HC Deb 09 November 1989 vol 159 cc1171-9 3.55 pm
The Secretary of State for Energy (Mr. John Wakeham)

With permission, Mr. Speaker, I should like to make a statement about electricity privatisation and nuclear power.

The Government remain determined to complete electricity privatisation, with all the benefits it will bring, in the lifetime of this Parliament. The preparations for the new system have brought issues into the open. In particular, attention has been focused on the costs of nuclear power. The Government have for some time recognised that our nuclear power is more costly than power from fossil-fuelled generating stations. [Interruption.] Nevertheless, it has an important role to play in providing diversity of supply and in protecting the environment.

On 24 July, my predecessor told the House that the improved transparency brought about by the preparations for privatisation had revealed substantially increased costs, relating primarily to the Magnox stations. This led us to the conclusion that the Magnox stations should remain under Government control.

Contract negotiations for nuclear stations have moved on since July. Discussions have taken place about financing new nuclear power stations. The Government told the House on a number of occasions during the passage of the Bill that the arrangements for nuclear power would strike the appropriate balance between the interests of the taxpayer, the electricity consumer and the shareholder. In the event, unprecedented guarantees were being sought. I am not willing to underwrite the private sector in this way. [Interruption.]

Given those factors, the Government have concluded that the English advanced gas-cooled reactors and Sizewell B should remain, along with the Magnox stations, in a Government-owned company. This company will inherit all the nuclear-related assets, expertise and support currently residing in the Central Electricity Generating Board, including the CEGB's rightly praised expertise in health and safety. Safety will continue to be paramount. Standards will be maintained at their present high level.

I am happy to announce that Mr. John Collier, chairman of the United Kingdom Atomic Energy Authority, has agreed to become chairman of the new nuclear company. He brings to this vital task a wealth of experience in the nuclear industry and well-recognised leadership qualities.

The company will be a substantial one, with a positive cash flow. [Interruption.] It could provide between 15 and 20 per cent. of electricity supplied in the mid 1990s. The company will retain the ability to construct and operate new nuclear capacity. It will not own any fossil-generating stations. Thus the prospects for fossil generators will remain essentially unaffected.

The CEGB's other power stations will be allocated between National Power and PowerGen as previously announced. Both companies will be major fossil-based generators, and will be privatised in this Parliament, as will the distribution companies.

We want to preserve the strategic role of nuclear power in order to maintain adequate diversity of electricity supply, avoid too great a reliance on a single fuel and obtain the benefits of this environmentally clean source of energy. As a result of privatisation, there will be competition in the electricity market, which is likely, of itself, to lead to greater fuel diversity. There are already a number of proposals for new generating projects based on combined cycle gas turbine technology, which of course leads to lower carbon dioxide emissions. Oil-fired stations have a role to play.

In the light of their performance to date, it should be possible, subject to the views of the nuclear installations inspectorate, for the lifetime of at least some of the Magnox stations to be extended. The Government will make available funds for any justifiable investment for this purpose.

In view of the factors which I have mentioned bearing on diversity, some of which relate to fossil fuels, the non-fossil obligation will be set at a level which can be satisfied without the construction of new nuclear stations beyond Sizewell B. [HON. MEMBERS: "Hear, hear.] The Government attach the highest importance to the successful completion and operation of Sizewell B in order to maintain the PWR option in the United Kingdom.

I am asking the CEGB to consider urgently what action it wishes to take with respect to its applications for my consent to build PWR stations at Hinkley Point C, Wylfa B and Sizewell C. The Government's statement is being communicated to the Hinkley Point C inquiry.

There will continue to be the opportunity, as has been made clear previously, for other non-fossil generation to contribute to the non-fossil fuel obligation. In particular, we will maintain the arrangements for the 600 MW special tranche for renewables announced by my right hon. Friend during the summer.

My proposals will not have an impact on the electricity industry's carbon dioxide emissions until about the turn of the century. By then we fully expect gas-fired stations to be playing an important role in electricity generation, and by maintaining the nuclear option we are creating the opportunity for a longer-term contribution from economic nuclear power.

The distribution companies need to be clear what their obligations will be for a reasonable period ahead. The Government will wish to review the prospects for nuclear power as the Sizewell B project nears completion in 1994.

