§ Mr. Alexander Eadie (Midlothian)
I beg to move amedment No. 1, in page 5, line 13, at end insert'which will ensure funding for safety'.
I shall not go into the detail of the arguments raised in Committee, but the Minister is aware that I undertook to consider closely what he had to say when we discussed the safety aspect, which was one of the most important debates in Committee. We simply sought to write into the Bill statutory provision for safety in the nuclear power industry. I have closely considered the Minister's response. I cannot say that he did not reply in detail, because he listed a long catalogue of what the industry was doing in this respect. However, I believe that his reply was defective on the obvious count that, if all that was done, we would have had a different Bill. It cannot be denied that the decision to re-organise the Atomic Energy Authority on a trading fund basis changes the position. If it did not, why should we have the Bill?
I mention the role of the Central Electricity Generating Board, because my sources inform me that the organisation is refusing to pay its levy on the work carried out. If that is so, the main thrust and import of the Bill is defective, because we are discussing the finances of the new authority. As to the external financing limit of the new authority, if it required, for example, £15 million and was granted only £9 million, that would affect its work. May I ask the Minister whether such an application has been made and whether the approved funding differs from the application?
At column 31 of the report of the Committee's second sitting on 30 January, the Minister said that my attempt to amend the Bill to provide mandatory provision or requirement was difficult to interpret, because one could not exactly interpret what constitutes an adequate programme. My amendment, which will ensure funding for safety, has removed the word "adequate". The Minister now has the opportunity to write into the Bill such statutory provision. While such a debate is raging about safety in the industry, it would be unwise to leave safety permissive. Indeed, it would be unsafe to do so.
§ The Parliamentary Under-Secretary of State for Energy (Mr. Alastair Goodlad)
In Committee, the hon. Member for Midlothian (Mr. Eadie) raised a crucial issue for debate on safety, to which he has returned today, and I welcome the opportunity to discuss at some length what the authority is doing in this area and how the work would be funded once the authority is operating on a trading fund basis.
In Committee, the hon. Gentleman quoted figures from the 1984–85 annual report and accounts. The figure of £20 million which I gave on Second Reading related to planned expenditure for 1986–87 under programme letters in thermal reactor and general safety research. The two are not strictly comparable. The content of the programmes in all these areas will have moved on somewhat in the intervening time, and the priorities within the programmes 883 will inevitably change as results come forward. Furthermore, as I said in February of last year when announcing the Government's decisions on the review, the Government were determined that the vote funding of the authority should be sufficient to safeguard an independent programme of research into nuclear safety, but that this did not preclude an increase in funding by the generating boards in specific areas.
In recent years, the CEGB has increased its funding of thermal reactor work—for example, in PWRs—by the authority. As a result of discussions following the review, the generating boards agreed additional contributions to thermal reactor and general safety-related research and development by the authority, to replace some Government funding. As I said, we consider that these shifts in funding are sound, and overall our judgment is that they will have no impact on the authority's independence in nuclear safety research.
The latest estimates of programme letter expenditure envisage the following approximate breakdown in the authority's charges to the Department for 1986–87: for PWR safety, more than £6 million; for the AGR, more than £11 million; and for general nuclear safety research, about £4 million. That gives a total of about £22 million. In addition, the element of the fast reactor programme explicitly concerned with safety is expected to have departmental funding of more than £6 million. Of course, safety-related matters are an important feature of many other parts of the fast reactor programme funded by the Department.
Other work, which was covered by the authority in the "general safety" heading of the annual report, included radiological protection research, nuclear instrumentation work, safeguards work, and the cost of the authority's reactor and plant safety services, or ARPS. All that work will continue. Nuclear instrumentation and ARPS will be charged to overheads, which means that the Department will contribute about £1 million to those. The safeguards programme will continue at a cost of nearly £1 million. Radiological protection work will continue to be Government funded to a significant extent, although only a relatively small proportion will come from the Department of Energy. Substantial funding, totalling almost £2 million in 1986–87 will come from other Government Departments who are particularly interested in the content and results of work in this area, namely the Departments of Environment, and Health and Social Security and the Ministry of Agriculture, Fisheries and Food.
As I said in Committee, the direct funding of research does not cover the full extent of the Authority's expenditure on safety. I do not propose, as I know that the hon. Member for Midlothian does not want me to, to repeat the very full description I gave to members of the Committee about the many facets of the authority's work, which have a bearing on nuclear safety. I can assure the House that the Government attach the highest priority to nuclear safety, and recognise the importance of high quality research in this. The move to the trading fund does not change this view, or its effects and substantial funding of safety related work by my Department will continue.
In the light of these assurances and the explanations that I have given, I hope that the hon. Member for Midlothian will now seek to withdraw his amendment.
§ Mr. Eadie
I can hardly say that I am satisfied with the Minister's explanation, but I am content in that I have placed on the record what I regard as an important aspect of the Bill. No doubt the staff in particular will read what the Minister said with interest, and time will test it. However, I hope that at no stage will we decide that there has been inadequate funding of research. The Government and the Minister will have it on their heads if that happens.
