| Previous Section | Home Page |
Mr. Salmond : May I take the Secretary of State back to his argument on the virtues of competition? I read his speech in Aberdeen last Friday. How will the cross-border competition work? In particular, how can we export Scottish electricity generated by coal at 4p per unit or by advanced gas reactor at, perhaps, 8p per unit when there are proposals to build 3,000 MW of gas-powered electricity stations in the north-east of England which will produce electricity at 2p per unit? Is not that a recipe for one -way competition? The competition will not be from north to south. From a Scottish perspective, can the Secretary of State really argue that it is a good deal to allow gas from Aberdeen to be sent to the north-east of England to out-compete the Scottish electricity industry and Scottish industry as a whole?
Mr. Wakeham : I am glad that the whole of Scotland is not as pessimistic about the fortunes of the Scottish economy as the hon. Gentleman. When I was in Scotland, I talked to a number of people involved in the electricity supply industry there, who believe that they can compete -- [Interruption.] The hon. Gentleman quotes a lot of figures. It is not for me to discuss the details of contracts to which I am not party. I am convinced that Scotland has the ability to compete ; that Scotland will compete on electricity and be very welcome in our system, in which it will play its part.
Column 804
Mr. Salmond : What about the price of the AGR system?
Mr. Wakeham : The hon. Gentleman asked me a question to which, in my view, I have given him the answer.
I always take a lively interest in the pronouncements of the hon. Member for Holborn and St. Pancras and his colleagues. Both he and his hon. Friend the Member for Dagenham (Mr. Gould) have come up with some interesting new policies on the environment recently. The hon. Member for Holborn and St. Pancras wants to introduce a new merit order based on environmental friendliness--by which, we must assume, he means nuclear first and coal last. The hon. Member for Dagenham--taking time off from the roof tax--has said that Labour would stabilise carbon dioxide emissions within five years and then embark on a major programme of reductions.
It seems to me that both hon. Members have committed themselves to policies without working out what impact they would have on our economy--and more specifically on the coal industry. The combination of those policies could have a devastating impact on the industry and on the workers in the industry that many Opposition Members represent. Perhaps the hon. Members have not done their homework, or perhaps they should think a little more before committing themselves to such policies, but until they come clean we can only assume one thing--that a Labour Government would be disastrous for the coal industry.
Mr. Dobson : I assume that the Secretary of State is referring to a speech that I made in Wakefield on 21 November. It would have been better if he had told the House that I did not announce the merit order as part of Labour's policy. I said--
Mr. Andrew Mitchell (Gedling) : The hon. Gentleman is recanting.
Mr. Dobson : No, I am not recanting at all. I said, "I don't pretend to have all the answers"--[ Hon. Members :-- "Oh."]--unlike Conservative Members who always have all the answers. I said that I was seeking advice about one idea that which force the generators to take the environment seriously. If the Secretary of State--and, presumably, those who helped him draft his speech and who are now sitting in the Box--had looked carefully at my speech, they would not have seen any suggestion that there should be comparisons between gas, electricity and coal because we are looking at the comparative merits of one gas-fired method against another and of one coal-fired method against another. I hope that the Secretary of State will stop this canard, which he has run out half a dozen times already.
Mr. Wakeham : I am grateful to the hon. Gentleman. Indeed, I am glad that an element of bipartisanship has broken out. We can agree that the hon. Gentleman does not know all the answers. However, more seriously--some important issues are involved--I give the hon. Gentleman this undertaking. If he has any plans about how he would like the merit order to be altered from the point of view of the environment, and if he will send his proposals to me, I will ensure that they are considered by the experts in the Department and I will give the hon. Gentleman a perfectly adequate answer. I mean that seriously. I am happy to cast a slide rule or two over the hon. Gentleman's proposals.
