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Column 671Question accordingly negatived.
No. 163, in page 62, line 42, leave out subsection (3). No. 167, in page 63, line 4, leave out paragraph (b).
No. 157, in schedule 13, page 115, line 21, leave out sub-paragraph (3).
Government amendments Nos. 91 and 75 to 78.
Mr. Morgan : This group of amendments relates, in the main, to restrictive trade practices. They raise the question of just how deeply the Government have thought about whether they have produced a competitive regime, and, if they have produced a competitive regime, whether it will be up to them to regulate it or whether it might be up to the European Community as well. Obviously, there is a fairly fluid boundary between the two jurisdictions on matters relating to competition. It certainly occurs to us, having read the comments made by bodies such as the CBI, that there may well be problems for the Government arising from the regulation, by the EEC, of some of the little peculiarities of this Bill. We are thinking particularly of the nuclear levy. Would the Government have a leg to stand on if someone challenged them on that at the European Court of Justice because they were in breach of article 85 by compelling people to buy more expensive power than they wanted? The CBI made that point and we entirely agree that the Government need to persuade us that if the large industries with the resources--
It being Ten o'clock, further consideration of the Bill stood adjourned.
That, at this day's sitting, the Electricity Bill may be proceeded with, though opposed, until any hour.-- [Mr. Durant.]
As amended, further considered.
Mr. Morgan : The CBI spoke of "the nuclear millstone". It wants to be free of that and the Government must address the matter. Consumers, particularly in the north and in south Wales, could well take the Government to the European Court and challenge them that the north subsidises the south on electricity prices and will do so even more under the Bill because of the increasing burden of the nuclear millstone. Have the Government thought about that?
We wonder how the Government will handle a proposed foreign takeover of any of the area boards or generating boards. Will not the EEC disallow the Government from keeping the essential sinews of the electricity industry, which we believe must remain in British hands? The water industry is in a similar position. If France or any other European country suddenly took a fancy to a British area board, as happened with the water boards, could the Government stop such a foreign takeover, given the strictures on restrictive trade in articles 85 and 92 of the treaty of Rome?
Mr. Michael Spicer : I assure the hon. Gentleman that we have thought about the competitive regime implied in the Bill. That is, indeed, when we introduced the Bill. It will have a dramatic effect in ensuring competition in the industry in future.
The amendments seek to remove all exemptions to restrictive agreements. We cannot agree to that because there must be some such agreements. The industry could not exist without, for example, agreements on emergency planning or pooling arrangements. We have had discussions with the Commission on the hon. Gentleman's question about the EEC. We have absolutely no reason to believe that there should be any problems. We are in the forefront of all European countries in providing a competitive regime for the electricity industry. We shall keep the EEC informed about any future developments. On that basis I hope that the hon. Gentleman will withdraw his amendment and that the House will accept the Government amendments in this group.
In the EEC, if one calls something public infrastructure and treats it as such, one is allowed all manner of exclusions from the impact of articles 85 and 92. However, if one calls something a straight commercial business and says that one wishes to return all EEC loans because one wants to be on a complete commercial footing, as the Government do, one is in trouble. Therefore, many questions must be answered before we can be assured that the EEC will not find it necessary to interfere on a large scale with the industry. The Government have not thought this through.
Amendment, by leave, withdrawn.
Amendments made : No. 91, in page 117, line 32, leave out sub-paragraph (1)(iv).
No. 75, in page 128, leave out lines 11 to 14.-- [Mr. Michael Spicer.]
Amendments made : No. 76, in page 129, line 22, leave out sub-paragraph (1) and insert
(1) Where any application made under section 2 of the Electric Lighting Act 1909 or section 35 of the Electricity (Scotland) Act 1979 is effective on the day appointed for the coming into force of section 33 of this Act--
(a) the application shall have effect as if made under the said section 33 modified for that purpose by the omission of subsections (2) and (2A) ;
(b) anything done before that day in relation to the application (whether under the said section 2 or 35 or under section 33 or 34 of the Electricity Act 1957) shall have effect as if done under the corresponding provisions of Schedule 8 to this Act, and
(c) the provisions of Part I of this Act shall apply accordingly.'.
