House of Commons Hansard Debates for 17 May 1995

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If those opportunities are seized, the business overall will be immensely strengthened and jobs made much more secure. But an essential prerequisite for getting the business will be technical expertise. I therefore seek an assurance from my right hon. Friend the Minister that a battle will be fought to win export business because that is the way to strengthen job opportunities for those who have technical expertise, and technical expertise is essential if export business is to be won.

I believe that Nuclear Electric's business is likely to be more successful in the private sector than in the public sector. I certainly do not support the Opposition's disgraceful motion, which strikes me as a blindly political diatribe in clause IV mode, and which does not begin to map out a future for Nuclear Electric but seeks only to cling to the past.

I know that my right hon. Friend the Minister will appreciate that I need some reliable assurances on the issues that I have drawn to the House's attention before I can support him in the Lobby tonight.

9.34 pm

Mr. Martin O'Neill (Clackmannan): The short debate has enabled several hon. Members to express legitimate constituency worries. Indeed, the hon. Member for Gloucester (Mr. French) has just expressed anxieties about certain aspects of the merger from a different angle from that which Opposition Members would choose--but legitimate none the less.

What was interesting in the debate was the absence of any of the usual arguments in favour of privatisation. No Minister or Conservative Member has argued that the work force should be cut because the nuclear power industry is a bloated, overstaffed nationalised industry. We know that, since it was split off from the Central Electricity Generating Board, the work force has been cut by about 50 per cent. for the English stations and 25 per cent. for Scottish Nuclear. Indeed, there have been about 8,000 voluntary redundancies, so the labour force issue does not arise.

The issue of inefficiency in the public sector does not arise. The most up- to-date figures, published by Scottish Nuclear a few days ago, show that unit generating costs have decreased to 2.2p per kWh from 2.9p per kWh in 1993-94. Power output has increased to an all-time record of 16.9 TWh and output per employee has increased by about 32 per cent. in that time.

In some respects that is because, for the first time, the nuclear industry has been free of the shackles of the CEGB and has been able to concentrate on its own affairs and to tackle the genuine problems of the advanced gas- cooled reactor and to make it an efficient and safe form of generating nuclear power.

The Government repeatedly trot out arguments in favour of privatisation to the effect that the companies will cease to be a burden on the taxpayer. The short-sightedness of the Government is revealed by the fact that those companies contribute about £100 million per annum to the taxpayer.

We are told on occasions that we need privatisation to introduce good, commercial management, yet the figures that I have quoted would not exist, were it not for the quality of the management and the way in which they have been able to work with the labour force to produce the achievements that I described.

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The hon. Member for Gloucester mentioned the freedom to seek business abroad, yet Nuclear Electric has been working with American consortiums to secure a Taiwanese contract. They were "down to the wire", as the saying goes, and they have now been told that they must rebid, but it was obvious that Nuclear Electric in the public sector was perfectly capable of associating with private companies abroad and of making a great success of one of the most highly competitive contract processes that has ever occurred in the energy business. We hope that, regardless of who owns Nuclear Electric, that work will come to Britain, because it is vital not only for people who work in the power stations but for those who work in the electricity supply and equipment supply industries, in which there are so many manufacturing jobs throughout the country.

Should there be freedom to seek investment in the market? Paragraph 4.41 of the White Paper refers to the fact that, with borrowing in the public sector at 8 per cent., if a new power station were built, the price of its electricity would be 2.9p per kWh. However, we know that that money will not be forthcoming from the Government. If the industry goes to the market, it will have to borrow at an interest rate of at least 11 per cent., which would put the price of a unit of electricity in a new power station at about 3.7p per kWh. No one has suggested tonight that anyone will invest in new nuclear power stations if the price of electricity is that envisaged in those figures. The Government have said:

"Private finance for a new nuclear station is unlikely to be forthcoming without a transfer of nuclear specific risks away from private investors to another party in the project."

The other party in the project would have to be the taxpayer, and it would have to be at substantial subsidy. No one is prepared to advocate that case.

Faced with such quantifiable problems, the Government have decided to keep the ageing Magnox stations in the public sector, with us, the taxpayers, picking up the bill for decommissioning and waste management. Let us face it--that will be no paltry sum. The Engineers and Managers Association, the trade union of the power station bosses, has noted that the nuclear liabilities of the two companies amount to about £10 billion. That discounted figure was largely accounted for by Magnox decommissioning.

