HL Deb 09 November 1989 vol 512 cc962-78

4.5 p.m.

The Lord Privy Seal (Lord Belstead)

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

"With permission, Mr. Speaker, I should like to make a statement about electricity privatisation and nuclear power.

"The Government remain determined to complete electricity privatisation, with all the benefits it will bring, in the lifetime of this Parliament. The preparations for the new system have brought issues into the open. In particular, attention has been focused on the costs of nuclear power. The Government have for some time recognised that our nuclear power is more costly than power from fossil-fuelled generating stations. Nevertheless it has an important role to play in providing diversity of supply and in protecting the environment.

"My predecessor told the House on 24th July that the improved transparency brought about by the preparations for privatisation had revealed substantially increased costs, relating primarily to the Magnox stations. This led us to the conclusion that the Magnox stations should remain under government control. Contract negotiations for nuclear stations have moved on since July. Discussions have taken place about financing new nuclear power stations. The Government told the House on a number of occasions during the passage of the Bill that the arrangements for nuclear power would strike the appropriate balance between the interests of the taxpayer, the electricity consumer and the shareholder. In the event, unprecedented guarantees were being sought. I am not willing to underwrite the private sector in this way.

"Given these factors, the Government have concluded that the English AGRs and Sizewell B should remain, along with the Magnox stations, in a government-owned company. This company will inherit all the nuclear-related assets, expertise and support currently residing in the CEGB, including the CEGB's rightly praised expertise in health and safety. Safety will continue to be paramount. Standards will be maintained at their present high level.

"I am happy to announce that Mr. John Collier, Chairman of the United Kingdom Atomic Energy Authority, has agreed to become chairman of the new nuclear company. He brings to this vital task a wealth of experience in the nuclear industry and well-recognised leadership qualities. The company will be a substantial one, with a positive cash flow. It could provide between 15 per cent. and 20 per cent. of electricity supplied in the mid-90s. The company will retain the ability to construct and operate new nuclear capacity. It will not own any fossil generating stations. Thus the prospects for fossil generators will remain essentially unaffected.

"The CEGB's other power stations will be allocated between National Power and Power Gen as previously announced. Both companies will be major fossil-based generators, and will be privatised this Parliament as will the distribution companies.

"We want to preserve the strategic role of nuclear power in order to maintain adequate diversity of electricity supply, avoid too great a reliance on a single fuel and obtain the benefits of this environmentally clean source of energy. As a result of privatisation, there will be competition in the electricity market which is likely of itself to lead to greater fuel diversity. There are already a number of proposals for new generating projects based on combined cycle gas turbine technology, which of course leads to lower carbon dioxide emissions. Oil-fired stations have a role to play.

"In the light of their performance to date, it should be possible, subject to the views of the Nuclear Installations Inspectorate, for the lifetime of at least some of the Magnox stations to be extended. The Government will make available the funds for any justifiable investment for this purpose.

"In view of the factors I have mentioned bearing on diversity, some of which relate to fossil fuels, the non-fossil obligation will be set at a level which can be satisfied without the construction of new nuclear stations beyond Sizewell B. The Government attach the highest importance to the successful completion and operation of Sizewell B in order to maintain the PWR option in the United Kingdom.

"I am asking the CEGB to consider urgently what action it wishes to take with respect to its applications for my consent to build PWR stations at Hinkley Point C, Wylfa B and Sizewell C. The Government's Statement is being communicated to the Hinkley Point C inquiry.

"There will continue to be the opportunity, as has been made clear previously, for other non-fossil generation to contribute to the non-fossil fuel obligation. In particular, we will maintain the arrangements for the 600mw special tranche for renewables announced by my right honourable friend during the summer.

"My proposals will not have an impact on the electricity industry's carbon dioxide emissions until about the turn of the century. By then we fully expect gas-fired stations to be playing an important role in electricity generation, and by maintaining the nuclear option we are creating the opportunity for a longer term contribution from economic nuclear power.

"The distribution companies need to be clear what their obligations will be for a reasonable period ahead. The Government will wish to review the prospects for nuclear power as the Sizewell B project nears completion in 1994.

"The nuclear company has a long-term future as a supplier of nuclear-generated electricity. This should provide continuing attractive employment opportunities. The pension rights of existing staff will be protected, as will their ability to benefit from the sale of the rest of the industry. I shall be discussing the implementation of these proposals with all parties concerned, including the trade unions.

