§ Question proposed,That the clause stand part of the Bill.4.20 pm
§ The Minister of State, Scottish Office (Mr. Ian Lang)
The Bill has one clause of substance and a single purpose which it is hard to think could reasonably be considered controversial. The purpose is to increase the borrowing limit of the two Scottish electricity boards so that they can continue to go about their normal business within the law. It has nothing to do with privatisation, although understandably the subject loomed large in our earlier debates. It might be helpful to the Committee if I were to say something about that.
§ Mr. John Maxton (Glasgow, Cathcart)
Just to clarify matters, this is a two-clause Bill. I accept that clause 1 has nothing to do with privatisation, but has clause 2 anything to do with privatisation?
§ Mr. Lang
We shall debate clause 2 in due course. I contend that it has nothing to do with privatisation. If the hon. Gentleman thinks otherwise, we can engage in a lively debate on that issue shortly.
The purpose of the Bill is narrow and specific—to raise the financial limit on the borrowings of the Scottish electricity boards from £2.7 billion to £3 billion. Because the boards plan and operate the generating system jointly, the limit applies to the total outstanding borrowings of the two boards taken together.
The new limit will enable the boards to obtain the finances necessary to continue their capital investment programme and fulfil their statutory obligation to supply electricity. The boards' borrowing requirements are determined mainly by the level of their capital expenditure and the extent to which that can be financed from internal resources. Many of the boards' investments are large and the assets constructed will have very long lives. It is therefore unreasonable to assume that the boards could find the necessary internal resources without recourse to borrowing, although at March 1987 about two thirds of the boards' current cost net assets were financed from their internal resources. Obviously, Torness has dominated the boards' investment programmes in recent years. The station is nearing completion and reactor 1 began to supply electricity to the grid last month. Full commissioning of both reactors should be achieved by the first half of 1989.
New power stations are not the only capital projects undertaken by the boards. They have a continuing need to spend on updating their existing power stations and on maintaining and upgrading their extensive transmission and distribution lines. For example, the South of Scotland Electricity Board spends more than £33 million a year on extending its distribution network. The North of Scotland Hydro-Electric Board will be investing about £32 million 744 in connecting the Western Isles to the mainland system by submarine cable and is spending a further £23 million a year on refurbishing aging distribution and hydro assets.
A further factor of importance when considering borrowings is the level of the boards' costs and prices. The boards have a good track record in holding down their costs while delivering a high level of service to their customers. The recent Monopolies and Mergers Commission investigations into the efficiency of the two boards concluded that they were skilled in managing their core functions of generating, transmitting and distributing electricity and deserved their good reputations far conducting their business efficiently and well. However, the commission also suggested that there was scope in a number of aspects for further improvement.
This efficient performance has been reflected in prices. Over the past six years average tariffs in Scotland have fallen by 9 per cent. in real terms. Domestic prices in Scotland are lower than those in England and Wales. The latest CBI survey of electricity prices shows that electricity prices for general industrial consumers were among the lowest in Europe. I am sure that the Committee will find that evidence of efficiency reassuring.
It is clear from our earlier debate that there is no dispute about the need for the increased borrowing facility. The proposed new limit of £3 billion is expected to be sufficient to meet the boards' projected needs, with a modest contingency margin of 10 per cent. We are therefore taking the opportunity to repeal the power to amend the limit by order, because it is most unlikely that there will be any need to increase the borrowing limit further between now and the time that the boards are privatised.
Privatisation has been a focus of much of the discussion. on the Bill, as was to be expected in any legislation. affecting the industry at this stage with privatisation on the horizon. This is not the time for a detailed statement of our intentions, but I make no apology for reaffirming the Government's strong commitment to the implementation of their proposals to privatise the industry. One reason of direct relevance to the Bill is that the industry's investment needs will no longer be decided by Government but will be determined by the industry on the basis of its commercial assessment of its needs.
That is only one of the many benefits that privatisation will bring. The Government are in no doubt that the requirement to operate in the commercial and more competitive environment that privatisation will create will provide added incentives to and sustained pressure on the boards further to improve performance and minimise costs to the benefit of customers and shareholders. We are confident that our proposals for privatisation will create a more competitive private sector electricity industry to meet the challenge of the 1990s and beyond.
Following the White Paper, the shape of the two companies is being discussed with the boards. There is much detailed ground to be covered and the boards are being closely involved at all stages. The discussions are progressing well and we shall announce our decision in good time.
The key principles underlying our proposals are that they will facilitate and encourage competition to provide the best guarantee of the customer's long-term interests. They will provide safeguards and new rights for the customer, including a new system of guaranteed standards of service and performance indicators. They will establish 745 regulatory arrangements to promote competition, to provide incentives for efficiency, and to oversee electricity prices for the consumer. They will ensure the maintenance of the present standards of safety throughout the industry, particularly at nuclear sites.
§ Mr. Tam Dalyell (Linlithgow)
The Minister mentioned maintenance of present standards. Am I right in thinking that, as with the Central Electricity Generating Board, the SSEB has been advised by Merz and McLennan? May I repeat question No. 3, which I put this afternoon to the Under-Secretary of State for Energy? Where else in the world has Merz and McLennan, which operates in some 70 countries, ever recommended a system of distribution controlled grid operation? Where has it recommended the experiment that it is recommending here?
§ Mr. Lang
I have to give the hon. Gentleman the same reply that I gave him when he asked the same question on Second Reading. Merz and McLennan is a firm of distinguished technical advisers. It was part of the team advising the Government on the structure of privatisation, although the main role was carried out by merchant bankers. The hon. Gentleman's question relates to the English structure of the electricity system under privatisation. Since he asked his question on Second Reading, he has written to me about the matter. I shall let him have a reply in writing in due course. With the greatest respect, this is not a relevant topic in the context of this debate.
§ Mr. James Wallace (Orkney and Shetland)
The Minister referred to the competition that could flow from privatisation. Will there be any restrictions on a company such as British Gas investing in the newly privatised boards? If British Gas invests substantially, will that promote or lessen competition?
§ Mr. Lang
That may be a suitable topic for discussion as we approach the formulation of our privatisation proposals. I shall bear the hon. Gentleman's point in mind. Because so many of these decisions have not yet been taken, I must confine myself to the general principles underlying our approach. The Government's proposals will benefit employees in the industry by providing wider career opportunities. They will give special rights to employees to acquire shares and give preference to customers in the allocation of shares. They will ensure security and diversity of supply and consolidate and update the legislation governing the supply of electricity.
Concern was expressed in earlier exchanges that security of supply might in some way be jeopardised by privatisation. I can categorically assure the Committee that such concerns are entirely without foundation. Following privatisation, the Scottish electricity industry will comprise two dynamic businesses which will be responsive to their customers' requirements. They will be under commercial and competitive pressure from other fuels and other electricity suppliers to deliver what the customer wants. Large industrial customers and domestic customers want the same guarantee of a secure supply of electricity at the lowest possible cost, and the system will deliver that.
The commercial pressures will be supported by a regulatory framework which will ensure that the statutory 746 obligation to supply which will fall on the licensed companies will be capable of being met. The companies will be under specific obligations as regards the security and quality of supply, and the overall price regulation will ensure that electricity is produced and priced at the lowest possible cost.
§ Dr. Norman A. Godman (Greenock and Port Glasgow)
Will these consumers' rights extend to those people, often on low incomes, who fall into arrears with their payments? As the Minister knows, some of them have their payments made by the DHSS. Will these rights continue, or, better still, will they be strengthened under the proposals to privatise?
§ Mr. Lang
Again, the hon. Gentleman is anticipating the detail of the legislation. There is already a fairly elaborate structure to try to help those in difficulties with their payments, governed by a code of practice on which the consultative councils have been consulted. We see no reason why there should be any substantial departure from those arrangements. Recently, the figures for disconnections have been more encouraging, and have been reducing. It is the boards' intention not to adopt a draconian attitude in this respect.
The matter of immediate concern is to ensure that the boards are able to finance their day-to-day business and their investment programmes. Clause 1 is an essential mechanism for enabling this, and I commend it to the Committee.
§ The First Deputy Chairman of Ways and Means (Sir Paul Dean)
Before I call the next hon. Member, I remind the Committee that a debate on the merits or demerits of privatisation would not be in order. On clause stand part, it is acceptable to speak, as the Minister has done, about the connection between that and clause I, but we cannot have a general debate on privatisation.
§ Mr. Donald Dewar (Glasgow, Garscadden)
I am grateful for your warning, Mr. Deputy Speaker, and i shall try to go no wider than the Minister did. I was interested to hear his ringing statement of commitment to the privatised future of the industry. I must confess that it came as no surprise. It was a statement of faith, a sort of ex cathedra Dover house. It sounded as though the word processor had been hard at work putting together a particularly appropriate piece of special pleading for the Minister. I doubt whether it will impress anyone else, and it did not impress any of my colleagues. I particularly stress that because, apart from two Whips, the Minister is entirely alone on the Conservative Benches. That is a matter of some interest.
No one objects to the clause as it stands. There is no question of our dividing the Committee against it, unless the Minister manages to irritate us beyond the norm. As the Committee will remember, this measure was debated in the Scottish Grand Committee, which was a constructive gesture on our part. That does not mean, as I am sure the Minister will appreciate, that we are in any way endorsing his vision of the future or have any time for the legislation that we are promised will come soon.
We are aware that the Committee has to grant additional finance to help the Scottish electricity boards 747 through the immediate period that lies ahead. We are being asked to sanction an increase in the borrowing requirement to £3 billion, and it is only right that before the Committee does that we try to extract some information from the Minister. We have been plugging away for some time trying to extract information from the Minister, and I am afraid that we have learnt to appreciate that he is the master of the stonewall tactic. I admire the persistent shameless level of non-information that has become the Minister's mark, and extracting information from him is gey dreich work.
If the Minister maintains, as I suspect he will, his record of pushing off any reasonable inquiries about the reason why this additional cash is needed, or about the immediate plans for the industry that are to be financed out of this additional borrowing, he will underline the need, when we come to look at the detailed proposals from the Government, to do so within separate Scottish legislation. This matter was raised during the last two Scottish Question Times and I was alarmed at the casual way in which both the Secretary of State and the Minister of State tended to brush this issue aside as some sort of idiosyncratic and parochial point raised by the Opposition.
For example, at the last Question Time, the Minister said:We are not ducking or dodging anything.That will come as a surprise to everyone. He continued:There is an appropriate time to answer these matters.I should have thought that this was an appropriate time, when we are voting to increase the borrowing powers of the boards.
He went on:Legislation has not yet been prepared or presented to the House. When it has been, that will be the appropriate time to answer these questions … I hear what the hon. Gentleman says about the Opposition's desire for separate legislation.He then said something that I find rather dishearteningThat will be decided at the appropriate time. The hon. Gentleman is as aware as I am that there are many matters which affect the industry both north and south of the border."—[Official Report,29 June 1988; Vol. 136, c. 351.]The recurrent theme is that there is much that is common, with the implication that a United Kingdom Bill is being contemplated. We do not consider that to be satisfactory. It makes parliamentary scrutiny extremely difficult. I give the Minister notice that if he goes down that road it will be unpopular, and that it will be as unfair on English Members, who will have to sit through lengthy considerations of matters Scottish, as it will be on Scottish Members at the other end of that equation.
