§ 2.49 p.m.
§ LORD DELACOURT-SMITH
My Lords, I beg to move that this Bill be now read a second time. It signalises an important stage in the history and development of the United Kingdom atomic energy industry, and perhaps I could most usefully begin by trying to indicate the antecedents of the Bill. In 1954, the Atomic Energy Authority was set up with three main tasks: research and development for atomic weapons, research and development for nuclear power, and the production of nuclear materials. The plants for the production of these materials were established at Windscale, Calder Hall, Springfields, Chapelcross and, later, Capenhurst. At first they produced materials for nuclear weapons, but rapid progress was made with the development of nuclear reactors for electricity generation, and when the country embarked on the first nuclear power programme, based on the Magnox reactor, originally designed primarily for military purposes, the Authority applied the formidable expertise it had acquired in military materials to the large-scale production of fuel elements for civilian use. These civil production activities 323 had become a substantial business by 1965 when the Authority, with the approval of the Government, created a trading fund, so that its production business could be separately accounted for and managed on a more commercial basis.
The year 1965 was also an important year in the development of nuclear power in this country for another reason: it saw the first commercial order for a new type of nuclear reactor, the Advanced Gas-cooled Reactor, which for the first time offered us the prospect of nuclear power at lower cost than that which could be obtained from the most modern power stations burning conventional fuels. Nuclear energy now supplies 12 per cent. of the electricity we consume, and this percentage is continuing to rise. Perhaps more significant is the fact that at present over half the generating capacity ordered in recent years by the Generating Boards has been nuclear capacity. I should perhaps say that this does not of course mean that nuclear power generation will replace generation by other fuels in the foreseeable future. Indeed, the main fuel for this is, and will remain for many years, coal. It means, however, that nuclear energy has now acquired an importance which confers a corresponding importance on the organisation for supplying the nuclear fuel from which the energy is derived.
The breakthrough of nuclear energy into commercial competitiveness meant that it had, so to speak, come of age. This carried with it far-reaching implications for the organisation of the country's nuclear activities. Although important development programmes remained to be carried out, the exploration stage of nuclear energy, when the emphasis had been primarily on research and development, had now been successfully accomplished, and a new form of organisation had to be found, more suited to the commercial exploitation of the technology which had arisen from those successes. This was the problem which the Select Committee on Science and Technology examined in 1967, and this was the back-ground to the Government's plan for the reorganisation of the industry which my right honourable friend the Minister of Technology announced in July, 1968.
324 That plan was, in effect, in three stages. The first stage envisaged the formation of the two reactor design and construction companies, replacing the three previous consortia, and incorporating design teams from the Atomic Energy Authority, while the Authority itself would withdraw from the commercial design of power reactors, and concentrate on research and development. That stage is now substantially complete; the two companies are now in business, the Authority has taken up a 20 per cent. shareholding in each of them, pending the formation of the Nuclear Fuel Company (to which I will come a little later) and a number of Authority design and development staff have transferred to one of the companies.
The second stage in the comprehensive development is the one with which this Bill is concerned. It involves the creation of a more commercial organisation for the Authority's fuel production business, by establishing it as a separate Government-controlled company, to be called British Nuclear Fuels, Limited. This will be set up for the purpose under the Companies Acts, and it will take over the Authority's 20 per cent. holdings in the two reactor companies. This measure also involves, as a corollary and on a smaller scale, the transfer of the Authority's other production activity, the highly successful radio-isotope business, to another, separate limited company, also Government-controlled, the Radiochemical Centre, Limited. Thus, these two companies will between them take over substantially the activities which until now have been covered by the trading fund established in 1965.
So far as the third stage of the reorganisation is concerned, we have already had a debate in your Lordships' House in so far as the remaining research and development activities of the Authority will be involved with the creation of an Atomic Energy Board to advise the Government on reactor development policy, as indicated in the Green Paper published in January and debated in this House on February 5.
The scope of this reorganisation has thus been very wide. Perhaps I may at this stage say a word about one of the principles that the Government have in mind in undertaking it; this is the principle of combining the strength of a successful public enterprise with that of 325 private industry on the basis of partnership. It is argued in some quarters that public and private enterprise are necessarily incompatible, or indeed mutually opposed, and cannot work together. This is not a view which the Government adopt; they do not believe in this conflict, and the re-structured nuclear industry will, the Government hope, embody a fruitful partnership between the public and private sectors.
So far as the proposed nuclear fuel business is concerned, of course nuclear fuel is already big business, and is likely to become much bigger business in the next few years. The home market for nuclear fuel is worth over £25 million a year, and is growing rapidly. The continuance of this growth will depend upon the continuance of competitiveness of nuclear power with other fuels; but it is the general expectation that by the end of the 1970s the market will be about five times its present size. The world market is already worth over £100 million, and by 1980 it is confidently expected to be worth more than £1,000 million a year. So the opportunities presented by this fast growing world market are most encouraging.
