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Column 787I take the point made by the hon. Member for Banff and Buchan (Mr. Salmond), quoting my hon. Friend the Member for Pontefract and Castleford (Mr. Lofthouse), that it is difficult to quantify decommissioning costs. My impression is that it is possible to make some estimate at a given point in time, but the trouble is that, over a long time, costs escalate in an alarming and extraordinary fashion.
I have an article from Power in Europe, a newsletter which carries some authority in the industry, showing the Central Electricity Generating Board's quantifications of decommissioning costs between 1986 and 1989 for a Magnox station. They vary from £211 million up to £641 million, depending on which of those years one picks, and the time scale between stages 2 and 3. This shows the variants and the unknown factors that we are being asked to face. We want to know a great deal more about this, and about the circumstances in which money will be paid out under schedule 12. We now know that the upper limit of £2.5 billion is at stake. That is a substantial sum of money. It looks as though the taxpayer is being asked to take over the difficult fag end of the nuclear industry--the older Magnox stations--and pay the bills as a sacrifice to allow the new privatised industry to be launched with reasonable prospects. It seems to me that there has been not just a touch of muddle, but a scandalous willingness to prop up a crumbling and tumbling scheme, almost irrespective of the cost.
Sir Trevor Skeet rose--
My worry is not with the City, or the financiers--I have some respect for the people who might invest in this company--but with the people who will get forms through the door, because they are South of Scotland electricity board customers, telling them that they will have a wonderful discount if they buy SSEB shares. I think that that is worrying. I am sure it must worry the Under-Secretary as well, if his senior colleague is right, and the Government have had to ride to the rescue because the electricity industry has not faced up to the true costs of decommissioning and reprocessing over the years, but must do so in future. I understand from that that the Minister expects those costs to be met partly out of schedule 12 funds, but substantially out of some reserve, some unidentifiable fund, to be built up over the years. It will face the formidable costs of decommissioning and reprocessing the AGRs in Scotland, which is bound to occur one or two decades after privatisation. I hope that the Minister will comment on that.
If we are to face the so-called true costs in the future, it is clear that there will almost certainly be a substantial increase in the price of electricity to the consumer. That is an inescapable conclusion from the statement we have heard today, and from the muddle and confusion that has emerged.
An article in The Daily Telegraph on 21 July said that there might be a 15 to 20 per cent. rise in electricity costs as a result of privatisation. The logic of what has been unveiled today makes that a real problem. It will be a problem for small shareholders and for the consumer. I do not think that the Government are out of the wood yet.
Column 788If the Minister sells these shares on the basis of the prospectus to people who are unlikely to have independent financial advice--people who get offers through the door with discount forms, who see the gloss and the glitz of the television advertising every day in their front rooms--to judge from the arithmetic and prospects that emerge from today's confusion, that would be the height of social and, I suspect, fiscal irresponsibility. The one thing that emerges from all this, with great clarity, is that the old story that I have been given year in, year out by the industry--that the best commercial basis on which to produce electricity is nuclear--has been blown out of the water. The truth is now out.
Paragraph 78 of the Energy Select Committee's sixth report, on the greenhouse effect, says :
"Most strikingly, when questioned about the economics of nuclear power and the impending privatisation of the electricity supply industry in Great Britain, the Chairman of the UKAEA said that he did not believe that in the present situation or climate privatised electricity generating companies would invest in nuclear power, to be absolutely frank'."
That we have again had to bail out a privatisation with the cynical use of taxpayers' resources does not hide the fact that the problems of nuclear power will haunt many of the Scottish boards, or rather the combined generating and distributing companies. I suspect, as the years go by, that exactly the same problems that have haunted the SSEB over the past few years will haunt the new companies and their shareholders and, given the Government's approach, the people who will pay the price, formally and unfairly, will be the customers who buy the electricity.
Mr. Michael Spicer : I hope that the House will agree to the Lords amendments that we are discussing and oppose the Opposition motions because, as I said in my opening speech, I do not think that it is sensible to put a time limit on these agreements.
Mr. Spicer : The hon. Member says that we want a bottomless pit. That is precisely what is not implied in this group of amendments, in clause 93 and in schedule 12. A precise figure is attached to them, as he knows, because his knowledge of the subject is detailed. The figure is £2.5 billion. I remind the House that, for the figure to be raised from £1 billion to £2.5 billion, there will have to be an affirmative resolution. I want to underline what my right hon. Friend the Secretary of State said about that--the affirmative resolution will be debatable. Therefore, far from being open ended, as the hon. Member for Cardiff, West (Mr. Morgan) said, it is the reverse. It is specific as to what sums of money are involved.
I assure the House that these amendments do not make any difference, in substance, to the purpose of clause 93 and to schedule 12. That is common ground in the House, I would have thought. It has been made clear to us when writing the prospectus for privatisation that the additional net, if it can be called that, should be introduced into the Bill so that there is no doubt about the Government's intention to apply the terms of clause 93 and schedule 12. It underscores and underlines the Bill as it stands.
I understand, after today's statement, that the Opposition want to peg further questions and debates. I do not quarrel with that, but this is purely a technical matter, underlining clause 93 and schedule 12.
