HL Deb 16 June 1978 vol 393 cc738-58

1.58 p.m.


My Lords, I beg to move that this Bill be now read a second time. The first four clauses of the Bill are concerned with the application of International Atomic Energy Agency safeguards to nuclear facilities in the United Kingdom. The fifth clause provides authority for Government expenditure to enable early construction of the Drax B power station. Clause 1 introduces Clauses 2 and 3 of the Bill, which themselves deal with the rights of IAEA inspectors and with regulations to give effect to certain provisions in the Safeguards Agreement. It indicates that their purpose is to give effect to this agreement, concluded in September 1976 between the United Kingdom, the European Atomic Energy Community and the International Atomic Energy Agency, for the application of safeguards to civil nuclear facilities in the United Kingdom in connection with the treaty on the Non-Proliferation of Nuclear Weapons. These safeguards comprise measures to guard against the diversion of nuclear materials from peaceful uses and to provide timely indication of possible diversions.

The United Kingdom is one of the three depository Powers of the Non-Proliferation Treaty which came into effect in March 1970. Non-nuclear weapon States party to the treaty undertake to accept International Atomic Energy Agency safeguards on their nuclear activities. As a nuclear weapon State, we were not obliged to accept these safeguards. During the negotiation of the Treaty, however, the United Kingdom volunteered that, at such time as the safeguards were put into effect in the non-nuclear weapon States, it would also be prepared to accept the application of safeguards, subject to exclusions for national security reasons only. The reasons for our offer were to demonstrate that we stood to gain no unfair commercial advantages by not having our nuclear facilities open to inspection, and to encourage non-nuclear weapon States to become parties to the Non-Proliferation Treaty. A similar offer was made by the United States, I am glad to report. France, although not a party to the Non-Proliferation Treaty, has negotiated an agreement with the Community, and with the IAEA for the application of IAEA safeguards in France.

Clause 2 of the Bill sets out the rights that the International Atomic Energy Agency inspectors will have under the Safeguards Agreement, together with the penalties to be imposed for failure to afford them those rights or for providing them with false information. The United Kingdom's national security interests will not be prejudiced by the inspections. We shall have both the right to object to any International Atomic Energy Agency inspectors who are not acceptable to us and the right to have such inspectors accompanied during their inspections by European Community inspectors and representatives of the United Kingdom.

The third clause of the Bill is concerned with regulations which may be made by the Secretary of State to give effect to certain provisions of the Safeguards Agreement. I should like to stress that no such regulations will be needed, in normal circumstances. The unusual circumstances in which it could be necessary to make regulations are limited to those which are referred to in Articles 18, 19 and 76 of the Agreement. These might include, for example, an irregularity in the operation of a nuclear facility which might have resulted in the diversion of nuclear facility which might have resulted in the diversion of nuclear material or a situation where it would be desirable to limit inspectors' access for reasons of safety, for instance, if a release of radioactivity were to occur. It is likely that, if such circumstances were to arise, they would arise suddenly and require swift action. If the Secretary of State did not have powers to make regulations, the United Kingdom might be unable to implement its obligations under the Agreement until a further Bill had been carried through Parliament.

Clause 4 provides that proceedings may be taken against any director, manager, secretary or other similar officer of a body corporate, as well as against the body corporate itself, if it can be proved that an offence under Clause 2, or under any regulations made under Clause 3, has been committed and that the offence was committed with his consent or connivance or as a result of his neglect. In this connection, it is worth noting that most of the operators of facilities in the United Kingdom containing nuclear material which would be subject to safeguards are bodies corporate in the public sector; for example, the United Kingdom Atomic Energy Authority, British Nuclear Fuels Limited, the Central Electricity Generating Board and the South of Scotland Electricity Board. The likelihood of this penalty clause being invoked is, therefore, extreme clause being invoked is, therefore, extremely small.

In urging the House to accept the clauses on nuclear safeguards, I do not wish to imply that the Government consider the present system will be complete. The system is, in fact, being steadily improved, and the United Kingdom is contributing towards that improvement. We are playing a full part in the International Agency's various consultative committees, symposia and advisory groups. As specific examples of what we are doing, we are examining ways in which we can help the Agency with analytical services and instrument-testing facilities and, perhaps, with the gift of instruments. We are also planning to hold a training course of International Agency inspectors in the United Kingdom later this year.

