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Column 760I intervened earlier to speak about the growing reputation of AEA Technology and about the fact that there are demands for its privatisation from another source. AEA Technology employed MORI to research customer attitudes. The findings were extremely positive. First, MORI found that AEA Technology was the highest-rated company in its sector. Secondly, 84 per cent. of customers welcomed privatisation. Thirdly, more than 58 per cent. thought that it would improve the service. An overwhelming majority of customers think that AEA Technology performs at least as well as its main competitors.
Dr. Moonie: I have listened to the hon. Lady's speech with great interest. Does she place the same cachet on the latest MORI poll which shows the Labour party on 58 per cent. and her own party on 20 per cent.?
Much has been made by Opposition Members of the position of employees. The impression has been given that we care not for employees or staff--or the workers, as one of my hon. Friends called the people who are employed at AEA Technology. AEA Technology not only recognises the quality and commitment of its staff, but realises that the staff are one of its greatest assets. The terms and conditions of employment will be safeguarded under the TUPE--Transfer of Undertakings (Protection of Employment) Regulations 1981--which means that the staff will transfer with their current pay and conditions, and that redundancy rights will be protected. The Bill places a duty on the Secretary of State and on AEA to ensure that employees can join a pension scheme on privatisation which, taken as a whole, is no less favourable than the AEA scheme. Employees will be free to leave any accrued rights in the AEA pension scheme. They will, therefore, continue to benefit from the full index-linked pension. Existing pensioners and the pensions of staff who remain in the AEA will not be affected. That is my understanding and I believe that it is also the understanding of AEA Technology. As for employee participation, although it is the decision of the Department of Trade and Industry, it will be AEA Technology's policy to seek to maximise initial and subsequent employee share ownership in the company after privatisation, including encouraging every employee to own at least a minimum number of shares, by operating a share option scheme that is equitable on the basis of length of service, contribution to the business and personal productivity. A committee will be formed to advise on extending employee share ownership. It will publish at the time of the annual report a full list of the number of shares and the number of options owned by every director. That is an excellent commitment.
I was delighted when my Government put their money where their mouth was and created the Office of Public Service and Science. We have heard from the hon. Member for Ellesmere Port and Neston and I hope that we shall soon here from the hon. Member for Cambridge (Mrs. Campbell). Like me, they are members of the Select Committee on Science and Technology. During our first year, we looked at the White Paper "Realising our
Column 761Potential" and at the crucial signpost from that White Paper, the foresight programme. One of the programme's aims was to help the business community to secure the maximum benefit from science and technology while continuing to support excellence in research. These steps towards liberating AEA Technology should be widely welcomed by politicians, by business men and by our community of scientists, as I know they are by AEA Technology. The Bill fulfils one of the aims set out originally in "Realising our Potential". I have no hesitation, therefore, in commending the Bill to the House. 8.26 pm
I am one of the many Labour Members who believe that power, wealth and opportunity should be in the hands of the many and not the few. One of the reasons why many of us oppose these privatisations is that we sincerely believe that that is a fundamental belief of the Labour party. I hope that we shall soon see that belief officially written into our constitution.
I intervened earlier to comment on the complete lack of a Government energy policy. I was glad that my hon. Friend the Member for Ellesmere Port and Neston (Mr. Miller) agreed with me on that occasion. I should also draw attention to the complete lack of Government policy on public sector research establishments. The Government have not even begun to try to answer very important questions such as what the establishments are for, what their role is and what they are expected to do that the private sector cannot achieve. Instead, the Government have progressed with a policy that has involved privatisation, stripping the establishments down, selling them off and generally debilitating and rationalising them in a way that has been extremely damaging.
The issue was first pointed out in the science White Paper, "Realising our potential". It is an important indicator of the way in which the Government have subsequently behaved. The White Paper says:
"The Government believes that many of the services currently provided by its research establishments could be carried out in the private sector, and that privatisation is a realistic prospect for a number of establishments. However, there are other establishments for which privatisation is not currently a realistic option. Where establishments are to remain, for the time being, in the public sector, the Government will ensure that customers are provided with a high-quality service in a way that represents best value for money. Careful consideration will need to be given to holding the level of any such capacity to the minimum necessary to meet Government's statutory responsibilities and other essential requirements." Since then, there have been several reviews. The DTI has suggested that several of its laboratories be privatised. There has also been the Government's efficiency scrutiny of the public sector research establishments, which was supposed to examine those establishments and find out whether any were suitable for privatisation. The recommendations were published, but so far the Government have not said whether they will accept them. We have been waiting a long time, and I suspect that the report will be quietly dropped because of the hostile
Column 762reaction not only of the House of Commons Select Committee but of the House of Lords Select Committee and of other respected bodies such as the Royal Society.
