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Mr. Alan W. Williams (Carmarthen) : The Prime Minister, in her third term of office, has at last started to take some interest in environmental matters. Unfortunately, the Department of Energy, which perhaps has the most to contribute to environmental protection, is preoccupied with this privatisation rather than devoting its time to what it could contribute to protect the environment.

We know that acid rain is a major problem for industrialised countries throughout Europe. Despite being in office for more than a decade, the Government have so far achieved nothing in tackling the problem. Britain is by far the largest producer of sulphur dioxide in Europe. We were about the last to reach an agreement with our European partners on progressive cuts of 20 per cent., 40 per cent. and 60 per cent. by the year 2003. We are way behind other countries in terms of doing something. West Germany has already fitted flue gas desulphurisation units to 40,000 MW of generating capacity--that is, 116 separate units--yet, when the Government leave office, not one of our power stations will have been desulphurised. That speaks volumes for the Government's and the Prime Minister's commitment to the environment.

On global warming, the Prime Minister made a major speech to the Meteorological Office on 25 May and impressively recognised that a major problem confronts the planet. Higher carbon dioxide levels in the atmosphere pose the threat that sea levels will rise and, much more important, climatic change across the globe. Having accepted that there is a major problem, the Government's policy is simply stabilisation of carbon dioxide levels by 2003. That implies that, if the Government were returned to office, they would allow carbon dioxide levels to continue to rise-- business as usual--and would then leave it to a successor Government towards the end of the century or early next century to try to effect those difficult cuts. West Germany has a target of 25 per cent. cuts by 2005. The Labour party is committed to stabilisation by the year 2000, which is the policy for most of the European Community. With the privatisation measure, there was an opportunity to do something constructive and substantial

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to tackle problems such as global warming. The answers lie in energy efficiency and in the development of renewable sources of energy. However, we know the record of the Energy Efficiency Office and the cuts in its budget. When the privatisation measure was considered in Committee and on the Floor of the House, many amendments were tabled by the Liberal Democrats and by Labour Members, but the Government voted them all down. A major amendment on energy efficiency and the idea of least cost planning was tabled in the other House, but it was voted down.

It is clear that, rather than invest £2 billion, or whatever is the figure now, for Sizewell nuclear power station, a much better use of the nation's resources would be to put that £2 billion towards improving home insulation, district heating schemes and so on. Investment in energy efficiency creates jobs and makes the economy more efficient. Last week, the right hon. Member for Henley (Mr. Heseltine) made some powerful remarks to that effect. If we invested to save energy use, the whole economy would be more productive and competitive. Energy would be saved and goods would be cheaper. That is the Japanese record, and it is self-evident common sense. The other way of tackling global warming, which is one of the most intractable environmental problems--by stabilisation of carbon dioxide levels--is not enough. We need drastic cuts during the next century. If drastic cuts are ever to be possible, we must develop renewable sources of energy. According to what I hear from organisations and from what I read in the newspapers, far from encouraging renewable sources of energy, this privatisation measure is faulty.

As the hon. Member for Erewash (Mr. Rost) mentioned, when the Department of Energy asked for projects to take the renewable tranche within the privatisation, it was embarrassed by the hundreds of replies that it received. Having got 600 or so projects lined up, it moved the goal posts and changed the 15-year payback to an eight-year payback. If we want renewable sources to make the major contribution that they could to our energy supplies in the next century, we must invest in the same way as we are willing to invest in nuclear power. The only good thing that has come out of the privatisation measure is the fact that it has introduced transparency to nuclear costs. When people in the City started to examine the costs of decommissioning and the costs of treating nuclear waste and possibly disposing of it, they were horrified. I am relieved and pleased that that aspect has been taken out of the privatisation measure. A 20 per cent. cost escalation at the Sizewell nuclear power station during the past two years has been mentioned. There is no question but that that power station, along with the other three, should be scrapped now.

Hon. Members have heard several contributions about economics and cost of the privatisation--selling £20 billion or £30 billion of assets at knockdown prices. The consumer will have to pay for that. It is my strong belief that the consumer cannot afford this privatisation. Because of imports implications, the country cannot afford it either, and nor can the environment.

