HL Deb 09 May 1995 vol 564 cc23-37

3.58 p.m.

The Minister of State, Department of Trade and Industry (Earl Ferrers)

My Lords, it may be for the convenience of your Lordships if I repeat a Statement which has been made by my right honourable friend the President of the Board of Trade in another place. The Statement is as follows:

"Madam Speaker, with permission I would like to make a Statement about the conclusions of the Government's nuclear review. This will be followed in due course by a debate. The findings of the review are set out more fully in a White Paper which I and my right honourable friend the Secretary of State for Scotland are publishing today and placing in the Libraries of both Houses and the Vote Office.

"First let me say that safety has been a paramount consideration throughout the review. The review has confirmed that nuclear power plays an important role in meeting the UK's energy needs and should continue to do so, provided that it is competitive and is able to maintain rigorous standards of safety and environmental protection. The nuclear industry argued the case for additional nuclear power stations. The appropriate test of this case is the potential availability of private sector finance for a project to build a new nuclear power station. There is, at present, no case for government intervention to distort the electricity market by providing finance or guarantees to one form of generation over another. While the market will ultimately be the judge, the review concluded that, on the basis of the figures provided by the industry in the review and in the light of the returns available from alternative generation projects, private finance is unlikely to be available at present for new nuclear construction.

"The review also examined whether, and over what time-scale, privatisation of the nuclear generators would be feasible. The benefit to consumers from the privatisation of most of the electricity supply industry has been clear: domestic electricity prices are now lower in real terms, even after VAT, than two years ago, with further reductions in the pipeline. The average price paid by industrial consumers has fallen by more than 10 per cent. in real terms since 1989, the last year in which the industry was in state ownership.

"The nuclear stations had to be excluded from electricity privatisation then, because investors were concerned about the risks of substantially increased nuclear costs; about the performance of the advanced gas cooled reactor, or AGR stations; and about the costs of financing new pressurised water reactors, or PWRs.

"The situation today is very different. The generators have removed many of the uncertainties about the costs of managing spent fuel and waste and decommissioning plant. They have completed the first stage of decommissioning Berkley Magnox station and the costs have been about one-third lower than originally estimated. The performance of some AGRs has vastly improved. Sizewell 'B' has been built within budget and is now in operation.

"As a result, the Government have decided to privatise the more modern nuclear stations—the seven AGR stations and the PWR station at Sizewell—during the course of 1996. The liabilities associated with those stations will also be transferred to the private sector.

"The Government have decided to create a holding company, with the parts of Nuclear Electric and Scottish Nuclear which are to be privatised as its wholly-owned subsidiaries. The holding company approach has been designed both to preserve the identities of Scottish Nuclear and Nuclear Electric and to establish a significant holding company to be registered in Scotland, where its headquarters will be located. The headquarters will include all key group functions. A chairman independent of both Nuclear Electric and Scottish Nuclear will be appointed.

"Scottish Nuclear will continue as a separate entity with its own board; its continued existence will be protected by special shares in the holding company and in Scottish Nuclear Limited. The functions currently carried out by Scottish Nuclear at its headquarters in East Kilbride will continue to be carried out there. In addition, it is expected that engineering functions within the group will be reorganised to bring more jobs to Scotland. In all, those developments are expected to bring at least 100 jobs to Scotland.

"The new subsidiary companies will continue to participate in their respective markets in England and Wales and Scotland. There will be no change in the market share held by Scottish Nuclear in Scotland but the establishment of the new separate Magnox company in England and Wales will mean that Nuclear Electric's private sector successor will have a smaller market share than Nuclear Electric does at present.

"In private ownership, the holding company will be free to compete, both domestically and overseas. Privatisation will provide powerful incentives for the two subsidiary companies to benefit their customers by raising efficiency and reducing costs.

"The new company will be totally committed to maintaining the exemplary safety record of the nuclear power generating industry. Safety is of paramount importance, and will not be compromised. As the Health and Safety Commission said about the transition to the private sector in its evidence to the review: 'The system of nuclear regulation in the UK … is internationally recognised as a rigorous system for ensuring a high level of safety. It is essentially sound, and there is no reason to change it in any fundamental way to deal with whatever structure emerges'.