My hon. Friend the Member for Wolverhampton, North-East (Mr. Purchase) told the House earlier why AEA privatisation had cropped up at this particular time. Many outside observers were greatly surprised that it was mentioned in the Queen's Speech last November, but it was obvious to the Opposition why that happened. The Government needed a last-minute suggestion because the Labour party ran a successful campaign against Post Office privatisation and so they could not proceed with that. I shall not pursue that point, Mr. Deputy Speaker, as I know that you will rightly stop me if I try, but it is worth pointing out that that is the only reason why AEA privatisation is before us now.
The hon. Member for South Dorset (Mr. Bruce) said that he had a constituency interest, and expressed concern about the employment opportunities for the people who work for AEA Technology. Indeed, when the Government published the preview to the efficiency scrutiny of the public sector research establishments AEAT employed 7,000 people, but today that number has fallen to 4,100. In the run-up to privatisation there has been a vast rationalisation and a great reduction in staff numbers, and I understand that AEA plans to cut its staff even further, by one sixth, after privatisation. Some of my hon. Friends may be rather disappointed that the redrafted clause IV of the Labour party's constitution does not mention full employment, but it does refer to giving people the opportunity to work. Clearly Conservative Members do not believe in that. Time and again, staff numbers are reduced and jobs lost, and people with great expertise and skills find that those qualities are no longer valued or used in the public sector. One could describe the Government philosophy as, "Strip it down, sack most of the staff, then sell it off"--and that epitomises exactly what is happening to AEAT. The civil service union, the Institution of Professionals, Managers and Specialists, has said that the only way in which the Government can increase profits at speed is to sack the people who have made the business successful. That is precisely what is happening at AEAT.
Hon. Members on both sides of the House have described at length what AEAT is all about, and I do not intend to repeat what they have said, but it is worth pointing out that it was set up under the Atomic Energy Authority Act 1954 to
"produce, use and dispose of atomic energy and carry out research into any matters connected therewith".
In recent years, in preparation for privatisation, the nuclear and the non- nuclear work have been separated and three divisions have been created--AEA Technology, the UKAEA Government division, which manages the AEA's nuclear liabilities, and the services division, which is being contracted out to the private sector.
If AEA Technology is privatised it will be one of the largest private sector engineering and science consultancies not just in this country but in the world. I want to talk about its previous history, especially the merger with the Warren Spring laboratory, which became part of the national environmental technology centre, which is now part of AEAT.
My hon. Friend the Member for Ellesmere Port and Neston was asked several times whether he had visited a laboratory. I visit as many Government laboratories as I
Column 763can, and I spend much time visiting science and technology organisations and institutions not only in my constituency but in other parts of the country. However, when my hon. Friend the Member for Newcastle upon Tyne, Central (Mr. Cousins) and I wished to visit Warren Spring laboratory before it was closed we were firmly given the thumbs down by the President of the Board of Trade, who refused to allow us to visit it unless we were accompanied by a Minister. It proved difficult to find a time when a Minister could visit the laboratory at the same time as my hon. Friend and myself, and in the end we could not make the visit. I have deeply regretted that ever since, as the visit would have been most interesting and would have helped us to understand the situation. I hope that Members on both sides of the House will deprecate the fact that Opposition Members were prevented from finding out about and visiting Government laboratories.
Only about half the Warren Spring staff moved to AEAT, a few moved to other posts in the DTI, and the rest took voluntary or compulsory redundancy. That is a pity, because a great deal of valuable environment-related work has been lost, and the expertise has probably been lost for ever. I know at first hand how valuable that work was, because Warren Spring was one of the main laboratories which analysed the samples taken in my constituency by Cambridge city council to monitor air pollution and established that Cambridge is one of the most heavily polluted cities in the country due to the effects of traffic. I am therefore well aware of the valuable work done by staff at the Warren Spring laboratory, and I hope that it is being continued, at least in part, by the staff at AEAT.