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6.38 pm

Mr. Rhodri Morgan (Cardiff, West) : In the light of the limited time available, I must dispense with some of the customary niceties in sweeping up at the end of the debate and get straight into the remarks that are necessary for Opposition Members to explain what we find so unsatisfactory about the Government's privatisation of the electricity supply industry.

This privatisation is different from other privatisations in that the industry is being dismantled and reassembled at the same time as it is being privatised. That poses entirely new problems for those guiding the industry not just into the private sector, as on 1 April, but on to the stock exchange and being sold off somehow or other over the next 12 months or two years.

Usually, when selling a company on the stock exchange, five years of audited accounts must be produced as a guide for anyone buying shares. What animal are they buying? Is it fish, fowl, chalk, cheese or whatever? Buyers will not have the benefit of that procedure with this flotation. Anyone wishing to buy shares in an area distribution company will find that it is not the same as the distribution board that existed until 31 March. It is without some of its previous operations, but it has many others. It has the power to generate, but it does not have a monopoly over distribution. When a new housing estate is built in the area, a generating company--or any Tom, Dick or Harry--could bid to put in the wires. There is no automatic monopoly ; the company has lost that guaranteed income.

Similarly, when buying a share in a generating company, that will not be the same as simply buying the 70 per cent. coal-fired and oil-fired generating sets that belong to the Central Electricity Generating Board, because the electricity distribution companies can operate in generating and the generating companies can operate in distribution. It is a complete mish-mash of an industry.

Conservative Members may say, "That's fine ; that is what we want. We want a mish-mash. We want distributors to be able to generate and generators to be able to distribute. We want distributors to be able to pinch business from each other in the borders or, for example, the North of Scotland Hydro Board to take contracts in south Wales, and so on." That is exactly what they want. What does that mean for the small shareholder who might be inveigled into buying shares? Stockbrokers can no longer say, "Here are the audited accounts for the previous five years. It appears that there will be a gently rising path into the future, which means that we can expect so much capital growth and so much dividend income." Now a new company, of a new kind, is being floated. What sort of protection will be offered to the small shareholder?

The Government could say, "Well, that does not really matter, because we are converting the company not merely into shares but into a sort of granny -bond operation. Whatever the results this year, we can project forward through the inclusion of the retail price index plus x minus y formula." Apart from the fact that that builds inflation into the formula, it is no real protection for the small shareholder because he cannot find any independent advice about new shares that he wants to buy.

Mrs. Edwina Currie (Derbyshire, South) : As the hon. Gentleman knows, a large number of people in my constituency work in this most important industry. I

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apologise for not having been present for the whole of the debate ; I have been in my constituency. Is he aware that the main question asked by people in the industry in my constituency is when will they get their shares? They have complete confidence in the industry and in the privatisation.

Mr. Morgan : The trouble is that that assumes that the shares will be given away at a very low price by writing off two thirds of their book value--and if that can happen once, it can happen again. Where will they get advice on what is the proper and fair arbitration of the current value of the shares as they belong to the taxpayer, and the appropriate value for selling them to the private shareholder? Who will provide that?

A recent heavyweight article in The Times Business News stated : "A few weeks back, a highly-placed executive at one of the country's 12 electricity distribution companies was threatened with court action by the Department of Energy.

His alleged crime was giving an honest review of the prospects for his business, a breach, in the department's eyes, of the Financial Services Act Nothing better reflects the paranoia and uncertainty surrounding electricity privatisation

It was a feature of the water floatation that the FSA was used as an extension of the Official Secrets Act, to plug unwanted--as opposed to Whitehall-sanctioned--leaks."

The problem with this privatisation--it is worse than with any previous privatisation--is that we cannot put a proper value on the industry unless we allow independent comment. The Government are putting a blanket ban on any independent comments that could help small shareholders to decide what is the right price and whether they want to go into the industry as investors.

As far as I am aware, the Government have not yet decided whether to sell any shares in the generating companies to the Sids. Perhaps the hon. Member for Derbyshire, South (Mrs. Currie), who has joined the debate at the last minute, has views on that which she may want to make to the Secretary of State. I understand that it might be done by replacement or by tender. The Secretary of State may have views on that which he could express to the House tonight--it is a suitable opportunity--because it is very important to the way that public expenditure on this industry is being thrown around.