On that basis, I beg to ask leave to withdraw the amendment.
§ Amendment, by leave, withdrawn.10.37 pm
§ Mr. Goodlad
I beg to move, That the Bill be now read the Third time.
We have had a number of useful discussions during the debates on the Bill. I pay tribute to the constructive approach taken by Labour Members. They have probed a number of detailed points relating to the financial framework and future of the Atomic Energy Authority, and I have given a number of assurances.
The main purpose of the Bill is to place the Authority on a trading fund basis, with borrowing powers and a revised capital structure. This is a small but important Bill.
I remind hon. Members of the changes that we propose to the financial framework for the authority. First, the authority will have a revised capital structure, including commencing capital debt, reserves and provisions. We have had a debate on alternatives, but I have emphasised that we regard a commencing capital debt as a sound feature of this revised capital structure and see no need for equity. It is expected after consultations with the authority and the Treasury that the debt will be set at about £80 million. Uncertainties inevitably exist when looking to the future, but assuming a broad continuation of the authority's existing business prospects, forward projections suggest that the authority should be left with a modest profit after payment of interest on its debt. A clear financial target has been agreed with the authority. Over the next three years they will aim to run the business to achieve an annual average return of 5 per cent. on current cost capital employed. Reporting profits, before interest, at this level, while still remaining competitive, will be a challenge for the authority in the early years of the fund but not, we believe, an unrealistic one.
Continued reliance by the authority on grant-aid is not a realistic option for the late 1980s and 1990s. We believe that a trading fund basis for its future operations is a sound one, and will give it the scope to develop its business while ensuring that it responds effectively to customer needs. The authority will in future have the ability to carry surpluses or deficits forward from one year to the next. This will give increased flexibility. It will have greater discretion over the use of internally generated funds, and in future profits from repayment work and royalties resulting from the fund's new intellectual property will contribute to internal funds. In the case of royalties deriving from programme letter work, the proceeds will be shared.
Finally, new capital investment can be financed by borrowing—if internal resources are insufficient—rather than being constrained by the annual grant-in-aid. These freedoms will, we consider, lead to a real change in the way in which the authority is able to conduct its business even though it will not be freed of all controls. This would be quite wrong. It remains within the public sector and will 885 be in receipt of considerable sums of public money either through programme letters or loans from the National Loans Fund. The controls we are proposing therefore are those necessary to ensure the proper control of public expenditure and the authority's continued accountability to Parliament.
I move on to the detailed provisions of the Bill. Clause 1 provides for the assumption by the authority of a commencing capital debt in the form of a notional loan from the National Loans Fund, deemed to be made on 1 April 1986, and repayable with interest out of the authority's trading profits. I have already described how it will fit into the authority's overall capital structure and financial framework. Clause 2 allows for borrowing from the National Loans Fund in sterling, and for borrowing from elsewhere in any currency if the Secretary of State, with Treasury approval, consents. The amount that the authority can borrow will be subject to the overall limits set in clause 3 and to an annual external financing limit.
Clause 4 empowers the Secretary of State to lend to the authority and sets out the procedures governing such loans. Clause 5 permits the Treasury to guarantee borrowing by the authority from non-Government sources, and sets out the arrangements to be followed if any such guarantee is called. Clause 6 provides that the authority carry out capital investment and other developments only within plans approved by the Secretary of State. Clause 7 provides that compensation may be paid by members of the authority for loss of office, for which there is no provision in the 1954 Act, and repeals section 1(8) of the 1954 Act. Clause 8 clarifies the authority's powers to exploit its intellectual property.
The Bill's enactment will change the direction of the authority in the coming years. Moving to a trading fund will, I believe, lead to increased efficiency, greater scope for development of the authority's business and increased responsiveness to the needs of its customers. I have assured the House that, with these changes, there will be no loss of accountability to the House. The authority expects to continue a vigorous and independent underlying research programme and there will be no effect on nuclear safety.
Hon. Members have probed at considerable length and often whether this Bill is a prelude to privatisation. I have given them a clear assurance, and I will repeat it again. The Government have no plans to privatise the authority. Anxiety has been expressed about undue influence by the Central Electricity Generating Board. I have explained that, even after the shifts in funding that I announced last year, its contribution to the Authority, in terms of turnover, will be less than 15 per cent.
I expect the authority, with its excellent scientific and technical track record, to keep its existing wide range of customers in the United Kingdom and abroad, and to add to it as it pursues a more commercial approach. This, and the maintenance of significant Government funding with the authority's reputation for the integrity and quality of its work, will be a significant safeguard against undue influence from any quarter.
Hon. Members have emphasised the impact of the Bill and the revised financial framework on the employees of the authority. As I said on Second Reading, the dedication and skills of the authority's workforce are its most important assets. Their attitude and morale are crucial to 886 the success of the trading fund. I hope and believe that they will respond to the challenge it sets. I have given an assurance that we do not intend to set cash limits for the authority's salaries and wages bill. Terms and conditions of service for the Authority's non-industrial employees are currently linked to those of the Civil Service. As I have said, it would not be for the Government to suggest any change in those arrangements. That would be a matter for the Authority and the staff trade unions concerned, within the machinery established under the 1954 Act.