The nuclear company has a long future as a supplier of nuclear-generated electricity. This should provide continuing attractive employment opportunities. The pension rights of existing staff will be protected, as will their ability to benefit from the sale of the rest of the industry. I shall be discussing the implementation of these proposals with all parties concerned, including the trade unions.

The price of the nuclear company's electricity will be set at a level consistent with its earning a return appropriate to public sector bodies. Since the price of nuclear electricity is likely still to be somewhat higher than that of fossil-fuelled electricity, the fossil fuel levy will be used to share the additional cost over all electricity suppliers.

This decision will help preserve diversity of supply and maintain the nuclear option. We will complete electricity privatisation in the lifetime of this Parliament, and in so doing will safeguard the interests of consumers, taxpayers and shareholders alike.

Mr. Frank Dobson (Holborn and St. Pancras)

That really was one of the most extraordinary statements that the House has ever heard. We have been told that the Thatcher Cabinet has declared the privatised electricity supply industry a nuclear-free zone.

What a shambles the Government are making of the electricity industry. Against the advice of the Labour party and of many other knowledgeable people, including the members of the Select Committee on Energy, the Government insisted that nuclear power stations should be privatised. In the words of the then Secretary of State for Energy in April this year, private ownership of nuclear stations would get them away from political influence and make them better managed, better off and more accountable. Does his successor acknowledge now that those words, the ritual Tory incantation about privatisation, have proved false and misleading?

Today's announcement confirms what we and the Energy Select Committee said: the nuclear power stations have proved unsaleable. This madcap scheme has been stopped in its tracks by the financial facts of life. The Tories' friends in the City would not buy nuclear power stations at any price. The private sector wants to take over only the fossil fuel assets and the Government expect the taxpayer to pick up the bill for the liabilities—in this case, irradiated liabilities.

This statement leaves the Government's plans in tatters. They promised their friends that they would create competing private generating companies, yet this latest plan will establish a separate, publicly owned nuclear monopoly from which the Government's friends, running the privatised distribution companies, will be obliged by law to buy electricity.

So much for competition. We know that whoever decides the price of this nuclear power in future, it will certainly not be the customers who, we were told, would be of paramount importance.

The Government's cockeyed arrangements for conventional electricity generation, with one large and one small company, are also in tatters. The size of the large company was justified, they said, by its need for more than its fair share of conventional power stations to compensate it for taking on the responsibility for nuclear power stations. Without the nuclear element, the imbalance between the two companies is ludicrous and unjustifiable; one will have more than 50 per cent. of the capacity, the other less than 30 per cent. Unless the Government change that imbalance, the customers will suffer.

The Government must now reconsider these ramshackle arrangements, which have never been argued before this House. It is no good the Government or their officials or press officers blaming the advice that they received from officials or from people in the electricity industry. As the Prime Minister is fond of saying, advisers advise, Ministers decide. In this case, the Ministers had lots of advice about the costs and problems of nuclear power; the trouble was that they took the bad advice and ignored the good—entirely typically for this incompetent Government.

Despite the obfuscation in the statement, it also spells out——

Mr. James Wallace (Orkney and Shetland)

On a point of order, Mr. Speaker. Should not a question be asked rather than a response statement made?

Mr. Speaker

The hon. Member for Holborn and St. Pancras (Mr. Dobson), as a former shadow Leader of the House, will appreciate the pressure on business today.

Mr. Dobson

Indeed, Mr. Speaker. Is the Secretary of State aware that, despite the obfuscations, this statement spells the end of the Government's commitment to an expanded programme of nuclear power? As late as 27 September, the right hon. Gentleman said that the stations he talked about today would be transferred to the private sector, reflecting, he said, the British Government's continuing faith in the future of nuclear power. Does the right hon. Gentleman acknowledge that his statement today shows that they no longer have faith in nuclear power?

This is a humiliating climbdown by the Government, who have treated the industry and its staff as a plaything. The problem results from the Prime Minister's twin obsession with privatisation and nuclear power, and from having a Cabinet full of Ministers who are unwilling to tell her the truth. The House and the country will want the truth and we shall want a debate, because the people of this country and the people who work in the industry are entitled to know about their future. And this House is entitled to be consulted about the whole future of the electricity industry, which is now a shambles.

