House of Commons Hansard Debates for 14 Mar 1995

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Those requirements are all being removed from members of the board of AEA which, in addition, is being reduced in size. I can see the advertisements now: "Join the board of AEA; fat salary available to the right man"--they will be men, of course--"No prior experience necessary; only former Tory Ministers need apply".

The real tragedy of the measure is not the fact that it is being brought before us today, but that there are so many other more worthwhile things that the Department of Trade and Industry could and should be doing instead of wasting our time with such a dubious measure. For instance, we could have had the Bill that everyone but the Government agrees that the Post Office requires to become more competitive in an increasingly complex trading environment while remaining where it belongs--in the public sector, as everyone wants. As I have already pointed out, we could have developed detailed plans to take full advantage of the technology foresight exercise- -I bet that the Japanese have.

Ministers might care to look at enacting a proper framework of legislation for competition in Britain to raise our standards to those of our competitors in the United States and the EC. They might even take the logic of the nuclear review a stage further and hold the full-scale strategic inquiry into our long-term energy needs that we believe is necessary. But no--instead, the Government bring this stupid measure before us: a Bill that will damage one of the few institutions of which the Department of Trade and Industry can be proud. What an indictment that is of the sorry bunch masquerading as a Government on the Conservative Benches.

5.14 pm

Mr. Ian Bruce (South Dorset): It is always a pleasure to listen to the hon. Member for Kirkcaldy (Dr. Moonie). I am a great fan of Scottish accents, and his is wonderfully pleasant.

Unfortunately, I had much difficulty discerning what the Labour party is about. Most hon. Members who are present this afternoon are here for the good reason that they have constituency interests, particularly affecting the employment of their constituents. I should have liked to hear from the hon. Gentleman--who believes, I am sure wrongly, that the Labour party will be in government in two years' time--that the Opposition's strategic planning had extended to deciding whether there should be a nuclear industry. I should be grateful to hear what Opposition Members think about the British nuclear industry.

Mr. Miller: Can the hon. Gentleman tell us what the Minister was unable to tell us--what will be in the nuclear review?

Mr. Bruce: I should be happy to be able to announce today what will be in the nuclear review. I am pleased to be able to tell the hon. Gentleman, and I am sure that he will be pleased to hear it, that the British nuclear industry is rapidly renationalising electricity supply. I say that because the proportion of electricity being generated by the nationalised industries rather than the privatised industries is going up by leaps and bounds.

One of the problems about privatising the nuclear industry is not that it will not make a profit or succeed, but that it is now so large that it could not be privatised in

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one lump. It represents too large a proportion of electricity supply and generation and so would have an advantage over conventional power stations.

Like the hon. Member for Kirkcaldy, I await with bated breath the results of the nuclear review, but I am confident about its outcome because the Government are fully committed to the nuclear industry and to diversity of supply, which has been so valuable for our country, particularly when we were being held to ransom by some hon. Members who support the Labour party.

Knowing that in recent years the nuclear industry has had to contract its research because of the paucity of new orders for new types of nuclear power station and the lack of any assured continuity of the pressurised water reactor stations, my constituents, who have one of the smaller nuclear sites at Winfrith, are concerned that it might be allowed to wither on the vine.

We had a steam-generating heavy water reactor, which was produced as a demonstrator when the right hon. Member for Chesterfield (Mr. Benn) was Secretary of State for Energy. He is a charming and well-respected Member of the House, but he is not well-liked in the nuclear industry in my constituency because it was he who decided to scrap that excellent design in favour of the advanced gas-cooled reactor. It will be a long time before we can fully establish whether the AGR was a success, but my constituents felt that the SGHWR was the right way to go. While it was producing 100 MW for the grid, it was successful, but it has come to the end of its useful life and is being decommissioned. That has meant a reduction in production workers in my constituency. The research side of AEA Technology has been reduced and that too has meant a loss of employment. My constituents, however, are always thinking in terms of enterprise and continuity of employment. Rather than simply allowing the site to become less and less occupied, they have already persuaded the Defence Research Agency to consolidate most of its operations in Dorset and beyond, to come on to the site and to take up redundant buildings, as well as constructing new ones. AEA Technology must be congratulated on perceiving that as a forward- looking way of dealing with the difficulties of reduced employment. Several other companies also intend to come on to the site, and the opportunities that that will provide for further employment are important to those who currently work for AEA Technology, and to all the divisions.

The nuclear industry has spawned a number of interesting new technologies. The site at Winfrith, for instance, is very good at oil well logging-- deciding how much oil is in a well. I was disappointed that, when the Government decided to move part of the Department of Trade and Industry out of London, they opted for Aberdeen rather than Winfrith. A move to Winfrith would have been much more sensible, because much of the technical work that is done for the DTI--enabling decisions to be made about how an oil company can best exploit a well--is done there. I am sorry that my right hon. and hon. Friends were short-sighted in that regard, not least because of the relative distances involved.

