HC Deb 22 March 1973 vol 853 cc670-8
The Secretary of State for Trade and Industry and President of the Board of Trade (Mr. Peter Walker)

Last August the Government announced their intention to encourage the consolidation of the nuclear design and construction industry into a single strong unit. Since then we have held wide and detailed consultations with firms both inside and outside the nuclear industry, and with the Atomic Energy Authority, trade union and staff association representatives and the electricity supply authorities.

These consultations have confirmed strongly the Government's view that there should be a single nuclear company which will use the skills and experience of the existing industry; that its management should be dedicated solely to the company's success; and that the present consortium arrangements are not compatible with the strength and unity of management which we all regard as vital.

The basis on which I am now discussing the establishment of the company is that 50 per cent of the share capital would be held by the General Electric Company whose international standing and financial and managerial strength will be most valuable, 35 per cent, of the share capital would be offered to other companies with an important interest in the nuclear design and construction industry, and 15 per cent, would be taken up by the Government through the AEA. This should give the new company a private sector shareholding of 85 per cent. GEC would also play a supervisory role on a basis agreed with the main board of the new company and would be paid for services provided.

The Government would have special rights in certain matters where the public interest is closely involved. These would include the formation of international links and securing that an open purchasing policy is pursued in order that neither the company's shareholders nor GEC subsidiaries should obtain preferential treatment in the allocation of contracts.

The company's normal business will be the design and construction of nuclear steam supply systems, since the main domestic customer, the CEGB, wishes to be free to place separate contracts for the nuclear steam supply system and the turbogenerators and associated plant and works. The company will however be able to supply complete power stations, in association with other firms, where the customer so requires.

The Government, with the support of GEC, consider that the board of the company should include people of experience and standing in the nuclear and electrical business. I am glad to say that Lord Aldington has agreed to become chairman and Lord McFadzean deputy chairman.

The Atomic Energy Authority will continue to play a vital part in the nuclear industry as the principal instrument for carrying out research and development. British Nuclear Fuels Ltd. will be closely associated with the new company in marketing and exploiting reactor systems and their fuel.

The skills and experience of the staff of the existing consortia are crucial to the successful completion of the existing business and the prospects of the new company. It is essential that the power stations now being built by the consortia should be completed successfully and quickly. To achieve this, it is intended that current contracts should be completed by existing staffs under arrangements to be agreed between the present consortia, which are responsible for the contracts, and the new company. The employment of staff on new work will be negotiated by the new company as a matter of high priority in full consultation with the unions and staff associations concerned.

These complex discussions on the reorganisation of the nuclear design and construction industry have necessarily involved prolonged consultation. Now that the basic decisions have been taken the important thing is to complete quickly the formation of the company so as to give renewed momentum to our nuclear business at home and abroad. The company structure we are adopting offers good prospects for this and I ask all involved to co-operate fully to ensure its success.

Mr. Benn

The right hon. Gentleman has made a very important statement constituting the second massive intervention in private industry in a week, in this case realising the objective which the Labour Government and the Select Committee on Science and Technology attempted unsuccessfully to carry through with the help of Lord Kearton of the IRC.

May I ask the right hon. Gentleman the following questions? What cash investment by Her Majesty's Government will be involved in the solution that the right hon. Gentleman puts forward? Secondly, in view of the fact that all the nuclear technology and almost all the engineering technology was funded by public money, either through investment in the AEA or through the CEGB's purchasing, how can the right hon. Gentleman justify a public stake as low as 15 per cent, instead of the majority holding which the Opposition would favour? Thirdly, will the open purchasing policy to which the right hon. Gentleman refers mean that the CEGB will not be committed to British systems which have been produced under the auspices of the AEA, and will American systems be offered to the CEGB through the new company? Will there be open tendering by American concerns for CEGB orders?

At the end of his statement, the right hon. Gentleman says: Now that the basic decisions have been taken…". Does that mean that there will be no parliamentary approval for this scheme? Is the right hon. Gentleman saying that we have to accept his statement when we still await the publication of the report of the Select Committee which is now examining this very important matter and in the absence of the Vinter Committee's report, which was the basis of the right hon. Gentleman's decision?

Finally, may I ask the Leader of the House to notice that here is another major aspect of industrial policy which calls for an early debate in Government time?

Mr. Walker

I welcome the right hon. Gentleman's endorsement of the concept that there should be a unitary company.

Dealing with his point about the investment, the suggested paid-up capital of the company is £10 million. Therefore the Government will put in their 15 per cent. shareholding in terms of that sum.