Mr. Wakeham

I think that the first thing that I should do is to congratulate the hon. Gentleman on his appointment as a shadow spokesman for energy. I know that he long wanted what he thought was a proper Department to shadow. I hope that I have at least given him something to get his teeth into to start off with. I am sorry that he has made such a mess of his first opportunity. I cannot decide whether he supports or opposes what the Government have announced. "Shambles" is a word that springs freely from his lips. I heard it first when I was in the bath this morning and I heard it again this afternoon. It is utter nonsense.

The decision will help to ensure that the privatisation of the rest of the industry will take place as I have pledged within the lifetime of this Parliament. The hon. Gentleman suggests that the Government are doing this at any price. If he had listened carefully to my statement he would have heard me say just the opposite. I said that we were not prepared to pay the risk premium which the banks and National Power were demanding. The rest of the industry will be privatised, and we are determined to get full value for the taxpayer in the proceeds.

The proposals that we have put forward will ensure fair competition between generators, whatever their size. We have no intention of changing the allocation of assets at this stage because we do not believe that to do so would be in the interests of the consumer or of the privatisation. But the system of competition that we shall produce will be fair for generators—National Power, PowerGen and the substantial new independent generators which we expect quickly to come into the market. Far from announcing the death knell of nuclear power, the proposal that I have put before the House today is the best way of ensuring a long-term future for nuclear power in this country.

Several Hon. Members


Mr. Speaker

Order. I am sure that I do not need to repeat what I have already said about the emergency debate. Bearing in mind that there will be other opportunities to ask questions, I will allow questions on this statement to continue until 4.30, when we will move on to the next statement.

Mr. David Howell (Guildford)

Is my right hon. Friend aware that he has taken a courageous and sensible decision today, which will pave the way for the successful privatisation of the electricity industry—I hope without any further difficulties, despite the fact that Opposition Members have been opposed to the plan all along? Does he accept that questions now arise about the structure of the generating industry as it stands? Does he recall that the structure was designed, on advice, to carry some of the risks of the nuclear programme? If he is not to do so now, at least in future will he ensure that the Government will not stand in the way of some evolution and change in the structure of the generating industry, to get away from the pattern of one very large generating firm and one very small generating firm, which may not be ideal for the future?

Mr. Wakeham

Obviously, my right hon. Friend, with his experience in these matters, must be listened to carefully by all hon. Members. I have said that I have no proposals to change the basis of the allocation between National Power and PowerGen, but I shall want to see that a proper competitive market is developing, not just because of the position of those two companies but because an essential part of the privatisation is the development of a substantial new element of independent generators, who must see that they are competing in a fair marketplace.

Mr. Tony Benn (Chesterfield)

Is the Secretary of State aware that, in his statement, he has simultaneously destroyed the case for privatisation, undermined the case for nuclear power by admitting that it is much more expensive, and retrospectively destroyed the Government's war against the mining industry, which he today admitted can generate electricity much more cheaply than the nuclear industry can?

Is he aware also of the unspoken part of his statement, which is that, if cheap coal can be imported from South Africa through the proposed new Humberside ports, the miners can be pressed yet again from another source? That explains the Prime Minister's refusal to join other Commonwealth leaders in taking sanctions against South Africa.

Mr. Wakeham

I understand the right hon. Gentleman's position. It was he, after all, who announced to the House that the option for PWRs was to be established in the United Kingdom. He said: Nor does anybody doubt that there will be a nuclear component in our future energy policy and that it will probably be a growing one".—[Official Report, 2 December 1977; Vol. 940, c. 973.] It is inevitable that I would have that to hand in case the right hon. Gentleman said anything.

There is a more important question, and I hope that those who are concerned about the future of the coal industry, as I am, will recognise that British Coal has an important future as a supplier of fuel, and will continue to have it. It must recognise, however, that the competition that it has to face is not primarily from imported coal. Instead, it is from natural gas and oil, and it must be a competitive coal industry.

Mr. Michael Jack (Fylde)

In thanking my right hon. Friend for clarifying the Government's commitment to the nuclear industry, may I ask him on behalf of the 3,000 nuclear workers in my constituency when the plans for the future of the Magnox stations will be available, when the details of the remedial works on the AGRs will be available, and when he will be able to advise British Nuclear Fuels plc about the future of its £123 million investment in the PWR fuel plant?

Mr. Wakeham

I recognise the concerns that my hon. Friend has expressed. There is nothing that I can say today particularly, other than that I recognise the concerns and that we shall make whatever statements are possible as soon as they are possible.