I see smiles on the faces of DTI officials--who are now hiding behind the Box--at the wonderful thought of working in Dorset, which is rather nearer to London than Aberdeen. Aberdeen is a wonderful place, of course, but

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it has already received a good deal of investment; the Government are already committed to Scotland, Wales and the more distant regions, and should be encouraged to help the south and south- west. Safety cases have always been a feature of nuclear technology. Everyone has always assumed that nuclear is more dangerous than anything else, which is not true. The safety cases for the nuclear industry, however, have an enormous cross-over benefit: we now realise that oilfield and transport technologies, for instance, need the same detailed provision. AEA Technology should be congratulated on having developed that outside the nuclear industry.

I hope that one of the spin-offs of AEA Technology's privatisation will be an opportunity for it to extend its activities into non-nuclear fields, but the Government must not expect it to lose its nuclear expertise. I am certain that they will require it to be "switched on" for nuclear purposes in future, both in the United Kingdom and--perhaps even more important-- overseas. I shall deal with the reorganisation issue shortly: I share the concern expressed by a number of hon. Members about the splitting of AEA Technology, and the possible reduction of its ability to compete in important respects. We often lose sight of technology transfer. The hon. Member for Kirkcaldy suggested that it had not worked particularly well for defence, but I believe that technology transfer in AEA Technology has been constantly held back by the fact that the organisation is Government-owned. Treasury rules have limited what it can profitably or sensibly do: for instance, it is currently not supposed to compete with other private organisations. That has nearly always meant that, when AEA Technology has developed a good idea, it has had to license it to another company rather than pursue it for itself. When it has been unable to find a private sector partner, despite believing that its idea has great potential, it has been unable to back its own judgment.

There is clearly a limited market for pure research. When AEA Technology can develop that research, manufacture products and provide services without having to worry about whether its activities are in the public interest or would be approved of by Government, it will be much better off. Employment will also benefit. Of course that is a risky strategy, because such activities can fail; but we cannot simply allow the nuclear research organisations to wait for the Government to come forward with research projects. We know that the Government and the generating industries are likely to spend less on research unless more nuclear power stations are built, or decommissioning is speeded up. We must give those organisations freedom to go out and compete.

Dr. Moonie: Does the hon. Gentleman agree that research-based organisations are not always good at production? There is a logical distinction between the two. Moreover, spending on research and development is highly elastic, especially in view of the business cycle. There is a considerable risk that, if the AEA is entirely dependent on the market, when there is a downturn--as always happens, with or without Government policy--it will suffer as a consequence.

Mr. Bruce: I have acknowledged the risks of moving into other areas of production. I was interested to note what the hon. Gentleman said about cutting off, as it were, some of the AEA's current arms by decommissioning. It

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will, of course, suffer as a result of that. But if a management is looking for opportunities and taking a conservative- -with a small "c"--view of the future, high technology and technology transfer should be at the forefront of its mind. It should consider how to transfer its technology into production; after all, that is what the United Kingdom will live on in the future. How that is done must be up to management. I agree with the hon. Member for Kirkcaldy that it is important to use those with good production skills, but management must have the freedom to make commercial deals that are in the best interests of AEA Technology and, ultimately, the creation of jobs and UK Ltd.

I hope that I have explained why I think that privatisation is the right course. Let me deal next with the genuine concerns of many of my constituents, which have already featured in the debate and will no doubt be mentioned again. I trust that I have made it plain that my constituents are not Luddites; they are not in the business of saying no for the sake of it. I therefore feel that the Government should listen to them carefully.

The Bill gives some reassurance about pensions. With previous privatisations, Opposition Members have often complained that the Bills involved contained no provision to help with pensions. We must ensure that people feel that their pensions are being properly looked after and that their future well-being is at the forefront of the Government's transfer plans.

Redundancies are also a real worry. Many of my constituents are saying, "I have many skills. The Government and AEA Technology may want to make me redundant; there have been some generous redundancy schemes in the past. Yes please, I will grab the redundancy and then take my place in the job market." As a constituency Member of Parliament, I do not want those people to take redundancy at this stage. I believe that AEA Technology has a great future, but we must reassure people.

In three, four or five years' time, AEA Technology may well be owned by a large multinational company. If people believed that the new employer could give them the minimum statutory redundancy pay and then push them out into the marketplace, they would feel that the Government had betrayed them. In recent years, the Government have rightly looked after employees who have been made redundant. The Government have an excellent record on privatisation and on helping people to move from Government to private sector employment, but I cannot emphasise strongly enough that all constituency Members of Parliament will be keen to ensure that the Government maintain their high standards. I shall certainly be at the forefront of doing so on behalf of my constituents.