During the earlier Question Time, when dealing with that point, the Secretary of State said:So far, neither of the chairmen"—that is, of the two electricity boards—has expressed any preference for a particular form of legislation."—[Official Report,25 May 1988; Vol. 134, c. 309.]It would be helpful if we could go into greater detail about that. It might be interesting to know whether they have now expressed any preference, or whether they are being specifically consulted on this matter.
The financial limit is being raised to £3 billion, and—this is something that the Committee can properly consider—that will increase the level of debt that will have to be settled or apportioned in some way soon. This is a matter of considerable interest. The Minister may be able to escape many questions, but he cannot claim that it is 748 irrelevant to ask how the debts of the Scottish electricity boards are to be dealt with, probably within a few months. and certainly within a year of the arrival of privatisation.
That is important, because it is a sensitive matter. For example, the apportionment of the debt between the North of Scotland Hydro-Electric Board and the South of Scotland Electricity Board will have a considerable influence on the viability of the smaller company. We know that, in some rather slow, befuddled and confused way, the Minister is planning that these two free-standing enterprises, as he is proud to call them, will be enmeshed securely into the joint operating company that will run the nuclear facility. A great deal of the debt—the Minister referred specifically to Torness and the £1.7 billion that it has cost—will be geared to the nuclear capacity. Therefore, the apportionment, or division, of it, and how much will be written off and what kind of Treasury subsidy will be involved, become matters of pressing interest. We should know something about the matter, at least in outline, before we nod through this increase in the boards' financial limits.
I do not wish to transgress and try your patience, Mr. Deputy Speaker, but this is important and sensitive because we are awaiting a great deal of information about such matters as control of these companies and how control will be maintained, both in Scotland and in the wider forum of the United Kingdom.
I notice that on 29 June, when referring to foreign holdings, the Minister said:I understand the right hon. Gentleman's anxiety—that is, my right hon. Friend the Member for Glasgow, Govan (Mr. Millan)—about this matter. It is an important issue and we are considering it carefully. There will be nothing wrong with a measure of foreign investment in the industry when it is in private hands, but I accept the right hon. Gentleman's anxiety about control or ownership being in foreign hands. That is something we shall consider closely, and we shall announce our decision at the appropriate time."—[Official Report,29 June 1988; Vol. 136, c. 350.]We are going to get tired of hearing people say that something will be announced at the appropriate time. It is becoming something of a litany of despair for anyone attempting to take an intelligent interest in the Government's plans for the industry.
§ Mr. Bill Walker (Tayside, North)
The hon. Gentleman was probably not present during Energy Questions earlier today when the issue of the ownership of the privatised electricity industry was raised. Had he been here, he would have heard the Secretary of State say clearly that the Government intend to ensure that no single individual or groups of individuals, including foreign individuals, could obtain the kind of control about which he and I are worried.
§ Mr. Dewar
I am grateful to the hon. Gentleman. He has made an important point. I plead guilty. I was not present for Energy Questions today, for a variety of reasons. I have to say—I am sure that the hon. Member for Tayside, North (Mr. Walker) will sympathise with this—that the Secretary of State for Energy has made similar statements, while the silence from the Scottish Office has been deafening. It is a silence in the face of persistent pressure from us. I should be delighted if the Minister, either now or when he winds up the debate, will repeat that pledge for Scottish undertakings. That would be a considerable help to us. The Minister has refused to do so. 749 I have quoted his words from as recently as 29 June, less than a week ago. He has consistently failed to give that guarantee. That difference of approach is now beginning to worry some of us. I am grateful to the hon. Member for Tayside, North for saying that it is worrying hon. Members on both sides of the House.
We should know whether there will be a golden share, however cynical we may be about the Britoil-British Petroleum experience, or whether there might be a 15 per cent. limitation on foreign holdings, as was built into the articles of association for the Rolls-Royce privatisation. There are a number of models. I recognise that the details may not have been worked out, but I agree with the hon. Member for Tayside, North that the Minister should make an unequivocal statement, which was apparently made for the position south of the border, that there will be some such machinery for the Scottish electricity industry.
I do not want to rely on some of the rather pat words of Ministers. When talking about privatisation, the Secretary of State has said that theunique and exciting opportunities to widen share ownership in Scotland must not be missed.Perhaps they should not be missed, but the trouble is that those who do not miss them sometimes take up the opportunity because they know that they will be able to sell when the price is right. I am not sure that that is a satisfactory level of guarantee. Let us have a guarantee. Let us hear from the Minister today. Perhaps the hon. Member for Tayside, North and I can combine during the debate to extract what should be an easily given promise from the Minister. We want a statement of principle that is relevant to the clause, because we are allowing a substantial debt to be built up. The security of that debt may bear some relationship to the stability of the companies and the issues I have been discussing.
The Minister was good enough to talk in general terms about the efficiency of electricity supply. My hon. Friend the Member for Glasgow, Cathcart (Mr. Maxton) said that it seems extraordinary that the Minister should be at the Dispatch Box praising the efficiency of the electricity boards and saying how splendidly they are performing, while promising periods of uncertaintly and upheaval with the privatisation programme.
The Minister talked about investment. He said that a large percentage of the debt was invested in the nuclear installation. Perhaps he could tell us how much of the £3 billion programme will be directly related to the nuclear programme. If we increase the borrowing requirement, I assume that some of that money will be used to improve the supply side of the industry. I do not know whether the Minister can say anything about this, but there are frightening rumours about escalating costs of decommissioning old Magnox stations. That is relevant to the borrowing requirements of the boards. Perhaps I could tempt the Minister to say a word or two about that.
If we are talking about plant and equipment, perhaps the Minister should say, in general terms, something about the joint ownership of the nuclear installation and how it will work. He should say something about what, in political terms, we would see as boundary changes, plant swapping or perhaps just heat exchange contracts, which adjust the requirements of the privatised north and south boards. The Committee will know that there have been many speculative stories about population switches, about 750 Cruachan going to the South of Scotland Electricity Board, about Kincardine going to the north board and about what will happen to Peterhead, which is a key installation. As we are being invited to pass the new clause on the basis that the money is required for the improvement of plant, it is important that the Minister clarifies the position.
I am sure that my hon. Friend the Member for Linlithgow (Mr. Dalyell) will raise this matter, but one of the most important parts of the static equipment and plant is the grid system. If the Minister is saying that the additional borrowing space is required to improve that machinery, it may be that some of the money will be spent on the grid system. If it is, we are entitled to know what will happen to it. I have been working on the assumption that there will be some sort of joint operating company and a separate Scottish grid. I suppose it is possible that the two Scottish boards will become partners in a national grid, although they would be dwarfed by the distribution companies south of the border. Whether it is separate or otherwise, I assume that there will be some sort of free-standing, giant holding operation. I use that contradictory bundle of terms because it is the sort of language that the Minister, puzzlingly, has been using about other parts of the new arrangement. The Minister owes us at least some explanation of how that will operate.
The Minister said a few minutes ago that consumer protection would be an important part of the new set up and that he finds the present position on disconnections encouraging. We will want to look at that closely, preferably in separate Scottish legislation. The Minister knows the example that I am going to quote, which is a startling, relevant and recent example. In the first nine months of 1987, under the brave new world of privatisation in the gas industry, the number of domestic disconnections in the United Kingdom rose by over 35 per cent. That is a frightening statistic. No doubt it is defensible in terms of tight commercial control of one's cash flow and in trying to maximise a return on capital for the shareholders, but it has substantial social implications. We should have a long hard look at that.
The Minister should answer some of the questions, at least in principle. I referred earlier to the future of the Peterhead plant. That is important, because it is said that by the early 1990s the Peterhead plant will be producing, by the use of sour gas, about 4 million tonnes of coal equivalent. The consequences of that for the energy industry, particularly the coal industry, are important. Before the end of the debate it is essential that the Minister should say a word about the coal burn and the implications of the clause for the coal burn. Clearly there is a real link between the financial limits of the boards, their buying policy and the mix of fuels used to provide electricity for the consumer in the north and south.
Many of my colleagues will remember that on 7 March we had a lively Supply day debate on this subject and that on 9 June on, Second Reading of the Bill, we tried hard to persuade the Minister to take an interest in the vexed and difficult question of the negotiations between the SSEB and British Coal over coal burn. The attitude was summed up in a now notorious quotation from Hansard. The Minister said:I am not uninterested in the negotiations but I do not believe that it is right and proper that we should interfere in them."—[Official Report, 25 May 1988; Vol. 134, c. 317.]751 That shows a level of casualness amounting to irresponsibility.
I corresponded with the Prime Minister on 8 March. She said:Provided they"—the boards—can adopt a flexible and constructive approach, there is no reason to believe such an agreement will not eventually be achieved.I do not believe that the Government can adopt such a stand-off stance. That was the beginning of March, it is now the beginning of July, and we are still faced with uncertainties.
Undoubtedly there is a link between the financial position of the board and the pressure that the Government place on its financial limits and its attitude to the purchase of coal. I ask the Minister to make an up-to-date statement of the position as the Government understand it. I am told—it is speculative as, unlike Ministers, I do not have direct access—that British Coal made an offer on Thursday and that the parties are in accord about the tonnage to be purchased until the end of March 1989 and the price to be paid for it. There is still a vital impasse over the way in which imported coal is to be used, especially at Cockenzie and Longannet. I am told that British Coal is anxious to limit the use of imported coal to Kincardine, which is a barrier to agreement. Even more important to the coal industry, the SSEB has made no concession that it will attempt to agree a long-term contract, without which the future of the coal industry will be bleak.
It is difficult to gather from the press exactly what is happening. At the end of last week a remarkably optimistic gloss was put on public reports, suggesting that an agreement was within grasp. I am told that that was optimistic and probably inaccurate. I do not know whether that is true. I offer it only as a suggestion that has been put to me.
§ Mr. Bill Walker
I do not like to repeat myself, but again this matter arose at Energy Question Time. My understanding of the Secretary of State's remarks was that, other than on one narrow detail, agreement had been reached.
§ Mr. Dewar
The hon. Gentleman is extremely helpful. He acts as an admirably efficient messenger boy for the Department of Energy. I wish that we received a similar service from the Scottish Office.
The hon. Member for Tayside, North made an interesting point, and I am sure that he reported it accurately. I am told—I concede that it is a caried story and that the Opposition are unlikely to be involved directly in these negotiations—that the narrow point is the commitment to a long-term contract and how much and where imported coal can be burnt. That leads to the vexed question of the existing contracts at Cockenzie and Longannet. It is important that the Minister clarifies the position.
I declare a constituency interest, because I understand that a United States boat, the General Estrella, came from Baltimore yesterday and entered Rothesay dock with 27,000 tonnes of imported coal on board. It is being unloaded and the coal is being carried on a reinstated spur of a railway line. It is important that at this stage we have some understanding of what is happening. If that coal is 752 taken by rail to Longannet and burnt, I suspect that we may be in a difficult legal arid practical position in which the House would have a legitimate interest.