International safeguards are sometimes criticised on the grounds that they cannot be guaranteed to prevent proliferation. The purpose of safeguards is to provide an early warning system to detect the diversion of nuclear material for illicit purposes. If such diversion is detected and reported to the International Agency, safeguards will have served their purpose. It would then be up to Governments to work together to ensure that the development of weapons in that suspect country was prevented.

In giving our support to International Safeguards, and implementing them in this country, we are aware of their limitations but we are also firm believers in their importance. The international credibility of safeguards is itself one of the most important factors in their effectiveness in preventing proliferation. In implementing them in this country, I submit that we are strengthening their credibility and enhancing their effectiveness. It is in that spirit that I commend this part of the Bill to the House.

I turn now to Clause 5 of the Bill, which is in the second part. Clause 5 is to provide authority for contributions up to a total of £50 million towards expenses which the Central Electricity Generating Board will incur in building Drax B. Your Lordships may recall that, when I informed the House on 18th July 1977 of the Government's decision that Drax should be advanced, to meet the immediate needs of the power plant manufacturers, I confirmed that the principle of compensation for the Board had been accepted, and this principle has been upheld by another place. In considering this part of the Bill, it may, however, be useful if I were to recall some of the background.

The Central Policy Review Staff report on the power plant industry, which was published in December 1976 and, of course, widely discussed, recommended that there should be no power station orders until the turbo-generator and boiler-making industries had been rationalised. But no rationalisation can succeed if it does not command the confidence of the workers, management, and the main customer. Despite wide consultations, it proved impossible to bring the main turbo-generator manufacturers, Parsons and GEC, into a single company, but discussions are continuing on the proposed merger of the main boiler-making firms, Babcocks and Clarke-Chapman. Rationalisation of the industry remains the Government's long-term aim, and the need for it has not been fundamentally altered by the grouping together of Parsons and Clarke-Chapman in Northern Engineering Industries.

However, neither the Government nor the CEGB have the power to force rationalisation on those who are unwilling to accept it. Finally, because of the pressing short-term need for work in important sections of the industry, the Government decided that the Generating Board should place an immediate order for Drax B, and should negotiate the turbo-generator contract with Parsons. Design phase contracts for the turbo-generators and for the boilers were placed in November last year, and it is the intention that manufacturing contracts should be placed this summer. The Board has, meanwhile, been authorising the purchase of long lead-time materials.

But for the Government's decision, the Board would not have placed the main contracts until, in their view, the likely growth of electricity demand made it necessary. On present forecasts, the Board would not have placed an order before 1980. Now, with orders placed in 1978, the station should begin to be commissioned in 1984, and be fully operational in 1986. It is true that there have recently been many examples of delays in power station construction. The CEGB are naturally doing everything they can to ensure that there are no delays to Drax. The separate letting of the design phase contract will mean that the design is "frozen" before the construction begins. A mutual agreement about pay and conditions between contractors on the site will be sought, so as to reduce the likelihood of industrial disputes. Contracts will also incorporate incentives for timely completion.

Ordering Drax two years early will bring benefits to the Board as well as costs. It is a mark of the Government's confidence in the future of the coal industry in the United Kingdom. It will bring forward by two years the savings in fuel costs consequent upon having a new, efficient, 2,000 megawatt generating station available to the CEGB. Suggestions were made in another place that the station's thermal efficiency could be further enhanced by using it as the centrepiece of a district heating scheme. The Department of Energy has had the opportunity to discuss with the CEGB the extent to which heat from Drax B could be made available for industrial or domestic use if practical proposals were made. I am pleased to tell the House that the design is such that if a suitable heat load became available after the plant was constructed, a scheme could be completed by the installation of additional steam pipework and control.

The main benefit of early ordering will come in the field of employment. Thousands of jobs which would otherwise have been at risk in the works of the main contractors and their sub-contractors will be saved. The order for Drax will be followed by orders for nuclear plant consequent upon the Government's decision on thermal reactor choice, and the Government will do all they can to help win export orders following on those recently announced for Hong Kong and South Korea.