I know that Ministers will say that, of course, management knows what is right, that it has a wonderful system of reorganisation and that they will back its ability to make the right decisions. My constituents, however, lack confidence in what management is saying. There is some justification for that feeling because management has reorganised AEA Technology almost annually, perhaps even bi-annually, which has sapped people's morale.

Clearly, we are approaching the point at which the Government will say, "This is the right reorganisation, the management has got it right, we will enshrine it by keeping a Government division, selling off the services

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and putting AEA Technology's operation and research arms into the private sector." We must be careful to ensure, however, that management has got it right, and even more careful that no evidence exists that the management's suggestion on the way forward has been overruled by Department of Trade and Industry officials, who recommend it to Ministers, who then rubber stamp what they think is the management's decision, but is actually the management decision as modified by the DTI.

It has been suggested to me on a number of occasions that management has agreed a trade-off with the DTI, which has said, "If you get rid of this, we will not hammer you on something else." I do not want to go into detail and embarrass individuals. One must appreciate that, effectively, the organisation's management is now made up of civil servants, who cannot talk publicly about what they want. Ministers should consider carefully what is being said to them and try to get the best deal for the future of AEA Technology. I have nailed my colours to the mast, unlike the Labour party, which is not in favour of privatisation. Privatisation will be good, but we must ensure that we get it right and that employees are given an assurance that it is not some form of redundancy scheme, with the Government, as an easy way of getting rid of the research side and 4, 000 employees, shoving them off into a company. If it failed, no embarrassment would be caused by a Minister having to say what the problem was at the Dispatch Box. That will not happen, but Ministers need to ensure that they are certain that the proposal will have a good chance of flying.

I notice the removal of large amounts of debts and liabilities from all wings of AEA Technology. The Government are doing their best to ensure that they leave a company that has low-cost assets and that could really do something in the market. That is important. One specific matter confused many of us who were enthusiastic about AEA Technology going into the private sector. Decommissioning work is undertaken in what was known in my constituency as building A59. Such decommissioning is undertaken at a number of AEA Technology sites. The Government division did not need to undertake that

decommissioning work--it could have been done in the private sector and was originally left with AEA Technology. I did not disagree with that. Then a deal was struck at the DTI, and decommissioning was promptly transferred from AEA Technology and back to the Government division, so that the Government division could sell it off to another company. I was not totally convinced that that was wrong, but I was concerned about what happened.

The Government and, I think, the DTI said that decommissioning could be undertaken by a number of different companies and that a competitive market should exist for decommissioning companies. I do not disagree with that. But why should not AEA Technology have a decommissioning arm? It knows about the subject. It has a research base and management for that. From day one, management would have been able to bid for decommissioning work in the marketplace. It was not necessary to sell it off to another company, which would

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then have that facility and which would be able to bid against other private sector companies going for decommissioning work.

Mr. Ken Purchase (Wolverhampton, North-East): Given his diligence as a constituency Member, in the past few months the hon. Gentleman will have made a number of inquiries about those matters. Does not he think that hon. Members will find it extraordinary that he now says that they cause him great puzzlement? Should not they have been sorted out to his satisfaction? He would then not have needed to express his worries to the House. Does that leave the rest of us with any confidence in the Bill?

Mr. Bruce: I am grateful to the hon. Gentleman for looking after my interests. As I am sure he appreciates as a constituency Member with detailed knowledge of the matter, I have pursued my interests both with Ministers and with different members of the management. [Interruption.] He should listen to my answer. I have explored this matter with a number of members of the senior management in AEA Technology. The answers that I received were not uniform. Some members of the management team, who I greatly respect, believe that this move is in the best interests of all the employees. That, after all, is what the DTI appears to be saying. Other members of the team are troubled by it. I know it is a big troubling factor for employees. They see a sub-plot that has not been fully explained to them. We must move carefully.

My understanding is that the work has already been sent out to companies that might want to take it over. Ministers should ensure that a bid by a new company to undertake the work will be put to the test. We should know whether employees will be better off from that move and what the continuity of the work will be. After all, decommissioning on the Winfrith site will end within the next two years, at which point employees expect to be made redundant. What proposal provides a better chance of them having work, and what are the chances of them having the same redundancy deal that they would have received from the Government? Those are important factors. If my hon. Friend the Under-Secretary is not satisfied with hiving off decommissioning work, he should talk to AEA Technology about the possibility of taking it back under its wing and continuing, as part of the privatisation, to keep it together. I rely on my hon. Friend. I notice that he is taking detailed notes of this, as, I am sure, are his officials. I hope that they will consider the matter in great detail. As the hon. Member for Wolverhampton, North-East (Mr. Purchase) suggested, I have unfinished business. I shall keep a close eye on it.