I am entitled to draw attention to the fact that the Scottish Office—I welcome this—clearly believes that it has an interest in this matter. Today, a headline in The Scotsman,under the byline of Keith Aitken—its industrial editor, who I know is a responsible journalist—says:Rifkind may intervene in SSEB coal row.The report rehearses the evident difficult state in which we find ourselves. It says:Mr. Rifkind is understood to have asked for a meeting in the early part of this week with senior BC executives in London, and may go on to see the SSEB, although the SSEB is responsible to the Scottish Office and is in regular contact with Ministers and officials.If it is still in regular contact, I should like to know what that contact has brought. I unreservedly welcome this sign of life and activity in the Scottish Office, but if there are to be meetings this week with British Coal in which the Secretary of State will be involved, it is important that we know about them so that the phenomenon represented by the General Estrella at Rothesay dock does not become a crisis of confidence for the future of the industry.
I have raised a number of questions about the future of the industry. I hope that I have related them to the important extension of borrowing powers that the clause gives the electricity boards. The debate is opportune because we are facing a sharp crisis in the energy industry in Scotland. I hope that the Minister will answer some of those questions.
I was not in the least impressed with the Minister's opening statement about the merits of privatisation—the wonderful advantages to industry, the consumer, the nation, the environment, anything else that he might be able to think of or anything that his advisers can put in a long list. It is a peculiarly unsuitable industry for privatisation, even if it is assumed that privatisation is a sound principle—which is what the Government clearly assume. A monopolies industry is being converted from a public utility to what looks dangerously like a private monopoly. The fact that there are two monopolies operating in tandem does not remove the essential dangers. We are left with a sick joke of competition by comparison, which has rightly been derided throughout debates in the House and which will continue to haunt the Secretary of State for some time.
There are major arguments about the security of supply, the mix of fuel and energy that we use and the proper and basic concern, which should be the mark of government, for the energy industry and the individuals and communities at risk. While this is a dry little Bill dealing with the arithmetic of the borrowing requirement, behind that limited facade it raises important questions. At a time of such crisis and conflict over the role and operation of the electricity boards, the Minister should come out of his shell and try to live down his reputation as the greyest and most persistent stonewaller, and give us some insight into what is happening.
§ Mr. Dalyell
When I interrupted the Minister's opening speech, he said that the situation in Scotland was entirely different. He might not have been present at Energy Question Time today, but those of us who were heard the Secretary of State for Energy—or should we now call him 753 the chairman of the Star Chamber court—go out of his way to emphasise the part that he hopes Scotland will play in the overall privatisation of the industry.
That was the view of the Secretary of State for Energy. I do not have the exact words, but we thought that the Government had in mind the integration of the Scottish and English systems.
That leads us to another matter. I do not know whether the Minister has been to the control room at Southwark, but some of us have taken the trouble to go there. We vividly remember the grid controller, Edgar McCarthy, and his colleagues showing us the big board on which were displayed, at the flick of a switch, the whole United Kingdom power supply and the number of units that were coming in from Scotland at a given moment. We were there during the middle of the day, and the number of units varied from 480 to 520, as is usual at that time. The Scottish contribution to control of the grid is absolutely vital.
We may not be talking directly about privatisation but rather about borrowing powers in the Bill, but that gives an opportunity to talk about the technical future of the industry. Does anyone really deny that, at best, the Government are embarking on an experiment that no one in the world has ever tried—the distributor-controlled grid system? I make no excuse for referring to my question 3 on today's Order Paper:To ask the Secretary of State for Energy, pursuant to his answer of 9 May, Official Report, column 3, what information he has as to how many distributor-controlled systems of the type now proposed for the privatisation of electricity in the United Kingdom, have been set up on the advice of his Department's technical advisers, Merz and McLennan, in the other countries in which they have helped to install grid systems; and if he will make a statementThe Under-Secretary of State for Energy courteously saw my hon. Friend the Member for Kingston upon Hull, East (Mr. Prescott) and myself, with his hon. Friend the Member for Bedfordshire, North (Sir T. Skeet), for an hour and a quarter last month. The adviser Russell Kennedy from Merz and McLennan and others were also there. I speak against a background of some rather detailed knowledge and excellent briefing on the issue. The truth is that Merz and McLennan has never, anywhere else, recommended the distributor-controlled grid system. Merz and McLennan is a distinguished firm of consultant engineers with a good reputation—that is not in doubt. However, Merz and McLennan has never put forward these particular propositions anywhere else in the world. The question arises why the Government think that they know better than all the technical advisers of the CEGB. I repeat my supplementary question: why do they think that they know better than Lord Marshall and, as I understand it, the unanimous technical advice from the CEGB and the SSEB?
My right hon. Friend the Member for Glasgow, Govan (Mr. Millan), who was a Minister, knows that the SSEB is in an extremely difficult position. It has obligations to the Government of the day not to speak out, yet it is not denied that all the technical advice is against the Government's proposals on grid control. I have become increasingly concerned about that issue. I therefore thought it proper to seek opinions from the Generation 754 Development and Construction Division of the CEGB, which also serves the SSEB. Those of us who have crawled over Torness and have been to Hunterston know well the contribution made by the office at Gloucester and the central research for the United Kingdom which is carried out at Barnwood. The points I raised with the Secretary of State come from the considered opinion of Dr. Bond and others, who are prepared to speak out and who have devoted their lives to the industry. They were distinguished engineers at Barnwood in the design, development and construction of generating plant. They say:There are two primary areas of concern. The first and the one that has dominated consideration so far is the viability of the minute to minute operating system now provided under completely integrated management and control by the CEGB, namely optimum efficient and secure generation and high voltage transmission under all conditions of weather emergency and load demand variation.I am advised that the whole issue of load demand variation has not been thought through. My hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) referred to the answers that we have been given. When we raised the matter in Committee, no convincing answer was given for a very obvious reason: the matter had not been thought through.
§ Mr. Dalyell
If the Minister thinks that load demand variation has nothing to do with the Scottish electricity system, he had better become a Minister in another Department and have no responsibility for power. That proposition is crass.
I wish to deal now with the issue of weather emergency conditions. Again, that is a matter that has not been thought through. After the gale that ravaged the south of England, engineers from my constituency and other Scottish constituencies, at the drop of the proverbial hat, without demur, rushed to Surrey, Sussex and Kent. I see that my hon. Friend the Member for Greenock and Port Glasgow (Dr. Godman) is nodding. Many of them got letters of thanks from people in the south of England who thought that the Scottish linemen and engineers were superb in the emergency. If there is to be haggling about contracts and prices, will not there be delay? Will the engineers do such a job? Are we to be told that that, too, is irrelevant? It is, quite clearly, relevant.
The Barnwood engineers say that the second point isthe need for the continuation of, and adequate resourcing of, the formations that provide essential and, from the aspect of efficiency and cost effectiveness, irreplaceable support for the main line generation and high voltage transmission system. These functions in all their considerable diversity are embodied in, for example, the CEGB Research Division, Generation Development and Construction Division and Transmission Division.The SSEB is intimately linked to the current operations of the CEGB transmission division.
The Barnwood engineers continue:There appears to be some acknowledgement of the RD function and the function of the Transmission Division links in a simply understood way with the high voltage transmission system. However, the necessary role of GDCD in the ordered development of power station technology and in continuing responsibility of the long term reliability of755existing plant—a service which no consultant engineers provide or are resourced to provide—appears to have received no acknowledgement or consideration whatsoever.I asked if there had been consideration of the views of the Barnwood engineers. If so, I should like to know what that consideration was.
The Barnwood engineers say that they are worried about the viability of the grid. They refer to an article by
Frank Ledger called,The power to command and control Privatisation and the CEGB".My colleagues may ask, "Who is Frank Ledger?" He is the board member responsible for engineering in the CEGB, so he might be thought to know something about it. He says:The fundamental principle of the electricity supply system in the UK and indeed worldwide is the responsibility to provide a secure and reliable service. The key to fulfilling that responsibility is central control of the planning, co-ordination and operation of an integrated system which has evolved over many years and whose excellence is internationally acknowledged and sought.Throughout the world, the dominant trend is towards fewer utilities and greater integration of generation and transmission, rather than towards fragmentation.It is fragmentation that we are now discussing. The Government are going against what everyone else in the world is doing. People who do that may be right, but they had better be very clear of the technical basis on which they do it. Ledger goes on:It is the power vested in the central control of the system in England and Wales which ensures that national optimisation of the system takes precedence over area and all other interests, and that the responsibility to supply is executed effectively.How do we know that, in future, arrangements that have worked very well between Scotland and England will work in anything like that way when there is not overall control in favour of national optimisation? Ledger Continues:Getting a power station from the drawing board and into operation is a lengthy process, as much as 10 to 12 years, and the current life expectancy is 30 to 40 years: so arguably one is looking as much as 50 years ahead. In that timescale there can be many changes which impact on a modern electricity supply system: sources of demand, sources and prices of fuel and raw materials, strategic need for fuel diversity daily and annual demand patterns, public opinion, and social and environmental pressures.Then the crunch:To manage these resources, the CEGB has developed a national planning and optimisation process to ensure that the electricity requirements for England and Wales are provided to a high standard of security at low cost. This process has been based on 30 years' experience of managing and operating one of the world's largest integrated power systems and relies on the central power to command in the interest of national optimisation.Wherein lies now the central power to command which the engineers say is so important? Every one of us who went to Southwark could not say other than that the central power to command is absolutely crucial. Ledger continues:For example, when a utility of the New York Power Pool did not respond to instructions from the central controller, New York was blacked out for up to 25 hours: there was mass looting, arson and even the closure of Wall Street.There was a similar incident on 20 May 1986 when lightning struck the Sundon substation in Hertfordshire. Had there not been the central power to command, the whole of the home counties and most of London would have been blacked out by the voltage collapse, and enormous damage to the whole supply system would have been done.
756 5.15 pm
That could happen anywhere. It could happen in Scotland. It could happen to us. When there is power to command, however, at least something can be remedied. The grid controllers told us that they had two minutes and 40 seconds to do something. They were able to save the system because they had complete authority. The Americans did not and could not, yet the Secretary of State for Energy told us earlier this afternoon that we should understand that we are going on the American system. Things might look greener on the other side of the Atlantic, but they have not been so stable when it comes to the matter of the secure provision of electricity.