There has been a rundown of the work done by AEA Technology. I would regard the AEA as being very valuable as a technology transfer organisation. The Select Committee on Science and Technology said that it was crucial to our national economic prosperity that the science base and the work done by universities and other institutions should be transferred into manufacturing technology. That is one of the most important purposes of public sector research establishments such as the AEA, which have direct contact with industry. The AEA provides a valuable consultancy service and is able to offer technical assistance regarding the research carried on in other institutions. That research can be passed to industrial applications to ensure that they take full advantage of it.
In earlier days, research associations provided that valuable role with a large element of Government funding. Since that Government funding disappeared, a lot of the research associations have diminished in size and reduced in effectiveness, and we are left with a small number of establishments such as AEA Technology which play a valuable role. That is different from the situation in Germany, where the Fraunhofer institutes play an extremely important part in transferring basic science and technology expertise to the industrial sector. That explains why Germany is so much more successful than the UK in manufacturing and production.
It is worth reviewing what will be lost following this privatisation. Jobs will be lost, including the jobs of people who have skill and expertise beyond the norm in this country and who have been trained at great expense by the state in science and technology. They have skills which we are supposed to value. We tell young people to study science and technology to help them get a job more
Column 764easily; yet time and again people with valuable science and technology skills are made redundant, sometimes in their late 40s or early 50s when they have little chance of getting other jobs. We are also losing the important base for Government research and development. That is not a one-off; it is part of a continuing trend. Statistics in the forward look statistical supplement published last year show that between 1986 and the projected spending for 1996 Government Departments will have reduced their research and development expenditure by a massive 46.7 per cent. The Ministry of Defence has had its research and development expenditure reduced during that period by 34.4 per cent. I do not particularly object to defence expenditure being reduced, as the end of the cold war has meant that we are living in a much more stable environment, but the fact that that money is not being transferred to civil research and development is a disgrace and the Government should be ashamed of that.
We are losing jobs and the important base for Government research development. We are also losing the supply of people into Government policy making. When one looks at the profiles of Government Departments, it is quite worrying that there are few scientists in the higher grades. The only places from which scientists can come are the Government research establishments, as they find their way to the top of those organisations and then into Departments. They can then become practising scientists and intelligent customers with real scientific expertise.
In the Department of Trade and Industry, for example, those in grades 1 to 3 make up a total of 70 staff, of whom only nine have science and technology qualifications. In the same grades in all Government Departments the total staff is 737, of whom only 59 have science and technology qualifications. That situation is not tolerated in other countries, which expect people involved in policy making to have science and technology qualifications. Our approach leads to poorer quality decision making by Government, and we should redress that.
We shall also lose the Government's resource to provide expertise at times of national emergency, and also the retention of expertise. Once AEA Technology is privatised, there is no guarantee that that expertise will remain available to the Government. The expertise may not remain as a single body, and it may split up in a way which makes it inaccessible.
A great deal of senior management time will also be lost, as indeed is happening already. What has happened during the past couple of years--and will happen in the next couple of years--is that instead of getting on with the job of making AEA Technology into a thriving organisation the senior management of AEAT will be spending their time in a diversionary way. They will be looking at how to privatise, how to arrange the rest of the organisation and how to improve staff morale and little effort will go into the actual running of the organisation.
The philosophy in relation to this privatisation should be, "If it's not broke, don't mend it." If there are no clear benefits, we should not proceed with the privatisation. The only clear benefit that I can see is that it will raise revenue for the Government. There will be a continuation
Column 765of the run-down in DTI research and development, which has been reduced by between £200 million and £300 million between 1985 and 1994.
The Government have not treated the safeguarding of the nation's knowledge base with respect, and this privatisation is another indication of the rather bizarre way in which they are discarding the nation's expertise. The stability of the work force will be lost as replacement of long-term research with short-term contracts will result from the commercial pressures to which this organisation will be subject. It is a sad commentary on the research and development industry in the United Kingdom that we so often find that long-term research is going out of the window, to be replaced by very short-term contracts which make it difficult to plan for the future. A more important question is why the privatisation is being undertaken at this particular time. The Government have given themselves the tools and the procedures with which to plan much more effectively what happens to our public sector research
establishments. We have a combination of two procedures. One is the forward look and the other is the technology foresight programme. They can be used as a means to identify overlap and encourage change without undue disruption. We should examine the scientific capabilities of the entire country and assess the research that we need to carry out to ensure our prosperity and quality of life into the future. We should use forward look and technology foresight to identify the areas in which rationalisation is possible. We should examine the scientific capabilities that we need to carry out research on topics identified by technology foresight.
