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Orders of the Day — Power Plant Engineering (Gateshead)

– in the House of Commons at 10:30 pm on 6th May 1986.

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Motion made, and Question proposed, that this House do now adjourn.—[Mr. Sainsbury.]

Photo of Mr Bernard Conlan Mr Bernard Conlan , Gateshead East 10:32 pm, 6th May 1986

I shall address my comments to particular problems that affect my area, but they concern the whole of the power plant engineering industry. For many years, there has been a general shortage of orders, recurring redundancies, little confidence and a severe drop in the morale of those working in the industry. Those problems affect the industry nationwide.

In 1984, more than 1,200 people were employed at Northern Engineering Industries' nuclear power plant. Today, 137 people are employed there. That is a substantial decrease. I doubt that the company's viability will continue with such a small workforce at that major plant. This will be the third redundancy announcement since December last year. If the problems continue, the company will bleed to death.

The problem is not new. Indeed, a Central Policy Review Staff report in 1976 said that the industry faced a serious problem. The report pointed out that the power plant industry faced grave threats and added: There must be a Government commitment to a firm, steady ordering programme, starting as soon as possible, for the home market. Little has been done about the problem since that statement was made in 1976.

The industry is faced with the difficulty that the Sizewell inquiry has been continuing for a long time and that the inspector has not yet reported. If newspaper reports are to be believed, he will not present his report until later this year. It is clear that the inspector's recomendations will be controversial and that the Government—the same would apply to any Government—will not be prepared to tackle the issue until after the next general election. That being so, it is clear that conditions in the industry will continue to get worse, and firms such as that in my constituency will disappear.

Should this local firm go out of existence—remembering that there have already been 1,200 to 1,300 job losses in Gateshead—the problems for the unemployed in the area and for the town will get worse. It will also present more problems for the nation, because the skilled teams needed to construct the high technology boilers and other equipment that comprise modern power stations will no longer be available. Britain will then have to turn to the Americans or even the Japanese. What a sad day it will be if we, with our proud record in the construction of highly efficient power stations, have to look overseas for our requirements.

I have for long believed that we should have a sensible mix of nuclear and conventional power stations. The recent tragic events in the Soviet Union should not deter us from pressing ahead with our nuclear programme. Our designs are quite different from theirs, including the station at Chernobyl. The AGRs produced at Gateshead have a safety record second to none, although there are doubts about the safety capacity of the PWRs, and that is the issue at Sizewell. We have only to recall the events at Three-Mile Island to realise that such doubts are well founded. Unless the Government are prepared to take firm and positive action to save the industry, we will live to regret the passing of one of the leading and major industries in this country.

The nuclear power plant of Northern Engineering Industries is possibly one of the most modern in Europe. In 1982 the Prime Minister was responsible for the official opening of the new nuclear facility. I recall that on that occasion, in declaring the new facility opened, she promised the workers—more than 1,200 people then—that they would have a bright and promising future. What hollow words they were. What was the bright and promising future that the Prime Minister promised to the workers in Gateshead a mere four years ago? Nearly 1,200 of those workers have already lost their jobs. Those words sound pretty hollow now in the light of experience.

At about the same time, in a great roar and fanfare of trumpets, the Government announced that it was their policy to embark on a programme of ordering one new nuclear power station a year up to and including 1991. What has happened to that policy? Not only have the Government not fulfilled that promise; they have not ordered one station. Indeed, the major redundancy in Gateshead occurred in 1984 when work on the Torness and Heysham power stations ran out. The Minister will not want reminding that it was not his Government who provided the work for Gateshead. It was provided by the Labour Government in 1978, who took the initiative and ordered those two new power stations.

What shallow and hollow words we have heard from the Government about providing work for this important industry. I have carried out some research, and I have found that since 1979, bearing in mind the fact that the Government have not provided work for any one power station, NEI has contributed to Tory party funds—if not to the Tory party funds, it has contributed to the front organisations—more than £200,000. In view of the Government's record for providing work for NEI, the shareholders of that company might consider that the £200,000 has not been cost effective.