Column 805
Mr. Home Robertson : When the Secretary of State has the slide rule out, and since his experts are to assess the environmental impact of different types of power, will he take this opportunity to say something about the circumstances in which the offshore wave power programme was rubbished by people in his Department, we assume, back in 1982? Is he prepared to make a further statement now on whether that programme will be started again?Mr. Wakeham : I came to the Department on 27 July 1990-- [Interruption.] --no, 1989, and I have not briefed myself on what happened in 1982. However, if the hon. Gentleman would like to write to me about it, I shall be happy to look into the matter. Even before it is accomplished, privatisation has had the effect of stimulating new thinking about methods of electricity generation in this country. The scope and incentives for combined heat and power, for the burning of gas and for renewable energy sources have become much clearer. All these are to be welcomed on environmental grounds. As I said on 12 February, around 300 projects have been put to the area boards in response to our policy of encouraging the development of commercial renewable energy sources.
There has been some ill-founded comment that we have overlooked the interests of independent generators in framing our privatisation proposals. This is not the case. The promotion of competition in generation remains a key objective.
As far as the existing generators are concerned, there are about 100 projects selling to area boards under the terms of the Energy Act 1983. My predecessor announced a year ago that we had agreed five-year transitional arrangements with the area board chairmen to ensure that the changes that we are bringing about do not materially affect the working of those independent power contracts that had been agreed against the backdrop of the Energy Act 1983. The object of the transitional arrangements is to ensure that the generators are no worse off in revenue income terms than at present.
Nevertheless, not all generators currently selling under 1983 Act terms could have been covered by these arrangements, since some 40 of those projects predate the 1983 Act. I have been considering this further and am pleased to say that my proposal is to extend the transitional arrangements to all existing independent generators, regardless of when the plant investment was made.
The successor companies of the area boards will, therefore, make available 1983 Energy Act terms to all existing generators who wish them, for a period of five years after vesting. I believe that that will give all independent generators now on the system an oportunity to come to terms with the new market environment that we are now creating.
As for new entrants, there is a substantial interest among the independent sector in entering the generating market. Lakeland Power and NORWEB, of course, led the way last October with the signature of a long-term power sales contract from the Roosecote station in Cumbria. I am glad to say that this particular project is progressing well. As we speak, the staton is undergoing conversion to burn gas and it is hoped that Lakeland will be supplying power by the winter of 1991.
Column 806
I hope and believe that more will follow. We know of around 20 other major generation projects in prospect and negotiations between the companies concerned are actively under way. I hope that the emerging final details of the new regime will assist in bringing such negotiations to successful conclusions. The hon. Member for Holborn and St. Pancras talked a great deal about the Government's record and policies--Mr. Kevin Barron (Rother Valley) : It says here--he has it typed out.
Mr. Wakeham : Well, I do not think that the hon. Member for Holborn and St. Pancras can object to me commenting as such, because he said very little about his party's record and policies. Perhaps he is a little embarrassed to talk about them. But if he will not, I shall. I shall set the record straight--and the record is clear. Labour is the party of electricity price rises. The Conservatives are the party of electricity price reductions. Labour in government did nothing to clean up the environment. The Conservatives in government are taking the lead throughout the world in tackling environmental problems. Labour believes the answer to everything is renationalisation. The Conservatives believe in free enterprise--
Mr. Dobson : While the right hon. Gentleman is talking about policy, does he recognise that on 13 December 1989 an Environment Minister said in a written answer that meeting the anti-acid rain commitment "will involve a range of measures by United Kingdom industry, including retrofitting at least 12,000 MW of electricity generating capacity with flue gas desulphurisation equipment."--[ Official Report, 13 December 1989 ; Vol. 163, c. 717. ]
Is that still the Government's policy, or has the Secretary of State just changed it?
Mr. Barron : Let us have a straight answer.
Mr. Wakeham : We shall meet that directive in the most sensible and practical manner. Global warming and carbon dioxide are important factors, and we have given a clear undertaking to meet the directive.
The contrast between the two parties could not be starker. Where Labour failed, this Government have a proud record and sound policies. I commend them to the House.
5.9 pm
Mr. Peter Hardy (Wentworth) : I am delighted to follow the preposterous speech of the Secretary of State. We can only assume that he is looking for an early ministerial reshuffle, as it is obvious that he does not want to be in charge of the electricity industry as it goes towards privatisation.
It is true that energy prices rose in the 1970s following the Yom Kippur war, when fuels costs quadrupled. After 1980, however, the reason for high electricity prices was the industrial devastation that had reduced demand and left the industry with a substantial surplus of generating capacity. That problem should have been resolved, but we now face massive price increases for no good reason.