The technology foresight programme has been running for more than 12 months now. Some recommendations from it have been carried forward into the science spending statement made by the Minister recently. We have not seen a full-scale publication of the technology foresight exercise which will identify the factors that I have outlined. I am therefore curious to know why the Government have decided to jump the gun and proceed with the privatisation of AEA at this particular time. The science and technology base is undergoing rational change and the Office of Science and Technology in particular should use the new tools available to it and not proceed in an ad hoc manner but implement change in a much more orderly way.
I draw to a conclusion by quoting the president of the Royal Society, who stated recently:
"we should remind ourselves that many of these"--
he was talking about the services provided by the public sector research establishments--
"were taken over by the state because (as perceived by the electorate at that time) the privately run services were inadequate or unsatisfactory. The arguments in favour would have varied but would have included the advantage of unification, public safety and long-term planning."
That is worth bearing in mind as we may find ourselves facing a similar situation in the future. Much of the work would then have been seen to be unnecessary.
Column 766It is also worth quoting an editorial in the Financial Times . Even though it was in favour of privatisation, it had the following to say:
"The ideal solution must be a management buy-out. This would create a sense of partnership among the company's employees and guarantee the AEA the independence to underpin its credibility as a consultancy.
The alternative would be flotation as a private company. This would not be easy, however, since investors would have to ensure that the AEA had a worthwhile portfolio of contracts, and that its principal assets--people-- would not walk out of the door.
Only as a last resort should the Government consider the remaining option: sale in whole or in part to trade purchasers. This would be highly unsatisfactory. The AEA would lose its independence and, if broken up, its range of skills as well."
That was a comment from someone who favoured privatisation, but I would say that there is one alternative open: not to proceed with privatisation at all.
Mr. Keith Mans (Wyre): I am grateful for the opportunity to say just a few words in this Second Reading debate. I associate myself with the remarks made by my hon. Friend the Member for Wantage (Mr. Jackson). He made a masterly presentation of what has been right and wrong in the nuclear industry and in particular in AEA in the past 20 or 30 years. His speech also demonstrated the right way ahead for AEA Technology.
It is worth contrasting my hon. Friend's speech with that of the hon. Member for Caithness and Sutherland (Mr. Maclennan), who seemed to think that nothing right could possibly happen. He simply dwelt on what were in many ways the false trails along which technology and the nuclear industry were led in past years.
The speech of the hon. Member for Ellesmere Port and Neston (Mr. Miller) showed up clearly the shambles of the Opposition's policy on nuclear energy. Until recently, it was clear that the policy was to shut down as many power stations as possible as quickly as possible. It is strange that all Opposition Members who have spoken tonight referred to the damage that would be done to our nuclear industry and more specifically to AEA if it went into the private sector, when but a few months if not a few years ago the industry would not have existed as we know it today if the Labour party had been in government. Labour Members are not in a responsible position to comment on what the Government want to do with this part of the nuclear industry.
It is worth noting the change that has occurred in the nuclear industry in the past eight to 10 years. There is little doubt in my mind that until 1980 or 1982 it was a high-cost industry. Indeed, it would be true to say that it did not even know what its costs were. It was driven by all the bureaucratic devices that have been mentioned. The way in which it has been transformed is a tribute to it. It operates in the much more commercial climate that has resulted from the vast majority of the electricity industry being in the private sector.
I should go further than that. I cannot see that Nuclear Electric, even though it is still in the public sector, would have achieved greater efficiency if the other two power companies had not already been privatised. That acted as a spur. As a result, Nuclear Electric was forced to compete. There is now a transparency of costs that did
Column 767not exist before and greater efficiency, with more generation of electricity by the nuclear industry than ever before.
I sincerely hope that we will have the results of the nuclear review sooner rather than later and that those results will acknowledge the fact that at present we have a most unlevel playing field for the generation of electricity. The nuclear industry rightly has safeguards far in advance of any other safeguards in the rest of the electricity generating industry. I hope that the Minister, who is in his place, will take note of the fact that people--especially those, such as myself, in the north-west--would think it wrong if part of Nuclear Electric were given to Scottish Nuclear Ltd. as a way of making the privatisation of that part of the generation of nuclear energy more equitable. That would be the wrong way forward. I think that I speak for all Members in Lancashire when I say that it would not be considered to be the right way of proceeding.
