Clause 5

HC Deb 06 June 1978 vol 951 cc53-94

CONTRIBUTIONS BY SECRETARY OF STATE

TOWARDS EXPENDITURE IN CON

NECTION WITH STAGE TWO OF DRAX

POWER STATION

4.33 p.m.

Mr. Hamish Gray (Ross and Cromarty)

I beg to move Amendment No. 1, in page 4, line 21, at beginning insert: 'Subject to subsection (4) below'.

Mr. Deputy Speaker (Mr. Bryant Godman Irvine)

With this we may take Amendment No. 3, in page 4, line 40, at end add: '(4) Before any money shall be defrayed under subsection (1) above the Secretary of State shall lay before Parliament a report detailing the expenditure incurred by the CEGB as a result of commencing the Drax Works earlier than they might otherwise have done.'.

Mr. Gray

In Committee we discussed the principle of the amendment in some detail, and I said: If the Minister is not prepared to accept the amendment, perhaps he would think about it and table an amendment on Report to cover the points that we make. The Minister acknowledged that and, later the same day, referring to what I had said, he replied: He asked whether I would be prepared to think again about this matter. It would be a foolish Minister who ignored such a suggestion from the official Opposition. I like to persuade people. I have no hesitation in saying to the hon. Gentleman that I will look at the matter again. I can give no undertaking to the hon. Gentleman about the result, but I shall consider whether his doubts warrant fresh consideration."—[Official Report, Standing Committee B, 11th May 1978; c. 48–51.] In view of that generous assurance by the Minister, it is appropriate that we should deploy some of the arguments again in order to freshen his memory in the hope that when he replies he may find it possible to accept the amendment.

The importance of the amendment is that it deals with the way in which public money is paid out. We pointed out in Committee that, as custodians of the public purse, it is important that we should ensure that, where a sum such as £50 million is likely to be paid to the Central Electricity Generating Board, the Board should justify such a payment before it is made.

In Clause 5 we are advised that we might have to pay up to a maximum of £50 million. The principle is not in question. Some years ago, a Conservative Government found themselves in a position in relation to the Ince B power station not dissimilar to that in which this Government find themselves. At that time it was decided that compensation should be paid and that the order should be brought forward.

It is obvious that without Government intervention no order would have been placed for Drax before 1980. There would have been seven years without an order for main generating plant, either by the CEGB or by the Scottish boards. This would have been a serious situation and there would have been many consequences. Some of the worst effects would have been the loss of skills that would have resulted from the order not being made and the number of apprenticeships available in the industry that would have been put at risk.

In addition, there would have been serious unemployment problems in the areas most affected. As I said in Committee, I visited the Babcock and Wilcox works in the last Summer Recess and I was most impressed by the people I met and what I saw there. I was left in no doubt about the serious effect that the absence of an order would have in that part of the country. This fact was also represented by hon. Members from the North-East who explained on Second Reading the seriousness of the situation in that part of the country.

It is a great pity that the Government were not able to seize the opportunity for rationalisation of the industry. Some progress has been made in the boiler-making sector. This was highlighted by my right hon. Friend the Member for Renfrewshire, East (Miss Harvie Anderson) on Second Reading, but much remains to be done and there is undoubtedly general dissatisfaction with the organisation of the manufacturing side of the industry.

On the turbine generator side one can go back as far as 24th April 1977, when the energy editor of The Sunday Times, Mr. Peter Rodgers, drew attention to the problem at that time and said in an article: Meanwhile the political row over the other side of the power station problem—plans to merge the turbine generator subsidiaries of GEC and Reyrolle Parsons—is growing apace. At the last minute—at a meeting before Easter—the Cabinet appears to have abandoned a plan to push for a joint company, 40 per cent. GEC, 40 per cent. Parsons and 20 per cent. National Enterprise Board". We know that that was the case. It seems a great pity that the Government were not able to bring the various parties together and to effect a rationalisation.

However, one does not want to inhibit what is being done and the efforts that are being made. Therefore, I shall not lay blame or offer criticisms but merely say that I hope that the situation will be resolved, because it will be to the long-term advantage of the industry if a rationalisation takes place.

Mr. Mike Thomas (Newcastle upon Tyne, East)

I share, as the hon. Gentleman knows—and I thank him—most of the concerns that he has about this matter. However, he will be aware that the 40/40/20 solution was unacceptable to only one party of the three or four that were then involved. Is he also aware that continued uncertainty on this front is not helpful to the industry? There is now no prospect whatsoever of a turbine generating merger, so would it not help if we stopped talking about it for a while and started getting on with selling turbine generators?

Mr. Gray

That is a fair point, but I would not agree with the hon. Gentleman. I think that it would be wrong of us merely to take the attitude that because the attempts and negotiations so far have been unsuccessful we should just leave it at that. I think that the hon. Gentleman would agree with me that the long-term future of the industry would benefit by rationalisation. Whether the fact that this was not achieved is perhaps due to personalities involved or basic disagreement between the unions and the various par- ties concerned is difficult to estimate. However, one can only hope that it will be overcome in future.

How can the compensation which is suggested to be paid to the CEGB be justified? We believe that the Minister was not as forthcoming as he might have been when he replied to the debate in Committee. I said at that time that it was doubtful whether he had satisfied the Committee as such. We should like to hear a little more from him today as to how he believes that the moneys for the CEGB can be justified.

Can we be certain, for example, that the £50 million will be the ceiling of what we are required to pay to the CEGB in compensation? Can the Minister be confident that in two or three years' time either he or whoever is sitting in the post he now occupies will not have to come forward and ask for some additional money?

I refer again to the article that I mentioned earlier. On 24th April 1977, Peter Rodgers obviously had doubts about this. He said: The Electricity Council, supreme body in the industry, believes Hawkins"— that is, the former chairman— is exaggerating fourfold. Hawkins had estimated that the early ordering would cost the power consumers something between £140 million and £160 million. Peter Rodgers said: the real cost would be £35 million to £45 million. Are the Government satisfied that Sir Arthur Hawkins was as far out as that? This is one of the matters that causes concern. If we are to approve £50 mil lion now, what will be the situation if we find that Sir Arthur Hawkins was nearer the truth than the writer of that Article thought he was? This is a serious matter. I should like the Minister to comment on it.

Let us look at the situation regarding the power station delays. The delay in power stations coming on line over the past decade or thereabouts has been anything from three years to seven years. In Committee my hon. Friend the Member for Exeter (Mr. Hannam) quoted from an article in The Times of 2nd October. On Second Reading I quoted from the same article. I should like to quote from it again. It said: experience suggests that an early start is necessary merely to get Drax finished on time. We raised this point at some length in Committee. It is a significant point and one to which the Minister should pay a little more attention than he did in Committee.

4.45 p.m.

It seems to me that it would have been prudent for the CEGB to place the order early. If the situation that I have described is correct and these stations have been coming on line anything from three to seven years late, surely it would not have been unreasonable for the CEGB to take that into account when placing its order. If it were to do this, we again delve into the whole relativity of the compensation which it is to be paid.

In Committee the Minister said that arrangements with the CEGB provide for payments to be made only after expenditure has been incurred. But, whatever these payments may be, should there not be another side to the balance sheet, on which could be estimated the expenditure in which the CEGB would be involved in the event of its going ahead with its normal ordering and then the power station not coming on line at the appropriate time? There must be another set of figures that should be considered in this context.

What about delays? I know that certainly the CEGB believes that the new Drax power station will overcome all the previous difficulties that have been experienced concerning delays and that the new technology will be such that it will be able to start the project and complete it in the estimated time. But this has been the case with every power station that has been built. When a power station has been commenced, no one has ever expected that it would not be finished on time. Recent experience does not indicate that the present Drax order is any more likely to be completed on time than former power stations.

These are all arguments that the Minister should consider very carefully. Frankly, I am disappointed that he did not find it possible to accept the amendments in Committee, and I am even more disappointed that in the weeks since the Committee stage he and his officials have not managed to devise a form of words that would meet the points that we have raised.

Concerning construction difficulties, in Committee my hon. Friend the Member for Exeter drew attention to the whole question of the cause of these delays. In his reply, the Minister said: During the course of his remarks, the hon. Member for Exeter also asked about construction difficulties. This is an important point, but I must be frank with him and say that I am not briefed on that point. However, since the hon. Gentleman has raised the matter, and since he may wish to return to the subject on Report, I will certainly look into it."—[Official Report, Standing Committee B, 11th May 1978; c. 48.] I hope that, between now and when he winds up this debate, the Minister will be able to get the information.

