HC Deb 16 November 1981 vol 13 cc89-114

Order for Second Reading read.

8.48 pm
The Under-Secretary of State for Energy (Mr. David Mellor)

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

The intention of the Bill is to alter the financial limit imposed by section 2(1) of the Nuclear Industry (Finance) Act 1977 in relation to British Nuclear Fuels Ltd. It was decided in 1976 that BNFL could borrow in the market, but that a Government guarantee would be necessary. The 1977 Act established a limit of £300 million, with the power to raise this to £500 million by statutory instrument. The BNFL (Financial Limit) Order 1981, which was debated in Standing Committee in March of this year, accordingly raised the limit to £500 million. BNFL expects to reach that limit by the middle of 1982.

The financial limit is the aggregate of the total paid for shares, loans by the Secretary of State, the principal of loans guaranteed by the Secretary of State and amounts due in respect repayments by the Secretary of State on any loan under guarantee. Those four categories make up the financial limit, but the House is in effect concerned today only with the question of loan guarantees. The Bill proposes to set a new limit of £1,000 million, with power to raise that by statutory instrument to £1,500 million.

It is appropriate at this stage to say something about the history and activities of BNFL. It was established in 1971 to take over the production functions of the Atomic Energy Authority. Its function is to provide nuclear fuel cycle services to the electricity generating boards, that is to say enrichment, fuel fabrication and the reprocessing of spent fuels. The company also generates electricity.

It is right also to pay tribute to the exporrt record of BNFL. It exports fuel cycle services where to do so is profitable and beneficial to the services provided for domestic customers. From a figure in 1971–72 of £6 million, exports have grown to about £41 million in 1980–81. The majority of its present business—about 60 per cent.—is work carried out for the generating boards of the United Kingdom. All the BNFL activities are pursued subject to the necessary standards of safety and environmental protection and in accordance with Government guidelines on the non-proliferation of nuclear weapons.

I should say something about the successes that BNFL has achieved over the past decade. It is, indeed, a successful company, both commercially and technologically. It has been consistently profitable since 1971. Its turnover in 1980–31 has grown to about £349 million. It is a profitable company. Its profits after interest and tax in the last financial year were about £12.9 million. Its principal shareholder is the Secretary of State for Energy. Dividends have been paid to the Government since 1976–77. Last year's dividend was £2.7 million. It is an advanced technology company. It employs engineering and chemical technology of the highest standards.

I give the House one example. The centrifuge process of uranium enrichment jointly developed by Urenco in a collaborative project with the Dutch and the Germans puts this country in the forefront of technological development in this field.

Mr. Tam Dalyell (West Lothian)

On the question of Urenco, it may be legitimate to ask whether in the light of the well-known case of Dr. Ali Quatar Khan and the breach of security that may, heaven help us, result in a quicker delivery of an Islamic bomb than anyone would have wished, the security arrangements at Urenco and Almelo have been tightened, as promised. I do not expect the Minister to give an answer off the top of his head, but a comment can perhaps be made in the winding-up speech.

Mr. Mellor

I shall be prepared to do as the hon. Gentleman suggests.

I now deal with the investment programme that lies at the heart of the Bill. The company plans to invest, at constant 1981 prices, about £3½ billion over the next 10 years. Actual investment will depend upon the rate of inflation. On the company's inflation projections, the actual outlay could be about £6 billion. Individual requirements within that total will principally be reprocessing—the largest investment amounting to perhaps £3 billion in plant for the reprocessing of irradiated fuel from our Magnox and AGR reactors. It is estimated that the additional cost of the Magnox reprocessing investment could be about £1,000 million, and the construction of a thermal oxide reprocessing plant to serve our existing AGR stations as well as some light water reactor fuel from abroad could be about £1.6 billion.

On enrichment, about £800 million is likely to be invested in the centrifuge project. On the fuel division, about £400 million may be invested in fuel fabrication and related activities. Up to £800 million has been set aside for unspecified projects. It is right to tell the House that much of this will be concerned with the management and processing of nuclear waste, but that specific projects that are likely to be required by the end of the decade cannot be more fully identified at this stage.

Finally, in the area of waste management, about £220 million is likely to be required for a plant for the vitrification of highly active liquid wastes. It can he estimated that about 25 per cent. of the total investment programme will be concerned with improving and expanding storage and handling facilities for all types of nuclear waste.

As the House will have gathered, this is an ambitious programme, but we believe that it is a sound one. In coming to that judgment it is important to bear a number of matters in mind. First, there is the long-term nature and the large financial scale of the nuclear industry. Secondly, it is crucial when assessing this expenditure programme to recognise that BNFL is not engaged in major speculative investment. The company is confident that about 86 per cent. of the investment contained in the current programme is covered by secure contracts which provide at the very least for the recovery of all its costs. The other 14 per cent. is largely investment in the centrifuge project where BNFL is collaborating with both the Dutch and the Germans, and the kind of guarantees which are present in the bulk of the company's business are not possible in this project.

