HL Deb 14 December 1981 vol 426 cc13-9

3.12 p.m.

Lord Skelmersdale

My Lords, I beg to move that the Bill be now read a second time. The object of this Money Bill is to raise the financial limit of British Nuclear Fuels Limited. The limit was set out at £300 million by the Nuclear Industry (Finance) Act 1977, with powers to raise this to £500 million. These powers were exercised by statutory instrument, which came up for discussion in another place on 25th March last. On that occasion the Opposition view that we should put BNFL's financial limit much higher in order to avoid the need for frequent return to Parliament for further authority weighed heavily with us. The Bill therefore raises the limit further to £1,000 million with powers to increase this to £1,500 million, again, by order.

The financial limit on BNFL comprises the amount paid for shares since the company's formation, the amount of outstanding loans to the company by the Government and the company's outstanding loans from non-Government sources which are guaranteed by the Government. I wish to stress that the purpose of the Bill is to increase the amount of BNFL's borrowing from non-Government sources which the Government may guarantee.

It would be appropriate if at this stage I spoke a little about British Nuclear Fuels Limited. Formed in 1971 out of the production group of the United Kingdom Atomic Energy Authority, BNFL has become in the space of 10 years a major company in its own right. It offers services in all aspects of the nuclear fuel cycle, from the conversion of uranium into gaseous uranium hexafluoride to the reprocessing of irradiated fuel. These services are provided principally for the home generating boards. BNFL is also a successful exporter. Sales last year totalled £349 million, of which exports accounted for nearly £41 million.

BNFL is at present engaged in a major expansion programme. Over the next 10 years, the company is planning capital expenditure of about $3.5 billion in constant money values. On the company's own inflation forecast, capital expenditure could total about £6 billion. These are large sums of money, so your Lordships will rightly wish to know how this capital programme is to be financed. Like any industrial company, BNFL is proposing to do it with funds generated internally, largely from profit and depreciation—about 70 per cent, of the capital expenditure programme over the next 10 years will be financed from internal sources—and by borrowing. The company expects to borrow about £800 million in 1981 money values, or about £1.5 billion, again according to its own inflation forecast.

The previous Administration agreed that BNFL could and should borrow in the open market rather than from Government sources. It also recognised that BNFL would require the support of a Government guarantee if it was to do that. The 1977 Act provided the necessary powers. We entirely share the view that was taken here: there is no need to emphasise the desirability that BNFL should seek its funds from non-Government sources. But it may be helpful if I explain the need for the guarantee. This is required because of the political risks to which BNFL is exposed —for example, the possibility that some future Government might, for political reasons, close our nuclear power stations or in some other way take action which affected BNFL's business. There is also the regulatory risk—for example, if it proved necessary on public safety grounds to close down some of our nuclear stations, BNFL's business would similarly be affected. For those factors, quite beyond the company's control and indeed peculiar to the nuclear industry, we consider the guarantee to be necessary.

The guarantee is, however, permissive. For each specific loan for which a guarantee is required, BNFL must approach the Secretary of State for Energy. He and his colleagues at the Treasury must agree to the terms and conditions of each loan before a guarantee may be extended. Further, the Secretary of State for Energy must lay before each House of Parliament a statement showing the extent and character of the guarantee issued and the circumstances in which it came to be given. There is, therefore, ample opportunity at this point for the Government to satisfy themselves as to the liability they are taking on, and for Members of this House or the other place to ask questions about a particular guarantee.

There is the further important question of the soundness of the company's business, and particularly its investments, with which the guarantee is concerned. I wish to point out in this context that BNFL is not engaged in major speculative investment. The company is confident that about 86 per cent, of the investment contained in the current programme is covered by secure contracts which provide, at the least, for the recovery of its costs. I also wish to point out that the investment programme is also primarily concerned with services for nuclear power stations already operating or under construction. Against this background, of course, the Government take all the steps which a prudent banker would take to satisfy themselves as to the soundness of the company's business. This is important, given the size of that business and the amount of borrowing which the Government are likely to be asked to guarantee.

This increase in BNFL's guarantee is related to the company's own borrowing requirement, which I have described, and to the need for regular parliamentary scrutiny of the company's affairs. BNFL expect to reach the present limit of £500 million somewhere towards the end of 1982. Depending on inflation, the new limit of £1000 million will be reached probably between 1984 and 1986. At that point, the Government must lay an order in draft before the other place, which must approve it. This occasion provides, clearly, an opportunity for debate of the company's affairs certainly within about four years of the Bill becoming law. That seems reasonable. There is of course a balance to be struck between the necessity of proper scrutiny and the freedom of the company to proceed with plans that are otherwise approved. I believe that the Bill strikes this balance.

