HC Deb 02 March 1988 vol 128 cc977-95 3.33 pm
The Secretary of State for Scotland (Mr. Malcolm Rifkind)

With permission, Mr. Speaker, I shall make a statement about privatisation of the electricity supply industry in Scotland.

The Government's proposals to privatise the electricity supply industry represent a major extension to our successful programme of privatisation, and they will put one of Scotland's most vital industries on to a new and dynamic basis. They will make an important contribution to the continuing regeneration of Scottish industry and to the growth of the private sector in Scotland.

Scotland is fortunate in having an efficient, well-managed and successful electricity industry, which has an impressive diversity of generation sources, including hydro, pumped storage, nuclear and the full range of fossil fuel capacity. In framing proposals, my aim has been to build upon the strengths of the present structure and to correct its weaknesses so that an even more efficient industry, which is sensitive to the requirements of all its customers, can develop. My purpose is to give the industry's customers and its employees a better deal, and to ensure that it strives towards greater efficiency and better standards of service.

I wish to create a structure that is appropriate to the full range of circumstances faced by the industry in Scotland. Prominent among those are the sparsely populated character of much of the area served, the high level of nuclear capacity and the level of surplus generation capacity.

I therefore propose to create two companies based on the present regionally based utilities. This will build on the existing structure of the industry in Scotland and ensure that it maintains its distinctive characteristics. I have considered carefully the attractions of other structures. I do not consider that it would be acceptable to create a single monopoly which would place the ownership and control of the entire Scottish industry in a single set of hands, whether or not involving a regional sub-structure. [Interruption.]

Mr. Speaker

Order. Scottish Members have been waiting for this statement. I ask them to listen to it.

Mr. Rifkind

This would ignore the regional diversity of the present industry, which has brought considerable benefits to consumers. A single company would also require heavy regulatory oversight. This option is inconsistent with the Government's overall objective to maximise the competitive potential and commercial pressures within the electricity industry, and it would be contrary to the interests of consumers. The two-company structure will provide competitive pressures within the industry in Scotland. In the short term, there will be potential for competition by comparison—[Laughter.] Mr. Speaker: Order. Mr. Rifkind.

Mr. Rifkind

—by which means customers will have a basis for comparing and assessing the prices and service they receive. By helping to ensure effective regulation of prices, this will be an important gain for the consumer. The shareholder will similarly be able to compare the performance of the two companies. A two-company structure will also increase the scope for direct competition for large industrial loads and for marginal exchanges of energy within Scotland.

The Scottish industry has an important competitive role to play in the overall electricity market in Great Britain. There is significant over-capacity in the Scottish system, which can be used to export electricity to England and Wales to the benefit of both buyer and seller. In the longer term, the structure will provide scope for substantial direct competition in generation: the regulatory framework will be designed to encourage independent generators to enter the market on a profitable basis.

I have considered whether the existing boards are candidates for privatisation as independent companies in their present form. My conclusion is that the generating assets in the system are not ideally distributed between the two boards. However, I am confident that two strong, well-balanced and commercially sound companies capable of independent operation can be established by means of some modest reallocation of assets and possibly customers between the existing boards.

I shall therefore invite the boards to consider, in consultation with Government, detailed proposals for achieving this reorganisation to create two companies which, although of different sizes, will be satisfactorily balanced in terms of mix of generating plant, the amount of spare capacity and forecast levels of profitability. The Government will ensure that neither company has an undue competitive advantage in the areas where there is scope for competition between them. We shall also ensure, as a first priority, that security and stability of supply are maintained.

One of the central principles underlying the restructuring will be a sharing of the benefits and costs associated with nuclear assets between the two companies. All of Scotland's electricity consumers have contributed to the creation of these assets, and it is therefore right that they should benefit from that investment in terms of economic baseload of electricity. I propose that the nuclear stations should be owned jointly by the two companies, with each receiving its proportionate share of the benefits and meeting its proportionate share of the total costs. [Interruption.]

Mr. Speaker

Order. We have an important Welsh debate in front of us. Hon. Members will have an opportunity to ask their questions when I call them, rather than from a sedentary position.

Mr. Rifkind

The legislation that I propose to introduce will create strong and effective safeguards for the customer on prices. An effective regulatory regime will be established to safeguard the interests of consumers, including those in remote rural communities, and to promote competition. Tariffs will be regulated. The development of the regulatory system will require the close consideration of a wide range of complex issues, and will be the subject of detailed consultation with the industry, An electricity supply code will also be included in legislation updating the laws governing electricity supply and setting out the basic statutory rights of customers to receive a supply. Safety standards will be fully maintained.

I propose that the legislation should also establish new rights for the consumer and provide for a new system of guaranteed standards of service. When a company fails to meet these levels of service, customers will receive a predetermined level of financial compensation from the company. The companies will also be required to provide a range of indicators, which will be published. They will enable comparisons to be drawn between companies, and encourage them to improve their efficiency and standards of service to the benefit of consumers.

The interests of the industry's employees will be carefully considered. Pension obligations will be safeguarded and the legislation will not change the present negotiation and consultation machinery. Employees will also be given attractive opportunities to acquire shares, as will the general public.

My proposals are of major importance to the future of Scotland's economy, and I am today publishing them in a White Paper.

My proposals for privatisation will help to secure even greater efficiency in the supply of electricity in Scotland, thus ensuring the maintenance of stable and competitive prices. They build on what is best in the industry and provide opportunities for further improvements. In this way, a modern competitive private-sector industry will be created in Scotland, with a major stake held by the Scottish public; it will be fully responsive to the needs of customers and employees. Privatisation of electricity offers real benefits and new prospects for the customer, the employee and the Scottish economy.