The Atomic Energy Authority has already built up a thriving export trade. In its last financial year it won orders worth some £11½ million. The growth of the market means that competition is very strong; but examples have come to mind of the Authority's success, such as the recent contract secured by the Authority to supply fuel to an American-built reactor in Holland, and other con-tracts secured to re-process the fuel from American-designed reactors in various places on the Continent of Europe.
As I have already suggested, these developments are promising. But the market is one which in most countries is strongly subject to political influences. A number of countries are anxious to be self-sufficient, if they can, rather than have to rely upon supplies from abroad. A successful nuclear fuel business will therefore need to be international in its operations. The Authority has already formed partnerships with commercial enterprises overseas, and these developments can be expected to receive a fresh impetus once the British business is itself organised as a normal industrial under-taking.
326 On the other side of the activities which will pass to the two new companies, the radio-isotope production activities at the Radio Chemical Centre at Amersham are a good deal smaller, as I have already indicated, but a great deal more diverse than the fuel business. The uses to which radio-isotopes can be put are legion, and are growing year by year. They are used as tracers in academic research and have contributed greatly to the growth of basic knowledge in the life sciences. In medicine they have extended the range of radiotherapy and introduced some radically new methods of diagnosis. In industry they are making a substantial contribution to manufacturing efficiency, chiefly in the field of non-destructive testing. The Radiochemical Centre deals with thousands of customers all over the world and despatches tens of thousands of consignments. Its record of growth and profitability is a consistent one, and it has consistently sold over half its output abroad.
The central purpose of the Bill is therefore a very simple one: to transfer the relevant assets and activities of the Atomic Energy Authority to the two new companies. Noble Lords will appreciate, I am sure, that as the new companies are intended to be set up under the Companies Acts and to be subject to the provisions of those Acts and to their own Memoranda and Articles of Association, the Bill does not have to provide for their structure and organisation in the manner that a Bill setting up a statutory corporation does. The intention of the Government is that the companies should be registered before the Bill is enacted, but after each House of Parliament has approved the principle of the Bill by granting it a Second Reading. It may well be that the constitution of the companies at this stage will be of interest to some noble Lords, and I have there-fore arranged for their draft Memoranda and Articles to be placed in the Library of your Lordships' House.
The Authority establishments to be transferred to British Nuclear Fuels Limited, are, first of all, that at Capenhurst, Cheshire, the main function of which is the enrichment of uranium for use in the more highly rated fuel elements used in the Advanced Gas-cooled Reactor and other advanced 327 reactor systems. Then, secondly, there is Springfields, where uranium is extracted from ore and reduced to a form suitable for enrichment, and fuel elements of all types in current use are fabricated for supply to reactor operators. Thirdly, there is Windscale, in Cumber-land, where the spent fuel elements are returned for re-processing after use for the extraction of valuable plutonium and for the safe disposal of radioactive by-products, and where the Calder Hall nuclear power station is situated. Fourthly, there is the similar nuclear power station at Chapelcross, in Dumfriesshire. The main function of these power stations is now the supply of electricity to the national grid, but they are also used for the production of plutonium and the experimental irradiation of nuclear fuel elements. The Authority will, however, retain the exclusive use of their research and development laboratories, both at Spring-fields and at Windscale.
In respect of Radiochemical work, the Bill transfers the Radiochemical Centre at Amersham to the second of the two new companies, together with certain activities and facilities belonging to the Radiochemical Centre at Harwell. A number of the establishments to which I have referred are of course in development areas, and I am glad to say that the expansion of the nuclear fuel business over the next five years is expected to bring some hundreds of new jobs to those development areas.
It may be asked, why new limited companies incorporated under the Companies Acts have been chosen as vehicles for the development of these two successful businesses, rather than the establishment of new statutory corporations. The Select Committee on Science and Technology, to which I referred earlier, recommended a company as the most appropriate vehicle for the fuel-cycle business, and the Government have agreed with that recommendation. I have already mentioned (and it is clearly one of the reasons for this decision) the increasingly international character of the business. The developing network of international partnerships which it is expected will take shape will present fewer complications if companies overseas are linking up with a company in the United King- 328 dom. By far the most important of these developments will be the Anglo/ Dutch/German centrifuge enrichment project, in which British Nuclear Fuels Limited will, if Parliament enacts this Bill, be the British participant.
Secondly, in choosing a company as the vehicle the Government have emphasised the commercial nature of the undertaking, after a period during which in this, as in many other countries, the development of nuclear energy was undertaken as a matter of national policy rather than primarily for commercial reasons. The third reason which has weighed with the Government in this connection is the hope that suitable firms in private industry which are able to offer relevant expertise of one kind or another will choose to participate directly in the fuel company by taking minority holdings in its capital. This would provide a means by which it could gain access to the marketing organisations of British international companies and also to the financial and commercial skills which are necessary to the development of an international business. And to the extent that private loan and share capital is forthcoming, the calls on the Exchequer to finance the business will be reduced.