The CEGB operates under a statute which requires it to provide an efficient, economical and co-ordinated supply of electricity. The Government have to take a wider view, and to consider the industrial contract in particular; the House will know that the Bill to reorganise the electricity supply industry would have laid upon the new Electricity Corporation a duty to take into account the effects of its purchasing policies upon its suppliers. Against this background, it seems right I suggest, to protect the electricity consumer, but to secure the benefits of an early order by payment of a Government contribution towards the costs. This contribution will be subject to an absolue ceiling of £50 million, which will not be increased whatever happens to interest rates and to power station construction costs. Compensation will be paid in annual instalments, on receipt of evidence about payments actually made by the Board.

Although, as I have explained, the period by which the order has been advanced is two years or more, in order to take into account the benefits of early ordering, we have agreed with the Board to pay compensation on the basis of a six-monthly period of advance. The main identifiable expense of early ordering is the interest cost on the funds borrowed for the project. Payment of compensation will, therefore, be linked to interest. This part of the Bill provides for the preservation of vital skills in a very important industry, and also demonstrates the Government's confidence in the coal industry. I commend it to the House. I beg to move.

Moved, That the Bill be now read 2ª.— (Lord Strabolgi.)

2.16 p.m.


My Lords, the House will be grateful to the noble Lord for giving us a very clear exposition of the contents of this small Bill, which deals with two quite different matters. It is perfectly true what he said, that the major part of the Bill, the first four clauses, deal with a basically non-controversial matter, and I am pleased to congratulate the Government on showing an international lead in this question of the non-diversion of peaceful atomic material, as he put it.

Lest we indulge in an excess of self-congratulatory halo-polishing, let us also welcome his recognition that we have a very long way to go in this matter as yet, but that this represents a useful start. I was also particularly glad to hear the noble Lord confirm that there will be a right to challenge the International Energy Agency, the inspectors, which was a matter that was raised by some of my honourable friends in another place. He did not, however, deal with one other small point, which was the question of the somewhat inadequate-looking penalties of, I think, £1,000 for non-compliance with the regulations in relation to the magnitude of the issues involved. This perhaps is somewhat small, but it is not something we need to get over-excited about.

When we turn to Clause 5 we deal with something that is a great deal less straightforward and less clear-cut, and a matter with a somewhat unhappy history. The provisions in the present Bill have a somewhat dubious ancestry, which I might perhaps describe as out of Plowden by Liberal pique. I think it is worth looking at the history of why we have ended up with a small Bill with one clause dealing with one specific issue. The Plowden Committee, which incidentaly contained three Members of this House in its makeup, reported in January, 1976 after just over 12 months' work. Then the Central Policy Review Staff published their report I was interested that they said they had to produce their report by October 1976, and the noble Lord told us that it was published in December 1976. At the risk of sounding niggling, is it not rather a pity that there is no date put on the front of these sort of reports, so that we know exactly to what time they refer? Something like this gets out of date very quickly, as we are well aware, and this was a hurried report, as it says in it.

Then it seems that the Government waited for about 18 months after the Plowden Report before they made the statement to which the noble Lord referred, in July 1977. Then there was a further six months' gap, when the draft Bill was considered early in 1978. Now that Bill, my Lords, was something of a curate's egg; it was good in parts and there were in it many things which many of us are rather sorry to have lost. However, there were also in it clauses about which we, on this side of the House, would have been rather unhappy, notably those clauses which we would have regarded as something equivalent to creeping nationalisation; I suppose that term will do as a shorthand.

We have the impression that one of the reasons that that Bill was not proceeded with was the rather curious one that apparently the Liberals did not particularly wish to support the Minister, who they did not feel was particularly enthusiastic to work with them. As I say, that is simply an impression that one has. Anyway, the facts of the matter are that all that happened was that the Bill appeared as the substantial content of the White Paper, Cmnd. 7134. The road to this little Bill is littered with a fair number of White Papers the names of which are confusingly similar; but this is the frustrated White Paper that we have seen before us. A good deal of the debate in another place took the form of debating the Bill that might have been; and many of us would have liked to see a number of the features in it.

