HL Deb 10 December 1985 vol 469 cc119-52

3.33 p.m.

The Minister of State, Scottish Office (Lord Gray of Contin)

My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.

Moved, That the House do now resolve itself into Committee.—(Lord Gray of Contin.)

On Question, Motion agreed to.

House in Committee accordingly.

[The LORD ABERDARE in the Chair.]

Clause 1 [Commencing capital debt]:

Lord Stoddart of Swindon moved Amendment No. 1: Page 1, line 7, leave out ("debt") and insert ("liability").

The noble Lord said: I think it will be convenient if, with this amendment, we take Amendments Nos. 2, 4, 5, 6, 7, 8 and 12.

Amendment No. 2. Page 1, line 8, leave out ("debt").

Amendment No. 4: Page 1, line 12, leave out ("debt").

Amendment No. 5: Page 1, line 12, after ("Authority") insert ("shall consist of public dividend capital and").

Amendment No. 6: Page 1, line 14, leave out ("the amount of that debt") and insert ("that amount").

Amendment No. 7: Clause 2, page 1, line 17, after ("borrow") insert ("or receive as public dividend capital").

Amendment No. 8: Clause 3, page 2, line 29, leave out ("debt") and insert ("and subsequent issues of public dividend capital").

Amendment No. 12: Clause 4, page 3, line 37, at end insert ("and issue as public dividend capital any amount which they have power to receive.

  1. (1A) The Authority shall pay a dividend on its public dividend capital to the Secretary of State not less than would have been payable should it have been treated as a loan under subsection (2) below.
  2. (1B) The Secretary of State may set, after consulting the Authority, a financial target to be earned on net assets.
  3. (1C) Section 4(2) of the Atomic Energy Act 1954 shall be repealed when this Act comes into force.").

In fact, I should have preferred that we take Amendments Nos. 13 and 15 as well, because that would have tied the whole thing together, since Nos. 13 and 15 are part of what I am seeking to do with this group of amendments.

I first take this opportunity, right at the beginning of our Committee stage, to thank the noble Lord, Lord Gray, for his extremely helpful letter of 3rd December, wherein he endeavoured to answer to our satisfaction many of the questions which were raised on Second Reading. That letter was extremely helpful and I thank him for the trouble that he took in dealing in detail with the points we raised.

The purpose of this group of amendments is to propose something rather different from that proposed by the Government. As noble Lords know, the Bill provides for the Atomic Energy Authority to have a commencing capital debt which will be repayable. The objective of these amendments is to delete this requirement, but to provide instead an alternative framework which secures financial accountability.

There is widespread recognition that the financial structure of nationalised industries and Government trading funds is defective, and neglect of the problem has led to two other problems. First, the enterprise is required to repay the initial capital as well as servicing it. That is an obligation which is not placed upon private enterprise firms in respect of the initial equity investment. They are not required at any stage to repay that initial investment. They are required only—provided, of course, that they make profits—to pay a dividend to the shareholders. Secondly, some enterprises—and the electricity boards are now reaching this position—become debt free, having repaid all their initial capital back to the National Loans Fund. The result is that the formal financial relationship between the Exchequer and the enterprise is obscured and resort has then to be had to ad hoc devices. Indeed, over recent years we have seen several such ad hoc devices which in my view have led to imposing on the existing consumer increases in the prices of electricity and gas, in particular, and indeed water, that need not have been levied, but for the Government's desire to claw some money from the consumers in those industries.

Regarding problem one, there is a serious defect in the arrangements made under the Government's 1973 Act on trading funds. Because the UKAEA's employees are already outside the Civil Service, the Government are here using special purpose legislation to set up a trading fund outside the Civil Service. This is therefore an excellent opportunity to tackle an under-lying problem. Rather than the commencing capital debt being treated as a repayable loan from the National Loans Fund, it will be treated as a non-repayable public dividend capital issued from the National Loans Fund.

In the past, the Treasury has not had a clear idea of what it expected to achieve using public dividend capital. It ruled that it was only appropriate where an enterprise's business, such as British Airways and British Steel, suffered from cyclical fluctuations. Unfortunately, it began to be used as a form of soft finance, more like a non-repayable subsidy than an injection of equity, partly as a way of avoiding EC regulations on subsidy. In order to avoid such problems in future, this amendment to this Bill makes the stringent provision that the dividend return on public dividend capital will not be less than would have been payable had the finance taken the form of a loan. This provision protects the Exchequer interest while removing the nonsensical requirement that the initial injection of public funds is repayable. As I have already said, in private industry this does not apply, and to be fair to the public enterprises it ought not to apply in their case, either.

Associated with these changes it is necessary to repeal Section 4(2) of the Atomic Energy Authority Act 1954, which gives the Treasury extraordinarily wide financial powers—powers which are no longer appropriate given the changes in financial arrangements made in the Bill. Section 4(2) at present reads: Any revenues of the Authority for any financial year, whether from Government departments or other persons and whether in respect of articles or property sold or services rendered or otherwise, shall be applied by the Authority in such manner as the Lord President of the Council may, with the approval of the Treasury, direct, and any such direction may require the whole or any part of those revenues to be paid into the Exchequer". It is possible that the noble Lord opposite will argue that deletion is going too far. He may argue that there are technical reasons for maintaining some such clause. But it is self-evident that the present provision is cast ridiculously wide. The object of deleting it is to hinder Treasury raids on the authority.

As I have already remarked, the experience in some nationalised industries has not been very good. Indeed, the Notes on Clauses in relation to Clause 4 of the present Bill read as follows: This Clause provides that the Secretary of State can set the terms of any loans he makes to the AEA including the commencing capital debt. It also permits him to change them during the period of the loan subject to consultation with the AEA—for which see Clause 4(3)". The Notes on Clauses go on to say: He is empowered to make changes to allow for the premature repayment of debt which might be appropriate if the authority were to be much more profitable than expected. The formula is also to be found in the Gas Act 1972 and the British Telecommunications Act 1981. It is not the intention to suddenly put the authority on notice to repay their outstanding debts instantly, which is why they have to be consulted before any change to the terms of the loan can be made". The noble Lord also deals with this point in paragraph 3 of his kind letter to me of 3rd December. The noble Lord repeats, virtually, what is said in the Notes on Clauses.

As I have said, this is really what worries us. We have been particularly concerned that consumer prices in the gas and electricity industries have been forced up by imposing upon those industries what are known as negative EFLs. It is in fact a way of making the present generation pay unduly for the use that posterity will make of a particular undertaking.

3.45 p.m.

There must be a means of allowing the Secretary of State to set financial targets for the authority. Nobody would quarrel with that. The amendments therefore make explicit statutory provision for this. In summary, the objective of the amendments is to provide a more satisfactory and transparent financial relationship between the authority and the Exchequer and thereby to provide as strong guarantees as are practicable that its independence will be recognised and respected. It is perhaps a new departure for the Opposition in this Committee to raise the fundamental question of the financing of public industries but I certainly think it is worth discussing this method—a method which commends itself to people not only in the Labour Party but throughout the political spectrum. I hope, therefore, that the noble Lord will treat the amendment very seriously indeed. I shall welcome his remarks, naturally, and I shall await them with interest. I beg to move.

Viscount Thurso

This is an interesting series of amendments which at first blush might appear to be tautological but which are in actual fact very much deeper. I ought to say at the outset that I am the happy recipient of a letter from the noble Lord, Lord Gray of Contin, as a result of our Second Reading debate. The noble Lord made a number of points to me in reply which are not obviously available to your Lordships' Committee in the sense that they have not appeared in Hansard. I have no doubt that the noble Lord will not mind if I refer occasionally to his letter to me on subjects which I raised at Second Reading. In his letter to me of 3rd December, one of the important lines in answer to points which I raised at Second Reading is: The Government does not intend to use this method of financing the authority for a series of raids upon the authority's funds. This is of course important, and is one of the points which worried myself and my colleagues. It seemed to us, in a way, to be one of the weaknesses of the Bill that there appeared to be an open-ended way of calling upon the Atomic Energy Authority for any payments that it might be felt were appropriate at any time, without let or hindrance.

It seems certainly to my noble friends on these Benches a much more businesslike way to set about financing the Atomic Energy Authority to have what the noble Lord, Lord Stoddart of Swindon, has described as "public dividend capital", rather than a starting debt. This, after all, is what any business has—an equity capital which it is not expected at any stage to repay but which represents its worth in the financial markets. This is what I think the noble Lord, Lord Stoddart of Swindon, is trying to get us to come round to.

It will be most interesting to see what the noble Lord, Lord Gray, says to this suggestion. It is a much more acceptable way to turn the Atomic Energy Authority into a publicly accountable body than simply to say that it should start off with a debt made up of those bits of its plant and equipment which we think are worth capitalising and which it has eventually to repay out of future profits: not out of profits which were originally adumbrated when it first started, or, indeed, out of returns which it originally made while the plant and equipment was being amortised, but out of future profits from future contracts. It would be much more businesslike to set about it in this manner.

I, for one, look forward to hearing what the noble Lord, Lord Gray of Contin, says to this in reply to the amendment and to seeing how he sets about allaying our fears, first, on the question of raids on the Atomic Energy Authority for funds, and, secondly, on a businesslike approach to the setting-up of the new trading basis.

Lord Ezra

I, too, should like to support the interesting series of amendments put forward by the noble Lord, Lord Stoddart. Having had some experience of the financing of a public enterprise over some years, I believe that there are a number of anomalies which need to be ironed out in time. Here is an ideal opportunity to start on a workmanlike basis.

It seems to me wrong that the opening debt should be a fully repayable loan. After all, this represents the assets which the enterprise is taking over. I would have thought that the various provisions put forward by the noble Lord, Lord Stoddart, would give the Government every security they require. I remember that when I was trying to negotiate a part of the funding of the National Coal Board on a public dividend capital basis the main argument from the Treasury was that it would never receive a dividend. That is answered by the proposition that the noble Lord, Lord Stoddart, has put forward; namely, that there should be a dividend regularly paid which, as a minimum, would be equivalent to the interest payable on a loan.