I do not want to take up time, but the technical case is devastating. The Barnwood engineers say:Both these factors can make very sudden destabilising impacts on what is in any case an inherently unstable system handling very large power flows. The actual power being handled in this system can be as high as 48GW which, in old fashioned terms, is equivalent to 64,000,000 horse power.I make this illustration to show how utterly ludicrous are the comparisons which politicians, consumer bodies and the media perpetually make with British Gas and British Telecom, the first being pretty well a simple distributive system somewhat akin to the electrical area distribution boards, and the second being somewhat similar in terms of network and also lacking the overpowering dynamic interaction between electricity generation and high voltage transmission which requires constant control and the optimum utilisation of very large power inputs obtained by conversion of fuel.The CEGB Generation Development and Construction Division as formulated at present provides a comprehensive centre of architect-engineering excellence of world repute containing the whole range of disciplines required for the planning, development and construction of modern high efficiency power stations, both large and small. All the basic skills exist for the diagnosis and solution of any specialist problems that may arise in operation.Are these facilities to be available under the new system without haggling? Time is of the essence. We have not been persuaded because we have not been told. The engineers continue:This Division has evolved very successfully and has established an excellent record in the construction of major plant within estimated timescale and budget.The division is to be broken up.If this Division were to be broken up no small privatised body could support its equivalent.Do Energy Ministers disagree with the engineers about that? If so, they had better say so.An inefficient regime in which consulting engineers taking large fees and having no follow-up responsibility for the success and efficiency of plant, or for its engineering support in operation, would ensue. This is not speculation—it is the reason for the evolution of this Division.Nor is it speculation. We are talking about the break-up of unique facilities which have been available to the SSEB, as to the Highland board and the CEGB.Salient points to pick out from a very large mass of comment and detail are:The Secretary of State's inference".The right hon. Member for Hertsmere (Mr. Parkinson) made the inference in answer to a question asked on 28 March by my hon. Friend the Member for Motherwell, North (Dr. Reid). We were told in The Times:Dr. Reid would find that Mr. Hadley no longer maintained that it would cost £1 billion. The figure, which was impossible to understand, had been based on the assumption that the Government would propose the creation of five vertically integrated power boards. They had not.It was now agreed between the CEGB and his department's technical experts that, though there might be a 757 cost from the proposals, that cost could be substantially more than matched by the savings which would result. Dr. Reid's information was grossly out of date.[Interruption.] The engineers side with my hon. Friend, not with the Minister.
The engineers say that the Secretary of State's inference:is effectively denied in correspondence between the CEGB and Mr. John Lyons (General Secretary of the Electrical Power Engineers Association).They also believe that:it is essential to restore the basic command structure linking generation and high voltage transmission to preserve the core of the present system. This means retaining the present generation side intact and allotting a management role in the transmission company to this major generating company. Competition from additional private sources would not be precluded but could be permitted by suitable regulation of the grid management to allow completely open competitive opportunity. To be viable these additional sources would, of course, have to be genuinely competitive with the present system.The rub is, what about the additional sources? We have not been told much about them.
The Barnwood engineers believe thatit is psychologically highly damaging to remove the obligation to supply from the generating side and that this must be reversed.They point out in previous letters thatthe governing ethos of the CEGB is public service and that a vital element of motivation will be lost if obligation to supply is removed.The Government say that there will be an obligation to supply, but how will that be carried out? We have not been told how such an obligation will operate. It is one thing to say that there must be an obligation, but it is another to say how it will be operated.
The engineers say:Merit order and commitment is to be replaced by a soulless regime of contracts and market forces-this is a prime blunder having regard to the traditions of this industry and must be unsound.That is the view not of the politicians, but of the engineers who have to operate the system. They say:A question relating to the proposed separately privatised transmission grid yet to be answered is how this will command the generators to generate and at what rate so as to protect the integrity of the power system under fault conditions? There is a clash of interest under circumstances when it may not be profitable or prudent for a generator to respond. For example to cut short a financially optimised programme of maintenance and to restrict the rate of loading of plant so as not to shorten the technical/financial life of the plant. Since the quantification of such matters cannot be predetermined, how would this be covered in a financially watertight contract between distributors and generators? And where does competition enter into this equation?We have seen no specimen contracts between distributors and generators. I questioned the engineers and others in the industry about that, and I doubt whether any watertight contract could be drawn up to take care of emergency faults because time would not allow for the making of arrangements. For proof of that we have only to ask the Americans about the mess up under their system.
The Barnwood engineers say:Government proposals contain nothing to replace the present CEGB statutory obligations on care of the environment. Also if privatisation goes ahead on the present basis there would no longer he an organisation with an overall view of needs or any requirement to consider the national good.758 My friends in the SSEB make exactly the same point—not simply to protect their jobs or positions, but because they are serious engineers who have to undertake the job.
The engineers state:The Government's vision appears to be tied to the assumption that the balance of usage of primary energy sources will remain much as it is now. By its proposals it is damaging greatly the ability of the generating industry to respond to future changes in this balance—splitting generation will weaken development resource and dividends will cream off development cash.Given that we are discussing borrowing, what is the Government's view on the creaming off of development cash? Where will development cash come from? What will that do to electricity prices? The industry can borrow from the merchant bankers, but at some price and at some interest rates. We are entitled to ask what effect there will be on electricity prices.
Finally, the Barnwood engineers say that theybelieve that the only economically and technically sound privatisation option is to privatise the CEGB basically intact with generating units operated in genuine cost merit order and a direct and immediate command, and existing economy of scale and resource for development retained. There are not enough corners to be cut off by competition as the Government visualise it to feed shareholders dividends and at the same time provide adequate development resource, without raising prices. The victim of this and of the technically unnatural and clumsy operational system proposed will be the consumer—twice over. In other words, the unnatural and costly distortions to be imposed on the present highly efficient and effective system are altogether too great to be acceptable. This is a matter of immense national importance which should come before silly party politics or the short term preservation of ministerial reputations.I believe that that is what this is all about. The SSEB and the CEGB face break-up simply because of political dogma, and not because of any sensible, technical consideration.
My colleagues have been patient with me this afternoon. I know better than to hope for a considered and detailed reply from the Minister. However, I shall plague him, the Scottish Office and the Department of Energy with letters requesting answers, one by one, to the engineers' points. If the Government cannot persuade the engineers, there is a danger of embarking on a considerable folly to the detriment of Scottish consumers, the SSEB and the CESB. I thank the House for its patience.
§ Mr. Brian Wilson (Cunninghame, North)
My hon. Friend the Member for Linlithgow (Mr. Dalyell) made an interesting and erudite speech. It is a pity that there has been such a small turn-out of the Scottish political minorities to learn from it. The entire spectrum of these minorities—apart from the Minister—is represented by the hon. Member for Tayside, North (Mr. Walker). If ever erudition was wasted, it must be when addressing the hon. Gentleman.
The parliamentary ranks of the Scottish National party have found something better to do today than to discuss the Scottish electricity industry. In future they could be known as the three lost live wires——
§ Mr. Wilson
That is not a bad description, either. They are probably in Kensington campaigning for Madame Cyn.
As my hon. Friend the Member for Linlithgow said, the Bill allows us to discuss the privatisation of the industry. 759 I have a particular interest in this matter, as my constituency includes Hunterston nuclear power station, which is the largest employer in it. In the months past—and no doubt it will happen in the months ahead—a lot of play has been made of what was in the Conservative party manifesto and therefore what people allegedly voted for last June. Let me make it absolutely clear that there was nothing in that manifesto that told the people who work at Hunterston or any other nuclear power station, or those who live near those power stations and who, therefore, have a legitimate interest in these matters, that they were to be privatised.
On 8 May 1987, in the Largs and Millport Weekly News, the Conservative candidate, hitherto the Conservative Member of Parliament for Cunninghame, North, Mr. John Corrie, announced:I am not happy about the privatisation of nuclear power stations. There has been a lot of talk in London over the past few weeks as to the sort of industry a new Conservative Government might privatise, but looking at the American examples, I really feel that safety aspects have to be kept up with nuclear power.I am not convinced that it would be a wise move to privatise.Mr. Corrie informed the readership of the paper that he had made his views quite clear to his bosses and he assured readers—hence my constituents—that no commitment had been made or given on the privatisation of nuclear power stations.
The evidence proves that there was no such commitment in the Conservative party manifesto and that it was something subsequently invented and done by stealth for the reasons that my hon. Friend the Member for Linlithgow discussed in some detail, namely, political dogma and—I was about to say the virility of Ministers, but, given the Minister concerned, it would be better not to go down that avenue.
§ Mr. Bill Walker
The hon. Gentleman made some reference to me in his introductory remarks. If he expects debate in this Chamber, he must expect people to listen to what he has to say. I have been attempting to listen to him, as I listened to the hon. Member for Linlithgow (Mr. Dalyell), and that is what the Chamber is all about.
Will the hon. Gentleman accept from me that those of us who were elected in Scotland on the Conservative manifesto left no one in any doubt that we would privatise the electricity generating industry? Those of us who were elected made that quite clear, but I cannot speak for those who were not elected.
§ Mr. Wilson
I am grateful to the hon. Gentleman for being here and listening. He has set a splendid example for his colleagues and it is a pity that so few have followed it. One wonders where the other eight are. I find it a remarkable concept that those who told the people of Scotland that the Government were going to privatise nuclear power were elected, and that those who took the precaution of telling the electorate that the Government were not going to privatise nuclear power were defeated. I believe that any rational observer will form his own judgment about that.
§ Mr. Wilson
I sense that there are disputes within the ranks of the Scottish Conservative party, but we will not go into that.
Nobody who works at Hunterston or lives in that area was told that the nuclear power stations were to be privatised. On the contrary, the Conservative candidate for the area went out of his way to give the impression that privatisation had not been decided upon and that it was still a matter for debate. On this occasion I agree with my predecessor's strictures.
In support of that argument, the 1986 report of the European Parliament Committee on Energy Research and Technology stated:alongside safety in design there must be operational safety. The public inspection auithorities monitor operators' compliance with the laws and regulations. However, experience has shown … that while the conduct of operators may be formally correct, it may still show considerable deficiencies. There is always the risk that the pursuit of 'cost efficiency' and the need to 'balance the books', so typical of the private sector, may lead to deficiencies in safety or the consequences of accidents being underestimated or even `covered up' … The attitude of management in nuclear installations must be completely different. In this area nothing must be left to improvisation, approximation or profit considerations. The government, which is responsible for ensuring public safety, can only fulfil this responsibility properly if in addition to exercising its 'supervisory' role in the operation of installations, it is also able, via the agency of firms appointed for the purpose, to play a direct part in the running of the installations themselves".It is worth placing that on the record, because it is the case against the Government's proposals. If the assets of the telecommunications industry, shipbuilding or other industrial sectors are given away the result might be a deterioration in services and perhaps a loss of jobs, but the result would be as nothing compared with the consequences if something went wrong with nuclear power stations. They will be handed away by this Government to people whose prime motivation is profit. That is the strongest argument against the privatisation of nuclear power stations.
Anyone who has visited Hunterston or any other nuclear power station cannot fail to have been impressed by the commitment and investment to safety. I have visited Hunsterston and seen the simulator in the control room, which cost millions of pounds to install. Can anyone imagine that P and O Nuclear Power Station Ltd. would make a similar investment and effort?
§ Mr. Wilson
I see that the hon. Member for Tayside, North is seeking to make up for those who are missing, so I shall give way to him.
§ Mr. Walker
Is the hon. Gentleman suggesting that the aviation industry does not invest in simulators and that the private sector of the aviation industry is unsafe? If so, does he feel unsafe flying up to and down from Scotland every week? What nonsense.
§ Mr. Wilson
There are some hair-raising stories about aspects of the transport industry. Frankly, if something goes wrong in that industry, where generally standards are extremely high—I cast no aspersions—we are talking about the loss of perhaps a few hundred lives. If something goes wrong in a nuclear power station, a much higher price has to be paid. Why should we take such a risk? Are Scottish people marching in the streets and saying that they are unhappy about the way in which the SS EB runs 761 its affairs? Are they saying that they want private enterprise to take over the nuclear power stations? That is an absurdity. There are a handful of zealots in the House, representing a minority of zealots in Scotland, who want to give away nuclear power stations to the private sector. In the case of the SSEB it would mean literally giving away those power stations, because that is the only way in which the Government will get anyone to take them off their hands, giving the high capital investment programme in which that board has engaged.
