House of Commons Hansard Debates for 9 Nov 1989

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energy. As a result of privatisation, there will be competition in the electricity market, which is likely, of itself, to lead to greater fuel diversity. There are already a number of proposals for new generating projects based on combined cycle gas turbine technology, which of course leads to lower carbon dioxide emissions. Oil-fired stations have a role to play.

In the light of their performance to date, it should be possible, subject to the views of the nuclear installations inspectorate, for the lifetime of at least some of the Magnox stations to be extended. The Government will make available funds for any justifiable investment for this purpose.

In view of the factors which I have mentioned bearing on diversity, some of which relate to fossil fuels, the non-fossil obligation will be set at a level which can be satisfied without the construction of new nuclear stations beyond Sizewell B. [ Hon. Members :-- "Hear, hear.] The Government attach the highest importance to the successful completion and operation of Sizewell B in order to maintain the PWR option in the United Kingdom.

I am asking the CEGB to consider urgently what action it wishes to take with respect to its applications for my consent to build PWR stations at Hinkley Point C, Wylfa B and Sizewell C. The Government's statement is being communicated to the Hinkley Point C inquiry. There will continue to be the opportunity, as has been made clear previously, for other non-fossil generation to contribute to the non-fossil fuel obligation. In particular, we will maintain the arrangements for the 600 MW special tranche for renewables announced by my right hon. Friend during the summer.

My proposals will not have an impact on the electricity industry's carbon dioxide emissions until about the turn of the century. By then we fully expect gas-fired stations to be playing an important role in electricity generation, and by maintaining the nuclear option we are creating the opportunity for a longer-term contribution from economic nuclear power.

The distribution companies need to be clear what their obligations will be for a reasonable period ahead. The Government will wish to review the prospects for nuclear power as the Sizewell B project nears completion in 1994.

The nuclear company has a long future as a supplier of nuclear-generated electricity. This should provide continuing attractive employment opportunities. The pension rights of existing staff will be protected, as will their ability to benefit from the sale of the rest of the industry. I shall be discussing the implementation of these proposals with all parties concerned, including the trade unions.

The price of the nuclear company's electricity will be set at a level consistent with its earning a return appropriate to public sector bodies. Since the price of nuclear electricity is likely still to be somewhat higher than that of fossil-fuelled electricity, the fossil fuel levy will be used to share the additional cost over all electricity suppliers.

This decision will help preserve diversity of supply and maintain the nuclear option. We will complete electricity privatisation in the lifetime of this Parliament, and in so doing will safeguard the interests of consumers, taxpayers and shareholders alike.

Mr. Frank Dobson (Holborn and St. Pancras) : That really was one of the most extraordinary statements that

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the House has ever heard. We have been told that the Thatcher Cabinet has declared the privatised electricity supply industry a nuclear-free zone.

What a shambles the Government are making of the electricity industry. Against the advice of the Labour party and of many other knowledgeable people, including the members of the Select Committee on Energy, the Government insisted that nuclear power stations should be privatised. In the words of the then Secretary of State for Energy in April this year, private ownership of nuclear stations would get them away from political influence and make them better managed, better off and more accountable. Does his successor acknowledge now that those words, the ritual Tory incantation about privatisation, have proved false and misleading?

Today's announcement confirms what we and the Energy Select Committee said : the nuclear power stations have proved unsaleable. This madcap scheme has been stopped in its tracks by the financial facts of life. The Tories' friends in the City would not buy nuclear power stations at any price. The private sector wants to take over only the fossil fuel assets and the Government expect the taxpayer to pick up the bill for the liabilities--in this case, irradiated liabilities.

This statement leaves the Government's plans in tatters. They promised their friends that they would create competing private generating companies, yet this latest plan will establish a separate, publicly owned nuclear monopoly from which the Government's friends, running the privatised distribution companies, will be obliged by law to buy electricity.

So much for competition. We know that whoever decides the price of this nuclear power in future, it will certainly not be the customers who, we were told, would be of paramount importance.