If we turn now to the issue of Drax B, this too has a fairly long history in that think that the Central Electricity Generating Board first proposed this power station in November 1969. At that time, and until about 1975, it was suggesting that it might be ordered in 1978. My understanding is that it consists of three 660 megawatt sets and that the contract would be of the order of £800 million. This order was vital to the supply industry, which is already facing a major downturn in demand as a result of the world recession combined with the results of the OPEC price increase. There is no need for us to get into a discussion as to which is the cause and the effect between the fuel price rise and the world recession. So far as the generating industry is concerned, we all know that for the first time for many years the demand for electricity has stopped increasing on a regular exponential basis, and inevitably this threw the industry into a certain amount of disarray.

The CPRS very strongly linked the suggestion of bringing forward the order to using the possibility of advancing the order as an incentive for rationalisation. This was one of its recommendations. It is here that we venture into a slightly more critical area. The Prime Minister somewhat sold the pass by announcing in May 1977, I imagine under pressure from Members of Parliament from the North-East in whose constituencies the Parsons and Reyrolle companies were, and also in the wake of President Carter's visit to that part of the country, that this order would go forward before the rationalisation had been completed.

Then in July Mr. Benn announced in another place, and the noble Lord repeated it here, that the order was to go forward before the turbo-alternator companies had merged. I find this slightly surprising, coming from him. I think that he must have been leant on by his right honourable friend the Prime Minister. I have never accused Mr. Benn of ever failing to play a negotiating card for all that it was worth; but on this occasion he seems to have thrown away this very strong negotiating card. The noble Lord correctly said that nobody could compel these industries to do certain things, but they have considerable persuasive powers. We have had this sort of discussion here in the past about the meaning of the word "voluntary" in connection with North Sea oil participation; so let us leave it at that. We are now trying to see what happened.

One other thing that we ought to bear in mind is that if we look at the energy policy consultative document and its forecasts, which inevitably are hedged around with all the uncertainties of the level of ordering which we can expect in the future, I think that we come out with about 2,000 megawatts a year. I suppose that we will have to become accustomed to calling that 2 gigawatts, but I find that even more difficult than some of the other terminology. That is an ordering level of 2,000 megawatts a year up to about 1990, gradually increasing to something of the order of 4,000 megawatts by the turn of the century. So that is the structural background against which we have to consider what is happening now.

We also find in the CPRS document a certain criticism of the CEGB for not having sufficient regard to the implications of its actions upon the industry which supplies it with generating equipment. That also appears in the Plowden Report. This takes us back to thinking about the Bill that might have been. I think that we ought to say a word or two about it. The proposal, as I understand it, is for what in industry would be called "vertical integration", whereby the generating and distributing functions become very closely linked with the manufacturing functions. It may well be that the Central Electricity Generating Board took a too narrow and short-term view of its functions, and did not have enough regard to the difficulties in which it might find itself if it allowed the home-based industry to wither away.

I cannot help having considerable reservations about the advantages of getting around this difficulty by vertical integration. When one is talking of businesses on this scale, it seems to me that one may make the difficulties of controlling these industries even more difficult than they are already. We have to think, admittedly in a slightly different connection, of the Rothschild Report on commissioning of research when it insists on the customer/client relationship, which I believe is a valuable one of which we should not lose sight. I also think that we ought to remember the rather unhappy experience that there has been in the past of the influence of the nationalised air corporations, BEA and BOAC, upon the aircraft manufacturing companies, which have been induced to produce aeroplanes specifically designed for use by the national airlines—the fact that they are nationalised has nothing to do with it—at the cost of their international competitiveness. This is in no sense intended as a criticism; it is intended as a word of warning and something for consideration.

In this connection it is worth repeating the strictures made by both Plowden and the CPRS Report. As a little word of warning, Plowden says on page 46, referring to the powers and the Government control over the Boards: Second, the Government must provide a stable framework of objectives and targets within which the Board can be held to account for the performance of the industry". It goes on—this is the point: Attempts to use the industry's prices and capital investment as an economic regulator are wholly inconsistent with this duty". That is what Plowden said. It repeated it in the Summary of Recommendations at the end. The CPRS a few months later said much the same. They say this on page xiii of their first chapter, "Summary and Conclusions": That is to say, the short term help should only be given as part of the agreement towards the rationalisation which is necessary for the longer term". Both these reports are concerned about the danger of using orders as economic regulators.