I might also point out that the investment programme for domestic customers is mainly to provide services for the existing United Kingdom nuclear power programme. It is not significantly dependent upon future nuclear expansion.

Mr. Dalyell

On waste management, how much is going into vitrification and, crucially, on what time scale, against the background of the argument that waste management techniques can wait for the long term, or at least the medium term—not an argument to which many of us subscribe, but an important one? It would be interesting to have some details of the time scale and the expenditure on vitrification.

Mr. Mellor

I know how closely the hon. Member for West Lothian follows these matters. I shall endeavour to satisfy him about this when I reply to the debate.

I was dealing with the investment programme for domestic customers of BNFL and saying that this was mainly to provide services for the existing nuclear power programme. Investment for overseas customers is to provide services for existing nuclear facilities overseas. There is nothing speculative about BNFL's assessment of the size of the current nuclear power market.

I want now to explain a little further the commercial soundness of this expansion. BNFL can take confidence from the fact that about 60 per cent. of the investment is to provide services for the United Kingdom generating boards. Business between BNFL and the boards is conducted under terms of trading which provide for recovery of the company's costs and for a return on its investment, with incentives and penalties related to performance.

Much of the other 40 per cent. of the investment, which relates to export services, is for reprocessing. BNFL's major overseas reprocessing contracts are on a cost-plus basis, which gives the company more security than almost any other type of contract that would be possible in these circumstances. These contracts and, indeed, all of the company's export business, are designed to generate profit and to broaden the company's base so that it can provide competitive fuel cycle services to all its customers, but most particularly the domestic generating boards.

I come now to the important question of how this ambitious expansion programme is to be financed. The purpose of the Bill is to give the Government the power to guarantee the borrowing necessary to finance the investment programme. According to its latest forecasts, which have recently come before the Department, BNFL will be able to finance from internal sources about 70 per cent—that could be over £4 billion—of planned investment over the next decade. The company has a very small equity base—only about £32.7 million. The Government do not intend to increase that base, nor indeed, in normal circumstances, as I have made clear, do the Government envisage lending money direct to the company.

Our intention is that BNFL should obtain the additional finance for its expansion by borrowing in the market. That will mean that BNFL will need to borrow up to £1,500 million over the next 10 years. Again, this figure depends, as do all such figures, on the rate of inflation that prevails over the next decade. Again, as I have indicated, it was recognised, very rightly and properly, during the lifetime of the previous Government that BNFL could and should borrow in the market but that, because of the scale of its borrowings, a Government guarantee would be necessary.

The nuclear industry is exposed to political risks—for example, sudden curtailment of the nuclear programme or part of it as a result of a change on political direction by a future British Government. BNFL must also react to the regulatory regime imposed on it in the public interest—for example, the closure on safety grounds of some part of its plant. In view of these considerations, which are quite exceptional when having regard to the normal companies that go to the market for substantial loans, it is right and proper, in the Government's view, that BNFL should be supported by a Government guarantee.

I must emphasise that the power to guarantee is permissive. It will be invoked in respect of specific loans and will be used subject to our satisfaction that the proposals that the company is making is sound. As shareholders, and already, therefore, as guarantors of some loans, we naturally take steps to satisfy ourselves that BNFL's business is on a sound footing. In particular, the company submits annually its rolling 10-year corporate plan to the Department of Energy and to Treasury Ministers for approval. There is a system of regular financial reporting and day-to-day contact with the company by my Department on a whole range of relevant issues.

As regards parliamentary discussion of BNFL, at present the company has outstanding long-term loans-guaranteed by the Government of about £220 million, to which must be added direct Government investment of about £20 million. In Standing Committee in March of this year hon. Members debated the raising, by order, of BNFL's financial limit to £500 million. Today, therefore, marks the second debate this year alone on BNFL's finances.

The company expects to reach the present limit of £500 million towards the end of next year. The limit of £1,000 million proposed in the Bill would be reached in the mid-1980s, somewhere between 1984 and 1986, depending upon the rate of inflation. There would then be the opportunity for a further debate on the company's finances. We believe—and I hope that the House agrees—that that is adequate for an industry of this nature. Additionally, individual guarantees—at the heart of the measure—require Treasury consent.

It is not merely in the hands of my right hon. Friend the Secretary of State, because, having given the guarantee, my right hon. Friend must lay a statement before the house and the other place, showing the extent, character and circumstances in which the guarantee came to be given and thereby enabling parliamentary scrutiny of what is done, pursuant to the powers which we hope the House will give us in the Bill.