The efficiencies that have been evident in the generating part of the nuclear industry have also been shown, more recently, in AEA Technology. There is little doubt that, as a result of what the Government have done in the past few years, that part of the industry has become more competitive and more commercially minded. What can happen in that part of the industry was demonstrated by the first privatisation--that of Amersham International. My hon. Friend the Member for Chesham and Amersham (Mrs. Gillan) clearly showed how the privatisation of a small company, as it then was, whose products were held in high regard and which had a great deal of technical expertise, provided that it is managed properly, can increase not only profits but jobs--by 50 per cent. That must be the way in which hon. Members on both sides of the House wish AEA Technology to progress.
I cannot envisage that happening in the public sector. I cannot envisage the constraints imposed by the Treasury and the bureaucratic environment in the public sector allowing AEA Technology to realise its full potential as a group, bringing to the market unique skills in many different areas, such as product enhancement, plant and safety performance and environmental matters.
I agree with my hon. Friend the Member for Wantage about the way in which the company should be privatised. I urge my hon. Friend the Minister for Energy and Industry to ensure that AEA Technology is put into the private sector as an entity in its own right and not split up. I suggest that he considers closely the success of the Water Research Council, which was very much the research arm of the water industry in the public sector and which has been placed in the private sector so successfully. It now not only works for water companies but has developed a considerable expertise abroad and is expanding quickly.
Privatisation also demonstrates the use of devices that allow the maximum amount of share ownership among employees. Many hon. Friends know that I feel that we have not taken enough advantage of that aspect of the privatisation of public companies. AEA Technology offers us the opportunity to ensure that many, if not all, its employees become shareholders in the company. If we do that, there is a much better chance of the company being able to prosper in the private sector, just as the WRC has prospered.
Column 768Privatisation should have occurred before now. I understand the difficulties associated with separating the different parts of what was the Atomic Energy Authority from one another, but now we definitely have a company in the public sector that is ripe to enter the private sector as one entity. If it does, there will be a much larger repeat of the success that Amersham International had more than a decade ago.
Mr. Geoffrey Clifton-Brown (Cirencester and Tewkesbury): We have had some thoughtful and informed speeches from Conservative Members and some exceptionally long speeches from very few Members of the Opposition.
The Opposition said that the Atomic Energy Authority was a last-minute inclusion in the Queen's Speech. The hon. Member for Ellesmere Port and Neston (Mr. Miller) called it a rushed privatisation. In fact, the Minister, my right hon. Friend the Member for Enfield, North (Mr. Eggar), announced in a written answer, as long ago as 17 February 1994, that:
"the business activities in the AEA's new commercial division are capable of privatisation".--[ Official Report , 17 February 1994; Vol. 237, c. 923. ]
That was about eight months before the Queen's Speech--hardly a rushed inclusion.
Predictably, the Bill's publication on 2 March 1995 was greeted with hostility, especially by the right hon. Member for Copeland (Dr. Cunningham), the Opposition Front-Bench spokesman, and by the Institution of Professionals, Managers and Specialists.
Many speeches this evening have mentioned the fact that the United Kingdom Atomic Energy Authority has been split in two. AEA Technology comprises a large range of nuclear and non-nuclear consultancies and research services, and that part of the business will be privatised under the legislation. The Government will retain AEA Government division, which will remain in public hands to oversee the substantial task of decommissioning the authority's many nuclear sites, including the Magnox power stations. AEA Technology is likely to be a £250 million business, capable of generating profits of £10 million next year and £20 million the year after. Its turnover could double in five or six years.
Mention has been made of the some 4,000 employees of AEA Technology. The hon. Member for Wolverhampton, South-East referred to the rundown in the number of employees. However, in the 1960s the business employed 16,000 people, so one could hardly claim that there has been a rundown in staff numbers recently to facilitate privatisation.
Half the 4,000 employees are scientists and engineers and their conditions of service must be a priority. Concerns have been expressed about their service conditions. Of course, they will be subject to the TUPE regulations, which means that their future conditions of service will be broadly the same as their existing conditions in AEA Technology. Schedule 3 deals with transferred pension rights which are modelled on previous privatisations.