Where does the demand come from? Who does the Minister represent when he puts forward such a proposition? He does not represent the people who work at Hunterston and have given excellent service to that industry and to the wider community. He certainly does not represent the Scottish people, whose acquiescence to nuclear power stations is guaranteed only by the utmost confidence that they enjoy in the operation of the installations. There is no demand except from the political motivators of the scheme and the greedy people who will yet again get their hands on another piece of public property.
Where will the buyers come from? They will not come in significant numbers from Scotland. They will not come from the financial institutions with anything like the relish that those buyers will feel for the lucrative industry of the south-east. Undoubtedly some buyers will come from overseas and within a few years the Scottish power industry, presently a credit to our country, will be turned into a conglomerate owned by a wide range of people whose last commitment will be the good of the Scottish community, whose guiding motive will be profit and who are likely to cut corners in pursuit of that.
§ Mr. Dalyell
The guiding motive may be profit, but it is the considered opinion of the board member for engineering that disintegration would add £1,000 million a year to the cost to the consumer. If the Government disagree with that, they had better tell the board members that they are wrong.
§ Mr. Wilson
My hon. Friend is right. There is no doubt that the price that the people of Scotland will pay for this nonsense is higher tariffs. I am sure that some of my colleagues will pursue that argument. My plea is for the people who work at Hunterston and for those who live in the area who want continuity and security, but who are having this nonsense foisted on them. For once in their misbegotten existence, why cannot the Government leave well alone?
§ Mrs. Maria Fyfe (Glasgow, Maryhill)
The debate has been proceeding for about one and a half hours and still we await the arrival of the three Scottish live wires. Other notable absentees from the Chamber are the English Tories, who profess such great interest in Scottish affairs and who turn up assiduously for Scottish Question Time. I note that the Scottish Liberals are absent, too, but my remarks are addessed to the English Tories, who attend Scottish Question Time deliberately to waste time, and who criticise Scottish Members for not speaking with a "bool in their mooths" so that they can understand them. Perhaps they have given up trying to understand expressions such as those used earlier by my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar), who 762 talked about something being "gey dreich". Perhaps they have all gone to Kensington to warn the dry-as-dust Tory candidate that he is in danger of Left-wing extremism and had better cool it a bit.
What I know about the technicalities of the electricity industry could be written on the back of a three-pin plug, so I shall not attempt to come anywhere near the speech of my hon. Friend the Member for Linlithgow (Mr. Dalyell), but I shall mention some anxieties that are shared by the women of Scotland, who generally take the responsibility for paying the household electricity bills.
The Minister has made no effort today or previously to reassure householders. When British Telecom was privatised, prices increased, the service became worse and there were longer waits for installation. The Minister was good enough to admit that people are generally satisfied with the SSEB and that they take for granted the fact that its service is excellent. The regular supply of electricity is so taken for granted that people do not even think about it, but a transfer to private hands may create circumstances in which we could not expect such a regular supply. All sorts of things break down in this life, but not normally our electricity supply, and, as some hon. Members have said, it has caused great anxiety in New York and other parts of the world when that has happened.
The Minister has not explained how privatisation will improve the lot of the consumer. We asked how it would affect prices. This afternoon the Minister said that there had been a 9 per cent. reduction in prices and that prices in Scotland were lower than those in England and Wales, but he made no commitment to ensure that prices will remain reasonable under privatisation. He said nothing about a better service. nor did he guarantee even the same level of service.
The Minister was asked about safeguarding the position of those who are unable to pay their bills. As we all know from our surgeries, many people are worried about their electricity being cut off and fear having to go through the winter unable to cook for their families. The boards work to guidelines, and as elected Members we can write to the boards and usually work out a satisfactory method of payment. All that the Minister has said in response to those anxieties is that he sees no reason why they should depart from the present code. We have heard those weasel words before. Those answers are no guarantee that there will be no departure from the present standards. The Government have seen fit to let old people die in the winter because of an inability to pay their bills, so what reason do we have to suppose that anything will be better under privatisation?
The Minister talked about giving preference in share buying to customers. That had me puzzled, because everyone who lives in the SSEB area is a customer—unless they live in some remote village that still uses oil lamps. What the Minister meant was that the shares would be offered across the entire country. Even if ordinary people start out as share owners, we know from previous privatisations that they would not retain those shares for long. As the pressures of normal family commitments arise—to feed and clothe the children and pay the bills—they will have to sell their few shares. In whose hands will those shares end up? The answer is with the greedy pigs who 763 simply want to gain more and more from the Government's privatisation drive. It has nothing to do with service to the public.
§ Mr. Dewar
My hon. Friend may also wish to consider the fact that any concessions will be granted to the householder, which will mean that shares will be available, not to everyone in the family, but to the male figure of the family and no one else. On that basis, there may be an unbalanced shareholders' list.
§ Mrs. Fyfe
That point is very relevant, especially to the women of Scotland, because often the husband's name is on the electricity bill as the householder, but it is the practice for the women to ensure that the bills are paid. The Government should recognise that women may miss the opportunity. I am in a quandary here because I do not want the Government to offer shares to anyone, but if they are to privatise electricity, the shares should be available to all.
However the sale is conducted, and however many ordinary householders apply for shares, the shares will not remain long in their hands. They will end up in the hands of those who are already rich—the yuppies who are striving for more wealth for themselves. The last thing on their minds will be service to the public and the maintenance of the high standards of which the electricity boards can, rightly, be proud.
§ Mr. Alistair Darling (Edinburgh, Central)
This may be the last occasion on which Scottish Members of Parliament have a chance to discuss the privatisation of the Scottish electricity industry in isolation, because I suspect that when the paving Bill is introduced later this year it will cover the entire United Kingdom. That is a matter of regret, but it is typical of the second-rate way in which the Government treat Scotland. When the Minister replies to the many points that have been made in the debate, including the detailed points made by my hon. Friend the Member for Linlithgow (Mr. Dalyell)——
§ Mr. Darling
—we will hear a second rate answer, because that is all that the Government can come up with. Just look at the empty green expanses on the other side of the Chamber. Only one Conservative Back-Bench Member is here, and I shall now have to give way to him.
§ Mr. Walker
The hon. Gentleman should realise that one reason why we are not speaking is to give Opposition Members the chance to speak. That was done by agreement through the usual channels.
When the Labour party was last in office, with what Bill did it nationalise the shipbuilding industry—a United Kingdom Bill or a Bill that dealt with the interests of the Scottish dimension? Was it a first or a second-class Bill?
§ The Second Deputy Chairman of Ways and Means (Miss Betty Boothroyd)
Order. I am sure that the hon. Member for Edinburgh, Central (Mr. Darling) will not stray down that road.
§ Mr. Darling
Indeed I shall not. It has nothing to do with what we are discussing. I shall say only that the hon. Member for Tayside, North (Mr. Walker) could have strung all his contributions together and called them a speech, as he seems to have made one in the course of the afternoon by intervening so often.
764 I turn now to the important issue of debt. It is proposed that the electricity industry should be allowed to borrow up to £3 billion. Last year's accounts for the South of Scotland Electricity Board show its indebtedness to be £1.9 billion. I make that point because I want the Minister to tell us what will happen to that debt in the event of privatisation. Will it be written off, as will happen with the Rover Group? It would be monstrous and scandalous if the people of Scotland were to have their industry taken away from them and were then told that the money that they had lent it was also going to be written off. It is incumbent on the Minister to tell us what will happen to the debt. Will it be written off, or is it to be privatised along with the industry, if that is what ultimately happens?
I recognise the Minister's problem: if he passes on all the debt with the electricity industry, he will find it difficult to sell off. He realises that the electricity industry is an unattractive proposition to investors. One of the things that the Government must realise is that Scotland cannot afford to buy the electricity industry. There is not enough money in Scotland to buy it, with or without its debt, so the Minister knows that if he does not do something about writing off that debt he will find it impossible to sell the industry. That is why I predict that he will write off some of the debt and we, the taxpayers, will have to foot the bill to make the industry a more attractive proposition. The Minister should come clean about this.
When the Minister spoke at the beginning of the debate he was happy to outline some of the benefits, as he saw them, of privatisation. Then, when he was challenged by my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar), he said that the Government had not yet discussed the details and was too early to say. The Minister cannot invite the House to endorse an increase in debt and then say that he does not have a clue about what will happen to that debt. Raising money is a serious matter, and people in the United Kingdom and Scotland are entitled to know whether the debt will be written off or whether there is to be some mechanism to ensure that we shall be repaid before those who buy the industry move in.
The more debt that the industry has, the more likely it is to be bought by institutional investors. The chances are that the control of the SSEB and the north board, far from resting in Scotland, will move to London, if not abroad. Only foreign institutions and multinational companies can afford to buy the electricity industry in Scotland. So, riot only will we lose our electricity industry, but we will find control moving to London or abroad. The industry will follow the example of Britoil and BP—the chain is endless. Scottish industry and resources will be stripped out merely because Scotland does not have the resources to buy the industry itself: nor should it be asked to do so, given that it already belongs to the people of Scotland. Why should we have to buy back our own industry? Why should the Government have the cheek to offer us the opportunity to buy shares in what we already own? That is nonsense and the Minister knows it.
What happens to the debt is important. If the Minister cannot answer my questions about it, perhaps he will turn his mind to one or two other matters. Why do the SSEB and the north board need to raise even more money? Where will it go? Perhaps it will have to be set aside for decommissioning nuclear power stations, about which the Government have been very quiet. The Minister must know that a large number of nuclear power stations throughout the country—some in Scotland—will have to 765 be mothballed soon. They will have to be cloaked in concrete for hundreds of years, and monitored and watched for as long. That will cost a great deal, and would-be investors will want to know what the Government's intentions are.
I want to know whether the money that we are being invited to approve this evening will go towards decommissioning, and what is to happen to nuclear power stations in the future. Again, the Government are quiet about that. They are keen to say that we need the benefits of nuclear power, but not so keen to discuss what will happen at the dirty end of the industry—at the end of its life. Will this increased borrowing be used to convert Inverkip power station to coal-fired burning? A little bird in the industry told me that that might happen. Inverkip is handily placed for receiving imported coal. It is oil-fired now and little used, although it was warmed up during the miners' strike. I am sure that the board might want to convert it to burning foreign coal. I repeat: we have the right to be told what the money will be used for.
The other thing that happens when one borrows a lot of money is that one incurs interest charges. Will not increased indebtedness lead to increased electricity charges? We were told when Torness was built that it would mean cheaper electricity for us all, but we have yet to see that. Electricity prices have yet to fall in absolute or real terms. If one invests heavily in the nuclear industry, capital costs are greater and so are borrowing charges—one of the reasons why the SSEB is so heavily in debt. What will be the repercussions of this increased borrowing? Will electricity prices have to rise even more? They are already going up by 4 to 5 per cent. to fatten up the industry for selling off.