No. 77, in page 129, line 43, leave out sub-paragraph (1) and insert
Column 673(1) Where any application made under section 10(b) of the Schedule to the Electric Lighting (Clauses) Act 1899 is effective on the day appointed for the coming into force of section 34 of this Act--
(a) the application shall have effect as if made under the said section 34 modified for that purpose by the omission of subsection (2) ;
(b) anything done before that day in relation to the application (whether under the said section 10(b) or under section 32 or 34 of the Electricity Act 1957) shall have effect as if done under the corresponding provisions of Schedule 8 to this Act ; and
(c) the provisions of Part I of this Act shall apply
accordingly.'.-- [Mr. Michael Spicer.]
Amendment made : No. 78, in page 144, line 45, column 3, leave out lines 45 and 46 and insert Section 44.'.-- [Mr. Michael Spicer.]
Order for Third Reading read--Queen's and Prince of Wales's consent signified.
It is probably impossible to present new considerations for the deliberations of the House that have not already been exhaustively discussed at Second Reading, in Committee or on Report. However, I would wish briefly, in order not to detain the House, to emphasise that the Government believe that the deliberations on the Bill have clearly and firmly established the basic propositions on which the Bill was originally commended to the House.
First, we believe that the Bill is in the interests of the electricity industry. It is significant that the industry agrees with our observation. Perhaps the most important consideration from the industry's point of view is that in future the investment needs and other crucial decisions affecting the electricity industry will not be subject to Government or to politicians of any party. That will place the electricity industry in the same position as other industries throughout the United Kingdom. It can only be beneficial that those aspects of investment and other matters are determined by the industry. I believe that that explains the enthusiasm of the people who work in the electricity industry for the prospects that privatisation will bring about.
Secondly, I believe that the Bill has clearly been shown to be in the interests of the consumer. That is central to the difference between the two sides of the House. Whereas the Labour party, and those who support its point of view, believe that if one cannot have perfect competition, one should be satisfied with perfect monopoly, the Government believe that it is possible to introduce substantial elements of competition within the electricity industry, that it is in the interests of the consumer to do so and that the Bill will bring that about.
There will, therefore, be competition in generation, there will be choice for bulk purchasers of electricity and there will be opportunities for exporters, especially for the Scottish electricity industry, which I believe have justified the support for the Bill. The Bill is especially important for Scotland where the nationalisation of the electricity industry some 40 years ago meant--as do all other forms of nationalisation in
Column 674Scotland--the loss of control in Scotland to the Government of the day, whichever Government that might be. One never ceases to be amused, as well as unsurprised, at the inability of the Opposition to understand that argument.
In future the needs of the Scottish electricity industry will be decided by the management of that industry in Scotland, which I believe is of significance. In addition, by the privatisation of the SSEB and the hydro board, we will create two of the largest Scottish companies, which will give a major boost to the development of the Scottish private sector. We will see also exciting opportunities for consumers, employees and financial institutions in Scotland to acquire a significant stake in the industry.
There are fundamental differences between the Government and the Opposition. The Opposition stand for monopoly. They stand for continuing monopoly that they express themselves content with and anxious to preserve. The Opposition also appear to believe that there is a need not for simply a regulatory structure to protect the public interest, but for politicians and for Governments to have a continuing right to interfere in the fundamental decisions affecting this industry, although they have no comparable right in other industries that are crucial to our national economy.
These are crucial issues of principle and I believe that during the debate my right hon. and hon. Friends, who have been concerned with the detail of the Bill, have manifestly shown the desirability of the Bill and, indeed, the benefits that it will bring to the public throughout the United Kingdom. It is on that basis that I happily commend the Bill to the House.