I can confidently assert that BNFL has shown itself to be technologically and commercially sound in its record over the past decade. It justifies the confidence that successive Governments have placed in it. On energy policy grounds, it is plainly desirable that fuel cycle services should be provided by BNFL for the home boards. It is also commercially justified, given that some services are not available elsewhere.

The exports involved are also beneficial. The company's planned expansion seems to us to be sound. We support it and are prepared, in principle—although individual applications must be looked at on their merits—to guarantee the necessary borrowing. As shareholder and guarantor—which is the role of my Department in this matter—we shall oversee expansion with care, as would any prudent banker in that situation. It is in that spirit that I commend the Bill to the House.

9.7 pm

Mr. Edward Rowlands (Merthyr Tydfil)

This is an extraordinary Bill to bring forward at this stage, because, as the Under-Secretary of State told the House, it was only a matter of months ago that the Government sought by order to extend the borrowing requirement of BNFL to £500 million. However, within a few months the Government are seeking to extend that borrowing requirement, not by about £200 million, as in the previous order, but by three times the amount of the potential borrowing requirement. One would have thought that Conservative Members would be jumping up and down on the Back Benches at the idea of a Treasury guarantee to a 100 per cent. nationalised Government-owned company, allowing it to treble its borrowing requirement and to expand its investment programme.

The Minister, in his lengthy speech, made no effort to explain the development and evolution of BNFL. The reason why the Chancellor of the Exchequer is not feeling queasy or worried about the impact that the Bill might have on the public sector borrowing requirement is to be found in the explanatory and financial memorandum to the Bill, to which the Under-Secretary made no reference. By an incredible, strange and curious factor of the nature of this company, the borrowing requirement of £1,000 million, rising to £1,500 million, does not fall on the public sector borrowing requirement. However, as the Minister explained, it does involve the possibility of Treasury guarantees behind the company's borrowing.

The Minister must find it ironic—bruised and battered as he is after his earlier battles on gas-gathering pipelines, and his total failure to deliver the Treasury's agreement on a modest guarantee for a commercial and potentially successful gas-gathering pipeline which was turned down—[Interruption.] It was turned down by the Treasury on the ground that such a guarantee would involve a great addition to the public sector borrowing requirement. Yet apparently Sir John Hill at BNFL and our legislators have managed to produce one organisation, 100 per cent. Government-owned, which is now seeking a very large borrowing requirement, backed by Treasury guarantees, not a penny of which falls upon the sacred PSBR.

If the debate does nothing else, it ought to register the nonsense—the absurdity—of the way in which the public investment sector of our economy is treated in PSBR terms. It is extraordinary that, in respect of BNFL, there can be a nil effect upon the PSBR, when in practice the Treasury has to provide exactly the same guarantees as BNOC would need or as British Gas has needed or asked for at various times. I hope that hon. Members on both sides of the House will be willing to recognise the absurdity to which I have referred.

In paying tribute to the company, the Under-Secretary of State perhaps did not underline as forcefully as he should have done that BNFL is a nationalised concern. It is a major example of a 100 per cent. Government-owned company which, according to the diktat and the ideology of Conservative Members, should be losing money. But, like Amersham International, which we debated earlier, and like BNOC and British Gas, here is another company, in which the Government are a 100 per cent. shareholder, which makes a profit of £2.7 million in a year for the Government. The company is rather awkward proof that a 100 per cent. Government concern can be a commercial success. Indeed, the Under-Secretary of State paid tribute to its viability.

In his annual report as chairman of the company, Sir John Hill states that, had it not been for Government policy, the company would have made more money. Indeed, half the chairman's review of the year's work represents a justifiable series of complaints about Government policy in relation to the economic climate in which BNFL has had to operate.

I repeat that here is yet another example of a 100 per cent. nationalised concern which is making profits for the community, as well as endeavouring to serve the community as a whole in the very sensitive area of nuclear power. I shall shortly deal with that sensitive area.

The Bill refers to shareholding but the Under-Secretary made no mention of that in his speech. I hope, therefore, that the Minister will give the House the clear and categorical assurance that the Government have no intention of selling off the majority holding in this successful nationalised company in the way that they did in Amersham International.

Mr. T. H. H. Skeet (Bedford)

Why not?

Mr. Rowlands

The hon. Gentleman should ask the Under-Secretary that question. On an earlier Bill we debated why it would be nonsense, in this extremely strategic and sensitive area, to do anything that would lead to large-scale privatisation. I hope and believe that even this Government will not be foolish or stupid enough to embark on such a course. I would not have bothered to raise the subject had it not been for the fact that in June 1981 an order was sneakily laid to transfer all the company's shares from the Atomic Energy Authority to the Department of Energy. That order was confirmed on 3 August.

