HL Deb 11 February 1985 vol 460 cc38-42

4.51 p.m.

Lord Gray of Contin

My Lords, with the leave of the House, I shall repeat a Statement made by my honourable friend the Parliamentary Under-Secretary of State in another place. The Statement is as follows:

"With your permission, Mr. Speaker, I would like to make a statement about the future of the Atomic Energy Authority. My right honourable friend the Secretary of State for Energy told Parliament on 28th March that he had set in hand a wide-ranging review of the role and activities of the authority. On 3rd October he placed in the Library of the House a press statement which summarised the recommendations of this review. Following consultations with the interested parties I can now inform the House of the conclusions reached by the Government.

"Since the authority was established in 1954 as a vote-funded body with a high degree of statutory independence it has made a crucial contribution to the development of the civil uses of nuclear power in this country. Today civil nuclear power is an essential and established part of our national life. Last year more than 18 per cent. of electricity supplied in the United Kingdom was nuclear. The proportion will reach 21 per cent. when the three nuclear stations most recently linked to the national grid reach full power, with a further increase when stations now under construction are completed. The civil nuclear industry in the widest sense now provides about 100,000 jobs. All this has been achieved with an excellent safety record. The authority's work is held in high regard and it will continue to have a major role to play in both the nuclear and non-nuclear field.

"The review had two guiding principles: firstly, that the authority should move further towards a commercial basis of operation; secondly, that a defined customer-contractor relationship should be applied as far as possible to its work. The Government fully endorse these principles.

"The review recommended, and the Government accept, that the activities of the authority should be placed on a trading fund basis. The authority will be required to account for its activities in a fully commercial manner, within financial objectives set by the Secretary of State. We intend to provide the authority with a capital structure and powers to borrow as required so as to enable it to operate as a trading fund from April 1986, and will introduce legislation as soon as possible for this purpose.

"I have considered carefully, in consultation with the authority and with its customers in the nuclear industry, how the principles of the review should apply to the funding of particular programmes at present financed by my department. A balance is required between the application of the customer-contractor principle, which is valuable for financial discipline and a more commercial approach, and the retention of an independent capability for safety and underlying research in the authority. The electricity industry, like the Government, attaches importance to that independent capability. Although the generating boards will increase the amount of work which they pay for on a customer-contractor basis, my department will continue to fund a substantial authority programme of thermal reactor and general safety research. The Government broadly endorse a recommendation of the Review Group that there should be an element in the authority's charges to customers, including the department, in respect of underlying research. I am discussing the application of this recommendation with those principally concerned.

"The effect of these proposals will be to carry further the development of recent years under which the funding of the authority's expenditure has become more broadly based and proportionately less dependent on Department of Energy votes. In particular there will be a further increase in funding by the CEGB. With other changes, I expect this to result in a reduction of £5 million in my departmental vote in 1985–86, compared with previous plans.

"I have already mentioned the Atomic Energy Authority's contribution to the development of civil nuclear power in this country. It continues to give valuable support to the nuclear industry in both the public and the private sectors. It is diversifying its services in the non-nuclear field, and has made an important contribution to technology relevant to North Sea development.

"The evolutionary changes I have just announced will put the authority on an increasingly commercial footing and will give its staff a new incentive. I am confident that these changes will enable the authority further to develop its role and contribution to the economy on both a national and international basis. I am also confident that all those concerned will join in taking full advantage of this new opportunity".

My Lords, that concludes the Statement.

Lord Stoddart of Swindon

My Lords, may I thank the noble Lord for repeating the Statement that was made in another place? Is he aware that the Statement gives the Opposition the utmost cause for concern, for what the Government are proposing amounts to a prelude to the virtual privatisation of the Atomic Energy Authority and nuclear research and development? That certainly gives the Opposition grave cause for concern.

Will the noble Lord accept that such policies are quite unacceptable to the Opposition and indeed, we believe, to the public generally? Will he confirm that the proposals for placing the Atomic Energy Authority on a trading fund basis will remove the authority from any kind of parliamentary control? Will he confirm that it will no longer be possible for Members of this House or of another place to raise questions about the Atomic Energy Authority once its activities are placed on a trading fund basis? Can he say what possible advantages the commercialisation of atomic energy research can have for the public and the nation? Is he aware that already there is grave concern over nuclear safety standards, and is it not likely that such fears will be heightened as a result of these particular proposals?

What firm assurances can the noble Lord give that nuclear safety will not be adversely affected by this Statement, which is clearly a forerunner to the full-scale privatisation of the Atomic Energy Authority in due course? Also, since the CEGB is to carry a greater share of nuclear generation research costs, can be say how that is likely to affect the prices paid by consumers and what effect is it likely to have on the comparative costs between nuclear power stations and coal-fired stations?