Mr. Blair : As we are preparing to vote on the Third Reading of the Electricity Bill it is instructive to remember the words of the Secretary of State for Industry who, six years ago, moved the Telecommunications Bill to privatise British Telecom. The Secretary of State for Industry then is the Secretary of State for Energy now, the peripatetic right hon. Member for Hertsmere (Mr. Parkinson). I gather he is now occupied as a travelling salesman somewhere in the Soviet Union. At that time he set up what he believed would be the guiding principle in the privatisation of British Telecom. He promised :
"It will give customers the choice between different suppliers of apparatus, different suppliers of services and, increasingly, different networks."
It did not do any of those things. He said of British Telecom : "I am convinced that to change British Telecom ownership will bring about a major improvement in BT's accountability."
It has not. Finally, he said :
"We offer the millions of BT customers a newly enshrined set of rights"-- [ Official Report, 18 July 1983 ; Vol. 46, c. 27-38.] Tell that to the thousands more who, each year, complain about the standards of service that they receive.
The truth is that every promise that has been made tonight for the Electricity Bill was made in 1983 for the British Telecom Bill. The Government were wrong then and they are wrong now. We have established that for the consumer, contrary to what the right hon. Gentleman has said, there will be no choice of area board, no choice at point of service. There will be little competition ever in this industry and no competition for at least 10 years.
Column 675We have shown that the basic security of supply is at risk because, as Mr. Baker said and the Secretary of State could not deny, it will not be the duty of National Power or PowerGen to keep the lights on after privatisation, although they are the only people who will be able to fulfill that duty of supply.
We have learnt that the area boards with a high proportion of industrial customers will be vulnerable to takeover and bankruptcy if they lose major customers from the system.
We have revealed that the nuclear industry, quite apart from any other section of the fuel industry, will be ring fenced, given special protection against risk and underwritten by a special tax paid for by the consumer and the taxpayer who will still be liable for the costs of decommissioning even after losing the profit from the industry.
We know that the national grid, the transmission system, itself a monopoly to be owned by the area boards, will be privatised although no rational case has been made for its privatisation at any time during our deliberations.
We have exposed the fact that the costs of flotation will be huge and that they may amount to as much as £25 for every household in this country. All that for a privatisation that the people do not want, the nation does not need and that is now incomprehensible in any terms except as a doctrine driven by prejudice.
Mr. Alfred Morris (Manchester, Wythenshawe) : Is not the Government's whole stance in relation to this Bill reminiscent of Oscar Wilde who said, after the first night of one of his plays, "The play is a great success, but the audience a failure" ? Although the Government are convinced by their own propaganda, has not the Bill been overwhelmingly rejected by the electorate and therefore by the consumers?
The Government may get their majority tonight in the House, but they have failed miserably to persuade the majority of people in this country that the proposal is good. At the next election they shall pay the penalty for that misjudgment.
Mr. Rost : I congratulate my right hon. and hon. Friends on the courageous manner in which they have introduced this radical Bill and on the skilful manner in which they have handled this complicated and technical reform.
I welcome the opportunity for competition. Evidence already exists of area boards shopping around and contracting or arranging to contract for cheaper electricity than they now pay the CEGB to supply. The east midlands board, for example, is already offered cheaper power than it now buys from the CEGB. I welcome the change of heart on the part of the CEGB, which is already having to rethink its energy strategy and abandon its traditional plans of electricity only large coal-fired stations in favour of lower-cost electricity production. It has had to turn to combined cycle gas turbines and it has realised that, in future, it will have to sell electricity in a competitive market.
I welcome the nuclear clause because for the first time, by ring fencing the real cost of nuclear energy, it will concentrate the minds of the nuclear industry, which will
Column 676have to become competitive if it wishes to have a future unprotected by a subsidy which I regard as transitional. I welcome the effect that it will have on the coal industry, which will also have to realise that it must improve its competitiveness if it wishes to sell its products. The country will no longer be handicapped by high-cost coal and the high-cost electricity which results from it. I welcome the opportunities of wider share ownership, particularly employees shareholding, that will result from the legislation. I welcome the opportunities that will come to the new technologies for electricity production, which the CEGB has preferred to ignore and which will produce cheaper power--the clean coal technologies, the combined-cycle gas turbine. Those will exert downward pressure on prices, as distributors have the competitive incentive to source their supplies from lower-cost electricity. I welcome the incentives particularly for the combustion of municipal refuse, which can be used for fuel instead of land fill and causing pollution. I have only one regret, and one reservation, which is that I hope that my right hon. Friends will look again at the need to increase the powers to oblige privatised production companies to sell off their surplus power stations, of which they are hoarding more than 100 at the moment-- most of them near urban areas. These redundant power station sites are ideal for the private producers, who want to provide competition. It is important that those sites should be made available on a competitive basis.
