House of Commons Hansard Debates for 24 Jul 1989

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will be liable. The price that we pay as taxpayers and consumers is, no more and no less, the price of saving the Government's face. I must make it clear that we wholly repudiate the notion that the Government should be allowed to enter into an open-ended agreement for the public subsidy of a private sector company. We do not regard the introduction of the amendment as a proper exercise of ministerial discretion.

Mr. Malcolm Bruce (Gordon) : Today's statement has sharpened the purpose of the amendment and for many outside it will be put into sharp focus the commercial and safety risks associated with nuclear power. During the past 15 years the Government have had an incredible record of misinforming the public about the case for nuclear power. It is therefore difficult to see how any innocent speculators can be reassured by the Government's admission that the Magnox stations are too big a risk to be privatised, but that they should not worry as the Government will underwrite the risks of the other nuclear power stations. People are supposed to be reassured that those stations do not suffer the same problems of uncontrolled costs and environmental complexities as the Magnox stations. We have heard it all before and no one should take the Government's word about nuclear power. Over the years the views of many of us have been vindicated. Throughout the passage of the Bill we have given the Government the benefit of our advice, but they have refused to take it even though, at the last gasp, we have been proved right and they have been proved utterly wrong.

The amendment is an open cheque as it is an attempt to get the House to accept that the private sector, which will run the nuclear power stations, should have unlimited access to taxpayers' money to cover the cost of its commercial mistakes, engineering failures, the difficulties associated with reprocessing, however unpredictable, or any other environmental consequences of the industry's activities. I hope that the Minister can tell us what other part of the private sector of the economy has such cast- iron, gilt-edged and open-ended guarantees. If such an amendment had been tabled by an Opposition party to cover any other industry it would have been ridiculed and condemned by the Government. Here they are, however, asking the House to accept a Lords amendment that will provide such guarantees. The Secretary of State told us that he has only just discovered that nuclear power is more expensive than people thought. Many of us could have told him that a long time ago if he had been prepared to listen.

Mr. Rhodri Morgan (Cardiff, West) : The right hon. Gentleman has moved rapidly.

Mr. Bruce : That is true. The right hon. Gentleman has told us that it has just become apparent that the cost of reprocessing is escalating at an unprecedented rate. Those of us who study the industry could see that coming and, in the circumstances, the escalation in costs is not entirely surprising.

It is not just a matter of problems associated with reprocessing as other changes are taking place. The hon. Member for Sedgefield (Mr. Blair) mentioned Baroness Hooper. She said that risk was being shared in such a way

"in areas which are not subject to the control of the nuclear operators"

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That underlines my point about the amendment being an open cheque. She also said :

"We must look very carefully at this area to see whether we can give greater certainty to the investor and the public that the Government will meet their side of the deal. Therefore, at Report stage we intend to table an amendment to Schedule 12 to enable the Secretary of State to enter into binding commitments in this respect."--[ Official Report, House of Lords, 19 June 1989 ; Vol. 509, c. 20.]

That quote sums up the Government's attitude. They are much more concerned about the potential investor than they are about the best strategic way in which to run the industry or about meeting the public's concern about nuclear power.

The cost of reprocessing has escalated and is continuing to escalate dramatically. What happens if the cost of reprocessing makes nuclear power stations unviable? Today's statement does not make any difference. The entire cost of the lost capacity would fall on the taxpayer ; there would be no risk to the shareholder. What would happen if Sellafield or THORP-- the thermal oxide reprocessing plant--were closed on safety grounds? As a consequence the Magnox power stations would have to cease to produce. Who would bear the cost of that? Who would find the replacement capacity? The answer is that the taxpayer would bear the cost. To pretend that normal risk analysis or risk management would operate is an extraordinary distortion.

There is evidence to suggest that my theory is not just a fanciful concern. At the Hinkley inquiry the National Radiological Protection Board said that evidence of recent years suggested that the acceptable radiation dose had been set at too high a level. It suggested that the level should be reduced to a fraction of the current level. If what the board is proposing were introduced, it would mean that about one third of the employees at Sellafield would be exposed to radiation levels above the safety level projected by the board. The Minister must acknowledge that, if that is so, it is difficult to see how Sellafield or THORP could continue to operate. Already they have been threatened with closure, and if that happens the consequences for the taxpayer will be phenomenal.

