HC Deb 05 April 1989 vol 150 cc200-3

`.—(1) The following powers, namely—

  1. (a) the power conferred on the Secretary of State by subsection (3) of section 2 of the Electricity and Gas Act 1963 to give directions as the repayment of advances made by him under that section to the Electricity Council; and
  2. (b) the power conferred on the Secretary of State by subsection (2) of section 24 of the Electricity (Scotland) Act 1979 to give directions as to the repayment of advances made by him under that section to a Scottish Board,
shall include power to direct the Council or Board to discharge its liabilities in respect of any advance so made by a payment to him, on such date as is specified in the direction, of such amount as is so specified.

(2) The Treasury may direct the Electricity Council or a Scottish Board to do anything specified in the direction which is requisite or expedient for the purpose of securing the discharge, or the transfer to the Treasury, of the Council's or Board's liabilities in respect of any foreign currency loan made to the Council or Board.

(3) Where the liabilities of the Electricity Council or a Scottish Board in respect of any foreign currency loan made to the Council or Board are to be discharged (whether in pursuance of a direction under subsection (2) above or otherwise), the Treasury may direct that the amount to be paid to the Treasury by the Council or Board for the foreign currency required for the purpose of securing the discharge shall be such amount as is specified in the direction.

(4) Where the liabilities of the Electricity Council or a Scottish Board in respect of any foreign currency loan made to the Council or Board are to be transferred to the Treasury (whether in pursuance of a direction under subsection (2) above or otherwise), the Treasury may direct the Council or Board to pay the Treasury, on the date of the transfer, such amount as is specified in the direction.

(5) The amount specified in a direction under subsection (1), (3) or (4) above shall be the aggregate of the present values (calculated in such manner and by reference to such rate of interest as the Secretary of State with the approval of the Treasury or, as the case may be, the Treasury may determine) of—

  1. (a) in the case of a direction under subsection (1), the payments which, if the Council's or Board's liabilities in respect of the advance were not discharged before the final date, would fall to be made to the Secretary of State in respect of the advance;
  2. (b) in the case of a direction under subsection (3) or (4), the payments which, if the Council's or Board's liabilities in respect of the loan were not discharged or transferred before the final date, would fall to be made the Treasury under the relevant exchange cover agreement.

(6) The Secretary of State may direct the Electricity Council to exercise its powers under section 21 of the Electricity Act 1957 in relation to any amount which falls to be paid by the Council in pursuance of a direction under subsection (1), (3) or (4) above in such manner as is specified in the direction under this subsection; and such a direction may in particular require contributions to be made by all or any of the Electricity Boards in England and Wales in such amounts as are specified in the direction.

(7) Any sums received by the Secretary of State in pursuance of a direction under subsection (1) above or by the Treasury in pursuance of a direction under subsection (4) above shall be paid into the National Loans Fund; and any sums received by the Treasury in pursuance of a direction under subsection (3) above shall be paid into the Exchange Equalisation Account.

(8) In this section—

Brought up, and read the First time.

3.52 pm
The Parliamentary Under-Secretary of State for Energy (Mr. Michael Spicer)

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

Mr. Speaker

With this it will be convenient to consider Government amendments Nos. 68 to 72.

Mr. Spicer

This new clause was the subject of the Ways and Means resolution we debated last night. Amendments Nos. 68 to 72, which are grouped with the new clause, relate to the money resolution which was also before the House last night.

In the case of England and Wales, it makes sense for all the long-term debt of the industry, including its foreign debt, to be repaid when the successor companies are set up. In that way, the companies can be properly structured financially in preparation for the private sector where their borrowing will no longer be protected and constrained by rules appropriate to the public sector.

Until flotation, while the companies remain in the public sector, they will be able to borrow for short-term purposes from the national loans fund under clause 72 and to have Treasury guarantees on market borrowing under the proposed amendment No. 68 to clause 73. That will cease when the companies are privatised.

