HC Deb 18 July 1977 vol 935 cc1150-64
The Secretary of State for Energy (Mr. Anthony Wedgwood Benn)

If I may, with permission, Mr. Speaker, make a statement, the Secretary of State for Industry has informed the House that it has not at this stage proved possible to find an acceptable basis for restructuring the power plant industry. At the same time, the Government recognise that the current lack of home orders, together with the relative lack of export opportunities in present economic circumstances, has led to a pressing short-term need for work in sections of the industry. To help with these short-term problems the Government have now decided that it would be right for the Central Electricity Generating Board to place an order for Drax B coal-fired power station and that the order for turbo-generators should be negotiated with C. A. Parsons.

The CEGB had not planned to place an order for the station before 1979 and the Government have agreed in principle to the payment of compensation to the Board in respect of costs incurred in bringing forward the order.

The Government further anticipate that, following the thermal reactor decision, an order will be placed for a nuclear station. The power plant industry will also benefit from ongoing repair and maintenance programmes. The Government believe that the order for Drax B, in addition to benefiting the power plant industry, is a further mark of confidence in the United Kingdom coal industry.

Mr. Tom King

Is the right hon. Gentleman aware that we know that his announcement has been taken in the teeth of the advice of the CPRS, the National Enterprise Board, the CEGB, the Secretary of State for Industry and the Department of Industry and that the Central Policy Review Staff's Report itself said that the ordering of Drax alone would only defer redundancies for two years and that jobs saved in one place would be jobs lost elsewhere? Since the Government's own CPRS Report is now being circulated by our competitors to our overseas customers, saying that there is no future for the British industry unless it is rationalised, and the Government have now decided, far from rationalising, actually to buttress that fragmentation, what hope is there for British companies in the export market?

Will legislation be needed to enable compensation to be paid? Will that compensation include such differences of price as might exist if the General Electric Company decided to quote also for this order? Has he noted the fact that at Question Time this afternoon the Secretary of State for Industry confirmed his support for the CPRS Report, which we strongly endorse, and his right hon. Friend's statement that rationalisation is essential for maintaining an internationally competitive industry? We only regret that through political expediency the Government have just thrown away their best card for achieving that.

Mr. Benn

Discussions have begun with the CEGB and I cannot in detail answer the question about compensation arrangements, because the discussions are in progress. The hon. Member will recall, however, that the previous Government, which he supported, gave an order for a power station at Ince B, with compensation, to Parsons, without a competitive tender. Therefore—[Interruption.] The hon. Gentleman can get up again if he wishes, but I want to make it clear that in circumstances not very dissimilar from those which now confront the Government, the previous Government excluded competition and arranged that the CEGB would have compensation to advance the order for Ince B.

The hon. Gentleman also does less than justice to the efforts made by my right hon. Friend the Secretary of State for Industry in seeking to bring about the restructuring of the industry in line with the recommendations of the CPRS and others whose advice was sought on the matter. In the course of many months of meetings, in which my right hon. Friend took a leading part, every possible effort was made to arrive at a restructuring arrangement. In announcing what I have announced today my starting point has been that it was not possible for my right hon. Friend to achieve that objective.

However, I want to make it absolutely clear—as I am sure he has done himself—that the Government believe that the longterm interests of this industry require a firm home ordering programme available to an industry able to compete effectively abroad as well. The problem facing the Government was that, in the absence of a capacity to bring that about, we thought it absolutely wrong to allow an important part of that industry—that at Parsons—to go out of existence and thus pre-empt the possibility of realising a long-term solution.

Mr. Mike Thomas

Is my right hon. Friend aware that no one, except apparently some Conservative Members, takes any joy from the failure of the restructuring talks and that we in Newcastle hope that they will proceed to fruition in due course and on an acceptable basis—perhaps one similar to the boilermakers? Is he aware of the relief on Tyneside and in Scotland that his decision will bring, that it will save at least 1,000 jobs in the short term and will provide a base for getting export work and that what the hon. Member for Bridgwater (Mr. King) suggested would have achieved the opposite and led to a firm in my constituency going out of existence? Will my right hon. Friend ask the CEGB to do what it can to get the work for this order on the shop floor as quickly as possible? We have had to wait a long time for this decision and the work is urgently needed.

Mr. Benn

On the latter point, I have met the CEGB for a preliminary discussion. There are a number of points that it wishes to discuss further with me. My hon. Friend will appreciate that the most important thing is that my statement today should have been made. However, I would not want the frustration of that intent to lead to difficulties. In fairness to other hon. Members representing GEC workers in their constituencies, he will also be aware that this decision was a difficult one for the Government, and that all those concerned, particularly on the trade union side, have shown great understanding of the difficulties facing the Government.