We have heard several times tonight about the way in which the generating companies are presenting themselves as the wonderful folks who bring us the world cup and the weather forecast. The world cup sponsorship slots are not just advertisements, they are included in the commentator's references. He might say, "This game is brought to you by National Power," as though the world cup would not be on television were it not for electricity privatisation. Bob Phillips, a sports commentator on my local newspaper in Cardiff, said that it was the most unwanted electricity plug of all time, and I agree. The blurring of the distinction between what is sponsorship and what is advertising is absolutely appalling. It is part of the drift into sleaze to which we have referred several times. It is impossible to obtain a contract in anything to do with privatisation unless Tim Bell is one's public relations adviser--

Mr. Barry Jones (Alyn and Deeside) : Ireland beat Romania 5 : 4 on penalties.

Mr. Morgan : I am glad to hear that.

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I am anxious that we should know just how much money is being spent on advertising. It appears that, this year alone, the corporate advertising of National Power, PowerGen, the 12 area distribution companies and the Government in presenting the companies for sale will be well above £50 million. That is creating a whole new class of privatisation junkies--advertising agencies that cannot do without the full-page advertising and newspapers which, in the downturn in commercial advertising, cannot really afford to keep on their journalists unless they take privatisation advertising.

The stockbrokers and merchant bankers--the Kleinwort Bensons, the Warburgs, the Capels and the Cazenoves--are now completely dependent on privatisation proceeds to keep them going during a period of slack business in the stock market and in merchant banking.

What we now need to know is the real purpose and the real priority of privatisation of the electricity supply industry. Will it meet the priorities of the industry? Will it convert the industry into the shape that it should be so that it can answer the real problems that it will face over the next 10 or 12 years--as perceived by Conservative Members, let alone by Labour Members? Will the electricity industry's top priority be competition?

Some Conservative Members probably think that everything should be subject to competition--even, as we heard last week, the very currencies in which we deal. They believe that hard and soft currencies should be the subject of competition when one buys groceries or uses a travel agent. We believe that there are more important priorities in the energy industry--and when it comes to attending international conferences, even the Prime Minister thinks that there are more important priorities than merely competition. I know that the Prime Minister suffers from her own version of BSE--Boadicea syndrome encephalopathy. She likes to grab hold of the nearest chariot wheels in the conference game. If there is a conference, especially in this country where she can organise it and make sure that she has a starring role, she is in there, fighting for a leading role. She is one of those recognisable types of person who boss their way into being secretary of the

best-kept-planet-in-the-galaxy committee. When it comes to global warming, yes, the Prime Minister wants to be there, as long as everybody does what she says. If everybody did what she says, not what she does, we might have a healthier environment for our planet, but we certainly will not have that if we follow what she does. The Prime Minister has refused to put conservation at the top of the energy industry's agenda, while talking up her role as the person who can solve global warming and acid rain. Having seen that wonderful headline in the Evening Standard,

"Maggie's plan to save the world",

the Prime Minister cut the acid rain reduction programme from 12, 000 MW to 8,000 MW. However, the Evening Standard did not run a headline stating, "Maggie's plan to save two thirds of the world", although it should have.

With all the advertising and the creation of an entirely new class of privatisation junkie, now is the time for the Government to giving serious thought to the real needs of the next 10 years. Is it rational to plan our use of energy and the way in which we sell energy, with a view to the global environment, or is it simply a question of selling off our energy industry to create a new class of small shareholder?

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If global warming turns out to be a big problem, and if in 10 years' time the Secretary of State's successor is sitting on the Terrace with the successor to Sir Humphrey as the Thames water from the rising sea level comes over the parapet on to the Terrace, we do not want the Secretary of State to say to Sir Humphrey, "Well, global warming is here to stay ; what is our policy response?", and Sir Humphrey to reply, "I suppose that we could always try breast stroke."

6.51 pm

The Parliamentary Under-Secretary of State for Energy (Mr. Tony Baldry) : This has been an interesting and wide-ranging debate. It has enabled the Government, once again, to set out the success of our privatisation proposals. We have heard interesting speeches from hon. Members of all parties, all of whom take a close interest in energy policy. In the eight minutes left to me, I shall try to respond to some of their points.