Earlier, the Secretary of State tried to impugn the Labour party's commitment to the coal industry, and what it has cost the taxpayer, and I suppose that the Opposition's commitment is fair game. But what the Government are proposing is potentially a far greater commitment than that to the coal industry. The Bill is already committed to costs of more than £7.5 billion, and they go up by about 20 per cent. every time it returns to the House. I imagine that there will be numerous orders in the coming years on occasions when the Government come back to the House to seek further consent to increase borrowing to cover the costs of decommissioning and rising reprocessing charges.

Until recently, not many people suggested that we would simply abandon a decommissioned nuclear power station in a concrete shell for 100 years. Interestingly, the industry has tried to make that sound like an acceptable proposition, but I do not think that it will prove acceptable to have a decaying nuclear power station--monitored though it may be--wrapped up in concrete as a monument looming over people's communities. People will want total decommissioning ; they will want stations removed ; they will want land to be freed from the blight put upon it

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Mr. A. J. Beith (Berwick-upon-Tweed) : Will not that be especially true in cases in which the generating board has its eye on greenfield sites and beauty spots like Druridge bay in Northumberland, where there will be not only a building but a structure that will last for 100 years?

Mr. Bruce : My hon. Friend raises a pertinent point. This factor will be used by objectors in future planning inquiries into the implications of building nuclear power stations. No longer will the industry be able to say--however unacceptable even this might be--that it is a question of a 25 or 30-year cycle, and then the structure will be removed. People know that it is so difficult to succeed in planning applications that one fades away, then another comes along, followed by another. My hon. Friend's point was a fair one : many communities will find it wholly unacceptable that a piece of land is likely to be frozen and out of use for up to 200 years. At least with a conventional power station, they know that it can be removed and that the site can be levelled within a generation or a generation and a half.

All those factors will affect the cost and liability of the industry. They will make many people reluctant to invest in it. We are faced with this prospect because of the consistent resistance of the City and other quarters to the saleability of a private electricity company based on nuclear power, and on Magnox reactors in particular. A poll published recently showed that about 17 per cent. of the population said that they might be willing to buy shares in the privatised electricity industry, but on closer questioning, more than half of those said that they would not buy shares if they included a nuclear component.

The Secretary of State may have had the worst of both worlds. He has failed to remove nuclear power altogether from the privatisation, but he has removed enough of it to tell these people that their judgment about the nuclear power industry was right and that an investment that requires them to buy into it is likely to be difficult--except that the Minister will be able to wave this proposal in front of them and tell them that they will make a profit while the taxpayer bears all the risk. The Government have signed up a wonderful deal for the investors. That is dishonest and immoral and it represents a principle that the Conservative party would not defend in any other context. It is the worst sort of double standards and double dealing to be brought before the House on this matter. 6.15 pm

The public should share my view and, if they have any sense, stay clear of the industry, and not only because it is not necessarily a sound investment : it is a bad risk with which they should not wish to taint their hands.

The Government are asking for an open-ended commitment which will leave investors feeling uncomfortable, which will not satisfy public concern and which will underline the fact that nuclear power should have stayed in the public sector. Surprisingly, the hon. Member for Bedfordshire, North (Sir. T. Skeet) is not in his place ; I should have thought that he would be anxious to contribute. He said from the outset that nuclear power should be kept in the public sector, as did the CBI. Many of us who opposed the privatisation recognised that it would have been tidier without the nuclear industry. It is extraordinary that the Government have not even been prepared to accept good advice either from the Opposition or from their own Back Benchers. We believed that,

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although privatisation should not go ahead, without the nuclear industry the argument for it could stand on its merits.

The Government have conspicuously failed to realise that. Their proposal involves a blank cheque which will mean, over time, that the industry will cost this country, in subsidies from the taxpayer, more than the coal industry has done to date--and by a substantial margin. It will do so in circumstances that utterly destroy the rhetoric for privatisation. This is a dishonest piece of legislation, of which this amendment is the most dishonest part.

Mr. Alan W. Williams (Carmarthen) : I find it strange that we are debating schedule 12, in view of the Government's statement this afternoon. As Magnox reactors have been removed from the intended sale, I should have thought that at least half the problem of decommissioning has been removed from the privatisation, and I would expect dramatic changes in schedule 12, the more so since Magnox reactors are near the end of their lives and will incur these costs first.

The same goes for all our discussions today. The changes implicit in the statement should be subjected to the sort of discussion that we had in Standing Committee, because many of the premises have been wholly changed.

There is a fundamental objection to schedule 12. Why should the public carry all the risk of the escalating costs of waste and decommissioning? The sums mentioned in this context--£1 billion or £2.5 billion-- are small compared with what I suspect the true eventual figures will be.