"The price of the nuclear company's electricity will be set at a level consistent with its earning a return appropriate to public sector bodies. Since the price of nuclear electricity is likely still to be somewhat higher than that of fossil-fuelled electricity, the fossil fuel levy will be used to share the additional cost over all electricity suppliers.

"This decision will help preserve diversity of supply and maintain the nuclear option. We will complete electricity privatisation in the lifetime of this Parliament, and in so doing will safeguard the interests of consumers, taxpayers and shareholders alike."

My Lords, that completes the Statement.

4.14 p.m.

Lord Williams of Elvel

My Lords, the House will be grateful to the noble Lord the Leader of the House for repeating a Statement made in another place. The House will also, I am sure, sympathise with the noble Lord the Leader of the House on having to read out a Statement which represents a complete mess. The whole privatisation programme has come to what must be its final stage. It should be scrapped.

Is the noble Lord the Leader of the House aware that in July we debated that issue in the House and that the Government deployed many arguments to explain why the nuclear sector should be privatised within National Power? Is the noble Lord the Leader of the House aware that the Government won a Division on that matter, and now the Government have to come back and admit that they were wrong? What has happened? Have they now had new ideas, or have they simply thought it through a little more carefully than they did in the summer?

On the specifics of the Statement, I have to say that it raises a myriad of questions. Let me take some of them. I cannot take them all because there are far too many. Let me ask the noble Lord the Leader of the House some questions. How will the fossil fuel levy work now? It was, after all, designed to ensure that nuclear power could be ring-fenced, would not compete with other power sources and would be subsidised by fossil fuel. Since the nuclear sector will remain under public ownership, how will that work?

Why is nuclear power to be, in the words of the Statement more expensive than fossil fuel generated power? The price is still likely to be somewhat higher. Why? On a marginal cost basis, which is what the grid operates off now, nuclear power is substantially lower in cost than fossil fuel. What extra elements are there? Is one the provision for de-commissioning that has to be built in to achieve that extraordinary statement? Why will the grid, presuming that it will, continue to operate on a price merit order rather than a cost merit order? Will that not change the whole basis of the grid's operations? Why should the Government continue with Sizewell B? What is the point of spending more than a billion pounds, given the cost over-runs, on Sizewell B, when we know from what the Government have said that they will ask the CEGB not to go ahead with Hinkley Point C, Wylfa B and Sizewell C? Does one PWR maintain the PWR option in this country? That is a ludicrous statement.

The Government also seem to doubt whether it is possible to float National Power with the nuclear sector in it. Perhaps I may remind the noble Lord the Leader of the House that I made chat point on Second Reading of the Electricity Bill when it came before your Lordships. The point was not accepted by the Government then; it has been accepted today. Now that it has been accepted, why does the division between National Power and Power Gen have to be the same as it was before? The whole point of giving 70 per cent. of the market to National Power was to ensure that it could carry the nuclear sector, which is known to be unprofitable. If we take out nuclear, why should National Power have 70 per cent.? Why should not others come in? Why should not the nuclear company also go in for fossil-fuel stations? I thought that the Government wanted to encourage competition. Why should not the public sector compete with the private sector on reasonable terms?

I could go on. There are thousands of questions; but it is pointless to go on with this rubbish. To be absolutely honest, it is the longest running farce since Sir Brian Rix left the Whitehall Theatre. It would be funny if it were not so absolutely pathetic. I wish that the Government would now come to the only logical conclusion and say that they must start again from scratch and stop this privatisation business, and let us get on with running the electricity business in the way that it should be run.

Lord Ezra

My Lords, the noble Lord the Leader of the House has read to us a most important Statement made in another place. We spent many days debating the Electricity Bill in this place. We are now confronted with the situation in which the whole nature of that Bill has been fundamentally altered. At the start, I should like to ask the noble Lord the Leader of the House, who, in a sense, is the guardian of the Constitution so far as we are concerned, whether or not he thinks that a constitutional issue arises. We have, after all, spent a long time debating a Bill on the basis of certain clearly defined principles. The principle of the Bill was that the whole electricity industry would be sold to the private sector. We are now told that the Government have reached a decision that we should have a combination of private and public ownership and that the whole of the nuclear side, something for which we pressed at the time, should now be taken away.

As the noble Lord, Lord Williams, has rightly pointed out, not only does that fundamentally alter the nature of the Bill which we spent so many days debating, but it raises the whole issue of the structure of the privatised electricity segment. The reason National Power was given 70 per cent. of the generating capacity and the other company was given only 30 per cent. was so that National Power could accommodate the nuclear segment. That was made very clear.