There are, however, three main respects in which the philosophy of setting up the companies as ordinary commercial undertakings must be subject to limitations which are imposed by the circumstances of this particular case. The first of these limitations is that the Bill requires the Government to retain permanently a controlling interest in the capital of the companies, either directly or through the Atomic Energy Authority as the Government's agent. It would, in the view of the Government, be quite wrong to allow such an important activity to pass out of public hands. Many of the operations of the fuel company in particular are likely to be very sensitive from the point of view of national security. The company will be engaged in the enrichment of uranium and the separation of plutonium, as well as the supply of fissile materials for military purposes. The Government have decided that it would not be right in such circumstances for the Bill to make it possible for the fuel company to pass outside their own ultimate control, and it is the intention to treat the radiochemical company in the same way. Initially the 329 capital of the companies will be held by the Authority, and they will remain subsidiaries of the Authority for a period while their affairs are disentangled from the parent body. But the Bill contains a provision which will permit the Minister to transfer the controlling Government holding in the companies to himself.
The second of the limitations that I mentioned also relates to national security. The Nuclear Fuel Company will pose a new kind of problem from the security point of view, and the problem arises because, in addition to having classified Government contracts, the company will be handling, and indeed genera-ting, secret information of a particularly sensitive character, but for purely civilian rather than military purposes. Other companies, and particularly the British arm of the international enrichment venture, will eventually raise the same problem, and the Bill deals with it by means of a Schedule of special security provisions which are very similar to those which were enacted for the Atomic Energy Authority itself when it was set up in 1954. These are, it is true, strong measures to apply to a commercial company, but the Government are convinced that the circumstances of the case justify their inclusion in the Bill before your Lordships. I should add that because they will be engaged in activities with which the Nuclear Installations Act 1965 is concerned, both new companies will be subject to that Act and to the inspection and licensing provisions which are part of it, but from which the Authority itself is exempt. Furthermore, that Act at present prohibits certain nuclear processes, except for the purposes of research and development, and the Bill therefore proposes an amendment to it empowering the Minister to allow those processes under permit.
The third limitation relates to the Authority staff whose work is being taken over by the companies. The Bill transfers them to the companies with their work. It has not been possible to allow them the option of remaining with the Authority, and so the Bill lays upon the new companies an obligation, to which the Government attach great importance, to provide terms and conditions of ser-vice for the transferred staff which are no less favourable, taken as a whole, than those they had under the Authority. The 330 Bill requires the companies to create suit-able machinery for negotiation on pay and conditions of service, and provides a right of appeal to arbitration in the event of any dispute as to whether the "not less favourable" stipulation has been met. The Bill also safeguards the pension entitlement of the transferred staff by providing for them to remain members of the Authority's superannuation schemes until the Minister is satisfied that the companies have introduced schemes of their own which are no less favourable than those of the Authority at the time.
The Bill provides for the companies to inherit the assets and liabilities of the Atomic Energy Authority's trading fund, including the loan on capital account. It also requires the companies, after taking account of the loan, to issue shares to the Authority in consideration of the difference between the value of the assets to be transferred and the liabilities. The assets would be transferred at their book values adjusted for some plants where the Authority have revised their estimates of the depreciation periods appropriate to the plants concerned, and no attempt is being made at this stage to assess the commercial value of the companies' assets or shares. Initially, all the shares will be held in the public sector which will receive all dividends, and their value will make no difference to the return which the public sector will receive, until the time comes for shares to be sold outside the public sector. Before then nothing must be done which would prejudice any negotiation for an appropriate price for the sale of the shares. Of course, when that time comes professional advice will be taken.
I have already touched on the possibilities for expansion which lie ahead of British Nuclear Fuels Limited, and a substantial programme of capital investment is needed over the next five years to cater for this. The Government, as I have said, hope that private interests will be willing to contribute to this programme, but public money will be needed as well, and the Bill contains provisions allowing the Minister and the Authority to make the necessary finance available.
To conclude, my Lords, the Government hope that if Parliament approves the Bill the two companies will be able 331 to start trading on October 1 this year. They will each be inheriting a sound business serving an expanding market. Both companies will be carrying further the strong tradition of successful public enterprise for which the Atomic Energy Authority is known. They will be making an important and growing contribution to the balance of payments, and to our industrial and medical needs at home; and, in particular, to the cheaper, cleaner provision of electric power which atomic energy is making possible. I trust that your Lordships will be willing to accord the Bill a Second Reading. My Lords, I beg to move.
§ Moved, That the Bill be now read 2a— (Lord Delacourt-Smith.)
§ 3.14 p.m.