Sir Trevor Skeet : Schedule 12 is there because certain costs cannot be evaluated because of the lengthy period over which they will mature. Decommissioning takes more than 100 years, so it is impossible to be precise, and, if one cannot be precise, one has to have this schedule to be able to deal with it. Is that not true?
Mr. Spicer : I am grateful to my hon. Friend for making an important point which leads me to what I wanted to say in any case. The purpose of clause 93 remains exactly the same in relation to the new private companies. No doubt there will be unforeseen and indeed uncontrollable costs, but the powers under the clause will allow them to be met. The problem of the time scale would exist whether or not the industry was privatised, and regardless of today's statement ; power stations of this kind have not been decommissioned before. The powers in the Bill clearly make sense, and the amendments simply underscore them.
The hon. Member for Gordon (Mr. Bruce), and a number of others, have thrown around the figure of £8 billion. I do not know where they got that figure ; perhaps they will let us into the secret, and help us to make our dispositions even firmer. One of the reasons why we have no firm figure as yet was implied by the hon. Member for Glasgow, Garscadden (Mr. Dewar) when he asked me about the effect of Chapelcross on the profitability of the SSEB last year. Let me remind the hon. Gentleman that, contrary to the impression that he gave, Mr. Donald Miller has always been very enthusiastic about the sale--or so all his public statements have implied.
The hon. Gentleman's main question concerned the relationship between BNFL and the SSEB in the context of delayed accounts. I concede that negotiations between BNFL and the entire United Kingdom electricity industry on reprocessing are still in progress. Until the contracts are completed we cannot foresee the costs, as my hon. Friend the Member for Bedfordshire, North (Sir T. Skeet) has pointed out.
Sir Trevor Skeet : I am not sure that the Opposition have worked this out properly. A different company from BNFL will probably be dealing with the Magnox reactors. I am assuming, on the basis of the schedule, that the additional costs of some of the reactors will come out of the £2.5 billion. If that can be clarified, we shall have made some progress.
Mr. Spicer : I was coming to that point. As I have said, the companies left in the private sector will be subject to the criterion that we have already laid down, and about which I was questioned by the hon. Member for Sedgefield (Mr. Blair). My hon. Friend was wise and percipient to ask about the Magnox reactors : the powers in clause 93 could be applied to Magnox costs, should cashflow problems require it. We are not sure whether that will happen, as they will be earning revenue in the public sector as well as creating costs. My hon. Friend has made an important contribution by enabling that to be put clearly on the record.
There is nothing untoward about the Lords amendments, and I hope that the Opposition will not press them to a vote. It would certainly be extraordinary of them to press their amendment to a vote. They may not like our general policy ; they may be concerned about the statement ; they may have all sorts of worries. The problems, however, are long-term problems and have not
Column 790occurred before. Any policy involving "capping" or "time-limiting" the agreements would, I feel, be wrongheaded.
Mr. Salmond : I hope that the Minister was not intending to finish his speech without answering a question that I have already asked twice today. Given that decommissioning costs have been discounted over long periods, who will pick up the tab if a private company goes out of business before the costs need to be met?
Mr. Spicer : That is very unlikely, for a number of reasons. One of those reasons is that the regulator will be able to determine the prices that the industry will require to cover its costs. At the back of our minds has always been the need to make proper provision over a period of time, difficult though that is. That will incur costs, which the regulator will no doubt take into account when constructing his price formula. There will be no problem ; that is the reason for the regulator's existence.
Given the regulation of the industry, the non-fossil fuel obligation and other protections for the industry which the Opposition have questioned, I do not feel that the hon. Gentleman's fears are well founded. I hope that the Opposition will feel able to withdraw their amendment and that the House will accept the Lords amendment.
Question put, That this House doth agree with the Lords in the said amendment :--
The House divided : Ayes 312, Noes 195.
Division No. 317] [7.27 pm
Alison, Rt Hon Michael
Arnold, Jacques (Gravesham)
Arnold, Tom (Hazel Grove)
Baker, Nicholas (Dorset N)
Banks, Robert (Harrogate)
Bennett, Nicholas (Pembroke)
Bevan, David Gilroy
Biffen, Rt Hon John
Blackburn, Dr John G.
Blaker, Rt Hon Sir Peter
Bonsor, Sir Nicholas
Boscawen, Hon Robert
Bottomley, Mrs Virginia
Bowden, A (Brighton K'pto'n)
Bowden, Gerald (Dulwich)
Boyson, Rt Hon Dr Sir Rhodes
Braine, Rt Hon Sir Bernard
Brooke, Rt Hon Peter
Brown, Michael (Brigg & Cl't's)
Browne, John (Winchester)
Bruce, Ian (Dorset South)
Buck, Sir Antony
Carlisle, John, (Luton N)
Carlisle, Kenneth (Lincoln)
Clark, Hon Alan (Plym'th S'n)
Clark, Dr Michael (Rochford)
Clarke, Rt Hon K. (Rushcliffe)
Coombs, Anthony (Wyre F'rest)
Coombs, Simon (Swindon)
Cope, Rt Hon John
Davies, Q. (Stamf'd & Spald'g)
Davis, David (Boothferry)
Douglas-Hamilton, Lord James
Evans, David (Welwyn Hatf'd)
Fairbairn, Sir Nicholas
Fenner, Dame Peggy
Field, Barry (Isle of Wight)
Fishburn, John Dudley
Fookes, Dame Janet