However, what the noble Lord is proposing, which I fully support, is the spirit of the idea that this should be the first step in making the authority a commercial enterprise, which, as we understand it, is the Government's objective. In any new enterprise that is set up now the initial funding has to be on an equity basis. The shareholder has to share in the risk of the newly-started enterprise. Here is a way in which the Government can organise the funding of this enterprise in such a manner that they can be secure in getting a fair return—a minimum return equivalent to the interest otherwise payable—but at the same time introducing into the concept a commercial consideration that seems to be lacking in the Bill so far. I therefore hope, with my noble friend Lord Thurso, that the noble Lord, Lord Gray, when he replies, will give this proposal very serious consideration.

Lord Gray of Contin

Perhaps I may first say how much I appreciate what the noble Viscount and the noble Lord have said about my efforts to amplify in my letters to them my comments when winding up the Second Reading debate on this Bill. I appreciate their remarks very much indeed.

I assure the noble Viscount and both noble Lords that we have taken this group of amendments very seriously and have looked carefully at what is intended in them. Noble Lords will not be all that surprised to hear that I cannot accept the amendments. In any event, I suspect that they are of a probing nature and that this occasion is being used so that we can explore the possibilities which the amendments might present. I shall try to explain as fairly as I can the reasons it is not possible for the Government to accept these proposals and why I believe that what is envisaged in the Bill is the best way to proceed.

First, the authority does not meet the Government's criteria for public dividend capital. Normally, public dividend capital is available only to those public sector bodies that are especially subject to cyclical fluctuations in their returns as a result of their trading conditions and the nature of their assets; for example, British Shipbuilders. That is not the case with the authority. By contrast, the Government have proposed a capital structure for the opening balance sheet of the trading fund which includes debt, reserves and provisions. We regard commencing debt of the order of about £80 million as an appropriate element in that structure within the context of the overall financial framework that I outlined on Second Reading.

The debt will amount to less than one-third of the likely opening capital employed. We consider that servicing a loan of that amount should not be an unreasonable burden on the authority. In any case, equity is unnecessary. Section 4(2) of the Atomic Energy Authority Act 1954 would enable the Secretary of State to require the authority to make distributions in addition to interest payments, if that seemed appropriate, to ensure an adequate financial return to the Government.

It is also not clear from the amendments whether the noble Lord is proposing that the whole of the opening capital employed be made up of PDC. If so, that could mean a sum of around £250 million. To pay a dividend on that figure, which would be no less than the amount that would have been payable on a loan—and the noble Lord's amendment to Clause 4 would indicate that—would require the Atomic Energy Authority to make a financial return on assets of around 11 per cent. in order to break even. The trading fund would certainly not be viable on that basis.

Public dividend capital was created in the cases of the Royal Ordnance factories, now a public limited company, and the Royal Mint. HMSO and the Crown Suppliers do not have equity. There is thus no general rule with respect to trading funds. It depends on expected trading conditions. Furthermore, in the case of the authority Section 4(2) of the 1954 Act already enables the Secretary of State to require the authority to make payments in addition to interest payments if that seems desirable.

As to the question of there not being equity and of how the authority would ensure a reasonable rate of return to the Exchequer, the discipline of having to reach a financial target will ensure that the authority runs its business so as to achieve a particular rate of return on assets before interest. The authority recognises the need to ensure a reasonable rate of return to the Exchequer over the coming years in the light of its trading performance.

Section 4(2) of the 1954 Act allows the Government to direct that any sums received by the authority be surrendered to the consolidated fund. That provision will remain in force but will not be used for arbitrary raids on the AEA's earnings. This point was one that I highlighted in my letter to the noble Viscount. Discussions are taking place with the authority to define as far as possible the circumstances in which the power under Section 4 might be used.

The authority itself attaches great importance to the successful resolution of those discussions. It has emphasised the need—and we support the authority in this—to ensure that whatever mechanism is employed, it has an incentive to improve its performance and to apply at least part of any rewards from such improved performance to developing its business.

I now want to say a word about the point that was raised in respect of Amendment No. 12 to Clause 4 where it states, in subsection (1B), that: The Secretary of State may set, after consulting the Authority, a financial target to be earned on net assets". I believe it was the noble Lord, Lord Stoddart, who referred to financial targets. Amendment No. 12 is unnecessary because, as the noble Lord is aware, the Government intend to set a financial target for the AEA as a trading fund—initially 5 per cent. on current cost capital employed. Financial targets in the energy sector have been set by agreement between the Government and the boards of the industries. We believe that that responsible partnership is the sensible way to proceed in the authority's case. It is expected that the Secretary of State will write to the chairman of the authority formally conveying the financial target at the start of the trading fund. A statutory provision is also unnecessary because the Secretary of State has powers of direction under Section 3 of the Atomic Energy Authority Act 1954.

4 p.m.

The final amendment in the group, Amendment No. 12, to which the noble Lord, Lord Stoddart, also spoke, in new subsection (IC) deletes Section 4(2) of the Atomic Energy Act 1954. Indeed, the noble Lord suggested that it should be repealed altogether when this Bill comes into force. I am afraid that we certainly cannot accept that because it runs counter to the whole philosophy of the Bill. The Bill makes the minimum changes necessary to the existing statutory framework for the AEA to operate as a trading fund with borrowing powers. This section has been used quite extensively over the years to ensure that certain moneys received by the authority were paid into the Exchequer.

We accept, of course, that once the authority is operating on a trading fund basis all its income, except in special circumstances, will be regarded as contributing to its own internal funds. This power will, however, still be required in the special circumstances I referred to. These include ensuring that the dividends paid by NNC will continue to be paid into the Consolidated Fund and it will also cover payments in regard to royalty receipts where intellectual capital is derived from Government-funded R & D and any excess of superannuation receipts. There may also be other examples not quite so readily foreseen.

Furthermore, as I have already explained, the Government will be relying on Section 4(2) powers to ensure a reasonable return to the Exchequer in the light of the Atomic Energy Authority's trading performance.

I have tried to deal in some depth with the amendments because I know that noble Lords have been exploring an alternative method. That is why I asked my advisers to look very carefully at the potential which these might offer; but in view of the explanations which I have been able to give to your Lordships I trust that, in the circumstances, the noble Lords concerned might be prepared not to press the amendments.

Viscount Thurso

The noble Lord lost me at one point. Can he explain why the operations of the Ordnance factories and the Mint are cyclical and the operations of the Atomic Energy Authority are not? I cannot see that there is any great difference between them.

Lord Gray of Contin

The operations of the Ordnance factories and the Mint are a very differrent exercise from the operation of this authority—indeed, in a great many ways. The financial structure of those concerns are such that the requirements ultimately are very different to what this authority would need. I have no doubt that when the decision was taken to set up those other organisations all the thoughts which we have had this afternoon were considered. However, the authority is the one under consideration; I merely gave those others as examples which operate differently. The suggestions put foward this afternoon by noble Lords concerning the operation of this authority have been carefully considered. In the case of this authority we do not consider that any of the suggestions would better those which we have proposed ourselves.

Viscount Thurso

We asked about the word "cyclical". Can the noble Lord explain what he means by "cyclical"?

Lord Gray of Contin

It is not really my role to act as an Oxford dictionary, but the way in which I use the word "cyclical" is that, for example, in the case of the Mint there are overseas earnings which can vary substantially. Again, in the Royal Dockyard that is a factor which can affect the amount of income and, indeed, the size of the profits ultimately made. Therefore, they can be cyclical, meaning that they will come not in an even form, but in cycles.

Viscount Thurso

I thank the noble Lord. This is most interesting. The Government are in the process of proposing that Dounreay, for instance, should operate a reprocessing plant for the processing not only of our own waste but also that of overseas countries. Surely that is very like the operations described by the noble Lord which are bound to be subject to forces which are not local and certainly cyclical in nature as the economies of those countries abroad rise and fall and the quantities of plutonium required to be processed rise and fall. It seems to me that the noble Lord is destroying his argument with his explanation.

Lord Gray of Contin

I cannot agree with the noble Viscount. I consider that I am establishing my argument rather than destroying it. Perhaps I am destroying his argument. As regards the cyclical effect and the Atomic Energy Authority, I do not consider that it applies, because in the case of Dounreay, which the noble Viscount mentioned, the authority has a much steadier series of contracts. It has contracts with the Central Electricity Generating Board, BNFL and the Department of Energy. It is not the same as the shipbuilding industry, which may fluctuate. When an authority has a series of customers such as those I have mentioned the flow of business is likely to be much more even than the up-and-down type of cyclical flow which is more likely in an industry such as shipbuilding.

Viscount Thurso

Surely the noble Lord is providing a Bill which he hopes will last into the future. The last Atomic Energy Authority Act lasted 30 years. We hope that this present Bill, when it becomes an Act, will go on well into the future. What the noble Lord will be looking for in the future at Dounreay will be the reprocessing of fuel elements from all over Europe, and perhaps from all over the world. Surely that will be just as cyclical as the business which he has described at the Royal Mint and the Royal Ordnance factories. I cannot see any difference if one looks at the future. I am not speaking about the past, because the past is behind us. We are setting up something for now and the future and are not dealing with what has gone before.

Lord Gray of Contin

The noble Viscount is looking a very long way into the future of Dounreay. I think he may have forgotten that any initial plant at Dounreay will be a demonstration plant. Any commercial operation will follow much later. I referred to business not being cyclical and this is supported by the fact that there will be research contracts which will tend to keep the flow of work even. We are perhaps making a mountain out of a molehill. I do not think that the noble Viscount has a point on this issue and I cannot accept his argument.

Lord Stoddart of Swindon

I should like to thank the noble Viscount, Lord Thurso, and the noble Lord, Lord Ezra, for their support on this group of amendments. It is quite clear that the idea of public dividend capital has many friends. I think we must listen very closely to the noble Lord, Lord Ezra, because he has been the head of a very large nationalised industry and has experienced, first-hand, the difficulties which arise under existing arrangements and the type of arrangements under which the AEA will be expected to work in the future. Since the noble Lord, Lord Ezra, is supporting them, these ideas have to be taken seriously.

