HC Deb 09 May 1995 vol 259 cc563-78 3.30 pm
The President of the Board of Trade and Secretary of State for Trade and Industry (Mr. Michael Heseltine)

With permission I would like to make a statement about the conclusions of the Government's nuclear review. It will be followed in due course by a debate. The findings of the review are set out more fully in a White Paper which my right hon. Friend the Secretary of State for Scotland and I are publishing today, and placing in the Libraries of both Houses and the Vote Office.

First, let me say that safety has been a paramount consideration throughout the review. The review has also confirmed that nuclear power plays an important role in meeting the United Kingdom's energy needs and should continue to do so, provided that it is competitive and is able to maintain rigorous standards of safety and environmental protection.

The nuclear industry argued the case for additional nuclear power stations. The appropriate test of that case is the potential availability of private sector finance for a project to build a new nuclear power station. There is, at present, no case for Government intervention to distort the electricity market by providing finance or guarantees for one form of generation over another. While the market will ultimately be the judge, the review concluded that on the basis of the figures provided by the industry in the review and in the light of the returns available from alternative generation projects, private finance is unlikely to be available at present for new nuclear construction.

The review also examined whether, and over what timescale, privatisation of the nuclear generators would be feasible. The benefit to consumers from the privatisation of most of the electricity supply industry has been clear: domestic electricity prices are now lower in real terms, even after VAT, than two years ago, with further reductions in the pipeline. The average price paid by industrial consumers has fallen by more than 10 per cent. in real terms since 1989, the last year in which the industry was in state ownership. The nuclear stations had to be excluded from electricity privatisation then, because investors were concerned about the risks of substantially increased nuclear costs; about the performance of the advanced gas-cooled reactor, or AGR, stations; and about the costs of financing new pressurised water reactors—PWRs. The situation today is very different. The generators have removed many uncertainties about the costs of managing spent fuel and waste and decommissioning plant. They have completed the first stage of decommissioning Berkeley Magnox station and the costs have been about one third lower than originally estimated. The performance of the AGRs has vastly improved, and Sizewell B was built within budget and is now in operation.

As a result, the Government have decided to privatise the more modern nuclear stations—the seven AGR stations and the PWR station at Sizewell—during the course of 1996. The liabilities associated with those stations will also be transferred to the private sector. The Government have decided to create a holding company, with the parts of Nuclear Electric and Scottish Nuclear that are to be privatised as its wholly owned subsidiaries. The holding company approach has been designed to preserve the identities of Scottish Nuclear and Nuclear Electric and to establish a significant holding company to be registered in Scotland, where its headquarters will be located. The headquarters will include all key group functions. A chairman independent of both Nuclear Electric and Scottish Nuclear will be appointed.

Scottish Nuclear will continue as a separate entity with its own board. Its continued existence will be protected by special shares in the holding company and SNL. The functions currently performed by Scottish Nuclear at its headquarters in East Kilbride will continued to be undertaken there. In addition, it is expected that engineering functions within the group will be reorganised to bring more jobs to Scotland. In all, those developments are expected to bring at least 100 jobs to Scotland.

The new subsidiary companies will continue to participate in their respective markets in England, Wales and Scotland. There will be no change in the market share held by Scottish Nuclear in Scotland, but the establishment of the new separate Magnox company in England and Wales will mean that Nuclear Electric's private sector successor will have a smaller market share than Nuclear Electric has at present.

In private ownership, the holding company will be free to compete, both domestically and overseas, and privatisation will provide powerful incentives for the two subsidiary companies to benefit their customers by raising efficiency and reducing costs. The new company will be totally committed to maintaining the exemplary safety record of the nuclear power generating industry. Safety is of paramount importance and will not be compromised. As the Health and Safety Commission said about the transition to the private sector in its evidence to the review, the system of nuclear regulation in the UK … is internationally recognised as a rigorous system for ensuring a high level of safety. It is essentially sound, and there is no reason to change it in any fundamental way to deal with whatever structure emerges. I agree. The Government's commitment to the continuation of a rigorous safety regime remains absolute.

The Government intend to safeguard financing of long-term liabilities to be passed to the private sector as a result of the proposals through the creation of segregated funds or similar arrangements. The review also considered the future of the Magnox stations. The Government do not believe that the Magnox stations can be privatised. The review did identify, however, opportunities for reducing the costs of discharging their liabilities, Which potentially fall to the taxpayer.

The Government propose in the first instance that all Magnox stations and their liabilities should be held in a stand-alone company owned by the Government.That will create a new baseload nuclear generator with 8 per cent. of the English and Welsh market. In due course, that company will be transferred to BNFL, giving BNFL a clear incentive to maximise revenues from Magnox generation, minimise reprocessing and other back-end costs, and optimise the stations' economic life.