THE EARL OF BESSBOROUGH
My Lords, we must thank the noble Lord, Lord Delacourt-Smith, for explaining so clearly this important Bill, which has not yet been dealt with in another place: it has come to us first. We certainly support the principle lying behind the Bill. I remember, indeed, that one of my very last acts as Parliamentary Secretary for Science in October, 1964—over five and a half years ago—was to advocate the establishment of commercial companies, not only for the design and construction of nuclear reactors but also for nuclear fuels and isotopes, somewhat on the lines suggested in this Bill.
I did that after having made a study not only of the Atomic Energy Authority in this country, but also of the way in which the Americans were then handling these problems through their own Atomic Energy Commission. The American A.E.C. did not design or construct nuclear reactors; that was left to G.E.C. and Westinghouse. Nor were they responsible for selling fuel or isotopes. The A.E.C. in America are purely an administrative body, and it seemed at that time, already five and a half years ago, that the American system was operating more effectively than our own.
It took some time for the present Government to come round to this way of thinking, after very considerable discussion in the Select Committee on Science and Technology in another place. But, as I said in our recent debate on the 332 Green Paper proposing the establishment of a new British Research and Development Corporation, which would absorb certain establishments at present part of the A.E.A., it was reassuring that the Ministry of Technology now recognised that as a general rule only the customer knows what he wants (I am quoting from the Green Paper), and by his readiness to pay for it makes the supplier aware of his requirements.
I was glad to note, too, that the Green Paper stated that a contractual relationship between Government laboratories and their customers was essential if the programmes and size of these establishments were to be directly related to real needs. The Government—or, shall I say, at least the Ministry of Technology, for this was only a Green Paper—seem to be coming round to our way of thinking in these matters, both in the formation of the two new design and construction companies and in the formation of the two companies mentioned specifically in this Bill. The Bill is indeed closely related to the Green Paper, and I think it not inappropriate for me to say here that I do not think that the Government have faced up to the running-down of A.E.A.'s staff. The creation of a B.R.D.C. may be proving a convenient way of avoiding this problem. I have also read the strong criticisms of the proposed new British Research and Development Corporation which have been made, not only by the Institution of Professional Civil Servants but also by Dr. Lawrence Pilkington who, as your Lordships know, is not only a director of Pilkington Brothers but also chairman of the Conference of Industrial Research Associations.
I think that, generally, informed opinion is becoming more and more critical of the proposal to set up a B.R.D.C., and I certainly wonder whether the Government will be in a position to make up their minds as they have indicated, perhaps by June, regarding the establishment of such a Corporation. No doubt, if we have another debate on the Green Paper, on the Motion of the noble Earl, Lord Shannon, we can discuss this matter in greater detail. This afternoon, however, we are concerned entirely with the formation of these two new companies and the precise terms of the Bill. I should say here that I regret that there has been such long delay in bringing forward this 333 legislation. In the Report of the Select Committee on the Nuclear Power Indus-try, published on July 24, 1969, the Committee were already then critical about the progress of reorganisation in the atomic energy industry.
On the question of the intention to set up a nuclear fuel company, the Committee pointed out in July last year that the Minister had declared over twelve months previously his intention to introduce legislation to establish it in the place of the A.E.A.'s fuel business. The Committee pointed out that much depended on speedy action and that the extent to which the companies were enabled to participate in fuel manufacture and re-processing would be a further indication of the seriousness of the Government's intention that competitive industry should be entrusted with the nation's nuclear power industry. It must therefore be, I would judge, nearly two years now between the statement of this intention and the introduction of this Bill. Despite the delay, we none the less, as I say, welcome the principle underlying it.
I note, too, that it was already in July, 1968, that the Minister stated in another place that, in addition to asking the Industrial Reorganisation Corporation to assist in the creation of the two new design and construction organisations, it would also be advisable to establish the Authority's fuel business as a publicly owned company under the Companies Act. That was in July, 1968. The Minister stated then that, in order to emphasise the interdependence of fuel and reactor design and supply, the Government intended that the fuel company should take up and hold minority share-holding in each of the two design and construction organisations. He also said that since the establishment of the fuel company would require legislation he was pressing that initially the Government shareholding should be taken up by the A.E.A.
In his letter to the chairman of the Industrial Reorganisation Corporation Mr. Benn made a number of points—this was already in July, 1968—with all of which I will not burden your Lordships but which I think in a general way we welcomed. We welcomed in particular the intention to create an organisation which would permit the sort of international industrial links which would be 334 of critical importance in all sectors of advanced industry and not just in atomic energy, and that this should be done with a special eye upon the future of the European nuclear industry in co-operation with our partners in Europe. As the noble Lord has said, the intention is that the new fuel company should be the British member of the new European Nuclear Fuel Consortium which it is proposed will manufacture uranium by the new centrifuge process. This is to be welcomed. But again there has been considerable delay, and I think I am right in saying that our German and Dutch partners have for some weeks been ready to establish the European Consortium and that British dilatoriness in the formation of our own fuel company has held up its establishment and getting on with the work at a time when our main competitors in the United States have been pressing on hard. I hope, therefore, that this Bill, appropriately amended, will have a speedy pas-sage through Parliament; but there have been these delays.