I should also like to thank the noble Lord, Lord Gray, for the serious way in which he has tackled these amendments. Actually, I think we have started him thinking; and when it comes to Government Ministers it is always a good thing when one makes them think, because all too often they are so bowed down with departmental responsibilities that they do not have the time to think. They have these red dispatch boxes full of letters which they have to sign every night, far into the night, and they simply do not have the time—poor things!—to get down to the real job of politics, which is to think about policies not only for the present but also for the future. I think that this group of amendments has had a value in that it has clearly made the noble Lord think.

I do not agree with the noble Lord that public dividend capital could not apply to the AEA, because it usually applies in cases where there is cyclical activity. I really think that argument is a get-out. I see absolutely no reason why in the case of AEA, which as the noble Lord said has many long-term contracts, the system of public dividend capital would not apply ideally. In fact, it would apply in a far better way than it would in industries with a cyclical tendency. Indeed, it would help the Government as well as the authority to plan ahead rather than to continue the present arrangement where the authority is always—how can I put it?—fearful that if it does well, and if its work proceeds profitably, then the Treasury will suddenly come along and say, "Ah, we are in a bit of difficulty this year. We want some more money from you." That might be all right from the Treasury's point of view, but from the point of view of the organisation itself, which may in fact be planning to expand and improve its operations, it could be a disaster. Therefore, I think that the noble Lord is not looking at this issue in the way that perhaps he could and should be looking at it. However, he is quite right: we did put this group of amendments down as a probing exercise and to obtain a discussion on it.

I think that probably it would be quite wrong of me to press the amendments this afternoon, but I hope that note will be taken of the discussions we have had here. Of course, it may very well be that our ideas are taken up in another place, which will have this Bill after we have dealt with it. It is not unusual for ideas from this House to be taken up by another place. We put some good ideas forward and are able to give good advice to another place and even to governments. Therefore, on that basis I think that it would be as well if I withdrew these amendments.

Amendment, by leave, withdrawn.

[Amendment No. 2 not moved.]

4.15 p.m.

Viscount Thurso moved Amendment No. 3: Page 1, line 9, after ("amount") insert ("not exceeding open market value nor the depreciated value of the assets, whichever is the less.").

The noble Viscount said: When I put down this amendment of course I did not have the benefit of the letter dated 3rd December from the noble Lord, Lord Gray of Contin. Perhaps I may once again quote from it. He says in his letter to me: It is expected that the commencing capital debt will be set at about £80 million. This figure has been arrived at after full and detailed consultations both about the size of the debt and the other elements of the financial framework with the AEA and the Treasury.

To a certain extent this amendment overlaps ground which we have already passed, but in a different sense. We are now accepting that we have to use the word "debt" and not the word "liability", that we are not having the benefit of a public dividend capital, and so forth. We want to make sure by this amendment that the debt does not become a millstone and that we have not put an unfair debt round the neck of the Atomic Energy Authority.

Certainly in moving this amendment that the debt should not exceed the open market value or the depreciated value of the assets, whichever is the less, I am seeking to ensure that the Atomic Energy Authority is not in any way being hamstrung at this stage of its existence, which is a transition from one method of accounting to another. I beg to move.

Lord Gray of Contin

The Government are opposed to this amendment on the grounds quite simply that it is unnecessary.

Clause 1(1) of the Bill, unamended, provides for the Secretary of State to specify, after consultation with the authority, a commencing capital debt in a notice in writing. As the noble Viscount knows, the Government expect that this debt will be about £80 million. It is likely to represent less than one-third of the value of the total capital employed on the opening balance sheet of the trading company when the assets are revalued on a current cost basis.

The noble Viscount is asking for a safeguard in the Bill to ensure that the commencing debt is not set above open market value or the depreciated value of the assets, whichever is the less. Open market value is a difficult concept to apply, in practice, to the authority. It does, of course, have relevance to a number of the authority's individual assets, but unless we were to try to privatise the authority (which I have confirmed we have no intention of doing) there is no other obvious way of testing its open market value. It is not therefore clear what ceiling a reference in Clause 1(1) to open market value would put on the authority's commencing capital debt.

As to a reference to the depreciated value of the assets, I can perhaps reassure the noble Viscount if I tell him that a debt of about £80 million would in fact be close to the expected depreciated value of the AEA's fixed assets, valued on a historic cost basis. The Government believe that, given an opening debt of this size, the authority should be able to make a modest profit after payment of interest. I trust that, in the light of these assurances, the noble Viscount will agree to withdraw his amendment.

Lord Stoddart of Swindon

I also have two amendments in this group but, as I explained, they relate to my previous group of amendments on public dividend capital. I think that the noble Viscount, Lord Thurso, has a point, and I must say that I remain puzzled as to exactly what burden will be placed upon the authority.

At Second Reading I raised the question of the return on capital which would be expected and the sum upon which this would be levied, and I made reference to the accounts of the authority, which I think showed a current balance of assets of about £250 million. I calculated that a 5 per cent. return would mean that the authority would have to pay about £13 million per annum before its starting, as well as interest on the commencing capital debt.

From what the noble Lord says, it seems that that might be wrong, and that is not the case. I am sure that he will correct me if I am wrong; I really am seeking information. It seems from what he said that the 5 per cent return would be levied not on £250 million, but on £80 million. I do not know whether he takes that view. Perhaps it would be as well if at this stage I sat down and allowed him to put me right. If it is 5 per cent on £80 million, we are talking about £4 million a year and not £13 million. It makes all the difference. It is of great importance to the noble Viscount and his colleagues, to myself and my colleagues and to the AEA to have this matter cleared up once and for all.

Lord Gray of Contin

The noble Lord sat down a moment or two too soon! The point that he made is relevant. The answer is that the 5 per cent is not a surcharge; it is profit before interest. The AEA only has to pay interest out of that profit.

I shall ask for simplification for the noble Lord, but in the meantime let me take up an earlier point that he raised. He mentioned Amendments Nos. 13 and 15 which he would have liked to see taken with the first group of amendments. They would strike out a key feature of the financial framework which we are proposing for the AEA trading fund. I can see why he would have preferred them to have been taken with the first group.

A commencing capital debt is a standard feature of trading funds. In the Government's view it is right for the AEA trading fund to have a commencing capital debt which has to be repaid over a number of years with interest to the National Loans Fund out of internally generated funds.

The noble Lord is concerned about the fairness of that and whether the debt will be an undue burden on the authority and affect the viability of the trading fund. I can assure him that those factors have been central to the debate which has taken place with the authority and the Treasury about the financial framework of the trading fund. Although the commencing debt is new it does not represent an additional burden on the authority compared with the present arrangements.

At present the grant in aid is equal to the net cash requirements of the authority after allowing for the AEA's profits from other customers to be appropriated in aid. In future those profits will be part of the authority's internally generated funds. In addition, the AEA will be including in its charges to the Department of Energy under programme letters an element for profit. Part of those profits will be applied to the authority to meet interest payments; and that is the point that we have been discussing. A reasonable level of commencing debt cannot therefore be determined in isolation. Many aspects of the financial framework are interrelated. If the requirement to repay a commencing debt with interest were to disappear, as would happen if the noble Lord's amendments were accepted, the coherence of the framework would be destroyed.

The target is 5 per cent. on £250 million before interest. The debt is £80 million. I do not think that I can go beyond that in my explanation to the noble Lord. I hope that that helps to clarify the matter.

Lord Stoddart of Swindon

Not quite. May I ask one question so that I am absolutely clear in my mind? The authority will be required to pay 5 per cent. on the £250 million, which is approximately £13 million a year, and then at, shall we say, 11 per cent., which I believe is the going rate on the National Loans Fund, it would pay that 11 per cent. on £80 million. Is that correct? In other words, it would be about £8.8 million in addition to the £13 million.

Lord Gray of Contin

No. A financial target of 5 per cent. return on average capital employed assessed on a current cost basis will be set for the first three years. The opening capital employed is likely to be £250 million.

Lord Ezra

Does the noble Lord not feel that that is an unduly complicated financial structure? Here was an opportunity for a financial reconstruction which had a commercial element in it. Had it been based on the proposition put forward by the noble Lord, Lord Stoddart, earlier on, it would have been comprehensible to all concerned. I regret to say that the more the noble Lord has tried to explain what the system is, the more some of us have become confused. I can only hope that the financial director of the AEA is being thoroughly schooled by the Treasury on that somewhat abstruse method of financing and paying its way.

Lord Stoddart of Swindon

We must get this straight; otherwise the authority will find itself paying enormous sums. Will the authority be required to pay interest on the £250 million as well as on the £80 million, or is it £250 million in total; or does it have to earn a return of 5 per cent on £250 million and pay the going rate on £80 million of that? Is that what the noble Lord is saying? I rather think that it is. If only he would say it, we should understand. We simple mortals understand only arithmetic and not mathematics.

Viscount Thurso

The noble Lord the Minister is using the word "target". In using that word does he mean it in the sense that it can be missed, as most targets can be if one does not try hard enough?

Lord Gray of Contin

I shall answer that one right away. Target profit is what we have been talking about. As we would be told at school, I am sure that noble Lords are not doing their best to understand what is quite a simple philosophy. The problem may be that I am not a very good teacher. Let me put it this way. The object of the exercise is to earn 5 per cent on £250 million and pay NLF rate on £80 million. The authority does not have to pay the 5 per cent to anyone. That is just its target profit. Money to the Exchequer will come in the form of interest on the commencing debt and on new loans, and in any payments under Clause 4(2).

Lord Stoddart of Swindon

I thank the noble Lord. That is the answer I was looking for. I now assume that if that target rate is met, it will be possible for the authority to plough the money back into its own operations. Is that correct?

Lord Gray of Contin


Lord Stoddart of Swindon

Good. That is what we wanted to know.

Viscount Thurso

This amendment has been worthwhile, because if nothing else, it has produced a lot of very interesting information. I think that your Lordships would not wish me to press it at this stage. I therefore beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 4 to 6 not moved.]

Clause 1 agreed to.