I agree. The Government's commitment to the continuation of a rigorous safety regime remains absolute.

"The Government intend to safeguard financing of long-term liabilities to be passed to the private sector as a result of those proposals through the creation of segregated funds or similar arrangements.

"The review also considered the future of the Magnox stations. The Government do not believe that the Magnox stations can be privatised. The review did identify, however, opportunities for reducing the costs of discharging their liabilities, which potentially fall to the taxpayer.

"The Government propose in the first instance that all the Magnox stations and their liabilities should be held in a stand-alone company owned by the Government. That will create a new baseload nuclear generator with 8 per cent. of the English and Welsh market. In due course, that company will be transferred to BNFL, giving BNFL a clear incentive to maximise the revenues from Magnox generation, to minimise reprocessing and other backend costs, and to optimise the economic life of the stations.

"Finally, the review examined the fossil fuel levy in England and Wales and the Nuclear Energy Agreement in Scotland. Both Nuclear Electric and Scottish Nuclear have achieved significant improvements in their financial performance and in defining and reducing their liabilities. In the case of Nuclear Electric, the company and its public and private sector successors should now be able to meet the full costs of liabilities as they fall due without further help from the fossil fuel levy.

"The Government have therefore decided that, at the time of privatisation, that part of the fossil fuel levy to which Nuclear Electric is entitled should be abolished, at least 18 months earlier than previously expected. Electricity prices in England and Wales will fall by up to 8 per cent. in a full year as a result of that decision, with the average annual household electricity bill falling by as much as £20. Lower prices will also give a major boost to the competitiveness of British industry.

"Comparable arrangements will be put in hand in Scotland. The nuclear premium there will be ended, and those savings will be passed through to franchise customers in Scotland. Due to those and other savings already in train, domestic electricity prices in Scotland will fall by around 8 per cent. in real terms between 1994 and 1996.

"My right honourable friend the Secretary of State for the Environment is making an announcement today about issues relevant to the nuclear review, which have been examined in his parallel review of radioactive waste management policy.

"Madam Speaker, the proposals that I have announced today will make for a more competitive nuclear generation sector operating to continuing, rigorous safety standards. They will strengthen the ability of British companies to market nuclear services abroad. That is the right way forward for this key industry. At the same time, the changes in the fossil fuel levy and the equivalent step in Scotland will bring significant benefits to consumers. I commend the proposals to the House".

My Lords, that concludes the Statement.

4.7 p.m.

Lord Peston

My Lords, I must first thank the Minister for repeating to the House the Statement made in another place by his right honourable friend. I find myself in an even more difficult position than is normally the case when dealing with Statements. This is an immensely interesting subject, but one which is technically difficult. I shall make my usual complaint: it is absurd that one is supposed to get up and begin to discuss such matters off the cuff. The position is made even more absurd by what appears to be, at a glance, a remarkably interesting White Paper. I must apologise to your Lordships and admit that I have just flicked through the pages, so there is no possibility that I can comment upon its contents.

The second sentence in the Statement reads: This will be followed in due course by a debate". We always have to understand that as meaning that the Statement will be followed by a debate in another place; it is never followed by a debate in your Lordships' House. One of the most ridiculous things about the arrangements in your Lordships' House is that we have debates on all sorts of subjects but because, obviously, the Opposition do not choose to use their very scarce time for such matters the Government never choose to find time to debate such fundamental issues. I can only repeat what I have said many times. I do not believe that that is making full use of all the skills and strengths of this House. The thought that today is the only time we shall have this remarkable White Paper before us does not fill me with any pleasure. Noble Lords have heard me say that before; that will not stop me saying it today or, indeed, in the future.

I have a number of questions to ask and a number of comments to make. First, am I right that the proposals contained in the Statement will not require legislation? I am not entirely certain of that, but I think it is the case that, because of previous legislation, this will simply happen. Incidentally, if that is true—I would like confirmation—it underlines my point about debates. It means that we shall not even debate the matter as legislation. We should be told whether I am right that legislation is not required.