The Government's cockeyed arrangements for conventional electricity generation, with one large and one small company, are also in tatters. The size of the large company was justified, they said, by its need for more than its fair share of conventional power stations to compensate it for taking on the responsibility for nuclear power stations. Without the nuclear element, the imbalance between the two companies is ludicrous and unjustifiable ; one will have more than 50 per cent. of the capacity, the other less than 30 per cent. Unless the Government change that imbalance, the customers will suffer. The Government must now reconsider these ramshackle arrangements, which have never been argued before this House. It is no good the Government or their officials or press officers blaming the advice that they received from officials or from people in the electricity industry. As the Prime Minister is fond of saying, advisers advise, Ministers decide. In this case, the Ministers had lots of advice about the costs and problems of nuclear power ; the trouble was that they took the bad advice and ignored the good--entirely typically for this incompetent Government.

Despite the obfuscation in the statement, it also spells out--

Mr. James Wallace (Orkney and Shetland) : On a point of order, Mr. Speaker. Should not a question be asked rather than a response statement made?

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Mr. Speaker : The hon. Member for Holborn and St. Pancras (Mr. Dobson), as a former shadow Leader of the House, will appreciate the pressure on business today.

Mr. Dobson : Indeed, Mr. Speaker. Is the Secretary of State aware that, despite the obfuscations, this statement spells the end of the Government's commitment to an expanded programme of nuclear power? As late as 27 September, the right hon. Gentleman said that the stations he talked about today would be transferred to the private sector, reflecting, he said, the British Government's continuing faith in the future of nuclear power. Does the right hon. Gentleman acknowledge that his statement today shows that they no longer have faith in nuclear power?

This is a humiliating climbdown by the Government, who have treated the industry and its staff as a plaything. The problem results from the Prime Minister's twin obsession with privatisation and nuclear power, and from having a Cabinet full of Ministers who are unwilling to tell her the truth. The House and the country will want the truth and we shall want a debate, because the people of this country and the people who work in the industry are entitled to know about their future. And this House is entitled to be consulted about the whole future of the electricity industry, which is now a shambles.

Mr. Wakeham : I think that the first thing that I should do is to congratulate the hon. Gentleman on his appointment as a shadow spokesman for energy. I know that he long wanted what he thought was a proper Department to shadow. I hope that I have at least given him something to get his teeth into to start off with. I am sorry that he has made such a mess of his first opportunity. I cannot decide whether he supports or opposes what the Government have announced. "Shambles" is a word that springs freely from his lips. I heard it first when I was in the bath this morning and I heard it again this afternoon. It is utter nonsense.

The decision will help to ensure that the privatisation of the rest of the industry will take place as I have pledged within the lifetime of this Parliament. The hon. Gentleman suggests that the Government are doing this at any price. If he had listened carefully to my statement he would have heard me say just the opposite. I said that we were not prepared to pay the risk premium which the banks and National Power were demanding. The rest of the industry will be privatised, and we are determined to get full value for the taxpayer in the proceeds.

The proposals that we have put forward will ensure fair competition between generators, whatever their size. We have no intention of changing the allocation of assets at this stage because we do not believe that to do so would be in the interests of the consumer or of the privatisation. But the system of competition that we shall produce will be fair for generators-- National Power, PowerGen and the substantial new independent generators which we expect quickly to come into the market. Far from announcing the death knell of nuclear power, the proposal that I have put before the House today is the best way of ensuring a long-term future for nuclear power in this country.

Several Hon. Members rose --

Mr. Speaker : Order. I am sure that I do not need to repeat what I have already said about the emergency debate. Bearing in mind that there will be other

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opportunities to ask questions, I will allow questions on this statement to continue until 4.30, when we will move on to the next statement.

Mr. David Howell (Guildford) : Is my right hon. Friend aware that he has taken a courageous and sensible decision today, which will pave the way for the successful privatisation of the electricity industry--I hope without any further difficulties, despite the fact that Opposition Members have been opposed to the plan all along? Does he accept that questions now arise about the structure of the generating industry as it stands? Does he recall that the structure was designed, on advice, to carry some of the risks of the nuclear programme? If he is not to do so now, at least in future will he ensure that the Government will not stand in the way of some evolution and change in the structure of the generating industry, to get away from the pattern of one very large generating firm and one very small generating firm, which may not be ideal for the future?