Now that the nuclear segement is to be removed, there is no reason any longer for that dominant position of National Power in relation to Power Gen. In fact, there is every reason now to subdivide the CEGB into many more parts—four, five or six—in order to enable real competition to take place. That is what the Government have always said was their intention.

I think that we are faced today with a situation that is about as fundamental as any we have had in recent years. We have spent a long time on the Bill and now its whole nature has been fundamentally changed. I should like the noble Lord the Leader of the House to indicate to us whether, in the light of this major decision which the Government have reached after the passage of the Bill, they will consider at the very least altering the proposed structure for the power stations in England so as to enable more competition to take place in the privately owned sector. Will they also contemplate quite seriously bringing the whole project back to this House so that we can consider it on the basis of the new premises?

Lord Belstead

My Lords, I thank noble Lords for their responses to the Statement. The noble Lord, Lord Williams, began with a fundamental criticism of it. I would only say to him and to your Lordships that these proposals will have the advantage of ensuring that electricity privatisation is completed during this Parliament. We believe that consumers will benefit from competition. As the Statement which I read out made clear, it is a fact that many of the costs of the nuclear industry have only begun to emerge as the preparation for privatisation has continued. The noble Lord, Lord Williams, shakes his head. Perhaps he will forgive me. I very rarely venture to criticise him, but there is just an element of complacency on the other side of the House.

Noble Lords


Lord Belstead

My Lords, the fact that under nationalisation costs can remain hidden which have now begun to emerge is something which I believe is not satisfactory. Although I am disappointed in the Statement I made today, I take considerable comfort from the fact that at least we now know that costs that were hidden have begun to emerge. We have therefore taken a straightforward decision which we have come immediately to both Houses to announce.

I think that the noble Earl, Lord Halsbury, will ask a question in a moment. Perhaps I may briefly say, yes, the noble Lord, Lord Williams, is absolutely right in saying that the House debated at considerable length the noble Earl's important amendment. I give the answer unreservedly to the noble Earl that on that occasion he was—as he so often is—entirely right.

However, I ask your Lordships to consider this. The Statement makes quite clear that subsequent to the debate on the noble Earl's amendment, since the end of July the contract negotiations have begun to demonstrate that what the Central Electricity Generating Board has had to do as regards its AGRs and the future PWR stations is to make unprecedented demands on both costs and on government underwriting if it is to go to the market.

I say quite seriously to your Lordships that the Government have tried to take the greatest care over this aspect of privatisation. We have finally come to the conclusion which the noble Earl urged on us towards the end of July. Once again I say that I believe it has been good that the preparation for privatisation has made transparent many costs which would otherwise have been hidden.

The noble Lord, Lord Williams, asked me a direct question: how would the levy work? I shall give the noble Lord a direct answer. It will work exactly as it was intended to work previously. Nuclear power is still likely to be higher than fossil power. The levy will identify the extra costs borne by the public electricity suppliers and ensure that they are fairly shared out. The noble Lord is very knowledgeable about these subjects and he was absolutely right that one of the matters which makes the nuclear costs high—I am sure there are others—is the back-end costs.

The noble Lord, Lord Williams, asked me: why on earth continue with Sizewell B? The answer is very simple but it is important. It is vital that we continue to maintain the nuclear option. We are absolutely committed to maintaining it. In addition, it is relevant that nearly half the cost of Sizewell B has already been incurred.

Both noble Lords asked: what about the split between National Power and Power Gen? The Bill has always provided for the entry into the industry of more generators. The Statement I repeated makes quite clear that the generators are waiting. Noble Lords look doubtful, but the Statement I repeated makes quite clear that the generators are keen to come in. If that is the case as regards presumably the very small generators, I do not believe that it will be in any way impossible to have the two main generators—National Power and Power Gen—with their respective allocations of percentages of the fossil generating capacity.

Finally, the noble Lord, Lord Ezra, said that he felt there was a constitutional issue. With great respect to him, I do not think that there is. What I have repeated today requires no legislation. The fact of the matter is that the parent Act provides for the CEGB functions to be split between different companies, of which the new nuclear company will be one. Therefore, while listening with interest to the noble Lord, I do not agree with the point he made.

The Earl of Halsbury

My Lords, I thank the noble Lord the Leader of the House for the very gracious terms in which he referred to my amendment. I was of course in league with the noble Lords, Lord Williams and Lord Ezra. We all three put our names to it, together with the noble Lord on my left in this Chamber and on the right in politics, but who is not here this afternoon.