Before AEA Technology is privatised, it is important to have the nuclear review. I heard my right hon. Friend the Minister for Energy and Industry say that privatisation would have been unlikely without the results of the nuclear review. I take that as an assurance that we will know about that. After all, what company could make a bid for the work without knowing the UK nuclear industry's future? The two Opposition parties are good at criticising Government policy on everything under the sun, but they have failed to tell us their thinking on the nuclear industry. The trade unions in the nuclear industry

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have quietened some of the more vociferous anti-nuclear protestors who have been screaming about closing down the industry, but that threat is still very real.

The fast breeder reactor programme was put on ice because we know that, in the next 30 years before it will be needed, it is likely that there will be a Government of a different political persuasion. What was the point of this Conservative Government spending taxpayers' money now when the Liberal Democrats and the Labour party have said that they would not build the reactor, even if it was in the market interest to do so. I notice that the hon. Member for Wolverhampton, North-East is shaking his head. I hope that he will mention that in his speech. The hon. Member for Workington (Mr. Campbell-Savours) is wandering around looking rather lost. Perhaps he would care to remain in his seat.

Mr. D. N. Campbell-Savours (Workington): I am not lost, particularly not on these matters, my lad.

Mr. Bruce: I am glad to hear that.

I want to talk about the future and the nuclear review. I know that John Collier, the chairman of Nuclear Electric, is keen to see that the great success that has been achieved by himself, his management team and every employee in the nuclear industry is recognised by the Government. They want to know that the Government realise that the nuclear industry is no longer a lame duck. It needs to be given the ability to go out and sell itself to the distributors and those who want to buy electricity in a profitable way. At long last we are starting to see the promise of the nuclear industry being fulfilled. We need to know about the programme for decommissioning. We need to know whether the Magnox stations will be decommissioned at a faster or a slower rate and we need to know about the life of particular types of power stations. It is important for people to know that before we privatise AEA Technology.

It has been mentioned that Barclay Laboratories may move away from the control of Nuclear Electric and into a possible merger with AEA Technology. That is important and it also needs to be looked at before we sell off AEA Technology.

I am sorry that I am losing the attention of Opposition Members because my notes say that at this point I should deal with the policies of the Labour party and the Liberal Democrats on nuclear electricity. However, there is then a blank in my speech. That is because, since the Opposition parties were trounced at the last general election, we have heard very little from them about that subject. Opposition Members may wish to campaign in my constituency, but some of those in my constituency have been in the nuclear industry for 30 years. They want to hear words of comfort from the Opposition parties. They do not want to hear that the Opposition parties are void of policy and fresh thinking. They want to hear that the Opposition know that we need a home nuclear industry to go out and sell our industry overseas. The Opposition are failing their constituents and the few of my constituents who choose to vote for them by not telling us about their policies.

Dr. Moonie rose --

Mr. Bruce: I am so glad that the hon. Gentleman wants to tell us about the Labour party's policy on this.

Dr. Moonie: I am afraid not. The hon. Gentleman can hardly expect any party to come forward with plans for

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the future of the nuclear industry before the nuclear review is public knowledge. Any future plans for our energy generation must depend on that.

Mr. Bruce: I am grateful to the hon. Gentleman for an assurance that the Labour party will announce its nuclear policy shortly after the Government announce the nuclear review. I shall remind him on 1 January 1996--that should provide a sensible amount time for both those things to happen--that he will be announcing, as soon as is practicable, in a pamphlet or some other form what will happen with the nuclear industry over the next three or four decades when, eventually, the Labour party comes to power.

I have been speaking for more than long enough to give an indication of my feelings on this issue. I entreat the Government to rely upon the staff at all levels within AEA Technology. They should be able to offer a positive view about what they feel should be happening in their own industry. The Government should listen to their concerns and recommendations and do whatever they can to reassure them. Her Majesty's Government owe a debt of gratitude and a duty of care to AEA's employees. I support the Bill enthusiastically, but I can assure Ministers that I will continue to remind the Government of these important matters and ensure that they do not short change this country's nuclear industry in any way.

5.45 pm

Mr. Robert Maclennan (Caithness and Sutherland): The hon. Member for South Dorset (Mr. Bruce) proclaimed himself a friend of the Government and a supporter of the Bill, but each of his questions was like a dagger being struck through the cloak or toga of the Minister. By the end of his speech, his friendship seemed like the friendship of Brutus for Julius Caesar. There was not a great deal left of the Bill by the time he had finished. Since he felt it necessary to refight the battle of the steam-generating heavy water reactor some years after the event in order to prove a rather arcane point about the right hon. Member for Chesterfield (Mr. Benn), I do not think that I shall follow him very far in his comments.