Mr. Wakeham : Obviously, my right hon. Friend, with his experience in these matters, must be listened to carefully by all hon. Members. I have said that I have no proposals to change the basis of the allocation between National Power and PowerGen, but I shall want to see that a proper competitive market is developing, not just because of the position of those two companies but because an essential part of the privatisation is the development of a substantial new element of independent generators, who must see that they are competing in a fair marketplace.

Mr. Tony Benn (Chesterfield) : Is the Secretary of State aware that, in his statement, he has simultaneously destroyed the case for privatisation, undermined the case for nuclear power by admitting that it is much more expensive, and retrospectively destroyed the Government's war against the mining industry, which he today admitted can generate electricity much more cheaply than the nuclear industry can?

Is he aware also of the unspoken part of his statement, which is that, if cheap coal can be imported from South Africa through the proposed new Humberside ports, the miners can be pressed yet again from another source? That explains the Prime Minister's refusal to join other Commonwealth leaders in taking sanctions against South Africa.

Mr. Wakeham : I understand the right hon. Gentleman's position. It was he, after all, who announced to the House that the option for PWRs was to be established in the United Kingdom. He said : "Nor does anybody doubt that there will be a nuclear component in our future energy policy and that it will probably be a growing one".--[ Official Report, 2 December 1977 ; Vol. 940, c. 973.] It is inevitable that I would have that to hand in case the right hon. Gentleman said anything.

There is a more important question, and I hope that those who are concerned about the future of the coal industry, as I am, will recognise that British Coal has an important future as a supplier of fuel, and will continue to have it. It must recognise, however, that the competition that it has to face is not primarily from imported coal. Instead, it is from natural gas and oil, and it must be a competitive coal industry.

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Mr. Michael Jack (Fylde) : In thanking my right hon. Friend for clarifying the Government's commitment to the nuclear industry, may I ask him on behalf of the 3,000 nuclear workers in my constituency when the plans for the future of the Magnox stations will be available, when the details of the remedial works on the AGRs will be available, and when he will be able to advise British Nuclear Fuels plc about the future of its £123 million investment in the PWR fuel plant?

Mr. Wakeham : I recognise the concerns that my hon. Friend has expressed. There is nothing that I can say today particularly, other than that I recognise the concerns and that we shall make whatever statements are possible as soon as they are possible.

Mr. Malcolm Bruce (Gordon) : Will the Secretary of State take it from me that he has much for which to thank his predecessor, the right hon. Member for Hertsmere (Mr. Parkinson)? In the circumstances, he has at least had the sense and wisdom to accept the advice that his predecessor was too arrogant to listen to during the proceedings in Committee on the privatisation Bill.

Will the right hon. Gentleman tell the House that he recognises that the flotation is now in such a shambles that it must be delayed until clarity emerges? Will he say what obligations have been made to Westinghouse for the PWRs that are now being cancelled, and the cost that will fall on the taxpayer as a result of that decision? Will he accept that there is a real risk that state-subsidised nuclear power will dump privately generated alternative forms of electricity, and that he needs to allay that fear? Finally, will he acknowledge that this is the beginning of the end of nuclear power?

Mr. Wakeham : No, I would not acknowledge that for one minute. I believe that this is the best policy for the future of nuclear power in the situation in which we find ourselves. The hon. Gentleman is wrong when he casts doubt on whether the privatisation of the electricity supply industry can be achieved during this Parliament. I believe that this will substantially alleviate the difficulties that we have to overcome to achieve that object.

Mr. Bruce : Will it help?

Mr. Wakeham : There is no question but that this policy will make the job easier. There are still other matters to be dealt with. As for the orders that have or have not been placed in accordance with the CEGB's proposals, they are a matter primarily for the board. I have no knowledge of any decisions of that sort.

Sir Ian Lloyd (Havant) : Since, in my humble judgment, it will be perceived within the decade on both sides of the House that the future of the country depends on its success, may I first wish the new nuclear company and John Collier every success? May I welcome the Government's decision to maintain the nuclear option, as all evidence reaching us about the greenhouse effect suggests that there is no other realistic option?