Finally, the review examined the fossil fuel levy in England and Wales and the nuclear energy agreement in Scotland. Both Nuclear Electric and Scottish Nuclear have achieved significant improvements in their financial performance and in defining and reducing their liabilities. In the case of Nuclear Electric, the company and its public and private sector successors should now be able to meet the full costs of liabilities as they fall due, without further help from the fossil fuel levy.

The Government have therefore decided that at the time of privatisation, that part of the fossil fuel levy to which Nuclear Electric is entitled should be abolished, at least 18 months earlier than previously expected. Electricity prices in England and Wales will fall by up to 8 per cent. in a full year as a result of that decision, with the average annual household electricity bill falling by as much as £20. Lower prices will also give a major boost to the competitiveness of British industry.

Comparable arrangements will be put in hand in Scotland. The nuclear premium there will be ended and these savings will be passed through to franchise customers in Scotland. Due to these and other savings already in train, domestic electricity prices in Scotland will fall by around 8 per cent. in real terms between 1994 and 1996.

My right hon. Friend the Secretary of State for the Environment is making an announcement today about issues relevant to the nuclear review which have been examined in his parallel review of radioactive waste management policy.

The proposals I have announced today will make for a more competitive nuclear generation sector operating to continuing, rigorous safety standards. They will strengthen the ability of British companies to market nuclear services abroad. It is the right way forward for this key industry. At the same time, the changes in the fossil fuel levy and the equivalent step in Scotland will bring significant benefits to consumers. I commend these proposals to the House.

Dr. John Cunningham (Copeland)

The President of the Board of Trade's statement could be succinctly summed up as the private sector gets a cut-price bargain; the taxpayer gets the bill.

Does not the statement by the President of the Board of Trade make it clear that the short-term political objectives of the discredited Cabinet lie behind the Government's decision to privatise the nuclear industry and not the interests of taxpayers and consumers, let alone the employees of the industries themselves? The statement has nothing to do with long-term energy policy or how best to introduce competition but seeks to maximise revenue to the Treasury before the next general election.

How does the President of the Board of Trade make sense of creating a nuclear generator bigger than National Power and PowerGen, when, at the same time, the industry regulator is insisting that those companies divest themselves of generating capacity? How does that fit in with his competition policy in the electricity generating industry?

Should not the decision that the right hon. Gentleman has announced today have been included in the prospectus for the recent sale of shares of PowerGen and National Power? Is it not clear, once again, that investors were misled by the Government's issue of a false prospectus in respect of that sale?

Will the President of the Board of Trade explain how the public interest will be safeguarded under private ownership of civil nuclear power? How will he guarantee that short-term profit demands, for example, will not undermine the long-term interests of public safety and the environment? That is a question that he barely addressed in his statement.

What assurances will the right hon. Gentleman give that there will be an effective and long-lasting financial arrangement to cover all aspects of the eventual decommissioning of and waste management from a privately owned nuclear power company?

Will the President of the Board of Trade assure the House that, although I agree with what he and the nuclear installations inspector said about the safety regime, the full licensing process will be followed by the nuclear installations inspectorate in respect of any new owners? Will the right hon. Gentleman assure us that there will be no short-cutting of the licensing process? Will he assure the House that the full powers of Her Majesty's inspectors of pollution will be maintained and that they will hold full public consultations on the duties and responsibilities of any new private owners?

What requirements will be placed upon a privatised nuclear industry to continue to fund research and development, not only into the industry itself but into the health and safety of people and communities associated with it, as well as into the environmental impact of nuclear power?

Is it not clear from the rout of Tories in local election results in Scotland from Hunterston to Torness, and in England from Heysham to Hartlepool and from Copeland to Suffolk, Coastal—the constituency of the Secretary of State for the Environment—that nuclear industry communities have no confidence in Tory party policies, whether on this industry or on any other aspect of Government policy? The nuclear industry communities in particular decisively rejected Tory candidates the length and breadth of the country.

The President of the Board of Trade referred to consumer interest. Is not it clear from recent reports from consumer watchdogs, including the report from the Electricity Consumers Committee a few days ago, that they share our view that, far from consumers getting a good deal, they have been massively overcharged for their electricity since the privatisation of the industry?

The President's announcement of the ending of the nuclear levy a little more than a year before it was due to end anyway raised a pretty feeble cheer from his Back Benchers. Is not it clear that even that welcome but tiny benefit to which consumers will no doubt give a warm welcome will be far outweighed by the costs of decommissioning and waste management which will be left to the taxpayer for decades to come?