Mr. Arthur Palmer (Bristol, North-East)

On the question of construction delays, I hope that the hon. Member is not suggesting that in these days, with coal-fired power stations of this kind—a fairly straightforward job—the real trouble is technical problems. The problems are labour problems and varying rates of pay, differentials and so on.

Mr. Gray

I accept what the hon. Member says, but I have no doubt that there are also likely to be problems of design, for example. As a project continues, it is frequently found necessary to modify the design in some way, and this upsets the work scale and the work progress and can lead to the sort of difficulties that have been mentioned. The kind of construction problems that are likely in a project of this sort are varied, but perhaps the Minister can say something about that.

We have thrashed out this principle fully in Committee, and I hope that what I have said will persuade the Minister that there is merit in our arguments. The amendment is intended not in a carping way but as a constructive suggestion. Labour Members are probably as anxious as we to ensure accountability in the spending of public money. I hope that the Minister will consider my arguments in that spirit and will be able to give a favourable reply.

Mr. Palmer

I shall be brief, because we are anxious to dispose of the Bill as quickly as possible; in any case, as the hon. Member for Ross and Cromarty (Mr. Gray) said, we dealt with these matters fully in Committee.

This quiet little debate has seen the emergence of the sensible face of the Conservative Party—for example, over the reorganisation of electrical manufacturing. The official Opposition spokesman talks of an amalgamation, creating one modern monopoly manufacturer, and concedes that 20 per cent. of public money should go into the combined enterprise. I cannot quarrel with that doctrine, but it clashes with many Conservative statements, which we shall hear again in the coming election, about the need for intense competition in British manufacturing, even when that is not domestically relevant or related to world conditions.

Like the electricity supply management, I am all in favour of the reorganisation of manufacturing of conventional plant, but that cannot be separate from the reorganisation of the nuclear plant industry. The whole question of manufacturing organisation and employment needs in different areas of the country has to be looked at again as it affects both kinds of plant construction.

I put down a Question recently about the nuclear side of the industry and changes now contemplated. There is a lot of secrecy and a lot of behind-the-scenes talk about coming changes, some of which will go deep, it is said. When public money is involved, as it is, we should have an early statement on these matters. It is long overdue and should be delayed no longer.

Mr. Patrick McNair-Wilson (New Forest)

I support the amendment, for a number of reasons. Ever since the Committee stage, a number of factors have changed the situation. I very much agree with the hon. Member for Bristol. North-East (Mr. Palmer) about the problem of delays. We need not fear the technical problems in a coal-fired plant, but the construction problems are gigantic. One has only to consider the delays at Dungeness B. There are 50 sub-contractors on the site. The targets for cost and completion were £89 million and 1970. That power station is likely now to be 10 years late—not seven years, as my hon. Friend the Member for Ross and Cromarty (Mr. Gray) said—and the total cost will prob- ably be £350 million. It is unreasonable to ask for up-to-date information, therefore, about Drax.

Only an optimist would believe that we are clear of all these constructional problems even when building what might be called a "simple" coal-fired power station—though that description is not quite accurate. I hope that the Minister will say that this £50 million of taxpayers' money which is to be given to the Central Electricity Generating Board will be used to ensure that we eliminate as much as possible the kind of situation which exists on the Dungeness site. There are lessons to be learnt there.

When talking about the Drax order, one is also talking inevitably about the coal industry. This power station is one of a group which will sit on the Yorkshire coalfield, particularly on the edge of the Selby field. It has been brought forward to help the plant manufacturers but also as part of the complete plan for electricity generation around that new coalfield.

The new information, since Committee stage, about the provision of subsidies for coal from the European Commission makes me wonder whether the British taxpayer has to fork out this money and whether we could not have got it from Brussels. As recently as last month, the Commission provided £65 million to help the Selby project. It could be argued that some of that money could be given to the CEGB to build this station, which is all to do with Selby.

We have also been told within the past month that the Government intend to subsidise substantially the additional burning of coal in power stations. Here again, we as taxpayers seem to be providing money which is available from other sources as well.

We need detailed explanations of what this £50 million will be used for. I am beginning to believe that more than that is already available and that this sum is simply the cherry on the top of a fairly large and expensive cake.

We talk about Selby, but I wonder how many hon. Members know that a major reconstruction of the London-Edinburgh railway line will be needed to get this coalfield on stream. A 14½-mile loop line will have to be built if we are not to lose the coal under the existing track.

5.0 p.m.

I hope that the Minister will not merely explain the matter but will convince the House that this is the only way that can be found to subsidise the CEGB. I think that even without this Bill we now have the available cash to do the job for us. I am not sure that we need to put our hands in our pockets on this occasion. After all, the NCB is doing quite nicely; it is breaking even and is showing a small profit. Here we have £65 million out of the blue from Europe for Selby. Surely the NCB in its wisdom, and, indeed, in a spirit of generosity, could have said "This power station will help us. Let us make a contribution."

Mr. Mike Thomas

Has the hon. Gentleman never heard of the concept of ultra vires?

Mr. McNair-Wilson

That may be so, but I believe we should not part with this money without making sure that it is well and properly spent. We should keep a running tally of how the money is going, but my guess is that it will not be long before somebody comes back to ask for even more money. On the evidence that is now available to us, I do not feel that a further appeal would be justified.

Mr. Gwilym Roberts (Cannock)

I hope that the Minister will reject these amendments, however, well-meaning they may be. I appreciate that the large sum of £50 million is involved, and I am always conscious of the fact that hon. Members should carefully examine any figures that are put before them. However in this case it is not easy to examine these figures in detail.

The hon. Member for Ross and Cromarty (Mr. Gray) pointed to the difficulties of delay and said that a figure should be written in to take account of that factor. The hon. Member for New Forest (Mr. McNair-Wilson) said that some of the dalays were due to complex labour problems. However, I do not know how my hon. Friend the Minister is expected to make such complex calculations. We all know that forecasting in these matters is a debatable exercise. Therefore, there is the general difficulty of providing meaningful figures.

I do not believe it is possible for the House to be presented with figures show- ing the economic advantages of bringing forward this project. In Committee the Minister said that some allowance would be made for interest, but I do not believe that the cost-effectiveness of the project in terms of its advantages to the generating industry and the coal industry can be measured. This is the difficulty of having to examine bare figures.

We know that in the longer term a great deal of coal will be used in the production of oil and chemicals and that that process will continue for many years to come. A major proportion of our coal production will be used for electricity generation. In that respect, it is impossible to measure the advantages of bringing forward this project.

I do not agree with the view of the hon. Member for New Forest about the bounty to be expected from the EEC. That is small beer compared with the amount of money which rightly must be spent on the expansion of the coal industry in the coming years. The recent disappointments flowed from conditions imposed by some of our EEC partners when considering further help. Clearly, there are insurmountable difficulties in presenting meaningful figures showing the advantages of the project.

The second reason why my hon. Friend the Minister should reject these amendments lies in the fact that any delay in this project would undoubtedly be fatal. I am referring not only to the delay as it would affect the firm of C. A. Parsons, the generation industry or the North-East in general, but to the delay that would be crippling to the future of the coal industry. That is a further problem when considering the relevance of delay.

Many of us regard the Drax B project as the first in a series of new coal-fired stations. I believe that there is a need to examine the whole of the generation industry. I know that Britain has moved more towards coal-burning capacity than is the case in many other countries. Many of the older stations are coal-fired, and there is a need to develop new ones in the future. We should refurbish the older plants, and I hope that we shall do nothing to delay this project. Therefore, I hope that the Minister will reject the amendments.

Mr. Norman Buchan (Renfrewshire, West)

I shall be brief. I, too, hope that my hon. Friend the Minister will reject these proposals. The Opposition speeches have puzzled me on Amendment No. 3, because it refers to expenditure incurred by the CEGB in bringing forward Drax B. The truth is that other expenses not mentioned in this amendment are involved.

I expected to hear at least one Opposition speech outlining the democratic necessity for proper investigations into public expenditure, and its proper deployment and scrutiny. The amendment contains no such general proposition, but is related exclusively to expenditure incurred by the CEGB. If the amendment had tried to make clear what expenditure would have been incurred if the project had not been brought forward, we could well have examined that proposition. The figure of £50 million must be offset against the social expenditure in which the community is involved in other ways.

The hon. Member for Ross and Cromarty (Mr. Gray) was correct to mention in this context the boilermaking industry and he recalled his inspection of the Babcock and Wilcox factory a year ago and the impression that visit made upon him. He mentioned the loss of skills and the loss of apprenticeships. We all know that if this order had not been brought forward, it might well have led to the destruction of the boilermaking industry.