Mr. Skeet

If the Government were to privatise the company, would the Labour Party—should it, unfortunately, be elected to office—renationalise it without compensation?

Mr. Rowlands

The hon. Gentleman, who is an active participant in all our debates, knows exactly where the Labour Party stands on the subject of compensation. However, I hope that we will get an assurance from the Minister and that the issue is hypothetical.

In June and July 1981 the shares were transferred, by order, to the Department of Energy. The order was finally approved on 3 August, when most of us were thinking about our holidays. What is the Government's intention regarding the shareholding in British Nuclear Fuels Ltd.? That question is relevant to the Bill and to our attitude towards BNFL. Although provision was made as long ago as 1971 for the possibility of a shareholding in the company, we would bitterly oppose and utterly reject the nonsense of privatising a large portion of such a strategic and sensitive industry, which involves properties and concerns such as Capenhurst and Windscale. I hope that the Minister will give the assurance that I seek.

A large part of the Bill's borrowing requirement is supposed to underpin the capital investment programme and its point and purpose. A useful statement has been made about the various items of capital expenditure involved. It is good to have a statement on the record of exactly what BNFL is up to. The heavy investment in reprocessing is interesting and important. To what extent does this capital investment programme relate to, or have any significance for, the Government's nuclear power programme, as outlined in 1979, and the absurd and unrealistic concept of a large-scale pressurised water reactor programme throughout the United Kingdom?

I have raised that point because in two of BNFL's annual reports the chairman refers to the Government's nuclear power programme. On the review for the year 1979.80, the chairman began—this will be pleasant, sweet music to Conservative Members—by saying: The new nuclear programme by the Government last December was welcome news for BNFL. In other words, BNFL clearly anticipated considerable benefits—as obviously there would be—if the Government managed to implement the huge pressurised water reactor and nuclear generating power programme that was envisaged in the statement made in December 1979.

In his annual report for this year, the chairman returned to that point, and said: The Government has received a Letter of Intent for the manufacture of PWR fuel for the CEGB, subject to the outcome of the Government's Inquiry into the PWR. That is extremely important. Whatever divisions of opinion there may be between us, the House should be clearly told to what extent the borrowing power and capital expenditure programme anticipates the pressurised water reactor programme.

I say to the Under-Secretary of State that if, by approving the Bill, we were to approve the capital expenditure programme and the assumptions about the PWR programme, we would be hesitant to accept it.

Mr. Mellor

I believe that I made it clear that the assumptions behind the investment programme are based on existing nuclear plant, whether in Britain or overseas. In no way does the investment programme anticipate the outcome of any PWR programme in Britain. That is freely accepted by the Government. That is why we have announced that there will be a wide-ranging inquiry. We must await the outcome of that inquiry before any plans can be made.

Mr. Rowlands

That is an important assurance for hon members who have strong feelings about whether we should have a large nuclear programme. The House must take note of the ambivalence, almost to the point of neurosis, that is genuinely felt in many communities. If we do not take note of it, the public will make us do so.

The idea, perhaps in the way it was presented, especially in the White Paper, of a new PWR almost every year led to a deep and genuine reaction. The PWR is one of the few stations that has failed and caused danger to a community. That is why we should be fundamentally queasy and concerned about the way in which that programme may be implemented in Britain.

My second point relates to the capital expenditure programme of BNFL. Much expenditure is and will be required to handle waste management in a way that is absolutely safe. The word "absolutely", as I shall draw to hon. Members' attention in a moment, is not one that can be used in nuclear power terms.

My father helped to build Capenhurst and I lived in its shadow during the early construction period. My father died at Dounreay in Scotland. Therefore it is only by accident that I was associated with the building programme of the Atomic Energy Authority as well as BNFL. I had not concentrated as deeply as I should on the question not only of waste management but of the safety of those plants.

In preparing for the debate, I was shaken to find that I had not read "The management of safety" report on Windscale by the Health and Safety Executive. When one comes afresh to the report, one reads: By the early 1970s the standard of the plants at Windscale had deteriorated to an unsatisfactory level. The report goes on: We are strongly of the opinion that such a situation should not have been allowed to develop, nor should it be permitted to occur again. One gets the chilling feeling that if there is any complacency—as the report seems to indicate there once was—we shall be dealing with a very dangerous world. The BNFL should devote sufficient resources to ensure the timely completion of the review which has been taking place since the incidents which led to the heightened interest in safety and waste management.

I do not know whether the report has been debated since its publication early this year. It deserves parliamentary and public attention, as does the whole waste management issue. The report reveals that large sums of money are not necessarily needed. Many of the 30 incidents a year referred to in the report are due to human error and procedural breakdowns which do not involve large-scale capital expenditure.