I should none the less say that we on this side of the House may have Amendments to put down, especially in regard to Clause 11, in which it is stated:The Minister may at any time by order made by statutory instrument transfer to himself all or any of the shares in either of the companies which are for the time being held by the Authority …Then, more particularly, in subsection (3) of Clause 11, that:… the shares in the company held by the Authority or by the Ministershouldcarry in the aggregate more than half of the voting rights exercisable at general meetings …My Lords, even if at the outset the Minister and the A.E.A. may have a majority holding in the companies, I am very doubtful whether this should be specifically written into the Bill. We may well come to the point where these two companies are profit-making—indeed, in a sense they already are now—and would be appropriate companies in which the public should be entitled to invest. We know already from the Explanatory Memorandum on the financial effects of the Bill and from what the noble Lord has said this afternoon that the parts of the Authority's undertaking which are to be transferred to the companies are all 335 financed out of the Authority's trading fund, which has always traded at a net surplus; and the noble Lord gave us some impressive figures. Indeed, it is stated in the Memorandum itself that the estimated amount of that surplus for the financial year ending on March 31, 1970, is not less than £3.5 million in respect of the activities which will be transferred to Nuclear Fuels Limited and about £200,000 in respect of the activities to be transferred to the Radiochemical Centre Limited.
Personally, I see no reason why these companies should always remain under Government control. The Minister has said that there are certain security aspects, secrecy, involved which make it necessary for the Government to maintain control; but, frankly, I do not think that this is a good enough excuse. The products of the companies can be supplied by other countries of the world, and I think it would be altogether beneficial if these companies could operate on a strictly commercial basis. I will not go into this matter further this afternoon, but it is probable, therefore, that on Committee stage we may put down Amendments deleting those passages in Clause 11 to which I have referred.
I should now like to ask the Minister certain questions—I am sorry to be so long, but this is an important Bill— arising out of the views of the Institution of Professional Civil Servants. The Institution notes that the surpluses I have mentioned are expected to continue but that no estimate can at present be made of the amounts which might accrue to the consolidated fund by way of distributed profits. It seems to me, my Lords, quite natural for the staffs concerned to say that they would welcome a more precise statement than this, since the security of their employment will largely depend on the future success of the companies. I think the staff are right to ask for further clarification on the likely market during the next five to ten years—perhaps the noble Lord has to some extent answered this point—and that it is fair to ask for further clarification on the share of the market which the new companies can expect to obtain and on the implications as to the size and character of its staff. And, of course, they would also like to 336 have further information about dividend policy.
In regard to Clause 8, concerning transfers of staff, I note that the Authority employees engaged in that part of the A.E.A.'s undertaking which is being transferred to the new companies will automatically become employees of the appropriate company on the appointed day. The Institution of Professional Civil Servants say that this is an extremely unusual provision, in that staff are not given an option as to whether they would prefer to transfer to the companies or remain with the Authority. I understand that the Minister of Technology feels that the only practical proposition is to provide for the automatic transfer of staff, and that there is a special obligation to ensure that the terms and conditions of service with the new companies are satisfactory. I do realise, however, that staff are likely to be concerned about being transferred automatically, ignorant of what their future terms of service will be. I think that staff are entitled to know precisely where they will stand during the interim period, and that they should be given a clear statement of their position. I see, too, their point that staff should have an assurance that they will get the benefit of any change in Authority terms and conditions of service.
Capenhurst, which the noble Lord mentioned, houses a fairly large development team engaged upon the new centrifuge process. This will be the only development project of any size within British Nuclear Fuels. The major part of the development work at the other sites— Springfields and Windscale—will, I understand, remain with the Authority. Some staff are therefore concerned that when the development work on the centrifuge proces is in due course run down from its present high level of activity there will be no alternative work for this development team. I think it reasonable that staff should ask for an assurance that if they are run down or run out of work then the Government will make every effort to find them work elsewhere.
On the question of pensions schemes in Clause 19, I am also inclined to appreciate the point made by the Institution that it sees no practical or other need to establish what seem to be three 337 separate superannuation schemes, one for the Authority and one for each of the two companies; and that there will no doubt be a need to interchange expertise between the companies and the Authority. Ever since reading the Sutherland Report on Government Research Establishments and Universities I have thought it would be desirable if we could adopt in this country a system similar to that which obtains in Sweden, whereby staff in industry, in Government establishments and in universities have transferrable pension rights. I have mentioned this point in your Lordships' House before. This would greatly ease the interchange, and I was hoping that Mr. Crossman was going to do something about it. I believe that there would be great advantages in this country in simplifying and rationalising, rather than further complicating pension arrangements, as is done in this Bill. I know that the Minister said that it would not be appropriate for the new company staff to remain permanently in a public service scheme.