It is perfectly true that I gave to Cecil Parkinson before he drafted the Bill advice which was based on intuitive knowledge of what I was talking about. I wish to explain to your Lordships, in order that we do not get across one another, that there would not be any nuclear power in the world if we had not started projects without first seeing the end of the road. For a long time the question of what we would do with high level waste was in debate. We now know that the French have solved it, and the Swedes have solved it. We know that we can do it.

Nobody has ever yet successfully concluded the decommissioning of a station. We have made a start at Chapel Cross, but Torness was built for a life of 30 years at 100 per cent. load factor. Of course it will not achieve that. At 75 per cent. load factor it will have a life of 40 years. How on earth can one ask the City to guess what a major undertaking will cost 40 years hence? It is a perfectly impossible proposition. It always was from the beginning. What the negotiations have shown is what I knew intuitively to be right and is confirmed by the accountants. Without wishing to appear to gloat, I thank the noble Lord the Leader of the House for his complimentary remarks on my having been right, and I resume my seat.

Lord Belstead

My Lords, I simply say to the noble Lord, Lord Williams, that I do not renege on what I said before. The noble Earl is generally right and he was right on that occasion. The noble Lord, Lord Williams, may wish to talk further to me about it but I am sure he will accept that when I said we had taken great care in looking at the nuclear option so far as concerns privatisation, I was speaking the truth. There is a wealth of evidence over the years which I have to say did not lead the Government to the conclusion that unprecedented guarantees would be asked for at the last moment by National Power. It felt it had to make these requests. I make no criticism but simply state that as a matter of fact.

4.30 p.m.

Lord Renton

My Lords, is my noble friend aware that the economics of building, operating and decommissioning nuclear power stations have from the outset, and continuing right up through the past 30 years, been fraught with uncertainties? In view of the forbidding new cost factors which have now come to light and to which my noble friend refers, should not the Government be congratulated on their sense of realism in the decision which they have taken? Is it not rather strange that noble Lords on the Opposition Front Benches should, instead of rejoicing at the decision, complain that the Government have decided not to do what they always said should not be done?

Lord Belstead

My Lords, I am grateful to my noble friend. I said earlier that I thought one of the benefits of this decision—I say this of course from this side of the House—is that we can proceed more smoothly towards privatisation. But perhaps it is more to the taste of noble Lords on the other side of the House if I respond to my noble friend by saying that another of the benefits is that the consumer will benefit. The consumer will no longer have to pay the costs which would have arisen from financing nuclear power in the private sector. That will also benefit the taxpayer.

Lord Diamond

My Lords, inasmuch as I spent the majority of my Second Reading speech in appealing to the Government and giving the reasons why nuclear generation should be excluded from a Bill if we were compelled to have a Bill on the privatisation of electricity, it will naturally follow that I can do no other than congratulate the Government on the Statement which they have belatedly made. However, they refused to accept that view and made that very clear from the beginning. All of us debated this Bill on the basis that there would be complete privatisation, including nuclear generation.

The whole of the legislation has now been altered. I ask the noble Lord the Leader of the House as Leader whether he is proposing to recommit the whole legislation so that this myriad of questions which the noble Lord, Lord Williams of Elvel, correctly referred to can be discussed and explained by the Government in terms of the form their policy will take. If the noble Lord the Leader of the House is not prepared to do that, is he at least prepared to bring forward some statement that can be debated fully, not for one afternoon but for the inevitable days of debate that will take place on what constitutes a new piece of legislation?

Having regard to my little knowledge of the rules of another place, I am astonished that such a thing will be permitted in another place, as this measure is such a total contradiction of the objectives of the legislation as they were originally laid out. The first question I wish to ask the noble Lord is whether arrangements will be made so that all 1 he questions can be covered—that would take a whole day to set out—and answers and explanations given.

Secondly, will the noble Lord explain now, in the light of the change of circumstances, what the Government's policy is with regard to nuclear generation? The Statement gives us no hope at all. It is written in very general terms. The phrase "keeping options open' does not tell us what is going to happen. The phrase "re-examining in the years ahead", does not tell us what is going to happen. What is the present Government's policy in the light of these new circumstances with regard to nuclear generation?

What are the arrangements for costs? Are the distributing companies going to be compelled to take electricity generated in this way, no matter what the cost is? All that is revealed in the Statement is that the Government will add on what they consider essential, and that cost will be passed on. Is that what the Government now have in mind? I wanted to ask whether that is what the legislation will provide, but one is in the totally absurd situation of not knowing what the law is going to be in view of this fundamental change of approach of the Government.