I was present when the Secretary of State's predecessor came to the House to say that electricity prices had to rise by 15 per cent. in 1988 and by up to 7 per cent. in 1989 to pay for capital investment. Hon. Members who were present then will recall that. We pointed out that the
Column 807
Central Electricity Generating Board had already budgeted for adequate capital investment without price increases and, during the passage of the Electricity Bill in Committee, we established that electricity prices had gone up for no good reason, as the board's capital expenditure programme had been met from its budgeted sums before those price increases. Those increases have put a heavy burden on domestic and industrial consumers.In the past two years, the Government have been fortunate, as the winters have been relatively mild. Had that not been so, there would have been a scandalous number of hypothermia cases and similar conditions. What the Secretary of State has said today brings no comfort to the domestic consumer. He has promised that prices will not rise above the level of inflation, but inflation may well reach 8 per cent. this year and any price increase will be a significant burden on those already paying too much for their electricity. Whatever the Government may say, the share of income devoted to electricity and fuel costs by the poorest 4 million people in our country is already excessive. They cannot afford to buy electricity shares or water shares. The private water companies recently demonstrated what privatisation means. They are now telling the fire authorities that they have no obligation to provide free water for fighting a fire. Before long, the private electricity generators will say that they have no obligation to provide heat and warmth for the poorest of our country.
It is bad enough for the Government to impose hardship upon the poor, but, while maintaining their arm's length relationship with industry, they should remember that they have an obligation to supervise the British economy. On Saturday, I spent the evening talking to employees of the steel industry who are members of the Iron and Steel Trades Confederation, the ISTC. They are anxious not only about their jobs, but about rapid developments that will take place in the months ahead. Their anxiety is shared throughout the steel industry and the chairman of United Engineering Steels, Mr. Pennington, wrote to me recently to express his anxiety. I am sure that the Minister is aware of that anxiety.
The signs are that we are heading for an industrial recession. Between December 1988 and December 1989, steel production fell from 363,000 tonnes to 343,000 tonnes ; between November 1988 and November 1989, steel production fell from 360,000 tonnes to 330,000 tonnes. Those falls are significant and serious, as the steel industry is typical of a number of high-technology, high-energy-using industries. Those industries know that, if we enter a tighter, more competitive international market, our competitors will behave with a great deal more intelligence than the Government have displayed since 1979. As competition increases and tightens, our competitors in France, Germany and elsewhere will recognise that intelligent support from the state and intervention by the Government will be helpful in maintaining their share of international trade. Our Government should remember that, for companies such as Rotherham Engineering Steels Ltd., the price of power may account for more than 20 per cent. of production costs. The Government will not
Column 808
provide such support, but how will we generate the import revenue to pay for the enormous importation of low- sulphur coal, as envisaged by the Government?The Government have wiped out the British low-sulphur coal industry, and they intend to rely upon imports. In the 1990s, it is inevitable that the premium enjoyed by that coal will increase. Within the decade, I estimate that it will cost £50 a tonne. Because of the Prime Minister's betrayal of her commitment to serve the cause of decency in the environment, we shall be forced to buy low-sulphur coal from abroad, and that will mean the equivalent of a balance of payments demand of £3,000 million.
Mr. Malcolm Bruce (Gordon) : Will the hon. Gentleman give way?
Mr. Hardy : I would rather not, as I promised to make a short speech --perhaps to enable the hon. Gentleman to make his own. The Prime Minister and her Government have betrayed the commitments to the environment that she gave several times 18 months ago. This most recent betrayal comes as no surprise ; we have seen it all before. As a result of the failure of the Government's energy policy, British industry and exporting companies such as Rotherham Engineering Steels Ltd. may face a serious competitive disadvantage. That will affect the national economy and the employment potential that industry should command.