Of course, the I.P.C.S. are unhappy about this, too. They do not under-stand why it should be inappropriate for the staff of the companies to remain in a public service scheme. They note also—and this is very interesting—that when staff were transferred from the Atomic Energy Authority to the Nuclear Power Group that company agreed immediately to amend its scheme to provide benefits comparable with those obtaining in the A.E.A. I think that the I.P.C.S. have made a good point here. However, if Clause 19 remains unamended the Minister will have power to order that no pension scheme maintained by the Authority shall apply to any persons employed by the companies, irrespective of whether the companies are satisfied that the terms of the new scheme are no less favourable to them than the Authority scheme.
The Bill proposes that staff should be transferred to the new companies on their present terms but that these shall be only temporary (and this is what is worrying them), the final terms to be decided by the companies in consultation with any organisation appearing to them to be appropriate. I hope that in fact the organisation consulted will be the 338 Institution. The staff believe that they should not be compulsorily transferred to a new organisation with undefined terms of employment and that Parliament should not pass a Bill which does this. I should be grateful if the noble Lord could say something on this point. He knows much more about trade union question and, no doubt, the work of this Institution than I do: he is highly qualified to reply on these points.
In regard to the rump of the A.E.A., in our view there may be a need for an A.E.A. nucleus—an Atomic Energy Board of the kind mentioned by the noble Lord—to give independent advice to the Government on certain hardcore public services. Defence applications are no doubt transferred to the Ministry of Defence, but there may be a case for certain residual activities being transferred to a kind of research association, a kind of A.E.R.A., in which industry, customers such as C.E.G.B., as well as the Government, would make their contribution. I put this forward merely as a suggestion.
Finally, my Lords, I do not want to be responsible for delaying further the passage of the Second Reading of this Bill: it has already been relayed sufficiently in drafting. In view of the fact that most of your Lordships are no doubt waiting to listen to what is being said in another place, I think that we should now, as I have said, give this Bill a Second Reading, and our more detailed views on specific clauses can be made at the Committee stage. However, I should be interested to hear the Government's preliminary observations on what I have said this afternoon.
§ LORD CAMOYS
My Lords, I hope that it is not improper at this moment for me to congratulate the noble Earl on what he has said and to support him in every way. I put it to the Government that you cannot move people about with-out giving them somewhere to go to. The Government have failed in their housing programme—I am not trying to be rude; I am only saying that it has not worked. I support the noble Earl in what he has said and I suggest that we should concentrate a little on providing houses near these new companies for those people who would otherwise have long distances to travel to work.
§ 3.35 p.m.
§ LORD SHERFIELD
My Lords, I rise to give a brief but cordial welcome to this Bill. It has often been observed, in this House and outside it, that the American and the British organisations for the exploitation of atomic energy took very different forms. In the United States the development was, from the outset, in the hands of private industrial firms working under contract to the Government through the Atomic Energy Commission. Over the years the A.E.C. has increasingly dismantled its monopoly and licensed private industry to produce and to deal commercially in nuclear pro-ducts. In the United Kingdom, the opposite course of direct State production of all nuclear materials was adopted. Having regard to the experience and capacity in this field of British industry in 1946, that would perhaps have been inevitable, even if a Government favouring private enterprise had been in power. There is therefore, in my opinion, no purpose in lamenting the course that was taken in the United Kingdom and which in fact has been a success, even though the American system has produced a very formidable commercial enterprise.
However, there has for a long time now been a strong case for modifying the British system and handing over more responsiblity and control to private industry. It is in many ways unfortunate that, partly owing to a difference of opinion between the political Parties as to how this should be done, the reorganisation and establishment of two nuclear design and construction companies took so long to bring about. However, that is now safely behind us, and this Bill to set up the nuclear fuel and the radio-chemical companies comes not a moment too soon.
In spite of the lack of success in selling our nuclear reactors overseas, the nuclear fuel and radiochemical business has done very well. The United Kingdom Atomic Energy Authority recognised some time ago the importance of separating off this business and putting it on a commercial basis, and it segregated it in 1964 by setting up the trading fund. This has been well run by the Authority. It has become entirely self-financing and has met its capital requirements without borrowing from the Treasury. Last year the return on nuclear fuel services trading with the United Kingdom Generating 340 Boards met the target rate of 13 per cent. set by the Treasury. As was pointed out by the noble Lord who moved the Second Reading, the Authority has already developed a substantial export business. The Radiochemical Centre at Amersham, in particular, under the able direction of Dr. Grove has shown a remarkable capacity for growth and last year exported 57 per cent. of its production. There is therefore every reason for satisfaction at the achievement of our nuclear fuel business up to the present time.