My final plea to the Minister is that he must reappraise the position of this vital industry. Tomorrow the Minister should place on his desk the 1976 report of the Central Policy Review Staff and consider the report's finding that the industry requires a steady improvement.

Photo of David Clelland David Clelland , Tyne Bridge 10:44 pm, 6th May 1986

People are nervous, if not afraid, as a result of the Chernobyl disaster, and understandably so. The full realisation of the devastating and deadly effects of unleashed nuclear energy has been brought home—literally—by an accident in a part of the world previously unknown to most people. This, following the accident at Three-Mile Island in America and constant doubts surrounding the nuclear installations at home, has quite naturally made people, to say the least, sceptical about the advisability of continuing with the development of nuclear power stations in this country on their very doorsteps.

Until such time as we are able to convince them—that can only be when we are convinced—that nuclear energy can be not only harnessed but kept harnessed, then why should we expect them calmly to accept future developments of this kind? Despite the continued reassuring noises from Ministers, and the Prime Minister herself, all the signs are that the ordering of any new nuclear power stations must be thrown into doubt, or at best delayed, as a result of Chernobyl.

Where does this leave those who work on the manufacturing and production of power station equipment? That is what they went to know, and an answer for NEI is urgently required. My hon. Friend the Member for Gateshead, East (Mr. Conlan) has already outlined the decline in the work force over the past four years. This followed the official opening of the facility in 1982 by the Prime Minister herself, who on that occasion forecast a secure future for the company.

The future was not, and is not, secure. More highly skilled men and women will be thrown out of work on Tyneside. Unless and until the Government have the good sense to plan properly for the future energy requirements of the nation, based on fuels and technology that are both plentiful and proven, the electrical engineering industry will be unable to plan and maintain the present skilled work force that has been so badly depleted over the past seven years.

Even the present functioning nuclear power stations could be providing more work if they were being properly maintained instead of being allowed to fall into disrepair and giving rise to concern. Even so, the skills of the work force at NEI are not entirely restricted to nuclear-related production, and the inventive and technological genius of the technicians are not entirely confined to nuclear energy. They can contribute to the provision and refurbishment of conventional stations and, more important perhaps, to the much needed, but sadly lacking, research into alternative and safe sources of energy.

The northern region is still reeling under the blow of losing the auxiliary oiler replenishment vessel, which was so badly needed by Swan Hunter. This threatens to aggravate an already record unemployment level, to say nothing of the human suffering that that implies.

While the local authorities continue to make every effort to preserve and expand employment, by attracting companies such as Nissan and Komatsu, through grants and incentives to new and existing business, every job that they attract is swallowed up by yet more bad news resulting from the Government's neglect to recognise properly the skills that we have, and the contribution that those skills can make to a properly planned future.

The problems faced by NEI are symptomatic of the problems of the electrical engineering capacity. In the not-too-long-term future, we look forward to the return of a Labour Government that can fully utilise the skills of our people by expanding our economy and planning our energy needs. In the meantime, we look to the Government to cast aside the dogma and begin doing something positive for the industry and the country. I hope that the Minister will give a satisfactory reply to the points that have been raised.

Photo of Mr John Butcher Mr John Butcher , Coventry South West 10:54 pm, 6th May 1986

I thank the hon. Members for Gateshead, East (Mr. Conlan) and for Tyne Bridge (Mr. Clelland) for raising a question which is obviously very much in their minds. I shall try to respond to the points that they have raised.

I was particularly interested to hear the hon. Member for Gateshead, East recount some of the history of the industry. He was right to point out that his remarks were geared towards describing the factors which have affected the whole power plant industry and not just one section of it. He was also correct to review the order position and to consider projections for the future.

The hon. Member for Tyne Bridge referred to a phenomenon which many of us have shared—the need to keep together groups and teams of skilled people so that a capability is not lost to the economy, not just for local but for national reasons. Therefore, I shall consider with them how the United Kingdom power plant industry has developed. We all agree that it has been through a very difficult period, with a low rate of home ordering for more than a decade. I shall begin by reviewing the situation on that front.