I now discuss the detail. The Statement says that the Government feel, to use their word—I think it is the wrong word here—that there is, no case for government intervention to distort the electricity market by providing finance or guarantees to one form of generation over another". I object to the word "distort". Until this point the Government have taken a view—not one I necessarily disagreed with—that a balanced energy programme was a sensible one, and that that kind of diversity might well require government support for one kind of generation rather than another. I would not use the word "distortion" as regards achieving that end; rather, the words "rational economic calculation".

Essentially the Government are saying that they no longer feel any further diversification is required. As the Government feel that way, and the Statement says that, private finance is unlikely to be available at present for new nuclear construction", am I right to infer, putting the two together, that that means the end of nuclear construction? Am I right to infer that the stations we have are the ones we shall have and that there will be no more? The Government will not put up any money and the document states that the private sector will not do so either. Although I am quite interested in science fiction, I cannot believe that our friends from Mars will come down and finance a nuclear station. I shall not comment on whether that serious matter is right or wrong, but it represents an important moment in the history of nuclear power.

I now deal with the question of decommissioning, liabilities, and all that. My noble friend Lord Williams of Elvel was, I believe, dealing with the matter when it was previously discussed. I believed then that the matter was simple and straightforward, that the private sector was simply not willing to bear the risk of decommissioning, and that that was why it did not happen. That appeared to come as a surprise to the Government. I remember the very hour it happened. However, it appears now that something has changed, if only slightly. The Magnox stations will stay nationalised. That has always struck me as being the reverse of what one might call traditional Adam Smith doctrine. Adam Smith essentially enunciated that the government were the place for safe projects and that the private sector was the great risk bearer. However, when it is a matter of nuclear generation it appears that the private sector will not go within a million miles of any risk taking and therefore the risks of not knowing the costs of decommissioning must be borne by the public sector.

My main question is the following. Does the review show that now we can calculate the costs of decommissioning the non-Magnox stations pretty accurately? Is that what has now been demonstrated? That leads me to another question. The Statement says: The liabilities associated with these stations will also be transferred to the private sector". When I refer to stations, I refer to the AGRs and the PWR. The Statement continues: The Government intends to safeguard financing of long term liabilities to be passed to the private sector as a result of these proposals through the creation of segregated funds or similar arrangements". That seems to me to be gobbledegook for saying that the private sector must put in train an amortisation fund which will amount in due course to the costs of decommissioning the AGRs etc. Am I right that that is what it means? That takes me to a related question. Does it therefore mean that this calculation can now be done; namely, that someone can say that the cost of decommissioning an AGR station can now be correctly calculated—given long-term rates of interest expected to last over the next 50 years of perhaps 8 per cent. net and 5 per cent. real—and that we now know how to set up the relevant fund? Is that what this is meant to say?

Can the proposal in the Statement on segregated funds be carried out without legislation? Does the Companies Act ensure that the new privatised sector will be obliged to create sufficient funds? It is not obvious to me that that will be so. It is worth bearing in mind that this is a special kind of risk because if, in due course, a privatised nuclear power company has not set aside enough funds for decommissioning, and decommissioning is required, there is not the slightest possibility that the Government could then say, "Well, too bad, that is your problem". The Government would have to take on that risk if the privatised companies had not set aside sufficient funds. Two things follow. The obvious point is that they must be legally made to do that in the first place. It seems to me absurd to place this matter in the private sector. If one ever set up a classic economic argument for why something ought to be in the public sector, the risk and decommissioning costs here exemplify that well. However, that does not stop the Government.

My next question and/or comment concerns the bizarre state of affairs in Scotland. I am delighted that we can calculate with such accuracy that the number of jobs created will be 100. With an unemployment rate of 2.5 million, I am delighted that we can calculate to a fineness of 100. However, that is by the way. And 100 is better than 50, which was the alternative calculation offered to me. However, I cannot see why the holding company is being set up, and why, if we are going to privatise, the two companies are not being privatised separately. I just cannot understand the logic of that argument. The regulator seems to have taken a different view and several other economic commentators have also taken a different view. What one ought to have done was to concentrate on competition here rather than on anything else.