But it is a logical step and entirely appropriate that the assets of the trading fund should now be transferred to commercial companies and that private industrial firms which have entered the nuclear field should have the opportunity of participating in them. The step is also required in order that this Government may participate in the centrifuge project on equal terms with the German and Dutch Governments. In a wider context, advanced technological industries are becoming more international in character, and the nuclear industry is no exception. As the noble Lord, Lord Delacourt-Smith, said in this connection, the fact that nationalistic and protectionist influences are particularly strong in the nuclear field make it necessary to arrange for these tendencies to be overcome by special arrangements. Our own industrial organisation must be in a position flexibly to adapt itself to those special conditions.
I listened carefully to what the noble Earl, Lord Bessborough, had to say about Clause 11 of the Bill. I must say I do not quite follow the purpose of this clause. Even if it is accepted that the con-trolling interest in these companies should remain in public hands, the Atomic Energy Authority will hold that interest on behalf of the Government. If at any time the Atomic Energy Authority should cease to exist, its functions would presumbably be transferred to some other body, to which the holdings could also be transferred. I should have thought, in principle, that to take back the shares into the Ministry would represent a retrograde step.
My Lords, when the two nuclear design and production companies were set up there was, I know, a good deal of hesitation among some employees of the Authority about transferring out of the public 341 sector. This hesitation about a change was perhaps in itself an indication that a more flexible and commercial system was overdue. I hope that in the case of these two companies there will be less reluctance on the part of those who will transfer to them under the provisions in the Bill. I see no reason to doubt the Minister's assurance that the terms and conditions of service for the staff under the new dispensation will be reasonable and fair.
In practical terms the real change will probably not be very great at the outset, but, in general, our objective surely should be to regard the peaceful applications of nuclear energy increasingly as important commercial and industrial activity like any other major industry. In the United States they are already nearly there. The American Atomic Energy Commission has said that since 1964 the nuclear economic climate has changed to one where virtually all activities are in the commercial/industrial sphere of the nation's economy. In this country the evolution will inevitably take place on a longer time scale, but this Bill represents a further step on the road and I therefore strongly support its Second Reading.
§ 3.43 p.m.
§ LORD DELACOURT-SMITH
My Lords, I am grateful to the noble Lords who have contributed to the debate for what they have said, and I will try to comment on one or two of the points which have been raised. The noble Earl, Lord Bessborough, returned to the question of the British Research and Development Corporation and the Green Paper. If I may say so, he was taking a second bite at the cherry; and if we come at a later stage to the Motion of the noble Earl, Lord Shannon, no doubt he will be able to take a further bite at this topic. But I do not think that it would be generally the wish of your Lordships that I should on this occasion pursue some of the points which the noble Earl raised in that connection.
However, I should like to make a reference to the statement made, or the suggestion which the noble Earl offered, that there had been dilatoriness on the part of Her Majesty's Government in action associated with the tripartite centrifuge scheme, and that this dilatoriness was leading to delays affecting the 342 project as a whole. I am bound to say that I do not find substance in that contention. The discussions leading to this Agreement were of course complex ones, and as I think I indicated when repeating to your Lordships a Statement on the subject made by my right honourable friend, it was envisaged, even when agreement had been announced, that there would be—as has proved to be necessary—discussions on a number of complex questions: establishment, organisation, staffing and so forth. In fact, those discussions are continuing at present. As we foreshadowed at the time, these are complicated issues to resolve, and I could not accept the statement of the noble Earl that there has been some dilatoriness on the part of Her Majesty's Grovernment which contributed to this situation.
THE EARL OF BESSBOROUGH
My Lords, if the noble Lord will permit me to interrupt him for a moment, may I say that both the Germans and the Dutch concerned have told me that we have been responsible for holding up the creation of the new European consortium, and I cannot see any reason why they should mislead me. So I am afraid I cannot let the noble Lord get away with that. It may be that he disagrees with what other countries think, but that, to my knowledge, is their view.
§ LORD DELACOURT-SMITH
My Lords, I do not think that I can, or wish to, add anything to what I have already said on this point. The noble Earl also asked about the staff employed on research and development. There is bound to be a continuing effort on centrifuge research and development for a number of years to come, and there will be close interworking between the staff of the British Nuclear Fuel Company and those who remain with the A.E.A. It is probable that the borderline on research and development between the two organisations may well change.
The noble Earl addressed himself particularly to two points: to the terms of Clause 11 and to the provisions affecting the staff transferring to the companies. On Clause 11, the noble Lord, Lord Sherfield, who speaks with great experience and authority in this field, also questioned some of the provisions in Clause 11. I offered the view that, quite 343 apart from other reasons, there were security grounds which justified the terms of Clause 11 and the maintenance of the predominant holding in public hands.