BNFL is a successful Companies Act company with plans for a major expansion programme which the Government support. The investments concerned will enable BNFL to continue to provide the fuel cycle services which are essential to our present nuclear programme. I must stress that without those services our nuclear power stations would be in grave difficulty. This is a high technology industry, making profits, and a major employer in the North-West region of England. I therefore commend the Bill to the House.

Moved, That the Bill be now read 2a.—(Lord Skelmersdale.)

3.20 p.m.

Lord Strabolgi

My Lords, we are grateful to the noble Lord, Lord Skelmersdale, for explaining the provisions of this short Bill. As the Order Paper makes clear, this is a money Bill, to alter the financial limit imposed by the Act, and I do not, therefore, propose to make a long speech on general nuclear energy policy, nor indeed to follow the noble Lord in some of the hypothetical questions that he raised today about what a future Government may or may not do. Important as the subject of nuclear energy is, I suggest that a general debate would not be appropriate today.

As the noble Lord has said, British Nuclear Fuels Limited has been a successful public company, with a good export record. Export figures for its fuel cycle services have risen over the last decade from £6 million to £41 million. I am glad to note that all the activities of BNFL are subject to the necessary safety standards, and are carried out with regard to the protection of the environment and to the guidelines on non-proliferation.

BNFL is a good example of a successful nationalised concern—and one of which we can be proud. In view of the Government's all too familiar attitude to nationalisation, will the noble Lord confirm that BNFL is not a company destined to be sold off in the same way that Amersham International was sold off? That was of course another successful state-owned company, but alas! it did not fit in with the Government's ideology for precisely that reason. Will the noble Lord confirm that there will be no privatisation of BNFL? I am concerned about this, not only because of the Government's past record and the declared intentions over privatisation in general, but also because the noble Lord's honourable friend, when dealing with this point, said in another place on 16th November, at column 111 of the Official Report, that, there is no present intention, but it would be wrong to rule out such an intention in future ". Can the noble Lord give the House a more specific assurance on this point?

3.23 p.m.

Lord Beaumont of Whitley

My Lords, as the noble Lord, Lord Strabolgi, has said, this is a money Bill and a small Bill, and, as he suggested, perhaps a general debate is not entirely appropriate. However, I think that there are one or two points to be raised on this matter. Although of course the actual finance raising is none of our business in this House, the method that the Government have chosen is a rather peculiar one, though also a very useful one from their point of view. After all, the two main ways in which the Government raise money for nationalised industries and other matters are through Government funding or commercially, and in this particular case we have an unfortunate hybrid of the two—the third method of a Government guarantee. This has a considerable advantage for the Government, in that they are let off the hook of including the money in the PSBR. Furthermore they do not have to persuade the financial institutions that the schemes for which they are raising money are financially sound, because the loans for the purpose will have Government guarantees behind them.

As I say, for the Government this is a very convenient way of raising money, but it gives rise to a number of questions. It raises the question of whether it is right that the Government should be let off the hook regarding the PSBR in this particular case. Presumably in monetary terms some effects will arise from this situation, and indeed if the matter had fallen within the PSBR the Government would not themselves have authorised such money raising in the particular situation. So merely by the accident that by custom, as I certainly admit, and for historical reasons, this particular corporation is excluded from the PSBR, the Government are let off that hook.

Secondly, there is the matter of Government guarantees. I accept some of the special circumstances that the noble Lord, Lord Skelmersdale, mentioned, but I still think that on the whole it is undesirable to multiply the number of instances where the Government guarantee the finance. The noble Lord said that there was the possibility of a future Government reversing the situation as regards this particular industry, and that is certainly a very fair point.

However, he went on to mention some matters that were outside the control of British Nuclear Fuels Limited which to me should not at all be outside its control. If I caught accurately what the noble Lord said, I understand that the safety factors, which at any particular time might lead to power stations being closed down, are beyond the control of British Nuclear Fuels Limited. If that is so, it is the most hair-raising, scaring remark that we have heard about the whole nuclear industry for years and years either in America or here. We have always been told that the safety records were absolutely right, that safety precautions were first-class, that everything was under the control of BNFL. If it is the case merely that that matter is not under BNFL's particular control but is under the control of the rest of the nuclear industry, then I see that there is a technical problem between the two sides. But perhaps the noble Lord will clarify that issue when he replies.

I now wish to move on from the money aspect and take only two minutes at the most merely to reiterate the policy of noble Lords on these Benches. We think that this way forward through nuclear means is not the best method by which to produce power to meet the needs of the country. Bearing in mind the forecasts regarding energy production, even in the present cold weather, it appears that in the future not nearly as much power will be needed as was thought to be likely two, three or four years ago. The steps that should be taken to conserve energy and to find different methods of producing power have certainly not been explored or exploited nearly as much as they should have been. It is a very short time since the report of the House of Commons Select Committee on Energy stated: We were dismayed to find that, seven years after the first major oil increases, the Department of Energy has no clear idea of whether investing around £1,300 million in a single nuclear plant… is as cost effective as spending a similar sum to promote energy conservation ". The amount of money that we are authorising here is about half the amount that would be needed to insulate all the buildings of the United Kingdom housing stock for their lifetime. It is our view that considerably more investment in investigations into, and development of, alternative energy sources would be a much more sensible way ahead. However, since the Government have chosen to proceed to raise money in this particular way, I believe that we should pay some attention to the method that they propose. But I hope that in future they will be able to find a way that appears rather more justifiable than the one they have chosen this time.