As I have not had the chance to read the White Paper, I have to ask the Minister whether it demonstrates that the holding company—putting the two companies together—is the correct answer. Is there research that shows that? And is that research set out in the White Paper? It certainly puzzles me that that is so. I have another question. I take it that the new body, given that it will not build any new nuclear stations and given that its capacity is then fixed, will be allowed to go into other methods of generation. Will the Minister confirm that there is nothing to stop the new body going into other methods of generation, especially if and when the Gas Bill goes through your Lordships' House and becomes law?

I hope that noble Lords will forgive me as I am speaking for longer than I would wish. That emphasises how important this subject is. I am not clear from the Statement what the role of the special shares in the Scottish company is. Is the role to prevent it being "de-Scotticized"—I am inventing the word—in order to please the Scots and to ensure that there will be a Scottish element? Are the shares intended as a pledge to the Scots that they will always have one bit of the English company, and that one bit of the English company will be forever Scottish? Is that the point of the shares? Perhaps the Minister can tell me. Will he also say how that can possibly be a guarantee because, so far as I know, the Secretary of State could have such shares but could sell them at any time he or she fancied selling them? Therefore, one cannot give the Scots that kind of guarantee by means of the shares. Nevertheless I ask that question because I want to know the answer.

Happily, I have nearly reached the end of my remarks as 10 minutes is long enough to speak. I have some final comments. The Minister said that the nuclear levy is coming to an end. Does he agree that ending the fossil fuel levy has absolutely nothing to do with the privatisation proposals? One can end the fossil fuel levy at any time one chooses. It is useful to refer to the two matters in the same Statement but they have nothing to do with each other as regards privatisation. Can we also be told what the effects of the abolition of the nuclear fossil fuel levy will be? Has there been any forecast or analysis of the effect on renewable energy?

My last comment concerns safety. I am not anti-nuclear. I have always favoured an energy market which was both diverse and efficient. It does British industry no good to have inefficient energy production. If nuclear energy is efficient, then I am in favour of nuclear energy. If it is inefficient, I am against it. That goes for any other form of energy supply. However, I accept the diversification argument. There is no difference between the Government and us. However, safety is central. We have to bear in mind that the general public are particularly sensitive to safety in this area and do not like smart alecs telling them not to worry. I speak as a smart alec.

My concern is whether, once the industry is privatised, the role of the inspectorate—which, as the Statement says, is recognised worldwide as outstandingly good—will be fully safeguarded. Does the sentence, The Government's commitment to the continuation of a rigorous safety regime remains absolute mean that, in so far as they are able to give a guarantee, the Government guarantee the position of the inspectorate and will support its continued existence?

Lord Ezra

My Lords, I, too, thank the noble Earl for repeating the Statement. I wish to declare that I am chairman of a group of energy companies, which includes one which provides advisory services on electricity.

I should like to put a number of questions to the noble Earl. First, why are the Government convinced that they can be more successful this time in selling off the nuclear enterprises than they were in 1989? The Statement referred to that, and the Government seem to believe that they will be successful. However, are the financial institutions convinced? Will it be necessary, in order to convince them, to sell off the assets at a relatively low price? There have been indications of that having been done in the past.

Secondly, the form which the privatisation is intended to take, which was raised by the noble Lord, Lord Peston, also puzzles me. According to press reports an argument raged as to whether the industry should be privatised as a whole, in which case there could have been benefits of scale, or privatised separately, in which case there could have been benefits of competition. If the industry is privatised as now proposed neither the benefits of scale nor the benefits of competition can be achieved. The holding company will supervise two quite separate enterprises which will continue, as before, with their relative market shares. There will therefore be no competition between them, and presumably no rationalisation. That does not seem to me to be a sensible proposition. Perhaps the noble Earl can convince us otherwise.

Thirdly, I listened with care to what the Statement had to say about the levy. It does not appear that the levy as a whole will be removed but only that part of it relating to Nuclear Electric and the special arrangements relating to Scottish Nuclear. That implies that some part of the levy will continue, presumably that which relates to the Magnox stations and, I presume also, that which relates to stimulating renewable energy. According to my calculations that probably represents about 20 per cent. of the levy. Will the noble Earl indicate whether that is correct and whether that will continue until 1998 or for a period beyond that?