Mr. Hugh Fraser

Is the right hon. Gentleman aware that trade union representatives from GEC felt that they were entirely misled by the Secretary of State when he saw them on Tuesday? Second, is he aware that the House has been misled by his Under-Secretary of State who announced, in reply to a Question from me, that this matter would go out normally to open tender? Third, is he aware that the harm done to our repute in the world, when decisions are taken purely on grounds of political muscle rather than true economic grounds, will considerably damage our overseas trade and is already being exploited overseas by Brown Boveri?

Mr. Benn

It is inconceivable that the GEC workers who came to see me could have been misled, because I began by saying to them that all that I could do was listen to their representations and be sure that those representations were properly reflected. That was clearly understood and there was no doubt in their minds that that was the position.

As for competitive tendering, we gave consideration to that proposal. The view was that in the event of competitive tendering being agreed for this order, the figures submitted would in effect be meaningless because so much would be at stake for the companies concerned, and the outcome might well be a monopoly in which the CEGB could lose out later as the successful company recouped for its uneconomic bid. If the right hon. Gentleman thinks that other countries, in planning their industrial restructuring, do not take account of the same sort of factors as we are taking into account, he must be very naive about the policies of our major industrial competitors.

Mr. Grimond

Is the right hon. Gentleman satisfied that this decision will help the restructuring of the industry which he says is Government policy? Who is obstructing the restructuring which the Government wish to bring about?

Mr. Benn

I would put it to the right hon. Gentleman like this: if no order had been placed, the future of a large, highly-qualified and well-respected section of the British turbo-generator industry might have been blanked out completely. As I made clear, after my right hon. Friend has been unable to get the agreement that we wished, at least our decision makes a restructuring possible later—as is still our intent.

I am afraid that I cannot describe the negotiations in detail except to say that the differences which existed about how this might be done were important differences of principle among the parties. Had they been other than that, my right hon. Friend would clearly have been able to suceed. There were serious problems which could not be resolved in the time scale necessary to keep this important part of the industry in being.

Mr. Buchan

Does my right hon. Friend accept that, despite the criticism of the Opposition, his statement will be widely welcomed by thousands of workers not only in the turbo-generating industry but in the boilermaking industry? Is my right hon. Friend aware that—whatever nit-picking may be indulged in by the Opposition—his decision is entirely in line with the spirit of the report of the Central Policy Review Staff? Does he further realise that his decision will be widely welcomed by the coal mining industry, and that for all those reasons we from Scotland particularly want to congratulate him?

Can my right hon. Friend give an assurance that, since one of the reasons for bringing forward the order was to save the future of the boilermaking industry, that part of the order will go to Babcock and Wilcox in Scotland?

Mr. Benn

It is expected that the bulk of the boiler work will go to Babcock and Wilcox. In addition to meeting the GEC workers on Tuesday, I visited Renfrew and, although at that time I was unable to anticipate the decision, I realised that there was real anxiety among the boilermakers—as well as in the turbo-generating industry—about the prospects of the industry. We, as a major energy producer, must necessarily wish to see the industry play an important long-term part in exporting equipment and in allowing us to use the energy that we shall be producing.

Sir David Renton

Has the Secretary of State given formal statutory directive to the CEGB under the Electricity Act on the ground that this is a matter of national interest? If not, what legal power does the Secretary of State claim for the decision that he has made against the advice of the CEGB?

Mr. Benn

I have not given a statutory directive. I have requested the CEGB to advance Drax B.

Mr. Palmer

Will my right hon. Friend say whether the consent of the CEGB to the placing of the order depends on the negotiation of terms for compensation which will be satisfactory to the CEGB?

Mr. Benn

I have had a number of discussions of various considerations with the CEGB—as my hon. Friend knows. One of them was the basis for a restructuring of the industry which the Government hope will be possible. More recently we have been discussing and negotiating with the Board the circumstances that now confront us. These discussions are not yet complete.

Mr. Skeet

Has the right hon. Gentleman considered the implications of his statement on consumers, and is he aware that the decision will cost Eastern Electricity Board consumers £9 a head? Is he also aware that once there is a more efficient station such as Drax B, a number of older stations will have to be closed, with the result that less coal will be used?

Mr. Benn

Drax B will take some time to build and the implications for the older power stations will not come into effect for six to seven years, or however long Drax B takes to build. Now that the decision has been taken, I advise the hon. Gentleman not to bandy about the wild figures that have been used in the course of this controversy because when we examined the figures with great care, many of those used in the propaganda arguments turned out to be incorrect. Some of those figures came from respectable sources, and we should look at them again.