The same argument applies to the other two AGR projects which are in the pipeline, and which are in the second stage of measures to preserve the industry. There is nothing in the amendment about the assessment of the cost of allowing an entire industry to go to the wall or about any attempt to resurrect it in five or 10 years' time. That is what would have happened if Drax B had not been brought forward. These amendments do not examine the social requirements or the social expenditure that is necessary, but refer only to the specific cost to the CEGB alone.

Mr. Gray

I think that the hon. Gentleman misses the point. There is no difference between us on the principle. The amendment refers purely to the CEGB and lays down that that organisation should have to justify the extra costs which it has incurred by bringing for- ward the order. The amendment is quite clear on that point.

Mr. Buchan

The amendment is absolutely clear, but it ignores the entire cost of bringing forward the order, or of not bringing it forward. There is nothing in the amendment that says anything about the nature of the cost incurred in not bringing it forward. It is because of this that I am puzzled by the speech of the hon. Member for Ross and Cromarty (Mr. Gray). He recognised the deep problem involved in the loss of apprenticeships and skills—

Mr. Gwilym Roberts

Will my hon. Friend agree with me that the cost of not bringing it forward is really immeasurable, and that that is part of the problem?

Mr. Buchan

In that sense, yes. I do not go along with all the technical arguments. Of course there will be a technical problem when we investigate any costs of this type of involvement. To that extent there is always an area of doubt about the accuracy of the figures that we get. If 10,000 men become unemployed we can total up the cost of benefits to the community, but there are a number of other costs which would be difficult to measure. Merely because it cannot be precisely measured is no argument for not scrutinising public expenditure.

My objection is different—it is related to the reason for my being puzzled by the Opposition. We heard a speech from the Conservative Front Bench, much of which I agreed with. We then heard a speech from the Back Bench—from the hon. Member for New Forest (Mr. McNair-Wilson) and it emerges that he is totally opposed to the whole concept. He is arguing the whole question of bringing forward the order at all. He camouflaged it his reference to this unknown sum that we are about to get from the EEC. All I can say is that I think our Government are pretty remiss if they cannot lay their hands on £150 million that is going begging as the hon. Member suggests.

Mr. Patrick McNair-Wilson

I made it very clear on Second Reading and subseqeuently that I support the ordering of the station ahead of time. All I am saying is that £65 million is available—it is not an unknown sum.

I really must try to clear the hon. Member's mind about our amendment. He knows that Clause 5 deals specifically with provisions of money to the CEGB. That is why our amendment is drawn as narrowly as it is. Will he now confirm that he believes that the CEGB, to which the clause refers, should explain to the Government why it needs £50 million, and £49 million or £51 million?

Mr. Buchan

I accept that it goes without saying that this kind of figure is not produced out of a hat. It is an estimate of the cost of this kind of operation, and this is the ceiling that we have laid upon the costs that will be incurred. If the CEGB goes over that figure it will be up to our various Select Committees to investigate. The truth is that the hon. Member is willing to wound but afraid to strike. Of course he says that he is in favour of the project, but in fact all that he has said has suggested that he believes there is no need for it at all.

The Government, unlike the CEGB, must have a much broader vision. The CEGB must be concerned with the technical, commercial and construction costs, while the Government must move into the wider field and make the decisions. I suspect that it is the objection to public decisions of this kind, which involve a wider social cost and understanding, which is behind the speech of the hon. Member for New Forest. He objects to public activity of this kind.

I welcome the Bill and I hope that the Minister will reject the amendment. The Minister was very generous on this matter in Committee—to my mind, too generous. But re-reading it, I think that this proposition is even more delphic than I said it was in Committee. The Minister is not bound to anything; therefore, I hope that he will reject the amendment.

5.15 p.m.

The Under-Secretary of State for Energy (Mr. Alex Eadie)

I have caused all this trouble that we are discussing today. As my hon. Friend the Member for Renfrewshire, West (Mr. Buchan) said, I had a delphic touch. I do not know whether that was a compliment or a criticism. He has assured me that it was a compliment.

Certainly I do not in any way criticise the way in which the hon. Member for Ross and Cromarty (Mr. Gray) opened his speech. What he quoted was perfectly true. When he appealed to me in Committee—it was a very good Committee—I assured him that I would look at this matter again. Of course I did. I confess that having listened to the debate I feel that hon. Members have been sidetracked from the question of parliamentary accountability. However, I examined this whole aspect and, as the hon. Member for Ross and Cromarty has suggested, I do like to persuade people, and now I shall try to persuade him.

I am sure that the hon. Member will recollect that the Secretary of State informed the House during Second Reading that whatever happens to interest rates and power station costs, compensation will not exceed £50 million. However, it may be helpful at this stage if I explain how each annual instalment will be determined.

Payments by the CEGB for Drax B began during the financial year 1977–78, because of the placing of design contracts last November. The rate of expenditure will increase with the signature of manufacturing and construction contracts until it reaches a maximum of about £200 million a year in the financial year 1982–83.

As I indicated in Committee, we shall therefore deal with the problem of determining the Board's extra costs one year at a time. In the autumn of each year the CEGB will forecast the costs it will incur, mainly through making progress payments to the manufacturers on Drax. At the same time the Government will make a determination of what the cost of financing such payments is likely to be over that year. On this basis a forecast of compensation payable will be included in the estimates laid before Parliament.

Because the station is being ordered two years early it might appear correct to pay compensation as two years' interest charges on the capital costs, just as the previous Administration agreed to pay 18 months' interest charges on the capital costs of Ince B. But, as I explained before, the Board obtains some benefits through the early ordering of Drax, and it is right that these expected benefits should in some way be offset against the costs. The compensation payment will, therefore, be determined as six months rather than two years interest charges.

Payment to the Board will not, however, automatically follow approval of the corresponding estimate by Parliament. We shall await production of a certificate by the Board's auditors each July of what has actually been paid over during the previous financial year for Drax, and we shall be able to recalculate the corresponding cost of finance. Thus, payments to the Board will be based on annual parliamentary approval and revision of the estimates based on calculations of costs that the Board incurred. The compensation payment will then be included in the estimate prepared for Parliament each autumn, showing what the next forecast annual payment will be.

I have answered the point about parliamentary control. I was seized of the question. I think that I have answered the main points in the hon. Gentleman's amendment. I thought that he argued his case very fairly. As one of his hon. Friend's put it, we need Drax B and we shall have Drax B because there are so many people involved. That aspect was argued to some extent, but, of course, we have to will the means, and that is the nub of the argument that we are having on the amendment.

I am conscious of the point about construction that was raised by other hon. Members, who asked whether the House could have an assurance about it. We must try to assure the House that the CEGB intends to make every effort to keep to the programme of construction of Drax B.

The hon. Member for New Forest mentioned Dungeness. We have all made good speeches on that question from time to time. I have made some myself in the past. To this end, design contracts have been let with a view to freezing the design before commencement of construction. The mutual agreement between contractors on the site will be sought, and contracts will incorporate incentives for timely completion. I hope that I have ben able to assure the House that the construction aspect has not been ignored between the CEGB and the Government.

Concerning rationalisation, I have to repeat what I said in Committee. I tell my hon. Friend the Member for Bristol, North-East (Mr. Palmer) that this is a matter for the Department of Industry and not for the Department of Energy, although I am quite sure that his points will be noted.

The hon. Member for New Forest also mentioned the question of the £50 million compensation. The EEC is no dripping roast for Great Britain. He talked about money being available. It may be available some day. I do not want to say that there will not be money available. But we have to remember that the plant manufacturing industry is involved here, and we cannot stand still and wait for some day in the bye and bye when we shall be able to get money, and proceed to save our plant manufacturing industry. The industry needs work in order to provide employment. I am sure that the hon. Gentleman's comments were not meant in a destructive way, but I am afraid that the money is just not available at the moment to solve the problem in the way that he suggested.

My hon. Friend the Member for Cannock (Mr. Roberts) made a very powerful point—one that is continually being made—in relation to refurbishing power stations. There are continual arguments about refurbishing. It is suggested that if we have a site already in existence we do not have to go through the long process of site acquisition, planning, and so on, and that when we have a power station it is possible to step in and carry out a refurbishing programme. I cannot say on behalf of the Government that we are pursuing a refurbishing programme or that the Government have decided to pursue one. My hon. Friend's point has been made very substantially by the plant manufacturing industry, and I am sure that his point will be noted.