Column 769AEA Technology has four nuclear and five industrial businesses. It delivers innovative technology and services to more than 2,000 organisations, many of which are household names and leading blue-chip companies. Although the United Kingdom and Europe constitute the company's largest market sectors, it is rapidly expanding into the United States of America, south-east Asia and 70 countries worldwide. That rate of diversification will be beneficial not only for the company but for its employees in giving the company a firmer foundation on which to base its future operations. Hon. Members have referred to the activities of AEA. It delivers a huge range of services and technologies. It has developed a system to test aircraft carbon fibre propellers, in which a company in my constituency, Doughty Air Propellers, has an interest. AEA Technology has been instrumental in helping Airbus Industries in Toulouse--which I was fortunate enough to visit during the summer--to produce a test so that the structure of the carbon fibre on aircraft wings can be verified and any deterioration discovered quickly.
AEA Technology is also involved in a number of environmental technologies which have been mentioned tonight. For instance, it participates in the European Space Agency's ENVISAT satellite environmental testing system, which is at the forefront of our space and science technology. No nuclear- powered submarine can go to sea without first having an AEA test.
The company is involved in a number of other industries, including the electricity industry. It promotes energy efficiency, which will be extremely important if we are to meet our Rio target of stabilising CO 2-- emissions at 1990 levels by the year 2000. It has been involved in promoting and producing the lithium-ion cathode battery technology, which is now in use worldwide thanks to a licensing agreement with Sony Technology.
AEA Technology is a world-beating company. Hon. Members have mentioned the fact that the company helps foreign Governments and they have referred to its partnership with the Ukraine Government in helping with the Chernobyl disaster clean-up. That has been accomplished partly through direct tender for contracts and partly through European Union funding.
Why should we consider privatising the company? Before Opposition Members laugh at that suggestion they should recall that it was Labour's Minister of Power, Fred Lee, who in 1965 promised an expectant nation that we would capture all the export markets of the world if we were to mass build all of his new advanced gas-cooled reactors. We all know what a disaster that decision was for the nuclear industry. It has taken 30 years to get over the problem of those advanced cooled gas reactors and it will take another 30 years and billions of pounds to decommission them.
Not only Fred Lee was involved in that programme; the right hon. Member for Chesterfield (Mr. Benn) was involved in promoting the programme. If those strategic decisions had been taken not by the political Freds and Tonys but by the private sector we would not have had such disastrous results and the nuclear industries would not have had to recover from those decisions ever since. It was not until recently--until Sizewell B came on stream, not only early on the contract time but below budget, and until the Government had the courage to make
Column 770a major strategic decision to adopt a wholly new technology--that we returned to the forefront of nuclear technology in the world. The importance of that decision was that 70 smaller companies were involved in the building and commissioning of Sizewell B, the major one of which was AEA. It will benefit from having gained expertise at Sizewell and will adopt that expertise in the emerging market for pressurised water reactors throughout the world. That will give it a great leg up in nuclear technology.
The hon. Member for Wolverhampton, South-East asked why it was necessary to privatise the company. As I pointed out to him, public companies operating in the public sector with Treasury rules and the external finance limit that they have to meet simply become starved of investment. We saw it with virtually every industry in the public sector. British Steel was losing £500,000 a week in the public sector; now it is the most efficient steel producing company in the world.
Mr. Purchase: May I correct the hon. Gentleman and remind him that I represent Wolverhampton, North-East, although I am proud of my hon. Friend the Member for Wolverhampton, South-East (Mr. Turner)? Does the hon. Gentleman recognise that the external finance limit and the rules imposed upon those companies can be changed? They are not God-given and the tremendous success that he has mentioned has been underpinned by the very rules that he now criticises.
Mr. Clifton-Brown: I bowled the hon. Gentleman a googly and now he has come back with a leg break. I mentioned the simple answer in an earlier intervention. If the assets--particularly the loans--of any organisation are accountable to the Treasury, of course the Treasury has to set proper financial directions for that organisation. Opposition Members would be first to criticise us if the Treasury were to allow any organisation to operate at a loss for any length of time. Therefore, proper external finance limits, financial guidance and, indeed, administrative guidance have to be given to every organisation in the public sector, and AEA Technology is not immune from that process.