Headlines say that the United Kingdom is becoming the nuclear wastebin of the world, because we are buying waste from elsewhere to process at a profit. I do not make a party political point. I have not done since I mentioned privatisation.

The Minister of State, Department of Energy (Mr. Hamish Gray)

That is a party political point.

Mr. Rowlands

The hon. Gentleman is too sensitive. I was not expressing a party political view. Nothing that I have said implies that I was. The Minister must have misconstrued my remarks, or perhaps he was not listening.

Mr. Gray

I was listening. The hon. Gentleman is not making a helpful or constructive speech. If he has done the homework that he claims to have done, he would realise that the safety record in the nuclear industry is second to none. To make such mischievous and troublemaking statements is wrong. I hope that he will think carefully before he makes anymore such statements.

Mr. Rowlands

With respect to the hon. Gentleman, I have not made a statement on my own behalf. I have read from a report on safety and waste management produced by the Health and Safety Executive. I make no allegations of any kind. I was saying that, as someone new to the subject I had picked up a report and was shaken by its references. Fortunately, many of the references are now history, although recommendations are made about the need for action and resources. That is the point that I was making. I was not speaking in a party political or partisan sense. It is wrong for the Minister to interpret my remarks in that way.

The provision of a large sum for vitrification, for example, is vital. The idea of hot liquid gases sloshing around in tanks is daunting and worrying. However safe the tanks might be, leaking and seeping has been a problem in some respects and in other circumstances. The possibility of embarking on a vitrification programme which eliminates or reduces massively the dangers is important and is a feature of the capital expenditure programme.

I conclude in the same tenor as I began and as I continued until the Minister chose to make his foolish intervention. I echo the Under-Secretary of State's view that we should debate the nuclear power programme and BNFL. We have yet to hear a response from the Government on the programme. We should certainly maintain a close scrutiny of BNFL's operation and expenditure, because it is a 100 per cent. Government concern. Above all, we should seek assurances that there is no plan or intention in any way to alter fundamentally what has been a remarkable success story.

In saying that, I hope that I end on a note of concord, at least between the two Front Benches. Although 100 per cent. Government-owned, BNFL has been remarkably successful in its commercial dealings and its safety record. Its expanding capital expenditure programme is important, and we certainly do not wish to oppose that. Therefore, we shall not oppose the Bill.

9.31 pm
Mr. T. H. H. Skeet (Bedford)

The hon. Member for Merthyr Tydfil (Mr. Rowlands) must be aware that there has not been a fatality at a nuclear power station. I think I am right in saying that that also covers the installations at Sellafield. On the other hand, he must be conscious of the fact that a number of mining deaths occur each year. Therefore, we come to the conclusion that it is more dangerous to work in the pits and the collieries than it is to work in a nuclear power station.

So great is the care taken by the nuclear industry that even a small leak which may be of no significance is made known, because the idea is to reveal to the public as much information as possible.

I congratulate the Minister on presenting an excellent case. However, I should like to ask several questions about privatisation. The hon. Member for Merthyr Tydfil and I served on the Committee that considered the Atomic Energy (Miscellaneous Provisions) Act 1981. Like the hon. Gentleman, I noticed two orders that were of relevance to that Act. The first was Order 1981/850 dealing with Radiochemical Centre Ltd., subsequently renamed Amersham International Ltd., whose work involves radio isotopes. The second was Order 1981/868 relating to BNFL and concerned various aspects of the fuel cycle. Shares in both companies have been vested in the Secretary of State and have been removed from the Atomic Energy Authority.

I doubt whether that has occurred by accident. With regard to Amersham International Limited, I believe that the Government intend to sell in 1982. However, does the Minister contemplate the sale of an interest in BNFL within the foreseeable future—possibly next year or the year after? After all, this commercial enterprise is profitable and capable of standing on its own feet. It would be useful to know at this stage whether such a sale is anticipated.

Section 1 of the Nuclear Industry (Finance) Act 1977 states: The Secretary of State may guarantee repayment of any loan made to …BNFL". Why is a Government guarantee required? Admittedly, this company has a small equity base of £32.7 million which could be expanded. The company is self-financing. Only a guarantee is required, but we know from experience over the past 20 years that no guarantee granted by the Government on a company such as this has ever been called in.

The company is subscribing 70 per cent. of the moneys that it requires, and that is internally generated. In my opinion, if such money came from a banking consortium or the European Investment Bank, that would be enough by itself. However, the Minister also mentioned the advance payment made by customers. In fact, 86 per cent. of the capital expended is covered in advance contracts already negotiated. Contracts with the Japanese, Brazilians and others account for 26 per cent. of that amount. The remaining 60 per cent. is covered by the CEGB and the SSEB. I should have thought that there was cast-iron security.