What assurances can the President give the House and electricity consumers about actions to end the abuse of salary awards and share options in a privatised nuclear industry? Will we see a rerun of what has happened with gas, water and electricity where people have made themselves rich at the consumers' expense with no discernible improvement in efficiency or performance, or will the President take some belated action to prevent that from happening?

How can the Government present this sale, which will perhaps raise £3 billion, as a gain to the taxpayer? The taxpayer paid £3 billion to build Sizewell B. At the very best it is a draw for the taxpayer. The purchaser gets not only Sizewell B but seven other AGR stations at the knockdown price of what the taxpayer paid for Sizewell B. As the President was forced to admit, the taxpayer will be left with the bill for the decommissioning of the Magnox stations and for the management of the waste that subsequently accrues.

May I press the right hon. Gentleman on what he had to say about the proposed headquarters in Edinburgh? What is to be the nature of the special share arrangement? How will it guarantee anything from a private company? Will not the likelihood—indeed the certainty—that this company will maintain a London office undermine any pretence that somehow it will be managed from Edinburgh? Is not that the reality and experience of people in Scotland in respect of Britoil and Guinness, to give just two recent examples?

The President said that the White Paper would be the subject of debate. Will he assure the House that before the proposals are acted upon they will be the subject of not only a debate but a vote so that the House has an opportunity to vote upon them? Is it not clear that people will see through this transparent device? The Tories will never be trusted on tax again. The President can be assured of that given the 20 new taxes and the increase of hundreds of pounds in tax bills in the past two years. Will not the people conclude that the result of the statement is simply that the cost of this squalid Government's failures will end up once again on the taxpayers' doormat?

Mr. Heseltine

The right hon. Member for Copeland (Dr. Cunningham) is one of the few Opposition Members with some understanding of nuclear policy, and that is why he is separated from the vast majority of his party when it comes to expressing ideas on the matter. One thing which is clear—the right hon. Gentleman must recognise it—is that there are no agreed Labour policies on nuclear energy of any sort, shape or size, because the party cannot agree on what to do.

It seemed extraordinary that our announcement that we are to reduce electricity prices by some 8 per cent. next year was apparently seen as an undesirable step by the Labour party. The right hon. Gentleman had an extraordinary range of questions to put to me. One that I found particularly interesting was his question about why the cost of the AGRs and the PWR were not recouped by the sale of the PWR within the grouping. That question should not have been put to me, but to the Labour Government who prepared the stations for authorisation in the original case. It was not a Tory Government who took those decisions, but a Labour Government. I am sad that the right hon. Member for Chesterfield (Mr. Benn) is not here, because he took one of the last of those decisions, which my right hon. Friend the Member for Guildford (Mr. Howell) confirmed when we were first elected.

I would like to mention the Scottish position. My right hon. Friend the Secretary of State for Scotland, as one would expect from a distinguished Secretary of State, has persuasively argued for and achieved a range of safeguards—not that I needed persuading. He has made sure that any successor to my right hon. Friend will be armed with the necessary weaponry as a result of the conditions imposed by the special share arrangements and by the memorandum and articles of the companies.

The headquarters of the company will be in Scotland. That has been enshrined for 10 years as a minimum, and it will remain there after that without repeal unless somebody does something about it. Built into the proposals is a cast-iron undertaking to the Scottish people about the intentions of the Government. If the Labour party has any doubts about that, it must decide what it would want to do if it were ever elected. We have made clear what we intend to do, and the Scottish people can be sure of that.

The right hon. Member for Copeland asked me about the regulator, but he will understand that the regulator is independent and I cannot tell him what to say about the matter. It is entirely for him to comment as he thinks fit. I was asked specifically about the recent flotation of shares in National Power and PowerGen. I can assure the right hon. Gentleman—I am surprised that he has not taken the trouble to find this out—that reference was made to the nuclear review in the prospectus for the sale of the shares.

I found the response of the right hon. Gentleman—who, because of his constituency interests, should know better—particularly distasteful in respect of his reference to nuclear safety, which is in no way a matter of controversy between all the parties in the House. Our standards are excellent, and they have been widely admired and followed through from Government to Government.

The standards are the responsibility of the Health and Safety Executive which, as the House will know, is a tripartite body on which the trade unions are represented. It is therefore of particular relevance that, in its evidence to the nuclear review, the Health and Safety Executive's nuclear installations inspectorate should have given clear indications that it did not believe that a different regime was appropriate whether the industry was in the public or the private sector. I can tell the right hon. Gentleman that the procedures will not be changed unless at the behest of the nuclear inspectorate.

There is nothing new in the idea that the nuclear inspectorate should license private sector sites. I would be happy to produce the information for the House—I am sure that I will be asked to do so. I have a list of about 56 public and private sector sites that are licensed by the nuclear inspectorate. It is a matter of historic fact that some of those sites were licensed by a Labour Government, long before we thought of privatising the industry. Those sites are and were in the private sector.