This should not be a matter for party games ; what is at stake is too serious. The Government's handling of the energy economy will endanger the well-being of the country, pose a threat to our exporting industries and cause hardship to the poorest sections of our community, who are already suffering a great deal. The Government's failure poses a danger to the health of the nation as they cling to the idea that the leukaemia-friendly nuclear industry is helpful to the environment. The facts are far too serious to allow the Government to continue with their preposterous approach. 5.17 pm
Dr. Michael Clark (Rochford) : When my right hon. Friend the Member for Hertsmere (Mr. Parkinson) announced his plans for the privatisation of electricity, he made the wise decision to split the generating board in two. He also made the important decision that the distribution companies could generate electricity and that other companies should be able to generate electricity by the use of private capital. One part of that privatisation plan was not how I would have wished, however--that relating to nuclear power. We could have privatised the electricity industry as a whole, but we excluded the nuclear part and kept it as a separate public company. The third report of the Select Committee on Energy for 1987-88 said in paragraph 147 :
"independent witnesses were unanimous that, because of commerical discount rates, and the price of coal, unsupported, private companies were most unlikely to build nuclear power plants."
In a speech in this House on 12 December 1988, I and my hon. Friend the Member for Bedfordshire, North (Sir T. Skeet), who has now left the Chamber, spoke of the wisdom of having a separate publicly owned nuclear company. I said that there was a right and an obligation to buy non-fossil electricity, but asked where the obligation was to build nuclear power stations or generating sets
Column 809
based on renewable sources. It seemed to be a one-sided relationship, with an obligation to buy but no obligation to build. At that time--admittedly, I am going back more than 12 months--there were arguments for a separate public company for nuclear power stations, so that the generation of nuclear electricity would be guaranteed. There was also an argument for a separate company to prevent the nuclear component from eroding the selling price of National Power and PowerGen--particularly National Power. There was also an argument that we should retain a centre of nuclear excellence in terms both of operating nuclear power stations and of research and development. There was, and still is, a case to have a separate nuclear company so that there would be public confidence in nuclear energy, especially with regard to safety.Above all, the main point made in that debate was that it was essential to keep nuclear generation separate from other forms of generation, so as to prevent the true costs of the nuclear industry from being concealed. They were the costs of capital, fuel, waste disposal and decommissioning. It seems that, due to the accoustics and the speed of sound in this Chamber, it takes about 12 months for noises from Back Benches to travel the 10 or 15 ft to the Front Benches.
I am delighted that my right hon. Friend the Secretary of State has taken the bold decision to put nuclear generation into a separate company-- Nuclear Electric. The fact that the decision has been taken a little later than one would wish does not change the fact that it was a bold, wise and correct decision, and I congratulate him on it. I add to the congratulations offered by the hon. Member for Holborn and St. Pancras (Mr. Dobson), and congratulate my right hon. Friend and his colleagues on the magnificent job that they are doing in completing the privatisation programme in the scheduled time. The vesting date will be 31 March. There is little doubt that my right hon. Friend is the right man for the right job at the right time.
Mr. Dobson : How would the hon. Gentleman describe the Secretary of State's predecessor?
Dr. Clark : I am talking about my right hon. Friend the Secretary of State, whom I congratulate on the work that he is doing at present. He is creating competition that will result in downward pressure on prices. Through competition, he will also encourage upward pressure on standard of service, which will benefit everyone using electricity.
We have heard much this afternoon about acid rain, which is principally caused by burning coal and producing sulphur dioxide. There are other forms of pollution, including that caused by carbon dioxide, which causes the so- called greenhouse effect. Carbon dioxide comes from burning not only coal, but all fossil fuels. It seems that, whether we are talking about acid rain or the greenhouse effect, it is either burning fossil fuel or, more specifically in terms of acid rain, burning coal, that is the problem. The difference between the two is that we can scrub out sulphur dioxide and prevent acid rain, as has been said, but we cannot do much now, if anything, to remove carbon dioxide, which causes the greenhouse effect. The only way we can do so is to think of other forms of electricity generation, whether renewables or nuclear.
Column 810
There is a principle--it is presently being embodied in legislation--that the polluter pays. With the privatisation of electricity, I am certain that that principle will continue. The price of electricity must reflect the price of removing such things as sulphur dioxide and preventing acid rain. If we were not careful and did not have privatisation, we would be in a cost-plus position, where the cost of the measures would be passed straight to the consumer by the generator. With privatisation and the competition that will ensue, the cost of removing pollution will be kept to a minimum and will result in a downward trend, not an ever-spiralling upward one.In the long term, there is little doubt that the nuclear programme and renewables are the solution to removing acid rain. However, we must concede --our Select Committee report showed this--that it is unlikely that the nuclear industry can make much of a contribution during the next 10 or 20 years. Therefore, we should perhaps look towards renewables.
