HL Deb 23 October 1995 vol 566 cc894-900

3.10 p.m.

Report received.

Clause 1 [Atomic Energy Authority to make schemes for transfer of property, rights and liabilities if so directed]:

Lord Peston moved Amendment No. 1:

Page 1, line 8, leave out ("or schemes").

The noble Lord said: My Lords, in moving this amendment I shall speak also to Amendments Nos. 2, 3 and 4. They are straightforward because, not surprisingly, we have already covered quite a lot of the ground.

The essence of the amendments is to amend the Bill as presented to your Lordships with a view to achieving what I think everybody who has looked at this matter agrees should happen, setting aside the whole question of privatisation of this part of the Atomic Energy Authority. That is not ground that I wish to go over again because it has been dealt with fully.

The question returns to one of form. As I say, everybody who has studied this matter, whether they are doubtful or enthusiastic about privatisation, argues on every ground imaginable—on grounds of economics, efficiency and business grounds—that this section of the AEA should be transferred to a single successor company; what one would call unitary privatisation.

That is not ruled out by the Bill but I believe that the reason it is not in the Bill is that the Government are a trifle afraid that there will not be a bidder for the thing as a whole and they wish to keep their options open. I have tabled these amendments on Report not to go over the ground again but simply in the hope that the Government have something more to tell us about it, either about their intentions or something along those lines. I beg to move.

Lord Haskel

My Lords, my name is also attached to this group of amendments. I remind the Minister that during the passage of the Bill many noble Lords spoke of the value of synergy in this business. The noble Lord, Lord Sheffield, who has spent a lifetime in this industry, was particularly anxious to emphasise that point.

I remind the Minister that there are two documents in his own department which provide support for the amendment. First, there is a report on the technology foresight exercise which says that companies of this kind should remain as a single entity. The second document is about some research in his department which speaks of the advantages of concentrating shareholding in this kind of business. That research identifies the benefits of concentrated shareholding as more direct involvement, better monitoring, greater stability in decision taking, greater commitment and long-term investment.

I should like to raise one further point. At col. 15 in Committee, the Minister said that if AEA Technology could meet the ambitious targets it has set itself, then sale as a single, independent entity may well be achievable. As I understand it, the sales and profit targets have more or less been achieved but it includes some profits from disposals. Is the Minister satisfied with that performance? Is the Minister sure that a test lasting a few months can be a proper basis for that decision? If the performance is good, why sell the business? If the performance is not that good, why fragment the business because of short-term considerations? I support the amendments.

3.15 p.m.

Lord Ezra

My Lords, as the noble Lord, Lord Peston, said in introducing the amendments, this issue has been one of the main subjects of debate both at Second Reading and in Committee. AEA Technology has established itself as one of the leading international engineering and scientific consultancies. As a whole, it can achieve, as it already has, a great deal. Divided, broken up and sold in bits and pieces, as one financial adviser to the Government has suggested, it might realise perhaps greater short-term gains but the long-term loss would be considerable.

Therefore, I very much hope that in answering the points raised on these amendments, the noble and learned Lord will reassure us that the Government have thought again and agree that the organisation should be sold off as a whole.

The Minister of State, Department of Trade and Industry (Lord Fraser of Carmyllie)

My Lords, in responding to these amendments, perhaps I may take a few moments to set out the Government's position not only because this is probably the most important set of amendments with which we shall deal this afternoon but also because it may help to clear the way for our consideration of later amendments.

These amendments are designed to remove the Secretary of State's power to make more than one transfer scheme, and to ensure that property, rights and liabilities transferred under it go to a "successor company" as defined in the Bill. When we discussed these amendments in Committee, I explained that it was too early to make irrevocable decisions on the form and method of privatisation and that it was only prudent to keep our options open. I also suggested that the position might well be clearer in the autumn, since by then we would have a much better idea as to how AEA Technology was performing and how the various sale options might satisfy the Government's stated objectives for the sale.

I remind noble Lords that the Government first announced their intention to privatise AEA Technology in February 1994. Since then, they have consistently made it clear that decisions on the form of privatisation would be based on AEA Technology's performance in the market place, on the needs and requirements of customers and on the extent to which the various options enhance competition, help to improve UK competitiveness and maximise the overall return to the taxpayer. We have looked at the options with those considerations in mind and taken due note of the views expressed in the House and of the various representations which have been made to us.