The money that electricity consumers paid to fund the work has been swallowed up, either by Sizewell B or by work on the advanced gas-cooled reactors, to which I referred earlier. Some of it may have been paid to the national loans fund and found its way into the financing of tax cuts.

The likely sum to be raised from privatisation is about £2 billion to £3 billion. That would probably afford a 1.5p cut in the tax rate. Taxpayers will be left to fund some £10 billion in decommissioning liabilities. That will work out at a cost of about £700 for every household in the land. We will be left with a holding company, supposedly based in Scotland, and perhaps in Edinburgh, although my hon. Friend the Member for Linlithgow (Mr. Dalyell) understandably argued that it should be based at Peel park, and there seems to be some logic to that.

Consideration must be given to the fact that, apparently, there will be premises in Gloucester and in London. If there were a split in the management structure, it would be attractive for the new management team to base itself ultimately in London, although the new chairman,Mr. John Robb, whose appointment was announced this

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evening, comes from Edinburgh. He seems to be eminently qualified to operate the nuclear industry's accounting system, in so far as he is chairman of Horserace Betting Levy Board. I do not know what other qualities he brings to these matters. We shall have to wait to see how long he is in post, because the holding companies have a somewhat chequered history.

If the stations are to achieve any further reductions in operations, and if the new chairman is to be able to deliver the goods, I suspect that the first casualties of the new order will be the same casualties that have emerged in the other energy privatisations--the research and development functions. They are important in that, in the nuclear industry, they have been closely linked to safety arrangements.

In Britain, the research that has been undertaken and the safety culture that has been a feature of the industry have been the real successes of the nuclear industry. Some speeches tonight, especially that of the hon. Member for Truro (Mr. Taylor), were scaremongering and alarmist about the nature of the nuclear industry. Flippant comparisons have been made between the nuclear industry in Britain and that in the former Soviet Union. It is like comparing a Jaguar car at its best with an inefficient, clapped-out old Lada, with exactly the same care and attention given to the safety and maintenance of Ladas as are showered on cars such as Jaguars. In part, the safety culture will remain--we do not deny that, but we doubt whether the research and development emphasis will be what it was in the past. If that culture and the mass of big science abilities are not kept together, the nuclear installations inspectorate will encounter difficulties in trying to maintain high safety levels, which will be expensive and dangerous to secure. In the United States, the industry operates in a different way. Its safety regulatory body is now a massive bureaucracy.

We need assurances from the Government that they will insist that the science and research elements which are critical to the industry will remain. The Government have used a great deal of ingenuity and have given a great deal of attention to triple-locking arrangements for the location of an office. Many of us are anxious that they should give as much attention to the location of the laboratories and the safety centres which are such an integral part of our industry.

Mr. Miller: I am sure that my hon. Friend will acknowledge the point made by the hon. Member for Gloucester (Mr. French) about the skills of the Magnox staff at Barnwood. Does my hon. Friend share my concern at the fact that we have heard very little from the Government about their intentions for the science base at Berkeley technology centre?

Mr. O'Neill: I understand my hon. Friend's concern because that is an important employer in the north-west and it is--

Mr. Miller: It is in the south-east.

Mr. O'Neill: I apologise. I am so accustomed to my hon. Friend defending the rights of his constituents that I assumed that that part of the nuclear industry was located in his constituency.

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My point remains; we are talking about big science and important research projects. We are talking about spin-offs which relate directly to nuclear safety--an area in which Britain can claim some credit for having a good record and not being complacent. We want to know whether those things will be sustained and whether other problems will be dealt with. Will the competition issue be dealt with? I do not look to the Minister for much consolation there, but I look to the Director General of Electricity Supply. He ducked out the last time when the second tranche of PowerGen and National Power was being floated. He should have made a reference to the Monopolies and Mergers Commission, but he did not. He is now trying to make the best of a bad job by persuading them to divest themselves of some power stations to try to create more competition. If he wants competition, he should ensure that the privatisation scheme is subject to a view from the Monopolies and Mergers Commission. We must take account of the arrangements that exist in Scotland where the must-take arrangement will be transferred from a public sector company to a private sector company. It will be interesting to see whether the North of Scotland Hydro-Electric Board and Scottish Power will be as keen to operate under the must-take arrangements regardless of price and whether they will seek a judicial review. It is reasonable to assume that there will be a number of legal or quasi-judicial obstacles in the way of this privatisation if the interests of the taxpayer and electricity consumers are to be properly protected.

