Atomic Energy Authority (Commercial Operations) (Hansard, 9 February 1965)

§ Mr. Cousins

The Atomic Energy Authority was set up under the Act of 1954 primarily to promote research into various applications of atomic energy and to manufacture special materials required for use in atomic energy programmes. Production activities have grown substantially in recent years and, in particular, the manufacture of fuel elements for sale to the electricity generating authorities, and for export, is now taking place on a large scale. Sales are likely to be at approximately the following level for the next few years:

	£m.
Reactor fuel elements	20
Electricity	7
Radioactive isotopes	2
	29

With the increasing scale of their commercial operations, it is now desirable that the Authority should operate under financial arrangements more nearly resembling 76W those of other industry both public and private. Annual parliamentary grants are not suitable for financing commercial business of this magnitude, which often involves long-term contracts and commitments and planning ahead. Accordingly, from the beginning of the next financial year, the Authority's commercial operations will be separated from the rest of their activities which are financed directly from the Atomic Energy Vote, and organised in a Trading Fund. This involves no change in the organisation and responsibilities of the Authority and no legislation will be required. Section 4(2) of the Atomic Energy Authority Act of 1954 allows the revenues of the Authority to be applied as the Minister shall, with the approval of the Treasury, direct, and a change in the statutory directions issued by the Minister to the Authority will be required to set up the Fund.

The new arrangements will provide a suitable financial basis for the Authority's fuel element business, based on their Springfields Plant. They will also cover the reactors at Calder Hall and Chapel-cross, which are now engaged primarily in the generation of electricity for supply to the Generating Boards, and the Radiochemical Centre at Amersham. The diffusion plant for the production of U.235 at Capenhurst and the plutonium separation plant at Windscale will not be brought within the fund initially. Capenhurst is running at a low level of output pending decisions on the future production of U.235 for civil purposes. Trading activities at Windscale are as yet relatively small. The inclusion of these two plants in the fund will be considered as soon as it is appropriate.

Parliamentary approval will be sought by means of a new Vote, separate from the existing Atomic Energy Vote. All the operations of the Fund will be subject to examination and audit by the Comptroller and Auditor General.

The establishment of the Fund will have no effect on Defence costs.

A target surplus has been agreed for the Fund, after meeting interest on capital, depreciation and other normal charges, including research and development costs. This envisages earnings at a rate which, over 5 years, would yield a surplus of £3.9 million. The Fund will retain depreciation provisions and trading surplus and will be enabled to build up its own 77W reserves to meet contingencies and normal capital investment requirements.

The Fund will be set up with an initial capital sufficient to cover the book values of both the fixed and working capital of the plants concerned. This is at present estimated to be about £37 million but the actual amount will depend on the precise values of current assets at the date on which the new arrangements are brought into force. The Exchequer will receive from the Fund interest on the initial capital. Should further advances at any time be necessary from the new Vote, they also will bear interest. The Exchequer will also receive a contribution in lieu of income tax where tax would be payable under the normal rules. The introduction of the Trading Fund will cause an increase in the net amount of the existing Atomic Energy Vote because of the elimination of receipts from trading operations. This will, however, be partly offset by an increase in Exchequer Extra Receipts of interest, and the Exchequer will, in future years, not have to provide that amount for the Authority's capital needs which can be met from their reserves.