Fourthly, I presume that the decommissioning fund will take the form of an amount of money which will be among the assets which will be sold on privatisation. Can we be assured that there will not be some corresponding reduction in the value of the other assets to be sold in order to make that proposition more palatable? I hope that the noble Earl will agree, on the basis of past performance in respect of sales of the public utilities, that we are entitled to have some doubts about the value which will be placed on those assets as a whole when offered for sale.

Finally, like the noble Lord, Lord Peston, I return to the question of safety. Quite rightly, the Statement emphasises the importance of safety. However, can the noble Earl say whether the Nuclear Installations Inspectorate will be given all the time it needs in order to prepare for adequate licences for the private operation of these installations? The public must be absolutely convinced beyond any possible doubt that there will be no conceivable relaxation of safety standards on the privatisation of the nuclear industry.

Earl Ferrers

My Lords, I am grateful to both noble Lords for the remarks they have made about the Statement. The noble Lord, Lord Peston, said that it was interesting and exceedingly difficult to understand. I agree that it is a highly complicated matter. The noble Lord therefore said that he found it difficult to speak on the subject. Having said that, he did not do too badly. He asked a number of penetrating questions, which I shall do my best to answer as succinctly as possible without discourtesy to the noble Lord or the House.

The noble Lord complained that there was no debate. That is a matter for the usual channels. I agree with him that this would be a most inappropriate form of debate as your Lordships have not seen the White Paper. Therefore, this is necessarily only a cursory response to the fact that the Government have announced that they are issuing a White Paper.

The noble Lord, Lord Peston, asked whether the proposals would require legislation. He was right: they will not require legislation.

The noble Lord referred to the fact that the Statement said that it was not correct to distort the electricity industry by subsidy. He questioned whether that meant that the Government had no interest in the future composition of the electricity industry. It is the Government's view that it is the market which should determine the best form of electricity generation. In 1989 70 per cent. of electricity generation was by coal. The situation has now completely changed and there is a greatly improved balance. It will be for the market itself to decide the proportions supplied by the various forms of generation.

The noble Lord, Lord Peston, referred to the fact that the White Paper mentioned that it appeared that there was no commercial argument for new nuclear energy and asked whether that meant that nuclear energy would come to an end. The noble Lord is not quite right in that respect. The National Economic Research Associates went into the matter in some detail and reported to the review. They considered, having taken all the information into account, that at present that was the case. However, if the private industry decides that the facts and figures have changed over time it is entirely possible for nuclear energy stations to be built.

The noble Lord asked whether Magnox decommissioning costs could be predicted fairly accurately. We now have a good deal of experience in relation to decommissioning costs. The costs are less than originally envisaged. Therefore, the cost of decommissioning nuclear generators as a whole is less than expected. Of course, it is impossible to give a simple answer which will cover every conceivable circumstance, but we can get a fairly broad idea now that we know that decommissioning is less expensive than it was expected to be.

It is perfectly true that when the companies are in the private sector they will have to accept liability for decommissioning. That will have to be taken into account when bids are made. How that decommissioning is carried out, whether through a sinking fund or some other method, is a matter for the companies.

The noble Lord was a little scathing about the 100 extra jobs in Scotland although he just about welcomed them. The moving of the headquarters, and the other repair mechanisms, to Scotland is a considerable advantage to Scotland.

The noble Lord asked, as indeed did the noble Lord, Lord Ezra, whether the holding company was a good idea. He asked whether the purpose was to enable Scottish Nuclear to remain basically for Scotland. That is, in fact, one of the main purposes. By having a holding company, one would have Nuclear Electric and Nuclear Scotland operating under a holding company. The purpose of having the special shares is to enable the Secretary of State, should he feel so inclined, to ensure that that remains the case. The White Paper discusses the benefits of the holding company, as the noble Lord will find when he reads it. Such a holding company is compatible with a regulatory regime and gives the least description to the existing companies.

The noble Lord also referred to the end of the fossil fuel levy. He stated that it was nothing to do with the White Paper. He may be strictly correct on that, but the matter is of considerable concern and interest. We thought it appropriate to put it in the White Paper. The only element of the levy which will remain—the noble Lord, Lord Ezra, referred to it—is the 1.0 per cent. to 1.5 per cent. levy raised for the renewals element.