We do not believe that the privatisation of the industry will make no difference. We believe that it is essential that the industry remains in the public sector. We know that the public have deep-seated, if not always correct, views on the issue of nuclear safety. What is more, we want to be certain that this debate will not be the last opportunity that the House has to debate the privatisation of the nuclear industry.

We recognise that this is the last gasp attempt of the Government to rustle up a few bob in the short term to provide money for bribes before an election. I do not think that the public will be taken in by that. As hon. Members go about the country and hear what their constituents feel about this privatisation, they will be clamouring for another vote. Before the Minister sits down, we want him to tell us that there will be other votes on this issue and that there will be the broadest possible consultation, such as that to which the Prime Minister referred when he came to Scotland last week. Before any subsequent votes, we want to see that there is still an opportunity for us to finish this debate and to finish privatisation. We will do that by going through the Lobby this evening to ensure that we get the vote that we want and end any threat of privatisation to an industry that is currently serving the country very well. 9.49 pm

The Minister for Industry and Energy (Mr. Tim Eggar): The remarkable thing about the speech of the hon. Member for Clackmannan (Mr. O'Neill), like that of his hon. Friend the Member for Hamilton (Mr. Robertson), was that he said not a word about the Labour party's policy on nuclear power. Indeed, he was about as forthcoming and knowledgeable on Labour party policy

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on nuclear power as he was about the geography of the United Kingdom when he seemed to think that Berkeley was in the north-west. My hon. Friend the Member for Gloucester (Mr. French) is understandably concerned about the interests of his constituents at Barnwood. He also rightly--and almost alone among hon. Members--paid tribute to the work done by the management and staff of Nuclear Electric. He asked me for certain assurances about the staff at Barnwood. First, I can tell him quite categorically that the transfer of work from England to Scotland with regard to Barnwood certainly represents fewer than 50 jobs which might go to Scotland. Secondly, he was concerned about the rumours which had apparently got round at Barnwood about some 300 job losses. I can tell him that those rumours are completely unfounded.

My hon. Friend also raised the issue of the location of the headquarters of the new Magnox company and the employees who would support it. I have taken very careful note of what my hon. Friend said tonight and what he has said to me and my right hon. Friend the President of the Board of Trade during the past few days. I have raised this matter with Nuclear Electric, which has assured me that it will pay the greatest attention to the welfare and convenience of staff in taking decisions about locations.

I also assure my hon. Friend that he and his constituents will get an opportunity to argue their case as part of Nuclear Electric's normal consultative processes. I will also draw his concern to the attention of the chairmen of the holding company and of the new company, when it is established, which will deal with the Magnox stations.

My hon. Friend the Member for Colchester, South and Maldon (Mr. Whittingdale) also raised concerns of behalf of his constituents. I assure him that I have taken careful note of them and will reflect them in my discussions with management.

My hon. Friend the Member for Gloucester asked about the future of the export business. I attach tremendous importance to export opportunities, both for Nuclear Electric and for BNFL and I regard that as a major opportunity for the UK.

My hon. Friend the Member for Colchester, South and Maldon and, in particular, my hon. Friend the Member for Rochford (Dr. Clark), raised issues and expressed concern about competition. The Scottish electricity market, in effect, operates separately from the electricity market in England and Wales. The nuclear generators operate in the base load element of that market, and in practice base load competition in England and Wales will be increased as a result of the spinning out of the new Magnox company. Far from competition being reduced, it is my very strong belief that these proposals will enhance it.

The hon. Member for Cunninghame, North (Mr. Wilson) also raised that issue. He, of course, did not say that he had received a letter from Professor Littlechild on the subject when he indicated, broadly speaking--and I stress broadly--that he accepted the argument about increased base load competition in England and Wales. Getting more competition in generation, especially in marginal plants, and setting the pool price remains an important objective. The undertakings that the director general negotiated last year with National Power and PowerGen about the disposal of plant are an important