I think that I have answered the major points made during the debate. I hope that the hon. Member for Ross and Cromarty will agree that I have answered the main point of the amendment, concerning parliamentary accountability. The House can rest assured that there is adequate parliamentary accountability. I hope, therefore, that he will ask leave to withdraw his amendment.

Mr. Gray

I am grateful to the Minister for the way he replied to the debate. He went into considerable detail in explaining how the Government propose to scrutinise the whole exercise. I sincerely hope—I make no apology for mentioning it again—that the estimate of £50 million will not be exceeded. I know that it cannot be exceeded under this legislation, but I sincerely hope that the Government will not at some future time come back and ask for more money. I hope that the estimate which was made by Sir Arthur Hawkins of £140 million to £160 million is way out, but we are not discussing that point at the moment.

We are grateful to the Minister for what he said about the estimate of £50 million. We would still have liked him to concede something to us in regard to our amendment, but obviously it is not a matter on which we wish to press the House to a Division. I therefore beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Peter Rost (Derbyshire. South-East)

I beg to move Amendment No. 2, in page 4, line 31, at end insert— 'Provided that no payment shall be made by the Secretary of State under this section unless he is satisfied that the Central Electricity Generating Board intends to make adequate provision for the utilisation of reject heat from the generating station either as industrial process steam or for district heating.'. The amendment proposes that the £50 million subsidy should be granted to the CEGB only if it makes provision for the use of reject heat from the power station for heating homes or for use in industry.

The Government should welcome the amendment. First, it would help energy conservation. Secondly, it would make good financial sense. Thirdly, it would provide a longer-term future for the coal industry. Fourthly, it would be in the best interests of the consumer by providing cheaper heating. I believe that that is the most important consideration for the Government.

I declare an interest as a non-executive director of a company which has produced feasibility studies on various aspects of energy conservation. Having declared that interest, I point out that my main concern here has always been in promoting the wider interests of energy conservation. It is for that reason that I am pressing the amendment.

I notice that the hon. Member for Newcastle upon Tyne, East (Mr. Thomas) is chuckling. I point out to him that at no time have I benefited financially from the interest that I have just declared, nor would I do so if my amendment were carried.

With regard to the contribution to energy conservation which could be made by using the reject heat from Drax B, if we look at the national figures we find that the amount of our total energy consumed in the production of electricity is approximately a third. In other words, one-third of our energy goes into producing electricity. Two-thirds of that energy is rejected in hot water and not used. In other words, twice as much comes out of the power station in heat and is rejected in terms of fuel as is actually converted into useful electricity. We are throwing away every year about £2 billion worth of fuel. That is the equivalent of the whole of the North Sea gas contribution to our energy, or about half our total coal production.

This might be an acceptable situation if the rest of the world were not doing something to stop this waste. Indeed, it has done so for a very long time. We know that elsewhere this energy is being conserved. Why is it not being done here? It is certainly not because it is uneconomic to do so. Studies made in this country have shown that combined heat and power stations are cost-effective. Such stations are being set up in other parts of the world on the basis of cost-effectiveness. They will become increasingly economical as the fuel price rises.

The Government's study on combined heat and power—Energy Paper No. 20—headed by Dr. Walter Marshall claims that there are no insuperable difficulties in the way of the inclusion of combined heat and power district heating in a national energy policy.

The Government-sponsored Building Research Establishment paper of June 1976 refers to an economic assessment of long distance heat transport and the utilisation of power station heat for district heating. For large schemes, the break-even distance is reckoned to be 13 kilometres. Within that the consumer would get cheaper heat and there would be substantial savings in national energy consumption.

5.30 p.m.

That is the Government's own assessment of the economics of transporting the heat, but we know that in other countries it has been shown to be economic to transport heat much longer distances from power stations. If it is cost-effective and in the national interest that the heat from power stations—particularly from Drax B—should be used rather than thrown away, and if others have been doing it for many years, then surely the Government should examine why it is not happening here. I therefore move this amendment in the most constructive way that I can.

Mr. Mike Thomas

On a point of order, Mr. Deputy Speaker. As we have considered this amendment almost word for word in Committee, and we have heard the speech almost word for word in the Chamber, is this in order?

Mr. Deputy Speaker

What happened in Committee is of no importance at the moment.

Mr. Rost

If this is cost-effective, in the national interest, and has been done elsewhere, surely we should be asking ourselves why it is not happening here. The answers come from different authorities. I could not do better than quote the Plowden Report on the reorganisation of the electricity industry. Paragraph 4.22 of the Plowden Report on the structure of the electricity supply industy pointed out that the expansion of combined heat and power is impossible without the active collaboration of the electricity supply industry. The report added: A good deal of evidence has been presented to us suggesting that the electricity industry could do more to secure the economic use of fuel". Paragraph 4.23, on "the industry's statutory duties" stated: It has been suggested that the reference to 'the economical and efficient supply of electricity' in the Boards' statutory obligations might be held to prevent them from collaborating in schemes where an improvement in the overall use of energy required them to purchase electricity from a combined heat-and-power scheme at a price higher than the CEGB's marginal cost of generation. In future no room should be left for doubt about the industry's powers. Similarly, the most economic way of developing heat-and-power schemes may well involve providing only heat at the outset and adding electricity generation at a later date. At the moment, the industry is allowed by its statutes to sell waste heat from existing power stations but not to sell heat alone. In both cases, the statutes are an obstacle to the most economical use of all national resources. They should therefore be changed. We are not, of course, debating a change in the statutes, but we are debating a public subsidy for Drax B, which could be an ideal example of implementing the recommendations of Plowden. A further restraint which has held up the development of co-generation is the criteria of the arbitrary discount rate of 10 per cent. in deciding whether or not the scheme is viable. Surely this is an unrealistic and inappropriate way of using such an arbitrary discount rate. Even the Government in their recent consultative paper have now admitted that a 10 per cent. rate may be unreasonable for such long term contracts. It is arbitrary and unrealistic because it is not weighted to take into account the declining availability of fossil fuels, the benefits to the balance of payments of the fuel savings that will arise from using combined heat and power, the likely rise in the price of fuels or the long lead times needed to develop a heat distribution network.

Section 5.13 of the Government's recently published consultative document on energy policy admits that substantial savings are obtainable from combined heat and power. It also admits that it is being adopted on a substantial scale in foreign countries. It further admits that if we are to achieve a substantial contribution by the year 2000, we need a fairly early start on a full scale demonstration scheme in a large city.

One is surely entitled to ask why, instead of making a start and using Drax B, we are proposing to subsidise with public funds the early construction of a power station for electricity capacity that we do not really need and use public funds to throw away 2½ million tonnes of coal a year in reject heat. According to the Minister's own answers to me, that could provide heating for 50,000 homes in the surrounding area.

The thermal efficiency of Drax B, as it is apparently to be constructed, would be about 35 per cent., whereas it could be 80 per cent. if the residual heat were not dissipated. I regard that as a folly. It is perpetuating a wasteful system, which is being increasingly rejected by the rest of the world. It is because we are perpetuating this folly that we are bottom of the league in terms of thermal efficiency in electricity production as well as bottom of the league in terms of the amount of combined heat and power that we produce from our power stations.

However, the pressure for change is building up. I hope that we are contributing to it this afternoon. It is certainly building up elsewhere. We know that within the Carter energy programme there are strong incentives for more combined heat and power production. We know that pressure is coming from within the EEC, not so much by directives but by action that is already taking place. Individual EEC countries, almost without exception, have introduced, or are introducing, measures to promote district heating schemes and co-operation between public utilities and industries for cogeneration for district heating and industry. Apart from Scandinavia, where this has been going on for many years. countries where particular progress is taking place are Germany, France, Belgium and Italy. Even in those European countries which are building nuclear power stations, sites are being specifically provided where that heat can be used for district heating or industry.

The British electricity plant industry, which has an important need for orders, has nothing to fear from combined heat and power. On the contrary, I believe that it will lose out if it does not catch up with the trend of the rest of the world. Increasingly that is where the market will be. We already have evidence that orders have had to be turned away from British manufacturers because they were not able to produce the combined heat plant that foreign customers wanted. Therefore, it would help the plant industry. If we do not move in this direction the danger is that we shall perpetuate an outdated technology for which there will be fewer orders in future at home and abroad.

I maintain that this would also help the coal industry. It is my belief that in the long term electricity cannot remain competitive for space heating if two-thirds of the coal used in that space heating production is rejected in electricity power plants. The only way to preserve the long-term viability of the coal industry and maintain its competitive position is by doing what the rest of the world is doing and moving over towards a more efficient coal burn through combined heat and power stations. The long-term interests of the coal industry—the future of that industry—can be secured only if it burns coal less wastefully than at present.