It is also a pity that, in the process of what has happened, we have lost some of the opportunities to implement others of the Plowden recommendations, to which indirectly the noble Lord referred. Plowden said on page 51 to the recommendations: At present the industry's statutory duty is to provide 'an efficient, co-ordinated and economical system of electricity supply'. This duty should be changed to take into account the importance of energy conservation". The next recommendation was: In order to enable the CEB to initiate heat-and-power schemes, its power to sell heat should no longer be restricted to selling heat which is a by-product of electricity generation". The other Bill would have been desirable to meet some of those points.

My Lords, on the present Bill we have always said that if the order were to be advanced, the CEGB should be compensated for having to act uncommercially. This was done by a Conservative Government in connection with Ince B, when the compensation had to be increased under the Energy Act. Similarly, in that instance we did not go out to tender, because the industry had come to an internal agreement that GEC at that time had plenty of orders and so the order was given to Parsons.

There is a slightly different situation now. I agree that it is fine for the Parsons' workers—I believe it has been said that 7,000 jobs have been saved by bringing forward the Drax order—but think we should remember that there are workers in GEC who feel discriminated against in favour of the less efficient workers at Parsons. They feel that their success in getting export orders from countries like Iran and Hong Kong is telling against them in the sort of objectionable way in which pensioners some times feel they have been treated if they have their own savings and are told they get less of a pension, which seems a little hard after managing their affairs in a responsible manner.

There is one other point I should like to raise here, and which the noble Lord touched on. It has been called the dinosaur policy by my honourable friend in another place. Are we right to build these huge power stations in remote areas, which in spite of all that the noble Lord says about the possibilities of combined heat-and-power, which I welcome, make things very much more difficult? One would have thought that there might have been a case for saying, rather than seek for an extra 2 per cent. of efficiency from 38 to 40 per cent. by going bigger and bigger in size, should one not concentrate on this two-thirds of the power which is currently wasted by building smaller stations in an area where it would be easier to exploit the combined heat-and-power possibilities? In the light of that, I must say I wonder very much whether the CPRS is right in saying that we ought to go ahead and order 1,300 megawatt sets.

In this connection may I also ask whether it is true that the 660 megawatt sets in Drax A have had a pretty unsatisfactory record of reliability? I am not suggesting that this should alter our policy, and I welcome many of the comments that the noble Lord has made about the entirely sensible arrangements which are being made to avoid the possibility of time and cost overruns in building this station. There is the other point, that it may well turn out that the order has not been advanced so much ahead of what the CEGB will in the end need.

My Lords, as usual I have spoken longer than I intended, and I apologise. May I sum it up this way: The nuclear safeguard provision in the Bill is a logical and unquestioned implementation of international policy, about which we should all be interested. Indeed, we had a Question very much on this issue this morning. The Drax compensation provision is all right so far as it goes and we cannot object to it, but I think it is worth saying that we have to accept that this rather sad little clause in the Bill is essentially an admission of failure on the part of the Government to achieve a very important restructuring of the industry, which has been left in the air and which may have been made even more difficult by the decisions that have been taken.

2.38 p.m.


My Lords, I should like to thank the noble Lord, Lord Strabolgi, for explaining and presenting this Bill. We understand, accept and welcome the first four clauses as part of the United Kingdom's policy to prevent the misuse of spent nuclear fuels for other purposes. The only question I wish to ask is whether Britain herself will be able to make a contribution to the inspectorate. We have in this country some of the finest expertise in the nuclear industry, and I should like to feel that the noble Lord the Minister will be able to confirm that part of the inspectorate for countries other than the United Kingdom will employ British personnel with nuclear experience.

I do not wish to say much about the points the noble Lord, Lord Strathcona, made, especially with references to my own Party. I feel that his interpretation of other people's Parties is not entirely correct and may be not wholly relevant in terms of this Bill. I want, however, to take up one point: that is, the role he cast for the Central Electricity Generating Board. As I see it, the only function of the Electricity Generating Board, the Coal Board and the Gas Board is to produce the fuel for which they are responsible, and to deliver it as efficiently and cheaply as they can to the consumer. I do not believe that it is the Boards' function to anticipate, direct or even force various contracts to go to certain companies. They contract out their needs, and it is the Minister for Energy, who is responsible in this country for energy policy, who has to draw the threads together, the needs of the consumer, the resources available and so on, through the various Boards that he has available to him.