My regret is that the Government have rejected amendments--including my own --that would have strengthened the obligation to produce electricity more efficiently and less wastefully. That is a missed opportunity, which would have encouraged more efficient electricity production, more city combined heat and power district heating, reduced the emissions of greenhouse gas CO whilst, at the same time, improving energy efficiency and reducing fossil fuel burn. The United Kingdom has the highest CO release of fossil fuel from energy production per head of population in Europe. We burn more coal and, at the same time, we use only one third of what we put into power stations to convert into electricity. We throw away, in the form of hot water, the other two thirds of the fuel--which other countries increasingly use for space heating, so displacing fossil fuel burn. We should also do that.
The Government could have given a lead--I hope that they will reconsider this--in promoting more energy efficiency by reducing the greenhouse gases and, at the same time,. reducing the threat of global warming. I predict that within two or three years, because of international and EEC pressure, and the need to reach agreement to reduce CO emissions globally, amendments will be made to the Bill in the form that some of us have suggested. I hope that hon. Members of the other place will look again and attend to this most important matter to strengthen the Bill in a way that will give credit to the Government in the longer term.
I hope that the regulator, when appointed, will prove to be as effective as the regulator of British Gas--the director general of Ofgas. He must be a person of such calibre because his
responsibilities will be immense and he will determine whether the Government's proposals for competition succeed or fail.
The Bill offers a long overdue restructuring of the industry. It will offer the opportunities that are desperately
Column 677needed for competition and innovation. It will provide a better deal for consumers and for industry, which has complained for far too long about too-high energy costs. It will therefore benefit the economy as a whole. That is why I regard this legislation as far more important than any other privatisation measure that we have introduced over the past decade. Indeed, I regard it as the most significant and radical measure of this Parliament.
In the longer term, this reform will benefit the whole economy and its competitiveness far more than any other measure that we have introduced.
As we have debated the Bill it has emerged that the consumer has been conned by the idea of the privatisation of the electricity supply industry. On any objective analysis of our discussions, it is certain that the consumer will pay more because of the measure. But that is not the end of it : the taxpayer will pay a price too. It has also emerged in the course of our debates that private capital is not interested in building thermonuclear power stations unless the Government are prepared to give some guarantees. So the Government are presenting private capital with a cheque to try to induce it to build thermonuclear power stations. Only time will tell whether the cheque is blank.
The Secretary of State for Scotland talked of the great freedom that the Bill would bring about--freedom from interference by the Government. He said that private capital and private industry would determine events. The Bill needs another title--it is not only about the privatisation of electricity ; the right hon. and learned Gentleman spoke of the abolition of the Department of Energy. That means the abolition of the pursuit of an energy policy. I predicted six months ago that it was planned to abolish that Department. Ministers and civil servants will become redundant as a result of this Bill. It is a pity that the Under-Secretary of State, who has worked so hard on the Bill, may be one of its casualties. The Conservative party was responsible for setting up the Department of Energy. Someone told me the other day that the Conservatives are so busy changing the policies and structures of previous Governments that they are now turning in on themselves and beginning to change policies and programmes that they instituted. The abolition of the Department of Energy would be a tragedy for the country. The Government do not even pretend that there should be an energy policy. The signal to abolish the Department of Energy is the signal that energy policy will be left to free market forces. It has been clear throughout the passage of the Bill that the people reject it. We heard earlier that as many as 70 per cent. of the electorate opposed the Bill. The Government are ignoring the wishes of the people. They are using their majority to drive through their dogma.
