HC Deb 20 March 1991 vol 188 cc285-94 3.32 pm
The Secretary of State for Northern Ireland (Mr. Peter Brooke)

With permission, Mr. Speaker, I should like to make a statement about the Government's proposals for the privatisation of the electricity supply industry in Northern Ireland, which are being published today in a White Paper.

In framing my proposals, I have had in mind four main objectives: to introduce competition wherever possible with the aim of achieving the lowest possible prices for consumers; to regulate the industry in a way which will protect consumers' interests and maintain security and safety of supply without being unduly intrusive; to diversify further the Northern Ireland economy through the introduction of enterprising new participants into the power sector; and to encourage participation by employees of Northern Ireland Electricity, as well as electricity consumers in Northern Ireland, in the ownership of the industry.

Competition is the best guarantee of consumers' interests and I believe that there is considerable scope for it to be introduced into the electricity industry in Northern Ireland. Since Northern Ireland Electricity is, at present, a vertically integrated undertaking with an effective monopoly on all aspects of electricity supply in Northern Ireland, this will mean a change in structure. I have concluded that generation must be separated from transmission, distribution and supply and that generating capacity should not be in the hands of a single owner.

I am proposing, therefore, that the four existing power stations will be sold to not fewer than two independent companies. This arrangement should encourage some competition between the existing stations and so provide an incentive for increased efficiency; but the major benefits of competition in generation will come when new power stations are needed. Competition to provide and operate the new stations should create a downward pressure on construction costs and on the price at which power is offered to the suppliers.

The transmission and distribution networks are natural monopolies which it would not be economic to duplicate. They, together with the supply business and the retail shops—that is, the remainder of NIE apart from generation—will remain as a single undertaking, which will have an obligation to supply electricity to consumers. It will meet this obligation by contracting with existing generators for power supplies and, when additional generating capacity is needed to meet rising demand or because of retirement of old power stations, it will seek competitive bids from operators willing to build stations and provide the required amounts of power.

Northern Ireland Electricity's existing power stations will, therefore, be offered for sale to trade purchasers by competitive tender. The transmission, distribution and supply business will be sold by public flotation.

In reaching my decision on the structure of the privatised industry, I considered a number of other possibilities, but I believe that the structure that I have outlined best meets my objective of seeking to introduce the maximum possible competition while minimising the need for intrusive regulation.

In restructuring the industry, I also wish to facilitate the introduction of competition in the supply of electricity. The existing generators and new entrants to the industry will be able to apply for permission to supply consumers directly but there will be limits on the extent of such supply, at least for an initial period. This is because, given the present characteristics of the Northern Ireland system, the immediate introduction of full-scale supply competition could work against the interests of consumers. In developing my proposals, however, I intend to examine how best to ensure that there is a progressive increase in supply competition in Northern Ireland over time.

I intend to bring forward draft legislation in the near future to enable the electricity supply industry in Northern Ireland to be restructured in the manner that I have described and to provide for its privatisation. The legislation will establish new regulatory arrangements with the aim of encouraging competition, providing incentives for efficiency and ensuring that the resultant gains are fairly shared with consumers. There will be full consultation on the draft legislation and, in view of the importance of the provisions, I am extending the customary six-week period to 12 weeks.

In developing my proposals, I intend to work closely with the industry in order to ensure that the interests of consumers and Northern Ireland Electricity employees are protected. As was the case in Great Britain, employees' rights will be protected during the course of the industry's transfer to the private sector; existing pension arrangements will be safeguarded and the industry's existing negotiating and consultation machinery will remain as it is, although of course the unions and the new owners may wish to make changes in the future.

The White Paper makes reference to the need for new generating capacity in Northern Ireland. The provision of this new capacity will be a matter for the new owners, but the White Paper outlines a number of possibilities, including the acquisition of a supply of gas to the Province for power generation and the provision of an interconnector with Scotland.