We have no real idea of how we shall get rid of high-level nuclear wastes. Intermediate-level waste will be given a shallow burial, probably at Sellafield. That will be very expensive and I do not think that the public, even near Sellafield, will accept it. Ideas for high-level wastes are still at the design stage. No country has got rid of its high-level waste, and the costs will run on for up to 100 years. The wastes will stay radioactive for hundreds or thousands of years, so how can we estimate the costs? One billion pounds or £2.5 billion seem trivial amounts compared with the true costs. Estimating the cost of decommissioning is crystal ball gazing. We understand that for Berkeley the cost may be about £300 million. Stages 1 and 2, which involve taking out the waste and reprocessing, will certainly account for that. We have no idea of the cost in 100 years time of dismantling the power stations and £300 million sounds like a terrific underestimate. Experts in the industry think that the cost could be anything up to £2 billion per reactor. That figure is from the Financial Times newsletter article, "Power in Europe" which is edited by Mr. Andrew Holmes. Where will that money be found?

In Committee we tried to estimate the foreseen costs for waste and for decommissioning and arrived at figures of £10 billion, £12 billion or £16 billion. Those are the present guesstimates. Apart from the guesswork involved in arriving at such figures, the fundamental objection to schedule 12 is why should the public carry the risk, especially in view of today's statement that Magnox reactors will be left out of the privatisation. The new privatised National Power will have AGRs and PWRs which will run for 20, 30 or 40 years. Presumably they will be operated at a profit but, if not, there is the nuclear tax to fall back on. When it comes to waste and decommissioning, the buck will be passed back to the taxpayer. Schedule 12 is wrong in principle.

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Mr. Alex Salmond (Banff and Buchan) : I should like to put two questions to the Minister to see if we can clarify the economics of the nuclear industry in the Government's mind. I understand that the Government now accept that the nuclear industry is not fully economic. In a whole variety of ways and through some ingenious subsidies, ways are to be found to subsidise the industry or to give comfort to private investors thinking of investing in nuclear power stations.

Can the Minister of State, Scottish Office tell us whether that is still the Government's thinking in terms of the Scottish nuclear industry? In Committee, the Secretary of State for Scotland still maintained that the nuclear industry was fully economic, and the most cost-effective method of generation in Scotland. My first question to the Minister is whether the Government feel that nuclear generation is not economic in England but is economic in Scotland.

If it is fully economic in Scotland, how does that square with the evidence given last week to the Select Committee by the chairman of the Atomic Energy Authority? Under the most strenuous questioning by the hon. Member for Pontefract and Castleford (Mr. Lofthouse) the chairman of the authority accepted the argument that the final decommissioning costs of nuclear power stations were unquantifiable at this stage. If the chairman of the Atomic Energy Authority is correct about that, how on earth can the Secretary of State for Scotland maintain that in Scotland the economics of nuclear generation is comparable with other power sources?

Perhaps the Minister of State will make a careful note of my second point, so that, when the Secretary of State returns, he will be able to give an answer to a question on which I manifestly failed to extract an answer from him earlier today. Given that the electricity companies are discounting over a long time the possible costs of decommissioning nuclear power stations, what will happen if the private companies go out of business before the costs fall due? Who will pick up the tab if the private companies which are to be given that responsibility are no longer around to meet the costs?

Mr. Ian Bruce (Dorset, South) : I should like to comment briefly upon the way in which the Government have decided to unscramble the electricity industry in a very much different way from that which was originally proposed. Many of us understand the problems that any Government would face in trying to privatise a complex industry such as electricity generation and separate the different companies and the way in which they will operate.

The Government were correct to decide that there should be competition. I have always felt that perhaps the nuclear element of the industry should consist of one or more separate companies. The amendments are sensible, because the Government need to have powers to take account of contracts and other such matters. It is rather strange that the Opposition should try to defeat such contractual arrangements because, basically, the Government are seeking the ability to set out what is for sale and the agreements that are to be made in the industry. They seek to be able to say to potential investors that this is the way in which the Government will take out uncertainty about the reprocessing and decommissioning costs on the nuclear side of the industry. By doing that, the Government are not subsidising investors or giving them

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additional profit. By taking out that uncertainty, they are ensuring that the price paid for the other assets is much higher than it would be if such a doubt were allowed to influence the price. They are protecting the assets of the Government and the taxpayer by doing it in that way.

I stress to the Government that the uncertainty about the way that decommissioning and reprocessing will be dealt with is causing problems. Like any Back Bencher, I appreciate the Government's difficulty, because every time they make a decision about the way that we are to dispose of or reprocess waste, the NIMBY syndrome appears. That is designed to stop us taking decisions, and sometimes we have to go down what seems to be long and involved roads and try to put nuclear waste within a constituency that is already so heavily committed to the industry that it feels that it must provide a site for the spent fuel.

