterston A station and was given absolutely no clue of any proposal to close it.
My hon. Friend the Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes) was absolutely right--the announcement was completely unexpected. I believe, as does the work force, that the station is but a pawn in the privatisation game, the outcome of which is not yet known. The real reason for Hunterston's closure, we are led to believe, is the increase in its operating costs, due particularly to British Nuclear Fuels' imposition of higher charges for the reprocessing of spent fuel.
The Minister, in his bland way, said that this was a technical matter and had nothing to do with the substance of electricity privatisation, but he has an obligation to say what considerations will be involved in the technical announcement contained in the new clause. The financial sums involved are truly enormous. The decommissioning of Hunterston A will probably cost about £250 million to
Column 234£300 million. Despite the questions that have been posed and partially answered in this debate, I still want a clear- cut statement from the Minister when he sums up about who will carry the costs of the decommissioning and about the relationship between the timing of the announcement of the possible closure of Hunterston A and the passage of the Bill through the House.
The logical consequences of the position of Hunterston A go far beyond that station and my constituency. As we understand it, the SSEB's concern, as a result of the high costs being charged by BNFL, is not primarily with Hunterston A but with the two advanced gas-cooled reactor stations, Hunterston B and Torness. As my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) pointed out, it appears from the evidence given to the Select Committee on Energy that the SSEB and its successor may be tied to a contract with BNFL which would impose exactly the same cost disadvantages on Hunterston B and Torness as those which led to the threatened premature closure of Hunterston A.
The Minister must say, within the context of new clause 6, whether the costs of decommissioning Hunterston B and Torness on account of a high-cost regime operated by BNFL can also be expected. He should say whether the story in The Scotsman of 8 March was founded in fact. Under an exclusive label, Chris McLaughlin reported that the tentative agreement reached between the SSEB and the Scottish Office was partly based on a review of the contracts that will govern the future relationship, after privatisation, with British Nuclear Fuels plc. Has a deal been made between the Government and BNFL on the relationship between the SSEB's successor and that company or is it possible, as predicted in the "Power in Europe" article published in the Financial Times, that continuing cost burdens will be imposed on Hunterston B and Torness in the form of high charges imposed by BNFL?
The Minister has a good opportunity today to take this matter out of the realms of journalistic theorising, leaked exclusives or the word of a "senior Scottish Office source" and give the House a definitive statement about the position. I need hardly say that the future of Hunterston B power station is of immense importance. It is of even greater importance to my constituency and that part of Scotland than Hunterston A, which may close within the next few years. As the Minister said earlier, we are talking about a decommissioning process which will continue for at least 100 years- -150 years has been suggested to me as the time scale involved before the core reactor can be removed from the Hunterston A site. We are talking about a time far into the future, and about continuing costs and implications for the communities around Hunterston A. I was surprised and disappointed that the announcement of this possible prospective closure should have come so unexpectedly, without rehearsal and with minimal notice to the work force and, so far, with so little information about the implications being given to the communities around Hunterston A. I want the relevant questions to be answered tonight. It is not good enough for the Minister to say that this is merely a technical clause. It carries on its back substantial financial and practical implications for Hunterston A in my constituency, for nuclear generation in Scotland and for electrical generation throughout Scotland. The Minister should take this opportunity to give us some answers.
Mr. Lang : On the small peg of this technical new clause it has been possible to hang quite a wide-ranging debate on the Scottish electricity industry, particularly in the context of nuclear energy, and I make no complaint about that. It has been a useful debate, in which a number of valid points have been made, with which I shall try to deal. One or two of the looser points may, of course, be picked up in our later debate.
I will refer first to a group of points which may be characterised as involving financial aspects such as debt and write-off, to which the hon. Member for Glasgow, Garscadden (Mr. Dewar) and others have referred. Listening to the hon. Member for Carrick, Cumnock and Doon Valley (Mr. Foulkes), I was struck by the feeling that when we talk about debt some Opposition Members seem automatically to think that we are talking about something disastrous and unsatisfactory which is the result of incompetence, profligacy or some kind of rake's progress arising from unprofitable trading. In fact, we are talking about debt that has been incurred deliberately for a specific purpose, is being re-serviced and will be repaid. Such debt is to provide for investment, and it is investment in assets that has put the Scottish industry in such a strong position as it faces up to privatisation. It clearly makes sense for the successor companies to have continued access to the national loans fund while they are still wholly owned by the Crown in the period leading up to flotation. The current limit of £3 billion on the boards' borrowings will be maintained. The two Scottish boards currently have debts of around £2.8 billion, arising from successive investments in new plant, most recently at Torness. About £2.3 billion of the debt is incurred by the SSEB and about £500 million by the north board. That investment puts the industry in Scotland in a strong, healthy position to move into the private sector, and removes uncertainty about its prospects.