In the 1970s the utilities were commissioning plant at the rate of about 2,000MW per year, and this represented a major workload for the United Kingdom plant manufacturers in the 1960s and the 1970s. Of these orders some 58 per cent. were won by GEC, while some 42 per cent. went to Northern Engineering Industries in the northeast. However, since 1973 only three orders have been placed: the Drax completion coal-fired station and the Heysham II advanced gas-cooled reactor station which were won by NEI, and the Torness AGR station which went to GEC.

So what are the prospects for the future? Of course, proposals for new generation plant must come from the electricity supply industry. The Government will examine each consent application on its merits. The Scottish boards are unlikely to need new major generating capacity for a number of years.

Power stations are usually built to provide generating capacity to meet demand, either because existing power stations have reached the end of their economic life and so have to be replaced or because of a net increase in demand. However, Sizewell B pressurised water reactor power station was originally put forward as a substitution project, since the cost of generating power from the proposed new station showed an economic return compared with generation costs from existing power stations. Since Sizewell B was first mooted, demand for power has increased and this has turned the original case for substitution into a requirement for replacement capacity.

Nevertheless, the Central Electricity Generating Board has stated that it does not intend to seek consent for other new power stations until the outcome of the Sizewell inquiry is known. Sir Frank Layfield has been faced with a formidable task in carrying out the inquiry and in compiling his report. The inquiry was extremely wide-ranging, lasting 340 days—the longest ever planning inquiry in this country. Sir Frank has indicated that he hopes to deliver his report to my right hon. Friend the Secretary of State for Energy in September of this year. My right hon. Friend has said that he will reach a decision as soon as possible after receipt of the report, and arrangements are being made for the Department of Energy to make an urgent examination of the report when it is available.

As hon. Members have noted this evening, any discussion which mentions nuclear energy must now take note of the Chernobyl disaster in the USSR. Although it is not part of the main topic of this debate, I am sure that hon. Members would wish me to comment. There are three major points to make on the relevance of the disaster to the United Kingdom.

First, the plant at Chernobyl is unlike any reactor type operating or planned in the United Kingdom, including the existing Magnox and AGR stations and the proposed PWR station. In the United Kingdom our system of licensing for nuclear plants puts safety first, and under that system a station such as Chernobyl would simply not have been found remotely acceptable.

Secondly, inquiries such as that into Sizewell B are not a feature of life in the Soviet Union. This Government decided that there should be a full public inquiry at Sizewell, at which any body with an argument against nuclear energy was able to put forward the fullest evidence and the fullest reasons for its point of view.

Thirdly, safety of course is, and will remain, the paramount consideration in the development of nuclear power in this country. Provided nuclear power stations can be built safely, and to time and cost, they offer very real economic benefits through cheaper electricity for both domestic and industrial users.

If formal consent were granted, Sizewell B would provide the opportunity for major orders for United Kingdom manufacturing industry earlier than any other possible new station. A very high proportion of the hardware would be supplied by British companies; the CEGB has estimated that only 7 per cent. of the total cost of the Sizewell B project would be for contracts placed abroad, and only about half that would be for plant and equipment.

The CEGB is also considering the possibility of ordering a new coal-fired power station for commissioning in the mid-1990s, but has not yet made a specific application. A reference design for a new type of 900 MW unit — compared with the present largest size in the United Kingdom of 660 MW—which might be used for such a station is being developed by the CEGB, the NCB and manufacturing industry. In more general terms, there will be a need for new power stations to replace existing outdated capacity in the 1990s and beyond.

Taking all these prospects together, I believe that, in the medium term, the United Kingdom power plant manufacturing industry can look forward to improved business prospects on the home front.

That having been said, the industry's concern about the home ordering programme is understandable, but the timing of orders must remain the responsibility of the generating boards. I must emphasise that any new power station which was not fully justified on economic grounds could be expected to have an undesirable impact on electricity prices, which would adversely affect both the domestic and industrial user, the power sector included.