The Government's nuclear policy contains some imponderables. As we know, the City dislikes imponderables and will take the worst case and add 50 per cent. for good luck. Taking out the Magnox stations is a sensible idea. However, the Secretary of State for Energy has left within National Power a hostage to fortune, in that the management of that company could well use it as a milch cow by putting all the costs that it possibly can on the nuclear side, knowing that the rest of the industry will provide a subsidy.

The AGR stations and the future PWR stations should be shown to be economic. Given the additional costs of solving coal-fired problems of pollution and the cost of "greening" fossil fuel burning, we shall see the equation between nuclear generation and coal-fired generation turning around. It is necessary to have within the Bill powers to give nulcear power a subsidy, if it is needed. However, I hope that my right hon. Friend the Secretary of State will look carefully at ways to introduce a profitable nuclear industry and stretch it out. The Atomic Energy Authority and British Nuclear Fuels plc are left in doubt as to what will happen to the nuclear stations that they are running. In my constituency, there is a steam generating heavy water reactor, which was designed many years ago as an experiment--the first-off of a type of reactor that was then cancelled by a previous Secretary of State for Energy, the right hon. Member for Chesterfield (Mr. Benn). This station has a fairly limited life left, because its generators and other equipment will not last. We were assured that the station would be included in the non-fossil fuels requirement. Today's statement leaves us in some doubt about how this station will be dealt with.

The powers in the Bill are designed to help the Government to provide a sensible solution to the great difficulties of producing a privatised, denationalised electricity industry, and I commend them to the House.

6.30 pm

Mr. Peter Hardy (Wentworth) : As I had to see a Minister about an urgent constituency matter, I missed part of the debate.

Mr. Giles Radice (Durham, North) : Which one?

Mr. Hardy : They change so frequently that it is difficult to remember.

I shall not detain the House for long, but I have one or two important points to make. The other day, I took part

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in a "Worldnet" television programme, which lasted the best part of an hour, between Strasbourg and Washington. Taking part were an American senator in Strasbourg and other American politicians in Washington. It was interesting to hear them say that an expensive, large nuclear power station had been built close to Long Island, but although it was now just about complete, it would never function because they believe that it is neither acceptable nor economic. The Secretary of State's statement about Magnox may have bought him some time, but whoever is Secretary of State for Energy after we come back from the recess will be appearing before the House to make yet another concession to try to make this privatisation work. Even with this concession, National Power will not be a successful flotation. The City may view PowerGen as dramatically more likely than National Power to succeed, because it has no nuclear encumbrance. However, if what I said both in Question Time and in the debate last Thursday is right, about the sheer fecklessness that we are about to experience as National Power approaches its launch in a few days' time, the City and many investors will be put off.

My last point echoes the point that I made when I asked a question of the Secretary of State after his statement. The prospect of electricity privatisation may be more attractive now in Tokyo, Frankfurt, New York and other such places than it is in London. Sir Trevor Skeet (Bedfordshire, North) indicated assent.

Mr. Hardy : I am glad to have the endorsement, from a sedentary position, of the hon. Member for Bedfordshire, North (Sir T. Skeet), who is the only Conservative Member to emerge with any credit from this sad and sorry tale. As he quite properly pointed out to the Secretary of State-- false modesty has no place in matters as serious as this--he proposed in Committee the very step that the Secretary of State has taken today.

Mr. Morgan : Part of it.

Mr. Hardy : The hon. Gentleman suggested part of the step. One recognises virtue on a larger scale than it might deserve. However, the hon. Gentleman recommended a course of action that we supported in Committee but the Minister rejected. It would be interesting to ascertain how much the dilatory response of the Secretary of State to that proposition has cost us. The Secretary of State may feel that privatisation is more worth while, but the City of London, in assessing the economics of privatisation, may now recognise, despite all the cosmetic actions that have been taken, and all the to-ing and fro-ing to No. 10, the Government now look like a sick Government, or a partial Government. They look like a partisan Government, concerned only with the interests of those who will be seeking to make a little money out of privatisation. Today's action will not make privatisation successful, and it will assist neither the new electricity industry nor the cause of those who wish to see the business of this nation conducted competently.