The noble Lord asked whether the Magnox element of the levy will remain. It will not remain because the levy has obtained sufficient money to cover the decommissioning of the Magnox reactors.

The noble Lord, Lord Ezra, asked why we should be more successful privatising now than in 1989. The answer is that in 1989 there was considerable concern expressed about decommissioning, and the effect of nuclear energy on the environment. A lot more is now known about decommissioning. That has been undertaken. Therefore, not only the Government but the industry also know more about it.

The noble Lord referred to the holding company. I answered that point. He also referred to the levy. I believe that I answered that point. He referred, too, as did the noble Lord, Lord Peston, to safety. I can give both noble Lords the assurance that safety is paramount. The simple answer is that the regulations control whether or not a system is safe, not the methods of generation. Whether the generation is in the public or private domain, it is the regulations which ensure the safety. It is our intention to ensure that that safety will continue to be of the highest order.

4.33 p.m.

Lord Boyd-Carpenter

My Lords, can my noble friend now answer the question which was very properly put by the noble Lord, Lord Peston, as to whether this matter will be debated by your Lordships' House when the White Paper is available? I hope that my noble friend will not reply that that will be a matter for the usual channels because it is certainly my experience that the usual channels generally become gummed up when there is any question of your Lordships' House discussing really important matters.

Earl Ferrers

My Lords, if I may say so, that is precisely the reason that it is a matter for the usual channels.

Lord Marsh

My Lords, perhaps I, too, may support the view expressed that the Statement is unusual in length and complexity, in the mixture of issues raised by it, and the importance of the matter generally. While one would not lay the responsibility for running the business of the House on the noble Earl, I should be grateful to think that he was at least sympathetic to the idea that we could have a serious, sensible debate on the White Paper at some time.

Perhaps I may raise two other points. There are a number of issues, but surely a major issue is the existence now of a massive international market in nuclear distribution in this area which is already in excess of £5 billion a year and growing quite rapidly. The British nuclear industry is superbly placed to exploit that market if the constraints of public ownership are taken away.

Finally, I should be grateful if the noble Earl will say whether these golden shares, special shares, are purely to ensure that the offices and the activities are located in Scotland, or are there other factors? I am highly suspicious of privatisations where governments retain reserve powers.

Earl Ferrers

My Lords, first, I understand the noble Lord's concern that this is an important Statement. It is a technical Statement. In no way did I wish to be curt to my noble friend Lord Boyd-Carpenter, as he might have considered that I was, in saying that it is a matter for the usual channels. However, my noble friend Lord Boyd-Carpenter is, if I may say so in a most gracious way, an old war horse at these games. He knows perfectly well that the Government cannot say that there will be a debate, because it is a matter for the usual channels. Having said that, I agree with him and the noble Lord, Lord Marsh, that these are important matters. We are talking about high technology. As the noble Lord rightly says, British industry has an enormous capacity to lead the world in this area, and the world market is considerable.

Part of the reason for privatising is to enable the industry to become more competitive—to compete better in the world than it has in the past. I believe that I can give the noble Lord, Lord Marsh, the assurance he seeks, but it would have to be couched in fairly generous terms.

The point regarding the special shares is to ensure that the Scottish part remains Scottish. It is not supposed to be a hamper on the development of either the Scottish or the English nuclear industry. That is the whole purpose of the privatisation. It is to make the industry more competitive; it is not to be a fetter.

Lord Simon of Glaisdale

My Lords—

Lord Stoddart of Swindon

My Lords, the Cross-Benches have had their turn. Let us do this right.

I should declare a couple of interests. First, Nuclear Electric pays me a small pension which I earned when I was employed by the CEGB. Secondly, I am an adviser to UNISON.

My first question is this. In repeating the Statement the noble Earl said that there had been great improvements in the performance of the AGRs and that the PWR at Sizewell had been built to time. Under those circumstances, since the industry has been such a success under public ownership, why on earth do we wish to privatise it?