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part of that process. I support the initiatives that the director general took then and look forward to a successful outcome. Much has been said about safety in this debate. Some Opposition Members have attempted to raise what I can only call safety scares. That is despite the fact that the Government have said clearly, and my right hon. Friend the Secretary of State has said specifically, that safety will be paramount and despite the fact that the nuclear installations inspectorate serves under the tripartite Health and Safety Commission on which, of course, the unions are represented. The HSC's evidence to the nuclear review made it clear that the safety regime could cope with any restructuring of the industry. Indeed, the nuclear installations inspectorate has made it clear that the safety regime already operates at private sector nuclear sites. Such sites have been operating under the present regime for a number of years, including the period when the right hon. Member for Chesterfield (Mr. Benn) was Secretary of State for Energy. Much has been said about the alleged threat to Scotland and to Scottish Nuclear from our proposals. Where is that threat? The creation of 100 high-quality jobs in Scotland is certainly no threat. A new world-class company is to be headquartered in Scotland and there will be an effective triple guarantee that the company will stay in Scotland. A Scottish chairman has also been appointed to the holding company. That is no threat to Scotland. There is a reduction in electricity prices for domestic consumers in Scotland--where is the threat in that? My right hon. Friend's announcement is good news for Scotland.

The Labour party has consistently opposed privatisation and the benefits which have flowed to the consumers from it. I will spell out to Opposition Members what those benefits are. First, they will benefit from the lifting of the nuclear levy. In England and Wales, domestic electricity consumers will save on average more than £20 as a result of the announcement. Consumers are already paying £13 less in real terms than they were before privatisation. Another £11 reduction in their bills is in the pipeline, and that is before any further tightening of price controls. The newspapers also tell us that the flotation of the National Grid could bring a one-off bonus of around £30 to consumers.

To sum up, therefore, our privatisation policy for the nuclear industry and for the traditional non-fossil fuel generating industry could eventually produce a saving of no less than £75 for the average electricity consumer in England and Wales in this year alone. Put into perspective, that amounts to 25 per cent. of the average electricity bill in England and Wales saved in one year. That saving would not have been made but for the Government's commitment to the privatisation of the electricity industry and the additional privatisation of nuclear electricity.

We know that the Labour party opposes privatisation for the sake of old socialist dogma, but we do not know what the Labour party's policy is on nuclear power. Its manifesto states:

"We will not invest in new nuclear power stations".

To be fair to the hon. Member for East Kilbride (Mr. Ingram), he made it clear that he stood as a Labour party candidate at the last election while not believing a word of his own party's manifesto with regard to nuclear power.

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He said that he would fight and fight again to change Labour party policy. The hon. Member for Hamilton refused to say what Labour party policy was, as did the hon. Member for Clackmannan. The only honest man on the Opposition Benches seems to be the hon. Member for Kirkcaldy (Dr. Moonie): when I pressed him on Labour party nuclear policy in a previous debate, he said that he did not know the answer.

Privatisation is good for the consumer, good for the nuclear industry and it should be approved by this House.

Question put, That the original words stand part of the Question: --

The House divided: Ayes 252, Noes 284.

Division No. 151] [10.00 pm

AYES

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Abbott, Ms Diane

Allen, Graham

Anderson, Donald (Swansea E)

Anderson, Ms Janet (Ros'dale)

Armstrong, Hilary

Ashdown, Rt Hon Paddy

Ashton, Joe

Austin-Walker, John

Banks, Tony (Newham NW)

Barnes, Harry

Barron, Kevin

Battle, John

Bayley, Hugh

Beckett, Rt Hon Margaret

Beggs, Roy

Beith, Rt Hon A J

Bell, Stuart

Benn, Rt Hon Tony

Bennett, Andrew F

Bermingham, Gerald

Berry, Roger

Betts, Clive

Boateng, Paul

Bradley, Keith

Bray, Dr Jeremy

Brown, Gordon (Dunfermline E)

Brown, N (N'c'tle upon Tyne E)

Bruce, Malcolm (Gordon)

Burden, Richard

Byers, Stephen

Caborn, Richard

Callaghan, Jim

Campbell, Mrs Anne (C'bridge)

Campbell, Menzies (Fife NE)

Canavan, Dennis

Chidgey, David

Chisholm, Malcolm

Church, Judith

Clapham, Michael

Clark, Dr David (South Shields)

Clarke, Eric (Midlothian)

Clarke, Tom (Monklands W)

Clelland, David

Clwyd, Mrs Ann

Coffey, Ann

Cohen, Harry

Connarty, Michael

Cook, Frank (Stockton N)

Cook, Robin (Livingston)

Corbett, Robin

Corbyn, Jeremy

Cousins, Jim

Cox, Tom

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