What will be the rights of the watchdog which was set up? Will he have powers to examine the costs of nuclear generation in the same way as he had before when it was to be privatised? Will he have the same rights to make comments and reports with regard to publicly-owned nuclear generation and the price at which that is being passed on to distributors and through them to consumers? There is a myriad of questions that one could ask and it is quite hopeless to attempt to cover them. Therefore, I shall leave it at that.

Lord Belstead

My Lords, with respect to the noble Lord, I am a little surprised that he has returned to what he calls a constitutional point. As he claimed, it is absolutely the case that he made a significant speech on the Second Reading of the legislation in which he referred in terms to this matter. The noble Lord referred to it in the terms of what has now happened. It is a little strange therefore for him at the beginning of the legislation, and other noble Lords as the legislation was going through, to say that nuclear generation should be taken out of the privatisation, and yet when the Government finally come to the House and say quite openly and honestly to your Lordships that that is what they intend to do and give the reasons why, he then turns round and says that that raises a great constitutional issue. If I may say so, it does not raise a great constitutional issue. The Government's decision responds to what the noble Lord himself called for. Further, if I may say so, this side of the House believes it contributes to the public good, along with the privatisation of fossil fuel generation. Finally, as I explained earlier but shall now repeat, the decision I have announced today does not raise the minutiae of a constitutional issue because it requires no primary legislation.

The noble Lord also asked me about the Government's policy on nuclear generation. It is simply to finish Sizewell B in order to keep the nuclear option open and to review the position on nuclear generation in the light of progress on Sizewell. However, the Statement makes it clear that we continue to believe in the importance of nuclear generation. Incidentally, let us not forget that when Sizewell comes on stream it will produce more than one-third of what all the Magnox stations together produce today.

Finally, the noble Lord asked about costs. I quite understand why he asked that question. Under this wholly government owned company, prices will be a matter for commercial negotiation between the distributing companies and the new nuclear company. However, the Government will require the nuclear company to earn a return appropriate to public sector industries.

The Earl of Lauderdale

My Lords, is my noble friend aware that many of us who took part in the legislation now wish to congratulate the Government on having seen the light and shown the courage to respond to that vision? There is more joy in Heaven over one sinner who repenteth. This decision is better late than never. Having said that, I also wish to congratulate my noble friend on the Government's choice of Mr. Collier to head up the new company. It is difficult to think of a better choice. However, that raises other questions that I wish to allude to. Will my noble friend say a little more about the proposed structure of the company? Will he, if not now, on a later occasion when he has time to brief himself on the minutiae, take up the point made by the noble Lord, Lord Williams of Elvel, about the working of the grid and the merit order and whether it must now to some extent at least reflect costs as well as price?

Finally, will the handling of nuclear power by a government-controlled company lead the Government to review recent decisions cutting back research on the fast reactors?

There are other questions which one could ask, but now is not the time. I support the noble Lord, Lord Diamond, in hoping that in the new Session we can have a debate on the whole issue.

Lord Belstead

My Lords, I apologise to the noble Lord, Lord Diamond. A debate is a matter for the usual channels.

I am grateful to my noble friend the Earl of Lauderdale for what he has said. He was characteristically generous and I was particularly glad that he was generous about the announcement of the appointment of Mr. Collier. The board of the new company will be a matter for discussion with the new chairman.

I hear what my noble friend said regarding R&D. I am advised that the operation of the merit order will not be affected by the decisions announced today. The stations with the lowest operating costs will be run first.

Lord Stoddart of Swindon

My Lords, I welcome the noble Lord's Statement and thank him for it. However, does it not show that the Government launched their privatisation programme with undue haste and a complete lack of preparation? Are they not to be condemned for that fact? Should they not have understood exactly what electricity privatisation meant, gone into the full costs and come forward with a properly prepared Bill?

Is it not even worse than that? Is it not the case that over the past few decades the Government and the department have been either fooled or lied to by those in charge of our nuclear power programme, or that there has been collusion? There has been collusion between the CEGB, the Department of Energy and private industry to foist upon this country a system of generation which is far dearer than conventional electricity and which carries dangers which other forms of generation do not.

Are the House and the electorate not entitled to have a full public inquiry into what has gone on in the nuclear industry over the past 20 to 25 years, irrespective of which government has been in power? Do not the figures which have recently been published, showing that the cost of nuclear-generated electricity is likely to be two-and-a-half times the cost of fossil fuels, support my demand that there should now be a full public inquiry into what has gone on?