The proposals that I have outlined, and which are set out in more detail in the White Paper, are designed further to strengthen the Northern Ireland economy and build on the achievements of the past, while creating a more competitive and efficient electricity industry to meet the future needs of consumers in the Province. They will also afford the people of Northern Ireland and the Northern Ireland Electricity work force the opportunity to invest in their own industry, which has such a vital role in relation to the Province's economy.

Mr. Kevin McNamara (Kingston upon Hull, North)

I thank the Secretary of State for making his statement, but the White Paper is one Brooke initiative that we and the people of Northern Ireland could well do without.

It is significant that, in the proposals, the right hon. Gentleman did not seek the approval of the Northern Ireland parties which represent the people of Northern Ireland and which are all united with the Opposition against the general proposition and the hotch-potch of proposals which seems to be coming forward.

The right hon. Gentleman said recently that Britain had no selfish interest in Northern Ireland, but it has. It has a selfish interest in imposing outdated Thatcherite dogma upon the Province. There is only one consolation, and that is the irony that the Under-Secretary of State, the hon. Member for Wiltshire, North (Mr. Needham), is having to explain this all away in Belfast this afternoon.

In Northern Ireland, the electricity system is equivalent to only one medium-sized power station in England, yet it is to have imposed upon it another English solution—at least two generating companies and a grid. That is despite all the advice that the Government have received that, if privatisation goes ahead, it should be through one single generating and distributing agency.

Will the right hon. Gentleman confirm that the generating capacity which will go out to tender would cost at least £500 million to replace, but it is unlikely that he will receive more than between £100 million and £150 million—a nice sweetener indeed to PowerGen, Hanson, National Power or whoever happens to get control? It also means that the control of generating capacity in Northern Ireland will pass out of the control of either the Government or the people of Northern Ireland. As for putting things out to sale by flotation of the grid, will the right hon. Gentleman confirm that that will be the only opportunity that the people of Northern Ireland will have to acquire any sort of share in what they already own—the Northern Ireland electricity undertaking?

Will the right hon. Gentleman also confirm that the recommendations in the White Paper are contrary to the advice given by the Northern Ireland electricity board, contrary to the advice given by consultants employed by that board, and also contrary to the initial advice given to the Government by their own consultants—until they were sent away to find new recommendations? Will he confirm that it is also contrary to the independent advice of Coopers and Lybrand Deloitte, which stated that, if privatisation should come about, it should be as one entity?

Can the right hon. Gentleman tell the House whether decisions on the gas pipeline spur, the interconnector with the south of Scotland or reconnection with the Republic will be entirely decisions to be taken by the new owners, or whether there will be any inducements given to the new people to develop those processes, either from the European Community or from the British Government?

Can the Secretary of State confirm that Sir Desmond Lorimer is to be the new chairman of Northern Ireland Electricity, in place of Dr. Schierbeek, whose work was much admired and who advised against splitting up NIE and therefore resigned recently?

Will the Secretary of State accept that the decision to separate the generating system from the distribution system flies in the face of all modern thoughts of conservation? Does he not realise that separate electricity generation and distribution will mean that each company will have a financial incentive to promote energy sales rather than energy savings, which is what we should be looking for?

What will happen to the overseas department? What institutional protection will be given to the consumer against increases in cost in a position which will be monopolistic? More particularly, and on a more immediate matter, what protection will there be for power workers who, once they are employed by privately owned companies, may come under increasing threat from paramilitary forces?

The right hon. Gentleman's proposals are irrelevant to the economic, social and industrial needs of Northern Ireland consumers. The Secretary of State has already announced the fattening up of the industry by increasing electricity prices last week to make it more attractive for privatisation. However, there is one consolation for the people of Northern Ireland—the time scale proposed by the Government. The incoming Labour Government will have the support of all the parties in Northern Ireland in abandoning these disastrous proposals and working together for an efficient energy policy that will benefit private and industrial consumers in Northern Ireland.

Mr. Brooke

The hon. Member for Kingston upon Hull, North (Mr. McNamara) embarked upon his remarks with a directness which made clear where his views lay. He referred to the congruity of the views of his party and the parties in Northern Ireland, in opposition to these proposals.