The hon. Member for Garscadden asked about the European Investment Bank borrowings and other debts. Those loans will be redeemed and converted into national loans fund debt, available at a rate of interest more attractive than from commercial sources. I expect the industry to be no worse off as a result in terms of the interest burden prior to capital restructuring.
We shall first establish the Scottish nuclear company on a wholly equity- funded basis in the ownership of the two Scottish electricity companies. We shall then go to establish an appropriate capital structure for those two plcs by converting some national loans fund debt into Government equity in the form of share capital and reserves. The rest will be converted into debentures. Such capital restructuring is an established business practice and will result in a combination of debentures, issued share capital and reserves which will replace the Scottish industry's extinguished liabilities pound for pound in the companies' books. In the meantime, the Government will continue to fund the industry's requirements for capital from the national loans fund.
We shall go on to dispose, on flotation, of part or all of the Government's equity by selling shares in the Scottish electricity companies. The amount that we obtain in proceeds will depend on market conditions at the time, and may or may not cover the nominal value of shareholders' funds invested in the business. What is important is that the shares on flotation are successfully marketed at a price
Column 236above their nominal value. We shall choose the capital structure best calculated to maximise returns to the Exchequer and hence to the taxpayer.
Debt will not be written off in the sense of obliteration. Here I repeat a point that was discussed more than once in Committee--this measure will not discharge the obligation to repay. It is not like a bankruptcy or liquidation, in which payment is made in the form of only a few pence in the pound. In the establishment of the capital structure of the companies prior to flotation, debt will be replaced by a mixture of debt and equity geared to market requirements. The sums owed to the NLF will be replaced pound for pound by debentures, share capital and reserves.
The hon. Members for Garscadden and for Gordon (Mr. Bruce), and one or two others, asked whether the cost of decommissioning nuclear stations would be paid for by the consumer or by the taxpayer. I consider it entirely appropriate for the customers to pay the knows costs of generation, whether nuclear or otherwise, as they have already done in relation to Hunterston A, and the SSEB has made provisions for decommissioning and for waste disposal.
We recognise, of course, that long-term changes in costs should not be met in full by future consumers. That is why clause 90 and schedule 12 allow a Government contribution. We have consulted closely with Donald Miller and his colleagues in the nuclear industry about uncertainties associated with some aspects of nuclear back-end costs, and the concerns to which they may give rise following privatisation. The powers that we have taken in clause 90 and schedule 12 have been drafted in the light of those consultations and are designed specifically to provide a framework to meet those concerns. The chairman of the SSEB shares my confidence that the Scottish industry, including its substantial nuclear assets, can look forward to a bright commercial future. He has been closely involved in discussion of the proposals, and has recently indicated his satisfaction with the progress of negotiations, although clearly a number of points of detail remain to be resolved.
Mr. Dewar : Is the Minister saying that since the original consultation which led to the drafting of the Bill no further reassurances, agreements or guarantees have been given that are unknown to the House? Is he saying that there is nothing in the reports that have appeared in The Scotsman about further reassurances and undertakings on what he elegantly calls "back-end costs"?
Mr. Lang : I think that I can reassure the hon. Gentleman. We have continuing contacts at both official and, occasionally, ministerial level with the chairmen of both the north and the south boards. I had a meeting with both chairmen only last Friday, when they signed the agreement to replace the joint generation agreement. There has, however, been no secret deal, no special patched-up arrangement, that has not been made plain to the House or provided for in the Bill. Clause 90--which I seem to recall was clause 88 in an earlier version--has been in the Bill since its inception. Any suggestion of a private arrangement or hidden agenda is entirely misplaced. Like the nuclear industry in the south, the Scottish industry already makes substantial provisions for decommissioning, waste disposal and other anticipated costs. At present, the SSEB has some £764 million
Column 237provided for in that context and further provision of about £58 million for short-term debts. It is significant that last year it was able to adapt without great difficulty to the changes resulting from Chapelcross and the increased costs that that brought, as well as the costs arising from a change in the reprocessing charges of BNFL. The powers in the Bill provide a backstop whereby the Government can meet unexpected, uncontrollable and substantial cost escalations arising well after the relevant electricity has been consumed, which might impose an unwarranted burden on the industry's future. It is, however, the industry's responsibility to meet the full known costs of nuclear generation and to make appropriate recovery from today's consumers.
"Neither side was prepared to reveal details of the talks, but the key element is understood to be assurances on the contracts which fix ceiling levels on the amount of any unforeseen rises in nuclear costs and in the contracts which will govern the relationship after privatisation with British Nuclear Fuels Limited."
Is that true or false?