Mr. Donald Dewar (Glasgow, Garscadden)

I do not think that the right hon. Gentleman's statement was well received by the House, because privatisation of electricity is no more than asset-stripping. The Government are living like spendthrifts, selling the future to finance today's expenditure. There is no case for replacing public utilities with a brace of private monopolies. If it is not acceptable to create a single monopoly—the Secretary of State has just said it is not—is he really arguing that if there are two the problems will somehow disappear? A monopoly is a monopoly and "competition by comparison" is nonsense. If the industry is efficient, well managed and successful", what is the case for privatisation? Why should the public believe in a scheme that makes nuclear safety the responsibility of directors whose overriding duty is to maximise profit for their shareholders?

Is it not nonsense to hand the most basic of utilities over to commercial instinct and then to struggle to build in regulatory machinery in an attempt to prevent the profit-driven companies from abusing their power? There is a startling silence in the Secretary of State's statement on safeguards of the independence of these privatised companies. What guarantees can he give that they will be in a position to withstand the attack of a determined predator? What price such guarantees after the Britoil fiasco?

Privatisation makes no sense, but if the Government insist on it the decision to maintain a Northern board at least gives some prospect of preserving the Hydro board's social charter. The Government must produce a workable structure that will protect the interests of the consumer and guarantee services at a fair price to scattered rural communities. The White Paper is strong on prejudice but thin on argument and detail. No one will be impressed by promises of a new and dynamic future selected at random from the Scottish Office's glossary of Toryspeak.

The House will notice the accuracy of the many leaks that the nuclear stations will be jointly owned and operated. What arrangements are being made for the apportionment of debt, and will the restructuring mean large sums being written off by the taxpayer? When will we know about the transfer of population or the redrawing of the boundaries between the boards implied in the statement? Is it true that the Government are considering the transfer of a coal-fired station to the Northern hoard? Does the Secretary of State accept that there are real problems in joint control of nuclear capacity when commercial interests may diverge? What would happen, for example, if there were a disagreement between the boards, or the privatised companies, over pressurised water reactor and advanced gas-cooled reactor technology for future plants?

Guaranteed standards of service must be enforced, and we want to be sure that the consumer watchdog has the power to protect customers on prices and to insist on a humane and balanced approach to personal debt and disconnections. Is the Secretary of State aware that the number of disconnections for non-payment of gas hills in that privatised industry rose by more than a third in the first nine months of 1987? Will the Secretary of State assure us that that will not happen in a privatised electricity industry?

The crisis over the South of Scotland Electricity Board's coalburn graphically underlines the dangers of privatisation with thousands of jobs at risk and the national interest pushed roughly aside in the rush to make shares more attractive to the market. The way in which the Secretary of State has shirked his responsibilities and watched the developing tragedy as though it was a spectator sport does not inspire confidence. His sale of the electricity industry will no doubt produce windfall profits for the Chancellor of the Exchequer, but it represents a real threat to the consumer and to the wider interests of the Scottish economy and we will oppose it to the best of our ability and right to the end.

Mr. Max Madden (Bradford, West)

On a point of order, Mr. Speaker.

Mr. Speaker

Arising out of this statement?

Mr. Madden

Yes, Sir.

Mr. Speaker

I will call the hon. Gentleman to put his question in a minute.

Mr. Madden

May I put a point of order that arises directly from the statement. It is not a question—

Mr. Speaker

Order. It is very difficult for me to judge whether it is a point of order as we are at the beginning of the statement. I will hear it when the hon. Gentleman raises his question afterwards.

Mr. Madden

But it is a point of order, Mr. Speaker.

Mr. Speaker

I will call the hon. Gentleman at the end after the statement, but I cannot interrupt the statement in the middle.

Mr. Madden

I am sorry, Mr. Speaker, but I do not see—

Mr. Speaker

No, if the hon. Gentleman will be patient—

Mr. Madden

I cannot see how I can raise a point of order arising directly from the statement at the end of the statement rather than at this stage.

Mr. Speaker

If the hon. Gentleman would wait until I call him, I will hear his point of order and judge it then.

Mr. Madden

I cannot see how I can raise a point of order in a question when my point of order is a point of order for you.

Mr. Speaker

Is the hon. Gentleman alleging that an unparliamentary expression has been used?

Mr. Madden

No, Mr. Speaker. I think—

Mr. Speaker

Order. Exceptionally — it is quite exceptional—I will call the hon. Gentleman. But I warn him that he will do his colleagues and the House a grave disservice if his point of order is not a genuine one.

Mr. Madden

Thank you, Mr. Speaker. I am glad that you have confirmed the right of hon. Members to raise a point of order at the appropriate stage.

My point of order is that, as there are only a handful of Conservative Members on the Conservative Benches —in fact, less than 20—would it be right for us and for journalists reporting the proceedings of the House to assume that the absentees are either drunk, lazy or incompetent—

Mr. Speaker

Order. That is an absolute abuse of a point of order. [HON. MEMBERS: "Hear, hear."] It is reprehensible and it merely confirms what I had hoped would not happen.

Mr. Rifkind

I was somewhat intrigued by the questions raised by the hon. Member for Glasgow, Garscadden (Mr. Dewar). He began by saying that the Government's proposals do not involve the introduction of meaningful competition, but simply continue a system of monopoly. I suggest that the hon. Member for Garscadden might like to consult his hon. Friend the Member Glasgow, Cathcart (Mr. Maxton) who only last Thursday was quoted in the press as saying: If the Government's justification is competition, the only way Scotland can have competition is to have separate boards. I suggest that the Opposition get their act together. Clearly they have failed to do that so far.

The hon. Member for Garscadden then asked about the safety of nuclear power stations. If he had done his homework, he would be the first to appreciate that the ownership of a nuclear power station has little to do with questions of safety—[HoN. MEMBERS: "Oh."] On the one hand, many power stations in the United States are in private hands and on the other stations like Chernobyl in the Soviet Union are in public hands. Few people who know anything about the nuclear industry would agree with the hon. Member for Garscadden that the question of ownership is relevant in one way or another. Of course the regulatory framework ensuring matters of nuclear safety remains exactly the same irrespective of questions of ownership; the hon. Gentleman should have been aware of that already.