Opposition Members would be the first to criticise us if we set a nil external finance limit for any of the organisations that have had substantial injections of public funds. That would be no way for a responsible Government to organise their affairs. Therefore, anyone who says that any company can operate as a quasi public sector company but with no external finance limit is not living in the real world. In my view, the only alternative is to have a fully public sector company to which the full rigours of the market do not apply, or to allow the full rigours of the market to apply, in which case all the benefits of the private market will apply.
What are those benefits? Private companies have innovation and the incentive to make a profit. Profit is a dirty word for the Opposition, but profit must be made before there can be reinvestment. Without that, the company cannot invest in new markets, find new technologies and produce new inventions as I have already suggested AEA should do and has the capability of doing. Like British Gas, British Steel and British Telecom, it can become a world-beating company. I want it to become a household name. I want its workers to benefit because they will have secure jobs that are well
Column 771paid. I want its shareholders to benefit through increased dividends. Above all, I want the country to benefit because the company will pay increased corporation tax as a result of making a profit.
This virtuous cycle of privatisation has been recognised throughout the world, but still the Labour party cannot recognise it. 9.14 pm
Mr. John Battle (Leeds, West): I congratulate and welcome the new Under-Secretary of State for Industry and Energy who, I gather, will make his debut at the Dispatch Box when he winds up the debate. I look forward to hearing his response to the serious questions that have been raised about the Bill by hon. Members on both sides of the House and hope that he will provide some answers.
The Bill is a space filler in the Government's rather thin programme, and its intention is to atomise AEA Technology. The chairman of AEA Technology, Sir Anthony Cleaver, suggested one reason why the company might not be attractive to potential private sector investors. He was reported in The Observer of 24 April as saying: "The real problem for the City is to understand what we do." I hope that, as a result of this debate, people will be better informed. It has been a well-informed debate and all hon. Members have spoken of contacts, and the work of AEA Technology has reached almost every constituency of every hon. Member who has contributed to the debate.
AEA Technology is the world's largest engineering and science consultancy and it is precisely because it is of such quality that we oppose its fragmentation in this manner. UKAEA's annual review for 1993-94 praises a Government Department in a way that they are rarely praised these days, and we endorse that praise. It says:
"AEA Technology's vision is to become a flagship science and engineering services business working in partnership with a broad range of customers world wide to improve their competitive edge. Our unique wide-skills base, built up from working at the leading edge of science and technology for over 40 years, is focused on providing integrated solutions in the closely related fields of plant and process performance, safety and environment."
I stress the words "unique wide-skills base", "leading edge" and "built up over 40 years". AEA Technology takes a diverse, yet integrated, approach. Why, then, should the Government dismantle it in this way? The company's scientists are technically the best in the world.
Interestingly, the hon. Member for South Dorset (Mr. Bruce), who is no longer present in the Chamber, expressed his fears that this could be another Government redundancy programme in the public sector. He also seriously queried the shifting of decommissioning
responsibilities in UKAEA and AEA Technology simply to move it around in order later to break it up. The Minister for Energy and Industry did not answer the questions in his earlier presentation, and I hope that we shall hear some answers in the winding-up speech. The hon. Member for South Dorset said that he suspected a sub-plot. Opposition Members, too, believe that there is a sub-plot. AEA Technology already engages in international science and engineering activity. It has not, as some Conservative Members suggest, been stopped in its tracks. On the contrary, it is making huge strides, which is the whole point. The Science and
Column 772Technology Act 1965 contained a section that extended the AEA's research functions and allowed it to carry out non- nuclear research and development under contract for its customers. It could be argued that the AEA does not need the Bill to enable it to extend its functions and develop, as it can recoup its investment in licence agreements and the rest. Again, the annual report states:
"AEA Technology can solve many problems better and more effectively than those who depend on bringing together a number of small companies, each with a narrow field of expertise. AEA Technology's major customers frequently draw on the skills of more than one operating division."
As my hon. Friend the Member for Kirkcaldy (Dr. Moonie) spelt out in his speech, the seamless activity within the organisation is its unique property, its greatest asset. There is space for lateral thinking, for research boundaries to be crossed, to create space for new development and new ideas, to integrate experience and expertise. There has been more than 40 years of experimental research, and a whole range of spin-offs from that primary nuclear research has developed in recent years, and we have heard about many tonight. In health, they include developments in carbon fibre hips and in laparoscopes for keyhole surgery. There have been developments in propulsion units for satellites. There have even been developments to protect aircraft from lightning strikes. In electronics, there have been developments in hybrid integrated circuit packaging, which is now making a major low-cost contribution. There have even been measures to deal with dangerous electronic smog, caused by mobile phones, computers and radio interference.