Perhaps I may also ask the noble Lord why, having decided, perhaps properly—I shall not go into that issue—to hive off nuclear power into a government-owned body, the Government have decided in the case of Sizewell B to throw good money after bad. There is no way in which Sizewell B can be profitable. There is no way in which Sizewell B can produce electricity more cheaply than coal-fired power stations at present. Why have the Government told the House that they will continue to throw money at Sizewell B at the same time as telling us that Sizewell B will not produce electricity at a cost which is competitive with coal?

Does the noble Lord not realise that, even at this stage when the additional costs over and above estimate are projected to be between £500 million and £1,000 million, it would be beneficial to convert the construction to either oil or coal-fired generation? It would be possible to convert the boilers for less than the present cost overrun.

Noble Lords

Too long!

Lord Stoddart of Swindon

Yes, it is too long, I quite agree, and I am coming to a conclusion. But I urge the Government, in the interests of good government and of democracy, to take on board the points that have been made this afternoon. I hope that they will arrange for a public inquiry to be held.

4.45 p.m.

Lord Belstead

My Lords, the noble Lord has a great deal of expertise in the subject. However, with respect, I believe that his last point goes over ground that has already been covered. Briefly, we have decided to continue with Sizewell B because we believe that it is very important to keep the PWR nuclear option in the United Kingdom in order to retain diversity of supply and because of the environmental benefits.

The noble Lord spoke critically about responsibility for the costs. Perhaps all that I ought to say this afternoon because of time constraints—and there is a Scottish Statement to come after this one—is to repeat that there have been benefits in the story of preparation for privatisation, in that the true costs of the nuclear industry have emerged.

The noble Lord was characteristically fair in speaking about the last 20 years. To give one obvious example, it is in the nature of the cost-plus arrangements that have applied in the nuclear industry to date that insufficient attention is paid to future costs since those costs can always be passed on to customers in the future. Preparation for privatisation has focused attention on those future costs.

Lord Gray of Contin

My Lords, does my noble friend accept that many of us sympathise with him very strongly, as we do with the Secretary of State, for having to make the Statement which he has repeated this afternoon? There are also many who believe that what has happened may in the long run be for the best. When, during the debate on the amendment that has already been referred to, I suggested that the noble Earl, Lord Halsbury, might not have had a monopoly of wisdom on the organisation of the electricity industry, perhaps I did not appreciate his perceptive qualities.

Does my noble friend agree that the Opposition cannot have it both ways? With the nuclear industry virtually removed from the privatisation is not the privatisation of the electricity industry, bearing in mind that there is still generation apart from nuclear generation and the merits of the other parts of the industry, now one of the most attractive privatisation opportunities for investors which this Government have so far produced?

Lord Belstead

My Lords, my answer to my noble friend's second question is a resounding yes. I am very grateful to him for asking that. I am also grateful to my noble friend for saying that he believes that, although there are disappointments arising from the Statement, it is for the best that the Statement is made this afternoon.

Lord Hooson

My Lords, the Minister has said that the CEGB have already incurred half the contractual costs for Sizewell B. Can the noble Lord say what that sum amounts to? Can he also say what are the total costs which have been incurred so far for Hinkley B, Wylfa B and Sizewell C?

Lord Belstead

My Lords, as I think I said, the total costs for Sizewell are very nearly half the expected total cost of £2 billion at 1939 prices. I am afraid that I do not have the figures for the other power stations which the noble Lord mentioned. However, figures were given in a CEGB memorandum for Hinkley, Wylfa and the preparations for Sizewell C for 1989. I do not have those figures in my head, but they are tiny compared with the cost of Sizewell B.

Lord Peston

My Lords, perhaps I may ask three brief questions. I should add that I do not ask them unsympathetically. I appreciate the difficulties into which the Government have got themselves, although one cannot resist saying "I told you so", as they did not have to do it. Perhaps the noble Lord will at least reflect on three of the answers that he has given.

First, on the constitutional question, he has treated the noble Lords, Lord Ezra and Lord Diamond, as the stupid boys in the class. I should like to join them as another stupid boy. Will he again explain why a Bill, which the Government insisted sought to privatise the whole of the industry, suddenly becomes an Act to privatise some of the industry, and why no constitutional or other legal issues arise? I can only say that, having spent as much time on the Bill as any noble Lord, I am simply bewildered as to how the fundamentals of the Act can change, yet one just shrugs it off and says that there is no problem here. I admit stupidity here. but I should like to have the matter explained to me again, as I think the other noble Lords would too.