Even apart from these considerations of security, there may well be differences of view between the two sides of the House upon the propriety of such an important and growing sector of our economy having a predominantly public influence in its ownership. I hope that the noble Earl will, on reflection, agree with me at any rate on this point. He suggested that there was no need—indeed, that it was undesirable—to have provisions in the clause which retained the predominant holding in the hands of the Government, either directly or through the A.E.A. as their agent. He suggested that this was something which could be left until we saw how developments took place. I hope the noble Earl will agree that even if there could be established an overwhelming argument (I do not believe that this would be the case) for allowing the predominant ownership and control of one or both of these companies to pass into private hands, it should be something done only with the distinct and specific assent of Parliament. I hope that the noble Earl will take that into account when considering whether to put down an Amendment at a later stage.
The noble Lord, Lord Sherfield, criticised the possibility envisaged in the clause of the holdings, which will initially be in the hands of the Authority, passing into the hands of the Minister. I think he said that he regarded that as possibly a retrograde step. The situation here is that the Government see the future of the Atomic Energy Authority as a research and development organisation. Incidentally, this is broadly in line with the recommendation of the Select Committee on Science and Technology in their 1967 Report. Possibly, too, we see it as part of a multipurpose research and development corporation, as put forward in the Green Paper which has already been mentioned. I am sure that noble Lords will agree that it will hardly be appropriate, in the interests either of the Authority or of the country, that an Authority which had developed in one of those directions should remain the controlling shareholder in a permanent 344 sense of the companies which we are proposing to set up.
I come lastly to the question of the members of the staff. In the first place, the noble Earl asked me to what extent I could give any kind of estimate of the future trading prospects and share of the market which the companies might expect to gain. I do not think that at this stage I can add much to what I said on this point in asking your Lordships to give this Bill a Second Reading. It is always difficult to make prophecies of this kind, and the further ahead one tries to prophesy, the more difficult it becomes. But I think the facts speak for themselves. These companies will be operating, first of all, on the basis of the good record in the past of the Atomic Energy Authority, and, secondly, in markets which show every sign of growth; and I believe that they will be able to take good advantage of these possibilities.
The question of staff and their conditions is one to which the Government attach a good deal of importance. It may well be that it would be better for us to pursue this matter in more detail at a later stage of the Bill. I am not sure that it will be best for the advancement of this matter for me to attempt to make any detailed observations at this stage, but I should like to make one or two comments on the position. After all, there have already been a number of cases of statutory transfers of staff from one employing authority to another. When a transfer of work or function takes place and a number of staff are involved in it, it is necessary to choose between two methods of dealing with the situation. One is the method of giving individual options to those staff who wish to be transferred with the work. The other is that of effecting a transfer by Statute, as in this case.
It is not easy, in cases where the block of work and the number of staff concerned are substantial, and especially where staff have a measure of specialist expertise, to effect the transfers by individual choice. Where there is a statutory transfer, it is right that the Government should try to make provision in the Statute to see that the individuals who are being transferred by the terms of the Statute should have their positions safe-guarded so far as possible. The experience which there is of these cases shows 345 that difficulties can arise and that careful consideration is necessary.
The noble Earl made the point that it appeared that the staff transferred to the companies would be guaranteed their existing conditions only as a temporary measure and that in due course their conditions would be determined by the new companies, necessarily, as the Statute specifies, in negotiation with the representatives of the staff concerned. But he said that in that sense it seemed that the staff were being transferred with quite undefined and unguaranteed conditions in the long term. But, my Lords, when one comes to think about it, it is exceedingly difficult to give any guarantee in broader or longer terms than the one here proposed. That guarantee is that the staff will be assured of adequate negotiating machinery. If one were going to do anything else, the only form in which one could give a continuing guarantee, envisaging the changing situation over the years to come, would be to link the conditions and pay to some other organisation and I am sure that the noble Earl would be the last person who would advocate, as a permanent arrangement, linking the staff conditions in the companies to the Civil Service or to the Atomic Energy Authority or to some other continuing body. So it is a little difficult to see how one can deal with this problem other than in the way proposed in the Bill.
On the specific question of superannuation, it would be difficult to place staff who are to be in companies which are to operate as commercial companies under the Companies Act, albeit with substantial public shareholding, in an existing public authority superannuation scheme. But we should not overlook the guarantee in the Bill that the Minister must be satisfied that the new superannuation scheme established by the companies provides overall as good conditions before he is willing to allow the transfer from the existing public scheme to take place. As I say, I think that these matters can perhaps be better pursued in more detail at a later stage in the examination of this Bill, although I am sure that none of us is in any doubt of their importance. The observations which have been made by noble Lords in this debate will be taken note of, and I trust that your Lordships 346 will now be prepared to give this Bill an unopposed Second Reading.
§ On Question, Bill read 2a, and committed to a Committee of the Whole House.