The hon. Member for Garscadden also asked about safeguarding the interests of rural communities. I am very conscious of the fact that one of the great achievements of the Hydro board in the north of Scotland has been to ensure easy access to power for island communities and remote rural communities in its area on a common tariff basis. That is one reason why we said in the White Paper that the successor company will be required to maintain a common tariff throughout its area and that that will protect the interests of those in the island communities in a way that will be warmly welcomed.

The hon. Member for Garscadden suggested that considerable problems would arise from joint control of nuclear power stations. He ought to know that, around the world, particularly in the United States, joint ownership of nuclear power stations has been a common feature. It does not create insuperable problems. Indeed, it does not create any substantial problems of the sort referred to by the hon. Gentleman. That is a factor that he should bear in mind.

I am well aware that, inevitably, the Opposition have a knee-jerk reaction to any proposals for privatisation. That is their philosophical position and they are entitled to it. However, they should realise that the interests of the Scottish economy will be greatly boosted by the creation of important companies of the sort proposed. The interests of the consumers will be greatly assisted by the downward pressure on prices that the structure proposed will achieve. If the hon. Gentleman does not appreciate that, he does not have the best interests of the Scottish economy or Scottish consumers at heart.

Mr. Alick Buchanan-Smith (Kincardine and Deeside)

Contrary to the dogmatic prejudice against change held by the Labour party, does my right hon. and learned Friend realise that his proposals will be broadly welcomed by Conservative Members and in the country beyond? I congratulate my right hon. and learned Friend on his decision to retain the integrity of the North of Scotland Hydro-electric board, which is valued in the north of Scotland. Can my right hon. and learned Friend say what arrangements will be put in place to ensure across Scotland the best use of low-cost generation and the best opportunity of exporting south of the border? Will they be in the legislation or will they be left, contractually, to the companies after privatisation?

Mr. Rifkind

I thank my right hon. Friend for his welcome for the proposals I have outlined today. It will be in the best interests of both the companies concerned to maximise the use of the capacity available. There is plenty of evidence from elsewhere in the world where companies operate together to ensure the maximum use of capacity in terms of the interests of their consumers. I have no doubt that both boards will be responding in a constructive and responsible way to ensure that the opportunities that exist for export of Scottish capacity to markets south of the border and the provision of cheap, secure supplies of electricity to consumers throughout Scotland will be not only safeguarded but enhanced as a result of the proposals.

Mr. Dick Douglas (Dunfermline, West)

Will the Secretary of State reflect on the fact that what he has produced is a two-headed pantomime horse over which we put a nuclear veil? Does he accept that joint ownership of nuclear power stations is really joint ownership of baseload capacity? How does that come under the argument of competition? Can he tell us whether any of the power stations in Fife are likely to be transferred to the Hydro board and who will own the gas-fired station at Peterhead?

Mr. Rifkind

The hon. Gentleman has not said whether he would have preferred the creation of a single monopoly in Scotland.

Mr. Douglas

I do not support two boards.

Mr. Rifkind

The hon. Gentleman may have his views about the principle of privatisation, but he should appreciate that, if privatisation is to take place, we will be interested in hearing his views as to the form of privatisation—[HoN. MEMBERS: "Answer the question."] I will answer the question. [Interruption.] Mr. Speaker: Order. Give the Secretary of State a chance.

Mr. Rifkind

Scottish Opposition Members were quoted last Thursday as saying that they believe that there should be a two-company structure if privatisation takes place. The hon. Member for Cathcart, speaking on behalf of the Labour party, specifically said that.

The hon. Member for Dunfermline, West (Mr. Douglas) began his question by referring to competition and the structure of the proposed industry. On the second part of the hon. Gentleman's question, the issue concerning an exchange of assets is, as my statement clearly said, a matter that is being discussed with both the electricity boards. Once we have had the benefit of their advice, we will be able to tell the hon. Gentleman and others what is proposed. The hon. Gentleman must appreciate that this is not a matter on which we should like to reach a conclusion without a most detailed discussion with both boards and those who are interested in it.

Sir Hector Monro (Dumfries)

I give the warmest possible welcome to my right hon. and learned Friend's statement, since it concentrates on the future economy of Scotland and the interests of industrial and domestic consumers. I have total confidence in the nuclear generation plant's being run by private industry. Is there within my right hon. and learned Friend's plan a long-term future for the British Nuclear Fuels plc plant at Chapelcross to generate electricity?

Mr. Rifkind

I thank my hon. Friend for his warm welcome, which I believe will be replicated by many people throughout Scotland. In the past, the precise role for Chapelcross had to be discussed with the South of Scotland Electricity Board. Any needs of the future South company with regard to Chapelcross will obviously be a matter for that company to discuss. I assure my hon. Friend that we shall keep a close interest in this matter.

Mr. Ernie Ross (Dundee, West)

Do these public utilities operate efficiently in respect of the provision of services and prices? Can the right hon. and learned Gentleman give a comparator, other than the boards themselves, against which we can measure the new boards' effectiveness, efficiency and prices?

Mr. Rifkind

The present joint generating agreement has certain advantages and disadvantages. It has advantages in that it allows, through the merit order system, the best utilisation of capacity. It has the disadvantage that it conceals almost entirely the relative efficiency of both boards, because they are required to share costs according to a predetermined formula and not according to the basis on which they run their establishments. Therefore, there are major problems as well as major disadvantages in the present joint generating agreement. The proposals which I have outlined will substantially remove that difficulty, because there will be a basis of transparency that will enable the public to be safeguarded with regard to costs and tariffs.

Mr. Allan Stewart (Eastwood)

Does my right hon. and learned Friend agree that his announcement represents a major opportunity for employees, customers and financial institutions in Scotland and elsewhere to take a direct stake in a major Scottish industry, which will have the great advantage of now being free from the inevitable constraints of Treasury control?