My second question is this. While consumers may well benefit from the early ending of the nuclear levy, what other benefits will the consumers gain arising from privatisation? The Statement made no reference to the benefits which consumers are likely to achieve from privatisation. Perhaps the noble Earl will outline those.

Regarding privatisation, shall we once again have the spectacle of the chairman's salary being increased many times over for doing the same job? Will the chairman and other members of the board be made millionaires because they will be granted share options?

Finally, I ask the noble Earl about the £70 million of pensioners' money which was used by Nuclear Electric to sack 2,000 people in order to fatten up the industry for privatisation. Can he say whether that £70 million—again I declare my interest—which was used to make 2,000 people redundant will now be returned to the pensioners where it properly belongs?

Earl Ferrers

My Lords, that was a good old controversial speech, was it not? I see that I shall have to give the noble Lord a lesson on the advantages of privatisation, but now would not be a particularly appropriate moment. I merely record the fact that new Labour is just as determined to carry on with nationalisation as was its predecessor.

If the noble Lord, Lord Stoddart, were to examine all the different companies, he would see that the benefits of privatisation were enormous—not only to those employed by the companies but also to their customers. The noble Lord asked: if the industry has been so successful thus far, why bother to privatise it? I come back to lesson number one on privatisation: namely, if an industry is privatised it generally works better, more cheaply and more efficiently. That is why we believe this privatisation to be necessary.

The noble Lord asked who will benefit from privatisation. I come to lesson number two of the privatisation sermon: the customers will benefit.

He then turned to the good old controversial subject of chairmen's salaries. I have no idea what the chairman's salary will be. But it is important that those who run our organisations are paid the rate for the job, whatever that rate happens to be. If you do not do that, you merely lose them to other organisations.

The noble Lord asked about the £70 million of pensioners' funds used to fatten up the industry. That was rather a vulgar way of putting it. If people are made redundant, they are entitled to a pension. If they are made redundant, it is in order to make the business more efficient. I cannot think that the noble Lord, Lord Stoddart, believes in his heart of hearts that it is right to employ more people than is necessary, at the ensuing cost to the public and to customers.

Lord Skelmersdale

My Lords, so far my noble friend the Minister has been subjected to a whole list of detailed questions, but there has been very little praise and very little condemnation for this policy of the Government. I congratulate the Government because of what was in the Statement, not so much because I am an arch Right-wing privatiser—although I recognise that if the Government are not prepared to put up development capital, industries will starve unless somebody else does. In this particular case, as indeed in other privatisations, it has been the City that has done just that.

In the Statement (I do not have the words exactly right) it was made pretty clear, to me at least, that the Government would not finance any additional nuclear power stations and that the market would be the judge. How can the market be the judge in the current circumstances, when 75 per cent. or thereabouts of the electricity generation market is in the private sector and 25 per cent. or slightly less in the public sector?

I also have a detailed question for my noble friend. So far, many millions of pounds have been raised through the fossil fuel obligation, popularly known as the nuclear levy, for the decommissioning of Magnox stations. That pot of money is somewhere in the system. Who owns it, and what will happen to it?

Earl Ferrers

My Lords, I am grateful to my noble friend for congratulating the Government. That was a very wise move and one that is greatly appreciated. He asked how the market can be the judge among the different systems of electricity generation. The fact is that people know the cost of generation. That is what the market is about, whether it is a matter of nuclear generation or any other kind of business. There are different methods of generating electricity. It is for the market to decide, as opposed to the Government subsidising, and therefore distorting, costs across the board. It is for the industry to decide whether there should be nuclear generation of electricity.

My noble friend asked what had happened to the "pot of money". A pot of money has been produced by the levy. That money is available for decommissioning the Magnox reactors and will be available for that purpose. The cost of the liabilities will be the cash in hand, some £2 billion; the remaining levy from the industry until it is privatised; and the privatisation proceeds—plus of course the expected reduction in the costs of decommissioning, which were estimated to be about £1.1 billion. The money that has been raised will be there and will be used for the decommissioning of Magnox reactors.

4.45 p.m.