In his statement on 12 February, my right hon. Friend the Secretary of State for Energy commented on the fact that the non-fossil fuel obligation would also encourage the development of commercial renewable energy sources. He reminded us this afternoon that about 300 projects have been proposed to the area boards in response to that policy. We await with considerable interest the second order, that he will introduce, which relates specifically to renewables. We look forward to learning about the success of many of those 300 projects.
Let us also hope that some of the money that is now being saved from nuclear research and development can be directed towards renewables. A little pump priming--if I may be excused the pun--in the renewable direction will have a great deal of benefit. Nuclear research is expensive, and it would not require more than a small percentage of that money to be diverted to renewables to have a significant impact on the number of renewable sources, their viability and their commercial success.
I still believe that, in the long term, the nuclear industry gives us the best options for constant availability of energy. In due course, as fossil fuels rise in price due to their scarcity, nuclear electricity will have advantageous prices and will be pollution-free.
Mr. Geoffrey Lofthouse (Pontefract and Castleford) : I am surprised by the hon. Gentleman's last remarks. As Chairman of the Select Committee on Energy, he knows full well that, while we have been taking expert evidence on this subject recently, no one has been able to give the exact cost of nuclear energy in the future, including decommissioning.
Dr. Clark : I grant that it is difficult to know what the cost of nuclear energy will be in future. However, it is also difficult to know what coal, gas, or oil will cost. One fact we do know is that coal, gas and oil are declining in world reserves, whereas the amount of uranium is largely untouched. Basic cost graphs will show that the cost of fossil fuel will increase as it becomes scarce, and the cost of nuclear energy will either remain stable or decrease as technology improves. We know that there is plenty of uranium to fuel the stations.
When the nuclear industry recovers from its temporary setback and starts rebuilding stations, I am certain that they will be in the private sector, as they are in America.
Column 811
There is no reason why they should not be in the private sector here in due course, although it is not appropriate at present, for the reasons that I gave earlier.I am disappointed that the review of the nuclear industry has been delayed until 1994. That will probably mean that there can be no new nuclear power stations before then. I wonder what will happen to fill the gap left by the cancellation of the three pressurised water reactors that are no longer to be built.
The work on finding sites for nuclear waste must continue regardless of the nuclear review. We have to be sure that we have the advanced technology for disposing of nuclear waste by 1994, when there will be another boost in the build of nuclear power stations. The nuclear industry will then be able to keep prices down, without the pollution which results from the burning of fossil fuels. Several Hon. Members rose --
Mr. Deputy Speaker (Mr. Harold Walker) : Order. If hon. Members limit their speeches to 10 minutes, all those who wish to speak will be able to do so.
5.29 pm
Mr. Malcolm Bruce (Gordon) : It is amazing to hear the complacent way in which the Government defend the privatisation of the electricity industry, given the shambolic way in which it has been conducted over the past year or two. The Government have turned cartwheels ; advice from Opposition Members and others outside the House, once treated with contempt and rubbished, has proved to be correct and has ultimately been accepted, but only after confidence in the Government's handling of the matter has been shattered. But that only came about because the City was not prepared to buy the package that was originally proposed. I agree with the hon. Member for Rochford (Dr. Clark) that, in the circumstances, the Secretary of State has made the best of a bad job, but I am sure that he and his predecessor are not the closest of friends as a result.
I am not convinced that the electricity industry has been privatised with the interests of the consumer in mind, with the objective of keeping down electricity prices or with the objective of dealing with the environmental problems associated with electricity generation. It has been done with the voter in mind, as a means to buy votes. However, the Government's economic policies are now in such a mess that it is difficult to see how they can issue such a bribe without aggravating the problems that they have created. The nuclear power industry has proved most embarrassing to the Government. We were first told that nuclear power was the cheapest form of electricity, even though for years it has been apparent to anybody who looked at it closely that that was not the case, and that it was expensive. At least privatisation flushed that fact out so effectively that the Government were forced to pull it from the sale, as I and others warned at the outset they would have to do, because it would not be a saleable proposition.