The first point that the Opposition sought to make was about the price of the privatisation. I wish to make it clear that, via the supplementary estimates, the Government have obtained parliamentary approval for the preliminary spending. The other spending will be netted against the proceeds of the sale, and has been provided for with a token vote, as is the established practice. The final cost will be presented to the House as soon as possible after the privatisation sale--again, following the established practice. That is all perfectly proper.

It is clearly too early to make any estimate of the final costs because numerous factors may affect them. However, we are seeking to keep the cost to the minimum commensurate with maximising the proceeds of sale because that will obviously be to the benefit of the taxpayer. In all this, we are seeking to ensure value for money. That is why we have awarded contracts by competitive tender, and are therefore getting competitive rates.

Electricity privatisation is an extremely complex exercise, but advisers are appointed only where a clear need for expert advice can be demonstrated and where that advice is not available within the Department. Therefore, the appointment of advisers is the most cost-effective way of obtaining expertise. The bulk of that advice is on accounting and legal matters.

We are seeking to ensure not only that the privatisation of the electricity industry is a success, but that the taxpayer and the community as a whole benefit from that success. We have always sought to make what we are doing clear to the hon. Member for Holborn and St. Pancras (Mr. Dobson) and he, of course, has been given ample information, including a list of the advisers appointed by the Department, a list of the advisers appointed by National Power and PowerGen and the area boards, and our estimated costs up to the end of 1989-90, together with our estimates for this year. I understand that the hon. Gentleman has sought further information from the regional electricity companies.

Mr. Dobson rose --

Mr. Baldry : No, I shall not give way--[ Hon. Members :-- "Give way."] With respect, I have very little time.

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In every privatisation, the total cost of the privatisation as a percentage of the sale proceeds has been small. In Britoil, it was 5.5 per cent ; for British Gas, it was 3.4 per cent ; and for the water privatisation it was 2.5 per cent. Those costs, as a percentage of the sales proceeds, were spent in ensuring the maximised return from the proceeds to the benefit of the taxpayer. As I said, we are seeking to ensure the minimum cost commensurate with the maximum proceeds.

Opposition Members seem to scowl at both marketing and advertising. The marketing of the industry is necessary to ensure that we have maximum wider share ownership, including among employees. Marketing is designed to ensure that we achieve value for money and that there is proper information that can lead to the formation of a proper share price, which again leads to the maximum proceeds. Similarly with advertising : it is too early to estimate the costs of an advertising campaign, but it is intended to ensure maximum proceeds for the taxpayer. It is surprising that Opposition Members, who are quick to criticise when they feel that the Government have not secured the maximum proceeds for an industry, should be so derisory when we take all proper efforts to ensure that we achieve the maximum proceeds.

All the advisers who have been retained by the Department of Energy punctiliously meet the conventions governing the appointment of such advisers. All those appointments have been made in accordance with the proper proprieties and to ensure value for money. There has been no breach of any rules. Every appointment has been made in accordance with the clear criteria set out by the Cabinet Office.

Mr. Dobson : If all the proprieties have been followed, why were not many of those advisers appointed by competitive tender? That point was confirmed by the Secretary of State in an answer to me.

Mr. Baldry : With respect, all the advisers have been appointed by a proper competitive process, to ensure proper competitive forces--

Mr. Dobson : The Minister should ask the Secretary of State about that.

Mr. Baldry : The hon. Gentleman's mathematics leaves a lot to be desired.

Not only is his mathematics wrong--he was incapable of deducting the £9 billion of Nuclear Electric from the value of the electricity assets--but so is his methodology. The current cost accounting method is not an appropriate basis for valuing the industry because it seeks to measure replacement value, which is not the same as what the taxpayer has paid for the assets. One must therefore look at the written down costs, which are estimated at £10 billion.

Estimates of the sale proceeds are at present somewhat speculative. However, the benefits of the privatisation are not only the money that it realises, but the benefits of competition ; of downward pressure on prices ; of wider share ownership ; and of removing the burden of interest costs from the public to the private sector. Competition and market forces are already producing real benefits in the price reductions that have been achieved for large industrial users. Our prices are good news for customers, industry and the environment.