Further to the point made by my right hon. Friend the Member for Kincardine and Deeside (Mr. Buchanan-Smith), can my right hon. and learned Friend give a categoric assurance to those in industry, such as the CBI and the Scottish Council, who have expressed concern that the end of the present integrated generation system might result in increased costs? Does my right hon. and learned Friend agree that, if he can give that assurance, his statement should be unequivocally welcomed by Scottish consumers?

Mr. Rifkind

I can give that assurance. I am happy to say that I believe that consumers, especially industrial consumers, will benefit from the kind of structure proposed. As to the earlier part of my hon. Friend's question, it is significant that the Labour party appears to prefer a situation in which the investment requirements of the Scottish electricity industry are decided by Labour or Conservative Governments rather than by the Scottish industry.

Mr. Archy Kirkwood (Roxburgh and Berwickshire)

Will the Secretary of State acknowledge that there is an element of farce in suggesting that the disposal of a public utility will be the principal engine of growth in the Scottish economy? Does the right hon. and learned Gentleman agree that there is an element of farce also in introducing the concept of competition by comparison? We oppose privatisation but of course we welcome— [Laughter.] As the hon. Member for Glasgow, Garscadden (Mr. Dewar) said, if there has to be privatisation, we welcome it being done on the basis of two boards. What safeguards will exist to ensure that these two boards are not prey to companies outside Scotland moving in and buying them up? Will the right hon. and learned Gentleman give an assurance that the social contract presently in the Hydro board's provisions and charter will apply not only to the Hydro board but to the SSEB in the new set-up?

Mr. Rifkind

I noted with some amusement that the hon. Gentleman said that his party was opposed to the privatisation of the electricity industry. Yet only a few days ago, he was quoted as saying that the Liberals were "not wildly keen" on privatising electricity.

Mr. Dewar


Mr. Rifkind

Yes, there was a "but". The quotation from the hon. Gentleman continued by saying: but if it was going to happen, certain conditions were absolutely essential to its success. That appears to be a traditional Liberal approach. We wait with interest to hear the textual analysis and to see the precise difference between "not wildly keen" and "opposed".

The social contract has been a feature not of the SSEB, but of the statutory basis on which the Hydro board operates. It was intended to ensure that the distribution system extends to the remote rural and island communities. As the hon. Gentleman will know, that has largely been completed, but there is another major factor —the maintenance of common tariffs in the island and remote rural communities. The hon. Gentleman and his colleagues will be pleased to see that the White Paper states specifically that the successor to the Hydro board will be required to maintain common tariffs throughout its area.

Mr. Nicholas Fairbairn (Perth and Kinross)

May I warmly congratulate my right hon. and learned Friend on returning to the Scottish people, for the first time in our programme of denationalisation, the assets of Scotland, which go solely to the workers of Scotland and benefit consumers in Scotland, because they can sell the product to consumers in England? If he had proposed a monopoly, would not the Opposition have complained that it was a monopoly? When he has proposed competing boards, they now complain that those boards are competing. Is not the Opposition, both from the Liberals and the Labour party, a sign that they are horrified that Scotland is having its assets given back to its people to the benefit of industry in Scotland?

Mr. Rifkind

I thank my hon. and learned Friend. [Interruption.] Mr. Speaker: Order. I appeal to the House to settle down and listen to the answers, in the interests of Welsh Members whose debate is to follow. It is rare to have a Welsh day. I shall endeavour to call those hon. Members who are rising, within the time scale, but I ask them to put only one question each, bearing in mind that there will be subsequent opportunities to ask questions on this matter.

Mr. Rifkind

I thank my hon. and learned Friend for his question. As the House will be aware, in previous examples of privatisation, preference has been given to employees and consumers of those industries with regard to the acquisition of shares. All the employees and consumers of both Scottish boards reside in Scotland, so it will be a unique opportunity for those living in Scotland to acquire a significant proportion of the shares in the electricity industry. My hon. and learned Friend is absolutely entitled to draw those conclusions.

Mr. Bruce Millan (Glasgow, Govan)

Is the Secretary of State aware that much of what he has said this afternoon was positively farcical? The business of competition between the two boards does not bear serious examination. Is not the Secretary of State creating two private monopolies which will be able to operate with scant regard for the interests of consumers, not to mention the overall Scottish interest, as we are already seeing with the outrageous behaviour of the SSEB in respect of coal purchases? When will he do something about that, instead of standing back and allowing the Scottish coal industry to be destroyed?

Mr. Rifkind

There will indeed be opportunities, particularly for industry, to acquire power from either of the two companies. There will be access to the transmission of both companies, so bulk purchasers of electricity will have a choice that has not been available in the past. In addition, we are establishing a structure that will exist for many years. The right hon. Gentleman may approve of the creation of monopolies, but neither I, the Government nor the vast majority of people in Scotland approve of that.

Mr. Alex Salmond (Banff and Buchan)

Do not these proposals represent a double mugging of the Scottish electricity consumer? Has not the strength of those companies — their asset base and capacity strength —been paid for by Scottish consumers through their electricity bills? Why, therefore, should the proceeds from a sale go to the Treasury rather than being returned to Scottish consumers? Furthermore, is it not inevitable that, in the private sector, electricity bills will rise because the two companies are saying that they want to double their rate of return? Is not privatisation just another word for higher electricity bills?

Mr. Rifkind

It is interesting to note that the hon. Gentleman had not thought it appropriate to agree with the structure proposed by the Government and has therefore shown himself to be entirely out of touch with opinion in the north-east of Scotland. It is significant that he appears to be uninterested in the views of his constituents and those who represent the interests of the north of Scotland.

The idea that a single state monopoly or a single private monopoly is in the interests of consumers is not a view with which those who have any knowledge of the real world would normally associate themselves.