I concede that there has been a vast amount of Government research, but I disagree that this should be a more publicly owned company and less in the private sector. It is important that the company should be commercially oriented so as to take advantage of the considerable export opportunities available. It will have most momentum by having this substantial private stake.

The future systems to be adopted are a matter on which the Secretary of State will depend upon the advice of the Nuclear Power Board which a previous statement on 8th August said was to be set up comprising a wide range of scientific advisers drawn from the AEA and the CEGB. There will also be representatives of the new nuclear company and a number of other advisers. It will be the job of the Nuclear Power Board to advise the Government on the systems which the country should pursue.

As for a parliamentary debate on this topic. I always welcome a debate on industrial matters as it is obvious that this Government are succeeding so much better than their predecessors.

Mr. Skeet

What is the effect of my right hon. Friend's statement upon the other leading companies in the industry? As my right hon. Friend has selected a national as opposed to a European solution, what is the way ahead for the industry in terms of export sales? Does my right hon. Friend envisage links with the West German firm KWU, or does he intend to leave matters to the consortia? Will the companies about to be terminated receive compensation for the losses which will accumulate as a result of their going out of business and having no profitable undertakings to carry through?

Mr. Walker

Dealing with my hon. Friend's first question about the effect on leading companies in the electrical business, the solution that we have reached, after careful consultation with the companies, will be in the interests of the British electrical industry as a whole. I am certain that the very substantial orders being obtained by a wide range of British firms from abroad will continue, aided by the expansion which the new company will provide.

It is right that the Government should bear the responsibility of creating the international links, because much of them will be related to research which is in the possession of this country and which has been done by the Government. The creation of the new company will give better prospects to sensible and rational links with Europe, and ones which can be obtained from a position of British strength.

As for the existing companies, the completion of their contracts must be a matter for negotiation between them and the new company. I am sure that negotiations will start quickly.

Mr. Grimond

Will the right hon. Gentleman say what estimates have been made of the profitability of the new company? If 85 per cent. is to be in private hands, why is no part being offered on the market? Will Lord Aldington and Lord McFadzean continue with all their present commitments in industry?

Mr. Walker

The chairman and vice-chairman both intend to see that the time available to the new company is such as will meet its requirements, and Lord McFadzean has announced recently his retirement from his main executive rôle with BICC. Both have massive international reputations and a great deal of good will in the industry.

The future profitability of the company obviously depends not only on the future national success of reactors purchased in this country but on its ability to compete with the powerful American companies already engaged in this sphere of activity. How successful or unsuccessful it might be in a very competitive world is a matter of speculation. I have endeavoured to create a company which, internationally, is strong competitively and which, I hope, will prosper internationally and nationally. I believe that the leadership Lord Aldington and Lord McFadzean give to it will be of considerable importance.

A number of major companies linked with the two existing consortia have done a great deal of work and, having eliminated the two consortia, it is right to ensure that they can be represented on the new company. A number of firms in the consortia will obtain international prestige as being part of it, which will be important to our export chances.

Mr. Tugendhat

Will there be a Government director as there is on the board of British Petroleum? Who will be the full-time chief executive? Will he come from GEC? May we have some indication of which are the companies with the 35 per cent. to which my right hon. Friend referred? It is a very large percentage.

Mr. Walker

I am unable to do so because obviously one has now to discuss with the companies concerned the stake they would wish to have, if any, in this company. The chief executive's appointment will be one which is approved by the GEC and the Government. I was asked about a Government director on the board. Since the directors have to be approved by both the GEC and the Government, I do not believe there is any need to have a specific director as a Government director. I wish to see a board which will be small and effective and of such calibre and repute as to be able to work successfully, as I am sure it will, to ensure that this company is a success.

Mr. Palmer

Although the right hon. Gentleman has not mentioned it, he will be aware that Sub-Committee B of the Select Committee on Science and Technology is now investigating this issue and hopes to report fairly soon. Could I ask him, therefore, why his Department has refused essential information to the Select Committee, including that on the Vinter Report, and, secondly, whether Sir Arnold Weinstock is to have a specific management contract with the new company, apart from the influence he will exert as a shareholder in the company? Will he also reconsider the answer he gave my right hon. Friend the Member for Bristol, South-East (Mr. Benn) about a majority State holding? Will he appreciate that many hon. Members on both sides of the House feel that the State should have a major interest in this matter, and will he therefore wait until the Select Committee finally reports before making up his mind?