Will the price be essentially determined by fossil fuel generators, even when their prices rise, as they are bound to do, when vast additional costs are imposed on fossil fuel stations to meet clean air conditions? Finally, does the revision of decommissioning costs--which were elaborately discussed in Lord Marshall's paper on 6 December, and

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which amount to between £8 billion and £12 billion--lie at the heart of my right hon. Friend's decision to revise the plan?

Mr. Wakeham : The position is considerably more complicated than can be dealt with in a short parliamentary answer. I am grateful to my hon. Friend for his support for the nuclear industry and his deep interest in it. We have not yet determined the level of the fossil fuel levy, but all these decisions will tend to make it lower rather than higher, certainly in the short term. Decommissioning will be dealt with in the state-owned nuclear company, and therefore will not present the difficulties we have had previously in trying to negotiate arrangements between the private and the public sectors.

Mr. Geoffrey Lofthouse (Pontefract and Castleford) : Is the Secretary of State aware that, if the Government had not refused to listen to the advice of the Energy Select Committee, he would not be at the Dispatch Box making this statement today? Having taken such a major decision, he must surely be in a position to tell the House what will be the cost to the public purse of generating 20 per cent. of electricity by nuclear power. If he cannot tell the House that cost, does that mean that, like everyone else, he does not know and has been scratching in the dark, and that, for purely dogmatic reasons, he is pushing forward with nuclear power whatever the cost?

Mr. Wakeham : No. Had the hon. Gentleman listened, he would have heard me tell the House that the state-owned nuclear power company's successor for the nuclear element of the CEGB will be a cash-positive company and will earn profits, not make losses. As both sides of the House must recognise, we have made a substantial investment in nuclear power. It is producing returns, and it should finance the cost of the Sizewell B project, with which we wish to continue because we believe it to be an essential part of maintaining the nuclear option.

Mr. John Hannam (Exeter) : Does my right hon. Friend accept that he has made the correct decision, given the emergence of hitherto concealed information about the true costs of nuclear power? Does he share my concern that, for many years, including those when the Labour Government were in office, figures came out of the electricity supply industry that did not bear a true relationship to the costs of nuclear power? Therefore, will he pay careful regard to any figures that the CEGB is now producing on future costs?

Mr. Wakeham : My hon. Friend is right. One of the difficulties with which we have had to deal has been that the costs of nuclear power remained hidden throughout nationalisation, and it was only the preparations for privatisation that brought them to light. I am not criticising anyone in particular for that, but it was only on 11 October that I finally managed to obtain the figures that I needed to make this decision, having pressed very hard for them from the moment that I took up office.

Mr. D. N. Campbell-Savours (Workington) : I welcome the decision to establish a new national nuclear corporation, and I join the hon. Member for Havant (Sir I. Lloyd) in wishing it success. Nevertheless, has not the right hon. Gentleman, with a number of decisions, placed

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a huge question mark over the future of the industry, which I have always supported--first, by running down the fast breeder reactor programme and secondly, by in effect curtailing the development of new nuclear stations, which some Labour Members want to be constructed? What is the future of the nuclear industry under this Government?

Mr. Wakeham : The future of Britain's nuclear industry will be decided finally in 1994. I hope that by that time it will be possible to produce nuclear energy economically.

Sir Trevor Skeet (Bedfordshire, North) : Having listened to my right hon. Friend the Secretary of State enumerate many of the arguments that I put forward in Committee and on Report, is it not a great pity that the Government did not accept my amendments? But having said that, and looking further into the future, when the price of coal rights itself and the price of oil goes up in about five or six years, will not nuclear energy come into its own and blossom forth in the economy?

Mr. Wakeham : I know my hon. Friend's point of view, and I do not deny him his moment of self-congratulation, particularly after his recent stunning victory in the country. He is entitled to be proud of himself. I hope that the future will be what we would wish it to be--that after we review these matters in 1994 we will be able and will want to develop our nuclear industry to produce economic nuclear power.