Mr. Peter Rost (Erewash)


Hon. Members


Mr. Speaker

Order. This is a United Kingdom Parliament.

Mr. Rost

Is my right hon. and learned Friend aware that both the Scottish boards and Scottish industry have sent detailed submissions to the Select Committee on Energy welcoming privatisation because the competition will benefit the Scottish economy and lead to a better deal for the electricity consumer? Is it not typical of Opposition Members to show yet again that they are not interested in representing the interests of the electorate whom they are supposed to represent and the interests of the consumer and the Scottish economy?

Mr. Rifkind

I am grateful to my hon. Friend, who has more knowledge of the electricity industry, through his work on the Select Committee on Energy, than most Opposition Members. He is absolutely right in reminding Opposition Members that the electricity industry, in the shape of both the SSEB and the North of Scotland Hydro-electric board, has expressed its view that privatisation is entirely in the interests of the industry and the consumer. Opposition Members may not like that, but they will have to appreciate it.

Mr. Alexander Eadie (Midlothian)

Since, in his preamble, the Secretary of State talked about the regeneration of Scottish industry, does he think that it is a good start that we should wipe out the Scottish coal industry as a consequence and lose thousands of jobs in Scotland? The Secretary of State was cagey when we mentioned the debt. How will this proposal be implemented so far as the debt is concerned? He is aware that the SSEB owes £1.8 billion. He knows that it has £1.1 billion of foreign debt as a consequence of Torness and that it pays £240 million per year in interest. How do the Government propose to tackle that? Do they propose to wipe off the debt, as the Treasury will get the filthy lucre involved in the privatisation?

Mr. Rifkind

The hon. Gentleman will know that, as in previous privatisations, those matters are dealt with at a later stage; therefore, I cannot give a detailed response on that matter at the moment.

With regard to the earlier part of his question, the hon. Gentleman will appreciate that, because of the present legal proceedings, it is difficult for any of us to comment in detail on the matter, but I understand his reasonable concern about the future of deep-mined pits in Scotland as a result of the present issues. It is perhaps unwise of him to refer to the death of the Scottish coal industry, because about half the coal produced at present comes from opencast mines in Scotland, which have grown substantially over the past 10 years.

Mr. Harry Ewing (Falkirk, East)

When the Secretary of State said at the start of his statement that he had been seriously considering the privatisation of the electricity industry in Scotland, why does he not be more frank with the House? Why does he not tell us that he considered nothing and that he comes along, like the lapdog he is, to do what he is told?

There is one significant omission from his statement in comparison with the statement made by his right hon. Friend the Secretary of State for Energy, who made a statement announcing tariff increases before the privatisation statement itself. When will the SSEB announce its tariff increases? Contrary to what the hon. Member for Eastwood (Mr. Stewart) says, does the Secretary of State realise that there is widespread anxiety throughout Scottish industry that the SSEB tariff increase will be of the order of the CEGB tariff increase to fatten up the industry for privatisation?

Mr. Rifkind

The hon. Gentleman should do his homework first. Then he would appreciate that the announcements made about tariff increases south of the border related to the need to attract the necessary level of investment because of the gross under-capacity of the electricity industry. I presume that the hon. Gentleman is aware that under-capacity is not a problem north of the border, where we have considerable over-capacity in the system.

If the hon. Gentleman is interested in a way of dealing with the requirements of the industry while recognising the Scottish dimension, he should appreciate that there are three specific Scottish characteristics of the industry, all of which have been recognised and safeguarded by my statement. The first is vertical integration, which exists only in Scotland and which is maintained under these proposals. The second is the high proportion of nuclear power in Scotland, unlike south of the border, which is also safeguarded by the joint ownership proposals. The third is the great over-capacity, which is more than safeguarded by the exciting opportunities that exist for exports south of the border.

Mr. Charles Kennedy (Ross, Cromarty and Skye)

Will the successor company of the SSEB have built into it a social clause along the lines of that of the North of Scotland Hydro-electric board? Can the Secretary of State give an absolute guarantee that those successor companies will remain, post-privatisation, in Scottish hands?

Mr. Rifkind

I would have been somewhat appreciative if the hon. Gentleman had recognised that today's announcement coincides with what I believe are the interests of his constituents. He, like his Liberal friend, appears to like to take that for granted and not to comment on that matter.

Mr. Kennedy

Answer the question.

Mr. Rifkind

Indeed. The hon. Gentleman is the first spokesman for his party to speak, and it might have been relevant to have some reference to that fact. The particular points that he raised on the social clause have never applied to the SSEB. As I said earlier, the main requirement with regard to the Hydro board is the preservation of a common tariff which has been safeguarded by the terms of the White Paper and by the preservation of the Hydro board as a separate company post-privatisation. That is what the Hydro board said was necessary to protect the interests of those who live in the hon. Gentleman's constituency and similar areas.

Mr. Phillip Oppenheim (Amber Valley)


Hon. Members


Mr. Speaker

Order. I call Mr. Oppenheim.

Mr. Oppenheim

Have not Opposition Members got their priorities wholly wrong? Scottish electricity generation does not exist to provide an easy, safe, uncompetitive, overpriced market for Scottish coal; it exists to provide low-cost electricity to Scottish consumers, and that is what the priority should be.

Mr. Rifkind

That is indeed the case, and why the electricity industry as a whole believes that privatisation will be in the interests of its consumers. I agree with that view.

Mr. David Lambie (Cunninghame, South)

While I am opposed to the principle of privatisation, I welcome the Government's decision to privatise the two existing companies separately. As Hunterston A nuclear power station is bound to be decommissioned soon, who will finance it — the shareholders of the new privatised company or the Treasury?

Mr. Rifkind

First, I thank the hon. Gentleman for his welcome of the two-company structure if privatisation were to take place. No decision has been taken on whether Hunterston A should be decommissioned and, if so, when. Clearly, these matters will have to be determined by the successor private company whenever a decision is reached that the decommissioning of Hunterston A is appropriate.