Since a central purpose of the proposals is to exercise a downward influence on prices, which will be beneficial to all consumers, the hon. Gentleman will have a little difficulty in explaining why he is acting in the interests of the general electorate.

In terms of the nature of the system, the purpose of our proposals is essentially competitive, and we shall see the benefits of competition that have resulted from previous privatisation exercises.

The hon. Gentleman asked me a question about the assets of Northern Ireland Electricity. I can confirm that those assets, at the time of the last balance sheet on 31 March last year, stood at about £400 million.

In terms of the flotation, the hon. Gentleman is correct to say that the opportunity to purchase shares will be in transmission, distribution and supply—that part of NIE that remains. However, the implications of the rhetoric that he deployed in terms of the percentage of NIE owned by individuals in Northern Ireland, in the fullest sense, also reflect his observations about the relationship of the generation of power in Northern Ireland to the generation of power in the whole country.

The hon. Gentleman mentioned the advice that the Government have received. We are at one with our advisers about our proposals, and I expect the board of NIE to support them as well. The interconnector and the gas pipeline are currently under negotiation. If it were possible to draw on the resources for future power generation, new owners would be able to consider doing SO.

I shall shortly be announcing the name of the successor to Dr. Schierbeek, to whose chairmanship I pay tribute.

The hon. Gentleman asked about conservation. The new arrangements will, of course, be subject to all the conservation rules to which the present arrangements are subject. He also asked about the overseas department. Such matters will flow from decisions made by the new management as and when transactions have occurred.

I think that, in expressing confidence that all the proposals that I have announced will be set aside by a Labour victory, the hon. Gentleman is counting his chickens a little early.

Mr. Roy Beggs (Antrim, East)

I think that the Secretary of State is the only person who believes that the proposals will bring competition to Northern Ireland. In the absence of members of I he Democratic Unionist Party and the SDLP, I can confidently speak for them and say that all Northern Ireland parties will oppose this charade.

Will the Secretary of State tell the House whether the former chairman of NIE, Dr. Schierbeek, resigned because he too opposed the proposals? When we have had to put up with cartels operated through the banks for years, does he expect us to believe that a half-monopoly—two private-sector companies operating generation in Northern Ireland—will provide a better service than a public monopoly? Northern Ireland industry and Northern Ireland consumers have been crucified. Northern Ireland Electricity has declared both a £90 million profit and a huge hike for next year's prices. We shall be subjected to even worse by profit-motivated private companies in the future. This is a disaster.

I sincerely hope that the consultation period stretches over 12 weeks, because the Government will learn their lesson if they decide to go to the country within the next 12 weeks.

Mr. Brooke

The hon. Gentleman was more convincing in his statement about the possible opposition of Northern Ireland parties to the Government's proposals than in explaining why those proposals will not have the same competitive benefits as they have had elsewhere.

I have paid tribute to Dr. Schierbeek's chairmanship of NIE.

The hon. Gentleman called for the continuation of a public monopoly. He will be aware of the frequency with which he and his hon. Friends have called for what is effectively a degree of public subsidy for Northern Ireland electricity prices. We are determined to secure lower prices through the vehicle of competition. To say that consumers have been crucified reflects on the past pattern of behaviour rather than on our proposals. The hon. Gentleman also referred to profit. His observations show some clairvoyance, as the financial year has not yet come to an end.

Mr. James Kilfedder (North Down)

The Secretary of State is aware, judging by what he has just said, that electricity prices in Northern Ireland for domestic consumers and for industry are far higher than the average in the rest of the United Kingdom. I would welcome any proposal that would reduce that heavy burden on people in Northern Ireland, especially retired people who live in all-electric homes.

Is the right hon. Gentleman aware that I have grave doubts about whether the measure will reduce prices? Will he assure us that, when electricity is privatised, it will not only bring prices down but keep them down? I fear that, once electricity is privatised, the shareholder will come first and the consumer a poor second.