The fact is that any attempt to frighten the public with the scare tactics characteristic of the Opposition will fall on deaf ears, because the regimes are tested in time and have been applied by all Governments to both public and private sector installations. I have not the slightest doubt that the right hon. Gentleman has done the best that he can with an impossibly weak case.

Several hon. Members


Madam Speaker

Order. Those first exchanges have taken about 25 minutes. If that goes on, very few people will be called, so I am asking for brisk questions and answers.

Sir Mark Lennox-Boyd (Morecambe and Lunesdale)

Is my right hon. Friend aware that employees at the two nuclear power stations at Heysham in my constituency will be most approving of his statement and of the way in which he is seeking to privatise the nuclear industries of Scotland and England jointly? No doubt the alternative would have been that Scottish Nuclear would have somehow acted in a predatory way to grab a couple of English power stations from my constituency. I am sure that the good folk in Scotland would not have wanted that and will realise that it is logical to promote the whole of the British nuclear industry as a British national asset for the benefit of all the British people.

Mr. Heseltine

My hon. Friend is absolutely right to place the emphasis on the overall national interest. As is widely known and would be expected, we considered a range of options but came to the view that, in the overall interests of the industry and of the United Kingdom, this was the best way forward.

Mr. Matthew Taylor (Truro)

The Secretary of State's opening comments confirm that the industry is uneconomical—the private sector would build no private stations. It should come as no surprise, therefore, that to make privatisation work he has had to cherry-pick the profitable bits, while leaving the liability with our children for generations to come.

Can he answer the crucial question this afternoon? What does he expect to be the income to the Government from the privatisation in order to fund tax cuts at the general election? What does he expect will be the total liability of the remaining costs of Magnox and of those sectors to be privatised, which his review confirmed will not be wholly taken on by the private sector? In other words, what is the profit and loss account to the taxpayer? Is it not mainly loss?

Mr. Heseltine

The hon. Gentleman will realise that he has tried to put the worst possible slant on what is a perfectly logical industrial evolution. We are not proposing to privatise the older stations—where experimentation and the older technologies were developed. After we moved from Magnox to the AGRs and PWRs, such were the enhanced gains, efficiency achievements and cost structures that emerged, that privatisation became an option.

Apparently, the hon. Gentleman knows that the private sector will not build a further station. I do not know on what basis he makes that calculation. The White Paper says that it will not build one now. If he knows what energy demand will look like in the next 10, 20 or 30 years, he has a wisdom that is wisely contained on the Opposition Benches.

Sir Trevor Skeet (Bedfordshire, North)

As the nuclear industry is environmentally friendly and very competitive on price compared with conventional fuels, will my right hon. Friend ensure that it has about 25 per cent. of our energy supply? On the transfer of the Magnox reactors to BNFL, will he confirm that that company will be fully compensated for the increased liabilities that are being placed on its shoulders?

Mr. Heseltine

My hon. Friend asks an important question. The transfers will take place on a commercial basis. The facts will be carefully considered and the arguments weighed at the time. I cannot give my hon. Friend an assurance about the specific market share. The essence of our energy policy is that we should have diversity of supply and competition between sources of fuel, so it is now for the various generators to seek the best possible deal in the light of what they can offer the market.

Mr. Adam Ingram (East Kilbride)

Does the President of the Board of Trade accept that last week we accurately speculated on the content of his announcement and that that speculation united all political parties in Scotland, provoked a furious reaction from the business community and caused the Financial Times to call the proposal a "folly". Does he accept that the people who work in Scottish Nuclear's headquarters in my constituency will believe none of the assurances that he gave today? He told the House that the new headquarters of the corporate company will be enshrined in law for 10 years. Will he give the same guarantee to those currently employed at Scottish Nuclear's headquarters in my constituency?

Mr. Heseltine

The hon. Gentleman will understand if I say that I find the Opposition's allegations about what people do and do not believe slightly lacking in intellectual credibility for one overriding reason: whenever we have privatised an industry, the Opposition have said that it is unpopular, nobody wants it and it will destroy jobs and investment. It has now been proved that they were so wrong that they are not now prepared to undertake to re-nationalise a single industry. They have torn their party apart by removing the conditions of clause IV because they know that the whole intellectual case against privatisation is bankrupt.

Mr. John Whittingdale (Colchester, South and Maldon)

May I welcome my right hon. Friend's statement, which is undoubtedly in the best interests of the nuclear industry and consumers? Will he say a little more about the fate of Magnox stations, such as Bradwell in my constituency? Will he confirm that those stations will remain open for as long as it is safe and economically viable for them to do so? If they are closed, will staff employed there be able to transfer back to Nuclear Electric and work in its power stations in the private sector?