Not only is the nuclear industry uneconomic, but it cannot be claimed to have all the benefits that the hon. Member for Rochford described. Safety problems occur far too frequently for us to be complacent about existing
Column 812
nuclear power stations. Only last week there was an incident at Hinkley Point. The industry maintains that there was no significant problem, but it was only a matter of luck that there were no serious consequences. The incident was certainly outside the budgeted safety provisions. In other words, it should not have happened. In addition, there are the problems of leukaemia clusters and the genetic transfer of leukaemia at Sellafield.That raises serious questions about whether the THORP project is the money spinner that the Government suggest. At the end of the day, that will prove to be a major cost and environmental liability. The project should never have been embarked upon. The idea that it will win us large quantities of foreign exchange in the short term is likely to be outweighed by the difficulties of maintaining the safety of that plant and dealing with the large volumes of radioactive waste that will be produced as a by-product.
The nuclear industry has no useful contribution to make in the foreseeable future, and it should be phased out during the next 15 to 20 years. That will require a radical reassessment of what our electricity supply industry should look like in 15, 20 or 25 years' time.
I agree with the Secretary of State that the Labour party's motion is a little cheeky. It is certainly bald, and it says little if anything about the Labour party's alternative. It is extremely negative in its approach. One of the Labour party's problems is that, fundamentally, it likes the electricity supply industry the way it was--a huge, centralised monolithic structure.
Mr. Barron : Will the hon. Gentleman give way?
Mr. Bruce : No, I am trying to be brief.
To make the point more forcefully, during the Lib-Lab agreement, the Labour Government's objective was a single electricity company for the United Kingdom. It was one of the small negative benefits of that period that the Liberals in government refused to accede to that objective, and we were right to ensure that the regional structure was maintained. It is necessary to ensure that the industry has some transparency and comparability.
There is room for competition within the supply industry. That has never been a problem for me or for my party, but I am not convinced that the structure that has been created is likely to be the definitive answer. Restructuring will inevitably take place over the years. I am not wholly convinced that there will be a proliferation of new small suppliers, but that is the direction in which the electricity supply industry should move in the next few years, so that we have much greater variety, scale and size of generation. Another mistake in the way in which the industry has been structured and has instinctively operated over the past 10 or 15 years is that, when demand has risen, the response has been to build a series of new giant power stations. That era should be behind us. That is one of the better reasons why the PWRs should be cancelled : not just because they are nuclear stations but because they are of a scale and type that is not relevant to the future structure of the industry.
We want smaller-scale generating capacity, which can be much more efficient because it can use combined heat and power systems and district heating systems and in other ways operate at a level of efficiency which will reduce environmental pressures as well as fuel requirements.
Column 813
Environmental pressures must be addressed from the outset. The Government should be setting targets not only for the reduction of acid rain but for the reduction of carbon dioxide emissions. That can be done only if one sets out the objectives for three to five years ahead and then works out how they can be achieved. The Minister says that the Government aim to achieve a 60 per cent. reduction in acid rain by 2003. The EC wishes to achieve that by 1995, so the Government are clearly not moving as fast as they should be. The practicalities of reducing carbon dioxide emissions are not too acute in the short term. I had the privilege and pleasure of opening a sheltered housing complex in my constituency last week. It was built by Gordon district council and is claimed to be the most energy-efficient housing complex in operation in the United Kingdom. For £30,000, a substantial reduction in heating costs has been achieved. The project cost £1.44 million and the 32 units cost £1 per week for all heat and light, using condensing boilers, triple glazing, high insulation and low-energy lighting.It is also estimated that carbon dioxide emissions from that building have been reduced by 50 per cent., compared to what would have been the case if that £30,000 investment had not been made. Building standards and an energy audit for the introduction of such new systems in a variety of buildings could quickly reduce fuel consumption and carbon dioxide output. Radical measures of that kind are needed if the environmental pressures created by the electricity supply industry are to be reduced.