My Lords, I think Clause 5 of the Bill introduces a new factor into Her Majesty's Government's energy policy equation, which so far consists mainly of taking into consideration renewable and nonrenewable energy resources, consumer price, conservation and pollution. This new factor is job creation, which the noble Lord, Lord Strabolgi, mentioned. We welcome this as a new factor and one which must be a permanent factor in this country's, and indeed in all countries, energy policy.

I think it is wrong to interpret it as being simply because it is an Election year that this order has been placed. I believe this is the right time to place such an order so as to retain the expertise in the industries mentioned and to prevent further unemployment in these areas where unemployment is far too high already. We also welcome the fact that the Government recognise that this should come under a separate costing arrangement which is not directly attributable to the Central Electricity Generating Board's budget. I believe that if decisions of this kind, such as bringing forward the Drax B power station, are made for job creation reasons, they have to be separately accounted for, both to the taxpayer and to the generating board concerned.

I should like to commend to the noble Earl, and to the noble Lord if he has not already read it, Report No. 95, April 1978, from the Committee on Government Operations of the House of Representatives in the United States. It is rather a lengthy and detailed report, but on page 73 it touches very closely on the principle behind Clause 5 of the Bill: The energy crisis, or the economic impact of our dependence on nonrenewable resources, is one of the major causes of unemployment". This is in the United States, of course. The report goes on to say: Each dollar the government spends should be evaluated on the basis of its potential to create jobs, save money, stimulate manufacturing, lessen pollution and save depleting resources". I am not wishing to compare the energy problems of the United States with those of the United Kingdom. The only point I wish to make is that in the United States they have recognised the role of job creation in terms of an energy policy. This is what Clause 5 is about and this is what we welcome.

I also feel that it is right to say, even in this small Bill where we are dealing with coal and electricity generation, that the jobs created by the new solar industries of energy creation are far more exciting than those created by new coal-fired stations or new nuclear power stations. In America, possibly because they have a better climate than we have here, the solar-based energy industry will take great strides forward, not only because it saves energy, but because it creates jobs.

I would add one final point, while talking on Drax B. There is an oversupply of electricity generation predicted in this country if the energy growth rates do not increase to anything like those predicted a few years back. I do not believe this matters—and I am not being unduly cynical here—because every extrapolation made in the energy industry to date has been wrong. It has not been wrong through the fault of those who have made such extrapolations. Other factors which have not been anticipated have always made those calculations wrong. And I suspect that they will be wrong again. Therefore, I am not unduly worried about the problem of the oversupply of electricity. However, I am worried about the current price of natural gas. I am also worried about its misuses for industrial purposes. In another debate the noble Earl, Lord Halsbury, said that this was really primarily to assist the householder and should not be used elsewhere, and should certainly not be used to fire electrical power stations.

These things again go back to the Minister of Energy and his pricing policy, and in terms of this Bill I welcome Drax B. The only reason for hesitation I have about it is perhaps one which has not been raised before in this House and which has not, so far as I am aware, been raised in terms of energy policy at all. It is that it greatly increases the carbon dioxide content, not only in the air locally, but it will on a global basis too. I do not have all the facts available at the moment, but there are some scientists, both in this country and in the United States and Russia, who are showing serious concern about the increase of carbon dioxide in the atmosphere. If that concern proves to be justified, to the extent that it will have been proven without any shadow of doubt that man is changing the climate every day, the effects of this in 20 or 30 years time, or by the year 2000, if extrapolated and if correct, could cast a great shadow on the use of coal-fired power stations for electricity generation. My Lords, this is not the time or the place to go into this question in any detail, but I should like just to say that I [...]onally am concerned about this. I hope that it will be proved that this concern is unjustified. Meanwhile, I should like to conclude by saying that we give a welcome to this Bill—both parts of it—and we look forward to seeing Drax B completed as soon as possible.

2.47 p.m.