The Bill is being speeded to the other place. The Government are not sure how it will work and to some extent it is a stab in the dark. The Government are passing the Bill with a prayer in their heart. Let us hope that lights do not go out as a consequence of the Bill. I hope that the other place will look closely at it because it is not in the interests of the British people.
Column 67810.25 pm
Mr. Malcolm Bruce : As the hon. Member for Midlothian (Mr. Eadie) has said, we are now speeding the Bill to the other place. The other House will make amendments that we have failed to have accepted. Even though the Bill is ill-thought out, the Government have accepted virtually no modifications even after 156 hours in Committee and three days of debate in the House. Opposition Members are extremely frustrated that Ministers are not prepared to acknowledge that they have lost many of the arguments and have had to force their will by way of the votes.
I have made it clear from the start that for many years I have not supported the prevailing status quo in the electricity supply industry. The one area in which I have had some possibility of agreement with the Government is in the analysis that restructuring is necessary. It is much more sensible to liberalise before privatising. That is better than creating a duopoly that will not provide effective competition and assuming that an untested carve-up will produce good results for the consumer, although all the evidence suggests that it will not.
The Government have resisted attempts to ensure that the Bill will give high priority to the promotion of energy conservation and reduce the impact of the energy supply industry on the environment. In spite of their protestations outside the House, the Government have resisted every amendment on those subjects. The industry is about to be given to a private sector that has no responsibility to increase energy conservation or to reduce the impact of the industry on the environment. That is a damning indictment of the so-called environmental commitment of the Government. Such a commitment does not exist and to them the pursuit of profit is far more important than concern for the environment and the industry's impact on it. The way in which the Government have been forced to fix the nuclear component of the Bill has made a mockery of effective competition. The nuclear industry will have to accept that at some time in future it and every other sector of the industry will have to stand up and be counted within a competitive environment. The Government know, because otherwise they would not have structured the Bill in the way that they have, that if that sector of the industry were made to do that it would fall flat on its face. Nobody wishes to invest in that sector. In spite of all the distortions and the fixes that the Government have put into the Bill, all the signs are that the City is still not interested in putting money into the nuclear industry. The Government have the audacity to lecture people inside and outside the House about free enterprise and the market economy. Yet they are effectively saying to the City of London and the public at large that the nuclear industry will be offered on the basis that the private investor will take the profits and the taxpayer will underwrite the risk. How can the Government continue to claim that they believe in a free market when they are creating an industry more featherbedded than any other sector of the economy? That is the most absurd component in the Bill.
In a rare contribution to the debate on the Bill, the Secretary of State for Scotland said that privatisation will be good for Scotland. Apparently the first good thing that Scotland has got out of it is an increase in electricity prices higher than anywhere else in the United Kingdom.
Column 679In Committee we told Ministers that the two specific requirements in the Bill that tariffs should be based on average United Kingdom prices and that, effectively, prices should operate on the basis of return on capital will mean that prices in Scotland will increase faster than anywhere else in the United Kingdom. Ministers were not able to deny that. That will be particularly true if the Scottish supply industry is not able to dispose of its substantial surplus activity, which it will have difficulty in doing. In those circumstances, the people of Scotland will experience the opposite effect over the next few years as their electricity bills rise well above the United Kingdom average, with consequent increases in hardship.
The Government have neither succeeded in persuading the House of the virtues of their argument nor, more offensively, even attempted to do so. They have laid back on the size of their parliamentary majority and treated the Opposition with contempt. We can take that because we have become used to it, but, far more important, the Government have treated the British people with contempt. They have shown not the slightest interest in the representations that have been made by a wide variety of interest groups. They have not won any of the arguments, although they will win the vote tonight. They have taken a step that will have to be corrected at a later date by a future Government.
I hope that the prospectus will contain a notification that if there is a change of Government, there will be a change of environment, the regulator will effectively regulate, and real competition will be brought into the industry, rather than the measures that the Government are proposing.