There are plenty of experts from industry who advise me that there is little doubt that if Drax B were being built anywhere else in Europe it would be a combined heat and power station. There has been so much progress in the past few years in the rest of the world. I quote from an international consultant, a world expert, a founder and former president of the District Heating Association—someone who is an adviser to the Department of Energy, among other things—Mr. Ernest Haseler: Of course Drax B should produce heat as well as power. As a combined heat and power station it will have a thermal efficiency of over 80 per cent. whereas, as an electricity-only station, two-thirds of the energy produced from the coal will be wasted. We want Drax B to be a shining example of Britain's skills in thermodynamic engineering and energy conservation, not an anachronism. The industry has already been overtaken by world progress, so, to survive, it will have to modernise. It will have to do so eventually so why not start now by using Drax B as Britain's first modern CHP station? Some of the £50 million could cover the industry's development costs. That is the view of one international expert. There are plenty of feasibility studies to show that although Drax B would not be an ideal site it would, nevertheless, be far more suitable than many others where combined heat and power has been developed.

Within a 25-mile radius of the station there is a substantial heat load. Even within five to 15 miles there is more than enough heat load. Selby and Goole are five miles away, York, Castleford and Pontefract are within about 15 miles. There is plenty of potential heat demand. As we know, heat is transported far greater distances in other countries for use in heating homes—and transported in much less favourable circumstances.

There need be no major technological problems nor can the CEGB say that there would necessarily be a loss of electricity if it marketed the heat. In the modern system available this need not be so. Nor do we have to accept the excuse that it cannot be done because it would not be economical. This could easily be disproved because there would be capital savings in all sorts of other directions. If less electricity is used for space heating we would not need to build so many power stations. The infrastructure of the heat grid could become highly competitive as fuel prices rise.

The studies that have been done in the United Kingdom show that it is in many ways better suited for using reject heat than other countries that have already developed the system. We have higher population density than anywhere else in Europe, apart from the Netherlands, with 80 per cent. of our population living in large urban centres suitable for using such heat. I maintain that if public money is to be spent on subsidising Drax B it should at least be spent in the best public interest. I suggest that that is achieved by spending the money in a way which can make a major contribution towards energy conservation, in a way which will help the plant industry in the long term and build future markets, in a way which will help the coal industry maintain its competitive share of the market by more efficient coal burn and in a way which will be of most benefit to the consumer.

Surely in this way we can end the shameful situation whereby hundreds of thousands of our citizens have barely been able to survive the winter—particularly the lower income groups, pensioners and the housebound—because they could not afford to heat their homes, while we have been throwing away enough heat from our power stations to heat all of our homes.

5.45 p.m.

I hope that the Minister will give an assurance that he accepts in principle the case that I am making and will say that he will set up, if he has not done so already, an independent feasibility study to look into the possibility of using heat from Drax B rather than throwing it away. I hope that the Minister accepts the arguments which I have presented in a constructive way and will use this as an opportunity to do better than we have done in the past and ensure that we use our energy more rationally, for the benefit of industry and the consumer.

Mr. Arthur Palmer (Bristol, North-East)

The hon. Member for Derbyshire, South-East (Mr. Rost) made broadly the same speech, of 40 minutes in length, in Committee. I am sure that he would not disagree. I make no complaint about that but I say that he is not now putting forward anything particularly new within the memory of those who were present in the Committee. The whole subject of district heating in relation to the generation of electricity power is not new, either; some of the first electricity generation stations in this country were operated on this principle. The principle of district heating is now much more relevant in practice than it was, because of changing fuel costs.

I suggest that the hon. Member for Derbyshire, South-East is putting forward a perfectly sound idea in the wrong way in the wrong place. The proposed Drax B power station is a coal-fired station, designed to provide electricity as cheaply as possible, allowing for present costs. As the hon. Gentleman admitted, this is in furtherance of the statutory obligation placed upon the CEGB, which has as its primary task the production of electricity as cheaply as possible. If the Board had a different statutory obligation the situation would of course be different. Its primary job, given to it by Parliament, is to make electricity as cheaply as costs allow. Undoubtedly, to extract low grade waste heat—and it is low grade—from this particular station, designed in the way in which it will be, is bound to be expensive and lead inevitably to an increase in the cost of the electricity generated.

I very much doubt whether there is a ready-made market for the heat. It cannot just be taken out into the wilds, away from Drax and then the CEGB say "Here is heat". It has to be marketed to potential customers who are probably already in possession of their own facilities for heating. It is a difficult matter commercially. I do not say that it cannot be done, but we cannot suppose that it could be done without a great deal of marketing preparation. If I doubt the feasibility of what the hon. Gentleman is suggesting that does not mean that I am against the purpose-built joint heat-electricity station. Indeed, I had the honour, two or three years ago, of speaking to the District Heating Association at its annual conference on this. But it is not relevant, as it happens, to Drax B.

I said in Committee that schemes of that sort are best developed by the area electricity boards. That is because the local people are in touch with potential customers. They know the competitive commercial conditions. Surely that is the best way in which to proceed. It so happens that under the existing statute—it is a great pity that we have not been able to improve it in this Parliament—the area boards have the right, with the permission of the Minister, to build their own generation facilities. If opposed by the CEGB, the Minister may make the decision. Even with legislation as it now stands, there is nothing to prevent an area board developing a district heating scheme. As I have already said, the Midlands Electricity Board has such a scheme in mind but the CEGB is in a different position.

The House should take careful note of what the hon. Member for Derbyshire, South-East said. We sympathise with his broad crusading generalisations, but they have little to do with Drax B I am afraid.

Mr. Gray

My hon. Friend the Member for Derbyshire, South-East (Mr. Rost) has done the House a great service by moving the amendment and making contributions on the subject over the years. It is significant that he should be able to call in aid, for example, the Electrical Review of 10th February 1978, which has an interesting article on district heating. The article begins: It might seem paradoxical that the nearer Britain comes to tackling combined heat and power seriously, the ideas of how to go about it become more and more diverse, not to say discordant. The article concludes: As Sir William Hawthorne, chairman of the advisory council on energy conservation told the conference at Imperial College on local energy centres last year, eventually combined heat and power will make good economic sense as well as energy sense. But British plant manufacturers in an industry largely dependent on big orders for Drax B or the new AGRs are not yet alert to the demand for smaller sets that a combined heat and power programme will require. Their competitors overseas are alive to this potential market however. It is sensible of my hon. Friend persistently to draw the attention of the Government to the fact that that is the situation.

As for the Central Electricity Generating Board and what was said by the hon. Member for Bristol, North-East (Mr. Palmer), in page 29, paragraph 463, of the CEGB's 1977 corporate plan A discussion document it is stated that The Board's policy is to plan to retain the option to be able to adopt district heating and combined heat and power on a large scale in the longer term. To be fair, I should add that the paragraph goes on to state that In order to be economically viable district heating networks would need to be introduced on a large scale". Therefore, there is some merit in the point made by the hon. Member for Bristol, North-East in criticising my hon. Friend the Member for Derbyshire, South-East.

My hon. Friend deployed his argument skilfully. I disagree with the argument of the hon. Member for Bristol, North-East that my hon. Friend's argument has little to do with Drax B. My hon. Friend showed us exactly how it could be related to Drax B. I reread our debates in Committee and I was surprised that the assiduous hon. Member for Newcastle upon Tyne, East (Mr. Thomas) slipped up. The hon. Gentleman will recall that in Committee my hon. Friend spoke not to an amendment but on Clause 5 stand part. He was right on that occasion to rehearse the arguments that he has put forward today.

It was significant that my hon. Friend observed that we are wasting £2 billion worth of fuel and that each year we waste 2½ million tons of coal with heat loss. That is a great waste and a great pity when energy is of such enormous importance and cost. The Government should be much more vigorous in their research on the subject. The Minister may say that the cost is such that combined heat and power schemes are not viable at present. That may be so and he may have figures to substantiate that argument, but that is no excuse for research and development not being intensified. We cannot be complacent when we are losing such a large amount of potential energy every year.

In Committee my hon. Friend made the reasonable observation that where Drax B is located there are within a radius of 20 miles cites and towns such as Leeds, York, Hull, Castleford and Pontefract. Surely there is potential there for the development of a scheme such as that which he has suggested. When I reread our proceedings in Committee I paid special attention to the answers, if such they can be called, that the Minister gave my hon. Friend. They were far from convincing. They did not begin to deal with the problem that my hon. Friend raised.