Mr. Joseph Dean

My right hon. Friend referred obliquely to the GEC work force. Should he not reflect further and see whether he can give them some assurance about the future, bearing in mind that during the last Labour Government—when my right hon. Friend was Minister for Technology—those workers reluctantly co-operated in carrying out a massive reorganisation? There were massive redundancies in an attempt to secure their future which was almost guaranteed by the Government of the day. Is my right hon. Friend aware that they now take a dim view of this?

Does my right hon. Friend realise that I am concerned about workers on both sides and not about one particular company? Will he give some reassurance, because those workers who were here last Tuesday are here again today and want to see my right hon. Friend about their future?

Mr. Benn

I met a large number of those workers, together with my hon. Friend the Member for Leeds, West (Mr. Dean), in my office last week. My hon. Friend can confirm that in that meeting I undertook only to convey their views, and that reference was made to earlier mergers involving GEC from which we all, including me, learned important lessons.

In my statement, I drew attention to the thermal reactor choice that will shortly be made, and the nuclear orders that would flow from that, and to refurbishing and the other possibilities that exist. I found that GEC workers, while expressing their own concern, did not want to see their future being at the expense of a large chunk of the industry in which they work. This is a difficult matter for all concerned.

Mr. David Price

In view of the Chancellor of the Exchequer's statement on Friday, are we to take it that if C. A. Parsons, under stage 3 or post-stage 3, settles for higher wage increases than GEC, the right hon. Gentleman will reverse the decision that he has just announced?

Mr. Benn

No.

Mr. George Grant

Will the Secretary of State accept bat this statement will be warmly welcomed in the Northern Region and that it is good news in the area of the highest regional unemployment in the country where clouds have been hanging over much of its basic industry? Is my right hon. Friend aware that his statement will do a power of good for the morale of the mining industry, because while it is one thing for the Government to talk about the expansion of coal production the statement was a practical expression of where the market will be?

Mr. Benn

I agree with what my hon. Friend said about the Northern Region and, as the dust settles, I hope that people will recognise that the first proposals for Drax B came from the CEGB in November 1969 and that all we have been discussing is the timing. I hope that those who are concerned with energy policy will recognise that in the United States and the Soviet Union coal production will be boosted to 1 billion tonnes because coal has an important part in meeting future energy demands. That means not just digging the coal but burning it in such efficient new power stations as Drax B. These factors should be taken fully into account by the House.

Sir W. Elliott

Does the right hon. Gentleman accept that the management and work force of C. A. Parsons are not, and have not been, against a restructured industry? Does he also accept that negotiations must have suffered a considerable setback through the vote of the executive of the Confederation of Shipbuilding and Engineering Unions at Scarborough to insist on NEB control of any new company?

Mr. Benn

I have already said that it it not for me to comment on the long and detailed discussions undertaken by the Secretary of State for Industry. However, I repeat that the issues raised here were not small or mean but important ones of principle which made it difficult and, within the time scale, impossible to reach an arrangement for restructuring along the lines that the Government wished and in accordance with the general recommendations of the CPRS.

These industrial problems are extraordinarily difficult. Both GEC and the workers concerned were also looking at the proposals in the light of experience. Nobody could have tried harder than the Secretary of State for Industry to reach an agreement but it was not possible, in the Government's view, to let an important part of the industry go out of existence because it was impossible to get the restructuring carried through in time.

Mr. Blenkinsop

While I strongly welcome the difficult decision that my right hon. Friend and others have had to take, would my right hon. Friend agree that one important element in the decision was the danger of erecting a complete private monopoly in the industry that might have had damaging effects for the future?

Mr. Benn

That point was one of the issues raised in discussions about the possible implications. It was not the only or primary problem, but it was a problem. The House, which takes an interest in these matters, should recognise that after so much effort it was only a point of real substance that frustrated the realisation of the Government's objective.

Mr. Biffen

Is the right lion. Gentleman aware that many people outside the House will be wholly unconvinced by his praying in aid the example of Ince B? Is he also aware that the ordering of stations ahead of time and the placing of contracts with selected, regionally favoured companies is all part of the industrial malaise from which we have suffered in the past generation? May I ask the right hon. Gentleman a specific question arising from an earlier supplementary question? He said that one consideration that he had borne in mind when taking a decision on tendering was his anxiety to avoid eventually having a monopoly in the industry. Are we to understand that the restructuring will mean that there will be at least two turbo-generating companies in the United Kingdom?

Mr. Benn

On the latter question, I was making a quite separate point and I am sorry if I did not make it clearly. I said that competitive tendering leading to a monopoly, which would have been the outcome here, would mean that tendering was not competitive. The figures would not be real.