Mr. Alistair Darling (Edinburgh, Central)

How does the Secretary of State propose to ensure that the ownership of the two boards remains within either Scotland or the United Kingdom? What is to stop the boards in future selling their shareholding to an Arthur Daley or Eddie Clockerty of the electricity industry?

Mr. Rifkind

The question whether there should be specific requirements to prevent foreign ownership or other changes in ownership will be addressed in clue course. There are no proposals on that for Scotland or England and Wales in the White Paper, but the Government will consider these matters in due course.

Mr. Dennis Canavan (Falkirk, West)

Since the Tory party was rejected by more than three quarters of the people of Scotland, what possible mandate does the Secretary of State have to sell two great Scottish electricity companies, which were created by the people of Scotland for the people of Scotland and which are the property of the people of Scotland? What right does he have to sell them to some rich friends of the Tory party whose main motivation will be to line their pockets, rather than public service and public safety which will best be ensured when a future Labour Government restore these companies to public ownership?

Mr. Rifkind

If the hon. Gentleman is genuinely interested in Scottish control of Scottish industry, I am sure that he will be in the forefront of encouraging his constituents, who are either consumers or employees, to buy shares in the Scottish electricity industry. That will help to achieve the objective which he so rightly seeks.

Mr. Eric Forth (Mid-Worcestershire)

Is my right hon. and learned Friend convinced by the mindless reaction of Opposition Members this afternoon that he certainly has this absolutely right and that he will deliver to the consumers of electricity in Scotland the best possible deal for the future? Can he assure the House in the interests of industry in Scotland and jobs in industry throughout Scotland that he will liberate the electricity industry to provide its energy from whatever source provides it best and most cheaply?

Mr. Rifkind

My hon. Friend is right to assume that the fact that we are subjected to an enormous volume but little content from Opposition Members speaks louder than words. Naturally, the SSEB has a statutory duty to put the interests of its consumers before other considerations, and that factor must be borne in mind.

Mr. Gavin Strang (Edinburgh, East)

Is the Secretary of State aware that his statement is an act of industrial sabotage of the Scottish economy? Is he further aware that nobody believes either the Government or the SSEB when they suggest that the argument over coalburn has nothing to do with privatisation? How can it be right to write off thousands of jobs and thousands of millions of pounds of investment in the Scottish coal industry for what at best is a marginal, temporary, short-term economic gain? Does the fact that these matters are now in the courts mean that the Secretary of State has abdicated any responsibility for Scotland's industrial base?

Mr. Rifkind: It means that, even with two nationalised industries, it is at times impossible for them to agree.

Mr. Tam Dalyell (Linlithgow)

Albeit that the Secretary of State thinks that he has his Gatling gun, could he return to the unanswered question that was first put by my hon. Friend the Member for Dunfermline, West (Mr. Douglas), which was, given that there will be joint ownership of the baseload nuclear power stations, where will the competition come from that supposedly will put a downward pressure on prices?

Mr. Rifkind

It will come from several places. First, it will come from the opportunity for industrial consumers to consider placing their requirements with either of the successor companies. Secondly, it will be provided in the long-term access for new generators to come on to the market. Thirdly, it will be provided by a basis by which the regulator, who will have to protect consumers' interests on tariffs, can compare the relative efficiency of the two companies.

If we have a single monopoly structure in Scotland, given that Scotland is the only part of Britain with vertical integration, there is no way in which the regulator could check the claims of the company in question and thereby give full protection to consumers. If the hon. Gentleman and his hon. Friends are interested in the protection of consumers, there is no doubt that yardstick comparison is an important, indeed essential, requirement to ensure that tariffs are maintained at the lowest possible level for the purposes of both industrial and domestic consumers.

Mr. Ron Brown (Edinburgh, Leith)

Is it not the case that the governor-general's statement, backed up by his entourage from the Institute of Directors and the Confederation of British Industry, amounts to one thing —legalised robbery with violence against the people of Scotland? The electricity supply industry belongs to the people of Scotland. It was built up by their efforts. It is wrong to suggest that to privatise it is to create a wonderful new world for the people of Scotland. It is a wonderful new world for the big business interests behind the Tory party, and that is clear.

Will the governor-general accept that the slogan outside the power stations will be, "Capitalism rules OK"? That may be OK for his friends, but the struggle will continue and Scottish workers will fight back. The Labour party has to carry out its historical role to organise the working classes because we are ready, willing and able to challenge any statement such as this.

Mr. Rifkind

As we are providing a unique opportunity for Scottish employees of the electricity industry and for Scottish consumers of electricity, which covers the whole of the Scottish population, to acquire shares in the ownership of this industry, the Government are entitled to say that our policy can be summed up by the phrase, "Power to the people".

Mr. David Harris (St. Ives)

Given my right hon. and learned Friend's emphasis of the fact that the Scottish industry has considerable over-capacity, does not his statement have considerable significance for consumers in England and Wales, as well as for consumers in Scotland? Is he aware that those of us in England who are keen to see greater competition, and who believe that that is essential in the provision of electricity, will heartily endorse all that he has said today?

Mr. Rifkind

I am grateful to my hon. Friend. Serious consideration is being given to strengthening the interconnector between Scotland and England, because that would double the export potential of electricity from the Scottish boards to the markets south of the border. That is entirely in the interests not only of the electricity industry but of consumers in Scotland. It is a United Kingdom electricity industry, and the requirements of the public as a whole are entirely safeguarded by our proposals.

Mrs. Maria Fyfe (Glasgow, Maryhill)

Does the Secretary of State recognise that he is bringing the unitary state of this Parliament into disrepute by having here this assortment of English Tory Back Benchers, no fewer than four of whom have put questions about the privatisation of Scottish electricity? If they are so interested in Scottish affairs, why are they not serving on the Scottish Standing Committee? Will he also recognise that the Scottish consumers do not want this privatisation?