Mr. Dennis Skinner (Bolsover) : Is the Leader of the House aware that, when the Bill was introduced by the previous Secretary of State for Energy, it included many items that will not now be acted upon? Is it not arguable that the Act is now full of hybridity in the sense that the nuclear element has now been taken out of it? Should not that matter be examined, since Parliament has been cheated? Will the right hon. Gentleman also take into account the fact that, now that we have reached a watershed in nuclear power and other forms of energy, it would make a lot of sense to stop the pit closure programme, to say that the CEGB's coal allocation should be increased from 60 million tonnes to 75 million tonnes, that coal imports should be stopped and that the Associated British Ports (No. 2) Bill should be dropped?

Mr. Wakeham : I am glad that, as Leader of the House, I made such an impression on the hon. Gentleman that he does not realise that I have given up that job. Nevertheless, the hon. Gentleman is wrong. The steps that we are taking conform completely with the Electricity Act 1989, so no further legislation is required.

Mr. Peter Rost (Erewash) : Is not the most important and painful lesson to be learned from my right hon. Friend's sensible and realistic decision the fact that nuclear electricity is uneconomic and produced at a high cost only in Britain, not in those many other countries that have done the job sensibly, and mostly in the private sector?

Mr. Wakeham : Absolutely ; my hon. Friend is right. There are many examples of the economic production of nuclear power in many other countries.

Mr. Ieuan Wyn Jones (Ynys Mo n) : Can the Secretary of State clarify one matter for the House? Since the Government will not now underwrite the cost of the nuclear sector into the future, will the PWR stations at

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Hinkley, Wylfa and Sizewell C go ahead, and does his announcement on the extension of the life of the Magnox stations have an implication for Wylfa A? It is important for my constituents and the House to know the answer.

Mr. Wakeham : We are looking at all the Magnox stations with the experts concerned and the nuclear installations inspectorate, and decisions will be made as soon as possible.

The hon. Gentleman's other question is extremely important, and I hope that he will understand the answer. Under the law as it stands, I have a quasi- judicial role in determining any matters put to me by the inspector at any of the inquiries. It is for the CEGB to make an application, and for inspectors to recommend. I should be doing the hon. Gentleman's constituents a disservice if I expressed any opinions whatever.

Dr. Michael Clark (Rochford) : Is my right hon. Friend aware that many Conservative Members welcome his decision? It is the right decision, and always was.

Does my right hon. Friend agree that the new nuclear company will be a centre of nuclear excellence, providing the public with confidence in the nuclear industry and ensuring that the industry has a future? Does he also agree that, without the rigours of privatisation, the true cost of nuclear electricity might never have come to light?

Mr. Wakeham : My hon. Friend is right. He is also right to pay tribute to the dedicated staff who have been involved in the nuclear power industry in this country. We are very fortunate that Mr. Collier has agreed to take over the job of chairman of the new company, and I believe that it has a very good future.

Several Hon. Members rose --

Mr. Speaker : Order. When we debate this matter subsequently, I shall seek to give priority to hon. Members whom I have not been able to call today.

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Electricity Privatisation (Scotland)

4.31 pm

The Secretary of State for Scotland (Mr. Malcolm Rifkind) : With permission, Mr. Speaker, I wish to make a statement about the future of the electricity supply industry in Scotland.

The House heard earlier today a statement by my right hon. Friend the Secretary of State for Energy, describing the continuing uncertainties over the costs and longer-term liabilities associated with nuclear power. Those uncertainties are also relevant to the Government's proposals for the privatisation of the electricity supply industry in Scotland. I have therefore reassessed my plans for the restructuring and privatisation of the Scottish industry, and wish to inform the House of my conclusions.