I thought that the more penetrating question came from the hon. Member for Wantage (Mr. Jackson) in his intervention during the Minister's speech. He asked whether the House would have any say about the mode of privatisation. The Minister's reply was oracular and oblique, when it should have been direct and straightforward. If the Minister is not prepared to tell the House today why and in what manner he proposes to privatise the industry, the Bill should never have been brought before us. The Bill leaves more questions unanswered than answered.

The Monopolies and Mergers Commission was invited by the Government to make good the deficiencies of their own thinking about the nuclear industry. In 1992, it produced an authoritative report that explicitly said that the privatisation of the commercial parts of the Atomic Energy Authority should be postponed until after the nuclear review was complete. Yet the Government have today brought the Bill before us for Second Reading, not heeding the advice of their own commission.

The Government have had report after report on the future of the AEA and its commercial activities. They have been consistent in their inconsistency. The first of the reports--the McKinsey report--was totally

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inconsistent with the BZW report. BZW proposed that the whole of AEA Technology should not be privatised as one enterprise and that the commercial division, as it then was, should be made available to any comer to pick off the pieces that it thought it might acquire. That view was cited as support for the argument by the Minister responsible for privatisation, but he has not been clear this afternoon about whether he accepts the logic that, according to BZW, there has not been any evidence of a single purchaser willing or interested in acquiring AEA Technology.

That lack of evidence was in a report published two years ago and there may have been developments since then; but, if there have been, it would have been candid of the Minister to tell the House this afternoon. What are these developments? Who is waiting in the wings to purchase the commercial interests of our British research effort? We know already who has been picking up the pieces in other areas. It was announced recently that Procord was taking over the facilities service division, of which the hon. Member for Kirkcaldy (Dr. Moonie) spoke. As the hon. Gentleman mentioned, Procord is very closely associated with Sir Anthony Cleaver, the current chairman of AEA Technology. I cast no aspersions whatever on Sir Anthony, but the connection is noted and it inevitably raises questions. It raises similar questions to those raised about the new director of Dounreay, whose association with Hunting-BRAE has also been noted. Questions have been asked about whether he is fattening up his new charge for the picking by someone else with whom he was associated in former commercial activities.

Mr. Richard Ottaway (Croydon, South): Will the hon. Gentleman repeat that outside the Chamber?

Mr. Maclennan: As a matter of fact, I have already said that in my constituency. I do not hide behind the shield of parliamentary privilege to make claims of fact.

The Bill seems flawed from the start by its uncertainty. It asks the House to give the Government a blank cheque, as the hon. Member for Kirkcaldy said, and to enable them to choose the moment at which they will flog off however so much they choose of the United Kingdom Atomic Energy Authority's commercial activities in a manner unprescribed by the Bill, save for the exclusion of certain responsibilities for nuclear safety and certain freehold property. Such an enabling Bill brings legislation into contempt. It is not the purpose of Parliament to write such broad prescriptions to enable Ministers to do as they like, when they like, for whatever cost or charge they like and with so little explanation of the reasons why. It is said that it is necessary to capitalise on the commercial activities of UKAEA, especially of AEA Technology. There is a tendency to confuse ends and means and, in particular, to confuse the proper role of the AEA, which has been to provide a research facility for the nuclear industry, to keep this country at the forefront of that industry and to ensure contemporaneously that the

decommissioning and waste management work is done with the highest regard for safety and the environment.

That is certainly true and we can take pleasure and pride in the AEA's diversification of its activities on the margin into important areas of research which are not directly related to the nuclear industry. Those opportunities, however, have been ancillary to its core duty and there is some evidence that the Government are

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losing sight of that core duty and its role: it is to secure a safe nuclear component for energy generation in this country.

It cannot be surprising that emphasis on new commercialism is giving rise to concerns around the country that the core function of the authority is being lost sight of and that it will be put in jeopardy by the approach to privatisation, for the companies involved have commercial ends. They are concerned more with profits and less with service provision.

The hon. Member for Wantage deserved a less obscure answer than that the Minister's words would repay careful study. However one studies the words, if one studies them like the words of a medieval schoolman for meaning or with the ingenuity of Michael Ventris trying to decipher Mycenaean Greek and linear B, the message is clear: the Minister is not prepared to say. It is not that he does not understand that he is asking the House to allow him to do what he wants when he wants. He is simply--transparently--not prepared to declare his purpose today.