The Minister indicated that this was a sensitive area and that one could have a President Carter-like Prime Minister who would say that the processing of nuclear fuel elements was not to be carried out and that they were to be kept in storage for many years. The Minister mentioned the possibility of the closure of a plant. It is unlikely that that would occur. The amount of electricity which presently comes from nuclear power stations is about 13 per cent. We hope that, in the not too distant future, that figure will rise considerably, but I do not think that it will ever rival that of certain Continental countries.

I have looked into this matter fairly carefully. Publicly owned companies may borrow without Government guarantees. For example, the BNOC has done that with Brit-oil and has an enormous investment. It did not require a Government guarantee. It was a profitable company and borrowed the money against the revenues from the North Sea. I believe that British Telecom will be given similar powers—I do not know whether it has those powers yet. The Radiochemical Centre Ltd. also had the power to raise money without guarantee.

I know the European Investment Bank tends to insist on Government guarantees, but it has a discretion to dispense with that requirement. Recently, when British Rail asked for guarantees for borrowing for electrification, the Government were able to attach certain conditions. If the Government give guarantees so that conditions may be attached to a grant, I ask the Minister whether any conditions have been imposed in the case that we are considering. We are concerned with a commercial undertaking making a healthy profit: it is well managed and directed. In other words, it is a sound company and there is no reason why it should not raise its own capital on the open market without Government guarantees. I hope that the Minister will explain why he thinks that it must be the exception to the rule.

The Minister mentioned that the money was required for a number of purposes, including Magnox fuel reprocessing facilities, thermal oxide reprocessing plants and the treatment of PWR fuels subject to authorisation by the planning inquiry. He also included the Magnox fuel fabrication and the vitrification plant on which £220 million is to be spent. Much progress has been made and the United Kingdom has borrowed the AVM technique from the French for use at Sellafield.

Those in the know have probably looked into the figures carefully, but there seems to be a slow-down in nuclear planning growth worldwide. By the end of the 1980s most of the Magnox reactors will be nearing the end of their lives. If we have substantial over-capacity in most of the nuclear fuel services, what is the position with regard to processing? The report of the BNFL states on page 7: In the Fuel and Reprocessing Divisions Planned Expansion Schemes are having to be reexamined. The Minister said that the figures were based on existing nuclear programmes. However, will all this money to be guaranteed be required? If it is less, perhaps there will be anxiety.

I also pray in aid what the director-general of the IAEA said: Looking beyond 1985 however the situation seems far less satisfactory. Dr. Eklund added that the annual rate of construction work on new nuclear plants outside the centrally-planned economies was expected to be less than 5 gigawatts electricity in comparison with more than 10 gigawatts per year in the years 1981 to 1985.

Will a slow down in the programme have an effect on the profitability of the investment? We are dealing with a concern that in the main is State controlled. In Parliament we are concerned with the granting of moneys. If the country is to be a shareholder in future, it will want to know whether the profits will continue to flow. I am certain that the Atomic Energy Authority and British Nuclear Fuels have taken that into account.

Recently I visited France and inspected some of the French nuclear establishments. The hon. Member for Merthyr Tydfil (Mr. Rowlands) is frightened by certain safety aspects. I am frightened by what is going on in France. France has the lowest electricity costs in Europe.

Mr. Rowlands

I am not frightened. I am merely vigilant.

Mr. Skeet

I hope that the hon. Gentleman will remain vigilant while I mention one or two important factors. If we imitate the French, we shall be much more secure. France is the purveyor of electricity to neighbouring States. As we are selling oil to Europe, the French will be selling their electricity to a number of States including, probably, the United Kingdom by means of a new line that will be built across the Channel.

There is extensive use of combined heat and power on the Continent for district heating, a concept that is not very well known in the United Kingdom. The nuclear industry has a long lead time. France has been able to saturate the market through a continuing series of commissionings. The first United Kingdom PWR is about 10 years away. In France a new unit is coming on to line every two months. When that is compared with progress in the United Kingdom, it is clear that we have been back peddling for years. We have not been getting on with the job.

Mr. Frank Hooley (Sheffield, Heeley)

Will the hon. Gentleman explain why the French are now back pedalling on their programme?

Mr. Skeet

The hon. Gentleman is entirely wrong. The French reconsider their programme. Recently the issue was debated in their Parliament. There was an overwhelming majority for their plan. There were nine new reactors in question. It seems that six will be authorised and that only three will be stood down for the time being. The projections remain precisely what they were.

About 13 per cent. of the United Kingdom's electricity is derived from nuclear power. The percentage may be slightly higher now. We hope to build it up a bit. In France 25 per cent. of electricity was nuclear powered in 1980. By 1984 it will be 50 per cent. and by 1990 it will be over 70 per cent. That will be achieved under their new planning arrangements. They have embarked on new plants and they are getting on with the job.