In Scotland, where the debts of the industry are much larger than in England and Wales, the long-term debt will be converted into debentures, issued share capital and reserves after vesting.

During the debate on the money resolution I set out the need for amendments Nos. 69 to 72, which set the borrowing limits of the industry in England and Wales at £2,000 million. In the context of an industry with a turnover of £11 billion, that is by no means a large borrowing limit. It has to be seen in the context of present borrowing, which is about £1.6 billion.

The question of continued parliamentary scrutiny was raised in the debate last night, especially by the hon. Member for Bradford, South (Mr. Cryer). Under clause 73, each issue of a Treasury guarantee requires a written statement to be laid before both Houses of Parliament and, under clause 72, each financial year the Secretary of State will have to prepare an account of transactions from and to the national loans fund and will have to lay it before Parliament.

Mr. Kevin Barron (Rother Valley)

We understand that that is the position under clauses 72 and 73. In relation to subsection (1) of new clause 4, it is likely that restructuring will go ahead before flotation and that the capital restructuring will be completed before then. Debts will be paid off in England and Wales.

The Minister referred to the debts of the Scottish industry, which were accumulated largely as a result of investment in nuclear electricity, especially at Torness, and said that those debts will be changed into a combination of debentures, issued share capital and reserves. How much will that cost the British taxpayer? It seems that, once again, the debts of nuclear power will be written off for it to go into the private sector.

On subsection (2), will the Minister confirm that foreign currency debts in England and Wales will be wholly paid off before the flotation of the companies and that Scotland will have the bulk of that debt paid off? What is the foreign currency debt of the Scottish industry, and how much of it will still be outstanding when the electricity industry is floated into the private sector?

Under subsection (6), the Electricity Council will be able to levy repayments of debt from the boards. Does the Minister envisage any disadvantage to the boards if that exercise takes place before the companies are floated? The boards in England and Wales differ in their economic structures and the consumers they supply. Does the Minister believe that any areas will be disadvantaged when the debts that the boards owe the Electricity Council are reclaimed?

Mr. Spicer

At the end of March, the Scottish boards had £1,591 million in outstanding debt to the national loans fund, £1,019 million outstanding in foreign borrowings and £500 million in short-term deposits. Those figures contrast with the position elsewhere. There is no disguising the fact that that is one reason why the Scottish companies must be treated differently from other companies with respect to the repayment of borrowings. For the English companies, that repayment will not be a difficult matter, as they have considerable deposits which could be used to finance the repayment of borrowings—at least in part.

I cannot answer directly the question about the exact nature of restructuring and it is not reasonable to expect the Government to do so. It is some time yet until the companies are floated, and that is the point at which the balance sheets and the financial structure of the companies should be laid out.

Mr. Barron

Will the Minister give way?

Mr. Spicer

I will, but I will answer the hon. Gentleman's question first about whether the area boards will be disadvantaged if their deposits are used for the repayment of debt. The answer is no. When we restructure the finances and balance sheets of the area board companies, which we shall do before flotation, we shall ensure that there is no disadvantage incurred in the way suggested—properly—by the hon. Gentleman. I can give him that assurance.

4 pm

Mr. Barron

The Minister says that the Government feel that it would be unreasonable and inconvenient for them to tell us exactly how the restructuring of the debt in Scotland will take place. Does he agree that the taxpayer should know exactly the amount that will be seen as a write-off? It cannot be unreasonable for us to hear the exact amount, even if it is given in percentage terms. Exactly how much will this cost the British taxpayer?

Mr. Spicer

Of course the exact cost to the British taxpayer will be known. In none of the privatisations with which I have been associated—I have been associated with several in recent years—have we come before Parliament with the financial restructuring until closer to the date of the privatisation. That programme is as yet not fixed, and when the time comes there will, of course, be a full disclosure of what, if any, write-offs will occur and any costs that there would therefore be to the public purse.

Question put and agred to.

Clause read a Second time, and added to the Bill.

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