My Lords, I think we have had an interesting short debate. I am very grateful to both noble Lords for their contributions towards it, and I will do my best to answer the various points that have been made. I was particularly interested in the noble Lord, Lord Strathcona's, speech. He always takes a deep interest in these matters, and, clearly, he has acquainted himself with Plowden and with all the different aspects in this very important and far-ranging matter. I am also grateful to the noble Lord, Lord Tanlaw, for his contribution and for the various questions that he has raised.

Of course, as he said, he went a little wide of the debate in raising the whole matter of the future of coal, but this is something which is taken into account. One of the difficulties is that we have to find a substitute one day for the natural minerals—and one of these substitutes could, of course, be atomic energy—but we are very rich in coal in this country. However, this will be taken into account. Fortunately, I think man usually finds that there are solutions to these problems. He is endlessly inventive.

The noble Lord, Lord Strathcona, congratulated the Government on the first part of the Bill, and I was grateful to him for doing this. He asked me about penalties. The level of penalties imposed under the Bill has been fixed in accordance with the Government's policy on the appropriate severity of fines and penalties for offences of the type envisaged and are well precedented in other United Kingdom legislation. On the advice of the Home Office, the relevant clauses of the Bill have been drafted in the light of this policy. The maximum of £1,000 in Clause 2 for obstruction or refusal or failure to [...]erate accords with the maximum normally available to magistrates in British courts.

The noble Lord then turned to Clause 5, which is the part of the Bill dealing with Drax B. He asked me first why there was no date for the CPRS report. I cannot tell him that, but I will go into it and let him know. He also referred to the question of the reorganisation of the electricity supply industry and the original Bill.

As noble Lords will be aware, it was the original intention of the Government that the provisions on Drax and nuclear safeguards should be included in a larger Bill, as the noble Lord said, providing for the reorganisation of the electricity supply industry in England and Wales, and these proposals followed the report of the Committee of Inquiry under the noble Lord, Lord Plowden. It would have provided a much needed unity and sense of strategic direction for the industry. I regret to say that it has not been possible to introduce these measures this Session, with the consequent uncertainty and damage to morale in the industry.

However, the Government remain fully committed to the reorganisation, and to demonstrate this commitment and to make their detailed intentions known, the Government have published a White Paper setting out their proposals for the structure of the electricity supply industry in England and Wales. The noble Lord, Lord Strathcona and Mount Royal, said rightly that it was the Liberal Party's objection which brought about the demise of the Bill. These objections were wide-ranging and if the noble Lord, Lord Tanlaw, will allow me to say so, not always consistent. There are also many Liberals who support the aim of unification.

I am sorry that the noble Lord, Lord Strathcona and Mount Royal, brought up the usual Conservative bugbear about nationalisation. Sub-Committee B of the Select Committee on Nationalised Industries is at present studying the White Paper in a series of pre-legislative hearings, and has heard evidence from the Secretary of State for Energy and officials, as well as representatives of the Plowden Committee, the industry, the unions, consumers and suppliers. In general, witnesses have favoured the overall aim of unification.

I turn now to the question of the Drax B delay. The Central Policy Review Staff which, although it was not dated, reported in December 1976 on the United Kingdom power plant manufacturing industry, suggested possible measures which could be taken to assist the industry. They laid particular stress on the need to achieve rationalisation of the industry to assist it in remaining internationally competitive. The Government then had to consider which direction to take. Intensive consultations took place with all the interested parties, the electricity supply industry, management and unions in the various companies. The aim was to achieve rationalisation as recommended by the Think Tank. But these are complicated matters and people are simply not willing at a moment's notice to consent to a fundamental change in direction of their firm's future. While there was a chance of achieving early rationalisation, the Government had to allow time for discussion and argument, but the Government had to keep in view, too, the overriding need to protect the industry's future by guarding against having any large-scale decline in employment at this critical juncture.

No rationalisation can succeed if it does not command the confidence of the management and workers involved, and, of course, that of the main customer. Equally, Government cannot bring about rationalistaion by compulsion. It finally became clear that early rationalisation could not be achieved. The Government thus decided in July last year to ask the CEGB to advance Drax orders and to place the turbine contract with C.A. Parsons. Since then, as the House will know, there have been discussions on a proposed merger of the boilermaking interests of Babcock and Wilcox and Clarke-Chapman. Rationalisation of the power plant industry, though, remains the Government's long-term aim.

