HL Deb 18 July 1977 vol 386 cc25-32

3.44 p.m.


My Lords, with the leave of the House I should like to repeat a Statement at present being made in another place by my right honourable friend the Secretary of State for Energy. The Statement is as follows: "The Secretary of State for Industry has informed the House that it has not at this stage proved possible to find an acceptable basis for restructuring the power plant industry. At the same time the Government recognise that the current lack of home orders, together with the relative lack of export opportunities in present economic circumstances, has led to a pressing short-term need for work in sections of the industry. To help with these short-term problems the Government have now decided that it would be right for the Central Electricity Generating Board to place an order for Drax 'B' coal-fired power station and that the order for turbo-generators should be negotiated with C. A. Parsons. "The Central Electricity Generating Board had not planned to place an order for the station before 1979 and the Government have agreed in principle to the payment of compensation to the Board in respect of costs incurred in bringing forward the order.

"The Government further anticipate that, as soon as possible following the thermal reactor decision, an order will be placed for a nuclear station. The power plant industry will also benefit from ongoing repair and maintenance programmes.

"The Government believe that the order for Drax 'B', in addition to benefiting the power plant industry, is a further mark of confidence in the United Kingdom coal industry."

My Lords, that concludes the Statement.

3.46 p.m.


My Lords, we are grateful to the noble Lord for repeating the Statement being made in another place. The Secretary of State for Industry, Mr. Varley, has, at Question Time in another place earlier this after-noon, fully supported the main recommendation of the report of the CPRS, the "think tank", that rationalisation of this sector of the industry is essential if it is to remain competitive in the world market—and it is a world market.

That report was published and has been widely read by competitors all over the world. As the CPRS recommended that there should in the meantime be no orders placed until that rationalisation had been decided upon, there must be grave doubts about the decision announced today. It is contrary to the known views of the Central Electricity Generating Board, the National Enterprise Board, which was recently set up by the Government, and the Department of Industry itself.

I should like to ask the noble Lord this first question: When do the Government expect the rationalisation or, as the Statement calls it, the restructuring, to be started? Do the Government agree with the suggestion of the CPRS that the placing of an order could lead to a dangerous postponement of the changes that are needed? The decision has clearly been taken as one of immediate expediency in order to save some jobs now, but there is a danger that it could well jeopardise many more jobs in the industry in the longer term.

My second question to the noble Lord is this: is the Drax "B" power station still open to competitive tender?—because there is a limit to the extent that Ministers can intervene in these matters. As the noble Lord will have surmised, we on this Bench have more than a suspicion that the Government have not handled this matter at all well or with any great wisdom.

3.48 p.m.


My Lords, is the noble Lord aware that we are pleased that the Government have accepted the recommendation which, on behalf of our Party, I made in the debate on 22nd December last, that an order should be placed during the course of this year for a 1,320 megawatt power station?—not for the reasons given by the Government, of short-term expediency, but because the CPRS report, to which the noble Lord has just referred, shows that even if there is no growth in demand for electricity at all, the programmes to replace existing plant would require ordering at the rate of 2,000 megawatts a year. If that is so, would not the noble Lord agree that an order for a nuclear station in 1977 on top of Drax "B" would more than allow for the retirement of existing plant? Moreover, would the noble Lord not agree that if the CEGB is going to be compensated for bringing forward the order for a nuclear plant, it is likely to be extremely expensive, whereas the order for Drax "B" can be offset by the decline in projected unemployment in the North-East?


My Lords—

3.50 p.m.


My Lords, I wonder whether I might answer the two noble Lords who spoke for the Opposition and the Liberal Party, before the noble Baroness intervenes. Yes, I agree with the noble Lord, Lord Avebury, about the question of unemployment. I am grateful to him also for what he said. With regard to the questions of the noble Lord, Lord Campbell of Croy—and I appreciate the moderate way in which he posed these—he asked me first about the Secretary of State for Industry. It is quite correct that my right honourable friend the Secretary of State for Industry informed the House at Question Time that the Government accepted the recommendation of the Central Policy Review Staff, supported by the National Enterprise Board, that it would be in the long-term interests of the country and those employed in the industry if restructuring took place. The Government have certainly not abandoned this objective, but although considerable progress has been made it has not at this stage proved possible to find an acceptable basis for restructuring.

The noble Lord also asked whether the Drax "B" was still open to competitive tendering. Because of the present short-term need for work at C. A. Parsons, the Government decided that a turbo-generator order should be placed with them. I may say that I think we had an excellent precedent for this, since the previous Administration thought it right not to go for competitive tendering in very similar circumstances over the Ince power station order, which they placed in 1972 with Parsons.


My Lords, I should be very unwise if I got myself involved in this controversy. But I am bound to say, when my noble friend Lord Campbell of Croy says what the opinion is on this side of the House, that that does not mean that I am going to support him. I am entirely entitled to have my own opinion. I do not in the least like the policy of Her Majesty's Government in many directions, but I am very grateful to know that for once the North-East coast is being considered suitable, and I should like to congratulate whichever Ministers in another place took the decision. We shall be very grateful. We have a higher level of unemployment in my part of the world, and it was my policy when I was in another place to try to support my part of the world, if possible. So I am delighted on this occasion to be able to support my part of the world.

Therefore, if my noble friend Lord Campbell of Croy does not mind, perhaps he will not get up and say that the whole opinion—even if I am only one person—on our side of the House is against what the Government have done. On this occasion, we in the North-East are very glad, and we in the North-East will continue to be glad, because it is very rarely that we get a decision which supports us. I just wanted to put that on the record. I shall not argue the technical details, but that is that.