Mr. Malcolm Bruce (Gordon)

Will the Secretary of State take it from me that he has much for which to thank his predecessor, the right hon. Member for Hertsmere (Mr. Parkinson)? In the circumstances, he has at least had the sense and wisdom to accept the advice that his predecessor was too arrogant to listen to during the proceedings in Committee on the privatisation Bill.

Will the right hon. Gentleman tell the House that he recognises that the flotation is now in such a shambles that it must be delayed until clarity emerges? Will he say what obligations have been made to Westinghouse for the PWRs that are now being cancelled, and the cost that will fall on the taxpayer as a result of that decision? Will he accept that there is a real risk that state-subsidised nuclear power will dump privately generated alternative forms of electricity, and that he needs to allay that fear? Finally, will he acknowledge that this is the beginning of the end of nuclear power?

Mr. Wakeham

No, I would not acknowledge that for one minute. I believe that this is the best policy for the future of nuclear power in the situation in which we find ourselves. The hon. Gentleman is wrong when he casts doubt on whether the privatisation of the electricity supply industry can be achieved during this Parliament. I believe that this will substantially alleviate the difficulties that we have to overcome to achieve that object.

Mr. Bruce

Will it help?

Mr. Wakeham

There is no question but that this policy will make the job easier. There are still other matters to be dealt with.

As for the orders that have or have not been placed in accordance with the CEGB's proposals, they are a matter primarily for the board. I have no knowledge of any decisions of that sort.

Sir Ian Lloyd (Havant)

Since, in my humble judgment, it will be perceived within the decade on both sides of the House that the future of the country depends on its success, may I first wish the new nuclear company and John Collier every success? May I welcome he Government's decision to maintain the nuclear option, as all evidence reaching us about the greenhouse effect suggests that there is no other realistic option?

Will the price be essentially determined by fossil fuel generators, even when their prices rise, as they are bound to do, when vast additional costs are imposed on fossil fuel stations to meet clean air conditions? Finally, does the revision of decommissioning costs—which were elaborately discussed in Lord Marshall's paper on 6 December, and which amount to between £8 billion and £12 billion—lie at the heart of my right hon. Friend's decision to revise the plan?

Mr. Wakeham

The position is considerably more complicated than can be dealt with in a short parliamentary answer. I am grateful to my hon. Friend for his support for the nuclear industry and his deep interest in it. We have not yet determined the level of the fossil fuel levy, but all these decisions will tend to make it lower rather than higher, certainly in the short term. Decommissioning will be dealt with in the state-owned nuclear company, and therefore will not present the difficulties we have had previously in trying to negotiate arrangements between the private and the public sectors.

Mr. Geoffrey Lofthouse (Pontefract and Castleford)

Is the Secretary of State aware that, if the Government had not refused to listen to the advice of the Energy Select Committee, he would not be at the Dispatch Box making this statement today? Having taken such a major decision, he must surely be in a position to tell the House what will be the cost to the public purse of generating 20 per cent. of electricity by nuclear power. If he cannot tell the House that cost, does that mean that, like everyone else, he does not know and has been scratching in the dark, and that, for purely dogmatic reasons, he is pushing forward with nuclear power whatever the cost?

Mr. Wakeham

No. Had the hon. Gentleman listened, he would have heard me tell the House that the state-owned nuclear power company's successor for the nuclear element of the CEGB will be a cash-positive company and will earn profits, not make losses. As both sides of the House must recognise, we have made a substantial investment in nuclear power. It is producing returns, and it should finance the cost of the Sizewell B project, with which we wish to continue because we believe it to be an essential part of maintaining the nuclear option.

Mr. John Hannam (Exeter)

Does my right hon. Friend accept that he has made the correct decision, given the emergence of hitherto concealed information about the true costs of nuclear power? Does he share my concern that, for many years, including those when the Labour Government were in office, figures came out of the electricity supply industry that did not bear a true relationship to the costs of nuclear power? Therefore, will he pay careful regard to any figures that the CEGB is now producing on future costs?

Mr. Wakeham

My hon. Friend is right. One of the difficulties with which we have had to deal has been that the costs of nuclear power remained hidden throughout nationalisation, and it was only the preparations for privatisation that brought them to light. I am not criticising anyone in particular for that, but it was only on 11 October that I finally managed to obtain the figures that I needed to make this decision, having pressed very hard for them from the moment that I took up office.