I am sure that noble Lords opposite will agree that it was right to allow time for an extensive debate following the CPRS report, but that it was right, too, to accede to the pressing need for home orders for the industry. After all, rationalisation can still take place, but the order for Drax B was necessary to ensure that an important part of the industry did not go out of existence. Since the decision to ask the CEGB to go ahead was taken last July, design contracts have been placed, and it is hoped to place manufacturing contracts and start main manufacturing work, shortly.

I am sure that the House will agree that a project of this nature is a massive task for all concerned, It is right to do everything possible to get the design right before beginning construction, so as to avoid design changes during construction and the unavoidable delay that these entail. The Government's decision on thermal reactor choice in January opens the way for orders for two advanced gas-cooled reactor nuclear power stations so that the short-term work load before the power plant industry for stations in Great Britain, is now 4,600 megawatts. The question of future orders is under review with the electricity authorities in the light of all relevant factors including forecasts of electricity demand and the planning margin needed by the industry.


Could the noble Lord put a time-scale on that level of ordering?


Yes, my Lords, I think I shall be able to say a little about that. The design phase began in November 1977. It is intended that the design should be frozen, as I said, when main manufacturing contracts are let. It is the present intention to let the contract for piling work on the Drax site in July. Comprehensive contracts for the manufacture of the boilers and turbo-generators will be let this summer, when the design phase is complete. The purchase of long lead-time materials has been authorised, as I said in my original speech. Some manufacturing work may begin on the basis of letters of intent before contracts are finally signed. The contract for constructional steel work is expected to be let in the spring of 1979, and the first 660 megawatt turbo-generator should be commissioned in June 1984, with the second and third following in 1985 and 1986. As I have said, the Central Electricity Generating Board are doing, and will do everything they can to ensure that there are no delays at Drax. The design is to be frozen before construction begins. There is to be a mutual agreement between contractors on the site and this will be sought so as to minimise the likelihood of industrial disputes, and contracts will incorporate incentives for timely completion.

The noble Lord also asked me about the question of Parsons and GEC. Now the rationalisation of the turbo-generating industry remains the Government's long-term aim, though it must be acknowledged that rationalisation cannot succeed without the confidence of management and workers and the main customer. But close co-operation and collaboration is being maintained between the nuclear power company, the Central Electricity Generating Board and the South of Scotland Electricity Board, to provide a standard design of the advanced gas-cooled reactor power station for Heysham and Torness. It is too early to determine how the contracts for the turbo-generators will be placed, but it is hoped to standardise the turbo-generator design also. This matter, I am glad to say, is currently being discussed with GEC and C. A. Parsons by the generating boards.

The noble Lord, Lord Strathcona and Mount Royal, and the noble Lord, Lord Tanlaw, asked me whether more coal-fired stations would be ordered. The Board has not at present sought approval for any coal-fired stations beyond Drax B. The timing of future orders will depend on many factors including the growth of electricity demand.

The noble Lord, Lord Strathcona and Mount Royal, asked about Drax B and its reliability. I am not aware of the details about the performance of the 660-megawatt generating sets. That is a matter for the Board. I can, however, assure the noble Lord that in general large generating sets which had their teething problems are beginning to prove themselves in service. After a period of successful operation, the new rotors had to be fitted to Units 1 and 2 at Drax A; since then the station has operated successfully. The noble Lord, Lord Strathcona, also said that he did not think that the CEGB took sufficient account of the interests of its suppliers. The Bill to reorganise the electricity industry would lay a duty on the new corporation to have regard to the effect of its purchasing policies on its suppliers.

He said that the Drax order should not have been placed in advance of the rationalisation. Rationalisation cannot be carried out by compulsion. It remains the Government's long-term aim that there should be rationalisation, but the need to preserve vital skills in the industry must be paramount. I hope that has answered all the various points that the two noble Lords have raised. I am grateful to them for their contribution and particularly to the noble Lord, Lord Tanlaw, for the support he has given and for his quotes from the Senate Committee. I beg to move that the Bill be now read a second time.

On Question, Bill read 2ª, and committed to a Committee of the Whole House.