Hon. Members will be aware of the important role that nuclear power plays in the Scottish system. The AGR stations at Torness and Hunterston B represent 25 per cent. of the generating capacity held by the Scottish boards. Hunterston A Magnox station is now approaching the end of its useful life, and is scheduled for closure in the near future. The SSEB's nuclear stations have an excellent record of safe performance, and I commend the management and staff of the board for their achievement in constructing and operating them. Despite that successful operational performance, the Government have had to examine carefully the future cost uncertainties associated with the nuclear operations in Scotland, as elsewhere in the United Kingdom. After close consultation with the industry and our financial advisers, we have concluded that the full flotation could not be successfully achieved without wide-ranging and unequivocal indemnity from Government for future cost escalations. We do not consider that it would be in the public interest to confer such indemnity, and have therefore decided that the nuclear enterprise in Scotland should remain in the public sector. We had already proposed that the nuclear assets should be held by a separate company, Scottish Nuclear Ltd. That company will now remain publicly owned, and will be responsible for the continued safe operation of the stations. The staff now engaged in nuclear matters will be employed by the new company, thus ensuring the retention of the essential expertise required to maintain safe and efficient operation of the stations for the continuing benefit of Scottish consumers. The company will enter into contracts for the sale of its output with the Scottish supply companies, Scottish Power and Hydro Electric. It is certainly our intention that Scottish consumers should continue to benefit from the large investment in nuclear capacity.

The industry north and south of the border has been investigating the economic case for upgrading the capacity of the interconnector between Scotland and England. There is a further opportunity, which we must now explore, to export Scottish output to England and Wales, thus contributing to the diversity of supplies there, and maximising the overall economic use of these major assets to the benefit of all concerned.

The greater proportion of the Scottish industry will be privatised.

Mr. Norman Hogg (Cumbernauld and Kilsyth) : The showrooms. [Laughter.]

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Mr. Speaker : Order. Time is very short this afternoon.

Mr. Rifkind : This will consist of two highly successful transmissesion, distribution and supply businesses with strong local identities and a modern and diverse portfolio of generating stations. They will own around 75 per cent. of generating capacity and employ 14,000 of the total 16,000 staff in the Scottish electricity industry. It is our intention to prepare these companies for privatisation within the current Parliament, and my Department is assessing with our professional advisers and in consultation with the industry the detailed implications of the Government's decision to withhold the nuclear assets from the sale.

There will need to be detailed discussions with regard to the proper relationship of the nuclear company with the other parts of the industry. These will be made easier by our previous decision to place all of the nuclear assets in a separate company. I shall wish to ensure that the revised arrangements have no adverse effects on the economy and efficiency of operation of the industry in Scotland and that there will be no adverse implications for tariffs as a result of these changes.

It will be central to our plans to safeguard the position of the existing staff engaged in the nuclear company, and in particular their pension rights will be protected. The Government will also ensure that these staff will be able to benefit from the flotation of the other parts of the industry. We shall be discussing the detailed implementation of these proposals with the management and the trade unions. The Scottish nuclear company can look forward to a successful and productive future working in close co-operation with the other electricity companies in Scotland.

I believe that a proper and carefully balanced mixture of private and public ownership-- [Laughter.] --will achieve our objectives and be of real benefit to electricity consumers. The nuclear enterprise will continue to play an important role in delivering a safe, reliable and competitively priced supply of electricity to the people of Scotland for many years to come. The two private sector companies, Scottish Power and Hydro Electric, will flourish in the private sector and deliver an improved service to their customers in the new environment.

Mr. Donald Dewar (Glasgow, Garscadden) : This must be one of the most humiliating statements that the House has heard from a Scottish Office Minister for a very long time. The Secretary of State was extremely wise to try to turn it into something of a joke. The Government's central strategy for the electricity industry lies in ruins. The Secretary of State's attempt to present this shambles as a minor policy adjustment is as pathetic as it is unconvincing. In fairness to him, he seemed to be enjoying the joke when he argued that the AGRs represent only 25 per cent. of generating capacity. Is he afraid to face the fact that 60 per cent. of all electricity sold in Scotland comes from nuclear capacity and that for the South of Scotland electricity board it represents, in its latest available balance sheet, at £2.048 billion, some 80 per cent. of assets? What we have now is a rickety structure cobbled together in panic in a futile attempt to save face. Is not the truth that the nuclear arithmetic has gone horribly wrong and that the heart has been ripped out of the whole scheme?