My Lords, I do not want to come between the noble Baroness and her own Front Bench. I have always had the greatest admiration for the common sense of the noble Baroness, and for the way she speaks up for her part of the world, and that admiration increased today. The noble Baroness is quite right and, if I may, I should like very briefly to state the reasons why the Government have made this decision. First, the Government have no power to compel a merger of two private firms, and no agreement could be reached. Secondly, the Government then acted to save jobs, in the same way as I said the previous Administration acted—which was absolutely right, in our opinion—over the Ince contract. Indeed, nearly 3,000 jobs will be saved at the main contractors only, to say nothing of the sub-contractors. Thirdly—and this is very important—Drax "B" is a coal-burning station and, in our view, this makes good fuel policy, especially in connection with the new Selby coalfield.


My Lords, is the noble Lord aware that, while it is easy to understand both the Party political and the compassionate reasons for the decision which he has just announced, it is blatantly against the economics as stated by people who understand these matters? I should like to ask the noble Lord whether he has an understanding—I will not say "approval", because one does not want him to be in a position to say that—with the International Monetary Fund, because he may remember that the facilities which we negotiated some time ago to get us over a great crisis were to be in three instalments, which was obviously to take into account any deviation from sound economics in future Government policies. Does he have the kind of clearance which will make it certain that both the Party political reasons and the compassionate reasons that have been announced do not interfere with the fundamental economic strength of this country to overcome the problems that are facing it?


My Lords, it is our policy to have a steady ordering programme, and we anticipate that beyond Drax a nuclear order will be placed as soon as possible following the thermal reactor decision. The question of orders beyond this is one that we shall, of course, continue to discuss with the Central Electricity Generating Board.


My Lords, would it be right to sum up the Government's position in these words, that they have decided to spend £600 million in ordering a power station which is not necessary and which the Central Electricty Generating Board do not want, in order to bolster up an industry which their own advisers have said should be restructured, and that their decision may in consequence ruin that industry?


No, my Lords, it would not be so at all. But I think that this is a debating point, and we should be getting into the field of debate if I answered it in any detail.


My Lords, neglecting the political arguments that have been put forward from the other side, and agreeing with the attitude, if not the arguments, put forward by the noble Baroness, Lady Ward, may I ask Her Majesty's Government whether they appreciate that what has now been done is something which keeps a very excellent firm in existence and, furthermore, enables a very important trained force in the North-East to continue in employment? Would Her Majesty's Government say whether any progress is likely to be made towards a co-ordination of the turbo-generator building industry, whether the firm of GEC is likely to show any more consideration in the future than it has shown in the past to the firm of Reyrolle Parsons, and whether there is any likelihood of our getting a unified industry in this field?


My Lords, I am very grateful for what my noble friend has said, with his unrivalled experience and knowledge in this field. It is the Government's purpose to create a viable power plant industry, but we have, of course, given this order to Parsons. My noble friend asked about possible mergers. Of course, there are discussions under way about a possible merger between Babcock and Wilcox and Clarke Chapman, the boilermakers. I cannot say anything about this at this stage, but of course a Statement will be made later if it is found necessary to make one.

The Earl of ONSLOW

My Lords, may I ask the noble Lord whether I am right in understanding that the Government are spending £600 million to save 1,600 jobs? I am certainly not in any way advocating sacking people, or anything like that—I think that I am far too humane a person to do that—but it seems economic madness to do this, when it would be much better to get those people employed in making something else which would make a profit, as opposed to subsidising them to make a loss by producing something which is unnecessary and not wanted.


My Lords, may I suggest that this last argument depends entirely upon the quite unfounded assumption that the people who would be displaced in the North-East would find alternative employment, either in the North-East or anywhere else. It would simply reduce the amount of employment. Therefore the interests of this industry cannot be regarded in isolation. There is a very heavy external cost to the nation as a whole which invalidates a great deal of the argument which the noble Lord, Lord Carrington, put forward.


My Lords, on costs I can say that the Secretary of State for Energy said last January that the effect on prices of advancing Drax "B" would vary according to the rate of growth in electricity peak demand and other factors. With regard to Drax "B", however, there is no question of its not being built; it has been in the CEGB's programme since the late 1960s. It is not a question of whether the station should be built, but when.


My Lords, may I compliment the noble Baroness, Lady Ward of North Tyneside, on her loyalty to the North-East and say that she can take some comfort from the fact that this year they have had visits from the Queen, the President of the United States and Mohammed Ali. So they are on the map!


My Lords, since the noble Lord has tried to draw a parallel between Drax and the Ince order, is he aware that that action was taken after consultations with the industry at a time when the industry, in happier days, was busy with heavier order books?


My Lords, I should not have thought that one could call the years 1970 to 1974 very happy days.

Several noble Lords

They were better than these!


But, my Lords, with regard to consultations, there were full consultations with the industry. Unfortunately, the companies concerned could not reach agreement.


My Lords, it will be remembered that in the steel industry a decision was made, on similar grounds of efficiency, to close down the Shotton steelworks. I am wondering how much money is being spent in order to avoid the reactions which resulted from the closing down of the Shotton steelworks. Is there not a similar set of circumstances today where, in the interests of efficiency and size, the suggestion is to close down not a neighbourhood like Shotton but a large part of the North-East coast?

If a large part of the North-East coast were to be closed down, how much money would we spend upon trying to put that right from a social standpoint, and how would it affect some of the big international and multinational firms which are working very well there and which have a good relationship with the workers on the North-East coast? This good feeling would be soured by action of this kind. Therefore, is it not better to foresee the social consequences, which are tied to the economic consequences, for at the end of the day these would prove to be more disastrous than anybody in this House at present seems to be able to foresee?


Yes, my Lords. I am very grateful to my noble friend Lord Douglass of Cleveland for stressing the importance of the social consequences. We are, after all, dealing with human beings.