Atomic Energy Authority

HC Deb 11 February 1985 vol 73 cc30-3 4.10 pm

The Parliamentary Under-Secretary of State for Energy (Mr. Alastair Goodlad)

With your permission, Mr. Speaker, I should like to make a statement about the future of the Atomic Energy Authority. My right hon. Friend the Secretary of State for Energy told Parliament on 28 March that he had set in hand a wide-ranging review of the role and activities of the authority. On 3 October he placed in the Library of the House a press statement which summarised the recommendations of the review. Following consultations with the interested parties, I can now inform the House of the conclusions reached by the Government.

Since the authority was established in 1954 as a vote-funded body with a high degree of statutory independence, it has made a crucial contribution to the development of the civil uses of nuclear power in this country. Today, civil nuclear power is an essential and established part of our national life. Last year more than 18 per cent. of electricity supplied in the United Kingdom was nuclear. The proportion will reach 21 per cent. when the three nuclear stations most recently linked to the national grid reach full power, with a further increase when stations now under construction are completed. The civil nuclear industry in the widest sense now provides about 100,000 jobs. All this has been achieved with an excellent safety record. The authority's work is held in high regard and it will continue to have a major role to play in both the nuclear and non-nuclear field.

The review had two guiding principles: first, that the authority should move further towards a commercial basis of operation; secondly, that a defined customer-contractor relationship should be applied as far as possible to its work. The Government fully endorse those principles.

The review recommended, and the Government accept, that the activities of the authority should be placed on a trading fund basis. The authority will be required to account for its activities in a fully commercial manner, within financial objectives set by the Secretary of State. We intend to provide the authority with a capital structure and powers to borrow as required to enable it to operate as a trading fund from April 1986, and will introduce legislation as soon as possible for that purpose.

I have considered carefully, in consultation with the authority and with its customers in the nuclear industry, how the principles of the review should apply to the funding of particular programmes at present financed by my Department. A balance is required between the application of the customer-contractor principle, which is valuable for financial discipline and a more commercial approach, and the retention of an independent capability for safety and underlying research in the authority. The electricity industry, like the Government, attaches importance to that independent capability. Although the generating boards will increase the amount of work which they pay for on a customer-contractor basis, my Department will continue to fund a substantial authority programme of thermal reactor and general safety research. The Government broadly endorse a recommendation of the review group that there should be an element in the authority's charges to customers, including the Department, in respect of underlying research. I am discussing the application of this recommendation with those principals concerned.

The effect of the proposals will be to carry further the development of recent years under which the funding of the authority's expenditure has become more broadly based and proportionately less dependent on Department of Energy Votes. In particular, there will be a further increase in funding by the CEGB. With other changes, I expect this to result in a reduction of £5 million in my departmental Vote in 1985–86 compared with previous plans.

I have already mentioned the authority's contribution to the development of civil nuclear power in this country. It continues to give valuable support to the nuclear industry in both the public and private sectors. It is diversifying its services in the non-nuclear field, and has made an important contribution to technology relevant to North sea development.

The evolutionary changes I have just announced will put the authority on an increasingly commercial footing and will give its staff a new incentive. I am confident that the changes will enable the authority further to develop its role and contribution to the economy on both a national and international basis. I am also confident that all those concerned will join in taking full advantage of this new opportunity.

Mr. Alexander Eadie (Midlothian)

The Minister's announcement is unsatisfactory on three counts. First, as the Minister said, to put the authority on a commercial basis is an evolutionary change. We believe that it is a change towards privatisation. I draw the Minister's attention to the note appended to the statement of 3 October so that the House is under no misunderstanding about the way in which the Government have clothed today's statement. Paragraph 9, entitled The Authority as a Trading Fund states: The extension of the customer/contractor approach to the Authority's nuclear work for the Department would be facilitated by putting the Authority on a Trading Fund basis. This would require all work to be accounted for on a fully commercial basis, impose additional discipline through the requirement to meet financial objectives, create financial flexibility between years, highlight major issues which need to be dealt with in commercial terms, and facilitate possible eventual privatisation.

Secondly, does the Minister realise that the people of this country will be appalled that work connected with nuclear power, whether research or in any other area, will be on a commercial basis, in private hands? The Minister has argued that the justification for that is the saving of £5 million. That is not an argument; it is an unsafe betrayal in the interests of private profit.

Thirdly, is it not monstrous that the result of the announcement will be to take from Parliament the right to question and seek accountability for that aspect of nuclear power activity?

The Government appear not only to be preparing the way for privatisation, but to be weakening the authority of Parliament.

Mr. Goodlad

I may be able to put some of the hon. Gentleman's fears at rest. There are no plans to privatise the Atomic Energy Authority. Therefore, the fears that animated his first and second points do not apply.

On the hon. Gentleman's third point, there will be no reduction in accountability to this House because of the change to the trading fund.