Secondly, will the noble Lord reflect again on the point made by my noble friend Lord Williams of Elvel about the new nuclear company? It will compete. The Government have said that competition is of the essence here. Again, I cannot see the logic of them limiting the way in which it may compete. The noble Lord may not want to answer that question now, but, once the Government go ahead in that new way, the new nuclear company could validly compete using fossil fuels as well. Again, I think that the Government should at least reflect on that possibility.

My third point relates to costs. Certainly, since I first studied the subject, which is over 25 years ago, I have been perfectly well aware that the zealots in this field exaggerate the benefits and underestimate the costs. I have known that from the very first day when, as a young man, I started to study the economics of nuclear power. I have therefore also known that one allows for that. What has shocked me—and I understand that it has shocked the Government—is the scale on which that has taken place. It is beyond anything that I in my most cynical mood ever thought of. The point raised by my noble friend Lord Stoddart of Swindon about the need for an inquiry should not be rejected, therefore.

This is not a party political issue. It has to do with efficient decision-making in the public sector. I do not make a party political point. I should like to know how the issue became as big as it did and how we only found out as late as we did. I do not argue about the merits of the Act but, in the interests of good government, the present Government should at least consider looking into the matter. I do not press the point any more strongly than that, but it is certainly one to which I should like to know the answer.

Lord Belstead

My Lords, I am grateful to the noble Lord for having put three good questions. We say that they are good questions if they are difficult to answer.

On the noble Lord's first point, I take issue with noble Lords opposite on the so-called constitutional point. I am surprised, when the exception of nuclear from privatisation was urged so strongly from the other side of the House, and by other noble Lords as well, and when the Government are now proceeding in that way, that it can be held to be some great new constitutional point. It would be so if, in addition we had to go back and change the Act, but absolutely no primary legislation will be needed. That is why I disagreed on that point.

On the question of the new nuclear company, the Government believe that it is sensible policy to leave the fossil companies to go forward to what my noble friend Lord Gray of Contin forecast would be a successful privatisation.

Finally, the costs of decommissioning are not known because decommissioning has not been undertaken in the United Kingdom. We are talking here about underwriting and the provision needed for the future. It was there that those who negotiated contracts began to find that they were running into difficulties. It was because of that that the Government felt that the straightforward thing to do was to keep nuclear in the public sector.

Lord Ezra

My Lords, before the noble Lord sits down, perhaps I may put this point to him. Those of us who said that the exclusion of nuclear, which we certainly pressed for and which we welcome, raises a number of other issues had in mind the point that it could affect the remaining structure. We raise that point because we believe that the proposed division of the CEGB into two parts, which was relevant when nuclear was included, is now no longer relevant. How will that issue be addressed?

Lord Belstead

My Lords, with great respect to the noble Lord, I have answered that question. I made two points. First, to change course at this moment would be a questionable thing to do when, as my noble friend Lord Gray of Contin rightly pointed out, there are two fossil fuel undertakings which will now proceed to a successful privatisation.

Secondly—noble Lords will forgive me if I repeat the point—when there is provision in the Act and a clear statement in the Statement which I have repeated today that there are new generators who will be keen to come into the market, I can only believe that my noble friend Lord Gray of Contin is absolutely correct and that, with the percentages that they have, both National Power and Power Gen have bright futures ahead of them in the privatised market.

Viscount Hood

My Lords, perhaps I may ask my noble friend the Leader of the House whether the Government intend to keep the allocation of fossil fuel stations as planned? If that is so, the size of National Power will be materially reduced because it will no longer have the nuclear stations. That would perhaps be helpful to the competition which the Government intend to provide.

Lord Belstead

My Lords, the answer to my noble friend Lord Hood is yes. He is correct in his assumption. The percentage of stations which National Power will have has been reduced. It is 62 per cent. to National Power and 38 per cent. to Power Gen.

Lord Hatch of Lusby

My Lords, the noble Lord the Leader of the House is in danger of misleading the House.

Noble Lords


Lord Hatch of Lusby

My Lords, if the noble Lord reads the debates on the Electricity Bill, he will see that the cost of nuclear energy has not been revealed since negotiations were undertaken in connection with the Bill. Those costs were constantly put to the Government from Second Reading onwards and the Government refused to listen to them and continually refuted them. They have wasted the time of this House. They asked us to debate a Bill which is now to be completely changed. Noble Lords opposite say that we should now be thankful that they have done what we asked them, but not a bit of it. We were opposed from the start to privatisation per se but we are very much more opposed to a form of privatisation in which it appears that the taxpayer will bear the major costs, thus subsidising the private companies that will be set up. The taxpayer will pay the heavy costs in the nuclear sector of the industry, allowing the private companies to make profits. The losses and expenses will be borne by the taxpayer.