Mr. David Penhaligon (Truro)

Is the hon. Gentleman saying that the main reason why electricity in France is cheaper than that generated in Britain is that 25 per cent. of electricity in France is generated by nuclear power whereas only 13 per cent. is generated by that method in the United Kingdom?

Mr. Skeet

Nuclear power in France is very much cheaper than in many other countries. The French are using the PWR system and it may be possible to establish the same system in the United Kingdom. Our conditions may be severer than those in France.

There are two reasons why electricity in France is so cheap. First, nuclear power is very much cheaper than power generated by coal and it is totally cheaper than oil.

Secondly, the French have extensive hydro-electricity. In 1990, when the French are generating over 70 per cent. of their energy by nuclear power, we shall be crawling. Our electricity costs may be so expensive that we shall be able to keep them down only by importing electricity from France. That seems absurd. I hope that hon. Members in forming a judgment will realise what is going on elsewhere. Belgium in 1981 has only a small electricity capacity. Nevertheless, 25 per cent. is nuclear, but in 1984.85 it will be 50 per cent. Sweden has a high proportion.

If one wants cheap energy costs, it is no good relying on high cost fuel industries. It is as simple as that. That is why the Government are right to carry on with their programme and I hope accelerate it. On the other hand, in past years we have been able to make a great deal of money out of the fuel cycle. That is where British Nuclear Fuels comes in. Surely, it is a broad industry. There is a company such as British Nuclear Fuels involved completely in the fuel cycle, the CEGB and the SSEB involved in the manufacture of nuclear electricity and there are also all the other manufacturing companies providing the plant and the equipment. That is an enormous employer of labour. That is why we should learn from experience abroad and bear in mind that while the Bill is confined to one corner of what we are talking about, it is important that we should get the matter into the correct perspective.

I support the Bill and what the Minister has said. He has been frank to the House. I am surprised at what the hon. Member for Merthyr Tydfil said about the safety aspects. No country in the world has been more responsible or scrupulous in those matters than the United Kingdom.

Mr. Rowlands

I was drawing the House's attention to a report on the management of safety by the Health and Safety Executive. If the hon. Gentleman wishes to challenge the professionalism of that report and the executive, I am willing to hear his evidence.

Mr. Skeet

I appreciate what the hon. Gentleman is doing, but he is placing the wrong interpretation on the report. The Health and Safety Executive is saying that things could be better, but not that life is at great risk. It is saying that more investment is required. That is what the Bill is all about. That is why the House is giving full support to it. I am afraid that the hon. Gentleman does not appreciate the significance of the point that I made earlier. I shall not repeal: it because many other hon. Members wish to speak.

In the United Kingdom we will highlight the smallest accident, although it may have no danger to human life. It is exposed so that it may be explored. Any possible weakness will be reported. In many other industries that would never occur, but in the nuclear industry it is caution and vigilance all the way.

9.47 pm
Mr. David Ennals (Norwich, North)

Unlike the hon. Member for Bedford (Mr. Skeet), and in line with my hon. Friend the Member for Merthyr Tydfil (Mr. Rowlands), I have the gravest doubts about the Government's massive nuclear power programme—a series of nuclear reactors that are likely to cost roughly £20 billion by the turn of the century.

The Government give little consideration to the likely electricity demand, of which I believe we already have substantial overcapacity. They give little consideration to the economic aspects. If we look at the costs of the Magnox, and the AGR, let alone the PWR, we see that none of them has provided the cheap energy that we expected. That was made clear in the Select Committee report, which said: In the past nuclear investments have had exceptionally low productivity. Great resources have been used with little direct return and a serious net loss. I now come to the safety aspects of the PWR in which the Government appear to have placed so much confidence in spite of the events at Three Mile Island, Harrisburg, Pennsylvania. If we have no doubt about the safety aspects, I want to know why the CEGB's safety reports have still not been published. They have been available for a long time but have not been made available to the public. The reports should be available so that the public inquiry at Sizewell can conduct its business. The Minister should ensure that they are made available.

I welcome the assurance that none of the additional funds made available to BNFL will be used to promote the PWR programme before the outcome of next year's public inquiry at Sizewell. There is great concern in Norfolk, Suffolk and Essex about the proposals for Sizewell. The Minister should not underestimate the strength of feeling.