The Government told the United Nations that they believed that it was possible to reduce the demand for electricity by 60 per cent. within the next few years--that is, a 60 per cent. increase in efficiency. However, in written answers that I have received even in the last few weeks, the Government insist that they believe only a 20 per cent., saving is achievable. How do the Government explain that differential? What is being done to achieve even a 20 per cent. saving?
One must ask also what is being done about renewable sources of energy. After conservation has been exploited--that must be the priority-- alternative energy resources must be dramatically expanded. Scotland has the best wind profile in Europe, yet that resource is not being developed at anything like the rate necessary. In fact, one company involved dropped out of the market because the pace of development did not allow it to survive.
We should be setting ourselves the clear objectives of reducing carbon dioxide emissions by 30 per cent. over the next 15 years, introducing a system of emission control licences to reduce the amount of carbon dioxide and of other greenhouse gases released by energy generation, developing renewable energy resources on a much greater scale, and changing the nature of the coal industry to ensure that we do not continue losing low-sulphur reserves, as we have done over the past year or two. We should also phase out the nuclear power industry by 2020, if not before.
All that is achievable and would bring the substantial benefits of savings to the consumer, reductions in electricity costs, reductions in fuel poverty, and reductions in the impact of the adverse effects of electricity generation on the environment.
Column 814
5.41 pmMr. John Hannam (Exeter) : I welcome the privatisation of the electricity supply industry and congratulate my right hon. Friend the Secretary of State on the effective grasp of the reorganisation that he has shown. In 1979, I and the late Jocelyn Cadbury, both working in the energy group, first drew up a report suggesting splitting the electricity industry into eight coterminous generating and distribution companies, as the first step to achieving a competitive situation. At that time, many technical objections were made, which outweighed the advantages. A decade later, the dream that I and the late Jocelyn Cadbury had of a more flexible and more competitive system is coming to fruition.
We are about to embark on a new era in electricity generation now that the old Central Electricity Generating Board monopoly is to be broken. With the emergence of two new private companies, National Power and PowerGen, together with the newly emerging independent generating companies such as Lakeland Power Ltd.--which has reached agreement to sell the output of its 225 MW power station in Cumbria to NORWEB--we can see all the pressures of competition being brought to bear on prices. I am confident that, within a few years, all the exaggerated fears of the Labour party that electricity prices will rise by 25 per cent. will be proved groundless--just as they were in the case of other major privatisations.
The Government can be proud of the success of their privatisation programme. Twenty-nine major former state sector companies have been privatised since 1980. Almost 45 per cent. of the former state sector and nearly 800,000 jobs are in private hands and are prospering accordingly. That has resulted in a trebling in the number of United Kingdom shareholders to more than 9 million. Ninety-nine per cent. of British Gas employees bought shares, and it would be a salutary lesson for Labour to poll all those employees, asking whether they really want to go backwards and see the renationalisation of the gas industry. Domestic gas prices fell by 16 per cent. in real terms in the five years from 1984 to 1989, and British Telecom charges have fallen by 5 per cent. in real terms since November 1986.
The statement by my right hon. Friend the Secretary of State last week that average electricity prices will increase below inflation is good news for everyone. It means, of course, that once again, Labour has got it all wrong, with its scaremongering forecasts of huge price increases.
Mr. Dobson : Will the hon. Gentleman allow me to intervene?
Mr. Hannam : Because of the time limitation, I cannot give way to the hon. Gentleman--but I can prove if necessary that such a forecast was made by two Labour Members.
History has shown that there were massive price increases under Labour Governments. Between May 1974 and May 1979, domestic electricity prices increased 9 per cent. in real terms, compared with an 8 per cent. fall between 1985 and the present under a Conservative Government. Under Labour, industrial electricity prices rose 6 per cent. in real terms, but have dropped 10 per cent. under a Conservative Government. As the right hon. Member for Plymouth, Devonport (Dr. Owen) said :
Column 815
"The last Labour Government, of which I was a member--I take my share of collective responsibility for this--caused a massive increase in electricity charges."--[ Official Report, 13 December 1988 ; Vol. 143, c. 813.]I have no doubt that the diversity of supply that the Electricity Act promises will materialise.