Sir Trevor Skeet : I apologise to the House for not being here earlier, but I had to attend to one or two matters. I was here for the interesting statement by my right hon. Friend the Secretary of State for Energy. I asked a question afterwards and suggested that my right hon. Friend could have gone a bit further. It is a wise man who

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recognises that, taking all the factors into account, a change is necessary. It shows the effectiveness of the Committee system when a Secretary of State listens to the arguments of Back Benchers, listens to the arguments put on Report, and eventually makes a modification. I find this one helpful. [Interruption.] I can remember when the Labour party introduced a groundnuts scheme, which cost us £36 million. An argument was put forward carefully in Committee and the Government are big enough, wise enough and awake enough to weigh up the arguments and bring out the desired modifications.

The crux of the Bill can be found in clauses 30, 32 and 93 and the schedule 12. We are dealing here with the schedule. When we deal with structures that will be closed down by the turn of the century, some revision must be made. Has it occurred to Labour Members that we are now building a third unit into the competitive exercise? We shall have not only National Power and PowerGen, but the British nuclear firm. In Committee, I made the modest suggestion that if we put some of the other nuclear assets into this body, it would be extremely competitive, and would be the third side of the competitive wedge. If we bring in the renewables, towards the end of the century, more competition will be introduced.

Mr. Morgan : The hon. Gentleman is rather jumping the gun. We were given no details to show that there will be a third company. If this were done by means of a sale-and-leaseback arrangement, that would not be the case. The Secretary of State gave no sign that a third company to supply nuclear electricity in England and Wales, with a bit of Scottish Magnox, would be set up.

Sir Trevor Skeet : It can be done in two ways. If the Magnox assets are retained by the state, those in Scotland and England will be either pooled into one company, or leased back to the enterprises. Final responsibility will rest with the state. That gives an additional guarantee to those concerned and to any disquieted members of the public that they can have full confidence in the privatisation that will ensue.

Further details will have to emerge. We shall have to ascertain precisely how these measures will be implemented. I have no doubt, however, that the right concession has been made at the right time and that it will lead to a successful flotation of the companies. The concession was made because the market required it--the market wanted the removal of uncertainty. It would not have been possible to continue with such a large measure of uncertainty.

Unfortunately, schedule 12 was not discussed at any great length in Committee. However, the Government were told that additional money would be required for the reprocessing of nuclear fuels, for their storage--much depends on where we put them--and for the disposal of nuclear waste. The Government were prepared to set aside as much as £2.5 billion, but the first tranche was to be a much smaller sum than that. If the Secretary of State wants to put more money up front, I can understand his reasons.

Let us try to understand what decommissioning is. For the first 50 years little will occur. That will be the cooling period. It will be a long time before the decommissioning can be amortised. We must understand that the Central Electricity Generating Board has been making provision for the eventual decommissioning of its stations. I do not

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think for one moment that it has made satisfactory provision, but some provision has been made. I understand that it intends to make more and more provision as time passes. There is an advantageous position because the state enterprise in which the company is vested will remain with the Department of Energy, and the Department will be responsible for the reprocessing of the fuel elements. It will be responsible also for ensuring that any necessary repair work is carried out. It will be responsible for decommissioning.

Mr. Salmond : I am sure that the hon. Gentleman has read the Select Committee's report on the accounts of BNFL, which contains the following passage :

"Using decommissioning to shift the burden of costs to future generations has little to commend it in economic or accounting theory or moral principle, particularly if the burden so shifted is a very substantial one."

Does the hon. Gentleman endorse that view?

Sir Trevor Skeet : We must remember that there are cycles of popularity. The nuclear industry was extremely popular a few years ago but popularity has now shifted to fossil fuels. I think that in the years ahead the nuclear industry will become more popular. Fossil fuels have the disadvantage of CO sulphur dioxide, metals coming out of stacks and so forth. All these consequences have to be avoided and the shoe can move on to the other foot, as it were. Much depends on the amount of coal that comes on to the market, and it may be more restricted than we think. If that is so, the nuclear industry will gain in popularity. I should think that that would happen in about two or three years' time.

6.45 pm

Who would have thought that the price of uranium would have fallen from about $45 a pound to below $10? That fall in price has meant that it has become not especially profitable to operate all sites. With any commodity there will be periods of expansion and improvement followed by a period of deterioration. I have full confidence in the nuclear industry. It is wise to keep the nuclear industry going in the United Kingdom for the time when there will be improvements and expansion. Some countries have decided to let their nuclear industries go. If we followed that example, teams of experts would be disbanded. If £2.5 billion is made available for additional expenses and costs, the nuclear industry can be kept intact to a certain extent. That must be the desired consequence.