The Secretary of State for Energy made it clear that the English and Welsh electricity boards would be unattractive propositions because of their low rate of return. Prices have risen in Scotland purely because of privatisation. We have 50 per cent. over-capacity in electricity, yet we have to pay increased charges. The irony is that Scotland, which produces a surplus of electricity, still contains people who cannot afford to heat their homes. The spectacle of representatives of the industry arriving at old ladies' doors with sledgehammers to break down the doors and remove electricity meters persists. That is intolerable.
It worries me that the industry is to pass to the private sector, to people who put a low price on safety because it undermines their profits, to people who want to squeeze every penny that they can get out of their customers because they have a stranglehold over them and the customers have no alternative but to get their electricity from them. It worries me, too, that all these questions remain unanswered because the Minister does not know the answers to them—or does not want to tell. The House is entitled to deride what he said when he introduced the measure and I suspect that it will deride what he has to say on winding up. He does not have answers. One of the difficulties is that he is not master in his own house. What he thinks or does matters not, because the whole operation is being controlled by the Department of Energy. When the announcement is ultimately made, it will be made by the Secretary of State for Energy and there will be a 766 supplementary press briefing by the Secretary of State for Scotland to say that he goes along with it. That is sad and it is why we have every right to be annoyed.
Towards the end of his speech the Minister started to laud the aims of privatisation—it was the usual speech churned out by the word processors in St. Andrew's house and Chester street. All the usual platitudes were uttered. The Minister said that many benefits would flow. As we always ask him this, and he never answers it, perhaps he will tell us now what competition by comparison means. When privatisation was announced it was made clear that, unlike now, when a matter can be raised with a Member of Parliament and thus in the House, there will be competition by comparison. If an Edinburgh electricity user does not like what the SSEB is doing, he can write a stiff letter to the chairman and compare the SSEB's actions with what is happening in Watford or Wick. Is that what competition by comparison means? The ordinary domestic customer, in other words, will be able to do nothing but grin and bear it. He knows that the board has a stranglehold over him. It is not realistic for him to ring up one of the other distribution boards and ask it to put a new electricity line into his house.
That contrasts with commercial users, who can opt out if they wish. If they do, that can only mean that the domestic consumer will have to pay more, as the board has an obligation to maintain supply. If its commercial users desert it because they do not like what is being offered, the domestic user will have to pay more.
We are faced with a measure which, on the face of it, in uncontentious, but I suspect that it will present far more difficulty than the Minister might have expected. Of course, it is the precursor, the forerunner of privatisation, as is everything in the electricity industry that we discuss, but there are questions that the Minister should answer now, because the people of Scotland and of the United Kingdom have an integrated electricity supply and generation system that is the envy of the world. They have their complaints—who does not?—but now the Government are taking our electricity industry away from us and the well-off will be invited to buy it back if they can afford it, which is a novel concept of justice if ever there was one. The vast majority will find that they are the victims of people whose No. 1 aim is to extract profit. They will have no choice. One cannot choose whether to light one's house, as the Minister well knows.
Let us consider other privatisations. BT ruthlessly exploits its monopoly. It has behaved shamefully over Talkabout, where people have got into major debt. If that is anything to go by, we have reason to be concerned. Another example is P and O, where safety is not the No. 1 priority that it deserves to be. Therefore, all of us have cause to be concerned—both electricity consumers and those who live in the vicinity of nuclear power stations.
There is every reason to be worried about the Bill. As Opposition Members have said on many occasions, nobody wants it. Nobody asked for it. There are no obvious benefits. Even the Minister knows that he has run into great difficulties. It is no wonder that the Secretary of State for Energy is already looking towards the greener pastures of No. 11 or elsewhere, so that he can get out of it before the troubles cave in around him.
I hope that the Minister will tell us what is to happen to the debt. Who will control the electricity industry in the 767 event of privatisation? What can he say to the people of Scotland, who suspect that there will be higher electricity prices and nobody to complain to because the person who will impose those higher prices and run the nuclear power stations will live, not in Edinburgh, but probably in America or the Gulf? We do not know. We know that we are about to lose our electricity industry and we shall suffer because of it. It is all the more worrying that the Minister will probably be unable to say anything about it because either he does not know or he does not care to say.
§ Mr. Alexander Eadie (Midlothian)
I apologise to the Minister for not being present to hear the beginning of his speech, but I am involved in the debate on the next Bill and had some work to do before I could join in this debate.
The Minister will have a good idea of why I feel compelled to intervene in the debate. My hon. Friends have been advancing the argument that, as the Bill involves the expenditure of a great deal of money, we are entitled and have the responsibility to raise issues concerning not only privatisation but the future operations of the SSEB.
My hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) referred to the SSEB and British Coal dispute. It is no secret that the crisis between British Coal and the SSEB arose because of the Government's proposition to privatise the electricity supply industry. I remember the present chairman of the SSEB saying to me personally that there will always be a take from the SSEB with regard to Scottish coal. I do not think that the chairman will resent me reporting my personal conversations with him. He argued that Scottish coal was a national asset and it was everybody's responsibility to ensure that Scottish deep-mined coal was burned. Indeed, he argued that it was a strategic reserve for the people of Scotland. Therefore, the crisis between the SSEB and British Coal is born out of the proposition to privatise the electricity industry.
My hon. Friend referred to the attempt to obtain an agreement between the SSEB and British Coal to burn Scottish coal in its power stations. The Minister must be aware that today is a significant date, so his reply to the debate will be significant, because today marks the end of the three-month pause or standstill during the endeavours of the electricity board and British Coal to reach an agreement. The conduct of the Government in trying to obtain an agreement has hardly been starry. When we have asked questions, we have always been told that it is a matter for the commercial judgment of the SSEB and British Coal.
§ Mr. Eadie
I hear what the hon. Gentleman says, but on the eve of the previous debate on the privatisation of electricity, for the first time in history the Scottish Office opened on a Sunday and we were told that the Secretary of State for Scotland would make a specific announcement to the House to resolve the problem, but there was no statement but pandemonium in the House because the only thing that was said was that it was a matter for the commercial judgment of the SSEB and British Coal. We challenged that.
Some of us went to the Library to look at the terms of reference passed by Parliament for the SSEB appointments. We knew that the Secretary of State was the one who appointed those people to the board. In short, he was 768 the master. If he wanted—he did not—he could tell the SSEB to reach agreement with British Coal. It was one of the most despicable episodes that we have seen when the Secretary of State and his Ministers denied to some extent the Act passed by Parliament, which contained the safeguards.
My right hon. Friend the Member for Glasgow, Govan (Mr. Milian) intervened in that debate. He said that a similar situation arose when he was Secretary of State for Scotland when there was a problem between British Coal and the SSEB and he had to intervene. He had the powers to do so, which are the same as those of the present Secretary of State. But he forgot to say that I was present at the meeting as a Minister in that Government, when we managed to resolve the problem. Some of my hon Friends have said in this debate that the Government's attitude is born of the dogma of privatisation. They do not want to help because that dogma has penetrated their brain. Whether it is beneficial to the nation is beside the point.
I said earlier that we are discussing money and that the time to reach an agreement expired today. Today I had the fourth question to the Secretary of State for Energy and I asked him what the hell was going on in Scotland because thousands of jobs were at stake, not just in coal mining but in engineering and the railways. We can calculate the knock-on effect, which would be the slaughter of the deep-mined coal industry in Scotland. What reply did I receive? In effect, the Secretary of State said that my anxieties were unfounded and that he would shortly announce that an agreement had been reached between British Coal and the SSEB. I pointed out to him the report in The Scotsman today that no agreement had been reached, but there was a dispute about the importation of foreign coal. It states that, because of the bad relations between the two sides, the issue may have to be decided in the courts, where previously Lord Prosser gave a decision.
Since the Secretary of State gave me that specific undertaking, I have received information that the House and I were misled. The SSEB and British Coal are not on the verge of reaching agreement and that is why I am intervening. The Minister has a responsibility, when he replies, either to say that his right hon. Friend misled the House or that his right hon. Friend is correct and he, as the Scottish Minister, expects to announce an arrangement or an agreement between the two. There should be no shilly-shallying. In some people's eyes this debate may be minor, but it is not in the eyes of the Scottish people. They are already worried about privatisation as well as the thousands of jobs which will go down the drain if an agreement is not reached. The Minister must reply specifically.
There has been some discussion about the role that nuclear power will play in a privatised electricity industry. We hear all sorts of arguments and there may even be differences of opinion. Some say that it is unwise to depend on nuclear power, whether or not that industry is privatised. Some argue that it is an unforgiving technology, and I agree. That is a fair argument in view of what happened at Chernobyl and Three Mile Island.
The other argument is whether the economics of nuclear power are what we have been led to believe. Lord Marshall is on the record as saying that they are suspect, and he is pro-nuclear and in favour of pressurised water reactors. He used to be my scientific adviser and I know that he holds a different opinion from the SSEB. There were volumes of evidence on this at the Sizewell inquiry.
769 I do not rest my case for an examination by the House into the economics of nuclear power only on the opinion of Lord Marshall. I do not know whether the Minister has been advised of an international report on energy published by the Financial Times. It made some outstanding statements and disturbing declarations about competition, and the Government want competition. They think that, with competition, energy will be cheaper for consumers, although we have repeatedly shown that privatisation will mean increased electricity prices.
The report states that nuclear power may well become uneconomic in the 1990s. There may be other reasons for nuclear power, but as we are discussing money the Minister must come clean about the financial aspect.
If the Minister is saying that it is in our strategic interests to develop a nuclear power programme, he must also argue that for coal, which is an indigenous resource. For many years I discussed coalburn with the chairman of the SSEB and he argued that it was in our strategic interests to have coalburn and coal mining in Scotland. What has changed? Is it the Government's dogma of privatisation? My hon. Friend the Member for Linlithgow (Mr. Dalyell) elaborated successfully on the nonsense of that unproven system. During Energy questions my hon. Friend described how the same adviser was advising foreigners on the grids as the Secretary of State, and his advice to foreigners contradicts the structural position that we shall have.
I hope that the Minister will tell the House specifically whether an agreement has been reached or is about to be reached between the SSEB and British Coal.
§ Mr. John Home Robertson (East Lothian)
I apologise to the Minister and the Committee for not being present for his opening speech, and I assure him that no discourtesy was intended.
It would be a particular pleasure to hear from the Minister about electricity generation because he has the unique distinction of being a Scottish Conservative Member with an electricity generating facility in his constituency. He could argue that he has a mandate to privatise the Tongland hydro-electric scheme—a mandate which is singularly lacking in other localities with electricity generating facilities in Scotland. As we imagine the depleted ranks of 10 Scottish Conservative Members—that is all we can do—only the Minister has the authority to speak on behalf of electricity generating facilities operated by either of the electricity generating boards in Scotland.
My hon. Friend the Member for Cunninghame, North (Mr. Wilson) has already mentioned that the biggest single employer in his constituency is a power station—Hunterston. The same goes for my constituency of East Lothian. My hon. Friend the Member for Dunfermline, West (Mr. Douglas) and I share the distinction of representing two power stations—in my case, Torness nuclear power station and Cockenzie coal-burning power station. There is no evidence of any support in my constituency for the privatisation of either power station. On the contrary, there is much concern about Cockenzie's future under the privatised regime, given the background of generating capacity imbalance in the United Kingdom. 770 There is also considerable concern in the neighbourhood of Torness about the undermining of safety standards, which would inevitably flow from the commercial pressures that would develop following privatisation. It is imperative that proper controls and safeguards are retained in the operation of all kinds of nuclear facilities in Scotland, but, given the problems of commercial management, there is genuine doubt about whether that will be possible.