Mr. Heseltine

I know that my hon. Friend has a considerable interest in this matter. We hope that the Magnox stations will continue in active life, producing electricity on an economic market base. It is very much our purpose in creating the stand-alone company that it will become part of BNFL and have every incentive to maximise its performance. I hope that my hon. Friend understands that I cannot foresee how long those arrangements will be in place, although we hope that they will be long-term. I cannot foresee the employment consequences and it would be misleading of me to give the assurances that my hon. Friend seeks.

Mr. Andrew Miller (Ellesmere Port and Neston)

The City institutions cannot even think in terms of the short life of this Government, let alone that of Stroutium 90, so how on earth can the President of the Board of Trade confidently say that the private sector will go for this package unless he is giving the industry away at well below its true value? Will the package give taxpayers' money to the President's friends in the City?

Mr. Heseltine

I do not know what the hon. Gentleman is worried about because if we can find no one to buy it, he will have no difficulties.

Dr. Michael Clark (Rochford)

Is my right hon. Friend aware that those of us who were somewhat critical of the delay in producing the nuclear review now consider that the wait was well worth while, as privatisation is included in the presentation? Will the privatisation of the nuclear industry facilitate the construction of more nuclear power stations? What constraints, if any, will be placed on the private company in that regard?

Mr. Heseltine

I know of my hon. Friend's deep interest in those matters. There will be nothing except the statutory constraints, although planning and safety arrangements must obviously be complied with before one can proceed to build a new power station. Equally, we have given every support to Nuclear Electric in its bid to supply a nuclear station to Taiwan, and we shall give the industry every support in pursuing other world opportunities.

Mr. John Home Robertson (East Lothian)

If one is shooting oneself in the foot, the clever thing to do is to stop pulling the trigger. May I tell the President of the Board of Trade that my constituents at Torness do not want to be privatised, and they certainly do not want to be shunted into a sham holding company, which would inevitably be dominated by its larger partner?

The President of the Board of Trade told us that the pill will be sweetened south of the border with a bribe of £20 per household arising from the lifting of the nuclear levy, but he was rather coy about the deal in Scotland. Will consumers north of the border receive an equivalent deal?

Mr. Heseltine

I explained that, with other reductions in electricity already forecast and the abolition of the levy arrangements in Scotland, something of the same order of reductions will take place. However, the House will be aware that Scotland starts from a position very different from that of England and Wales, because electricity prices in Scotland are already about 10 per cent. less than prices in England and Wales, so one is not comparing like with like. I do foresee significant reductions in electricity prices in Scotland, and that is much to be admired.

I find it extraordinary—although it reveals the attitude of the Labour party—that, when we offer to return to people the money that they themselves have earned, it is regarded as a bribe.

Mr. Neil Hamilton (Tatton)

Will my right hon. Friend accept my strong support for that policy of privatisation of the nuclear industry? I speak as someone many hundreds of whose constituents are employed in that industry, and no doubt that contributed to the fact that the Conservatives retained control of the local authority in Macclesfield, in anticipation of the excellent announcement that was made today. [HON. MEMBERS: "Hear, hear."]

Was my right hon. Friend surprised at the sour note struck by the right hon. Member for Copeland (Dr. Cunningham)? Considering that, for the past 15 years, the Labour party has been wedded to a policy of slow strangulation of the nuclear industry, there would not have been any review under a Labour Government because they would have continued their policies, which would have led to the destruction of the nuclear industry and the jobs of the right hon. Gentleman's constituents.

Is my right hon. Friend aware that 126 nuclear projects are going on or are in prospect in the next quarter of a century throughout the world, and that a huge business opportunity exists for Britain? Will not the nuclear industry be far better able to take advantage of that opportunity in the private sector than in its present position, which has existed for so long, where its managers have had to look over their shoulders at politicians to decide whether they can run their industry in the most successful way?

Mr. Heseltine

I knew, from the years that I had worked with my hon. Friend, exactly how much support I could anticipate from him for my announcement today, and I welcome the public revelation of that fact. I totally support his opinion. There would not have been a review by the Labour party. Indeed, all the evidence today is that it is trying to interfere with the regulators whose task it is to drive down prices in industry after industry, in order to find a range of politically acceptable nostrums. The only effect of that will be to keep prices higher than they could otherwise be.

I fully accept and greatly welcome the excellence of the announcement for Macclesfield. I realise that one of the great advantages of leaks is that a leak enabled that constituency to make so wise a judgment. I can assure my hon. Friend that I am now working on a range of policies to deal with less fortunate constituencies.