We have been told that no new nuclear power stations are being built in the United States. We must remember that the price of coal in the United States is very different from the price in the United Kingdom. The price here is relatively expensive, but in the United States the nuclear industry cannot compete with coal. I agree that the competitive element has gone in the United Kingdom that is on an 8 per cent. discount rate--but there are greater advantages here than there are in the United States.

Mr. Geoffrey Lofthouse (Pontefract and Castleford) : Does the hon. Gentleman think that he or anyone else can estimate the full cost of nuclear power, including decommissioning? It is all very well to talk about the next 50 years, but somebody will have to pay the full cost at the end of the day. It is likely that for two or three decades the private sector will make a profit from our nuclear industry.

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When the time comes to pay for decommissioning, the bill will probably be met by the public purse. Is that what the hon. Gentleman advocates?

Sir Trevor Skeet : If a plant is dismantled, it normally has to be dealt with there and then. When a nuclear plant is decommissioned, it has to be left to cool for a number of years. That applies especially to the reactor. The first phase may be 50 years. We then enter subsequent phases. Therefore, nuclear costs can be phased over a period. There is ample opportunity to do that. The purpose of the provisions that we are discussing is to meet the future possibility of vastly increased costs. When we dealt with this issue in Committee, I recommended that the Magnox assets were not very valuable and that they should be written down to some extent. It could be argued that some of the assets in the coal industry are similarly not of great value and that they should be written out of the accounts. I recommended today that the coal industry should be subject to a reconstruction. It may be that after 100 years have passed we shall have to examine certain aspects of the nuclear industry with a view to deciding what should happen next.

I think that the Government are moving in the right direction. They have taken up the Magnox stations and kept them within the state scheme. I agree that they could have gone a step further, but they have not done so. A partial contribution is an extremely valuable asset.

Mr. Ian McCartney (Makerfield) : The Lords amendments stem from the directors of the National Westminster Bank. I have no doubt that the Secretary of State for Trade and Industry was to be seen scurrying to his inspectors to get them to examine the figures proposed by the Central Electricity Generating Board. We are talking not of a blank cheque but of the complete underwriting of a share issue because of the Government's fear that the City will not purchase at a sufficient level and that there will be a disaster on flotation.

These are not party political points being advanced by those who are opposed to the principle of privatisation. The issue arose in January in Committee when, fortuitously, the then chairman-designate of National Power sent a letter to my hon. Friend the Member for Sedgefield (Mr. Blair) in which he set out his concerns about the flotation of the company. He was anxious about its being saddled with the decommissioning costs of the nuclear industry. He argued against the underwriting by the company of the cost of fuel storage. He urged that the Government should construct a financial settlement that would protect BNFL, limit risks and enable it to be ripened, as it were, for future privatisation. The chairman-designate was opposed to the declared policy of the Department of the Environment that the polluter must pay. He said that, carried to its logical conclusion, such a commitment hung round the neck of the company would mean an unsuccessful flotation on the stock market. He said that he expected the Secretary of State for Energy to come up with proposals that would not only loosen the strings of that commitment, but would mean the Government picking up 100 per cent. of the continuing costs of nuclear decommissioning and the underwriting of fuel storage costs. The Minister of State, Scottish Office is on the Bench and will respond to this debate. No doubt the Secretary of State and his Under-Secretary have been either successful

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or unsuccessful in the current operations at No. 10 Downing street. Perhaps we will be told later today what has happened. Will the Minister either confirm or deny that in January the Secretary of State received a letter from Mr. Baker making it clear that unless he introduced suitable amendments in another place it would be almost impossible to achieve a successful flotation of National Power? It is important that the public understand that the purpose of the amendments is not to provide some equalisation of market forces within the industry following privatisation ; it is no more and no less than the use of taxpayers' resources to fund the flotation--a flotation which scares the Secretary of State stiff.

Mr. Baker's letter also made it clear that National Power was not prepared to agree to any commitment to phase 3 of decommissioning. He said :

"There is no way that you can guarantee that National Power will not become insolvent over the next one hundred years. Any impediment on National Power is only likely to increase the chances that it will not survive."

He said that that would

"significantly reduce its attractiveness to investors". The amendments are designed purely to improve the attractiveness of the industry to potential investors, and the necessity to do that has obviously been quite clear since Mr. Baker's letter last January. My hon. Friend the Member for Wentworth (Mr. Hardy) was right to say that the beneficiaries of this policy will not be the taxpayers or the investors of the United Kingdom, but the foreign private capital investors who will buy the shares in the marketplace.