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The opposition has been based on a complete misunderstanding of the position and on ignorance of the progress being made. The benefits already secured in privatising the industry are considerable. The Opposition say that they want to get proper value for the industry, yet they criticise the valuation and marketing exercise which the Government are undertaking and which will ensure that we realise a proper return for the public.

This debate--

Mr. Frank Haynes (Ashfield) rose in his place and claimed to move, That the Question be now put.

Question, That the Question be now put, put and agreed to. Question put accordingly, That the original words stand part of the Question :--

The House divided : Ayes 186, Noes 298.

Division No. 259] [7.2 pm

AYES

Adams, Allen (Paisley N)

Allen, Graham

Alton, David

Anderson, Donald

Archer, Rt Hon Peter

Armstrong, Hilary

Ashdown, Rt Hon Paddy

Ashley, Rt Hon Jack

Ashton, Joe

Banks, Tony (Newham NW)

Barnes, Harry (Derbyshire NE)

Barron, Kevin

Beckett, Margaret

Bell, Stuart

Benn, Rt Hon Tony

Bennett, A. F. (D'nt'n & R'dish)

Bermingham, Gerald

Bidwell, Sydney

Blair, Tony

Blunkett, David

Boyes, Roland

Bradley, Keith

Brown, Ron (Edinburgh Leith)

Buckley, George J.

Caborn, Richard

Callaghan, Jim

Campbell, Menzies (Fife NE)

Campbell, Ron (Blyth Valley)

Carlile, Alex (Mont'g)

Carr, Michael

Clark, Dr David (S Shields)

Clarke, Tom (Monklands W)

Clay, Bob

Clwyd, Mrs Ann

Cohen, Harry

Coleman, Donald

Cook, Robin (Livingston)

Corbett, Robin

Cousins, Jim

Cox, Tom

Cryer, Bob

Cummings, John

Cunliffe, Lawrence

Cunningham, Dr John

Dalyell, Tam

Darling, Alistair

Davies, Rt Hon Denzil (Llanelli)

Davies, Ron (Caerphilly)

Davis, Terry (B'ham Hodge H'l)

Dewar, Donald

Dixon, Don

Dobson, Frank

Doran, Frank

Douglas, Dick

Dunnachie, Jimmy

Dunwoody, Hon Mrs Gwyneth

Evans, John (St Helens N)

Ewing, Harry (Falkirk E)

Ewing, Mrs Margaret (Moray)

Fatchett, Derek

Faulds, Andrew

Fearn, Ronald

Field, Frank (Birkenhead)

Fields, Terry (L'pool B G'n)

Fisher, Mark

Flannery, Martin

Flynn, Paul

Foot, Rt Hon Michael

Foster, Derek

Foulkes, George

Fraser, John

Galloway, George

Garrett, Ted (Wallsend)

George, Bruce

Gilbert, Rt Hon Dr John

Godman, Dr Norman A.

Golding, Mrs Llin

Gould, Bryan

Graham, Thomas

Griffiths, Nigel (Edinburgh S)

Griffiths, Win (Bridgend)

Grocott, Bruce

Hardy, Peter

Harman, Ms Harriet

Hattersley, Rt Hon Roy

Haynes, Frank

Heal, Mrs Sylvia

Healey, Rt Hon Denis

Henderson, Doug

Hinchliffe, David

Hoey, Ms Kate (Vauxhall)

Hogg, N. (C'nauld & Kilsyth)

Hood, Jimmy

Howarth, George (Knowsley N)

Howells, Dr. Kim (Pontypridd)

Hoyle, Doug

Hughes, John (Coventry NE)

Hughes, Robert (Aberdeen N)

Hughes, Simon (Southwark)

Illsley, Eric

Janner, Greville

Jones, Barry (Alyn & Deeside)

Jones, Ieuan (Ynys Mo n)

Jones, Martyn (Clwyd S W)

Kaufman, Rt Hon Gerald

Kennedy, Charles

Kilfedder, James

Kirkwood, Archy

Lambie, David

Lamond, James

Leadbitter, Ted

Leighton, Ron

Lestor, Joan (Eccles)

Lewis, Terry

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