That is a fundamental difference from the Bill which the Government put forward and which we debated here day and night. If the noble Lord the Leader of the House just brushes aside the constitutional point, I ask him to think again. The Government brought forward a Bill which is no longer the Bill that has been put on to the statute book. It is fundamentally different. Our debates were just a waste of time. Surely, on constitutional grounds, when the Government have made such a fundamental change to the Act, it is their duty to seek that the House should recommit it and that we should then have an opportunity to debate the new Bill which they propose to put into statute rather than going on with a hybrid Bill which has been changed by fiat of the Government without any consultation or debate in this House.

5 p.m.

Lord Belstead

My Lords, on the noble Lord's first point that the issues we have been discussing have been quite clear to everybody all the time, I think we have really come full circle. I can only repeat what has been said in the Statement: the House has been given the best information available. New factors have come to light since the Electricity Act completed its passage, and we have laid our proposals before your Lordships at the earliest possible moment.

The second point that the noble Lord made was that the Act has now been changed. The answer to that is no, it has not. That is a point I have made two or three times before. Thirdly, the noble Lord mentioned quite an important point: that in some way the taxpayer will not come out of this well. With great respect to the noble Lord, it is important that I should say that that is not so. As I said in the Statement, we were not prepared to pay the risk premium for which the banks and National Power were asking. So far as the rest of the industry is concerned, which will be privatised, we are determined to get full value for the taxpayer in the proceeds.

The noble Lord, Lord Diamond, asked about the running of the new nuclear company. I made it clear that the Government will expect a proper return from that company. It is perfectly true that Schedule 12, which deals with grants for back-end costs, remains in the Act, but with that one exception I would expect the new company to be run on a proper commercial basis.

Noble Lords

Next Statement!

Lord Howie of Troon

My Lords, from this side of the House I should like to congratulate the Government on having done something extremely sensible, albeit rather late in the day, and albeit they were advised long ago to do so. Secondly, I would ask the Government not to be unduly overweighed by the cold water that has been thrown on the nuclear programme as a whole by my noble friend Lord Williams —whom I congratulate on his recent appointment —and my noble friend Lord Stoddart. I hope that the Government will continue to support nuclear power rather beyond what seems to be the extent of the support in today's Statement.

Lastly, I should like your Lordships to support the noble Lord, Lord Diamond, and others who have raised the constitutional issue, although I would not quite call it that. Does the noble Lord the Leader of the House recollect that, as Leader of the House, he is the servant of the House and not merely of the Government? So far in this Statement he has appeared as a Minister, a servant of the Government, rather than as a servant of the House as a Whole.

It is apparent to most of us that, although the Act might not have been changed, the context in which the Bill was discussed has been changed quite substantially. I merely ask the Leader of the House —as Leader of the House and not as a member of the Government —whether he will enter into consultations with my noble friends on the Front Bench and on other Front Benches to see whether or not the Act can be reconsidered, as its context has been substantially altered.

Lord Belstead

My Lords, I am grateful to the noble Lord for what he has said about the future of nuclear power. We remain committed to a continuing role for it. The PWR option in the United Kingdom remains very much open. Sizewell B, as I said earlier, will provide capacity equal to about one-third of the total Magnox capacity, and indeed the Magnox stations' lives can be extended. Therefore, we are very much on the same side as the noble Lord so far as that is concerned.

In my capacity as Leader of the House of course I take seriously what the noble Lord, Lord Howie, has said about what has been called the constitutional point from the other side of the House. However, I have to say, wearing my Leader's hat, that I really do not agree with what noble Lords have said on that particular point.

Lord Diamond

My Lords, before —

Noble Lords

Next Statement!

Lord Diamond

My Lords, I have a really important point to make which I shall make as shortly as I can. I realise how long we have been discussing this. If this Bill had been introduced in the form which now applies —that is to say, there was a proposal by the Government to select certain activities out of the industry for privatisation and to leave others —would it not have taken on the nature of a hybrid Bill, and therefore have had to be considered in the way in which hybrid Bills have to be considered?

Lord Belstead

My Lords, of course I shall look at that point.