The Minister must clarify the statement made in another place about the Secretary of State giving up the power to decide on grants for unforeseeable costs. Indeed, under the amendments the Secretary of State relinquishes any power logically to decide on claims for the cost of decommissioning. By giving a blank cheque to the privatised companies he hopes to improve the chances of a successful flotation. During the months since the Bill first entered its Committee stage, it has become increasingly clear that the public do not think that privatisation will benefit the nation. The Secretary of State has tried to push through this amendment while the manoeuvring at No. 10 is grabbing the headlines. He will not be successful--

Sir Trevor Skeet : The hon. Gentleman made a number of speeches in Committee. Does he accept that in most countries the private sector electricity industry is successful? That is partly because it involves an element of competition. Before the Government can privatise the industry, they must determine the value of its assets. Correct valuations must, for example, be made for all the reactors that will shut down by the end of the century. If a company is to be floated, it is important to decide whether its assets are worth nothing or a great deal. The Government have placed the private companies under an obligation to build four 1175 MW PWRs. That will be a heavy burden on the industry.

Mr. McCartney : The hon. Gentleman obviously did not listen to any of the arguments deployed by Labour Members in Committee, when we produced ample evidence of the problems. For example, New York state has had to step in to save a privatised company from bankruptcy. It sold and and then had to buy back the potential nuclear power generating capacity. The nuclear

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companies in France are on the verge of bankruptcy because of crippling costs and the French Government have had to intervene to prevent that. The hon. Gentleman knows that his argument does not hold up. That is why he, more than any Conservative Back Bencher who supports privatisation, has pressed the Government to underwrite the sale of the industry. Without a massive underwriting, not only will there be a shortfall on the expected proceeds from the sale, but in the long term the privatised company will be unable to cope with its social and environmental responsibilities as well as its prime objective of realising the profits that come from privatisation.

Mr. Eric Illsley (Barnsley, Central) : I wish to make only a few brief comments, most of which will relate to the Secretary of State's statement this afternoon and the effect of schedule 12. The right hon. Gentleman said that the Magnox stations will now remain in public ownership, yet schedule 12 increases funding for unforeseeable costs from the interim level of £1 billion to £2.5 billion. That suggests that the funding is being increased for the benefit of fewer power stations. There will be a larger pie for fewer stations.

Sir Trevor Skeet : There were many fund-raising Bills for the coal industry under the National Coal Board in its time. Each time it exhausted the upper limit, it was extended through a new Bill. I am sure that no one would suggest that schedule 12 will last for ever. Perhaps another £500 million will be required and the Secretary of State will have to come back to the House with a new Bill. That is in line with coal industry legislation.

Mr. Illsley : The hon. Gentleman merely reinforces the point that we made in Committee, that decommissioning costs were unforeseeable and the Government would have to come to the House time and again to obtain more money for the nuclear industry. Cost comparisons including decommissioning all show that coal-fired stations are more economic than nuclear-powered stations. The Electricity Bill has not yet completed all its stages, yet already the Secretary of State intends to raise the funding for unforeseeable costs from £1 billion to £2.5 billion, even though the Magnox stations have been taken out of the equation. The decommissioning costs are increasing even before privatisation. The Select Committee report in April endorsed our views on BNFL, in which the hon. Gentleman has a particular interest. Its decommissioning costs have increased fivefold because of the change of policy to decommissioning to greenfield sites in three stages over 100 years.

We must wait until the Bill reaches the statute book in the autumn before the necessary order for further funding is brought before the House and we have an opportunity fully to debate the matter. BNFL's liability for decommissioning costs alone has increased five times over the estimated amount. That begs the question of whether the Government will need to return to Parliament for more money to pay for the decommissioning of the THORP plant, the costings for which already lag well behind the likely actual expense.

7 pm

Mr. Donald Dewar (Glasgow, Garscadden) : I am obliged to the hon. Member for Bedfordshire, North (Sir T. Skeet) for the thought that the measure that is the subject of this debate might be the equivalent of the groundnuts scheme for the Government. However, there is

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a distinction to be drawn between the two, because I am sure that the hon. Gentleman accepts that the groundnuts scheme was based on idealism and good intentions, and no one can say that the same is true of electricity privatisation. Certainly it cannot be said of the muddle that we have witnessed today.

I am sorry that, although the Minister of State, Scottish Office, has been courteous enough to await the conclusion of this particular debate, he has chosen not to reply to it. I wanted to ask him one or two questions about the implications of schedule 12 for Scotland, and the Under-Secretary of State for Energy, who is beginning to look like a remarkably solid and permanent object on the shifting scene of the Department of Energy, may not be able to provide the detailed information I want.