There is extreme cost in the development of a nuclear programme. It is costly; it is centralising; it is in many ways dangerous. We need a society which is more human and more devolved. We need to pursue alternative energy policies; and, above all, we need to practise fuel conservation. Not nearly enough is being done in either of those fields. My Lords, we do not need nuclear power and we do not need this Bill.

3.30 p.m.

Lord Skelmersdale

My Lords, I am grateful to both noble Lords for the very moderate way in which they have greeted this Bill. My last excursion onto the nuclear front was in June and July of this year, when the Liberal Party (represented on that occasion, not by the noble Lord, Lord Beaumont, but by the noble Lord, Lord Lloyd of Kilgerran) was somewhat more forthright than the noble Lord has been this afternoon. In fact, I must confess that a rather wicked thought went through my mind. I wondered whether the Liberal Party had not (to misquote Portia)" turned a manly stride into two mincing steps". However, we shall see.

The noble Lord, Lord Strabolgi, asked whether we intend to privatise BNFL. My Lords, I like to be consistent. On 9th July of this year, at column 896, I said: the Government have no such plans at present". Before that, on 23rd June of this year, at column 969, I said: They"— that is, the Government— have at present no plans to do so". The position remains exactly the same today. However, having said that, I would add this. In his speech the noble Lord was referring to the Atomic Energy (Miscellaneous Provisions) Bill, and he is quite right in saying that the Secretary of State has now been allowed to transfer to himself all the shares in BNFL which were previously held by the Atomic Energy Authority. This means that should an occasion arise it would be possible for him to sell, again according to the Act I have just mentioned, 49 per cent. But I continue to say that there are no plans at present to do anything of the sort, and I hope the noble Lord will understand that that really is as far as I can go on this occasion.

The noble Lord, Lord Beaumont, referred to a couple of things. "This peculiar way of raising money", I think he said; I hope I have his words right. I do not see why it is peculiar at all. We are here talking about a Companies Act company which, as I have said and the noble Lord, Lord Strabolgi, has reaffirmed, is very successful indeed at doing its job. Any Companies Act company outside the public sector would be expected to go to the money markets to finance that part of their borrowing, if you like, for capital projects that they cannot do from internal sources; and where, as on this occasion, we have this very successful company inside the public sector, why should it be any different?

" The Government do not have to persuade financial institutions of the rightness of the company's borrowing", the noble Lord said. But the company has to convince the Government of it, and the company also has to convince the financial institutions. So I really cannot see why this should be such a damnation.

Lord Beaumont of Whitley

My Lords, the company, surely, does not have to convince the financial institutions once it has a Government guarantee. That is quite enough. It does not have to say another word.

Lord Skelmersdale

That misses the point completely, my Lords. The company does not get a Government guarantee until it has convinced the financial institutions. That is a fact.

The noble Lord also spoke about the safety factors, and, of course, the noble Lord is quite right. I am again going to be consistent. On numerous occasions I and other Ministers in the Department of Energy have said that during nearly 20 years of commercial operation of nuclear power stations in this country no accident has occurred which has given rise to significant public hazard. This is because successive Governments and the nuclear industry have attached paramount importance to safety from the earliest days of nuclear power, and we intend to maintain that excellent record. The nuclear industry as an industry is a very safe one. Any other power industry just would not measure up to the standards of safety that both Parliament and the industry itself have set, and I am absolutely sure that this is the right way to proceed.

The noble Lord again criticised me because in my speech I referred to matters outside the control of BNFL. In fact, he saw me shaking my head and nodding it at various moments, and he ended up by answering his own question. So, if I may take it as a rhetorical question to which he has given the answer, I would agree with him in the answer and the conclusion to which he came.

As to whether nuclear power is or is not the way forward, we have developed this programme over 20 years and we are, of course, investigating various ways in which alternative sources and the more conventional fossil fuel sources can be used. But the fact is that we have it, and the guarantee (to go back to the guarantee) is necessary because in the two fields of the fuel fabrication part and the reprocessing of fuel by the company the company has not got overall control. If there are no nuclear power stations, of course, there will be no fuel to be reprocessed or, indeed, to be created in the first place. So I do not think it is fair to blame the company in respect of this one. My Lords, I hope T have said enough to convince the House that this is a soundly based Bill and that it should receive your Lordships' approval.

On Question, Bill read a second time; Committee negatived.