Clause 2 [Borrowing Powers]:

[Amendment No. 7 not moved.]

Clause 2 agreed to.

Clause 3 [Limit on borrowing]:

[Amendment No. 8 not moved.]

4.30 p.m.

Lord Stoddart of Swindon had given notice of his intention to move Amendment No. 9: Page 2, line 33, leave out ("£150 million") and insert ("£200 million").

The noble Lord said: It is my turn to get into difficulties now. In my view this amendment is relevant only if the Committee decides to pass my new clause in Amendment No. 20 which we shall not reach until almost the end of the Marshalled List. But clearly if that amendment is passed by the Committee, the amount of money available to the authority at £150 million, and not exceeding £200 million, will be insufficient. I am therefore in a quandary. It would be absurd of me to move an amendment which might prove not to be necessary if the Committee subsequently decides not to accept my new clause. I think that the best way I can overcome the problem is to crave the indulgence of your Lordships' Committee by suggesting that it would be wise for me at this stage to withdraw my amendments but not before the noble Viscount, Lord Thurso, has had a chance to move his. This is on the understanding that if, by some miracle, my new clause is later passed by the Committee, I shall be able to reintroduce these amendments at Third Reading, since we are not to have a Report stage. With those few words I shall sit down for the moment and so enable the noble Viscount to speak.

Viscount Thurso

I go along with the noble Lord, Lord Stoddart of Swindon on this. I should certainly be willing to go along with his withdrawing this amendment and reserving his right to come back at Third Reading, since we are not to have a Report stage, and perhaps get another bite at the cherry then.

Lord Gray of Contin

Perhaps I may intervene for a moment in an effort to be helpful. So far as the Government are concerned, certainly if it were for the convenience of the Committee, we would have no objection whatever to discussing Amendment No. 20 now, if that would be helpful to the noble Lord. We could discuss Amendments Nos. 20 and 9, 10 and 11 grouped together. In other words, we could move up Amendment No. 20 to include it in the group comprising Amendments Nos. 9, 10 and 11, which we are discussing, if that would be helpful.

Viscount Thurso

With great respect to your Lordships' Committee, I think that Amendment No. 10 is slightly different from Amendment No. 9. I hardly think that the noble Lord, Lord Stoddart of Swindon, would necessarily want to deal with Amendment No. 10 now in the same voice.

Lord Stoddart of Swindon

It would not work.

The Deputy Chairman of Committees (Lord Murton of Lindisfarne)

If we are to continue to debate this amendment, it should be formally moved, unless it is not to be moved by the noble Lord—whichever he prefers.

Lord Stoddart of Swindon

I think that the best plan is not to move the amendment.

[Amendment No. 9 not moved.]

Viscount Thurso moved Amendment No. 10: Page 2, line 33, leave out ("not exceeding £200 million").

The noble Viscount said: This is slightly different from Amendment No. 9 and, indeed, from Amendment No. 20. We are here talking about the maximum borrowing power which the Secretary of State is able by secondary legislation or subordinate legislation to offer to the Atomic Energy Authority. I am here looking at the length of time which the Atomic Energy Authority Act has lasted. It has lasted for 30-odd years without needing, or apparently needing, to be changed. Let us hope therefore that the Bill which we are now looking at is not simply a short-term measure but one which will last as long as the previous Act. If we do a good job, there is no reason why it should not.

We are here saying that at no time, without further legislation, shall the borrowing power of the Atomic Energy Authority exceed £200 million. I think that this is hubris. It is assuming that there will never be any inflation which will make this £200 million appear to be insufficient. What if inflation rockets up once again? We read in the papers today about the OPEC oil sheikhs thumping the table rather loudly and the effect that this is having on the value of the pound and the dollar, and perhaps on inflation. To put a £200 million ceiling on the figure which it would be reasonable to allow the Secretary of State to authorise the Atomic Energy Authority to borrow is totally wrong. I do not think that there should be no limit, but that the limit should not be so precisely defined as £200 million. The limit should be such as the Secretary of State finds himself able to approve and to suggest in subordinate legislation and so on.

My amendment therefore suggests that we simply delete the words "not exceeding £200 million". This allows a borrowing ceiling of £ 150 million to start with and then allows the Secretary of State to adopt the normal common-sense approach that we would hope any Secretary of State would employ at any time in relation to the value of money, the needs of the Atomic Energy Authority, the work which the authority is called upon to do, and so on.

We must also remember that if your Lordships accept that we are legislating for perhaps a quarter of a century hence, we shall be moving towards the magic era of the year 2,000, the end of the millennium. We are told that the demand for electricity will then be totally different, the needs for atomic power will be totally different, and therefore the need for atomic research will be totally different from what it is today. We can bump along comparatively quietly today, but in 25 or even 20 years' time we may have to look very differently at the volume of research being done by the Atomic Energy Authority on our behalf. Therefore it seems wrong to hamstring the Secretary of State at this stage with a limit of £200 million borrowing powers, when today it is considered reasonable to have a limit of £150 million. In other words, to give him in 20 years' time only a £50 million rise when we expect that there may be more demand and less value in the money seems to me wrong. That is why I have put down this amendment for your Lordships' consideration. I beg to move.

Lord Gray of Contin

Clause 3 of the Bill sets an initial borrowing limit for the authority of £150 million. In setting this level we have taken account of the expected level of commencing debt of about £80 million and the need for new borrowing to finance working capital, which could lead to a requirement for temporary borrowing up to a maximum of £30 million. We have added a contingency allowance to cover additional borrowing for capital investment and to cope with unforeseen events.

It is standard practice for nationalised industries to set an initial limit on their borrowing and to allow the Secretary of State to increase it by order, subject to parliamentary approval. If borrowing above that limit is judged necessary, Parliament expects the Secretary of State to return to the House with new legislation.

We think that it is also right to apply this framework in the case of the AEA trading fund, and the Government would regard it as appropriate to return to Parliament with amending legislation if it seemed likely that the AEA would need to borrow in excess of £200 million. That does not seem unreasonable to me. As the noble Lord, Lord Ezra, will know very well from his experience, that is the normal practice. In my view it is a good practice. It is good that Parliament should have the right to determine an increase in borrowing requirement by a body of this type.

If the amendment of the noble Viscount, Lord Thurso, were accepted, Parliament would be denied what could prove to be a very important opportunity to deliberate on the financial affairs and the future development of the authority. For those reasons, I am unable to accept the amendment. I trust that, having heard my explanation, the noble Viscount may be prepared to withdraw his amendment.

Viscount Thurso

Obviously the other place will have more to say about matters of this nature than we shall. However, I think it was right to raise the matter. It is very difficult to state at this stage what will be required, and when. I should not want to feel that any future Government were lumbered with having to produce legislation in order to get on with the work that needs to be done at some future date. I was trying to give flexibility, but in view of what the noble Lord has said, and in view of the fact that we have discussed this matter and that it will be considered in another place, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 11 not moved.]

Clause 3 agreed to.

Clause 4 [Loans from the Secretary of State]:

[Amendments Nos. 12 and 13 not moved.]

Viscount Thurso moved Amendment No. 14: Page 4, line 1, leave out subsection (3).

The noble Viscount said: This amendment is really concerned with the heavy hand of the Treasury upon the Secretary of State. In my view, to restrict the Secretary of State to giving loans only with the approval of the Treasury is to place undue control upon the Secretary of State. After all, the Secretary of State only has so much money, which he has won very hard from the Treasury. If he thinks that he needs to lend it to somebody, I should have thought that he would have made due provision and would have discussed it with the Treasury beforehand. I should not have thought it necessary that the Treasury should use its atomic expertise—if it has any—to decide whether the Secretary of State was right in deciding to lend such money. The subsection gives power for undue interference by the Treasury in the normal decisions of the Secretary of State, and it is for that reason that I beg to move the amendment.

4.45 p.m.

Lord Gray of Contin

It is standard practice to require Treasury approval of the terms and conditions of NLF loans. This is not an onerous procedure but a sensible safeguard for ensuring that the Treasury's expertise in these matters is available to the sponsoring department of the industry. It also enables the Government to take an over-view of the total resource requirements of the public sector. This is an important aspect of macro-economic policy, and the Government are therefore opposed to such an amendment.

If accepted, this amendment would also remove a safeguard for the authority in that the Secretary of State would not be obliged to consult the authority before changing the terms or conditions of a loan, and, of course, that would be unreasonable. For those reasons, I am afraid that I cannot accept the amendment.

Viscount Thurso

Obviously this is very much more a matter for the other place rather than for your Lordships. Having made the point and having received the noble Lord's assurances on the matter, I am happy to beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendment No. 15 not moved.]

Clause 4 agreed to.

Clause 5 [Treasury guarantees]:

[Amendment No. 16 not moved.]

Clause 5 agreed to.

Clause 6 [Supervisory powers of Secretary of State]:

Lord Stoddart of Swindon moved Amendment No. 17: Page 5, line 9, after ("Authority") insert (", after consultation with the recognised Trade Unions,").

The noble Lord said: I beg to move Amendment No. 17, which stands in my name. The object of the amendment is to bring the trade unions into the planning process, not only because under the new trading account regime the salaries, terms and conditions of service, the jobs and the safety of their members may be adversely affected through financial pressures, but also because they have a great deal to contribute towards the efficiency of the AEA and to ensuring that their members feel involved in and part of the authority.

Noble Lords will remember that we had a debate a week ago last Monday on the report of the Select Committee on Overseas Trade. One of the major points which the committee made was that we needed people to be more involved; everybody had a responsibility—not just the Government, not just the employers, but everybody was involved in the process of rebuilding Britain's trading base. The AEA is just as much part of that trading base as anything else. It is vital to research; it is vital to our continued progress in the field of atomic energy, in particular, and, of course, in many other fields, especially in renewable energy, matters of safety and so forth.

Therefore, we think it right and proper that at this stage we should seek through the Bill (since we are setting up a new organisation and a new trading fund) to involve the trade unions right from the start and to say to them, "Yes, you are important people. We want you involved in what we are doing. We want your interest. We want your ideas. We want your commitment".