Mr. Tom Cox (Tooting) : The Third Reading of the Bill will see the end of a policy for the electricity industry, the overriding priority of which was to keep the supply going. We have heard a great many statements about how wonderful a private electricity industry will be. No one ever writes to me saying that. On the contrary, I have received an enormous number of letters from constituents who are extremely concerned, as have hon. Members who have spoken in the debate. I am sure that even Conservative Members have received such letters.
We should always remember that, since the formation of the state-run electricity industry, it has met the needs not only of the great cities but of the rural areas. When there were privately run companies, the needs of many of those rural areas were not met. Electricity was not supplied to many of them not because they did not want it but because the companies were not prepared to pay the costs of bringing the supply to them. Now the criterion of profit will be put first.
Even at this late stage, it is wise to comment on the remarks made by Mr. John Baker, the designated head of National Power. He said : "The job isn't about shouldering national responsibilities but about meeting contracts, improving profitability, about seeking opportunities, but only exploiting them if it pays to do so We need to define ways of running our power stations so that we can exploit our power contracts profitably. Our task will not be to keep the lights on whatever the cost".
That should be made known to the public.
I have read the Official Report of the Committee sittings, and have listened to some of the debates in the House. We have heard much about "consumer interests" and "competition". It all sounds wonderful, but there is
Column 680nothing in the Bill to ensure that there is competition. Prices will not even stabilise, let alone go down. They will increase. The Government imposed increases in 1988 and 1989, and they will be the criteria that the private companies use.
What is most tragic is that, although we are a rich nation, we cannot use our resources without planning over the whole range of electricity policy. But where is any long-term planning provided for in the Bill? Where is real public accountability or consultation enshrined in the Bill? Despite what the Minister has said, nothing of the sort is to be found in it.
I have raised only some of the vital issues that should have been discussed. As those who were members of the Committee that considered the Bill have said, long-term planning, public accountability and consultation were not really discussed in Committee. The great tragedy is that in the long term it will be the British people who will pay for the folly of the privatisation of our great electricity industry. It was highly profitable when it was state run and it met real needs, whether in large cities or small rural areas. The industry met the needs of the British people. They will not be met when the Bill is enacted.
Mr. Hardy : I hesitated before I decided to speak once again on the Bill. It was the contribution of the Secretary of State for Scotland that persuaded me that I should make some brief comments. The right hon. and learned Gentleman said that the electricity industry wanted privatisation. Those who are at the top of the industry, who may see substantial increases in their salaries, may want it. With the contacts that I have in the power industry, I have not detected any wish to embrace privatisation.
The Government may feel that they can persuade those who work in the industry to accept privatisation when they are offered shares, but more and more of them have come to the conclusion that the offer will leave them with less than 1 per cent. of the equity. Relatively shortly after the shares have been allotted, we shall find that there are larger shareholdings in Tokyo, Bonn, Ottawa, New York and all the other financial centres of the world than among those who work in the industry who do not want privatisation.
As Conservative Members have boasted, this is the largest privatisation that the Government have proposed. Conservative Members to a man have trooped through the Government Lobby in support of it. Not one of them has ever asked how much the country will get for the privatisation. The Minister knows that the net asset value of the industry is well over £14 billion. He may be able to reduce that figure by writing down capital, but when the industry is sold it will be lucky if the price is half of its real value.
It was said earlier today that we have already sold the family silver and that now we are selling the family gold. Unfortunately, when the gold is sold it will be at the going rate for silver, not for gold. The interests of the nation will be gravely disregarded. The value of Britain, in terms of the worth of the electricity industry, will be dramatically reduced. The bargain for the consumer will be a bad one. Indeed, the consumer is already paying far more than he should as a result of the sweetening exercise that has taken place since last year.
Column 681The Government will secure the Bill's passage through Parliament, but over the next two years the British people will realise that they have been robbed. They will realise that their assets have been disposed of cheaply. They will understand that to a large extent profits will accrue for only a small minority. The guarantee of supply, which has been the proud boast of the industry in public hands, will not be guaranteed or sustained in the years ahead. The Government will regret the enactment of the Bill, and from that point of view I suppose that we have some cause for rejoicing. The people have begun to understand that what the Government are about is not in the long-term interests of the nation.