I would like to say something about consultation with employees. There are, of course, two joint bodies involved in consultation in the authority — the National Joint Industrial Council, including representatives of industrial employees, and the authority Whitley Council, including representatives of the non-industrial unions. The employees' representatives of both of those bodies were invited formally, by letter on 20 December, to consider proposals for joint consultation under the trading fund, with particular reference to consultation on corporate planning.
In the case of the staff trade union side, that had been proceded by some informal discussions about the consultation procedures to be applied. They were the discussions to which the Lord Gray of Contin was referring when, on 19 December, he said:The trade unions are involved in discussions at the present time".—[Official Report, House of Lords, 19 December 1985; Vol. 469, c. 904.]
The record does not, however, draw a clear distinction between those discussions and consultations with the industrial trade unions. I would therefore like to clarify this matter. At that date, the industrial trade unions had not been involved in specific discussions about the consultation procedures to be followed under the trading fund. There had been only a brief discussion at the National Joint Industrial Council meeting on 5 December about the trading fund and its implication for the authority's industrial employees.
The formal approach to industrial and non-industrial employees' representatives was made the following day. No formal response has yet been received. I understand from the authority that it would be the normal practice for the bodies involved to consult their constituent unions before responding.
As I emphasised in Committee, I recognise the importance that authority employees attach to being involved in a meaningful way in discussions with the management about the future of the business, and I strongly support them in that.
I believe that putting the authority's operations on a trading fund basis, within the financial framework that I have outlined, provides a sound basis for the future. I commend the Bill to the House.
§ Mr. Eadie
I have already expressed disappointment at the fact that the Government have not seen fit to amend the Bill in any way. Even the Minister confirmed that our approach to the Bill was constructive and not in any way destructive. After all, the House must remember that we are seeking to change the structure of the authority after 30 years at the behest of the Government. We have read and heard with keen interest what has been stated in relation to privatisation—that it is not the Government's intention to privatise the authority in this or any other 887 Parliament. That was read with great interest by the staff of the AEA. We as an Opposition invited the Minister to state the Government's position. We regret that the Government did not take the opportunity to deal with the non-nuclear activities of the authority. If our suggestion had been accepted, it would have underlined the role which the authority plays in this sphere and it would have enhanced the status of the AEA rather than diminish it. That was the last opportunity before the new life of the AEA as constituted in the Bill.
Although the Minister in his speech demonstrated that there had been some second thoughts, I think that the Government put up a very weak defence for not writing into the Bill a requirement of consultation with the recognised trade unions. As a Government, they have not begun to realise that such a statutory right would have been a breath of fresh air in industrial relations. What a source of strength this would have been in an industry which has experienced difficulty in achieving public acceptability. The Government have missed a great opportunity in failing to make this a statutory provision in the Bill.
With regard to membership of the new board and its independence free from commercial interests, the Government promised that this would be allowed. They will be watched and tested by their actions. The Government have a scandalous record in appointments of all descriptions, and have probably done great damage in this respect. Most appointments have the tarnish of being sympathetic to government. For some, this is a monstrous libel on their professional qualifications and integrity.
We still do not know who is to be the new chairman of the authority. We should know this before the Bill completes its passage through the House. I have already had wind of a name, and understand that it is to be the chancellor of one of our universities. If that is so, we are at least saved from the embarrassment and burden of another banker of city accountant-cum-financier. The Government have a bad record in such information having to be prized from them.
Before the debate ends, the Opposition want to know the name and the qualifications of the person who will 888 become chairman of the new Atomic Energy Authority. Parliament has a right to know when it is asked to pass the Bill. I hope that the Minister will respond to that question. On Second Reading and in Committee we raised the issue repeatedly and we were told that the appointment would be announced.
§ Mr. Goodlad
With the leave of the House. The hon. Member for Midlothian (Mr. Eadie) has rehearsed again some very important points that we have covered during the proceedings on the Bill. He raised the question of the chairmanship of the authority. As I said in Committee, the Secretary of State shares with him an appreciation of the urgency of the matter. I hope that an announcement will be made before too long. The hon. Gentleman will understand, as will the House, that it would not be appropriate for me to comment on any individual who has been or is being considered.
No doubt the hon. Gentleman would wish, as would all hon. Members, to join me in paying tribute to the very distinguished tenure of office of Mr. Arnold Allen, the chairman who has led the authority in the last two years. I also pay tribute to the employees of the authority for having established it as a pre-eminent body in its sphere in the world.
The enactment of the Bill will mark the end of one era for the authority, but it will open up a new one and will provide new disciplines, challenges and opportunities.
The authority's key role as adviser to the Government will remain. Funding will move closer to a customer-contractor relationship, and the nuclear industry will take on a greater share of funding. But substantial Government funding of safety research will continue, as I have said. The authority's capability for underlying research will be maintained by contributions from all customers. Accountability to Parliament will be preserved.
I commend the Bill to the House.
§ Question put and agreed to.
§ Bill accordingly read the Third time, and passed, with amendments.