But it has become clear to me since I became involved with this Bill that unfortunately the people who work for the AEA feel unsettled by the proposed change to a trading account status. That in fact does not make for involvement; it makes for worse. Indeed, I mentioned at Second Reading that the people who work for AEA feel that their jobs and conditions of service will be at risk from commercialisation, and if this amendment were accepted it would at least go some way to assuaging their understandable fears. As I have already said, we want people to be involved in what they are doing. We want them to feel part of the undertaking, and feel that they have an interest in that undertaking not merely as employees but as people who want the undertaking to succeed for their benefit, and for the benefit of the country as well.

In the case of AEA in particular, we have to bear in mind that the people there are highly intelligent, in general highly trained and expert, and as such have a lot to give to the organisation. It would therefore be sensible and productive for them to be involved through their trade union organisations, and to be properly represented at the planning stages in order that their advice and assistance could be given in a structured and ordered manner.

The noble Lord, Lord Gray, could not possibly disagree with any word that I have uttered this afternoon. I know from long experience of working with him that he is as concerned as I am to ensure that people working in industry are not only treated properly but are given the opportunity to contribute to their industry in the best possible manner. I hope, therefore, that when he speaks he will not give the normal response that is given by governments: "There are various organisations, national joint industrial councils, and what not", and fob us off with that kind of thing.

I should like to see from him this afternoon a reply which gives us some indication that the Government really believe that Britain is one nation—although, by God, they have split it over the past six or seven years—and that individual people count. Through supporting this amendment this afternoon they could give an earnest of their intention to ensure that people working in industry have a decent say in what is going on and the future of their lives. I beg to move.

Lord Ezra

The noble Lord, Lord Stoddart, has raised the important point of participation. I am sure that the Government's policy must be to encourage the maximum degree of effective participation in enterprises throughout the country, whether publicly or privately owned, because it is only in that way that industry can move forward and thrive. If the Government are unable to accept this amendment, I hope that the noble Lord will nevertheless explain to us what steps are going to be taken, or are already being taken, within the AEA to encourage the necessary degree of participation.

Lord Gray of Contin

Certainly the noble Lord, Lord Stoddart of Swindon, was correct when he suggested that I have a real concern to ensure that employees of the authority, and indeed employees of any other body in similar circumstances, are made to feel part of the whole unit and are consulted about their future. So far as the Government are concerned, this is paramount in our view on this matter as well. Perhaps I may tell your Lordships that my right honourable friend the Secretary of State has had no indication that authority employees are opposed to the proposed arrangements, although they have asked for reassurances on particular points. I am happy to be able to tell the noble Lord, Lord Stoddart of Swindon, and the noble Lord, Lord Ezra, who was also concerned about this point, that they have received those assurances which they themselves sought.

The Government encourage consultation of this kind, which they believe is best settled as part of normal relations between management and employees without outside prescription. Through the Whitley Council and the National Joint Industrial Council the authority keep the staff/trade union side informed of major developments in finance and manpower. I know that the noble Lord mentioned the National Joint Industrial Council and suggested that he did not really want that as an answer, but he has to look at it objectively. I know that he has a deep interest in the trade union movement, but the Government take the view, I think rightly, that these matters are better settled and discussed by the official representatives who have a wealth of experience in these matters and whose good influence can often help to reassure people who might otherwise be unhappy.

Currently there are discussions taking place and consultation procedures are being employed, and they will be in use when the trading fund is in operation. We believe that it would be wrong for the Government to impose a particular form by dictating that certain documents should be handed over, such as is suggested. In view of my assurance that the Government are consulting and that the reassurances which were sought have been given to the employees of the authority, I hope that the noble Lord will accept that the way we are proceeding is for the best, and that he might consider that his amendment is unnecessary and he prepared to withdraw it.

Lord Stoddart of Swindon

I am not satisfied with that reply, and I am not inclined to withdraw the amendment. It is quite true that employees at AEA are not opposed to the trading fund concept per se, provided they have proper safeguards written in. The employees at AEA are perfectly reasonable people who want to assist the Government in getting the best possible financial and working arrangements. I put down this amendment because they are so co-operative, and because by this amendment they could become even more co-operative because they would be able to put more into the organisation.

It is true that the trade unions operate through their various joint councils. When I worked in the electricity supply industry I worked through the National Joint Council on negotiating business, but we also had consultative arrangements. Indeed, I took part in those consultative arrangements and was the secretary of a local committee. But those arrangements were not good enough. They enabled employers to brush employees off with all sorts of excuses, and there was never any real consultation. That is why I want to give the workers at the AEA statutory rights to be consulted about plans which will affect their livelihood, their industry, and indeed the country.

I do not conceive, and I am sure other noble Lords on this side of the Committee, and possibly some on the other side as well, do not conceive consultation as merely being handed a set of papers. That is not consultation; that is an insult. I have been through it myself and was duly insulted. What I am seeking is the statutory right of workers in this industry to be consulted about their industry on a real and ongoing basis.

5 p.m.

It is not good enough to brush this amendment off as calling for Papers. It is not calling for Papers. We do that when we have Unstarred Questions or Motions in your Lordships' House. I want to see the workers in this industry recognised for the intelligent human beings they are, ready to contribute, as the noble Lord has acknowledged, to the industry in which they work and which sustains them. I am therefore inclined to test the opinion of the Committee on this matter, because I and my colleagues feel so strongly that the time has come to make progress in this area of recognising the rights of working people to have real consultation, to be considered, to have their ideas and their views considered before plans are passed which affect their lives, their families, their working conditions and what have you.

Viscount Thurso

In view of the fact that so far the noble Lord, Lord Gray, has not shown any other way by which consultation might be written into the Bill, I feel that we must go along with the noble Lord, Lord Stoddart of Swindon. But I hope that the noble Lord, Lord Gray, may yet relent and give us some better idea of how consultation may be built into this Bill.

Lord Gray of Contin

I believe that I indicated—but I shall do so again—that the unions are currently having discussions about the consultation procedures they will use when the trading fund is in operation. In my view, it would be quite wrong for the Government to impose a particular form by dictating that certain documents should be handed over. I take the view that the authority regards the workforce as highly responsible. The relations between the workforce and management are extremely good. These people are having their own discussions at the moment. I cannot see that it is for the benefit of those discussions for the Government to lay down specific objects or targets which they must achieve. I think it is very much better that this be left to those who are experienced and responsible for these matters. As I indicated a little earlier, through the Whitley Council and the National Joint Industrial Council the authority keeps the staff and the trade union side informed of major developments in both finance and manpower. It seems to me much more sensible that it is left to those people who are experienced and who know what they are about than that the Committee should decide to pass this amendment at this stage. I must ask your Lordships to resist the amendment.

Viscount Thurso

Does the noble Lord use his phrases advisedly? He spoke about keeping people informed of decisions, not about asking them to participate in the making of those decisions. This is what the noble Lord, Lord Stoddart, and I and my colleagues are trying to do. How are people to participate in decisions? Are they merely to be informed or are they to have another opportuntity to participate in the making of them?

Lord Gray of Contin

I am afraid the noble Viscount must realise that these discussions are taking place now. Therefore neither I nor anybody else can answer that question. They are having discussions as to how they should proceed. I believe it is a mistake for us to interfere at this stage in such matters. It is better to leave it to them to decide. The Bill is in its very early stages.

Lord Lloyd of Kilgerran

I hesitate to interfere at this late hour in the discussion, but the noble Lord the Minister is always a very reasonable man on these matters. I appreciate the difficulty that he is in, and also the difficulty that we are in, on this important matter. The Minister referred to handing over papers. I was not quite sure what he meant by that. Can he give some assurance to the Committee, even at this stage, that he will take this amendment back and think about it again? It is a fundamental matter, and co-operation with the trade unions is going on now, I understand.

If the noble Lord the Minister is saying that the Government know that the trade unions do not want to be consulted as suggested by this amendment, that is another matter. It would be helpful for the Minister to say that in the course of these consultations the trade unions are happy about the present position. Perhaps there might be a further development. Can the Minister say whether the trade unions have categorically said that they do not want to be consulted? I am sure the answer is that the trade unions have not said that. Will he therefore take back this amendment and think about it again so that we can consider the matter at a later stage, instead of taking up time now on what both sides of the Committee think are important matters?

Lord Gray of Contin

The noble Lord, Lord Lloyd, is, as always, persuasive, but I am afraid I am not prepared to accede to his request. I have explained as best I can that discussions are taking place between the authority and the trade unions involved. I have little doubt that they will be able to resolve this matter perfectly well, and I think it would be a mistake for us to interfere at this stage. I have every confidence that they will resolve these matters themselves. I am afraid I cannot give any more information, because I have not been directly involved in this matter; but I repeat what I said earlier: that I trust your Lordships will resist this amendment, which I do not see as having merit.

5.8 p.m.

On Question, Whether the said amendment (No. 17) shall be agreed to?

Their Lordships divided: Contents, 82; Not-Contents, 111.