Turning to the overseas market for power plant which is an integral and important component of order prospects, this has naturally been an important part of the activities of United Kingdom companies over the past few years. For example British companies have undertaken major power station projects in the Sudan, in Korea, Hong Kong, South Africa, India and Brazil. There have also been many more minor projects, which still involve substantial United Kingdom content, of which the supply of plant and equipment from United Kingdom factories and the provision of design and engineering services is worth collectively many millions of pounds. Total exports from the United Kingdom power generation machinery and equipment sector in 1985 amounted to £675 million, which shows an excellent performance.

The Government have placed considerable emphasis on helping United Kingdom companies to win business overseas, and especially in developing countries. The financial package is just as important as the price and quality of the equipment offered to overseas clients. The financial expertise of the City has been used by British compaies in the power sector—as by other capital goods exporters—to get together commercial financing on the best possible terms. I pay tribute to the financial services available to our exporters. However, there has been an increasing tendency in recent years for major projects overseas to be won with soft finance. While the Government deplore this growing international trend and would prefer to see an end to mixed credit activity, we are determined that our companies should not be at a disadvantage. Accordingly, the Government announced to the House last November that we intended to provide a new soft fund, in addition to the existing system of grants under the aid and trade provision. Our objective is to double the business won by British industry with the help of mixed credits over the next few years from the present level of about £250 million a year to about £500 million a year.

Traditionally, the power sector has been a major beneficiary from ATP. From the date of introduction of the scheme in 1977, over 20 projects in the power sector have been won with ATP. This amounts to about 40 per cent. of all the ATP granted to British companies. This large proportion reflects the importance of power projects in infrastructure development. Developing countries cannot progress unless they have adequate, secure and reliable generation of electrical power, with the necessary systems to transmit and distribute that power to industry, to commerce and to domestic customers.

Although the market for major power projects overseas has been very slack over the past few years, showing a considerable decline from earlier levels, I understand that most commentators in this country and abroad see an increase in activity in the years ahead, reflecting the needs of developing countries. Falling oil prices and the trend towards lower world interest rates will provide an additional boost. The Government will respond by continuing to support the power sector through ATP, including the use of the soft loans facility. It is open to companies in the sector in Gateshead to benefit from our support, as it is to companies elsewhere.

As the industry has looked increasingly overseas for its livelihood in recent years, so it has become apparent that to compete effectively major investment has been needed to update and improve products, production equipment and methods and the working practices of the industry. The industry has responded with large investment programmes, assisted where necessary by the Government under the provisions of the Industrial Development Act and the Science and Technology Act. Since April 1979 support for the power plant engineering industry throughout the country under the Science and Technology Act has amounted to some £21 million with some £3·5 million of that amount offered to companies in he Gateshead area. With Government assistance at an average of around 25 per cent. this would represent an investment in innovative products and processes of more than £80 million by the industry; and I pay tribute to that. This is just the tip of the iceberg. Millions of pounds more have been invested by the industry without recourse to the Government.

Under the Industrial Development Act and its predecessor, since August 1979 support offered for investment schemes within the power plant engineering industry has amounted to some £24 million, of which £2–5 million has been offered to Gateshead firms. This assistance is specifically aimed at capital regeneration on both regional and national benefit grounds. With an average Government input of some 10 per cent. it means that the industry has invested some £240 million of capital, all aimed at ensuring a competitive product able to win overseas orders on price, delivery and technical excellence.

As with all Adjournment debates, I have listened carefully to the arguments that have been put forward. I congratulate the hon. Members for Gateshead, East and for Tyne Bridge on raising this important issue at what has transpired to be a topical moment. I fully understand the hon. Gentlemen's reasons for wanting to defend the continuation of those teams of skilled people in their constituencies, and I shall ensure that the points that they have raised tonight are well lodged with my right hon. and hon. Friends at the Department of Trade and Industry and the Department of Energy.

Question put and agreed to.

Adjourned accordingly at two minutes past Eleven o'clock.