Mr. John Hannam (Exeter)

Does my hon. Friend agree that this decision really consolidates the existing trend on outside financing? Will he reiterate that research into the safety of nuclear reactors will still be a top priority of the Government?

Mr. Goodlad

My hon. Friend is quite right to say that the move to a trading fund will reinforce a trend that is already taking place. He is also correct to say that the resources available to the authority for thermal reactor and general safety research will not be reduced. The Department will continue to fund substantial authority programmes in that area. The Government attach paramount importance to safety, and will continue to do so.

Mr. Merlyn Rees (Morley and Leeds, South)

Under the trading fund structure, will capital borrowings now cease to be counted by the Treasury in the public expenditure totals?

Mr. Goodlad

The capital structure of the trading fund has yet to be established by my right hon. Friend, and will be the subject of continuing consultations.

Mr. Rob Hayward (Kingswood)

In welcoming the statement, may I ask whether the authority will continue to co-operate with its European partners in the projects that are currently operating?

Mr. Goodlad

Yes, Sir.

Mr. Robert Maclennan (Caithness and Sutherland)

I accept that, after it has successfully spearheaded the development and research of the nuclear programme during about 30 years, it is sensible to move towards a recognition of the commercial possibilities of the authority. However, does the Minister realise that his statement is unsatisfactorily opaque in that, although it accepts in principle the recommendation of a trading fund, it does not begin to define which matters will still be funded by the Department? There have been six months of consultation on this matter. Is there a risk that fundamental research will not be commissioned, and therefore, not carried out? How does the Minister propose to continue to fund the fast-breeder reactor programme?

Mr. Goodlad

I said in my statement that the underlying research of the authority will remain a priority. That will be the case. My Department will continue to provide funding to underlying research, and the industry will also contribute. The position of the fast-breeder reactor programme will remain as it is at present. The programme is proceeding through the collaborative arrangements set out in the intergovernmental memorandum of understanding which my right hon. Friend the Secretary of State signed in January last year. The resources available to the programme are not changed by this decision, but the work will be carried out on a more explicit customer-contractor relationship between the Department and the authority.

Viscount Cranborne (Dorset, South)

My hon. Friend's statement will be studied with the keenest interest at the atomic energy establishment at Winfrith, which is the largest employer in my constituency. The workers there will appreciate his remarks about their work in safety and nuclear matters, and about the additional research that they have done on North sea oil. However, will he give them some assurance this afternoon as to whether the commercial implications of his statement, which I am sure will be broadly welcomed, will give undue leverage to the Central Electricity Generating Board over the authority's activities? Does he accept that many people throughout the industry, and especially in my constituency, would be most grateful for a reassurance on this matter?

Mr. Goodlad

I join my hon. Friend in paying tribute to the distinguished work that has been done at Winfrith for many years, in which I know he has taken a close interest. I assure him that no undue influence will follow this review either from the CEGB or anyone else.

Dr. M. S. Miller (East Kilbride)

The Minister referred to research, notably in connection with the fast-breeder reactor. What effect will the Government's proposals have on longer-term research into changing to the fusion process instead of fission?

Mr. Goodlad

The review of the authority did not cover fusion. The position remains that research into fusion forms an integral part of the Euratom fusion programme and is a successful example of European cooperation in a high technology sector. Recently I announced that the Government's direct contribution to the United Kingdom Atomic Energy Authority's fusion work, which is carried out under a contract of association with Euratom, should be £15.9 million in 1985–86, £13.7 million in 1986–87 and £13.3 million in 1987–88. That funding, together with our commitment to the joint European Torus project under the joint understanding and the host agreement, will ensure that the United Kingdom maintains a substantial fusion programme.

Mr. Michael Morris (Northampton, South)

Will the external financing limit of the electricity supply industry be adjusted because of its increased contribution, which will come about presumably because of this change?

Mr. Goodlad

In principle, changes will be reflected in the EFL.

Mr. Michael Meadowcroft (Leeds, West)

Does the Minister accept that nuclear power capacity is a matter of considerable political sensitivity, and that there is genuine concern that increased commercialisation is bound to impinge on control and accountability? Will he expand his previous assurance and tell us what changes are being made to ensure that, in this different perception of the authority's role, there will be genuine accountability to, and control by, the House?

Mr. Goodlad

I assure the hon. Gentleman that the Government and the House will have as much control and accountability as they have always had.

Mr. T. H. H. Skeet (Bedfordshire, North)

Will the financial objectives be set out in White Papers or in specific legislation brought before the House for that purpose, like section 29 of the Water Act 1973? When is such legislation likely to appear?

Mr. Goodlad

My right hon. Friend the Secretary of State will be responsible for setting the financial objectives of the authority, with the agreement of the Treasury and after consultation with the authority. The timing of legislation will be a matter for my right hon. Friend the Leader of the House.