Airedale, L. Lloyd of Hampstead, L.
Ardwick, L. Lloyd of Kilgerran, L.
Attlee, E. Lovell-Davis, L.
Aylestone, L. McGregor of Durris, L.
Banks, L. Mackie of Benshie, L.
Beaumont of Whitley, L. McNair, L.
Blyton, L. Mais, L.
Bruce of Donington, L. Meston, L.
Carmichael of Kelvingrove, L. Mishcon, L.
Chitnis, L. Molloy, L.
Cledwyn of Penrhos, L. Nicol, B.
Crawshaw of Aintree, L. Northfield, L.
Davies of Penrhys, L. Oram, L.
Dean of Beswick, L. Phillips, B.
Diamond, L. Pitt of Hampstead, L.
Donaldson of Kingsbridge, L. Ponsonby of Shulbrede, L. [Teller.]
Dowding, L.
Elwyn-Jones, L. Raglan, L.
Elystan-Morgan, L. Richie of Dundee, L.
Ennals, L. Rochester, L.
Ewart-Biggs, B. Ross of Marnock, L.
Ezra, L. Seear, B.
Falkland, V. Sefton of Garston, L.
Gallacher, L. Serota, B.
Galpern, L. Shepherd, L.
Gladwyn, L. Shinwell, L.
Glenamara, L. Stallard, L.
Graham of Edmonton, L. [Teller.] Stedman, B.
Stoddart of Swindon, L.
Gregson, L. Taylor of Mansfield, L.
Grey, E. Thurso, V.
Hampton, L. Wallace of Coslany, L.
Hanworth, V. Walston, L.
Harris of Greenwich, L. Wells-Pestell, L.
Heycock, L. Whaddon, L.
Houghton of Sowerby, L. White, B.
Hughes, L. Wigoder, L.
Jenkins of Putney, L. Willis, L.
John-Mackie, L. Wilson of Langside, L.
Kilmarnock, L. Winstanley, L.
Kirkhill, L. Winterbottom, L.
Llewelyn-Davies of Hastoe, B. Young of Dartington, L.
Alexander of Tunis, E. Cameron of Lochbroom, L.
Allerton, L. Campbell of Alloway, L.
Ampthill, L. Campbell of Croy, L.
Auckland, L. Carthcart, E.
Belhaven and Stenton, L. Colwyn, L.
Beloff, L. Cork and Orrery, E.
Belstead, L. Cowley, E.
Bessborough, E. Cullen of Ashbourne, L.
Blake, L. Dacre of Glanton, L.
Brabazon of Tara, L. Davidson, V.
Broxbourne, L. Denham, L. [Teller.]
Caccia, L. Denning, L.
Caithness, E. Drumalbyn, L.
Effingham, E. Mersey, V.
Elgin and Kincardine, E. Molson, L.
Elliot of Harwood, B. Morris, L.
Erroll of Hale, L. Mottistone, L.
Faithfull, B. Munster, E.
Fanshawe of Richmond, L. Murton of Lindisfarne, L.
Fortescue, E. Norfolk, D.
Fraser of Kilmorack, L. Northesk, E.
Gardner of Parkes, B. Onslow, E.
Gibson-Watt, L. Orkney, E.
Glanusk, L. Orr-Ewing, L.
Glenarthur, L. Portland, D.
Gray of Contin, L. Rankeillour, L.
Hailsham of Saint Marylebone, L. Reay, L.
Renton, L.
Halsbury, E. Rodney, L.
Harvington, L. Russell of Liverpool, L.
Hayter, L. Saltoun of Abernethy, Ly.
Henderson of Brompton, L. Sandford, L.
Henley, L. Seebohm, L.
Holderness, L. Selborne, E.
Home of the Hirsel, L. Selkirk, E.
Hooper, B. Sempill, Ly.
Hunter of Newington, L. Skelmersdale, L.
Hylton-Foster, B. Somers, L.
Killearn, L. Stamp, L.
Kinloss, Ly. Stodart of Leaston, L.
Kinnoull, E. Strathcona and Mount Royal, L.
Lane-Fox, B.
Lauderdale, E. Sudeley, L.
Lawrence, L. Suffield, L.
Long, V. Swinfen, L.
Lucas of Chilworth, L. Swinton, E. [Teller.]
McFadzean, L. Terrington, L.
MacLehose of Beoch, L. Teviot, L.
Macleod of Borve, B. Thurlow, L.
Mancroft, L. Trenchard, V.
Margadale, L. Tryon, L.
Marley, L. Vaux of Harrowden, L.
Marshall of Leeds, L. Vivian, L.
Massereene and Ferrard, V. Whitelaw, V.
Maude of Stratford-upon-Avon, L. Wise, L.
Young, B.
Merrivale, L. Young of Graffham, L.

Resolved in the negative, and amendment disagreed to accordingly.

5.16 p.m.

Lord Stoddart of Swindon moved Amendment No. 18: Page 5, line 10, at end insert ("who shall, after his approval has been given, lay a copy of the plan before Parliament.").

The noble Lord said: I think I can move this amendment very quickly. The amendment is self-explanatory and expresses the wish that Parliament should be kept informed of developments. There is an increasing feeling that Government policies are more and more removing Parliament from matters which concern them as the properly elected representatives of the public. There is a real and understandable concern that a whole range of matters which concern people are being removed from the control or influence of elected people and given to faceless, often unidentifiable, people or organisations.

In the field of nuclear energy, in particular, the public generally feels that it is ill-informed and suspects that information is deliberately being withheld from it. From the point of view of the Government themselves, and particularly of the atomic energy industry, it is vital that the greatest amount of information available is given to the public. The public, as noble Lords will know, is suspicious of nuclear energy. It does not understand it. If it believes that information is being withheld from it, then support for nuclear energy programmes will wane. I think it is therefore essential that the information given, particularly to Parliament, is of the utmost.

This amendment, in my view, goes a little way to reverse the tendency to withhold information by giving Parliament the opportunity to examine, if not influence, the plans of the AEA. I hope it will be acceptable to the Committee, if not to the Government. I beg to move.

Viscount Thurso

I go along with what the noble Lord, Lord Stoddart, says. I think that the public in general tends to be afraid of atomic energy because it is a subject about which the ordinary citizen knows comparatively little. This fear very rapidly subsides, as I know has happened in my part of the world, when more information is given and more openness is shown. For example, the success of the research establishment at Dounreay has been due to the way in which the Atomic Energy Authority has never sought to conceal anything from the people in that area, and, indeed, has sought to inform them. The more the authority seeks to inform and the less the Government or anybody else seek to conceal, the better in this particular field of endeavour. By this, I do not mean to say that they have to give away technical secrets; there is no question of that. It is merely a question of disclosing plans and intentions. I think this is good, both for the country and for the Atomic Energy Authority.

Lord Gray of Contin

I would agree entirely with what the noble Lord, Lord Stoddart of Swindon, has said, and also what the noble Viscount has said, about the desirability of making information available. Indeed, the example which the noble Viscount, Lord Thurso, has given about the Dounreay project is an excellent one. However, of course, the vast amount of information which comes from Dounreay does not come from the kind of suggestion which is made here in this amendment. The information which comes from Dounreay comes very largely from Mr. Blumfield, the director, and his very efficient public relations staff, who keep the general public fully informed about everything which is going on at Dounreay. The noble Viscount, Lord Thurso, and I may not have much in common politically, but we have a great deal in common in our admiration of the success story of Dounreay over the past 20 years.

I believe it would be wrong to lay down a general rule that all plans should automatically be laid before Parliament irrespective of their nature. The authority's corporate plan would be likely to contain sensitive information of a confidential character about its strategies and financial forecasts which would be of interest to the authority's competitors. The AEA's annual report and accounts, which will of course continue to be laid before Parliament, gives general information about its activities. In addition, there are many other ways in which the Government and the authority can inform Parliament and the public as necessary. And, of course, Parliament has its own procedures for asking such questions and seeking such information as it requires; so there is no reason to suppose that these arrangements will not continue to be fully effective.

For those reasons, I would suggest that the amendment which has been proposed by the noble Lord, Lord Stoddart of Swindon, is not necessary and, indeed, is not desirable. I would ask that it be rejected.

Lord Stoddart of Swindon

I am sorry to have had such a negative response from the noble Lord. I always try to be helpful to the Government. I note that mynoble friend is not here. I was told off by him for saying that I always try to be helpful to the Government; and here I am again trying to be helpful to the Government. All that we really want is to lay as much information before Parliament as we can. I said at the outset that some of us are concerned that people misunderstand the nuclear industry—what nuclear energy does, the dangers from it, and what-have-you. I should have thought that it could have been just a little gesture to the public for the Government to say, "We want to be as open as possible". I am sure that the AEA does. So why not lay this plan before Parliament so that people can examine it? After all, if they want to answer a question or two, why should they not? That is what Parliament is about.

I am sorry that the noble Lord, Lord Gray, has been negative about this. He is not a negative man; he is a positive man. As I have said, I have known him for a long time and I have had a great deal of help from him. However, it is quite clear that he is not going to go with me this afternoon, so I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 6 agreed to.

Lord Stoddart of Swindon moved Amendment No. 19: After Clause 6, insert the following new clause:

("Amendment of s. 1 of the Atomic Energy Authority Act 1954. .—( ) The Atomic Energy Authority Act 1954 shall be amended as follows. ( ) After section 1(5) there shall be inserted— (5A) A person shall be disqualified from being appointed or being a member or part-time member of the Authority so long as he holds an interest in any of the organisations which have contractual arrangements with the Authority.".").

The noble Lord said: I beg to move Amendment No. 19. Noble Lords will recall that I raised the question of the composition of the board at Second Reading, and I made the point then that it was essential that the board should be seen to be completely independent and free of pressure from commercial interests. The noble Lord, Lord Gray, was good enough in his winding-up speech to deal with this aspect. In column 541 of the Hansard report of our Second Reading debate on 19th November, he is reported as saying: It is expected that there will no longer be part-time members holding executive responsibility in the CEGB, BNFL or the department. So it would appear that we are in agreement on this issue. However, the noble Lord will understand that a statement in the House of Lords at Second Reading does not have the force of law. In order to assist the Government and to assist the noble Lord to make his assurance stick, I have tabled the amendment which is before us now.

Our main concern about the continuation of part-time board members with a direct commercial interest in the work of the authority is quite simply that their responsibilities within their own organisations could so easily conflict with their responsibilities for ensuring the essentially independent approach of the authority on all matters. The issue of safety is a case in point. It would be unfortunate, to say the least, if the CEGB, for example, were seen to be exerting a direct interest on decisions affecting long-term safety and public acceptability of nuclear programmes. No matter how high-minded and respectable the CEGB may be—and they are—the fact is that they are a commercial organisation in competition with other energy suppliers and, as such, are under pressure to cut their costs.

Furthermore, there is now widespread speculation —not convincingly denied, I am afraid, by the Government—that the electricity supply industry will follow gas into the private sector, if not in this Parliament then early in the next if the country is unfortunate enough to have a Conservative Government inflicted on it for another term of years. I look forward, therefore, in all those circumstances, to the acceptance of the noble Lord, Lord Gray, of this amendment in the spirit in which it is meant—a spirit of wanting to assist the noble Lord once again to get a better Bill. I commend it to your Lordships.