Is the outcome to be a management buy-out? Sir Anthony Cleaver says that that has not been seriously considered. Has it been seriously considered by the Department? Perhaps the Under-Secretary will tell us. From the wreathed smiles of the Minister, we were supposed to divine that, perhaps, that had not been entirely ruled out. Is it to be a trade-sharing approach, which explicitly won the backing of BZW, or the cherry-picking approach, which the hon. Member for South Dorset apparently does not favour? The hon. Gentleman, at least, was not persuaded by the arguments put forward by BZW, but was the Minister persuaded? We are entitled to know. Is there to be a flotation? If so, on what terms and on what time scale?

The industry has suffered too much uncertainty. It is not fair to the people working in the business to reorganise and reorganise as has been done. There has been no Government vision, no direction and no sense. Indeed, I pray in aid what the hon. Member for South Dorset said about that, too, in his concluding remarks. From the date on which the Government established the trading fund basis, to which I did not object, a year has not gone by in which there has not been some fundamental attempt to rearrange the pieces on the chess board.

Mr. Ian Bruce: I am grateful to the hon. Gentleman for constantly referring to my speech. I hope that he will read it because, clearly, he was not listening to it. I wonder whether, on behalf of his party--I am glad to say that he has open house because no other Liberal Democrats are here to listen to him--he could tell us the Liberal Democrats' policy on nuclear power. The hon. Gentleman is a great advocate for his own constituents at Dounreay and is a regular attender of such debates, but one does not seem to get the same message coming from the Liberal Democrats' conclave at their conferences.

Mr. Maclennan: The Liberal Democrats have consistently supported nuclear research in their manifestos. We are concerned, as every party in the House should be, about the careful and safe management of nuclear liabilities. I believe that the Conservatives have done more damage to the nuclear industry than any other party in the House. I do not exclude from that point the party of the right hon. Member for Chesterfield, who

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decided to do down the steam-generating heavy water reactor. He also introduced the Nuclear Installations Act 1965 which has enabled the build-up of commercial activity to take place.

When the Conservative party took office, we heard about the series ordering of nuclear power stations. Where has that series ordering been? In 16 years, we have had only Sizewell B, which has not been a notable success. The rather convoluted suggestion by the hon. Member for South Dorset about the decision in 1988 to close down the prototype fast reactor by Mr. Cecil Parkinson, as he then was, and should have remained, is scarcely credible.

I agree with the argument of the hon. Member for Kirkcaldy that it is damaging to the national interest to embark on the route of privatisation at this time. It is also conceptually unreal to seek to divide the nuclear from the non-nuclear and the commercial from the non-commercial because the non-commercial has led to the development of the commercial. The close integration of work on what was patently non-profitable allowed the research that has led to the development of skills in descaling and pipelines, which have been a profitable sideline at Dounreay. Such activity did not stem from a determination to go out into the marketplace to find new work. It stemmed from the application of skills that had been developed in the non-commercial field. The same is broadly true of other work done.

Will the Under-Secretary spend a moment trying to understand the risks involved in proceeding as the Government intend? I do not mean him personally, because he is new to the Department and to the Government. The AEA is moving from a site management model to a model that completely fractures the cohesion of the sites and the clearly understood missions of those working on the sites.

What has happened at Dounreay in the past couple of years is appalling, demoralising and disturbing. The facilities service division has been carved out and the whole structure of businesses, which was put in place only a couple of years earlier, has been dismantled. AEA Technology was up for grabs. Another series of provisions are in contemplation for the engineering services and for the decommissioning work of the Dounreay fast reactor which is, apparently, also to be made the work of another outside body brought on to the site.

Only yesterday, it was announced that a site managing agency arrangement will be entered into. That will bring on to the site yet another bunch of strangers who are supposed to pull the different organisations together into a coherent whole and to secure the safety and environmental acceptability of what is being done. They will have to ensure the commercial profitability of the parts of the industry that are commercial and they will have to deal with the core work of decommissioning and reprocessing. It is a pretty tall order, not just for those innocents who are straying abroad on to the site at Dounreay, but for all who have worked there for years trying to follow the latest twists and turns of Government policy and of the authority which has been beaten around so vigorously in recent years. It has been a matchless experience--a visionless waste of opportunity. I hope that something can be retrieved from the wreckage. Not much will be retrieved by the Bill.

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6.4 pm

Mr. Robert Jackson (Wantage): I welcome my hon. Friend the Under- Secretary of State to his new position. This is his debut on the Front Bench and we all wish him well in his wind-up speech. He will have many questions to answer and I hope that he will be able to deal with them in the time allotted to him.

I have followed the development of the Atomic Energy Authority at Harwell in my constituency for 16 years, first when I became a Member of the European Parliament for the area in 1979 and subsequently as the Member of Parliament for Wantage since 1983. Harwell has been an impressive story of successful adaptation to adverse circumstances. The Bill, which will enable the privatisation of the bulk of the AEA, is a critical step in the process of adaptation and one that should help the authority to continue successfully in the future, if it is handled properly.