I reject absolutely the theory that this country suffers from an industrial malaise. What is and has been wrong over a very long period is that this country has lost substantial and important parts of its manufacturing capacity which, because they were not present, has put us in the position of having to import what could have been made at home. Every other industrial country has recognised that where there is a short-term dip in demand, it is sensible to expand or, in some cases, to maintain capacity so that industries can make their contribution to the upturn when it comes. I do not accept that the decision that I have announced on behalf of the Government represents part of a malaise. It was a difficult decision, but the right one in the circumstances.

Mr. Kelley

Is my right hon. Friend aware that electricity consumers should be greatly obliged to him for his decision? Many millions of pounds were spent on the original design of Drax B in order to preserve a situation for the second phase development and this capital investment has been lying dormant with the people who consume electricity having to pay loan charges on the investment. Is he aware that we now hope that the second phase development will be brought into operation as quickly as possible?

Mr. Benn

It is true that the new Drax B coal-fired station will be the most efficient for the consumer and that using coal from Selby will be a very good bargain for consumers. It is an indigenous fuel that is not subject to the uncertainties of imported fuel and, from the longterm view of consumers, the decision makes sense.

Mr. Nelson

Does the right hon. Gentleman realise that some of the worst examples of the industrial malaise recognised by my hon. Friend the Member for Oswestry (Mr. Biffen) have taken place in public sector industries, very often at the instigation of the Government? Does he not feel that the decision will be greeted with incredulity in this country and abroad by people who feel that a Government who are borrowing so much cannot possibly afford to sponsor projects in advance of time?

Will he at least ensure that if GEC decides to tender, the terms of its tender will be made public?

Mr. Benn

I do not know how the hon. Gentleman assesses foreign opinion, but for many years I have been reading accounts of other industrialised countries advancing and assisting their industries in order to put them in the position of being able to compete with British industry. If the hon. Gentleman thinks that Governments should never engage in investment in energy industries and that the only investment should be that which market forces provide, he should realise that with that approach we should now have no nuclear energy industry of any sort because every penny for that, from the beginning until now, has come from public resources and I am continually urged by hon. Members opposite to expand investment in nuclear capacity. Their criticisms are reserved for the expansion of coal-fired capacity—for no very good reason.

Mr. Andrew F. Bennett

Can my right hon. Friend confirm that when he met the shop stewards of GEC last week, they pointed out that there were 27,000 employees at Trafford Park 10 years ago and that now there are fewer than 7,000? Is he aware that these 7,000 workers will be bitterly disappointed with the decision? Can he at least tell us what progress is being made with the CEGB about bringing forward the refurbishing of existing power stations that might give these employees some work?

Mr. Benn

I have discussed my hon. Friend's latter point with the CEGB. It was a factor that I especially drew to its attention at the meeting at the end of last week following the Government's decision. I do not dispute what my hon. Friend says about the feeling among GEC workers, except to say that the progressive contraction of manufacturing industry, of which Trafford Park is a vivid example, has been brought about, in part, by mergers that were not agreed by the workers concerned. That has been a big factor in the development of Government thinking, and we have tried to carry the workers of the industry with us. My right hon. Friend the Secretary of State for Industry resolutely tried to do this.

Mr. Budgen

Does the right hon. Gentleman agree that the Ince B and Drax B decisions point to the proposition that all Governments will, to a greater or lesser extent, interfere in nationalised industries and that the only way to stop this tendency is to adopt a policy of rapid denationalisation?

Mr. Benn

Looking back at the record of the Government whom we succeeded—who managed to drive every nationalised industry into severe losses that had to be paid for later by the consumer—I do not think that that bit of advice from that source is likely to be particularly credible to us or to anyone hearing it. The policy pursued by the last Conservative Government was very damaging to nationalised industries.

Several Hon. Members rose—

Mr. Speaker

Order. I propose to call those hon. Members who have been seeking to catch my eye since the Secretary of State finished his statement.

Mr. Dalyell

Will my right hon. Friend accept that many of us think that he has done not only the right thing but the only thing? Following some of the comments from the Front and Back Benches opposite, will my right hon. Friend confront the Opposition with some of the letters and pleas that he has received from subsidiary and sub-contracting industries to make it clear that it was not only C. A. Parsons that was at stake but a great deal of expertise in related industries all round this country? May I also ask my right hon. Friend a question that I do not expect him to answer? Is he aware that I recently asked the Prime Minister—quite seriously—whether the time had not come to abolish the CPRS? Will he reflect on this matter?