My hon. Friend the Member for Linlithgow (Mr. Dalyell) spoke at length about considerations affecting the CEGB. The Minister will not be surprised to hear me make a passing reference to the glaring disparity between the commitment to the principle of good neighbourliness where the CEGB is constructing nuclear power stations, and what applies under the responsibility of the SSEB. I refer, of course, to the substantial budget available to the CEGB for a "good neighbours" programme in, for example, the Sizewell area, where it is spending hundreds of thousands of pounds on community facilities—supporting village halls and community centres, and even refurbishing a cinema. Nothing has been done directly by the SSEB to help to deal with the disruption caused to the local economy in the Dunbar area as a consequence of the construction of Torness.
The Minister knows all about this, because I have been in correspondence with him. I understand that meetings are taking place between East Lothian district council and the SSEB, and I hope that there may yet be some prospect of the imbalance being put right. It is intolerable that communities in England should have the benefit of support when they are disrupted by major construction projects, while their counterparts north of the border have no access to similar funding.
A number of my hon. Friends have spoken about the prospects for coal burning in Scottish power stations. This is of immense importance to my constituents who are directly employed at Cockenzie power station, and to my constituents and those of my hon. Friends who work in the pits that supply the coal to the power station. We have waited for a long time for some indication of genuine commitment on the part of the Government, who are supposed to be responsible for energy in Scotland, to intervene to ensure that Scottish coal will continue to be burnt in Scottish power stations. At last, after all these months, we see some stirrings in new St. Andrew's house. The report in The Scotsman today that was quoted by my hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) suggested that the Frankenstein's monster of the Secretary of State for Scotland was moving at last, and might say or do something to ensure that the industry that is supposed to be his responsibility would continue to burn Scottish coal.
My hon. Friend the Member for Linlithgow referred to the possibility of a catastrophe in the event of a shortfall in electricity generation capacity at times of peak need. I suppose that there is not much risk of that happening in Scotland, technically at least, because the Government have managed to manoeuvre themselves into a position in which there is about double the generating capacity of the maximum likely demand for electricity in Scotland at any one time. We have all that spare generating capacity, with, sadly, no prospect in our depressed economy of encouraging more consumption. The only market is south of the border.
771 It seems to be possible to construct all these power stations, with the ability to generate electricity, but we are still waiting for the interconnect facility that will make it possible to transmit the electricity down the wire to the potential market south of the border. We have had some fairly positive responses from the Secretary of State for Energy, but we are still waiting for some similar indications from the Scottish Office. Of course, a major expansion of the interconnect between Scotland and England would take a long time. We all know from bitter experience the difficulties that can arise—for instance, planning consent—over the construction of new overhead pylon routes. What line are the Government taking?
§ Mr. Dalyell
May I intervene, for the sake of accuracy? After all, we have to be extremely accurate about these matters. I was referring to a potential voltage collapse specifically on 20 May 1986, when lightning struck the sub-station at Sundon and resulted in what could have been chaos had the CEGB not had complete control of the grid.
§ Mr. Home Robertson
I understand very well what my hon. Friend was talking about. The point that I am trying to highlight is the lack of an adequate interconnect between the two systems. If advantage is to be taken of generating capacity in Scotland by our neighbours south of the border, it can be done only if there is sufficient capacity in the transmission grid to enable the electricity to be used.
We are dealing with a small Bill that provides for an increase in the borrowing of the SSEB and the hydro board. I fear that unless we are told that it is the Government's policy to continue to burn Scottish coal in the existing Scottish coal-burning power stations, this could represent a double cost. Borrowing money to pay for imported coal, or facilities for handling it, will then have to be paid for by Scottish electricity consumers. It will have to be paid for all over again as a consequence of losses in employment and the depression of the economy, because we shall not be burning our own coal. It is imperative that the Government assure us about their willingness to intervene directly to ensure that Scottish coal-burning power stations will continue to do the job for which they were originally constructed—to burn Scottish coal and to provide electricity for Scottish consumers.
Finally, I want to make a detailed point about the privatisation proposals that the Government keep going on about, which, as they know, are universally opposed in Scotland. I keep reading about rumours of changes in the boundary between the hydro board and the SSEB to make it easier to privatise two separate entities. It has even been mooted that the Cockenzie power station might be transferred to the hydro board, which serves the north of Scotland. That is causing some surprise and uncertainty among my constituents who work at Cockenzie. We have nothing against the hyro board, but this is the first time that I have heard it suggested that East Lothian could have anything to do with the highlands and islands.
As the Bill must clearly be seen in the context of the Government's privatisation proposals, perhaps the Minister could take this opportunity to clarify the present doubt about the way in which the division between the hydro board and the SSEB may be adjusted in accordance with the Government's plans.
§ Mr. Gavin Strang (Edinburgh, East)
Like my hon. Friend the Member for Midlothian (Mr. Eadie), I had an oral question answered by the Secretary of State for Energy on the urgent and vital subject of the future of the Scottish coalfield. That is what is at stake in the current negotiations between the South of Scotland Electricity Board and British Coal.
The Secretary of State made a statement today which was not discouraging as regards the long-term future of the Scottish coal industry, and when my hon. Friend the shadow Secretary of State for Scotland led a deputation to meet him some months ago he was by no means dismissive of the case for a deep-mining industry in Scotland. When the Secretary of State referred to an imminent agreement, my hon. Friend said that his information was that no such agreement was imminent. That apparent contradiction can be resolved in the following way.
The coal industry in Scotland needs a long-term agreement. Decisions about investment in the industry are taken not one year or even two or three years ahead, but in some instances five to 10 years ahead. Pits cannot be sunk overnight and major decisions cannot be based on short-term considerations. It is clear that the agreement to be announced between British Coal and the SSEB will not be a 12-year agreement, although that is what is needed. It will not even be a four-year agreement. I suspect that it will be a deal taking us no further than the end of the current year and that the Secretary of State's reference to volume and price related merely to the current year. That is not an agreement. It is simply an interim arrangement to postpone the ultimate decision.
Incidentally, the Secretary of State's reply to my hon. Friend the Member for Midlothian was uncalled for and in no way justified by what my hon. Friend had said. The Secretary of State did not. actually refer to flexible working, but that is what he meant when he said that Scottish miners needed to concede even more than they had in relation to the operation of machinery at maximum capacity. My hon. Friend the Member for Kirkcaldy (Dr. Moonie) will confirm that that is certainly a factor in the discussions about the future of the Francis colliery. The arguments about flexible working are not nearly so glib or straightforward as is suggested in the quality press, let alone the tabloids. Whatever the arguments for arid against, anyone who knows the situation is aware that the Scottish area and its NUM leadership are ahead of most other areas, if "ahead" is the correct expression, in terms of developments in that direction. It was therefore unfortunate that the Secretary of State sought to raise that issue today, albeit only in passing.
§ Mr. Strang
I am grateful to my hon. Friend. I do not wish to make too much of this, but I was surprised at that throw-away reference in the Secretary of State's reply to my hon. Friend today.
The real issue is what happens in the coming days, because that is when the decision will be taken in relation to the future of the industry. It may well be unprecedented for the Secretary of State for Scotland to be meeting the 773 chairman of British Coal, as the Secretary of State for Energy confirmed today. We understand that the meeting is about privatisation, although the press briefing suggested that it was a routine meeting. The crunch issue is what is to happen to Scotland's coal industry.
Following the exchanges today, I wrote to the Prime Minister reminding her of her letter to me in relation to a question that I put to her about Lord Prosser's judgment. We felt that the Prime Minister had made a statement when the whole issue was sub judice.
Lord Prosser made it absolutely clear that it would be a catastrophe for the Scottish coal industry if imported coal were burnt at Longannet and Cockenzie and thatit would be premature at least to embark now on a course with such a potential for disaster for the Scottish coal industry.That is why it is monstrous for the SSEB—without, one hopes, the support of the Secretary of State for Scotland—to be trying to force British Coal to burn imported coal at Cockenzie and Longannet this year. That is the main reason why an agreement has not been reached. I was glad to hear the Secretary of State for Energy say today that the Secretary of State for Scotland would be putting the Government's position—in other words, that he would not just be putting his own position or that of the Scottish Tories, which is to write off the whole industry so as to help sell off the SSEB.
I hope that that means that the Secretary of State for Scotland will not have a mandate to browbeat British Coal tomorrow into conceding on that fundamental issue—the burning of imported coal at Cockenzie and Longannet—which would make a complete mockery of the proceedings of the Court of Session. I must tell the Minister that we are frankly suspicious of his right hon. and learned Friend's intentions. In discussions with Scottish Office Ministers and Ministers from the Department of Energy, Labour Members gained the impression that the latter were more committed to the Scottish coal industry than was the Secretary of State for Scotland. It is easy to understand why that is so. The Secretary of State for Scotland seems to have got it into his head that the SSEB must be given a completely free hand to facilitate the sale of the electricity industry to the private sector.
That, however, is a minor issue in the context of the real problem of privatisation of the SSEB. As the Minister knows, the real problem is the huge proportion of electricity to be generated, especially in the future, by nuclear power. Private investors do not like nuclear power. They are unhappy about the risk of what could befall them if something went wrong and about the unquantified costs of decommissioning and getting rid of installations when they reach the end of their useful life. Set against that, the idea that the electricity industry needs to have the whole future of the coal industry in its hands is entirely misjudged.
The fundamental issue is whether the Government accept any responsibility for the Scottish economy. Successive Governments have invested hundreds of millions of pounds in the Scottish coal industry. I was told in a parliamentary answer today that the present Government have invested £125 million in the past five years. It would be utter nonsense for all that investment to be written off, but that is what is at stake in the medium 774 to long term. It is not just the reopening of the Francis, which we all hope will take place, but the possible elimination of the entire Scottish mining industry.
It is nonsense to consider jeopardising our balance of payments for a temporary short-term price gain. We cannot run an ever greater deficit without some recognition of the importance of investing in our own industries. We are concerned, above all, not just about miners' jobs but about the many thousands of jobs in Scotland which depend on the coal industry. That is why I hope that the Minister of State and Secretary of State will not be persuaded, in the attempt to facilitate privatisation of the SSEB, to allow short-term considerations to justify browbeating British Coal into accepting a deal which can only mean the beginning of the end for deep mining in Scotland.
§ Mr. Maxton
This has been an interesting debate, ranging across the issues of privatisation of the coal and electricity supply industries in Scotland. I congratulate the hon. Members for Eastwood (Mr. Stewart) and for Tayside, North (Mr. Walker) who, separately or together, have attended all the debates. I am not sure whether they have been deliberately spelling each other so that they can go for cups of coffee or tea, but I give them their due.