Mr. Alex Salmond (Banff and Buchan)

Has the President of the Board of Trade already influenced the nuclear installations inspectorate? A spokesperson for that organisation is quoted in The Herald this morning as hoping that the Government's timetable for privatisation can be kept on track. Is not that inspectorate meant to be an independent organisation, fearlessly inspecting nuclear installations—not part of that madcap privatisation, and not hoping that it can be kept on track?

Will the President give a serious answer to the anxieties that exist in Scotland? Given the experience of companies such as Guinness, which made commitments that then were broken, British Gas and British Steel, in respect of which commitments were made as part of a privatisation process and then broken, and Britoil, in which case, the President will remember, there was a golden share, why should anyone in Scotland have any confidence in Tory promises, paper guarantees or golden shares that turn to base metal?

Mr. Heseltine

The hon. Gentleman will know that, as I said originally, my right hon. Friend the Secretary of State for Scotland will possess a share, either jointly with myself in respect of a holding company or individually in respect of Scottish Nuclear, to ensure that the proper safeguards are operated. We have gone to considerable lengths to discuss the matter with the parties concerned to ensure that there is a clear understanding of the Government's intention. I must say, more in sorrow than in anger, that I find it intolerable that the hon. Gentleman should think that the inspectorate is capable of being influenced—but he reads the newspapers, so perhaps I do understand why he believes that that is possible.

Mr. Allan Stewart (Eastwood)

In contrast to the neanderthal, knee-jerk reactions of Scottish Opposition Members to my right hon. Friend's statement, I warmly welcome his decision to privatise the nuclear industry. As he knows, a substantial number of my constituents are employed by Scottish Nuclear Ltd. in East Kilbride. Will he confirm my interpretation of his statement that not only will there be no job losses at East Kilbride as a consequence of the decision, but in fact it will create substantial additional employment opportunities?

Mr. Heseltine

My hon. Friend has represented his constituents extremely forcefully and we are well aware of the local concerns about the matter. He will know, as will all hon. Members who are interested in this subject, that there have been significant job losses in Scottish Nuclear in recent times. That is a feature of the modernisation of many of our major companies. I have made it clear that we think that some 100 jobs will be created in Scotland which would not exist if it were not for the announcement.

Dr. Jeremy Bray (Motherwell, South)

Is the President aware that he is undermining the future of commercial nuclear power by hiding its capital costs from public view? If and when future hydrocarbon costs move in a direction whereby nuclear power becomes fully competitive, taking into account capital costs, is the President not aware that there will be a long lag? The nuclear power industry is so profitable and it is so ready to invest that it will bitterly regret the many years of neglect of research and development and investment under this Government.

Mr. Heseltine

The hon. Gentleman need not be so pessimistic. The fact is that it is the easiest thing in the world to hide the capital costs in the public sector, but one cannot hide the capital costs in the private sector. While I would be the first to recognise that the hon. Gentleman makes a valid point about the absence of clear financial disciplines under the present regimes, that is a criticism which could be levelled at the public sector owning and operating any industry.

The costs of the new company that we are talking about today will be clear. It will have to raise its funds from the market place and remunerate them in the proper way. I hope to see the market change and the hon. Gentleman may be right in expecting to see relative cost changes. It takes about 10 years to build a new nuclear station, and that is not an impossible time scale in the context of the hon. Gentleman's remarks.

Mr. Den Dover (Chorley)

A few years ago the Government were quite right to hold back from privatising the nuclear industry. However, today's announcement deserves great praise because it shows that we are continuing the privatisation of the power industry in a practical and a pragmatic manner.

Mr. Heseltine

I am most grateful to my hon. Friend. I believe that he is right and, as with all the other privatisation measures that we have taken and have had to fight to get through Parliament, I am sure that this measure will prove justified also.

Mr. Tam Dalyell (Linlithgow)

Why has no mention been made of the need for a group safety director to serve on the main holding company board? What engineering functions does the Secretary of State have in mind in the context of his statement about engineering functions coming to Scotland? Does he accept that, unless the apparatus of the safety monitoring mechanism and key engineering functions come to the headquarters, he might as well be putting up a brass plate in Edinburgh and little else?

Mr. Heseltine

I am surprised that it has taken the hon. Gentleman so long to come to that view. The nuclear installations inspectorate has operated for many years and it has the power to say whether it wants safety directors to serve on the boards of companies. When it was in power, the Labour party had every chance to influence the nuclear installations inspectorate.

The hon. Gentleman has asked a question to which the obvious answer is: the nuclear installations inspectorate has not thought it necessary, as part of its rigorous and world-renowned regime, to state that a safety director should serve on the boards of companies. I have no concerns about the proposal if the experts, who are charged by the House to carry out their responsibilities in the area, think that it is necessary. I would not wish to undermine the hon. Gentleman's credibility, but I must tell him that it would take more than a parliamentary question from him to persuade me.