The Opposition are sympathetic to the amendment. We are critical of the Government for not pursuing a more vigorous attitude towards research and development. We shall await with interest the Minister's reply.

Mr. Palmer

In the unlikely event of a Conservative Government being elected as a result of the next election, would a Conservative Minister occupying the position of the Secretary of State for Energy use his powers to instruct the CEGB to turn Drax B into a district heating station?

Mr. Gray

This a matter that should not be jumped upon. A Conservative Government would ensure that realistic sums were made available for research and development so that the CEGB could incorporate such a system in a station similar to Drax B.

Mr. Eadie

I have been accused in the debate, as in Committee, of giving far from convincing answers. I hope at this stage even to satisfy the hon. Member for Derbyshire, South-East (Mr. Rost), although I have been told that it is a difficult job to do so.

The hon. Gentleman is well known for his consistent advocacy of combined heat and power schemes. I think that he must know that the Government are by no means inactive in that sphere. The combined heat and power group that was set up by my right hon. Friend the Secretary of State some years ago has already published a report on district heating, which is listed as Energy Paper No. 20. In the next few months it is expected to produce a final report. Meanwhile, my right hon. Friend and I are always ready to consider combined heat and power schemes that are put forward.

The House will know that my right hon. Friend recently approved the scheme submitted by the Midlands Electricity Board for the supply of heat to industrial consumers in conjunction with the supply of electricity to the grid. The hon. Gentleman spoke at length in Committee—that is putting it mildly—and made a number of rather sweeping statements about how far Britain is behind various Continental countries, particularly in the application of combined heat and power and in Government assistance for that purpose. The hon. Gentleman's enthusiasm may in some instances have led him to make slightly exaggerated claims. Nevertheless, I do not dispute that certain Continental countries, particularly Germany, Denmark and Sweden—I have seen some of them—are active in the encouragement of combined heat and power.

6.0 p.m.

Mr. Rost

The Minister has accused me of making sweeping statements. I was quoting his own figures to me on the percentage of combined heat and power produced by different countries to show that, without any question whatsoever, we are bottom of the league. If the Minister wants me to quote the figures, I can do so. However, I do not want to waste any more of the time of the House. I simply point out that we are bottom of the league. For example, in Denmark 36 per cent. of electricity is produced from combined heat and power, whereas in this country the figure is only 6 per cent.

Mr. Eadie

The hon. Gentleman always chooses figures which suit him. I heard him chastised in Committee by my hon. Friend the Member for Bristol, North-East (Mr. Palmer). It is not a question of my saying that some of the figures that he gives are of dubious origin. But let us try to be friendly about this matter. I said that I thought that I could satisfy the hon. Gentleman and, indeed, give him a great triumph. Apparently, he does not want any great triumph; he wants to continue to interrupt.

Mr. Rost

I must object to the insinuation, first, that my figures were sweeping and, now, that they are dubious. I was quoting the Minister's replies to my questions. If he wants the full reference, I can give it. These are not selective figures. Presumably they are neither dubious nor sweeping figures. They just show that we are bottom of the league.

Mr. Eadie

The hon. Gentleman made that point before. I merely emphasise that he picks figures to suit himself. However, I shall leave it at that. I also quoted what other Members said about the hon. Gentleman in Committee. Indeed, I even quoted some poetry on the last occasion. I am trying to be helpful.

Mr. Mike Thomas

As we are correcting insinuations, will my hon. Friend confirm that British manufacturers can manufacture these schemes, that they are not losing orders because of their failure to do so and that in general terms they can apply these ideas to small as well as to large sets?

Mr. Eadie

We are now coming to the dubious assumptions in the figures given by the hon. Member for Derbyshire, South-East. However, the hon. Gentleman does not accept this argument, so I shall leave it at that. We may come back to it on another occasion. The hon. Gentleman and I have made many speeches across the Floor of the House, and at times we have given no quarter. However, as I said, we shall no doubt return to this matter.

There is no question but that the amendment is unacceptable. I do not imagine that Opposition Members will go into the Division Lobby in support of it.

Turning to some of the arguments advanced by the hon. Member for Derbyshire, South-East, I think that I have to demonstrate to the House in particular, and certainly to the hon. Gentleman, that some discussion has gone on about power stations and combined heat and power. The Department of Energy has had the opportunity to discuss with the CEGB the extent to which heat from Drax B could be made available for industrial or domestic use if practical proposals were made. The design of the station is such that, although it is by no means a complete combined heat and power station—heat would be the main product and electricity a by-product—it would be possible, if practical proposals were made, for the reject heat to be made available for either domestic or industrial uses.

Allowance will be made in the design of the steam pipework for suitable terminal points for the heat supply. If a suitable heat load became available after the plant were constructed, and provided that all safety aspects were clear, it would be possible to complete the scheme by the installation of additional steam pipework and control. That was the triumph that I was trying to give to the hon. Gentleman, but he was not prepared to listen.

Clearly, the economics of any proposal would need to be studied closely. I should emphasise that the modification would not mean any delay in the beginning of work on the station. At present, neither I nor the CEGB are aware of any proposals for a suitable heat load. Nevertheless, the Board would welcome such proposals. I believe that the House will agree that, in the light of what I have said, the Government and the Board are doing everything possible to ensure that use can be made of reject heat from Drax B.

I do not think that it is necessary for the amendment to be written into the Bill. Therefore, I ask the House to support the Bill as it stands. I hope that the hon. Gentleman will seek leave to withdraw his amendment.

Mr. Rost

I think that the House will agree that on this occasion the Minister listened to the proceedings in Committee, because he went back to the CEGB and asked "For goodness sake, what shall I say when the hon. Member for Derbyshire, South-East comes at me again on Report?" Indeed, he has come back with something which I suggest is a move forward, in the sense that it could be the beginning of a real contribution towards energy conservation. I am sure that we all welcome that. I should naturally expect to hold the Minister to this vigilant approach and to ensure that we move forward, not just make provision for and talk about it. We must find an application for this reject heat.

I think that the Minister accepts that my approach has not been critical of him so much. I was hoping that he would assume that we were on the same side on this matter. My criticism has been directed more at the intransigence of the public electricity supply industry, which has continuously attempted to resist any application for reject heat. Therefore, this is as much a victory for the Government as for Back Benchers such as myself who have been raising this matter for a considerable time.

Mr. Eadie

I hoped that the triumph would be mine, because I did the work on the Bill.

Mr. Rost

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

6.7 p.m.

Mr. Eadie

I beg to move, That the Bill be now read the Third time.

I shall make no further comments at this stage. I understand that the hon. Member for Bridgwater (Mr. King) wants to make some remarks.

6.8 p.m.

Mr. Tom King (Bridgwater)

I think the brief introduction by the Minister marks the Third Reading, rather appropriately, of a small and sad remnant of what should have been a major Bill for the reorganisation of the electricity industry. I well understood the sad reference to it by the hon. Member for Bristol, North-East (Mr. Palmer) and his recognotion of what might have been. We referred to this matter on Second Reading. I do not propose to pursue the point now.

In Committee, my hon. Friends diligently pursued the Minister on the issues that we said we would raise: certain aspects of nuclear safeguards, which we broadly welcome, and the compensation proposals about which we were keen to get further details.

One issue which cannot be overlooked when giving a Third Reading to what has become a minor Bill is that it leaves one major aspect unresolved. Many feel that it has made the resolution of it more difficult. I am talking of the rationalisation of the power plant industry.

The hon. Member for Newcastle upon Tyne, East (Mr. Thomas) suggested that that was now a totally unobtainable objective and so everybody had better forget about it. But it is not as easy as that. During Second Reading the hon. Member intervened during my speech and said that it was a pity that the CPRS Report was published. I agree with him. But it is published. It is lying on the tables of the main potential export customers of the British power plant industry. It contains the recommendation that there is no real future for the industry unless it is rationalised.

My hon. Friend the Member for Derbyshire, South-East (Mr. Rost) said that one of our overseas competitors is making great use of that report in its attempts to secure business in competition with British companies overseas. The Government understand the significance of rationalisation. On Second Reading the Secretary of State said: Although rationalisation remains the Government's long-term aim, and in our view would help the industy to remain internationally competitive, the problem as it finally emerged for a decision by the Government was that we had to act in advance of the rationalisation that we sought."—[Official Report, 24th April 1978; Col. 948, c. 1021–2.] The Secretary of State said that it remained the long-term aim, but it has not yet been achieved. The House should appreciate that the problem is more one for the turbine generator industry, as my hon. Friend the Member for Newcastle upon Tyne, North (Sir W. Elliott) and the hon. Member for Newcastle upon Tyne, East will know because of their close interest in C. A. Parsons.