Mr. Speaker

Briefly, please.

Mr. Kilfedder

—in order to provide real competition, will he provide a gas pipeline between the mainland and Northern Ireland?

Mr. Brooke

I acknowledged in my answer to the hon. Member for Antrim, East (Mr. Beggs) the pattern of prices in the past. That is one reason why we are trying to gain the benefits of competition—in order to bring those prices down in the future. The hon. Gentleman said that he has grave doubts, but it would be an unusual occurrence, in view of previous privatisations, if competition did not provide the beneficent influence that it has in other cases.

The hon. Gentleman asked about prices being kept down some way down the road. I am confident that that is more likely to happen some way down the road, when there are further opportunities for supplying competition. The hon. Gentleman fears that the profits would be garnered by the industry and not shared with the consumer, but the regulator would exercise just that balance. As I said earlier, we are engaged in investigating the pipeline.

Mr. Simon Hughes (Southwark and Bermondsey)

Is the Secretary of State completely committed to what is clearly a matter of ideology rather than rationality, or is he saying that, if the consultative process results in wholesale opposition to his view from all parties and their representatives in Northern Ireland and from those informed about the industry, the Government will think again?

Will the right hon. Gentleman answer the specific question about the reason for the resignation of Dr. Schierbeek as chairman and the real effect on costs? If costs are 30 per cent. higher in Northern Ireland than in the rest of the United Kingdom—as is widely believed—is the Secretary of State saying that costs will come down by that amount? Given that the extra cost of getting rid of emissions is to be charged additionally to consumers over the next decade, presumably they will have to pay for that.

Mr. Brooke

If, in propounding the benefits of competition, I am regarded by the hon. Gentleman and his party as guilty of dogma, on behalf of my party, I happily plead guilty. The hon. Gentleman is correct that there will be a consultative period and there will be an opportunity for those who take a different view from the Government to demonstrate that the competitive results that I have forecast will not have the benign consequences that I mentioned.

Dr. Schierbeek had a contractual relationship with Northern Ireland Electricity which had come to a particular point. It is true that there will be a massive exercise in advance of carrying through the Government's proposals.

The hon. Gentleman referred to prices. I shall correspond with him on that, since he quoted a figure that I do not readily recognise.

Several Hon. Members


Mr. Speaker

Order. May I draw the House's attention to the fact that we have a busy day ahead of us and that many hon. Members wish to participate in the Budget debate? May we have brief questions? During the three-month period, we shall certainly be able to discuss this matter.

Mr. Julian Amery (Brighton, Pavilion)

Does my right hon. Friend agree that, whether the proposals are right or wrong, they will be seen in Northern Ireland as colonialism? If he wants to keep in touch with opinion in Northern Ireland, would not it be better to restore local government and get a better feel of what the community thinks?

Mr. Brooke

My right hon. Friend makes a delicious flank attack on me, and I know of his interests in the matter. I do not think that I would accept his premise. Both the private and the industrial consumer in Northern Ireland should receive energy supplies at the lowest possible price, and that is the Government's principal motivation.

Mr. Merlyn Rees (Morley and Leeds, South)

What about possible ownership from outside the United Kingdom? If, for example, the Electricity Supply Board in Dublin sought to purchase the NIE, there would be nothing to prevent it.

Mr. Brooke

I understand the right hon. Gentleman's question. It would be inappropriate to prejudge the outcome of the tender competition to purchase power stations. [Interruption.] I will take this at dictation speed. Each bid will be examined on its merits, but I assure hon. Members that the public interest, in the widest sense, will be taken into account.

Mr. William Ross (Londonderry, East)

The right hon. Gentleman seemed to suggest that he was dissatisfied with the efficiency of Northern Ireland Electricity, because of the cost of the electricity it produces. As the Government have run Northern Ireland Electricity for 10 or 11 years, will the right hon. Gentleman now resign because of the grave inefficiency that he has admitted? If he is so anxious to privatise Northern Ireland Electricity, this would be the supreme chance for him to introduce a Bill. Why does he not do so?