Lord Gray of Contin

I am most grateful to the noble Lord, Lord Stoddart, for his efforts to be helpful to me. Indeed, it is very reassuring to know that at heart I have his support on this Bill, if not on anything else. May I say, however, that I am afraid that I am not able to accept his amendment.

The Government accept that it would not be right for representatives of the AEA's main customers to continue on the AEA board once the trading fund is in operation. From 1st April 1986, representatives of the Department of Energy, CEGB and BNFL will no longer sit on the AEA board, and the Secretary of State does not intend to appoint members of the AEA from the main customers or contractors of the authority. There is no need to make this a statutory requirement, however, given the Government's assurance on this point.

It is, of course, possible that some member of the AEA might have an interest in a company with which the authority wanted to enter into a contract. In such a case, the member would be expected to follow the rules in Schedule 1 to the 1954 Act concerning possible conflict of interest, whereby he would declare his interest but refrain from taking part in the board's discussions of the issue.

We do not believe it to be in the best interests to deal with this matter through this amendment. We think it is not necessary to write this into the legislation. The Government have given their assurance on this point and so far as this is concerned we just do not think it desirable actually to lay down in legislation the kind of detail the noble Lord has suggested here. For that reason, I am afraid I cannot accept his amendment.

5.30 p.m.

Lord Stoddart of Swindon

What can I do except express surprise that the noble Lord is not prepared to translate, through my amendment, his words on Second Reading into positive action? He was quite specific on Second Reading and indeed he has confirmed this afternoon that it would be undesirable for people with interests elsewhere to be serving on the board of the AEA. I simply cannot understand why he would not want to write this into legislation, because it would in fact give a greater safeguard to people and to the authority itself and would increase the confidence of the general public in the organisation. As we have already noted, public confidence is a very important element, and in these new arrangements it is more than ever important that the people who serve on the AEA are seen to be people who have only the interests of that organisation in mind and could not possibly have any other interests in mind when coming to decisions. I really hope the noble Lord will reconsider his attitude and I wonder whether he will just respond a little further before I decide whether to press this amendment to a vote.

Lord Gray of Contin

I do not think I can respond very much further. I have indicated to the noble Lord that I agree it is undesirable that members of companies which are principal customers or contractors should serve on the AEA board. Indeed, I have given him the assurance that the Secretary of State has absolutely no intention of appointing any such person. But we believe it would be wrong to write that so specifically in the Bill. It is conceivable at some future time that there might be a particular person with very special abilities who would be of great use as a member of the authority and who might have a conflict of interest at a later time. If such a person became involved, the procedure is clearly laid down in the 1954 Act that he would declare an interest and would take no part in the discussion on that particular issue.

I do not think I can go further than that. I have given the assurance both at Second Reading and again this afternoon, and no doubt in another place that assurance will be given again when the issue is discussed. But we feel it would be a mistake to write this firmly into legislation; and for that reason I am afraid I cannot accept the noble Lord's amendment.

Lord Stoddart of Swindon

Naturally I am disappointed. Noble Lords will understand that, but in the light of the noble Lord's assurance—I take it as an assurance—that really the Government would wish to have somebody with a possible interest only in the most exceptional circumstances, I think the best thing I can do is not to proceed with the amendment. I therefore beg leave to withdraw it.

Amendment, by leave, withdrawn.

Lord Stoddart of Swindon moved Amendment No. 20: After Clause 6, insert the following new clause—

("Amendment of s. 2 of the Atomic Energy Authority Act 1954 —( ) The Atomic Energy Authority Act 1954 shall be amended as follows. ( ) After section 2(2)(c) there shall be inserted— (ca) to undertake research and development into production of fuels and power sources and to promote the use of fuels and power sources having regard to the development of energy supply and to efficiency, economy, and safety of operation; (cb) to provide for any person technical advice or assistance, including research services, as respects any matter in which the Authority has skill or experience;'.

( ) For section 2(2)(f) there shall be substituted— (f) to distribute and at the request of and by agreement with any person make available information relating to, and educate and train persons in matters connected with, atomic energy or radioactive substances and its activities undertaken under the terms of this Act, the Science and Technology Act 1965, the Radiological Protection Act 1970 and the Control of Pollution Act 1974, provided that information so released does not constitute an invasion of individual privacy, is not a trade secret, nor prejudicial to the interests of the nation.".").

The noble Lord said: The proposals contained in this new clause seek to widen the scope of the authority's activities in the field of energy research and the promotion of fuels and sources of power, to provide a wide range of technical advice and assistance and to make available to the public much more information about atomic energy and radioactive substances and the authority's activities relating to these matters than has been available hitherto. Naturally, in relation to information safeguards are written into the new clause in respect of individual privacy, trade secrets and the safety of the nation. The noble Lord, Lord Gray, may very well protest that by this amendment we are seeking to widen the scope of the Bill in a way that alters it beyond all recognition; but that is not so, as I shall seek to show.

The United Kingdom Atomic Energy Authority already undertakes non-nuclear work and the Department of Energy has funded an energy support unit at Harwell for many years. However, as the noble Lord opposite knows, many of us in this Chamber have been concerned for some time that the Government have lost interest in renewable energy sources. I was myself particularly put out at the abandonment of the wave-energy programme just at a time when the Norwegians were able to apply wave technology pioneered by our own scientists. Indeed, I know the noble Lord, Lord Ezra, has been concerned with this matter and has often raised questions of "renewables" in this Chamber. I hope he will join with me in supporting this aspect of the new clause.

That apart, however, the AEA does work over the whole of the energy technology field in conservation, wind power, passive solar heating, geothermal energy and biofuels, as well as work on the problems of acid rain and the safety of offshore oil and gas operations. After 30 years of operations, mainly in the field of developing nuclear power but also concerned with the other matters I have mentioned, it seems timely and indeed logical to put matters on a formal basis. This would serve to give the authority a new sense of direction and purpose and would enable it to work better with other energy producers to bring about improvements in the thermal efficiency of fuels, greater safety and reliability, reduced environmental pollution and the better conservation of existing stocks of fossil fuels, especially where that can be achieved by a more positive development of renewable sources.

There is of course no intention to encroach on the work of other energy industries but rather to get a co-ordinated approach to energy research and a properly funded programme towards that end. The AEA of course has specific scientific and engineering expertise as well as the proven ability to manage large projects calling for a wide mix of skills. A properly funded renewable R & D programme of, say, £150 million could turn the AEA into a versatile energy authority with the ability to co-ordinate the activities of the various establishments, including the universities, the National Engineering Laboratory and others, to which much of the money would be allocated. And of course that was the additional money I wished to provide under earlier amendments, and, if this amendment were carried, might wish to provide by means of an amendment at Third Reading.

Giving the AEA this wider role would put Britain on a par with the United States of America, the Netherlands, Italy and Sweden, and would enable this country the better to discharge its energy responsibilities not only at home but in the wider international context, particularly in assisting third world countries with energy technology suitable to their own local needs and conditions.

With regard to freedom of information, which is mentioned in the new clause, it would be in the interests not only of the public but of the AEA itself to have a freer flow of information, within, of course, the parameters that I set in my opening remarks. There is no intention by this new clause to release the authority from the Official Secrets Act, but rather to place upon it the duty to release as much information as possible—we have already discussed the desirability of this—and to require the authority to justify the withholding of information if the failure to release it is thought to be unreasonable.

I feel sure that the noble Lord, Lord Gray, will appreciate that the authority already feels constrained by the Official Secrets Act and is over-cautious about the amount of information released to the general public. But with commercialisation there could be a growth in secrecy, due to commercially, or so-called commercially, confidential material—which has already been mentioned this afternoon by the noble Lord, Lord Gray—increasingly seen as a further constraining influence in the matter of public information.

As we have already said, the public is suspicious about atomic energy and fearful of the dangers, perhaps unnecessarily so, because atomic energy itself is a mysterious force but made more mysterious and less well understood due to unnecessary secrecy. With those remarks, I hope that I have explained the reasons for the new clause. I sincerely hope that it will receive discussion and a favourable reply from the noble Lord, Lord Gray. I beg to move.

Lord Ezra

The noble Lord, Lord Stoddart, has raised an important issue in connection with research and development in energy. We need to mobilise all the resources at our disposal to promote this research. My experience of the work being done at Harwell, in my time at the NCB, was that indeed they were spilling over inevitably into other forms of energy research and doing some very valuable work in that connection. Therefore I hope that, with this important nucleus of technological skill that has been accumulated at the AEA, it will be enabled through this legislation to spread into other forms of research where it may make a valuable contribution.

There is no way in which one can precisely divide research in energy. One form spills off into another. The relationship of atomic energy with electrical generation is an obvious illustration. Connections with the coal industry were developed in my time and, indeed, connections with the gas industry also exist. It is this interconnection of energy research which will be facilitated and encouraged by the amendment proposed by the noble Lord, Lord Stoddart, which I fully support.

Lord Gray of Contin

I listened very carefully to the noble Lord, Lord Stoddart, in his submission and also to the noble Lord, Lord Ezra, who spoke in support of the new clause. But I am afraid that I must oppose this new clause, because to the extent that it does not simply duplicate existing powers it would lead to an undesirable increase in the authority's non-nuclear powers. This could be to the detriment of other energy bodies and of the private sector generally.

The first part of the new clause, paragraph (ca), is unnecessary in that the Secretary of State already has powers under the Science and Technology Act 1965 to require the authority to undertake research and development in specific non-nuclear areas, which could include the production of fuels and power sources. Indeed, a requirement of as long ago as 9th April 1974 already enables the authority: to undertake scientific research into the provision, distribution and use of energy resources and associated technology". Substantial work is already undertaken by the authority for customers under this requirement. The authority also already has powers to distribute the results of its research and development under Section 2(2)(f) of the 1954 Act, which apply just as much to its research in non-nuclear areas as to its research in atomic energy, as a result of the 1965 Act.

5.45 p.m.