It appears that there is more prospect for rationalisation in the boiler industry. The turbine generator position is acutely worrying. I have recently visited GEC and talked to the workers and management there. They have a point of view. It is important that the House should understand what that view is, because it has not been fully explained. It does not concern a battle between Sir Arnold Weinstock and many hard-pressed workers in Newcastle. The futures of workers in all the companies—in Newcastle, Rugby, Stafford and Trafford Park and at Larne in Northern Ireland—are tied up in the future of the industry.

GEC has made a particular effort not only to obtain domestic orders but to obtain export orders. Over the last 10 years that company has obtained about 90 per cent. of such export orders, which amount to £370 million. The international market is intensely competitive. Anyone with any experience of these large construction contracts, which often involve Government intervention, all types of special arrangements and extremely tough terms, often without a good hedge against inflation, will know that it is an extremly competitive business.

The workers at GEC feel that they have got business for this country, have taken on some competitive and sometimes risky orders and, by so doing, have in some way jeopardised the opportunities for a fair share of the home market. This is understandable. Any Government could be faced with that problem. All Governments are faced with the unemployment problem. It is understandable that they will look at each firm's order books, see which is better loaded and be influenced to give domestic orders which are in their control to areas where the threat of unemployment is greatest.

I do not say this in a pejorative sense. The whole House has an interest in the success of the generator industry. One can admire the success that GEC has had in the international export markets. That success is based on a successful home market. GEC claims that the export markets cannot of themselves justify the present work load in its factories. GEC is concerned because its future success in the export markets could prove a penalty to obtaining domestic orders.

It is generally felt in the industry that domestic orders are more profitable than some of the more risky projects overseas. If that situation continued GEC could find that it could no longer sustain its activity in this area. Obviously, the nation would be the loser.

I know that the view at Parsons is different. But there is a problem. The CPRS Report states that the British domestic load, or the ordering prospects, and the possible export contributions cannot sustain two manufacturing companies on a scale at which they would be able to compete in world markets. That is the view in the report which has been circulated to all our major customers overseas.

Mr. Mike Thomas

The hon. Member has made his case articulately. I do not dispute that his account is accurate. But is he going to give the views of the workers at Parsons?

Mr. King

I know that the hon. Member has fought hard for the people who work at Parsons. I understand the issues. I understand the problem of unemployment in Newcastle and the North-East. That is of concern to the Government, whichever party is in power. These are difficulties that we must all face.

We are about to give a Third Reading to a Bill which will approve the funds for advancing the order for Drax, for which the turbines are to be allocated, unilaterally, to Parsons. Parsons gains on this occasion. That company will receive the order for the turbines. But that raises the question of what is to happen to the still unresolved question which is being pre-empted, as the Secretary of State said, by this decision. In some ways the problem might have been made more difficult to resolve. What is now to happen about the ordering of the turbines for the two AGRs? How will those orders be allocated? Will they be split? Will they go to one company or to another?

GEC has obtained the order for the China Power and Light Company in Hong Kong. That is a competitive order. The company has taken on that order to maintain its work load in the factories. But will that order count against the company when consideration is given to the allocation of AGR turbines? These problems go to the heart of an industrial strategy.

Mr. Brian Sedgemore (Luton, West)

Special pleading.

Mr. King

Whatever the hon. Member says, this is GEC's argument. We have had much discussion about the problems in the North-East. But all the problems must be put on the table. The hon. Member for Luton, West (Mr. Sedgemore) will have read the CPRS Report. He will know that its recommendations have not been implemented and that the Bill ignores one of those recommendations. One of those recommendations was that the precondition of the order for Drax should be the rationalisation of the industry. The House is about to approve a Bill which ignores that recommendation.

Mr. Mike Thomas

That is wrong.

Mr. King

The Government do not think that it is wrong. The Secretary of State has made it clear that rationalisation remains the Government's long-term aim and that it would help the industry to remain internationally competitive.

I am not sure that people fully understood what was meant by that. I am taking the opportunity to amplify one aspect of it. The hon. Member for Luton, West said earlier that I was indulging in special pleading. I am stating one case. It is a case which has not been made clearly. It has lost out by default under the Bill. I shall be visiting Parsons very shortly and I shall be discussing the other aspects of the case with the people there.

However, our concern in this House, as my hon. Friend the Member for Ross and Cromarty (Mr. Gray) said, is how we retain the skills in the industry and how we maintain an internationally competitive turbine generator industry in this country with the maximum employment in all those areas where employment is at present offered for these skills. That is the challenge we face.

We must recognise that that challenge has not been met by the Bill. The problem remains, and it would be quite wrong to let the Bill pass without recognising that fact. I understand why hon. Members who have partisan views based on the constituencies they represent feel obliged to fight every inch of the way for their constituents and for the factories in their constituencies, but we in this House have a national responsibility. The problem has not been resolved, and it would be wrong to give the Bill a Third Reading before we recognise that fact and before we recognise the problems that it can pose for us for the future.

6.22 p.m.

Mr. Mike Thomas

I should not allow the Third Reading to pass without paying tribute to my right hon. and hon. Friends on the Front Bench for the way in which the Bill has been conducted and for the outcome of our discussions. My hon. Friend the Under-Secretary will already know the views of the coal mining industry. He is closely associated with it. He also should know of the gratitude of many people in my part of the world and of workers in the GEC factory at Larne in Northern Ireland who will also benefit from the work. I am sure that they are grateful also for the speedy way—Conservative Members are also due for some credit on this score—in which the Bill has passed through the House.

I cannot allow the Third Reading to pass without making one or two comments which have been provoked by the hon. Member for Bridgwater (Mr. King). He is right to say that I feel strongly about these matters, but I am not purblind and partisan about these matters, neither am I unreasonable about them. I hope that he will accept that.

We have seen a late conversion to the principle of the Bill, and I still doubt whether, if the right hon. Member for Leeds, North-East (Sir K. Joseph) had been occupying the Opposition Front Bench, we should have heard the same sort of speeches and the same views from that Bench even now. I shall not go into that, however. I am glad at what I hear the hon. Member for Bridgwater and his hon. Friends say now.

The hon. Member was right to refer to the CPRS report. He and I share a great many views about that, not least about its publication. I am not entirely sure that the commissioning of the report was helpful in the circumstances. It was, after all, in part the use of one of the traditional British democratic ways of delaying a decision—that is, to have a commission to look into the matter. We were pressing very hard to get the power station ordered long before the CPRS team was asked to look at the subject.

The fact that the CPRS made a conclusion of one sort or another does not mean that that conclusion was necessarily right. In my view, it was wholly foolish for the CPRS to conclude that that power station order should be tied to the reorganisation of the industry. That was never a viable strategy for achieving an objective that may or may not have been desirable. It was nonsense ever to believe that it was. That demonstrates the political naivety of some of the people who were associated with the CPRS Report.

I hope that the hon. Member for Bridgwater will enjoy his visit to Parsons. The company is in my constituency, although many of the workers there live in the constituency of the hon. Member for Newcastle upon Tyne, North (Sir W. Elliott) and others of my hon. Friends.

I hope that the hon. Member for Bridgwater will forgive my saying that if he continues to make speeches such as the one he made in the House today he will be widely thought of in my part of the world as a spokesman for GEC. I know that that is not his intention, but he must be clear that that is the impression that his speeches create. I know that that is not his intention, as I said when I intervened, but if he is unaware of the impression he creates I am telling him of it now as someone who represents the feelings of the people in my part of the world.

Mr. Tom King

I am glad the hon. Member recognises that I am in no sense a spokesman for one interest or another. I have not made speeches of that kind. Today was the only time that I have spoken in that way. I did so because, as the hon. Member knows, this is an issue on which the benefits will be going to Parsons on this occasion. There is a GEC point of view here. It is a view that is strongly held by the workers at GEC. I am not sure that people have fully understood the background to their concern about the industrial implications of this decision. I thought it right to put that before the House.

I thought I had made it quite clear that I was putting forward the views that were expressed to me by GEC. I look forward to visiting Parsons to hear its views on the matter. I am not in any sense an advocate of one side against another, and I am glad the hon. Gentleman recognises that.