Earl Russell

My Lords, perhaps I may return to the issue of safety. I ask the noble Earl to remember the case of the nuclear accident at Three Mile Island. At the inquiry it emerged with painful clarity that the cause of the accident was that the company, which was privately owned, had brought the plant into operation before it was ready in order to get it into the old financial year and to secure a tax rebate of 5 million dollars (I believe that was the sum, although I would not answer for it). I decided then that I would never trust nuclear safety to the power of the profit motive. Can the noble Earl tell me why I should change my mind?

I regret that a change of this magnitude can be brought in without primary legislation. Does that not illustrate the danger of leaving unexploded vires lying about in the statute book?

Earl Ferrers

My Lords, the noble Earl referred to a specific example, in which I believe there was no escape of radiation from the building. However, that does not answer the noble Earl's real concern. He said that a company brought the station into operation before it should have done. Perhaps I may return to a remark I made to an earlier point raised by the noble Lord, Lord Ezra. What controls safety is the regulations that are attached to an organisation. There are many safety aspects, on roads, for instance, and in the air. Rigorous safety is accorded to organisations that are privately run. The reason why safety will be assured when nuclear generation is privately run lies in the regulations that apply to it, which will be just the same as those that apply to it now. If the noble Earl is doubtful about that, I would ask him to consider the example of air traffic, which is pretty hazardous if the regulations are not very tightly controlled, as they are.

With regard to the noble Earl's last argument about "unexploded vires", I have to work out exactly what unexploded vires are. But I understand his generality of concern. I shall explain only that that is the position of the law at the moment and that is why the Government do not see a need for further legislation.

Lord Simon of Glaisdale

My Lords, do not the questions that have been raised in the short time following the Statement show the immense importance of noble Lords being vouchsafed a debate? Has not the other place been told in the Statement that it will have a debate? Why should this House be denied one? Is it not proper for the noble Earl to say that there will be a debate, and at a convenient time to be arranged through the usual channels? Is not this hesitation symptomatic of much that is going on in the way of an attempt to marginalise this House in the legislative process? There were a minimum of three working days between Report and Third Reading of the Pensions Bill so that there was no time to correspond with the Ministers. The Finance Bill was put in on a Friday, on a day when the House does not normally sit, and at very short notice. Does not all that show that your Lordships' activities are being subordinated to the Government's desire to use your Lordships merely for processing a vast mass of government legislation? Should not the noble Earl now say, "Yes, there will be a debate and the place and time are for discussion through the usual channels"?

Earl Ferrers

My Lords, that was a forceful intervention by the noble and learned Lord. Indeed, he always makes forceful interventions on matters of constitutional propriety. He will realise that I was repeating a Statement. In the Statement, my right honourable friend said that in another place there would be a debate. But the other place has its own methods and system of arranging debates. It would be inappropriate for me to say that we in your Lordships' House will be guaranteed a debate. I shall undertake to consider very carefully and closely the concerns which have been expressed, not only by the noble and learned Lord but also by the noble Lord, Lord Marsh, my noble friend Lord Boyd-Carpenter and others. This is a subject which could and should be debated.

What I do not intend to do—I hope that the noble and learned Lord will acquit me of discourtesy—is give a guarantee that that will happen. That is not the way that such things are done in your Lordships' House. They are done through the usual channels and I believe that that is the right way. But I shall certainly bear in mind the concerns that your Lordships have expressed.

Perhaps I may also say that if the noble and learned Lord and indeed anybody else are concerned about this matter, they have the opportunity to table Questions and debates. It is not solely the responsibility of the Government. But I understand the concern that has been expressed.

Lord Hughes

My Lords, this is the disposal of yet another public asset. In the early years of privatisation, the Government pointed out the extent to which the proceeds of those sales enabled a reduction of public debt. Is there any possibility at this late stage in the Government's life of a return to that form of financial rectitude? Alternatively, if that is not the case, is there any possibility that the proceeds of Scottish Nuclear should be applied to making more capital available to projects in Scotland?

Earl Ferrers

My Lords, I can assure the noble Lord that one of the ways in which a diminution of public debt is effected is by selling things that are in the public arena. That reduces public debt. There is nothing new about that.

I should like to give a little thought to the noble Lord's question about Scotland and perhaps I may write to him on that point.