But a general power to promote the use of fuels and power sources implies something that is not, and should not be, the authority's job. It is the job of the energy industries, guided, in the case of the nationalised industries by the requirements of the statutes which already make reference to such matters as safety and efficiency. It has also been the Government's policy, by requiring proper pricing policies in the nationalised energy industries and by other measures, to ensure that consumers themselves are in a good position to choose the best fuel for their circumstances.

The second part of the new clause, paragraph (cb), may at first seem a harmless enough amendment, in that it relates to matters in which the authority "has skill or experience". But it is not restricted to requirements under the Science and Technology Act 1965; the authority can offer research services to any customer in areas covered by these. This amendment could allow the authority to go far beyond the research functions which are at the heart of its raison d'etre; "technical advice or assistance" is, of course, open to a very broad interpretation. The amendment would therefore run counter to this Government's policy of reducing, not expanding, the involvement of the public sector in the economy.

I want to turn to Section 2(2)(f). I am afraid that the part of the new clause which relates to this is also unnecessary. The power which the Atomic Energy Authority has under the 1954 Act allows it to distribute information and to educate and train people on matters connected with atomic energy and radioactive substances. This includes all its nuclear work, including that covered by the Radiological Protection Act and the Control of Pollution Act. The Science and Technology Act 1965 also gives it the same powers for work undertaken under the terms of that Act. Naturally, the authority exercises its powers in a reasonable way and does not give out information which is an invasion of individual privacy, a trade secret or prejudicial to the interests of the nation. Perhaps I may also say that the authority can of course already give information to people who request it. However, to require the authority to answer every question that people might choose to ask would be unreasonable.

I have dealt at some length with this new clause, because it was fairly wide-ranging in what it sought to achieve, but I think I have been able to explain to the Committee that most of what the noble Lord has suggested is in fact already available to the authority. It already has very wide-ranging powers and it seems to me that to accept this amendment would create duplication of an unnecessary nature. For the reasons which I have given, I hope that the noble Lord might consider withdrawing his amendment.

Viscount Thurso

May I fasten on certain words used by the noble Lord, Lord Gray? He talked about the raison d'être of the Atomic Energy Authority. Surely the raison d'être of the Atomic Energy Authority is to be one of the principal advice and research and, indeed, development sources for the Secretary of State and for the Government as a whole. Would it not be a very nice thing at this stage if the noble Lord were to say that he would have a look at this amendment?—because all that it is seeking to do is to make certain that in passing this new Bill we have updated every facet of the old Atomic Energy Act and that we have made certain that the raison d'être of the Atomic Energy Authority is being brought up to date as well as its finances. It would be very nice if the noble Lord could say that he would at least look into this between now and Third Reading and invite the noble Lord, Lord Stoddart, to withdraw on those grounds.

Lord Gray of Contin

No, I am afraid that I cannot accept that suggestion. I have gone to considerable lengths to try to explain to the Committee why this new clause is simply not necessary. The noble Lord, Lord Stoddart, knows full well that if I did not see a genuine hope of incorporating his new clause I would not be likely to say that I would take it away and look at it. I think it is deceiving the Committee to suggest just for the sake of it being a nice thing to do, that one will take something away and look at it. If one suggests that one is going to take something away and look at it one genuinely should have in one's mind a desire to try to incorporate it. Practically all of what is being asked in this new clause is already available in existing legislation, and therefore I feel that it would be wasting the time of the Committee to suggest that I would take it away with any serious purpose, and I do not want to do that. I hope the noble Viscount will understand; and I ask the noble Lord, Lord Stoddart, to withdraw his amendment.

Lord Stoddart of Swindon

I should like to thank the noble Lord, Lord Ezra, and the noble Viscount, Lord Thurso, for their support for this amendment. I do not intend to press it—I will say that—because I think it would be unwise to press it at this stage. Nevertheless it is true—and the noble Lord, Lord Ezra, in particular knows this because we had the pleasure (and the work, incidentally) of serving together on the Select Committee for Overseas Trade, which I have already mentioned once.

One of the things which the noble Lord will agree we found was this lack of direction. All too often there was not a proper aim, and the objective of this amendment was in fact, as the noble Lord, Lord Ezra, properly pointed out, to bring the whole thing together. Here was an organisation which was going to be thrusting, which was going to bring itself and help other energy industries to bring themselves to the forefront of technological advance, as well as in matters of energy research, energy saving and the development of new sources. We need direction and we need thrust. That was the objective of the amendment.

I am sorry that the noble Lord should feel that this amendment runs counter to Government strategy. Bearing in mind the Prime Minister's own personality, if you like, of being a thrusting (some say overhearing) woman, I should have thought that the Government would have wanted to attach themselves to this forward-looking, thrusting idea. I am sorry that the noble Lord should feel that what we are suggesting in the interests of the authority and in the interests of the nation runs counter to Government strategy.

However, I shall not berate the noble Lord any more; he has had just about enough this afternoon. He has only one more amendment to come. We have had a good debate, and, therefore, under all the circumstances, and bearing in mind that he said that most of it is available anyway—we shall remember that; we shall remember that the AEA can exercise much wider powers than it has already exercised—I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Stoddart of Swindon moved Amendment No. 21: After Clause 6, insert the following new clause:

("Restrictions on disposal of shares. . Before either the Secretary of State or the Authority may dispose of any shares in subsidiaries of the Authority, under the powers confirmed and extended by section 1 of the Atomic Energy (Miscellaneous Provisions) Act 1971, the Secretary of State shall make an order subject to affirmative resolution by each House of Parliament.").

The noble Lord said: The main doubts which have been expressed about the Atomic Energy Authority Bill relate not so much to the transition to trading fund status, although we have discussed that at length this afternoon, but to the suspicion, fuelled by the non-publication of the Manley Report—I referred to this on Second Reading—that the Government's ultimate objective is privatisation.

I know that the noble Lord, Lord Gray, did his best to provide reassurance at Second Reading, committing the present Government to no privatisation during the present Parliament but making the valid point nevertheless that Ministers could not bind future Governments. I think it is most unfortunate that the noble Lord could not have gone a little further to bind a future Conservative Government. I accept that he could not possibly bind a future Labour Government or any other kind of Government, but I think he could have gone a little further in binding the Conservative Party not to privatise the AEA or any part of it in the future.

What is causing concern is that below the level of the trading fund a number of wholly-owned subsidiaries may be set up to run the profitable activities of the UKAEA, and then these will be quietly sold. The gradual process of transfer of other activities—for example, Amersham International, which started life within the authority, then became a trading fund, then became a limited company and then was privatised—is a precedent which certainly causes the Opposition alarm, and I would hope that it would cause other noble Lords alarm as well. The Government have power to dispose of shares under Section 11 of the Atomic Energy Act 1971 and under Section 1 of the Atomic Energy (Miscellaneous Provisions) Act 1981; there is in fact no requirement for parliamentary approval. We think that is unfortunate. Therefore, we have tabled this modest amendment which builds upon the assurance of the noble Lord, Lord Gray, that there are no plans for privatisation by building in the requirement that the disposal of shares in subsidiaries should be subject to affirmative resolution of both Houses of Parliament.

The advantage of this amendment is that ownership changes in an industry which must sustain public confidence if it is to prosper must be openly debated in Parliament and cannot be quietly slipped through. Bearing in mind the comments and assurances of the noble Lord, I hope he will feel able to accept the amendment.

Lord Gray of Contin

I am afraid that I cannot accept this amendment, which is meant to refer to the Atomic Energy (Miscellaneous Provisions) Act 1981, and not 1971. There is a misprint regarding that. I am sure it is the 1981 Act that is meant.

Lord Stoddart of Swindon

That is correct.

Lord Gray of Contin

Let me say at the outset that the existing statutory provisions would not in practice permit the piecemeal privatisation of the Atomic Energy Authority. They certainly envisage the authority being able to hive off particular parts of their business, but not to the extent of undermining their ability to carry out their statutory functions. For example, it would not be possible for the Secretary of State to require the authority, by means of a Section 3 direction under the 1954 Act, to set up major subsidiaries with the express purpose of selling them off; for example, the Harwell Research Establishment. That would be an improper use of the Secretary of State's powers of direction. The scope of the existing powers is therefore limited.

The noble Lord can therefore rest assured that even if the Secretary of State so wished—which of course he does not—it would not be possible to use those powers to privatise the authority by stealth. The noble Lord would surely agree that the creation of subsidiaries for specialised purposes, with the Secretary of State's agreement, could be a sensible managerial decision even though the authority has no such subsidiaries at the moment. I hope the noble Lord will agree that no parliamentary procedures should be required for such action. If so, surely the same arguments ought to apply to the disposal of subsidiaries.

The present powers were fully considered and approved by a previous Parliament. To impose greater restrictions now would be quite contrary to the rationale of this Bill, which is to provide the authority with greater commercial opportunities and disciplines than is possible under the present grant in aid arrangements. I hope therefore that upon reflection and in the light of my comments and assurances the noble Lord will agree to withdraw his amendment.

Lord Ezra

Before we conclude I should like to say that I find the Government's position a little anomalous in respect of some of the matters we have discussed today. On the one hand we are told that the intention is to make the authority a more commercial organisation, and yet the various very reasonable amendments put forward to do so rather more than would the Government have been rejected. We are told also that an amendment to safeguard the authority as a publicly-owned enterprise is equally undesirable. I had hoped that we could clarify rather more than we have done this afternoon the Government's real intentions in regard to this body. Perhaps we may pursue that discussion in the next phase.

Lord Stoddart of Swindon

We shall need to study what has been said by the noble Lord, Lord Gray, this afternoon. I believe the noble Lord went a little further than he did at Second Reading. I do not know for certain because it is difficult by just listening to what someone is saying to gather everything that they mean. I am sure that the noble Lord means well. Nevertheless, I shall want to read what he said because I believe that he has gone further with his assurances than he did at Second Reading. So as to enable me and other noble Lords to read Hansard very carefully and to decide on our strategy for a later stage I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Remaining clauses agreed to.

House resumed: Bill reported without amendment:

Report received.