As I flew to London this afternoon, it occurred to me that many important questions remained unanswered because of the total lack of information about nuclear capacity and nuclear costs. However, as a consequence of the past two or three hours, we have almost too much information--most of it confused and disjointed. Nevertheless, only the most churlish right hon. or hon. Member could retreat from remarking that there has been a most interesting series of happenings.

While I recognise that it is difficult to get the attention of any even junior Ministers on this day of all days, because there is some nervous tic on the Conservative Benches, I may tell the House that my interest in schedule 12 was triggered by a report last week in the Glasgow Herald that the South of Scotland electricity board's accounts will be delayed for up to six months. I was curious to know whether that was true and, if so, the reasons for the delay. Perhaps we can now guess at some of the reasons, but it will still be useful if the Minister can confirm that the SSEB's accounts have been delayed and that the explanation offered by those who monitor the industry is correct--that the arithmetic of nuclear power has gone so badly wrong for the SSEB that it has been compelled to delay publication of its accounts while it scratches its head about the way of presenting them in a more palatable form to those people who may be tempted to invest in the privatised company.

That is an extremely plausible scenario. As the Under-Secretary of State may recollect, last year the SSEB reported a £15 million operating profit, but it was suddenly translated into a £70 million loss because of the problems relating to the transfer of Chapelcross and of the sharp rise in BNFL's reprocessing costs. Those circumstances form part of the formidable evidence that the whole privatisation exercise is in appalling and fundamental trouble as a consequence of the escalating costs of Britain's nuclear capacity. I confess that I am greatly irritated by the way that Ministers blandly deny even the existence of such troubles and there is hardly a ripple across their calm pond of ideology, when anybody who takes the slightest interest knows that there is a ferment of anxiety behind the scenes. It may even have reached the notice of the Energy Minister that in December 1988 the chairman of the South of Scotland electricity board, briefing the press at Torness, remarked that if the Government pursued their original plans, the privatised company would be unsellable. He asked for "absolute insurance" against the ever-escalating

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costs of reprocessing and the way in which he could apparently be held to ransom by BNFL and by the substantial costs of

decommissioning, which are also constantly rising.

SSEB's chairman said at that briefing--I recall raising this point again and again with the Scottish Office--that the assurances "will have to be signed and sealed before one writes a prospectus--otherwise it will not be worth writing."

Clearly he felt very strongly about that matter. Subsequently, I and other right hon. and hon. Members pressed for details of the Government's intentions. There were tales in the press about secret deals and guarantees, but perish the thought, we were told it was a horrible idea that such things should be happening in smoke-filled rooms. In fact, I am sure that those rooms had very good air conditioning. We were told that nothing was happening, but now we know that a deal was hammered out, and that in essence it is an extremely bad deal for the taxpayer.

The Secretary of State for Energy--as he then was, and may still be-- suggested that the Labour party was not in touch with reality and had failed to catch up with the developments with which he was dealing so bravely and effectively. However, when I raised various matters in December 1988, I received a reply from the Secretary of State for Scotland, who is ever-courteous in responding to queries, in which he wrote :

"I fully recognise Mr. Miller's concerns, but I am confident that there will be a range of instruments to meet them in a manner which both meets legitimate investor concerns and safeguards the position of consumers. There are no grounds for suggesting that the successful privatisation of the industry will be jeopardised by risks associated with the nuclear operating costs."

A few months later, the Secretary of State for Energy stumbles to the Dispatch Box and concedes that there was every reason for concern, and that a major capitulation by the Government is required in respect of nuclear costs.

I still want the Under-Secretary of State for Energy to explain more about the Government's intentions. I realise that there will be detailed statements and a debate later, which I welcome. However, as the hon. Member for Bedfordshire, North fairly pointed out, we are faced with a patchwork quilt of responsibilities, consisting not only of the English distribution companies but of two generating companies, one of which will have nuclear interests, and in Scotland a nuclear company wholly owned by the two successor companies to the present boards. There will be a Scottish Nuclear Company, and there is the possibility--I put it no higher--of some continuing state nuclear capacity, which will mesh into that network in a way that is, as yet, obscure.

I accept entirely that the details have yet to be worked out, because the Government have not worked out the details of any of their actions. They never seem to be worked out, and the Government consequently shift and change their position. The Minister must surely be able to give an overview of how the network will work and describe in the broadest terms what kind of holding company, public institution, quasi-quango, state board or corporation will be created to look after the residue of Britain's nuclear capacity that is the surviving Magnox stations--and state who in Scotland will spend the £400 million or £500 million that will, according to latest estimates, be required for decommissioning Hunterston.

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