§ Mr. Maxton
In part, that is true. They are loyal to their Front Bench. One has been a Minister and has no intention of ever being a Minister again and the other will never be a Minister, so their loyalty is strong. Their interest in the electricity supply industry is much stronger than that of the Social and Liberal Democrats or the Scottish National party, whose representatives have failed to be here throughout the debate.
It is astonishing that the hon. Member for Banff and Buchan (Mr. Salmond) has not bothered to come here. He makes many noises around Scotland about what the SNP will do, is a member of the Select Committee on Energy and just this morning had a report in The Scotsman about nuclear waste dumping in Scotland—a vital matter in relation to the supply industry. Recently I read that he was the man that we most loved to hate, but I can have no relationship with him at all. He is not here often enough for me to have a relationship with him, whether one of love or of hate. He is never in the House to contribute.
The Minister said that the Bill had nothing to do with privatisation. Although he made some general remarks about the future of privatisation in Scotland, he was not prepared to give any details because he believed that to be irrelevant. It is worth looking at the financial and manpower effects of the Bill as described in the explanatory and financial memorandum. The Bill increases the borrowing powers of the Scottish electricity boards by some £300 million—not £3 billion, because most of the money has already been borrowed. The explanatory and financial memorandum says:The Boards may borrow either from the Secretary of State (who in turn borrows from the National Loans Fund) or from other sources. If they borrow from other sources, the Treasury may guarantee the borrowing.I notice that the word is "may" and not "must". The explanatory memorandum continues:Should the Boards use their increased borrowing power to borrow from the Secretary of State, advances from the National Loans Fund would be increased accordingly. Should they borrow elsewhere with a Treasury guarantee, there would be a corresponding increase in the contingent775liabilities on the Consolidated Fund … Any payments under the Treasury guarantees from the Consolidated Fund must be repaid by the Boards to the Fund.What will happen after the Bill is passed and if the boards seek that extra money? As there will be no financial implications for the Government, the boards will be encouraged to borrow from other sources rather than from the Secretary of State.
If I were the general manager of the Royal Bank of Scotland, Clydesdale bank or some other financial institution and were approached by the SSEB for a loan, I should want to know the board's future structure. I should want to know first whether the Treasury's guarantees under the Bill would continue once the company were privatised. Before I lent one penny to the new board, I should want to know whether the money that the SSEB was borrowing for its capital structure would remain in that board's hands or whether it would go to the North of Scotland Hydro-Electric Board.
What will happen if there is a split and a redrawing of the boundaries between the two hoards? We have been given no details. We do not know which power station will go where—which will go to the NSHEB and which will remain with the SSEB. If I were lending money to either board, I should want to know the future boundaries. The boundaries would make a difference to whether the boards had the ability to repay a loan and pay the interest on it.
Will the outstanding debt of both boards be written off by the Government when they are privatised? If that happens, the Bill is of direct relevance to the structure of the privatised industry. If I were lending money, I should want to know what would happen to any money used on nuclear power developments. We have no details of the new structure and do not know what control the new boards will have. We know that the new structure is to be different and that the nuclear power stations will be owned jointly. If I were lending money, I should want to know what will happen to the debt.
The Bill is of direct relevance to the concept of privatisation. Members of Parliament may be responsible for lending money to the boards, so we have a right to know the future structure of the privatised industry before the Bill becomes law. We do not want glib references by the Minister. We want to know now.
We must return to the issue of foreign control. My hon. Friend the Member for Glasgow, Garscadden (Mr. Dewar) said that the hon. Members for Tayside, North and for Eastwood had not spoken but, to be fair to the hon. Member for Tayside, North, he intervened two, three or four times—I am not sure how often because the hon. Gentleman seems to intervene more often than he does in reality—and some of his comments were important and relevant to the debate. He said that this afternoon the Secretary of State for Energy gave guarantees on foreign control of the electricity boards. The Secretary of State for Energy can given no such guarantees because he is not responsible for the two Scottish boards. They are the responsibility of the Secretary of State for Scotland and the Minister of State. I hope that the Minister will give us that same guarantee—that there will be no foreign control of the two Scottish electricity boards. Many Opposition Members would wish to interpret the right hon. Gentleman's comments slightly differently from the way in which Conservative Members would interpret them——
§ Mr. Maxton
I am not. Most Opposition Members and the people of Scotland believe that foreign control would include England as well as Scotland—[Interruption.] Conservative Members may mock, but we do no want the electricity supply industry in Scotland eventually to be owned by the CEGB. That is not beyond the realms of possibility. It would make nonsense of the Government's plan. I hope that the Minister will give us guarantees about foreign control and about the in-built independence of the Scottish boards from control by any of the English boards. That is vital.
§ Mr. Eadie
We have had numerous debates on Bills that deal with ports, such as the one we are to start at 7 o'clock. Speeches have been made during those debates about the South African stake in the electricity supply industry. There is nothing in the replies that we have had to persuade us that a delegation or a deputation from South Africa did not come to this country, and was encouraged to think about——
§ The Second Deputy Chairman of Ways and Means
Order. That has no relevance to the clause under debate.
§ Mr. Maxton
I accept what you say, Miss Boothroyd, although my hon. Friend the Member for Midlothian (M r. Eadie) is making an important point. The clause is about borrowing £300 million. If I wanted to lend the boards money, I would want to know whether, built into this future structure, there was the ability to ensure that foreign control could not be brought in. Alternatively, I might want to know that it was to be brought in. I would simply want to know one way or the other whether a privatised company could be foreign controlled. If I did not know that and there was, for example, a large South African shareholding in the boards and, at a future date, the South African Government changed——
The Second Deputy Chairman
Order. I have already given a ruling on this. I ask the hon. Gentleman to refer to the clause under debate.
The Second Deputy Chairman
I hope so, and I hope that the hon. Gentleman wilt proceed with debating the clause.
§ Mr. Maxton
I will do that, although I hope that the Minister will take the opportunity, when talking about the lending of money, to give us some idea whether foreign control would be allowed, and, if so, how.
I hope also that the Minister will explain how there will be competition in the provision of domestic electricity in Scotland. How am I, as a user of electricity in Hamilton, to be able to say to my electricity board, "Supply me with cheaper electricity or I will go to another board"? That will not happen. There cannot be competition in those circumstances.
I hope that the Minister will use his best offices as a Minister of State, along with the Secretary of State whom we keep hearing is a powerful member of the Cabinet who presses the interests of Scotland, to ensure that we have a separate Bill. The Minister must answer the questions about the coal industry that have been asked by my hon. Friends. He is responsible for the SSEB. It is not 777 privatised, and the House has not passed a Bill giving it any legal status. Therefore, the Minister is also responsible for the industry in Scotland, and in particular the coal industry, in its broadest sense. He has a responsibility to see that the electricity boards and British Coal are brought together to ensure the future of the British coal industry. If he does not, it will be a major indictment of him, as the Minister in charge of industry, and of the Government, who have already been rejected by the people of Scotland. The few remaining Tory Members who represent Scottish constituencies will lose in the next general election if the Government are the architects of the destruction of the coal industry in Scotland.
§ Mr. Lang
The hon. Member for East Lothian (Mr. Home Robertson), in his contribution to this interesting rolling debate, referred to the fact that I have in my constituency an electricity generating scheme in the form of a hydro-electric scheme. A number of miners also live in my constituency and there is an active opencast mine as well. In responding to the debate, I must view the matter from a wider base, and in the context of the national interest. We have covered a number of topics in the debate and I shall try to reply to as many points as I can.
The hon. Member for Glasgow, Garscadden (Mr. Dewar) asked me about the purpose of the extra borrowing powers sought under the Bill, and mentioned in particular the development of nuclear power. Torness features largely in the borrowings of the SSEB, with an overall estimated cost of £1.8 billion. That venture was embarked on by the previous Labour Government and it is approaching fruition after a decade of successful construction. There are also other updating and improving activities, examples of which I gave the Committee in my opening remarks, to improve the transmission and distribution system within Scotland. The boards also have temporary borrowing needs, at the moment in the region of £140 million.
As to future needs, while we anticpate that borrowings will peak at around £2,760 million later this year, and thereafter will start to decline, future investments of substance may be contemplated. The hon. Member for East Lothian mentioned the interconnector, which at the moment has a capacity of 850 MW, equivalent to over 3 million tonnes of coalburn. There is considerable scope for improving the export of electricity south of the border if we can generate it competitively and strenghten the interconnector. We are keen to make progress in this sector, and it is an example of borrowings that may be required by the boards.
We have already debated the question of separate legislation. I repeat that there is much north and south of the border that is common, such as safety regulations, conditions of service, consent procedure and so on. When electricity was nationalised in 1947, the Labour Government thought that one Bill was sufficient to nationalise the electricity board for the whole country. We shall take a view on this matter and announce our proposals in due course.
The hon. Member for Garscadden asked me whether the views of the chairmen had been sought. We are interested in the views of the chairmen of both boards on 778 the structure of the industry and the contents of the Bill, but the question whether there will be one or two Bills is primarily a matter for the Government.
The hon. Members for Garscadden, for Edinburgh, Central (Mr. Darling), who told me that he would not be able to stay for the remainder of the debate, and for Glasgow, Cathcart (Mr. Maxton) asked about how the debt will be dealt with. The hon. Member for Garscadden further asked about the apportionment of debt between the south and north boards, but that is not a relevant consideration because each board has its own package of debt. The different sets of accounts for each board shows the debts clearly.
§ Mr. Maxton
There are to be some changes in the boundaries between the two boards which might mean a difference in assets on which there are debts outstanding. Does that not mean that there will be some changes in the present apportionment of debt? For example, if there is something outstanding on a power station, will the other board have to take it on?
§ Mr. Lang
That is a fair point. We made it clear in the White Paper that we would consider the possibility of the reallocation of assets and consumers. In that context, the structure of the companies, post-legislation, would come into the reckoning also. That matter is being investigated. It may be that the amount of reallocation that will be necessary will be limited. There may be other ways to handle such matters.
§ Mr. Dewar
The Minister is giving the impression that debt would accrue to the new privatised companies that replace the new boards. I had understood that a large portion of the debt was in connection with the nuclear capacity, so presumably that will accrue to the joint holding company. This is rather more complicated than the Minister seems to be suggesting, and there is also the question of the write-off effect and whether that has been ruled out.
§ Mr. Lang
I will come to the write-off later. If there were to be restructuring of the kind that the hon. Gentleman suggests, that would have to take account of matters other than just the generation of electricity, the boundaries of the boards and the consumers.
The hon. Member for Edinburgh, Central asked whether the debts of the electricity boards could be compared with those of the Rover Group. It is fair to point out that we are talking about debt entered into by two successful commercial ventures. Two thirds of the net current cost assets have been financed from internal resources. These are profitable companies. Currently, the north board is a net repayer of debt. As I have said, we anticipate that the combined debt of the two companies will peak fairly soon and start to decline. The south board's debt is being fully serviced and is being repaid or rolled over on a commercial basis. Indeed, 58 per cent. of the south board's debt has been incurred from overseas lenders on commercial terms.
The question of writing off debt is not as important as Opposition Members seem to think.
§ It being Seven o'clock, and there being private business set down by direction of THE CHAIRMAN OF WAYS AND MEANS under Standing Order No. 16 (Time for taking private business), further proceeding stood postponed.