As the Statement says, 100,000 jobs are dependent on the nuclear industry but, arising from the Statement, is it envisaged that by placing the Atomic Energy Authority's activities on a trading fund basis there will be significant redundancies within the authority? If that is so, have any consultations been undertaken with the staff concerned?

Lord Ezra

My Lords, we from these Benches welcome the decision to retain the AEA. We feel that a great deal of expertise has been built up in that organisation and we are glad that it is the firm intention of the Government that it should continue in existence. We also think it is right that organisations such as this should be reviewed from time to time as to their financial operations, and we would support some degree of a commercial structure so long as it is very clearly defined.

The Minister in the Statement indicated that the line would have to be drawn between the contractual activities and the basic activities and safety. We think it is very important that we in this House should be very clear as to how that line will be drawn, and no doubt that will emerge in the proposed legislation. We think it right, in important areas of energy such as the nuclear sector, that basic research and safety should be subject to a degree of Government funding and control.

A more general point that I should like to raise is whether this approach should equally be applied to other energy sectors. I have reason to believe that a certain amount of long-term basic research in some of the other sectors has been jeopardised by the fact that there is not a similar arrangement, and that the enterprises running them, whether in the public or the private sectors, having been constrained by commercial considerations, have tended to put virtually the whole of their research emphasis on short and medium term objectives and the longer term research has accordingly suffered. So I should like to suggest that the solution now being found in the nuclear industry might be looked at in relation to other energy sectors as well.

Lord Gray of Contin

My Lords, I am again grateful to both noble Lords for the comments which they have made on the Statement. I appreciate what the noble Lord, Lord Stoddart, said when he expressed the concern and the reservations which the Opposition have over what is happening. But I am sure he will agree with me that there has not yet been very much time for them to consider the details of what is happening, and I feel quite sure that when they have considered those details they will feel substantially more reassured.

I think that I can give him a negative answer to almost all the points which he raised with me. The first is that this in no way prohibits debate. Indeed, it has no effect whatever on the present status which the authority enjoys. This is purely a financial matter. It is the creation of a trading fund the advantages of which will be that all the authority's work will be undertaken on a fully commercial basis, that further encouragement will be given to a rigorous attitude to costs and to using both staff and capital assets to the best effect and that there will be greater flexibility in the use of those funds. The authority will have a revised capital structure, it will have powers to borrow, it will have an operating account, with surpluses and deficits carried forward from one year to another, and it will have financial objectives set by the Secretary of State and agreed with the Treasury.

The question of redundancies does not apply in this case, so I can give a negative answer there again. The concern over nuclear standards is not affected either. We must bear in mind that, despite the new method of funding, the department will still be funding directly a great deal of work and this applies very largely in the safety area, which I think is causing concern to the noble Lord. The nuclear industry can be proud of a safety record which is probably quite outstanding in industry in this country, and this is something which the Government are determined to preserve.

The noble Lord, Lord Ezra—not surprisingly, from his previous interests—takes a very strong view on the financial affairs of nationalised industries and I am grateful to him for his indication of support in what we are seeking to do. He said he agrees that nationalised industries should from time to time have their financial matters looked at and updated, and I shall certainly pass on to my right honourable friend the Secretary of State for Energy the noble Lord's comment that he feels that this principle should perhaps be applied elsewhere. He will not expect me to comment further at this stage. I am grateful to both noble Lords for their comments on the Statement.

The Earl of Lauderdale

My Lords, will my noble friend agree that many thoughtful people will wish to congratulate the Government on the purpose of this Statement, not least since the Atomic Energy Authority has been trading for years: first, in isotopes and, secondly, through the sale or hire of research facilities at Harwell? Also, is it not the case that safety is protected by the statutory Nuclear Safety Inspectorate, which has the highest standards anywhere in the world—far more exacting than anything in Europe or America? Can my noble friend give one assurance? Can we be certain that the effect of this will not in any way be to impair the collaboration with France and Germany on research and development of the fast reactor?

Lord Gray of Contin

My Lords, while I answered the noble Lord, Lord Stoddart, in the negative, I am happy to be able to answer my noble friend Lord Lauderdale in the affirmative. There is nothing in what we are doing which would in any way prejudice the very good relations which we have developed with our European partners in this matter. I can confirm that to hint.

Lord Ross of Marnock

My Lords, can the Minister tell us what are the implications of this change of policy for the important research and other work done at Dounreay in Scotland?

Lord Gray of Contin

My Lords, there are no implications so far as the status of Dounreay is concerned. The United Kingdom Atomic Energy Authority has proposed that the United Kingdom should bid for the location of a fuel reprocessing plant at Dounreay and a Government Statement will be made on this in due course. No detailed comment can be made at the moment, because the Secretary of State's role is also as a planning Minister, but, to answer the question of the noble Lord, Lord Ross of Marncck, this will have no effect on the work at Dounreay.