All those developments--including that mentioned by the hon. Member for Cirencester and Tewkesbury (Mr. Clifton-Brown): the lithium-ion cathode battery technology--are respected internationally and turned into products that are used. There are other areas, including heat transfer and fluid flow services. There are the non-nuclear consultancies, and the work of the energy technology support unit. My hon. Friend the Member for Cambridge (Mrs. Campbell)--a diligent champion for science and technology in the House--referred to air pollution in Cambridge. Again, that is part of the work. What about chemical monitoring and conservation expertise? AEA Technology is leading the field in a whole range of areas, including safety in the North sea.
Why, then, with that tremendous non-nuclear environmental expertise, are the Government going to place it in jeopardy with the Bill? It could all be lost if the Bill goes through. The hon. Member for Aylesbury (Mr. Lidington) suggested that it can succeed only if there is a sell-off. Precisely the opposite it true. It is succeeding because of its integrated functions and, of course, its well-respected international consultancy services. At least some good is associated with Government activity, when our Government's research is associated with cleaning up after the Chernobyl disaster. We are used in Slovakia because of our expertise in this country, which then reflects on the science base, to the celebration of scientists in this country. Why privatise it, push it out, suggest that there is no role? It is a fully fledged integrated operation. It is our best example of technology transfer. Because it is successful, it does not need the spur of sell-off that the Government propose. There is no need to palm it off. It is not inefficient.
Column 773Again, in the annual report, the chairman wrote:
"With our business strategy aimed at increasing profitability through the more efficient use of resources, exploitation of international markets and improved customer care, we decided to focus AEA Technology's products and services on the three inter-related fields of plant and process performance, safety and environment. All of these are areas of growing expenditure by industry world-wide. We therefore expect global demand for our services to increase substantially over the next decade . . . The outlook for AEA Technology is therefore bright and we are working enthusiastically to continue to develop a profitable, integrated business with a good track record and to exploit to the full the opportunities which are apparent both nationally and internationally."
AEA Technology is not inefficient. It employs more than 4,000 staff. The business has a turnover of £250 million, derived from the invoices of services, products, royalties and completed long-term contracts. The profits alone are reported to be, as other hon. Members have mentioned, about £10 million. In an interview with The Engineer magazine, on 8 December last year, the chief executive of the AEA, Dr. Peter Watson, was reported as saying that the annual turnover would rise to £400 million over the next three years. Of the present turnover, 41 per cent. comes from work for the Government, 18 per cent. from other public bodies, including, as has been mentioned, from local authorities as well as private sector business in Britain, and 23 per cent. from work for overseas customers. In other words, it is not an inefficient business. That is the whole point. The only thing that jeopardises it and threatens to make it inefficient is the Bill.
In the debate on the Loyal Address on 21 November, the President of the Board of Trade claimed that privatisation of AEA Technology "will benefit consumers and, of course, add to national competitiveness."--[ Official Report , 21 November 1994; Vol. 250, c. 355.]
It is hard to see how in the proposals before us. As John Billard of IPMS said:
"The cost in lost jobs, redundancies and future changes to government will far exceed AEA's market value."
In the memorandum that the IPMS submitted to the Select Committee on Science and Technology, dealing with the efficiency unit's scrutiny of the public sector research units, it said:
"In the case of AEA which is already a Trading Fund and operates at arm's length from government, the rush to privatise the `commercial' arm of AEA Technology and separate it from a government owned decommissioning authority requires careful review from several angles. Firstly, it will remove from government a major pool of expertise on nuclear and other energy matters other than those relating to decommissioning."
It goes on:
"the increasing profit projects for AEA Technology rely on exploitation of monopoly positions that currently exist . . . and without the guarantee of long-term government contracts after flotation, the future of the Division would be at risk."
We have heard nothing today of any of those guarantees. It is becoming increasingly clear from today's debate that privatisation makes not only no political sense and no sense in terms of Britain's science base but no economic sense.
When the Under-Secretary replies, will he confirm that more than £300 million will have to be set aside to cover redundancy costs and pensions to staff not transferring to