Mr. Rifkind

I am interested that the hon. Lady and her hon. Friends do not apply the same criteria to Scottish Labour Members serving on the community charge Bill.

Mr. John McAllion (Dundee, East)

Earlier, the Secretary of State expressed his confidence that the nuclear capacity of the two electricity boards could safely be placed in private sector hands. Is he not aware of a report by the European Parliament committee on energy, which looked into this very matter in great detail and which concluded that the running of nuclear installations and the management of nuclear radioactive wastes must be kept in the public sector because the private sector cannot be trusted to put the interests of safety above its own interest of private profit?

Mr. Rifkind

Of course, there has to be a regulatory body answerable to Government to ensure that standards of nuclear safety are fully safeguarded — that goes without saying. However, the hon. Gentleman does not seem to appreciate that the ownership of a nuclear power station will not, in itself, determine questions of safety, as long as the highest standards of regulatory control are maintained. As the Government have every intention of doing that, he should be reassured.

Dr. John Reid (Motherwell, North)

Will the Secretary of State recognise that it is arrant nonsense for him and his colleagues to claim that there is widespread support for this measure in Scotland? Is it not a pathetic sign of what little support he has that he has to rely on the support of hon. Members with no direct interest in Scotland, some of whom did not even have the interest to be in the House when the Secretary of State made his statement? Is not the truth that there are so few supporters in Scotland for this case that they could easily have fitted on to the Benches behind the Secretary of State? Had it not been for the intervention of my hon. Friend the Member for Bradford, West (Mr. Madden), which sent the Tory Whips scuttling to the Tea Room, one could have fitted almost the whole population of Scotland on to the Benches behind the Secretary of State.

Despite promptings from my hon. Friends the Members for Glasgow, Garscadden (Mr. Dewar) and for Edinburgh, Central (Mr. Darling), the Secretary of State has not admitted that there will he no guarantee to defend the independence, economic autonomy and Scottishness of these boards. Will the Secretary of State give us a guarantee that, unlike the "Kuwaiti Kid", he is prepared to defend the Scottish industry over the coming years?

Mr. Rifkind

I have already said clearly that the future ownership of industries post-privatisation is a matter that the Government will be considering in the weeks and months to come. If the hon. Gentleman had been in the House since 1979, he would have found that every time the Government put forward proposals for privatisation or to extend home ownership, the Labour party always said that there was no demand for it. Despite that, in Scotland and elsewhere, hundreds of thousands of Scots have used these opportunities and have become owners of industry, homes and other sectors where the Government have, for the first time, provided such opportunities.

Mr. Brian Wilson (Cunninghame, North)

The Secretary of State referred to competition by comparison. Would he care to contemplate how he might get on if he were to compete in the court of Scottish public opinion with the memory of the late Tom Johnston? Will he contrast the social commitment for which that former holder of his office stood with what he is putting forward today? In particular, will he comment on the fact that his analogy between Hunterston and Chernobyl is not only crass and glib but deeply offensive to the people of my constituency, who have been responsible for levels of safety and efficiency second to none within the public sector? Will he accept that there will be no welcome for the privatisation of the nuclear industry in Scotland, except from the tiny rump that he represents? Selling off the family plutonium will be a deeply unpopular policy within his party.

Mr. Rifkind

If the hon. Gentleman were aware of his party's history, he would have been aware that Tom Johnston's great achievement was the creation of the North of Scotland Hydro-electric board and that his main interest would undoubtedly have been to ensure the preservation of a board serving the interests of the Highlands and Islands of Scotland. [Interruption.] Mr. Speaker: Order. The hon. Gentleman has asked his question and he is now getting an answer.

Mr. Rifkind

Precisely, Mr. Speaker, and he does not like the answer. The hon. Gentleman should appreciate that one of the central elements of this statement is recognition of the distinctive needs of the Highlands and Islands of Scotland. The Hydro board has welcomed that fact, as have many interests that represent various points of view in the north of Scotland. The hon. Gentleman knows that the preservation of a separate structure which guarantees common tariffs throughout the Highlands and Islands has been the greatest single achievement of the Hydro board.

Mr. John. M. Taylor (Solihull)

Will my right hon. and learned Friend reassure the House that nothing in his statement, which we welcome, will stand in the way of the progress of the fast breeder reactor at Dounreay, and the important contribution that it makes, and will make, not merely to Scottish but to United Kingdom, technology and energy generation?

Mr. Rifkind

Yes, I can assure my hon. Friend that the position of Dounreay is not affected by the proposals that I have announced today.

Mr. John McFall (Dumbarton)

Paragraph 70 of the White Paper says: the Scottish public will have a major stake". What guarantee does the Secretary of State have that the Scottish public will have this major stake? Will he be setting aside 51 per cent. of the shares for present electricity consumers?

Mr. Rifkind

For the first time, all the consumers of a privatised industry will be located in Scotland, for obvious reasons. Therefore, this is a unique opportunity for residents in Scotland, if they so wish, to acquire the shares of the industry concerned.

Mr. Canavan

It serves part of England too.

Mr. Rifkind

The hon. Gentleman is correct. The SSEB also serves the needs of Berwick-on-Tweed, in that small part of England, which emphasises that my statement is of relevance to English Member: as well.

Mr. Calum MacDonald (Western Isles)

The Secretary of State has said a couple of times now that he is conscious of the importance of the social role of the Hydro board in the Highlands and Islands, but he has given no guarantee that this social role will continue. The social role was embodied in two successive Acts of Parliament, of 1943 and 1979, in the unique social clause. Will the Secretary of State give a guarantee now that that social clause will also be embodied in the new power companies? If he does not give such a guarantee, will he accept that his proposals will be greeted with dismay throughout the Highlands and Islands?