I support the Bill in principle, but I have a number of concerns about the way in which privatisation is to be effected and about the details, especially as they affect my constituents who work in the Harwell laboratory, at the AEA headquarters and in the Culham laboratory on the other side of the river in the Henley constituency of my right hon. Friend the President of the Board of Trade. I offer some general reflections on the background to the Bill. The AEA belongs to a generation of organisations which can be found all over the advanced industrial world, from the United States through western Europe to the former Soviet Union. Almost everywhere, such organisations face considerable difficulties. It is important to bear in mind the fact that the AEA is not unique.

The generation of organisations to which the AEA belongs originated in world war two when science was applied with such success to political purposes in the shape of the atomic bomb. The model for the AEA was developed for scientific research for military purposes in world war two. Among its features were the idea of the crash programme and the total dedication of teams of scientists to a single objective. Economic considerations were largely discounted. The programmes were managed within a military-bureaucratic command structure. There was a marked emphasis on security, leading to the choice of physically remote sites. Harwell was constructed on a disused airfield in the countryside at some distance from Oxford and Reading. The best available young scientific brains were recruited on a permanent civil service basis.

Over the decades, since the establishment of the AEA, there have been many developments, some of which have been mentioned in the debate. They include the separation of the military aspects at an early stage, the spinning off of a number of commercially successful undertakings and the growth of non- nuclear work after the Nuclear Installations Act 1965. Yet the basic structures and the basic culture of the post-war period have remained in place and intact at AEA. They still seem to be in place and intact in the thinking of the hon. Member for Kirkcaldy (Dr. Moonie). It was interesting and ironic to find nostalgia for the world of Clement Attlee on the day after the national executive of the Labour party had voted to do away with clause IV in its traditional form. The hon. Gentleman, who is a psychiatrist, will know how to cope with this schizophrenia.

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Forty years on, with the benefit of hindsight, when we look back at the construction of AEA and similar organisations after the war, we can pose questions that perhaps were not sufficiently fully considered at the time. What happens when the tenured brains, the scientific civil servants, grow older together? How is that to be managed in institutions relatively isolated from the wider academic community? What happens as science becomes more and more complicated, and there is an increasing need for interaction with other centres of research? What happens as the single-minded dedication of hot war and cold war fades, and economic questions increasingly raise their ugly heads? Above all, what happens when the concept of a single dedicated purpose becomes blurred?

All those question marks and others besides have been raised over many of the wartime and post-war research organisations. I remember vividly a visit that I paid to the German nuclear research centre at Ju lich in the early 1980s. That institution was comparable with Harwell, although slightly smaller, and it had suffered the cancellation of the project to which it had been dedicated and for which it had been established--the German "pebble" reactor, I believe. There was a moribund air about the place-- hundreds of highly intelligent men and women with nothing much to do were waiting for something to turn up. In that case the hope was for a new dedicated project, an atom smasher, which was subsequently allocated elsewhere.

I remember thinking at the time that Harwell seemed to be in a much better position. But that was just before the British Government finally decided to go ahead with pressurised water reactors, and also just before the decision to privatise the electricity industry brought to the fore the real economic costs of nuclear power--or, more specifically, the costs of the outstanding nuclear liabilities. Those developments in the Government's wider energy policy, dethroning the central objective of the UKAEA, for which it had been established, have posed for the authority profound questions about its identity and future. Although that presented huge managerial problems it also constituted a major human problem.

The approach of AEA, which I have followed closely as it has evolved over the years, has been to retain its nuclear strength as far as possible, while expanding its non-nuclear expertise and business. It has sought to internationalise its business and at the same time to become more like a business--a trend that leads from the 1965 Act through the trading fund of the late 1980s to the privatisation that we are considering today.

I believe that that fundamental reorientation has been tackled successfully. If we compare 1986-87 with 1994--roughly a 10-year period--we find that the nuclear business covered by a grant from the Department of Energy has fallen from 50 per cent. to about 27 per cent of AEA activity. That transition covers the end of all reactor development, together with an increase in decommissioning activity. The non-nuclear business, on the other hand, has increased substantially. In 1986-87 about 5 per cent. of UKAEA activity was contracted to other Government Departments for non- nuclear work. That proportion has now risen to about 15 per cent. There has been a contraction in work done for the United Kingdom public sector as a whole, including what was formerly the Central Electricity Generating Board, from about 30 per cent. of AEA activity to about 20 per cent. On the other

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hand, sales to the United Kingdom private sector have risen from 10 per cent. to 20 per cent. Sales overseas have increased from about 5 per cent. to about 20 per cent. That all constitutes a considerable success against an unpromising background.