Mr. Brooke

The hon. Gentleman makes the seductive suggestion that I should resign over the provision of electricity. The Government's intention—this is quite deliberate—is to improve on the previous record by introducing competition into the system.

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

Will the Secretary of State confirm that, if his misguided proposal goes ahead, there will be nothing to safeguard the continued use of high-quality Ayrshire coal, which is vital not only to the Ayrshire coalfield but to Ayr harbour?

Mr. Brooke

The hon. Gentleman has been pressing Ministers for some time on the subject of Ayrshire coal. Decisions on the future design of power generation in the Province will be in the hands of the operators, but I should be surprised if Ayrshire coal did not prove competitive in the exercise. I am greatly distressed that the hon. Gentleman thinks that Ayrshire coal needs a crutch or prop to sustain it.

Mr. John D. Taylor (Strangford)

Does the Secretary of State recognise that the Ulster Unionist party created the state industry of Northern Ireland Electricity and is proud of NIE's service to Northern Ireland? Does he accept that all the Northern Ireland parties in the House are against his proposal?

Will the right hon. Gentleman explain why he will not allow the House to debate the proposals in a normal parliamentary manner? Why does he intend to force them through the House by means of an Order in Council, rather than having a proper parliamentary debate on a Bill on a process that vitally affects all sections of Northern Ireland? Why does the Secretary of State oppose cross-community relations in Northern Ireland when the whole community is united on this matter?

Why is this not a normal privatisation? Why will shares not be floated to the public? Why is the sale restricted to tenders from the limited firms in a position to tender for such stations? Is it true that one of the firms already created is led by the president of the new Northern Ireland Conservative party?

Will the Secretary of State reconsider the idea of privatising power stations that belong to Northern Ireland by restricting the sale to a few selected companies, and instead—if privatisation is to be forced upon us—give us the same type of privatisation as has happened elsewhere in the United Kingdom?

Mr. Brooke

The right hon. Gentleman is of course quite right to take the credit for the previous actions of the Ulster Unionist party in creating the industry. I find somewhat at variance the periodic criticisms by members of his party of the price charged for electricity in the Province and the suggestion that it would be better if that price was otherwise. That seems to me to be sporadic pride.

The right hon. Member for Strangford (Mr. Taylor) asked about the Order in Council; I must apologise to the hon. Member for Londonderry, East (Mr. Ross) because I did not answer his question about that. All hon. Members will be aware that the privatisation of the industry in Northern Ireland is essentially a transferred matter under the Northern Ireland Constitution Act 1973, and such measures are generally dealt with by an Order in Council.

The right hon. Gentleman also asked why we were not following a normal privatisation process. I must stress that the generators will be sold by tender to not fewer than two independent companies. The balance of NIE will be sold by a flotation to the wider public. The restructuring that gives rise to the different treatment is taking place to introduce the competition to which I have consistently referred in my replies today.

Mr. Dick Douglas (Dunfermline, West)

Will the Secretary of State elaborate on the significance of the interconnector? What are the prospects of public finance for the interconnector, in view of its importance for electricity generation in Scotland and the Scottish coal industry? Is it not a trifle absurd to go forward with what amounts to half a prospectus without a proper evaluation of the cost benefit of such a link between Northern Ireland and the rest of Britain?

Mr. Brooke

I have consistently said in answers on this statement that the idea of an interconnector with the Scottish industry is now being pursued energetically, discussed and negotiated. While those negotiations obviously need to be commercially sensible, I sincerely hope that future suppliers of power generation in the Province will have the widest possible variety of options available to them, and that also applies to the gas pipeline.

Mr. Harry Barnes (Derbyshire, North-East)

Why has there just been an 8.5 per cent. increase in electricity prices in Northern Ireland? Were not prices raised, to the detriment of consumers there, to fatten up the electricity companies for the privatisation that has just been announced? Why can we not have normal procedures for this legislation so that it can be amended in the House? The recent emergency legislation for Northern Ireland was not made by Order in Council. We do not have to have Orders in Council for this kind of legislation.