Having done so, I can now tell the House that the Government have no intention of breaking up AEA Technology in advance of sale and will be aiming to sell the business as a single whole. I take it that in going forward on that basis, we shall enjoy the full support of the House.

That conclusion reflects the progress AEA Technology has made over the past 18 months in focusing its various activities and in improving the performance of the business as a whole. Management has rationalised the structure of the business, taken action to reduce overheads and improved its marketing and responsiveness to customer demands. As a result, AEA Technology is more competitive in its UK and international markets and more profitable.

Operating profits before interest and restructuring more than doubled in the year to March 1995. And for the six months to 30th September, both sales and profits are expected to be ahead of budget and substantially ahead of last year. Those results are a real tribute to the efforts of both management and staff. They provide a firm foundation from which, in the private sector, AEA Technology can make an even greater contribution to the economy, and to UK competitiveness.

I can also tell the House that, subject to the Bill completing its remaining stages in this House, the Secretary of State would propose to give a direction to the UKAEA under Clause 1(1) of the Bill to make a scheme providing for the early transfer of the activities of what now constitutes AEA Technology to a single successor company owned by the Secretary of State. No decisions have yet been taken about the method of sale as it is too early to say whether a flotation or a trade sale will offer better return to the taxpayer. As is normal in situations of this kind, decisions will be taken in the light of market circumstances at the time and on the basis of securing best overall value for money.

With the two clear statements that I have made in responding to the amendments, I hope that noble Lords who have participated in the debate will feel reassured and that the noble Lord, Lord Peston, will feel able to withdraw the amendment.

Lord Peston

My Lords, I thank the noble and learned Lord for that very full reply. All noble Lords who have taken an interest in this matter will be gratified both by what he said and by the fact that what he said is in response to what noble Lords argued earlier. I understand also why we have had to wait this long for that statement because quite clearly, the additional information that has been made available makes the whole matter look much more sensible. I am not sure whether I ought to raise the following matter under this heading or under a later amendment on transfer schemes.

However, the one matter that troubles me a little is that, when all this happens—that is, assuming the passage of the Bill and the subsequent transfer schemes—because of the nature of the Bill we may never get the chance to look into the matter again. I do not know whether the noble and learned Lord can advise us on that aspect. I cannot see anything in the Bill under the transfer schemes which would mean that they would have to be placed before your Lordships, but I may have misunderstood that part of the legislation. There will obviously be one or two orders in connection with it, but I do not believe that the transfer scheme will be included therein. Is it reasonable for me to ask the Minister whether or not he can give me a reply on the matter today?

Lord Fraser of Carmyllie

My Lords, I shall respond briefly. I have indicated that the scheme will be made in terms of Clause 1(1) and that that will be allowed for. However, once the scheme has been made that will be an end to the matter. It is not a matter that will come before your Lordships' House again. However, as it meets exactly the objective set out by the noble Lord, I hope that he will agree that it is an appropriate way to go forward.

Lord Peston

My Lords, I thank the Minister for that response. I agree that it is an appropriate way to go forward. It is just that I know that noble Lords like to debate almost everything. Therefore, I should not sell the pass too quickly on such matters. My main point was to thank the Minister for his reply on behalf of the Government. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 2, 3 and 4 not moved.]

Lord Peston moved Amendment No. 5:

Page 2, line 4, at end insert—

("( ) No direction to make a transfer scheme shall be made before a period of one year has elapsed after the passing of this Act.").

The noble Lord said: My Lords, Amendment No. 5 has some logical connection with what we have just heard, but there is a little more to it. There are two difficulties that we have had in discussing the subject.

Obviously the Government will wish to get the best possible price for AEA Technology. They have a duty to the taxpayer to do so and they would certainly receive the support of your Lordships if that is the way they approach the matter. It is my view that one must get the very best price.

Assuming that the legislation is passed, although I believe that it would be in the interests of AEA Technology for the whole thing to go ahead as rapidly as possible, it would not necessarily be in the interests of the taxpayer if the whole business were hurried. There is obviously a balance to be made between the efficiency advantages of knowing where you are and the possible taxpayer advantages of taking your time about looking for the best bidder.