Mr. Rifkind

They will not be greeted with dismay, because the White Paper specifically guarantees the preservation of common tariffs throughout the area of the North company. The hon. Gentleman, as Member for Western Isles, should welcome that fact.

Mr. Henry McLeish (Fife, Central)

Most sensible Members will appreciate and acknowledge that the general proposals in the White Paper are ill-conceived and half-baked — nothing new for the present Government. But what is worrying is the part dealing with the nuclear industry. Will the Secretary of State accept that he has not a clue about how to deal with this measure in relation to privatisation? If that is the case, will he give the Scottish people an assurance that this very important matter will be sensibly dealt with, instead of being treated in the cavalier fashion in which he has dealt with it at the Dispatch Box and in the White Paper?

Mr. Rifkind

With regard to the proposals affecting the nuclear power stations in Scotland, if I have not a clue then neither has the SSEB nor the North of Scotland Hydro-electric board, because these proposals are very much in accordance with what both boards wish to see.

Mr. Frank Doran (Aberdeen, South)

Will the Secretary of State explain — [Interruption.] Mr. Speaker: Order. I hope that I did not hear an unparliamentary remark. [Interruption.] Order. The hon. Member for Dunfermline, West (Mr. Douglas) is a very senior Member of the House, and he knows perfectly well that he should not react by saying things like that.

Mr. Doran

Will the Secretary of State explain what he means by the expression "competition by comparison"? Will he advise me exactly how my consumers in Aberdeen will benefit from what, to me, is a completely new form of competition?

Mr. Rifkind

I can explain it to the hon. Gentleman. If one had gone for the alternative structure of a single company, that would have been the only part of Britain where there was a system of vertical integration, with generation, distribution and transmission all under the control of a single company. The regulator, who will be a public official whose regulatory function will be to ensure that any tariff proposals are defensible and in the public interest, would have no basis for examining the claims made by a single monopoly company as to whether the factors that had led to such tariffs justified them. By the existence of at least two companies operating in comparable fashion, we have an important amount of information which enables the public interest to be safeguarded.

Mr. Sam Galbraith (Strathkelvin and Bearsden)

I was interested in the Secretary of State's comment that prices would be kept down because industrial concerns would be able to choose which board they obtained their electricity from. Will the Secretary of State explain the mechanism by which an industrial concern in, say, Inverness or Lochinver, which gets its electricity from the Hydro board, then switches to the South of Scotland Electricity Board?

Mr. Rifkind

As the White Paper makes clear, there will be in Scotland, as elsewhere in the United Kingdom, common access to the transmission system. The transmission system in each area will not be the sole prerogative of the company covering that particular area.

Mr. George Foulkes (Carrick, Cumnock and Doon Valley)

Will the Secretary of State not admit that part of the fattening up for privatisation is the reason for the disgraceful decision by the South of Scotland Electricity Board to renege on its contract with British Coal? Why did the Minister of State or the Secretary of State not intervene before this matter got into the courts? Have they totally abandoned all their responsibility for employment and industry in Scotland? The effect of this decision in my constituency will be catastrophic, with the potential loss of 400 jobs, in an area where the unemployment level in the Cumnock and Sanquhar travel-to-work area is the highest in the whole of Britain. Why is the Secretary of State abandoning his responsibility for my constituents and for the other people of Scotland who will be affected by this?

Mr. Rifkind

The hon. Gentleman likes to suggest that this is a nice, simple, straightforward matter, yet he knows perfectly well that the interests of Scottish industry as a whole, including Ravenscraig, the largest single user of electricity from the SSEB, are materially affected if it is required to pay tariffs which are higher than necessary. If the hon. Gentleman has the interests of Scottish industry as a whole at heart, he will realise that these are all matters that must be taken into account.

Mr. Martin O'Neill (Clackmannan)

The White Paper refers in paragraph 36 to the achievement of a balanced set of generating assets". Before the Secretary of State starts talking to the SSEB and the Hydro board, will he bear in mind that, because the Longannet complex comprising two mines and two power stations — Kincardine and Longannet — both receive the coal from the one source and share the same work force at present, it would be the height of lunacy to try to split these two and to break up what is at present a flexible working arrangement, which operates to the benefit of everybody—and which will continue to do so as long as he is prepared to back the miners who produce the coal that these two power stations are prepared to use?

Mr. Rifkind

The particular circumstances of each power station will be taken into account when these matters are considered.

Mr. John Home Robertson (East Lothian)

Has the Secretary of State got the message from these exchanges that Scotland wants no part of this daft exercise, an exercise of Tory dogma and fake competition? Does he recognise that the present lay-off of coal miners in my constituency is a bitter foretaste of the effects of this experiment on the Scottish economy? Is it not painfully clear that the prospect of privatisation is already promoting the import of foreign coal rather than the export of Scottish electricity?

Will the Secretary of State accept that people living near Torness and Hunterston will be alarmed by the proposal that these nuclear installations will be run by a surrogate private nuclear company? How will local communities be able to deal with this organisation on matters of day-to-day management or employment or on the vital matter of safety? The Secretary of State cited experience in the United States. Has he forgotten all about Three Mile Island?

Mr. Rifkind

The hon. Gentleman knows perfectly well that the record of the British nuclear industry is second to none. He knows that that is a matter that has been determined by the regulatory framework under which it operates.

If the hon. Gentleman is interested in the well-being of those in his constituency who require electricity and wish to buy low-cost electricity, he should realise that the interests of the consumers will be advanced by the proposals being put forward. He must appreciate that, outwith the ranks of the Labour party, there is very little support for the belief that state monopolies are somehow in the public interest.

The hon. Gentleman's hon. Friend the Member for Cathcart said that, if competition is required, then the creation of two separate Scottish companies is the best way to achieve it. I disagree with the hon. Member for Cathcart on many things, but that is one area where I am only too delighted to approve of what he has said.

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