Mr. Brooke

The implication of the hon. Gentleman's question related to the level of profits that NIE declared last year. However, in terms of current costs, those profits amounted to £4 million. As it is known that further power generation will be necessary in the Province in the near future, the reconstruction of the industry is difficult to contemplate if the profits are only £4 million per year.

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

Can we get it quite clear? Is it true that the Northern Ireland electricity board, the consultants to the board, the first opinion of the Government's own advisers, Coopers and Lybrand Deloitte, Dr. Desmond Lorimer, the next chairman, and Dr. Schierbeek, the former chairman, all opposed privatisation in the form outlined by the Secretary of State today? Why do the Government believe that those people are wrong and the Government are right? This matter will inevitably come before the Public Accounts Committee. Get it right.

Mr. Brooke

The answer lo the hon. Gentleman's rather long list of questions is no. In terms of the proposition that I have put forward, I said that there was no conflict between the Government and their advisers. As I said, I am confident that the hoard of Northern Ireland Electricity will support what we propose.

Mr. Bob Cryer (Bradford, South)

Why can we not have legislation when the Minister knows that the powers of delegated legislation are scrutinised wholly inadequately? To undertake such a major policy by anything other than primary legislation is an abuse of the House.

Can the Secretary of State assure us that the chairman of the Northern Ireland Conservative party will not be involved in any financial dealings whatsoever with the privatisation, that no contributor to Conservative party funds will be allowed to tender, and that no contributor to Conservative party funds will be allowed to promote the scheme, be involved in merchant bank funding for the scheme, or be involved in any other way? If the Secretary of State cannot give that assurance, it will appear to people outside to be a clear case of political corruption.

Mr. Brooke

The hon. Gentleman is a respected authority on our legislative procedures. There will be an opportunity for full consultation on the Government's proposals for the privatisation of NIE, which may also be debated in the Northern Ireland Committee, if hon. Members request it, before the order is laid before Parliament. I hope that such all opportunity will be available.

On the questions that several hon. Members have asked about the Conservative party in Northern Ireland, it has been my experience that, on a series of issues, the Conservative party in Northern Ireland has regularly been in disagreement with the Secretary of State, and, perhaps with the single exception this afternoon, more frequently than any other politicians in Northern Ireland. I shall certainly pay attention to its views and to its position, but, in the past, its complaint has been that I have been paying insufficient attention to it.

Mr. Dennis Skinner (Bolsover)


Mr. John D. Taylor

On a point of order, Mr. Speaker.

Mr. Speaker

No, I will take Mr. Skinner's question first.

Mr. Skinner

Does not the Secretary of State realise that one of the reasons why hon. Members who represent Northern Ireland constituencies are against the measure is that they can see what has happened to the privatisation of electricity in Great Britain? They see prices going through the roof, and they do not want any more of it. As for the Secretary of State's remarks about subsidies not being applicable to Northern Ireland, perhaps hon. Members from Northern Ireland will say that what is good enough for Wandsworth's subsidies is good enough for them.

Mr. Brooke

I think that this is the first time that Wandsworth has been injected into one of our Northern Ireland debates, but they do range widely. The Government's preoccupation is with getting prices down in Northern Ireland and making them competitive not only with Great Britain but with the rest of Europe, because, in the Europe after 1992, it will be peculiarly important that Northern Ireland should be able to compete on a level playing field.

Mr. John D. Taylor

On a point of order, Mr. Speaker. When hon. Members on these Benches asked for a Bill rather than an Order in Council so that we could have a proper debate on the measure and the right to table amendments, the Secretary of State kindly responded by saying that a debate could take place in the Northern Ireland Committee if we so requested it. Is that not somewhat misleading, in that, even if the order went before the Committee, we would not be allowed to table amendments? That would not be in accordance with the normal parliamentary rights that hon. Members should have.

Mr. Speaker

I have no responsibility for Select Committees, but I understand that that is the case.

Forward to