Mr. Phil Gallie (Ayr)

As a supporter of the nuclear industry, unlike most Opposition Members, may I welcome the move to privatise it? That is the only means of bringing about investment and further development. I also welcome the announcement of new jobs in Scotland, and the opportunities for more engineering jobs that will go with the investment and development. May I remind my right hon. Friend that, if he and his predecessors had, listened to Opposition Members, there would have been no Torness?

Mr. Heseltine

My hon. Friend is absolutely right. We would not have had any of the great privatised companies either, if I had listened to the Labour party. It is simply because the Government have had the guts to do what they have done that we have so many world-class players, converted out of the public sector and turned into world-class private sector companies.

Mr. Dennis Skinner (Bolsover)

Have we not reached a sorry state of affairs, when the Government who privatised rain are now privatising radiation? What guarantee have we that the President of the Board of Trade will not do the same trick as he pulled with the coal industry and organise a shabby deal with one of his Tory friends, as he did when he sold the coal industry to R. J. Budge? Will he guarantee that this time he will not engage in a crooked deal—[HON. MEMBERS: "Withdraw."]—or refuse to examine it when requested to in the House? What guarantees have we that the same thing will not happen again?

Madam Speaker

Order. The hon. Gentleman has used language and accusations that are unacceptable in the House. I ask him—

Mr. Skinner

It was all on "Panorama".

Madam Speaker

We are not on "Panorama" in the House, thank goodness. I should be grateful if the hon. Gentleman would rephrase what he has just said—

Mr. Skinner

No. It was a crooked deal.

Madam Speaker

Order. I cannot accept what the hon. Gentleman is saying. If he wishes to rephrase it of course I shall accept it and call on the Secretary of State to respond.

Mr. Skinner

I have no intention of withdrawing the fact that the Government engaged in a crooked deal to sell off the English part of the coal industry to R. J. Budge—one of their Tory friends, and a director who had been discredited before the sale took place.

Madam Speaker

If that is the case, in accordance with the power given me by Standing Order No. 42 I order the hon. Gentleman to withdraw immediately from the House for the remainder of this day's sitting.

The hon. Member then withdrew.

Mr. Douglas French (Gloucester)

Notwithstanding the commercial logic of privatisation, is my right hon. Friend aware that his announcement will cause considerable anguish and anxiety to my 900 constituents who work at Nuclear Electric in Barnwood in Gloucester? Is he aware that his statement, although strong on job creation in Scotland, said little about job implications in Gloucester? In particular, would it not be possible to reconsider the proposed changes on the Magnox front? Magnox could easily have been left in the hands of Nuclear Electric at Barnwood, as the management there recommended.

Mr. Heseltine

I want to ensure that my hon. Friend's views are clearly understood, and I should be happy to discuss those matter with him. However, the figures that he mentioned alone suggest that the cause of his concern may not be so substantial. We have talked about an extra 100 jobs in Scotland, and my hon. Friend is talking about a constituency interest involving 900 jobs, so it should be reasonable for us to allay his anxieties.

Mr. Dafydd Wigley (Caernarfon)

As I have constituents who work in the two Magnox stations in Gwynnedd, and as that county has suffered more than any other and still suffers from the effects of Chernobyl, the President of the Board of Trade will understand if I press him on his statement about minimising back-end costs in respect of Magnox stations. Will he give an assurance that adequate funds will be available from the public purse, as necessary, to ensure that any decommissioning of those stations is done in a thoroughly safe manner and that no risks whatsoever will be taken when their life comes to an end?

Mr. Heseltine


Mr. Richard Alexander (Newark)

Is my right hon. Friend aware that his decision will be welcomed by the coal industry, which feels that its competitiveness has been undermined by the nuclear levy for far too long? Does he agree that, at long last, that industry can compete on much more equal terms with other potential providers of energy?

Mr. Heseltine

I hear what my hon. Friend says and, of course, it must be true, but the most exciting development for the coal industry is its enhanced competitiveness and productivity following privatisation.

Mr. Malcolm Chisholm (Edinburgh, Leith)

Was not The Economist magazine right when it said that it was a short-term financial fiddle to help the Tories but not the country? Why should the Government cherry-pick the nuclear industry so that a few individuals can make a great deal of money, while the vast majority of the British people are bribed with their own money in the short run and have to face higher taxes to pay for decommissioning costs in the long run?

Mr. Heseltine

The hon. Gentleman will know that the same question was asked earlier and I answered it. In respect of the Magnox stations in the public sector and the Nuclear Electric stations in the private sector, there will be segregated funds to ensure that the costs of decommissioning are met as the consumption of electricity increases.