Mr. George J. Buckley (Hemsworth) rose
Mr. Hannam : In view of the comments of Mr. Deputy Speaker, who asked right hon. and hon. Members to curtail their speeches, I think that I had better carry on.
I mentioned Lakeland Power's 225 MW station, and there is also the ICI- National Power-Enron proposal for a £1 billion gas-fired power station using combined heat and power, which would generate 1,500 MW. Thames Power has plans for a series of five or six generating plants, including a huge 1,000 MW station at Barking, which would supply nearly one quarter of London electricity board's peak demand. South-Eastern electricity board, London Underground Ltd., British Coal and Whitchurch hospital in Cardiff all have schemes that would produce downward pressure on prices and much greater efficiency in energy production.
By seeking out the cheapest source of supply, the 12 area supply companies will promote competition among the generators, with the national grid acting as the market. They will be able to generate electricity themselves or to purchase it from new independent generators. The requirement to purchase a percentage of their needs from non-fossil fuel sources will help to ensure security of supply and encourage the development of renewable sources of power. I wish that the non-fossil fuel percentage could somehow have been extended to include combined heat and power, which must be more greatly encouraged as one of the most energy-efficient means of generating and using electricity.
I support the decision to separate the nuclear power element of the industry at this stage. It is vital to keep nuclear capacity, not only for security of supply but on environmental grounds and a longer-term supply basis. Within a few years, fossil fuel prices will without a doubt begin to rise again and nuclear power will become price-competitive in the United Kingdom--as it is in France, Japan and West Germany. Alternative renewable resources of non-fossil fuel generation will also play an increasingly important part in our energy equation.
The Government are right to help research into, and evaluation of, various forms of electricity generation. Although I should not like to put my money on any particular schemes at this stage, because we have seen their order of priority chop and change over the years, I believe that the Mersey tidal barrage will succeed, as will wind farms on our windier islands. I note the remark of the hon. Member for Gordon (Mr. Bruce), that Scotland presents special opportunities in that context. The landfill gas schemes that are proliferating are also likely to succeed.
The impending privatisation of the electricity industry has given a huge boost to the development of such projects--so much so that 300 schemes have been submitted to area boards for consideration under the non-fossil fuel obligation. Important to us all is the effect of energy production and use upon our environment. A great deal more has to be done in respect of cleaner production and energy efficiency. As I pointed out in an earlier
Column 816
intervention, a process that removes a pollutant such as sulphur dioxide or the lead from petrol can increase the amount of carbon-dioxide going into the atmosphere. That problem will not go away, as has been made clear in all our discussions with environmental organisations.We need imaginative new initiatives throughout the whole area of energy efficiency, if we are to properly protect our environment, as the hon. Member for Gordon said. All the present evaluations show that the best opportunities for environmental benefit probably lie with transport, through increasing car engine efficiency and through new attitudes to travel systems.
In recent discussions with Friends of the Earth, it was pointed out that our present policy of creating industrial estates and new factories far away from the houses in which the employees live creates huge transport problems. It results in vast commuter traffic and use of cars. As many of the new industrial plants are quiet and clean and use new technology, perhaps our planners ought to consider whether we should go back to integrating some of the plants and industries with the housing for the people who will work in them, and so help to produce an answer to one of our environmental problems. We now spend six times the amount that we spent in 1979 on energy efficiency. The Electricity Act places a duty on the Secretary of State and on the Director General of Electricity Supply to promote energy efficiency and economy by suppliers, and to promote the efficient use of the electricity which they supply.
However, the energy efficiency of British buildings is not satisfactory compared with that in other European countries. The programme of energy saving in the early 1980s produced a significant upturn in the awareness of the importance of energy efficiency among industrialists, business men and domestic householders. Now is the time to regenerate--if I may be allowed to use that phrase--full awareness of energy saving and the benefits to the consumer and for future generations. Energy audits, insulation, double- glazing, building design and electronic controls--those are a whole range of actions and options that need to be encouraged, and I know that my right hon. Friend the Secretary of State will pursue them vigorously together with Ministers in other Departments.
The Opposition motion has effectively been torpedoed by my right hon. Friend's announcement of a lower-than-inflation price structure. I ask the House to support the Government amendment.
5.51 pm
| Next Section
| Home Page |