Mr. Benn

My hon. Friend will have to pursue his latter point with the Prime Minister. The Government were right to seek a restructuring of the industry. I am sine that the decision, taken in the absence of such a restructuring, to maintain this important capacity was right. I am sure that, on reflection, most people observing this matter at home and abroad will believe that the decision was right. I certainly do, particularly as all the work done by my right hon. Friend the Secretary of State for Industry in the intervening period, far from being wasted, has formed the basis of the further discussions that will no doubt take place.

Mr. Whitehead

May I put to my right hon. Friend the reservations of my constituents who work in a section of the turbo-generating industry that is in neither the North-East nor Scotland and who accept the political considerations that made him bring forward the Drax B order? There has been a great deal of humbug about this from hon. Members opposite. Is my right hon. Friend aware that my constituents want to know whether the bringing forward of the Drax order has made it more or less likely that the necessary restructuring of the industry —not necessarily on the lines of the CPRS Report—will take place because their jobs depend on that in the next decade?

Mr. Benn

If the Government had decided not to give the order to C. A. Parsons, the question of restructuring would have been pre-empted by a major contraction of a major part of the industry that, I understand, all concerned with the restructuring proposals thought would have a massive and important part to play in the industry. Therefore, we prevented by our decision the foreclosing of a very important option for the future.

Mr. Gerry Fowler

Will my right hon. Friend accept that many of us on this side of the House who are not opposed to public ownership are concerned at the failure to achieve restructuring, with a substantial NEB stake, with the result that we have again the uncompetitive placing of contracts in what purports to be a competitive situation? I say that on behalf of consumers as well as on behalf of GEC workers.

Mr. Benn

I note what my hon. Friend said, but he will recall over the years the method of placing contracts by the CEGB. It tended in earlier years to be a rotation of orders among the different consortia, and in the case of Ince B it was an allocated contract. My hon. Friend will find that what we have done is not so very different from what has been done in the past, given that we are doing it against the background of a slump, when the demand for equipment is below what we know and believe it will be when there is a recovery in home and export demand. We did not want to see that capacity go out of existence.

Mr. English

The Government have demonstrated by this decision their good will towards the unfortunate employees of an inefficient company—

Mr. Mike Thomas

Untrue, untrue.

Mr. English

Will my right hon. Friend speculate on why, since they have made this decision, the Government recently concentrated all their public expenditure cuts on capital projects and so made a very different and rather more cruel decision in relation to the construction industry?

Mr. Benn

I absolutely disagree with what my hon. Friend the Member for Nottingham, West (Mr. English) has just said about the quality, design, workmanship and skill of Parsons workers. He talked about unfortunate workers of an inefficient company. That was a reference to a company which has a distinguished record at home and abroad in producing turbo-generators. He was absolutely wrong in saying that.

The position facing the Government was that in the absence of a capacity for restructuring we would in the future either have been observing and contemplating the withdrawal of this large section of the industry or considering its retention to permit discussions to continue. That was the basis upon which the decision was taken.

Mr. Hardy

I welcome the decision, but will my right hon. Friend accept that there is much greater concern on the Labour Benches for the efficient use of our energy resources than appears to exist on the Opposition Benches? Is my right hon. Friend aware that the coal to which he referred, which will be mined in Selby in Yorkshire, is of high quality? It is, therefore, essential that the highest possible level of thermal efficiency should be achieved at the new power station. Is my right hon. Friend confident that there will be a significant advance in this area and that that will make a contribution to the future prosperity of the industries which will create Drax?

Mr. Benn

I cannot go beyond saying that the Drax B station, burning Selby coal, will be a very good technical bargain and a bargain for the consumer, because it will use coal in the most efficient way. The coal being an indigenous fuel, it will meet some serious and unchallenged long-term energy policy requirements.

Mr. Skinner

Will my right hon. Friend confirm that the long-term security of all the workers either at GEC or at Parsons can be met only on the basis of a publicly-owned industry and not according to the whims of either Arnold Weinstock or anybody at Parsons? Will he also confirm that in the 1950s and 1960s, failure to order power stations contributed to the massive closure of pits throughout Great Britain and that, as a result of that, it is important to ensure that there are no further delays?

Mr. Benn

The question of the organisation of the turbo-generator industry is one for my right hon. Friend the Secretary of State for Industry. Any integrated energy or fuel policy which this country needs would give a very high place to modern coal-fired capacity, given the enormous resources of coal that we have and the fact that they are indigenous fuels which we should use in efficient power stations. Drax B will be such a station. Although this matter was raised with me by a number of trade unions with which I discussed it, it is in the first instance for my right hon. Friend the Secretary of State for Industry to deal with it.