The reason for my concern about the latter is that, alongside what we are discussing here—but not entirely separate from it—is the whole question of the privatisation of nuclear power. It is not at all clear at what rate that will proceed. It may well be that we will simply wait for the gracious Speech to be informed. I wish to raise the point that a large part of the business in which AEA Technology will be engaged is, as I understand it, to do with the nuclear power industry. Until one knows what is happening in that respect, it is not obvious to any bidder what the value of the assets that he is bidding for will be. To put it at its mildest, there is a certain amount of market risk involved. Therefore, the point of raising the question of a possible delay, which I do not wish to push too strongly because I can see the arguments for not delaying once this goes through, would be to make the asset value as large as possible.

In raising the matter, it is my hope that the Minister will be able to place on the record what the Government's current view is on the matter. I believe that it would be too much to hope that the noble and learned Lord will tell us anything about the timetable for nuclear privatisation, but certainly any more light that he can throw on the matter would be extremely helpful. I beg to move.

Lord Fraser of Carmyllie

My Lords, I compliment the noble Lord yet again for his ingenuity in tabling an amendment in order to prise out of me information on a matter which, despite what he said, is not directly related to the privatisation proposal contained in the Bill; indeed, the purpose is essentially to draw from me what our plans are in relation to nuclear generators. I do not think that the noble Lord will be surprised when I tell him that I have little to add to what I said in July. Work towards a sale for nuclear generators in the course of the next year is proceeding to plan. Our proposals were fully debated last May following the publication of the nuclear review White Paper and the Government have no plans at present for a further debate.

So far as concerns AEA Technology, I have already made clear to your Lordships that the Secretary of State would propose, given the direction under Clause 1(1), making a scheme providing for the early transfer of the activities of what now constitutes AEA Technology to a single successor company owned by the Secretary of State. Both AEA Technology and the UKAEA Government Division are keen that the transfer should take place as early as practicable so that they become independent legal entities able to deal with each other on a fully commercial basis. The proposed amendment would prevent that and produce renewed uncertainty for all concerned, not least the employees of both organisations. When the noble Lord said that he agreed that there were arguments which went both ways, I have no doubt that the prospect of a period of uncertainty for the employees was one of the factors that he had in mind.

I should point out that the sale of AEA Technology has no implications for the sale of the generators, except that AEA Technology may well be able to offer a wider range of competitively priced services once it is freed from the shackles of public-sector control. The generators are not dependent on AEA Technology, in the same way that AEA Technology is not beholden to them.

Last week I had the opportunity to visit Harwell and see something of the range of activities being undertaken. If the noble Lord has not done so himself, I commend it to him. I am sure that he will be hugely impressed by the real range of scientific expertise which is available. Indeed, some of that expertise has gone a long way from its early origins in supporting our nuclear industry.

Lord Peston

My Lords, I should like, first, to follow the Minister's final remarks. The Atomic Energy Authority has been one of the great triumphs of this country. Our contribution to nuclear science is something about which we can be extremely proud. I have not visited Harwell recently, but if I can find a break and if the pressures of being an Opposition spokesman are not too great, I shall try to follow the noble and learned Lord and visit the people involved. I usually watch such things completely open mouthed when I see what those people do and how bright they are. However, that is by the way.

Of course, I did not expect a great deal more from the Minister. However, I believe that I ought to point out en passant that we never really debated the nuclear power White Paper in your Lordships' House. Indeed, that was one of the things we all moaned about because there did not seem to be any way of persuading the usual channels to organise a debate. However, as the passing of the Electricity Act allows the privatisation of nuclear generators to take place without any more ado, in theory—and, possibly, in practice—we may not get a chance to debate that ever again. That is something that I complained about some time ago.

My main point is that it must surely still be true that the nuclear generators are important customers of AEA Technology. That aspect of the matter was on my mind. However, I fully appreciate that there are limits to what the Minister can say. I certainly have no desire that anything I say today should add to uncertainty in any way. Of course, the uncertainty of employees is of great importance. But we are discussing an asset which currently belongs to the nation. Even if I do not favour its privatisation, if one is to sell it I favour getting the Largest possible price for it. That was partly what I had in mind. Having said that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

3.30 p.m.

Lord Clinton-Davis moved Amendment No.6:

After Clause 1, insert the following new clause—