Secondly, it was suggested in The Guardian on 12 October that The United States has asked Britain to sell her plutonium to back up a planned increase in production to meet the needs of her expanding nuclear weapons programme. The report went on to say that it was later confirmed …that the US had approached the British Government about buying plutonium and a spokesman for British Nuclear Fuels Ltd…. added, if the Americans wanted to buy, BNF would examine the possibility 'under the usual safeguards'. There is a good deal of concern about the matter. The Financial Times said: For the US Government this scheme has great advantages. But many observers in Europe see immense political dangers for the civil nuclear industry because such a move could unleash once again at nuclear electricity the hostility currently being directed against the new nuclear weapons. The director-general of IAEA, Dr. Eklund, was quoted earlier in the debate. The article said that he had already issued a stern warning about the political dangers of the United States scheme. It continued: In Britain, the CEGB—preparing itself for a public inquiry at Sizewell …—is decidedly nervous about British public reaction to the US scheme. I am, too. Is there a link between a possible deal between BNFL and the United States and the Bill?

9.52 pm
Mr. David Penhaligon (Truro)

I welcome the debate. My chief criticism of the Government is that we do not spend sufficient time discussing, debating and approving, if need be, massive decisions being made in the nuclear industry.

The Government wish to build a series of PWR reactors costed, at today's money, at between £10,000 million and £15,000 million—the equivalent of £300 for every man, woman and child in the nation. It is perhaps the largest single capital investment by the State in the history of our economy. It was announced some time ago, and work is being carried out on the assumption that the programmes will be implemented, yet the House has not spent a single second discussing the merits of the proposition. We have never had a motion to vote on. That is an appalling scandal and the greatest derogation of duty of any Government since I have been a Member of the House.

The Government pride themselves on carrying out thorough and close examination of the way that the State spends its money. I give them credit for an approach that perhaps did not exist in the previous Government. However, all the good work done will be swept aside by the expenditure of between £10,000 million and £15,000 million on this series of nuclear reactors, without discussion, without a motion on the Order Paper, and no way in which I or any other hon. Member can speak or vote for or against it.

A few yards outside my constituency work has already begun on one of the five sites in the South-West currently being investigated by the CEGB as a possible site for a PWR. People there frequently ask whether I voted against the proposal, and I have to try to convince what is sometimes a fairly large audience that although I am a Member of Parliament and the project was announced 18 months ago, and although holes are already being dug in their fields and they are threatened with a PWR in their area, we have not had one miserable second in the House of Commons to discuss the level of expenditure involved. I find that amazing.

I cannot understand how the weeks and months are allowed to pass without the Government's having the courage—I say "courage", but I fear that there is a considerable majority in the House in favour of the proposal—to give it some authority in our democracy—for I still believe that that is what we live in—by bringing forward a specific motion seeking the approval of the House. I hope that the various pressures that are building up will eventually persuade them to do so, but it has not happened so far, and I regard that as scandalous.

I think that the hon. Member for Bedford (Mr. Skeet) and I are now the two oldest hands in the House on these matters, having met at most debates over the years. The hon. Gentleman referred to cheap electricity in France. I do not deny the basic facts that he mentioned. If one wants cheap electricity, however, the real lesson to be learnt from the French is not to build nuclear power stations but to build mountains. I do not know whether that is within the possibilities of modern technology. I suspect that it is not. Nevertheless, the real reason why electricity is so much cheaper in France than almost anywhere else is that a very large proportion of it is generated by hydro-electric power, which the French have intelligently and sensibly exploited. If we had similar natural resources I have no doubt that successive Governments would have done the same in Britain.

Those who argue the pro-nuclear case often refer to low electricity costs in France and then point out that France has a substantial nuclear programme, as I admit is the case. But to extrapolate from those facts that nuclear power is the reason why electricity is cheaper in France is simply not true. The hon. Gentleman well knows that that is not the primary reason why electricity is cheaper in France than it is here.

Mr. Skeet

It is part of the reason.

Mr. Penhaligon

Indeed, if one wished to build a power station in Cornwall to generate the cheapest possible electricity I suspect that at present the solution would be to build a coal-fired power station and to import the coal from one of the various countries that are willing to export it.

Mr. Skeet

The hon. Gentleman and I have had many arguments about this. The operating costs for an AGR are 1.45p per kWh, as compared with 1.85p per kWh for a coal-fired station and 2.62p per kWh for an oil-fired station. A PWR, which is the type of reactor used in France, is even cheaper. Surely, therefore, I am right to suggest that the French have cheap electricity at present as a result of two factors—I agree that there are two—but that it is due very significantly to nuclear power.

Mr. Penhaligon

The hon. Gentleman quoted a figure for nuclear power against coal. That was the cost of generating electricity with British coal. I made the point that if one wanted cheap electricity one could import coal. No one has said that what I say is not true. If electricity in the South-West peninsula can be generated more cheaply by importing coal, why are we building a nuclear power station? If the only argument for building the power station is that it is cheaper than generating electricity with British coal, why is consideration not given to importing coal?

It being Ten o'clock the debate stood adjourned.

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