Mr. Piers Merchant (Beckenham)

May I congratulate my right hon. Friend on a masterstroke? Is not the fact that he has been able to reach absolutely the right conclusion a tribute not just to him, which it is, but to the work of Nuclear Electric and Scottish Nuclear over recent years? Does he agree that privatisation will benefit the consumer with lower prices, the taxpayer because of the proceeds of privatisation, the industry by giving it independence, and British exports by setting Britain's nuclear industry free to compete and thrive on the world market?

Mr. Heseltine

My hon. Friend has, in summary, set out the excellent ideas that were enshrined in his pamphlet. I agree exactly with him. I should say to the hon. Member for Edinburgh, Leith (Mr. Chisholm) that the segregated funds that I mentioned will be in the private sector, applying to arrangements in respect of Nuclear Electric and Scottish Electric. There are no segregated funds in the public sector, but that will not prejudice the spirit of what I said.

Mr. Mike O'Brien (Warwickshire, North)

Should not potential investors beware? Has not the President of the Board of Trade said that he will not interfere with the competition policy of the regulator, who has said that PowerGen and National Power are too large and must divest themselves of certain parts of their organisations? Therefore, potential investors may be investing in an organisation that may be ordered to be broken up by the regulator shortly thereafter.

Mr. Heseltine

The regulator will want to comment on those matters, but the House will appreciate that, on the announcement that I have made today, the nuclear companies will increase their share of the market. If anything, we are enhancing competition by splitting the nuclear industry into a public and private sector. There will be a free-standing Magnox company and a privatised company. It is a matter entirely for the regulator to decide his own views, but competition is enhanced, not diminished, by what I have said today.

Mr. Michael Stern (Bristol, North-West)

Does my right hon. Friend agree that the success of the privatisation will depend entirely on the mix of assets, liabilities, income streams and planning permissions—such as that at Hinckley C—that are passed to the new company? In particular, will he confirm that the segregated funds for future decommissioning liabilities will consist of liquid rather than trade assets, so that the public can be reassured that there will be no core in 50 or 100 years time?

Mr. Heseltine

In respect of the private sector, following the answer that I have just given, we certainly accept the spirit of what my hon. Friend says. We expect them to be cash or liquid funds, but we shall examine the matters in detail.

Mr. Alan W. Williams (Carmarthen)

I disagree with virtually all the right hon. Gentleman's arguments in favour of privatisation, but does he realise that his announcement today will kill off the nuclear industry, that, if the nuclear industry had been in private hands, no nuclear reactors would ever have been built, and that the privatised nuclear industry that the right hon. Gentleman has announced today will never build any new nuclear power stations?

Mr. Heseltine

I do not know which Sunday newspapers the hon. Gentleman reads, but I could not help noticing that The Independent on Sunday, not a newspaper overwhelmingly committed to the Conservative cause, said: Privately owned nuclear stations are not unusual. Outside Britain, the majority are already in the private sector, including plants in the United States, Spain, Sweden, Belgium, Germany and Japan. It is a little rash for the hon. Gentleman to suggest that none would have been built here under the private sector.

Mr. Ian Bruce (South Dorset)

The House will not be surprised that my right hon. Friend believes that, as the review says, the private sector will not want to finance a new nuclear power station now, but if a future management of the company wanted to ask the private sector whether it was willing to finance Sizewell C, or some other nuclear power plant, to get on with that and to find the funds, would he encourage them if it could be done without any public subsidy?

Mr. Heseltine

My hon. Friend hits the nail on the head. As long as there were no public subsidy, and subject to the usual statutory procedures, I would encourage it, yes.

Mr. Martin O'Neill (Clackmannan)

The Secretary of State has made repeated references to the importance of nuclear safety, and he has correctly identified the publicly owned nuclear industry as a major contributor to that safety. As the nuclear installations inspectorate is considerably smaller than many of its international comparators, what guarantee can the right hon. Gentleman give that, in the private sector, shareholders will continue to give the same commitment in terms of expenditure and resources to safety and investment in research so that the companies will be able to carry on in the future and the safety measures in particular will be stressed? At the moment, we have a small inspectorate and a large commitment from the nuclear industry to safety. How can the right hon. Gentleman guarantee that that will continue under the new owners?

Mr. Heseltine

It will continue in exactly the same way as it continued under the Labour Government when they licensed private sector nuclear sites. The same inspectorate will carry out its statutory duties. Neither this Government nor any other Government would dare to try to influence the nuclear installations inspectorate in, or prevent it from, the proper exercise of its duty. To suggest anything other than that is, frankly, to cast a slur on a distinguished group of men and women doing a thoroughly honourable job.