There has been some reduction in the size of the organisation. That is sad but inevitable, and it has been well managed in human terms. Speaking as the constituency Member of Parliament for some of the people affected, I have to say that there have been few complaints and that I appreciate the approach of the Government and of the management, which have eased the pain of change.

However, I am not saying that the picture is altogether that of a smooth and easy transition. We got some of the flavour of what has happened, as seen from the perspective of Dounreay, in the speech of the hon. Member for Caithness and Sutherland (Mr. Maclennan). As he said, there has been much demoralising reorganisation and re-reorganisation. In that respect it might have been better if the Government had set privatisation as a target in the mid-1980s. Although the trading fund was an important preliminary to privatisation, its introduction was associated with new structures, which have all now been reconstructed again for the purpose of AEA privatisation. But I do not think that we can blame the Government for not making up their mind earlier about that difficult and complex issue. I certainly cannot say that in the mid-1980s I was urging them to rush ahead with a programme of privatisation.

Perhaps the most important development to influence the Government's approach to such matters has been their new thinking on the wider issue of how Departments meet their research and development requirements--new thinking with which I had something to do as a Minister at the Office of Public Service and Science. Among other things, that new thinking has led Government to a clearer sense of the distinction between science for use and science for purely intellectual purposes.

I hope that the other great research institution in my constituency, the Rutherford Appleton laboratory, which is next door to Harwell, will continue to benefit from the Government's refreshed understanding of their special role and responsibility in relation to basic science. The mission of AEA and Harwell as institutions serving science for use has now been more fully clarified, although of course with some difficulties in connection with the former underlying research programme.

It is now much clearer that AEA's role in relation to Government is as a contractor organisation serving a market in which it is no longer tied to any single purchaser. The logic of that development must lead to privatisation, which will help to develop a wider customer base in the private sector and abroad to compensate for its loss of a secure tied customer in the form of the Department of Energy and the Department of Trade and Industry.

Before concluding my general observations about the Government's R and D procurement policy I shall make one more comment. For a contractual relationship to work successfully there must be two intelligent partners-- an intelligent customer and an intelligent contractor. I am sure that AEA can function as an intelligent and business-like contractor to Government and to other

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organisations. But I am not so sure that the Government are equally capable of acting in the long term as an intelligent customer. Each Department has its own research budget, and all are subject to the annual public expenditure cycle. So long as organisations such as AEA contract preponderantly with the Government, their future must be vulnerable to fragmented short-term decisions in purchaser Departments. I see it as a critical role of the Chancellor of the Duchy of Lancaster and the Office of Public Service and Science to ensure that we do not waste important national assets by failing to adopt an overall strategic view of the role of the Government as a purchaser of R and D. It seems a pity that there is no Minister from that Department here for this debate on a most important scientific and technological matter.

I shall now deal with what I consider to be the critical issues of detail for the privatisation. First and foremost is the form of the sale, and the way in which that will affect the future integrity of AEA Technology. Like the management of AEAT, the unions there and my constituents who work at Harwell and Culham, I believe that the Government should attempt to privatise AEAT as a single entity, and should adopt a form of sale conducive to that objective. That is to say, AEAT should be privatised by flotation rather than by a trade sale.

There are many reasons why the privatisation should be unitary. First, AEA is already successful as a single company. It currently has sales of about £250 million and profits of £10 million, and the management forecast is that in three years sales will increase to £350 million, with profits of £40 million.

Secondly, much of the value of AEA Technology comes from its breadth of skills and its ability to assemble integrated multi-disciplinary teams of specialists providing a comprehensive range of facilities.

Thirdly, size is vital in winning business in overseas markets, where there is bound to be concern about confidence in continuity. Any suggestion of a break-up would undermine confidence and thus AEAT's ability to win large long-term overseas contracts. I am not sure whether the Government fully understand the way in which customers for services such as those provided by AEAT need to build long-term relationships with suppliers. If customers cannot see a long-term future for AEAT, they will have little incentive to stay loyal to it.

Fourthly, it is also important to recognise that the independence of AEAT from the suppliers of capital goods gives it a significant advantage over many of its competitors, and a break-up and trade sale would threaten that independence.

Fifthly, the Government must recognise that businesses such as AEAT are above all people businesses, and I was pleased to hear what my hon. Friend the Minister of State said about that. The key asset of a business such as AEAT is the skills and ability of its work force, the best of whom will go elsewhere if they feel uncertain about their personal future. Losing contracts and staff will waste a national asset and if that is not a primary concern of the Treasury, it must be said that that would also reduce the sale price of AEAT. Sixthly, in recognising that this is a people business, it is important that the form of the sale should be such as to facilitate employee participation in the ownership of the new company. The Government believe in that in

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