How can the Minister have the brass neck to claim that he believes in

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"a proper and carefully balanced mixture of private and public ownership"

when he has spent the last year denying in the strongest possible terms that there is any place for the nuclear industry in the public sector? Does he remember writing to me less than a year ago to say that

"There are no grounds for suggesting that the successful privatisation of the industry will be jeopardised by risks associated with the nuclear operating costs"?

Does he remember that in this House last April his Minister of State, the hon. Member for Galloway and Upper Nithsdale (Mr. Lang), expressed his unshakable confidence

"that the Scottish industry, including its substantial nuclear assets, can look forward to a bright commercial future."--[ Official Report, 5 April 1989 ; Vol. 150, c. 236.]

I can only say to him that what he has announced today is neither proper nor balanced. It is a mixture, which many people would describe as a dog's breakfast.

Why has the Minister remained in such a state of ignorance, despite the persistent and wholly justified attack by the Opposition on these matters and the specific warning from the chairman of the South of Scotland electricity board in December 1988 that under the then current arrangements his company would be unsaleable? Why has it taken so long to discover--or, even more damaging, to admit--the painful truth? It is a tale of incompetence and dither.

How will Scottish Nuclear price the power that it produces? Is that possible at all if it is impossible to put a figure on the ever-escalating costs of decommissioning and reprocessing? The Secretary of State for Energy talked about the price being consistent with earning a return appropriate to public sector bodies. How does the Secretary of State intend to build into that pricing structure the end costs of decommissioning? Does the Secretary of State now agree with the Department of Energy that, if that is done, the true cost of nuclear power is at least twice that of conventionally produced power?

Is it not true that the whole exercise is designed so that the taxpayer will be left with the liabilities and the investors with the profits? Is the Secretary of State confident that Scottish Power and Hydro Electric can stand on their own? Will they survive as independent entities without the nuclear generating capacity, which the chairman of the SSEB recently described as the mainstay of his board's finances?

What has happened to the Minister's proud boast that the strength of his specially tailored Scottish solution was the merging of generation and distribution? Are not those claims now a joke? Does not today's statement show the folly of Ministers meddling in a complex industry that they clearly do not understand? If the so-called sale excludes the core of the industry, would it not be more honest, and more in the public interest, for the Secretary of State to admit his error and to abandon the whole misconceived exercise?

Mr. Rifkind : The hon. Gentleman seems not to have studied the industry terribly carefully. At the moment, approximately 16,000 people are employed in the Scottish electricity industry. Only 1,800 of them--about 10 per cent.--are employed in the nuclear industry. Some 90 per cent. of employees and 75 per cent. of the industry's capacity will go into the private sector. All the hon. Gentleman can take refuge in is the fact that the historic book value shows--not surprisingly, as Torness has only

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recently been completed--that a high proportion of assets on a historic book basis are of the kind to which the hon. Gentleman referred.

If the hon. Gentleman is concerned about people and the capacity to generate power, I should have thought that he would attach more importance to the fact that 75 per cent. of capacity and 90 per cent. of the employees will go into the privatised industry. Frankly, that accounts for more than the core of the industry.

The hon. Gentleman asks why that has come about, and why the Government did not have this view some months ago. One of the consequences of privatisation, whether in the electricity industry or in any other industry, is that it is only when one is contemplating privatisation that the industry and the public address themselves to the costs incurred by nationalised industries. Electricity privatisation revealed the true cost of many of the hidden subsidies and unknown factors that had always been there.

The hon. Gentleman asked about the views of the SSEB and the Scottish electricity industry. I remind him that the SSEB and the Hydro Board were fully behind the Government's proposals to privatise the whole industry. In the light of the information that is now available, they have said that they believe that the Government are right to go ahead in the way in which we are now proposing. Finally, the hon. Gentleman asked me about the way in which pricing would be determined. I said in my statement that today's announcement would have no adverse consequences for tariffs. The Government are committed to the principle of tariff continuity. [Interruption.] When the contracts between Scottish Nuclear and the two private sector companies are entered into, the pricing which will be agreed will enable the tariff consequences to be the same as they were under our original proposals.

Several Hon. Members rose --

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