Mr. Walker

I have made up my mind and I am against having a majority State holding in this company. I want it to be very commercially oriented and I think that a majority State holding would be wrong. The hon. Gentleman knows full well that the Vinter Report was prepared by civil servants for the Government and that it has not been customary either for the previous Government or for this Government to publish such reports, particularly when information is given in confidence to Government officials. But, as he knows, my hon. Friend the Minister for Industry has offered a considerable amount of information from the Vinter Report to the Select Committee. Finally, there will be no management contract with GEC.

Mr. Crouch

May I put it to my right hon. Friend that his statement this afternoon is an example of massive intervention of the private sector into the public sector? While I accept that his obvious desire is to introduce a very commercial element, I am concerned that the research and development contribution of the AEA, which in the past has been and I hope will continue in the future to be very considerable, is not sufficiently represented by this 15 per cent.? I am also concerned about the position of parliamentary control in this key sector of our energy policy and production.

Mr. Walker

I would remind my hon. Friend that the AEA had a direct interest in the two previous consortia that existed and it was agreed that they should be united into one strong consortium. We are dealing here with what is very much a commercial operation which has enormous worldwide prospects. I believe it to be right to have a commercially oriented company with strong management, for that reason. The important point about parliamentary control is that the Nuclear Power Board, which will advise the Government and, of course, the Secretary of State for Trade and Industry, will have considerable powers, for which, as always, the Secretary of State will be answerable to Parliament— powers over international links, over open purchasing policy, over the research programme which will continue to be done by the AEA, and over the advice which will be made available to him on choice of reactor.

Mr. Benn

Is the right hon. Gentleman aware that to use the word "commercial" in respect of nuclear power is to turn language on its head? Nuclear power has never been commercial. It is entirely research and development. Well over £500 million has been paid for that by the taxpayers and that is to be handed over in return for a £1½ million stake in the equity of a company which is to be privately controlled, without a Government director and without parliamentary approval. For the Minister to say, "I have made up my mind" indicates the contempt with which he regards the legitimate interest of the House in this matter.

Mr. Walker

If the right hon. Gentleman holds those views I can only say that if he should have responsibilities in this field again, all the major American nuclear companies would be delighted that he was in that position, because he would be handing over one of the fastest expanding industries in the world to the much more competitively successful and commercially oriented companies of the United States.

Mr. J. H. Osborn

I would ask my right hon. Friend whether he is aware that, unlike my hon. Friend the Member for Canterbury (Mr. Crouch), I welcome this very bold statement, as do many Members on this side of the House, and wish this new company every success. I would ask him whether it is not a fact that this company will be in competition with two private enterprise companies in the United States—General Electric and Westinghouse—which have gained Government contracts in research and development for over 25 years and have developed a commercial expertise which has been denied us in this country, and whether it is not a fact that we are now taking a bold step which should be welcomed?

Mr. Walker

It is certainly true that this is potentially a massive world-wide market. More than two large American companies are already penetrating world markets and a number of European companies are also emerging into this sphere. I believe that with our expertise it is absolutely vital for us to penetrate these markets.

Mr. Ronald Brown

Is the right hon. Gentleman aware that his statement on the publication of the Vinter Report is extremely disappointing since exactly the same argument was raised by him or his predecessor on the Doxey Report? There is no excuse for the Government withholding this important information from the Select Committee.

Mr. Walker

All previous Governments have withheld advice given to Ministers by their officials. Any previous Minister—including a relative of the hon. Gentleman—will advise him that that is a fact.

Mr. Adam Butler

May I re-echo the feeling that most hon. Members have on this side of the House over the faith which my right hon. Friend has shown in the private sector and ask him to confirm that it will be the Government who have the vital choice on reactor, when that choice is likely to be made and orders placed with the new company?

Mr. Walker

The new nuclear company will as quickly as possible enter into discussions with the CEGB. Obviously it is our intention quickly to establish the active work of the Nuclear Power Board which will advise the Government of the best system to pursue in the future.

Mr. Rost

While congratulating my right hon. Friend on taking an initiative on a decision on a commercial fooling for this industry and restricting the Government's stake to 15 per cent., may I ask whether he will confirm how the loan capital will be provided, whether it will be in equal proportion to the equity and whether the 35 per cent. contribution from the existing companies will be on an open competitive basis or by invitation?

Mr. Walker

It will be by invitation, looking at those companies which have particularly participated in the nuclear industry in the past. It is not envisaged that any new loan capital will be required.

Mr. Ginsberg

Can the right hon. Gentleman say what is to happen to the CEGB's holding in APC and whether that is to be additional to the AEA holding of 15 per cent.?

Mr. Walker

No, Sir.