Mr. D. N. Campbell-Savours (Workington)

I welcome the decision to establish a new national nuclear corporation, and I join the hon. Member for Havant (Sir I. Lloyd) in wishing it success. Nevertheless, has not the right hon. Gentleman, with a number of decisions, placed a huge question mark over the future of the industry, which I have always supported—first, by running down the fast breeder reactor programme and secondly, by in effect curtailing the development of new nuclear stations, which some Labour Members want to be constructed? What is the future of the nuclear industry under this Government?

Mr. Wakeham

The future of Britain's nuclear industry will be decided finally in 1994. I hope that by that time it will be possible to produce nuclear energy economically.

Sir Trevor Skeet (Bedfordshire, North)

Having listened to my right hon. Friend the Secretary of State enumerate many of the arguments that I put forward in Committee and on Report, is it not a great pity that the Government did not accept my amendments? But having said that, and looking further into the future, when the price of coal rights itself and the price of oil goes up in about five or six years, will not nuclear energy come into its own and blossom forth in the economy?

Mr. Wakeham

I know my hon. Friend's point of view, and I do not deny him his moment of self-congratulation, particularly after his recent stunning victory in the country. He is entitled to be proud of himself. I hope that the future will be what we would wish it to be—that after we review these matters in 1994 we will be able and will want to develop our nuclear industry to produce economic nuclear power.

Mr. Dennis Skinner (Bolsover)

Is the Leader of the House aware that, when the Bill was introduced by the previous Secretary of State for Energy, it included many items that will not now be acted upon? Is it not arguable that the Act is now full of hybridity in the sense that the nuclear element has now been taken out of it? Should not that matter be examined, since Parliament has been cheated? Will the right hon. Gentleman also take into account the fact that, now that we have reached a watershed in nuclear power and other forms of energy, it would make a lot of sense to stop the pit closure programme, to say that the CEGB's coal allocation should be increased from 60 million tonnes to 75 million tonnes, that coal imports should be stopped and that the Associated British Ports (No. 2) Bill should be dropped?

Mr. Wakeham

I am glad that, as Leader of the House, I made such an impression on the hon. Gentleman that he does not realise that I have given up that job. Nevertheless, the hon. Gentleman is wrong. The steps that we are taking conform completely with the Electricity Act 1989, so no further legislation is required.

Mr. Peter Rost (Erewash)

Is not the most important and painful lesson to be learned from my right hon. Friend's sensible and realistic decision the fact that nuclear electricity is uneconomic and produced at a high cost only in Britain, not in those many other countries that have done the job sensibly, and mostly in the private sector?

Mr. Wakeham

Absolutely; my hon. Friend is right. There are many examples of the economic production of nuclear power in many other countries.

Mr. Ieuan Wyn Jones (Ynys Môn)

Can the Secretary of State clarify one matter for the House? Since the Government will not now underwrite the cost of the nuclear sector into the future, will the PWR stations at Hinkley, Wylfa and Sizewell C go ahead, and does his announcement on the extension of the life of the Magnox stations have an implication for Wylfa A? It is important for my constituents and the House to know the answer.

Mr. Wakeham

We are looking at all the Magnox stations with the experts concerned and the nuclear installations inspectorate, and decisions will be made as soon as possible.

The hon. Gentleman's other question is extremely important, and I hope that he will understand the answer. Under the law as it stands, I have a quasi-judicial role in determining any matters put to me by the inspector at any of the inquiries. It is for the CEGB to make an application, and for inspectors to recommend. I should be doing the hon. Gentleman's constituents a disservice if I expressed any opinions whatever.

Dr. Michael Clark (Rochford)

Is my right hon. Friend aware that many Conservative Members welcome his decision? It is the right decision, and always was.

Does my right hon. Friend agree that the new nuclear company will be a centre of nuclear excellence, providing the public with confidence in the nuclear industry and ensuring that the industry has a future? Does he also agree that, without the rigours of privatisation, the true cost of nuclear electricity might never have come to light?

Mr. Wakeham

My hon. Friend is right. He is also right to pay tribute to the dedicated staff who have been involved in the nuclear power industry in this country. We are very fortunate that Mr. Collier has agreed to take over the job of chairman of the new company, and I believe that it has a very good future.

Several Hon. Members


Mr. Speaker

Order. When we debate this matter subsequently, I shall seek to give priority to hon. Members whom I have not been able to call today.