Mr. Thomas

I appreciate what the hon. Gentleman has said, and I accept it. I always have. However, he must be careful over the impression that he gives. I say to him humbly that we must also do a little more study. On the restructuring front, about which we are all concerned, it was unrealistic to suggest that there was the possibility of a solution. Let us consider the history of the matter. The 40-40-20 percentage arrangement was not acceptable to one party to the talks. Even 50-25-25 was unacceptable to the same party. If we are talking here about imposing upon what were 5,500 but are now 5,000 people in my constituency a solution of this kind which is wholly against their wishes and which they do not construe to be in any way in their best interests, we are not thinking in terms of practical politics. In this day and age, matters cannot be handled in that way. I know that Conservative Members representing my part of the world know that that is true.

The hon. Member for Bridgwater must do his homework about the market. He speaks of this order as though it represents some mammoth distortion of the home ordering pattern in favour of Parsons. In fact, it is a small redress after a long period in which the home ordering pattern has been consistently biased against Parsons. Even if Parsons were to get the next two or three power station orders from the CEGB and the SSEB, that would only just achieve equalisation between one part of the industry and the other. Let us have no mythology about this being an unfair division of the work available. Until this order came along, there was an extremely unfair division in favour of GEC.

For the future we must consider a number of factors. The first is the level of work at home and abroad. I hope that my hon. Friend the Under-Secretary will tell us today that we shall get the two gigawatts of construction a year from the home market, of which the AGRs and Drax B are just the start. Secondly, there is the question of the export market. That depends almost entirely on the extent to which world trade picks up. I do not think that the electricity market can be treated separately. I hope that world trade will pick up generally, that this will filter back specifically to electricity supply and that we shall see a substantial increase in the export market.

Again, however, the hon. Member for Bridgwater must do his homework more carefully. One can pick one's cut-off points where one likes, but in any decent, recent period Parsons' export record is not bad. It is nothing like as bad as getting only 10 per cent. of the orders. We must pick our dates more carefully and consider who is providing us with the dates and the cut-off points.

We have to consider the sort of contracts that are and will be available in the future. The creation of one turbine generator company is not necessarily the most important thing. That CPRS conclusion was not necessarily the right one. It may well be that the creation of turnkey capacity, involving boiler-making, switchgear and other technical aspects and possibly civil and mechanical engineering of a more general kind, will be the way in which the market will go in the future. It may be that it is the company that can deliver that package that it is important for Britain to have rather than the company that happens to make turbine generators. Northern Engineering Industries, of which C. A. Parsons is a part, is far better placed to produce that type of package than GEC could possibly be.

In the future we cannot guarantee parity of treatment in the international market place. There will be some parts of the world in which Parsons is well placed and some parts of the world in which GEC is well placed. Incidentally, C. A. Parsons did not tender for the order in Hong Kong in part in order to give a fair wind to the GEC prospect, for the company seemed much more likely to get the business for Britain. I hope that we shall see that approach in reverse when the opportunity comes.

I hope that my hon. Friend the Minister will take back to his colleagues the fact that no one in Parsons will want to see anything other than parity of treatment in ECGD and on the question of Department of Trade and Department of Industry support for future export orders. I am not suggesting that there is less than parity at the moment. I am sure that there is not. However, should there be any sign of it, a number of us will become agitated.

I wish the Bill well on its way. I hope that it will be out of this place as soon as possible and through the other place like a dose of salts.

6.32 p.m.

Sir William Elliott (Newcastle upon Tyne, North)

I wish briefly to intervene and at once acquit my hon. Friend the Member for Bridgwater (Mr. King) of any suggestion that he has been unfair to Parsons in what he said. There is no doubt that under the terms of the Bill Parsons will benefit.

Of course, the hon. Member for Newcastle upon Tyne, East (Mr. Thomas) and I have a partisan interest here, and from the knowledge that we have gained from studying the problem it is fair to say that there has never been any reluctance on the part of C. A. Parsons about the possibility of rationalisation. There have been arguments and union intervention. A newspaper report of the Confederation of Shipbuilding and Engineering Unions' conference in Scarborough last summer said: Unions insist on NEB control in GEC-Parsons power merger". The Secretary of State at that time said that the majority decision in the conference was bound to hold up any possibility of rationalisation.

In fairness to C. A. Parsons, it is right at this late stage of the passing of legislation which benefits C. A. Parsons and Tyneside to put on record that neither the management nor workers at Parsons have ever been against rationalisation, and they remain of this view. Rationalisation of the industry must in due course come in the face of international competition.

The hon. Member for Cannock (Mr. Roberts) asked earlier this afternoon whether cost-effectiveness with regard to Clause 5 of the Bill could be measured. I thought that the Minister's formula with regard to the £50 million, how it was to be spent and how there would be a parliamentary check upon it was reasonable. I hope that it can be adhered to, because it sounded perfectly all right to me.

Can cost-effectiveness with regard to the keeping in being of C. A. Parsons and GEC be effectively measured? I doubt it in terms of money. In the time that I have been a Member of the House, I have done my best in advocating the North-East of England as an area not so much wanting subsidy and not so much suggesting—as it had been accused of doing from time to time—that the rest of the country owed it a living. That is not true. We are a proud area. What we have suggested over the years, and what I continue to suggest, is that the North-East of England wishes to play its full part in the national economic well-being. I therefore believe that, without the provision in the Bill of £50 million to the CEGB, Parsons would have had great difficulty in remaining in existence, as would Babcock and Wilcox.

I suggest that Clause 5 will assist us greatly in solving our own problems in the North-East. Perhaps GEC has suffered through seeking export orders at the expense of home orders, but C. A. Parsons is, on the basis of the opportunity which has been given to it by the home order, seeking export orders and obtaining them. It will continue to do so. I therefore believe that the passage of the Bill will greatly assist the North-East of England to solve its own problems, as the Bill will keep in existence a centre of considerable skill without which our area would be much the poorer.

6.38 p.m.

Mr. Eadie

I want quickly to respond to the last point made by the hon. Member for Newcastle upon Tyne, North (Sir W. Elliott). We have to describe what the Bill has done. The Government's decision to ask the CEGB to proceed early with completion of Drax and the Board's response to that decision were made with a view to meeting the immediate needs of the power plant industry. As a result of the Drax decision and the decision on the thermal reactor anounced in January, the industry has in prospect a work load of 4.6 gigawatts for Great Britain, in addition to any export orders that it might gain.

GEC has recently won export orders for Hong Kong and South Korea after negotiations in which the Government did all they could to help. The Drax order will safeguard the substantial number of jobs at Parsons, at Babcock and Wilcox and their suppliers and in the construction industry.

The Drax decision is a mark of the Government's confidence in the future of coal. I am pleased that in Committee and in the House there has been a wide measure of support for this part of the Bill. When the hon. Member for Bridgwater (Mr. King) introduced this aspect of the debate, he said that this was a small Bill. It is a small Bill, but I believe, as I said in Committee, that although it may well be a small Bill it is an important one. In the Bill we are talking about people, work and wages and how we can sustain and retain a plant industry. It is a small Bill but it is important.

I am grateful for what my hon. Friend the Member for Newcastle upon Tyne, East (Mr. Thomas) said, but I must say to him and to the hon. Member for Bridgwater that, when they start discussing rationalisation, the Bill and I have no locus in this matter. I am the Minister responsible for piloting the Bill through. It is urgently needed by people in the industry.

If hon. Members want to debate rationalisation, that is a matter for the Secretary of State for industry. My Department has no locus in this aspect. I cannot assist the House, because the Bill does not deal with rationalisation.

Mr. Tom King

I am rather shocked by what the Minister has said, because his right lion. Friend the Secretary of State specifically referred to this question on Second Reading. I was about to ask the hon. Gentleman whether he could give us any further news of developments. He now says that he cannot answer such a question. Given what the Secretary of State said, it is extraordinary that one of his colleagues is unable even to comment on the matter.

Mr. Eadie

It is astonishing that an Opposition Front Bench spokesman should not know that the Department of Industry is concerned with the rationalisation of the industry. There may have been comments on Second Reading, but we are not debating that now and the Bill does not deal with rationalisation.

The House is about to pass the Bill to another place, and it is fair for me to say that there is nothing in the Bill about rationalisation. The hon. Member for Bridgwater must accept what I am saying. He should not be so indignant or astonished. He quoted a Second Reading speech, but we are not debating the Second Reading.

I commend the Bill in the confidence that hon. Members will support its purposes, which are to bring the United Kingdom's civil nuclear facilities under the International Atomic Energy Agency safeguards, thus fulfilling an undertaking that we have already given. It will provide for the CEGB to be compensated for the expenses incurred in the early ordering of the Drax B power station, thus lending its support to both the coal and the power plant industries in the United Kingdom.

Question put and agreed to.

Bill accordingly read the Third time and passed.